Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 K I 25X1 DIRECTORATE OF INTELLIGENCE 14 March 1988 25X1 PANAMA HOW NORIEGA WOULD REACT TO US SANCTIONS Summary Noriega probably would respond to the imposition of new US political and economic sanctions with specific measures designed to up the ante for Washington The regime however would be constrained by the desire to avoid harming its own interests Noriega probably would increase harassment of US diplomatic and military personnel and might stage potentially violent demonstrations at the Embassy and other US facilities He could evict some key Embassy personnel and put others under tougher surveillance He might also officially ask for the withdrawal of the headquarters of the US Southern Command Although the regime can take virtually no financial measures that would hurt US business interests without seriously damaging Panama's own economy Noriega might lash out nonetheless For example halting the flow of US oil through the Trans-Panama Pipeline would pose a costly logistics problem for US oil companies and cause a sharp drop in revenues for the pipeline's US owners This typescript was prepared by _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 25X1 Middle America-Caribbean Division Office of African and Latin American Analysis Comments and queries are welcome and may be directed to the Chief Middle-America-Caribbean Division ALA 25X1 25X1 ___J ALAM 88-20021 25X1 1 SECRET Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 Decla ified in Part- Sanitized Copy Approved for Relea l3f07 23 CIA-RDP04T00990R000100470001-9 I 25X1 Noriega probably would not demand the removal of US forces or disrupt shipping operations through the Canal to avoid giving Washington a pretext to renege on the Canal Treaties but he might allow some harassment of their operations Over the long term continuing deterioration of Panama's economy and relations with Washington would increase Noriega's incentives to develop stronger ties with Communist countries and Libya and to involve Panama more deeply in drug trafficking Increased support for radical leftists in the region is less likely because it would provide few concrete benefits for the regime other than spiting the US and the present General Staff would be hesitant to support such actions Nonetheless the military's siege mentality and the more leftist inclinations of up-and-coming majors probably would allow Noriega to move in that direction if he felt he had no alternative 25X1 25X1 The embattled Defense Chief has adopted a restrained stance thus far The regime would be very reluctant to take the provocative action of demanding the departure of US troops defending the Canal since such action would open Panama to charges of breaching the Canal Treaties In addition the regime would be unlikely to risk its long-term economic equities in the Canal by abrogating the Treaties or attempting to disrupt Canal traffic or occupy Canal facilities He may however cut off trash collection and fire and police protection or encourage pro-Noriega Canal workers to stay home to protest the escrowing of US payments to the Canal Commission Short of such extreme actions further deterioration of the government's fiscal position as a result of US actions could lead Noriega to up the ante significantly This paper discusses the range of retaliatory measures Noriega could take against US interests in Panama Political Options Noriega probably believes he would have little to lose by exposing certain US activities in an attempt to discredit the current US administration For example the Defense Chief might try to provide credible new evidence to the US media or Special 2 SECRET Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 25X1 Decla ified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 25X1 Prosecutor Walsh that would incriminate US Government officials in the Iran-Contra affair He might also approach the US media with information about secret US olic overtures to Panama 25X1 LOAI Besides planting stories of alleged US efforts to use Panama against Nicaragua Noriega in the longer term could try to complicate US policy interests by·adopting anti-US positions on Central American issues The regime for example might support Nicaraguan positions in the Central American peace process in a bid to win allies in Latin America and raise the specter of US interference in regional affairs Most Latin governments however probably would be wary of cooperating with the militarydominated regime I I 25X1 Options Against US Officials and Installations Targeting US officials and installations would be the regime's easiest means to take direct action against US interests in Panama The regime probably would declare key Embassy personnel--such as the Ambassador DCM and the Economic Counselor--personae non gratae and intensify surveillance on others Such actions would inhibit the Embassy's ability to meet with and report on the activities of business and opposition leaders While potentially violent demonstrations in front of the US Embassy and some US military installations are likely we do not believe Noriega would order physical attacks against US personnel I I 25X1 25X1 If tensions escalate the regime might formally demand the removal of the headquarters of the US Southern Command from Panama and prohibit United States military activities not strictly related to the defense of the Canal · Both the regimecontrolled National Assembly and a group of middle-level officers have called for the ouster of SOUTHCOM Noriega probably would calculate that such a move would send a strong signal to the United States without directly violating the Canal Treaties Actions such as forbidding flights from Howard Air Force Base except to and from the United States denying permission for US soldiers to transit Panamanian territor between defense sites probably would be imposed selectively in r_e_s_p_o_n_s_e_t_o__ U_S_m_e_a_s_u res I I 3 SECRET Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 25X1 25X1 Lo X 1 Decla ified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 25X1 25X1 Financial Options The importance of US business to Panama hinders Noriega's ability to move against US financial interests without damaging Panama's economy US fixed assets which amount to $1 5 billion extend into all sectors of the economy but are concentrated in banking the Trans-Panama Pipeline and oil refining In addition the US is Panama's primary trading partner supplying more than $700 million each year in imports and absorbing more than 50 percent of Panamanian exports If the regime seized or obstructed the operation of US banks and businesses by actions such as nationalization the freezing of US assets or demanding a controlling voice in their activities Panama's reputation as a stable banking sector and an attractive investment site would be irrevocably d a m a g e d - - - - - - - - - 25X1 Panama City however could stop US oil companies from using the Trans-Panama Pipeline if the US Government is successful in preventing US companies from paying pipeline revenues to Panama Panama earns $7 million each month from pipeline operations in addition to taxes on oil company activities Halting the flow of oil would pose a costly logistical problem for US oil companies and cause sharp losses for the pipeline's US owners 25X1 Longer-Term Options The continuing deterioration of relations with the United States would increase Noriega's incentives to promote stronger ties to the Soviet Bloc and Libya although the General Staff's wariness of these countries would be a limiting factor The regime having recently entered into agreements with Moscow for Aeroflot landing rights in Panama and the repair of Soviet fishing fleets could grant even broader commercial access Noriega however would be unlikely to accept any Soviet military presence in Panama Noriega also might expand existing intelligence links with Cuba and Nicaragua and could even approach Libya We believe there is little support at present in the military for closer cooperation with these countries Nevertheless Noriega's determination to stay in power the military's bunker mentality 4 SECRET Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 c K T 25X1 and the more leftist inclinations of the majors who command the troops and will soon move into leadership positions could make such actions tempting to the Defense Chief if cornered 25X1 Noriega might be willing to expand Panama's role in narcotics trafficking to relieve the government's critical cash shortage while damaging US drug interdiction efforts Moneylaundering operations reportedly are already being incre-sed and the regime could try to turn Panama into a major transshipment point and safe haven for drug barons I I 25X1 Noriega is unlikely to increase cooperation with radical leftist groups in the region because Panama would have little to gain besides spiting the United States M6reove the military is reluctant to support such activity and would insist on maintaining controls over leftist operations that probably would limit Panama's use as a subversive base l ----------- I 5 SECRET Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 25X1 Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 25X1 ANNEX US MILITARY PRESENCE The United States maintains a considerable military presence in Panama involving all the services and a substantial number of civilian workers The US Department of Defense has a total of some 16 000 personnel in Panama including 10 000 active duty military and about 6 000 civilians In addition to active duty military and civilian personnel nearly 14 000 US dependents also reside in Panama The US military maintains five major base complexes which include several facilities see map These major bases are to remain under US control until the end of 1999 according to the 1977 Panama Canal Treaties but can be transferred earlier by mutual consent In addition there are 66 other areas that the US military is able to use in Panama Of these 28 include training weapons firing and bomb testing sites The other 38 areas are related to civilian activities and include housing schools and health clinics The military installations also support US military operations in Central and South America These activities include security assistance programs personnel exchanges and support for emergency evacuations in various countries I 6 SECRET Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 25X1 25X1 Decl8 ssified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 Major US Military Facilities in the Panama Canal Area Caribbean ----------------------------t sta Sea Ric Caribbean Sea S 'i v e_ -y o Guff of Panama Q • 0 ¼ North u Pacific Ocean 0 50 100 Kilometers ama al Ort n I brook ffo ck 0 Arm Reservati A Rodman Naval Station Howard A Air Forceu o0 '' Bay of Panama 10 Kilometers 10 Miles 711421 10-87 DERIVATIVE CL BY 536618 DECL QAOR DERIVED FROM MULTIPLE Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 25X1 Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 SUBJECT 25X1 PANAMA How Noriega will React to US Sanctions 14 Mar 88 Distribution - The Honorable Donald Gregg Assistant to the Vice President for National Security Affairs Rm 298 OEOB - Mr Stephen I Danzansky Special Assistant to the President for International Economic Affairs NSC Rm 365 OEOB - Ambassador Jose Sorzano NSC Room 391 OEOB - Mr Kim Flowers NSC Room 391 OEOB - The Honorable Michael H Armacost Under Secretary of State for Political Affairs Rm 7240 State - The Honorable Elliott Abrams Assistant Secretary of State for Inter-American Affairs Room 6263 State - The Honorable William G - Walker Deputy Assistant Secretary of State for Central America Room 4915 State - Mr Richard Wyrough Director of Panamanian Affairs Room 4915 State - Amb Morton I Abramowitz Asst Secretary of State for Intelligence and Research Room 6531 State - Mr Robert Fouche Director Office of Analysis for Inter-American Republics INR Room 7358 State - Mr James Buchanan Chief South America Division INR IAA SA Room 7534 State - The Honorable Richard Armitage Assistant Secretary of Defense for International Security Affairs DOD Room 4E808 Pentagon - Mr Robert Pastorino Deputy Assistant Secretary for Inter-American Affairs DOD Room 4C800 Pentagon - BG Charles Link USAF Deputy Director PoliticalMilitary Affairs J-5 Rm 2E972 Pentagon - VADM John A Baldwin Jr JCS Room 2E996 Pentagon - BG T H Harvey JCS Room 2E976 Pentagon - LTG Leonard H Perroots USAF D DIA Room 3E258 Pentagon - Col John Cash DIO DIA Room 2A520 Pentagon - SOUTHCOM J2 - Mr Ramonda Pena - SOUTHCOM JS - Mr Randall Fort Department of the Treasury Rm 4324 DDCI EA DCI Rm 7El2 EA DDCI Rm 7El2 DDI Room 7E44 ADDI Rm 7E44 0 DDI -- - Room 7E44 NIO LA Room 7E62 NIO Economics Rm 7E62 25X1 25X1 25X1 - C LA DO Rm 3C2016 7 SECRET Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 C ''C'rtT IT' lm Decl s ified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 - C LA DO Rm 3C2016 -- C LALJ Rm 3C3203 C LA Rm 3D30 C LA RR Room 3D30 PDB Staff Room 7F30 - C PES Room 2G25 - DDI CPAS IMC CB 7G07 5 copies - D OGI Rm 3G00 - D ALA Room 3F45 - DD ALA Room 3F45 - C ALA MCD Room 4F29 - DC ALA MCD Room 4F29 - ALA PS Room 4F21 1 clean copy - ALA PS Room 4F21 1 sourced copy - ALA Research Director 3F44 - MCD Division Files - CA Branch Files 5 DI ALA MCD 14 Mar 88 8 SECRET Declassified in Part- Sanitized Copy Approved for Release 2013 07 23 CIA-RDP04T00990R000100470001-9 X 25 1 X1 25X1 25X1