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December 12, 2016
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June 26, 2002
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August 30, 1947
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Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 ONFI r TIAt 3 0 AUG 1947 .471 p T, AN HAS NO OBJECTION THF, THE PFCI,ASSIEICATION OF GE RAL jgj~ DQou i1T. 1. Rio Pact not to alter US Antarctic t i . c - - T A ! 'D1 f inept of State r mmar0ng o roposal to inelu e a part of Antarctica in the "heo isphere defense zone," has suggested to the US Delegation at Rio that because Argentina, Chile, and the UK have conflicting claims to that part of Antarctica, Great Britain might protest its inclusion in tht "'defense zone,' Is and Argentina and Chile th ht later invoke the treaty provisions against the UK. The Department has also suggested to the US Delegation that it r4 k e a formal statement reaffirming the US policy of non- recogni-tion of any- claims to Antarctic territory. 25X6 EUROPE onsiderirs ao eal caw for wheat--US Am- .3. FRANCE- Cabinet bassado? Cax"fery in Paris has been informed liy two independent and trustworthy sources" that: (a) the Ramadier Cabinet is considering an appeal to Moscow for wheat; (b) the appeal is being urged not only by Communists but also by certain Socialists who consider that the "USSR should be "put on the spot. 4. RUMANIA: Triage of Armed Forces undertaken without wag`s, permission-- US Military Representative C1, Rumania reportrst1w e long-awaited purge of the Rumanian Armed Forces will begin on 1 September. The ensue has been secretly ordered by the Deputy Chief of Staff, despite Michaels oblectlons, and is viewed by the US Representative as an t e r .example of the Icing's waning authority. DIA and DOS Reviews Completed Document No. e)- !r2 [] HANGE in Class . NO C C7 DECLASSIFIED Class. CHANGED TO: TS DDA Memo, 4 Apr 77 Auth: DDA REG. 7711763 Approved For Release 2 Qrp$I, ~~ltt~jt~diiQt - DP7-- OZ-1 {, ~tff k 25X1 Approved For Release 20i~ P78-01617A005900010002-1 NEAR EAST-AFRICA 5, r.,A : ,USSR presents threatf:nin _no a to --US Ambassador .l.t=n reports that Soviet Ambassador Sadchikoff has delivered to Minister Qavam a note which: (a) states that Qavam's uncooperative sttixude in the oil. matter is regarded as a sign of enmity toward the .' SSR; and -) insists that the Soviet-Iranian oil agreement of 4 April 1943 be implemented by the Iranian Government without delay. I ile a states that neither Qavam nor members of the Majlis give any indication of wavering In their determination to reject any zvlet oil proposals and that Iranian opinion against the USSR has olidified? FAR EAST 8. C: kNA: Conscription program marked by usual incompetency --U3 `:`o s ,Iate General Shanghai reports that the Mat o-nal Government's 8 onscriptio a program in Shanghai and surrounding provinces is R,tefx g carried out with "`disgraceful incompetency and corruption." - Const late General believes that this development "augurs ill" `-r the Government's recently announced all out anti-Communist :-,aig;n. (CIG Comment: Despite announced plans for sweeping reforms a ; the recommendations of the US Army Advisory Group, the Chinese Xai. cta.l Government continues to weaken its current military position _ y - .dbering to its age-old conscription system.) Approved For Releas MEA Ift RDP78-01617AO05900010002-1 1UIUU o.LEu I IRL ' Y AUG 1947 Approved For Rele 45 ' DP78-01617AO05900010002-1 470 ~ . `Ty.K .,.AL SI.T 1~`? ~A+t EUROPEAN RECOVERY Secretary. Marshall has requested that the US joint Chiefs of Staff,_ study the problem of the withdrawal of UK troops from Greece'and Italy (see item 1). GREECE As the Cabinet crisis continues, it is becoming increasingly evident that any government which may be formed will retain most of the Rightists from' the old Cabinet and will be unable to inspire the confidence of the people. INDONESIA It is believed that the Netherlands Cabinet has agreed to accept the good offices offered by the Security Council on 25 August. The Security Council's offer will probably also be accepted by the Indonesian Republic in the hope that the good offices will eventually take the form of arbitration in the Dutch; donesta n dispute. The Netherlands is opposed t o settleraw mt by arbittration on the g ,ounnds that the problem is of an Internal co stltutio l nature and thus not susceptible of out-- side Judgment. I'ORFA The US proposalfor a conference in Washington on the Korean problem has been delivered to the Ulf, the USSR, and China, the other three signers of the Mote cow Agr oeranerr?t. Ambassador Smith in Moscow indicates that the USSR is unlikely to accept the US suggestion of Immediate zo. .l elections (see item. 8). CHINA Secretai.7 Marshall has directed a letter to the Foreign Minister indicating US unwillingness to participate in Four Power discussions preliminary to the Japanese peace conference.. (see item 2). Document No. o sl NO CHANGE in Class. 0 0 DECLASSIFIED Class. CHANGED TO: TS S DDA Menio, 4 Apr 77 Auth: DDA REG. 77 1763 Date : ` APR 197a Sy: 25X1 Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release IPP78-01617A005900010002-1 GENERAL 1. US requests that the JCS studU troowithdrawals--`T'he De- partment of State has informed US Em assyon on of Secretary Marshall's request that the US Joint Chiefs of Staff: (a) study the implications of the intended withdrawals of UK troops from Greece and Italy (see Daily Summary of 25 August, item 2), exploring the possibility of the alternative withdrawal of even larger numbers of UK troops from less sensitive areas; and (b) consult with the British Chiefs of Staff with a view to formulating positive recom- mendations on this problem to the US and UK Governments. (The Department had recently suggested to Secretary Marshall in Petropolis that the problem of retaining UK troops in Greece and Italy be approached through military channels, after conclud- Ing that diplomatic representations had failed.) 2. US reply to Chinas statement on Japanese peace- -Secretary Mar- shall has dihecte awe eto the ese Foreign Minister pointing out that the "principle of eleven-power participation" would be compromised if the Four Powers met separately to reach agree- ment on a Japanese peace conference as suggested earlier by the Foreign Minister (see Daily Summary of 25 August, item 4). The Secretary's letter: (a) states that the purpose of a Four Power meeting can be better achieved if China and other Interested governments individually attempt to obtain Soviet participation in the peace conference; and (b) re-emphasizes the need for an early start on a peace settlement. US Ambassador Stuart has been instructed to inform the Foreign Minister orally of Secretary Marshall's opinion that the Chinese National Government is overly-concerned about the effect on the Dairen issue of peace treaty discussions without Soviet par- ticipation, since there is no prospect that the USSR, even if it takes part in peace discussions, will make any early change in its policy of effectively denying Dairen to the Chinese. (CIG Comment: While Secretary Marshall's reply should convince the Chinese Government that the US intends to maintain a firm position toward the USSR on Japanese peace questions, Approved For Release C RDP78-01617A005900010002-1 TUAMAAL Approved For Release EIHDP78-01617A005900010002-1 momXl c.r. CM Urp Chinese policy will probably continue to be dominated by fears of: (a) Soviet reaction to a peace treaty concluded without USSR par- ticipation; and (b) a new Japanese menace in the Far East.) 3. UK economic difficulties affect civil air_ olicyr--An official of the Ministry of Civil Aviation has told the US Civil Air Attache in London that because of the world trend toward "restrictionism" in international trade, he feels that the October Rio Conference will offer the last chance for a liberal multilateral air agreement which will be favorable to the "strong" air transport countries. The Attache reports that the official indicated that British economic difficulties are beginning to affect air policy and that a program of retrenchment for British civil aviation is contemplated.. The Civil Air Attache believes that the UK may lead a movement directed against US air policy if the Rio negotiations fail. (CIG Comment: It is unlikely that the UK will make a clear break with the US on civil air policy so long as there is the pros- pect of a successful outcome of the European economic recovery program.) EUROPE 4. FRANCE: Communists an "famine committees"--US Embassy Paris reports that according to a `trustworthy informant" the Communist Party is preparing to set up "committees against famine and misery" throughout France. According to the inform- ant, the Communist-led General Confederation of Labor is to call upon both Socialists and Communists to join committees of this nature with a view to organizing manifestations, agitations, propa- ganda, and incidents. (CIG Comment: Such Communist moves have every pros- pect of success as long as the French food shortage continues.) 5. GERMANY: Possible demilitarization SMA-_Ac!cnrdjng to 25X1 C F7 ~ have -3- Approved For Release gE:RDP78-01617A005900010002-1 Approved For Release NF4 TKDP78-01617A005900010002-1 stated that the Soviet Military Administration (SMA) Is about to be converted into a civilian administration by placing leading political officers in a civilian status and sending additional ci- vilians from the USSR. (CIG Comment: Such a reorganization of the SMA would: (a) place under the Soviet Foreign Office those SMA officials who have reportedly tended to disagree. with the policy of the Foreign Office--see Daily Summary of 20 August, item 6; and (b) ease the transition of the Soviet Zone Germany from the status of a con- quered area to that of a Soviet Satellite.) 5. AUSTRIA: Assets negotiations with the USSR postpc sed--US Legation Vienna, reports that the Foreign Ministry has agreed to postpone bilateral negotiations with the USSR on the German assets problem (see Daily Summary of 25 August, item 7). The decision whether to initiate such talks will not be made until after the Austrian Treaty Commission completes its discussions. 7. YUGOSLAVIA: U tence ofInternational BrITade doubted--Am- bassador Cannon in Belgrad expresses doubt that an international brigade is being formed to take part in Greek guerrilla warfare. Cannon points out that adequate personnel is readily available to the guerillas in the border areas of Yugoslavia, Albania, and Bulgaria and that the use of such personnel instead of an inter- national. brigade does not involve the risk of "serious internation- al repercussions." Cannon believes that the rumors of recruit- ing personnel for an international brigade may have originated from the recruitment of European youth for Yugoslavia labor projects. (CIG Comment. The existence or non-existence of an in- ternational brigade has not yet been definitely established. Am- bassador Cannon's opinion cannot be accepted as final in view of: (a) continuing rumors; and some evidence to the contrary Approved For Release Approved For Release ,ILDP78-01617A005900010002-1 s w 116 FAR EAST 8. KOREA: m a~ TS , r~ s ,ls--Am ssador Smith in Moscow believes that the USSR is not likely to accept the US proposals for Immediate zonal elections in Korea. Smith xvarns~however, that if the USSR does accept the proposals, such acceptance will a clear indication that the USSR is confident of achieving final control of Korea through the carrying out of the US program. Approved For Releas fQ RDP78-01617AO05900010002-1 Y 55 Approved For Release P78-01617A005900010002-1 CRITICAL S KTUAT!Cr s EUROPEAN RECOVERY Departments of State and War have approved the communique on the London tripartite level-of.-industry talks. GREECE Prolongation of the Cabinet crisis will lead to further loss of confidence in the Government and will therefore enable the guer- rilla forces to operate with increased effectiveness. INDONESIA Hi officials of East Indonesia and West Borneo, whose states have been denied a voice in Security Council discussions on the Indonesian situation, condemn the present Indonesian Republi- ca.a Government as unrepr; eseantatjy e and undemocratic. KOREA The Department of State has instructed the US Delegation to the joint Commission not to propose a recess while awaiting a reply to the proposal of a four-power? conference. CHINA Wedemeyer"s departing statements in China have come as a rude shock to the Chinese National Government and have apparently made Chiang Kai-shek concerned over the security of his orm position (see item 5). Document No. 0.3"0 NO CHANGE in Class. E] D DECLASSIFIED Class. CHANGED TO: TS S 2 DDA Memo, 4 Apr 77 Auth: 11DQ. ;?.; ~. ? 1763 Date: I By: -- I - a8 5X1 Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 20U~JWIIP78-01617A005900010002-1 GENERAL 1. Turkey considering declaration of solidarity with Greece--The Turkish Government has asked US Ambassador Wilson for an ex- pression of US views concerning a possible Turkish declaration of political and economic solidarity with Greece. Wilson interprets Turkey's proposed move as an effort to counter Yugoslav-Bulgarian cooperation directed against Greece. Wilson believes that the Turk- ish Government should defer its decision on this matter until after the UN General Assembly has considered the Greek case. 2. USSR rejects US note on Dairen--The USSR, In reply to the US note on NEW see ally ummary of 13 August, item 7), has categori- cally rejected "any attempt to burden the USSR with responsibility for treatment of American interests" in Dairen. The Soviet note declares that: (a) Dairen must remain under the Port Arthur Naval Base regime until the Japanese peace treaty is signed; and (b) the Chinese National Government has failed to fulfill its administrative functions in Dairen "for reasons beyond Soviet control:' (CIG Comment: The Soviet line of reasoning indicates clearly that the USSR intends to retain exclusive control over Dairen as long as possible.) 3. UK to sell aircraft to new Iranian airline--The Ministry of Civil Aviation has advised US Ambassador Douglas in London that British aircraft will be sold to Eagle Airways, a new Iranian airline, and that British Overseas Airways Corporation (BOAC) will conclude a management contract with the line. (GIG Comment: The UK had previously assured the US that BOAC would not "intervene in Transcontinental and Western Air (TWA) affairs" in Iran. Although the UK now asserts that Eagle Airways will not compete with Iranian Airways (Iranair), with which TWA has a virtually inoperative management contract, Eagle opera- tions will probably be disadvantageous to Iranair and reduce the chances that US technical assistance in Iranian air transport will be maintained; see Daily Summary of 25 August, item 10.) -2- Approved For Release 120 - ftlARDP7801 61 7A00590001 0002-1 Approved For Release 20-P78-01617A005900010002-1 EUROPE 4. USSR: US to answer Soviet note on Petkov case --The Department of State has instructed US embassy Moscow to join with the UK Embassy Moscow in informing the USSR that its rejection of the US proposals on the Petkov case (see Daily Summary of 26 August, item 4). constitutes a violation of. the obligations assumed by the USSR at Yalta and negates the rights of the US as a signatory to the Bulgarian armistice. FAR EAST 5. CHINA: Government shocked byWedemeyer statements--US Am- bassador Stuart reports t e epar ng s emen made by General Wedemeyer unquestionably came as a "rude shock" to the Chinese National Government, even though most nonpartisan and liberal Chinese largely endorsed Wedemeyer's views. Stuart adds that Chiang Kai-shek had tried earlier to persuade Stuart to caution Wedemeyer against being too critical and is now preoccupied with the question whether the US may be planning to force the General- issimo's retirement from office. 6. BURMA: AFL rejects Communist proposal for reunion--US Consul General Rangoon has been orme by a member f Burmese Cabinet that the re-entry of the White Flag Communist Party into the Anti-Fascist League (AFL) has been blocked by the refusal of the Communists to accept the terms of reunion as laid down by the AFL. (CIG Comment: The possibility that the White Flag and Red Flag Communists will join forces Is now greater, but the union is still improbable. However, in view of the mounting political tension in Burma, widespread violence is likely to increase and may result in another attempted coup d'etat.) -3- Approved For Release 2 DP78-01617A005900010002-1 t~nalu~ ~~ a 4Mn. 87 4 J j IN4f Approved For Release 2~002/A8/2~1.; ,EIA-RDP78-01617A005900010002- 6 8 CRITICAL SITUATIONS C EUROPEAN RECOVERY The US, UK, and French delegations to the tripartite talks in London on German level of industry have reached agreement on a communique (see item 1). GREECE Tsa.ldarris has apparently abandoned his efforts to secure the coopera- tion of the Liberal Party in forming a cabinet and now threatens to form an Extreme Rightist government. It is believed that such a government could not survive in view of present Parliamentary and popular opposition. INDONESIA The UN Security Council has agahi called on the Netherlands and the Indonesian Republic to comply with the cease-fire order of I August. Meanwhile, the Netherlands has taken another step toward the forma- tion of the projected United States of Indonesia by recognizing an autonomous government i_n East Borneo. KOREA In an attempt to reach some decision on the Korean problem, the Department of State has sent a note to the four signatories to the mission negotiations and asking those governments to send delegates to a conference beginning 3 September in Washington (see item 3). Moscow Agreement calling attention to the deadlock in joust Co CHINA One of the outstanding obstacles faced by the Chinese National Government in its efforts to reinforce Manchuria is that senior Nationalist commanders In North China are reluctant to release a portion of their owe tr?o~)ps because of the uncertain political situation within China (see item 4). 04-9 NO CHANGE in Class. 0 R DECLASSIFIED Class. C::iAii D TO: TS S 1 DDA Memo, 4 Apr 77 Auth: DDA R.G. 77/1763 I Date: 1-0 APR 197T By: CONFIDENTIAL ; 7 5X1 Approved For Release 2002/08/20 : CIA-RDP78-01617A005900010002-1 Approved For Release 200wjpEK Rw8-01617A005900010002-1 GENERAL 1. C'on,rffiuniqueosed on level-of-industr talks--US Ambassador Douglas reports that K, an renc a egations to the Lon- don talks have agreed on a communique which will be referred to the respective governments for approval. The communique will include a statement that the French delegation cannot withdraw its objections to the level-of-industry agreement until there is "a satis- factory outcome" to the forthcoming Berlin discussions of French proposals on the export of Ruhr coal. The US delegation recommends US agreement to the communique and recommends further that, even if the French Government refuses to agree to the communique, the new level of industry be published on 1 September. 2. UK seeks Immediate discussion of bizonal financing--The UK Gov- ern ten - s sxagges iio 'o "t ae `D-epar f en -of State that US - UK discussions leading to a revision of the present agreement for the financing of the US and UK Zones Germany be initiated at the earliest possible moment. The note declared that the UK will be unable to provide further dollars for German expenditures when the current appropriation is exhausted (approximately at the end of December), but is prepared to discuss possible contributions from non-dollar sources. FAR EAST 3. KOREA: Soviet Delegation continues dilatory tactics--The US Dele- gation to the joint Commission reports that the present deadlock is so complete that it will be difficult to agree on even a factual joint report. General Hodge states that Soviet tactics still consist of un- acceptable counter-proposals and propaganda against "oppressive" US policies in South Korea. (CIG Comment: The complete failure of the Soviet Delegation to make a plausible case for the continuing of the joint Commission, combined with the rather weak USSR propaganda line, indicates the possibility that a surprise Soviet proposal will be made at a forth- coming conference in Washington. This might be a suggestion for the immediate withdrawal of both US and USSR occupation forces.) -2 - 8//20 : CIA-RDP78-01617A005900010002-1 Approved For Release ~IOENTIAj Approved For Release 20 UI=78-01617A005900010002-1 4. CHINA: Nationalist commanders unwillin release troops for Manchuria-- According to U Ambassador Stuart, the British Military Attache in Nan- king has been reliably informed that Chiang Kai-shek was unable to per- suade General Hu Tsung-nan in Yenan to release part of his troops for reinforcement of Manchuria. (General Hu, Nationalist Commander in the Yenan area, is regarded as one of Chiang c most faithful supporters.) Stuart adds that General Fu Tso-yi, commanding Nationalist forces in the Nalgan area, may be similarly reluctant to part with any of his troops during the current political instability in China. Stuart observes that Chiang's Government is still compelled to effect troop movements "largely by negotiations rather than,by the issuance of orders. " THE AMERICAS 5. PARAGUAY: Government to hold elections--US Embassy Asuncion re- ports that President Morinigo has told a group of foreign diplomats that he intends to hold elections "in due :course," and that he will turn over the Government to the victorious party. -3- Approved For Release ~QQ~I DP78-01617AO05900010002-1 nUC(I IIRL iurffW I UI4L fj u MUh IJ-74A Approved For Release,? ,?,/ DP78-01617AO05900010002 ' _4A C R I T I C A L S I T U A T I O N S EUROPEAN RECOVERY The Chairman of the CEEC doubts whether Western Europe can be self-supporting by 1952. Clayton recommends that the US im- pose certain necessary conditions upon US acceptance of the CEEC report (see item. 1). GREECE Continued resistance on the part of the opposition makes it highly unlikely that any effective government under Tsaldaris can be formed (see item 6). INDONESIA US Embassy The Hague reports a growing belief in the Nether- lands that Russia will sabotage any decisions of the UN not favor- able to the Indonesian Republic. KOREA US -USSR negotiations have reached a critical stage and significant developments are expected within the next few days. CHINA A political and economic crisis of record severity is likely to follow the 24 August statement made by General Wedemeyer on his departure from China. In reaction to this statement, the Chinese National Government will probably reiterate that govern- mental reforms cannot be carried out so long as it is compelled to prosecute the civil war without foreign aid. Doau mcnt No. 0 4 c NO CHANGE in Class. [] E] 'DECLASSIFIED Class. CHIA'NGED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA REG. 77 1763 10 APR By. 2 X1 Date: CONFIDENTIAL Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 20}~P78-01617A005900010002-1 GENERAL 1. Requirements desired in CEEC report--The Department of State believes that there must be major changes in both the content and conclusions of the report which is being drawn up by the Com- mittee for European Economic Cooperation (CEEC). The Depart- ment feels that the report in its present form does not meet the following essential standards: (a) achievement of a self-sustain- ing European economy; (b) maximum realization of mutual aid; and (c) concentration of aid at points where it will produce the maximum immediate recovery. While the Department believes that the US must not create the impression that it is directing the specific content of the report or delaying its preparation, publi- cation of a report not meeting the essential requirements of the recovery program would do irreparable harm by evoking serious criticism in the US and by further undermining the confidence of European nations in their ability to help themselves. cia ,Y top's views on the CEEC9 rest-Under Secretary Clayton has told Sir Oliver Franks, Chairman of CEEC, that the figure for US aid of 28.2 billion dollars, tentatively reached by the CEEC, is "out of the question." Clayton got the impression that: (a) Franks is very reluctant to initiate discussion in the Conference of living standards relative to pre-war and post-war conditions; and (b) the Conference is not likely to arrive at a program which would bring actual dollar requirements much below the prelimi- nary summation. Upon being informed of the Department of States objections to the report in its present form, Franks ex- pressed doubt whether Western Europe, under any reasonable assumptions, can reach a completely self-supporting status by 1952. Clayton recommends that the US inform the Conference that it must plan on the annual export of 25 to 30 million tons of coal by the UK by 1951 and consider that France will again be practically self-sustaining in bread grains by that date. Clayton is convinced that the only way for the US to deal with the CEEC report is to impose necessary conditions. Approved For Release 24 1LP78-01617A005900010002-1 Approved For Release 2009CEnER AC78-01617A005900010002-1 2. Australian position on Japanese peace talks- -US Ambassador IIr reports that the viedo Aus ra ian Minister of External Affairs Evatt concerning possible delay In convening a Japanese peace conference is that: (a) it is urgently necessary to hold the peace conference before the UN General Assembly meeting, be- cause the otherwise crowded program may postpone the con- ference several months; and (b) the conference must be held promptly, even if the USSR refuses to attend. 3. Partial Turkish demobilization unlikel to affect USSR policy--US Ambassa or Smith in Moscow reports his opinion a partial demobilization of the Turkish Army (see Daily Summary of 19 August, item 6) would not materially affect Soviet policy toward Greece, Turkey, and Iran, particularly if accompanied by an of- ficial Turkish statement which would: (a) reiterate Turkish de- termination to defend itself against aggression; and (b) point out that a reduction in the financial burden of maintaining large forces under arms would improve Turkey's capacity to resist aggression, should the need arise. 4. USSR rejects US protest on Petkov case--The Soviet Government has refused the recent US propoi that the Bulgarian Government be directed by the ACC to delay the execution of Nikola Petkov, pending ACC review of the case. The USSR contends that ACC Bulgaria has no authority to review decisions of Bulgarian courts, and that such a review would be an infringement upon Bulgarian sovereignty. The Soviet note likewise rejects the US proposal that consultations be undertaken among the three powers repre- sented at the Yalta Conference in an effort to work out a concerted policy regarding the Petkov case. (CIG Comment: A similar Soviet position may be expected in the September trial of Maniu in Rumania or in any future case in which the Western Powers seek to check the elimination of non- Communist elements from Satellite politics.) -3- Approved For Release 2 / ~ U4i DP78-01617A005900010002-1 Approved For Release 200/oOQ,~,~I,P78-01617A005900010002-1 EUROPE 5. AUSTRIA: Keyes desires US aid for Soviet zone--US Commanding General Keyes believes that, in view of the Soviet refusal to admit US relief into eastern Austria under the control provisions of the US-Austrian Relief Agreement, it is necessary to protect Austria's economic unity by supplying eastern Austria with food from US military relief stocks. Keyes declares that failure to supply this aid will: (a) result in greater over-all US relief requirements for Austria; and (b) be a first step toward the division of Austria. 6. GREECE: Government impasse continues--According to US Am- bassador Mac eag , r me s er s darts has proposed to Sophoulis (leader of the Liberal Party) that: (a) Populists and Liberals unite to form a new government, with Sophoulis presid- ing over the Council of Ministers and with Tsaldaris functioning as "active"' Prime Minister because of Sophoults' advanced age; (b) the portfolios be distributed equally between Populists and Liberals; and (c) Tsaldaris and Sophoulis each have veto power over any Cabinet appointment. Sophoulis replied that: (a) because the Government has failed, the opposition (Liberal Party) should form the new govern- ment; and (b) if the Liberals collaborate with the Populists, the Cabinet's policy must be wholly that of the Liberal Party. Mac Veagh is not hopeful of an effective coalition between Populists and Liberals, because he believes that Sophoulis considers Tsaldaris' proposals a sign of weakness and is therefore pos- sibly anticipating that, by holding out a little longer, the Liberals may be able to take over the whole government. NEAR EAST-AFRICA 7. IRAN: Soviet intimidation of Iran continues--US Ambassador Al- len Tehran has been informed by a confidential representative of Qavam that the Iranian Government has received reports of 10,000 Rarzani (Kurdish) tribesmen concentrated on the Azerbaijan border by the USSR, for the purpose of creating disturbances in Iran which -4- -.il'+p car, /'~bt'T CONFIDENTIAL Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For ReleaseRIIAIRDP78-01617A005900010002-1 -;P9P will serve as a pretext for Soviet Embassy to informant also stated that the Soviet mbassy is start "a pro-Soviet movement" among Iranian officials on the ground that "great turmoil" is imminent in Iran. (CIG Comment: more The e- than 1500 It is in conside~ed likely lieved to number that the USSR will use them, as well as other tribal elements, to promote Iranian unrest.) FAR EAST 8. C A: VT5SR _01i r China--According to the US Naval Attache Nanking, USSR officials in China have stated that: `a) Soviet Ambassador Petrov will return to China, probably in September; and (b) there will be no change in Soviet policy in China until US policy changes. (Petrov left Nanking for Moscow in June. At that time Soviet officials in China reportedly inter- preted his departure as the first step in a new USSR policy of `getting tough with China. ) -(CIG Comment: It is believed likely that the Kremlin will maintain an outwardly "correct" attitude toward China, at least until the USSR is in a position to judge the effectiveness of any additional US assistance that might be extended to the Chinese Nationalist Government.) THE AMERICAS 0. PARAGUAY: Reactivation ?f US Miss ons recommended--US Charge Trueblood in Asuncion has recommended that the US Air and Ground Missions in Paraguay be authorized to resume oper- ation. (The Missions were suspended in March in view of the pos- sibility that their activities would be considered military inter- vention by the US in Paraguay's civil war.) Approved For Release 20 ~Q Q~ 78-01617AO05900010002-1 C r r r r r, ~ INS AUG 1941 Approved For Release 78-01617A005900010002-1 466 CV-11TICAL SITUATIONS EUROPEAN RECOVERY The French have indicated that unless there is agreement be- tween France and the US e Ruhr coal and coke, the French Government will probably as nounce that the level-of industry agreement is unsatisfactory (see item 1). GREECE The fall of the Greek Government will not have any immediate deleterious effect on the general situation In Greece and may even result in the formation of a more representative government if e.,:zl~1DER~DP78-01617A005900010002-1 the present regime. However, early de facto recognition of the regime is likely to follow as a matter of course. If it does, General Somoza will probably make his long-deferred trip to the US, and his departure will force a political realignment in Nicaragua.) 10. PARAGUAY: Government successes in civil war--US Charge Asuncion reports, as of 18 August: (a) the apparently assured" safety of Asun- cion, with present acute food shortages expected to improve rapidly; (b) the recapture of the civil' airport by the Government; and (c) the absence of rebel planes over the city through the last two days. (CIG Comment: I 25X1 C confirms press reports the remainder of the attacking rebel forces have split into several groups. If other recent press re- ports are also confirmed, the military phase of the civil war, except for possible continuing guerrilla action in localities remote from the capital, may be considered ended.) 11. URUGUAY: Arms shipments to ParER!a an rebels--The Acting Minis- ter of Foreign Affairs of Pa ay has Infor-m-ed-We- US Embassy in Asuncion and the diplomatic representatives of the American Republics that a plane that crashed near Montevideo on 15 August was carrying Uruguayan Government munitions to the Paraguayan rebels. In this connection, the US Military Attache Montevideo reports his convt ^tion, based in part on a document discovered among the effects of the co- pilot of the plane in question, that high Uruguayan officials have been sponsoring arms shipments to the Paraguayan rebels. 12. ECUADOR: US comments on ammunition chase--The Department of State has informed US Embassy Quito in connection with the report that Ecuador might purchase from Czechoslovakia large quantities of 7.92 calibre ammunition (see Daily Summary of 18 August, item 9), that: (a) the purchase would commit Ecuador to a rifle that is not standard US equipment; and (b) Ecuador is still eligible to receive a small amount of ammunition under the US interim arms program at a considerably lower price than that quoted by the Czechoslovakian firm. Approved For Release DP78-01617AO05900010002-1 ~E~~'~i t t I U4L AUG 1947 Approved For Rely IA-RDP78-01617A005900010002-~ 61 CRITICAL SITUATIONS EUROPEAN RECOVERY . UK officials estimate that at the present rate of drain on British dollar resources the balance of the US loan will last only about two weeks; the Cabinet has therefore decided to take unilateral stop-gap action to forestall a break in sterling (see item 1). GREECE Intensified guerrilla activity will follow the recent announcement by General Markos of the establishment of a "free" Greek government. The guerrillas will attempt to extend their control in northern Greece before the Greek Army can make effective use of the equipment supplied by AMAG. I1 'DONESIIA Despite pressure from liberal elements in the Netherlands to curtail military action, Dutch forces may soon reopen "police operations,"" possibly with the occupation of the Republican capital of Jogjakarta as their objective. KOREA No significant new development. CHINA A plan currently proposed by the UNRRA office in China, which would with . hold UNRRA supplies fro-in military areas under Nationalist con, trol (as well as from Chinese Communist areas), would probably in- tensify Chinese reaction against any foreign demands for the "privilege of interfering in Chinese affairs" as a condition for extending aid to China, Document No. 04 NO CHANGE in Class. [:] DECLASSIFIED Class. CHANGED TO: TS S /?~'/' DDA Memo, 4 Apr 77 `,?Auth: DDA REG. 77/1763 Bate: A 0 APR 1975 Approved For Release 2002/08/20 : CIA-RDP78-01617A005900010002-1 Approved For Release DQNEIIENTI&DP78-01617AO05900010002-1 GENERAL 1. UK to act unilaterally to protect sterling- Bevin has informed US Ambassador Douglas that, because the run on UK dollar re- sources has accelerated so greatly that the remainder of the US loan may be exhausted in two weeks, the Government has decided to take Immediate action unilaterally to protect sterling. Bevin stated that while he would have opposed such a step, if the Issue were purely monetary, he Is convinced that a break in sterling would: (a) "impair. if not destroy" all US and UK efforts In the political field over the past two years; (b) lead to increased ag- gressive action by the USSR; and (c) have a "profound adverse ef- feet" politically and economically in France and Italy. Bevin emphasized that this action is to be taken as a stop- gap to maintain the status quo while the US and the UK are review- ing the situation and Is not to be construed as a repudiation of the financial agreement: In this connection, Douglas feels confident that Uevin was expressing the UK Government's sincere convictions. 2. US representatives in Moscow discount overt Soviet move in Iran-- The US Military Attache Moscow reports his belief that: (a) the USSR does hot intend to make an overt hostile move against Iran; and (b) any changes which may have been made in Soviet troop dispositions in the area were probably for the purpose of intimi- dating the Iranian Government. US Ambassador Smith reports that there Is neither anything definite to substantiate recent rumors of increased Soviet strength on the Iranian border nor any concrete indication that the USSR is preparing to occupy Iranian territory. EUROPE 3. USSR: Note relects US view on former Axis assets--US Embassy Moscow has received a note from thcontending that Soviet acquisition of former Axis assets in Hungary, Bulgaria, Rumania, and Finland is final. The note rejects the US contention that trans- fers of such assets thus far have been only provisional, pending the implementation of peace treaties. -2 - Approved For ReleasclM -RDP78-01617A005900010002-1 nnuera~NL ? Approved For Release MNTiALDP78-01617A005900010002-1 Smith expo delay of ratification--US Ambassador Smith in Moscow believes that the Soviet delay in ratifying the Italian and Satellite peace treaties reflects a Eremllin estimate that ratification would not be advantageous to the USSR at present. Smith points out that through delay the USSR can. (a), avoid the termination of armistice regimes, thus allowing more time for the consolidation of Soviet control; (b) disturb the precarious political balance in Italy; and (c) maintain troops in bulgaria for continuation of the `war of nerves" on Greece and Turkey. 4. HUNGARY: Secret treaty for retention of Soviet troops--The US Military Representative Budapest has learned from 61a usually re- liable source" that the Chief of the Military Committee of the Hungarian Communist Party recently stated that a mutual assist- ance treaty between the USSR and Hungary is being prepared which will include provisions for the retention of Soviet troops in Hungary. (CIG Comment: dging by previous reports, such an agree- ment is quite possible. It is unlikely, however, that the USSR would make such a treaty with Hungary without making similar pacts with Bulgaria and Rumania.) 5. BULGARIA: Mission suggests direct appeal for Petk y--The US Mission in Sofia states its view that a direct appeal by the US for clemency for Opposition Leader Petkov should be made to the Bulgarian Government in addition to the representations already made to the Allied Control Council. NEAR EAST-AFRICA S. TURKEY: 29yernment, a lorin~ ssibili of reduc!ag armed forces-- US Ambassador Wilson reports that the Turkish Government, in at- tempting to decide whether a reduction in the Turkish armed forces should be made,, wants to be Informed of US views on the international situation. While Wilson believes that Turkish forces should not be reduced for at least a year, he suggests that the Government be given Approved For Releas f Tt RDP78-01617A005900010002-1 Approved For Release=@129`. AA DP78-01617A005900010002-1 a frank estimate of the international situation, on the basis of which it can make its own decision. Wilson feels that Turkey would then maintain the armed forces at present strength. THE AMERICAS 7. URUGUAY: US cattle shipment infected with hoof-and-mouth--US Charge Montevideo has received a note from the Uruguayan Govern- ment stating that in a shipment of dairy cows arriving direct from New Orleans on 17 June: (a) one animal was infected with hoof -and- mouth disease on arrival; and (b) by 12 July, all but two of twenty- nine animals had developed the disease. (CIG Comment: The latest US epidemic of the highly con- tagious hoof-and-mouth disease occurred in 1929 and was stamped out by slaughtering all cattle in the infected areas. The US is now cooperating with the Mexican Government in a similar slaughter campaign in that country. several months ago referred to a plot looking to a deliberate a empt to 'cause the disease to spread to the US.) -4 - 25X1 Approved For Releas N ffALRDP78-01617A005900010002-1 r jA RING 1341 Approved For Relea ` -RDP78-01617A005900010002-1 460 CRITICAL SITUATIONS THEC.!.A.HASNOO1-?ECTION TO THE DECLASSIFICATION OF THIS DOCUMENT. t 25X1 EUROPEAN RECOVERY l o. French officials favor the establishment of a customs union through the European economic recovery program (see item 1). GREECE The "free" Greek government proclaimed by General Markos (Greek guerrilla leader) is merely provisional and military. Markos proclamation will probably be followed by the announce- ment of a more permanent political government which will be recognized by the Satellites, if not by the USSR. Meanwhile, Satel- lite representatives are withdrawing from Athens and leaving Greece in virtual diplomatic isolation from its northern neighbors. INDONESIA The Netherlands Reconstruction Minister has been sent to Batavia with Instructions to Van Mook that Dutch forces must cease advances and take only protective measures. KOREA The Soviet delegation on the joint Commission, continues to insist that it has no instructions to meet with US delegates for the purpose of drawing up a statement on the present deadlock in the negoti- ations, as, proposed. by Secretary Marshall's recent letter to 'olot?v. CHINA The Central Government's new foreign exchange plan, which recog- nizes the depreciated open market rate for all exchange transactions except those covering essential Imports, will not succeed in materi- ally reducing the drain on Government foreign exchange and gold resources unless the plan is capably administered and is accompa- nied by a revival of public confidence in the Government and its currency. Document No. NO CHANGE in Class. ^ o DECLASSIFIED Class. CHANGED TO IT$ DDA Memo, 4 Apr 77 Auth: DDA REG. 77/1763 di BY: Dee: Wrn ~.. reP 90sRSz W flENT1AL Approved For Release 2002/08/20 : CIA-RDP78-01617A005900010002-1 Approved For Releasecmw LDP78-01617A005900010002-1 1. French favor customs union of Western Europe--Under Secretary Slayton reports that French off icials strong y favor provisions within the European economic recovery program for: (a) financial and mone- tary reform; and (b) the eventual establishment of a customs union. Clayton adds, however, that there is general agreement that the UK empire-preference system is a barrier to taking even preliminary steps toward a customs union. 2. UK will consult US before mmakin trod withdrawals --US Ambassa- dor Douglas reports that the UK Foreign Office has assured him that the UK will undertake no troop withdrawals from Italy or Greece with- out full, prior consultation with the US. 3. atrQ r Stevie olic r to bran expected--US Ambassador Smith in Moscow ? reports his conviction that the USSR is in a position to follow a strong policy in Iran. He believes that the recent demands made by the Soviet Ambassador on Prime Minister Qavam (see Daily Summary of 15 August, item 5) create a situation which the USSR may exploit either to gain an oil concession in northern Iran or to weaken seriously the British oil position in southern Iran., WIG Comment: The USSR will undoubtedly resort to every means of intimidation short of military force in attempting to procure a concession. If, as seems certain, the Majlis fails to ratify the original agreement or to grant a concession comparable to that of the UK, the USSR will intensify its efforts to secure a government In Iran more amenable to its objectives.) EUROPE 4. AUSTRIA: lodes urges continuance of ATC talks--US Representative Dodge at the Austrian Treaty omm ssion TC) urges that ATC talks be continued during his absence in Washington for consultation (see Daily Summary of 9 August, item 2). Dodge believes that continuance of the discussions is necessary to: (a) establish the record of untenable Soviet positions; (b) provide better factual basis for the US position; and (c) facilitate agreement in the ATC among the US, UK, and France., GENERAL -2- Approved For Releas Vfl4fltRDI7sOl61 7A00590001 0002-1 Approved For ReleasecoNAN UkIDP78-01617A005900010002-1 5. NETHERLANDS: Labor Party split averted--US Embassy The Hague reports that according to the Chairman of the Labor Party the threatened split within the Party (see Daily Summary of 15 August, item 3) has been averted by the recognition that: (a) initiative in the Indonesian dispute is no longer in Dutch hands; and (b) no further military action would be tolerated by Labor members of the Cabinet. 25X1 6. FRANCE: Reduction of bread ration imminent--US Embassy Paris reports that the French Government is considering the reduction of the bread ration to the lowest ration since the war. The Embassy, believing that such a reduction would be intolerable during the fall and winter when other foods are scarce, urges. that an effort be made to expedite grain shipments in order to: (a) maintain the present ration; (b) facilitate domestic grain collections; and (c) prevent further unbalance in the general economic situation. 7. RUMANIA: Announcement of monetary stabilization creates panic-- US Mission Bucharest states that the recent publication of the Govern- ment monetary stabilization decree has resulted in panic and almost complete commercial ralysis. The Mission 25X1 the Government intends use e stabilization program as a means o expropriating certain business and industrial enterprises. NEAR EAST-AFRICA 8. PALESTINE: Anti-Jewish riots cause alarm--US Consul General Jerusalem reports as "highly disturbing'" continuance for six successive days of Arab anti-Jewish riots in Palestine. He adds that the riots are similar in pattern to events which in the past have led to widespread trouble in Palestine. -3 - Approved For ReleasaM D "ftRDP78-01617A005900010002-1 WVN AL Approved For Release lgiA078-01617A005900010002-1 THE AMERICAS 9. ECUADOR: Czechoslovakia offers ammunition to Ecuador--The Chief of the US Army Mission in Ecuador has told US Ambassador Simmons that: (a) Czechoslovak salesmen have offered 30 million '1.92 cartridges to the Ecuadoran Government and have promised delivery of 5 million rounds within 30 days; (b) only an immediate US offer of comparable materiel at "substantially cheaper prices" can prevent the purchase by,Ecuador; and (c) the Minister of Defense favors the buying of US ammunition and promises to delay the con- tract pending new information on US prices. The Chief of the US Mission believes that the Czechoslovak offer is bona fide. 10. PERU: - US -manufactured planes lacspare, parts --The Commanding General Caribbean Air Command reports that many Peruvian Air Force planes of US manufacture are now grounded for lack of spare parts. He comments that unless a solution is found to this general problem the goodwill initially created by making US surplus military equipment available to Latin American countries will be destroyed. -4- Approved For Rele9sq f -RDP78-01617AO05900010002-1 mcn unt 16 AUG 1!14 Approved?For Rele IAA-RDP78-01617A0059000100024-59 GENERAL 1. Australian a argo on Dutch trade en tiered Communists--US Naval Attache Melbourne repute that Communists have maneuvered the Australian Council of Trade Unions Into supporting a blanket embargo on Dutch trade. The NA believes that the Australian Prime Minister has disregarded fundamental principles by merely request- Ing the Unions to modify the ban (permitting trade with the Nether- lands but not with the k I) instead of questioning the right of private persons to direct Australian policy. The NA declares that Australia, having offered to mediate in the Indonesian dispute, has now intervened in favor of the Indonesian Republic. 2. US still favors settlement of A W, .o-Egv tIan d 1i t e eene a tiat1on-- The Department of State ha.o unformed e U elegation to te l_ of its view that the Anglo-Egyptian dispute can best be resolved by an SC recommendation that the two disputants renegotiate and report later to the SC. 3. UNSCOP reportedly favors an independent Palestine --The British ore t has n orn ed WEn~ asst a~ondornMa"t (a) the UN Special Committee on Palestine (UNSCOP) apparently favors the establishment of an independent Palestine, although there is no indi.- catton whether the delegates are considering one or two Palestine states; and (b) it is increasingly apparent that the Grand Mufti is determined to test his strength by promoting a campaign of violence by the Arabs in Palestine, possibly before the end of the year. EUROPE 4. ITALY: Dunn urges increased aid--US Ambassador Dunn urges a substantial increase in food shipments to Italy, preferably of wheat, to arrive as soon as possible and to.reach a peak in March. Dunn doubts whether the democratic leaders can defeat the Communists at the April 1948 national elections if Italian expectations of extensive US aid have not been fulfilled before that time. Document No. 040 NO CHANGE in class. d 1 a D DECLASSIFIED Class. CHANGED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA RyG. '7/1763 Got JDE NzIAL Date: 10 APR 1978 By Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 2 1 E)W- JJ P78-01617A005900010002-1 THE AMERICAS 5. CUBA: US Navy Reconnaisance locates military stores--According to the US Naval Base at Guantanamo, Cuba, aerial photographs re- veal about 400 men, military stores, and camouflaged buildings on a small island off the northern coast of Cuba. The report also states that an LCI and three other small vessels were nearby. (The US Naval Attache Havana had reported previously that Dominican revo- lutionists were on this island.) 6. PARAGUAY: Relief of Capital confirmed--The US Military Attache Asuncion has repor e that one st loyal troops reached the city from the north and "relieved the critical situation." Approved For Release 2MOIDEMEP78-01617AO05900010002-1 Utah h IULHi' ~i-IL .15 AUG 1941 Approved For ReleasQ . 0 812 -RDP78-01617A005900010002-1 CRITIC L SITUATXONS EUROPEAN )RECOVERY US officials believe that new proposals to France will clear the way for the economic revival o we :,tern Germany (see item 1). The Department of State believes that the nations of Western Europe must adjust themselves to basic changes In their international pozi- fion and must stress self-aid in any economy program to be accept- able to the US. GREECE A u"olAo announcer-i-ant of the, e slime aw of , " ree" Greek gov ernment, accompanied by intensified guerrilla activity, is believed to fore shadowed by eonntluiR rumors of the formation of such a government, by Gronyko s recent outburst in ' he Security Council, and by veiled Soviet tahreatsn to sever diplomatic re tionss with Greece. DO Sf-d As a means of seMRo , the Indonesian question, the Netherlands Government now favors a ? bltration by tree representatives, one each to be appointed the Republic and the Dutch, and a third to be chosen by both sides. Firm in. Its opposition to arbitration by a single third party, the .e-publican Government has broadcast appeal to the Security Council to conduct a plebiscite on the future of Indonesia? KOREA No significant new developments. C il:TA. The Chinese, a ble to fill their i anediate needs for aircraft ammunition by ptrchases from the US Go'verment, are now attintpt- in g to obtain such ammunition from private man acturers in the U,13 (see Item 6). Document No. 0-7.9 CONFIDENTIAL NQ CHANGE in Class. DECLASSIFIED Class. CHARMED TO: TS S DDA Menio, 4 Apr 77 Auth: DDA REG. 77/1763 Date: . i. 2 1 By: 125X1 Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 20=tY.u~1178-01617A005900010002-1 GENERAL 1. US officials' recommendation for eement with France on Ruhr--. under Secretary Clayton and US Ambass dors Doug as iiiff a fery recommend, on the basis of French suggestions, that the US Inform the French Government of its willingness to join with France and the In establishing by the German peace settlement an in- ternational board which would allocate Ri nhr coal, coke, and steel and limit German consumption to peaceful uses. The US officials recommend further that this board be composed of representatives from the US, UK, France, Benelux, and Germany. The officials add that in return the French will be expected to. (a) raise no objection to the revised level of industry ,agreement, (b) agree to its early publicati ; and (c) take steps not later than the close of the November meeting of the CFM to merge the French Zone with the US- Zones Germany. Clayton, Douglas, and Caffery believe that if action can be taken along these lines, no important problems will arise with the French on the level of industry agreement. 2. Complications in US-Portuguese air ne otiations--US Ambassador Wiley in his reports his bee at e'o - guese Foreign Minister has been unable to carry out his intentions to facilitate the agreement with the US for air rights in the Azores. Wiley points out tha4although the Foreign Minister once asserted that the Portuguese would henceforth be politically oriented toward the US and implied that there would be a complete break with the "Portu- guese historic affiliation" (presumably the alliance), he has recently absented himself from discussions. Wiley believes that the ex-Secretary General of the Foreign Ministry, Mathias, and possibly the Minister of War, who advises Premier Salazar on aviation matters, were able to get Salazaar's approval of the "`oral' formula" which contained Portuguese proposals unacceptable to the US. (CIG Comment: These developments indicate a continuation of the tug-of-war between two opposing Portuguese factions. Salazar has probably not yet made up his mind on the ultimate Portuguese attitude. Unless definite progress in the Azores negotiations is achieved almost immediately, it will be necessary to discontinue US military air operations through the Azores on the existing basis.) -2 Approved For Release 4QVAIIWW DP78-01617AO05900010002-1 L 111 111 Approved For Release 20=WF EUROPE 3. NETHERLANDS: Split within Labor Party may be imminent--US Embassy The Hague reports that tension within the Labor Party may lead to an open split over the Government's "`practical abrogation" of the Linggadjati Agreement with the Indonesian Re- public. The Embassy adds that repercussions may affect the make- up of the present Government. 4. HUNGARY: Recommend US-UK action before elections--US Minis- ter Chapin in Bu pest in agreement with his British colleague) recommends that joint US-UK action be taken before 31 August in order to provide a basis for non-recognition of the Hungarian national elections. Chapin suggests: (a) immediate protests to Hungary concerning reported widespread abuses of disenfranchise- ment procedures, estimated to affect at least 20% of electorate (see Daily Summary of 11 August, item 2); % lid (b) joint proposals to the Allied Control Commission for postponement of elections. NEAR EAST-AFRICA 5. IRAN: USSR adamant re ardin Soviet-Iranian oil agreement-- Prime Minister Qavam has informed US Ambassador Allen that Soviet Ambassador Sadchikoff has formally insisted that the original proposal for the formation of a joint Soviet-Iranian oil company be presented to the. Majlis promptly for ratification. Qavam replied to Sadchikoff that the Majiis would unquestionably reject the original terms and suggested that the USSR enter into further negotiations. Sadchikoff rejected this suggestion and stated that if Iran refuses to ratify the original agreement, his Government will immediately demand a northern concession similar to that held by the British in the south. (The Anglo-Iranian Oil Company is an all-British company In which the British Government owns a controlling Inter- est.; expresses his belief that the USSR realizes it will be un- able to obtain any kind of Iranian oil concession and is consequently maneuvering to save face and to make more difficult the British oil position in Iran. -3- Approved For Release INNEM t DP78-01617AO05900010002-1 Approved For Release 20M1IP78-01617A005900010002-1 FAR EAST 6. CHIhiA: US position on Chian&'s request for aircraft ammunition-- With reference to Chiang Kai-shek 's inquiries about the purchase of aircraft ammunition from the US (see Daily Summary of 2 August, item 7), the Department of State has authorized Ambassador Stuart to state that: (a) no facilities exist for a temporary loan from US Army stocks; and (b) the Army at present has no surplus stocks available. The Department, noting that the Chinese are now ne- gotiating with private ammunition dealers in the US, authorizes Stuart to Inform the Chinese Government that it is at liberty to procure ammunition through such channels. 7. PHILIPPINES: Transfer_ of war materiel to Philippine Government_ The Department of State, indicating concern over requests for trans- fer of large amounts of ammunition, bombs, and military stores to the Philippine Government, has instructed US Embassy Manila to determine specifically the use to be made of the materiel. The De- partment calls attention to the possibility that the falling of war materiel into undesirable hands in the Philippines and elsewhere will embarrass the US. (CIG Comment: The Philippines have been, since the end of the war' a center for illegal, arms, traffic which has been effective in sustaining armed conflicts in southeast Asia.) THE AMERICAS 8. CHILE: Impending crisis In Chile--US Ambassador Bowers reports that Chilean armed forces are trying to operate the country's postal and telegraph services in the face of a Communist-led strike and that a presidential spokesman has asked the striking employees to return to their jobs because a "coup d'etat is being prepared that will endanger the country's democratic regime." Bowers describes the situation as chaotic. Approved For Release 2 VAR P78-01617AO05900010002-1 Approved For Release 20g 4MP78-01617A005900010002-1 9. PARAGUAY: Develo?lanients in Civil War--US Charge Trueblood reports that a Rebel break-through into Asuncion in the early morning of 14 August was checked by the "opportune arrival of some 1,000 mounted troops in battle trim belonging to Govern- ment's First Corps . ". (The First Corps to the Governn nt force that occupied Concepcion in northern Paraguay. Troops of this corps are reported to have been marching to the relief of Asuncion) However, the US Military Attache, reporting the same day, does not mention the "1,000 mounted troops"' and states that the actual strength of the expected Government re- lief from the north is unknown. Approved For Release FI . T4 DP78-01617A005900010002-1 uw li a feu o jraa. NUIa W4/ Approved For Release 2A? /Q$ ?.Qr;,U8j 2DP78-01617A005900010002-1 ? 5 7 THE C.I.A. HAS NO OBJECTION C 7 T I C A L SIT U A T 10 N 8 TO THE DECLASSIFICATION OF THIS DOCUMENT. Btdault has retreated from his former position concerning inter- national management of the Ruhr; US officials recommend that the proposed tripartite talks be suspended until some agreement has been reached with Bidault (see item 1). E W OPEAN RECOVERY GREECE No signif'i.cant new develop cents.. ll DONESIA The denesian Republic will protest to the Security Council against the admission of delegations from the Daatch.-sponsored states of West Borneo and Mast Indonesia to Council hearings on the Dutch- Indonesia dispute? US Consul General Batavia warns of the di fi- culties of securing Republic implement?,tic,n. of any deep lions pro-. duced through US good .. ot't'ic ,s (see Vera V., KOREA No signific at ne' v . vellCopm ants. RNA No significant nn n.ew devejapmen as Document No. Qlt NO CHANGE in Class. 0 C7 DECLASSIFIED Class. CHANGED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA REG. 77/1763 Date: 10 APR 1,7,8 By:j CONFIDENTIAL Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release E 1 A DP78-01617A005900010002-1 GENERAL 1. Bidault raises new difficulties on Ruhr settlement--Under Secretary ln an Ef TJS m sadors `a erq an oiig report from Paris that French Foreign Minister Bidault has retreated from his former position on the Ruhr question and has insisted,in an informal con- versation, that he does not favor international control over Ruhr management (see Daily Summary of 8 August, item 1). Bidault em- phasized that French acceptance of the new lever of Industry agree- ment is contingent upon: (a) guarantees that the Ruhr industrial capacity will never again be used for military purposes against France; and (b) some arrangement assuring that Western Europe's access to Ruhr production will not depend upon the will of Germany. The US officials fear that unless there is agreement with Bidault prior to the forthcoming tripartite talks, French opposition to the level of industry agreement will be so violent as to involve the possible fall of the present French Government and the loss of French support and leadership in the European economic program. The US officials advise therefore that no date be fixed at present for the London conference. 2. US reply to Soviet counter proposals r rding Japanese Peace Treaty-- i"e epa en o e, in- a rep p the o e a a memo e o 22 July regarding the forthcoming Japanese Peace Treaty, has main- tained that: (a) the agreements reached at Cairo, Yalta, or Potsdam do not invest the CFM with any authority concerning the Treaty; (b) the establishment by the Moscow Conference of the Far Eastern Commission recognized the primary interest of the eleven powers in the Commission In all Japanese post-surrender policies; (c) since only an exchange of views on such a conference was desired, any interpretation of unilateral action by the US is erroneous; and (d) the proposed conference will decide its own procedure. The Department's reply expresses the hope that, because the other nine interested gov- ernments have accepted these proposals, the USSR will also accept. The Department has indicated to its embassies that if the USSR does not reply w{thin two weeks, the US will consider dispatching formal invitations for a Japanese Treaty Conference to the other nine powers, such a conference to be held in Washington on 8 September. -2- Approved For ReleaseDp02L11 1 RDP78-01617AO05900010002-1 Approved For Release 20c NFID 78-01617A005900010002-1 3. 'FlE desires is bases in Gyrenaica- US Embassy London re- ports that the UK Foreign Office and the War Office are seeking some means of obtaining strategic bases in the Cyrenaica area. The Embassy adds that in the opinion of the Foreign Office no satisfactory solution to the Italian colonies problem will be found by the CFM and that the problem will eventually have to be placed before the UN. (The Daily Summary of 5 July, item 5, reported the insistence of the UK General. Staff that Cyrenaica bases were absolutely essential to their strategy, owing to forthcoming troop withdrawals from Egypt and very possibly from Palestine.) 4. Debt ,d ult holds resumvdon UK-,Soviet trade talks--The UK Foreign Office has advised US Embassy London that the USSR has been firmly informed that trade talks cannot be resumed until the Soviet debt default of 1 August is cleared up. The British are re- ported to feel increasingly that the USSR will not have grain avail- able for export. (CIG Comment: This information differs from an Embassy report of 11 August Indicating a British move to reopen trade nego- tiations. The reported British initiative appears actually to have consisted only of asking the Soviets to pay the defaulted sum, to- gether with a proposed commitment that the terms of any new pay- ments agreement would be retroactive to the date of collapse of the last Moscow talks.) 5. ITS ?b ecttons to Azores sro osais - ,The State Department has pointed out to US Ambassador `Wiley in Lisbon that the text of a recent Portuguese memorandum regarding US air rights in the Azores (see Daily Summary of 28 July, item 2) would exclude US Navy transport aircraft and might exclude all combat aircraft. The Department proposes that Wiley inform Portuguese officials, if they cite the US -Icelandic agreement in arguing against the use of military personnel, that the use of civil personnel in Iceland has proved most unsatisfactory and that the US hopes for a much more satisfactory arrangement with Portugal. The Department suggests that Wiley approach Premier Salazar directly if necessary. Approved For Release 2 ,IT DP78-01617A005900010002-1 WE Approved For Release 20 SENT P78-01617A005900010002-1 r EUROPE 6. USSR: Further Lela in ratification of peace treaties--The Soviet Government has Informed Ambassador Smiffi o is view that the US, the UK, the USSR, and France cannot deposit ratifications of the Italian and Balkan peace treaties until the treaties have been ratified by the ex-enemy states. Smith points out that as recently as January the USSR supported an opposite view. The Ambassador believes that the USSR is attempting to delay rati- fication because it wishes to maintain its armistice regime in Hungary until the scheduled elections occur In that country. (See Weekly Summary of 25 July, page 1, for additional consider- ations prompting Soviet obstruction.) FAR EAST 7. NEI: Foote warns acceptance of US offices unlikely--US Consul General Fite in Batavia be eves at a ones an Republic will not accept the US offer of good offices unless it is endorsed by the Security Council because It wishes arbitration by repre- sentatives of countries selected by the Republic. Foote warns that no decisions produced through US good offices could be implemented by the Republican Cabinet without the agreement of Republican military leaders. THE AMERICAS 8. DOMINICAN REPUBLIC: Government rejects Cuban protest-- The Cuban Charge in Ciudad Trujillo has Informed US Ambassador Butler that the Dominican Government has rejected a Cuban pro- test regarding alleged Dominican press attacks on President Grau of Cuba. The Charge believes the Dominican Government is try- ing to force a break in relations with the Cuban Government, but he indicates that the Cuban Government does not Intend to permit such a break. 4_ Approved For Release 2 9' P78-01617AO05900010002-1 Approved For Release 20T#P78-01617A005900010002-1 9. PANAMA: Defense sites negotiations--US Ambassador Hines, in reply to a request for comments on a War Department draft for a new US -Panama defense sites agreement, observes that the draft would entail an "awkward" withdrawal from the US commitment to "Joint authority, in some form," Hines believes that such a withdrawal would "inevitably lead to public char " "Fes of bad faith" and that delay can only prejudice our position. Approved For Release Ntff. .N2DP78-01617A005900010002-1 Approved For Rele q A-RDP78-01617A005900010002-1 45 6 CRITICAL SITUATIONS EUROPEAN RECOVERY US Ambassador Douglas is pessimistic concerning the effectiveness of the measures taken by the to remedy the present economic crisis (see item 2). GREECE AMAG Chief Griswold reiterates his belief that no increase in the permanent size of the Greek Army should be permitted (see item 3). INDONESIA Despite vigorous pretests from the Netherlands Ambassador and the British, French, and Belgian delegates, representatives of the Indo- nesian Republic have, been permitted to participate in Security Council discussions, As a counter-move, Netherlands Ambassador van Kleffens has proposed that the same privilege be given to delegations from the Dutch-sponsored states of East Indonesia and West Borneo. In an effort to prolong joint Commission negotiations until Foreign Minister Molotov replies to Secretary Marshall's letter, the US dele- gation has proposed that oral consultations be abandoned and that plans for a provisional government be evolved from the questionnaires filed by applicants for oral consultation. CHINA The US note protesting Soviet delay in implementing the Sino-Soviet Treaty of 14 August 1945 will strengthen the Chinese National Govern- ment in 'its negotiations with the USSR on the Dairen issue (see item 7). CONFIDENTIAL O T NO CHANGE in Class. o 0 DECLASSIFIED Class. C"JANGED TO: TS S " DDA Memo, 4 Apr 77 Auth: DDA F?G. 77/1763 Date: I C Sys Approved For Release 2002/08/20 : CIA-RDP78-01617A005900010002-1 Approved For Release N fl fiEN tDP78-01617A005900010002-1 GENERAL 1. UK seeks common front with US on E~rptian case--A high UK Foreign five official has told US Embassy London that Bevin has been keenly disappointed by the lack of clear-cut US support of the UK in the Egyptian case now before the UN. The Foreign Office fears that fail- ure of the US and UK to present a common front on the principle of the sanctity of treaties may result in adverse long-range effects in the Near East. EUROPE MA's views of effect of troop reductions overseas--US Mili- tary Attache London reports his conviction that any appreciable reduction of UK military forces overseas will require a "softer'' defense policy and foreign policy, despite Attlee's official statement that the planned reductions (some 40% by 1 April 1948) imply no policy changes. The MA adds that substantial withdrawals of troops, unless commitments are assumed by the US, would tend to create partial vacuums offering opportunities for the USSR to gain the initiative.' 3. GREECE: AMAG opposes increasing size of Greek Army--AMAG Chief Griswold reiterates his belief that i is no necessary to in- crease the permanent size of the Greek Army because: (a) In- creases made now would not improve the fighting strength of the Approved For Release RDP78-01617AO05900010002-1 Approved For Release f DEN bDP78-01617A005900010002-1 , Army for at least three months; and (b) the General Staff is not making full use of the present strength of the Army and is too much concerned with political considerations. The military, sec- tion of AMAG believes that "present Army strength properly and energetically utilized can decisively defeat the present strength of the bandits." 4. HUNGARY: Suggests bringing Hungarian case before the UN-- US Minister Chapin in Budapest reports tin the op on o Undersecretary of State Pongracz (a member of the Conservative Smallholders Party), the forthcoming national elections of 31 August represent `the last opportunity for the US to halt the Soviet -Communist drive in Hungary." Pongracz declared that probably the only effective measure for the US to take in the situ- ation would be to bring the Hungarian case before the UN. NEAR EAST-AFRICA 5. IRAN: British propose Iranian air merger--According to US Ambassador Allen in Tehran, British Overseas Airways Corpo- ration (BOAC) has proposed that Iranian Airways (Iranair) be merged with a hitherto inactive Iranian airline, and that BOAC operate the consolidated concern with British aircraft under a management contract. (CIG Comment: US interests in Iranian Airways, which have consisted of 10% ownership and a management contract by TWA, would be eliminated by such an agreement.) FAR EAST 6. FRENCH INDOCHINA: Meaning of Bollaert's departure for Paris-- US Consul O'Sullivan in Hanoi reports his belief that French High Commissioner Bollaert apparently had planned, before his sud- den departure for Paris, to present terms to the Vietnam Govern- ment, the almost certain rejection oLwhich would justify a -3- Approved For Releaser RDP78-01617AO05900010002-1 Vu . Approved For Release # DP78-01617A005900010002-1 conclusive military campaign during the coming dry season. Consul O'Sullivan feels that Bollaert desires to defend this plan personally before officials in Paris who are divided on French policy in Indochina. 7. CHINA: US protests Soviet deia on Dairen--The State Depart- ment has instructed massy oscow transmit to the Soviet Foreign Office a note again calling attention to the delay in opening Dairen to international commerce as a free port in accordance with terms of the Soviet-Sino Treaty of 14 August 1945. The Department's note reminds the USSR that,although two years have passed since the Japanese surrender, repre- sentatives of US firms have not yet been allowed to visit their properties in Dairen. The note also states that until the USSR and China reach agreement on Dairen, the US holds the USSR responsible for treatment accorded to US interests there and requests information on the steps which the Soviet Government will take to assure equitable treatment to US Interests. -4- DP78-01617A005900010002-1 Approved For Release Mff mfifff UUISI 1UL11 a r;ML AUG 1947 45 Approved For Releaa"a - . fm -RDP78-01617A005900010002-1 455 CRITICAL SITUATIONS E ,QPEAN RECOVERY . Bevin has agreed to tripartite discussions of the German coal and steel problems on the condition that there be no implications that the French will have power of veto. THE C.I.A. HAS NO OBJECTION TO THE DECLASSIFICATION OF GREECE THIS DOCUMENT. No significant new developments. 110. INDONESIA The Dutch have proposed to set up immediately an interim federal government composed of Dutch-sponsored Indies states and have invited the Indonesian Republic's cooperation. This government would administer areas occupied by the Dutch in recent weeks in addition to the Dutch-sponsored states. KOREA Secretary Marshall has addressed a personal letter to Molotov expressing concern over the stalemate in the joint Commission. The letter suggests that by 21 August a report be made by the Commission oIi the present status of its deliberations.. CRINA Even if the National Government's military power in north China is strengthened, the military advantage in Manchuria will probably remain with the Chinese Communists unless the National Govern- ment carries out major reforms and receives substantial mili- tary assistance from abroad. Document No. NO CHANGE in Class. ^ DECLASSIFIED Class. C`1ANGED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA ^..G. 77 1763 Dato: APR 976 By: -l- 101 Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release iDEt,9I~LDP78-01617A005900010002-1 EUROPE 1. ITALY: Seeks equality with France in aid program--US Embassy Rome reports that the Italian Foreign - - - Office has instructed its dele- gates at the Paris Conference to Insist upon the principle of equality between France and Italy in the aid that may be sought under the European recovery program. The Embassy believes that these in- structions may have been elicited by representations made in Rome recently by northern Italian industrialists, supported by the General Confederation of Labor. (CIG Comment: The support of the Italian industrialists by the Communist-led General Confederation of Labor probably indicates that the Communists are maneuvering in this way to create disharmony within the Parts Conference.) FAR EAST 2. FRENCH INDOCHINA: Postponement of High Commissioner's speech-- US Consulate General Saigon reports the postponemen o e presenta- tion of new French terms to Vietnam by M. Bdllaert, French High Com- missioner for Indochina. US Consul Hanoi has been Informed by the International Red Cross there that M. Bollaert proposed returning to Paris on 13 August, apparently to- confer on French policy. US Consul Saigon believes that contributing factors to French indecision may be the Indonesian situation and Leon Blum's recent statement on Indochina. (CIG Comment: Blum, who opposes the current French policy in Indochina, expressed in a recent editorial his belief that negotiations must be undertaken with authentic representatives of the Vietnam people and that Ho Chi Minh remains qualified to speak for the Viet- namese.) Approved For Releasee /rq,$ff j%RDP78-01617A005900010002-1 tU t F I l' .I AUGI J Approved For Relea _RDP78-01617A005900010002-1 434 CRITYCAL SITUATIONS EUROPEAN RECOVERY, Bidault has accepted the opportunity to confer with US and UK officials on the level of industry in the US-UK Zones Germany. GREECE Recent reports indicate increased political activity in the Balkan Satellite States directed toward the formation and support of an "inde- pendent' Gomimnh;t Greek government. INDONESIA The Netherlands Gever ument will not consent to the appearance of Indonesi Republican representatives before the Security Council (see item 3). KOREA NO significant anew developments. C HIN A Chinese Nationalist assertions--that the real strength of the Chinese Communist Parity and its most effective pro-Soviet leaders are in Manetkuria--appear to be part of the current Nationalist effort to develop political and military objectives in Manchuria which would warrant US support. Document No. 0,74-1-- 140 N0 CHANGE in Class. El [] DECLASSIFIED Class. CHANGED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA REG. 77 176 3 Date: Sy CONFIDENTIAL G Approved For Release 2002/08/20 : CIA-RDP78-01617A005900010002-1 Approved For Release 2ADWI9~KA~LP78-01617A005900010002-1 GENERAL 1. No immediate UK troop withdrawals from Greece or Italy--Revin has informs US Aaassador Douglas that the UK Government is contemplating no troop withdrawals from either Greece or Italy "in the immediate future," but that he expects pressure from the left wing of the Labor Party favoring such withdrawals. EUROPE 3. HUNGARY: 900,000 voters disenfranchised before elections--US Minister Chapin 'in Budapest states. that a major scandal has deve- loped over the disenfranchisement of an estimated 900,000 voters. These persons are "disqualified" from voting in the 31 August national elections by direction of the Communist Minister of Interior on the grounds that they are Fascists. PAR EAST 3. NEI: Dutch o ose appearance of Re ublican officials before SC -- US Embassy The ague luis been Informed by a Dutch official that. his Government will not consent to the appearance of Republican Foreign Minister Salim or former Premier Sjahrir before the Security Council to present the Republic's position. Such repre- sentation, the Dutch believe, would recognize Republican sovereignty. THE AMERICAS 4. ARGENTINA: Fore! Minister promises Argentine support to US-- Argentine Foreign Minister Rramuglia has informed US Charge Ray that Argentina "'must and will" support the US internationally, and that any indications to the contrary are solely for domestic con- sumption. Bramuglia adds that the Argentine Government: (a) before the Rio Conference, would like to discuss with Secretary Marshall and Assistant Secretary Armour a possible US Argentine anti-Com- munist agreement, preferably to be kept secret; (b) favors separate -3- Approved For Release ? ~~ A DP78-01617AO05900010002-1 Approved For Release 20GgMF 78-01617A005900010002-1 Rio treaties for tra-Hemisphere and extra-Hemisphere aggression; nd (c) would welcome steps the US toward a special economic :, m rence prior to the Bogota Con ereaxce. (CIG Connnent: joint action on aggression by American or i? rn-American rattans alike was agreed upon for the first time at The C`hapultepec Conference in 1945. The. Argentine position on separate treaties, if accepted by the Rio Conference, would cancel the progress ache red in this matter at Chapultepec.) PARAGUAY: R beis ma occu Asuncion--US Charge Trueblood in Asuncion rc~p~r, as o ug6 a e rioration in the Gov- rnruent$s military situation, and (b) Government loss of ground at a z ate that might result in rebel occupation of Asuncion before the arrival of reinl'orc man4ts from the north. -3- Approved For Release 206 f JE T pP78-01617AO05900010002-1 Approved For Rel RUC 1947 A-RDP78-01617A00590001OOO -1 J 3 THE? C. I. A. HAS NO OBJECTION TO THE DECLASSIFICATION OF THIS DOCUMENT. GENERAL No. 1. U$ ready tg disc Germ,-:"dust Department of State has instructed US Ambassador Caffery to inform Bidault that the US is prepared to confer jointly with France and the UK on a possible revision of the level of industry in the US- UK Zone Germany. Caffery is to assure Bidault that the fullest consideration will be given to French views, but is to explain that without a fusion of the French Zone in Germany with the US-UK Zone, all final decisions regarding German industry in the bizonal area must remain the responsibility of the US and' he UK. '?xP~~is ~".di ~. dons o~ steep-Caffery reports that technical committees of the Paris Conference have been halted in their work by the reluctance of the French delegates to participate in the preparation of reports based on the possibility of an increase of steel production in the US-UK Zone Germany. EUROPE 2. AUSTRIA: I a ,ile fraxzn ATC--The Department of State has requested US Representative Dodge at the Austrian Treaty Commission (ATC) to return to Washington at once for consultation. Dodge is instructed to amiounce at the next ATC meeting that because of Soviet unilateral action in seizing Austrian industrial plants and Soviet indifference to factual material pre- sented by other ATC delegates, the Department considers it neces- sary to consult with Dodge about the future work of the ATC. FAR EAST 3. NEIL Dutch favor US mission -- US Embassy The Hague reports that the Netherlands Government now regards the Linggadjati Agreement as abrogated but still considers itself "morally bound"' to maintain the principles of the agreement as a basis for future dealings with the It donesian Republic. The Netberlands Foreign Document No. :r'?"' NO CHANGE in Class. [] (] DECLASSIFIED Class. C IANCED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA REG. 7711763 Date: 1 0 APB 1979 By 25X1 Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 200JPAIRdP78-01617A005900010002-1 Office continues to oppose arbitration of the Dutch-Republican dispute and hopes that the US will send a mediating commission to Indonesia as soon as possible. The Foreign Office believes that the Republic would accept this US action despite its request that US good offices be used only to secure arbitration by an inter- national commission. US to repeat offer of good offices to Republic--The State Department has instructed US Consul General in Batavia to repeat the 'US offer of good offices to the Republican authorities. The Consul General is to point out, however, that the US does not intend that other nationsparticipate in the exercise of these good offices which are intended only to bring both parties together to work out a mutually equitable settlement. 4. CHINA: Possible unified control l annchuria- US Embassy Nan- king has been informed by a source "believed reliable" that mili- tary and political control in Manchuria will shortly be unified under the overall command of General Chen Cheng, present Chief of Staff of the Central Government Army. US Embassy comments that while such a move to eliminate the present inefficient duality of control would indicate that the Central Government is attempting construc- tive action in Manchuria, these measures would not solve the pres- sing military problems in Manchuria or end major criticism of that Government's political administration there. -2 - Approved For Release 2 45 Approved For Releaser2Q4 :8~~ J/k-RDP78-01617A005900010002-4 52 CRITICAL SITUATIONS E OPEAN RECOVERY J3idault proposes international board to allocate the production of the Ruhr (see item I). GREECE While guerrilla activity continues on a slightly reduced scale, unconfirmed reports point to large troop concentrations and movements along the Greek border in the Satellite States. BONE S.IA. The Indonesian Republic has accepted the US offer of good offices but has requested that those offices be used to secure the dispatch of a UN arbitration commission to : rndoznesia as soon as possible. KOREA The US delegation to the Tel at Commission report', that further discussion in the Commis ,ion aionng present lines has become absurd. , CIUNA No significant new developments. Document No. 0 . NO CHANGE in Class. :... fl DECLASSIFIED Class. CHANCED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA R3G. 77/1763 Date; ~. 0 ApP 1g7P By: CONFIDENTIAL Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 20dAoUSP78-01617A005900010002-1 f GENERAL 1. Bidault favors international board to allocate Ruhr products-Under Secretary Clayton has been told by Foreign Minister Bidault that France would not object to any US-UK agreement for the level of industry in western Germany, provided the French had assurance that the resources of the Ruhr would not again be employed in war on France. Bidault believes that such assurance could be obtained by the creation of an international board (composed of representatives from the US, UK, Benelux, France, and eventually Germany) to allocate the production of the Ruhr. Clayton expresses the opinion that Bidault's suggestions should be accepted by the US as the basis for further conversations. Clayton believes that "France is the key country of the sixteen par- ticipating in the Paris Conference," and that French withdrawal or the fall of the present government, as a consequence of French dis- satisfaction relating to Germany, would probably gravely jeopardise , the whole European recovery program. 2. US believes Greek problem should go to UN General Assembly--The State Department has notified the US delegation to the UN that it is considering a statement informing the majority members of the Security Council of the US conviction that: (a) the Greek problem must be carried to the General Assembly, If the SC is unable to afford Greece the necessary protection; and (b) the General Assembly, in the event of the SC's continued failure to act, will exercise its powers "to the limit" for the protection of Greece (see Daily Sum- mary of 7 August, item 2). 3. Douglas to stress US views on UK withdrawals--The Department of State has instructed US Ambassador Douglas to reiterate to Foreign Secretary Bevin our views concerning the unfortunate effects of an immediate withdrawal of British troops from Greece and Italy. 4. UK to postpone declaring end of war with Austria--The Department of State has been informed by the UK Embassy Washington that the -re~eeex~F. Approved For Release 21ed ID NTt 78-01617A005900010002-1 Approved For Release 20ARgE '! ;Rt78-01617A005900010002-1 Foreign Office will postpone any statement terminating the `'state of war with Austria (see Daily Summary of 7 August, item 3). The UK is now waiting for a Soviet reply to the last UK query on Soviet ratification of the Italian and Balkan Treaties. If the Soviet reply is unsatisfactory, or if no reply is received within a reason- able time, the UK will then issue statements simultaneously termi- nating the state of war with Italy and Austria. EUROPE 5. CZECHOSLOVAKIA: Soviet infr nsent of so_ vereignty criticized -- US Embassy Prague reports that the leader of the moderate MARG-511c Peoples Party made a public statement recently declaring that his Party intends to resist Communist domination as long as circum- stances permit. The Party leader is reported also to have made an " implied but quite obvious criticism of Soviet limitations on Czecho- slovak sovereignty.'' NEAR EAST-AFRICA 6. IRAN: vain enda; ers position as Prime Minister--US Ambassa- dor Allen reports that rime s er vam may ffave lost his chances, of remaining Prime Minister by permitting Muzafar Firuz to continue as Ambassador in Moscow. Allen believes that the Shah now will almost certainly endeavor to remove vam. (CIG Comment: The Shah is bitterly opposed to Firuz, who has consistently urged Qavam to appease Moscow. Firuz claims that the USSR will probably take drastic action if bran rejects the Soviet oil proposals.) Approved For Release 2 Nf t DP78-01617A005900010002-1 JV II L' ( .urr, 1941 uur+nr WL Approved For Release 20, X10$1 9.Y,CrIA!;RDP78-01617AO05900010002-1 451 CUIT.lti?rAL SITUATIONS EUROPEAN RECOVERY' US officials Meeting in Paris consider that US objectives in Western Europe may not attained without further US aid this year (see item 1). GREECE Dwight Griswold and Greek Government leaders in Athens are discussing the Government's recent request for greatly increased US military supplies to meet the growing guerrilla threat. DO ESI.A The press agency of the donesian Republic has released a state- ment by Premier SiarifoeddLa. c ncerning the Republican attitude toward settlement of the dispute (see item 5). Dutch authorities accuse the Repa-blic of violat.in g the cease-fire order, paralleling earlier Republican charges of now Dutch operations. XOREA The Joint Commission continues deadlocked as the Soviet deleg-a- tion accuses the US of causing delays and violating joint decisions., C;A The Chinese Nationalist Coniniand is apparently becoming inereas.. ingly concerned over the probability that the Chinese Communists will launch strong Offensives in Manchuria and north China within one or two months. Document No. 032. NO CHANGE in Class. El DECLASSIFIED Class. 'CHA.!:k~_-ED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA REG. 77/1763 Date: 10 APR 19M By CONFIDENTIAL 25X1 Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 ringlpfM Approved For Release 20ky IIIUP78-01617A005900010002-1 GENERAL 1. US officials recommend further US aid to Europe in 1947--Under Secretary Clayton and Ambassadors Douglas, Caffery, and Murphy believe that in the absence of additional assistance from the US this year, conditions in the UK, France, and Italy may so deteriorate that US objectives in Western Europe and elsewhere may become unattainable. They suggest, therefore, that every conceivable avenue of providing interim assistance be carefully reviewed, possibly in- cluding the calling of a special session of Congress. These US officials suggest, furthermore, that the US inform- ally present specific recommendations to the Paris Conference on European economic recovery. They cite. maximum coal production, monetary stabilization, and progressive reduction of trade barriers between participating countries as essential elements in the recovery program; and they suggest that failure by any participant to take effective action in these respects will be ground for reconsideration of the aid it is receiving. 2. Austin recommends US anticipation of Soviet veto--US Delegate Austin' believes that the Department of State, in anticipation of a second Soviet veto on the Greek case, should make a policy decision by which the US will press the case in the General Assembly and will urge the Assembly to take action against Yugoslavia, Bulgaria, and Albania under Article 41 of the Charter, if developments warrant.. (Article 41 provides for the complete or partial severance of trans- port communications and economic and diplomatic relations.) Austin feels that such a decision would bolster the friendly members of the SC who are now skeptical concerning further action on the Greek case. EUROPE 3. ITALY: UK ma declare end of "state of war" with Aus a--US Ambassador Dunn has been informed by the UK Ambassador that the UK may soon declare the "state of war between England and Austria to be at an end." Dunn recommends that the US should overlook no Approved For Release 2 MCMERfWP78-01617AO05900010002-1 irtu Approved For Release 20 BFI ENI1MF78-01617A005900010002-1 . opportunity to deter the UK from making such a declaration, in view of "`the devastating blow it would give to Anglo -Italian relations by placing Austria in a position of official preference over Italy." NEAR EAST-AFRICA 4. IRAN: Qaya seeks delay in Soviet oil matter--Prime Minister Qavam{has confidentially Informed US Ambassador Allen that he has in mind a plan which would delay decision on the Soviet oil, question for perhaps two years. Qavam would first engage neutral geologists to determine the areas in which oil exists and then restrict any con- cession to such areas. FAR EAST 5. INDONESIA: Republic demands UN arbitration--US Consul General in Batavia reports that a statement has been issued by Premier S jartfoeddin declaring that the Republic will not negotiate with the Dutch until the arrival of a UN Commission. The statement announces -that the Republic will reject all mediation and will agree wily to arbi- tration, stressing in this connection the importance to the Republic of the demarcation lines between Dutch and Indonesian forces at the com- mencement of hostilities on 20 July 1947. Consul General Foote warns that Premier Sjartfoeddin's statement may be for internal consumption and suggests that the Republic's reply to the US offer of good offices may differ In tone. (CIG Comment: The emphasis by the Republic upon the prob- lem of the demarcation lines indicates that the Republicans will proba- bly insist on the withdrawal of Dutch forces to the 20 July positions before entering into any negotiations. Such a stand will seriously de- lay any moves toward settling the dispute.) -3 - Approved For Release 2 ~e~rseeX -- X H NF DP78-01617A005900010002-1 Approved For Release 20t UMFj8 78-01617A005900010002-1 6. CHINA: Fear a ressed that US aid will be d"ad--A reliable source, according to the Rival c e , quotes the Deputy Commander of Chinese Nationalist Ground Forces as saying that "US aid to China will be overly delayed by the necessity of waiting for the next session of Congress, unless the US President can be per- suaded to declassify certain material." The Commander cited as precedent "a similar method of handling aid to Britain prior to war." (He was presumably referring to such transactions as the classifica- tion of 50 US destroyers as obsolete and their subsequent transfer to Great Britain.) (CIG Comment: It is doubted that any such US action would materially alter the Nationalist military outlook for the near future. Moreover, there is a real possibility that US military equipment, if supplied to the presently Inadequate and disorganized Nationalist military administration, would be grossly mis used and might even find Its way Into Chinese Communist hands.) -4- Approved For Release :QNM@ElfffAtDP78-01617AO05900010002-1 UUI1I ILL LU4L r; (Y 1947 Approved For Rele r-IA-RDP78-01617A005900010002-1 C ,t~, ` " ut ..a SITUATIONS THE C.T.A. HAS NO OBJECTION TO THE DECLASSIFICATION 0 THIS DOCUMENT. EUROPEAN RECOVERY - No. The K Government has informed Parliament that it will immediately reduce food purchases from hard-currency areas as one means of slashing dollar expenditures. GREECE In an effort to insure the success of t.he,US aid program, Dwight Gri.s old has recommended that the US replace )British troops in Greece with US troops (see item 1). INDONESIA l'adosuiaax Rep gAblic authorities charge that the Dutch have violated the agreement to comply w,yyithh t o cease-fire request by capturing two more towns since the truce deadlw e, The Republic also announces that it no longer considers, itself bond, by the Linggadjati Agreement. and desires solution. of the conflict h an international commission. " O EA Negotiations in the Joii. std Sazi:?:{m sio are expected to break off within the next two weeks. Fresh political disorders In Korea will Undoubted- ly ensue. CHi Deep..rooted fears that japan, v ith US backing, Vr ll regain a position of economic supremacy in Asia ~h %derlie the f uet outbursts against the growing Japanese menace fro official Chinese sources and broad secti s~ of the Chinese , u I b Such fears are likely to be increasingly reflected Chinese Government policy toward Japan, especially if China itself fails to receive US assistance. Document No. 017/ NO CHANGE in Class. [] 0 DECLASSIFIED Q Class. CHANGED TO: TS S '0'z DDA Memo, 4 Apr 77 Auth: DDA REG. 77 1763 Date : 1 0 APP '976 By : Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 20 CiE1k78-01617A005900010002-1 GENERAL 1. Griswold recommends US replace UK trop in Greece--AMAG Chief Dwight Griswold has recommended that British troops are withdrawn from Greece, they should be replaced by US troops. He believes, how- ever, that this plan should be adopted only after Greek political leaders have agreed to broaden the present Government. US Ambassador Mac- Veagh questions the wisdom of making the decision to send troops con- tingent on the willingness of Greek politicians to form, a more repre- sentative Government because: (a) such a decision must rest on con- siderations far transcending Greek internal problems and involving US-Near Eastern policy; and (b) Greek politicians, understanding this situation, will probably delay broadening the Government, "if they do so at all." 2. US officials approve immediate high-level US-UK discussions--Under Secretary Clayton and Ambassador Douglas have recommended ap- proval of Bevin's proposal for immediate high level US-UK discussions of the British financial position and its international implications. 3. Suter Act and Rio Conference--US Ambassador Pawley reports that: he feels reasonably certain" that at the forthcoming Rio Confer- ence an attempt will be made to force discussion of Clause 202E of the recent US Sugar Act; (b) Mexico and Uruguay, and perhaps Bolivia and Colombia, will possibly support such an attempt; and (c) a high Brazilian official believes that Brazil will support the US "should a controversy arise." (Clause 202E permits the cancellation of any increased sugar quotas for any country that in the US view discrimi- nates against US commercial interests.) -2- Approved For Release "MOM, DP78-01617AO05900010002-1 Approved For Release CRITICAL SITUATIONS EUROPEAN RECOVERY Under Secretary Clayton reports from Geneva his conviction that the British, French, and Italian economic situations "are almost certain to blow up" if US aid is not forthcoming before March 1948. GREECE Although recent reports indicate dissension between Communist leaders sent to Greece from the Satellite states and their Greek opposite numbers, such disagreement is having no visible effect on the conduct of the guerrilla war. 43 INDONES. Dutch forces have achieved the principal objectives of their "police action," but implementation of the ;ease-fire agreement requested by the UN Security Council may be impeded by the Republican demand that Dutch troops be withdrawn be hind demarcation lines fixed on 14 October 1 46 KOREA The joint Commission remains deadlocked. CHINA Recent reports from Manchuria fail to substantiate Chinese Govern- ment charges that the USSR has supplied the Chinese Communists with Soviet-made military equipment. aY NO CHANGE in Class. F1 0 DECLASSIFIED Class. CHANGED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA REG. 77/1763 Date: 10 APR 197' By: T CONFIDENTIAL. Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 2Q)WEbP78-01617A005900010002-1 GENERAL 1. USSR re ortedl threatens Iran on oil ro osal--The State Department has been informed by the British Embassy in Washington that Molotov reportedly told the Iranian Ambassador in Moscow recently that: (a) the Iranian Parliament's action on the Soviet oil proposal will be the "acid test" of friendly Soviet-Iranian relations; and (b) should Parlia- ment fail to ratify the proposals, the "independence of Iran would be at an end." 2. President of SC reportedly ordered to favor E tian case- 25X1 X President Quwwatil of yr s informed the Egyptian overnment tit may look upon Faris al-Khuri (Syrian delegate to the UN and currently president of the Security Council) as an Egyptian delegate. Quwwatli reportedly added that al-Khuri will carry out Egyptian instructions to the letter during the hearing of the Egyptian case against the UK.. (CIG Comment: Egypt has timed its appeal to coincide with al-Khuri's term as president of the SC. Even with the assurance of his support, however, the success of the Egyptian case is doubtful.) EUROPE 3. HUNGARY: Socialists protest Communist rigg!nS of 31 August elections-- US Minister Chap reports eports from Budapest that the national electoral campaign has begun with an angry protest by the Social Democratic Party against the illegal tactics of the Communists. Despite a previous joint declaration of unanimity, the Socialists have sent an ultimatum declaring that unless the Communists stop cheating and intimidating, the Socialist Democratic Party will withdraw from the elections. 4. BULGARIA: Government prepares Soviet-type "trial" for Petkov-- US Political Representative Horner in Sofia reports that prior to the trial of Opposition Agrarian Leader Petkov, the Rumanian Govern- ment: (a) coerced factory and government workers to participate in mass meetings which demanded the death penalty for Petkov; (b) ar- -2- Approved For Release 2P78-01617A005900010002-1 25X1X Approved For Release 2 0 gE Tf P78-01617A005900010002-1 r rested two attorneys whom Petkov had designated to represent him; (c) extracted by torture "confessions" from three Agrarian Deputies known to be faithful Petkov supporters. Horner adds that on the open- ing day both US and UK Representatives in Sofia were refused admit- tance to the trial. He also reports that the Government is expected to impose the death penalty. FAR EAST 5. CHINA: Soviet assistance to Chinese Communists- According to Assistant US Military Attache Barrett, twenty Japanese and Koreans taken prisoner by Chinese Nationalist forces at Ssupingkai stated that: (a) they were not forced to enter military service but-joined the Communist troops in order to get food and employment; and (b) they had seen no evidence of Soviet aid to Communists in Manchuria. (The Acting Commander of the Nationalist forces in Manchuria has also expressed to Barrett his belief that the USSR is supplying the Communists with Japanese equipment only, because the supplying of Soviet equipment "would give away Soviet policy to the US. ') THE AMERICAS 6. D?MINiCAN REPUBLIC: Sea and air search yields negative results-- Commander, Caribbean Sea Frontier reports a 2-4 August sea and air search of Caribbean waters for Dominican revolutionaries allegedly en route to Hispaniola from Cuba yielded negative results. According to the US Military Attache Havana, aircraft belonging to Dominican revolutionaries have been seized by the Cuban Army Air Force. (CIG Comment: The Inability of the Commander, Caribbean Sea Frontier to discover evidence of unusual movement of either ships or men from Cuba toward the Dominican Republic confirms earlier CIG analysis regarding the exaggerated character of these reports.) Approved For Release 200 E - P78-01617AO05900010002-1 45 Approved For Release ~fl ? 1 =.~ CIA.RnP78-01617AO05900010002-1 CRITICAL SITUATIONS EUROPE4N RECOVERY'-GREECE Bevin has proposed immediate high-level US-UK discussions on the UK financial position and its international implications. In response to US expression of concern over UK intentions, Sevin insists that no fundamental change in foreign policy is implied in the sudden IlK decision to reduce its troops in Greece and Italy (see item 1). US representatives deplore the disturbing effects of this "ill-timed" decision on the stability of the Italian and Greek Governments (see item 2). INDONESIA Although both Dutch and Indc nesiagn Republic leaders have agreed to cea,se fire in response to the UN request, considerable doubt exists whether such an order can be enforced by both sides, in view of the continuing causes for tension between the two parties. KOREA The US delegation to the Joint Commission believes it will be able to spin out negotiations with the USSR for only two more weeks, barring unexpected developments. CAA Chiang Kai-shek's current all-out effort to improve the Nationalist military position in Shantung prior to the departure of General Wedemeyer appears designed to justify a request for sufficient US aid to extend Nationalist offensive operations to Manchuria. Document No. OR (7 - NO CHANGE in Class. LI DECLASSIFIED Class. CHANGED TO: TS AUth. DD Date :X 0 APR Shia BY: DDA Memo, 4 Apr 77 A '=fl 77/1763 Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For Release 2 1 F119ENIJDP78-01617A005900010002-1 GENERAL 1. Benin intends no form policy change--In response to Secretary Marshall's expression of concern over the announced withdrawal of British troops from Greece and Italy (see Daily Summary of 2 August, item 1), Benin has assured US Ambassador Douglas that UK foreign policy changes are not implied In this decision. He added that the precise extent of UK troop reductions abroad has not definitely been settled and that the Cabinet's announcement in Commons will proba- bly be made only in the most general terms. Bevin asked how long the US desired UK troops to remain In Greece and stated that before the Cabinet makes any final decision regarding UK troops In Italy, he will communicate with Douglas. 3. USSR asks Austria for copies of economic conference ocum - US Ambassador Caffery reports that Voligruber, Austrian delegate to the Committee of European Economic Cooperation, has been re- quested by the Soviet Embassy in Parts to make available to the USSR copies of all Parts conference documents. The Chairman of the Com- mittee has suggested to Voligruber that this is a matter which the USSR should take up with the Austrian Government at a top level. -2- Approved For Release 20 r78-01617AO05900010002-1 Approved For Release 20 D 1DE II 78-01617A005900010002-1 EUROPE 4. UK: Anti-US sentiment Increasing--US Ambassador Douglas reports, after conversations a n-,_t anti US sentiment seems to be growing within the UK Labor Party and that this sentiment may be increased when the impending drastic measures to save dollars are announced by the Government. As causes for this sentiment, Bevin laid particular emphasis on US financial contributions to illicit Palestine activities, criticism in the US of British management of the Ruhr coal operation, the burdensome conditions of the US loan, and the 50-50 sharing of German occupation costs. Douglas adds that Bevin believes a US UK schism may be developing. Douglas comments that if the USSR notes a deteriora- tion in US -UK relations, it may "step up the pattern" of its tactics. THE AMERICAS 5. PARAGUAY: Rebel force 32 miles from Asuncion--US Charge True- blood reports that the Rebel flee , now re-p-oiUd f6 consist of some 20 vessels with several thousand troops, reached on 2 August a point 32 miles north of Asuncion where Government opposition com- pelled them to turn back upstream. -3 - Approved For Release 2~~ ~11E f~P78-01617AO05900010002-1 ii~ A U G 1947 Approved For Release 2QQ2L08/flO.:t-GIA-RDP78-01617AO05900010002-44 47 CRITICAL, SITUATIONS EUROPEAN RECOVERY The Executive Committee at the Paris Conference has demonstrated a readiness to tackle such basic questions as multilateral elimina- tion of quota restrictions and progressive reduction of tariff barriers with a view to reaching a customs union. French representatives have expressed concern for France's economic and political stability if US assistance under, the European plan Is not forthcoming until March 1948. GREECE In view of the Soviet veto in the Security Council, US and UK repre- sentatives in Athens are re-estimating the military situation. They agree that the Greek Army, properly deployed, will be able to cope with present guerrilla strength. UK representatives, however, doubt that the AMAG program will immediately discourage further guerrilla recruitment. The US Governs entt has expressed its concern over the UK decision to wit hdraxw its troops (see item 1), INDONESU The UN resolution calling .for cessation of the Dutch-.Indonesian hostilities and arbitration offers both parties a final opportunity to reach a settlement prior to any UN decision to claim full jurisdiction, in the controversy. KOREA Stalemate in the Joint Commis ,ion conntinuues. CHINA Chiang is seeking to purchase ten million rounds of US aircraft ammunition (see item 7)., Document No. 028 NO CHANGE in Class. E] M DECLASSIFIED Class. CHANGED TO: TS S DDA Memo, 4 Apr 77 Auth: DDA REG. 77 1763 Date: 1.0 APR 19 y: 5X1 Approved For Release 2002/08/20 : CIA-RDP78-01617AO05900010002-1 Approved For ReleasC fi TtAt-RDP78-01617A005900010002-1 GENERAL 2. Ar tin~a proposes re-Conference t nderstandiial with US--US Em- bassy Buenos Aires has been assured by Enrique Coromiinas, one of the 'principal Argentine delegates to the Rio Conference, that Argen- tina will bring up no controversial matters at the Conference, and that in Argentina's view: (a) a completely united front against aggression by an extra -continental power, especially the USSR, must override "all other considerations"; and (b) because Argentina is the "only nation which counts besides the US," a pre-Conference understanding between the two countries would eliminate all diffi- culties. Corominas, whose remarks were in the Embassy's opinion "Inspired" by Foreign Minister Bramuglia, offered to arrange a conversation between the Embassy and the Foreign Minister to dis- cuss such a pre-Conference understanding. 3. "Southeast Asia Federation Committee" appeals to UN--US Military Attache angkok reports that a Southeast Asia Federation Committee, composed of a "local Viet Minh committee, free Laos, free Cambo- dians, Indonesians, Burmese, and free Thai," has been formed in Bangkok. The Committee has issued a manifesto appealing to the UN for aid for the conflict areas and has requested that the problems of Southeast Asia be considered as a whole. (CIG Comment: Continued efforts by nationalist groups in Southeast Asia to obtain regional action by the UN may be expected.) Approved For Released RDP78-01617AO05900010002-1 Approved For Release NHRffDP78-01617A005900010002-1 EUROPE 4. GERMANY: Creation of a German Government for the Soviet Zone-- the Soviet Military Authority (SMA) has re- newed discussions with German political leaders concerning the creation of a government for the Soviet Zone, including the Soviet sector of Berlin. (see Daily Summary of 1 July, item 2). The USSR reportedly desires that the formation of such a government be com- pleted by 14 August. (CIG Comment: The USSR has denounced the union of the US and British Zones in Germany as political rather than economic. Having already matched the US-UK bizonal economic administration with a central economic administration for the Soviet Zone, the SMA would regard the creation of a zonal Government as a logical devel- opment. Manifestly such a Government could readily be converted into a Soviet satellite state in Germany, its nominal independence exerting considerable attraction upon Germans in the Western Zones. That further step, however, would compromise the USSR's present effective pose as the champion of German unity in opposition to separation and partition. It is not likely to be taken unless and until the CFM meeting in November proves unification on Soviet terms to be impossible and partition an accomplished fact perversely attributable to Western "imperialism:') 5. AUSTRIA: Influx of Jewish DPs into US- Zone--US Minister Erhardt reports that the steady influx of Jewish refugees into the US Zone of Vienna, which is currently caring for 7,000 persons in camps with a normal total capacity of 2,000, is creating serious problems of crowding, feeding, and sanitation. 6. BULGARIA: Division in Communist Party rumored--Acting US Rep- resentative Horner reports a revival of rumors in Sofia that a differ- ence of opinion exists within the Bulgarian Communist Party. The "moderates," headed by Provisional President Kolarov and Tsola Dragoicheva (National Secretary of the Fatherland Front) reportedly favor a more independent Bulgarian policy in contradistinction to complete subservience to the USSR. Horner considers that the existence of such a rift was in part substantiated by Finance Minister Stephanov, who, to a conversation with the Acting US Representative 9 dismissed the anti-US press campaign as "propaganda for the masses" and expressed great interest in the revival of Bulgarian-US economic relations. -3- Approved For Releas? RDP78-01617A005900010002-1 Approved For Release 2M fl DP78-01617A005900010002-1 FAR EAST 7. CHINA: Chiang request 10 million rounds of aircraft ammunition-- Generalissimo Chiang Kai-shek has indicated to US Ambassador Stuart his desire to purchase 10 million rounds of M-2 .50 caliber aircraft machine gun ammunition, with links, from the US for immediate delivery and use. Stuart has advised Chiang to communicate directly with the Chinese Embassy in Washington for negotiations with the War and Navy Departments. THE AMERICAS 8. DO CAN REPUBLIC: Developments in rumored invasion--US Ambassador Butler reports that: (a) Ciudad Trujillo is quiet and orderly although a newspaper has now published reports of the sup- posed Imminent invasion; and (b) both Army and Navy air forces are conducting patrol missions. According to the US Military Attache, the Dominican Army expects landings to be attempted on the island's north coast. US Ambassador Corrigan transmits from the Venezuelan capital a report from an informant whom he considers trustworthy that 350 Dominicans and Venezuelans, some of whom are allegedly Communists, have left Venezuela over the past five days to partici- pate in the attempted ouster of Dominican President Trujillo. Corrigan believes high Venezuelan officials are "countenancing" the movements of men and equipment from Venezuela for use against Trujillo. fates that: (a) Haiti's Chief of Sta is apprehensive raga army's ability to repel any large invasion force that might attempt to land In Haiti; and (b) Hai- ttan civil and military officials have a report that large Dominican forces are ready to cross the border into Haiti to engage any forces that may attempt to land there. The State Department has informed US Embassy Ciudad .Trujillo that it will henceforth permit arms exports to the Dominican Republic on the same basis as those to the other American Republics-- that is, whenever in the Department's view they are "reasonable and necessary" from the standpoint of internal order, self-defense, or international obligations vis-a-vis the Security Council. ? -4 - Approved For Release 111/,ETDP78-01617A005900010002-1 Approved For Release 2 P78-0161.7A005900010002-1 GUNHUEOff 9. PARAGUAY: Rebels attack Government High Command--U5 Charge Trueblood Asuncion reports that; a some 1,000 rebels proceeding from Asuncion in two armed boats have surprised the Government High Command at Ypapobo (between Concepcion and Asuncion on the Paraguay River) with an attempted landing operation; (b) conflicting reports of an imminent rebel attack on Asuncion itself have caused the Government to adopt precautionary measures there; and (c) he is inclined to credit the Government claim that Concepcion has fallen to its troops. Approved For Release IDP78-01617A005900010002-1 '3 c..4b Approved For - WUQ9QWM : CIA-RDP78-01617AO05900010002-1 C B4 Tr,'- L T U a ,' 10 14 S EUROPEAN RECOVERY. Fa .'iaer retrenchments to the Mr domestic economy are under dis- 25X6 S-si.mn the UK Government. 25X6 GREECE Dissension in the Greek Cabinet concerning the organization and direction of the Army has resulted in the withdrawal from a Cabinet meeting of Ger c' al _ ;r as, Minister of Public Order. Interference by politicians co nti a