CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000900030001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 41
• Document Creation Date: December 23, 2016
• Document Release Date: May 24, 2012
• Sequence Number: 1
• Publication Date: July 12, 1956
• Content Type: SUMMARY

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,..; ~.
~. ` _
CONFlDENTIAL ~.o/Fa
9E~Ci~EF
(CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
W~+TE `Frr~.=.s.?.L~..i~EVIEV'JER
AUTH? HR 70-
COPY N0. ~_s
Q(; ~ N Q, 4.645/56
12 July 1956
DOCUMENT NO. ____
NO CHANGE IN CLASS. D
DECLASSIFIEt)
CLASS. CHANGED TO:
NEXTREVIEW DATE: ' r -
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
_~
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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 far 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.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
T H E W E E K I N B R I T F
USSR ISSUES FURTHER GUIDELINES
Page 1
ON DE-STALINIZATION .
Pravda's editorial follow-up to the 30 June central
comma twee resolution issued in defense of de-Stalinization
indicates that the Soviet party has, for the time being
at least, closed the debate on the causes and implications
of Stalinism. Although reassessmen~.~af Stalinist practice,
accompanied by a guarded loosening~at certain points in
the Soviet system; is lik---to continue at a deliberate
pace, the regime has owe again acted to ensure its strict
control of the process. Meanwhile, the most important
Western Communist parties have commented favorably on the
30 June resolution.
ARAB-ISRAELI SITUATION . . . . . . . e Page 2
New incidents which have taken place on the Israel-
Jordan border may revive the excitement which prevailed
in Arab capitals for a few days last week when Jordan's
leaders announced they expected imminent Israeli ag-
gression. The Israeli response to the new incidents
may be even more bitter than usual, since they follow
close on assurances from Jordan that King Hussain and
his chief of staff are doing their utmost to control
their own forces and avoid what the Israelis would view
as provocations. UN secretary general Hammarsk,~old is
scheduled to return to the area next week.
THE TITO-NEHRU-NASR MEETING . . . Page 3
The meeting in Yugoslavia of Tito, Nehru, and Nasr,
apparently scheduled to begin on i8 July, will bring
together for the first time these three self -appointed
champions of the "anti-bloc" nations of the world.
Preoccupation of each of these leaders with his own
special interests will probably restrict their field
of agreement to themes favoring national independence,
coexistence,.: the peaceful settlement of disputes, and
the need for disarmament and a ban on atomic warfare.
C01'~FIDENTIAL
i
THR WEEK IN BRIEF
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CURRENT INTELLIGENCE WEEKLY SUMMARY
I2 July 1956
NOTES AND COMMENTS
repression as a means of control.
AFTERMATH OF POZNAN RIOTS . . ~ . Page 1
The Polish government has reacted to the Poznan .riots
with a combination of threats and concessions. The Polish
United Workers' (Communist) Party and the government are
in a dilemma as a result of differences of opinion among
the leaders between the proponents of a more liberal
course for Poland and the militant Communists who favor
TAE FRENCH COMMUNISTS
AND THE CULT OF PERSONALITY . . . . ~ Page 2
On the eve of its 14th congress, scheduled to begin
on 18 July at Le Havre, the French Communist Party seems
to have accepted the results of the Soviet 20th Party
Congress, particularly Khrushchev?s attacks on Stalin
and the cult of personality. Despite some continuing
confusion and indications that Stalinist traditions in
the French party may die hard, the r ,
seems to be maintaining control.
THE PANAMA MEETING OF PRESIDENTS ~ . . Page 3
A number of the Latin American presidents who are to
meet with President Eisenhower in Panama on 21-22 July
apparently have plans for requesting economic or polit-
ical aid. The most urgent request for an extensive
foreign loan is expected to come from Brazilian president
Kubitschek in connec his economic development
program.
SIGNS OF BURMESE DISCONTENT
WITH COMMUNIST TIES ~ ~ , . Page 4
There are increasing signs in Burma of discontent
with the results of the close ties established with
Communist countries during former premier U Nu's tenure.
The initial momentum of the Sino-Soviet campaign to
capture Burma's sympathies appears to be lost, and the
bloc can be expected to take some steps aimed at
ad us? rences that have now arisen,
C~~I~IDENT~AL
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THE WEEK IN BRIEF
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CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
CAMBODIA'S RELATIONS
WITH THE SING-SOVIET BLOC
Cambodian crown prince Sihanouk's policy of closer
relations with the Sino-Soviet bloc produced on 7 July,
at the conclusion of Sihanouk's visit to Moscow, a Soviet
pledge to provide Cambodia "unconditional" economic and
technical assistance. While some Cambodian leaders fear
the consequences of the influx of numerous Communist
technicians into Cambodia, Sihanouk appears confident
that he can control Communism internally. For its part,
the USSR probably regards the outcome of Sihanouk's visit
to Moscow as an important step in the x~romotion of its
aims in Southeast Asia.
Page 5
JAPANSSE SOCIALISTS SCORE GAINS
IN UPPER HOUSE ELECTION . . . Page 6
As a result of their gain in the Japanese upper
house election on S July, the Socialists, supported by
other leftist elements, now control one third of the
upper house membership, en?ugh to block government
plans to revise the constitution in order to legalize
Japanese rearmament. The Socialists have attributed
their increased popular support to the party's anti-
American policy, which emphasized the Okinawan land con-
troversy and opposition to both American bases and re-
armament.
CHINESE COMMUNIST PARTY CONGRESS
TO CONVENE IN SEPTEMBER
Peiping has announced that the Chinese Communist
Party will convene its eighth congress on 15 September.
The last congress met in 1945. Some 1,000 delegates
are expected to reaffirm Mao Tse-tung's leading position
within the regime and to "elect" a new central committee
which will reflect the present power position of Mao's
be negotiated '?in a few months." India, although
suspicious of Chinese Communist advances, has thus far
Page ?
PEIPING PREPARES NEW MOVE
FOR CLOSER TIES WITH NEPAL . Page ?
Since Nepal recognized Communist China in August
1955, Peiping has. worked steadily to draw the kingdom
out of the Indian orbit and expand Chinese influence
there. This campaign is apparently about to pay off
in a treaty covering commercial and economic matters to
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THE WEEK IN BRIEF
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AFGHAN-SOVIET DEALS Page 9
The signing of six contract agreements in late June
and early July for Soviet projects in Afghanistan is a
further indication of the speed with which the USSR is
implementing its $100,000,000 credit agreement of last
Jar~,y, One of .the contracts--for the Kabul airport--
CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
countered the impact of a $14,500,000 Afghan-American
aviation development agreement signed on 27 June.
FRENCH NORTH AFRICA
.SECRET"
Algerian rebel activity has slowed in the north, but
it has increased in southwestern Algeria along the
Moroccan border. In Morocco, a potential threat to the
sultan's authority appears reduced by the incorporation of
part of the "Army of Liberation" into the new Moroccan
army while French-Moroccan tension over defense matters
has intensified. The Moroccan government is pressing the
American air base issue. Tunisian-French tension has
again flared on the issue of Tunisian svrnpathy for the
MOLLET'S CONCESSIONS WIN FRENCH
ASSE~dBLY'S SUPPORT FOR EURATOM . ,
Page 10
Page 12
Premier Mollet has won a 342-183 vote of approval
in the National Assembly for French participation in
the drafting of a six-power EURATOM treaty. Some of
his. support, however, was won by concessions to nation-
alist opponents of European integration who objected in
particular to any effective limitation of France's
rights to develop nuclear weapons. These concessions
leave in doubt the question of whether a treaty accept-
able to the other five nations will be ratified by the
FRICTION IN
WEST GERMAN-YUGOSLAV RELATIONS ,f Page'13
West German-Yugoslav relations suffered a setback on
7 July when the Bundestag, irked at recent Yugoslav state-
ments seeming to imply recognition of East Germany, ad-
journed without ratifying the West German commercial loan
to Yugoslavia ar the war claims agreement negotiated in
March. Yugoslavia's indignant reaction will probably
jeopardize West Germany's economic position there. These
incidents typify the kind of difficulties Bonn is likely
to encounter in its relations with o h
matters pertaining to East Germany.
SECRE T
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THE WE'E'K IN BRIEF
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CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
Cf~LLECTIVIZATI4N DRIVE page. 14
IN THE SATELLITES .
the bloc's agricultural problems.
A drive to speed up the pace of collectivization
in the Eastern European Satellites has been in progress
since mid-1955. This campaign may seriously increase
peasant bitterness and depress future agricultural out-
put, but the Communist leadership has apparently de-
cided that collectivization is the only solution to
RECENT SQVIET AGRICULTURAL DTCREE . . . . Page 15
undergo mayor change before formalization.
received unfavorably by the urban population and will
The Soviet Union has taken the unusual step of
publishing a decree in draft and allowing "public
discussion" before governmental approval. The proposed
decree, which would eliminate the use of grain and other
foodstuffs purchased from state stores for feeding
privately owned livestock and would restrict private
ownership of livestock in urban areas, has apparently been
INDONESIA . . . . . . Page 16
The influence and prestige of the moderate, pro-
West Mas~umi probably will decrease further as the re-
sult of its present isolation within the Indonesian
government and its allot I1 share of
government appointments.
C?MMUNIST YOUTH-FRQNT ACTIVITY
IN LATIN AMERICA Page 16
International Communist youth fronts are making an
increased effort in Latin America to extend their net-
work and expand memberships and influence. The campaign,
which coincides with the Soviet bloc's program to in-
crease diplomatic and economic relations with Latin
Amerj.ca, was ordered in August 1955 when the councils of
the World Federation of Democratic Youth and the Inter-
national Union of Students resolved to correct the
"insufficient attention" previously given this area.
SECFdE7'
THE WEEK IN BRIEF
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CURRENT YNTELLIGSNCE WEEKLY SUMMARY
12 July 1956
PATTERNS AND PERSPECTIVES
DEVELOPMENT CF THE SING-SOVIET ALLIANCE Page 1
The Sino-Soviet alliance, which was firm in Stalin's
time, seems to be as firm or firmer under the Khrushehev-
Bulganin leadership. In the past two years, the Kremlin
has helped Peiping to increase its international prestige,
has continued its aid to the Chinese Communist military
establishment, and has agreed to enlarge substantially
its contribution to China's industrialization. Peiping
may have adjusted its policy toward Taiwan to fit the
Soviet aims of avoiding a general war and of engaging
the West in a long-term competition. The Chinese are 25X1
elsewhere in the Far and Near East.
LATIN AMERICAN ATTITUDES TOWARD US INVESTMENT . . .
Latin American dissatisfaction with Washington?s
emphasis on private rather than government investment
has notably abated during the past several months. While
Ibis dissatisfaction had become less intense following
the Rio conference of November 1954, it could well re-
sume its former intensity if measures taken by the United
States and local economic reforms do not substantially
increase the flaw of private dollar capital.
~'~'CRET'
Page $
THE WEEK IN BRIEF
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. - ~ ~ SECRET ?~
CURRENT INTELLIGENCE WEEKLY SUI4'i1~1ARY
1B July 1956
?F IMMEDIATE INTEREST
USSR ISSUES FURTHER GUIDELINES
?N L1E-STALINIZATION
Pravda's~editorial follow-
up to tie 30 tune central com-
mittee resolution issued in de-
fense of de-Stalinization in-
dicates that the Soviet party
has, far the time being at
least, closed the debate on the
causes and implications of
Stalinism.
Clearly suggesting that
the party has rested its case
on the "vivid and precise Marx-
ian reply" provided by the res-
olution, Pravda has shifted
from defense to reaffirmation
of basic political premises and
a statement of the limits be-
yond which "democratization"
will not be willingly carried.
Although reassessment of
Stalinist practices, accompanied
by a guarded loosening at cer-
tain points in the .Soviet sys-
tem, is likely to continue at
a deliberate pace, the regime
has once again acted to con-
fine the process to a frame-
work established by itself.
Pravda's editorial of 6
.duly, ke the central commit-
tee resolution, stressed that
-the basic lines of the Soviet
system and the party's "Lenin-
ist principles" were unaffected
~~by Stalin's errors. "In spite
of the great harm done to the
party by the cult of the in-
dividual of J. V. Stalin," the
editorial asserted, "the party
created by V. I. Lenin,, backed
by its local organizations,
..never ceased to live a creative
life."
In Stalin's late years,
Pravda continued, in an appar-
en reference to the present
leadership, there was in the
central committee "an able
Leninist nucleus of leaders who
understood correctly the press-
ing requirements both in the
fields of home and foreign pol-
icy.'? The thread between Lenin
and the present, it was implied,
therefore. is unbroken and the
principle of the party's con-
tinuity and infallibility re-
mains intact.
There can be no question
of freedom of the press in the
Western sense'or of a mufti=
party system in the USSR, Pravda
emphasized--thus implying pia
such proposals have cropped up
within the country. .They are
ruled out by the fact that "the
Communist Party was, is, and
-will be the one and only ruler
of thoughts, the one to express
the ideas and .hopes of the peo-
ple--the leader and organizer
throughout the entire struggle
for Communism."
Having restated this funda-
mental principle, Pravda pointed
to a proper understating of
"Soviet democracy" with a quota-
tion from Lenin; "It is heces-
nary to learn to merge together
the turbulent, mass-meeting-like
democratism of the working class-
esy flowing like a spring flood,
with iron discipline in work,
with unc~emurring submission to
the will of the individual--
the Soviet leader--in work.?'
Meanwhile, the most im-.
portent Western Communist par-
ties have commented favorably
on the 30 June rPSOlution.
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PART I DF Id>N[EDIATE INTEREST Page 1 of 4
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SEC.I~ET
CURRENT INTELLIGENCE WEEKLY SUMMAR Y
12 July 1956
The French party has praised it
extravagantly, Italian and
American Communist leaders have
also endorsed the statement but
have indicated that they have
some reservations,
Italian, Belgian, and Brit-
ish Communist Party delegations
are now holding talks in Mos-
cow, presumably discussing the
de-Stalinization question, and
,Finnish party leaders are re-
portedly there also. Leaders
of other Western Communist par-
ties can be expected to join
the procession to Moscow.
Rank-and-file Communists
and the leaders~of some of the
"West European parties, particu-
larly Dutch and Belgian, are
reported) in a stat
fusion.
A French Communist central
committee statement, issued
after the return of a three-
man party delegation from talks
in Moscow, "warmly approved"
ARAB-ISRAELI SITUATION
New incidents which have
taken place on the Israel-Jor-
dan border ma,y revive the ex-
citement which prevailed in
Arab capitals for a few days
last week when Jordan's leaders
announced they expected an im-
minent Israeli attack. The
Israeli response to the new
incidents may be even more bit-
ter than usual, since they fol-
low close on assurances from
the Soviet resolution and rec-
commended it to all party mem-
bers far study. (See Part II,
p. 2 for details of the French
party's positiana)
Italian party leader Tog-
liatti continue, to express
"unreserved appr-oval" of the
policy of overcoming the per-
sonality cult but has said that
"differing opinions are pos-
sible" on the significance of
atalin's mistakes and that
further "frank discussion" is
necessary. He did not retract
his charge of "degeneration at
various points of the (Soviet)
social bady," for which he was
taken to task in the Soviet
resolution.
American party leader
Eugene Dennis, whose article
on the de-Stalinization ques-
tion was reprinted in Pravda
on 27 June, said the Soviet
resolution "goes a long way'''
in explaining the Stalinist
cult. The New York Daily
Worker, however, has sad. that
wfi~e-some Marxists would be
fully satisfied by the resolu-
tion, others "will feel that
the final answers still need to
be found and that the discussion
Jordan that King Hussain and
his chief of staff are doing
their utmost to control their
own forces and avoid what the
Israelis would view as provo-
cations.
So far, however, the more
determined Israeli attitude has
been given only verbal expres-
sion. During the apparently
artificial crisis between 4 and
SECRET
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PART I OF IMMEDIATE INTEREST page 2 ~f
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'CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
8 July, when Jordan insisted
that Israeli troops were mas s-
ing,. the Israelis repeatedly
asserted Jordan's fears were
figments of Arab imagination.
They invited foreign attaches
to view Israeli maneuvers on
9 and IO July, probably to re-
assure these observers that
nothing unusual was taking
place Foreign Minister Myer-
son told American officials she
could explain the crisis only
in terms of some internal Arab
maneuvering from which Arab
leaders wished to distract at-
tentian,
Developments in the Arab
states--the change of army
staff chiefs in Syria, uncer-
tainty about future political
trends in Jordan, and Iraqi
troop movements--probably had
much to do with the nervousness
exhibited by some of the Arab
leaders.
THE TITO-NEHRU-NA SR MEETING
The meeting in Yugoslavia
of President Tito, Prime Minis-
ter Nehru,-and President Nasr,
apparently scheduled to begin
an 18 July, will bring together
for the first time all three
Qf these-self-appointed cham-
pions of the "anti-bloc" nations
of the world.
The preoccupation of each
of these leaders with his own
special interests will probably
preclude agreement on specific
problems of mutual interest
.and limit any joint communique
vmainly to restatements of such
general themes as the "five
principles" of peace and coex-
istence, the need for disarma-
ment and a ban an atomic weap-
ons,:-and the settlement of
disputes by peaceful means
Even though the excitement
early in July seems to have
been a false alarm, the Jorc'a-
nian response to UN truce chief
Burns' warning and Burns' own
views--he told American offi -
cials he was "frankly alarmed"
at the Israeli attitude--are
symptoms of renewed tensions.
UN secretary general Hammar-
sk~old, who will again visit
Jerusalem on 19-20 July, and
go on to Cairo on 21-22 July,
will find that much of the ef-
fect of his mission last April
has been dissipated, and that
his fears that he had gained at
best a temporary truce have
been Iaraely iustif;A~
Regardless of the nature
of the communiqub, however, the
meeting will be widely inter-
preted in Asia as further evi-
denee that the neutralist powers
-are growing in importance in
world affairs, Many former
colonial countries would prob-
ably also be encouraged by an-
other formal association of a
European power with the neutral-
ist views of Asiaa
One. issue on which all
three men could probably agree
is that there has been a major
change in Soviet thinking dur-
ing-the past year in the direc-
tion of political "liberaliza-
tion" and that Soviet actions
are genuinely intended to re-
lieve world tension. Tripartite
formalization of this agreement,
s~e~~T
OF IMMEDIATE INTEREST Page 3 of 4
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CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
already individually expressed
by Tito and Nehru, would prob-
ably lead `to wider acceptance
or this opinion in the .Asian
world.
The greatest common inter-
est of the three leaders lies
in the Middle East, and discus-
sions will probably be devoted
primarily to that area.
Tito, Nehru, and Nasr will
probably voice sharp criticism
of military blocs, but Tito is
unlikely to agree to any s pecific
reference to the Baghdad pact.
Tito and Nehru may hope
for a solution to the Israeli
problem. Nasr probably cannot
officially associate himself
with any settlement plan dis-
cussed at Brioni without con-
sulting his Arab colleagues.
SE'CR,~T
OF IMMEDIATE INTEREST Pa~P a ~f .e
Nehru and Tito oppose UN
discussion of the French Algeri-
an dispute. Nasr, although be-
longing to the group of nations
which argued for UN considera-
tion of the case, might, if
pressed, agree to put out feel-
ers along the lines of the an-
nounced Indian-plan for a cease-
fire and direct negotiations.
If rumored efforts by Tito
'to assume leadership of a move
to bridge the gap between Com-
munism and Socialism under the
guise of "progressive unity"
should actually develop, they
.may lead to a rivalry between
,the three men, each of whom as-
pires to a prominent position.
Nehru, in particular, would
react strongly to any action by
Tito which he might consider a
challenge to his own ambitions.
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
I2 July 1956
NOTES AND COMMENTS
AFTERMATH OF POZNAN RIOTS
The Polish government has
reacted to the Poznan riots
with a combination of threats
and concessions. The Polish
United Workers' (Conununist)
Party and the government are
in a. dilemma as a result of
differences of opinion among
the leaders between the pro-
ponents of a more .liberal.
course for Poland and the
militant Communists who favor
repression as a means of con-
trol.
Party first secretary
Och~,b and his followers may
claim that the Poznan incident
is sufficient reason to.rein-
stitute tighter centrals, at
le2.st temporarily, while the
faction led. by Premier Cyran-
kiewicz may propose a contin-
uation of the liberal policies
to placate the populace. Some
cognizance will have to be
taken of the views of the
people, who appear to be en-
couraged by the uprising and
may seek redress of their
grievances with further demon-
strations. So fax, the govern-
ment-has acted relatively
moderately:
Concessions have been made
to the Poznan workers. The
-first of four payments, which
will total 6,50,400 zlotys
($1,625,?~O.at-the legal rate
of exchange) to compensate far
overtaxation, has been made..
The government claimed that
the-tax settlement had ?been
arranged the day before the
ricits,
Two government officials
have been removed from office,
either as scapegoats or for
actual ineptness in handling
the Poznan workers' demands.
On ? July, Machine Industry.
Minister Fidelski and Auto-
mobile Industry Minister
Tokarski were relieved of
their posts and their minis-
tries combined. The new Min-
istry of Machine Industries
is under former power minister
Jaszczuk. Fidelski has been
cited several times by Radio
Warsaw as having taken. part
in negotiations with-the
Poznan workers before the
riots.
Of the many persons ar-
rested in Poznan, ten have
been publicly identified and
will probably be tried and
punished for fomentiag the
riots. Mass punishments, how-
ever, are unlikely,
The .riots are being in-
vestigated by a special com-
mission headed by party
secretary Gierek. Since
Gierek is said to be a sup-
porter of Premier Cyrankiewicz,
who has assumed a leading role
in the liberal group, his ap-
pointment may indicate the
government intends to follow a
the rioters.
SECRET
PART I I NOTES AIVD C'.nMMENTS n.,.y... , _.~ ' ,
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SECRET .
CURREI~LT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
THE FRENCH COMMUNISTS AND. THE
CULT OF PERSONALITY
On the eve of its 14th
.congress, scheduled to, begin
on 18 July at Le Havre, the
French Communist Party (PCF)
seems to have accepted the re-
sults of the S?viet 20th Party
Congress, particularly Khru-
shehev's attacks on Stalin and
the cult of personality. De-
spite some continuing cpnfusion
and indications that Stalinist
traditions in the French party
may die hard, the present lead-
ership-seems to be maintaining
its control.
The French Communists were
apparently startled by Khru-
shchev's exposure of, the errors
of Stalin, and hesitated initi-
ally to make any comment.
Following Italian leader Togli-
atti's sharp attack on the
method and meaning of the re-
port, however, the French party
echoed some of his points in
milder terms. Further indica-
tions of PCF acquiescence ap-
peared following the Moscow
.press announcement of a "com-
plete identity of views" be-
tween Soviet party officials
and the French Communist
delegation that went to b~oscow
on 26 June for clarification
of the new line.
'Major changes in leader-
ship appear unlikely in the
near future as a result of the
new policies.. Secretary Gen-
eral Thorez' health has re-
portedly deteriorated recently,
and it is rumored he may be
elevated to an honorific post.
He is said to have re-
established party discipline
among the rank and file, and
his recent claims of having
tried to avoid personal pub-
licity may be taken as an at-
tempt to conform to the new
line of collective leadership.
He is said to "continue to
believe" that-the best chance
for future success lies in
close, but better-disguised,
ties with Moscow.
As long ago as last spring,.
there were indications of dis-
content-among the second eche-
lon leaders, possibly as a re-
sult of Pierre Herve's charges
that the party was doctrinally
rigid. At that time, secretariat
member Servin allegedly pro-
posed that self-criticism not
be limited to the USSR, that
expelled members be given a
second hearing, and that elec-
tions to the party's highest.
bodies be by secret ballot. In-
clusion of Servin in the group
sent to Moscow in late June may
be an attempt to assuage this
discontent by broadening the
base for .policy formation.
In any-ease, the Stalin..
issue does not- seem to have
.weakened the Communist Party
in France, and it is unlil~ely
to provoke a major wrangle at
the party congress, particular-
ly since strong efforts will
be made to muffle criticism
and questioning. The congress
is expected to concentrate on
pressing for unity of action
with the Socialists, but the
Communists may have difficulty
in reconciling this policy
with its strong stand for im-
rnediate negotiations in A1-
geria.
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PART II NOTES AND COMMENTS Page 2 of 77
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J~~C'1`~L~T
CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
THE PANAMA MEETING fJF PRESIDENTS.
A number- of Latin American
presidents evidently hope- to
-find an opportunity at the 21-
22, July meeting; of-chief exec-
utives of the American republics
to press requests for economic
or political assistance on
President Eisenhower, although
the agenda makes no provision
for substantive discussions.
The unprecedented meeting,. which
was postponed from 25-26: Jurie
to permit President Eisenhower's
attendance, is to commemorate
the-first step in inter-American
organization, the Congress of
Panama of 1$26.
Bilateral Approaches.
-__
Brazil: The most urgent
request for aid is expected to
come from Brazilian president
Kubitschek, who. did not origi-
na11y intend to go to the meet-
ing. Kubitschek~tald American
ambassador Dunn on 3 Jnly he
planned to take up with Presi-
dent Eisenhower his economic
program and to explain-the do-
mestic political problems
arising from his policies of
close. collaboration with the
United States, opp?sition to
both Communism and extreme na-
tionalism, and insistence on
maintaining Brazil's commit-
ment to export atomic minerals
to the United States.
Kubitschek may also expect
to discuss a US request for
military sites on the Brazilian
bulge. Since it would require
an extensive effort by his ad-
ministration to get the Brazil-
ian congress to approve such
an agreement, Urazil is
requesting a small aircraft
carrier as a visible quid pro
quo.
Panama: The host govern-
ment. of Panama may seek to dis-
cuss its negotiations with the
United States for radar sites
connected with projected Nike
installations in Panama. Panama
has consistently obstructed the
.initiation of surveys for the
radar sites, denying that ex-
isting treaties authorize leases
for these sites.. Panama may
hope to extract new concessions
or at least to accelerate US
action on legislation imple-
menting the 1955 treaty.
Chile:- Chilean president
Ibanez may also plan to dis-
cuss his economic problems with
President Eisenhower. The
editor of a semiofficial
Chilean newspaper repprtedly
stated on 9 June that the
Chileam president, who has in
recent months adopted economic
and financial, reforms long ad-
vocated by the United States,
may request President Eisen-
hower?s intervention in favor
of a $160,000,000 development.-
laan which Chile requested
from the US in 1953.
Multilateral Approaches
The Chilean editor also
stated that all Latin American
presidents going to Panama
were doing so in expectation
of a US announcement of a sub-
stantial increase in economic
aid or technical assistance to
Latin America. .While-this does
not appear to be a widespread
feeling, a general discussion
of US-Latin American relations
may arise. Brazil?s support
for a general discussion of US-
Latin American economic rela-
tiaras may be indicated by
Kubitschek?s statement on 6
July that he planned to bring
up the problems of foreign in-
machiner ports . 25X1
25X1
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PART II
NOfiEB AND COMMENTS Page :~ ~f ~ ~
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
SIGNS OF BURMESE DISCONTENT
WITH COMMUNIST TIES
There are increasing signs
in Burma of discontent with the
results of the close ties with
the Communists established dur-
ing former premier U Nu's tenure.
Further development of this
friction in Burma, one of the
Sino-Soviet bloc"s earliest
targets-among the neutral na-
tions, could impair the Com-
munists' coexistence campaign
in South and Southeast Asia.
Past promises of noninter-
ference in Burmese affairs did
not prevent the Soviet and Chi-
nese embassies from liberally
subsidizing the opposition
National United Front in the
April elections. This meddling,
which resulted in significant
gains by the opposition, may
have played a large part in U
Nu's decision to resign last
month.
On the economic side, the
Burmese have lately discovered
that barter trade with the bloc
is by no means the hoped-for
panacea for their economic ills.
They have complained of red tape
in arranging imports of goods,
uncertainty of delivery dates,
and poor quality of items. U
Nu openly criticized barter
deals just before his resigna-
tion, saying one would have to
be "crazy to barter rice when
he could sell it for cash."
An additional indication
of a cooling of Burmese rela-
tions with the bloc is the fact
that a high-level Burmese trade
mission that recently departed
for Europe deleted, at the last
minute, all Communist countries
from its itinerary.
The initial momentum of
the Sino-Soviet campaign to
capture Burma's neutralist sym-
pathies appears to be lost, and
the Burmese are likely to show
more sophistication in their
future dealings with the bloc.
The Communists, however, can
be expected to take some steps
aimed at correcting these points
of friction. Promised Soviet
construction of several impres-~
sive projects in Rangoon--a
hospital, a sports center and
a technological institute--
should help reduce areas e~
irritation.
,SECRET
PART II .NOTES AND COMMENTS
Page 4 of 17
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SECRET
'CURRENT INTELLIGENCE WEEKLY SUM?aARY
12 July 1956
CAMBODIA'S RELATIONS
WITH THE SINO-SOVIET BLOC
Cambodian crown prince i
Sihanouk's foreign policy of
closer relations with the Sino-
Soviet bloc produced on 7 July
a Soviet pledge to provide
Cambodia. with "unconditional"
economic aiYd technical assist-
ance..,. A point communique'.
issued in Moscow also spoxe of
strengthening political and cul-
tural ties between the- two
countries and announced a
Soviet gift of a hospital, com-
plete with equipment, for
Phnom Penh.
Sihanouk, head of a delega-
ian that included Premier Khim
Tit and National Assembly chair-
man Oum Chheangsun, left little
doubt during his seven-day visit
to-the USSR that, despite his
"permanent" resignation from
public office last March., he re-
mains the architect of Cambodian
policies. The visit was marked
by Soviet praise of Cambodia's
neutralism and its successful
"evasion" of Western military
blocs; Sihanouk reciprocated by
lauding the USSR's progress.,
t;aod will and dedication to world
peace. A basic reason for
Sihanouk's effusiveness--evident
in his statement that Cambodia's
national interests are dependent
on "sincere, claw and fraternal.
relations with the Soviet anion"'
--apparently lies in his con-
viction that by obtaining-the
USSR's public commitment to the
"five principles" of peaceful co-
existence in .its relations with
'Phnom Penh, Cambodia's security
would be guaranteed,
Tconomilc Aid
According to the Moscow
commun~:que, Soviet and Cambodian
experts will meet soon in Cam-
bodia to develop "practical" ways
to implement the economic and-
cultural ties between the two
countries. In this connection,
the-USSR expressed ifa readiness
to send technicians to train
Cambodian personnel-and to
provide industrial equipment.
This agreement follows closely
the conclusion of a $22,400,000
Chinese Communist economic aid
agreement. with Cambodia, and,
there is a possibility that
assistance may also be forthcoming
from Poland.
Sihanouk. hopes this Commu-
nist aid, in conjunction with
Western assistance, will enable
Cambodia to fulfill an ambitious
two-year economic development
plan designed to make the
country econarnically independent
by 1957. While some Cambodian
leaders fear that Communist
technicians will engage in sub-
versive activities in Cambodia,
Sihanouk apparently remains
confident that he can control
Communism within Cambodia's
borders.
For its part, the USSR--
which recently expressed its
readiness to establish diplamatie
relations- wi1;h Laos--probably
regards the outcome of
Sihanouk's visit as an im~-
portant step in the promo-
tion of neutralism in South-
east Asia. A further oppox?-
tunaty to expand Soviet in-
fluence in the area will actor
during the as-yet-unscheduled
visit to Cambodia, at
Sihanouk's invitation, of
Bulganin, Khrushchev and
Shepilov.
SECRET
~rmm~ ~ ~ ~ *~n rnxRxr~tJm s Pa vr~ .5 ~ f l
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SECRET
JAPANESE SOCIALISTS SCORE GAINS
IN UPPER HOUSE ELECTION
As a result of their gains
in the Japanese upper house
elections on $ July, the So-
cialists, supported by other
leftist elements, will Control
for another three years one
third of the upper house member-
ship, enough to block govern-
ment plans to revise the consti-
tution in order to legalize
Japanese rearmament. The gov-
erning Liberal-Democratic Party,
however, continues to retain
control of the chamber by a
simple majority with the support
of the Ryokufukai ("Green
;Breeze"). The Socialists have
attributed their increased popu-
lar support to the party's anti-
American policy which emphasized
the Okinawan ,land controversy
and opposition to both American
bases and rearmament,
The composition of the weak
upper chamber does not affect
the tenure of the administration,
since questions of confidence
are the prerogatives of the
lower house. The Socialist gains
in the House of Councilors,
nevertheless,-are a serious set-
back to-the government,. The
Hatoyama administration not only
will be unable to undertake a
revision of the constitution,
but will be further handicapped
by its loss of prest~,ge.
The government party will
need to impose stronger disci-
Aline on the rank and file than
in the past if it hopes to push
its legislative program past the
strengthened Socialist opposi-
tion. The poor conservative
showing at the polls may also ~
encourage dissident factions
within the party to increase
their efforts to wrest the party
leadership from the Hatoyama
group.
The primary reasons for the
Socialist gains, not only in
urban areas but also in the
traditionally conservative
:rural areas, appear to be popu-
lar opposition to rearmament,
the furor over the Okinawan
land dispute, and general dis-
satisfaction with continued
conservative factionalism. -The
failure of the conservative
"Green Breeze" to elect an ap-
preciable number of its candi-
dates and the complete shutout
of the pro-Communist Labor-
:E'armer Party indicate a polar-
izing of popular strength between
the two major parties to the
disadvantage of the minor parties.
CURRLI~7l INTELLIGENCE WEEKLY SUli1dARY
12 July 1956
OTNER I
COMMUNIST (ARTY 2
iz row issc
JAPANESE HOUSE OF COUNCILORS
PRE ELECTION
GREEN
BREE Zf
LIBERAL- DEMOCRATIC
PARTY
SOCIALIST PARTY \ 1` ' 12'1
66 U'-~
250
SEATS
Sanzo Nosaka, leading cen-
tral committee member of the
Japan Communist Party, who
emerged from underground last
summer, and one other Communist
won seats in the election, one
moire than -the party previously
held.
Although the conservatives
failed to win the number of seats
necessary to carry out a revision
of the constitution, the govern-
ment is likely to proceed with
its preparations to do so, witYi
the hope that it will gain the
necessary seats three years
hence. Hatoyama and his
SECRET
NOTES AND COMMENTS Page 6 of 17
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMI[ARY
12 July 1956
supporters may also seek a
quick normalization of re-
lations with the USSR in an
effort to recover their lost
CHINESE COMMUNIST PARTY CONGRESS
TO CONVENE IN SEPTEMBER,
Peiping has announced
that the Chinese Communist Party;
will convene its eighth con-
gress on 15 September, The
last congress met in 1945.
Some 1,000 delegates are ex-
pected to reaffirm Mao Tse-
tung's leading position within
the regime and to "elect" a
new central committee which
will reflect the present power.
position of Mao's lieutenants.
The Chinese Communist
Party's last congress, meeting
in Yenan before Communist power
was consolidated on the Chinese
mainland, elected a 7?-man
central committee, which has
been reduced to 68 by the
death of five members and the
dismissal of two for incompe-
tence and two others for "anti-
party" activity. Many of the
remaining members apparently
have no power in the regime.
The new central committee is
expected to be more represent-
ative of real authority and
to be considerably larger be-
cause party membership. has in-
creased from 1,200,000 to more
than 9,000,000 in 11 years.
PEIPING PREPARES NEW MOVE
FOR CLOSER TIES WITH NEPAL
A treaty between Communist
China and Nepal dealing with
commercial and economic matters
will be negotiated at Katmandu
"in a few. months." Preliminary
arrangements far these negotia-
-tions were apparently discussed
prestige with a diplomatic
triumph and to consolidate their
control of the conservative
party.
The agenda of the congress.
will include (1) a report on
the work of the central com-
mittee since 1945, (2) a report
on the revision of the party
constitution, (3) a directive on
the Second Five-Year Plan (1958-
62), and (4) the "election" of
a new central committee. The
members of 'the new committee will
of course have been picked pre-
viously by the top leadership.
In addition, Chou En-lai has
reported that opposition to
"right-leaning conservatism"--
i.e., a more moderate approach
to socialism--will be the central
question at the congress.
It seems probable that a
show of "democracy" will be made
at the congress; the People's
Daily has said that t e~'party
is eager to develop "criticism
and self-criticism." A recent
press announcement that Italian
Communist Party boss Togliatti
will be in China in September
suggests that he had perhaps
other top foreign Communists
will attend -the congress as
observers.
:in Peiping when the Nepalese am-
bassador, who is normally sta-
tioned in New Delhi, presented
his credentials in June. This
:is the latest result of Com-
munist China's continuing cam-
paign to expand its influence
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PART II NOTES AND COMMENTS Page ? of 17
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SECRET
CURRENT INTELLIG:ENC~ WEEKLY SITI[1~Y
12 July 1956 -
25X1
in the Sino-Indian border re-
gion.
Since August 1955 when
the .Nepalese government ex-
tended recognition to Communist
China, Peiping has worked
steadily to draw Nepal out
of the Indian orbit and expand
Chinese influence there. The
Chinese have twice offered Nepal
economic assistance, once in
October 1955 and again in Feb-
ruary of this year. In March,
Peiping requested permission to
open a library and .information
center in Katmandu and the Nepal-
ese reportedly favor acceptance
but have not yet approved it.
Prime Minister Tanka Prasad
has accepted an invitation to
visit Communist China and.,re
portedly plans to make the trip
as soon as Nepal's five-year
economic development plan gets
under way next month. His visit
will probably be exploited by
the Chinese to prepare for sub-
sequent treaty negotiations, in
which Peiping can be expected
to press for the establishment
of a diplomatic mission in Kat-
mandu, conclusion of an economic
assistance agreement which would
require the presence of Chinese
technicians in Nepal, a trade
.agreement and final approval
for the information center in
Katmandu,
The Tanka Prasad govern-
ment, which lifted the-ban on
the Communist Party in Nepal
last April, has been moving
steadily toward closer con-
~tact with Peiping. In July a
Nepalese official at New
Delhi told the American embassy
-there that Nepal was "too de-
pendent" on India and must at-
tempt to balance Indian-with
Chinese influence. It seems
likely, therefore, that the
Nepalese will be receptive to
Peiping's proposals. At the
same time the Nepalese official
denied that a military treaty
exists between India and Nepal.
them.
has decided to compete w;th
The Indian government has
been concerned over Chinese
influence in the border region
ever since the conquest of
Tibet in 1950 and has regarded
Peiping's efforts to woo Nepal
with suspicion. Thus far, how-
ever, New Delhi has not taken
decisive action to counter-the
Communist advance. A recent
Indian newspaper editorial state-
ment that Nepal's "best security
at present is the good-neighbor-
liness of India and China" sug-
gests India may now have aban-
doned efforts to exclude the
Chinese from Nepal-and instead
SECRET
PART II NOTES AND COMMENTS PacrP_ R of ~7
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SECRET
12 July 195E
in the Sino-Indian border re-
gion.
Since August 1955 when
the Nepalese government ex-
tended recognition to Communist
China, Peiping has workP~l
steadily to draw Nepal out
of the Indian orbit and expand
Chinese influence there. The
Chinese have twice offered Nepal
economic assistance, once in
October 1955-and again in Feb-
ruary of this year.. In March,
Peiping requested permission to
open a library and, information
center in Katmandu and the Nepal-
ese reportedly favor acceptance
but have not yet approved it.
Prime Minister Tanka Prasad
has accepted an invitation to
visit Communist China and re-
portedly plans to make the trip
as soon as Nepal's five-year
economic development plan gets
under way next month. His visit
will probably be exploited by
the Chinese to prepare for sub-
sequent treaty negotiations, in
which Peiping can be expected
to press for the establishment
of a diplomatic mission in Kat-
mandu, conclusion of an economic
assistance. agreement which-would
require the presence of Chinese
technicians in Nepal, a trade
agreement and final approval
far the information center in
Katmandu.
The Tanka Prasad govern-
ment, which lifted the ban on
the Communist Party in Nepal
last April, has been moving
steadily toward closer con-
tact with Peiping. In July a
Nepalese official at New
Delhi told the American embassy
-there that Nepal was "too de-
pendent" on India and must at-
~tempt to balance Indian with
Chinese influence. It seems
likely, therefore, that the
Nepalese will be receptive to
Peiping's proposals. At the
same time the Nepalese official
denied that a military treaty
exists between India and Nepal.
The Indian government has
been concerned over Chinese
influence in the bander region
ever since the conquest of
Tibet in 1950 and has regarded
Peiping's efforts to. woo Nepal
with suspicion. Thus far, how-
ever, New Delhi has nottaken
decisive action to counter the
Communist advance. A recent
Indian newspaper editorial state-
rnent that Nepal's "best security
at present is the good-neighbor-
liness of India and China" sug-
gests India may now have aban-
doned efforts to exclude the
Chinese from Nepal and instead
has decided to compete with
them.
SECRET
PART II
NQTES AND COMMENTS Page.$ of 17
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SECRET'
CURRENT INTELLIGENCE WEEKLY SUI~ARY
12 JLtly 1956
AFGHAN-SOVIET DEALS
The signing of six contract
agreements in late June and
early July for Soviet projects
in Afghanistan is a further in-
dication of the speed with which
the USSR is implementing its
$100,000,000 credit agreement
of last January.
The contracts are for:
1) construction of motor ~rehicle
xepair shops at Kabul, Pul-i-
I{humri, and Herat; 2) a ferti-
lizer plant at Kabul; 3) a ma-
terials testing laboratory at
Kabul; and 4) a new road through
~che Salang Pass across the Hindu
Kush mountains to expedite trade
i---~ Broad gauge railroad
~~ Narrow gauge railroad
All-weather road
o MIL E4 iS0
trade and communications with
the USSR. The road, which will
shorten by about 80 miles the
main route between Kabul and
the Soviet border, will report-
edly cost $T9,000,000.
The fifth. and sixi;k~ con-
tracts are far construction of
a new airfield at Bagram--re-
portedly for military use--and
reconstruction of the airfield
at Kabul. The Kabul project
was given to the Russians. de -
spite a statement by Prime Minis-
ter Daud in P1lay that it would
be given neither to the. United
States nor the USSR.
Stalinabad
U S S
Termez
.SOVIET PROJECTS CONTRACTED UNDER
$100,000,000 CREDIT AGREEMENT
Salang Poss
Bagram
~i Petroleum storage tank
Testing laboratory
Motor repair shop
SECRET'
? J A M M U
~AKIS AN ~ AND
KAS HM IR
$f12Wa (Status in dispute)
PA KISTAI
I 3
Fertilizer plant
Airfield
NOTES AND COMMENTS Page 9 of 17
Rawalpindi
Aral o ' coo
Se0 MILfiB
U S S R ,;~
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~SECRE.T
CURRENT INTELLIGENCE WEEKLY SUMMARY'
12 July 1956
The Soviet con-tract for
the Kabul airport was report-
edly signed by Daud himself al-
most simultaneously with the
signature of the Afghan-Ameri-
,.can aviation development agree-
ment by low-level Afghan of-
ficials. Daud probably in-
tended by this gesture to make
it clear that he is unwilling
to modify his commitments to
the .Soviet Union, although he
is prepared to accept new Ameri-
can aid,
FRENCH NORTH AFRICA
Algeria
The tempo of guerrilla
activity in rural northern
Algeria has slowed considerably
since the large-scale sweeps
carried out in early June by
the greatly strengthened French
forces. The rebels, whose
losses have been heavy, appear
to be more on the defensive than
at any time in recent months.
Except for occasional hit-and-
run forays by small bands,
guerrillas generally.-stay under
cover in their mountain hide-
outs.
The increase in rebel
attacks on French desert out-
posts, particularly along the
Moroccan-Algerian border,- sub-
stantiates reports that some
nationalist elements are moving
west and south. At the same
time, indiscriminate terrorist
attacks in the large northern
urban centers have increased.
As yet, such attacks remain
sporadic and have not reached
serious proportions.
Morocco
A potential threat to the
sultan's authority appears re-
duced by the integration into
the royal army of important
northern elements of the ir-
regular "Army of Liberation.''
Other former resistance fight-
ers, spurning integration now,
are reportedly moving southward
toward the ill-defined frontier
region of the Sahara, where
Moroccan nationalists have an-
nounced extensive territorial
claims on Algeria.
The increased number and
activity of "liberation army"
bands in the south and the gen-
eral Moroccan hostility toward
the movement of French troops
are seriously exacerbating
French-Moroccan relations.
France, anxious to retain
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
freedom of movement for its
80,000 ground forces, stands
on the 2 March agreement, which
provided that the status of
France's forces in Morocco
would remain unchanged until
a basic defense relationship
between the. two countries is
negotiated,
Moroccan negotiators now'
in Paris are seeking to re-
strict the movement of French
troops. Unless an agreement
is concluded soon, there may
be serious trouble, possibly
including large-scale clashes
between French troops and the
official Moroccan army.
Meanwhile; the Moroccan
government is ready to press
for the opening of bilateral
negotiations with the United
States regarding the status
of the five American air bases
in Morocco, The Moroccan for -
eign minister has formally re-
quested that the United States
furnish his government with the
texts of the 1950 French Ameri-
can agreements, which France --
had-agreed to furnish it some
weeks ago. Paris is apparently
withholding this information.
in an attempt to bolster-its
position during economic and
financial negotiations with
the Moroccans,.
On 6 July the secretary
general of the French Foreign
Ministry asked for an American
commitment not to offer mill-
Lary aid to either Morocco or
Tunisia, and implied that the
texts of the 1950 agreements
would be withheld until a com-
mitment'.is received. Such a
commitment, which would only
be useful to France if "leaked"
to the Moroccans, would in the
opinion of the American charge
in Rabat adversely affect the
American position in Morocco.
Tunisia
The antagonism and sus-
picion underlying French-Tuni-
sian relations, particularly
concerning Tunisian sympathy
for the. Algerian nationalists,
flared this-week when the French
government strongly protested
an Arab-language broadcast of
1 July by Radio Tunis support-
ing the Algerians. The Tunisian
government rejected the protest.
Negotiations under way in
Paris on defense and foreign
policy seem to be marking time.
French officials' hopes that
the issue of a defense agree-
ment will "quietly die" within
the next few weeks appear un-
likely to be fulfilled. The
Tunisians continue to press
strongly far complete military
evacuation of Tunisia. A com-
mitment to evacuate, even over
a long term, does not seem likely
in view of the strategic im-
portance to France of its ex-
tensive naval facilities
at Bizerte.-and the unresolved
Algerian-rebellion:
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,NOTES AND COMMENTS Page 11 of 17
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CURRENT' INTELLIGENCE WEEKLY SUMMAIRY
12 July 1956
MOLLET'S CONCESSIONS WIN FRENCH
ASSEMBLY'S SUPPORT FOR EURATOM
Premier Mollet has won a
342-183 vote of approval in-the
National Assembly for French
participation in the drafting
of a six-power EURATOM treaty.
Some of his support, however,
was won by extensive concessions
to nationalist opponents of
European integration, who ob-
jected in particular to and
effective limitation of France's
rights to develop nuclear weap-
ons, These concessions leave~in
doubt the question of whether a
treaty acceptable to the other
five nations will be ratified by
the French assembly.
From the start of the
debate, Mo31et was faced with
-the absolute hostility of the
Communists and the Poujadists;r
opposition from the right-center
-aimed at the supranational as-
pects of EURATOM; and with fears,
:particularly among Mendes-
France Radicals, that the six-
nation organization would be-too
small,
While Mollet did not for-
mally demand a vote of confi-
dence, he felt obliged to threat-
Mollet apparently con-
cluded that the threat of res-
ignation was insufficient to
assure success, however, and
made additional concessions to
center and rightist nationalists.
He promised to demand at the
current Brussels conference
that the EURATOM treaty provide
for institutions completely
separate from those of the Coal-
Steel Community, Mollet also
discriminated against West
Germany by promising to insist
that France and all other members
Hof the six-nation organization,
except West Germany, regain tr^
(right to manufacture nuclear weap-
ons- at the end of a four-year
'"moratorium," and retain the
right to undertake preliminary
weapons research- during this
period.
French nationalists maintain
that France?s future great-power
status depends. on the possession
iof atomic weapons, -and that this
;right should not be x?enounced
;even temporarily. The paper
;echoed allegations made by ultra-
nationalists during the recent
(Council of the Republic debate
on establishing a military divi-
sion in the French Atomic Energy
.Commission that American res
s
While the assembly vote will
permit. the negotiations on the
EURATOM treaty to continue
th
,
e
which Mollet had desired in order government?s position in the ne-
to avoid a repetition of the se- igotiations may be considerably
quence of events which led to ;weakened. Moreover, the debate
rejection of EDC. :virtually ignored the question of
situation restricted the free
.expression of parliamentary opin-
ion on the EURATOM issue itself
p
ure
can opposition within the cabinet.~was behind the proposals-for
This threat of a government cri- peaceful uses only,
sis in the face of-the Algerian
en to resign in the event of an
adverse vote in order to over-
come Radical and Social Republi-
;the common market, which other
!.prospective members of EURATOM
shave hoped to see established
;simultaneously. The prospect
ithat future official French ex-
~pressions of support of the com-
mon market will be regarded as
;merely lip service will further
hamper EURATOM ne~nt;ations.
SECRET
PART II NOTES AND COMMENTS Page 12 of 1?
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.SECRET
CURRENT INTELLIGENCE WEEKLY SUMI~A'RY
12 July 1956
~.~RICTION IN
'aVEST GERMAN-YUGOSLAV .RELATIONS
West German-Yugoslav re-
lations suffered a setback on
7 July when the Bundestag, irked
at recent Yugoslav statements
seeming to imply recognition
of East Germany, adjourned with-
out ratifying-the West German
commercial loan to Yugoslavia
or the war claims agreement
negotiated in March. Yugosla-
via's indignant reaction will
probably jeopardize West Ger-
many's economic position there.
These incidents typify the dif-
ficulties Bonn is likely to en-
counter in its relations with
.other states on matters per-
taining to East Germany,
West German officials had
demonstrated a desire early
this year for improved relations
with Yugoslavia, and negotia-
tions for a $14,000,000 settle-
ment of Yugoslav war claims were
completed on 10 March. Payment
of a $50,000,000 postwar Yugca-
Slav trade indebtedness to West
Overmany was postponed to 1968,
and West Germany granted a $5?,-
000,000 long-term ,commercial
loan to Yugoslavia at-the same
time, These commercial agree-
ments indicated West Germany's
interest in long-term consolida-
tion of its position in-the
Yugoslav market.
The trend toward better re-
cations received a sharp set-
back, however, as a result of
Pdarshal Tito's trip to Moscow.
~gest German leaders objected to
the joint Tito-Khrushchev com~
rnuniquL issued on 24 June which
stated that there are two sov-
ereign German states and that
German reunification should pro-
teed from East-West German nego-
tiations. This eommuniqu~ and
other Yugoslav statements an
the de facto existence of two
German states led many Bonn
leaders to fear. that Tito might
PART' II
wait .only for ratification of .
the March agreements before
recognizing the East German re-
gime--a move which Bonn has of-
ficially said would be "an un-
friendly act."
.Yugoslav officials were
irked when they learned that
Bonn intended to make ratifi-
cation of the March agreements
conditional on explicit assur-
ances that Belgrade would not
recognize East Germany. State-
ments by responsible Yugoslav
leaders, however, that they
had only recognized the d,~ facto
existence of, two German govern-
ments, with no present intention
of establishing diplomatic re-
lations with East Germany, left
the Bundestag still so suspicious
that it refused to ratify the
'two March agreements before ad-
journing on 7 July.
The Belgrade press has
been extremely indignant, accus-
ing Bonn of having attempted to
exploit the economic negotiations
to influence Yugoslav policy to-
ward East Germany.
It is still unclear as to
what steps Bonn might take in
the event of Yugoslav recogni-
tion of East Germany. The con-
troversy possibly typifies the
difficulties Bonn will encounter
by its policy of threatening
retaliation against countries
recognizing East Germany.
Dras-tic off icial Yugoslav
counteraction is unlikely be-
fore a clear-cut decision is
made in Bonn, but the Federal
E,epublic has probably seriously
jeopardized its economic privi-
leges affirmed in the commercial
agreements, including a provision
.giving the West Germans equal nav-
igation rights on the Danube
with Yugoslavia.
NOTES AND COMMENTS Page 13 of 77
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
COLLECTI VI ZATION DRIVE I N THE
SATELLITES
A drive to speed up the
pace of collectivization in
the Eastern European Satellites
has been in progress since raid-
1955, During the first four
months of 1956, a total of
about 4,000 new collective
farms have been formed. This
total excludes East German.
figures9 which are not yet
availableo The campaign fol-
lows a period of virtual stag-
nation in collectivization
that began .with the inception-
of the "new course" in mid-
1953,
At the- end of 1955,-the
percentage of the arable land
collectivized ringed from 10
percent in Poland to-about 61
percent in Bulgarian
Under:. the recently.
announced Satellite
Five-Year Plans
(1956-60), the per-
centage of collec-
tivized arable land
in Czechoslovakia,
East Germany, Hungary
and Rumania is to
reach 50-60 percent,
an increase of 25 to
40 percent over 1955a
Poland, where
collectivization has
always proceeded
slowly, will prob-
ably collectivize
no more. than 25 to
30 percent of the
arable land by 19609
compared with 10 per-
-cent in 1955, Thp
sown area of Bul-
garia, on the other
hand, could well be
completely socialized
by 19570 The econ-
omies of both Bul-
garia and Albania
are probably intended
to remain .primarily
a gricultural'under
-PART II
the long-range plan for eco
noraicintegration of the blocq
The peasants now coming
under pressure are the middle-
class farmers who have held
-the land for generations and
are wedded to it, not the
peasants who. received the land
under postwar land reforms
and did not have the capital
or know-how to .develop its
A slight lull in the rate
of collectivization may be ex-
pected during the harvesting
season this years but following
that, increasingly vigorous
pressures-will probably be ap-
plied, possibly with some use.
of intimidationo If continued,
x to be collectivized
by 1960
s~cR~r~
NOTES AND COMMENTS Pale 14 of 17
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SECRET
CUR~ENT INTELLIE~ENCE WEEKLY ISU~~A~'tY
12 July 195
the campaign will probably
cause serious bitterness among
the peasantry and could depress
future foad output. The col-
lectivization drive may sPrious-
ly reduce the Satellite's'
prospects for achieving the
rise in living standards now
RECENT SOVIET AGRICULTURAL
DECREJE
The Soviet Union has taken
the unusual step of publishing
a decree in draft form and al-
lowing "public discussion" be-
fore governmental approval.
The proposed decree, issued on
25 June, is designed to elimi-
nate the uSe of grain products
and other foodstuffs purchased
from state stores as feed for
privately owned livestock. The
proposed decree would also re-
strict the private ownership
of livestock in urban areas
through the introduction of
high monetary taxes and oblig-
atory deliveries of milk and
meat,
The removal in 1953 of the
:restructions on urban ownership
.and production of livestock pro-
duce has, according to the de-
cree, resulted in a situation
which many urban dwellers have
t~xploited t4for private gain."
;Livestock products command high
orices on the open markets and
;ire in short supply in state
stores, while grain products
;have been cheap and relatively
;plentiful. The decree states
that townspeople and collective
:farmers adjacent to towns took
advantage of the removal of
:restrictions by feeding bread
and other foodstuffs purchased
:from state stores to livestock.
'T'his practice '?disorganizes"
the supply of foodstuffs fore
'the population,
These urban holdings of
livestock are not large~in terms
planned for 1960 unless the'
food deficits are made up by
imparts, The Communist leader-
ship has apparently decided
that collectivization is the
only solution to the bloc?s
agricultural problems.
(Prepared by ORR)
of total numbers, but probably
account for a disproportionate-
ly large share of the live-
stock products available in
urban areas. Furthermore, the
draft decree indicates that
since 1953 large increases
have occurred in the production
of livestock products in the
.urban areas--where Soviet of-
ficials probably least ex-
pected. them. The new measures
probably would reduce the urban
supply of livestock products.
The decree promises that
the decline in the supply of
-urban livestock products which
would result from its enactment
will be quickly overcome by
increased .state and collective
livestock production< This
increase in socialized produc-
tion, in turn, is to result
partly from new measures aimed
at persuading urban livestock
holders to sell their livestock
to the state.
The anna~uncement has re-
portedly aroused much opposi-
tion in Soviet urban areas,
About a week after its publica-
t-ion., the Soviet minister of
state farms,Benediktov, said
it would undergo major changes
before promulgation. The Soviet
leadership,by .issuing the de-
cree in draft for discussion.,
is apparently trying to con-
vince the people that it is
now conducting most of its oper-
ations on the-basis of popular
interest9 and is no longer
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PART II NOTES AND COMMENTS Page 15 of L?
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- .... r.MAhN,CA,.14~i~r:~r. _,. :r .w MS~w .i .~~. u .
CURRENT INTELLIGENCE WEEKLY S.IIMIRARY
12 July 1956
arbitrarily forcing unpopular
policies upon the people. The
y government certainly would
also wish to avoid a violent
popular reaction which might
result in large-scale slaughter
of livestock by townspeople.
Prepared by ORR) 25X1
Friction is increasing
among the three largest par-
ties in the Indonesian cabinet:,
particularly over the matter
of patronage. An important
contributing factor ~is concern
over-the Gauntry?s economic
problems and continuing disci-~
dente.
Although the three princi-
pal parties--the Masjumi, the
National Party (PNI) and the
Nahdlatul Ulama (NU)--hold a
nearly equal number of cabinet
seats, the moderate, pro-Wes t
Masjumi is receiving only a
small share of diplomatic and
executive appointments, ~~
e ash uma. , owe ve ,
w~ ind its position improved
-only when the army or the op-
portunistic NU, which hopes
to supplant the Masjumi as
the leadin; Moslem party,
chooses to co-operate with it
to restrain the PNI or Pres-
ident Sukarno.
Meanwhile, government
parties are increasingly
aware of the need for measures
to restore the balance of pay-
ments and stop the dangerous
decline of foreign exchange
reserves. Chiefly at the
urging of the PNI, the cabinet
has made the largely political
gesture of withdrawing rubber--
Indonesia's principal export--
.from the list of UN-embargoed
products to Communist China.
negotiations.
The problem of dissidence,
which continues to be one of
the countryts major difficul-
ties, has been given little
attention, probably because
of differences between the
PNI and the NU as to how the
question should be handled,
The PNI favors military sup-
pression whereas the NU prefers
COMMUNIST .YOUTH-FRONT ACTIVITY
IN LATIN AMERICA
International Communist
youth fronts are making an in-
creased effort in Latin America
to extend their network and
expand memberships and influ-
ence, The campaign, which
coincides. with the Soviet bloc's
program to increase diplomatic
and economic relations with
Latin America, was ordered. in
August 1955 when the councils
of the World Federation of
Democratic Youth (WFDY) and .the
International Union of .Students
(IUS) resolved to correct the
"insufficient attention" pre-
viously given this area.
The Mexican affiliate of
both the WFDY and IUS, the Na-
tional Federation of Techni-
cal Students (FNET), has taken
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PART II NOTES AND COMMENTS Page :16 of 17
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?
-SECRET
CURRENT I NTELLI GENCE WEEKLY SIUI$Y
12 July 1956
the lead in organizing national
student co-ordinating councils
in Mexico City and in Merida,
Yucatan., It was primarily
responsible for instigating
and directing a 66-day student
strike in Mexico which ended
on 21 June following the inter-
vention of President Ruiz
Cortines.
The IUS, which was .involved
in student strikes in Quito
last November, offered medical
services in the IUS-supported
sanitarium in Czechoslovakia
to a number of Cuban students
wounded in demonstrations in
late. 1955, It reportedly plans
~to sponsor a student co-
ordinating council in Santiago,
Chile.. A new-youth group,
with objectives identical to
-those of the WFDY, has report-
edl'y been formed in British
.Guiana.
Two student leaders-vis-
itin~ in $razil, an Indian rep-
resenting the IUS. and an
Ecuadoran representing the
Communist-infiltrated Federa-
tion of University Students of
Ecuador, were expelled from
the country on 11 June., accord-
ing to the American embassy in
Rio de Janeiro. They were re-
por~ed to be carrying "vast
documentation" showing plans
to create unrest in Brazil,
Uruguay, Argentina, Chile,
PART II
SECRET
Ecuador and Mexico. They also
planned to attend the student
congress in Santiago beginning
2$ July, presumably to en-
courage attendance at the World
Student Congress to be held
in Prague in August and at the
1957 Youth Festival in Moscow.
Jacques Denis, WFDY secretary
general, who was expelled on
his arrival in Mexico on 2 June,
carried visas for Argentina,
Brazil and Chile.
Guatemalan officials al-
lege without citing any im-
pressive evidence that recent
student disturbances in
Guatemala are part of an inter-
national Communist conspiracy,
and have- pointed out their
coincidence with student dis-
turbances-elsewhere in Latin
America.
WFDY and IUS propaganda
to Bolivia and Cuba has in-
creased and an IUS manifesto
was distributed during the
NOTES AND COMMENTS Page ~ 7 r,~f i ~
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~ SECR~'T
CURRENT INTELLIGENCE R~EEKL'Y SU1t~ARY
12 July 1956
PAST III
PATTERNS AND PERSPECTIVES
DEVELOPMENT OF THE
The Sino-Soviet alliance,
which was firm in Stalin's
time, seems to be as firm or
firmer under the Khrushchev-
Bulganin leadership. In the
past-two years, the Kremlin
has helped Peiping to increase
its international prestige,
has continued its- aid to the
Chinese Communist military
establishment, and has agreed
to enlarge substantially
its contribution to China's
ixidustrialization. Peiping
may have adjusted its policy
toward Taiwan to fit the
Soviet aims of avoiding a
general war and of engaging
the West in a long-term compe--
tition. The Chinese are also
closely co-ordinating with
Moscow their programs else-
where in the Far and Near East.
The Stalin Era
Soviet dictation of Chi-
nese Communist tactics in the
1920's was followed by a series
of failures. With Mao''Tse-
tung's triumph over Soviet-
trained internal opposition in
1935, and with Moscow's belated
.endorsement of Mao's program
the same year, Chinese Com-
munist primacy in devising the
party's program for China was
established. Although the
Chinese Communists were quick
to adjust to changes in Soviet
foreign policy after 1935, the
Kremlin apparently did not
again interfere in Peiping's
domestic planning or in the
Chinese Communist Party organi-
zat-ion. From that time until
now, the principal criterion
for advancement in the Chinese
party has seemed to be loyalty
to Mao Tse-tung rather than to
any group of leaders in Moscow,
It is not known whether
Stalin at any time considered
attempting to transform Soviet
influence ,over thy: Chinese
SING-SOVIET ALLIANCE
Communists into Soviet control
of the movement. Any inten-
tion along these lines would
presumably have been discouraged
by the experience in 1948 with
Yugoslavia.. In any case, after
the establishment of the Peiping
regime in October 1949, the
USSR treated Communist China
with much greater deference
than it did the Eastern Euro-
pean Satellites and apparently
made no effo"rt to reduce Pei-
ping to satellite status.
SinodSoviet
Treaty
The Sino-Soviet treaty of
February .1950, concluded during
Mao's only known trip outside
China, became the rough guide
for Soviet treatment of the
Peiping regime during the next
few years. It provided for
consultation on all matters of
common concern, and subsequent
Soviet and Chinesge policies
for the most part have seemed
well co-ordinated. It gave
Peiping a Soviet military
commitment in the event of
attack by Japan or any ally of
Japan, a conunitment which,
while evasive, has been publicly
extolled by Peiping as a
deterrent to ~.merican action
against the China mainland.
The treaty also promised
Feiping $300,000,00? in economic
aid and provided for Soviet
occupation of Port Arthur,
joint control of the main rail-
way in Manchuria, and joint
operation of certain other
enterprises in Manchuria and
Sinkiang.
The Chinese Communist
victory over the Nationalists
during 1949 may have led Stalin
to believe that the Western
powers could be forced from the
Asian mainland without great
risk to the ~TSSR, and,. in the
case of Korea, without great
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PART III PATTERNS AND PERSPECTIVES` vAao i ?~ ,n
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CURRENT INTELLIGENCE. WEEKLY SUltllfARY
12 July 1956
expense. However, with the
successful UN intervention in
the Korean war, Chinese partic-
ipation became necessary to
prevent a Communist debacle in
Korea.
in the Sino-Soviet relationship
--although a strain far short
of rupture. A Chinese Com-
munist delegation initially
headed by Chou was engaged in
high-level ecanomic negotia-
tions in Moscow from August
1952 to May 1953, The prolonged
talks suggest that there was
hard bargaining and possible
Chinese disappo~,ntment over
failure to obtain greatly in-
creased Soviet support of
Peiping's industrialization
program.
Korean Settlement
There may also have been
a difference of views between
Peiping and Moscow on the terms
for a Korean cease-fire, nego-
tiations for which were begun
as a result of Soviet initia-
tive in 1951. The USSR, having
restored Communist control of
North Korea by proxy, seemed
to fear that any concession to
the West would be regarded .as
a sign of weakness and the
negotiations dragged on until
after Stalin's death. The
Chinese Communists, on the other
hand, boasted that they had
achieved a stand-off with the
West and suggested they would
like to get on with China's
industrialization.
The Indian formula for a
Korean truce in late 1952 was
denounced by Soviet UN delegate
Vyshinsky after the Indians--
perhaps incorrectly--had con-
cluded that their proposal was
satisfactory to Chou En-lai.
In any case, Chou made his own
bid for the Korean settlement
.shortly after Stalin's death,
and Soviet diplomats then
endorsed Chou's overtures.
There may have been
another strain at this time
Moreover, Mao in early
1953, following Stalin's
death, published an article
called "The Greatest Friendship"
in which he suggested a real
sense of loss over the "great
teacher" and "most sincere
friend" of the Chinese people.
Recent Soviet Policy
In May 1953, the new
Soviet leadership apparently
moved a considerable way toward
meeting Ghinese economic demands
by agreeing to provide aid for
the construction of 141 basic
enterprises in China under a
program running through~1959.
In October 1954 the Kremlin
agreed to extend aid to 15
additional basic construction
projects and to provide another
long-term credit of $130,000,-
000, In April this year, First
Deputy Premier Mikoyan committed
the USSR to assist Peiping in
building 55 more industrial
enterprises. There seems little
doubt that Soviet econom~,c aid
of this type is being given the
Chinese as rapidly as they can
handle it.
Military Aid: The Kremlin.
is continuing its substantial
military aid to Communist China,
while helping the Chinese
develop their own production
capabilities.
SECRET
25X1
25X1
25X1
25X1
7PART III PATTERNS AND PERSPECTIVES ~a~e ~ of 1(1
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CUKRENT INTELLIGENCE WEEKLY SUYYARY
12 July 195F.
The Russians Have also
given extensive technical
assistance to Peiping's air-
craft and shipbuilding Indus-.
tries. Under the supervision
of many Soviet advisers, naval
shipyards in Shanghai have-,been
greatly expanded in the past
year., In launching their first
modern .destroyer iri April 1956,
the Chinese apparently matched ,
timetables of Soviet yards for
production of this vessel,. The
Chinese have also succeeded,
with much: Soviet help, in a
"trial" production o:? jet air-
-craft engines.-
Training: In addition to
providing large numbers of
Soviet advisers on reasonable
terms, the Soviet Union is
educating some thousands of
Chinese students. -There are
now about 2,600 Chinese students
in the USSR, with nearly 7,000
more scheduled to go to the
USSR--and 700 to the Satellites
--through 1957. In addition,
about 11,500 young Chinese are
to be sent to the USSR and the
Satellites in the next few years
for "practical training."
Political Su~~or____t_~ : The
present-Soviet lead .have
been making. an effort to go
even further than Stalin in
helping Peiping acquire inter
national prestige. When a high-
-level Soviet delegation--in-
eluding Khrushchev, Bulganin,
Mikoyan and Shepilov--visited
Peiping in the fall of 1954,
142oscorv agreed to an early trans-
fer to the Chinese of Soviet
shares in the four Sino-Soviet
joint stock. companies and.
to the early withdrawal of
Soviet armed forces from Port
Arthur. In thus liquidating
Soviet footholds in China--
which had often been interpret-
ed by Asians as evidence of
European extraterritoriality--
the Soviet leaders fulfilled
a commitment given in 1950, for
which they took credit.
Public. Soviet support for
Peiping's policies reached a
new high during the Soviet visit
in the fall of'1954. Khrushchev
declared that the Soviet people
sympathized with and supported
the'Chinese in their determine-
tion,to "liberate" Taiwan.
Although Ifhrushehev did not
,ment~ion~the type of Soviet sup-
port which Peiping, could expect,
his speech was the first in
which~..any tap-level Soviet
leader. had publicly pledged
support for this Chinese Com-
munist-goal.
Coleadership
Immediately after taking
.over in February-1955, the
Khrushchev-Bulganin team ele-
vated Peiping to the status of
"coleader'`' ? of the world Com-
munist camp. Soviet propagan-
dists began to refer to Com-
munist China as a power capable
of;"taking care of itself."
Whi~.e the use of such descrip-
tions of the Peiping regime
made ft possible for the USSR
to-claim that it was not re-
sponsible for Peiping's actions,
this characterization, in terms
of prestige, went far beyond
angthing ever previously ac-
corded a non-Russian Communist
movement.
Soviet leaders subsequently
wade no effort to force the
Chinese Communists to conform
to the Soviet line on "collec-
tive leadership," Chinese Com-
munist praise of Mao's personal
leadership continued, and in
July 1955 ~llao emphatically as-
serted that leadership by
purilicl.y reversing the policies
of all other~Chinese Communist
leaders who' h~,d spoken on the
subject of the speed of China's
socialization.
"Different Roads"
The new Soviet leadership
also turned .down the fire under
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`~ SECRET
CURRENT INTELLIGENCE WEEKLY ~1Uli~l[ARx
12 July 1956
some doctrinal points which had
been simmering for years. between
Russian and Chinese theorists. ,
The new Soviet approach was
shown by several speakers at
the Soviet 20th Party Congress,
who affirmed that there may be
"different roads. to socialism."
Shepil?v, for example, remarked
That the Chinese program, "from
the point of view of a (mere)
Bookman of Marxism, is almost
tantamount to trampling under
foot the principles of Marxism
Leninism." This view is clearly
congenial to Mao, who .once ob-
served that dogma is "more use-
less than cow dung."
avoided any mention of militar
Soviet reluctance to at-
tempt to impose a rigid line on
Peiping has. also been suggested
during the devaluation of Stalin
during 1956. In what Chou En-
lai has described as a "very
serious and responsible" edito-
rial of early April--written by
proteges of Mao--Peiping. took a
more moderate line than did the
Soviet press. The editorial
minimized Stalin's errors on
China in the 1920's by attribut-
ing them to former Chinese Com-
munist leaders, and did not ac-
cuse Stalin of sins against'-
China in even the latter part of
his life, when he made "gross
errors'' in other. directions.
The Soviet press has not express-
ed or implied any criticism of
Peiping's treatment of Stalin.
Policy on Taiwan
Peiping's propaganda about
Taiwan. reached an all-time high
in belligerency in early 1955,
and there seemed at least.a mar-
gi~al possibility of an early
attack in the Taiwan area. Then
in the spring of 1955,~Peipi~ng
suddenly switched to a,conci~lia-
tort' line, which has continued
ever since.. The Russians may
have played some role in this
change. ,
Similarly, during the peak
o'~~..Peiping's "liberate Taiwan"
campaign in February 1955, Sovi-
et leaders .suggested a wish to
..convince the West that Moscow
was not responsible for. Peiping ~
policy moves. Ambassador Bohlen
pointed out that the coleader-
ship formula, while consistent
with other Soviet efforts to
give new prestige to the Chi-
nese, in. one sense tended pub-
licly to disengage the USSR from
direct responsibility for rash
Chinese actions in the foreign
field. The Chinese Communists,
who-are well. awaxe that the suc-
cess of an operation against
Taiwan would depend on Soviet
willingness to assume military
oluligations under the Sino-Sovi-
et treaty, have never-adopted
the coleadership formula and
continue to refer to the Com-
munist camp as headed by the
USSR alone.
In .any case, present Chi-
nese Communist policy'toward
Taiwan fits into the Soviet aims
of avoiding a general war and of
engaging the West in a long-term.
c?mp~;tition. Chou En-lai, while
reaffirming the regime's determi
nation to~annex Taiwan by one
means" or' another, has recently
asserted that the possibility
of "peaceful, liberation...is in-
creasing;" Peiping seems to
foresee a long period of explor-
ing primarily political forms of
action--singly and in combina-
tion--such as.subversion, nego-
tiations with the United States
to effect, an American withdrawal,
and negotiations with any group
of Nationalist leaders willing
to talk,
Khrushchev had not referred to I Other Policies
support by the Soviet "govern-
ment," Khrushchev-had, moreover, Peiping has publicly "wel-
~ corned" the extension of Soviet
sECRET
-After Khrushchev's-speech
in Peiping in the-fall of-1954
had been publicized, Soviet :offi- ,
vials in Moscow pointed out to
Western correspondents that
25X1
25X1
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SECRET
CURRENT` INTELLIGENCE WEEKLY Sti~ilLARY
'12 July 1956
nese Communist diplomatic effort
in the Middle East.
Peiping's silence on for-
eign policy matters concerning
which the USSR has taken a defi-
nite stand has sometimes sug-
activity in Asia,'and Moscow ~ front and seem to be co-ordinat-
has actively assisted the Chi- ~ ing their tactics.
ing anon-Communist state,
The Chinese Communist leader-
ship, the composition of which
has not changed greatly in re-
cent years, seems to be at least
as~strongly committed to the
Soviet alliance at the present .
gusted a Sino-Soviet policy dis- time. as it was during Stal~.n's
agreement. It is more likely time, All Chinese Communist
that this silence merely reflects leaders have affirmed, on one or
a Chinese desire to avoid irritat- another occasion, their support
of the,new Soviet team. There
is not a single Chinese Communist
leader who can be reliably iden-
tified as anti-Soviet or even
cool toward the Russians: Tlie
continuation of this Chinese
attitude will presumably de-
pend on a continuation of the
Soviet policy--pursued by
Stalin and improved on by the
later Russian leaders--o:f
helping Peiping acquixe pres-
tige and providing i t with 25X1
issues involving Mi dle and Far substantial material. aid.
Eastern countries, Peiping and
Moscow are presenting a united
S~C1~~'T
PATTERNS AND PERSPECTIVES
Page 5 of 10
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ument Denied
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t
SECRET
CURRENT INTELLIOENGE WEEKLY SUMMARY
12 July 1956
LATIN AMERICAN ATTITUAES TOWARD U5 INVESTMENT
Latin American dissatis-
faction with Washington's empha-
sis on private rather than
government investment in Latin
America has notably abated
during the past several months.
While this dissatisfaction had
become less intense following.
the Rio conference of November
1954, it could well resume its
former intensity if measures
taken by the United States and
local economic reforms do not
substantially increase-.the flow
of private dollar capital.
Latin American Hopes
At the end of World War II,
the Latin Americans had expected
a large influx of private Amer-
ican capital for the accelerated
industrialization of the south-
ern continent. However,. recol-
lection of heavy losses on past.
private investment in Latin
American government-bands had
a discouraging effect, and more
secure opportunities in. the
United States-and Canada proved
too strong a counter-attraction
to private investors, Conse-
quently, the Latin Americans
increasingly disparaged private
capital as a source of funds,
Nevertheless, American private
investment in these countries
amounts to about $6.5 billion,
or 3? percent of total US for-
eign investment.
Being accustomed to a
larger role for government in
economic affairs than prevails
in the United States, they re-
sented Washington's view that
they should themselves create
internal conditions attractive
to private investment and should
use foreign public loans pri-
marily as a further stimulant,
not as a substitute.
US private investment in
Latin America declined from
$580,000,000 in 1952.to
$223,000,.000 in 1954, and con-
siderable resentment over: US
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PART LII PATTERNS AND PERSPECTIVES Page 8 of 1D
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CURRENT INTELLIGENCE WEEKLY ~UMAlAI~Y
12 July 1956
~~5 ,1950 1951 1952 1453
~ $o~e ,distortion results from .cyclical factors in
~'~~nd ,is~or pet credit to_approach zero.
~I~,~fYLY f40? ...
SECRET
CREDITS UTIIIiED
EXPORT-IMPORT BANK
OTHER
NET CREDIT
REPAYMENTS
1954 1955
timing of repayments,
1956
(1ST QRT.
and equipment . fires-
ident Kubitschek of
Brazil, who came to
power on the campaign
slogan of "50 years
of progress in~five
years," is counting.
primarily on attract-
ing large private
funds from abroad.
The provisional
government of Argen-
tina,has stressed
since last ?ctober
its desire for for-
eign private capital
ANNUAL RATE)
60702 2
policies was expressed at the
,inter-American economic con-
ference in Rio de Janeiro in
November-1954. A declaration
by the United States toward
the end of the conference that
it would contribute about 35
percent of the capital to a
new $100,000,000 International
Finance Corporation (IFC) af-
filiated with the World Bank
started a change in attitude.
Private Investments
IDuring recent
,months several im-
~ortant South Ameri-
can countries have
been looking with re -
newed hope to foreign
private capital far
development funds
egiaiptnent, (3) re-
c.#.procal adjustment
of corporate income
taxes to promote
private foreign in-
vestment, and (4)
negotiation of in-
vestment guarantee
agreements.
Subsequent measures con-
tributing to this change in-
cluded:, (1) loans by the Inter-
national Co-operation. Adm,inis-
,tration to Latin American firms,
(2) credits by Export-Import
anti private bank consortia to
US exporters of capital
and seems trying to
reorganize the domes=
tic economy in such
a way as to regain
the foreign investor's con-
fidence.
In Chile, which before the
Rio conference, in a gesture
symbolic of opposition to US
foreign economic policy,,, led
a widely supported drive for a
new inter-American lending
agency, the government has rad-
ically changed its policy. ,Act-
ing on the recommendations of
US experts, it launched last
January a rigorous attack on the
country's acute inflationary
problems, and; with.. the help of
improved expoxt`prices, has ..,now
achieved .considera~ile economic '
stability and substantially in-
creased the inflow of foreign
private capital.
US DIRECT CAPITAL Ol1TPLOW AND REINVESTED
EARNINGS IN LATIN AMERICA
REINVESTED EARNINGS
OF SUBSIDIARIES
1946 1941 1948 1949 1950 1951 1952 1953 1954 1955 1956
Includes reinvested earnings of branches,
*Not available; total net outflow was probably somewhat larger in 1955 than in 1954.
I! JULY /I!C so~o2 2
SECRET
AND CREDITS TO LATIN.. AM~RICA_
MILLIONS OF DOLLARS)
580
PART y~~ PATTERNS AND PERSPECTIVES o~~s a ?~ ,.,
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- - ..
s SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
12 July 1956
Peru's success over the
past six years in similarly at-
tracting private capital on the
basis of economic reforms rec-
ommended by the same US experts
has had an important psycho-
logical impact beyond Peruvian
borders.
Political and Economic Problems
It is by no means certain,
however, that this improved
Latin American attitude toward
private investment .will endure.
There is no evidence of any im-
pressive over-all increase. in
the flow of private dollar cap-
ital to Latin America, The
IFC's operations are not`sched-
uled to begin for another few
weeks and other measures -for
expanding private investment
have apparently not yet had
time to take effect.
The Brazilian and Argentine
governments face grave political
problems that will. restrict
their ability to carry out the
disinflationary and other eco-
nomic reform measures needed to
create a climate favorable to
large-scale foreign investment.
The level. of savings and domestic
investment in many other Latin
American countries also con-
tinues to be depressed by pres-
sures for a rising standard of
living combined-with such basic
unsolved problems as vulnera-
bility to fluctuations in world
prices of a limited range of
exports.
If the ambitious stabiliza-
tion plans of mayor Latin Ameri-
can countries should fall con-
spicuously short of realization
during the remainder of this
year, or should there be a broad
economic downturn, a resurgence
of bitter criticism of the
United States' "neglect of
Latin American .financial and
development needs" can be ex-
pected. .This would be particu-
larly conspicuous at the next
inter-American economic con-
ference tentatively scheduled
in the spring of 1957.
Under such ~Qriditions,
moreover, Latin ~~uerican coun-
tries might well become vul-
nerable to Soviet bloc offers
of development capital at lower
interest rates than those
available in the West
.SEC`RET'
PART III PATTERNS AND PERSPECTIVES oAao 7n ,.~ ,,,
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