NATIONAL INTELLIGENCE DAILY FOR 12 JANUARY 1990

Created: 1/12/1990

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USSR: Situation Report

EC: Seeking Control of Funds to Eastern Europe

Sign of Factionalism Within Hvballah

Poland: Communist Pany Trying To Save Itself

Nicaragua: Opposition Campaign Stumbling

Cambodia: ProspectsN Ssltlemen'

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Pledges Procedure* for

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lhc first day of his three-day visit io Lithuania, Generalproposed an unprecedented law establishingrepublic secession,ajor policy reversalhis determination ioiolejxrTesponse to BalticGorbachev repeated earlier appeals to Lithuaniansplans for secession but said the Supreme Soviet willa secession procedures law. He indicated the lawtimeframes for secession, defense matters, andissues. In Vienna, Soviet Interior Minister Bakatininterviewers lhe new law would allow secessiona civil war"ublic referendumajority offavored independence.3

In an interview published yesterdayeading Swedish newspaper. CPSU Secretary Ligachev, the chief defender of lhe interests of the pany apparatus, asserted that attempts at secession could lead to serious "misfortunes" for small nalional groups, but he noted the national party and thc USSR "can live on without one or another small republic" and implicitlyiliury response. None of lhc statements have been picked up bv ihc: Soviet

Until now ihc leadership has categorically ruled oul lhe

possibility of republic secession. The less drastic issue of republic Communist Party independence had provoked raging controversy in the Central Committee since thc Lithuanian party's split from the CPSU in December. Gorbachev appears to have recognized that even transition to ahe reportedly said in December would occur in fivebe too little, too late for Baltic nationalists.inimum, he presumably hopes that his proposal will persuade the new Baltic legislatures to delay steps toward independence until the law passes. Beyond that, he may hope that thcstipulating requirements such as compensation to Moscow for economic and militaryransition period, and continued securityprolong transition toy.ilhout being so siringeni as to provoke the Baits to act illegally.

The proposal is likely io outrage conservatives in the Central Committee and thc legislature. Ligachev's seeming moderation on the issue of secession, however, suggests lhat Gorbachev has the Politburo's backing for the proposal, which will strengthen his hand in seeking Supreme Soviet approval. The three Baltic republics and Georgia, and possibly Armenia and Azerbaijan, wil^initially view the proposalreen light for eventual independence. Disillusionment

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spawneduniiively siringenl law. however, probably would provoke an angry response- and might encourage republics loecleratc theii lime tabic tor independence

but Asks Lithuanians To Reconsider

his proposal for procedures for secession.earlier appeals lo Lithuanians to abandon plansin return for greater auionomy within aand implied!ush for rapid secession would leaddid not dwell

much on the cnhuSnffii party's spin front ihc CPSU in December, lhe reason for his vim. Instead, he stressed lhal lhe Central Com mi lice ai its meeting later this month would discuss ways lo increase lhe auionomy of republic Communist Parties wiihin the framework of the national part) afflM|r

decision to focus primarily on ihe broader issue of secession suggests that he lias accepted the Lithuanian pany splitait accompli. In the likely event Gorbachev cannoi persuade the renegade party to reverse its decision, he probably will be able to fend pffihosc Central Commince members pushingough response *NMt fc> }

Crisis Brewing In Caucasus

demonstrated throughout Azerbaijan yesterday in reaction to the Armenian Supreme Soviets decision on Tuesday to include Nagorno-Karabakh in Armenia's economic plan. In Lenkoran' city. Azen nationalists, including members of thc Azeri Peoples Front look over the local communications center, as well as police. prosecutors', and other governmentby local militia, the demonstrators called for total Azeri sovereignly over Nagorno-Karabalth and threatened to seek Azerbaijans secession if this demand is not met. Armenia, meanwhile, in defiance of Moscow, yesterday became the fifth republic loesolution declaring republic laws sovereign over national laws. Other such resolutions have been condemned by lhe USSR Supreme Sown Presidium V> 3

Moscow has failed in its efforts to use the Supreme Soviet lo moderate ihe Armcnian-Azeri dispute and to temper popular -suppon for more republicupreme Soviet compromise resolution on Nagorno-Karabakh passed in November acknowledges Azen claims of sovereignty over the region, and the Supreme Soviet Presidium has declared the Armenian resolution on unification with Nagorno-Karabakh unconstitutional. These developments also point to lhe increasing evolution of iniereihmc dis*putesJMo constitutional

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The Proposed Bank for Reconstruction and Development

EC member countries have reached broad agreement on the basic structure and mission of the Bank.

The Bank will support development of the private sector through loans. Ii will also finance large infrastructure projects.

Member countries intend to controlercent of the voting power, holding most shares themselves and allocating some to the EC Commission and the European Investment Bank.

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TheECis proposing initial capitalizationillion; only

ercent of subscriptions will be paid ineriod of

Thc -USabout S1 billion, of which

illion would have to be paid in.

countries probably will have to meet political as well I as economic conditions. The political terms probably will

include democrat reforms, respect for human rights and observance of the rule of law.

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Seckins Control of Funds to Eastern Europe

Thc EC member slates haveeneral agreementstructure and priorities of the proposed European Bankanti Developmentevelopment thaiihe Community's determination tor/rchessrateto Eastern Europe,J>

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Compromisesthe Bank's capitalization and financing priorities have ledroad EC conscnsusjHaajMhlAaaaMlkaW^

President Mitterrand will meet representatives of countries participating in4 aid effort in Paris on Sunday to calm any irritation about the ECs unilateral decisions before meeting with East Europeans at the Bank's founding conference on Monday,

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EC representativesecond conference will be needed next month but hope to finalize an agreement in March. The French want donor governments to pass enabling legislation by yearend so the Bank can begin operations1

insistence of the EC on retaining majority control of the new Bank is intended to strengthen its influence in the Western assistance effort. By encouraging non-EC governments to channel their financial help through the EBRD, the Commission and member governments want to change the ECs role from coordinator to decisionmaker. The process by which the EC has pursued the Bankthe essentials in an EC forum before consultingforeshadows the EBRD's decisionmaking process. tHLaaai

Community probably will push to set the capital shares of Paris, Bonn. Rome, London, Washington, Tokyo, and Moscowercent, giving Soviet President Gorbachev at least the appearance of equal footing that Mitterrand promised him last month. It may also signal the Community's willingness to engageialogue with Moscow on the future "architecture" ofopic almost certain to be discussedc.il meeting on Eastern Europe onanuary.

LEBANON: Sign of Factionalism Within Hizballah

A new radiostai ion has gone on thc air in Lebanon broadcastingand views of Hizballah's spiritual guide Ayatollahappearance of "the Radio of Light" suggests factionalismradical Shia organization is increasing. Theto Fadlallah as an Ayatollah.Iranian-sponsored media have yet to do

The prominence given Fadlallah suggests his followers arc gaining influence in Hizballah at the expense of pro-Iranians. The electionew Hizballah leadership council last November and growing resentment of Iran's dibits to end clashes between Hizballah and the rival Shia Amal in southern Lebanon are signs that Fadlallah backers arc asserting their independence. Factions in Beirut typically .

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POLAND:ty Trying To Save It*OT

shaken party's promise of far-reaching clianges in ils

polilical program is unlikely to make it competitive or stave off its further decline. The changes approved by the Central Committeeain attcmpi at appeasing Ihc reformists in the leadership without jeopardizing thc party's traditional base. But the quest for internal cohesion probably will not restore the Communists' electoral competitiveness. Thc party is so discredited lhat ils successor cannot escape being tainted,urther decline appears inevitable. Large numbers of Communists already have abandoned their pany ties to protect Iheir jobs with lhe Solidarity-led government, and more defections are likely. If the pany suffers massive defeats in the local elections this summer, as isjikejy. pressureormal split may prove

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In Brief

South Asia.

nationalists in Soviet Georgia staging hunger strike, demanding independence, dialogue witheorgians increasingly supporting independenceoscow likely to keep channels open by sending low-leveln.flHp

Army units on strike for military reforms pose first major challenge to newresident Havel likely to seek compromise, avoid punishingight hand would alienate Communist Defense Minister Vacek. (MHlffc |

East German career soldiers, mostly officers, formedear further troop cuts, trying to insure socialonscripts, who favor cuts, may,

Leaders of Tunisia. Morocco, Algeria, Mauritania postponed Arab Maghreb Union summitrobably

lo encourage unenlhusiastic Qadhafi to3

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Special Analysis

Campaign Stumbling

National Opposition Union has lost momentum in recent weeksresult of Sandinisfa intimidation, lack of campaign resources,group's organizational weaknesses. The coalitionmanagedits fragile unity, but several key leaders are preparing to allywith ihr regime after lhe

this month, ihc coalition's presidential candidate and unifying symbol. Violetn Chamorro, injured Ijer knee and abandoned the husUngsfor at least two wceki

Opposition rallies appear to have peaked in November0 participants, in pan because of resource constraints. Although opinion polls in Nicaragua are questionable barometers of public sentiment, three of thc four most recent ones show President Daniel Ortegaubstantial lead onhonage of funds has kept the opposilion from exploitingthe regime's willingness to let it expand iu access to television fcj 3

Pressure Tactics

Since an incident in crly December in which one person was killed and several injured. Sandinista mobs have not disrupted opposition raJhesaUtiough the regime has kept up lheSandinista intimidation and hlandishmcnis have led more than JO opposition mayoral candidates and several poll watchers to resign. The opposilion claims the regime is responsible for telephoned drain threat" against several of its leaders, including Chamorro and vicc-prcsidcniial candidate Virgil io Godo) AMP

Demoralization Setting In

Uocal lepreseniaiivei-are^lsTr^ghTthat. with less jhan two nionths to go. the coalition has no simple campaign theme ^VasVaTT

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forUN Settlement

Allhough all of Ihe parties involved are pessimistic about thea near-term sotatipn to lhe Cambodian civil tear, most agree lhelikely toole in any political settlement. The five VNpermanent members -ill meet ia Paris on MoMday andtry to revive momentumettlement.

To get around the power-sharing issue that has deadlocked the diplomatic process, Australia haslan under which the UN would administer Cambodia during an interim period. Key players have expressed inlerest in the proposal, but there is little indication any of them are prepared to modify their own positions significantly. The major obstacles still blocking an accord include:

Khmer Rouge's insistenceuadripartite interim administration with each of the four factions playing an equal role.

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The need for the other Cambodian factions to agree on the extent to which the current regime in Phnom Penh will be dismantled in favorN administration.

The absence of major power agreementingle settlement plan and an arms moratorium.

The difficulty ofN observer group that canease-fire and effectively and convincingly ensure the operation of an impartial Cambodian Government until an election is held^

Difficulties for the UN

Even if the considerable differences among the factions andplayers are overcome, thc UN will find it difficult toa peacekeeping mission in Cambodia. The UN would havea cease-fire among four belligerents who probably willand in control of territory they now hold. The latkrequire0 troops, which the UNhard pressed to find because most of its traditionalthe Nordicalready

eutral Cambodian administration before an election lakes place wouldelicate operation because of the need to workargely intact Phnom Penh administration. Thc UN would also

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have io find as manyijjan administrators and Tin Cambodia has no jradiiion of democratic elections and p

SeenTing External Support

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Although the USSR has

its sincerity and the degree

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