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July 28, 1955
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25X1 Approved F elease 2005/03/29 : CIA-RDP79-009 9b600020001-5 CONFIDENTIAL SCR CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. /? OCI NO. 6456/55 28 July 1955 DOCUME.N?i NO -~~ 1 ASS . Ci W iN ci = lr_w ^ ~IECII~SSl1 CLASS. ~CHANGEO Tos T 14 NEY.'r REV-EW DPTE: CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE State Department review completed CONFIDENTIAL 25X1 25X1 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Approved FarRelease 2005/03/29 : CIA-RDP79-0092 A000600020001-5 THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. The Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Approved F Velaase 2 IAL P79-009000600020001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 T H E W E E K I N B R I E F OF IMMEDIATE INTEREST PROSPECTS AFTER GENEVA . . . . . . . . . . . . . . . . . . Page 1 The general impression left by the Geneva talks is that the Soviet leaders are relatively content with the status quo and believe that time is on their side in the long-term struggle with the West. The negative Soviet attitude on German unity is unlikely to change in sub- stance when Chancellor Adenauer visits Moscow, although there may be some tactical offers on unification based on German neutrality within a. security system. While Moscow obviously decided that the time was not ripe for demanding a multilateral Far Eastern conference it is probably holding such a proposal in reserve. TALKS BETWEEN AMERICAN AND CHINESE AMBASSADORS . . . . . . . . . . . . . . . . . Page 2 In the talks between the American and Chinese Com- munist ambassadors in Geneva, it would seem to Peiping's interest to take a. conciliatory line on the question of detained nationals in the hope of smoothing the way for a discussion of larger issues such as Formosa. Soviet Mid-1955 Economic Plan Report: The Soviet 1955 midyear pan report, issueir on 2]. July, indicates that recent measures to improve the efficiency of the Soviet economy have been generally effective. The 1955 industrial goals, which were generally re- vised upward last winter, will be more than met. Agriculture continues to be the weakest sector and to receive increasing support. The rate of improve- ment in output of consumer goods will probably be somewhat lower than last year. The announcement confirmed the emphasis on heavy industry and agri- culture evident in Soviet statements and releases, since early this year. CONFIDENTIAL Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Page 1 25X1 25X1 25X1 r hNI ? vvcaa at c~caac wv.nvpyycyy yr J 'w...........-J CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 25X1 25X1 25X1 SECRET Approved For Release 2005/03/1%: CIA-RDP79-00927A000600020001-5 THE WEEK IN BRIEF necessary to reassure the East German leaders and their supporters, who fear they will be abandoned Soviet Delegation to Geneva Visits East Berlin: Soviet efforts to increase domestic -support or the East German regime and to raise its prestige in the eyes of the world are apparent in the stopover of Bul- ga.nin and Khrushchev in Berlin after the summit con- ference. Soviet leaders also probably-considered it for the sake of unifying Germany. Page 3 25X1 Moscow May Be Studying Plans for "Free"' Elections in Satellites: There are rumors o prepara ons or ree" elections in the Eastern European Satellites. The USSR may be planning some form of dramatic propa- ganda. gesture in Eastern Europe intended to concili- ate opinion not only in the West but to some extent among the Satellite populations as well. Philippines--Ma.gsaysa.y-Recto Feud: President Magsaysay's public break. with Sena. tor to On 26 July shows he now is ready to make a. more determined effort to lead the Nacionalista Party and push for the adoption of his own policies. Magsaysa.y announced that he would not support Recto for re-election in November a.nd would personally ca.mpa.ign against him if he is renomi- nated. Recto will nevertheless be a, hard man to beat. Situation Remains Tense in Vietnam: Partially as a, result of the hostile rea.c ion to e 20 July riots against the International Control Commission, Diem ha.s indi- cated, in effect, that he is not unalterably opposed to some sort of consultation with the Viet Minh re- garding elections. The situation remains tense, particularly in Saigon's residential section where there has been a. series of terrorist attacks. Page 7 Page 7 25X1 Approved For lease 2005/OWt IP,DP79-0092700600020001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 Negotiations in Laos Make Little Progress: Prospects for a settlement Between the Laotian government and the Pathet Lao continue poor, despite the optimism of the International Control Commission. Little progress has been made in the current military and political negotiations. Chinese Communist and Viet Minh propa- ganda on Laos has become more belligerent in the past two weeks. Page 9 Cambodians Dissatisfied With Commission's Ruling on US Aid: Cambodian officials have indicated dissatisfaction w th the reservations in the resolution adopted by the Inter- national Control Commission, although the commission generally agrees that the US military aid program does not conflict with the Geneva. accords. The Cambodian premier has stated that unless the phraseology is changed, his government will have no alternative but to lodge a protest with the Geneva cochairmen. 25X1 Page 10 Indonesian Cabinet Crisis: Progress toward forming a new Indonesian cabinet as thus far been characteristi- cally slow. Aside from the usual difficulties arising from Indonesia's multiple party system, the procedure is complicated by the absence of President Sukarno and the fact that the cabinet must have army approval. Should cabinet negotiations require a month or more, Indonesia's first national elections, now scheduled for 29 September, may be delayed. Page Pakistan Delays Adhering to Turkish-Iraqi Pact: Palestine's formal adherence to the r is - raq cat may be con- siderably delayed as a. result of the Karachi govern- ment's failure to take immediate action after Prime Minister Mohammad Ali's public announcement on 1 Jul that Pakistan intended to join. Page 11 French North Africa: The French government has yet to de- vise a formula. which would justify continued French presence in the eyes of the North Africans, satisfy the more reasonable of native aspirations, and make it possible for the nations friendly to France to sup- port its policy in the area.. New proposals for Tunisia are expected when the French Council of the Republic considers the French-Tunisian agreement early in August. Action on the reform program for Algeria is not expected before fall, and no immediate soli R"on is in sight for the tense situation in Morocco. Page 12 SECRET Approved For Release 2005/03/?2i CIA-RDP79-00927A000600020001-5 25X1 25X1 25X1 25X1 Approved Fo lease 2005/031Pd- DP79-0092WO0600020001-5 28 July 1955 Tension Renewed Between Costa Rica and Nicaragua: Tension has mounted between Costa ca and Nicaragua following Nicaraguan charges against Costa Rica. President Somoza accused Costa Rica in June of complicity in a new plot to assassinate him and took measures against Costa Rican citizens transiting Nicaragua. This led to bitter exchanges between the two governments. PATTERNS AND PERSPECTIVES 25X1 STATUS OF KREMLIN CONTROL OF THE SATELLITES . . . . . . . Page 1 Moscow is faced with a dilemma in the Eastern European Satellites arising from its efforts to end intimidation as a means of control and obtain instead the voluntary co-operation of the Satellite populations. These moves--which in effect are an attempt to substitute more subtle for direct controls-- have been interpreted by the Satellite peoples as indicating a weakening of Soviet controls and have whetted their desire for concessions greater than the Kremlin has been willing to make. Moscow must now choose between encouraging "voluntary" co-operation while reducing the more obvious aspects of direct controls, or abandoning present tentative efforts to govern by consent. The Soviet leadership appears to believe that, given sufficient time, a more satisfactor relationship with the Satellites can be established. 25X1 ;COMMUNIST CHINA'S FIRST FIVE-YEAR PLAN . . . . . . . . . . Page 3 Peiping appears confident, judging from the recently released report on its first Five-Year Plan, of achieving its. military and industrial aims for 1957. Barring further agricultural disasters similar to those of 1954, these aims can probably be reached. Soviet support and more intensive austerity are be essential for the success of the plan. Peiping says that China's level of industrialization will still be low by 1957, and that it will take 20 to 50 years for China to become a highly in ed state. SECRET Approved For Release 2005/03/2iYCIA-RDP79-00927A000600020001-5 THE WEEK IN BRIEF Approved F elease 2005/03/29: CIA-RDP79-0092Zh000600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 LATIN AMERICAN COMMUNISTS REWRITE PARTY PROGRAMS . . . Page 9 Latin American Communists are rewriting their party programs, using the Brazilian program as a model. The programs concentrate their fire on US imperialism as the chief enemy of the people, and seek to develop allies. among "anti-Yankee" nationalist business elements. While the Communists do not have good prospects of attaining their political objectives in most countries, they may be able to make significant gains in Brazil. SECRET Approved For Release 2005/03/29x: CIA-RDP79-00927A000600020001-5 THE WEEK IN BRIEF 25X6 25X1 Approved Faelease 2005/03/29 : CIA-RDP79-009200600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 OF IMMEDIATE INTEREST PROSPECTS AFTER GENEVA Events at Geneva indicate that the Soviet leaders are rel- atively content with the status quo and believe that time is on their side in the long-term struggle with the West. They appear to be developing a for- eign policy of conciliation based on strength. The West can now expect a prolonged peri- od of relaxation, a series of international meetings, the lifting of some portions of the iron curtain, less virulent propaganda, and endless rounds of visits and cocktail parties with Soviet leaders. Meanwhile, Moscow appears confident that its economic strength will grow and its mili- tary position vis-a-visthe.West will improve, particularly in terms of air power and nuclear weapons. It probably does not believe it will have to make any major substantive conces- sions in order to maintain its advantageous position. The Soviet insistence that German unity is impossible at present and must await estab lishment of a European security system, admittedly. likely to be slow in coming, quite accurate= ly reflects Moscow's real views. When Chancellor Adenauer gets to Moscow, however, the USSR is likely to make some new offers on unification, still based on German neutrality. within a se- curity system, but accenting more heavily the alleged Soviet willingness to meet Western de- mands for free elections. This tactic will be designed to por- tray Adenauer as an opponent of unification and if possible to undercut his strength with- in West Germany. While the USSR continued to urge eventual establishment of a comprehensive European se- curity system, which would in- volve the dissolution of NATO and WEU, and gave no formal answer to Eden's proposals for more limited security arrangements, Bulganin did express interest in them, and press reports say that privately Soviet officials have shown. even greater interest. This may indicate one of the opportunities for progress in the October talks. However, while the West has insisted that unification of Germany must accompany any security arrange- ments, Moscow probably views the :.den proposals primarily as use- ful preliminaries to a broad security system which would pre- cede unification. While Soviet acceptance of the President's proposal for aerial inspection and exchange of military blueprints was un- likely, the caution of the So- viet leaders in not immediately rejecting the plan shows that they wanted to avoid destroying the atmosphere of the meeting with any blunt rejection or sharp criticism. Swedish Foreign Ministry officials report that Marshal Zhukov, presumably after his return to Moscow, com- mented that the Soviet disarma- ment plan may not be bold enough. The Soviet failure at Geneva to insist on discussing Far Eastern issues or to propose a subsequent Far Eastern confer- ence appears to have been moti- vated simply by a desire to avoid undermining the conciliatory atmosphere by pressing an issue on which disagreement with the SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 OF IMMEDIATE INTEREST Page 1 of 3 Approved Folease 2005/03/29 : CIA-RDP79-0092000600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 United States seemed inevitable. Another factor may have been the Chinese Communist acceptance of the American offer. to begin direct talks at the ambassado- rial level at Geneva-. Although Peiping had previously called for both direct talks and an in-.-- ternational conference, Moscow, if not Peiping, may well have judged that direct talks TALKS BETWEEN AMERICAN AND CHINESE AMBASSADORS Peiping's representative in the Geneva talks, scheduled to begin on 1 August, will be Wang Ping.=an, Chinese Communist ambassador to Poland. Wang, who took part in talks with Ambassador John- son a year ago on the question of detained nationals, was a Chi- nese Communist spokes- man in Chungking and Nanking after World War II. He had an important job in the Ministry of Foreign Affairs from 1949 to 1954.. There is no clear indication of Chinese Communist intentions regarding the only explicitly defined topic for the Geneva talks--"the repatria- tion of civilians who desire to return to their respective coun- tries..." There are at least 40 American civilians, in addition to the 11 airmen of the "spy" case, de- tained in Communist China, but very few Chinese detained in would be enough- for the time being. Soviet and Chinese comment at the close of and following the conference on the con- tinuing urgency of Far Eastern problems suggests that a propo- sal for a new multilateral conference is being held in reserve, the United States against their will. Peiping may try to bar- gain for the forcible return of SECRET 25X1 25X1 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART I OF IMMEDIATE INTEREST Page 2 of 3 Approved Foy-lease 2005/03/29 : CIA-RDP79-009200600020001-5 ?' SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 the thousands of Chinese stu- dents in the United States who do not want to go to Communist China. It would seem to Peiping's interest, however, to take a conciliatory line on the ques- tion of detained nationals in the hope of smoothing the way for discussion of larger ques- tions. The Chinese Communists have frequently stated their wish to negotiate with the United States about the Ameri- can "occupation" of Formosa-- that is, the American commit- ment to Formosa's defense and the presence of American forces in the area. If approached on the con- cept of a cease-fire in the Formosa Straits., the Chinese Communists at Geneva are ex- pected to begin from their frequently stated position that this question is irrele- vant, as Communist China is not at war with the United States. Peiping is also expected, how- ever, to suggest that a de facto cease-fire can continue so long as satisfactory progress is being made toward the solution of problems the Chinese Commu- 25X1 nists define as outstanding. ,: ~c :~' # s rk SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 OF IMMEDIATE INTEREST Page 3 of 3 Hppruveu rur?cease cuvatuaictv : %.w-muritv-uuticitNwjuouuucuuu i-a SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955, Soviet Mid-1955 Economic an Report The Soviet 1955 midyear plan report, issued on 21 July, indicates that recent measures to improve the efficiency of the Soviet economy have been generally effective. The 1955 industrial, goals, which were generally revised upward last winter, will be ex- ceeded across the board. Agri- culture, as expected, continues to be the weakest link and to receive increasing industrial support. It appears that the improvement in output of con- sumer goods will be somewhat less than last year. The an- nouncement confirmed the em- phasis on heavy industry and agriculture evident in Soviet propaganda since early this year. Apparently the nonagri- cultural labor'force grew but slightly in.the first six months of 1955. In the postwar period, failure to increase labor pro- ductivity has been compensated for by sizable above-plan ad- ditions to the labor force. These additions have been the source of about half the in- dustrial growth in this period. This development was un- doubtedly the basis for Bul- gan:tn's clear implication on 4 July, before the central com- mititee that in the future short- falls in labor productivity could not be compensated for simply by adding more people than planned to the industrial labor force. The era of milking agriculture of its surplus labor to mieet Industrial production goals has apparently come to an end. Of the'315,000 young tech- nicians graduated in the first six months of 1955, 235,000-- INCREASE IN SOVIET LABOR PRODUCTIVITY 1955 Planned Goals 1955 Estimated Projection SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 NOTES AND COMMENT S Page 1 of 15 Approved Foy R (ease 2005/0 &,WDP79-009200600020001-5 28 July 1955 25X1 70 percent--were transferred to agriculture. The midyear report con- firms previous announcements that the goal for total in- dustrial output of the original Fifth Five-Year Plan (1951-1955) was fulfilled eight months ahead of schedule, on 1 May 1955. This indicates that even the new, higher 1955 goal announced last February will be slightly exceeded, and suggests that the recent changes in organization and planning and the emphasis on introduction of new tech- nology have resulted in in- creased efficiency. As for basic heavy in- dustries, output of steel and electric power continues to rise at a rate sufficient to meet the Five-Year Plan goals, in- dicating that certain problems facing these two industries at the end of 1954 have been solved. The rise in the rate of growth of petroleum output from 12 per- cent in 1954 to 19 percent in the first half of 1955 suggests SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 NOTES AND COMMENTS Page 2 of 15 that the original plan may be slightly overfulfilled. The growth of coal output rose from 8 percent last year to 12 percent in the first half of this year. The data on agriculture repeat earlier announcements that the sowing plan for both corn, and wheat acreage has been fulfilled. Areas sown in flax, sugar beets, sunflowers, and potatoes also increased by amounts greater than last year's gains. Livestock numbers, how- ever, increased more slowly than in 1954, and the number of hogs actually remained the same as on 1 July 1954. The delivery of machinery and equipment to agriculture continues to in- crease rapidly and except for row-crop tractors, grain-clean- ing equipment, and tractor drills, production was generally above plan. The data on consumer goods production and retail trade in- dicate that private consumption will not grow as rapidly this Approved Fore ease 2005/03/29: CIA-RDP79-00927A000600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 year as last. Though remaining substantial, growths in the pro- .duction of manufactured con- sumer goods and clothing are off considerably from last year's high gains. A slight increase in the growth of food production is insufficient to offset this, with the result that the gain in total produc- tion of consumer goods has lagged somewhat behind last year's growth. The announced 8-percent increase in retail trade, a sharp drop from the 1953 and 1954 figures, probably is less than the normal growth of wage payments. The inflationary danger inherent in this sit- uation may be offset, however, by the increase in the state loan and the failure to reduce retail prices this year. The volume of investment increased 11 percent in com- parison with the first half of 1954, but was reported as 7 per- cent below plan. This surpris- ingly large increase occurred in the face of a 2-percent de- crease below the 1954 level in new allocations for investment from the 1955 state budget. Failure to utilize a fairly large proportion of the invest- ment funds last year and signifi- cant economies achieved through organizational and technical measures probably explain this apparent contradiction. Soviet Delegation to Geneva Visits as er n Soviet efforts to increase domestic support for the East German regime and raise its prestige in the eyes of the world are apparent in the stop- over of Bulganin and Khrushchev in Berlin after the summit con- ference. Soviet leaders also probably considered it necessary to reassure the East German leaders and their supporters, who fear since the recent con- PART II Investment in heavy in- dustry apparently accounted for the bulk of the increase, with investment in light industry re- maining at approximately last year's level. Investment in agriculture and transportation is reported to have increased, but precise data are not avail- able. Labor productivity in in- dustry met the revised plan by increasing 7 percent in the first six months of 1955. The 10-per- cent increase in labor produc- tivity in construction is a marked improvement compared to the increases of 4 and 8 percent in ].953 and 1954 respectively. This, together with sizable in- creases in actual construction, shows that the extensive shake- up of the building industry, be- gun in August 1954, has been ef- fective. The rates of increase in labor productivity are not, how- ever, sufficient to meet the cumulative 1955 goals. If the growth rates of the first six months are maintained for the rest of the year, industrial labor productivity will have increased 42 percent and con,- struction labor productivity 45 percent for the 1951-55 period, compared with originally planned increases of 50 and 55 percent respectively. dilatory Soviet gestures toward the West that they will be aban- doned for the sake of unifying Germany. On his arrival in East Berlin on 24. July, Bulganin drew particular attention to the "sovereign" status of the German Democratic Republic and its "equality" with West Germany. ire repeated the view that the SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 NOTES AND COMMENTS Page 3 of.15 25X1 25X1 Approved ForIease 2005/03/29 : CIA-RDP79-00927400600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 German unity question can be solved only through the partici- pation of the German-people themselves. Bulganin said that the East and West German regimes should share in negotiations on unity, but that this goal could be achieved only if West Germany withdrew from NATO and canceled its adherence to the Paris agree= ments. He also repeated the So- viet position that German re- unification must await the formation of a European security pact as proposed by the Kremlin. Cognizant of the consuming desire of the East German people for reunification, the Soviet leaders may have wished to stress that this could be achieved only if the people supported the present East German regime, which will be the one to negoti- ate with the West German republic:. The Soviet visitors used the occasion to tour 'the coun- try, making frequent public appearances in the company of East German officials. While publicly demonstrating con- fidence in the government, the Moscow May Be Studying Plans For 'rFree" E ections in Satellites Some of the Eastern European Satellite governments are al- legedly preparing to hol-d "free elections" in the not-too-distant future. Although reports of such activities are to date lit- tle more than rumor, changes al- ready evident in Soviet-Satellite relationships apparently are scheduled to continue (see Part III, p. 1), and Moscow may be planning some form of dramatic propaganda gesture in Eastern Europe in order to impress the PART II Russians had an opportunity .to observe conditions within the country. Soviet leaders have no doubt been disturbed by the unrest and dissatisfac- tion prevalent in East .Germany and must regard this problem as one of first importance in the Satellites. The unexplained absence of party first, secretary Ulbricht and Deputy Premier Rau was a conspicuous feature of all the public appearances of the So- viet leaders. These two top Communists would ordinarily have been on hand for such important occasions. It is strange that Ulbrricht, who has been con- sidered to be the "strong man" of 'East Germany, would be relegated to the background while the Russian and East German leaders firmed their plans for dealing with the question of unity. He may be ill or on vacation. Ulbricht went on an unpublicized vaca- tion in the Soviet Union at about this time last year. 25X1 West and to a lesser extent the Satellite populations themselves. The Soviet Union has made it perfectly clear that it does not wish to be "pushed" in its relations with the Satellites. SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 NOTES AND COMMENTS Page 4 of 15 25X1 Approved For lease 2005/03/29 : CIA-RDP79-009200600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 195 25X1 301 301 The USSR probably has never- contemplated holding free elec- tions in the Western-sense-of the term. It could, however, use the parties participating in the various national fronts to give a democratic facade to elections. On 10 July a London daily carried rnat oscow, in or er to pave the way for ostensibly-free- elections in the Satellites, has ordered various prewar and postwar leaders and-secondary figures released from prison. They would presumably; The release and rehabilita- tion of political prisoners has been a recurring Satellite-wide phenomenon for some time, and appeared one facet of the general "liberalization" program initiated in 1953. Some of these rehabilitated figures were used to bolster the national fronts during the 1954 elections in Czechoslovakia and Hungary. More recent developments include a wave of releases of former opposition leaders in Bulgaria, and the apparent freeaipig this year 'of a number of secondary leaders in Rumania. X f such men are convinced-- as many of, thgm 'Apparently have been--that they must work for the regimes,"they might serve a useful purpose for the regimes during "free" elections. Any "free" elections planned by the Communist parties would pre#;ent no danger of election upsets. The positive' propaganda effect domestically, moreover, would probably be limited large- ly to non-Communists already pre- disposed to co-operate with the regimes. The general popula- tioEL, which might interpret any broadening of-elections as a possible sign of weakness or of a, genuine loosening of So- viet controls, might be en- couraged to demand real con- cessions. As a Soviet "conciliatory" gesture aimed at the West, the holding of "free" elections might prove effective in con- vincing many in the West that this represented a significant departure from previous policy- I 25X1 SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 NOTES AND COMMENTS - Page 5 of 15 25X1 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Approved Foelease 2005/0~9efiff DP79-0092700600020001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 Philippines-- Magsaysay-Recto Feud Philippine president Magsaysay's public break with Senator Recto on 26 July shows that he now is ready to make a more determined effort to lead the Nacionalista Party and push for the adoption of his own policies. Recto leads the ultrana- tionalist faction of the Nacionalista Party which accepted Magsaysay as its presidential candidate in 1953 because of his immense popular- ity. Party wheel horses, how- ever, believed that he would be a mere figurehead and that they would determine policy. Magsaysay readily accepted Recto's support during the election campaign and repeatedly deferred to him during the early weeks of his administra- tion. Although the president soon became aware that his policies were jeopardized by Recto's ambition for party leadership, he had hitherto failed to take a determined stand against the senator. Magsaysay's pro-American foreign policy has been the Situation Remains Tense In Vietnam The South Vietnam govern- ment has not been conspicuously successful in its efforts to offset the adverse reaction to the Saigon riots of 20 July directed against the Inter- national Control Commission. The situation remains tense, particularly in Saigon's resi- dential. section, where there has been a series of terrorist attacks. basic issue in the struggle between the two men. This week's break was precipitated by Recto's charge that the Philippine recognition of South Vietnam on 15 July was dictated by the United States. The feud between the two men is not over. Recto claims Magsaysay cannot prevent his running for re-election, imply- ing that he will fight to stay in the Nacionalista Party and run on the party ticket. How- ever, a report is already cir- culating that Recto is consider- ing joining forces with several Liberal Party leaders to form a new party. Recto has always attracted a great deal of publicity and his name is one of the best known in the Philippines. He is an astute politician and probably has kept his political fences well mended. He is almost certain to seek re- election in November, and whether he runs as a Nacion- alista or as the leader of a new party, he will be difficult to defeat. On 21 July, Premier Diem, aware that his government had suffered a setback as a re- sult of the rioting, publicly expressed regret, promised compensation for losses, and gave assurances that action was being taken to prevent any recurrence, The next day, a government communique denied that the SECRET 25X1 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART II NOTES AND COMMENTS Page 7 of 15 Approved For elease 2005/0g/t)&#TRDP79-0000600020001-5` CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 demonstrations had been directed against the commission. Diem has indicated that he is willing for the commission to maintain its headquarters in Saigon, although Vietnamese officials had previously indicated it should move to Dalat. These measures have thus far failed to achieve positive results. It is the unanimous opinion of the commission dele- gates and their military ad- visers that the Diem government is fully responsible for what happened, apologies and denials notwithstanding. They also note that the press, heavily censored by the government, remains highly critical of the commission. The commission has decided to remain in Saigon, not because of Diem's new attitude, but to avoid giving the appearance of succumbing to mob pressure. The commission's position is viewed with sympathy in London, Paris, and New Delhi. The upshot has been that addi- tional pressure has been placed .on Diem to enter into some sort of consultations with the Viet Minh regarding elections. Apparently in response to this pressure, Diem has, in effect, indicated that he is not unalterably opposed to con- sultation. He has requested advice from the United States as to how to handle the letter sent him--via French channels-- by Vice Premier Pham Van Dong of North Vietnam requesting the appointment of representa- tives to conduct pre-election negotiations. A press report, quoting high-level sources, states that Diem will insist that the Viet Minh release all Vietnamese military prisoners and allow free movement of refugees to the south before considering the appointment of representatives for con- sultations. The Saigon press, which heretofore has made no effort to conceal the government's hostility toward talks with the Viet Minh, appears to be taking a new line. It is repeating the theme that the south is not opposed to elec- tions, but insists that they be genuinely free. One paper points out that where Vietnamese have been free to express their feelings without fear, they have rejected Communism, and cites the anti-Communist sentiment prevalent in areas recently' freed from Viet Minh control. There have been reports that Viet Minh representatives have been discussing the elec- tion question with Bao Dai, and Dont''s letter to Diem was also addressed to the "chief of state"--Bao Dai. In 1945, Bao Tsai served as "supreme counselor" to the Viet Minh. Communist propaganda from Hanoi and Peiping continues its tough tone. A recent Hanoi broadcast commenting on the riots repeats the accusation that they were a device to sabotage the Geneva agreements and warns that "this dictatorial regime, sub- servient to the warmongers, .will be the cause of worse re- sults...." The situation in Saigon remains tense because of a series of well-executed terrorist inci- dents in the residential section. The main targets of these attacks have been electrical and tele- phonic facilities. by police or army countermeasures, a continuation of this activity will make it extremely difficult for most of the European popula- tion to remain in Saigon. While the dissident Binh Xuyen is generally regarded as responsible, involvement of Commu- nists is a strong possibility in Approved For Release 2005# 9R.,BIl-RDP79-00927A000600020001-5 NOTES AND COMMENTS Page 8 of 15 Approved For R (ease 2005/03/29 : CIA-RDP79-009 72A 00600020001-5 SECRET CURRENT INTELLIGENCE WKLY SUMMARY 28 July 1955 25X1 view of recent reports of their efforts to infiltrate the Binh Xuyen, In addition, suspicion has been voiced in Saigon that unofficial French elements may have been behind these dis- 25X1 Negotiations'in Laos Make Little egress The prospects for a set- tlement between the Laotian government and the Pathet Lao continue poor, despite the optimism of the International Control Commission in Laos. Little progress has been made thus far in the current military and political nego- tiations. Moreover, Chinese Communist and Viet Minh prop- aganda on Laos has become more belligerent in the past two weeks. The present optimism of the Indian and Canadian mem- bers of the control commission is based on the fact that an agenda for political talks has been agreed on, and apparently also on the assumption that the Pathet Lao genuinely desires peaceful integration into the national community. Actually, agreement on the agenda was possible only because the gov- ernment accepted Indian and Canadian advice to give in to the Pathet demand that elections be the first order of business. The government had pre- viously insisted that control over the disputed provinces of Saw Neua and Phong Saly be the' first item. The Pathet Lao is now presenting its case on elec- tions and there is every indi- cation that discussions on this problem will be protracted. Military negotiations on the disposition of opposing forces in the Muong Peun area ,of Sam Neua Province are also stalled. The Pathet Lao is insisting on keeping its pres- ent positions, while the gov- erninent is pressing for an ar- rangement which would secure communications between its Muonng Peun garrison and neigh- boring Xieng Khouang Province. There is little reason to believe that the Pathet Lao and its Viet Minh advisers are ne- gotLating in good faith. The Communists are unlikely to re- linquish their control of the disputed provinces unless they can obtain in exchange a strong position in the rest of the country. In the past two weeks, Chinese and Viet Minh propaganda regarding Laos has hardened. The United States is accused of having instigated the recent government "attack"--which was in fact a counterattack--on the Pathet Lao at Muong Peun. Com- munist propaganda charges that "sinister American maneuvers" in Laos threaten to "rekindle the flames of war in Indochina." 4 While this propaganda cam- paign'may be laying the ground- work to justify the use of vio- lence, its immediate objective appears to be to back up Commu- nist political demands. 25X1 PART II SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 NOTES AND COMMENTS Page 9 of 15 Approved Fq lease 2005/03/29: CIA-RDP79-0092 ,Z!900600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 Cambodians Dissatisf:ie4 With Cambodian officials have indicated dissatisfaction with the reservations-in the resolu- tion adopted by the Intc;rna- tional Control Commission which generally agrees that the American military aid program does not 'conflict with the Geneva accords. The Cambodians object to the resolution, which has not yet been published, because it implies that there are lingering doubts as to the validity of the aid agreement under the Geneva accords The Cambodian'premier has stated that unless the phraseology, is changed.,, his government'-will, have, no.alter- native but to lodge a,protest with the cochairmen of the 1954 Geneva conference. The premier has promised, however, first to seek a com-. promise.with the Indian chair- man of the commission. The outcome of these nego- tiations is very much in doubt. The Indian official is in a particularly difficult position as his government is anxious to maintain and extend its influence in Cambodia while at the same time to avoid antagonizing either Communist Chula or the Viet Minh. The final decision, therefore, again rests with New Delhi, where opinion seems to be in favor of going ahead with publication of the reso- lution. Indonesian Cabinet Crisis Progress toward forming a new Indonesian cabinet has thus far been characteristically slow. Aside from the usual di_ff1.c'Oties arising from Indo- Even if the resolution problem is settled by mutual agreement, implementation of plans to publish the back- ground material is bound to draw a strong Cambodian pro- test. Included among these documents is the commission's letter of 5 July to the Cam- bodian government specifying the doubts concerning the aid agreement. Prince Sihanouk was named chief of army opera- tions on 25 July. Sihanouk would be, in effect, commander in chief of the Cambodian security system and in a posi- tiord to control the country through the police as well as the army. His appointment, if confirmed, would be an effort on his part to ensure an over- whelming victory for his followers in the 11 September elections. nesia's multiple party system, the procedure is complicated by the absence of President Sukarno and the fact that'the cabinet must have army approval. SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 25X1 25X1 25X1 PART II NOTES AND COMMENTS Page 10 of 1.5 Approved Fo,. rR lease 2005/03/29 : CIA-RDP79-009 7200600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 Vice President Hatta ac- cepted Prime Minister.Ali's resignation on 24 July. He will complete conferences with the 20 parliamentary-parties and factions about 29 July and hopes to be able to name a cabi- net formateur by that time. Action may be delayed, however, until Sukarno returns from his pilgrimage to Mecca on 4 August. Meanwhile, the Ali cabinet re- mains in office on a caretaker basis. The army leaders primarily responsible for the cabinet collapse are reported-to have informed all parties that the formation of a. new cabinet will not in itself solve the army crisis. The army is expected to press for guarantees from the 'new government on future army policy, particularly with regard to organization and training. It will also seek a clear understanding on the extent to which politics will influence the military estab- lishment. Hatta and Sukarno are expected to work for the forma- tion of the usual parliamentary cabinet, despite pressure from the Masjumi and other opposition parties for a "presidential cabinet" appointed by the president and responsible to parliament. There is'no con- stitutional basis for such a "presidential cabinet" and the formation of one would Pakistan Delays Adhering To Turkish-Iraqi act Pakistan's formal adherence to the Turkish-Iraqi pact may be considerably delayed as a result of the Karachi govern- ment's failure to take immedi- ate action after Prime Minister require either parliamentary authorization or an executive decree, neither of which is likely. until other efforts have been exhausted. The formation of a cabinet has always been a lengthy pro- cedure in Indonesia. Negotia- tions for the country's four previous cabinets took from five to ten weeks. With elec- tions close at hand, however, agreement may be reached this time with less difficulty than usual. It is also likely that, in an effort to expedite matters and avoid party jealousies, as many parties as possible will be invited to join the govern- ment; . If the cabinet negotiations do require a month or more, Indonesia's first national elec- tions, now scheduled for 29 September, may be delayed. The government is highly centralized and the formation of a new cabinet is usually accompanied by the cessation of all but routine activity. In addition, the Ali government, faced with the prospect that another cabinet will be in charge of supervising the elections, will have little incentive to press election prep- arations. The incoming re- gime will also probably wish to inspect the electoral macbin- ery before proceedin with election plans. Mohammad Ali Is public announcement on ]L July that Pakistan intended to ;join. By not acting before the newly elected Pakistani Con- 'stituent Assembly met on 7 July, the government lost its best SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART II NOTES AND COMMENTS Page 11 of 15 Approved Fo elease 2005/0 / & DP79-0092000600020001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 opportunity to adhere to the pact without opposition from dissident politicians. Opposition deputies in the assembly are now likely to demand either that Pakistan not join at all or that the assembly be asked for its approval. Since the government's control of the assembly is still shaky, it may be unable to obtain quick ratification of the pact. The principal factor com- plicating the situation is the possibility that Governor Gener- The French government has yet to devise a formula which would justify continued French presence in the eyes of the North Africans, satisfy the more rea- sonable of native aspirations, and make it possible for the nations friendly to France to support its policy in the area. The two immediate problems in Tunisia deal with the econ- omy an a new constitution. Proposals to solve these is- sues probably will not be an- nounced until the French Coun- cil of the Republic considers the French-Tunisian Agreement early in August. Meanwhile, repercussions from the Moroccan disorders took the form of a series of relatively minor in- cidents. Immediate and firm police measures should reduce the possibility of serious dis- orders in Tunisia. The French governor general in Algeria recently expressed confidence that the rebel ef- fort has been so weakened that the French would shortly have al Ghulam Mohammad may die at any moment. This is encouraging politicians such as Awami League leader H. Suhrawardy to bargain for high posts in the government as the price of their parties' continued support of the Moslem League. If the governor general should die and these leaders not be satisfied, there might be a shift in the relationships of the major parties in the assem- bly, and the Moslem League might have to form a majority by alliance with a number of 25X1 independents and minor party groups. the situation in hand. The American diplomatic agent be- lievies, however, that this would mean only the establish- ment of comparative calm, not a solution of the Algerian problem. On the other hand, the letup in rebel activity may be a maneuver rather than the results of French military repression. The French National Assem- bly now plans to discuss the Algerian situation on 28 and 29 July, when it will consider giving the government decree powers to extend the state of emergency beyond October, cre- ating a fourth Algerian depart- ment with headquarters at Bone, and approving some administra- tive reforms. The most controversial measures of Governor General Soustelle's Algerian reform program have been strongly opposed by the French settlers. These! measures, considered essential to alleviate the unrest among Algerian Moslems, SECRET Approved For Rele% TES AND COMMENTS 9-00927A000600 Page 112 of 15 Approved F ,o please 2005/0RI4DP79-009 00600020001-5 28 July 1955 25X1 25X1 would remove the Moslem reli- gion from state control, teach Arabic in state schools, and progressively extend local self- government. The proposals will first be considered by the Algerian Assembly, which convenes at the end of September, where they are expected to be defeated. Subsequent passage by the National Assembly in Paris is, however, hoped for. This de- lay in a program which was first announced last December will prolong the high tension. In Morocco, Resident Gen- eral Grann vaITs tour of the principal cities was broken off at Meknes when Moroccan nationalist-inspired demonstra- tions in favor of the deposed sultan, Mohamed ben Youssef, and welcoming Grandval resulted in bloodshed in both Marrakech and Meknes. Grandval's.third stop was to have been Fez, the Moroccan Tension Renewed Between Costa Rica and Nicaragua Tension has mounted be- tween Costa Rica and Nicaragua following Nicaraguan charges against Costa Rica. President Somoza accused Costa Rica in June of complicity in a new plot to assassinate him and, took measures against Costa. Rican citizens transiting Nicaragua. This led to bitter exchanges between the two gov- ernments. The work of the Commission on Investigation and Concilia- tion, set up by the Council of the Organization of American States after the abortive religious center, where tensions are particularly high with the approaching religious festival of Aid-el-Kebir, which will be celebrated this week end. French residents in Morocco, most of whom are apprehensive over what policy Grandval may propose, may even have provoked the incidents at Meknes and Marrakech in order to impress Grandval with the undesirability of granting concessions to the Moroccans. Despite Gr-.andval's reported assertion that Paris is not con- sidering restoration of Ben You.ssef to the throne, rumors are circulating that he will be brought back before the week- end's festivities. Without the return of Ben Youssef, which is the basic demand of Moroccan nationalists, this important religious holiday will again be a period of mourning and possi- bly of widespread serious dis- orders. 25X1 Nicaraguan-backed rebel invasion of Costa Rica last January, mitigates but does not eliminate the danger of a serious crisis. Thee-commission secured conces- sions from both governments on 21 July, including a promise to continue negotiation of a treaty designed to guarantee each coun- try against revolutionary or terroristic acts originating in the other. The internal situation in Nicaragua could lead to further incidents. Somoza, strong man of Nicaragua since 1934, is preparing to succeed himself in elections set for November 1956. SECRET 25X1 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART II NOTES AND COMMENTS Page 13 of 15 25X1 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Approved F rF please 2005/03/29 : CIA-RDP79-009Z7A00600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 STATUS OF KREMLIN CONTROL OF THE SATELLITES Moscow is faced with a dilemma in the Eastern European Satellites caused by its efforts to end intimidation as a means of control and obtain instead the voluntary co-operation of the Satellite populations. These moves--which in effect are an attempt to substitute more subtle for direct controls-- have been interpreted by the Satellite peoples as indicating a weakening of Soviet controls and have only whetted their de- sires for concessions greater than the Kremlin has been will- ing to make. After World War II, the Kremlin sought to develop through force and intimidation all the means necessary to pre- vent any Satellite regime from slipping the Soviet yoke and to preserve the Communist People's Democracies against possible overthrow by their dissident populations. Control was gained, however, only at the expense of the good will and co-operation of the Satellite populations and the stifling of initiative among local Communist leaders. Furthermore, the USSR failed to obtain the economic and po- litical benefits which it ex- pected from its domination of the Satellites. After Stalin died, Moscow began to move away from intimi- dation and sought to develop active support for the Communist regimes among the Satellite populations by appealing to their self-interests and--par- ticularly in Hungary and Poland --to their strong nationalist sentiments. During 1953 and 1954, the drive toward the traditional goals of rapid industrialization socialization of agriculture, and elimination of "class enemies" was temporarily shelved. Through this "new course", the Soviet leaders attempted to rectify the growing economic imbalances which had lowered living standards and led to greater popular resistance. To grant the Satellites an appearance of a greater degree of control over their own in- ternal affairs, the Kremlin ostentatiously withdrew its outstanding reparations claims and sold back to various Satel- lite regimes its interest in most of the Soviet-Satellite joint companies. It condoned the tailoring of Soviet direc- tives to fit the particular conditions within each Satel- lite. The Satellite regimes were also directed to attempt to improve trade and diplomatic relations with the non-Commu- nist world. The Kremlin has, however, strengthened its hold over Eastern Europe in less obvious ways, Since July 1953, the USSR has replaced its ambas- sadors to most of the Satellites with men who have had extensive experience in party or govern- ment administration, and who are presumably better qualified than Foreign Ministry special- ists to serve as channels of Soviet control. The joint Soviet-Satellite military command established at the Warsaw conference on 14 May 1955 was apparently set up primarily as a bargaining in- strument to obtain the dis- solution of NATO. It can be used, however, to legalize the extension of Soviet occupation of ::astern Europe while creating the appearance of increased Satellite sovereignty. The increasing integration of the long-range economic plans of the Soviet Union and the Satellites will ultimately place the Satellite economies more SECRET Approved For le se 2005/03/29 : C A-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSP.I CT'I Vi t~ Page 1 of 12 Approved FQr Release 2005/WRIJ.RDP79-0092 7A 00600020001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 effectively under. Moscow's , control than heretofore by re- ducing their self-sufficiency and tying their production plans more. directly to the over-all Soviet bloc program. There are a number of steps the USSR can take to further the semblance of Satellite in- dependence without actually weakening its control. For ex- ample, the Cominform, long a symbol of Soviet domination-but never in fact an instrument of control, could be abolished without cost to the USSR. The USSR could also withdraw some of its troops from Hungary and Rumania without either compro- mising its control over these Satellites or prejudicing its military position vis-a-vis .Western Europe. Gestures made since Stalin"s death toward "liberalization" of economic and political pro- grams, however, have not had the desired effect. Elements within some of the Satellite Communist parties--and particu- larly in the Hungarian party-- seized on the Kremlin's recogni- tion of the right of individual states to a-dapt Soviet experi- ence+ to local conditions. This resulted'in policies at odds with the traditional Soviet policy and in a serious loss of party discipline in Hungary. The realization in Moscow that a continuation of this trend could not be tolerated was at least partially respon- sible for Malenkov's demotion in February 1955 and Hungarian premier Nagy's ouster in March. Kremlin leaders have since modi- fied their manner of implement- ing this policy in order to re- emphasize the traditional goals, to tighten discipline within the parties, and to prevent further local deviations from the Moscow line. The Kremlin probably considered this es- pecially necessary prior to any dramatic gestures toward Tito's Yugoslavia, There has been no return, however, to the coercive tactics typical of the Stalinist period. The rapidly unfolding Soviet diplomatic offensive of the past few months has aggravated Mos- cow's problems in Eastern Europe. The reaction of the Satellite people and party members to Soviet diplomatic moves has faced the Kremlin with the possi- bility that it might have to use force to maintain control. This,, of course, would vitiate its of - forts to ease international ten- sions and gain sympathy for So- viet policies. Moscow's signature of the. Austrian state treaty raised ex- travagant hopes among the Ru- manians and Hungarians for the early withdrawal of Soviet troops. The widespread expectation among the Satellite populations that the West would demand a con- sideration of the status of the Satellites at the summit meet- ing gave rise to wild rumors and speculation that unpopular local officials would be purged, that free elections would be held, and that the Satellites wou:td be granted a neutral status. Local Communist leaders in the Satellites, the lower levels, have also been confused by the rapid shifts in policy. The Soviet recognition of the validity of the Titoist variant of Socialism has ag- gravated the problem of dis- cipline within the ranks of the various Communist parties. Some top-level leaders are probably not only confused but fearful, especially since they have been closely identified with strong anti-Tito policies, which now appear to be proscribed. Soviet leaders are extremely. sensitive to this reaction and are taking strong measures to counter it. They took a firm stand against considering the status of the Satellites at the four-power conference. Most of the Satellite regimes are, under SECRET PART III Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PATTERNS AND PERSPECTIVES Page 2 of" i$ Approved Fir 2elease 2005/03/29: CIA-RDP79-009,000600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 Kremlin direction, undertaking campaigns to strengthen labor discipline and heighten vigi- lance against both internal and external enemies. They are increasing their efforts to convince the populations that the United States is interfering in internal Eastern European af- fairs through subversive tactics. The cautious publicity given in the Satellites to Khrushchev's acceptance of the Titoistalternative to the So- viet road to Socialism indicates that the Soviet leaders realize that this recognition must be carefully circumscribed in the Satellites lest it encourage nationalist deviation within the Satellite parties. At the same time, however, they must gain consistent Satellite sup- port for their new Yugoslav policy in order to solidify whatever success they have gained in their appeal to Tito for a genuine rapprochement. This has again raised the problem for the Kremlin of how to ensure Satellite compliance without ex- posing the naked machinery of Soviet domination. The Soviet leaders probably believe that given sufficient time they can establish a more satisfactory relationship with the Satellites. During their talks with Tito in early June, Soviet leaders reportedly claimed that there would be a change in their policy toward the Satel- lites, but that time would be needed for this. 25X1 COMMUNIST CHINA'S FIRST FIVE-YEAR PLAN Peiping has announced for the first time the main details of its first Five-Year Plan. It was begun two and a half years ago but the final draft was completed only last February. The announcement discloses that Peiping is generally adhering to its previously announced ambi- tious industrialization goals while reducing agricultural targets. The,regime appears confident of achieving its goals for mili- tary and industrial development. Barring further agricultural dis- asters similar to those of 1954, these aims can probably be reached. Peiping is placing greater emphasis on austerity and is temporarily showing the trend to- ward socialization in agriculture and retail trade in order to stimulate production incentive. The Five-Year Plan report acknowledges the importance of material and technical aid from the USSR, which has assumed responsibility for the construc- tion of 156 large industrial projects described as the core of the industrial construction program. The report reasserts China's determination to-achieve a socialist society on the Soviet pattern in three Five-Year Plans and to become a highly indus- trialized country in 40 to 50 years, but says that by 1957 the level of industrialization will still lag far behind that of Japan. Capital investments--addi- tions to fixed assets--from 1953 through 1957 are to total $18.3 billion. This is more than 10 percent of the gross national product during the period, a high SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 3 of 12 Approved F2elease 2005/(al-RDP79-00000600020001-5 28 July 1955 figure for a country with China's low standard of living. The rate of investments is to rise as the plan progresses; 68 per- cent of construction work is scheduled for the last three years of the plan. COMMUNIST CHINA Major Heavy-Industrial Construction Under-, First Five-Year Plan A (>'.tHR t~AC:HiNEk'i ( ~-' i n: t'i?;M MOTOE fEEiiCLE 0! 4 TRACTOR The $18.3 billion .(con- verted at the current exchange rate) is allocated principally to the following: 58.2 percent to industry; 19.2 percent to transport, posts and telecommuni- cations; and only 7.6 percent Tsitsihar Haokang Kirin `Tafengmen SAW * r fAAuukden Changchun Anshar1* Kungyuan it Yumen Taiyuan Shihchi3chuang .~r Lanchou. Fengfeng it Chengchou Huainan' Chengtu i'ar,tou X Sian X Chungking Tatung Peiping Kailan Dairen angshan Wuhan 4Tayeh Hsiangtan* 0 `Kunming OKochiu Cantonal Nanping W U nfocated 25X1 SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 4 of 12 Approved Felease 2005!;EMErp-RDP79-00000600020001-5 CURRENT INTELLIGENCE WEE1MY SUMMARY 28 July 1955 25X1 COMMUNIST CHINA Five-Year Plan CAPITAL INVESTMENT - $18,300,000,000 to agriculture, forestry and water conservancy. Of the $10.7 billion for industry, heavy industry is allocated 88.8 percent, a larger proportion than in the Soviet first Five-Year Plan, but one which is justified, according to Peiping, by the existence of much idle capacity in - light industry and lack of raw cotton and other agricultural raw materials to support a large expansion of light industries. The geographical center of industry is to be shifted inland for both security and economic reasons, but this redistribution will not become significant until the second Five-Year Plan, during which new industrial bases in North, Northwest and Central China are to be com- pleted. Meanwhile, China's industry will remain concentrated in Manchuria and coastal areas. Of the 694 large industrial projects being started during the first plan, 472 are located in inland provinces. Some investment prices supplied by Peiping when compared with construction costs in other countries suggest that the exchange rate at Which the $18.3 billion figure for invest- ments is calculated somewhat, but not greatly, overstates the real value of the investment program. Peiping has reported the costs of the following enter- prises: $840,000,000 for an iron and steel enterprise with an annual capacity of.1,500,000 metric tons; $28,000,000 for a 50,000-kilowatt power plant; $170,000,000 for a tractor plant producing 15,000 54 horsepower tractors per year; and $14,000,000 for a 50,000- spindle textile mill. While comparisons are difficult.and tentative, it is believed that China is budgeting the costs of its new plants at a higher level than the costs of com- parable facilities in non- Communist undeveloped countries. Little new capacity had been added to China's industries by 1.954, however, and a substan- tial portion of the new plants will not be in operation until the second Five-Year Plan. Industry and Rail Transport The Five-Year Plan report retains the previously announced industrial target of doubling gross output between 1952 and 1957. The annual increases in the gross value of industrial production and railroad trans- port operations are to fall off sharply after the first two years of the plan from an annual average increase of about 24 percent in 1953 and 1954 to 9 percent per year in the last three years of the plan. This decline is anticipated despite rising investments and indus- trial capacity, and results from a considerably intensified use of existing industrial and transport capacity during 1953 and :1954 to a nearly maximum level. The projected decline in the annual rate of increase is SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 5 of 12 Approved For release 2005/03/29: CIA-RDP79-00L000600020001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 less pronounced in heavy in- dustries than in textile and light industries. The propor- tion of gross output of heavy industries to total industrial output is to rise from 39.7 to 45.5 percent during the period of the plan, Agricultural Production The new 1957 target for food crops is 192,800,000 metric tons, 17.6 percent over 1952 but 10 percent below a 1957 goal announced in 1953. Although Peiping is appraising its agri- cultural prospects more real- istically than in 1953, even the reduced target is believed to be unattainable with the small in- vestment resources allocated to agriculture. Since Peiping has admitted that agriculture is to have low priority for investment in the second Five-Year Plan, except for the large projects to control the Yangtu and'Yellow Rivers, it is estimated that the actual-rise in food out- put during both plans will not be much more than 10 percent. Population growth during this period will almost certainly be as great. The goals for industrial crops are higher than those for food: raw cotton produc- tion is to rise 25.4 percent in the five-year period; oil bearing crops, 37,8 percent;. sugar cane, 85 percent; and tobacco, 76.6 percent. Efforts toward socializa- tion during the last three years of the plan are concentrated on eliminating remaining private indus- . trialists,. Meanwhile, the drives to socialize two other groups--farmers and retail merchants--are to be moderated, evidently a belated attempt to retain agricultural production and marketing incentives. COMMUNIST CHINA Industrial Production and Railroad Freight Volume ?- STEEL .TT ELECTRIC POWER _ _ _ COAL -----_ CEMENT .??????.????. CLOTH RAILROAD, TON-KM S. 28 JULY 1955 Whereas in 1954 Peiping predicted that by 1957 more than half the peasants would be in agricultural producers' co-operatives, an elementary form of collective, this target has now been cut to one third. As most peasants in the "old liberated areas" of northern China are to join co-operatives, apparently little effort is planned in the Yangtze Valley and South China, where peasant opposition to the regime is probably more intense. At pres- ent, . 14 percent of the 110,000,- 000 peasant families in China are in co-operatives. Private retail merchants apparently have been given a reprieve. The proportion of retail trade to be handled by state organizations is to de- cline from 58 percent in 1954 to 55 percent in 1957, but there will. be a concurrent tightening of indirect controls on private retailers. 25X1 SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 6 of 12 Approved Fc Release 2005/0?L9e?Glgy:,F DP79-00$,23A000600020001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 The state plans to absorb by 1957 most remaining private industry. The proportion of total industrial output pro-duced in state-owned factories and others under direct state control was 37 percent in 1949, 61 percent in 1952, 75. percent in 1954 and is to be 88 percent in 1957. The placing of nearly all wholesale trade under state man- agement--a primary goal of the first Five-Year Plan--has already been accomplished. This move and the related program of forced purchase of farm products under a quota system have increased considerably. the regime's con- trol over farm produce and pri- vate industrial output. Ties with the USSR Soviet aid is said to be essential to the plan, with the 156 projects being built by the USSR constituting the nucleus of industrial construc- tion in the plan. Peiping claims that it has a high priority for delivery of equipment from the USSR. The European Satellites, probably at Soviet direction, are'supplying increasing quanti- ties of equipment and technical aid for industrial development in China. According to the plan report, China expects with So- viet aid to begin the develop- ment of atomic energy for eco- nomic purposes by 1957. The USSR has publicly offered during 1955 to help China and several Satellites to develop atomic energy for peaceful purposes. The report emphatically re- affirms China's close ties with the USSR. It devotes a long sec- tion to praise for Soviet aid, and other sections contain fre- quent references to Soviet aid, citations of Soviet sources for justification of policies, analo- gies from the first Soviet Five- Year Plan, and assertions that Soviet patterns are being followed. 25X1 25X6 SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 7 of 12 25X6 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 Approved FRelease 2005'S0/9ET-RDP79-00A000600020001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 25X6 LATIN AMERICAN COMMUNISTS REWRITE PARTY PROGRAMS Since the draft of the new Brazilian Communist Party pro- gram was issued in January 1954, other Communist parties in Latin America have been re- writing their own programs, using the Brazilian one as a model. The Communists' pros- pects for achieving their political objectives are un- favorable in most countries. In Brazil there is a possibil- ity, however, that the party may be able to strengthen its position through an electoral alliance. The new Communist programs seek to isolate United States "imperialism" as the chief target for attack. They seek to bring the "national bour- geoisie"--business elements independent of American con- trol--into a Communist-led "united democratic front for national liberation." The new party programs recognize the significance of Latin America as the locus of 40 percent of all American foreign investment, the source of 32 percent of US imports, and the market for 26 percent of the United States' non- military exports. The Commu- nists hope to capitalize on the widespread dissatisfaction with dependence on United States capital and trade policies. The Communist programs are designed to isolate the United. States by promoting trade with non-American countries, and to gain the sympathy of a dissatis- fied, nationalistic, bourgeois group. In this effort, the parties are aided by the Soviet Union's trade offensive. This offensive, of which the recent Soviet trade fair in Buenos Aires was an example, caters to Latin Ameri- can interest in independent national development programs, barter agreements, and develop- ment of non-US markets and sources of supply. The Latin Americans' dis- satisfaction with their econom- ic relations--often linked with emotional "anti-Yankee national- ism"-is one of the greatest assets the Communists have to exploit. The growth of trade between the USSR and Latin America responsible for. Uruguay's recent decision to reopen its legation in Moscow--may in- directly contribute to the prestige and security of local Communists. The Brazilian Program The Brazilian party's pro- gram was developed in 1952 and 1953 under Soviet guidance and has received the official SECRET' Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 9 of 12 Approved Fo,telease 2005/03/29: CIA-RDP79-009 7? SECRET 000600020001-5 28 July 1955 LATIN AMERICAN REPUBLICS COMMUNIST PARTY STRENGTHS Estimated Party Membership over 100,000 25,000 to 50,000 5,000 to 25,000 500 to 5,000 under 500 endorsement of the Soviet Com- munist party. It was approved by the Brazilian Communist Party congress in November 1954, The major objectives of the Brazilian party's program were presented in the Cominform journal earlier this year in an article by Diogenes Arruda Camara, secretary of the cen- tral committee of the Communist Party of Brazil. Arruda listed the main conclusions of the 50726 program, such as the necessity of overthrowing the present Brazilian government--identified as the tool of American "im- perialists"--the need to form a united front of all antiimperial- ist and antifeudal forces, from the proletariat to the national bourgeoisie, and the need to make the Communist program that of "the whole people." Arruda noted that the pro- gram recognizes "Marxist-Leninist SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 10 of 12 Approved F Release 2005/ REIILRDP79-00 000600020001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY 28 July 1955 teaching" with respect to the nature of the revolution in colonial and dependent countries i.e., that in such countries the native capitalists them- selves are victims of imperial- ism, and are thus useful as allies in the anti-imperialist struggle. Arruda then defined the "four new basic elements" of the program as follows: First, it "concentrates its fire on US imperialism," and "makes it possible to use the contradictions among the imperialists in the interests of the revolution," and seeks as provisional allies those Brazilian capitalists who are linked with "non-US" imperial- ist groups. Second, it demands confis- cation of the properties of large landowners only, and thus corrects the former "sectarian" error of viewing the "rich and even the middle-class peasants" as a counterrevolutionary force. By guaranteeing the property of the well-to-do peasants, the program accepts "objective economic reality," and makes it possible to win over the well- to-do peasants as allies, and increases the possibility of winning over the richer peas- ants. Third, the program does not ask for the confiscation of all banks, enterprises, and capital, but only of those which have "betrayed national in- terests" through collaboration with American interests. Fourth, the program seeks the establishment of a 'people's democratic state" which would be "a coalition of the working class, peasantry, intelligentsia, petty bourgeoisie, and national bourgeoisie," led by the pro- letariat and the Communist Party. Brazilian Program as a Model The Brazilian program has been given continuing laudatory attention in the Soviet and Cominform press, and is now being extensively copied. Steps have been taken toward the formulation of new programs by Communist parties in Colombia, Costa Rica, Ecuador, Paraguay, Uruguay, Venezuela, and possibly other countries. In a number of cases, parties have explicitly recognized the Brazilian program as their guide, and in others, acceptance of its major points is apparent in party activities. In Mexico, for example, the committee assigned to draft a new party program has come to the following "conclusions": (1) the Ruiz government represents only the wealthy class and gives special protection to United States capital; (2) the "national bourgeoisie" should be persuaded of the need to fight "Yankee imperialism"; and (3) even those bourgeoisie who are linked with British or French "imperialism" should be defended if they are opposed to the United States. Mexican party leaders stress that the "national bourgeoisie" --which they have defined as those whose capital comes from within the country and who man- ufacture for domestic or other Latin American consumers--must be sought as allies and assured that their properties will not be confiscated. Stating that the ""democratic-bourgeois revolution" has already develop- ed in Mexico--reaching a peak in the 1930's under President Cardenas--the Communists define their task as that of exposing the betrayal of the present bourgeois administration and building a democratic, anti- impesrialist liberation front under their own leadership. In Costa Rica, the "new theoretical contributions" of the Brazilian party program were recently praised by Rodolfo Guzman, a member of the political commission of the Costa Rican Communist Party, who is preparing a draft program for SECRET Approved For Release 2005/03/29 : CIA-RDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 11 of 12 Approved FoteleaseQQ5/03/2P:LL-00900600020001-5 28 July 1955 consideration at a party con- gress to be held later this year. The Venezuelan Communists have recently published the Brazilian party program in pamphlet form, calling it evidence of "a new stage in the application of Marxism to the conditions obtaining in Latin America, where the people have the same enemy--US imperial- ism--and generally similar economic, social, ant. political problems." The Uruguayan Communists, who will also hold a congress this year, are likewise study- ing the Brazilian program. The Paraguayan and Colombian Commu- nists have acknowledged it, and within the Chilean party it has been described as a "model for all of Latin America with re- spect to party organization, press, and propaganda." Implementing the Programs .In most countries, the Communists' prospects are un- favorable. Both administra- tion and major opposition parties are anti-Communist, and the Communists, often numeri tally insignificant, must be circumspect in their actions. Moreover, their programs, calling for a broad coalition of popular forces, preclude alliances with extremist non- Communist elements which have no popular support. In Mexico, for example, the anti-Communist administra- tion party has a virtual monop- oly.over popular support., The Communist Party, with only about 4,500 card-carrying members, has found it impossible to dis- credit the administration leadership. In Colombia, the party is in danger of drastic suppres- sion, has gained no supporters for its "democratic front for national liberation," and has denounced as "sectarian" those who.favored open support of the extremist Liberal elements now engaged in guerrilla activity. In Chile, the party posi- tion is somewhat better. There it possesses some 35,000 mem- bers, appears well organized, has good propaganda outlets and a significant influence in labor. It remains illegal, however, and the "people's front" which it has been able to es- tablish with minor legal parties is politically ineffective. The Chilean Communists' fear of government repression was recently apparent in their reluctance to support the one- day general strike of 7 July. Only in Brazil does there seen to be a Toss ility at present of significant Commu- nist political achievement in line with the party program. There the 120,000-member Com- munist Party, although illegal, is very well organized, has a popular following in its own right, and has instructed its members that they must be pre- pared to "take up arms immedi- ately" in event of illegal seizure of government power. However, the Communists, recog- nizing the infeasibility of challenging the Brazilian armed forces by taking unilateral action of a violent nature, are concentrating on efforts to align themselves with other political forces. In this effort, the party achieved one striking success when it formed a winning alliance with two important legal parties in the Sao Paulo mayoralty elections of May 1955. The Brazilian Communists hope to establish a similar alliance prior to the presi- dential elections on 3 October. The existence of several candidates and the divided electorate place the party in a position to bargain its sizable disciplined vote for an oppor- tunistic alliance which, if successful, would greatly en- hance the part Is political position. CONFIDENTIAL 25X1 Approved For Release 2005tDP79-00927A000600020001-5 PART III PATTERNS AND PERSPECTIVES Page 12 of 12