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INTERNATIONAL BUREAUS: Bogota: Carlos Cota Meza Bonn: George Gregory. Rainer Apel Chicago: Paul Greenberg Copenhagen: Vincent Robson Houston: Harley Schlanger. Nicholas F. Benton Los Angeles: Theodore Andromidas Mexico City: Josejina Menendez Milan: Stefania Sacchi. Marco Fanini Western concern about Soviet military-industrial capabilities is Monterrey: M. Luisa de Castro matched only by the crude and often tendentious manner in which New Delhi: Paul Zykofsky Paris: Katherine Kanter. those capabilities have been estimated. This week we bring together Sophie Tanapura the Fusion Energy Foundation's research, the LaRouche-Riemann Rome: Leonardo Servadio Stockholm: Clifford Gaddy econometric model, and EIR's Soviet Sector analysis to identify the United Nations: Nancy Coker actual strengths and weaknesses of the U .S's_R.'s defense base, with Washington D.C.: Richard Cohen. Laura Chasen. Susan Kokinda emphasis on the strengths no other Western analysts have properly Wiesbaden: Philip Golub. Mary Lalevee. identified. Thierry Lalevee. Barbara Spahn EIR's own capabilities have been expanded, starting last week, by Executive Intelligence Review (ISSN0273- 6314) our co-optation of one of NSIPS Press Service's senior editors, is publishedweekly( 50 issues jexceptfor the second week of Julyandfirstweek of Januaryby Christina Nelson Huth, as Features Editor. This means greater "free New SolidarityInternational Press Service 304 W.58th Street. New York. N. Y. 10019. energy" and expertise for our weekly Special Reports and other EIR III Europe: Executive Intelligence Review, features. Nachrichten Agentur GmbH, Postfach 2308, O. 6200 Wiesbaden Tel: 30-70-35 Further LaRouche-Riemann model results coming up in EIR Executive Directors: Anno Hellenbroich, Michael Liebig include: 1) a study of the relationship, both historical and projected, I" Mexico: EIR, between U.S. infrastructural investment and U.S. productivity gains Francisco Oiaz Covarrubias 54 A-3 Colonia San Rafael, Mexico OF. Tel: 592-0424. or losses; and 2) a simulation of the effects of continued high interest Japan subscriptiollsales: O.T.O. Research Corporation rates and of the proposed Weinberger defense budget on the industrial Takeuchi Bldg. 1-34-12 Takatanobaba Shinjuku-Ku, Tokyo 160 economy. Tel: (03) 208-7821 Copyright" 1981 New Solidarity And we look forward to an expansion of our European economic International Press Service All rights reserved. Reproduction in whole or coverage, because Economics Editor David Goldman has begun a in part without permission strictly prohibited. visit to Western Europe. Second-class postage paid at New York, New York and at additional mailing offices. Subscription by mail for the U.S.: 3 months-$125, 6 months-$225, 1 year-$396, Single issue-$I 0 Academic library rate: $245 per year TIillContents

Departments Economics

12 Science & Technology 4 Oil-price plunge Congress to trade off will ravage Third nuclear programs? World producers Volcker's interest rates have 45 Interview cut demand for oil: the debt­ William Crawford, former finance implications and U.S. Ambassador to domestic consequences for underdeveloped nations North Yemen and Cyprus, - who directs Islam like Nigeria. Centennial Fourteen. Documentation: Interviews with oil-market specialists in London and Dateline Mexico 50 Western Europe. Part I: the surprising PSD.

8 Currency Rates 51 Middle East Report The A. Basmouk 9 Trade Review connection. International Credit Book Review 10 59 The Fed's new squeeze. Death Beam by Robert Moss. 11 Banking Bailout time for the S&Ls. 60 Congressional Closeup 'Free-market' plan Editorial 14 64 boosts dirty money What about Mr. An update on the so-called Haig:s ethics? Jamaica model.

15 Illiquidity at home, cash flow abroad A report on Colombia.

16 Business Briefs March 23, 1982 Volume 9 Number 11

Special Report International National

34 Britain speeds effort to 54 Williams forces inquiry chop globe in three into DOJ misconduct The diplomatic and A summary of the senatorial economic effort to cut off challenges to Abscam which the United States. preceded the New Jersey Documentation: Excerpts Democrat's resignation, and from Conservative leader a report on his own Edward Heath's March 2 expectation of vindication. speech in Fulton, Missouri. Barges transporting wood, steel, and other ma­ 57 'No budget cuts, terials on the Neva River in Leningrad. The time India stresses joint no tax increases' is October 1977, the eve of the 60th anniversary 37 of the Russian Revolution. APNjSygma North-South stakes In a National Democratic A conference report Policy Committee statement from New Delhi. now circulating on Capitol Hill, EIR founder Lyndon 18 The hidden strengths of 39 The P-2 death squads LaRouche outlines why Congress should stop the Soviet economy The fe ared initiators of fiddlingwith the Uwe Parpart, Contributing Central American slaughter administration's fiscal plan Editor and Research and counter-slaughter are and get down to the Director of the Fusion controlled by fascist business of ousting Paul Energy Foundation, networks outside Volcker instead. estimates the gains achieved the continent. Documentation: Mr. in the U.S.S(R. and the LaRouche's fo ur-point potential for sustaining Zia's purges and his 41 program for U.S. economic them. own survival chances recovery.

22 Soviet military costs: a London's operatives 42 62 National News scientific estimate plotting new coups Drawing on the LaRouche­ The Muslim Brotherllood's Riemann econometric regroupment. model, Military Editor Steven Bardwell, Editor-in­ Islamic Centennial Chief of Fusion magazine, 43 14 and fundamentalism documents a defense buildup double the CIA's estimate. 47 Britain manipulates Moroccan insurgents 28 Siberian development: the fulcrum of U.S.S.R. 48 Haig sinks deeper economic growth policy into P-2 coverup An overview by Soviet Our weekly Investigative Sector Editor Rachel Leads summary on Douglas. international terrorism.

52 International Intelligence �ITrnEconomics

•

Oil-priceplunge will ravage Third World producers

by RichardFreeman

World oil production levels, which in the non-communist glutted world oil market. Oil consumption has dropped, world exceeded 50 million barrels per day two years ago, because a world plunged into the depression that Federal may now fall to 40 million barrels per day or below. Reserve Board Chairman Paul Volcker's high interest OPEC oil production, which averaged about 32 million rates have created has far less need for oil. According to barrels per day fo r several years, may drop to half that a statement by Kuwaiti Oil Minister Sheik KhalifiaAI­ figure. And the price of a barrel of crude oil which last Sabah March 9, certain multinational oil companies are year reached as high as $40 and is currently $34, may hit dumping 4.5 million barrels of oil per day onto the a floorof $15 per barrel by mid-summer. These are the market in an attempt to force the price down. set of predictions released March 8 by Texaco Oil Com­ This will create an oil shock in reverse. The purpose pany, British Petroleum, the Hudson Institute, and of the shock is to destroy the ambitious development others, including the newspapers Le Figaro in Paris, and programs of some of the most advanced and more pop­ the Financial Times of London. ulous Third World nations, led by Mexico, Indonesia, The predictions of lower oil prices should not be and Nigeria, which depend on oil revenues to finance taken as a sign that the world will return to the good old their programs. days of cheap energy. Certain of the multinational oil "The world oil markets will become a dog-eat-dog companies, and the Anglo-Dutch oligarchies standing situation," stated Mr. Lippey, the chief economist of behind them, are after all the same people who forced on British Petroleum, March 9. "The fall in the oil prices the world a 13-fold increase in the price of oil following could lead to instability. I wouldn't be surprised to see a the 1973-74 Middle East war, and the 1978-79 Iran coup d'etat in Indonesia; the coup attempt in Nigeria "revolution." Their game is not to return the world to was just the beginning, and a coup in Saudi Arabia prosperity through cheaper oil prices. Rather, they in­ cannot be excluded." tend to use a price drop to fracture OPEC into a thousand The oil price strategy reflects the 1975-79 "Project pieces, by sending prices crashing. Leaving nothing to 1980s" perspective of the New York-based Council on chance, the oil multis are dumping oil stocks onto a Foreign Relations. According to the CFR study, the

4 Economics EIR March 23, 1982 developing sector should be forcibly "delinked" from the case of Mexico, it was projecting for 1982 oil exports of advanced sector, thus condemned to underdevelopment. 1.5 m' illion barrels per day, at an average price of both At the same time, the Project 1980s projected a collapse light and heavy oil of $30 per barrel. This would yietd of world trade and a "controlled disintegration of the $16.5 billion worth of export earnings, or more than 75 world economy." percent of Mexico's expected $19 to $20 billion of total merchandise export earnings for this year. But what Trigger for lower prices happens if Mexico's production for export is lowered to The world depression caused by Fed Chairman 1.1 million barrels per day, as it has been, and the price Volcker's interest rates has reduced oil imports and oil of Mexican crude is cut by an average of $4 per barrel? consumption dramatically. In 1979, for example, the Mexico's expected export earnings from oil would United States imported 6.51 million barrels of oil per plunge to $10.5 billion, or a cut of Mexico's total day. By February 1982, this was down to below 3 projected export earnings of one-fifth. This slashes million barrels. A marginal amount of the drop is due Mexico's ability to carry on its internal development to energy efficiencies or switching to alternative sys­ programs: not only do oil exports provide foreign tems, but most of it results from the decline in industrial exchange with which to buy high-technology goods, but use of oil. In Germany, between 1980 and 1981 that oil production also provides more than a quarter of tax nation's use of oil dropped 16.7 percent. Overall, world revenues. consumption of oil shrank by II percent between Janu­ Last month, Swiss and British banks forced Mexi­ ary 1981 and January 1982. co's currency, the peso, to undergo a 40 percent deval­ This sent world oil stockpiles held by companies, uation. A top think-tanker connected with the Council nations, OPEC producers, etc. to 110 days' worth of on Foreign Relations stated March 9, "The estimates I supply, when 80 to 90 days is considered normal. Since have from knowledgeable sources is that Mexico needs a day's worth of stocks is roughly equal to a day's $30 billion in gross financing, $20 billion in net, this worth of production-currently 45 million barrels per year. They simply won't get it. Mexicans think they can day-the excess 20 to 30 days worth of stocks means carry on, but the 3 percent budget cutback they've that an extra 900 to 1,350 million barrels exist out there announced doesn't mean anything .... They will have to be dumped. to cut capital investment in long-term projects, the This "oversupply" set up the conditions for an petrochemical industry . .. steel . .. maintenance on interesting set of maneuvers. According to one well­ roads and railroads ... [and] slow the ports placed oil analyst, President Reagan and the leaders of projects ...." Saudi Arabia conspired to use the glut of world oil Nigeria, with 80 million people-more than one­ production to begin a controlled lowering of world oil fifth the population of the continent of Africa-is production and thus freeze Libya and Iran out of world struggling to bring its popUlation into the 21st century. oil production. This would be a political move that Oil revenues provide more than 90 percent of its export would change the face of Middle East politics. earnings and almost the entirety of its budget revenues. Whether by getting wind of this, or simply deciding In February, British-controlled forces ran an assassina­ that the time was propitious for a bear raid, the British­ tion attempt on the President of Nigeria, Shehu Shagari. Venetian forces responded to the over-stocked world oil And at the end of February, British Petroleum and situation with a dumping spree and threats to bust Phillips Petroleum pulled out of a natural-gas liquefac­ OPEC. Thus, the week of Feb. 15, the British National tion project in Nigeria that all but killed the project. Oil Company cut the price of North Sea light crude, Now London bankers predict that Saudi Arabia will which competes with North African light crude, by $4 have to bail out Nigeria financially, which will run a to the price of $32 per barrel. Britain has used the price payments deficit even if it cuts back its development cut to undercut Nigeria, and has actually replaced projects. Nigeria as the second largest seller of oil to the United Indonesia, another major oil producer, has 110 States. If the price falls as low as $25 to $28 per barrel, million people. Though for the last few year it has run not to speak of $15, it will wreak havoc with developing balance of payments surpluses, a fall in the price of light sector producers. And three of those producers, with crude to $28 per barrel would wreck its development some of the most ambitious development programs, programs. The country is still a net importer of rice; its largest populations, and highest import demand from development programs never reached the level of pro­ the West are in special jeopardy: Mexico, Nigeria, and ducing enough food for its people. Indonesia. Among them these nations have more than a quarter of a billion people. Banking collapse The best way to evaluate the situation is to see how The lowering of oil prices occurs against a back­ vital oil is to a nation's development programs. In the ground of tremendous financial upheaval. The high

EIR March 23, 1982 Economics 5 interest rates in the United States continue to drain Documentation capital from Europe, causing extreme currrency ex­ change-rate instability. If OPEC moved into deficit, and withdrew funds from the Eurodollar market, the basis for international debt rollover would shrink drastical­ ly. OPEC has $125 to $150 billion in Eurodollar depos­ 'Multisare dumping, its, about half the core deposit base of the Eurodollar banks. Upon this base, with a multiplier of from 4 to 6, social chaos willfollow' the banks have lent out $1.2 to $1.6 trillion to each other, and more importantly to third world nations From a March 9 interview by EIR Wiesbaden correspond­ which need the funds for debt roll-over. ent Mark Burdman with Herr Lonncke. a Hamburg oil The OPEC surplus in 19,81 was $66 billion. For 1982 analyst: Chemical Bank estimates that OPEC's expenditures for imports, transfer of resources, and charges for insurance Burdman: How do you see the OPEC situation? and shipping come to $220 billion. Then, at an oil price Lonncke: We don't know yet what OPEC will do exactly, of $28 per barrel and an OPEC production level of 18 but I can say that prices are certainly falling. Even if million barrels per day, OPEC will run an approximate OPEC goes below 18 million barrels a day, it doesn't $50 billion current-account deficit, even if it cuts back make an impression on the buyers. After all, interest on development projects. Were the price of oil to fall as rates are too high for the companies to maintain stocks, low as $15 per barrel, and the OPEC production level to so they will try to sell off surplus reserves in response to 16.5 million barrels per day, OPEC would run a deficit the rather depressed level of activity now prevailing; so of between $100 and $125 billion. the companies are drawing down stocks. While Saudi Arabia and Kuwait may achie�e a The lower prices and production are rather difficult surplus this year, even if the price of oil falls, other for Nigeria. Their planned liquefied natural-gas project OPEC nations, including Algeria, Iran, and Ecuador, has effectively been killed. The Nigerian national oil as well as Nigeria and Indonesia, will probably run company was going to put in 60 percent of the cost, but deficits. In the event that the Saudis lend them money, Phillips and BP [British Petroleum] dropped out, and the that would amount to the same drain on the Eurodollar project is dead. Nobody is going to take their place. deposit base as a direct withdrawal of their own funds. There will be problems for Algeria and Libya too, OPEC already drew approximately $15 billion from its more so Algeria. Algeria is certainly in bad shape. Alger­ Eurodollar deposits in 1981; if members go into deficit, ia priced itself out of the market, especially in respect to the rate would be at least doubled. gas sales. Their crude is too high. They're losing volume As an economist fo r Texaco Oil in London com­ every day, and they have no reserves to speak of finan­ mented March 9, "I could see a few large banks going cially. bankrupt if OPEC withdraws deposits. This would mean that international lending would be curtailed." Burdman: What does the situation you are describing The consequences for the Third World, which has mean for German exports to OPEC countries? $100 billion in balance of payments and current account Lonncke: It will certainly mean that our exports to that financingfor 1982, according to the IMF, are obvious. part of the world will decline in the second half of the The world is not completely helpless in the face of year and through 1983. There will be no reversal in the such a "reverse oil shock" threat. Under the conditions decline of income in the OPEC countries for at least a of collapsing oil prices, notably Japan and Germany, couple of years. They will have to get along with a much but also the Uniied States, would realize a sharp im­ lower level of income. This will certainly hamper them in provement in their terms of trade. If the Germans and ordering new technology imports. We in Germany will Japanese were to make the increase in their current be hit by this, there is no doubt about it. To calculate account surpluses the basis for credit expansion geared exactly how much would be very difficult. ... toward increasing world trade, their economies could survive the shock, and begin to put the Third World on Burdman: What effect will the situation have on OPEC its feet. lending? In order to make such potential practical, Germany Lonncke: The Arabs with money will now only lend to and Japan, in tandem with Saudi Arabia, would have to their close circle of friends. The rest of the community peg the deutschemark and the yen to give gold backing needing money will be squeezed out. I am thinking of to this long-term trade credit. The Eurodollar market India, Bangladesh, and South American countries. There would then cease to be the central source of internation­ will not be much left after lending goes to Iran, Iraq, al liquidity. Algeria, and Nigeria, the OPEC countries in deficit. And

6 Economics EIR March 23, 1982 even this income may become scarce if the Saudis go Burdman: What is your judgment of OPEC's future down to 6 million barrels a day. Such a level is clearly output? possible; there is a lot of pressure. This would be suffi­ Mina: It's very difficult to protect the market price of oil cient for their budget, and would allow others to produce through cutting production, since many OPEC countries more. There is pressure along such lines, also from are in great need of money at this point. I'm thinking of Kuwait and the Emirates. Nigeria, Libya, Algeria, and others.... Nigeria would be happy at the 1 8.5 [million barrel per day total OPEC From a March 9 interview with Mr. Maynard of Texaco output] figure, if it didn't have to reduce prices. But the Economics in London: recent moves by the British oil companies put Nigeria under great pressure. If there is a cutback in Nigeria and Burdman: Can you comment on talk of a $15-per-barrel elsewhere, there will be considerable budget deficits. OPEC price? Maynard: The $15 figure was based on a report I can Burdman: What is your information on oil-company send you. It was speculation on a pretty extreme case. drawdowns of stocks? We think that things could fall quite precipitously before Mina: I think the level of these drawdowns is 1.5 million resistance is mounted effectively enough. Such a level barrels per day, not 3-4 million as is sometimes men­ would have catastrophic consequences for OPEC. There tioned. The companies still have excess, with the esti­ would be amazing political problems, many countries [in mates being that there are 103 days' overall inventory OPEC] wouldn't be able to run any more, pure and still existing. The companies will draw down more in the simple. This is true particularly for the countries with coming months, because prices will drop further, and the high populations, like Indonesia, Nigeria, and Ecuador. companies want to beat the price drop by selling as much These places have clearly balanced budgets which they as they can now. have to maintain. Because of the high interest rates, it is no longer What you have now in the oil markets is a ratchet logical for the companies to keep stocks.... With inter­ down; every time there is a fall, another level of drop is est rates high, the oil companies have the incentive to necessitated, and so on. Twenty-eight dollars a barrel make quick cash, when money is worth 14-17 percent on may be an adequate price, but production of 18.5 million the international markets. Their idea is to sell their stocks barrels a day is too high. It has to go down to at least and make as much cash as possible. 16.5 to 17 million to be at all effective. This is mostly going to have to come from the Saudis. There is no From a March 8 interview with Mr. Bretherton of the alternative.... International Energy Agency in Paris:

Burdman: Do you think the Saudis could go to 6 million? Burdman: What do you consider the most important Maynard: I don't see why not. They could balance their factors facing OPEC? budget at that level. For a short period of time they could Bretherton: Two factors are definingthe situation. First, go to that level. demand fi gures are absolutely horrific; January con­ sumption figures show that the trend for demand was Burdman: What effects are likely on the international down II percent in comparison with the previous Janu­ credit and recycling situation? ary. There's a 2 million-plus volume drawdown in the Maynard: There is a danger of a bank crash if the OECD countries, and maybe as high as 4 million for the reserves are pulled out by OP EC countries. The question whole world. Eleven percent is a hell of a lot of drop. I ask is how quickly they could pull reserves out. The Second, 1981 ended with pretty high stocks for the problem is that the money has not been kept as cash in companies, and the industry is now trying to run the the banks but has been loaned out. Look at how much stocks down. By our estimation, there's a 4 million barrel money is going into Poland! It would be very dangerous a day drawdown of stocks now taking place. With OPEC if any revenue-hungry country tried to pull out th eir producing at 20 million, this makes for quite a glut. ... reserves. I'm thinking primarily of Iran, although some­ one like Iraq is a possibility too. Look at the Iranians, Burdman: Could prices go as low as the $15 per barrel they are selling as much gold as they can. This is an figure cited by Texaco? extreme case, admittedly, that such a crash would occur: Bretherton: It's conceivable, purely by the market, if The OPEC countries would try to pull their money out, demand is weak, and stays that way, and there is a stock findit already loaned, and the crash would be on.... overhang, prices will continue to fall. Then you have North Sea and Mexico coming into the market, which From a March 8 interview with Parviz Mina, fo rmer head means it will be harder for Iran, Iraq, Libya, Nigeria, of the Iranian state oil company: and so forth to maintain their market share. A country

EIR March 23, 1982 Economics 7 like Nigeria, which is now producing 1.4 million barrels a day, is moving slower than events, and the markets are moving against them. Nigeria will have to scale down Currency Rates their expectations of income, at the same time they are committed to high levels of spending. Our view is that now demand will slow down in 1982. The previous expectation of an upswing in demand is The doOar in deutschemarks now disappearing. Demand in 1982 will be far weaker New York late afternoon fixing than expected. The demand decline, in our view, could � 2.35 � "- -V'""� accelerate. - ..... 12.30 A-J r- From a March 8 interview with Mr. Lippey, economist at 2.25 British Petroleum's London headquarters: 2.20 Burdman: What is your estimated range of drawing 2.i5 down of stocks by the companies at this point? 1211 1 27 2 . .� 2/10 2/17 2/24 3/3 3/10 Lippey: It's within the range of 1.5-4, it's uncertain exactly how much, but it's within that range. It ought to doUar be near the higher end, that is traditionally what happens The in yen New York late afternoon fixing at this time of year, but I don't think it's being drawn down at such a high rate, since the demand is just not 240 .- - there for so much oil, and oil is being pumped out now as 230 � '--' � r- � "-""� .. fa st as the demand is there. There are 103 days of reserves ..... """"" - now, significantly above the 90-day figure under the lEA 220 [International Energy Agency] statutes, but demand is very low; my information is that Japanese and U.S. 210 demand has fallen more than expected in comparison 200 with European demand .... 1/211 I 27 ! .l 2/ III 2 17 2/24 -'/3 .�/ III

Burdman: What effect would a war in the Mideast have on the price and production? The doUar in Swissfrancs Lippey: A war would mean a giant yawn. If Iraq blows New York late afternoon fixing up, it makes no difference at all. It wouldn't matter if this happened anywhere, except for the Saudis ....the drop 1.90 - in production would be made up by the North African , 1.85 ..... I . 'V- �\ producers ....It's a dog-eat-dog picture in OPEC. There """" would simply not be enough money to go around if oil 1.80 sold at $28 a barrel at 18.5 mbd. If the Saudis can't go 1.75 down in production, the other OPEC countries are in trouble. There are discreet discounts now being offered 1.70 1/27 here, there, and everywhere. The BNOC [British Nation­ 120 2/.1 2/111 2/17 2/24 3/3 3/10 al Oil Company] price cut has put the cat among the pigeons.... The action of non-OPEC producers-the The British pound in dollars U.S. , Mexico, Britain, Egypt-has jumped the gun on New York lale afternoon fixing OPEC. OPEC has lost its markets. 1.95

Burdman: What does this mean for the political stability 1.90 of these countries? 1.85 Lippey: I wouldn't call them stable entities in the first �� � � - ..... � place, would you? What keeps Saudi Arabia from going -- 1.80 '-' �"- � under? ..An y of these regimes might just keel over .... The fall in the oil price could lead to instability. I 1.75 wouldn't be surprised to see a coup d'etat in Indonesia; 1/211 1-/27 2/-' 2/111 2/17 2/24 3/3 3/10 the coup attempt in Nigeria was just the beginning, and a coup in Saudi Arabia cannot be excluded.

8 Economics EIR March 23, 1982 TradeReview by Mark Sonnenblick

Cost Principals Project/Nature of Deal Comment

NEW DEALS

$1.3 bn. Indonesia from Pertamina, the Indonesian state oil company, has signed Nihon Keizai comments U.S.A./West with Kellogg of Houston and Thyssen (TRT) of Dus­ on scheme of To yo Men­ Germany/ seldorf for turnkey construction of petrochemical com­ ka Kaisha, ltoh, Mitsui, Japan plex. Plant at Plaju oil refinery in southern Sumatra will and Nichimen: "The turn 30,000bpd of naptha into 400,000 tpy benzene and Japanese traders kept other aromatics. Plant will include 250,000 tpy tereph­ themselves from becom­ thalic acid facility. Kellogg will engineer; TRT admin­ ing a main contractor in ister and procure. Pertamina is ordering $400 mn. the Indonesian project. equipment for it, including high pressure vessels, direct­ They apparently fo und it ly through 4 Japanese trading companies, which will risky to do so, consider­ sign deal with Pertamina in May and thus get Japanese ing the stalemate of a Exim-Bank credits. Legally, Kellogg and Thyssen are similar proj ect in Iran." prime contractors. In general, however, Ja­ pan-Indonesia projects are on the increase.

$700mn . Maputo from Maputo (formerly Mozambique) has awarded an Italian Italian Foreign Ministry Italy consortium contracts for 56 separate agricultural proj­ arranging financing un­ ects, which will employ 90,000 persons. Program will der state-state agree­ irrigate 89,000 acres of croplands and improve 420,000 ment. political condi­ acres of pasturage. Partners in Coboco consortium are tions not revealed. Italian state�owned Condotte Dacqua and Italstat, and private Lega Cooperative.

$450 mn. Malaysia from Malaysia has ordered plant which will turn Australian Financial Times say Jap­ Japan iron ore into 600,000 tpy sponge iron and 560,000 tpy anese beat Voest of Aus­ steel billets. Plant will use natural gas from offshore its tria because willing to Trengganu site. Will be joint venture owned 70% by take equity share. Fi­ Malaysia and 30% by Japanese partners, including nancing from Japan's Nippon Steel, Mitsubishi, Chiyoda, and Daido. Ex-im of $285 mn. in yen at 7.7%; other Japanese sources providing $67 mn. at 6.5%; all for 10 years.

$300 mn. Iraq from Iraq has contracted project management of a $300mn. Includes design, engi­ Spain antibiotics plant from Foster Wheeler's Spanish subsid­ neering, and construc­ iary. tion supervision.

UPDATE

$486 mn. South Korea France has sewn up South Korea's ninth and tenth Will be financed at from France nuclear plants and is leading for 13 more planned by 7.85% over 15 yrs. with Korea. Alsthom-Atlantique was recently awarded con­ grace until plant com­ tract for turbine generators and other components. pletion. Financing by Framatome subsidiary of Creusot-Loire had been given Societe Generale, Pari­ contract for nuclear steam supply system in Nov. 1980. bas, Banque Francaise Korea negotiated downward Alsthom-Atlantique's du Commerce Exterieur, winning bid by reducing exchange risk through pricing with govt. export aid. equipment in Swiss fr ancs not subject to price escala­ tion.

$460 mn. China from Following long negotiations on the mill contracted Little better than cancel­ West Germany from Scholemann-Siemag for the practically abandoned lation. Baoshan steel complex, it was agreed that delivery of the cold strip rolling mill would be postponed for three years.

EIR March 23, 1982 Economics 9 InternationalCredit by Renee Sigerson

The Fed's new squeeze pecting a new round of reschedul­ The central banks are flexing their muscles against private ings due to continued high interest rates and the jitters in the market lending to developing-sector governments. caused by the Polish debt debacle. If the Fed then requires banks to set aside reserves of as much as I per­ cent of their reschedulable loans, it The March 8 monthly meeting of coming from his friends at the Bank would cost the banks $10 million in the Bank fo r International Settle­ of England and the Bank for Inter­ lost interest on the money set aside ments in Basel, Switzerland, cast a national Settlements. Christopher at the Fed for each $1 biIlion of debt baleful eye on what central bankers MacMahon, Deputy Governor of rescheduled. there deem "excess borrowing" by the Bank of England, told the New Since the Fed is also contem­ the nations of the developing sec­ Jersey Bankers Association on plating classifying any renegotia­ tor, my Washington sources say. March 2 that "although the inter­ tion of a debt as "rescheduling," Since the last IMF Annual Meeting national banking system proved re- there is at least some $10 billion ,in in October, central bankers have . silient to the upheavals of the 1970s, such debt upon which the Fed is been demanding that the commer­ there is little doubt that ... the ready to slap reserves. That alone cial banks cut out their lending and increasing burden of debt is in­ adds up to $100 million in direct force the Third World into austeri­ creasing risks in international lend­ profitloss, in a sector which can ill ty, but to no avail. ing. Decisions on financing the afford it. Now the BIS is ready to move, payments deficits of LDCs must be And, such reserves come direct­ and the U.S. Federal Reserve is, as turned over to the bank supervisors ly out of the "high-powered mon­ always, taking the lead. If U.S. and the IMF," he said. ey" the banks would use as a base Federal Reserve Governor Henry Emil van Lennep, Secretary for mUltiplying their lending many Wallich gets his way, American General of the Organization for times, said my source. A $100 mil­ banks and perhaps others will soon Economic Cooperation and Devel­ lion set-aside of reserves could be hit with a new set of central-bank opment, the sister organization of mean $1 bilIion or more in new lending controls which could en­ the BIS, demanded in Paris the loans never made. fo rce "a real contraction in world same day that "major LDC bor­ The Fed will then be taking a credit," my top source at the U.S. rowers will have to move toward direct, hands-on participation in Treasury reports. economic strategies which are less the renogatiating process, telling WaIlich is proposing, on behalf dependent on international trade Third World borrowers on exactly of the BIS group, that the U.S. Fed and fi nance." what terms they can renegotiate the force American banks to set aside Under the title "Weak Loans loans, he said. penalty reserve requirements on Need More Rigorous Treatment," "It means very subtantial U.S. any loan to a developing country WaIlich writes that private banks government interference in the so­ which goes into rescheduling. must now be made to stop their caIled free market. It means teIling These reserves would be required high rates of lending. "Resched­ the sovereign borrowers what to on extant loans as weIl as future uled loans have increased in the do." loans. Since there are, in fact, po­ past few years ... and are becom­ WaIlich, he noted, is advocating tentiaIly dozens of billions of dol­ ing an area to which bank supervi­ this extreme position because the lars of such loans to countries in sors and regulators must give in­ Polish debt crisis has not slowed the Eastern Europe, Africa, and Latin creasing attention." Banks should rate of international lending as America already on the books, be required "to make a reserve allo­ much as the Fed had hoped. The this could cost the banks a great cation against non-performing Reagan administration is reluctant deal. loans," he concludes. to make such a government inter­ Wallich's proposal, which he This wilI mean "contraction of vention, but "if there is another printed in the New York Journalof world credit," my.Treasury source debt crisis like Poland, WaIlich may Commerce March 3 and 4, is clearly confirmed, because the Fed is ex- get his chance."

10 Economics EIR March 23, 1982 Banking by Kathy Burdman

Bailout time for the S&Ls from its commitment to guarantee Paul Volcker busts the federal budget once again; what's really savings," Senate Banking Commit­ tee Chairman Jake Gam (R-Utah) needed is low interest rates, at once. told the press in mid-March. This statement, not widely publicized, refers to the fact that until now, deposits in S&Ls have only been The near-bankrupt V.S. savings fund could also be used to give insured up to the $7 billion assets of and loan industry is about to re­ direct capital assistance to S&Ls the Federal Savings & Loan Insur­ ceive a hefty bailout from the fed­ whose net worth (capital) falls be­ ance Corporation, which has never eral Treasury on the order of $8- low 1.5 percent of assets. had any legal mandate to obtain $10 billion within the next weeks, Green flatly told the press that further Treasury funds should its my Washington sources now con­ Volcker is the real problem. "We own resources run out. While Garn cur. High time, too, for if the ad­ have waited fo r interest rates to fall, did not advocate any concrete bail­ ministration waits much longer and we can afford to wait no long­ out plan, this statement indicates a there will be many more S&Ls in er." he stated. real change. need of mergers and fe deral bail­ Volcker's rates are the reason Conservative House Republi­ outs than there is money in the why the S&Ls must pay out an can Barber Conable of New York insurance funds. Behind the move average of 16 percent on deposits, on March 5 endorsed the St. Ger­ is new support for S&Ls from while earning only an average 9 main plan, saying "We're going to White House Counselor Edwin percent on mortgages. This gave have to bail them out," and support Meese, who for political reasons is the S&Ls a loss of $6.4 billion in is reported to be growing among advising President Reagan to act. 1981, and they are losing close to $1 House Republicans. But what this drastic action billion a month now. According to my sources, the shows above all is that Reserve Days later, Presidential Coun­ White House itself has told Treas­ Chairman Paul V olcker is responsi­ selor Ed Meese met with the S&Ls, ury Secretary Donald Regan to ble for busting the V.S. budget. It is and for the first time began to plead prepare a list of "options for the Volcker's interest rates which have within the White House for a bail­ President" regarding the S&L cri­ bankrupted the S&Ls, and fo rced out. The free-market maniacs at the sis. These reportedly include a pub­ them onto the federal dole. This Treasury continued to argue that lic statement by the President or occurs when the V.S. deficit is al­ the government let the S&Ls "die," Donald Regan that the V.S. Treas­ ready rising at $20 billion a year for my source said, and no policy has ury pledges its "full faith and cred­ every one point Volcker holds in­ been firmedup yet, "but it is only a it" behind all deposits. This would terest rates above 10 percent. Now matter of weeks before the White be used after an emergency arose; Volcker is costing the taxpayers an­ House gets something through." such a dramatic announcement other $10 billion, for starters. Heavy lobbying by the industry would have little use in forestalling The White House moved after a and word that the White House an emergency, since it might fright­ call by the V.S. League of Savings thinks the situation is dangerous is en more depositors than it soothed. Associations and the National Sav­ also about to move Congress. The only real option is a bailout ings Bank Association March 3 for When House Banking Committe fund. "Theoretically we won't a $10 billion package of federal re­ Chairman Fernand St. Germain spend a cent," one White House lief. V.S. Savings League President (D-R.I.) called for a $10 billion aide told me, "but that's just the­ Roy Green proposed at a press con­ S&L bailout last month, it seemed ory. In politics, you have to be more ference that the U.S. Treasury es­ no one in Congress would consider practical. " tablish a new Community Deposi­ spending the money. But certain However, unless there is a low­ tory Conservation Corporation conservative Republicans have be­ ering of U.S. interest rates in a few which would pay S&Ls an interest­ gun to move. months, the bailout could double or rate supplement on their holdings "There is absolutely no way the triple and become a major budget of low-paying mortgages. This Congress would or will walk away headache for U.S. taxpayers.

EIR March 23, 1982 Economics II the administration for the Department of Energy for Science & Technology FY83 proposes to reduce funding from $2.822 billion in FY82 to $2. 184. This does not take inflaton into ac­ count. The bulk of the proposed reductions fa lls in the solar, conservation, environmental, and fossil-fuel pro­ grams. Though there have been protests from the solar and soft technology lobby that their programs were cut by over 80 percent, most of those programs never had any reason to receive federal funds. The fossil fuel research, however, included high-technology programs such as Congress to trade off magnetohydrodynamics and other coal, oil, and natu­ ral-gas research which is necessary to make the most nuclear programs? efficient and economical use of these resources. Senators and Congressmen have registered strong by Marsha Freeman, objection to the slashing of the fossil-fuel R&D budget from $566 million in FY82 to the proposed level of $107 Science Technology Editor & million. Most of the FY82 funding was money put back into the fossil-fuel programs after the OMB tried to end Could it be that the Director of the Office of Manage­ them last year. Through the budget cycle Congress ment and Budget, David Stockman, has used his own clearly expressed its judgment that these programs anti-nuclear prejudices to purposely put together a budg­ should continue. Now the DOE is trying to use these et request that so devastates other energy research and R&D dollars to end these programs by re-programming development programs that nuclear energy has now the authorized funds. become a target for cuts in order to restore other pro­ In hearings before the Senate Committee on Energy grams? and Natural Resources on Feb. 23, Senators from coal­ During the fo ur years of the anti-nuclear Carter producing states such as Kentucky and Montana told administrtion, the U.S. Congress voted funds to continue DOE Secretary James Edwards that the only place left work on the Clinch River Breeder Reactor (CRBR) in from which to take money for the devastated coal Oak Ridge, Tennessee, to demonstrate its support for programs was the nuclear budget. Specifically targeted nuclear energy over the objections of the Energy Depart­ was the breeder. ment. The liquid-metal fast-breeder-reactor program Senator John Melcher (D-Mont.) stated that the was seen as epitomizing the nation's long-term commit­ "coal R&D programs, compared to nuclear, are out of ment to commercial nuclear power because, in addition proportion. The budget is warped toward nuclear," he to producing electric power, the breeder produces more continued, "and defies all common sense." Edwards fuel than it consumes and could provide an indefinite lamely interjected that even the nuclear programs were supply of nuclear fuel. cut in the FY83 budget, from $1.089 billion last year to Now, for the firsttime in a decade, the administration a proposed $1.016 billion for FY83, but that did not in Washington has expressed its support fo r nuclear allay the anger of the Senators. power development, but it has submitted a fi scal year Wendell Ford, a Democrat from Kentucky, warned: 1983 budget request for the Department of Energy that "Nuclear programs will die if the fossil programs die. has provoked an anti-nuclear backlash in the House and Clinch River was funded last year because Congress Senate. also doubled the administration's request for fossil­ Last year, for the first time in history, a combination fuel" programs, he stated. of the free-marketeer Republicans and the anti-nuclear Angered by Edwards's feeble defense that the gov­ Democrats in the Science and Technology Committee ernment had to fund the nuclear R&D programs be­ succeeded in voting down funding for Clinch River. It cause the industry had been financially "burned" by the was restored on the fu ll House floor. This year it is Carter administration, Ford replied that "it is a riot that unclear whether the added weight of the disgruntled we talk about needing government funding for nuclear coal-state representatives who have previously supported when you're getting ready to 'burn' industry that works nuclear development will swing a majority of the House in the fossil-fuel programs, now." None of the coal­ and Senate against nuclear energy. state Senators agreed with the administration that the private sector would pick up the R&D if it were An "unbalanced" DOE budget dropped by the government, and in the case of magne­ The research and development budget submitted by tohydrodynamics (MHD) research, they insisted that it

12 Economics EIR March 23, 1982 should cohere with the administration's stated philoso­ Republican Rep. Claudine Schneider from Rhode phy of funding "long-term, high-risk, and high pay­ Island, known for her anti-nuclear proclivities, told back" energy R&D. DOE representatives the following day that their budget "MHO was zeroed out of the budget," stated Sena­ "lacked total credibility" because of the conflict be­ tor Melcher, "even thouh it is the only ongoing R&D tween their "free-market" rhetoric and support for program to use coal for central-based electric power Clinch River. generation. It has already generated some electricity The pro-nuclear leadership of the House Science and and is nearing the point of reaching its goals. It will Technology Committee has recognized the danger of increase the efficiency of producing electricity by using this backlash. In her opening statement on March 4, coal up to 50 percent, as opposed to conventional Marilyn Bouquard, Chairman of the subcommittee on steam-turbine methods, which are only 34 percent effi­ Energy Research and Production, which has jurisdic­ cient. tion over the nuclear and magnetic fusion programs, "MHO will be better at meeting federal standards charged directly that the "administration's funding for polluting emissions," Melcher continued, "and also recommendations are generally unacceptable." for thermal pollution. It will be low-cost with high "We hear daily that the DOE is on the verge of reliability and availability." MHO is a direct conversion precipitous action to break up critical R&D teams, a process which burns coal at a high temperature and gesture which can only be interpreted as a direct con­ converts it directly to electricity without the use of travention of the will and intent of both �his committee steam turbines. and the existing law," she stated. After scoring the Melcher was supported by Rep. Albert Gore (0- imbalance in the program funding, Mrs. Bouquard Tenn.) a week later when the Energy Secretary appeared pointed out that the "nuclear programs in fission R&D before the House Committee on Science and Technolo­ and fusion have now become enormously vulnerable gy on March 4. targets," even though the budget proposes "a 30 percent "The OMB sees that MHO is moving along with reduction in nuclear fission R&D and a significant great promise," he stated, "and is anticipating building reduction in real dollars for magnetic fusion." a demonstration plant" if success continues. That is why "Can the administration seriously expect this com­ [the OMB] zeroed it out-because they are not commit­ mittee to support these kinds of drastic measures all in ted to a large-scale, possibly $500mi llion demonstration the name of short-term economic recovery?" she de­ of a needed technology. "The majority in Congress manded. support this technology," Gore continued, "and you Mrs. Bouquard came to hearings on March 5 to are turning the constitutional process upside down" by discuss a report recently done by the DOE;s Energy seeking to "reprogram the funds authorized by Con­ Research Advisory Board (ERAB), which recommend­ gress to work on MHO" to terminate the program. ed downgrading the Clinch River breeder to a "low­ "Why has the administration chosen to negate the priority" project due to the lack of nuclear power plant Congress's action?" he asked rhetorically. construction. The danger in the current situation was summarized Bouquard introduced into the hearing record a letter by Rep. Harold Volkmer (D-Mo.), who stated that he sent by Scientists and Engineers fo r Secure Energy, had "always supported the breeder and nuclear pro­ which is based in New York City, in reply to her request grams, but now I see an unfairness. I will have to vote for a written response to the ERAB report. Their letter with the other members to take money out of the states that the ERAB recommendation on Clinch River breeder and nuclear for other programs." "misrepresents the role of Liquid Metal Fast Breeder Reactors (LMFBR's), and in particular, CRBR. The 'Free enterprise,' not Clinch River Clinch River project is a necessary step in bringing the Another kind of attack against the breeder and LMFBR program out of the paper-study and experi­ nuclear budgets came from freshmen Congressmen who mental phase and into the realm of practical use." have swallowed whole hog the administration's "free­ The project will "provide the United States with an enterprise" ideology. Rep. Vin Weber (R-Minn.) stated option for an orderly transition, if suclt a transition is at the hearings that he was elected "to pursue the needed, to a virtually unlimited fuel supply for electric development of the economy based on the philosophy energy production," the letter continues. of a radically new role for the federal government," Congo Don Fuqua (D-Fla.), who chairs the full which does not include funding for demonstration Science and Technology Committee, opened the hear­ projects like the breeder and synthetic fuels. Rep. Judd ings with the Secretary by stating that there is a Gregg (R-N.H.) chimed in that the Clinch River breeder "philosophical disagreement between the administra­ project had been "assessed by this committee last year tion and the committee"; and there has been a "disre­ as a failure, a white elephant, and non-economical." gard of Congress's strong support for nuclear energy."

EIR March 23, 1982 Economics 13 THE CARIBBEAN By making Jamaica the model Reagan told the govern­ ments represented at the OAS gathering that the United States will promote drug-based economies. Jamaica's Prime Minister, practicing voodoo priest Edward Seaga, has never been shy about what constitutes the essence of his nation's "recovery": drug revenue. During a January 1981 tour of the United States Seaga bluntly declared on 'Free-market' plan national television that his government could not and would not stop the marijuana trade-and the ,United boosts dirty money States should learn to live with it. In one of his first statements after taking office in November 1980, Seaga told Jamaica's bankers to ask no questions about the by Valerie Rush origins of money offered for deposit, just "grab it!" The centerpiece of the plan-granting Caribbean The much-heralded Caribbean Basin Initiative, promised products duty-free entrance into the UnitedSt ates-may by Reagan administration officialsfor months as a new result in some increase in the legal side of the economy policy framework for dealing with the Caribbean and such as goods produced in Hong Kong-like sweatshops. Central America, was finally unveiled last month by The increasingly drugged and impoverished people of President Reagan in a speech before the Organization of the Caribbean are to be put to work assembling gadgets American States in Washington. With all the lip-service from semi-manufactured parts shipped in by U.S. man­ paid to "economic health" as the key to stability in that ufacturers, items which will then be "re-exported," duty­ volatile region, the program announced by the President free, back into the United States. on Feb. 23 is in fact a carte blanche to Rockefeller and the drug-related interests behind his U.S. Business Com­ Colombia: drug money put to work? mittee for Jamaica to turn the Caribbean into a "Hong A new element in the Caribbean Basin Initiative Kong West" of slave labor and drugs. could be Colombia, reportedly peeved at its exclusion Marijuana production, along with transshipment of from last fall's Nassau summit of the United States, cocaine, heroin, quaaludes, and black-market weapons, Mexico, Venezuela, and Canada to discuss the Carib­ are today the single largest "industry" in the Caribbean. bean/Central America region. For most of the English-speaking islands, independence Vice-President Bush's visit to Bogota last October has been a cheap cover fo r the British colonial interests included an explicit invitation to join the Nassau Four to retain control over their properties and the old rum­ in their efforts "to try and stabilize the political and smuggling routes now turned to drugs. The Spanish­ economic situation" of the Caribbean. In Reagan's speaking Caribbean and the "banana republics" of Cen­ OAS speech Feb. 23, Colombia received honorable tral America are run as private plantations of United mention as a "potential donor" to the CBI program. Brands Company and its interlocking financial interests. What Colombia is likely to donate, however, is a It is the "magic" ofthis dirty-money marketplace which well-oiled apparatus fo r laundering the dirty money the Caribbean Basic Initiative is intended to promote; its expected to flow in increasing amounts through the chief sponsor is David Rockefeller, the former chairman Caribbean's free-enterprise economies. Colombia, of Chase Manhattan Bank, which in recent years has whose own economy is today fully dominated by the increasingly depended on "hot-money" flows from financiers of a mammoth and highly lucrative trade in Hong Kong and the Bahamas for its solvency. illegal drugs, is now prepared to export its expertise. The philosophy of the CBI, according to Reagan's Until recently, the Colombian government's aggres­ OAS speech, is based on the "fresh view ofde velopment" sively publicied "opening" into the Caribbean has been which he had taken into the Canc(m meeting on North­ more word than deed, with Colombia's credit-starved South cooperation last October: a long-term "free-enter­ productive sector unable to expand operations to meet prise" model to "help our neighbors help themselves." the challenge of a new market and its banks unwilling The $350 million in supplemental U.S. aid will be direct­ to take the risk. A series of monetary measures an­ ed toward the drug-linked "private sectors" while U.S. nounced QY the Turbay government on Feb. 15 was technical assistance and training programs will be geared ostensibly designed to free up the credit and provide the toward "creative private entrepreneurship." incentives for just such a move. Those measures, com­ Jamaica is the model of "making freedom work," bined with an official green light to Colombia's drug­ Reagan told the assembled Latin American diplomats, bloated financial sector to set up shop in the Caribbean, because its strategy of "reducing bureaucracy and dis­ are Colombia's credentials for participation in Rocke­ mantling unworkable controls" is pulling in investment. feller's new "Hong Kong West."

14 Economics EIR March 23, 1982 percent of capacity and, according to latest figures, laid COLOMBIA off some 180,000 workers in 1981. Nearly every textile company which has managed to survive to date is now threatened by or in the midst of labor strikes. Food production, which grew by a reported 8.1 per­ cent in 1979, declined at a 6.4 percent rate for the first nine months of 198 1. Colombia, traditionally touted as Illiquidity at home, having an "agricultural vocation," is today a net import­ er of food. cash outflowabroad The new program The government's latest measures could prove a by Valerie Rush and Carlos Cota Meza disaster for the already weakened economy. The stated intent of the Feb. 15 decrees is to bring interest rates­ The announcement of President Reagan's Caribbean now about 45 percent-down "naturally" by issuing Basin Initiative (CBI) on Feb. 26 brought a flood of credit "for production, not speculation." In fact, while protest from Colombia's private-sector producers, espe­ the measures do "unfreeze" a portion of the country's cially those involved in production of sugar, bananas, banking reserves, the extra liquidity is to be channeled coffee, and leather goods. The elimination of duties on into government-run "development" funds whose prior­ U.S. imports of these products from the Caribbean Bas­ ity by law is to pay off the fo reign debt. What liquidity in, they protested, will give unfair advantage to Colom­ does escape in the form of "credit for domestic capital­ bia's competitors in that region. "It could prove cata­ goods production," its nominal purpose, will do little strophic," declared one large sugar grower. for an industrial sector presently indebted by up to as Yet Colombia has just promulgated a series of mon­ much as 60 percent of its assets. etary measures with the alleged purpose of opening up The new measures also order a reduction in previous the Caribbean to Colombia's commercial and financial import surcharges on both raw materials and many con­ sectors. Those measures will in fact impose a "final sumer goods from 35 to 20 percent-guaranteed to solution" on what were once Colombia's industrial and finish off domestic producers such as the textile and agricultural sectors, and deliver the economy to the auto industries-and allow for increased fo reign indebt­ financialin terests behind that country's drug trade. edness of the private sector, a measure widely interpret­ The huge quantities of drug money that have flooded ed as a violation of the Andean Pact's Article 24, which Colombia's financial sector over the past five years have prohibits foreign takeover of an economy. given immense power-both political and economic-to Probably the most significant aspect of the govern­ entities like the Bank of Colombia, Colombia's largest. ment's new economic package is its Caribbean initiative. This "dirty" liquidity-combined with the government's In a meeting with the nation's top 19 banks Feb. 12, Friedmanite policies of tight money-has enabled the Development Minister Gabriel Melo Guevara invited country's three or four largest financial groups to bank­ the Colombian banking sector to enter the Caribbean rupt and buy out one chunk after another of the produc­ offshore market as part of the government's strategy of tive economy, to the point that even some of the fiercest "commercial colonization" of that region. Bank of Friedmanites in industrial circles, such as the president Colombia president Jaime Michelsen Uribe took up the of the National Industrialists Association, Fabio Echev­ challenge with a proposal to form a single trust compa­ erri Correa, have begun to demand lower interest rates ny made up of all of Colombia's banks, to facilitate "a and "a genuine industrialization program." more efficientpene tration" of the Caribbean. Economist Edgar Gutierrez Castro, at a conference One Washington-based Colombia-watcher observed last month in the depression-wracked city of MedeIHn, that Colombia had neither the transport capability nor warned that Colombia was undergoing a process of "de­ the internal economic health to "open up" the Carib­ industrialization, when it is imperative that just the re­ bean as a marketplace for Colombian goods. He ac­ verse occur." He pointed out that of 28 major industries knowledged, however, that Colombia's drug-generated in Colombia, 24 had drastically cut back their work liquidity, with no place to go in the bankrupt Colombia forces in 1981, 14 due to negative growth rates. At lease economy, could establish a cozy home for itself in the 78 percent of the industrial sector, he said, is suffering a Caribbean. As the London-based Latin America Weekly underutilization of capacity that is reaching 30 percent in Report observed in its Feb. 26 issue, "Colombian finan­ many cases. cial presence in the Caribbean ... fitsin very well with The textile industry, once the pride of Medellin and such key aspects of U.S. policy towards the area as the the entire country, is now operating at less than 50 Caribbean Basin Initiative."

EIR March 23, 1982 Economics 15 Business Briefs

International Credit 16.5 percent. The money-center banks ernmental channel for new economic may follow. policies," one participant told a journal­ East bloc debt sound, The problem of interest rates is that ist. "We're going to take over world though business loans have stagnated at policy initiatives." Austrians conclude large weekly reporting banks at $198 to The meeting discussed "a new pro­ $199 billion for the last five weeks, the posal on how to manage world exchange While the American financial press has volume of commercial paper is still ris­ rates, another plan on the management tended to portray the East bloc as on the ing, and corporate loan demand still re­ of world trade, and a third on East-West verge of massive debt defaults, others fuses to contract. Thus, though official trade and how to handle that," a source who deal extensively with the bloc con­ inflationhas declined over the last several said. test that view. According to the March months and producer prices fe ll a tenth 10 Neue Zurcher Zeitung. the Austrian­ of a percent in February, corporations East Bloc Chamber of Commerce has are not benefiting,because their interest­ evaluated the possibility of steady pay­ rate costs are still sky-high, requiring World Trade ments by East bloc debtor nations to the more and more bank borrowing. West. It concluded that only Poland and Japan may buy U. S. perhaps Romania present serious debt­ grain for Third World finance problems. Conference Report Romania, the Austrian Chamber The Japanese government is considering found, had "liquidity problems," but the a plan to buy U.S. grain for cash and holders of East German debt are "not Marshall Fund relays resell it to Third World countries on a threatened," and Czechoslovakia, Hun­ orders to governments deferred-payments basis, according to a gary, and Bulgaria have very sound cred­ report in the Japanese daily Asahi Shim­ it ratings. Under the auspices of the German Mar­ bun. The report stated that Washington The sole outstanding problem in the shall Fund, leaders of the Socialist Inter­ officials had been approached and re­ region, the Austrian Chamber stated, is national met in secret March 11 in New sponded fa vorably to the idea, though Poland, which has $27 billion in public York to lay out the policies they hope to Japanese Agriculture Ministry officials and private debt it owes to Western na­ dictate to world governments. The occa­ are unwilling to confirmdeta ils. tions and banks. The March 11 London sion was the first meeting of the Board of The plan was developed in response Finanoial Times reported that Poland is Directors ofthe Institute for Internation­ to increasing U.S. demands that Japan defaulting on two notes, one for $35 al Economics, the $4 million think tank open its markets further to American million, whose lead manager is Amex, fo unded by the German Marshall Fund farm products-a demand rejected by and another for $30 million, whose lead late last year. Japanese producers. manager is Banque Nationale du Paris. The meeting was held at the board­ But the Austrian Chamber of Commerce room of the Lehman Brothers Kuhn, concluded that even here, it appeared Loeb investment bank on Wall Street, that "Poland has everything covered." chaired by Peter Peterson, Lehman Economic Diplomacy Brothers chairman, who also heads the lIE board. Peterson is the U.S. chairman U. S. to Europe: Domestic Credit of the Brandt Commission, the Socialist International lobby for population cuts 'drop dead' u. s. interest rates pushed in the Third World. Other attendees included W. Michael The U.S. delegation at the March quart­ up by debt-finance needs Blumenthal, Jimmy Carter's Treasury erly meeting of the Organization for Eco­ Secretary; Karl-Otto Poehl, the Social nomic Cooperation and Development After earlier signs of weakness, interest Democratic head of the German central provoked a harsh confrontation with its rates bounded upward for the week of bank; Raymond Barre, former Prime European allies, EIR has learned. The March 8-12 on the strength of the in­ Minister of France; Lane Kirkland, head U.S. delegation to OECD's Group of crease of$3.4 billion in money supply for of the AFL-CIO; Andrew Young, Car­ Ten Deputies and Working Party III the latest reporting week. Three-month ter's U.N. Ambassador and a Brandt meeting in Paris was led by Undersecre­ Treasury bilL rates had bounded down to Commission associate. Several ostensi­ tary of the Treasury Beryl Sprinkel, an as low as 12.32 on March 9, but rose 40 bly conservative advisers to President outspoken isolationist and monetarist. basis points by March 11. And the prime Reagan were present as well, including At the meeting, entitled "Problems lending rate, which had been lowered to Alan Greenspan and George P. Shultz, and Policies in the Present Conjuncture," 16.0 percent by many money center members of the President's Economic West German and other European dele­ banks on March 6. was raised four days Advisory Board. gates repeated the judgment 'o f West later by two Detroit banks back up to "We intend to become the non-gov- German Chancellor Helmut Schmidt

16 Economics EIR March 23, 1982 Briefly

• ALEXANDER HAIG is appar­ that high U.S. interest rates are ruining and that imports may total 8 billion ently trying to collapse the world Europe. francs per month. gold price. Haig told a Senate The U.S. delegation, however, re­ hearing March 10 that the U.S. fused to listen to the Europeans, U.S. credit squeeze against Moscow has Treasury sources said. "We haven't lis­ forced the Soviet Union to dump tened to Germany up to now, and why Public Policy over 60 tons of gold onto the mar­ should we change policies?" a Treasury ket during January. The report, official said. "Schmidt's complaints are German central banker which Haig presented as a hot nothing new. He's been complaining for lies about depression State Dept. intelligence study, is months. So what? It's the same old song, not only a story which has been and we st ill disagree. Now he's got some out in the gold market for weeks, West German Central Bank President new nuances he's added; he say's there is but a lie. As EIR has reported, the Otto Poehl, on a visit to the United States danger of a world depression. So what? Soviets are swapping the gold with this month, has been advising Americans We don't buy it. ...We still insist that if central banks and keeping it care­ in press briefingsand private meetings to the German currency is weak because of fu lly off the market. high dollar interest rates, that's not our ignore some of the warnings of Chancel­ lor Helmut Schmidt about the dire con­ problem. We're on the right course, and • THE FEDERAL DEPOSIT In­ sequences of Federal Reserve chairman we will not change our monetary policy. surance Corporation, in violation Paul Volcker's high interest rates. Interest rates cannot be brought down by of the 1956 Bank Holding Com­ Showing a stronger loyalty to the loosening credit." pany Act, has allowed Chase Man­ Swiss bankers who control central-bank "They [Europe] can take it or leave hattan and Republic National policy than to his own government, it," he concluded . "What choice do they Banks to bid for the assets of the Poehl told the New York Times March II have?" failing New York Bank for Sav­ that Schmidt did not mean to accuse the ings, a mutual saving bank. The United States of causing a depression, FDIC cited the size ($3.5 billion in which, Poehl said, was "uncalled for." assets) of New York Bank for Sav­ Schmidt, Poehl lied, was merely engag­ European Community ings as the reason for its action to ing in domestic politicking for a German allow commercial-bank bidders audience, . "reflecting the pressure the Budget-cutters may for the thrift'sas sets. Chancellor is under from the leftwing of scotch French economy his own party." • AN INDUSTRIAL ROBOT Also on March II, Poehl told a meet­ with "sight" functions has been The French economy, which has been ing of the German Marshall Fund in developed by a research group at artificially maintained by a large budget New York that while he does not support Tokyo University. The robot, deficit, may undergo a sharp contraction Volcker's high interst rates per se, he which employs a mini-radar func­ as a result of new proposals by French "totally supports Volcker's efforts to cut tion, can find objects and take Socialist President Fran�ois Mitterrand. the U.S. budget," according to a report them to a designated place. As a result of deficit pump-priming, from a participant at the meeting. largely into wasteful areas, consumer in­ Poehl, an associate of the secretive • SHOICHIRO KOBAYASHI, comes have been maintained, and output Swiss-based Mont Pelerin Society, said, president of Kansai Electric Power has been supp orted. According to the "The U.S. deficit must be crushed." He Company, told the press Feb. 26 latest report from INSEE, the official continued: "Volcker is not a free agent that Japanese firms and Westing­ national statistical bureau, French indus­ and cannot lower interest rates at will, house of the United States would trial production in January 1982 was un­ but must have a victory on cutting the be able to sign a contract for devel­ changed from a year earlier. Thus, budget before rates can come down." opment of an advanced (nuclear) France, unlike the economies of the Only on the question of Europe po­ pressurized water reactor (PWR) United States and Germany, has stagnat­ tentially "decoupling" from the United early in April. Agreement has al­ ed but has not sharply declined. States altogether was Poehl in agreement ready been reached amoog Japa­ But on March 10, Mitterrand an­ with Schmidt's publicly stated views. The nese users of a PWR and the U.S. nounced that he will limit the budget idea has gained currency among leftists firmtha t of the total development deficitto 3 percent of total Gross Domes­ in Europe, but, Poehl said, "Europe cost, five electric power firms, in­ tic Product (GDP). This would cut the would have to take intolerable steps to cluding Kansai Electric will supply deficitto 125 billion fr ancs, from an orig­ accomplish this." 10 billion yen (about $42.4 mil­ inal projection level of FF 200 billion. "Germany would have to impose ex­ lion), and Mitsubishi Heavy In­ That wi ll remove the props to produc­ change controls worse than those now dustries, Ltd. and other Mitsubishi tion. Meanwhile, INSEE projects that imposed by France. This cannot work. It group companies 10 billion yen. French imports this year will grow three is not a solution," he told the Marshall times as fast as the growth of the GDP, . Fund group.

EIR March 23, 1982 Economics 17 TIillSpecialReport

The hidden strengths of the Soviet economy

by Uwe Parpart, Contributing Editor

Before December of last year, the dangerous and illusionary "crumbling empire" perspective of developments in the , Soviet Union and its East European allies had continually gained ground among Washington govern­ ment, intelligence, and military circles. According to this not exactly original perspective, first vigorously promoted by Carter's National Security Adviser Zbigniew Brzezinski and more recently publicly endorsed by President Reagan, bureaucratic mismanagement of the Soviet and East European economies , exacerbated by large military expenditures, will in the fo reseeable future lead to increasing economic hardship, popular dissatisfaction, and unrest throughout the East bloc, and a buildup of centrifugal tendencies in the outer reaches of the empire (i.e., non-Russian Soviet nationalities, etc.). The finalco llapse will not be far behind. But the evidently stabilizing effect of the Polish military takeover-some knowledgeable analysts, such as John Erickson of the University 'OfEdin­ burgh (see EIR , Jan. 19, 1982), fo resee an extended pe�iod of East bloc stability-will have dashed some fo nd expectations and perhaps calmer voices will now be given a hearing. Not, of course, if Henry Kissinger can have his way. Kissinger at a recent Washington gathering of the Committee fo r the Free World beseeched U.S. and West European policy makers that now more than ever is the time to be tough, to keep NATO together, to hold out at all costs, th us to ensure that in ten short years, the final victory will be ours. We will show in the fo llowing that Brzezinski and Kissinger's "crumbling empire" thesis and their policy recommendations based upon it must be rejected, if only because the principal pillar of their thesis-their analysis of the state of the Soviet economy-is thoroughly mistaken. Gross underesti­ mates of major aspects of Soviet economic development are nothing new. In 1977, the CIA published completely untenable forecasts of Soviet energy resources and production; in 1976, the CIA was fo rced to admit that its estimates of Soviet military expenditures had been off by as much as 100 percent over exten ded periods of time. In both cases, gross strategic miscal-

18 Special Report EIR March 23, 1982 Th is gas pipeline linking Mozdok in the North Caucasus with Kazimagomed in Azerbaidzhan will be compteted soon. culations would or could have been the consequences of of their intended result; nor, we should add parentheti­ such incompetence. cally, should any illusfons persist that forcing the Soviet A just-concluded study of the Soviet economy as a Union into ever-increasing military spending will lead to whole, conducted by the Fusion Energy Foundation and the imposition of intolerable hardships upon the Soviet the Executive Intelligence Review- with special attention population. The Soviet population's ability ,to tolerate to the military component-demonstrates that published such hardship is a known and tested quantity. The U.S. accounts by private institutions (e.g. Wharton Economic population's is not. Forecasting Associates) or government agencies on this topic are as inadequate and unreliable as the just-cited Trouble in 10th Five-Year Plan topically more limited CIA reports. The EIRjFEF Asjust noted, the Soviet economy, afteran extended study finds, contrary to prevailing "crumbling empire" period of growth in productivity and major categories theories, that: of output throughout the early 1970s, was not able to sustain this performance during the 10th Five-Year Plan I) while experiencing major difficulties espe­ (1976-80). In the final phase of the plan, the situation cially since the second half of the 10th Soviet Five­ reached crisis proportions in several sectors of the Year Plan (1976-1980), the CMEA economies retain a economy, most notably agriculture, and the growth rate significant growth potential in the immediate fu ture, of overall labor productivity collapsed to almost zero in augmented in particular by Siberiandevelo pment; 1979-80. Table (see next page) provides a comparison 2) Soviet and East bloc economic difficulties, I of Soviet and U.S. economic performance in tangible insofar as they are due to mismanagement and goods for key categories over the past 20 years. The related social factors, will tend to be alleviated figures show that consumer goods as well as heavy rather than exacerbated by enhanced military com­ industrial output fell to near zero-growth levels in the mand influence in economic management and re­ period after 1975. The LaRouche-Riemann model, used source allocation; in all aspects of the EIRjFEF study and fed with official 3) the Soviet economy, since at least 1977, has Soviet data* normalized for constant 1980 rubles, fully sustained military expenditures 'averaging close to confirmsa sharp post-I975 drop and draws attention to 50 percent higher than previous highest estimates what must have been relatively sudden major investment by "Team B" analysts in the United States. decisions. These developments, however, should not be Ironically, therefore, those who could not resist push­ too consoling to American observers, since growth rates ing the Solidarnosc destabilization tactic to the brink, in the corresponding period for the United States were will soon findthat they have brought about the opposite generally negative.

EIR March 23, 1982 Special Report 19 In first approximation, two general types of cause, explanation offe red by the "crumbling empire" both widely discussed in Soviet and western publica­ theorists. And there can be no question that tions, can be held responsible for the dramatic collapse widespread mismanagement and planning foul­ in Soviet growth rates after 1975: ups exist; in fact, they are widely discussed in the technical as well as non-technical Soviet literature 1) There were bad harvests in 1972 and 1975, and on economic SUbjects. There is clear evidence, in consecutive bad harvests again in 1979 and 1980. particular, of recognition of the negative conse­ Shortfalls in fertilizer production, and a general state quences of the retr.ogressive capital investment of disrepair of harvesting equipment (of up to 50 percent!) and farm machinery in general (especially tractors) further exacerbated an already bad situation. The cumulative effect of the grain imports required Table I to overcome agricultural production deficits and Food, steel, machine tool, ,and energy production, the diversion of investment to subsidize food con­ U.S.S.R. and U.S.A. sumption and production so taxed the economy Food production 1965 1970 1975 1980 that industrial output suffered. Red meat 2) While capital investment has absorbed over (kg. per capita) 25 percent of total economic output during most U.S.S.R. 38 44 50 48 of the post-World War II period, the efficiency of U.S.A. 78 83 78 77 capital investment (output per unit of capital) has Grain declined severely in the 1970s. This is due to (kg. per cap) failures to eliminate major bottlenecks in the U.S.S.R. (5 year ave.) 569 693 717 775 supply of materials (including metals) and energy U.S.A. 950 910 1160 1310 and in the transportation infrastructure, which in turn has given rise to an ever-increasing, produc­ U.S.S.R. average annual growth in per capita production, tivity-depressing backlog in unfinished construc­ preceding five years: Meat (red) +3.0% +2.6% -1.0% tion. There is a clear trend of investment capital Milk +3.4% +0.7% +0.3% flowing preferentially into the machine-building Grain +4.0% +0.7% +1.5% and metal-working sector rather than into the crucial infrastructural, transportation, energy, Steel production (kg. per capita) chemicals, agricultural machinery, and food pro­ cessing sectors. U.S.S.R. 397 480 557 559 Production and productivity losses resulting U.S.A. 617 580 490 447 from bottlenecks have been further exacerbated by a tendency for capital investment to go to U.S.S.R. average annual growth in per capita production, repairs of old facilities at the expense of new preceding five years: construction, and to "in-width" expansion of pro­ 3.9% 3.0% ·0.4% duction in the same technological mode at the Electricity production . expense of the introduction of new technologies (kilowatt/hours per capita) 1965 1970 1975 1979 into the production process. The cumulative effect U.S.S.R. 22 14 3065 4102 4721 of such inefficiencies has been the development by U.S.A. 5878 8000 9360 10493 the late 1970s of a serious threat to the further U.S.S.R. as percent of orderly and productive expansion of Soviet eco­ U.S.A. 38 38 44 45 nomic activity. U.S.S.R. average annual growth rate, preceding fiveyears The 'super-military-spending' hypothesis 6.7% 5.9% 3.6% While points 1) and 2) describe the phenomena �achine tool output (thousands of observed and reflected in Soviet economic statistics, units) 1960 1965 1970 1975 1977 they offer little help in the identification of the underly­ ing causes, especially of the precipitous decline in U.S.S.R. 188.9 220.6 243.3 281.5 290.3 growth rates after 1975. Generally, three different kinds U.S.A. 62.2 93.3 73.5 92.7 89.6 of explanations, not necessarily mutually exclusive, but U.S.S.R. average annual growth, preceding fiveyears: assigned different weight by different analysts, have 3.2% 1.9% 3.0% 1.5% been put forward: (for 1976-77) 1) Bureaucratic mismanagement, lack of econom­ Source: James Grant for JEC ic freedom and incentives, etc. have been the favorite

20 Special Report EIR March 23, 1982 profile of the economy. However, it is the judg­ exact size of such increased spending and the ment of this writer that to the extent that justified historical and future consequences for the Soviet dissatisfaction with management performance has economy of the level of military spending we have led to "Libermanite" decentralization and "free­ determined to now exist and to have existed enterprise" experiment in the Soviet and East bloc throughout much of the 10th Five-Year Plan, will economies, such experiments have not succeeded be analyzed in Steven Bardwell's discussion below. and have actually contributed to a worsening of As already indicated, we have found that for at economic performance. The often-cited "Hungar­ least five years now Soviet military expenditures ian model" is hardly relevant in this context; have been up to 50 percent higher than the highest decentralized management and a market-style in­ previous U.S. estimates. centive system are limited to certain specialized sectors of agricultural production and the units It is our contention that particularly the dramatic concerned were permitted not to incur (or have decline in Soviet industrial productivity in the past charged to them) infrastructural and other costs several years can be uniquely explained on the assump­ which previously depressed their profitability.The tion of our "super-military-spending" hypothesis. The principal problems to be resolved in agriculture argument is as follows: are cultural and social. In industry, the major In any economy, rapid increases in military spending roadblock to be overcome is the effective transla­ can be achieved only at the expense of a) the level­ tion of scientific and technological advances into qualitatively as well as quantitatively-of consumption broad-based productive techniques. Any attempt of the population (including health and social services, to blame the centrally planned character of the etc.), and b) new investment, especially in infrastructural Soviet economy itself fo r the recent downturn terms. clearly ignores the sharply conjunctural character The immediately observable consequences would be of this crisis. pressures on the consumer goods sector, and a rapid 2) The relatively depressed state of the world fu rther proliferation of bottlenecks in all non-military economy in the second half of the 1970s has been sectors of the economy as the demands of increased cited by both Soviet and western analysts as a military production and capacity utilization and expan­ significant contributing cause of Soviet difficul­ sion put heavy new strains on an already stretched ties. In light of the fact that the Soviet economy is transport and energy supply system. Massive new delays the most independent of the United States and in civilian construction of the reported kind would be Western Europe of any country in the world, inevitable, with immediate dour consequences for pro­ importing in every category less than 10 percent ductivity figures. of its own production, the only question is the Assessing the empirical evidence before us, we con­ extent to which the depressed world economy has clude that the Soviet economy has in fact given off all affected Soviet performance. The effect is proba­ the signs one would expect if the "super-military" thesis bly larger than the 10 percent import figures were true. The effect of the depressed world economy indicates. Especially in the area of new, high­ on the CMEA sector must be reassessed in this light: technology-based investments the Soviet economy the net profitability of the Soviet economy as a whole has relied to a much higher degree on western might have been high enough to cushion the civilian i,nports, and in some areas, such as the chemical sectors against the worst consequences of the increased industry, up to 30 percent of total investment has military budget; but imported western recession re­ been imported from and co-financed by the moved that cushion. United States and Western Europe. Since world­ What then lies ahead for the Soviet economy? inflation thus specifically hit highly sensitive new Viewed in purely economic terms, Soviet military spend­ investment categories, and since high technology ing at the present level is sustainable only if pre- 1975 investments are the principal motor of economic and higher productivity growth rates are restored to the growth, there can be no question that imported economy as a whole. The question then comes down to inflation and related factors have had considerable identifying whether there exist any marginsimme diately influence on recent Soviet and CMEA economic in the economy to accomplish such a productivity development. Still, the LaRouche-Riemann model recovery, and whether there exist a somewhat longer analysis of the Soviet economy shows that by term potential in the economy which would allow themselves world depression shocks were nowhere stabilization and recovery to be maintained even under near sufficient to account for the post-I975 down­ still-worsening world economic conditions. It is our turn in the Soviet economy. The single most conclusion that both the technical econ�mic and the significant factor is clearly: encompassing political preconditions exist to allow for 3) massive increased military spending. The an in-depth reversal of the present crisis situation.

EIR March 23, 1982 Special Report 21 In the short term, the added influence of the military in all sections of government, of which the Polish military takeover presents the most radical case, will lead to more effective and decisive moves against the grossest forms of economic mismanagement and coun­ teract negative consequences of decentralization. Ironi­ cally, therefore, what fo rms of obvious mismanag�ment exist in the East bloc economies provide under the changed political circumstances after Poland a certain significant margin of economic recovery. In the some­ what longer run, this same added military influence defines an optimal chance of more immediately bringing Soviet militarycosts : to bear on the Soviet economy as a whole the thinking and leadership of the scientific and military elite. This by Steven Bardwell, Military Strategy Editor elite has a greater chance than the entrenched bureau­ cracies of instilling a fighting morale in the population and of mobilizing the Soviet economy from the stand­ All experts (both real and self-advertised) agree that point of those areas of strength which give it potential the most problematic aspect of studying the Soviet econ­ advantages over its U.S. counterpart. Aside from gen­ omy is the extent and effect of the Soviets' military eral structural consideration discussed below, these spending. However, a few facts are universally acknowl­ areas of great potential strength in the 'Soviet economy edged: are identifiableas follows: I) Military expenditures are grossly understated in the Soviet budget as officiallyprep ared; a large and rapidly growing pool of scientific I) 2) Actual Soviet military expenditures are greater and engineering manpower characterized by un­ (as a percentage of total output) than those of the surpassed excellence precisely in certain fieldsmost United States; intimately related to future economic and military 3) The overall quantity of Soviet arms expenditures strength. These areas include the theoretical has increased secularly over the past 30 years. branches of mathematics, physics, astronomy, elec­ The standard estimates of the Soviet military budget trochemistry, and fl uid dynamics. Soviet excellence are reproduced in Table I. All of these estimates use the in the field of atomic particle acceleration is well­ same methodology to arrive at a figure for the Soviet known, and Soviet efforts here point to an early military budget: the official Soviet output figures are development of controlled thermonuclear fusion taken to represent a sum total of economic output, and power, as well as the development of a particle­ subjective criteria are used to determine the distribution beam weapons system. Soviet laboratories also lead of that output between civilian and military customers. in laser research, particularly the use of lasers in Even the careful estimates of Soviet watcher W. T. Lee fusion research, and as weapons against missiles and satellites. use this "inventory" method; his disagreement with the estimates of the CIA and Stanford Research Institute is 2) The sizeable and growing impact on the economy as a whole of the large Siberian infra­ that, first, they mistakenly include some output from the machine-building and metalworking industries in structure projects, elaborated below. 3) The build-up in the past 20 years of an the category of the civilian economy when Lee's conten­ tion is that it should be included in the category of the impressive and growing reservoir of machine military, and secondly, that a portion of the science tools. In this same period, total U.S. machine tool budget is actually military R&D. However, even Lee's stocks decreased by 7 percent, while the Soviet figures, if correct, only show a Soviet military budget Union experienced a 250 percent increase. which is comparable to that of the United States, larger The hidden strength of the Soviet economy lies in percentage terms but nearly the same in procurement primarily in the potential inherent in these three crucial terms when all uncertainties of dollar-ruble conversions, areas. Greater influence of the military-scientific com­ differences in pay scales, and so forth are take� into plex on the Soviet economy as a whole defines the account. These marginal differences · between the Soviet imminent possibility that this potential will be unlocked. and U.S. military budgets are then the basis for heated And among civilian economists, as well, there appears to be an increasing awareness of what is required. A more realistic picture *Source: Narodnoe khozyaistvo SSSR v. 1978q. , supplemented by . figures from the 1979 and 1980 editions and data of Ekonomicheskaya debate between policy-makers who all agree on this gazeta, no. 5, 1982. method of evaluation.

22 Special Report EIR March 23, 1982 U.S. figures for comparison. The striking difference in the percentage of productive industrial operatives be­ tween the two countries expresses most succinctly the potential strengths ofthe Soviet economy. The overhead expenses for the Soviet economy are significantly less than those of the U.S. economy because of the higher proportion of workers involved in the production of tangible output and the much smaller service sector. To some extent this reflects the relative backwardness of the Soviet economy, the lower productivity levels, and the more labor-intensive agriculture. But this relative a scientific estimate underdevelopment of the Soviet economy should not obscure the more important fact that the Soviet econ­ omy has not suffered the cancerous growth of a parasitic real-estate, services, "post-industrial" sector as has the United States. This accelerating deindustrialization of The unique power of the LaRouche-Riemann model the United States is responsible for the remarkable drop is its ability to get behind the superficial pictureof an in the proportion of the United States workforce in­ economy provided by output and inventory figures in volved in the production of tangible goods in the period order to arrive at an understanding of the causal between 1970 and 1980. The fact that the Soviet Union features of an economy. Such a causal analysis of the has not undergone this transformation toward what Soviet economy, working from a data base assembled fo rmer National Security Adviser Zbigniew Brzezinski by Clifford Gaddy of EIR 's Stockholm bureau, shows, hailed as the "technetronic society" is its greatest rela­ contrary to all other estimates, three facts about the tive strength today. Soviet economy: The depth of this advantage is illustrated in Figure 1) The Soviet economy functions at this point in a 2 with a comparison of the number of scientists and qualitatively different mode than the U.S. economy: it engineers involved in research and development in the has a positive net reproductive ratio, that is, it is growing two countries. The drop in absolute terms of the figure in its ability to reproduce itself, while the U.S. economy for the United States in the period after the height of is not. the Apollo program is symptomatic of the social and 2) There were two important, sudden shifts in the economic policy introduced in the late 1960s. internal composition of the Soviet economy, one in 1975 The consequences of these demographic facts were and again in 1978. These shifted it substantial and noted in the introduction to this report: the Soviet unrecorded amount of output to the military and signifi­ economy for the period between 1950 and 1975 was cantly impeded civilian production. All "inventory growing at a consistently high rate; it had all the methods" of estimation are inherently incapable of indications of an economy in the later states of indus­ detecting this "hidden" component of the Soviet econ­ trialization. However, in 1975 there is a sudden and omy. Thus, our estimate is of an additional 38 billion qualitative change in the growth rates, investment struc­ rubles per year at minimum spent on the military. ture, and productivity of the Soviet economy. 3) The Soviet economy, with its present rate of technological innovation, is incapable of sustaining this massive diversion of resources to military expenditures. Our projections show that a point of net disinvestment Table 1 will be reached by 1985, if current trends in productivity Other estimates of Soviet military expenditures continue. However, only small increases in productivity 1960 1966 1970 1975 1980' would be required to make even this large military diversion "affordable" for the Soviet Union. Such rates CIA2 18 21 24 25 29 of productivity were realized as recently as the early SRP 17 23 25 29 1970s, so that, should a policy stressing advanced W.T. Lee4 18 29 47 73 83 scientificresearch in the U.S.S.R. be adopted, the Soviet military budget could continue to grow. I Estimated from CIA published growth rates. 2 In billions of 1970 rubles. The LaRouche-Riemann model analysis of the So­ J In billions of 1970 rubles, median estimate. viet economy begins with the examination of the recent 4 In billions of 1970 rubles, median estimates. Defense analyst W.T. trends in the basic categories of real, tangible output Lee's findings were published in his 1977 book, Arms. Men and Military Budgets. and investment. Figure I shows the most basic of these, the overall composition of the Soviet workforce, with

EIR March 23, 1982 Special Report 23 ,------­ Figure I Employment by sector-U.S.S.R. and U.S.A. U.S.S.R. U.S.A.

NP NP NP NP 20% 22% 23% 29% NP NP NP NP PI 51% 56% 64% 70% 32% PI 39% PI 46% PI 48% PI Ag PI 35% PI Ag PI 48% Ag 35% 32% 39% Ag Ag Ag Ag Ag 27% 25% 20% 14% 9% 5% 4% 1950 1960 1970 1980 1950 1960 1970 1980

NP-Non-productive sectors Source: LaRouche-Riemann model data base. PI-Producti.e industry (totals of o.er 100% are due to rounding) Ag-Agriculture

The cause of this drop has been fiercely debated in that something else was the primary determinant of the West. We have rejected the explanations which Soviet economic behavior in the late 1970s; we believe would, somewhat self-consolingly, explain the Soviet that diversions of increasingly large amounts of tangible economic difficulties by crop failures, pressure from output were made to the Soviet military, diversions declining Western economies, growing costs of main­ which were neither recorded as military expenditures or taining the Soviet bloc countries, or accelerating ineffi­ as output in the first place. ciencies in the Soviet economy itself. Our study shows What the LaRouche-Riemann model revealed The starting point for the LaRouche-Riemann Figure 2 model study is the data presented above on the real Scientists and engineers-U.S.S.R. and U.S.A. output of the Soviet economy. This data has been (thousands employed in research and development) . compiled for the Soviet economy from 1950 through 1980 and reduced, using a set of special algorithms, to 900 the fo llowing quantities: 1) Total tangible consumption by the productive work 800 - � force. The work force in demographic terms is divided into two categories, those producing tangible goods 700 - (and transportation services) and those involved in all other enterprises. The workers in the first category are 600 - analyzed in terms of their consumption, to derive an � - - estimate of their total tangible consumption (housing, 500 - - - food, clothing, but not services). This figure then rep­ - resents the annual investment, in currency terms, of tangible output devoted to the reproduction of the workforce. This amount will change from year to year, U U U U reflecting both changes in the living standard of the U S U S U S U S S S S S S S S S workforce and changes in the size of the workforce at A R A R A R A R constant levels of consumption. 2) Total investment in plant, equipment, agriculture, and transportation. This quantity is measured from 1965 1970 1975 1980 official statistics and is used to calculate the changes in

Source: LaRouche-Riemann model data base. capital stock from year to year. 3) Total depreciation costs. This quantity, a part of total investment, expresses the equilibrium costs of

24 Special Report EIR March 23, 1982 Figure 3 LaRouche-Riemann modeled reproduction of an economy

N,

------T , S' 1 p{ T " 2 T,

~ =r: G) T = tangible consumption C = depreciation costs C1 � PR = productivity C C1 2 N = non-productive consumption

P = tangible profit (gross)

S' = tangible profit (net)

maintaining existing plant, equipment, agriculture, and tween the gross tangible profit and net reinvestment transportation facilities. represents a quantity of goods which are consumed 4) The difference between the sum of depreciation and without reappearing in the next cycle of production. total tangible consumption is calculated and called total This nonproductive consumption includes all services tangible profitfor an economy. It represents the fund out (both necessary and unnecessary), government bureauc­ of which all overhead expenses (those not directly racy, military expenditures, and scientificresea rch. productive of tangible goods), research costs, and new In the United States, this non-productive expendi­ investment must be made. This fund, aggregated for the ture has grown enormously over the past 20 years, as whole economy in our data base, is the margin of the speculative and parasitic parts of the economy have production above the equilibrium expenses required for increased. However, a growing non-productive con­ maintenance of the workforce and capital stock. sumption can also reflect the process of industrializa­ Using these quantities, a number of subsidiary quan­ tion, rising living, educational, and cultural standards, tities are calculated which provide an "intrinsic" picture and increasing commitments to research and develop­ of the Soviet economy and the basis for projecting ment. Non-productive consumption, while assigned a economic behavior. single quantitative value, is much more a figure of 1) Gross reproductive capability or ratio. This is the qualitative significance. In the case of the Soviet Union, ratio of total tangible profit to the sum of the equilib­ non-productive consumption has grown steadily in per rium costs of the economy. It is a measure of the total capita terms (see Figure 7), and for the period 1950-75 productivity of the tangibles-producing base of the this slowly rising ratio was directly and tightly corre­ economy. This quantity is, historically, very closely lated with rising productivity. The correlation-which correlated with traditional measures of productivity and does not exist at all for the U.S. economy over the last profitability, depending on the level of technology in an 1 5 years-reflects the economic importance of invest­ economy, on the development of infrastructure, and on ment in education, research, health care, and other the quality of the workforce. necessary but non-productive economic activities. 2) Total net reinvestment. The yearly change in That is to say, the cause of the rising productivity is tangible consumption, added to the net new investment, investment in these areas and their realization through gives an estimate of the portion of total tangible profit investment in capital embodying new technologies. Fig­ which is reinvested in the production of tangible output. ure 3 summarizes this reproduction process. This quantity, called S', is an unnormalized measure of 4) After factoring out non-productive expenses, the the growth potential of an economy. In the United quality of investment decision in an economy is most States, for example, S' has been negative for the past sensitively measured by the ratio of S' to the total several years as the economy has begun to decline in the equilibrium costs of the economy. This ratio, the net production of tangible output and its reinvestment. reproductive ratio, measures, the ability of an economy 3) Nonproductive consumption. The difference be- subject t9 the given investment decisions to continue to

EIR March 23, 1982 Special Report 25 + 55000 .8000+ ! I I I • I I I • • I I I I • • • S' I PR I II. RILS ! ! I I • + + I I I I I ! I I I I ! I . I ! '" * I 10000 ! ! .5000 ! + _ _ - -+------+ -----_ -+------+ _ .. --_ .. -. +------+ - -- .. -+ ------.. •• •• .. -- +------+_. _ ---- -+- ---.. ---+ .. __.. _-_ .. +.. _ .. _ .. _--+-- .. __ ....-+_ ...... _-- +-...... _--- 1950 1964 1'50 1'64 NET RE INVESTED PROFIT FOR SOVIET ECOSOHY PRODUCTIVITY FOR SOVIET ECONOIIY Fig. 4 Fig. 5

.1200 1 .1000+ ! • I I· I I I I I I I I I S'I I NPI I (C+V) I V I I I + + I I I I I I I I • I I I . • I • I I ! I .2000 1 I + -_.. _--- -+ ------+ ----_ ..--+ ------+------+------+------+------+------+--_...... _--+------+- _ ... - - -; _ ...+- - - - _ ....-+- - - .. ----+ ...._ ...... -+ ...... - _ ...- . 1950 1966 1.50 1.64 . NET REPRODU ! l IET ECONOIIY lION-PRODUCTIVE RATIO FOR SOVIET ECONOIIY Fig. 6 Fig. 7 � � I�r ���

70000+ 100000+ I I I I I I I - I I I I I s' I S' I - " RILS I I " RILS I I II I + + I I I I I I 1 I I [1 11 I - .. - - ... 1 I - I I - I I 0 1 - - -- -1------I +---_ ... __.. +---_ .. _ ... -+ ...... _-----+_ ...... _----+-_...... +_ ...... _ ..+ ...... _---- + ...... _ ...... +_ ... _ .. -_...... + _-----..+---- .. _ .. ...+ .. _-_ ...... +... __ .. __... _+-----_ ..-+-- ... - ... ---+- ....-_ .... 1.50 1.6" 1950 1966 HISTORICAL 'HIDDEN IIILITARY COSTS' IN SOVIET UNION 'HIDDEN IIILITARY SPEhllING' IN SOVIET ECONOHY (HIGH) Fig. 8 Fig. 9

grow. In analytic terms, this ratio is the instantaneous (Figure 5) and in the net reproductive ratio (Figure 6). growth rate of total tangible production. Note that if this recent drop in reproductive capability 5) A measure of productivity unique to the model is is proj ected forward as shown in Figure 6, the Soviet provided by the ratio of total tangible profit to total economy reaches zero growth by 1985-86. tangible consumption. This ratio is a slowly changing The model provides several insights into the cause function of the quality of manpower and the level of of this drop. First, as shown in Figure 7, the overhead technology available to that workforce. expenses per productive worker, have not increased in a Graphs for some of these quantities are presented in different way during this period than they did during Figures 4 through 7. Figure 4 shows the net reinvested the previous 25 years. That is, the economy was not profit for the Soviet economy from 1950 through 1980. more inefficient, attempting to support a larger burden This graph shows quite clearly that a qualitative change of reported military, service, or scientific endeavors than in the Soviet economy occurred after 1975. While S' had previously. What happens is that the quite close corre­ been rising steadily in the 25 years previous to 1975, lation between productivity and overhead expenses there is a rapid and sustained decline in the reported which obtains for the Soviet economy (but not for the investments after that point. This change is shown not U.S. economy in the same period) between 1950 and only in total reinvestment but also in productivity 1975, is suddenly broken. By official statistics and our

26 Special Report EIR March 23, 1982 modifications of them, military expenditures are in­ cluded in this overhead category. That is, they are Table 2 expenditures which correspond to tangible output, but Increments of "hidden" Soviet defense spending they are invested in nonproductive activities not produc­ (billions rubles) tive of further tangible output. 1975 1976 1977 1978 1979 1980 However, this "tax" on the productive economy has not increased at a rate different between 1975 and 1980 Low estimate 17.6 22.4 21.6 26.2 34. 1 38.3 than it had between 1950 and 1975. In fact, there is no High estimate 17.6 22.4 33.0 54.0 59.0 64.0 reported statisti�al indication of the possible source of this difficulty. While the causes noted above of increas­ ing obsolescence and agricultural difficulties are un­ doubtedly relevant, they are also of insufficient magni­ and the structural impact of this spending has changed tude to account for the simultaneous drop in during the past fiveyears . productivity and reinvestment rates, at the same time that overhead expenses as reported continue to increase. Can the Soviets afford their military budget? Our contention is that th�re are large unreported Finally, we evaluated the effect of this military military expenditures which must be added to the spending on the Soviet economy, spending which we reported output of the Soviet economy. This output was estimate to be approximately 70 percent larger than the produced, but was diverted to military investments largest conventional estimates. To do so, we performed during the 1975-80 period and not reported in official two projections fo r the Soviet economy's future. In the Soviet statistics. This amount is in addition to the most first, present productivity trends continue and the Soviet careful inventory estimates made of military spending. economy continues to devote 50 percent of its reinvest­ No other explanation can account for the bizarre ment fund to military procurement. This projection is changes in the Soviet economy. shown in Figure 6. The Soviet economy, in this scenario, To estimate the magnitude of this diversion, we use is unable to sustain these military expenditures and the most important property of the LaRouche-Riemann enters a phase of zero growth during the middle 1980s. analysis-its ability to lay bare the investment structure However, this scenario assumes that the abnormal of an economy, its real growth pot�ntial. The Soviet productivity trends of the past fiveyears continue. If we economy's growth potential, as measured by its net assume that the average productivity growth of approx­ reproductive ratio, is easily determined in approximate imately 3 percent per year, as seen during the past 20 terms, and it is straightforward to use the model to years, continues for the period 1980 to 1985, the Soviet answer the question: how much additional reported S' economy would grow even while sustaining an ever­ would have to be added to the reported S' to restore at larger burden of military expenditures. Figure 9 shows least constant growth potential to the Soviet economy? the military costs in this scenario, a figurewhich reaches That is, the growth potential is most con servatively approximately Ito billion rubles by 1985. estimated to have remained constant during 1975-80 in This figure is easily affordable by an economy whose actual terms. How much unreported S' exists that would productivity is increasing. That is, if the Soviet Union is account for the apparent drop in the reproductive ratio? able to realize its plans for Siberian development, and Figure 8 shows our "low" estimate of the hidden to translate even a small part of the advanced techno­ military expenditures in the Soviet Union for this pe­ logical possibilities of a large military budget into riod. Table 3 tabulates both a low estimate, based on productive reinvestment, its economy will grow rapidly. the assumption that the reproductive ratio would not A large military budget based on the development of have decreased, and a high estimate, based on the plasma technologies and directed energy-beam and assumption that the reproductive ratio would have space-based weapons , is precisely the sort of military continued to increase at half the rate it had been which "pays its own way" because of the productivity increasing for the past ten years. increases it effects in the civilian economy. It is important to note that this series itself is divided This simple economic fact is proved in the converse into two periods. During 1975-77 the proportion of by the current military budget in the United States. The diverted S' is about 50 percent of thetotal reported S'. U.S. military budget, lacking a "science driver" of However, in 1978, this proportion jumps to almost 100 advanced research and development, spending increas­ percent of the reported S'. That is, half of the reinvest­ ingly large sums on existing or obsolete technologies, ment fu nd for the So viet economy was di verted to and orienting more and more away from advanced military expenditures during the last three years of the technologies in its R&D funding, produces not only a decade. Both of these conclusions are important: the decrepit military capability, but also renders itself unaf­ Soviet military budget is much larger than reported, fo rdable.

EIR March 23, 1982 Special Report 27 Siberian development: the fulcrum of U.S.S.R. economic growth

by Rachel Douglas, Soviet Sector Editor

Iran West Siberian natural gas pipelines

28 Special Report EIR March 23, 1982 The acceleration of Soviet military investment correlates and longevity of the country's economic mecha­ with the international situation and NATO strategies. Of nism .... There must be further improvement of course, the commitment of resources to defense has the system of the mobilization readiness of the consistently risen since the Cuban missile crisis of Octo­ national economy, because a close interconnection ber 1962. But the inflection points observed in the mid- among the mobilization readiness of the Armed 1970s and in 1977-78, for instance, followed closely upon Forces, the national economy and civil defense is a international events which must have convinced the So­ very important requisite fo r maintaining the defen­ viet leaders that a constant rate of military expansion was ses of the entire country at an adequate level. not sufficient fo r them. Brezhnev and the chiefs of industry In 1973-74 there came, in rapid succession: the Wa­ Through an ever more perilous decade, when atten­ tergate scandal,just months after Nixon had been Brezh­ tion to defense was so dramatically redoubled, the core nev's host in the United States; the October 1973 Mideast of Soviet foreign policy has nevertheless been war war; government collapses and social upheaval in Europe avoidance. The central figure is General Secretary Leo­ in early 1974; the U.S. Jackson-Vanik amendment link­ nid Brezhnev and the central idea is his detente, or ing Soviet-American trade to Jewish emigration from the "relaxation of tensions" with the West. To understand U.S.S.R.; and the proclamation of a "limited nuclear Brezhnev, as well as the possibilities of the post-Brezh­ war" strategy for NATO in the initial guise of the Schles­ nev years, it is best to set aside the aspect of his foreign inger Doctrine. The second inflection point, in 1977-78, policy that is foremost both in Soviet propaganda and had to do with the Soviets' realization of what four years in Western ruminations about East-West relations, with Jimmy Carter as President of the United States were namely, arms limitation. going to look like. Secretary of State Cyrus Vance's Looking instead at Brezhnev's career-long alle­ March 1977 trip to Moscow with a proposal for "deep giance to the Soviet steel industry and later the national cuts" in strategic arsenals, a proposal guaranteed in economy, something more fundamental is discernible: . advance to be rejected, was read in the Kremlin as fair this is someone concerned with building a nation state. warning that the opposite course, an arms buildup, The staying power of Brezhnev, and of his close Polit­ would probably ensue on both sides. buro allies Kirilenko and Tikhonov, derived not only Since then have come the "China Card" of American from their practiced skills at bureaucratic infighting, geopolitics; the December 1979 "two-track" decision on but from their more essential identity as chiefs of medium-range missiles in Europe, which the Soviets industry. regularly call a "first strike" decision, and which pre­ For the rest of the world, this quality came out in ceeded the invasion of Afghanistan by a fortnight; the Brezhev's negotiations on East-West trade. Because of Polish crisis; and the ouster of Brezhnev's detente inter­ what Chancellor Helmut Schmidt had to contribute, it locutor Valery Giscard d'Estaing of France last year. was during Brezhnev's 1978 visit to Bonn that it was We may be now at the gravest moment yet, as the most fu lly exploited, when a 25-year cooperation pro­ Soviets read the international crisis, and the conse­ tocol set joint economic development projects as a quences become visible not in defense spending alone, bedrock for a stable political relationship. Brezhnev's but in the political prominence of the Soviet military. West German television speech had a profound effect The contingent of generals and admirals on diplomatic on the population-not the greenies and the future missions to every corner of the globe is larger from year peacenik movement, but the ordinary citizenry-be­ to year, and during 198 I their contributions to Soviet cause he spoke with fervor about building industry and party and government publications became more asser­ developing Siberia. tive. In a July 1981 article for the Communist Party In Brezhnev there is a vestige, however weakly periodical Kommunis(, Soviet Chief of Staff Marshal articulated, of what scared the daylights out of H. G. Nikolai Ogarkov defined the military and the economy Wells and Bertrand Russell when they encountered the as a whole as coextensive: national electrification plan of G. M. Krzhizhanovskii The question of prompt transfer of the Armed in the I 920s. It caused progress-hater Russett to curse Forces and the entire national economy to martial the Bolsheviks for wanting to make the sensitive Rus­ status-of their mobilization in a short period of sian soul "industrial and as Yankee as possible." time-is posed more acutely . ... Now, as never The outlook is more strongly pronounced in other before, it is necessary to achieve coordination of Soviet circles than that of Brezhnev's party comrades. the mobilization of the Armed Forces and that of We see it in a Soviet scientist who speaks proudly about the economy as a whole, particularly respecting "our Count Witte," the tsarist finance Minister who led human resources, transport, communications, the Russia's late 19th-century industrialization with Ameri­ power industry, and means to ensure the resistance can dirigist methods adopted from Germany's Friedrich

EIR March 23, 1982 Special Report 29 List. Academy of Sciences President A. P. Aleksandrov usually dictated by the prognosticator's own expecta­ expressed it not long after the Three Mile Island acci­ tions or even preferences about crumbling in the West, dent, when he was quoted as saying he wished America is that they exclude a range of possible new ideas, had a vigorous nuclear energy program because that policies, and institutional arrangements on the other would make us energy-secure, more stable, and less side. The only reliable way to assess Soviet policy is to likely to go to war. gauge what the Soviets are doing against what they The Soviet military, to the extent it houses military would do if they were smart-bearing in mind that a professionals who think more in terms of the global combined strategic and economic crisis invites interven­ power of the state than of party ideology, is another tion from the military and scientists, who may be able collecting point for such views. to raise collective intelligence in the Kremlin by no There are, of course, other tendencies in Soviet mean margin. policy-making which are devoid of the builder's quality. These were embodied by the late Mikhail Suslov, the The two futures of Siberia Marxist-Leninist encyclopedia who yielded to Brezhnev The huge construction projects of Siberia-the re­ the top party job he helped Khrushchev vacate in 1964, gion's share of national investments climbed towards 20 and the old Communist International apparat carried percent in the late 1970s-will be of worldwide signifi­ fo rward by the Central Committee International De­ cance, with or without Western participation. Without partment a.nd the KGB. Also included are most of the the West, in circumstances of aggravated East-West fo reign policy think-tank personnel, who have so cor­ hostility, Siberia will be a main girder of "fortress rupted their powers of judgment by studying Western Russia," and a reinforcement of the U.S.S.R.'s long methods of sociological analysis that few of them could eastern frontier. Last year a top Siberian scientist told begin to grasp the significance of maintaining the Witte the German business daily Handelsblatt that Soviet tradition. scientists were projecting development to work without Western technology. The economy and the succession But if the West abandons neo-Malthusianism and Currently circulated Western scenarios for the Soviet gets serious about world economic recovery, then the leadership succession open the door to dangerous stra­ Siberian frontier will become a boon for trade and tegic miscalculation. According to one prognosis, even development-anchored security, in which the natural­ a neo-Stalinist interlude after Brezhnev would inevitably gas pipeline from Siberia to Western Europe will have give way to the ascendancy of liberal decentralizers­ been the first of many projects. young technocrats schooled in systems analysis-when Most Soviet construction "from the ground up" is the Soviet economy could no longer support its mili­ now in Siberia. The principle of growth "through better tary burden. German Sovietologist Wolfgang Leonhard use of already-created production potential and recon­ has made this case in print. Abram Bergson in the struction and technical re-equipping of existing enter­ International Communications Agency's Problems of prises" for the rest of the country, is enshrined in the Communism (May-June, 198 1) and William Hyland in 1981-85 Five-Year Plan, which forbids "location of new the Council on Foreign Relations' Foreign Affa irs (the and extension of existing power- and water-intensive latter written aftermartial law began in Poland) alluded plants ... in the European regions." This main line, to it, posing the possibility that "a degree of austerity" refurbishing old plants, has been the target of criticism (Bergson) will face the Soviet defense sector soon. from Soviet economists studying the brake that current In the London Times of Feb. 18, 1982, Arrigo Levi, investment practice puts on the spread of more produc­ unchastened by the results of British attempts to further tive, new technology. But fo r now, it is law. a liberal decentralizers' takeover in Poland two years There are three main Siberian deVelopment zones, ago, proposed that the West start working on means to each comprising one or more so-called Territorial Pro­ strengthen the hand of "economic bureaucrats" against duction Complexes (TPC). They are the West Siberian "party bureaucrats" and "military bureaucrats" in the oil and natural gas fields,ju st east of the Ural Moun­ U.S.S.R. tains; the Angara-Y enisei river basin in central Siberia; Other British scholars accept the probability of and the land along the north of the Baikal Amur internal tightening up, before and after Brezhnev, but Mainline (BAM), a second trans-Siberian railroad un­ look fo r a new Russian national-chauvinist leadership der construction from Lake Baikal to the PacificOce an. to hold the fort against ethnic minorities in turmoil. West Siberia: The exploitation of West Siberian Both the "decentralizers" and the "Russian" sche­ fossil fuel deposits on a large scale dates only from the mas rely on the crumbling of the Soviet empire, a 1970s. In 1976-80, oil from the expanse of forest, lakes, premise which has proven a less than sure guide in the and swamps above 58° N latitude accounted for 90 case of Poland. The flaw in such paradigms, which are percent of the increase in Soviet petroleum extraction.

30 Special Report EIR March 23, 1982 Tyumen • Omsk •

Orenburg ')_...-:::�::��_P...:ipe,--li_n _e_t.:O-!"8 - ra tstvo" S�s\e((\

The three Siberian development zones Distributionof U.S.S.R. natural gas to Europe --- existing lines -1980gas distribution lines ...... Vamburgpipeline ..••••• planned line Total capacity of gas distribution ltnes In 1980was 21 billion cubic meters per year to Western Europe. With the completion of the Yamburg pipeline, this will nearly triple to 60 billion cubic meters per year

This was achieved with the investment of I billion rubles the Soviets. Earth cuts and road-building for the up to a year, or 2.2 percent of total Soviet investment in $15 billion project began soon after the first contract industry. for the gas deal was signed with Ruhrgas in West Natural-gas exploitation is now proceeding at a Germany on Nov. 20, 1981. Wide-diameter pipe and faster pace than oil. The Urengoi-Uzhgorod Export compressors are coming from companies in West Ger­ Pipeline, commonly known as the Yamburg pipeline many, France, Italy, and Britain. Upon completion, the after one of the gas fields it will eventually tap, is one of line will triple Soviet gas exports to Western Europe, six new gas lines leading from Urengoi, in West Siberia bringing in"26 percent of West Germany's natural gas near the Arctic Ocean, being commissioned between (5.5 percent of primary energy consumption) and earn 1980 and 1985. The Yamburg pipeline will be 4,465 the Soviets as much as $10-15 billion per year in foreign kilometers long from its source to the Czechoslovak exchange. border and will be built in two years time, according to Angara-Yenisei Basin: The Yenisei River, which with

EIR March 23, 1982 Special Report 31 its tributaries comprises the middle one of Siberia's prospects for exploiting Siberian natural gas adjacent three great river systems, starts with the waters of the to the Bering Strait and piping it out to the Western Himalayas. On its upper reaches, the 6400 MW Sayano­ Hemisphere. This scheme, on the scale of the projects Shushensk hydroelectric power dam, biggest in the drafted in the Global Infrastructure Fund of Japan's world, is under construction; it is one of 12 dams in Masaki Nakajima (EIR, Feb. 23, 1982), is only at the place or planned on the Yenisei and the Angara River. proposal stage. Around it is the Sayano TPC, which is to contain the Aganbegyan also boosts an even larger infrastruc­ Sayan Aluminum Plant and fo ur clusters of machine­ ture project, for diversion of waters from the West building and light industry development. Siberian Ob-Irtysh river system to the Central Asian In the same region is the Kansk-Achinsk TPC, based rivers that empty into the Aral Sea. A 2,230-kilometer on strip-mining the largest prospected Soviet coal de­ canal, built over 30 to 40 years, removing one hundred posit, 72.6 billion metric tons of lignite. Soviet special­ times the earth moved to build the Panama Canal, ists are debating heatedly about the best technologies would bring at first 6 percent and later 15 percent of the for exploiting this volatile, low-grade coal, but the plan Ob's flow south to irrigate 15-20 million hectares of arid is to raise Kansk-Achinsk's 5 percent share of Soviet land. Study and preparatory work for the canal are coal production substantially. Soviet officials told West ordered in the current Five-Year Plan. German economic officials last year that Kansk­ Achinsk could become "a new Ruhr," a center of heavy Debates on investment, organization industry that would invite foreign investment. Siberia suffe rs from the same afflictions as the rest of the Soviet economy: labor shortage, blockage of new Baikal-Amur Mainline: The BAM development proj­ technologies, and organization snarls. In one 1981 ect best illustrates the impact of Western investment, or article, Aganbegyan claimed that 1 million people in its lack, on Siberian development plans. The original Siberia could be taken out of maintenance and repair scheme when BAM construction began in 1974, was for jobs alone, if cold-weather technologies were gotten off 70 percent of its eventual cargoes to be tanked crude oil the drawing boards. bound from West Siberia to Japan via a complicated Work with the basic unit of Siberian development, pipeline/freight car transport system. Negotiations for the TPC, has yielded potentially fruitful approaches to this part of the project broke down, while the Soviets the problems of organization. The point of interest is decided to use the West Siberian oil in the western part not the systems analysts' efforts at optimally juggling of the country and for export. Three-way talks among the resources allotted to a given TPC, of which analysis the Soviets, the Japanese, and EI Paso Natural Gas there is a surfeit, including at Aganbegyan's Novosi­ Company of the United States also petered out in the birsk Institute fo r the Economy and Organization of late 1970s, leaving exploitation of the trillion-cubic­ Industrial Production, but that several Soviet planners meter natural gas fields around Yakutsk, north of trace the TPC to its antecedents in the electrification BAM, an open question; the Soviets had contemplated and industrialization campaigns of the 1920s and 1930s. this as an export venture only. Aganbegyan wrote in the Central Committee indus­ Construction of the 3,145-kilometer main span of try daily last year that the appropriate model for manage­ the BAM has gone ahead, and the 1981-85 plan refers ment of a TPC was the 1930s Ural-Kuznetsk project to "preparations" for exploitation of iron ore in the under Stalinist industrializer V. Kiubyshev, who as a BAM zone, which also has deposits of copper, tungsten, government commissar was empowered to reallocate manganese, graphite, diamonds, gold, tin, lead, and monies and order departments "to do what the state other minerals. Near one of the iron ore deposits around needed done at a given moment." According to Agan­ Neryungri, there is also high-grade coal. This town is begyan, the West Siberian Petroleum and Gas Complex, reached by the "little BAM" spur of the railroad, fo r instance, should be overseen by a person of minister­ already built, by which the coal may be transported to ial rank with this degree of say-so. He should be able to the coast via the first trans-Siberian railroad. By 1979, cut through on-site parochialism that wastes millions of the Japanese had invested $540 million in the exploita­ rubles; another Soviet report on TPC integration re­ tion of Neryungri coal (13.5 percent of Japanese cently cited the case of a major rail line built in West U.S.S.R. investments up to that time), under an agree­ Siberia, fo r which the Ministry of Transport Construc­ ment for the supply of 5 million tons per year of tion ommitted any track to connect the railroad to the Neryungri coking coal to Japan over forty years; the towns and plants it was supposed to service. scale-up of deliveries to that level is behind schedule. The exigencies of economic mobilization in the face Siberian economic specialist Abel Aganbegyan, ac­ of international crisis, such as Ogarkov wrote about, cording to Allen Whiting's new book East Asian Siber­ can work in fa vor of application of 1930s-vintage ia, looks north of the BAM area and Yakutsk to command methods. It may also bring to the fore a

32 Special Report EIR March 23, 1982 lobby of economists for radical reform of Soviet invest­ transition to higher productivity through technology. ment policy as it affects technological advance. Although meagerly followed up since then, it was At the 26th Party Congress one year ago, Brezhnev launched by economist V. Lebedev on the authoritative demanded that "industries having a particularly strong pages of Pravda. Writing in terms of a "struggle" for scientific base, including defense" make a special con­ raising the technological level of the economy, Lebedev tribution to "the regroupment of scientific fo rces" for proposed that "centralized leadership of scientific and the economy. Almost universally treated in the West as technical progress and the whole economy" be effected a criticism hinting at impending sacrifice of defense through the establishment of large projects to pioneer requirements fo r consumer or other sectors, Brezhnev's advanced industrial technologies and serve as beacons remark has quite another implication if placed in the to guide their proliferation through the economy. On context of Ogarkov's thesis on integration of the mili­ investment, Lebedev lined up with Fedorenko and tary and civilian economy: it calls for military-style Lvov's later argument: "Plans for the steel plant of the management, efficiency, and R&D in the whole econo­ future," he wrote, "show the possibility of raising the my. productivity of labor by a factor of five or six .... A The Soviets' problem with industrial technology is new factory will cost nearly 40 percent less than the best that innovation remain bottled up, unavailable to indus­ of those now under construction. And every branch of try at large. N. P. Fedorenko and D. S. Lvov, two top industry should prepare well in advance to build and analysts from the Central Economic Mathematics Insti­ assimilate such facilities; they should be the chief guide tute, wrote in November 1981: "Some 70 percent of for development." In this light, Lebedev recast the capital investments go to reconstruction and technical industrial branch ministries as "state staffs for the re-equipping of production. At the same time, the leadership of scientificand technological progress." percentage of output which meets demands of the Most important, Lebedev placed a premium on highest category of quality remains disproportionately "that technolog� which is created on the basis of low. It is necessary that the basis and starting point of fundamental achievements of science," which opens the the capital construction plan be a plan for the develop­ door to virtually unlimited gains in productivity. He ment of science and technology." They proposed that defined's uch progress as "intellectual credit" to the the bulk of all new investments be designed to serve as economy, and recommended sanctions for failure to "vehicles fo r new scientific and technological innova­ exploit them. tions. " These are some of the methods available to the The Fedorenko-Lvov article harks back to a propos­ Soviet party/military command fo r improving econom­ al made in August 1980 for how to accomplish such a ic performance in the months and years ahead.

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EIR March 23, 1982 Special Report 33 Britainsp eeds effort to chop globe in three

by Webster Tarpley from Wiesbaden

Statements by authoritative spokesmen for the British work of the extinction of the dollar as a world currency intelligence establishment have established the strategy and the concomitant emergence of currency zones, to­ now being pursued by the London-Geneva-Zurich bank­ ward which various areas of the underdeveloped sector, ers' cabal and its oligarchical co-thinkers elsewhere on notably the Middle East and China" would tend to the European continent. These forces are manipulating gravitate. world political and economic affairs toward economic .In such an arrangement, the British, Helvetian, and , depression and superpower confrontation out of which Venetian oligarchs would seek to manipulate and man­ they expect to precipitate a new tripartite world strategic age a series of confrontations between the twin paranoid constellation composed of the following elements: superpowers. British agents of influence, especially in the 1) Mother Russia, a neo-Stalinist military dictatorship United States, are now proceeding to act out a series of deprived of economic cooperation with West Germany, frontal attacks upon European national interests and Japan, and other states in the development of Siberia, sensibilities which will facilitate a breakup of the older and in which the combined effects of excruciating inter­ NATO structures, including a likely withdrawal of U.S. nal economic bottlenecks and hostile encirclement exac­ troops from Europe, in favor of a revived European erbat ; the paranoid xenophobic elements in the national Defense Community as prescribed by the "Cercle" (Le . ideology; Cercle Violet) networks. The high U.S. interest rates 2) Fortress America, characterized by a paranoid imposed by Swiss puppet Paul Volcker of the Federal xenophobia of its own specificneo-iso lationist variety, in Reserve are the most fundamental cause of the U.S.­ which the Goering-like economic doctrines of the Bush­ European estrangement, followed closely by the eco­ Ikle-Weinberger Team B military buildup presides over nomic warfare obsessions of Team B's Caspar Weinber­ the busting up of trade unions, the demolition of social ger. The same European oligarchical networks who own legislation and pensions, and the general collapsing of expendable assets and agents of influence like Volcker the civilian sector of the economy; and and Weinberger are at the same time the most vociferious 3) An "Independent Europe" dominated by a British­ in publicly deploring their agents' handiwork. Winning Swiss condominium , anti-American and anti-Soviet at the prize for two-faced hypocrisy are surely those British the same time, with its own specific form of zero-growth intelligence networks who have words of respect and fa scist ideology and economics, in which such figures as recognition fo r West German Chancellor Schmidt in French President Mitterrand, Italian Socialist leader Bet­ public, but whose less visible machinations aim at an tino Craxi and Bavarian-based CSU leader Franz-Josef early overthrow of the Chancellor, as for example Strauss would adapt pragmatically to the basic frame- through the watergating efforts of Der Sp iegel magazine.

34 International EIR March 23, 1982 Creating the European third force Jerusalem with Mitterrand. In Washington March 12, The overthrow of Schmidt, not to mention Italian Mitterrand may ask President Reagan to step back and Prime Minister Giovanni Spadolini, and the thorough allow France to take charge of Middle East diplomacy. wrecking of Vatican Secretary of State Cardinal Agos­ Sources in Paris and London report that French influ­ tino Casaroli's diplomacy, are the necessary precondi­ ence in Saudi Arabia, established during the era of tions fo r the successful creation of the projected Lon­ Giscard d'Estaing, may be used as leverage to pull don-Geneva "European Third Force." Saudi Arabia away fr om its traditional reliance on the In this remaking of the strategic constellation estab­ United States. lished, not at Yalta, but in the course of the London­ Most British spokesmen join in condemnation of the promoted Cold War of the late 1940s, the economic new "global unilateralist," tendency in the United issue predominates. High U.S. interest rates, copied, as States represented by Weinberger, Fred Ikle of the we should recall, from Margaret Thatcher's great exper­ Pentagon, and Irving Kristol and Norman Podhoretz iment, are now causing a world depression. Former of Commentary magazine. Weinberger's "go-it-alone" British Prime Minister Edward Heath, a leading mem­ attitude has repeatedly exacerbated frictions between ber of the World Bank/Brandt Commission, visited Europe and the United States, notably in his hard-line Westminster College in Fulton, Missouri, to call upon demands that the Europeans scrap the Siberian gas Europe to decouple economically from the United pipeline and accept a Polish debt default, regardless of States in order to defend itself from these interest rates the damage such measures would inflict on their nation­ (see below). al interests. Ironically, this tendency has been fed by the Of course, if Heath and his friends were seriously Heritage Foundation, deeply influenced by British intel­ determined to change U.S. interest rates, Volcker would ligence, in Washington. The excesses of these unilater­ be out of office in 24 hours. But the devastation alists elicited the comment of one German think-tanker wrought by these interest rates is designed to provide recently that these Americans are "hysterical." Other sober and patriotic Europeans with the proof that the attacks on the lunacy of U.S. strategy have come from United States has gone collectively insane. such pro-British sources as Theo Sommer in Die Zeit Beyond this, other oligarchical spokesmen are elab­ and Arrigo Levi in the London Times. orating concepts for the exploitation by the European third fo rce of the power vacuum left behind as the hard­ Carrington and the Hamburg mafia pressed United States dwindles, in French Foreign In contrast to wild men like Weinberger, British Minister Cheysson's phrase, into a "regional power." Foreign Minister Lord Carrington can cut the figureof As EIR reported March 16, Heath's associate Simon olympian restraint and rationality, and the chief of May sees excellent possibilities for "European" inter­ British diplomacy is exploiting the moment to the hilt. vention into the upcoming Sahara-Polisario crisis (see Carrington's German audience in Hamburg in early Africa Report) and Aegean-Cyprus crisis-with "Great March took an instinctive firm grip on their wallets Britain as the guarantor power" of course. when they heard him remark: "It is a pleasure for me to be in Hamburg once again, one of Europe's greatest Mitterrand's role states. I almost have the feeling that I should be treated The visit of Francois Mitterrand to Israel last week as an honorary member of that legendary force in represents a significant advance for the British goal of a German politics, the 'Hamburg mafia.'... My presence nonaligned Europe. Mitterrand, who since coming to here is, I hope, symbolic ... of the excellent relations .. power last year has reversed France's close alliance with between the Federal Republic of Germany and Great Chancellor Schmidt's Germany in favor of ties with Britain. I believe those relations have never before been London, established close political and intelligence links so close, so warm, and so important. And that says a with the Israeli government, including especially De­ great deal, if one considers how far into the past the fense Minister Ariel Sharon. Despite Mitterrand's rhe­ links between Germany and Great Britain stretch, and torical support for a "Palestinian state," a number of how manifold they are. Our languages are closely inter­ accords were reportedly reached on resumed French tied. arms sales to Israel, closer French-Israeli cooperation in "The German element in our populations still ex­ Africa, and French diplomatic mediation of Israeli­ hibits itself today in physical traits; we are occasionally Arab relations. still referred to today as Anglo-Saxons, although the Having already positioned France in the Arab world true Saxons live on this side of the North Sea ....Close by reaffirmingFranc e's traditionally good links to Arab bonds continue to exist 'Jetween our own royal family capitals, Mitterrand now believes that Paris can serve as and the royal families of Germany; the most British of the broker of Middle East affairs, operating jointly with our Queens, Victoria, spoke German with her house­ such British Arabists as Lord Caradon, who was in hold."

EIR March 23, 1982 International 35 DQGumentation some other Central American countries. The firstis the long history of repression and exploitation of ordinary people by the government in league with an oligarchy of business interests. The second is the devastating effect which the rise in the cost of oil, low prices for the commodities which they export, high interest rates, and a shortage of foreign credit have had on their rural Ted Heath renews bid economies .... In Saudi Arabia. the United States still has. in my view. a political profile that is fa r too conspicuous. Th e to isolate America West must beware of pressuring the Saudi government into fo rmal agreements on matters of security .... Below are excerpts from a speech by British Conversative The inadequate effo rts of West European members of Party leader Edward Heath. delivered as the 38th John NA TO to improve the conventional defence of their Findley Green Lecture at Westminster College. Fulton. territory will. I believe. make the use of nuclear weapons Missouri. on March 2. Emphasis is in the original. as significantly more probably should war break out. More­ provided by the British government. over, by enhancing Europe's dependence upon nuclear protection by the United States and upon the vagaries The changing face of power of American nuclear policy, these inadequate efforts ...We continue to live in a world in which the make nuclear strategy an issue which is immensely preservation of freedom and the continuation of liberal controversial and therefore damaging to the cohesion economic systems depend absolutely on our power to of the Alliance. These facts provide European leaders resist the expansionist energies of the Soviet Union. with a powerful argument for increasing expenditure on These energies derive their momentum not merely from conventional defence, which I believe they have failed the simple lust for power, but also from the frustrations sufficiently to use .... of a restless empire in Eastern Europe; from the demor­ In Europe many ordinary people fe el that should war alisation of an economic system which has failed in break out they would be fa ced with alternativenigh tmares: every Soviet Republic and satellite; from the humiliation on the one hand. desertion by the United States; on the of a political creed which has failed utterly to inspire the other hand. a nuclear exchange fo ught by the two super­ millions in whose name it is perpetrated; and from the powers but confined to the European battlefield.. . . The inability of Soviet leaders to derive psychological secu­ belief of some U.S. strategists in the concept of "limited rity from any source other than their growing military nuclear war" and in the notion of prolonged nuclear arsenal. It is this combination of facts which makes the "war-fighting" has not provided solace to the Europe­ Soviet Union such a peril to civilisation and freedom ans .... everywhere .... I remain convinced that the causes of this can only be This brings me, Ladies and Gentlemen, to the next dealt with by closer integration within Western Europe in challenge to Western strategy in the years ahead. It is to the realm of security. Only this would give Europeans real involve the major regions of the Third World gradually confidence in their ability to influence the defence policies in a full partnership with the West in every sphere of by which their security is maintained. It would require us international affairs .... Perhaps the most vivid testi­ in Europe not only to develop the procedures fo r co­ mony to this necessity is the damage which has been ordinating our defence policies within NA TO. but also to done to the security interests of the West in the Gulf, in deepen our co-operation within the European Community the Horn of Africa, and in South Asia by the failure of in the sphere of diplomacy. The need for common the United States to develop a close political partnership European diplomacy is particularly great in those areas with India. This is a country which in the next century such as the Middle East and Cyprus where Europe has is set to become one of the world's principal industrial a role to play which is both distinctive from and powers, one of its major suppliers of a host of raw complementary to that of the United States .... materials, and one of the leading architects of interna­ The West can only influence the process of change in tional order .... Poland. as well as in the Soviet Union. by long-term In EI Salvador, the [U.S.] administration has policies which provide support and encouragement fo r claimed the right to intervene militarily should the those who are committed to gradual reform. This cannot opposition forces look like winning the civil war. This is be done without deepening our communications with those justified by the assertion that these forces are the countries in the realms of trade. political consultation. product largely of external communist support. In my and discussions on human rights .... judgement, this view fails to give due recognition to the We should not, I believe, make ourselves so depen­ primary causes of the upheaval in EI Salvador and in dent upon Soviet markets or supplies of raw materials ·

36 International EIR March 23, 1982 that we end up by giving her a significant source of Third World Diplomacy leverage over us. Nor should we resume the extension of credits to Poland if no progress is made towards liberalisation and economic reform in that country .... Th e new religion of so-called "self-reliance" which holds sway in London and Washington will, I believe. suff er its demise as it becomes plain that it damages not only the economies of others but their own as well. In the India stresses joint United States, the unprecedented overvaluation of the dollar caused by the contradictory pursuit of high North-Southstakes interest rates and loose fiscal policies is bound to produce large trade deficits and to do further damage by Daniel Sneider, Asia Editor, to its economic growth. Sooner or later, this will lead to from New Delhi a major fall in the value of the dollar, which in its wake will bring more instability to the world's currencies and impart a powerful impulse to inflation in the United How developing countries will face what Indian Prime States itself. Minister Indira Gandhi characterized as the "visible The determination of the American authorities to deterioration in the global economy even in this short avoid intervention in the exchange markets to help period of fo ur months since the Cancun Summit" was control the value of the dollar will exacerbate these the topic of three days of consultations in New Delhi effects. Only the speculators will draw comfort from beginning Feb. 21. this situation. The ranks of the unemployed will contin­ The meeting, requested by Mrs. Gandhi, brought ue relentlessly to swell. And the rest of the world will together representatives of 44 developing nations to seek probably wait patiently for the next shock which a a common perspective on future North-South negotia­ collapse in the dollar will impart to the global system of tions to promote modernization of the "South," or trade, finance, and investment. underdeveloped sector. Of immediate concern to the Yet I believe that Europe neither need nor should wait participants was the continued foot-dragging by the patiently fo r this to happen. Th e Community ought to Reagan administration on entering such talks, and the take action to insulate itselfmore effectively fr om changes related administration failure to address the world eco­ in U. S. interest rates which are geared primarily to nomic crisis. This crisis, Mrs. Gandhi warned in her American needs. This could be done by the selective use opening speech, has "disastrous consequences for man­ of exchange controls and by greater supervision of the kind." Euro-currency markets. It would require the Commu­ The New Delhi meeting intersected an apparent in­ nity to develop a more effective policy towards the tensification of disunity among the developing-sector dollar for the European Monetary System than exists at nations themselves over how to respond to the Reagan present. And it would need to be supported by greater administration's stalling tactics. Frustration and anger is harmonisation between the member states of their fiscal running high in all the developing countries over the lack instruments, particularly taxation on portfolio invest­ of progress in the North-South talks that have been off ments. and on since at least 1974. A grQUp of radical, "hard­ The alternative to these policies is that Europe will line" nations led by Cuba and Algeria is using this mood be condemned sheepishly to follow U.S. monetary among the developing countries to argue for, alternative­ objectives. This will leave it with no choice but to ly, an inflexible confrontationist attitude toward the tighten fiscal policies even more sharply. The almost United States, or a virtual abandonment of North-South inevitable result would be to endanger expenditure on talks with a "go-it-alone" strategy for the developing defence and security .... countries. Some may say that these policies would contribute India, with strong backing from Mexico, sought to to the further erosion of international cooperation. I use the New Delhi talks as a forum to organize the other believe that they would do the opposite. First, by developing countries around a viable strategic perspec­ helping to stabilise currencies they would contribute to tive for future talks. The element Mrs. Gandhi empha­ the maintenance of an open international trading sys­ sized was the reciprocity of interest between the developed tem, precisely because turbulent exchange rates are such and developing countries-the industrialized countries a potent cause of protectionist pressures. And second, can only recover if they export technology to the so­ they would contribute towards the development of a called Third World. regional approach to the management of global economic In the end, the talks failed to reach the desired and monetary affairs-which I believe will be the only agreement on how to approach the Reagan administra­ successfu l approach in the long term .... tion's foot-dragging, because the developing countries

EIR March 23, 1982 International 37 are supposed to function on the basis of unanimity, but proposed that a "preliminary conference" be held be­ Cuba and Algeria refused to alter their positions. The fore the "global negotiations" begin. While rejecting question of tactics will now return to the United Nations this U.S. proposal, the developing countries must now in New York, where the developing countries' negotiat­ come up with a response. ing arm, the Group of 77, will further consider the issue. In the discussions, the lack of unity among the They hope to reach a common approach by March 16, developing countries emerged, with Cuba and Algeria when the U.N. General Assembly reconvenes with the adopting their positions that absolutely no concessions North-South issue on the agenda. be made in an attempt to break the deadlock. Others, led by Pakistan's United Nations Ambassador Niaz Mrs. Gandhi sets the tone Naik (Vice-President of the General Assembly and a In her inaugural speech to the delegates, Mrs. key participant in the negotiations) urged compromise, Gandhi emphasized the crisis in the world economy, and proposed the convening of an "organization ses­ and the consequences for developing countries of sharp sion" for the "global negotiations." This proposal, cutbacks in financial flows as a result of high interest which reportedly had the go-ahead from the United rates. "One has only to image the effects of prolonged States, was made in the ' belief that it is worthwhile to and mounting unemployment, inflation and interest get some movement on the talks, and leave the main rates," she said. issues-the status of the International Monetary Fund Mrs. Gandhi was bluntly critical of the lack of and World Bank-for later. progress in North-South relations. "Progress in the . The Indiah hosts generally weighed in on the side of developing countries will help to rejuvenate the stagnat­ the moderates, and their attempts to bridge the posi­ ing economies of the industrialized countries. In turn," tions was reflected in the finalstatement of the meeting, she said, "improvement in the economies of the indus­ which called for the developing nations to be "firm and trialized world offers better prospects for our own flexible-firm in its commitment to the basic objectives development. " and flexible in its approach and strategy." Mrs. Gandhi's views fo und broad agreement among Informed sources say the Indian government did not the developing nations represented. Mexican delegation want emphasis placed on the global negotiation proce­ head Jorge Eduardo Navarrete, a top Foreign Ministry dural issue, but rather on substantial issues like finance official, told(Ielegates in private session that the mone­ and energy, with the aim of "getting something done," tary and trade policies of some industrialized countries rather than getting "bogged down in technicalities" at were being pursued with the "'beggar-thy-neighbor' the United Nations. approach of the 1930s which brought about widespread, The issue which brought out the strongest remarks cumulative recession." was financing, followed by the question of cooperation Navarrete, clearly referring to the Reagan adminis­ among developing countries themselves. An Indian tration and Paul Volcker, criticized the "restrictive delegate told the committee on North-South relations, monetary policies and increased interest rates" that are that "oil importing developing countries are being hard causing "increased indebtedness and debt burden" for hit by recession, by sharp deterioration in the terms of the developing countries. trade, by high interest rates, by adverse exchange rate The conference discussions were divided into two movement" and by sharp drops in low-interest conces­ areas: North-South relations and South-South relations. sional lending from the institutions like the World Most attention fo cused on the area of greatest Bank's International Development Agency. Countries contention, North-South relations, and particularly the especially from South Asia and Africa are being told to stalled effort at the United Nations to convene "global seek capital in the high-interest-rate dominated private negotiations" on the world economy. The effort is markets, to compensate for the cutbacks in Internation­ blocked by Reagan administration refusal to concede a al Development Agency lending announced by the broad and comprehensive range for such talks, specifi­ Reagan administration. cally encompassing the fu nctioning of the International The finalcon ference statement condemned this trend Monetary Fund and the World Bank. as one which will "accentuate the already heavy debt The United States insists that agenda items can only burden of the developing countries." It also attacked be discussed within those bodies, where the weighted "outmoded concepts" such as "graduation," the World voting rights of their Bretton Woods charters gives the Bank's description of a stage when countries supposedly United States and other advanced countries control. No "graduate" from receiving low-interest loans to partici­ progress has been made since the October North-South pating in private capital markets. The statement sum­ heads of state meeting at Cancun, Mexico. The current ming up the talks also condemned "the tendency toward stalemate was solidified in December 1981, when the stricter conditionality" in the effort to push private United States reiterated its policy on this issue, and financial flows.

38 International EIR March 23, 1982 The P-2 death squads A document on El Salvador outlines the origins of slaughter in Central America and the possibility of reversing left-right collusion.

On March 2, EIR founder Lyndon H. LaRouche, Jr., up this death-squad activity. announced the formation of a new Commission for Free The spread of these death squads has made the al­ Elections in El Salvador. Heading the Commission, ready difficult Central American conflict impossible to LaRouche announced that it would contact the Presi­ negotiate. As long as they are allowed to operate, viol­ dents of Mexico, El Salvador, and the United States in ence will escalate between "right" and "left"fo rces in the order to pull together agreement on how to stop the region. The reasons are elementary. dangerous polarization which appears inevitable follow­ The function of these P-2 controlled death squads is ing the elections if the situation continues on its present not to end leftistinsu rrection. Rather their purpose is to course. Negotiations with insurrectionary groups may create insurgency by using torture and other bestial be one necessary step, LaRouche specified, and the only methods to induce suicidal revenge-reactions among military action required is to hunt down and summarily targeted populations. As an op-ed by William Leo­ execute every member of the death squads now operating Grande in the March 7, 1982 New York Times reported in El Salvador. matter-of-factly: "According to U.S. intelligence esti­ The targeting of the death squads brought an imme­ mates, for every civilian the Salvadoran army kills, at diate response from officialsin all three capitals contact­ least 25 guerrilla sympathizers spring up." An entire ed by the Commission. "Nobody at all will say anything guerrilla movement can then be created by introducing a about the death squads," one Salvadoran official said handful of leftist Jesuit and Socialist International terror­ nervously. "They function just like the Mafia. Anyone ist controllers into such a terrorized social environment. who says a word ends up dead the next day." "You'll "Left" and "right" atrocities are triggered, in which a never get the families behind the death squads," another genocidal "population war" is the finalou tcome. Latin American security officer stated. "They run them EI Salvador is already approaching the point of no through the military-and keep their names clean." The return in this regard. Guatemala, with the rest of Central following memorandum, produced by Commission America right behind it, is on the edge of such an member Dennis Small, provides initial leads into precise­ uncontrollable holocaust. ly those higher levels of control. Four examples illustrate the case:

The principal reason that the horrible warfare in Central 1) The 'Triple A' and P-2 America is rapidly becoming uncontrollable is the activ­ EIR has confirmed from Argentine and other relia­ ities of fascist death squads in the area. These paramilitary ble Latin American sources that there are-as various groupings are linked to: a) the Italian Freemasonic other media have also alleged-a few dozen Argentine Lodge Propaganda-2 (P-2), documented in detail by ital­ specialists currently in EI Salvador, "advising" the ian authorities to be the controllers of both international military there on counterinsurgency methods perfected terrorism and narcotics trafficking; and b) certain con­ through extensive use in Argentina in the 1970s. taminated networks inside the United States. It is hardly It is documented fact that the 1970s anti-terrorist accidental that U.S. Secretary of State Alexander Haig­ activities in Argentina were run principally by the whose name has appeared repeatedly in the Italian press infamous Alianza Anticomunista Argentina ("Triple A") as complicit in the P-2 scandal-has consistently covered death squad. The creator and controller of the Triple A

EIR March 23, 1982 International 39 was Jose Lopez Rega, the astrologer and principal my St. Cyr, and fo ught alongside French troops in the adviser to Argentine dictator Juan Domingo Peron, and Algerian war. During this period he established ongo­ the lover and controller of Peron's widow, Isabel Mar­ ing contact with the Organisation de I'Ar mee Secrete tinez de Peron, herself president of Argentina from 1974 (OAS) networks around Jacques Soustelle, who in turn to 1976. Lopez Rega is a listed member of the P-2 are linked closely to the Permindex assassination capa­ Masonic lodge, and was on intimate terms with P-2 bility responsible fo r the John Kennedy murder and the fo under and Mussolini ally Licio GeUi. dozen of attempts on the life of French President Even after Lopez Rega's departure from Argentina Charles de Gaulle. in 1975, the P-2 apparatus retained extensive influence Reliable sources have informed EIR that Benedicto in the country, especially the military, through individ­ is also closely linked to the powerful Central American uals such as: apparatus of the American company United Brands General Carlos Suarez Mason, currently head of the (previously United Fruit Company.) United Brands has government petroleum company, Yacimientos Petro­ a documented role in training both left and right Ifferos Fiscales; Admiral Emilio Massera (ret.), the for­ terrorists in Central America at its Pan-American Agri­ mer head of the Argentine Navy who today heads that cultural School in Tequcigalpa, Honduras, and at the country's official social-democratic party; Raul Lastiri, Jesuit Loyola University's Inter-American Center, in Lopez Rega's son-in-law who served briefly as presi­ New Orleans. The Honorary Chairman of the Board of dent in 1973; Alberto Vignes, Foreign Minister of United Brands, Max Fisher, has strong connections to Argentina from 1973 to 1975; Arturo Frondizi, president the Israeli Mossad. Benedicto Lucas Garcia, for his of Argentina from 1958 to 1962. part, is a vocal advocate of the Israeli cause, and has In addition to the Argentine advisers currently in El been quoted saying that "Israel is an example for our Salvador, there are ongoing negotiations to increase soldiers. " this involvement. The Army Chief of Staff of El Salva­ dor, Col. Rafael Flores Lima, was recently in Argentina 4) Roberto D'Aubu isson to discuss these matters with his counterparts there, and D' Aubuisson is a former officer in the Salvadoran received a favorable response. army who runs a large part of the fascist death-squad apparatus in that country. He was an active participant 2) The World Anti-Communist League in the 1980 W ACL conference presided over by P-2 The World Anti-Communist League (WACL) is an member General Suarez Mason. D'Aubuisson today is umbrella association of anti-communist groupings running for the Constituent Assembly in the March 28, which includes a number of overt death squads-such 1982 elections, on behalf of the Nationalist Republican as the Cuban exile groups Alpha 66 and Omega 7, and Alliance party, and has vowed: "We will exterminate the Guatemalan Movimiento de Liberacion Nacional the guerrillas three months after coming to power .... (MLN). The ultra-right MLN is headed by Mario Napalm would be indispensable." His campaign Sandoval Alarcon-a presidential candidate in Guate­ spokesman, Mario Redaelli, is quoted as adding: "We mala's recent elections-who is widely reported to be don't believe the army needs controlling. Civilians will one of the controllers of Guatemala's "Mano Blanca" be killed, war has always been that way. When the death squad. The Unification Church ("Moonies") of Germans bombed London, they didn't tell civilians to Rev. Sun Myung Moon also support WACL. Another get out of the way first, did they?" curious fact about WACL is that present at its 1967 D' Aubuisson's campaign is financed by way of the fo unding conference was Costa Rican ex-president Jose Miami community of expatriate Salvadorans, Nicara­ "Pepe" Figueres, an active member of the Socialist guans, and Cubans. He has also visited the United International and a sponsor of the 1979 Sandinista States on various occasions, at the invitation of the

Revolution .• Council for Inter-American Security (CIS) and other groups. 3) Benedicto Lucas Garcia and Perm index Yet D'Aubuisson's campaign is reportedly receiving Another controller of the death-squad apparatus in support from Salvador's leftist insurgents as well. Jorge Guatemala is General Benedicto Lucas Garcia, the Army Bustamante, the head of Salvador's Electoral Commis­ Chief of Staff and brother of Guatemala's president, sion, recently reported: "I think some leftists will vote Romeo Lucas Garcia. Besides the ongoing assassination for him [D'Aubuisson] also. They know that where you of thousands of Guatemalans, Benedicto is engaged in have 3,000 guerrillas today, you'll have 300,000 . if a special operation to drive thousands of refugees across D'Aubuisson gets into office." the Guatemalan border into neighboring Mexico, in It is this death-squad apparatus which must be order to destabilize that country. dismantled, if there are to be any negotiations to resolve Benedicto was trained at the French military acade- the Central American crisis.

40 International EIR March 23, 1982 an open alliance with Washington, scrapping Zia's cur­ Pakistan rent "non-aligned Islamic conference" profile. Caught between the State Department pressure and the Pakistani population's growing hatred, Zia is now lashing out with mass arrests. In the process, he may so Zia's purges andhi s discredit himself that his fellow generals will let him collapse. One successor sometimes rumored is Gen. own survival chances Fazle Muqeem, a close associate of Gen. Fazle Haq. The latter was named by EIR last fall as part of the drug-traffickingring in the Pakistani military. by Ramtanu Maitra Fazle Haq, the military governor and martial-law administrator of the Northwest Frontier Province, During the first two weeks in March Pakistani dictator through which there is a gigantic flow of drugs, is the Ziaul Hag has arrested more than lO,O()() supporters of brother of Fazle Hussain, who is wanted by Interpol in the late Premiere ZulfikarAli Bhutto's Pakistan People's connection with several cases involving drug trafficking Party (PPP), the most fo rmidable opposition to General throughout Europe. Zia's regime. Police spokesmen said that unnamed top­ Fazle Muqeem, a retired general, is himself a close level government officialswer e also rounded up. associate of General Rahimuddin, the military governor According to reports from Pakistan, Zia has estab­ of Baluchistan, the other big drug-producing province lished two detention camps surrounded with barbed wire in Pakistan. Rahimuddin's daughter is married to Zia's fences, one in Lahore Fort and the other 12 miles fr om son, and among his associates are Europeans linked to Karachi. A few primary schools in Sind and Punjab the drug traffic. provinces are also said to have been converted to deten­ A key controller of these generals is the London­ tion centers. based Agha Hassan Abedi, the founder of the Persian The crackdown puts an end to press claims of "stabil­ Gulf-based Bank of Credit and Commerce International ity" in Zia's Pakistan. Even parties and individuals for­ (BCCI), who was named by late Premier Bhutto as one merly supporting the regime are now joining the Move­ of the people instrumental in provoking the capital ment fo r the Restoration of Democracy (M RD), in which flight and social destabilization that preceded his over­ the PPP plays a leading role. The MRD now encompas­ throw. The BCCI is tied to the outlawed Propaganda-2 ses 12 parties; three new parties, including the Jamiat fascist lodge's financial apparatus, and to Libyan-Ira­ Ulema-i-Pakistan (JUP), which had formerly supported nian networks. Zia, have joined the movement. Abedi's payroll includes such agents as Yuseof The extent of the crackdown was revealed when Haroon, brother of Zia's Interior Minister; Humayun Maulana Noorani, president of the JUP, told a press Khan, Toronto-based son of Zia's newly promoted conference that the government had turned Pakistan into Chief of the General Staff, Lt.-Gen. Akhtar. Rahman a police state by arresting innocent people. Movement Khan; Zia's son, Ijazul Haq; and General Chisti. Chisti, spokesmen also suggested that Zia is moving toward a who according to informed sources, runs a drug opera­ bloodbath which will not only destroy the democratic tion with the help of a front man based in Finckley, opposition but engulf the entire region in chaos. England, recently bought some real estate in Langley, The mass arrests were preceded by a series of events Virginia, where the CIA is headquartered. Last month, indicating sharp foreign-policy dispute within the ruling Chisti went back to Pakistan, reportedly carrying a junta. In early February, a Pakistan delegation led by the message to Zia to hasten the delivery of military bases Foreign Minister Agha Shahi was in New Delhi holding to the United States. preliminary talks on a "no-war pact" with Indian Prime Whether the State Department will sacrifice Zia or Minister Indira Gandhi. Then Shahi resigned, and was be content with shoring up the right-wing generals in replaced by retired Lt.-Gen. Shahibzada Yaqub Khan, a his support, the overall plan is to push forward with the man with friendly ties in Washington, where he was once policy. Secretary of State Alexander Haig and Undersec­ Ambassador. On Feb. 24, Agha Hilaly, representing the retary James lluckley have pursued uuring the past Pakistani government at a meeting of the United Nations year-from arming the Pakistani army with sophisticat­ Commission on Human Rights in Geneva, made delib­ ed weaponry to financing the drug-peddling "Afghan erately provoctive remarks against India, and the Indians refugees." Now the State Department, by ignoring the canceled future talks. documented evidence of Zia's fascist measures and Reliable sources insist that behind these develop­ large-scale drug-dealing among his generals, is instru­ ments is U.S. State Department pressure on Zia to give mental in promoting an imminent bloodbath in Paki­ the United States military bases in Pakistan and to enter stan.

EIR March 23, 1982 International 41 their controllers believed; it led to a national reaction THE ARAB WORLD against fundamentalism, with power consolidated in the very popular regime of Mubarak. When Mubarak suc­ ceeded in obtaining a full denunciation of Sadad's mur­ derers from Omar Telmesanni, the official head of the Brotherhood in Egypt, as the price Telmesanni had to pay to get out of prison, in a few minutes years of London's operatives organizing work by the Brotherhood in Egypt were plotting new coups destroyed. 'Mubarak is like Sadat' For these reasons alone, Mubarak has become the by Thierry Lalevee number-one target of the Brotherhood, and the Bonn demonstration was only the most public feature of what When President Hosni Mubarak of Egypt arrived in is being plotted. the West German capital of Bonn, Feb. II, he was M ubarak's assassination was the subject of planning greeted by a demonstration of 6,000 angry Muslims, sessions held over the past months, especially a secret denouncing his policies of "repression" against the conference held in London in mid-December under the Egyptian Muslim Brotherhood. leadership of the aging Dr. Said Ramadan, son-in-law These demonstrators had two distinguishing fea­ of Muslim Brotherhood founder Hassan al-Banna. tures: first,acc ording to eyewitness reports, most of them Ramadan, the acknowledged leader of the Egyptian belonged to the huge Turkish Muslim community living Brotherhood in exile, has been plotting ever since he left in West Germany and had been brought to Bonn in a Egypt at the end of the I950s, for his triumphal return well-organized system of buses from the Rhine city of to head an Islamic republic in Egypt. His base for more Koblenz, some 60 kilometers away. A second feature is than 20 years has been the Islamic International Center that, according to the well-established Islamic Centers in in Geneva. Ramadan has been traveling to London Germany, the demonstrators' organization did not exist. since last autumn in what he described as an "advising ' ' Befo re appearing at the domonstration, the Turks had mission," to initially bring together for the first time in distributed leafletsin the name of an "Islamic Union of London the Muslim Brotherhood for the entire Islamic Germany," a name which surfaced only a few days before world, including official government representatives the demonstration, according to spokesmen for the Mus­ from Libya and Iran as "observers." lim Brotherhood in Germany. The West German Muslim The results of the discussions were leaked a few community has been split for several years into the weeks later by Dr. Marcel Boisard, the Secretary-Gen­ Munich-based South German Islamic Community, eral of the Club of Rome-created "Islam and the West" which is the strongest such organization in Germany. Association based in Geneva, which has maintained Various local Islamic centers exist in Aachen, Cologne, close links with Ramadan's associates. In a discussion Dortmund, and Hamburg. "There is no such thing as a with a journalist, Boisard boasted that the Brotherhood general 'Islamic Union' of Germany," an angry Stuttgart was getting stronger in Egypt by taking advantage of member told a reporter. Mubarak's liberalization. Recognizing that the Broth­ Behind the shadowy phenomenon of these 6,000 erhood has no broad-based public support, he warned Turkish demonstrators is a very secretive re-organization that if the new president did not change his policies, of the international Muslim Brotherhood apparatus. The "strong and violent actions are to be expected." Bonn demonstration showed that this reorganization is Around Dr. Ramadan, a hard core of Islamic rep­ aimed at establishing a close coordination between the resentatives and leaders is now functioning as the various national operations of the Brotherhood. The international leadership. They include Salem Azzam, Turkish workers demonstrating in support of their Egyp­ the Saudi Arabian who heads the London-based Islamic tian brothers was a successful trial balloon for how "pan­ Council of Europe, and is directly involved in subversive Islamic solidarity" can be organized. activities inside Egypt under the code name "Hajj abu This reorganization occurred in the last month of Mohammed." In this capacity he chairs, with the exiled 1981, and its fu ll effects are not yet evident. It was Egyptian opposition figure who claims responsibility necessitated by the developments in Egypt after the Sadat fo r Sadat's llJurder, General Shazli, the Tripoli-based assassination, which were disastrous fo r the Muslim National Front. This group also includes Ziauddin Brotherhood there. The assassination did not lead to a Sardar, an environmentalist and a member of the Ja­ national upheaval and an Egyptian Islamic republic on maati Islami who operates as an official researcher on the Iran model, as the fa natics of TakfirWa l Higra and behalf of Boisard's Islam and the West, and the presi-

42 International EIR March 23, 1982 dent of the Islamic Council of Europe-sponsored Islam­ A U.S. CONNECTION ic Commission fo r Human Rights, fo rmer Algerian President Ahmed Ben Bella. This international apparatus, based in Paris and London with branches in West Germany and Switzer­ land, has defined the new targets of the Brotherhood: Islamic Centennial 14 the Gulf region, Egypt, and Morocco, which are oper­ ations to be carried out in coordination with the new and fundamentalism Shiite International created by Ayatollah Khomeini. With Egypt as the key project of Azzam and Rama­ by Nancy Coker dan, Africa has been made the responsibility of Ahmed Ben Bella in Paris, who has received considerable sup­ port from the regime of Socialist President Fran90is In the summer of 1978, when the phenomenon of "Islam­ Mitterrand. ic fundamentalism" was still a novelty and the fu ll impli­ According to reports, Ben Bella is expected to lead cations of the "Islamic revival" had not yet become a massive Brotherhood offensive in the North African apparent, a group of approximately 20 people were country of Morocco, which has also been targeted by meeting regularly in Washington to plan how the United Iranian terrorist circles for its collaboration with Iraq. States could best play the Islamic card. This group was While Morocco is being put under military pressure by the preparatory committee for what was later to be called the Libyan-sponsored "Polisario" synthetic liberation the National Committee to Honor the Fourteenth Cen­ movement-which was granted recognition by the tennial of Islam, or Islam Centennial Fourteen CICF), OAU in the beginning of March-sources report that headquartered in Washington. the Brotherhood has intensified its campaign inside the Officially, the ICF was set up as a nonpolitical organ­ country after having seized numerous mosques, from ization committed to fostering an understanding of Is­ which they have delivered anti-King Hassan tirades. lamic civilization and culture in the American popUla­ The West German-based Moroccan community is being tion. In point of fact, ICF works to deliberately obfuscate put under pressures by Ben Bella and Libyan-connected Islam, by creating a smokescreen in the name of religious Muslims. Moroccan sources report that in Dortmund, ecumenicism and cultural relativism for such extremist a national conference of the Brotherhood was held in pseudo-Islamic cults as the Muslim Brotherhood. Like early March which discussed the case of Morocco as a the Aspen Institute, which was instrumental in the over­ priority. throw of the Shah of Iran, ICF and its executive director A newcomer in the deployment of the Brotherhood, William Crawford, retired ambassador to North Yemen Ben Bella was quick to make it to the top of the and Cyprus, disseminate the view that Islam and mod­ hierarchy after his release from an Algerian jail some 18 ernization are inherently in conflict with one another. months ago. He is trying to become for the Sunnite This conflict, they maintain, is what undid the Shah, and Islamic world what Khomeini is to the Shiite world. Ben if there is to be economic development in the Islamic Bella has been supported by the very same circles which world, it must be reconciled with local prejudices and created Khomeini. Upon his release from prison, his beliefs. firsttrip abroad was to London to meet with the leaders Last year ICF raised more than $2 million in tax­ of Amnesty International and the Bertrand Russell deductible contributions from corporations across the Peace Foundation. country, including most of the major oil companies and Ben Bella is now championing the rights of the construction firms. Although several of these firmsare developing countries, although as he told Le Monde last complicit in the true nature of ICF's activities, most year, he acknowledges that his earlier commitment to corporate representatives interviewed by EIR were unin­ socialism was "wrong" and that Islam alone can pro­ fo rmed that the ICF is advocating an approach to the vide the answers to the developing countries' problems. region that, expressed in economic practice, would se­ At present, he just wants to be called an "anti-imperial­ verely limit corporate activity in the Islamic world. ist" and it was in that capacity that he was elected president of the Islamic Human Rights Commission in The role of Joe Malone September 1981, which was established in the Paris According to ICF insiders, Islam Centennial Four­ offices of UNESCO under the auspices of Salem Azzam. teen is the creation of Joseph Malone, a long-time asset The commission was specially created to give Ben Bella of British intelligence who operates out of his Middle an official job, rather than out of concern for human East Research Associates in Washington. Malone-like rights, which are continually violated by Azzam's asso­ ICF director Crawford's family-is a product of the ciates in Pakistan. American University in Beirut, a bastion of British

EIR March 23, 1982 International 43 Hayes of Mobil Oil; and Tom Snook of Exxon. The State Department and the National Security Council, encouraged by President Carter, repeatedly began to draw on the services of this group of "old Middle East hands," calling them over fo r "advice" on Iran. "When Brzezinski discovered Islamic fundamen­ talism, he asked fo r a country-by-country review by the ICF preparatory group," stated a source. To this day, ICF maintains close links to the State Department, mediated primarily through Crawford and other ICF mem bers such as Philip Stoddard and Malcolm Peck. "The ICF got a great boost from the Carter admin­ istration," said one ICF source. In a letter to ICF Chairman Lucius Battle on July 12, 1980, Carter pledged to "enco urage involvement by appropriate governmental agencies as well as by individual citizens." In the summer of 1979, Crawford was brought on as full-time executive director of ICF. The ICF inaugural gala was scheduled fo r November of that year, but was postponed because of the hostage seizure in Iran. "President Carter precipitated the postponement," said one fo unding member of ICF. "I thought it was a bum decision to postpone. In my opinion, the ICF has taken an easy route by trying not to upset Khomeini or the radical Muslims. I think this could be seen as an effo rt by Crawford to apologize fo r the radicals. Craw­ fo rd lumps everything together that has to do with Islam, all in the name of promoting Islamic culture. He m akes no distinction between the radicals and the moderate mainstream. This is inexcusable. As a result, William Crawfo rd of Islam Centennial Fourteen. ICF has become a clearinghouse fo r all kinds of strange activities. For example, the ICF newsletter prints infor­ intelligence operations in the Middle East and the seat mation on meetings held by Muslim Brotherhood radi­ of the British-KG B networks around triple agent Kim cal groups as well by legitimate organizations." Philby, a friend of Malone's. Malone is an intimate of dissidents throughout the region, particularly in Saudi The Rothko Chapel affair Arabia, where his close relations with anti-establishment On March 10, Crawford was in Houston fo r the "Young Turk" elements have implicated him in the opening of ICF's "The Heritage of Islam" exhibition. 1975 assassination of King Faisal and the ongoing Attending the inaugural was Schlumberger heiress operation to undermine Prince Fahd. Dominique de Menil, whose husband John was impli­ "ICF was essentially an outgrowth of the Middle cated in the 1963 assassination of President Kennedy. East Ed ucational Trust [MEET], a small fr ont group Six months earlier, Crawford had another occasion that Malone was running in the late seventies," said one to meet with Mrs. de Menil, when he attended a so urce . "There was some communication with a group conference at her Rothko Chapel in Houston of 25 in London-Malone had many fr iends there-who had Muslim "scholars," many of whom were adherents of picked up the idea of building a new organization the Muslim Brotherhood and proponents of Khomeini­ around the fo urteenth centennial of Islam, which is style terrorism-all in the name of Islam. Crawford what Malone then went about doing." personally blocked requests by the National Democratic The preparatory committee met frequently in 1978, Policy Committee and Houston officials that the State usually at Wash ington's Islamic Center. Among the Department refuse to issue visas to the Muslim Broth­ early members were Malone; Malone's sidekick at erhood participants. "A fr iend of mine at the State MEET, Jim Johnston; John Duke Anthony of Johns Department drafted the answer fo r the Secretary of Hopkins; Ralph Braibanti of Duke University; Mo­ State and the State Department on this matter," Craw­ hammed Abdul-Raul' of the Islamic Center; Admiral ford confi ded to a fr iend, "preventing any action that Marmaduke Bayne of Georgetown University; Jack might have prevented the conference fr om occurring."

44 International EIR March 23, 1982 appear in the aggregate threatening to Americans? Yes, INTERVIEW in the aggregate it looks threatening, but becomes less so through better information, if you portray the Muslim world for what it is: highly diverse nations, in cultural Mr. Crawford on the and ethnic and linguistic terms, going through a process of reaffirmation of pride and independence from the Muslim Brotherhood maj or power blocs, having been inundated by everything Western fo r over the last many decades and then in The fo llowing is an interview with William Crawfo rd, frantic pursuit of catching up, beginning to question the fo rmer u.s. Ambassador to North Yemen and Cyprus,and appropriateness of everything that's being imported or executive director of the Islam Centennial Fourteen, by pushed on them by their own national leadership. This is Robert Dreyfuss, EIR's Middle East editor. not a rejection of things Western. It's a more selective approach-"what is appropriate to our own societies." Dreyfuss: What are the objectives of the Islam Centen­ And atthe same time I think you findpeople drawing a nial Fourteen and what do you hope to achieve in the balance sheet-what has been achieved after the head­ next yearor so? long pursuit of "modernization" and imports oftechnol­ Crawford: There is a real curiosity [about Islam] that ogy and all the rest. And they find that something has come into being in the American public because, I important is missing in their lives, and that is their own think, of recent events and all the headlines. So we're indigenous value system, variously interpreted, and that finding a great and mounting receptivity to objective, is Islam. And this is what I think is the implication of nonpolitical information [on Islam]. We're not coming what we are seeing when we talk about Islamic resurg­ from any particular political point of view. We 're not ence and fundamentalism. lobbyists or pushing the interests of any particular coun­ try or any bloc of countries. We're simply in the business Dreyfuss: What I'm really asking you is to make a value of providing basic, objective information. We're finding judgment. If some group in the United States-for ex­ a very warm reception, indicative, I think, of the kind of ample, supporters of Ayatollah Khomeini-came to you interest which is welling up in this country, a lot of it and asked you to include in an art exhibit some calligra­ starting from a hostile point of view, understandably phy done by Khomeini's mullahs in some Qom theolog­ enough, given the hostage situation and so on. ical seminary, I presume you would turn them down. Crawford: Yes, I would. Dreyfuss: There's obviously been sort of a well-poison­ ing going on since the Khomeini revolution, in the sense Dreyfuss: But what about the Ikhwan Mllslimun [Mus­ that a lot of Americans view Islam as a threat rather than lim Brotherhood]? Would you consider them to represent simply a religion. What is your organization doing spe­ Islam as they claim to, or would you agree with Sadat's cifically to counter that? You say you provide "simple, characterization of them as lunatics and dwarfs? nonpolitical, objective information," but I doubt such Crawford: I think that they run the gamut from genuine­ information exists. ly religious people who are very seriously concerned Crawford: I think our "Introduction to Islam" kit pretty about the headlong pursuit of Westernization, to those well describes the kind ofinf ormation we put out. who esentially see their involvement in the Muslim Brotherhood as an...expression of political opposition. Dreyfuss: What I mean is, if someone in the Muslim world called up some Christian mission and asked, "Is Dreyfuss: How do you view someone like Hassan al­ Adolf Hitler an expression of Christianity?" there would Banna, the founder ofthe Brotherhood? be many ways of explaining why that wasn't true. If some Crawford: I wouldn't really pretend to be an expert on American organization asked you, "Does the Khomeini the Ikhwan. Where I would put him personally, I don't regime represent Islam?" what would you say? know. Crawford: They do ask that question frequently, and I say firstof all that you must realize that Iranians are Shia Dreyfuss: But that brings us to the central question. He's Muslims representing only JO percent of the Muslim revered, but he's a madman. He was an assassin. He had world; that they are Persians, not Arabs; that what is an extremist organization that was allied to the pro­ going on is a political revolution given a religious label Nazis in the Middle East. He was responsible for killing [which] is regarded as absolutely false and an aberration, several Egyptian prime ministers. and a very dangerous one, by most sensible Muslims Crawford: Well, that I obviously findrepreh ensible. around the world .... How do we counter all these stereotypes that do Dreyfuss: But you can't separate his religious activities

EIR March 23, 1982 International 45 from the fact that his organization as a whole was you can do that if you associate yourselves with a group extremist. What I'm asking is whether your organization like Islam and the West. would agree unequivocally that these people are evil? Crawford : We are not members ofIslam and the West. Crawford : The whole Ikhwan? Or the Khomeini group? Dreyfuss : In October, you attended a conference on Dreyfuss: The Khomeini group, the Ikhwan, Hassan al­ Islam at the Rothko Chapel in Houston, Texas, under Banna's organization-the whole thing. You say you the sponsorshipof Mrs. de Menil. There were a number findhis actions reprehensible, but you don't say you find of radicals at that conference, like Hamid Algar of the him reprehensible. Or do you? University of Caliornia at Berkeley, who led a group of . Crawford : Khomeini? Or Hassan al-Banna? chanting pro- Khomeini ruffians into the room. Could you explain your presence at the conference? Dreyfuss: Both. Crawford: Unfortunately, I was only there for a day and Crawford : Khomeini I do find reprehensible. a half. I have the highest regard for Mrs. de Menil, who organized the conference in order to give Muslims a Dreyfuss: And the latter? Hassan al-Banna? chance to talk to each other in a non-Muslim environ­ Crawford : I don't know. My personal estimate is that ment where they wouldn't feel there was an audience there are some seriously religious people, reformists in it. looking over their shoulders, and the press, and govern­ There are others who are in it as an expression of political ments, and so on. opposition. Dreyfuss : Are you aware that there were people are this Dreyfuss : I understand that you recently addressed an conference fr om various Muslim Brotherhood organi­ Islam and the West conference in Paris. I've read their zations from various Arab countries, that there were literature, and I've noticed that they're very critical of people praising the Sadat assassination, and people call­ what they call the "Western development model." ... ing for the overthrow ofthe Saudi government? Y our organization is obviously trying to contact a lot of Crawford: No, I did not hear any of that. Maybe that Americans and explain Islam to them. but I wonder if came up later, but not during the time I was there.

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46 International EIR March 23, 1982 It has been an objective of networks associated with Northern Mr ica the Club of Rome to depopulate the African continent. Were it possible to draw the United States into "rapid deployment fo rce" involvement in a regional war, these circles reason, all positive U.S. influence in Africa could be eliminated. At present, high-level circles of the British Britainmanipulate s House of Lords are speaking of having Europe under British leadership intervene in Africa as a "Third Force." Moroccan insurgents The content of "Third Force" policy would be that ofthe Brandt Commission (named for the Socialist Interna­ tional's Willy Brandt), "decoupling" the economies of by Douglas De Groot, Mr ica Editor severely destabilized countries from industrialized na­ tions and returning them to the status of mere raw­ The Secretary General of the Organization of African materials sources. The Club of Rome's depopulation Unity (OAU), Edem Kodjo, unilaterally seated a dele­ objective would then be achieved soon enough. gation of the Polisario Liberation Front as a full OAU According to Simon May, an aide to fo rmer British member-government at the opening of what was to have Prime Minister Edward Heath of the Brandt Commis­ been a routine Feb. 22 OAU budgetary meeting in Addis sion, the Moroccan-Polisario conflict holds the potential Ababa. The Polisario guerrilla organization, nomads to become an African "El Salvador," not only involving backed by Libya and Algeria, has fo ught a seven-year the United States, but with the same potential for dis­ war against the Moroccan regime of King Hassan II, crediting the United States amid nation-wrecking and seeking to have the desert south of Morocco, the Western genocide as the Central American "population war." Sahara, declared an independent micro-state. The Heath aide called the Western Sahara crisis "the Kodjo's sudden extension of recognition, prepared in most serious crisis after the Israel-Palestine conflict." secret without consulting OA U Chairman Moi of Kenya, The U.S. is preparing to become involved, on cue. provoked an immediate walk-out by 19 delegations of Secretary of State Haig, a Club of Rome supporter, the 50 present. It portends an intensified and "interna­ recently sent CIA chief Vernon Walters to meet with tionalized" Western Sahara conflict, featuring U.S. in­ King Hassan to pledge U.S. support. Similarly the U.S. volvement on the side of the king. It also portends an Ambassador, Joseph Werner Reed, has sought to win acute weakening of the OAU, which could cease to exist Hassan into an open alliance with the United States as an effective instrument fo r handling African crises. against the rebels. Reed is a former top-level Chase Morocco was colonized by two powers, France and Manhattan official whom David Rockefeller personally Spain, the Western Sahara being the former Spanish intervened with President Reagan to have appointed. Sahara. Since 1956, several parts of this area have been Meanwhile the same Club of Rome-linked (Propaganda- joined with fo rmerly French Morocco proper, but the 2 Freemasonic) networks to which Haig, Rockefeller, majority of the 120,000 nomadic inhabitants, whipped and Walters are linked are behind Muammar Qaddafi's up by Libya's Qaddafi and short-sighted support from support of Polisario. neighboring Algeria, have never been integrated, instead Former revolutionary leader Ben Bella is reportedly fightinga sometimes bloody war against the monarchY. preparing to "whip up the mobs" in Algeria to retake At the last OAU summit, King Hassan agreed to a power on the basis of Islamic fundamentalist fu ror, referendum for the Western Sahara. But with Edem which would find a convenient target in U.S. involve­ Kodjo's recent admitting of Polisario as a recognized ment in Morocco. Inside Morocco, too, Islamic fu nda­ government, the referendum is obviously preempted, mentalist fe rment includes widely circulated tapes by leaving King Hassan almost no political alternative but blind Sheikh Kishk, imprisoned for subversion by to intensify efforts to crush the Polisario rebels .. Egypt's Sadat. Since the Shah's fall, the same British­ One of my sources has expressed the fear that "this supported Muslim Brotherhood networks have targeted could lead to a split of the OAU into two organizations, the Moroccan monarchy for overthrow. "Without the one moderate, the other radical, leaving Africa with no monarchy in Morocco," I was told by someone who is way of dealing with the crises that are being stirred up, no friend of the king's, "you would have permanent and leaving African nations extremely vulnerable to destabilization. " those trying to prevent these nations' development." Thus, Edem Kodjo's recognition of Polisario is, in Edem Kodjo, from Togo, has closely associated him­ effect, a well-timed contribution to the staging of cri&is self in recent years with the Club of Rome, and in and warfare in northern Africa along the lines of the particular, its co-founder, Dr. Alexander King. These present Central American situation. If it develops ac­ are circles most interested in preventing African nations' cording to plan, at least two nations, Morocco and development. Algeria, won't survive.

EIR March 23, 1982 International 47 Ledeen was apt. Used throughout his career as a high­ INVESTIGATIVE LEADS level and very effective troubleshooter, Walters built up his Italian connections right after World War II when he was stationed there as liaison officer between the U.S. and Brazilian armies. Later he was reassigned to Brazil, where in 1964 he coordinated U.S. assistance for the coup d'etat of that year, working through the officers Haigs inks deeper who had been with him in Italy. In 1981, he negotiated with the Argentine military advisers for the training of into P-2 coverup Guatemalan death squads on the sophisticated "public relations technologies" firstemploye d by the Argentine Triple A. The people under whom Walters worked in Italy in by Vivian Zoakos, European Editor the immediate postwar years, such as James Jesus Angle­ ton-later chief of CIA counterintelligence-were pre­ For the past few weeks, Secretary of State Alexander cisely those who organized Italian left-and right-wing Haig's adviser, Michael Ledeen, has been systematically networks into the Propaganda-2 lodge. The members of exposed by Italian government authorities as being inti­ that secret lodge became the controllers and coordinators mately linked to the highest levels of Italian terrorism of the enormous portion of the international drug and and the international drug lobby. Now a second Haig arms trafficthat passed through Italy. They also created adviser of even higher rank has been implicated: the and deployed the various terrorist gangs. notorious Vernon Walters, currently ambassador with­ The terrorist connection of Haig's and Walters's out portfolio and reportedly Ledeen's superior at the subordinate, Michael Ledeen, has since begun to come State Department. to light in greater detail following the ambassador's The facts about Vernon Walters were published in failed visit. Ledeen has been connected to Luigi Scric­ the issue of the Italian magazine II Mondo, one of the ciolo and his wife Paola Elia, both Socialists and high­ leading investigative journals in It�ly. In presenting the level members of the trade-union confederation, UIL, new facts of the case, II Mondo correctly points out that who were arrested in February under charges of being Walters's involvement in the Ledeen scandal has impli­ active, ranking members of the Red Brigades, Italy's cated the Secretary of State himself much more seriously most infamous terrorist gang. than ever before. Europeo magazine of March 6 reported that Scric­ II Mondo reports that in February, Ambassador Ver­ ciolo and his wife had contacted Ledeen in the course of non Walters visited Italy for the sole purpose of forcing two trips to the United States. The antecedents to this a cover-up of the Ledeen involvement with the illegal story are that the Red Brigades had issued a communique Propaganda-2 Freemasonic lodge, controllers of Italian in the period in which they still held Dozier in which they terrorism and drug-and arms-trafficking. Not only did said that the Socialist Party was being controlled from · he not succeed, but subsequent revelations have linked the State Department through an unnamed individual. Ledeen to the Red Brigades terrorist gang that kid­ Antonio Savasta, Dozier's chief Red Brigade jailer who has napped American NATO General James Dozier. since turned state's evidence, subsequently named that In publicizing Vernon Walters's mission, II Mondo individual as Michael Ledeen. draws the obvious conclusion that it was not for the Europeo reports that Savasta's information came purpose of saving Ledeen's relatively low-level neck that from the meetings between Ledeen and the Scricciolo a man of Walters's stature risked involvement in the pair, Luigi and Paola. Testimony from Savasta and the highly dangerous Propaganda 2 affair. Walters's concern Scricciolo's own cousin-jailed terrorist Loris Scric­ in covering up for Ledeen could only have been motivat­ ciolo-identified them and particularly Luigi Scricciolo ed by fear that were the investigations allowed to run as being the "public relations" man for the Red Brigades their normal course, Alexander Haig personally would and the liaison man between the Red Brigades, the Irish soon become enmired in the scandal. Republican Army, and the Basque ETA. Haig is already involved. The Propaganda-2 member Italian anti-terrorist investigators released to the who had been paying off Michael Ledeen, the Socialist March 10 issue of the Italian newspaper La Repubb/ica Francesco Pazienza, has admitted in testimony in the that two Americans were part of the 12-man commando Italian Parliament the fact of his own close relationship team that kidnapped and later murdered former Italian with the Secretary of State prior to and during his Prime Minister Aldo Moro in March 1978. assumption to that post. One man is already well-known to Italian authorities: The choice of Walters to run the attempted cover for Ronald Hadley Stark, who, among his other activities,

48 International EIR March 23, 1982 recruited potential candidates fo r the terrorist training terrorist and organized crime operations. camps run in Muammar Qaddafi's Libya. Since February, Italian, French, and U.S. authorities Stark, who is a chemist, helped set up the Brother­ have been running simultaneous investigations into how hood of Eternal Love in California in 1966, the organi­ the Swiss banking system of secret numbered accounts zation responsible for working with counterculture guru aids criminality. These official investigations, particu­ Timothy Leary to produce approximately 10 million larly the French and U.S. investigations, have concen­ doses of LSD-25 ("Orange Sunshine") in the late 1960s. trated oli issues of stock fraud, capital flight, and other Stark also maintained a liaison with the terrorist types of "white collar crime." However, the arrest of W eatherunderground. Swiss terrorist Breguet, and the Le Monde expose, signal According to fe deral law enforcement sources, the that law enforcement groups are aware that the Swiss Brotherhood of Eternal Love paid the Weatherunder­ banking system is a protection system for much more ground $25,000 to coordinate the 1979 prison break of dangerous criminals than those perpetrating financial Timothy Leary. fraud.

French arrest leads into Switzerland Defferre's affairs prompt resistance The arrest in Paris in early March of Bruno Breguet, A new scandal involving French Interior Minister a Swiss national suspected of being involved in a planned Gaston Defferre broke the firstweek of March. Defferre bombing of a Paris hotel, has reopened a trail of investi­ was the long-time Mayor of Marseilles, center of the gation into an entrenched fascist/terrorist network' heroin-running French Connection. which has operated out of Switzerland with impunity for Defferre has lost the confidence of almost the entire decades. professional law enforcement corps in France as a result Breguet is not a new name for European enforcement of his attempt to demote-on purely political grounds­ authorities. In 1970, Breguet was arrested in Israel when one of the country's top policemen, Marcel Leclerc, explosives were found in his possession. Charged with head of the special criminal brigade in Paris with being a terrorist operative for the Popular Front for the authority over matters ranging from terrorism to organ­ Liberation of Palestine (PFLP), he was sentenced to 15 ized crime. years imprisonment. Then, in 1977, he was suddenly Defferre's attempt led to the resignation of Fran�ois i rele sed, whereupon he left Israel for Switzerland, to be Le MoueI, head• of the Judiciary Police in Paris and the employed by Genevan banker Fran�ois Genoud. former head of the central narcotics bureau, in solidar- Breguet's association with Genoud was very well ity with Leclerc. Le Mouel played a leading role in the publicized. Prior to Breguet's release, Genoud had been dismantling of the French Connection. openly organizing public support committees for Bre­ On March 9, an unprecedented meeting of 300 to guet, to plead in behalf of his release. Genoud's own 400 law-enforcement professionals in Paris denounced long-term associations with the Palestinian terrorist cir­ the actions of the Minister of Interior. A letter was cuit were documented in detail March 7 and 8 in a drafted to be hand-delivered to President Mitterrand by lengthy feature in France's daily newspaper Le Monde. a police delegation, asking him to control his minister. As Le Monde reports, Genoud's bank, Banca Arabe Defferre's name has also come up in a prominent Commerciale, was the chief bank used by the Algerian fashion in the Marcel Francisci affair. Francisci, king of FLN political movement during the 1950s and 1960s. the casino gambling industry in France and an elected Genoud spent some time in an Algerian jail in the 1960s official of the Gaullist party in Corsica, was murdered because of suspicions by Algerian President Ben Bella in Paris Jan. 15. Now, the content of a tape found on that Genoud was siphoning party funds out of Ben Francisci's body has been published in Le Monde, Bella's control. revealing that Francisci had approached Defferre's law­ Prior to his association with Algeria, however, Gen­ yer, Paul Lombard, asking him to get another lawyer, oud had been a prominent figure in the Swiss support Roland Dumas, to intervene. on his behalf with the movement behind the German Nazi movement. Le Interior Minister to reopen the most prestigiDus casino Monde notes that in 1939, Genoud joined the Abwehr in France, the Cercle Haussman, which Defferre had despite his Swiss nationality; other European sources shut down. The taped conversations indicate that Du­ report they are certain Genoud was a close friend of mas-one of Mitterrand's closest political friends since General Wolff, the German commander who oversaw 1958-had agreed to intervene, asking for it 50,000 northern Italy for the Nazi party in the final phase of Franc deposit for the job. World War II. Defferre and the two attorneys deny that any inter­ Le Monde's expose on the Breguet-Genoud connec­ vention was ever made, and Lombard insists that the tion is the latest in a series of hardhitting international taped conversations were excerpted in an incriminating probes into the role of Switzerland's banks in protecting fashion by unnamed enemies.

EIR March 23, 1982 International 49 DatelineMexico by Josefina Menendez

Part I: T�e surprising PSD early 1970s, the 23rd of September Not social-democratic and hardly a party. its newly launched League. Von Bertrand's teaching specialty is sociological techniques presidential campaign bears watching. to measure "public opinion." To this day Guajardo, IMOP, and von Bertrand share offices in the same building in Mexico City. From reliable sources, J have As J indicated to you in this space One of the PSD's models is the learned that the PSD plans to a few months ago, the Mexican So­ campaign waged by Jose Vasconc�� launch its presidential campaign on cial Democrat Party (PSD) is a very los, former Educa tion Minister, or around April 1 in the northwest­ strange political beast. against the candidate of the fore­ ern state of Sonora . The principal You may remember that J docu­ runner of the PRJ party in 1929. speaker, in addition to Moreno mented its ori gin in Monterrey Vasconcelos attempted to split the Sanchez, is scheduled to be Adip Christian Democrat circles, and its unity of the governing party with Sabag-the president of IMOP at close continuing ties to those cir­ demagogic appealS' to "clean out its founding and subsequently the cles, despite its evolution into one corruption. " operation chief for the PSD's suc­ of the most important directing Moreno Sanchez was an enthu­ cessful environmentalist campaign fo rces of both terrorism and envi­ siastic Vasconcelista at that time. to prevent the construction of a ronmentalism in the country under On Feb. 28 he accepted the PSD nuclear training reactor complex at a "left"political coloration. nomination with an ugly attack on Lake Patzuaro in Michoacan state Now J present some important the morality of PRJ presidential last year. Sabag's speech will be a updates. At its presidential nomi­ candidate Miguel de la Madrid. vitriolic attack on the successor test nating convention Feb. 28, the PSD On behalf of PSD masterminds reactor center now scheduled to be nominated 74-year-old former PRJ Roberto Guajardo Suarez and the built in Sonora, I am told. party luminary Manuel Moreno brothers Luis and Edmundo San­ The PSD emerged in Monterrey Sanchez as its standard-bearer for chez Aquilar, Moreno Sanchez im­ during the sixties, firstas a faction the July 4 national elections. mediately pledged "a new kind of in the Mexican Employers' Confed­ It was not so surprising that the campaign," different from the eration (Coparmex), then as the party chose someone from outside PRJ's direct contact with voters. moving force of the Mexican Social its own ranks. It has almost no The statement implied use of the Christian Movement (MSC) and membership of its own. The PSD media and "polling" manipulation the Social Union of Mexican Busi­ had in fact published a long list of which is a hallmark ofPSD activity. nessmen. potential candidates. with all but Under its previous name, Acci6n My associates in Europe are one or two fr om outside the party. Comunitaria, the PSD formed a now tracing out the ties of this net­ However, the choice of Moreno special subsidiary called the Mexi­ work into the European "Solidar­ Sanchez is significant. Moreno can Institute of Public Opinion ist" groups, of both "left" and Sanchez rose in the PRJ party in the (IMOP) in 1975. JMOP in turn de­ "right" tinctures. When a colleague late 1950s to the powerful post of signed the media package for the of mine recently confronted PSD head of the Senate, and retains to Mexican Communist Party's 1976 secretary-general Luis Sanchez this day wide political recognition. electoral bid and published appro­ Aquilar with all the "anomalous" The decision to nominate him priate "polls" to bolster the PCM features of PSD activity, he calmly means that the PSD has serious and discredit the PRJ. brushed each aside-until my col­ plans to split the PRJ "from The PSD's expertise in this area league raised the "solidarism" within." There are unconfirmedre­ came directly from close Guajardo question. Sanchez Aquilar then hit ports that the PSD is courting other Suarez associate Hermann von Ber­ the roof. PRJ figures who lost out in the trand, S.J., who is widely docu­ current round of nominations for mented as the creator of Mexico's In Part II: ThePS D's business con­ congressional seats. most lethal terrorist group of the sulting empire.

50 International EIR March 23, 1982 MiddleEast Report by Robert Dreyfuss

The A. Basmouk connection owner of Monte Carlo radio, along The dope-dealing Assad brothers of Syria may soon find with a Greek Cypriot who is reput­ that they and theirfriends are out of luck. ed to be deeply involved in the in­ ternational diamond market, a market whose long-standing control by Israeli organized crime and re­ lated networks has become infa­ mous. Evidence is accumulating that a long the favorite route of Middle Syria is also angling to maintain certain A. Basmouk, a shadowy East dope smugglers-drug trans­ a controlling interest in Lebanon, Syrian national reported currently shipments have been diverted into which is viewed by Assad and his to be in the New York area, may Syria, and fr om there to Europe friends in Israel as a highly profita­ figure prominently in efforts by and the United States. ble plantation for opium and hash­ Syrian President Hafez Assad and According to Arab sources, the ish cultivation. his gangster brother Rifaat to ex­ Syrians are working closely with To this end, Assad is said to pand their organized-crime net­ the Israeli intelligence agency Mos­ have decided to support old feudal works in the United States. sad and with corrupt elements in Lebanese warlord Camille Cham­ According to reliable Arab Turkish intelligence to protect and oun as president of Lebanon in the sources, the corrupt Assad brothers expand the Syrian connection. Spe­ elections there this summer. Cham­ are working closely with the Mafia cifically, the Assad regime, which is oun, who is known in Lebanon as a in New York and New Jersey, as made up almost exclusively of British agent, has recently allied well as in Sunnyvale, California, members of Syria's minority Ala­ himself with the drug-connected and Lynchburg, Virginia, to facili­ wite sect has cultivated close ties Lebanese left and Libya. tate the entry of illegal drugs from with its "Alawite brothers" in the The Assad brothers' efforts to the Middle East into the United opium-growing Iskenderun region expand their sordid operations in States. Cooperating with the As­ in southern Turkey. According to Syria into a far-flung international sads are several well-placed U.S. the sources, opium from Iskende­ crime empire have run into opposi­ . Customs agents and Bureau of Im­ run is being smuggled into Syria by tion inside Syria, where a revolt migration officials, whom the Syri­ Assad-linked Turkish Alawites. against the regime continues. an regime has managed to buy off. Syria's connections in Cyprus Despite reports of an apparent Last year, at Kennedy Airport and Greece, much augmented since calming of the internal Syrian situ­ in New York, one Riad Rahmou, a the installation of Socialist Andreas ation, the town of Hama is said to Syrian national related to Hikmat Papandreou as Prime Minister in still be out of Assad's control, and Chehabi, Hafez Assad's chief of Athens, are also important. Both tension grips the 'country as a staff, was picked up by the Drug Cyprus and Greece are reported to whole. Enforcement Agency trying to be major transshipment points on This month, Hammoud el­ smuggle in a large cache of drugs the Syrian-European drug route. In Choufi, a former Syrian ambassa­ from the Middle East. recent months, Syrian-Cypriot­ dor to the United Nations and firm The incident was immediately Greek trade has jumped dramati­ opponent of the Assad regime, is­ hushed up, and Rahmou was re­ cally, providing a perfect cover for sued a call from Baghdad, Iraq, for leased and has never been brought enhanced drug trafficking. At the the formation of a national front to to trial. same time, a direct ferry link be­ overthrow the Syrian government. Although the Assad family is tween the Syrian port of Latakia, an Choufi, who resigned in December known to be involved in numerous Assad/ Alawite stronghold, and the 1979 in part because of his opposi­ organized-crime operations, drugs Greek port of Volos has just been tion to Syrian support for Kho­ are the mainstay of their dealings. established. meini in Iran, said that all measures Following Ankara's highly effec­ The Greek-Cyprus connection includ',g "armed struggle" would tive clampdown last year on illegal goes deeper. According to intelli­ be needed to topple the Assad re­ drug trafficking through Turkey- gence insiders, Rifaat Assad is part. gime.

EIR March 23, 1982 International 51 InternationalIntellig ence

indicated that the campaign against him poration (CDC) 25 percent of new oil Haig plays dominoes is part of an attempt by friends of Amer­ discoveries on fe deral lands; create more ican mobster Meyer Lansky in Israel to state companies at the expense of private in Central America take over the state ofIsrael. Laviv fu rther corporations; spy on oil and gas activi­ specified that the operation against him ties, and expropriate land (provincial) Testifying before numerous Congres­ is being waged by people deeply involved rights) for interprovincial power lines. sional Committees and granting "exclu­ in the international drug trade. Evidence This is a rigged crisis timed to coin­ sive". interviews to any paper he could for this comes partly from Federal Bu­ cide with critical restrictions on transfer find, Alexander Haig launched a person­ reau of Investigation documents on Is­ payments to the provinces for the next al crusade in early March to blow up any raeli mafia drug-trafficking activities five years, and with the rapid ratification remaining chances for avoiding the out­ into the United States from South Amer­ of the new Canadian Constitution (Brit­ break of generalized war in Central ica, documents that Laviv himself has ish North America Act) in Britain. America over the next few months. seen but which have been suppressed On Commonwealth Day March 8, Haig went afterMe xico-the one ally from public purview in the United States. the British House of Commons approved in the area which has offered the United the patriation of the Canadian Constitu­ States a strategy for ending the blood­ tion by a vote of 177 to 33. The "Canada shed. In an interview with the Los Ange­ Bill" is expected to pass the House of on March 4, Haig portrayed les Times Lords quickly. Should that occur before Mexico as one of the next dominos to fall the parliamentary crisis in Ottawa were from the chaos in Central America. The Energy bill prepares to be resolved, this would enable Tru­ problem with Mexican leaders, Haig rule by decree deau to constitutionally rule by decree. pontificated, is that they "are con­ strained by political reality from doing Led by an outraged Joe Clark , Canadian what an outside observer [i.e. Haig] Conservatives have boycotted the House might presume to be logical action." of Commons over the introduction of an Guatemala will be another EI Salvador omnibus Energy Security Bill which leading to "fundamental threat to Mexi­ Guatemala: terror Clark called "as dangerous to democracy co in a very predictable future." as the War Measures Act." According to after election Clark, the emergency measures planned by Trudeau would "allow the govern­ The presidential elections held March 7 ment to set up internment camps." Al­ in Guatemala will maintain the present Israeli anti-drug though the press has been silent on the radical rightwing regime in power, and specifics of emergency measures intro­ that means added geopolitical difficulties investigator threatened duced, Solicitor General Robert Kaplan for Mexico, which has staked its future stated in a news conference on March 8 on seeking political stability in the vola­ Israeli journalist Yigal Laviv, a well­ that "the plans would be used only in a tile Central American region. known investigator of mafia activity in time of war." General Anibal Guevara, former De­ Israel and the source for much of the Seeking to amend 15 existing laws fense Minister of the current dictator­ material found in the French-language and implement the National Energy Pro­ ship, emerged with a reported 37 percent expose "The Israeli Connection" by gram (NEP), the Bill will also give Tru­ of the vote in a race against three other Jacques Derogy, has received open death deau the right to raise energy taxes by rightist candidates. Guevara's plurality threats from the highest levels of those decree. According to the Toronto Globe guarantees he will be named president by Israeli circles involved in international & Mail. Trudeau wants to avoid parlia­ a session of the Guatemalan Congress. drug trafficking. The threats have been mentary and public discussions. The con­ Earlier in March, U.S. Secretary of accompanied by a frame-up of Laviv, servatives say they will not go back to State Alexander Haig announced Gua­ who was arraigned in late February on their seats until Trudeau either retracts temala will be the next El Salvador-a spurious charges of extortion trumped the bill, separates it in several bills or remark designed to win backing for a up by the mafia. Several organized crime calls for new elections. The Liberals have stepped up U.S. military presence. En­ figures (including the notorious Shmuel rejected' all three proposals. hancement of Guatemalan military ca­ Fiatto-Sharon, who evaded extradition The bill attacks both provincial and pabilities will increase pressures on Mex­ to his I,l!ltive France several years ago by private ownership of resources. It would ico. Already, atrocities committed by buying himself a seat in the Israeli Knes­ empower the government to take over army-sanctioned death squads have sent set) are implicated in the operation to foreign-owned companies by injecting waves of refugees-sometimes number­ silence Laviv. up to $5.5 billion in Petro-Canada; give ing in the thousands-over the border In a soon-to-be-published interview Petro-Can and possibly the Maurice into Mexico, where they are used as po­ with Executive Intelligence Review. Laviv Strong-led Canadian Development Cor- litical leverage by the left against the

52 International EIR March 23, 1982 Briefly

• THE STANDING Committee of the National People's Congress of China announced March 8 that the central government bureauc­ government of Jose Lopez Portillo. agencies, and to fu nnel Arab money into racy of 600,000 will be immediately These atrocities are a central factor in the investment portfolios in Zurich, Genev

EIR March 23, 1982 International 53 Williams forces inquiry into DOJ misconduct

by Molly Hammett Kronberg

In a Capitol Hill press conference March II, Senator exposure from my own personal situation. I plan to go Harrison Williams of New Jersey blasted the American ahead with my personal fight in the courts and I am press for having "so distorted the issues" of the Abscam confident that I will eventually be exonerated in full. ... frame-up against him "as to make it unrecognizable." "And, I don't 'feel' innocent; I know I'm innocent." The international press corps of 100 reporters had hoped that Senator Williams's press conference-in which he Most important Senate debate in century announced he would resign from the U.S. Senate rather Senator Williams's aggressive and self-assured res­ than proceed fa rther with the week-long hearings on ignation speech (which, New York and New Jersey whether he would be expelled from the Senate over press were quick to note, not only charged as virtually Abscam-would be a tearful goodbye like Ed Muskie's treasonous the judgment-by-the-press but also did not or Tom Eagleton's. Instead, the stunned press heard exclude the Senator's possibly seeking re-election to his itself indicted by Senator Williams for its irresponsible old Senate seat) capped a week of the most dramatic, and criminal misrepresentation of his frameup. The passionate, and constitutionally crucial proceedings in press, charged Senator Williams, "have said I am a the history of the U.S. Senate. broken man. They have said that my wife was in tears in On March 9 and 10, the fourth and fifth days of the the gallery. I am not a broken man. And I can tell you hearings on Senator Williams's case, grievous miscon­ that the only time my wife was in tears during the last duct by the Justice Department and Federal Bureau of two years was when she heard of the death of Marie Investigation in the Abscam operation against Senator Weinberg. I am reminded of what the great Italian poet Williams was exposed before the Senate. Forgery, per­ Dante had to say about the users of false words, whom jury, acquiescence in illegal targeting operations by FBI he put in the bottom of the eighth circle of Hell, just Director William Webster, were all brought out in the above the traitors ... debate. "I am innocent," he continued. "I was confronted Yet, despite all the revelations, which made manifest with men like Judge [George] Pratt and Prosecutor that the Carter Justice Department deliberately set out Thomas Puccio who had no hesitation and spared no to destroy political opponents of Carter's administra­ effort to exonerate those who manufactured crime ....If tion and the institution of the Senate itself, under Senate I ever have the opportunity to be in the same room with Majority leader Howard Baker and Heritage Founda- ' Mr. Puccio, I'll walk out. tion dominance in the GOP, the 53 Republican Senators "I was fa ced with massive momentum against me in were forced into backing a railroad of Senator Williams. the Senate. Nonetheless we succeeded in getting the facts The Democratic Senators-under the direction of Dem­ of the crimes of the FBI and its accomplices onto the ocratic National Committee head Charles Manatt and Senate floor. I believe it is best now to separate this Senate Minority Leader Robert Byrd-were also "dis-

54 National EIR March 23, 1982 ciplined" into conniving at a railroad. A few courageous tion of powers. ... Unchecked abuse of executive Democrats, among them Senators Inouye of Hawaii branch investigative and prosecutorial powers could and Melcher of Montana, emerged as a Constitutional escalate into despotism ...." bloc against the expulsion of Williams. Senator Cranston reviewed the revelations by Marie The implications of an expulsion of Harrison Wil­ Weinberg, wife of Abscam conman Mel Weinberg, who liams stretch far beyond the present. If the Senate were in January (one week before her violent death) gave to allow itself to ratify the frame-up of one of its affidavit evidence of Weinberg's bribery of FBI agents members by the corrupted "Dope, Inc." elements in the and perjury during the Abscam trials in which his was Justice Department, it would thus ensure that the U.S. the main testimony against Senator Williams. "There is Senate could not survive as an independent institution. ample reason," said Cranston, "to believe Marie Wein­ If that were to happen, in turn, it would mean that no berg. Her credibility has been clearly established by obstacles remained to the creation in this country of a much independent corroboration .... Her husband, on dictatorship based on a program of fascist economics the other hand, is a self-admitted liar who has perjured like that the Carter administration attempted. himself on numerous occasions in Abscam judicial proceedings. . . . I suggest to my colleagues that Mel 'Illegal' to be a Senator Weinberg's lack of good character is a red herring being In Tuesday's debate it became clear that with an used by Mr. Puccio [chief government Abscam prose­ illegal operation like Abscam in full swing, the consti­ cutor-ed] to distract attention from the real issue of tuency representation on which American politics has the Abscam operation ....I am shocked by this govern­ based itself for 200 years is "illegal" by the standards of ment duplicity." Abscam! Senators Howell Heflin (D-Al.) and Malcolm Wallop (D-Wyo.), representing the Senate Ethics Com­ The media and the 'fixers' mittee and its expulsion-recommendation against Wil­ Thursday morning's press, March 10, gave an idea liams, were grilled by Democratic Senators Russell how far the media, in the service of the Abscammers, Long, Patrick Leahy, and Joseph Biden on what pre­ were prepared to go in surrounding the Senate and cisely were the "improprieties" the FBI, Justice Depart­ public with "perceptions" to make the fix against ment, and Ethics Committee insist Williams committed. Senator Williams possible. Senator Cranston's speech, Senator Leahy expostulated: "There are many of us and the exchanges between Wallop and Heflin of the who have business interests, and many bills come up Ethics Committee and other Senators, were blacked that may correspond to some of these areas. Are you out. Anyone who relied on the average U.S. newspaper saying that anyone who has an interest in any private or newscast would have had no idea whatever of the venture is guilty of an ethics violation? ... Because if issues before the Senate. you are, we are going to be here for a hundred years, The deployment of Republican and Democratic trying 99 other Senators." Ethics Committee Chairman Senators of the anti-Williams camp on March 10 made Wallop, manically determined to throw Williams out of obvious the outlines of a railroad. First, the word went the Senate, said flatly that the "quid pro quo" basis on out, through the media, that a Republican Senate which constituency politics functions is an "ethics vio­ Caucus under tight discipline was prepared to move lation." against Williams. Although Howard Baker was forced to say three times, "for the record," that no such caucus Cranston: 'shocked by government duplicity' had met, the virtual dead-silence of the Republican Senator Alan Cranston (D-Calif.) rose to present his Senators on the most important constitutional issue to resolution to censure, rather than expel, Senator Wil­ confront the Senate in decades made it pretty clear that liams. Though Cranston's speech was weakened by his the GOP controllers-the Roy Cohn-Heritage Founda­ assertion that Williams warranted censure, rather than tion-Baker-Bush crowd-had established top-down di­ full exoneration, he insisted that the case of Harrison rection. Williams is an issue on the outcome of which rises or Kennedy liberals in the Democratic Party staged a falls America's fo rm of government: "I believe there has floor-show Thursday afternoon which disrupted the been the grossest abuse of power and misconduct by the discussion and made it equally clear that the Manatt­ executive branch of the United States government in the Byrd-Kennedy wing of the party was deployed for a investigation and subsequent prosecution of Senator "fix." Williams .... Senator Williams faced what was a cruel, As the debate opened, Senator Daniel Inouye (0- unreasonable, unwarranted, improper test. ... An op­ Hi.) rose to refute, again, the spurious charges against eration such as Abscam, when directed against the co­ Williams and to stress, again, that the great danger now equal legislative branch of the Government by the was that, if the Senate simply used the trial record of executive branch, poses a very real threat to the separa- the Abscam frameup by which Senator Williams was

EIR March 23, 1982 National 55 convicted, it would lose all independence and instead he thought Puccio had violated his oath of office, and fall under the sway of a Justice Department and FBI perhaps should even be disbarred-but still Senator whose conduct is "very much in question." Inouye told Williams had to be expelled! his colleagues that all were under great political pres­ A subsequent statement by Senator Pryor provided sure; they were being told that it was "expedient" to at the same time evidence of a ghastly level of involve­ vote for expulsion; the press was insisting that those ment in the FBI's targeting of Senators by FBI Director who rejected expulsion were risking their political ca­ William Webster personally, and, also, in its melodra­ reers. But, he said, a monstrous miscarriage of justice matic effect, a sure way to break up the Senate deliber­ was underway, in which the U.S. Senate was being told ation and reflection which Senators Inouye and Melcher to presume Williams guilty. was trying to develop. Pryor introduced a memo just Inouye said there were those who criticized Williams obtained from FBI files, never before revealed to the fo r having given too long a speech to the Senate, those Senate, showing that the FBI targeting of Senator Larry who criticized his wife Jeanette for appearing on televi­ Pressler (R-S.D.) was not the freelance action of a sion to compare Abscam to Nazi tactics; but, said lower-level FBI agent but was approved in writing by Senator Inouye, Senator Williams thinks he's innocent. the FBI Director himself. The stagey method of pre­ Under the American system of law, Williams should not senting the evidence (though the evidence itself is pow­ have to prove his innocence; the American system of erful proof of the dimensions of the illegal Abscam law, which was suspended here, assumes a man's inno­ operation thrown against Harrison Williams) was de­ cence until his guilt is proven. signed by Pryor and his fellows to distract attention from the constitutional line of argument so carefully Melcher, Inouye: pro-constitutional bloc built up by Melcher and Inouye. Next spoke Senator John Melcher (D-Mt.). He re­ As the Senate adjourned on March 10, it became minded the Senate of an old Sam Rayburn quote that evident that the evening press was trying to pillory "political speeches you don't make can't hurt you." Senator Williams. Across the airwaves, rumors, vilifi­ However, Melcher declared, he was about to make a cations; the press line was uniform: Senator Williams a speech at great political risk, a speech Sam Rayburn "broken man," his "fightove r," and so on ad nauseam. would have advised him not to make. Certainly that is why the press corps was so taken He focused on the economic collapse overtaking the aback on March II when, in announcing his resigna­ United States-firm and farm bankruptcies, unemploy­ tion, Senator Williams stressed two things: He said he ment. This issue, said Senator Melcher, is one the had accomplished what he set out to do-to bring Senate must address, and must address correctly. But it before the Senate the dimensions of the FBI-Justice could be addressed correctly only if the Williams issue Department illegal actions against the legislative were addressed correctly first. branch. Second, he exposed the near-treasonous actions To do that, the Senator attacked Abscam prosecutor of the U.S. press in acting as judge and jury against an Thomas Puccio and Federal Judge George Pratt, who innocent member of the U.S. Senate. presided over Williams's frameup, and he attacked the credibility of the FBI "evidence" with which the frame­ The next step: investigate Abscam up was secured. I refuse to get on this railroad, Senator The significance of the revelations before the Senate Melcher said. of gross wrongdoing by the Justice Department and In closing his remarks on "vigilante law," Senator FBI is twofold. First, even some of the Senators who Melcher quoted from Robert Bolt's play about Sir were in the "railroad" camp felt forced to make some of Thomas More, A Man fo r All Seasons. There Bolt these revelations. They were responding to an upsurge makes More say: There is God's law and man's law; of public sentiment on the Williams case the like of certain things cannot be trampled on. Though a man which has not been seen in the U.S. in almost 20 years. tear down the law to get at the devil himself, when the Senators' offices were comparing the outpouring of devil turns around to get at you, there will then be left phone calls from their constituents to the passion gen­ no law standing to protect you. erated by the Vietnam War. Here the liberal-Democratic claque intervened', with The second point of importance about these revela­ statements from Senators Leahy (Vt.), Stennis (Miss.), tions is that, once forced onto the Senate floor,they are Pryor (Ark.), and Bradley (N.J.). Each asserted that the now there, in public, to be used to dismantle the FBI­ FBI-Justice Department behavior was heinous, and Justice Department Abscam operation which was aimed required immediate investigation, but that Harrison at the U.S. government. Senator Inouye has pledged an Williams had to be expelled. Senator Williams rose to "open; no-coverup" investigation into Abscam. They ask Senator Leahy's opinion, as a former prosecutor, of can be turned against the very people who have tried so the conduct of Thomas Puccio. Leahy responded that hard to "fix" the case against Harrison Williams.

56 National EIR March 23, 1982 ed a 6 percent decline in the U.S. economy. The actual NDPe STATEMENT decline was 8 percent. No other econometric projections but that of my associates and myself anticipated any significant decline for that period. In September 1980, we projected a temporary recov­ 'No budget cuts, ery, to last into the first halfof 1981, which occurred. In May 1981, we projected a 3 percent decline for the remainder of the year, against an actual 3.4 percent no taxincrea ses' decline for that period. Our present forecast, compiled during February 1982, shows us to have entered a depres­ by Lyndon H. LaRouche, Jr. sion, with no recovery in sight even as late as the end of

The fo llowing statement was released on March 8 by economist Lyndon H. LaRouche, Jr. , fo unding editor of EIR and Chairman of the advisory board of the National 'Economic collapse will Democratic Policy Committee. Mr. LaRouche was a can­ didate fo r the Democratic presidential nomination in 1980. wipe out incumbents' This is to announce the reasons why I am now encour­ aging Democrats throughout the Unite� States to pres­ It is now clear that the nomination of Jimmy Carter sure Congress for passage of the Reagan administra­ by the August 1980 Democratic Party convention tion's combined budget-proposals and tax-proposals as would cause a landslide crushing of the Democratic submitted, and to reject all such foolish schemes as the Party in the November 1980 elections ....Theref ore Baker-Hollings finagling. the best informed perception is that the Democrati� The main fa ct to be stressed is that the United States Party is now being destroyed almost hourly by Carter­ has already entered the Second Great Depression of this Mondale use of Justice Department frameups and century. The depression has not yet become irreversible, other evil means to blackmail delegates .... In any although we are presently at the edge of a precipice of case unless the delegates findthe courage to stand up chain-reaction bankruptcies of firms, farms, and thrift to blackmail, the Democratic Party appears doomed institutions which would create a condition ofnear-irrev­ to be nearly destroyed in a vastly worse defeat than ersibility. the RepUblicans suffered in 1964. This depression has been caused by the monetary policies which the Federal Reserve System has imposed -June 1980: Draft Democratic on the U.S. economy and world trade since the beginning Party Platform, "The Next Fifty­ Year Economic Boom," by Lyndon of October 1979. Unless interest rates are forced down LaRouche, Jr. below 10 percent prime rates within weeks, the collapse H. of the U.S. economy's tax-revenue base will drive the federal deficittow ard between $150 and $200 billions for Let us suppose that the methods of blackmail and fiscal year 1981-82 and generate federal deficits"of f the related tyrannical practices of the Carter administra­ charts" for fiscalyear 1982-83. tion and of henchmen John White and Les Francis Obviously, to worry about $10 or $20 billions of succeed in turning the Democratic convention into a combined federal budget cuts and tax-increases under kind of zombie-ritual of renominating Carter. In that these circumstances is sheer idiocy, as voters will remind case, the most probable consequence is a November candidates for Congress during November 1 982. landslide victory for Reagan, gutting the Democratic There is no competent basis for disputing my projec­ Party's positions in both the Senate and the House­ tions. My associates and I represent the only economic perhaps carrying the House for the RepUblicans, and forecasting service whose projections have been compe­ numerous state-officepositions besides. tent during the period beginning October 1979. By com­ -Democratic Party Policy Review, parison, every other econometric forecast, including July 1980: "Why Western Europe those of the Commerce Department, the Joint Economic Broke Out From Under Control of Committee of the Congress, and the Office of Manage­ the U. S. Government's Directives," ment and Budget, have been totally incompetent, less by Lyndon H. LaRouche, Jr. than worthless. For the record: For the firsthalf of 1980, my associates and I project-

EIR March 23, 1982 National 57 1983. can be automatically reemployed, and the federal, state, These forecasts are based on study of the effects of and local tax revenue base can be expanded." both the Volcker monetary policy and the Reagan mili­ 2) Produce 100 billion watts of nuclear electricity­ tary-spending program on each of all the principal sub­ output capacity by about 1986-87 and an additional 50 sectors of the U.S. economy. There can be no recovery billion w�tts by 1990. from the present slide into a 1932-1933-style economic "This will not cost us a penny, since this energy will depression-even with increased military spending­ represent a major saving to the economy .... This will without reducing prime interest-rates below 10 percent create about 2.5 million work-places in the private sec­ levels immediately. After a chain-reaction of bankrupt­ tor." cies among farms, firms, and thriftinstituti ons, possibly 3) Develop an integrated water resource and transpor­ erupting this spring and summer, even lowering the tation complex which will overcome the critical problems interest rates will not stimulate any automatic recovery. in these two interdependent systems. The administration and Congress must forget the The water resource program, including the long­ issue of federal budget-deficitsand concentrate all ener­ projected effort to bring water from Canada and Alaska gies on dramatically expanding the federal, state, and into the states west of the Mississippi and into the Great local tax-revenue base. I have drafted a comprehensive Lakes system, and the Delaware River basin water proj­ four-point program which will effect the needed econom­ ect to service the lower Northeast is essential if the nation ic recovery. Pending the enactment of such a recovery is to have the water necessary fo r its agricultural, indus­ program, the only action which can halt the presently trial, and household needs. accelerating slide into a Hoover-style depression is a Since water transport can be efficiently integrated drastic reduction in prime interest rates. with rail, truck, and air systems, an integrated container Therefore, although there are many blunders and system must be designed which is compatible for every injustices in the proposed federal budget, improvements aspect of the transport system. Along with this, the in the proposed budget should be deferred to supplemen­ nation requires a rebuilding of its rail system and a tary budget action over coming months. It is worse than maritime fleet for both economic and national-security a waste of time to attempt to improve the submitted reasons. budget now, an absolutely worthless exercise in legisla­ "Like nuclear-energy investment, investment in tive theatrics as long as the issue of Paul Volcker and water-management and transportation-improvements Volcker's economy-wrecking policies is not resolved. represents a cost-saving as well as other forms of im­ Ladies and gentlemen of the Congress, unless you provement fo r the economy as a whole." come to your senses and dump Paul Volcker, the voters 4) Reorganize the developing nations' debt structures of this nation are going to lynch you politically at the . so that necessary world trade can be expanded by $200- polls come primaries and general election this year. $400 billion annually. Those who fightto rid the nation of the curse of Volcker "If developing nations' debt-structures were reorga­ will earn credit. Those who defend V olcker deserve to be nized in a sensible fashion, nations such as India, Brazil, thrown out of office. and Mexico represent magnificientin vestments in mod­ ern goods-producing capacity through infusions of cap­ ital goods from industrialized nations," said LaRouche. LaRouche'sJo ur-point "The great need of developing nations is for rapid infusions of modern agricultural technology-not con­ recovery program sumer-goods industries. This is the great market for capital goods of the industrialized nations over the com­ Mr. LaRouche released the jo llowing jo ur-point program ing 50 years. It is time we acted to make that market a . in January: reality." 1) Supply low-interest credit to essential goods­ A lot of people share the blame for this depression, producing industries and farms by remonetizing U.S. gold wrote LaRouche: President Jimmy Carter, Fed Chair­ reserves at about $500 an ounce. man Paul Volcker, Democratic National Committee "The Congress," wrote LaRouche, "has the power to Chairman "Banker" Manatt, and the misadvisers of issue gold-reserve-denominated notes. These notes President Reagan, "and a very great num\?er of other should not be used for government spending, but for persons, who rejected foolishly what have proven to be government lending. They should be lent through the this writer's precisely accurate predictions of the result of private banking system to farms, industries, and trans­ foolish 'tight money' policies." portation improvements, at interest rates not in excess of But, LaRouche stated, "The practical question is, not 4 percent charged by the government." who is to blame? The practical question is, can we get By this means, "a large portion of the unemployed ourselves out of it?"

58 National EIR March 23, 1982 lation with the Soviet Union. So far, so dull. But a few of the specificsare interesting. BookReview· First of all, the "death beam" itself. Aside from the fact that Moss's science is incompetent, since neutron beam weapons are technologically unfeasible and would be incapable of penetrating the earth's atmosphere from We �pons andliaisons : space ifthey were ever put in orbit, it is quite true that an as x-ray laser placed in orbit could represent a strategically thespook novel lie decisive anti-missile capacity. Such laser systems are considered to be within the near-term capabilities of the by Robert Zubrin Soviet military, while the somewhat further offpossibili­ ty of an orbiting gamma-ray laser might represent an actual capability for widescale destruction of land areas. The blockage of U.S. research in these areas does Death Beam represent a grave threat to America's national security, by Robert Moss New Yo rk: Crown. 198 1 both because the United States will soon fall behind the $13.95 416 pages Soviet Union in the achievement of the generation of weapons and defensive systems that is to replace the nuclear �ge, and because of the depressing effects on the Toward the end of March 1981, Lyndon H. LaRouche, civilian economy of national investment decisions that Jr. and the Executive Intelligence Review put out a warn­ favor "in-width" military production rather than re­ ing to President Reagan that terrorist networks con­ search and development at the frontiers of science. trolled by British intelligence circles were planning an According to Moss, it is the liberals and the pro­ assassination attempt against the President. Immediate­ Soviet softies who have stripped America of its advanced ly, British Secret Intelligence Services agent Robert Moss military capabilities such as that represented by beam and his allies went into high gear to discredit LaRouche, weapons technologies. He is lying. In fact, both the U.S. urging the White House to ignore the warnings. Less space program and basic laser research have been sys­ than a week later, President Reagan was shot. tematically wrecked over the past 10 years by no other Now, Robert Moss has come out with a novel proj­ institution than Robert Moss's Heritage Foundation, ecting that the assassination attempt against the Presi­ and its associated Mont Pelerin Society circle of "fiscal dent was carried out by forces associated with Soviet conservatives." To be precise, as recently as last year, military intelligence. If one comprehends the above in­ Moss's Heritage Foundation went so far as to suggest formation, then one understands all there is to know that the Space Shuttle program be abandoned. If one day about Robert Moss and his best-selling spy thriller Death Americans face death from the skies, they can blame Beam. The novel, like the man, is a lie. Robert Moss and his friends. Shoveling aside for a moment the mountain of British There is another interesting feature of Death Beam. geopolitical propaganda that weighs the book down like While all the Soviets are evil in Moss's tale, the ones he a ton of sin, the plot of Death Beam is quite simple. The encourages his readers to root for are in the KGB. To Soviets, led by the evil Marshal Safronov (who has a claw some, the sympathies of the supposedly conservative for a hand), are planning to put a huge neutron-beam Moss for the Soviet intelligence service may come as a weapon into orbit, which they will use to exterminate surprise. Perhaps it has something to do with the com­ America and perhaps the rest of the free world. Fortu­ manding role played in that agency by such of Moss's nately, the Mossad has a friend in the East German fellow British agents as Kim Philby and Donald Ma­ intelligence service, who joins forces with Israeli intelli­ clean, or with the fact that Moss's Heritage Foundation gence to sabotage the weapon. This discredits Safronov, is riddled with KGB moles, as EIR has documented. allowing his opponents in the Soviet KGB to overthrow Finally, the interesting locales in which Moss places and execute him, saving the world and allowing the his characters includes the Hotel Carlyle of midtown Great Game of geopolitical warfare to continue. Accord­ Manhattan, where Death Beam begins. According to ing to Moss, the Soviets are inhuman and evil, and the persistent and widespread reports, the Carlyle has served only realistic view ofthe world is as a struggle for survival as the site for blackmail setups against diplomats and between America and the U.S.S.R. This isjust an extreme other influentials, sometimes involving the use of young version of the cold-war ideology the British cooked up boys. The Carlyle is also reportedly a favorite New York afterWorld War II in order to recruit the United States City hotel of Henry Kissinger. Did Moss ever meet to replace Nazi Germany as the British-controlled Henry at the Carlyle? One of Death !Jearn's sex scenes marcher lord to be sacrificed in a war of mutual annihi- features an aging KGB agent and a little boy.

EIR March 23, 1982 National 59 the Global 2000 design for geno­ ate, the Club of Rome. Almost the Byrd seeks War Powers cide. A spokesman fo r Byrd fur­ entire two day proceeding was amendment on EI Salvador ther admitted that he did not think monitored by Donald Lesh, a for­ Senate Majority leader Robert that the resolution, should it pass, mer Kissinger National Security Byrd (D-W. Va) introduced an would halt the bloodshed in EI Council operative and former ex­ amendment to the War Powers Act Salvador. ecutive director of the U.S. Asso­ of 1973 that would specificallypro­ In addition to Byrd, a former ciation for the Club of Rome, who hibit the President of the United Ku Klux Klan member from the now directs the Global Tomorrow States from sending troops into El Rockefeller-controlled State of row Coalition of fifty-fiveenviron­ Salvador unless authorized by West Virginia, the amendment is mentalist organizations. As most Congress and/or to protect the co-sponsored by a number of Sen­ speakers stressed support for the lives of American citizens requir­ ators who also have a background provisions of H.R. 907 establishing ing evacuation. in promoting Malthusian policies. a demographic "foresight capabil­ Despite the fact that President One co-sponsor is Senator ity" in the federal government, it Reagan has repeatedly stated that Claiborne Pell (R-R.I.) a leading became clear that this was an at­ he has no plans to introduce U.S. member of the genocidal Club of tempt to implement the objectives troops into El Salvador, Byrd Rome which is promoting wars in announced by Club of Rome mem­ claimed to be taking the action as Central America to reduce popu­ ber Gerald Barney at a March 2 a precaution. There are indications lation. Byrd's resolution followed conference titled "Creating the Fu­ that more is going on. directly from a trip to EI Salvador ture" sponsored by the Club in Two weeks ago, a fo rmer top by Pell two weeks ago. Washington. At that conference, Carter administration official said Barney emphasized the importance that David Rockefeller's Trilateral of instituting Club of Rome-style Commission was about to stage a global modelling and forecasting Congressional coup, seizing con­ Population controllers operations in the government. A trol of U.S. foreign policy and testify in House number of speakers, including Ben using situations such as EI Salva­ On March 10 and II, Robert Gar­ Wattenberg of the American En­ dor as a pretext for such a coup. cia (D-N.Y.) chaired hearings be­ terprise Institute and Arnold The Byrd amendment appears to fore his census and population Torres of the League of United be an opening salvo in such an subcommittee of the House Postal Latin American Citizens dissociat­ effort. and Civil Service Committee on ed themselves from the "popula­ Byrd, in announcing his plans H.R. 907, the Ottinger Bill, which tion-stabilization" provisions of fo r the amendment, stressed that would establish a federal Office of H.R. 907 but supported the estab­ Congress needed to exercise its Population Affairs to coordinate lishment of some kind of foresight power to make and control foreign the use of demographic models in capability. Donald Lesh wrote a policy, and that this Administra­ the determination of all national letter to Garcia on behalf of his tion needed to be "taught that policy and would mandate zero coalition which endorsed only the lesson." population growth as a national office of population affairs and not While intoning about saving goal of the United States. the population-stabilization provi­ lives, Byrd has no intention of Unaccompanied by any col­ sions. going after the underlying cause of leagues on his committee, Garcia Garcia, in his own remarks, the fighting-the pursuit of a con­ heard testimony almost exClusively admitted that the population-con­ scious depopulation policy by the · from representatives of organiza­ trol provisions of the Ottinger Bill State Department. It has been con­ tions such as the Sierra Club, Zero were very unpopular because tinued by the Haig State Depart­ Population Growth, and the Na­ America was founded on a philos­ ment, as documented by EIR. tional Wildlife Institute, which are ophy of unlimited growth. The Byrd's office denies that American coordinated by the international Club of Rome strategy, however, policy in Central America is based environmentalist fascist director- is to introduce a "capability" into

60 National EIR March 23, 1982 the federal government for brain­ ship urging the implementation of field resolution was more relevant washing the bureaucracy and the the McCormack Fusion Act. now than in the 1970s when it was general public into an anti-science The Act, passed in 1980, au­ narrowly voted down. world outlook, through institu­ thorizes a twenty year program to In an interview made available tions such as the proposed Office have an operational Fusion Engi­ to EIR in February, Angelo Cod­ of Population Affairs. neering Device on line by 1990 and evilla, an aide to Senator Malcolm a commercial demonstration reac­ Wallop (R-Wyo.) and a ringleader tor ready by the year 2000. Over of a group of Senate aides and the past year the Reagan adminis­ Defense Department officials who Kemp wants job training tration, under advice from its anti­ are conspiring to oust West Ger­ for enterprise zones science adviser, has tried to keep man Chancellor Schmidt, had pre­ Seeking support for his flounder­ the fusion program as a "science" dicted that the Senate would soon ing urban enterprise zones propos­ project by refusing to begin the put forward some version of the al to create tax havens for low­ engineering design work. Mansfield Amendment as part of wage, low-skill employers, Con­ The FY 83 budget submitted his efforts to embarrass Schmidt. gressman Jack Kemp (R-N.Y.) has by the Reagan administration pro­ Stevens has not decided on the proposed legislation to foster "job poses cutting the magnetic fusion form such a resolution would take. training" programs in the enter­ budget from $456 million allocated He or dered a staff study to be prise zones. His bill, H.R. 5527, last year to $444 million. completed by late March. titled the Private Sector Opportun­ Meanwhile, a source close to ities Act, emphasizes private sector Senator Sam Nunn (D-Ga.) re­ activity in such job training. ported that the Georgia Democrat It would reauthorize Title VII Threaten Schmidt is going to play the key role in of the Comprehensive Employ­ with G.I. pullout shaping such an amendment. The ment and Training Act (CETA) Talk of reviving the 1974 Mans­ source reported that Nunn has de­ until 1985. This CETA title estab­ field Amendment, which calls for clared all out war on Europe and lished private industry councils to pulling U.S. troops out of Europe, would like to deliver a message to coordinate job training programs. surfaced in the Senate last week as the NATO allies and Schmidt in Kemp's bill would stress training Senate Majority Whip Ted Stevens particular. N unn does not think fo r jobs in enterprise zones and fo r of Alaska railed at America:s Eu­ that reviving the full Mansfield enterprise zone residents. ropean allies for their passivity. amendment would succeed how­ In the middle of a discussion of ever; he prefers a more limited the European gas pipeline deal form. He is likely to propose legis­ with the Soviet Union March 2, lation that will call for the U.S. not Congressmen to press for Stevens declared, "It is time to re­ to authorize money for the posi­ greater fusion budget examine our commitment [to tioning of an additional two Army Four leading House Republicans Western Europe-ed.] because of divisions in Europe. Mandated by have decided to fightthe attempts their willingness to become in­ a U.S. agreement with its NATO ofOMB Director David Stockman creasingly dependent on the Sovi­ allies, they would cost approxi­ and White House Science advisor ets for their daily commerce and mately $1 billion each George Keyworth to gut Ameri­ daily life ...if [the Europeans] feel , Regardless of what finally hap­ ca's fusion program. The four so secure in their relations with the pens with the amendment, all the Congressmen, including members Soviets, then it is time to ie-exam­ talk of pulling U.S. troops out of of the House Appropriations ine our number of troops in Eu­ Europe has the "get Schmidt" con­ Committee, which begins hearings rope." spirators ecstatic. "We're getting a on the FY 83 fusion budget March Stevens was joined by Demo­ lot of play in Germany," said one 15, will be circulating a Dear Col­ cratic Senator John Stennis of Mis­ ally of Codevilla, "and this weak­ league letter to the House member- sissippi, who stated that a Mans- ens Schmidt ..."

EIR March 23, 1982 National 61 NationalNews

which function as the principal vents for manding local ordinances be overturned. its internal heat. The Court's decision bounced the cases While NASA's Pioneer spacecraft is back to the Court of Appeals, which in Seaga says Kirkland still orbiting Venus and providing data, turn has upheld the local laws. all new Venus probes by the U.S., includ­ On March 5, the Supreme Court supports cheap-labor zone ing the previously planned Venus Orbit­ ruled that the definitions contained in an Edward Seaga, the practicing voodoo ing Imaging Radar (for mapping the Illinois community ordinance were not witch-doctor who is also Prime Minister planets' surface) have been cancelled by "vague" as the dope lobby lawyers had of Jamaica, told the Journal of Commerce administration budget cuts. contended. Though the Court was only that AFL-CIO president Lane Kirkland ruling on the language of the ordinance would not mount serious opposition to and not on the law itself, which requires the so-called Caribbean Basin Plan, the headshop owners to list names and ad­ David Rockefeller-authored scheme to 'Air Opium' has DNC's dresses of customers, the law stands. create a "free trade zone" for slavery and The March 8 decision in particular is drug-running in the Caribbean, which Manatt on board seen as positive by anti-drug forces, since has been fo isted on the White House. The Chairman of the Democratic Na­ it gives a nod of approval to anti-para­ Seaga said he pad met with Kirkland tional Committee, banker Charles T. phernalia laws based on a model bill a month ago and "left the meeting with Manatt, is on the board of Flying Tiger drafted by the Drug Enforcement Ad­ the impression that labor ...would not International, the airline which has ministration and endorsed by the Na­ object to the measures ... as long as earned the nickname 'Air Opium,' ac­ tional Anti-Drug Coalition. Most mu­ these did not lead to loss ofjobs." cording to the March 8 issue of New York nicipalities with anti-heads hop laws have In his first week in office last year, magazine. New York reports that Metro used this modeL Seaga ordered Jamaica's banks to accept International Airways, a Flying Tiger Further, Justice Thurgood Marshall, dollar-profits from the illegal export of subsidiary, is currently under Pentagon in the March 5 ruling, said the drug marijuana to the United States. The new contract to fly Salvadoran soldiers to lobby's concept of "free speech" plan will also allow Jamaica to export Fort Bragg in North Carolina. amounted to "speech proposing an ille­ tax-free rum, and will grant U.S. tariff An aide to Manatt confirmed that the gal transaction, which a government may breaks to Jamaican goods manufactured California banker has been on Flying regulate or ban entirely ." The Justice's with cheap labor. Tiger's board since 1979, but claimed notion of freedom of speech tied to the that "he was never informed about the EI idea of public good had been almost Salvador contract." abandoned by modern courts. Flying Tiger got its start running NASA findsabundant arms to Chinese Nationalist leader Chiang Kaicshek in the 1930s and later fusion fuel on Venus earned its nickname for its role in flying High Plains Council drugs out of Southeast Asia's Golden The National Aeronautics and Space debates NAWAPA Administration (NASA) reports that its T,. iangle. It also is widely believed to be Pioneer Venus spacecraft has returned a front for CIA operations. The "Water fr om Alaska" aspect of the data which measure the ratio of deuter­ National Democratic Policy Commit­ ium to hydrogen on Venus to be over 100 tee's fo ur-point program to get the coun­ times larger than it is on the earth. Deu­ try out of the depression was the subject terium is the main isotope of hydrogen Supreme Court drops of a heated debate March 4 at the quart­ erly meeting of the High Plains Study which provides the basic fuel for both boom on head shops thermonuclear bombs and thermonu­ Council chaired by Texas Governor Wil­ clear fusion reactors. A single gram of Within a five-day period, the Supreme liams Clements. deuterium can provide as much energy as Court has done what amounts to turning The High Plains Council, created by $3000 worth of fo ssil fuels. According to its head while lower courts lower the Congress to include governors and se­ NASA officials, the extreme plentitude boom on head shops (stores that fe ature lected appointees from six states facing a of deuterium on Venus is strong evidence dope-related items) around the country. severe water shortage due to the deple­ for the theory that billions of years ago, Although the Court has made no ruling tion of the Ogallala Aquifer, met to de­ Venus may have had a large ocean which on the constitutionality of a ban on drug liberate over its finalreport to Congress. since that time has lost almost all of its paraphernalia, its latest actions are tacit High Plains Council member Keith light water content to space, leaving the approval of bans and restrictions being Farrar, urged a followup study on the "heavy water" deuterium behind. enacted by communities nationwide. feasibility of importing water to the cri­ Other recent NASA Venus findings On March 8, the Court refused to sis-stricken high plains from Alaska and include evidence that there are at least hear two separate headshop ban cases Canada under a revived "North Ameri­ two active volcanic areas on the planet filed by drug paraphernalia lawyers de- can Water and Power Alliance" J 62 National EIR March 23, 1<,.82 Briefly

• THE WHITE HOUSE, the Na­ tional Security Council, and Henry Kissinger's office at Georgetown (NAWAPA) plan of the Parsons Engi­ The FEC, created in the wake of Wa­ University are all keeping quiet • neering Company, orginally developed tergate, regulates federal campaign fi­ about a report in Newsweek mag­ in 1964. nancing and provision of "matching azine that Henry has been named Nicholas Benton, southwestern di­ fu nds." to head a new "special consulting rector of the NDPC stated, "We are at group on East-West credits" with­ the point of almost having to make a in the NSC. Newsweek says that political revolution just to get a drink of the group also will include David water." Rockefeller, thus containing "two Gov. Clements stated that he thought Liberal Dems convene names certain to irritate" some the discussion was "extremely interest­ Reagan backers. ing," but punted on endorsing formal to revive Mussolini Council adoption of Farrar's call for a The annual convention of the Americans • THE GUARDIAN ANGELS, resolution to the U.S. Congress. for Democratic Action (ADA), held the gang-member-turned-crime High Plains Council members felt March 6-7, put fo rward a full-fledged fighter group, has been linked to confident the Council would not submit Mussolini-style corporatism as the solu­ the Dec. 30 Newark, N.J. robbery its finalreport to Congress this fall with­ tion to America's economic crisis. The in which one of the vigilantes was out including a recommendation calling 44-point statement of principles issued shot by a policeman while alleged­ for work to begin on a study of a by the Socialist International's key U.S. ly attempting to stop the robbery. "NAWAPA" approach. outlet included wage-price controls, According to Newark sources, one work retraining and relocation, estab­ of the three suspects in the heist is lishment of a National Industrial Policy the son of the second-in-command Board and an Urban Infrastructure of the guardian Angels in Newark: Board, and a call for "corporate democ­ LaRouche awarded racy." • MAYOR ED KOCH of New injunction against FEe Patrick Caddell, Jimmy Carter's York City announced March 10 pollster, sounded a major theme of the that he will introduce legislation to The Federal District Court in New York convention when he declared that Presi­ send small-time offenders to City issued a preliminary injunction dent Reagan was destroying his own Quonset hut minimum-security March 9 against the Federal Election popularity along with the U.S. economy, camps on Rikers island for terms Commission, barring them from launch­ and that therefore the Democratic Party up to 15 days. The inmates would ing any new investigation of Citizens for is the wave of the future. Capitalizing on then be trucked around the city in LaRouche (CFL) or contributors to the the President's biggest blunder, tolera­ work gangs, with penalties for es­ 1980 president campaign of EIR founder tion of Federal Reserve chief Paul Volck­ caping ranging up to three years in Lyndon H. LaRouche, Jr. Blasting the er, an ADA spokesman said the group prison. "They are not concentra­ "interminable, inconclusive and oppres­ "will be making the ending of the inde­ tion camps. They are work sive investigations" of CFL being con­ pendence of the Fed one of the major camps," the Mayor said in answer ducted by the FEC, Judge Charles goals we'll be organizing fo r." to criticism. Brieant warned that such investigations This was echoed at a major confer­ "are not, nor should they become, star ence banquet by Shirley Williams, the • GORE VIDAL, the novelist chamber proceedings." leader of England's new Social Demo­ best known for his "picaresque "It would be hard to imagine a more cratic Party, who called on American comedy about bisexuality," Myra abusive visitation of bureaucratic pow­ liberals "to rise up and replace Reagan's Breckinridge. has announced he er" than the FEe's numerous investiga­ monetarist policies," which she likened will enter the California Demo­ tions of CFL, stated Brieant. The injunc­ to Margaret Thatcher's. cratic Senatorial primary against tion is the result of a lawsuit brought last Among the more than 60 speakers at Jerry Brown. Also running in the fa ll, Dolbeare v. Federal Election rom­ the social fascist weekend were Michael race is Will Wertz, who has been mission. The FEC has been under fire Harrington, head of the Democratic So­ endorsed by the National Demo­ from both the Republican and Demo­ cialist Organizing Committee, Club of cratic Policy Committee. Vidal cratic Parties for widespread abuse of its Rome member and former congress­ says he will run on a platform op­ powers. woman Patsy Mink, Rep. Henry Reuss posing any military budget, calling The Southern District Court of New (D-Wis.), Ralph Nader, Andrew Young, for taxes on religion, and support­ York ruling in the Dolbeare case stipu­ and National Education Association ing legalization of marijuana and lates that the FEC must expedite its find­ head Terry Herndon. prostitution. Insiders speculate ing of probable cause and conciliate all Many of these were part of the origi­ that Vidal has been asked to enter pending matters, or drop its investiga­ nal coalition behind the Humphrey­ the' race to "make Jerry Brown tions of CFL. It must also establish pro­ Hawkins make-work/forced-labor bill, look normal." cedural safeguards . which the ADA is now trying to revive. •

EIR March 23, 1982 National 63 Editorial

What about Mr. Haig'sethics ?

While Senator Harrison Williams was being railroad­ reacting to them butchered 13,000 civilians last year). ed out of the U.S. Senate between March 3 and 11 for Haig sprinkled his remarks with insults about L6pez "violations of ethics" he never committed, far graver Portillo's "appeasing" of his opposition. questions arose about the ethics of an individual Haig simultaneously began a frantic media cam­ whose responsibilities and power in the United States paign to convince Americans that the Soviet presence may be second only to the President's. in Nicaragua was a threat to American security. After Secretary of State Alexander Haig's name has the fiasco of photographs of "Sandinista atrocities" appeared with increasing frequency in the widening against the Miskito Indians released by Haig, which Italian scandal of "persons above suspicion" implicat­ turned out to be atrocities committed by the Somoza ed in the terrorist kidnaping last December of Ameri­ dictatorship, on March 9 reporters were called to the can NATO General James Dozier. As this week's State Department for a photographic display of "So­ Investigative Leads column documents, two top aides viet-model obstacle courses" in the Nicaraguan jun­ of Haig, Vernon Walters and Michael Ledeen, have gle, but still no evidence was produced to back Haig's now been named in the investigation of Propaganda assertion that Nicaragua and Cuba are arming the 2, the secretive "Freemasonic lodge" that was set up guerrillas in EI Salvador. afterWorld War II as the Italian command center for But the next day word was leaked to the press that international terrorism, dope, and gun-running. the President had authorized a CIA covert action One of the most shocking of the latest revelations option to fund and build a paramilitary force of up to is the testimony of Dozier's jailer, Red Brigader An­ 500 Latin Americans for commando operations tonio Savasta, that Haig aide Michael Ledeen-ac­ against Nicaragua. Another report has it that Haig is cused by the Italians of having been on the P-2 pay­ considering deploying up to 60,000American soldiers roll-met twice with Luigi Scricciolo, the ultraleft into EI Salvador in a blitzkrieg maneuver. Troops in trade unionist recently jailed as a Red Brigades terror­ and troops out, the argument goes, should avoid the ist. mire of a Vietnam. The gravity ofthe charges is underlined by another Why does not Haig take the one action that would report we publish this week, the special dossier prov­ stop the bloodshed in Central America-cutting offat ing that the "death squads" at work in Central Amer­ the source the flow of arms to both sides? Anyone ica are run by P-2 and other elements in the interna­ familiar with Central America knows the weapons tional network we call Dope, Inc. For at this very come mainly from private arms merchants linked to moment, Alexander Haig is doing everything to em­ Israeli intelligence and Max Fisher's United Brands. broil the United States in a reckless military adventure And both right and left are increasingly being advised in Central America. by Argentines linked to the P-2 lodge. In an interview published March 4 in the Los Could the "why" be linked to some loyalty other Angeles Times, the Secretary of State summarily dis­ than to the United States-some loyalty such as to P- missed the "last-minute appeal" of Mexican President 2? Even the aroma of ties to something involved in the L6pez Portillo to mediate between the United States filthiest aspects of the genocide being so cynically and Cuba in pursuit of a political solution to the conducted in Central America, on the part of the U.S. Central American conflict. The L.A. Times interview Secretary of State, is a threat to our national security. was taken by all observers as a particular slap in the Not only should the U.S. Senate, so attuned to "eth­ face to Mexico. Haig predicted that Mexico itself ics" questions, quickly bring the matter under scruti­ would soon be swept up in the conflagration as it ny, but other U.S. NATO allies besides Italy should spread from EI Salvador into Guatemala (a country find it in their vital interests to demand full clarifica­ where the P-2 linked death squads and insurgents tion.

64 National EIR March 23, 1982 Franklin House Publishers present: Lyndon LaRouche

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