CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000900110001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 32
• Document Creation Date: December 16, 2016
• Document Release Date: January 27, 2005
• Sequence Number: 1
• Publication Date: September 6, 1956
• Content Type: SUMMARY

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CONFIDENTIAL
SE~i2?T
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 1.
OCI NO.6110/56
6 September 1956
DOCUMENT N?. /0%
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CENTRAL INTELLIGENCE AGENCY
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily 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.
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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
T H E W E E K I N B R I E F
OF IMMEDIATE INTEREST
THE SUEZ SITUATION . . . . . . . . . . . . . . . . . . . Page 1
Egypt's Position: President Nasr is maintaining the
position he adopted at the outset of the Suez crisis. He
sees the principle of Egyptian control of the operations
of the canal and guarantees of freedom of navigation as
two distinct issues; he has been unwilling to compromise
on the first, but is willing to negotiate on the second.
Despite their public insistence that they are fully
prepared to defend the country, Egyptian military
authorities appear privately to be pessmistic about the
capabilities of their forces.
British and French Moves: The British and French
are continuing military preparations in the evident be-
lief that the meetings between Nasr and the Menzies
mission may not succeed. No decision has apparently
been taken on a plan or date for a joint British-French
military move against Egypt.
Soviet Tactics: The USSR is following a cautious
course, apparently convinced that time is on Egypt's
side. Moscow has been attempting to discourage Western
military action against Egypt, while not committing the
USSR to any course of action.
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POSSIBLE CHANGE
IN FRENCH ALGERIAN POLICY . . . . . . . . . . . . . . . Page I
The French government has apparently concluded
that it cannot achieve victory over the rebels in
Algeria this autumn. Considering the related problem
of dealing with Nasr of more immediate importance,
Premier Mollet, in conversations on 8-9 September, will
urge his minister residing in Algeria, Robert Lacoste,
to undertake early negotiations with the Algerian rebels,
a move which reportedly now would receive rightist
support.
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MOROCCO . . . . . . . . . . . . . . . . . . . . . . . . Page 2
The Moroccan government crisis apparently has abated,
and the sultan continues in firm control of the govern-
ment. The Moroccan government is wary of becoming
closely tied with Egypt. The sultan, nevertheless, has
indicated that Morocco would join the Arab League.
GREEK GOVERNMENT DISCOURAGED
OVER CYPRUS . . . . . . . . . . . . . . . . . . . . . . Page 3
The position of the Greek government is precarious
as a result of recent developments concerning Cyprus.
The surrender ultimatum issued by the British in answer
to the truce called by the Cypriot guerrillas, and
Britain's publication of captured documents connecting
Archbishop Makarios and the late prime minister of
Greece, Marshal Papagos, with violence on the island
have contributed to the difficult position of the
Karamanlis government.
POLITICAL CRISIS IN JAPAN . . . . . . . . . . . . . . . Page 3
The Hatoyama government is undergoing an internal
struggle over whether to send the prime minister to
Moscow to seek a compromise on Soviet peace treaty terms.
The dispute is intensified by political maneuvering
for control of the governing party in the event of
Hatoyama's long-expected retirement. The most likely
prospect is a cabinet reshuffle, although a party
split is a possibilit when the issue comes to a head.
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LAOS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
Laotian prime minister Souvanna Phouma is "most
disturbed" over the Pathet Lao's frequent violations of
the cease-fire agreement and its delay in sending repre-
sentatives to negotiate the detailed form of the final
settlement. The Pathets may use stalling tactics to
extort additional concessions from Souvanna, whose
political position depends on his ability to reach a
settlement. Meanwhile, Souvanna is trying to reduce
the unfavorable effects on the West of his recent trip
25X1 to Peiping and Hanoi.
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PEIPING HEDGING
ON BORDER DISPUTE WITH BURMA . . . . . . . . . . . . . . Page 5
Faced with a resolute Burmese position on the border
issue, the Chinese Communists have announced they are
willing to withdraw troops from the disputed territory
in the Wa States, according to Burmese press reports.
Peiping proposed, however,!that Burmese troops be with-
drawn from the disputed boundary in the Kacbin State
area--a condition which Burma will almost certainly
reject. Continued Chinese intransigence may cause
Rangoon to bring the weight of other neutral nations
bear on the Chinese for a final settlement.
INITIAL OPERATIONS
OF THE TRANS-MONGOLIAN RAILROAD . . . . . . . . . . . . Page 6
During the first five months of its operations--
January through May 1956--the Trans-Mongolian Railroad
carried 652,000 tons of goods. At this rate, the line
would carry about 2,000,000 tons of goods in its first
year of operation. This is about one half the esti-
mated capability of the line and is equal to one third
the goods moving between the USSR and China.
BIRTH CONTROL BEING ADVOCATED
IN COMMUNIST CHINA . . . . . . . . . . . . . . . . . . . Page
Communist China is the only Sino-Soviet bloc
country which has permitted an educational and propa-
ganda campaign to popularize the practice of birth
control. The campaign is taking place despite the
standard Marxist dogma that poverty is attributable
not to population pressure on the economy but to "pre-
"
Socialist
forms of social organization.
SOVIET-WEST GERMAN RELATIONS . . . . . . . . . . . . . .
Controversies over the status of Soviet nationals
in West Germany and German nationals in the USSR, to-
gether with the banning of the West German Communist
Party, have further damaged the already poor relations
between the two states, but neither government is
likely to move now to break diplomatic relations.
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WEST GERMANS WEIGH SHIFT
IN MILITARY DEFENSE STRATEGY . . . . . . . .. . . . . . . . Page 10
A growing dispute over the nature of West Germany's
new defense forces is likely to come to a head in the
Bundestag soon after it reconvenes in mid-September.
Chancellor Adenauer, who deplores signs of a shift in
Western defense strategy from conventional to nuclear
weapons, hopes to find support for his view--that
Allied manpower in West Germany should not be reduced--
at a meeting of the Ministerial Council of the Western
European Union scheduled at his request for 15 September
25X1 in Paris.
EAST GERMAN LIVING STANDARDS . . . . . . . . . . . . . . Page 11
The people of East Germany are increasingly dis-
satisfied with their standard of living which, though
higher than that of most of the Satellites, remains
below the prewar German level. Despite Soviet economic
aid to East Germany scheduled for the period 1957-60;
which is designed to improve living conditions, standards
as high as those of West Germany almost certainly will
25X1 not be attained.
PATTERNS AND PERSPECTIVES
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THE FORTHCOMING CHINESE COMMUNIST PARTY CONGRESS . . . . Page 1
The Chinese Communist Party's 8th Congress, sched-
uled to open in Peiping on 15 September, is likely to
start the party moving in the direction of a "collective
leadership," but Mao will almost certainly continue as
the dominant figure. The proceedings at the congress--
the first since 1945--will throw further light on Mao's
intentions with regard to his succession, and may re-
flect the relative strength of Mao's lieutenants in any
maneuvering following Mao's departure from the scene.
The congress will elect a new and probably larger central
committee, hear reports adjusting the party constitution
to the latest Soviet party statutes, and will be pre-
sented with an ambitious five-year plan for the period
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6 September 1956
SOUTH VIETNAM FEARS NEW COMMUNIST PRESSURE . . . . . . . . Page 5
The government of South Vietnam is increasingly
concerned over what President Diem calls the "rampant
growth of neutralism" in Asia. In particular, South
Vietnam fears that the Laotian government's rap-
prochement with the Pathet Lao will undermine Diem's
own efforts to resist Communism. It anticipates re-
newed Communist efforts to develop international
pressure for holding unification elections.
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GRANTS UNDER THE SOVIET FOREIGN AID PROGRAM Page 7
The USSR has granted countries outside the Sino-
Soviet bloc loans and credits totaling at least
$500,000,000 for economic purposes since launching its
"trade and aid" campaign early in 1955. In the same
period, credits for the purchase of military equipment
extended indirectly by the USSR to the Middle Eastern
nations totaled $300,000,000. In contrast, countries
belonging to the bloc have received only $100,000,000
for economic purposes since early 1955, while $500,000,000
was granted in military credits--all to Communist China.
From 1946 through 1954, the USSR had advanced $4.7
billion to Communist-controlled countries for all pur-
oses and made no significant loans to other countries.
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6 September 1956
THE SUEZ SITUATION
Egypt's Position
Egypt's President Nasr is
maintaining the position he
adopted at the outset of the
Suez crisis. He sees the prin-
ciple of Egyptian control of
the operations of the canal
and guarantees of freedom of
navigation as two distinct is-
sues; he has been unwilling
to compromise on the first,
but is fully willing to nego-
tiate on the second.
Cairo and the Middle East
generally are reported to be
tense, awaiting the outcome of
the talks.
Manifestations of support
for Nasr continue both in and
outside Egypt Rallies on 3
September in Cairo contributed
to the tension but remained
orderly.
On 4 September, Jordan
was reported preparing a pro-
test against British and French
troop movements. Syrian presi-
dent Quwatli has reaffirmed his
country's solidarity with Egypt.
Despite their public in-
sistence that they are fully
prepared to defend the country,
Egyptian military authorities
appear privately to be very
pessimistic about the capa-
bilities of their forces.
I regu-
lar army officers have expressed
a low opinion of the national
guard, units of which have been
put in forward positions along
the beaches near Alexandria.
A certain air of depres-
sion among the military may
have led to Nasr's alleged plan
to resign his presidential func-
tions in case his colleagues
refuse to support him in his
stand against a compromise of
what he sees as the basic is-
sue in the canal dispute.
. The canal itself has con-
tinued to carry about the same
number of vessels daily as it
did before nationalization.
However, discontent among the
pilots is becoming conspicuous..
The Egyptian au-
thorities are believed to be
more seriously concerned about
this aspect of the situation
than any other, since they
recognize that an interruption
of the flow of traffic through
the canal could provide France
and Britain with an excuse to
use force.
The British are continu-
ing military preparations to
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
meet any eventuality in the
Suez situation in the evident
belief that the Cairo meetings
between Nasr and the Menzies
mission may not succeed. Lon-
don is apparently proceeding
on the assumption that its
demonstrative preparations
are essential to maintain pres-
sure on Nasr to come to a set-
tlement. Parliament ,has been
recalled for 12 September.
According to press reports,
the reactivation of certain re-
serve naval units and the move-
ment of landing craft and mine
sweepers to the Mediterranean
is continuing.
Public opinion in Britain.
continues divided on the govern-
ment's policy to date. The
American embassy in London be-
lieves that, while popular sup-
port for the use of force has
undoubtedly waned, the Con-
servative Party "probably solidly
supports" the government's policy,
including possible military
action to assure international
control of the canal. The power-
ful Trades Union Congress; how-
ever, representing some 8,000,000
trade unionists, in its annual
conference this week demanded
that Britain not use force
against Egypt without the ap-
proval of the UN. It was in
recognition of the state of
public opinion that the Eden
government decided to recall
Parliament.
French Moves
The view that Nasr must not
be allowed to get away with his
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301
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coup has become stronger in
French government circles since
the end of the London confer-
ence, and Paris is now ostenta-
tiously stepping up military
preparations. The American
embassy in Paris believes the
Mollet government is anxious to
push the issue to a climax
within a few weeks to avoid
giving Nasr time to overcome
Egypt's difficulties in opera-
ting the canal.
There is a belief in the
French government that the pilot
shortage will cause a breakdown
There is little hope in
Paris that the committee of
five will succeed, and unless
Nasr yields far more than seems
probable, the Mollet government
may try to bring strong pres-
sure for immediate and drastic
sanctions. Paris, like London,
appears to believe that mili-
tary operations would be speed-
ily effective and is also con-
vinced that the USSR would not
intervene.
France's military re ar
tions,
25X1 I 1 have
received considerable publicity
in the last week, particularly
with the arrival of French
forces on Cyprus.
While total French military
personnel actually on Cyprus at
this time is not known, press
reports indicate that a con-
tingent of air-transported army
personnel, numbering approximate-
ly 1,000, landed at Nicosia on
30 August. A day later -the first
of more than 20 cargo and pas-
senger ships which had been re-
ported loading troops and equip-
ment at Marseilles docked at
Famagusta and discharged 170
soldiers, representing apparently
the advance party of two divi-
sions from Algeria--the NATO-
committed Seventh Rapid Mecha-
nized Division and the Tenth In-
fantry Division (Light), a re-
serve unit activated in July.
Description of the latter as a
"parachute division" suggests
that some of the French para-
chute regiments in Algeria may
have been attached to it.
The press also reported
that an important naval force
headed by the cruiser Georges
Leygues left Toulon on 28 August,
and the most modern of France's
major naval units, the powerful
new antiaircraft cruiser De
Grasse, formerly based at Brest,
has joined the Mediterranean
Fleet. The Georges Leygues was
reported at. Malta on 5 September.
Vice Admiral Auboyneau, com-
mander in chief of French naval
forces in the Mediterranean,
stated on 29 August that the
navy would have an essential role
in the event a diplomatic solu-
tion is not found, and indicated
this would involve naval avia-
tion and amphibious units as well
as the fleet.
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6 September 1956
Soviet Tactics
The USSR is continuing to
play a cautious role in the
Suez dispute, apparently still
convinced that time is on
Egypt's side. Moscow probably
believes its best course is to
avoid unnecessary entanglement
in view of what it considers to
be a possibility of Western
military action.
Although Soviet propaganda
calls the French movement of
forces to Cyprus an "instru-
ment of pressure'," Moscow ap-
prec,iates the seriousness of
the Suez dispute. Soviet
foreign minister Semenov, after
his return from the London
conference, told French ambas-
sador Dejean that if the 18
powers attempted to impose their
plan on Nasr, "it would mean
war." Foreign Ministry offi-
cials said that Dejean was un-
clear as to whether Semenov
intended the remark to be in-
Jt?erpreted literally.
Semenov's statement re-
flects a further Soviet attempt
to discourage Western military
action.against Egypt, without
committing the USSR to any
course of action. While there
have-been repeated Soviet warn-
ings to the West about the
dangers of military action
against Egypt, these warnings
have not been accompanied by
any indications'that the USSR
intends to intervene directly
with Soviet forces in the event
the West does initiate military
action against Egypt.
Moscow is demonstrating
its willingness to give eco-
nomic and military assistance
to Egypt. On 4 September a
new Soviet-Egyptian wheat agree-
ment was announced providing
for 200,000 tons of. Soviet
wheat in the near future. This
would assure Egypt of receiving
400,000 tons out of some 600,000
believed needed during the next
year.
Soviet shipments of arms
purchased in 1955 and early 1956
are still arriving in Alex-
andria.
Moscow radio has also
broadcasted reports that Soviet
and East German ship pilots are
already preparing to leave for
the Suez Canal.
Nasr's independent line
might cause Moscow to move
slower in its involvement at
this time. Shepilov's diffi-
culties in London and the after-
math of the conference have
pointed to the Soviet inability
to influence to an appreciable
degree the actions of either of
the chief ants onists.
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POSSIBLE CHANGE
IN FRENCH ALGERIAN POLICY
A change in France's
hitherto rigid policy of "paci-
fication first" in Algeria may
become evident following Pre-
mier Mollet's talks on 8-9
September with Robert Lacoste,
French minister residing in
Algeria. Because Lacoste con-
siders Egyptian premier Nasr the
chief troublemaker for France
in North Africa, Lacoste may
let Premier Mollet persuade him
to agree to early negotiations
with the Arab nationalists.
military pacification this
autumn as had been hoped. 1
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Paris reportedly is con-
sidering a policy change be-
cause it recognizes the virtual
impossibility of achieving
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consideration of a new status
for Algeria.
Despite the indications
of support from the right and
right-center for a policy
change, Mollet still runs a
risk of clashing with his fel-
low Socialist, Lacoste, whose
resignation from the government
would entail at least a major
cabinet reshuffle. Lacoste had
planned to promulgate broad
new reforms in about a month,
but such plans are dependent
on a setback for Nasr.
The Moroccan government
crisis apparently has abated,
but tensions remain high and
no action has been initiated
to lessen basic dissatisfac-
tions.. The moderate faction of
the Istiglal party seems to
have dissuaded the extremist
faction from pressing for the
immediate resignation of the
ten Istiglal cabinet ministers.
This extremist demand which had
precipitated the crisis was de-
signed to force the installation
of an all-Istiglal cabinet.
Although the sultan con-
tinues in firm control of the
government, some reorientation
of the cabinet is inevitable if
the strife between the dominant
Istiglal party and the small
Shoura party is. to diminish.
Replacement of some Shoura and
independent ministers, possibly
including Premier Bekkai, by
Istiglal leaders is likely.
Meanwhile, Egyptian blan-
dishmert:s continue. The Egyptian
ambassador-designate has not
yet arrived in Rabat, however,
nor has the sultan yet named
,an ambassador to Cairo. \ I
Mollet may hope that his
firmness on the Suez issue will
gain Lacoste's support for
early negotiations in Algeria.
He might argue that it would
be best to move quickly to
avoid a prolonged debate.on
Algerian policy when the Na-
tional Assembly reconvenes on
2 October, and that early nego-
tiations would weaken the
anticipated renewal of Arab
criticism of France when the
UN General Assembly meets in
November. 25X1
Negotiations are under way for
the establishment of an Egyptian
cultural center and high school.
The school is tied in with an
earlier Egyptian offer of 15
teachers at practically no cost
to the Moroccan government and
50 scholarships for study in
Cairo. These negotiations may
be prolonged, as the Moroccan
government is wary of becoming
too closely tied to Egypt.
No steps are known to have
been taken with regard to Mo-
roccan membership in the Arab
League, but the sultan recently
told an American correspondent
that Morocco would join the
league. He added that he does
not consider such membership in
conflict with his desire for
close ties with the Western
world, as he views Morocco
as a bridge between East and
West. Entry into the league
probably will be postponed un-
til after the UN General Assem-
bly approved Morocco's appli-
cation for membership in the
United Nations.
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GREEK GOVERNMENT DISCOURAGED
OVER CYPRUS
The position of Greek
prime minister Karamanlis'
government is becoming pre-
carious as a result of recent
developments concerning Cyprus.
The surrender ultimatum issued
by the British in answer to
the truce called by EOKA, the
Cypriot guerrilla organization,
dashed the cautious optimism
that had been developing in
Athens, and EOKA has resumed
its campaign of violence on
the island. Subsequent publica-
tion in London of captured EOKA
documents allegedly linking
exiled Archbishop Makarios
and the late Greek prime min-
ister, Papagos, to violence
on Cyprus have further strength-
ened the Greek conviction that
Britain does not desire a set-
tlement of the issue and seeks
the overthrow of the Karamanlis
government.
At the same time, the
build-up of British and French
forces on Cyprus in connection
with the Suez crisis under-
scores Britain's claim of the
island's strategic importance
to the protection of its
POLITICAL CRISIS IN JAPAN
Foreign Minister Shigemit-
su's return to Tokyo this week
to report on the deadlocked
Japan-USSR treaty negotiations
produced the expected political
storm,.., and presented the Hato-
yama government with a serious
crisis which threatened to split
the conservative Liberal-Demo-
cratic Party.
Negotiations With. USSR
The debate centered on
whether to accept the present
Soviet terms, reject them, or to
send Prime Minister Hatoyama to
Moscow. in an attempt to reach a
compromise solution. With Some
elements in the party seeing an
opportunity to bring about what
they regard as Hatoyama's long-
interests in the Middle East
and suggests a further stiffen-
ing in London's attitude toward
the Cypriot claim for self-de-
termination. Also, Turkish
president Bayar recently re-
iterated Ankara's determined
opposition to any concession
to Greek-Cypriot nationalists
and insisted that the only
solution to the problem is to
maintain the status quo.
The preoccupation of the
Greek public with the Cyprus is-
sue has forced the government to
devote most of its energies and
resources to that problem, to the
exclusion of needed economic
planning and development. Greek
popular impatience with Kara-
manlis' moderation in promoting
Cypriot claims is causing A weak-
ening of party discipline among
the prime minister's followers
in parliament. If the government
should fall, it would almost cer-
tainly be succeeded by one sus-
ceptible to Communist influence
and inclined to promote the
Cypriot cause regardless of
Greece's ties with its Western
allies.
overdue retirement, the con-
troversy has revived deep-
seated factional rivalries, and
a struggle for control of the
government is under way.
Hatoyama, is still deter-
mined to make the trip, but is
apparently supported only by
his own faction of the party.
While Hatoyama's opponents fear
that, in his eagerness to re-
store relations with the USSR,
he might accept terms unfavor-
able to Japan, their major con-
cern is that he would be suc-
cessful in effecting a compro-
mise which could be favorably
presented to the Japanese pub-
lic. This would inevitably en-
hance the prestige of the ambi-
tious agricultural and forestry
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CURRENT INTELLIGENCE WEEKLY SUMMARY
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6 September 1956
minister, Kono, and others who
presumably would. accompany the
weak and ailing premier.
A majority of the Iconserv-
atitre :'leaders are _._probably now
convinced, along with .Shigemitsu,
that further negotiations with
the USSR would be futile.
Some of them are pressing for
an immediate rupture in the'
talks, to be followed by Hato-
yama's resignation, and a re-
newal of negotiations at some
future date by the new govern-
mente
Others believe that while,
no further substantive conces-
sions can-be expected from the
USSR on the , southern Kuril
question, a skillful negotiator,
fortified by the regent.American
statement which strengthened
Japan's position on the terri-
torial issue, could still con-
vince the Russians to accept
the formula contained in the
San Francisco treaty which re-
nounced Japan's sovereignty over
the Kurils but did not admit to
Soviet sovereignty, or which sets
aside the issue for future
settlement.
Power, Struggle
Hatoyama's proposed trip
has other implications in the
power struggle. The prime min-
ister has often asserted that
a restoration of diplomatic
relations with the USSR, with or
without a peace, treaty, would
crown his career, and that he
would then be willing to retire.
Each faction leader in the
Liberal-Democratic Party wants
to be in a position to take up
LAOS
Laotian prime minister
Souvanna Phouma is "most dis-,
turbed"' over the Pathet Lao's
frequent violations of the
cease-fire agreement and its
PART I I
Hatoyama's mantle when he re-
tires, which might follow either
success or failure at Moscow.
The various party factions
also apparently feel that who-
ever is selected to act as prime
minister in Hatoyama's absence
would have an inside track in
the race fot the premiership.
The inability of the party to
agree on a successor has kept
Hatoyama in power,. although con-
servative leaders have long since
acknowledged that his weak and
inept leadership has become a
political liability. The prob-
ability that the trip would be
preceded by a cabinet reshuffle
has given further impetus to
the political maneuvering.
In an effort to restore
calm, party leaders are concen-
trating on the question of what
course. to follow in the treaty
negotiations. Japanese press re-
ports'indicate that the govern-
ment has decided to explore fur-
ther the possibility of restor-
ing relations without actually
concluding a peace treaty--a
formula which the Soviets firmly
rejected during the Moscow talks.
to make further gains.
The possibility that the
crisis will develop to the point
where it would precipitate a
.party split and the fall of the
government cannot be completely
discounted. Most observers
believe, however, that a cabinet
reshuffle is the.more likely
immediate result of the contro-
versy, since nond of the con-
servatives would view with .
equanimity the prospect of new
elections, in which the now unit-
ed Socialists would be certain
delay in sending representa-
tives to work out a detailed
.settlement implementing the
agreement in principle reached
with Prince Souphannouvong.
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6 September 1956
The American embassy in
Vientiane reports that the
Pathet Lao violations of the
cease-fire agreement of 5
August in the two disputed
provinces of Phong Saly and
Sam Neua have caused the
Laotian army chief of staff to
doubt Pathet "good faith."
Souvanna, who is worried
about these skirmishes, has
"summoned" Souphannouvong to
come to Vientiane at once with
his negotiating teams to settle
the details covering the impo-
sition of royal authority over
the disputed provinces and the
integration of Pathet forces
into the :arm .
Since becoming premier,
Souvanna's chief objective has
been to reunite Laos. To
achieve this objective he has
banked heavily on Pathet
"patriotism," has promised ex-
tensive concessions to the Com-
munists, and may be vulnerable
to pressure to make further
accommodations. The Pathets'
intransigence seems to be aimed
at extorting a settlement that
will leave them in de facto
control of their troops and
territory--at least until their
political position is firmly
PEIPING HEDGING
ON BORDER DISPUTE WITH BURMA
Faced with a resolute Bur-
mese position on the border is-
sue, the Chinese Communists have.
announced that they are willing
PART II
established. It is probable,
however, that they will soon
show up to "negotiate," if for
no other reason than to prevent
the overthrow of the Souvanna
government and its possible
replacement by a less accom-
modating regime. The Interna-
tional Control Commission noti-
fied the Laos government on 3 Sep-
tember that the Pathet teams were
expected on the fifth or sixth.
China Trip
Meanwhile, Souvanna has
indicated that he was well-
pleased by the "red carpet"
treatment he received in Peiping
and Hanoi during his recent trip.
He was favorably impressed by
Chinese Communist advances in
heavy industry and was convinced
that Chou En-lai -is a man of peace.
Since his return, however,
,Souvanna.has sought to dissi- 25X1
pate the unfavorable effects
his trip had on the West
In any event, the unifica-
tion of Laos as well as the course
of its relations with the Orbit 25X1
depends essentially on the outcome
of the negotiations to. be conducted
in the mixed commissions.
to withdraw troops from the dis-
puted territory in the Wa States,
according to Burmese press re-
ports. Peiping proposed,: however,
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6 September 1956
that Burmese troops be with-
drawn from the disputed bound-
ary in-the Kachin State area--
a condition which Burma will al-
most certainly reject. Con-
tinued Chinese intransigence
may lead to an attempt by Ran-
goon to bring the weight of
other neutral nations to bear
on.the Chinese for a final set-
tlement.
The Chinese proposal ap-
parently was designed to give
China a counterweight on the
Wa States', Burma's case for the
boundary in the Kachin State is
less clear-cut. Peiping appar-
ently hopes to prolong any ne-
gotiations in order to postpone
a choice between abandoning its
territorial claims and offending
Burma by demanding cession of
the disputed areas.
Burma's Prime Minister Ba
Swe, whose vigorous demands have
been forcing Peiping's hand,
probably would meet any continu-
ing deadlock by attempting to
create pressure on Communist
China through the intercession
of neutral nations,
The urmese newspaper
Nation called for India and In-
aonesia to send observers to
Burma and an influential Indo-
nesian newspaper published an
editorial strongly supporting
Burma and denouncing Chinese
"bluster and arrogance,"
In the event that any
neutral countries intercede with
Peiping on Burma's behalf,the
Chinese Communists are likely
to try to convince them that
China's claim to the disputed
areas is at least equally valid.
They will probably continue to
insist that a settlement of the
Wa States dispute must be part
of an over-all solution, which
would cover the Kachin State
issue.
BURMA
6 SEPT 1956
%1//j Area claimed by China
0 0200
miles
INITIAL OPERATIONS
OF THE TRANS-MONGOLIAN RAILROAD
During the first five
months of its operations--
January to May 1956--the Trans-
Mongolian Railway carried 652,-
000 tons of goods. The tonnage
reportedly moved in May was.
87 percent higher than that
in January, and shipments in
June were expected to be still
higher.
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6 September 1956
Chinese exports
over the railway con-
sisted mainly of
agricultural products
and industrial raw
materials, relieving
traffic over the
Manchurian line, for-
merly China's only
rail link with the
USSR.
Chinese imports
consisted of plant
equipment, machinery,
electrical apparatus,
petroleum products,
chemicals and trans-
port and agricultural
equipment.
On the basis of
freight-carried be-
tween January and 31
May, it is estimated
the line will carry
about 2,000,000 tons
in its first year of
operation. This is
about one half the
estimated capacity
of the line, and is equal to
one third the volume of goods
moving between the USSR and
China. Specific details of
grain cargoes reveal that
freight cars have been lightly
loaded. This practice will
probably continue at least
through 1956 to prevent major
damage to the roadbed,, which
has not yet settled.
In addition to reducing
freight costs, the railway pro-
vides a direct route for the
equipment to support industrial
development in west and north-
west China. Moreover, its use
decreases the length of freight
YELLOW
SE1,t
Existing
haul previously required of
Chinese rolling stock, thereby
easing the growing burden on
the Chinese freight car park.
This line, in conjunction
with other rail developments
is greatly increasing China's
ability to reach all major parts
of the country by a relatively
secure rail system and is re-
ducing vulnerability to a
coastal blockade. A line con-
necting Paochi and Chungking
has recently been completed,
and construction is planned on
a line that will connect Chung-
king with the main north-south
system. (Prepared by
BIRTH CONTROL BEING ADVOCATED
IN COMMUNIST CHINA
Communist China is the
only Sino-Soviet bloc country
which has permitted an educa-
tional and propaganda campaign
to popularize the practice of
birth control. The campaign
is taking place despite Marxist
dogma that poverty is attributable
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
not to population pressure on
the economy but to "pre-
Socialist" forms of social or-
ganization.
The Chinese Communist Party
has refrained from direct
criticism of the Marxist doc-
trine. The party line on the
population problem, as theo-
retician Chen Po-ta,affirmed
last February, remains that
"there is no sign of overpopu-
lation in China." Communist
spokesmen reiterate assurances
that planned increases in
agricultural production will
provide sufficient food for
the country's expanding popu-
lation. Party officials allude
to the possibility of overpopu-
lation in China only by in-
direction, as for example in
statements urging migration to
the relatively unsettled
r
OP AT
THE CONTI J~V
EA H SYMBOL R S NTS 50 , l~I N
TOTAL 2.7,BILLION
northeast and northwest'to re-
duce the "surplus rural popu-
lation."
While unwilling to press
for a revision of doctrine at
this time, however, the Chinese
Communists are apparently deter-
mined that doctrinal considera-
tions alone are not to prevent
the adoption of realistic
policies. At the National
People's Congress sessions in
1954 and 1955, non-Communist
Shao Li-tzu called for "some
restriction on population,"
This appeal was taken up in
the 1956 session of the con-
gress by Minister of Health
Li Te-chuan, also a non-
Communist.
In press and. magazine
articles, the Chinese authori-
ties are now giving detailed
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6 September 1956
information on contraception.
Birth control is described as
the "people's democratic right."
A directive issued by the Min-
istry of Public Health last
month called. on provincial and
municipal health organizations
to train propaganda workers
and to work through women's
organizations to spread birth
control information.
In deference to Marxist
doctrine, the propaganda on
birth control appeals to such
SOVIET-WEST GERMAN RELATIONS
Controversies over the
status of Soviet nationals in
West Germany and German nation-
als in the USSR, together with
the banning of the West German
Communist Party, have further
damaged the already poor rela-
tions between the two states,
but neither government is likely
to move now to break diplomatic
relations.
Status of Nationals
In a note delivered on 28
August, the Soviet government
denied that the tens of thou-
sands of Soviet citizens which
it said were in West Germany
were actually refugees who de-
sired to remain. there. It
charged that Soviet citizens,
particularly certain ones who
have been in prison, were being
bullied into avoiding contacting
the Soviet embassy to seek re-
patriation. This is the latest
in a series of recent Soviet
notes charging that Soviet
citizens were being held in
West Germany against their will,.
presumably designed to offset
similar charges by Bonn con-
cerning:the treatment of German
nationals in the USSR.
In mid-August, the West
German embassy in Moscow was
prohibited from contacting some
30 German.guided-missile
considerations as the health
of mothers and the welfare of
the children rather than. the
desirability of ameliorating
the, overpopulation problem
in order to raise living
standards.
Although the Chinese Com-
munist Party has not voiced its
support of the non-Communist
advocates of population limita-
tion, the Communist leadership
clearly condones and almost
certainly approves their views.
specialists being held in the
USSR despite the expiration of
their.contracts, on the grounds
that their interests were being
handled by the East German em-
bassy.
The West German government
has had difficulty in obtaining
the return of other German na-
tionals. The USSR has claimed
that mafy on the first list of
1,000 names submitted in March
have died, have previously been
repatriated, or are actually
Soviet citizens. This last
point in particular is likely
to be a source of continuing
dispute. The Bonn government
contends that it has the sole
right to determine the nation-
ality of Germans desiring re-
patriation in the USSR.
Reunification
The recall of the Soviet
ambassador from Bonn in.July
was presumably designed to
dramatize the charge. that the
Bonn government had Scorned an
opportunity to improve the
chances of reunification by ig-
noring Ambassador Zorin. Al-
though his post is likely to
remain unfilled for some time,
there is no sign Moscow intends
to break diplomatic relations.
There is no indication
that Ambassador Haas will be
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
recalled as a countermove. He
has returned to Moscow following
talks in Bonn. Bonn is unlike-
ly to break diplomatic rela-
tions with the USSR at this
time, when the opposition par-
ties could exploit such a move
against Adenauer in the'1957
election campaign.
The West German Foreign
Ministry hopes to initiate an
exchange of ideas on reunifica-
tion and other questions
through a note which it has
let be known would be sent this
week to the four former occupa-
tion powers. The note, ad-
dressed primarily to the Soviet
Union, will set forth a hypoth-
esis for a new move on reunifi-
cation, which Bonn hopes will
allay Soviet mistrust of the
Federal Republic and relieve
present tension between the
two countries.
Reaction to Party Ban
On 29 August the barrage
of Orbit propaganda attacking
the banning of the West German
Communist Party was climaxed
by the publication of a state-
ment of.the central committee
of the Soviet Communist Party.
In unusually harsh tones, it
charged that Bonn was following
in the footsteps of Hitler and
that its ''arbitrary and terror-
istic" actions showed it was
aiming at a "forced reunifica-
tion of Germany through a new
war.." It said the ban renders
peaceful reunification impos-
sible and talk of free elec-
tions meaningless. The Bonn
government called the Soviet
party statement a "gross inter-
ference in West German internal
affairs."
The American embassy in
Moscow has pointed out that the
USSR is particularly sensitive
to the ban of the West German
Communist Party because it re-
flects on Soviet efforts to
cloak foreign Communist parties
with respectability. Moscow
may expect its statement to off-
set the effect of the forth-
coming West German note on uni-
fication. In view of the
widespread criticism of Bonn's
action by the opposition par-
ties and by the European press,
the Soviet leaders probably be-
lieve their sharp attack will
help to discredit the Adenauer
regime, and-;put the blame on it
for the lack of progress toward
unification. 25X1
WEST GERMANS WEIGH SHIFT
IN MILITARY DEFENSE STRATEGY
A growing controversy over
the nature of West Germany's
new defense forces is likely
to come to a head in the
Bundestag soon-after it recon-
venes in mid-September. Chan-
cellor Adenauer, who deplores.
signs of a.shift in Western
defense strategy from conven-
tional to nuclear weapons,
hopes to find support for his
view,that Allied'mannower in West
Germany should not be reduced,
at a meeting.of the Ministerial
Council of the Western European
Union scheduled--at Bonn's re-
quest--for 15 September in Paris.
Since the meeting was
called on 25 July, the Germans
also have become worried over
the withdrawal of some British
forces from West Germany as a
result of the Suez crisis.
The dispute over Bonn's
defense forces has gained new
momentum from an official ar-
ticle recently published by
Chancellor Adenauer.'.in which
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6 September 1956
he stressed his view that dis-
armament is impractical until
the USSR manifests a genuine
change in attitude. He argues
that the shift of emphasis in.re-
armament to.atomic weapons would
be a mistake and lessen the chance
of avoiding global atomic war,
Deputy Chairman Mellies
of the opposition Social Demo-
cratic Party (SPD) at once re-
plied that the SPD intended to
have this subject taken up in
the Bundestag during the 'debate
on the length of service for
draftees. Mellies attacked. the
chancellor's views-, saying that
the Western powers had already
decided to concentrate on atomic
weapons. He claimed Adenauer
was making a fatal error in be-
lieving that ,a war in Europe
could be nonato iic or localized
and concluded that.the only
solution for Bonn ,was a small
army of highly trained techni-
cians.
Meanwhile, Bonn officials
have stated that the Germans'
main objective at the WEU meet-
ing will be to reach some agree-
ment among member countries as
to the political importance of
maintaining conventional forces.
EAST GERMAN LIVING STANDARDS
The people of East Germany
are increasingly dissatisfied
with their standard of living,
which though higher than that
of most of the Satellites, re-
mains below the prewar German
level. The Soviet-East German
agreement of mid-July which is
to make available 7.5 billion
rubles (1.8 billion dollars) to
East Germany for the period
1957-60, is designed to improve
living conditions. However,
standards as high as those of
West Germany will almost cer-
tainly not be attained.
PART I I
They fear that reducing Western
forces in. Europe and placing
less.stress on conventional
weapons would leave the West
dangerously exposed to Soviet
bloc actions short of all-out
atomic war. Chancellor Adenauer
apparently hopes that any sup-
port he obtains for this line
of argument at the WEU meeting
will strengthen his position for
the later Bundestag debates and
help him "sell" the whole pro-
gram of rearmament and conscrip-
tion to the public before the
crucial 1957 federal election.
Bonn expects considerable
support from the Benelux
countries. The British, how-
ever, appear to regard the
matter of troop cuts in West
Germany as a question to
be taken up by NATO, and
do not see what can be "de-
cided" at the. WEU meeting.
There are indications that
the French, while sharing
A denauer's misgivings, would
not strongly support the
Germans, since they do not
want to offend the British
during the Suez cris
25X1
Although output of consumer
goods other than food doubled
between 1948 and 1954, the East
German worker finds the quality
of goods inferior not only to
that of the merchandise he
bought. before the war but also
to that of items now available,
in West Germany. The as-
sortment of goods. is frequently
quite limited and the distribu-
tion to retail outlets, even of
products in relatively good
supply, is reported to be er-
ratic;.
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During present conditions
of full employment, when labor
productivity has been lower
than planned and overtime work
has been considerable, the worker
has accumulated excess purchas-
ing power. This has created
inflationary pressure and stimu-
lated black markets, to the
worker's disadvantage. Pres-
sure on the worker to increase
his output, has heightened his
discontent. The regime recently
canceled the application of new
output norms because of adverse
worker reaction.
Housing continues to be
inadequate, and during the
severe weather of last winter,
shortages of coal and electric-
ity caused considerable suf-
fering and a reduction in in-
dustrial output.
In agriculture, there was
no appreciable increase in out-
put between 1951 and 1956. Rea-
sons include the neglect of agri-
cultural investment, pressure
PART II
from the regime for farm col-
lectivization, loss of farmers
to industry, and defection of
farm workers to the West.
The average consumption of
food, in calories, during 1955-
56 was lower than in any Satel-
lite except Albania. The quality
of the diet, however, generally
ranks above that in most Satel-
lites. Fats, meat products
and sugar are strictly rationed
to ensure that the industrial
force is favored. Shortages
of meat and butter have'apparent-
ly been more serious than normal
this summer.
Agricultural output is
scheduled to expand only 25 per-
cent during the Five-Year Plan
(1956-60) and production of all
consumer goods only 40 percent.
Thus, it is virtually certain
that East Germany will not at-
tain a standard of living as
high as that of Vest Germany
during this period.
(Prepared by ORR)
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
The Chinese Communist Par-
ty's 8th Congress, scheduled
to open in Peiping on 15 Sep-
tember, is likely to start the
party moving in the direction
of a "collective leadership,"
but Mao Tse-tung will almost
certainly continue as the
dominant figure. The proceed-
ings of the congress--the first
since 1945--will throw further
light on Mao's intentions with
regard to his succession, and
may reflect the relative
.strength of Mao's lieutenants
in any maneuvering following
Mao's departure from the scene.
The congress will elect a new
and probably larger central
committee, hear reports adjust-
ing the party constitution to
the latest Soviet party stat-
utes, and be presented with an
ambitious five-year plan for
the period 1958-62.
The party's 7th Congress
in 1945, like the Soviet party
congresses since the 1920's,
was clearly a rubber-stamp for
the party leadership, enthu-
siastically approving its poli-
cies and electing its choices
to the central committee. This
is expected to be essentially
the case again, although there
will be an appearance of earnest
discussion and a mild show of
"criticism and self-criticism."
In line with similar develop-
ments in several bloc countries
since Stalin's death, such
criticism was expressed during
the government's National Peo-
ple's Congress last June and
has been encouraged in local
party congresses in recent
months.
Mao Tse-tung probably will
give the welcoming speech. The
approximately 1,000 delegates
then will probably elect a
temporary presidium and secre-
tariat to guide the congress.
The 15-man presidium elected
at the 1945 congress included
12 persons who were subsequently
elected to the politburo. The
guiding organs at the forth-
coming congress, similarly,
will probably include all mem-
bers of the politburo which
will emerge from the congress.
The Central Committee Report
If the Chinese follow
Soviet practice, the report of
the party central committee,
the first item on the published
agenda, will be the major feature
of the congress, with an elabo-
rate review of the world situa-
tion, China's internal position,
and the condition of the party.
If this procedure is fol-
lowed, Mao himself would proba-
bly make the report, just as
Khrushchev made the central
committee report to the Soviet
party congress in February.
Mao might delegate the job,
however, in order to emphasize
collective leadership and to
give a fresh indication of his
choice as to the second-ranking
man in the collective. Liu
Shao-chi has been Mao's top
lieutenant and his foremost
spokesman in party affairs
since 1945, while third-rank-
ing Chou En-lai has covered
both foreign and domestic af-
fairs many times in his periodic
reports as premier.
Alternatively, the congress
may restrict the central commit-
tee report to a review of party
affairs and surround it with
other major addresses, thus in
effect breaking up a Soviet-
style report into several com-
ponents. For example, Mao
might make a report outlining
party policies in the "transi-
tion to socialism," while sev-
eral lieutenants might report
on their areas of responsibil-
ity.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
In any case, the Chinese
are expected to make the same
generalities about the world
situation as Khrushchev did at
the Soviet party congress, to
the effect that the Socialist
camp will triumph in a long-
term peaceful competition.
With regard to domestic
affairs, the central committee
report is expected to assert
principally that China remains
on the "high tide of Socialist
revolution," that this can be
completed "in the main," as Mao
has said, in three years or less,
and that five-year plan goals
will be met ahead of schedule
or surpassed.
In describing party affairs,
the central committee report
is expected to assert that the
party leadership is faithful
to Leninism, and that the party
must lead in opposing "conserva-
tism" in all phases of the "tran-
sition to socialism."
The central committee re-
port and any other major speeches
will probably be followed by
"discussion." Central and pro-
vincial party leaders may ex-
press minor criticisms but are
expected to give greater atten-
tion to shortcomings in their
own spheres of responsibility.
Revision of Party Constitution
The next item on the agenda
is a report on a revision of the
party's constitution, last re-
vised in 1945. The 1945 re-
port was given by Liu Shao-chi,
credited with the largest role
in drafting the constitution
and generally believed to be the
principal supervisor of the
central committee's major de-
partments. Liu or one of his
deputies is expected to make
the report on constitutional
revision again. Liu appears
to have held on to his position
in the party hierarchy--second
only to Mao--despite the em-
barrassment caused him in 1954
by Jao Shu-shihr Jao, apparently
a protege of Liu and director
of the organization department
of the central committee, was
broken for conspiracy with
politburo member Kao Kang.
The constitution adopted
in 1945 was modeled on the
Soviet party statutes of 1939,
embodying the basic Leninist
concepts of party organization--
centralism, authoritarianism
and rigid discipline. As
usual, however, the Chinese
Communist Party "adapted" the
model to Chinese conditions,
in particular the dominance
of the party by Mao and the
party's effort to present its
program as "new democracy."
The new constitution will
probably resemble in many re-
spects the latest Soviet model
of 1952. Of the Chinese fea-
tures, Mao's personal leader-
ship will probably no longer
be emphasized, and the party's
tasks will be updated to stress
,the "transition to socialism."
Of particular interest is
the possibility that the number
of pasts held by the head of
the party will be reduced. Mao
is chairman of the central
committee, the politburo, and
the secretariat which directs
the daily operations of the
party. If one or more of his
posts were eliminated, the party
would present an appearance of
greater collective leadership
and would in fact have taken
a step toward such a collective.
The party might at the same time
provide for a leader of the
post-Mao collective by creating
the post of vice chairman under
whichever chairmanship Mao re-
tains.
The constitution may also
be revised to expand the role
of the secretariat in organiza-
tional work, in line with Soviet
practice. With the elimination
of the organization department
or restriction of its functions,
the top handful of party leaders
would get a tighter grip on the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
key function of assigning party
personnel.
Other revisions are expect-
ed to include a stiffening of
qualifications and procedures
for party membership, a defini-
tion of the role of the Central
Control Committee set up last
year, and a provision for some
equivalent of the Soviet party's
Central Auditing Commission.
Second Five-Year Plan
After discussion of the
report on the party constitu-
tion, the directive on the
Second Five-Year Plan, the third
agenda item, will be presented.
The speaker may be, following
Soviet practice, Premier Chou
En-lai, but is more likely to
be one of his two top lieuten-
,nts for economic affairs: Li
1u-chun, the chief economic
negotiator with the USSR and
chairman of the State Planning
Commission, which has primary
responsibility for drawing up
the five-year plans; or Chen
Yun, the senior vice premier
and the regime's principal
spokesman for economic matters
in general,
The Second Five-Year Plan
in many respects will be China's
first co-ordinated long-term
plan. In the period 1953-57,
officially that of the first
plan, controls over the economy
and statistical reporting or-
ganizations were in process of
organization, and most of agri-
culture, food distribution and
other commerce was in private
handsand only indirectly sub-
ject to centralized planning,
,Socialization of agriculture,
industry and trade will probably
be essentially completed in the
second plan period.
Unlike the USSR, Peiping
has not published a draft of
the new plan prior to the con-
gress. Announcements to date
have made clear that it will
emphasize heavy industry, pro-
vide for increased investment
in light industry, and call for
a great increase in agricultural
output.
increase of almost 2 percent, with a mainland population
f 70,00 ,000 in 1967
1961 GOAL
1955 1967
1 ODITY CLAIM U AL INMEASE PLAN
STEEL
(1HIWONF TONS)
GRAINS
(Miwoil TONS)
- RICE
'MIWON TONS)
RAIL LINES
(THOUSAND MILES)
460-
314- 550
346
6-
184 09.5
65
M
16.8
07.8
M 9.5
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OIL
LMSM COMMUNIST
NOMIC GOALS
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6 September 1956
Clues as to specific goals
may be found in various 12-
year plans published by the re-
gime. These have appeared to be
early and rough plans--intended
in party to dramatize Peiping's
expected successes. The planned
increase.in grain output in
particular seems unrealistic.
Election of Central Committee
The final item on the
agenda is the election of a
new central committee. The
present central committee--
41 full members and 27 non-
voting members--has been of
little importance as a body in
recent years. The composition
of the new membership, never-
theless, will be significant--
primarily because it will have
been decided on beforehand by
the party's top leaders and
may reveal their relative
strengths.
It seems likely that the
membership will be roughly
doubled, to between 120 and 150.
Most of the 68 present members
will probably be named again.
New members will probably in-
clude leading officials of the
central committee's central
departments, government and
military officials in Peiping,
ambassadors and leaders of mass
organizations, first secretaries
of the party's provincial and
muncipal committees, and com-
manders and political commis-
sars of major military areas
and operational commands.
The high levels of the
party and government in Commu-
nist China in recent years have
clearly represented Mao Tse-
tung's own team. That is, al-
most all members of the polit-
buro and secretariat, and most
of the top two dozen officials
of the government (including
the principal military leaders)
are known or believed to owe
their position to Mao more than
anyone else. Many of Mao's
favorites occupy top party and
government posts concurrently.
The central committee elec-
tions and appointments will
almost certainly continue to
reflect Mao's domination of the
party, and will throw further
light on Mao's preferences as
to his heirs.
It is be no means assured
that Mao'.s arrangements will
survive him: some of his lieu-
tenants may well have plans of
their own. Many of them have
acquired proteges and their
success in installing their
personal followers in key party
positions may have a profound
effect on the leadership picture
following Mao's departure from
the scene.
Personalities
Mao's two most powerful
lieutenants have long seemed
to be Liu Shao-chi and. Chou
En-lai. Other centers of power
seem to be Peng Te-huai, the
defense minister, Peng Chen,
mayor and party boss of Peiping,
and Kang Sheng,long reported
as the party's secret police
chief.
Figures at the politburo
level who would be great assets
to any contender for power are
economic specialist Chen Yun,
the ailing military hero Lin
Piao, and long-time political
commissar Teng Hsiao-ping.
Other key officials, one
or more of whom may be tapped
for politburo membership, in-
clude: Li Fu-chun,'state plan-
ning director; Po I-po, who
directs the annual economic
planning; Teng.Tzu-hui, Mao's
main lieutenant for agriculture;
Li Hsien-nien, a top economic
co-ordinator; Lo Jui-Ching, the
public security chief; Lo Jung-
huan, director of the political
apparatus in the armed forces;
Chen I, a military leader and
vice.premier; and Su Yu, chief
of staff., although Su has been
out of the news and may be in
trouble.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
Among these lieutenants,
Liu Shao-chi's hand is expected
to show most clearly in the
selection of new central commit-
ee. members from the committee's
present apparatus. In the se-
lection of new members from per-
sons.important primarily as
government officials, Chou En-
lai's. influence will probably
be most apparent,.:The'military
group to be named will probably
reflect most sharply the rise
in recent years of.Peng Te-
huai, who has been surrounding
himself at the top of the
military establishment with his
earlier deputies.
Few of the party leaders
outside Peiping can be plausibly,
aligned with any one of the top
handful, although some of them
may have been appointed by
Liu. Those elected to the
central committee will probably
have had substantial associa-
tion with the onetime regional
leaders. now just below the top
level of power, such as Teng
Hsiao-ping,.Lin Piao, Chen I
Teng Tzu-hui Li Fu-chun and
Po I-po. 25X1
SOUTH VIETNAM FEARS NEW COMMUNIST PRESSURE
The government of South
Vietnam, having achieved a
measure of internal stability
and security, is increasingly
concerned over what President
Diem calls the "rampant growth
of neutralism" in Asia, par-
ticularly in Laos and Cambodia.
Threat From Laos and Cambodia
South Vietnam fears that
the Laotian government's
rapprochement with the Pathet
Lao foreshadows an anti-Western
administration in Laos, which
would undermine its own efforts
to resist Communism. With
Cambodia already strongly
neutralist and antagonistic
toward Saigon, such a develop-
ment in Laos would complete
South Vietnam's physical
isolation from sympathetic al-
lies and further expose it to
Communist encroachment.
More immediately, the Diem
government fears that the set-
tlement in Laos will provide the
Communists with fresh propaganda
to revitalize their long-
standing, but lagging, campaign
to develop international pres-
sure on South Vietnam to accede
to unification elections.
Saigon feels that British sup-
port of, and India's acquiesence
to, Diem's anti-Geneva stand
will be adversely affected,
since both these countries have
tended to consider that a set-
tlement in Vietnam would be
dependent on Communist willing-
ness to come to terms in Laos.
Cambodia and Laos, more-
over, have both recently signed
joint communiques with bloc
nations formally endorsing the
full implementation of the
Geneva accords in Vietnam,
whereas previously they had re-
fused to become involved in
Vietnamese affairs. Hanoi radio
has already noted Saigon's
concern over developments in
Laos, and pointedly predicted
that "the success of the Vien-
tiane talks has heightened the
confidence and spirit of struggle
of the Vietnamese people for the
peaceful reunification of their
country."
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6 September 1956
South-Vietnam's Tactics
To protect its position
externally, Saigon has rushed
an envoy to Laos to counter-
act the arrival of any Commu-
nist representation in Vien-
tiane that seems likely to re-
sult from Laotian premier
Souvanna Phouma's visit to
Peiping and Hanoi. The.envoy's
thinly veiled threat to Laotian
leaders prior to their depar-
ture for Peiping, however, to
the effect that Laos' outlets
through South Vietnam might
be closed unless Vientiane
abandoned its neutralism, ap-
pears only to have irritated
the Laotians.
Similarly, the South Viet-
namese representative in Cam-
bodia has been instructed to
"stand and fight it outs" in
the event Viet Minh diplomats
show up in Phnom Penh. In ad-
dition, Saigon has decided to
continue its disadvantageous
trade and payments agreement
with Cambodia in order not to
push the Cambodians toward
closer relations with the
Communists.
Saigon is also attempting
to convince New Delhi that
Indian interests can best be
served in Indochina by keeping
South Vietnam independent. To
this end, the influential
secretary.of state for the
presidency, Nguyen Huu Chau,
went to New Delhi with a trade
delegation for talks th Prime
Minister Nehru and other Indian
officials. Chau appears to
have had some success, as he
has quoted Nehru as saying,
"The Red Chinese--they must
not absorb Vietnam," an indica-
tion that India is becoming
apprehensive of growing Chinese
Communist influence in the
Indochinese peninsula, despite
its official position that the
early unification of Vietnam
would help relax international
tensions.
Internal Situation
Meanwhile, Diem is con-
tinuing efforts to shore up
South Vietnam's internal de-
fenses against Communism.
Constant military and police
pressure is being maintained
on Viet Minh cadres. Army
units are also conducting a
major security sweep to elimi-
nate all significant Viet Minh
paramilitary forces in the
southern part of the country.
As part of the antisubversive
program, Dien issued a tough
antiespionage and treason de-
cree on 21 August establishing
the death penalty for any
Vietnamese taking up arms
against the state.
Diem recognizes that al-
though the danger of overt
Viet Minh aggression seems to
have receded for the present,
he will have'to deal with the
more subtle long-range problem
of political and economic sub-
version. Spiraling living
costs, periodic shortages of
commodities and labor agitation
are sources of potentially
serious unrest. In addition,
travelers on the highways have
been subjected to lengthy
harangues by Communist agents
concerning the South's impov-
erishment and lack of hope for
the future, an indication that
the Viet Minh is actively ex-
ploiting economic conditions
in South Vietnam.
Diem blames much of the
recent labor trouble and food
shortages on corrupt adminis-
trators. Accordingly, he has
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 served notice that now that a
measure of stability has come
to South Vietnam, he intends to
concentrate on rooting out venal
elements in the government.
Stiff punishment has already
been meted out to high-ranking
officials convicted in the
black-market sales of government-
distributed rice, while the
"brains" of this swindle--a
former cabinet member--faces a
possible death sentence under
last Octobez's antispeculation
decree. Despite the involve-
ment of high officials, the full
publicity given these trials
will probably enhance the gov-
ernment's prestige.
CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
Diem is convinced South
Vietnam must expand its economy,
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GRANTS UNDER THE SOVIET
both agriculturally and indus-
trially, if it is to compete
successfully with North Vietnam
in the long run. Efforts for
a large-scale expansion of the
South Vietnamese economy, how-
ever, are still largely in the
planning stage, although there
are some signs of progress, such
as the prospects for a modest
resumption of rice exports next
year. During 1957, the South
Vietnamese plan to give top at-
tention to agricultural projects
promising quick results for
large numbers of people, but
the establishment of certain
light industries such as tex-
tile, glassware, sugar and jute
will also have a high priority.
__
F
I
FOREIGN AID PROGRAM
The USSR has granted coun-
tries outside the Sino-Soviet
bloc loans and credits totaling
at least $500,000,000 for eco-
nomic purposes since launching
its "trade and'aid" campaign
early in 1955. In the same peri-
od, credits for the purchase of
military equipment extended in-
directly by the USSR to the Mid-
dle Eastern nations totaled
$300,000,000. In contrast,
countries belonging to the bloc
have received only $100,000,000*
for economic purposes since
early 1955, while $500,000,000
was granted in military credits--
all to Communist China. From
1946 through 1954, the USSR had
advanced $4.7 billion tc Commu-
nist controlled countries for all
purposes, and made nc signifi-
cant loans to other countries.
Credits to Sino-Soviet Bloc
Soviet aid to bloc coun-
tries since 1946 totals $5.3
-The USSR has recently of-
fered economic aid to East Ger-
many, including a loan of un-
known amount, but apparently
less than $250,000,000.
billion. Of this, over $2 bil-
lion has been granted for eco-
nomic development and for food-
stuffs and raw materials. The
major beneficiaries of this
part of the program have been
Poland, East Germany, China,
North Korea and North Vietnam
A like amount of Soviet credits
has been extended for the pur-
chase of Soviet-owned properties
in East Germany, Rumania, Hungary,
Bulgaria and Communist China.
These so-called "joint stock
companies" were largely composed
of Soviet-seized assets of Nazi
Germany and Japan.
Military aid, totaling
$1.2 billion, accounts for the
remainder of Soviet financial
assistance to the Sino-Soviet
bloc since 1946.
Of the $5.3 billion total,
only $600,000,000 has been granted
since January 1955: Communist
China received a military credit
of $500,000,000 for the pur-
chase of Soviet-held equipment
and installation in Manchuria,
and Bulgaria received about
$100,000,000 worth of economic
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 September 1956
1 ,3,300
SING SO /JET,sAID
(millions of dollars)
L $ 200
E$ 300
$ 500
SOVIET
MILITARY AID
--#1,200--
t\$500 (1955-1956
$ 4,100
$100 (1955-1956)
O:.:.LO.c_.
_11946-1956)
assistance in 1956 to mechanize
and develop agricultural land.
In most cases, repayment
of loans and credits and pay-
ment of interest charges are
made in the form of commodities,
frequently the output of facil-
ities built with the credits
granted. Interest charges on
loans and credits to the bloc
range from one to three percent
with repayment over periods up
to ten years.
The Soviet aid arrangements
have been beneficial to both
sides. They enabled the Euro-
pean Satellites to acquire ur-
gently. needed grain and raw
materials in the immediate post-
war years, and have assisted
them in the development of a
vastly expanded industrial
capacity,
The USSR, on the other
hand, increased its control over
the economies of the Satellites.
In particular, by specifying
the commodities to be sent in
repayment, the USSR has been
able to some extent to direct
investment within the bloc.
Free World Credits
During the past
year, about $500,000-
000 in Soviet economic
credits--equal to
about one quarter of
the economic develop-
ment funds the USSR
granted to bloc coun.-
tries since 1946--have
been made available to
countries outside the
bloc. About 95 per-
cent of this sum went
to Yugoslavia, India
and Afghanistan for
capital goods and
technical services.
Interest charges have
ranged from 2 to 2.5
percent with repayment
periods up to 30 years.
The USSR has expresses
a willingness to accept commodi-
ties and local currencies in
repayment. In some cases, it
will receive products from the
installations to be built with
Soviet aid.
Of $200,000,000 in economic
credits advanced to nonbloc coun-
tries by the European Satellites,
90 percent has gone to Yugo-
slavia. Token :roans by Czecho-
slovakia and East Germany have
been made to Indonesia and Af-
ghanistan. A gift of $22,000-
000 from Communist China to Cam-
bodia in June was the first out-
right grant by any bloc nation
to a non-Communist country.
On the military side, the
Soviet bloc since late 1955
has extended to Middle Eastern
countries about $300,000,000
in credits for the purchase
of arms on extremely attractive
terms. These credits are being
met by shipments of large sur-
pluses of cotton, for which
Egypt--the major recipient of
the arms--could not readily
find a Western market,
(Prepared by ORR)
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SATELLITES AND
COMMUNIST CHINA
sovif BLOC
MILITARY AID
SOVIET
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