WEEKLY SUMMARY #98

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002300160001-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 27, 2016
• Document Release Date: May 21, 2013
• Sequence Number: 1
• Publication Date: April 14, 1950
• Content Type: REPORT

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WEEKLY SUMMARY
Number 98
4 APR 1950
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Date: 31-4-1 S By: CD I 3
CENTRAL INTELLIGENCE AGENCY
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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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aHIGHLIGHT,S......... !C.....".?.00
WESTERN EUROPE... ow e a ow es
CO.MMUNISM IN SOUTHEAST ASIA , . ... ***** . .
FAR .E A S T . . . . ,.. 6 o o. o e a o a e -6 e 000000000
WESTERN HEMISPHERE...... -. . ..
ARTICLE
French Economic Problems. ... ..? . .. , ......
Pada
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HIGHLIGHTS
The development of friendlier Italo-Yugoslav re-
lations appeared no closer this week as the long stalemated
issue of Trieste once again inflamed popular feeling in
both countries (see page 3). ?During preliminary efforts to ,
lay the groundwork for Halo-Yugoslav negotiations on Trieste,
Yugoslavia made it clear that-it would insist on retaining
Zone B, and political considerations still prevented Italy
from openly negotiating on any other basis than ,the Western-
sponsored 1948 proposal that'all Trieste be ceded to Italy.
In other areas of the world, no startling changes
occurred in the situations most directly affecting US security.
A review of Chinese Communist relations with the nations of
Southeast Asia reveals that the Peiping regime is gradually
strengthening its ties with local Communist movements and
attempting toweld the Overseas Chinese communities into '
useful instruments of Chinese Communist policy (see page 5).
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WESTERN EUROPE
UNTI'ED KINGDOM
Political Situation The present state of political ten-
sion in the UK, caused by the narrow
margin between Labor and the Conservatives, will continue
during the life of this Parliament, but neither party is likely
to precipitate a new election soon. No serious new issue has
arisen upon which to base an election campaign, and a new
election now would probably not turn out much differently than
the last one. In the meantime, the Labor Government, con-
tinually harassed by the Conservatives, will remain irresolute ?
on controversial domestic issues while vigorously pursuing-a
foreign policy which will enjoy broad Conservative support.
So long as Prime Minister Attlee can marshal his party for
important votes, the government will probably be able to win
votes of confidence and to forestall resignation until the fall,
when Parliament reconvenes, or even until the early spring
of 1951. It is always posssible, however, that new eleCtions
may become necessary before then if a critical issue should
suddenly arise or if deaths should reduce Labor's slim
majority in Parliament.
Dollar Position The gold and dollar reserve position of
Great Britain and the sterling area showed
a marked improvement in the first quarter of 1950 over the
last three quarters of 1949. Reserves reached $1,984 million,
a figure higher than a year ago and close to what is regarded
In the UK as the minimum safe working balance. Moreover,
for the first time since before the war the area had a net
earned dollar surplus. This quarter's gains, however, do not
necessarily indicate a lasting trend. They were caused in
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UNITED KINGDOM
part by such factors as: (1) delayed payments for goods
0 bought before devaluation; (2) replenishment by the US
and Canada of stocks of sterling area goods depleted in ?
0 anticipation of lower prices after devaluation; and (3) sales
of such commodities as wool and cocoa, which were at
seasonal highs"during this quarter. Nevertheless, there
0 ? are solid and lasting reasons for the improvement. Large
economies in sterling area dollar expenditures are be-
ginning to take effect, Britain's hard currency deficits
with Switaerland, Belgium, and Iran have been eliminated ,
or sharply reduced, and receipts from "invisible" accounts
have risen.
TRIESTE.
Crisis Possible ? The long staleniated issue of Trieste
has once again flared into the open, and
the danger exists that strong?Yugcslav and Italian feeling
? .over the disposition of the territory may provoke a crisis
Li which would not only impede the development of closer
Italo-Yugoslav relations but would be detrimental to US
0 interests in the Adriatic area. During preliminary efforts
to lay the groundwork for Italo-Yugoslav negotiations on
Trieste, it has been made clear that Yugoslavia will insist
on retaining all of its zone while agreeing to Italian posses-
sion of Zone A, Including the city of Trieste. Italy, however,
continues to insist that negotiations be on the basis of the
Western-sponsored 1948 proposal to return all of the Free
Territory to, Italy. The recent publicity given the issue has
0 inflamed popular opinion in both countries and has increased
the difficulty of a compromise. Yugoslav prestige is at stake,
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TRIESTE
and the Yugoslays feel confident that the _West will not
resort to force to eject Yugoslavia from Zone B. Mean-
while, Italian public opinion is becoming so aroused over
the possibility that Yugoslavia might annex Zone B that
the Italian Government cannot afford the risk of con-
cessions at this time, particularly in the face of the
growing Communist threat to its stability and the ability
of the Communists to exploit any weakening of the Italian
position on Trieste. Although the stand taken by Italy
. and Yugoslavia thus appears to have crystallized, neither
country 'wishes to let the situation get out of hand. The
Italians -are aware of Yugoslavia's strategic and political
significance in the cold war, and the Yugoslav leaders
tdo not want to alienate Western support at this juncture
in their fight against the Cominform. Formal negotiations
aiming at a de jure settlement, however, will probably be
shunned by both parties because of fear of serious domestic
? repercusSions.
GERMANY
Land Elections The Land elections in West Germany,
which begin in June 1950, will probably
reflect the growing swing to the right in the three Western
Zones and will reduce the stability of the Adenauer Govern- .
ment. Much of the large refugee vote will go either to the
newly-established extremist and irredentist parties or to
existing right-of-center parties and independent candidates.
In any case, the strength of the moderate parties will be re-
duced, and they will be under strong pressure to enter into
coalitions in the Land governments with rightist groups. Such
a development might alienate left-wing elements of the Chris-
tian Democratic Union and thus reduce Adenauer's strength
in the Federal Government.
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? COMMUNISM IN' SOUTHEAST ASIA
The Chinese Communist regime in Peiping is
already taking aetive measures to support the natiotal
liberation' movements throughout Sautheast Asia. ,Moral
and..material.aid is being furnished -in .varying degrees and
In. general the Chinese Communists are strengthening their
ties-with local Communist movements and are gradually
weldink.the Overseas Chinese communities into useful
instruments of Chinese Communist policy. The degree of
Communist penetratien and current trends in Chinese Com-
munist relations with the several Southeast Asian states are
summarized below.
Indochina Although the Ho regime has been receiving
senile supPortiroth the Chinese Communists
in the form of arms deliveries and the free movethent.of
resistance troops back and forth across the China border,
there is no firm evidence that the Chinese Communists
are moving their own troops across the border or planning
to do so in the near future. Politically, the.Chin.ese Com-
munists and the Ho regiine have accorded each other de
Jure recognition, but have not as yet exchanged diplomatic
missions or concluded any form of treaty or agreement.
Steps may soon be taken (or may already be in process) to
formalize these relations; when this occurs, Chinese Com-
munist support for the Ho forces Will probably increase.
Thailand Thailand has not recognized the Peiping regime
- and has shown, of late, a rather firm disposition
to resist Communist psychological pressure. The Peiping
regime does not appear especially interested in. establishing
diplomatic relations with Thailand, eVenthough such a move
could facilitate the acquisition of Thai rice. Within Thailand,
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as elsewhere in Southeast Asia, the Overseas Chinese
community continues to be a special target of Chinese
.Communist propaganda and .organiiational activity.
Communist agents are proceeding with a program of ?
Infiltration, not only of the Chinese community, but also
of trade unions, youth grouPs, and other organizations
which can be exploited to the disadvantage and emba.rrass-
ment of the Thai Government. If Thailand should receive
US military aid or participate in a non-Communist asso-
ciation of Asiatic states, the Chinese Communists would
increase their pressure on Thailand through propaganda,
and possibly through the stimulation of internal disturbances.
Malaya There is, evidence that the Chinese Communists
have been infiltrating agents into Malaya to sup-
port the terrorist movement and to gain influence in trade
unions and other organizations. The Malayan Chinese, who
make up nearly half the total population of the Malayan
peninsula, are responding favorably to Chinese Communist
efforts to win support and sympathy for Peiping, and the
morale of the terrorists appears to have risen somewhat
as a result of ,the growing prestige and aggressiveness of
the Chinese Communists. Chinese Communist support
for the "liberation" movement in Malaya, however, is
complicated by the fact that the terrorist organization
is composed almost exclusively of Chinese and is opposed
as much by the native Malayans as by the British, with
the result that Communist propaganda in favor of Malayan
nationalism has a rather hollow sound. The campaign to
win the Chinese half of the population to the Communist
cause will continue in vigorous fashion and will succeed
in proportion as the Peiping regime can solve its internal
problems and maintain the prestige of a dynamic political
movement. There is, however, no early prospect that the
Chinese Communists will recognize the terrorists as the
"government" of the Malayan peninsula.
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Burma Burma recognized the Chinese Communist
regime on 17 December 1949, but the estab-
lishment of diplomatic relations between the two govern-
ments has not yet been accomplished. As a result of the
establishment of a "purified" Burmese Communist regime
at Prome, the Peiking regime may stall on the formalization
of its relations -with Burma in the hope that the Prome regime
survives and flourishes. Peiping may then recognize that
regime as the "government" of Burma, and ignore the
Rangoon authorities altogether.
Indonesia Although the USI on 4 April 1950 received a
communication from Peiping expressing the
Chinese Communists' willingness to establish diplomatic re-
lations with the new republic, and Premier Hatta expressed
agreement to such a step, the Chinese Communists have made
no, further moves in this direction, nor have they given any
publicity to the matter. Despite internal instability, the USI
does not appear to be vulnerable in any important degree to
? armed Communist activity, nor could armed groups receive
significant assistance from the Asiatic mainland. Communist
strategy for the UK appears to turn on the establishment of
diplomatic relations with Jakarta and the eventual staffing
of Soviet and Chinese Communist missions there, from which
organizational and propaganda work will be carried on among
both the Overseas Chinese and native Communist and leftist
movements. The USI will delay the actual exchange of diplo-
matic missions with both the USSR and the Peiping regime as
long as possible because of "a keen awareness among many UM
officials of the dangers of allowing Communist officials from
abroad to establish direct contact with local dissident elements.
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The Philippines The Philippine Government has not re-
cognized the Chinese Comnaunist regime
and has given no indication that it will do so in the near future.
The Philippine response to the establishment of a Communist?
state oh the Chinese mainland has been mainly one of fear that
the Overseas Chinese in the Philippines would align themselves
with the Chinese Communists and become a menacing fifth
column within the islands. The Qhirino regime has taken steps
to restrict Chinese immigration sharply and to deport Chinese
who are under suspicion for illegal entry or subversive acti-
vities. There are some indications that The civil liberties of
'the Chinese-community may be seribus.ly. abridged, a-develop-
ment which would draw the full wrath of the Chinese Communist
propaganda machine. While conclusive evidence of direct
?Chinese Communist support for the local Huk rebellion in
the Philippines is lacking, it is almost certain that some
liaison exists.
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'FAR EAST
CHINA
Airplane Dilemma Several recent developments suggest
that the British, faced with the con-
tinuing dilemma of the disputed aircraft and spare parts
still at Hong Kong, may have decided to keep the planes
grounded indefinitely in an attempt to reduce US pressure on
the US to deny the planes to the Communists. The aircraft
have been completely defueled and the Hong Kong Director
of Civil Aviation, speaking as a private individual, has stated
that he could and would prevent the movement of the aircraft
and parts until their disposition is settled. The official is
already attemPting to work out an interim agreement among
the Chennault interests, the Nationalists, and the Communists
under :vihich the aircraft would remain grounded indefinitely.
Moreover, a political adviser to the Hong Kong Government has
expressed his personal view that if the US Government maintains
a "stiff attitude" toward the situation, the UK may devise some
over-all plan to deny the aircraft to the Communists while
saving face for the Hong Kong courts.
If the British have decided to abandon their previous
position that the issue could only be settled though legal
channels, they may now believe that the Communists: (1) may
no longer take retaliatory action because they have already
received a large portion of the spare parts from Hong Kong;
and (2) may be somewhat less eager to obtain the planes be-
cause they hope to obtain transport aircraft elsewhere. The
UK, on the other hand, may have decided to use the aircraft
issue as a bargaining level in the protracted negotiations in
Peiping for establithment of normal diplomatic relations.
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CHINA
Sinkiang Status The thirty-year pact establishing Oslo
joint Soviet-Chinese: companies in
Sinkiang points to the special Soviet interest in this mineral
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rich province as well as to the Kremlin's desire to obtain
the same degree of economic control over Sinkiang's economy
as it exercises over its European Satellites. Although the area
has never been developed, Sinkiang is believed to contain the
richest of China's meager oil deposits and also posesses other
mineral resources, including non-ferrous metals. The joint
companies establihed to develop these resources are similar
in nature to those in the European Satellites and provide the
USSR with a basis for gradually extending its control over the
entire Sinkiang economy.
INDOCHINA
Cabinet Shift Although there has been little change in the
military stalemate between the French and the
forces of the Vietnamese resistance, recent political develop-
ments have not been altbgether favorable to the French. The
French-sponsored Emperor Bao Dai, who has been facing both
Cabinet resignations and an intransigent attitude on the part
of Premier Long, has privately stated that he will soon re-
place Long with Tran Van Huu, the able Governor of South
Vietham. Although Huu, a French citizen, is expected to work
more constructively with the French in the administration of
US military and economic aid to Vietnam, his known opposition
to a unified Vietnam, together with his past association with
the French, is likely to make him suspect in the eyes of many
Vietnamese nationalists. Unless Huu is able to dispel such
apprehensions, popular support for his administration is
doubtful.
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INDONESIA
Makassar Revolt Although the situation at Makassar
remains confused following the re -
cent uprising, the political tension which was the basic
e-cause of the revolt appears to have subsided. Representa-
tives from the East Indonesian, Republican, and USI govern-
ments, meeting bn 10 April, &greed that the Republic and
East Indonesia would continue to exist side by side until
an over-allt national decision could be reached on the crucial
question of whether East Indonesia must submit to atria' lgama-
tion into a "unitary" state. With all official statements
deploring the revolt against USI authority, a peaceful political
settlement of the Makassar uprising is possible. If such a
settlement is not forthcoming, however, the USI is prepared
to undertake large-scale punitive action in order to settle the
Makassar affair. ?
MALAYA
Bandit Activity The recent "Anti-bandit Month" campaign
-waged by British security forces aided by
400,000 volunteers fallect to make any appreciable inroads
on the 3,000 bandits still active in various parts of the
country. Seriously concerned over the steadily deteriorating
situation in Malaya, British authorities are planning to develop
an auxiliary police force to relieve regular forces for opera-
tional duty, reinforce present troops with units from Hong
Kong, and obtain additional aircraft, including heavy bombers,
from Great Britain.
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WESTERN HEMISPHERE
BOLIVIA
Communist Plot The announcement of the discovery of
a Communist plot against the govern-
ment appears to be merely a new stage in the Bolivian Gov-
ernment's current campaign to combat all opposition groups
by connecting them with alleged Communist plots. By such
charges, the government also hopes to quiet increasing labor
unrest and to impress the US with Bolivia's need for financial
assistance. Although many aspects of the Bolivian situation
are propitious to Communist activity--the unfavorable re-
action to the recent currency devaluation, a threatened gen-
eral strike, and the unfavorable prospects of the Bolivian
tin industry?the Communists in Bolivia are still not strong
enough to constitute a serious threat to the government. Their
only importance at this time is the contribution they can make
to the already powerful opposition to the present government.
ECUADOR
Regime Threatened Confronted with growing popular dis-
content and serious economic diffi-
culties, the pro-US Gab o Plaza administration in Ecuador
continues in office largely because the army and civilian
groups conspiring against it are still divided and no single
one is strong enough to overthrow the government. Although
economic conditions may eventually improve as the quantity 7
and quality of Ecuador's exportable agricultural products
improve, present economic prospects are poor because of
such recent developments as: (1) severe floods in March
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that paralyzed rail transportation between Guayaquil and
Quito; (2) the plans of the Shell OH Company to end explora-
tions in the Oriente unless -sufficient oil is found by the end
of April; and (3) the fact that the South American Develop-
ment Company, which employs 20,000 persons, will soon
terminate its gold mining program- Focal point of anti-
fl activity is a newly formed political party
(Partido del Pueblo) led by Carlos Guevara Moreno, who
is backed by Guayaquil bankers and businessmen. Col. Alfaro,
.Deputy Chief of the Armed Forces, Is another threat. In
addition to stirring up trouble within the army, he has recently
Li made an alliance with the Socialist Party and can probably
count on some support froth left-wing members of the Liberal-
Radical Party. Although increased unrest and dissatisfaction
could provoke a revolution at any time, it is unlikely that the
two leading opposition groups will get together in the immedi-
ate future.
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FRENCH ECONOMIC PROBLEMS
Despite impressive gains in economic recovery,
France must still overcome numerous basic obstacles if
it is to have a stable and self-supporting economy by 1952,
when the European Recovery Program ends. The danger of
renewed inflation is the most serious economic problem
facing the government, which must also find means of lower-
ing produttion costs, augmenting dollar earnings, and curbing
the revival of cartels, which are likely to render trade liberal-
ization measures less effective.
Implementation of the French Assembly resolution of
28 March calling on the givernment to ease credit restrictions
will assist small and medium enterprises in meeting higher
tax and wage payments, but is also likely to give new impetus
to inflationary pressures. The government, influenced by
strong support for the proposal from the Radical Socialists
and by popular apprehensions that unemployment (still
negligible) will continue to rise, has already authorized the
Bank of France to raise rediscount ceilings.
Premier Bidaules productivity bonus proposal has
focussed attention on the need for increasing efficiency in
all economic activities. For example, deeply-rooted obstacles
which are responsible for the fact that French industrial pro-
ductivity is only one-fourth that of the US must be overcome.
These factors inelude: (1) the general conviction in labor, ranks
that increased efficiency will lead to unemployment; (2) the
tendency, especially of small businessmen,to prefer restricted
operations at high unit costs and profits; and (3) the magnitude
of the technical and institutional reforms necessary to in-
crease plant efficiency and production. The Bidault proposal
has, however, emphasized the urgent need for increasing pro-
ductive efficiency as the only effective means of raising the
standard of living.
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French efforts to augment dollar earnings will be
largely unsuccessful not only until productive efficiency
can be increased but :Vail other long-range reforms in
the French economy can be accomplished. French business-
men must be educated to the concept of mass production and
sales rather than of limited but sure markets. Moreover,
administrative export procedures must be simplified and
raw material production developed in the Overseas Territories.
Another threat to greater efficiency in French pro-
duction and full economic recovery is the increasing support
in France for the revival of the prewar system of European
cartels. Powerful French business interests as well as
labor are still firmly wedded to the belief that unlimited com
petition will be detrimental to their Interests. The steady
growth of eazrtels, by keeping production costs high and per-
petuating weak industries, will impede the liberalization of
trade and the rationalization of production in Europe,
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DISTRIBUTION
1. . . . The President
2,64. Secretary of State
3,4. Secretary of Defense
5 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, US Air Force
18 Assistant Chief of Staff, G-3, Operations
19 Deputy Chief of Staff (Operations), US Air Force
20 Deputy Chief of Naval Operations (Operations)
21 Director of Plans and Operations, US Air Force
22,23,24. . . . Special Assistant, Intelligence, Department of State
25,26,27,28,29,
30,31,32,33,34. Assistant Chief of Staff, G-2, Intelligence
35,36,37,38,39,
40,41,42,43,44. Director of Naval Intelligence
45,46,47,48,49,72,
73,74,75. . . Director of Intelligence, Headquarters, USAF
50 Director of Intelligence, Atomic Energy Commission
51 ...... Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
52953954,55,56. Chief, Acquisition 8z Distribution Div.,0CD,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: Policy Reports Staff)
61 Deputy Director for Intelligence, The Joint Staff
62,63 Secretary, Joint Intelligence Group, joint Staff
65 US Air Force Representative of Joint Strategic
Survey Committee
68 Administrator, Economic Cooperation Administration
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U. S. GOVERNMENT PRINTING OFFICE
2631-S-1948
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