CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001900040001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 46
• Document Creation Date: December 16, 2016
• Document Release Date: February 17, 2005
• Sequence Number: 1
• Publication Date: September 11, 1958
• Content Type: SUMMARY

Approved For Relea 2005/03/15 : CIA-RDP79-00927AO01940040001-9
CONFIDENTIAL PT/-CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
DIA and DOS review(s)
completed.
L
COPY NO. 50
OCI NO. 4046/58
11 September 1958
A/
NO CHANGE IN CLASS
17 DECLASSIFIED
CLASS. CHANGED TO: TS S
DATE/a_7 REVIEWER
NEXT REVIEW DATE:
AUTH: HR 70-2
25X1
NFIDENTIAL
25X1
Approved For Release 2005/03/15 : CIA-RDP79-00927A0019000400 1-9
 Approved Foelease 2005/03/15 : CIA-RDP79-00921t001900040001-9
THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
 Approved For ReleaTe 2005/03/15 : CIA-RDP79-00927A001 0040001-9
~ CONFIDENTIA!.
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
T H E W E E K I N B R I E F
PART I
OF IMMEDIATE INTEREST
TAIWAN STRAIT SITUATION . . . . . . . . . . . . . . . . . Page 1
The increasingly belligerent statements by Chinese
Communist leaders and Premier Khrushchev's blunt warning
to the United States are intended to serve notice that
the bloc is prepared for a showdown over the offshore
islands. Bloc leaders may believe, 'however, that their
present tactics will enable them to progress toward po-
litical goals without major hostilities. The USSR will
probably raise the issue of "American provocations"
against Communist China in the forthcoming UN General
Assembly session, where a major debate over the question
of Chinese representation appears in the making. Although
Peiping has agreed to resume ambassadorial talks with the
United States, if these talks fail to progress, the Com-
munists will probably press for multilateral negotiations
on a higher level. Militarily the Chinese Communist naval
build-up in the strait area continues. Bombardment of the
Kinmens has been light except for 8 September, when some
50,000 rounds were fired against the islands. The Chi-
nese Nationalists have had difficulty in supplying Kin-
men, even with American naval escorts. The dominant re-
action throughout the free world to the prospect of Sino-
American negotiations was one of relief, although there
was no expectation that any permanent solution would be
achieved,
MIDDLE EAST DEVELOPMENTS . . . . . . .
25X1
. . . . . . . . . Page 6
as r
has in effect indicated to UN Secretary Genera Hammar-
skjold that he would not be willing to provide the as-.
surances of noninterference in Jordan desired by King
Husayn before the King agrees to the withdrawal of Brit-
ish troops. Jordanian officials consider the Hammarskjold
mission has failed, and it is likely that Jordan will again
place its complaint against UAR interference before the
next UN General Assembly session. Cairo is striving to in-
crease its influence in the Iraqi armed forces, presumably
to strengthen the faction, led by Deputy Prime Minister
Arif, which favors membership in the UAR.
Approved For Release 2005/03/15: CIA-RDP7900-QW
THE WEEK IN BRIEF
41 Al
25X1
 Approved For Rele a 2005/03/15 : CIA-RDP79-00927A001040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
PART II
NOTES AND COMMENTS
USSR SCHEDULES 21ST PARTY CONGRESS FOR JANUARY . . . . . . Page 1
The Soviet party central committee on 5 September
decided to convene an "extraordinary" 21st party con-
gress on 27 January to discuss economic goals under
the Seven-Year Plan (1959-65). While the agenda does
not provide for the election of a new central commit-
tee, changes may be made in that body; it is also likely
that membership changes in the party presidium and secre-
tariat will be made in furtherance of Khrushchev's polit-
ical control. The congress is expected to extol Khrushchev's
economic policies in such appealing terms as to obscure the
likelihood that a slower rate of improvement in living stand-
ards will be necessary if the present rate of industrial
growth is to be maintained.
EAST GERMANY CONCERNED OVER REFUGEE FLIGHTS TO WEST . . . Page 2
East German officials are greatly concerned over
the mass refugee flights to West Germany which have
continued despite severe control measures in East Ger-
many and East Berlin. The situation has also caused
all the West German political parties to condemn strong-
ly the political oppression in East German which has 25X1
caused this exodus.
CZECH WAGE REFORM . . . . . . . . . . . . . . . . . . . . . Page 4
A campaign is under way in Czechoslovakia to popu-
larize wage reform measures and work norm revisions
which will affect approximately two million industrial
workers. The regime hopes to lower costs and increase
industrial output by raising labor productivity propor-
tionately more than wages and by redistributing wage
funds among workers. While the regime plans to institute
reforms cautiously, any rise in work norms is bound to
antagonize labor and could hamper the regime's program
for continued economic expansion.
CAMBODIA . . . . . . . . . . . . . . . . . . . . . . . . . Page
Premier Sihanouk seems likely to become even more
uncompromising than in the past in handling Cambodia's
border and other disputes with neighboring South Viet-
nam and Thailand. His attempts to use Peiping as a
counterweight to Saigon and Bangkok will probably ac-
25X1
25X1
celerate Communist subversion in Cambodia. 25X1
SOUTH KOREAN LEADERSHIP . . . . . . . . . . . . . . . . . Page 6
The relatively moderate reaction in South Korea
to the Taiwan Strait developments contrasts with the
lively interest shown in the Indonesian situation last
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
THE WEEK IN BRIEF
 Nwf
Approved For Release 2005/03/15 : CIA-RDP79-00927AO019ZO040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
PART II (continued)
May when government-staged demonstrations called for
"volunteers" to aid the insurgents. The present atti-
tude may in part result from President Rhee's waning
dynamism and gradual withdrawal from day-to-day politics.
The poor health of Rhee's chief political lieutenant, Yi
Ki-pung, who may have to step down as chief of the gov-
erning Liberal party, is further weakening the administra-
tion leadership. These factors reduce the possibility of
an orderly and constitutional succession when Rhee dies.
F__ I
NORTH AFRICA . . . . . . . . . . . . . . . . . . . . . . . Page
Morocco and Tunisia are committed to support Al-
gerian independence, but are beset by internal diffi-
culties and apparently have given little more than lip
service to their agreement of last June to coordinate
foreign policies and collaborate closely in other
spheres. Tunisia's decision to join the Arab League,
following similar action by Morocco, was more an ef-
fort to avoid isolation from the rest of the Arab gov-
ernments than a gesture of North African solidarity.
A recent meeting of the Maghreb Secretariat--composed
of Algerian, Moroccan, and Tunisian political lead-
ers--indicated only superficial harmony a on the
North African leaders.
CYPRUS . . . . . . . . . . . . . . . . . . . . . . . . . . Page
EOKA's announcement on 7 September of the termina-
tion of its month-old, self-imposed "truce" may presage
a resumption of terrorism on a major scale. Greek and
British officials expect all-out attacks by 1 October,
when the British plan is to be implemented. These at-
tacks may include an attempt on the life of the Turkish
representative appointed to advise Governor Foot or vio-
lence against Turkish Cypriots in an effort to gain
prompt UN intervention to "restore peace" on Cyprus.
25X1
25X1
25X1
FRENCH CONSTITUTIONAL REFERENDUM . . . . . . . . . . . . . Page 8
The new French constitution is virtually assured
of approval on 28 September by a substantial majority
of voters in metropolitan France, where most political
leaders are rallying to support it; in tropical Africa,
where the option of independence has won it wide back-
ing; and in Algeria, where the army is expected to get
out a favorable vote. Most of the traditional parties
and the recently organized political groupings are now
maneuvering with an eye to parliamentary elections
which probably will be scheduled for November.
SECRET
25X1
i i i
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
THE WEE?. IN BRIEF
 Aw~
Approved For Release 2005/03/15 : CIA-RDP79-00927AO019WO40001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
PART II (continued)
ITALIAN GOVERNMENT PROBLEMS Page
When the Italian Chamber of Deputies convenes on
16 September, Premier Fanfani's shaky coalition may
be threatened by a financial scandal which allegedly
involves members of his own Christian Democratic party.
Fanfani is depending on his diplomatic initiatives in
Middle Eastern affairs to bolster his government's pres-
tige, but possible defections from right-wing Christian
Democrats who object to his socio-economic reform pro-
gram could deprive him of'his present three-vote ma-
jority and force him to broader parliamentary sup- 25X1
port.
CHILE'S PRESIDENTIAL CHOICE . . . . . . . . . . . . . . . Page 10
Prominent Chilean industrialist Jorge Alessandri,who
won a slim plurality over leftist candidate Allende
in the 4 September presidential election, will probably
be ratified by the Chilean Congress on 24 October. He
hopes to solve Chile's long-standing economic diffi-
culties by a program of economic austerity and by re-
storing competitive enterprise with a minimum of state
intervention, but will rob uire substantial
foreign aid.
THE ABORTIVE MILITARY COP I
U N V
25X1
ENEZUELA N . . . . . . . . Page 12
The attempted military coup in Venezuela on 7 Sep-
tember failed in part because the civilians' defense
against a return to military rule was well organized
and most of the divided armed forces continued their
support of junta president Larrazabal. An effective
general strike on 8 September, in which the Communists
were particularly active, further demonstrated civilian
strength. The military may still unite for a showdown,
if it feels its role in the government is further en-
dangered or if the junta beconer aptive of periodic
mob action. 25X1
PART III
PATTERNS AND PERSPECTIVES
BLOC ECONOMIC ACTIVITY IN INDONESIA . . . . . . . . . . . Page
Sino-Soviet bloc assistance to Indonesia has been
marked this year by Djakarta's activation of the long-
standing Soviet $100,000,000 economic credit, a Chinese
Communist $40,000,000 loan, and an arms deal possibly
amounting to as much as $200,000,000. The aid is in
the form of essential items, such as rice, textiles,
ships,.and industrial machinery, and also provides for
technicians, including military specialists. Bloc
SECRET
iv
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
THE WEEK IN BRIEF
 Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
PART III (continued)
trade promotion activities, reinforced with liberal
credit offers, probably will result in an increase
in bloc-Indonesian trade for 1958 above the 1955 peak
of $74,000,000.
25X1
ISRAEL AND THE MIDDLE EASTERN CRISES . . . . . . . . . . . Page 4
Israel has reacted to the Middle East's latest
crises with intensive diplomatic activity including
consultations with French, British, and Italian gov-
ernment leaders. Israel is seeking late-model arma-
ments and a guarantee of Israel's territorial integri-
ty. Israel fears that Nasir's influence may be extended
over Jordan and Lebanon. Concern over such encirclement
might lead the Israelis to take a military initiative
at a time and place of their own choosing.
POLISH ECONOMIC DEPENDENCE ON THE BLOC . . . . . . . . . . Page 7
The Soviet bloc accounted for 59 percent of Po-
land's foreign trade in 1957, a figure which probably
will not change significantly during the next two years.
The extent of Warsaw's ties with the bloc puts the So-
viet Union in a strong position to influence Polish ac-
tions. Basic political concessions probably could not
be forced on the Polish Government through economic means
alone, however, since Poland after first suffering consid-
erable losses could reorient its economy from the bloc to
25X1
25X1
BRAZIL'S FINANCIAL SITUATION ... . . . . . * . , . . . . . Page 10
Brazil has undertaken a number of emergency meas-
ures in recent weeks designed to head off a foreign ex-
change crisis in 1959. Even if these measures are fully
carried out, Brazil will continue for some years to suf-
fer severe balance-of-payments difficulties. These dif-
ficulties result from its continued dependence on the
fluctuating coffee market for 60 to 70 percent of its
exports and the increasing demands of its booming in-
dustrial complex for imports of oil, machinery, and
parts. Repayments on foreign loans will require 15
to 20 percent of export earnings for the next several 25X1
years. F_ I
NIGERIA'S PRE-INDEPENDENCE PROBLEMS . . . . . . . . . . . Page 13
The African leaders of the British colony of Ni-
geria who will meet with British representatives in
London in late September have been pressing for Ni-
geria's early independence within the Commonwealth.
They have unilaterally set 2 April 1960 as the date
even though the country still lacks national unity.
SECRET
V
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
THE WEEK IN BRIEF
 Approved For Rele a 2005/0359Ecl&FDP79-00927A0011040001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
PART III (continued)
The London conferees will also consider the reports
of commissions which have been studying the colony's
financial and political problems.
SECRET
25X1
25X1
vi
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
THE WEEK IN BRIEF
 Approved For Release 2005/03/15 : CIA-RDP79-00927A0019 9040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
OF IMMEDIATE INTEREST
The increasingly belliger-
ent statements of top Chinese
Communist leaders and Khru-
shchev's blunt warning to the
United States during the past
week were intended to serve
notice that the Sino-Soviet
bloc is prepared for a, show
down over the offshore islands.
Bloc leaders are probably con-
fident, however, that their
tactics will enable them to
achieve progress toward politi-
cal goals without major hostili-
ties.
Premier Chou En-lai, in
agreeing on 6 September to a
resumption of talks with the
United States on the ambassado-
rial level, reaffirmed Commu-
nist China's "absolute right"
to take the "necessary military
action" against Chinese Nation-
alist forces on the offshore
islands. On 7 September polit-
buro member Peng Chen declared
at the largest mass rally. ever
held in Peiping. that China is
"determined" to take Taiwan is
well as the offshore islands.
In the sharpest warning to
date from Communist China, the
People's Daily stated on 9 Sep-
tember that convoying activity
by American forces will place
the United States in a "most
precarious situation involving
direct armed conflict with China
at any moment."
Khrushchev's letter of 7
September to President Eisen-
hower--the first official Soviet
pronouncement on the present
Taiwan Strait crisis--contained
the strongest statement of So-
viet support for the Chinese
Communists to date. After point-
edly warning against the danger
of miscalculation, the Soviet
premier declared: "An attack
on the Chinese People's Republic
...is an attack on the Soviet
Union." Although he did not
specify the conditions under
which the Soviet commitment would
take effect or its precise form,
the language of the letter ap-
pears to pledge the USSR to as-
sist Peiping with direct mili-
tary support if the crisis de-
velops into a major military
action.
Chinese Communist officials,
in conversations with Asian dip-
lomats, have also contributed
to the picture of strengthened
confidence which the bloc is
presenting to the world..,
These Soviet and Chinese
moves, while calculated to dis-
courage expansion of American
military support of the
25X1
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
PART I OF IMMEDIATE INTEREST Page 1 of 7
 IV-
Approved For Release 2005/03/15: CIA-RDP79-00927A0019ON40001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
Nationalists, are also intended
to assist attainment of politi-
cal objectives. In particular,
the Communists probably feel
that by further stimulating ap-
prehension throughout the world
over the prospect of large-scale
hostilities, America's allies
and neutral governments may be
induced to bring pressure on
the United States to avoid ac-
tions which might lead to a
large-scale clash.
Bloc leaders apparently are
seeking to secure a greater
voice for Communist China in
world affairs and its acceptance
by other states as a "great
power." Other Communist polit-
ical goals are to diminish Amer-
ican prestige, discredit Amer-
ican policy toward China, and
to demoralize and weaken the
Nationalist regime in order to
lay the groundwork for eventual
acquisition of all Nationalist-
held territory.
Chou En-lai stated on 6
September that Peiping is ready
to resume the ambassadorial
talks suspended last December.
Two days later Mao Tse-tung made
a firmer commitment to resume
the talks, and Ambassador Wang
Ping-nan has left Peiping to re-
turn to his post in Warsaw,
evidently prepared to begin
negotiations.
The Chinese decision has
been underplayed in the Commu-
nist press, indicating that the
Chinese leaders intend to sus-
tain the atmosphere of crisis
throughout China and maintain
military as well as psychological
pressures during the prospec-
tive negotiations.
Communist China at the talks
will probably demand the with-
drawal of Chinese Nationalist
troops from the offshore islands,
particularly the Kinmen and Matsu
islands. Peiping's propaganda
stresses the "immediate threat"
posed by these two island
groups and places Taiwan and
the Penghus in the category of
territory which will be "re-
stored sooner or later," sug-
gescing that the Taiwan issue
will not be pressed as force-
fully at this time.
Peiping's declaration on
4 September extending its ter-
ritorial waters to a distance
of 12 miles was intended to
emphasize the proximity of the
Kinmen and Matsu groups to the
mainland; both are well within
the new limit.
The Chinese Communist nego-
tiator will also propose that
the discussions consider such
questions as "American provoca-
tions" and "invasion" of ter-
ritorial waters. In any event,
Peiping will try to gain con-
cessions, but will probably re-
fuse to agree to any declaration
or commitment which would com-
promise its position that the
"liberation" of Taiwan, as well
as the offshore islands, is an
"internal" problem.
If the negotiations fail
to progress, the Chinese Com-
munists may propose that the
ambassadors confine their ef-
forts to a preliminary airing of
views and the establishing of
ground rules, and demand that
substantive negotiations be
transferred to the foreign min-
ister level or to a heads-of-
government meeting with Chinese
Communist participation. Khru-
shchev hinted on 7 September
that he may call for high-level
negotiations by the United
States, the USSR, Communist
China, and "other countries" on
ways of resolving the crisis
through "common efforts."
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
PART I OF IMMEDIATE INTEREST Page 2 of 7
 Approved For Release 2005/03/15 : CIA-RDP79-00927A001ftb040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
Peiping's ambassador in
Warsaw, Wang Ping-nan, will con-
tinue in the role assigned to
him in 1955 as negotiator for
the Chinese side. A protegd of
Chou En-lai, Wang is considered
one of Peiping.'s top diplomatic
technicians and has been used
for many years as a contact man
with foreigners.
Military Developments
The Communists could con-
centrate about 100 torpedo boats
near the offshore islands within
48 hours. Landing craft have
been collecting in the strait
area which, in conjunction with
the 5,000 or more junks already
present, give the Chinese Com-
munists the capability to quick-
ly assemble sufficient
sea lift for an as-
sault on the offshore
islands.
On 8 September
12 MIG's clashed with
12 'Nationalist F-86F
jets
(Na-
tionalists claim that
five MIG's were shot
down and two were dam-
aged in the resulting
engagement with one
F-86F damaged. Al-
though some F-86's
are now equipped with
Sidewinder air-to-air
missiles, they were
not involved in this
Bombardment of the Kinmen
Islands group was light on 5,
6, and 7 September, but the Com-
munists fired about 50,000 rounds
on 8 September in what they
termed a punitive bombardment;
the firing continued through 11
September but at a reduced level.
Command and supply facilities
and US-escorted Nationalist con-
voys continued to be the prin-
cipal targets for Communist fire.
Nationalist Developments
Many high-level Chinese Na-
tionalists fear'that any renun-
ciation of the use of force in
the Taiwan Strait area by Pei-
ping and Washington would indef-
initely defer a showdown fight
with the Communists which they
have anticipated might grow out
of the offshore islands situation.
!/
J
7 ~AMOY/ LLEH HSII Jw:
EHRTAN
National let held
---~. Selected railroad
25X1
25X1
25X1
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART I OF IMMEDIATE INTEREST Page 3 of 7
 Now,
Approved For Release 2005/03/15 : CIA-RDP79-00927A001b040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
These Nationalists have been
dismayed by the American offer
to resume negotiations with Com-
munist China, and they may try
to take provocative actions,
such as air attacks on Commu-
nist airfields and artillery
positions, in an attempt to ex-
pand the area of conflict to
the mainland.
estimated 30 to 60 days in ma-
jor items. There are no crit-
ical shortages yet, and damage
to Nationalist supply dumps by
artillery fire has been negli-
gible. The Nationalists have
initiated air drops but their
logistical capability is in-
sufficient to resupply the
Kinmens by this means.
Taipei's public line con-
tends that a Communist assault
on the offshore islands is im-
minent. An indication that the
real estimate of the Foreign
Ministry differs has been re-
vealed by the Nationalist mili-
tary attache in Ankara. He told
the American naval attachd there
that the Foreign Ministry had
informed its embassies that Com-
munist intentions regarding the
offshore islands were political
rather than military.
Chinese Nationalist han-
dling of the resupply convoys
to the Kinmens on 7 and 8 Sep-
tember was marked by lack of
coordination and preparedness
at the beaches by the Kinmen
Defense Command. Neither con-
voy unloaded all of its sup-
plies, and an LSM was lost from
the second convoy. No smoke
screen was laid to shield the
landing ships on the beach, and
counterbattery fire suffered
from improper positioning of
Nationalist guns as well as lack
of precise knowledge of the Com-
munist gun positions.
Another major resupply at-
tempt was made on 11 September,
when two convoys were sent from
Taiwan. The first, consisting
of an escort vessel, two tugs,
and three landing ships, suc-
cessfully evacuated wounded, but
the second convoy, which was to
land supplies, was driven off
by artillery fire from the main-
land.
Supplies now available on
the Kinmens are adequate for an
Free-World Reaction
Free-world reaction to re-
cent developments in the Taiwan
Strait situation was predominat-
ly one of relief at the prospect
of negotiations, although there
was no expectation that any
permanent solution would be
achieved. Chou's offer to nego-
tiate was attributed by many
Western observers to US "firm-
ness," but there continues to
be strong opposition to any
American military action to pre-
serve the status quo of the is-
lands. The threatening tone of
Khrushchev's letter to President
Eisenhower was roundly condemned.
The British Government ap-
pears increasingly apprehensive
at the prospect that the United
States intends to defend the off-
shore islands, as most influen-
tial British opinion doubts their
importance to free-world securi-
ty. Opposition leader Gaitskell,
assuming emphatic labor and Lib-
eral opposition to American poli-
cy,believes the government may
have serious trouble in holding
its own supporters.
Comment from other NATO
countries has generally been fa-
vorable, and Greek, Turkish, and
West German officials have ap-
proved the firm line taken by
the United States as necessary
to free-world security.
In line with President
Nasir's accusation of "direct
aggression" by the United States,
the Cairo press continues to
support Peiping's case, holding
Approved For Release 2005/03/1,5 ; Ri79-00927A001900040001-9
PART I OF IMMEDIATE INTEREST Page 4 of 7
 Approved For Release 2005/03/15 : CIA-RDP79-00927A0019'lf040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
the United States responsible
and giving Khrushchev's warn-
ing full play.
Southeast Asian governments
have reacted with moderation
and along expected lines. South
Vietnam and the Philippines have
expressed the hope for continued
American firmness. Burma has
drafted a policy statement de-
ploring the use of force in the
strait as a violation of the
Five Principles, and has pri-
vately indicated that it wel-
comed resistance to further
Chinese Communist expansion.
Indonesia, declaring it was
"not neutral" on the China is-
sue, has reasserted its recog-
nition of Peiping. Cambodian
Prince Sihanouk, without com-
mitting his country, has acted
as a publicist for the Chinese
Communist leaders' statements.
Indian Prime Minister Nehru
on 7 September reiterated sup-
port for Peiping's claim to the
offshore islands, but urged that
the matter be solved peacefully.
Several leading Indian papers
have criticized Peiping's bel-
licosity.
The prospect of resumed
ambassadorial talks was warmly
applauded in Japan, although
Foreign Ministry sources are
pessimistic over-chances of
agreement. The Tokyo press
criticized Khrushchev's letter
to President Eisenhower as "men-
acing, unrealistic, and unhelp-
ful."
UN Representation Issue
Prior to the present crisis
in the Taiwan Strait, a majority
of UN members seemed ready to
keep Taipei in the Chinese seat
at the General Assembly session
opening on 16 September. Recent
events, however, may lead many
members to reassess their pol-
icies in order to bring UN in-
fluence to bear on the situation.
Peiping's previous attempts
to gain China's seat in the UN
have met with little response,
largely because no formula for
the future of Taiwan has been
presented which is sufficiently
attractive to weaken Western
support for Taipei. National-
ist China's seat in the UN has
been upheld for the past six
years by the moratorium device--
which postpones substantive
discussion of the question and
requires only a simple majority
vote. Most UN members, however,
believe Peiping must eventually
be admitted and have supported
the moratoriur largely on grounds
of expediency. Taipei's majori-
ties have decreased each year.
At this session, India for
the third time will ask the
General Assembly to discuss the
issue substantively. An actual
vote on which of the two Chinas
should be seated would require
a two-thirds majority--which
neither Taipei nor Peiping seems
at this point likely to attain.
Such a vote, however, would re-
quire UN members to choose openly
for the first time between the
two governments.
Even if the General Assem-
bly should support Taipei at the
beginning of this session,: it
could reopen the question at
any time. Nationalist China's
UN membership could be seriously
jeopardized by any action by
Taipei to provoke hostilities
involving the United States or
a diplomatic offensive by Peiping,
particularly if in response to
any UN efforts to ensure peace
in the area.
25X1
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
PART I OF IMMEDIATE INTEREST Page 5 of 7
 Approved For Release 2005/03/15 : CIA-RDP79-00927A001"6040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
MIDDLE EAST DEVELOPMENTS
Despite the easing since
4 September of the rebel-en-
forced general strike, most op-
position forces in Lebanon still
stress that the rebellion will
continue until their demands
for political "reform" are met
by the government to be installed
by President-elect Shihab on 24
September. The gradual lifting
of the strike reportedly re-
sulted from Shihab's agreement
to several opposition demands,
possibly including appointment
of Tripoli rebel leader Rashid
Karame as prime minister in
the next cabinet. The opposi-
tion also insists that Shihab
after inauguration take steps
to amend the constitution to
limit presidential powers.
Factional squabbling has
broken out among the rebels,
primarily as a result of unwill-
ingness on the part of the ex-
tremists to cooperate with the
rebel majority in making a ges-
ture which would enable Shihab
to expedite the withdrawal of
American troops.
pro-Chamoun extremists may at-
tempt to prolong the crisis in
order to prevent the withdrawal
of American forces. By the re-
cent formation of the National
Liberal party, Chamoun has
created a personal political
organization with which he hopes
to continue participation in
Lebanese affairs after he leaves
the presidency on 23 September.
25X1
In talks with UN Secretary
General Hammarskjold, Nasir has
in effect indicated he would
not be willing to meet King Hu-
sayn's desire for assurances of
noninterference in Jordan before
Husayn agrees to the withdrawal
of British troops. Cairo has
taken the position that the UN
General Assembly's Middle East
resolution on 21 August was in-
tended essentially to expedite
the withdrawal of foreign troops,
and has warned that severe ten-
sions would reappear if with-
drawals were not speedily ar-
ranged. Jordanian officials
consider that the Hammarskjold
mission has failed, and it is "
likely that Jordan will again 25X1
place its complaint against UAR
interference before the n N
General'-Assembly session.
Arab League
The Moroccan and Tunisian
decision to join the Arab League
gives Nasir another significant
SECRET
25
X1
PART I Approved For Release OF IMMEDIATE INTE9REST 7A0019000400019 ge 6 of 7
 Approved For Release 2005/03/15 : CIA-RDP79-00927AO019MO40001-9
SECRET '
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
victory. Membership in the
Egyptian-dominated league will
now include all independent Arab
states-including those which
in the past have opposed him.
The UAR President appears in-
creasingly to be without public
challenge in the Arab world.
Iraq
The Egyptians are striving
to increase their influence in
the Iraqi armed forces. In-
creased Egyptian influence in
the armed forces would presuma-
bly be exploited to strengthen
the position of the faction led
by Deputy Prime Minister Arif
which favors Iraqi membership
in the UAR. Those Iraqis led
by Prime Minister Qasim who fa-
vor a more independent associa-
tion with the UAR would proba-
bly eventually seek a direct
arms deal with the Soviet bloc.
Meanwhile, dissatisfaction among
some army officers with the pro-
gram of the Iraqi revolutionary
regime has given rise to reports
of plotting to organize a coun-
tercoup. The regime is also
beset by increasing unemployment
and labor unrest.
Israel
An Israeli Foreign Ministry
spokesman has informed the Amer-
ican Embassy in Tel Aviv that
there has been a steady increase
in Egyptian reconnaissance and
sabotage by both regular forces
and terrorists in Israel since
the Iraqi coup in mid-July. In
publicizing the new Egyptian 25X1
infiltration, Israel may be
building a case to support its
requests for arms aid
UAR relations with the
Sudan are still strained as a
result of the controversy over
the Nile waters. Nasir re-
portedly stated he intends to
go ahead with plans for the
high dam at Aswan, for which
he said he might ask Western
assistance, and will not con-
sult the Sudan. He feels uni-
lateral action is justified
as a result of what he considers
the recent Sudanese abrogation
of the Nile waters agreement
of 1929. The Sudan maintains
it is not bound by an agree-
ment on d.ivision~ of the wa-
ters signed before its in-
dependence; in July it began
diversion of some of the flow
for use in a local irrigation
project.
25X1
SECRET
PART I Approved For Releast 00IMME ,AC~# INTE9R 9 7A00190004000P9ge 7 of 7
 Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11'September 1958
NOTES AND COMMENTS
USSR SCHEDULES 21ST PARTY CONGRESS FOR JANUARY
The Soviet party central
committee decided in a plenary
session on 5 September to con-
vene an "extraordinary" 21st
party congress on 27 January.
The only item on the agenda,
discussion led by Khrushchev
on the goals for the economy
under the Seven-Year Plan (1959-
65), will be based on a set of
"theses" to be published prior
to the congress. Although long
provided for in the party stat-
utes, an "extraordinary" con-
gress is unique in Soviet histo-
ry. The forthcoming session
has probably been designated
as "extraordinary" because it
has been called to discuss one
special topic instead of an ar-
ray of problems facing the par-
ty. According to the statutes,
an ordinary congress would have
been convened not later than
February 1960.
The only other business an-
nounced by the one-day plenum
was the removal of former
Premier Bulganin from the
presidium.
The party congress will
not necessarily be limited to
its agenda. It may change the
membership of the central com-
mittee, which in turn may affect
the composition of the party
presidium and secretariat in
such a way as to further Khru-
shchev's political dominance.
Besides the failure to pub-
lish the plan before now, there
are other suggestions of high-
level conflict over the growth
capabilities of the USSR. This
might explain the decision to
issue more flexible and tenta-
tive "theses" for public discus-
sion prior to the party congress
rather than the traditional
"draft directives." This possi-
ble conflict may involve the
rate of improvement in living
standards. If the 1955-57 an-
nual rate of increase in total
investment (13 percent) is not
maintained, as seems likely, the
continuation of an annual 10-
percent rate of industrial
growth--which the leadership ap-
pears determined to maintain--
may require that the necessary
additional funds, materials, and
labor for industrial expansion
be diverted from housing and
other consumer-oriented invest-
ment. Khrushchev may bow to
this necessity in order to "catch
up" with the West more quickly.
The "theses" may put forth
new proposals, possibly includ-
ing increased authority over in-
vestment funds for the regional
economic councils, modifications
of prices and pricing systems,
and perhaps additional changes
in agricultural organization.
In any case, one theme of the
congress will be the continuing
high rate of socialist economic
growth compared with that of
capitalism, and particularly
the fast rate "at which the
USSR will be overtaking the
United States" e next
seven years.
SECRET
~C1
25X1
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART II NOTES AND COMMENTS Page 1 of 12
 Approved For Release 2005/03/15 : CIA-RDP79-00927A001906b40001-9
SECRET
CURRENT INTELLIGENCE WEEKLY PUMMARY
11 September 1958
EAST GERMANY CONCERNED OVER REFUGEE FLIGHTS TO WEST
East German officials are
greatly concerned over the mass
refugee flights to West Germany
which have continued despite
severe control measures in East
Germany and East Berlin. The
current exodus--highlighted by
the escape of leading German in-
tellectuals--apparently results
from the relentless implementa-
tion of new hard-line policies
in the cultural and economic
fields and an apparent belief
that no diminution in political
oppression or improvement in
living standards is in the off-
ing.
Some 4,300 refugees reached
West Berlin during the week end-
ing 2 September--a seasonal
peak--while in approximately the
same period more than 1,800 fled
over the interzonal border to
REFUGEES REPORTING TO
WEST BERLIN AND WEST GERMANY
West Germany. This brings the
total number of escapees to more
than 140,000 during the first
eight months of 1958; more than
two million persons have fled
East Germany since mid-1949. The
total number of refugees since
1 January falls below the 1957
figure of 166,000 for the cor-
responding period but includes
a much higher proportion of es-
sential "brainworkers"--doctors,
scientists, technicians, and
teachers--many of whom are re-
ported to be party members.
Moreover, this total includes
more-'than 10,000 males of mili-
tary age--the equivalent of one
line division.
As East German authorities
have intensified security meas-
ures along the interzonal border
between East and West Germany,
a much larger proportion of es-
capees have fled through West
Berlin than in past years. In
August almost 65 percent came
into this city, whereas until
this summer approximately 50
percent crossed the interzonal
frontier.
The East German Government
believes it cannot permit the
country "to bleed to death through'
the refugee flow," but East Ger-
man officials appear to be in a
quandary over what measures to adopt.
Party boss Walter Ulbricht re-
portedly favors taking even
harsher steps to cut down on
travel between East and West Ber-
lin and is said to have discussed
the matter with Khrushchev, who
allegedly was unwilling to go
along with his proposals.
American officials in Berlin
believe still more rigorous con-
trol measures may be taken by
Pankow to halt travel between
East Germany and Berlin. East
German authorities have already
imposed a ban on rail travel to
stations within 31 miles of the
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART II NOTES AND COMMENTS Page 2 of 12
 Approved For Rele se 2005/03/15: CIA-RDP79-00927A001%0040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
city, and travelers
reportedly must now
secure permission of
local police to go
to Berlin.
Some East German
party circles may be-
lieve that allowing
potential dissidents
to escape to the West
provides a safety
valve which may pre-
vent a recurrence of
such explosions as
the 17 June 1953 up-
rising. Nonetheless,
the Council of Minis-
ters is reported to
have been considering
a modification of
present hard-line pol-
icies concerning pri-
vate industry, appar-
ently with a view to
removing some of the
causes for refugee
flights.
All West German political
parties have seized the refugee
issue as evidence of continued
political oppression in East
EMIGRATION FROM THE SOVIET ZONE
AND THE SOVIET SECTOR OF BERLIN
LEAKAGE OF BRAINS
- - FROM DIE WELT, 20 AUGUST 1958
Berlin
and
East Germany for the
purpose
of
directing world opin-
ion to
the
"German question."
Leaders
of
the major parties
are considering sponsoring a
resolution on this subject when
JAN FLU MAK AVK MAT JUN JUL AUu
1957
JAN FEB MAR APR MAY JUN JUL AUG
1958
SECRET
PART Iproved For Release 2( ~f15AA927A001900040001-$age 3 of 12
 Approved For Release 2005/03/15: CIA-RDP79-00927A0019N40001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
the Bundestag reconvenes on 1
October for its traditional
opening session in West Berlin.
Such a resolution would empha-
size the injustice that forces
the refugees to leave their
homes. A part of the West Ger-
man press has demanded that Bonn
bring the issue to the United
Nations. Christian Democratic
officials, however, feel it is
important not to promote fur-
ther unrest in the Soviet Zone.
The continuing heavy in-
flux of refugees into West Ber-
lin has strained reception fa
cilities, and some West German
states have become reluctant to
accept their refugee quotas.
In response to appeals from West
Berlin authorities, Bonn has 25X1
ordered evacuation flights of
refugee
The sudden sharp drop in
the number of refugees entering
West Berlin in the week ending
9 September--3,128, a decrease
of 1,204 from the preceding
week--may have been due in part
to the spreading in East Ger
many of sews of: crowded con-
ditions in'West Berlin recep-
tion centers. 25X1
A campaign is under way
in Czechoslovakia to popularize
wage reform measures and work
norm revisions which will af-
fect approximately two million
industrial workers. The regime
hopes to lower costs and 'in-
crease industrial output by
raising labor productivity pro-
portionately more than wages
and by redistributing wage funds
among workers. The reform, to
be fully in effect by 1960, is
closely, allied to the reorgani-
zation of industry and planning
now under way. While the regime
plans to institute reforms
cautiously, any rise in work
norms is bound to antagonize
labor and could hamper the re-
gime's program for continued
economic expansion.
Czechoslovakia will suffer
a declining rate of growth for
industrial production unless
extraordinary measures are taken
to increase labor productivity.
Czech wage funds have advanced
faster than labor productivity
in recent years, but the regime
now plans to reverse this ratio
by cutting into the worker's
share of the growing gross
national product and diverting
these funds to capital invest-
ment. Because of the relatively
few additions to the labor
force, the regime has for some
time drawn on marginal labor--
for example, women and pen-
sioners, who have relatively
high absentee rates--but such
labor raises production costs.
During the past year, as
part of a scheme for reorganiz-
ing industry, administrative
personnel have been dismissed
in large numbers and salary
schedules for such personnel as
were retained, as well as for
technicians and engineers, have
been revised: basic payments
were raised and bonuses dras-
tically curtailed. The average
take-home pay is now roughly,
the same as previously, but the
total number of workers is few-
er, with a resultant lower total
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART II NOTES AND COMMENTS Page 4 of 12
 Approved For Release 2005/03/15 : CIA-RDP79-00927A00110040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
salary bill to the regime. It
was hoped that discharged per-
sonnel could be channeled into
production jobs where they were
needed, but in this the regime
admits only limited success to
date.
The wage reform for indus-
trial workers, originally to be
experimentally introduced in
selected enterprises next month
but apparently already under
way, will similarly raise basic
payments but reduce bonuses..
from about 50 to 15 percent of
take-home pay without lowering
average wages, according to the
regime.
An accompanying comprehen-
sive change in the system of
job classifications and work
norms will, however, lower take-
home pay for some workers while
it raises that of others, be-
cause present wage schedules
are "out of date" and the in-
dividual workers are often com-
pensated far above the value
of work performed. In addition,
the reform will re-evaluate
wage schedules according to the
branch of industry in order to
ensure greater compensation for
workers in "priority" industries
such as mining and metallurgy.
Even though the absolute
wages of most Czech workers are
not lowered, as the regime c
claims, workers will in the long
run be working more for the same
amount of money under the system
of higher work norms, and this
gradual speed-up will become in-
creasingly apparent to the work-
ers. Reportedly, passive re-
sistance has already occurred
in one factory in Pilzen, where
elements of the wage reform were
introduced and where reassigned
administrative personnel were
obliged to work for wages con-
siderably below their previous
salaries.
The combination of an un-
popular increase in norms and
a knot of disgruntled former
white-collar workers in the
factories poses a threat to re-
25X1
gime hopes of increasing ro-
duction by there r f orms.
25X1
CAMBODIA
Premier Sihanouk seems
likely to become even more un-
compromising than in the past
in handling Cambodia's border
and other disputes with neigh-
boring South Vietnam and Thai-
land. Sihanouk is en route to
New York for the regular session
of the United Nations General
Assembly, where he may try to
portray "small, neutral" Cambo-
dia as the aggrieved victim of
the "militant" Vietnamese and
Thais. Phnom Penh's ignoring
of an offer by Saigon to re-
move the controversial boundary
marker erected by Vietnamese
troops last June inside the old
Cambodian frontier indicates
Sihanouk is unwilling to dispose
readily of this handy symbol of
Vietnamese "expansionism."
Student demonstrations be-
fore the Cambodian Embassy in
Bangkok following the breakdown
on 4 September of Thai-Cambodian
negotiations attest to Thailand's
hardening attitude toward Cambo-
dia.since. Phnom Penh's recogni-
tion of Peiping last July. The
Diem government in Saigon has
long been convinced that attempts
to reach an understanding with
Sihanouk are useless. Its offer
to remove the boundary marker
and to fix the common frontier
by a joint survey was intended
SECRET
PART Approved For Release 2005/0
NOTES 5AND COMMENTS 27A001900040001-9Page 5 of 12
 Approved For Release 2005/03/15 : CIA-RDP79-00927A0019'0040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
essentially to deflate any Cam-
bodian charges at the United
Nations of Vietnam's unyielding
attitude.
Despite Sihanouk'.s praise
of the Peiping regime's economic
progress and general policies,
he remains opposed to the spread
of Communist influence within
Cambodia. However, subversive
inroads are already perceptible
as a result of Cambodia's eco-
nomic and political contacts
with the Sino-Soviet bloc. For
example, the Cambodian Informa-
tion Ministry and the local
press have become orientated to
the left, while Communist in-
fluence among the nation's youth
and the influential Overseas
Chinese population is a growing
problem for the government.
There is considerable danger
that Sihanouk may accelerate
this trend by attempting to use
Peiping as a counterweight to
Saigon and Bangkok.
25X1
The relatively moderate
reaction in South Korea to the
Taiwan'.Strait developments con-
trasts with the lively interest
shown in the Indonesian situa-
tion last May, when government-
staged demonstrations called for
"volunteers" to aid the insur-
gents. The present attitude may
in part result from President
Rhee's waning dynamism and grad-
ual withdrawal from day-to-day
politics. The development of a
critical void in the adminis-
tration leadership is further
suggested by the possibility
that Rhee's chief political
lieutenant, Yi Ki-pung, may have
to step down as leader of the
governing Liberal
party because
of poor health.
Yi's political effective-
ness
has been at a low
ebb since
May
and a recent rest
apparently
has
failed to restore
his physi-
cal
and mental vigor.
Should Yi
be forced to withdraw, it might
set the stage for an internal
power struggle which could re-
duce the possibility of an order-
ly and constitutional succession
when Rhee dies.
The lack of leadership
evidenced by the uncoordinated
Liberal party efforts to over-
come Democratic party obstruc-
tionist tactics in the recent
National Assembly session may
have resulted in part from Yi's
poor health. Also, he has not
assumed the added responsibili-
ties necessary to fill the gap
left in the Liberal leadership
last June when a number of his
experienced subordinates were
replaced by less able politicians;
as the result of factional maneu-
vering.
Rhee's numerous purges of
subordinate political leaders in
the past will make it difficult-
to find a qualified successor to
Yi. Most of the possible can-
didates are obviously incompe
tent, or have made themselves
SECRET
PART II Approved For Release W~3/j%C REg0927A001900040001Page 6 of 12
 25X1 Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
 Approved For Release 2005/03/15 : CIA-RDP79-00927A0019Sd040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
persona non grata to Rhee by
displaying minds of their own.
Ambassador Dowling feels the
only obvious alternatives to Yi
are aged incompetents under
whose leadership party organ-
ization would soon deteriorate.
Korean politicians are not
noted for their devotion to
party and, with Yi gone,
many of his followers prob-
ably would seek to make
new political alliances.' His
withdrawal also could tempt
many administration politicians
to use the powers of the
government to suppress the
opposition. F -1 25X1
Tunisia's decision to join
the Arab League, following simi-
lar action by Morocco, was more
an effort to avoid isolation
than a gesture of North African
solidarity. A meeting from 30
August to l September of the
Maghreb Secretariat--composed
of Algerian, Moroccan, and Tuni-
sian political leaders--,indi-
cated only superficial harmony
among North Africans. Morocco
and Tunisia are committed to
support Algerian independence,
but are beset by internal dif-
ficulties and apparently have
given little more than lip serv-
ice to their agreement of last
June to coordinate foreign pol-
icies.
Under strong pressure from
the left wing of the dominant
Istiqlal party, the moderate
Moroccan Government was ap-
parently persuaded during the
recent visit of Iraqi Foreign
Minister Joumard of the advan-
tages of Arab solidarity.
The Moroccan decision to
join the league was made with-
out consulting Tunisia. Presi-
dent Bourguiba is annoyed with
Morocco's action but nonethe-
less considered that Tunisia
could not afford to remain out-
side the league. He seems to
hope Tunisia can exert a moderat-
ing , influence, a possibility
which might be enhanced if Tuni-
sia is elected to the UN Securi-
ty Council. Bourguiba has been
outspokenly anti-Nasir and his
relations with the UAR probably
will not improve materially with
league membership, as he will
continue to combat' Egyptian sub-
version in Tunisia.
The Maghreb Secretariat
meeting in Tunis was apparently
only superficially concerned
with major policy issues. It
seems to.have directed its ef-
forts primarily toward drafting
a final communique denouncing
the French constitutional ref-
erendum and announcing agreement
to collaborate during the forth-
coming UN debate on Algeria. It
made no progress toward forming
a Maghreb Consultative Assembly,
desired by the FLN, and scheduled
another meeting for Rabat on 6
October.
Probably dissatisfied
with the lack of substantive
progress at Tunis, the FLN may
be weighing the possibility of
overriding Moroccan-Tunisian
objections and declaring its
executive committee--reorganized
along governmental lines some
months ago--to be the pro-
visional government of an
Algerian republic. It would
then seek membership in the
Arab League.
SECRET
25X1
PART II Approved For Releasedfl5 /~3/I DC&WN7~ p0927A00190004000~9
age 7 of 12
 Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
SECRET %W
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
EOKA's announcement on 7
September of the termination of
its month-old, self-imposed
"truce" on Cyprus follows a re-
cent increase in clashes between
EOKA and the security forces.
It may presage a resumption of
terrorism on a major scale.
Both Greek and British offi-
cials expect all-out attacks
on the British by 1 October
when Turkey's official repre-
sentative, appointed to advise
Governor Foot as the first step
in implementing the new British
plan for Cyprus, is expected to
arrive in Nicosia. Turkish par-
ticipation in the administra-
tion of the island--even on a
consultative basis--is violent-
ly opposed by Greek-Cypriot
leaders as well as the govern-
ment of Greece as a move toward
partition and violation of the
Treaty of Lausanne.
In addition to stepping :up
its attacks on the British,EOKA
may launch attacks against Turk-
ish Cypriots or make an attempt
on the life of the Turkish rep-
resentative. Attacks against
the Turks would embroil EOKA in
fighting on two fronts, but the
Greek Cypriots might deem them
necessary in order to obtain _
prompt UN intervention to "re-
store peace" on Cyprus. Arch-
bishop Makarios on 28 August
called on the UN to intervene
for that purpose. An attempt
on the life of the Turkish rep-
resentative or new intercommunal
violence on Cyprus would also
lead to a severe crisis in rela-
tions between Greece and Turkey,
Greek Foreign Minister Aver-
off favors breaking diplomatic
relations with Britain and Tur-
key acid possibly withdrawing
from NATO if the British plan
is implemented. Averoff has
been warning for some time that
Greece must make "drastic
changes" in its foreign policy
if the Cyprus issue is not re-
solved along lines acceptable
to Athens, but his views may be
modified by Premier Karamanlis.
Governor Foot recently
visited London for discussions
which concerned in part the pos-
sible return of the exiled
Makarios to Cyprus. Makarios
has previously been forbidden
to return until all violence
ceased on Cyprus for an extended
period of time. A change in
the British attitude toward his
return would be based on the hope
that his presence could be used
to restrain EOKA. Recent state-
ments by Makarios indicate, how-
ever, that he remains ada-
mant in his opposition to the
British plan for Cyprus, and
his return to the island at
this time might not lead' to
an end of violence.
The new French constitu-
tion is virtually assured of ap-
proval in the 28 September ref-
erendum as most political lead-
ers in metropolitan France and
France's overseas possessions
rally to back it. Socialist
leader Guy Mollet's plea for
broad support to thwart any
rightist claim to "an exclusive.
mandate to build a new France"
is expected to swing his party,
which will adopt an official
stand at its 11-14 September
party congress. Most of the
leaders at the Radical party
congress, meeting during the
same period, are also expected
to back De Gaulle.
SECRET
25X1
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART II NOTES AND COMMENTS Page 8 of 12
 Approved For Release 2005/03/15 : CIA-RDP79-00927A00tZP040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
The Popular Republicans
have already voted to back the
constitution, and most right-of-
center leaders, despite reserva-
tions, will do the same. Ex-
treme rightist Poujade and his
Peasant party ally Antier, how-
ever, are opposed. Practically
all of the dozen or so new po-
litical groups support the con-
stitution except Daniel Mayer's
leftist Union of Democratic
Forces and General Chassin's
rightist organization of "Com-
mittees of Public Safety," which
may have ties with Poujade and
Antier.
In view of De Gaulle's
last-minute revisions in the
text of the constitution to rec-
ognize the right of overseas
territories to opt for independ-
ence, it now appears likely that
the territories will vote fa-
vorably. A large favorable ma-
jority seems assured in Algeria
despite De Gaulle's deliberate
vagueness concerning the area's
future, which has disgruntled
many settlers, and despite con-
tinuing FLN efforts to force
Moslem abstention.
The Communists. will provide
the most active opposition, but
minority leaders in both Social-
ist and Radical circles are also
expected to campaign against De
Gaulle. They.argue that the
referendum has become a plebi-
scite on De Gaulle rather than
on the merits of the proposed
constitution, which they con-
sider too authoritarian. Wheth-
er they succeed in rallying a
sizable negative "republican"
vote or not, Pierre Mendes-France,
Christian Pineau, and Daniel
Mayer will probably form the
nucleus for a new political
grouping in the subsequent par-
liamentary elections. They will
try to consolidate the non-Com-
munist left in the hope of de-
veloping a loyal opposition.
On the right, three of the
new political formations, in-
cluding Information Minister
Soustelle's Union for the Res-
toration of France, have com-
bined under the leadership of
the secretary of the Gaull-
ist'. Social Republican party.
They may seek to participate
in the elections scheduled
for November as a reincarna-
tion of. De Gaulle's Rally
of the French People.
ITALIAN GOVERNMENT PROBLEMS
When the Italian Chamber
of Deputies convenes on 16 Sep-
tember, Premier Fanfani's shaky
coalition may be threatened by
a financial scandal which al-
legedly involves members of his
own Christian Democratic party.
Fanfani is depending on foreign
issues to bolster his govern"
ment's prestige, but may have
to seek broader parliamentary
support.
Finance Minister Preti, a
Democratic Socialist, is press-
ing an investigation of "Bankers
Anonymous," a financial group
which has been engaged for eight
years in "administering" huge
sums contributed by small in-
vestors who received from 30
to 100 percent interest on their
investment. The Republican
party--on whose abstention the
government depends for its three-
vote majority--charges through
its newspaper that the treasury
minister, a right-wing Christian
Democrat, and a Catholic Action
leader are also involved.
The Democratic Socialists
and the Republicans seem to be
25X1
Approved For Release 2005/03/1 : I - 'P79-00927A001900040001-9
PART II NOTES AND COMMENTS Page 9 of 12
 Approved For Release 2005/03/15: CIA-RDP79-00927A0Qr,900040001-9
SECRET
CTJRRENT INTELLIGENCE WEEKLY SCARY
11 September 1958
ITALIAN PARLIAMENT
MAY 1958
COMMUNITY MOVEMENT JJ REPUBLICANS (PRI) I RAN DINT LIM
r
/ RADICALS (PR)
246 ELECTED MEMBERS
17 APPOINTED FOR LIFE )
SENATE
253 SEATS
14-POPULAR MONARCHISTS(PMP)
NEO-FASCISTS(MSI)
SOUTH TYROLEANS(SVP)
pushing the issue as a way of
ridding the cabinet of right-
wing Christian Democrats, but
their efforts have weakened
the coalition and may decrease
the possibility of early Repub-
lican participation in the gov-
ernment. The government's
right wing is already unhappy
over Fanfani's proposals for
land and tax reforms and may
be tempted to overthrow him in
the secret vote on the foreign
affairs budget, the first major
item on the legislative agenda.
Fanfani has been striving
to build up his personal prestige
by talks with foreign
government heads, and
he now seems to be
trying to develop a
role for Italy as me-
diator of Middle East- 25X1
ern problems. He hopes
to visit Cairo in late
September, presumably
as a step in his ef-
forts to effect a rec-
onciliation between
Egypt and Israel. In
the meantime he is at-
tempting to placate
the Republicans by
sending one of their
leaders, Randolfo
:Pacciardi, on a fact-
finding mission to
the Middle East on
12 September.
The long-term
prospects for Fan-
fani's government will depend
to a considerable extent on
the outcome of three political
meetings this fall. The Dem-
ocratic Socialist central com-
mittee meeting later in Sep-
tember will discuss the party's
continued participation in the
coalition. The Republican party
congress in October will decide
whether that party is now to
join the government. The Nenni
Socialist congress in November
or December may consider the
question of relations with the
Christian Democratic party.
1 -1
CHILE'S PRESIDENTIAL CHOICE
Prominent industrialist
Jorge Alessandri, winner of
Chile's 4 September presiden-
tial election, has promised to
turn the country away from the
leftist economic policies of
the past 20 years and attack
its long-standing economic
difficulties by a program of
economic austerity and by re-
storing competitive enterprise
with a minimum of state inter-
vention. Since Alessandri
failed to win by a majority,
the Chilean Congress must choose
on 24 October between him and
25X1
SECRET
PART Itpproved For Release 21~I "Q927A001900040001-page 10 of 12
 Approved For Release 2005/03/15 : CIA-RDP79-00927A0 1W00040001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
Socialist candidate Allende, but
his formal election by Congress
is generally taken for granted.
Senator Alessandri, a 62-
year-old civil engineer and son
of one of Chile's best known
His first step is lik
presidents, is a former minister I
to be a request for.
of finance with a..long record as
in. consolidating Chile'
a champion of economic liberal
ism and anti-Commu
nism. He will prob-
ably make '.little CHILEAN PRESIDENTIAL ELECTION RESULTS
change in President
50%
Ibanez' foreign pol-
( OVER 50% REQUIRED FOR ELECTION)
assuring him an operating ma-
j orit3r. there . In addition, the
returns in certain working-class
districts indicate that a large
sector of Chile's normally Marx-
ist: labor voted for Alessandri.
Alessandri faces serious
economic problems, which stem
mainly from the steady three-
year decline in the price of
copper--source of 65 percent of
Chile's foreign exchange and
much of its government revenue.
The newly released figures for
the 1959 budget, projecting a
level of expenditure obviously
inadequate for the country's
needs, represent a frank ad-
mission of the inability of the
government to finance a major
portion of its total require-
ments.
Despite his own preference
for free enterprise and economic
self-help, Alessandri will prob-
. .
ably have to ':ask for US aid
ely
help'
s
TOTAL VOTE 1, 247,000
25X1
JORGE
SALVADOR
EDUARDO
191,000
LUIS
1%
20,000
ALESSANDRI
ALLENDE
FREI
BOSSAY
41,000
INDEPENDENT SOCIALIST CHRISTIAN RADICAL ANTONIO
EMOCRAT ZAMORANO
VOID
D
INDEPENDENT 11 SEPTEMBER 1958
The election re-
sults give promise
of greater political stability
than any Chilean Government has
enjoyed for some time. He seems
likely to get the Radical parr,.
ty's support in Congress, thus
short-term debt abroad, which 25X1
is now estimated at $150,-
000,000,
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
PART II NOTES AND COMMENTS Page 11 of 12
 Approved For Release 2005/03/15 : CIA-RDP79-00927AOW00040001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
THE ABORTIVE MILITARY COUP IN VENEZUELA
The failure of a military
coup attempt in Venezuela on 7
September demonstrates the ef-
fectiveness of civilian strength
as a check against a return to
military rule and continuing
support by most of the divided
armed forces for junta presi-
dent Larrazabal. A general
strike of 8 September, in which
the Communists were particular-
ly active, ended when the junta
acceded to demands that the
coup leaders be punished. Nei-
ther the civilian nor the mili-
tary elements appear satisfied
with the junta's handling of
the situation. The armed forces
may still face a showdown with
civilian elements over control
of the government, perhaps even
before the scheduled November
elections.
The abortive revolt was
quickly suppressed, but fight-
ing between civilians and the
military rebels resulted in
several casualties in Caracas.
The action was led by officers
allegedly involved with former
Defense Minister Castro Leon,
who was reportedly planning a
coup at the time of his ouster
from the cabinet on 23 July.
The attempt climaxed a period
of tension over the recent re-
assignment of the chief of the
Combined Staff, a close asso-
ciate of Castro.
The elaborate civilian or-
ganization, which called the
strike on 8, September, has been
developed since the ouster of
dictator Perez last January
primarily to guard against the
continuing threat of a military
coup and to ensure the restora-
tion of constitutional govern-
ment. It includes political,
student, and labor groups, some
of which are armed and most of
which can be mobilized rapidly
for a general strike or similar
display of force. The respon-
sible leaders in this civilian
structure, however, may not in
the future be able to exercise
control over the radical ele-
ments, which could convert the
organization into an instru-
ment of violence.
The armed forces, divided
among themselves, have been re-
luctant to use force against
civilians to bolster their wan-
ing political power, because
such action would probably lead
to widespread unrest or possi-
bly civil war. The military may
still unite for a showdown if
it feels its role in government
is further endangered -or 'if' the
junta becomes a captive of peri-
odic mob action.
Moreover, in the present
atmosphere :charged with tension
and rumor, armed civilian groups
might provoke serious incidents
with the military, which is be-
coming a symbol of reaction in
the public mind. Meanwhile,
any breakdown in the political
unity program, endorsed by all
parties but now under consider-
able strain, is likely to en-
courage continued military
plotting.
SECRET
25X1
25X1
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART II NOTES AI 'b COMMENTS Page 12 of 12
 Approved For Release 2005/O BIETDP79-00927AO0190d040001-9
CURRENT INTELLIGENCE WEEKLY SUMAI RY
11 September.. 1958
'PATTERNS AND PERSPECTIVES
BLOC ECONOMIC ACTIVITY IN INDONESIA
The Sino-Soviet bloc has
extended liberal assistance to
Indonesia this year, particular-
ly a Soviet $100,000,000 eco-
nomic credit, a Chinese Commu-
nist $40,000,000.loan, and an
arms deal possibly amounting
to as much as $200,000,000. The
aid is in the form of essential
items, such as rice, textiles,
ships, and industrial machinery,
and also provides ' for .tech-
nicians, including military
specialists. Bloc trade pro-
motion activities, reinforced
with liberal credit offers,
probably will result
in an increase in
bloc-Indonesian trade
in 1958 to above the
1955 peak of $74,
000,000.
Economic Aid
The Soviet $100,-
000,000 economic
loan, offered first
in 1956, was not ac-
cepted until early
this year. In March
and April, ten So-
viet cargo vessels
costing about $11,-
500,000 were pur-
chased under the
loan and, subsequent-
ly, two tankers cost-
ing about $3,300,000.
Other Soviet commit-
ments under the cred-
it include a foreign
exchange loan of
$25,000,000, textiles
worth $600,000, and
possibly the sale of some fish-
ing trawlers estimated at about
$12,600,000. A highway which
has been surveyed by Soviet
technicians may be constructed
in Borneo at an estimated cost
of $8,000,000 for the machinery
alone.
In addition to the $100,-
000,000 loan, the USSR has of-
fered to carry out a mineral
and uranium survey for Indonesia
and to exploit any deposits
found. It has also offered to
cooperate with Djakarta on a
research program for developing
peaceful uses for atomic energy
and to aid the country's ed-
ucational system with $10,000,-
000 worth of projects. .Indo-.
nesia. is said to ::have .disc- .
cussed -recently .. the. , pur-
chase of $15,000,000 worth
of barges and dredging equip-
ment from'.the USSR : and.,
Poland.
Aside,.from these offers of
assistance to the Indonesian
Government, Moscow has offered
to extend unlimited credit with
easy repayment terms to private
organizations. As a-result,
a $2,500,000 glass factory is
under construction near Djakarta
and another firm has signed a
contract for the delivery
of $800,000 worth of electrical
equipment.
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 1 of 16
 Approved For Release 2005/0311$ 9c'4 DP79-00927A0019 ,0040001-9
- J
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
Of the $40,000,000 econom-
ic aid offer from Communist
China, $11,200,000 is being
used to import 20,000 tons of
rice and 74,000,000 yards of
textiles. The proceeds from
the sale of these goods are'to
be used for meeting local con-
struction costs incurred in the
building of textile factories.
The purchase of factory equip-
ment is to be financed under
the remainder of the Chinese
credit. Peiping, in addition,
has offered to purchase oil
from the North Sumatran fields,
The European satellites
also are contributing to the
bloc's economic program in In-
donesia. Poland contracted in
June to deliver to Indonesia
during the next three years 24
ships worth an estimated $39,-
000,000, under a liberal 13-
year credit with a 2-percent
down payment. East Germany
completed in June a $7,900,000
sugar refinery at Jogjakarta,
which, because of several break-
downs, is not expected to be
in operation until 1959. Other
East German offers of credit
in the fields of mining, road
building, shipping, and commer-
cial air lines have been made.
Czechoslovakia is probably
the most active of the European
satellites in efforts to develop
a wide, variety of economic
contacts in Indonesia. It has
completed construction of a
small enamelware factory in
Djakarta and'is-financing under
a five-year credit the Brantas
irrigation canal project now
under construction in east-cen-
tral Java. A $1,500,000 rubber-
tire factory in Djakarta built
by Czech engineers is scheduled
to open soon. A $4,900,000 con-
tract for equipment to generate
hydroelectric power was signed
in April 1958 and additional
contracts are expected to fol-
low shortly. In addition to
these projects, Prague has ex-
tended several other offers, in-
cluding construction of a $25,-
000,000 thermopower plant, a
$6,000,000-power plant, and a
$4,500,000 tractor deal.
The Communist bloc con-
cluded arms deals with Indonesia
early this year amounting to at
least $100,000,000 and possibly
as much as $200,000,000. The
Indonesian Government has stated
that its arms mission was given
the authority to purchase up to
$250,000,000 worth of arms--
$50,000,000 for the army and
$100,000,000 each for the air
force and the navy.
The army group apparently
purchased about $20,000,000
worth of hardware in Poland
and Czechoslovakia. In 1957
the army and air force together
purchased 4,000 jeeps from the
USSR at a cost of over $7,000,-
000.
The air force contingent
met its requirements within the
bloc--allegedly in Czechoslovakia
--purchasing aircraft and sup-
plementary equipment worth
about $63,000,000--about 35 MIG-
17 jet fighters, 20 to 30 IL-28 25X1
jet bombers, 20 IL-14 transports,25X1
20 MIG-15 jet trainers, and
possibly some helicopters. I
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 2 of 16
 Approved For Release 2005/03/5 P79-00927AO019 00 040001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
about 130 are military~ special-
ists# and personnel will prob-
ably be continually arriving in
the country. The bloc, in ad-
dition, is providing facilities
for at least 50 Indonesian mili-
tary personnel now training in 25X1
Poland,
Technical Assistance
Concurrent with its mili-
tary and economic aid programs,
25X1
the bloc also is providing tech-
nicians to work on economic de-
velopmental projects as well
as military specialists to
assist in the assembly and
maintenance of the arms being
delivered to Indonesia. About
400 bloc personnel are now en- Bloc trade promotion
gaged in Indonesia, of whom activities in Indonesia are
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 3 of 16
 Approved For Release 2005/03MCR1EIFDP79-00927A00 90 040001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
being effectively reinforced
with offers of liberal credit
to both government and private
organizations. Bloc trade was
small in 1957, however, amount-
ing to only $68,000,000, about
4 percent of Indonesia's total
foreign trade. Communist China's
share of the bloc's trade with
Indonesia rose to about 78 per-
cent last year. Trade with the
USSR in 1957 was only about 1
percent of total bloc trade,
but this trade has increased
this year.
Trade agreements are being
renegotiated with some of the
European satellites. One was
signed with Czechoslovakia
in May and another was con-
cluded with Poland in August.
Delegations from Communist
China and North Korea are
now in Indonesia to devel-
op trade with Djakarta.
North Vietnam recently pur-
chased at least $500,000 worth
of Indonesian rubber for
transshipment to Eastern
Europe. It is probable that
bloc trade with Indonesia
in 1958 will rise above-
the previous $74,000,000 peak
recorded in 1955. 25X1
25X1
ISRAEL AND THE MIDDLE EASTERN CRISES
Israel has reacted to the
Middle East's latest crises
with intensive diplomatic ac-
tivity involving conferences
between Foreign Minister Golda
Moir and French, British, and
Italian government leaders.
This busy diplomacy reflects
increased Israeli anxiety over
the effect of events in Iraq,
Lebanon, and Jordan on Israel's
isolated position amid hostile
Arab neighbors.
The Israelis apparently
feel recent events have hastened
an Arab-Israeli showdown. A
settlement with UAR President
Nasir seems as remote as ever,
and the Israelis very likely as-
sume that radical Arab nation-
alism, as symbolized and led
by him, by its very nature must
eventually attempt an all-out
assault on Israel. The prospect
that such an assault would be
better coordinated than in 1948,
in addition to being waged with
modern Soviet weapons, emphasizes
the seriousness of Israel's
problem. The travels of Mrs.
Meir and Ben-Gurion have aimed
at meeting this longer range
contingency. They have sought
essentially .:late-model `arms-
ments and a guarantee of Israel's
territorial integrity.
Results of Israeli Diplomacy
In Paris, Mrs. Meir hoped
to reconfirm close French-
Israeli ties with the De Gaulle
government and effect a possible
alliance. Premier de Gaulle,
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 4 of 16
 Approved For Release 2005/039PX?f!DP79-00927A00' 00040001-9
VW
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
however, reportedly
wishes to de-empha-
size the relationship
between the two coun-
tries in order to
facilitate his policy
of seeking :a rap.
prochement with the
Arab states. The
possibility of a for-
mal French-Israeli
alliance therefore
probably is remote,
but Israel may be
able to obtain addi-
tional Vautour twin-
jet aircraft from
France.
Despite De
Gaulle's reticence
on political rela-
tions, a close rela-
tionship between the
armed forces of the two coun-
tries very likely still exists.
On 4 August, the subdirector
for Levant affairs in the French
Foreign Ministry, while telling
an American official that
French-Israeli relations had
become "more reserved and objec-
tive," conceded that strictly
military relations remained ex-
tremely close but that even
working-level officials at the
Foreign Ministry did not know
exactly what form of agreement
existed between the services of
the two countries.
In London, Mrs. Meir ap-
parently received some encourage-
ment. Foreign Secretary Lloyd
assured her his government no
longer intends to suggest any
Israeli territorial sacrifices
as it previously had proposed
in seeking to promote an Arab-
Israeli settlement. Earlier,
a British official stated that
Prime Minister Macmillan had re-
sponded cordially but vaguely
to recent overtures from Ben-
Gurion for a "partnership" ar-
rangement between the two aov-
25X1
25X1
Economic Considerations
There is also an economic
aspect to recent Israeli di-
plomacy. The UAR has imposed
severe restrictions ion the
SECRET
Italian Prime Minister
Fanfani, after his meeting with
Mrs. Meir, spoke of his plans
to promote negotiations between
Israel and the UAR. The Is-
raeli foreign minister may have
encouraged him in order to es-
tablish a possible avenue of
contact with Nasir.
MEDITERRANEAN Tripoli
LEBANON
An arms deal very likely
was part of Mrs. Meir's price.
Britain has agreed to sell Is-
rael military equipment, in-
cluding two submarines, and is
considering supplying 55 tanks.
The Israelis probably see in
Great Britain a power which
might well consider close co-
operation with them as valuable
to the protection of British
interests in the Middle East.
The on-and-off status of Israel's
permission for British over-
flights of its territory en
route to Jordan probkbly was in
part an effort to obtain British
concessions to Israel's needs.
25X1
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 5 of 16
 Approved For Release 2005/05F2R-TDP79-00927A00199OOD040001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
passage of Israeli trade through
the Suez Canal, and the Arab
states as a whole cooperate in
an economic boycott of Israel.
This has prevented the Israelis
from integrating their economy
with that of the Middle East
as a whole and has kept their
ports from.,becoming commercial
centers for the area. Israel
accordingly has been forced to
seek commercial partners abroad.
A particular endeavor has been
made to establish trade rela-
tions with African and Asian
states, an effort to which the
development of Eilat port on
the Gulf of Aqaba and the main-
tenance of ::transit rights
through. the gulf are linked
Israel sees another possi-
ble means of increasing its
earnings by becoming a passage-
way for Middle Eastern oil
bound for Europe. After Nasir
blockaded the Suez Canal in
1956, the Israelis attempted to
obtain Western support for con-
struction of a 32-inch pipeline
across Israel. During the re-
cent crisis, the Israelis again
seized on the apparent threat
to establish oil routes as an
argument for Western sponsorship
of such a pipeline. They
achieved partial success in
late August, when two interna-
tional banking firms reportedly
agreed to lend $15,000,000 to-
ward completion of a 16-inch
line linking Eilat and Haifa.
Iranian oil, which Israel al-
ready-obtains for domestic con-
sumption, probably will be
available for the new pipeline.
Israel hopes European utiliza-
tion of a trans-Israeli oil
route would increase Western
interest in its territorial in-
tegrity.
Israel, with a population
of slightly over 2,000,000, ex-
fists amid an Arab Middle East of
over 55,000,000 inhabitants.
Nevertheless, the Israeli armed
forces probably still could de-
feat the combined Arab forces
in a localized conflict, al-
though their advantage in.train-
ing and leadership is being in-
creasingly countered by the
quality and quantity of the So-
viet-bloc arms and training the
UAR has received. The Israelis
are fearful that as the Arab
forces achieve proficiency in
handling their new weapons,
Israel's advantage will soon be
overtaken.
Moreover, the expansion of
Nasir's influence this summer
contributes to Israel's convic-
tion that it must also obtain
new weapons and equipment. One
of Foreign Minister Meir's prin-
cipal tasks during her European
visit in August was to lay the
groundwork for such procure-
ment. In London, she announced
Israel's opposition to a Mid-
dle Eastern arms embargo on
grounds that it would benefit
only the Arabs, who already have
late-model weapons.
An intensified Arab-Israeli
arms race accordingly has begun.
Shimon Peres, director general
of the Israeli Ministry of De-
fense, has presented Western
countries with a detailed list
of Israel's armament needs.
A settlement of Arab dif-
ferences in accordance-' with
the UN General Assembly resolu-
tion of 21 July would only re-
move deterrents to coordinating
Arab hostility against Israel.
Heretofore, intra-Arab differ-
ences have mitigated the effec-
tiveness of the collective Arab
threat to Israel; Arab disunity
was a considerable factor in
Israel's success in the Arab-
Israeli war of 1948 and per-
mitted the Israelis to engage
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
PART III PATTERNS AND PERSPECTIVES Page 6 of 16
 Approved For Release 2005/0313?P79-00927A0019,~.0040001-9
11 September 1958
Egypt alone in the 1956 Sinai
campaign. The overthrow of the
Nuri Said regime in Iraq,.-how-
ever, eliminated Nasir's prin-
cipal Arab opponent and in-
stalled a government there fav-
orable to him. The increasing
likelihood that his sphere of
influence eventually will also
include Jordan and Lebanon con-
fronts Israel with encirclement
by Arab states responsive to
the leadership of its archenemy.
Jordan remains the key. Its
absorption into Nasir's sphere
of influence could result in the
deployment of UAR troops and So-
viet weapons along Israel's 330-
mile Jordanian border. Should
w
eve pro
ency -
c
Soviet arms.)
The pattern of industrial-
ization followed by Poland,
partly at Soviet dictation,
since the early postwar years
has tended to reduce the sup-
ply of goods it can sell at a
profit on Western markets and
to increase its economic de-
pendence on the bloc. Although
therennhave been important modi-
fications in the order of eco-
nomic priorities since 1955,
the legacy of the Stalinist
period and present party goals
for economic development will
tend to preserve this depend-
ence, at least through the
present Five-Year Plan (1956-
60).
While the West's share in
Polish foreign trade has in-
creased from 30 percent in 1954
to 41 percent in 1957, and while
the Poles are clearly making
strong efforts to diversify
their foreign markets and
sources of supply--both for the
direct economic benefits and
for the bargaining power such
diversification provides in
negotiation with the bloc--the
Polish Government still considers
most of its trade with the bloc
vital to the achievement of its
economic objectives.
The trade agreements nego-
tiated with almost all bloc coun-
tries for the period 1958-60 ap-
pear to stabilize the bloc's
share of Polish foreign trade
at approximately the 1957 level.
Moreover, the decline in West
European demand for certain im-
portant Polish exports--especial-
ly coal and meat--and the exhaus-
tion of most sources of Western
credits to Poland make an ex-
pansion of trade with the West
this occur soon as a result of
a coup in Jordan, the Israelis
have clearly indicated they will
fight. If the Jordanian crisis
instead evolves without violence
in Nasir's favor, Israel will
still face the same ultimate
threat. In such a situation, the
Israelis probably would decide
to take the military initiative
at a time and place of their own
choosing in order to achieve max-
imum advantage. The timing of
any such initiative would depend
on the length of time required
for assimilating the weapons they
obtain from the West and on their
assessment of when the Arabs
i t.1. 25X1
3 l 1 --U 4
fi
i
SECRET
A proved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART IIr PATTERNS AND PERSPECTIVES Page 7 of 16
 Approved For Release 2005/0$ RIBTDP79-00927A00.1, 0040001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
on favorable terms extremely
difficult in the short run.
Soviet attempts to promote
bloc economic integration by
strengthening CEMA might also
hinder such an expansion, al-
though it is too early to judge
CEMA's effectiveness.
Only a small proportion
of Poland's imports of consumer
goods and materials for light
industry--with the exception
of cotton and oilseeds--comes
from the bloc. On the other
hand, the bloc is the predomi-
nant source of imports of liquid
fuels, machinery (equipment
and parts), and most of the
raw materials used in heavy in-
dustry. It is also the major
market for exports of machinery
and equipment, the production
of which is growing rapidly.
The largest single economic
factor tying Poland to the bloc
is the need for a market for
the output of its newly developed
metallurgical and machinery in-
SOVIET BLOC SHARE IN
POLISH FOREIGN TRADE
EXPORTS:
BLOC
AS PERCENT OF POLISH PRODUCTION TOTAL
Machinery and equipment
14
12
7
Hard coal
14
7
0
Coke
18
17
0
Rolled products
17
10
2
zinc
52
42
19
Soda ash and caustic soda
18
13
11
Cement
3
2
2
Cotton fabrics
11
2
0A
Sugar
32
17
17
Meat
7
5
4
IMPORTS:
AS PERCENT OF POLISH CONSUMPTION TOTAL
BLOC USSR
Machinery and equipment
28
22
9
Iron ore
82
57
53
Manganese ore
100
99
73
Chromium ore
100
66
34
Copper
71
35
29
Alumina
100
100
0
Potash
100
100
0
Rubber(incl. synthetic)
100
27
11
Petroleum and products
90
73
46
Cotton
100
58
55
Wool
69
0
0
Grains
12
3
3
SECRET
dustrtes. Only 12
percent of Polish ma-
chinery exports have
gone to the West in
spite of strenuous
efforts to find mar-
kets in underdeveloped
countries and in West-
ern Europe. About
half of Poland's
scheduled exports of
machinery during 1958-
60 are to be purchased
by the Soviet Union,
and recent trade agree-
ments also provide for
increased machinery
exports to other bloc
countries.
A large portion
of Poland's stock of
machinery and equip-
ment is of Soviet de-
sign and uses Soviet
parts, and many in-
vestments have been
planned with the ex-
pectation of bloc
deliveries of ma-
chinery and equipment,
although to a lesser
degree than was the
case before Gomulka's
return to power. Po-
land also exports to
the bloc significant
quantities of its out-
put of coal, coke,
zinc, rolled .prod-
s1ct ..: roili:lig stodgy:,.,
ships,,. machine stools,
calcinated and caus-
tic ,soda,. apd . sim-
ple coal-tar de-
rivatives.
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 8 of 16
 Approved For Release 2005/033 I DP79-00927AO011 0040001-9
..r
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
Soviet Economic Pressures
The closeness of Poland's
economic ties with the bloc
puts the Soviet Union in a
strong position to influence
Polish actions in other spheres.
Soviet economic pressures are
likely to be most effective when
employed in moderation in bar-
gaining on limited issues.
Political concessions could
be exacted, for example, by of-
fering economic aid or better
terms of trade, or by withhold-
ing credits or temporarily slow-
ing the flow of selected raw
materials. There are indica-
tions that the Soviet Union re-
sorts to this tactic at times
now. However, basic concessions
probably could not be exacted
from the Polish Government by
economic dictation, that is, by
repeated small pressures which
at some point would make the
present economic relationship
unfavorable to Poland, or by a
partial or complete embargo on
bloc trade with Poland.
It appears that, if nec-
essary, Poland could adjust its
production structure sufficient-
ly to make practicable a shift
of trade to the West. Such an
adjustment was made by Yugo-
slavia after 1948 and by Poland
after World War I when the new-
ly formed nation had not only
to create a pattern of foreign
trade but also to develop do-
mestic trade almost from scratch.
After World War II, Poland
shifted most of its trade from
the West to the bloc.
Economic sanctions leveled
against Poland by the bloc would
not greatly reduce supplies of
essential consumer goods in the
short run, since Poland is
practically self-sufficient
agriculturally and a large share
of its imports for light in-
dustry comes from outside the
bloc.
Poland nevertheless would
certainly suffer heavy economic
losses from a bloc embargo.
The metallurgical and machinery
industries would be affected
immediately and most severely
for lack of supplies of ferrous
raw materials and machine parts.
Investments would in turn be
greatly reduced, and there would
be severe unemployment in cer-
tain industries. Yet given
the necessary foreign exchange,
Poland could obtain from
the West an adequate quantity
of nearly all goods now imported
from the bloc, and without
delay if the present buyers'
market for most raw materials
persists.
The greatest difficulty
would lie not in obtaining im-
ports, but in shifting exports
from bloc to Western markets
within a reasonably short time
and on a large scale. For
the country's largest export
commodity, coal, the shift
could be made only at sub-
stantially lower prices and
in reduced quantities; for
machinery, the second most
important export at present,
the shift could probably not
be made for many years, if at
all. Without large-scale West-
ern aid, the necessary ad-
justments in production and
trade would be extremely slow
and painful. In the long run,
Poland could profitably ex-
pand its exports to the West
of processed foods, textiles,
fine ceramics, various handi-
craft products, and certain
types of steel, machinery, and
chemicals.
The Soviet Union can exer-
cise considerable influence on
Polish policies through economic
negotiations, but is unlikely
to make extensive use of eco-
nomic sanctions. Such sanctions
would probably accomplish noth-
ing that could not be done by
political means or by the threat
of military action. They would
tend to bring about conditions
inimical to Soviet interests--
a shift in Poland's economic
orientation to the West, and
possibly enhanced popular sup-
port for the Gomulka regime.
SECRET
25X1
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001- 9 of 16
PART III PATTERNS AND PERSPECTIVES age
 Approved For Release 2005/03/SE P79-00927A00119900040001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
Brazil in recent weeks has
curbed imports, cut back this
year's economic development
expenditures, and undertaken a
number of other emergency meas-
ures designed to head off a for-
eign exchange crisis in 1959.
Even if these measures are ful-
ly carried out, the country
will continue for
some years to suffer
severe "financial
stresses and inter-
national payments
difficulties.
The payments
difficulties, al-
though exacerbated
by recent events, de-
rive mainly from the
basic pattern of
Brazil's "foreign
trade. The drive
for industrializa-
tion and an expand-
ing population have
meant a continually
increasing demand for
imported capital.
goods, while Brazil's
ability to pay has
remained dependent on
its traditional agri-
cultural exports.
Development
The postwar de-
velopment of Brazil's
economy has been so
rapid that the indus-
trial sector, which
before the war was
only half as impor-
tant as agriculture,
by 1951 equaled the
agricultural sector's
contribution to the
gross national prod-
uct. Despite this,
however, the coup-,.
try's industry--both
heavy and light--
still caters princi-
pally to domestic de-
mand, and contributes
almost nothing to export earn-
ings. The administration of
President Kubitschek, elected
in 1955 on a platform of "fifty
years of economic progress in
five," had redoubled the past
emphasis on industrialization,
setting goals that will cost
$2.3 billion, of which $1.2
BRAZIL: COMPOSITION OF
FOREIGN TRADE
EXPORTS 1956
COFFEE
71.0
COCOA BEANS & BUTTER- 5.4
PINE WOOD
2.3
IRON ORE
2.4
CANE SUGAR
COTTON
3.2
OTHER
15.7
TOTAL
100.0%
(MILLION DOLLARS)
$1,482
IMPORTS
1956
PETROLEUM & PRODUCTS
22.2
TRANSPORTATION EQUIPMENT
AND PARTS
5
.9
WHEAT AND WHEAT FLOUR-
9.3
NONFERROUS METALS -
4.9
NEWSPRINT
PAPER & PULP
,
4.6
MISCELLANEOUS IRON
MANUFACTURES -
2.5
FERTILIZERS, SODAS &
ANILINE DYES
2
4
.
OTHER -
48.2
TOTAL
10
0.0%
1957
60.7
6.4
4.6
3.4
3.3
3.2
18.4
100.0%
$1,392
1957
17.3
11.4
7.0
4.1
4.0
3.7
1.8
50.7
100.0%
(MILLION DOLLARS) $1,234 $1,489
25X1
SECRET
PART 11p proved For RelePgA q&QRNS3AN1 PERSPECTIVES 001900040001P-age 10 of 16
 Approved For Release 2005/038IE ITDP79-00927A00190O'040001-9
r.+
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
billion will be required in
foreign exchange.
The government is aware of
the varied difficulties empha-
sized by unbalanced economic
development and indeed esti-
mates that Brazil will not meet
the United Nations standard of
per capita income for a "devel-
oped country" before 1980, it
is trying at present to diver-
sify exports, particularly by
encouraging development of the
country's extensive deposits of
WORLD COFFEE PRODUCTION
(IN THOUSAND BAGS)*
Brazil is also vulnerable
to the threat of continuing
world overproduction of coffee.
Although it is still the larg-
est coffee grower, supplying
40 percent of the total, Bra-
zil's share of the world mar-
ket has dwindled steadily over
the past 20 years--principally
as a result of competition from
African coffee. There is lit-
tle prospect of regaining the
lost portion even should the
African producers agree to join
the world coffee-marketing agree-
ment now under dis-
cussion.
1935-36
1946 47
1953 54
1954.55
1955 56
1956 57
1957 58(ES
BRAZIL
25,340
18,704
19,700
18,100
23,500
18,000
23,500
COLOMBIA
4,452
5,840
7,088
6,405
6,800
7,000
7,000
OTHER LATIN
AMERICA
6 , 697
6,980
8,301
9,004
9,096
9,460
9,887
TOTAL LATIN
AMERICA
36,489
31,524
35,089
33,509
39,396
34,460
40,387
AFRICA
2,602
4,385
6,790
7,112
8,749
8,685
8,235
OCEANIA
2,495
1,001
2,117
1,567
2,266
2,572
2,688
TOTAL
41,586
43,996
4Y 188
50,411
4S,717
51,310
WORLD
38,91D
PRODUCTION
*
F]
F
ONE BAG EQUALS 132.276 LBS.
manganese and high-grade iron
ore, but this effort has been
undercut by the decline during
the past year in world demand
for these products.
Coffee and the Economy
Coffee, although account-
ing for only 5 percent of Bra-
zil's GNP, has largely financed
its vast postwar industrial ex-
pansion by providing E60 to 70
percent of the country's for-
eign exchange and an even great-
er percentage of its dollars.
This dependence on a single
commodity has made Brazil es-
pecially vulnerable to the vi-
cissitudes of the world mar-
ket, in which prices have fluc-
tuated from 88 to 45 cents per
pound over the past five years.
Under the terms
of this agreement,
Brazil is to withhold
40 percent of its
marketable crop, com-
pared with 15 percent
for Colombia and 5-
10 percent for other
producers. For the
first six months of
1958, Brazil's coffee
exports were down al-
most 10 percent over
the same period last
year. In addition,
the price of Brazil-
ian coffee had dropped
from 55 to 45 cents
per pound by early
September.
Foreign Exchange Commitments
Despite the serious drop
in coffee prices and sales,
Brazil's trade balance was fa-
vorable in the early months of
1958, and the drain on foreign
exchange appeared primarily the
result of payments on foreign
loans and investment. Such pay-
ments amounted to $170,000,000
in 1957 and are scheduled at
$305,000,000 for 1958--or more
than 20 percent of the country's
total 1957 exchange earnings.
This schedule of repayments con-
tinues to balloon through 1959
and 1960 and will be extremely
heavy even should Brazil succeed
in making arrangements to post-
pone payments on the US private
consortium loan of $200,000,000
that falls due in those years.
SECRET
PART II I Approved For R~XTN 5/( /b5 ~'ERSPECTIVES 7A001900040P 001 g-9
11 of 16
T)
 Approved For Release 2005/03SEC,k'DP79-00927AO0190040001-9
11 September 1958
in early May of this year,
Brazil's dollar holdings had
virtually reached the zero mark
and continued imports were pos-
sible only through emergency
loans from private American
banks. Subsequent loans from
the IMF and the Export-Import
Bank have brought total emer-
gency assistance for
the year to more than
$250,000,000, but
even this may be in-
sufficient to meet
Brazil's needs.
Hope of New Investment
The extent to
which new foreign in-
vestment can be ex-:
pected to remedy the
foreign exchange im- 809083B
balance is question-
able. Although the Kubitschek
regime has actively solicited
foreign investment in all fields
except oil, the vast inflow of
the past decades--which brought
US investment to $1.2 billion--
has begun to taper off and, in
the past five years, profit
remittances have exceeded new
investment by between $100,000,-
000 and $150,000,000 annually.
The most ambitious new invest-
ments are being made by Japan
and Germany. Some large new
US operations may be undertaken
in iron, should the world mar-
ket improve, but such operations
would for the short run bring
mainly equipment from the US
and not dollar funds.
In the longer run, however,
such investment--especially in
the now-taboo field of oil--is
considered one of the key solu-
tions to Brazil's dollar prob-
lem. Oil imports cost Brazil
between $250,000,000 and $270,-
000,000 annually, mostly in
dollars, and comprise about 20
percent of the value of total.
imports. Brazil was reported
"shaken to its roots" by the
news in July that Argentina had
reached agreements with private
oil companies willing to invest
almost $1 billion there--on a
Brazil's national oil mo-
noply, Petrobras, has been wide-
ly praised over government radio
stations in recent weeks for
its success in having doubled
production for the second
straight year. It is now produc-
ing about 20 percent of nation-
al demand, but this is the re-
sult of transportation improve-
ments?and not of new discoveries.
The administration's recent
strong praise for the government
oil monopoly is probably dictated
in part by the approach of the
3 October congressional and
gubernatorial elections. Within
Kubitschek's shaky congression-
al coalition, the leftist Labor
party and the allied' Social
Progressive party are expected
to gain at the expense of his
own Social Democratic party.
Some gains may also be made by
the leading opposition party,
the National. Democratic ! Un-
ion.
A number of the emergency
measures taken to head off a
foreign exchange crisis are
necessarily unpopular. That
reducing. imports 40 percent
is particularly subject to
SECRET
nonconcession basis under con-
tract to the State Oilfields
Administration. Nevertheless,
the Kubitschek government, un-
der renewed pressure from the
army and other vocal nationalist
groups, still appears fearful of
risking -any - compromise with pri-
vate investment in'this field.-
(MILLION DOLLARS)
1 1958 1959 1960 1961 1962
CONVERTIBLE
CURRENCIES
231.9
262.8
323.8
173.2
91.4
CURRENCIES OF
LIMITED CONVERTIBILITY
59.0
56.4
40.1
27.2
13.5
INCONVERTIBLE
CURRENCIES
14.0
9.9
4.8
3.5
1.9
TOTAL
304.9
329.1
368.7
203.9
106.8
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 12 of 16
 Approved For Rel~asr 2005/031'I9`9?-fFDP79-00927A001i906040001-9
bog
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
political attack, since it ap-
pears to have contributed to
the new spurt in domestic in-
flation this year. It is there-
NIGERIA'S PRE-INDEPENDENCE PROBLEMS
African regional leaders
in Nigeria will meet with Brit-
ish representatives at a con-
ference scheduled to begin in
London on 29 September to estab-
lish the date for Nigeria's in-
dependence within the Common-
wealth and to consider the re-
ports of commissions which have
been studying financial and po-
litical problems. They have
unilaterally set April 1960 as
the date, even though the coun-
try still lacks national unity.
Nigeria, the largest unit
in the British colonial empire,
has a population of over 35,-
000,000. Under a 1957 consti-
tutional arrangement with Brit-
ain, there are a central govern-
ment having carefully defined
powers and four regional gov-
ernments with local self-govern-
ment except for such matters
as defense, police, transporta-
tion, and currency. The central
government embraces the office
of the federal prime minister,
who is assisted by a cabinet
which is representative of the
leading party of each region,
and a federal House of Repre-
sentatives. During the past
year, Nigeria and Britain have
reached agreement on Nigeria's
responsibility for its armed
forces, a central bank and cur-
rency, and arrangements to train
Nigerians for the diplomatic
service..
Federal Prime Minister Abu
Bakr Tafawa Balewa believes the
country is in a dangerous mood
because of the widespread na-
tionalist feeling. He feels
London must recognize the 1960
date for Nigeria's independence
even though the political lead-
ers have not been able to rise
above regional religious and
tribal differences. Similarly,
the British governor general be-
lieves Britain must either grant
independence by mid-1960 or move
in troops.
The forthcoming conference
is a follow-up to a meeting in
May-June 1957 at which Nigeria's
future status was discussed.
Commissions were set up to study
problems such as allocation of
revenue between the central gov-
ernment and the regions, control
of the police, and recognition
of the rights of tribal minori-
ties by the creation of new po-
litical subdivisions. At that
time British officials also prom-
ised to give sympathetic consid-
eration to early independence
for Nigeria. Subsequently, how-
ever, the Nigerian leaders uni-
laterally set 2 April 1960 as
the date for independence.
The leaders now are report-
ed dissatisfied with the Minori-
ties Commission's proposal that
no new regions be created, some
federal control be extended over
the minority' -tribal areas;
and annual-'reports be'.sub-
mitted to 'thb federal House of
SECRET
fore questionable whether all
the emergency measures will sur-
25X1
vive the campaign and be fully
carried out.
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 13 of 16
 Approved For Relea a 2005/03/1SEQRR '79-00927A00190,1040001-9
Iftw
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
igeria:
FRENCH WEST AFRICA
Bananas
V Cattle
Cocoa
Cotton
cY Peanuts
Palm produce
Representatives. Each leader
wants to carve up the regional
bailiwick of opposing politi-
cians in order to weaken their
influence and destroy their op-
portunity to achieve the com-
manding national position. In
view of Nigeria's heterogeneous
tribal situation, any national
leader must form a coalition
with his counterpart in another
region. There are constant ru-
mors of political deals but no
firm alignments thus far.
A united Nigeria has no
historic precedent. In 1914,
Britain joined its separate pro-
tectorates of Northern and South-
ern Nigeria into one administra-
tion; since then London has tried
to develop Nigerian unity while
gradually increasing self-govern-
ment. This approach has spurred
regional demands for greater
autonomy, to which London has
? Tin
Oil
Railroads, selected
reluctantly agreed providing
the functioning of colony-wide
enterprises, such as the trans-
portation system, were not ad-
versely affected.
Regional Breakdown
At present there are four
regions--each with its own prime
minister and legislature. The
Northern Region contains over
half of the country's population
but a smaller proportion' of the
wealth. Culturally distinct,
the Northern Region is overwhelm-
ingly Moslem and politically
backward. It is controlled by
emirs who rely heavily on Brit-
ish guidance. During the 19th
century, the emirs and their
armies were a threat to the more
advanced Christians and pagans
of the south. In recent years,
however, the Moslems have feared
that Nigerian independence would
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
PART III PATTERNS AND PERSPECTIVES Page 14 of 16
 Approved For Release'2005/038EOMFTDP79-00927AO01 6040001-9
CURRENT. INTELLIGENCE WEEKLY SUMMARY
11 September 1958
lead to an influx of southern
administrators, clerks, and
technicians. Northern politi-
cians therefore have resisted
the drive toward early independ-
ence. Their leader, the Sardauna
of Sokoto, however, recently
joined the other Nigerian lead-
ers in their demand for inde-
pendence.
Southern Nigeria, divided
into the Eastern and Western
Regions on the basis of distinct
tribal groups, now is the scene
of the bitterest political skir-
mishing. Each region has an am-
bitious, foreign-educated prime
minister who aspires to dominate
a united Nigeria--Obafemi Awolowo
in the west, Nnamdi Azikiwe in
the east. The governing parties
are formed from the dominat trib-
al groups, while the opposi-
tion's strength is drawn from
the minorities.
The political situation in
the Eastern Region--described
by the federal prime minister
as virtually "a shambles"--has
become increasingly unstable.
In June 1958, regional Prime
Minister Azikiwe's control was
seriously challenged by 31 im-
portant members of his party,
and the federal prime minister
and the Western Region's prime
minister are apparently increas-
ing their intervention in the
affairs of the Eastern Region.
If regional opposition to Azikiwe's
questionable methods grows, he
will probably not become an ef-
fective influence on the nation-
al scene.
The Southern Cameroons is
the fourth and smallest region.
Its politicians, however, are
preoccupied with the question
of reunification with the French
trust territory of Cameroun and
do not play a significant role
in Nigeria's political develop-
ments.
Political. disunity in Ni-
geria is:h.virig an adverse effect
on the nation's economy, par-
ticularly on economic develop-
ment. Disagreement over econom-
ic policies and a shortage of
competent personnel have already
forced an extension of the orig-
inal 1955-60 development program
to 1962. These factors have also
restricted the country's rate
of economic growth. Nigeria's
gross-national product has grown
annually by about 5 percent since
1951, but half of this may rep-
resent an inflationary rise in
prices.
The relatively limited for-
eign investment in Nigeria is
largely British, and Britain ac-
counts for about 55 percent of
Nigeria's annual trade of $770,-
000,000. This pattern of heavy
reliance on the sterling area
is not likely to be seriously
changed following independence.
Falling world commodity
prices are having an increasing-
ly adverse effect on the economic
structure. Restrictions on tin
production have caused the lay-
off of about 18,000 miners in
the Northern Region, while fall-
ing rubber prices have destroyed
much of the incentive for the
peasant rubber producers in the
Western Region. A 45-percent
decline this year in the cocoa
crop--the region's economic main-
stay--also damaged the economy,
although prospects for the forth-
coming crop season appear bright-
er.
The Eastern Region may suf-
fer from a reappraisal of its
oil potential now being hinted
at by some Shell - British Pe-
troleum officials. Considerable
development has taken place along
the coast, but the high cost of
transporting oil to ships and
less favorable indications of
oil are dampening earlier opti-
mism.
Despite an estimated $600,-
000,000 in sterling reserves in
London, Nigeria may also experi-
ence balance-of-payments diffi-
culties soon. This is primarily
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
PART III PATTERNS AND PERSPECTIVES Page 15 of 16
 Approved For Rely 2005/03 aC c-TDP79-00927A001 90440001-9
V.Mwf
CURRENT INTELLIGENCE WEEKLY SUMMARY
11 September 1958
the result of larger imports of
heavy capital goods for the eco-
nomic development program. In
1956 and 1957 Nigeria had an
annual trade deficit averaging
about $67,000,000; in the first
quarter of 1958, the trade defi-
cit was $9,500,000,compared with
a surplus of $2,200,000 in the
comparable period of 1957.
25X1
SECRET
Approved For Release 2005/03/15 : CIA-RDP79-00927A001900040001-9
PART III PATTERNS AND PERSPECTIVES Page 16 of 16
 25X1 Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9
 Approved Foelease 2005/03/1E4-0001900040001-9
CONFIDENTIAL
CONFIDENTIAL
x
Approved For Release 2005/03/15 : CIA-RDP79-00927AO01900040001-9