KOREAN DEVELOPMENTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002400080001-6
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 23, 2016
• Document Release Date: May 21, 2013
• Sequence Number: 1
• Publication Date: September 22, 1950
• Content Type: REPORT

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KOREAN DEVELOPMENTS
Military Prospects .... . . . . . ... . . . . 2
Possible Soviet Moves . . . .. . .... . . . . . . 3
'Soviet Military Intervention . ............ 3
Soviet Diplomatic Moves . . . .... . . . . s ... 4
Reconstruction Problems. ............... 5
STRAINS ON WESTERN UNITY
Atlantic Defense ................. .. 7
Turkey and NAT ? 8
? West German Reaction
'Arab-Israeli Tension. , . . . . . . . . . . . . . ? . g'
Iran Looks East , .... . ..... . .. . ... 10
South African Defense ................. 10
ASIAN PROBLEMS,-,? Over-all Soviet Policy.......... , .... 11
Chinese-Indian Relations . . .... . ........ . 12
Struggle for Labor .. . .... . ....... . .. . 12
LOCAL DEVELOPMENTS
West German Politics . ................ 14
French Labor Discontent .......... ... 15
British Steel Nationalization......... 16
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The UN landing at Inchon brings appreciably nearer
the time when Soviet and North Korean actions will reveal
the extent to which the USSR will be willing to write off
the Korean venture. With presently available forces, the
North Koreans will be unable to hold South Korea; in that
event, it is believed that the disadvantages, from the Soviet
view, of employing Soviet or Chinese Communist troops
to defend North Korea or attempting a diplomatic settle-
ment will on balance be greater than those resulting from
a continuation of the Kremlin's present "hands-off" policy
(see page 2)..
In its efforts to counter Soviet aggression, the
non-Soviet world still shows signs of strain. European
nations are apparently still not ready to reach firm agree-
ment on a united European force or German remilitariza-
tion, nor are the US, UK, and France able to adopt a com-
mon policy on a number of key East-West issues (see
page 7). Meanwhile, Israeli-Arab tension is mounting
(see page 9), Iran appears to be on the verge of conclud-
ing trade negotiations with the USSR (see page 10), and
South Africa is apparently determined to demand ?stiff
concessions from the UK in return for offering. one armored
division for service outside Africa in the event of Soviet
aggression (see page 10).
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 !1 -
The UN landing at Inchon., by rapidly changing. the
outlook of the campaign in South Korea, brings appreciably
nearerethe time when North Korea, as well as the USSR,
must implement crucial political and military decisions re-
garding the ultimate fate of North Korea. With presently
available forces, the North Koreans will be unable to hold
South. Korea; a choice of the four bi oad "alternative cour.sesc:
of.action available to the enemy, therefore,. depends in the
.last analysis on the extent to which the USSR is willing to
write off North Korean field forces or perhaps North Korea
as a whole. These courses of action are: (1) North Korean
military action aimed primarily at defending North Korea i:.
from invasion by UN forces, possibly combined with North
Korean peace proposals; (2) commitment of Chinese Commu-
nist or Soviet troops north of the 38th Parallel; (3) an attempt
by the USSR itself to settle the conflict diplomatically; or
(4) efforts by some third party, perhaps under Soviet influence,
to mediate the conflict.
Military Prospects Successful consolidation of the ON beach-
head at Inchon and Seoul would effectively
Interdict the main route of supply for the estimated 120-130,000
North Korean troops engaged in southeastern Korea. Unless
UN forces can be expelled from the Seoul area, organized re-
sistance in the south cannot last long. It is estimated, however,
that with the exception of 15-20,000 relatively ineffective
security troops, all North Korean combat units have already
been committed to the fighting in the southeast. Moreover, it
.is not believed that Korean reserves now being trained could
undertake action against the Inchon beachhead soon enough to
prevent the retreat, with heavy losses, of Nofith Korean:troops
from the southeast. Militarily, then, the most probable course
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of 'action by North Korean forces; and the one offering the
best chance of success, would be the commitment of North
Korean reserves to a defensive role and a simultaneous with-
drawal of as many combat units as possible over secondary
lines of communication from the southeast to defensive posi-
tions along the 38th Parallel.
Soviet Plans Given this probable military development,
the USSR must soon: (1) refrain from inter-
vening and rely on the North Korean forces to prevent their
own military defeat by UN forces; (2) employ Chinese Com-
munist or Soviet troops in North Korea; or (3) attempt to
achieve a diplomatic settlement. The disadvantages. to the
Soviet Union of the two latter alternatives make -the.fir.st'the
most likely Soviet course of action.
Both the commitment of non-Korean military units
and a diplomatic solution. negotiated by the Soviet Union
itself. would force the USSR to disavow its previous stand
regarding the Korean question. Since the invasion began,
the USSR has made every effort to localize the conflict and
to disassociate itself completely from the North Korean action
as well as from the UN action. Military: action at this time
would clearly undermine this position, and even further weaken
the current Soviet peace offensive, while Soviet diplomatic
action would force the USSR to accept the legality of UN action.
The USSR might,. however, encourage the North Koreans or
some third party to seek a settlement. In either event, the
.North Korean position would probably be so weak as to leave
the terms of settlement largely in the hands of the. UN.
Global War Soviet unwillingness to substantially increase.
the risk of global war and the Soviet appreciation
that the employment of. Soviet or Chinese Communist troops
in Korea would represent such a risk are even more compelling
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reasons for the USSR to refrain from military intervention,
even at the expense of a Communist military defeat in North
-Korea. Faced with the prospect of UN air and naval harass-
ment of lines of communication in North-Korea, the USSR
would probably not employ its troops or those of Communist
China without providing them with substantial air cover.
Inevitable conflict with,UN aircraft might lead to a situation
which the USSR might consider itself unable to. control short
of precipitating general war. Even if the USSR issued prior
warning of such a move, it could not be assured that UN air
forces would refrain from such attacks. Moreover, Soviet
or Chinese Communist aid to the North Koreans would leave
..Chinese and Manchurian supply routes, and possibly indus-
trial installations, open to air attack. The USSR would prob-
ably avoid risking damage to this segment of the Communist
Far Eastern potential unless it intended to initiate general
war in the immediate future.
,Diplomatic Action Any Soviet offer of a negotiated settle-
ment, in addition to requiring the USSR
to abandon its position of refusing to accept the legality of
.the UN's position in Korea, would place the USSR in a very
disadvantageous position. Such an offer would have to go
beyond a pious call for a "pea.cef'ul settlement"; in view of
the changed military situation, the USSR no longer has any,
trump cards. Its bargaining position is so weak that pros-
pects for a settlement favorable to the USSR are extremely
-limited. The USSR might attempt to improve its bargaining
position by threatening to reoccupy North Korea; such a;
threat, however, would entail the strong risk of being forced
to carry it'throitgh. An unfavorable settlement. in. which..the
USSR had participated or which had been preceded by a mili-
tary bluff would be more damaging to Soviet prestige than
the consequences of a continuation of the present hands-off
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policy. The .Kremlin, therefore, is more likely to seek to
thwart UN efforts through its usual tactics of obstructionism
in.the UN, coupled with guerrilla warfare, subversion, sabotage,
and propaganda within Korea. Although the North Koreans either
themselves or through a third party would also be at a disadvan-
tage in seeking a diplomatic solution, if military developments
make such an attempt advisable, neither they nor the USSR will
be restrained by those considerations of prestige which would
deter such action by the USSR alone.
Korea north of the 38th Parallel, the initial cost of rehabilitating
the country as a whole would be much greater than that involved
.in South Korea alone. Because of the complementary nature
of the economies of the two zones, however, the long-range cost
of external assistance necessary to develop a viable Korean
.Reconstruction Problems Followinc the collapse of the
invaders resistance in southern
Korea, the victorious Republic will be faced immediately with
a tremendous problem of economic reorganization. The dollar
cost of reconstructing essential South Korean installations
and facilities destroyed during the conflict will far exceed the
.total value of. ECA aid received to date. Although reliable in-
formation, is not yet available, it is known that South Korea's
coal mines, power plants and power distribution facilities,
textile mills, transportation facilities, communication facilities,
and numerous small industrial establishments have been heavily
damaged. The only bright spot in the picture is the over-all
.food situation. Although-local shortages will develop in liberated
areas such as Seoul and Inchon and imports will probably be
.required for immediate relief, chances of saving the autumn
rice crop have improved considerably. Despite war damage,
the 1950 crop is estimated to equal 1949's production.
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economy probably would be considerably less than that
required for the development of South Korean self-suffi-
ciency, since planning for economic rehabilitation on a
national basis could proceed along much more realistic
.lines than are possible for the predominantly agricultural
.economy of the south.
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STRAINS ON WESTERN UNITY
Atlantic Defense It is clear from the recent Foreign
Ministers : meetings' in New York that
although 'the.European countries welcomed_in principle the
strong US initiative and recognize the urgent need for bold
action to strengthen the Western world, they are still re-
luctant to commit themselves firmly to the'drastic measures
necessary to achieve this goal. The NAT Council reached
tentative agreement on a US proposal for a unified European
defense force with a combined command and staff and strong
economic organs. On the vital question of includipg German
units in such a force, however, French reluctance forced
postponement of a decision. All other European NAT countries
were apparently willing to support the US proposal, which called
only for agreement in principle so that planning could begin, but
French Foreign Minister Schuman objected that France was
not yet ready for such a drastic move. After a short recess
to permit the ministers to consult their governments, the
Council hopes to take final action on both key issues and It
is expected that France, while seeking appropriate safeguards,
will then approve. Meanwhile, conscious of their own military
weakness, most of the continental countries except Italy pre-
ferred not to extend the geographical scope of NAT at this time,
and thus agreed to invite Turkey (and Greece) to participate in
NATO military planning for the defense of the Mediterranean
rather than to consider them for full-fledged membership at this
time. The concurrent meetings of the Big Three Foreign Mini-
sters reached accord on a wide range of issues, particularly on
the relaxation of Allied control In Germany, but still remained
apart on a number of others. No real agreement was reached
on: (1) centralized or laen.der control for the new German mobile
police force; (2) a positive policy in Indochina; (3) a common
policy toward Communist China; or (4) tightening controls over
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East-West trade. Moreover, despite their agreement to a
general policy of removing occupation controls on Germany,
the British and French are still reluctant to follow the US
lead on a number of important details.
Turkey and NAT Although the Turks will undoubtedly be
gravely disappointed by the failure of their
post-Korean campaign to gain admittance to the North Atlantic
Treaty group, it is not likely that any lasting significant change
in their official attitude toward the West will result. Internally,
even if the opposition People's Republican Party attempts to
capitalize on the NAT Council's refusal to consider Turkey's
open bid for membership; the Council's agreement to the in-
clusion of Turkey (and Greece) in. NATO military talks on
defense of the Mediterranean, if properly publicized, will
probably enable the government to emerge without a mortal
blow to its prestige.
.West German Reaction West German reaction to the decisions
of the Foreign Ministers Conference
with respect to Germany:;will be generally favorable despite con-
siderable disappointment in nationalist circles over the shelving
of a German army and postponement of the decision to include
German units in a Western defense force. Socialist leader
Schumacher has sharply criticized' the Allied communique as
merely skimming over the surface of the German question and
failing to come to grips with . realities. There will be caviling
from other quarters at the limited nature of the sovereignty re-
stored to the Federal Republic and at the cautious approach to
the problem of removing economic controls. Chancellor Adenauer,
on the other hand, seems prepared to make the best of the situation,
however short it may fall of his original expectations. Aided by
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the vagueness of the Foreign Ministers' communique, he will
press ahead vigorously with negotiations for a relaxation of
Allied restrictions in a variety of political and economic fields.
The Chancellor has bitterly resented his position of inferiority
in relation to the High Commission and may be expected to
take a much stronger and less deferential stand in his future
dealings with the occupation powers.
Insistence on German equality with other Western Euro-
pean powers may also increase friction with Germany's neighbors
under the new arrangements envisaged in the Foreign Ministers'
decision. If the Germans press ahead on all fronts, as will very
likely be the case in view of the opportunities now extended to them,
they will arouse alarm and resentment in France, and possibly else-
where, that may hinder the attainment of common objectives in
economic and military matters.
Israeli-Arab Tension The current intensification of tension
between the Arab states and Israel
makes the possiblility of a Palestine peace settlement even more
remote. Jordan has complained to the Tripartite Declaration
signatories, and, with the support of Iraq and Syria, to the UN
Security Council over an alleged border violation by Israel. In
the Jerusalem area, tension has grown because of rumors that
Israel is planning to seize Mt. Scopus. Egypt has accused
Israel of systematically expelling Arabs across the border, and
Israel has made countercharges of Egyptian border violations
and has also filed a protest with the UN against continued Egyptian
restriction of Suez Canal traffic.. The Security Council discussion
of the Arab charges and' the General Assembly debate on the re-
fugees and on the internationalization of Jerusalem will doubtlessly
increase the current tension.
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USSR-Iran. With respect to Iran, the Soviet Union appears
to be accelerating its efforts to clear up out-
standing problems, probably in order to assure the propaganda
coup which would result if a settlement were reached before
current negotiations for a.$25 million Export-Import Bank
loan are concluded. The Soviet reply to Iran's proposals have
led Premier Razmara to believe that an agreement on trade can
probably be worked out in two or three weeks. Moreover, Soviet
Ambassador'Sadchikov has not only urged the immediate appoint-
ment of the Iranian members of the Soviet-proposed mixed
frontier commission but has also stated that his government was
prepared to take up at once Iran's claims regarding gold and
other foreign exchange held by the USSR. (Razmara had previously
indicated that he would not permit ratification of a trade accord
until the gold question was settled.)
South African Defense In its defense discussions with the UK
that begin in London, on 25 September,
the Union of South Africa will offer one armored division for
service outside Africa in the event of Soviet aggression, but will
make such stiff demands in return that no extensive agreement
appears likely. One demand will be that all the equipment for
the division be obtained from abroad. Another will be to make
the South African. military contribution not through bilateral
arrangements with the UK but through a comprehensive alliance
of all the African powers which, in the South African government
view, would allow the Union to assert its leadership on the con-
tinent. This African Defense Pact, originally proposed by Prime
Minister Malan in April 1949, would have definite ties with the
Atlantic Pact and would also incorporate such aspects of South
African racial views as opposition to Indian immigration and to
the arming of native troops anywhere on the continent. The Pact
would thus raise extremely serious difficulties for the UK in its
colonial and Commonwealth relations.. South Africa has also ex-
pressed a desire for similar defense talks with the US at an early
date.
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Soviet Policy Although the explosive Korean and Chinese
issues have overshadowed all other recent
Asian developments, the USSR during 1950 has been engaged
in an intensive political and propaganda campaign designed
to improve Soviet relations with Asian nations and strengthen
popular support for the Communist movement. While in
Indochina, the Philippines, and Malaya, where conditions
were favorable, the USSR has lent encouragement to guer-
rilla movements, elsewhere it has been cultivating the gov-
ernments and peoples through a combination of cultural,and
diplomatic activity. Its most recent step in this direction--
the inclusion of the Foreign Ministers of the Kazakh and
Uzbek Soviet Republics in the Soviet delegation to the GA--.is
intended to demonstrate to other Asians the autonomy granted
Soviet minority peoples and to present the USSR as a non-
colonialist, semi-Asiatic power, willing and able to assist
backward nations to attain independence and industrialization.
During 1950, the USSR has recognized Indonesia and Ho Chi
Minh's regime in Indochina, has agreed to exchange ambas-
sadors soon with Burma, and has dispatched the first Soviet
Ambassador to Pakistan, Several Soviet cultural delegations
have toured Asia and there has been an increase in the number
of films, publications, and broadcasts reaching Southeast Asia.
A special effort has been made to woo India, and recently the
USSR has been pursuing a conciliatprypolicy-tbward-Iran;.
Within the USSR, the greater attention being devoted to Asian
matters is seen in the recent amalgamation of all oriental
study groups into one "Institute of Oriental Science of the
USSR Academy of Sciences" with its emphasis on "national
liberation" struggles and the study of Eastern languages.
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India and China India's current attempts to play the
mediator's role between East and West,
particularly in Asian matters, have had less effect on
Chinese Communist behavior than India apparently thinks
they have. India's present policy seems to be based on the
supposition that India. not only can exe: t a restraining in-
fluence over the Chinese Communists but, in fact, has
already had some success in. (1) inducing Peiping to nego-
tiate with Tibet and postpone the Taiwan invasion; (2) easing
tension between the US and Communist. China; and (3) pre-
venting direct Chinese Communist intervention in Korea or
Southeast Asia. In reality, however, Indian representations
probably have had little or no influence on Chinese Commu-
nist policy. Regarding Tibet, it will cost the Communists
nothing to avoid an- expensive military venture and. reach a
peacefiul.agreement..which can be subverted_at.leisure...In turn,
the apparent postponement of the Taiwan operation is prob-
ably due to Peiping's lack of confidence in achieving easy
military success there at present and its hope that US
"neutralizing" forces will be withdrawn after settlement
of the Korean conflict. There is no indication of an improve-
ment in Chinese-American relations.; Peiping still regards
the US as its principal enemy. Finally, direct Chinese Com-
munist military action outside'China will occur only when
international Communist strategy abandons its present re-
liance on local "liberation" forces. Meanwhile, Communist
China plays an important role in the Soviet effort to neutralize
India; atask made particularly easy and necessitating few
concessions because of India's extremely conciliatory attitude
toward Peiping.
Struggle for Labor The East.-West conflict in Asia is also
being waged on the labor front, with
both the World Federation of Trade Unions (WFTU) and the
International Confederation of Free Trade Unions (ICFTU)
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stepping up their efforts to control Asian workers. The
WFTU is planning a two-day world boycott of US ships on
6-7 October in what may be the opening move in a long-
range Soviet program for interfering with the shipment of .
US materiel to the Far East. Although the strike is not
likely to be effective, it will serve to dramatize the WFTU's
campaign protesting. US participation in the Korean war.
Meanwhile, the ICFTU has taken several steps to strengthen
the non-Communist labor movement in the Far East, includ-
ing a decision to establish a temporary regional ICFTU
office in Singapore and to call a regional Asian labor con-
ference in Karachi in May 1951.
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Political Unity Chancellor Adenauer's efforts to elimi-
nate friction between the Federal Govern-
ment and the moderate opposition parties may ultimately
produce broadened parliamentary and public support for
government policy on national issues. The Chancellor, who
has recently consulted Social Democratic Party (SPD) Chair-
man Schumacher on several current issues and directed
Christian Democratic Union (CDU) delegates to cooperate
more closely with their SPD colleagues in the Bundestag
legislative committees, is now reported to have established
a seven-man supra-party committee to consult and advise
on major policies. Schumacher's more positive recent
public pronouncements concerning the government's stand
on major issues are indicative of the success of Adenauer's
new policy of conciliation. Chief among Adenauer's motives
for these moves is probably the desire for a relatively united
front in West Germany, both in relation to the Western occupa-
tion powers and against the German Communists. (In this
connection, it should be noted that amendment of the Bonn
Basic Law to permit German remilitarization in any form
would require a two-thirds majority in the Bundestag, for
which SPD participation would be essential.) In addition,
Adenauer may hope by these moves to retain the initiative
for CDU-SPD cooperation on the national level and to use the
specter of a CDU-SPD alliance, to intimidate the Free Democratic
Party, which has recently shown signs of opposition to his leader-
ship.
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 Political Showdown fi The rising discontent of French labor
is likely to develop during the next
few months into a threat to the Pleven Government and to Its
program for national defense. Although no sustained or
serious strike campaign is at present anticipated, political
dissension deriving from labor's demands, at a time when
the government will encounter US pressure for the adoption of
energetic defense policies, may result in a political crisis.
Labor's long dissatisfaction at the failure of *ages to keep
up with the advancing cost of living has already been intensified
by the recent abrupt upturn in retail prices and will sharpen at
the prospect that the strain of rearmament will make It still
more difficult to achieve a rise in the standard of living. Premier
Pleven has refused to impose direct price controls, and the govern-
ment will tend to block a general rise in wages because it fears the
inflationary effect of such a trend. Under these circumstances, the
Socialist Party, which recently has been willing to compromise on
partisan issues in order to preserve the present middle-of -the-
road government coalition, is likely to stiffen its advocacy of
labor s cause. With elections to be expected within the next 14
months, the Socialists will spare no effort to attract the labor
vote, and some members of the Popular Republican Movement
may also defend labor interests within the Cabinet and in Parlia-
ment. In addition to specific demands concerning wages, the
Socialists are likely to insist on safeguarding labor interests in
such defense measures as new taxes, governmental economies, cuts
in long-term investment, and deficit financing; business and farm
interests, also well represented in the government coalition, will
run counter to. many of the Socialist demands. The Communist
Party can be expected to concentrate on supporting labor's wage
demands during the next few months, and some strike activity is
probable, particularly in connection with the return to collective
bargaining. Some of the regional non-Communist unions are al-
ready committed to joint action with locals of the Communist:-led
General Confederation of Labor.
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Steel Nationalization ' The major portion of the British iron
and steel industry will pass into public
ownership on 1 January 1951 or "as soon thereafter as practicable"
unless in the meantime the government falls. and is-succeeded
by a Conservative regime. This was affirmed by the recent
parliamentary vote in which the Conservative opposition un-
successfully challenged the Labor Government's announced interi-
Lion to implement the nationalization measure enacted by the pre-
vious Parliament. Whatever may be the long-range effects of
this measure, the transfer of top-level control from private
directors to the newly established Public-board and the reorganL-
zation of some parts of the industry will be accomplished without
interference with mill operations, and no adverse effects upon the
projected rearmament programs are expected.
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 6,7,8...... Secretary of Defense
9........: Secretary of the Army
10......... Secretary of the Navy
Document
......... The President
2,3,4,5..... Secretary of State
of
CHANGE in Class.
DECLASSIFIED
Auth:
Date:
DDA Memo, 4
DDA REG. 77
TS S
Apr 77
BYE
11......... Secretary of the Air Force
12... ....... Special Assistant to the President, W. A. Harriman
13,14,15..... Chairman, National Security Resources Board
16,17........ Executive Secretary to the National Security Council
18......... Assistant Secretary of the Navy for Air
19:........ Chairman, Joint Chiefs of Staff
20.......... Secretary, joint Chiefs of Staff
21,22....... Chief of Staff, US Army
23,24,25..... Chief of Naval Operations
26,27,28...... Chief of Staff, US Air Force
29......... Assistant Chief of Staff, G-3, Operations, US Army
30......... Deputy Chief of Staff (Operations), US Air Force
31......... Deputy Chief of Naval Operations (Operations).
32......... Director of Plans and Operations, US Air Force
33,34,35..... Special Assistant, Intelligence, Department of State
36,37,38,39,40,41,
42,43,44,45. Assistant Chief of Staff, G-2, Intelligence, US Army
. 46,47,48,49,50,51,
52,53,54,55,56,
57,52,59,60. Director of Naval Intelligence
61,62,63,64,65,66,
67,68,69... Director of Intelligence, Headquarters, US Air Force
70......... Director of Intelligence, Atomic Energy Commission
71......... Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
72,73,74,75,76,77,
78,79,80,81,82, -
83,84,85... Chief, Acquisition and Distribution Div., OCD., State
86........."Chief, Policy Planning Staff, Department of State
87........ !US Air Force Representative on joint Strategic Survey
Committee
.88......... Director';: Federal Bureau Pf Investigation
63. ....... 0 Administrator, Economic Cooperation Administration
90.......... Deputy Director for Intelligence, The Joint Staff
91,92.. ;..... Secretary, Joint Intelligence Group, Joint Staff
93,94,95..... Director, Armed Forces Security Agency
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