NATIONAL INTELLIGENCE DAILY

Created: 8/14/1980

OCR scan of the original document, errors are possible

CHINA-FRANCE: Possible Arms Sales

residentis increasingly disappointcdunwil.mgnoss to withdraw troops frommay wish to underscore French displeasure withand to find ways for Franco to maxinixo Ussecurity. With an eye to the presidentialspr.ng, the decision also may be related toto present himself at home as guarantor of anTrench foreign policy.

There is no certainty that the decision willyield an ams agreement.

_ The

likely to put strong pressure

on France tooaT^

f

USSX:

Towardest Gorman Ties

han veleemod MMof growingtlat refloat greater Independence from the VS.arproval teen tempered with concern that thieenhance Veat turopoan military capabllitiee in

The Soviet media applauded the talks betweenGiscardhancellor Schmidt in Bonn inthat "Bonn and Paris aro united in thedotonte in Europe must ho consolidated andwith the USSR must be continued." also emphasized that the talks took placetine whenest European differences havothemselves most strongly."

US. M

German

'MM*, jnoviet Journal fc nikoial Portugolov contended that the two West European leader, evidently had reached agreementider range Of military cooperation questions than had been announced The article warned that intra-Europeanof militarist objectives would accelerate tho arms racc^ampjcjLliLjlcad inevitably to greater dependence on

Moscow has long been ambivalent about closorrelations, and evidently is aware that one cost of weakening US-European ties may be broader militarybetween tho two major continental pnworn. ThoV portu.;aloyarning to Bonn that the US in unlikely toore militarily independent West Germany aad, in acting to preventay aeek forestall any greater German independence in general.

The Soviets probably aro particularly disturbed by

ilitaryignificant

pcnccni oi us ami NATO control. Moscow, eveTvigi lant" against resurgent Germanas for three decode, warned against Bonn's occurring any access to the nuclear trigger."

JGorroany had giver, de facto support to USnur'extend officially backed financinq to the USSR and not to take over US contracts. Bonn's approval followsimilar decision by the Fronch Coyornment torench firm to bidroject originally awardedS-Japaneao consortium.

Bonn now claim that the German bid on asac.ter docs notS role. Sovietwill replace the more sophisticated US the original package. West Gcmany judges thatroyal will not bo required.

SPECIAL ANALYSIS

ARAB STATES: ilsirig the Oil Weapon

Persian Gulf oil producers are bypassing, the major oilana using state-to-state oil sales to promote their foreign policy Objectivesreater degree than ever before. Suopovt 'Or

tne Palestinian cause mirf greater aeeese to advanced technvlogu ojten have become implicit conditions for sales. In the future dtreot sales to governments are likely to reflect an inereaeinehi complex aeb of political, eomereial. and sometimes military tie's

tnat nerve both tide-,.

Iraq now sells overercent of its oil outputmillion barrels perto governmentand small private firms instead of theoil

7hs Ir^qis Supplyercent of Brazil's currentand nave used this leverage to obtainaon cultural

1 rnlrd World countries

similar inducements to supoort the Pales-

Saudi Arabia has increased its direct sales* past year illion barrels per day ? JoSt

raigXt com-

Japan, west Germany, and Brazil have sQuah* to

clSs'er cot

technology sought by Riyadh.

Ird0 7Urkey'Pakistan as gestures of political support.

L. S- France, Portugal, Ireland,Korea helped smooth the way for such deals bypublic support for the Palestinians.

Kuwait and the United Arab Emirates have madeuses of their oil. The two states, which aresuppliers to Japan, were influential last fall in arranging an unofficial invitation for Palestine Liberation Organization Chairman Yasir Arafat to visit Japan.

France's stand in favor of Palestinian self-determination has helped itales contract from Kuwait for commercial aircraft. The Kuwaitis have sought to use state-to-state oil sales to acquire energy-related technology and greater participation in downstreamm the UK, France, Japan, and South Korea, but with kittle success so far.

Short-Term Outlook

Over the next several years, the Gulf oil states will sell even more oil directly and less through theester i' oil companies. These marketina changes will increase the economic and political leverage of the producers and will make it more difficult for the US and its allies to influence the allocation of oil supplies in an

Thediminishing role of the multinational oilaiso may exposa Gulf producers to more directpressure to accommodate the oil needs ofCommunist slates. Kuwait willer clay this year to Communist nations. anu perhaps some of the other conservativeultimately view increased oil salesEuropeay to buy off Soviet-inspired

xop-*.

IH MllVlirt 0

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