CURRENT INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000100050001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 15, 2016
• Document Release Date: February 5, 2004
• Sequence Number: 1
• Publication Date: July 3, 1953
• Content Type: REPORT

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~o"Ftljaviia-& wk
OCI NO. 4834
3 July 1953
CURRENT
INTELLIGENCE
WEEKLY
NO CHANGE IN CLASS. Ll
I I DECLASSFIED
CLASS. CI HANG=D TO: TS S
ISEXT CEViLW DATE:
AUTF ' F
DATE. REVIEWER.
CENTRAL INTELLIGENCE AGENCY
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t= I 3 0
OFFICE OF CURRENT INTELLIGENCE
STATE review(s) completed.
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SUMMARY OF CONTENTS
THE SOVIET WORLD . . . . . . . . . . . . . . . . . . . . . Page 4
RECENT MODIFICATIONS IN SOVIET DOMESTIC
ECONOMIC POLICY. . . . . . . . . . . .
The reduced size of the Soviet State Loan for 1953
and other economic measures suggest a possible shift in
the pattern of growth planned for the soviet economy
from the emphasis on armaments and capital goods to con-
sumer goods.
PREMIER LANIEL'S FRENCH GOVERNMENT . . . . , . . . .
The new French government of Premier Laniel is ex-
pected to follow the foreign policy of his predecessor.
There is little hope for an immediate solution of the
basic financial problems which led to the fall of the
Mayer government.
. Page 6
. Page 7
EGYPTIAN INFLUENCE THREATENS LIBYA'S FUTURE. . . , . . . . Page 9
Growing Egyptian influence in Libyan affairs chal-
lenges Western influence there, obstructs the negotia-
tion of Libyan-Western military agreements, and encourages
the disintegration of the kingdom.
JAPANESE LEFTISTS EXPLOIT OPPOSITION TO AMERICAN
BASES. . ,
.. . . . . . . . . . . . . . . . . . . Page 11
American requirements for military bases have placed
on Japanese rural communities demands which provide
leftist groups with a major weapon for arousing anti-
American sentiment.
DI
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POSSIBILITY OF EVACUATING CHINESE NATIONALISTS FROM
BURMA WILL SOON BE TESTED . . . . . . . . . . . . . . . . Page 12
The full cooperation of Taipei and Nationalist
field commanders, on which depends the success of the
evacuation of the estimated 12,000 Chinese Nationalist
troops in Burma, is by no means assured.
DE GASPERI MUST CHOOSE BETWEEN RIGHT OR LEFT TO FORM
A NEW GOVERNMENT . . . . . . . . . . . . . . . . ... . . . . Page 14
The Italian Christian Democrats face the problem
of collaborating with either the right or the left to
achieve the coalition they need to form a new govern-
ment when parliament reconvenes this fall.
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THE SOVIET WORLD
Inside the USSR, there were pontinued signs last week that
the new leadership was endeavoring to eliminate some of the
strains of Stalin's regime. The party's authoritative ideologi
cal journal Kommunist continued the new campaign against the
earlier policy f Russifying minorities. The Latvian SSR's
central committee not only: scored the Soviet nationality policy
but replaced four Russian nationals with Latvians in important
posts in its apparatus.
The appearance of V. A. Malyshev at the Bolshoi Theatre on
27 June with eleven of the fourteen members of the All-Union
party presidium suggests that he has, now replaced L. G. Melni-
kov as a presidium alternate. Malyshev, Minister of Transport
and Heavy Machine Building, is an important member of the tech-
nical bureaucracy and was a full presidium member from the Octo-
ber Congres's until Stalin's death. Melnikov had been severely
criticized for not using local leaders in the western oblasts
of the Ukraine, and his ouster as first party secretary of that
republic was announced on 13 June.
In addition to Melnikov, L. P. Beria and M. D. A.Bagirov
failed to appear with their colleagues, In Stalin's day, it
was not unusual for one or more of the top leaders to be absent
even on regular state occasions. Bagirov may have been in
Azerbaijan where he is the local leader. Some Western obser-
vers speculated that Beria's absence indicated that he may have
been blamed for the temporary loss of control in the East German
riots, but the nature of MVD appointments throughout June suggests
Beria's continued power.
Recent Hungarian press criticism of economic leaders for
neglecting "the just demands of the workers" reflected possible
Soviet sensitivity to repercussions from Czech and East German
disturbances. These criticisms may presage concessions to Hun-
garian workers similar to.those recently announced for the
peasantry. In addition, Hungary and Albania last week modified
their agricultural collection programs to the benefit of the
farmers.
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Throughout East Germany, Soviet forces had apparently re-
stored order, and it was reported that some restrictions had
been lifted in East Berlin and the rest of the zone. Soviet
troops and tanks were being withdrawn, but would doubtless be
kept on the alert. There also were reports that many of those
arrested would be freed leaving only a few of the ringleaders
and "fascist agents" to take the blame for the riots.
Under Communist orders, new demonstrations were staged in
East Berlin and Moscow to support the propaganda line on Western
responsibility for the riots. Communist press and radio also
linked the riots to the release of Korean prisoners but the
Soviet Union had not yet shown its hand on a new unification
campaign or new proposals for a united Germany. Meanwhile the
Kremlin appeared to be pushing its new economic policy for the
East German regime with renewed vigor. New decrees were pub-
lished which, if implemented, would increase consumer goods, re-
duce agricultural quotas, improve housing, welfare, wages, and
lower norms for the workers.
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RECENT MODIFICATIONS IN SOVIET DOMESTIC ECONOMIC POLICY
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The reduced size of the Soviet State Loan for 1953, an-
nounced on 24 June and fully subscribed by 27 June, is in line
with the unusually large retail price reductions this year and
with planned increases in consumer goods production. These sug-
est a possible shift in-the planned growth of the Soviet econ-
omy from emphasis on armaments and producer goods to consumer
goods and are consistent with other Soviet moves aimed at gain-
ing popular support for the new regime.
The new loan is about half as large as the 1951 and 1952
loans. State loans, virtually equivalent to a direct tax on
personal income, have annually siphoned off consumer purchasing
power equivalent to four weeks' pay per worker. This year only
two weeks' pay per worker will be removed. These reductions
in the loan and in consumer goods prices increase consumer pur-
chasing power.
The loss of revenue to the state budget resulting from the
loan reduction, which amounts to only three to four percent of
total budget revenues, is not large enough. to have a signifi-
cant direct effect on 1953 budget expenditures or on individual
budget components such as military outlays or capital invest-
ments. Its limited effects may be offset by additional receipts
from other sources. The major source of government revenues is
the turnover tax, falling largely on consumer goods, and even
a slight increase in the tax rate or consumer goods sales would
offset the revenue lost through the loan reduction,
This and other economic actions by the new Soviet govern-
ment suggest that consumer goods production will be permitted
to increase more rapidly than in the past relative to the growth
of production in other industries.
By the end of the fourth Five Year Plan in 1950, Soviet
progress in armaments production and the restoration of heavy
industry had reached a point that permitted a slight shift in
the emphasis in the fifth Five Year Plan to consumer goods pro-
ductions With the outbreak of hostilities in Korea, the decision
to make such a shift may have been delayed. The over-all goals
of this new Five Year Plan, not announced until mid-1952, in-
cluded a slight. shift of.emphasis in economic growth to the con-
sumer goods segment. An acceleration of this trend by the new
government would only be undertaken if it felt that war was not'
imminent.
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F_ I
PREMIER LANIEL'S FRENCH GOVERNMENT
No change in French foreign policy is expected under
Joseph Laniel, heretofore a relatively obscure conservative
Independent,and there is little hope for an immediate
solution of the basic financial problems which led to the
overthrow of the Mayer government on 21 May. Laniel won
the premiership on 26 June with nearly unanimous support
from all the center and rightist elements in the National
Assembly, largely because the deputies were convinced that
a left-center government was out of the question for the
moment.
Laniel, a wartime resistance hero and an industrialist,
has fewer handicaps than ex-premier Pinay, an earlier dark
horse who managed to hold the premiership for nearly a year.
While Laniel has retained most of Mayer's ministers, he has
formed a stronger cabinets A seven-man "inner cabinet,"
composed mainly of ex-premiers, is designed. to expedite.
the business of the government and compensate in part for
Laniel's inexperience.
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Although associated with both Pinay and Reynaud, Laniel
felt that Pinay's save-the-franc policies were leading to
economic stagnation. He seems to be more under the influence
of Reynaud, who has long advocated drastic financial reforms.
The appointment to the Finance Ministry of Edgar Faure, who
shares Reynaud's financial views? may presage a more forthright
fiscal policy than Laniel's short investiture speech indicated.
It is unlikely, however, that the cabinet's measures will be
accepted by the assembly.
The continuity of French foreign policy is assured
through the presence of Bidault as foreign minister, Pleven
as defense minister, and Reynaud and Teitgen as deputy
premiers. Laniel adopted Bidault's position that the assembly's
decision on the EDC treaty would be sought only after a settle-
ment of the Saar question, the signing of the interpretative
protocols, and the conclusion of the accords associating
Britain with the EDC.
Laniel has said that he intends to seek an end to the
Indochina war either during negotiations following the signing
of the Korean armistice or in other negotiations conducted
with the agreement of the governments of the Associated States,
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There is no indication, however, that the French are willing
to consider an outright withdrawal, which would probably
be the Viet Minh's condition for an armistice. Laniel
planned to raise at the Bermuda conference the question of
France's "too heavy burden" in Indochina, and American
officials in Paris expect strong pressure for a sharing of
the financial burden of France's military commitments
throughout the world.
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EGYPTIAN INFLUENCE THREATENS LIBYA'S FUTURE
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Egypt's influence in Libya's affairs challenges American,
British and French influence in the two-year-old kingdom. It
obstructs the negotiation of military base agreements between
Libya and the Western powers and threatens to hamstring any
agreements concluded. It fosters the forces imperiling the
existence of the kingdom and makes Arab fanaticism an impor-
tant factor in Libyan politics.
Egypt's proximity to Libya, their common Arab-Moslem
character and Egyptian oppositions to Western activities in an
Arab state account for Egypt's interest. Britain and France
have played influential roles in Libyan affairs, and the United
States actively participated in the United Nations' establish-
ment of a federated Libya under King Idriss as a constitutional
monarch in December 1951.
Libya's three provinces --Cyrenaica, of which King Idriss
is also the spiritual ruler, Tripolitania and the Fezzan --
have little natural unity. Their king is narrowly sectional
and offers no inspiring leadership. His people are economi-
cally poor, largely illiterate His 25X6
government depends on-British enc financial assistance
and has little real administrative talent, a notable exception
is Prime Minister Mahmoud Muntasser-, an able, pro-Western
Tripolitanian.
This situation generates serious political, economic and
administrative problems, not the least of which is royal inter-
ference with the normal processes of government. This recently
precipitated a government crisis which almost forced the
prime minister -- sorely tried by the king's tampering -- to
resign. A reported compromise between the two probably leaves
their basic conflict unresolved. Muntasser's continuance in
office, in the face of royal indifference to Libyan unity, is
at best a weak immunization against the dissolution of the
kingdom. His resignation, always a possibility, probably would
bring to power a Cyrenaican little interested in the task of
realizing such unity.
In this situation Libya is confronted with important prob-
lems in foreign affairs. Italy, which took Libya away from
the Turks in 1911; wants a treaty providing a favorable settle-
ment of its property claims. France and Britain want military
base agreements/
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The United a es wants a formal agreement regularizing the
use of Wheelus Field at Tripoli.
More importantly, from a Western viewpoint, Egypt is
trying to draw Libya firmly into the Arab camp. The Cairo
government has been particularly successful in extending its
influence over King Idriss and his close advisers; this has
merely intensified their sectionalism and made Cyrenaican
separatism a greater threat to a united, federated Libya.
Egypt has furnished King Idriss legal and technical
personnel in an apparent effort to reduce Libyan dependence
on Western advisers. According to a recent cultural agree-
ment, Egypt will provide Libya with 1,000 teachers over the
next five years as well as introduce Egyptian educational
curricula into the schools. On 3 March the two countries
concluded a financial and commercial agreement, and Egypt is
currently renewing a long-standing offer to meet Libya's
financial deficit. Libya was admitted to the Arab League on
28 March and is expected to sign its security pact when the
Anglo-Egyptian dispute is settled.
Egypt has warned Libya that the West will use finan-
,cial aid as a lever for obtaining advantages not consonant
with Libyan sovereignty. The king's request for a five or
ten year, rather than a 20-year, military agreement with the
United States appears to reflect Egyptian advice.
This Egyptian influence has conveniently supplemented
internal Libyan reasons for delaying the signing of base agree-
ments and may prevent or indefinitely postpone ratification.
Even if base agreements are successfully concluded, their imple-
mentation over the years is likely to be fraught with diffi-
culty as Egyptian-Libyan interaction encourages the development
in Libya of intense anti-Western nationalism.
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JAPANESE LEFTISTS EXPLOIT OPPOSITION TO AMERICAN BASES
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American requirements of land and sea areas for military use
have placed on the limited agricultural and fishing resources of
Japanese rural communities demands which are providing leftist
groups with a major weapon for arousing anti-American sentiment.
These groups are attempting to inflate local opposition against
the bases into a nationwide campaign.
Despite Japan's vital need for the income resulting from the
presence of the American forces, many Japanese apparently are be-
coming more sensitive about these troops. In June the volume of
critical comment in major newspapers was 50 times greater than
favorable coverage, a postoccupatiLon high. Much anti-American
feeling appears to stem from the common belief that Japan's
commitments to the United States were made under occupation
pressure and make the nation's regained sovereignty meaningless.
The Japanese also believed that a reduction of American
military installations would follow the end of the occupation
and this has failed to materialize. The approximately 250,000
acres of land and 100,000,000 square feet of building space occu-
pied by American forces loom large in a nation where population
pressure is severe. Consequently.there has been growing local
resistance to the government's efforts to obtain any new facili-
ties required by the American forces. The anticipated rise in 25X6
American troop strength in Japan following a Korean armistice
is likely to create further antagonism.
The agitation over military bases involves more than the
general leftist position on rearmament and neutralism. Blocked
by the land reform under the occupation and the subsequent con-
structive agricultural policies of the government, the leftists
have made relatively few political inroads on the traditional
conservatism of rural Japan. They now have an opportunity to
increase their strength among the rural population.
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POSSIBILITY OF EVACUATING CHINESE NATIONALISTS
FROM BURMA WILL SOON BE TESTED
While agreement has been reached on procedure for the
evacuation of the estimated 12,000 Chinese Nationalist troops
in Burma, the real test is yet to come. Full cooperation between
Taipei and the Nationalist commanders in the field, on which
success of the evacuation effort depends, is by no means wholly
assured.
The reaching of an agreement is significant in itself
since it suggests that Taipei finally may have agreed to the
advisability of withdrawing at least some of the troops from
Burma. Under the terms of the evacuation plan worked out by
Chinese Nationalist, Burmese, Thai and American representatives
meeting in Bangkok, Nationalist troops willing to be evacuated
are to be flown or marched into Thailand from designated safety
zones in Burma and thence transported to Formosa. The agreement
also provides for the full exchange of prisoners and the repa-
triation of civilian Chinese detained by the Burmese government
on charges of collaboration with Li Mi's forces.
Even with the fullest cooperation, the evacuation of an
appreciable number will be difficult: as the troops are ill-
disciplined and widely dispersed and nearly all are Yunnanese
who have no desire to go to Formosa. In fact, however, there is
no evidence that the Bangkok committee's agreement is more than
a paper concession by the top Nationalist leaders
General Li Mi, by far the most important authority
to the troops in Burma, so far has not used his influence to
facilitate a withdrawal and has continually raised objections
to such action.
Meanwhile, Nationalist propaganda continues to deny that
Formosa exercises control over the troops in question or can
accept responsibility for any who may be unwilling to leave
Burma.
Five Nationalist field commanders ordered
to Bangkok o give the committee detailed information remained
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in northern Thailand for an entire week. When they finally
arrived in Bangkok, they reiterated Taipei's earlier arguments
against withdrawal and injected a new note of discord by imply-
ing that Burma was responsible for alleged atrocities against
Overseas Chinese. Their spokesman said that a small number of
troops might be willing to go to Formosa if so ordered, but
their public statements and the Burmese reaction to them has
at least temporarily disrupted the evacuation plans.
The evacuation of 2,000 to 3,000 troops is probably the
best that can be hoped for. Such a partial solution would
probably placate the Burmese, provided Taipei dissociates
itself from those remaining in Burma. Failure to accomplish
even such a partial withdrawal would give Communist elements
in Rangoon, which have been exploiting the delay in the Bangkok
negotiations, an opportunity to intensify greatly their pressure
on the Burmese government.- This might force reversal' :of : a
trend toward closer relations with the West.
An almost certain consequence of a breakdown in the talks
would be a second Burmese appeal to the United nations, a move
already threatened by high Rangoon officials. A second appeal
undoubtedly would be far more bitter than the first and this
time might involve the United States,
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DE GASPERI MUST CHOOSE BETWEEN RIGHT OR LEFT TO FORM
A NEW GOVERNMENT
The Italian Christian Democrats, face the problem of
collaborating with either the right or the. left to achieve the
coalition they need to form a new government when parliament
reconvenes this fall. The De Gasperi coalition cabinet resigned
on 29 June and then received parliamentary authorization to func-
tion as a provisional administration through 31 August.
A further move to the right by the government in the fall
would probably widen the social and economic cleavage indicated
in the results of the 7-8 June national elections. This would
tend to precipitate serious labor disturbances and could weaken
Italy's capacity to.contribute to Western European defense.
Strong pressure is being exerted on De Gasperi to ally his
Christian Democratic Party with the Monarchists. Agitation is
also afoot to replace him, should he reject such an alliance,
with Piccioni, aright-wing Christian Democrat who was De Gas-
peri's vice premiere A Christian Democratic-Monarchist alliance
would almost inevitably open the way to neo-Fascist participation
in government policy. The Monarchists and neo-Fascists are
closely associated, and for the 1951-52 local elections were elec-
torally linked in many districts.
One of the prime movers for a new rightist coalition is
Catholic Action chief, Luigi Gedda, who urged a Christian Demo-
cratic electoral alliance with the neo-Fascists in the 1951-52
elections, and is now reported to be trying to effect such an
alliance by bringing the, Monarchists into the government. In
any such government one of the strongest influences would be
Monarchist leader Achille Lauro, a member of the new lower house,
The impressive leftist gains in the recent elections have
indicated a widespread desire not for Communism, but for a
Socialist alternative to both Communism and neo-Fascism. Labor,
for instance, was overwhelmingly against the Christian Demo-
crats because of the De Gasperi gove:rnment's half-hearted and
belated moves to fulfill its promises for social reforms, The
formation of a government including the rightists, who oppose
these promises, could be expected to provoke aggressive labor
reaction.
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Both American and Italia observers have pointed out that
the two strongest elements of Italian life are catholicism and
socialism, and that a stable government must represent not only
the 40.7 percent who voted for the Christian Democrats, but also
the 41.3 percent who voted for social reform.
In order to avoid being driven into a rightist alliance,
De Gasperi wishes to retain the support of the Democratic
Socialists, who quit the cabinet in 1950 because of right-wing
Christian Democratic domination but nevertheless continued to
back the government in parliament. Because the party was
almost demolished in the last election as a result of its
association with the Christian Democrats and the unpopular
electoral law, party leaders are loath to continue this support
unless the government is broadened to include the other social-
ist parties, particularly the Nenni Socialists. Democratic
Socialist leader Saragat is apparently determined not to support
a rightist government, and should one be formed, De Gasperi
would probably be deprived of his last element of moderate
leftist support.
Since the election, the Nenni,Socialists have offered to
support the Christian Democrats and to participate in a De
Gas.peri government. Although Nenni has not indicated any in-
intention to relax his party's opposition to Western European
integration programs, he has stated that he might "swallow" the
Atlantic Pact; his close association with the Communists, how-
ever, leaves much doubt as to his sincerity.
Meanwhile, Undersecretary for Foreign Affairs Taviani,'
leader of the left-wing Christian Democrats, whose influence
in the party has reportedly increased as a result of the elec-
tions, has stated that the new government will have to satisfy
those who voted for Nenni. He points out that an inflexible
attitude against collaboration with the Nenni Socialists might
drive the Italian voter even further to the left and jeopardize
the already precarious stability of the government.
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