CURRENT INTELLIGENCE WEEKLY SUMMARY

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CIA-RDP79-00927A001600060001-9
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January 30, 1958
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SUMMARY
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Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 CONFIDENTIAL ~e='T URRENT INTELLIGENCE WEEKLY UMMARY CENTRAL IN I LLLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE x-aasr2/.v DATE.JAW"J REVIEWER: AUTH: HR 7 NE)aREVIEW DATE: Ci DECLASSIFIED CLASS. CHANGED 10: COPY NO. X16 OCR NO. 0030/58 30 January 1958 DOCUMENT N?. NO CHANGE IN CLASS. 0 CONFIDENTIAL nr/'f1 T DIA review(s) completed. State Department review completed Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 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. I'he 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 rurrent situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 IJVI~i iii-11I IttL CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 OF IMMEDIATE INTEREST USSR CONTINUES CAMPAIGN FOR SUMMIT MEETING . . . . . . . . Page 1 Soviet party chief Khrushchev's discussion of foreign policy in his 22 January speech at Minsk was designed to maintain diplomatic and propaganda pressure on the West in the current series of exchanges on the question of a heads- of-government meeting. Kremlin leaders apparently believe that mounting popular pressures for summit talks will pro- gressively weaken the Western powers' position and eventu- ally force them to agree to negotiations on terms favorable to the Soviet Union. 25X1 BRITAIN SUGGESTS SUMMIT TALKS THIS SUMMER, . . . . . . . . Page 2 The British Government in its draft reply to Bul- ganin's second note suggests preparations for a summit meeting with the Soviet Union. The draft reply says prep- aration of an agenda should begin "at once" for a top- level meeting "sometime this summer." The reply may en- counter some opposition in the North Atlantic Council if submitted in its present form. 25X1 EGYPTIAN-SYRIAN UNION DEVELOPMENTS . . . . . . . . . . . Page 3 Syria's President Quwatli is scheduled to arrive in Cairo on 1 February, presumably to join Nasir in announc- ing Egyptian-Syrian union, but a last-minute postponement is possible. Proponents of union may try to keep up pop- ular enthusiasm by inventing new Western "plots" against Syria and by exploiting the impact of recent Israeli-Syrian border incidents. To avoid offending proponents of Arab unity, Moscow may feel obliged to make some gesture ap- proving the union when announced, despite some indications that it may continue behind-the-scenes opposition. NFLLYENTiAL THE WEEK IN BRIEF Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET 30 January 1958 PART I (continued) VENEZUELAN JUNTA ANNOUNCES ITS PROGRAM . . . . . . . . . . Page 5 The basic program announced by the Venezuelan govern- ing junta on 27 January calls for the restoration of con- stitutional government and free presidential elections within 18 months. The status of Communists, the influence of leftists in government, the return of exiles, and simi- lar problems facing the junta could give rise to serious friction between military and civilian elements which ap- pear united behind the new regime at present. KHRUSHCHEV?S PROPOSAL FOR AGRICULTURAL REORGANIZATION . . Page 1 Khrushchev has again proposed shaking up the Soviet system in his campaign to catch up with the West. Now he proposes a radical but gradual transformation of the machine tractor stations (MTS)--for years the stronghold of economic and political control in the countryside. The increased strength of the party in rural areas since Sta- lin's death and recent changes in rural party organiza- tion have now made f the MTS as a control mechanism. 7 a t__7 The Algerian rebellion may soon enter a more active phase. The military potential of the rebels is improv- ing SECRET Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 THE ALGERIAN REBELLION . . . . . . . . . . . . . . . . . . Page 2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 PART II (continued) Page 4 e e e e o e o e e e e During the past week Turkish Cypriots have engaged in the worst rioting since the beginning of the Cyprus controversy. The demonstrations were set off by the sud- den departure of Governor Foot to confer with Foreign Secretary Lloyd, who was in Ankara for the Baghdad Pact meeting. A serious split in Greek Cypriot ranks has been emphasized by clashes between right- and left-wing mem- bers of the community. Unless the anticipated British statement on a new policy for Cyprus meets the minimum de- -I- d to resume CYPRUS . e . ? . . . . e mands of Archbishop Makarios, EOKA is e c e oil-rich Arab states to participate an is 25X1 UN Secretary General Hammarskiold plans to push a- head with his plan for a Middle East development fund financed. primarily by oil revenues. In his view it is the only way to prevent serious deterioration in the area. Members would consist of the Arab League states, includ- ing Libya and the Sudan but not Tunisia and Morocco. The plan faces formidable obstacles in thedreluctaancgeenofathexa- HAMMARSKJOLD'S PLAN FOR A MIDDLE EAST DEVELOPMENT FUND . . Page 4 full-scale violence in the near future. ability of the Arabs to work on common projec Page 5 BRITAIN'S FREE TRADE AREA PROJECT NEAR STALEMATE . . . . . Negotiations to establish a European free trade area are near a stalemate. Continental nations, particularly France, find Britain's recent limited concessions toward freer imports of agricultural products and on relations with the six-nation European Economic Community inadequate. Mutual interest in European economic cooperation may lead to additional concessions on the part of the British and to the necessary reciprocal concessions, but possibly not in time t ahlish the free trade area in 1958 as Britain desires. 25X1 25X1 THREAT OF VIOLENCE REDUCED IN GUATEMALA . . . . . . Page 7 The danger of violence in Guatemala over the still undecided 19 January presidential election has diminished but not disappeared as a result of the agreement reached on 27 January between General Ydigoras, who plurality, and Cruz Salazar, the apparent followers are to accept Ydigoras as president, and Ydi- goras has promised to include his erstwhile opponents in an anti-Communist coalition and to give them three cabi- net posts. SECRET THE WEEK IN BRIEF Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 PART II (continued) RUSSIAN SCHOOLS TO TRAIN MORE STUDENTS FOR MANUAL WORK Page 8 The Ministry of Education of the Russian Republic has announced that 50 secondary schools in the republic have recently begun a study program designed to place students on the production line even before graduation. The new study program is probably`a pilot project intended to ease, the enrollment pressure on higher educational institutions and adjust an increasing number of secondary-school graduates to becoming industrial and agricultural workers rather than members of the intelligentsia. POLAND'S ECONOMIC PLAN FOR 1958 . . . . . . . . . . . . . Page 9 Poland's economic plan and budget provide for ap- preciable economic advances in 1958 over 1957, but the decline in the rate of growth which began in 1950 is to continue. Consumer goods production is to be emphasized, but the necessity of restoring depleted reserves and of reducing foreign credits precludes any appreciable im- provement during 1958 in the low standard of living. The relinquishment of the Hungarian premiership by Janos Kadar, who retains party leadership, suggests no significant changes in internal policy, but will enable him to devote more time to rebuilding the party into an effective instrument of Communist control. This and other leadership changes were probably designed primarily to convince the Hungarians and the non-Communist world . Page 10 that Hungary has returned to "normalcy." . Page 11 Peasants in eastern Rumania have been resisting stepped-up regime pressures for complete collectiviza- tion, and uprisings have been reported in at least two villages in which it may have been necessary to use Ru- manian or Soviet troops to restore order. The reports, which are not confirmed, center on the Iasi region and the Danube riparian areas of Galati and Constanta. West- ern observers have been denied access to most areas east of Bucharest since 18 January. SECRET Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET 30 January 1958 PART II (continued) CHINESE COMMUNIST NATIONAL PEOPLE'S CONGRESS . . . . . . . Page 12 The National People's Congress which begins plenary sessions in Peiping on 1 February after a one-week post- ponement is scheduled to discuss language reform, the state budget, the draft economic plan for 1958, and a program to "readjust" government organs under the State Council. It is also expected that the congress will be used as a forum to announce the dismissal of government officials accused as "rightists." The "conservative" outlook in economic matters is expected to came under at- tack, and economic plans will probabl call for large in- creases in production and investment . . . . . . Page 14 Peiping has issued new regulations governing the discharge of all army personnel conscripted after 1 No- vember 1954. The regulations provide for preparing servicemen for civilian life and for easing the ten- sions between civilians and veterans, a problem of con- siderable concern to the regime. LAOTIAN GOVERNMENT TAKES OVER FORMER PATHET LAO BASE AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 14 The Laotian Army has taken control of the former Pathet Lao provinces without opposition, and most of the Pathet Lao troops have entered regroupment centers where they are being processed either for demobiliza- tion or integration into the army. The Pathet Lao now is relying primarily on legal political techniques and subversion in its efforts to gain power in Laos. ICELANDIC MUNICIPAL ELECTIONS . . . . . . . . . . . . . . Page 16 The Icelandic municipal elections on 26 January re- sulted in an impressive victory for the Conservative party--the chief opponent of the governing coalition of Progressives, Social Democrats, and the Communist-front Labor Alliance. The result will stimulate Conservative attacks on the coalition which may force the three par- ties into greater dependence on each other, thus making a breakup of the government coalition unlikely in the near future. The strong position of the pro-US conserva- tives will discourage the coalition from reviving its policy of opposition to US bases. SECRET V THE WEEK IN BRIEF Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 PATTERNS AND PERSPECTIVES CHINESE COMMUNIST POLICIES TOWARD UNDERDEVELOPED AREAS . . Page 1 Communist China, taking an active role in bloc ef- forts to supplant Western influence in underdeveloped regions, is concentrating chiefly on a propaganda of- fensive, cultural exchanges, and trade. Peiping's pri- mary target is Southeast Asia, but it is becoming in- creasingly active in the Middle East, Africa, and Latin America. In addition to working for the advancement of bloc interests in these areas, the Chinese Communists hope to win wider diplomatic recognition and internation- al acceptance. Only recently embarked on their own in- dustrial development, the Chinese have gained prestige by extending or offering economic aid to other under- developed countries--Eg t Yemen, Burma Ne al, Cambodia, Ceylon, and Indonesia. SOVIET PRICE REFORM DISCUSSION . . . . . . . . . . . . . . Page 3 For the past year, Soviet economists have been dis- cussing pricing policies in an effort to cope with the growing size and complexity of the economy. The apprais- al is concerned particularly with the pricing of producer goods--raw materials, semifinished goods, and machinery. As more decisions are entrusted to lower echelons in con- nection with the regional reorganization of industrial management, it becomes increasingly important that these echelons, as well as planners in Moscow, work with prices which realistically reflect production and consumption con- ditions. MIDDLE EAST OIL DEVELOPMENTS 1957,1958 . . . . . . . . . . Page 5 The prospects for Middle East oil production in 1958 are for a record year, with levels substantially above those before the Suez crisis in late 1956. All major Middle East crude producers had fully recovered from the Suez crisis by mid-1957 with the exception of Iraq, where production was still down by almost 40 per- cent because of reduced pipeline capacity. By the end of 1957, over-all Middle East production had increased about 2 percent over 1956 and some 8 percent compared with 1955. SECRET vi THE WEEK IN BRIEF Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET 30 January 1958 PART III (continued) FALLING METAL PRICES DISTURB LATIN AMERICAN ECONOMIES . . Page 13 The downward trend of prices for copper, tin, lead, and zinc is undercutting the economies of Chile, Bolivia, Mexico, and Peru and causing concern among these and other Latin American primary producers over the possible imposi- tion of tariffs by the United States. The success of US- backed economic stabilization programs in Chile and Bolivia is endangered, and Chile is turning-to the Soviet Union as a customer for its copper. Mexican and Peruvian export patterns are the most diversified in Latin America, but falling metal prices are cutting foreign exchange revenues and retarding economic growth. SECRET vii Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Owefm k ; . ITU\ 30 January 1958 OF IMMEDIATE INTEREST Soviet party chief Khru- shchev's discussion of foreign policy in his 22 January speech at Minsk was designed to main- tain diplomatic and propaganda pressure on the West in the current series of exchanges on the question of a heads-of-gov- ernment meeting. Kremlin lead- ers apparently believe that mounting popular pressures for summit talks will progressive- ly weaken the Western powers' position and eventually force them to agree to negotiations on terms favorable to the So- viet Union. Khrushchev examined in con- siderable detail the question of Soviet-American relations in the context of the current East- West diplomatic exchange, and took up a number of points raised in President Eisenhower's reply delivered on 20 January to Bulganin's December letter. The Soviet party chief sought to parry the President's propos- al to establish international control of outer space for peaceful purposes by stating that the Soviet Union would be willing to discuss this problem only as part of a general dis- armament agreement which called for a ban on nuclear weapons, suspension of nuclear testing, and liquidation of foreign mili- tary bases. On the question of prepar- ing for a heads-of-government conference, Khrushchev avoided giving the appearance of cate- gorically rejecting Western proposals for preparatory nego- tiations through diplomatic channels or by foreign ministers. Although he omitted the refer- ence in Bulganin's mid-January letters that a. foreign ministers' conference might create addi- tional obstacles to agreement at the summit, he contrasted the "urgent" Soviet calls for a summit meeting with alleged Western efforts, particularly on the part of the United States, to avoid talks by raising the impossible "demands" that the East European and German re- unification questions be dis- cussed. The confident and unyield- ing tone of Khrushchev's re- marks, together with the hard terms for discussion of inter- national control of ballistic missiles, provides further in- dication that the USSR's cam- paign for a summit meeting is not intended to lead to serious substantive negotiations but is actually designed to discredit Western policy and to disrupt Western unity. Soviet propaganda comment on the Western replies to Bul- ganin's December letters in- tially was restricted to brief factual reporting and the re- actions of the Western press. On 27 January Izvestia printed the full texts of the replies from the United States, Britain, and France, together with a long editorial following the line of argumentation used by Khru- shchev in his Minsk speech. Based on past Soviet practice, Khrushchev's remarks of 22 Jan- uary probably were intended by the Kremlin as the Soviet answer to the Western replies. The lag in the Soviet prop- aganda treatment of the Western PART I OF IMMEDIATE INTEREST Page 1 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 replies, plus. a, three-day lapse be- fore the publication of Khrushchev's for- eign policy state- ment-, : indicates that the Kremlin is carefully studying its approach to the current East-West exchange--particu- larly the question of Soviet-American relations--and to its campaign for a summit meeting. Soviet Foreign A F I N L A N d t ,moo '6e IAR.E ~It ~4 t HELSINKI a a4e LENINGRAD Minister Gromyko 30 JANUARY 1958 told Ambassador Thompson on 23 January that the Soviet Government is con- cerned with the composition of a heads-of-government meeting and pressed the ambassador very hard as to American views on possible participants. In his remarks to Western ambassadors at a 27 January Indian reception, Khrushchev again urged the West to partic- ipate in a heads-of-government meeting, asserting that such a conference should first take up the "simplest problems" such as a nonaggression pact between NATO and Warsaw Pact powers. Soviet diplomats have con- tinued their efforts to gain iq? Western support for the measures the USSR has proposed for high- level discussion. There are indications that-the Soviet Union is willing to discuss with Finland the return of the Saimaa Canal area of Karelia. Such talks might be undertaken with the intention of gaining Finnish support for a "nuclear- free zone" in northern Europe, as called for in Bulganin's letters of 10 January to Norway and Denmark. The USSR also appears to be trying to persuade the Aus- trian Government to take an active role in promoting a sum- mit meeting and the establish- ment of a "nuclear-free zone" in central Europe. BRITAIN SUGGESTS SUMMIT TALKS THIS SUMMER The British Government in its draft reply to Bulganin's second note suggests prepara- tions should be undertaken for a summit meeting with the Soviet Union. The draft reply calls for the big four foreign min- isters to start preparing an agenda "at once" for a top- level meeting "sometime this summer." While emphasizing that the preparations must be adequate SECRET AV TwmrnT ATE TNTEREST va ap 2 of 6 PART Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET_ . CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 and thorough, the Macmillan gov- ernment would in effect set a deadline for the meeting, as the opposition Labor party leaders have urged. This would turn the preliminaries into agenda-draft- ing rather than efforts at sub- stantive progress to determine whether a meeting of heads of government would be productive. The draft note states a preference that the British, French, American,and Soviet foreign ministers determine what issues should be discussed, but also suggests the alterna- tive method of "confidential diplomatic exchanges." The British would reserve judgment as to which nations should be included in the summit talks. If the draft is approved by Prime Minister Macmillan-- now in Australia--it will be submitted for North Atlantic Council discussion. There it may be expected to encounter considerable opposition from West Germany, the Netherlands, and possibly others for tending to predetermine the holding of a summit meeting without pre- liminary probing of Soviet in- tentions. London is sensitive to views expressed in NATO, and is probably ready to_ make some adjustments in the note; but the Macmillan government's evi- dent belief that public opinion demands further Western initia- tives might bring it to risk some annoyance by other NATO members rather than acquiesce completely in the views of the North Atlantic Council. France's view of the pre- liminaries is similar to Brit- ain's. Foreign Minister'Pineau, speaking on a French television program on 27 January, stated that the best preparations for summit talks would be establish- ing an agenda through a foreign ministers' meeting. He sug- gested disarmament, German re- unification, and aid to under- developed areas as topics,,and added that those countries "directly" interested in the agenda should participate in the summit conference, pre- sumably including West Ger- many. EGYPTIAN-SYRIAN UNION DEVELOPMENTS A formal announcement of Egyptian-Syrian union, made by Nasir and Syria's President Quwatli from the rostrum of the Egyptian National Assembly, was scheduled for the end of this week but may be postponed be- cause of a last-minute revival in Nasir's mind of doubts he had previously quieted. Na.sir is said to be wary of entering the labyrinth of Syrian politics. Typical of the problems he might encounter here is a reported move by the the conservative Populist party to join with the Communists, remnants of ex-dictator Shi- shakli's Arab Liberation Move- ment, and the anti-Nasir Moslem Brotherhood in an anti-union alliance. Apparently trying to overcome Nasir's doubts on this point, Syrian Foreign Min- ister Bitar has proposed that the present Egyptian and Syrian national parliaments be dis- solved in favor of a number of regional bodies in each country and an over-all union parlia- ment--a move which might make SECRET PART I OF IMMEDIATE INTEREST Page 3 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 it easier to get rid of some of the more obstreperous polit- ical personalities. The Syrian Communists, how- evero will probably continue behind-the-scenes efforts to block or sabotage the union pro- posals. Syrian Communist party leader Bakdash has already an- nounced that if the new union is really democratic,there will be no need for the dissolution of political parties--one of the conditions set by Nasir for Egyptian agreement to union--and Bakdash pointedly observed that the party had never dissolved voluntarily but only under pres- sure of dictatorships. Syrian proponents of union may invent new Western "plots" in order to maintain popular enthusiasm for the proposals; Syrian propaganda media have pointed to the Ankara meeting of the Baghdad Pact Council as a likely hatching place for conspiracies against the Arabs. Another line that may be used once again is the Israeli threat, which could seem more real as a result of recent bor- der incidents in the northern Israeli-Syrian demilitarized zone. New impetus to union would almost certainly be given should the Israelis undertake operations in reprisal for the killing of two policemen in a skirmish with Syrians this week. Other Arab leaders con- tinue to be concerned over the effect of an early announcement of Egyptian-Syrian union plans. Lebanese Foreign Minister Malik has said such a move would spell disaster for the pro-Western Lebanese Government, and has of- fered to "go any limit" if his government has American support. Moscow seems to be faced with a conflict of interests in Syrian-Egyptian union, The Kremlin can hardly welcome any move affording the possibility of neutralizing pro-Soviet ele- ments in Syria. To avoid of- fending proponents of Arab unity, however, Moscow may feel obliged to make some gesture approving the union when it is announced. There are indica- tions that Moscow will there- fore attempt discreetly to obstruct the actual implementa- tion of union. Soviet diplomats have indicated that the USSR would have to reconsider eco- 25X1 nomic and military commitments to Syria if union goes through. propaganda emphasis, which sug- gests uncertainty, has been evident in Moscow, where the radio has studiously avoided reference to union, while the Soviet press has maintained a 25X1 fairly steady low-level atten- tion to union in positive'terms. SECRET A difference In 2 PART I OF IMMEDIATE INTEREST Page 4 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 VENEZUELAN JUNTA ANNOUNCES ITS PROGRAM The basic program announced by the Venezuelan governing junta on 27 January calls for the restoration of constitu- tional government and free presidential elections within 18 months. The status of Com- munists, the influence of left- ists in government, the return of exiles, and similar problems SECRET PART I OF IMMEDIATE INTEREST Page 5 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 facing the junta could give rise to serious friction between military and civilian elements which appear united behind the new regime at present. The junta, by 25 January, had accomplished its principal immediate task of restoring order. It had also added two civilian representatives, re- moved two military members under popular pressure, and appointed a predominantly civilian cab- inet. The armed forces pledged their full support on 27 Janu- ary, reportedly to dispel rumors that they were divided in al- legiance to the new government. The junta has expanded its civilian support. The Patriotic Front, a coalition of the four principal parties--the URD, the AD, the PCV, and the Catholic- oriented COPEI--has granted it The PCV, with an estimated 9,000 members, stands to bene- fit politically as an important element in the front, particu- larly if the front is used as a device for coordinating, party opinion with the junta. Under Perez it was allowed to retain a position in the labor move- ment, which now may be expanded. substantial endorsement and has called for legalization of all factions, presumably including the Communists. I Top leaders of the three non-Communist members of the front also agreed, when in ex- ile, to cooperate with the junta in preserving order and to unite their efforts for the restoration of democracy. They have not yet indicated their position toward Communism. They have also agreed that the new oil concessions, granted in 1956 and 1957 to primarily US-owned companies for initial payments of about $700,000,000, are illegal and subject to fu- ture renegotiation--a position which may arouse military hostility. The maintenance of three- party unity will be tested by personal ambitions and differ- ences in party orientation. The younger leaders of the Patriotic Front may challenge the titular party heads, two of whom have been in exile for several years. SECRET PART I OF IMMEDIATE INTEREST Page 6 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 G Ns IDLINTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 NOTES AND COMMENTS KI-URUSHCHEV'S PROPOSAL FOR AGRICULTURAL REORGANIZATION Khrushchev, in another of his bold plans for economic reorganization, has proposed the radical but gradual transfor- mation of a historic agricul- tural institution, the machine tractor station (MTS). Under his proposal the large quantity of production machinery now owned by the state would be sold to collective farms--a step which Stalin as late as 1952 said "could only retard our advance toward Communism. Thus the proposal is a contin- ua.tion of the post-Stalin crit- ical review which is question- ing all but the most basic tenets of the operation of the Soviet economy. When imple- mented, it will constitute the biggest organizational change in Soviet socialized agricul- ture since its establishment in the 1930's. The MTS, one of the three basic Soviet agricultural insti- tutions along with the state farm and the collective farm, is a state owned and operated pool of agricultural machinery which serves one or more col- lective farms on a contract basis. Khrushchev, in outlining his plan, said the tractor sta- tions are to be gradually rele- gated to the status of repair depots and sellers of spare parts and machinery. Khrushchev suggested that the proposed change be discussed on a, nationwide basis, as was the case with the reorganization of industrial management in the spring of 1957. In the mean- time, the MTS are apparently to service the 1958 crop. The change-over, when it comes, is to be gradual. Control of their own ma- chinery by the collective farms, Page 1 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 a step suggested by members of the American farm delegation which visited the USSR in 1955, should result in real savings. The separation of MTS and col- lective farm functions has un- doubtedly been a cause of in- efficiency, as has the size of the MTS themselves. Khrushchev said the reor- ganization would reduce costs of grain to the state and in turn permit a reduction of retail prices of grain products. He expected it to lead to a more rational use of machinery, to elimination of unnecessary machinery purchases, and to an increase in over-all production. Political Control The increased strength of the Communist party in the So- viet countryside since Stalin's death and recent changes in rural party organization have paved the way for Khrushchev's proposal. As a result of the amalgamation of collective farms and the strengthening of rural party membership, nearly all collective farms now have primary party organizations in contrast to the situation that prevailed under Stalin in 1949, when only 15 percent of the farms could boast such units. There has also been a signifi- cant increase in the number of collective farm chairmen hold- ing party membership. In a move designed to fa- cilitate greater control by pri- mary party organizations in collective farms, the regime late last year withdrew some of the powers previously granted to the MTS. Under the agricul- tural reform of September 1953 which reinforced the political role of the MTS in the CONFIDENTIAL PART TT NOTES AND COMMENTS Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 countryside, each MTS had been assigned a district party secre- tary who had charge of a group of party instructors, each of whom in turn supervised the political and personnel affairs of one or two collective farms. These MTS instructor groups now have been abolished, ac- cording to an editorial in the December issue of the party's organizational journal, Party Life, on the grounds that t ey ten ed to duplicate and inter- f ere with the work of the pri- mary party organizations in the collective farms. The elimination of the MTS instructor groups, which were composed of at least 70,000 full-time party officials, was part of a general 20-percent re- duction last year in the admin- istrative staffs of rural party organizations. These experi- enced party officials have thus been made available for assign- ment directly to collective farm party organizations, and they probably comprised the bulk of the replacements for the large number of secretaries of primary party organizations who were removed last fall at the rural party conferences. The effect of recent changes has been to strengthen party control at the grass-roots level in the countryside, making superfluous the direct political supervision formerly exercised by the MTS. In addition to the proposal to transform the tractor sta- tions, the post-Stalin critical review of the operation of the Soviet economy has included last year's industrial reor- ganization, the abolition of the doctrine that obsolescence cannot occur in a socialist state, and the current discus- sion of the Soviet pricing system which tends in its wider impli- cations to conflict with the Marxist labor theory of value. (see Part -III, page 3). The searching nature of this review makes unclear the future status of collective farms and state farms. Soviet ideology calls for ultimate conversion of collective farms into state farms, and in the past few years many "economical- ly weak" collective farms have been thus converted. Giving collective farms machinery could be a step toward more rapidly converting them into state farms. However, it is al- so possible that a long period of simultaneous operation of the new-style collective farms and the state farms, to determine their relative merits may take place. (Pre- 25X1 pared jointly with ORR) The Algerian rebellion, now well into its fourth year, may soon enter a more active phase after several months dur- ing which the National Libera- tion Front (FLN) appeared to have lost the initiative to the French pacification forces. In any event, the rebels' military potential, especially armament, is improving and there is little prospect for an early end of the conflict, which is continuing to tie down over 400,000 French Army, Navy, and Air Force person- nel. There has so far been no noticeable increase in the in- tensity of the rebel campaign SECRET Page 2 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET mer. They have had no diffi- culty replacing manpower rbss- es,, morale is high, and their performance in recent engage- ments indicates they are bet- ter trained and certainly bet- ter armed' than heretofore. They may only be awaiting the arrival of more favorable weath- er or additional supplies.be- fore expanding their activities. 30 January 1958 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 as compared with recent months, Should a new guerrilla of- fensive materialize this spring, Reported location of rebel base The "Morice Line" (electrified barricade) it might be centered in eastern Algeria and, more specifical- ly, in the region ad- jacent to Tunisia, where armed FLN bands have for some time enjoyed safe haven at training and opera- tional bases. 90 JANUARY 19'58 T4? The rebels are not believed capable at this time of captur- ing and holding. any urban center of importance, but they might sharply increase terrorist ac- tivities, which have declined in recent months. Despite the relative suc- cess of the French in clearing rebels from certain areas and the erection of the much-pub- licized "Morice line," an elec- trified barricade near the Tu- nisian frontier, the rebels are in some respects stronger mili- tarily than they were last sum- The situation may 25X1 25X1 few weeks aimed at neutralizing 25X1 the rebel bases in Tunisia. An all-out punitive effort against these targets could easily develop from France's appli- cation of the "hot pursuit" policy without any clear in- dication of special prepara- tion. SECRET PART II NO'T'ES AND COMMENTS Page 3 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 During the past week Tur- kish Cypriots have engaged in the worst rioting since the beginning of the Cyprus contro- versy. The riots were appar- ently triggered by fear that decisions were being made re- garding a Cyprus settlement which did not provide for prompt partition of the island. The violent demonstrations, in which several Turks were killed and scores injured, were set off by the sudden departure for Ankara of Cyprus' Governor Foot to confer with British Foreign Secretary Lloyd, who was in the Turkish capital for the Baghdad Pact Council meeting. The riots were aimed both at Foot, whom the Turks consider too conciliatory to- ward the Greeks, and at the Greek Cypriot community. Only strenuous efforts by security forces prevented serious clashes between Turks and Greeks on Cyprus. Meanwhile, within the Greek Cypriot community, a smoldering_ conflict between right-wing fol- lowers of Archbishop Makarios and left-wing members of the Pan- Cyprian Labor Federation recent- ly developed into violence. Masked men, assumed to be act- ing on orders from EOKA, killed two prominent left-wing labor leaders and wounded three others. The subsequent island- wide protest strike called by leaders of the Labor Federation and clashes between the nation- alists and the leftists empha- size the deep split in Greek Cypriot ranks. Calls for unity by Makarios and the leaders of the Labor Federation have re- stored peace temporarily be- tween two basically hostile groups. Barring further armed attacks by EOKA on labor union members, an appearance of unity probably can be ,maintained until self-government or self- determination for Cyprus is secured. While all parties in the Cyprus dispute await the antic- ipated British announcement of a new policy for Cyprus,"the authorities'in Nicosia are mak- ing final security arrangements for an expected outbreak of violence by EOKA following is- suance of the policy statement. Meanwhile, in Ankara, con- versations between British and 25X1 Turkish.-=officials have produced 25X1 no mutually acceptable plan for Cyprus. Violence can probably be prevented if Archbishop Ma- karios accepts the new British proposals for Cyprus. HAMMARSKJOLD'S PLAN FOR A MIDDLE EAST DEVELOPMENT FUND UN Secretary General Ham- marskjold plans to push ahead with his plan for a Middle East development fund financed pri- marily by oil revenues, which he believes is the only possible way to prevent serious deteri- oration in the area. His pre- liminary discussions with the British and French foreign ministers, as well as with se- lected Arab statesmen, have SECRET' PART II NOTES AND COMMENTS Page 4 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 evidently led him to believe there are some prospects for such economic cooperation among the Arabs. The inability of the Arabs to work together on common projects and conflicts in local interests, however, will be difficult obstacles to overcome. The UN Secretariat is pre- paring a study on the possibil- ity of channeling Middle East oil profits into a central bank- ing system for Arab development. Hammarskjold hopes that issuance of the report will induce the Arabs to call a meeting to or- ganize such a bank. He sees the development fund consisting of members of the Arab League, including Libya and the Sudan but excluding Tunisia and .Mo- rocco, at least at the outset. He thinks inclusion of Iran, though desir- able, would raise the question of Tur- kish and Pakistani participation, which he feels is undesir- able. Operation of the fund during its first five year is envisaged at the level of "hundreds of millions of dol.= lars" in short-term governmental loans. Later on, the fund would get into longer term loans. Specific organizational for the fund have not been worked out. The idea of utilizing Mid- dle East oil revenues to fi- nance inter-Arab development NUARY 1958 24853 that such an investment on their part should be politically at- tractive to them, the principal oil-producing countries have so far been reluctant to make significant cash contributions. BRITAIN'S FREE TRADE AREA PROJECT NEAR STALEMATE Mid-January discussions in the OEEC's intergovernmental committee on the establishment of a Free Trade Area (FTA) have revealed a near stalemate. SECRET schemes has been discussed pe- riodically for several years. The Arab League "decided" in early 1956 to form an Arab De- velopment Bank, and in January 1957 the International Bank for Reconstruction and Development submitted, at the league's re- quest, a draft charter for such a bank. Last December, Egyp- tian Foreign Minister Fawzi discussed a central bank plan with US officials, indicating that a preliminary agreement had been reached by Egypt, Saudi Arabia, and Iraq. Fawzi emphasized, however, that "help was needed" from the United States and Britain, not only in technical advice but also in encouraging oil-rich Arab states to participate. Although it has been argued PROPOSED MEMBERS OF THE MIDDLE EAST DEVELOPMENT FUND ) T Malta" MUSCA AND OMAN I/ IRENCH 1 Y 4 -EQUATORIAL ? nR. \ AFRICA plans Continental nations, particu- larly France, find Britain's recent limited concessions to- ward freer imports of agricul- tural products and on relations SECRET Cyprusc 'SYRIA ?? LEBANON.' ?'' ISRAEI/.?- 1 IRAQ AAHRt4N lA:'AR PART II NOTES AND COMMENTS Page 5 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET ,CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 with the six-nation European Economic Community inadequate. Mutual interest in European economic cooperation may lead to the necessary reciprocal concessions but possibly not in time to establish the free trade area in 1958 as Britain desires. Britain has offered some slight concessions on the FTA's institutional relations with the European Economic Community and on the British proposal to exclude all agricultural imports from the FTA's trade liberaliza- tion program--a major stumbling block to the Continental powers. The Continent still wants the FTA,but most nations find Britain's recent concessions inadequate. The intensity of their objections varies from France's obstructionism to a strong West German desire to cooperate with Britain. The French Government accepts the FTA in principle but urges that because of the parlous state of France's trade and finances and in view of increased West German competition in the 'European THE PROPOSED FREE TRADE AREA POPULATION GNP 1955 1956 (Billion (Millions) Dollars) EUROPEAN ECONOMIC COMMUNITY (EUROPEAN COMMON MARKET): BELGIUM-LUX......... 9.2 9.75 FRANCE ................43.6 52.00` WEST GERMANY ..... 51.6 41. SD ITALY ................48.2 21.70 NETHERLANDS...... 10.9 .6.20 TOTAL ..163.5 133.45 COUNTRIES THAT PROBABLY WILL JOIN FTA WITH FULL OBLIGATIONS: AUSTRIA ............... 7.0 4.21 DENMARK .............. 4.5 4.15 NORWAY ............... 3.5 3.38 SWEDEN ............... 7.3 8.74 SWITZERLAND ....... 5.0 6.24 UK ....................... 51.2 57.40" TOTAL ........ 78.5 84.12 COUNTRIES THAT PROBABLY WILL JOIN FTA WITH SPECIAL CONDITIONS: GREECE ................ 8.0 2.15 ICELAND ............... .2 . 16 IRELAND ............... 2.9 1 .52 PORTUGAL............ 8.8 1.78 TURKEY ................24.8 3.92 TOTAL . . ..... 44.7 9.53 GRAND TOTAL ...... 286.7 227.10 Member nations of the Free Trade u Area and the OEEC Member nations of the European Economic Community (European Common Market) 0 200 410 800 M11- 0 200 400 6G~_ 800 400 1200 Kilometers 24854 30 JANUARY 1958 10 SECRET PART II NOTES AND COMMENTS Page 6 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 Economic Community, it cannot now risk additional competition that would result from estab- lishment of the FTA. It is therefore resorting to hard bargaining and delaying tactics and now promises to introduce its own proposal on the FTA in March. THREAT OF VIOLENCE REDUCED IN GUATEMALA The danger of violence in Guatemala over the still unde- cided 19 January presidential election has diminished as a result of the agreement reached on 27 January between General Ydigoras Fuentes, who won a clear plurality, and followers of Lt. Col. Jose Luis Cruz Sala- zar, the apparent runner-up. Cruz followers are to accept Ydigoras as president, and Ydigoras has promised to include his erstwhile opponents in an anti-Communist coalition and to give them three cabinet posts. Pro-Cruz parties control the congress, which'began its review of the votes on 27 Janu- ary and which, since no one won a majority, will have the responsibility of naming one of the two top runners president- elect. Congressional leaders expect the process to take at least ten days. The agreement was motivated by the realization that it was perhaps the only way to avoid serious political violence and also by a desire to form a united front against leftist resurgence. The residue of bitterness between Ydigoras and Cruz partisans is still strong, however, and if the pact hits a snag, serious violence is still possible. Both Ydigoras and Cruz followers are armed. Interim President Flores might well use any violence to justi- fy an attempt to continue in office. There is some suspi- cion that he may even be spread- ing rumors of impending dis- turbances along the Mexican and Salvadoran borders in an attempt to accomplish this end. Ydigoras, though supported by extreme conservatives, prob- ably could not impose a repres- sive dictatorship even if so inclined. He would, at least for a time, be checked by a gen- erally moderate-minded officer corps which has shown itself responsive to public opinion, by a congress in which his par- tisans will form a minority, at least until the next congres, sional elections two years hence, and by the safeguards written into the agreement with Cruz. SECRET PART II NOTES AND COMMENTS Page 7 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 VL.,A sL a r'CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 The leftist Revolutionary party, which polled over a quar- ter of the votes and emerged as an important political force, has apparently been left out of the Ydigoras-Cruz agreement. It will probably not, however, stage a violent protest since RUSSIAN SCHOOLS TO TRAIN MORE The Russian Republic Minis- try of Education has announced that 50 secondary schools in the republic have recently be- gun a study program designed to place students on the pro- duction line even before gradu- ation. In city schools, ninth- and tenth-grade students will study only three school days a week and devote the remaining three to factory work. Rural pupils in those grades will spend most of the winter with their academic studies but dur- ing agricultural seasons will apparently work full time for collective farms or machine tractor stations. Not only is it planned to retain all the general educa- tional courses taught in stand- ard ten-year schools, but "spe- cial disciplines, familiarizing the students with the theoreti- cal part of their selected pro- fession," will be added to the curriculum. For this season, the course of study in these 50 schools will be extended from ten to "11 or 12 years." After they complete this course, students wi .l be assigned to those factories, collective farms, and machine tractor sta- tions where they did their practice work, The regime is apparently attempting to solve the growing its leaders realize that the public will condemn any group initiating violence at this time. Party leaders are avow- edly anti-Communist, but the party is a prime Communist tar- get and is already infiltrated in its lower echelons. STUDENTS FOR MANUAL WORK social problems connected with the transition to universal ten-year education. Soviet uni- versities and two-year higher technical schools are experienc- ing difficulty in absorbing the increasing numbers of secondary- school graduates who wish to go on to further training. There is evidence of dissatisfaction among many young people who have been refused admission to higher institutions and reluc- tance on their part to enter the factory and agricultural labor force. The regime has instituted the policy of preferential con- sideration for university ap- plicants who have worked one or two years. On the other hand, factory and collective farm managers are often reluc- tant to hire secondary-school graduates, apparently because they feel the young people will leave at the first opportunity, and also because of the legal restrictions on hours and types of work they may be required to perform. This latest development appears to follow the current trend in Soviet education to- ward more specialized training at the secondary-school level. In 1956, an experimental study program was introduced in over 500 schools in the Russian SECRET PART TT NOTES AND COMMENTS' Page 8 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 Republic, whereby the number of hours spent studying "princi- pies of production" was doubled in the eighth through the tenth grades. Under that program, eighth- and ninth-grade students spent 24 days during the summer working at collective or state farms or factories. Apparently the program was successful be- cause in September 1957 it was extended to cover one fourth of all the schools in the re- public. The new experiment might ultimately lead to a dual sys- tem of secondary schools, with admission to the traditional academic ten-year schools--and therefore to higher institutions' liift fed - to "bright'' students, and the less able youngsters shunted first into the 12-year technical schools and from there into the labor force. More immediately, however, the techni- cal secondary schools are prob- ably intended to ease the enroll- ment pressure on universities and higher technical schools and to adjust an increasing number of secondary school students to 25X1 becoming industrial and agricul- tural workers rather than me of the inte ligentsiaa (Concurred in by OSI) 25X1 POLAND'S ECONOMIC PLAN FOR 1958 Poland's economic plan and budget provide for appreciable economic advances in 1958 over 1957, but the decline in the rate of growth which began in 1950 is to continue. Consumer goods production is to be em- phasized, but':the necessity of restoring depleted reserves and of reducing foreign credits precludes any appreciable im- provement during 1958 in the low standard of living. Industrial output is slated to increase during 1958 by about 7 percent'-over the 1957 1 eve1, ...Em- phasis on the output of consumer goods is to continue, production being set at 8.4 percent above 1957 output, while heavy industrial pro- duction is to rise 5,5 percent, in con- trast to the trend in the other satel- lites. Agricultural output is to increase about 4 percent but will not be suffi- much-publicized abolition of compulsory farm produce deliv- eries, The Polish budget-_12 per- cent higher than the record 1956 budget--is in line with the economic plan in programing increased economic activity in 1958. It provides for a small increase in national defense expenditure over the low 1957 figure and an increase in in- vestments of about 7 percent. It substantiates the moderate trend toward administrative decentralization by reducing the proportion of budget funds POLISH INDUSTRIAL PR (OFFICIAL PERCENTAGE INCREASES OVER PRECEDING YEAR) 1949 1950 1951 cient to permit the 80JANUARY 1958 SECRET 1952 1953 1954 1955 (PLAN) 80128 4 PART II NOTES AND COMMENTS Page 9 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 passing through state channels and the proportion of total in- vestments financed through the budget. Despite the increased out- put scheduled, the standard.of living will not rise as much during 1958 as it did during 1956 and 1957. There will be no significant improvement in the amount and variety of food available because food exports are to increase 33 percent. Industrial consumer goods and housing will continue to be extremely scarce. Reserves of food and consumer goods which were depleted in 1957 to satis- fy demand are to be restored this year, and the use of ex- pensive short-term credits is to be restricted. Possibly as much as 50 percent of the in- crease in personal consumption in 1957 was financed by foreign credits. As in 1957, the urban worker will benefit least from any small improvement that ma- terializes in living standards, and discontent among urbanites will probably increase. Despite increases in wages, real incomes rose little in 1957, except in the case of selected categories of workers such as coal miners. Gomulka has warned all workers that they can expect higher wages this year only if they work harder and more effectively. In contrast to the Polish peasant, whose real income rose 18 percent between 1955 and 1957 and whose morale is high- est among farmers in the bloc, the depression of the Polish worker continues to deepen with the dim prospect of improvement in his standard of living. His attitude is exemplified by a radical increase in absenteeism and alcoholism and by sporadic strikes, which will probably be more frequent in 1958. Prepared by ORR) HUNGARIAN GOVERNMENT CHANGES The changes in the Hungar- ian Government which occurred on 27 January during the Nation- al Assembly session suggest no significant change in internal policy, although the replace- ment of the moderate minister of culture by a hardline Com- munist appears to presage a further tightening in the cul- tural sphere. The reshuffle, was probably designed to com- plete the return to "normalcy" before Hungary enters 4 period of rigorous consolidation of Communist control. The relinquishment of the premiership by Kadar, who re- tains party leadership, will enable him to devote more time to rebuilding the party into an effective instrument of con- trol for the Communists. At the same time, some persons who were of value during the postrevolutionary phase because of their national Communist or liberal backgrounds--offering the best chance of some support from the hostile Hungarian pub- lic--may be forced into the background in favor of more reliable, militant figures. Premier Kadar and Minister of Culture Kallai, both moder- ates, stepped down in favor of First Deputy Premier Muennich and Valaria Benke, respectively, allegedly so that Kadar and Kallai could devote more time to their party duties. Concur- rently, Stalinist Antal Apro moved up to first deputy premier. Muennich is a Moscow-educated old-time Communist who proved SECRET PART II NOTES AND COMMENTS 1 - 10 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 his loyalty to Moscow by organ- izing and heading the security organs after the 1956 revolu- tion. There is little evidence of any'rivalry between him and Kadar. Kadar and Kallai remain in the government as ministers of state, positions which will enable them to oversee but not to administer government policy. Kallai is taking over leadership of the regime's major mass organ- ization, the Patriotic People"s Front--perhaps as part of a move to expand its activities. Benke, former head of the Hungarian radio and noted for her advocacy of a hard cultural line, will probably be more in- clined than her predecessor to follow a repressive policy in the literary sphere in line with Stalinist desires. The position if Kadar, who may still be regarded with some suspicion by the USSR because of his past "national Communist" associations, appears to have been restricted by the promotion of Stalinist members Of the re- gime. As head of the party, he nevertheless will retain a powerful position as long as he serves Moscow's pur- poses. Peasants in eastern Ruma- nia are resisting stepped- up regime pressures for complete collectivization least two uprisings may have been suppressed by Rumanian or Soviet troops thus far centered on the Iasi region and the riparian areas of Galati and Constanta, along the Danube. Although peasants in these areas have been relatively pas- sive in recent years, they have been the subject of particular attention during the regime's 1957-1958 collectivization cam- paign. During 1957 the total percentage of-arable land in collective units rose from 17.5 to 31 throughout Rumania, but in Constanta, Iasi, and Galati the increase was- even more marked. Land which originally had been taken into intermediate peasant cooperatives was sum- marily incorporated into state farms, thus adding to peasant resentment. On 20 October it was an- nounced that Constanta was the first of Rumania's 16 regions to be fully collectivized, and it is estimated that at least seven out of Galati's 11 dis- tricts are also fully collectiv- ized. Political-organizational work by an estimated 40,000 agitators, working on a house- to-house basis, has supplemented strong economic pressures. The regime may be willing to risk even extreme measures at this SECRET PART II NOTES ANn rOMMENTS Page 11 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 30 January 1958 time because of the margin of safety pro- vided by a record harvest in 1957. C2 H UI N G A R V inhabitants of the village of Suraia were killed or hos- pitalized as a re- sult of action by So-ry U GO 8 L A' L A,' viet troops. On 26 January two "columns' of Soviet forces were reported moving to- ward the city of E Focsani, ten miles west of Suraia. A revolt was also reported in an unnamed, nearby village. The Turkish consul in Constanta re- ported the same day that pres- sures for collectivization were meeting strong resistance, re- quiring armed intervention in areas of the Galati region, in- cluding Braila and Focsani, and in the Tulcea district of the Constanta region. Western observers in gen- eral have been denied access to these areas since 18 January, although the Tulcea area was not closed until 27 January. Furthermore Greek nationals living in Galati have been de- nied permission to visit Bu- charest for nearly a month6 The US air attache, however, was granted permission to fly to Iasi within the past week. Earlier speculation that these restrictions were designed to hide maneuvers by Warsaw Pact armies would seem to be weakened by the inclusion of Tulcea, where the terrain is not suitable for large-scale maneuvers. The US air attache reported the area blanketed by heavy snows which delayed his return to Bucharest from Iasi for more than 24 hours. The attache, who heard rumors of Soviet troop rotation while he was in Iasi, now believes they were a "plan t," intended to cloak the real reason for denying tra vel requests from Western dip loma ts. CHINESE COMMUNIST NATIONAL PEOPLE'S CONGRESS Peiping has announced that plenary sessions of the Nation- al People's Congress (NPC), which was originally scheduled to convene on 25 January, will begin a week later after con- clusion of "preparatory" meet- ings addressed by top regime leaders. This delay suggests that the Chinese Communists are making last-minute changes in the agenda and want to give delegates more time to become familiar with their scripts. SECRET PART II NOTES AND COMMENTS Page 12 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 U. SS I Marasestt? ? ?Ksra Foceanl Galati Braila UU ?^Palcea d: 8 L A CI K ConsItanta. Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 The most likely addition to the business of the congress is the removal of government of- ficials accused of political deviation. Some recent meet- ings of the provincial con- gresses have already been used for this purpose. The NPC, on paper the "highest organ of state power" but in fact a rubber stamp body, would be an appropriate instrument for the latter as- signment. The last session-- held from 26 June to 15 July-- was used to launch the regime's antirightist campaign which followed stormy criticism of Peiping's policies and the Chi- nese Communist party during the spring of 1957. The 1 Feb- ruary date for convening this special session of the NPC coincides with the official end of the second phase--the: attack on rightists"-'in 'the rectification campaign. Three ministers who have been under heavy attack since last summer--Communications Minister Chang Po-chun, Food Minister Chang Nai-chi, and Timber Minister Lo Lung-chi-- are expected to resign in dis- grace along with some of their key subordinates. The Ministry of Building Materials Indus- try was singled out for of- ficial criticism about two weeks ago and will probably yield additional victims. Lai Chi-fa, the Communist party member who heads this organiza- tion, has already confessed to mistakes in leadership which permitted "counterrevolutionary elements" to penetrate sub- ordinate offices of the ministry. The announced agenda of the congress calls for discus- sion of the 1958 draft economic plan and budget, a plan for phoneticization of the Chinese language, and a program to "readjust" government organs SECRET PART II NOTES AND COMMENTS Page 13 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 subordinate to the State Coun- cil. The nature of the contem- plated readjustments is sug- gested by resolutions issued last November which ordered that certain activities of ministries dealing with light industry, the food industry, forestry, textile industry, building construction, and com- munications be removed from the direct control of the ministries in Peiping and placed under the regional and local authorities. At the same time, the planning system was simplified so that economic plans would be less rigidly determined from Peiping. Cer- tain of the ministries and com- missions which have lost part of their functions may now be abolished or amalgamated. This would be in line with Peiping's demonstrated determination to reduce the capital's bureauc- racy. (Prepared jointly with ORR) bitious ones. The 1958 annual economic plan and budget to be presented to the congress will probably call for large increases in production and investment over _ last year's relatively modest goals. Plans of this nature would be a natural outgrowth of the regime's campaign over the past few months against the "conservative" outlook in eco- nomic matters. The People's Daily has defined a "conserva- tiv as one who thinks that too much was attempted in 1956, who regards the long-range agricultural plan as "too im- petuous," and who feels that the five-year plans have been "off the mark." The regime has noted approvingly the high agricultural targets set by various provinces. Various enterprises have already re- 25X1 placed goals drawn up since mid-1957 with new and more am- Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY' SUMMARY 30 January 1958 PEI PI NG' S NEW MILITARY Peiping has issued new regulations governing the dis- charge of all army personnel conscripted after 1 November 1954. The regulations provide for preparing servicemen for civilian life and for easing the tensions between civilians and veterans, a problem of considerable concern to the re- gime. The approximately 800,000 army men slated for discharge this year comprise the first group conscripted under the provisions of the military con- scription law. According to the new regulations, these men are to undergo intensive pre- separation training covering "socialism, patriotism, produc- tion through labor, participa- tion in the militia force, ob- servance of government decrees, unity with town and cooperative cadres, establishment of good relations with the masses, and the revised draft national pro- gram for the development of ag- riculture." Farewell parties are to be held by the military units for DISCHARGE REGULATIONS the discharged servicemen, and welcoming parties are to be or- ganized by the people's coun- cils of their home villages. The new regulations provide for retirement bonuses and bene- fits for those disabled on ac- tive duty. Those discharged are required to make application for reserve service. In September 1956, Defense Minister Peng Te-huai warned veterans that they were demand- ing too much from the party and government without contributing their full share to "peaceful production." Shortly there- after, a Defense Ministry di- rective ordered all units to perfect demobilization work dur- ing 1957 in order to facilitate the veterans' transition to civilian life. The new regula- tions complement the "Support the Government--Love the People" program and the rectification campaign within the armed forces, both of which were instituted last ., year 'to: reduce fric- 25X1 tion between the civilian populace and servicemen includ- ing veterans. LAOTIAN GOVERNMENT TAKES OVER FORMER PATHET LAO BASE AREAS The Pathet Lao has, for the most part,, complied with the military provisions of the unfication accords. Laotian Army forces totaling 11 bat- talions encountered no opposi- tion in their recently com- pleted reoccupation of the two provinces formerly held by the Pathet Lao. Royal government functionaries are expected to proceed into the two provinces in large numbers once the mili- tary units are settled in posi- tion. The main communication routes to North Vietnam and China Will be sealed off, and the government-appointed admin- istration will begin to func- tion in the two provinces after three and one half years of Pathet Lao control. The number of Pathet troops arriving with their weapons at the regroupment centers prior SECRET PART II NOTES AND COMMENTS Page 14 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 as proof that the set- tlement accords recog- nized the Pathets on terms of equality with the government, and are urging the people to disregard the or- ders of government functionaries. Demobilized Pa- thets returning to their home villages in Sam Neua reportedly are organizing clan- destine cells, and this pattern will doubtless be followed throughout Laos dur- ing the next few weeks. In addition, the gov- ernment's amnesty to political prisoners is already reported to have given a boost to both the Pathets and the fellow-travel- ing National Union party. In taking the gamble of exchanging its military base for to the 18 January deadline swelled to about 7,200, includ- ing some dependents, out of the estimated total Pathet strength of 7,500. It is still believed likely, however, that the Pa- thets have cached some small arms and that a small nucleus of armed men will continue to hold out and engage in harass- ing activity against the govern- ment. Pathet propaganda cadres in Sam Neua Province have been holding nightly meetings to con- dition the population for the shift to a period of "political warfare." The cadres are point- ing to the 50-50 division of administrative posts in the two provinces between govern- ment and Pathet functionaries tive parties. with the left-wing National Union party, and may col- laborate with the conserva- legitimate political status, the Pathet Lao undoubtedly believes that its dynamism and superior organization will give it an edge in competition with the traditional Laotian political parties. The conservative par- ties seem alive to this threat. Chiefs of the leading conserva- tive parties--the Nationalists and Independents--have signed an agreement to support a joint- ly approved slate of candidates for the 4 May supplementary elections. There are also tenta- tive signs that the small, con- servative Democratic party is breaking its unnatural alliance SECRET PART II NOTES AND COMMENTS Page 15 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY $.ARY 30 January 1958 ICELANDIC MUNICIPAL ELECTIONS The Icelandic municipal elections on 26 January result- ed in an impressive victory for the Conservative party, the chief opponent of the governing coalition of Progressives, So- cial Democrats, and the Commu- nist-front Labor Alliance. .Since the popularity of the na- tional government became an is- sue in the elections, the re- sult will stimulate Conservative attacks on the coalition. The three parties may thereby be forced into greater dependence on each other, thus making it unlikely that the government coalition will break up in the near future. The strong posi- ICELANDIC PARLIAMENT 24 JUNE 1956 ELECTIONS that their more favorable show- ing in the 1956 parliamentary elections resulted only from their electoral alliance with the agrarian Progressives. In Reykjavik the Progressives in- creased their popular vote con- siderably. The results of the munici- pal elections and the outcome last week of the trade union elections in Dagsbrunn, the un- skilled workersunion in Reykja- vik and the largest single un- ion in Iceland, indicate that the hard core of Communist strength remains relatively un- eroded, Despite a determined Social Democratic - Conserva- tive effort to dislodge them, the Communists in Dagsbrunn ob- tained 58 percent of the vote-- as against 65 percent in 1954, the last time their control of the union was challenged--but almost the same number of votes. tion of the pro-US Conservatives will discourage any intent by the coalition to revive its policy of opposition to US bases. The Conservatives obtained 57.7 percent of the vote in Reykjavik, winning 10 of the 15 seats in the city council, and in the country as a whole they received approximately 52 per- cent of the vote, obtaining a majority in 14 of the larger towns. The Labor Alliance re- ceived almost 20 percent of the vote and kept its three seats on the Reykjavik council, al- though its total vote declined some 25 percent in comparison with the parliamentary elections of June 1956. The Labor Al- liance also retained its strong- holds of Kopavogur, a suburb of Reykjavik, and Neskaupstadur on the east coast. The Social Democrats suffered a serious defeat, confirming the view Despite press reports, the coalition government does not appear in any danger of disrup- tion. The government?s majority in Parliament remains secure, and the Social Democratic party, the least enthusiastic member of the coalition, probably in- tends to stick with the cabinet alliance headed by Progressive Prime Minister Hermann Jonasson. The Social Democrats would fade into political impotence with- out the support of the Progres- sives, and neither the.Progres- si've party, nor the Labor Alli- ance stands to. gain by a breakup. The outcome of the election reduces still further the pos- sibility that the coalition might revive its opposition to US bases in the near future, or that it would call for resumption of ne- gotiations with the United States looking toward withdrawal of US forces from the NATO air base at Keflavik. SECRET PART II NOTES AND COMMENTS Page .16 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 CUNFIDLN I INL E CURRENT INTELLIGENCE WEEKLY S'VVM 30 January 1958 PATTERNS AND PERSPECTIVES CHINESE COMMUNIST POLICIES TOWARD UNDERDEVELOPED AREAS Communist China, taking an active role in bloc efforts to supplant Western influence in underdeveloped regions, concen- trates chiefly on a propaganda offensive, cultural exchanges, and trade. Peiping's primary target is Southeast Asia, but it is becoming increasingly ac- tive in the Middle East, Africa, and Latin America. In addition to working for the advancement of bloc interests in these areas, the Chinese hope to win wider diplomatic recognition and in- ternational acceptance. Only recently embarked on their own industrial development, the Chinese have gained prestige by extending or offering economic aid to other underdeveloped countries--Egypt, Yemen, Burma, Nepal, Cambodia, Ceylon, and Indonesia. Chinese aid thus far offered to these countries totals about $100,000,000. Peiping like Moscow sus- tains a sizable propaganda ef- fort in aligning itself with nationalistic and anticolonial- ist sentiment. The West, par- ticularly the United States, is persistently vilified for "imperialistic" activities in underdeveloped regions. Pei- ping initiated a series of daily radiobroadcasts to Arab states in November, and a similar se- ries to Latin America in De- cember. Chinese propaganda direct- ed to the Middle East and Latin America invites underdeveloped countries to model their efforts on Chinese experience to achieve independence from the West. The Chinese pose as members of the "colored race" who have suc- cessfully overthrown "imperial- ist aggression" in acquiring independence. Chinese books, pamphlets, and other literature are found in increasing quanti- ties in the Middle East and South America, and all develop this theme while chronicling the advances made on the main- land under the Peiping regime. To spread their influence in areas where they lack diplo- matic representation, the Chi- nese continue to rely on "peo- ple's diplomacy'--widely varied cultural exchanges--and are financing an increasing number of mainland visits by groups from the Middle East, Africa, and Latin America, as well as from Asian states. Most of the travelers return home with glow- ing accounts of Chinese achieve- ments and thus can serve to popularize the Peiping regime. Businessmen and traders among the travelers often come away with dazzling visions of China with its population of about 640,000,000 as a poten- tially lucrative market. Play- ing on this, the Chinese have sent trade missions on exten- sive travels and have received similar missions from abroad. Hampered by shortages in for- eign exchange and committed largely to the bloc for foreign trade, the Chinese have signed no extensive trade agreements with free world countries, but they cultivate a belief that the possibilities for trade in the future are good. The Chi- nese frequently equate "maximum" trade arrangements with early diplomatic recognition. There is evidence that Peiping may be playing an im- portant role in guiding the activities of some foreign Com- munist parties. Peiping has influenced party affairs in a number of Asian countries over the past decade, and some Com_- munist leaders in Latin America, as well as those in Egypt, are beginning to place greater em- phasis on Peiping as a source TJAL 'PART TTT PATTERNS AND PFTY.SPVV1rtvie Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 of ideological guidance, with- out rejecting, cow9s recognized supremacy. Communist China's politi- cal and economic drive in under- developed areas is concentrated in South and Southeast Asia, ve where the long-term objective is an alignment of states which can be dominated from Peiping. One of the means now being em- ployed is trade. Approximately 25 percent of China's $1 billion worth of annual trade with the free world involves this area. For the most part, Peiping supplies Southeast Asia with inexpensive Chinese-manufactured goods rather than the raw lma- terials with which it supplies other free world markets. This tends to promote the view that China is rapidly approaching industrial self-suffncy. pol- Moreover, Chinese pricing icies are designed to eliminate competition from Japan and Kong and make Southeast Asia dependent on the mainland. By quoting prices well below those prevailing in the market and by offering favorable payment terms, Peiping is able to under- cut the position of private traders. The Overseas Chinese, many of whom are influential in the politics and economies of their host countries, are important targets for Chinese Communist strategems. Embassy staffs give advice and guidance to pro-Com- munist Overseas Chinese indiv- iduals and organizations and help promote their causes. Local branches of the Peiping- controlled Bank of in and Burma, Malaya, Indonesia, loans Singapore offer easy-term Overseas Chinese merchants to purchase exports from the mainland. In some cases such loans are extended inreturn o for the borrower's promise support Communist objectives. The extension of economic aid is a newer device for Pei- ping, one which the regime's officials admit sdifficult be- to use to any great cause of limited resources. China's first venture in for- eign aid was made in the sum- mer mer of 1956, with a grant $22,400,000 to Cambodia. That fall it extended aid worth al. $13,000,000 to neighboring Nepal. Since then, the Chinese have offered low-interest loans of $20,000,000 to Indonesia b used in building up sumer industries, and $4,200,- 000 to Burma for a textile mill. Last September, a grant of $15,- 750,000 was made to Ceylon for the rehabilitation of Ceylonese rubber plantations. Except for $4,200,000 in cash given Nepal, this aid to Asian countries has involved light industrial soldgoods, which in many cases the receiver countries to gener- ate funds for the domestic economy. Peiping boasts that its aid has "no strings attached." It is tailored to the economic requirements of the countries concerned and in some cases is particularly well matched with Soviet approaches. The aid to Ceylon's rubber replanting pro- gram, which was offered at the con- end of China's five-year at prices tract to buy well above the market level, has been followed by a Soviet offer to buy most of Ceylon's s rubber output at top prices. Middle East and Africa The Chinese have followed the Russian lead in noisily backing Arab causes, and have aligned themselves with Egypt, Syria, and Yemen on all issues involving the Middle East. The Chinese effort in the area is almost entirely political, but in some cases pledges of friend- ship have been backed byea co- nomic nomic aid. Peiping gave gift of $5,000,000 to Egypt SECRET __ ~A,rq,RRNS AND PERSPECTIVES Page 2 of 16 PAR7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 during the Suez crisis in 1956 and recently extended an inter- est-free credit of $16,500,000 to Yemen for purchases of ve- hicles and other commodities from China. The Sino-Yemeni agreement, worked out by Chou En-lai and Crown Prince Badr during the latter's visit to China in December and January, calls for the Chinese to send road construction technicians to Yemen and for the training of Yemeni students in Chinese schools. Trade between China and the Arabs amounts to about $40,000,000 annually, most"of it involving Egypt. Cultural exchanges between China and the Arab countries are increasing and visits of high-level officials are in the offing. Chou En-lai is planning to go to Cairo, and probably Damascus, later this spring. No date has yet been announced for Nasir's projected tour of the Far East. Peiping is active in Africa also, working to increase trade and promote bloc interests. Chief targets are the newly in- dependent governments from which Peiping seeks diplomatic recog- nition. The Chinese see trade and "people's diplomacy" as intermediate steps toward this goal. Morocco, Tunisia, Ghana, and Sudan are the prime objects of Peiping's attentions. Latin America As in the Middle East, the Chinese rely primarily on propa- ganda in contributing to bloc attempts to penetrate Latin America. Chinese activity is supplemented by a trade drive. Tours of South America by Chi- nese Communist entertainment troupes have helped to focus some Latin American interest on China. There has been limited trade with Mexico, Argentina, Brazil, Uruguay, and Cuba, and a Chinese commercial delegation in 1957 made a seven-month tour of Argentina, Chile, and Uru- guay in hopes of landing sig- nificant trade contracts. No trade or payments agreements were reached, but reports sug- gest the Chinese may have made some headway in Uruguay. If, as the Chinese hope, a perma- nent trade mission can be posted there, Peiping will have its first representation in the western hemispher e (Prepared jointly ORR) SOVIET PRICE REFORM DISCUSSION For the past year, Soviet economists have been discussing pricing policies in an effort to cope with the growing size add complexity of the economy. As more decisions are entrusted to lower echelons in connection with the regional reorganiza- tion of industrial management, it becomes increasingly impor- tant that these echelons, as well as planners in Moscow, work with prices which realis- tically reflect production and consumption conditions. Al- teration of the price system is also aimed at eliminating obvious anachronisms such as the use of prewar labor norms and wage rates in determining production costs. In its wider implications, the debate could bring into question certain basic Soviet tenets which deny that a price system can be efficient as an automatic regulator of a so- cialist economy, and stress the role of centralized planning. In view of the increasing at- tention being given to more ef- ficient use of resources in the USSR as one way of promoting SECRET PART III PATTERNS AND PERSPECTIVES Paap Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 economic growth, fundamental questioning of economic dogma may well persist. The debate involves staff members of the Academy of Sciences, Gosplan experts, uni- versity professors, factory managers, engineers and tech- nicians, and students. It began in specialized newspapers and magazines on economics and was taken up by statistical conferences, public meetings, and by party journals such as Kommunist and In Aid of Politi- cal Se -Educati n. The appraisal is concerned particularly with the pricing of producer goods, such as raw materials, semifinished goods, and machinery. Prices for some of these goods now do not cover the cost of production--a de- viation from the standard pric- ing doctrine in the USSR. In addition, prices often do not reflect abundance or scarcity relative to the demand for goods. Unduly low prices for high-cost or scarce commodities encourage their wasteful use. Two Schools The proposals advanced to correct these deficiencies fall into two general categories. One school--represented by Strumilin, Kronrod, and Kondra- shev of the Academy of Sciences --has advocated an across-the- board increase in industrial wholesale prices. A uniform percentage markup, combining profits and excise taxes, would be fixed for all industrial production, and would be cal- culated as a percentage of wage costs or of total cost. At present, although the profit rate is planned in rela- tion to total cost, rates vary for different industries and excise taxes vary widely. Price differences under the revised arrangement would reflect dif- ferences in either labor costs or total cost. According to Soviet estimates, however, such an increase would cause a 100- percent rise in the producer goods price level, because of its cumulative effect, since some producer goods are used in the production of other pro- ducer goods. The second school is rep- resented by Professors Bachurin and Turetsky, Gosplan price ex- pert Mayzenberg, Ostrovityanov of the Academy of Sciences, and Gatovsky, editor of Problems of Economics. Thisschool op- poses a general increase in industrial wholesale prices, on the grounds that it would not meet what they consider the primary need of price reform-- a system of prices which more accurately reflects scarcities and real costs. This group also believes such an increase would violate the policy of making periodic reductions in producer goods prices as costs decline. Instead, this school pro- poses selective increases or decreases in industrial whole- sale prices--the differing rates of profit to reflect relative scarcities. For example, prof- its would be higher in extrac- tive industries than in machine building, which in turn would have a higher profit. rate than light industry. Were industries to retain and invest their prof- its, expansion could be ef- fected in those industries where it was required. This scheme would reverse the present prevalence of higher profit rates in light industry than in heavy industry. Retail Prices Exempt Neither group, has proposed major changes in retail prices. Any increase in costs in light industry caused by an increase in producer goods prices would,. according to both schools, be at the expense of excise taxes or profits rather than retail prices. However, since it is generally agreed that the level of retail prices must be high enough to absorb the money income of the population, return to the practice of annual general retaii'pric a cuts. of SECRET PART III PATTERNS AND PERSPECTIVES Page 4 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Ift"Aw SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 1948-1954 is unlikely, although adjustments .inL -the.- prices, of certain consumer goods and services are recommended by some economists. Neither group has advo- cated changes in the general level of agricultural procure- ment prices. While endorsing the price increases established in 1953-1955 as being necessary to stimulate lagging agricultur- al output by-increasing farmers' incomes, Soviet economists also endorse the principle of keep- ing agricultural procurement prices substantially below re- tail prices. From this "spread," the state is reimbursed for the land and services it provides agriculture and avoids greater reliance on direct income taxes. However, some adjustments have been advocated in the prices of individual agricultural prod- ucts, such as an increase for livestock and a reduction for flax. In addition, some writ- ers have recommended the adop- tion of a single form of state procurement at a single price-- instead of the present system which calls for obligatory de- liveries to the state at one price and above-quota sales to the state at another higher price. Recent issues of Kommunist, the chief party journal, have given some clue to what the of- ficial line on price reform may be. It appears likely that ad- justments will be made in the most conspicuous cases of under- pricing--coal, for example, A decision may be taken to re- duce or eliminate subsidies judging from the price increase and the elimination of sub- sidies on timber decreed early in 1957. Timber had been sold for many years at a loss. How- ever, it seems probable that a general price change will come only when the planned re- valuation of fixed assets and the revision of amortization rates are completed in 1959. According to views expressed in Kommunist, the periodic whole- sale price changes for industry should take the form advocated by the second school--selective, specific price adjustments. Prepared by ORR) 25X1 The prospects for Middle East oil production in 1958 are for, a r0cord - ye;gx, . , with levels substantially above those before the Suez crisis in late 1956. All major Middle East crude producers except Iraq, had fully recovered from the Suez crisis by mid-1957. By the end of 1957, over-all Mid- dle East production had in- creased about 2 percent over 1956 and some 8 percent com- pared with 1955. Leading the improvement was Iran, which increased produc- tion to 725,000 barrels per day, almost 34 percent over the pre- vious year, and,exceeded,'for the first time the output level of 1950, the year before nation- alization of the oil industry. Least affected by the Suez closure, the Iranian oil situa- tion seemed to be moving- SECRET PART III PATTERNS AND PERSPECTIVES Page 5 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SU1- ARY 30 January 1958 contrary to established oil in- terests for a while last year when the government-owned Na- tional Iranian Oil Company signed an agreement with the Italian government-controlled national oil company ENI to ex- ploit jointly onshore and off- shore concessions. While this agreement calls for the usual 50-50 percent profit split, its provisions are such that the Iranian Government will receive 75 percent of the profits. The SECRET Oil pipeline ------ Proposed oil pipeline Metline trunk system Metline feeder system 30 JANUARY 1958 Oil pipeline ----- Proposed oil pipeline == Metline trunk system 30 JANUARY 1958 O MILES 500 agreement thus poses a potential threat to the 50-50 formula widely used in international oil operations. The Italian deal, however, is unlikely to have any appreciable effect in the next several years on the operations of other Western companies, since neighboring oil countries have adopted a wait-and-see attitude toward. possible renegotiation of oil agreements. Soviet- proposed pipeline 'ill)' 'fill Sea Rasht PART III PATTERNS AND PERSPECTIVES U2174:1 F of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET "CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 CRUDE OIL SITUATION 1957 PROVED RESERVES PRODUCTION BILLIONS OF BARRELS TOTAL 53 168.7S The Italian company plans to spend $6,000,000 in the next four years and $16,000,000 in the succeeding eight, whereas the consortium of almost 20 other Western companies operat- ing Iran's oil industry will spend $140,000,000 in 1958 alone. The consortium, moreover, pays profits in hard currencies and offers established trans- port and marketing facilities --advantages known to area.gov- ernments. Iran probably has the most favorable prospects in the Mid- dle East for continuing sub- stantial production increases. The growing markets of the con- sortium companies have en- couraged the group to invest heavily in the Gach Saran field in southern Iran--$53,000,000 in the next few years. This field, discovered in 1928 but held in reserve because of the special processing required for its crude, is believed by some to be the largest in the world. In 1956 it had only one pro- ducing well, with an output of TOTAL 10,444 OUSANDS F BARRELS PER DAY IRAQ QATAR 136 only 231 barrels a day. In 1957, 12 wells were producing a total of 43,000 barrels per day, and present plans call for construc- tion of several processing plants each to handle 150,000 barrels per day. Progress on the government- owned and .'-oper.a.ted Qom. st-r.ike has been steady if unspectacular. The Qom wildcat, located more than 200 miles from any other Iranian field, was brought in in 1956 and, uncontrolled, gushed about 80,000 barrels a day until the well collapsed. An American syndicate has agreed to finance construction of a pipeline from the field across Turkey to the Mediterranean. Implementation of this project, however, depends ultimately on sizable proved reserves at Qom. The USSR reportedly has offered to participate in Iran's oil industry through a guarantee to purchase crude from areas yet to be exploited and to build a pipeline from Iran under the Caspian Sea across the USSR to SECRET 3,498 PART III PATTERNS AND PERSPECTIVES Page 7 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 the Black Sea, apparently ter- minating near Batumi. There has been no official Iranian acknowledgment of the offer. Iraq Iraq's crude production in 1957 averaged- only about 440,- 000 barrels per day--35 percent below 1955--a direct ;result of the destruction of pumping sta- tions of the Iraq-Syria-Lebanon pipelines during the Suez crisis. These lines, which had a capac- ity, of about 534,000 barrels per day just before the Suez closure, were carrying less than 390,000 barrels a day in September 1957. Although they are to be restored to the pre- crisis level this year, Iraq's general transportation bottle- neck will still keep output at about the 1955 figure, During the first. half of 1957 the major Middle East oil companies discussed construc- tion of a pipeline--the so- called Metline--from Iraq through Turkey to the Mediterranean to absorb increases in Iraq's production. The line was also expected eventually to carry crude from Kuwait, Iran, and possibly Saudi Arabia. The proposal has been indefinitely shelved, however, largely be- cause of Iraq's reluctance to offend its Arab neighbors, and also because of differences be- tween the companies concerning the advantages of a pipeline over supertankers. Fao, Iraq's only port, cannot handle more than 200,000 barrels a day. Con- struction of a second part now- planned at the mouth of the Shatt-al-Arab River, however, would allow substantial produc- tion increases. Thus far neither economic activity in general nor Iraq's ambitious development plans-- which are completely dependent on oil revenues--have been meas- urably affected by decreased oil production. The cutback in oil revenue was made up from substantial reserves built up in previous years by the Iraq Development Board--amounting to over $200,000,000 at the time of the Suez closure--and loans from the Iraqi Petroleum Com- pany (IPC). Minister of Fi- nance Nadim Pachaci has ac- knowledged, however, that fiscal 1959 will probably be an "aus- terity" year. Spending will be cut somewhat to reduce the $36,000,000 deficit originally envisioned, and Pachaci also hopes to postpone until January 1959 payments on the IPC loan due this July and to receive an additional $13,000,000 to $15,000,000 from the IPC. Saudi Arabia, almost as hard hit by the Suez crisis as Iraq, had only a modest crude production increase in 1957. The year's average was 990,000 barrels per day, only 0.4 per- cent over 1956 and about 12 per- cent below Kuwait, still the area's record producer. There were, however, several significant petroleum develop- ments. The Safaniya field--the Persian Gulf's first offshore field, discovered in 1951--was brought into production in April following completion of a 140- mile 22-inch pipeline to loading facilities at Ras Tanura. The line is expected to carry up to 175,000 barrels a day by mid- year. The Arabian-American Oil Company (Aramco) in late Novem- ber brought in an offshore wild- cat at Manifa which reportedly hit a new producing formation of unknown size. Onshore, two important dis- coveries were made this year. The strike at Khurais may be one of the most important to date. Khurais is near the west- ern border of the Aramco conces- sion adjacent to a large area SECRET PART III PATTERNS AND PERSPECTIVES Page 8 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET 30 January 1958 in which the company has only "preferential rights"--i.e., the right to meet any compet- ing bid. Also in 1957, Ain Dar Number 56 was brought in, extending the Ghawar field 12 miles northward. This field, the largest in Saudi Arabia, now is 152 miles long and about 16 miles wide 5 The capacity of the 735- mile Trans-Arabian Pipeline (Tapline'), which terminates at Sidon, Lebanon, is being. stepped up this year to 435,- 000 barrels a day as compared with 325,000 barrels a day be- fore the Suez closure. A Japanese mission which visited Riyadh in December to discuss a concession agreement, in Saudi Arabia made little progress. The Japanese, how- ever, did obtain the concession to exploit Saudi Arabia's half RAS 1 /If"1 r71'1 F N .I.- ,CAI Agabah WADI FEIRA rr BELA YIM `k1 URGHADA E GYP T NEUTRAL ZONES El ? Oil field Oil pipeline - - Proposed oil pipeline Arabian American Oil Company concession Arabian American Oil Company, area of preferential concession rights S A U D I rABQAI t~ 1 AND DMAN) ,QATAR Al Huiuf AD DAWHAH A WAR Jidda!o ?MECCA 11 Port Sudana SUDAN I KHARTOUM J r interest in the Neutral Zone's offshore areas. Neutral Zone In terms of Middle East oil, the Neutral Zone between Kuwait and Saudi Arabia is in- significant, with crude pro- duction averaging only 65,000 barrels a day in 1957. How- ever, production will probably increase to 100,000 barrels a day this year. The Saudi-Japa- nese agreement, has given the zone a new importance. The onshore areas of the Neutral Zone are under conces- sion to two American firms, the Getty Oil Company and the Ameri- can Independent Oil Company (Aminoil). Field operations are on a joint basis. Getty received its concession from Saudi Arabia, while Aminoil is exploiting Kuwait's half KHURAIS (discovery well) A R A B I A 'YEMEN 6~SANA -- / COLONY OF ADEN FR. SOM. (urc.) SECRET Os" MUSCAT Z Q t PART III PATTERNS AND PERSPECTIVES Page 9 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY ? RAUDHATAIN (nonproducing) MILES 50 24846 interest. Each company pays its consignor country roughly 50 percent of the company's profits. The agreement assigning Saudi Arabia's half interest in the Neutral Zone offshore area to the Japanese group is the first to depart specifically from the 50-50 profit split prevailing in the area. Saudi Arabia will participate in the management of the company and apparently will receive 56 per- cent of the profits of transpor- tation, refining, and marketing as well as production. The agreement is a triumph for Tariqi, Saudi Arabia's am- bitious and competent director of petroleum affairs, who has been hoping to broaden his coun- try's participation in Aramco operations and eventually to acquire for his country a share of the transporting, refining, and marketing profits of the company's operations. 30 January 1958 K U W A I T OQasr as Sabihiya KUWAIT 1 Recovering quickly from the Suez closure, Kuwait crude pro- duction,still the largest in the Middle East, reached a rec- ord high in early December of 1,405,000 barrels a day, up about 17 percent from the level just preceding the closure. The year's daily average, how- ever, was about 1,111,000 bar- rels a day, less than 2 percent above 1956. Expansion of load- ing facilities to accommodate the increasing output began at the Mina-al Ahmadi tanker SECRET PART III PATTERNS AND PERSPECTIVES Page 10 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 terminal; a new jetty, expected to be completed by mid-1959, is being built. Other facili- ties enlarged in 1957 increased loading capacities from 1,200- 000 to 1,500,000 barrels a day. The Raudhatain field, dis- covered in 1955, was confirmed last year and, while probably not as large as the Burgan field, promises to be a major producer. All 1957 production was from the Burgan and Magwa-Ahmadi fields, which boast reserves of 60 billion barrels, the largest in the world. While Kuwait is negotiat- ing with Japanese and American groups for the offshore half-in- terest in the Neutral Zone, there has been no activity re- garding the offshore area of Kuwait proper. The area on- shore and out to the six-mile limit is under concession to MAURITANIA ??` SUDAN..-? ~00000?? Kr r n_ r o T r^ u A ri SECRET the Kuwait Oil Company, in which the Gulf Oil Corporation and the British Petroleum Co., Ltd? each have a 50-percent in- terest. Algeria Algerian crude production was negligible in 1957, with only one old field about 65 miles south of Algiers produc- ing an average of 346 barrels a day. Drilling continued on four fields discovered in 1955 and 1956, however, and proved reserves increased from about 15,000,000 barrels in 1956 to about 500,000,000 last year. Ultimately, reserves from these fields may exceed 8 billion barrels--more than onshore re- serves in the Neutral Zone. The main problem in Algeria is transporting the oil through rebel-infested territory to the Algiers. Bougie Phitippeville j Tunis Rhardaia? ("''Colomh Bechar A L G E R I A ?In Salah 1 I !TUNISIA Biskra ? Gabes uara Tl `,- / Tripoli ?Ouarglaouggour / TIGUENTOURINE / Esso concession r ?, FEZZAN N FRENCH EQUATORIAL AFRICA PART III PATTERNS AND PERSPECTIVES Page 11 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 coast. French hopes of utiliz- ing Hassi Messaoud crude are pinned on a 112-mile 6-inch pipeline completed in December which joins the field to the railhead at Touggourt, where the crude would be transferred into tank cars for the 340- mile rail journey to the Al- gerian port of Philippeville. The first token trainload of 1,500 barrels in mid-January was delayed when rebels de- railed 20 cars in a preceding train. The pipeline, built under a $3,000,000 crash pro- gram, is expected to carry 4,000 barrels a day. An American group has proposed a $40,000,000, 18- inch pipeline from Hassi Mes- saoud to the Edjele field through Libya to Tripoli. The line would have an initial capacity of 100,000 barrels a day which lager could be stepped up to 160,000. A French group has made initial surveys on a 300-mile 24-inch line from Has- si Messaoud to Bougie On the Algerian Mediterranean coast. This line would have an initial capacity of 100,000 barrels a day which could ultimately be raised to 300,000. Libya Hopes that Libya might hold major petroleum deposits were raised in late December when the Libyan affiliate of Esso--Standard Oil Company (New Jersey)--had favorable oil shows in its concession near the Algerian border. A wildcat, which tested 280 bar- rels a day, is located just across the border from the French discovery at Edjele, where oil in commercial quan- tities was found in 1955. While substantial drilling and ex- ploration work continues through- out most of the country, the Esso well offers the strongest evidence to date of oil in commercial quantities in Libya. The future of Libya as an oil country may well be determined by the end of 19 58 . In other Libyan develop- ments, Enrico Mattes, Middle East troublemaker and dynamic head of Italy's national oil company, ENI , suffered a major setback when the Libyan conces- sion for which he was negotiat- ing was suddenly awarded to an American company. Egypt In 1957, Egypt made sig- nificant progress toward its goal of self-sufficiency in petroleum. Reversing a long- term downward trend, Egyptian crude production from all fields reached an average of 48,000 barrels a day. This 30-percent increase over 1956 was due al- most exclusively to increased production from the Belayim field on the Sinai Peninsula, discovered in 1955. The Rudeis field on Sinai, discovered last year, is also expected to be a major producer by Egyptian standards. While production increased to the equivalent of over 60 percent of total petroleum con- sumption--about 80,000 barrels a day--imports of crude remain at a high level because of the characteristics of Belayim crude. In addition to having a high salt content which ren- ders it virtually unusable. in present Egyptian refineries, Belayim crude yields practical- ly no kerosene or distillate4, which are major items in Egypt's petroleum consumption. Through its holdings in the International Egyptian Oil Company, the Italian govern- ment-owned ENI has been import- ing 15,000 barrels a day of Egyptian crude and hopes to double that amount this year. Since the Suez crisis,, nearly all Egyptian crude pro- duction and refining have been dominated by the government. Following the hostilities, Cairo sequestered the previously predominant British interests, including the largely British SECRET PART III PATTERNS AND PERSPECTIVES Page 12 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 owned refinery at Suez, handling 44,000 barrels per day. With the help of Czechoslovakia, Egypt is doubling the capacity of its own plant at Suez to about 55,000 barrels a day. Israel Israel :.ailed to make any appreciable progress last year in its search for an adequate FALLING METAL PRICES DISTURB The downward trend in prices for copper, tin, lead, .,.nd zinc is undercutting the economies of Chile, Bolivia, Mexico, and Peru--the four Latin American countries where metal ores are critically im- portant foreign exchange earn- ers. The success of the US- backed economic stabilization programs in formerly inflation- ridden Chile and Bolivia is endangered by the loss of for- eign exchange and by the pos- sibility that opposition pol- itical groups will capitalize on the threat of new US tar_ iffs. Under this pressure source of domestic oil. Al- though production from the Heletz field--the only proved field in Israel--was double that of 1956, the amount was still negligible. The 1,200 barrels a day produced in 1957 accounted for less than 5 percent of the country's re- quirements of about 25,000. Reserves are estimated at about 50,000,000 barrels. Prospects for a substantial find this year are not promising. While production was dis- appointing, the government changed its petroleum transport system markedly. Prior to 1957, no petroleum was moved through the port of Eilat on the Gulf of Aqaba. Last year, however, a pipeline from Eilat to the Mediterranean was completed along with storage facilities at Eilat for 225,000 barrels of oil. Probably as much as 50 percent of Israel's 1958 petroleum imports will pass through Eilat. The origin of this petroleum is non-Arab Iran, which continues to allow crude shipments to Israel despite ap- eals from its Arab neighbors. LATIN AMERICAN ECONOMIES Chile is turning to the Soviet Union as a customer for its copper, The Mexican and Peruvian export patterns are the most diversified in Latin America and these countries are there- fore not so dependent on a single category of exports. The affected metals neverthe- less make up about 15 and 40 percent respectively of total exports, and falling prices rill put a brake on economic growth. Only four Latin American countries are seriously affected SECRET PART III PATTERNS AND PERSPECTIVES Page 13 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY BURY 30 January 1958 Chihuahua o Q A ? MonWWey Durango w 2 Nirl-AL it-" Y ?San Luis Potosi o? MEXIICCO CITY SELECTED MINERAL DEPOSITS IN LATIN AMERICA +Copper ^ Tin A Lead 01111111111111 COSTA RICA by metal market developments. Nevertheless, action at a meet- ing of the Inter-American Eco- nomic and Social Council in late December suggests that the 20 Latin American countries have a strong feeling of solidarity as producers of primary commod- ities. Although only three produce significant quantities of lead and zinc, 15 members of the council voted to oppose an increase in US tariffs on those ores. Representatives of five countries were not pres- :ent',, and the US representative cast the only negative vote. Copper The world supply of cop- per exceeds the demand for the first time since before World War II--a fact with serious im- plications for Chile, with 65 percent of its export earnings derived from this metal; Peru, with 11 percent; and Mexico, with 6 percent. The spectacu- lar price drop, from a New York high of 46 cents per pound in the first half of 1956 to a January 1958 low of 25 cents in New York and 21.2 cents in London, seriously threatens the US-backed economic stabiliza- tion program in Chile. A drop to 24 cents would bring into effect a mandatory US tariff and might result in the deteri- oration of relations with the United States in all these cop- per-producing countries. S PANAMA DOMINICAN t REPUBLIC HAITI!;, PERU Cerra = Trujillo *+,` e Pasc Arequipa yam., ? EA BOLIVIA" BR. GUTA -~PUTANA RIN.% , r A PARAGUA ITIACO ,UIUUGUAY The high copper prices of early 1956 led to increased in- vestment by producers in im- provements and expansion, shifts by manufacturers to cheaper substitute materials, and, in anticipation of still higher SECRET PART III PATTERNS AND PERSPECTIVES Page 14 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 30 January 1958 prices, the accumulation of inventories by consumers,, but some readjustments in these situations have already oc?i cu=e. A world-wide 10-percent producers' cutback is now tak- ing place, and while copper prices may drop still further and fall below the 24-cent minimum, future price cuts will be minor compared with the drop that has already taken place. While the long-range out- look appears fairly good,'the immediate problems of overpro- duction and lower prices have caused mine shutdowns in Mex- FROM COPPER, TIN, LEAD & ZINC (MILLIONS OF DOLLARS) ico and production cutbacks in Peru, while in Chile the clos- ing down of marginal producers has been stalled only, by gov- ernment subsidies. In the event the US tariff is applied, the difficulties of the Chilean Government would be greatly in- creased in pursuing its economic reform program, which is widely known to be backed by the United States. Chile is nego- tiating with the USSR for sales of bare copper wire to the Soviet bloc in the hope of mak- ing up some of its foreign ex- change deficit. Popular. ignorance in Latin America regarding the world copper market and latent dis- trust and dislike of the large American companies continue to create a fertile field for po- litical extremists in Chile and Peru, particularly in conjunc- tion with other economic prob- lems confronting the governments. Mexico sees the threat to its copper production as proof that the United States is not aware of the effects in Latin America of US tariffs and economic policies. Tin is almost as important to Bolivia as copper is to Chile, since tin makes up about 60 percent of total Bolivian export earnings. Tin prices have dropped 14 percent, from $1.09 per pound in early 1956 to about 91 cents in 1958. The excess supply has resulted pri- marily from the cessation of strategic stockpiling by the United States in 1956 and from recent Soviet sales in the free world of an amount equal to about 4 percent of annual world consumption. Open market purchases un- der the terms of the Interna- tional Tin Agreement--which came into force between Bolivia and five Afro-Asian countries in mid-1956--have steadied the market and, by absorbing excess production, should prevent prices from declining much be- low the agreed floor of 91.25 cents per pound. Even these operations, however, are not without cost to Bolivia, since the government has had to bor- row a considerable sum of money to contribute to the buffer-stock fund. Furthermore, its exports for the first quar- ter of 1958 are under quanti- tative limits established by the Tin Council set up under the tin agreement. Lead and Zinc Lead and zinc--which are usually mined together--do not dominate any one of the Latin American economies but provide at least a tenth of total ex- port earnings in Mexico, Peru, and Bolivia. The fall in lead prices from 16 to 13 cents over SECRET PART III PATTERNS AND PERSPECTIVES Page 15 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 SECRET CURRENT INTELLIGENCE WEEKLY ;SUMMARY 30 January 1958 the past two years, and in zinc prices from 13 to 10 cents, is having a depressing effect on the economies of these countries. These two minerals in them- selves are the most important for the mining industry in Mexico, and the production of other minerals as by-products contributes a sizable amount to the economy. For example, two companies, both primarily lead and zinc producers, ac- count for 66 percent of Mexican silver production. Falling production will have an adverse effect on the Mexican budget as well as on exchange earnings because, while certain small producers have already closed mines, the larger producing companies are in an inflexible position re- garding labor. As in Peru and, to an even greater extent, in Bolivia, these companies cannot lay off workers without legal complications and without paying heavy indemnification. Produc- ers are likely, therefore, to seek increased Mexican Govern- ment subsidies to counter fall- ing production rather than to cease operations to redress the balance between supply and demand.. Peru's lead and zinc ex- ports are only about half as large as Mexico's but, since Peru's economy is much smaller, these ores play a more impor- tant role, making up 15 percent of total export revenues in 1956. As in Mexico, lead'mining SECRET in Peru brings with it an in- creased production of other metals. The Peruvian lead and zinc industry appears in worse con- dition than the Mexican. Peru is farther than Mexico from world markets and its mines are located at an altitude of 13,000 feet or higher, thus adding to transportation costs. Furthermore, the silver content of the lead and zinc ores some- times spells the difference between profit and loss, and Peruvian ores are not generally as high in silver content as Mexican ores. While most pro- ducers in Peru have thus far postponed mine shutdowns to avoid heavy labor layoff costs, only the lower cost producers are expected to continue pro- duction through 1958. Exports of lead and zinc ores from Bolivia come to only about one fourth of Peru's ex- ports, but in Bolivia's tiny economy they represented about.10 percent of total foreign exchange earnings during 1956. Because of the decline in the earnings of tin and tungsten--tungsten ore prices fell more than 50 percent in 1956-57--lead and zinc ex- ports provided 18 percent of foreign exchange earnings during the first nine months of 1957. The cost structure of lead and zinc production appears to be more precarious in Bolivia than in Peru, since Bolivia's mines 25X1 have equipment deficiencies and are even more isolated from world markets than Peru's. PART III PATTERNS AND PERSPECTIVES Page 16 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9