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January 26, 2005
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August 9, 1956
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CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. 16 OCR NO. 4649/56 9 August 1956 OCUMENT NO. N? CHANGE IN CLASS, 0 D DECLASS151ED CLASS. CHACNGED TO: S C NEXT REVIEW DATE: ~ .... , - REVIEWER: I L 25X1 OAM3ZZ69 CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE State Department review completed 25X1 Approved Fease 2005/02/10 : CIA-RDP79-009270900070001-7 CONFIDENTIAL &E-ERF ' r Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 Approved Fo1 lease 2005/02/10: CIA-RDP79-00920900070001-7 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 2005/02/10 : CIA-RDP79-00927A000900070001-7 CO 1 1)E TIAL Approved FoNW lease 2005/0 j PP79-0092MQ 0900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 T H E W E E K I N B R I E F PART I OF IMMEDIATE INTEREST SUEZ CRISIS . . . . . . . . . . . . . . . . . . . . . . Page 1 ,A week before the opening of the London conference on the Suez Canal on 16 August, Egypt is unlikely to accept the Western invitation but still appears unde- cided on the exact nature of its reply, which probably will be made on 12 August. President Nasr has been con- sulting closely with the Soviet ambassador in Cairo. The nature of the Soviet acceptance shows that the USSR's immediate concern is to try to prevent any early action by the conference. ARAB-ISRAELI SITUATION . . . . . . . . . . . . . . . . . Page 3 Syria and Jordan have remained nervous about the possibility of Israeli action while Egypt is preoccu- pied with the Suez crisis. The Israeli radio announced on 5 August that construction of a dam to divert Jordan River headwaters into a new canal would begin in a few days. This construction, however, would be entirely within Israeli territory and is part of a larger Israeli project not directly related to the Banat Yacov ques- LAOS . . In its negotiations with the Pathet Lao, the royal government has agreed to adopt a policy of "peaceful co- existence," to promote "friendly contacts" with Commu- nist China and North Vietnam, and to abstain from mili- tary commitments with foreign nations. It is also re- ported to have agreed to the formation of a coalition government and to hold supplementary general elections, in which the Pathet Lao will participate, for the pur- pose of filling additional seats in an enlarged national assembly. In return the Pathet Lao has agreed to liqui- date its control over the disputed northern provinces. Premier Souvanna Phouma's reportedly imminent departure for Peiping suggests that he feels a final settlement is all but concluded. C CONFIDENTIAL 69eRfif ow . Page 5 i Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 THE WEEK IN BRIEF N E T(AL.. Approved FaQWease 05/,Q 10 C 9-0092%WO900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 NOTES AND COMMENTS YUGOSLAV ECONOMIC TIES TO EAST GREATLY INCRE SE . . . . Page 1 Yugoslavia's recent acceptance of a large credit from the USSR and East Germany for the development of aluminum production facilities indicates that President Tito is now willing to accept a.major share of his financing from the Soviet bloc, if sufficiently favorable terms are offered. This action runs~.cOunter to repeated official Yugoslav statements that Western credits for new industrial develop- meat are preferred and casts some doubt on'Yugoslavia's ex- pressed preference for Western arms aid, EAST GERMANY BELATEDLY ADOPTS DE-STALINIZATION LINE . . . . . . . . . . . . . . . . Page 3 East Germany's. Socialist, Unity (Communist) Party, after dragging its feet for several months, has finally come around to the Kremlin line on de-Stalinization. The party central committee, meeting from 27 to 29 July, re- scinded.the sentences against former high-ranking party functionaries purged for deviations from. the party line, promised liberalization of party policies, and called for improved working conditions and increased productivity in industry and agriculture. POLISH COMMUNISTS' LIBERALIZATION PROGRAM REAFFIRMED . . . . . . . . . . . . . . Page 4 The seventh plenum of the central committee of the Polish United Workers (Communist) Party, which met in War- saw from 18 to 28 July,.,formally launched a program of liberalization. This step marks a further gain for the moderate elements in the party. The closing resolution outlined ,a, number of. economic and political concessions designed to win popular support for the regime. CONFIDENTIAL SLreftepft 25X1 25X1 25X1 ii Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 THE WEEK IN BRIEF Approved Foi ease 2005/02/10 : CIA-RDP79-00920900070001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 SOVIET MIDYEAR ECONOMIC REPORT . . . . . . . . . . . . . . . . . . Page 5 The report on plan fulfillment for the first half of 1956 shows that the Soviet economy is off to a mod- erately good start in the first half year of the Sixth Five-Year Plan. Industry and transport met or almost met most major targets, but investment in new capacity lagged. Achievements in producing materials and equipment for agriculture, together with the favorable weather so far this year, should enable the USSR to harvest a good crop. The standard of living of most consumers apparently in- creased slightly and will probably improve more sharply the latter halt of this year. SOVIET-JAPANESE NEGOTIATIONS . . . . Page 8 Soviet and Japanese negotiators have reached a com- plete deadlock on the territorial issue, which is the major obstacle to conclusion of the peace treaty, but both sides say they will continue to work for a treaty. The USSR is confident it can push Japan into normaliza- tion of relations by an exchange of ambassadors without further concessions, deferring a final territorial set- THE SINC)-BURMESE BORDER PROBLEM . . . . . . . . . . . . . Page Peiping's statement on 3 August ridiculing reports of troop encroachments on Burmese territory as "absurd" is designed to minimize damage to Communist China's peaceful posture in international affairs. The Chinese, who have refused repeated Burmese offers to negotiate on the border problem, give no indication of abandoning their claims to the disputed areas. The Rangoon govern- ment has sought to play down the seriousness of news re- ports of border clashes but has recalled its ambassador to Peiping "for consultation." SOUTH KOREA ADOPTING IMPROVED ECONOMIC MEASURES . . . . . . . . . . . . . . . . Page The appointment by President Rhee of new economic officials has resulted in more realistic efforts to com- bat inflation and to co-operate in the administration of the American aid program, which amounts to over $300,000,- 000 annually. Despite these efforts, it is still un- certain whether the Koreans will give greater immediate emphasis to the fight against inflation rather than to an industrial build-up and whether President Rhee can be persuaded to moderate his opposition to procurement of aid goods in Japan. SECRET 25X1 25X1 iii Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 THE WEEK IN BRIEF Approved For FRblease 2005/02/10 : CIA-RDP79-00927A000900070001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 COMMUNISTS DOMINATE SINGAPORE'S MOST VIGOROUS PARTY . . . . . . . . . . . Page 11 At the third annual congress of the People's Action Party in July, the party's Communist faction led by Lim Chin Siong succeeded in dominating the left-wing social- ist faction and gained control of the key party posts. The popularity of the Lim group's leaders among the pre- ponderantly Chinese population makes probable the fur- trier development of the party along C.ommu,n:ist lines. ARGENTINA TAKES INITIATIVE IN SOUTH ATLANTIC DEFENSE PLANNING Argentina on 31 July invited Brazil and Uruguay to join it in planning the defense of the South Atlantic area. Brazil disapproves of the proposal but probably will not reject it outright lest this weaken the domes- tic position of President Aramburu of Argentina. The Argentine action probably stems in part from a desire to obtain military equipment from the US and to commit a future elected Argentine government to inter-American military cooperation. MOLLET'S PRESTIGE HIGH AS RESULT OF SUEZ CRISIS'. . . . Overwhelming support of Premier Mollet's strong . Page 13 . Page 15 position against the Egyptian seizure of the Suez Canal has temporarily rallied to him even those non-Communists who had refused to support his government on the Alge- rian issue. Nevertheless, France's economic problems continue and, when the National Assembly reconvenes on 2 October,. Mollet will face increasing labor unrest, a mounting threat of inflation, and stopped-up Communist unity-of-action appeals. NEW DEVELOPMENTS IN THE ITALIAN LABOR MOVEMENT . . . . . . . . . . . . . Page 16 The announcement on 1 August by the secretary gen- eral of the Italian General Labor Confederation that it is independent of Communist Party control may signal a major re-orientation in Italian labor developments. The confederation has been declining in membership and in- fluence and is threatened by disaffection of its Social- ist following. The assertion in the Communist press that the confederation is "independent" appears to be aimed at exploiting the renewed hope of labor for legit- imate economic objectives, and at pushing for a "broad social front" to include Democratic Soci list and Catholic workers. SECRET iv Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 THE WEEK IN BRIEF Approved Forase 2005/02/10: CIA-RDP79-00927900070001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 CEYLONESE MINORITY GROUP PLANS DEMONSTRATION-MARCH . . . . . . . . . . . . . Page 17 Violence may break out in Ceylon after 10 August, when Tamil-speaking members of the Federalist Party and their sympathizers begin a long-scheduled march from all parts of the island toward the naval base of Trincomalee in protest against the government's decision to make Sinhalese the sole official language of the country. r- I POLITICAL STRUGGLE RENEWED IN PAKISTAN . . . . . . . .. . . . . . . . . . . . . . Page 18 The scheduled meeting of the East Pakistan assembly on 13 August has renewed the domestic political struggle in Pakistan which reached crisis proportions last May. A change in the national leadership or imposition of executive control by President Mirza may result. PATTERNS AND PERSPECTIVES USSR MOVES TOWARD NEW RELATIONSHIP WITH WESTERN COMMUNIST PARTIES . . . . . . . . . . . . . . . . . . . Page 3 The Soviet Union is moving to change its technique of control over the Communist parties outside the Orbit. Moscow seems to be permitting these parties, particu- larly those in the West, greater latitude for maneuver within the general framework of Soviet policy guidance, and is seeking to create the impression that they are now independent national political movements. The USSR has made it clear, however, that these parties must adhere to basic Communist objectives as inter- preted by Moscow. SECRET . 25X1 v Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 THE WEEK IN BRIEF Approved For Release 2005/02/10 : CIA-RDP79-00927A'000900070001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY ,. J 9 August 1956 25X6 THE OUTLOOK FOR EURATOM AND THE EUROPEAN COMMON MARKET . . Page 7 When negotiations between the six Coal-Steel Com- munity nations are resumed in September on EURATOM and the European common market, efforts will. be renewed to whittle away the obstacles which still remain, particu- larly those concerning institutions, national weapons programs, and the role of the common market. The Mallet government has made a gesture of stronger sup- port for EURATOM and the French assembly gave it a favorable vote on 12 July. Moscow promptly responded by criticizing EURATOM as "a closed community." 25X1 25X1 25X1 SECRET vi Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 THE WEEK IN BRIEF Approved ForRe~ease 2005/02/10: CIA SECRET SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 QF f ED1 A -E T Tt, ' SUEZ CRISIS President Nasr is evidently still formulating his reply to the invitation to confer in Lon- don on 16 August with 23 other nations on the Suez Canal situa- 25X1 Lion. F_ I 25X1 Nasr will in a ec refuse the invitation by suggesting a change of location for the talks and increased participation to include more Arab states. Nasr is also reported likely to assert that Egypt cannot discuss the issue while under duress from Western mill-, tary measures,and may urge that the subject be taken up in the United Nations. It was been announced that Nas C will make a statement on 12 August aid this presumably will contain Egypt's-answer. Soviet Stand In its statement of accept- ance on 9 August, the USSR made several,reservations concerning the conference. Moscow urged a postponement of the conference until the end of August and asked that 22 additional coun- tries be invited, including eight Arab states,-six Satellites. and Yugoslavia. The statement added that it is "indispensible for such a great powerk" as Communist China to take part in the con- ference. The statement supported Egypt's right of nationalization, dissociated the USSR from pre- vious Western measures on the Suez, and described military measures being carried out by Britain ' and.France as "utterly inadmissible" and a "'challenge to peace." It also hinted that the USSR 'may introduce at the conference the status of other waterways, such as the Panama Canal.. The nature of the Soviet acceptance shows that the USSR's .immediate,concern is to try to prevent any early action by the conference'. The USSR has been working closely with Cairo, possibly to develop a co-ordinated approach to the West. Soviet ambassador Kiselev was the first foreign diplomat to be received by Nasr after the London declaration and met daily with Nasr from 3 through 7 August and on 9 August. All the other nations in- vited to the conference have accepted except Spain and Greece, from whom nothing has been heard. Spain, anxious to bolster its, the Arab world, can be expected to support Egypt's cause. In announcing India's acceptance. on 8 August, Nehru said he"could support no effort to impose an international solution opposing Egypt's sovereign'-rights. He also de- plored-Britain's public display of force'as unlikely to help resolve the crisis. An indica- tion of further possible sym- pathy for Egypt among conference participants appeared in the observation on 1 August by the semiofficial Esteri of Rome that Italy intense 'to remember its friendship for Egypt. SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 QF IMMEDIATE INTEREST Page 1 of 5 Approved For el ase 2005/02/10: CIA-RDP79-00927000900070001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 Among those not invited, Panama on 6 August publicly protested being left out de spite its own great canal and shipping interests, and affirmed that it would not be bound by the conference results. Near East SuSpport In the uninvited states of the Near East, there is wide- spread popular support of Nasr's move. Even the pro-Western Iraqi government announced its support of Egypt's "dignity" and "sovereignty." In private, however, other Arab governments are, for the most part, indicat- ing some fears of the possible repercussions of the Suez nationalization. The Saudi Arabians reportedly fear the Western reaction, and the Jordanians fear an Israeli attack while Egypt Is involved in Suez. Actually the Israelis'have been relatively quiet, while hoping for eventual benefits, such as more arms. In French North Africa, both French and moderate nationalist leaders fear that the crisis has already stiffened the backs of extremists in Cairo and virtually eliminated prospects for early negotiations between France and the Algerian rebels. British and French Moves After a week of extensive military preparations, Britain on 9 August announced a halt "for at least 24 hours" to its measures to bolster its forces in the Mediterranean. This followed Prime Minister Edents public reaffirmation that Brit- ain sought a peaceful solution. Military steps taken in the past week included sending three aircraft. carriers--two of them as troopships--from Britain to join the one carrier already in the Mediterranean, placing in readiness one light cruiser and three destroyers, taking out of reserve several landing craft, dispatching twin-jet Canberra bombers to Malta, and sending 1,000 more troops to augment the 38,000 already in'the area. Press reports indicate that an infantry division will be sent from Britain to Cyprus. This deployment has caused adverse repercussions on European defense. Britain informed the North Atlantic Council on 3 August it planned to withdraw "certain individuals and units" from its NATO-com- mitted forces in Britain and Germany, although only those absolutely essential to its new plans would be taken from Germany. The British representative's statement implied that restoration of these forces would depend on the forthcoming reappraisal of defense requirements. France's military gestures have been limited to making ready its Mediterranean fleet at Toulon. The battleship, three carriers and other ships based there could readily be released for Suez duty. With the equivalent of approximately 13 divisions tied down in Algeria, however, the personnel for no more than an infantry division--normally about 18,000 men--could probably be made available without additional mobilization. In both Britain and France, public support for the govern- ments' approach remains high. The British press, however, while endorsing the effort to ensure international control SECRET Approved For Release 2005/02/10: CIA-RDP79-00927A000900070001-7 PART I ' ' OF IMMEDIATE INTEREST Page 2 of 5 Approved For ease 2005/E? DP79-00927 00 900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 25X1 of the canal, has increasingly questioned the Eden government's apparent intention. to use force if necessary to guarantee the "unfettered" passage on which the prime minister insists. Labor Party leader Hugh Gaitskell has urged that the London con- ference seek to put any inter- national control of the canal under the United Nations. Egyptian Measures In Egypt, the military, the public, and Nasr have begun .to show some anxiety over the stiff Western reaction. Cairo's military leaders recognize they would have no hope of keeping Britain and France from 25X1 the canal. ARAB ISRAELI SITUATION Syria and Jordan have re- mained extremely nervous about the possibility that Israel might take some action against them while Egypt is preoccu- pied with the Suez crisis. On 7 and 8 August, the Syrian gov- ernment announced mobilization --the first time in support of Moscow probably doubts that the West will take military action against Egypt. However, it is unlikely that Moscow has committed itself to direct mil- itary support of Egypt in the event military action is taken by. the West. Egypt, the second time as a response to an alleged resump- tion of Israeli work on divert- ing Jordan River waters. The Jordanians, jittery over reports of Israeli troop movements and a test mobilizati.on--one that failed to materialize--sought assurances that Britain would SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 OF IMMEDIATE INTEREST Page 3 of 5 25X1 Approved. For % ase 2005/02/,~Q ~,~ DP79-00927A 900070001-7 CURRENT-INTELLIGENCE WEEKLY SUMMARY 9 August 1956 25X1 come to their aid under the Anglo-Jordanian treaty, There seems to be some fac- tual basis for Syria's reaction. The Israeli radio announced on 5 August that construction of a dam above Lake Hula to divert .,water from the upper Jordan Riv- er into a new drainage canal would begin in a few days and probably would be completed with- in two months. This construc- tion, however, would be entirely inside Israeli territory and outside the demilitarized zone, and is part of an Israeli proj- ect not directly related to the Banat Yacov issue, Tel Aviv appears to ave adhered to Foreign Minister Meir's statement to the parlia- mentary foreign affairs com-` mittee on 1 August that Israel would maintain a "wait-and-see" attitude during crisis, PART I SECRET Approved For Re~se2? MEDIATE : INTEREST 00927A000900070001-7 Page 4 of 5 25X1 Approved For;ase 2005/02/10: CIA-RDP79-0092740( 900070001-7 . ..SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 Present negotiations in Vientiane between the Laotian government and the Pathet Lao appear to be moving toward an early settlement. Thus far the Pathet Lao appears to have ob tained important concessions from the government as the .price of liquidating its con- trol of the disputed provinces of Sam Neua and Phong Saly, In a joint communiqu6 of 5 August,both sides formally endorsed a policy of "peaceful coexistence" for Laos, estab- lishment of friendly relations with neighboring countries and repudiation of foreign military commitments. Three days later, according to press releases, they agreed to the formation of a coalition government and to supplementary general elections in which the Pathets would freely participate.' Political and military subcommittees, however, are still working out the de- tails for the restoration of Vientiane's authority in the two provinces, and the reinte- gration of the Pathet Lao into the national community. P ouma peatedly assured them he can "handle" his half-brother, Souphannouvong, and that he plans to be tough in the settle- ment of the "details." The Laotian government's endorsement of a policy of co- existence is the culmination of several months of drifting toward neutralit , 25X1 aos' sense of isolation in the face. of heavy Communist pressure, Souvanna Phouma has indicated that following final settlement of the Pathet issue, Laos will probably enter into formal relations with`Com-- munist bloc nations, especially Communist China, the USSR and North Vietnam. The Chinese Communists may be afforded an early opportunity to propose such relations. Souvanna Phouma, who in May was invited to make a state visit to Peiping, reportedly now plans to depart about 19 August, His early scheduling of this visit, which he has consistently main- tained would not be made before the Pathet issue was resolved, is a further indication that he anticipates no difficulties over a final settlement, 25X1 SECRET 25X1 PART I Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 OF IMMEDIATE INTEREST Page 5 of 5 Approved For? ase 2005/~/,1 1-1A P79-00927009900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 YUGOSLAV ECONOMIC TIES TO EAST GREATLY INCREASED Yugoslavia's recent ac- ceptance of a large credit from the USSR and East Germany for the development of aluminum facilities indicates that Presi- dent Tito is now willing to satisfy a major share of his country's financing needs from the Soviet bloc, if sufficiently favorable terms are offered.- The action runs counter to re- peated official Yugoslav state- ments that Western credits for new industrial development are preferred and casts some doubt on Yugoslavia's expressed pref- erence for Western arms aide Terms-of the Agreement Under the agreement an- nounced on 3 August, East Ger- many and the USSR are to share equally in a long-term 700,000- 000-ruble ($175,000,000) credit for the development of Yugoslav aluminum facilities, with an eventual capacity of 100,000 tons annually. The present sum is to finance only half of this ultimate capacity, and a future credit for developing the full. capacity has been promised. All the credits are to be repaid by aluminum exports, which are to start not later than 1961. The entire Soviet share of the credit is apparently to be in the form of wheat, which will be sold in Yugoslavia to meet internal construction costs. Yugoslav officials claim that they anticipate getting this wheat in five equal annual installments of 200,000 tons beginning in 1957. They there- fore say this does not affect their request for 300,000 tons of American wheat immediately to meet food needs this fall and they still want another PART II 1,050,000 tons by the end of 1957. These requests are basi- cally part of a previously stated request for 1,000,000 tons of surplus American wheat annually for the next five years to be sold on long-term credit. With the present agreement, Tito is approaching the half- billion-dollar mark in obliga- tions to the East, which is YUGOSLAV MEDIUM- AND LONG-TERM FINANCIAL OBLIGATIONS APPROXIMATE, IN MILLIONS OF DOLLARS AT OFFICIAL RATE WEST Portions of previous obligations still to be drawn on as of January 1956 .......... 61 West German unratified "credit"............... 57 TOTAL 118 EAST USSR (Negotiated in 1955. Allocated, but only small proportion drawn.)......... 194 Czech (negotiated February 1956) .............. 75 Polish (negotiated Feb 1956) ..................... 20 USSR-East German, "in equal parts';......... 175 TOTAL 464 Also available are $15,000,000 of Italian war reparations, $14,500,000 of an unratified German war claims settlement, and $85,000,000 of Hungarian war reparations. far more than his total credits and loans from the West. Approach to West Intermittently since last March, Belgrade officials have said they preferred to finance plants for the export produc- tion of aluminum and electric power through West European SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 NOTES AND COMMENTS Page 1 of 19 25X1 Approved For?tease 2005/ Q RDP79-00927.900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 credi'ts; f'or' the' foreign exchange costs and American surplus, wheat, on long-term credit for the in- ternal costs. Although Belgrade has consistently said that the USSR was willing to finance these projects, Vice President Vukmanovic-Tempo said he did not want to deal on the terms the USSR had offered, although he would do so "if necessary." He publicly expressed his desire for Western financing as late as 14 July, and detailed nego- tiations were started with the West soon thereafter. East German Role Soviet first deputy premier Mikoyan, on his hurriedly sched- uled visit to Tito on 21-22 July, may have clinched the deal by saying that-the East German half of the credit would count as war reparations and not have to be repaid. In mid- June it was reported that an East German Chamber of Foreign Trade representative in Bel- grade was negotiating on repara- tions claims, and that the Yugo- slavs were asking for $80,000,- 000, while the East Germans were then offering only $20,000,000. the aluminum agreement was not in- tended to constitute de jure recognition of East Germany, but this is the first time Yugoslavia has signed an offi- cial agreement with the East German government. Trade agree- ments, even including one signed on 4 August, one day after the credit agreement was announced, have been between the nongovern- mental Chambers of Foreign Trade. It is still possible that Tito will hold off recognition at least until after the West German Bundestag reconvenes in late September. The Yugoslavs negotiated a settlement last March with West Germany on war reparations, whereby the Yugo- slavs were to receive a $57,- 100,000 90-year "credit," but this agreement is subject to ratification by a Bundestag which has already adopted a balky attitude over Tito's statements in Moscow about the existence of "two sovereign states" in Germany. Future Aid The Yugoslav counselor also said the way was still open for the West to finance two thirds of Yugoslavia's total projected aluminum production capacity. He reasoned that the plans submitted to the Western countries in mid-July called for a total projected capacity of 165,000 tons annually, and the present Soviet-East German credit will provide for 50,000 tons, aside from promises of further credits later. In addition to this demon- stration of willingness to sup- ply economic development credit, Moscow may be willing to fill Yugoslav requests for arms. Yugoslav officials claim they want American arms but say that the present American military aid in the pipeline--over $100,000,000 worth of arms, in- cluding jet planes--would sat- isfy most of their present needs. (Concurred in by ORR) SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 NOTES AND COMMENTS Page 2 of 19 25X1 Approved For ease 2005/02/3: L P79-00927A 900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 EAST GERMANY BELATEDLY ADOPTS DE-STALINIZATION LINE East Germany's Socialist Unity (Communist) Party, after dragging its feet for several months, has finally come around to the Kremlin line on de- Stalinization. The party cen- tral committee, meeting from 27 to 29 July, rescinded the sentences against former high- ranking party functionaries purged for deviations from the party line, promised liberaliza- tion of party policies, and called for improved working conditions and increased pro- ductivity in industry and agri- culture. The party admitted that its slavish adherence to Stalinist policies had led to a paralysis of personal initia- tive and prevented an objective study of social and political problems in East Germany. Like other Satellite Com- munist parties, the East German central committee apologized for "false charges made against the Communist Federation of Yugoslavia" in 1948, and ex- pressed hope for the restora- tion of friendly relations. politburo member Paul Merker, purged in 1950 for alleged contacts with Noel field, would be dropped since they were largely of a political nature not warranting criminal pro- ceedings. All except Merker were purged in 1953. All had op- posed the policy of blind obedience to Moscow pursued by party first secretary Walter Ulbricht, and had stood for a policy which would achieve Com- munist aims but adapt them to local needs. Dahlem and Acker- mann, the principal exponents of a "German road to Socialism," have ideas of their own. The Kremlin, even now, probably could not depend on them to fol- low every shift in its policies as Ulbricht does. Since his rehabilitation, however, Dahlem has been given a second-level government post. No.hint has been made of a possible rehabilitation of the two men who most openly chal- lenged Ulbricht's control of the party: former state security minister Wilhelm Zaisser and the former editor of the party newspaper, Rudolf Herrnstadt. Rehabilitations In a grudging acknowledg- ment, probably dintated by Mos- cow, of the need for the recti- fication of "the individual errors and mistakes by Stalin," East Germany followed Poland, Hungary, Czechoslovakia., and Bulgaria in correcting past injustices to purge victims. It rehabilitated former polit- buro member Franz Dahlem, and annulled the punishments of former deputy foreign minister Anton Ackermann, his wife, Elli Srh*nidt, who was a former candi- date member of the politburo, and former Berlin party boss Hans Jendretzky, The central committee also decided that the charges against former Improvements Promised In sharp contrast to pre- vious statements blaming Western agents and enticements for lur- ing East Germans to the West, Ulbricht's report on the party meeting charged that "the bureaucratic and.soulless at- titude of state officials which violated the private interests of.citizens" was at least par- tially responsible for the flights of large numbers of technicians, skilled workers, and young men of military age. Ulbright called for a "reso- lute struggle against callous SECRET PART I I Approved For Relea*&2RR5/R#60a g9-00927A000900070001-7 Page 3 of 19 Approved FoQWease 2005 ::P-RDP79-00920900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 bureaucracy" to remedy the situation, and promised that the party would concentrate on measures to improve supplies of food and consumer goods that would permit the end of ration- ing by the end of 1957. He also promised higher pensions, .shorter working hours, and in- creased construction of.housing. POLISH COMMUNISTS' LIBERALIZATION PROGRAM REAFFIRMED The seventh plenum of the central committee of the Polish United Workers (Communist) Party (PZPR), which met in War- saw from 18 to 28 July, formally launched a program of liberal- ization which represents a fur- ther gain for the moderate ele- ments in the party.* The clos- ing resolution outlined a num- ber of additional economic and political concessions designed to win popular support for the regime. Economic Concessions Much of the plenum was taken up with economic problems, indicating the serious concern felt by the top leaders over the unsatisfactory internal 25X1 situation. t e workers are surly and grumbling, factors which are undoubtedly causing the regime concern in the wake of the Poznan riots. *The term "moderate ele- ments" refers to the party figures who oppose certain practices of the present leader- ship on grounds ranging from conviction that greater liberal- ization is required in all sec- tors of domestic policy to a mere difference as to the best tactical approach in implementing current policies. Ulbricht's statement that the new policies mean "demo- cracy for the workers and for the. people, and not for hostile elements" indicates that the promised liberalization of party policies is to be confined within strict limits. 25X1 Recognizing that even a moderate increase in the stand- ard of living will be unattain- able if agricultural production does not increase 25 percent as scheduled, the party made a num- ber of concessions to the peas- ants. Compulsory milk delivery quotas will be abolished on 1 January, increased credits are to be allocated to the agri- cultural sector, the definition of the term "kulak" was con- siderably narrowed, and those peasants who remain classified as kulaks will be given access to machine tractor stations and additional supplies of agri- cultural machinery. While these concessions will be welcomed by the peas- ants, they are unlikely to re- sult in a significant increase in production as long as the regime pursues its policy of rapid collectivization. The lack of emphasis on collec- tivization in the resolution and the subsequently announced Five-Year plan may indicate that the regime realizes this and will not push for rapid collectiviza- tion in the next five years. Party Democracy Several measures will be adopted to further the party's 25X1 SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART II NOTES AND COMMENTS Page 4 of 19 Approved For ease 200510S/j.)~T-DP79-00927A 900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 aim of increased "democratiza- tion." One widely publicized statement in the resolution called for the party to cease, interfering. with the administra- tion of the government and the economy and to turn its energies toward educating and inspiring the masses in the manner needed to carry out the basic policies adopted by the party. However, similar statements made in the past have not resulted in any relaxation of party control over the administration. Of greater significance is the call for elected party bodies to reassert their con- trol over the party apparatus. In recent years, the apparatus has grown in importance while the elected bodies-have been reduced to little more than rubber stamps. While the call for such a change will be wel- comed by many members, they are likely to reserve judgment on its importance until they see actual results. The ap- paratus has long existed in- dependently of the elected party bodies in the USSR, but there has been no similar criti- cism of the Soviet apparatus. Gomulka'S Rehabilitation Shortly after the closing session, it was announced that the plenum had annulled the November 1949 resolution which accused former secretary SOVIET MIDYEAR ECONOMIC REPORT The report on plan ful- fillment for the first half of 1956 shows that the Soviet economy is off to a moderately good start in the first half year of the Sixth-Five-Year Plan. Industry and transport met or almost met most major targets. general Wladyslaw Gomulka, for- mer politburo member and deputy minister of defense Marian Spy- cha.iski, and former head of the cadres department of the party Zenon Kliszko of national devia- tionism or Titoism. In addition, Gomulka had been accused of being unwilling to implement a Comin- form directive calling for rapid collectivization of agriculture. The announcement added that Gomulka's rights as a party mem- ber would be restored. IC _-1 25X1 the party planned to bring him back, but balked at his demand for a seat on the politburo. the central committee 25X1 own the motion of a trade union leader that Gomulka be invited to attend the plenum. On the following day,Zenon Kliszko was reappointed under secretary of state in the Minis- try of Justice, the post he held when purged in 1949, suggesting that Gomulka, and possibly Spy- chaiski, may also be offered official positions in the near future. If such a position for Gomulka should ultimately serve as a steppingstone to the polit- buro, it would not only be a significant gain for the moder- ates but might also threaten the position of First Secretary 25X1 Shortages in certain types of construction materials and equipment continue to retard the investment program.. The standard of living of most consumers apparently increased somewhat, and will probably im- prove more sharply the latter half of this year. SECRET PART II Approved For Rele a E005/AND CO MERNTS 9-00927A00090007 001-7 g e5 of 19 Approved Forl ase 2005/02,Q 'COWP79-00927, 0 900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 Labor productivity rose as planned in industry, 8 percent, and in construction, 10 percent, though other efficiency indica- tors did not. The midyear re- port announced that the labor force - gained by 1,200,000 in the year ending 1 July against a gain of 1,000,000 the preced- ing 12 months. Industry Industry exceeded by 2 percent the plan for gross production and continued to grow at roughly the same rate--12 percent--as during the final years of the Fifth Five- Year Plan. It suc- cessfully fulfilled output targets for leading nonferrous metals, petroleum products, chemicals, foodstuffs, and hard consumer goods. Fail- ures, in some cases only nominal, included underfulfillment of targets for iron and steel, coal, machine tools, metallurgical and chemical equip- ment, and cement. While the report contains no breakdown of total production into heavy and light industrial categories, data on specific com- modities suggest a small shift in favor of the latter. In- creases in the output of leading producer goods were generally smaller than those registered in mid- CREASE { OVER F_P$ECEDING YEAR FIRST HALF 1955 M _ FIRST . F TES - 14 RIM 1955, while the re- N verse was true of con- sumer goods other GOODS (111C 'POWER -T f > tERTILIZERS lE -GOODS Agriculture Data on agriculture reflect the policy of intensifying its development through allocation ,... f MIC D-~y,,(~ ffirf.aft r -x E R v .PRODUCTIVITY CAP~AL If VEST MIENT -MADE ~N FABRICS FABRICS SHIIG MACHINES IIMACHIN #T. E-A RYMPDUCTS CANNED GOODS 21 15 138 121 SECRET Approved For Relea /O : lWe-00927A0009000701-7 Qag 6 of 19 25X1 Approved For Release 2005/0I~.r-FDP79-0092. A000900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 of a larger share of resources --a policy inaugurated in 1953 and embodied in the Sixth Five- Year Plan. Sown acreage now stands at over 480,000,000 acres, or'4 percent more than in 1955, and includes a higher proportion of high-yielding crops. The plan for spring sow- ing was overfulfilled. Deliv eries of tractors and other machinery were generally above those for the, corresponding period last year and use of fertilizers was considerably above. These developments, coupled with favorable weather, augur good harvests and further improvement of the livestock situation. The numbers of var- ious livestock on 1 July were above those of 1 July 1955, and production of'milk has increased substantially. Investments The investment program con- tinued to have its troubles. State investments during the half year amounted to only 86 percent of plan. The plan, how- ever, called for a 15-percent increase this year, considerably above the annual rate required to meet the 1960 goal. It is doubtful that the 1956 goal will be achieved. Failure was reflected in both major elements of invest- ment: construction-assembly work fell short-by about 10 percent, and machinery and equipment deliveries by at least 15 percent. Construc- tion work was plagued by its usual difficulties, including the scattering of resources among too many projects, and inadequate utilization of con- struction machinery. Produc- tion of metallurgical and chemical equipment was con- siderably below target, the latter even falling below the corresponding 1955 figure. Consumer Welfare From the report it ap- pears that consumer welfare has not improved as much as planned. Retail trade turn- over increased by only 5 per- cent over the first half of 1955, against a planned. in- crease of 7 percent and an achieved increase of 8 percent in the first half .of 1955. . However, the mass of consumers, for whom food is the major item of expenditure, fared better than is suggested by this rise, since food, es- pecially dairy products, con- tributed the major portion of the increase. Prices in com- mission stores and on the col- lective-farm market reportedly dropped appreciably, the former falling 12 percent. Moreover, 'increases in the production of consumer goods and the prospect of good harvests suggest that all con- sumers can look forward to a sharper improvement in the second half of the year. SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART II NOTES AND COMMENTS Page 7 of 19 C INDU9tAL 25X1 Approved For e, ,,,ease 2005/gEL A?RDP79-00927900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 The abrupt and unequivo- cal Soviet refusal to compro- mise on the problem of sover- eignty over South Sakhalin and the Kuril Islands highlighted the first week of the Soviet- Japanese treaty talks in Mos- cow. Since the territorial issue is the major remaining obstacle to conclusion of a peace treaty, the Soviet re- fusal is probably intended to force an early denouement in the talks. Japanese foreign minister Shigemitsu rejected the Soviet position on 8 August following a special meeting with Soviet foreign minister Shepilov, thus making the territorial deadlock complete. However, both sides are reportedly agreed that a peace treaty must be concluded and have ruled out an interim normalization through an ex- change of ambassadors. Special committees have been set up to work out lesser unsettled is- sues as the negotiations con- tinue. Shigemitsu, who remarked on 6 August that the negotia- tions made him "acutely realize how weak one could be without strength," will appeal to Kremlin leaders in an effort to break the impasse. For the first time since talks on a treaty began in January 1955, Soviet propaganda organs are making a concerted call for a rapid conclusion of the negotiations, suggesting that the USSR is confident it can push. Japan into a normali- zation of relations now with- out making further concessions. Soviet foreign minister Shepilov's strong reiteration that "Japan has no right to raise any claim to any territory which was occupied by the Soviet Union" was-forcefully backed by the Soviet press and radio. Shepilov tried to balance this firm stand by presenting in some detail an alluring pic- ture of trade possibilities which would follow the normali- zation of relations. He pre- dicted a rise in five years of the total annual volume of trade to one billion rubles or more--about 50 times the negli- gible amount now being carried on. The Japanese will be skep- tical of this possibility. Japan has been dissatisfied in the past with the price and quality of Soviet goods, par- ticularly coal and lumber, which it most desires,and the probability is that Japan will continue to honor COCOM embargo lists, reducing the scope of its exports. However, the Japanese delegation might ac- cept trade overtures in Moscow to offset to some extent its failure to regain the lost territories. Conclusion of a final treaty or simply a normaliza- tion of relations through an exchange of ambassadors would bring into effect a number of Soviet concessions, including the return of Japanese prisoners of war, long-term fishery and sea rescue pacts, some measure of Soviet support for Japan's admission to the United Na- tions. It is questionable, however, whether the USSR would return Shikotan and the Habomai Islands for an thin short of a final treaty. 25X1 SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART II NOTES AND COMMENTS Page 8 of 19 Approved For EJ&ase 2005/02/10 : CIA-RDP79-00927A00 00070001-7 SEC1ET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 THE SINO-BURMESE BORDER PROBLEM Peiping's first public reaction to Burmese publicity on the Sino-Burmese border problem was a broadcast on 3 August of a statement by the authoritative "Observer" of People's Daily in which charges that Chinese troops had en- croached on Burmese territory were ridiculed as "groundless" and "absurd." The broadcast explained that Communist forces were in disputed areas along the border to "preserve the status quo" pending a settlement by diplomatic negotiations. Although the Communist statement of 3 August is clearly designed to minimize damage to Peiping's pose as a peaceful and reasonable power, it con- tains no indication that the Chinese intend to abandon the unyielding position they have Existing Under con so-ecuen Road, selected Pack trail, selected 9 AUGUST 1956 O MU ES TO 24272 thus far taken on the border question. It appears likely that Communist military out- posts will not be withdrawn at this time and that Peiping will insist strongly on its own ter- ritorial claims in any talks with the Burmese. Meanwhile, the Burmese government has sought to play down press stories of friction; along the border. In a care- fully-worded communique of 31 July, it stated that these re- ports were overly sensational. Prime Minister Ba Swe subsequent- ly stated in public that Sino- Burmese relations were "cordial" and that he had "every hope" the frontier problem would be settled amicably. There is growing evidence, however, that Rangoon has for C H siakua Paoshan ~ Yunsihtfl Chenkang S Nengma Possi6~e r gmeng __,~ 4mengyun ien Tayakou-1 -jMengman Ningerh 1.Ssumao a long time been deeply disturbed by Chinese activities in the border areas. In addition to Chinese military incursions, Rangoon has been aware of a continuing fairly large-scale flow of' illegal immigration from Yunnan. At the same time, the Chinese have built new roads in the border-region which will progres- sively integrate that region with Communist China. Most points along the frontier south of the Burma Road are now accessible by road from China. There are some indica- tions that pack trails from main routes to other border points are being made motoxable. A railroad is now under construction which will connect Kunming with the Burma border, possibly at SECRET Approved For ReI QOjjy~ (Q,~/10 : CIA--RDS 79-00927A000900070001-7 COMMENT Page 9 of 1.9 Approved For IA se 2005/0$/5)g-7ZDP79-00927AOO 00070001-7 valor CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 Kunlong, northeast of Lashio. According to one report, approx- imately 150 miles of track have already been laid. The Burmese government, has asked Peiping to withdraw its troops from the Wa States and to ne- gotiate a final'demarcation of the border. In this connection, the Burmese ambassador to Pei- ping has been recalled "for consultation." SOUTH KOREA ADOPTING IMPROVED ECONOMIC MEASURES President Rhee's removal of Paek Tu-chin as South Korea's top economic official and his appointment of new officials in late May have resulted in the adoption of stronger fiscal measures to combat inflation and. in an unpredecented degree of co-operation with American aid officials. appointment of Kim Hyon-chol in Paek's place and the addi- tion of a new economic team have installed economists who may be.less accomplished, but who appear more genuinely con- cerned with Korea's economic development.. Although President Rhee still makes the decisions on all policy, the new Korean Peiping prove futile. (Concurred in by ORR) The paper that published the "invasion" story has ad- vised Burma to seek interna- tional support, and Deputy Pre- mier Kyaw Nyein has inquired about the American position. He intimated, however, that there was little likelihood that Burma would refer the matter to the UN, inasmuch as Communist China is not a member. Never- theless, Rangoon probably re- gards referral to the UN as its trump card to be used in the event negotiations with officials appear more inclined than their predecessors to risk incurring Rhee's displeasure for the sake of gaining his en- dorsement of an economically sound program. Korean co-operation has stemmed from the fact that Korean officials have recognized the need for implementing certain steps to achieve intermediate goals before additional Ameri- could be expected, either in total appropriations or in specific projects. Korean officials still continue, how- ever, to sign agreements and then try to circumvent them if they later prove to be unpalatable. South Korea's more construc- tive approach to its economic problems has been reflected in several developments, such as the government's announcement SECRET 25X1 Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART II NOTES AND COMMENTS Page 10 of 19 Approved For Ease 2005/( TC -7RDP79-00927AOO000900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 in early August that $10,000,000 worth of fertilizer would be sold for cash through commercial channels. The move is designed to counter inflation by lowering fertilizer prices and contract- ing the money supply; fertilizer prices have been reduced by more than half since this announcement. Earlier the Commerce and Industry Ministry reportedly submitted to President Rhee a plan to increase electricity rates and coal prices in order to eliminate deficit financing of these government-owned enter- prises. This resulted from an American stipulation that the government make this move be- fore an additional $25,000,000 aid would be added to the $297,- 000,000 provided in fiscal 1956. The minister of reconstruc- tion also announced that, con- trary to earlier reports, South Korea would not seek to remove grains and fertilizer from the Seoul wholesale price index. The price of fertilizer has now turned downward, but the rising prices of grains have been dxeat- ening to push the index to the point at which an upward revi- sion of the hwan-dollar exchange rate may have to be made in September. Korea has consistently opposed any increase in the ex- change rate, now set at 500 hwan to the dollar. Finally, after nearly a year of American demands, South COMMUNISTS DOMINATE SINGAPORE'S MOST VIGOROUS PARTY Singapore's most rapidly growing party, the People's . Action Party, is reportedly now dominated by its Communist-led Korea has agreed to refund over an extended period $6,236,000, representing extra profit it made by procuring rebuilt en- gines with American aid funds and selling them to Korean im- porters as new manufactures. Several very important dif- ferences nevertheless remain between Korean and American officials over the choice of methods to stabilize the econ- omy and, with the country's limited resources, to create an industrially productive eco- nomic system as nearly self- sustaining as possible. Prob- ably the most basic of these differences has been whether greater immediate emphasis is to be given to an industrial build-up, as Korea desires, or to combating the runaway in- flation with more consumer goods and a tighter fiscal policy, as the United States desires. A second major prob- lem involves President Rhee's opposition to the purchase of aid goods in Japan because of his political differences with Tokyo. The present extent of in- flation in Korea is represented by a Seoul wholesale price in- dex of more than 20,000--based on a 1947 standard of 100. A test of the new Korean attitude on economic measures may occur in September if the index reach- es the point calling for a rise in the exchange rate as mutu- ally agreed on in August 1955. faction. The growing split between the party's two fac- tions, both Communist-inclined, has resulted in the control of SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 NOTES AND COMMENTS Page 11 of 19 25X1 Approved For el ase 2005/OS8EJcE7RDP79-00927A 900070001-7 VQAW 9 August 1956 key party posts by the extreme group. The popularity of this group's leaders among,the pre- ponderantly Chinese population makes probable the further development of the party along Communist lines. The party has been regard- ed as Communist-manipulated since its inception in November 1954. There have been growing indica- tions, however,,of the develop- ment of two factions: the Lim Chin Siong group, led by Commu- nists and determined to carry out international Communist directives, and the Lee Kuan Yew group, led by left-wing socialists who have knowingly co-operated with the Communists but are now anxious about their personal future as they note Lim's increasing influence. At the party's third annual congress in July, followers,of the Lee faction were re-elected to prestige offices, but their deputies--all members of the Lim faction--reportedly control these offices. Lim received the highest single number of votes among party officers. The ascendancy of the Lim faction will probably continue, since Lee is handicapped in working among Singapore's Chi- nese, 78 percent of the popula- tion, by the fact that neither. he nor many of his followers speak Chinese. He and his as- sociates are largely English- educated, whereas Lim is Chinese- educated and makes most of his public addresses in Chinese. Lim and his Communist followers, who are believed to be'the best trained members of the People's Action Party, are particularly active among Chinese students and in peasants' and women's groups and cultural societies. Although Lee is legal adviser to most left-wing labor unions in Singapore, these unions are chiefly under the organizational control of the Lim faction. Other political parties in Singapore are encouraging Lee to defect from the party in the hope of utilizing his political talent to their own advantage and to weaken the People's Action Party. There is little indication that he will do so in the immediate future. He is still a leader in the best organized and most rapidly growing party in Singa- pore and, despite ideological and personal differences with Lim, will probably choose to remain as long as it appears to be politically worthwhile. Apparently in line with the international Communist directive for united-front tac- tics, the party has joined the general demand for the peaceful achievement of self-government in Singapore. Under the direc- tion of Lim Chin Siong, the party's policy may reflect in- ternational Communist tactics even more closely than in the past. The party is expected to be generally co-operative with the Labor Front government in its preparations for renewed self-government talks in 1957. Thereafter it will probably press for early elections since it believes by that time its popular support will have signif- icantly increased. SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART II NOTES AND COMMENTS Page 12 of 19 Approved For,. ele a 2005/02 ECR P79-0092_ A000900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 The party was included in the unsuccessful 1956 self- government talks in London and will expect to participate in those next year. Should it be excluded, as the present chief ARGENTINA TAKES INITIATIVE IN SOUTH ATLANTIC DEFENSE PLANNING Argentina's proposal on 31 July that Brazil and Uruguay join it in planning the defense of the South Atlantic was de- clared to be based on "recom- mendations of the Inter American Defense Board" (IADB), It prob- ably stems in part from a desire to obtain American military equipment and to commit a future elected Argentine government to inter-American military co-op- eration. Domestic political considerations also may have prompted the announcement at this time. Brazil, though noncommittal to the press, privately disap- proves of the proposal. Uruguay finds it confused, and other . countries wonder whether Argen- tina and Brazil, traditional rivals for South American leader- ship, are forming a bloc. Argentina's Proposal The confusion stems from the vagueness and abruptness of Argentina's proposal. minister has hinted, the party would probably resort to more obstructive tactics than it otherwise apparently plans. The proposal suggests that representatives of the three countries meet in Buenos Aires to discuss plans for organizing the defense of the South Atlan- tic and that a "permanent seat for the organization" be located in Montevj.deo. Observers from other American countries were declared welcome. The General Military Plan for the Defense of the American Continent, drafted in 1951 by the IADB, provides for regional planning within.each of three maritime sectors. One of these is the South Atlantic, including Argentina, Brazil and Uruguay, supported by landlocked Paraguay. The Argentine proposal is intend- ed to implement the IADB plan, and is the first major initia- tive in this direction. The IADB plan has been approved by the United States and all Latin American republics except Mexico, Venezuela having approved with reservations. SECRET 25X1 25X1 Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART II NOTES AND COMMENTS Page 13 of 19 Approved Fa Rise 2005/QSffLr,RF2DP79-0092.7A00070001-7 9 August 1956 Argentine Motives Domestic political and logistical considerations may outweigh other motivations be- hind the proposal. Since Peron's ouster in September 1955, the navy, under the command of Vice President Rojas, has been trying to increase its power position relative to the traditionally dominant army. It may believe this initiative will expand its importance in the inter American defense system and result in priority treatment over other Argentine services with regard to American military aide At the same time, Argentine military leaders may be testing the reaction of the somewhat isolationist Argentine public to inter American defense col- laboration--gilded by Argentine sponsorship--to determine whether or not closer military co-oper- ation with the United States may be feasible. They also evidently hope to conclude any new military negotiations prior to the na- tional elections scheduled for late 1957. The largest pro- government party, the Radical Civic Union, cast a minority vote against Argentine ratifi- cation of the Inter American Treaty of Reciprocal Assistance of 1947, which has been ratified by all Latin American countries. Brazilian Reaction Brazil, considerably irri- tated by Argentina's precipitous announcement, does not favor the establishment of regional de- fense arrangements within the hemisphere and considers that defense of the North and South Atlantic cannot be separated, according to the secretary gen- eral of the Brazilian Foreign Ministry. Brazil also suspects Argentina of trying to offset recently increased Brazilian influence in Uruguay and Paraguay. Nevertheless, Brazil may suggest that the proposal be referred to a joint commission for further study, since it believes outright rejection might be prejudicial to Aram- buru's position. Other Reactions Uruguay's acting foreign minister told the press on 5 August that in regard to the "Argentine naval initiative," no new legal instrument defining military obligations would result, only the fulfillment of measures determined by the 1947 Rio treaty. The Paraguayan ambassador in Montevideo commented that the Argentine proposal looked al- most like a revival of the triple alliance against Paraguay during the last century. Chile, piqued at being uninvited, officially opposes the proposed Buenos Aires meeting, stating that the Rio pact is sufficient for defense purposes. Chile will not go as an observer, but would "consider" attending if _ invited as a full participant, SECRET 25X1 X1 Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART II NOTES AND COMMENTS Page 14 of 19 Approved For? ze 2005/02/15EOR 79-00927AA000009990070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 according to the Foreign Minis- try. The consensus of Latin American diplomats in Montevideo is that the proposal will get nowhere. A Moscow Red Star article of 5 August charged that the MOLLET'S PRESTIGE HIGH AS RESULT OF SUEZ CRISIS Overwhelming support of Premier Mollet's strong posi- tion against the Egyptian sei- zure of the Suez Canal has temporarily rallied to him even those non-Communists who had refused to support his govern- ment on the Algerian issue. Nevertheless, France's economic problems continue and, when the National Assembly reconvenes on 2 October, Mollet will face increasing labor unrest, a mounting threat of inflation, and stepped-up Communist unity- of-action appeals. By a 422 to 140 vote on 2 August, the assembly approved the government resolution nam- ing Egypt's President Nasr a "permanent threat to peace." The non-Communist press has al- so given nearly unanimous sup- port to the government's posi- tion on the Egyptian seizure. France has long considered Presi- dent Nasr guilty of fomenting agitation in Algeria, and the canal nationalization has aroused profound apprehension that Algerian nationalism will be encouraged beyond contain- ment. In addition, the poten- tial threat to France's oil sources has helped shore up French unity. As the initial shock of the Suez seizure abates, however, proposal is a new case of "pactomania" initiated during the "US-dominated" July meet- ing of American presidents in Panama and that the "pact would be contrary to the spirit of the times." 25X1 opposition to Mollet's Algerian policy is bound to spread, par- ticularly if the government continues to enlarge the area of local autonomy in Algeria and pacification seems remote. As the government steps up implementation of administra- tive and land reforms, strong conservative resistance is expected. Communist Position The Communists, who alone voted against the Suez resolu- tion, appear to be in a more isolated position than at any time in the present assembly. Earlier Communist-sponsored attempts to disrupt the recall of reservists for Algeria ap- pear to have been checked, and their unity-of-action campaign seems to have been dealt a severe blow as a result of French public support for Mol- let's Algerian policy. They can be expected, however, to continue to appeal to the strong minority within the Socialist Party, which is dissatisfied with Mollet's handling of the Algerian campaign as contrary to Socialist doctrine. In addition, a mounting inflationary threat and the need to find new funds to fi- nance the Algerian campaign SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 NOTES AND COMMENTS Page 15 of 19 Approved Fore e 2005/O ' -lFDP79-00927A0 0070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 continue to pose crucial prob- lems, which may be intensified in the fall. France's European Payments Union deficit rose to $70,600,000 in July compared to a surplus in July 1955, and some price increases in basic commodities such as wheat have been granted. Mollet's finan- cial policy--particularly re- stricted investment--has been under fire from ex-premier Mendes-France. At the same time, opponents of increased taxes are expected to increase their efforts to prevent Mollet from applying any new tax measures if the bond issue just voted fails to produce adequate revenue to finance the Algerian campaign. Mollet is seeking a law to permit publication of all tax returns in an apparent effort to mollify labor, which feels NEW DEVELOPMENTS IN THE ITALIAN LABOR-MOVEMENT The announcement in the Communist press on 1 August- that the Italian General Con- federation of Labor (CGIL) is independent of Communist Party control may signal a major re- orientation in Italian labor developments.. The move was probably sparked by a decline in membership and influence and by the threat of Socialist disaffection; it appears to be aimed at exploiting the renewed hope of labor for legitimate economic objectives. For the past year and a half the CGIL, which controls over half of the country's organized workers, has been declining markedly in strength in relation to other unions. It has lost control of the shop steward committees in most major industrial enterprises, at PART II that it is carrying an undue share of the tax burden. Labor is increasingly restive over government manipu- lation of the cost-of-living index to avoid mandatory wage hikes. The Socialist-led labor confederation, Workers Force, issued a resolution on 30 July opposing a freeze on wages in any form. The Com- munists, who abstained on the sixth reading of the civil budg- et ostensibly because of Pre- mier Mollet's statement against a general wage increase, hope to exploit this growing unrest. Despite non-Communist labor warnings against Communist unity-of-action attempts, the rank and file will be increas- ingly vulnerable to these ap- .least partially because of management and government pres- sure on the workers over the issue of CGIL's Communist domi- nation. Its membership is predom- inantly oriented toward the Communist and Nenni Socialist Parties, although some members support the center parties. Leadership is shared by Com- munists and Nenni Socialists, but the latter have recently shown signs that they might challenge the Communist monop oly of key positions. Recent labor agitation in. Italy has been more and more concentrated on such purely economic questions as wages, bonuses, and seniority rights. For several years workers have shown no interest in politically SECRET Approved For Re a 2005/02/10 : CIA-RDP79-00927A000900070001-7 . ES AND COMMENTS Page 16 of 19 25X1 Approved For Relase 2005SE ,@,T-RDP79-00 900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 inspired strikes, except for a few Communist-led demonstrations to protest unrelieved hardship conditions during last winter's severe weather. At the CGIL congress in February 1956, the Nenni Socialist elements spear- headed an unsuccessful move to emphasize action at the plant level rather than continue the policy of nationwide bargain- ing. Among the possible motives behind CGIL secretary general Di Vittorio's 1 August announce- ment may have been a desire to block a possible move by the Nenni Socialists to walk out unless the CGIL were granted the greater autonomy which a separate meeting of its Nenni Socialist membership in late July had requested. Conversely, the Communists may hope to en- tice members of the non-Com- munist unions to come back in. The theme of "trade union. unity," which was played up at the February congress, has. re- cently reappeared in reports CEYLONESE MINORITY GROUP PLANS DEMONSTRATION MARCH Violence may break out in Ceylon after. 10 August, when Tamil-speaking members of the Federalist Party and their sympathizers begin a long- scheduled march from all parts of the island toward the naval base of Trincomalee in protest against the government's deci- sion to make Sinhalese the sole official language of the country. As early as May, the Fed- eralist Party, which repre- sents many of the Tamil-speak- ing persons of Indian descent, who form a large proportion of the population of northern PART II from Genoa which state that the CGIL there planned to push for a "broad social front" to include Democratic Social- ists and Catholics and to pro- pose.the presentation of single lists in forthcoming shop steward elections. The new emphasis on the "nonpolitical" position of the CGIL may be aimed at extending this tactic to a national scale. This would be in line with the Communist Party's attempts to extend its con- tacts with Italian Socialists and Catholics. Since Di Vit- torio's "declaration of in- dependence" was announced in the official Communist Party daily L'Unita, the move ap- pears to have the party's full support. Di Vittorio, who is also president of the Com- munist World Federation of Trade Unions, presumably will retain his position as a member of the Communist Party central committee and his seat as a Communist deputy in the Italian parliament. Ceylon, planned the march to focus attention on the contro- versial naval base at Trincoma- lee and on the 7,000 or more Tamils employed there. The purpose,was to emphasize Tamil opposition to ousting the Brit- ish'from the base and to call attention to the unemployment problem that would arise from doing so. Some Tamils are reported to be in an ugly mood, as a re- ?sult of attacks. made on their comrades by. Sinhalese during the rioting in Colombo and eastern Ceylon in June. They. are allegedly willing to spill SECRET Approved For ReleasgRJ%10 J/AB : &b%?W?-00927A000900070pa 17 of 19 25X1 Approved Fo ele a 2005/0?IIgtDP79-0092A000900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 Sinhalese blood if their march is opposed as it passes through predominantly Sinhalese regions. According to the American embassy in Colombo, a Sinhalese extremist group is now threat- ening a rival march on Trincoma- lee. The Ceylonese police fear that the Trotskyite Viplavikara Lanka Sama Samaja party--an element of Bandaranaike's united front--may have agitators at Trincomalee and may start trouble simultaneously at the port of Colombo with worker unions under its control. Prime Minister Bandaranaike's an- nouncement. on 30 May that he did not .intend to allow a mass demonstration at Trincomalee is apparently being disregarded, as are his subsequent attempts POLITICAL STRUGGLE RENEWED IN PAKISTAN The scheduled meeting of the East Pakistan assembly on 13 August has renewed the po- litical struggle which reached crisis proportions in Pakistan last May. A change in the na- tional leadership or imposition of executive control by President Mirza may result. East Pakistani. Struggle While there is still op- position to the provincial and central governments in the West Pakistan assembly, which-began its session on 1 August,'the challenge to the national leader- ship will come from the East Pakistan assembly, where the United Front government may not be able to muster a majority. The test of strength will proba- bly come when approval is sought for the provincial budget and on the question of whether or not separate constituencies for non-Moslems are to be established to obtain promises of modera- tion from Tamil leaders. The government is alive to the dangers of the situa- tion, and army units and police reinforcements have been moved to Trincomalee and other poten- tial trouble spots. However, the firmness of their actions will depend on whether or not they get strong backing from Prime Minister Bandaranaike, who delayed for some days be- fore making up his mind during the Colombo rioting in June. The question also arises as .to whether Tamil and Sinhal- ese. members of the army and police will display impartiality in dealing with large-scale Tamil-Sinhalese disturbances if they should occur. in the province. The opposition Awami League, whose national leader is H. S. Suhrawardy, seems to have the best chance to gain control of the East Pakistan assembly as a result of its success in attracting some Hindus and re- gaining the support of some of its dissident members. How- ever, the political "horsetrading" now going on makes the results of the struggle uncertain until an assembly vote is actually taken. .National Repercussions Displacement of the United Front government in East Paki- stan would have reflections in the national assembly, which is expected to meet in September. These in turn would make likely a rearrangement of the central leadership. SECRET 25X1 Approved For Release 2005/02/10 : CIA-RDP79=00927A000900070001-7 PART II NOTES AND COMMENTS Page 1.8 of 19 Approved For se 2005102L5 E.I MROV79-009200070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 25X1 In anticipation of this- possibility, Prime Minister Chaudhri Mohammad All apparently has attempted to assert himself politically. He reportedly has threatened to found a new party and has charged that Pakistan's political instability has weak- ened its prestige international- ly. He has also stated that he is not going to allow national policy to become the sport of provincial politics. President Mirza's Role In the absence of any po- litical support of his own, however, the prime minister is dependent for his position on President Mirza, who through his control of the army and PART II civil service remains the ulti- mate source of power. IMirza will probably support Chaudhri unless the prime minister attempts to carry out his threat of estab- lishing a new party,. Since Mirza is determined to remain in power, he is ca- pable of making a deal with Subrawardy if the latter demon- strates unusual political strength. In addition, he might resort to executive power and dispense entirely with parlia- mentary rule. SECRET Approved For Relealfffl/0j'19 : ~7g-00927A0009000700a011- Page 19 of 19 25X1 25X1 25X1 Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 Next 1 Page(s) In Document Exempt Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 Approved Foe 2005/ RDP79-00927A00070001-7 ::SECRET V4 wo CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 USSR MOVES TOWARD NEW,. RELATIONSHIP WITH WESTERN COMMUNIST PARTIES The Soviet Union is moving to change its technique of co- ordination and control over the Communist parties outside the Orbit, particularly in the West. Moscow seems to be permitting these parties greater latitude for maneuver within the general framework of Soviet policy guidance, and is seeking to create the impression that they are now independent national political movements. The USSR has made it clear, however, that these parties must adhere to basic Communist objectives as interpreted by Moscow, Al- though Moscow has also begun' to demand somewhat less con- formity from the Satellites, it can permit greater flexi- bility in the Communist parties outside the Orbit because it has less to lose from differ- ences among these parties, which are out of power and, in most cases, relatively inef- fective. Implementation of these new techniques, which received their doctrinal foundation at the 20th party congress, seems to have been marked by some vacillation in Moscow and by considerable confusion among parties abroad since the de- Stalinization campaign. Reappraisal of Policy Probably the most impor- tant factor behind Soviet en- dorsement at the party congress of "different roads to Social- ism" was the realization that the situation following the death of Stalin required a modification in the Soviet re- lationship with the Satellite states, Communist China, Yugo- slavia and the Communist par- ties in other countries. Stalin had demanded that all Communist parties be docile instruments of Soviet policy and condemned as "nationalist deviation" any departure from this rule. He did not tolerate any independent initiative or spontaneity which might imply a denial of his total control. The Bulganin-Khrushchev regime is not driven by such heavy- handed insistence on iron con- formity and slavish idolatry of the Soviet model. A year and a half before the. 20th party, congress. en- dorsed the "different roads to Socialism" doctrine, Bul- ganin and Khrushchev took a major step toward modifying Soviet relations with foreign Communist parties when they went to Peiping and elevated the Chinese Communist regime to a position of equality with the USSR at the head of the "peace camp." A second major step was the trip to Belgrade in May 1955, when the Soviet leaders accepted the Titoist doctrine of the fraternal solidarity between independent equals, a concept proclaimed by the Yugoslavs soon after the break in 1948. USSR's Favorable Position Behind the USSR's new approach to world Communism was a favorable estimate of the Soviet Union's military and economic position.vis-a- vis the Western powers. The .20th party congress declared that the "main feature of our epoch" is the "emergence of Socialism from within the bounds of a single country and its transformation into a world system." The logical corollary of the end of the USSR's isolation and the So- viet government's greatly in- creased use of traditional methods of diplomacy and power politics was a diminished need to rely on foreign Communists for slavish support of every detail of Soviet foreign policy. SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART III PATTERNS AND PERSPECTIVES Page 3 of i2 Approved Forg, se 2005/$ DP79-00927AAO 0070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY -9 August 1956 New International Atmosphere Another factor underlying the change in techniques proba- bly was the opening of a new phase in East-West relations, marked by the final entry of a sovereign West Germany into NATO in May 1955 and by the relaxation of international tension after the summit con- ference at Geneva the following July. Throughout the long Soviet campaign to block German re- armament, many Western European Communist parties, particularly the French, were forced to sub- ordinate their internal in- terests to wage Moscow's battles against the EDC and later the Paris accords, Following rati- fication of the Paris agree- ments, these Western European Communists were permitted to redirect their attention to domestic problems. "Unitg'.of Action" Sought The major advantage Moscow seeks from a loosening of the reins is the "elimination of the split in the workers' move- ment" and "unity of action" be- tween Communists and Socialists. The doctrines promulgated at the Soviet party congress of "different roads to Social- ism," nonviolent transition to Socialism by parliamentary means, and noninevitability of war were all intended, among other things, to remove the obstacles to co-operation between Com- munists and Socialists. Like- wise, the current tactic of Western European Communist par- ties of concentrating on local political and economic instead of foreign policy issues is designed to prove that they are legitimate, independent, na- tional parties ready to join in election alliances and popu- lar-front governments with So- cialists and other leftist groups. Party presidium member Sus- lov, while calling for inter- national solidarity, told the French Communist Party congress in July that today the "success of every Communist party is measured primarily by the degree to which it expresses and up- holds the interests of the work- ing class and all laboring people, its country's national interests, and the degree to which its political line accords with concrete national peculiarities and traditions," The Communists hope by these tactics to build a leftist movement powerful enough to force the democratic Socialist parties, particularly in France, into active collaboration with them. Eventually the Communists probably plan to use collabora- tion with the Socialists and other leftists as a bridge to the center parties. The aim of this policy is to dissolve the military and political ties of the Western European coun- tries with the United States and to draw them into the neu- tralist "zone of peace." The Role of Yugoslavia The Yugoslav Communists are acting as intermediaries between Moscow and Western Com- munists and Socialists. The Yugoslavs' good contacts with Western European Socialist par- ties are being.put to use. Italian Communist leader Tog- liatti visited Tito in late May, and the French Communists will hold talks With the Yugoslavs in the fall. Togliatti proba- bly intended his trip to Belgrade to have the symbolic significance of identifying him with the head of an independent Communist government whose insistence on an independent road to Socialism and equality with the USSR had been recognized by the Soviet leaders. The New Techniques of Control Moscow itself has not spelled out what the nature of SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PATTERNS AND PERSPECTIVES Page 4 of 12 Approved Fose 20051DP79-0092-00070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 its relationship with foreign Communists. should be, and may still be,in the process of determining this. It has neithe.r'a.pproved nor disapproved publicly the description pro- vided by Togliatti in his state- ments on 16 and 24 June. Togliatti coined the term "polycentrism" to describe a Communist movement in which there are "'different centers of orientation and development" and in which the.Soviet model of Communism "cannot and must not any obligatory." This new situation, said Tog- liatti, requires "full autonomy of the various Communist parties. and movements and bilateral re- lations between them." Be observed that such a system is best for extending the relations between the Communists and. "movements with a Socialist, non-Communist orientation--So- cialists, Social Democrats, and national liberation move- ments.;" It is unlikely that Mos- cow would be willing to em- phasize the autonomy of the foreign parties as strongly as Togliatti did. The CPSU central committee resolution of 3b June .and subsequent Soviet editorials and speeches demanded strict ideological unity throughout the international Communist movement. They denounced at- tempts by the "ideologists of imperialism" to introduce'' "dissension and confusion" within the movement. They em- phasized, as they did when. the Cominform was dissolved, that the foreign parties must main-- tain close contacts with Moscow. The Soviet party remains the political and ideological leader of world. Communism, and for that reason, together with its control of such instruments of pressure. as financial sub- sidies, it apparently expects its influence on the Communist parties to.remain strong. Many Communist parties are likely to continue to rely on Moscow to settle local factional dis- putes. The leaders of the two major parties in.W'estern Europe, Thorez and Togliatti, will proba- bly not soon forget that they owe their eminence to Soviet support in the early years of their party history. The Soviet Communist Party, however, will probably refrain from rude intervention in the policies of the national par- ties. Soviet leaders will make a point of listening attentively to the problems of foreign Com- munist leaders and may, on sec- ondary matters, adjust their propaganda and tactics to the needs of the national parties.. The publicity and communiquds connected with the visits of the French, British, Italian, and Belgian Communist Party delegations to Moscow in late June and early July were an example of the Soviet attempt to show that relations are con- ducted on a basis of equality and friendship. The foreign Communist parties are likely to be free to indulge in mild criticism of certain Soviet policies, when it serves the purpose of improving their domestic political. position. De-Stalinization The de-Stalinization con- troversy has'provided the first example of the greater flexi- bility allowed the national Communist parties, and has shown what limits"Moscow places on this,freedom., The Soviet decision to launch an attack on Stalin was evidently taken for internal reasons, although Moscow proba- bly also expected that it would eventually have a favorable.ef- fect abroad. The'Soviet leaders must have realized that it would produce serious shock and con- fusion among.the rank-and-file members of the foreign parties. SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART III PATTERNS AND PERSPECTIVES Page 5 of 12 25X1 Approved Foise -0092ZA0.00 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 25X1 later. The Soviet leaders may have underestimated the serious- ness of repercussions in for- eign Communist parties, They seem to have believed that any minor losses of fringe followers suffered by the foreign parties as a result of de-Stalinization would be more than offset by the improved prospects of at- tracting other leftist forces into participating in popular fronts. The Soviet leaders took a risk, however,-in in 'itiating the new techniques in relations with the par- ties at the. same time the de- Stalinization drive was launched. Reaction of Western Parties Most of the Western Euro- pean Communist parties issued statements in March giving cautious support to the Soviet de-Stalinization campaign but were reluctant to go even as far as the Soviet leaders had gone in publicly criticizing Stalin. The anti-Stalin campaign appears to have caused con- siderable confusion among the rank and file and some of the leadership in. most Western Communist parties. Western party criticism was directed at both Soviet leaders and leaders of the national par- ties. The obvious questions were asked about how Stalinism could have arisen in the USSR and why the other Soviet leaders failed to curb Staling On 16 June Togliatti raised even More fundamental questions in a lengthy interview,that was reprinted in part in some of the Satellite press and re- printed, or commented on favor- ably throughout most of the Western Communist movement. In quick succession, briefer but.- similar statements were issued by the French, British, American, and several other Western par- ties. These statements were notable for the similarity of the points made. All of them called for a "Marxist analysis" which did not simply place the blame on Stalin, and several raised the question of the co- responsibility of other Soviet leaders. Nearly all the party statements, however, praised the Soviet attack on Stalinism, asserted that Stalinism was not inherent In the Socialist sys- tem, and provided explanations for its growth, Soviet Reply Pn 27 June the Soviet press published an article by American party secretary Dennis,, which, though reflecting most of the questions raised by other par- ties, was generally laudatory of the Soviet leaders. This set the stage for the "Marxist analysis" in the form of the central committee resolution "On Overcoming the Personality Cult and Its Consequences" on 30 June. The explanation it provided of the historical causes of'Stalin?s errors and the failure of Soviet leaders to replace him was striking be- cause it added nothing which had not been suggested by one or the other of the foreign Communist parties themselves, or by previous Soviet state- ments. It also asserted firmly SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART III PATTERNS AND PERSPECTIVES Page 6 of 12 X1 Approved F release 2005 RDP79-00900070001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 that Stalinism was not Implicit in the Soviet social order nor had it changed the Soviet order. A number of the Western Communist parties have issued statements welcoming the Soviet resolution. While the French party viewed it as a definitive answer to all questions, the British and Italian parties im- plied that the de-Stalinization question might continue, and the American and Canadian parties said that certain ques- tions still remained unanswered. Recent Soviet statements have stressed the need for unity in the Communist movement under Moscow's ideological leadership and have limited the scope of discussions on de-Stalinization by the foreign Communist par- ties. The Soviet leaders have devised a standard "Marxist analysis" of Stalinism which can be used by national party leaders trying to keep their rank and file in line. They have not imposed complete con- formity on the foreign parties, however, but have continued to permit discussion by those parties which find it necessary to prove their independent na- tional status or to control dissension among the rank and file. It is not yet clear how much further discussion of Stalinism Moscow will tolerate. It is clear that the Soviet leaders are giving their fol- lowers abroad license and en- couragement to tailor their activities to the local scene with the objective of achieving a major expansion of Communist influence, particularly in the West, where Communism has been THE OUTLOOK FOR EURATOM AND THE EUROPEAN COMMON MARKET The adjournment for the month of August of the Brussels treaty conference on EURATOM and the proposed European common market marks completion of the first phase of the dip- lomatic effort to advance these two projects for the further integration of Western Europe. There are still serious obsta- cles ahead but, when formal negotiations are resumed in September, an effort will be made to reach agreement while parliamentary conditions still seem favorable in France. The objectives continue to be joint development of atomic energy, co-ordination of national atomic programs, and the gradual in- tegration of economic policies in a general European customs union. While initially con- fined to the six Coal-Steel Community countries, there is hope for the participation or association in these objectives by other Western European countries. Increased Faith in Mollet Proponents of these goals regard as encouraging the re- sult of the French debate of 6-12 July, which recorded an unexpectedly large majority in favor of continuing the EURATOM negotiations. They admit that the vote hinged on several factors--particularly the depu- ties" reluctance to overthrow Mollet during the Algerian prob- lem--but they hope that the SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART III PATTERNS-AND PERSPECTIVES Page 7 of 12 25X1 Approved Fo;se 2005/Oa/,~,Q,; DP79-009~A00070001-7 9 August 1956 assurances expressed in the am- biguous resolution the assem- bly approved will. satisfy op- ponents and that ratification can be sought while Mollet is still in power. Following a meeting of the conference on 26 July called by the French, a spokesman for Belgian foreign minister Spaak observed that for the first time "French attitudes had been completely satisfactory." He added, moreover, that he saw no insoluble problems result- ing from the conditions Mollet accepted regarding French free- dom in the nuclear weapons field and the divorce of CSC and EURATOM institutions. This interpretation was apparently shared to some ex- tent by the other delegations, and the conviction has grown that Mollet and Under Secretary Maurice Faure, his principal lieutenant at Brussels, are determined to fight and that thus far they have done so ef- fectively. Accordingly, in an effort to get the treaties as far forward as possible while this favorable situation lasts, some work will go ahead during. the interim period, a heavy work schedule has been set up for the conference when it for malty.reconvenes on 3 Septem- ber, and another meeting of the six foreign ministers has been scheduled for late September. EURATOM Negotiations An intensive effort will be required if a EURATOM treaty 25X1 UNITED KINGDOM (Linked to the CSC through the Council of Association) is to be ready for French Na- tional Assembly consideration this autumn. A draft treaty-- a legal version of the original Spaak report--is still in the process of revision; it re- flects some of the weaknesses of that report on such basic issues as institutions and national weapons programs. Although the Brussels conferees have generally been mystified by Foreign Minister Pineau's "illogical and incom- prehensible" commitment to the French assembly that EURA- TOM's institutions would be kept separate from those of the Coal-Steel Community, the Belgians consider the creation of still another "European as- sembly" a price worth paying for French ratification. Amalgamation of only the limited "legislative" and "ju- dicial" functions of the two organizations had been envis- aged by the Spaak report in the first place. French of- ficials have explained, more- over, that the Pineau commit- ment does not necessarily im- ply a complete duplication of organizations, but only that it should be made clear that EURATOM is not subordinate to the CSC and that, while both organizations may "use" the same institutions, they are in fact separate. French insistence that at the end of four'years France must not be fettered in under- taking the manufacture of nu- clear weapons is obviously AUGUST 1956 24160 Seat of the High Seat of the CSC THE EUROPEAN COAL-STEEL CO/ UNITY ("Community of Six") Prospective Members of EURATOM and the E can Common Market PART III more complicating. Tt is not clear, however, how; far beyond the widely discussed Spaak moratorium proposal the other countries will have to go to meet French-needs in this respect.: TheSpaak-proposed moratorium--presumably acceptable outside France--applies only to production of SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PATTERNS AND PERSPECTIVES Page 8 of 12 Approved FoQk se 2005/0 IA-RDP79-0092- ~00 0070001-7 N&AET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 August 1956 "explosive devices," thus ex- cluding other nuclear devices of military significance such as'submarine-,engines. Under it, moreover, France would be free after five years to under- take the-manufacture even of explosive devices provided it has the consent of two other members of EURATOM.., While the Mollet govern- ment stated in the EURATOM de- bate that France must retain unilateral freedom after merely consulting with its partners, Faure has since declared at Brussels that "it would not intend to evade either neces- sary consultation with its partners or community controls, nor do the French seek to evade the. rule of free communication of research and free access to patents in the'military sector." West Germany and Controls Aside from the political problem of writing a formula acceptable to France as well as to West Germany--which will remain bound in the nuclear weapons field by its WEU com- mitments--the weapons issue in any case is essentially one aspect of the general problem of maintaining EURATOM's con- trols over the purchase and utilization of nuclear fuels. To "unfetter" France in the weapons field threatens some departure from the principle of EURATOM's monopoly controls --a principle which has been somewhat. watered down already in the Spaak report and which has had hard going in West Germany. The EURATOM negotiators have already conceded to the German position the possibility that in a period of shortage a member state might obtain nu- clear fuels outside EURATOM, although the organization's security controls would con- tinue to apply. However, the treaty negotiations of the past month have been marked by continued German insistence that adherence to "liberal eco- nomic policies" by the Bonn government still makes the ac- ceptance of EURATOM's "perfec- tionist monopoly" extremely difficult. The other powers have not challenged the Germans to produce by September the de- tails of their alternative plan and to prove that it would of- fer comparable security. This problem points to the possibility of potential political difficulties in West Germany comparable to those faced by Mollet in Paris. The position taken by the German. negotiators is in large part a reflection of the personal views of Minister of Atomic Affairs Strauss backed up by the German industrialists. Because of the importance of this group to Adenauer in the 1957 elections, this attitude may constitute a serious ob- stacle. Adenauer is certain, however, to be subjected to strong pressure from the other EURATOM members to reverse his minister, for the principle of EURATOM's monopoly is the fea- ture which recommends it over all other schemes for nuclear co-operation and which is its special claim to US support. Role of the Common Market The progress on EURATOM has continued to be complicated to date by,the slower progress on the common market scheme, which would extend basic fea- tures of the CSC not only to atomic energy, but to all West European economic activity in general. The decisions taken by the foreign ministers at their late May meeting in Venice to pro- ceed simultaneously on both projects reflected the prevail- ing view that while a "package" EURATOM-common market is almost SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART III PATTERNS AND PERSPECTIVES . Page 9 of 12 Approved Fuse 2005/03/q..;,CtfDP79-009200070001-7 CURRENT INTELLIGENCE WEEKLY SUM19fiR,Y 9 August 1956 Adenauer's,position with respect to EURATOM would be greatly improved by more spe- cific signs of.a favorable evolution of French thinking on the common market. During the course of the French as- sembly debate in July, Under Secretary Faure stated that in principle the French govern- ment favors the common market, provided safeguards are ade- quate and the French Union is permitted to participate. The inclusion of overseas terri- tories in the common market is now believed acceptable to the other members of the proj- ect, and a six-nation report on its ramifications is ex- pected to be submitted to the Brussels conference in September. Reactions Elsewhere In the meantime, these de- velopments in the integration certain of approval in West Germany, Italy, and the Bene- lux countries, it is almost equally certain of rejection in France. Nevertheless, there is reported an increasing dis- position on the part of the other powers--West Germany ex- cepted--to accept in good faith Mollet's claims that he is pre- pared to fight for European integration and that French ap- proval of EURATOM would set the stage for a strong effort later to obtain approval of the com- mon market. program have evidently made an impression on countries out- side the "Community of Six"-. particularly on the Soviet Union and on the member coun- tries of the OEEC, notably the United Kingdom. Following the favorable vote of the French assembly on 12 July, Moscow suddenly revived its proposal for an all-European atomic energy agency, accompanying it with a blast at EURATOM as a "closed community." This in- tervention has not greatly dis- turbed EURATOM's supporters and a reply is being drawn up. It could, however, have some effect on French opponents of a six- nation organization who have wavered on the strength of Mollet's assurances. In the OEEC, where 17 West- ern European. countries, includ- ing the six CSC members, have been conducting parallel nego- tiationsulookin: toward. a looser form of co-operation in the atomic energy field, there has been increased recognition that "the six" have shown a de- termination to go ahead as a.. unit and that the EURATOM and the OEEC efforts are not'neces- sarily in conflict. Moreover, recent British "eagerness" to survey the possibility of some link between a common market of "the six" and an OEEC free trade area--while possibly diversion- ary--may also represent a re- treat from initial British ske - ticism and hostility... 25X1 (Concurred in by OSI 25X6 * 25X1 * SECRET Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 PART III PATTERNS AND PERSPECTIVES Page 10 of 12 25X6 Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7 Next 2 Page(s) In Document Exempt Approved For Release 2005/02/10 : CIA-RDP79-00927A000900070001-7