REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE SECURITY OF THE UNITED STATES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP67-00059A000500070006-3
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: November 11, 2016
• Document Release Date: August 20, 1999
• Sequence Number: 6
• Publication Date: August 19, 1948
• Content Type: REPORT

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REVIEW OF THE WORLD
SITUATION
Published 19 August 1948
CENTRAL INTELLIGENCE AGENCY
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This document contains information affecting the na-
tional defense of the United States within the meanint,
of the Espionage Act, 50 U.S.C., 31 and 32, as amended.
Its transmission or the revelation of its contents in any
manner to an unauthorized person is prohibited by law.
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1. This copy of this publication is for the information and use of the recipient
designated on the front cover and of individuals under the jurisdiction of the recipient's
office who require the information for the performance of their official duties. Further
dissemination elsewhere in the department to other offices which require the informa-
tion for the performance of official duties may be authorized by the following:
a. Special Assistant to the Secretary of State for Research and Intelligence, for
the Department of State
b. Director of Intelligence, GS, USA, for the Department of the Army
c. Chief, Naval Intelligence, for the Department of the Navy
d. Director of Intelligence, USAF, for the Department of the Air Force
e. Director of Security and Intelligence, AEC, for the Atomic Energy Com-
mission
f. Deputy Director for Intelligence, Joint Staff, for the Joint Staff
g. Assistant Director for Collection and Dissemination, CIA, for any other
Department or Agency
2. This copy may be either retained or destroyed by burning in accordance with
applicable security regulations, or returned to the Central Intelligence Agency by
arrangement with the Office of Collection and Dissemination, CIA.
DISTRIBUTION:
Office of the President
National Security Council
National Security Resources Board
Department of State
Department of Defense
Department of the Army
Department of the Navy
Department of the Air Force
State-Army-Navy-Air Force Coordinating Committee
Joint Chiefs of Staff
Atomic Energy Commission
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REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE SECURITY
OF THE UNITED STATES
1. Four US security problems are coming to a head : Germany, Southeastern
Europe, the US-UK position in the Mediterranean-Near East, and the implementation
of the European Recovery Program. (Infra. paras. 1, 2.)
a. In the case of Germany, even if the USSR makes the concessions needed to re-
solve the Berlin issue, differences in fundamental objectives will still offer serious ob-
stacles to the preparation and successful conclusion of a subsequent Four-Power
Conference. Failing a compromise of these differences, the USSR would probably
renew its determined pressure in Berlin and bring the Western Powers closer to the
ultimate choices that appear to face them there-resort to force or planned withdrawal.
(Infra. para. 3.)
b. The Danubian Conference appears to be moving toward a consolidation of the
strategic pattern at which the USSR has aimed in Southeastern Europe. (Infra. para.
4.)
c. A breakdown of the Palestine Truce would offer more possibilities than at any
time previously for widespread political disorder throughout the Near and Middle
East. (Infra. para. 5.)
d. There are signs of economic difficulties in areas under USSR control. Com-
parable difficulties in Western Europe are being reduced by the European Recovery
Program. The obstruction of ERP is accordingly given a high priority by the USSR.
(Infra. para. 6.)
2. Particular situations bearing on the problems noted in para. 1 are : the economic
weakness of the United Kingdom, the political instability of France, the Italian desire
for a neutral position between East and West, and the disposition of the Italian colonies.
(Infra. paras. 7-10.)
3. In the Far East, Communist activity and the response of Western European
powers is focussing the conflict between local nationalism and the colonial pattern of
control. In addition, the position of the Chinese Nationalist Government is reaching
the critical point. (Infra. para. 11.)
4. In Latin America, economic difficulties increase and fears of Argentinian ex-
pansion are being expressed. (Infra. para. 12.)
Note: This review has not been coordinated with the intelligence organizations of the Depart-
ments of State, Army, Navy, and Air Force, though information copies were circulated on
17 August. The information herein is as of 16 August 1948.
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REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE SECURITY
OF THE UNITED STATES
1. A number of situations that have been for some time developing are coming to
a head in Europe and the Mediterranean-Near East region. They bear directly on
the long-run distribution of influence and power as between the United States and the
Soviet Union. No matter how they are resolved, there is little doubt, that their out-
come will set the stage for the next period in US-USSR relations. They are:
a. The "Berlin crisis", which clearly focuses the conflicting objectives and policies
of the United States and the Soviet Union with respect to Germany as a whole; and,
more remotely, with respect to the long-term balance of power in Europe.
b. The Danubian Conference, which focuses the conflicting objectives and policies
of the United States and the Soviet Union with respect to Southeastern Europe; and,
more remotely, with respect to the long-term balance of power in Europe and the
Eastern Mediterranean.
c. The Palestine Truce, which focuses, in terms of the internal stability of the
Near and Middle East, the conflict between a Soviet policy of expansion and a United
States interest in containing that expansion.
d. The contrast between the increasing economic stability of Western Europe
and the growing economic instability of Eastern Europe focuses the conflict between
the Soviet aim of expanding the economic capabilities of the USSR and Satellites and
the United States' interest in retarding such expansion.
2. The positions of Western European countries, with the exception of the United
Kingdom, in respect to these issues are shifting and often contradictory. Basically,
American objectives call for uniformity of action from the countries of Western
Europe; but this is not in fact obtainable, and American policy is obliged to work with
the degree of uniformity that can be secured in any given instance. There is a pos-
sibility, however, that USSR-Satellite solidarity is being similarly weakened. The
struggle between the Yugoslav Communist Party and the Politburo in Moscow, par-
ticularly the undercurrent of national feeling that has appeared as part of this struggle,
suggests this possibility. The present picture, however, is still one of "correct" relations
and of a uniform front to the West.
Previous estimates to the effect that the purpose of the blockade of Berlin was
to force the resumption of Four-Power negotiations about Germany under conditions
largely favorable to the USSR appear to have been justified. The USSR apparently
concluded that the Western Powers had made a firm decision to stabilize the economy
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of their zones in relation to the European Recovery Program and to set up a separate
German Government there. The Soviet reaction accordingly took the form of an
action-the blockade of Berlin-aimed at weakening this firm decision. To delay the
implementation of a program for Western Germany offered the USSR a hope of return-
ing the German issue to a state of fluid uncertainty and of throwing the Western
Powers back into the dilemma from which they had partly emerged. The Berlin
blockade has led to the conversations now taking place in Moscow.
It remains uncertain whether or not the USSR will make sufficient concessions
to resolve the question of the blockade to the satisfaction of the Western Powers.
Without satisfactory resolution, the Western position in Berlin is untenable in the long
run. Success in maintaining by air the food supply of the city's western sectors has
not prevented the steady deterioration of its economy. Nor is this method likely to
be successful in maintaining the city as a going concern. The "squeeze" on the po-
sition of the Western Powers in Berlin has developed more rapidly than the effects
of their counter-measures on the general economy of the Soviet zone. Although there
is some evidence of economic dislocation in the USSR and Satellite States, it is esti-
mated that the USSR can afford-without losing its initiative-to outwait the Western
Powers in Berlin.
Even if the Berlin situation is favorably resolved, essential differences will still
underlie the Four-Power discussions that are presumed to follow. The US definition
of Western Germany as an integral part of the European Recovery Program, and the
Soviet intention of reaching to the West from an Eastern Germany that has been
integrated with USSR-Satellite economy, represent positions that cannot be sub-
stantially modified without changing larger political and strategic objectives. Bar-
ring significant change on the Soviet part, it is likely that a deadlock will once more
develop in Berlin and that the Western Powers will ultimately be obliged to choose
between two basic alternatives with respect to their position there.
Irrespective of intermediate alternatives that might be developed, in the final
analysis the Western Powers will have the following courses open to them, (a) to resort
to force, or (b) to withdraw from Berlin and to implement to the full the stabiliza-
tion and recovery of Western Germany. The first, from the Soviet point of view, must
appear an unlikely choice. The second, from the Soviet point of view, must seem
inevitable. If the Soviet aim of preventing the orientation of Western Germany
toward the West cannot be achieved, their obvious second course is to accept, at least
temporarily, the division of Germany as an established fact and then to ensure that
no Western authority remains within the Soviet zone and to exploit by every device
of "cold war"-propagandistic, economic sabotage, and political penetration-the
doubts and loss of prestige that would accompany a Western withdrawal.
4. THE DANUBIAN CONFERENCE.
While the United States and Western Europe can at best exert only a very limited
positive influence in the Danubian region it is obviously desirable to keep the pattern
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of Soviet political control and economic reorganization from being confirmed by inter-
national agreement. From the Soviet point of view, the value of freezing by interna-
tional accord the favorable situation that has been developed since the end of the war
is clearly indicated. Vishinsky's handling of the Conference suggests steam-roller
tactics designed to this end; and the position taken will leave the USSR and the
Satellites in solid agreement even if what emerges from the Conference is not formally
agreed by the United States, Great Britain, and France. Subject to later modification
by other factors, such as economic weakness and internal resistance, this action will
tend to consolidate the strategic pattern at which the USSR has consistently aimed
in Southeastern Europe.
The steady uniformity with which Yugoslavia has supported the Soviet line in
this Conference does not suggest that the rift with the Kremlin has been closed but
that the United States and Western Europe will derive no immediate advantages from
the controversy. If possible advantages are discovered, they will presumably show
as part of a longer term nationalistic development and will be linked with the pres-
sure of economic necessity in Eastern Europe.
The truce arranged less than a month ago is being maintained with increasing
difficulty. A growing number of reports indicate the growth of intransigeance on
the part of Israel and a willingness to take forceful advantage of a situation that is
judged favorable for expansion. Currently, neighboring Arab States, having barely
weathered the pressures of domestic opinion and kept some minimum political sta-
bility, are now involved in a large scale refugee problem and faced with a large question
of maintaining public order.
If hostilities are renewed in Palestine, the possibility of a chain reaction of social
tensions and political upsets working rapidly through the Near and Middle East must
be taken into account. The Arab League is less well placed to prevent this happening
than at any time since the war, and the United Kingdom is less sure of its relations
with the Arab-Moslem world and less able to exercise a restraining influence. The
total situation, plainly approaching a major climax, raises a diversity of problems.
The basic one is the possible formation of a broad power vacuum in this strategically
important region. The immediate consequence of such a development would be to
present the United Kingdom with a problem that is insoluble in terms of existing
British economic, diplomatic, and military resources. Its longer range consequence
would be to challenge the security of the entire US-UK position in the Eastern Medi-
terranean.
In addition, existing Soviet activities would be quick to seize upon the new op-
portunities offered by growing tensions and spreading instability. Direct intervention
would not be called for, since the maximum opportunities would be generated by the
situation itself. The loosening of authority in the Arab States and a search for ex-
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ternal aid and support by both Jews and Arabs would provide an adequate foundation
for expanding covert activities and intensifying overt propaganda.
The situation in Iran is linked with this general problem. For the moment a
firm stand is being taken against renewed Soviet demands for a reduction of American
influence and the army continues alert to Communist infiltration. Popular dis-
content, however, is growing in the face of half-hearted attempts at internal reform.
A concentration of Soviet pressure in conjunction with a general wave of instability in
the Near and Middle East would uncover marked elements of weakness for exploita-
tion.
6. ECONOMIC PRESSURES.
There are indications that economic needs are also becoming increasingly im-
portant and that economic considerations have measurably come into both the German
and Danubian issues. These pressures are felt by the Soviet Union and the eastern
Satellites on the one hand and, to a less immediate degree, by the countries of West-
ern Europe on the other. In general, Eastern Europe is finding it to meet its
schedules of rapid industrialization, and Western Europe is conscious-perhaps over-
conscious-of its need for certain bulk commodities from the East. The possibility
of exchange between Eastern and Western Europe on these terms is, however, inter-
fered with by political considerations and by the American interest in slowing up a
rapid development of the industrial capabilities of the USSR and the Satellites.
The pressure on the USSR is mounting. Aside from the requirements of its own
economy, it is a target for the economic dissatisfactions of the Satellites who have
been kept out of participation in the European Recovery Program without receiving a
satisfactory equivalent in commodities from the Soviet Union. In addition, the eastern
zone of Germany, marked for integration with the economy of Eastern Europe, is
being adversely affected by the interruption of its commercial relations with the west-
ern zones. The conflicting demands of immediate consumer needs, plans for indus-
trialization, communist doctrine about agricultural collectivization, and Soviet com-
modity requirements seem to be building up towards a general problem of maintaining
effective political control through the machinery of the Satellite Communist Parties.
While this is a possibility to be watched and not a firm evaluation, Western Europe and
the western zones of Germany and Austria are, in comparison, cushioned against the
more immediate and severe effects of economic dislocation by the operation of the
European Recovery Program.
This program is clearly a matter of primary concern to the USSR. Its interruption,
or, failing that, its retardation has become a major short-term objective, for the con-
sequences of its success can flow into neighboring areas of Soviet influence and ad-
versely affect that influence.
7. UNITED KINGDOM.
The part that the United Kingdom can play as a free agent in connection with
the issues described above is being steadily limited by continuing economic weakness.
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The export drive, though in itself an achievement, has its benefits consistently under-
cut by such factors as unfavorable terms of trade, the lowering of gold reserves to the
irreducible minimum needed to operate the sterling area, and the fact that there is
almost no margin left for the further reduction of imports. Although these factors
are partly checked by the operation of ECA, a weakness remains that is of primary
importance in relation to the growing instability of the Near and Middle East, where
any gap that forms between British capabilities and commitments can only be filled,
directly or indirectly, by the United States. Meanwhile, the United Kingdom intends
to maintain its position in the region to the full extent of its capabilities, and is
seeking as a first step to restore British prestige in the Arab States.
France's part in resolving these issues is confused by the influence of its traditional
policies as a great power. This leads to the statement of objectives that are unrealiz-
able in terms of France's present power capabilities. In addition, the French contribu-
tion is still further limited by the uncertain political base on which any French Cabinet
now stands. The Schuman Cabinet fell on a trivial issue. The Marie Cabinet, in-
heriting in unchanged form the same problems of production, wages, and inflation
that frustrated its predecessor, is subject to the same danger.
There are indications that in Italy there is a strong public sentiment for main-
taining a position of neutrality as between the US-Western Europe and the USSR-
Eastern Europe. This conception grows naturally from the still ambiguous balance
of political power in Italy, from the overwhelming pressure of social tensions
within Italy, and from the failure of the DeGasperi Government to take any important
steps to resolve these tensions. It includes the hope that ERP benefits can be com-
bined with the development of economic relations with Eastern Europe. The concept
poses still further problems for the maintenance of an effective American position in
the Mediterranean and suggests that the recent Italian elections did no more than
momentarily consolidate that position.
10. THE DISPOSITION OF THE ITALIAN COLONIES.
With the exception of Somaliland, this problem is proving intractable and efforts
are being made to defer action on it. In particular, the cases of Tripolitania and
Cyrenaica raise long-term strategic and political issues between the USSR and the
United States and Great Britain, between the major Western Powers and Arab nation-
alism, between the Western Powers themselves and Italy, and between the security
interests of the United States and the resistence of American opinion to solutions
that imply colonial commitments. It remains a primary concern of the United States
to find a satisfactory solution since the US position in the Mediterranean, the rela-
tions of the United States with the Arab League, and the degree of influence which the
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United States can exert in Italy are all directly affected by the answer. If the question
reaches the General Assembly of the United Nations, where a small-nation sentiment
for independence is strongly developed, it will add to the difficulty of securing a solu-
tion adequately covering these diverse interests.
Of immediate interest to US security is the stepped-up Soviet effort to exploit
indigenous nationalist groups throughout Southeast Asia and to identify these groups
with Communist elements.
In the Philippines, the apparent failure to find a common ground between the
Government and Communist-led Hukbalahap opens a fertile field for Soviet exploita-
tion.
In Malaya, disorders have spread to an extent requiring a fully developed military
and police operation on the part of British authorities.
In Burma, the expulsion of a large faction of the People's Volunteer Organizations
from the Government Party, desertions from the Burmese Army, and an apparent
attempt by at least two Army battalions to overthrow the Government have built
up into a genuinely serious situation. The immediate prospect, in view of the break-
down of authority in large areas, is widespread and prolonged turmoil.
While Burma offers little scope for external counter-measures, and the French are
obliged by their domestic political uncertainties to hold off in Indochina, the British
are taking determined action in Malaya and the Dutch are suggesting that they may
be obliged to reopen their military effort in Indonesia. These efforts, while they may
succeed in controlling present disorders, bring into sharp focus the critical restlessness
of the region and tend to fix it in a pattern of persistent conflict. This increases the
difficulty of maintaining a favorable US position vis-a-vis the USSR in the Far East.
The difficulty is illustrated by the description given by Soviet-Communist propaganda
of the struggle as one for freedom from imperial colonial overlords. In addition, the
conflict affects adversely the economy of Western Europe and the strategic interests
of the United States.
The position of the National Government has reached a point where a major
military defeat, or a significant political defection might precipitate the final break-
down. A spirit of defeatism and a profound war weariness in Nationalist China is
producing a drift towards a negotiated peace, though this spirit cannot become effective
as long as Chiang Kai Shek retains any semblance of authoritative control. It cannot
be assumed that a collapse will be sudden, spectacular, and total. It is more likely to
show as a reversion to regionalism, in which the present Nationalists will be reduced
to one among many de facto authorities.
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LATIN AMERICA
13. There are increasing indications that the previously noted political and institu-
tional difficulties of Latin America generally are coming closer to a point of crisis.
Economic pressures are intensifying as the consequences of a long maladjusted situa-
tion with respect to foreign trade become more unmistakable. Currency devaluations
have taken place or are planned, but constitute only a palliative, not a solution.
Current fears of Argentine expansion by intrigue and coup d'etat are more widely and
loudly voiced. The immediate consequences are likely to be requests from Argentina's
neighbors for US aid in the form of military equipment and general demands for eco-
nomic support.
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U. S. GOVERNMENT PRINTING OFFICE
2899-S-1948
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