NATIONAL INTELLIGENCE DAILY FOR FRIDAY, 2 AUGUST 1991

Created: 8/2/1991

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-aet lo Iht Lithuanian killings. Ytl'lsin is challenging iht Ctnltr's pitrogatiets in MotCO- but cooperating with itecenomi, nobltms in tht Soiiti InEast SJaflnaV

Responseithuanian Murders

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Gorbac lias con coo pen guards, receive* invesiia

gar.li

yesterday thai KGB Chairman'resident Landsbergis and offeredhc recent murder of six Lithuanian border

legislative deputy denies Landsbergis :hev says hc will personally supervise the

I Gorbachev's failure to take decisive action Quicklyreference to Kryuehkov will be seen as indications he isin damage control thanhoroughis hostile to the Baltic independence drive andany involvement by centrall>-ihn'

covenjp if hc had ai the outset appointed an investigatingmembers having reputations for independent thinking,Shevardnadze orselected

Expands Moscow Mayor's i'o-ers

ecree Wednesday greatly enhancing the powers of Moscow Mayor Popov that will remain in effeclussian law on the city is passed ihis fall. Ii gives Popov control over the budget and over the traditionalist-dominated Moscow Oblast government.

Yel'Uin's decree is another challenge io the center, which is pushing its own law on Moscow in the USSR Supreme Soviet. Thc center will nol be happyro-Yel'lsin mayor is being granted enhancedraditionalist-reformist coalition in ihe Moscow City Council has long feared losing its power to Popov and will try to reassert us authority; either side may legally challenge Yel'Uin's decree. Yel'tsin plans io seek legislative authority this fall to appoint local executives in Russia on an interim basis, and reaction to his

_wil| be an important indicator of his future success in doing so

continued

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DeciCC oni Issued

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Prime Minister Pavlov and Russian Prime Minister Silayev

nd joint decree to help case the growing shortages of food and fuel in the Soviet Far East. Far Lastcm enterprises, which have been allowed to keep onlyoercent of their bard cuircncy earnings, will now be able to retainercent,

governments will be allowed to use their hard currency to import goods duty-free, and local havc lnc iSue

export licenses. I

its is the first joint economic decree issued by theihe hist time Ihey have agreed to give up allrevenue. Their concessions indicate thcthey place on the Far East; thc regionajorkey commoditiesital link between the Soviet heartlandPacific. Its natural resource wealth has also attracted theforeign investors, especially Asian Pacific Rim countries.reflects Yel'tsin's strategy of giving regions createrto deal wiih their economic

on Ihc Offensive

militants on Monday killed seven Aicri mililiamen who wereillage from which Armenians had been deported. Armenians killed two Azeri villagersormerly Armenian-populated village on Tuesday ando^mn ofinistry iroops on Wednesday. iHW

fggfg'g'fg These amtks will prompt darsh reprisals fiomand possibly fiom centralviolence lo escalate in the region. Recent Azeri and Soviet operations designed to curtail Armenian violence have insiead stirred lhe Armenians to become more aggressive

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Miliary Development*

Croatia ai Loose

Report

Efforts loeaie-fire begin again today ai fighting conlinuii in Serb-populated ereai of Croatia. Croatian forces are continuing torubbing, and Zagreb may be considering trying ta cut its tones In

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The Yugoslav Army intervened yesterday in several clashes between Croatian and Serb forces. At Dalj in eastern Croatia, the Armyanks from Serbia androatian police officers. Air Force jell

. strafed Croatian targets in thc area. Western journalists have confirmed that Croatian forces late Wednesday retreated from

their last foothold in Krajma. Meanwhile, atederal Army lanks. armored personnel carriers, and trucks left Slovenia yesterday.

Croatian forces haveerious defeat in Krajma and are farina oooilv in eastern Stavonia. Srrhiihsome support from local Army commanders, have dominated Croatian military units in recent clashes, fighting in Krajma may taper off temporarily if Zagreb opts not to launch an offensive to retake lost ground and if ethnic Serb commanders do not expand operations* in to majority-Croat areas where they would lose the benefits of fighting on their home ground. Further violence is virtually assured incontested Stavonia. however, and probably in Krajins well gflHM

Following renewed d|

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Croatian President Tudjman yesterday told the republic legislature that Croatian foices are too poorly armed and trained to succeed against thc Serbs and Ihc federal Army, and claimed hc has ordered Croatian forces to avoid provoking Army units. He nevertheless added that Croatian forces would resist future atiefftbis by ethnic Serb paramilitary forces to seite Croatian territory, and he accused some federal Army elements of actively aiding Serb rebels.Tudjman also gave opposition figures several portfolios in his new "national salvation" cabinet, kaaaaaaat

itint in eastern Croatia, the

jrged lhe legislatureemergency pen-ers

He also called on all able-bodied Croatian* to register wiih the republic defense forces. Hawkish republic legislators yesterday harsMy cniii Tudjman's handling or the Scib rebellion taaV

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Presidency To Meet Again

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defensive speech suggests he may be

considering writing offeffectivelywill

reiist the Serbs" efforti to expand their influence in Slavonia. If

Tudjman's own authority erodes further, thcstill

control securitypush CroatiaroaderTiwtlm*- -

opposition figures into thc cabinet almost certainlyid"to strengthen his position in his own p. ff

The federal Presidency will meet today to hear Croatia's response to its proposalease-fire. The Presidency continues to demand Croatian demobilization before any Army return to garrison, according to US diplomats. Croatian officials say ihey Still want federal troops to withdraw now. The Luxembourg. Duich, and Portuguese Foreign Ministers. meanwhile, arrive in Zagreb today to push Ihc EC cease-fire proposal, which hinges on joint Army.CroatianfM

Serbia and its allies are driving the Presidency'* cease-fire 'uiuaiiy assuring inai mere win oe no agreement on us terms. The EC mission may be able to push Tudjman toward an agreement, however. Tudjman specifically said yesterday that his "limited'* military response to the Serbs ihus far was partly aimed at satisfying Westcrnedcmandseaceful path to independence. Winning agreement from Ihc Serbs, who sense victory on the battlefield, probably will be moic difficult,

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LEBANON: Pcice Conference Decision Draws Fire

Thc Harawi government's decision lo participateegional pthe legislature ha*unleashed widespread public criticism from former government officials.

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strain fearr. The ii whoa ccono the Ja

Comment: Thc opposition emphasizes Ihe government's fears lhat securing Israel's withdrawal from southern Lebanon may become hostage to other peace process issues and lhat Lebanese national

decision couldabinet ministers, who iiiuaiion for polilical gain. Sovcrnment members cc on such issuei as Ihc

eployment into

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FRANCE-EC: Protectionism in High Tech Industries

lan to increase protectionism in the EC information technology industry probably willool reception from other EC members.reliminary stage in Community

market, increase subsidies for investment and research, and encourage closer cooperation among ECember-state working, group will consider the proposal next monthas panommission effort to achieve an EC consensus,

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Releasing Froren Funds

Brasilia this month will begin releasing some ofillion in savings account funds froicn since0 under its anti-inflation program. In addition, the government plans to free the rest in monthly installments during the next year and hasrer>lin toome of the funds,!

Each installment equalsercent of the money supply and has tne potential for rekindling inflation, which currently is rising atercont per month. Brasilia hopes most oTthc funds will remain invested, but pent-up demand may lead to increased consumer spending. Moreover, uncertainly aboul fulurc policies may prompt some investors to shift thetr funds overseas. In an effort to dampen inflation and enhance confidence in its program, tlic government is likely to introduce additional measures thaiaj liquidity and clamp down on expenditures.

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