REVIEW OF THE WORLD SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A001300260001-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 23, 2016
• Document Release Date: July 30, 2013
• Sequence Number: 1
• Publication Date: September 14, 1949
• Content Type: REPORT

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REVIEW OF THE WORLD
SITUATION
CIA 9-49
Published 14 September 1949
Document No. 02
NO CHANGE in Class..
JO DECLASSIFIED
Class. CHANGED TO:
0
TS S
DDA Memo, 4 Apr 77
Auth: DDA iREi. 77/1763
Date: /OM By; oil
CENTRAL INTELLIGENCE AGENCY
132
2 -?777/ S Eeirgr
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WARNING
This document contains information affecting the na-
tional defense of the United States within the meaning
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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PAGE 270 ?
UNCLASSIFIED
NFAC
ORE
29
DIRECTOR NATIONAL FOREIGN ASSESSMENT CENTER
DOCUMENT ID NUMBER REPORT 49-9
AGENCY . CIA
ORIGINATING OFFICE ORE
DOCUMENT TITLE REVIEW OF THE WORLD SITUATION
DOCUMENT DATE 490914
NUMBER OF PAGES 8
ORIGINATING DIRECTORATE NFAC
ORIGINAL CLASSIFICATION S
TOP SECRET NUMBER
RELEASE ACTION DEC
ACTION DATE 770324
ACTION OFFICER 058375
REQUEST NUMBER E77-0061
UNCLASSIFIED
80K
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REVIEW OF THE WORLD SITUATION AS IT RELATES
TO THE SECURITY OF THE UNITED STATES
SUMMARY
1. The British financial crisis under discus-
sion at Washington is but one aspect of the
present critical state of the European Recov-
ery Program. Barring a perpetuation of dol-
lar subsidies, a solution of the problem will
require more fundamental readjustments in
the structure of Western European production
and trade than have yet been undertaken.
2. Current developments in the area now
make possible a reduction of the Greek guer-
rilla threat to manageable proportions.
3. The intensification of Soviet pressure
against the Tito regime is probably intended
to protect isolated Albania and to encourage
dissident elements within Yugoslavia. The
threat to Tito is of subversion rather than of
direct military intervention. Tito, however,
is probably able to control the situation within
Yugoslavia.
4. Chinese Nationalist resistance on the
continent has disintegrated into isolated seg-
ments the continued existence of which is
more a matter of Communist logistical limita-
tions than of their own inherent strength.
The short-term prospect for continuing re-
sistance on Taiwan is somewhat better, but
by reason of its insular position rather than
of military or political strength.
Note: This review has not been coordinated with the intelligence organizations of the Depart-
ments of State, Army, Navy, and the Air Force. The information herein is as of 9 Sep-
tember 1949.
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REVIEW OF THE WORLD SITUATION AS IT RELATES
TO THE SECURITY OF THE UNITED STATES
1. General.
The theme of CIA 7-49 (July) was that,
with the conclusion of the recent session of
the Council of Foreign Ministers, internal de-
velopments within the Western and Soviet
spheres respectively would become the princi-
pal concern of statpsmen. Particular refer-
ence was then made to the fundamental eco-
nomic problems confronting the Western
world and to the also fundamental problem
of nationalist deviations within the Soviet
orbit.
During the past month both of these in-
ternal problems have been brought into sharp
focus. In Washington the representatives of
Great Britain, Canada, and the United States
are seeking to deal with the again critical
financial situation of the United Kingdom.
The British crisis, however, is but one aspect
of the broader problem confronting the OEEC.
Soviet propaganda, of course, delights to dwell
on this subject. The more immediate con-
cern of the USSR, however, is the iniquity of
that supreme national deviationist, Tito of
Yugoslavia, against whom the USSR now
threatens to employ "more effective meas-
ures."
On the other side of the world, meanwhile,
the sands are running out for Nationalist
China.
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THE CRITICAL STATE OF EUROPEAN RECOVERY
2. The Washington Conference.
The current economic and financial consul-
tations at Washington will probably result in
some limited measures designed to ease the
pressure on British gold and dollar reserves.
They will also provide the British Government
with a clearer understanding of the area
within which it will now have to shape its
external and internal financial and economic
policies. The future value of Britain as an
ally of the United States will be strongly
affected by whether these policies contribute
to the successful adaptation of the British
economy to the fundamental changes which
have occurred in the world economy.
3. The General European Problem.
The re-establishment of a self-sustaining
economy in Western Europe involves not only
recovery from specific local effects of the war,
but also profound readjustments to meet eco-
nomic trends operative before the war and
greatly aggravated by it. In the terms of this
basic problem, the European Recovery Pro-
gram is a palliative, not a cure. Addressed to
the emergency situation of 1946-1947, the
Program proved a striking political success in
restoring confidence, stemming the tide of
Communism, and preparing the way for West-
ern Union and the North Atlantic Treaty. It
made possible a remarkable recovery in indus-
trial employment and production and a con-
siderable reduction of inflationary pressures.
However, the very emphasis upon a rapid in-
crease in production and upon the satisfaction
of urgent postwar demand in domestic and
soft-currency markets, together with optimis-
tic expectations of dollar earnings, has tended
to retard Western European readjustment to
the basically altered economic situation. The
maintenance and development of European
production depends upon continued imports
from the dollar area which cannot be paid
for through current dollar earnings. Barring
a perpetuation of dollar subsidies, solution of
the fundamental problem requires a rationali-
zation of European production and trade, on
a collective rather than a national basis, and a
concomitant readjustment of US policies to
stimulate and accommodate that develop-
ment. The importance to US security of
achieving a self-sustaining European economy
is obvious.
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MOUNTING TENSION IN EASTERN EUROPE
4. Defeat of the Greek Guerrillas.
The cumulative effect of the closure of the
Yugoslav frontier and of successive Greek
Army victories in the Vitsi and Grammos areas
constitutes a severe setback for the Greek
guerrillas. They have lost not only their two
principal fortified positions in Greece, but also
control of the territory best suited for the in-
filtration of men and supplies into the interior.
If now the Greek Army can both control the
Albanian frontier and pursue vigorously the
guerrilla bands still at large, the prospect will
be good for reducing the guerrilla threat to
manageable proportions.
The guerrillas are capable of staging a
comeback, with Satellite aid, but that prospect
is qualified by the general development of the
Balkan situation. There are some 12,000
guerrillas in Albania, available for recommit-
ment, and some 6,000 similarly situated in
Bulgaria (as against an estimated 5,000 still
at large within Greece) . There are indica-
tions, however, that the bordering Satellites
may have found it expedient to adopt a more
discreet attitude for the time being. The
guerrilla command may well decide to confine
its activities to peace propaganda, minor sabo-
tage, and terrorism, husbanding its strength
until the spring, by which time favorable de-
velopments in Yugoslavia and a relaxation in
Greece might justify a resumption of major
operations.
5. The Precarious Situation of Albania.
Tito's continuing defiance of the Kremlin
and Greek Army victories on the frontier ap-
pear to have aroused genuine alarm in Al-
bania, where the position of the Hoxha regime
is obviously precarious. Albanian references
to a putative Greek-Yugoslav agreement to
partition Albania (for which there are his-
torical precedents going back to 1912) are in-
dicative of this state of apprehension. Tito
is probably prepared to subvert the Albanian
regime, but the threat to do so serves as a
counter against the threat of Soviet-Bulgarian
subversion of Macedonia, while its execution
would be a severe provocation to the USSR.
The Greeks would be unlikely to join Tito in
such a provocative enterprise, or to be wel-
come partners to him. A radical development
in the Albanian situation is therefore unlikely,
unless and until the USSR takes the initiative
in Yugoslav Macedonia, but meanwhile fear of
it may serve to restrain Albania from flagrant
provocations.
6. Soviet-Yugoslav Tension.
It is against this background that the
mounting tension between the USSR and
Yugoslavia must be viewed. This intensifica-
tion of Soviet pressure against Tito cannot be
dismissed as routine war of nerves. For the
Kremlin the stakes are high and the hand
must be played out. Tito's contumacy and
the dangerous influence of his example are in
themselves intolerable. Economic sanctions
having had no other result than to hasten
Tito's rapprochement with the West, it is all
the more imperative to move against him by
more effective means before his position ?in
Yugoslavia is further strengthened and his
realignment with the West is firmly estab-
lished. These developments, in combination
with effective suppression of the Greek guer-
rillas and the disappearance of Albania as a
Soviet Satellite, would not only mean the ex-
pulsion of the USSR from the western
Balkans, but would have fateful repercussions
in Bulgaria and throughout Eastern Europe.
It does not follow that the USSR has any
present intention of direct resort to armed
force in order to overthrow Tito. The risk of
general war, even if it be judged slight, is a
restraining factor pending the trial of other
means. The very war of nerves itself tends
to protect isolated Albania, and so long as
Albania remains under Soviet control both
Greece and Yugoslavlia are subject to the
threat of guerrilla action. Moreover, the cur-
rent pressure serves to embolden and support
dissident elements within Yugoslavia. These
appear to be its immediate purposes. For
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the time being, therefore, the threat to Tito's
position is of a Stalinist coup or Macedonian
insurrection rather than of direct Soviet mili-
tary intervention. It is probable, however,
that Tito is capable of controlling the situa-
tion within Yugoslavia.
7. Other Aspects.
Meanwhile the USSR has made further
specific advances toward consolidation of
Stalinist control in Bulgaria, Hungary, and
Czechoslovakia. Soviet "welshing" on the
Austrian treaty may be, at least in part, the
consequence of a desire to prolong the stay
of Soviet troops in Austria, Hungary, and
Rumania. The Communist-led strikes in
Finland were probably intended to test the
ripeness of that country for an extension of
Soviet control. (If so, the Kremlin bit into
an unripe persimmon.)
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THE DISINTEGRATION OF RESISTANCE IN CHINA
8. Prospects on the Mainland.
The sands are running out for Nationalist
China. On the continent, resistance to the
Communist advance has disintegrated into
three isolated segments, the continued exist-
ence of which is more a matter of Communist
logistical limitations than of their own in-
herent strength. Recent events in Yunnan
are indicative of a tendency toward further
fragmentation in transition toward accom-
modation with the Communists.
In the Northwest (Tsinghai, Kansu, and
Ningsia) Ma Pu-fang has some 130,000 good
troops, but no appreciable logistic support.
He yielded Lanchow in order to maintain his
force in being, but the necessity to do so
underscores the weakness of his position.
In the Southwest (Szechwan and Yunnan)
Chang Chun nominally commands 200,000
men, but has less than 35,000 under his direct
control. The Yunnan incident emphasizes
his weakness. Terrain barriers may delay
the arrival of the Communists in Chungking,
but not for long.
In the South (Hunan, Kwangtung, and
Kwangsi) Pai Ching-hsi and Li Tsung-jen
have 260,000 troops. Unable to prevent the
capture of Canton, they probably intend to
fall back upon their native province, Kwangsi,
but cannot be expected to hold out there,
under pressure, for longer than a few months.
9. The Prospect on Taiwan.
The prospect for continuing resistance on
Taiwan (Formosa) is somewhat better, but
because of its insular position, rather than by
reason of military or political strength.
Chiang Kai-shek has assembled there some
100,000 troops, as well as the National Air
Force and Navy. The successful withdrawal
of an additional 100,000 troops from the adja-
cent mainland would raise his over-all
strength to some 300,000. These forces, how-
ever, are demoralized by defeat and long-
standing maladministration. Dissension al-
ready exists in the high command. The posi-
tion is further undermined by Taiwanese dis-
affection. The Communist lack of a present
capability to mount a major amphibious
assault may afford the Nationalists some res-
pite, but the probability is that eventually
Taiwan will fall of its internal weaknesses
without necessity for such an assault.
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THE UN GENERAL ASSEMBLY
10. The Soviet Approach.
With the dual purpose of retarding imple-
mentation of the North Atlantic Treaty and
of obtaining Western capital equipment for
the USSR and its Satellites, the Soviet propa-
ganda leitmotif at this year's General As-
sembly is likely to be Soviet devotion to peace
and to East-West trade. The alleged aggres-
sive intent of the Atlantic Pact will be con-
trasted with the universal popular demand for
peace as recorded at sundry peace congresses
held under Communist inspiration: the United
Nations may be called upon to declare "ag-
gressive alliances" to be a violation of the
Charter. At the same time the alleged dol-
lar imperialism of ECA and the real difficulties
confronting the OEEC will be contrasted with
the mutual benefits to be derived from in-
creased East-West trade. The USSR may also
take the occasion to call for a reconvening of
the CFM to resume consideration of a Ger-
man settlement as well as the Austrian treaty
and an early peace treaty with Japan.
11. The Agenda.
The General Assembly agenda includes
fewer major problems than those of recent
years. In the case of the Italian colonies,
the shift of the Western position from trustee-
ship toward early independence for Libya
should permit a settlement of the issue at this
session. With the dispatch of the Economic
Survey Mission to the Near East and the
Hague Round Table discussion in progress,
less may be heard of the perennial Palestine
and Indonesia cases. A new problem looms in
China's eleventh-hour appeal against Soviet
violation of the Sino-Soviet Treaty of 1945, a
matter likely to prove more embarrassing for
the Western Powers than for the USSR.
There is also the unlikely possibility of a Yugo-
slav appeal against the menacing attitude of
the USSR.
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U. S. GOVERNMENT PRINTING OFFICE
4193-STATE-1949
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