EIR

The special reports listed below,

prepared by the EIR staff, are now available.
1. What is the Trilateral Commission?
The most complete analysis of the background, ori
gins, and goals of this much-talked-about organiza
tion. Demonstrates the role of the Commission in the
Carter administration's Global 2000 and Global
Futures reports on mass population reduction; in the
Propaganda-2 Freemasonic scandal that collapsed
the Italian government in 1981; and in the Federal
Reserve's high interest-rate policy. Details the Com
mission's influence in the Reagan administration. In
cludes complete membership list. $100.
2. The Global 2000 Report: Blueprint for Extinction
A scientific and political refutation of the Carter ad
ministration's Global 2000 Report. Includes a review of
the report's contents, demonstrating that upwards of 2
billion people will die if its recommendations are
followed; a detailed presentation of the organizations
and individuals responsible for authorship of the
report; analysis of how the report's "population
control" policies were applied in the Vietnam war and
the destruction of Cambodia, EI Salvador, and Africa;
analysis of environmentalist effort to "re-interpret" the
Bible in line with the report. $100.
3. The Club of Rome in the Middle East
A dossier on the role played by the Club of Rome in pro
moting "Islamic fundamentalism." Focusing on two or
ganizations, the Arab Thought Forum and Islam and
the West, both of which are intimately tied to the Club
of Rome, the report shows how the Club uses "Islamic
fundamentalism" as a political tool to promote neo
Malthusian, anti-development ideas throughout the
Middle East. $250.
4.

Mexico After the Devaluation

One of the most-discussed documents circulating in
Mexico, this report describes in detail the role played
by the U.S. Federal Reserve Chairman Paul Volcker and
the Swiss-based Bank for International Settlements in
organizing a credit cut-off against Mexico. Describes

the demands being made by the International Mone

tary Fund for economic "reforms" in Mexico, and why
these demands are being resisted. Much information
on Mexico's economic conditions and political fac
tions is included. $250.
5. Who Controls Environmentalism?
A history and detailed grid of the environmentalist
movement in the United States. Analyzes sources of
funding, political command structure, and future plans.
$50.
6. (J.S. Policy Toward Africa
A case study of the "new" North-South policy of the
Reagan administration, showing how economic policy
toward Africa is being shaped according to the anti
technology, zero-growth guidelines of the Carter ad
ministration's Global 2000 Report. Discusses in detail
the role being played by the AID and World Bank in im
plementing this policy, under directions primarily from
Hnry Kissinger, David Rockefeller, and the Ford
Foundation. Includes profiles of the administration's
top ten policy-makers for Africa. $250.
7. Kissinger's Drive to Take Over the Reagan Administration
Full analysis of Henry Kissinger's attempt to consolidate
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sion wing of the Republican Party; and the implications
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Kissinger's collaborators inside the administration, in
cluding recent administration appointees. $250.
8. Outlook for (J.S.-Japan Economic Relations
Detailed analysis of why U.S..Japan economic frictions
are likely to escalate in the coming months unless U.S.
economic policy is changed. Features a strategic analy
sis of the U.S..Japan relationship; analysis of the five key
areas that friction will increase; evaluation of the
political intent behind "Hitachi spy case"; and inter
views on U.S.-Japan relations with leading Reagan ad
ministration officials. $250.

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Founder and Contributing Editor:

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T his week we make life uncomfortable for many of the individuals

who generated political chaos and economic devastation, over the

past decades. Our Special Report features a section of a dossier,
prepared by our European counterintelligence chief, Paul Goldstein,
on Franois Genoud, the Swiss banker who runs what the Klaus
Barbie case recently brought to world attention as the still-flourishing
Nazi International. Genoud's business connections on the one hand,
and his sponsorship of "Islamic fundamentalist" terrorists like Ahmed
Ben Bella on the other, come together in a cross-section of the drug,
weapons, and coup apparatus which will have to be dismantled if
nation-states are to survive.
In our Economics section, we make life uncomfortable for Sec
retary of State Shultz and others who have wittingly lied that lower
oil prices will rescue the world economy, and who have insisted that
the less-developed countries must obediently accept credit cutoffs
and murderous austerity. See our LaRouche-Riemann model study
on the effect of downward oil prices, and our report on this month's
conference of the Group of?? Third World nations, dispatched from
Buenos Aires by correspondents Peter Ennis and Dennis Small.
In our National section, we raise the question as to why the
Democratic Party leadership's arguments against the President's
beam-weapons program sound so much like those ofYuri Andropov.
(The answer has to do with old AvereH Harriman.)
Coming up are a Special Report on the precarious situation around
the Dome of the Rock mosque in Jerusalem, the target of "Temple
Mount" Christian fundamentalists and the crazed factions in Israel,
and a thoroughgoing overview of the global debt time bomb.

TIrnContents
Interviews
41

Samak Sundaravej

The head of Thailand's Citizens

Party talks about domestic politics ,
and ridicules ecologists.

44

Demetrio Vergara
Stanziola

The author of a technologically

uniqu e plan for a second Panama
Canal at sea level explains
the proposal.

48

Fernando Manfredo

The deputy canal commissioner

discusses labor questions
and canal capacity .

Departments
15

Dateline Mexico

The San Jose Accord flap .

49

Middle East Report

A question of time .

64

Editorial

Productivity and national security.

Economics
4 Debate over debt strategy
breaks out in the G-77
Documentation: The text of the
call for a unified debtors' strategy
by the secretary-general of the Latin
American Economic System
(SELA), Carlos Alzarnora.

7 Ibero-America receives
threats from creditors
But Mexico is offering support
for Ecuador's "debtors'
cartel" initiative.

9 Why cheaper oil

cannot buy a U.S.
economic recovery
The LaRouche-Riemann
econometric model's findings.

12 PIK program: a hoax for

farmers, and a threat to
U.S. food supplies
The "Payment in Kind" budget
cutting maneuver will evidently
rob the consumer without paying
the producer.

16 International Credit

Next phase of creditors' cartel.

17 Domestic Credit

What makes interest rates go up?

18 Business Briefs

Volume 10 Number 15

Special Report

April 19, 1983

International

National

28 Tailspin in Western Europe

over U.S. defense policy

52 Bipartisan government in
1985, pledges LaRouche
The EIR founder identifies the

"We need to preserve nuclear

blackmail!" cries the Royal Institute
of International Affairs.

Reagan nuclear defense strategy as

an irreversible turning point for
national morality and scientific

30 Soviet press rallies the

party for laser technology

The Ekonomicheskaya Gazeta has
published a map of economic
applications of the U.S.S.R.'s
beam-weapons program.

20 The Genoud networks and

the plan to set the Mideast
on fire
An overview of the Nazi
International, coordinated by
Switzerland's Franc;ois Genoud,
and a report on the latest effort to
deploy the International's
Khomeini-style networks

In counterintelligence format, a
dossier on the shadowy protege of
the Swiss banks, the Schlumberger
interests, and the Allen Dulles
networks in Anglo-American
circles.

possibilities of his presidential

candidacy from that point of view.

55 Harriman Democrats are

recycling the Andropov line
against beam weaponry

31 Soviets move to unlock

technology bottlenecks

Their plans to tum both the United

States and the Soviet Union into

32 The real threat in Central

America: Kirkpatrick,
Sharon & Company

utter jeopardy.

34 In defense of Nigeria

EIR board member Allen Salisbury

challenges the international media.

throughout the Middle East.

22 Franois Genoud,
terrorist controller

capability, and reviews the

36 African officials blast

Club of Rome, IMF
38 Thailand: the choices as
elections approach

41 The Kampuchea issue: a

'patient stance'

Our correspondents report from

Bangkok on the present
government's foreign policy,
and the political
alignments domestically.

42 The world needs a new

sea-level Panama Canal
50 International Intelligence

"post-industrial" swamps are in

56 SPIS: offshore banks aid

drugs and crime
The Senate subcommittee report on
dirty-money laundering calls a
spade a spade.

58 How the FBI was set up

as a national Gestapo
Part I of a new series describes the
Bureau ofinvestigation's
unconstitutional sweeps in the name
of law enforcement before and
during World War I.

62 National News

ITillEconomics

Debate over debt strategy

breaks out in the G-77
by Peter Ennis and Dennis Small in Buenos Aires

Nicaraguan Foreign Minister Miguel D ' Escotto reiterated

before the Group of 77 meeting the call for a debtors' asso
ciation , first issued at the Non-Aligned Conference in New
Delhi . "Just as the developed countries have united as credi
tors , we developing countries should unite ourselves as debt
ors , not to impose solutions but, on the basis of respect for
national profiles of each debt and each credit , to find solutions
which make possible the prosperity of all , " D ' Escotto told
the conference of the Third World cabinet ministers .
The call for an association of the debtors issued by the
secretary-general of SELA , Carlos Alzamora , in the name of
that institution (see below) has further shaken up the environ
ment at the conference , breaking through the effort to depict
the Ibero-American nations as totally opposed to such bold
actions . The statement counters the arguments that have been
circulating to keep separated the necessary combination of
countries for an Ibero-American debtor' s cartel , and reflects
SELA' s optimism about the openings that have begun to
show at the conference in such countries as Brazil and
Argentina.
Alzamora ' s argument , like D ' Escotto ' s , is that the de
veloping sector countries should at least consider the levels
of coordination which the creditors have achieved , a view
increasingly heard in the halls of the G-77 meeting and in the
pages of the Argentine and other Ibero-American press .
While there was lots o f talk "around" the conference o f a
debtors ' cartel, inside , in the speeches of the ministers to the
plenary session which began on April 5 , the tone has been a
careful one , widely characterized as "moderate" and "prag
matic , " as has been the case with most of the official docu4

Economics

ments which have formed the basis for the discussion within
the conference committees . Nevertheless , many of the
speeches contain paragraphs on debt and other issues that
reflected the huge fight on the issue of the debtors ' cartel that
surrounds the conference proceedings .

Argentina sets a ' pragmatic ' tone

The ministerial level of the conference was inaugurated
April 5 by Argentine President Reynaldo B ignone , and he
gave what most delegates called a completely "flat" speech .
He used many of the "correct" words, such as the usual call
for a "new international economic order, " but the tone was
characterized by the following statement: Bignone said the
developing countries should act with "political common sense
in order to avoid being carried away by attitudes which could
lead us to extreme positions . "
B ignone pointed out the big problem the developing
countries are having with debt . But he motivated action to
alleviate the problem as necessary "to preserve the world
economic order, " rather than to construct a new one . "The
debts of many countries will have to be refinanced at conve
nient terms and interest if the world economy is to be kept
afloat." He also said, "It is hoped that" private banking sources
will not increase conditionalities on their loans .
Several delegates pointed out that they were interesting
paragraphs in Bignone ' s speech . First of all , Bignone directly
linked the decline in world trade to the debt crisis , arguing
that "the strangulation of world trade" has come about be
cause "settlement of the debt or merely the payment of the
interest on them absorbed a large part of the resources that
EIR

April 19, 1983

otherwise might have been earmarked for imports . "

He also paid some lip service to forces calling for a
debtors' cartel by saying that the developing countries "must
exchange informati on , share experiences and realize that the
problem of the debt is not the unilateral responsibility of the
debtors , but also concerns the creditors , and that both parties ,
in a common effort , must overcome this pressing problem. "
For their part, the developing countries must act with " a high
degree of responsibility"-an explicit rejection of the for
mation of a debtors ' cartel .
Overall , Thero-American delegates in particular were di
vided in their interpretation of the Bignone speech. One del
egate known to strongly favor the debt bomb said he saw
"some positive light" in the reference the Argentine president
made to need for "exchange of information . " The same del
egate linked Bignone ' s comments to a comment made the
day before by Brazil ' s Saraiva about the existence of a com
mon program of developing countries to deal with the debt
problem . But another Latin delegate said , "This is all demag
ogy; in the meantime our countries are being destroyed by'
the IMF . "

Latins hint at
'collective action'
Bignone also made mention in his speech of the economic
warfare Argentina suffered at the hand of the British during
the Malvinas War, and he called for the developing countries
to "agree on the establishment of mechanisms which will
enable us to give a congruent response to those who , forget
ting international principles and norms , resort to economic
pressures as another weapon in the arsenal of their dissuasive
power. "
Echoing Bignone o n this issue , the Colombian foreign
minister said it was appropriate that the Group of 77 was
meeting in Argentina, since that nation had directly engaged
in a fight against colonialism and that the effort currently
being waged by developing countries to obtain a new inter
national economic order is fundamentally the same struggle
waged by Argentina. The Colombian minister said that "the
iron-clad determination" of Argentina to regain the Malvinas
Islands "should inspire all of us . " Bolivia made a similar
statement to the plenary , raising the possibility that "the spirit
of the Malvinas" might break out among the Latin American
delegations , leading to unity on broader issues.
The speech delivered by Brazilian Foreign Minister Ra
miro Saraiva was similar to that of Bignone . He said that the
debt crisis of developing countries was actually "a crisis of
the financial system and even , in wider terms , of the global
economic system . " He also rejected the idea that the "prob
lem of endebtedness will be resolved exclusively by the im
plementation of austerity policies by the developing coun
tries . " However, the minister never even broached the ques
tion of how the crisis might be solved .
At the same time he warned the international bankers and
EIR

April 19, 1983

their domestic representative in Brazil, Planning Minister

Antonio Delfin Netto , that some in Brazil wish not to contin
ue Brazil ' s current suicidal course . "How long will the fragile
social , economic , and political fabric of the nations of the
South be able to resist the shockwaves caused by the econom
ic and commercial policies of the great economic centers?"
The crisis if "reaching unbearable levels of political and
social tension" in the developing sector, Saraiva said . "Our
peoples cannot be deprived of the hope for development. Our
countries cannot have their growth prospects treated as a
hypothetical byproduct of the recovery of the main countries
of the North , which is itself uncertain and precarious . "
The speech by Colombian foreign minister Lloreda Cai
cedo was the strongest delivered . Speaking on behalf of the
Latin American group , Lloreda gave a lengthy description of
the debt crisis . He said that even though Colombia is not a
country badly affected by the debt crisis , his government
recognizes the need for a united front (jrente solidaria) of the
developing countries on the question of debt . He reiterated
two proposals earlier put forward by Colombian president
Betancur, the first calling for a fund to subsidize interest
payments by developing countries and the second calling for
a limitation on the percentage of export earnings a developing
country would have to spend on debt service payments in any
given year.
"We must say to the more advanced countries that despite
our material limitations , we have not lost the capacity to
think, " Lloreda Caicedo reminded the ministers at the end of
his speech . "That we conceive of economy as a science in the
service of man , and not man in service of the economy . That
we visualize modern technology as an opportunity to redeem
and not to destroy . In a word , we are here to lay the basis for
a new world economic order which make possible coexist
ence and well-being . "
Bolivian Foreign Minister Mario Velarde scored British
economics . "Instead of finances serving the development of
production , the latter is a prisoner of finances . The invisible
hand of Adam Smith , in which some still try to believe since
it favors their egotistical interests , is strangling the world
economy . " The solution must lie in the common interests of
North and South , " Velarde added , "not in the invisible hand
of he , whom upon killing , can die as well . " Eventually ,
"those who eat our hunger" must realize , "our lack of bread
can one day provoke desolation and hunger for them also . "

India presents Non-Aligned stand

The foreign minister of India, Narasimha Rao , gave a
special speech to the plenary in India's capacity as chairman
of the Non-Aligned movement . Rao gave a detailed report
on the New Delhi summit emphasizing the theme that devel
opment and peace are inseparable . His speech was largely
constructed from the final documents of the Delhi summit .
Speaking for the Non-Aligned movement, Rao called for
"the development of a comprehensive , equitable , multilateral
Economics

framework for the restructuring of the debt burden of the

UNCTAD meeting in Yugoslavia. Instead, the proposal was

developing countries." Indian Commerce Minister Singh,

included in the conference's general political declaration.

speaking for his government alone, called again for the con

Hill personally invited the International Monetary Fund's

voking of an International Monetary and Financial Confer

observer to the G-77 to attend all meetings of the finance

ence. "The idea is to put in place a monetary and financial

committee, despite the fact that the meetings were private

system which can effectively meet the development and other

and to be attended only by official delegates to the confer

financing requirements of the international community, par

ence. When his antics were questioned, Hill lied that the

ticularly those of the developing countries, and the need for

finance committee's proceedings were "public."

growth-oriented structural changes, " Singh stated, in the most

The Queen's agent also tried to organize opposition to a

explicit statement yet by an Indian official that the conference

resolution passed by the trade committee, according to which

implies the complete overhaul of the international monetary

the United States and the European Community countries

system, not some vague discussions of "problems."

would be asked to lift all trade restrictions on products from

Final document being hammered out

opposition to the resolution, Jamaica would receive special

developing-sector nations. Hill was told that if he organized

As we go to print, the final political statement of the

benefits in the context of the Reagan administration's "Car

conference--called the Buenos Aires Message and addressed

ibbean Basin Initiative." When the resolution came up for a

to the countries of the "North " -is in final stages of prepa

vote on April 7 before the G-77 plenary session, Hill told the

ration. It has been h ammered out by the representatives of

delegates that approval of the resolution "would not be a good

India, Algeria, Argentina, and Mexico. Worst

idea." He unsuccessfully tried to garner support for his view,

four countries,

among them, according to well-informed sources, is Mexi

but no one in the room would back him.

can representative Jorge Eduardo Navarette, an anglophile

who has the post of Sub-Secretary of Economic Mfairs at the
Foreign Ministry, and is part of the old "foreign ministry
mafia" which hounded L6pez Portillo as well. Navarette is
reportedly being "terrible, intransigent, and obsessive " at the
meetings of the committee.
On the debt issue, the final economic document which

will be issued when the conference ends on April 9, of which

EIR has obtained an advance copy, does not come in any way

Documentation

SELA's Alzamora calls

for unity of debtors

near the position adopted at the New Dehli conference, itself

a compromise position. In the last days of the conference,

this document was converted into a specific resolution to be
introduced into the UNCTAD meeting by the Group of 77.

Below is the. text of the April 7 statement issued in Buenos

Aires by Carlos Alzamora, secretary-general of the Latin
American Economic System (SELA).

On the debt issue, the group will not make any proposal
on private debt, but will only propose action relating to offi

In the Group of 77 lies the broad framework of common

cial debts. This decision was taken at the insistence of Brazil

action and solidarity of the developing countries in their battle

and Mexico in particular; their representatives argued that

for a more equitable participation in the benefits of the world

any statement on the question of private debt would constitute

economy to which they offer their labor and resources. But

interference into their "sovereign " discussions with their pri

to the degree that each region finds itself affected in a partic

vate creditors!

ular way by one or another type of problem, the solution to

The resolution is remarkably convoluted, even by the

those problems aquires its own priorities. This is the case in

standards of conference documents. On the crucial issue of

Latin America with the problem of the foreign debt, which is

private debt, the resolution states: "Notwithstanding the dif

the most pressing of all not only for its intrinsic importance,

ferent debt profiles of individual developing countries, a gen

but because the way in which we solve it will also determine

eralized approach is required, including guidelines in dealing

how other problems are resolved. To the extent that it de

with the problem of private debts through rescheduling and!

mands, or not, the concentration of all our resources, ener

or refinancing, this does not imply a uniform set of solutions."

The Indian proposal for an International Conference on

gies, and efforts, it will be to the detriment of the develop

ment and well-being of our own peoples. That is to say, it is

Money and Finance for Development has also been a highly

essential that we not sacrifice this well-being and security of

contested issue throughout the entirety of the conference

our own societies to those of others, and that we must find a

proceedings. At the insistence of a group of countries led by

point of conciliation which allows us to meet financial com

Brazil, Mexico, and Saudi Arabia, with the backing of the

mitments without strangling our economies or mortgaging

Jamaican head of the Finance Committe, Anthony Hill (see

our future.

EIR, April

12), the Indian proposal was not included in the

documents that will be binding on the negotiations at the June

Economics

In the process of provoking and organizing this negotia

tion, it becomes the sovereign and legitimate right of the

EIR

April 19, 1983

debtor countries to form the relationships or associations

required for the success of this negotiation, when and how
ever they deem convenient, just as the creditor nations have
done. Furthermore, I think it would be very healthy for debt
ors and creditors to have the greatest organization and coor
dination possible so as to maintain the delicate operation of
placing this gigantic debt under guarantees of discipline and
control. It is clear that this arrangement-I refer to a genuine,
durable, and viable one, and not one which must be renovated
and patched up every day-has no solution within the tra
ditional and orthodox framework, and requires a global and

Ibero-America gets
threats from creditors
by Cynthia Rush

negotiated solution which involves the responsibilities of

debtors and creditors, because it is understood that the im

On April I, as delegates to the Group of 77 developing

mense magnitude of the problem surpasses the individual

nations conference met in Buenos Aires, the Argentine news

capacity

international

service DYN published the text of a message that was re

In their speeches, the President of Argentina, the foreign

country's-foreign creditors in Europe and London. The mes

ministers of Brazil and Colombia, stressed this point. And

sage, communicated through Argentina's ambassador to the

of

governments,

banks,

and

organizations.

portedly delivered to President Reynaldo Bignone from the

from the creditor countries, so have such authoritative

European Community, Dante Simone, warned that "any de

spokesmen as Henry Kissinger and Helmut Schmidt, with

viation by Argentina in the area of debt payment or violation

vision, foresight, and political realism. But if the debtor

of agreements with the IMF, could result in the application

countries do not formulate their positions and proposals, in

of what is defined in international forums as 'exemplary

the end these negotiations will have to be carried out in the

punishment,' as a lesson to the other large debtors. "

unilateral framework of the creditor nations; and this carries

DYN explained that the ultimatum was intended to avert

with it a very great responsibility for those who insist on

the possibility that Argentina might unite with other Ibero

ignoring the problem, or leaving it to fate, when they have

American debtors to jointly renegotiate their foreign debt, or

an important potential, which, used together, could efficient

even opt for a "unilateral payments rebellion. " The bankers

ly protect the interests of our peoples. That the press or public

not only ordered the current government to "scrupulously

opinion refers to us as a club, cartel, or debtors' union, is

comply with agreements made with the IMF, " but demanded

only proof that the theme has found an echo in the conscience

that the next elected government, scheduled to take power in

of our peoples, who follow this process with great intensity.

January

But we should not prejudge the character or the purpose of

1984, continue application of IMF policies.

International wire services published their own reports

this type of association already created by the creditor na

on the DYN story, which were subsequently run by leading

tions. Nor should we confuse it with the idea of collective

newspapers in Venezuela and Peru as the major weekend

renegotiation of the debt which is repeated in bad faith to

news item. An Associated Press wire in Venezuela's El Na

create confusion, and which, because of the variety of actors,

cional appeared under the headline "Argentina Under Strong

circumstances, and characteristics, is both impossible and

Pressures Due to Virtual Entry into Debtors' Club. "

unneccessary.
What we propose is an agreement on the basic conditions
for terms of payment, interests, and conditions by which the

These crude threats are being made because the Interna

tional Monetary Fund and other creditor banks do not have
the lbero-American situation under control.

debt becomes payable. To establish multilaterally the norms,

In a letter to Ecuador's President Oswaldo Hurtado, pub

principles, and guidelines which should govern bilateral pro

lished by the Mexican press April 6, Mexican President Mig

cesses of debt negotiation. To exchange information and

uel de la Madrid expressed full support for Hurtado's recent

experiences, but naturally not for the morbid pleasure of

proposal to have all Ibero-American countries taking "con

knowing how the one who preceeded us was ruined, but to

certed action " in the the economic crisis.

coordinate and consolidate a negotiating position beneficial

The Ecuadorean president has proposed that the govern

to each and every one, which does not bypass realism and

ments of the region adopt a joint economic program which

which can foresee and be watchful.

would be drawn by the Latin American Economic System

Without question, the debtor countries have the right to

(SELA) and the Economic Commission for Latin America

associate themselves so as to better protect their interests, as

(CEPAL) and would include an increase in exports and im

the creditors have done, when it is demanded by their sover

ports among the Ibero-American countries and a favorable

eign will and the necessities of a negotiation which requires

renegotiation of those countries' foreign debts. "We are con

coordination and and the simultaneous contributions of the

scious, " de la Madrid says in his letter, "that the actions each

debtors and the creditors to insure viable, efficient, and stable

of us undertake in our countries will not have the positive

results.

result we expect if at the same time we do not re-order the

EIR

April

19, 1983

Economics

international economy in a just and equitive way."

Calls for debtors' cartel greets Group of 77

On the opening day of the Group of 77,labor unions shut

to the United Nations, as well as the president of the Group

of 77. To a question posed by an EIR correspondent, Hurtado
added that SELA and CEPAL will present a first draft of their
economic program early May and that such a program will

down Argentina with a general strike protesting economic

be thoroughly discussed in a coming meeting in Bogo,

policy.During the course of the conference,every Buenos

Colombia.

Aires daily has been filled with articles debating the merits
of a debtors' cartel,some using information from EIR on the

Brazilian moratorium?

creditors' cartel known as the Ditchley Group. Buenos Aires

The international creditors accurately fear that if Argen

is rife with rumors that Finance Minister Jorge Wehbe, a

tina bolts from their control,similar action by other big debt

staunch defender of IMF policies, will be removed from

ors would follow.

office.

Rumors that Brazil is ready to declare a moratorium on

Exemplary of the mood in the country was the treatment

given Wehbe at the barbecue and rodeo held Easter weekend

its debt have been circulating for weeks. Now rioting has
been added to the equation. The April 1 1 issue of Business

at the Sociedad Rural,the gathering place of Argentina's pro

Week reports "there is more and more speculation in Brazil,

British oligarchy. The master of ceremonies at the event,to

even in banking circles, that the government of President

which all Group of 77 delegates were invited,was Peronist

Joao Baptista de Oliveira Figuereido will declare a morato

leader Juan Mareco. At one point, Mareco turned to Wehbe

rium on its foreign debt. "That would be calamitous,Business

and asked "Mr. Minister, do you like the tango?" Wehbe

Week continues,because "Brazil might then set a precedent

laughingly responded, "Of course,I love the tango." Mareco

for some 30-odd other debt-ridden countries. ... "

then asked, "Well then, Mr. Wehbe, suppose we use the

Betting on exactly when the government might take this

tango to organize a debtors' cartel? What do you say?" Eye

action is now becoming commonplace,according to sources

witnesses report that Wehbe nearly choked on his fine Argen

in Rio de Janeiro. Brazil has used up the new money it

tine beefsteak.

borrowed six weeks ago, and most American banks are Il"

Concern over the Argentine situation is such that U.S.

fusing to increase their exposure. As an executive at a top

Treasury Undersecretary Tim McNamar flew into Buenos

Chicago bank reported, "I can't believe we are faced with

Aires unexpectedly the first week in April after meetings in

this [having to consider more loans to Brazil] after just having

Brazil to exert additional pressure on the government.

settled the thing; we're not doing anything more with Bra

McNamar met for an hour and a half with Wehbe,after which

zil...." Financial sources estimate Brazil will need be

he publicly praised the finance minister and the central bank

According to a report in the April 3

tween $4 and $8 billion this year.

In his meetings with Brazilian economic authorities,

president for their "professionalism."

Tiempo Argentino,

McNamar claimed that Brazil was "too competent" to have a

Henry Kissinger had told his friends among the Argentine

debt moratorium and promised that the recovery of the U.S.

oligarchy that the country "was now like Iran." Kissinger

economy would bring the reopening of financial markets for

advised them to pack up,sell their holdings,and get out of

the country.When Brazil Foreign Minister Saraiva Guerreiro

the country fast.

said in Buenos Aires that he oppposed the formation of a

In

an

effort to disorient debt discussion,sources close to

the finance ministry began to circulate rumors at the Group

debtors' cartel, reporters observed "that he has just come

from talks with Tim McNamar."

of 77 conference that the debtors' cartel proposal "originated

David Rockefeller's new "debt squad," the Western

is a "British campaign " directed against

Hemisphere Commission on Debt, will meet later this month

in London," and
Argentina.

in Brazil.The commission's task is to ensure "case by case"

debt negotiations, and the enforcement of the IMF's

Momentum for debtors' unity

conditionalities.

Yet support for a suspension of payments on the conti

Venezuela is receiving a visit from the IMF, which is

nent's foreign debt continues to grow. According to the April

demanding a 220 percent devaluation of the Venezuelan cur

6 Mexican press,the largest opposition party in Peru,APRA,

rency, a liberalization of import policies,and the elimination

is now demanding that the government declare a moratorium

of price controls. Press sources quote government officials

on foreign debt payments.

terming such IMF conditionalities are "unacceptable." The

American ambassadors to the United Nations April 6 to rally

Venezuelan bolivar was recently devalued from 4 to 8 boli

vars to the dollar. The IMF demands,as intended,are already

support for his initiative.In statements for the press, Hurtado

creating anarchist opposition. The Liga Socialista,a terrorist

In New York, President Hurtado met with all Ibero

said he has received overwhelming support from most gov

gang, has re-emerged after a long absence,and is now using

ernments in the continent, adding that at this point his pro

the motto: "The International Monetary Fund is running the

posal is being discussed by African and Asian representatives

country."

Economics

EIR

April 19, 1983

Why cheaper oil cannot buy

a U. S. economic recovery
by David Goldman
Secretary of State George Shultz told the Senate Foreign

billion total net borrowing requirement of the U.S. govern

bring about American economic recovery, and that this re

significant upward pressures on interest rates, the conse

Relations Committee on Feb. 15 that lower oil prices would

ment and its agencies during 1983 has already produced

covery would ward off ail international monetary crisis brought

quences of an additional $20 billion financing requirement

about by the debt problems of the developing sector. Private

from non-OPEC sources relative to last year represents a

ly, the administration does not believe this. State Department

considerable problem.

officials report in "background discussions " that the recovery

Given the generalized crisis of the world banking system,

argument must be employed to dissuade advocates of debt

it is impossible to isolate the "OPEC factor " in world interest

moratoria among the Ibero-American nations, however du

rates. Nonetheless, it is evident that a sharp decline in OPEC

bious the argument's merits. At the Council of Economic

deposits and purchases of Treasury securities will have a

Advisers, discussion has begun, tentatively, to focus on the

decidedly upward impact on short-term interest rates.

"structural problems " of the American economy which inhib

Of more fundamental importance than the financial con

it recovery through conventional means. At the White House

sequences of a reduction in oil prices, however, is the posi

itself, the 1939-44 "model " of "self-financing budget defi

tion of the American economy after a decade in which "en

cits " is under discussion as a way forward.

ergy conservation " or high-cost energy alternatives have

The EIR' s LaRouche-Riemann econometric report dem

onstrates clearly that an oil price decline will have negligible

dominated capital investment.

Five years ago, before the spectacular boom in oil drill

effects on overall output of the United States. In some cate

ing, a price fall from the then-prevailing $14 per barrel price

gories of industry, different price levels make a very big

might have made a big difference. At this point, so much of

difference; but for the machine, construction, and chemicals

American investment is bound up in production of expensive

sectors, the increase in demand for their products due to lower

energy that a reduction in oil-related investments will cancel

oil prices just about compensates them for the falling-off of

demand due to lower oil industry capital investment.

out almost all of the positive impact of an oil price reduction.

Since the highest-productivity sectors of the American

rise in interest rates-through OPEC disinvestment in Amer

prices for a substantial portion of their sales, a drop in the oil

ican Treasury securities and a lower deposit flow to interna

price--and a collapse of oil investments-hits the economy's

Should the decline in oil prices produce even a 2 percent

tional banks-all the positive effects of even a $20 per barrel

economy, especially machinery, have depended on high oil

strongest sources of growth. This is sufficient to wipe out the

oil price would be wiped out. And if the falling oil price

benefits derived from additional consumer income and cor

destroys the paper-thin financial package that has kept Mex

porate earnings through lower energy prices.

ico away from default, the oil price decline might produce
utterly disastrous effects.
A $25 oil price under anticipated production levels would

The final conclusion as such is indisputable: the study on

which this article is based assembled (for the first time) com
plete data on the oil industry's use of rigs, drilling platforms,

produce a $66 billion OPEC current-account deficit, i.e., an

pipe, chemicals, pumps, trucks, and other capital goods, and

additional $66 billion in OPEC financial demand on world

examined the effect of different oil price levels on the oil

credit markets; this compares to a net investment in these

industry's purchases of such goods (as well as export demand

markets of an average of $100 billion during 1980-198 1.

Under the cited circumstances, Saudi Arabia would find itself

in a $26 billion current-account deficit.
It might be anticipated that the Saudis would swing from

for such goods).

Then, the impact of both the rise in consumer and cor
porate demand was measured against the consequences of
lower capital investment, using the LaRouche-Riemann model

a net $ 10 billion purchaser of Treasury securities to a net $10

of the American economy. That economic model has pro

nancing requirements of the Treasury. Since the nearly $300

economy during the past three years.

billion liquidator, adding an effective $20 billion to the fi

ElK

April 19, 1983

duced the only consistently accurate forecast of the American

Economics

Cost of expensive energy

ces that exclude a technological revolution in American in

Presented in this form, the conclusion is inescapable that

dustry." For the past six years, from 1977 through the end of

Shultz is either lying or thoroughly incompetent in economic

1982, the U.S. oil industry has engaged in an exercise of

policy matters. But another, more disturbing, question is

exhausting economic supplies of oil; the more it invested in

raised: if the economy will not recover as a result of lower oil

lower-yield wells, the less new output per unit of new in

prices, under what circumstances can it recover?

vestment, to the point that output did not rise even through

The answer implicit in the study is "under no circumstan-

the peak of new drilling from 1979 to 198 1!

Figure 3

Figure 1

55000+

550000+
,

'"

]
"0

"0
+
N
t- ,

o ,
,

...

:::

'"

,
,

...

'"

;.

,
,

:g

+---_ ... -_ ... ..... ... -- -_ ...... ........... ---_ ... +--- ... ...... --..........
. ....... ---+-... ------+-- ... ---_ ...+- ... .. ... -_ ...
1979
1981

,
,

400000 !

35000

!
+_ .... ....... .. .. . - ... .... -_ ............ ---_ .. --+---_.. ...... -+ ................. -+ .. ----.. - ... + ... _---_ ... -+ -_ ... _--1981

1919

Total tangible profit:

no oil price drop-, $5 drop

,$9 drop. ,$14 drop.

$9 drop followed the same trajectory as the $5 drop.

Machinery tangible profit:

no oil price drop- $5 drop
,

$9 drop. ,$14 drop *

Figure 4

Figure 2
.021 +

,
,

4acoe'"

-.038!
....................... +_ ... ...... .. .......
. . + .................
. .......
. .. ---_ ..-+ ......---....+ -_ ........--+ ------_ .. +-_ .. .. -_ ..
1979

1981

Net reinvestment per unit of total operating cost:

no oil price drop-, $5 drop"', $9 drop. ,$14 drop.

10

Economics

2500:) !
1979

1981

Transportation tangible profit:

no oil price drop-, $5 drop

...

,$9 drop. ,$14 drop.

EIR

April 19, 1983

Oil drilling cost 1 0 times as much per well in 1 98 2 as in

1961 , partly because oilmen drilled deeper to find less acces
sible oil , partly because drilling conditions were less favor
able in the new fields opened up . The staggering demands
for pipe , rigs, chemicals, and other equipment could only be
financed through huge doses of new credit, on the anticipa
tion of higher oil prices. The drop in oil prices over the past
year has already forced a reduction of drilling by nearly half,
and more is to come . The decline in activity has been punc
tuated by a wave of bankruptcies that may ultimately hit
hundreds of independent oil drilling and equipment firms .
An economy which invests huge portions of its capital
into an industry whose output does not rise is in big trouble .
One might say that oil is a special case , since the exhaustion
of domestic reserves forces a rising cost-curve for new dis
coveries . But the steel and auto industries are not substan
tially different. American steel companies , which refused to
build modem plants (like the Japanese) and patched up their
old facilities , sank billions into "investment" and have less
capacity now than five years ago . Auto makers sank billions
into redesigning cars and reconstructing assembly lines to
produce "fuel-efficient" cars , and now produce fewer cars
than they did 10 years ago .
These are not "natural" events ; but neither is the oil dis
aster. By concentrating on "energy conservation" and expen
sive domestic oil rather than building new sources of cheap
power, nuclear generating stations , for example , the Ameri
can economy spent the majority of its available investment
capital during the past 10 years to produce as much , qr les s ,
o f the things i t needs ! Had the samr a quarter o f the
same-investments been made in nuclear energy , the United
States would now be awash in cheap electricity.
Consider the structure of the American economy: about
one-quarter of its potential workforce receives unemploy
ment insurance , or early retirement benefits , or welfare , or
other forms of federal support, which represent de facto a tax
on the country' s productive structure . Of the three-quarters
employed, there are three service workers for every goods
producing worker; that is , fewer than one-fifth of all working
age Americans are now producing goods . Of these , most
who are producing capital goods are consigned to "energy
conservation" or exorbitantly expensive domestic oil produc
tion; their labor adds nothing to the economy ' s future capac
ity to grow .
In the base run used as the starting point against which
different oil scenarios might be analyzed , the economy shows
negative growth over 1 983-84. The model treats the U. S .
economy as a single agro-industrial firm , whose output is
measured as the constant- 1 972 dollar volume of tangible
goods production , and whose employment of service , gov
ernment, and other non-goods-producing personnel (includ
ing the 23 percent unemployed) is counted as "overhead , "
just as a manufacturing firm must count a s overhead its clerks ,
sales force , managers , and so forth . This breaks with con
ventional economic treatment, and rightly so, since the pracEIR

April 1 9 , 1 983

tice of including all incomes in Gross National Product dou

ble-counts the incomes of non-goods-producing workers .
Just as in the case of an individual firm , a nation that
devotes more and more of its earnings to overhead expenses
(plus interest costs and taxes) will first cut back capital ex
penditures , and ultimately reduce its payroll and inventories
and production level . That is the case of the American econ
omy now . The impact of the federal budget deficit on interest
rates, the perennial subject of financial press commentaries ,
merely reflects what the LaRouche-Riemann model can
measure in terms of the physical economy: the legal demands
for payments to overhead account, including the distorted
employment profile as well as the swo!len unemployment
and related expenses of the treasury , exceed the production
of tangible goods in excess of the replacement costs of goods
producing industry .
That is , the "fund" for overhead expenses is the tangible
profit of goods-producing industry, i . e . , production in excess
of labor, capital-goods replacement, and raw materials costs .
If the demand for overhead is in excess of tangible profit, the
difference must be made up through a reduction in the current
production inputs , i . e . , a decline of output.
This situation is immediately the result of Paul Volcker' s
credit rampage o f the past three years , but also the result of
the Carter administration ' s insane energy policies , as well as
the Ford administration ' s incompetent response to the rise of
oil prices in 1 973-74 .
The result is an economy which is beyond susceptibility
to the normal means of bringing about economic recovery.
Removing the pressure of oil prices does not work. This is
not to say that the economy cannot recover under any circum
stances . Were the thin margin of available capital investment
to be applied to industries in which technological break
throughs were occurring , the productivity effects of such
investments would transform the economy within a few years,
repairing the damage of more than a decade .
That is the promise of President Reagan ' s beam-weapons
program; the massive , Manhattan Project-style investment in
this field promises to create a technology-driver for the civil
ian economy , and the only way out of the present mess. These
technologies were examined in detail in EIR ' s Special Re
port, "Beam Weapons: The Science to Prevent Nuclear War. "
A preliminary assessment of their economic impact was pub
lished in EIR ' s January Quarterly Economic Report for the
U . S . economy . A more detailed assessment of the recovery
prospects of the American economy through a defense-based
"R&D-driver'; is in progress and scheduled for May release .

This article was adapted from a brief excerpt o EIR's

new multi-client special report, titled "Oil Price 1983: Prob

lems and Prospects . " It includes thefull LaRouche-Riemann

computer analysis of the oil-price drop ' s effect on the

U.S.

economy; a political analysis of London' s manipulations of

the OPEC pricing structure; and an extensive report on the
prospects for

u.s. oil and oil-equipment producers . Avail

able for $250from EIR ' s Special Services Department.

Economics

11

PIK program : a hoax for farmers ,

and a threat to u. s. food supplies
by Cynthia Parsons
The U . S . Department of Agriculture (USDA) announced
March 22 that 57 percent of com and sorghum farmers , 62
percent of wheat farmers , and 95 percent of cotton and rice
growers have signed up for the Payment in Kind (PIK) pro
gram launched by the Department last December. The PIK
program will pay the farmer in existing grain, com , cotton ,
and rice for not planting these crops in 1 983 , with the double
purpose of both reducing agricultural surpluses in storage
and reducing the cash farm price supports paid to the farmers
by the government by $ 1 billion in 1 9 8 3 , and by $2 to $3
billion in 1 984 and 1 985 .
Although Agriculture Secretary John Block announced
his "delight" in the farmer' s rush to enter his PIK program,
the future of the program is uncertain . "Phase I was easy , "
explained USDA ' s PIK economist Ray Voekel . "Phase II ,
providing the payment in kind , is a little more difficult. "
The government owns only 1 0 percent o f the 4 billion
bushels of stored grain , most of which is committed for aid
and emergencies and has neither the large amounts of com
modities needed to pay the farmers nor the budget to purchase
what would be necessary . Given that the PIK program was
designed to reduce government cash outlays , under current
conditions it will be impossible to carry out !
One of the most serious results of the program is that the
USDA cannot predict how acreage reductions will affect the
size of the 1 983 crop . Even if farmers leave 68 million acres
unplanted this year (see table) , they are generally taking their
lowest-yield acres out of production , and there are indica
tions that they will be attempting to maximize yields from

the acres they plant to cash in on the expected higher prices .

For the first time in over 40 years , the Department of
Agriculture , whose projections for crop production are usu
ally accurate to the bushel , will not be able to forecast exactly
how much grain will be produced until July . This situation
will give the international commodity cartels and futures
dealers an open field for speculation , and , if the price support
programs are dismantled , a virtual monopoly over world
commodity prices .
Although a n immediate food shortage will not develop
even if the full 82 million acres slated for set-aside are left
unplanted , some agricultural economists are estimating that
com production will be down over 3 billion bushels , wheat
half-a-billion bushel s , rice 40 million hundredweight, and
cotton 3 billion bales . The USDA estimates that stocks will
be reduced nearly 10 percent for wheat and 45 percent for
com by the fall of 1 984 .
The United States will be able to grow enough to maintain
current domestic and export orders , but the real problem is
to preserve the farms for future production . PIK is dangerous
because it destroys the pricing mechanisms which have guar
anteed that farmers will be able to maintain consistent levels
of production over successive years since they were estab
lished in the 1 930s , and have been a prerequisite for making
U . S . agriculture the most productive in the world .

How it works
Payment in Kind is a voluntary program intended to aug
ment the other set-aside programs , further reducing wheat,

1983 ARP, PDP, and PIK enrollment

National
total
base acreage

Total
base acres
enrolled

Percent
total
base
acreage

Percent of
farms
enrolled

Total acres
diverted*

Percentage
total basse
acreage

Corn/sorghum . . . . . . . . . . . . . . . . . . .

1 0 1 ,059 , 5 3 3

78 , 824 ,4 1 2

78 . 0

57

39.4

Wheat . . . . . . . . . . . . . . . . . . . . . . . . . .

90 , 806 ,0 1 3

7 8 , 308 , 888

86 . 2

61.8

32. 1

1 5 , 446 ,69 1

1 4 , 607 , 249

35

Cotton . . . . . . . . . . . . . . . . . . . . . . . . . .

94 . 6

85 . 3

3 , 835 ,4 1 7

44

Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 , 000 ,586

6.8

95 . 9

96

1 .7

43

39

* Rounded millions
Total PIK: 68 million acres (13 . 3 million acres come under the paid diversion program)
Total acreage reduction: 82 million acres will not be planted in 1 98 3 .
Source: USDA

12

Economics

EIR

April 1 9 . 1 983

sorghum, com , and cotton production . PIK is intended to

reduce government expenditures for storage and deficiency
payments for surplus grains .
Traditionally , price supports protect the farmer when
market prices are low by having the government intervene
and make up the difference between actual prices and a target
price set by Congress. When prices are low , or the farmer
cannot sell his grain, he can ' store it in the Farmer Owned
Reserves (FOR) until prices rise . When grain is put into the
reserve , the farmer contracts it to the government , leaving
the grain there for the length of time of the contract. In return ,
the farmer receives a cash loan repayable with interest.
The PIK plan grants farmers surplus stocks of govern
ment-owned commodities in return for agreeing to reduce
their crop production . The only specific limit on the proposal
is that no more than 45 percent of the base acreage in any one
county can be taken out of production . Farmers participating
in the PIK program must also comply with the Acreage Re
duction Program (ARP) and the Paid Diversion Program
(PDP) , the two other federal set-aside programs .
The ARP and PDP programs require feed grain and wheat
farmers to limit the acreage devoted to those crops in 1 983 to
an amount at least 20 percent less than the farm ' s base acreage
for those crops . Farmers who plant at that upper limit must
also devote an acreage equivalent to 20 percent of the base
acreage to approved conservation uses . For each acre divert
ed to conservation, farmers will receive an amount of grain
that is equal to a specified percentage of the farm ' s per-acre
yield: 80 percent for com and 95 percent for wheat .
The farmer can also take a " 1 0 to 30" option , which
means that he cannot plant between 10 to 30 percent of his
base acreage in any one crop . When added to the ARP and
PDP requirements , this means that a farmer complying with
the com or wheat PIK program would limit his 1 983 acreage
of that crop to 30 to 50 percent of the farm ' s base acreage ,
depending on his level of PIK participation .
The U . S . government does not normally buy and sell
grain. To obtain the grain necessary to carry out the PIK
program , the administration is actually encouraging farmers
to release the grain stored in the Farmer Owned Reserve
(FOR) , which they had used as collateral for Commodity
Credit Corporation loans . The administration has announced
that it is willing to cancel loan repayments and interest on
that grain if the farmer agrees to tum it over.
For the government to legally acquire grain from the
Farmer Owned Reserve (FOR) , farmer A must forfeit it by
defaulting on his CCC loan , or failing to make interest pay
ments on his loan . Farmer B , participating in the PIK pro
gram, must accept what grain the government allots him , no
matter what the quality . Although the accumulated interest
charges on the previous owner's loan will now be forgiven
on the date that the entitlement is transferred , much of this
grain has been abandoned by its original owner because it is
of such low quality it was not worth the cost of the interest
EIR

April 1 9 , 1 983

and low repayments .

Current g overnment-owned wheat stocks of 1 80 million
bushels are held for security and foreign aid . Thirty-five to
40 million bushels of this are committed for the Egyptian
wheat flour sale made early in the year, which exhausts all
disposable government stocks . CCC stocks of com are esti
mated to be between 450 and 460 million bushels , with 44
million of these being held for disaster relief. One-and-a-half
billion bushels of com will be needed to pay farmers already
signed up for the program . The government owns no cotton .
If farmers chose to stay with their present PIK commit
ments , reduced plantings and harvestings would cut farmers '
use of seed , fertilizer, and pesticides by 1 2 to 1 5 percent from
last year, according to the USDA . Fuel use is expected to fall
8 to 1 0 percent . Already harshly reduced machine purchases
will be affected much less , USDA predicts , declining 2 to 3
percent.
The immediate effect of the PIK program would be to
force layoffs or shorter workweeks for at least 2 to 3 percent
of those employed in agriculture-related industries . Employ
ees of companies that provide farm services or produce farm
equipment and chemicals will be most heavily affected .

The price support issue

The PIK program is Phase I of the administration ' s at
tempt to reduce price supports by at least 50 percent . "Free
market" ideologues, who believe that the international com
modity cartels should set the price of world food prices and
therefore control world food production levels , are demand
ing (for example , the March 2 1 issue of Business Week mag
azine) that all price supports should be scrapped . This would
detonate a bankruptcy wave in the farm sector.
Though the USDA generally denies that there is any re
lationship between PIK and and its policy of phasing out
price supports , PIK economist Ray Voekel admitted that
once "supply and demand" were more in line "farmers will
not have to get price supports . "
One o f the strongest arguments made by the free marke
teers is that the government is carrying an increasing propor
tion of the farm debt. As of Jan . 1 , 1 983 , the government is
carrying 27 percent of the $ 1 05 billion non-real estate debt .
In 1 979 , this proportion was 1 6 percent, which includes CCC
price support and crop storage loans as well as Farmers Home
Administration debt . Because of ever lower prices , high in
terest rates , and increased production costs resulting in in
come losses for farmers , the CCC price support and crop
storage debt increased by 69 . 5 percent from Jan . 1 , 1 982 to
Jan . 1 , 1 98 3 . But it is the advocates of the free market like
Paul Volcker, chairman of the Federal Reserve Board-the
single policy maker most responsible for burdening farmers
with massive debts-who now demand that government as
sistance to farmers be cut and farm prices be determined by
the international speculators . That amounts to a national se
curity threat.
Economics

13

Currency Rates
The dollar in deutschemarks
New York late afternoon fixing
-I -_ .

----r---I

2.50

Special
Technical Report

A BEAM-WEAPONS
BALLISTIC MISSILE
DEFENSE SYSTEM
FOR THE
UNITED STATES

2.45

--l lUJjJlJ
-+---+--llJ

'-
3/r.c
1 6---;
--- 3;-;;;
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/2
3 -'3

4/6

The dollar in yen

by Dr. Steven Bardwell, director of plasma

physics for the Fusion Energy Foundation.
This report Includes:

a scientific and tech nica l ana lysis of the fou r

major types o f beam-weapons for ba l l istic
m issi le defense, which a l so specifies the
areas of the civi lian economy that are crucial
to their successfu l development;

a detailed comparison of the U.S. and Soviet

programs in th is field, and an account of the
differences in strategic doctrine behind the
widen ing Soviet lead in beam weapons;

the uses of directed energy beams to trans

form raw-materia ls deve lopment, industrial
materials, and energy production over the
next 20 years, and the close connection
between each nation's fusion energy devel
opment program and its beam weapon po
tentia ls;

The dollar in Swiss francs

New York late afternoon fixing

2f23

the impact a "Manhattan Project" for beam

weapon development wou l d have on m i l i
tary security and the civi lian economy.

T h e SO-page report Is available for $ 2 50 .

F o r more InformatIon, contact Robert Gallagher
or Peter EnnIs (2 1 2J 247-8820.

14

Economics

3/2

3/9

3/1 6

3/23

4/6

The British pound in dollars

New York late afternoon fixing

1 .65

3/30

3/23

1.60

1 .55
1 .50

1 .45
2f1'

2/23

-:;A

3/2

3/9

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!

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-

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3/16

3/23

EIR

3/30

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11

4/6

April 1 9 , 1 983

DatelineMexico

by

Josefina Menendez

The San Jose Accord flap

Pemex chiefBeteta is raising doubts about where his true
loyalties lie . The U . S . "strategic reserve" is in volved .

n a New York press conference on

April 2 , Petroleos Mexicanos director
Mario Ram6n Beteta raised a recri
minatory finger, charging that Vene
zuela had "de facto left Mexico bear
ing 100 percent of the burden" of the
Mexico-Venezuela agreement to sub
sidize oil sales to nine Central Amer
ican and Caribbean countries , an
agreement known as the San Jose Ac
cord . This situation , he threatened ,
could lead Mexico to drop the agree
ment when it comes up for renewal
next August.
Beteta' s statements were seen here
and in Caracas as a knife in the back
to the present joint efforts by Mexico
and Venezuela to cool tensions in
Central America.
A week before , Mexican Secre
tary of National Patrimony Francisco
Labastida had issued a communique
announcing the two countries ' deter
mination to maintain the agreement .
The announcement was made after a
meeting between Venezuelan Minis
ter of Energy and Mines Humberto
Calder6n Berti , Labastida, and Mex
ican Foreign Minister Bernardo Se
pulveda. The latter is closely working
with President de la Madrid on deli
cate diplomacy in Central America.
Labastida and Calderon told the press
that the agreement had not only good
economic effects , but social and polit
ical ones .
Signed in San Jose , Costa Rica in
1 980 by the L6pez Portillo and Her
rera Campins administrations , the
agreement marked the beginning of
joint efforts to overcome Central
America ' s political tensions.

EIR

April 19, 1 983

According to Venezuelan sources ,

the two countries are now supplying
1 80 ,000 barrels of oil per day under
the accord , which stipulates that 70
percent of these deliveries must be paid
in cash . The other 30 percent is deliv
ered on the basis of five-year credits
at 4 percent annual interest rates . These
credits can be extended to 20 years
with 2 percent interest if such funds
are invested in energy or other natural
resource development projects . The
accord amounts to an estimated total
of $900 million dollars per year , $300
million in the form of credits .
In Beteta's statements for the press
as he stepped off the plane from ex
tended consultations in London, he
added that if the United States tries to
impose a $5 dollar tax per barrel on
imported oil , Mexico would lose ap
proximately $2 . 5 billion dollars per
year. Nobody knows where Beteta got
this figure , unless he was making the
astonishing claim that Mexico , not the
U . S . consumer , would pay a U . S . tax .
Whatever the case , Beteta ' s re
marks raised havoc here . Some col
umnists are calling for Mexican oil
exports to the United States to be ex
empted from this tax if it is approved .
Such demands echo recent proposals
by former Assi stant Secretary of State
Meyer Rashish , who drew up a study
for David Rockefeller and Henry Kis
singer in the mid- 1 970s which propos
es turning Mexico and Venezuela into
a "strategic petroleum reserve" for the
United States .
Beteta made his remarks during
ceremonies installing Alfredo Gutier
rez Kirchner as head of the Pemex of-

fice in New York and of the compa

ny ' s new offices in Washington . Ac
cording to a UPI wire circulated here
March 25 , the Washington office is
intended to "establish a new oil rela
tionship with the United States . "
The opening o f an office i n Wash
ington at a time when Pemex is cutting
back its budget has led some here to
suspect that Mr. Beteta is willing to
listen to those forces which , like
Rashish , are committed to make Mex
ico and Venezuela drop the San Jose
Accord and concentrate on supplying
a U . S . "strategic oil reserve . "
As for Mr. Gutierrez Kirschner,
he is the son-in-law of the head of the
Washington-based
Inter-American
Development Bank , Antonio Ortiz
Mena , the dean of Mexico ' s monetar
ist economists and the man reputed to
be the behind-the-scenes fixer in Mex
ico ' s current debt reorganization ef
forts . As finance minister in the 1 960s ,
Ortiz Mena engineered the "stabiliz
ing development" model which heav
ily favored import dependency in key
production lines to the detriment of
Mexico ' s
industrial
domestic
infrastructure .
Beteta' s New York statements
quickly shifted to the category of
"misstatements" as the de la Madrid
government caught up with him. On
April 5 , the board of directors of Pe
mex issued a communique stating
Mexico' s commitment to the accord
as agreed to by the Calder6n-Labasti
da-Sepulveda meeting , adding that
Venezuela has "satisfactorily met its
commitment" to the deal . Beteta had
to swallow his words by asking the
press of clarify that although "Vene
zuela had not been operating in the
accord , now it is doing it . " An embar
rassed Beteta also later released a
statement backing off from his claim
that Mexico would lose $2 . 5 billion if
the U . S . tax went through .

Economics

15

International Credit

by Kathy

Burdman

BIS plots next phase of creditors ' cartel

I don't think we can do that just yet .

B ut it' s a good idea . "
I n his speech , Leutwiler stressed
and run by the Ditchley Group .
his recent theme that "the BIS is sim
ply not a new source of credit in the
financial markets ," the banker said , in
order to make two points :
First, by pointing out that the BIS
and will not form a debtors ' cartel but
won' t pick up the tab , Leutwiler wants
will cower before the creditors ' cartel .
to force the banks to establish global
"We don ' t have to do anything in par
credit controls . He wants them "to find
ticular, because these [Latin Ameri
a level of credit to which they can force
can] politicians are no threat to us , " a
the countries to reduce , and which they
Morgan banker said . "In December,
can force the countries to pay , through
people said Mexico would play hard
tough austerity programs ," one bank
ball , that they were going to declare a
er explained . "He wants the banks to
moratorium . Look at them now , they
negotiate
conditionalities
strong
have been forced to eat crow. We ' ve
enough to do the job . He does want
gotten them to agree to pay whatever
the banks to be prudent, and cut back
they can .
lending , but he doesn't want them to
"They know if they push it to con
pull out entirely . "
Second , Leutwiler i s trying to call
frontation , they will be totally cut off
from the outside world . . . . Some of
the question on the Morgan-backed
amendment by Sen . Charles Percy (R
them are screaming , because it hurts .
It' s too bad . Screaming is not the same
Ill . ) which would have the United
as declaring they refuse to pay . "
States join the BIS . Then "the BIS
The meeting was dominated by a
would get a powerful new sharehold
speech by Leutwiler, who is also the
er, " the banker said .
head of the Swiss central bank . He
"At the moment , the United States
urged the banks to make the cartel more
is not behind the BIS , just some pri
formal . "Mr. Leutwiler praised us as
vate U. S . banks which hold some
a contact point between the banks and
shares . But if the U . S . government
the central banks , and announced that
became a shareholder, this would help
he finds it very convenient to discuss
the BIS ' s presence on the markets
the debt crisis with us as a group ," one
enormously when it goes out to bor
participant explained .
row . What Leutwiler has been saying
"In fact , they want us to do even
is that the BIS really can ' t borrow , and
more . So far, the Ditchley Group has
therefore can ' t lend , very much at all
resisted getting involved in individual
at the moment . If the BIS can borrow
ongoing ' workouts ' of specific debt
on the world markets with the full
renegotiations like Brazil Project 1 .
guarantee of the government of the
But Leutwiler wants us to expand , and
United State s , with the formal name
to do just that . They want us to get into
of the U . S . government behind it, they
the rescheduling workouts per se , to
will be much happier. "
run the actual operations in a country .
At the next Ditchley meeting in
"The BIS wants to have a single . June , the BIS relationship may be for
contact point with the banks, a clear
malized , and the officers of the new
channel of information and direction
Ditchley Institute for International Fi
for the regulators and the central banks .
nance officers will be announced .

The Bankfor International Settlements wants aformal cartel

backed by the U . S . government,

ank for International Settlements

Chairman Fritz Leutwiler instructed
the March 25- 26 meeting of the Ditch
ley Group bankers ' cartel in Zurich to
form .a formal world credit cartel ,
banking sources told a journalist early
in April .
To provide the muscle behind the
DIS-run cartel , it will be necessary for
the United States to join the BIS ,
bankers further stated. As Morgan,
economist Rimmer de Vries has pro
posed , if the United States joins the
BIS , the BIS "can borrow on the world
markets with the full guarantee of the
government of the United States , " a
Morgan source said .
What is needed , one Genevan fi
nancial expert said , is an "institutional
context" in which the BIS and the cen
tral banks , especially the U. S . Federal
Reserve , could freeze all international
credit and "control the international
credit multiplier" in the Eurodollar
markets , making any future expansion
of lending to the Third World
impossible .
Named for London' s Ditchley
Park , where it was founded in May ,
1982, the Ditchley Group is a cartel of
over 36 international commercial
banks run by the British banks , the
B ank of England, and the Swiss-based
BIS . The Zurich meeting was hosted
by the Swiss B ank Corporation and
the other big Swiss banks . Dr. Fritz
Luethoff of Swiss Bank Corporation
is now Ditchley "interim director. "
Bankers meeting at Ditchley said
they are now confident that the Third
World has been effectively dealt with ,

16

Economics

EIR

April 1 9 , 1 983

Domestic Credit

by Richard Freeman

What makes interest rates go up?

Fundamentals, not monetarist gobbledygook or "market
management, " are important.

he dip in short-tenn Treasury bill

rates, which fell from about 8 . 64 be
fore the Easter weekend to 8 . 3 8 on
April 6, reflects the same "bouncing
ball" pattern of increase which has
prevailed since last January .
Although the fundamental pres
sures driving interest rates up , as EIR
described last week , are continuous,
the evolution of the financial futures
market prevents their effect from being
continuous .
To the extent that the majority of
large speculators fix their attention on
the Federal Reserve ' s perception of
their own perception of the Federal
Reserve , in the fonn of that esoteric
discipline known as monetarism , such
wild swings are inevitable .
Rates dropped the first week in
April , partly because speculators took
a bet on a less restrictive Federal Re
serve monetary policy than they had
earlier feared , based on a guess that
narrowly defined "money supply"
would not ri se as fast during the sec
ond quarter as they did during the first
quarter.
On this basis , the Fed will suppos
edly let interest rates drift down. More
notable is the simultaneous sharp in
crease in the spread between Eurodol
lar and Treasury bill rates , reflecting a
"flight to quality" among a certain sec
tion of the market . Taking into ac
count Eurodollar rates , which actually
rose on April 4 and 5 and then fell only
margina1ly , the drop in rates is less
confidence-inspiring .
All this supposes that rates intially
rose on "expectations" that the Fed

EIR

April 1 9 , 1 983

would tighten to contain money growth

throughout March .
This is not true; as one monetarist
who heads capital market research for
a top brokerage finn notes, the de
mand for refinancing of American
banks' short-tenn loans to foreign
banks would , by itself, account for the
rise in the Fed funds rate during
March-whatever
anyone
else
thought .
Not merely the volume of domes
tic Treasury financing , which the
"market" takes into account, but the
staggering volume of overseas refi
nancing , represents a continuing
source of upward pressure on interest
rates-even with flat commercial
credit volume .
The Fed has , indeed , pennitted
what the St. Louis Fed calls the mon
etary base to grow at a 1 2 percent an
nualized rate this year; but is this the
source of the 1 5 percent annual rate of
M l growth?
There has been no new lending to
the private sector, the traditional source
of the "money multiplier;" most lend
ing has gone abroad . Why does it show
up in M l ?
The Fed (and the IMF staff) have
one explanation , which I illustrate with
excerpts from a conversation the sec
ond week in April with a Federal Re
serve official .
Q: Why are interest rates going
up?
A : I don ' t know .
Q: Couldn ' t it be that the combi
nation of the Federal borrowing re
quirement $ 1 00 billion in excess of

income flows plus the immense off

shore rollover requirement are push
ing rates up faster than the Fed dares
lean against?
A: That's one explanation. It might
be true . The other explanation is that
people are scared .
What the Fed official was indicat
ing is that investors terrified by the .
recent spate of oil industry , S&L , and
related bankruptcies are holding cash
to an abnonnal extent . S ince the Fed
itself is the source of this uncertain
ty-as monetarist Dennis Kamowky
of Conti Commodities points out-the
notion that this should detennine in
terest-rate developments is distressing.
Nonetheless ,
the
Hayekians
among foreign central banks , as well
as their principal mouthpiece in
Washington , Fed governor Henry
WalIich , are using the spectre of ex
cessive M l growth to demand that the
Fed tighten . Here is what one Belgian
central bank official had to say on the
matter:
"The problem is that they are not
willing to take the measures that would
be required , by which I mean reducing
the immense fiscal deficit; and without
a lower deficit, it is not possible to
lower interest rates and control the
dollar. And now the Fed will have to
tighten monetary policy . They cannot
permit the monetary aggregates to keep
growing as they have . "
The Fed and the administration ,
for different reasons, have resisted
such perverse logic , the Fed because
it hopes against hope for a "smooth"
reorganization of the collapsing world
banking system , the administration
because it wants an economic recov
ery . The second week in April , to
gether they beat back the speculative
"overshooting" in the credit markets .
But without a fundamental change in
policy , the underlying pressures will
defeat them .

Economics

17

......................U.
A....Z
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Business Briefs

Brazil to greater oil imports from Mexico

Fiscal Policy

than the austerity program warrants . "

Supply-sider protests

what the Swiss newspaper Neue Zurcher

Apparently, the

Zeitung predicted in a dispatch from Buenos

IMF interference

Aires April 7: an lbero-American debtors'

"The International Monetary Fllnd h as no

right to tell the U. S. to cut expenditures,"
Columbia University

economist

Financial Times fears

cartel.

United States doesn ' t have balance of pay

ments problems. It is in equilibrium. It has
a floating exchang , ate , which is what it is
supposed to have under the Jamaic ;:;. agree
ment. M"n:: .:n-C1, the dollar is appreciating

in any case . "

Mundell, a former IMF econvmit whose

arguments formed the basis for "supply-side

economics , " argues that the "IMF has re
sponsibility only in balance-oi-payments
questions," and " has no authority to tell the
U. S. to retrench" at a time when it cannot
demonstrate an American balance-of-pay
ments problem.
Mundell also predicted that the U. S.
would reject suggestions that it join the Bank
for International Settlements . "Everybody
else would like the U.S. to take part, be

cause the U. S. is the biggest country. It ' s

only a way for other people t o ta1(e over part
of the power of the U. S. But the U . S . wants
to keep its options open, and won't join. "

End of March business

fail.ures top 600

- ..---

Dun & Bradstreet reports that business fail

ures for the week ending March 3 1 again
topped the 600 mark with the greatest in

like to reduce Israeli activities in Central

ning in Lisbon, Portugal April 1 7 , Peres

stated: "The International must deal with the
North-South dialogue, the necessity for ar
riving at

new world economic order, dis

armament, and the soluticn to the armed

conflicts throughout the world. "
Prominent Israeli politicians have not
been wont in the past period to talk about
the "new world economic order" in a posi

"All types of operations except retail

ing showed a mild rise in failures during the
week just ended," Dun & Bradstreet goes

press indicate that Peres is staking out an

companies having liabilities over $ 1 00 ,000 .

claims that Peres' statements to the Spanish

"alternative way" for Israel to become more
involved in the developing sector.

on. "All functions had heavier casualties than

in the like week last year, with the steepest
climb from 1 982 in manufacturing. "
"Geographically, the week's upturn in
business failures took place in six of nine
regions. Leading the climb were the East
North Central and West South Central
States."
Year-to-date business failures were
7 ,733 compared to 1 98 2 ' s year-to-date fig
of 5,705. This year' s business casualties

are running 36 percent above last year's.

European Industry

No ' drop ' in

German unemployment
While the "official interpretation" of unem
ployment data released by the West German
Labor Office on April 6 touts "the first drop

of unemployment since May 1 98 2 , " all of

the chief industrial centers of the country are

In an editorial April 8 , the London Financial

Peres proposes new

reporting increases in the unemployment

Israeli policy

cluded by Brazilian economics minister

Delfim Netto the week of April 4 , under

sales,

tive context. An Israeli source in Europe

Development Policy

Times warned Mexico and Brazil against the

amlS

Peres stated: "The Israeli Labour Party would

crease coming in manufacturing and among

Financial Times decries

Brazil-Mexico barter

multibillion-dollar barter agreement con

ward Central America, which has been to

foment regional wars to expedite

meeting of the Socialist International begin

U.S. Economy

ure

Ibero-America

Latin America." On Israel's orientation to

America . "
Asked what would be discussed at the

Robert

Mundell said in an April 7 interview . "The

his personal opinions and because of the

already existing relations between Spain and

rates that are turning key cities into disaster

areas.
According to the official figures , there
was a 1 80,000 person drop ia \Ota). unem
ployment in March, t0 2. 3 96 miIlion. Those
on "short work" declined by

II percent

to

1 . 023 million, giving an ovetall 9 . 8 percent

which Brazil will sell Mexico machinery in

In interviews with the Spanish papers EI

Pais and ABC April 5, Israeli Labour Party

return for oil.

chairman Shimon Peres supported the dip

trial Ruhr area recorded incre

The British newspaper ' s editorial on the

subject says that it "is difficult to accept the

lomatic efforts ir Ibero-America of Spanish

ployment. Two cities showed increases to

relevance of the barter deals because barter

President Felipe Gonzalez and attacked the

policy orientation toward Central America

post-war record levels of unemployment: in

Bochum there was a 0. 5 percent increase to

provides no foreign exchange for debt serv

devised by former Defense Minister Ariel

ice , " and "it diverts potential exports that

Sharon. "The Spanish president must be lis

might otherwise be available for export

tened to, " Peres stated. "His policies de

against hard currency , and it may commit

18

Economics

serve attention and respect , because they are

rate of unemployment.
But six out of nine districts in the indus

unem

1 3. 6 percent, and in Dortmund an 0. 7 per

cent increase to 14 percent. The Krupp steel

centers of D uisberg and Gelsenkirchen both
showed unemployment increases to over 1 4

EIR

April 1 9 , 1 983

Briefly
percent.

Lower Saxony reported no change in un

employment because the Bonn govern
ment ' s efforts to launch a mini-boom in
housing construction has absorbed a small
fraction of the over 200,000 unemployed
construction workers , although this was
"nullified by layoffs in other areas ," accord
ing to Lower Saxony authorities . The city
of Bremen , which ended 1 982 with an av
erage unemployment rate of 1 0 . 3 percent ,
1 . 3 percent above the national average , re
ported no detailed statistics , but will be dev
astated by the collapse of shipbuilding.

While the German Bundesbank is bend

ing over backwards to support the Kohl gov
ernment' s "recovery" by pumping money
into the economy at an 1 1 percent rate of
growth, although the official target for
"monetary growth" was within 4 to 7 per
cent, the Machinery Association (VDMA)
has thrown a cold shower on the propagan
da. Incoming orders in February , the Asso

ciation announced April 6, were down I I

percent from February 1 982, and still fall
ing . Domestic orders were down 16 percent
and orders for exports of plant and machin
ery fell by 8 percent.
The VDMA has already made it clear
that the machinery sector is so export-de
pendent (only 30 percent of business is do
mestic) , that it is impossible to compensate
for collapsing exports . Orders dropped last
year by 2 1 percent to 20 . 2 billion deutsche
marks , and sales dropped even faster, by 28
percent. The machinery sector still employs
95 ,000 people.

World Trade

Japan protests embargo

on exports to Soviets
The Japanese government determined April
6 to file a protest against President Reagan ' s
legislative proposal for greater restrictions
on Western high-technology exports to the
Soviet Union, according to Jiji press.
Japan will tell the U . S . administration
that such export restrictions will affect the
unity of the Western alliance and the stabil
ity of international trade , Japanese officials
announced. The Japanese government will

EIR

April 1 9 , 1 983

also seek a detailed explanation o f the pur

pose of the legislation from the U . S .
administration .
Reagan' s proposal , which was sent to
Congress on April 4, calls for the renewal
of the 1 979 export administration act , which
will expire at the end of September. An ad
ditional clause proposed by Reagan would
impose restrictions on exports to the United
States on foreign companies which ignore
U . S . -imposed controls on high-technology
exports to the Soviet Union . Previous leg
islation cut back U. S. exports to nations not
compling with the U. S . high-technology re
strictions , hurting U . S . exporters in the world
market.
The Japanese foreign ministry and trade
and industry ministry stated that such a clause
might conflict with international law , and
could adversely affect Western nations ' trade
with the Soviet Union .

Drug Trafficking

Leading banks cited

in New York trial
Leading banks are expected to be named in
a trial which opened April 7 in New York
City of Colombian cocaine dealer Eduardo
Orozco, who was seized and indicted last
November.
Orozco was discovered to have depos
ited $ 1 50 million in drug revenues and other
illegal funds in offshore banking accounts
which were taken into custody after his ar
rest . Six other people are on trial with Oroz
co as co-conspirators , including Fred Gam
bale, a former branch manager for Citibank,
one of the largest banks in the United States .
Orozco is reported to have worked with of
ficials from other leading banks , still un
named, in laundering his cocaine funds , as
well as with government officials of foreign
countries .
Orozco-' s money laundering operation
was disguised as a lending agency , located
at 1 20 Wall Street. Drug enforcement offi
cials report that the U . S . Treasury Depart
ment wants to tighten scrutiny and regula
tion of such non-banking "lending" opera
tions around the country , as part of an effort

BRUNO BERTHEZ

, editor of
the largest circulation French eco
nomics weekly, La Vie Franaise,

warned in an editorial April 4 that

"Our English friends have dropped
their mask and revealed their true in
tentions: France should not hesitate
to abandon a part of its sovereignty to
the International Monetary Fund. "
Berthez notes that "in the second De
lors plan, there is no more talk of
industry . . . . It is just austerity and
asphyxiation , which will lead to no
recovery at all . "

JAPIC , the Japan Project Indus

try Council , a new business organi
zation for the promotion of large do
mestic and foreign industrial proj
ects , was authorized by the Japanese
goveinment April 5 as an official non
profit corporation . The council will
involve major businesses and indus
trial organizations , and will be chaired
by the head of Nippon Steel, Eishiro
Saito . Saito is a close collaborator of
Masaki Nakaj ima, who first pro
posed the Global Infrastructure Fund
(GIF) recovery plan . Saito said that
JAPIC would consult with the banks
on possible international syndicated
loans for big domestic projects . JAP
IC will also consider big overseas
projects "such as the construction of
the second Panama Canal . "
THE SOVIET UNION

has de
signed a reverse Payment-in-Kind
style program to encourage food pro
duction. The natural' naya oplata
(natural payments) program offers
bonuses for farms exceeding their
production quotas . Workers on state
owned grain, vegetable , fruit, and
fodder farms can receive up to 1 5 per
cent of the extra crop production in
addition to their regular wages , ac
cording to a USDA report . Similar
policies have been recommended for
collective farms , which are more au
tonomous than state-owned farms.
The bonuses are aimed at getting
farmers to raise more cattle, sheep,
and poultry on their private plots to
help relieve the meat shortage .

to break up drug-money laundering rings .

Economics

19

TIillSpecialReport

The Genoud networks

and the plan to set
the Mideast on fire
by Scott Thompson

The death knell for Arab nationalism, overwhelmed by a revival of Islamic fun
damentalism that has already plunged Iran into the Dark Ages under the Muslim
Brotherhood' s psychotic Ayatollah Khomeini and his mullahs , will be sounded at
a conference sponsored by Georgetown University ' s Center for C-o ntemporary
Arab Studies on April 1 4- 1 5 . "In less than a decade , " the conference document
states , "Islam has become so dominant a force in the eyes of the West that other
ideologies and forces of solidarity in the Islamic World-e . g . , nationalism-are
thought to have receded into the background . " Speakers at the conference will
include many of the leading academic apologists and strategists who heralded the
British Arab Bureau ' s Iranian coup plot that toppled the Shah "as the harbinger of
a new chapter in the history of Islam . "
From pre-conference statements made available t o EIR , the purpose o f the
Georgetown conference will be to create a new combination of Islamic fundamen
talist ideologies that may be used next to engulf Egypt , Saudi Arabia, Algeria, and
Morocco with feudalist revolutions similar to the one in Iran . While the George
town discussants work to weave the myths that underly Wahabism, Shi' ism, the
Muslim Brothers , and Sufi Masonry into a common strand , the forces on the
ground that will carry out the actual coups and assassinations in these countries
share a common point of control through the Lausanne , Switzerland-based Nazi
international .
One of the more relevant cases is that of former Algerian President Ahmed
Ben Bella, a notorious early follower of Hitler, who has been reborn as an Islamic
Fundamentalist and is now engaged in a coup attempt in Algeria that immediately
threatens the King of Morocco . Among Ben Bella ' s most prominent backers since
the 1 962 Algerian Revolution that first placed him in power is Franois Genoud ,
a member of the Swiss Nazi Party during World War II , who assisted Allen Dulles
from 1 943-45 in negotiations to redeploy Nazi intelligence assets into safe havens
for later use . Among those assets which Dulles shared with British and Swiss
intelligence allies was Amt VI , the "foreign nationalities division" of SS General
Walter Schellenberg ' s Sicherheitsdienst (SD) , consolidating both the Second Di20

Special Report

EIR

April 1 9 , 1 983

Mufti of Jerusalem with Adolf Hitler. The two are said to have met in Berlin . An alliance between European Nazis
DseuaG'-IS4iamlC agents has been maintained since World War II.

vision of Admiral Canaris ' s Abwehr and foreign nationalities

division of the Waffen SS that maintained extensive Mideast
networks through an alliance with the Grand Mufti of Jeru
salem . The Swiss-based Fran<;ois Genoud is , as well docu
ment below . today the banker and one of the principal con
trollers of these Amt VI assets .
Distant as the Georgetown conference may pretend to be
from Fran<;ois Genoud and the reborn Ahmed Ben Bella ,
it is through such members of the Nazi international that the
dirty work outlined by its participants will be achieved .
The Georgetown conference has all the appearances of
being a replay of one held on Oct . 2 1 -25 , 1 98 1 at the Rothko
Chapel in Houston titled "Islam: Spiritual Message and Quest
for Justice" which brought together leading strategists and
assets of the British Arab Bureau only days after the Muslim
Brotherhood assassinated Egyptian President Anwar Sadat .
As with the Rothko Chapel event. the Georgetown confer
ence is being run in parallel with a meeting in Paris of Islam
and the West , which is tied to the Club of Rome through such
figures as NATO strategist Alexander King and the Kim
Philby-linked KGB agent Djerman Givishiani .
On April 29-30 , following the Georgetown conference
there will be another secret meeting of Islam and the West at
the Meridien Hotel in Paris , attended this time by former
British Prime Minister Ted Heath ; French neo-Gaullist Mi
chel Jobert; German banker Karl Otto Poehl; Olivier Giscard
d'Estaing , the brother of the former French President; Mus
sah Ali . vice president of the Dimi Bank and consultant to
Pakistan ' s military ruler Zia ul-Haq ; Maurice Strong , chair
man of Royal Bank of Canada; Andreas Wall , chairman of
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April 1 9 , 1 983

Volvo ; and Ahmed al Najja, secretary general of the Inter

national Association of Islamic B anks .
Where the Islam and the West meeting brings together
leading representatives of oligarchic interests that have sought
to play the Muslim Brotherhood card , the Georgetown con
ference is more a gathering of strategists with such figures
as: Mahmoud Ayoub , a Lebanese-born professor at the Uni
versity of Toronto who is a promoter of Sufism; Cherif Bas
siouni , a relative by marriage to the European black nobility ,
who is both a professor at the University of Chicago and head
of the Sicilian Institute on Terrorism; Richard Mitchell , the
leading world expert on the Muslim Brotherhood with close
ties to its Egyptian underground and those involved in recent
efforts to destabilize the Indian government , and who is now
a professor at the University of Ann Arbor; and Mansour
Farhang of Princeton University , who was briefly Iranian
Ambassador to the U . N . under Khomeini ' s Foreign Secre
tary, Sadegh Ghotbzadeh . The Georgetown Center is spon
sored by many of those corporations and individuals who
actively promoted the overthrow of the Shah of Iran .
In the case of Rothko Chapel, the connection between
such strategists and the Nazi international-linked networks
that carry out the dirty work they envision was even more
direct . This conference , which was prominently attended by
Fran<;ois Genoud ' s Ben Bella , was sponsored by Mme . Jean
de Menil (nee Countess Schlumberger) , whose husband
emigrated from France to Houston in 1 945 to establish a
branch of Schlumberger, Ltd . , one of the largest oil survey
companies in the world. The Schlumberger family is inter
married closely with the Neuflize , Mallet , and other Swiss
Special Report

21

oligarchic banking families who actively promoted Hitler's

rise to power and assisted their relative , Allen Dulles, in
orchestrating the post-World War II reorganization of the
Nazi international now controlled by such figures as Genoud.
Jean de Menil was also a board member of the Permindex
Corporation that wove together British , Swiss , Israeli , and
Nazi international figures into an international "Murder, Inc . "
Among these were such figures a s British Special Operations
Executive veteran , Maj . Louis M. Bloomfield , King Farouk ,
a close ally of the Grand Mufti of Jerusalem' s fascist "Green
Shirts;" and, Prince Guttierez Spadafora, the former Mus
solini Undersecretary of Agriculture , who became an adviser
for the post-war activities of Franois Genoud and SS Col .
Otto "Scarface" Skorzeny in Egypt and other sectors of the
Mideast.
In 1 969 New Orleans D . A. Jim Garrison indicted mem
bers of Permindex for their role in the November 1 963 assas
sination of President Kennedy , while French intelligence
named Permindex responsible for dozens of assassination
attempts in the early 1 960s against French President Charles
de Gaulle carried out by OAS personnel linked to Genoud .
The process that participants at the Georgetown confer
ence are part of represents an oligarchic campaign to disin
tegrate civilization under conditions of deep economic
depression that threatens to plunge the world into a New Dark
Age unprecedented since the 1 4th century .
In a recent interview made available to EIR , Mahmoud
Ayoub , an acquaintance of Ben Bella , describes how such a
collapse of civilization might occur in Saudi Arabia:
"The problem with the Saudi royal family is that they are
saddled with an ideology that they cannot live up to , but they
feel that it is the only wall behind which the regime can exist.
So, I say that the Saudi regime lives not with the enthusiastic
voice of its founder, Abdul Wahabi, but rather with its oil
wells as did the regime of the Shah of Iran . . . . The same
power that brought the Saudis on the scene will eventually
destroy them . . . . What happened at the Al Haram Mosque
two years ago was not really the work of a starry-eyed group;
it was a genuine revolution that failed . But, I don 't think that
every revolution will fail . "
What Ayoub refers to as the Haram Revolution was an
effort to split the fanatic Wahabies from the Saudi Royal
family by showing that they could not protect the most sacred
of Islamic shrines , the Al Haram Mosque in Mecca. Leading
this revolution was the Muslim Brotherhood-trained leader
Juhaiman who drew together religious fundamentalist broth
erhoods in Pakistan, the Muslim Brotherhoods of Egypt, the
Sudan, Kuwait, the Teghlibi brotherhood of India, and even
Black Muslims from the United States into a Kuwaiti-based
movement, Jamiat al Islah (Call of the Brethren) .
Mansour Farhang , the Ghotbzadeh-linked Iranian Am
bassador to the United Nations , is today at the Princeton
Center for International Studies where Bernard Lewis first
authored the plan adopted by the Carter administration in
22

Special Report

tandem with the British Foreign Office to revive Islamic

fundamentalism and tribalism to redraw the map of the Mid
dle East . In an interview made available to EIR , Farhang
stated he was also a party to meetings between Bani Sadr,
Ghotbzadeh, and Ben Bella in which the latter' s rebirth as an
Islamic fundamentalist was first discussed. Farhang sees Egypt
as the next target for an Iranian-style revolution:
"From my personal value perspective as a participant in
the Iranian Revolution , it was a tremendous force that will
have dramatic consequences upon the region . . . . If there is
anywhere that Iran may serve as a model it is in Egypt, where
the Muslim Brotherhood remains strong and where many of
the same conditions of mass poverty among a large urban
population exist. The same process that occurred in Iran is
now underway there , but it cannot be spoken of because it is
an underground movement. "
Cherif Bassiouni stated i n an interview made available to
EIR that the main catalyst for Islamic fundamentalist revo
lutions may well be the attempt by an Israeli faction that
includes Yigal Yadin and Yuval Ne' eman to rebuild the Tem
ple on the Mount in Jerusalem that is now the site of the
second most holy Islamic shrine , the Dome of the Rock: "If
the Dome of the Rock is damaged , the next day you are going
to see the Islamic world in blazes . I wouldn 't want to be in
an American embassy on that day , I ' ll tell you that much .
And, any regime that would continue to have any relations
with Israel or not use its entire capabilities to put pressure
upon the United States to again put pressure upon Israel
would certainly be in a very difficult circumstance . "

Documentation

Franois Genoud,
terrorist controller
by Paul Goldstein in Wiesbaden
Profile: Franois Genoud
Born: Oct . 26, 1 9 1 5 in Lausanne .
Parents:
Franois and Marie Henriette Charlotte
Breithaupt.
Married: First to Elisabeth Peeters, divorced; second to
Liliane Moru de LaCotte , three children .
Residences: Lausanne-until 1 946
Tangiers-until 1 955
Cairo-until 1 956
Frankfurt-until May 30 , 1 95 8 ,
Friedlehenstrasse 36;
Lausanne-25 Fontanettaz

EIR

April 1 9 , 1 983

47 Boulevard de la Foret
Tel . 28 . 08 .42

I. Personal history
At the age of 2 1 , Genoud joined the National Front of
Switzerland (NFS) . NFS was a fascist group associated with
Georges Oltramaire's National Union . Oltramaire ' s family
comes from a leading Swiss banking family who have sat for
generations on the board of directors of the Lombard Odier
Bank of Geneva . This bank became famous for its involve
ment with the Office of Strategic Services during World War
II , dating from Allen Dulles's assignment in Berne , Switz
erland. Its facilities were used by Dulles to facilitate the
surrender of SS Gen . Karl Wolff, head of the German army
in northern Italy. Genoud was used as a personal intermediary
between Dulles and SS General Wolff.
In 1 940 , Genoud set up a night club , Oasis , in Lausanne
as a covert operation for the Abwehr in Lausanne . This Oasis
Club was a joint venture with a Lebanese operative named
Daoud, a nephew of an impcrtant figure in Lebanon named
Omar Bey . Prior to hIs operation in Lausanne , Genoud trav
eled extensively in the Mideast and met with the Grand
Mufti of Jerusalem in 1 936. His Abwehr cover enabled him
to set up a spy nest throughout the Mideast . His recruiting
officer was an operative named Guimanll, the Mayor of
Tiengen . Under these conditions , Genoud became one of the
key go-betweens for spy-running operations and drug-smug
gling activity in the Middle East and North Africa, especially
in Tangiers .
By 1 943 , Genoud began using his banking connections
to set in motion the networks which later became known as
the Odessa. The transfer of millions of marks from German
into Swiss banks , and the evacuation of key SS and Nazi
leaders into Morocco, Spain , and Latin America were the
principal aspects of this operation . For this purpose a firm
known as Deithelm Brothers was established in Lausanne
under the personal sponsorship of Adolf Hitler' s personal
secretary Martin Bormann , and functioned until the end of
the 1 940s , transporting out of Europe thousands of Nazi
leaders .
Genoud befriended SS General Wol ff SS Captain Rei
,

chenberg, Luftwaffe Gen. Hans Rudel , General Ramcke,

and countless others , including Otto Skorzeny and Hitler' s

economics minister, Hjalmar Schacht . It appears that Gen
oud was arrested some time after the war, but freed due to
the pressures of former Gestapo official and later Interpol
chief Paul Dickopf. In 1 955 , Genoud was in Tangiers with
General Wolff and General Ramcke . In 1 956, he met with
Hjalmar Schacht in Cairo , along with Dr. Hans Reichen
berg, where several financial investments into Morocco were
created . During this time he met with Ben Barka and an
operative named Skalli , both members of the opposition
party in Morocco . While in Cairo , Genoud was introduced
to the Algerian Front for National Liberation (FLN in
EIR

April 1 9 , 1983

. French) , led by Ahmed Ben Bella and his treasurer Mo

hammed Khidder . Genoud officially becomes a courier be
tween Tangiers and Cairo , setting up the financial support
operations for the FLN .
Over the course of these years many new Nazi Interna
tional operations were arranged through and into Argentina,
a process Genoud aided . In Argentina , Hans Rudel , now
deceased , was given the financing to create the Europe-Ar
gentina Association . It was through this apparatus that S S
Obersturmfiihrer Klaus Barbie' s operations i n Latin Amer
ica were arranged . In the postwar period , the huge transfer
of Nazi funds was conducted under the patronage and protec
tion of OSS-CIA chief Allen Dulles under the code-name
"Operation Land of Fire , " and later the State Department' s
covert policy arm until 1 95 1 , the Office o f Policy
Coordination .
After the war, Genoud and the Diethelm brothers , op
erating through the Diethelm export-import company , fi
nanced a Nazi publication called Der Weg in 1 948-49 . Run
by SS officers and based in Buenos Aires , this publication
was one of the first post-war attempts to regroup the Nazi
apparatus internationally.
In 1 959, Genoud created the International Association of
the Friends of the Arab World , along with Benoist-Mechin .
In September 1 960 , Genoud established relations with EI
Wakhil el Kabbani , the head of the Arab Information
Center in Geneva. His other business ventures included the
creation of a Munich-based export-import firm , Arabo-Af
rika , in conjunction with the old Nazi Reichenberg , who
later became an economic adviser to President Houari Bou
medienne of Algeria . Genoud' s other contacts included the
Egyptian ambassador to Berne , reputed to have been head of
the Egyptian intelligence service , Fathy el Dib Mohammed.
The International Association of the Friends of the Arab
World ' s officer in Geneva was Ibrahim Haeid , a Tunisian
formeriy of the Abwehr, located at 8 Chemin des Epinettes
in Lausanne .
Genoud' s connection to Benoist-Mechin is extremely
significant in light of the fact that Benoist-Mechin wrote an
entire profile of the Ibn Saud family , a fact which places him
in the British intelligence operation through the St. -John
Philby apparatus . According to one source , Benoist-Mechin
was an Abwehr agent working with the fundamentalist Mus
lim Brotherhood .

Genoud ' s Arab contacts expanded during this period of

the late 1 950s and 1 96Os . One contact , Youssei Abderrah
man , a member of the National Union of Popular Forces of

Morocco (Polisario) , was a key Genoud connection to the

opposition . Operating through Cairo , Genoud financed not
only the Algerian FLN operations , but the "liberation forces"
throughout the Maghreb . He remained in contact with a top
Muslim Brother named Boudgemline Mohammed of the
Jamiaat al Islam.

In July 1 960 , Genoud was secretary of the administrative

Special Report

23

council of the Society Interlogin S. A. , a Freiburg-based

export-import company . It became one of Genoud' s main
activities . With his old-Nazi funds , new revenue from arms
and drug-running , and the FLN treasury provided by Mo
h ammed Khidder, Genoud established the Banque Com
merciale Arabe in Lausanne . According to reports , Gen
oud ' s "new" bank became a model for Swiss banking ; noth
ing but multiple signatures were legally required to establish
a banking institution.
At this point Lausanne became the center of FLN financ
ing of numerous arms deals, usually made in Germany by
former Nazis who had been recycled as arms merchants . Otto
Skorzeny , based in Madrid , was part of the arms-smuggling
operations which financed the anti-de Gaulle Secret Army
Organization (OAS) and the FLN . Genoud , during the mid1 960s, financed a major arms-drugs deal between the Le
banese drug-smuggling operation known as Casino de Liban
and a "French organization . " The go-between was an "old
friend , " Jeanmarie Tine , one of the leaders of the SAC
covert intelligence unit which was created during the Alger
ian war to fight the FLN and OAS . The SAC-Genoud deal
was arranged through Genoud ' s client Dr. Alfred Ziegler,
a.k.a. Muhammed Saleh of Cairo .
Genoud also set up contacts between the old Nazi net
works and the Palestinians . In April 1 969 , in Barcelona, at
the "Europiiische Neue Ordnung , " a special delegation of Al
Fatah spoke on the issue of the "Palestinian Revolution . "
Genoud arranged for the training o f AI-Fatah troops b y for
mer Nazis such as Karl van de Put of Belgium , formerly of
the Afrika Corps , and Johann N . Schuller, presently living
in Rome . According to one lead , Schuller may have been
linked to the assassination of Aldo Moro . It appears that one
of Schuller' s employees in his export-import firm was arrest
ed by police after the assassination; he had used the office of
the "Heraldic Society , " which was adj acent to Moro' s office ,
and part of the business of this export-import firm was elec
tronic bugging equipment. The employee , Moreno , was later
released without explanation .
In September 1 969 , Genoud was involved as lawyer for
two Palestinian terrorists who were members of the Popular
Front for the Liberation of Palestine (PFLP) . At this point,
he was integrated into the "Arab Union o f Lawyers," led
by his old Moroccan friend Youssei . Another important link
to Palestinian terrorism was Franc;ois Duprat, the French
fascist leader assassinated in 1 979 , who ran the Franco
Palestinian Association and helped set up the Breton lib
eration movement.

In the 1 970s , Genoud expanded his banking operations

and financing of the Nazi International . In 1 97 1 , his arms
smuggling operations into Lebanon expanded as well .
Through his front-man Guy Amaudruz, Genoud ran huge
shipments of arms into the Mideast via Lebanon . At this time ,
Genoud, through Mohammed Khidder' s lawyer Louis Bos
quet, arranged via Sylvain Dayan, a.k.a. Saadi Behham
ou, and Antoine Kamouh from Intrabank-Beidas , a major
24

Special Report

arms-drugs deal . In 1 977 , Genoud negotiated the release of

terrorist Bruno Breguet from an Israeli prison .

II. Banking connections

In December 1 979, a Swiss federal court ruled that Gen

oud ' s Banque Commerciale Arabe (BCA) was rightfully
owned by the Algerian government. Thus ended a 1 4-year
controversy that embroiled Franois Genoud and the Alger
ian government over the ownership of the BCA. Although it
appears that Genoud lost control over BCA, nonetheless , out
of the 1 4-year court battle , which left in its wake several
dead , including Mohammed Khidder, treasurer of the FLN ,
the BCA was reorganized by the Algerian government as the
Banque Algerien de Commerce Exterieur .

In 1 95 8 , BCA was organized in Lausanne by Martial

Gaffiot; Gerard-Charles Borguin; Max Mosher, a Geneva

lawyer; Zouhair Mardam Bey , and others . Hj almar Schacht

was a financial adviser.
Mardam, Bey is one of the keys to the whole Genoud
banking nexus . The Syrian father of Zouhair Mardam Bey
was an intimate friend of Ibn Saud , of the royal family of
Saudi Arabia. Zouhair and Genoud ran the BCA up until the
Algerian government government takeover, Zouhair is now
working with or through a bank in Geneva called the Saudi
Swiss Finance Company . This may be one of the key links
into the whole Islam and the West financing operation , run
through Prince Mohammed al-Faisal's Dar a1-Maal ai
Islami (DMI) , which is targeted by French authorities for
investigation . Reinforcing this link is the fact that Zouhair
saved a character named Akram Oijeh , a top broker for the
Saudi royal family along with Fuad Rizg, Adnan Khassogi,
Zouhair Mardam, and Gaith Pharaon . Fuad Rizg comes
from a Lebanese family which became central for the mar
keting of Saudi oil .
Regarding the Mardam Bey family itself, the father of
Zouhair was Syrian foreign minister during 1 946-47 , and
died in the 1 960s . The father, Kahlil Mardam Bey , was an
intimate of Otto Skorzeny . During the course of 1 983 , Skor
zeny ' s wife has been meeting with Mardam Bey and Franois
Genoud . There have been meetings in Paris among Genoud,
Mme. Otto Skorzeny, and Mardam Bey . The major areas
of activity are banking and business ventures in Germany ,
Morocco , the Mideast, Brazil , and Argentina. According to
a source, the Swiss-Saudi bank is the vehicle for their trans
actions . Most of the financial operations are capital flight
activity out of Morocco, Mexico , and other nations .
Another, perhaps unwitting . vehicle involved i n these
black market operations is Guy Tennart, of the Societe du
Promotion de Resource Hospitalier. He apparently serves as
a go-between for , investments in real estate in Cannes and
Nice, France .
Key to the entire Swiss banking operation i n conjunction
with Genoud is Dr. Alfred Schaeffer , the former chairman
of the Union Bank of Switzerland and close confidante of
Hjalmar Schacht . Now 80 years old , Schaeffer has been in
EIR

April 1 9 , 1 983

the center of pre- and postwar financial arrangements with

The recruitment by the Genoud-Abwehr apparatus of

Nazi-related financial matters , including the I . G . Farben fi

Ahmed Ben Bella demonstrates the method by which the old

nancial holding company Interhandel A.G. , a "dummy"

Nazi-Abwehr apparatus set up the Middle East fundamental

corporation of which Schaeffer was chairman .

This Interhandel A . G . was set up in 1 938 by I.G. Far

ben , with Schaeffer pursuing a 20-year litigation against the

U . S . government on behalf of Farben to
in 1 942.

unfreeze assets seized

Schaeffer' s relationship with Schacht provides the key

overlapping lead into the development with Genoud of the

ist operations . Ben Bella' s relative , who operated a radio

transmitter in North Africa for the Abwehr, recruited Ahmed
into the Mufti-Abwehr network .
However, according to a French source , the Genoud-Ben
Bella connection is further understood from the standpoint of
the career and international terrorist role of Michel Pablo (ne

Raptis) .

whole Muslim Brotherhood financing operation identified

Pablo was born in Alexandria, Egypt in 1 9 1 1 , arrived in

earlier. In the 1 950s , Schaeffer set up oil exploration opera

Paris in 1 9 3 8 , and spent two years operating underground.

tions in Egypt which were arranged by Schacht and other

What is most important to pin down is how Pablo managed

former Abwehr agents , through the Industrie und Handels

to escape from a prison on the island of Crete and wound up

bank. One of these agents presently living in Berne , Switz

in Paris without "any visible means of support. " This could

erland , Ahmed Huber, set up many of these operations .

mean that Pablo was an Abwehr agent from the beginning ,

Huber arranged for Genoud to meet with then-Egyptian Pres

working for British intelligence . If this is the case , we have

ident Gamel Nasser. Along with Hans Ellenberger, Huber

the solution to the question of how the historical links be

set up the Swiss-Arab Society in 1 965 . The former Swiss

tween left- and right-wing terrorism have really worked .

ambassador to Cairo, a certain Herr Parodi , currently with

His activity during the war remains relatively unknown.

Islam and the West in Geneva, operates closely with Huber

However, immediately after the war, Pablo emerged as the

and Ellenberger.
The Schlumberger banking complex completely overlaps

secretary general of the British intelligence-controlled Fourth

International . Out of this operation the logistical infrastruc

with Genoud' s operation . With Prince Moh amme d al-Fais

ture of what became known as the Terrorist International was

al ' s DMI bank, the Schlumberger, Neuflize and Mallet

established .

bank finances Islamic fundamentalist activity throughout the

Pablo was instrumental , along with Genoud , in setting

West. It is under the rubric Islam and the West that most of

up the support apparatus for the FLN . In particular, two

the old Abwehr-Nazi International operations are being

workshops , printing and forging money and documents , are

conducted .

part of the overall operation . Networks in Sicily , Germany ,

Included in this apparatus is the Schlumberger Oil Cor

poration , headed by Jean Riboud , which recruits key Arab

and Sweden were established for future terrorist operations .

In 1 962 , Pablo became an adviser to Ben Bella.

engineers as part of the network. Within this nexus is Dutch

During the Algerian war, Pablo was arrested by the French

born banker Nicholas Krul, a top banker in the Lombard

authorities . His attorney was Jacques Verges , who later,

Odier Bank of the Oltramaire family, the same bank with

with Genoud' s assistance , was the lawyer who defended

which Genoud has collaborated since 1 94 1 . Krul left Lom

Bruno Breguet and Magdelena Kopp . Verges, who was also

bard Odier in 1 977 and established the Gulf and Occidental

a member of the FLN , had been indicted in France , fleeing

Bank in Geneva. This bank was financed by Credit Com

to Switzerland with Michel Zavrian and Maurice Courige,

mercial de France of the Inter-Alpha group . Krul main

both lawyers in the same circle .

tains financial consultancy positions with the Syrian govern

ment, while backing the Islam and the West organization .

Verges converted to Islam in 1 962 , adopting the name

Jacques Mansour and married a leading Algerian political

There are three other banks which are possibly part of the

figure , Djamila Bouhired. By 1 963 , Verges broke with

same apparatus : the Arab-American Bank, the Algerian

Ben Bella and started his own "revolutionary" journal. At

central bank, and Credit Commercial de France (Mon

this time , Pablo was recruiting Regis Debray as his asset for

treal) . According to one source , the Arab-American Bank

future terrorist operations . In 1 965 , Verges defended a Pal

interfaces with Genoud' s smuggling operations out of

Switzerland.

estinian terrorist in Israel , and later, in March 1 966 , a Jor

danian named Hedjazi . Following this trial , Verges disap
peared for 1 5 years , only to emerge as the attorney for Baad

m. Genoud, Ben Bella, and terrorism

er-Meinhof terrorist-lawyer Klaus Croissant. In 1 98 2 ,

set up through the Nazi war funds financing scheme , utilizing

Moreau of Action Directe .

Genoud' s terrorist operations intersect various structures

Verges defended Bruno Breguet and Kopp , along with Eric

the Abwehr n Minorities Division , Walter Schellenberg ' s

The other key figure in this apparatus :is Slimane Hofl'

SS-SD unit Amt V I , and the Anglo-American intelligence

man , who remains a key figure in the Algerian interior min

apparatus of the postwar period . As a keeper of the Nazi

istry and is one of the military officers who put Boumedienne

funds , Genoud has been instrumental in arranging many ter

in power after the decision to dump Ben Bella was taken.

rorist operations .

Hoffman represents a crucial interlace for the espionage-

ElK

April 1 9 , 1 983

Special Report

25

terror apparatus Amical des Aigeriam and ETA separatist

terrorists . Genoud ' s relationship to this particular aspect of
the terrorist international is financial . However, in historical
terms , Genoud backed both the

Boumedienne faction and

for a new fascist

attendance we!"\: Sir Oswald Mosely, who was
being financed by a Venetian-based foundation , according to
gathered to pull together the prepar3tions

order. In

U . S . Army counterintelligence records; Count Lordean , a

Ben Bella . This duplicity landed him in jail , from which he

Venetian nobleman who organized the Italian Social Move

was only rescued by the efforts of a group of fellow Swiss

ment (MSI) , as

bankers and intelligence officers .

The Islamic fundamentalist terrorist operations which
Genoud finances along with Prince Mohammed AI-Faisal ' s

e ll as leading former Nazis and SS officers

such as Heinz Priester and Fritz Richter, a.k.a. Roessler.

In 1 95 1 , the second meeting of the Nazi International was

held in Malmo , Sweden .

D . M . 1 . bank are linked to their support for the Groupement

Officially, the Malmo International was dissolved in 1 956;

Islamique, based in Paris ; Ali Kattani , head of the Islamic

however, the organizational infrastructure is maintained

Foundation for Science and Technology , which is involved

through covert networks . The ostensible issue which split the

in separatist-terrorist projects in Barcelona, Spain ; the Islam

Malmo International was the dispute between the German

ic League for Human Rights , a key coordination point of

and Italian delegations on the issue of South Tyrol . However,

Muslim fundamentalism; Maarouf Dawalihi , head of the

the differences centered upon the question of combining rab

World Muslim League, founder of the Geneva-based Islam

id anti-Sovietism and anti-Semitism , or concentrating upon

and the West organization , and a former member of the pro

joining the British intelligence-controlled "Cold War . "

Nazi Syrian Popular Party (PPS) in Syria. Genoud' s long

The present profile o f the neo-Nazi International i s under

association with Dr. Said Ramadhan , head of the Egyptian

stood through the network of publications and institutions

Muslim Brotherhood , who is based in Geneva, set up a secret

operation with the head of the Islamic Council of Europe,

Alem Azzam , to overthrow several governments of the Mid

dle East.

which is again propagandizing the "racial purity" line: the

Mankind Quarterly, run by Scottish Rite and British intelli

gence operative Sir Robert Gayre; Armin Mohler of the

Siemens Foundation; the Ecole Nouvelle of Alain de Ben

oist; and Ties Christophersen 's Gesellschaft fUr Biolo

IV. The post-war Nazi International: universal

fascism
The key lead in establishing the continuity of the Nazi

gische Anthropologie.
Genoud' s publication last year of the "Political Testa
ment of Hitler" is now to be followed by "The Last Political

apparatus before , during , and after the war is not only the

Notes of Martin Bormann , " representing the renewed cam

Anglo-American protection operation , but the British intel

paign for reorganizing the old Nazi apparatus .

ligence-run European Center for the Study of Fascism

Operationally , this neo-Nazi apparatus functions through

directed by Strachey Barnes . Based in Lausanne , the home

Scottish Rite Freemasonic lodges: in Italy, Propaganda-2;

of Genoud , Bames ' s operation served as a mediation point

Monaco, Monte Carlo Lodge; Geneva , Alpina Lodge; and

for Prime Minister Winston Churchill , Mussolini , and lead

London , the United Mother Grand Lodge run by the Duke

ing German Nazis . Immediately after the war, Bames turned

of Kent. Separatist organizations such as the Basque ETA

over the operation to a close associate of Genoud, Gaston

and its Corsican , Armenian , Breton , Alsatian , and Tyrolean

Armand Guy Amaudruz . During the 1 940s , Amaudruz es

counterparts are considered assets in place, along with the

tablished the Courier du Continent and the New European

Society for Endangered Peoples , run by professed fascist

Order organizations. In 1 946, Amaudruz took over the Eu

Per Engdahl with the backing of Hermann Goering ' s niece,

ropean Center for the Study of Fascism .

Frau Birgitta Wolf. Frau Wolf, born a member of the oli

In setting up the New European Order organization , the

garchic von Rosens family of S weden , which promoted the

"universal fascists" created an intelligence operation under

display of the swastika , has extensive ties to the Beck family

the protection of the Anglo-American intelligence agencies .

of Great Britain .

Working with Amaudruz was a Nazi youth leader, Gunther

One of the top law firms of the Nazi apparatus , Poncet,

Schwab, whose book Dance with the Devil created the core

Turetini, Amaudruz, and Neyrod, is based in Geneva. The

ideological base by which today ' s new fascist party , the

Amaudruz in question is Gaston Guy Amaudruz , and the firm

Green Party of West Germany , was formed . Schwab ' s co

is utilized by Franc;ois Genoud in handling many of bis pub.

lishing lawsuits .

ordinator for intelligence was another SS officer named

Theodor Soucek , who ran from Vienna the Weltbund

It should be underscored that Genoud' s publishing rights

schutz des Leben organization . It is this grouping which

to Hitler' s last political testament were arranged through the

became the ideological center for the Nazi International .

Establishing the international networks became the work

help of Nazi propaganda minister Josef Goebbels ' s widow ,

a close friend of Franc;ois Genoud .

of the Amaudruz-run Malmo International . In 1 950, at the

In terms of the Anglo-American intelligence services , the

first meeting in Rome , all the old luminaries of the war

key protected asset of British intelligence and its junior part-

26

Special Report

EIR

April 1 9 , 1 983

ner the OSS-CIA was SS Colonel Otto Skorzeny, head of all

special paramilitary operations for Hitler. Skorzeny married
the niece of Hjalmar Schacht, who as noted above is now one
of the closest of Genoud ' s associates .
Skorzeny, in all likelihood, was a British agent-of-influ
ence through most of the war, and brought Abwehr and SS
officers into the Anglo-American camp after the war. Ac
cording to one source, he had extensive holdings of land in
Ireland and Spain which were protected by the British as a
hedge against future collaboration with Skorzeny after the
war. Skorzeny not only saved Mussolini ' s life, but was prob
ably responsible for preventing the partisans in Italy from
seizing the secret papers of Benito Mussolini and his corre
spondence with Churchill, a favor which Churchill never
forgot.
Skorzeny was close to the number-two man at the Ab
wehr, Lahousen-Wemint, and was able to bring this group
ing into the post-war Anglo-American operations . One un
confirmed story is that immediately following the war, Skor
zeny was paid by the General Fire and Insurance Company
of Scotland, a company owned by the Royal Bank of Scot
land. Skorzeny' s Middle East apparatus, protected by Allen
Dulles, intersected three areas: 1 ) Farouk' s Egypt, 2) the
King of Libya (a Senussi), and 3) the Kalil family of Kuwait .
According to a former U . S . intelligence officer, Skorzen
y's ties into the Kalil family enable him to finance many of
the projects for the Middle East. The Kalils had old Ottoman
Empire ties, and one of the sons was trained at Berlin Uni
versity when Skorzeny had been a student there . Both were
engineers and Arabologists. After the war they combined
their talents for setting up the Egyptian missile program and
carried out innumerable special operations . One of Skor
zeny' s deputies, an operative named Wermuth , also an en
gineer by training, set up many of the banking-logistical
operations around which Fran<;ois Genoud later turned up .
Using his Madrid-based company Adsap, Skorzeny estab
lished smuggling, arms, and drug operations in Vienna and
Paris .
This established the operational capabilities for the Vi
enna-Swiss smuggling operations such as WEF A, based in
Basel, I which is under investigation by French judicial au
thorities . The key neo-Nazi smuggling operations to finance
destabilizations are handled by an Austrian neo-Nazi named
Horst GriUmayer; Stefano dalle Chiaie of P-2 1 980 Bo
logna bombing fame; Klaus Barbie ' s Bolivian connection;
and Klaus Fiebelkorn , who was recently arrested in West
Germariy. It also intersects the neo-Nazi Turkish Grey Wolves
organizations which deployed would-be papal assassin Meh
met Ali Agca on behalf of this network .
The career of the Nazi Amt VI ' s Walter Schellenberg
raises the key question: how were most of the S S , Gestapo,
and Abwehr networks turned over to the Anglo Americans?
Schellenberg, according to a recent book on the subEllR

April 1 9 , 1983

ject by William Stevenson, was absorbed into a British secret

service network and spent five post-war years in what had
been a lunatic asylum outside London . This asylum provided
the perfect cover for the long-term interrogation of men like
Schellenberg .
Schellenberg, who had taken over Heydrich' s position
after the latter' s assassination during the war, was Abwehr
director over Admiral Canaris and also in charge of the Geh
len Organization . It is not well known that after the war,
Reinhard Geblen and his circle confiscated Schellenberg ' s
file system with an international list o f all informants, agents,
etc . A reconciliation between Schellenberg and Gehlen oc
curred in 1 950, at a meeting in Madrid, where Skorzeny
opened his office and received both men .
It is through the ideological and operational centers of the
neo-Nazi International that both left-wing and right-wing
assassination and terrorist operations come together. The
overlap of the Abwehr-SS and Trotskyite Fourth Internation
al is, in a sense, the Terrorist International . In France the
Nouvelle Droit Le Pen , in Germany the neo-Nazis, in Spain
Nueva Fuerza, and in Britain Column 88, are all basically
under control of the League of St. George, based in Brit
ain-which also controls the Regis Debray Fourth Interna
tional via Michel Pablo .

V. Protectors and collaborators

Genoud' s circle of protectors include the sister of the

present Swiss defense minister Chevallaz, Madeleine Chev

allaz, and one of his closest business associates is the widow

of Otto Skorzeny . Mme . Skorzeny is presently directing cap
ital flight operations out of Mexico and Morocco with the
help of Dr. Alfred Schaeffer' s Union Bank of Switzerland,
Credit Suisse , and the Swiss Bank Corporation . These
bankers were key in the Schacht apparatus during and after
the war. Mme . Chevallaz is involved in directing and coor

dinating key separatist movements in India, Ethiopia, So

malia, and Sudan, and is working in conjunction with Lord
Carrington's Mideast apparatus .
A key protector of Genoud i s Gilbert Baechtold , who is
a socialist working with Genoud on selling "soft technolo
gies" to the Third World and involved in some business deals
with Guy Tennart, identified earlier. Presently, Genoud is on
a tour of the Middle East, focusing on Morocco and Tunisia.
Using Mme . Skorzeny ' s base of operations in Madrid, Gen
oud and his Swiss banker backers at the Alpina Freemasonic
Lodge are out to send the Mideast up in flames, utilizing their
key assets, the terrorists of the Muslim Brotherhood . Ac
cording to one recently received report, Ahmed Ben Bella is
presently living in Genoud ' s challet in Lausanne, which is
where many of the present destabilization plans are being
directed . Whether the Swiss defense minister or central bank
chief Fritz Leutwiler are protecting Genoud remains to be
seen .
Special Report

27

ITill International

Tailspin in Western Europe

over U. S. defense policy
by Criton Zoakos

President Reagan' s March 23 announcement of the new U . S .

military policy of strategic anti-missile defense has left the
Western European governments in a state of perplexity and
incomprehension . Virtually none of them has formally re
sponded to the fact that the strategic doctrine regulating re
lations between the two superpowers has been drastically
altered . The most significant non-governmental reaction has
perhaps come from David Watt , director of the Royal Insti
tute of International Affairs in London .

The RIIA response

Writing in the Times of London on April 8 , Watt head
lines his piece , "Why We Need to Keep the Bomb . " Admit
ting that President Reagan is now committed to making nu
clear weapons "impotent and obsolete ," he labels Reagan ' s
doctrine "sentimental , simplistic , and dangerous . " This is
true , the heir of Arnold Toynbee insists , because "nuclear
weapons , though unimaginably terrible , are still weapons , "
and correspond t o man ' s need for "the u s e o f force" t o defend
himself, which will continue with or without nuclear weap
ons . Neither a "new world order" based on "a juster world
and new international institutions," nor "moral restraint" will
change this, Watt continues . Furthermore , war has thus far
been "deterred" by the existence of nuclear weapons, and
their being made obsolete , he insists , will increase the chance
of war!
Says Watt: "President Reagan ' s vision of an infallible
anti-ballistic missile system is an appalling one . . . . The
28

International

perfect ABM would be extremely destabilizing . . . . If both

superpowers lose the capacity to destroy each other we are
back to the 1 930s and an era in which regional conflict forever
threatens to escalate into conventional war on global lev
els . . . . Very few things in this world are wholly bad , and
fear is not one of them. In 40 years fear of nuclear weapons
has done more to undermine war as an instrument of policy
than anything else in the history of mankind. Remove that
fear and we are back to where we started . "
The Royal Institute essentially runs British foreign poli
cy, and Watt ' s statements typify those assembled from such
quarters since March 23 . Against this background murmur
ing from the adherents of the MAD doctrine , EIR founder
Lyndon H . LaRouche , Jr. addressed the semiannual confer
ence of the International Caucus of Labor Committees in
Kiedrich , West Germany on April 2. It was the ICLC which
established the European Labor Parties , a unique associa
tion of scientists and politicians from almost every European
country , which hails from the American System nation
building tradition in modem politics .
First, LaRouche asserted, any politician in Europe who
believes the President of the United States has merely set out
to propose a policy, or that that policy can be reversed,
that person is a fool . The President is the Commander in
Chief of the Armed Forces . He made his decision in the
company of various people, including hi s Chief of Staff and
others , and is not responsible to Congress for his decision .
"Congress hasn ' t a damned thing to do with thi s ! When the
EIR

April 1 9 , 1 983

R RCN:
WE suPPT

I
*.A
'I
lrrT
'o .
]
.

,... .. Or:'M

What the "Andropov Democrats" fear.

il j

President, so to speak , let the genie out of the bottle , certain

things happened in the Soviet Union . The U . S . S . R . is now
in a race for full-scale development of beam weapons systems
before the United States . We now have an arms race between
two superpowers !
"Any little politician in Europe who thinks this fantasy
will find himself ground and crushed ! Naturally, Andropov
is angry , and will do anything to embarrass the United States,
to create cleavages between the United States and Europe;
and he will be helped by the British and by the NATO Com
mand , because those who say Reagan ' s policy is not real ,
have heard it either from the Brits or from NATO . and it ' s all
a lot of damned lies ! This system is now going . "
There will be $200 billion spent for it during the next 1 0
years , for this system alone , on a scale larger than the Man
hattan Project , on the scale of pre- 1 967 NASA , LaRouche
said. The systems will go in place, conservatively , in 7 to 1 0
years , although the first systems will actually be in place by
1 987-88 , and certain systems may be deployed this year .
"We have blue-green fluoride chemical lasers , and we have
the target capability for such a weapon , and it can be put
around cities to kill some missiles against cities-this year !
The x-ray laser exists ; do you think we 'll wait? No , we 're in
an arms race , and this will go up , as we wait for something
better. "
Second , Larouche went on , "it should not b e said that the
President acted under my influence to adopt my policy . True ,
all that I said since .february 1 982 about this subject is now
EIR

April 1 9 , 1 983

the strategic doctrine of the United States . It is true that the

doctrine is my doctrine , and everybody knows it , they know
it in Moscow . However, I didn 't march into the White House .
The President made his own decision , with the National
Security Council and the Pentagon . He asked them, and Dr.
Edward Teller, for their opinion . They gave him their best
judgment . But they came to that judgment because they went
over my doctrine and found nothing better than what I
proposed . "
The objections to the new policy, LaRouche indicated,
were not because the policy is thought to be wrong , but
because governments in Europe , like that of West Germany ,
are locked into arms contracts for planes which this policy
will "make into a piece of junk , obsolete and unimportant . "
The specific problem i n West Germany up till now , he noted ,
is that "for 20 years , the German military has had no military
function except to die , no strategy except to be extinguished
within the first 24-48 hours of war; it has no role under the
present doctrine . "
France , he contrasted , "used to have a doctrine , de
Gaulle ' s concept of theforce defrappe, which was a response
to MAD , giving France a modicum of sovereign independ
ence , " but since the installment of Soviet S S-20s with so
phisticated targetting capabilities , every military and logis
tical target is implicitly saturated by target Soviet warheads ,
and "within six minutes , no single surviving installation would
be left standing . " Given Soviet killer-submarines , all France' s
submarine capability now is also "junk . " The Tornados so
desired by the West Germans, LaRouche stated , "won 't have
anywhere to land except the Soviet airport . Unless a nation
can survive to fight, why equip to fight? This," he noted ,
"leads to the perverted argument of the greenies and peace
niks: ' Okay , we 're gonna die anyway , why do we need weap
ons? Let' s have a good time , without working , and trying the
99th variety of sex . This is the deep cultural pessimism which
arrives . "
S o , LaRouche summed up his introductory remarks , "this
is the nature of the opposition to the Reagan speech: either
pure idiocy or the greenies . . . . Until these governments put
up the ABM , either independently or in cooperation , France ,
West Germany , and the United Kingdom have no survival
capability in a conflict which under MAD must occur in the
1 980s . "

The Soviet response

As for the Soviet Union ' s response to the Reagan doc
trine , five days after President Reagan ' s speech, the econom
ics weekly of the Communist Party Central Committee went
to press with the headline , "The Laser Beam Is Working . "
The Ekonomischeskaya Gazeta notified the U . S . S . R . ' s entire
cadre force that laser-beam technologies are to be proliferated
throughout the Soviet economy . Below we present the gist
of the article by Academician Ye . P. Velikhov , head of the
Soviets ' laser program , which is crucial for weapons
development .
International

29

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As E1R goes to press , we have received the Soviet party Central

Committee ' s economic weekly , Ekonomicheskaya Gazeta , No . 1 4
for 1 98 3 . Sent t o press five days after President Reagan ' s historic

speech of March 2 3 , decreeing the development of anti-ballistic

missile weapons using new technologies--beam technologies--the
newspaper displayed a front page headline: "The Laser Beam Is

Working . " Its article by Academician Ye o P. Velikhov , head of the

U . S . S . R . ' s national laser program , told in detail how laser technol
ogies are transforming basic industrial processes in many branches
of Soviet industry and called for even greater efforts in this field .
In mid-March, just before Reagan spoke, Velikhov was in the
United States-ostensibly to confer with scientists from the "peace
movement. " He was received at the Soviet Embassy in Washington
by Ambassador Anatolii Dobrynin .
Back in Moscow , Academy of Sciences Vice-President Veli
khov wrote that laser applications give "convincing confirmation of
the determinitive influence of fundamental scientific discoveries on
the economy . " Pointing ahead, he said that although the present
program "is an important stage in the introduction of laser tech-

30

International

... ...C ' ... 1Cl

y :5 p <> q ' k " ' '' j:>''' !>I'I<>'

- -

The Ekonomicheskaya Gazeta

captions read, counterclockwise
from upper left: 1) "Ten-kilowatt
technological laserfor welding
and heat-strengthening in ma
chine building . " 2) "Lasers are
used in construction, for laying
communication lines, and in
mine sufveying. " 3) "Medicine:
the LAS-3 laser scalpelfor sur
gical operations . " 4) Laser
chemicals possess huge poten
tial. " 5) "Laser equipmentfor
environmental monitoring . " 6)
"One and a half kilowatt techno
logical laser apparatus for mate
rials processing . "

niques and technology in the national economy , " still "it can be said
with certainty , that the main achievements lie ahead . "
I t i s n o secret, that the technologies o n which Velikhov works-

for years in the Soviet fusion power program, and now in a project
called "Creation and Production of Laser Technology for the Na

tional Economy"-are crucial for weapons development. His article

in this widely circulated party economic paper meshes with recent
pronouncements from military officers on economic affairs, such as
armaments chief General Shabanov' s demand for "the introduction
and production of equipment and technology that is new in princi
ple , which raises the flexibility of production , its ability to shift
from one type of production to another. "
The new assertiveness of Moscow' s military men has not eluded
observers in London , who sourly acknowledge that Reagan ' s policy
changed strategic relations irreversibly and set new politics into

motion in the U . S . S . R . The Times of London April ? reflected under

the headline "The Rise of Russia' s General s , " that "the pendulum
has swung back to the military , who are playing a growing role in
political decision-making . "

EIR

April 1 9 , 1 983

Breaking resistance 'from below'

Soviets move to unlock

technology bottlenecks
by Rachel Douglas
Since last autumn , representatives of the Soviet military have
more vocally asserted the defense sector's claim on the Soviet
economy . The Deputy Defense Minister for Armaments has
written in the Communist Party' s economic weekly that
priority development of basic industry is crucial for defense ;
his emphasis was unmistakably different from the Februrary
1 98 1 twenty-sixth party congress ' s commitment to a superior
growth rate for the consumer sector (see EIR , April 1 2) .
America' s resolve to build an anti-ballistic missile de
fense , meaning the most rapid development of new technol
ogies , will increase the pressure for military investments in
the U . S . S . R . Marshal Viktor Kulikov , Warsaw Pact com
mander, has already vowed "to build the counterweapons" to
match anything U . S . strategy leads to .
The Russian ability to tighten belts in order to fill military
orders should never be underestimated . But does it follow
that all other sectors of the Soviet economy will be starved?
A number of Soviet economists evidently do not think so.
The Central Committee weekly Ekonomicheskaya Gaz
eta in mid-March gave a sign of the times: a 3 , 500-word
article called "Space Aids the National Economy . " Writers
from the State Committee on Science and Technology showed
how and in what sectors the large Soviet space program (in
which a high portion of launches are in the primarily military
Cosmos series) is improving economic performance .
There is a current among Soviet economists , of people
who for several years have been grappling with the problem
of how to get technological advances that occur in the labo
ratory or a single sector-like defense-generally utilized
in the. national economy . In August 1 980, economist V .
Lebedev proposed to set up large projects to pioneer ad
vanced industrial technologies and serve as beacons to guide
companies all around the U . S . S . R . , a means for "centralized
leadershi of scientific and technical progress and the whole
economy ." A year later, economists N. P. Fedorenko and D .
S . Lvov argued this school ' s case that only a fundamental
change in investment policy could open the bottleneck behind
which innovations in industrial technology get stopped up;
instead of letting 70 percent of capital investments go to
rebuilding facilities at their original , outdated technological
level , they said , the bulk of new investments should serve as
"vehicles for new scientific and technological innovations . "

EIR

April 1 9 , 1983

The leadership transition has provided an opportunity for

this current to press its case with renewed vigor. While Yuri
Andropov ' s economic pronouncements concentrate on or
ganizational improvements and a campaign for "discipline ,"
they have been taken as a go-ahead for an assault by some
economists on resistance to the transformation of investment
policy Fedorenko and Lvov lobbied for.
In the daily Izvestia March 1 8 , corresponding member of
the Academy of Sciences P. Bunich pushed the discussion
forcefully . "Despite the growth of size of our economy ," he
wrote , "the number of technological innovations introduced
in 1 98 1 was 4 percent smaller than in 1 980, and the quantity
of new models of machines , equipment, apparatus , and in
struments shrank by one-fifth during the past decade . And
the old technology quite happily lives and gets along , al
though it is obsolete . The annual rates of writing it off are so
low , that it takes more than a decade for complete turnover. "
Bunich proposed to develop ways to stop penalizing en
terprises for the introduction of new technologies , which
happens because in its "incubation period ," a new technology
is not so profitable . At present , he observed , scientific and
technological progress is seen by the plant manager "not as
an economically necessary factor . . . but a factor which only
complicates and hinders fulfillment of the plan . "
According to Bunich , all the long-term science plans in
the world will not avail , unless the "anti-stimuli against sci
entific and technological progress , acting from below ," are
removed . He proposed a range of price and other incentives
for companies to implement new technologies and , for cer
tain innovations that require huge investments , forms of col
lective financing for their assistance .
All this , he said , applies to "the evolutionary type of
scientific and technological progress . " But "there is also the
revolutionary type . " Bunich suggested that if the steam en
gine had been subjected to strict cost-accounting criteria, it
would never have been built . The same would go for "the
beginning of the era of computers , lasers , space rockets . "
Eventually , "all of these . . . not only become profitable . . .
but the most profitable , which confirms the rule that in the
final analysis , there is nothing more beneficial than funda
mental improvements . " In the early phases , insisted Bunich ,
spending on such technologies must come out of the state
budget, or at least the ministerial budget .
In referring to the state budget , Bunich posed the matter
as one of setting national priorities . The Academy is already
administering several nation-wide programs in industrial
technology , one of which is Academician Ye o P. Velikhov ' s
"Laser Equipment and Technology" program, for which shops
at the huge ZIL auto plant in Moscow have been co-opted .
There , and at a dozen other plants around the U . S . S .R . ,
scientists are practicing the industrial application of directed
energy beam technologies, which are also the heart of anti
missile defense research.
International

31

The real threat in Central America :

Kirkpatrick, Sharon, & Company
by Gretchen Small
British and Israeli fanatics have pumped the weapons , prop

The "freedom fighters" whom Kirkpatrick et al . are pro

aganda, and funds into Central America to whip up a war in

moting are a quarreling assortment of adherents of the So

which the United States is supposed to emerge the big loser.

cialist International who follow Jesuit-trained Eden Pastora

Caught sabotaging American interests are the Reagan admin

(nicknamed "Commander Zero") , ousted dictator Somoza's

istration' s U . N . ambassador, Jeane Kirkpatrick; the U . S .

National Guardsmen , a contingent from the smuggling-based

ambassador to Honduras , John Negroponte; his British oli

Miskito Indian tribe , and mercenaries seeking "action . "

garchic wife, Diana Villiers; a group of anthropologists run

Israeli gun-runners are currently supplying both sides

Sandinistas and anti-Sandinistas .

by "former" Nazis ; and the dope-pushing, gun-running Mos

sad renegades backing Ariel Sharon.

Honduras and Costa Rica, the current bases of operation

This group wants to enmire the United States in a "con

for this new "Bay of Pigs ," have become major assets of

ventional" Vietnam-style war, to put the brakes on the Rea

Israeli influence in the past year. Through the Israeli wife of

gan administration ' s revolution in American strategic de

Costa Rican President Luis Alberto Monge , himself a Social

Democrat who has taken orders from the Lane Kirkland

fense doctrine, and discredit the President as a bloodthirsty

bungler. The Sharon faction in Israel hopes that getting the
U. S . military pinned down in Central America will give them
a

free hand in the Middle East . At present, American- and

Israeli-trained "freedom fighters" continue to cross into Nic

Jeane Kirkpatrick "right-wing social democratic" crowd at

the AFL-CIO for decades, Costa Rica has become a major

base of Israeli gun-running for all of Central America,

sources

in Mexico report .

aragua from Honduras and Costa Rica, and Honduras and

Nicaragua appear locked on a course toward a war into which
outside forces could rapidly be drawn.
The "case officer" inside the administration for the Cen

tral American operations is reported widely to be Kirkpa

trick. Working with Secretary George Shultz and Luigi Ei

The Sharon operation

Last December, Ariel Sharon , the renegade former Israeli
Defense Minister condemned for his role in Lebanese mas
sacres , paid a high-profile visit to Honduras and Costa Rica
to consolidate his faction ' s influence . Sharon ' s trip was to

naudi at the State Department , and William Casey and Con

arrange arms transfers to those countries and the step-up of

stantine Menges at the CIA , Kirkpatrick is said to have sold

Israeli training of the Honduran Armed Forces ; sources in

the White House on a strategy to "pin" Nicaragua down with

Washington and the Middle East reported that Sharon was

"internal uprisings," covertly supplied by American funds

sent to restructure the massive arms-for-drugs traffic in the

and forces . The argument was that internal turmoil would

area. Central American sources reported the first week in

stop Nicaragua from supplying arms to EI Salvador ' s

April that Sharon is expected to visit Honduras again shortly .

guerrillas .
In February , Kirkpatrick paid an official visit to Panama,

A Norwegian paper,

Dagbladet, reported this month that

a "former" Nazi , Ole Christian Olstad , who had been fighting

Venezuela, and other Ibero-American countries to tell those

with the Israeli-backed militias of Major Saad Haddad in

governments that their efforts to end the continuous rounds

Southern Lebanon , has announced his plans to travel with

of fighting in Central America were viewed in Washington

several other mercenaries to Costa Rica to join the anti

as "anti-American . " In Panama, Kirkpatrick ordered oppo

Sandinista forces .

sition leaders to prepare to become the next government on

behalf of "U . S . " interests .

The Miskito Indians have been assets of the British Crown

since the tribe first signed a formal treaty with the British in

In mid-March, the go-ahead was given to begin action.

1 687 which established a "Miskito Kingdom" -replete with

The first of some several thousand "freedom fighters , " armed

Crown-appointed King-with the responsibility of guarding

and trained over the course of the past year-and-a-half in

British interests on the east coast of Central America. During

camps lining Nicaragua' s two borders , began entering

the two centuries that treaty existed , the Miskitos captured

Nicaragua.

and sold into slavery the rest of the Indian population in the

32

International

EIR

April 1 9 , 1 983

area.
British control over the Miskitos continues today . A net
work of British-trained anthropologists associated with the
Society for Endangered Peoples , a European-based group
,
headed by fonner Nazis , organized the flight of the Miskitos
into Honduras over a year ago as a defense of "Indian rights . "
Once in Honduras , the Miskitos were herded into refugee
camps . Access to these camps , the anthropologists report, is
controlled by Diana Villiers , the fonner British Conservative
Party leader now married to U . S . Ambassador John Negro
ponte. Negroponte has been called more Commander in Chief
of the Honduran Anned Forces than President S uazo , be
cause of his close relationship with Anny Chief General
Alvarez .

the agreement ending the Cuban missile crisis of 1 962 . "

Though paying lip service to bringing other regional pow
ers such as Mexico , Venezuela, and Colombia into the dis
cussions , the report insists on a basic East-West confronta
tion mode in which , according to a summary printed in the
Journal oj Commerce , "both the American and the Soviet
Cuban sides would have to give up something in any such
accommodation for long-range stability . "

Colombia's Betancur on
emergency mission

Wbat next?
Not since the United States supported the British in the
Malvinas War against Argentina has a U . S . policy threatened
such a rupture with its southern neighbors .
In speech after speech at the Un ited Nations during the
.
recent Security Council debate on Central America , Ibero
American governments tried to steer the United States off the
Kirkpatrick line , warning that U . S . arms shipments and
backing for the insurgents would only make matters worse .
This is a "conflict which, if sharpened, could have . . . extra
continental implications , " Argentina' s ambassador to the
United Nations stated.
Support for the standing offer by Mexico and Venezuela
to provide their good offices as mediators of the Honduran

Nicaraguan dispute has come from most governments in the

region . During a visit to the United States at the beginning of
April , Brazilian Air Force Minister Jardim de Mattos told the
press Brazil backs Mexico and Venezuela ' s initiatives for a
peace , adding that Brazil will not enter the Central American
conflict in support of the United States. Nicaragua ' s Foreign
Minister, Victor Tinoco , likewise issued an urgent appeal for
a heads of state meeting to take place between Honduras and
Nicaragua, with the Mexican and Venezuelan presidents
present as "witnesses of good faith . "
I f a political approach i s not adopted , the most radical
faction inside Nicaragua, which argues that Nicaragua should
stop negotiations and tum to "friends" like Libya, Bulgaria,
and South Yemen for defense , may increase its power. On
March 28, Libyan dictator Mu ammar Qaddafi announced
that he has offered Nicaragua the Libyan armed forces to help
them fight "imperialism . "
The Kirkpatrick group i s attempting t o use the crisis to
restore the old pattern of brinks manship-cum-crisis-man age
ment between the superpowers which President Reagan
superseded as of his March 23 defense policy speech. The
recently fonned Linowitz Commission on "Latin American
U . S . dialogue , " which includes Cyrus Vance and Robert
McNamara, just issued a 82-page report demanding that the
United States and the Soviet Union j ointly negotiate over
Central America in a crisis-management mode , "similar to
EUR

April 1 9 , 1 983

"

Colombian President BelisariO Betancur will under

take an emergency tour to stabilize,the Central Ameri
can region, it was announced ' simultaneously April 5
in Bogota, Caracas , Panama City , and Mexico City.
Betancur will confer with Venezuelan President Her
rera Campins; continue to the Mexican resort of Can
cUn on April 9, where Betancur will meet with Presi
dent Migel de la Madrid; and conclude on April 10 in
Panama, in a meeting with Panamanian President Ri
cardo de la Espriella, Costa Rican President Alberto
Monge, and perhaps Herrera Campins as well. Accord
ing to press reports , Betancur will also discuss utgent
economic issues .
'The Betancur ,initiative raises to the level of presi
dents the coordination among Mexico, Venezuela .
Colombia, and Panama that began at the foreign min
ister level in early January, At that time the four foreign
ministers constituted themselves as a body to assume
responsibility for keeping the lid on the Central Amer
ican conflicts, and urged all major powers, including
.
the United States , to stay out.
EIR ' has recommended that during these consulta
tions, , two urgent steps be taken to opeJl the maneuver
ing room foi' further reduction of tension;
' I) that the Israeli , involvement ill the region be .
eliminated, including Ariel Sharon's arms- and gun
running operations in Honduras and Guatemala , the
Sharon faction's work with the controllers of lUas Montt
on the Temple Mount Project, and the substarltial Is
raeli control over Costa Rican President Monge;
2) that the presidents of the region extend over
tures, privately and publicly, for consultations with the
White House that would give Reagan room to act '10
concert with other presidents" and thus bave an insur
ance policy against the Watergating operations now in
motion against him on the issue of Central America.
These , measures would not eliminate the conflicts
in the region , but would go a long wayto beginning to
solve them.
,

International

33

In defense of Nigeria
Those who have expostulated most self-righteously about the expulsion qf
non-citizens are out to destroy the country. wrttesAllen Salisbury.
Mr. Salisbury, a member o/EIR's board o/directors, and a
member 0/ the international executive committee 0/ the Club
0/ Life, recently returnedfrom a trip to Nigeria .
The Western press has been having a field day over the
unfortunate circumstances that led to the expulsion from Ni
geria of between 1 and 2 million immigrantircumstances
which are almost entirely due to the deteriorating economies
of the West and to the determination of some very powerful
interests there to drastically reduce the population of Africa.
"The population explosion in Africa is a true thing , in
Africa as a whole . I think it should be tied down to what it
was at the beginning of this century , " stated one of these
strategists , Robert Gayre of Scotland . This outlook has in
creasingly shaped the foreign policy of the industrialized
nations toward the developing sector, such that today vir
tually no loan comes from the International Monetary Fund
or World B ank without hideous conditionalities aimed at
shrinking the population . It is in this context that Nigeria
with one-quarter of the black population of Africa, or an
estimated 80 to 1 20 million people--has become a principal
target for destabilization .
The Western press coverage of the Nigerian expulsions
displayed a jackal-like hypocrisy . Newsweek, for example ,
lied outright , printing a picture of soldiers beating Ghanaian
refugees with a caption , "Justice Nigeria-style . " The only
problem was that the picture was not taken anywhere in
Nieria; it was taken at the Benin-Togo border, and the troops
were from Benin . In typical Newsweek fashion , the only
correction that appeared was a one-line sentence at the bottom
of an official protest from the Nigerian information ministry
printed in the Letters to the Editor column .
French press coverage was equally atrocious. In a center
fold in Le Monde, Jean-Claude Pomonti gloated that Nigeria
is no longer the big brother in Africa, and lied that teachers
and skilled workers were placed under the expulsion order.
Le Monde ' s Jan . 25 editori al asserted that the expulsions
reflected the failure of Nigeria' s Green Revolution , a pro
gram which has often been attacked in the West as overly
ambitious and dependent on modem technologies .
This comes from the same Malthusian policy grouping
whose Swiss-influenced oligarchy has not hesitated to initiate
34

International

military coups in francophone African states at the drop of a

hat-except in the case of Libya' s invasion of Chad , when
the French clearly had the responsibility to act, but did nothing .
The attack On the Green Revolution was echoed by the
London Times in a March 3 centerfold feature which recom
mended that Nigeria give up its development projects and
devalue its currency . Nigeria has just signed an irrigation
assistance pact with Sudan which will aid in developing 1 1
river basin irrigation and agriCUltural projects .
In West Germany, the Social Democrats squealed against
Nigeria with the mock outrage of an anthropologist who
discovered that her servants occasionally spit in the soup .
These are the same Social Democrats who have kept Turkish
guest workers from the hope of full-fledged citizenry . The
Frankfurter Allgemeine Zeitung, the country ' s newspaper of
record , had run a statement not long before accusing the guest
workers of taking advantage of German residency to increase
their population , and calling for measures to limit Turkish
origin demographic growth , while former Social Democratic
Chancellor Helmut Schmidt is currently globetrotting with
Henry Kissinger, preaching the doctrine of population control.
The British media , especially the BBC , were equally
vicious on the subject of their former colony .

The background
Until its recent economic crisis , it was Nigeria' s policy
to allow an open door with respect to Africans from other
countries seeking to escape to a better life in Nigeria. Along
with this influx , however, came an organized migration of
radical religious sects to both the north and the south of the
country . These sects have been responsible for the murder of
thousands of Nigerian citizens in riots ILld other upheavals ,
and posed an obvious national security threat to Nigeria
particularly with elections approaching .
As for the economic situation , a review of the conjuncture
leading up to the expulsion order shows that the crisis was
principally caused by. the very Westerners who took so much
delight in their recent press attacks on Nigeria.
Gulf Oil , for example, suspended lifting oil for two months
on Jan . 7 , then announced that it would resume operations at
a greatly contracted level . Other companies lifting oil in
Nigeria have done the same . Moreover, late last year West
EIR

April 1 9 , 1 983

German Minister of Economic Cooperation Jiirgen Warnke

announced that the Kohl government would cut development
aid to five African countries-Benin , Angola, Mozambique ,
Ethiopia, and Algeria-as well as India, because those coun
tries are "anti-West," and would also cut aid to Third World
countries deemed to have "disproportionate military budgets . "
The International Monetary Fund has incessantly pres
sured Nigeria to devalue its currency, and thereby double its
indebtedness , a proposal Nigerian officials insist , rightly ,
that they will not accept. Barclays B ank is now selling the
Nigerian currency , the naira , at black-market rates , and there
is evidence of a massive dumping of counterfeit naira on the
markets .
And amidst the press furor about the expulsions and the
economic crisis , no mention has been made that in the weeks
prior to the expulsion order, Nigeria was attempting to ne
gotiate a $ 1 . 1 billion loan from Saudi Arabia to help it weath
er the oil crisis . The Saudis refused to provide the loan , under
pressure from the U . S . State Department . A spokesman for
Chase Manhattan Bank had said last summer that the bank
no longer had any intention of granting loans to Nigeria for
development purposes ; at best , financing would be confined
to credits for food and consumer products .

The upcoming elections

The hypocrisy of the U . S . press since the expulsions is

particularly disgusting because , despite the fact that the So

viet Union aided the federal government in Nigeria' s 196770 civil war, when the leaders of that nation decided on a
form of government to replace military rule , they chose the
American constitutional system with a president, vice-pres
ident , Senate , and House of Representatives . During my visit
to Nigeria, it was a pleasure for me to see schoolchildren
engaged in debates as to whether the American constitutional
system or the British parliamentary system was a better form
of government (debates that rarely occur any more in the
United States) . The American position always won out .
Nigeria has had its present form of government since
1979, when the presidential elections were won by Alhaji
Shehu Shagari and his party , the National Party of Nigeria
(NPN) , with only 3 3 . 7 percent of the total vote . The five
political parties presently existing are closely associated with
tribal and religious groupings . The NPN , despite the fact that
it is dominated by the Hausa and Fulani ethnic groups in the
north-who are predominantly Muslim-is the only party in
the country with significant membership from the other tribal
and religious sections of Nigeria.
The Nigerian People' s Party (NPP) , headed by Chief
Nnamdi Azikiwe , has its power base in the southeastern part
of the country , which is predominantly Ibo and Roman
Catholic .
The People' s Redemption Party (PRP) is based among

NIGER

The vote in the 1 979

state elections
National Party of Nigeria
Nlgerlan People's Party
. Em Great Nigeria People's Party
Iill United Party of Nigeria
f']J People's RedemptiOn Party

' Federal Capital Territory

EIR

April 19, 1983

International

35

the northern Hausa Muslims; the main plank in its electoral

platform is rejection over the compromises the NPN has made
with the south and the Christians .
The Great Nigerian People ' s Party (GNPP) , also a north
ern-based party , won the governorships of Borno and Gon
gola states in the 1 979 elections.
The United Party of Nigeria (UPN) is headed by Chief
Obafemi Awolowo , with its power base among the Yoruba
in the southwest .
Presently, the opposition parties have formed a somewhat
shaky confederation called the Progressive People ' s Alliance
(PPA) and are tentatively commited to supporting a candidate
chosen by that coalition .
Because of the complex formula involved in a presiden
tial election , there is all sorts of room for forces outside
Nigeria to intervene and manipulate the outcome . Under the
constitution , a president cannot be elected by a simple ma
jority ; in order to prevent a candidate from winning based on
the strength of only one tribal group , the constitution holds
that a victorious candidate must get at least 25 percent of the
vote in at least two-thirds of the states.

Economic prospects
The economics of Nigeria' s federal system are as follows:
The 1 9 states and the federal government are funded by
dividing oil revenues . The federal government receives 50
percent, the states 40 percent , and local government 1 0
percent.
The decline in oil revenue has severely affected Nigeria,
as it has other OPEC members , forcing a cutback in some
development plans and restricting imports , especially con
sumer goods . Nigeria is dependent on oil sales for 90 percent
of its foreign exchange . The import restriction has been geared,
not to cutting the living standards of the population, but to
weighting the economy toward heavy industry and infrastruc
tural development; Nigerians are aware that no country on
earth has developed economically except by protecting its
industries from dumping and providing protected markets .
Nigeria is going ahead with plans to dredge its river
system to facilitate the transport of iron and steel from its two
steel plants at Aladja and Ajuokuta. Three rolling mills are
under construction at Jos , Katsina, and Oshogbo ; other roll
ing mills are on the drawing boards . As a result of the inter
national economic crisis , Nigeria has , however, postponed a
$2 billion-plus plan to build a standard-gauge railroad linking
the Ajaokuta steel complex to Port Harcourt.
It is impossible to say how many further economic shocks
Nigeria can withstand , but it can be emphasized that the
country is not without weapons . Together with Saudi Arabia
Nig':!ria could easily participate in pankrupting Britain' s North
Sea oil corporation , BNOC , which has taken the lead in the
operation to destroy the large-population OPEC producers
by lowering the price of North Sea oil below OPEC ' s prices .
North Sea oil competes directly with Nigerian oil (both are
36

International

of the same high quality) . The price-cuts meant that pur

chasers of Nigerian oil broke their contracts . If the Saudis
and Nigeria deliberately drove the price to an extreme tem
porary low , BNOC , with its relatively high production costs ,
could be forced under. In tandem with a debtors ' cartel to
force a flow of credit for industrial development, this could
put Nigeria on the track of rapid growth .
And , as the London Daily Telegraph has pointed out,
Nigeria is Britain ' s largest trading partner, which represents
another potential for leverage .
To refer back to the international press: this writer has
never seen such a display of hypocritical racism. Not only
are the media's controllers out to destroy Nigeria: don ' t be
lieve for one second that they give a damn about the deportees .

Documentation

Mrican officials blast

Club of Rome IMF
,

Africa has suffered the most deeply of any continent at the

hands of the colonial oligarchy which organized the Bretton
Woods system at the end of World War II . At the time of
independence in the early 1 960s , Africa was balkanized into
mostly small , underpopulated countries : 24 of the 39 Subsa
haran countries in Africa have a population of less than 5
million , and 1 2 of these 24 have less than 1 million . Only 6
of the 39 have more than 1 5 million .
The draconian conditionalities imposed by the World
B ank and IMF , in the context of the depression crisis of the
international economy , have in most cases wiped out the first
steps of progress that African countries made in the period
immediately after independence . As a solution , the World
B ank is now proposing , as described by its infamous Berg
Report, the restoration of colonial economic organization.
The Berg Report categorically calls for African nations to
forget about the national institutions necessary to guide the
development proces s , and remain content with small-scale
agriculture , using primitive technology, and producing cash
crops for export , and extracting raw materials to generate
foreign exchange . This is exactly how economies looked in
Africa under their respective colonial administrations .
Zaire , for example , a country with tremendous potential
for industrialization , has been completely destroyed as a re
sult of World Bank and IMF policies . The central government
is no longer in control of sections of the country as transport
and communications infrastructure fall apart .
During the recent Non-Aligned summit in March in New
EIR

April 1 9 , 1 983

Delhi , India, EIR correspondents had the opportunity to talk

to four African cabinet officials about the economic problems
facing Africa . Sophie Tanapura of EIR ' s Paris bureau con
ducted interviews with Zimbabwe minister of Finance , Eco
nomic Planning and Development , Dr. Bernard Chidzero;
Zaire Foreign Minister Kamanda wa Kamanda; Guinea For
eign Minister Abdoulaye TQure; and Ghana minister of Ex
ternal Affairs , Dr. abed Y. Asamoah .
What emerged from these interviews with representatives
of nations ranging from southern to central to western Africa
was a common perspective both on the nature of the problems
facing Africa, and what the solution should be . The hopes of
all four government officials for progress and development
have not been dimmed by the continent' s disastrous econom
ic situation.

'We could sustain far larger populations'

Malthusian propaganda, such as that spread by the anti
growth Club of Rome , and implemented by the IMF, was
dismissed out of hand by the African ministers . "I don ' t think
Africa is overpopulated; Africa is very rich in resources ,"
asserted Ghana External Mfairs Minister Asamoah . "What
we need is to exploit these resources and use them for the
benefit of the people . If this is done , then we can certainly
sustain a much larger growth rate in population . I think the
biggest weakness of the Club of Rome theory is that they do
not give due credit to human ingenuity . "
Asamoah also attacked the IMF prescriptions as being
worse than the disease: "The interesting thing is it ' s very
difficult to come up with an example of a country that has
applied IMF methods and has come out of it well . "
Zaire Foreign Minister Kamanda, whose country has
plenty of experience with IMF conditionalities , and whose
central bank and finance ministry have been occupied by IMF
personnel as one of these conditionalities , criticized the IMF
as aggravating the debt crisis facing the developing sector:
"It is absolutely indispensible to solve the problem of condi
tionality and that of the deterioration of the terms of trade .
The developing countries see their export earnings diminish
continually because the prices are fixed in an arbitrary way ,
because these countries do not master the fixing mechanisms
of these prices . . . . In this situation , if we are forced to
resort to foreign borrowings to meet immediate and daily
needs of development, it is only logical that these borrow
ings , these developing countries ' debts , should not suffocate
us , should not kill us . . . .
"One cannot, on the one hand , try to help developing
countries ' economies out of a dead end , and on the other
hand, create such pressures that the priority of all our actions
for development be oriented toward satisfying debt de
mands . . . . We are the poorest countries of the world , whose
economies are the most vulnerable in the world . . . . We are
reduced to producing and selling in order to pay our debts , at
the expense of evident domestic aspirations of the people for
EIR

April 1 9 , 1 983

development.
Kamanda made it clear that he was not merely looking
for a way to avoid paying some debts , but was seeking de
velopment: "This having been said , we are not opposed to
reimbursing debts . What is needed is the creation of the
economic development capacity which would allow us to pay
O\lr debts . . . . It is only normal that we reimburse money
that has helped us increase our productivity . "
H e went o n to make the case for a new monetary system
needed for the developing sector to get out of the no-win trap
it is in . "The Bretton Woods accords , which had its merits at
the time , does not correspond to today ' s realities anymore .
Currency parities which were the basis of the agreement at
Bretton Woods and at the creation of the IMF , do not exist
anymore . Therefore , there is a problem of restructuring , a
new structure which should be adapted to new developments .
We were not at Bretton Woods when the IMF was created .
We were not at San Francisco when the United Nations was
created . If we were taken into account at all , it was in the
context of a marginal notation that was concluded and voted
on among big powers . At the start, things were not made for
us to solve our problems nor to take into account our concerns . "
Kamanda pointed out that since the creation of the Bretton
Woods system , "to speak only of Africa, 50 states [have
emerged] that did not exist in 1 945 , 50 states that correspond
to the same number of states present at the creation of the
United Nations.
"We think that the moment has come for us to gather
together, to create together, to put together, to forge together
new mechanisms , new structures that will engage the respon
sibility of everybody in such a way that everyone takes part
in economic as well as political affairs . I mean , finally a new
system which will allow each one to find his own interest
without forgetting the lawful interests of nations in the world. "
Referring t o the IMF solution o f patching up the bankrupt
Bretton Woods system, he said: "Illusions , expedient solu
tions that do not tackle the fundamental issue will not solve
the problems posed . We are speaking of a reform of the
international monetary system and not of the transformation
of the IMF into a [world central] bank to manage private and
public credits . There is a very big difference between the two
approache s . If this transformation is far from the essential
parameters of a new world economic order, it is evident that
all this will complicate even more the already difficult rela
tions between industrialized and developing nations . "
The Zimbabwe Minister of Finance, Economic Planning
and Development , Dr. Bernard Chidzero , also stressed ' the
problem of the present monetary system: "It is not the prin
cipal which is difficult to repay , it is because the interest rates
are just too high . "
Guinea Foreign Minister Toure stated that the purported
IMF solutions actually cause more damage: "As for the IMF ,
we have noted that each time the IMF has intervened in a
Third World country , whether it be in terms of advice or
International

37

allowance of Special Drawing Rights to patch up a conjunc

tural payments crisis, the receiver country has always ended
up in bankruptcy , in total catastrophe . Examples are many in
Africa as well as in Asia. Therefore , this destabilization
caused by the IMF advice that these countries have followed ,
shows clearly that the philosophy of the IMF is not often-if
ever-in the interest of the Third World countries . "
Toure linked the idea o f a debt cartel and a new monetary
system. "Whether you speak of a debtors ' cartel or South
South cooperation , all that means really is that the South
should form a common front . . . . To constitute a debtors '
cartel would be a strategic solution . Those who demand pay
ment of our debts, can only demand repayment if we have
the means to do so . They must be brought to reconsider their
position, i . e . , to offer us better repayment conditions . Oth
erwise , in trying to repay our old debts , we are getting more
indebted. We think that the best way to pull the Third World
out of this bankruptcy situation , or out of this precarious
monetary situation , is to first of all reconsider the internation
al monetary system . This is a necessity . The second consid
eration is the strengthening of South-South solidarity . "

The need for unity

The idea of South-South cooperation was a recurring
theme when the question of how to implement the new world
economic order, how to get a new monetary system , was
discussed. As Asamoah put it: "I think that the North-South
dialogue will take much longer to materialize , and I think the
area of more immediate progress will be in this field of South
South dialogue and cooperation . And I think if that could be
developed, this could improve our position in relation to the
North-South dialogue . "
.
Toure also emphasized this point: "One point is clear.
The North is in agreement to act in a concerted manner. One
of the first remedies must be agreement in the South to act in
an equally concerted manner vis-a-vis the North . The South
is a market of raw materials , a key borrower from a debt
ridden market , and a market upon which more and more
pressure is brought to bear . " Toure indicated the "vicious
cycle" of Third World countries running to the banks in the
North to borrow money deposited by oil producers from the
South , and asserted: "Once again , it is necessary to stress
that, in all domains , South-South dialogue is the solution to
our present situation . "
At the time of independence i n Africa, the United States
was the one hope that Africans had to break the colonial
relations with Europe that had kept Africa undeveloped . Un
fortunately , the United States did not distinguish itself that
much from prior and present European policy toward Africa .
As Kamanda said: "The United States must shape a coherent
policy vis-a-vis the Third World in general , and Africa in
particular. There are numerous friends of the United States
in the world who have the impression that there is no clear
and precise African policy , no Third World policy of the
United States . "
38

International

Thailand : the choices

as elections approach
by Pakdee Thnapura and
Sophie Thnapura in Bangkok
Since the beginning of the year, Thailand-a country of 42
million inhabitants-has again been plunged into political
instability . Strategically situated, Thailand has common bor
ders with the Indochina countries on the east , with Burma on
the west, and with Malaysia in the south . For more than two
decades , the country has been involved in the Indochina
conflicts: after having provided the United States with bases ,
Thailand is now providing the Khmer Rouge of Pol Pot
(backed by China) and Khmer Serai forces ("Free Khmer"
led by Son Sann and backed by the United States) with train
ing camps to fight the Vietnamese-backed Kampuchean gov
ernment of Heng S amrin. This is Thailand' s backup for the
"China card" policy of the U . S . State Department.
Since 1 976 Thailand has been operating under a quasi
parliamentary system dominated by the Thai military . The
four-year "crisis management" provided by the constitution
was to come to an end on April 2 1 , at which point the military
dominated appointed Senate would relinquish to the elected
National Assembly the power to nominate the prime minis
ter. The present government of Premier General Prem Tin
sulanonda would have run a high risk of losing its place to a
civilian government.
Army Commander in Chief General Arthit Kamlangek,
in league with Prime Minister Prem , opted for a "democratic
coup" by proposing an amendment to the constitution , in
order to prolong the provisional crisis management for anoth
er four years .
Fearing a violent coup d ' etat, the parliament initially
accepted the amendment. Then the media and pro-British
political figures such as Kukrit Pramoj , former prime minis
ter and leader of the Social Action Party , began to argue that
the amendment would pave the way for a continued military
dictatorship . Rallies were organized by Anant Senakhan , a
police officer under the 1 960s Marshal Pao Sriyanond gov
ernment. Anant recently quit his post-law enforCement
inonkhood to organize a hunger strike against the amend
ment. Under this pressure , the parliament convened a new
session to reconsider the amendment .
In the second voting , the amendment was rejected ,
whereupon the parliament was dissolved by royal decree
implemented by the Prem government . Election day is set
for April 1 8 , giving the candidates only one month ' s cam
paigning . The quick dissolution allowed for elections to take
place under the old electoral formula of the crisis-manageEIR

April 1 9 , 1 983

ment constitution , thus effectively voiding the parliament' s

vote against the anny ' s amendment .
The country is now divided into two camps-for and
against the amendment. The first camp is strengthening Gen
eral Arthit as the strong military man . The second camp is
pushing Kukrit to the fore as the opposition leader.

Kukrit Pramoj and General Kamlangek

A graduate of Oxford University with a masters degree
in philosophy , Kukrit Pramoj is widely known as a homosex
ual and a demagogue . Kukrit is also known to be close to the
Chinese and to Chinese business circles in Thailand . S ince
1 974 , the year Kukrit became prime minister, he and his
newspaper Siamrath have had a strong influence among
intellectuals .
Kukrit has always advocated no-growth economic poli
cie s . It was he who promoted services at the expense of heavy
industries in Thailand . He also owns one of the most luxuri
ous hotels in B angkok , the Indra Hotel. Since 1 970, Siamrath
has countless times attacked the Kra Isthmus Canal project ,
causing the project to be shelved . If dug across the southern
peninsula of Thailand , this canal would not only shorten the
oil route , making it unnecessary for tankers to detour through
the Malacca Straits , but also develop the troubled southern
provinces of Thailand economically . The Kra canal would
end , however, the role of the Chinese city-state Singapore as
the key trade and commercial center of the region .
When it came to building a new international airport in
the Bangkok area , Kukrit was also against this chance for
Thailand to increase its role as an international center in
Southeast Asia. The badly needed airport was finally built in
Singapore . When Thailand was badly hit by the oil crises in
the 1 970s and a nuclear program was seriously considered,
Kukrit manipulated public opinion to put a stop to it. Kukrit
and his party have also put into question the construction of
the Nam Jone Dam, which would be able to produce 5 80
megawatts more of electricity in the year 1 987 . What is
absolutely clear is that Kukrit Pramoj , his Social Action
Party , and his newspaper have contributed to delaying the
sound development of the Thai economy to Singapore ' s
benefit.
As for the up-and-coming military figure , Anny Com
mander in Chief General Arthit Kamlangek, his economic
policies are not known; this leads some observers to believe
that they can still eventually be shaped in the national interest.
After the aborted military coup led by "young Colonels" a
year ago , General Arthit has gained more and more power.
He rapidly climbed to the post of Anny Commander of the
First Region (Bangkok-Central Plain Region) before being
named Anny Commander-in-Chief. It has been mooted that
General Arthit would be the likely military man to replace
General Prem, the present prime minister. Arthit' s bid for
power is opposed by other elements of the Thai military ,
however.
General Arthit is known to have links with the U . S .
EIR

April 1 9 , 1 983

Defense Department and State Department, and is an advo

cate of close Thai-Chinese cooperation , including recently
increased contacts among senior military leaders . Curiously
enough, he has also taken on as a close adviser Prasert Sap
sunthorn , the fonner general secretary of the pro-Chinese
Communist Party of Thailand (CPT) . He has recently gained
a favorable reputation by granting amnesty to those CPT
members who willingly tum themselves in , reportedly at a
rate of 1 ,000 per month . It is believed that the CPT has
already lost up to 95 percent of its guerrilla forces to the urban
areas in this way . Finally , General Arthit enjoys the backing
of Queen Sirikit.
Basically , as the Thais would put it, the situation is one
of "Granny ' s money buying Granny' s cookies": Pramoj and
Arthit are presently two sides of the same coin .

Perspectives after April 18

After the April 18 elections , it is likely that no party will

emerge with a majority . However, Kukrit' s Social Action
Party along with the Democratic Party of Bhichai Rattakul
will most probably fonn the next government , even though
Kukrit had already vowed that his government would be
"either horse or donkey but never a mule . " Such a civilian
government would not last long and could pave the way for
the return as prime minister of fonner prime minister Samak
Sundaravej , now head of the Thai Citizen Party , to be fol
lowed by General Arthit.
Other elements that could change such a scenario would
be initiatives taken by the pro-industrial faction represented
by the Chart Thai Party and the pro-American conservative
party of fonner Premier General Kriangsak . Among the sen
ior military officers known to be opposed to General Arthit
are Supreme Commander Saiyud Kerdphol and General Ham
Leelanond , army commander of the Fourth Region (Southern
Peninsula Region) , who are also very active in promoting
development projects . Had early elections not been called ,
General Ham and the deputy communications minister, a
member of the Chart Thai Party , would have already held a
planned political seminar on the Kra Isthmus Canal project
together with the local authorities of the 14 southern prov
inces. As for General S aiyud , he has constituted "soldiers for
development" units manned with tractors instead of tanks.
General Kriangsak is sure to be re-elected to parliament .
A senior officer confided to EIR , "Now , if only General
Kriangsak would keep his distance from brandy , he can once
again become a prominent political figure in Thailand-and
this time with popular support . "
I f Thai political leaders focused more on making Thai
land into an industrial power of the region , they would not
feel compelled , as many in Thailand do , to view their future
as a choice between being part of a Chinese or a "Soviet
Vietnamese" sphere of influence .
Continuation of the present political instability will make
it difficult either to solve regional problems , such as Kam
puchea, or achieve economic development.
International

39

Interview: Samak Sundaravej

Thai politician looks

to high-growth future
The following interview with Samak Sundaravej, leader of
the Thai Citizen Party, was conducted by Pakdee Tanapura
of the EIR Paris Bureau in Bangkok in March just after the
dissolution of the Parliament.

Samak: I would increase both wages and prices , based on

the inflationary rate index. Income in the countryside will

also have to be increased . This can be done through the
reduction of the number of peasants . Look at the United
States: around three million Americans work in the agricul
tural sector, but they feed 200 million inhabitants . We have
to have a bigger input of advanced technologies in the agri
cultural sector, which would reduce the cost of production.
We also need a system of intergrated food industries to trans
form the agricultural surplus into semi-finished or finished
products such as animal feed . With such industries , we can
shift peasants into this sector and thereby increase their in
come by more than four times. These industries can be de
veloped in the provinces and thus avoid congestion around
the B angkok area.

EIR: You are accused of supporting the military proposal

for the amendment of the constitution . Do you have any

comment on this?
Samak: I want a stable government. Next year we will have
to decide on lots of investments like those for the eastern deep
port, the construction of a new airport, gas separation facto
ries , etcetera. If the government were to be unstable over
three to six months , nobody would want to invest in Thailand.
I would like to have a full democrac y , but given that the
future looks so unstable , the presence of the military would
help to stabilize the situation .
As for the question of whether or not civil servants and
the military should be allowed to play a part in politics , I
would say yes , they should definitely have this right . Some
times politicians cannot deal with certain social and econom
ic problems . A civil servant often has the experience and will
be readily able to deal with these problems. A high school
graduate cannot become minister of health ! We need to be
flexible on these questions.
EIR: Certain media like the Siamrath of Kukrit Pramoj have
been encouraging instability in Thailand and sabotaging de
velopment projects by manipulating public opinion . What do
you think of Kukrit Pramoj ?
Samak: Kukrit is an old politician . People around him are
bad. He might not have bad intentions himself. If he is in the
government , he may not oppose infrastructure projects . If
environmentalists did not campaign against these projects ,
they would not have anything to do . The present government
has tolerated these people too much. In fact, they should be
sent into the jungle so that they would not be able to use
Kukrit and his newspaper any more . These environmentalists
are really insane . They even say that wallpaper can cause
cancer. I ' ve been staying in a house with wallpaper for more
than forty years and I don't have cancer. These people are
definitely mad .
EIR: If you become the next prime minister, what would

you like to do?

40

International

'if the government were unstable

over three to six months, nobody
would want to invest in Thai
projects. The present government
has tolerated environmentalists
too much. These people are
definitely mad. AsJor solar
energy, it seems to be good only
Jor heating water, and Thai
people don 't like hot water
exceptJor making coffee. Nuclear
energy is needed. '

In the meantime , we should use surplus such as animal

feed to raise livestock in the countryside , which would raise
the output of meat production in the country . If we can create
a surplus of meat production , this can be exported interna
tionally . Increased production would mean that we would be
able to feed an increased number of population .
We should have nuclear plants , but the only obstacle
would be the question of the site . Plants that leak are just too
old. We have to have modem ones. As for solar energy , it
seems to be good only for heating water. I have traveled
around the world more than 1 0 times and I have seen a lot. If
that is all it' s good for, then we don ' t need it. Thai people
don' t like hot water except for making coffee . Nuclear energy
is needed, and with cheaper electricity , we will be able to
reduce the tax on gas and petrochemicals .
EIR

April 1 9 , 1 983

The Kampuchea issue :

a 'patient stance'
by Paul Zykofsky in Bangkok
Thailand sees no "quick or easy solution" to the conflict in
Southeast Asia over Kampuchea. "We will need great pati
ence , more than the patience of Job , to resolve this issue ," a
senior official in Thailand ' s foreign ministry told EIR during
a recent discussion in Bangkok .
While the official was predicting that tensions would
continue for some time to come , Vietnamese troops were
engaged in a large scale offensive against the remnants of the
deposed Khmer Rouge regime of Pol Pot along the Kampu
chean border with Thailand. Starting on March 3 1 , Vietnam
ese troops launched a series of attacks on forces of Kampu
chean opposition groups linked to Pol Pot ' s Khmer Rouge
and its "coalition" partners , the Khmer Peoples ' National
Liberation Front led by former Premier Son Sann and ex
Prince Sihanouk ' s Moulinaka . The fighting along the border,
which has involved heavy shelling and ground attacks on the
base camps , some of which virtually straddle the border, has
put Thai army forces into clashes with Vietnamese troops .
Some observers viewed the results of the latest offensive
as further evidence that the Pol Pot-led opposition coalition
can pose no serious military threat to the Vietnamese-backed
Heng Sarnrin government in Kampuchea . But the senior of
ficial in the Thai foreign ministry strongly disputed thi s ,
claiming that according t o intelligence reports , the Khmer
Rouge ' s attacks within Kampuchea have stepped up within
the past two years . However, he indicated that the current
political stalemate will continue for quite some time .
Ever since Vietnamese troops intervened in Kampuchea
in January 1 979 to oust the genocidal regime of Pol Pot ,
tensions between Vietnam and Thailand have been high .
While Thailand insists that the Vietnamese troops must with
draw from Kampuchea, the Vietnamese have refused to to
tally remove their troops until there are guarantees that the
40 ,000 or so Khmer Rouge forces taking refuge along the
Thai border, backed and armed by China , will not return . A
stalemate has ensued , with occasional Vietnamese attacks on
the Khmer Rouge forces , and efforts by ASEAN to build up
the coalition "government" of "Democratic Kampuchea"
which includes Sihanouk , Son Sann , and Pol Pot ' s Khmer
Rouge , as an alternative to the Heng Samrin government .
Hopes were raised in early March that the impasse might
be ended , when Vietnamese Foreign Minister Nguyen Co
Thach hinted that talks could be held between the Indochinese
EIR

April 1 9 , 1 983

. countries and ASEAN without the presence of the Heng

Sarnrin government . These hints followed a meeting during
the Non-Aligned summit between Thach and Malaysian for
eign minister Ghazali Shafie (see EIR , April 1 2 ) . The offer
was welcomed by foreign ministers of two ASEAN coun
tries-Malaysia and Singapore-as "the latest sign of [Viet
namese] flexibility . "
But Thailand rejected this approach , and the statement
issued following the recently held meeting of the European
Community and ASEAN foreign ministers in Bangkok linked
the question of talks to the standing ASEAN proposal for a
U . N . -sponsored "International Conference on Kampuchea"
-a proposal emphatically rejected by Hanoi and Phnom
Penh in the past.
The foreign ministry official explained that Thailand had
rejected the offer of talks made by Thach because "we see a
lot of pitfalls and traps in it . " The primary objection was that
to agree to such talks would make it appear that ASEAN
accepts Vietnam ' s longstanding argument that a permanent
solution to Kampuchea depends primarily on China, and that
the only issue concerning Kampuchea that can be discussed
between the Indochinese countries and ASEAN is the secu
rity of the Thai-Kampuchean border.
The official went on to make it clear that ASEAN is
becoming increasingly concerned that international support
for the "coalition" -which holds the U . N . seat for Kampu
chea-is eroding . If ASEAN agreed to talks on Vietnam' s
terms , the official warned , i t would severely undermine sup
port for the coalition "government" and "could lead to the
empty-seat formula at the U . N . " Among many developing
countries , the official complained , it has taken a great deal of
"lobbying and horse-trading" to get the vote in favor of the
coalition at the U . N .
A t the ASEAN-European Community foreign ministers '
meeting , adding to ASEAN ' s concern , France and Ireland
openly voiced opposition to the inclusion of Pol. Pot in the
coalition "government . " The newly elected Labour govern
ment of Australian Prime Minister Bob Hawke has a similar
stand , and the Labour Party ' s pre-election platform calls for
the resumption of economic aid to Vietnam .
While stating that none of the ASEAN countries liked
supporting the Pol Pot forces either, the official indicated that
Thailand believed it had no other choice but its present posi
tion if it wanted to negotiate with Vietnam . Thais are also
mindful of China' s open support for the Khmer Rouge and
would hesitate to do anything which might antagonize China.
This is especially the case because China could wield its
allied Communist parties in these countries .
Given this scenario , the foreign ministry official conclud
ed that the stalemate will continue for some time , with con
tinued skirmishes along the border. Any long-term solution
will depend on compromises by both sides , he argued . "Thai
land is not the United States or France . We are here . We
can 't just pack up and leave . Vietnam has to deal with us , "
h e concluded .
International

41

The world needs a new

sea-level Panama Canal
by Carlos Wesley
"Crossroads of the world" and "funnel for the world' s com
merce" are the two slogans most commonly associated with
Panama. Some 40 ocean-going ships pass through the Pana
ma Canal each day laden with the raw materials , semi-fin
ished goods , and finished products that are the lifeblood of
the world' s economy . That means that in a given year, some
1 4 ,000 ships , carrying over 1 60 million tons of cargo repre
senting more than 4 percent of total world trade , go through
the waterway . The canal is a marvel of American engineering
connecting the Orient with Europe and Africa, North Amer
ica with the nations of western South America , and the United
States' own Eastern Seaboard with its West Coast .
Transit is not limited to the canal . The legendary Panama
Railroad, which carried the old Forty-Niners on their way to
the California Gold Rush , still has an important role , al
though it is in disrepair. Panama is also playing a growing
role as a transshipment point for air cargo . Alaskan North
Slope oil is now reaching the eastern United States through a
just-completed pipeline across Panama.
But the funnel is getting clogged . Rail and air transit
through the isthmus may serve useful supplemental roles , but
they cannot replace IiIl inter-oceanic waterway . Maritime
shipping is, and will remain , the most expeditious and eco- '
nomical way of moving goods. Yet for current world needs ,
the present Panama Canal is in danger of outliving its
usefulness .

' The Big Ditch '

Completed by the United States in 19 1 4 after 30 years of
work-including 20 years by the French , who failed to build
a sea-level canal before the Americans took over-the Pan
ama Canal has been rightly called "the eighth wonder of the
world . " A ship literally "climbs" over the mountains as it
crosses the 43-mile wide isthmus to get from the Atlantic to
the Pacific Ocean . By means of locks , a ship is lifted from
the Atlantic Ocean 85 feet above sea level to Gatun Lake ,
one of the largest man-made hikes in the world; travels across
the Continental Divide through the famous Culebra or Gail
lard Cut-the digging of which meant the removal of more
than 280 million cubic yards of rock and earth; and is lowered
42

International

85 feet by other locks to the Pacific Ocean .

There are three separate sets of steel and concrete locks
in the Panama Canal , of up to three chambers each. These
lock-chambers are the steps that raise a ship to cross Gatun
Lake and the smaller Miraflores Lake . Each chamber is 1 1 0
feet wide and 1 ,000 feet long , with massive lock-gates as high
as an eight-story building . A ship going across the canal uses
some 52 million gallons of fresh water, all of which is fed by
gravity flow-there are no pumps--and then spilled into the
ocean .

A great enterprise

According to Fernando Manfredo , deputy administrator

of the Panama Canal Commission (see interview , below),
unless certain improvements are soon undertaken , the present
canal will reach a point of saturation by 1 995 . Even if those
improvements are carried out , they will only add 1 0 years to
the canal ' s capacity for absorbing traffic .
But the Panama Canal could become a major bottleneck
much sooner than Manfredo estimates , since his projections
are based on current trends , which include a slowdown in
world trade . If world trade were to grow by only 1 percent a
year, shipping would exceed the canal ' s maximum capacity
long before Manfredo' s most optimistic calculation s . Even
today , it is not uncommon for ships to have to wait in line for
as long as five days to make the nine-hour passage through
the canal .
The Panama Canal has already outlived its usefulness for
about 8 percent of the world' s ocean-going fleet. The "Big
Ditch " has become too small for more than 2 , 000 of the
world' s vessels . Many of the oil-carrying supertankers and
other bulk carriers are as large as 250,000 tons. But the
maximum size ship that the canal can handle is 65 , 000 tons .
This also bars its use by U . S . Navy aircraft carriers of the
Enterprise clas s .
The present c anal could easily b e made useless b y sabo
tage . Terrorists could destroy or disable one or more of the
lock-gates, or the -dams that feed the water for the locks .
S inking one or mQre vessels in the lock-chambers could
also incapacitate the canal .
EIR

April 1 9 , 1 983

All the above considerations point to the need for a new

sea-level canal capable of handling some of the world ' s larg
est ships. The present lock-canal was never conceived to be
the optimum solution for a passageway between the two
oceans. The lock system was designed as the most expedi
tious way to make the canal operational in as short a period
of time as possible . The idea was to replace it with a sea

level waterway as soon as practicable .

As early as 1 929, the U . S . Congress authorized a study
of the feasibility of expanding the Panama Canal , and of
building a new canal through Nicaragua . Similar studies were
ordered in 1 936 and 1 939 . Work was actually begun in 1 940
to expand the current canal , but World War II brought exca
vations to a halt. Because of the perceived need for a larger
and more easily defensible canal , Congress ordered further
studies . A study completed in 1 947 concluded that the current
canal would begin to experience difficulties in handling the
world ' s commerce by no later than the 1 960s-as it has in
fact-and recommended that a new canal be constructed .
In 1 970, the Inter-Oceanic Canal Study Commission
(IOCS) , which had been appointed by President Lyndon
Johnson in 1 964 , submitted a report comparing the advan
tages of eight routes across the isthmus. One of the most
interesting aspects of this study , which was mostly conducted
by members of the U . S . Army Corps of Engineers , was that
it analyzed the feasibility of employing peaceful nuclear ex
plosives (PNE) for the excavations . This aspect of the study ,
carried out by Lawrence Livermore Laboratories as a part of
"Project Plowshare" under President Eisenhower' s Atoms
for Peace Program , concluded that on certain of the routes
under consideration-those away from population centers
PNEs could be safely employed at a considerable savings of
time and money. The excavation period could be cut in half,
from 10 to 1 2 years by conventional methods , to 5 to 6 years
if PNEs were used , according to the commission ' s report .
The IOCS report rates the routes across Panama, or near
the Panama-Colombian border, as the most advantegeous
from the standpoint of political considerations , cost, ease of
construction , and distance to be saved in routingships . The
Nicaragua route , although it would take advantage of Lake
Nicaragua, would require more digging . The same holds true
for the River Atrato route in Colombia, and although in this
case the possibility of employing PNEs would make exca
vations competitive with excavations by conventional means
through some of the isthmian routes where the use of PNEs
is not possible , the Atrato route would mean that a ship would
have to travel some 700 more miles than at present .
Had work on a new canal begun in the 1 970s , the costs
of excavation, even by conventional methods , would not
have exceeded $3 . 5 billion , according to members of the
Corps of Engineers that worked on the study . This outlay
would have been recouped within 60 years of construction .
A contributory factor in delaying agreement on a new
treaty with Panama for a sea-level canal was the leaking of
EIR

April 1 9 , 1 983

the recommendations , out of context, for the use of PNEs .

This set off a wave of hysteria among Panamanians , who
were led to believe that they would be guinea pigs in experi
ments with untested nuclear technologies .
A new accord with Panama was finally signed in 1 977 ,
the Torrijos-Carter treaties . But by then the Carter adminis
tration , fully committed to zero growth for the advanced
sector and genocide for the Third World (as exemplified by
the Global 2000 Report) , was no longer interested in a great
enterprise such as a sea-level canal , which would serve as the
technological driver for development , not only of Panama
but of the whole region . That was exactly what occurred
when the current canal was built at the beginning of this
century .
The 1 977 treaties include a clause preventing either the
United States and the Republic of Panama from undertaking
the construction of a new canal without the consent of the
other nation . This clause , in practice , limits Panama ' s' sov
ereignty, since it denies Panama the right to undertake the
project with another partner, such as Japan , without U . S .
approval .

Japan wants new canal

The Japanese have shown a keen interest in the construc
tion of a new canal , not only because Japan is, after the United
States, the second largest user of the current waterway-but
also because it perceives such a project as a catalyst for for
economic growth , to pull the world out of its current deep
recession . This is stated explicitly in the proposal for a Global
Infrastructure Fund for economic recovery made by Masaki
Nakaj ima , founding chairman of the Mitsubishi Research
Institute . Construction of a new Panama Canal and the 1 3
other "super projects" or "engineers ' dreams ," as the Global
Infrastructure Fund proposal terms them, "would lead to the
development of peaceful demand in the manufacturing in
dustry as well as technological incentives in the advanced
countries in lieu of arms production . Also expected would be
the multiplier effects upon the national income and employ
ment of many developing countries which would be recipi
ents of the proposed projects . "
A t next month ' s Williamsburg economic summit, Japa
nese Prime Minister Yasuhiro Nakasone may propose that
the industrialized countries , including the Soviet Union , join
in establishing the Global Infrastructure Fund . According to
Kyodo News Service , the prime minister will lay out a plan
that would generate $6 billion a year for the great enterprises .
Japan will propose that the United States and the Soviet
Union contribute I percent of their military budgets , and
Japan provide I percent of its export earnings , a figure much
larger than its military budget . The Mitsubishi infrastructural
projects include irrigation-hydroelectric projects in Africa
and India .
A co-thinker of Nakajima , Shigei Nagano , president of
Nippon Steel and the Japanese Chamber of Commerce , has
International

43

taken the lead in pushing for the building of a new sea-level

canal in Panama . Nagano ' s proposal is to construct the canal
through Route 10 (see illustration) . A few miles west of the
current waterway (the canal ' s traverse is actualy north-south ,
not east-west) , the site identified as optimum by the IOCS in
its 1 970 report , although it is not suitable for the use of PNEs .
Nagano has worked so energetically for this project that the
Panamanian goverment honored him two years ago by nam
ing a nearby hill after him .

State Department sabotage

Less successful have been his efforts to get the U . S . State
Department to give the go-ahead for the project. The official
line of the State Department is that all options should be
studied , not only a sea-level canal , but the construction of
pipelines , a new set of locks to handle larger ships , a rail line ,
and a trans-isthmian highway-in short , anything to delay or
even prevent the construction of a sea-level canal . The Jap
anese have been forced to agree to join a tripartite study
commission , with the United States and Panama , to analyze
all these "options , " wasting valuable time that could better
be employed in conducting the feasibility studies and under
taking the design of the new canal .
A propaganda campaign has been launched against the
sea-level canal enterprise , contending that it would be too
costly , that it would destroy the environment, that it would
result in fewer jobs than a lock canal , and that it would bring
about global ecological devastation by permitting species in
one ocean to migrate to the other.
The State Department formula has gained many impor
tant adherents in Panama, as can be seen in the following
interview with Panama Canal Commission Deputy Admin
istrator Manfredo . He is known to favor adding a new set of
locks to the present canal , the so-called Third Lock option .
There are other Panamanians who are keenly aware that
what they would be getting in the year 2000 (when the treaties
call for the present canal to be reverted to Panama) would be
a waterway on the verge of obsolescence . These people re
alize that the time to start working on building a new canal is
now .
One such person is Demetrio Vergara Stanziola, a Pana
manian engineer, who details a proposal for a new canal .
Veragara Stanziola ' s proposal is notable because he ap
proaches the problem of building a new canal from the per
spective of a great enterprise , a project that would improve
conditions for the whole of mankind . His proposal is also
unique in its design , because it eliminates the need for mas- sive tidal gates at the entrances of the sea-level canal . The
tidal gates are included in all the other proposals we are aware
of. They are designed to deal with the problems caused by
the significant differences in the tidal levels of the Pacific
Ocean , as compared to the Atlantic .
The following interview with Vergara Stanziola should
makes clear what constitutes a great enterprise .
44

International

Interview: Demetrio Vergara Stanziola

'A new canal would be

to strengthen the

U. s.

Panamanian engineer Demetrio Vergara Stanziola has come

up with a novel design for a new sea-level canal through
Panama, capable of handling supertankers and other large
scale vessels which cannot move through the present canal.
Vergara' s design does away with the need for tidal gates,
and includes the proposal that much of the excavations be
done byfirstflooding the area, and then dredging it-"dredg
ing the mountain . " Although hydraulic dredging is somewhat
more costly than conventional excavation methods, Vergara
states in his book EI Canal a Nivel (The Sea-Level Canal)
that the extra expense is more than made up by the savings
realized in the disposal of spoils, which can be piped out.
This system of disposal consumes less energy and is more
efficient than haulage by either truck or rail, both of which
have a built-in inefficiencyfactor of50 percent (on the return
trip, the conveyance is empty) .
Our correspondent caught up with Vergara Stanziola in
Panama City on March 4 . Excerptsfrom his interviewfollow.
Wesley: Can you tell us briefly , exactly what it is that you
are proposing?
Vergara Stanziola: It is a project for a sea-level canal across
Panama, which follows the approximate alignment of the so
called Route 1 0 . It will allow traffic-dispensing with tidal
gates, and virtually eliminating tidal currents-under condi
tions of maximum security for inter-oceanic navigation , of
vessels of 250,000 tons or more, without interrruptions, locks ,
or the need for convoys .
The complex of technologies that I propose be employed
in building the canal , which I call "dredging the mountain , "
will result i n considerable savings o f energy , and take full
advantage of hydraulic resources for the generation of elec
tricity , and to establish huge reserves of potable water, the
"transparent petroleum" of the future . My methods will sig
nificantly reduce costs , as compared to conventional meth
ods , and also reduce the risks to human life during the period
of construction .
Wesley: Today , using the existing lock canal , it takes a ship

from 8 to 10 hours to make the crbssing from one ocean to

the other. How long will it take through a canal such as the
one you propose?
Vergara Stanziola: Around five hours .
Wesley: You are proposing a canal that can handle two
EIR

April 1 9 , 1 983

an essential link
and world trade'
vessels of up to 250,000 tons each , simultaneously , going in
opposite directions . The existing canal cannot handle that
kind of tonnage , which means that a significant portion of the
world ' s oceangoing fleet cannot use it. The urgent need for a
new canal has been made clear since at least 1 970, when the
Inter-Oceanic Study Commission issued its report. In 1 970 ,
it was estimated that the excavations would only cost about
$3 . 5 billion; your proposal , I believe , would cost about $ 1 7
billion . . . .
Vergara Stanziola: Between $ 1 4 and $ 1 5 billion if work
were to start by 1 985 .
Wesley: .
. And how long will it take to complete the
construction?
Vergara Stanziola: The construction itself would take about
1 2 years , but you would need an additional two years for the
feasibility studies . . .
.

Wesley: Then why has work not begun , if we already knew

in 1 970 that we could have built the thing for $3 . 5 billion ,

and when even the $ 1 5 billion you talk about is not a great
deal when you distribute them over 1 2 to 14 years ?
Vergara Stanziola: I believe that the Americans , apparent
ly , are trying to gain time . First there was the problem that a
new treaty on the existing canal had to be agreed upon . That
was finally done in 1 97 7 , and through it they ensured that
any study on a new canal , be it a lock canal or a sea level one ,
will have to be done in partnership with the United States .
Therefore , they known that they have that absolutely inviol
able right, consecrated by the treaties , when they are ready .
They will get interested in the construction of a new canal
when the world situation presents that project as the way out
of some other, structural , problems .

level canal will still be necessary , because the massive trans

portation of products dictates it. Of course , we can see that
mineral products , petroleum, can be carried by pipelines, but
that requires the use of a great deal of energy .
If you have an aquatic medium of sufficient capacity
available , the most expeditious and cheapest way of moving
goods is by steel over water, and that is the way of passing
the supertankers from one ocean to the other directly , from
the point of production . to the final destination , in one single
continuous proces s . The same applies to other mineral s . The
other methods of transportation are complementary ones,
because we lack a sea-level canal , but if we had such a canal ,
the other options would become irrelevant.
Wesley: You have said that this project will be the greatest

work of excavation that will be carried out in this century .

The Japanese have expressed a tremendous interest-they
are very interested in the building of a new inter-oceanic
canal . Do you believe that they would be the ideal partners
for a project of this type , bypassing in that way the perceived
negative attitude of the Americans toward the project , or can
an agreement be worked out between the three parties , Pan
ama, the United States , and Japan to get construction
underway?
Vergara Stanziola: Rather, I believe that an understanding
on the future construction of a sea-level canal will have to be
reached between the United States , Japan , Panama , and other
major users . However, the United States will still want to
retain a significant and controlling role over the future sea
level canal , because they consider it to be inextricably linked
to their inter-coastal-Atlantic coast, Pacific coast-trans
portation needs , and it has always been among their major
concerns for their own national development .
Wesley: Most designs before yours have proposed to solve
the problem of the differences in the tides between the Atlan
tic and the Pacific by means of tidal gates . Your design does
not include such gates; how do you get around that problem?
Vergara Stanziola: The solution that I have proposed is the
construction of massive breakwaters , which project about 1 0
miles . into the ocean from the Pacific coast , and a shorter
distance on the Atlantic side , because the depths of the At
lantic are greater than the coastal and continental platform
depths of the Pacific . . .
The tidal intake , which is forcibly limited by this design,
expands within the artificial coves that are formed inside of
these massive breakwaters , and projects itself in a fan-like
shape , loosing speed . It is a hyaulic phenomena , which is
perfectly normal . The calculations of the velocity of the tide
is limited in this way to only the lenght of the canal and the
passageways to the coves themselves, which are about one
and a half kilometers in length . Ships would transit through
these entry ways , at their usual speeds , in about four or five
minutes . That is where the velocity of the tides would be at
.

Wesley: Fernando Manfredo , Deputy Administrator of the

Panama Canal Commission , and officials of the government

of Panama and of the U . S . State Department have presented
a series of alternatives , such as a "dry canal , " an overland
rail line or highway , pipelines, or even widening the existing
canal , or adding a new set of locks-the so-called "Panama
nian alternative , " proposed by the engineering firm of Lopez
and Moreno . In your view , are any of these alternatives more
feasible than a sea-level canal?
Vergara Stanziola: I believe that the construction of a seaEUR

April 1 9 , 1 983

International

45

The Route 10 .
canal proposal

From !be book El Canal a Nivel.

their maximum. FrQm there 'On in, the tidal velQcities de

crease rapidly , until the entrance tQ the canal proper where
they WQuld practically be zero.
Wesley: AmQng the QbjectiQns vQiced by thQse whQ 'Oppose

a sea-level canal is that it WQuld lead tQ an eCQIQgical disaster,

as species from the Atlantic migrate tQ the Pacific , and vice
versa, creating imbalances in the flQra and fauna. Does yQur
design include any means fQr aVQiding this problem?
Vergara Stanziola: . . . AlthQugh I dQ nQt cQmpletely ex
plain it , in my book I talk about an aquatic ecQIQgical cur
tain-of sweet water-which CQuld CQme frQm the medium
sized rivers 'Of the watershed arQund the canal . These WQuld
appreciably modify the salinity 'Of the canal prism . But, 'One
'Of the principal factQrs that we have tQ cQnsider regarding the
intrusiQn and interactiQn 'Of the'biQta from both oceans through
the canal , is the velQcity 'Of the currents.
AccQrding tQ my design , we WQuld have a canal with
practically nQ currents . The prQblem 'Of the currents is sQlved
46

InternatiQnal

by the artificial CQves established 'On the Atlantic and Pacific

CQasts . That means there will be little velQcity available fQr
the transit 'Of these animal and plant life , and much mQre
cQntrQI 'Over them. What ' s mQre , in the CQves themselves ,
w e will have the P'Otential fQr many 'O f these species tQ prolif
erate , S'O that n'O 'One has tQ WQrry that they will emigrate
thrQugh the canal passage , hich has a different level 'Of
salinity .
Wesley: AnQther 'One 'Of the Qbjecti'Ons tQ a sea level canal is

that it WQuld eliminate j'Obs, that it WQuld provide less jobs

than the current I'Ock canal .
Vergara Stanziola: . . . A canal that needs mQre peQple tQ
run it, is a less efficient canal . We must think 'Of efficient
enterprises . If we want tQ emplQy peQple , we must IQQk fQr
reSQurces , PQtentials 'Of 'Other types , and see tQ it that the sea
level canal itself is accQmpanied by a series 'Of structures,
facilities , and installatiQns that WQuld allow f'Or the establish
ment 'Of new industries in Panama. . . . This W'Ould generate
EUR

April 1 9 , 1 983

more employment than building another, more inefficient

lock-canal just because it would need eight thousand people
to run it.
Wesley: In your book you talk about the possibility that , for

example , the Japanese could establish great steel-making

complexes in Panama, as an example of the type of new
industries that could develop as a consequence of a new sea
level canal .
Vergara Stanziola: The great iron ore deposits that are in
the South American continent are in Venezuela, in the Ori
noco region , and in Carajas in Brazil , which has enonnous
deposits with an estimated value of $40 billion dollars . Ven
ezuela also has bauxite , which is one of the essential raw
materials for modem techonology, for the making of alumi
num , in the Caroni region .
Colombia has the famous Ceraj6n hill , which has an
immeasurable potential for coal production . All of these , to
get to the industrialized and industrializing nations of the Far
East, must necesarily go through the Panama Canal .
Japan has the need to import great quantities of these
materials to its own territory , to there transfonn them into
finished goods , which consume oil that is also imported . It is
obvious from an economic standpoint, that the establishment
of great iron foundries in Panama could , in a certain way ,
complement the work of the large Japanese industries . Be
cause , if you already have the steel manufactured in Panama,
they can make the finished goods that require a higher tech
nology-automobiles , refrigeration components , and other
goods that you need for those basic products-at a lower
cost.
That is why I believe the Japanese are so interested in
establishing themselves in Panama. We have seen how [Shig
ei] Nagano' s group came with a large entourage of industri
alists and businessmen to assess the possibilities of establish
ing themselves in the industrial field . First, to develop, little
by little , the nucleus , to develop the skilled labor force , so
that in the future they can develop and expand those industries
that they will establish in Panama , initially as a kind of
development foci .

Wesley: The Mitsubishi Research Institute has proposed a

series of "great enterprises" that in their estimation would

serve as science and technology drivers for the economic
development of all of mankind . Your book opens with the
following invocation: "I pray that You lift what for You
would only be a little slice of my land , if that would also
serve to bring humanity closer together. " It seems to me that
your proposals fit into the concept of what Lyndon LaRouche
and Mitsubishi define as "Great Enterprises . "
Vergara Stanziola: Yes , I conceive o f this a s a great enter

prise . . . . That is why I call u pon the Lord ' s power to pour
his Spirit over this proj ect, so that this endeavor will be taken
as seriously as possible , because it is one of the greatest
projects on earth , and it would bring more unity to all the
people of the world .
I do not mean that just because we have a more expedi
tious way across the oceans, that humanity will come closer
together. But the effect on the universal spirit of all that a
project of this magnitude entails , will have incalculable re
sults . . . . It will allow all the countries of the world to
communicate better, to strengthen their mutual economies ,
their mutual trade , not with divisive spirits, ignoring the
limitations of particular systems and restrictive political and
economic theories . . . .
For Panama, the construction of this canal would mean .
in the first place , the invigoration of our economy . Besides
the future benefits that it would bring to humanity , it creates
an opportunity for the development of new technology on the
part of interested countries-be it the United States or Japan ,
or other countries .
For the nations of Latin America, such as Venezuela , and
Brazil , it offers the opportunity of exporting their iron . Ven
ezuela already manufactures tubing ; it can export the tubi ng
needed for dredging through the mountains . . . . Colombia
can also sell part of its production . France , which provided
the steel and the tubes for the pipeline just built in Panama,
would also have an interest in selling , not only tubing , but
machinery for the construction of the new canal .
Wesley: Any other reflections ?

Wesley: You say that water is the "transparent petroleum of

Vergara Stanziola: I want t o address the American people:

the future ," a saleable natural resource that could be sold to ,

for example , Saudi Arabia . Could you expand on that idea?
Vergara Stanziola: Yes . If in the future , as things develop
and, routes get modified , when tankers bearing Saudi oil , be
they Saudi Arabian flagships or ships of a different flag , come
here , it is possible-if the scarcity of water, which is becom
ing a crisis , continues to worsen-that those ships could carry
water from Panama as ballast on the return trip . That water
would be slightly contaminated, but they could store it, de
cant it, and possibly use it as potable water. More likely , they
could use it for industry or for agricultural purposes . In the
future , having good water will have as much , if not more ,
importance than oil .

They must take more of an interest in these projects that bear

directly on the shipping from coast to coast of their products .
They once had a President with vision , Theodore Roosevelt,
who did everything possible so that a canal through Panama
would be built. Then , the American vision was clear and
aggressive . Today they have greater technology and financial
resources than they had then . . . . They should base their
decisions not only on momentary considerations , but they
must safeguard those interests that are more pennanent, that
affect their security and stability as the leader of the economy
of a large part of the world . And the Panama Canal is an
essential link to strengthen the United States economy and
security .

EIR

April 1 9 , 1983

International

47

Interview: Fernando Manfredo

' In twenty years , old

canal won't suffice'
Fernando Manfredo. deputy director of the Panama Canal
Commission. is the chief Panamanian officer on the U.S .
run commission. who will be overseeing day-to-day opera
tions of the canal until it reverts to Panama in the year 2000 .
Below are excerpts from an interview with EIR's Carlos
Wesley on March 2 which took place in Panama City .
Wesley: There has been much in the press lately about the
labor problems caused by the fact that American workers in
the canal get a higher pay than Panamanian workers .
Manfredo: In the old Canal Zone , the Panama Canal Com

pany , the U . S . armed forces , and the Canal Zone government

paid salaries that were based on the salaries on the continental
United States . . . . It was the only case outside of the United
States proper where the American government paid salaries
that were tied to the prevailing wage scales in the United
States .
When the new treaties were negotiated and Panama re
covered its jurisdiction , the United States decided that it no
longer had the obligation to keep the same wage scale . There
fore , in the treaty itself, workers that were already on the
payroll were "grandfathered , " but those that were to be hired
after Oct. 1 , 1 979 [when the treaties took effect] had to be
tied to a wage scale based on the Panamanian labor
market . . . .
The problem was taken up with the board of directors ,
which at its most recent meeting decided to equalize the
salaries for certain levels within the organization , but not
because of the fact that there is discrimination-the Panama
Canal Commission does not accept that there is discrimina
tion , nor does the United States government . They say that
there may be disparities , but no wage discrimination . Those
salaries that were upgraded were those where we found that
the commission is not competitive in the local market , not
attractive enough to keep the quality of worker that we need .
But all the rest of the employees are still pending , that is
the majority of new employees . . . .
Wesley: There was a lot of controversy generated because
the board had agreed to do away with the double scale, and
then later rescinded the decision .
Manfredo: No, you

48

International

are

referring to a previous meeting where

the members were different from the current one . The Amer
ican members of the board , of which there are five , and who
form the majority , could not reach a consensus , which meant
that the retention of the dual scale was not going to obtain a
majority of the votes . At that point, the president of the
board-who is also the representative of the U . S . Secretary
of Defense , and the head of the American representation
invoked a provision from U . S . Law 970, which gives him
the right to exercise what is called the directed vote , to vote
in the name of all .
Wesley: The recent decision to raise tolls was not taken too

kindly by many of the nations at the southern end of the

hemisphere . They thought that Panama owed them some
thing for the support they gave this country in getting the
United States to agree to a new treaty .
Manfredo: The tolls were raised in part to make up for the
loss of clients we suffered when many started using the oil
pipeline that was built across Panama. The loss of this busi
ness , which means a loss of $50 million to $55 mill ion a year ,
meant that a toll increase was inevitable . However, we took
into account the fact that maritime trade today is going through
rough times , and we also took into account the effect a toll
increase would have on the economies of neighboring coun
trie s , particularly on Central America . . . . To compensate
for our losses , we should have raised tolls by almost 1 7
percent; instead w e only raised them b y 9 . 8 percent; and
decided to make up the difference by cutting our costs .
Wesley: What are the long-term perspectives ? What does

the canal commission foresee will happen between now and

the year 2000 in terms of new facilities ?
Manfredo: I t is difficult t o make accurate predictions for
such a long period of time . B ut if transit continues to grow at
the current rates-some 1 4 ,000 ships are going through the
canal each year, and the rate of growth is very low , about 2
to 2 . 5 percent a year-we could expect that by the year 2005
we will have a completely saturated canal , even if we carry
out a plan to improve the canal , which is awaiting a final
decision , to widen Culebra Cut and the entrances to the canal .
If that program is not carried out, then we would reach the
saturation point much earlier, around 1 995 . It is very impor
tant that by that point , when the canal would be virtually in
Panamanian hands , that the Republic of Panama should have
reached some decisions about whether it wants to continue to
participate in handling the growing volume of traffic , and in
what way: whether it wants to employ some other transpor
tation techniques such as a sea-level canal , adding a third set
of locks to the existing canal , pipelines, a land bridge , or
some other means of transport across the isthmus .
Wesley: Are you saying that the canal will be obsolete by

the year 2oo5 ?

Manfredo: Not obsolete , saturated . Obsolete is when you

cannot use it. It will be used to its maximum capacity .

EIR

April 1 9 , 1 983

Mlddle East Report

by Nancy

Coker

A question of time

government was seeking to blend the

Reagan and Fez Plans and hoped to

President Reagan is renewing his drive for a U . S . -sponsored

use Mubarak' s visit to achieve this ob

regional peace-before it is too late .

jective . "What is required now is to

search for a way to reconcile and co
ordinate between what came in the
Reagan and Fez Plans in order to have

Described by White House sources

one initiative based on the same prin

specious grounds that the Reagan Plan

ciples for achieving peace . This is a

as "deeply frustrated" by the continu

will "split the Arab world ;" the real

common aim we , together with Egypt,

ing deadlock in the Middle East , Pres

reason the British wish to thwart the

seek to achieve . We will concentrate

ident Reagan has stepped up efforts to

Reagan Plan lies in their secret, long

our efforts on this project . "

toward a v . S . -sponsored peace settle

dent Reagan ' s peace efforts are not

Reagan has contacted King

in the Middle East.

According to sources in Washing

Hussein of Jordan and other Arab

ton and the Middle East , President

chances for a settlement will all but

ensure that immediate progress is made

ment .

standing aim to subvert V . S . influence

Arab leaders know that i f Presi

accommodated

at

this

time ,

the

leaders to urge them to accept the Rea

Reagan is open to the idea of merging

disappear, since by mid- 1 983 , all of

gan Plan as the framework for peace

the Reagan Plan with the Fez Resolu

Reagan ' s attention will have turned to

negotiations . While King Hussein has

tion worked out last year at an Arab

League summit in Morocco . The

the 1 984 presidential election .

endorsed the Reagan Plan , he will not

commit himself to negotiations with

blending of the two plans would pro

addressed this reality in a statement on

April 5 : "King Hussein has taken the

Israel until he has the go-ahead from

vide Arafat with the Arab "umbrella"

the Palestine Liberation Organization ,

that

Saudi Arabia , and other key Arab

extremists .

he

needs

to

quiet

the

PLO

ers as well will recognize that this is a

1 98 2 ,

combining the Reagan and Fez Plans

unique moment , which must be seized

peace initiative , under which West

"could go so far as to recognize Is

before it is lost , and that they will sup

Bank Palestinians not belonging to the

rael ' s right to exist" --giving the Rea

port the king in his desire to move

PLO would join a delegation led by

gan administration increased leverage

forward toward peace . "

King Hussein and enter peace talks

in dealing with the recalcitrants in the

President Reagan ' s Sept .

1,

with israeL Although the plan has been

League

peace

peace proces s . I would hope that oth

proposal

The Reagan Plan is shorthand for

new Arab

lead in recognizing the opportunity

currently available for revitalizing the

According to one PLO source , a

states .

A State Department spokesman

Time i s not the only threat to the

Begin government who oppose any

peace

criticized for its many ambiguities and

kind of settlement that would curtail

backed by factions in the Begin gov

proces s .

Israeli

extremists ,

for not explicitly endorsing the Pales

Israel ' s territorial ambitions .

ernment and V . S . -based Christian

tinian right to self-determination , it

constitutes a potential vehicle for the

Egyptian President Hosni Mubar

fundamentalists , still plan to seize the

ak and Japanese Prime Minister Ya

Temple Mount in Jerusalem . Every

Reagan administration to assert itself

suhiro Nakasone are throwing their

one knows that this act could trigger

in the Middle East and to challenge

weight behind the idea of merging the

religious warfare throughout the Mid

those in Moscow , London , and Wash

two peace plans . According to Kyoto

dle East , since the Temple Mount is

ington (the Henry Kissinger crowd)

news service , Mubarak , who began a

the site of one of the holiest sites in

who are intent on keeping the region a

state visit to Japan on April 5 , is ex

Islam , the Dome of the Rock mosque .

cockpit and reversing its steps toward

pected to issue a joint communique

In addition , Israel and Syria, op

economic development.

with Nakasone that will "highly ap

erating with the tacit approval of Brit

ain and the Soviets , are considering

The Reagan Plan has been rejected

preciate the Fez resolution" and "wel

both by the Begin government in Is

come the moves for a comprehensive

activating a deal to stage what they

rael and by pro-terrorist radical fac

peace settlement on the basis of the

call a "limited war . " Such a war would

tions of the PLO . The B ritish have

Reagan and Fez Plan s . "

probably result in the partition of Le

been pressuring King Hussein not to

cooperate with the Americans , on the

EIR

April 1 9 , 1 983

The week before , Nakasone told

the Egyptian daily

A l-Ahram

that his

banon and the liquidation of King

Hussein .

International

49

International Intelligence

French ambassador:
'Friedman a genocidalist'
Antoine Blanca, the special French ambas
sador without portfolio to Thero-America ,
used appropriately undiplomatic language
at a recent press conference in Venezuela to
describe monetarist economist Milton
Friedman. "Friedman is a genocidalist, es
pecially against the Third World, " the per
sonal envoy of French President Franois
Mitterrand said .
Speaking at the French embassy in Ven
ezuela during his tour of several Thero
American nations, Blanca also criticized the
press for ignoring the effects of Friedman' s
Malthusian policies .
"The press , which is so worried about
France, doesn ' t say anything about the great
disaster of monetarism and of the Chicago
boys . It doesn't say anything about the dis
aster of Madame Thatcher' s economy [in
Britain] , nothing about the industries that
have to close in the United States. It doesn 't
say anything about the Third World, where
these people make Friedmanite experi
ments , as they did in Chile , where he had
his big moment and now his biggest disas
ter . The same in Argentina with [former Fi
nance Minister] Martinez de Hoz , who
brought his nation to its knees . "

Jewish Council calls JDL

afascist movement
The official newspaper of the Central Coun
cil of Jews in West Germany has labeled as
"fascist" Rabbi Meir Kahane, founder of the
U . S . Jewish Defense League and Israel ' s
Kach movement.
The March 25 issue of the Allgemeine
JUdische Wochenzeitung (German Jewish
Weekly News) concluded: ''The 'Kach' group
of Kahane is certainly a case of fascist ele
ments , influenced by racism. Prof. Ammon
Rubinstein has said that the Kach-ideology
is clearly racist, because its leaders , the
Rabbis Kahane and Ariel , want to degrade
the Arabs, or ' Ismaelites , ' to some form of
racially inferior Jebusites , who have no
business being in Israel and whose expul
sion or ' emigration' to the Arab states has to

50

International

be demanded . "
The article tied Kahane and his follow
ers to attempts by the Temple Mount project
to foment religious war in the Middle East
through a campaign to rebuild the Temple
of Soloman on the site of the Dome of the
Rock Mosque , the second holiest shrine of
Islam.
Written by Zeev B arth , the German
Jewish Council article appeared under a
headline warning: "Here as well they are
increasing their power. "

JDL murderer sentenced

in Jerusalem
A Jerusalem District Court judge sentenced
Jewish Defense League member Alan
Goodman on April 7 to life imprisonment
and an "additional 40 years penalty" for hav
ing killed Muslim worshipers in the AI-Aksa
mosque in a shooting spree last year .
The court judged that Goodman ' s de
fense of "insanity" was not valid . As he was
brought out of the court , Goodman , imitat
ing Rabbi Meir Kahane , started shrieking ,
"Kill the Arabs ! Kill the Arabs ! "
According t o one Israeli source , the sen
tence against Goodman was a "warning to
the Gush Emunim West Bank settlers and
Kahane ' s crowd that they had better cool
down their actions . " He said that the grow
ing fear of Israeli security authorities was
that Kahane and his JDL followers would
. form a "zealot underground" funded by
"Christian evangelical organizations in the
United States . "
Before the April 7 action b y the Jerusa
lem court, Israeli police had used tear-gas
grenades to break up an attempt by fanatical
Zionist religious groups on Easter Sunday
to climb onto the AI-Aksa mosque and Dome
of the Rock on the Temple Mount area of
Jerusalem to "pray. "
This incident, which caused a wave of
anger and anxiety among Jerusalem ' s Arab
population, was almost entirely blacked out
of the international press , except for a short
dispatch in the Neue Zurcher Zeitung April

6.
Earlier this month i n the Tel Aviv-Jaffa
region the top section of the Hassan Bek
Islamic mosque somehow collapsed . Mus-

lim leaders in Israel are accusing Israeli ele

ments of having sabotaged the structure , and
the radio broadcasts of the governments of
Syria and Jordan are blaring loud broadcasts
accusing Israel of "desecrating Muslim holy
places . "
An expert on Islam at Israel ' s Tel Aviv
Shiloah Centre , Zvi Elpeleg , warned that if
the Israeli government did not take action to
ensure that the Hassan Bek structure were
preserved and that the incident of the col
lapse were fully investigated, "this incident
may spread like fire through the Muslim
world, which will not accept the conclusion
that the structure collapsed by itself. " Elpe
leg stressed that such an incident may arouse
"real religious feelings" in the Islamic world
"which are then exploited by the Muslim
Brotherhood. "

Why is A ndropov afraid to

reveal the truth ?
Lyndon H . LaRouche , Jr . 1 980 presidential :
candidate and advisory board chairman of
the National Democratic Policy Committee
(NDPC) , released the following policy
statement from Wiesbaden, West Germany
on April 6 .
"President Reagan should immediately
challenge every Soviet-loving , peacenik,
nuclear freeze advocate to put the question
to Yuri Andropov why Reagan' s speech was
never printed in the U . S . S . R . Is Andropov
afraid of printing the President ' s proposals?
Why is he afraid to utter a single word about
the substance of Reagan ' s speech?
"It would not be inappropriate for the
President to demand that George Ball be the
first to make this demand of Andropov .
"Until the peace movement demands that
Yuri Andropov print Reagan ' s speech, its
adherents should kindly shut their mouths. "

Mother R ussia dislikes

beam weapons
Rallying to the support of Yuri Andropov ,
Patriarch Pimen of the Russian Orthodox
Church (Moscow Patriarchate) has sent a
letter to Ronald Reagan , accusing the Pres
ident of being a "bad Christian , " because
EIR

April 1 9 , 1 983

Briefly

"you are pushing for war against my nation

and fatherland. " Reagan, according to the
Muscovite Patriarch, is committing a "seri
ous sin" by pondering the "criminal hypoth
esis of war."
The letter is also meant as support for
the American nuclear freeze bishops . Radio
Moscow has played up a U . S . Roman Cath
olic pastoral message which calls for "large
scale public resistance" against "Reagan' s
immoral policies . "
The president o f the Great Britain
U . S . S .R . Friendship Association, Sir John
Lawrence, told a caller, "Mother Russia will
take care of the beam weapons . " He pre
dicted an "unstoppable religious renais
sance" in the Soviet Union by the end of
century , which is being prepared by the un
derground Uniate Church in the European
part of the U . S . S . R . and the Sufi Brother
hoods in the Caucasus and Central Asian
Muslim regions . "Secret believers" inside
the Communist Party , the Oriental Institute,
and other institutions preparing the way , he
said.

French a[!ack
Bulgarian Connection
France' s April 6 decision to expell 47 So
viets is related to the recent assassination of
Colonel Nut, head of the French DGSE In
telligence services for the Alpine region who
was instrumental in uncovering the "Bul
garian Connection" involved in the attempt
ed assassination of Pope John Paul II. Nut
had supplied Italian officials with intelli
gence leading to the arrest of Soviet spy
Pronin. 1t is reported in the French press that
Nut, found dead on Feb. 25 , could have
been killed by a double agent who fled to
East Berlin with documentation collected by
Nut regarding KGB operations in Italy and
France .
According to the International Herald
Tribune , French intelligence obtained from
a Bulgarian defector provides an extensive
reading of the plot to kill the Pope and of the
Bulgarian drug and weapons ring only one
month after the attempt against the Pope' s
life . The Soviet spies deported are the net
worl<: of Nikolai Chetverikov, said to be KGB
superviser in France , who was himself de
ported. Ostensibly first counselor at the SoEIR

April 1 9 , 1 983

viet embassy in Paris , Chetverikov is known

as the "faceless man" who takes his orders
from Soviet leader Yuri Andropov .
The decision to expel the 47 Soviets was
made by President Mitterrand himself, after
a briefing by Interior Minister Gaston Def
ferre . Mitterrand, according to some re
ports , was enraged when he realized that the
KGB had attempted to infiltrate his own en
tourage. Both Spain and Britain have ex
pelled Soviet diplomats as spies in the recent
period, but only one or two at a time.

Colombia losing 'privleged

debtor' status
New York bankers have told EIR ' s Debt
Watch that Colombia "will have a very hard
time getting private bank credits from now
on, " despite that country's remaining $4.5.
billion reserves.
This view was confirmed to EIR by a
Japanese diplomat in Colombia who said
that Japanese bankers expect Colombia to
"explode" as Mexico, Brazil, and Venezue
la have. Even the Japanese, therefore, are
avoiding any new
. loans to Colombia, he
said.
Last month Colombia FiIlaijce Minister
Edgar Gutierrez had boasted at the meeting
of the Inter-American Development Bank
(lADB) in Panama that his country was being
deluged with a "rain of offers" of interna
tional bank credits of all kinds .
Colombia central bank head Hugo Pa
lacios Mejia, a member of the delegation to
the IADB meeting, contended that one such
offer came from Japan, an offer of yen-dc
nominated bonds through the Banco Indus
trial de Panama. The Japanese diplomat de
nied that the offer had been made . .
Palacios Mejia also said that Colombia' s
reserve "cushion," now at $4.5 billion and
declining, would still provide a "margin of
security" to guarantee the nation' s import
requirements for at least 14 months and to
maintain its seal of approval by the interna
tional banking community .
One New York banker who has been
carefully watching Colombia in recent days
told EIR , "Things could change overnight.
Those reserves can be pissed away awfully
quickly . Just look at Brazil. . . . "

HENRY KISSINGER denied

that he had threatened former Italian
Prime Minister Aldo Mom just prior
to Moro' s kidnapping and murder by
the Red Brigades in 1 978 in a inter
view on Italian national tCievision
April 8. "The Red Brigades are a
communist organization," Kissinger
stated. "I am very enraged when I
hear people accusing the United States
of killing Moro . " When pressed by
the interviewer, who cited the testi
mony of Moro' s widow and children
that pointed directly to Kissinger, he
answered, "How could I have threat
ened Also Moro if l don't speak Ital
ian? . . . They are just upset by Mo
ro's death. "
JURGEN HOLST, science and
technology consultant to the Palme
Commission, said April 8 that the
Commission had "submitted its last
report" in the wake of President Rea
gan's March 23 speech calling for
U . S . development of space-based
beam weapons. " [The Commission]
may not continue to function. "
FALCO ACCAME, head of the

military department of the Italian So

cialist Party and a former head of the
defense committee of the Italian Par
liament, declared that, if President
Reagan' s beam weapon technology
is deployed, the equilibrium of terror
will be replaced by "a new equilibri
um of underpants . . . . We will find
ourselves in our unrpants if we take
off all our armaments. If we abandon
the sense of unjust security based on
the equilibrium of nuclear terror, we
will find ourselves without our pro
tective mother. "

EFRAIN RIOS MONTT , the

fundamentalist dictator of Guatema

lan, declared that "greater Guatemala
has historically extended from the
state ofChiapas, Mexico to Costa Rica
in an interview published n the Co
lombian magazine Cromos March 29.
------- ------

International

51

TIrnNational

Bipartisan government
in 1 985 , pledges LaRouche
by Lyndon, H.

LaRouche ,

Jr.

The following release was issued on April 6 .

If I choose to campaign for the 1 984 presidential nomination
of the Democratic Party, as I am presently inclined to do , and
if I am also nominated and elected , I now solemnly pledge
that my cabinet will constitute a bipartisan government . I
would also ask President Ronald Reagan to consider a similar
commitment, in the event of his almost-certain nomination
and probable reelection . .
The action taken by President Reagan , in establishing an .
irreversible new strategic doctrine for the United States,
changed the course of human history at almost the same
moment he completed his televised address to the nation .
Within no less than 48 hours following that address , the
government of the Soviet Union acted to accelerate its exist
ing program of development of a full-scale strategic ABM
system based on beam-weapons technologies . Among the
leading political figures of the world , only small-minded
fanatics still believe that the change in strategic doctrine
could be reversed . The proverbial genie is out of the bottle ,
and no one could ever put it back in .
What the President has accomplished is what the great
German poet, historian , dramatist, and political leader Fried
rich Schiller defined as a punctum saliens . In the major crises
of real history , and in the course of warfare among well
matched adversaries , as in the great classical tragedies of
Aeschylus , Shakespeare , and Schiller himself, a point of no
return is reached . At this point , there exists some unique
command-decision to be made by a leading figure , on which
the future course of events entirely depends . If that unique
choice of command-decisions is made , the looming tragedy
is averted. If that command-decision is not made at that point ,
52

National

there is no power on earth capable of stopping the monstrous

tragedy ready to unfold .

Dimensions of the crisis

At the moment the President made his historic command
decision of March 23 , the world was already in the grip of a
downward-spiralling , new economic depression , and was at
the brink of the biggest worldwide financial collapse in his
tory . We faced an almost certain new missile-crisis , far more
dangerous than that of 1 962 , during the period between Oc
tober 1 983 and March 1 984. If we escaped general nuclear
warfare during that crisi s , we faced the prospect of almost
certain nuclear warfare sometime during the second half of
the 1 980s . The economies of the United States and Western
Europe were collapsing into the helpless ruin of "post-indus
trial society . " Our principal trading-partners of the develop
ing nations were on the verge of either being destroyed by
Khomeini-like murderous insanity , or were simply financial
ly bankrupt and collapsing into economic and social ruin .
All of these critical problems had been avoidable . Over
the recent 1 5 years or so, our nation had made the wrong
decision at nearly every turning-point. We had continued an
absurd policy of nuclear deterrence , which led lawfully to
the brink of nuclear warfare . We had permitted Malthusian
fanatics to bully government into turning our economy into a
post-industrial scrap-heap . We had made wrong decisions at
each point of new monetary crisis we shollid have reorga
nized an exhausted Bretton Woods system .
The problem has been that the habits of decision-making
built into our government and major parties led us each time
to the wrong choice of action in each of these areas . Unless
some profound political shock broke up those acquired, builtEIR

April 1 9 , 1 983

on strategic doctrine . The folly of warfare is the folly of the

human condition from unremembered past to the present .
Circumstances not created by him gave this President no
other choice . He did not create the mess , the folly; he acted
as President to mobilize us to work our way upward out of
all of those catastrophes which loomed before us .
Our great republic and the Soviet Union are now locked
into the new strategic doctrine the President has unleashed .
We have no choice but to unleash that national mobilization
of idled labor, depleted agriculture and industry , and ruined
urban infrastructure , by which to develop and to deploy in
the shortest possible time , a complete strategic defense-sys
tem adequate to ensure that our nation can not be physically
destroyed within the initial 25 minutes of thermonuclear bar
rage . The resistance will vanish , as the whisper of a "fool ,"
or perhaps even "traitor, " is the word the citizens speak
almost by reflex against whatever political figure would ob
struct this inescapable effort .

Fundamental changes implied

Lyndon H. LaRouche. Jr .

in habits of decision-making , our civilization was doomed to

die during the present decade . As the second quarter of 1 98 3
approached , time was running out . The command-decision
needed must be made now , and among all the forces in the
world , only the President of the United States had the specific
power to deliver that needed decision .
On March 23 , 1 98 3 , that President acted . If our civiliza
tion is saved , as we may now hope it will be saved , it will be
that decision of March 23 which made such a happy conse
quence possible .

' Do not blame

President Reagan '

It may be deemed unfortunate by many , that the Presi

dent ' s punctum saliens was in the form of a military-decision ,
a decision which obliges us to unleash a new , high-technol
ogy arms-race . Similarly , we stumbled through eight years
of a Great Depression , from 1 93 1 to 1 93 9 , before we ended
the depression with the 1 939-43 military-production build
up under President Roosevelt . We could have risen out of the
depression by non-military mean s , at any point during the
preceding eight years , but even President Roosevelt could
not force through the needed actions of general economic
recovery , except at the point the popular will forced through
the decisions needed to mobilize idled labor, depleted agri
culture , and collapsing industry for producing the means of
warfare . Similarly, Lazare Carnot saved France from de
struction under Jacques Necker and the Jacobin Terror, in
1 793-94 , by effecting an industrial revolution as part of a
revolution in warfare .
Do not blame President Reagan , that we could be saved
from our habitual follies only through a necessary decision

EIR

April 1 9 , 1 983

This command-decision , and the mobilizations of our

wasted capabilities it implies , will change fundamentally the
trends of general opinion of our citizen s , as well as the deci
sion-shaping institutions of government and political parties .
I n this way , we shall become the United States of America
once again.
We shall probably avoid the terrible war still threatening
us . Sooner or later, it will become clear to the Soviet leader
ship that our government and our people will proceed with
full commitment to implement the President' s decision . At
that point , the Soviet leadership will negotiate with us on the
terms which the President and Defense Secretary Weinberger
have implicitly offered publicly . Those negotiations will be
successful , and will require neither power to compromise
any interest which is truly vital . Those negotiations will ac
complish the purpose stated by Richard Allen in a televised
comment following the President ' s March 23 address : Mu
tually Assured Survival .

The Soviet reaction

At this present moment, the Soviet leadership is bitterly

frustrated that the President has stopped the 1 5-year-long
process of self-destruction of Western civilization . Until
March 2 3 , some gentlemen in Moscow might have dreamed
that we would succeed in transforming ourselves into the
pitiable wreckage of a post-industrial society , and that they
might become world-hegemonic during the 1 990s , on con
dition they manage their way through the strategic crises
erupting in the last moments of our collapsing power. Any
leading circles in Moscow whose thoughts had drifted hope
fully in that direction , must have suffered an inevitable sud
den rage of deep frustration as they heard the President' s
words on March 23 . Even now , a s Moscow dispatches ex
pose this fact of the situation , dead dreams die hard .
Sooner or later , during the weeks ahead , the Soviet leadNational

53

ership will reconcile itself to the inescapable fact, that the

sure to our children and grandchildren a different quality of

United States of the 1 990s will be once again the greatest

response by government than has prevailed since the middle

economic power on earth , and that the Soviet Union must

of the 1 960s . Particular decisions come and go ; new laws are

learn to live on the same planet with our republic for a very

enacted to replace old; technologies will develop rapidly .

long time to come . Then , albeit with bitter scars where dead

The quality of decision-making our people properly require

dreams once flourished , they will negotiate the implementa

of government does not change . We must mold habits of

tion of a new strategic order in world affairs , Mutually As

response by government, and must accomplish that by a

sured Survival .

continuity of direction in leadership of each branch and de

The reawakened power of reason

our Presidents .

partment of our federal government over successive terms of

Out of this military endeavor there will erupt the greatest

I would heartily recommend to those of my fellow-citi

technological revolution in history . The benefits of controlled

zens who wish to reflect on this matter, three books written

energy-flux densitie s , beyond the wildest dreams of a gen

by two among the great leaders of our nation in the past . The

eration ago , will , during the next several years , begin to

first was written in 1 8 1 5 by Mathew Carey , a former Irish

transform both industrial production and also our definitions

republican , who joined

of natural resources and raw materials . Within a decade , a

became a great citizen of the city of Philadelphia, and did

single operative in one of a growing number of revolutionized

much to restore our national prosperity during the terms of

Dr. Benjamin Franklin in Paris , who

industries will have the power to do the work of 10 or more

office of Presidents Monroe and John Quincy Adams . His

skilled workers of today . Within the span of the remaining

book ,

years of this century , laser-like devices above the gamma

condition of our major political parties of that time , the Fed

The Olive Branch,

addresses the fact of the ruined

ray spectrum will provide some skilled operatives the power

eralist and Democratic-Republican parties , and proposes a

to change the nuclear structure of matter at will . The average

bipartisan effort by the best currents of both parties to remedy

power of each of our citizens to produce the material prereq

the evils which had befallen our nation since 1 796 . The

uisites of life will rise to many times that of today' s technology .

second two books are by Mathew Carey ' s son , the leading

Accompanying this economic benefit for all our people ,

American economist of the 1 840s through the 1 870s , and

there will be a great resurgence of morality . Even within

Abraham Lincoln ' s chief economic advisor . I recommend

hours of the President ' s March 23 address , a significant up

his 1 848

surge of technological optimism was evident among our cit

1 85 1

izens . This represents a process of reawakening of the best

from our past , but they aid us to put our present problems
into historical perspective . We must learn how the past shaped

features formerly associated with the American character.

That best quality of the American character was not our

The Past, The Present, and The Future, and also his
The Harmony ofInterest. These are , admittedly , books

our present , and use that knowledge gained to make us wiser

concern with material wealth as such . It was a belief in

in contemplating what consequence our present policy-ac

reason , that the development of our powers of reason gave

tions will have for our own posterity .

us the proper means for facing problems in all aspects of life .

Therefore , I now solemnly pledge , that were I to become

I t was also a belief i n developing these powers i n our children

President in January 1 985 , I would hope to invite some of the

and grandchildren , with aid of appropriate education , and

best officials of the Reagan administration , those who have

thus bequeathing to our posterity a better world , a better life

performed well in implementing policies I deem in our na

than we had known . It made us moral insofar as it prompted

tion ' s best interest, to be included in the new federal

us to regard the brief span of our mortal existence as serving

Government .

a purpose higher than those monetary pleasures whose mem

ory dies in our graves .
During the coming years , w e must b e engaged i n trans

If both great parties of our nation are equally committed

to the leading , essential features of the new direction in our
republic ' s policy , although also disagreeing on some specific

forming the quality of both our political parties and our insti

features of policy , this ensures the essential continuity of

tutions of self-government. Our federal bureaucracy has been

government . Properly designed , bipartisan government en

molded by 15 years of error in habits of decision-making . To

sures the best government .

guide that bureaucracy into the new habits of decision-mak

If ! choose to run , it will be in large part to ensure that the

ing practice implicit in the new course of our national prac

Democratic Party is committed to effective implementation

tice , it is essential that a certain continuity of leadership from

of the new strategic doctrine and the high-technology eco

. the top-most positions be ensured . A President is elected for

nomic recovery that doctrine implies . I will also campaign ,

whether I become a candidate or not , to ruin the possibility

only four years , and serves at most for eight . The new direc
tions in policy-making now unfolding since the March 23

that our Democratic Party could nominate a candidate or

punctum saliens of future world history , are policy-directions

adopt a policy contrary to such a strategic doctrine , and

to be maintained and developed over decades . We must en-

contrary to such a high-technology economic recovery .

54

National

EIR

April 1 9 , 1 983

Harriman Democrats are recycling the

Andropov line against beam weaponry
by Graham Lowry
The u . s . "Eastern Establishment" has lined up with Yuri
Andropov to attack President Reagan ' s decision to develop
beam weapons that will defend the United States from nuclear
attack.
Recycling the lies of the Soviet leadership that the new
U . S . defense doctrine is a "first strike" policy are the policy
makers and think tanks grouped around "old Soviet hand"
Averell Harriman , his wife Pamela Churchill , former Cabi
net officials Cyrus Vance and Robert McNamara, and their
political action committee slush funds . This is the group
which runs the Democratic Party ' s National Committee
through California banker Charles Manatt , who is doing his
best to rig the 1 984 presidential campaign , and has already
ordered Walter Mondale and its other designated "front-run
ners" to side with Andropov against the President . So far,
1 980 presidential candidate Lyndon LaRouche , who had
warned for five years of Soviet beam weapons development,
is the only major Democratic Party figure to unambiguously
support the President' s decision .
The Harriman faction knows perfectly well the Kremlin ' s
"first strike" charge i s nonsense: didn 't the President himself
say that it could be in the national interest to share the new
technology with the U . S . S . R . ? The Harrimanites also know
that the Soviet Union itself has been pouring immense amounts
of scientific manpower and research funds into beam weap
ons technologies, and that the weird McNamara "balance of
terror" doctrine known as MAD (Mutually Assured Destruc
tion) , under which the superpowers hold each other hostage
with enough nuclear warheads to obliterate the human race ,
is finished . The fact is that clinging to MAD while only one
superpower develops beam weapons can only lock the world
on course to nuclear war.
It is their obsessive hatred of technology, industrial prog
ress , and the republican nation-state that motivates the Har
riman Democrats . Since Reagan ' s beam weapons decision
promises to trigger a cascading series of technological break
throughs that will permit the U . S . economy to produce its
way out of the depression , it threatens the Harrimanites '
"weaken the West" arrangement with the Soviets .
It is under these auspices that so many U . S . political
figures are echoing Andropov ' s words in Pravda that Presi
dent Reagan ' s call for the development of defensive beam
EIR

April 1 9 , 1 983

weapons is aimed at "acquiring a nuclear first strike capabil

ity" and will "open the floodgates of a runaway race of all
types of strategic arms . " They agree with Andropov that the
U . S . defense budget must be cut, and they are lining up their
assets in Congress to "freeze" U . S . defense policy to the
Politburo ' s specifications .
The Soviets are counting on old Averell and his deputies
to defend them . As a commentator in the Soviet military daily
Krasnaya Zvezda wrote March 27, "Observers considered .
the House . . . decision to approve an ' alternative' U . S . draft
budget for 1 984 . . . a most powerful blow to President
Reagan ' s prestige . " Sen . Edward Kennedy ' s immediate re
sponse to Reagan ' s address was , "The Democratic alterna
tive in the House is a far more responsible answer to the real
defense needs of our nation than the misleading red-scare
tactics and reckless ' S tar Wars ' . schemes of the President . "
The Harrimanites deployed on the Democratic presiden
tial trail are evidently determined to prevent the American
population from seizing the path to a higher level of security
and real economic recovery . S ince the President ' s speech,
they have stepped up their attacks on the Reagan defense
budget , and most have zeroed in on beam weapons .
Alan Cranston , a founder of the anti-technology World
Federalists , called Reagan ' s plan "a nightmare of more and
more spending . . . . Each questionable item in the budget
should be evaluated carefully and prudently . One of the most
dangerous is a deceptively minor $ 1 billion item for an anti
ballistic missile system . That ' s four times more than we spent
in previous years , but only a preliminary drop in the bucket
for the tens of billions of dollars that Reagan would have us
spend in future years to carry nuclear warfare into outer
space . "
Carter-hangover Mondale , appealing to make the world
safe for MAD , added, "For strategic forces , we need weap
ons such as cruise missiles , Trident and Stealth [bombers]
that will ensure a survivable , stable deterrent , not Star Wars
fantasies or excessively expensive B- 1 s . " Mondale called for
canceling the MX missile , which Dr. Edward Teller and other
scientists working on defensive beam weapons envision as
the payload vehicle to put mirrors for laser weapons into
orbit .
Gary Hart , the senator from the KGB-linked Aspen InNational

55

stitute in Colorado , has demanded $ 1 00 billion in defense

cuts over the next five years , and "an emphasis on the kinds
of weapons that work in combat, rather than those with the
greatest technological complexity . I propose cutting such
major weapons systems as the Nimitz-class carriers" for "less
expensive , more effective alternatives . " Along with these
hardened-slingshot proposals , Hart urges , "We should seek
to ban outright the use of weapons in space rather than em
phasize space-based defenses . "
Senator Ernest Hollings , a regular fixture at Pamela Har
riman ' s Washington salon , has a doublespeak pitch: "Amer
ica must retool , invest in the future , and put 1 2 million Amer
icans back to work. To do that , we must begin by freezing
the federal budget to reduce recovery-choking deficits . That
sacrifice must be shared , even by the Pentagon . " Eliminating
major new weapons like the B - 1 bomber, a Nimitz-class
carrier, and the advanced F- 1 8 fighter-bomber, Hollings'
program calls for cutting $ 1 7 5 billion in defense over the next
five years .

Budget maneuvers
The common theme for these Harrimanite-KGB varia
tions on how to gut U . S . defense capacities was injected
earlier into this year's budget debate by "nuclear freeze"
leaders Cyrus Vance and Robert McNamara . They have de
manded that Congress cut nearly $ 1 50 billion in defense
spending over the next five years , especially "technologically
complex" systems. McNamara went on national television
the second week in April to spout Andropov ' s line .
The Washington Post rounded up various MADmen with
the Andropov line for a story April 4 on the Reagan decision .
The "first strike" charge was repeated by Seweryn Bialer of
the Columbia Research Institute on International Change;
former KGB agent Vladimir Petrov , now a professor at George
Washington University ; Kissinger flunky William Hyland of
the Carnegie Endowment , who declared, "Andropov has said
that the United States is going in the direction of a first strike";
and Raymond Garthoff of the Brookings Institution , who
said, "The Soviets are going to have to look at this as having
an offensive capability . " Marshall Shulman , director of the
Averell Harriman Institute at Columbia University , said that
Reagan ' s initiative "raises questions about what the inten
tions of the administration are" and reinforces the "impres
sion that this administration is not serious about arms control . "
The Harrimanites in Congress are geared up for an assault
on the defense budget centered on portraying the President' s
"compulsive overspending" a s an addiction to warmonger
ing . Like Andropov , they prefer to talk about "first strike"
and "stopping the arms race" than to discuss the President ' s
actual plan for eliminating MAD and the threat o f nuclear
destruction .
Perhaps they can explain why Andropov has prevented
publication of the full text of President Reagan ' s March 23
speech in the Soviet Union .
56

National

SPIS : offshore banks

aid drugs and crime
by Renee Sigerson
The Permanent Investigations Subcommittee of the U . S .
Senate issued a report early last month charging that the $ 1 . 7
trillion Euromarket system is heavily dominated b y narcotics
traffickers , smugglers , and organized crime cartels which are
financially looting the United States . Entitled "Crime and
Secrecy : The Use of Offshore B anks and Companies," the
report i s the outcome of a two-year study which has resulted
in the best-documented account of the financial workings of
criminal organizations ever issued by an official U . S . gov
ernment agency .
Public charges that the Euromarkets work to the benefit
of international organized crime , and operate largely as a
cover for illegal activities , were first made in 1 97 8 . At that
time , EIR editors David Goldman and Jeffrey teinberg is
sued what became a best-selling documentary entitled Dope,
Inc . demonstrating that the international narcotics trade , the
"biggest business in the world, " was conducted through the
electronic transfer of funds provided in secrecy by offshore
banking centers . Although the contents of that study were
made available to numerous governmeot agencies during the
Carter administration , this documentation was heavily
suppressed .
The subcommittee report indicates that the Reagan
administration is attempting to escalate the "war on drugs"
announced by presidential adviser Edwin Meese at the end
of March, and the war on the Mafia, announced by President
Reagan earlier this year.

The scope of criminal financial activities

The Subcommittee (known by the acronym SPIS ) , takes
as its starting point the estimation by experts that the illegal
economy in the United States ranges "from $ 1 00 to $330
billion" annually; that is, around 1 0 percent of total U . S .
Gross National Product . Going from there , SPIS estimates
the value of "foreign commerce" for illegal activities to be
roughly in the same proportion as exports are to the U . S .
legal economy , or about $20 billion peryear.
Although this estimate of illegally laundered funds ema
nating from the United States seems extremely modest, it is
large enough to have led the investigators to consider the
broadest range of channels through which funds are laun
dered out of the United States for concealment . The study
reports that London is the leading center worldwide for the
concealment of funds; and that two-fifths of all foreign bank
ing activities conducted out of Switzerland are performed
with other offshore centers , Switzerland being the center for
EIR

April 1 9 , 1 983

the practice of "layering" secret financial accounts so that

beneficial ownership is impossible to detennine .
The SPIS task force also concluded that the absolute size
of laundering operations aside , illegal financial operations
are now so tightly interwoven with "legitimate" operations
in the Euromarkets, that illegal funds constitute a threat to
the stability of the world banking system . A chief example
used in the study is the 1 982 bankruptcy of an offshore sub
sidiary of Banco Ambrosiano of Milan , Italy , a bank con
trolled by the secretive Propaganda-2 Masonic lodge . (The
SPIS document is probably the first U . S . government report
to discuss the P-2 affair in Italy-which revealed the intimate
connections between criminal Mafias and leading bankers
in any substantial detail) . The report states:

In 1 982, Banco Ambrosiano of Milan , Italy, col

lapsed , crippled by a $ 1 .4 billion exposure in loans

to several mysterious Panamanian "shell"
companies . . . .
The Euromarket is a critically important . . . fea
ture of international commerce . But in the
haven countries where money is laundered . . . it is
unregulated. Thus , the same conditions which facil
itate international commerce also create criminal
opportunities .
The criminal use of offshore facilities poses a prob
lem to the . . . stability of entire national banking
systems . The fragile condition of the world ' s banking
system today is a result in part of questionable loans ,
poor controls and the country risk occurring when so
many nations cannot pay the interest or principal on
their debt .
It is not inconceivable that it could be a criminally
derived loss , not the failure of repayment of a loan
from a sovereign nation , which could be the back
breaking straw to the banking system.
Included in the report is a shocking-if not surprising
account of the response SPIS investigators received in the
City of London to requests for cooperation between the
United States and Britain in dismantling criminal activities
in offshore centers . British officials rejected the proposal
for cooperation out of hand , asserting for the record that
organized crime was an internal American problem , due to
a significarit degree to the shortcomings in the functioning
of the U . S . government !
As London sees it , the crime problem for the most
part rests with the U . S . , for whether it is drug money
or other fraud it derives primarily from U . S . sources ,
i . e . , criminal transactions in the U . S . , and is processed
offshore on behalf of American citizens and compa
nies . The problem is compounded by U . S . agencies
which do not cooperate with one another. . . . That,
in relation to banking crime , is a small mirror of what
these officials contend is the disorganized foreign polEIR

April 1 9 , 1983

icy of the present U . S . administration , including in

adequacy in the Caribbean .
Associated with this failure is a U . S . political and
ideological attempt to export the responsibility for
U . S . crime . . . . [I]t is argued by London that control
efforts will incur only costs but no benefits . Given
these conditions , whatever the U . S . policy, it be
hooves the U . K . not to involve itself collaboratively .
As proven in Dope, Inc . , Britain ' s major banks , along
with their junior partners in the Canadian banking system,
not only participate in the proceeds of the international nar
cotics cartel , but act as the primary discounting and credit
forwarding facilities for drug plantations , processing facil
itie s , warehousing and transport. While it is natural that
British officials would thus be so hostile to requests for anti
crime support, the fact that SPIS chose to publish the con
tents of their discussion should have far-reaching effects .
Appended to the SPIS study is a list of dozens of legal
suits filed by U . S . agencies against criminals who used
offshore accounts to conceal financial transactions . Most of
the cases cite as many as 10 leading Swiss banks as complicit
in the "layering" of offshore accounts. Also prominent in
the series is Canada' s B ank of Nova Scotia, Barclay ' s Bank,
and offshore divisions of Chase Manhattan' Bank . The case
stories include documentation on Joseph Hauser, a Mafia
kingpin who defrauded untold millions of dollars from trade
union organizations through insurance fraud .
While the report devotes much attention to internal po
litical conflicts which stymie a direct approach to law en
forcement in tiny Caribbean banking centers , the investi
gators stress that a crackdown on illegal banking must be
organized by "the major trading nations" if it is to work.
The study warns against understating the degree to which
illegal deposits are accepted by the world' s largest-and
allegedly most reputable-banks . "For example , in the Car
ibbean , one major Canadian international bank has a con
sistent reputation for encouraging dirty money . . . . Senior
bank officials [commercial and governmental] describe in
stances where headquarters banks have removed competent
offshore managers for their failures . . . to optimize profits
through corrupt relationships . "
The SPIS study has already been taken a s a_ warning by
international bankers . When it was released in early March ,
the London Financial Times ran front-page coverage of its
existence. What many participants in the offshore circuit
hope , no doubt , is that this exposure will quickly lose po
litical momentum; and that in the wake of a pending collapse
of the world banking system , Dope , Inc . will simply pack
up and move its operations "on-shore , " to such locations as
the International Banking Facilities, established in 1 982
throughout the United States as competitors to offshore cen
ters . The SPIS report, however, gives reason to suspect that
forces in the Reagan administration will not tolerate that
kind of solution to offshore criminality .
National

57

The Truth About the FBI

How the Bureau was set up

as a national gestapo
by Marilyn .James
Culminating in Abscam-Brilab , the last several decades of
the Federal Bureau of Investigation have been an endles s
series o f unconstitutional excesses . I f allowed t o continue on
its present course of subverting the American law enforce
ment system, the Bureau , under the guidance of FBI Director
William Webster, will most assuredly become a national
gestapo .
Americans need only look at the 5 5-year sentence handed
Teamster Union President Roy Williams on March 3 1 to see
the results of the FBI ' s gestapo tactics already in use .
The trade union president' s conviction come just one year
after the FBI railroaded a 23-year veteran of the U . S . Senate
from Congress . On April 5 the witchhunting FBI ' s collabo
rators in court denied an appeal to former Sen . Harri s on
Williams of New Jersey . He faces a three-year sentence and
a $50,000 fine . He was convicted of a "willingness" to com
mit a crime that the FBI ' s own stealthily made films show he
did not commit .
The Teamster president was convicted o f attempting to
bribe a U . S . Senator. The FBI spent an admitted $ 1 million
to tap Roy Williams ' s phones and, as in Abscam , relied on
the testimony of a convicted criminal to make its case . The
jury admitted the testimony was "confusing and contradic
tory . " The political purpose of the trial was made clear when
Justice Department officials reportedly offered Williams pro
bation if he would agree to step down as the union ' s presi
dent. For refusing he was slapped with the 5 5-year sentence .
From the FBI ' s inception, historical investigations show
that the Bureau at the very least has been nothing more than
a political police deployed to destroy constituency-based po
litical machines through the weaponry of blackmail , extor
tion , entrapment, and perjury . At most the Bureau is the
means of Anglo-Soviet penetration and manipulation against
U . S. interests .
The Bureau , which , until a 1 935 congressional act, was
called the Bureau of Investigation (BOI) , was conceived in
secrecy , and in defiance of the expressed will of the Congress
of the United States . Congress became the first victim of the
Bureau ' s blackmail , and of its frame-up efforts , carried out
at the direction of President Theodore Roosevelt and his
Attorney General , Charles J. Bonaparte .
In 1 907 Bonaparte went before the House Appropriations
Committee to request the creation of a permanent detective
force for the Department of Justice (DOJ ) . He used the still
58

National

smouldering land-frauds scandal in which the General Lands

Division of the Interior Department and several congression
al members were found to have been involved in speculative
ventures under the Timber and Stone Act of 1 87 8 . To conduct
what was later found to have been a highly irregular
investigation into the initial allegations of land fraud , Bona
parte had to "borrow" special agents from the Postal Service
and Treasury Department.
Bonaparte ' s request for his own detective force was not
received well by the congressmen . The House moved to ban
the existing DOJ practice of "borrowing'? agents . This it
accomplished by amending the Sundry Civil Appropriations
Act passed May 27 , 1 908 .

The backroom birth

of the FBI
In an attempt to sidetrack the amendment, President Roo
sevelt wrote to House Speaker Joseph G . Cannon , warning
that "the provision about the employment of the Secret Serv
ice men will work very great damage to th.e government in
its endeavor to prevent and punish crime . There is no more
foolish outcry than this against ' spies ' ; only criminals need
fear our detectives . "
The New York Times rallied to the cause o f Roosevelt and
B onaparte . Its editorials protested that the amendment was
the work of the land fraud swindlers and that the "Represen
tatives have , however unwittingly , become the tools of
theives . The Senators are duly warned . "
A typical Chicago newspaper article that summarized the
opposing viewpoint during the debates was published in the
Congressional Record: "There is no desire for a general de
tective service or national police organization in connection
with the federal government . On the contrary , there is in
Congress an utter abhorrence of such a scheme . . . "
The Congress , believing the matter settled and Roose
velt-Bonaparte checkmated, adjourned June 1 , 1 908 . On July
26 , acting at the direction of the President , Bonaparte issued
the order that gave birth to the BOI. Upon its return , Congress
was confronted with the Roosevelt-Bonaparte fait accompli .
The congressional response was both hostile and imme
diate . Investigations were launched by both houses into all
federal investigative and police agencies , particularly the
new DOJ detective force . Bonaparte was forced to appear
before the House and was subjected to intensive confronta.

EIR

April 1 9 , 1 983

tion and grilling by the angered members .

At the same time , rumors and accusations were circulat
ing that congressmen were being placed under surveillance
and their personal papers and mail were being tampered with .
Roosevelt publicly denied the charges . But, he admitted that
"sometimes through the accidental breaking of such [a mail]
package the contents were exposed . " The President then pro
ceeded to publish the correspondence of one of his principal
foes , Sen . Benjamin R . Tilman of South Carolina. The object
lesson was not lost on the opposition , nor has the Bureau ever
forgotten its effectiveness .
Impatient with the persistent, however feeble, cries against
the abuses of the new agency , Bonaparte appearing before
the congress for the last time on the matter in December 1 908 ,
declared: "Anybody can shadow me as much as they please .
They can watch my coming in and my going out. I do not
care whether there is somebody standing at the comer and
watching where I go or where I do not go . "
Kentucky Congressman J . Swagar Sherley ' s response to
Bonaparte , was reportedly met with resounding applause by
the House: "In my reading of history , I recall no instance
where a government perished because of the absence of a
secret-service force , but many there are that perished as a
result of the spy system . If Anglo-Saxon civilization stands
for anything , it is for a government where the humblest of
citizens is safeguarded against the secret activities of the
executive of the government . . . .
"The Fourth Amendment declares: ' The right of the peo
ple to be secure in their persons , houses , papers , and effects
against unreasonable searches and seizures shall not be
violated . . . . '
"The view of government that called it into existence is
not lightly to be brushed aside . "

The first menace

Despite being created by the executive branch , the BOI
had no jurisdiction . It spent its first two years fighting to stay
in the game . It was obvious to all that , then as now , the
. Bureau ' s only relationship to law enforcement-retrieving
stolen vehicles aside-is as a pretext for gathering informa
tion to be used in its jihad against its assigned targets and
perceived foes . The FBI has justified its long history of gross
abuses by pointing in each case to a "menace"-a threat to
citizens ' safety or national security so grave as to exonerate
even the Bureau . For the fledgling Bureau , "white slavery"
was its first "menace" and its long- sought justification for its
ongoing existence .
Bonaparte appointed BOI chief Stanley W. Finch jumped
at the opportunity to enforce the Mann Act of 1 9 1 0 . Finch
immediately realized that , given the appropriate climate , the
enforcement of the Mann Act could also be used to justify
requests for more funding and manpower. This tactic was
liberally applied by later FBI Director J. Edgar Hoover.
The Congress , of course , saw no need for the Bureau to
"purify [interstate] commerce" or to pile up "recitals of filth
EUR

April 1 9 , 1983

and iniquity . . . and then run to Congress for more legisla

tion . " The Congress rightly understood that the federal gov
ernment should not be burdened with "dig up the private
scandals of men . "
Finch ' s response can now b e considered classic Bureau
esque , in terms of handling Congress and other agencies .
Finch appeared before the congress i n 1 9 1 0 and reported the
following chilling state of affairs:
"Unless a girl was actually confined in a room and guard
ed , there was no girl , regardless of her station in life , who
was altogether safe . . . . There was need that every person
be on his guard, because no one could tell when his daughter
or his wife or his mother would be selected as a victim . "
Hoover would later acknowldge , "The average case concerns
usually one man and one woman or two men and two wom
en , " -not the gangbusting crime hunt of legend .
Pimps and madams were used as "informants . " Local
attorneys were hired to spy on local brothels and keep a
census on patrons and prostitutes . These local relationships
were used to place agent "handlers" across the nation and
tum citizens into the "eyes and ears" of the Bureau . The BOI
agents refrained from direct action , but on occasion would
threaten to furnish local police with evidence of a local crime
to keep the network under control . The Mann Act authori
zation was frequently used to launch inquests into the person
al morality of individuals not connected to criminal activity
in any way . Their employers and neighbors were questioned .
In this manner the Bureau ' s massive bank of raw dossier
material on thousands of citizens was initiated .
Also feeding the files was information gathered by the
BOr s primitive , but effective , wiretaps . No one was
immune . A former FBI agent later recalled that during the
1 930s , "When we were doing investigations under the White
Slave Act, there was one dependable way to find out infor
mation about call girls, by wiretapping . And we didn 't hesi
tate a bit . " The records bear out that little of the information
electronically gathered ever surfaced as evidence in a court
of law . Rather, it continued to feed the "raw" data dossiers .
But As the Mann Act hysten a and arrests died down , the
Bureau had achieved three major objectives: it had become a
major bureaucracy with offices across the country and an
established multimillion-dollar budget; it had secured a net
work of informants throughout the country , often themselves
criminals ; and , most importantly , it had its files , with infor
mation on thousands of American citizens , information that
without being criminal material-could be used to intimidate
and coerce .

The World War I rampage

No better instance of the BOr s irresponsibility and thor
ough disregard for the rights and interests of the American
citizenry can be found than in its activities during World
War I .
I n the years before and during that war, British intelli
gence directed a concerted propaganda and dirty tricks camNational

59

paign to secure U . S . entry into the war on Britain ' s side ,

using such influence channels as Walter Lippman ' s New Re
public . Attacks were leveled against German-Americans and
German culture-including the works of such Germans who
influenced America as Beethoven and Schiller.
One effective vehicle for this drive was the American
Defense Society . Formed with Teddy Roosevelt as its hon
orary president, and the ever-present Charles Bonaparte
(grandnephew of Emperor Napoleon I) as honorary vice
president , the ADS opposed German business in America,
employment of Germans, and teaching of the German lan
guage in schools .

When the FBI 's predecessor, the

Bureau oj Investigations, was
created, it was obvious to
everyone that, then as now,
its only relationship to law
enforcement-as idefrom
retrieving stolen vehicles-was
to use crime:/i.ghting as a pretext
for gathering iriformation to be
used in its political war against
ass ig ned targets and perceived
foes. The Bureau 's activities
during World War I exemplify its
thorough disregardfor the rights
and interests of the American
citizenry.

This line was quickly taken up by the remnants of turn

of-the-century nativist movements . By the time of the 1 9 1 4
outbreak of hostilities , the ADS had fueled j ingoism and
xenophobia with self-appointed vigilante bands throughout
the country . In March 1 9 1 7 , BOI chief A. Bruce Bielaski
seized upon this impulse to complement the Bureau ' s net
work of informants with an army of thugs . Winning approval
from Attorney General Thomas W. Gregory , Bielaski an
nounced the formation of the American Protective League as
a civilian adjunct of the Bureau open to able-bodied , patriotic
American men who wanted "to help their country . "
Within three months, the APL grew to 1 00 , 000 members ,
60

National

and swelled at its height to 250 ,000 in chapters nationwide .

For $ 1 , the recruits obtained a shiny badge describing the
bearer as a member of the Secret Service Division . Later,
when scandalized officials of the Treasury Department-of
which the Secret Service was a branch-protested that the
badges would invite confusion between the leisure-time gum
shoes and the real Secret Service , the badges were changed
to read "Auxiliary to the United States Department of Justice . "
However , while the B O I busily built its vigilante army,
it abdicated all serious responsibility for America' s wartime
security , just as today it has failed to curb drugs and terror
ism . While the Bureau ' s assistance was eagerly sought by
other U . S . agencies engaged in wartime intelligence and
internal security , the Bureau refused to cooperate . The BOI
attitude-now well known by federal state and local law
enforcement agencies across the nation-was that if it could
not call the shots and grab the headlines , why should it share
the burdens of responsibility? Instead , the Bureau used its
extralegal apparatus founded on the APL to harrass law
abiding citizens, especially union organizers and immigrants .

The draft raids

Any doubts as to this harsh assessment of the Bureau ' s
actions during the World War I are quickly dispelled when
the Draft Raids of 1 9 1 8 are examined . When the nation was
in war full mobilization , the Bureau was fixated on broad
ening its responsibilities and those of its junior G-men . Still ,
the energy of the APL was not to be squandered on the
national defense , nor would their targets be limited to union
ists and immigrants . Now with full arrest powers , the APL
watchdogs would be unleashed against any American male
hapless enough to be caught in the BOl ' s first great dragnet.
On Aug . 5 , 1 9 1 8 , Secretary of War Newton Baker wrote
Attorney General Gregory , claiming that the "known deser
tion" from the first and second draft calls totaled 308 ,489
persons . How this figure was arrived upon has never been
determined , but it provided the needed pretext for the BOI
APL draft raids . .
The hunts began in earnest on Sept . 1 5 . Thousands of the
Bureau ' s special "deputies" were poised to descend upon
suspected draft dodgers in cities throughout the country .
Anyone who could not produce his draft card or birth certif
icate when challenged by the BOI-APL agents was rounded
up and detained .
In the New York metropolitan area alone , 7 5 , 000 sus
pected "slackers" were arreted and j ailed , 30,000 of them
on the first day . By the second day of the New York City
raids , the press began reporting the wholesale release of men
arrested , and accounts of the horrible conditions of impris
onment began to filter out. In the end, it was admitted that
for every 200 men arrested , at least 1 99 were mistakes; better
than 99 percent would later be found to have been men who
were visiting an area from out of town.
It should be noted that there was a mercenary quality to
EIR

April 1 9 , 1 983

against "mob rule" and "terrorism , " and an outraged citizenry

led the Bureau to back down .
Toward the end of the war, reports historian Corsan , the
APL had become "too large and had been created from too
many separate operations for anyone to control it. . . . Or
ders from . . . Washington were routinely disobeyed or ig
nored . For the remainder of the war, various segments of the
APL abused their position through illegal wiretaps , arrests ,
harassments , violations of personal records , and general dis
regard of civil liberties . The Justice Department lacked the
money and manpower to control the APL , or to do without
it. "
Although the APL was no longer used in the raids , it was
preserved as an informant network , feeding illegally secured
information-through illegal wiretaps , interviews, surveil
lance and "black bag jobs" -into the BOrs raw data "black
files . "
Perhaps the best contemporary verdict o n the incidents
was given by Senator Bandagee , who remarked at the time
of the BOI-APL alliance , "If this great government . . . is to
hunt down lawbreakers , it cannot with any consistency as
sume to act the part of the lawbreaker itself. " As Cointelpro ,
Abscam , Brilab and a host of other "investigations" show ,
the FBI never learned that lesson .

the APL ' s cooperation . U . S . intelligence historian William

Corsan reported that "in return for a promise from the Justice
Department that they would have sole j urisdiction over slack
ers , APL members pledged to forego" a promised $50 bounty
per slacker. "On April 1 5 , however, Attorney Gregory au
thorized 'expense reimbursements ' of up to $50 per slacker
. . . in effect renewing the bounty hunter incentive . "
The BOr s blundering may have resembled a Keystone
Cops farce , but it caused incalcuable damage-not only to
the victims and their families , but to the nation . First, by
whipping up a baseless claim that hundreds of thousands of
young men were slackers , the morale of the nation in warfare
was at least temporarily compromised .
But even worse, the BOrs Nacht und Nebel tactics brought
the U . S . close to a police state . Many legislators rushed to
the Bureau ' s defense , taking the attitude expressed in the
Senate: "Is there a Senator in this body who would not will
ingly stay in jail a week, if necessary , in order to have justice
meted out to even one such criminal . "
Fortunately, not all congressmen had lost sight of the
Constitution. One congressman , said , "In the west we have
another name for that sort of procedure , although we use it
against animals and not men . We call it a round-up , and even
then the mavericks are cut out . " The combined pressure of
outspoken congressional critics, the press editorializing

To be continued.

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$12 5

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3 m o . $135 , 6 m o . $245 , 1 yr. $450

$396

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North Afric a : 3 mo. $140, 6 mo. $255, 1 yr. $470

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National

61

National News

Williams appeal denied ;

Abscam condoned
The U . S . Court of Appeals for the Second
Circuit in New York on April 5 denied for
mer New Jersey Senator Harri son Wil
liams' s appeal of his Abscam conviction.
The Second Circuit has consistently con
doned the Carter administration Justice De
partment's witchhunt against constituency
politicians with its rulings .
An arch-liberal panel of Judges Jon
Newman, Amalya Kearse , and Henry
Friendly (a Louis Brandeis-Felix Frankfurt
er protege) heard argument on the appeal
late last fall . Judge Newman began his opin
ion by denying that Williams' s refusal to
take a bribe, a fact recorded on the FBI' s
own videotape, would i n any way affect the
legal issues in his case . Newman writes:
"The evidence against Williams . . . differs
in significant respects from that presented in
previous Abscam trials , but the major legal
issues are similar. "
Williams , a 23-year veteran of the Sen
ate , was sentenced to three years in prison
and a $50,000 fine on Jan. 1 6 , 1 982 by Judge
George Pratt in Federal District Court. Re
liable sources report that when Pratt was
awarded his appointment to the appeals court
after convicting Williams, he shared offices
with Judge Newman.
The Second Circuit's decision goes be
yond its previous denials of Abscam appeals
by , in effect, establishing "willingness" as
an ex post facto law . The opinion reads:
"From the totality of the evidence . . . the
defendants were 'ready and willing' to com
mit the crimes charged as soon as the oppor
tunity was first presented ," but does not as
sert that they did commit a crime.

Rohatyn proposal
introduced in House
House Banking Committee Chairman Fer
nand St. Germain (D-R . I . ) introduced
HJR208 on March 1 7 , calling for the United
States to pursue certain policies at the May
6 Williamsburg economic summit. The res-

62

National

olution mirrors the proposals put forward by

Felix Rohatyn for a "Global Big MAC" to
recycle Third World debt.
The three "resolved" clauses of the St.
Germain resolution are that the United States
should propose:
" I ) consideration of a multilateral agree
ment to adopt national fiscal and monetary
policies designed to bring about a prompt
reduction in worldwide unemployment and
interest rates;
"2) inauguration of a plan to extend the
maturity of foreign debt owed by developing
nations; and
"3) commitment to correcting any lack
of uniformity of deficiencies which now ex
ist in the regulation and supervision of inter
national banking. "
Th e resolution was worked out i n con
cert with Federal Reserve Board chairman
Paul Volker, whose reappointment at the
end of his term this fall is supported by St.
Germain.

Euthanasia attacked at
committee hearing
Senate Family and Human Services Sub
committee chairman Jeremiah Denton an
nounced at April 6 hearings that he was in
troducing legislation to ensure that "infants
at risk with life-threatening congenital im
pairments will be provided with nourish
ment, medically indicated treatment, and
appropriate social services. "
The legislation, a part of the bill reau
thorizing the Child Abuse Prevention ,
Treatment, and Adoption Reform Act, is a
response to the recent Indiana "Baby Doe"
case , in which a Downs Syndrome baby was
denied life-saving medical treatment and al
lowed to starve to death because its "quality
of life" was not considered worth
maintaining .
The mentality of those who would cate
gorize handicapped infants as "useless eat
ers" was exposed by Dr. David McLone , a
Chicago pediatric neurosurgeon, who coun
terposed the American medical response to
babies born with spinabifida (an "open"
spine) to that of the British . After surgery
performed within 24 hours of birth to close
the spinal column . which is done in 85 per-

cent of the diagnosed cases in the United

States , 50 percent of affected children are
able to walk and 73 percent develop with
normal IQs . British doctors , however, only
operate on 25 percent of the cases . With
technological advances , he and other medi
cal professionals point out, it is now possi
ble to correct the majority of the problems
that were diagnosed as mental and physical
handicaps in the 1 950s .
But another witness , Father John Paris ,
S .J . , who had recently testified that with
holding food and water from a comatose
adult patient (in the California Clarence
Herbert case) was an accepted medical prac
tice , attacked "vitalists" who feel that life
must be fought for at all costs . "We bow
before the golden calf of life at any cost,"
Paris stated.
Danton, in his opening statement, point
ed out that "allowing the 'less than perfect'
among us to die raises the terrifying possi
bility that more and more groups will be
labeled as somehow defective , and allowed
to perish. As Dr. Koop [the U . S . Surgeon
General] and others have often pointed out,
Nazi Germany' s Final Solution was the last
phase of a 'purification' program that began
in the 1 930s with the killing of handicapped
infants . "

Henry Kissinger:
' Reagan a Neanderthal'
Henry Kissinger said President Ronald Rea
gan represented "Neanderthal Republican
ism" on Italian television April 8, because
of the President's commitment to the devel
opment of space-based beam weapons that
could end the era of Kissinger' s Mutually
Assured Destruction (MAD) strategic
doctrine .
In an interview on MIXER , a program
on the national television station controlled
by the Italian Socialist Party , Kissinger as
serted that the "star" weapons were "not fea
sible . . . the only thing are the Euromis
siles . " Reiterating the statements of former
West German chancellor Helmut Schmidt
on his Kissinger Associates-sponsored tour
of the United States, Kissinger declared:
"Our allies requested the Euromissiles be
cause they were afraid they would be abanEIR

April 1 9 , 1 983

Briefly

doned . They opposed submarine-launched

nuclear missiles , because they feared the
submarines could move away . "
"The problem [with the Reagan administration)" Kissinger went on, "is that there
are too few pro-European officers there .
Reagan represents a Neanderthal Republicanism . " Asked why he was not in the
administration , Henry resentfully replied ,
"Because nobody proposed it to me . . . and
in any case I would have refused . "
To justify his "save the missiles" campaign, Kissinger claimed that the Euromissile deployment would represent no danger
to Europe because "the Soviet head of the
General Staff declared that the Soviets would
answer by hitting only the United States . "

subcommittee also added $50 million on to

the funds for buying space parts for the Space
Shuttle fleet . The congressmen specifically
stated in their budget report that this was for
"maintaining production readiness for a fifth
Shuttle orbiter. "

Schmidt and his cronies

criticize Reagan' s policy

House committee ups

fusion , NASA budgets

Subcommittees of the House Committee on

Science and Technology have added $ 1 00
million to the administration ' s request for
the NASA space programs , and $33 million
for the magnetic fusion program request in
actions taken over the past few weeks .
The magnetic fusion increase attempts
to salvage key programs , such as the nextstep Elmo Bumpy Torus P experiments , to
be built near the Oak Ridge National Laboratory , which had been slated for elimination by the Reagan administration . Other
technology projects , such as studies on advanced compact toroid devices and nextstep tokamak design s , have been upgraded.
The House subcommittee action brings
the FY84 fusion request up to $500 million .
The needed next-step engineering fusion reactor has still not been approved by the White
House , but congressmen are stating their
displeasure at the lack of support for fusion
engineering from the executive .
The additions to the NASA budget also
restore programs , such as technology utilization and space applications , to levels at
which some productive technology transfer
can go forward . Ten million dollars was
added to the crucial space station design work
and money was added on to the research and
analysis sections of the space science , physics , astronomy , and planetary budgets .
The Space Science and Applications

EIR

April 1 9 , 1 983

West Germany ' s former chancellor Helmut

Schmidt spoke at Texas A&M University
together with former British prime minister
and Brandt Commission member Edward
Heath, and former U . S . President Gerald
Ford, continuing his Kissinger Associatesand Morgan Guaranty Trust-guided tour of
the United States and Canada.
The three speakers stressed that President Reagan' s anti-nuclear missile defense
policy announced on March 23 raises "questions" that must be answered before the
country makes a full commitment.
Schmidt cautioned Reagan that "the Soviets may rush to do the same thing , or to do
something before the U . S . reaches the stage
where they 'll be impenetrable to ballistic
missiles . . . . Space-age weaponry and negotiations on restricting the deployment of
ABM systems comprise a Pandora' s box of
questions that need to be opened . "
The Soviets , Schmidt claimed , have
abided by every treaty they have negotiated
with the West and , if no new negotiations
are begun with the Soviets by the end of
1 983 about limiting medium-range missile s , the United States should deploy the
Pershing and cruise missiles in EUrope .
Space-age weaponry "will be the tools
of the military in the next century , but their
development and usages still have not been
been fully discussed by the allies , " asserted
British Conservative Heath , attempting to
reassert the "oldest ally" relationship between Britain and the United States .
Schmidt , who has been using the Palo
Alto home of Secretary of State George
Shultz as his base during his tour, has called
for "U . S . leadership" to avert an "economic
depression . " Upon his arrival in New York
at the beginning of the tour, Schmidt had a
private meeting with top executives o f Morgan Guaranty.

VANCE DEVOE BRAND, an

American astronaut who participated

in the fifth mission of the space shuttle Columnia, will make a six-day visit
to Brazil beginning April 1 6 , 0 Estado de Sao Paulo reported April 6 .
Brand will give a talk at Sao Paulo
University ' s Politechnique School
and at the National Institute of Spacial Research. He will also visit the
Institute of Spacial Activities of the
Aerospace Technical Center in Sao
Jose dos Campos , Sao Paulo. He plans
to visit Brasilia and the northeast city
of Nata! , where he will visit the rocket launching facilities of B arreira do
Inferno . During his December 1 982
visit to Brazil , President Reagan welcorned collaboration between American and Brazilian astronauts .

RICHARD BURT, the Assist-

ant Secretary of State for European

Affairs , told a luncheon meeting of
the Overseas Weiters Club in Washington April 6 that President Reagan' s announced B allistic Missile Defense program did not involve a 'new
strategic doctrine . " Burt, although a
former correspondent for the New
York Times, which has editorially
supported Soviet President Yuri Andropov ' s oppposition to Reagan , and
a former associate director of London ' s International Institute for Strategic Studies (IISS) , managed to answer, "Of course" when asked if he
felt he could loyally execute any diplomatic tasks necessary to implement
the Reagan plan .

JOHN HUGHES, the Britishborn spokesman for Secretary of State

George Shultz , chuckled and answered, "Nobody ' s asked me to take
one" when asked at an early April
press briefing if any State Department officials had yet been required
to submit to lie detector tests as part
of the President' s crackdown on unauthorized information leaks in the
administration . One veteran correspondent present remarked, "If he
passed, Shultz would have to ask him
to resign . "

National

63

Editorial

Productivity and national security

Unless you were an Executive Intelligence Review sub

maintaining equipment in space .

scriber at the time , you probably had no idea last winter

Bardwell stated: "A qualitative examination of these

than an intensive discussion was under way within the

technologies shows that if they were available in the

U. S . government and armed forces as to the desirability

form required for a beam weapon , then the technologies

and feasibility of a directed-energy beam national de

state of industrial processe s , which are almost totally

nuclear warheads in flight. Since the autumn of 1 98 2 ,

dependent at present on the narrow range of the electro

EIR has made this possibility the focus o f the military

magnetic spectrum.

and scientific intelligence we present .

At the same time , we have identified the economic

consequences of such a defense program .

"The characteristic feature of these new technolo

gies is that they access the full range of the electromag
netic spectrum , from x-rays to microwaves . For the

In our Dec . 2 8 , 1 982 Special Report on the subject,

first time , it becomes economic to perform chemical ,

Military Editor Steven Bardwell , one of the world' s

industrial, and agriCUltural processes using finely tuned

leading plasma physicists , wrote:

"The national security of the United States , in the
classic sense as national security was understood by the

electromagnetic energy rather than "brute force" in

frared energy. The impact of this general change can
hardly be overestimated . "

great military leaders at the founding of this country ,

First, fusion energy , the harbinger of the plasma

will be determined for the next several decades by the

age , which requires the same physics and engineering

decision to be made in the coming year on the devel

breakthroughs involved in beam weaponry , and which

opment of directed energy beam weapons . Beam weap

Japan projects can be on line in the mid- 1 990s , pro

ons will shape the military boundary conditions affect

duces clean , cheap energy using sea water as its fuel

ing foreign policy , but even more importantly , will

source , in intensities a hundred times those available at

determine the economic health of the nation without

present. Secondly , plasma torch processing can make

which no national defense system is possible . "

astronomical increases in the natural resource base of

Bardwell went on to describe "the coming of the

the world economy . Metalworking , chemical process

plasma age , " enumerating the technological problems

ing , and food processing with the new technologies

which must be solved to create beam weapons capable

would be transformed, on a mass production scale .

of destroying ballistic missiles from near-earth orbit .

The science and technology are well within reach ,

Namely: sensing and target acquisitions , demanding

assuming that the government spends on securing peace

the perfection of sensors , telescopes , and other detec

and economic recovery what it has spent in the past on

tors; data processing , demanding new breakthroughs in

fighting wars--wars that occurred in the first place be

circuit integration and computer algorithms ; precision

cause the U . S . passively allowed the "geopoliticians"

optics ; magnetics , materials , and pulsed power.

That is in addition , of course , to high-energy lasers
and space engineering capabilities of launching and

64

available to the civilian sector would usher in a new

fense which would enable the United States to destroy

National

and "fiscal conservatives" to wreck nations and dictate

policy .
Those are the stakes in the current budget debate .

EIR

April 1 9 , 1 983

IIill

Confidential
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