WEEKLY SUMMARY NUMBER 71

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002200240001-0
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 27, 2016
• Document Release Date: May 28, 2013
• Sequence Number: 1
• Publication Date: October 7, 1949
• Content Type: REPORT

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WEEKLYSUMMARY
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CeNTRAL INTELLIGENCE AGENCY
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Number 71
7 OCT 1949
Document No. CO/
NO ORANGE in Class. -
No-nECLASSIFIED
Class. CHA7.7.D TO: TS S C
DZA. IL:lao, 4 Apr 77
Auth: REG. 77/2753
Date: ce0/?e)a? 78 By:
&ore/
dLhC.347
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1. This publication contains current intelligence exclusively
and therefore has not been coordinated with the intelli-
gence organizations of the departments of State, Army,
Navy, and Air Force.
2. This copy may be either retained, or destroyed by burning
in accordance with applicable security regulations, or
returned to the Central Intelligence Agency.
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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CONTENTS
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WESTERN EUROPE
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ARTICLE
Israeli-US Zionist Friction
12
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HIGHLIGHTS
The USSR made vigorous efforts on several fronts to
regain the cold war initiative during the past week. In the UN,
the 5' October announcement that the USSR intends shortly to
place a new proposal for International arms control before
the UN Security Council points to a Kremlin attempt to seize
quick advantage of the assumed Soviet possession of an atomic
weapon. The Kremlin may hope that by winning acceptance of
some such proposal as an international convention outlawing
atomic weapons, similar to the 1925 Geneva Protocol on poison
gas, present US superiority in atomic weapons can be neutralized
(see page 7).
In continuing its energetic pursuit of the Tito controversy,
?
the Kremlin directed several Satellites during the past week to
abrogate their mutual assistance pacts with Yugoslavia (see
page 7). This move, which will probably not lead to a complete
break in diplomatic relations, appears largely to be a continua-
tion of the Soviet effort to seal Cominform countries off from
the Tito virus. Meanwhile, direct Soviet military action against
Yugoslavia remains at present unlikely despite a recent rise in
Soviet military strength in neighboring countries.
In Germany, the USSR has sought to regain the Initiative
through its 7 October proclamation of a German Democratic
epublic in East Germany (see page 2). By establishing this
new regime with a capital in Berlin and with claims to sovereignty
over all Germany, the USSR hopes to counteract the unifyin effect
? of the Bonn Government and may be preparing to exact increased
political pressure for a 'western withdrawal from Berlin.
Meanwhile, rising political instability in France has
found expression in the fall of the Queuille Government, the
most stable and long-lived French regime in the postwar period
(see page 3). The present political uncertainty, which will
probably last for a minimum of two months, is being aggravated
by growing French fears about national security, particularly
in relationship to Germany (see page 4).
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1
WESTERN EUROPE
GERMANY
East Zone Government Formation on 7 October of the
Soviet-sponsored German Demo-
cratic Republic in East Germany is a logical Soviet re-
action to developments in West Germany and represents
I. a Soviet effort to regain the initiative in Germany. The
new regime, by claiming sovereignty over all Germany,
will enable the USSR to counter the attraction of the
Bonn Government as the focal point of German unity.
Moreover, establishment of the new regime with its
for the withdrawal of the western powers from Berlin.
capital in Berlin may result in increased Soviet pressure
In an attempt to obtain the maximum political advantages
from the East German state, the USSR will grant the
new regime the appearance of greater independence than
the West German Government through such propaganda
devices as promises of early troop withdrawal, a separate
peace treaty, and diplomatic recognition by the USSR and
the Satellites. It is unlikely, however, that the USSR will
risk early withdrawal of its troops from the Soviet Zone.
Moreover, the Kremlin is unlikely to propose seriously
a merger of the East and West governments until the
Soviet position throughout Germany is considerably
stronger.
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II
I.
orirliwrri
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FRANCE
I. Cabinet Crisis The fall of the Queuille Cabinet, France's
most stable and long-lived postwar regime,
was caused primarily by disagreement among the coalition
parties over wage-price policy. Right-of-center ministers
would neither accede to labor's wage demands, except to
liberalize an indemnity to part-time workers, nor consent
to a return to collective bargaining, except in particular
industries showing increased productivity. Labor, however,
exerted sufficient pressure on the Socialist and to a lesser
extent Popular Republican ministers to precipitate the gov-
ernment crisis.
Parliament has reportedly been recalled to meet
during the week of 9 October. The political complexion of
the next Government will be almost identical to that of its
predecessor, although possibly with a somewhat smaller
rightist representation. Both Communists and Gaullists will
seek to exploit the crisis, but their political appeals will have
little direct influence. Meanwhile, the unions are in a post-
tion to win at least immediate payment of a cost-of-living
bonus for all workers. However, labor unrest and economic
and political Instability will remain serious until basic wage
levels are raised, and labor has been assured of at least a
gradual return to collective bargaining. This instability will
probably last for a minimum of two months and this could
lead to increased Gaullist demands for dissolution of Parlia-
ment and advancement of the date for national elections, now
two years distant.
Security Fears Meanwhile regardless of the outcome of
France's Meanwhile,
crisis, French officials
are reassessing the role of France in the Atlantic Pact
community in the light of recent US-UK trade and monetary
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II
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FRANCE
decisions and the announcement of an atomic explosion in
the USSR. Within French official circles and among the
population generally there is growing conviction that the
US and the UK are tending increasingly to act bilaterally
In economic matters without consideration for the inter-
ests of the Western European nations. The French gen-
erally are deeply disturbed by France's exclusion from
the recent monetary talks, the drastic, unilateral deval-
uation of the pound by the UK, reported US economic con-
cessions to the UK, and, finally, the pressure exerted by
the US for devaluation of the West German mark. French
concern for the possible adverse effect of these develop-
ments upon national security will undoubtedly be increased
by Soviet possession of an atomic weapon. The French will
thus feel even more strongly that only US guarantees of
immediate, large-scale military intervention will provide
France with adequate protection in the event of war with
the USSR.
German Policy Growing French fears that France's
security is being jeopardized are finding
practical expression in French policy toward implementa-
tion of the German occupation statute. The French are
taking advantage of the broad and vague terms of reference
of the statute to restrict wherever possible the exercise of
Independent authority by the west German government.
This obstructionist attitude of the French was emphasized
by the tension generated between France and Germany
during negotiations on German currency devaluation.
French opposition to German independence has also been
manifest in refusal to: (I) permit the German Republic to
become a direct participant in the Organization for European
Economic Cooperation; and (2) allow the Berlin city govern-
ment to make direct arrangements with the Bonn authorities
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FRANCE
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I concerning the Berlin ECA program. The French are also
attempting to thwart the decartelization program and sub-
stitute Franco-German cartels and will probably make
I difficulties when the International Authority for the Ruhr
begins to function and the status of the German delegation
on the board requires clarification. The French attitude
Iis particularly embarrassing to the US. As the dominant
occupation power, the US will be held responsible by the
I Germans for all vetoes, even those due to French efforts.
At the same time, US pressure on Paris would bolster the
French conviction that the US places German interests
Iabove those of the Continent.
I UNITED KINGDOM
1
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British Elections The impending national election is
primarily responsible for the failure
of either Labor Party or opposition leaders, during the
recent 3-day session of Parliament, to propose a clear-
cut economic program to supplement Britain's monetary
devaluation. Concerned for their standing among the
electorate, the Conservatives merely repeated their
several criticisms of the Labor administration, and Gov-
ernment spokesmen resorted? to counter-criticism and
familiar exhortations to labor and management for in-
creased industrial efficiency. Because the debate was
confined principally to electioneering, public expectations
of an early election have increased; the British public
feels that political maneuvering must cease before eco-
nomic measures essential to obtain the full benefits from
devaluation can be instituted. Although Prime Minister
Attlee and Deputy Prime Minister Morrison are thought
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UNITED KINGDOM
to prefer a spring election, public opinion and pressure
from other influential Laborites and Cabinet members
may move Attlee to seek a new mandate before December.
NORWAY
Election Forecast Norway's Labor Party is assured
of a plurality in the 10 October elec-
tions and can be expected to form the new government.
There is some doubt, however, as to the Party's ability
to retain its one-vote majority in the Norwegian Parlia-
ment, The Communist Party is expected to lose about
half of its eleven mandates, and the Labor party will
benefit from the Communist losses although dropping
some votes to the rightist parties. The advantage which
the Labor Party hoped to achieve by abolishing combined
lists (pooling of votes after an election) may be counter-
acted by the joint lists already submitted in certain districts
by two or more of the bourgeois parties.
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CI r7+ rn
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EASTERN EUROPE
SOVIET UNION
Arms Proposal The USSR has indicated that a new Soviet
proposal for international arms control
will be put before the UN Security Council next week. The
timing of this Kremlin proposal, which will almost certainly
Include some provision for control of atomic weapons,
points to an attempt to take quick advantage of the assumed
Soviet possession of an atomic weapon. The Soviet proposal
may take the form of an international convention outlawing
the use of atomic weapons in var. Such a convention, which
presumably might resemble the 1926 Geneva Protocol out-
lawing the use of poison gas and which would probably per-
mit the manufacture and possession of atomic weapons with-
out international irispection, might be regarded by the Kremlin
as favorable to Soviet interests because of its estimate that;
(1) the US would be forced by public opinion to abide by the
convention until a Soviet atomic attack had been made, thus
neutralizing present US atomic superiority; and (2) the USSR
could then attempt to equal the US potential both for atomic
and non-atomic war. Obviously, the USSR would also hope
to reap great propaganda advantages from making such, a
proposal.
YUGOSLAVIA
Anti-Tito Moves The Tito-Cornirdorm dispute staved in
high gear this week with the abrogation
of mutual assistance pacts binding Yugoslavia to the USSR
and several Satellites. This Soviet-inspired move, although
1771 /-11-2irr
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YUGOSLAVIA
unlikely to lead to a complete break in diplomatic relations
between the two disputing groups, will probably result in
the mutual expulsion of numerous diplomatic personnel.
A complete diplomatic rupture would not only deprive the
Kremlin of its overt contact with internal Yugoslav develop-
ments but weaken its ability to exert pressure on Tito
through diplomatic channels. Tito, on the other hand, is
expected to react moderately to the Soviet action, refusing
to be provoked into any rash action. Thus this new diplomatic
attack by the Kremlin appears to have been designed more
to seal-off the Cominforrn area from the Tito heresy than
to subvert the Tito regime. 'Meanwhile, Soviet-inspired
sabotage activities are reportedly increasing somewhat in
Yugoslavia; estimates of Soviet military strength in neighbor-
ing countries have been increased from live divisions to seven,
or possibly even nine divisions., Direct Soviet military action
Is still considered unlikely, however, and in any event would
not occur until the Soviet Union had exhausted all other avail-
able means of pressure.
SC Bid Meanwhile, Yugoslavia's bid for a seat on the UN
Security Council, along with Chines complaint
? against the USSR and Soviet acquisition of the atom bomb,
Is contributing markedly to the increase in tension at the
current session of the General Assembly. In response to
Soviet assertions that Yugoslavia's bid and US support thereof
constitute the most serious development in the UN since its
NI inception, some attempt is being made to find a compromise
formula which would give Yugoslavia greater prestige in the
UN but would at the same time not antagonize the USSR.
Voting on the SC election has been postponed in the meantime,
and Yugoslav chances of obtaining the necessary two-thirds
majority remain uncertain.
?
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z
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FAR EAST
CHM
2] Canton's Fall Canton, Nationalist minim: capital in the
southern province of Ewangtung, will probably
fall to the Communists within the next thirty days, either by
2 military conquest or defection. Nationalist plans for the con-
struction of defenses for the city reportedly never progressed
: beyond the talking stage and there are indications that the
Nationalist clique of Cantonese generals is prepared to
effect an accommodation with the Communists. Two key
: Nationalist leaders Raw* Yueh, governor of Kwangtung
Province and Yu Ran-mou, military commander at Canton,
are known to have strong ties with Li Chi-shen, leader of the
left-wing Kuomintang Revolutionary Committee and one of
the recently appointed Vice Chairmen of the newly-formed
1 Peoples' Republic of China. The two Kwanghmg leaders are
believed to be engaged in negotiations with Communist repre-
sentatives for a turnover of Kwangbmg Province in the hope
of obtaining positions in the new government. These prepara-
tions for a peaceful turnover may be one explanation for the
puzzling lack of a major Communist offensive against Canton.
1 Following Canton's loss--a more deadly blew than the
loss of Nanking--the renmants of the National Government
: will be further scattered, part under Chiang Kai-shek on
Taiwan, and part on the mainland in Szechuan and Kwangsi
I
provinces where they will be unable to offer effective mili-
tary resistance to the Communists. The fall of the Nationalist
capital, moreover, will strengthen the Communist claim that
: the Peiping government is truly representative of the people
of China, and will be an important factor inclining countries
outside the Soviet bloc toward recognition of the Communist
m
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CHINA
regime. In addition, Canton's fall would add weight to
anticipated Soviet demands that the Chinese Communist
regime replace the Nationalist Government on the UN
Security Council. Although such a development is unlikely
during the present session of the General Assembly, the
UN will undoubtedly find some means of overcoming the
legal obstacles to removing the present Chinese delegation
once a majority of UN members have recognized the Com-
munist regime.
INDONESIA
Hatta Under Fire Growing dissatisfaction among Republi-
can delegates to The Hague Conference
with Premier Stites conduct of the negotiations, if unchecked,
will diminish the possibilities for an Indonesian settlement e
Attacks on. Hatta's policy are being made by members of
both leading political parties in Indonesia as well as by the
Republican representative to the UN Security Council. Re-
publican President Sukarno is thus faced with the urgent
problem of convincing dissatisfied party leaders in Indonesia
that Hatta"s stead in the negotiations will not in fact compro-
mise Indonesia's sovereignty. If this disunity continues within
the Republican delegation at The Hague, and among Republican
leaders in Indonesia, the Dutch may point to Hatta 's lack of
support as justification for demanding more comprehensive
safeguards, thus imperiling the difficult negotiations. Regard-
less of the effect on The Hague Conference, continued opposi-
tion to Premier Hatta will undermine the ability of the Re-
publican Government to deal with the nom crucial problems
it will face after it achieves independence.
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I.
WESTERN HEMISPHERE
Devaluation Results The devaluation of European currencies
increases the probability of devaluation
In several Latin American currencies; will have a deflationary
effect in most Latin American countries; and will produce some
changes in present trade patterns and trade volume. Latin
American countries whose exports to the UK and Western
Europe are considerable will be under the greatest pressure
I. to devalue their currencies. Arge tina, which exports large
quantities to the UK and Western Europe, has already made
a selective alteration in its exchange rates. Uruguay, Chile,
and Peru are under considerable pressure to devalue their
currencies. Colombia and Ecuador, while only slightly affected
I. by the European devaluations, may now find it more politically
expedient to devalue their currencies, a move they have been
considering for some time. bilexico (which devalued its cur-
1 rency several months ago), Cuba, and Venezuela will be only
slightly affected by the European currency devaluations; the
latter two are not likely to devalue at this time. Unless ade-
quate countermeasures can be taken in Latin America; the
devaluation of European currencies will tend to have a defla-
tionary effect in the Latin American countries: Latin American
imports from Europe and the UK, constituting about one-third
of all Latin American imports, will be cheaper; Latin American
exports to the devaluing countries will tend to decline, and the
decline will be especially felt where competition with suppliers
In the devaluing area is greatest. During the past several
years, Latin American countries have established various
trade-control mechanisms designed to shift import orders from
dollar areas to soft-currency areas and to i icrease exports to
the dollar areas. Although these trade control mechanisms
may be modified, the European devaluations will provide addi-
tional incentive for Latin American purchasers to import from
Europe, thus helping to maintain present trade trends?
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ISRAELI-US ZIONIST FRICTION
Cooperation between Israeli and US Zionists has
diminished with the establishment of comparatively normal
conditions in Palestine. The Jew who immigrated to Pales-
tine and fought to defend it now has a certain contempt for
the armchair Zionist abroad. Meanwhile, the US Zion-
ist, who considers his political and financial activity
largely responsible for the existence of Israel as a state and
who until May 1948 shared in the development and direction
of the Palestine Jewish community, now finds that he has
little say in the management of Israeli affairs, although he
Is expected to tnaintain and even to increase his financial
support.
Ideologically, a conflict exists between the secular
nationalism of the Israeli and the emotional and religious
views of the non-Israeli Zionist. These differences, gen-
erally Submerged during the common struggle to save
Israel from the Arabs, have been emphasized by the failure
of the United Jewish Appeal (UJA) campaign to approach its
$250 million target in the US. The belief is widespread in
Israel that the transportation of immigrants is the responsi-
bility of Jews abroad. Moreover, the UJA failure has been
attributed by the Israeli press to the negligence of US Jews,
and the Israelis urge that Zionist policy in the US be re-
vamped and that US Jews be reawakened to their responsi-
bilities toward Israel.
Meanwhile, current Israeli criticism of US Zionists
might well increase the difficulty of obtaining the financial
Support so essential to Israel's economic existence. Many
Israelis, therefore, are urging that a hard-headed effort to
get US capital invested in Israel will accomplish more than
continued emotional appeals to US Jewish philanthropy. Israeli
success in attracting US capital, however, will depend in large
part on whether the Israeli Government removes enough of the
present restrictions to assure a fair margin of profit to the
investor and can create confidence in Israel's political and
economic future.
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DISTRIBUTION
1 The President
2,64 Secretary of State
3,4 Secretary of Defense
6 Secretary of the Army
6 Secretary of the Navy
7 Secretary of the Air Force
8,70 Chairman, National Security Resources Board
9,71 Executive Secretary, National Security Council
10 Assistant Secretary of the ,Navy for Air
11,69 Chief of Staff, US Army
12,13,14 Chief of Naval Operations
15,16,17 Chief of Staff, U.S. Air Force
18 Director of Plans and Operations,General Staff,U.S.Army
19 Deputy Chief of Staff (Operations) U.S. Air Force
20 Deputy Chief of Naval Operations (Operations)
21 , Director of Plans and Operations, U.S. Air Force
22,23,24 Special Assistant to Secretary of State for Research
and Intelligence
25,26,27,28,29, Director of Intelligence, General Staff, U.S. Army
30,31,32,33,34.
35,36,37,38,39, Chief of Naval Intelligence ,
i
40,41,42,43,44. ,
45,46,47148,49. Director of Intelligence, U.S. Air Force
50 Director of Security and Intelligence,Atomic Energy Comm.
51 Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
52,53,54,55,56. Chief,Acquisition & Distribution Division,OCD,Dept.State
57 Director, Federal Bureau of Investigation
58 Secretary, joint Chiefs of Staff
59 Chief, Policy Planning Staff, Department of State
60 Secretary of State (Attention: Chief, Policy Reports Staff)
61 Deputy Director, joint Intelligence Group, joint Staff
62,63 Secretary, joint Intelligence Group, joint Staff
65 US Air Force Representative on Joint Strategic
Survey Committee -
68 Administrator, Economic Cooperation Administration
Cl r f? Fl rT1
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LI
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Document No. d:MMJ,
NO CNANGE in Class. 0
MotECLASSIrI70
Clean. CA=D TO: TS S C
D:A VL.ao. 4 Apr 77
At: DDA REC. 77/3733
Date; ti9/-62- 713 By: Ol$
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SErdiV
U S GOVERNMENT PRINTING OFFICE
2631-S--1948
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