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Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 CONFIDENTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. 50 OCI NO. 1799/58 24 July 1958 0 DECLASSIFIED CLASS. CHANGED TO: DOCUMENT NO. NO CHANGE IN CLASS. 0 NEXT REVIEW DATE: AUTH:ti,70 CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE State Department review completed CONFIDENTIAL two it';;1a tot, 5X1 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 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-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Next 6 Page(s) In Document Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 ,OJT CONE DENTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 OF IMMEDIATE INTEREST MIDDLE EAST DEVELOPMENTS Political activity in Leb- anon is reviving. Speaker of Parliament Usayran professes to be confident that a quorum will be on hand for the presi- dential election session he called for 31 July after cancel- ing the session scheduled for 24 July. Opposition leaders, although they are still insist- ing they will not participate in any election until American troops have been withdrawn from the country, are considering candidates. The leading con- tender in the opposition's mind appears to be Yusuf Hitti, a nonentity who presumably would be easy for the pro-Nasir ele- ments to manage. President Chamoun is putting forward simi- lar candidates on his side-- Jawad Bulus, a respected Maro- nite savant who seems to have a number of supporters but lit- tle influence, and Alfred Naq- qash, a 70-year-old former foreign minister. General Shi- hab is no longer being seriously considered by the civilians, al- though some army officers still hope for a coup to put him in. Rebel military activity, which dropped off sharply when the American forces arrived, shows signs of resuming its us- ual pattern. Kamil Jumblatt's Druze rebels are again moving on the Beirut-Damascus road, courtesy of the army which has vacated positions opposing them, and reports of larger scale in- filtration from Syria are again being received. There has been no indication of a rebel inten- tion to attack the American forces, although sniping at American aircraft continues. As tight a security lid as King Husayn's government can forge has been placed on Jordan, but officials still fear the outbreak of disorders or a coup attempt. Disturbances seem par- ticularly likely to occur in West Jordan if the Western pow- ers appear to be becoming rec- onciled to the new Iraqi regime. Husayn and Prime Minister Rifai have stopped pressing for Ameri- can troops to join the British forces in Jordan, although they would still like to have them. Rifai's latest concern is Jor- dan's isolation from interna- tional air traffic, which oc- 25X1 curred when the UAR banned the 25X1 craft over its territory. Iraq The new regime in Baghdad has further consolidated its position. Reports from the provinces this week indicate that there was very little if any opposition anywhere to the coup, although the middle class generally has adopted a "wait- and-see" attitude. Public serv- ices and communications have been restored throughout the country, the curfew period in Baghdad has been abbreviated, and the border with Syria has been opened, although others remain closed. Officials of the regime have continued to pre- sent an appearance of friendli- ness toward the West and have reiterated assurances that they will respect existing oil agree- ments, although they do wish ww"Ver CONFIDENTIAL PART I OF IMMEDIATE INTEREST Pare 1 of 8 - Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 to renegotiate them in due course. Behind the facade of calm and friendly assurances, how- ever, the Iraqis have clearly been fearful, of Western inter- vention against them and have sought Nasir's full support. On 19 July an Iraqi delegation head- ed by Colonel Arif, deputy prime minister and possibly the "strong man" of the regime, signed an alliance treaty with Nasir in Damascus. It is also clear that the Iraqi regime intends to follow Nasir's policy, even if it does not actually join the UAR. Colo- nel Arif, who does most of the speaking for the regime, has of- ficially defined the new course MEDITERRANEAN SEA Kabul LEBANON/ SEA SUDAN i ?sa~a YEMEN against the new look in Baghdad. His trip to Moscow and a private UAR propaganda line that the purpose of this trip was to persuade the Kremlin not to in- tervene in the Middle East were almost cer- tainly aimed in part at frightening the West. UAR officials are evidently fearful nevertheless that they may find themselves at war With the West, and military preparations have been hastened in both Egypt and Syria against such an even- tuality. Emphasis has been placed on antiair- craft defenses ; ships loaded with cement are reported in position in the Suez 'Canal; and the ports of both countries have been closed during the night. Much of the defense activ- ity is ostentatious, CASPIAN SEA CULF IMAN SECRET U A R (EGYPT) OF I MIQEDI ATE INTEREST Page 2 of 8 in Baghdad as "positive neutral- ity,"'aid the Iraqi statement welcoming Soviet recognition "emphasized" the Iraqis' desire for the further development of relations with the USSR. One of the first practical forms this emphasis is likely to as- sume is an invitation to bloc suppliers and contractors to bid on Iraqi development proj- ectl3a Invitations were previ- ously restricted to Western bidders; the new regime has al- ready canceled a, contract awarded an American firm for a sulfur plant. Nasir's top priority proj- ect this week has been to ward off any Western intervention - Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET 24 July 19 58 and may be designed to reassure the populace, particularly in Egypt, of the UAR's ability to meet hostile attack. At the same time, however, Nasir and UAR agents have been active in seeking to exploit other periph- eral situations to undermine the Western position in the area. The Ruler of oil-rich Ku- wait, who has been in Damascus on vacation, had two interviews with Nasir this week, and is reported to have assured the UAR leader of his good will, citing the fact that he had re- sisted efforts to bring him in- to the Iraqi-Jordanian union. While there is no confirmation of Syrian press assertions that Kuwait may soon join the UAR, public sentiment in Kuwait fa- vors such a move, and the Ruler might do so if only to use Nasir for protection against the revolutionary Iraqis. In the Sudan, pro-Western- Prime Minister Khalil is facing discord within his own party and increased activity by the opposition, partly at least Egyptian-inspired. A unanimous vote by the Sudanese Senate on 23 July condemning American landings in Lebanon and the British action in Jordan sug- gests that Khalil may be losing his hold over even his own fol- lowers. The Saudi Government, fearful that the revolutionary surge may engulf it along with 25X6 Iraq, is pursuing an open policy Israel The Israeli Government re- mains alert to possible dangers to it in the Middle East situation, but has not yet mo- bilized reservists other than those probably needed to plan more general action. Tel Aviv, concerned that its acquiescence in the British airlift to Jordan will serve to identify it fur- ther as a tool of imperialism in the minds Of neutralist Asian and African nations, is protest- ing vigorously against the con- tinuation of the operation. The Israelis are redoubling their efforts to obtain promises of Western support and materiel. Foreign Minister Meir is now on a mission to Western Europe for that purpose. SINO-SOVIET AND FREE-WORLD REACTIONS TO MIDDLE EAST CRISIS Soviet Premier Khrushchev's I lomatic and propaganda campaign ostensibly favorable reply to American and British proposals for a UN Security Council ses- sion at the heads-of -government level is designed to maintain the momentum of the bloc's dip- to exploit Arab-Asian opposition to Western policies in the Mid- dle East. The Soviet response attempts to construe the Western letters as acceptance of Khru- shchev's 19 July proposals and SECRET OF IMMEDIATE INTEREST Pace 3 of 8 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET 24 July 1958 is deliberately ambiguous as to the agenda, participants, and procedure of such a meeting so as to maintain maximum freedom of maneuver. Moscow's aim ap- parently is to ensure that all the important discussions will be conducted in a Security Coun- cil subcommittee composed of the Big Four and India plus repre- sentatives bf "interested Arab states." The Soviet summit call highlights a concerted bloc cam- paign to extract maximum diplo- matic and propaganda benefit from the Western landings in Lebanon and Jordan and to in hibit additional Western mili- tary moves against the "Arab liberation movement." Moscow moved promptly to establish dip- lomatic relations with the new Iraqi Government and to extend its diplomatic and propaganda support. Bloc embassy officials in various world capitals pri- vately have pressed the line that the USSR is not particular- ly concerned by Western troops in Lebanon and Jordan, but that any military move against-Iraq, either alone or in concert with Baghdad Pact countries, will provoke "serious" but unspeci- fied Soviet counteraction. the Soviet chargd in Ankara that Turkey "will refrain from taking any steps which might in- crease tension." This appears to be part of a coordinated ef- fort to reinforce psychological pressures on Western and neutral countries as to dangers inherent in the Western moves. Although the Arab press has yeported Soviet assurances of "volunteers" in the event of Western military action against the UAR or Iraq, Moscow has not played up this possibility in the present crisis. Moscow ra- dio has devoted more attention to present Middle Eastern de- velopments than to any other international matter in the whole post-Stalin period. Mos- cow propaganda does not reflect concern that Soviet security has been threatened by the land- ings in Lebanon and Jordan, al- though frequent reference is made to the dangers of "world conflagration" which might arise from a continuation of Western aggressive moves in the area. Massive "popular demonstra- tions" throughout the bloc and the Soviet Aviation Day speeches of Marshals Malinovsky and Ver- shinin on 20 July were designed to reinforce the false sense of crisis contained in the Khru- shchev summit letters. Neither Moscow nor Cairo has released the substance of the secret Khrushchev-Nasir consultations held in Moscow on 16-17 July, but Khrushchev at the Polish Embassy reception on 22 July stated that he and Nasir reached "an identity of views." Nasir's brief public account of the talks and press accounts originating from Da- mascus and Cairo reinforce the popular image of close Soviet- UAR collaboration. Soviet maneuvers in the UN have been designed to mobilize world-wide opposition to recent American amd British action in the Middle East and to forestall additional Western military SECRET Page 4 of 8 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 moves. Soviet UN delegate A. A. Sobolev on 22 July, following Security Council rejection of Soviet amendments, vetoed the watered-down Japanese resolution to strengthen the UN Observation Group in Lebanon, suggesting Moscow is more interested in keeping the issue alive before the UN than in gaining early withdrawal of American troops from Lebanon. On 19 July,Sobolev vetoed the American proposal for send- ing a UN emergency force to Leb- anon in line with Moscow's long- standing opposition to such UN forces. The 18 July Soviet pro- posal for calling a special ses- sion of the General Assembly was not voted on Moscow wou hold off pressing or an immedi- ate assembly meeting pending Western response to Soviet pro- posals for a summit meeting. Peiping's Reaction Since 17 July, the day after the Western intervention, Communist China's press and ra- dio lave devoted almost exclu- sive attention to the situation, and Peiping has joined Moscow in a massive propaganda counter- attack against the West's "ag- gression." Mass protest rallies were held from 17 to 21 July throughout the mainland surpass- ing those held during the Suez crisis; Peiping claimed on 21 July that some 21,000,000 Chi- nese had participated in demon- strations. There are still no signs that Peiping is considering any kind of major military diversion in the Far East. Chinese Com- munist efforts, like those of Moscow, have been aimed chiefly at limiting and containing West- ern intervention, while whipping up world opinion in opposition to the West. Apparently confident that diplomacy and propaganda. can bring about a disaster for the West, Peiping has made no direct mention of "volunteers" nor has it indicated any intention to intervene directly under present circumstances. Free-world opinion has rapidly accepted the fact that the next approach to the Middle East problem will be through a summit conference under UN aus- pices. Many countries neverthe- less harbor deep misgivings, fearing that the meeting will not produce any progress toward a solution, and several nations not now members of the Security Council are pleading their cases for inclusion in the discussions. The Asian Baghdad Pact powers are especially skeptical of the meeting's ability to achieve a satisfactory solution. Other Asian countries, such as Ceylon and Indonesia, will feel that they have less opportunity to be heard than in a General Assembly session. Those most directly con- cerned with the Middle East are anxiously: awaiting clarification as to which Arab countries Khrushchev referred to in his note of 23 July. Nasir has indicated a desire to come to New York, and all other Arab countries will probably also wish to be represented. Both Israel and Turkey feel they should attend any Middle East meeting, raising the possibility that Iran and Pakistan may also put in their bids. Recrimina- tions from rejected countries will be directed toward those SECRET PART I OF IMMEDIATE INTEREST Page 5 of 8 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 19 58 powers responsible for the se- lection. North Atlantic Council discussions have brought out differences among NATO allies as to the objectives of a summit meeting. At a 23 July meeting, the German repre- sentative, supported by the French, Italians, Dutch, Turks, and Belgians, expressed deep concern lest the discussions with the Soviet Union be broadened to cover long-range Middle East problems. They did not appear satisfied with the British statement that only the pending immedi- ate problems of Jordan and Lebanon would be discussed, with broader questions neces- sarily awaiting more extensive Western consultation. UN Secretary General Ham- marskjold takes the posi- tion that his previous terms of reference are sufficient for the time being to enable him to proceed legally despite the Soviet veto of the Japa- nese resolution. He plans to retain political control of the enlarged group himself. Despite his previous reluctance, the secretary general now ap- pears willing to set up a force as large as necessary to con- trol the situation. Meanwhile, additional na- tions are recognizing the new Iraqi regime. Sino-Soviet bloc countries have all recognized Iraq. With India's recognition on 23 July, the number of Asian and African nations following suit is expected to increase materially. Indonesia, the Su- dan, and Tunisia took the step prior to India. Since West Ger- many also appears to favor rec- ognition, a general movement in this direction may develop soon in Western Europe. Western Europe Both France and Germany seem apprehensive lest too- close a con- nection with the Anglo-American intervention hurt their own stand- ing with the Arabs. Bonn wishes to maintain its economic interests and preserve its political neu- trality in the Middle East. The De Gaulle government fears the in- tervention may have harmful reper cussions in North Africa, and Paris now seems anxious to avoid joining in the intervention. Although De Gaulle appears to agree with a Foreign Ministry group that has been urging that the close French- Israeli diplomatic and military contacts be played down, a stand- ing agreement with Tel Aviv for a French landing in Israel in cer- tain circumstances may already e,dst. Among Western European de- mocracies, the Netherlands Govern- ment has offered the firmest sup- port of the intervention. Austria, while privately approving, has stated it.will p-erndt no more military overflights of its territory for the present. Sweden failed to persuade Norway and Denmark to take a joint approach in urging Western acceptance of Khrushchev's call for summit talks. Of NATO members, only Canada called for a "positive" response. Latin America Official reactions to the Middle Eastern events have ranged from full support of the US posi- tion by most of the smaller coun- tries to only very tentative sup- port by Mexico. There is serious concern among some that the t1UN may be weakened by what the Mexican foreign minister re- ferred to as the threat of a return to "unilateral action by the great pow- ers." Others fear being SECRET PART I OF IMMEDIATE INTEREST Page 6 of 8 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 put into a-position of oppos- ing what they regard as the justified aspirations of Arab unity and nationalism. Public opinion has been less favorable to the US position, with left- ists and Communists strongly condemning the "brutal and im- perialistic" US moves in Leba- non. Communist-inspired anti- US riots have twice erupted in the Argentine capital, and 25X1 on 20 : July :at an election rally, Communists in Chile pro- tested the US action. BRITAIN'S MOVES :IN THE ;MIDDLE ;EAST The gradual but steady con- centration of British forces in the Mediterranean, Arabian pen- insula, and Indian Ocean areas appears designed to enable Brit- ain to retain control through- out the Persian Gulf area and particularly to safeguard the vital Kuwait oil supply. The British will probably not oc- cupy Kuwait's oil installations against the wishes of the Ku- waiti authorities unless trou- ble develops. The populace in Kuwait has welcomed the Iraqi coup, but authorities have told Brit-Ain they can maintain order and would consider occupation of the airfield premature at this time. If a quick airdrop be- comes necessary, a paratroop battalion is available on Cyprus. In the event of overflight prob- lems, infantry units would have to be sent by sea from Bahrein. A British official in Kuwait claims troops could be there in six hours. No animosity or discrimination has been shown to Americans or the British so far, but the Amer- ican Consulate expects trouble, as the reformist nationalists have been ominously silent. In contrast to Kuwait, the Ruler of Bahrein has agreed to receive British reinforcements, and a battalion has already ar- rived. A destroyer en route to Bahrein will i augment ? the normal patrol vessels in the Persian Gulf. The British were also con- cerned about possible disturb- ances in Qatar, where sabotage occurred during the Suez crisis, and sent a frigate with a land- ing party aboard to stand by. The frigate returned to Bahrein when the strike of native oil workers was settled without in- cident on 21 July. Libya In order to protect and if necessary evacuate the King of Libya, The British political agent appears to have developed a good working relationship with Acting Ruler Abdullah Mubarrak. The British had previously sup- ported Mubarrak for:the succes- sion and might try to work out some deal with him if the Ruler should move closer to Nasir. SECRET PART I OF IMMEDIATE INTEREST the British dispatched a marine commando unit to Tobruk, 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 The British in Aden are preparing for increased Yemeni agitation. The Anglo-Yemeni talks in Ethiopia on 14 July produced reasonably friendly discussion but no agreements. Britain has declared it will extend both economic and mili- tary aid to the prospective fed- eration of Aden principalities and may specify details in talks planned shortly between the rulers and the governor of Aden. Meanwhile, preventive aerial reconnaissance of Yemeni terri- tory has increased. London has indicated it will increase both its eco- nomic and military aid to the Sultan of Muscat beyond that originally planned There have been indications for some time of a prospective increase in Omani rebel activi- ty. Jordan In an effort to minimize friction, the 1,700 to 1,800 troops are confined mostly to the Amman airfield. Forces are being supplied via overflights of Israel--high and at night, at Israeli request--but London is urgently attempting to or- ganize shipments through the Suez Canal. The War Office has declined to specify London's next move should Nasir refuse permission to use the canal. SECRET PART I OF IMMEDIATE INTEREST Page 8 of 8 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 CON- IDENTIAL CURRENT INtELLIGENCE WEEKLY BII MY 24 July 1958 NOTES AND COMMENTS MIDDLE EAST OIL SITUATION Iraq The Iraqi regime's assur- ances to the West that the flow of oil will not be interrupted are probably aimed at discour- aging Western intervention. As a result of the confusion, how- ever, tankers initially were stopped from proceeding up the Shatt al Arab River to the Iraqi ports of Fao and Basra. A few tanker diversions to other ports did occur, but the situation now is normal. Shipments of Iraqi oil to Jordan, which began just before the coup, have been halted, thus stranding in Iraq about half of Jordan's tank trucks. Iraqi cooperation with the UAR on oil matters has already begun. Officials of the rebel regime reportedly consulted with Nasir in Damascus on 18-19 July regarding plans to build Syria. a new pipea.ine.through MEDI TERRA NE A N Tripoli LEBANON; AAerandRa - ,Fort Said ba y UVN~4IT .: dOWAIT Banryas~ 'Aleppo" S Y R Oil continues to flow from Kuwait, the Middle East's larg- est producer, at a record rate of nearly 1,600,000 barrels a day, and there are no indications that the flow will be halted. However, riots, strikes, and sabotage are possible. Over half the approximately 200,000 inhabitants of Kuwait come from Arab Palestine, Iraq, Syria, and Egypt. These elements are pre- dominantly responsive to Nasir's brand of revolutionary national- ism, as are many of the remain- ing 100,000 Kuwaitis. Commenting on widespread reports that Kuwait would soon join the UAR, an official Syrian spokesman stated that "no formal decision has been taken thus far" but that the UAR welcomes the Ku- waiti people to "join the caravan of liberated Arab nationalism." The Ruler of Kuwait, who was visiting Damascus when the Iraqi CONFIDENTIAL womexrl~ PART II NOTES AND COMMENTS Page 1 of 1$- Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET 24 July 1958 coup occurred, met with Nasir there this week. Saudi Arabia's denial of overflight permission to US air- craft for an airlift of products from the Bahrein refinery to Jordan derives from Crown Prince Faysal's policy of seeking an The Saudi Council of Minis- ters--a body headed by Faysal-- has just issued a decree an- nouncing that the 44,000-square- mile "preferential area" west of the Aramco concession and encompassing the city of Riyadh will be broken up and given out to possibly as many as ten dif- ferent companies. The Royal Council apparently does not in- tend to honor its contractual agreement with Aramco guarantee- ing the company what amounts to a first refusal on this area. Bahrein is a relatively large supplier of military POL requirements for both British and American military units, although it is not an important oil producer by Middle Eastern standards and accounts for only about 37,500 barrels a day-- less than 1 percent of produc- tion in the area. Bahrein has a major refinery with a capacity of 211,000 barrels of crude a day and cracking facilities for 43,320 barrels a day. American refinery officials on British-controlled Bahrein fear there is an even chance of a strike, since the refinery em- ploys about 1,000 Iraqi Arabs plus numerous other pro-Nasir groups. During the Suez crisis, acts of sabotage did occur at the refinery. The Ruler of Bahrein, the British political agent, and the American refinery manager all feel that sabotage is inevitable without heavy guard. It is doubtful, however, whether a heavy guard could pre- vent violence. The present crisis has had no effect on Iranian production or transportation of oil, and the Tehran government is unlike- ly to take any action which would either halt or reduce the flow of its oil to the West. The major oil terminal and re- finery area of Abadan has been heavily reinforced by Iranian troops, and travel in the area has been restricted. Friction is said to be developing between the thousands of Arabs employed locally and the Iranians, and Arab- or Communist-directed vio- lence may develop. Preparation for Sabotage Iraq and the UAR have made preparations for denying oil to the West. Two old barges have been towed by the Iraqi regime to the Iraqi port of Fao at the mouth of the Shatt al Arab River, which forms part of the Iraq- Iran border. These barges if sunk would block the river channel, effectively denying oil tanker transit not only to the Iraqi ports of Fao and Basra but to the Iranian oil terminals of Abadan and Khorramshahr as well. Cairo is said to have moved at least two cement-loaded block ships into position in the Suez Canal. Explosive charges have long been in place along the Iraqi and Saudi pipe- lines which pass through Syria, but it is not believed Nasir will destroy them unless his position worsens con- siderably. SECRET NOTES AND COMMENTS Page 2 of 18 - Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 Prospects With the exception of Iran, all of the major Middle Eastern oil-producing countries now have indicated some degree of responsiveness to Nasir's influ- ence. While Iraq has assured the West that oil will continue to flow, it has declared its ad- herence to Nasir's brand of na- tionalism and has announced its intention to seek renegotiation of IPC's concession agreement. Even the conservative and pro- Western regime of the late Nurd Said of Iraq, however, was be- ginning to pressure the IPC for substantial changes in the com- pany's concession area and a change in the profit split toward the newly established 75-25 Iranian pattern. The Rulor of Kuwait, who is still in Syria, may have come to some form of working arrange- ment with Nasir during his two meetings with him there, although the Ruler's. main concern is prob- ably to protect his own income. Before he went to Damascus, he had been urging an accommoda- tion with Cairo as the only practical course. In Saudi Arabia, the recent developments make clear that future oil poli- 25X1 cy will be determined with one eye directed toward Cairo. 25X1 GENEVA TECHNICAL CONFERENCE ON TEST DETECTION The Soviet delegation to the Geneva technical conference appears to be seeking a wide enough measure to agreement to handicap the West in insisting on more extensive inspection measures and bring pressure to bear on Britain and the United States to halt tests. In pur- suit of this objective, the Soviet delegation has conceded that limited flights by air- craft to collect samples of nu- clear debris could be made under certain circumstances over So- viet and US territory. The Soviet delegates aban- doned their insistence that surface stations alone be used to collect nuclear debris and agreed to the use of aircraft over oceans and, if a test alert resulted from other detection techniques,. over Soviet and American territory. Soviet delegates have also hinted at agreeing to mobile ground in- spection after a test alert at the option of an international control body. At an informal meeting on 17 July, Soviet delegates made a strong bid for concluding a unanimous agreement on a control system and thereby avoiding an intergovernmental dispute. They argued that this was possible if the West did not make too extensive demands for inspec- tion. The Soviet delegates claimed that an elaborate inspec- tion system that could guarantee a high probability of detection was unnecessary because no coun- try would undertake nuclear tests if there were any real likelihood of detection. They suggested that a minimal control system could be established initially which-could be expanded when more highly developed detection techniques were perfected. The delegation appears interested in getting agreement on the out- line of an inspection system without much consideration of its details, an approach that SECRET NOTES AND COMMENTS Page 3 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 could exaggerate the amount of agreement that had actually been reached. The Soviet delegation has not presented as much scien- tific evidence for its proposals as have the Western scientists. The conference has reached agreement on acoustic and nu- clear debris sampling methods of detection, but some differ- ences still remain on seismic and electromagnetic methods. While the scope of inspec- tion that Moscow might agree to will not be clear until there is a comprehensive discussion of control systems, the scientific papers thus far presented by bloc scientists at Geneva are designed to prove that a suffi- cient degree of inspection can be achieved with a modest inspec- tion system. A remark by one Soviet delegate that it will be difficult to complete the con- ference before 6 August suggests that the USSR does not plan any abrupt break in talks after the 30 days it originally specified for the conference have elapsed. OSI) (Concurred in by 25X1 According to present pros- pects, the USSR will have a bump- er harvest this fall--possibly the largest in Soviet history. Favorable weather, following a late, cool spring, has prevailed thus far in most of the new lands and in the traditional growing areas. The American Embassy comments it has become increasingly apparent in re- cent weeks that if favorable weather continues, a record crop could be harvested this year. Khrushchev, in his 17 June report to the central committee on agricultural procurement, in- dicated that prospects were good for most crops, and Minis- ter of Agriculture Matskevich said that as of 10 July the con- dition of grain crops was good almost everywhere, except for some districts in the Urals and western and northern Kazakhstan. A Gosplan official recently told an American delegation of agri- cultural economists that the grain harvest would exceed that of 1956, the best year thus far. In 1956, harvest losses caused by both rainy weather during the harvest season and by inadequate transportation and storage facilities were high in the new lands area. Storage facilities have been substan- tially expanded since that time. A bumper grain harvest this year would enable the USSR to increase its exports to non- bloc countries and to the Euro- pean satellites, especially in the south, where prospects are for a small-grain harvest some- what below average. Although serious floods may be developing in China, Peiping will probably not receive agricultural prod- ucts from the USSR. The flow of agricultural products has been traditionally from China to the USSR. A bumper harvest would also aid in the drive to catch up with the United States in meat and milk production. Milk production may increase suffi- ciently in 1958 for the USSR to claim to have caught up with or even to have surpassed the United States in total produc- tion. In 1957 the USSR claimed to have produced 95 percent as much milk as the US; a more ac- curate comparison, however, would probably put Soviet milk production closer to 85 percent of that of the United States. (Prepared by ORR) 25X1 SECRET PART II NOTES AND COMMENTS Page'4 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 Peiping's "rectification" campaign, which is the regime's systematic program for refining Communist cadres to the point where they are capable of reg- imenting the populace without provoking antiregime sentiments, is "nearing conclusion" in cen- tral government departments. Rectification in these depart- ments has been'the pilot for the over-all `campaign, and last week's announcement that 90 per- cent of them will conclude their drives by the end of July sug- gests that Peiping expects to wind up rectification in all are- as,by fall. The campaign for the past several months has been directed toward drumming up pop- ular enthusiasm for the regime's all-out production effort, and the Chinese Communist party con- tinues to avoid the crude and repressive measures used in na- tional campaigns during 1950-54. During the present cam- paign, the regime has attempted to appear solicitous in redress- ing popular grievances against Communist cadres. The People's Daily on several occasions has attacked the "phenomenon of in- equality," which it admits still exists in the relationship be- tween leaders and the public. Public debate and the lodging of popular protests have been stressed as the means for pre- venting discontent arising from the "mistakes" of cadres. Posters with large Chinese characters, which have been plastered on factory buildings and agricultural cooperative headquarters, were declared on 17 July to be the "permanent method of airing views in the future." Unlike the free-speech period during the spring of 1957, however, the criticisms contained in the posters apply only to lower level cadres and administrative personnel--in- cluding some plant managers-- and for the large part discuss major production measures before the measures are put into effect. The rectification campaign within the Chinese Communist party is similar to its prede- cessor of 1942-44, which was designed to improve the indoc- trination of party members and train them to apply Bolshevism to Chinese conditions. Thus far there has been no confirma- tion of rumors of a Stalinist- type purge and killing of "old comrades." Only a handful of "rightists" have been exposed in the party, and none of these is believed to have been punished severely. The number of Commu- nist party members expelled since October 1955 as "counter- revolutionaries"--well before the start of the rectification drive--came to less than one percent of total party member- ship, according to the minister of public security. Rectification in the Minis- try of-Public Security points up the relatively moderate na- ture of the campaign. Police boss Lo Jui-ching recently stated that "only a part" of the people's police is "liked by the masses," primarily be- cause the police "speak rudely to the masses and do not treat them as equals." Lo stated that, during the rectification drive, inhabitants of such cities as Peiping and Shanghai have been criticizing the police by using posters; he claimed that "public criticism of the police is permitted nowhere else in the world." In exhorting public security personnel to improve, he warned that whether the populace "dares to criticize us or not" constitutes an im- portant criterion for judging whether police-populace rela- tions are "normal." However, the people, too, have been "bound to good behavior" by publicly signing pacts under which individuals are to educate themselves in "socialism" and become, in effect, part of the docile labor force of "red" ex- perts and workers now being created. SECRET Page 5 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET 24 July 1958 PEIPING'S ARMED FORCES ASSUME LARGER ROLE IN CIVILIAN ECONOMY In support of this year's all-out drive for rapid econom- ic development, Peiping has as- signed more troops to civilian tasks, evidently hoping that military personnel, with their disciplined labor force and rel- atively,. high technical skill, will set a beneficial example to workers and peasants and re- furbish the image of the armed forces as a friend of the masses. This campaign will probably not be allowed, however, to inter- fere significantly with the training and efficiency of com- bat units. Members of the armed forces, from "generals to privates," have been ordered to contribute this year some 30,000,000 man- days to agricultural work, a 50-percent increase over last year. By the end of April, how- ever, the armed forces had al- ready contributed 15,000,000 man-days to water conservancy work alone, and the year's tar- get seems almost certain to be overfulfilled. The army's railway con- struction corps recently doubled its target for railroad build- ing in the Second Five-Year Plan (1956-1962), to a total of over 6,000 miles of new line. In the Sinkiang autonomous re- gion, where the army has been particularly active in the past, army units plan to reclaim more than 600,000 acres of farm land this year alone, as compared with a total of only 500,000 acres reclaimed in the past sev- en years by army labor. These units will also play a key role in the regime's plan to turn Sinkiang into one of the' nation's top cotton-produc- ing areas. Since late last year, mili- tary factories have been di- verting part of their produc- tive capacity to the manufacture of civilian goods. Thus, an air- craft plant which formerly pro- duced for the military is now making light transports for China's civilian air line, and a naval ship repair facility in Fukien is making steel for civilian consumption. Numerous articles have appeared in the mainland press detailing how machine shops and re- pair facilities of the armed forces are producing small tractors, irrigation pumps, and other types of equipment for China's farms. Military units have been reported helping civilian authorities build the local industrial instal- lations which are a featured part of Peiping's new program for socialist construction. At least one military unit, which has retained its organizational integrity after discharge from the armed forces, has been active as a construc- tion company at the No. 1 Auto Works in Changchun and later at Fularki. The majority of this year's discharged servicemen, including officers, have "vol- unteered" for work on state farms in northern Manchuria. Others have been assigned to work on farms and mines in northwestern China. This di- version of the military to sup- port the civilian economy il- lustrates the importance the leadership in Peiping attaches to achieving a measurable de- gree of success in the present drive for economic develop- ment. Prepared 25X1 by ORR) SECRET PART II NOTES AND COMMENTS Page 6 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 PEIPING CONTINUES HARD LINE TOWARD JAPAN Peiping is giving no sign of letting up its pressure on the Kishi government in Japan. Economic and cultural exchanges broken off by Peiping in early May remain in abeyance, and Com- munist spokesmen have recently called for further sanctions to be taken against the Japa- nese. The Chinese still insist that the Kishi government must take the first step if relations are to improve. It now appears that Peiping's minimum price for a resumption of trade is Kishi's approval of all provi- sions of the fourth private trade agreement. The terms of this agreement, which permits the exchange of trade missions with quasi-diplomatic rights and the right to fly the nation- al flag, very nearly caused a rupture in Japanese - Chinese Nationalist relations last spring before it was rejected by the Japanese. For a normalization of all relations, however, Peiping says it will require full diplomatic recognition from Kishi, or, at a minimum, a break in ties be- tween Tokyo and Taipei. The latest tactic that Pei- ping is using to increase the pressure of Japanese business interests on Kishi for a resump- tion of trade is the threat of a boycott by Overseas Chinese of Japanese goods in areas of Southeast Asia. At a recent meeting in Peiping of an organi- zation of Overseas Chinese who have returned to China, two Com- munist spokesmen called on the "broad masses of patriotic Over- seas Chinese" to boycott Japa- nese goods and thus iaqsist the "motherland" in the struggle against Japanese "economic ex- pansion." It is doubtful that Pei- ping could carry off a boycott CHINESE CLAIM KISHI BLOCKS TRADE " A bow to his master " --from Peiping Review 22 Apr 1958 throughout all of Southeast Asia, but Japanese goods have been losing their pre-eminent posi- tion in markets there for some time--in large part because com- petitive Chinese goods are con- sistently underpriced. The mere threat of a boycott, however, has heightened concern in Japan, particularly among textile in- terests, that it might lose Southeast Asian markets to Com- munist China. (Concurred in by ORR SECRET NOTES AND COMMENTS Page 766f 18 - Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET PEIPING'S ECONOMIC OFFENSIVE IN SOUTHEAST ASIA k 24 July 1958 Communist China, already well established in consumer goods markets in South and South- east Asia, is selling increasing amounts of machinery and indus- trial raw materials there as well. Peiping's exports, al-: though relatively small in the area, will probably expand rap- idly since they are tied in with the Chinese aid program and at- tractive terms are being offered Under Peiping's recent loans and grants worth about $60,000,000 in Southeast Asia, Chinese consumer goods are being sold in local markets to finance the construction of light indus- trial plants. Indonesia is re- ceiving a textile factory, and Burma is importing Chinese ma- chinery for soap and textile plants. Under its grant to Cam- bodia, China is to construct sion from that country is in- vestigating the possibilities for this venture. Exports of machinery and consumer manufac- tures as a form of assistance have increased the willingness of underdeveloped areas to ac- cept Chinese aid programs, and have established a foundation for Peiping's expansion of po- litical relations as well. China is emphasizing ex- ports to Southeast Asia, to off- set its growing trade deficit in Western Europe. China also is able to purchase raw materials from Southeast Asia for its own use or for re-export to the So- viet bloc. The growth of Commu- nist China's sales in the area has been conspicuous since 1955, and total exports to Southeast Asian countries amounted to $95,000,000 in 1957, double those of 1955. PATTERN OF CHINESE COMMUNIST SALES IN SELECTED SOUTHEAST ASIAN COUNTRIES (PERCENT OF TOTAL SALES) CURRENT INTELLIGENCE WEEKLY SUMMARY (JAN-Mm) FOODSTUFFS AND OTHER MACHINERY AND INDUSTRIAL RAW MATERIALS TEXTILES four industrial plants to pro- duce textiles, paper, cement, and plywood. China has also of- fered to set up textile mills in Ceylon, and a technical mis- Peiping focuses its trade drive on the Overseas Chinese com- munities in these coun- tries, particularly in Indonesia and Ma- laya, where there are large groups of Chi- nese. Peiping-con- trolled-branches of the Bank of China are sources of marketing information and offer credit facilities for Chinese merchants. Pei- ping has made a prac- tice of granting Asian importers short-term letters of credit and long-term contracts protecting merchants from price declines. Pro-Communist associa- tions exhort overseas Chinese consumers and business- men to buy mainland China goods, and Peiping sets prices lower than in the local markets. Pei- ping now is publicly urging these SECRET PART II NOTES AND COMMENTS Page 8 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 communities to boycott goods from Japan, with whom Peiping has severed economic relations in a blatant appeal to enter markets primarily supplied by Japan. Although China is not able at present to supply many manu- factured goods in large quanti- ties, its advertising indicates that further export diversifica- tion is planned. For the first time China is offering trucks and buses for sale in Southeast Asia. (Prepared 25X1 by ORR) CAMBODIAN RECOGNITION OF COMMUNIST CHINA The Sihanouk government's de jure recognition of Commu- nist China, to include an ex- change of ambassadors, follows several weeks of demagogic stage-setting by the premier. Sihanouk has been alluding to the need for a "new ally close at hand" to offset alleged West- ern bias against Cambodia in its increasingly bitter terri- torial and other disputes with South Vietnam. Cambodia here- tofore has deliberately avoided any closer ties with Peiping than the economic and cultural relations entered into in 1956. Many influential Cambodians, apparently including King Sura- marit and Queen Kossamak, are deeply concerned over the im- plications of this step. They fear this will aggravate the problem of Communist subversion and jeopardize the continuation of American aid. Although Siha- nouk is still firmly in command, open defiance of his power may develop among conservative po- litical and military elements who are increasingly critical of his one-man rule. Strong reaction can be ex- pected from South Vietnam, where officials fear Sihanouk also in- tends to grant representation to Communist North Vietnam. Saigon is convinced that Siha- nouk--who is likened to a less intelligent Nasir--harbors gran- diose plans of restoring, with the support of Communist China, the ancient Khmer Empire at South Vietnam's expense. Presi- dent Diem has regarded Sihanouk's past accommodation of the Sino- Soviet bloc a serious menace to Vietnam's security. He has dwelt recently on growing internal op- position to Sihanouk and can be expected to support, if not ac- tually promote, a scheme to re- move him from power. Cambodia's recognition of Communist China constitutes a significant political victory for Peiping and will enhance its prestige throughout Southeast Asia, particularly among the in- fluential Overseas Chinese com- munities. Taipei's already shaky influence among Cam- bodia's 250,000 Chinese will be virtually eliminated, and chances for accrediting the un- official Chinese Nationalist consul now in Phnon Penh appear nil. 25X1 SECRET PART II NOTES AND COMMENTS Page 9 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET 24 July 1958 INDONESIA Army Chief of Staff Nasu= tion has-ordered lav:.,enforcement agencies to take steps to pre- vent strikes and sabotage or any other threats to public order. This is an apparent reference to the recent threat of SARBIJPRI, the Communist-dominated agricul- tural workers' union, to take action against American rubber interests in Sumatra unless US troops are withdrawn from Leb- anon. At least two other Com- munist-led labor unions and one Communist-manipulated organiza- tion have, threatened ':action against American economic inter- ests. The army's ability to pre- vent extensive damage should the Communists choose to follow through on their threat is high- ly questionable in view of the troops' present difficulties in maintaining order in the dissi- dent Sumatran areas. A concert- ed sabotage campaign in Sumatra would also affect American oil installations, where another Communist-dominated union, PERBUM, is strong. Indonesian Government forces occupied Tondano, a city near Menado in the North Celebes, on 17 July, thereby further reduc- ing the area still:Junder dissi- dent control. Indonesian Government lead- ers believe the dissidents in Sumatra plan to transfer their headquarters from Central to North Sumatra, specifically to Tapanuli, an area where the dis- sidents have been most effective. The army appears to have abandoned plans for post- poning the 1959 national elec- tions, probably as a result of nonsupport from President Sukarno. According to Deputy Chief of Staff Djatikusumo, military leaders are considering strengthening IPKI-- a small party supported by cer- tain army elements--as a political25X1 vehicle rather than supporting one of the larger non-Communist parties. B O R N E O ,~,Donggaia* -Tobolir" 864kpapanl Pal,... ,Poso ..~~L'ERES DOAK?ARTA AS 110 Surabaya SECRET NOTES AND COMMENTS AUSTRALIA 14s- ` Page 10 of 18 - Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 June 1958 HONG KONG - CHINESE COMMUNIST RELATIONS Hong Kong - Chinese Commu- nist relations, already strained by British efforts to curb Com- munist subversion in the local schools, may be further exacer- bated by Peiping's order for "peaceful" demonstrations in the colony to protest Anglo- American intervention in the Middle East. The Hong Kong authorities also believe Pei ping may take economic reprisals against the colony, which re- ceives about 80 percent of its foodstuffs from the mainland. While the local security forces are believed capable of control- ling any civil disorder short of an all-out Communist attempt to take over the colony, Hong Kong's dense and volatile popu- lation poses a latent threat of mass violence that might be Ignited by;-any civil crisis. Both Hong Kong and London have been concerned for some time over Peiping's reaction to the colonial government's re= fusal to permit Communist-con- trolled local schools to fly the Chinese Communist flag. The ban is aimed at combating Communist subversive activities in the schools, although local British courts may not uphold the government's action. Commu- nist propaganda has strongly condemned the ban, and Peiping on 10 June officially protested this "unfriendly act." One London official has termed Peiping's attitude in- creasingly "nagging and trucu- lent." Despite this, however, London has authorized the Hong Kong authorities to take action against the principal of the colony's largest Communist- dominated school for his con- tinued violation of the prohi- bition of political activity in the schools. London's reply to Peiping's protest of 10 June will declare that the flag ban was ordered to prevent possible civil violence which could arise if the Communist-controlled schools continued to fly Pei ping's flag. Most of Hong Kong's population, which is 98-percent Chinese, is believed opposed to the Peiping regime. The Hong Kong police re- cently withdrew permission for an international trade fair to be sponsored by local supporters of the Chinese Nationalists in mid-August. The police explained that the fair also would con- stitute a threat to public safety. The government's action in this instance, however, appeared primarily intended to demon- strate its impartiality. Peiping's local machina- tions in response to the Middle East crisis appear to have in- creased the possibility of civil disorder in Hong Kong. However, the capabilities of the Hong Kong security forces have im- proved since the riots of 1956, and the British continue to assert their right to control Hong Kong affairs without out- side interference. PRO-COMMUNIST LEADERSHIP OF JAPANESE TEACHERS' UNION CHALLENGED The pro-Communist leader- ship of the influential Japan Teacher's Union (Nikkyoso) is being challenged by a moderate left-wing faction and by the government, which is moving to eliminate leftist influence in the educational system. The internal power struggle is re- lated to the government's newly SECRET PART II NOTES AND COMMENTS Page 11 of '18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 June 1958 established system for evaluat- ing teachers. If the moderate wing wins out in the convention scheduled for 27 July, it prob- ably would try to make some compromise with the government on the teacher rating system, which appears certain to become effective throughout most of Japan in September. Prime Minister Kishi, to- gether with conservative leaders in business and education, re- gards the teachers' union as the greatest threat to Japan's demo- cratic institutions. The gov- ernment is attempting to re- strict Nikkyoso's influence by reimposing some degree of cen- tral government control of edu- cation--as well as by direct measures to restrain the union's political activities. Since 1956 local school boards have been appointed by governors and mayors instead of elected despite the opposition of scholars, educators, and the press, who charge a revival of state control of education. The government has devised a standardized rating system for teachers throughout the public school system. The system, which has been implemented in two of Japan's 46 prefectures and is expected to become effective in most others in September 1958, offers incentives to outstand- ing teachers and is designed to improve personnel methods and raise the level of instruction. A recently passed government bill gives school principals a special allowance and is designed to induce them to leave Nikkyoso. Prime Minister Kishi also has intimated that, if necessary, he would resort to legislation excluding principals from mem- bership in the union, and the government is considering stand- ardizing textbooks throughout the country. Texts are now selected by individual teachers. The teachers' union is the country's largest labor organ- ization, comprising.about 85 percent of Japan's 645,000 pri- mary and junior high school teachers. Teachers in senior high schools.have a separate union. Japanese -'schoolteachers are traditionally conservative, but since World War II have been dominated by Communists holding powerful policy-making positions in the union. Nikkyoso exercises political power through its position as the largest union in the General Council of Trade Unions (Sohyo), and through its control of 24 Socialist members of the Diet. During Nikkyoso's annual convention in early June, con- troversy over policy toward the government's system of rating teachers and factional rivalry over the election of the secre- tary general revealed a split in the union between moderate and leftist factions. Secre- tary General Miyoshi Hiragaki, representing the pro-Communist elements, walked out of the convention when Vice Chairman Sadamitsu Miyanohara, leader of the moderate faction, won the election, apparently by one vote. The convention adjourned without validating the election requirthg a new convention to settle the dispute. The union charges the gov- ernment with attempting to con- trol individual teachers by arbitrary discharges, penalties, and a return to prewar institu- tions. The government appears determined, however, to continue its attack against Communist influence in the teachers' union and to discourage teachers from using their classroom positions for political activities. The government program has not aroused popular :opposition, and 25X1 Japan's teachers probably will gradually become more responsive to central direction. SECRET PART II NOTES AND COMMENTS Page 12 of 18 - Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 NEPAL'S DETERIORATING FINANCIAL POSITION Nepal's efforts to develop its primitive economy are im- peded by the country's limited financial resources. The budget for fiscal 1959, which began on 15 July 1958, indicates that the government will exhaust its funds by the end of 1958 unless it cuts economic development activi- ties or resorts to printing pa- per currency. Since either move would cause political problems for the government in view of the elections scheduled for Feb- ruary 1959, Katmandu is more likely to attempt to secure addi- tional foreign aid. Expenditures budgeted for the present fiscal year total $14,950,000. Normal government expenses account for $11,836,000 of this sum, and the remaining $3,114,000 is to be used for economic development, chiefly in conjunction with foreign- aided projects. Total antici- pated revenues are only $10,310,- 000, leaving a deficit of $4,- 640,000. Katmandu can use $2,- 330,000 in unutilized Chinese, Communist.aid which.was given in the form of cash, as well as the remaining $820,000 the govern- ment has in the Nepal State Bank,, thus reducing the deficit to $1,490,000. While Nepal could increase taxes enough to eliminate even this shortfall, no political leader in the present interim government is likely to support such a move or to take responsi- bility for butting economic de- velopment expenditures before the elections. The government, therefore, probably will attempt to secure additional foreign aid to enable it to carry out pres- ent development plans. The Soviet-Nepalese com- muniqud issued at the end of King Mahendra's recent visit to the USSR stated that Moscow agreed to extend economic assist- ance to Nepal and that discus- sions on the scope of such aid would be undertaken after the King returned to Katmandu. While the Nepalese Government prob- ably is willing to receive some Soviet aid, it is reluctant to accept Soviet technicians and may attempt to use the talks with the USSR to stimulate India and the United States to expand their existing aid programs. India is already supplying $20,- 000,000 in assistance to Ne- pal's Five-Year Plan. ORR) (Concurred in by MILITARY DISAFFECTION IN CEYLON The reported deterioration of morale within Ceylon's mili- tary and police forces, which suppressed widespread communal violence in late May and early June, creates doubt concerning their ability or desire to main- tain internal security in the event of further disturbances. Their lowered morale stems chiefly from apparent disagree- ments between Prime Minister Bandaranaike and Governor Gen- eral Goonetilleke over the role of the armed forces and who is to control them under emergency rule. Bandaranaike's interven- tion has hamstrung military ef- forts to execute orders from Goonetilleke, who took over primary responsibility for di- recting the armed forces when he assumed emergency powers on 27 May. Increased unrest in the services might eventually cause key military elements to become antagonistic toward the govern- ment. SECRET PART II NOTES AND COMMENTS Page 13 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 SECRET 24 July 1958 Bandaranaike's directive to the police on 2 July threat- ening severe consequences if he received further reports of po- lice excesses in their efforts to maintain order, and his or- der of 5 July to arrest a high- ranking Tamil naval officer ac- cused of abusing Singhalese agitators substantially damaged police and military morale. US Embassy employees who visited Ceylon's eastern province dur- ing the last week of June re- ported that military personnel stationed there blamed the gov- ernment--particularly the prime minister--for the island's troubles. Military personnel also stated that it is "high time" the governor general took action "to end this administra- tion," mentioning in this con- nection "a caretaker govern- ment" which might include mili- tary participants. The increase is Goonetilleke's personal power as a result of his firm use of emergency powers and the corresponding decrease in Bandaranaike's prestige may be responsible for at least two recent indications of friction between the two men. At a meet- ing on 28 June which Goonetilleke and Bandaranaike held with major newspaper editors to discuss ex- isting press censorship, Banda- ranaike granted permission for free reporting on parliamentary proceedings, then withdrew it, apparently at Goonetilleke's re- quest. An emergency regulation authorizing arrests without war- rants, which Bandaranaike revoked on 5 July, was restored the next day, probably also at the-:gov- ernor general's insistence. DE GAULLE'S ECONOMIC AND CONSTITUTIONAL PROGRESS Premier de Gaulle hopes to profit from a postponement of France's pressing economic problems to put the finishing touches on the constitutional revisions to be submitted to a referendum either on 28 Septem- ber or 5 October. Both business and labor interests will become increasingly restive over-his SECRET NOTES AND COMMENTS Page 14 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY 8UNKARY 24 July 1958 economic program, however, and he is apprehensive over the re- percussions Middle East devel- opments may have on the Algerian situation. France's most immediate economic difficulties have been temporarily put off. Finance Minister Pinay's gold-babked loan, which brought in approx- imately $785,000,000, including $169,000,000 in gold, has im- proved foreign exchange holdings to the extent that France may not have to resort to foreign assistance before the end of the year. De Gaulle's promise to review the wage situation in the nationalized industries be- fore the end of the year if eco- nomic circumstances warrant will not satisfy labor, however, and Christian and Socialist union leaders appear seriously con. cerned over worker reaction. Nevertheless, a Communist union official has expressed doubt that a strike would be called in the immediate future. On the international eco- nomic front, the premier has in- structed the cabinet to find some means of reaching agreement on the proposed free trade area in the interest of maintaining unity within the Western world. Farm and business groups, how- ever, which had been reluctant even to enter the Common Market despite '-its- concessions' to France, will oppose a too lib- eral interpretation of this order. The cabinet is completing its review of an initial draft of constitutional revisions which will be submitted to an advisory committee of legislators and jurists by the end of July. It has been announced that the over- seas territories will be asked after the referendum to decide whether they prefer (1) contin- uation of their present status, (2) full integration with France as departments, or (3) "associa- tion" in a framework of federated territories. Algerian settler extrem- ists, who reject any form of federal relationship and demand complete integration of Algeria into France, can be expected to react sharply to this proposal in view of De Gaulle's earlier statement that Algeria would have a "choice place" in a fu- ture federal association of France and its overseas posses- sions. Their reaction will prob- ably be intensified by a debate just published in Paris in which the prointegration side admitted a federal relationship was the only practicable way of associat- ing Algeria with France. De Gaulle now seems fearful lest Middle East events precipitate developments in North Africa which would prevent the applica- tion of a moderate program. THE ITALIAN GOVERNMENT The close margin of 295- 287 by which the Italian Chamber of Deputies approved Amintore Fanfani's Christian Democratic? Denocratic Socialist government on 19 July points to a situation of inaction or chronic instabil- ity. The government is pledged to support active participation in NATO and to a program of so- cial legislation but, because the government coalition is in a minority in the chamber, it must depend on the help of other parties. Moreover, both govern- ment parties have sharp internal divergencies on policy that may prevent much " progress and may SECRET PART II NOTES AND COMMENTS Page 15 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 even cause the government to fall. The coalition has a majori- ty in the Senate, but it will continue to be dependent in the Chamber of Deputies, as it was in the investiture vote, on sup- port from one Community Movement representative and the absten- tion of six Republicans and three deputies :representing the German-speaking portion of the South Tyrol. Republican participation will not be de- cided until the party congress in October, and support from the conservative Liberals would threaten the existence of the present center-left coalition. Enactment of the government's proposed social legislation might win some eventual Nenni Socialist support, but Fanfani's strong endorsement on 19 July of the American and British moves in Lebanon and Jordan. makes unlikely any Nenni Social- ist backing for the time being. Fanfani has tried to create a "new-broom" impression by im- posing strict working hours on ITALIAN PARLIAMENT MAY 1958 COMMUNITY MOVEMENT 1 REPUBLICANS(PRI)Il RAN JOINT LISTS I (RADICALS (PR) r 246 ELECTED MEMBERS ( 7 APPOINTED FOR LIFE I SENATE 253 SEATS Former Democratic Socialist party secre- tary and left-wing leader Matteotti and two of his supporters have reportedly re- signed from the party's governing body, al- though they apparently 24 JULY 1958 intend to remain party SECRET NOTES AND CO$MENTS Page 16 of 18 government employees and cabinet members. His program, however, which was adopted by a joint meeting of the two coalition parties on 28 June, closely par- allels that of the recent inef- fectual Zoli government. In general, it calls for intensified spending An the underdeveloped south, a variety of housing and other welfare measures, a plan for development of educational facilities, legal and administrative reforms, action in favor of European unification, and a defense of the consumer against monop- olies. The government 25X1 must contend in any case with foot-dragging by right-wing Christian Democrats and pressure from influential con- servative church and industrial groups. 14-POPULAR MONARCHISTS(PMP) NEO-FASCISTS(MSI) SOUTH TYROLEANS(SVP) Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY S Y 24 July 1958 members in order to wrest con- trol from party secretary Sar- agat and pull the party out of the government. Although all 22 of the Democratic Socialist deputies voted in favor of Fan- fani's investiture, some six of these are believed to be sup- porters of Deputy Matteotti and could take steps to bring down the Fanfani government if the party crisis deepens. BRAZIL RELATES DULLES'VISIT TO WESTERN SECURITY During Secretary Dulles' planned good-will visit to Bra- zil, scheduled for 3 to 5 Au- gust, President Kubitschek will probably emphasize not only Brazil's serious financial dif- ficulties but also the pressing need for "Operation Pan-Ameri- ca"--his term for a "comprehen- sive reappraisal" of inter-Amer- ican relations proposed in a letter to President Eisenhower in early June. Kubitschek views underdevelopment as the weakest link in hemisphere security, and he has pointed to the urgent need to remedy the situation. While Kubitschek has left a specific blueprint for "Op- eration Pan-America" to a later inter-American meeting, he has described in recent speeches some of the Latin American grievances which he feels threaten to undermine the in- ter-American system. Brazil views itself as the United States' senior partner in Latin America, not only be- cause of its size and strategic location but also because of its close political and mili- tary support of. the ':United States. Brazil believes this close cooperation increases its vulnerability in the East-West struggle and that it should have more of a voice in internation- al affairs--that the Latin Americans should no longer be "a simple choral group." Kubitschek told top govern- ment and military officials on 18 July that it was of primary importance to "maintain inde- structible relations" with the US and, therefore, Brazil's duty to express unhesitatingly its sincere reactions. Kubitschek described his letter to Presi- dent Eisenhower, which he sent shortly after Vice President Nixon returned from South Ameri- ca, as a "warning cry against the cold war that is now begin- ning to exhibit its first symp- toms in our continent." In addressing Latin American dip- lomats on 20 June, he urged that the sickness of underdevel- opment be combated with mod ' ernized international financial institutions, technical assist- ance, and measures to protect primary products from excessive fluctuation. His views have been heartily endorsed in '.Latin America. Increasing financial dif- ficulties in Brazil, linked to lower prices and reduced coffee exports, which supply 60 percent of Brazil's foreign exchange, have limited Brazil's economic development plans and caused rising discontent. National- ists friendly to the United States, as well as extremists, are exerting pressure on the government to seek quicker so- lutions to pressing economic problems. SECRET PART II NOTES AND COMMENTS Page 17 of 18 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 The Communists--showing some recovery from last year's dissension--are exploiting dis- content to press for increased trade and diplomatic relations with the Soviet bloc. Opposi- tion campaigning for the 3 Octo- ber gubernatorial and congres- sional elections will put addi- tional pressure on the govern- ment. Communist-influenced stu- dent groups have publicly threatened a "peaceful" demon- stration against Secretary Dulles, hinting at a road block- ade, who er trying to anticipate possible points of difficulty, claim' to be capable of con- trolling any violence which might occur. SECRET PART II NOTES AND COMMENTS The police, Page 18 of 18 25X1 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 CONFIDENTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 PATTERNS AND PERSPECTIVES MIDDLE EASTERN MEMBERS REAPPRAISE BAGHDAD PACT Turkey, Iran, and Pakistan are engaged in an intensive re- appraisal of regional security along the "northern tier" in preparation for the Baghdad Pact Ministerial Council meet- ing in London on 28 July. Alarmed over the effects of the Iraqi coup on collective defense arrangements and on the stability of governments in the area, Ankara, Tehran, and Karachi will strive for greater regional integration, full US adherence to the pact, and increased military assist- ance. They anticipate that the British role will be de-empha- sized in any event. Impact of the Iraqi Coup The sudden overthrow of King Faysal's regime was as much a psychological blow to the three other Moslem nations in the Baghdad Pact as it was a loss in purely strategic terms. The shocked reaction of the Turkish, Iranian, and Pakistani chiefs of state was quickly translated into concern over the future of the collective de- fense system and also over in- ternal repercussions in their own countries. Demoralization among the pro-Western countries in the area was recognized as a real danger. News of the military coup in Iraq broke as the leaders were gathering on 14 July in Turkey for a meeting of the Moslem lembers of the pact in advance of the Ministerial Council meeting in London. The conference was hurriedly con- verted, in the absence of King Faysal, into a round of inten- sive consultations among the Shah of Iran, Turkish President Bayar, and Pakistani President Mirza on the fast-developing Middle Eastern crisis. The pact leaders adopted a more confident tone in statements following the Ankara talks, ob- serving that recent events in the area stressed "more than ever the need for collective security and for an organization having a very practical nature." Officials made clear their deter- mination to increase the collabo- ration between Turkey, Iran, and Pakistan, and thus strengthen the "Baghdad" Pact. While pub- lic avowals of closer cooperation were designed primarily to demon- strate the solidarity of the Moslem countries in the pact, it was evident that all three gov- ernments did in fact feel the need to draw together as never before in the interest of self- preservation. Strategic Considerations The Moslem members had long regarded Iraq as the weakest link in the alliance, and had frequently considered the pos- sibility of its withdrawal. They did not anticipate, however, that King Faysal's government might be forcibly overthrown and Iraq transformed into what they view as a hostile base. Much of the alarm expressed in Ankara and Tehran reflected the greatly increased threat to each nation's frontier security posed by the new government in Iraq. Most-of Iran's western borderland, as well as its vul- Ene" T northern border with the CO N FID PART III PATTERNS AND PERSPECTIVES Page 1 of 12 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 USSR, now is open to infiltra- tion by subversive elements. Moreover, Iran's access to the Western world will be curtailed by Iraqi control over the major highway between Tehran and Baghdad. Turkey, which recent- ly displayed great apprehension over the danger of subversion from Syria, now is even more concerned at the extension of what it considers to be pro- Communist influence along the remainder of its southern flank. Officials in Ankara and Tehran probably see the developments in addition, give the remaining members greater leverage in exerting pressure on Washington to join the pact, since: they would reaso . that ', the United States' against allying,,itself with Baghdad in opposition to Other Arab States no longer apply. The denial of important bases and lines of communica- tions located in Iraq would constitute a more considerable loss for the pact in strategic terms than the loss of Iraq's =Middle East Members of the Baghdad Pact 24 JULY 1958 in Iraq as a further step in Moscow's "leapfrog" strategy of penetrating the Middle East behind the free world's de- fense line. The new Iraqi Government has not yet indicated its final attitude toward association with the Baghdad Pact. Its withdrawal or expulsion from the pact would remove the Arab element in the alliance. While the influence of the pact throughout the Middle East would be considerably lessened as a result of its dissociation from the Arab world, it might produce an alignment with greater unity of outlook and purpose. Histor- ical relations and continuing disputes between Turk and Arab, and between Persian and Arab, had tended to inhibit genuinely close cooperation among the Turkish, Iranian, and Iraqi lead- ers. Withdrawal by Iraq would, 65,000 troops. The take-over of Baghdad by potentially hos- tile forces, more- over, involves far 25X1 more than a blow to the pact's prestige, for in addition to lending its name to the pact, Baghdad housed the secretariat where classified files of the various po- litical, military, eco- nomic, and counter- subversion organiza- tions are stored. The reported seizure of these documents is likely to be fully exploited for propaganda and intelligence purposes. National Concerns Turkey will continue to be a vigorous supporter of regional security arrangements in the Middle East. While Prime Min- ister Menderes and Foreign Min- ister Zorlu privately may feel less satisfied with the pact, largely because of its failure to provide the mechanism for Western-backed armed action against the Iraqi rebels, these leaders can be expected to work energetically;,, to increase the effectiveness of the pact agree- ments. Turkey's continued partici- pation in the pact is not like- ly to be affected by the dis- favor with which important seg- ments of the population view SECRET PART III PATTERNS AND PERSPECTIVES Page 2 of 12 __ Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY 3U L RY 24 July 19 58 the whole approach toward rela- tions with the Arab world which the pact represents. A number of influential Turks have shown considerable suspicion of Arab leaders in the pact, accusing them of trying to use Turkey and the pact apparatus to fur- ther their own national or personal interests. Iran is likely to relate its commitment to the pact in the future on the prospects for US adherence and additional American arms, and on the will- ingness of its allies to join in an effort to restore a pro- Western government in Iraq. Should these conditions remain unfulfilled, the Shah probably would strive for some alterna- tive to the pact as presently organized. In forthcoming pact con- ferences, Tehran can be expected to express its urgent concern over Iran's increasingly ex- posed position between the USSR and Nasir's sphere. Continuing Soviet maneuvers on the northern border are likely to intensify its apprehension over the time- liness and effectiveness of US support in the event of an ag- gressive move by Moscow against Iran. The Shah is particularly worried over possible domestic repercussions of the events in Iraq, and fears anti-Western nationalist elements will be encouraged to attempt similar action against his regime. Like the Turkish authorities, Tehran officials will be especially preoccupied with the effects of Cairo radio's propaganda on the Kurdish minority as well as on Arabs in southern Iran. Pakistan is interested in the Baghdad Pact primarily as a counterweight to the influence of India and other nonaligned countries. Karachi will want to repair the damage to the pact's prestige by strengthen- ing its cooperation with the like-minded governments in Teh- ran and Ankara and adopting a more aggressive stand against the encroachments of Nasirism. Senior Pakistani army of- ficers have placed themselves strongly on record as favoring prompt military action to lib- erate Iraq. President Mirza has been particularly outspoken in his advocacy of forthright steps to recover the situation in the Middle East, but he is unlikely to resort to action without consulting US officials. While the Pakistani Army appears united in its support of the.,,country's present leader- ship, there is considerable sym- pathy among lower and middle- class elements for the Moslem SECRET PART III PATTERNS AND PERSPECTIVES Page 3 of 12 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 nationalism of which Nasir is a symbol. Opposition parties.: are likely to achieve consider- able success, especially in East Pakistan, in stimulating popular protests against the govern- ment's pro-Western foreign pol- icy on the basis of recent Mid- dle Eastern developments. Future Alignment The Middle Eastern members of the pact will concentrate immediately on tightening the working relationship between Ankara, Tehran, and Karachi.. The increased danger to all of ex- panding nationalism on the one hand and Soviet threats on the other is likely to impel the three countries toward closer integration of their political, economic, and military ac- tivities. Uppermost in the minds of government leaders will be the objective of committing the United States to a more active association with the pact. Turkish, Iranian, and Pakistani officials will argue that the latest developments in the Mid- dle East demand a thorough re- thinking of regional security needs. Requests for substantial increases in military force goals and for stepped-up eco- nomic assistance, calculated on the basis of new estimates of each country's security posi- tion, are likely to be forwarded to Washington within the near future. British association with the Baghdad Pact, on the other hand, may be de-emphasized as a result of the new situation, since London's participation in the .alliance stemmo&latge'rly, fr- m SECRET its special relationship with Iraq. A growing sensitivity to identification with colonial powers has been evident in the pact capitals since the erup- tion of nationalism in Baghdad. The Moslem allies can be ex- pected to exert strenuous ef- forts to increase American in- fluence in the pact. As pact members reassess the security of the "northern tier," renewed interest in pro- posals for a regional federation of some kind is likely to be stimulated. The Shah of Iran, concerned over the weakness of Iraq as an ally, has for some months urged President Mirza to consider some form of federation between Iran and Pakistan. The Shah's interest in sharing Paki- stan's more advanced military force is certain to be enhanced by the presence of forces viewed as unfriendly on his western f lank. gree. The three Moslem nations also are likely to pay greater attention in the future to the position of Afghanistan. Tehran may attempt to iron out long- standing differences which have strained its relations with Kabul in the past. Similarly, Karachi and Ankara can be ex- pected to renew efforts to es- tablish closer ties with Afghani- stan. When Turkey's President Bayar visits Kabul in September, he may broaden his discussions of the status of the Turkish military mission there to in- clude proposals for Afghan as- sociation in a new regional grouping. However, while the royal Afghan Government has been shaken by the fall of the Iraqi monarchy, it is not likely to modify its policy of neu- trality to any significant de- PART III PATTERNS AND PERSPECTIVES Page 4 of 12 ,_ Approved-For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUNNARY 24 July 1958 Science in Communist China figures prominently in state policy and planning considera- tions, as is reflected in nu- merous public statements by leading personalities. The call to "storm the fortress of science" was made by Premier. Chou-En?- lai to the National People's Congress in July last year.,. Vice Premier Li Fu-chun at the Eighth All-China Congress of Trade Unions in December said that China had to fulfill its scientific goals is expected to carry through its over-all plans for future development. Government support of science in 1957 was marked by a budget increase of 25 percent over 1956, granted in the face of a general hold-the-line budg- et policy. Estimates for 1958 show a 30-percent increase over 1957. The percentage of the total budget is 1 percent and better, a fairly high figure considering the modest size of Communist China's research es- tablishment. China has undertaken to attain or approach in the next 12 years world-power status in those scientific fields deter- mined to be most important in strengthening national power, including nuclear energy, elec- tronics, jet propulsion, mineral exploration, metallurgy, heavy chemicals, agricultural chemis- try, flood control, power de- velopment, and fundamental re- search. The amount of research done so far has been slight. The scientists have been busy organizing, planning, and train- ing, and research work has been devoted largely to low-level industrial testing, trouble- shooting, assimilating foreign technology, and overcoming in- dustry's inability to provide equipment and material needed in research and development. Scientists' time has also been absorbed by various political campaigns, such as land reform, the 3- and 5-anti programs, and the antirightist and rectifica- tion program now drawing to a close. The effect on science of the present government's wide program to reduce overstaffing and improve contact with the people is not yet clear. Its application to scientific es- tablishments has been mentioned, but with few details. China is beginning to pro- duce its own laboratory equip- ment and materials, including some for meteorological and geo- physical exploration. Because of the minimal support.given science by industry in China, the scientists have taken on the job themselves. Scientists have successfully engaged in re- fining germanium crystals for their budding transistor "in- dustry," actually still in the trial-production state in the laboratories. Production of chemical reagents is moving along slowly, and the Communists report success in some metallur- gical projects and some advances in the technology of synthetic fuel production. Expansion in the organiza- tion of research probably now is tapering off. The Academy of Sciences has 55 research in- stitutes and some 20 subordi- nate research bodies. The gen- eral fields of medicine and agriculture are both organized under central academies under the Ministries of Public Health and Agriculture respectively. The various technical ministries have under their jurisdiction a total of about 100 research institutes, not including local industrial laboratories or pro- vincial agricultural experi- ment stations. Science is controlled at State Council level through the Scientific Planning Commission, set up in 1956 with 35 members SECRET PART III PATTERNS AND PERSPECTIVES Page 5 of 12 Approved For Release 2007/10/23: CIA-RDP79-00927A001800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 and enlarged to 106 in 1957, at which time it was made a per- manent working body of the State Council, with Vice Premier Nieh Jung-chen as chairman. Although the commission is concerned mainly with natural science- and technology, less than half the members are scientists or engineers, and, of those, less than one third are party members. Among the economists, politicians, and mil- itary men making up the majority, on the other hand, over half are party members, including 11 central committee members. During the ' height of the "bloom- ing and contending" episode in the spring of 1957, some brave statements were made doubting that the "laymen" could lead the "experts," but this idea was soon submerged and the ar- ticulate scientists were suppressed as rightists. One con- sequence of the anti- rightist campaign was the expulsion of five natural scientists from the commission, further reducing the scientific represents tation. ophy level. Since Chinese uni- versities offer no doctorates except in medicine, these men were all educated abroad, main- ly in the United States. The regime, clearly in need of its trained scientists, has put up with their lukewarm at- titude toward Communism. After six years of pressure to "re- CHAIRMAN, CHINESE PEOPLE'S REPUBLIC CHINESE COMMUNIST PARTY CENTRAL COMMITTEE, PROPAGANDA DEPARTMENT, SCIENCE SECTION Defense Ministry (principally medical research at present) H Education Ministry (usi,erstttes and colleges) Various Technical Ministries (93 research iustttutesl Central Meteorological Bureau (research institute) Scientific Apparatus Centers National Central Library ( library system Academic Council of the Departments Physics, Chemistry, and Mathematics Department (10 research institutes, 7 branches) Earth Sciences Department (5 research institutes, 7 branches) Technical Sciences Department (ft research institutes, 3 branches) Manpower and Training Nearly 20,000 persons are engaged in research in Com- munist China's re- search establishments and-uni- versities. According to offi- cial reports, this figure in- cludes apprentices and labora- tory assistants. About 1,000 are of a quality to plan and carry out research comparable to that commonly carried out in the West. Among. Communist China's scientists some 600 hold scientific and engineering degrees of the doctor of philos- Biology Department (15 research institutes, 7 branches) L Social science Department (11 research institutes) Branch Administrative Offices Central China East China Noribeast China Northwest China South China Southwest China H 9cienific hdormatlon Institute Publication and Translatian Bureau Central Library and Branches educate and reform," interlaced with a few periods of relaxa- tion and even coddling, the ef- fort still goes on to make the scientists both "red" and "ex- pert." The effectiveness of the scientists is probably re- duced by the deadening aspects of these political campaigns. This is the case in the recent "antirightist" campaign which was turned on following a rash SECRET PART III PATTERNS AND PERSPECTIVES Page 6 of 12 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 of criticism of the party fol- lowing the invitation to "let all flowers bloom" and to help "rectify" the party. The Overseas Chinese scien- tists are viewed by the regime as a potentially rich source of new badly needed talent. In the United States alone there are about as many Chinese na- tionals with doctor of philos- ophy degrees as there are in Communist China, and the regime has been trying to entice them to return to the mainland. Some 100 have returned since the Communist take-over. There has been little in- crease in the number of quali- fied researchers under the Com- munist regime. Examination of candidates for the advanced- degree program of the Academy of Sciences revealed surpris- ingly poor preparation. In technician and engineer train- ing, shortcomings have also been disclosed when graduates with very narrow fields of specialization could not be fitted into changing personnel requirements. Policies are changing, with more emphasis on quality and fundamentals which are more broadly appli- cable. An intensified effort to train advanced scientists in China got under way in the Academy of Sciences- in 1956, with some 200 scientists being named as graduate tutors. In the fall of 1957 a similar pro- gram was started in the uni- versities with about 130 tutors. About one half of these 330 have doctor of philosophy de- grees. Each tutor apparently takes on one or two trainees each year for training up to four or five years. The training program in the Academy of Sciences calls for producing 10,500 scientists of the doctor of philosophy level by 1967, a goal that could conceivably be met if the number of tutors is expanded and if training is the princi- pal activity of the few good scientists. A hitch in the program may have already de- veloped inasmuch as no announce- ment of the enrollment of new graduate students in the acad- emy has been made for the 1957- 58 academic year. Instead, according to an announcement of 17 June, the academy is set- ting up a new "university of science and technology" to en- roll 950 undergraduate students this summer. These students are to work in or in very close association with the academy's research institutes. This plan may be the academy's answer to the problem of getting quali- fied men for its advanced pro- gram. The Academy of Sciences sent 129 men to the USSR in 1956 for advanced study, and the Min- istry of Higher Education sent about 500 postgraduates, some of whom will be trained as re- searchers. The number sent is limited by the shortage of quali- fied men and by the need to keep the older men in China to carry on research and teaching. Returnees with "associated doc- torate" degrees numbered 62 in 1956; two received doctorates in 1956. An estimated one hun- dred such trainees will return each year during the early years of the 12-year plan, and the number will increase in the latter years. A Soviet adviser is regu- larly assigned to the Chinese Academy of Sciences and Soviet scientists have lectured in China, but on the whole the USSR has not shown an enthusi- astic interest in promoting re- search and development in Com- munist China. Until this year there has been no known over- all research and development agreement with the Soviet Union. Formal relations in the scien- tific field are believed to SECRET PART III PATTERNS AND PERSPECTIVES Page 7 of 12 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET 24 July 1958 have been limited to statements of intention and ad hod rela- tions. Sixteen Soviet scien- tists arrived in China in the spring of 1956 to help work out the 12-year plan, and in March 1956 Communist China joined with the Soviet Union and the satellite countries in estab- lishing the Joint Nuclear Re- search Institute at Dubna near Moscow. China, -which contributes 20 percent of the operation costs of the institute, is per- mitted to use its research and training facilities. The Chinese probably in- stigated the three-month-long negotiations in Moscow which led to an agreement in January 1958 providing Soviet assist- ance to China on its 12-year plan. Details of the agree- ment are lacking, but apparent- ly an attempt was made to tie it down to specific goals of the 12-year plan. The agree- ment probably also clarifies and extends arrangements for giving Chinese scientists ad- vanced training in the USSR. Another agreement was signed in December 1957 between the science academies of the two countries aimed at facili- tating cooperation. This agree- ment appears to be a belated effort to implement the Chi- nese and Soviet resolutions agreed on when the Soviet acad- emy mission visited Communist China in June 1955. Relations with other bloc countries are nominal. There has been some exchange of lec- turers, and research students have received some advanced training in satellite countries. Peiping is on record that it will seek knowledge wherever possible including the free world. Mao Tse-tung is report- ed to have said to the Supreme State conference: in February 1957 that "it is even necessary to learn from the United States, especially in the field of science and technology." Communist China's scien- tists are beginning to make con- tact with free-world scientists --particularly Japanese--by at- tending scientific congresses. The Japanese Science Council and the Chinese Academy of Sciences exchanged delegations in 1955 and a group of Japanese physicists spent a month in China in the spring of 1957. There is some indication that Peiping would like to have Jap- anese scientists come to China for extended periods for re- search and teaching. The Chinese Communists withdrew officially from the International Geophysical Year because that body recognized Na- tionalist China as an official participant. They continued in an observer capacity, however. Nuclear Energy Developments With a very limited number of nuclear physicists, few training facilities, and limited industrial capacity for the pro- duction of nuclear facilities, Communist China is heavily de- pendent on the USSR for its progress in the field of nuclear energy. As a country in a position to contribute uranium resources to the Soviet nuclear energy pro- gram, Communist China was desig- nated in 1955 as one of the bloc countries that would receive Soviet aid in nuclear research. On 1 July, China announced that the 6.5-10 megawatt thermal re- search reactor and 25,000,000- electron-volt cyclotron built with Soviet assistance began operating on 13 June. These facilities, largest in the bloc outside the USSR, are believed to be located in Peiping. Some alleged details of the agreement connected with nu- clear energy development have SECRET PART III PATTERNS AND PERSPECTIVES Page 8 of 12 - Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY j4UARY 24 July 1958 been received and are considered possibly true. The Soviet Un- ion reportedly is to train 50 Chinese scientists in the So- viet Union and furnish 20 nu- clear scientists to supervise Chinese nuclear research. Dur- ing the Chinese Second Five- Year Plan (1958-62), the Soviet Union will aid in the construc- tion of two nuclear power plants, another research reactor, and a 50,000,000-electron-volt cyclo- tron, and will keep China cur- rent on the results of Soviet nuclear research. Pre-25X1 pared by OSI) Six months after the ouster of dictator Perez Jimenez, Ven- ezuela's caretaker junta is still attempting to balance antagonistic military and civil- ian elements, and faces serious difficulties in carrying out its plan for a peaceful trans- fer of power to a coalition government expected to be elected on 30 November. The conditions essential to a peaceful transi- tion--survival of the junta and election arrangements acceptable not only to the disparate par- ties but also to the tradition- ally dominant military--may be difficult to meet. Governing Junta The governing junta, with three military and two civil- ian members, appears to have the backing of civilian groups, the press, and public opinion generally, and to retain the majority, but diminishing, sup- port of the military. Junta President Larrazabal, key per- sonality in the government at present, is a high-ranking naval officer whose brother is com- mander of the navy--an associa- tion which has seemed to carry a special guarantee of naval support for the regime. Although theoretically apolitical, the junta is in a position to influence the out- come of the elections for a con- stitutional government. Through the policies it adopts and the use of its appointive powers, it is able to promote the in- terests of one or more of the political parties. Larrazabal himself has been considered a coalition presidential candidate. The Military The traditionally dominant military has the power to take over the present government or pre- vent an elected government from as- suming office. Factors promoting such a move include the military's strong hostility to Venezuela's largest party, the leftist but non- Communist Democratic Action (AD), and concern over the growing in- fluence of the Communist party. Serious checks on the free- dom of the military to intervene, however, include the continuing reorganization of the armed forces following the ouster of senior officers who served under the former dictatorship; the minority of the military which might oppose a coup at the pres- ent time; and the pronounced public opposition to a return of strong military rule. Civil- ian groups also might unite to oppose a coup, with resultant widespread violence. Moreover, the military are probably re- luctant to act without some SECRET PART III PATTERNS AND PERSPECTIVES Page 9 of 12 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 advance indications that US rec- ognition of a new military- sponsored regime would be forth- coming at an early date. Political Parties Four of Venezuela's five major political parties have reorganized rapidly since the fall of the dictatorship, and one new party has been founded. The voting strength of these groups-can only be estimated because of the lapse of time since the last free nationAl elections were held. AD, although probably the majority party, is limited by the attitude of the military, who tend to consider it Communist. Its leader, Romulo Betan- court, is virtually eliminated from the. presidential race as a consequence. AD, however, apparently has substantial in- fluence in the pres- ent government and the support of the great majority of or- ganized labor. The Venezuelan have the advantage of being na- tional parties somewhat more ac- ceptable to the military than either AD or PCV. COPEI also has the endorsement of the Catholic Church. The influence of the moder- ate Republican Integration (IR) cannot be measured accurately, but it has been accorded favor- able treatment by the govern- ment, and its membership includes a number of respected individ.. uals. Unlike the other four parties, however, it has no known labor following or youth auxil- iary. Other minor parties do. not appear to have any pbrcelbtible influence at pres- ent. VENEZUELAN POLITICAL PARTY STRENGTHS ESTIMATED PERCENT OF POPULAR VOTE IN A GENERAL ELECTION ) OF CENTER ~EFZ wields political in- v M(PcMMHNIST fluence out of pro- 807213 portion to its esti- mated strength through OTHER: s S % its reported penetration of the I Other Civilian Power Elements government at all levels; its prominent position in student, teacher, intellectual, and jour- nalistic circles; its influence over the non-Communist press; its position in organized labor, probably second only to AD among the major parties; and its re- spectability and security through association with united labor and political organizations. The PCV may also have penetrated the other parties in some degree as the latter reorganized rapidly. Both the Democratic Repub- lican Union (URD) and especially the Christian Democratic COPEI Union labor is so organized as to be in large degree a po- litical arm of each of the major parties except IR. All four parties have labor organizations with membership on the United Syndical Committee, a .labor unity group which in theory is supervising the reorganization of Venezuelan labor and main- taining a labor truce among the parties. The strength of or- ganized labor, which could prob- ably launch a partially effec- tive general strike, has not yet been tested but is believed to be increasing. At present, SECRET PATTERNS AND PERSPECTIVES Page 10 of 12 RN;AM NEEEBRATION CENTER (IR) 3% -- Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 24 July 1958 the great majority of labor is reportedly affiliated with AD. Under the present uncertain political conditions, the grow- ing number of unemployed--esti- mated at 70,000, primarily in Caracas--lend themselves to po- litical manipulation and could serve as a significant element of force for political parties. Avowedly apolitical, the Roman Catholic Church in Vene- zuela exercises some influence on government and politics, al- though less than in some other Latin American countries. It is associated with the COPEI party and COPEI's labor affili- ate, for which it acts as coun- selor. The Catholic paper La Religion, which has an esti= mated c rculation of 28,000 and is the only periodical which is anti-Communist at present, prob- ably has some political influ- ence over moderate and conserva- tive readers. Moreover, clerics are active on political bodies such as the Patriotic Front. The press has become in- creasingly influential under the present government, which seems highly sensitive to pub- lic opinion, with the number of papers and their circulation increasing since the ouster of dictator Perez. The press, which tends to be antimilitary, is largely leftist-owned and -managed, and most of the staffs of the principal newspaper are penetrated by Communists or sympathizers. Virtually no anti-Communist material is printed in the non-Communist press, which also serves as an outlet for Communist Propaganda. Thus the press has considerably enhanced the position of the PCV as a power element. Student groups, which took the initiative in the overt ci- vilian phase of the movement which ousted Perez, have become one of the leading forces in Venezuelan politics. The major political parties except IR also have youth auxiliaries. The principal independent organiza- tions in the Caracas area are penetrated and, in large meas- ure, dominated by Communists. Politically oriented, the stu- dents are readily manipulated by political agitators. Since the public in Venezuela is gen- erally hostile to forceful ac- tion against student demonstra- tions--a situation which often embarrasses an incumbent regime --students are a power in na- tional affairs beyond their strength in numbers. The principal business or- ganizations are in part designed to influence national economic policies to favor Venezuelan industry and commerce over for- eign competition, but they are also a potential stabilizing force. The financial resources of the members, the majority of whom tend to be conservative, could be applied to influence the military or the political parties. Outlook Much of the present uncer- tainty derives from the fluid relationships among Venezuela's power elements. The junta has alienated some military support recently by complacency toward the growing Communist influence and by its quick response to civilian pressures. The prin- cipal check on a military coup apparently is the likelihood of widespread civilian violence against such a move, as was dem- onstrated on 22-23 July when Defense Minister Castro Leon was forced to resign. The strength of parties vis-a-vis the military depends in large degree on the mainte- nance of their proclaimed truce and unity program. All major groupings are members of the Patriotic Front, which played a key role in the ouster of Perez and whose present objectives are to ensure an elected con- stitutional government and to SECRET PATTERNS AND PERSPECTIVES Page 11 of 12 - Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 SECRET CURRENT' _INTELLIGENCE WEEKLY SUMNARY 24 July 1958 guard against the return of mil- itary dictatorship. Any break- down of unity among the parties would be likely to enhance the position of the military as the dominant element in Venezuela. The parties have not yet agreed, however, on the nature of the elections and on their respec- tive positions in a future coa- lition regime. long-range instability. In the event a peaceful transfer of power takes place next April, the doubtful ability of civilian groups to cooperate in the actual exercise of gov- ernmental power while retaining essential military support fore- shadows at least a measure of SECRET PART III PATTERNS AND PERSPECTIVES Page 12 of 12 __ Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01800080001-5