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February 27, 1958
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Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 tONFIDENTIAL I m . ^ w N . 0.0 II, CURRENT INTELIlGENCE WEEKLY SUMMARY COPY NO. 16 OCI NO.0034/58 27 February 1958 DOCUMENT NO. & NO CHANGE IN CLASS. 0 0 DECLASSIFIED CLASS. CHANGED TO: T.S NEXT REVIEW DATE: w1~ R - n ts CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE CONFIDENTIAL DIA and DOS review(s) completed. Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 T'HI 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- SIO,N4 OR REVELATION OF WHICH IN ANY MANNER TO AN -UNAUTHORIZED PERSON IS PROHIBITED BY LAW. Thi Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 25X1 Next 5 Page(s) In Document Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 'VLFAUL.' III L ?.?" CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 OF IMMEDIATE INTEREST President Sukarno is sched- uled to make a major speech on 3 March in which he is expected to call for an all-out campaign against the Sumatran and North Celebes rebels and their sympa- thizers. This address presum- ably will be an appeal to the people over the heads of any military and political leaders who may be reluctant to support his decision to use force.. Sukarno is also likely to renew charges of Western in- volvement in the dissident move- ment, and probably will expand considerably on the subject of "imperialist attempts" to divide the country. The 20 February incident in Makassar Strait in which a Dutch destroyer seized and disarmed a former Dutch mer- chant vessel now manned by Indo- nesians may be used as the basis for new and stronger charges of Western interference in Indo- nesian affairs. The struggle between the dissidents and the cen- tral government is intensify- ing ethnic antipathies between Javanese and non-Javanese, as evidenced by recent reactions to bombings by the govern- ment's forces. Sukarno, how- ever, has gained significant political support among non- Communist Javanese political leaders during the past week, and has the continued firm INDONESIA o MILE91,. Goo K I s i_. i f C ~~ MOR aE J/ FlOREG NEW GUINEA I (Statusin DIIsputa) PART I OF IMMEDIATE INTEREST Page 1 of 4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 support of the Communist party, which is chiefly Java-based. Army Chief of Staff General Nasution who supports Sukarno, is faced with the uncermi-n loyalty of many military units in Java from which troops almost cer- tainly would be recruited, and with the fact that considerable forces are necessary in West and Central Java to contain the long-standing Darul Islam armed dissident movement. Troops from East Java are nevertheless re- ported assembling in Djakarta presumably for use in the dis- sident provinces. Djakarta has already sent commandos to Goron- th Celebes talo in rebellious Nor to support a small body of if government troons attack Cen- t 1 Sumatra be satisfied because of a deci- sion by the Singapore government to ban shipment of war materiel to both contending forces in Indonesia. The Djakarta request suggests that South Sumatra, Djakarta's normal source for high-octane fuel, is denying supplies to the central govern- ment. The rebels have moved their headquarters from Bukittinggi to an undisclosed location in the hills to avoid further air attack and apparently are con- tinuing to count on the support of sympathetic forces in the military districts both to the north and south. Lt. Col. Barlian in South Sumatra has stated he will not permit government troops to move through his command, and all non-Communist political parties in his province on 26 February demanded the resignation of the Djuanda cabinet-in Djakarta. The Atjehnese in North Sumatra, also an armed dissident group of long standing, have made no open declaration of support for the rebels but may attack the pro-Djakarta area around Medan 25X1 troops there who had announced ra their continued loyalty to the central government. The Indonesian Air Force may soon be forced to curtail air operations against the dis- sidents because of high octane fuel shortages. An alleged re- quest to Singapore by the Dja- karta government for urgent de- livery of 13,000 gallons cannot PROSPECTS LESSENING FOR SETTLEMENT OF FRENCH-TUNISIAN SITUATION Bitterness against France The basic disparity in is now so widespread in Tunisia views between France and Tunisia that President Bourguiba proba- regarding the subjects to be bly would not be supported in considered under the US-British efforts to achieve a rapproche- good offices proposal shows the ment with Paris. almost impossible task to be SECRET OF IMMEDIATE INTEREST Page 2 of 4 PART T Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 faced in getting France and Tu- nisia to negotiate. Bourguiba's government has stressed that a solution of the Algerian war must be "the keystone of Ameri- can policy in North Africa" and that. consideration of Tunisia's internal problems must not be allowed to interfere. Bourguiba gpposes any Tunisian participa- tion in an international commis- sion to patrol the Algerian- Tunisian border. Paris, on the other hand, is adamant that the conflict in Algeria not be dis- cussed because such talks would internationalize the problem. President Bourguiba is not likely to back down regarding Algeria because of Tunis' strong sympathies with the Algerian nationalists, the presence of at least 60,000 Algerian refu- gees and several thousand armed nationalists in Tunisia, and his strong belief that no North African state can enjoy politi- cal stability until the Algerian problem is settled. Bourguiba has already lost the support of many politically minded Tunisians--90 percent oppose his "conciliatory" poli- cies He has been censured for not pressing his case in the UN Se- curity Council, for having "con- ceded victory" to France in ac- cepting Anglo-American good of- fices, and for not keeping pres- sure on the United States and France to withdraw all French troops. He made a strong bid for popular support when he re- jected Paris' proposal of 22 February to regroup the 22,000 French forces in Tunisia, and charged that the proposal to transfer over half of.the 4,000 French troops in the Tunis area to the base at Bizerte and con- centrate almost all of the forces south of Tunis at Gafsa, Sfax, and Gabes was a tactical measure to improve the French military position and was not designed to prepare the troops for embarkation, as demanded by Tunis. MEDITERRANEAN SEA 27 FEBRUARY 1936 p Miles 2pp 24922 1 SECRET PART I OF IMMEDIATE INTEREST Page 3 of 4 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 French Premier Felix Gail- lard's right wing threatens to abandon the government dur- ing the current budgetary debate, and other elements of his coali- tion are becoming restive. Leaders of the left and center parties are probably still re- luctant to risk a crisis; their decision may hinge on the course of US-British good offices on the Tunisian issue. On 18 February, the Inde- pendents voted solidly against Gaillard's equivocal proposals on the Bizerte question. Both Antoine Pinay and Roger Duchet, fearful that the premier might relinquish full French control of the base, appear determined to bring about his fall. Dis- cussion of the budget, which started on 26 February, is ex- pected to reopen the Tunisian issue, on which Pinay and Duchet may press an all-out attack. The premier is also faced with loss of both his Socialist and Popular Republican support. The American Embassy in Paris has reported a growing "aloof- ness" among the Socialists, who were embarrassed because the government's authority was ap- parently flouted when Sakiet was bombed. There is also a growing unwillingness within the Socialist party to back Lacoste's Algerian policy un- reservedly. The Popular Republicans, who have thus far stood behind the government on all issues, have disapproved of Gaillard's acquiescence in sending his proposed constitutional amend- SECRET PART I OF IMMEDIATE INTEREST ments back to committee. They have since been mollified by the cancellation of debate on electoral reform measures, which they feared would lead to a new system limiting their chances in future elections. This step, however, has further alienated the coalition's right wing--the Independents and many Radicals. Despite the attitude of Pinay and Duchet, most of the leaders within the coalition are probably unwilling to risk a crisis now. Nevertheless, some steps are apparently being taken to try to limit the dura- tion of the next crisis by lin- ing up a successor government prior to Gaillard's fall. Ex- Premier Rene Pleven is being mentioned as an agreed candi- date whom both Socialists and Independents would support. Similar deals have been con- templated in the past, but have not worked out. In an effort to head off a vote of no confidence, Gaillard can be expectdd to emphasize the importance of supporting British and American good of- fices on the Tunisian issue. This tactic may boomerang, how- ever, as the right becomes in- creasingly incensed over Bour- guiba's determination to include Algeria as a topic in any dis- cussion of French-Tunisian rela- tions. If the right should muster all its strength on this issue, the full support of Gail- lard's left and center coali- tion partners might not be suf- ficient to pull him through. Page 4 of 4 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 CONFIDENTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 MIDDLE EAST DEVI~PMENTS Gamal Abdul Nasir, in visit- ing Syria accompanied by other high Egyptian officials, appears to be trying to make the most of the emotions worked up by the plebiscite last week which made him President of+_the United Arab Republic (UAR). On 26 February he made his first pub- lic attack on the Iraqi-Jorda- nian federation, citing it with the Baghdad Pact as a union created by the "imperialists" to oppose the real will of the "Arab people." Nasir's move probably presages an=other Egyp- tian-Syrian campaign to intimi- date King Saud from supporting the federation and to undermine King Husayn. The Egyptian leader may also be gaining a first-hand look at the Syrian political situation; he soon will have to name the persons who will head the local Syrian government. Syrian Foreign Minister Bitar, one of the leaders of the radi- cal nationalists, is reported ready to visit Cairo again to help work out some of these problems. During Nasir's visit, Syr- ian G-2 chief Sarraj and Chief of Staff Bizri have been most prominent among Syrians seen with Nasir on public occasions. Bizri, whom Nasir had previously indicated he wished removed, last week was particularly friendly to the American mili- tary attache during a Soviet party; he may be still trying to erase the impression that he is pro-Communist. The Iraqi-Jordanian federa- tion--which apparently will be officially transliterated as the Arab Union (AU)--has not enjoyed a similar succession of psycho- logical boosts. Ilmost three months are supposed to elapse before the federation's con- stitutional committee will com- plete its work. While the new federation is not popular in Jordan--there have been demonstrations in Nab- lus in West Jordan which com- pelled the government to close schools there--it probably has given some further sense of sta- bility to the government. This in turn seems to be encouraging Husayn's ministers to take a firm stand against subversive agitation. They..intend to crack down on a "new" conspiracy by radical nationalist army of- ficers, and some cryptoleftists high in the civil service have been fired. Jordan's security situation, however, still does not seem likely to improve much over the long run and would de- teriorate rapidly if Nasir de- cided to mount a full-scale sub- versive attack. The Jordanian and Iraqi leaders continue to seek closer support from King Saud. Foreign ministers of the two countries went to Riyadh on 26 February to "explain" their union further and probably to tempt him into more forthright gestures in Saud's smaller neighbors along the Persian Gulf are the subjects of a number of COI??~ EIDENTIAL 25X6 25X6 PART II NOTES AND COMMENTS PaLrP 1 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 rumors regarding their future association with Saudi Arabia, the UAR, or the AU. These ru- mors have focused mainly on Kuwait, whose oil revenues would be a welcome addition to the income of any of the Arab states. The Kuwaiti populace favors the UAR; however, there is no indication at this time that the ruling family, which has been torn by disagreement over the eventual successor to the present ruler, has any significant interest in ex- changing its present profit- able relationship with Britain for Arab domination. A similar situation probably prevails on Bahrein, with the added com- plicatign of Iranian claims to sovereignty over the island. Tehran has been much exercised recently over any possible shift in Bahrein's status. The Egyptian-Sudanese dis- pute over the status of three border areas appears to have calmed. The Sudan's pariiamenTary - tions began on schedule on 27 February and are to continue until 8 March. Military movements along the Egyptian-Israeli border may presage new tension in that area,.which has been quiet since the Sinai campaign. The general Israeli posture of very watchful waiting was underlined by Prime Minister Ben-Gurion's press conference statements this week which in effect put the West on notice that even the pro-Western Iraqi-Jordanian federation is viewed by Tel Aviv as a distinctly unfavor- able development. SECRET PART II NOTES AND COMMENTS Page 2 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 25X1 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 25X1 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 GOVERNMENT CRISIS IN FRENCH CAMEROONS The fall of the Mbida gov- ernment in the. French Cameroons, recall Of the French high com- missioner, and continuation of guerrilla warfare by a Commu- nist-dominated nationalist movement are symptomatic of instability in this African territory. The fall from office on 16 February of Premier Andre Mbida, the first African to head the government since the grant of internal autonomy to the trust territory by France in 1956, was caused by the ma= F R E N C H ` , WEST AFR I C A GULF OF G V. N MI~E, 27 FEBRUARY 1958 an early date for Cameroons in- dependence and to foster the reunification of the British and French Cameroons. Paris decided to remove High Commissioner Jean Ramadier after only a two-week tenure in Yaounde, following charges by Mbida that Ramadier inter- fered in local politics. Mess- mer, the previous French high commissioner, was removed in late January because of dis- agreement with Minister of Over- seas France Jacquet on the date for independence. This spring Li, the minister intends to set the date, prob- ably sometime in 1960, in full recognition that Cameroons inde- pendence will set a precedent for other French possessions in tropical Africa. An outstanding problem which the new government must face is the Communist-domi- nated, outlawed move- ment, the Union of the Cameroons People (UPC). The UPC was responsible for an abortive uprising in Douala in 1955, and since then has kept ~4FRENCH EQUATORIAL AFRICA personal animosity between Mbida and other African leaders, who feared his request for strong powers to control anti- government agitation would be used against rival politicians. The new premier,Ahmadou Ahihjo, is a member of the same pro-French party as Mbida and was deputy premier in the former government. In an ef- fort to keep extremists from profiting by the government crisis, Ahidjo's government will probably increase pres- sure on Paris, however, to set up its antigovernment propaganda, particularly from Cairo, where several leaders took refuge following the Douala incident. The UPC engaged in violence during the December 1956 elec- tions campaign, and during the past several months has carried out guerrilla warfare in the southwestern forested area of the Cameroons. With an esti- mated 400 tough fighters, the UPC has killed, wounded, or kidnaped about 150 persons. Its members murdered a deputy of the legislative assembly, SECRET 'EIW PART II NOTES AND COMMENTS Page 4 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 burned 60 villages, and have tied down several hundred French and Cameroons troops. In Decem- ber, France sent two infantry companies to reinforce the 1,- 500 French troops in the Camer- .oons and prevent the develop- ment of a situation similar to that in Algeria. The UPC's potential is strong in the political field, where demands for independence and unification find growing popular support in the southern areas, and its international connections suggest possible foreign support. Its activity at the Afro-Asian Solidarity Conference at Cairo won the UPC's delegate a seat 25X1 on the permanent secretariat responsible for mat- ters. ORGANIZATION ESTABLISHED FOR TECHNICAL COOPERATION IN AFRICA A new intergovernmental organization--the Foundation for Mutual Assistance in Africa South of the Sahara (FAMA)-- designed to facilitate the ex- change of technical assistance to the area, was officially launched on 20 February at a conference in Accra, the capi- tal of Ghana. Eventual inclu- sion of other independent Afri- can states might end inter- colonial rivalries and begin technical cooperation between African entities6 will be eligible to receive technical assistance under the aegis of FAMA. Membership in the founda- tion presumably will be limited at the outset to present members of CCTA. Invitations to join the new organization, however, will probably be extended to non-CCTA member countries with territorial responsibilities in Africa south of the Sahara, in- cluding the Sudan, Ethiopia, Italy, and Spain. The parent organization of FAMA is the Commission for Tech- nical Cooperation in Africa South of the Sahara (CCTA)-- which includes Britain, France, Belgium, Portugal, South Africa, the Federation of Rhodesia and Nyasaland, Liberia, and Ghana. CCTA agreed in 1954 to establish the foundation for the expan- sion of technical assistance. The foundation is to act as a clearing house for offers of, and requests for, technical as- sistance among countries in the area, and serve to bring inter- ested parties together. It will supervise the expenditure of funds for experts, advisers, and teaching material, but will have no funds itself for aid al- location. All countries of Africa south of the Sahara, in- cluding nonmember countries, Participation in FAMA by countries without territorial interests in Africa--such as the United States, West Germany, or the Netherlands,--was favored by members prior to the Accra conference. The American ob- server at the conference, how- ever, stated that most delegates showed considerable coolness to such participation at this time. This attitude may be an attempt to forestall any Soviet attempt to participate in the foundation. In fact, some mem- bers regard the organization as a way to counter increased So- viet influence in the area, the threat of which was underlined by the USSR's recent "offer" of aid to underdeveloped countries 25X1 and announcement of an intention to establish diplomatic rela- tions with Ghana. SECRET PART II NOTES AND COMMENTS Page 5 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SO'AR-i 27 February 1958 The wide margin of victory for Arturo Frondizi and his In- transigent Radical party in the Argentine general election of 23 February has diminished the possibility that conservative military elements will attempt to prevent Frondizi from taking office on 1 May. Frondizi's party won all 22 provincial gov- FRONDIZI ernorships, over two thirds of the seats in the Chamber of Deputies, and may control the entire Senate, which will be selected by the incoming pro- vincial legislatures during March. Provisional President Aramburu and Vice President Rojas are believed disappointed with the outcome of the elec- tion, but they have publicly reiterated their determination to prevent military interference in the political process. At the same time, however, supporters of exiled former President Peron--to whom Fron- dizi owes a substantial measure of his victory--are inviting military unrest by making pub- lic demands on Frondizi. During the campaign, Frondizi openly promised most of the things the Peronistas are now "demanding" --a general amnesty and an end to restrictions against Peron- i8ta political and labor organi- zations. Frondizi has said he will let Congress decide wheth- er Peron should be permitted In addition to these polit- ical problems, Frondizi will be ARGENTINE ELECTIONS OF 23 FEBRUARY 1958 (NEARLY COMPLETE RETURNS) PRESIDENCY POPULAR VOTE Frondizi ...................................... 4,086,653 Balbin .......................................... 2,581,964 Others .......................................... 2,644,006 Blank votes . .................................. 687,377 ELECTORAL COLLEGE (ABSOLUTE MAJORITY REQUIRED) Frondizi .................................................. 319 Balbin ......................................................142 466 CHAMBER OF DEPUTIES Intransigent Radicals ............................133 (UCRI) (Frondizi) Popular Radicals ................................... 52 (UCRP) (Balbin) Liberal Party of Corrientes Province ............................... 2 confronted with extremely seri- ous economic and foreign ex- change difficulties and will probably seek large-scale for- eign assistance. He has not been especially friendly toward the United States, but he has already put out feelers on Wash- ington's attitude toward loans to Argentina. SECRET PART II NOTES AND COMMENTS Page 6 of 17 25X1 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY i ? 27 February 1958 POLITICAL PROSPECTS IN BOLIVIA The prospective visit to Bolivia of former President Paz Estenssoro, now ambassador to London, promises an unusual- ly critical period in mid-March for the government of moderate President Sales Zuazo. Paz' reported intention to reunite the government party, the Na- tionalist Revolutionary Move- ment (MNR) which he still heads, may presage an attempt to re- store the balance between the leftist critic of the stabiliza- tion program, Juan Lechin, and the program's leading backer, President Siles--a balance which during the past year has tipped increasingly in favor of Sales. Paz' visit was prob- ably timed to coincide with the MNR's convention to nominate candidates for the late spring congressional elections. During Paz' term of office from 1952 to 1956, he was re- garded both as a national hero and as Bolivia's one politician sufficiently adept to persuade leftists and moderates to work together. During the past 18 months, however, his reputation has suffered from apparently well-founded charges of corrup- tion and contrasts with that of his politically effective but simpler and more straightfor- ward successor. In several clashes during this period be- tween Sales and labor leader Lechin, Paz from London has tended to support Lechin. Over the past year and a half Sales has nevertheless gained sharply in popular appeal at the ex- pense of the labor leader. Nominations for next spring's elections--for one half of the deputies and one third of the senators--will be decided at the forthcoming con- vention of the MNR, the party which polled 82 percent of the total vote in national elec- tions in 1956. During the con- vention prior to the 1956 elec- to:ons. Lechin dominated the con- gressional nominations, while the moderates gained the presi- dential nomination for Sales. For the 1958 convention, how- ever, pro-Sales forces, supported SECRET PART II NOTES AND COMMENTS Page 7 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 .ET CURRENT INTELLIGENCE WEEKLY SUP;3MARY 27 February 1958 by leftists in rivalry with Lechin, apparently have felt no need to make a similar com- promise. Early in January, the government-owned La Nacion, throwing the concept party unity to the winds, suggested that the disgruntled leftists withdraw from the MNR and form a "constructive opposition." Under these circumstances,- efforts by Paz Estenssoro to regain party unity may weaken the Siles government, persuade it to compromise with the pro- Lechin group, and undermine its attempt to implement the US- backed economic stabilization program. COMMUNISTS CONTINUE PRESSURE FOR KOREAN SETTLEMENT The Communists are sustain- ing their diplomatic and propa- gauda offensive for a Korean settlement launched earlier this month. The Soviet Foreign Min- istry on 20 February issued a statement urging that Korea be made a nuclear- and missile- free zone and proposed that a "conference of interested states" be convened to discuss a Korean settlement. The Soviet statement was issued with an eye to neutralist support for the Communist posi- tion. Indian Prime Minister Nehru suggested last January that the concept of a nuclear- free zone be extended to the Far East. New Delhi was ap- parently given advance notice of Peiping's intention to with- draw its forces unilaterally and is expected to.urge--in-- formally at least--UN with- drawals. V. K. Krishna Menon publicly stated on 17 February that withdrawal of foreign f orces.fiom Korea would remove one of the deterrents to seat- ing Peiping in the UN and de- clared that if the "other side" responded to the Chinese with- drawals, "it would be a great force for peace." The Chinese Communists are hopeful of isolating the United States from the other 15 nations in the UN Command. On 20 Feb- ruary, the Peiping People's Daily claimed that other UN Com- -mand nations "have not been in- flexible" on the issue of troop withdrawals and declared that the United States will "feel more isolated than ever". if it continues to reject Communist proposals. In an effort to maintain Western solidarity, the British are urging that the UN Command nations work out a common position at an early meeting, lest they respond to new Communist initiatives "with different voices." On 24 February the North Korean - Chinese Communist com- mand called a meeting of the Military Armistice Commission to reiterate Pyongyang's pro- posals for a Korean settlement-- the withdrawal of all foreign troops, elections to be held under supervision of "neutral" nations,-North-South negotia- tions, and reduction of North and South force levels. The hijacking of a South Korean airliner on 16 February has provided the North Koreans with an additional bargaining weapon in their efforts to bring about North-South negotiations. North Korean spokesmen are in- sisting that the release of pas- sengers desiring to return to the South depends entirely on South Korean willingness to enter into direct talks with Pyongyang. Seoul is aware of SECRET PART II NOTES.;?AND COMMENTS Page 8 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 SECRET N"Mage CURRENT INTELLIGENCE WEEKLY. SUMMARY 27 February 1958 the Communists' desire to un- dercut Rhee's contention that the South Korean Government is the only Korean government and has flatly rejected all overtures for direct talks. South Korea-is holding mass demonstrations in Seoul in reaction to the airliner incident and is carrying out maneuvers involving. 50,000 troops adjacent to the demili- tarized zone. Although Presi- dent Rhee has refrained from threats to take violent ac- tion, the Communists seem wary that he might consider Chinese withdrawals as a sign of weak- ness. Chinese military spokesmen have threatened to re-enter Korea in the event of renewed hostilities. 25X1 25X1 25X1 25X1 SINO-JAPANESE TRADE TALKS TO BE RESUMED The return to Peiping of a Japanese trade delegation with new proposals for an unof - ficial trade agreement and for an exchange of permanent trade missions indicates that strong domestic pressure for increased trade with the China mainland is forcing the Kishi government toward recognition of Commu- nist China. The proposals, which were developed by Tokyo following Peiping's rejection of Japanese terms last fall, would relax entry requirements for Communist Chinese trade representatives and accord them certain diplomatic privileges in Japan. The Japanese Government has avoided official negotiations with Communist China on the trade issue and, instead, has worked through private trade representatives to conclude a fourth unofficial trade agree- ment to replace the one which expired in May 19 57. Peiping, however, has made the conclusion of an agreement contingent on a political accord to exchange trade missions, which an be decided only by the Japanese Government. Under pressure from many sources, including all political elements, the Kishi government has obtained Diet passage of legislation relaxing fingerprinting requirements for aliens and has authorized its trade delegation to offer some diplomatic privileges to pros- pective Chinese trade officials in Japan. These privileges presumably would include customs and tax waivers, guarantees of personal safety and immunity from arrest, use of communication codes, and freedom to travel freely through- out Japan. The use of the Chi- nese Communist flag, which Pei- ping has demanded, apparently still would not be permitted under the new proposals. In addition the number of Chinese representatives to be allowed in Japan would not be specified, although the Japanese will at- tempt to obtain an understanding on a limit of 15 persons. Japanese economic interests believe the 20-percent drop in Sino-Japanese trade to $127,000,- 000 in 1957 resulted from the SECRET PART II NOTES AND COMMENTS Page 9 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 absence of a new trade agreement and are anxious for both an agreement and mission accord. The Japanese Foreign Ministry, however, has recommended to Prime Minister Kishi that,'if such an accord is signed, the arrival of the Chinese Commu- nist trade mission be delayed until after the Japanese elec- tions expected sometime this year. The recent $280,000,000 iron care -steel barter deal be- tween Communist China and Ja pan--negotiated at Peiping's . initiative--may be the Chinese reaction to the Kishi govern- ment's authorization of "quasi- diplomatic" status for the pros- pective trade mission. Although some increase in Sino-Japanese trade in 1958 is to be expected as a result of this and other recent trade contacts, a long- range increase in trade and Japanese access to mainland raw materials will depend on further accommodation by Japan to P ning's political pressure. PETROLEUM INDUSTRY CONTINUES TO DISAPPOINT PEIPING Communist China's petroleum industry was responsible for the. only significant 'industrial shortfall during the nation's First Five-Year Plan (1953-1957), achieving less than 75 percent of its goal. Despite heavy im- ports--averaging some 50 percent of total supply--shortages of petroleum products affected eco- nomic programs, most notably the development of truck transport. Peiping last year began to ex- plore more intensively alternate fuel sources for trucks, such as charcoal or coal burners. The minister of the petro- leum industry was removed on 11 February 1958 after admitting to a number of shortcomings in his ministry, including waste- fulness and a tendency to build "too large, too soon." He was replaced by Yu Chui-li, an army general with no known previous experience in the petroleum in- dustry, who has enunciated a program based on a more careful and methodical development of all phases of the industry. This year, one of generally ambitious economic goals, the industry plans the smallest production increase thus far. The total output of 1,,550,,000 tons of crude oil is air, increase of only 6 percent over 1957 as compared with an average annual increase of 27 percent achieved in the First Five-Year Plan. Workers in the industry have already pledged to exceed this modest target by 110,000 tons. Also reflecting a more careful approach, investment funds for the industry have been sliced below last year. Projects for the year include a 90-mile pipeline from the Karamai oil field to the Tushantzu refinery.. Full exploitation of the field, for which Peiping continues to have high hopes, will probably not be possible until the Trans- Sinkiang Railroad is completed sometime in 1959 or 1960. How- ever, Karamai is expected to be- gin producing on a small scale this year and the refinery at Tushantzu is to be expanded to an annual capacity of 400,000 tons. Construction will be con- tinued on the large, million-ton refinery at Lanchow, which will use crude oil from the Yumen fields brought to the refinery- by rail. Noteworthy in the 1958 pro- gram is increased interest in the development 'of relative- lyd expensive' shale-oil and SECRET PART II NOTES AND COMMENTS Page 10 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 CHINESE COMMUNIST PE ROLEUM INDUSTRY 27 F U LpNCHOU"L Churigk' KWEICHOU A 1-1 TUSHANTZU ? a neinK .,mr>,ia J~ ~U~mchi Petroleum refinery Synthetic--oil plant Railroad Railroad under construction or planned synthetic-oil enterprises, in- dicating not only a more realis- tic attitude toward the develop- ment of natural crude-oil re- sources but also a need to turn to more readily available re- sources. Existing shale-oil plants at Fushun and Huatien will be expanded and preparatory work begun on a new shale-old plant; at Mourning in southwestern Kwangtung to exploit the large reserves of high-quality shale there and provide South China with its own source of oil, now largely supplied from,. abroad. Also planned is the future de- velopment of a synthetic indus- try using coal as a raw material. This is a still more costly and even less satisfactory substi- tute, offering only the advan- tage of location. Peiping has suggested that experience in the liquefaction of-coal. in..the nortneast could be used in sim- ilar plants ' Shansi and Kweiohow Provinces. The search for natural crude oil--the only long-range answer to China's liquid fuel problem--is to be pressed in various parts of the country. But the search is evidently pro- ceeding with an increased aware- ness that every oil seep is not an oil field and that an oil field cannot be developed over- night. For some time, domestic sources of petroleum will re- main inadequate to meet the rapidly growing demands of Chi- na's industrializing economy and imports will continue to be required. (Prepared by OR SECRET I ISAIDAM r DART II NOTES AND COMMENTS Pate 11 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUL R1ARY 27 February 1958 SOVIET ARMED FORCES DAY--40TH ANNIVERSARY Soviet Minister of Defense Marshal Rodion Malinovsky de- livered the major speech in Moscow on 22 February on the eve of the 40th anniversary of Soviet armed forces. In attend- ance were most of the top polit- ical and military leaders. The anniversary had been anticipated for several weeks with commemo- rative articles in the Soviet press by leading military fig- ures, and the day itself was marked by a large Kremlin re- ception. As usual, however, there was no military display. Malinovsky claimed that all branches of the Soviet armed forces are in a state of readi- ness and are equipped with the latest weapons. He made the usual charges that the West was pursuing an aggressive policy and that the Soviet armed forces must, accordingly, be capable of. "inflicting so crushing a coun- terblow that it will once and for all put an end to any at- tempts from any quarter to hin- der through force of arms the natural progress of the people toward Communism." He observed that the USSR has "rockets of short, intermediate, long, and superlong range action." Anniversary speeches and articles by military leaders in years past contained similar confident claims. Malinovsky's words seem to have been, on the whole, neither more nor less truculent than those of previous orators on this occasion. One distinguishing feature of Malinovsky's speech was its frequent invocation of the Communist party and the tribute paid the party's system of po- litical control in the armed forces, a line which has been persistently pursued since the dismissal of Marshal Zhukov as defense minister last October. Referring to his predeces- sor, Malinovsky asserted that "the party has justly condemned the mistakes and checked the harmful practices of the former minister of defense, Zhukov, who pursued a policy of abolish- ing the leadership and control of the army and the navy by the party, its central committee, and the government." Malinov- sky did emphasize, however, the importance of a single command in military matters, ruling out the old system of dual control by political commissars and mil- itary commanders. An interesting sidelight to the anniversary celebrations was the appearance of Nikita Khru- shchev in military uniform sport- ing his World War II rank of lieutenant general. Also, in the.course of the proceedings, Marshals Budenny, Grechko, and Biryuzov were awarded the cov- eted title of'Hero of the Soviet Union. They were the only mar- shals of the Soviet Union who did not hold this award. SETBACK IN DEVELOPMENT PLANS FOR EASTERN REGIONS OF THE USSR There is considerable dis- parity between planned state capital investment in the east- ern regions of the USSR for this year and that originally sched- uled for 1958 under the defunct Sixth Five-Year 'Plan (1956-1960). Only about 27 percent of total Soviet capital investment for 1958 has been earmarked for the eastern area, whereas the orig- inal plan allocated 40 percent SECRET PART I I NOTES AND COMMENTS Page 12:. of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 to this area during the five- year period, suggesting that the rate of development for the area has been retarded,.pos- sibly by as much as two years. Key projects in the de- velopment of the area include the Bratsk and Krasnoyarsk hy- droelectric power stations. These were formerly scheduled to start partial operation in 1960 and 1961 respec- tively, but will not now begin operating until 1962 and 1963. Bratsk, with a planned installed capacity of 3,600,- 000 kilowatts, and Krasnoyarsk, with 4,000,000 kilowatts, will be the largest hydroelectric sta- tions in the world. With a combined pro- duction of about 40 billion kilo- watts, they will supply power to the major industrial station has been postponed be- cause of construction problems with the project itself. Last year, its builders three times won first place in the quarter- ly all-union socialist competi- tion, were awarded the Chal- lenge Red Banner, and fulfilled their ten-month plan 20 days ahead of schedule. The delay is probably the result of a gen- eral reduction in the tempo of HYDROELECTRIC ST,ITI0N industrialization in the east- ern regions. Construction is lagging in most branches of in- dustry in the area, including ferrous and nonferrous metal- lurgy and coal, and construc- tion at the Bratsk station apparently has been rescheduled to coincide with that of the new industrial plants it will serve. Prepared by ORR) 25X1 areas of Irkutsk, Krasnoyarsk, and the Kuznetsk Basin (Kuzbas), where large power-demanding in- dustries in such fields as alu- minum, magnesium, ferroalloys, chemicals, and probably fis- sionable materials are to be built. It is not likely that the completion date of the Bratsk PERVUKHIN NAMED AMBASSADOR TO EAST GERMANY Mikhail G. Pervukhin has been named Soviet ambassador to East Germany, replacing Georgi Pushkin who returned to the USSR on 9 January. There has been no announcement concern- ing Pervukhin's position as candidate member of the party presidium, but'-his.''appointment to L a position away.from Moscow probably means he will be dropped. Pervukhin has been in- cluded in the upper levels of Soviet officialdom for nearly 20 years--as a member of the SECRET PART It NOTES AND COMMENTS Page 13 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 party central committee since 1939 and of the presidium since 1952--but last June, at the time of the purge of Malenkov, Molotov, Kaganovich, and Shepi- lov, he was demoted from full to candidate membership on the presidium. The fact that his MIKHAIL G. PERVUKHIN name did not appear earlier this month on the lists of nominees for election to the Supreme Soviet foretold his current appointment. While it appears to be a demotion, Pervukhin is nonetheless well qualified to fill this important diplomatic post. An electrical engineer, he became chief of the Soviet electrical industry in 1939 at the age of 35 and then took on general responsibility for the fuel and chemical industries. His broad experience in the eco- nomic field will serve him well in East Germany, where an ex- tensive economic reorganization is under way. In July 1957, following the purge of the "antiparty group," Pervukhin was named chairman of the new State Com- mittee for Foreign Economic Relations. Semyon A. Skachkov has now replaced him on this committee, which is responsible for directing the expanding eco- nomic activities of the USSR with both bloc and free world countries. Skachkov was a party central committee organizer for tank production during World War II, a tractor plant direc- tor following the war, later a USSR deputy minister for trans- port machine building, and most recently chairman of the Kharkov Sovnarkhoz in the Ukraine. He is not a member of the party central committee Czechoslovakia, having re- gained most of the West Euro- pean air routes it held in 1948, has the most extensive civil air operations of the satel- lites. The Czech airline has recently received three Soviet 70-passenger TU-104-A jet transports and will probably soon resume scheduled flights to Cairo and Damascus. Czecho- slovakia already has air agree- ments with Egypt and Syria, and once.a ' foothold" in' the Middle East is regained, the Czechs can be expected to press vig- orously to establish further international routes, particu- larly into South Asia. Prague's interest in expanding air op- erations to South America has also been reported. After the Communists took over in February 1948, Czech international flights declined as a result of the bloc policy of curtailing commercial contacts SECRET PART II NOTES AND COMMENTS Page 14 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SPRY 27 February 1958 with the West, although Czecho- slovakia retained its member- ship in the UN affiliated Inter- national Civil Aviation Organ- ization (ICAO). Poland is the only other bloc member. This decline was accelerated by the Western action to restrict Soviet-satellite airlines to bloc air space. Czechoslo- vakia's air operations reached their nadir in 1953, when its routes were limited to Sofia, Budapest, Bucharest, the Soviet sectors of Berlin and Vienna, and only one Western European link, Copenhagen. Shortly thereafter the Soviet policy of restricting relations with the West was re- laxed and Prague capitalized on its central position as an exchange point for such serv- ices as the Air France - Soviet Aeroflot route between Paris and Moscow and the Indian air- line's New Delhi - London route. Czechoslovakia has since been the most active bloc country in seeking air ri hts in the free world. Pre- pared by ORR HUNGARIAN ECONOMIC OUTLOOK FOR 1958 the Rtingar'iad i'dgime may succeed this year either in bal- ancing its foreign trade or in maintaining the standard of living achieved last year, but probably will not be able to do both, as it has planned. Domes- tic production must be relied on to meet these objectives, since bloc loans of about $300,000,000 which were largely responsible for Hungary's industrial recovery during 1957 are unlikely to be made again this year. Living standards of urban workers will probably be sacrificed, and peasant income will also suffer. The uprising, which the regime says caused nearly $1.7 billion (at the official rate) worth of damage, put the planned growth of Hungary's SECRET ~PINLAN? CZECHOSLOVAK FOREIGN AIRLINES -1958 SPAIN * M.drtd CASPIAN PART II NOTES AND COMMENTS Page ? O- of 17. Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUIIddARY 27 February 1958 economy a year behind schedule. Nevertheless, the raw material supply did improve in 1957 through bloc did, and industrial production, though costlier than the previous year, topped the 1955 level. Imports in 1957 were 24 percent higher than in 1955, and a $170,000,000 deficit was incurred. The 1958 industrial plan calls for increased out- put particularly among those industries likely to contribute to Hungary's export potential. A 22-percent increase in exports and a 12.5-percent reduction of imports are considered neces- sary this year to balance trade. How- ever, even if Hun- gary balances its trade in 1958, the basic economic prob- lem of paying its debts to.the bloc, which begin to ma- ture in 1959, re- mains essentially unsolved. Agricultural production is to be raised this year by The need for increasing agri- cultural production will prob- ably also prevent a return to compulsory crop deliveries or a reduction of state buying prices. Firm measures are being taken to curb theft and waste of state property in industry. The managerial level particu- larly is under fire because of the growing backlog of uncom- pleted investment projects, which mounted to more than 150 percent of total 1957 in- vestment at the end of the year. HUNGARY: GROSS INDUSTRIAL PRODUCTION ANNOUNCED PERCENTAGE CHANGE OVER PREVIOUS YEAR 4.6 percent, despite a level of investment which is far short of that for 1955. In contrast to 1956 and 1957, no imports of bread and fodder grains are planned. The need for greater production should preclude extending the col- lectivized sector in 1958 much beyond its present level of 11 percent--less than half that before the revolution. A re- cent increase in agricultural taxes, however, will reduce peasant incomes and could later provide a means of forcing pri- vate farmers into collectives. (PLAN) 80225 Steps being taken to in- crease discipline among indus- trial workers include greatly stepped-up activity by regime- sponsored factory councils, which replaced the revolution- ary workers' councils. Recent changes in the wage system, which. emphasized making raises contingent on increased pro- ductivity, presage a cheer- less outlook for the Hun- garian worker in 1958. (Prepared by ORR) SECRET PART II NOTES AND COMMENTS Page 16 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 THE AFRO-ASIAN WOMEN'S CONFERENCE The Afro-Asian Women's Conference held in Ceylon from 15 to 24 February apparently maintained the nonpolitical nature which its organizers planned, and the Communists were unsuccessful in their ef- fort to use the meeting as a propaganda vehicles Sponsored by Burma, Ceylon, India, Indonesia, and Pakistan, the meeting was attended by about 150 delegates from 19 Afro-Asian countries and by representatives of UNESCO, UNICEF, the World Health Or- ganization, and the Interna- tional Labor Organization. Five Afghan delegates attended-- the first time Afghan women have participated at such a conference. 'T'opics on the agenda were limited primarily to the fields of education, health, citizen- ship, slavery, labor, and the promotion of closer contacts among women of the area. How- ever, familiar themes of anti- colonialism, "peaceful coex- istence," the banning of nu- clear weapons tests, and ces- sation of the East-West arms race were brought up by dele- gates from Communist China, Mongolia, and Ghana. No pub- licity adverse to the West ap- peared to result from the men- tion of such topics. The key- note of closing speeches at the conference was the growing spirit of cooperation and friendship existing among women of Afro-Asian countries. The only incidents of a controversial nature reported were three walkouts by Chinese Communist delegates'-during the reports of UN agency repre- sentatives, on the excuse that Peiping had been deprived of its legitimate rights at the UN. The leading Turkish dele- gate urged deletion from the record of remarks sympathetic to Communist China reportedly made by the leader of Ceylon's delegation. The issue of Pei- ping's exclusion from the UN did not otherwise arise. Chinese Communist dele- gates concentrated mainly on being friendly at social events. The Chinese Communist ambas- sador in Colombo, however, aroused some antagonism by several requests prior to the conference to increase the num- ber of Chinese delegates and by bringing pressure to bear on non-Communist leaders during the conference. Such efforts evidently hnd 1 7 e effect. SECRET PART II NOTES AND COMMENTS Page 17 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 PATTERNS AND PERSPECTIVES CURRENT POLISH-SOVIET In the past year, Poland seems to have regained a meas- ure of Soviet confidence, and the meetings in January between Khrushchev and Gomulka may have narrowed the areas of disagree- ment between them. Poland and the USSR have avoided open clashes and misunderstandings. To do this, Polish leaders, while preserving the basic pol- icy outlined at the eighth par- ty plenum in October 1956, have moved to temper the more en- thusiastic expectations many Poles attributed to the October 1956 changes. Internal Affairs Gomulka to a large extent continues to manage his coun- try's internal affairs, but re- mains mindful of the necessity of preserving Communist domi- nance and of not provoking the USSR. There are some developments in Poland about which Khrushchev and Gomulka are in agreement. Gomulka's efforts to strengthen the party's youth program and to purge anti-Communist elements from the mass organizations, coupled with his determination not to permit workers' councils to interfere with trade union activity, may have increased Khrushchev's confidence in him. Khrushchev's proposal to reor- ganize machine tractor stations in the Soviet Union appears to parallel very closely Poland's reorganization, and some of the recent suggestions for future changes in Soviet priding bear some resemblance to the recom- mendations made by Gomulka's economic council last year. To combat anti-Soviet at- titudes, the Polish1'regime has tried to prohibit the publish- ing of criticism of the Soviet Union, has revived the Polish- Soviet Friendship Society, and sFNeRr~" CONFIDENTIAL has signed an agreement for an extensive cultural exchange with the USSR. In addition, Gomulka has been most circumspect in his own statements about the Soviet Union, and has empha- sized the great help it has giv- en Poland. He has not tried to force the population to en- gage in mass demonstrations of affection for the Soviet Union but has called for self- restraint necessitated by Po- land's geographic position. These efforts, however, have not appreciably altered traditional Polish antipathy toward the Soviet Union. The Polish people ignore, boycott, or privately criticize Soviet plays, literature, art, music, and movies. The anti-USSR feel- ing which swept across Poland during Khrushchev's attempted interference in internal Pol- ish affairs in October 1956 has not been alleviated by the removal of most Soviet officers from the Polish Army, nor by two agreements since October which established Polish con- trol over the movement of So- viet troops in Poland. The Polish Army's politi- cal commissar wrote of wide- spread anti-Soviet attitudes within the service in an article forthe army's official maga- zine n.mId-June 1957. As re- cently as December, a poll of Szczecin,, (formerly the German city of Stettin) residents re- vealed that anti-Russian and even anti-Communist attitudes were present to an overwhelming degree, a situation to which Gomulka's own periodical, Polityka, has addressed itself. Ideological Considerations While some of the causes for Soviet cconcern over 'Pol- ish ideological developments have been eliminated, basic CONFIDENTIAL PATTERNS AND PERSPECTIVES paaP i of 10 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 disagreements continue to exist and are unlikely to be settled in the near future. Gomulka has probably eased Soviet wor- ries by his clear adherence to the principle that the party has the leading role in the Commu- nist state;, and, by his, attempts to strengthen his party through the purge introduced at the tenth plenum. On the other hand, ideolog- ical disagreement between the two countries is evident in the attacks on Polish policy and on ideological debate which has been stepped up in both Soviet and satellite publications since the November anniversary meet- ing in Moscow. These articles particularly rankle the Poles because some of them have crit- icized established Polish pol- icy in the field of agriculture and church relations. Other articles criticized material which appeared in the Polish press in earlier periods, yet failed to mention the fact that its appearance was immediately followed by expressions of of- ficial Polish disapproval. observers, they must be viewed with reserve. The subsequent Soviet and satellite propaganda campaign against revisionism, using Pol- ish writers as the example, sug- gests that Gomulka did at least succeed in the insertion of the clause permitting each party to decide for itself the degree of the threat posed by revision- ism. Foreign Policy Warsaw before Gomulka con- sistently followed the USSR's lead in its policy toward the West, presuming only to modify Moscow's propaganda tone. Po- land sees eye to eye with the USSR on the Oder-Neisse line and on a demilitarized Germany, and this identity of interests has helped to prevent serious policy deviations in other areas. Gomulka declared in the London Times interview that Poland's Iti ernational policy is and will be in accordance with the policy of the whole Socialist camp." Poland has heretofore been firm in opposing the formation of an international Communist organization, as well as par- ticipation in the publication of a journal of international Communism. The various Commu- nist parties reportedly decided last November that such a jour- nal would be published, and Po- land's continued refusal to con- tribute may be one of the rea- sons why this journal has not yet appeared. Gomulka's activity at the November Moscow conference of Communist leaders is still the subject of various reports al- leging that he succeeded in his efforts toward softening the language of the final communi- que, particularly in regard to the rate of agricultural col- lectivization, the leading role of the Soviet party in the work of other Communist parties, and the dangers of revisionism. Since the reports may have been tailored to appeal to Western Poland's expanded contacts with the West have not been in- consistent with Soviet policy statements. Poland has justi- fied its acceptance of Western economic assistance by its desperate economic situation, though this acceptance was prob- ably not pleasing to the Soviet Union. The USSR's failure to respond to repeated Polish re- quests for more economic support has left it little choice but to concur in Poland's reception of Western aid. Outwardly Poland's rela- tions with Yugoslavia have been within the limits of the public- ly announced Soviet policy of friendship and cooperation with Yugoslavia. Soviet leaders ap- parently were not officially informed of the subjects dis- cussed by Gomulka and Tito last September, and may have been expressing disapproval of the talks by virtually ignoring in their propaganda media the fact that they even took place. How- ever, Gomulka took great pains SECRET PART III PATTERNS AND PERSPECTIVES Page 2 of 10 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 to assure the USSR of his friendship and fidelity in the speeches he made in Yugoslavia. Poland regards its plan for a nuclear-free zone in central Europe as a step to- ward attaining greater inde- pendence in the field of for- eign affairs. The Rapacki plan was a major topic at two meetings between Soviet and Polish leaders in January. Foreign Minister Rapacki.has little hope that the plan will be fully accepted, but hopes to promote discussion of it as a stimulant to East-West talks. To this end the Polish leaders apparently convinced Soviet leaders to agree to limit the plan's geographic scope and to permit the Poles to propose more detailed dis- cussion of control factors than has been normal Soviet practice. remain. Prospects Polish-Soviet relations will probably remain on their present plane for the foresee- able future since Gomulka is likely to continue generally to support the Kremlin's for- eign policy while avoiding in- ternal actions that would of- fend the Soviet leaders. Po- land may in time attain a small measure of independence in the international arena, within the obvious limitations imposed by its relationship with the USSR. Khrushchev is probably satisfied that Gomulka's rule in Poland is not having dis- astrous consequences for bloc unity and therefore he will probably not oppose those Pol- ish innovations introduced up to now. The seeds of con- tinuing differences in the in- ternal and ideological fields SINO-SOVIET BLOC AID AND TRADE OFFENSIVE ENTERS FIFTH YEAR Soviet statements at the Afro-Asian Solidarity Confer- ence in Cairo and the UN Far East Economic Commission meet- ing in Bangkok indicate that the bloc this year will continue to expand its trade and aid program in underdeveloped free world countries. The Middle East and South and Southeast Asia, which have received 75 percent of total bloc aid to date and all of the $560,000,- 000 worth of aid the bloc has extended since mid-1957, will probably continue to receive major attention. However, stepped-up economic relations are likely to be promoted with expire. Bloc countries now Latin American and African are either negotiating or plan- countries, particularly those ning agreements with underde- suffering from depressed mar- veloped countries which have kets for their major exports. heretofore accepted little or no bloc assistance. SECRET Since mid-1957, two large credits and a number of smaller ones have been extended by the bloc; obligations have been as- sumed under large credits pre- viously offered; progress con- tinues on projects started in earlier periods; trade continues to increase; arms deliveries continue; and agreements have been made for additional deliv- eries after present contracts PART III PATTERNS AND PERSPECTIVES Page S of 10 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 SINO-SOVIET BLOC AID TO UNDERDEVELOPED AREAS SINCE MID-1957 MIDDLE EAST EGYPT Soviet economic development loan Czech economic development loan SYRIA Soviet economic development loan Soviet arms agreement YEMEN Chinese economic assistance loan Soviet economic assistance loan (probably concluded Jan. 1958) INDIA Czech loan for Ranchi foundry CEYLON Soviet economic assistance loan Chinese economic assistance loan Czech economic assistance loan BURMA Soviet loan for agricultural development Chinese loan for textile industry New Offensive The boldness of the eco- nomic offensive in recent months is traceable in part to the-bloc's Aew prestige gained by fulfilling its economic as- sistance commitments and by the launching of the sputniks. The skepticism which greeted offers in the past has been largely dispelled. The uncertainties that may have induced Soviet leaders to be cautious about increasing their foreign economic commit- ments, particularly in the pe- eriod immediately following the Hungarian uprising, have large- ly been overcome. The bloc now is in a position to exploit the opportunities that appear and to create additional ones. The importance the USSR attaches to its economic off en- sive was indicated by the crea- tion of the State Committee for Foreign Economic Relations in July 19 57 to replace the Chief Directorate for Economic Rela- tions, a lower ranking body. The committee controls economic organizations which in turn pre- 175 56 168 30 pare aid and trade offers and arrange aid and trade programs. These organizations prepare plans for factories to be built abroad, supply for- eign governments with technicians, and ar- range for the pro- duction and delivery of equipment. Since the committee's crea- tion, continuing reor- ganization apparently has taken place to enable it to do its 16 25(MIN.) 25 Job more efficiently and to cope with new foreign trade problems. Preliminary data on 1957 bloc trade 13 with underdeveloped countries indicate that total turnover may have been about 25 percent greater than in 1956. During the first six months of the year, bloc trade in this area was about $1,850,000 on an annual rate basis. The level of trade in 1956 was about $1,480,000. The bloc's exports to under- developed countries rose,sig- nificantly during 1957, but its imports increased even more and were up to 40 percent higher than in 1956. Sino-Soviet bloc credits and grants to underdeveloped countries now total about $2 billion. New credits were of- fered to only a limited extent between mid-1956 and mid-1957 but were increased during the last half of 1957 by about $400,000,000. Some new agreements already have been negotiated in 1958, and there are several bloc of- fers outstanding on which nego- tiations may be opened during the coming months. The USSR is offering Iran a general plan of assistance for economic de- velopment as well as a number of separate, specific proposals, including one for the develop- ment of petroleum in northern SECRET PART III PATTERNS AND PERSPECTIVES PawP A of 10 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY'SUMMARY 27 February 1958 Iran. Poland has offered tech- nical assistance and a credit to Brazil for the development of its iron ore. General bloc offers to other underdeveloped countries, including Tunisia, the Sudan, Ghana, and Pakistan, appear to remain open for con- sideration. Latin America, confronted with falling world prices for its chief exports of agricul- tural goods and minerals, is also receiving renewed atten- tion. An Argentine mission now in the bloc seeking to use up trade credits earned there during the past two years has expressed willingness to con- sider a bloc offer of additional credits for industrial goods normally imported from the West. Argentina has neither the cred- its nor the foreign exchange with which to purchase these goods from the West. Elsewhere in Latin Amer- ica, particularly in Uruguay, Colombia, and Brazil, bloc mis- sions are offering both loans and the exchange of industrial goods for surplus agricultural SINO-SOVIET BLOC AID TO UNDERDEVELOPED AREAS SINCE 1954 (in millions of dollars) Economic loans* It Military loans Communist China has given outright gifts in the amounts specified to the following: Cambodia ($23,000,000), Ceylon ($16,000,000), Nepal ($13,000,000), and Egypt ($5,000,000). z t, v t [ ~ v BRAZIL 5 ICELAND SECRET products. Chile, faced with depressed markets for its cop- per, has indicated an interest in selling copper wire to the USSR. In addition to inviting delegations to the Afro-Asian Solidarity Conference meeting in Cairo in December 1957 to submit requests for assistance for economic development, the Soviet participant, in an at- tempt to create an investment climate unfavorable to private venture capital, recommended the nationalization of foreign- owned enterprises as a means of obtaining capital for develop- ment. It is increasingly the practice of the bloc to accept payments of a loan in terms of specific commodities from the one-crop nations, or to accept local currencies from states such as India, with the result that the bloc is carving out for itself a larger share of the foreign trade of these coun- tries. PART III PATTERNS AND PERSPECTIVES Page 5 of 10 Approved For Release 2007/10/23: CIA-RDP79-00927A001600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET 27 February 1958 In January, the USSR's del- egate at the Bangkok meeting of the UN Economic Commission for Asia and the Far East (ECAFE) cites as major causes of current difficulties in the ECAFE the reduced demand for raw materials resulting from the business "recession" in capitalist coun- tries and the area's heavy trade deficit with the United States. He said the USSR would grant credits 'of up to five years for the purchase of machinery and equipment by underdeveloped countries of the region, and would study the possibilities of signing long-term agreements for purchase of certain basic export items of the area. Observers from Czechoslo- vakia and Hungary also offered to discuss long-term agreements under which their countries would acquire area raw materi- als directly rather than through international markets as they now do. Limitations In the long run there are certain disadvantages which the USSR must overcome if it is to threaten the present commercial superiority of the principal capitalist countries. The pres- ent reliance on bilateral trade arrangements restricts the range and total volume of trans- actions. Often the problem of making periodic bilateral set- tlements is solved by restrict- ing trade so as to minimize im- balances. The inconvertibility of Soviet and satellite currencies has not hindered the expansion of trade, except in Latin Amer- ica, but it will pose problems for Moscow as trade is further increased. The USSR has an advantage in its ability to propose either general or specific aid offers on short notice, thus exploiting situations as they arise. However, once a pro- gram is under way, the USSR appears to be considerably less flexible. This is partly a re- sult of its planned economy. The committee responsible for foreign aid may have to consult with as many as 100 regional economic councils when setting up production schedules for aid goods. The USSR already this year has refused a request for changes in the operation of its aid pro- gram in India. Moscow may find that wide- spread foreign assistance gen- erates new problems. The suc- cess of an aid program in one country may give rise to criti- cism from other countries where the results of development loans are not so spectacular. The Soviet Union urged Syria to ac- cept Soviet loans for its devel- opment program which had been acknowledged by most economic experts as a reasonable scheme and likely to succeed. On the other hand, Egyptian requests for economic development loans were not enthusiastically re- ceived by Moscow since they were not expected to produce as fa- vorable results as Syria's. (Prepared by ORR) SECRET PATTERNS AND PERSPECTIVES Page 6 of 1.0 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURR9NT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 The Turkish Government failed in 1957 to carry out many stabilization measures which it had adopted the previ- ous year. As a result, last year's apparent slight economic advance was achieved at the price of increased monetary in- stability. Although Ankara maintains that inflation will be halted in 1958 and has pre- sented a ba1aFnced budget, the prospects for success seem doubtful, barring a marked shift in government policy and sub- stantial outside aid. Turkey has been seeking since 1950 to develop its econ- omy as fast as possible. In- dustrial as well as agricultural production--the mainstay of over 80 percent of the population-- has been substantially increased. While industrial production has risen 61 percent in real terms since 1948, agriculture still accounts for about half the na- tional income. The gross na- tional product in current prices has climbed almost 140 percent since 1950, but the real in- crease in per capita income has been small because of the rapid rise in prices. Ankara's financial problem has been caused largely by its policy since 1950 of maintaining a rate of investment substantial- ly higher than warranted by. available internal and external resources. The resulting infla- tion has either largely miti- gated or wiped out many of the gains from investment. By 1956, Turkey's attempt to build its economic house without a plan and without ap- parent regard for the conse- quences had brought the problem to a crisis. The government-- in response to pressures from the United States, the OEEC, and the International Monetary.. Fund--adopted a policy of keep- ing investment within the limits of available noninfla- tionary financing. A maximum of $130,000,000 was to be made available for 1956 from nonin- flationary sources and a finance committee was to be established to supervise expenditures. However, the usual politi- cal pressures for more spending proved irresistible and total of $308,000,000 was cominitted during the year, This 130-per- cent overexpenditure furced prices up while the Turkish pound continued to depreciate. Similarly in 1957, Turkey pre- sented a balanced budget which nonetheless ended in a sub- stantial deficit. There are in- dications, however, that the Turkish Government is viewing its economic problem more seriously and may be willing to make sub- stantial economic policy changes. These moves would be conditional on a substantial multilateral aid program involving the OEEC, the United States, and the In- ternational Monetary Fund. Foreign Trade The Turkish Government's encouragement of foreign borrow- ing to acquire materials for industrialization resulted in a trade deficit of over $100,- 000,000 in 1956 and almost half a billion dollars in the last three and a half years. Turkey's foreign debt probably totals more than $1.2 billion. Government restrictions reduced the trade deficit some- what during the first eight months of 1357 but resulted in widespread shortages of consumer goods and raw materials. Thus, factories dependent on foreign raw materials were idle or operated part time while the government plunged further into debt to build more plants. The General Electric light-bulb plant in Istanbul, for example, was Idle from August 1957 to SECRET 'DART III PATTERNS AND PERSPECTIVES Page 7. i G.l Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 27 February 1958 TURKEY: FOREIGN TRADE 1954-1957 MILLIONS OF DOLLARS GERMANY UNITED KINGDOM UNITED STATES SOVIET BLOC SECRET CURRENT'INTELLIGENCE WEEKLY SUMMARY GERMANY UNITED KINGDOM UNITED STATES SOVIET BLOC early February 1958 for lack of $75,000 in foreign exchange needed to purchase raw materials. Government agricultural pricing policies have caused a gross distortion of local prices com- pared with world prices, and, in many cases, exports are made possible only by government subsidies. Turkey's trade with the So- viet bloc has been increasing in recent years. In the first eight months of 1957, the bloc accounted for about 18 percent of total trade. West Germany and the United States provided about 45 percent of Turkey's imports in 1956 and took about 36 percent of its exports. Accomplishments Despite the seri- ous monetary insta- bility, economic ac- tivity in Turkey has 75 increased considera- bly during the past 50 several years. This higher production, 25 however, could have been attained with considerably less tional investment program. Still, from the Turkish point of view, these years have been marked with success despite the pres- ent financial problems. The gross national product in real terms--eliminating the effects of increased prices--was about 43 percent higher at the end of 1955 than in 1948. In addi- tion, industrial development grew faster than the economy as a whole. Much of the investment has been in projects with a long-term payoff, such as elec- tric power plants, but which are a prerequisite for further TURKEY: TRADE BALANCE (MILLIONS OF DOLLARS ) -1955 cost had the govern- 17 FI:6RUARY 1958 ment adopted a ra- SECRET IMPORTS 1ST 2ND 3RD 4TH 1ST 2ND 3RD 1956 1957 - PART I I J DATT1RNC ANTI DFP DTa rTT VrC 8 of 10 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 development. The production of electricity, gas, and water has increased faster than for any other type of industrial ac- tivity, and by the end of 1955 had increased 128 percent over 1948. While industry has received favored treatment, improvement in agriculture and the raising of farm incomes have been a major economic and political goal of the present government. exploration. Since then at least a dozen Western companies have received concessions, but no major discov- eries have been made. The only production is from the Raman field (4,000 barrels per day) in south- eastern Anatolia, dis- covered in 1941, and the Garzan field (2,- 300 barrels per day) in Thrace, discovered in 1951. The proved reserves of these two fields are es- timated to be about 65,000,000 barrels, a relatively small quantity even when measured against Tur- key's own requirements of only about 10,000,- 000 barrels annually. From 1949 to 1955 the number of tractors increased seven- fold to over 41,000 units. An extensive training program de- signed to acquaint farmers with modern agricultural developments has been undertaken with vary- ing degrees of success. Physical factors, however, still dominate the Turkish agricultural picture. Crop production fluctuates wide- ly, varying with the amount of rainfall and causing an un- stable national income. Wheat yields, for example, may vary from 636 to 1,153 pounds per acre. As a result of the high level of investment, rapidly growing money incomes have in- creased domestic consumption of agricultural products in many cases rather than making higher production available for export. This also holds true for many products of industry. In early 1954 Turkey passed a liberal petroleum law which opened the country to foreign oil companies and ended the government's monopoly on oil Ankara has high hopes for oil discoveries. As economic development continues, the coun- try's petroleum consumption is increasing substantially and continues to be a large factor in the balance-of-payments def- icit. In 1956, domestic pro- duction supplied less than 18 percent of requirements. Monetary Survey The financial sector of Turkey's economy mirrors the general deterioration of the economy since 1950. All mone- tary indicators paint an ex- ceedingly gloomy picture and suggest a further deterioration SECRET PART III PATTERNS AND PERSPECTIVES Page Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 -- ??'~'PRdCE$SING INDUSTRIES " GROSS NATIONAL PRODUCT Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 February 1958 unless the government takes drastic action. The govern- ment's reckless borrowing spree has resulted in near chaos as prices continue to spiral up- ward and government debt in- creases alarmingly. Since 1950, wholesale prices have increased over 180 percent, resulting in a concomitant rise in the cost of living. The creation of money for investment has in- creased central bank claims by over $1,4 billion in the last seven years and has expanded the money supply from about $715,000,- 000 in 1950 to over $2.1 billion by the end of 19 56 . The government's recent price control measures will prob- ably fail, as virtual- ly all such measures have in the past. Through a series of exceptions, the prices of goods will be allowed to rise until the upward spiral of prices is again in full swing. The Turkish foreign exchange position is exceeding- ly weak, and the gov- tion of the Turkish pound ac- companied by stringent measures to restrict increases in domes- tic consumption and to reduce sharply the country's invest- ment program. The Turkish pound, now officially pegged at 2.8 to the dollar, has been selling for up to 14 to the dollar in Beirut. Some econ- omists believe an eight-to- one rate would be realistic. While a devaluation probably would provide welcome relief, the results would be transitory I T R Y 1 O A ET 11 4 I A R$ { 1 _.I MONEY SUPPLY TIO AL BAN ~ 1 1800 4- ILA ~ p --- ~-- CLAIM LAI SON GO S ON ERNME 5 S 1600 ~-- MY TIl4.~- REI R CH WE IN EX F W OLE A PRI ES 1400 -., f .Y. _ i...-. .1. ._.. .....! ...-t. _. ._ -- -__ _...,. i lzoo -I 1000 i I 808 1-'---I 600 -I --1 - { . 400 200 ~_ r ~ -f - - - ~_~~ II _I l i I .I I I _II ~_l I L-) ernment is operating on a hand- to-mouth basis. Oil companies have refused to extend further credit and will make deliveries only on a cash basis. Since Turkish capabilities to in- crease exports are limited, the balance-of-payments problem can be solved only bya substantial reduction in imports of capital goods and building materials. Prospects Turkey's major trading partners are seeking a devalua- unless accompanied by a sub- stantial change in the gov- ernment's economic policy. Ankara thus far remains ada- mant in rejecting both devalua- tion and a lower level of investment. Ankara's attitude toward its financial situation suggests that the Turks believe that in the event of a major crisis, Western economic aid would be forthcoming in amounts ade- quate to see Turkey through its problems. SECRET PART III PATTERNS AND PERSPECTIVES Page 10 of 10 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600100001-4