Warning Page
Contents
Shevardnadze Again Voting Kabul Aigarta; infusion ol AJd Buys Time Notes
3 -
Resistance Sets Shura Oat
Franca: Leftists Agree on Eloctlon Strategy Cuba: Cmtccrn High About TVnternational: Payments to IMF Lagging In Brief
A
6
3
bi b3
S
Analyses
Lebanon-Syria: Damascus and the Shia Civil War USSR: Council of Ministers To Dxcuss Ecwvomlc ReIormB China; Losing the Battle Againsi Inflation
to
14
r
'
2
Again Visiting Kabul
Sovfef Foreign Minister Shevardnadze's visit toarrivedIs Intended to coordinate with Afghan President Na,ibtiltah the tinol phase ol the Soviet troop withdrawal MMl
Shevardnadze "pot toear ago. belore Moscow's fl February atalemonl announcing Ita plans to withdraw; ho was ihoro again In Augual as the first phase ol the withdrawal was nearing completion. Meanwhilo, Soviet Deputy Dolonse Minister Shabaitov dociarodress conference In Moscow yooterday that the Soviets would honor their commitment undor Hie Geneva Accords to be out of Afghanistan by is rnSruaryecond stage ot the withdrawal would start
trip probably Is also Intended toontinuing support for Its client fen Kabul. especially after the felted negotiations with the resistance In Islamabad last week and as Soviet troops wfthdrow But. while bucking up regime morale lor lha hard days ahead, he almost certainly Is cautioning Nakbullah and the ruling party that factional Infighting would threaten the regime's remninlog hold oh powcr^mp
Tho Soviets prosumabty have few Illusions about the choncoaavorable political settlement at this lale date but. with Kabul, might try one more political gambit lo entice the resistance back to lhe negotiating table or. falling that, to seize the propaganda high ground tor the final weeks, fn his tasks with the Pakistanis and the Insurgents last week. First Deputy Foreign Minister Vorontsov showed great interest in the creation of an Afghan consultative council orindudc "good Muslims" from thea means loofiow-on government. The Sovtatasnd Kabul mayal of
didatealoreetlng^saBB*
ll Is loss likely that Moscow and Kaj.ul wouldovernment reshuffle lhal would furthnr diminish ma ruling party's presence and rename IL as has boon rumored In Kabul, or otter Nalibullah's roKlgnatlon. The reslatonco has rejected such offers as disingenuous and would do so again. And Moscow and Kabul would afmoal certainly be conenrnod. that such moves might further damage party unity and i
may signal an end to ihe press blackout the Soviets lufeeteen maintaining on their withdrawalPoetical spokesmen Irke Vorontsov. however, may continue to threaten nonedherence to the Geneve Accords in last-colch atlernplaresistance into political settlement
e'3
t?-3
t .
2
Tt<ttmJlfS
Ion of Aid Buys-
Algeria has received more then S3 blfilon In grants, concessional loans, end trade credits alnce the riots In October, glvlrtgair chance ot {njiddllng through this year without rescheduling Its foreign"
says Ihe Kuwait Investment Autticity also lias0 million grail..flBsaBBa*
Among West European creditors, France this week agreed to provide Si billion over threeof It tied to specificItaly0 million, three-
These financial inflows probably willhowdown with International creditors, to whom Algiers-owes more Ihan S5 billion in debt payments this year, but may weaken the government's resolve to press ahead wtth politically sensitive economic reforms. The aid accord with France and the pending sottlemeot of tho longstanding trade dispute over natural gasignificant warming of" "
.
w
B-3.
B-3
AFOMANISTAN: Mcsistanee Sets Shura Dale
Altsnceave rerchod agreement to hok) theirpoMi-oncil shura (Consultative council) .
lhe shura Is being held toupremo counciliansiiional government. The agreement reaffirmed that "good Musfims" from the' Kabul regime can be inciuiWd in the shura. but it cm not provide any method tor lnvo*ving them. The eight Tehran-baaed Shia groups have refused to sign the -agreement because they wore offered.onlyercent ofeals in thecelow theercent they demanded An aUtance delegation that left for Tehran yesterday wai meet with Iranian officials and AJooan Shias to discuss Shia reorei the shuti
*any contentious Issues remain Io be solved.liere to hold lhe shura and whether former King Zahir Shah is toole in the transitional government. Several clliance members had opposed giving the Shias even as many seats as Ihey ooi and are unlikely io offer them more. Paklsian, which Is Increasingly concerned about Its diminishing influence with the Insurgents, will be encouraged that prospects lor convening tho shuro are Improving, and with Ihem its chances lor Influence In Afghanistan alter thc Kabul regime falls
at*?
6-7
FRANCE: Lsflials Agree on Election Strategy
The Socialist anct Communist Parties nave formed an alliance -lor the municipal elections In MarchffJJaa-aj-ajsssalaM
The Communists reportedly promisee) not to vole with the rightt-ejloclalist government during the term of the
I The agreement emphasizes lhe mutualthe twolocs. Oesoite speculation abouttbe Communistsych more dependableIhe Socialists. Tho Communists' support olsectortail and their failure toocialist budget bill lastthe Socialists that lha Cornmuntstsorce wtthgovernment must reckon. The sHiance probably wHI help theIhesome municipalthe Communists" electoral fortunes have declined Inelections Thetao diminish Sociakatright might claim are evtoeece o'l public djfjajjs'action with1
'ere. ^3
anuary ifldd
2 8 J
CUBA: Concern High Aboul TV Marti
that habe
a serious provoealion and lhal he Inienda io retaliate Cuba's Justice Mlnlntor said earlier this month that TV Marti would pul possible bilateraln
that arge, diverse, and loyal foeowtng.,
i leaders are pertleuiarty concerned because ol Merit's success, and their threats are aiiended lo discourage US plans to begin television broadcasts. Havana probably also views the issuoest of tho new US administration's policy toward Cuba. Initially. Havana would be llkory to Jam theatop within Ita capothe Cubans might also seek to dlsrupl uomo medium wave radiobroadcasts In the US. Castro would bo loss-inclined to suspend the bilatural emigration accord, aa ho did fn response to the advent of Ftadlo Marti, because tb/trenlnw. derives conalderable benefit from that agreementi
INTFRNATIOKAU Paymenta to IMF Lagging
Ovorduo payments to the IMF from member countries oontinue to mount. Asecember, total aiears to the IMF had5 billion, up S1 billion from the levell theountries overdue.ere delinquent by moreonth. Eight or thenvaccount for about SO percent of thc total overdue ond hSvc been declared Ineligible by the IMF for additional loans-Guyana. Liberia, Peru. Sierra Leone. Somalia. Sudan, Vietnam,aHW
payments to tho IMF are becoming more frequent, end about halfountries that borrow Irom the Fund experienced some delay lasl year, tl this situation continues. It wis weaken the Fund's financial base and linerole In tlm^'ii'd World debt suatogy
2 2 8 2
In Brio!
Arab Leagueunisia Oeall brieflyba non. set up committee to contact Lebaneseocused on Palestinian upihwig in Israeli-Intelromised more money and Strong international lobbying lor
Car bomb exploded yesterday in Beirut's sou mom suburbs during Hizballah-sponsored protest ol inlra-Sniaress says two Shia clerics among casualties . undamentalists probably will accuse Amal despite its disavowal,
b3
Former General Stafl Chlel AKhromeyev loday says ho endorsee announced unilateral Soviet trooprobably trying lo scotch reports ol hislso claims new defensive doctf_nc. troop cuts will allow reduction in defense Spending.
Gorbachev told Soviet agriculture conference yesterday party mcetlgg on agricultural reforms postponed Irom February Id arch .. con-men is by head of statedusinal committee indicate reorganization ol ngr.cuttunil bureaucracy Ifertyeaaaajjaj
Troops used tc aueli unrnst al Chinas Oaqing oi'lield laslcontnuing over low
'wages, poorri,t. use ol military against Chinesn civilians in several years. ' _
k>
Sandinistas approved march by Nlcaraguan
opposition tomorrowirat major opposition raHy permitted sincelpionce not expected, planning diflicultles may
Km.;
Prime Minister lhatcher has said measures being taken against British firms supplying equipment lor Libya's Rabtaends support to US calls Igj cuto'l of loreign knv London rcterailng oeslrtrju/y action. '
iatee*
4
Analysis
LEBANON-SYRIA; Damascus and lheCivil War
current round Of clashes between Amal and Hizballah hot not substantially altered tho balance of poirtr between fne two Shia groups. Syria, which nas links fo both aides, does not yef appaar witling to atop In forcefully In Lebanon fo end file lighting. Damascus may sea the Shia unrest as Increasing Its leverage on both feesj|^
Sin oo the first serious outbreak of flowing between Amal and theore radical Hizballah mltltla lost April, there have been hundreds of deaths. Including many chrfkens. The latest round ol elashoaouthern Lebanon alone reportedly hasresuliod in moreeaths0 newt0a%
Amal has auiabliBhed Itself as Ihe primary Shia force In theHizballah has demonstrated superior strength In thoof Beirut and in me Bekaa Valley, including itsnear Ihe Israeli-occupied security zone. Hizballahto let It return to southern Lebanon, and Amal continuesthat Hizballah hand over the assassin* of several
Thc moniha of
Amal haa lost several key leaders to tbe violence. Perhaps more worrisome to Amal is Syria's recently more rn-enhandod treatment ol lhe two mrtities. That shrfi has severely undermined the myth thai Amal enjoysrotect ion-end unquestioned assistance IromJbss*
S-3
8-1
Syria's Role
Syria's eltorls al mt southern suburbs Is only I.
pre.'isi&'e Ihat rtlM
oh in Beirut's ihos there were Ihe kinds of
2 2 8 5
b3
Syria probably will avoid docHJve intervention in lhe Shia struggle, realizing Unit, as Ihe two militias exhaust themselves. Iheir capacity lo resist Damascus also decreases Syrian strategybarton has long been to Keep all tactions relatively equal, according to the US Embassy in Beirut, and Oamascus is not.likely to allow either militia to win dear dominance over the Other tW^lfr
Hostage Implications
Increased Syrian influence over the Shia community in Lebanon Is not likely to improve Ihe situation ol the Western hostages held by Hiiballah. Although Oamascus wet continue seeking poliiical benefits In Ihe International community from Us mediatingn theolated dialogue. It Is unlikely to press HubaSah hard on this issue The fighting, meanwhile,nroat to the hostages' safety, as they may get caught In the crossfire Various reports Indicate that hoatagos have been moved during past Amal-HiZbaltah confrontations.
- i
Concern About Economic Reforms Increasing
"Two yearsould say: 'We win* have success In pereslroyka by the' and
everyone said: 'Aoalkln?till say we will have success InSZ&ZZ
porostrayke by thend they cay. 'Whatiii^s
Abaltcln. Director, Instlluto of Economics ol
the USSR Academy of ' .
o still do not seem to have the decisiveness required for the most radical and
*
Shatalln. member of the USSR Academy' '.
," '
"We simply cannot possibly win tbe price treform] campaign under
matter how carefully the retail price Increase might be prepared and explained to the people, matter how much compensation will be paid to tho consumer, the ensuing
not satisfy the
'The absenceormal marketistorts socialism, prompts speculation, and causes the emergence of mafia-type groups."
Nikoiay Petrakov. Deputy Director. Centra) - Mathematics and la^omlcs Institute ol Ihe USSR , Academy ol Sciences.
tpiiBrcniry concernedshort-term economic coats ot pushing ahead too testrafonn would erode pubOc support lotla not too tale tor the leadership to reaffirm Itaeconomic reform In order to achletp many of Ita goals 9
theut rime Is running out
Economic reform was already hampered by flawed legislation and bureaucratic resistance, and Soviet officials admit that the reforms Introduced last year produced no major breakthrough In economic
performance. The reforms worsened tho position of consumcrai-
woge reform contributed to the Inflation thai is reflected in
price increases in farm markets and shortages in atate stores. -Because of lhe centrally administered price structure, many
enterprises have used their new freedomlan output to a"
Soviei officials are concerned about the growing Impatience ombno consumers for welfare improvements from economic reform. FormerMoscow party boss and candidate Politburo member Yol'tsln told an Italian newspaper this week that he and othera believe tho leadershipt-ar or perhaps two to Improve Hie lot ol .consumers "before Ihey'"a
or reduce the production of unprofitable lower priced pood-aaaj
Backtracking on Reforms
Moscow, faced with growing consumer concern, nationality tensions, and problems In BTiplementing political reform, has backtracked on pending economic reforms that could spur inflation or negatively affect the consumer. The linchpin of Ihe entire program, reform of whoioMtic prices. Is scheduled lo begin next year but reportedly will enisilevision of price* ratherore flexible pricing mnChaivsm. Changes in agricultural procurement prices that were to be impicvrSrited1 reportedly have been deterred, and relaii price reform scheduled lor the"same year has been
continued
2 2 8 8
t
J
Soviet Economic Reforms: Status Roport
. /
schedule, but has not rosutlod In genuine financial accountability
because Implemented before price reform.-
orders substantially reduced Irom So percent8 to
ercenttill high degree of central control.
of sctiedule, but criticized tor not giving enterprises enough
freedom to choose suppliers.
Wholesale prices On schedule, except tor agncuhural procwremenl prices, but win entail price revisions rather thanhe price formation mechaniam.
Retail price reform Orlginasy scrtoduledut postponed Indefinitely.
Privateby law onut stIM accounts for only Bmafl fraction
ot total goods and services produced by state. Some activities were recently regulated or prohibited, but these measures affect tew existing cooperatives.
Foreignlegislation recently lejereOzed but key restrictions remain.
2 8 9
leadership continue* lo support Ihe development o( inaependeni"
cooperative businesses, many ot which produce consumer goods and
services. Soviet leaders nave, however, approved measures Mt wBI
restrict many ot these businesses in selling prices because*of popular
resentment over price gouging. The leaders also plan to invest more
In housing, food processing, and light Industry this year. 'Moscow has
tasked the defense industry toreater role in the
production of consumer goods. This, year's plan calls tor the defense
Ind jstry to improve the quality and increase the production ol
consumer goodsand capital equipment lor consumer-related Industries.
1
Today's Council of Ministers session provides the leadership en opportunity to confront Its problems wtth economic retorm. Moscow may only be willing, for now, to push reforms that have little potential for disruptions, such as recent measuron limiting tho proportion of enterprise output determined by Gosplan, Increasing enterprises' autonomy In conducting foreign trade, end allowing them to lecue shares fJpseassaT'*'
To matte major gains during the, however, lhe leadership must soon reaffirm its commitment*to reforms In key areas tike wholesale pricing and planning thai are needed to make enterprises compete In search of profits. The chief of the Economics institute. Leonid Abalkln. recently said, "There ts suit time to switch to mo new form ot planning and_mannqomeni today, but tomorrow__wtl! Be too
mmf V
S*3
2 9 3
China: Economic
Note ita/f
, Urban InflationProaitclUB
' - mnrli nun
Special Analysis
Losing tha Battle Against Inflation
Rerrencnment policies Belling has odoptod over Ihe pestonths ere not likely to do much to reduce urban Inflationrom fls current level ot more thanercont, the highest In nearlyears. Beijing will try to tighten enforcement ol such measures as ceilings on nonproductive Invettatont and spending tor nonessential Imports but will probably ease credit controls to keep enterprise oarnlngs and fax revenues Irom dropping while Increasing subsidies to urban workers hurt by Inflation. The pursuit Ol such contradictory policies Is likely to sharpen differences within the leadership and weaken turther Ils ability in manage China's eoonomft problems *sssMss%h
InliatJcn ano thc related problems of an overheated industrial sector have led Beijing since August IO take measures lo curb consumer. Investment, and government spending; limit exports of Items In Short supply; stimulate tha producllon of scarce raw rruitorlala and agricultural goods; and slow growth in lhe money supply. Theso slep'i have not slowed the economy *assaa|WliseJtHVMH Industrialercent In the frArnrTquerter^yverTiaster rate last month than In November. In an unusually gloomy speech lost month, the Finance Ministerew tax hikes and tighter budget controls to combat inflation. Meanwhile. Beijing haa put off major price reforms tor two years whia leaders try to bring Inflation down to single digits 4bSbssb>
Malfhoarled Austerity Efforle
fc . eciwon arir-.rwmced in Oct.
rrgoods factories. And. to protect koep-fiielr large work forcesbe given priority access to low-Interest
Concerns about the repercussions of some policies haye led Beijinghvovoid addressing some of Hie mosl serious causes ofexcesshe-hands of consumers ahd out-of-controt borrowing by state-owned factories. Beijing recognizes, for example, that feverish consumer spending Is partly the result ot rapid Increases Mi wages and bonuses but has assuredonsumers that thotr. salaries and government subsidies will Increase wHh rises In food costs and rent. In what appears another move to molSfy urban workers. Beung recently announced plans lo increase ihe production of consumer goods,ecision announced in October to
stale-Owned enterprises and Beijing has ordered that loans and raw mKertals.
(laShInvestrnnnl for-
b gel ifWuH cooperation of powerful provincial and municipal eaders has atop deali scypre Mows tg Ihe austerity program. Local officials ofleKoverriden denials and approve
I
-r
nonessential construction prelects. Ctilns'B weak contral bank.
moreover, la unable to control lending by the hundreds ot
financial Institutions that have sprung up In roconl ye 3
Looking Aheed
Pressuros to rescind light money policies will probably force Bef|lng
to ease controls Ihis spring. China's leaders lee/tringent,
impartial onfrjreement of their austerity policies would risk cutting
aggregate production as wed as demand and might lead to tha
of low growth-high inflation that has taken place In Poland and Yugoslavia. Theyrop In industrial production would cut state
revenuesime of rising expenditures At me same time. Beijing has come under Intense criticism from farmers for offering lOUs inslead of cash for (heir fall harvests. It recogntzos that the move will reduce incentives lo grow grain and cut funds available lor spring planting and that higher prices, fewer poodn, and mora widespread use ot ration coupons for food and consumer products would add lo urban discontent. Beijing thus will probably need to provide credits for enterprises to sign annual supply contracts and for peasants to buy seed and ferUL "
Some-of China's most profitable. .Internationally competitiveenterprises like Ils rural textile and garment factories will probably see earnings decline sharply as Beijing gives priority tor Joans and row materials to large urban faddles.esult. China's trade deficit will widen, paralleling an incroaso In its domestic budget deficit as revenues decline and subsidy payments Increase. Althougheficits will remain manageable, budgetary problems will keep Beijing fromralslng grain prices to the level neededtimulate production.
Regardless of what Beijing does, over the next few months,
inflation will not dtp much belowercent this year. The anticipated ollback of credit restrictions would funnel even more money Into Ihe economy and accelerate mhatlcre-JHven If controls remain In place and growth in the money supply slows In the second and third quarter,
however, the Infusion of8 win keep Inflation at aboulevel for at least tho next
Ihat Beijing's efforts to cool the
and slow Inflation are rjgLrikeJy to be fully successful and
wider budget and trade-deficitsot ^jjrsees Ihereal GNP growth as, on balance, outweighing lhe
negative effects of the Inflation It engenders, tjkSw believes,
that ihe expected rise In the trade deficit will have beneficiaLcllocis
more goods willbe available for demesne use. fjfealso believesstops, such as ralilrig rnterrtsl.rales above the rate of. ^'
u inflation, can be taken"fi the eoortorrfy falls to ccol
fit
IS
I
2 2 9 3
Original document.
Comment about this article, ask questions, or add new information about this topic: