Washington, Dec 8 (NationPress) A recently declassified memorandum from the Central Intelligence Agency, dated March 1983, reveals that officials in the Reagan administration believed a significant drop in global oil prices could alter the strategic balance in South Asia. The memo cautioned that any increase in military assistance to Pakistan could jeopardize a recent reconciliation in US-Indian relations, which was being fostered under the leadership of then-Prime Minister Indira Gandhi.

According to the memo, Prime Minister Gandhi was endeavoring to navigate a more neutral stance between the United States and the USSR than she had previously. The document warned that escalating military support for Pakistan might threaten this diplomatic thaw.

This confidential analysis, disseminated by CIA Director William J. Casey to key members of the US national security team, has now been made public under the Freedom of Information Act.

The 19-page document, titled "An Oil Price Drop and US Leverage," discusses the potential vulnerabilities faced by Pakistan in the event of diminished Gulf financial inflows. It states, "Although Pakistan is an oil-importing nation, it would face significant financial challenges if aid and remittances from Pakistani workers in the Gulf were to decline significantly." However, the authors noted that "increasing economic pressures are unlikely to impact the nuclear program, as Zia considers it essential for maintaining regional equilibrium."

Conversely, the CIA assessed that India's economic situation would stand to gain more from reduced energy costs compared to Pakistan. "While India would also suffer from lower remittances from the Gulf and declines in exports, overall, it would fare better than Pakistan," the memo indicated. Nevertheless, it minimized the potential for the US to leverage this situation, concluding, "We do not anticipate that a decrease in oil prices would provide significant opportunities for exploitation in India."

The analysis posits that South and Southeast Asia offer varied prospects for US influence.

"Among the South and Southeast Asian LDCs of strategic interest to the United States, we believe that lower oil prices represent the greatest threat to both Indonesia and Pakistan," the memo asserts.

In Indonesia, the document warns that Jakarta would need to implement drastic cuts to development expenditures and predicts a current account deficit ranging from $8-11 billion for the year. In exchange for US assistance in securing financing, it is suggested that Indonesia might reconsider its plans to further tighten regulations for foreign oil companies.

Beyond regional considerations, the CIA outlines a broader context connecting oil markets to US power. "A sharp decline in oil prices would generally create a favorable environment for the US," the report claims. It notes that "lower oil prices—by reducing inflation, lowering interest rates, and stimulating economic growth—will strengthen the US economy, enhancing the government's capacity to pursue foreign policy initiatives."

A significant implication, as per the agency's analysis, relates to the shrinking hard-currency revenues for Moscow. "The Soviets currently derive over half of their total hard currency from oil and gas sales, with an additional 5-10 percent from gold, whose prices have recently plummeted," the memo states.

As revenues decline, the USSR will need to be more selective about its support for various countries or groups, leading to a "compelled Soviet retrenchment that would diminish the appeal of the Soviet model," while increasing US access as nations seek American assistance to regain economic growth.

The report also examines potential economic upheavals from West Africa and the Horn to Latin America and the Middle East, warning of crises in key producers like Nigeria and Venezuela and noting that a steep price decline in the Gulf could present "more challenges than opportunities."

For Saudi Arabia, it predicts a heightened sense of vulnerability to Iranian and Libyan threats, suggesting that cuts in aid could undermine Riyadh's capacity to sway Arab radicals, while Egypt and Sudan may increasingly look to Washington for financial and political support.

Casey’s brief cover note emphasizes the strategic importance of the document. "I requested this memorandum to explore how the decline in oil prices could yield opportunities for enhanced US leverage and influence globally," he wrote while forwarding the analysis to the Secretaries of State, Defense, Treasury, and Commerce, along with the President's National Security Adviser.

This memo emerged during a transitional phase for global oil markets, moving away from the price shocks of the 1970s towards the mid-1980s surplus that drastically reduced revenues for OPEC countries and the Soviet Union. In South Asia, Indira Gandhi's administration in New Delhi and General Zia-ul-Haq's military regime in Islamabad were grappling with soaring oil import expenses, Gulf remittances, and Cold War alliances, all while Pakistan's nuclear ambitions and India's non-aligned stance remained central considerations in US strategic plans.