NATIONAL INTELLIGENCE DAILY FOR FRIDAY, 4 AUGUST 1989

Created: 8/4/1989

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Contents

Lebanon: Situation Report

Iran: Increasing Involvement in Lebanon

El Sahador: Military Developments

USSR: Supreme Soviet Backs Cooperatives

Reverberations From Insurgent Clashes

Ttniiland; Strains Ahead for Chatchat .Governmentiad Trying To Regain Control

Bolivia: Ban/cr Concedes Presidency to Pur /jmcu

Romania-US: Tics Declining. Notialu

In Bf|tf

Aoalyais

Dotneuic Support for Ubayd

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MtMtlM Meson

In announcing suspension of lhc threat lo kill IIS hostage Joseph Ciapp*o. lhc Revolutionary Juuicc Organiialion broadened its demand* lo include ihr release of an unspecified number of imprisoned Lebanese and Palestinian inivun as well as ShayU Abdul Kanm Ubayd. According to the pressist of the prisoner* e pesacdhe Red Cross.

CasWMtM: These developmcnii almost certainly will si Israeli leaders' belief lhat negotiations are possible

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ews briefing held in Moscowoviet Foreign Ministry spokesmsn stated that tbe USSR is urongjy opposed to escalating violence over Ihe hostage crisis, cautioning ihat the threat or use or force would not defuse the situation He said Moscow intended to discuss lhe hostage crisis with Syrian and Palestinian leaders ind lhat it wouldessage to Israel on the mailer Soviet prm coverage of US naval movements in the Mcditr^TBxican has been factual"

Moscow it attempting lo dissuade lhe US and Israel from military strikes thai could lead lo calls from rts allies for more direct Soviet involvernent and undermine its efforts to convene an international conference on ihe Arab-Israeli peace process. The Soviets' more active diplomacy is also designed to establish lhc USSR's credentials as an opponent of lerroriimeacemaker in the region.r

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I", Mil, ln>ul<enu'nl in I

ffkrwrn ii exmmmmlimg ti, tmrfon for St)im formoitlilk Syrim io mmrtp font*mtmimsi

orencouraging Iran toarger role in Lebanon in pari because Damascus hat limned influence wiih Hizballah It needs Tehran's help to keep peace between the rival Shia groups and to draw Hizballaharger Lebanese Muslim alliance againsi Awn.

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Military IX'iclopnicnt.

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Marxist insurgents conducted attacks throughout iJ-Sahadar en

Wednes _

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Thc rebel attacks Appear to have been well coordinated and'

targeted isolated National Guard and civil defense posts rather than

wcll-dcfcndcd military installations for the most part. The guerrillas

also conducted several sabotage operations against electric, lines and

the transportation system. The civil defense and security forces

reportedly suffered at least four dead andounded while the

rebels sjstair.cd three cjsuallicsv*/

military hasajor operationebel base area

battalionsational Guard troops have deployed to Usuluian Department to increase securityajor eolTee-producing area. Thc Army also iseries of smaller commando operations in nonhcin Mgra/an Department that have killed at leastucrril

mage aircraft

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it insurgcnti probably timed their attacks to take advantage of military unpreparednesseeklong national holiday. Despiteear of military setbacks, the insurgents are still strong enough lo engage some lightly guarded targets. The rebels probably could notortified militaiy installation such as llopango Airbasc. but ihey may be able to damage aircrafi and

facilities bytandoff bombardment

By attacking rebel base areas, the military is try ing to establish apresence in areas the rebels have long held Thebe able to avoid taking many easualtics during thesedispersing their forces elsewhere in El Salvador. But.forces can deny the rebels sanctuary', they may atfrustrateability

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Supreme Sovlci Bucks Cooperating

Supreme Soviet's approval this weekevised decree thatlanned increase in taxes an cooperatives underscores the reform-minded mood of the new lonltlature and should encourage the rapidjlerelopmeni af these independent businesses to continue.

revived decree was issued after moreeek of healed debate bclween deputies who view Ihe independent businesses at essential for rcinvignrating the economy and those who believe they are out Iuuick buck at thc expense of ordinary cttltCitt. The original tax decree, issued in February, allowed republic aulhorilics. asuly, to determine thc tax rales for cooperatives in their regions. Some republics, the Baltic ones for example, adopted moderate rates, but others, like the Russian Republic, whose cooperatives account for roughl> half the goods and cooperatives produce nationally, act prohibitive rates.

revised decree limits thc tax rates bvirtually all i> pes orcoopcraiives toercent and. ifslate prices, toerceni. II exempts from taxableon fixed capital, on training personnel, on protectingwages. Like the originalil docs not limit the lax rates that republics setIhat act as middlemen between enterprises and(3)

public or between one enterprise and another'

JssatgsHrFl he new decreeictory for refornvmindcd deputies o were concerned prohibitive rales would stifle cooperatives. Althoughpcrccnt ceiling is not as low as many cooperative businessmen would like, ii docs not appear excessive. If spending on wages is in fan exempt, the new decree is likely io substantially reduce ihc taxable income of virtually all cooperatives because most arge share of their income on wages.

In thc absence of tax ceilings for middlemen, thc Russianother regions where hostility to cooperatives is strong willlax rates that will probably force many cooperatives ihcrebusiness or underground, depriving the legal economy ofactivity. Many or these middlemen ma> seek to registerin areas, like the. Baltic republics, thairaditionbusiness./gj

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AFGHANISTAN: Kv'crbcratlon* Fruro Insurgent Unites

Afghan interim goitrnment risks open breaks in its leadership if it daes not deal soon with the attack last month un insurgents in northeastern Afghanistanival resistance faction.

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Thc killing of more thanembers of thcstami ccsistancc group by members of Ihe Hirbi islami faction threatens the Afghan resistance. Jamiat leader Hurhanuddin Rabbani says publicly thai thc killings were an attempt by Hirbi Islami leader Gulbuddin Hikma to wc

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[The interim government risks an open break with ith moreighters, the largest insurgentit does not disciplineailure to investigate lhc incident and punish lhe killers will reinforce lhe Afghan perception that interim government leaders cannot make hard decisions.uster from the interim government mightts popularity but would probably not slop further clashes in thc UB

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Thc murdered fighters were loyal tonorthern commander. Ahmad Shah Masood. and included seven of his leading commanders. Masood nonetheless will try to avoid revenge attacks on Gulbuddin groups. He intends to press ahead with plans to begin an ofTcmivc early next month against regime positions in northeastern Afghanistan and along the Sslang highway. If Masood believes the interim governmeni is treating his grievances lightly, however, he probably will reevaluate his strategy nnd undertake linsl Hirbi Islami positions in the north!

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Cliatchal's New Thinking on Indochina

With help from his advisers. Prime Minister Chaichai hat translated Ins preoccupation with establishing an economic foothold in Indochinaolitically appealing policy line. The advisers contend lhal VictnanVs Heady economic decline means thai il no longererious military threat to Thailand and that, with Vietnam's wiihdrawal from Cambodia nearly complete, Bangkok's moil important opportunities and challenges are shifting to thc economic arena.

itchai and his advisers are arguing that business diplomacy is the key to diversifying Thailand's political alliances and trade relationships with thc goals of:

uard<ng Thai political sntcrests in Jndochina Chatchai and his advisers see rebuilding Indochina through trade and investment as lhe best means of gaming influence there.

Easing Thai resource constraints. Bangkok is concerned thai Thailand's export boom is depicting local slacks of many raw

. materials like limber and seafood that Indochina still has in abundance.

Maintaining strong growth qf exports and iisconies Chatchai argues that trade with Indochina can help offset protectionist pressures from Thailand's traditional markets in Nonh America and the EC and reduce Thailand's dependence on Ihem.

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Misinsor Chuichal Comnmunt

Prime Minister Chatehai finishes kit first year in officetrong political position, bur his governing comlitlon will be tested in the year ahead, especially on how It manages economic and ttadri- cs afataaY

democratic

Chatehai plays to the public'sdesire for.

has held "mobile cabinet meetings" around the coumr. andonstitutional amendment lhat will give more power to the elected lower house of the legislature. Chatehai has also used hii coalition'i large majority to push for legislation that may help distribute the benefits of Thailand'sercent lastevcnlv.

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Slua IrylniiTo Kcsiain C'untrg)

President Siad may eliminate she final vestiges of constitutional rule in an effort lo Increase Mis authority In Stogadishu; gorernment control else-here in the country continues to slip.4.

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ove*eterminationtifle dissent. Although ihc legislature lacks real authority, dissolving il would eliminate ihc lail forum for criticizing the regime. Revival of the autocratic rev olutionary council, through which Siad governed afler the coup that brought him to powerould warn hit critics thai antiregime activity will again be brutally punished. Having concluded that Western donors are already backing away from his regime in response to human rights concerns. Siad probablv calculates he lus little moreose on that score.

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andleader toaliiiunai Zamora prcsidcnc) and hoarding uf food

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amora'* andarties arc noi IdcolOgii ally compatible, and iheir coalition i* inherently unstable. Why Hanrcr who appeared io have lhe presidency in his grasp, conceded is not clear. He wai disgusted with three months of imcrpariy squabbling and apparently feared I'a/ Zamora mighi join with the ruling-party candidate, whom Bunrxr despises. Thc run on the banks shows disjjust of Pa/ Zamora. who served as vice president in thchen hyperinflation almosi destroyed the economy. I'a* Zamora will need io move quickly to assure Bolivians hc is committed to maintaining current ccononncjioliciv* andlop tin run from depleting bank deposits 4ssaWasMBaWaCsWaBVaNa*

ROMANIA-US: Ties Declining. Notight

Although Bucharest beliescs mourning hostility to it throughoutGovernment will cause US-Romanian tics to dctcriotaicRomanianii refuse lo reconcile themselvesc situation orresponsibility for ii,""

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. . r rwSJ? "PP^cnilyoncerned it has litde chanced nce enjoyed with Uuuxmproving ihc adamant. Romania's

nd lobbying for closer

paradoxically genume desire to increase trade and acquire advanced

example, lull-page ads in US

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economic

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In Ilrirl

Rumor* in Mown- tat CJorbai iod partyForoign Minister Shevardnadzei corroborationrcllcciiun of increasing Icuilcisltip lent ions. Gorbachevon Supreme Soviet

-Gorbachev met with head of oftivial PolKh unionwilct leader endorsed expanding tics to all Polish panic's, irjdc unions,robably preparing to meet Solid*rit> leader Walesa soon.

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Two-hour warning strikem bass coal mines'Siiearby dam's construction not haltedin local strikehows Moscow thatto strike remains(3)

East

weather, increased acreage have given China recordfertilizer and other shonoges mean more imponaniprobably will be short ofrain impons ma>lastillion metric tons.

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China

in accepting passenger aircraft from Boeing, says.et delivered Tuesday.ore on ordersatisfied by US decision exempting aircraft'ssanctions./gj

Radical Sinhalese insurgents calling general strike lodav in Sri. failure of talks on Indian troop withdrawal will fuel their campaign againstresident Premadasa under fire from opposition, own pany.

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Special

idnapping I

7"Ae Israeli Oaiernmeei has received strong domestic support Jar lis handling of iht Ubayd operation. Opinion is running strong: against

Western critics tho blame Israel, not Hizballah, for lhe txtcutjon of any hmiage, Israelis art concerned about maintaining Ibeir country's deterrent against terrorism and nam ta avoid appearing to hare given

in to Hizballah.

Seizing Sli.i> kli Abdul Karim Ubayd had overwhelming bipartiian backing. the Inner Cabinet votedu one to approve lhe operation, accord ing u>cponv In contrast to mostracliingle major figure from ihc Labor Parti or tlic Likud blew lis*criticized tlic action opt rih aafttks%V

Until the announcement of thc death of Lieutenant Colonel Higgins. lhc Israeli public mood was strongly upbeat with high hope* for swapping Ubayd for lhe three Israeli soldiers Hizballahhe initial editorial response to thc kidnapping of Ubayd was unanimously favorable. Last weekend. Israelis widely and proudly compared lhe seizure to the rescue raid on Entebbegj

it* daring and precision.*

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Israeli public commentary ha* widely blamed US and Western criticism of Israel's action for emboldening Hizballah. Tel Aviv appears shocked and angry that some in thc West hold Israel, not Hizballah, primarily responsible for any hostage death. Israeli newspapers say lhe Ubayd abducllon is no different! han the US seizure of Shia tcrrortsi Fawaz Yunls

Prime Minister Shamir on Monday equated Israel's action* to those of

Despitesecond-guessingthc damage the alTair could do to US-liraeli relations, support tor ihe government's handling of il remains high. The Knesset on Wednesday rejected no-confidence motions from three Communist and Arab fringe parties over lhe government's actions. Three left-ol-center opposition panics that are

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