CURRENT INTELLIGENCE WEEKLY SUMMARY

Document Type: 
Collection: 
Document Number (FOIA) /ESDN (CREST): 
CIA-RDP79-00927A001200030001-7
Release Decision: 
RIPPUB
Original Classification: 
S
Document Page Count: 
52
Document Creation Date: 
December 16, 2016
Document Release Date: 
February 3, 2005
Sequence Number: 
1
Case Number: 
Publication Date: 
April 4, 1957
Content Type: 
SUMMARY
File: 
AttachmentSize
PDF icon CIA-RDP79-00927A001200030001-7.pdf4.14 MB
Body: 
Approved Forease 2005/02/14: CIA-RDP79-00927,,A001200031;7~ / r C4NFIDENTI CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. 16 OCI NO. 141.8/57 4 April 1957 OOCU9NI W C$4NGE.oa Cam. O CLAS . c GEo TO; AEV1 WDATe: CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE CONFIDENTIAL 25X1 25X1 State Department review completed Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 Approved Foor~elease 2005/02/14: CIA-RDP79-009001200030001-7 THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. The Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 Approved For ,99lease 2005/Oi~ DP79-00901200030001-7 ~NI~~~Ir.~Tfi~~L MIDDLE EAST DEVELOPMENTS . . . . . . . . . . . . . . . Page 1 OF IMMEDIATE INTEREST 25X1 25X1 Egypt gives no sign of willingness to make signif- icant modifications in its memorandum on the operation of the Suez Canal; France and Britain are planning to call an early meeting of the UN Security Council on this issue. Hammarskjold, who says he is satisfied with the arrangements for the UNEF's operations in Gaza, has asked the Israelis to accept the UNEF on their side of the border. King Saud has again voiced his determination to oppose Israeli use of the Gulf of Aqaba. Leftist elements in Syria and Jordan still appear to have the upper hand. In Syria, leaders of.the opposing factions have joined to protest Israeli activity in the demilitarized zone near Lake Hula. CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 - T H E W E E K I N B R I E F SOVIET INDUSTRIAL REORGANIZATION PUSHED . . . . . . . . Page 3 On 30 March, the Soviet press published for public discussion Khrushchev's "theses" calling for the re- organization of industry on a territorial basis. These pro- posals are to receive formal consideration at the Supreme Soviet session scheduled to begin on 7 May. Khrushchev hopes through these changes to return the rate of industrial growth to the `1Q,=- or 12 Apercent re- quired to meet the present Five-Year Plan goals. SOVIET DIPLOMATIC MOVES DIRECTED AGAINST NUCLEAR TESTS AND BASES . .. . . . . . . . . . . . . . Page 6 for the suspension of nuclear testing. In response to recent announdements on Western mili- tary planning, the Soviet Union in the last t.wo weeks issued blunt warnings to Great Britain, Norway, Denmark and Greece of the dangers inherent in allowing nuclear bases to be established on their soil. These warnings followed a campaign of propaganda threats and informal diplomatic approaches to other countries, including Japan, Turkey and Ethiopia. At the same time, the USSR is maneuvering through diplomatic channels to gain support for its proposal at the London disarmament talks CONFIDENTIAL --- rtim 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 TIDE WEEK IN' BRIEF Approved FoQjpiease 2005/0# & DP79-0092 001200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 NOTES AND COMMENTS 25X1 25X1 SOVIET ACTIVITY IN THE MIDDLE EAST . . . . . . . . Page The USSR continues to support the Arabs against the West and to back anti-Western factions in the Middle East, while warning Israel and France against renewing the military conflict with Egypt. The Soviet Union, last week aligned itself with the Nabulsi faction against the Jordanian king and, in order to help Syrian leftists, spread alarmist rumors of Israeli troop concentrations. NEW BRITISH DEFENSE PROGRAM . . . . . . . . . . . Page 2 The substantially reduced British defense program is based on what Prime Minister Macmillan described at Bermuda as Britain's entrance on a new phase as a nuclear power, as well as the need to reduce the defense burden on the nation's economy. Macmillan envisages cutting the armed forces by nearly half over the next four years, drastically reducing overseas garrisons, and no longer attempting effective over-all air cover for the United FURTHER STRAINS ON THE MACMILLAN GOVERNMENT . . . Page 4 Prime Minister Macmillan has sustained further serious losses in domestic prestige as a result of Lord Salisbury's resignation on 29 March, charges that the Bermuda conference increased Britain's dependence on the United States, and the government's handling of the ex- tensive labor disputes. Differences within the Conserv- ative Party now center on the annual budget, scheduled for presentation arliament on 9 Apriil.. 25X1 CYPRUS DEVELOPMENTS . . . . . . . . . . . . . . . . . . Page 5 The Greek majority on Cyprus apparently regards Britain's release of Archbishop Makarios as a victory for the union-with-Greece movement. The Greek Cypriots show no willingness to compromise on the self-determination issue and are unlikely to agree to any self-government program which fails to provide a mechanism for an eventual change in the island's status. Although Athens has pub- licly rejected any negotiations with Britain and Turkey, as Ankara in particular demands, it has hinted that secret negotiations among`.the?tbree.governments would be acceptable if at the same time Britain negotiated ,with Makarios. 25X1 SEYRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 THE WEEK IN BRIEF Approved Forease 2005/02 P79-009270 1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 INDONESIA . . . . . . . . . . . . . . . . . . . . . . . Page 6 Continued Moslem party unity against the inclusion of several prominent fellow travelers in the Indonesian cab- inet has forced formateur Suwirjo to return his mandate to President Sukarno. Sukarno has now reportedly invited party and provincial leaders to a meeting in Djakarta to discuss ways to solve the crisis. The president, who apparently is attempting to intimidate his opponents, may be stalling, hoping that dissension within the auton- omous areas will force the provinces to ease their political and economic demands. RIOTS IN CHILE . . . . . . . . . . . . . . . . . . . Page 7 The future of the Ibanez government in Chile is in doubt following "ry.serious rioting over the government's economic stabilization program. A state of siege was declared on 2 April, and President Ibanez convoked an emergency session of congress on 3 April to request " extraordinary powers" for six months. ARMY TAKES OVER IN HAITI . . . . . . . . . . . . . . . Page 7 Provisional president Sylvain of Haiti was forced out of office on 2 April by a general strike, and the Haitian army has assumed control until a provisional government or a permanent president can take office. Presidential and senatorial elections previously announced for 28 April are reportedly still to be held as scheduled, but potential rifts within the army and lack of agree- ment on provisional government arrangements suggest that a more serious breakdown in civil order may occur before ARGENTINE ELECTION TIMING PROVOKES CRISIS . . . . . . Page 8 President Aramburu's announcement on 30 March that national elections will be held on 23 February 1958 in- stead of late in 1957 provoked near rebellion by the Argentine air force. The army and navy are reported supporting Aramburu against ousted air noinister Krause, who appeared to be playing partisan politics on the question of the election date. SECRET 25X1 25X1 25X1 iii Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 THE WEEK IN BRIEF Approved ForRelease 200597/'1"4qIT RDP79-004WA001200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 25X1 PHILIPPINE POLITICAL SITUATION ... . . In the absence of a highly popular figure such as the late president Magsaysay, the campaign for the Philippine election in November is shaping up as a fight between the two major parties. Maneuvering for nominations is intense. President Garcia appears to be in the strongest position for the Nacionalista nomination, but the possi- bility that the administration party may split over rival contenders has improved Liberal Party prospects. Page SOVIET-JAPANESE RELATIONS . . . . . .. . . . . . Page 10 A Soviet statement to the Japanese that the Okhotsk Sea will be closed to foreign fishing by 1959 indicates an intention to pre-empt the area for the rapidly growing Soviet fishing industry and may also be related to security considerations and weapons testing. The Japanese have called Soviet terms in the fishery negotiations un- acceptable, but their weak position may force them to agree, in the hope that benefits might come from subse- nest trade development and atomic energy co-operation. 25X1 JAPANESE SOCIALISTS SENDING GOOD-WILL MISSION TO COMMUNIST CHINA . . . . . . . . . . . . . . . . . . . Page 12 The Japanese Socialist Party is sending,a mission to Communist China on 10 April for a two-week stay. The Socialists, planning to make relations with China an issue in an anticipated general election, probably hope for some specific gesture indicating Chinese willingness to negotiate with their party. 25X1 25X1 SINO-CZECH TREATY SIGNED DURING SIROKY VISIT TO PEIPING . Page 13 The Sino-Czech treaty and the joint communique` issued by Chou En-lai and Czech premier Siroky during Siroky's visit to Peiping suggest that the Chinese in- tend to play an increasingly active role in East European affairs. The treaty calls for co-operation on matters of economic, scientific and cultural development. ECONOMIC PROVISIONS OF SOVIET-HUNGARIAN COMMUNIQUE . . . Page 13 The comprehensive Soviet-Hungarian economic agree- ment concluded on 28 March strengthens Moscow's control over Hungary's economic future. In return for substan- tial immediate concessions in the form of goods and cred- its, Hungary pledged to expand shipment, to the USSR over a long-term period. SECRET iv 25X1 Approved For Release 5/~2* : f f f! MP-00927AO01 Approved F rcR (ease 2005/f~RDP79-009201200030001-7 4 April 1957 25X1 YUGOSLAVIA REORIENTING FOREIGN ECONOMIC POLICY TOWARD THE WEST . . . . . . . . . . . . . . . . . . . . . . . . Page 14. The political dispute with Moscow has forced Yugo- slavia to re-evaluate its long-term foreign economic relationships. It apparently now feels it must rely on a greater extent on the West, in.particular on the United States. Yugoslav officials state that the shift in attitude is prompted by growing distrust of the Soviet Union. PRINCE,PETSARATH RETURNS TO LAOS . . . . . . . . . . . Page 15 Since his return to Laos, Prince Pletsarath has called for a policy of "strict neutrality" and for dip- lomatic relations with Communist China and North Vietnam. While disclaiming anti-American bias and any intention to accept Chinese Communist aid, he has been sharply critical of the "bad utilization" of American assistance. The arrest of one of Petsarath's"followers in connection with a political murder unsolved since 1954 may intensify disunity in Laotian political circles. Page 16 25X1 25X1 25X1 SINO-BURMESE BORDER DISPUTE . .. . . . . . . . . . . . Page 17 Burmese premier U Nu's 11-day visit to Communist China ended on 2 April without a final agreement on the Sino- Burmese border dispute. Peiping is politely evading the issue but is maintaining the appearance of reasonableness. Rangoon can be expected to press for a settlement and, failing that, to revive its previous tactic of publi- cizing the issue. E__ I SECRET v Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 THE WEEK IN BRIEF 25X1 Approved For lease 2005/02/14: CIA-RDP79-0092 1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 25X1 MOLLET GOVERNMENT WEAKENED . . . . . . . . . . . . . . . Page 19 The sharply reduced margin which the French National Assembly gave Premier Mollet in the 28 March vote of confidence underlined his dependence on rightist votes for survival. Mollet's next period of crisis is expected during the debate on budgetary and tax issues in May when the right ma attempt to overthrow his government. 25X1 PATTERNS AND PERSPEC"CIVES 25X1 25X1 RESISTANCE CONTINUES IN HUNGARIAN SCHOOLS . . . . . . . . Page The Hungarian Communist regime is meeting with strong, united opposition in the nation ''s,scbools%..Stu~ dents of all ages, in many cases acting in concert with their teachers, are maintaining the spirit of the revo- lution in the classroom. The party and the government have responded with traditional techniques of intimidation and force. ECONOMIC REFORMS IN RUMANIA . . . . . . . . . . . . . . Page 3 The Rumanian regime is overhauling its economic plan- ning and the organization of the central government in order to deal with inefficient production and unrest brought about by shortages, mounting unemployment and high prices. New responsibilities delegated to the people's councils--the local unit of government--give them a key role in eeonom; c .,l ' "_ ane SECRET vi Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 THE WEEK IN BRIEF SECRET Approved .lease 2005/02/14: CIA-RDP79-009271200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 INDIAN NATIONAL ELECTION RESULTS . . . . . . . . . . . . Page 5 In India's second national election, Prime Minister Nehru's Congress Party retained its firm hold in parlia- ment but lost ground in nine of the 13 state governments. It lost Kerala to the Communists and has such a small plurality in Orissa that it may not be able to form a stable government there. Serious declines in the Congress Party's power in some other states, coupled with an over- all increase in Communist strength at both state and national levels, raise problems regarding the amount of co-operation a Congress-dominated parliament can obtain from the states during the next few years. NORTH VIETNAM'S STATUS IN THE BLOC . . . . . . . . . . . Page 7 The Viet Minh leadership, while drawing on Soviet and Chinese sources for guidance, is setting its own pace in the management of North Vietnam's internal affairs. In foreign affairs, the leadership has re]Luctantly subordi- nated its own aspirations to the lines of policy drawn in Moscow and Peiping. Chinese commitments to North Vietnam are somewhat larger than those of the USSR, and Chinese influence seems to be correspondingly greater. This influence, however, has been exerted in full aware- ness of Vietnamese nationalist sensibilities and with the declared intention of avoidin the error of "great- nation chauvinism." INFLATIONARY TRENDS IN WESTERN EUROPE . . . . . . . . . Page 11 At a time when Western Europe's attention is increas- ingly centering on such major plans as the Common Market, inflationary pressures are slowing the general rate of economic growth, weakening the area's dollar position and, in France, threatening:a finanoia:l".crisis'.with serious political repercussions. SECRET Approved For Release 2005/02T1 1 CIA-RDP79-00927AO01200030001-7 THE WEEK IN BRIEF 25X1 Approved For Release 2005/02/14 - tONF P79-004001200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY, 4 April 1957 PART i OF IMMEDIATE INTEREST MIDDLE EAST DEVELOPMENTS Suez Canal British and French UN rep- resentatives have indicated that their governments intend to call for an early meeting of the UN Security Council unless Egypt makes substantial modifi- cations in its memorandum on Suez Canal operations. The essence of the Western objet tions is that nowhere in the document is there reference to the six points agreed on last October, nor is there any pro- vision for international par-; ticipation in the operation or in decisions on the development of the canal. Egyptian foreign minister Fawzithas'vaguely indicated Egypt would agree to some of the changes of language proposed by the United States, but there has been no sign yet that Cairo will make concessions of a kind that would appease British and French leaders. The Israelis, who have said they would riot "push to the head of the queue",on the question of canal passage, at the same time have shown some- fear that their claims are'being ?ignored... To counter this, Tel Aviv is repeating at frequent intervals its threat to try to send a. test ship through=-but does not say when. Ships flying the flags of more than a dozen nations,--in- cluding Greece, Liberia, Norway, Panama, West Germany, Italy and .the USSR--have already passed through the canal and paid tolls to Egypt. Some vessels have not had the.types of currency C PART T called for by the Egyptian pay- Iment regulations, however, which fare designed to replenish Egypt's hard currency resources and to assure that toll pay- ~ments will not simply be debited from blocked Egyptian accounts in Britain or France. A pilot force equal to. that-which was operating in the canal before hostilities re= porteelly is again available, ands, it: is believed,,will do at least an adequate job under the favorable climatic conditions which should prevail during the next few monthsl A shortage of tugs and other ancillary .equipment may lead to some abnormal delays in traffic, !however. I The Egyptian authorities formally raised their flag over Ithe Gaza strip on 2 April. UN Secretary General Hammarskiol4 `reported to his advisory com- mittee that he believed the arrangements being worked out between the UNEF and the Egyp' tianss will be satisfactory. General Burns, the UNEF commander, does not seem to be as sanguine as Hammarskiold appears to be. Burns has re- ported that the UNEF still does .not have authority to shoot at cross-border'.iifiltratorr, alp though it can otherwise try to capture them . Certain national cont:Lngents of the UNEF, such as tine Indian, are precluded from using force by policies of their governments. The Palestine police, a force under Egyptain control which existed W DEefliAL Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 OF TMMEDTATE INTEREST Page 1 of 7 Approved For Release 2005/02/14: CIA-RDP79-0092:701200030001-7 V#AW SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 in the strip prior to the Isra- eli occupation, reportedly has joined the UNEF in border pa- trolling. Hammarskjold has formally asked the Israelis to permit the UNEF to function on their side of the border. The Israe- lis: have already indicated that their response will be negative; they assert that they see no relationship between such a request and their own disap- pointed "assumptions and expec- tations" regarding the func- tions of the UNEF in Gaza. Hammarskj old and the UN advisory committee have empha- sized the importance of the Cairo government's making clear publicly that it is against border-crossing by individual marauders as well as by organ- ized fedayeen. This is the kind of undertaking Cairo has in the past found very difficult to fulfill, and the present situation is unlikely to be an exception. Veteran refugees are not easily discouraged from return- ing to their old habits, and the Israelis will take full propa- ganda advantage of the incidents these elements are almost cer- tain sooner or later to become involved in. An even more im- mediate danger of a resumption of serious incidents comes from the fedayeen believed to have returned to the strip in civil- ian clothes. Aqaba The situation in the Gulf of Aqaba remains quiet. While the Egyptians avoid comment, the Saudis remain adamant against allowing Israel free passage., King Saud told American charge Jenkins on 30 March that this question is "a matter of life and death to us and to our country." There has been no interference with shipping under Israeli charter passing through the straits, however. Jordan King Hussain's position in Jordan appears to be becoming more precarious. The Nabulsi cabinet, which had decided to resign on 1 April in protest against Hussain's sending a personal emissary to Cairo with- out consulting it, remains in office. Nabulsi is seeking support wherever he can get it. He reportedly has made a person- al appeal to local Communist leaders, who are co-ordinating their efforts with left-wing nationalist elements. The announcement on 3 April that the cabinet intends to establish diplomatic relations with the Soviet Union is almost certainly a calculated blow at the king's prestige, and, through him, at the West. Syria The various Syrian army factions remain stalemated in their efforts to gain ascen- dancy. The only action dur- ing the past week was the bomb- ing of the headquarters of the conservative Populist Party. It is not clear whether this act was a provocation, aimed at spurring the conservatives SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART I OF IMMEDIATE INTEREST Page 2.of 7 Approved For ease 2005/02/14: CIA-RDP79-00921200030001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 to new action against the leftists, or whether it was a leftist move to further in- timidate the conservatives and at the same time justify the perpetuation of the martial law which has covered the arbi- trary proceedings of the leftist military faction. Against Israel, however, the Syrians can always demon- strate unity. Last week they did so. Colonels Sarraj and Nufuri, representatives of the contending factions, jointly summoned the chairman o-.0 the Israeli-Syrian armistice com- mission to deliver an ultimatum. Either Israel would withdraw all its' troops east:.of the'' Jordan River, in the neighbor- hood of Lake Hula, or the Syrian army would eject them by force--deadline 1200 hours, 31 March. government. After the deadline had passed, the Syrians agreed they would be willing to nego- tiate on this matter; they pro- tested strongly, however, against Israeli bridge-building activity in the demilitarized zone just south of the lake and against the alleged pres- ence of Israeli troops in the zone. The Syrian UN repre- sentative in New York said he might take this issue to the Security Council if he could get more information from his On 30 March, the Soviet press published for public discussion.Khrushchev's "theses" calling for the reorganization of industry and construction activities on a territorial basis. The proposals:.a:re_,to.,re- ceive formal consideration and approval of the Supreme Soviet session scheduled to begin on 7 May. Khrushchev hopes through these changes to return the rate of industrial growth to the 10 or 12 percent required to meet the present Five-Year Plan goals. The new structure would retain the advantages of central planning while main- taining the rights of the union republics. Economic councils would be responsible for administering industrial and construction activity within geographic areas. Ex- amples described in the theses as ideal areas include the Bashkir ASSR, Sverdlovsk Oblast and Chelyabinsk Oblast. The Urals area is said to be too large. Though also large, the Yakutsk ASSR and Magadan Oblast are to have councils because of their geographic remoteness. SECRET 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART I OF IMMEDIATE. INTEREST Page' 3 of''7 Approved FooRRe ease 2005/02/14: CIA-RDP79-00921200030001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 The councils and the ter- ritorial governments would be able to allocate manpower, finances, material supply, and, within the framework of the national plan, could allocate products, locate new construc- tion and exercise operational control over individual enter- prises in their areas.. The new Council of Minis- ters of the USSR would include the chairmen of the republican Councils of Ministers much as the USSR Supreme Court now in- cludes the 15 Republic Supreme Court chairmen. It would also include some subordinate offi- cials from the State Planning Commission (Gosplan), and the .January 1955 FlAreas mentioned by Khrushchev 4 APRIL 1957 24500 Magadan Oblast head of the Central Statisti- cal Board. Khrushchev urged that Gos- plan, now responsible for long- range planning, should be strengthened and expanded to as- sume responsibility for the year- ly plans and their implementation and also some of the responsi- bilities of the present special- ized ministries. It would also allocate resources among re- gions, handle plans for strate- gic stockpiles, review the work of regional planning bodies and control the distribution of certain items in short supply. The State Economic Com- mission, headed by Mikhail SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 OF IMMEDIATE INTEREST Page 4 of 7 25X1 Approved For Release 2005/02/14: SECRET-W1200030001-7 _oll 4 April 1957 Pervukhin, would then be un- necessary and should be dis- solved. Khrushchev's discussion of this point did not reflect any dissatisfaction with the work of Pervukhin's commission. Khrushchev urged, in fact, that All-Union Ministries ORGANIZATION OF SOVIET INDUSTRY JANUARY 1957 Union Republic Ministries COUNCIL OF MINISTERS USSR COUNCIL OF MINISTERS OF REPUBLICS Combines, trusts Counterpart Union Republic Ministries Combines, trusts 1 Commission might be transferred to the new State Planning Commission. Failure to assign Pervukhin to an important post Gosplan, USSR in the reorganization, II Gosplan of Republic Republic Ministries 1 COUNCIL OF MINISTERS USSR +-- Line of command - Line of planning This step may not exist in some cases. Gosplan, USSR COUNCIL OF MINISTERS Territorial and Regional Gov'ts. (I{rais ahd Oblasts) Council of National Economy Technical and Divisions Economic Council Construction Planning (advisory board Labor Material-technical Supply of specialists) Finance Others Combines, Trusts, etc. (factories, mills, construction sites, supply organizations, etc.) '4-.APRIL 1957 however, would suggest dissatisfaction with his performance in the preparation of the 1957 plan. The Ministry of State Control, headed by Vyacheslav Molotov, was sharply criticized, and Khrushchev called for a new statute re- quiring the organiza- tion to bring its work in line with "Leninist" directives on control work. This probably means making its work more responsive to di- rection by the col- lective leadership. Accounting and statistical matters are to be centralized in a greatly strength- ened Central Statisti- cal Board. The board would also provide for machine data proc- essing centers to be established regional- ly under its control. Khrushchev hopes that his proposals SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 OF IMMEDIATE INTEREST Page 5 of 7 Gosplan of Republic key personnel assigned to Gos- plan should have ministerial rank. as "in the case of the State Economic Commission." This suggests that the present top-level administrators as- signed to the State Economic CURRENT INTELLIGENCE WEEKLY SUMMARY Approved Forease 2005/02/14: CIA-RDP79-00920 1200030001-7 SECRET' CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 will buoy up Soviet industry and construction as the virgin lands program did for Soviet agriculture in 1956. His theses reiterate the goal of catching up with the West and put unusually strong empha- sis on the continued primacy of heavy over light industry. He stated that the nation's future growth would suffer "if we yield to an incorrect and false in- terpretation" that light indus- try should,have priority. This suggests that the issue may have been the subject of recent debate. Khrushchev apparently feels that present unrest in the Soviet Union does not call for such improvement in living standards as to require further diversion of effort from heavy industry to housing or consumer goods. Soviet vulnerability to at- tack will eventually be reduced by the decentralization, although this is not a reason for the reorganization. In fact, Khrush- chev emphatically stated that SOVIET DIPLOMATIC MOVES DIRECTED In response to recent an- nouncements on Western military planning, the Soviet Union in the last few weeks issued blunt warnings to four NATO countries-- Great Britain, Norway, Denmark, and Greece--of the dangers in- herent in allowing nuclear bases to be established on their soil. These warnings followed a So- viet campaign of propaganda threats and informal diplomatic approaches to other countries, including Japan, Turkey and any tendency toward regional sell'-sufficiency was undesirable. Soviet economic objectives would not be changed in any fundamental way by the reorgan- ization, nor any of its major chronic problems be solved. The key economic goals and the tempo of development will still be set by the central adminis- tration monitored by the party. Nevertheless the ramifi- cations of such a reorganiza- tion are numerous. Thousands of middle-level bureaucrats and technicians may be ordered to leave the relative comforts of Moscow and Leningrad for the rigors of life in the prov- inces. Initial confusion will be considerable. Once overcome, however, there.may be some im- provement in Soviet industrial efficiency, though probably not enough to warrant the present confidence of the Soviet press in the USSR's ability to meet the original Sixth Five-Year (Prepared jointly with ORR) Plan goals. AGAINST NUCLEAR TESTS AND BASES Ethiopia. The campaign began in January with an official TASS statement on "US atomic bases and preparation for atomic war." The Soviet campaign is tailored primarily to generate strong popular reaction and to give new impetus to political partiLes and independent groups already on record as opposing atomic bases in Europe and favoring a , cessation of SECRET Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 OF IMMEDIATE INTEREST Page 6 of'7 25X1 Approved Forease 2005/02/14: CIA-RDP79-00921200030001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1.957 nuclear tests. These groups are by no means all Communist or Communist-inspired. Mos- cow hopes it can.so spur pub- lic opinion on these issues that the incumbent governments will have to accede at least partially to these pressures. Moscow's warnings of nu- clear retaliation complement its campaign for an immediate ban on nuclear tests, a subject which, on Soviet insistence, is being given priority at the disarmament subcommittee talks in London. Soviet chief dele- gate Zorin had pressed for per- sonal appearances before the subcommittee of representatives from Japan, Norway, India and Yugoslavia, but later settled for subcommittee consideration of written statements from these countries, all of which NATO. PART I are promoting either a limita- tion or ban of nuclear tests. Moscow has capitalized on widespread efforts by the Jap- anese to promote at least limited agreement on the cessation of tests. In a note to the Japa- nese government on 1 April, de- voted solely to the tests is- sue and in reply to the Japanese note, of 5 March requesting a cessation of tests, the USSR urged Japan to support the So- viet proposal for an immediate ending of nuclear tests. Following the USSR's pro- posal on 26 March for a "tem- porary" ban on testing, Moscow propaganda media have given high priority to this issue, especially in broadcasts to "densely populated" Western European states associated with SECRET Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 OF IMMEDIATE INTEREST Page 7 of 7 25X1 Approved FoC Release CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 NOTES AND COMMENTS 25X1 SOVIET ACTIVITY IN The USSR continues to support the Arabs in their de- mands against the West and to back anti-Western elements in the Middle East, while warning Israel and France against re- newing the military conflict with Egypt. The Soviet Foreign Ministry has recently set up two separate divisions to deal with the Middle East area in apparent anticipation of even heavier commitments there. The Cairo press reports that a Soviet UN delegate de- clared publicly on 28 March that the "Gulf of Aqaba is Arab landlocked territorial water," which would be the flattest public statement of support by a Soviet official thus far on the issue. A TASS statement on 28 March that the Soviet govern- ment "resolutely condemns" Israeli and French preparations for a "new aggression against Egypt" may have been inspired by Soviet' reports from Parish The TASS statement made no specific threats of Soviet action, merely pointing to the "heavy consequences for the cause of peace"of any Israeli action. Soviet ambassador to Israel Abramov, who was recalled to Moscow last November, is re- ported en route to Israel via Paris. The USSR will probably seek to convince the Arabs that Abramov's return will aid in a renewal of Soviet pressures on Israel. Israeli press reports of talks "now under way'" on the resumption of Soviet oil shipments have not been con- f i rmed . Moscow recently attempted a rumor campaign in Syria simi- lar to the one it conducted last November. I Soviet propaganda directed to Jordan, like that broad- cast to Libya and Lebanon re- cently, has distinguished be- tween internal segments of political power in order to support one faction over an- other. Since 30 March, Soviet broadcasts have lauded Jordan's action in terminating its treaty NiVTIAL Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 NOTES AND COMMENTS Page 1 of 20 Approved F9 eR (ease 2009P . P-RDP79-009 01200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 with Britain, praised the Nabulsi government and criti- cized King Hussain for his order banning ""all progressive papers in opposition to the people's demands." - Izvestia on 30 March com- memorated the first anniver- sary of the treaty of friend- ship between the USSR and Yemen by promises of continued sup- port and by a reference to re- cent reports of "thousands of people" volunteering to fight on Yemen's side, a renewed attempt to focus attention on Britain's position on the Ara- bian peninsula. The Soviet Foreign Ministry recently divided its Near and Middle East Division into a Near East Division under A. P. Pavlov, formerly assistant chief of the parent division, and a Middle East Division under G. T. Zaitsev, formerly chief, apparently in anticipa- tion of greater participation 25X1 in the area's affairs. NEW BRITISH DEFENSE PROGRAM A substantially reduced British defense program has emerged after many months of reappraisal. Its underlying philosophy, as described by Prime Minister Macmillan at Bermuda, is recognition of Brit- ain's entrance on a new phase as a nuclear power, as well as the need to reduce the defense burden on the nation's economy in the face of the growing So- viet economic threat. At the Bermuda conference, Prime Minister Macmillan said he hoped to reduce the present armed forces strength of 750,- 000 by nearly 50 percent over the next four years. Instead of maintaining a chain of over- seas garrisons, Britain would station forces only in a few key areas, relying on quick 25X1 reinforcements airlifted from a central reserve--presumably in the United Kingdom. He said the Persian Gulf area would be defended by a combination of forces based at Aden, plus re- serves stationed in East Africa and a naval task force in the Indian Ocean. Macmillan hoped all forces might eventually be withdrawn from Libya. In Malaya and Singapore, the air force will be maintained, but there and in Hong Kong as well the ground forces will be re- duced. The mission of fighter aircraft will be to defend the sites of "deterrent forces." Effective over-all air cover for the United Kingdom is no longer envisaged. The navy is to be organized in carrier task. SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 2 of 20 Approved Foease 2005/02/14: CIA-RDP79-0092_1200030001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 groups consisting of more modern vessels, with a reduction of about one third in present D-day strength. More details of this gen- eral plan will probably appear in the defense white paper being issued this week. Some of the reductions seem to be already under way. No re- placements are scheduled so far for a battalion which left Singapore last month and for three leaving Hong Kong by the end of April, although another unit leaving Malaya in May has a replacement. Britain recently informed the United States that it would witlidraw its 1,600 remaining ground forces in Korea by October, leaving a small liaison mission, and maintaining "for the present" its warships in Korean waters. Scheduled cuts in Germany will in the next 12 months re- duce the 76,000 ground troops by 13,500, consisting about equally of combat and adminis- trative units. Another 8,500 are to be removed in the second year, but the British say they are "open to convincing" on an additional 5,000-man strategic SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 3 of 20 25X1 Approved Fo Iease 2005L E/'3Rff DP79-0092 0 1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 reserve element they wish to withdraw. British troops must be withdrawn from Jordan by 13 September--six months after termination of the 1948 Anglo- Jordanian treaty on 13 March. For Libya, the timetable is not yet firm and may await the forthcoming talks in Tripoli on this and economic aid. Several reports before the Bermuda con- ference predicted the 7,800 troops would be reduced by half within about a year, but re- placements are now scheduled for two battalions to return home during April. Cyprus was men- tioned in Bermuda as having a declining military importance, and a recent London press re- port states that a massive troop withdrawal is planned as soon as the political situation settles down. The contemplated decrease in over-all armed forces strength to under 400,000, consisting as far as possible of regular troops, would bring nearer the abolition of conscription--a long-standing demand of the Labor opposition, rather in- effectively countered by govern- ment promises to achieve it as soon as practicable. 25X1 FURTHER STRAINS ON THE MACMILLAN GOVERNMENT British confidence in Prime Minister Macmillan's leader- ship has been further weakened by the resignation on policy grounds of Lord Salisbury, one of the most highly respected members of his cabinet, and by the widespread belief that Britain's dependence on the United States has been increased as a result of the Bermuda con- ference. Criticism centers on the Anglo-American missile agree- ment and the government's ap- parent reversal of policy in re- jecting limitation of H-bomb tests outside a general dis- armament agreement. Conservative Party dissension now turns on conflicting approaches to the annual budget to be presented to Parliament on 9 April, The growing feeling of frustration among Conservative Supporters, accentuated by the unfavorable trend in recent by- elections, has produced a split among party leaders on the budget. Convinced that "bread and butter" issues are the main concern of the average voter, they believe that increasing dissatisfaction with the government's economic prog:ram is the primary cause of its present unpopularity at the polls. Some party officials in- sist that major income tax concessions to middle-class groups are the only effective way of regaining their electoral sup- port., Abstentions by Conservative MP's on votes on controversial clauses in the rent decontrol bill recently reduced the govern- ment majority in the House of Commons to 25, the lowest since the ]!955 general election. Other party leaders, aware that the Conservatives must con- tinue to draw substantial support SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 NOTES AND COMMENTS Page 4.. of 20 25X1 Approved FoR ease 200~:-C1A-RDP79-0092-1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 from the working-class voter, oppose granting any favors to special groups, Still others contend that the budget must continue to be a restrictive one if Britain is to expand its industrial potential. They view the recent nationwide strikes in heavy industry and shipbuilding as proof that in- flationary pressures are still endangering Britain's economic progress. The government's award of a 5-percent wage increase to its 500,000 railway employees on 22 March has undercut the widespread belief in industrial circles that a period of wage and price stabilization was in sight. Macmillance~s evident willingness to risk inflationary pressures, despite his previous insistence that he would take "unpopular decisions" to stimu- late industrial expansion, will accelerate what the American embassy in London has called "a spreading defeatist philosophy" in Conservative ranks, and could render the government's program completely ineffectual. CYPRUS DEVELOPMENTS The Greek majority on Cyprus apparently regards Britain's release of Archbishop Makarios as a victory for the union-with-Greece (enosis) movement. The Greek Cypriots show no willingness to compromise on self-determination and are unlikely to agree to any self- government program which fails to provide a mechanism for an eventual change in the island's status. The American consul in Nicosia reports that news of Makarios' release brought a general and spontaneous favorable reaction and belief that a great victory for enosis had been achieved. Not least among those sharing the glory of this vic- tory was EOKA, and the consul believes it is "quite doubtful" that EOKA, chief. Grivas;~or._}is .t organization will withdraw soon. EOKA, still apparently command- ing the support of most Greek Cypriots, would probably con- tinue to do so it it decided to resume its anti-British operations. Because of the opposing stands of Greece and Turkey on the Cyprus issue, tension be- tween the Greeks and Turks on Cyprus has increased and the Turkish Cypriots are increasing- ly nervous. During the celebra- tions on 28 March, Greek Cypriots apparently sought opportunities to taunt and threaten the Turks for their public opposition to Maka,rios' release. King Paul. of Greece told Ambassador Allen on 31 March that Prime Minister Karamanlis is "furious" at Makarios because of the latter's statement re- jecting negotiations with the British unless he could return SECRET 25X1 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 5 of 20 Approved For (ease 2005/02/14: CIA-RDP79-009%W01200030001-7 SECRE7' CURRENT IN'T'ELLIGENCE WEEKLY SUMMARY 4 April 1957 to Cyprus. Makarios also told the press on 2 April that nego- tiations regarding Cyprus could be held only by himself and the British; while he was willing that the rights of Turkish Cypriots be "internationally safeguarded," he rejected their participation in any negoti- ations. Athens apparently expects, however, that Turkish Cypriot representatives and Makarios will. be brought to London for negotiations. Although it has publicly rejected any negoti- ations with Britain and Turkey, as Ankara in particular demands, Athens has hinted that simul- taneous secret negotiations between the three governments would be acceptable, provided there were prior assurances ' of "no leaks." Continued Moslem unity forced cabinet formateur Su- wirjo to return his mandate on 2 April. The Moslem parties objected principally to the participation in the cabinet, as demanded by Sukarno, of sev- eral prominent fellow travelers. Sukarno reportedly has now invited leaders of various par- ties and outlying provinces to an early meeting to discuss ways and means to solve the crisis. There is no indication, however, that former vice president Ratta, a Sumatran and a strong anti- Communist, has been invited, even though his participation in the next government has been consistently demanded by the Moslem and Christian parties and leaders in non-Javanese areas. Although Sukarno is prob- ably considering further limit- ed concessions, he undoubtedly still hopes to preserve the es- sentials of his concept. This calls for at least a gesture to- ward Communist participation in the government and the establish- ment of an appointed national council which will represent all significant elements of organized Indonesian life. The army has arrested several prominent political leaders in Djakarta and summoned for questioning at least 30 others as part of an alleged anticorruption drive, which may well be designed to intimi- date Sukarno's opponents. In this connection, Sukarno has publicly identified himself with the drive and has also charged that certain political leaders are being utilized in an "'imperialist plot" to "dis- integrate the nation." The president may be stalling, hoping that in the interim, dissension within the autonomous areas will so weaken resistance to the central gov- ernment that the provinces will be forced to withdraw their political and economic demands. The governing council in Central Sumatra is said already to be suffering from political fac- tionalism and economic deteri- oration as the result of in- sufficient planning before the local government was seized in December. In South Sumatra, an abortive countercoup on 31 March may have been stimulated by Sukarno, who had visited the area only a few days previously. A weakening of Sumatran resist- ance could be expected to im- pair seriously the determina- tion of similar movements in East Indonesia and Borneo. 0 25X1 25X1 SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 6 of 20 Approved Forase 2005/02/14: CIA-RDP79-0092701200030001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 RIOTS IN CHILE Serious rioting, apparent- ly rooted in a general resent- ment of the government's econom- ic stabilization program, broke out in Chile on 29 March and several hundred have been killed or wounded. Despite the dec- laration of a state of siege late on 2 April, the stability of the Ibanez government is still threatened. The economic stabiliza- tion program, initiated in Jan- uary 1956 on the advice of an American investment firm, was responsible for keeping the cost-of-living rise down to 37 percent in 1956 as compared with over 80 percent in 1955. Real worker income is declin- ing, however, since the govern- ment has limited compensating wage increases to under 31 per- cent. Furthermore, during the period from November 1956 to February 1957, the government-- with an eye to the 3 March congressional elections--used price controls and subsidies to give an appearance of almost complete price stabilization. Consequently, price increases in March were particularly sharp and bitterly resented by a public lulled into a feeling that stabilization had been ac- comtplished. A 50-percent increase in public transportation fares sparked the rioting, which was originally directed by leaders of a non-Communist student fed- eration. Leaders of the Com- munist-dominated labor federa- tion, the Communist Youth or- ganization, and individual Com- munists reportedly were aiding the disturbances. On 2 April, Communist Party officials, pre- viously standing back, reported- ly decided to join the disorders. A call from the student federa- tion for an end to the demonstra- tions.was ineffective, despite government annulment of the transit fare increase. President Ibanez convoked an emergency session of congress on .3 April to ratify the decla- ration of a state of siege which will permit the transfer of in- dividuals to outlying parts of the country. He is also re- questing "extraordinary powers" for six months to suspend con- stitutional guarantees, thus suggesting that he feels the stability of his regime is still threatened. 25X1 ARMY TAKES OVER IN HAITI Increasing. instability. in Haiti culminated in the oust- ing of provisional president Sylvain on 2 April after a two- day general strike. Similar strikes overthrew president Magloire on 21 December 1956 and provisional president Pierre- Louis on 3 February. The latest strike was the climax of a week-long campaign against Sylvain's government led by six of the seven major presidential candidates in the PART II national elections scheduled for 28 April. By the evening of 2 April, Sylvain was under house arrest in the presiden=- tial palace, and the army chief of staff, General Leon Cantave, was in charge of a military regime until a provisional gov- ernment could be appointed or a permanent president inaugurated. It is reported that all presi- dential candidates continue to favor holding elections as scheduled. SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 . NOTES AND COMMENTS Page 7 of 20 Approved F - r (ease 200W!iP49CIA-RDP79-009 01200030001-7 CURRENT INTELLIGENCE WEEKLY :SUMMARY 4 April 1957 A more serious breakdown in civil order may occur dur- ing the interim period. Can- tave has reportedly announced that the army will maintain peace and stay neutral in re- gard to a new provisional gov- ernment. A rift between Can- tave's senior officer faction and junior officers may, how-. ever, disorganize the army. While Cantave recently assured American embassy officers that he has assumed a nonpolitical attitude, he played a big role early in the current election campaign and may become active again. There may also be con- siderable delay before the elections in reaching agree- ment on the make-up of a pro- visional government. 25X1 ARGENTINE ELECTION TIMING PROVOKES CRISIS President Aramburu's an- nouncement on 30 March that national elections will be held on 23 February 1958 instead of late in 1957 provoked near re- bellion by the air force, add- ing another crisis to those straining the stability of the provisional government in re- cent weeks. The army and navy, along with most of the political parties, are reported support- ing Aramburu and his timetable against ousted air minister Krause, Who appeared to be play- ing partisan politics on the question of the election date. Aramburu's "political calendar," which he said was "irrevocable," calls for elect- ing a constituent assembly on 28 July to revise the constitu- tion, issuing the call and con- ditions for general elections on 15 November, holding general elections on 23 February, and transferring power on 1 May 1958. Previously no firm election date had been set, and Aramburu ex- plained the February date as dictated by "technical diffi- culties,"' presumably the time required for revising the con- stitution. This calendar indicates that constitutional revision, to be undertaken in September or October, would have to be completed prior to the call for elections on 15 November, a relatively short period for air- ing conflicting views. Virtual- ly all political leaders agree that the 1853 constitution needs revision. 25X1 25X1 ical calendar, the near rebel- lion. has added to the political strain caused by the recent cab- inet crisis over proposals to meet Argentina's economic dif- ficulties, the escape to Chile of important Peronista prisoner, 25X1 and the forced resignation of the formerly powerful under secretary of the navy. SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 8 of 20 Approved For_jease 2005/REftfRDP79-00921200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 PHILIPPINE POLITICAL SITUATION In the absence of a public figure capable of capturing the public imagination as the late president Magsaysay had done, the campaign for the Philippine election in November appears to be shaping up as a straight fight between the Nacionalista and Liberal Parties. During the short time since Magsaysay's death, political maneuvering by a steadily rising number of aspirants for the presidential nominations of both parties has become increasingly intense. President Garcia, with the powers of office at his dis- posal, holds the inside track for the top spot of the Nacion- alista Party ticket. The presi- dent's nomination would satis- fy the party's "old guard." It might also be acceptable to a large segment of the party's younger membership, despite their fears of re-emergence of old-guard rule. Garcia's prompt pledge to carry on Magsaysay's policies was calculated to win wide popular'support, while reports that Garcia has the backing of party president Rodriguez suggest that "pro- fessional" assistance in con- solidating Garcia's party and popular strength may al- ready be assured. Another important Nacional- ista figure is Senator Josd Laurel, puppet president during the Japanese occupation in World War II. Laurel has let it be known that he is available, and is reported working assiduously to The "drafted." There are some indications, however, that Laurel is not a serious candi- date because of his age and un- certain health, and is serving as it stalking-horse to gain at least the vice-presidential nomination for his son, House Speaker Josd, Jr. Neutralist-inclined Sena- tor Claro Recto appears deter- mined to maintain his candidacy, although entertaining little hope for the Nacionalista nomi- nations Recto will face major difficulties as an independent candidate. The intense public emotional reaction to Magsay- say's death lends substance to the view that Recto's candidacy will suffer from his identity as the chief opponent of Mag- saysay's policies. He is,more- over, persona non grata with the Roman Catholic hierarchy in the Philippines. The possibility that the Nacionalistas will split over the rival contenders has im- proved the prospects of the otherwise weakened Liberal op- position. Liberal leaders, who have considerable financial .resources, are now being ap- proached by politicians of all shades. The Liberals reportedly hope to hold an.. early conven- tion and nominate the respected elder statesman, former house speaker Jose Yulo, who they be- lieve can unite their party and possibly be elected despite his age. For the vice presi- dency the Liberals are casting SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 NOTES AND COMMENTS Page 9 of 20 Approved Fo lease 2005 igP%kH4-RDP79-0092-X01200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 about for a younger man who would stand to win back the support of,the sugar bloc, and the Democratic Party followers of Ambassador Carlos Romulo, and--above all--appeal to the admirers of the late president. In an effort to prevent their own political eclipse and to maintain pressure for con- tinuing the Magsaysay policies, close associates of Magsaysay have launched a "Spirit of Mag- saysay Movement" and are groom- ing as a vice-presidential hopeful former customs commis- sioner, Manuel Manahan, a man personally and politically close to Magsaysay. Although their cohesiveness against the pres- sures of more seasoned politi- cians remains to be tested, they may well exercise some in- fluence in the election through the movement's ability to trade on the name of a revered public hero. Moscow's statement to the Japanese that the Sea of Okhot- sk would be permanently and entirely closed to all foreign fishing by 1959 at the latest was apparently motivated by a combination of economic, foreign policy and military security considerations. Clo- sure of the sea would both strengthen military security of the Soviet Far East and pro- vide a restricted area for military activity or weapons testing. The Soviet Far East has become the most important fish- ing region in the USSR, and this move would pre-empt the Okhotsk area for the rapidly expanding Soviet fisheries. This sea provided 29 percent of the Soviet 1956 catch in the Far East. Permanent closure of the Sea of Okhotsk would also les- sen the possibility of any future return of the southern Kurils to Japan. Setting of the 1959 deadline may be aimed at pushing Japan into negotia- tions for a peace treaty which will involve discussions con- cerning return of the islands. Fishery negotiations, in which agreement was reached on a total Japanese catch of 120,- 000 tons, are again deadlocked on the conditions attached by the USSR to that figure. The Japanese have informed the USSR SECRET 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS. Page 10 of 20 Approved For1ease 2005? 61 `&ZE-RDP79-00921200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 they -cannot agree that the 120,000-ton quota for all types of fish in the restricted area is exceptional and good only for 1957, and that the Okhotsk Sea is to be closed to all foreign fishing. Ex- clusion from the Okhotsk area would have a serious impact on the Japanese fishing indus- try since, even with a short season and a reduced number of fleets, the 9,363,000 salmon caught in that area in 1956 constituted 32 percent of the catch from the Soviet-restricted area and 10 percent of Japan's total catch. The Japanese are vig- orously pressing for some con- cessions from the USSR which will provide a compromise. The Japanese especially desire that the quota for this year be des- ignated as provisional rather than as exceptional in order to avoid setting a precedent for a maximum Japanese catch. The need to avoid delay in preparing for the coming fishing season, however, may force Tokyo to agree to Moscow's terns. There is an unconfirmed press report that an agreement will be signed 6 April. ThCtUSSR` :,,has made of- ficial overtures for a trade agreement. In response, the Japanese have maintained that a satisfactory fishing settle- ment,.is .aprerequisite for negotiations on trade and other matters. While the Japanese discount Soviet trade prospects, the idea has political appeal and the bait of potential mar'5- kets held out by the five-year development plan for the So- vieit Far East may stimulate pressure in Japan for a com- mercial treaty. The Japanese cabinet de- cided on 29 March to open ne- gotiations for an atomic power agreement with the USSR, appar- ently in an effort to provide a broad technical and material base for Japan's atomic energy industry. The Japanese prob- ably have been attracted by re- ports that the USSR will supply atomic facilities and materials ,SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 11 of 20 Approved Forwa,jease 2005/02/14: CIA-RDP79-009271200030001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 on a commercial basis with no strings attached. Leftists among Japanese scientists also have exerted pressure for co- operation with the USSR in nuclear energy development. JAPANESE SOCIALISTS SENDING GOOD-WILL MISSION TO COMMUNIST CHINA The Japanese Socialist Party is sending an official "good-will mission" to Commu- nist China on 10 April for a two-week stay, The mission will sound out Peiping's reac- tion to recent modifications in Socialist policies which call for early normalization of relations with Peiping and for treating Taiwan's status as an "internal" Chinese prob- lem. The Socialists favor Japan's maintaining relations with Taiwan, however, as long as the island remains independ- ent. The party hopes eventually to replace both the Sino-Soviet treaty of friendship, which designates Japan as a potential enemy, and the US-Japanese se- curity treaty with a Locarno- type pact among the four na- tions. In the interim, however, it expects Peiping to agree that American bases in Japan are no bar to the restoration of rela- tions. It also expects the Chinese to renounce reparations claims. In sending the mission, the Socialists are motivated by a desire to create a "big issue" for an anticipated general elec- tion. For maximum political advantage, the Socialists prob- ably Dope for some specific Communist gesture indicating that the Chinese will negotiate with party representatives on some such subject as a renun- ciation of reparations claims or a declaration ending the state of war. The party also hopes the inclusion of repre- sentatives of all factions in the mission will help to unify the party's views on closer relations with the mainland. There is some evidence than the Socialists hope to become a "go-between" on the Taiwan problem. One of the mission's objectives will be to determine the truth of rumors of direct Communist-Nationalist talks. The Chinese may exploit the Japanese visit to enlarge their psychological warfare claims on this subject. The most important member of the mission probably will be Shichiro Hozumi, because of his ability as a "go-between" with the Japanese government. A high Socialist Party official has indicated also that the party hopes to send a mission to Washington after the one to China returns. Chinese interest in the mis- sion may be reflected by a re- port that "Peiping representa- tives" in Japan asked that it be headed by a top party leader. Nevertheless, the Chinese Commu- nists are not likely to make any genuine concessions before for- mal government-to-government talks begin. 25X1 25X1 SECRET PART II Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 NOTES AND COMMENTS Page 12 of 20 Approved Forjease 2005/02/14: CIA-RDP79-00921200030001-7 -SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 SINO-CZECH TREATY SIGNED DURING S[ROKY VISIT TO PEIPING The Sino-Czech treaty and .the joint statement issued on 27 March during Czech premier Siroky's visit to Peiping sug- gest that Peiping's role as moderator during the bloc crisis in Europe last year was not a one-shot performance: the Chi- nese apparently intend to play an increasingly active role in bloc European affairs. The Czechs have been steadfastly loyal to Moscow, and Sirkoy's trip, which is in line with Peiping's growing interest in East Europe, almost certainly had the approval of the Kremlin. The Sino-Czech treaty is the second Peiping has signed with an East European Satellite --the other, a similar one, being the .tr.eaty, with the East Germans in 1955. The oper- ating clauses of the new treaty, like those of the Sino-Soviet alliance, call for consulta- tions concerning important questions affecting the inter- ests of both parties while promising co-operation on matters of economic, technical, scien- tific and cultural development. The agreement has no provision for military co-operation. It will confer prestige on the Czechs and open the way for further expansion of bilateral relations between Peiping and Prague. Chou has already agreed to return Siroky's visit at an unspecified future date. The lengthy joint state- ment issued by Chou and Siroky is stodgily orthodox in most respects, but the discussion of iLntrabloc relations indicates that Peiping intends to keep reminding the Kremlin of the good behavior promised by its declaration of 30 October last year in this matter. In the communique the two parties affirm that the October declara- tion is of "extremely important significance to the improvement of mutual relations of the socialist countries...." The communique states that both, Prague and Peiping will continue to regard strengthening the unity of the bloc "headed by the Soviet Union" as their. "prime international duty." This is the only reference in the statement, however, to the Kremlin's sole leadership of the Communist world. In Hanoi a week earlier, Siroky signed a communique with the Viet Minh which called for unity of the socialist countries "around the Soviet Union and the People's Republic of China." Speaking in North Korea on 1 April,Siroky used a similar formulation. Both Siroky and North Korean premier Kim Il- sung affirmed, however, that the USSR is "heading" the bloc. F__ I ECONOMIC PROVISIONS OF SOVIET-HUNGARIAN COMMUNIQUE The comprehensive Soviet- Hungarian economic agreement concluded on 28 March strengthens Moscow's control over Hungary's economic future. In return for substantial immediate conces sions in the form of goods and credits, Hungary pledged to ex- pand shipments to the USSR over a long-term period. In response to Hungary's request for a considerable in- crease in 1957 deliveries of SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 TOTES AND COMMENTS Page 13 of 20 25X1 Approved Fo ease 2005 WQR . ' i RDP79-0092 1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 raw materials, semimanufactured products, equipment and other commodities, Moscow agreed to deliver, largely on credit, goods totaling over $250,000,- 000. Under the agreement, So- viet credits available to Hun- gary in 1957'will total about $220,000,000, consisting princi- pally of a $190,000,000 com- modity and foreign currency loan at 2-percent interest repayable in kind over a 10-year period beginning in 1961. Recognizing the inability of the Hungarian economy to fulfill all its obligations, the USSR deferred repayment of almost $40,000,000 in earlier loans and canceled a Hungarian debt of approximately $90,000,- 000 "incurred" when Moscow turned over to Hungary the former German assets and the Soviet share of joint Soviet- Hungarian companies. The USSR agreed further to consider requests for economic and technical aid in reconstruc- tion and building of "'certain industrial establishments" and to continue to help in pros',- pecting for uranium, building YUGOSLAVIA REORIENTING FOREIGN The political dispute with Moscow has forced Yugoslavia to re-evaluate its long-term for- eign economic relationships. It apparently now feel;s*it must rely to a greater extent on the West, in particular on the United States. Yugoslav offi- cials clearly state'.that the shift in attitude is prompted by growing distrust of the So- viet Union, Yugoslav vice president Vukmanovic-Tempo told an Amer- ican official on 4 March his country must now orient itself toward the United States and Canada, adding that the key factor in Yugoslavia's long-run economic development is Amer- ican. aid. The Yugoslavs, according to Tempo, feel that the Soviet bloc has interrupted its investment agreements with Belgrade to undercut the economy of Yugoslavia and demonstrate, particularly to the Satellites, that what he termed the "liberal" methods of the country's eco- nomic system would inevitably bring about`'its collapse. SECRET atomic power stations and pro- viding necessary fissionable materials. Hungary is to ship to the USSR all uranium "not needed"' in Hungary. The provision for repay- ment in goods over a 10-year period will ensure Hungary's continued economic orientation toward Moscow. The Soviet in- tention in this regard is brought out by emphasis in the communiqud on "the positive effect of long-term agreements in the planned development of the economy of both countries." Furthermore, agreement by both sides to discuss mutual commodity deliveries through 1960 suggests that Hungary's trade with the West may be some- what curtailed. Expanded Hun- garian commitments to the USSR under this agreement will tend to impair Hungary's credit in trade with the West and may dis- courage Western traders who have recently been actively seeking new markets in Hungary. Hun- gary,l's future trade relations with the West will be developed only under Moscow's watchful eye? (Prepared 25X1 by ORR ECONOMIC POLICY TOWARD THE WEST Approved For Release 2005/02/14.: CIA-RDP79-00927AO01200030001-7 PART II -NOTES AND COMMENTS Page 14 of 20 Approved FoR --lease 2001`1T~T-RDP79-00921200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 Further, he stated that although it cannot completely ignore its trade relationship with the USSR, Yugoslavia simply does not "believe" in Soviet equip- ment. Yugoslav officials assert they are fully aware that a breakdown of deliveries under the seemingly favorable 1957 trade agreements with the USSR and all the Satellites except East Germany could occur at any time, as proved to be the case with the investment agreements. These attitudes contrast sharply with those revealed in Yugoslav-American economic dis- cussions in 1956. Yugoslav officials then emphasized their desire to maintain a balanced economic position between East and West, not being overly com- mitted to either. Although they sporadically mentioned some lack of faith in Moscow, their behavior did not confirm this. They consistently played East against West, endeavoring to obtain the most advantageous arrangements for financing large industrial investments in alu- minum, electric power and cop- per. This was most sharply emphasized last August when they abruptly agreed to'the Soviet-East German $175,000,000 aluminum deal while in the midst of discussions with Western nations for aluminum develop- ment. Implementation of the So- viet-East German aluminum agree- ment has, however, been "de- layed, " and Belgrade now ap- pears to have lost hope that the East will give it economic aid without political strings. Further evidence of this dis- illusionment is the interest displayed by Foreign Minister Popovic to the French ambassador in Belgrade in the possible association of Yugoslavia with the European Common Market. While the Yugoslavs are prob- ably not yet ready to commit themselves fully to such a move, for the first time since 1954 they apparently want to avoid being left out of a major Western European development. (Concurred-in by ORR) Laotian prince Petsarath, half brother of both Premier Souvanna Phouma and Pathet Lao chief Souvannouvong, has seized the center of public attention since his widely acclaimed re- turn to Laos on 22 March. De- spite his 11 years of self-im- posed exile, he has not hesi=- tated to speak out almost as though he were the head of state. The prince had hardly set foot in Laos before he began to advocate a "mass reduction" in the Laotian army and the estab- lishment of diplomatic relations with Communist China and North Vietnam. In a press interview on 28 March, he endorsed a policy of "strict neutrality," and sharply criticized the "bad utilization" of American aid, which he said "enriches a minor- ity while the population re- mains poor." He contended that this poses a greater danger of Communist subversion than the integration into the national community of the Pathet Lao, whom he regards as "sincere patriots above all." Souvanna reportedly stated that the ideas expounded by Petsarath matched his own. SECRET 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 15 of 20 Approved F r 5please 2005/02/14: CIA-RDP79-009 01200030001-7 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 In a conversation with the American ambassador in Vien- tiane, Petsarath disclaimed any anti-American sentiments and said his concern over American aid was merely directed toward making it more effective. He said Laos would never accept Chinese Communist aid because of Laos' historical fear of Chinese expansion. The Amer- ican ambassador found Petsarath well informed, "sharper" than Souvanna, but evasive on con- troversial issues in Laotian- American relations. Petsarath has indicated that he will visit the prov- inces, including Pathet-held territory, before he determines his future plans. Firsthand contact with the realities of the Laotian scene may cause him to modify some of his pres- ent ideas. One immediate consequence of Petsarath's return is the re- opening of a murder case, un- solved since 1954, in which major political figures have been implicated. An individual in Petsarath's entourage has been arrested for alleged par- ticipation in the crime. It is quite possible that a public trial may rekindle animosity and intensify disunity in Lao- tian political. circles.. SECRET 25X1 PART Z I Approved For Releas 30_ TE5 (02A/ t: COMMENTS 00927A0012000300Q1age 16 of 20 Approved For,,U&ase 2005/02/14: CIA-RDP79-00921 1200030001-7 -SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957' 25X1 SINO-BURMESE BORDER DISPUTE Burmese premier U Nu's 11- day visit to Communist China ended,on 2 April without pro- ducing a final agreement on the Sino-Burmese border dispute. Chou En-lai in his speech of farewell emphasized, however, the growth of Sino-Burmese friendship and predicted that "ties of kinship will develop ceaselessly" between the two countries. Peiping's shift to a poli- cy of polite evasion on the border question may well have started during Chou En-lai's "good-will" visit to Burma last December, when Chou began to emphasize that the complicated problems involved in a border settlement would have to be worked out "step by step" and could not be resolved "at one stroke." Following Chou's visit, the Chinese began to display renewed sensitivity on the border question. At the same time! Peiping became increas- ingly evasive regarding Burmese suggestions that negotiations be quickly concluded. Chou's decision to meet with Nu last week despite a heavy schedule of important business demonstrates Peiping's concern for maintaining appear- ances. It seems clear, however, that the Chinese intend to pur- sue a dilatory course for some time to come, possibly to chas- tise Rangoon for its temerity SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 17 of 20 Approved Fear Release 200&b i -RDP79-009 A01200030001-7 CURRENT INTELLIGENCE WEEKLY. SUMMARY 4 April 1957 last summer in launching a propaganda campaign which great- ly embarrassed Peiping and eventually brought about with- drawal of Chinese Communist troops from disputed territory along the frontier. Peiping's temporizing::stand on the border question is un- doubtedly a great disappoint- ment to the Burmese government. Once it had overcome opposition of the Kachin minority to the cession of three border villages to China, it confidently ex- pected the agreement to go through quickly and with a min- imum of difficulty. Rangoon can be expected to keep press- ing for a settlement, and, fail- ing that, is likely to revive its previously successful tactic of publicizing the issue. Nu was probably especially disappointed at the failure to reach a final agreement on the border during his visit to Com- munist China. He had undoubt- edly counted on such a ceremony to get his new term as prime minister off to an auspicious start. 25X1 25X1 SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 18 of 20 Approved Fo Release 2005Sf 51T-RDP79-0092W1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 25X1 The confidence vote in the French National Assembly on 28 March showed a serious weakening of the Mollet govern- ment's position and underlined its dependence on rightist votes for survival. Mollet's next period of crisis is expected after the Easter recess during the debate on budgetary and tax issues, when the right may attempt to overthrow his gov- ernment. Although the deputies voted 221 to 188 in favor of the gov- ernment, the 110 recorded ab- stentions, largely from such right-center parties as the Independents and Social Action Peasants, have weakened Mollet's position. It is apparent that these groups were deterred from throwing their support against Mollet largely because they lacked fully developed plans for an alternative government. SECRET Approved For. Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 19 of 20 Approved For?.Jease 20055 f 1r'RDP79-0092 1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 They may now be expected to be more insistent on policy con- cessions. The debate also underlined the growing splits among the parties of the left and center which have tended to strengthen the key position of the right. Within the Socialist Party, whose long-standing division over Algerian policy has been masked by Mollet's control over the party organization, there are signs that elements opposed to Minister Resident in Algeria Lacoste's pacification policy have been strengthened. The Radicals, which have already split into three groups, now show signs of generating yet another splinter party follow- ing the failure of Mendes- France's followers to vote as a bloc against the government. The.Popular Republicans, whose assembly leader proposed that the base of Mollet's minor- ity government be broadened, ap- pear to have supported the gov- ernment with an eye to obtain- ing a bid for participation in the cabinet. While they are still separated from the So- cialists on the church school SECRET question, the Popular Republi- cans espouse a social and eco- nomic program similar to Mot= let's party and must stay close to it to maintain their dwin- dling popular support. Unresolved overseas prob- lems such as Algeria and Suez, for which no one has a clear- cut alternative policy, still tend to work in Mollet's favor. The imminence of the ratifica- tion debate on EURATOM and Com- mon Market treaties also deters some deputies from bringing down the government now. On the other hand, the government's vulnerability con- tinues to be increased by France's melting foreign ex- change reserves, mounting in- flation, and Finance Minister Ramadier's politically unpalat- able proposals for budget cutting and new taxes as solu- tions. The mid-May debates on tax bills and other provisions of the budget will offer the opposition a more clear-cut opportunity than the recent general policy debate to use their own increased potential and exploit the reduction in Mollet's support. 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART II NOTES AND COMMENTS Page 20 of 20 Approved FoRe ease 2005/ P79-009271200030001-7 .. COFtDENTl 4 April 1957 PATTERNS AND PERSPECTIVES The Hungarian Communist regime is meeting with strong, united opposition in the nation's' schools. Students of all ages, in many cases acting in concert with their teachers, are engaged in a not-so-silent conspiracy against all central authority and are maintaining the spirit of the revolution in the class- room, The party and the govern- ment, reneging on earlier prom- ises of reform in the schools despite occasional apologies, have responded with traditional techniques of intimidation and force. According to First Deputy Minister of Education Magda Joboru, speaking in late Janu- ary, demonstrations in the schools had been universal dur- ing the revolution, She admit- ted that revolutionary theories are still alive among students and teachers, and that there fie "complete disillusionment" with the doctrines of the past. Teachers are refusing to follow orders on grounds that the ad- mitted errors in school books invalidate that obligation. She added that students are in the habit of quoting sarcasti- cally and with "malicious glee" the "erroneous, unscientific statements of the textbooks that offend the intellect and feelings." In some schools, resistance to Russian language instruction has taken the form of "stupidity strikes," while in others there have., apparently been incidents of students persecuting col- leagues who refused to accept religious instruction. In re- gard to the regime's political reirLdoctrination program,;some students and teachers appear to have made gentlemen's agreements to avoid discussion of political topics altogether. The regime's reactions to these forms of resistance and ideological anarchy have been mixed. Some members of the regime continue to search their souls in public. The party press printed an open letter which claimed that youth has turned away from the party be- cause it had frustrated their ideals. In a speech on 1 March, Joboru attributed the "serious evils" in the political and moral development of youth to the Rakosi-Gero "sins," and spiritual and moral conflicts, to the "frequent contradictions between what the children were taught at school and what they learned in the family and in life." Basically, however, the regime seeks a return to pre- revolution standards.- It has, --Hungarian First Deputy Minister of Education Speaking on "Current Problems in Education, " 29 January 1957. How is life in our schools today? In our opinion in the majority of the schools the atmosphere is tense and agitated. We believe the main cause is that many pupils and teachers still do not appraise the events following 23 October correctly; they do not see their counterrevolutionary character and they take them for a revolution anda fight for freedom. A part of the teachers and pupils who hold this view do not speak openly and use allusions to express their secret understanding. It is said on these grounds there are ex- cellent relations in many places between teachers and pupils and there is discipline and order in the schools. a Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND PERSPECTIVES Pave I of 14 Approved Fore ase 2005/0E 'R!E- DP79-009270 1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 --Comment by a Budapest Schoolteacher In Magyar Ifjusag, 2 February 1957. I am surrounded by an atmosphere in which to utter the name of Lenin in our class amounts to a sin. The instructions say that teachers who can tell the story of the Octo- ber Revolution (Soviet) properly, may speak about it. The answer of my colleagues is that they cannot tell it properly. I cannot understand why it is considered a sin if a teacher tells the children the Russian folk tale "The Cat With The Grey Whiskers." That is what a colleague of mine did and he was attacked by the other teach- ers, who said that if foreign folk tales had to be taught, he should have chosen a French or other folk tale instead of the Russian one. Recently children attending the first form staged a demonstration in the corridors. They shouted at the top of their voices: "We won't learn Russian! I tell you, these were children from the first form, who do not have to learn any foreign language Little Peter is one of our best pupils. Some days ago I went into the classroom and saw his name written in huge block letters on the black- board with the label "Pagan." Little Peter was the only child who had not enrolled for religious instruction. The stronger boys boxed his ears, the rest scoffed at him, and nobody played with him during the break. for example, restricted foreign language classes to those con- ducted by "qualified" teachers, virtually assuring compulsory Russian instruction since.a "shortage of teachers" limits instruction in Western languages.. In addition, the government has decreed--contrary to earlier promises--that only those stu- dents enrolled'in classes for religious instruction in Septem- ber can now be enrolled; the regime's complete intolerance of religion in state schools has been openly declared. The party apparently recog- nizes that a return to tradi' tional educational policies can- not be achieved without some force and the issuance of some sensational threats. A party organ suggested in February that Hungarian children might more or less permanently be separated from their parents and brought up in "special towns" where unreliable influences could be eliminated. On a more practi- cal note, the regime has organ- ized a successor to the discred- ited prerevolutionary youth or- ganization and has-re-established the younger "Pioneer" groups. Teachers of elementary and secondary schoolchildren are being forced by the party to attend lectures on how to deal with "counterrevolutionary" children, One city's party executive committee has ruled that most of the teachers who participated in the revolution "can only be blamed for a mo- mentary blunder for which they should not be condemned and branded," but this tolerance is not typical. In February,; the regime reportedly was threatening that teachers must either join the new party or be deported to the countryside. Moving against both teach- ers and students, the regime has introduced the police into the schoolroom. Stories of the secret police examination of the personal papers of 12-year- old boys in class have been confirmed, and on 1 March, Joboru frankly stated that units of the militia appear from time to time in some schools, a measure, she said, which is "absolutely unavoidable" in these "extraordinary" times. SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND PERSPECTIVES Page 2 25X1 Approved For Release 2005yEE1TfRDP79-00901200030001-7 ftwwr CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 ECONOMIC REFORMS IN RUMANIA Rumania has followed the example of Hungary and Bulgaria in "rationalizing" its govern- ment structure. On 16 March, the politburo demanded a reduc- tion in the number of central ministries from 26 to 15. It proposed the creation of an all-encompassing, ministerial- level economic council to "solve economic problems" and recom- mended an extension of the pre- rogatives of local government organs. Addressing the Grand Na- tional Assembly three days later, Premier Stoica outlined important fundamental changes to be made in the economic or- ganization of the country. He decried "excessive centraliza- tion" and advocated relieving the ministries of many tasks which "should be allocated to lesser units." As a part of the general streamlining of the government, the people's councils--the lo- cal units of government--are to assume far-reaching responsi- bilities for management of lo- cal industries, including dis- tribution of output and the management of a large percentage of the profits of these enter- prises in the development of public works and social and cultural activities. The councils will be em- powered to draft and execute construction projects of local interest, such as workshops and mills, earnings of which will be used to raise the eco- nomic level of the communities. When compulsory quotas were abolished for most produce on 1 January, the councils took over supervision of local pro- curement of agricultural com- modities for the state. The councils are "to lead the en- tire local activity in the economic, management, social, cultural, and administrative fields of the territorial ad- ministration units where they, are elected." the Rumanians have been forced into decentralizing industry by the realization that "a heavy-handed bureaucracy" rog ress impossible. The nee o re- duce government expenditures and increase production by giv- ing greater incentive to pro- ducers has become all too ap- parent to Rumanian officials at higher government levels. State revenues in 1956 were about 7 percent less than expected and the financing of the new agricultural contract purchase system and wage in- creases presents problems. The inadequacy of Rumania's foreign exchange position was pointed out by the need for a 270,000,- 000-ruble Soviet loan in De- cember 1956. The appointment of "rehabilitated" Aurel Vijoli as minister of finance may be particularly significant in the light of these difficulties. Vi'oli, a former deputy finance minister, was purged in 1952 for rightist deviations and opposi- tion to a currency revaluation. According to the American lega- tion in Bucharest, his return may presage orthodox banking techniques and perhaps serious monetary reforms. Unemployment is more seri- ous now than at any time since the war. A recent resolution calling for dismissals of state or state enterprise employees with. more than one source of income was a tacit admission by the regime that there are not enough jobs to go around. The resolution, withdrawn after SECRET Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 PART III PATTERNS AND PERSPECTIVES Page 3 of 14 25X1 25X1 25X1 25X1 Approved Far R es ase 2005I025(9 " pP79-009 7A , 1200030001-7 CURRENT INTELLIGENCE WEEKLY SU 1l8Y 4 April 1957 a storm of protests, apparently was interpreted by the employees as an ultimatum threatening their very existence by permit- ting only one wage earner per family, many of which barely manage to exist at a substand ard level by having two wage earners-in the family or through extra jobs in addition to regu- lar employment. Major causes of general discontent in Rumania, aside from unemployment, are high prices, consumer goods shortages and totally inadequate housing. The 30 Decembers communique 'of the party central committee called for a major overhaul of ,the economy in order to increase agricultural and consumer goods .output to raise the standard of living. Industrial expan- sion is to be slowed as a re- sult, although continued "pri- ority development" of heavy industry is ensured as the "guarantee of continual progress for the economy." To alleviate the lack of housing, over one bil- lion lei ($167A 000, 000 at the un- realistic official rate) will be allocated in 1957 alone, compared with two billion for the entire First Five-Year Plan. The government is to spend five billion lei ($833,000,000) .in 1957 to improve salaries, .pensions, and subsidies for children, to develop socio-cul- tural projects and increase peasant income. Poor crops in 1956 resulted in a decrease in agricultural exports and necessitated in- creased imports of wheat and other foodstuffs, with a re- sultant deterioration in Ru- mania's foreign exchange posi- tion. Yields in the socialized sector continue to be disappoint- ing compared to those in the privately held acreage, and Agriculture Minister Stanco has called the problems to be faced in organizing and strengthening the socialist sector a "gigantic task." In this connection, some 272 state farms are to be reor- ganized into 377 smaller ones to achieve more effective opera- tion and control. The cost of replacement of the compulsory collections system by a con- tract-purchase system for agri- cultural commodities will be considerable and will add to inflationary pressures in the economy. Workers will receive some benefit from a resolution passed in December to raise wages an average of 15 percent and estab- lish a new system of basic wage rates. Under the new system, which is being extended gradual- ly, a worker's basic wage will represent up to 75-85 percent of his total salary in contrast to present levels as low as 40-50 percent supplemented by bonuses. The new basic wage will be based on the total the worker is presently earning, and his new norm will be increased to approximately. his current out- put. As before, he will receive a premium for output over the norm. Thus, the worker will no :longer be completely at the mercy of his machinery or his factory's supply of materials and power since he will have a more adequate basic wage to count on. Production is expected to :increase since the worker will have'an incentive to pro- duce more than formerly in order to obtain bonuses. The deterioration of the Rumanian economy has caused the regime to take a new look at its planning. A serious attempt is apparently. being made to re- duce administrative inefficiency in the government and to improve incentives as it means of increas- ing production. Some economic aid is being given by the Soviet Union in the form of raw mate- rials and goods, but much de- pends on the extent to which the workers can be induced to co-operate and the effectiveness of the people's councils and other reorganized units in im- leraentin the new program. 25X1 SECRET Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 PART III PATTERNS AND PERSPECTIVES Page 4 of 14 Approved F rlease 2005/ ' r rDP79-009&Z&01200030001-7 CURRENT INTELLIGENCE WEEKLY SAY 4 April 1957 INDIAN NATIONAL ELECTION RESULTS Prime Minister Nehru's Congress Party has retained its firm hold over parliament,. . Virtually complete returns from India's second national elec- tions show the party has lost ground in nine of the 13 state governments, however, despite the fact that it still holds an absolute majority in 11 of them. The loss of Kerala State to the Communists, the very small size of the Congress Party's plurality in Orissa, and the serious reduction. in Congress strength in Bombay and Uttar Pradesh state assemblies raise questions regarding the amount of co-operation a Con- gress-dominated parliament can expect to obtain from state governments during the five years until the next elections. While final figures are not yet available, the Congress, the Communists, and the rightist Jan Sangh appear to have in-? creased their shares of the popular vote for parliament over the 45, 4.5, and 3 percent, respectively, they polled in 1952. The fourth national party, the Praja Socialists, lost some of the 11 percent polled in 1952. All four na- tional parties increased their shares of the popular vote in state contests compared to 1952 returns. The Congress Party, however, suffered a net loss in state seats. In addition, the Congress Party suffered a considerable number of "prestige" defeats as a result of opposition ef- forts to concentrate on unseat- ing prominent Congress leaders. The party lost two minis tens and two deputy ministers in the national government and at least 15 state ministers and six state deputy ministers. Other important defeats involved the Congress Party boss in Uttar Pradesh, the party presidents in Assam and Mysore, and other important party members not in the government structure. Since in many states a considerable number of successful Congress Party candidates lack previous government experience, the de- feat of these party leaders as well as of numerous members of state assemblies will result in a "new look" on Congress Party benches in the future. The Situation in Parliament Of the 488 parliamentary seats for which elections have been held, the Congress Party has won 365, the Communist Party 27, the Praja Socialist Party 19, the rightist Jan San;gh 4, other parties 45, and independents 28. Elections to four seats in Himachal Pradesh and two seats in the Punjab will be held in June, when snows have melted and weather permits polling. The Congress Party is expected to win most of these seats. An additional six seats, completing the total of 500 in the lower house, will be filled when the president of India appoints this number of dele- gates from Indian-held Kashmir. In 1952 the Congress Party won 364, the Communists 16, the Socialists 21,, the Jan Sangh 3, other parties 40, and independ- ents 38, out of a total of 489 elected seats. These totals indicate, that the Congress Party itself with over 75 percent of the seats will be slightly stronger in parliament than it was in 1952, when it held 74 percent of the seats. On the other hand, less outside support may gravitate toward the Congress Party than in the past because of stronger anti-Congress feeling on the part of deputies from small parties and independents who represent linguistic groups and defectors from the Congress Party. SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND PERSPECTIVES Page 5 of 14 Approved ForrRRelease 2005/,OgfE R]W DP79-00301200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 19517 The most important change in the parliament's line-up is that the Communists replaced the Socialists as the leading opposition group, the Communist Party alone having won nearly as many seats as it and its allies have held since 1952. This presumably will increase Communist prestige somewhat, though the party is still too weak to affect the nature 'of legislation signi?ficantly.. ?.ADHYA .'.ZAULS I 80% SIKKIM (FROTI-TORnre) ARABIAN SEA GOA (Port.) CEYLON SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND PERSPECTIVES Page 6 of 14 At the state assembly level,, the Congress Party, in winning 1,889 of the 2,901 seats an- nounced to date, has obtained only 65 percent of the total 2,906 seats as against 68 per- cent in 1952. In Kerala, the Communists wore 60 out of 126 seats and, with the aid of at least five independents, are to form a INDIA State Assembly Seats Won by Congress Party 60% and below M 61% to 70% 0 71% and over 25X1 Approved F r R lease 2005/021 C ffP79-00901200030001-7 CURRENT INTELLIGENCE WEEKLY SU 7 4 April 1951' government. In Orissa, the Con- gress Party repeated its 1952 failure to win an absolute ma- jority, but unlike 1952 its present plurality of 56 seats out of 140 is so slight that it may not be able to form a workable government. Both the Congress Party and the Ganatantra, Parishad, which won 51 seats, face the prospect of having to work with ideologically incom- patible parties to obtain the 71-man majority required. In both Kerala and Orissa, the ruling party's majority margin may be so slight as to make stable government impossi- ble. This would represent a distinct setback to the prestige of the Indian government. So also should the fact that the Communists, Nehru's "Enemy Num- ber One,"" are now represented for the first time in every state assembly in the country. Future Prospects The state election results demonstrate that the Congress Party must increase its grass- roots activity, even in those states it considers most safe, if it hopes to remain in power. Party factionalism, linguistic controversy, and provincialism may be expected to plague the Congress Party's national and state governments during the five years until the next scheduled eletion. Aside from rivalries with- in its own organization, many of which are expected to re- emerge now that elections are over, the Congress Party may be hard pressed to maintain amicable relations with the Sikhs in the Punjab, an alliance which was presumably responsible for the Congress victory there. Linguistic agitation is almost certain to continue in Bombay, where the Congress Party enjoys only a small majority. The pro- vincialism shown by the voters of Kerala, Orissa, and Assam especially has not been over- come by the Congress Party. This last is a particularly important battle for Nehru's government to win if it expects to build a strong federal structure in India and if it hopes to mobilize India's max- imum effort in making the Sec- ond Five-Year Plan a success. The Viet Minh leadership is setting its own pace in the management of North Vietnam's internal affairs, while drawing on both Soviet-and Chinese sources for inspiration. In foreign affairs, the leadership has reluctantly acquiesced in the subordination of its own aspirations to the lines of bloc policy drawn in Moscow and Peiping. With Chinese activity in North Vietnam and Peiping's economic commitments to the Viet Minh exceeding those of the USSR, Chinese influence may be corre spondingly-greater. This in- fluence, however, has been ex- erted in full awareness of Vietnamese nationalist sensi- bilities and with the declared intention of avoiding the error of "'great-nation chauvinism." The Viet Minh leaders have applied distinctively Chinese SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND PERSPECTIVES Page 7 of 14 25X1 Approved For Release 200;W-RDP79-00001200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 RAILROADS Operable (selected) -+-- -+- Inoperable (selected) methods in their efforts to consolidate Communist control in North Vietnam, faithfully copying Peiping's policies on land reform, taxation, and .relatively moderate treatment of native capitalists. The ex- tension of Communist control to the entire China mainland in 1949 gave the Viet Minh ac- cess to substantial outside Communist support for the first time. Completion of the. Chinese railroad to Munankuan on the border greatly increased the Sino-Soviet bloc's ability to provide military support and undercut the French military position. The Chinese Communist aid which contributed so much to Viet Minh successes, including that at Dien Bien Phu, greatly increased Peiping's prestige among the Vietnamese Communists. Vietnamese theoreticians under- scored their common doctrinal position with the Chinese on agrarian revolution. In March 1951, Vietnamese.Communists pro- mulgated'party statutes which declared that Marxism-Leninism and the "thoughts of Mao Tse- tung" constituted the party's guiding doc- trines--a formulation taken from the Chinese Communist Party con- stitution and infer- entially acknowledg- ing the Chinese claim to a unique develop- ment of Communist theory. Soviet theorists in November 1951 criticized the con- cept of "Mao's road" and cautioned Asian Communist parties against viewing the Chinese revolution as a "stereotype" for revolutions in Asia. Nevertheless, the Viet Minh continued to advise its cadres that the "valuable experiences of the Chinese revo- lution" were a major subject for. their studies. The post- Stalin leadership has conceded that Mao and the Chinese Com- munist Party have made a "major contribution to Marxist-Leninist theory," which can serve as "a model for many peoples." Deferring to Vietnamese nationalist sensibilities, the Chinese Communists exert their influence without bullying meth- ods. Chinese Communist advisers probably several thousand, are present in North Vietnam in various areas but have not been placed in positions of authori- ty. In a December 1052 hand- book, Peiping instructed its cadres that they were going to North Vietnam as allies to help Ho Chi Minh in "his leadership" of the Viet Minh armed forces, with whom they were instructed to "live and die." In the charged atmosphere following the East European disorders, Premier Chou En-lai took pains during his visit to Hanoi last November to stress Peiping's SECRET Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 PART III PATTERNS AND PERSPECTIVES Page 8 of 1.4 25X1 ApprovedFor Release 2005 ZIT ~f1F-RDP79-00; p001200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 intention to avoid the error of "great-nation chauvinism." Soviet interest in the Viet Minh prior to 1949 was almost negligible. The Chinese Communist victory, however, heightened Moscow's apprecia- tion of the prospects for fur- ther Communist successes in Asia, and Soviet propaganda and diplomatic support of the Viet Minh greatly increased as Ho's armies launched ageneral offensive in early 1950. Re- ports suggest the continuing presence of a few Soviet mili- tary and economic advisers. In accepting Soviet as- sistance, the Viet Minh became correspondingly responsive to Soviet policy. By offering to negotiate a settlement with the French in late 1953, Ho Chi Minh subordinated his own fa- vorable prospects for further military successes. to the USSR's broader international objectives. There is evidence that many North Vietnamese party members opposed Ho's move. Ho may have been persuaded by Moscow that political meth- ods offered the best chance for attaining Communist control 25X1 over all Vietnam. 25X1 Viet Minh hopes for a coa- lition government in Vietnam waned as Soviet officials began to suggest in April that an Indo-China settlement might be based on partition. Objections were registered by Hanoi, but the Kremlin disregarded Viet Minh desires in the matter. Peiping, which had not taken a public stand on the division of the country, concurred in the Soviet-imposed partition solution. Chinese Primacy The Chinese Communists have persistently projected themselves as the principal champion of the Viet Minh. Chou En-lai's leading role as spokesman for the Communists at the Geneva conference, while perhaps entirely acceptable to Moscow, was probably meant by Peiping to illustrate Commu- nist China's intention to re- main the Viet Minh's closest "brother." Aid commitments to North Vietnam further illustrate Peiping's determination to ap- pear as the principal patron of the Viet Minh. There are con- siderably more Chinese than Soviet military and economic advisers in North Vietnam. In the course of Ho's visits to Peiping and Moscow in July 1955, the Chinese made a $326,- 000,000 aid grant to the Viet Minh, while the value of the Soviet aid was $100,000,000. Less inclined than Peiping to defer to Viet Minh national sensibilities, Moscow has paid only, lip service to Viet Minh demands for national elections and has shown continued willing- ness to accept the indefinite existence of two Vietnamese states. After endorsing a proposal by Hanoi and Peiping for re- convening the 1954 Geneva con- ference, Moscow last May agreed to a British counterproposal, for talks by the Geneva co- chairmen, the USSR and Britain. During the talks, Soviet repre- sentative Gromyko gave the im- pression of only perfunctory SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND PERSPECTIVES Page 9 of 14 Approved Fc4 'lease 2005/ RDP79-0092QF1200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 support for Chinese Communist and Viet Minh demands for a new conference. This difference between Soviet and Chinese attitudes was also evident in the USSR's move last January to counter an American proposal to admit South Vietnam and South Korea to the United Nations. The Soviet delegate proposed that both North and South Vietnam and North and South Korea should be admitted simultane- ously as "separate states." Hanoi and Peiping avoided direct comment on this pro- posal, but continued publicly to reject the concept of dual membership. Ho continues to defer to Moscow's wishes and publicly to oppose a return to forceful methods for unifying Vietnam. In view of Peiping's agreement with Moscow that bloc soli- darity must remain the primary consideration in relations among Communist countries, Ho prob- ably sees no other course open to him,for the present. In an implicit rebuke of party militants last summer, Ho re- jected the notion that Hanoi's problems are a "'personal af- fair' which no longer concerns the international proletariat." Viet Minh Maintains Independence While dependence on bloc military and economic support severely circumscribes Viet Minh freedom in foreign policy, Hanoi continues to set its own pace in the management of in- ternal affairs. In contrast to the Chinese Communists, for example, the Viet Minh leader- ship has virtually suspended its liberalization program. Hanoi's position is that the Chinese policy to "let all SECRET schools of thought contend" will not be applied to North Vietnam until social and ideo- logical "reform" has neutralized the threat from "counterrevolu- tionaries." In their public statements, the Viet Minh leaders display no undue subservience toward either the USSR or Communist China, balancing each off in a show of impartiality. Hanoi often refers to the Communist camp "headed by the Soviet Union and China"--a phrase originally formulated by So- viet speakers for occasions demanding flattery of Peiping but borrowed for frequent usage only by North Vietnam. The party apparatus devel- oped by the Ho leadership in the long years when communica- tion channels to the USSR and Chinese Communists were poor apparently is still free from outside domination. Minor reshufflings in the leadership have been inspired by domestic considerations rather than by Moscow or Peiping. Truong Chink, for example, was dropped from his post of secretary general last fall because of "mistakes in land reform." He nevertheless continues active in party affairs and remains an influential member of the politburo. With its own Vietnamese ca- dres advising the Pathet Lao dis- sidents, the Viet Minh plays the primary role in implementing and possibly formulating bloc policy toward Laos. The injection of a Chinese Communist economic aid offer into the current negotia- tions with Laos suggests that Hanoi is consulting with Peiping on major policy decisions, but the Pathet Lao looks to Hanoi for guidance on day-to-day tac- tics. 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND PERSPECTIVES. Page 10 of 14 Approved Flease 2005//jRDP79-009?Z01200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 support for Chinese Communist and Viet Minh demands for a new conference. This difference between Soviet and Chinese attitudes was also evident in the USSR's move last January to counter an American proposal to admit South Vietnam and South Korea to the United Nations. The Soviet delegate proposed that both North and South Vietnam and North and.South Korea should be admitted simultane- ously as "separate states." Hanoi and Peiping avoided direct comment on this pro- posal, but continued publicly to reject the concept of dual membership. Ho continues to defer to Moscow's wishes and publicly to oppose a return to forceful methods for unifying Vietnam. In view of Peiping's agreement with Moscow that bloc soli- darity must remain the primary consideration in relations among Communist countries, Ho prob- ably sees no other course open to him.f or the present. In an implicit rebuke of party militants last summer, Ho re- jected the notion that Hanoi's problems are a "'personal af- fair' which no longer concerns the international proletariat." Viet Minh Maintains Independence While dependence on bloc military and economic support severely circumscribes Viet Minh freedom in foreign policy Hanoi continues to set its own pace in the management of in- ternal affairs. In contrast to the Chinese Communists, for example, the Viet Minh leader- ship has virtually suspended its liberalization program. Hanoi's position is that the Chinese policy to "let all SECRET schools of thought contend" will not be applied to North Vietnam until social and ideo- logical "reform" has neutralized the threat from "counterrevolu- tionaries." In their public statements, the Viet Minh leaders display no undue subservience toward either the USSR or Communist China, balancing each off in a shove of impartiality. Hanoi often refers to the Communist camp "headed by the Soviet Union and China."--a phrase originally formulated by So- viet: speakers for occasions demanding flattery of Peiping but borrowed for frequent usage only by North Vietnam. The party apparatus devel- oped by the Ho leadership in the long years when communica- tion channels to the USSR and Chinese Communists were poor apparently is still free from outside domination. Minor reshufflings in the leadership have been inspired by domestic considerations rather than by Moscow or Peiping. Truong Chinh, for example, was dropped from his post of secretary general last fall because of "mistakes in land reform." He nevertheless continues active in party affairs and remains an influential member of the politburo. With its own Vietnamese ca- dres advising the Pathet Lao dis- sidents, the Viet Minh plays the primary role in implementing and possibly formulating bloc policy toward Laos. The injection of a Chinese Communist economic aid offer into the current negotia- tions with Laos suggests that Hanoi is consulting with Peiping on major policy decisions, but the :Pathet Lao looks to Hanoi for guidance on day-to-day tac- 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 PART III PATTERNS AND PERSPECTIVES. Page 10 of 14 Approved Fcglease 2005/SLCYV CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 INFLATIONARY TRENDS IN WESTERN EUROPE At a time when Western Europe's attention is increas- ingly centering on such major plans as the Common Market, inflationary pressures are slow- ing.the general rate of econom- ic growth, weakening the area's dollar position and, at least in France, threatening a finan- cial crisis with serious po- litical repercussions. The oil shortage caused by the closing of the Suez Canal did not reduce industrial produc- tion to the extent widely an- ticipated but raised costs and dollar outlays for oil, coal, and freight. The past three boom years have seen rising in- ternal demand press- ing increasingly on limited resources of skilled manpower, key materials and plant capacity. Since early 1955,to- tal monetary expend- itures have risen faster than output, and wage rises have exceeded increases in productivity. For Western Europe as a whole, the gross na- tional product grew 6 percent in 1955 but slowed to a 3.9- percent increase in The extent of inflation varies widely in the Western European countries, depending largely on the time each entered the boom phase, approached the limits of availability of key resources and then applied cor- rective measures. Britain, Sweden and Norway entered this cycle in late 1953 and their 1955 disinflationary measures have now begun to have some stabilizing effect. The Benelux countries, on the other hand, entered the cycle comparatively late and have only in the past few months reached the stage of preparing disinflationary measures. France entered its boom. phase in 1954, encountered MONETARY _ EMAND OUTPUT (GNP) 5.3 2.5% 1956 and is expected to rise only 3.7 percent in 1957. Average price increases for the 17 OEEC countries were 4 percent for 1956 as contrasted with only 1.3 percent in 1954 and 2.5 percent in 1955. This compares with a rise in the United States of 3.0 percent in retail prices for the entire three-year period. Despite this accelerating rise, econom- ic experts of the OEEC believe the inflationary problems and related trade and payments dif- ficulties can be managed if the various governments adopt suf- ficiently firm policies in co- operation with each other. inflation late in 1955 and has not yet taken adequate cor- rective steps. The Italian economy, with extensive American assistance, has shown impressive gains in production and trade for three years and consumer prices ap- pear to have reached a plateau in 1956--though their rise since 1953 is above the average for major Western European countries and unemployment re- mains high. 'West Germany,is in a cate- gory by itself; its production and trade have expanded more than -those of any other Western SECRET 25X1 PART III Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PATTERNS AND PERSPECTIVES Page 11 of 14 Approved F r R lease 2005/0 I P79-009 7A 01200030001-7 ,e L~l CURRENT INTELLIGENCE WEEKLY S T 4 April 19 57 European country. Large re- serves in a labor force, which has been moderate in demands for wage increases, and prompt application of disinflationary measures have promoted inter- nal financial balance. How- ever, this balance may now be threatened by labor shortages and more aggressive wage de- mands, by the added strain of armaments production,, and pos- sibly by excessive political concessions to particular in- terests in an election year. Effects of the Oil Shortage The oil shortage, which amounted to only 17 percent of normal supplies during the first quarter of 1957 and is estimated at 5 percent for the second quarter, has proved much less serious in its over-all effects than was feared in the weeks immediately following the Suez intervention. In the United Kingdom, it actually SURPLUS; reinforced disinflationary ef- forts by further curtailing de- mand for labor and materials through its retarding effect on some industries. In such countries as France, however, where adequate disinflationary measures have not been under- taken, the oil shortage has significantly added to the up- ward pressure on prices. Outlook in Britain UNITED ! KINGDOM ? Britain's eco- nomic outlook, though still extremely un- certain, is consider- ably better than in December. The Brit- ish had previously expected a $560,000,- 000 surplus for the fiscal year ending 30 :.June and still fcre- see:.:some improvement in the gold and dol- lar reserves during the second half of 1957 if the interna- tional situation de- velops satisfactorily. Britain now expects to achieve an approx- imate balance on its current international account by mid-1957. By mid-1956 the measures taken dur- ing the previous 18 months to tighten credit, trim govern- ment expenditures SECRET OEEC COUNTRIES: CURRENT BALANCE OF PAYMENTS MILLIONS OF DOLLARS Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND PERSPECTIVES Page 12 of 14 Approved FgIease 2005/ 9(~ RDP79-009 7% 01200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 and curtail consumption already had a discernible effect in curbing inflation and improving Britain's international trading position. For the year as a whole, industrial production remained at the same level as in 1955 and the upward movement of prices was less pronounced. The government will, however, probably continue its broad disinflationary program. There is considerable pressure for some slight concession to par- ticularly hard-hit middle-in- come taxpayers in the budget to be presented to parliament on 9 April. The Suez crisis initially posed a greater financial threat to Britain than to any other European country because of loss of revenues from sales of Middle East oil, the need to substitute dollar oil for Con- tinental customers as well as in the domestic market, and consequent speculation against the pound. Pressure on ster- ling had intensified in July 1956 because of uncertainties.. in the international situation and increased until the govern- ment took vigorous measures in December by obtaining $1.8 bil- lion in emergency'assistance from the United States and the International Monetary Fund (IMF). The pound's dollar rate thereafter improved gradually until the shipbuilding and engineering strikes in March brought a renewal of short sales against sterling on the Conti- nent4 Support operations by the Exchange Equalization Ac- count probably wiped out the early March gains in the gold and dollar reserves, and the pound continues under pressure. France has long been ex- pected by the experts to en- counter a crisis in its external financial relations during 1957 and the added Suez dollar drain of an estimated $100,000,000 to $150,000,000 may bring this about in the first half of the year rather than in the second, as previously anticipated. The government's persistent reluc- tance to disinflate is fostered by an urgent desire to continue the rapid growth of industrial production, which increased by 11 percent in 1956--more than in any other Western European country. Gold and dollar reserves of nearly $2 billion at the be- ginning of 1956 made it possible until mid-1956 to suppress in- flation artificially through subsidies on living essentials and through increased imports, but it has since become in- creasingly apparent that this policy is leading France into a balance of payments crisis. Heavy losses of gold and dollar reserves began in the second quarter of 1956, when severe winter weather necessitated large wheat imports, and the Suez crisis added an estimated $100,000,000 to $150,000,000 to the drain. By the end of the year the reserves had fall- en by about $600,000,000 and were only $358,000,000 above the $1 billion minimum safe working level. In recent months the gov- ernment has even resorted to subsidizing the production and marketing of key items in the cost-of-living index to keep it from rising to 149.1, at which point negotiations for an increase in the minimum wage .would become mandatory under the terms of the July wage-price freeze. By March the index had reached 148.0 and the unions were increasingly bitter at what they term the practice of "cooling the thermometer to cure the patient. With France's EPU deficit for March near a record high of $150,000,000, the government has approached Washington for assistance totaling about $300,- 000,000 and has announced new corrective measures at home. SECRET Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 PART III PATTERNS AND' PERSPECTIVES Page 13 of 14 Approved For please 2005/A k RDP79-0092 AO01200030001-7 CURRENT INTELLIGENCE WEEKLY SUMMARY 4 April 1957 These measures reveal no intention of sacrificing the policy of continued economic expansion, and the specific economies to effect an announced budget cut of $750,000,000 are still under cabinet negotia- tion. Right-center dissatisfac- tion with the government's han- dling of, the economic situation nearly brought about the Mollet government's overthrow in a confidence vote on 28 March. SECRET 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927A001200030001-7 PART III PATTERNS AND PERSPECTIVES Page 14 of 14 25X1 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7 Approved For Release 2005/02/14: CIA-RDP79-00927AO01200030001-7