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March 20, 1958
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Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 CONFIDENTIAL, 'I III C URRENT INTELLIGENCE WEEKLY SUMMARY NEXT REVIEW DATE DECLASuIF1ED CLASS. CHANGED TO: NO CHANGE IN CLASS. COPY NO. 14 OCI NO. 0037/58 20 March 1958 DOCUMENT AUTH: _ HR 70-2 DAT REVIF-WER: CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE CONFIDENTIAL State Department review completed Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 Awe THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. The Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Next Page(s) Next 7 Page,(s) In Doc Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 u ment Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Name CONFIDENTIAL OF IMMEDIATE INTEREST Central government troops are established in and around the Caltex oil center of Pak- anbaru, but apparently are still engaged in clearing op- erations in Stanvac areas to the south near Rengat. The government has opened the Pak- anbaru airfield to company planes of both Caltex and Stanvac, but Pipeline i i Railroad Road I.." .MO BURMA CAM. IIETNAM the Stanvac airfield near Rengat is damaged. The Siak River is clear, and the military has in- formed Caltex that full-scale operations, including the use of tankers, may be resumed. Army battalions, using an overland route from Dumai, are now arriving in Pakanbaru IV .A _L A,Y A MALAYA WU .OWMfa WAW AW' SUMATRA PaWf B""'? $iNGAPORE N.K.) ,BTandjung Pinang RIAU ISLANDS CONFIDENTIAL 24929 PART I OF IMMEDIATE INTEREST Page 1 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY to replace air force paratroop- ers who captured the town. These forces are probably part of a build-up for an overland advance on the dissident strong- holds of Padang and Bukittinggi which may already be under way. Six Javanese battalions are also said to be available in Java for an attack on Padang and have been alerted for an air move to Central Sumatra. Two dissident battalions from Tapanuli are attempting to rendezvous with the troops of Major Nainggolan, which num- ber apps ximately three com- panies and seized Medan on 16 March but withdrew southward the following day. Nainggolan's forces are already being har- assed from the air and, accord- ing to several reports, some of his vehicles have been de- MIDDLE EAST DEVELOPMENTS Nasir-Saud Relations UAR President Nasir re- turned to Cairo on 17 March from his three-week visit to Damascus. A high-level Egyp- tian emissary has gone to Yemen with Crown Prince Badr in order to explain Nasir's stand on Saud to the Imam. This step appears to indicate an unyield- ing attitude on Nasir's part. The 25X6 Cairo press is spreading reports of disagreement and dispute among Saud's councilors, es- pecially the ex-Palestinians Jamal Husseini and Yusuf Yassin. It has pointed to the official Saudi seizure of the records of the Arab Bank in Riyadh as an attempt to destroy the evi- dence of the Saudi conspiracy against Nasir. Saud is seeking to counter this Egyptian propaganda while taking maximum security pre- cautions. Mecca radio is broad- casting detailed'statements of his activities and whereabouts, SECRET stroyed. Colonel Simbolon, the over-all dissident military commander in Padang, is report- edly taking one company into Tapanuli and then will person- ally join the Nainggolan forces. A showdown fight between these two forces for control of North Sumatra may develop around Siantar. Some of the ten merchant ships ordered from the USSR have arrived in Djakarta. Apparently, the ships cannot be placed im- mediately into service since ar- rangements are being made for their alteration in the Sura- baya dockyard for service in Indonesian waters. The ships were purchased under the terms of the $100,000,000 Soviet loan agreement which was ratified by Indonesia in early February. PART I OF IMMEDIATE INTEREST Page 2 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 there are no signs that e King is losing control over the sources of power in the army and security forces. Saud, in addition to moving what appear to be younger, pro-American of- ficers into key army staff positions and increasing the authority of his son, Prince Fahad, the defense minister, has asked the United States military mission and the Iraqis to undertake the training tasks abandoned by the Egyptians last week. The alignment of Yemen with the United Arab Republic (UAR) in a new organization called the United Arab State (UAS) probably marks the opening of a now phase rather than the closing of the clandestine struggle between Saud and the Egyptians for control of Yemeni policy. UAR Developments Nasir's three-week stay in Syria and 30 speeches produced a wave of popular enthusiasm for the United Arab Republic and resulted in the emergence of ex-Syrian G-2 chief Sarraj as Nasir's proconsul for the Syrian region. Officially miL-- ister of interior for the Syrian region, Sarraj now occupies the office space traditionally re- served for the prime minister and for the first time his pic- ture is being prominently dis- played throughout Damascus. Nasir has placed all security forces, with the exception of the army, under Sarraj's In- terior Ministry. The radical nationalists and masses view the UAR as a great step forward toward the long-desired Arab unity. Con- servative elements, while re- garding Egyptian ascendancy as distasteful but essential:med- icine for Syria's economic and political ailments, welcome the suppression of the Commu- nists and transfer of army pol- iticians to civilian jobs. The public enthusiasm for the "new order" and the osten- tatious manifestations of vig- orous leadership in Syria are reminiscent of the era follow- ing Syria's first military coup in 1949, when Col. Zaim seized the reins of government. With- in two months, the public grew weary of the regime's incom- petency and the lack of real progress, As at that time, civilian politicians such as Akram Hawrani--Zaim's accom- plice--and President Quwatli have been irked by many of the new political appointments and the downgrading of their friends from real power. Gaza Strip Increased reconnaissance by Israel over its borders, plus current spring maneuvers in southern and central Israel, have aroused Arab apprehensions, par- ticularly in Syria and Jordan. In the Gaza strip a new legislative council was estab- lished on 15 March accompanied SECRET PART I OF IMMEDLATE INTEREST Page 3 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 by celebrations reflecting hope among the refugees that the council was the first step to- ward establishment of an effec- tive Arab Palestine government, No moves have yet been made to recognize the Gaza council as such a government or to affil- iate it formally with the UAR. Nasir may visit the str._,_ in person in the near future. SUMMIT CONFERENCE MOVES Soviet Maneuvers Soviet leaders now are try- ing to further the impression that the USSR and the West are moving toward agreement oa at least some key issues, thus making substantive preparations for summit talks as demanded by the West unnecessary. So- viet diplomats are privately hinting that the Kremlin is ready to modify its position on some issues after talks at the summit get under way, and is prepared to forego neutral- ist participation at summit talks as well as at a foreign ministers' meeting. On 17 March the counselor of the Soviet Embassy in Paris, after reiterating Soviet objec- tions to substantive prepara- tions, told American officials that the best way to determine the possibility of East-West agreement would be for the heads of government themselves to discuss substantive questions. He argued that the USSR--"just like" the United States--might be holding back compromise solutions for bargaining pur- poses, and stated that "Bul- ganin might be able to agree on things to which Gromyko could not." The Soviet diplomat assert- ed that, while it "was agreed of course" to have equal East- West representation at a heads- of-government meeting, Moscow no longer considers neutralist participation in summit talks essential. In his view, the United States, Britain, France, and Italy would represent the West, and the USSR, Poland, Czechoslovakia, and Rumania would participate on the Commu- nist side. In early March, So- viet officials indicated in private conversations that the USSR would be prepared to forego neutralist representation at a foreign ministers' session and that such a meeting could even be held on a four-power basis. The Soviet Foreign Ministry, in a statement of 15 March, re- peated the proposal mentioned briefly in Bulganin's 6 March letter to President Eisenhower to link a ban on military uses of outer space with liquidation of military bases on foreign territory. The suggestion to guarantee implementation of such an agreement with "due interna- tional control" under UN auspices and to set up a UN agency to facilitate international coop- eration in outer-space research is apparently intended to give SECRET PART I OF IMMEDIATE INTEREST Page 4 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET Nftwf: CURRENT INTELLIGENCE WEEKLY SUMMARY the impression that East-West differences are narrowing. The formal inscription by the USSR of this proposal on the provisional agenda of the next General Assembly--sched- uled to open in September-- specified that, after agree- ment "at least in principle" had been achieved at a summit meeting, the General Assembly could work out a general in- ternational agreement. Moscow probably expects this move to still criticism arising from its denunciation on 14 March of the American proposal to hold a procedural meeting of the UN Security Coun- cil in order to discuss means for resuming disarmament talks. Despite the public denunciation, Soviet diplomats continue to hint privately that the USSR may yet agree to action, such as the United States proposes, provided it does not detract from the prospects for a summit meeting. Bulganin's letter of 17 March to Prime Minister Mac- millan contained no concessions on the agenda for a summit meet- ing. Bulganin charged that Brit- ain and the United States were delaying a high-level conference while "hastening the implementa- tion of practical steps in the sphere of war preparations." Western European Attitudes Public pressure on the British Government for quick agreement on summit talks has eased somewhat, as more com- mentators question whether Mos- cow really wants talks. Brit- ish and European public opinion still appears to want and ex- pect talks to be held, however. Preliminary governmental studies on European security plans re- flect different approaches to substantive issues and have brought out French suspicions of British intentions. While the Macmillan govern- ment remains under heavy attack on foreign policy, the first substantial signs of a counter- attack and reaction have ap- peared. In an evident attempt, to offset the extreme leftists' and pacifists' demands for uni- lateral British disarmament, a group of 175 MP's, including 17 Conservatives, on 13 March introduced a motion in the House of Commons containing the relatively modest demand for establishment of a UN au- thority to administer limita- tions and an eventual ban on both nuclear and conventional armaments. A motion by 100 Tory MP's directly opposed any unilateral British disarmament moves. Most interpretations placed on the results of widely publicized polls of university students conclude that youth, however affected by desires for disarmament, is not yet overwhelmed by pacifism as in the 1930's, British press comment be- fore receipt of Bulganin's 17 March letter to Macmillan showed pronounced irritation with the latest Soviet diplo- matic-propaganda moves, espe- cially tying control of outer space with the dismantling of SECRET PART I OF IMMEDIATE INTEREST Page 5 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 JLCLtCL 1 CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 all American bases abroad. There was an increasing dis- position to blame the USSR for delaying progress toward summit talks and even to question whether Moscow genuinely desires them. Elsewhere in Europe, pub- lic opinion shows little change, although the American Embassy in Brussels reports a growing appreciation there of the merits of the Western position on sum- mit preparations. The direction of the Brit- ish Foreign Office's "disengage- ment" study reflects the heavy pressure on the Macmillan gov- ernment to offer positive pro- for easing cold war ten- sions. The Foreign Office is now studying a plan for a small demilitarized area on each side of the present East-West border in Germany, in advance of agree- ment on reunification. Foreign Secretary Lloyd may sympathize with such a plan, but the Min- istry of Defense considers pres- ent Foreign Office proposals for modified forms of disen- gagement as too dangerous, French Foreign Ministry officials express alarm at such British sentiments, and assert that the generally "soft" Brit- ish attitude threatens to up- set the political balance in France and disturb the whole structure of Western defense. The French approvingly report that, in contrast, the German disengagement study is focus- ing on establishing a demili- tarized area in the pres- ent Soviet zone of Germany and in adjoining satellite territory only after reuni- fication, which would accord with the Western position at the 1955 Geneva foreign ministers' conference. FRENCH POLITICAL SITUATION The government's 282-to- 196 victory in the 18 March confidence vote merely post- poned a final decision on con- stitutional reform and leaves unresolved the basic differences within the coalition, which is increasingly split over the Algerian question. A wide range of respon- sible opinion in France is speculating on the possibility of a return to power of General de Gaulle. He still insists on assurances that the assembly would give him a free hand to effect a complete reform of French political institutions, and the deputies still appear reluctant to give up their prerogatives. Nevertheless, some political leaders profess to see a growing trend in the assembly and in the Council of the Republic for his investiture as premier. While some of this scare reporting is probably aimed at getting firmer Amer- ican support on North Africa, the continuing impasse in France's North African problems does foster a political atmos- phere conducive to a "strong- man" solution. The Independents have taken a strong anti-Tunisian stand SECRET 25X1 25X1 PART I OF IMMEDIATE INTEREST Page 6 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 Nome SECRET V"EW CURRENT INTELLIGENCE WEEKLY SUMMARY and their ministers have threat- ened to resign from the cabinet despite -their support of the government in the 18 March con- fidence vote. This may be a matter of tactics, but with the Socialists considering a less rigid policy toward Algeria, the cleavage within the govern- ment may be deepening at a time when public opinion is becoming mono polarized and more frus- trated. In the meantime, Gaillard faces further debate on his controversial proposals for constitutional and electoral reform. He has postponed a SECRET new airing of the veterans' pensions issue until 28 .'March in the hope that the prospect of the spring recess scheduled to start at the end of that day's session will discourage rebellious deputies who might be willing to have a showdown on this explosive issue. Gail- lard seems intent on holding on as premier, at least until the assembly quits for the cantonal and senatorial elec- tions. However, he has given no indication of any willing- ness to assert the leadership 25X1 necessary to restore confidence, in the parliamentary regime in France. PART I OF IMMEDIATE INTEREST Page 7 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 nge NINON; CONFIDENTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY MIKOYAN REVIEWS SOVIET ECONOMIC POLICIES Anastas I. Mikoyan, in a pre-election speech to his Ar- menian constituency on 11 March, took an approach reminiscent of Khrushchev's in its theoretical innovations and disregard for dogma. He reviewed the domestic policy innovations of the post- Stalin period and strongly linked increased personal con- sumption by the Soviet people to the goal of catching up withi the United States. He set forth the goal of catching up with the West in retail trade turn- over as one attainable in the "historically near future." Alluding to policy disputes in the presidium, he pointed up the absurdity of the belief of some "famous old party leaders" that, because the means of pro- duction are the base of the So- viet economy, the USSR should overtake the United States in steel production before over- taking it in production of meat, milk, and butter, Mikoyan stated that there is no reason to delay catching up in agricul- steel is achieved. He gave as his reasons the great hidden potentialities in agriculture, the fact that agricultural goals are being gained without elimi- nating capital investments in metallurgy, and the fact that food is produced for the labor force, "which is after all the basic production force in the society." Earlier disputes, such as the differences in the presid- ium over the new lands program, were also discussed by Mikoyan. Mikoyan appeared to go out of his way to praise Khrushchev for his initiative and keenness in developing the new lands pro- gram. He also endorsed Khru- shchev's machine tractor station reorganization as the "greatest event in the life of our country- side since collectivization." Establishing a goal of catching up with the West in re- tail trade turnover per capita in the "historically near future" indicates that the present policy of significantly improving the consumer's lot--seen in the agri- culture and housing programs particularly--is continuing un- abated, and may be stepped up further. Catching up in this field is a tremendous task and has not been stressed previously. Mikoyan holds that such a course does not involve abandonment of the traditional emphasis on in- vestment and heavy industrial growth, although attainment of this goal implies a growing im- portance of consumption relative to investment. The Soviet leadership appar- ently intends to push a consumer program while maintaining high industrial growth rates rather than pursuing maximum industrial tural products until parity at all costs. Such a PART II NOTES AND COMMENTS Page 1 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 JCI.I'cfr 1 %Now policy is seen in Khrushchev's rather modest 15-year in- dustrial forecasts and Mikoyan's state- ment last year that Soviet industry would be growing at the rate of about 7 percent annually. Former rates were much higher. :a dealing with intl..- Y.%tional af- fair:, ; Mikoyan, quot- ing lioerally from US News and World Report, Walter Lipp- man; and Fortune, made well-stated CONSUMPTION AND RETAIL SALES US - USSR ( 1956 DOLLARS CONSUMPTION PER CAPITA - RETAIL SALES PER CAPITA* 1950 1520 1956 USSR us USSR us * The comparison of retail sales is necessarily approximate. 20 MARCH 1958 80319 4 pitch to the whole non-Commu- aist world for increased trade. He noted American concern over the domestic economic situation, Western European fears over the effect of an American recession, the continuing growth of Commu- nist international trade, and ;.he actual advantages--like the low interest rates for bloc credit--of Communist bloc - Afro-Asian trade and aid. "Am- erican monopolists and war prof- iteers" received'the propaganda treatment usually accorded them., by Soviet leaders in such a speech. (Pre- pared by ORR published program for the seventh congress of the League of Yugoslav Communists in April shows that the Yugo- slavs will reaffirm the views which in the fall of 1956 re- vived their ideological con- flict with the USSR. To avoid provoking Moscow unnecessarily, however, Tito is making public efforts to minimize his dif- ferences with the USSR. The Yu- goslavs hope that continuing active support for Soviet foreign policy will go far to counter Moscow's anticipated irritation over the aggressive presentation next month of the Yugoslav "road to socialism." The party program published on 13 March implies strong criticism of the Soviet bloc for failing to recognize changes in the contemporary world, and it emphatically re- jects the ideological superior- ity accorded the USSR by the other Communist states. Con- trary to current Soviet dogma, it denounces those who regard as "revisionism" every ef- fort toward further develop- ment of Marxist thought and it declares as harmful the view that only Communist parties have a monopoly on forms of progress toward social- ism. SECRET PART II NOTES AND COMMENTS Page 2 of l8 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 JI/l,l C/ 1 ,"moo . CURRENT INTELLIGENCE WEEKLY SUMMARY Remarks preparatory to the party congress have left little doubt that next month Yugoslavia will again present its "road to socialism" as the most pro- gressive and up to date in the Communist world. In a speech on 7 March, Vice President Kardelj, Yugoslavia's leading ideologist, highlighted dif- ferences with Soviet bloc theoreticians when he attacked "persons" in Eastern Europe who are "enclosed within narrow dogmatic schemes and ideological conservatism" for saying that Yugoslavia should not have developed its system of workers' self-management so quickly. Kardelj in effect replied that the Yugoslav workers' council system had been strengthened rather than weakened through its rapid development. Possibly in an attempt to soften the impact on the Soviet bloc of both the party program and recent public statements extolling'-the Yugoslav "road to socialism," Tito told-Cyrus Sulzberger of the New York Times on 28 February that here ware no ideological differences be- tween Belgrade and Moscow, but only differences in methods, Khrushchev, however, as recent- ly as 21 December recognized the existence of "ideological differences" with Belgrade. Tito's refusal to discuss the issue of Stalinism in the USSR with Sulzberger was probably influenced by his desire to avoid provoking a sharp Soviet reaction. On 16 March, moreover, Tito linked himself unreserved- ly with the Soviet position on summit talks. Abandoning the view Belgrade had been adopting recently with regard to the attitudes of East and West on the talks, Tito publicly accused the West of "sabotaging" and evading the preparatory talks agreed to by the USSR. While this new anti-West stand may partially reflect Belgrade's frustration over receiving little Western support for participation in summit talks, Tito no doubt hopes that his demonstration of affinity with Soviet foreign policy at this time will mollify Moscow's anticipated displeasure over Yugoslavia's projected party program. Tito alluded to "certain things" that "are casting a shadow" on Yugoslav-Soviet relations, and added that the Yugoslavs do not approve of the virtual blackout the Soviet press has adopted this winter regarding Yugoslav developments. Delegates of more than 30 Communist parties meeting in Prague announced on 11 March that a number of parties will publish a "theoretical and in- formative" monthly periodical as an international organ for world Communism. A compromise has apparently been reached between such parties as the Czech, East German, and British, which have demanded some cen- tral international Communist guidance, and those "independ- ent" parties, such as the Polish and Italian, which fear any international publication might be used by the USSR to impose conformity. The terms of reference of the new journal suggest that it will not publish "directives" but is to be a clearinghouse of SECRET PART II NOTES AND COMMENTS Page 3 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET ideas. Unlike its predecessor, the Cominform journal, the new publication is not the mouth- piece of an international Communist organization. It appears to require simply an editorial board with a number of sponsoring parties for the publication as a whole. The brief announcement from Prague invited parties not attending the founders' meeting to "join on a footing of equality or take part in the publication and work of the journal in any other form that suits them," indicating approval of a loose association of parties not sub- ject to strict discipline. British, French, Indian, Argentine, Polish, and Chinese Communists reportedly were also among those participating at Prague. The USSR probably believes the new publication can be effectively used to stress agreement on Marxist-Leninist fundamentals. For the purposes of the journal, Moscow may moderate its strident attacks on international Communist re- visionism which tend to alienate Polish Communists and to height- en Yugoslav antipathies. The establishment of the journal implements an accord reportedly reached among most of the Communist parties which attended the 40th anniversary celebrations in Moscow. Strong Polish and Italian objections at that time to the establish- ment of a "directive" publi- cation like the Cominform journal may have been assuaged by Soviet assurances that the new period- ical would be purely informative. The Polish and Italian parties will probably remain skeptical and sensitive to any Stalinist tendencies evident in the jour- nal. The visit of high-level Soviet party officials to Italy in late February and early March may have been for the pur- pose of overcoming Italian res- ervations. While the Yugoslav press has noted the establishment of the new journal, Tito's party has apparently avoided mention- ing it. The Yugoslav ambassador told American Minister Wharton in Bucharest on 12 March that he doubted that the Yugoslav party would either contribute to or participate in the new journal. Tito will probably refrain from participation at least until the new journal has proved to be a truly independent forum. In past discussions con- cerning a "socialist" publi- cation, Belgrade has advocated, as the best insurance against Moscow's domination, that it be a medium for the world's socialist parties as well as for the Communists. Although the USSR has emphasized the need for socialist-Communist international contacts in the past, there is as yet no indi- cation that the new publication will go that far. The atmosphere in East German party and government circles differs markedly from that of postpurge periods in the past. A strong undercurrent of sentiment against Stalinist party First Secretary Ulbricht remains, despite his apparent victory over dissident elements at the Socialist Unity (Commu- nist) party (SED) plenum in early February. There is a tendency among party and govern- ment officials to avoid taking SECRET PART II NOTES AND COMMENTS Page 4 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY an unequivocal position which would identify them as strong Ulbricht adherents, and sym- pathetic treatment accorded individuals recently attacked by the party is in sharp con- trast to the ostracism accorded those critical of the party in the past. The fact that men who have been under attack still main- tain their contacts with the Russians--former Deputy Premier Oelssner, one of the purgees, retains some of his preroga- tives--suggests that the Krem- lin may not have reached a final decision on the East German leadership question. Selbmann, one of East Ger- many's leading economic experts, was attacked during and after the 35th plenum for "managerial- ism" and opposition to Ulbricht. He spoke out boldly at the planning commission conference and denied all the accusations made against him. Selbmann's defense was apparently accepted at face value,as no one rose to. challenge the contradictions be- tween his statements and the widely publicized charges a- gainst him. Failure by the con- ference to espouse the Ulbricht line appears to reflect the attitude of many party and gov- ernment officials. Selbmann has substantial support within the managerial class and among practical econo- mists; he is regarded by them as the logical successor to Ulbricht if the Kremlin should decide that a change in the East German leadership would best serve Soviet interests. He is rumored to have his own chan- nels to the Kremlin and is said to be close to Mikhail Pervukhin, the new Soviet am- bassador to East Germany, who also is an economic expert. There is a belief among party functionaries that Selb- mann obtained assurances of Soviet support during his stay in Moscow in mid-February. In support of this belief, they cite the cessation of press attacks on him following his return to East Germany. There is a possibility that Selbmann, with Pervukhin's assistance, may be able to convince the Kremlin that Ulbricht's economic policies could lead to political 25X1 disaster and that only a change in leadership can avert a catastrophe. PIPING PUSHES USE OF LATIN ALPHABET Peiping is promoting its newly adopted plan to Latinize Cbina's written language in the face of considerable antagonism from Chinese intellectuals. A Ministry of Education directive requires that instruction in the alphabet begin in all primary and middle schools this fall. The new system is al- ready being used in the mast- heads of major newspapers and SECRET PART II NOTES AND COMMENTS Page 5 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 for brand names of products. Textbooks and popular reading materials are being printed with alphabetic annotations. Out of deference to die- hard opponents, Peiping is giving assurance that the new ern European countries and USSR union repub- lics use the Latin alphabet. The pro- ponents of Latiniza- tion also claimed that the Latin alpha- bet had a long tradi- tion in China and was more readily adapt- able to Chinese than the Cyrillic. Peiping's cau- tious and rational approach to the many problems of Chinese language reform, sug- gests that the pro- gram will succeed to Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Jl/t,t{C 1 ~~ ENMIN R AO DA GONG BAO Present mastheads of Peiping People's Daily, top, andTa Kung Pao, bottom, a, considerable de- using both Chinese characters and Latin letters. g r e e. Increased alphabet will not supersede the old characters in the near future. According to the Communists, its use will be restricted for the present to popularizing standard spoken (_:hinese, reforming minority languages, assisting foreign- ers in learning Chinese, and transliterating foreign names and technical terms. Opposition to the plan from some quarters apparently derived from the fact that the Latin rather than the Cyrillic alphabet had been used. Premier Chou En-lai last January de- fended the use of Latin letters and pointed out that some East- literacy and ease of communication among various parts of mainland China resulting from such success would aid Peiping in exercis- ing its control over the coun- try. General familiarity with the Latin alphabet would also assist the regime in spreading the knowledge of Western science and technology which is essential its moderniza- tion program. CHINESE COMMUNIST WITHDRAWAL FROM NORTH KOREA The Chinese Communists have announced the arrival in Antung, Manchuria, on 16 March of the first group of troops departing North Korea. The entire withdrawal is to be accomplished in three stages by the end of 1958. The first stage involves six divisions comprising approximately 80,- 000 troops, and is to be com- pleted by 30 A ril according to Peiping. 25X1 25X1 SECRET PART II NOTES AND COMMENTS Page 6 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 ..- SECRET. CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 .some of the Chinese Com- munist troops with- drawn from Korea will be demobilized and established on state farms in north- eastern Manchuria. Chinese forces in Korea reached a maximum of 19 armies, over 800,000 troops, shortly after the truce talks began in July 1951. In 1953 the Chinese began to withdraw their for- ces, and by October 1955 the "People's Volunteers" consist- ed of the five ar- mies--approximately 300,000 troops--now in Korea which have begun to withdraw. Completion of the withdrawal will reduce the total Communist troop strength in North Korea by about 50 North Korean Army shown in brown Chinese Communist Army shown in red "People's Volunteers- shown in green percent. The North 124938 Korean Army of 334,- 000 men will be greatly outnumbered by the UN forces, consisting of 613,000 South Korean and 61,000 Ameri- can and UN troops. On the other hand, the North Korean Army is superior to the South Korean Army in firepower and heavy weapons capabilities and can rely on its far superior airforce--450- jet fighters and 75 jet light bombers as compared with South Korea's poorly equipped force of only 80:---tactical jet fighters. The repositioning of North Korean army units necessitated by the withdrawal of Chinese units will result in a loss of defensive depth and a corre- sponding decrease in North Korean defensive capabilities, particularly in coastal areas. As a remedial measure, the North Korean Army will report- edly strengthen its units by increasing from 60 to 90 the number of men in its infantry companies. Front-line units will get top priority. New recruits are to supply the in- crease, but manpower shortages in North Korea are critical, and the scheduled increase will be very difficult to achieve and can be accomplished only by taking men from rear-echelon units and internal security troops. The withdrawal of the Chi- nese forces will not. affect the SECRET PART II NOTES AND COMMENTS Page -7 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 %ftwol SECRET l....W CURRENT INTELLIGENCE WEEKLY SUMMARY over-all capability of Commu- nist military power in the area, however, because the Chinese Communists retain a strong reinforcement capabil- ity with their forces deployed in Manchuria, only 250 miles from the demarcation line. In CHINESE NATIONALISTS THREATEN TO BREAK WITH JAPAN Chiang Kai-shek has threat- ened to break relations with Japan if the Chinese Communists are allowed to fly their nation- al flag over their proposed trade mission premises in Tokyo as a consequence of the trade agreement recently negotiated with Peiping by private Japa- nese interests. Chiang was "most uncompromising" on the flag issue, according to Ambas- sador Drumright, although will- ing to gloss over trade and other concessions stipulated in the agreement. The Nationalist Govern- ment reacted to word of the Japanese agreement by suspend- ing negotiations with Tokyo for the annual barter trade agreement, and five days later it forbade the signing of con- tracts with Japanese suppliers. Banning of contracts with Japa- nese suppliers may induce Japan to curtail its purchase of sugar and rice from Taiwan, which constitutes the major source of Taiwan's foreign exchange. The Japanese Government has not yet indicated the ex- tent to which it will cooper- ate in fulfilling the terms of the private trade agreement with Peiping. Prime Minister Kishi has publicly opposed the flag provision. The govern- ment, however, is under strong domestic pressure to accept a Communist trade delegation, and the Foreign Ministry has in- formed Taipei that Tokyo might have no alternative to granting privileges to the Chinese Com- munists, including the right to fly the-flag. This right was written into the agreement at Peiping's insistence. Peiping is prob- ably interested more in the po- litical than in the economic aspects of the agreement, and almost certainly would not agree to any new effort to modify it. Counting on the rising pressure in Japan for mainland trade, the Communists probably believe Kishi will have to accept the present ac- cord. Foreign Minister Yeh is aware of the consequences for Nationalist China if it breaks relations with Japan. He is known to be counseling moderation in government cir- cles. Chiang Kai-shek, how- ever, obviously feels very strongly in this matter and has previously shown a willingness to act regardless of the conse- quences--as in the Outer Mongo- lian issue in the UN in late 1955. SECRET addition to the units now in Korea which may remain in Man- churia after withdrawal, Com- munist China could move into Korea within eight to ten days some 250,000 troops now located in North and Northeast China. PART II NOTES AND COMMENTS Page 8 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 CURRENT INTELLIGENCE WEEKLY SUMMARY MODERATES CONTROL RYUKYUAN LEGISLATURE The success of moderate political elements in winning control of the 29-seat unicam- eral Ryukyuan legislature in the 16 March election will make possible continuation of a rel- atively harmonious relation- ship between the legislature and the American administration on the islands. Since none of the moderate parties commands a majority by itself, legisla-? tive action will require coop- eration among them. The absence of an absolute majority will impede the operation of the legislature and might stimulate party mergers which could re- sult in a two-party system. The new legislature will include nine delegates from the Okinawa Socialist Masses party (OSMP), seven from the Ryukyus Democratic party (RDP), five from the extreme leftist Liai-. son Council for the Protection of Democracy (LCPD), and eight independents. The victory of the moderates has been inter- preted as a protest against the program of the anti-American LCPD rather than an endorsement of American policies. Popular feeling on the issues of rever- sion to Japan, opposition to the requisition of land for military use, and,lump-sum com- pensation rather than rent for this land remains high and will hinder full cooperation between the legislature and American authorities, The leftists increased their seats from one to five. The LCPD received an estimated 28 percent of the popular vote, slightly more than any other competing bloc. The election results are nevertheless re- garded as a setback for them, since they failed to make an- ticipated gains. It is note- worthy that in the capital city of Naha, which was believed an LCPD stronghold, only one of the party's six candidates was elected, In Koza, which was considered anti-LCPD, however, two of three leftists won. The new legislature also will have its first woman member, Hatsuko Miyazato of the OSMP. The creation of minor par- ties and splitting of former major parties have been impor- tant features of Ryukyuan poli- tics over the past year. The present US-appointed Ryukyuan chief executive, Jugo Thoma, an independent, intervened strongly in the election cam- paign in opposition to the LCPD,: and several independents and OSMP candidates he supported were elected. He desires the formation of a new conservative party, and new political align- ments may very well emerge now that the election is over, Naha Mayor Saichi Kaneshi's newly organized Okinawa Socialist par- ty could provide the nucleus for leftist elements in opposi- tion to a conservative party under Thoma. Japanese interest in Ryu- kyuan affairs probably will re- main high, and the Japanese So- cialists will continue to press the Kishi government to make stronger demands for the return to Japan of administrative re- sponsiblity for the islands. While Kishi is aware of the sensitivity of the Ryukyuan is- sue in Japanese-American rela- tions, he is likely to request publicly a, greater role for Japan on the islands since he faces a lower house election within the next year. SECRET PART II NOTES AND COMMENTS Page 9 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET Ifthw% CURRENT INTELLIGENCE WEEKLY SUMMARY ISRAEL'S POLITICAL AND ECONOMIC OFFENSIVE IN AFRICA The present visit to West Africa by Israeli Foreign Min- ister Golda Meir is part of a political and economic offensive Israel is waging among African states. Israel is trying to win allies who will give it support, particularly in the United Na- tions, and to limit the influ- ence of UAR President Nasir. Africa, with its raw materials and potential market for manu- factured goods, is also regarded in Tel Aviv as an area which must be penetrated commercially if Israel is to approach eco- nomic viability and rectify its present three-to-one excess of commodity imports over exports. The immediate Israeli economic objective is to compensate for the Arab boycott. The Israelis so far have been most successful in estab- lishing ties with Ghana. Mrs. Meir attended the first anniver- sary celebrations of Ghana's independence on 6 March, and the Israeli ambassador in Accra is a man of higher political stature than Israel normally ac- credits to so small a state. Since Nasir is also cultivating the new state's friendship, Is- raeli-Egyptian rivalry in Ghana is likely to tie fairly keen. Ghana, an important source of raw diamonds, especially in- terests Israel, whose second most valuable export is polished diamonds. The two countries have initialed a draft trade agreement, and Israel has said it will extend credits to Ghana. Last September a joint Israel- ment to train merchant marine personnel for Ghana over a pe- riod of several years. A Ghan- aian trade union mission has studied the structure and meth- ods of the Histadrut, Israel's labor organization. Mrs. Meir's tour also in- cludes Nigeria, Liberia, and French territories in West Af- rica. A Nigerian official has referred to the possible par- ticipation of Israel, through technical assistance, in a Ni- gerian development program, and Israel's two tire companies are said to be considering the es- tablishment of rubber planta- tions in western Nigeria and possibly in Ghana. The Liberian Government, hoping to thwart the creation of a pro-Nasir bloc within the emerging pan-African movement, has recognized the state of Is- rael. Liberia and Ethiopia are the only African countries with representatives in Israel; the Israelis have representation in six African states. In East Africa, Israel hopes to promote trade which will move to Eilat through the disputed Gulf of Aqaba, in which the Israelis are attempting to establish their "rights" to free transit in the face of Arab claims to sovereignty. Israel's plans to resume its former com- mercial air flights to South Af- rica over Aqaba will add the is- sue of air space sovereignty to the dispute. Ghana shipping line was estab- An Israeli-controlled meat- lished with Ghana having a 60- packing firm has operated at a percent interest. Israel, whose I loss in Ethiopia and Eritrea many European immigrants have since 1953. Tel Aviv now may provided it with an abundance be subsidizing it, perhaps to of technicians, also has ini- tiated a "miniature Point-Four program" involving assistance on a water survey and an agree- assure continued shipment of its kosher products to Eilat. One Israeli-owned fishing ves- sel flying the Ethiopian flag SECRET PART II NOTES AND COMMENTS Paffe 10 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 based at Massaua periodically carries its catch directly to Eilat. Discussions have been held concerning an extension of Israel's technical assistance to Ethiopia. Israel has also estab- lished a new commercial bureau in Nairobi, Kenya, and signed a commercial agreement with Rho- desia and Nyasaland in Decem- ber. An East African shipping line has been formed by an Is- raeli company for trips between Eclat and Portuguese Mozambique, while in Madagascar the Israelis propose to set up a 75,000-acre 25X1 agricultural enterprise to pro- duce animal feed and other crops for Israel. French Premier Gaillard may have serious difficulties obtaining support for the Tunisian Government's latest proposals. Tunis is marking time pending the French reac- tion, but much public discour- agement has been expressed over the failure of the proposals to include a specific reference to Algeria. Tunisian President Bour- guiba's insistence that the French-controlled airfields be put under a "mission of observation" runs counter to French rightists' public demands that the airfields not be aban- doned. , Since the =publication of Tunisian terms in the Paris daily, Le Monde, many independ- ents, Socia`I Republicans, and Dissident Radicals have publicly repudiated the concessions their ministers agreed to in the cabi- net last week. The Independent party con- gress last weel end demanded "neutralization" of all Tunisia as the price of any agreement by France to relinquish control of its airfields in Tunisia. Although party spokesmen have privately intimated they could accept a package deal provided the airfield question was "well camouflaged," Independent cabi- net ministers have threatened to resign and the party congress may have gone too far toward an extreme position to permit any backtracking. The Social Republicans have urged Defense Minister Cha- ban-Delmas to express to the cabinet their "uneasiness" over prolongation of the good offices mission and over Gaillard's Med- iterranean pact proposal. They maintain they are absolutely opposed to any concession on Bizerte, and their party has proclaimed itself in a "state of alert" pending outcome of. the Tunisian negotiations. In Tunisia, popular dis- appointment has been expressed regarding the prolongation of the crisis. The public also fears that the Algerian nation- alists will feel themselves be- trayed because President Bour- guiba has not yet succeeded in enlarging the scope of the good offices mission to include a settlement of the Algerian re- bellion. Nevertheless, the Tunisians are hopeful that the United States' involvement in North African problems through the good offices mission may 25X1 French negotiations. lead indirectly to Algerian- SECRET PART II NOTES AND COMMENTS Page 11 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 GROWING WEST AFRICAN PRESSURE FOR REVISION OF FRENCH UNION Growing African pressure for a revision of political re- lations, between West Africa and France has been shown re- cently,by the decision of the political leaders of French West Africa to agree on a joint course of action to win great- er political autonomy from Paris. The basic reform law of 1956, which provided a large measure of internal autonomy for the Africans, has spurred their demand for a further po- litical advance instead of satisfying their ambitions. In late February, a leading African politician who is also a secre- tary of state in the Paris gov- ernment warned the minis- ter of overseas France that "the time had come for France to do something more than talk about this French-African com- munity." Representatives of the three leading African parties agreed in Paris in mid-February to present a single political platform defining precisely what the federation demands as the next step in its politi- l ~_Y A) FRENC. HA "' NICE I CAM_ c EQUATORIAQ (,Monrovia TOGO [ ~...,..,.~ Fernando Poo ` ^??~?? Yaound J RIO-??-??~?+?-. .MUNL..-~ j BELGIAN CONGO Brazzaville :;~Leopoldville SECRET cal advancement. The proposed platform calls for total intern- al autonomy for the federations of French West Africa and French Equatorial Africa and for any other grouping of French ter- ritory; for the creation of a federal republic uniting these federations with France on the basis of absolute equality and the right to independence; and for a central government within each federation having all the attributes of internal sovereign- ty except direct control of for- eign affairs, defense, finance, higher education, and justice. These powers would be reserved to the federal republic. This program would strength- en the government at Dakar at the expense of the eight con- stituent territories of French West Africa and reverse the present policy of Balkaniza- tion. The Africans' toughening attitude is also shown by an agreement of the principal po- litical parties in the key ter- ritory of Senegal to create a 20 MARCH 1958 24941 single African na- tionalist party, Such a party would even- tually become the Senegalese section of a federation-wide African party, in place of the present m nulitiplicity of na- tionalist parties. Officials in the Ministry of Overseas France are sympathetic to these African de- mands and are consider- ing the future rela- tionship between France and its coloni- al possessions in tropical Africa. A French parliamentary committee is now PART II NOTES AND COMMENTS Page 12 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 JZ1.1'GtSI drafting a law which would re- vise the French constitution to permit a federal type, of union, but this concept will probably be unacceptable to right-wing French politicians who fear its effect on Algeria. Paris is also planning to create a separate African civil serv- ice and to offer French of- ficials employment guarantees to assure a continuity of French civil service aid to Africa. Meanwhile the former trust territory of Togo,now known as the Republic of Togo and the leader in the process .of political evolution in French tropical Africa, took a further political step forward recently when it was accorded full in- ternal autonomy except for for- eign affairs, finance, and de- fense, which remain under the control of Paris. The Togolese were given control of the ad- ministration of justice, and the power of the local premier was increased at the expense of the French high-commissioner. 25X1 The opposition Moslem League on 18 March apparently attempted to overthrow the Re- publican party government in West Pakistan in the'hope of weakening and eventually caus- ing the downfall of the national government, which is also led by the Republican party. Prompt Republican countermeasures, in- cluding the appointment of a new provincial chief minister, seem to have foiled the attempt. The intent of the Moslem League apparently was to induce defections from Republican ranks in the West Pakistan provincial assembly, now meeting in Lahore to consider the provincial budg- et for fiscal 1959. The league hoped, with the support of these defectors and of elements of the leftist National Awami par- ty, to supplant the Republican government with one led by the Moslem League. President Mirza was rumored as supporting the Moslem League's effort. Although Mirza had helped to found the Republican party, he had been antagonized by it last December when it re- volted against his authority and caused the fall of Prime Minister Chundrigar's short- lived Republican party - Moslem League coalition government. Since then, Mirza is said to have tried to replace the new coalition between Prime Minis- ter Noon's Republican party and H. S..Suhrawardy's Awami League with a coalition more amenable to his control. On 18 March, several Re- publican.deputies in the West Pakistan assembly led the move by defecting to the opposition. Interior Minister Talpur, a Re- publican personally loyal to Mirza, supported the maneuver at the national level by re- signing from Noon's cabinet. Once begun, these defections were expected to produce about 30 others--enough to shift the balance of power in the West Pakistan assembly of 300-odd members in favor of the Moslem League. The leftist National Awami party is reported to have agreed to throw eight or more of its members behind the league. The Republican party coun- tered rapidly, however. It ob- tained the resignation of un- popular West Pakistan Chief Minister Rashid, and thereby probably assured the continued SECRET PART II NOTES AND COMMENTS Page 13 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 %ftw~ SECRET allegiance of elements who op- posed Rashid's desire to break up West Pakistan into several smaller provinces. It also probably prevented the defec- tion of an important Republican, M. A. Qizilbash, by making him the new chief minister. The Moslem League apparently has .failed to win the support it expected. No further Republican defections have yet been re- ported, and potential defectors are reconsidering the advisabil- ity of taking such a step. The Republican party's ef- fort to stay in power may be materially aided by the growing feeling in Pakistan that changes of government at this time, either at the provincial or na- tional level, would indefinitely postpone the national elections now scheduled for November 1958 and possibly lead to an unwanted dictatorial rule by President Mirza. This feeling may have helped Noon to survive the re- cently concluded budget session of the National Assembly, de- spite widespread opposition to his new tax proposals. If his party retains its hold on West Pakistan, the likelihood of its remaining in power until elec- tion time would be increased. Simultaneously, a second victory by the Republican party over President Mirza would further lower the President's restige. Following a 225-to-60 vote of confidence on 13 March, the Greek caretaker government of Premier Georgakopoulos im- mediately submitted a draft electoral law, based on "rein- forced proportional representa- tion," to parliament, where it is under heated debate. Follow- ing the vote on the law, the premier plans to dissolve par- liament and call for national elections within 45 days, prob- ably in early May. Leaders of the two largest parties in Greece, the right- wing National Radical Union (ERE) of former Premier Kara- manlis and the centrist Liberal party, jointly holding over two thirds of the seats in the Cham- ber of Deputies, agreed on the terms of the draft electoral law prior to the resignation of Karamanlis on 2 March. De- spite heavy political pressure against the proposed law and some dissatisfaction within the Liberal party over the man- ner in which the issue was handled by leaders of that party, eventual passage of the measure in approximately its present form is probable, as the alterna- tive would be elections under the present electoral law, which would be highly unfavor- able to the Liberals. Both the proposed and pres- ent laws are favorable to the SECRET PART II NOTES AND COMMENTS Page 14 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 ..; SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY ERE, and Karamanlis continues to believe his party would do well in the elections. Even if the ERE fails to gain a majority in the forthcoming elections, he believes it will have the strength to determine the length of tenure of the resulting government and to be the decisive force in eventual- ly pushing through still another electoral law. All leaders of the smaller Greek parties have denounced the proposed legislation. Mod- erate and rightist leaders have castigated the Liberal leaders for joining with Karamanlis in. what they regard as an attempt to eliminate the rest of the non-Communist opposition to the ERE. The creation of new parties, encompassing members of several present parties, or the building of temporary elec- toral coalitions is probable, as both the present and pro- posed laws make futile the participation in an election of small parties acting alone. The political orientation these new parties or coalitions may assume is uncertain, but the Communist-front United Demo- cratic Left (EDA). is trying to create a large electoral group- ing in which it can participate. Such participation with center and right-wing parties would give the EDA additional re- spectability in Greece and an opportunity for wide dissemina- tion of its anti-American propa- ganda. law. coming vote on the electoral Present confusion in Greek politics, resulting from debate on the draft law and maneuvers in preparation for the impending elections, will probably be some- what clarified after the forth- 25X1 25X1 25X1 ITALIAN NATIONAL ELECTIONS In the elections for the Italian Chamber of Deputies and Senate, now scheduled for 25 May, the basic issues will be the traditional ones of econom- ic and social reform, church- state relations, and foreign policy. Most political ob- servers at present give the parties, including the Commu- nists, approximately the same voting strength they had in the 1953 elections, but a re- vised electoral law may pro- duce some shifts in representa- tion among the deputies. The Communists continue to stand on their traditional positions. Their campaign is stressing the church-state con- flict and opposition to Ameri- can missile bases in Italy, but the chief source of Communist strength will be the protest voters, who continue to believe that they are the victims of economic and social injustice. The Communists are generally expected to receive approxi- mately six million votes as they did in 1953, but they may ob- tain seven or eight fewer seats in the lower house because of the changes in the electoral law. The Christian Democrats, who have ruled Italy as a minority government for the past nine months, will also be handicapped by the electoral law. Some proclericals in their right wing may vote for Achille Lauro's Popular Mon- archist party because of Pre- mier Zoli's endorsement of the recent judicial decision against the bishop of Prato. A further factor which may hurt the SECRET PART II NOTES AND COMMENTS Page 15 of 18: Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 ITALIAN CHAMBER OF DEPUTIES 11953 POPULAR VOTE IN PERCENT) CURRENT INTELLIGENCE WEEKLY SUMMARY Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 DEMOCRATS 0 SO NCI 2.ALISTS CHRISTIAN CD PSI (14.7% %) (40.7%) \\\\" COMMUNIST PCI 144.7%) Christian Democrats is the pos- sibility of a recession stem- ming from a slowdown in steel production, housing, and ship construction. With the small parties generally expected to make cor- responding gains from the changed electoral law, the Christian Democrats apparently do not ex- pect to have a work- ing majority by them- selves. Because some factions among pos- sible allies of the Christian Democrats oppose collabora- tion with them, the electoral showings of these factions are likely to be as impor- tant a determinant of the postelection situa- tion as the party showings. The electoral law for the selection of senators has not been changed, but since it still favors large parties, the Nenni Socialists may be impelled to run joint senatorial lists with the Communists In some areas. 25X1 Prime Minister Diefenbaker's Conservative party is seeking an absolute parliamentary ma- jority in Canada's 31 March elections. It continues to advocate more independence in Canada's economic and defense relations with the United States but is campaigning principally on domestic economic issues. The Liberal party is still dis- organized by its fall from power in last June's election and is fighting an uphill battle. The Conservative party is concentrating on persuading the electorate that its nine months as a minority government have been too little for full implementation of its domestic program of extending social welfare benefits and starting a public works program to coun- ter the recession. This tactic appears to be effective, and the American Embassy in Ottawa believes the Conservatives will probably gain their absolute majority of 133 seats and that a landslide is possible. Diefenbaker holds to his goal of diverting some of Canada's trade from the United States to the Commonwealth and claims that the Canadian eco- nomic mission to Britain last December has led to the sched- uling of a full-scale Common- wealth trade conference in Canada next September. Con- servative candidates also point to the fact that this year marks the first time the United States Congress is giving individual attention to Canadian relations in its annual foreign policy re- view, citing this as an indica- tion that under a Conservative government Canada is no longer taken for granted. SECRET 25X1 25X1 PART II NOTES AND COMMENTS Page 16 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET BRAZIL'S FOREIGN EXCHANGE SITUATION Brazil's foreign exchange position is so critical, despite drastic new import restrictions, that Finance Minister Alkmim fears it may be impossible with- in a few weeks to meet current bills. A solution of the basic problem would call for scrapping large parts of Brazil's complex subsidy, revenue, and economic development schemes--measures politically difficult in an election year. At the end of December, Brazil's estimated payments def- icit for the year was $129,000,- 000 compared with a surplus of nearly twice that much in 1956. M 'ap E L DOLLAR AVAILABILITIES IRm: CREDIT BAIANCE- r MAY JUN...JUL AUGSEP OCT NOV DEC JAN FEE MAR APR MAY JUN 1957 1958 The deficit, which is contin- uing to mount, was caused by increased imports, payments of $170,000,000 on foreign loans, and a serious drop in coffee prices and sales. Thus far, the government has refused to consider revis- ing its exchange structure, fearing the effects such a move would have in an election year, and has reitera-'?ed its deter- SECRET At the same time, Brazil's ef- 803198 forts to diversify its exports by development of its iron ore and manganese production have been undercut by the recent de- cline in world demand for these products. The payments outlook is further dimmed by the sched- ule of repayments due this year on fixed foreign obligations. The amount due is about $200,- 000,000 or approximately 15 percent of the country's total export earnings last year. In addition, domestic inflation, PART II NOTES AND COMMENTS Page 17 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 mination to continue support- ing the world price of coffee, even though other countries have been selling at prices be- low the floor Brazil is trying to establish. Since the start of the Present crop year last July, Brazil has spent the equivalent of over $100,000,000 on withholding stocks from the market and additional amounts on support purchases in the New York market. Although coffee accounts for only 5 percent of Brazil's gross national product, it nor- mally provides up to 85 percent of the country's dollars and 70 percent of its to- tal foreign exchange earnings. With in- creasing production in both Latin America and Africa, the coffee outlook for the next few years is poor, despite the adoption this year of market- ing quotas for the major Latin American producers. Brazil produces about half the world supply and is committed this year to withholding at least 20 percent of this from the market. T 1 I F r *A first drawing of $37,500,000 was obtained from f I the International Monetary Fund in October. Note: Uncommited gold holdings worth about $119,000,000 have also been available during the entire period. I N CASH BALANCE i rnuucntuI S Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 JCL,hfG 1 *%ft which was slowed dur- ing 1957, threatens to spurt ahead again as a result of the government's price support buying and o curtailed imports. This situation has led to renewed agitation within the past few weeks for new and expanded trade ties with the Soviet bloc. This died out during Feb- ~.a ruary but, following statements by the fi- nance minister that he was at- tempting to sell coffee to Mos- cow through Western European intermediaries, a Senate com- mittee presented a new demand to the foreign minister in early March for an "explanation" of why the government has not re- newed either diplomatic or com- mercial relations with the USSR. vg g TOTAL IMPORTS TOTAL EXPORTS ~{ --~ COFFEE EXPORTS --- - - -------_--- 10 SECRET PART II NOTES AND COMMENTS Page 18 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Nftmwf: CONFIDENTIAL 20 March 1958 PATTERNS AND PERSPECTIVES BULGARIA READY FOR NEW PHASE OF COMMUNIST DEVELOPMENT Bulgaria may become the first Sino-Soviet bloc satellite to complete "the transition from capitalism" to socialism and enter into the final r,Sxase of Communist development--"the transition from socialism to Communism." The Bulgarians have apparently met all the con- ditions which the Soviet Union used to justify the same step in 1936. Entry into the W phase could thus be ared whenever the move would best serve Soviet interests and at the same time be reconciled with the problems that would be created within the bloc--partic- ularly over Czechoslovakia's progress toward socialism. It could be used to refute the arguments of Poland's Gomulka and others who advocate a right- ist course as the only correct way to "build socialism," to il- lustrate to the uncommitted na- tions of Africa and Asia the material progress Bulgaria had achieved by attaining this stage, and to counter Yugoslav ideo- logical propaganda. Bulgarian Claims The Bulgarians claim they have met all the conditions which authoritative Soviet for- iulations cite as prerequisite to advancement from the stage of the transition from capital- ism to socialism to the stage of transition from socialism to Communism. While they have not yet claimed to have embarked on the new stage, important figures in the hierarchy clearly con- sider Bulgaria ready to emerge from the first phase. Bulgarian party First Secretary Zhivkov stated on 20 January that "in fact, we have already created the material basis of socialism in our coun- tr?y,...(the people) have already tasted the fruits of socialism BULGARIA'S VIEW OF ITS "ADVANCE TOWARD COMMUNISM" CONDITIONS FOR ENTERING STAGE TWO STATEMENTS OF WLGARIAN COMPLIANCE Voluntary observance by the "Our greatest success in the people Of the elementary condi- past years has been the change in it one c) socialist life. the minds of the people... the fact that our people have changed and become more disciplined and united and more politically farseeing."-- Vulho Chervenkov, 18 December 1957 Public ownership of the "We have socialized the means means of production. of production and have built a socialist economy, not only in the towns but in the villages."--Todor Zhtvkov, 20 January 1958 Absence of exploitation "In the process of our victo- of man by man. rious socialist construction, we have liquidated the capitalist order and the exploitation of man by an in our country."--Resolution of , the Bulgarian party central com- mittee, 18 February 1958 Comradely collaboration 'Proletarian tnternationaltsm in relations with other Com- and fraternal solidarity with all m ntst parties and states. Commuist and workers{ parties, with the international workers' movement, and with the great Soviet Union became one of the main forces in the development of the Bulgarian People's Republic." Zhtvkov, 20 January 1958 An uninterrupted upsurge in "We have succeeded in sub- the material and cultural level stantially improving the material of the working people. and cultural situation of the workers and we can definitely say now that for the workers in towns and villages, socialism is no longer mere propaganda and a dis- tant target."--Zhtvkov, 20 January 1958 The practice of criticism and self-criticism as the moti- vating force of socialist de- velopment. Virtual completion of agricultural. collectivization. "Criticism and self-criticism are a moving force in party life. and development, as well as in our eomminity." -- Bulgarian press, 2 January 1958 "The socialist reorganization of our agriculture is one of the greatest achievements of our peo- ple'a democratic state." "Social- ism has attained a final and Irrev- ocable victory in our villages." -- Appeal issued by a conference of collective farm members, 6 December 1957. (Some 87 percent of Bulger- We land has been collectivized, a percentage larger than that in any other satellite.) Complete accord between the means of production and. "Productive relations" (i.e., the workers' place in society and Industry) CONFIDENTIAL 3 "Our working class, toiling peasants, and people's tntelli- gentsta, liberated from capitalist oppression, are the sole creators and owners of all material and cultural goods in their socialist motherland." -- Resolution of the Bulgarian party central comnittee, 18 February 1958 PART III PATTERNS AND PERSPECTIVES Page 1 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 itself." Politburo member and Deputy Premier Vulko Chervenkov stated on 18 December,. ""Our nation J_~3 already a socialist nation..-The foundations of socialism wer., laid during the First Five-Year Plan and the Second Five-Year Plan ending this year (1957)." No other top satellite leaders are mak- ing such claims for their coun- tries. The Qualifications The conditions which must be met for entry into the new stage are sufficiently intangi- ble that full compliance is both difficult to achieve and to prove. In terms of Marxian analysis, however, the key fac- tor is that of achieving state ownership of the means of L'roduc- tion, after which most of the other conditions theoretically follow. Bulgaria is the only satellite which can present a just claim that it has met this qualification. A second condition is that of a planned economy which knows no crises or unemployment. The Bulgarians can point to have completed their Second Five-Year Plan to prove existence of a planned economy. Further, Bul- garians claim--without grounds-- that unemployment does not exist in their country. (See chart for further qualifications.) Possible Motivations By crediting Bulgaria with moving to a more advanced stage of socialist development, Mos- cow would have a weapon to use against "revisionism" in the bloc. The Bulgarians have de- veloped what they consider to be "unique" forms of socialism by having adapted Soviet experi- ence to their own local condi- tions,, Although these forms actually differ little from those in the USSR, they never- theless could be alluded to by Moscow to point up the degree of "creative application" that is desirable in a satellite, thereby providing an example of the "correct interpretation" of the concept of separate roads to socialism. Thus one of the chief argu- ments of Polish party chief Go- mulka and other proponents of a rightist, pragmatic course-- that doctrinaire, Soviet-orient- ed tactics actually obstruct "socialist" development--could be refuted by showing that the Bulgarians were able to com- plete the transition from capi- talism to socialism through a rigid Soviet-oriented policy without major setbacks or erup- tions and at the same time were able to exercise a degree of internal independence. Bulgarian advancement to the new stage would also serve to further Soviet foreign policy objectives, particularly in re- spect to the uncommitted na- tions of Asia and Africa. Bul- garia in the past had one of the lowest standards of living in prewar Eastern Europe, Since the war, agricultural pro- duction has increased, and now the industrial and agricultural sectors of the economy contrib- ute approximately equally to the gross national product, whereas before the war Bulgarian. industry's contribution was ap- proximately 20 percent. The fact that a backward country could achieve signifi- cant material advances while moving rapidly toward socialism would be useful ammunition for bloc propaganda asserting the superiority of the Communist system. The assertion that all this had been accomplished with the help of the Soviet Union would also show the ad- vantages the "uncommitted" countries could gain through establishing an intimate as- soc %tion with the USSR. The Yugoslavs will be holding a party congress in April, where ideological SECRET PART III PATTERNS AND PERSPECTIVES Page 2 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 r! `'i r-` SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY pronouncements with regard-to socialist gains in Yugoslavia can be expected to give Moscow cause for concern. In prepara- tion for the congress, Yugoslav ideologists have been discuss- ing the withering away of the Yugoslav state, and have boasted that Yugoslav forms of worker management (workers' councils) constitute the most advanced form of socialist development in existence. Moscow considers these claims to be heresy. Since ,the Hungarian rebellion, and especially in connection with the 40th anniversary of the So- viet revolution in November, the Soviet Union has been at- tempting to recover its stance as the only country qualified to lead the socialist camp. The Soviet leaders therefore cannot allow any Yugoslav pre- tensions of Marxian superiority to go unanswered. An announce- ment by Bulgaria that it had progressed so far along the road to Communism would serve as an indirect Soviet answer to the Yugoslav position and a defense of the supremacy of Soviet ideology. A declaration of Bulgarian advancement would, however, pose certain problems within the bloc. It could cause morale problems for party members in the other "orthodox" satellites, especially highly industrialized Czechoslovakia, which has little respect for "backward" Bulgaria and has ambitions of its own. Pronouncements made by the Czechoslovak party's central committee, preparing for a par- ty congress, suggest that Czech- oslovakia too is on the "thresh- hold of socialist society." The Czechs, however, do not expect to meet several of the qualifications until the end of their Second Five-Year Plan in 1960. Thus these claims are not so extensive as the Bulgarians', although a Czech political commentator recently predicted that Czech- oslovakia would "be the second country in.the world, after the Soviet Union, to complete the building of a socialist economy, of a socialist order of life." The animosity which would probably be generated in the Czechoslovak party by such a Bulgarian advance might con- vince the Russians that they should delay their authoriza- tion of such a move until it can be coordinated with a sim- ilar move by the Czechs. The position of Communist China also. comes into question. The Chinese,'.however, do not meet thequalifications, and do not seem to be in any hurry to pass into the new stage. They describe their regime as having "essentially" completed the tasks of the transition to socialism, a formula which will probably hold them at least to the end of their present five- year plan in 1962. China thus appears to be in a position similar. to, but behind, that of Czechoslovakia. Internal Consequences Formal advancement on the socialist ladder would presum- ably require internal changes. Bulgaria would have to adopt a new constitution, as was the case in the USSR, and would probably have to merge the Agrarian Union into the Commu- nist party and dissolve the Fatherland Front mass organi- zation, since these organiza- tions would be considered superfluous in the new phase. Although constituting a sizable task, these alterations could probably be accomplished with- out causing excessive difficulty for the regime. Of a more serious nature would be. the relationship of the new Bulgarian Socialist Re- public with the USSR. Incorpo- ration into the USSR is an SECRET PART III . PATTERNS AND PERSPECTIVES Page 3 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET %ftSO CURRENT INTELLIGENCE WEEKLY SUMMARY extremely unlikely consequence, since such a move would have an adverse psychological effect on the peoples of Eastern Europe and would destroy the propaganda effect the announce- ment presumably would be intended to create. It seems more likely that Bulgaria would be allowed to become a proto- type of a bloc country outside the USSR arriving at a new stage of socialist de- velopment while retaining an approved degree of autonomy. 4? r T III PATTERNS AND PERSPECTIVES Page 4 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Next 1 Page(s) In Document Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 The increasing political use which the USSR and its sat- ellites have made of the United Nations Educational, Scientif- ic, and Cultural Organization (UNESCO)--a specialized agency intended at its inception to engage only in nonpolitical activities--has put the organ- ization under a cloud. SECRET PART III PATTERNS AND PERSPECTIVES Page 7 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY UNESCO's vulnerability to Soviet exploitation results primarily from the nature of the agency itself and the dif- fering views of its members re- garding its functions. Where- as Western European countries seem to regard UNESCO only as a means for promoting coopera- tion and contact among intel- ligentsia, the less developed countries look on the agency as a neutral source of aid and assistance and as a possible bridge between the free world and the Communist bloc. The USSR has, on occasion, been able to turn the interest in UNESCO as an East- West bridge into prop- aganda for "peaceful coexistence." It has also benefited from the way UNESCO's or- ganizational struc- ture has permitted it to be dominated by a voting majority of countries which contribute little to its support. Organization Final authority over the 79-member organization rests with the General Con- Lerence of country representatives which meets every two years MORE THAN 5.0% Board, which meets periodically and is composed of 24 representa- tives elected by the General Con. f erenc e. A basic concept of UNESCO since its establishment in 1946 has been maximum. reliance on member countries, nongovernment- al organizations, and individual citizens for the achievement of its objectives. The present director gen- eral, Luther`' 1. Evaps an ti. . Ame,rican~ : is.m, up .:for re-elect t oa,' at.-:1. the ndxt ,:General Conference. _ MEBER OF _U NIL" 0 BY PERCENTAGE OF CONTRIBUTION TO BUDGET Represented on UNESCO Executive Board United States (31.30%) Argentina Australia .50-5.0% Belgium Brazil Canada China Czechoslovakia Japan Spain ...~..~- Denmark Mexico Sweden ?_J?, Germany Netherlands Switzerland India Pakistan Turkey Italy Poland Ulkraine._ Soviet Union (13. 11%) United Kingdom (7.33%) France (5.35%) Belorussia Ceylon Chile Colombia Cuba Egypt LESS THAN .10% Afghanistan Bolivia Burma Cambodia Costa Rica Dominican _.-Repabiic to pass on UNESCO pro- grams and other policy matters by a simple majority vote. Its membership differs in a number of respects from that of the UN itself. West Germany and South Korea, not in the UN, have been members since 1951, while the USSR did not join until 1954, Admission of Communist China in place of Nationalist China has been proposed at each conference and is expected to arise again at the next General Conference in Paris in November. Regular administrative mat- ters are handled by the 1,000- man Secretariat and the Executive Members:', Differing Attitudes The international reputa- tion of UNESCO in Western Europe and much of the Western world depends to a large extent on its standing as a meeting place for scholars. Delegations to UNESCO meetings and appoint- ments to the Executive Board have been recruited primarily from the ranks of intellectuals who are not necessarily polit- ically minded. Governments of these countries have usually left the administration of UNESCO affairs to their min- istries of education and culture. SECRET Ethiopia Finland Greece Hungary Indonesia Iran Iraq Israel Rumania Korea Sudan Peru Vietnam Philippines _ n. Ygoslagia ~,. Haiti _ Libya Paraguay Honduras Luxembourg Saudi Arabia PART III PATTERNS AND PERSPECTIVES Page 8 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 SECRET .... _ .. ..... .... CURRENT CJ~"x ;S.I,z ,l,td 'fly ;'r'.{,EKLY SUMMARY Many of.the non-European countries, on the other hand, see UNESCO largely as a source Of neutral aid for aspects of their national development pro- ';rains--such as efforts to abolish illiteracy, standardize text- books, or provide teacher train- Lug. They have not hesitated to use their majority position in the General Conference to push through favorite projects. At the 1956 General Conference in New Delhi, the budget recom- Dmended by the director general was increased by $1,000,000 in a vote of 27 for, 20 against, and 19 abstentions. The 27 votes to increase the budget came from countries that con- tribute only 15 percent of the total budget. As an initial measure, the West will attempt to amend the rules to require a two-thirds majority vote on budget matters at this fall's General Con- ference. A number of Western countries are also planning changes which will result in closer government control over ,their representatives at UNESCO, There has been a tendency for UNESCO to become increas- ingly involved in international political issues, often in a way that Soviet propaganda can readily exploit. The 1954 and the 1956 Gen- eral Conferences called on UNESCO members to make increased use of the social sciences to develop "peaceful cooperation." At both of these conferences, the United States and other Western countries successfully defeated attempts to have the conference call for "peaceful coexistence." However, it has since become apparent that a number of members regard the revised version of the phrase as simply one of terminology and still believe the resolu- tion to be applicable primarily to the differences between the Communist and non-Communist systems. The UNESCO Secretariat has chosen to interpret the resolution in the same manner. In conjunction with several in- ternational nongovernmental so- cial science organizations, the Secretariat has promoted a series of professional meetings in which emphasis has been placed on having equal numbers of rep- resentatives from the Soviet bloc and the West, regardless of the qualifications of indi- vidual representatives.. When the USSR joined UNESCO in April 1954 after an eight-year boycott, its early activity was devoted primarily to trying to make a favorable impression. A definite change in the Soviet attitude was noted in early 1956 with the assignment of V. A.. Kemenov, a deputy minister of culture, as permanent representative to UNESCO and the USSR's mem- ber of the Executive Board. Kemenov immediately adopted a more aggressive line than his predecessor and has continued to slow down the work of the board with frequent and verbose interventions. Soviet interventions have been directed primarily to the thesis that UNESCO should take the lead in promoting "peaceful coexistence" and East-West con- tacts. Although the Executive Board often rejects Soviet pro- posals, the American representa- tive has pointed out that the USSR by its :interventions SECRET PART III PATTERNS AND PERSPECTIVES Page 9 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927A001700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET . .... . CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 successfully gets its viewpoint on the record and, by sheer length of presentation, dwarfs -those advanced by other members. Soviet tactics have considerably more success at the General Con:ference,where the large nupiber of neutralist countries are enamored of the idea of UNESCO, A British official has stated that, at the 1956 con- ference in New Delhi, "there was more emphasis on Suez, Hungary, and Cyprus than on education, science, and culture. In accord with the present Soviet line, Hungary hopes to step up its activities in UNESCO, in an effort to regain a measure of acceptance in international affairs. Such in- creased activity probably would be directed toward whitewashing the present regime and blaming, the revolution on intervention by "Western imperialists." The Soviet bloc can be expected to continue its present obstructionist tactics in UNESCO and to capitalize on the voting majority in the General Confer- ence held by the underdeveloped countries. Continued introduc- tion of critical political issues at future conferences could lead to serious reversals for the West on such issues as Chinese representa- tion,: THE SITUATION IN THE PHILIPPINES Economic drift and polit- ical irresponsibility are becoming increasingly evident in the Philippines. Although President Carlos Garcia has made numerous forthright pro- nouncements regarding the coun- try's economic difficulties and the need for austerity, his administration has so far been uninspired and there has been no vigorous follow-through in implementing corrective meas- ures, Garcia's announced auster- ity program is aimed primarily at building up Philippine for- eign exchange reserves, which declined rapidly during 1957. ;With $200,000,000 considered a safe minimum, Philippine re- serves stood at about $138,000,- 000 in late December, and much of this was committed for ex- penditure, An increase to $150,000,000 by the first week of March is believed to reflect SECR principally seasonal returns on sugar exports rather than the effects of~ ~auet,erity?; and some responsible Philippine officials are predicting a new foreign exchange crisis by June. The government has contin- ued to yield to pressure to grant exceptions to the tight- ened exchange and credit re- strictions imposed last December. Recently, it has eased cutbacks in foreign exchange allocations for luxury imports and relaxed a ban on bank credit for pur-? chase of real estate and other nonproductive undertakings. The 1959 budget also casts doubt on the Garcia administra- tion's det:erininati.on to enforce austerity. The proposed level of expenditures is slightly above that proposed for the pres- ent fiscal year and well above the level of actual expenditures so far., The government i ET ILLEGIB PART III . PATTERNS AND PERSPECTIVES ILLEGIB Page 10 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 relying heavily on questionable sources of revenue, including proposed foreign bond financing of $50, 000, 000.. The longer range economic policies of the government have not yet'been spelled out, but there appears to be virtual una- nimity among Philippine offi- cials that some form of peso devaluation will soon be neces- sary. A presidential committee investigating ways to increase export production has recommend- ed the lifting of all economic controls over a two-year period, while permitting the peso--now pegged at two to the dollar--to seek a free rate, Even Central Bank Governor Miguel Cuaderno, previously the stanchest advo- cate of a hard-money policy, has declared himself in favor of devaluation if: it is accompanied by adequate safeguards. President Garcia's hesita- tion to take a stand on the is- sue, however, creates consider- able danger that devaluation may be introduced as a sudden dra- matic gesture, or through poorly prepared congressional legisla- tion. Without adequate prepara- tion and controls, devaluation could bring windfall profits to certain export interests, while imposing a new inflationary bur- den on the already hard-pressed population. In recent weeks, reports reaching the American Embassy in Manila have indicated gener- ally deteriorating conditions in many rural areas. Shortages of consumer goods are apparent, particularly rice supplies, which have been reduced by drought and by the maneuvers of speculators. Prices have been rising and there are reports of widespread unemployment, Con- stabulary authorities are cit- ing an increase in crime in many provinces, and further economic decline could lead to serious social unrest. The prospect for firm leg- islative action is not promis- ing in the light of Garcia's re- lations with Congress to date. Control of committee chairman- ships by Garcia's followers has provoked considerable discon- tent, even among members of his own Nacionalista party. One disappointed Nacionalista con- gressman has attacked the Presi- dent for failing to carry out Philippine law, and there have been the usual threats of im- peachment by the weak Liberal party opposition. The present congressional session appears to be drifting toward the cus- tomary last-minute passage of ill-considered legislation. SECRET PART III PATTERNS AND PERSPECTIVES Page ii of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 . w~ SECRET %woof CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 President Garcia has made known his desire to visit the United States and his hope of obtaining American economic as- sistance during such a visit. He is under considerable pres- sure to revive long-standing Philippine war claims against the United States totaling $800,000,000 or to obtain a large foreign exchange stabili- zation loan. The Philippines has already taken steps to in- crease its borrowing quota with the International Monetary Fund, and has applied for an Export- Import Bank loan to finance construction of a. steel mill. The country is also seeking sub- stantial rice imports under US Public Law 480. On specific foreign policy issues, the uncertainty sur- rounding Garcia's intention was aggravated by his long delay in confirming the appointment of Foreign Affairs Secretary Felixberto Serrano. The Presi- SUDAN FACING NEW ECONOMIC PROBLEMS The Sudan faces a need for au terity in its economic policy this year as a result of an ex- tremely small 1 crop. the 1957-58 crop w 1A,, total only 256,230 bales covpared with a record 560,150 bales the previous season, The Sudan's short-staple (America.n- type) cotton crop is double last year's, but is still not a. major foreign exchange earner, The management of the Gezira Development Board--the country's major cotton-growing agency--is largely responsible for the present crop shortfall. The insect infestation which damaged the crop could have been averted had the board taken effective preventive measures early in the season. By the time the board decided to use insecticides on a large scale, SECRET 25X1 dent's appointment as secretary of justice of the anti-Americ Jesus Barerr y ores a ow considerable d ma iffi- culty on the issue of American bases.. On several occasions, Garcia has affirmed his opposi- tion to recurring suggestions that trade relations be opened ough he has in the past en- dorsed an Asia-for-the-Asians foreign policy, Garcia is ex- pected to maintain the basic Philippine Western orientation. Within this framework, however, he may endeavor to bring about a more independent attitude to- ward the United States and closer ties with non-Communist Asian countries 25X1 25X1 25X1 25X1 PART III PATTERNS AND PERSPECTIVES Page 12 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 ,SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 LONG-STAPLE TYPES THOUSANDS OF BALES: I BALE :480 L BS. - DAN: COTTON PRODUCTION 195-4 1954-5 1955-6 '~ INARCH 1958 1957-8(EST) The carry-over 25X1 will help substantial- ly to make up for this year's shortfall, since total Sudanese long-staple cotton available for this sales season will be only 17 percent below last year.. Even if all the available cotton is sold, how- ever, receipts will be $25,000,000 to $30,000,000 less than the 1956-57 figure of almost $59,000,- 000. Although the present cotton prob- lem is far from the "national disaster" claimed by Prime Min- ister Khalil, it will out a crimp in the the bulk of the damage already had been done, The board's managing di- rector, Mekki Abbas, was also the architect of the cotton- marketing fiasco last year. He thought his country could'force world cotton buyers to pay a high price for Sudanese long- staple since the Communist world had taken the bulk of long-staple Egyp- tian cotton. His re- fusal to recognize the basic fallacy of his position--a world oversupply of cotton --resulted in such a loss of sales that the Sudan was forced last fall to reduce the price of its cot- ton drastically in order to make it com- petitive. Since the move came late in the 1956-57 marketing season, the country entered the 1957-58 marketing year on 1 March with, the largest carry-over stock in its.his- tor y o. Sudan's modest development plans and probably further reduce the country's dwindling foreign ex- change reserves. The Sudan, almost completely dependent on cotton for its economic well- being, must maintain relatively large foregin exchange reserves to weather the vicissitudes of the international cotton market as well as local natural SUDAN : COTTON SUPPLY POSITION (THOUSANDS OF BALES ; 1 BALE= 480 Les.) STOCK CARRY-OVER SECRET 1956 7 1957-8 ESTIMATED PART III PATTERNS AND PERSPECTIVES Page 13 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 SUDAN : VALUE OF LONG - STAPLE COTTON EXPORTS CURRENT INTELLIGENCE WEEKLY SUMMARY 20 March 1958 hazards which affect the cotton supply, In recent years, the declining value of sterling securi- ties--the major form of Sudanese financial reserves--and the shortfall in cotton sales have placed major strains on the country's finances, In 1957, for example, the total net foreign exchange loss amount- ed to about $72,087,- 200--a major deterio- ration in the foreign exchange reserves. The value of long- staple cotton exports last year was only $58,876,000 compared SECRET (MILLIONS OF DOLLARS) 125 100 75 s0 4 25 EST. 0 19 50 5 1 52 5 3 54 55 5 6 5 7 58 with about $119,931,848 in 1956. Because of the cyclical pattern of export receipts from long-staple cotton exports, the country faces serious recurrent problems. Failure to market the bulk of this year's salable cot- ton could cause an economic crisis. The foreign exchange windfall of 1957 resulting from the currency agreement between Egypt and Britain on the one hand and the Sudan on the other will not recur this year. This agreement establishing the Su- dan's own currency gave the country about $51,121,600 in foreign exchange. Although sales of Sudanese cotton mounted toward the end of 1957 as a result of the gov- ernment's reduction of the price of cotton, competition from Egypt may place increasing pres- sures on prices and slow down SECRET future sales. Egypt?s new cur- rency regulation, for example, probably will reduce the price of Egyptian cotton to Western buyers by as much as 30 percent. These factors and the general oversupply of cotton on the world markets will probably in- crease the Sudan's problems in disposing of its present crop, relatively small though it is, Serious economic difficul- ties arising from the cotton problem could be the occasion for a. Soviet offer of aid, as occurred in 1957. The pressure for acceptance would probably exceed that which Khalil suc- cessfully resisted last year, and could undermine the pro-Western orientation the Sudanese Government. 0"R (Concurred in y 25X1 25X1 PART III PATTERNS AND PERSPECTIVES Page 14 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2 Approved For Release 2007/10/23: CIA-RDP79-00927AO01700020001-2