Created: 1/1/1986

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Prooosed Action: Revoke South Africa's Most Favored Nation

Ispact on South Africa: .Most South African goods would not be affected by its loss of Host Favored Nation status wnich would have effects similarelected Doycott of South African products. Our analysis of past trade boycotts against South Africa and other countries suggests that such actions are aost likely to De effective when tne goods involved are easily traceable tc country of origin and substitutes are readily available at similar prices fron other sources of supply. This would affect South African exports ccai, steel, agricultural products,and gold coins, but these goods account for less thanercent of total South African export earnings. ontrast, boycotting or, if Host Favored Nation status is revoked,igher price on South African geld bullion, diamonds, andaccount forhan half of expertoe .'ifficult tc enforce as they ari readily marketable, easily transshipped, and difficult tc trace. An Embassy contact reports that in an effort to circunvent possible trade sanctions, some exporters of mineralditles already are laundering forwarding documents to disguise South African origin. |

Impact on Region: Pretoria Bight respond with ninor economic sanctions against neighbors, including expulsion of some foreign workers, rail slowdowns, and the like. South African companies probably would try to use neighboring states to disguise country of origin with sone ainor benefits for those countries. |

Inpact on US and Allies: Pretoria probably would tighten foreign currency controls on tnej'.vidends sr.'i profits by fcrslgr., which woulc affect tne book value of foreign assets in South Africa. Pretoria night threaten to impose limited embargoes on strategic mineral sales to the West, but may be deterred from taking action by fear of prompting tougher sanctions. BHjjajjjajj_B


c-!on: Tersinate South African Airlines Lancing Blgfcta

I react on Scuth Africa: Would reinforce South Africa's already stronr

developing eiabo

jf0ia"3n- ora clearly an-.icip.tas further sane.lens on its civil aviation. The tUU-rai South African Airlines (ShA) already is experiencing financial difficulties due to the recession, the falling rand, inflation, and increase- costs, anc sane-ions woulc further cripple its sluing revenues. SAA already is

the effects of lost landing

?.fh* Bf byin Zanbia. Swaziland'

3 *loul ban on SA* Ending

*nuii_ be difficult since negotiations reportedly are unoerwaywltn Olympic (Belgium. KLH (Thend UU (France) to increase the *aiy avJbtr of rights t: * h th. provision that theypecial surcharge to SAA. Terr.irjtisngr-.ts oya few countries would nave only United Lapact

teg{io^= Soae countries in the region woulc stand tc rai-aodit.onal revenues due to increased international traffic throuer. their .acuities. However. South Africa is likely to retaliateights oy restricting soae rail transit in tha region.

:npact on us and Allies: Pretoria would likely retaliate by denying fortign carrier landing rights in South Africaubstantial losstm air n;la. Price Minister Thatcher recently stated that stopping direct flights to South Africa could cost British Airways about jic; Billion in lost revenues. Loss of South African landing rignis also would require significant re-routing of Westerntraffic to the region. In addition. South Africa could retaliate oy restricting access of sone wes.ern ships to ports ana refueling facilities. More0 snipsuMrouJ registries call annually in Duroan, Cape Town. Port tllzabeth. and ether South African ports annually. 1

Prososea Action: Visa restrictions on eapioyees cf South African Ocve.-nment ana certain private citizens.

Impact on South Africa: Would reinforce Soutr. Africa's already strong sense of diplomatic isolation oy Uniting highly valued diplomatic contact. Also restricts reporting capabilities of its diplomatic presence. Zs-lz sharpen divisions aoong wr.ite South Africans by cutting access to potential haven for whites, especially professionals and Englisn-sptaKeri. seeding to emigrate.|

Impact on region: Protably little as Pretoria likely ta respondretoria could tighten border controls or introduce new regulations on viss requirements for individuals transiting through Soutn Africa to neighoorlng

tasjict. ar.r: Allies: Almost certain retaliation in Kind. an: European official travel to Soutn Africa. Pretoria isignatory to the Vienna Consular Covtntion, which provides guidance on diplomatic relations, and it already has cent rules by demanding that. Embassy positions be approved and the names of newly assigned personnel subnittediplomatic identity card is issued. This action could portend,limitations on the nunber of diplomatic personnel recognised Dy Pretoria, particularly the five new personnel assigned to the newroup. Loss of US and Allied diplomatic presence probably exceeds that of South Africa because of West's relatively United access to events and people Inside South Africa, particuarly in the wake of nationwide declaration of emergency. Pretoria probably also would refuse again to gram traveli'.ir- leaders, suchBishop Tutu. |

Alternative action:. and its Allies could demand descriptions of the duties of South African diplomatic personnel, as we do with Cuba and the Soviet Union, or limit renewals of visas for diplomatic personnel. Could be labelled as retaliation for South African moves and probably would lead to significantly reduced diplomatic presences, bctn in South Africa and ln the West.

Proposed Action: (Jo New Investment For Non-Suliivan (non-EC Cede) Signatories

Iooact on Soutr. Africa: Would have little economic impact since we expect littl-new foreign investment ln South Africa until the domestic unrest subsides, which is unlikely In the near term. The recentoss of foreign confidence ln Southindicates investor concern over domestic political and economic uncertainties. oreign" investment in South Africa fell by nearlybillion as the result of disinvestment, loan repayment, ana capital flight.

Estimated Foreign Investments in Soutn Africa*

United billion

United billion

West Sillier.




* Includer direct Investment, foreign-owned shares on the Johannesburg Stock Exchange, other types of equity investment and overseasl

Impact on Region; Pretoria probably would respond with minor economic sanctions against neighbors, including expulsion of some foreign workers, rail slowdowns, and the Uke. If part of comprehensive package, more severe punitive actions likely. I

r, US and Allies: Pretoriaould retaliate by tighte-ine foreign currency controls on the repatriation of dividends and profits by foreign companies, which would affectk value of foreign assets in South Africa. Pretoria might threaten to impose limited embargoes on strategic nineral sales to the Vest, but nay be deterred fron taking stiffer action by fear of pronpting tougher sanctions.

Alternative Option: Ban All New Foreign Investment and Loans: We believe that many studies overstate South African economic vulnerability to foreign restrictions on new investnent and loans, although widespread investmentand loan restrictions would reduce long-run growth potential. South African investment has not depended heavily on foreign funds: net capital inflows accountedferercent of domestic fixes investment3ccording to South African Government data. apital outflows have exceeded capital inflows by an average ofmillion per year, and investment has been funded fron internal corporate savings. ortion of these internally-generated funds have come fron subsidiaries of foreign companies, but, to cate. bans or. new investment have not applied to reinvested profits.

Prccoseo Action: No cocpjter sales to South African Covernnent

"rpact on region: Pretoria probably would respond with sinor economic sanctionsneigr.ccring states, including expulsion cf sone foreign workers, rail slowdowns, and the like^^fjiartomprehensive package, more severe,ive actions likely.

Impact on US and Allies:an on sales only to government offices is probably unenforcable, acquisition by South African business firos probably would compensatefor reduction in government demand, thus negating impact on US Allies. I

Pressed Action: Extending arras embargo against military and police

on .South Africa: Minimal. South Africa has been operatingoluntary UK arms embargomandatoryThe result hasesilient, thriving arms industry, which already meets most domestic defense and security requirements, with such exceptions as advanced aircraft, large naval vessels, and certain high technology electronics. Moreover, South Africa has extensive covert traoe operations in weapons and weapons technology with dealers in western Europe and israei.

Impact on Region: Probably none.

nforcement would be

Impact on US-Hies: blinc eye to covert traae with South Africa, difficult as country cf origin labels on weapons and shipping manifests are easily altered. Moreover, dealing with dual use commodities has always been difficult. For exanple,ritish firm modified air traffic control radars sold tc South Africa in, citing Pretoria's assurances that it was for civilian use'onl]

Alternative Options: Further discourage purchase of South African-produced arms by third countries, such as Iraq, Taiwan, Chile, and Argentina. The UX1esolution, requesting UK nercber nations net to buy nilitary equipment produced in South Africa. Despite South Africa's aggressive efforts to market its arms, actual sales are still fairly United and the loss of these markets would havenited Impact in South Africa. BfJJ

Proposed Action:stcgic minerals

Impact on South Africa: Would reinforce South Africa's diplomatic IsolationWest's oeterninatior, to reduce longstanding dependence onsignificant Western stockpiling effort, however, undoubtedly would boostof South Africanmanganese, platinum-group, netals,add to foreign currency earnings,ercent of whichtnese minerals. Over the long haul, however, higher prices wouldrecycling and substitution efforts, and encourageto gear up production. As the main alternative supplier ofminerals, the Soviet "Union probably would _

Strategic Minerals: Estimated World5 (Percent)


Mineral Snare" of Western Share ofof World


Chromium 53

Manganese 29

Platinum group 86

Vanadium 58

Impact on Region: Would benefit Zimbabwe as producer of abou^^percent of world chronium supplies, with negligible inpact elsewhere. I

Impact on US and Allies: Aside from the cost of stockpiling and higher price of minerals for current use, would have little impact except In unlikely ease Preteritreemptive enbargc on strategic mineral sales. Pretoria would fear that an embargo would lower export earnings and could trigger reprissals against South Africa's export-dependent economy. The US has substantial stockpiles or reserves of all four minerals, West Europe has United stockpiles, but Japan is the nest dependent, receivingercent or acre of each of the four ninerals fron South Africa. 1BH

Alternativeromote Substitution: An announcement that the US and its allies will push the development or alternative materials and sources of supply could have an important pyschological effect on Pretoria since it would signal the West's determination toongstanding dependence on South Africa. The immediate economic impact, however, would be negliglole.

Proposed Action:le South Af.-ican Cove-nnent1 cine.

I-cact on Southan on ail sales tc government offices couldignificant inpact out is probably unenforcable. South African firms have developed considerable skill in evading end-use certification anc probably could divert needed itens to the governnent and government-ownedoreover. we estimate tnat09 Pretoria spent overillion building and maintaining nonnilitary strategic stockpilesar. weather ever, comprehensive import enbargoes for several years. In aodition. Pretoria has engaged in subtrefuge trade that has enabled it to circumvent all previous economic embargoes.

Inoact on the region: Pretoria probably would respond with minoragainst neighboring states, including expulsion of. partcrprefier.siveors

severe, punitive actions likely,

Impact on the US and Allies:an on sales only to the government is probably unenforcable, acquisition by South African' Business firms would compensateeduction in government demand, thus negating iocact on US and Allies "


Proposed Action: Expand US AID programs

Impact on South Africa: Would beef up existing programs and increase US ties to affected individuals Put. in our view, would be unlikely to win many points for the United States among blacks in general. Crowing anti-American sentiment among South African blacks reflects tne perception that the United States supports Pretoria's "neo-apartheid" policies that change the Image but not the reality of racial oppression. Increased US assistance to blacks under the currenp svsterc reinforces the racical view that the "JS'governaeri: is tacitly aicing SAC efforts tolacks. apid infusion of US aid targeted at blacks could overwhelm the already extended managerial

c* iacV. business. Pretoria's recent cracKdown onctivity also raises problems for possible US ventures since many connunity groups are affiliated with the United Democratic Front, whose local level leaders havepecific target for detentions. Finally, the SAC's toleration of specific programs targetted at blacks already has been strained; increasing then will be viewed as more "foreign meddling" in internal affairs and could well be rejected by Pretoria, especially if these measures are announced In conjunction with an economic sanctions^

Imoaot on Region: None, unless aid programs cf neighboringries arees tc accommodate increasedor South Africa.

Impact or. the United States and Its Allies: In addition to normal budget problens, increased US or Allied assistance targetted at blacks under the current system always risks the perception, both domestically and internationally, that efforts to help blacks, without ending apartheid, anounts to little norethan helping blacks adjust to continued white rule. I

Proccsedncrease aid to rebuild townsnips car-aged in anciapartneid unrest, particularly in toe areas of ncusing, education, health, and Business development

Inoact on South Africa. Unrest-related destruction in the townships steas largely from attacks by radicals which probably would continue despite US efforts to rebuild schools and otner governnent buildings. Rapid urban growth is straining the alreacv inadequate nesitn, housing, and educational facilites and probably can be alleviated only by longtern development programs, themselves possible if unrest subsides, union is unlikely. US assistance in such areas'as housing" undoubtedly would be seen by many blacks as Anerican collaboration with Pretoria to make apartheid more acceotaDle. Pretoria, increasingly about "outsides unlikely to pernit anv *rasb,-ar :s grar foroDviousUyindercuts the potential impact on South African blacks. |

impact on Reeion: Probably some resentment fron neighboring states where living conditions often fall short of those for urban blacks in South Africa.

:.iapct or. the US and Allies: Would require dramatic increases in funding to acnieve even aarginal results in theoordinated effcrt by the US and its Allies, however, would likely allow greater funding and possibly defuse opposition fron past critics of US projects.

Incact op South Africa: Strong demonstrations of Western support for oeighDoring Black-ruled states would nave significant psychological impacts on Pretoria, which also counts or. its neighbors' dependency on South Africa to stave ofr sanctions. In the short term, nowever, significant progress toward reducing dependence on South Africa is unlikely. Moreover, anv inprovement in neighboring econonies probably would raise their denand for South African nports. We estiaate that South Africa earns2 billion from all cf

its regional economic ties.

Imoact cn Region: Depends on nature and extent of assistance. Major ir.frastructurai projects, such as upgrades of rail lines or port facilities, could take years to have any significant impact and could Be derailed bv

turnoil. The Southern*rr=inatlon

O by nine southern and eastern African nations with the goal of reducing economic dependence on Southreceived donor contriButions or conaitmerits exceedingillion, but is further than ever from achieving its goals, in our view. Poor economic policy choices, drought, and low world prices for the region's najor conncditv exports have combined to boost econoaic dependence on South Africa, Western donors, and policy advice from organizations such as the IMF. ^

Impact on US and Allies: An effective Marshall-type plan wouldassive nulti-year effort. For example, in the extreme caseouth African blockade against its neighbors, balance of payments assistance tc compensate for the loss of all exports currently funneled throughican ports would total nearlyor. per yeir.

Original document.

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