CURRENT INTELLIGENCE BULLETIN - 1955/07/10

• Document Type: SPECIALCOLLECTION
• Collection: Current/Central Intelligence Bulletin Collection
• Document Number (FOIA) /ESDN (CREST): 03448329
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 8
• Document Creation Date: September 20, 2019
• Document Release Date: September 26, 2019
• Publication Date: July 10, 1955

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TOP SECRET
3.3(h)(2)
3.5(c)
10 July 1955
Copy No,,
99
CURRENT INTELLIGENCE BULLETIN
DOCUMENT NO /6
NO CHANGE IN CLASS. VIV
Li DECLASSIFIED
CLASS. CHANGED TO: IS S C
NEXT REVIEW DATE. 20/ 0
AUTH: HR 70-2
DATE: REVIEWER:
Office of Current Intelligence
CENTRAL INTELLIGENCE AGENCY
TOP SECRET
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SUMMARY
FAR EAST
1. Comment on Communist China's 1955 budget (page 3).
SOUTHEAST ASIA
2. Comment on Pathet Lao attack in northern Laos (page 4).
3. Outcome of Indonesian elections predicted (page 6).
NEAR EAST - AFRICA
4. Early fall of Iranian cabinet seen possible (page 6).
WESTERN EUROPE
5. CSC president seeks US co-operation during atomic pool talks
(page 7).
* * * *
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FAR EAST
1. Comment on Communist China's 1955 budget
Almost one fourth of the record $12 bil-
lion Chinese Communist national budget
for 1955 will be spent on defense, ac-
cording to an announcement from Peiping on 6 July. Total budgeted
expenditures are 21 percent higher than the amount spent in 19549
while the rise in military spending is set at 24 percent.
Moreover, the military budget of approx-
imately $3 billion is probably understated by 10 percent or more
because it does not cover investments for military purposes made
by industrial ministries.
The large increase in defense expendi-
tures in 1955 is explained by Peiping as being necessary because
"the imperialists are still encircling China and she has to pro-
tect her independence and national constitution, liberate Formosa,
and safeguard her territorial integrity."
Emphasis on military spending may have
cut into funds for industrialization, which comprise about 22 per-
cent of the budget. A rise of only 11 percent in industrial in-
vestment is planned this year over 1954, but heavy industry is to
receive a greater share.
The military spending figure is about
10 percent of China's gross national product of more than $30 bil-
lion, and economic investments constitute another 20 percent. The
peasantry will continue to bear the main burden of these large mili-
tary modernization and industrial programs. Although the budget
report stated that direct farm taxes would drop to 12 percent of
total revenues in 19559 the regime can expect increased revenues
from the stepped up program of forced purchases of agricultural
products at low prices.
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SOUTHEAST ASIA
2. Comment on Pathet Lao attack in northern Laos:
The recent clash between Pathet Lao
and Laotian government forces at
Muong Peun, southwest of Sam Neua
village, appears to have subsided,
with no essential change in the mili-
tary situation. This latest action in
the series of clashes instigated by the
Communists since the 1954 cease-fire
follows a several months' build-up of
ary s ren y s0 sides in the vicinity of Muong Peun.
The Pathet Lao forces began their at-
tack on 3 July and succeeded in capturing strategic hill positions
encircling the Muong Peun garrison. Subsequent reports stated,
however, that royal government forces recaptured these posi-
tions.
The Pathet Lao is estimated to have
3,000 troops in the Muong Peun area, approximately one half of
its total force. Laotian army forces there totaled 1,800 at the
start of hostilities but have since been reinforced by the air drop-
ping of several hundred fresh troops.
The Communist attack may have been an
attempt to take this important post by surprise, as the first stage
of a campaign to force the complete withdrawal of royal forces
from the disputed provinces of Sam Neua and Phong Saly. The
similarity to previous actions suggests, however, that this attack
was another effort on the part of the Communists to influence the
course of recently resumed negotiations between Pathet Lao and
government officials.
During the course of these negotiations,
which began last January, the Pathet Lao has frequently staged
shows of strength, apparently in an attempt to pressure the Lao-
tian government into an acceptance of its exorbitant demands.
The immediate consequence in this case, however, has been the
suspension of these talks by the government.
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Niro
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PATHET LAO ATTACK IN NORTHERN LAOS
oPHONG SALY
PRESENTATIONS DIVISION
NEUA
�SAM NEUA
MUONG PEUN
P ROVI NC
NONG ET
�Road
(selected)
JULY 1955 50709
Muong Peun remains a potentially ex-
plosive situation, and hostilities there could spread throughout
both Phong Saly and Sam Neua provinces. Neither side at pres-
ent appears capable of gaining complete military control over
the northern provinces. The Pathet Lao, however, aided by both
materiel and personnel support from the Viet Minh in contraven-
tion of the Geneva agreement, is gradually increasing its mili-
tary capabilities.
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3. Outcome of Indonesian elections predicted:
the
IvIasjumi and two smaller Moslem par-
ties can be expected to win at least 50
percent of the seats in parliament in the forthcoming national
elections. The National Party, which heads the present govern-
ment coalition, on the other hand, is not likely to obtain more
than 15 percent of the seats.
Socialist Party wouldstrive to win a tenth of the parliamentary
seats. In areas where there was no chance of electing its own
representatives, it would support the Masjumi so as to prevent
gains by the Communist Party.
Comment: Since Indonesia has never
held national elections and conditions are unsettled, any predic-
tion regarding the outcome of the elections�scheduled for late
September�should be treated with considerable reserve. On
the basis of available information, however, it appears that the
parties now in opposition will win the election; if genuinely free,
but by a smaller margin than indicated in the above report.
There is some reason to expect the
Indonesian Communist Party to obtain more votes than the Na-
tional Party, which it is presently supporting, and thus become
the second strongest party in parliament.
NEAR EAST - AFRICA
4. Early fall of Iranian cabinet seen possible:
Iranian prime minister Ala told the
American charg�n 7 July that attacks
on his government were coming from
all sides and that the regime, if not in
retreat, was definitely on the defensive. Even cabinet members
and progovernment Majlis deputies are actively speculating on
its chances of survival.
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The embassy comments that the resigna-
tion of the government in the near future is quite possible, either
as a result of the prime minister's and the cabinet's discouragement
or the Shan; belief that the cabinet is not carrying out his directives.
A no-confidence vote by the Majlis is,
however, unlikely, and most of the deputies will continue to sup-
port Ala as long as the Shah desires it.
Comment: The Shah is heavily committed
to the success of the present government and probably will try to
maintain it as long as possible.
Any new government would�like the Ala
cabinet--be likely to suffer from the attempts of the Shah to par-
ticipate in day-to-day government operations.
WESTERN EUROPE
5. CSC president seeks US co-operation during atomic pool talks:
President Rene Mayer of the Coal-Steel
Community's High Authority told Ameri-
can observers to the CSC on 7 June that
he was gratified by Washington's sympa-
thetic attitude toward the negotiations
sc e u e o begin in Brussels on 9 July for a European atomic
pool. He hoped, however, that the United States would not sign
any new bilateral atomic energy agreements with any of the six
CSC countries while these talks were in progress.
French opposition to further European
Integration will be overcome, Mayer said, provided France's con-
tribution to an atomic energy pool is matched by an equivalent
contribution in raw materials by other prospective members.
This would involve, however, a revision of the American-Belgian
accord on uranium supplies.
Comment: Mayer'S anxiety regarding
possible bilateral agreements apparently results from the Ameri-
can invitation to a number of countries on 10 June for negotiations
about agreements on peaceful uses of atomic energy.
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The Brussels conference of experts
was set up at the 1-3 June meeting of the foreign ministers of
the six CSC countries, which showed great interest in the pooled
development of atomic energy to keep Western Europe indus-
trially abreast of the United States and the Soviet Union. A
sharp dispute arose between France and Belgium, however, over
their respective contributions to the proposed atomic energy pool.
Belgian foreign minister Spaak, the
"pro-European" chairman of the Brussels talks on atomic energy,
wants to use the Belgian Congo's resources in uranium as a lever
to induce Paris to take a decisive step toward further suprana-
tional integration. There appears to be broader French political
support for a common European effort in the atomic field than in
any other. (Concurred in by OSI)
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