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Approved for Release: 2019/01/17 C03172646 Nor DIRECTORATE OF INTELLIGENCE WEEKLY SUMMARY 50 2 February 1968 No. 0005/68 Approved for Release: 2019/01/17 C03172646 3.5(c) EO 13526 3.3(h)(2) EO 13526 3.5(c) Approved for Release: 2019/01/17 C03172646 .1001 41.10 The WEEKLY SUMMARY, issued every Friday morning by the Office of Current Intelligence, reports and analyzes significant developments of the week through noon on Thursday. It fre- quently includes material coordinated with or prepared by the Office of Economic Research, the Office of Strategic Research, and the Directorate of Science and Technology. Topics requir- ing more comprehensive treatment and therefore published sep- arately as Special Reports are listed in the contents pages. WARNING The WEEKLY SUMMARY contains classified information af- fecting the national security of the United States, within the meaning of Title 18, sections 793 and 794, of the US Code, as amended. Its transmission or revelation of its contents to or re- ceipt by an unauthorized person is prohibited by law. SEGRET Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 1.10, I CONTENTS (Information as of noon EST, 1 February 1968) Far East THE WEEK IN PERSPECTIVE VIETNAM The unprecedented Communist offensive touched off on the eve of Tet was country-wide and continued unabated over a three-day period. Although the offensive had slackened by 1 February, the Commu- nists still had partial control of four provincial capitals. President Thieu declared martial law throughout the country. CAMBODIA RENEWS CRITICISM OF VIETNAMESE COMMUNISTS Cambodia's uneasy relations with the Vietnamese Communists appear to be under increasing strain, but it appears unlikely that Chief of State Si- hanouk will push matters to a diplomatic break. NORTH KOREA REMAINS UNYIELDING IN PUEBLO CRISIS The North Koreans show no signs of retreating from the confrontation provoked by their seizure of the Pueblo. Their immediate aim apparently is to maintain pressure on the US during the current Communist offensive in South Vietnam. FACTIONAL FIGHTING CONTINUES TO PLAGUE COMMUNIST CHINA Peking is showing increasing concern about faction- alism, both within the military establishment and among "revolutionary" organizations, but the central leadership apparently has been unable to reach a concensus on how to deal with the problem. SEC Page i WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 46pproved for Release: 2019/01/17 C03172646 - Europe THE WEEK IN PERSPECTIVE 3.3(h)(2) 11 USSR REPORTS CONTINUED ECONOMIC GROWTH IN 1967 Final figures released by Moscow on the USSR's economic performance last year indicate that the regime was able once again to claim relatively satisfactory results in almost all sectors of the economy. As in the recent past, however, these were achieved in large part by sacrificing invest- ment in new capacity essential to maintain current rates of growth. NEW CZECHOSLOVAK LEADER CONSOLIDATES POSITION In less than a month, Czechoslovak party First Secretary Dubbek has taken several steps that will strengthen his leadership of the new regime. USSR CONCLUDES TRADE NEGOTIATIONS WITH EASTERN EUROPE Despite increases called for in their 1968 agree- ments with the USSR, the Eastern Europeans' trade with the Soviet Union is not likely to grow as fast as it is with the West, partly because they are seeking to acquire the latest technology. SLIGHT THAW NOTED IN HUNGARIAN ATTITUDE ON US RELATIONS Budapest has recently indicated interest in nego- tiating solutions to certain long-standing problems with the US, a significant change from the politely negative stance adopted last November after the arrival of the first US ambassador. NEW MANEUVERS OVER BRITISH ROLE IN EUROPEAN COMMUNITIES Various proposals have beer made by the continental countries to keep alive Britain's bid for member- ship in the Communities, biA so far none has led to positive results. Page ii WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 14 15 17 18 19 Approved for Release: 2019/01/17 C03172646 ,wor Nevi ET UN TRADE AND DEVELOPMENT CONFERENCE OPENS IN NEW DELHI Although there is little optimism that the con- ference will come up with immediate measures for aiding less-developed countries, it may stake out realistic principles to guide future international action. Middle East - Africa 20 THE WEEK IN PERSPECTIVE 21 CONCILIATORY MOOD PERVADES ELECTIONEERING IN CYPRUS Preparations by the Greek and Turkish communities for the presidential elections next month are proceeding peacefully. ISRAEL SEEKS MORE MILITARY AIRCRAFT With the Arab nations' collective jet fighter inventory now roughly three times that of Israel, Israeli officials are searching Western Europe and the US for fighter aircraft to reduce the numerical deficiency. RECENT GOVERNMENT REORGANIZATION IN EGYPT The changes appear to represent some return to normalcy following the military defeat last summer. Western Hemisphere THE WEEK IN PERSPECTIVE ET Page iii WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 22 23 24 25 3.3(h)(2) 4Approved for Release: 2019/01/17 C03172646 ,s.peritrr ARGENTINE MILITARY IMPATIENT WITH ECONOMIC PROGRESS The military leaders, who helped install and feel responsible for the success or failure of the Ongania regime, are concerned about public dis- satisfaction over rising costs and wage restric- tions. 26 3RAZILIAN GOVERNMENT REACTS STRONGLY TO OPPOSITION CRITIC 27 If President Costa e Silva decides to prosecute perennial oppositionist Carlos Lacerda under provi- sions of the tough new national security law, it will be widely interpreted as a lack of self-confidence and will discredit his much-publicized efforts to "humanize" the Brazilian revolution. CUBA WARNS POLITICAL MALCONTENTS The ouster of 11 members of the Cuban Communist Party appears designed to convince doubters at home and abroad that Castro is still in control and charting his own course. DOMINICAN SITUATION CONTINUES UNSETTLED Threats of violence from the left, a Communist victory in student elections, and President Balaguer's de- cision to allow the return of exiled General Wessin y Wessin are likely to keep the political pot sim- mering. INCIDENTS MAR PARAGUAYAN ELECTION CAMPAIGN With Paraguayan national elections little more than a week away, campaign incidents are testing the spirit of coexistence among the participating parties. ?age iv WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 29 30 32 Approved for Release: 2019/01/17 C03172646 SEQr(ET FAR EAST Hanoi is portraying the Communist attacks on cities and allied military and civil installations throughout South Vietnam as a major turning point in the struggle. This well-coordinated show of force apparently was designed primarily as a damaging psychological blow against the Saigon government and the US presence rather than as a bid to seize and hold major population centers. The heavy attacks on allied airfields throughout the country probably were intended to set the stage for a major assault in the Khe Sanh - Demilitarized Zone area. Hanoi has claimed that the country-wide assaults have "dangerously scat- tered" US forces, reduced their defensive capac- ity, and exposed to attack the "nerve centers" of US power in Vietnam. The North Koreans appear determined to main- tain tensions over the Pueblo seizure at a high level during the Communist offensive in South Vietnam. Hanoi and the National Liberation Front enthusiastically supported Pyongyang's action, claimed that they and the North Koreans share the same battlefront against the "US im- perialists," and predicted a "more rapid" defeat for the US in Vietnam if the US "dares to lay a hand on North Korea." Pyongyang's tactics thus far appear to be based on the assumption that, by holding the Pueblo crew as hostages, it can deter the US from invoking military retaliation and oblige the US to restrain the South Koreans from moves against the North. The North Koreans are also seeking further insurance against US reprisals by con- veying assurances that the Pueblo crew is being well treated and by hinting vaguely at their wil- lingness to discuss the issue in the Korean Mili- tary Armistice Commission, provided the US re- frains from military threats. Page 1 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 TIIAILAND � � '1 � NORTH \ VIETNAM \ � -\ � "a� fs. PHNO PENH Chau Phjx� --.��� DOG El EN HONG Demilitarized Zone _WANG TRI Khe Sant ;Hue � THUA THIENI Da Nang Hoi (i) QUANG NAM ' QUANG TIN ,-;,chu Lai .Quang Ngai \ BINH TAY LONG NINH FIALI KIEN TUONG QUANG NGAI KONTUM 7 ;Kont m BINH -DINH Pleiku. PLEIKU DARLAC �Ban Me Thuot ' QUANG DUG PHUOC LONG �TUYEN Oa Lat� DUC LAM DONG BINH TUY LONG - AN 010 DIN GULF OF - SIAM IEN PH UOC TUY PHU YEN \ KHANH HOA � NINH BINH THUAN ..yrAg-Tau Hi CORPS i GO PS\ KIE�N Capital Special Zone IANG VINH ) BINH , CHUONG BA XUYEN\/ AN XUYEN BAC LIEU- IV CORPS 0.1 013 a Trang 44 RAN H. TH UA_N,j SOUTH VIETNAM 25 .5�.0 " 75 100 Miles 25 50 75 160 Kilometers .11,0 69470 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 SE VIETNAM The unprecedented military offensive during the Communists' self-proclaimed lunar new year cease-fire involved attacks against principal cities and ma- jor US bases throughout South Vietnam. According to the Com- munists' own propaganda, it is part of their long-heralded "gen- eral offensive" designed to trig- ger a "general uprising" among the South Vietnamese people in support of Liberation Front ob- jectives. The military attacks con- tinued unabated over a three- day period, and although the vigor of the offensive had slack- ened by 1 February, the Commu- nists still had partial control of four provincial capitals and maintained scattered pockets of resistance throughout the country. In addition, the major threat to Khe Sanh and northern Quang Tri Province continues. It is unlikely that the cur- rent military action is designed to hold any principal towns for extended periods of time. Al- though the Liberation Radio is portraying the current offensive as an effort to destroy the Thieu government and replace it with one under Communist control, it is doubtful that the Communists fore- see an early collapse of the Sai- gon government. Foreign Commu- nist propaganda is more realistic in calling the offensive a dis- play of military strength that will force the US to recognize and deal with the Front. There are no signs to date that the Communists have been suc- cessful in rallying significant SE popular support for their "uprising." They undoubtedly have succeeded in shaking civilian confidence in the Saigon government, however, and in inflicting serious setbacks to security and pacification pro- grams throughout the country. Com- munist propaganda is attempting to give the impression of wide- spread popular support by citing the establishment of local or- ganizations called "alliances of national and peace forces," which will negotiate with the Liberation Front to set up a new government. It will probably be some time before the full military extent of the offensive will be known, especially in rural areas. Reports indicate enemy assaults were made against at least 22 provincial capitals and against some 30 to 40 districts head- quarters. More than 6,000 Com- munists have reportedly been killed, and allied forces' cas- ualties now stand at nearly 600 killed (93 US) and over 1,700 wounded (562 US). Damage to al- lied aircraft and facilities is extensive. In addition, the Communist assaults and the allied reaction to them appear to have taken a heavy toll of civilian casualties. The Communist offensive had been carefully prepared and co- ordinated in advance, possibly to take maximum advantage of surprise during the Tet holiday truce period. In its initial phase, the military action was directed al- most exclusively against targets in southern I Corps and II Corps, Page 3 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 and involved coordinated actions by the Communists' B-3 Front in the highlands and their Military Region 5 command in the coastal provinces. In addition to mortar and ground attacks on such major bases and neadquarters as Da Nang, Chu Lai, and Nha Trang, fighting was particularly bitter at Hoi An, the capital of Quang Nam Prov- ince, and at Kontum city in Kon- tum Province. Allied forces are now reported to be control of all major II Corps towns except Kontum and Ban Me Thuot, although sporadic contact is still reported in the outskirts of several pro- vincial capitals. Among the enemy targets in Saigon were the US Embassy, the Presidential Palace, the govern- ment radio station, and the Tan Son Nhut military complex. It took US troops about six hours to drive a band of attackers from the US Embassy grounds. The build- ing itself was rocked by several large explosions, but no struc- tural damage was reported, and the embassy is now fully opera- tional. Scattered, sometimes heavy, ViEt Cong activity was continuing elsewhere in Saigon at last report. On 31 January, enemy mortar and grount attacks struck prov- incial capitals and district towns in the delta and in the two northernmost provinces of I Corps. Attacks were reported in at least eight of the 16 southern tlelta provinces. On 1 February, fighting was con- tinuing in at least three cities, My Tho in Dinh Tuong, Ben Tre in Kien Hoa, and Chau Phu in if Chau Doc Province. In the lat- ter province, the Communists appeared to be still in control of the city. With the exception of Hue in Thua Thien Province, allied reaction forces apparently have countered the enemy's thrust throughout the northern T Corps area. Elements of a Communist regiment were reported to be in control of important sectors of Hue on 1 February. The area im- mediately south of the Demili- tarized Zone (DMZ), however, still remained relatively quiet. Evi- dence of a heavy enemy build-up throughout the area of the DMZ continued to be reported. GVN Declares Martial Law Saigon's President Thieu responded to the country-wide Viet Cong offensive by declar- ing a nationwide state of mar- tial law on 31 January. This action temporarily suspends some of the civil rights guar- anteed under the constitution and permits the President to govern by decree for 12 days. Earlier in the week, Thieu had devoted much of his "State of the Union" message to dis- missing Communist proposals for peace talks. He rejected any coalition government with the Front, and said that the bombing of North Vietnam could not be stopped unless hostilities ceased in the South. He added, however, that bombing could be decreased by stages in propor- tion to a Communist decrease in military ground activity in the South. Page 4 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 ST CAMBODIA RENEWS CRITICISM OF VIETNAMESE COMMUNISTS Cambodia's uneasy relations with the Vietnamese Communists appear to be under increasing strain. Chief of State Sihanouk made one of his sharpest attacks on North Vietnam and the Viet Cong's Liberation Front in an emotional press conference on 27 January. He referred bitterly to recent statements by Hanoi and the Front as "indirect threats" to his regime, and he accused the "Maoist camp" of backing Cambo- dian Communists in an effort to pressure Phnom Penh to maintain its anti-US posture. Sihanouk warned the Commu- nists that such tactics would not work and could be dangerously counterproductive. He pointedly raised the specter of a Cambodian government closely tied to the US in order to remind the Commu- nists that he can still exercise options that will be extremely damaging to their interests. In so doing, Sihanouk went much further than he has in the past in publicly acknowledging the extent to which the Vietnamese Communists use Cambodian terri- tory Sihanouk's outburst was triggered by a recent renewal in western Cambodia of leftist- inspired dissident activity, which has included a number of attacks against small police outposts. Although he admitted that Phnom Penh's evidence is weak, Sihanouk holds both Hanoi and Peking responsible for these activities. Sihanouk also appears to be reacting to what he apparently regards as the threat posed to Cambodia by the Communists' ex- cessive use of Cambodian terri- tory to prosecute the war in South Vietnam. / Although there is specula- tion in Phnom Penh that a "dip- lomatic break" is now inevi- table, it seems unlikely that Sihanouk will push too hard against the Vietnamese Communists as long as he continues to be- lieve that the Communists will prevail in South Vietnam. He apparently does want, however, to refurbish Cambodia's standing as a neutral in the Vietnam war, even if it causes some short- term problems with the Commu- nists. Page 5 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.3(h)(2) 3.5(c) ,Approved for Release: 2019/01/17 C03172646� NORTH KOREA REMAINS UNYIELDING IN PUEBLQ CRISIS The North Koreans show no signs of retreating from the confrontation with the US pro- voked by their seizure of the Pueblo and its crew, They appear to be gambling on the assumption that, by hold- ing the crew as hos-:ages, they can deter US military reprisals, force the US to restrain the South Koreans, and prolong the confrontation. Their immediate aim apparently is to maintain diversionary pressures on the US at a high level during the cur- rent country-wide Communist of- fensive in South Vietnam. Over the longer term, Pyongyang prob- ably hopes these tactics will aggravate US - South Korean re- lations, discredit the Seoul gov- ernment, and extract valuable concessions from the US. The North Koreans are con- tinuing the defiant stance they adopted during the Military Armistice Commission meeting on 24 January. In official state- ments and propaganda, Pyongyang has maintained it acted within its rights as a sovereign state, and that the Pueblo was engaged in hostile acEivity in North Ko- rean territorial waters. Pyong- yang has attempted to document its version of the incident by broadcasting an alleged confes- sion and other statements by the commander of the Pueblo. More- over, Communist propaganda has attempted to connect the Pueblo with the war in Vietnam. The commander was said to have stated his mission was in preparation for a "new war" of aggression in Asia and that the US regards Ko- rea and Vietnam as "two fronts of the war." The North Koreans have avoided specifying conditions for the release of the Pueblo and its crew. Pyongyang has, however, repeatedly condemned efforts to involve the UN. A high-ranking North Korean leader complained on 31 January that the US was seeking a solution through "illegal discussions at the United Nations." He went on to observe that "there is a precedent for the treatment of similar cases at the Korean Mil- itary Armistice Commission." This "precedent" probably refers to negotiations at Pan- munjom in 1963-64 over the fate of two US helicopter pilots downed in North Korea. In its desire to extract maximum propa- ganda value from that case, how- ever, Pyongyang kept the negotia- tions going for 13 months before releasing the pilots. Despite their militant stand, nothing the North Koreans have done suggests they are about to embark on large-scale hostil- ities. Their actions have been largely defensive, apparently as a precaution against some re- taliatory action by the US or South Korea. Propaganda state- ments claim that the country is "prepared to counter any provocations or surprise inva- sion." -s+-eirET Page 6 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 Nue .sEcatrr On the diplomatic front, the Soviet Union has supported the North Korean position while treating the incident as a mat- ter to be resolved between the US and North Korea. Moscow's tactics appear designed to mini- mize the situation and to forestall any possible US mili- tary action, while keeping their public record of support for North Korea unassailable. Pre- mier Kosygin reflected this line in his statement to Western re- porters in New Delhi, saying that the incident was a viola- tion of territorial waters and should be settled as such by the two countries involved. The Soviets voted against the matter being brought before the Security Council but have indicated a willingness to have North Korea invited to appear before the council as long as the invitation is unconditional. The Security Council has been stalemated over the issue of inviting North Korea to attend. Peking's reaction to the Pueblo incident has been rela- tively restrained and has avoided any specific reference to steps China might take to support Pyongyang. Although the Chinese Government statement on 28 Jan- Page 7 uary warned that "US imperialism had forgotten the lesson it was taught in the Korean War," it promised only that the "Chinese Government and people firmly support the just stand" of North Korea. The statement seemed primarily intended to portray the Pueblo's capture as further evidence of US plans to expand the war in Vietnam--a favorite theme of recent Chinese propa- ganda. Some South Korean leaders have complained that the US has devoted too much attention to the Pueblo crisis and has played down�EN-J.�issue of North Korean violations of the armistice agreement, particularly the at- tempt to assassinate President Pak. Seoul is also concerned that Pyongyang may gain status at South Korea's expense, either through an invitation to par- ticipate in the UN Security Council debate or by direct US - North Korean negotiations. Another sign of South Korean uneasiness was a suggestion in a Seoul newspaper editorial on 31 January that the government might have to consider withdrawing troops from South Vietnam if the US reduced its forces in the Korean area following a settle- ment of the Pueblo crisis. .glisteltr17 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 FACTIONAL FIGHTING CONTINUES TO PLAGUE COMMUNIST CHINA Peking is showing increas- ing concern About factionalism, both within the military estab- lishment and among "revolution- ary" organizations in the coun- tryside, but there is as yet no indication that the central lead- ership has been able to reach a consensus to deal firmly with the problem. Using official propaganda organs, moderate ele- ments continue to stress the damage that factionalism is causing to the country's economic and political fabric. More rad- ical elements, however, seem de- termined to protect the "revolu- tionary" Red Guards--the primary source of the trouble--and to keep them active. Violent and disruptive fac- tional fighting is still being reported from widely scattered parts of China. Although these disorders are sporadic, they ap- pear to be on a fairly large scale and show no signs of Abate- ment. Amoy, in Fukien Province, is in a virtual state of anarchy. Hainan Island in Kwantung Province, evidently has been the scene of widespread violence. The regime has made a special effort to maintain order in the capital city, but violent clashes Page 8 have broken out several times in Peking in the past few weeks, according to newspaper reports. One hundred persons were reported injured in a clash on 25 January, and on the same day Peking tele- vised the trial of 11 men charged with murder, complicity in murder, and distributing "counterrevolu- tionary tracts." Much of this violence con- tinues to be ignored in official regime propaganda, which merely deplores factional disputes in general terms. In the past week, official media have particularly stressed the necessity for the army to avoid factionalism in its own ranks, as well as involvement in disputes among "mass organiza- tions"--a euphemism for Red Guard and other "revolutionary" groups. This line strongly sug- gests that Peking is becoming in- creasingly concerned about fac- tionalism already existing within the military as well as the pro- pensity of army commanders to 3.3(h)(2) support one or another of the Red Guard factions. Hainan Island report that local army forces have been sup- plying arms as well as offering political support to one faction on the island, while the navy backed an opposing faction. Although official propaganda has taken an increasingly stern $44eRrrf WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 %we attitude toward the problem of factionalism in the military and among the Red Guards--a Libera- tion Army Journal editorial on 28 January took a realistic and sober approach to the problem-- the Red Guards themselves appar- ently still operate under a pro- tective umbrella. Recently re- ceived Red Guard materials indi- cate that the militant organiza- tions are continuing their attacks on local military commanders and on established "revolutionary committees" in the provinces. Moreover, they continue to circulate statements by radical leaders in the capital that ap- pear designed to encourage mili- tancy in the hinterland. A speech given on 12 November by Chiang Ching, Mao's wife, which called upon the Red Guards to "disturb the enemy," has now been dis- tributed throughout the country for "study and guidance" as an official central committee di- rective. The speech has been widely reproduced in Red Guard newspapers, but has been ignored in the official press. A further sign of the bold- ness of the militants was a re- cent poster attack on the Peo- ple's Daily--the official organ of the central committee. The paper was lambasted for repro- ducing in November a photograph that, because of the angle of the camera, showed a Mao quota- tion upside down. The delay in making this far-fetched charge suggests that the paper came under attack for recent state- ments condemning militant ob- structionism in uncompromising terms. Page 9 SECRET WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) spproved for Release: 2019/01/17 C03172646 Page 10 10 WEEELY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 ErFeR-ET NINO EUROPE Moscow has poured more cold water on West German hopes to negotiate an exchange of declara- tions with the USSR renouncing the use of force. In a note delivered this week, the Russians indicated that Bonn would have to go a long way toward recog- nizing East Germany as the price of such an agree- ment. The note, in addition to mollifying the East Germans, will test how far Bonn will go in its eagerness for progress on its eastern policy. Premier Kosygin returned from a six-day visit to India that ended with a promise of more frequent exchanges in a number of fields. The visit was ap- parently made at Mrs. Gandhi's repeated urgings and was mainly a demonstration of friendship. Almost all sectors of the Soviet economy performed satisfactorily in 1967, according to the final figures that Moscow has just released. Farm output fell only slightly below the record levels set in 1966 when growing conditions were excep- tional. The good economic results were achieved in large part, however, at the sacrifice of in- vestment in new capacity, which is needed to main- tain current growth rates. Yugoslavia and West Germany announced the resumption of diplomatic relations on 31 January, marking an end to the ten-year lapse that began when Belgrade recognized East Germany. Earlier in the week, Yugoslav - West German trade nego- tiations were suspended, reportedly because of Bonn's failure to liberalize its policy on im- ports from Yugoslavia. The talks will be resumed in the early spring. In Denmark, Hilmar Baunsgaard, a leader of the neutralist-tending Radical Liberal Party, is putting together the first non-Socialist cab- inet in 15 years. What the new government's posi- tion on defense and foreign policy will be is not yet clear. As a result of the lost H bombs, however, it will be under growing public Dressure to redefine US rights in Greenland. Page 11 ST WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.3(h)(2) Approved for Release: 2019/01/17 C03172646 PA* J.i4;ettIrrr Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 vimpe Sgettri 3.3(h)(2) Page 13 5.E.GRET WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 oft, USSR REPORTS REPORTS CONTINUED ECONOMIC GROWTH IN 1967 Final figures released by Moscow on the USSR's economic performance last year indicate that the regime was able once again to claim relatively satis- factory results in almost all sectors of the economy. As in the recent past, however, these were achieved in large part by sacrificino investment in new capacity essential to maintain current rates of growth. Industrial output is esti- mated to have increased at the same rate estimated for 1966. The failure to improve on last year's growth rate is largely ascribable to a marked slowdown in all components of industrial production during the final quar- ter of 1967. This may have re- sulted in part from the ending in October of the campaign to honor the 50th anniversary of the revolution with above-plan obligations. In the important machinery sector, the rate of increase in military and space hardware was appreciably higher than that of the sector as a whole. This difference in growth is indica- tive of the continued priority accorded the defense establish- ment following the ouster of Khrnshchev. Judging from the 1968 plan and budget, moreover, a continuation of this trend is planned this year. Agriculture's performance in 1967 failed to match the record level of output produced a year earlier, but the shortfall was minor for most farm products. The chief exception was the cru- cial grain harvest--down to an estimated 120 million metric tons (mint) from 140 mint in 1966. This is still sufficient to meet domestic needs, however, and to provide for a modest export sur- plus. Meat and dairy products registered impressive increases, but livestock numbers did not rise, and in the case of hogs actually declined. It is pos- sible that available feed supplies may have suffered in the past several years as the farms con- centrated on the more profitable bread grains. Despite the slippage in the industrial growth rate during the last quarter of 1967 there was nevertheless a notable accelera- tion in the output of agricul- tural machinery. Although this recovery is considerably below the level required by the Brezh- nev program, it is nonetheless the first evidence that the farm sector is receiving more resources. It remains to be seen whether this reversal of the poor per- formance in the production of farm machinery during the past few years will be sustained. The Soviet consumer enjoyed further gradual improvement in his standard of living last year. This was partly attributable to the regime's decision to treat the populace to more consumer _sgx--}Rrr Page 14 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 %yr, Sarcatrr N4010-f goods during the anniversary year. A major increase in the consump- tion of better quality foods was made possible by record levels of livestock products. Savings de- posits nevertheless rose almost twice as rapidly as the increase in total money income. This is the third year in a row that a consid- erable increase has occurred in savings, indicating continued la- tent purchasing power and suppres- sed inflationary pressures. New housing fell far short of plan, as usual. As in the recent past, the relatively favorable performance of the Soviet economy last year was in large measure the result of decisions to emphasize the here and now at the expense of future growth. Investment pro- grams in both industry and agri- culture showed unimpressive in- creases, and the completion of new projects was not up to plan in the iron, steel, chemical, and paper industries, among others. Most construction or- ganizations also fell short of their completion goals. Despite its formal adher- ence to a number of goals for 1970 that will require extensive new capacity, during 1966-67 the regime has allowed the rate of growth of industrial invest- ment to fall by one third from the already low rates of 1961- 65. At the same time, invest- ment in agriculture is growing at a rate roughly half that re- quired under the Brezhnev pro- ram for 1966-70. Unless these trends are reversed, the regime runs the risk of not being able to maintain its recently achieved rates of growth. NEW CZECHOSLOVAK LEADER CONSOLIDATES POSITION In less than a month, Czech- oslovak party First Secretary Dubcek has taken several steps that will consolidate his posi- tion as the new regime leader. His actions to date have been capped by a meeting with Soviet leaders in Moscow, which both sides have been eager to repre- sent as a success. Dubcek's quick trip to the USSR on 29-30 January, during which he was un- accompanied by any other Czech- oslovak official, gave both sides a chance to size up the other and to go into Dubcek's plans for changes in the country's domestic policies. The Soviets may have been somewhat reassured, but must still look on Dubcek's liberaliz- ing experiments with apprehension. Prague's unusually effusive description of the talks was Page 15 15 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 1:44eittrr� lacking in specifics, but stated that "a full accord of views on all questions discussed" was reached in "an atmosphere of cor- dial friendship, sincerity, and friendly understanding." The two parties were said to have "ex- changed views" on foreign policy questions and the problems of international Communism. Certain specific problems in bilateral relations probably were set aside for another time and for lower level officials to deal with. On the same day that Dubcek arrived in Moscow, for example, a Soviet delegation wound up nine days of talks in Prague on the question of pricing policy, long a source of friction that has interfered with trade between both states. Having received at least the tacit acceptance of Soviet leaders, Duncek probably returned home with confidence in his plans to set Czechoslovakia on a new course and to broaden his base of political support. To mollify critical intellectuals prior to his Moscow trip, he already had allowed the Czechoslovak Writers' Union to elect its own liberal leadership. He has also per- mitted the union to publish a new weekly journal to replace the one taken away from the union by former party boss Novotny. While heartened, the intel- lectuals have not completely re- laxed their suspicious attitudes. In contrast to their bitter op- position to Novotny, however, they view Dubcek's election as "the beginning of a process in- side the party and society in which writers want to take part." On 23 January, one of Dub- cek's trusted colleagues, Vasil Bilak, was elected to succeed him as first secretary of the Slovak Communist Party. The two apparently achieved a good working relationship while run- ning the Slovak party between 1962 and 1967. The election of Bilak, a Ukrainian, continues the trend started by Dubcek of elevating representatives of national minorities into posi- tions of power. Dubcek, him- self a member of the Slovak minority, had already appointed a man of gypsy origin to the party presidium. These initial changes seem to be having their desired ef- fect. It has been reported, for example, that younger, progres- sive elements in Czechoslovak society are optimistic that Dubcek's election will result in a genuine break with the past. Whether their optimism is justi- fied or not, their rising expec- tations that the party's dead hand will be lifted from domestic affairs will generate additional pressure in that direction. ...SUC-4R-Ler Page 16 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 4i,E-(tRITV USSR CONCLUDES TRADE NEGOTIATIONS WITH EASTERN EUROPE Trade negotiations have re- cently been concluded between the USSR and each of the Eastern Eu- ropean countries. Despite the increases called for, Eastern Europe's trade with the USSR is not likely to grow as fast as that with the West, partly be- cause they are seeking to acquire the latest technology. Neverthe- less, the USSR still is the most important source of raw materials for Eastern Europe and provides a market for a variety of manu- factured goods not readily sal- able elsewhere. The Soviet Union provides approximately 80 percent of East- ern Europe's imports of basic fuels and raw materials, in- cluding crude oil, rolled steel, coal, iron ore, pig iron, and cotton. Deliveries of many of these products are to be increased in 1968. The USSR has warned, however, that Eastern European countries expecting to purchase larger amounts of raw materials from the Soviet Union after 1970 must grant credits to help pay exploitation costs. Some such arrangements have already been concluded. In 1963, five coun- tries extended $49 million in credits to the USSR to assure supplies of phosphorite, and more recently Czechoslovakia agreed to invest $556 million to guarantee oil deliveries. The USSR also supplies about one third of the machinery and equipment imported by Eastern Eu- ropean countries, including 60 percent of oil-drilling equip- ment and more than one half of tractor and truck requirements. Soviet grain deliveries furnished about two thirds of Eastern Eu- ropean import requirements from 1960 through 1964, but declined to one half last year, and are expected to remain at about the same level this year. The Soviet share of Eastern European foreign trade varies markedly from country to country, ranging from 26 percent of Ru- mania's total trade to 56 per- cent of Bulgaria's. The Eastern Europeans' collective share of total Soviet trade is currently more than 50 percent. The USSR orders some 75 percent of its imports of machinery and equip- ment from these countries, prin- cipally from East Germany and Czechoslovakia. The bulk of Soviet orders are for rail trans- port equipment, seagoing and river vessels, and equipment for the food and chemical industries. The current Soviet program to increase the availability of con- sumer goods at home in part de- pends on purchases from Eastern Europe, and these imports are slated to increase in 1968. SUG-ftET Page 17 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 The USSR has expressed dissatisfac-Aon with foreign trade prices, but suggestions by Soviet economists to estab- lish a new pricing system have not been acceptable. The USSR contends that under the present system it pays too much for most Eastern European machinery and equipment, and that Soviet raw material exports are priced too Low to cover the growing costs of exploitation. SLIGHT THAW NOTED IN HUNGARIAN ATTITUDE ON US RELATIONS The Hungarian Foreign Minis- try Aas recently indLcated re- vived interest in negotiating solutions to certain long-stand- ing problems with the US. This is a significant change from the politely negative stance that Hungary adopted after the ar- rival last November of the first US ambassador to Communist Hun- gary. Budapest's initial coolness was designed to minimize the political impact of the increase in the level of US representa- tion and to demonstrate that Hungary's acceptance of the change did not imply a shift in the regime's basic alignment. The Kadar regime does not want its motives misunderstood by its Communist allies. It has proposed, therefore, to negotiate on topics that have clear precedents and are thus politically "safe." So far, the Hungar:_ans have expressed specific interest in joint eco- nomic ventures, a consular treaty, Page 18 economic claims, and a possible easing of restrictions on the size of the embassy's staff. In keeping with its apparent desire to minimize US contacts with the Hungarian population, the regime maintains that ex- panded cultural relations would be politically "dangerous" and has again refused to discuss the matter. The Foreign Minis- try also displayed sensitivity to possible publicity arising from any of the proposed nego- tiations, warning that such publicity could abort the talks. The Hungarians are being very cautious. Simultaneously with their private approaches to the US, they have in a num- ber of ways publicly under- scored their basic alliance with the Soviet Union. Within this context, however, there appears to be room for a grad- ual and low-key improvement in Budapest's relations with Washington. 611.1:411trEt.l." WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) 3.5(c) Approved for Release: 2019/01/17 C03172646 *Rot, NEW MANEUVERS MANEUVERS OVER BRITISH ROLE IN EUROPEAN COMMUNITIES Various proposals have been made in the continental countries to keep alive Britain's bid for mem- bership in the Communities, but so far none has led to positive re- sults. The Germans evidently are awaiting the results of Kiesinger's and Brandt's talks with De Gaulle in Paris on 15-16 February before committing themselves to specific proposals. They have suggested, however, that Britain consider join- ing EURATOM, presumably as an in- terim step. Bonn also envisions that the commission would play a role in con- sulting with the British on their application and in exchanging in- formation. The Benelux countries have of- fered a potentially far-reaching "package" plan to break the cur- rent stalemate. They proposed that the Six consult with the four ap- plicants--perhaps through something like the existing agreement between the UK and the Coal-Steel Community-- on matters covered by Community treaties. Moreover, "joint action" was proposed in fields not directly included in the treaties, such as patents, arms development and pro- duction, and technological coopera- tion. Finally, "other European countries," are invited to par- ticipate in political consultations that the Benelux countries are ini- tiating among themselves on foreign policy and other "questions of com- mon interest." Page The Benelux plan is not without risks for the Communities. Some of the areas for suggested economic cooperation touch on questions al- ready under Community jurisdiction, and the envisaged political coopera- tion would be outside such jurisdic- tion. The effect of the plan thus might be to detract from the Commu- nities. The proposals nevertheless have the advantage of sidestepping the issue of negotiating some form of associate, half-way, or transi- tional membership which the British have already rejected. Moreover, they conform to British ideas about gaining a foothold in European de- liberations as a way of "preparing" for EC accession. In Brussels this week, Italy and Germany expressed interest in the plan but the Benelux countries were not given a mandate to get dis- cussions started. The emphasis was on possible technological coopera- tion, and there was apparently lit- tle attention given to political cooperation. France was clearly not enthusiastic, but has not flatly opposed the Benelux plan. Couve, however, recently told the Belgian ambassador in Paris that the "time was not ripe" for it. Meanwhile, the Dutch and Ital- ians have balked at discussions-- which were due to begin this week in a Community framework--on tech- nological cooperation, among the Six. The EC Council will discuss in February whether the Commission should pursue its study of "dispar- ities" between the Community and the applicants for membership. _SEC-It-Er 19 WEEKLY SUMMARY 2 Fob 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 mom .62,44-trr When the German leaders visit Paris in February, De Gaulle may try to give some content to his suggestion of "possible arrange- ments" between Britain and the Com- munity. While not discouraging the Germans from exploring what De Gaulle may have in mind, the British doubt that anything acceptable to Paris would also be to London. The French may simply reply on a dis- play of renewed interest in accel- erated cooperation among the pres- ent Community members in order to ward off any German participation in contacts with the British that would exclude France. Britain, meanwhile, has thus far apparently felt incapable of doing more than waiting to see how the effort of the continentals will develop. UN TRADE AND DEVELOPMENT CONFERENCE OPENS IN NEW DELHI The concern of the less-de- veloped countries (LDCs) over their deteriorating terms of trade as well as the slackening of aid from the developed countries will probably be aired at the second United Na- tions conference on Trade and De- velopment (UNCTAD), which opened yesterday in New Delhi and will run through 25 March. Although the at- titude of the LDCs will probably be more realistic than at the first conference in 1964, there is little optimism tha-: the conference will achieve much in the way of imme- diate results, in part because of the financial difficulties facing the major developed countries. Despite their divergent in- terests, the LDCs will endeavor to present a common front toward the industrialized nations. UNCTAD Secretary General Prebisch has urged them to press for specific commitments from the developed countries on a system of general tariff preferences far LDC exports 3.5(c) of manufactures and on the conclu- sion of international agreements to regulate trade in certain com- modities. Demands for increased aid, including financing to sup- plement shortfalls in LDC export earnings, are also likely. The West is agreed in prin- ciple to the granting of general preferences. Difficulties could arise, however, if the LDCs press for something more specific at this time because significant differences remain among the developed coun- tries on how to carry out a pre- ferential scheme. The Communist countries-- which also have been subjected to demands by the LDCs--probably hope to play down their own lack of a unified policy. They can be ex- pected to reach for some propaganda benefit by pointing to Vietnam as detracting from the US aid effort. Page 20 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 Neel. ,Tur,;err MIDDLE EAST - AFRICA Arab-Israeli tension continued to dominate events in the area last week, but new stresses appeared in the Persian Gulf and older problems elsewhere dragged on. A heavy exchange of gunfire across the Suez Canal caused Egypt to suspend efforts to release the 15 cargo ships trapped in the canal since June. Israel previously had warned Cairo against an attempt even to check the condition of the canal in the north--a move which Israel probably believes would weaken its leverage on Egypt for face-to-face negotiations. Further international pressure is expected, principally from the UK but also from the USSR, to have the whole canal cleared to normal traffic. Stresses in the Persian Gulf, anticipated eventually as a result of Britain's new "West of Suez" defense policy, have begun to appear already among the three major powers in the area-- Iran, Saudi Arabia, and Kuwait. Tehran has evinced considerable irritation over Saudi sup- port for Bahrain--which Iran publicly claims-- and over alleged Kuwaiti references to the "Arabism" of the gulf. Riyadh has protested recent Iranian oil operations on the Saudi side of the gulf's median line. In the Nigerian civil war, the renewed federal offensive is still making significant gains, but the Biafrans are apparently prepared to fight for a long time. A Biafran emissary is bringing back from London new peace proposals from the Commonwealth Secretariat, but prospects for early talks remain dim. The Greek junta continues to strengthen its position internationally and at home. Most NATO and other countries have followed Turkey's lead in resuming diplomatic contacts with the regime. Officers who were sympathetic to the King's abortive coup have been retired, and some 50 university professors have been dis- missed for disloyal activities. In a demonstra- tion of self-confidence, the junta released 86 mnre: political prisoners last week. Page 21 slieG.a-er WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 ANIK 77,17711,.. CONCILIATORY MOOD PERVADES ELECTIONEERING IN CYPRUS The rival Greek and Turkish Cypriot communities are prepar- ing for the presidential elec- tions on 25 February in an atmo- sphere considerably less menacing than has existed on Cyprus in some time. Neither community has apparently been strongly stirred by the other's moves. In line with the 1960 con- stitution, Greek Cypriots will elec-: the president and Turkish Cypriots will elect the vice president in separate polls. President Makarios is most un- likeLy to have any opposition in his bid for a new "mandate" from the Greek Cypriot community. He has cooled a minor flare-up among some bishops who are critical of his apparent abandonment of the long-standing goal of enosis (union with Greece). Pockets of pro-enosis sentiment doubtless will remair, however, especially in the rural areas wftere the church has considerable influence. This will prevent any public an- nouncement by Makarios that he has completely ruled out eventual enosis as a desirable goal. Incumbent Vice President Kucuk likewise will run unopposed.. An apparently more qualified but politically unknown candidate withdrew in favor of Kucuk, who is a symboL to Turkish Cypriots of their resistance to Greek hegemony on the island. Ankara also disapproved of any challenge to Kucuk because it might divide and weaken the Turkish community. Makarios also may be consider- ing new parliamentary elections. This maneuver would be somewhat more delicate for Makarios than the present presidential elec- tions. In the 1960 parliamentary elections, Makarios allowed the Communists to run unopposed for five seats in Parliament in re- turn for a Communist promise not to contest pro-Makarios candi- dates in other constituencies. The Communist Party is the best organized political group on Cyprus, however, and probably is capable of winning 20 percent or more of the vote. If they refused to cooperate again, the unity of the Greek Cypriot com- munity as well as Makarios' own political position could be weakened. Unless Makarios uses the presidential elections as a springboard for the "courageous decisions" he forecast in an- nouncing them, the elections will be meaningless. His real motives still are unknown, but if he does not move further toward cooperation between the Greek and Turkish communities, he will be faced at some �oint with a fresh crisis. GritrT Page 22 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.3(h)(2) 3.5(c) 3.3(h)(2) Approved for Release: 2019/01/17 C03172646 *ftve' ,u;e1rErr Now' ISRAEL SEEKS MORE MILITARY AIRCRAFT Israeli officials are search- ing Western Europe and the US for fighter aircraft. Israel cur- rently has about 210 jet fighters, only 52 of which are sophisticated Mirage Ms, while the Arab na- tions now have about 675 jets, more than 250 of them late models. To solve its fighter-bomber shortage, Tel Aviv has begun to take delivery of 48 US A-4 Sky- hawks purchased before the war in June. Israel has requested additional A-4s and also has asked for 50 US F-4 Phantoms. The Israelis still hope to obtain delivery of 50 Mirage 5 inter- ceptors from France, but De Gaulle has given no indication that he is about to lift his embargo on these aircraft. Page 23 3.3(h)(2) Another deal, involving the purchase of 12 F-86s from US surplus stocks through a Dutch arms dealer, was dropped when the US refused to grant an ex- port license for the planes. An Israeli attempt to obtain quick delivery of Hawker Hunters from the UK failed. The British said that the aircraft would not be available. The F-86s and the Hawker Hunters are in the same class with the Mystere interceptors presently in the Israeli inven- tory. None of these aircraft is a match for the MIG-21s or SU-7s being supplied to the Arabs, but will serve as stopgap hardware until better interceptors become available. The Israelis have always been at a disadvantage as far as numbers of aircraft are concerned, but this deficiency is counter- balanced by the superior quality of Israel's air staff, pilots, and technicians. Although the Arabs' collective jet fighter in- ventory is now roughly three times that of Israel, the Israeli force retains the qualitative superiority that quickly enabled it to attain decisive air su- premacy in the June war. WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 RECENT GOVERNMENT REORGANIZATION IN EGYPT Recent changes in the Egypl:ian Government appear to represent a return to a greater degree of nprmalcy following the trauma of the military defeat last summer. On 24 January, Ali Sabri was reappointed secretary gen- eral of Egypt's only legal polit- ical organization, the Arab Socialist Union (ASU). Sabri had occupied the secretary gen- eral slot until shortly after the conflict with Israel, at which time President Nasir took over that post as well as the position of prime minister, a title he officially still holds. Sabri's reappointment relieves Nasir of the chore of heading the practically moribund ASU. In another change, the com- mander in chief of the armed forces, General Muhammed Fawzi, was given added duties as the minister cyf war. This position also has been sharply upgraded to give the minister greater control over the entire military effort and a more direct line to the President. These new duties would appear to give Fawzi in- creased stature within the gov- ernment and reflect Nasir's in- tention to continue his own ef- forts to improve the efficiency of the Egyptian armed forces. In another development, the public trial of those accused of conspiracy in the August plot to overthrow the government began on 22 January as scheduled. Fifty- four defendants--mostly from the military, and including Nasir's former chief of intelligence, Salah Nasir--are under indictment for complicity in the affair. The charge against the accused re- cently was changed from attempt- ing to seize control of the Armed Forces General Command to attempt- ing to overthrow the system of government. Among the reasons for the alteration of the charge may be the discovery of more evidence than anticipated, a more secure feeling on Nasir's part that al- lows him to make stronger charges, and a stiffer attitude toward the conspirators. Page 24 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 Nor, Noir WESTERN HEMISPHERE The election of a secretary general of the Organization of American States (OAS) continued to be the subject of much diplomatic maneuvering among Latin Americans last week. Central American foreign ministers met in Panama to consider their position for the fifth ballot, and the Council of the OAS met a few days later to decide whether the vote should be held on 12 February as scheduled. The council decided to go ahead as planned. None of the present three candidates appears assured of a clear-cut victory, and another impasse or even a close victory will further tarnish the image of the organization. In Guatemala, guerrilla activity may soon in- crease. There are reports that Communist factions have agreed to join forces and deploy away from the capital. Right-wing civilian commando units, supported by the army, are also reported to be operating again in the northeast. Violence is also likely in Panama. The lame-duck status of the administration was underscored when the President failed to ask for special powers during the eight-month legislative recess that began on 30 January. No legislative initiative--such as rati- fication of the canal treaty drafts--can be taken until Robles' term ends on 30 September. In Chile, President Frei has withdrawn his controversial wage-readjustment bill in the face of sure defeat in the Senate, but plans for submitting a revised bill are already under way. The original bill was designed to hold down inflation and create investment funds by paying part of a wage increase in government bonds. Frei probably has the votes to block the opposition's bill, which would divert a portion of copper earnings into the treasury to finance paying the whole increase in cash. 43-Fenn' Page 25 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 4pproved for Release: 2019/01/17 C03172646 ARGENTINE MILITARY IMPATIENT WITH ECONOMIC PROGRESS Argentina's top military leaders are again showing impa- tience with the slow progress of the government's economic reform program, despite some substantial successes In 1967. Popular dissatisfaction with the continuing rise in the cost of living and with covernment restrictions on wage increases is causing considerable reaction among some military leaders. The generals, who brought the present government to power and feel re- sponsible for its success or failure, are sensitive to criti- cism of it. President Ongania's regime has made impressive gains in re- forming the Argentine economy. Since the beginning of the eco- nomic reform program in March 1967, the budget deficit has been significantly reduced, the peso has been maintained at a stable rate, and foreign reserves have more than quadrupled. In addi- tion, government operations have been streamlined. The gains have impressed both national and for- eign bankers and financiers, but have had little posLtive impact on the Argentine public. The commanders of the three military services recently told Ongania that "tangible" gains would have to be scored by March or changes might have to be made in the cabinet and in government policies. The military chiefs reportedly even hinted that On- gania himself might have to be replaced. Early in 1967, these same military chiefs went through a similar phase of grumbling and impatience. They were mollified then by cabinet changes that brought in Economy Minister Krieger Vasena, the architect of the current economic program. The government is committed to Krieger Vasena's program, and any show of vacillation could undercut the entire stabiliza- tion effort. In particular, Ongania cannot do anything "spectacular" to improve wages. The situation is compli- cated by an apparent cooling in relations between Ongania and army commander in chief General Alsogaray, who up to now has been considered one of Ongania's strongest backers in following the Krieger Vasena program. This will almost certainly be Alsogaray's last year as army chief, however, and he can af- ford to be somewhat more out- spoken. In seeking a more popu- lar government policy, Alsogaray may be making an effort to en- sure his own political influence after he steps down. He has even gone so far as to maintain 'FtS11�. Page 26 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 contacts with with General Candido Lopez, who was retired recently for his attempts to form an op- position movement. Despite these rumblings, On- gania's position remains secure. Nevertheless, the continued pres- sure against the economic reform program and the somewhat more independent line of the military leaders may force some chan es in government policies. BRAZILIAN GOVERNMENT REACTS STRONGLY TO OPPOSITION CRITIC President Costa e Silva has reportedly decided to take ac- tion against perennial opposition- ist Carlos Lacerda, but has not yet decided whether to go as far as to strip him of his political rights as hard-line military ele- ments advocate. The government reacted strongly last week to counter a suspected plot by Lacerda. Military and security forces were put on alert before Lacerda de- livered a highly touted and vi- tuperatively antiregime speech in Sao Paulo on 28 January. The alert set off an ava- lanche of rumors that military hard liners were attempting to force the President to crack down on Lacerda. The speech passed without incident and by 29 Jan- uary the alert was over. Press Page 27 35(c) and congressional reaction indi- cated widespread puzzlement over the administration's overreaction and a belief that the government had made itself appear more than a little foolish. Lacerda has been a thorn in the side of every Brazilian WEEKLY SUMMARY SUMMARY Lacerda 2 Feb 68 Approved for Release: 2019/01/17 C03172646 Approved for Release: 2019/01/17 C03172646 Nue SEeRET president for more than 20 years. Although he was a key civilian leader in the 1964 revolution that ousted leftist president Goulart, he soon became disen- chanted with the military gov- ernment and formed an alliance with former presidents Kubitschek and Goulart, both of whom lost their political rights in 1964. Lacerda's attacks on the government as a dictatorship by a minority group of military "ad- venturists" have stung the Bra- zilian military--which is not used to being goaded. He has ac- cused the administration of be- traying the country to foreign-- specifically US--interests, has compared it to the regimes of Hitler and Mussolini, and has promised to produce proof of cor- ruption at high levels. His blasts have struck a responsive Page 28 chord with many Brazilians, par- ticularly among leaders of the only legal opposition party. If the government now gives in to hard-line pressure and prosecutes Lacerda under provi- sions of the tough new national security law, a considerable press and public hue and cry can be expected. Although such ac- tion would have strong backing from the military--the ultimate arbiters of Brazilian stability-- it would be widely interpreted as a sign that the administra- tion lacks self-confidence. It would also play into Lacerda's hands by making him a political martyr. Further, it would dis- credit Costa e Silva's much- publicized efforts to "humanize" the revolution begun by his �redecessor. 8.ET WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 003172646 3.5(c) Approved for Release: 2019/01/17 C03172646 *we ,fte CUBA WARNS WARNS POLITICAL MALCONTENTS The Communist Party mini- purge announced last weekend in Havana, though directed against potential political malcontents in Cuba, will be taken by Moscow as another affront. Moreover, it confirms to any latent or actual doubter within or out- side Cuba that Fidel Castro is still thoroughly in control. According to the official party newspaper, Granma, Raul Castro told the central commit- tee members last week that those purged supported the Soviet line on all issues that have caused the strain in relations between Moscow and Havana. According to the newspaper, these issues in- clude Fidel Castro's emphasis on "armed struggle" in Latin America, his attack on Soviet credit and technical assistance to Latin American "oligarchies," and his opposition to the USSR's "uni- lateral" withdrawal of rockets from Cuba during the missile crisis of October 1962. Report- edly, members of this "microfac- tion" contacted Soviet and some East European officials in the hope of getting them to prevail on Castro to abandon his inde- pendent line. The leader of the antiparty group is Anibal Escalante, a two- time loser who was also purged in 1962. The errors committed by the only other prominent per- sons charged--central committee members Ramon Calcines and Jose Matar--appear to be that they consulted with Escalante while drafting planning papers or status reports. The central committee decided to expel both Calcines and Matar from the committee, and to purge only Calcines from the party. Escalante and the other eight low-level members of the "microfaction," however, are to be tried by Revolutionary Tri- bunals. Although some "old guard" Communists are among the antiparty group, it appears to comprise a cross section of Cuban society, and the central committee's actions should not be construed as a purge of old pro-Soviet Cuban Communists. "Old guard" Communists such as Carlos Rafael Rodriguez and Blas Roca are not affected at all. The purge of this generally low-level group, which posed no serious threat to the regime, is a dramatic warning to other mal- contents that opposition to Cas- tro's extremist policies will not be tolerated. In addition, it makes clear to Moscow that Castro will continue Cuba's active sup- port for armed revolution. The special central commit- tee meeting also issued resolutions proclaiming Cuba's solidarity with _s14elltri7 Page 29 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 approved for Release: 2019/01/17 C03172646 MAW .sg-eitrr North Vietnam and support for Nortn Korea in its confrontation with the US. In addition, it ratified the political bureau's decision not to send a delegation to the scheduled international Communist con- ference at Budapest. Moscow's first response�a brief TASS re- port of the proceedings in Ha- vana--ignores the provocative implications of Raul Castro's al- legations. Whatever their private reaction, the Russians will go some distance to avoid doing fur- ther damage to their relations with Havana by engaging in a pub- lic exchange of insults. Although the Soviets are in a position to apply economic pres- sures against the Cubans, they are unlikely to jeopardize their stake in Cuba by resorting to heavy-handed reprisals. Signs of their intentions should appear with the publication of the new So- viet-Cuban trade agreement a draft of which is now near completion. DOMINICAN SITUATION CONTINUES UNSETTLED Threats of violence from the left, a Communist victory in student elections, and President Balaguer's decision to allow the return of exiled General Wessin y Wessin are likely to keep the political pot simmering. On 20 and 24 January, the secretary general of the left- of-center Dominican Revolutionary Party accused the government of condoning rightist repression of the left. He charged that a price tag ad been put on his head by an unnamed US intelligence agent and warned that the party would retaliate in kind if a member of the party's national executive committee or any "revolutionary" were murdered. Page 30 Leaders of the Marxist- Leninist Dominican Popular Move- ment, speaking to a labor group on 20 January, reportedly said the party has adopted a political line of violence similar to that of the Guatemalan revolutionaries. The spokesmen stressed that their party must strike back against "repression," and made it clear that US citizens would be included as targets. Although an increase in vi- olence has been apparent during the past few months, only a few incidents appear to have political overtones and there is no evidence of a calculated campaign of vi- olence by the right or left. Acts of terrorism by the left, how- ever, probably would be met by WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 .S.E4+FltT- -Now ruthless counterterrorism from the right. In such an event, the possible involvement of US citi- zens cannot be ruled out. The Communist victory in student elections at the Autono- mous University of Santo Domingo (UASD) on 29 January does not augur well for future university- government relations. The elec- tion will probably reinforce the position of the leftist UASD authorities in their present stand- off with President Balaguer over the university budget. It may also bring increased pressure on Balaguer by his conservative ci- vilian and military supporters to curb Communist influence on the campus. Meanwhile, the legal recog- nition of the Democratic Quis- queyan Party (PQD) and Wessin's Page 31 declaration as the party's 1970 presidential candidate are pres- suring Balaguer to permit Wes- sin's return. At a press con- ference on 24 January, Balaguer said Wessin would be allowed to return at an "opportune moment," the timing of which depended on "circumstances." The President, as well as many of his security advisers, probably views Wessin and the PQD as a threat to the government. 33(h)(2) Leftist demands for the re- turn of exiled former "constitu- tionalist" officers--particularly Colonel Caamano, whose whereabouts is still unknown--will probably follow Wessin's return to the coun- try. 3.5(c) 41.PeirE17 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 46pproved for Release: 2019/01/17 C03172646 INCIDENTS MAR MAR PARAGUAvAN ELECTION CAMPAIGN With Paraguayan national elections little more than a week away, campaign incidents are testing the spirit of coex- istence among the participating parties. The worst problems appear to have involved scheduling of oppostion election rallies. In several cases, the Radical Lib- erals have made arrangements to use a hail only to find that it has been pre-empted by President Stroessner's Colorados. Early in January two promi- nent former exiles, Carlos Pastore and Colonel Alfredo Ramos, were officially disqualified as op- position candidates for the Senate on the Radical Liberal ticket. This action was probably ordered by President Stroessner, on the basis of their long records as leaders in anti-Stroessner plots and armed incursions. The party has reluctantly submitted a new slate, but has protested the ar- rest of several party members. Recently, a number of Feb- reristas in Concepcion were re- portedly arrested and roughed up by the police. Party leaders have protested, but not very strongly in view of the fact that Febre- rista youth had been painting antiregime slogans in the city prior to Stroessner's arrival for a campaign rally. Despite the recent political arrests and reported acts of vi- olence, the government still ap- pears resolved to hold the most honest election in Paraguayan'his- tory. The minister of interior is making a sincere effort to en- sure that rural authorities act responsibly during the election, and has threatened punishment for those that do not. In spite of the difficulties and growing animosities, it seems that all four parties will par- ticipate in the election, with Stroessner and his Colorados of course emerging as the winners. _SEC--ftEr Page 32 WEEKLY SUMMARY 2 Feb 68 Approved for Release: 2019/01/17 C03172646 3.5(c) Approved for Release: 2019/01/17 C03172646 3.3(h)(2) Approved for for Release: 2019/01/17 C03172646