CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001100020001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 40
• Document Creation Date: December 23, 2016
• Document Release Date: May 30, 2012
• Sequence Number: 1
• Publication Date: December 27, 1956
• Content Type: SUMMARY

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CONFIDENTIAL
car
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 18
OCI No. 7756/56
27 December 1956
AUTH Ft ?
OAT REVIEWER:
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CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
-gFwQftZffi
25X1
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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 13, 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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 nnnurinrAMTtI I
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
T H E W E E K I N B R I E F
OF IMMEDIATE INTEREST
NEW SOVIET ECONOMIC PLANNING COMMITTEE . . . . . . . . . Page 1
The communique following the recent plenum of the
central committee of the Soviet Communist Party and the
restaffing of the State Economic Commission under
M.G. Pervukhin suggest that the Khrushchev leadership is
still dominant in the USSR. The communique's reiteration
of the policies laid down at the 20th party congress and
the naming to the economic commission of specialists who
have long been serving as part of the Khrushchev-Bulganin
team suggest that no change in the top leadership is
imminent. An over-all review of the Sixth Five-Year Plan
is to be conducted by the specially constituted, high-
level planning group. This review apparently signals
the beginning of strenuous efforts to adjust Moscow's
plans to meet recently increased economic pressures.
SUEZ AND SINAI . . . . . . . . . . . . . . . . . . . . . Page 2
The Arab states, apparently convinced that the with-
holding of oil from the West has been the tactic which
played the biggest role in forcing Britain and France to
withdraw from Suez, are now continuing to apply the same
pressure to obtain a complete Israeli evacuation of Sinai
and the Gaza strip. Israel is showing increasing re-
sistance and is in turn asking the Western powers for
guarantees before it makes a final decision on the evac-
uation question. The British and French, meanwhile,
continue to seek a role in the canal clearance operations
as a means to retain some on-the-spot leverage.
INDONESIA .. . . . . . . . . . . . . . . . . . . . . . . Page
The bloodless coup by elements of the Indonesian army
in Sumatra is now aimed at forcing the collapse of the
government of Premier All Sastroamidjojo. The government's
continued existence is jeopardized by the threatened de-
fection of a large portion of its political support..
Agitation for the appointment of former vice president
Hatta as premier is growing, but there is some doubt
whether President Sukarno would agree to such a move.
CONFIDENTIAL
25X1
4
THE WEEK IN BRIEF
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
NOTES AND COMMENTS
CABINET CRISIS IN SYRIA . . . . . . . . . . . . . . . . Page 1
Conservative efforts to prevent a complete assumption
of power by the leftists have apparently delayed the
formation of a new cabinet following the resignation of
Prime Minister Asali on 22 December. Pressure on the con-
servatives mounted, however, with the announcement of a
court-martial of Syrians involved in an alleged Iraqi-
sponsored coup. 25X1
GREECE AND TURKEY SHIFTING TACTICS ON CYPRUS ISSUE . . . Page 1
Greece and Turkey appear to be shifting their tactics
on the Cyprus problem. Greece will press for an immediate
debate in the UN and will probably emphasize "independ-
ence" rather than "self-determination." The Turks are
now urging partition as the only solution they could
tolerate. London intends to retain sovereignty over
Cyprus for the foreseeable future and will adhere to its
L: _z
riots have
C
h
yp
t
e
responded with renewed violence. 25X1
SOVIET ARMS SUPPLY TO AFGHANISTAN . . . . . . . . . . . Page 2
The shipment of Soviet arms--including aircraft--
into Afghanistan in the past several months raises the
possibility of an eventual large-scale armed clash
nistan
ht
.
oo
between Afghanistan and Pakistan over Pus
2G\/1
CHOU EN-LAI ANNOUNCES FORTHCOMING TRIP TO THE USSR . . . Page 4
Soviet relations with the Satellites probably will
be a principal topic of discussion during Chou En-lai's
trip to Moscow in January. The Chinese have been
strongly sympathetic toward Satellite aspirations for a
greater degree of freedom within the bloc. Peiping
wishes, however, to avoid a public quarrel on the issue,
Ch
'
s
ou
and any Sino-Soviet communique emerging from
visit would probably acknowledge the necessity for bloc
"
unity and "proletarian internationalism.
SOVIET PROPAGANDISTS STRESS VIGILANCE THEME . . . .
Concern over unfavorable tendencies in the political
orientation of the Soviet people has prompted Moscow to
warn Soviet citizens of the need for greater vigilance
against the enemies of the USSR. There are as yet no
indications that repressive measures typical of Stalinist
Page 5
THE WEEK IN BRIEF
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-Woo SECRET -VANNe
vigilance campaigns are being prepared. These demands for
watchfulness seem to be primarily an effort to justify
the use of force in the Hungarian uprising, which is said
to have been instigated by the "reactionary" West.
GOMULKA'S POSITION AND PROSPECTS . . . . . . . . . . . .
Polish party first secretary Gomulka is faced with
an increasingly stronger party opposition and growing
popular discontent, The
responsibilities of office and the resulting need to
balance political realities carefully have forced him to
resort to temporizing tactics in an effort to fulfill
high popular expectations while at the same time attempting
to forestall Russian counteraction. His task is made all
the more difficult by the weakening of central authority
and the loss of party unity which accompanied his rise to
power.
HUNGARIAN REGIME SEEKS CO-OPERATION OF PUBLIC .
The Hungarian regime, no longer forced to combat
violence and general strikes, has stepped up its propa-
ganda campaign to convince the overwhelmingly hostile and
suspicious population that it is working for the popular
welfare and is worthy of popular confidence. Attempting
to minimize the terror tactics of the newly constituted
security forces and to ignore the presence of Soviet
troops, press and radio statements promise daily that
life can be better than ever if everyone will now join
an all-out effort to rebuild the nation's shattered
economy. The Soviet occupation will have to be maintained
for the foreseeable future and popular hostility is un-
likely to diminish unless major concessions are granted.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
EAST GERMAN CRACKDOWN ON INTELLECTUALS AND STUDENTS . . Page 9
The East German regime is making alternate threats
and promises to intellectuals and university students
while playing on the theme that excesses and misguided
actions by these groups were responsible for the anti-
Soviet developments in Poland and Hungary. Some intel-
lectuals have been arrested and a few university students
expelled as a warning to potential dissident elements.
Important party and government officials are joining the
press and radio campaign to combat the spread of danger-
ous ideas;"
BOLIVIAN MONETARY PROGRAM MAY PROVOKE CRISIS . . . . . . Page 10
The implementation on 15 December of the Bolivian
monetary stabilization program--a basic economic reform
bearing heavily on the working classes in its opening
phase--has aroused widespread unrest and may bring about
the downfall of the administration. Discouraged by the
wavering support of labor leaders, moderate President
Siles has threatened to resign, and the cabinet reportedly
tendered its resignation on 18 December in protest against
left-wing political attacks in congress.
CHANGING BRITISH ATTITUDES ON CONTACTS WITH USSR . . . . Page 12
Indignation in Britain over recent Soviet actions in
Hungary has virtually halted all trade union and student
exchange trips to the Soviet Union. The government does
not appear, however, to have abandoned its view that
exchange visits by individuals and groups offer the
principal hope for a long-term improvement in Anglo-
Soviet relations.
NORTH AFRICA . . . . . . . . . . . . . . . . . . . . . Page 12
In Algeria, Resident Minister Lacoste has been un-
able to get the Moslems to participate in his reform plan,
and the terrorists have increased their attacks. In
Morocco and Tunisia, there are indications of a desire
for improved relations with France. 25X1
LAOS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
The Laotian cabinet on 20 December refused to
approve a communique signed by Prime Minister Souvanna
Phouma and Pathet Lao chief Souphannouvong calling for
the immediate inclusion of Pathet Lao leaders in the
cabinet but offering no effective guarantees for the res-
toration of the government?s control over the disputed
provinces, integration of Pathet forces into the royal
army, and dissolution of the Pathet Lao movement. The
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THE WEEK IN BRIEF
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
cabinet has agreed, however, to accept.two Pathet officials
in the cabinet if such guarantees are forthcoming. 25X1
UNREST IN URBAN AREAS OF NORTH VIETNAM . . . . . . . . . Page 14
Violence in North Vietnam has apparently been con-
fined to the rural areas, but there is growing evidence
that dissatisfaction is also widespread among the urban
population. Intellectuals appear to be particularly
restive, and Hanoi on 15 December had to suspend publi-
cation of a new literary magazine which criticized the
Communist regime. The Viet Minh has recently called for
25X1
people's classes."
Page 15
SCANDALS PLAGUE RHEE ADMINISTRATION . . . . . . . . . . Page 16
Three scandals, two involving assassinations and
one corruption, have lately embarrassed the Rhee admin-
istration in South Korea. The handling of the cases
suggests that President Rhee is reluctant at this 'time
to protect officials guilty of misconduct, and this
attitude may presage at least a partial cleanup within
h
t
e,corruption-ridden Liberal Party.
INDIAN REACTION TO NEHRU'S VISIT TO UNITED STATES . . . Page 17
The Indian public and press appear pleased with
Prime Minister Nehru's reception in the United States
and feel that there will be a definite improvement in
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V
THE WEEK IN BRIEF
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
PATTERNS AND PERSPECTIVES
THE BALTIC STATES: CHRONIC TROUBLE SPOT FOR USSR . . . Page 1
Lithuanian party boss Antanas Snechkus admitted in
mid-December that the Hungarian revolt had encouraged
"bourgeois nationalists" in Lithuania to attack the
Communist Party. Early in November, anti-Soviet rioters
in several cities demanded the withdrawal of Russians
from Lithuania, and in December, the local parties ex-
pressed concern over student unrest in Latvia and Estonia.
Such developments indicate that anti-Communism and re-
sistance to Soviet rule are still strong and perhaps
growing,16 years after the incorporation of the Baltic
CHINESE COMMUNIST AGRICULTURE . . . . . . . . . . . . . Page 4
Communist China probably will not achieve the high
targets for agriculture of the Second Five-Year Plan
(1958-1962),- unless the regime invests more than is now
scheduled. Peiping's planning relies heavily on the
farms to produce the surpluses needed to pay for the
ambitious industrialization program. To date, the
pressure of a growing population on land resources and
the unwillingness of the regime to invest heavily in
agricultural machinery and fertilizer have made increas--
ingly difficult the realization of such surpluses.
SPAIN: INFLATIONARY PRESSURES . . . . . . . . . . . . . Page 8
Spain is threatened by growing inflation as a result
of pay raises averaging 40 to 45 percent decreed in
November for industrial and agricultural workers. Govern-
ment control measures thus far seem inadequate and, should
an inflationary spiral develop, the ensuing economic dis-
locations and popular unrest could endanger.Franco's
position.
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vi
THE WEEK IN BRIEF
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CURRENT INTELLIGENCE WEEKLY SUMMARY
OF IMMEDIATE INTEREST
The communique on the de-
cisions of the recent plenum of
the central committee of the
Soviet Communist Party and the
restaffing of the State Economic
Commission under M. G. Pervukhin
.suggest that the Khrushchev
leadership is still dominant.
Khrushchev himself did not
figure personally in the public
statements emanating from the
plenum and there has been, no
mention of serious political
problems which the meeting may
have discussed. The communique's
reiteration of the policies
.laid down at the 20th party
congress and the naming to the
planning commission of special-
ists who have long been serving
as part of the Khrushchev-Bul-
ganin team suggest that no
dramatic change in the top
leadership is imminent.
Rise of Pervukhin
The appointment of M. G.
Pervukhin* as chief of the
commission is in line with
earlier indications that he
has been steadily improving
his position over the course
of the past two years. In
contrast, the planning organi-
zation under the former chief,
M. Z. Saburov, has been direct-
ly criticized by Khrushchev
on several occasions.
The central committee re-
ferred a re-examination of in-
ternal economic development
policy to a specially consti-
tuted, high-level planning
group, which apparently will
review the Sixth Five-Year
Plan draft and submit a re-
vised version to the Supreme
Soviet during the first half
of 1957. The 1957 plan and
budget probably will not ap-
pear until well into 1957.
Thus, the central committee de-
cided against making immediate
changes in the Soviet Union's
economic plans in favor of an
over-all review of the Sixth
Five-Year Plan.
Pressure for modification
in the plan has been occasioned
by recent changes in the eco-
nomic relationships with the
Satellites, the maintenance of
large military forces, and the
leadership's apprehension of
potential discontent. In
addition, there have been cumu-
lative internal maladjustments
arising from underfulfillment
of plans for production of in-
dustrial raw materials and
construction materials.
Commission Appointees
The re-staffed State Econom-
ic Commission will apparently
review the Sixth Five-Year Plan
as well as annual plans. High-
ranking officials named to
assist Pervukhin represent im-
portant aspects of the Soviet
economy: First Deputy Chair-
men Kosygin and Malyshev, light
industry and industrial tech-
nology respectively; Deputy
Chairmen Khrunichev and Ku-
cherenko, armaments and construc-
tion. Agricultural experts
Matskevitch and Benediktov
were also appointed deputies.
Although no foreign economic
relations specialist was named
ckPPILIA
PART I OF IMMEDIATE INTEREST Pa.PP 1 of 4
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
at this level, such specialists
are undoubtedly represented
just below these chairmen and
deputies.
The central committee
plenum reaffirmed the policy
framework adopted at the 20th
party congress within which
the planning group should
operate. The primacy of heavy
industry and the goal of catch-
ing up with the West in per
capita production in the short-
est possible "historical time"
were restated. Emphasis was
placed on greater decentrali-
zation and efficiency to make
possible the simultaneous
achievement of all goals, while
increased functionalism was
stressed as necessary for the
achievement of industrial con-
struction and housing goals.
These points have'been fre-
quently stressed by Bulganin
and Khrushchev. The committee
will probably have to devise
solutions more far-reaching
than these, however,to resolve
the difficulties.
Prior to the central com-
mittee meeting, there were in-
dications that the Sixth Five-
Year Plan would be modified to
provide for significantly in-
creased hoi4sing construction,
and possibly for stepped-up
consumer goods production.
The Arab states have in-
dicated a growing sense of
their bargaining power during
the past week. They appear to
regard the British and French
withdrawal as "their" victory,
won by the withholding of oil
from the West, and are now try-
ing to apply the same tactics
The pressure for an in-
creased housing program came
at a time when it was clear
that other elements of the
1956 economic plan would not
meet goals. Production goals
for coal, metals, cement and
timber will not be met, indi-
cating a trend which could lead
to a strain on the raw material
base for industrial expansion.
Thus, there was counterpressure
to maintain construction ac-
tivities serving industry and
raw materials extraction. Con-
struction was singled out for
much discussion in the central
committee communiqud, and a
remedy for slowing down the
rate of new construction starts,
while concentrating on projects
already under way, was advanced.
The central committee's
decision to forego an immediate
increase in housing and con-
sumer good's goals in favor of
an over-all review of the
plan was accompanied in the
report by a note of satisfac-
tion with present progress,
Output of consumer goods will
be more than 9 percent greater
than in 1955, and this year's
record harvest ensures further
significant progress in 1957
to obtain a complete Israeli
evacuation of Sinai.
Although Egypt apparently
has agreed to allow salvage
work on the canal to begin,
there were signs that Cairo had
been strongly tempted to delay
the operation. Nasr may well
SECRET
PART I OF IMMEDIATE T'TTFRERT Dnrpm % ,,-P A
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
still use the threat of new
delays to press the West for
a commitment on the Israeli
withdrawal. Earlier last week
the Jordan cabinet announced
it would urge that Arab oil
remain cut off from the West
until Israel gives satifaction.
Syrian officials said the pipe-
line from Iraq to the Mediter-
ranean could only be re-opened
promply if the United States
would set a terminal date for
Israel's occupation of the
Gaza strip.
The Israelis reacted to
this Arab pressure by further
glowing down the snail's pace
of their withdrawal and by re-
peating, with added emphasis,
their statements of determina-
tion to keep Egypt from return-
ing to the Gaza strip, Prime
Minister Ben-Gurion has said
his government must-settle its
policy on this issue by early
January, when Israeli troops
will have withdrawn as far as
El Arish, the last town west
of the Egyptian-Israeli border
in Sinai, and to a belt of
territory along the Gulf of
Aqaba.
The British and French,
following their evacuation on
22 December, have continued to
press the UN for maximum Al-
lied participation in the canal
clearance operations, with
"adequate safeguards" for their
crews. General Wheeler, the lo-
cal head of the UN. salvage opera-
tion, reportedly has contracted
for two British and one French,
as well as four German vessels,
London and Paris are seeking
by this means to avoid being
completely excluded from Egypt
and to maintain some on-the-spot
influence. Two top aides of UN
secretary general Hammarskjold
were scheduled to arrive in.
Cairo on 27 December for further
talks on clearance problems.
In what appears to be a
countermove to Egypt's delaying
tactics, French and Israeli
engineers, according to an an-
nouncement from Tel Aviv, have
begun to survey a route for an
oil pipeline to run from the
Gulf of Aqaba to the Mediterra:-.
nean. France is reported to be
willing to finance part of the
construction. Announcement of
the move at this time is prob-
ably intended in part to indi-
cate to Nasr that the Suez
Canal's importance may diminish
in the future and thus lead him
to be more conciliatory now.
The Soviet press again
played down its direct cover-
age of Middle East events, but
continued to encourage Egyptian
obstructionism.
Although a TASS report of
22 December charged that Israel
was campaigning for the annexa-
tion of the Gaza strip, Soviet
propaganda was noticeably re-
strained in reacting to Ben-
Gurion's announcement on Gaza,
An Israeli official has told
the American embassy in Tel
Aviv that Soviet ambassador
Abramov, who was recalled from
Tel Aviv on 5 November, was, mak-
ing preparations to return by
1 January.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
The situation in Sumatra
arising from the bloodless coup
by Indonesian army elements
has been complicated by the re-
ported arrest of Colonel Sim-
bolon, the rebel leader, by Lt.
Col. Ginting, who recently re-
placed,him as the official ter-
ritorial commander in north
Sumatra. Ginting pledged that
"relations with the central
government will carry on as be-
fore," but it is doubtful he
can command the loyalty of all
troops and police in the area,
and armed clashes are a possi-
bility. Discontent in the
Celebes and in Borneo reported-
ly has increased as a result
of the Sumatran coup, and in
south Sumatra, the army is said
to have seized control of the
area's finances.
The cabinet of All Sastroa-
znidjojo is in serious trouble.
The announced aim of the coup
was the, replacement of the pres-
ent cabinet by an "honest" gov-
ernment which would give greater
attention and financial support
to non-Javanese areas, take
action against high-level cor-
ruption, and generally assume
a more decisive approach to
pressing domestic problems.
One small party has already
withdrawn from the cabinet, and
SECRET
the two large Moslem parties--
the Masjumi and the Nahdlatul
Ulama--reportedly will with-
draw unless President Sukarno
calls for the cabinet's resigna-
tion. Moreover, Foreign Minis-
ter Abdulgani.. has been offi-
cially charged with corruption
and is facing prosecution.
Sentiment among army and
political leaders is growing
in favor of a "presidential
cabinet" led by former vice
president Hatta. The demand
for such a cabinet, to which
members would be appointed
without regard to party member-
ship, lends itself to Sukarno's
own ideas of a "guided democ-
racy" and a de-emphasis of-
political parties. Whether he
would accept Hatta as prime
minister, however, is somewhat
doubtful in view of their dif-
ferences on basic issues.
Hatta has told the Ameri-
can ambassador that Sukarno
himself should assume responsi-
bility for setting up a presi-
dential cabinet, an indication
that Matta and hi~z; supporters
may intend to force Sukarno
either to make such a move him-
self or to turn the government
over to them.
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S1 I Ilk
CURRENT INTELLIGENCE WEEKLY SUMMARY
A new Syrian cabinet has
not yet taken office
CABINET CRISIS IN SYRIA
25X1
25X1
The conservatives,
been arrested,
coup to overthrow the Asali
although on the defensive, are
apparently trying to exert what
efforts they can to prevent a
complete assumption of power
by the leftists.
Pressure on the conserva-
tives has mounted, with the an-
nouncement of a court-martial
of some 47 Syrians allegedly
involved in an Iraqi-sponsored
NOTES AND COMMENTS
r' 1956
government. The trial will be 25X1
aimed at conservative and pro- 25X1
Iraqi politicians; several have
to make the most of the
pec t e
plot to intimidate the con-
servatives and eliminate their
influence. The impending forma-
tion of a leftist-dominated
government and the upcoming
court-martial may drive rightist 25X1
elements to. attempt counterac
tion, but their chances of suc-
cess appear slim.
GREECE AND TURKEY
SHIFTING TACTICS ON CYPRUS ISSUE
Greece and Turkey appear
to be shifting their tactics in
seeking a solution to the Cyprus
problem. Athens has announced
its intention to press for an
immediate UN debate when the
political committee reconvenes
on 3 January and has indirectly
indicated that it will emphasize
independence rather than self-
determination for Cyprus. Tur-
key has now abandoned its in-
sistence on maintaining the
status quo on Cyprus and is
urging partition as the only
solution which would bar the
ultimate union of the island
with Greece.
The Greek government,
in deciding to promote Cypriot
independence, is apparently
motivated by a desire to get
the support in the UN of India
and some other countries which
seem to suspect that "self-
determination" for Cyprus is
merely a cover for annexation
by Greece. The Soviet bloc
would favor independence for
Cyprus, particularly since the
Communist-front party on the
island is the strongest and
best-organized political force.
The bloc can be expected to op-
pose any negotiated settlement
and may propose a demilitarized
Cyprus under UN supervision.
The Greek decision to.
press for a quick showdown . with
Britain in the UN reflects Athens'
conviction that London will not
negotiate significant modifica-
tions
of its latest constitu-
tional
plan for Cyprus. By
urging
quick action in the
UN,
Athens
might also reassure
the
Greek
public that no deal
was
made with the British during
the recent visit to Athens of
British colonial secretary
Lennox-Boyd. Prime Minister
Karamanlis apparently hopes the
UN will appoint a commission of
nations not immediately
The leftists can be ex- 25
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
concerned to recommend some
Cyprus solution. Karamanlis
says Greece could accept any
solution approved by the UN.
Ankara stated in a memo-
randum on 20 December that
agreement in principle was
reached with London during
Lennox-Boyd's visit to Turkey.
The Turks promised a favorable
reaction to the proposed Rad-
cliffe constitution for Cyprus
in return for Britain's ac-
ceptance of the concept of
partition, described by the
Turks as "integral self-deter-
mination."
Britain, however, has
shown no indication of changing
its policy of retaining sover-
eignty over Cyprus as long as
strategic considerations require.
Since the abortive Suez adven-
ture, London's determination to
avoid a withdrawal from the
island has probably been rein-
forced. The British cabinet
has already considered and
rejected the idea of partition,
and Lennox-Boyd probably raised
the subject in Parliament only
to placate the Turks.
Athens and Cypriot leaders
have already condemned partition
as a solution of the dispute,
and violence has increased on
Cyprus in response to the new
British constitutional plan.
The shipment of Soviet
arms-- including aircraft--into
Afghanistan in the past several
months raises the possibility
of an eventual large-scale armed
clash between Afghanistan and
Pakistan over Pushtoonistan.
The extent of the Soviet
arms build-up in Afghanistan
is not yet clear, although sub-
stantial quantities of ground
forces equipment--probably in-
cluding a few tanks--are be-
lieved to have been delivered
in October and November. Even
more significant is the develop-
ment of the air force, which
seems to have been given priority
by both the Russians and the
Afghans.
In addition to the field
at Mazar, the Russians are to
construct a new military air-
field at Begram, 30 miles north
of Kabul 25X1
the USSR
may also undertake construction
of new airfields at Tashkurgan
and Kunduz, and possibly also
in the Khost-Matun area near the
Pakistani border.
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PART. II NOTES AND COMMENTS Page 2 of 17
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
A dangerous aspect of the
Soviet-sponsored aviation build-
up is the possibility that the
new air force will eventually
be used against Pakistan. Af-
ghan prime minister Daud, when
he announced the arms deals in
August, referred back to the
decision of the Grand Assembly
of Tribes in November 1955
which committed the nation to
support the Pushtoonistan move-
anent. Despite the apparent
lessening.of tension between
Pakistan and Afghanistan during
the past several months, Daud's
actions during his visit to
Karachi at the end of November
made it clear he continues to
be obsessed with the idea of
an independent Pushtoon state.
In the past, Pakistan has
had the advantage of uncontested
+-t Broad gauge railroad
- i- Narrow gauge railroad
All-weather road
p MILES 7S0
27 DECEMBER 1956
~~ /q~4s
Gilgit
HELMAND RIVER
DEVELOPMENT AREA
art Sandeman,
--- in -puce/
Rawalpindi
PAKIST -`MII
~-r"1
SECRET
NOTES AND COMM2NTS Page 3 of 17
control of the air over the
tribal areas involved in the
Pushtoonistan dispute. Daud
probably feels that possession
of an operational air force
would counter this. The develop-
ment of such a force would
probably require at least sev-
eral years, but the mere pres-
ence of a substantial quantity
of Soviet arms in Afghanistan
could encourage new hostile
moves agaiast Pakistan.
In turn, Pakistan--which
thus far has appeared surpris-
ingly indifferent to the arms
build-up in Afghanistan--might
at some future date feel com-
pelled to attempt to cripple
the Afghan military establish-
ment before it can fully absorb
the new arms.
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JLCKL 1 ,,%owe
CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
CHOU EN-LAI ANNOUNCES FORTHCOMING TRIP TO THE USSR
Chou En-lai announced in
Karachi on 24 December he would
postpone his scheduled visit to
.Afghanistan and go instead to
Moscow and larsaw. This news
overshadolaed Chou's Pakistan
trip, which produced no star-
tling developments. Chou re-
ceiyed a warm public welcome,
but his conversations with offi-
cials were apparently confined
largely to an exchange of plat-
itudes.
The final communique empha-
sized the "strengthening of
friendship" between Pakistan and
Communist China, although noting
that there was a "divergence of
views on many problems" between
the two countries.
The USSR's relations with
other Orbit countries will prob-
ably be a principal topic of
discussion during Chou's visit
to Moscow in January. The Chi-
nese premier will be able to re-
port the unfavorable Asian re-
action to the Soviet armed inter-
vention in Hungary. Tailoring
his remarks to his Asian audi-
ences, Chou frequently during
his tour gave assurances that
Peiping itself would try to
avoid "great-nation chauvinism."
Chou may point out to the Soviet
leaders that Communist China has
lost prestige in the eyes of i
important Asian neutrals because
it had to express support for
the use of Soviet troops in
Hungary.
Chou is likely to inform
the Soviet leaders that Com-
munist China favors a relatively
liberal and more flexible Soviet
policy in Eastern Europe. The
Chinese have shown great sympathy
for Polish efforts, and for the
early Hungarian efforts, to at-
tain a greater degree of freedom
within the bloc. Chinese com-
mentaries have indirectly crit-
icized Soviet actions to a
degree unprecedented for Peiping,
and have described "great-nation
chauvinism" as the "main thing"
to be avoided in relationships
among bloc countries.
While Peiping's stand on
Eastern European developments,
including. its avoidance of com-
ment on the Soviet-Yugoslav
dispute, probably did not come
as a complete surprise to the
Soviet leaders, they apparently
are disappointed with the Chi-
nese position. The Russians
will almost certainly seek from
Chou a private commitment to
support Soviet efforts to pre-
serve Moscow's leadership of the
Eastern European Satellites.
Despite China's effort to
dissociate itself from the
harder aspects of Soviet policy
toward the Satellites, the Chi-
nese leaders clearly wish to
avoid a public quarrel on the
question and have emphasized the
need for unity within the bloc.
Any Sino-Soviet communique
emerging from Chou's visit would
probably profess recognition of
equality among Communist states,
but express the need to strength-
en bloc unity and "proletarian
internationalise."
During his visit, Chou will
probably be briefed on the re-
cent discussions of the Soviet
central committee plenum con-
cerning economic policies and
the effect, if any, these pol-
icies may have on the Soviet aid
program to Communist China.
Chou will also visit Warsaw
in mid-January--the first visit
by a non-Soviet leader since the
Conulka government was estab-
lished. The visit will formalize
Peiping's approval of I'darsaw's
new relationship with Moscow.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
In private, however, Chou
will probably inform the Poles
that continued Chinese support--
which reportedly was first given
to former party leader Ochab in
Peiping last September--will
depend on Polish adherence to
the principle of bloc solidar-
ity under Soviet leadership, a
principle which Peiping has
called the "highest duty" of
Communist states.
SOVIET PROPAGANDISTS STRESS VIGILANCE THEME
Concern over unfavorable
tendencies in the political
orientation of the Soviet peo-
ple has prompted Moscow to warn
Soviet citizens of the need for
greater vigilance against the
enemies of the USSR. Warning
that "ifnperialist reactionaries"
employ any means to undermine
socialist power, propaganda
media have begun to exhort the
populace to be on guard against
"every manifestation of bour-
geois ideology." Emphasis in
the press thus far has been
on improving ideological work
to "clearly demonstrate the
advantages of the socialist.
system," and there are as yet
no indications that repressive
measures typical of Stalinist
vigilance campaigns are being
prepared.
These demands for watch-
fulness seem to be primarily
an effort to justify the use
of force in the Hungarian up-
rising, which is said to have
been instigated by the "reac-
tionary" Western powers seeking
to reinstitute capitalist re-
pression and destroy the social
SECRET
gains of the Hungarian people.
It has been repeatedly alleged
that the imperialists fomented
the revolt in order to prepare
a new war.
25X1
25X1
The Soviet armed forces
on 22 December were called on
to "pay extraordinary attention
to current world events and
draw the necessary conclusions."
A recent article in the Soviet
navy's official newspaper stated
that "the government and the
armed forces must take into
account the provocations and
intrigues of the enemies of
peace, The state interests of
the socialist motherland demand
that Soviet fighters increase
their military preparedness and
vigilance still more."
In addition to warning
that the imperialists are pre-
paring for a new war, the So-
viet press has recently pub-
lished stories alleging espio-
nage activities directed against
the whole Soviet bloc. By
creating an atmosphere of
vigilance against the external
NOTES AND COMMENTS Page 5 of 17
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
enemy, the regime is seeking
to counteract the adverse ef-
fects the intervention in
Hungary has had on the Soviet
populace, particularly young
people and intellectuals, and
trying to explain popular dis-
satisfaction as due to the
influence of reactionary, bour-
geois ideology.
The December issue of the
official party journal, Parti-
inaya Zhizn, cited a signii ci ant
increase in the efforts of stu-
dents to "understand questions
of theory and present policies,"
and warned that if their ques-
tions were not answered, they
would seek information "else-
where, thus permitting the pos-
sibility for a distortion and
a weakening of the struggle
with bourgeois and petty bour-
. uals_ may succumb to the influence
of bourgeois ideology, and one
writer warned that "he who casts
doubt on the necessity of party
leadership of literature aims
at the socialist structure, at
the Soviet regime, at the Com-
munist Party, and at the heart
of our people. He opposes the
basic interests of the working
people."
Questions about party and
,government policy and Marxist
ideology are explicitly encour-
aged as long as they do not
serve as a pretext for casting
doubt on the fundamentals of
the Soviet Communist system.
The equating of opposition to
party guidance of culture with
a rejection of the Soviet system,
for example, is a clear warning
geois ideology." A local party ; to questioners of party control
journal has admitted that "in- 1 that they are approaching
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PART I NOTES AND COMMENTS Page 6 of 17
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Iftn"dw
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
GOIAULKA'S POSITION AND PROSPECTS
25X1
25X1
Polish party first secre-
tary Gomulka is faced with an
increasingly stronger party
opposition and growing popular
discontent, according to recent
reports. The responsibilities
of office and the resulting
need to balance political real-
ities carefully have forced him
to resort to temporizing tactics
in an effort to fulfill high
popular expectations while at
the same time attempting to
forestall Russian counteraction.
.His task is made all the more
difficult by the weakening of
central authority and the loss
of party unity which accompanied
his rise to power.
Goinulka will find it dif-
ficult to continue his program
in the face of the opposition
which threatens from every
quarter, and he may not last
long in the attempt. The coming
spring will undoubtedly be a
critical period. By that. time
popular hopes will probably have
been deflated by the realities
of the continuing economic
hardships. F -1
In addition to
trying for a rapid improvement
in the economic, situation, he
is now replacing and reforming
party cadres and consolidating
his position within the army
and security forces.
Next to the difficult
economic situation, the party
itself is probably Gomulka's
most pressing immediate problem.
He has no personal following,
no patrons in the Kremlin, no
"apparatus," and almost no as-'
sociates of tested loyalty and
reliability. The "palace
revolution" that brought him
to power has made the position
of most of the regional and
lower-level party functionaries
untenable. Many have resigned;
others have been forced out by
popular pressure or in the
gradual replacement of cadres
now under way.
Not associated with the
new leadership faction which
suddenly materialized at the
top, and already compromised by
the de-Stalinization movement,
they are now swelling the ranks
of the dissident group known
as the "Natolins." This group,.,
lacking clear leadership at
the moment, is looking to the
Soviet Union, from which it
is reportedly receiving in-
creasing support. It probably
hopes this will enable'it to
turn from obstructionist tactics
to counterrevolution. The con-
tinued suppression and gradual
neutralization of this faction
in the face of subversive sup-
port from the Kremlin will
challenge to the utmost Gomulka's
hold on the state security and
party control forces.
C'Tol,iulka is also confronted
by increasing disaffection among
his formmier supporters., partic-
ularly journalists, students and
intellectuals who are dismayed
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
by his go-slow tactics.and who
resent as an act of bad faith
measures that appear repressive.
These groups, together with the
workers, consider themselves
the self-styled leaders in the
democratization movement and
feel that Gomulka owes to them
everything he is today. Demands
among them f?r greater journal-
istic freedom, for further
liberalization of the election
system and for more rapid imple-
mentation of worker self-govern-
ment are kept from-getting out
of hand more by awareness of
the Hungarian example and its
aftermath than by effective
regime control. They seem to
be biding their time with Go-
mulka until a more favorable.
alternative-can be realized.
The Kremlin leadership
.has its own reasons to be op-
posed to Goanulka; he has started,
in the name of an "independent
road to socialism," a series
of innovations which, like a
cancer, will certainly make
damaging inroads if not stopped
in time.
Among these innovations,
cessation of jamming, agree-
ment to permit religious educa-
tion in primary and secondary
schools, and de-emphasis on .
collectivization of agriculture
accompanied'by abolition of the
delivery quota system are per-
haps the greatest threat to the
Soviet system. Another in-
novation is modification of the
election system to a degree
which could permit election to
the Sejm on 20 January of-an
increased number of delegates
who favor greater independence
from the Soviet Union.
Poland has also become
a divisive element in the social-
ist camp by.seeking support from
China and Yugoslavia for its
independent road. Further, the
Soviet leadership must harbor
a bitter personal animosity
toward Gomulka for the humiliat-
ing defeat it suffered in at-
tempting to dictate to the Pol-
ish central committee on 19-20
October.
Recent Soviet moves which
have tended to support Gomulka,
such as the agreement on station-
ing of troops in Poland, sug-
gest that the Soviet leader-
ship considers it has no prac-
tical alternative at the moment.
Fear is growing in official
Warsaw circles, however, that the
USSR may withhold economic aid
in order to aggravate the in-
ternal situation and bring
about a better opportunity to
reassert Soviet control. Thus,
the Kremlin seems to be counting
on internal difficulties to
bring Gomulka down, confident,
meanwhile, that the inescapable 25X1
from straying too far.
need for friendly relations
with the USSR will prevent him
. HUNGARIAN REGIME SEEKS CO-OPT 1-i,A'. I0N CF PUBLIC
The Hungarian regime, no
longer forced to combat violence
and general strikes, has stepped
up its propaganda campaign
to convince the overwhelmingly
hostile and suspicious popula-
tion that it is working for the
popular welfare and is worthy
of popular confidence. Attempt-
ing to minimize the terror tac-
tics of the newly constituted
security forces and to ignore
the presence of Soviet troops,
press and radio statements
promise daily that life can be
better than ever if everyone
will now join an all-out ef-
fort to rebuild the nation's
shattered economy. The Soviet
occupation will have to be
maintained for the foreseeable
future and popular hostility
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
is unlikely to diminish unless
major political concessions--.
which would threaten the
regime's authority--are granted
during the coming year.
With industrial production
at a virtual standstill for
twos months, with about half of
the nation's coal miners no
longer available for mining
work, and with major damage to
be repaired in several cities,
the country is faced with a
long and grueling battle for
recovery. The regime has ad-
mitted that during the first
quarter of 1957 light indus-
trial production will be at
only 50 to 60 percent of capac-
ity, that sporadic shortages
of some food supplies will
continue for another half year,
and that coal production this
year is already approximately
40 percent short of the planned
goal.
Fuel shortages have forced
the closing of several fac-
tories, with the workers sent
home on half pay. Further
unemployment is expected, and
regime economists foresee up to
200,000 workers without jobs
by the beginning of 1957.
Economic aid from the USSR
will allegedly supply on credit
the country's bread grain needs
until the end of May. But,
with trade-debts piling up and
exports at a standstill, some
form of over-all large-scale
aid will be needed. Press re-
ports from Budapest claim that
the Hungarian government had
been planning to ask for a
$100,000,000 loan from the
International Bank for Re-
construction and Development,
even though not a member.
The Kadar regime, although
continuing its use of martial
law, curfews and arrests of op-
position figures, is attempting
to appear as conciliatory as
possible. It has de-emphasized
its police methods, has stressed
the alleged legality of its
tactics, has continued to per-
mit the formation of ostensibly
nonparty youth groups, news-
papers, and trade unions, and
apparently has avoided strict
regime censorship of some
news media. Negotiations with
minority party figures are
reportedly in progress and
radio Budapest recently prom-
ised that the government would
be "extended" in the near
future.
Although the people have
been deprived of their top
leadership and are no longer
united in active and violent
opposition to the regime,
basic hostility probably re-
mains as high as ever. Spor-
adic strikes, occasional anti-
regime demonstrations and an
all-pervading popular apathy
can be expected to plague the
regime throughout the coming
year.
EAST GERMAN CRACKDOWN ON INTELLECTUALS AND STUDENTS
The East German regime is
making alternate threats and
promises to intellectuals and
university students, while
playing on the theme that ex-
cesses and misguided actions by
these groups were responsible
for the anti-Soviet developments
in Poland and Hungary. Some
intellectuals have been arrested
and a few university students
expelled as a warning to poten-
tial dissident elements.
Important party and government
officials are joining the
press and radio in the campaign
to combat the spread of
"dangerous" ideas.
Party first secretary
lac-
cuse Hungarian intellectuals
of precipitating the revolution
in that country. Noting that
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CURkENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
tendencies similar to those
evidenced by Hungarian intel-
lectuals had been observed
among some East Germans, he
warned that under no circum-
stance would his regime toler-
ate such leanings.
Some prominent intellec-'
tuals connected with publica-
tions denounced by Ulbricht
for printing "defeatist arti-
cles" by Hungarian intellec-
tuals have now been arrested,
probably as a warding to others
to hew more closely to the
party.line. Writers and intel-
lectuals are clearly not to be
permitted to spearhead a drive
for liberalization in East
Germany, as they did in Poland
and Hungary.
Recent pronouncements in
the party press by leading
Communist officials reflect
the regime's growing concern
over widespread ideological
deviations among students,
particularly their unwillingness
to accept the orthodox Russian
interpretation of the recent
developments in Eastern Europe.
The party's problems are now
compounded, since it must com-
bat not only Western ideas but
also the concept of a develop-
ment of national Communism
within the Soviet bloc. The
government is especially sensi-
tive to hostility among young
peopled
A letter from the party
central committee signed by
Ulbricht illustrates the re-
gime's approach to the problem.
Clearly threatening expulsion
or worse for those who do not
conform, it warned, "At our
universities and colleges only
those may study who are faith-
ful and loyal to the worker-
peasant power." The letter
cited the necessity for close
ties between students and
workers, and then continued,
"He who attempts to maintain
or restore capitalism--even
though he may try to'disguise
capitalism with hypocritical
slogans...is trying to stem
the course of the wheel of
history and will fail in the
attempt,"
Minister of State Security
Ernst Wollweber, long-time Com-
munist thug and hatchet man,
got into the act with an arti-
cle in the party newspaper on
21 December, warning, "We will
not tolerate so-called 'free'
discussion that leads to anti-
democratic and antisocialist
ideology." He said enemy agents
in universities, encouraged by
the Hungarian revolt, had been
arrested.
In an effort further to
isolate East German students
from forbidden ideologies, in-
cluding national Communism,
the government has sharply
curtailed visits of foreign
delegations and athletic teams,
partic"ularly, from West Germany
and Poland.
BCLIVIAN MONETARY PROGRAM MAY PROVOKE CRISIS
The Bolivian government's
political stability has been
threatened by labor's opposition
to the immediate sacrifices
demanded of it under the sweep-
ing monetary stabilization pro-
gram promulgated on 15 December
to check the country's dan-
gerous inflationary spiral.
Backed by credits of the Inter-
national Monetary Fund and the
US government, the plan calls
for a drastic revision of fiscal
practices and the application
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of austerity measures which
in their initial phases bear
particularly hard on the
Bolivian worker, who understands
neither the economic exigencies
behind stabilization nor its
ultimate aims.
The new administration of
moderate President Siles Zuazo
appeared to have won substantial
advance co-operation for the
plan from labor and political
leaders of the government
Nationalist Revolutionary
Movement (MNR). The first
days of the program's opera-
tion were punctuated, however,
by sharp price increases, spo-
radic rioting and serious
violence in the mining districts
over labor's loss of subsidized
food purchases. Influential
labor leaders, whose backing
may be vital for the program's
eventual success, wavered in
their support. Juan Lechin,
president of the senate and head
of the powerful Bolivian Work-
ers Central (COB), threatened
to denounce the reform as prej-
udicial to the workers' in-
terests and convened a series
of meetings starting 21 Decem-
ber to-determine the COB's
future attitude toward the
program.
Discouraged by such ad-
verse reactions, Siles has con-
sidered stepping down from
office in favor of leftist
Vice President Chavez, and the
cabinet reportedly tendered
its resignation on 18 December
in protest against a left-wing
congressional attack. Chavez,
who is now in New York for the
UN General Assembly meetings,
has subsequently assured US
officials of his support of
the stabilization program.
Ever since Siles' inaug-
uration last August, however,
there has been a widening rift
between the left and moderate
wings of the MNR.. As the
power base of the left wing
of the party, the COB considers
itself a co-partner in direct-
ing government policy. Its
leaders control congress, the
vice presidency, and four
cabinet posts.
In the event the stabili--
zation program becomes the issue
provoking a struggle for power
within the MNR, the COB and
other leftist elements could
possibly command--in addition
to rank-and-file union affili-
ates--the great majority of
the armed worker and peasant
militia. The militia is numeri-
cally superior to the combined
armed forces and police, and
in fighting ability is believed
to be an almost equal match
for them--particularly since
the loyalty of the police and
armed forces to the government
might be affected by an open
split in the MNR.
Although the concerted
opposition of labor could
probably wreck the stabiliza-
tion plan, leftist labor and
political leaders may be re-
luctant to force the downfall
of the government over this
issue. As in the past, labor
leaders may be expected to
threaten violent action in a
continuing effort to extract
special concessions for the
worker, but they are probably
not eager to assume the respon-
sibilities of office themselves
in a deteriorating economic
situation, which apparently 25X1
measures.
can be rectified only through
politically difficult austerity
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27 December 1956
Indignation over recent
Soviet actions in Hungary has
brought an almost complete re-
versal of British public at-
titudes toward the desirability
of expanding contacts with the
Soviet Union. Virtually all
trade union and student exchange
trips have been caazceled. Sever-
al unions with considerable
Communist sentiment and which
had earlier led the drive for
expanding contacts with the
bloc have dropped plans to ex-
chang:; delegations. On the na-
tional level, the General Coun-
cil of the Trades Union Congress
(TUC) on 29 November urged its
187 affiliates to abandon any
such glans. The TUC was capi-
talizing on the changed climate
of opinion to give voice to its
own skepticism of the value of
the exchanges, which it had
questioned even before the dis-
turbances in Eastern Europe.
The Foreign Office has
modified its position in such
a way as not to preclude a re-
sumption of its policy of pro-
moting contacts. Britain will
avoid exchanges that might be
accompanied by great publicity,
such as a scheduled visit of
the Sadler Wells Ballet to
Moscow. The Foreign Office
states that it intends to avoid
a "rigid" attitude and will
consider exchanges that would
benefit Britain from a technical
or intelligence point of view.
While thus accommodating
to public opinion, the governr
ment does not appear to have
abandoned its view that expanded
exchanges of individuals and
groups offer the principal hope
for a long-term improvement in 25X1
Anglo-Soviet relations. One
visit still on the calendar is
that of Prime Minister Eden to
Moscow in May 1957.
Algeria
Terrorism increased during
the Christmas season despite
repeated French claims that
military action has eliminated
all large bands. In addition,
a countrywide week-long general
strike at an indefinite date
has been decreed by the Nation-
al Liberation Front.
Minister Resident Lacoste
in Algeria has scored a victory
over local French settler ex-
tremists. He influenced the
mayors in the departments of
Oran and Constantine not to
subscribe to resolutions drawn
up by their Algiers Department
colleagues calling for their
resignations if the government
dissolved settler-controlled
municipal and departmental
councils in order to permit
greater Moslem participation.
Councils are being dissolved,
but even so, Lacoste still
has been unable to get a singze
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146"11* %NEW
SECRET
CURRENT INTELLIGENCE WEEKLI SUMMARY
27 December 1956
influential Moslem to partici-
pate in his reform program.
About 15 January, Premier
Mollet is expected to decree
equal civil rights, election
of a unicameral body from-which
a prime minister chosen by Paris
would select a cabinet respon-
sible to the assembly, and a
reconstitution of local councils
to provide equal French and
Moslem representation. This
plan will probably be unaccept-
able to the rebels, who demand
recognition of the principle
of Algerian independence.
Morocco and Tunisia
Greater co-operation be-
tween France and Morocco and
Tunisia appears probable de-
spite disagreement over the
status of French troops and the
extent of Paris' contribution
to the local budgets. In Rabat,
Foreign Minister Balafrej and
another cabinet minister re-
portedly have convinced the
sultan that a compromise with
France is necessary because of
the serious economic situation.
The dominant Istiglal party has
not yet accepted this thesis,
and the sultan will delay ap-
pointing an ambassador to
France until Paris-makes some
concession to avoid arousing
the party members.
The climate of the Tuni-
sion-French negotiations has
improved principally as a
result of Tunisia's realization
that it must depend on France
for funds. Bourghiba was un-
usually friendly recently while
presiding at a French cultural
gathering. Agreement has been
reached for the French govern-
ment to purchase outlying French
farms, and Paris has made some
financial advances to permit
Tunis to pay its current ex-
penses.
The Laotian cabinet on 22
December refused to approve a
communique" signed by Prime
Minister Souvanna Phouma and
Pathet Lao chief Souphannouvong
which called for the immediate
inclusion of several Pathet Lao
leaders in the cabinet but of-
fered no effective guarantees
for restoration of the govern-
ment's control over the disputed
provinces and for integration
of Pathet forces into the royal
army, Although unwilling to
accept a sellout to the Pathet
Lao, the cabinet still wishes
to reach a settlement and has
agreed to accept two Pathet Lao
leaders in the cabinet with
minor portfolios, if an accept-
able agreement can be reached
on the dissolution of the Pathet
Lao and for the immediate im-
position of government control
over the Pathet forces and the
two northern provinces.
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This latest development
poses a dilemma for the Pathet
Lao, which, although willing to
make sweeping concessions "in
principle," has heretofore
shown great reluctance to agree
to specific terms which threat-
ened its control over the two
provinces. On the other hand,
if the Pathets fail to meet the
cabinet's conditions, the
Souvanna Phouma government prob-
ably will fall, terminating
the agreements already negotiat-
ed. In this connection, Sou-
vanna on 22 December reportedly
reaffirmed his intention to
resign if no solution to the
Pathet problem is found.
In the event an acceptable
agreement is reached, the gov-
ernment reportedly plans to
place the issue before the
National Assembly during the
first week in January. A two-
thirds majority will then be
required to approve the
"broadening of the cabinet"
to include the Pathet Lao
officials.
25X1
25X1
Although the disorders in
North Vietnam last month were
apparently confined to rural
SECRET
own admissions, present increas-
ing evidence of widespread dis-
content in the urban areas of
Hanoi and Haiphong, especially
among intellectuals and mer-
chants.
Ho Chi Minh's press decree
of 15 December tightened the
already stringent regulation
of publications and provided
the basis for the Hanoi Admin-
istrative Committee's immediate
suspension of the new literary
periodical People's Culture.
In the five issues of this
periodical since it began
publication several months ago,
there were apparently several
articles which drew attention
to the repression of individual
creativeness in the arts by
the Communist bureaucracy. In
announcing the suspension,
Hanoi radio declared that every
issue caused "readers to be-
come discouraged, pessimistic,
and dubious of our regime and
leadership... and had a disas-
trous effect on the consoli-
dation of North Vietnam."
Apart from considerations
of academic freedom, the un-
easiness of many intellectuals
derives in large part from
their bourgeois or landowner
backgrounds. The livelihoods
of their families and close
friends were invariably affect-
ed by the Communist land re-
form and tax policies; some
even lost their lives. In
November a Hanoi publication
frankly acknowledged that the
resistance of intellectuals
to the regime is still a
problem requiring solution.
There have been unconfirmed
reports that students at
Hanoi University staged pro-
test meetings to criticize
certain regime policies.
There are also indications
of dissatisfaction among the
general population in the
cities.
a p ong res eats, particu-
larly merchants, frequently
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
25X1
25X1
express the opinion that "con-
ditions could not be worse" than
at present, mainly because of
increasingly heavy taxes. F
(Hanoi radio
itself, in one of its recent
self-criticisms, admitted that
the North was beset by inequi-
table taxation, inflation, and
scarcity of consumer goods. It
called for correction of mis-
takes in order to "allay the
unrest of all the people's
classes" in the capital city.
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
SCANDALS PLAGUE RHEE ADMINISTRATION
Three scandals, two in-
volving assassinations and one
corruption, have lately embar-
rassed the Syngman Rhee admin-
istration in South Korea. The
handling of the cases suggests
that Rhee is reluctant at this
time to protect officials guilty
of misconduct, and this attitude
may presage at least a partial
cleanup within the corruption-
ridden Liberal Party.
Two trials now hold public
attention in South Korea. In
one, the assailant of Vice
President Chang Myon has said
he was aided in his assassina-
tion attempt by the South Ko-
rean National Police. In the
other, Lt. Gen. Kang Mun-bong,
one of South Korea's ablest
generals and a close friend of
Chairman of the Joint Chiefs
of Staff Chong Il-Kwon, ap-
pears likely to be convicted
of complicity in the year-old
slaying of CIC chief Maj. Gen.
Kim Chang-yong ("Snake" Kim).
To date there is no reli-
able evidence to link senior
administration officials to the
wounding of Chang. However,
the long-standing hostility
between Rhee and his vice presi-
dent has caused the incident
to be embarrassing to the ad-
ministration. The Democratic
Party has alleged that his
assailant had visited Seoul
police headquarters several
times prior to the shooting.
It is possible certain police
officials, anxious to curry
favor with Rhee, encouraged the
attempt on Chang's life.
On top of these develop-
ments, in late November two
Liberal Party politicians, in-
cluding Assembly vice speaker
Hwang Sang-su, were forced to
resign high assembly posts
after being linked with the
smuggling of a consignment of
watches from Hong Kong. The
incident prompted Rhee to an-
nounce that he would sever all
connections with persons whose
conduct is detrimental to the
national welfare, without re-
gard to past services.
While Rhee has shown no
sign of disrupting legal proc-
esses in the smuggling and
Chang Myon cases, he may desire 25X1
to limit the scope of the
"Snake" Kim investigation.
case appears to. be adversely
affecting army morale and is
undermining popular confidence
in the army.
President Rhee's stated
intention not to protect those
guilty of personal misconduct
will probably not preclude ex-
tralegal activities on behalf
of the"LiberaI Party.
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-w
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
It appears likely that the
police, whose influence and
independence has increased
in recent months, will continue
to "protect" Rhee from his
"enemies."
INDIAN REACTION TO NEHRU'S VISIT TO UNITED STATES
The Indian public and press
appear pleased with Prime Min-
ister Nehru's reception in the
United States and feel that
there will be a definite im-
provement in Indian-American
relations.
There is no reason to be-
lieve this favorable reaction
will last for long, however, or
that Nehru himself has changed
his basic beliefs that military
pacts are bad and that India
must remain friendly with both
the USSR and Communist China.
The Kashmir question, to be
raised in the United Nations in
January, is likely to produce
renewed Indian criticism of the
United States.
More than 100 members of
the Indian parliament sent a
message to Nehru on 21 December
expressing "deep appreciation
for his great achievements in
cementing friendship between
India and the United States."
That was only to be expected
when two minds so earnestly ded-
icated to the cause of peace and
human progress discussed world
problems in an informal atmos-
phere." Another paper commented
on the meeting: "It comes at a
moment of history when the
policies of the United States
and India, which had seemed to
follow divergent paths, have at
last coincided and found a firm
basis of co-operation with the
UN."
Other Indian papers com-
ment: "Of all that has been
published about the visit, the
most arresting statements are
in Nehru's address to the UN
General Assembly. Nehru's
speech should convince all alike
that the future of the UN should
not be judged by comparing its
apparently meager achievement...
the future of world peace depends
on world opinion which will give
the UN the strength it needs for
throwing all its weight effec-
tively against the aggressor."
The Indian press has car-
ried extensive reports of the
Eisenhower-Nehru talks, as well
as of Nehru's New York visit.
Commenting on the Eisenhower-
Nehru joint communique, one
paper observed: "Never perhaps
has so much been said in so few
words...the utter sincerity of
the declaration is so apparent.
The only discordant note
struck was by the Indian Commu-
nist Party organ Swadinhata,
which stated that the Eisenhower-
Nehru communique showed a strong
departure from Nehru's former
"strong, healthy, independent,
self-sufficient principles."
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1-4001 WAtwiplialik _1MW
CURRENT INTELLIGENCE WEEKLY SU$ "GARY
THE BALTIC STATES: CHRONIC' TROUBLE
Lithuanian party boss
Antanas Snechkus admitted in
mid-December that the Hungarian
revolt had encouraged "bourgeois
nationalist elements, and their
accomplices" in Lithuania to
raise their heads, and attack
the Communist Party. Early in
November anti-Soviet rioters
in several cities demanded the
withdrawal of Russians from
Lithuania, and local party
concern over student unrest
in Latvia and Estonia was
expressed early this month.
These and other recent develop-
ments in the Baltic states in-
dicate that fundamental anti-
Communism and resistance to
Soviet rule are still strong
and perhaps growing 16 years
after Lithuania, Latvia and
Estonia were incorporated into
the USSR.
Seizure
of Baltic States
The Soviets
gained an initial
foothold in the
Baltic area in Octo-
ber 1939 when "mutual
assistance" pacts
were concluded with
the three' neutral
republics. By May
1940, the Kremlin
had evidently decided
to take complete .
control in the Baltic
republics and
military occupation
was completed in
mid-June.
The Kremlin
demanded that the
parliament of each
republic be dissolved
and a new government
elected. Elections
held in July achieved
the obvious results.
In early August,
each nation asked
ALAND
ISLANDS
and received admission into
the Soviet Union. The princi-
pal Western powers have never
recognized this development,
however, a fact which many
sources believe to be an
important element in continued
Baltic resistance to Soviet
rule.
Soviet Control
The Kremlin has done little
to modify the harsh policies
it put into effect on the
admission of the Baltic states
into the USSR. The post-Stalin
thaw apparently has not been
as rapid there as in other
areas of the Soviet Union, and
the basic features of Soviet
control remain unaltered.
L
LATVIAN
? Liepaja
L I T H U A N I A
~/ Kaunas ? ~! J
? Olsztyn
LAND
EIDENTI
VILN.YU ....... Former Estonian, Latvian,
r'`'
I PATTERNS AND PERSPECTIVES Page I of 10
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
The Baltic regimes have
traditionally been headed by
Moscow-trained natives like
Snechkus in Lithuania and
Yanus Kalnberzin in Latvia,
who have tossed their Communist
parties since 1940. In both
party and government, key posi-
tions on the second echelon
have usually been held by
Russians. Between 1944 and
1953, for example, there was
an almost unbroken succession
of Russian second secretaries
of the party in each republic.
In addition, Slavs have
always comprised a strong mi--
nority"in the Baltic central
committees, and principal
cabinet portfolios have often
been held by specialists from
Moscow. These regimes are
maintained in power by the
presence of large numbers of
Soviet troops, augmented by
internal security troops, whose
continued presence is justified
by the alleged need to defend
the Baltic Sea approaches to
the Soviet Union.
The keynote of Moscow's
Baltic policy has been the
Sovietization' of all spheres
of life. Primary attention
has been directed to the
socialization of industry,
collectivization of agriculture,
and Communist education of the
populace, which, according to
1956 Soviet statistics, numbers
5,800,000. Implementation of
this policy often entails purges
and mass deportation of re-
calcitrants. The most extensive
deportations took place in 1940,
after the Soviets occupied the
area, and in 1944, when it was
"liberated" from German
occupation. While no reliable
figures are available, the
more than 100,000 persons were
deported in these periods.
Banishment of natives to
Siberia reportedly continued in
1948, 1949, 1950 and 1953. The
last major purge occurred in
early 1950, when the Estonian
party underwent a thorough
cleansing in order to eliminate
"bourgeois nationalism" and to
correct the serious mistakes
in the "allocation and training
of cadres" which had resulted
in the "admission to party
ranks of kulaks and other
hostile elements."
The only significant shift
in Baltic policy occurred in
June 153 following charges at
party plenums that distortions
of the Lenin-Stalin nation-
alities policy had been allowed
in the past. As a result, the
Russian second secretaries
were replaced by natives.
Similar plenums with similar
results were also held in the
Ukrainian and Georgian
Republics; this de-Russification
policy may have been the result
of the machinations of Beria,
who was seeking to bolster
his own position, or may have
been undertaken by the entire
leadership in order to preclude
adverse reactions to Stalin's
death by making concessions
to local national sentiment.
By early 1954 the trend
had been reversed in the
Baltic states, and Russians
again began to appear in lead-
ing party and government posts.
By January 1956 the post of
party second secretary had re-
verted to Russians in both
Latvia and Lithuania.
Effects of Soviet Policy
Moscow's acquisition of
Latvia, Lithuania and Estonia
satisfied some of the Kremlin's
major strategic requirements.
It secured a portion of the
western boundary against land-
based attack and increased the
USSR's acces to maritime trade 25X1
routes. It also added to the
Soviet Union three states
whose economies and cultures
were already well developed.
Twelve years of uninter-
rupted Sovietization (1944-56),
however, have served to
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
strenmthen the basic anti-
Communism of a majority of
the native population. Economic,
recovery in the postwar period
han been slow and. while the
living standard in the Baltic
area is evidently still some-
what higher than in the rest
of the USSR, several reports
suggest that,fin contrast to
the USSR, it has not surpassed
its prewar level.
Russification in all
spheres of life also causes
considerable resentment. Russian
has replaced native tongues as
the official language of govern-'
ment, and heavy doses of Commu-
nist propaganda are administered
daily in an attempt to convince iI
the population of the superior-
ity of the Soviet system. Par-
ticularly in the cities, both
military personnel and the
thousands of Russian civilians
who poured into the area after
the deportations receive
preferential treatement even in
insignificant matters, such as
preferential seating in theaters.
The net result has been to make
many natives feel like second-
class citizens in their own
countries.
Current Situation
The Baltic area has been
closed to foreigners since
1940 and, as a result, little
firsthand information has been
obtained concerning the after-
math of de-Stalinization there.
It is evident that tensions
lessened and fear of the secret
police diminished noticeably.
As a result of recent amnesties,
small numbers of former inmates
of slave labor camps have
begun to drift back into h
area.
t e situation
erwise remains much the
same as it was prior to Stalin`
death.
Stubborn passive resist-
ance'continues in rural
districts. Party plenums held
in each republic during 1956
demanded an improvement in
political work among the rural
population.
low party member-
ship on collective farms is
regarded as a serious and
continuing problem.
there 25X1
are still many peop who who prefer
to "live in an illegal situation"
rather than to take advantage
of the 1955 amnesty for those
who collaborated with the
Germans.
The outbreak of rioting
in November provided the first
indication of open resistance
in the Baltic area in many
years, and the admission by
Snechkus of disturbances in
his bailiwick conceded for the
first time that events in the
Satellites have had serious
repercussions within the USSR.
It may be, however, that
Snechkus' treatment of the
disturbances is of greater
significance than the events
themselves. His statement
that it is the youth and stu-
dents who are most susceptible
to the lies of the bourgeois
nationalists implies that years
of Communist indoctrination
have not succeeded in winning
Lithuanian youth over to
Communism.
Repressive action against
dissident elements in the Bal-
tics may be in preparation.
Snechkus asserted that it was
impossible to "remain passive"
while the youth were being im-
bued with false and idealized
views of bourgeois life. If
an attempt is made to overcome
resistance through repression, 25X1
however, it does not seem
likely to enjoy any more success
than have similar moves in the
past.
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
Communist China probably
will not achieve the high tar-
gets for agriculture of the
Second Five-Year Plan (1958-
1962), unless the regime invests
more than is now scheduled.
Peiping's planning relies heavily
on the farms to produce the
surpluses needed to pay for the
ambitious industrialization pro-
gram. To date,the pressure of
a growing population on land
resources and the unwillingness
of the regime to invest heavily
in agricultural machinery and
fertilizer have made increas-
ingly difficult the realization
of such surpluses. The regime
began in 1955 a major effort to
socialize agriculture in order
to increase state control over
crop output.
JAMMU AND
1(ASH MIR
(STerub Irv D~SPV?[I
Lhasa
AGRICULTURAL AREAS
27 DECEMBER 1956
24393
Agricultural output in Com-
munist China constitutes an
estimated 45 percent of the
gross national product, and 80
percent of the population lives
on farms. China's agricultural
production--and its population--
are greater than that of any
other country in the world. The
land is worked very intensively.
Whereas 168,000,000 Americans
are supported by 866,000 square
miles of cultivated land, China's
600,000,000 are fed from some
428,000 square miles of agri-
culturally productive land.
Rice accounts for around one
half of cereal production. This
is significant from thel
HUp.EH .Hank.
OTTONs
K-iy-p"
)fi`
SECRET
RTH
'NAM
f AN TUU'
Canron ~d:1"'?
EAST
CHINA
SEA
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MUTUAL AID TEAMS
LOW-LEVEL CO-OP
.80
ADVANCED CO-OP
COMMUNIST CHINA
PROGRESS IN
PERCENT
OF RURAL
FAMILIES
100
1951
(EARLY)
1952
(EARLY)
SECRET
1957
(SPRING)
(PLANNED)
standpoint of mechanization and'
collectivization, since paddy
farming is not easily improved
by mechanization or by merging
small plots into larger fields.
The problem of increasing farm
production is not one of im-
proving labor productivity, but
one of increasing land produc-
tivity.
Some increase in yields is
possible through the relatively
inexpensive measures of greater
use of natural fertilizer,
better seeds and insecticides,
and through selective stock
breeding and small-scale irriga-
tion and flood control. Any
major improvement in the balance
of population and food supply,
however, will probably come
about only with large-scale
outlays, particularly for chem-
ical fertilizers.
A major problem facing the
regime is maintaining production
incentives. To prevent discon-
tent among. the millions of
peasants who have lost and are
losing property through collec-
tivization, it is necessary to
demonstrate that socialism in-
creases their income. While the
progress of collectivization
seems to have been to the gen-
eral satisfaction of the leader-
ship, some fairly serious side
effects have been
admitted. The nor-
mal sideline produc-
tion of the farmers
in off seasons ap-
pears to have been
neglected. This has
decreased the income
of the peasants and
reduced the amount of
raw materials avail-
able for some light
industries and ex-
port trade. Also,
the numbers of fowl
and livestock have
declined under the
collectivization pro-
gram.
61211 Socialization Program
The' regime has
almost completed a campaign
to socialize agriculture, begun
in 1950, which gives Peiping
a mechanism for extracting the
surpluses it needs for its
investment program. The process
of socialization began with the
land reform program which,
theoretically at least, took
land from the."landlord" and
"rich peasant" classes and re-
distributed it among land-poor
peasants. Next, "mutual aid
teams" were established in
which neighboring families pooled
their labor, animals and imple-
ments for certain tasks at
certain seasons. The peasant,
however, remained an individual
agent.
The third and fourth phases
have involved, the establishment
of agricultural producer co-
operatives. Producer co-ops
proceed from "lower" or "semi-
socialist" to the fourth stage
of "advanced" or "fully social-
ist." In the lower form, land
and property are pooled and the
individual is paid a share of
the produce both on his labor
and on the value of his capital
contributions. In the advanced
form,, land and property are
collectively owned and each
member is paid exclusively ac-
cording to the amount of work
he performs.
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An advanced co-op encom-
passes between 100 and 300 peas-
ant households. As socializa-
tion progresses, these co-ops
presumably will be combined
into much larger units until
they become bona fide collective
farms. For example, the model
Peace Collective Farm outside
Peiping has 2,400 peasant
households.
The fifth and last stage
of socialization, according to
Peiping's doctrine, is technical
reform. The regime is not
likely to make spectacular gains
in this field for some years to
come.
In July 1955 the inter-
vention of Chairman Mao Tse-tung
resulted in a tremendous ac-
celeration of the drive toward
the fully socialist form. It
is now planned that 90 percent
of China's peasants will be in
advanced co-ops by the spring
of 1957.
Agricultural Plans
Communist plans for agri-
cultural production are set
forth in three programs: the
First Five-Year Plan (1952-
1957), the Second Five-Year
Plan (1958-1962) and a long-
range Twelve-Year Draft National
Program for the Development
of Agriculture (1955-1967).
Production targets for the
First Five-Year Plan have
shuttled up and down. The cur-
rent target, as spelled out at
the eighth party congress in
September 1956, is the same
as the original target. It
calls for a 17.6-percent in-
crease in food crop production
between 1952 and 1957 (164,-
000,000 to 193,000,000 metric
tons) and for a 26-percent in-
crease in cotton output (1,300,-
000 to 1,630,000 tons) for the
same period. Peiping claimed
in late November that food
crop production had already
reached the 1957 goal.
The Second Five-Year Plan
calls for a near doubling of
1952 food and cotton produc-
tion by 1962. Under the twelve-
year program, food crop produc-
tion in 1967 is to reach 450,-
000,000 tons, a 175-percent..i.n-
crease over 1952, and cotton
output is to reach 4,000,000
tons.
While primary reliance is
being placed on increasing
yields, ambitious plans for the
expansion of cultivated acreage
have been drafted. In addition,
construction is under way on
-=FOQ[? -CRQ-PL-
150.0
1436
163.9
163.9
APPROX.
192.0
180.0
192.8
187.0
APPROX.
250
217
:COTTON
0'S
1.3
1.3
1.6+
1.6
1.6
1.7
APPROX.
4 X
2
2.4
1936
.
LIVESTOCK
189.3
208.0
324.9
APPROX.
510
0
(MILLION HEAD)
.
CHEMICAL
0.2
2
0
0
2
0.6
0.5
0.6
0.5
3.0-3.2
FERTILIZER
1941
.
.
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several long-term multipurpose
water conservancy projects,
In the near future, however,
most of the benefits in the
field of water conservancy will
come from projects on the local
level.
Plans to produce heavier
and more complicated iarm.equip-
ment, such as tractors, reapers
and combine harvesters, are in
an early stage, and production
of such items will remain in-
significant for some time.
Three tractor plants are being
built--in Loyang, Tientsin and
Nanking--which should begin to
meet an important part of China's
needs after 1958. Most of
China's heavier equipment has
been imported from other bloc
countries.
More important than mecha-
nization in Communist plans. is
the provision for better hand-
and animal-drawn implements.
For example, the traditional
plow used by the vast majority
of Chinese peasants does not
plow deeply or turn the earth
properly. Some 1,300,000 two-
wheeled plows were delivered to
peasants in the first half of
1956.
Increased use of chemical
fertilizers probably holds the
greatest single promise for in-
creasing agricultural production;
in China. Natural fertilizer
is in short supply. Probably
as little as 1.0 percent of the
amount of chemical fertilizer
which could be profitably ap-
plied is now in use, and the
prospect is that only a small
fraction of chemical fertilizer
requirements will be met for
many years.
Agriculture, forestry and
water conservancy received only
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7.6 percent of capital con-
struction investment under the
First Five-Year Plan. Official
statements on the Second Five-
Year Plan indicate that agri-
cultural investment, although
double the First Five-Year
Plan figure, is still sub-
ordinate to heavy industrial
investment, and that to assure
planned investment rates, the
regime is relying chiefly on
an even more intensive effort
by the peasants and on better
control over production.
Prospects
According to Communist
doctrine, production increases
will be effected through social-
ization. Some positive results
can be achieved by merging small
individual plots of land into
larger fields, centralizing
management, better planning on
land utilization, and organizing
labor for land and capital im-
provements. Set against these
probable gains are the disrup-
tive effects of collectivization
on the countryside, the fact
that agriculture gets a small
portion of total investment, and
a nationwide shortage of qualified
cadres to manage the collectives.
The basic problem of increas-
ing yields still lies in main-
taining and improving the
fertility of the land, regard-
less of the organizational forms
used.
gets of the Second Five-Year
Plan or the long-range 12-year
Production increases prob-
ably will keep pace with popula-
tion growth over the next five
years. Short of revolutionary
changes in agricultural tech-
nology or drastic increases
in investment, it is unlikely
that Communist China can attain
the over-all agricultural tar- 25X1
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CURRENT INTELLIGENCE WEEKLY SU1V7?ARY
27 December 1956
SPAIN: INFLATIONARY PRESSURES
Spain is threatened by
growing inflation as a result
of pay raises averaging 40 to
45 percent decreed in November
for industrial and agricultural
workers. Government control
measures thus far seem inadequate
and, should an inflationary
spiral develop, the ensuing eco-
nomic upsets and popular unrest
could endanger Franco's position.
Siace the autumn of 1955,
Spanish officials have expressed
concern over the increasing
danger of Inflation, the steady
rise in living costs, and the
critical shortages of basic
foods. The problem was inten-
sified by the unusually severe
winter last year and by wage
boosts in the spring and fall
of 1950.
The increases given to in-
dustrial workers in April, as
the first round of a general
pay raise to help offset the
rise in living costs, failed to
satisfy labor's demands and
were followed almost immediately
by a protracted strike in the
northern industrial centers.
The government has shown its
apprehension of further worker
unrest by decreeing a substan-
tial wage boost for agricultur-
al as well as industrial workers
effective 1 November to replace
the modest "second-round" in-
crease originally planned for
October.
I..1' lat i onary Threat
in 1956 are the pub-
lic and private in-
vestment boom, wage
increases exceeding
Inflation has
been encouraged since
1954 by an increased
domestic demand, sup-
ported by an expan-
sion of bank credit
and the total money
supply. Factors con-
tributing to this
condition since early
the growth in productivity, and
foreign exchange shortages re-
sulting from the effects of
last February's freezing weath-
er on Spain's agricultural ex-
ports.
The damage from the cold
wave is expected to curtail
citrus crop export earnings at
least until 1959, thus limiting
essential imports from Western
Europe. Compensatory expansion
of other Spanish exports has
aggravated the inflationary
situation by reducing supplies
of these commodities on the
home market. An additional in-
flationary factor will be the
anticipated tripling of counter-
part expenditures for American
base construction in the cur-
rent fiscal year and through
fiscal 1958.
Budget Deficit
Government borrowing to
finance economic development
programs has resulted in a
growing over-all budget deficit.
It was estimated in early Octo-
ber that the deficit for 1956
might be as much as 513, 000, 0()0,
some 66 percent above the 1955
figure," Even this estimate does
not take into account the ad-
ditional wage boosts decreed by
the government on 26 October
for some 8,000,000 industrial
and agricultural workers. These
raises, which average 40 to 45
percent and range as high as
75 percent, are equivalent to
over $820,000,000 this year,
SPAIN-COST OF LIVING INDEX
(1953=100)
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JAN FEB MAR
1956
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CURRENT INTELLIGENCE WEEKLY SUMMARY
or more than 10 percent of the
national income.
These wage increases, with
the additional family, seniority
or production bonuses expected
to accompany them, will probably
satisfy the workers' demands for
higher pay, but unless there is
a concomitant increase in produc-
tivity, a rise in the price
level is inevitable, The impact
on price levels is already sub-
stantial, and complaints over
the steadily rising cost of liv-
ing can be expected to multiply.
Effective government action
to counter this inflationary
threat is unlikely. There are
serious political and adminis-'
trative obstacles to instituting
adequate controls over the do-
mestic economy, and Spain's bal-
ance-of-payments difficulties
cannot be alleviated--as can its
neighbors'--by the automatic
credit extension which the Euro-
pean Payments Union provides
its members, The $30,000,000 of
rationing to reinforce price
controls, or of resorting to
indirect monetary and fiscal
controls to reduce demand. The
The possibilities of in-
creasing supply to control in-
flation are limited by Spain's
precarious trade balance, The
government has failed to facili-
tate the flow of foreign exchange
by creating a favorable climate
for private foreign investment,
which continues to face exten-
sive restrictions on foreign
ownership of industrial and
commercial enterprises in Spain
and on the transfer of earnings
abroad,
Adequately enforced con-
trol measures, particularly if
attended by steps to revamp the
nation's tax system in order to
provide more revenue, would be
opposed by the propertied
classes, which are the backbone
of the regime. Financial, land-
additional defense support aid owning and industrial groups
which Spain is requesting from would resent credit and price
the United States would do little; controls, both as an immediate
to solve its inflationary prob- threat to high profits and as
lem.
Steps taken thus far on.a
national basis will probably be
limited in their practical
effects. On 9 November the cab-
inet re-established a central
price control board to fix food
prices and issue directives to
provincial and municipal author-
ities. It also provided for an
advisory board and a judicial
agency to prosecute price con-
trol violators. On 23 November
the cabinet put clothing, house-
hold goods, and construction
materials under price control.
The government, however,
shows no sign of instituting
a possible prelude to an eventual
socialist state. In addition,
any prospect of competition from
foreign firms in Spain as a re-
sult of the liberalization of
restrictions on outside capital
would play on the xenophobic
fears of all these classes.
Increasing Instability
Foreign Minister Martin
Artajo told the American embassy
on 19 November that the price
rise was periling Spain's eco-
nomic stability. Failure of the
government to take the strong
steps required will probably,,
in the absence of economic
assistance from abroad, set off
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 December 1956
an inflationary spiral. In an
effort to minimize its impact,
the workers, remembering their
partial successes of last April,
might'be tempted to call nation-
wide strikes for futher wage
raises.
The propertied classes,
alarmed at the general deterio-
ration of the economy, under
such circumstances would tend
to question the Franco regime's
intensified,
classes, might be tempted to
replace the present regime
with a more effective symbol
of authority, particularly if
the threat to public order were
ability to serve their interests
effectively, The American
embassy has suggested that
high-ranking military officers,
who are mostly drawn from these
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