Document Type: 
Document Number (FOIA) /ESDN (CREST): 
Release Decision: 
Original Classification: 
Document Page Count: 
Document Creation Date: 
December 16, 2016
Document Release Date: 
August 9, 2005
Sequence Number: 
Case Number: 
Content Type: 
PDF icon CIA-RDP67-00059A000100010002-7.pdf18.95 MB
Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET NATIONAL INTELLIGENCE DIGEST CENTRAL INTELLIGENCE AGENCY TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET INTRO-A Page 1 of 1 INTRODUCTION PURPOSE AND SCOPE The National Intelligence Digest is intended to serve as a summary of intelligence on major world problems for the use of government officials. Users of the Digest should be aware that it is not designed to provide complete and up-to-the minute current intelligence. The country handbooks published by the Office of Current intelligence provide this type of information in considerable detail. Moreover, the Digest does not provide a compilation of National Intelligence Estimates, but rather is a collection of generalized abstracts of such estimates. The Digest will be revised monthly to take account of major current developments and to include abstracts of the latest pertinent National Intelligence Estimates. The date at the bottom of each page indicates the cut-off date for the information contained on that page. SOURCE The Digest is. not an LW-coordinated publication. Where National Intelligence Estimates are abstracted, the source Will be clearly indicated in a footnote. CIA assumes sole responsi- bility for this abstracting as well as for all other material. CLASSIFICATION This Digest as a whole is classified TOP SECRET and each page is so marked. Individual sections in many cases have lower classifications, which are shown under the title on the first page of the section. The lower classification may be employed if the material is separated from the Digest_ Copy No. Approved For Release 200?ThriAtiftelA-RDP67-000591A6401606-1;6602-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET TABLE OF CONTENTS I. GENERAL INTRO-B Page 1 of 3 No. of Date of Pages Information A. Estimate of the World Situation through 1955 (10) 10 Dec 53 B. Probable Effects of Increasing Nuclear Capabilities upon the Policies of US Allies ? . . (2) 1 May 54 C. Probable Development of the Soviet Bloc and Western Power Positions over the Next Fifteen Years........?.... (5) I May 54' II. SOVIET BLOC A. Soviet Capabilities and Probable Courses of Action through Mid-1959 B. Communist China. 000000000 goe000afee 00000000 C. The European Satellites D. Soviet Bloc Economic Warfare Capabilities and Courses of Action (Discontinued) E. Review of Current Communist Attitudes toward General War F. Probable Soviet Response to the Ratifi- cation of the Paris Agreements (13) (6) (5) (3) (4) 1 Apr 55 1 Apr 55 1 Apr 55 28 Feb 55 1 Apr 55 III. FAR EAST A. Communist Courses of Action in Asia through 1957 (4) 1 Apr 55 B. Strategic Resources of the Far East (Discontinued) C. Korea (4) 1 Apr 55 D. Japan (4) 1 Apr 55 E. Taiwan (5) 1 Apr 55 F-1 Mainland Southeast Asia (Discontinued) F-2 Indochina WC, 1 May 55 F-3 Burma (2) 1 Apr 55 F-4 Malaya (1) 1 Oct 54 F-5 Thailand (4) 1 Jan 55 G. Australia (1) 1 Jun 54 H. New Zealand (Discontinued) I. The Philippines. ......... .......... (3) 1 Apr 55 Jo Indonesia (3) 1 Apr 55 K. Hong Kong and Macao (Discontinued).......... TOP SECRET Copy No., 1 May 3.95 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 INTRO-B Page 2 of 3 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOT SECRET IV. V. VI. SOUTH ASIA Introduction (Discontinued) A. India B. Pakistan C. Kashmir Dispute D. Afghanistan. .. . so 0.-? E. Ceylon.. OOOO 000.00000 OOOOOOO 000109009 OOOOOO 0 MIDDLE FAST AND AFRICA V. Middle East Defense A. Iran. OOOO 00000 OOOOOOOOO 0000 OOOOO o00 OOOOO 000 B-1 Arab States.. 0000000000 OOO ; OOOOOOO 000000000 B-2 Egypt...... OOOOOOOOOOOOOOOOOO ... OOOOOO 00000 B-3 The Sudan B-4 Syria B-5 Lebanon B-6 Iraq B-7 Jordan B-8 Saudi Arabia B-9 Libya. .. OOOOO . OOOOO 000 OO 0 OO 0 OOOOO 0000000000 C. Israel D. Turkey E. Middle East Oil (Discontinued)... 000 OOOOOOO F. North Africa G. Union of South Africa ... OOOOOOOOO 00000.0000 H. Tropical Africa I. Greece.. . OOOOOOOOOOOO ............. OOOOOOOOO EUROPE A. The Outlook for Western Birope over the Next Decade B. Status of the NATO Defense Effort C. Status of the Western European Economy D. Status of European. Integration........... No. of Pages Date of Information 25)05 25X6 (3) (4) (1) (3) (2) (1) (4) (2) (3) (2) (2) (1) (2) (1) (2) (2) (3) (2) (5) (3) (3) (4) (2) (2) (3) (2) 1 Apr 55 1 Apr 55 1 Apr 55 1 Dec 54 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Oct 54 1 Apr 55 1 Apr 55 1 Apr 55 1 Nov 54 1 Oct 54 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Jul 54 28 Feb 55 1 may 54 1 Nov 54 1 Jan 55 1 Nov 54 F. France (4) 1 Apr H. West Berlin Saar J. The German Unity Issue (Discontinued) K. Italy L. Trieste (Discontinued) M. Austria.... OOOOOOOOOOOOO ? OOOO ! OOO .000000000 (1) (2) (4) (4) 1 Apr 1 Apr 55 1 Dec 54 1 Apr 55 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 'TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET INTRO-B Page 3 of 3 VI. EURDPE (Continued) N-1 Benelux Countries N-2 Belgium N-3 Netherlands N-4 Luxembourg 0. Switzerland (Discontinued) P. Scandinavia P-1 Norway P-2 Denmark P-3 Sweden .. OOOOOOOOOOOOOOOOOO 1)-4 Finland Q. Iceland R. Portugal S. Spain .. T. Yugoslavia. No. of Pages Date of Information (1) (I) (1) (I) (1) (2) (2) (3) (2) (1) (3) (4) 1 Apr 55 1 Apr 5.5 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 I Apr 55 1 Apr 55 1 Apr 55 VII. LATIN AICA A. Over-all Situation B. Argentina C. Bolivia, D. Brazil E. Chile F. Colombia.. G. Caribbean Republics H. Guatemala I. Panama (Discontinued) J. Venezuela K. The European Dependencies in the Caribbean Area (1) (3) (3) (4) (3) (2) (6) (3) (3) (2) 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 1 Apr 55 I Apr 55 I Apr 55 TOP SECRET Copy No f"..3_ I May 19 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 .? CIA-RDP67-00059A00010001000277 TOP SECRET A - ESTIMATE OF THE WORLD SITUATION THROUGH 1955* (SECRET) SCOPE This estimate is concerned with the major international trends which will affect the world situation through 1955 rather than with the specific events and conditions which will characterize that situation. The esti- mate must assume a continuation of present US policies and thus cannot consider the effects which a change in these policies would have on the world situation. ESTIMATE The Over-All Situation Through 1955 Despite the change in regime in the USSR and the shifts in Soviet foreign and domestic tactics, there has been no change in the USSR's basic hostility to all non-Soviet power. The USSR will continue its cold war against the Free World, largely through a vigorous political warfare campaign. While East-West negotiations are possible, there is little likelihood of any major Soviet concessions. On the other hand, we believe that deliberate initiation of general war by the USSR is unlikely during this period,** and, to the extent that the USSR pursues a more cautious policy, the chance of war by miscalcula- tion will also probably be less. However, there will be continuing danger that it may occur from a series of actions and counteractions initiated by either side, but not intended by either side to have that result. In par- ticular it might arise from actions by one side that were regarded by the other as an imminent threat to its security. There will also be a con- tinued danger of new or intensified East-West clashes, particularly in Indochina, and Korea, and of incidents in Germany. In the absence of such East-West clashes, and unless the USSR aban- dons its ostensibly conciliatory tactics, the next two years will probably be a period of reduced Free World apprehensions of general war. So long as this period lasts it will present a new challenge to the Free World. While over the longer run the very diversity of the Free World may lend it a flexibility and potential for growth which will constitute a source of strength, over the next two years this diversity may prove a source of weakness. The totalitarian nature and centralized controls of the Soviet Bloc might give it advantages in this phase of the cold war, even though the totalitarian rigidities of the Bloc system might over the longer run * This chapter contains the complete text of NIE-99, "Estimate of the World Situation Through 1955" (23 October 1953). ** The Deputy Director for Intelligence, The Joint Staff, considers that the in- telligence available is insufficient to permit a judgment, of Soviet capabilities or intentions, sufficiently accurate to justify the conclusion that: "Deliberate initiation of general war by the USSR is unlikely during this period." MO RI 39792 PAGES 1.:24 Tokv sxcR_ET Approved F-or Release 2005/08/15 : CIA-RDP67-00ARegalE0488b2-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 1-2 TOP SECRET impair its stability and cohesion. Continued stresses and strains within the Soviet Bloc are likely, but the monolithic unity and forced cohesion of the Bloc will probably be much less affected by a situation of reduced apprehensions than the more divided Free World. Moreover, the build- up of Bloc strength will almost certainly continue, even if at a somewhat reduced rate, while the Free World may be inclined to relax its guard. We believe that in a situation of reduced international apprehensions and Bloc emphasis on divisive tactics, there is danger of a weakening in the unity of the Free World. The progress being made by the USSR in the development of nuclear weapons is also a factor of prime military and psychological importance in the world situation. As this Soviet capability increases, Western superiority in numbers of nuclear weapons will be of relatively less sig- nificance so far as the psychological factor is concerned. As the USSR increases its capabilities for delivering a seriously damaging attack on the US, the US is losing the unique position it has held in the East-West struggle. The full impact of this development is not yet clear, but even now we perceive two new elements: a. One is the danger that the USSR may use threats of atomic bom- bardment against certain Free World countries in an attempt to force their compliance with its demands. There is a chance that some US allies, if they feared that the threat of US retaliation would not deter Soviet action, would be forced by the prospect of atomic devastation to adopt more neutral positions in a cold, or especially in a hot, war. b. In an age where initial air assault can be so destructive, the US is losing, if it has not already lost, the immense advantages of being able to conduct a deliberate and extensive post D-day mobilization with rela- tive freedom from enemy attack. Probable Trends in Soviet Bloc Cohesion, Strength, and Policies Cohesion of the Bloc. Despite the possibility of a disruptive struggle for power within the new Kremlin leadership and the evidence of popular disaffection within the Satellites, we believe the Bloc will preserve its cohesion through the period of this estimate, and that the Kremlin will continue to play the dominant role in the formulation of Bloc policies. We believe that the USSR and Communist China will remain closely allied during the period of this estimate. Bloc Capabilities. The build-up of Bloc basic industry and military capabilities will continue even though increased attention will be devoted to the correction of certain economic deficiencies in agriculture and con- sumer industries which recently have been specially emphasized. There are indications that the Soviet authorities intend to proceed along the lines laid out in the announced plans for these sectors of the economy. This would require an allocation of greater resources to agricultural and consumer goods production and, at least for the short run, would lead to a reduction in the rate of expansion of other sectors of the economy. The most significant increase in Bloc military capabilities during the period of this estimate will arise from enlargement of the Bloc stockpile of nuclear weapons (and the addition of a thermonuclear component) , and from an increase in the number of its jet aircraft and its submarines. AM3rW681VberrRgiase 2005/0a6P: EW-MCF67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET 1-3 The Bloc may by mid-1955 have available a sufficient number of heavy bombers to increase greatly its long-range air offensive capabilities. The Bloc will probably increase its air defense capabilities, and may have a limited number of all-weather jet interceptors in operational units. We do not believe that marked changes in Bloc military strength and capa- bilities are likely to occur in other respects; however, there will be a general improvement in training and equipment of Bloc armed forces. Bloc political warfare capabilities, through exploitation of Western political and economic vulnerabilities, encouragement of anti-Westernism and nationalism in underdeveloped countries, and utilization of the world-wide network of Communist parties, will remain great. Probable Bloc Policies.*** We believe that the Communist rulers re- main profoundly convinced that permanent hostility exists between the Communist and the free worlds. Their basic objectives, therefore, con- tinue to be an expansion of their own sphere of power and the eventual domination of the non-Communist world. We believe that during the period of this estimate Bloc leaders will try to avoid courses of action which in their judgment might involve sub- stantial risk of general war. We also believe it unlikely that the Bloc will initiate new local aggressions with identifiable Bloc forces during the period of this estimate, since the Communist leaders probably estimate that virtually any new local military aggression would now entail sub- stantial risk of general war or political consequences adverse to Bloc interests. It is always possible, of course, that the Kremlin will deem some act of local armed aggression sufficiently advantageous to make the risk worth while. Moreover, despite its reluctance to run substantial risks of general war, the Kremlin might through miscalculation adopt some course of action involving such a risk. We also believe that the Kremlin would not be deterred by the risk of general war from taking counter- action against a Western action which it considered to present an immi- nent threat to Bloc security. During the period of this estimate the Communist leaders will conduct a vigorous political warfare campaign to undermine the Western power position. At present the Kremlin seems to be trying to give the im- pression that it has adopted a more conciliatory policy than that fol- lowed in Stalin's later years. The Kremlin may hope by such tactics to relax the vigilance of some Western states, to encourage dissension be- tween the US and its allies, and to delay the progress of Western rearm- ament. We cannot predict how long such comparatively conciliatory tactics will continue; we believe that harsh courses of action similar to those pursued by the Kremlin in the past will reappear whenever the Kremlin deems them advantageous. We believe that Bloc leaders during the period of this estimate will probably be prepared to reach an accommodation on some minor ques- tions, and may make plausible but unacceptable proposals on major matters. However, they will almost certainly be unwilling to settle any *** The material in this section is taken from N1E-95, "Probable Soviet Bloc Courses of Action Through Mid-1955," 25 September 1953. ber 1953 Approved For Release 20M8/VC: IgAr-RDP67-00H9R8000010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 1-4 TOP SECRET East-West differences at the cost of major concessions. We believe, more- over, that the Bloc leaders will be extremely cautious in pursuing con- ciliatory tactics, and may revert from time to time to demonstrations of toughness, especially when they consider that their vital interests are involved, or that their tactics are being construed abroad as a sign of weakness. Offers to negotiate may be accompanied by reminders that the USSR now has improved capabilities in the nuclear weapons field, and as these capabilities further increase, the Kremlin may become bolder in its dealings with the West. There are recent indications that the Bloc intends to increase its trade with non-Communist states. The Bloc's volume of trade with the Free World will probably increase somewhat during the period of this esti- mate, but this trade will continue to be very small in proportion to intra- Bloc trade. New trade agreements will probably be intended not only to obtain desired imports but also to weaken the economic ties of non- Communist states with the US, and to make strategic trade controls a bone of contention between these states and the US. While the Bloc will not be able to bring about a major shift in present trade patterns, the Communists probably estimate that political dividends can be earned from even small increases in their current volumes of trade with indi- vidual non-Communist states. Probable Developments in the Free World During the next two years the Free World will have difficulty in main- taining its strength in the face of Soviet divisive tactics and probable reduced apprehensions of East-West conflict. In contrast to the Krem- lin's ability to control or influence the close-knit Soviet Bloc, the US, as leader of the anti-Soviet powers, faces the complex problems of dealing with the loose anti-Soviet coalition and the agglomeration of other na- tions of varying neutral tendencies which together make up the Free World. To many of this latter group, particularly the Middle and Far Eastern countries, the East-West struggle seems less important than the solution of their internal problems and the assertion of their independ- ence of the chief Western Powers. Differing views also exist between the US and its allies over the immi- nence of the Communist threat. The very fact of Communist aggression in Korea increased fears of general war and was a prime factor in stimu- lating Western rearmament. Now that many Free World countries be- lieve that the threat of war has been reduced by a Korean armistice and by an ostensibly more conciliatory Soviet policy, the US will have greater difficulty holding together an anti-Soviet coalition and in securing in- creased Free World armed strength. The levelling off of the US's own rearmament effort and the decline in many of its foreign aid programs also lessens the sense of urgency abroad. The apparent decline of Free World confidence in US leadership is another problem facing the US. Influential groups in many Free World countries, including several US allies, doubt the stability, moderation, and maturity of US policy. On the one hand, there is fear the US will shift to a "go-it-alone" policy or even retreat to isolationism, on the other that the US will involve the Free World in war. These doubts and fears AN3rT8M4b8F ligase 2005/0gRf:lig367-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET 1-5 offer a fertile field for Soviet divisive tactics, and the new Soviet regime may be more successful than Stalin in exploiting them. In a situation in which many Free World countries believe that the threat of war has been reduced, economic problems will also assume greater prominence and will test the strength and cohesion of the Free World. This reduced apprehension will weaken what has been a power- ful incentive to cooperation and sacrifice. Moreover, some readjustment to a reduced rate of rearmament and declining US aid will be necessary. Much will depend on US economic policies and the US economic situation. Not only would US economic setbacks have a serious impact on the Free World, but US trade policy will directly affect the economic health of Free World countries, and US aid will remain in many cases an important element in their military build-up, economic stability and development, and political orientation. The problem of East-West trade is also likely to become more troublesome. Therefore, we believe that in the absence of renewed Soviet provocation, there may develop further serious rifts between the Free World nations which will weaken the Western position in the cold war. Such rifts may develop in any case as a result of economic developments or local nation- alist pressures but reduced apprehensions of war, combined with skillful Soviet divisive efforts, would make them even more serious. The most troublesome differences may arise over policies to be pursued in the Far East. It is possible, therefore, that the next few years might see an increasing isolation of the US, not by its own desire but because of in- creasing policy differences between it and other countries of the Free World. Even assuming the continuation of the Soviet courses of action pro- jected above, there remains a serious danger of new or widening East- West clashes in such critical areas as Indochina, Korea, and Germany, which would again increase Free World apprehensions. Whether, if such clashes took place, the Free World would then rally to the support of the US and of expanded rearmament programs, as after the Korean aggres- sion, would probably depend at least in part on the circumstances under which the clashes developed. Probable Developments within the NATO Coalition Although we foresee no developments which will undermine the basic solidarity of the NATO alliance, we believe that, in view of reduced Euro- pean apprehensions of East-West conflict, rifts may develop between the NATO partners, particularly between the European NATO countries and the US. The USSR will attempt to undermine popular support for the NATO alliance and for rearmament, in particular the program to rearm West Germany. These efforts, together with increased Soviet nuclear capabilities, continued intra-European differences, and European disa- greements with the US over cold war policies, may lead to more nation- alist and neutralist attitudes in Western Europe. So long as apprehensions remain reduced there also will almost cer- tainly be a further loss of momentum in the NATO build-up. The gen- eral feeling that the immediate Soviet threat has receded has already led most NATO countries to reduce their military outlays. While a further TOP SECRET 10 Decembies 1953 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 1-6 TOP SECRET slow increase in NATO strength over the next two years is probable, only in event of renewed Soviet aggressiveness will it be as rapid as in 1950- 1953. On the other hand this might allow many NATO countries to concentrate on domestic needs and to devote more resources to meeting their own social and economic problems. Such a trend might strengthen countries such as the UK, which remain highly vulnerable to adverse international economic developments. Significant increases in European NATO military strength over the coming period will probably depend upon the extent to which Spain, Yugoslavia, and above all West Germany can be directly or indirectly associated with NATO. The Trieste issue will remain an irritant in Italo- Yugoslav relations which will render the association of Yugoslavia with NATO difficult. Until a settlement of the Trieste issue is generally accepted, the usefulness to NATO of the Greek-Turkish-Yugoslav entente will be impaired. But above all, the prospects for greater European NATO strength and cohesion will revolve increasingly around the interlocking problems of Germany's future and the attitude of France. As a result of Soviet failure to come forward with any acceptable reunification scheme and of Adenauer's overwhelming victory, the chances for integrating West Germany with the Western Powers and for initiating its rearmament have increased. The Kremlin may seek to avert or postpone these devel- opments by renewed talk of German reunification, but it is unlikely to offer any terms which would jeopardize its control over East Germany. Adenauer's position is so strong and German disillusionment with Soviet unification offers is so great that any Soviet offers not involving aban- donment of Soviet control over East Germany would be unlikely to have much impact on German opinion. The importance attached by the Soviet rulers to West German rearmament is such, however, that they might react to it by measures which would enhance the risk of an East- West clash in this area. A likely pressure point would be West Berlin. Though many in France are aware of the need for strong government, there is no evidence that this awareness will lead to a stronger French political system. ArlOrkalPIFRaase 2005/08FRP: 86C-Rg67-00059A000100010002-7 25X1 25X1 Approved For Release 2005/08/15 : CIA-RDP67-00059A00010001100102-7 TOP SECRET Probable Trends in the Far East In the last two years the most active theater in the East-West struggle has been in the Far East. There the Western Powers have kept the Com- munists from overrunning South Korea and Indochina while attempting to build up anti-Communist strength through US support of the non- Communist countries in this area. We believe it unlikely that the Com- munists will undertake new local aggression in the Far East with identi- fiable Bloc forces. The emphasis in Communist China over the next two years will probably be on building up industrial and military strength. However, we believe that the Communists would take counteraction against Western actions which they felt presented an imminent threat to their security, even at the risk of widening hostilities in the Far East. It will be difficult to increase the strength, cohesion, and anti-Com- munist orientation of the non-Communist states of the Far East. The cessation of hostilities in Korea, together with Communist efforts to pro- mote rifts among the anti-Communist powers, will add to this difficulty. During the next two years there is unlikely to be any significant improve- ment in the Western position in this area; moreover, there are possibili- ties of serious deterioration, particularly in Indochina, Indonesia, and Korea. Korea. A Korean political conference, if it takes place, is unlikely to result in any agreement which would alter the status quo. The Commu- nists are unlikely to break the armistice by renewing hostilities, but they almost certainly will not agree to Korean reunification on terms which would endanger their control of North Korea. On the other hand, if President Rhee remains convinced that the US could neither prevent an ROK armed attack against the Communists nor disassociate itself from military support of such action, once undertaken, we believe that he will probably at some time seek to disrupt the armistice by such an attack. If hostilities are renewed, the Communists will probably take, at a minimum, the military measures they consider necessary to maintain their position in Korea. Unless the ROK renews hostilities, we believe that there will be a continued armed truce in this area, with both the US and USSR engaged in reconstruction and in strengthening their re- spective Korean partners. Taiwan. Any major change in the status of Taiwan is unlikely. The Communists probably will not attempt invasion so long as the US de- fends Taiwan; and unless the US decides to support Chiang's forces directly, he in turn will be unable to undertake more than minor harass- ment of the mainland. Indochina. We believe that there will almost certainly be important developments in the Indochina situation during the period of this esti- mate. The steady deterioration of France's will to continue the struggle has been at least temporarily checked by French resumption of the initi- ative under the Laniel-Navarre plan. We do not believe, however, that the French will achieve a complete military victory. The French objec- tive is to reduce the drain of the Indochina war on France, while main- 10 December 1953 Approved For Release 200Kg1g .VEZIDP67-00059A000100010002-7 Apnved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET taming a position for France in the Far East. The outcome will depend on whether, by a combination of military victories and political conces- sions, the French can strengthen the Associated States to the point where these states will be able to maintain themselves against Communist pressures with greatly reduced French support. The French would hope in this way to create a situation which could serve as a basis for successful negotiations with the Communists. The Laniel-Navarre plan may be the last French effort in Indochina. Should it fail to achieve its objec- tives we believe that, unless the US proves willing to contribute forces, the French will in time seek to negotiate directly with the Communists for the best possible terms. For their part, the Chinese Communists will almost certainly continue their present type of support for Viet Minh. They are unlikely to inter- vene with organized units, at least in the absence of Western moves which in their opinion threatened the security of Communist China. At the same time, the Communists will probably talk of peace negotiations as part of their propaganda campaign and might raise the Indochina issue in high level political conferences. They are unlikely, however, to agree to any political settlement which they believe would lessen their chances of eventually gaining control of Indochina. Other Countries of Southeast Asia. Problems facing the other South- east Asian countries are those of attaining political stability, coping with local insurrections, and meeting their own serious economic problems. The outlook in the Philippines, and in the absence of serious deteriora- tion in the Indochina situation, in Burma, Thailand, and Malaya, is for some improvement in stability, though these countries will by no means resolve their numerous internal problems. In Indonesia, however, the leftist character of the present government offers increased opportunities for Communist penetration, Japan. Accumulating economic difficulties and the reluctance or in- ability of the Japanese Government to adopt energetic economic and rearmament policies are prolonging Japanese dependence on the US and delaying Japan's development as a counterweight to Communist power in the Far East. At the same time there is growing anti-American senti- ment in Japan. Unless Japan can find the necessary foreign markets and take the necessary internal economic measures, the development of a sound defense structure as well as a sound economy will be endangered, the present dominance of the moderate conservatives will be weakened, and the whole pattern of US?Japanese cooperation will be threatened. We foresee no basic change in Japan's pro-Western orientation, but eco- nomic difficulties and growing nationalism will create increased US? Japanese frictions and postpone the development of a strong anti-Com- munist Japan. Prospective Trends in the Middle East, Africa, and South Asia In the underdeveloped areas of Asia and Africa the Western position has deteriorated since World War II. Local nationalism has proved a force against the West and the deep-seated revolutionary forces at work in these areas have created political instability. It is difficult to over- come the anti-Western sentiments of the newly independent Asian and African countries and convince them that Communist policies threaten /11?3139asiaipcir Wiase 2005/698 ERik6P67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET 1-9 their independence. Except in Iran, however, the internal Communist threat is small and is unlikely to grow greatly in the next two years. The Middle East and North Africa. Conflicts between native nation- alists and the "colonial" powers will continue, but we believe that in certain areas there are prospects for improvement in the West's position. The fall of Mossadegh in Iran has at least temporarily increased the opportunities for strengthening Iran's internal stability and settling the Anglo-Iranian oil dispute. Chances for settlement of the Anglo-Egyptian base controversy have improved, and if a settlement is reached it will probably have a favorable effect on both the stability of the Egyptian regime and on the Western position throughout the Arab World. On the other hand, an Anglo-Egyptian settlement may set the pattern for similar demands from Iraq. The Arab?Israeli dispute will continue, but a renewal of large-scale hostilities remains unlikely in view of the near military equilibrium of the two parties, and the restraining influence of the US, the UK, and France. The more favorable policy that the US has adopted toward the Arab States may contribute to better relations with them. However, there remain possibilities of markedly adverse develop- ments in this volatile area. Although the deposition of the Sultan of Morocco has temporarily bolstered French control, it is likely to drive the nationalists to more extreme positions since France seems unlikely to implement very far-reaching reforms. South Asia. India and Pakistan will probably remain preoccupied with their own serious economic and social problems; they will also remain concerned with their dispute over Kashmir. India is unlikely to abandon its neutralist position in the cold war, but Pakistan, motivated largely by its desire to improve its position vis-a-vis India, will continue its efforts to secure some pact with the Western Powers, in return for extensive US aid. Some further improvement in the relations of this area with the West may occur over the next two years, but they will remain acutely sensitive both to anti-colonial disputes in other areas and to any indications that the West is pursuing aggressive cold war policies, particularly against Communist China. Probable Trends in Latin America There will probably be a continued trend in Latin America toward extremely nationalistic regimes based on demagogic appeals to sectors of new political importance ? organized labor, white-collar workers, and the lower middle class. This trend will be most evident in countries where rapid social and economic change is taking place. This change results from forced industrialization at the expense of agriculture, which is generally accompanied by severe inflation. Right or left extremism which poses potential threats to US security interests will probably be strongest in Argentina, Bolivia, Chile, Guatemala, and possibly Brazil. In these countries there will continue to be substantial Communist and demagogic nationalist influences, which will attempt to channel the resentment of the dislocated groups against the US. In Guatemala Communist influence over the government, already strong, may increase. Communist penetration of British Guiana has posed a new problem in the Caribbean area. TOP SECRET 10 Decembgr Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 1-10 TOP SECRET Most Latin American countries will probably continue to cooperate with the US in the UN on basic East-West issues, although they will tend increasingly to pursue an independent course on issues affecting under- developed countries. Latin America will be increasingly concerned about US trade and especially tariff policies. Regardless of the degree of Latin American cooperation with the US, there will probably be an increasing tendency to expand commercial and possibly diplomatic relations with the Soviet Bloc. Apiki:PtIVAVRaiggse 2005/0811P 611C1:14467-00059A000100010002-7 GENERAL Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET I-B Page 1 of 2 B. PROBABLE tnECTS OF INCREASING NUCLEAR CAPABILITIES UPON THE POLICIES OF US ALLIES* (Secret) ASSUMPTIONS Nuclear weapons will not have been used in war since 1945. No international agreement will have been made restricting or outlawing the use of nuclear weapons in war. CONCLUSIONS A great and recognized growth in nuclear capabilities will obviously intensify the anxiety of peoples and governments to avoid war. No government will willingly run risks of war unless interests are at stake which it considers vital, and the threat of nuclear weapons will almost certainly tend to narrow the range of interests that any government will consider vital. Under such circumstances, the difficulties presently felt in maintaining an effective Western coalition under US leadership may be increased, but we do not believe that the alliance will neces- sarily show significant weakness, at least as long as there does not seem to be a greatly increased likelihood of general war. The US allies will probably seek to obtain greater influence over US policy in order to ensure a cautious and non-provocative attitude toward the Communist states. The alliance could receive a severe test, however, in con- nection with local aggression committed or supported by the Soviet Bloc. Fear already exists that strong reaction to such aggression might lead to general war. Fears of general war will be intensified when both great power blocs are believed to possess large nuclear capabilities. US allies would therefore be even more insistent than at present that every effort be made to limit the scope and area of local conflicts and to deal with local aggression without resort- ing to acts which might expand the conflict into general war. US allies generally would also be more unwilling than at present to participate in repelling local Communist aggression. * This section includes the Conclusions of NIE 100-54, "Probable Effects of Increasing Nuclear Capabilities upon the Policies of US Allies", 26 April 1954. MORI 1189628 TOP SECRET 1 May 1954 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 1-B TOP SECRET Page 2 of 2 In the event of international crisis involving grave danger of general war, we believe that the allies would almost certainly support the US as long as they believed that firm maintenance of the alliance would probably avert war. We cannot estimate the probable courses of action of US allies if an international crisis should develop to the point where general war seemed to them virtually certain and no longer to be averted by firm maintenance of the alliance. There is inadenquate evidence or precedent on which to calculate the reaction of governments and peoples who consider themselves to be facing imminent threat of attack with nuclear weapons. Among the factors influencing the courses of action of each nation, we believe that the following would be of most importance: (a) the estimate that the government and people would make of their chances of survival in the event of participation in general war; (b) the alternatives which would ap- pear available at the time; (c) the political and social stability of the state, and the morale of its population; (d) the importance, to the state, of the issueS at stake in the crisis; (e) the strength and cohesion of the alliance at the beginning of the crisis, and the degree of integration Of its armed forces; and (f) the judgment which people and government had made of the wisdom and skill with which US policy had been conducted. We believe that most allied governments, if confronted with certain national destruction as the sole alternative to an ac- commodation with the USSR, would choose the latter. We believe it unlikely, though possible, that the major allies of the US would become convinced that the alternatives facing them were so limited and so clear-cut as the two described. MORI 1189628 1 Miqpgad For Release 2005/08/41:' a-grP67-00059A000100010002-7 GENERAL Approved For Release 2015/08/15 ? CIA-RDP67-00059A000100010002-7 StuFt.ET I-C Page 1 of 5 C. PROBABLE DEVELOPMENT OF THE SOVIET BLOC AND WESTERN POWER POSITIONS OVER THE NEXT FIFTEEN YEARS* We believe it essential to state at the outset that there is no unequivocal answer to the question "is time on our side." Even assuming a continuation of the present amoral trend of policies of both the Bloc and the Western Powersw* (itself an assumption of doubtful validity), there are so many accidental or unpredictable factors which will materially affect the world situation as to prevent any firm estimate of the relative Soviet Bloc and Western power positions fifteen years from now. However, it is possible to appraise in general terms our likely power position vis-a-vis the Bloc if present trends continue and if various major alternative developments do or do not come to pass. PROBABLE ECONOMIC GROWTH OF SOVIET BLOC AND THE WEST The Soviet Bloc. At present the over-all economic strength of the Soviet Bloc is far less than that of the Western Powers; in term of gross national product (GNP), the 1952 output of the entire Bloc is estimated to have been about one-third that of the Western states.*** However, the economic strength of the Soviet Bloc should increase greatly over the next 10-15 years. Soviet GNP will probably almost double within this period, while Bloc GNP as a whole will increase around 75 percent. Bloc economic capabilities to wage war are likely to increase substantially since the Bloc will probably continue to place great emphasis on military production. * This section is a summary of SE i6, "Probable Long Term Development of the Soviet Bloc and Western Power Positions", 8 July 1953. ** The Western Powers are taken to include the US and its allies. 4 f For the purpose of these economic projections, the Western Powers include the US, the European NATO countries, West Germany, Canada, Australia, and Japan. Approved For ReleaseTitY0?/Wg: CIA-RDP67-00059141M/Gart0002-7 Approved For Release 2005/08/15: CIA-RDP67-00059A000100010002-7 I-C TOP SECRET Page 2 of 5 The West. It is more difficult to estimate the probable eco- nomic growth of the Western Pcwers. The Western economies are more vulnerable to economic fluctuations and trends in international trade than are those of the Bloc. However, assuming a continuation of present trends and no serious depressions, we estimate the prob- able growth in US GNP at about 56 percent over the next fifteen years, and at almost 50 percent for the WesternPowers as a whole. While Bloc GNP will probably increase at a higher rate than that of the Western Powers, the GNP of the West is already so much greater than that of the Bloc that the absolute gap between the two will widen despite the lower rate of Western growth. Thus the West will remain for the indefinite future greatly superior to the Soviet Bloc in total economic strength. PROBABLE SCIENTIFIC CAPABILITIES OF THE WEST AND THE SOVIET BLOC The over-all scientific assets of the West are now far greater than those of the Soviet Bloc, and almost certainly will remain greater over the next fifteen years, despite great efforts by the USSR to reduce this disparity. It is impossible to estimate whether the power relationships between the Soviet Bloc and the Nest will be changed during the period of this estimate by any major technological breakthrough by either side, such, for example, as the initial production of the atomic bomb by the US in 1945. PROBABLE TREE:6 IN THE MILITARY CAPABILITIES OF THE WEST AND THE SOVIET BLOC We believe that throughout the next fifteen years the West will maintain a substantial absolute advantage in capabilities for atomic warfare, but that the Bloc will gradually reduce this ad- vantage. Within the period of this estimate both US and USSR will produce a sufficient stockpile of atomic and possibly thermonuclear weapons to cripple the other side, if delivered on targets. How- ever, unless it attained complete strategic surprise or achieved an unforeseen technological breakthrough, we believe that neither side would be able to prevent powerful retaliation in kind. It is likely that the West will, during the period of this estimate, remain superior to the Soviet Bloc in capabilities for tactical use of atomic weapons. The development of Bloc and Western power positions during the next fifteen years will be significantly affected by their relative lAiwoyglifor Release 2005/08/15rogINNE137-00059A000100010002-7 Approved For ReleasegO5s/RE: CIA-RDP67-00059f080100010002-7 Page 3 of 5 conventional military capabilities. Bloc military forces are being continuously modernized and strengthened. The ability of the West to counterbalance this by developing local military capabilities, particularly in key areas such as Went Germany and Japan, will depend on Western and other policy decisions. PROBABLE TRENDS IN THE POLITICAL AND SOCIAL STRENGTH AND COHESION OF THE SOVIET BLOC AND THE WEST The Soviet Bloc. Political and social trends will have an important, and perhaps controlling effect on the relative power positions of the Bloc and the West and are most difficult to estimate over so long a period as the next fifteen years. During this period a struggle for control within the Kremlin might cause a retraction and decay of Soviet power. However, we believe it unsafe to assume that over the next 10-15 years the Soviet regime will lose its stability or the Bloc its cohesion. Trends in the Political and Social Strength and Cohesion of the West. Because of the greater diversity of the looser Western coalition, we find it even more difficult to project probable trends in Western strength and cohesion. However, at no time in the foreseeable future will the Western Powers be likely to attain or to desire to attain centralized control to mobilize their re- sources. In general, they will probably continue to be more sub- ject to internal conflicts, economic fluctuations, and divisive influences than the Bloc. As the only single aggregation of resources outside the US itself comparable to the Soviet Bloc, Western Europe plays a major role in the world power balance. Its continued weaknesses con- stitute a major vulnerability of the Western Powers, while Western Europe's acquisition by the Bloc would be a tremendous increment to Soviet power. The reappearance of a strong and viable Western Europe, including Germany, would alter the present power relation- ship between the Soviet Bloc and the West to the advantage of the latter. We believe that a primary concern of the Kremlin over the coming period will be to frustrate the development of a viable and defensible Western Europe; in so doing the Kremlin will almost certainly concentrate on the German problem. If a shift in Soviet policy on Germany, for example, led the Germans to accept a united, armed, and neutral Germany, it would introduce a new factor of great significance into the world power balance. Such a develop- ment, if accepted by our NATO allies, would not necessarily weaken the Western position. A rearmed and neutral Germany would act as a buffer state, and if the Germans were subsequently to abandon neutrality, we believe that they would be more likely to align themselves with the West than with the Bloc. Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SEcRET 1 may 1954 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 .I-C TOP SECRET Page 4 of 5 The emergence of a rearmed, anti-Communist Japan would be a major asset in restoring the strategic balance in the Far East. However, the degree of future Japanese cooperation will depend largely on the extent to which Japan's political, economic, and military demands are met. The Strength and Alignment of "Gray" Areas A major difficulty facing the West is represented by the extreme political and social instability of the underdeveloped areas of the Middle and Far East and Africa. The anti-Western overtones of this political and social revolution create ad- ditional difficulties for the West. The danger to the Western position is acute in some areas of Southeast Asia and the Middle East. Their loss would be a serious blow to the West. However, Western control or influence is still paramount in these areas. Over the next 10-15 years the US and its allies still have the opportunity to undertake actions which might arrest this trend and maintain that influence. Possible Effects of a Kremlin Shift to Soft Tactics We believe that a prolonged Kremlin shift to more moderate tactics would also present a real challenge to further growth of the Western Alliance. Should the Soviet threat appear to diminish, the likelihood of divisions among the Western Powers would markedly increase. It might lead, over the longer run, to some of our al- lies adopting more neutral positions, or even to the creation of a European "Third Fome." A prolonged relaxation of tensions might also have an ad- verse effect on the cohesion and vitality of the world Communist apparatus and hence on the Soviet power position. Soviet leaders are under some compulsion to pursue an aggressive policy in order to preserve the Communist ideology as a vital force. Any pronounced subduing of the irreconcilable hostility motif of Communist propa- ganda might serve to soften the rank-and-file of foreign Communist parties. IS TIKE ON OUR SIDE? We believe that the Soviet Bloc under present policies and programs will over the next 10-15 years decrease the proportion by which its economic and technological capabilities are inferior to Pf0311:5541 For Release 2005/08/1f0PCIAMP67-00059A000100010002-7 Approved For ReleaseT200p054M: CIA-RDP67-00059fk_Q610100010002-7 Page 5 of 5 those of the West and will acquire sufficient atomic capabilities to cripple the US. Therefore, although the West will probably retain a sizable absolute margin of superiority, we believe that in these respects time must be said to be on the Soviet side. In other respects, time may be on the side of the West. The West's military capabilities will increase during the next fifteen years if conventional rearmament programs and tactical applications of unconventional weapons enhance its present defensive capabili- ties in overseas areas. The extent to which these developments are likely to occur depends on Western and other policy decisions. Trends can be identified within both the West and the Bloc which might undermine each side's political stability and cohesion. We cannot predict, however, that these trends will have such ef- fects and certainly we cannot say that they would do so within the period of this estimate. Even under the assumption of continuation of the present general trend of policies in both the Bloc and the Western Powers, there are so many accidental or unpredictable factors which could alter present trends, that we are unable to conclude that time is on the side of either the Soviet Bloc or the West. Though a few of the components of power can be projected with fair confi- dence, the relative over-all development of the power positions of the West and Soviet Bloc cannot be predicted. Approved For Release 20D5100/115RECIA-RDP67-00059A040*9501462-7 II. SOVIET BLOC Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 200541g1?MRTRDP67-00059A0001000pritb2z7 age of 13 SOVIET BLOC A. SOVIET CARIBILIlish AND PROWLE COURSES OF ACTION THROUGH MID-1959* (See charts following this section) WIC COMMUNIST OBJECTIVES AND BFLTRFS The Communist leaders now in power in the USSR, or any that are likely to succeed the% almost certainly will continue to consider their basic objective to be the consolidation and expansion of their own power, internally and externally? In pursuing this policy most Soviet leaders probably envisage ultimatelys (a) the elimination of every world power center capable of competing with the USSR; (b) the spread of Communism to all parts of the world; and (c) Soviet domina- tion over all other Communist regimes, Soviet leaders probably are also committed to the following propositions concerning the empansion of the power of the USSRg a. The struggle between the Communist and the non-Communist world is irreconcilable; b. This struggle may go on for a long time, with periods of strategic retreat possibly intervening before the final Communist triumph; C. The struggle will not necessarily involve general war, though general war is always a possibility; During the period of "coexistence of the two camps" of Connunism and capitalism, the Communists must steadily build up the economic and military strength of the USSR, its Satellites, and Communist China; and ? At the same time, the Communists must constantly try to divide and weaken the non-Communist SOVIET POLITICAL STRUCTURE AND DOMESTIC DEVELOPMENTS Events since Stennis death do not indicate any essential changes. in the institutional bases of Soviet power. The system of party * This section is based on NIE 11-4-54, "Soviet Capabilities and Probable Courses of Action Through Mid-1959," 14 September 1954. A new estimate, NIE 11-3-55, "Soviet Capabilities and Probable Courses of Action Through 1960," will be published in May. Approved For Release 2005/W15s: Cop No. DP67-00059A0V-10001.01W Page 2 of tproved For ReleastDEONThirk : CIA-RDP67-00059A000100010002-7 controls over the police, armed forces, and the bureaucracy remains intact. The Beria affair, during !whicA the influence and status of the MVD were reduced, confirmed the effectiveness of party controls within this important instrument of power. Despite the increased prestige granted to certain military career officers since Stalin's death, there is no evidence of stiV relaxation of party controls over the armed forces. Stabilitz:of the Regime We believe that the present Soviet regime is firmly in power and that it is unlikely to be dislodged either by a grouping of forces outside the top leadership or as the result of a struggle within it, Significant changes may take place in the composition of the ruling group or in the relative power positions of its members; one man may even succeed in gaining absolute power. We believe, hoe- ever, that the new Soviet regime mill be able to resolve such con- flicts within the confines of the ruling group and the higher echelons of the Communist Party. Consequently, we believe that whatever con- flicts for power 4r differences respecting policy may develop within the ruling group, they are unlikely to affect significantly the stability of the regime or its authority within the country, or to prevent it from making policy decisions and carrying them out. These policies and their implementation will continue to reflect the funda- mental agreement which evidently obtains Among the leaders concerning the basic objectives of the Communist regime. Domestic Policies Although there has been no weakening in the authority of the Soviet regime, there has been an apparent effort to moderate some of the more vigorous aspects of the system devised by Stalin. Since the death of Stalin the regime has promised the people an improve- ment in their standard of living and increased personal security for average law-abiding citizens. The regime has backed these pro- mises with a variety of measures designed to impress upon the popu- lation at large the seriousness of its intentions. We believe that the Soviet regime's present efforts to moderate Certain aspects of the dictatorship and to raise living standards sprang from a conaidered revision of the extremes of Stalin's manner of rule and were not merely the temporary concessions of a new regime. We believe that the Soviet leaders recognize that a reversal of this program, except in the event of an external threat of actual war, would result in serious public discontent Which would tend to retard the growth of Soviet economic strength. Consequently, these measures will Almost certainly be continued for the next two or three years, 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/669?5DP67-00059A0001000 IkS of 13 and possibly throughout the period of this estimates if the pressure of external or internal circumstances does not require their reversal. The result may well be an improvement of morales, especially among the more privileged eleeents of the population. However if the oone cessions made to the peasant population do not achieve sufficient increases in agricultural productions, or if they result in renewed resistance to the system of collective farming, the regime will prob- ably resort again to more repressive measures against the peasantry. In this events, the regime might find itself ?faced with serious prob- lems of low public morale and low productivity. SOVIET-SATELLITE RELATIONS The appearance of new leadership in Nbscow has had no apparert effect on the character of the relations betwe n the USSR and its Satellite states in Eastern Europe. We believe that Soviet authority over the satellite regimes will remain intact during the period of this estimete. Widespread political discontent and serious difficulties in building up the Satellite economies will continue. However, during the next five years the Satellite centribution to Soviet power will gradually increase. Soviet control will continue to depend primarily on the presence or proximity of Soviet armed forcess, and in the absence of general war popular dissatisfaction almost certainly will not develop. beyond the stage of paseive resistance and occasional localized outbreaks of violence. SINO -SOVIET RELATIONS . The relations of the USSR with Communist China are markedly different from those prevailing between the USSR and any other Comm- unist country. Communist Chima is more a Soviet ally than a Satellite. It posseesee some capability for independent actions, possibly even for action which the USSR might disapprove but which it would find difficult to repudiate. However, the main outlines of Communist policy in Asia are probably jointly determined * Moscow and Peiping. While the Soviet voice probably will remain preponderants, Communist Chine appears to be increasing its stature within the Sino-Soviet partnership. Soviet propaganda and diplomacy have recently given great emphasis to Chinags claim to an acknowledged position in inter- national affairs? and the USSR has giw en evidence of a willingness to have Communist China assume greater responsibilities in further- ing Communist interests in Asia. In particular Communist China seems to have an increasingly important role in the execution of Communist policy in North Korea and Indochina. Copy No. TOP sEcimr 1 April 19 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 II-AA Approved For ReleAROMM5 : CIA-RDP67-00059A000100010002-7 Page 14 of 13 The national interests of the USSR and Communist China are in SOMB cases conflicting, and constitute potential sources of friction between the two powers. We believe, however, that throughout the period of this estimate the cohesive forces in the Sino-Soviet re- lationship will be far greater than the divisive forces. The USSR and Communist China share a common ideology. Both of them regard the US AO the chief obstacle to the achievement of their objectives, and consider that their interests are threatened by US policy and power. Moreover, each partner profits at the present time from its alliance with the other. Communist China receives essential Soviet political, military, and economic support. Soviet leaders recognize in China a valuable ally, Which provides the USSR not only military strength and defense in depth in the Par "Bast, but also a base for further advancing Communist aims in Asia. SOVIET Ecopomrp POLICY The present regime in the USSR has not fundamentally changed the traditional policy of placing primary emphasis on the rapid development of heavy industry and war potential. The new regime has, however, devoted a great deal of its attention and energies to a revision of =rent economic plans aimed at speeding up the produc- tion of agricultural commodities, especially foodstuffs, and manu- factured consumer goods. Soviet leaders have stated that this goal is to be achieved without decreasing the tempo of heavy industrial ? development, but they apparently intend, at least for the next two years, to limit defense outlays to approximately the high level reached in 1952 andmaintained in 1953. This modification of Soviet economic programs is designed to overcome deficiencies in certain sectors of the economy, particularly agriculture. We believe that Soviet economic policy will continue, at least through 19552 to place primary emphasis on the further growth of heavy industry, While maintaining defense outlays at approximately a constant level, and giving increased attention andresources to agriculture and consumer industries. Since advances in consumption are likely to fall far short of expectations, the chances are good that the regime will feel it necessary to continue the pattern of resource allocations along present lines through 1959. However, if at any time the KreOlin estimates that international tension is rising dangerously, 'then it Will almost certainly increase defense allocations. SOVIET ECONOMIC GROWTH The rate of growth of the Soviet economy has declined in the past five years from the very high: rate of the immediate postwar period. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/0TR5MRDP67-00059A0001000 to i 0 of 13 We estimate that during the next two years Soviet gross national product (GNP) will increase by about six or seven percent, and in 1956-1959 by about five or six percent, per year. If US GNP should increase during the period of this estimate at its long-range annual average of three percent, Soviet GNP would at the end of the period bei about two-fifths of US, as compared with about oneg4hird in 1953. The pattern of resource allocation in the Soviet economy in 1953 showed about -14 percent devoted to defense, 28 percent to in- vestment, and 56 percent to consumption. Current econOmic programs indicate that for at least the next two years the amount of expendi- ture on defense, instead of continuing the rapid increase that prevailed in 1950-,1952 will remain about the same, While expenditure on investment and consumption will increase. We believe the chances are better than even that the Kremlin will continue its policies along these lines throughout the period of this estimate-, The chief emphasis will almost certainly continue to be on further development of heavy industry. The Soviet leaders probably recognize that their economy is unable to support the additional heavy investment outlays in industry and the increased requirenents of the agricultural and consumer goods program, While simultaneously maintaining such a rapid rate of in- crease in the production of conventional military goods as prevailed in the Korean War period. Moreover?, Maintenance of a constant level of total military expenditure would not imply any slackening in the Soviet program in the field of unconventional weapons. It is possible, despite the absence of direct evidence, that the USSR will maintain conventional military production at somewhat lower levels for at least the next few years, but will give increased emphasis to the develop- ment of unconventional weapons and new weapons systems. The chief weakness of the Soviet economy as a Whole has been in agricultural production, Which has remained since 1950 at ap- proximately the prewar level, though the population is now about 10 percent greater than in 19140. Soviet leaders appear to have recognized that continuation of the serious lag in agriculture would ultimately make it difficult to meet the food requirements of the growing urban population, the raw material reqnirements of the ex- panding industrial economy, and the export requirements of Soviet foreign, trade, iA which agriculture plays a major role. To remecly the situation the regime has embarked on a vigorous prOgram? with the aim of achieving by 1956 a 50 percent increaee in agricultural production over 1950. We believe that this goal will not be met, and that even by 1959 agricultural production will be no more than 15 to 20 percent higher than in 1950. Even this increases however, would be sufficient to achieve a moderate increase in the per capita availability of foodstuffs and textiles. Copy No. TOP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved ForRelea2816 Page 6 of 13 SCIENTIFIC AND TECHNICAL DEVELOPMENTS 15: CIA-RDP67-00059A000100010002-7 Soviet scientific and technological capabilities are sufficiently well developed to provide effective support to industrial and military research and development. At present, the scientific assets of the USSR (the number and quality of trained personnel, facilities, equip- ment, and financiel support) are smaller than those of the US, and the assets of the Soviet Bloc are far smaller than those of the West. However, with respect to scientists of the very top rank, whose numbers are few in any country, the USSR probably has in many fields men who are as able as their counterparts in Western countries. The USSR provides the bulk of Bloc scientific assets, but East Germany and Czechoslovakia, and to a lesser extent Poland and Hungary, con- tribute a substantial increment. Communist China is unlikely to add significantly to Bloc scientific assets prior to 1960. MILITARY STRENGTH AND WEAPONS DEVELOPMENT We believe that, generally speaking, the size of Soviet armed forces-in-being will remain approximately constant during the period of this estimate. However, the over-all effectiveness of these fortes will increase, mainly because of the following factors: a. A great increase in numbers of nuclear weapons, and in the range of yields derived frap these weapons; b. An increase in the number of all-weather fighters and jet medium bombers, and the introduction of jet heavy bombers in 1957; c. A great increase iA the number Of long-range submarines; and d. An increase in combat effectiveness of Soviet ground forces, primarily due to improved weapons, equipment and organizes 25X1 tion, and to changes in doctrine and tacticsdesigned to increase their capabilities for nuclear warfare. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 25X1 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Next 1 Page(s) In Document Exempt Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/0M :4151MADP67-00059A00010001MC*7 Page 9 of 13 Jet Bombers In the past several months there have been =elusive indica- tion that a jet medium bOmber equipment program has been initiated in Soviet Long-Range Aviation. During the 1954 Soviet May Day fly-by and the rehearsals preceding it, 9-11 twin jet medium bombers, designated by allied intelligence as Type 39, participated. SUb- segued, intelligence has associated this type with a known Soviet Long-Range Aviation unit. We estimate that as of 1 July 1954 at least two regiments of Soviet Long-Range Aviation with a TIE strength of 60 aircraft were in process of equipment with Type 39 jet medium bombers. Total actual strength of these units is estimated at approximately 20 aircraft. Series production of the Type 39 is estimated to have begun in mid-1953, and total production as of 1 July 1954 is estimated at about 40 aircraft. It is estimated that Soviet Long-Range Aviation will contain an actual strength of 650 jet Medium bombers by mid-1957, and 1,050 by mid-1959. The Type 370 which was initially observed on 30 July 1953 and later observed in flight on seven different occasions in connection with the 1954 May Day celebration, is a swept wing, for-engine, jet heavy bomber with an estimated gross weight of 365,000 peunds. The aircraft, considered presently to be in the prototype stage, is expected to appear in operational units by the end of 1956 building up to an actual strength of about 50 aircraft by Mid-1957 and 250 by mid-1959. There has been some evidence of the existence of a large bomber designated the Type 31. On the basis of present evidence, it is highly doubtful that any substantial re-equipment of Long-Range Aviation units with Type 31 class aircraft has occurred to date, though possibly 15 or 20 may have been introduced. The Long-Range Aviation re-equipment program to replace the TU-4 is more likely to be accomplished by introduction of the jet bomber aircraft which have now appeared, and the Type 31 class probably will not be in- troduced in numbers. uopy No TOP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 II-A Approved For Relea172NRE5 : CIA-RDP67-00059A000100010002-7 Page 10 of 13 Air Defense Weapons We estimate that at present Bloc defensive capabilities against air attack are insufficient to provide an adequate defense under the variety of eenditione which could be expected to prevail. Through 1957 Bloc air defenses will probably be gradually strengthened by the introduction into operational units of new fighter aircraft, new radar equipment, new anti-aircraft weapons, and surface-to-air guided missiles. All-weather fighters in limited quantities are probably already being introdueed into operational units, but problems related to the operation and maintenance of airborne intercept radar will probably take a minimum of 18-24 months to solve. The filtering phase of air raid reporting (combat information control) is expected to continue to be a major problem daring the period of this estimate. However, the gradual improvement of weapons, equipment and training will be sufficient by 1958 to provide a Bloc air defense system substantially more effective than that now existing. Submarines The Soviet Navy is apparently concentrating on the construction of two long-range submarine types developed since World War II. These are equipped with snorkel and have operating radii of about 4,700 and 6,700 miles respectively. By early 19550 107 of these had joined the fleet and the present building rate is estimated as 75 per year. The Soviets are known to have continued development of the Walther Closed-cycle engine for submarine propulsion and an experimental submarine powered by such an engine could be operational now. It is also possible that, during the period of this estimate, nuclear propuJ ion for submarines will have been developed by the USSR. However, there is no evidence of Soviet development of sub- marines equipped with either of these types of propulsion. PROBABLE SOVIET COURSES OF AMON We believe that the developments within the sphere of Soviet power and the Soviet estimate of the world situation have led the Soviet leaders to assess their own situation somewhat as follows the balance of military power in the world and the increasing destructiveness of nuclear weapons are such that general war would involve very heavy risks to the Communist sphere, extending possibly to the destruction of the Soviet system itself. On the other hand, non-Communist power is not so great that withdrawals from the present advanced positions in Europe and Asia seem necessary. Moreover, the prospects probably seem good that the increase of Bloc military capabilities, together with political defections or disunity on the non-Communist aide, will gradually shift the balance of power in 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/013CF5 SIBERTDP67-00059A00010001DDEUR-7 Page 11 of 13 favor of the Soviet Bloc. In the meantime, the Bloc has a full agenda of internal problems which, while they do not imply a weakness requiring abandonment of expansionist aims or even the neglect of opportunities for expansion under circumstances of limited risk, do call for attention during the next five years at least. These problems include the further buildup of economic power in the Bloc as a step toward balancing the vastly greater economic potential of the West, and the correction of certain weaknesses in the Bloc economy, particalarly in agricultural production. We believe that during the period of this estimate, the Kremlin will try to avoid courses of action, and to deter Communist China from courses of action, which in its judgment would clearly involve /substantial risk of general war.* However, the USSR or one of the Bloc countries might take action creating a situation in which the US or its allies, rather than yield an important position, would decide to take counteraction involving substantial risk of general war with the USSR. We believe, moreover, that the Kremlin would not be deterred by the risk of general war from taking counteraction against a Western action which it considered an imminent threat to Soviet security. Thus general war might occur during the period of this estimate as the climax of a series of actions and counteractions* initiated by either side, which neither side originally intended to lead to general war. The progress being made by the USSR in the development of nuclear weapons, and the increasing Soviet capability to deliver these weapons, are changing the world power situation in important respects. Soviet * ThecAssistant Chief of Staff, G-2, and the Director of Intelligence, USAF, believe that the following Should be substituted for the first sentence of this paragraphs "Although the Kremlin will probably try to avoid courses of action and to deter Communist China from courses of action that entail'substantial risk of involving the USSR in general warp it may be more willing to support courses of action that would involve risk of a localized war between the US and Communist China. The support given such courses of action would depend largely on Soviet judgment as to the probable outcome of the war. If the Soviet leaders believed that it would result in a severe defeat to Communism, or the fall-scale participation of the USSR in general watj, they would probably exert pressure on the Chinese to avoid courses of action which would precipitate hostilities. On the other hand, if they estimated that the conflict could be limited to war localized in the Far East, and that it would result in greater relative damage to US strengths than to Communist strengths, they probably would support more adventurous courses of action on the part of the Chinese COnnunists.? Copy Noe Approved For Release 2005/0TR5%MRDP67-00059a3011160131107F- 11.4 Approved For ReleailiOPOS Page 12 of 13 5 : CIA-RDP67-00059A000100010002-7 leaders almost certainly believe that as Soviet nuclear capabilities increase, the unwillingness of the US and its allies to risk general war will correspondingly increase, and that the Kremlin will there- fore have greater freedom of action to promote its objectives without running substantial risk of general war. In any case, the USSR will probably be increasingly ready to apply heavy pressure on the non- Communist world upon any signs of major dissension or weakness among the US and its allies, Nevertheless, we believe that the Kremlin will be extremely reluctant to precipitate a contest in which the USSR would expect to be subjected to nuclear attack, The extent to which the Kremlin uses its increasing freedom of action will depend primarily on the determination, strength, and cohesiveness of the non-Communist world, We believe that the Kremlin will continue to pursue its ex- pansiOnist objectives and to seek and exploit opportunities for enlarging the area of Communist control. It will be unswerving in its determination to retain the initiative in international affairs and to capitalize on successes in order to keep the Free World on the defensive, For the near term, however, the Kremlin will almost certainly direct its external policies towards the immediate ob.. jectives of weakening and disrupting the mutual defense arrangements of non-Communist states, preventing or retarding the rearmament of Germany and Japan, undermining the economic and political stability of non-Communist states, and isolating the US from its allies and associates in Europe and Asia. At the same time it will continue to expand the industrial strength of the Bloc, and to maintain large modern forces-in-being as a guarantee of the integrity of the Bloc and as an instrument of intimidation in support of its policies abroad. The Communists will vary the methods used to accomplish the foregoing aims and will time their actions so as to exploit situations that in their judgment offer the most favorable opportunities. For the time being, the Krealin seems to feel that its foreign objectives will be best served by a generally conciliatory pose in foreign relations, by gestures of HpeacefUl coexistence" and proposals for mutual security pacts, by tempting profrers of trade, and by playing on the themes of peace and disarmament. The purpose of these tactics is to allay fear in some parts of the non-Communist world, to create the impression that there has been a basic change in Soviet policy, and therefore to destroy the incentive for Western defense, and to undermine US policies, At the same time, however, the Communists continue to support and encourage nationalist and anticolonial move- ments, and to maintain their efforts to subvert governments outside the Bloc. We believe that the Kremlin will revert to more aggressive and threatening conduct Whenever if feels that such conduct will bring increased returns. By such varieties and combinations of tactics 1 April 1955 TOP SECRFX Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/01iDiMERDP67-00059A0001000141*-7 Page 13 of 13 the Soviet leaders almost certainly consider that they cal improve the chances fOr further Communist strategic advances. We do not believe that such tactics indicate any change in basic Communist objectives, or that they will involve any substantial concessions on the part of the Kremlin. We believe that Southeast Asia almost certainly offers, in the Cormunist view, the most favorable opportunities for expansion in the near future. The Communists will almost certainly attempt to extend their gains in Indochina, and will probably expand their efforts to intimidate and subvert neighboring countries by political infiltration and covert support of local insurrections. We do not believe that the Communists will attempt to secure their objectives in Southeast Asia by the commitment of identifiable combat units of Chinese Communist armed forces, at least during the early period of this estimate, However, we find the situation in this area so fluid that we are unable-to estimate beyond this early period. Copy NO, TOP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 25X1 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 SECRET 2 Section II-A Figure 3 CHEMICALS PRODUCTION SYNTHETIC AMMONIA ouu US 2074 000 500 Bloc 000 1037 53 500 USSR / 265 0 1938 '48 '49 '50 '51 '52 1953 12 10 2 FERTILIZER Millions of Metric Tons 15 12 9 6 3 0 SULPHURIC ACID US '12.9 Western Allies ?9.4 Bloc 4.1 USSR .../ ----- .1.5 2.8 1956 1959 1938 '48 '49 '50 '51 '52 1953 USSR 6.0 3.2 0 1938 '48 '49 '50 '51 '52 1953 1956 1959 13396 CIA, 9-54 1956 1959 The Western Allies of the US include the other members of NATO together with Spain and West Germany. SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 SECRET 120 100 80 ?S2 60 .2 Thousands of Metric Tons 40 20 0 METALS AND MINERAES PRODUCTION INGOT STEEL to US ,101.2 Western Ales 62.2 Bloc 48.4 USSR ---.,, 37.7 18.0 1938 '48 ,52 1953 1200 1000 800 600 400 200 1956 PRIMARY ALUMINUM .1959 US 1135.8 Western Allies 851.0 Bloc 369. 310.0 /USSR 43.8 . 1938 ,50 ,52 1953 13395 CIA, 9-54 Thousands of Metric Tons 1000 800 600 400 200 0 Section II-A Figure 2 PRIMARY AND SECONDARY COPPER ? UJ 1015.0 Bloc 422.2 T. Western Al 515.0 ' ies USSR _ _ 115.0 350.0 1938 '48 ,50 ,52 1953 BO 60 40 20 0 CEMENT 1956 1959 'Western Allies 59.4 US '45.0 _ Bloc 25.3 16.1 /USSR 5.70 1956 1959 1938 ,48 '49 ,52 1953 The Western Allies of the US include the other members of NATO together with Spain and West Germany. SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 1956 1959 Approved For Release 200510811P41: CIA-RDP67-00059A000100010002-7 USSR PARTY AND GOVERNMENT ORGANIZATION PARTY GOVERNMENT PRESIDIUM SECRETARIAT COUNCIL OF MINISTERS PRESIDIUM MEMBERS BULGANIN VOROSHILOV KAGANOVICH MIKOYAN MOLOTOV PERVUXHIN SABUROV KEIRUSHCHEV? ? ? MALENKOV- CANDIDATES Shvernik Ponomarenko Kirichenko ? FIRST SECRETARY Khrushchev _ SECRETARIES Pospelov Shatalin Suslov Central Committee Party Congress PRESIDIUM CHAIRMAN Bulganin FIRST DEPUTY CHAIRMEN Kaganovich Mikoyan Molotov Pervukhin ? Saburov DEPUTY CHAIRMEN ? ?Malenkov Kosygin Malyshev Tevosyan Khrunichev Kucherenko Lobanov Zavenyagin 48 other ministers 2 millhn1rstrrfili7.14of CHAIRMAN- CEREMONIAL HEAD OF S1ATE Voroshilov 16 DEPUTY CHAIRMEN (The chairmen of the Suprene Soviet Pre- sidiums in the 16 Republ ins) SECRETARY Pegov MEMBERS ? ?Khrushchev --Shvernik ? Ponomarenko ? --Kirichenko (In addition there are 11 other members of lesser importance) Supreme Soviet Soviet of the Union Soviet of Nationalities 1955 50408 3 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 FIGURE 1 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 ? SECRET 500 400 ki 300 'c 0 tn g 200 100 0 Section 11-A Figure 4 ENERGY AND TRANSPORT ANTHRACITE AND BITUMINOUS COAL Western Allies 495.0 US 435.2 Bloc 393.3 28.0 USSR / 114.5 1938 '48 '49 '50 '51 '52 1953 400 300 0 200 0 45 ?C2. 100 1956 PETROLEUM PRODUCTS 1959 US 327.6 Western Allies 92.9 Bloc 58.4 USSR r 45.5 26.3 1938 '48 '49 '50 '51 '52 1953 13397 CIA, 9-54 1956 1959 600 500 400 O 300 200 Billions of Ton-Kilometers 100 0 ELECTRIC POWER US 513.5 Western Ales 312.5 Bloc .205.1 i 133.0 USSR / 39.6 1938 '48 '49 '50 '51 '52 1953 1000 800 600 400 200 RAIL TRANSPORT 384.4 1956 1959 Bloc 975.0 US 901.1 Range of probable USSR'4 pro-uction 800.0 Western Allies 259.1 0 1938 '48 '49 '50 '51 '52 1953 1956 1959 The Western Allies of the US include the other members of NATO together with Spain and West Germany. SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 SECRET 20 16 Billions of 1950 Rubles 4 MANUFACTURING MOTORS AND GENERATORS* MACHINE TOOLS 160 US 16.7 USSR Bloc '7.1 4.4 0 1938 '48 '49 '50 '51 '52 1953 1956 1959 4 ELECTRON TUBES* USS US 7.3 Bloc 1.3 0.9 0 1938 '48 '49 '50 '51 '52 1953 Thousands of Units 120 80 40 Bloc 141.9 Section II-A Figure 5 USSR 53.9 8 82 RangeOirprobable USSR production 0 1938 '48 '49 '50 '51 '52 1953 1956 1959 200 150 0 kn 100 0 0 -c 50 0 TRACTORS 13Z 120 Ra '-USSR ge of prob d pro_uc 110 USSR_ / 49.0 1956 1959 1938 '48 '49 '50 '51 '52 1953 *In view of the somewhat heterogeneous composition of the items included in these categories, and the problems of dollar-ruble conversion, these estimates represent rough orders of magni- tude of production rather than precise calculations of quantity Or value. 13398 CIA, 9-54 1956 ble ion 1959 The Western Allies of the US include the other members of NATO together with Spain and West Germany. SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Releas`e 2005/08/15 : CIA-RDP67-00059A000100010002-7 SECRET 8 60 ' 40 0 0 20 0 MILITARY END ITEM PRODUCTION TOTAL AIRCRAFT PRODUCTION* (Military and Civilian) 73.7 IIUS 11111 I 1 38.4 Bloc33.8 11! Western Allies 14.6 1938 '48 '49 '50 '51 '52 1953 *including spares 20 16 0 ARTILLERY 1956 1959 \NUSSR Bte 1.5 1.0 Western Allies 1,0.24 1938 '48 '49 '50 '51 '52 1953 1956 1959 13399 CIA, 9-54 10 Thousands of Units 80 8 6 4 2 TANKS AND ASSAULT GUNS US 9.1 USSR 7.5* USSR Section II-A Figure 6 Range of probable USSR production USSR 1.5 Western Allies 0.6 0 1938 '48 '49 '50 '51 '52 1953 1956 1959 "USSR only 600 1,2 a) 400 200 0 1938 ARTILLERY AMMUNITION USSR 24 USSR 544 '48 '49 '50 '51 '52 1953 The Western Allies of the US include the other members of NATO together with Spain and West Germany. SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 1956 1959 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 SECRET Millions of Metric TODS Millions of Metric Tons 250 200 150 100 50 Section II-A Figure 7 AGRICULTURAL PRODUCTION GRAIN ' Bloc 225 .US 140.6 Western Allies 100.2 88.6 \ USSR __,..--"" 8N1 Range of USSR pro 1938 '48 '49 '50 '51 '52 1953 160 120 80 40 POTATOES 1956 roboble faction 1959 Bloc 148.0 73.8 USSR 6.4 Western Allies 64.5 US 10.1 0 1938 '48 '49 '50 '51 '52 1953 13400 CIA, 9-54 a 1956 1959 Millions of Metric TOM. 12 10 8 6 4 2 MEAT* 0 1938 '48 '49 '50 '51 '52 1953 US ,11.0 Bloc 10.2 Western Allies 9.5 a NUSSR 1956 *Excluding slaughter fats, lard, fat cuts, and bacon. 1959 Assuming the continuation of the policy of encouraging consumer goods expansion. b Assuming the discontinuation of that policy. The Western Allies of the US include the other members of NATO together with Spain and West Germany. SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/1( : CIA-RDP67-00059A000100010002-7 SECRET DIRECTION OF FLOW OF USSR FOREIGN TRADE, 1937 AND 1948-53 (Total Trade Turnover) Millions of 195i US Dollars Section II-A` Figure 8 European Satellites Communist China West 3927 13401 CIA, 9-54 Approved For Release 2005/0811Fg111:67-00059A0001000100027 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Section 11-A Figure 9 US AND USSR COMPARISON OF MAJOR SCIENTIFIC GROUPS AS OF MID-1954* (In Thousands) LIVING GRADUATES IN SCIENTIFIC FIELDS Soviet Union -1400 IIIIIIIIIIIIIIIII United States-1700 GRADUATES SCIENTIFIC 1035 EMPLOYED IN FIELDS 1115 "SCIENTIFIC (Professional scientists teaching in higher 155 WORKERS" in research educational institutions or institutions) 240 Health Sciences - 22 Health Sciences 435 Agricultural Sciences 33 Health Sciences 290 Physical Sciences and Engineering 185 Agricultural Sciences 185 Health Sciences 50 Agricultural Sciences 155 Physical Sciences and Engineering 560 Physical Sciences and Engineering 525 Agricultural Sciences 30 Physical Sciences and Engineering 75 Soviet Union United States Soviet Union United States SOVIET KANDIDATS AMERICAN IN SCIENTIFIC 54 AND Ph.D.'s FIELDS 48 SCIENCE /954 224 GRADUATES and /955 134 Health Sciences 37 Agricultural Sciences 48 Health Sciences 16 Health Sciences 8 Physical Sciences and Engineering 139 Health Sciences 43 Agricultural Sciences 10 Agricultural Sciences 10 Physical Sciences and Engineering 28 Physical Sciences and Engineering 30 Agricultural Sciences 24 Physical Sciences and Engineering 67 Soviet Union United States Soviet Union United States 13402 CIA, 9.54 *Numerical estimates of Soviet scientific personnel are be- lieved to be correct to 'within plus or minus /0 percent. Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET II-B Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002age 1 of 6 SOVIET BLOC B. CDmvITNIST CHINA* Political Since their assumption to power in 1949, the Chinese Communists have undertaken to create an industrialized and militarily powerful state. At present, the energies of the regime appear to be devoted to the con- solidation and expansion of Chinals"economic strength, modernization of military forces, and the transformation of China's political and social structure. The Chinese Communists have adapted Soviet administration and political institutions and techniques to Chinese conditions. The highly centralized and dictatorial government has imposed a unitary state structure with direct lines of command down to the village level. Ultimate power in China resides in the Cbmmunist Party and is vested in the Political Bureau (Politb?ro) of the Party's Central Committee. Mao Tse-tung continues to dominate the government and party. By the terms of the Constitution, adopted in 1954, Chu Teh is in line to succeed .Mao as Chairman of the government, but actual power appears more or less divided between Liu Shao-chti, Chairman of the Standing Committee of the Congress, and Chou En-lai, Chairman of the Government Council. Despite rivalries for power in the past, Chinese leadership has been marked by the cohesion and stability of the party elite. The first purge of major proportions since 1938 appears to have been in process since at least early 1954. The chief victims to date have been Kao Kang ("suicide"), former Politburo member and boss of Manchuria; and Jao Shu-Shih (present status unknown), former government head of the East China regional area. There is no firm evidence as yet as to the extent, intensity, or full cause of the purge campaign. The precise manner in which Soviet influence or control finds its way into Chinese policies is not known. Soviet advisers almost This section contains a summary of NIE 13-54, "Communist China's Power Potential through 1957,n 3 June 1954. A new NIE covering these questions is scheduled for preparation in the fourth quarter of 19550 NIE 13-55, "Communist China's Capabilities and Probable Courses of Action in sia through 1960.0 ** Except where otherwise indicated explicitly or by context, *Thine and "Chinese?11 as used hereafter, refer to Communist China and the Chinese Communists. Copy No. TOP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 25X1 25X1 II-B Page 2 of 6 Approved For Release 2M/UNFTCIA-RDP67-00059A000100010002-7 certainly are in contact with Chinese leaders, but it is unlikely that they issue direct orders. The USSR is able to exert influence over Chinese policies primarily by virtue of their common ideology and China's economic and military dependence on the USSR. The Communist regime has vigorously and ruthlessly set about establishing political control over the Chinese people. To de this, it has employed a wide array of programs, ranging from inducements and patriotic appeals to coercion and terror. The Obnmunists have had considerable success in winning support from certain government workers, members of the armed forces, skilled industrial workers and particularly the youth. Through terror and force, the Communists have eliminated the landlord class and thousands of businessmen,, professionals, and former government officials. There is no evidence of significant organized resistance. To insure its control, the regime has established extensive security forces in addition to the army. Although much of the voluntary support the regime received in 1949 has been dissipated, such dissatisfaction as now exists in China has neither the universality, the intensity, nor the physical means by which to transform itself into effective resistance. China's domestic interest, international relationships, and long- term aspirations have resulted in a foreign policy along these broad lines: (a) maintenance of the alliance with the USSR; (b) aid to indigenous Communist parties and groups in non-Communist Asian countries; (c) continued application of political warfare pressure against non- Communist Asia, and intense military and political pressure against the Chinese Nationalists*; (d) diplomatic and propaganda efforts designed to enhance China's prestige and world status. Such a policy appears to be designed to further China's domestic and international objectives without provoking full-scale conflict with the West. It also appears to be based on the belief that time will work to Communist advantage in achieving China's international aspirations. See NIE 16572757.7-77Communist Capabilities and Intentions with Respect to the Offshore Islands and Taiwan Through 1955, and Communist and Non-Communist Reactions with Respect to the Defense of Taiwan," 16 March 1955. 1 41..11 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET 1I-B Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7page 3 of 6 ?00, Economic China is en underdeveloped agricultural opuntry with a population of 600 million. China's 1952 estimated gross national product (GNP) of approx- imately US $27 billion* was less than one-third of Soviet and about one- fourteenth of US GNP. China's per capita GNP of less than roughly US $46 is not quite equal to that of India and only one-quarter that of Js.pan. While there are the beginnings for a modern industrial development, the present contribution of the industrial sector to total output is small. The regime faces a formidable task in achieving its long-term goal of a modern industrial economy. By 1952 the Chinese national budget had risen to about a third of the GNP, a substantially lower proportion than in the case of the USSR. The two most important categories of budget expenditures during this period have been military outlay and capital investment. In 1949 production was extremely low. By the end of 1952, the Chinese had succeeded in general in rehabilitating the economy. Steel production exceeded by roughly one-quarter the highest levels reached between the years 1937 and 1945; grain and power production were slightly above this level; and coal output was about three-quarters of this level. The general rise in domestic production and trade, the great expansion of overland trade between the Soviet Bloc and China, and the movement of military supplies to Korea have increased demands on Chinese transport capacity. The regime has almost restored the rail net as it existed in 1945. The ComMunists.have also brought to completion more than 1,600 miles of new lines (as of the end of 1954). However, the rail net is still inadequate in many areas. Drastic measures are being amployad to stretch present capacity. Other forms of transport have played a smaller part in the regime's program. Although the Communists have made considerable progress in rehabilitating the Chinese economy, the basic pattern remains unchanged. Agriculture is still the primary activity and per capita production is stil3 low. More- over, the geographic concentrations of economic activity within China remain substantially unchanged. On the other hand, the Communists have made a major change in the direction and composition of China's foreign trade. In 1938 practically all of this trade was with countries not now in the Soviet Bloc, while in 1952 the Soviet Bloc accounted for about 70 percent of China's foreign trade. In terms of constant dollars, 'China's total foreign trade in 1952 Estimates based on 1952 data are used generally throughout. The 1954 GNP will prove to be modestly greater, but changes since 1952 are believed not to have altered the general order of magnitudes or the relationships. 25X1 Approved For Release 2005/08/15 : CERIVRZ059A00010001000217PY NO. 74pril 195.5 II-B Page 4 of 6 Approved ForRelease2A/ A-RDP67-00059A000100010002-7 NOVRE: was roughly the same as in 1938. Imports of consumer goods in 1952 constituted a smaller proportion of the total than in 1938. Imports of military supplies in 1952 constituted a much greater proportion of the total than in 1938. Imports of capital goods andAmdustrial.raw materials constituted about the same proportion in 1952 as in 1938. These changes in direction and composition have come about in part because of China's new political relationship with the Soviet Bloc, in part because of Western trade restrictions, and in part because of the requirements of China's programs of economic and military development. Pllitary The internal control and the international power position enjoyed by the Communist regime rest largely upon the power potential of China's military establishment. Within China, the armed forces hold a position of unique privilege and per in the state hierarchy. The loyalty of the mLitary forces adds greatly to the regime's power to coerce the people. The Chinese military establishment is at present the largest of any Asian nation, with over 2* million men in the field forces and an actual air- craft strength of more than 1,500. These forces, supported by the USSR and greatly improved by the Korean War, have given the Comnunists an overwhelming military advantage over the countries of non-Communist Asia and have profoundly affected the over-all balance of power in Asia. The Chinese air capability was not fully tested in Korea. The Chinese have a fair capability in air defense, but only under good visibility conditions. The Chinese Air Force has some capability for tactical support operations. It alsu has a sizable force of light bombers, both jet and piston, and a few medium bombers. The Chinese Navy, though low in over-all operational effectiveness by US standards, hs demonstrated considerably improved effectiveness in recent small engagements in the Taiwan Straits area. Moreover, it now is believed to operate 2-5 sub- marines. The major weakness of the Chinese armed forces is their lack of domestic supply facilities and their concomitant dependence upon the Soviet Union. At the present time this weakness would become critical in the event of a general war in the Far East whiCh involved both the Soviet Union and China. Estimate of Probable Developments The Chinese Communists have as their long-range goal the development of a Soviet-style state in China, with its own bases of economic and 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/1P:PC1W057-00059A00010001040 5 or 6 military strength, and dominant in Eastern and Southern Asia. To this end they will proceed, as rapidly as possible, through the forced and ruthless measures characteristic of Communist regimes, to reorganize the social structure along Communist lines, improve the effectiveness of the administrative system, and develop the economy to the extent feasible. The regime will devote Substantial resources to modernizing and strengthening its armed forces as a power base for its foreign policy. Although the Chinese plans for economic development are not known in detail, it appears that these plans contemplate an increase in total output in 1957 to 20-25 percent above the 1952 level. Emphasis is placed upon increasing the output of the modern industrial sector, particularly heavy industry and transport. Fulfillment of the regime's economic plans depends upon increasing agricultural output while rigorously restricting consumption so as to provide the resources needed to support the industrial investment and military programs. A large part of the capital goods needed to fulfill the proaram will have to be obtained from the rest of the Soviet Bloc in return for Chinese exports. Available resources will have to be efficiently al]ocated to ensure that crucial sectors of the economy, such as transport, meet the demands generated by increasing production. . Barring a major crisis or other unpredictable event, it is probable that China will have attained by 1957 a GNP of roughly US $32 billion, an increase of 20-25 percent over the 1952 figure. It is probable that agricultural output will be about 10 percent higher than in 1952, and the output of the modern industrial sector of the economy 70-100 percent higher. The increases in individual industries (including transportation) will of course vary widely from this over-all rate of increase. Even by 1957, however, the Communists will only have begun the modernization of China's economy. The country will as a Whole remain agrarian and underdeveloped. It is probable that by 1957 the Chinese regime will have increased its administrative efficiency and have further tightened its mitrol over its people and resources, but the regime will not have been able sub- stantially to alter traditional social patterns or to obtain more than passive acceptance from the bulk of the population. However, the regime's ability to direct and control China will probably not be significantly. impaired. Furthermore, the regime will probably be able to master leader- ship problems that are likely to arise, even in the event of the death or retirement of Mao Tse-tung. It is probable that the military establishment will gain in strength and effectiveness during the period through 1957 as a result, of the regime's program of modernization and training. Soviet assistance will continue to be essential to the fulfillment of this program. Copy No. TDP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 25X1 II-B Page o Approved For Release 20R0?/WEIA-RDP67-00059A000100010002-7 or o China's dependence on the USSR will probably not be significantly lessened by 1957, and maintenance of the alliance with the USSR will continue to be a dominant aspect of China's foreign policy. The Chinese Communist regime will continue to consolidate its political position, to gain in economic and military strength and by 1957 will be a more powerful force in world affairs than at present. Certain aspects of China's development will be used to support claims that time is on the Communist side in Asia. China's increased power and prestige will present a challenge to the influence of the Western nations in Asia, and to the Asian leadership aspirations of India an Japan. 1 April 1955 TOP SECRET 41111 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/M9s:EERTRDP67-00059A0001000 age2- f 5 SOVIET BLOC THE EUROPEAN SATELLITES* (See charts knowing these pages) Soviet Policy Soviet policy in the Satellites is directed toward developing them into a strong area of the Soviet empire which will increase Soviet power and strengthen the Soviet world position. Soviet con- trol of the Satellites is based on the Soviet armed forces stationed in Eastern Europe, on the MVD (Soviet security services), on Soviet diplomatic, economic, and military missions in each Satellite, on individual Soviet citizens in key positions, and is exercised through the Satellite Communist parties and governments. The Satellite Communist parties, the leaders of which are approved by the Kremlin, constitute the principal instrumentality for implementing Soviet policy. The subservience of the Satellite Communist parties to the new Soviet rulers is complete. The Soviet Union exercises control over the economic development of the Satellites by fixing over-all production goals and priorities, and by supervising their foreign trade. Satellite economic plans are prepared in accordance with general policies issued by the Soviet Union, The Soviet pattern of intellectual, cultural, and religious life is being imposed upon the Satellites. The Satellite govern- ments have a monopoly over the schools and all mass-information media and have brought church organizations under the control of the state. The educational system has been reorganized, and teaching staffs and libraries have been purged. Finally, the cultural in- fluence and autonomy of family life has been disrupted. The USSR continues to maintain strong combat-ready forces, totalling an estimated 531,000 army troops, 24,000 security troops, and 1,800 aircraft (estimated actual strength) in the Satellites, -mostly in East Germany. 25X1 Is sectionowith some updating, is a summary of NIE l2-54,"Probable Developments in the European Satellites as They Affect Soviet Capabilities,. through:Midir1956;1 24 August 1954. The term nSatellites" includes East Germany, Pdland07,Ozechoslovakia? Hungary, Rumania, Bulgaria, and Alb4nia. 25X1 Copy No.________ SECRET 1 April Im Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 II-0 Page 2 -Approved For ReleZACM/15 : CIA-RDP67-00059A000100010002-7 of The relationship between the Satellites and the USSR remains basically unchanged since the death of Stalin, but the new Soviet leadership has adopted a more flexible attitude toward the Sate- llites under Malenkov and more recently, under Kruschev. These changes, , however, represent a refinement of method rather than a reduction in control. The Satellite leadership groups, which have become almost completely reliable through a continuous process of selection and purging, remain virtually unchanged. Moves taken by the Satellites to give a greater appearance of "collective" leadership are probably imitations of the Soviet pattern. The USSR continues to place great emphasis upon strengthening the Party position in the Satellite countries. The principal obstacle to the Sovietization of Eastern Europe is the continued opposition of the Satellite populations. However, the effectiveness of this opposition is severely constricted by the con- trols imposed on every aspect of the lives of the people. There is virtually no organized active resistance and only little unorganized active resistance. On the other hand, passive resistance continues to be widespread and to constitute a serious drag on economic programs. The more prevalent forms of passive resistance are worker absenteeism, work slowdowns, crop-delivery evasion, increased church attendance, and whispering campaigns. The imminent approval of West German rearmament has caused the USSR to call at least one Satellite conference during the past six months, probably for the double purpose of establishing a solid political front and preparing for an integrated Satellite defense command to offset the growth of West German military strength. Economic In 1953, the Satellites undertook revisions of economic plans which -- like the plan revisions in the USSR -- were aimed at in- creasing the production of agricultural commodities, especially food- stuffs, and of manufactured consumer goods. These revisions were occasioned mainly by the adverse cumulative effects of overemphasis on heavy industry at the expense of agriculture and light industry. The various Satellite economies have now virtually reached the point in their development where manpower, raw materials and plant will be the controlling factors in their growth, rather than any shifts in emphasis promulgated by the Soviet leadership. Over-all Satellite industrial production was back to the 1938 level by 1951 and in 1953 it was about 25 percent above the prewar level. The most impressive growth hasbeen in the production of machinery andequipment, chemicals, metals, energy, and building materials, generally in that order. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005i1011?gWIRDP67-00059A0001000-14062-7 Page 3 of 5 In contrast, Satellite agriculture has lagged seriously. Although the output of industrial crops returned to the prewar levels between 1948 and 1950, over-611 agricultural production has not yet regained the prewar level of production. Over-all agri- cultural output in 1951 was an estimated 14 percent below the prewar level, but it slipped back in 1953 to approximately 21 percent below that level. Total agricultural collectivization continues to be the? ac- knowledged long-term goal of Satellite governments. However, the Satellite leadersof East Germany, Czechoslovakia, and especially Hungary, have attempted to encourage production by private peasants by offering temporary concessions. By the end of 1953, the combined GNP (Gross National Product) of the Satellites had returned approximately to the level of 1938. Total Satellite GNP in 1953 was an estimated 45 billion of 1951 US dollars Or about two-fifths that of the USSR. In 1953 Poland, East Germany, and Czechoslovakia contributed over 80 percent of the total Satellite GNP, while Hungary, Rumania, and Bulgaria (in that order) accounted for less than 20 percent. The most important development in Satellite foreign trade has been its reorientation away from. Western countries toward the Bloc. The trade Of the Satellites with the West declined from more than four-fifths of their total trade before the war to less than one- third in 1951 and 1952. During the same period, Satellite trade with the USSR increased from one-hundreth to over one-third of the total trade. The scientific and technical capabilities of Eastern Germany and Czechoslovakia, and to a lesser extent Hungary and Poland, constitute substantial additions to those of the USSR. In parti- cular, the electronics and communications research capabilities of East Germany, Czechoslovakia, and Hungary, and the optics research capabilities of East Germany are of considerable value to the Soviet Union. The main contribution of the Satellites to the Soviet nuclear program is in uranium ores and concentrates. It is probable that East Germany is currently providing about half of Bloc production of uranium ores and concentrates. The other Satellites are less import- ant sources. The USSR, however, is not dependent upon Satellite sources. If necessary, the Soviet atomic energy program could probably be supported at its present level of operation from internal Soviet sources alone. uopy No. TOP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Page 4 of 5Approved For RelegR2NYM15 : CIA-RDP67-00059A000100010002-7 Military The strength of the Satellite ground forces is estimated at 1,115,000 men organized in 82 line divisions, of which 6 are armored and 13 medhanized. These forces are supplemented by Sate- llite security troops which total about 306,000 men. The USSR controls these Satellite forces by direct Soviet staffing in Poland and by large Soviet military missions in all other countries. The Satellite armies are equipped largely with Soviet World War II material of good quality, but they require substantial amounts of additional supplies and equipment for sustained combat. They are dependent, upon the USSR for most of their heavy equipment. The questionable political reliability of the Satellite armies places a significant limitation upon their military usefulness. At present the Kremlin could probably not ray upon the majority of the Satellite armies in a general war except for employment in secondary roles or in a defensive capacity* The Satellite air forces now have an estimated TOO strength of 3,600 aircraft of all types (approximately 2,400 actual). Piston fighters continue to be replaced by jet fighters, and other equipment is being modernized. Training is being improved. The current operational capabilities of these forces are un- evenly developed. Ftrthermore? the political reliability of the Satellite air forces, like that of the Satellite armies, is question- able. Owing to their small size, their meager equipment, and the unreliability of the personnel, the Satellite navies lack the capability of making more than a minor contribution to Soviet naval strength. Estimate of Probable Developments. The Kremlin almost certainly regards the maintenance of the Soviet position in Eastern Europe as essential for: (a) safe- guarding the military security of the USSR through possession of advanced bases and defensive positions outside Soviet frontiers; (b) adding to the economic and military resources of the USSR; (c) upholding the prestige of the USSR in its role as leader of the world Communist movement; and (d) checking the re-emergence of a powerful Germany allied with the west. It is likely, there- fore, that the Kremlin will continue to push forward its long-term plans for integration of the Satellite countries into the Soviet system, though almost certainly not, during the next two years, to the point of outright incorporation into the USSR. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/eVI&A31bI1RDP67-00059A0001000406277 Page 5 of 5 Soviet control of the Satellites remains virtually complete and is unlikely to diminish or to be successfully Challenged from within during the next two years. Although the principal Obstacle to the Sovietization of Eastern Europe is and will continue to be the opposition of the Satellite populations to Communism and Soviet domination, this opposition alone will not seriously impair Soviet control or threaten the stability of the Satellite governments. The revisions of Satellite economic plans have not altered the Kremlin's basic aim of increasing as rapidly as practicable the Satellitesl.contribution to Soviet economic power. The 1953 re- visions were aimed primarily at removing the threats to future industrial growth by correcting the imbalances in the Satellite economies resulting from an overemphasis on heavy industry at the e:Lpense of agriculture and light industry. In essence, they provide for slowing down the expansion of heavy industry in 1954-1955 and for increasing the resources allotted to agriculture and consumer industries. Nevertheless, Satellite economic policies will still be strongly oriented toward development of heavy industry. At the same time, defense outlays will probably be maintained at approxi- mately present or only slightly higher levels. These revisions have not resulted in any significant improvement in the standards of living and it is probable that the Satellite governments in two years time will be faced with much the same basic economic problem as at present. It is estimated that total Satellite GNP in 1953 was about two-fifths that of the USSR and that the Satellite.share-of total Bloc GNP will remain substantially unchanged through 1956. During this period the growth rate will probably average about 4 percent annually as compared with an average of 6 percent annually from 1948 through 1953. The Satellite armed forces have become a substantial element in the balance of military power in Europe. It is probable that the Satellite armies will reach an over-all peacetime strength of approximately 1,265,000 men by mid-1955 and that no substantial increase is likely thereafter. It is estimated that by mid-1956 the Satellite air forces will probably have a TOgeE strength of 4,400, of which 2,450 will probably be jet fighters. During the next two years Czech and Polish production will probably be adequate to meet all Satellite peacetime requirements for jet fighters and ground-attack aircraft. It is likely that while the Satellite armed forces would probably fight well against traditional enemies, their reliability will remain sufficiently questionable during the next two years to place a significant limitation upon their military usefulness in event of general war, uopy no. TOP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 SECRET 51.2 1938 1953 1956 Approved For Release 2005/0811( : CIA-RDP67-00059A000100010002-7 SATELLITES* ESTIMATED GROSS NATIONAL PRODUCT 1938, 1953, and 1956 (Billions 0c1951 US Dollars) 1.0 1.4 1.6 m 8.4 9.2 1938 1953 1956 1938 1953 1956 ALL SATELLITES* BULGARIA CZECHOSLOVAKIA 13459 CIA, 8-54 17.1 1938 1953 1956 EAST GERMANY 2.5 1938 1953 1956 HUNGARY 3.7 16.3 1938 1953 1956 POLAND SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 II?C Figure 1 3.0 2.9 3'3 1938 1953 1956 RUMANIA *Excludes Albania SECRET 100% Trade Services Agriculture Transportation and Communications Construction Industry Approved For Release 2005/08/1i : CIA-RDP67-00059A000100010002-7 SATELLITES* ESTIMATED DISTRIBUTION OF GROSS NATIONAL PRODUCT BY SECTOR OF ORIGIN, 1938 and 1953 an Percent) .5 1938 1953 1938 1953 1938 1953 ALL SATELLITES* BULGARIA CZECHOSLOVAKIA 13460 CIA, 8-54 1938 1953 EAST GERMANY SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 1938 1953 HUNGARY II?C Figure 2 1938 1953 POLAND 1938 1953 RUMANIA *Excludes Albonia SECRET Approved For Release 2005/08/15,: CIA-RDP67-00059A000100010002-7 SATELLITES* ESTIMATED PRODUCTION INDICES 1938 and 1953 1950=100 II?C Figure 3 INDUSTRY SUBSECTORS Energy Metals Machinery and Equipment Chemicals Building Materials Forest Products Food Processing Light and Textile 100 94 129 100 gENME 84 AV 125 157 A 144 100 121 123 130 IIMEMENI -4 64 A% IM?MMTME, MENMEMI 240 24 ,="51 ,y 279 211 30 M.11.111 MININ11111111111111 96 124 149 183 161 - 80 r 109 93 99 126 130 A AY r 132 118 A 150 104 98 01 194 105 M=12 113 103 81 ,EMErgnian 173 152 EAST GERMANY Energy Metals Machinery and Equipment Chemicals Building Materials Forest Products Food Processing Light and Textile 34 160 158 ** ** ,Y a * * .0/ 136 125 111 99 BULGARIA 13461 CIA, 8-54 113 47 4 131 418 370 KEY IMEM 1838 1953 Approved For Release 2005/08/15 : CIA-RDPgiE1r000100010002-7 fal, 987 POLAND 8NE mmeimmeki 66 100 V, 4 97 MINNIMMIMI '7 4 153 MEMENENMEM ;.????=mine UMMM' =17 1 10108 135 159 95 119 118 HUNGARY 178 171 CZECHOSLOVAKIA 100 93 4Y 4 100 136 r? A 172 159 181 rozWEE 101 ....... 98 RUMANIA 116 119 150 136 *Excluding Albania **Zero or negligible Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 SECRET II?C Figure 4 SATELLITES ESTIMATED GEOGRAPHIC DISTRIBUTION OF TRADE 1936-38 AVERAGE and 1951 (In Percent) CHINA 1 CHINA 1 USSR USSR 1 SATELLITES NON-BLOC 2 84 31 SATELLITES 13462 CIA, 8-54 NON-BLOC 100% 1936-38 1951 1936-38 1951 EXPORTS IMPORTS SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15?FIMW67-00059A0001000100k2at SOVIET rwut, Page 1 of 3 E. REVIEW' OF CURRENT COMMUNIST ATTITUES. TOWARD GENERAL WAR* Chinese Communist Attitudes Chinese Communist propaganda and diplomatic representations demonstrate that the regime is strongly committed to the "liberation" of Formosa, the Pescadores, and the offshore islands. The Chinese Communist leaders give every indication of holding to this position. Moreover, Peiping has long regarded the continued presence in the Formosa Strait and on Formosa itself of a Nationalist China supported militarily by the US as at least a long- range threat to its security. We believe that the Chinese Communists will refrain from courses of action which they estimate will involve them in full-scale warfare with the United States. However, we believe that the Chinese Communist attitude with respect to war is bold, sometimes boisterous, sometimes sophisticated, and that the Chinese Communists are therefore likely to test the upper limits of US tolerance with a variety of substantial military actions. Moreover, in the light of Chinese Communist activities in recent months and their reactions to the recent US policy pronouncements on the defense of Formosa and the Pescadores, we are not confident that the Chinese Communists clearly under- stand which, if any," of the offshore islands the US would defend with its own forces, the circumstances under which the US would defend them, or the extent to which the defense would be carried. We believe, therefore, that the Chinese Cbmmunists may miscalculate the degree of risk which military actions on their part in this area would entail. In any event, we believe that the Chinese Communists will probably take military action against the offshore islands of sufficient scale to test US determination to halt their advance at some point. They might even*** attempt to take Quemoy, Matsu, or Nanchi regardless of whether they estimated that the US would participate in the defense of these islands. *This section contains the text of SNIE 11-4-55, "Review of Current Communist Attitudes Toward General War," 15 February 1955. NIE 11-4-54, "Soviet Capa- bilities and Probable Courses of Action through Mid-1959," has dealt with this problem on a long-term basis. The above estimate is confined to a short-term? and is written primarily with reference to the situation respecting Formosa and the offshore islands. **The Deputy Director for Intelligence, The Joint Staff, would delete the words "if any." ***The Assistant Chief of Staff, O-2, Department of the Army, believes that the word e "might even" should read "probably will." Approved For Release 2005/08/15X)CIA1ZIPM7-00059A000100010 25X1 )02-7 LaPpy NO. /j 28 February 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 ? II-E TOP SECRET Page 2 of 3 They may not be convinced, in the light of the restraint exercised by US policy in Korea and Indochina, that the US would in fact react to attacks on the offshore islands by attacks on the mainland. Or, they may believe that the scale of any US reaction, even if it involved some attacks against the mainland, could be controlled by them, perhaps by diplomatic action at a critical juncture, in which they would count heavily on the restraining influence of US allies on US policy. Finally, they may believe that the US would not be willing to react to their actions in ways which could lead by stages to full-scale war against them, and perhaps eventually to war invol- ving the USSR. If the Communist judgments did in fact prove to be mistaken, a series of actions and counteractions might be set in train which could bring about unlimited hostilities between Communist China and the US. Soviet Attitudes We believe that the Soviet leaders view general war as a hazardous ,gamble which could threaten the survival of their system. Accordingly, we believe that they will not deliberately initiate general war, and will try to avoid courses of action which in: their judgment would clearly involve substantial risk of general War. We believe that the recent changes in Soviet leader- ship do, not indicate any increased disposition on the part of the regime to. risk such a war. ,The Kremlin would.,not be deterred by the risk of general war from taking counteraction 'against any Western action which it regarded as, an imminent .threat to its security, ,.However, we see no evidence that he Kremlin estimates any recent action by the Western Powers, including progress so far made toward German rearmaments, as constituting such an imminent threat. The new Soviet leadership has express'd "full approval and support" for Chinese Communist mpolicy" with respect to Formosa and the offshore islands, but has left uncertain the extent to which the USSR would support a Chinese Communist effort to take Formosa and the offshore islands by military. action. We believe that Moscow might see certain advantages in clashes between Chinese Communist and US forces, at least as long as it believed that the clashes would be limited and localized. Both Soviet and Chinese Communist leaders probably estimate that strictly local cpnflict between the Chinese Communists, and the US, with the accompanying increase of international tensions, would serve their interests. They may estimate, for example, that the US in these circumstances would not have the support of its allies or of world opinion in a defense of the offshore islands, and that the result would be an in- creasing isolation of the US. Under these circumstances they might believe that US progress toward its objectives elsewhere, including West German 28 February 191.0.0roved For Release 200A69,8VEtliEA-RDP67-00059A000100010002-7 Approved For Release 2005/08/1W5W67-00059A00010001011 Page 3 of 3 rearmament, would be impeded, and that Soviet aims would thereby be served. However, the Kremlin would almost certainly be concerned that military conflict between the US and Communist China could not be kept limited and localized. It would almost certainly estimate that unlimited war between the US and Communist China not only would endanger the existence of the principal ally of the USSR, but also would involve substantial risk of spreading into general war. Hence, it would probably attempt to exert a restraining influence if it judged that appreciable danger of unlimited war between the US and Communist China were developing. If such war did occur, we believe that the USSR would support its ally in carrying on the war, but would not assist with its own forces to such an extent as, in its judgment, would cause the US to attack targets in Soviet territory. We believe that the USSR would openly intervene in the war if the Soviet leaders considered such intervention necessary to save the Chinese Communist regime, but the Soviet leaders would still try to confine the area of hos- tilities to the Far Zast.* *The Director of Naval Intelligence and the Deputy 'tractor for Intelligence, The Joint Staff, believe that the following should be substituted for the last sentence: "Should the conflict progress so far that destruction of the Chinese Communist regime appeared imminent, we believe that the Soviet leaders would recognize that open intervention on their part against US forces sufficient to save the Chinese regime would involve grave risk of general war with the US. Their decision would probably be based on existing military, political, and economic strengths, with particular emphasis on the current disparities in nuclear stockpiles and delivery capabilities. We believe that the SOviet leaders would probably conclude that if they intervened, the conflict could not be confined to the Far East, and that Soviet strengths were insufficient to risk their own regime in this manner." TOP SECRET 25X1 Copy No. 7 7 28 February 3_955 Approved For Release 2005/08/15: CIA-RDP67-00059A000100010002-7 ? Approved For Release 2005/0Foy ?sig41:)P67-00059A00010001990?-7 Page 1 of 4 SOVIET BLOC F. Probable Soviet Response to the Ratification of the Paris Agreements* ROLE OF GERMANY IN POSTWAR SOVIET POLICY The role that a restored Germany wouId eventually come to play in Europe has been a key issue in the postwar power Struggle between the USSR and the Western Powers. Despite the tremendous postwar growth of Soviet power (=pared with that of Germany, Soviet fear of Germany, sustained by the memory . of Nazi aggresSion?-has remained 4 powerful force. Soviet policy in Europe since 1945 has been de- signed to prevent any German settlement which would permit the align- ment of a rearmed Germany on the aideof the Western Powers. This policy has apparently:been based on a belief that the addition of German power to the Western alliance would constitute a serious blow to patriot prestige, would seriously hamper further Communist ox- pan ion in hrope, threaten Soviet control over the Satellites, and perhaps even Jeopardize the security of the USSR. PROBABLE SOVIET ESTIMATE OF THE SIGNIFICANCE OF RATIFICATION The rearmament of even West Germany and its inclusion in the NATO alliance is almost certainly viewed by the Soviet leaders in a perspective of suda risks and danger*. They probably doubt that West German military forces would be kept within the proposed limits, and probably recognize that the net increase in the strength of the military combination which the USSR confront* in &rope would be greaterthan indicated by the simple addition Of a particular number of West German divisions, On the other hand? the Soviet leaders probably estimate that it would require :about three years to complete the proposed rearmament program in West Germany.' They would :probably consider, therefore, that the.potentialAhreat in- volved in West GerMan rearmament would not emerge at an slay date and that there would remain time fpr possible counterbalancing developments. * This section is an abstract of NIE 11-55, "Probable Soviet Response to the Ratification of the Paris Agreements," I March 1955. . copy No. POP SECRET 1 4ril 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 II-F Page 2 ofkifroved For Release 164E/TAT: CIA-RDP67-00059A000100010002-7 PROBABLE SOVIET COURSES ()FACTION We believe it unlikely, therefore, that the initial Soviet response to ratification of the Paris Agreements would be based on the assumption that the security of the USSR was immediately en- dangered. We believe that the USSR would take measures to improve its military position, would employ all political and subversive means to prevent or impede rearmament in West Germany and to obstruct its cooperation with its Western partners, and would attempt to compensate elsewhere, under conditions of limited risk, for the accretion to Western strength resulting from Wrest German rearmament. This general pattern of response would exclude a military action which, in the Soviet view, would involve sub- stantial risk of general war. It would also exclude major con- cessions which could provide the basis of a German settlement with the Western Powers. In conjunction with this general line of strategy, we do not believe that there would be any fundamental shift in the Soviet public posture, but the USSR might for a time adopt a more menacing attitude. In view of the vigorous campaign they have made against ratification, the Soviet leaders would probably take some of the measures they have threatened, notably the denunciation of the pacts with the UK and France, and the establishment of an East European defensive system. They might even invoke the terms of the Soviet- Finnish Mutual Assistare Treaty of 6 April 1948. Attitude Toward Negotiations on Germany. We believe it unlikely that the USSR would participate in four-power negotiations on Germany for some time after ratification. Nevertheless, the Soviet leaders recognize that the German desire for unity will persist and that, as long as the USSR retains the capability to grant or withhold unification, it may be able to inhibit the pace and reduce the scale of German rearmament through negotiations, or the promise of negotia- tion. For these reasons, we believe that the USSR would be willing, after an interval, to negotiate further on Germany. However, it is highly unlikely that the USSR would agree to German unification on terms that would be acceptable to the West. Berlin. Since we estimate that the Soviet response to ratification would not include any moves which would entail substantial risk of war, we do not believe that the Soviet leaders would take strong measures to force the Western Powers out of Berlin. Nevertheless, West Berlin border controls would probably be tightened and there would probably be some harassment of Western access to the city by 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/0871: U0141)P67-00059A00010001042E7 Page 3 ofL. way of probing Western determination to maintain the Berlin position. Such moves might be associated with an East German program to build up defenses, and would probably be carried out by the East German regime. In consequence there is likely to be some increase of tension over Berlin in the period immediately following ratification. We believe, however, that the Soviet leaders would be concerned not to allow such a situation to get out of hand. Austria. In the initial period following ratification, the Soviet authorities, alleging violation of zonal agreements for Austria, may re-establish zonal border controls, and even threaten to parti- tion the country. We believe it unlikely, hol4ever? that the Soviet leaders would permit any such actions to go beyond the stage of demonstration, or that they would take any course which would limit their freedom of action in using the Austrian issue for future bargaining with the West. Bloc Defense Measures. Among the measures which the USSR would prob- ably take to improve its military posture would be the creation of the joint command structure for Eastern Ehrope forecast at the recent Moscow conference of Bloc states. We also believe it possible that the USSR would strengthen Soviet forces in the Satellites, par- ticularly in East Germany. Satellite forces may likewise be strengthened. The East German forces are likely to be unveiled as a national military establishment and strengthened somewhat, possibly by the introduction of conscription. The USSR would probably accelerate the strengthening of its own armed forces if German rearmament showed signs of successful imple- mentation. However, we see no indication, even in the most recent Soviet budget, of an intention to begin an early rapid build-up of Soviet armed strength. Since the Soviet leaders probably believe that ratification of the Paris Agreements poses a potential rather than an immediate threat to Soviet security, we believe that Soviet policy will continue to emphasize long-term qualitative improvement rather than short-term enlargement of its military forces. If at any stage in the process of implementing the Paris Agree- ments the various courses of action described above did not, in the Soviet view, sufficiently offset the developing threat of German rearmament, we believe the Soviet leaders would almost certainly take further measures in the attempt to counter this accretion to the strength of the West. These measures would include primarily a sharp build-up of Soviet and Satellite military capabilities. uopy No. TOP SECRET 1 April 1955 Approved For Release 2005/08/15: CIA-RDP67-00059A000100010002-7 Jame II-F Approved For Releam2NNR15 : CIA-RDP67-00059A000100010002-7 Page 4 of 4 They might also include more threatening courses of action against Berlin, or in the Far East, or elsewhere, with the purpose of arousing fear of nuclear war in the West and causing Western peoples to demand that their governments follow a cautious policy. We believe that, at this stage, the USSR would adopt bolder courses of action than it had previously, but would avoid those which in its judgment clearly entailed the probability of general war. ALTERNATIVE SOVIET COURSE OF ACTION It is possible that the Soviet leaders may at any time decide that they cannot adequately offset the developing threat of German rearmament. In this case, they would be confronted with two broad alternatives: (a) to undertake an early showdown with the Western Powers on this subject, possibly including the use of force in- volving grave risks of general war; (b) to attempt to negotiate a settlement in which both Western and Soviet troops would be with- drawn and a reunified Germany would be neutralized with controlled armaments. We believe the USSR would reject the first alternative as too hazardous a gamble under currently prevailing circumstances. In view of the grave disadvantages entailed, we believe the second alternative is only a possibility, but it might be adopted if the Soviet leaders believed it offered the only means, short of general war, to prevent the development of a critical threat to the security of the USSR. We believe, however, that the Kremlin would be more likely to adopt the courses of action described in the preceding paragraph. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 III. FAR EAST Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 ? Approved For Release 2005/08/Er. 8g-MTP67-00059A000100010014reAl of FAR FAST ? Communist Courses of Action in Asia * Through 1957 ** Although the USSR possesses preponderant influence in the Sino- Soviet partnership, the main outlines of Communist policy in Asia are almost certainly determined jointly by consultation between Moscow and Peiping, not by the dictation of Moscow. Chinese Communist influence in the Sino-Soviet alliance will probably continue to grow. it is estimated that such frictions as may exist between Communist China and the USSR will not impair the effeetivenese of their alliance during the period of this estimate. The Communists will attempt to impress free world countries, particularly Japan and the Asian neutrals, with their willingness to negotiate outstanding issues. In so doing, they will probably make proposals from settlements which may be attractive to BOMA non-Communist nations but contrary to US interests, and, as at Geneva, may on occasion make significant procedural and tactical concessions. Communist China may attempt to negotiate, on the basis of the Chou-Nehru five points, a series of mutual nonaggression coexistence understandings with most of its Asian neighbors. In these efforts, the Communists will continue to seek greater recognition and acceptance of the Peiping regime, and to hold out the promise that Asian and world problems can be solved by ? Great Power deliberation if Peiping is permitted to participate therein. /n addition, the wisdom of closer diplomatic ties with Peiping will be impressed upon non-Communist Asia by constant exaggeration of Communist China's strength, progress, and peaceful intent. The Communists will almost certainly make every effort to publicize the attractive possibility for non-Communist nations of increased trade with the Bloc. It is probable that Communist China will continue to exchange trade missions with many non-Communist countries and to negotiate trade agreements, both formal and informal, which express hopes of a high level of trade and disapproval of trade restrictions. * .Asia,as here used, includes Japan, Taiwan, the Philippines, Indonesia, Ceylon, and all of mainland Asia east of (but not including) Iran and Afghanistan. ** This section is largely a summary of NIB 10-7-54, l'Communist Courses of Action in Asia through 1957," 23 November 1954. COPY NO. TDP SECRET 1 April- 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 25X1 25X1 III-A Page 2 of 4Approved For Release 200E8PIPEA-RDP67-00059A000100010002-7 The Chinese Communists will continue their efforts to subvert and exploit the overseas Chinese in Southeast Asia. The degree of Communist success in exploiting the overseas Chinese will be strongly influenced by the over-all fortunes of Communist China. However, because the usefulness of most of these Chinese is limited (their members are apolitical, culturally isolated, and disliked by the indigenous populations), the Communists will probably concentrate their activities primarily on the governments and indigenous populations of Southeast Asian countries. Communist China will continue to regard the eventual "liberation" of the offshore islands, the Pescadores, and Taiwan as a basic national objective essential to its security, characterizing the issue as an internal affair in which foreign interference will not be tolerated. Hence, this issue will continue to present the greatest danger of large- scale warfare in Asia. ? It is estimated that as long as the US remains firmly committed to defend Taiwan and the Penghuss the Chinese Communists will almost certainly not attempt to invade through at least 1955. Short of invading Taiwan, the Communists will almost certainly concentrate on an interim policy of subversion and other means of softening up Taiwan for ultimate takeover. An intensive propaganda campaign designed to induce defection by offering amnesty to all save Chiang Kai-shek has already begun. Available Chinese Communist strength in place is such that the Chinese Communists have the present capability -- at the risk of heavy casualties -- to seize the Quemoy and Matsui groups if defended solely by the Chinese Nationalist forces. The Chinese Communists will probably undertake air, naval, and artillery attacks against Quemoy and the Matsus and attempt to seize poorly defended island outposts within the area. They will also seek to erode Nationalist ability and determination to hold these islands, and to probe US intentions. Should they become convinced the US was determined to prevent the seizure of an island, they mould probably be deterred from attempting dldh a seizure in the near future. It may not be possible for the Chinese Cbmmunists? as a result of their probing actions alone, to ascertain the full extent of a possible US counteraction to an attempt at seizure of an offshore island. If the US did not respond to initial probing actions, the Chinese Communists might estimate that the US would not in fact commit its own forces to the defense of the island. Or, even though there was sane US military reactiem to a probing attack, the Chinese Communists might still estimate that US counteraction to an actual invasion of offshore islands would remain limited and localized. Or, the Chinese Communists might estimate that they could overrun an offshore island before effective US counter- action could be brought to bear and that the US would not subsequently initiate major hostilities in order to regain the captured territory. 1 April 1955 TOP SICRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/1 : Mi9i'67-00059A00010001ooRre43 of In any of these circumntances, we believe the Chinese Communists would probably attempt to seize or complete the seizure of the offshore islands:* It is estimated that the Vietminh now feels that it can achieve control over all Vietnam without initiating large-scale warfare. Accordingly, it is estimated that the Communists will exert every effort to attain power in South Vietnam through means short of war. Should South Vietnam appear to be gaining in strength or should elections be postponed over Cbmmunist objections, the Cammunists probably would step up their subversive and guerrilla activities in the South and if necessary would infiltrate additional armed forces in an effort to gain control over the area. How- ever, it is estimated that they would be unlikely openly to invade South Vietnam, at least prior to July 1956, the date set for national elections. Elsewhere in Asia (the Nationalist-held offshore islands and South Vietnam excepted as per the above paragraphs), the Communists will probably not, during the period of this estimate, initiate new local military actions with identifiable Soviet, Chinese Communist? North Korean, or Viet Minh forces. The Asian non-Communist countries are dangerously vulnerable to the expansion of Communist power and influence because of their military weaknesses and consequent fear of antagonizing Communist China, their political immaturity and instability, the social and economic problems they face, and the prevalence of anti-Western nationalism. The effect of the Geneva COnference and subsequent events has been to increase this vulnerability. Accordingly, the' Communist leaders almost certainly estimate that they have a wide area of maneuver open to them in Asia in which they can safely continue efforts at subversion and support of armed insurrection without incurring unacceptable US counteraction. COmmunist policy during the period of this estimate will probably seek to continue a stabilized situation in Korea. It is estimated that the chief features of this policy will be: (a) to refrain from renewing hostilities in Korea, but to be militarily prepared for a resumption of hostilities; (b) to refuse to accept any settlement in Korea Whidh either endangers continued Communist control of North Korea or precludes hope of eventual COmmunist control of All Korea; (c) to rehabilitate North Korea and to strengthen its military and economic power; and (d) to attempt to weaken the ROK by infiltration and subversion. * The preceding paragraphs on Taiwan and the offshore islands were drawn from NME100-4-55, "Communist Capabilities and Intentions with Respect to the Offshore Islands and Taiwan through 1955, and COmmunist Re- actions with Respect to the Defense of Taiwan," 16 March 1955. 25X1 Copy NO. TOP SLAT 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Page of 4 Approved For Release 20N0?/liFEgIA-RDP67-00059A000100010002-7 Japan and India will become increasingly important targets for Cbmmunist ?coexistence policies and propaganda. It is estimated that the Communists will continue their efforts to undermine Japants stability and present orientation and will seek an expansion of economic and cultural relations. They will make greater effort to create the impression that their terms for a resumption of diplomatic relations with Japan are flexible, and may offer to conclude a formal peace settlement during the period of this estimate. It is estimated that the Communists will focus increasing attention on India in an effort to insure at least its continued neutralism, and if possible to bring it closer to the Communist Bloc. However, even at the expense of friction with India, Communist China will seek to increase its influence in the Indo-Tibetan border area. Communist influence in Indonesia has grown considerably since the present government took office in July 1953, and as a result of recent political developments the government is increasingly dependent upon Communist parliamentary support for its continued existence. It is estimated that the Indonesian Communists will probably continue to support the present government or, if it falls, to work for the establishment of another government in which they would participate or in which their influence mould be strong. They will try, through both constitutional and illegal means, to expand their influence in the bureaucracy and the armed forces, and to prevent the formation of a unified and effective opposition. They will probably also attempt to strengthen their capabilities by the organization of a Party-controlled armed force. In general, however, they will probably avoid highly aggressive tactics in the near future, lest these provoke counteraction by the military or by domestic opposition groups before their own strength has become great enough to deal with it. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/11-: CIA-RDP67-00059A000100010002-7 COMMUNIST CHINA PARTY AND GOVERNMENT ORGANIZATION 25X1 CHINESE COMMUNIST PARTY NATIONAL PARTY CONGRESS (Supposed to meet every three years to elect Central Committee, has not met since 1945.) THE CENTRAL COMMITTEE (Currently has 41 regular members and 27 alternates) POLITICAL BUREAU Mao Tse-tung-CHAIRMAN Liu Shao-chi-VICE CHAIRMAN Chen Yun Chang Wen-tien Chou En-lai Chu Teh Lin Po-chu Peng Chen THE SECRETARIAT Mao Tse-tung-CHAIRMAN Chou En-lai Chu Teh Chen Yun Liu Shao-chi Peng Teh-huai Tung Pi-wu Kang Sheng Teng Hsiao-ping Lin Piao REGIONAL BUREAUS NORTHWEST-Ma Ming-fang, acting SINKIANG-Wang En-mao INNER MONGOLIA-Yun Tse NORTHEAST SOUTHWEST Ho Lung TIBET-Chang Kuo-hua SOUTH-Tao Chu, acting EAST CHINA SHANTUNG 13166 3-54 (Third Revision 5-55) Figure 11-61 CENTRAL PEOPLE'S GOVERNMENT NATIONAL PEOPLE'S CONGRESS (1226 delegates elected every four years by lower level congresses - meets yearly.) SUPREME PEOPLE'S COURT *Tung Pi-wu-PRESIDENT 55(3 Vice Presidents) PROCURATOR-GENERAL *Chang Ting-cheng tt(2 Dep. Chief Procurators) STANDING COMMITTEE NATIONAL PEOPLE'S CONGRESS *Liu Shao-chi-CHAIRMAN *112 Vice Chairmen) STATE COUNCIL **Chou En-lai-PREMIER t(10 Vice Premiers) 36 MINISTRIES AND COMMISSIONS INCLUDING: Foreign Affairs-Chou En-lai National Defense-Peng Teh-huai State Planning-Li Fu-chun PEOPLE'S REPUBLIC OF CHINA *Mao Tse-tung-CHAIRMAN *Chu Teh-VICE CHAIRMAN NATIONAL DEFENSE COUNCIL Mao Tse-tung-CHAIRMAN **(15 Vice Chairmen) PROVINCIAL AND LOCAL GOVERNMENT COUNCILS Elected by People's Congress **Decided on by People's Congress on chairman's nomination t Decided on by People's Congress on premier's nomination tt Decided on by Standing Committee Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 to Approved For Release 2005/s :/358:E8N-TIDP67-00059A0001000ial of ?41' FAR FAST C. KOREA North-Korea Political The political situation in North Korea remains stable. The Soviet Union continues its dominant role in North Korean political affairs, although Chinese Communist influence appears to have in- Greased during the Korean war, Pyongyang readily accepts Peiping's aid, and the first Chinese Communist Ambassador since 1950 has recently presented his credentials at Pyongyang. There is no re- liable evidence of friction over North Korea. North Korean proposals on unification continue to demonstrate that the Communists would agree to a settlement only on terms in- suring their control of all Korea. Continuing to woo South Korea with the line that the 38th parallel is an *unnatural, man-made obstacle" which can be eliminated easily, North Korea has offered to supply the south with electric power, ferrous metals, coal, and machinery if Seoul would accept a plan for fostering economic inter- course between the two nations *without delay." Recent propaganda beamed to South Korea has urged the withdrawal of all foreign forces from Korea and has stressed the need for the "Koreans themselves" to neek unification. Economic With Sino-Soviet Bloc technical and materiel aid, North Korea is beginning to show some progress in rehabilitation. The regime, however, is plagued by labor and material Shortages, and most major industries remain inoperable. The goals of the current Three-Year Plan call for a 50 percent increase over 1949 in total industrial produc- tion, an approximate doubling of 1949 consumer goods output, and a 20 percent increase in agricultnral production. The vote for industrial production was reportedly fulfilled 100 percent for the first half of 1954, but it is unlikely that the 1956 goal can be attained. The doubling of consumer goods output, however, does seem possible. li9ALEE Since January 1954 there has been a discernible trend toward increasingly greater defense responsibilities' for the North Korean Amy. tdopy NO. . Approved For Release 2005/04N5MWDP67-00059A0010?061100Zr? IIIC Page 2 Approved For ReleaW142WE15 : CIA-RDP67-00059A000100010002-7 of 1.4 Since the ArMiStiC0.9 North Korean strength has increased from 281,000 to 332,000s concurrently, Chinese strength in Korea has been reduced from 872,000 to 559,000 as of February 1955. The withdrawal of an additional 73,000 Chinese Ommunist troops from Korea during the period 19 February-4 Mardi has also been reported. The North Korean Aix Force, the bulk of which has been moved from Manchuria to North Korea despite the trace terms, comprises an estimated 340 aircraft, including 170 jet fighters and 40 jet bombers. The Communists in Korea retain the capability to attack with little warning, but their axrrent dispositions and attitude do not indicate an intention to resume hostilities. EStimate of Probable Developments* General Communist policy with respect to Korea will probably bes (a) to refrain from renewing hostilities in Korea, but to be militarily prepared for a resumption of hontilitiess CO to refuse to accept any settlement in Korea which either endangers continued Communist con- trol of North Korea or precludes hope of eventual Communist control of all Koreas (c) to rehabilitate North Korea and to strengthen its military and economic powers and (d) to attempt to weaken the ROK by infiltration and subversion. South Korea Political President Rhee's primary aim remains the unification of Korea, which he believes can only be achieved by a renewal of hostilities. He is motivated by a genuine concern over what he considers to be a weakened Western military position in Asia, by the continued Communist threat in Korea, by fears that the US is abandoning South Korea, and by a belief that American assistance to Japan constitutes a threat to his country. He also has a deep-seated conviction that "pro- Japanese" American officialdom is not sympathetic to South Korea. In keeping with these views, Rhea has criticized American strategic concepts in Asia including the withdrawal of American troops, has renewed his agitation for ending UN control and inspection of the South Korean armed forces, and has demanded a larger military establish- ment. * This paragraph is taken from NIE 10-7-54, "Communist Courses of Action in Asia through 1957,* 23 November 1954. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/W15SPWRDP67-00059A00010044937 of The ROK has extended considerable encouragement and sympathy to Nationalist China, but has signed no military pact with it. .However? should the US become involved in hostilities over the Taiwan issue, Rhee would probably hope to initiate military action in Korea or at least precipitate incidents along the demilitarized zone. Relations with Japan remain unsatisfactory. Although the resumption of ROK-Japanese negotiations for the normalization of relations between the two countries appears likely, little progress is expected ap long as lhee's bitter and vocal distaste for Japan prevails. ? Seoul has adamantly resisted North Korean blandishments for unification talks and cultural and economic intercourse, and has continued to assert that it is still at war with North Korea. How- ever, there are indications that the general population in South Korea is receptive to proposals for liberalized' contacts with the North and pleased by the prospects of continued peace. Political instability has increased since the passage of Rhees constitutional amendments which provides (1) a means whereby Rhee can run for a third term (2) reorganization of the executive branch to assure supremacy over the legislature; and (3) a more stable succession in case of Rheela death or incapacitation. These amendments were bitterly opposed, and the legality of legislative approval is disputed by the political opposition. Subsequently, There have been some defections from Rheegs Liberal Party, which is wracked by internal dissension. In addition, anti-Rhee leaders have tried to create a unified opposition party. To counteract these difficulties Rhee has ordered a rejuvenation of the Liberal Party and has checked a number of political aspirants for governmental control, Rheels health is relatively good considering his advanced age and recent surgery. However the vary real possibility of his death or incapacitation for office has kept Korean politics in a state of constant unrest in anticipation of the expected power struggle. In any event, the military are certain to play a major part in the selection of any successor, Economic tweagema..o South Koreals economy continues to be dependent on foreign aid, amounting to about $3300000,000 in FY 1954. Us aid Copy No. TOP SECT= 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 III-c Approved For ReleaMP20113111112[15 : CIA-RDP67-00059A000100010002-7 Page 4 of 4 Alak administrators are constantly harassed 25X1 by ROK demands for:. greater control over the use of aid funds g impractical industrial expansion; the exclusion of Japan as a supplier of aid goods; and the retention of an unrealistic exchange rats. The economy is characterized by large-scale unemployment, inflation, and shortages of raw materials, equipment, and technical skills. So long as budgetary deficits remain and defense expenditures exceed 65 percent of total outlays, inflation seems inevitable. Military The present 20-division army is now at full strength and holds more than two-thirds of the front line. The VI Cbrps which was activated on IS May is now operational, bringing the number of such units to five. A new ?rear-area =mane is being organized and reportedly will soon be designated as the 2nd Army. South Korean ground combat forces now total 384,595g the air force comprises 118 conventional aircraft. Eta-Ltstin of robablelDeveloente Future developments in South Korea depend for the most part on the policies of the US and of President Rhee. As for the latter, so long as he remains in power it is almost certain that conditions will remain unfavorable for the development of clear US-ROK under- standings, for the effective utilization of US economic assistance, or for a significant improvement in ROK-Japanese relations. It is unlikely that Rhee will go so far as to launch an attack against North Korea, but the possibility of Rheegs attempting to involve the US in renewed hostilities in Korea cannot be dismissed. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET II 1-D Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010W 1 of 4 FAR EAST D. JAPAN* General Since the war, Japan has been unable to develop a sense of national purpose, and as a result, its leaders and people have tended to drift aimlessly without agreement on objectives and without resolution to settle the nation's pressing problems. Although a majority of the Japanese probably support the principle of cooPeration with the US and the Free World, their attitudes re- flect confusion arising from defeat in mar and disruption of na- tional values, uncertainty over Japan's international role, dis- trust of foreigners, suspicion of US reliability and motives, and susceptibility to leftist propaganda. Many important groups in Japan have neutralist and leftist thought patterns, partly as a continuing reaction to Japan's undemocratic and militarist past. Japan has developed only a weak sense of partnership with the US and of common interest with the democratic nations. Many Japanese look upon US actions and motives as entirely selfish, with little regard for the interest of Japan. The View is strong in Japan that the US considers Japan indispensable to its security, and therefore Japan can get what it wants from the US. Political Moderate conservative forces are dominant in Japan, and have consistently secured about 2/3's of the Vote in recent national elec- tions. However, they are split, and efforts to achieve unity over the past three years have failed. The result has been ineffective government. There has been some revival of ultra-rightist views although they have little representation in the Diet. This section is largely an extract from "Japan's Situation," an appendix dated 14 March 1955 to a draft NSC paper entitled "US Policy Toward Japan," constitutes the Conclusions of NIE 41-54, "Probable Developments in Japan through 19570? 10 August 1954. A new NIE on Japan is scheduled for completion in the third quarter of 1955. Copy No. TOP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 III-D Approved For Release ig5g694?1. CIA-RDP67-00059A000100010002-7 Page 2 oi Left-of-center groups are strong in Japan but, like the con- servatives, they are split by marked differences over policy and personality but have cooperated closely in efforts to weaken the conservatives. Communists are weak politically in Japan and are unlikely to attain significant parliamentary strength. The Communists are in- fluential, however, through their infiltration of the bureaucracy, the leftist parties, educational institutions, labor unions, and information media. The Communist Party also retains a large potehtial for sabotage, last demonstrated in the May Day riot in 1952. There has been an inevitable reaction of all political groups against the Occupation reforms and against US guidance. Among the conservatives this takes the form of a drive for revision of the Occupation-sponsored constitution to increase the power of the central government and make for a more highly disciplined populace. The Socialists oppose these changes and with their control of one-third of the seats in the Lower House of the Diet, they block constitu- tional amendment. Economic Japan has perhaps the poorest economy of all major powers, with the fewest natural resources, the most critical import reqUirements, and the heaviest pressure of population on productive land. Japanfs basic economic problem is that of providing employment and adequate living standards for its growing population through expansion of foreign trade and development of its limited domestic resources. Japan has had a large international trade deficit through- out the postwar period which has been offset by roughly $5 billion of US economic aid and military expenditures. Although considerable success resulted from the governments deflationary and austerity policies inaugurated in late 19530 the long-term economic outlook is adverse. Pressures in Japan for higher levels of trade with Communist countries, particularly Communist China, are increasing and the Hatoyama government can be expected to make a determined effort to have trade controls relaxed vis-a-vis Communist China probably by the elimination of the differential between the COCOM and CHINCOM lists. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/M MIET/P67-00059A00010001 Qtrizg Page 3 of L. The government's ability and willingness to hold the line at this point will, in part, be determined by Japan's ability to solve its economic problem mitain the Free World. This, in turn, depends to a large extent on the success of Free World efforts to raise levels of economic activity in the underdeveloped countries of Asia and to promote Japanese exports through the relaxation of tariff and other trade barriers. Even if Japan undertakes sub- stantial trade with China, its economic tics and dependence on the free nations will remain comparatively much stronger. The government's willingness and ability to develop its defense capabilities will also depend largely on the solution of its economic problem. Defense For a number of reasons Japan is unwilling to move rapidly on the problems of rearming. It is not convinced that it is in serious danger of attack or that its national interests are at stake in the present crisis. It desperately fears involvement in war and is in- clined to-think that its danger of involvement is less if its forces are small. It claims it cannot afford to build a large force. It fears revival of a military clique, and there remains much anti-mar feeling among women and youth. . , Moreover, the Japanese government, partly at US urging, is committed to a deflationary program which required the curtailment of governmental expenditures and the maintenance of a one trillion yen budget ceiling. The unwillingness to moire rapidly on defense has made Japan's defense relations with the US a major issue in Japan's domestic politics. Most Japanese feel that the US has pushed too hard on rearmament and expects Japan to put more money into defense than Japan can afford. Foreign Affairs Japan has established diplomatic relations with most of free Asia, but the spirit of reciprocal interest and cooperation is weak. Nationalist China almost alone of the free nations of Asia wants to cooperate with and enlist the support of Japan, while Japan, although aware of the present value of its trade with Formosa, feels there is little future to Nationalist China and it must not get more involved. I 25X1 Copy No. TOP SECRET 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 III-D Approved For Release fee5egiv CIA-RDP67-00059A000100010002-7 Page 4 of 4 Japan is taking steps to improve relations with the Soviet Union and Communist China. It desires to eliminate frictions with these powerful neighbors and to increase trade and cultural con- tacts with them with a view to establishing full diplomatic rela- tions. It believes that it can develop good relations with the Communist nations without harming its close cooperation with the US and the free nations and that it is in its national interest to be able to bargain more freely with both sides. Estimate of Probable Developments Through 1957, Japan will not be in a position to play a leading or stabilizing role in Asian affairs. Assuming a continuation of US assistanoe, however, it is likely that Japan will slowly gain in strength. Japan will almost certainly continue to be economically and militarily dependent on the US. It will therefore continue to avoid any action that might seriously jeopardize its alignment with the US, in spite of numerous frictions arising out of its condition of dependence. Within these limitations, Japan will attempt to pursue a more in- dependent foreign policy, notably in terms of establishing more active and extensive economic and political relations with lommunist China and the U6SR. There will probably be some growth in neutralist sentiment, an increasing spirit of nationalism, and a continuing critical appraisal of US policy. Moderate conservative elements will probably continue to dominate Japanese government and politics, although factional rivalry among the conservative elements will probably hamper governmental effectiveness. Although factionalism will limit socialist influence, the two groups will probably retain sufficient strength to act as a break on the governmentls increased conservatism. Although the Japanese Communist Party is not likely to gain substantial parliamentary strength, it will continue to exercise an imnortant influence through its ability to aggravate popular griev- ances and to exploit and infiltrate mass organizations of the non- Communist left. The Communists will probably be able to maintain their underground organization but not to increase significantly their potentialities for sabotage and subversion. Assuming US military assistance, the Japanese Government will continue to rearm gradually. By 1957, it is probable that Japan will have military forces capable of making a substantial contribution to its defense, but by no means adequate to assume full responsibility therefor. Japan will be reluctant to accept military commitments beyond the immediate defense of Japanese territory and will hesitate to join any regional defense system. 1 April 1955 Approved For ReleaseR)57NAT: CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/157%IMA7-00059A000100010 kel of 5 FAR EAST E. 'Taiwan* Political The National Government of the Republic of China is an anomaly. It exists only because of US support. The National Government continues to be acknowledged by a majority of the states of the world as the legal government of China, yet it controls only a few islands, and its inter- national position is being eroded by the growing power of Communist China. Nationalist China is an armed camp, maintaning a disproportionately large military establishment and focusing its resources and its purpose on a future invasion of the continent. Yet its economy is incapable of supporting this military establishment, and its armed fomes are not capable by themselves of undertaking the desired invasion or even successfully defending the territories they now hold. There is no immediate prospect that its hope for an early return to the mainland will materialize; meanwhile its armed forces grow older. The regime has enjoyed US support and on 2 December 1954 signed a Mutual Defense Treaty with the US. How- ever, the US has not to date underwritten Nationalist aspirations to return to the mainland, and in recent public utterances has indicated ap unwillingness to do so. It is staunchly anti-Communist, yet it is an important source of dissension in the non-Communist world. The National Government is superimposed upon a native Taiwanese population from which its interests often diverge and which outnumbers the mainlanders 8 million to 2 million. The National Government claims to speak for the Chinese people everywhere, yet its leadership and political programs have not attracted significant support from among mainland or overseas Chinese, and the Taiwanese, themselves of Chinese descent, have no effective voice in the determination of national policies. Nationalist China is in essence a one-party state; authority is centralized in the hands of a few, and ultimate political power resides in the hands of the leader of the Kuomintang Party and head of the govern- ment, Chiang Kai-shek. The Generalissimo dominates the political scene not so much through direct fiat as through indirection and the skillful balancing of personalities and cliques within the government. His traditional and skillful practice of divide-and-rule is probably responsible in large measure for Taiwan's present degree of political stability. At the same time Chiang's methods are largely responsible for such con- tinuing Nationalist shortcomings as the retention of incompetents in high positions, a general failure to delegate authority to subordinate political and military officials, and factionalism within the ruling circles. * This section is Largely a sumnary of NIE 43-54, "Probable. Developments in Taiwan Through Mid-1956," 14 September-1954. uopy NO. Approved For Release 2005/08/1fIRCWW67-00059A00010900 v2-11955 25X1 25X1 111-E Approved For Release 261f5/WHFCIA-RDP67-00059A000100010002-7 Pagd 2 of 5 The struggle among traditional mainland factions for political influence has persisted, but political rivalry centers at present chiefly around Vice President Chen Chteng and the Generalissimo's Moscow-educated elder son, Chiang Ching-kuo. The power of these two figures is believed to be approximately equal at the present time. Antipathy is not strong at present between the native Taiwanese and the Chinese mainlanders on Taiwan. In short, the native islanders tolerate the National Government, and wish it every success in its efforts to return to the mainland. On the surface the general state of Cainese Nationalist morale remains fairly good; despite recent events, it is not appreciably different from what it has been for some time. Communist subversive activity on the island is not of major proportions, and apparently is being effectively suppressed. Nevertheless, the Nationalist regime has undergone many frustrations and disappointments during its six years on Taiwan, and adverse psychological forces are almost certainly at work beneath the surface of Nationalist society. Economic Owing to wartime and postwar dislocations, Taiwan no longer has a viable economy. Since 1945, economic development of the island has been largely neglected because of the National Government's preoccupation with political and military affairs. Taiwan's economy is basically agrarian, with nearly 60 percent of the population engaged in agriculture, while only about 5 percent are engaged in industry. The prospects for agricultural expansion are limited. Undeveloped resources outside of agriculture are also limited. Known mineral resources are meager, although coal production meets the island's current needs and could be expanded to support a growth in industry. Formosa could also greatly expand its hydroelectric facilities. The development of any of these resources, however, would regaire heavy initial investments. The National Government hasnotaeriously attacked its long-term economic problems, partly because of its preoccupation with immediate problems and partly because of its unwillingness to accept the prospect of a long exile on Taiwan. Government enterprises, which account for two-thirds of all activity in industry, mining, and transport operate inefficiently, and, in many instances, at a loss. Domestic private investors have received no real mcouragement, while foreign private investment has been limited by legal provisions. Other Nationalist policies have tended to decrease production, discourage investment in agriculture, reduce farrimarketing, and hamper exports. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/157%1MNER7-00059A0001000100CrYi-E age 3 of 5 In spite of these shortcomings, the economic situation, with US assistance,* has substantially improved, as compared with the chaos of 1949. Between 1949 and 1953 industrial output increased from 74 percent to 140 percent of the 1941 level, while agricultural output rose from less than 80 percent to 93 percent of the 1935-1939 level. Effective budgetary controls have halted the growth in government expenditures, although government receipts exclusive of US aid did not rise in real terms between 1950 and 1953. Also inflationary pressures have been eased. However, a balance of trade deficit persists; in 1953 it amounted to $69 million. Military The present strength of the ground forces is 422,000, of Which about 285,000 are effective combat troops organized into 24 infantry and 2 armored divisions. The army's effectiveness is impaired by a failure of the highest command echelons to delegate authority and by a political officer system which interferes with command functions. However, a recent reorganization integrated logistical support into the field army structure. This move promises more effective control of supply and resupply and consequently should better provide effective support to fighting units. Progress is also being achieved in raising the level of combat efficiency of the Nationalist Army. Leadership at the lower levels is improving steadily. Training has also improved. Troop morale is considered satisfactory. Based on status of personnel, equipment, training, and quality of leader- ship, MAG rates infantry units at approximately 50 percent combat effective. The navy includes two destroyers, five destroyer escorts, and a number of smaller craft. The air force, with 410 combat aircraft (including 117 jet fighters) is probably superior to the other services in equipment, morale, and leadership. However, it is far weaker than the Chinese Communist Air Force. Deliveries of US aid goods in 1953, exclusive of military supplies, totalled US $83 million, amounting to 38 percent of Taiwan's receipts of goods and services fran abroad, and, if converted at the average black market foreign exchange rate, equalling 62 percent of the net revenues of all levels of government. US economic aid funds, exclusive of Mall costs disbursed on behalf of the National Government between July 1950 and August 1954, totalled approximately US $300 million. TOP SECRET uopy A0a 1 April 1955 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 25X1 III-E Approved For Release 20R?TOMPArft-RDP67-00059A000100010002-7 Page 14 of 5 Estimate of Probable Develo ments The future fortunes of the National Government will be determined to a very large extent by US policy, and will depend increasingly upon the scale and character of US aid and support. Should US aid continue at approximately present levels, the prospects of the National Government for maintaining domestic stability between now and mid-1956 cpear good. Communist influence and subversion will probably continue to be vigorously suppressed, although sporadic cases of Communist infiltration and of defections may occur, particularly as time passes and there is growing disillusionment over prospects of a return to the mainland. Nationalist leadership will irobably not succeed in creating any new and dynamic political program. Although there will be some improvements, the fundamental economic weaknesses of Taiwan will probably became more acute by mid-1956. Because of a rising population and a leveling off of current expansion of industrial and agrieultural production, Nationalist China by mid-1956 will probably be more dependent than at present upon US economic aid for its continued existence. A return to the mainland will continue to be the centra objective of the National Government and the focus of its fbreign and domestic policies. The National Government will continue to believe that US support for such a return will not be likely unless and until other circumstances impel the US to engage Corrnunist China or the Communist bloc in a major war. Nationalist leadership will almost certainly not become reconciled to an insular future, nor will it concentrate principally on the development of Taiwan. In this connection the islands of Quemoy and Matsu have recently assumed such importance in the eyes of the Nationalists that their loss would be a severe blow to morale, irrespective of the circumstances or conditions under which the loss occurred. In any event, however, we believe that the blow would not be so great as to cause the Nationalists immediately to fold up. We believe that they would continue their resistance to Communist pressures, at least for a time. The sub- sequent behavior of the Nationalists would depend in large measure on specific US actions with respect to Taiwan, and on US reactions to subsequent Communist moves, The Cninese Nationalist armed forces remain an important source of non-Communist military strength in the Far East. During the next two years their combat capabilities will appreciably improve. However, they will remain greatly outweighed by those of Soviet-aided Communist China. Outside logistic, air, and naval support will continue to be required to defend Taiwan or the Pescadores against full-scale Communist invasion. 1 April 1955 TOP SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 Approved For Release 2005/08/15 :EFAWE-00059A00010001041E5 f Nationalist China's international position will continue greadually to deteriorate. A few foreign states will probably recognize the Chinese Communist regime during the next two years, and Nationalist China's right to membership in international bodies, including the UN, will come under increasingly serious challenge. In the face of a deteriorating inter- national position and unimproved prospects for return to the mainland, the National Government's task of maintaining its own morale and that of its armed forces and the former mainlanders on Taiwan will become increasingly difficult. Twelve million overseas Chinese are one of the few sources from which the Chinese Nationalists might draw additional support. However, little significantly increased support from among the overseas Chinese will be forthcoming, largely because of the probable relative power of Communist Cnina and Nationalist China. If, beyond the next two years, the adverse trends described above are not reversed, the strength and international position of the Republic of China will probably deteriorate, even assuming a continuation of US support at approximately present levels. Copy No. TOT SECRET 1 April l9.5 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 25X1 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 A TOP SECRET III-F-2 Page 1 of 6 FAR EAST Mainland Southeast Asia INDOCHINA* VIETNAM Political The recent success of Premier Diem in military operations against the Binh Xuyen, and in his stand against Bap Dai and the French, has created a new and potentially revolutionary situation in South Vietnam. While the situation remains extremely fluid, Diem appears to hold the initiative, and the interested parties -- particularly the French and Bao Dai -- will have to adapt themselves to a radically new situation dominated by Diem or by more extreme nationalist elements. If they do not adapt and if there are any substantial efforts by Bao Dai or the French to frustrate Diem's government, the chances of anti-French violence and the dissolution of the imperial institution would be greatly increased. Prior to the recent clashes between Diem's forces and the Binh Xuyen, little progress towards establishing a strong, effective anti- Communist government had been made in South Vietnam since the conclusion of the armistice. Despite his considerable nationalist following, Diem had been unable to attract much support from the small political elite of the country, primarily because of his inability or unwillingness to delegate authority. Diem placed his trust in members of his family and resisted suggestions that he broaden his government's popular base. Diem, as the leading lay Catholic in Vietnam, has the support of most Catholics, but this fact has generated suspicion among non-Catholic Vietnamese and religious sect leaders who have accused Diem of promoting a private Catholic army. However, none of the groups opposing Diem has apy broad-based popular support. Diem's popular reputation for integrity and his nationalist zeal have been his most important assets, and the virtual expulsion of the Binh Xuyen from Saigon-Cholon has increased Diem's prestige throughout Vietnam. The confidence of Diem and his supporters in their own strength, judgment, and popular appeal has been considerably enhanced. * This section is basea 17117gely on NIE 63.1-2-55, "Possible Develop- ments in South Vietnam," 26 April 1955, and SNIE 63.1-2/1-55, "The Current Saigon Crisis,n 2 May 1955. This report will be revised following the publication of NIE 63.1/63.2/63.3-55, "Probable Developments in North Vietnam, Carecodia, and Laos through July 1956," scheduled for publication in June. Approved For Release 2005/08/1513.,41gLiktilg7-00059A0001000 10002-7 (dopy No. IO 1 May 1955 25X1 25X1 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 I31-F-2 TOP SECRET Page 2 of 6 In contrast to the fluid situation in South Vietnam, the Vietminh is energetically consolidating its control over North Vietnam, is greatly increasing its armed strength by various measures including the evasion of armistice terms, and is continuing, though not without difficulty, to develop networks of agents and political cadres in South Vietnam, Laos, and Cambodia. The harshness of Vietminh repressive measures and the present economic difficulties of the regime, coupled with the flight of refugees to the South, would seem to presage an unfavorable popular reaction to the regime. Military The Vietnamese National Army is now being reduced from its former strength of 170,000 regulars and 10,000 auxiliaries in conformity with US recommendations for a 100,000 man force. The French Expeditionary Corps has a strength of approximately 150,000 regulars and 22,000 aux- iliaries, plus relatively small air and naval contingents. The French are reluctant to commit their forces in internal security operations. At the present time, the combined French and Vietnamese armed forces could only delay a full-scale Vietminh invasions they could not stop it without reinforcements from outside. The Viet Minh is consolidating and reorganizing its armed forces by grouping formerly independent regular and regional units to form new divisions with augmented firepower. During the next 12 months the Viet- minh will probably have at least 11 or 12 infantry divisions, two artillery divisions, and one anti-aircraft division. These developments would more than double the pre-Geneva combat effectiveness and capabilities of the Viet Minh regular army. The Viet Minh is expanding and improving its transportation and communication facilities, including rail and highway links with South China. Estimate of Probable Developments As a result of his recent successes, Premier Diem will almost certainly resist any efforts to remove him from office. His actions and those of his followers have taken an increasingly nationalistic, anti-French tone and Diem may now be convinced that a continuation of this anti-French policy is essential to the rallying of popular support. Nevertheless, he has exercised a moderating influence on the more radical elements around him. If Diem is thwarted in his objectives by the French or by Bao Dai, however, he will become more susceptible to pressures toward extreme action. Diem has rallied additional support during the currant military phase, and 1 May 1955 Approved For Release 2005/08/1VICIMM7-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP STORET III-F-2 Page 3 of 6 from this position of strength, Mem will almost certainly continue to gain adherents, including defections from among the Binh Xuyen and the sects. Aside from the French Army, only the VNA presently has the capability to enforce Bao Dai's authority in Saigon or to back Diem in defiance of Bao Dai. There are some VNA officers who dislike Diem and who are con- cerned by the developing rift between Diem and Bao Dai. On the other hand, there is considerable pro-Diem nationalist sentiment in the Army; Diem has gained additional support as a result of clearing the Binh Xuyen from Saigon; and most importantly, the VNA units in the Saigon area appear to be loyal to Diem. As a result of Diem's stand against Bao Dai and because of the latter's involvement in what many Vietnamese nationalists consider to be a French inspired political maneuver, Bao Dal's prestige has been greatly reduced. There appears to be considerable sentiment for the deposal of Bac Dad., and if Diem gives his consent such action may be taken at any time. For the present, Bao Dai apparently feels that the tide is running with Diem, and is attempting to preserve the institution of the monarchy by accepting the continuation of the Diem government. The French will find it difficult to accept Diem's success which came despite their strong and well-publicized opposition, and will probably continue pressure for his removal. However, if the French believe that Diem will succeed in consolidating his position they may decide that they have no choice except to repair their position with Diem as best they can while making plans for accelerated withdrawal of their forces.* The Viet Minh probably fear that Diem's continuation in office would limit the prospects of a peaceful unification of Vietnam under terms favorable to the Cbmmunists. They will probably continue covert efforts in South Vietnam to keep the situation agitated. The COmmunists almost certainly will not invade South Vietnam in the near future. Assuming that the US continues to support Diem, and that the French acquiesce, we believe the situation will stabilize in Saigon under Diem's control. However, Diem's talents as an administrator are unlikely to improve. His success achieved largely on his own initiative and with his own resources is likely to make him more independent and less amenable to policy guidance. Diem's government will still be confronted with manifold internal problems e e.g., integration of the sects, resettlement of refugees, land reform, ex- tension of government authority in the provinces, training of the army. Although Diem has improved his position, we believe that it will still be extremely difficult, at best, for Diem or any Vietnamese government to build sufficient strength to meet the long-range challenge of the Communists. The Special Assistant, Intelligence, Department of State, believes that ? the last sentence of this paragraph understates the difficulty the French would have in accommodating to a strong, anti-French government in South Vietnam, and therefore believes the sentence should read: "If these efforts are unsuccessful and Diem appeared to be consolidating his position, the French in the end may decide that they have no choice except to step up the withdrawal of their forces from Vietnam." Approved For Release 2005/08/15 : CIA-1Wp6gEW/9A00010001-Uuui-I eopy No. IQ 1 May 1955 25X1 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 III-F-2 TOP SECRET Page Lof 6 TA OS Present Situation Laos lacks effective political leadership, and the population is in large measure politically apathetic. At present the government is a reasonably stable coalition of leading non-Communist political personalities with the pro-US Crown Prince Savang maintaining a balance of power. Laos is principally threatened at present by the Communist-dominated Pathet Lao movement which occupies and controls the two northern provinces of Phong Saly and Sam Neua and has an army which numbers about 6,000 men. Negotiations designed to bring the Pathet Lao into the Royal Government have resulted in a cease-fire in Sam Neua and Phong Saly provinces and the establishment of a mixed committee to renew further discussions. This cease-fire, which tends to solidify the Pathet Lao position in the two provinces, was brought about largely by Premier Katay who tends to regard the Pathet as "wayward brothers who can be brought back into the fold," rather than as Communists supported and controlled by the Vietminh. The Laotian armed forces have a current strength of 27,000 and are augmented by a French Military Mission and by 3,500 French combat troops. The Laotian Army has not displayed a real will to fight and is incapable of defending Laos against any Vietminh invasion. It is unlikely that the Laotian Army can now without all-out French support exercise effective control in the two northern provinces in which the Pathet Lao are concentrated, or that it can prevent Communist activities on the local level elsewhere in Laos. Estimate of Probable Developments Pathet Lao followers of the Vietminh will probably continue to exercise considerable control in the provinces of Phong Saly and Sam Neua. Moreover, the Communists will have the capability by political and sub- versive means to heighten their influence in Laos and to weaken the anti-communist government. However, the nature of Communist aggressive action against Laos will be moderated by the Communist desire to continue their "peaceful coexistence" line in Asia, particularly directed toward Indian reactions, and to a lesser degree by the possibility of US counter- action. Under these conditions, and providing that the Lao Government obtains and effectively utilizes outside assistance, we believe that it can limit Communist political advances. 1 May 1955 Approved For Release 2005/08/15tOZIMM7-00059A000100010002-7 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 TOP SECRET III-F-2 Page 5 of 6 However, if during the period of this estimate, South Vietnam should fall to the Vietminh, Communist capabilities for pressure against Laos would be substantially increased, and Laotian will and capability to resist these pressures mould be correspondingly lessened. The extent to which the Communists choose to exploit this situation would depend almost entirely on their estimate of the probable reactions of the Manila Pact power and of the neutral countries of South and Southeast Asia. CAMBODIA Present Situation King Norodom, who had exercised supreme power since 1952 when the National Assembly ceased to function, officially abdicated on 2 March 1955 following criticism by the International Control Commission and some of the Geneva signatories of his anti-democracy program designed to preserve the monarchy as the primary instrument of government in Cambodia. Norodom's mother and father have assumed the throne, with the former exercising actual authority. Norodom continues to exercise many of his old functions in the government and has publicly announced his intention to take his program to the people and form a party in opposition to the national or "Democratic Party." The Cambodian public, despite their affection for the ex-King, have remained largely apathetic to the abdication probably because the significance of the ex-King's motional maneuver escapes the unsophisticated bulk of the population. However, Cambodians as a whole can be expected to remain loyal to the royal family, and Cambodia's stability will continue to depend primarily on the attitudes and reactions of the royal family as a whole, rather than in changing popular political tastes. We believe that despite the evacuation of a number of Viet Minh troops a sizeable Viet Minh cadre remains in Cambodia. Moreover, the Cambodian Communist armed bands, although ending their guerrilla activities, have failed to demobilize or to turn over their arms. The Cambodian armed forces total 32,000 and would be incapable of defending against a large scale Viet Minh invasion. 10P SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A0001000 May 19 25X1 Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 III-F-2 TOP SECRET Page 6 of 6 Estimate of Probable Developments We believe that for the next year or so, providing outside assistance and the assurance of western support are forthcoming, the Cambodians will maintain an anti-Communist policy and will be able to control int ernal subversion. Future events in Cambodia will be co is iderably affected by developments in Vietnam and in Laos. A Oomrminist takeover in South Vietnam would increase Communist capabilities against Cambodia and would impair Cambodian will to resist further Communist pressures, though we estimate that the Cambodians would be more resolute than would the Laotians under similar circumstances. 1 May 1955 Approved For Release 2005/0035 '67?ifilDP67-00059A000100010002-7 SECRET Approved For Release 2005/08/15 : CIA-RDP67-00059A000100010002-7 100 105 110 ?th ...1 73 1 I i -1 t. H . Al, ... . .. ? Ssu-nieo i ".t../....../ . s?ao Kay SO Ph. u `\,.. Lal Cha 0 - .... ... - N anh Th_i fie) ."?...---\....7,..?? an.ning , 7 t.. CB? IL'000 ` I BacA Kan9 N / Ne Ch? ing-ming . Tuyen fi LAng S A ----"--- 0 Keng 'I'ung B By ? ' Dien Bi;in,Plin ?S? L re1 . " '..,,v. ? u Tho .1, A, * C Pei-hai illiki, ,-- V. Bayard Ni 20 B U RVj Is???-f. ...,...) 1--mi,ang ,' A Al , ?soc, Si te?:? ) \ sKit " ? '''''",r, ',, 1--1. 's - Ban Houe lAal \\\ ' ? a s a ') ( ri,:_,---,i ltri ---' , AN nh ., Phu Ai. 4W, CAC SA 18 may 1955 .44 ? Xs.s . AM h - H (300 Days) ' h Shin 2 Ch'iung shan.. 2 Chiang Ra' .? --'- -,-- ...? uang Prabang E Moony Soul A _ uo, ? . ,...? ,THA LI?ND-"- S VZin? l' Thenh Hoa ? .??, i? 0') s ic i N c. HAINAN Chiengmal ang --- rti V..ns V,ssg: .e %., Phu Dien Chau -h Nan- - j- ,0 Mu 1-NH '1 Muang ? L0,00.0g , - %Ha 4/4 Lek Sao TInh ,.. Mang Ph ae Vi -,, 6.4 (-- ? aracht . Muang Lord Llagn Tha,ni .ong Hol ----?"--, ? NakhMo_n_Pngan,om.A ? T a k An INDOCHINA .1 (' ' \. ,6"111111111k,>- Tchepon DEMARCATION LINE (PROVISIONAL) Mgang KhOrt Kaen Mulideh fn'eeknh: ' usng Tri , ? - Muong hi '' HUE iiii \,.. ha Sarekham 'Chi . ?OURA i o p ? Sa a e THAIL ? INT Completion of Troop Withdrawals "/?,..\,,,n, th, ? 15 ? Vietnam 18 May '55 (300 Days) .? Laos \ 20 Nov. '54 (120 Days) Cambodia '54 .Surin ,,,0.0"... ???...... , ..----A 1 ISernrong , 1-- ) ?t 1.) 0 ?? Ped igo e . ORS NO ? ( ? _ _ _ 1 Attopeo ENt ? ? 17 ,APPI u A , 4'6' -,/,,? -,..,,, 'or Nhon I 15 20 Oct. (90 Days) .p,,,t . isophon ?ii.,(1!so.., Ch., 's '11 ' Viet Minh i'-'-' ,0Slern Reap / . Battam n C.'",A M ?\/- Puree , ,/ i x----v?-- "oe OD1A ' Kratle r,4 dog COO ,,, ? .. 18 May 1955 000 Days) 4' .% P Ban Me . 1 . ,,... Thuot N?sh 6. s. KI,..t."..7. kel/ '....."\-- ,__, ? ? L'ili:At\Nha Trang 1-- Evacuation Area French Evacuation Area French Division Plq. p Point of Entry ----,(y) f Chhna \I \ PHNOM PENH ii t . Umbel/ L si Takeo Tan 0 o. ompong Cham 1 ,,j,. Debt . ( --''''' --fr-Loc N' h '(