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are able to risk having what amounts to a bare-bones, one-ocean navy."

The Soviet Union has been acquiring ports of strategic importance all around the globe. Its latest effort in that connection is in Angola. Communist domination of the Canal, whether open or camouflaged, is a key objective of the Soviet navy master plan. If accomplished, Moscow and its puppets would be able to divide U.S. naval strength almost at will.

5) Within the framework of the retention of sovereignty, the United States should continue to deal with the people of Panama in friendship and fairness, as it has for 73 years. It should continue to make adjustments on the spot in non-essential treaty provisions, as it also has in the past. But the United States must negotiate with a Panamanian Government only on a no-nonsense basis. And let the word go out to “Torrijos & Co." that our solicitude for the Panamanians does not extend to a government that threatens, villifies and incites its population against the United States.

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17 NATIONAL SECURITY * FOREIGN RELATIONS

II
1608 K STREET, N.W., WASHINGTON, D.C. 20006 (202) EX3-4811

DE ROEFP FOCET Ciro In E MET LIVIH Naia I
Foreign Relations Commission

National Security Commission de

G. MICHAEL SCHLEE, Director Frank A. Manson, Counsellor

James B. Hubbard, Asst. Director for Foreign Relations

for National Security National Security-Foreign Relations Division

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PANAMA ENTERS PRESIDENTIAL SWEEPSTAKES FOR 1980:

President Carter's entry last week into the Panama Canal sweepstakes certifies the re must be more to the new treaty with Panama than is publicly known. Plus, the re must be some urgency or something Presidential involved. President Carter has urged the negotiators to get on with the new treaty. What could it be? What is, there at the end of the Panama rainbow? What is the connection?

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The Banking Connection: Banks and bankers have a way of influencing Presidents and nations. United States and their foreign branches banks have invested $2.77 billion in the Torrijos government. No one but Torrijos and his bookkeepers know the full extent of his government's indebtedness to banks other than the U.S. Could the total indebtedness run to $50 billion? Presumably the U.S. money was loaned on the strength of the Tack-Kissinger agreement of 1974 whose key provision is ceding all U.S. territory in the Canal Zone to the Republic of Panama.

If this happens, if the U.S. gives up its legal sove reignty and ownership, the rest of the agreement actually becomes irrelevant, The U.S. will do exactly as it is told by Torrijos. Treaty discussions have actually become so ludicrous in recent weeks that Torrijos is now asking $5.0 billion from the U.S. taxpayers in order to get him to take the $7.0 billion investment off our collective backs. How ludicrous can things get? Only a few months ago, Torrijos threatened force if the U.S. didn't come

Now he wants payment to accept the heavy responsibility, or more likely, the banks who have loaned all the money want their interest--now!

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One new bit of raw data has become available on the banking connection. The Republic National Bank of New York was listed until June 10, 1976 by the Department of Justice as Registered Agent #2604 for the Republic of Panama. If government investigators were searching for some real scandal, they could most likely find bags full of it in the banking connection. But the odds are against such an investigation. This may be one of those rare exceptions where money does not talk! So far, the banks have kept a stiff upper lip, despite the doubts they sometimes express about their billion dollar blunder.

The Business Connection: Apart from the banking connection, there are also the business interests which surface from time to time. Although Ambassador Sol Linowitz has publicly denied that oil pipelines and Alaskan oil have crept into the treaty discussion, there is a growing suspicion that Alaskan oil and the 4- Navy pipelines are very much involved in a business connection.

Recent announcements of a joint U.S. - Panamanian business venture to build a $40 million oil storage facility on Panamanian soil, is indicative of business activity. U.S. citizens do not object to any good business deals, but why keep secrets and especially if publicly owned property is in involved? Why increase the credibility gap between the government and the people?

The recent $100,000 contract between the Republic of Panama and Butler Associates of Tulsa, Oklahoma for a study on the transfer of oil by pipelines is indicative of more than passing interest in the commercial aspects of the developing oil situation. Butler Associates' lips are sealed and Torrijos is not talking, but many oil men know that John D. Rockefeller made a bigger fortune in transporting the oil from Ohio than in the actual pumping of it from the ground.

To make the business and banking connection even more plausible, Mr. Irving S. Shapiro, Board Chairman of Dupont, is also on the Board of Directors of Citicorp, a heavy lender to the Torrijos dictatorship. Also John D. Debutts, Board Chairman of AT&T, serves on the Board of Directors for Citicorp. The Torrijos regime is heavily indebted to Citicorp. Now, whether these business leaders, or others like

them, ever discuss business, banking and international treaties at the same time, is } not known. But it would seem reasonable that they wouid occasionally take more

than a passing interest in the bankrupt condition of the Torrijos government and might even go so far as twist the arm of a President.

The Public Relations Pay-Off: Surely it can be said that never in U.S. history has so much public money been spent in an effort to convince the American people it was in their best interest to give away a territory in which they have invesged some $7.0 billion. The U.S. State Department has sponsored a nation-wide speakers bureau sending Panamanians, as well as U.S. speakers, across country all pumping out the same pa rty line. This is the last U.S. colonial enclave, so-called by the Department of State's Alger Hiss shortly after WW II. Hiss listed the U.S. Canal Zone as occupied territory, and the Hiss judgment has filled the lecture halls of civil and college audiences from the mouths of tax paid lecturers.

Since September 1974, Ambassador Ellsworth Bunker has received an annual salary of $57,500 with the sole purpose of supporting the Canal give away. Ambassador Bunker's salary and expenses are all at taxpayers expense.

Then two of America's brightest PRmen, F. Clifton White, PR adviser to Senator Barry Goldwater; and Joseph Neopolitan of Vice President Humphrey's campaign for the Presidency, were hired at $200,000 for a 6-months final effort to put the give away idea across on the basis that it served the national interest.

former Meanwhile, on the other side,/Chairman of the Joint Chiefs of Staff, Admiral Thomas H. Moorer, USN Ret. said, the U.S. Canal Zone and Canal are absolutely vital to the security interests of the United States. No one knows and it would be difficult to

estimate how much of the Taxpayers money has been spent by the U.S. State Depa rtment to consummate an idea which was created by a few bureaucrats, and once created, had to be supported to the bitter end, however wrong the original idea might have been.

The Communist Connection: Time was when many U.S. Congressmen thought the Soviet Union might be the prime mover behind the Panama Canal give away.

Soviet strategists have made no secret of their ambition to control the four narrow sea passages which interconnect the worlds oceans. These are the Straits of Malacca and Bering, the Suez Canal and the Panama Canal.

Torrijos has visited Castro. These two have offered each other cooperation and support. Exactly what Castro has sent to Panama is anyone's guess. Our intelligence agencies don't tell us and neither does Panama G-2 Chief Colonel Manuel Noriega.

The Economic Pact signed on July 19, 1977 between the Soviet Union and the Republic of Panama is prima facie evidence of the Soviet Union's and Torrijos' common, long-range objectives. Thus far, there has been no U.S. publicity on the Soviet Panama treaty whose provisions include establishing a Soviet bank in Panama, the building of a hydro-electric plant and comparable economic ties.

The American people do not know if there is a communist connection. They do know
there are grounds for suspicion. The most recent polls indicate that 86% of our
U.S. citizens oppose a give away of the Canal, the prime objective of the new treaty.
Surely 86% of the American people can't be wrong and, in the final analysis, the
American people will be heard.

SOVIET UNION AND PANAMA SIGN HISTORICAL PACT:

For years, conservative organizations and prudent leaders have said, "The Russians are coming to Panama sooner or later." These prophecies have now been fulfilled. On July 19, 1977, according to a press story appearing July 20 in a Panamanian newspaper, the CRITICĄ, the Soviet Union and Panama signed an Economic Pact involving millions of rubles. This is significant since the Soviet Union and Panama do not have "official" diplomatic relations. According to the Soviet Panama Treaty, some of the agree conditions include the following items:

1. The Soviet Union will construct in Panama a hydro-electric plant to provide a base for improving the Panamanian economy;

2. The Soviet Union is permitted to build, open and operate a barík on Panamanian territory;

3. The Soviet Union may utilize Panama's "Colon Free Zone" as an outlet for Soviet merchandise; which includes Old France Field in the Canal Zone;

4. The Soviet Union has agreed to purchase 50,000 tons of sugar from Panama under conditions described in the Pact beginning in 1978.

Torrijos' brother-in-law signed this pact for Panama and stated, "the signing of this document has great historical significance; not only for our country but for the American continent, who are always facing strong forces that represent a philosophy that is contra ry to the destiny of Latin America." Thus, as if for ordained, in some medieval drama, the communist villain has arrived, as many American leaders had forecast. The play has begun, Soviet trade, power and influence are expanding in the Western Hemisphere. Cuba was phase one. Panama is phase two.

Former Commander-in-Chief, Pacific, Admiral John S. McCain, USN Ret., in his statement for the U.S. Senate Subcommittee on the Separation of Powers, candidly stated on July 29 that a Soviet naval task force will be ope rating in the Gulf /Caribbean area in the not too distant future. The floating guests will be most unwelcome visitors we have had in our nation's history. McCain went on to say that the United States should reclaim "Old France Field" in the U.S. Canal Zone, and develop it along with the U.S. Naval Air Station located nearby to establish an air capability to deal with this type of Soviet naval power in lieu of the U.S. Navy's steadily diminishing aircraft carrier capabilities.

Senate Hearings on Panama Stir Emotions: During the hea rings before the Senate Subcommittee on the Sepa ration of Powers Committee on Judicia ry on July 22, 1977, hearings which Senator Helms accurately forecast would most likely remain secret because the news media would not see fit to report it, the four Senators: Alien, Hatch, Helms and Scott, pressed each witness for the logic behind the "give-away" of the Panama Canal.

During the testimony of former Chairman of the Joint Chiefs of Staff, Admiral Thomas
H. Moorer, USN Ret., one Senator blurted in a not so senatorial manner and more
out of frustration than in anger, "What the Hell is wrong with the State Department?"
Admiral Moorer replied matter-of-factly that this was not his jurisdiction.

Moorer was called the best qualified man in the United States to speak on the Panama Canal, and he was an impressive witness. Senator Allen called Moorer's testimony "unanswerable and unassailable." Moorer stated simply that any Chairman of the Joint Chiefs of Staíf "will immediately perceive that it is vital to the United States' interest to retain ownership and control of the Panama Canal."

Moorer recalled how he, as Commander-in-Chief, Pacific had relied on the Panama Canal for support of his forces in Vietnam. Without use of the Canal, "The war in Vietnam would have been much more difficult and costly to conduct," he said. Then as Commander-in-Chief, Atlantic, he said the Panama Canal was especially needed for rapid transfer of troops and amphibious lift during one of the Caribbean crises and also during the Middle East war of that period. As Chief of Naval Operations, Moorer said, he looked to the Panama Canal as a means of equalizing the strength and providing the balance between the Atlantic and Pacific Fleets. Without the Canal, the United States wouid have to build a two-ocean Navy costing billions of dollars.

Speaking of the danger of Soviet sovereignty by proxy through Cuba, Moorer said, "I was convinced as Chairman of the Joint Chiefs of Staff--and I remain convinced today-that if the Soviet Union ever gained even proxy sovereignty through Cuba, the U.S.

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