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PRIME MINISTER PM/78/119 1. At the meeting of the Defence and Oveiajs Policy CoxmBiwzee on 30 October I said I would consider whether there was a cas€or taking^action*nowto" suspend the Ugandan Airlines flights from Stansted to~\£ebbe in the light o the US trade ban and the difficulties President Amin now ffii. himself in. 2. President Amin has seized the Kagera salient, a part of Tanzania nd declared its annexation to Uganda. President Nyerere has declared his intention to fight to regain this territory but although hostilities are continuing, a military stalemate now exists. 3. It seems likely that the Ugandan attack on Tanzania is related to the fact that Amin is in some trouble at home although it is difficult to assess its extent. Since the windfall of the coffee boom in 1977 Uganda's foreign exchange reserves have again run right down and the economy appears to be back to its earlier hand-to-mouth position. Following the US ban on trade with Uganda, US oil companies have suspended oil supplies to Uganda, where they are responsible for 40% of the market. Shell/BP, with our encouragement and the two other European oil companies involved in supply to Uganda are restricting their supplies to the reduced levels they have for technical reasons been maintaining for some months. There are already reports of serious shortages and severe rationing of fuel in Uganda. 4. It would be contrary both to our policy of adopting sanctions only on the basis of internationally agreed action and to our international obligations, including the EEC Common Commercial Policy and the Lome Convention, to follow the US in a trade embargo. There remains the question of the Ugandan Airline flights to and from Stansted Airport, which are used mostly to carry Ugandan commercial exports, largely coffee, and, on the return flight miscellaneous goods purchased in the UK, including luxury items, such as whisky and clothes, for supply to Ugandan military shops, amounting to 20 - 25% of the total load. SECRET