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Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 CQJEJDENTIAL ~SfCREF CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. 50 OCI NO. 4048/58 25 September 1958 Document No. -__--_ --6 N Chang to Class. E] Decl sified ange o? S 25X1 Date: Date: 2O - - BY~ e Class, Changed to: Ts so 25X1 Next Review Date: IQ Auth.: HR 7n.a -- d e 9 n Class. p ^ Declassifi d Document No. ----------- No Chan 1 --------- CENTRAL INTELLIGENCE AGENCY OREJDENTJAL SET , State Department, ARMY review(s) completed. Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. The Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Next Page(s) Next 6 s Page,(s) In Doc Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 u ment Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 OF IMMEDIATE INTEREST The Chinese Nationalists stepped up their air activity over the mainland on 23 and 24 September. Communist jet fight- ers reacting in.large numbers to Nationalist penetrations ap- parently suffered their heaviest losses to date, particularly on 24 September. No Nationalist losses were reported, and some of the Nationalist fighters used Sidewinder air-to-air missiles for the first time with consid- erable success. Nationalist pilots have been increasingly aggressive in inviting and initiating air en- gagements over the mainland, reflecting the mounting danger that the Chinese Nationalists might take more significant unilateral military action against the mainland. Chiang Kai-shek told several high Amer- ican officials on 23 September that the Kinmen resupply prob- lem must be solved within two weeks. This was a modification of a position he took on 12 Sep- tember, when he said that dras- tic steps would have to be taken if the resupply effort did not show marked improvement in five days. Chiang also emphasized on 23 September that if Tatan and Erhtan islands, which he described as being in a perilous state, were attacked, the Na- tionalists would employ all re- sources to meet the attack. situation continues to be the interdiction of the Kinmens. Since American naval forces be- gan on 7 September to escort convoys to the three-mile limit, the resupply deliveries by sea and air have averaged about 100 tons a day. As of 23 September, the Kinmen garrison had on hand sufficient rations and ammuni- tion--the two most important supply categories--to sustain it for slightly more than a month. Increases in the daily tonnage delivered could extend this period. Increased Commu- nist interdiction efforts, to- gether with expected poor weath- er at this time of year, could, however, prevent any extension. Communist Action Chinese Communist military action remained primarily con- centrated on interdicting sup- plies to the Kinmens. Artillery fire is still directed at supply areas and targets of opportunity, with heavier concentrations be- ing laid on resupply convoys. Communist naval units have generally avoided clashes with Nationalist forces. On 21 September, however, the National- ists reported that two subchasers and a patrol escort engaged five Communist craft, probably tor- pedo boats, near the Matsus. One of the Communist craft was reported sunk, another damaged. The Nationalist Government has attempted to increase pres- sures on the United States to increase its commitments to assure the retention of the offshore islands. The most immediate and critical problem in the strait The Communists have taken steps to improve their air defenses. High-altitude bursts near Kinmen suggest that they are now using 100-mm. antiaircraft guns, and radar- aimed searchlights have been observed on Amoy Island. SECRET PART I OF IMMEDIATE INTEREST Page 1 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 A People's Daily editorial on 21 September oar the first time in recent months publicly reflects the Peiping leaders' actual comprehension of Ameri- can nuclear capabili- ty, stating', "We know very well the immense destructive power of atomic weapons." Al- though the editorial repeats Peiping's generalized boast that "people and not weap- ons" are decisive in war, it declares that any American nuclear attack on the main- land would result in an attack on the United States "by the same means." The passage on retaliation is attributed by the editorial to Khru- shchev's 19 Sep- tember letter to President Eisenhower, suggesting that Com- munist China does not possess nuclear weapons of its own. In a slight moderation of Pei- ping's earlier threats against the United States, the same editorial states that 600,000,000 Chinese will only fight "if" the United States should "impose war on us." A 23 September editorial in the Pei- ping Kwang-ming Daily, a lead` ng government newspaper, carries this line even fur- ther. After announc- ing "We will never attack unless at- tacked; if attacked, we will certainly NORTH Han SECRET counterattack," the article adds, "The Chinese people have never intended to fight with the United States." i Chichit ,eYh J `t{arb'~n ~ ~ nka Eiden pyr rt prth", . ~Pngr watow NG KONG PART I OF IMMEDIATF INTEREST Page 2 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 SECRET 25 September 1958 Peiping continues to num- ber its warnings against the "intrusions" of American naval and air forces, making its 12th on 24 September. The Communists are attempting to demonstrate that such actions are frequent and-are the cause of tensions, which will subside only after the numerous armed "provoca- tions" cease rather than after agreement is reached on a cease- fire. There is still no in- dication in these warnings that Peiping considers that American convoying activities warrant direct military counteraction at this time. The Chinese Communists ap- pear increasingly anxious to head off any international de- mands for an immediate cease- fire without significant con- cessions to Peiping. Their propaganda insists that a cease- fire should not be the immedi- ate aim of the talks in Warsaw and calls for the withdrawal of American forces from the Taiwan Strait area. A People's Daily editorial on 22 September afes, "Beyond this, all other talks are pure nonsense." In an ef- fort to stimulate world-wide apprehensions and to prod the United States into political concessions Soviet as well as Chinese commentaries continue to stress the threat of war if negotiations on the present dispute fail. Premier Khrushchev's letter of 19 September to President Eisenhower placed the USSR firm- ly on record as "fully support- ing" Communist China. After repeating his earlier warning of 7 September that "an attack on the Chinese People's Republic... is an attack on the Soviet Union, he alluded to the Sino-Soviet mutual defense treaty and de- clared: "May no one doubt that we shall completely honor our commitments." . Khrushchev called on the United States to withdraw its forces from the area, includ- ing Taiwan, and warned that if such action is not taken, Com- munist China "will have no other recourse but to expel the hos- tile armed forces from its own territory...." The letter--termed by the American Embassy in Moscow as probably the clearest warning the USSR has made in the post- war period that it is willing to engage in direct military action with the United States- gives the impression that Amer- ican accommodation to the Chi- nese Communist position provides the only alternative to major hostilities. The clear restate- ment of Soviet support for Pei- ping is intended to discourage an expansion of American mili- tary activity in support of Na- tionalist forces. Moscow reacted to the re- jection by the United States of Khrushchev's letter with press and radio charges that the action violates "generally accepted" diplomatic practices. Since the start of the Sino- Soviet American ambassadorial SECRET PART I OF IMMEDIATE INTEREST Page 3 of Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 25 September 1958 talks in Warsaw, Soviet prop- agandists have consistently deprecated the possibility of successful results on grounds of American insincerity, claim- ing that this view is substan- tiated by intensification of American military preparations and evacuation of American de- pendents from the Taiwan area. Soviet domestic broadcasts have charged that the United States "has rejected in advance any prospect of a peaceful settle- ment" of the strait issue. SECRET apprehension and scare buying in the USSR, as did the Middle East crisis of last summer. Western diplomats in Moscow are generally in agreement that the 25X1 Soviet leadership does not want 25X1 or expect war to develop from According to the American Embassy in Moscow, the crisis has not given rise to popular MIDDLE EAST DEVELOPMENTS Increased Christian-Moslem tension, the result of a recent wave of kidnapings and the mur- der of a Christian editor in Beirut, has made much more dif- ficult Shihab's task as presi- dent of Lebanon and has in- creased the danger of Moslem- Christian fighting. Shihab's appointment of Tripoli rebel leader Rashid Karame to head a cabinet com- posed of minor political figures with no pro-Chamoun members ap- pears to be a major concession to the rebels and to Nasir. The inclusion of several active op- position supporters and the awarding to Karame of the port- folios of defense and interior are an almost total defeat for the pro-Chamoun faction. The fact that the Damascus press on 23 September predicted the com- position of the present cabinet may give it a "made in Cairo" label and build up pro-Chamoun and Phalangist opposition which will result in efforts to block confirmation by Parliament on 30 September. President Shihab has evaded responsibility for maintenance of the country's internal secu- rity by vesting it in Karame's hands. The attacks by Christian Phalangists on Moslems on 24 September are likely to result in retaliation, and there is danger that the security forces will split along confessional lines. The situation is complicated further by possible Syrian in- tervention. Syrian Interior Minister Sarraj, who is strong- ly anti-Western, reportedly wants to prolong tension in Lebanon in order to prevent stabilization short of com- plete subservience to the UAR. SECRET PART I OF IMMEDIATE INTEREST Page 4 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 s extremist pres- sure is also aimed at moderate opposition leaders and Presi- dent Shihab. About 300 armed men from Syria have reinforced opposition leader Jumblatt southeast of Beirut. Supplies brought by this group include winter clothing for Jumblatt's men. Lebanese army officers fear this move may reflect an intention to intimidate the Shihab government. .Jordan A UN representative is scheduled to arrive in Jordan about 24 September to establish a "watchdog" mission there to report on interference in Jor- dan's internal affairs by neigh- boring Arab states. Nasir as in effect indicated that he will not cooperate with this mission, however, and the gov- ernment-controlled Cairo press has denied that Nasir agreed to establish elements of such a mission in the UAR. Iraq Internal maneuvering for power in Iraq continues as Premier Qasim, supported by a group of older officers and Minister of Guidance Shanshal, as well as by the Communists, strives to further downgrade Vice Premier Arif, who fronts for a group of pro-Nasir junior officers and Baathists. The brigade which Arif commanded prior to the 14 July coup has been sent south from Baghdad for piecemeal employment against the rebels, leaving Qasim's former brigade unchallenged in Baghdad. Despite their factional differences, however, Iraqi army leaders continue to co- operate with the Egyptians in military planning to improve Iraq's defense against foreign intervention. Recently announced plans to centralize in Cairo the plan- ning, coordination, and execu- tion of UAR policies probably presage a move to strengthen Nasir's control over Syrian af- fairs. Even the limited autonomy granted the Syrian region fol- lowing union with Egypt last February allowed too much freedom SECRET PART I OF IMMEDIATF INTEREST Page 5 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 to groups which resented Egyp- tian economic and political domination. Nasir presumably fears the natural attraction of Iraq for Syria and, in curb- ing the activities of Syrian politicians, will seek to pre- vent political cooperation be- between the two areas. Saudi Crown Prince Faysal has taken a noticeably harder line toward American policy in- terests in recent talks with Ambassador Heath. Faysal's frustrations with budgetary problems have led him to charge that the Arabian-American Oil Company (Aramco) is indifferent to Saudi financial difficulties. Faysal, apparently reflecting the influence of his pro-Egyp- tian petroleum adviser, hinted to Ambassador Heath that action to curtail Aramco's rights may be under consideration. SECRET The ambassador also inferred that some recognition of the Soviet bloc is being considered. This would be in line with Fay- sal's intention to have a "neu- tral" foreign policy for Saudi Arabia. Closer Saudi relations with the UAR may be developed at the meeting of the Egyptian- dominated Arab League scheduled for 1 October in Cairo. Kuwait, largest Middle East oil producer, also appears headed toward closer relations with Nasir. The deputy Kuwaiti rul- er, Abdulla Mubarak, declared in Cairo on 24 September that Kuwait was prepared to join the Arab League and contribute to an Arab Development Bank. Such a bank would in effect be a de- 25X1 vice by which Kuwait and Saudi Arabia would contribute to UAR economic development. PART I OF IMMEDIATE INTEREST Page 6 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 NOTES AND COMMENTS CHINESE COMMUNIST MOBILIZATION CAMPAIGN Peiping claims that in less than three weeks the Chi- nese people have been "fully" mobilized, with every eligible person--perhaps as many as 150,- 000,000 of the total 650,000,- 000--"under arms." This mobi- lization, intended to demon- strate popular support for the regime's stand on the Taiwan issue, has stimulated the Chi- nese people's nationalism and has whipped up anti-American feeling, which the regime is channeling into stepped-up pro- duction efforts and support for its program for formation of "people's communes." Peiping on 7 September be- gan its campaign for the "mobi- lization" of the Chinese people against American "aggression" with a call'for the "voluntary" enlistment of all between the ages of 17 and 40 in an "every- one-a-soldier" movement. The press and radio have since played up angry slogans, mot- toes, and statements by indi- viduals, and are proclaiming a popular desire to master mili- tary techniques in the "shortest time possible." Thus a truck driver pledges tb "crush" the American aggressors under the wheels of his vehicle. Sea militia corps, comprising over 100,000 fishermen with their boats, have reportedly been or- ganized to perform patrols, commando raids, and rescue mis- sions. Except in Fukien Province, where the militia may be assist- ing regular army troops in some guard duties, the real signifi- cance of the mobilization cam- paign lies in its propaganda aspect. The Chinese Communist Army is capable of handling most situations which might arise on the mainland and might even be hampered by the presence of amateur militiamen. Further- more, American army officials in Hong Kong doubt that the Chi- nese have sufficient weapons to arm millions of recruits. The mobilization campaign has given great impetus to the formation of "people's communes," in which the militia has both a real and a propaganda func- tion. As originally planned early this spring, the militia was intended as an integral part of the communes, apparently to provide both greater discipline over the peasants and an organ- ized labor pool more responsive to the demands of the commune leaders. This is still believed to be the militia's primary job, despite Peiping's assertions now that it is prepared to play a major role in national defense. The regime will face a severe test in changing the lives of the peasants during the com- mune movement and will need the tighter internal security which a real militia f r rovides. _0~ CHINESE COMMUNIST MOVES AGAINST HONG KONG AND MACAO Peiping is continuing its practice of asserting "Chinese rights'" in Hong Kong. In the past two months the Chinese Communists have intensified their complaints, protesting the expulsion of a Communist middle-school principal for un- lawful political activities, the closing of a Communist-controlled SECRET PART II NOTES AND C(MMFNTS Pave 1 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 ' ~,.,~ JCI.tCC ! Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 school as structurally unsound, and alleged incursions into Communist air space. Peiping is harassing Hong Kong fishermen to force them to join mainland marketing cooperatives. The British note that the colony is being subjected to one of the heaviest propaganda barrages in years. British authorities are rounding up suspected agitators in anticipation of riots between rival Chinese factions on 1 October, the Communist national holiday, or on 10 October, the Nationalist holiday. Hong Kong police probably could cope with any disturbances. Macao also is under mount- ing Chinese Communist pressure, which the Portuguese authorities find difficult to resist. Al- though it rejected a recent Com- munist request for the estab- lishment of diplomatic relations with Peiping and the severance of those with Taipei, Portugal felt compelled to yield to Com- munist pressure to the extent of requesting Taipei to recall its commissioner in Macao at least until after the October holidays. The British foresee serious difficulty in the Chinese Com- munist claim to a 12-mile ter- ritorial waters limit, which London rejected on 13 September. Peiping's claim would place the entire western sea approach to Hong Kong in Chinese Commu- nist waters and would narrow the eastern entrance to a width dangerous for rough weather transit and involving consider- able detours. Some air ap- proaches also would be over Communist waters. HONG KONG J - 3Po ~C: ~'~ ("1 L 3 BOUNDARY OF HONG KONG TERRITORIAL WATER, ~OKOL' LSLANDS 124576 809183 14oo' 114? 151 SECRET PART II NOTES AND COMMENTS Page 2 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 "" SECRET 25 September 1958 Naval incidents on 15 Sep- tember indicated the Chinese intend to support their 12-mile claim. Two Communist vessels nearly ran aground two British motor launches, and another British.ship was signaled by a Communist shore station to "leave Chinese territorial wa- ters." Although the British feel they cannot restrict their patrols without serious damage to their prestige, they never- theless have instructed them to proceed as "unobtrusively as possible" in an attempt to avoid 25X1 an exchange of fire with Com- munist vessels. CHINESE UN REPRESENTATION QUESTION The moratorium on Chinese UN representation was adopted on 23 September with the solid support of the Latin American bloc and most of the Western and Asian nations allied with the United States in defense treaties. The vote shows, how- ever, a loss of support from last year which may be critical for Nationalist China's opposi- tion in the UN. Although Pei- ping's vote rose only from 27 to 28, Taipei for the first time lost the support of Greece, Iceland, and Austria. Remarks during the discussion of the issue also suggest that any Gen- eral Assembly consideration of the Taiwan Strait crisis would bring substantial support for Peiping's attendance as a party to the dispute. Greece and Iceland, which have supported the United States on this question for the last seven years, abstained this year; U N VOTE ON SEAT FOR COMMUNIST CHINA Argentina Australia Belgium Bolivia Brazil Britain Canada Chile Colombia Costa Rica Cuba Dominican Republic Ecuador El Salvador Ethiopia France Guatemala Haiti Honduras Iran Italy Japan Jordan Lebanon Liberia Luxembourg Mlaya Mexico Nationalist China Netherlands New Zealand Nicaragua Pakistan Panama Paraguay Peru Philippines South Africa Spain Thailand Turkey United States Uruguay Venezuela Afghanistan Albania Bulgaria Burma Byelorussia Cambodia Ceylon Czechoslovakia Denmark Finland Ghana Hungary India Indonesia Austria Greece Iceland Israel Laos SECRET Iraq Ireland Morocco Nepal Norway Poland Raman is Soviet Union Sudan Sweden Ukraine United Arab Republic Yemen Yugoslavia ABSTENTIONS - 9 Libya Portugal Saudi Arabia Tanisia PART II NOTES AND COMMENTS Page 3 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 another NATO country, Portugal, consistently abstains because of Macao. Athens' decision to abstain may have resulted large- ly from pressure by Krishna Menon of India. Foreign Minis- ter Averoff has been quoted as saying that "the only delegation and person to whom Greece can turn for assistance on the Cy- prus-question is India and Menon." Iceland's abstention may be partially attributable to a desire to court Arab-Asian and Soviet bloc backing for its plan to ask the General Assembly to endorse the 12-mile terri- torial waters limit. In addi- tion, Iceland may have been in- fluenced by the other Nordic countries, which have long sup- ported Peiping's entry into the UN. Austria's abstention, how- ever, is directly attributable to pressure from the USSR. The chief Austrian delegate told Am- bassador Lodge on 23 September the USSR had urged Austria to take a line more independent of Libya, which supported the moratorium last year for the first time, abstained this year. This turnabout reflects Libya's present policy of abstaining when it cannot agree with the Arab majority, which in this case has been in favor of Pei- ping's entry for years. Cambodia's recent recogni- tion of Peiping and the change of government in Iraq resulted in both of these countries op- posing the moratorium this year. However, Peiping had one less vote this year than it would have had because of the union of Syria and Egypt, which last year had two votes. Cyprus remains tense as the 1 October date for implemen- tation of the British plan for limited communal self-government approaches. Ankara's decision to appoint the Turkish consul general in Nicosia as its first representative to Governor Foot is a conciliatory move which might prevent an immediate out- break of new violence. Actual implementation of the plan could, however, lead to increased sabo- tage, cause the Greek Cypriots to engage in illegal demonstra- tions, and spark attacks by the Greek-Cypriot organization EOKA on British military and civilian eaders. While there is no evi- dence that EOKA intends to at- tack Turkish Cypriots at this time, armed attacks on Turkish- Cypriot police, which would prob- ably occur during large-scale violence, could lead to renewed communal warfare and further em- bitter relations between Greece and Turkey. 25X1 Archbishop Makarios and the Greek Government are intensely opposed to the British plan, re- garding it as a first step to- ward partition. Makarios pro- poses dropping the plan in favor of eventual independence for Cy- prus, with both enosis--union of Greece with Cyprus--and par- tition precluded. The Makarios proposals were immediately at- tacked as "too conciliatory" by the intransigent wing of the Cyp- riot ethnarchy. Meanwhile, Ma- karios and Greek church leaders in Athens are applying pressure on the Karamanlis government to SECRET PART TT NOTES AND COMMENTS Page 4 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 5EUXET Now 25 September 1958 force it to abandon Greek ties with NATO if the British pro- ceed with their plan. Karamanlis says he has only two alternatives if the plan is implemented without modifica- tions--to resign or to withdraw Greece from NATO. It is unlike- ly, however, that Karamanlis would- resign, in view of the recently increased Communist vote in Greece and the danger that his resignation could lead either to further leftist gains or to a rightist dictatorship. On the other hand, Greece might progressively dissociate itself from NATO--while not actually withdrawing. It might also re- call its ambassadors from London and Ankara. NATO Secretary General Spaak and prominent members of the British Labor party are cautioning London to postpone implementation of its plan, in view of the anticipated effect in Cyprus and on NATO. Foreign Office spokesmen, however, in- sist that the version of their plan announced on 15 August will be implemented. In an effort to calm the Greeks, however, London may announce before 1 October an end to its ban on the return of Makarios to Cy- prus. The proclamation by the Algerian National Liberation Front (FLN) on 19 September of a provisional regime was timed to offset the anticipated af- firmative Algerian vote on the French constitutional referen- dum and to gain support of Al- gerian Moslems for the FLN's boycott of the vote to be held in Algeria from 26 through 28 September. Rebel spokesmen claim that "political workers" and the Army of Liberation in- side Algeria demanded the gov- ernment's formation to produce a psychological impact before the referendum. Continuing ter- rorist and guerrilla activities are also designed to disrupt the voting. Nevertheless, the French Army will make a maximum effort to get Moslems to the polls and ensure a large af- firmative vote. The new government is headed by moderate nationalist Ferhat Abbas, who joined the FLN in April 1956 and is.con- sidered to be a figurehead. The 16-member cabinet is almost evenly balanced between moder- ates and extremists and between politicians and military fig- ures. Although FLN spokesmen deny that a decision has been made regarding the seat of gov- ernment, they do not rule out ,Cairo as a possibility. The FLN claims it is deal- ing cautiously with the United Arab Republic and says the Al- gerian regime will not allow it- self to come under the influence SECRET PART II NOTES AND COMMENTS Page 5 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 5ECRET 25 September 1958 of any government. ly arranged It apparent- France has warned that recognition of the Algerian regime would be considered an "extraordinarily unfriendly act," but a Foreign Ministry spokesman assured American of- ficials there is "no question" of recalling French ambas- sadors from Tunis or Rabat. Paris, he said, would make every effort to ensure that Moroccan and Tunisian rec- ognition would not result in such embarrassing "practical consequences" as an exchange of ambassadors or "official" acknowledgment of clandestine aid to the rebels. Ifor Iraqi recognition to precede that of the UAR. Moreover, the Iraqi press reveals that Iraq has granted $280,000 to the new gov- ernment for victims of "French brutality." Tunisia, Morocco, and all members of the Arab League except Lebanon have recognized the regime, while Communist China on 22'Septem- ber became the first non-Arab state to do so. An FLN lead- er has denied that the rebels desire to embarrass the United States on the question of rec- ognition, but recognition has been formally requested. A trial of strength be- tween Premier de Gaulle and the military and rightist ele- ments demanding integration of Algeria with France may arise when he visits Algeria immedi- ately after the constitutional referendum on 28 September. His recently publicized pref- erence for a compromise solu- tion may stem from a desire to reassure the Moslems that he holds to his June promise of reaching a settlement with the elected representatives of the whole Algerian community. He will probably try to avoid a showdown with resident and mil- itary leaders, at least until after the November parliamen- tary elections. The French Army and set- tlers in Algeria have shown un- easiness over De Gaulle's offer of independence to the African territories and over statements by the Socialist and Radical parties in anticipation of a liberal Algerian solution. They will probably be further perturbed by recent press re- ports that De Gaulle has char- acterized both integration and independence as "foolish" solutions. De Gaulle may have been led to indicate a preference for a moderate so- lution by the stepped-up ter- rorist campaign the Algerian nationalists have unleashed in France, climaxed by the assas- sination attempt against Infor- maton Minister Soustelle, and by the formation of an Algerian government-in-exile. He may feel he cannot afford to allow further deterioration in re- lations with the Moslems if his hope of negotiating with elected representatives of all Algerians is to be realized. Army support will be nec- essary for De Gaulle to make any moderate solution prevail over the settlers, who profess to favor integration as a means SECRET PART II NOTES AND COMMENTS Page 6 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 of keeping Algeria French but are unwilling to accept politi- cal, social, and economic equal- ity for the Moslems. he can induce the army and set- tlers in Algeria and their sym- 25X1 pathizers in France to accept a solution which would not involve integration. estimating the extent to which Khrushchev's sharp attack on the French Government in a Pravda interview broadcast on 21 September apparently stems from his displeasure over the recent meeting between French Premier de Gaulle and West Ger- man Chancellor Adenauer and may presage a stronger Soviet stand on the North African problem and possibly a shift in Moscow's attitude toward the De Gaulle government. Soviet preoccupation with developments in French - West German relations is evident in Khrushchev's statement that a rapprochement between "French reactionaries and West German revengemongers" can only be a step toward war. The Soviet premier charged that French ruling circles are prepared to sacrifice the "higher national interests" of France "to assure for themselves the support of one of the most reactionary re- gimes in Europe." In another interview published on 23 Sep- tember in the West German week- ly Die Zeit, Khrushchev again warned against the establishment of a Bonn-Paris axis, comparing it with the prewar Berlin-Ronne axis. 25X1 The proposals made by Khru- would lead to fundamental changes shchev on 21 September in his in Soviet secondary education. memorandum on schools, if car- ried out in their present form, The proposals, already ap- proved by the party presidium, SECRET Moscow's relatively re- strained and cautious attitude toward the De Gaulle government during its first four months in power reflected the Soviet leaders' hope that the French premier would pursue a nationalistic line which would weaken NATO and re- verse the policy of close coop- eration with West Germany. While its earlier expectations have been disappointed, Moscow is still apparently hesitating to take action which would preclude a future deal with De Gaulle. Although Khrushchev denounced the proposed new French consti- tution and several leading fig- ures in the Paris government, he refrained from a personal at- tack on De Gaulle. Khrushchev attacked De Gaulle's failure to end the "in- iquitous colonial war against the Algerian people," but he avoided any indication that the USSR might recognize the Al- gerian rebel government pro- claimed on 19 September. Com- munist China's recognition prob- ably will be followed by public Soviet support which may lead eventually to formal recognition. De Gaulle may be under- PART II NOTES AND COMMENTS Page 7 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 J1 1XG I - 25 September 1958 will probably be considered next at a central committee plenum, then developed into theses for "nationwide discussion," and finally adopted by the Supreme Soviet and the union republics. Such a lengthy procedure sug- gests an attempt to gain public cuneurrence for an unpopular- measure. The proposed system would probably limit the full- time education of the vast ma- jority of Soviet youths to seven or eight years, although second- ary education would be available for young workers in their spare time. The memorandum notes that Soviet higher educational in- stitutions can admit only 450,- 000 students each year. Khru- shchev said that the majority of secondary-school graduates, nearly twice this number, not only fail the entrance examina- tions for universities and in- stitutes, but at the same time "turn out to be untrained for practical life, do not know production," and consider farm and factory labor beneath them and "a kind of insult." Khrushchev proposed that all children in the Soviet Union complete seven to eight years of school. The majority would then go directly into "socially useful labor at enterprises, collective farms, and other places of work." These young people could complete their secondary education at corre- spondence or evening schools or at part-time agricultural train- ing centers. It was also proposed that first- and second-year univer- sity students study only on a part-time basis while working a full day in industry or agri- culture. In their third year they would study at the univer- sity three days a week and work the other three days. In their fourth and fifth years their studies would be interrupted only by "production practice" in their specialties. Khrushchev.stressed that there would be "no exceptions" for children of high Soviet of- ficials, but that children who at an early age demonstrated a special gift for science, math- ematics, music,. or visual arts would receive in the secondary schools full-time preparation for higher education. He recom- mended that during the projected three- to four-year transition period, some ten-year schools be preserved in order to maintain a regular flow of gifted students into the universities and in- stitutes. Khrushchev insisted the general educational level would not be lowered by his proposed changes, which he attempted to justify by stating that only 80 percent of the school children now complete the seven-year course. He also revealed for the first time that of the stu- ' dents in Moscow's higher educa- tional institutions, only 30 to 40 percent are children of work- ers and collective farmers. Khrushchev is also con- cerned over the annual increment to manpower, which is an impor- tant element in maintaining the high Soviet rate of industrial growth. The age group now leav- ing school is composed of chil- dren born during World War II, a period when the birth rate suffered a severe decline. Stat- ing that "in the near future... we must send 2,000,000 to 3,500- 000 adolescents" to work every year, Khrushchev instructed Gosplan to draw up a long-term plan for the employment of ad- olescents. SECRET PART II NOTES AND COMMENTS Page 8 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 Nuritdin A. Mukhitdinov, a Soviet party secretary and presidium member, arrived in the United Arab Republic on 17 Sep- tember for a ten-day visit and has conferred with top officials of both of its regions. The visit is being portrayed by Mos- cow and Cairo as a good-will tour stemming from Nasir's visit to the USSR in May, with offi- cial business limited to talks on the extension of Soviet-UAR cultural and economic ties. Mukhitdinov may, however, at- tempt to smooth out Soviet UAR policy differences involving the Middle East. There is evidence that Nasir was dissatisfied with the equivocal promises of Soviet support he received after his hurried flight to Moscow fol- lowing the Iraqi coup. Several points of friction remain, aris- ing out of differences of ap- proach by Moscow and Cairo on such issues as Iraq and the ac- tivities of local Communist par- ties. Moscow's acquiescence to the dissolution of political par- ties in Syria at the time of the union with Egypt has not les- sened efforts to build up Com- munist party strength through- out the Middle East. Mukhitdinov has made a rapid rise to prominence under Khrushchev's tutelage and now apparently is responsible at the highest level for Soviet Middle Eastern policies. Al- though his government post is only that of chairman of the Foreign Affairs Committee of the USSR Council of Nationali- ties, Mukhitdinov has increas- ingly taken the public role of a top Soviet spokesman on Arab and Middle Eastern affairs. He traveled with Nasir on his 18- day tour of the USSR in May and is to accompany Marshal Voro- shilov to Afghanistan in Octo- ber. Mukhitdinov's UAR visit 25X1 may serve as a prelude to a Khru- shchev visit tentatively sched- uled for this fall. BLOC MOVES ON GERMAN UNITY PROBLEM The Soviet and East Ger- man governments have moved dur- ing the last three weeks to un- dercut a West German initiative on the reunification problem which could have placed the bloc in a difficult p:,opaganda posi- tion. Anticipating a West Ger- man proposal for the establish- ment of a four-power commission to discuss the "German ques tion," with top priority given the reunification issue, the East German regime on 4 Septem- ber addressed notes to Bonn and the three Western powers calling for a four-power commission which would be limited to draft- ing a peace treaty for Germany. Moscow endorsed this proposal in notes on 18 September to the two German governments, the United States, Britain, and France. The Soviet leaders thus hope to camouflage their in- transigence on this question by making West Germany and its allies appear to reject an os- tensibly constructive Communist initiative. SECRET PART II NOTES AND COMMENTS Page 9 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 "' SECRET CURRENT INTELLIGENCE WEEKLY SUMMART 25 September 1958 The series of notes has stimulated renewed interest in the "German question" in West Germany on the eve of the new session of the Bundestag. While Chancellor Adenauer has dis- missed the East German proposal as propaganda and has rejected the Soviet note, the idea of negotiating a peace treaty as a first step continues to at- tract support from West German opposition parties as well as from some government circles. The opposition can be expected to bring up in the Bundestag the issue of a four-power peace treaty commission. By seizing the initiative on such a commission, Moscow hopes to divert attention from the Western formula for unifi- cation, which gives top priority to free elections, and to focus the debate on conclusion of a peace treaty as the first order of business. The Communist suggestion of a commission was calculated to impress the public with the existence of some kind of common ground on this problem. Moscow may also hope to show that the Western position on recognition of East Germany is a false barrier standing in the way of the West's accepting provisions of the East German notes. Soviet leaders, however, have not deviated from the long- established Soviet position toward the German problem: that reunification is the exclusive responsibility of the two German states and that the role of the four powers is confined to draw-25X1 ing up a peace treaty in con- sultation with representatives of Bonn and Pankow. SECRET PART II NOTES AND COMMENTS Page 10 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 CURRENT INTELLIGENCE WEEKLY SUMMARY 25 neptember 1958 The Salazar regime in Portugal, troubled by sporadic unrest since the presidential election last spring, is now concerned over the possibility of new disorders early in Octo- ber. It is prepared to crack down on opposition activities, but is anxious lest public dis- content be aggravated by any severe treatment of General Humberto Delgado, former presi- dential candidate and a presist- ent critic of the government. Delgado intends to address a big rally in Oporto on 5 October, the anniversary of the republic. The government feels obliged to arrest him if he makes political attacks on that occasion, but fears making him a martyr and running the risk of riots like those in Oporto in mid-May. In their efforts to avoid such a contingency, the authorities are now seeking to get him out of the country or installed in a new "safe" post at home. The regime is seriously concerned over the effective organization evidenced by new opposition groups in which Communist influence has increased since June. It fears Communist use of these groups to create SECRET Page 11 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 incidents--a technique well demonstrated during the elec- tion campaign last May. Delgado has told the defense minister that he has probably been ex- ploited by the Communists, who supported him in the election campaign and penetrated his organization, but has apparent- ly taken no steps to disown the party. Government attempts to com- bat unrest seem to have been confined thus far to police ac- tion against the opposition and efforts to remove dissension within the regime itself. Del- gado's public protests against the arrest and mistreatment of some of his election backers have, for example, been stigma- tized by the regime as subver- sive. Salazar's reshuffle of the cabinet in mid-August ap- pears to have been designed more to reduce friction between its military and civilian com- ponents than to pave the way for political and socio-economic reforms. The government has made no move to meet the de- mands which Delgado has been pressing--the removal of re- strictions on personal free- dom, increasing economic pro- duction,and effecting a more equitable distribution of wealth. Until it does, it may find the preservation of public der in- creasingly difficult. STRAINS WITHIN THE WEST INDIES FEDERATION Antagonism and rivalry among West Indian political leaders are accentuating weak- nesses within the West Indies Federation inaugurated by Brit- ain early this year. The pos- sibility of the secession of Jamaica, the most important political and economic unit, in the federation, is being dis- cussed by some political and economic leaders there as well as by the local press. Both Jamaican political parties now question whether Jamaica should remain in the federation. Antifederation sentiment stems largely from economic factors. Commercial interests, for example, are apprehensive about the proposed customs union and fear the ef- fects of interisland free trade on protected Jamaican industries such as cement and textiles. Growing political differ- ences, many personal, are under- lining the Jamaican problem. Leaders of the island's two political parties resent what SECRET PART II NOTES AND COMMENTS Page 12 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 they consider the "empire- building" tendencies of federal ministers, that is, their ef- forts to augment the federal government's few powers. Even Jamaican Chief Minister Norman Manley, who heads the majority federal party, has joined the critics of federation--probably in part out of personal rivalry with the federation's prime minister, Sir Grantley Adams. Jamaican public hostility has been aggravated by the re- cent aggressive attacks on Jamaica's policies by Eric Williams, the anti-American and ardent profederalist chief minister of Trinidad, the fed- eration's second most important member. Jamaicans believe Williams is determined to be- come the leader of the federal government while "forcing" Jamaica to play a subordinate ? CAYMAN ISLANDS .~. JAMAICA NICARAGUA role or to secede. Williams' previous issue, the demand for the United States base at Chaguaramas, Trinidad, as the capital for the federation, has faded out since the joint US-UK- West Indies commission's recom- mendation against complying. While alienating the Jamaicans, Williams continues his efforts to gain British Guiana's early entry into the federation. He has received support only from the opposi- tion party in British Guiana, while Cheddi Jagan, Communist leader of the majority party there, continues to rebuff these efforts. Jagan maintains that before the colony joins the federation, British Guiana must gain complete internal self- 25X1 government and the federation obtain independence within the Commonwealth. ,,. CAICOS ISLANDS n, .11 TURKS ISLANDS Caribbean ATLANTIC OCEAN PUERTO RICO ^^~~ VIRGIN ISLANDS *f Nevis St. Christopher ,Antigua Sea Montserrat GryGuadeloupe ,Dominica Q, Martinique Grenada Chaguaramas Tobago - Federation of West Indies MILES 400 J COLOMBIA SECRET ,St. Lucia r, I if Barbados PART II NOTES AND COMMENTS Page 13 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 MANEUVERING FOR THE VENEZUELAN PRESIDENCY The Venezuelan parties have failed thus far to agree on a joint presidential candi- date for the scheduled 30 Novem- ber elections--the major initial step in carrying out their "truce and unity" program de- signed to guard against a return to military rule. This has led to a rise in political tensions, while rumors of another mili- tary plot and of another civil- ian general strike contribute to the uncertain outlook. In the latest attempt to reach multiparty agreement on the elections, the Democratic Republican Union (URD), probably the third largest party, recent- ly put forward junta President Admiral Larrazabal as the joint presidential candidate. The proposal apparently faces op- position from the Democratic Action (AD), the largest party, and the Christian democratic COPEI, probably the second strongest party. COPEI, which objects to a military candidate, and AD, which has a strong pro- Larrazabal minority faction, reportedly may join to back COPEI chief Rafael Caldera, who is believed to be the party leader most acceptable to the military and the other parties. Larrazabal, probably the most popular figure in Vene- zuela, may resign from the junta shortly to launch his candidacy as an "independent" in a move which could split the parties and undermine the unity program unless all major groups endorse him. At pres- ent n_ - a the support of the navy, commanded by his brother, and could probably win the Com- munist vote and a considerable portion of the AD's, along with a large part of the unorganized vote, which constitutes most of the Venezuelan electorate. Larrazabal has removed a number of key ground force of- ficers believed opposed to his presidential ambitions, Meanwhile, there is re- ported civilian pressure for calling a general strike to de- mand the wholesale removal of officers suspected of plotting against the regime. Should such a strike take place, it might unite the now leaderless armed forces and touch off se- rious violence, particularly since many civilians possess arms. THE BRAZILIAN CONGRESSIONAL ELECTIONS In the Brazilian congres- sional and gubernatorial elec- tions to be held on 3 October, President Kubitschek's middle- of-the-road Social Democratic party (PSD) will probably sus- tain substantial losses. Gains will be made principally by the so-called "populist" parties, particularly Vice President Goulart's left-wing Labor party. The campaign has been marked by the usual maneuvering by candidates, and seemingly SECRET 25X1 25X1 PART II NOTES AND COMMENTS Page 14 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 contradictory party alliances, which may make it difficult for the PSD to maintain a workable congressional coalition. A new electoral law which takes effect this year places the PSD at a disadvantage by giving added weight to the ur- ban vote, on which the "popu- list" parties' strength is based. While the populists have generally supported Kubit- schek in the past congress, their cooperation will be in- creasingly in question, since three of their national leaders are strong contenders to cap- ture the presidency from the PSD in 1960. A gain for the Labor party in particular would probably mean stepped-up na- tionalist agitation and in- creased difficulties for Kubit- schek's financial stabilization measures. The prospects for the il- legal Communist party are mixed. Although split on both ideolog- ical and tactical grounds, it will probably see a number of members and sympathizers elect- ed on the tickets of other par- ties, as has been the case in the past. The Communists are campaigning openly for selected candidates in each major party, but with particular emphasis on the Labor party and almost none on the PSD. Recent government and church attacks on Communist political activity are apparent- ly based only partly on these alliances, however. With Com- munist chief Prestes at liberty for the first time in 11 years and purveying the party's new "soft" line--a combination of bourgeois and nationalist senti- ments--the Communists have clear- ly been attempting to rebuild past congressional sentiment for legalizing the party. By placing new restrictions on Prestes' political activity and sponsoring radiobroadcasts condemning the party as a tool of Moscow, the government prob- ably hopes not only to make the Communist cause unpopular in congress but to deal a blow to the growing number of fellow-travel-25X1 ing nationalists both in and out of congress. SOVIET-JAPANESE TRADE Trade between Japan and the USSR during 1958 is expect- ed to reach approximately $45,- 000,000--less than the target stipulated in the trade agree- ment of last December, but more than double the 1957 total. Re- laxation of COCOM controls and indications that the USSR may make additional commodities avail- able to Japan are likely to lead to a further growth in trade between the countries. In some instances this could result in a reduction of Japanese imports from the United States and oth- er free-world countries. Tokyo hopes to export prod- ucts this year valued at $25,- 000,000 and anticipates imports of $20,000,000. The USSR, how- ever, consistently has maintained the trade balance in its favor and is insisting that Japan ac- celerate its importation of So- viet goods. Japan now is accepting So- viet orders for small ships, rolling stock, chemical fibers, and industrial equipment to add to normal exports of light in- dustrial goods. In return, Ja- pan has been buying larger amounts of Sakhalin coking coal, lumber, and metallic ores. Mos- cow also is offering to supply new items--wheat, crude oil, tin, soybeans, and coal from the SECRET PART II NOTES AND COMMENTS Page 15 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 . JGI.I'CG l CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 Kuznetsk region, al- though it apparently has only limited amounts of such com- modities available for export. The Jap- anese Government is considering a trial import of semihard wheat and may feel under compulsion to accept some other Soviet commodities, 1953 1954 1955 1956 1937 1958 (JAN-AUG JAPANESE TRADE WITH USSR EXPORTS I IMPORTS I TOTAL I PERCENT OF TOTAL TRADE 7,400 39,000 2,076,000 760,000 9,300,000 20,000,000 $ 2,126,000 $ 2,133,000 2,250,000 2,289,000 3,054,000 5,130,000 2,870,000 3,630,000 12,300,000 21,600,000 17,000,000 37,000,000 80924 1.29 1.45 despite their relatively high price, for the sake of expand- ing exports to the USSR. The recent opening of ship- ping services between Japan and Soviet ports in Siberia and on the Black Sea should assist trade; two Japanese economic missions are either in the USSR or en route there to investi- gate trade possibilities. Dur- ing trade negotiations opening in Moscow in late October, Ja- pan intends to propose a 60- percent increase in planned 1959 trade. (Con- 25X1 curred in by ORR) NORTH KOREA PLANS BIG ECONOMIC EXPANSION North Korean Premier Kim I1-sung, in a recent speech marking the tenth anniversary of his regime, outlined greatly expanded goals for the economy and said the First Five-Year Plan (1957-61) would be ful- filled 12 to 18 months ahead of schedule. In what appears to be a junior version of Peiping's "giant leap forward," Pyongyang has set goals for .'six or sev- en" years from now that are at least double the ambitious Five-Year Plan targets for many basic industrial goods. Much of the speech was de- voted to comparing what Kim sees as the sorry economic plight of South Koreans with the abundant life of North Ko- reans, who are "rushing toward socialism like a flying horse." He emphatically stated that economic exchange could be the most important single means for unifying Korea, and the tone of his speech suggests that Pyong- yang is attempting to make an issue of the competition in economic development between North and South Korea. Al- though Kim I1-sung's appraisal of South Korea's economy, which he claims is on the verge of bankruptcy, is extremely biased, Pyongyang's leaders may actually believe they can attain a suf- ficiently high level of produc- tion to attract real support in the South. Kim emphasized that heavy industry would continue to get priority. He took considerable pains to justify the "correct- ness" of this policy, and his defensive tone indicates that the struggle over this issue which admittedly took place in 1956 has not been forgotten. He also said that within six or seven years North Korea would become a completely self- sufficient "industrial-agri- cultural" nation. The metal- lurgical, machine-building, power, coal, chemical, and building-material industries SECRET PART II NOTES AND COMMENTS Paae16 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 NORTH KOREAN ECONOMIC GOALS (METRIC TONS EXCEPT WHERE NOTED) (1957-1961) PIG AND GRANULATED IRON 330,000 700,000 4,000,000 STEEL 277,000 670,000 3-3,500,000 ELECTRIC POWER (BILLION KWH) 6.9 9.7 20.0 COAL 5,000,000 9,500,000 25,000,000 CHEMICAL FERTILIZER 321,000 630,000 1.5-2,000,000 CEMENT 895,000 1,750,000 5,000,000 FISH 564,000 620,000 1,000,000 GRAIN 3,200,000 3,760,000 7,000,000 809172 will be developed "ahead of the others." The speech hinted at a measure of decentralized con- trol with respect to light in- dustry. Food-processing and other light industries are to be developed by building small, locally run factories in every county, so that by 1959 produc- tion from this type of enter- prise will equal the total out- SECRET put of enterprises still under the Min- istry of Light In- dustry. As the lo- cal industries devel- op and expand, so too will the "local organs of power." Grain production is scheduled to reach 7,000,000 tons, in- cluding 4,000,000 tons of rice, by 1964 or 1965--almost double the Five-Year Plan goals. More irriga- tion and increased application of chemi- cal fertilizer will be the principal means of achieving this goal. The announcement of these greatly expanded targets, which directly follows the month-long visit to China of the North Ko- rean state planning chairman, may indicate that Pyongyang has been able to negotiate addi- tional economic assistance. (Prepared by ORR) 25X1 PART II NOTES AND COMMENTS Pagel7 of 17 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 Since Stalin's death in 1953, the USSR has placed in- creasing emphasis on its econom- ic and cultural relations with other nations. Soviet leaders apparently hoped this more lib- eral approach would not only ap- pear responsive to the Soviet people's desire for greater freedom and contact with the West, but would also enhance the USSR's prestige and influence, especially in underdeveloped nations, thereby supporting the broader objectives of Soviet foreign policy. Moscow's cultural offensive has consisted of encouraging visits by foreign heads of state and selected groups--scientists, artists, students, tourists-- and showing them only the best the Soviet Union has to offer. It has likewise made wide use of the press, films, and radio for this purpose. While the Soviet leaders have exchanged with free-world countries care- fully selected representatives of a wide variety of professions and activities, Moscow has con- sistently sought to shield the general Soviet public from con- tact with Western ideas and in- stitutions and to prevent any comparison with reality of the image of the West as built up in Soviet propaganda. Growth of Exchange Program Soviet cultural and scien- tific exchanges, virtually non- existent in 1950, have steadily increased since Stalin's death. The widespread cancellations by free-world governments after the Soviet intervention in Hungary were followed by an all-out So- viet campaign to restore con- tacts. The number of delega- tions exchanged with the free world in 1957 increased 30 per- cent over 1956, and exchanges with the free world during the first half of 1958 more than doubled over a comparable peri- od in 1957. The Soviet Union has re- cently made determined efforts to increase the number of formal exchange agreements with the free world, and it now claims to have over 90. The US-USSR agreement signed last January, the most comprehensive thus far, provides for a fivefold increase in the number of offi- cially sponsored exchanges in the next two years. The USSR has pointed to this in negotia- tions with Britain, West Germany, and Turkey in an attempt to break down opposition of these governments to concluding simi- lar agreements. In the six months since the accord went in- to effect, exchanges between the United States and the Soviet Un- ion have risen by over 65 per- cent, and privately initiated exchanges have been greatly stim- ulated. There has been a noticeable emphasis on scientific, techni- cal, and professional delega- tions--most years they have ac- counted for over half of all So- viet exchanges--demonstrating the Soviet leaders' desire both to impress the world with the USSR's stature in the scientific world and to foster exchanges which will pay off in higher Soviet production and greater technical advances. The number of sports and cultural exchanges is also growing. The great in- crease in trade delegations over the past six months reflects the present Soviet trade offensive. The majority of exchanges with the free world have been and still are with the United States and the countries of Western Europe. Nevertheless the USSR, in conjunction with its efforts in the economic and SECRET PART III PATTERNS AND PERSPECTIVES Pace 1 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 " SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 diplomatic fields to exploit the ascendant forces of nationalism, anticolonialism, and social un- rest, for over a year has placed particular emphasis on develop- ing further cultural contacts with the underdeveloped nations of Asia, Africa, and Latin Amer- ica. Expanded contacts with these nations accounted for most of the 1957 increase. Since the inception of the ex- change program, moreover, So- viet propaganda has given far greater publicity to contacts with underdeveloped areas than to those with the more advanced nations. SOVIET EXCHANGE PROGRAM (NUMBER OF DELEGATIONS EXCHANGED) 2,S27 Organization of Exchanges Two organizations divide the responsibility for handling official and unofficial Soviet exchange groups. The State Committee for Cultural Relations with Foreign Countries was set up in May 1957 under the Coun- cil of Ministers to coordinate official cultural exchanges. Last February the Union of So- viet Societies for Friendship and Cultural Relations with For- eign Countries was created to handle unofficial exchanges. The transfer to the latter of the apparatus and functions of the All-Union Society for Cultural Relations with Foreign Countries (VOKS) demonstrates the increased emphasis the USSR is giving to cultural relations. Since 1925 VOKS had been the principal body through which the USSR had conducted its ex- ternal cultural relations, but its effectiveness had been im- paired by too close association with the party and government. Soviet propaganda has therefore stressed the spontaneous popu- lar origin of the new union and the voluntary association in it of the 19 newly formed counter- part friendship societies. VOKS had maintained a close liaison with Soviet friendship societies abroad which, under a thin disguise of nonpolitical respectability, acted as the effective agents of Soviet cul- tural and political propaganda. The patently fellow-traveling complexion of these societies and the consequent refusal of most Western governments and official bodies to have anything to do with them reduced their usefulness and that of VOKS to the Soviet Government. The new union, however, although obvi- ously under tight party control, has encouraged the formation of more representative and appar- ently less partisan societies abroad. Exchange of Delegations The USSR in its emphasis on scientific and technical ex- changes now sponsors important scientific conferences, and So- viet physicists, chemists, phy- sicians, and engineers attend all important international con- ferences and, on invitation, tour Western scientific institu- tions. The Soviet Union recognizes the value of increased cultural and sports contacts as an open- ing wedge to future exchanges. Moscow has usually seen that only top-ranking artists repre- sent the USSR in the West, re- serving others for less discrim- inating audiences in Asia and Africa. The Sixth World Youth Fes- tival in the summer of 1957 SECRET PART III PATTERNS AND PERSPECTIVES Page 2 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 `'K SECRET 25 September 1958 brought 34,000 young people from 131 countries to the Soviet Union, according to Soviet fig- ures. Apparently to convince the visitors that the iron cur- tain was a "myth," unprecedented freedoms were permitted during the festival. Although students from out- side the bloc account for only about 3 percent of the nearly 15,000 foreign students studying in the USSR, the number from underdeveloped nations is stead- ily growing. Moscow has offered many more scholarships than these countries have accepted. Every effort is made to recruit politically active students from the colonial areas in anticipa- tion of their future usefulness to Moscow as leaders in their own countries. The number of Soviet stu- dents who have studied in the West for a year or more since World War II is still infini- tesimal, and the scheduled ex- change of 20 students this fall under the US-USSR agreement in- volves the largest group of So- viet students ever to study in a free-world country. Afraid of exposing its youth too long to Western freedoms, the USSR has favored short-term exchanges of student groups with the free world. Tourism has been encouraged by bringing the costs down-- through rebates, special group rates, and an adjusted ruble exchange rate for noncommercial transactions--to correspond more closely to the price of compa- rable tours in the West. The So- viet agency Intourist now offers a choice of more than 40 guided tours, and travel by automobile became possible in 1957 for the first time since the war. How- ever, to make certain the tour- ist receives only the desired impression, as well as to ob- serve security precautions, routes are carefully defined and travelers are invariably ac- companied by an Intourist guide and interpreter. Some 40,000 bona fide tourists are believed to have visited the Soviet Union in 1957. By contrast, only about 10,000 Soviet tourists visited the free world in 1957, although this figure is expected to triple by the end of this year. Press, Radio, and Films The USSR has contributed heavily to book fairs and ex- changed books with libraries the world over. Its invasion of the Indian book and periodical mar- ket is an example of the extent to which Soviet efforts have gone in this line. By asking prices far below cost for ex- cellent editions in both English and the regional languages and by giving liberal terms, the USSR has presented impossible competition to Indian publish- ers and importers of Western publications. Figures on the amounts spent annually in sub- sidization of foreign Communist party publications and on bro- chures and articles reprinted in the foreign press are extreme- ly high. Foreign books translated and published in the Soviet Union are carefully chosen and, although many foreign classics, novels, and books on folklore are reprinted, the emphasis con- tinues to be on scientific and technical works, especially American. The USSR, having never signed the international copyright convention, rarely pays royalties to authors abroad. Adlai Stevenson, who conferred with the Russians on this ques- tion on his recent trip to the USSR, was given little encourage- the authorities. Distribution of the maga- zine Amerika since the first is- sue appeared in October 1956 has been hamstrung by the Soviet state distribution monopoly. Month after month thousands of copies, never offered for sale in the provinces, have been re- turned to Moscow as "unsalable." SECRET PART III PATTERNS AND PERSPECTIVES Page 3 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET 25 September 1958 The United States, however, sends to libraries throughout The Soviet Union most of the 2.000 complimentary copies it is allowed to distribute, and the magazine's effectiveness can be seen by the frequent attacks on it by the Soviet press and radio. Moscow broadcasts in 45 foreign languages and dialects. As of last April the USSR de- voted more than 700 hours per week of non-Russian-language broadcasts to free-world coun- tries--300 to Asia, the Middle East, Africa, and Latin Ameri- ca, and the rest to North Amer- ica and Western Europe. Its concentration on underdeveloped areas and uncommitted nations is again shown by the steady in- crease in broadcasting to South- east Asia, the Middle East, and Africa. The Soviet Union's efforts in the motion-picture field take a variety of forms: pro- duction of cultural films and documentaries illustrating So- viet achievements, use of cost- ly promotional devices, partic- ipation in film festivals, of- fering of films abroad at prices far below cost, and payment of high prices for mediocre films from small film-producing coun- tries. Americans attempting to negotiate film exchanges with Moscow have observed that, in accepting films for showing in the USSR, Soviet officials pre- fer westerns, frivolous comedies, and starkly realistic dramas-- those which best reinforce the ,image built up in the minds of the Soviet people of a decadent America totally lacking in cul- ture. The Russians seem to be eager--as in all fields--to learn American methods in motion pictures, radio, and television, but are reluctant to make any agreement which might restrict their policy of censorship with- in the USSR. The projected ex- change of radio, television, and motion-picture material under the recent US-USSR agreement is still subject to negotiation. tive tongues. There is increasing empha- sis in the Soviet Union on the study of languages, es- pecially those of Asia and Af- rica, and Soviet diplomats, technical advisers, and teachers are being equipped to convey 25X1 the Soviet message to the people of these countries in their na- KHRUSHCHEV'S AGRICULTURAL POLICY SINCE 1953 Soviet Premier Khrushchev, in a speech last July at the Polish Embassy in Moscow, spoke ebulliently of conditions fa- voring Soviet industry and agri- culture. The tone of his re- marks contrasted sharply with that of his September 1953 re- port on agriculture, in which he complained bitterly about the state of agriculture as Stalin left it. Many far-reach- ing changes benefiting agricul- tural output have been made since 1953, and Khrushchev has been intimately associated with all of them. His policies made possible a record harvest in 1956, and this year's output may again reach an all-time high. Exceptionally favorable weather has contributed and is contrib- uting greatly to these records. By contrast, agricultural output in 1957 fell below 1956, almost entirely because of less favor- able weather. SECRET PART III PATTERNS AND PERSPECTIVES Page 4 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET 25 September 1958 Stalin's policy of coer- cion to expand production has been largely replaced by a sys- tem based on economic incentives. Increases in prices paid for produce, along with tax re- ductions, have aug- mented peasant in- come. While Khrushchev has continued Sta- lin's practice of and supply depots. The MTS for- merly had a near monopoly on the machinery used by the collective and was the focus of local poli- tical control over the collec- tive farms. giving priority to 130 industry, he has placed increasing emphasis on agricul- tural expansion. In the last several years, there has been a substantial growth in capital investment 1950-53 1954 AVERAGE in agriculture,. and the long- term trend toward a smaller agricultural labor force has been halted. Thus the impor- tance of agriculture as a com- petitor for resources has in- creased. Organizational Changes Probably the most impor- tant organizational change in Soviet socialized agriculture since its establishment in the 1930's was the machine-tractor station (MTS) reorganization USSR: PROCUREMENT OF COLLECTIVE - FARM PRODUCTS EHI NEW SYSTEM MTS OBLIGATORY DELIVERIES P PAYMENTS IN KIND R C ABOVE QUOTA PURCHASES CONTRACT PURCHASES instituted by Khrushchev this year. The collective farms now can buy and operate their own machinery, while the MTS's are being transformed into repair In another innovation, stem- ming from the MTS reorganiza- tion, the party central commit- tee on 18 June decided to discard the long-established multiple- price system of procuring agri- cultural products from collec- tive farms in favor of a simpler system. Instead of compulsory deliveries, payments in kind for MTS services, and above-quota purchases, the state will pur- chase produce at single prices, beginning with the 1958 crop. In commenting on the general level of the new prices, Khru- shchev implied that the amounts to be paid to the collective farms will approximate funds previously paid them plus funds allocated to the MTS's. Live- stock prices appear to be con- siderably higher than previous average prices. The importance of the com- pletely socialized state farm sector has increased signifi- cantly. The area sown by state farms rose in 1957 to more than 25 percent of the total sown area for the country, in con- trast to 12 percent in 1953. The rapid increase in the rel- ative importance of state farms results primarily from the SECRET PART III PATTERNS AND PERSPECTIVES Page 5 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 new lands program, in which state farms play a big role. In recent years, moreover, some collective farms have been transformed into state farms. Production Programs More than 85,000,000 acres have been brought into culti- vation under the new lands program, raising sown acreage by about one quarter. Although national grain harvests will henceforth be higher, grain from the new lands will probably be more costly than that from the traditional grain areas. In January 1955 Khrushchev announced a program for in- militate against production on 70,000,000 acres over a long period. In 1958 nearly 50,- 000,000 acres were sown in corn. Khrushchev's program launched in May 1957 to catch up with the United States in per capita production of meat, milk, and butter in the next few years has received tremendous pub- licity. Khrushchev berated his economists for being too con- servative in their analysis of livestock potentialities and criticized the scientists in the experimental stations for underestimating the value of corn. The livestock program is probably the most unrealistic of all of Khrushchev's farm pro- grams. With the pro- gram as now constituted, the goals cannot be achieved, and meat production especially will fall far short of the 1960-62 goal. USSR:OWNERSHIP OF LIVESTOCK 1957 (MILLION HEAD) OWNED PRIVATELY BY COLLECTIVE FARMERS ALL CASTLE COWS HOGS *Owned by state farms, state farm employees, city dwellers, etc. creasing the corn acreage by 1960 from about 10,000,000 to 70,000,000 acres--an area almost as large as that seeded to corn in the United States. This pro- gram was conceived in the hope of obtaining large supplies of feed as a basis for expanding the livestock industry. Al- though basing his corn program on the American model, Khru- shchev apparently disregarded the fact that there is no large area in the USSR as suitable as the corn belt in the United States. Restrictions of soil and climate will make corn farm- ing relatively expensive and The USSR will be able to increase the output of livestock products substantially in the next several years, however, and Khrushchev may con- veniently overlook his earlier promises. In April 1958, for the first time, he quali- SHEEP AND fied his promise to GOATS ' th the i catch up w United States in live- stock products by making it con- tingent on solution of the fod- der problem. The new lands expansion, the corn program, and the pro- gram for catching up with the US in per capita meat and milk production have points of similarity. All should yield some benefit, but none is likely to be nearly as success- ful as Soviet leaders claim to expect. All are relatively expensive, and all show evidence of inadequate planning, es- pecially in their initial stages, with the result that progress SECRET VAnT TTT PATTFRNS AND "PERSPECTIVES Page 6 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 has been by fits and starts. Central direction has been another of their characteris- tics, with relatively little left either to local initiative or to the "experts" who would be best qualified to plan pro- grams of this nature. All have been put into effect with a speed that would be impossible if much decentralization ac- tually existed. Prospects The average caloric intake of Soviet citizens, despite their increasing numbers, will continue to be adequate, and there will probably be moderate improvement in the composition of the diet. The USSR will be capable of exporting more agricultural commodities than in the past and of absorbing significant amounts of the agricultural exports of various underdeveloped countries. The extent of both the imports and exports will probably be deter- mined largely by political con- siderations. Under present programs, the growth of agricultural out- put will be slower than in the period since Stalin, because the stimulus of the new lands and corn programs will already have been largely dissipated. If Khrushchev cannot be satis- fied with a rate of growth far less than that which he boast- fully promised, he will prob- ably initiate still more changes. The USSR's inefficient use of agricultural labor is another reason for future moves by Khru- shchev. Industry's needs, to- gether with a decrease in the rate of growth of the labor force, will create pressure to release manpower from agricul- ture. Agricultural problems will probably receive much attention at the forthcoming 21st party congress in January and at the scheduled All-Union Congress of Collective Farmers in early 1959. Some lines of action which may be taken are suggested by recent developments and press discussions. As a result of the MTS reorganization and the new single-price procurement sys- tem, Moscow may feel it neces- sary to establish at the col- lective farmers' congress a new collective farm model charter to replace the one established in 1935. In this event, a col- lective farm will probably emerge which more closely re- sembles a state farm or facto j. Khrushchev's favorite farm in his native village of Kalinovka has recently purchased all the privately owned livestock of its members. While Khrushchev has warned against a too rapid ex- tension of this procedure, this innovation may be sanctioned at the collective farmers' con- gress and become a rapidly spread- ing movement. Khrushchev may view such a move as important in his attempt to catch up with the United States in per capita meat production. There has been considerable discussion about and experiment- ing with the practice of paying collective farm workers entirely, or almost entirely, in cash and including a minimum wage system. If this were done widely, it would further reduce the dif- ferences between collective farmers and industrial workers. industry and agriculture. Preoared by. ORR 25X1 Establishment of a collec- tive farmers' union has been discussed in the Soviet press. Apparently the contemplated "union" is an organization of farms rather than of farmers. The "union" has been suggested as an organization to compel the economically stronger farms to help the weaker. This would speed the process of disbanding those MTS's which are being retained because backward col- lectives cannot now purchase the machinery, and would also further the trend of reducing 25X1 income disparities, a principle already being applied both in SECRET PART I T T PATTERNS AND PERSPECTIVES Page 7 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 INDONESIA: PRESIDENT SUKARNO, THE ARMY, AND THE COMMUNIST PARTY With the decline of non- Communist parties in Indonesia during the past 18 months, the three centers of power in the country are, in order of impor- tance, President Sukarno, the army, and the Communist party. Alhtough the army's political strength is increasing, Sukar- no's lead in authority and pres- tige remains large. The Commu- nists, although expanding their following at the grass-roots level and benefiting from their association with Sukarno's pol- icies, are being obstructed in the use of their strength by army tactics. Sukarno remains the key to all significant government ac- tivity in Indonesia. Although his prestige and area of maneu- verability have diminished, any policy to be successful,must have his support. His principal source of power and prestige is support of the masses, partic- ularly in Java where over 60 percent of Indonesia's 82,000,- 000 people live. In early 1957 Sukarno an- nounced a program of "guided democracy" which called for a de-emphasis of political parties and parliamentary government. Indonesia had been independent for seven years, had averaged a new cabinet every year, and had made little economic prog- ress. The 1955 national elec- tions, which had been expected to provide a cure-all for the country's problems, had only created a coalition government of eight parties whose inexperi- ence and rivalry made for con- tinued indecisive and ineffi- cient government. Sukarno had just completed tours in both the West and the Sino-Soviet bloc. He felt he had seen in Communist China such tremendous economic advances that Chinese methods held les- sons for Indonesia. Sukarno has repeatedly stated that he is a Marxist but not a Commu- nist. He appears to believe he can establish a socialist state and can use Communist techniques without threatening Indonesia with Communism. Sukarno encountered expected opposition from the non-Commu- nist political parties. He had the support of the army, however, and the vigorous assistance of the Communist party and other leftist elements. With this support, he was able to form in April 1957, with- out consulting political parties, the present extraparliamentary business cabinet, led by a non- party prime minister, Dr. Djuanda. In June 1957 he installed an ex- traconstitutional national coun- cil under his own chairmanship, and he has recently named a pre- paratory council to formulate a national economic planning board. SECRET PART III PATTERNS AND PERSPECTIVES Page 8 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 ~.. SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 In the interim, however, he appears gradually to have become aware of the increasing Communist strength which his own policies have permitted. He has therefore apparently wel- comed army measures which began about December 1957 to obstruct the growth of Communist influ- ence. Sukarno has not personally challenged the Communist party and probably will not for two reasons: he wishes to retain its support; and a challenge to the party, whose chief sup- port--like his own--comes from Java, would force the Javanese masses to choose between him and the Communists. He fears the results of such a choice since it would not only whittle away his own source of power but at the same time would set up a powerful antagonist. The Army The Indonesian Army has assumed an increasingly power- ful position, including a grow- ing policy-making role, since the beginning of conflict with the rebellious provinces in Su- matra and North Celebes last .March. This period has coin- cided with restrictive moves against the Communists. The army's increased power has re- sulted from three factors: the considerable authority permitted the army under the present "state of war"; the support of Sukarno; and the prestige accruing from its success in suppressing the revolt. Chief of Staff Nasution and other army leaders, although sharing Sukarno's desire for na- tional stability and progress and his exasperation with the ineffectiveness of political parties, differ with him over his willingness to rely on the, Communist party. Nasution has said the army's task is to steer a middle-of-the-road course, preventing a move either to Com- munism or to a Moslem state. Nasution subordinated anti- Communist action for the first two years of his tenure, which began in October 1955, in the interests of building a disci- plined army. His first signifi- cant move against the Communists was in December 1957, when Su- karno instituted a campaign to take over Dutch interests in Indonesia and the Communists seized the opportunity to force a far more extensive take-over than most government elements had anticipated. When the army moved to control those interests seized by Communist-influenced groups, Sukarno did not inter- fere and apparently supported the move. Army leaders are aware that the rebellion has provided the Communist party with new oppor- tunities for growth. Nasution has therefore banned political activity in all areas except Borneo and Java, taken steps to prevent leftist-inspired demon- strations, and thus far forestalled Communist-inspired SECRET PART III PATTERNS AND PERSPECTIVES Page 9 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927A001900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 strikes and boycotts by decree- ing that the army "cannot ap- prove" actions which would dis- turb the public order. A few pro-Communist army officers have been transferred from po- sitions of influence. The army also pressed--although with only moderate success--for a cabinet reshuffle last June to reduce leftist influence. Nasution persisted and succeeded in ac- quiring American arms which, although purchased only in to- ken quantities, balanced to some extent large military purchases from the Communist bloc. National elections, which had been scheduled for September 1959 and in which significant Communist gains were anticipated, have now been postponed a year. None of the army moves al- ready taken against the Commu- nists constitutes major opposi- tion. Generally they have been minor moves of containment or obstruction. Army leaders, al- though willing to go further than Sukarno, fear Communist power and hesitate to challenge it before first strengthening their own position with the In- donesian people and stabilizing the country generally. In addition to the major problems of Sukarno and the Com- munists, the army has internal difficulties of factionalism, Communist infiltration, and low- er rank discontent which weaken the position of'army leaders. Army factionalism is on the decrease, although a renewal, growing from the rebellion and aggravated regional prejudices, can be expected as soon as dis- affected units are restored to the army roster. Those elements which formerly constituted the most effective opposition to Nasution and his followers are with the dissidents in Sumatra and North Celebes, so that the present officer corps is rela- tively disciplined. Nasution's chief threat is Sukarno, himself, who may come to fear tie chief of staff as a serious rival and arrange his removal. This does not yet appear likely. Communist infiltration of the army is heaviest in the en- listed ranks. In the officers corps, where om- munist sympathy appears limited, 25X1 the Communists rely on using persons of extreme pro-Sukarno sentiment. Enlisted men are poorly paid and frequently have sub- standard living conditions. Both the Communists and army faction- al leaders have exploited their discontent. The Communist Party The Indonesian Communist party (PKI) has risen rapidly from a third-rate party in 1952 to the largest in Java in 1957, in great part by following na- tional-front tactics which have included support for Sukarno and identification with his pol- icies. The PKI is better organized and has worked harder than any non-Communist party. Under Sec- retary General D. N. Aidit, the party's membership is believed to be at least 700,000 and may approach claimed membership of over a million. The party won SECRET PART III PATTERNS AND PERSPECTIVES Page 10 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 7,000,000 votes--25.6 percent of the total--in the 1957 Java- nese provincial elections, and made gains in limited local elections elsewhere in Indonesia. It has made vigorous prepara- tions for the now postponed na- tional elections, while non-Com- munist parties have been vir- tually inactive. The Communists' strongest front group is SOBSI, Indonesia's largest and most ef- fective labor federation. Com- munists also control the larg- est veterans' organization, PERBEPSI, and the largest peas- ant organization, BTI. The party strongly support- ed military measures against the provincial dissidents and has shared in the prestige ac- cruing from their defeat. Re- strictive army measures, how- ever, have prevented the con- siderable exploitation of this development which the Commu- nists had obviously planned. Communist leaders are re- ported disturbed over increased army power and the apparent ac- quiescence of President Sukarno to army policies. They also appear di.stressed over that part of Sukarno's "guided democracy" concept which calls for the de- emphasis of political parties. They can be expected to continue national-front tactics, however, as long as they bene- it from any identification with Sukarno. They will probably in- crease their efforts to sow dis- sension between Sukarno and Na- sution. Although undoubtedly greatly disappointed at the election postponement, they can be expected to try to capitalize on it by denouncing it as an ob- struction of "the people's will," and they may attempt some test 25X1 of popular feeling on the issue. Prospects The three elements of In- donesia's power complex remain an essentially unstable mixture despite some cooperation enforced on them in recent weeks by the provincial rebellion. Effec- tive army opposition to the Com- munist party at some future date depends not alone on the approv- al of this policy by President Sukarno. Other factors essen- tial for the army's progress toward an effective anti-Commu- nist policy would appear to in- clude success in acquiring enough arms from the free world to permit a straightforward anti- Communist political position; progress, with the cooperation of civilian elements in the gov- ernment, toward redressing po- litical disunity and economic instability aggravated by the provincial revolt; and Sukarno's trust, particularly his belief that no army leaders will attempt to replace him or seriousl chal- len a his popularity. SECRET PART III PATTERNS AND PERSPECTIVES Pale 11 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 FREE WORLD MONETARY PROBLEMS There is widespread con- cern among both the industrial and the underdeveloped countries of the free world over the ade- quacy of monetary reserves and development funds to support desired rates of economic growth. This concern probably will lead many of the 67 finance minis- ters meeting in New Delhi from 6 to 10 October as the board of governors of the International Monetary Fund (IMF) and the In- ternational Bank for Reconstruc- tion and Development (IBRD) to press for early major increases in the lending resources of these two agencies. The fears of a general economic and financial crisis which troubled many free-world leaders a few months ago have been signif- icantly eased by the improving outlook for the American economy and by re- cent American initi- atives for expanding international credit facilities. Industrial Countries Economic ex- perts of the OEEC .since mid-1958 have generally seen lit- tle danger of the United States "ex- porting" a recession to industrial Europe. They attribute the present leveling off in the Western Euro- pean economy to anti- inflationary meas- ures taken to curb the boom and to re- store exchange sta- bility after the dis- locations of Suez and last year's cur- rency crisis. BURMA - INDIA MALAYA NEW ZEALAND PAKISTAN DENMARK FRANCE ITALY NETHERLANDS SWITZERLAND WEST GERMANY ARGENTINA BRAZIL_ CHILE CUBA PERU VENEZUELA- FINLAND IRAN --------JAPAN PHILIPPINES In fact, well- SPAIN sustained American YUGOSLAVIA commodity imports and sharply reduced trade ex- ports have combined with grow- ing US capital exports to strengthen Western Europe's in- ternational financial position. These factors, along with the return of a large amount of the capital withdrawn from Western Europe during the currency crisis, have increased its gold and dollar reserves by a little over a billion dollars during the first half of this year. In Japan, also, the reces- sion is believed to have been brought on by anti-inflationary measures which succeeded, how- ever, in converting a payments deficit of about $500,000,000 in the first half of 1957 to a surplus of nearly $200,000,000 FREE-WORLD GOLD AND FOREIGN EXCHANGE HOLDINGS UNITED KINGDOM OTHER STERLING AREA COHT1NWA1_-MEMBERS OF- EUROPEAN PAYMENTS UNION LATIN AMERICA OTHER J REI _WOTIIDE SECRET 1 41 1 42 1 41 43 123 117 113 1 13 168 STERLING AREA OUTSIDE UK CONTINENTAL EPU COUNTRIES 24 J 32 LATIN AMERICA 65 OTHER FREE WORLD PART III PATTERNS AND PERSPECTIVES Page 12 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25 September 1958 during the first six months of this year. The industrial countries, however, continue to watch American trends very closely out of concern over possible direct repercussions on their own economies. Greater appre- hension is felt over possible indirect effects, such as the possibility that less developed countries, confronted with a reduced American demand for raw materials in the event of a slowdown of the US economy, might in turn curtail their own imports of industrial products. Countries producing raw materi- Als take one third of all Western European exports, com- pared with 7 percent taken by the United States. These coun- tries have recently maintained high levels of imports only by drawing on their reserves and by heavy borrowing from the IMF, the IBRD, and from private- capital markets at a rate which they are unlikely to be able to continue. Primary Producing Countries The economic difficulties among countries producing pri- mary materials originated in a general weakness of commodity prices which has persisted over the past two years. These dif- ficulties have since been con- siderably aggravated by the eco- nomic slowdown in the industrial nations. In Latin America, depressed world prices for coffee have led to heavy payments deficits and reserve losses in many coun- tries, including Brazil and Colombia, which depend on cof- fee exports for a major share of their foreign trade. A 50- percent decline in the world price of copper since 1956 and declines in the marketing of lead, tin, and zinc have sharp- ly reduced the foreign exchange earnings of Chile and Bolivia add adversely affected those of Peru and Mexico. In Asia and the Far East, persistent trade deficits in 1957 reached their highest point since the Korean war. A major factor was the decline in world prices and marketing of rubber and tin. Malaya is in a par- ticularly poor position and the Philippines is faced with a dangerously deteriorated pay- ments balance. All countries in the Mid- dle East and South Asia except Iran are experiencing foreign exchange difficulties largely attributable to rising imports and worsening terms of trade for some of the areas' principal exports. Emergency assistance is now being arranged for Turkey and India, but the reserves of Pakistan, Afghanistan, Egypt, and the Sudan are also precar- iously low. Exports from Africa south of the Sahara have in gen- eral not yet been seriously af- fected. Role of the IMF The IMF greatly expanded short-term lending operations since early 1956 to assist about one third of its member coun- tries to ward off or recuperate from currency, payments and re- serves crises. In so doing, it may well have prevented a gen- eral financial crisis which might have had serious politi- cal repercussions in several countries. Massive assistance to Britain after the Suez crisis stemmed a run on the pound; France was rescued from near financial collapse early this year; Japan has already and Turkey soon will benefit; India has just been assured of Ver large IBRD and~multinational~ assistance; and Brazil last sum- mer received substantial aid from the fund to retrieve a badly deteriorated payments and reserves situation. The fund has also increased the effectiveness of its aid by coordinating its efforts with those of other lending agencies SECRET PART III PATTERNS AND PERSPECTIVES Page 13 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET 25 September 1958 such as the European Payments Union, the IBRD, and with cred- itor governments, notably the United States and West Germany. At the same time, fund sponsor- ship of the joint operations permits an insistence on much stronger corrective measures-- as, for example, against domestic inflation--then would be polit- ically possible for an individ- ual creditor nation. These expanded operations during the last two-and-one- half years have used twice as much of the fund's gold and dollars as in the previous eight years. As a result, the readily available supply of such funds is now below $1.5 billion--com- pared with $3.4 billion on hand when operations began in 1947. With resources at such a low S level, the danger arises that some countries might withdraw their gold and dollar contribu- tions if they should see a pro- spective scarcity of funds in relation to requirements. Britain is particularly sensitive to any possible weak- ness in the fund, because of its vulnerable trade, payments, and reserves position in main- taining the pound as the pay- ments medium for 40 percent of free world trade. Since its sterling crisis a year ago, Britain has, therefore, strong- ly urged a general expansion of the fund's gold and dollar hold- ings. It contends that the quadrupling of the value of world trade between 1937 and 1957 and the consequent reduc- tion of free-world reserves, excluding those of the United States, from 63 to 34 percent of annual imports has brought about a situation in which these reserves are not adequate to support present levels of world trade with a safe margin. Brit- ish representatives accordingly advocate at least doubling the fund's present level of author- ized gold and dollar holdings. Britain's contention is often refuted by citing the fact that in the stable and prosperous year of 1928, corresponding world monetary reserves were only 35 percent of imports. The president of the West German Central Bank further insists that any present inadequacy of international monetary reserves is the fault of deficit coun- tries for not balancing invest- ments with savings. He holds that such reserves can only be adequate in the long run when all countries practice monetary discipline to avoid speculative movements and excessively unfa- vorable terms of payment. This West German financial authority concludes that his country will go along with an increase in gold and dollar resources for the fund only if the amounts are reasonable, all members con- tribute, and such increases do not entail weakening of monetary discipline in deficit countries. Staff experts of the fund take the view that neither 1928, with many hidden credit malad- justments, nor 1937, with nominal reserves greatly in- creased by the dollar devalua- tion of 1934 and by the low level of world trade, can serve as an adequate criterion for 1958. They conclude that any judgment of the adequacy of present free-world reserves must be conditional, depending both on further strengthening of the international credit system and on future national willingness to pursue flexible fiscal and credit policies and to avoid overambitious investment prac- tices. SECRET PART III PATTERNS AND PERSPECTIVES Page 14 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 SECRET 25 September 1958 Reactions to US Proposals Reaction in the Western world to President Eisenhower's announcement on 26 August that the United States would propose at the New Delhi meeting prompt consideration of the advisabil- 4ty of a general increase in quotas of fund member govern- ments has been overwhelmingly favorable. West European eco- nomic and financial experts see great merit in the proposal, not only as possibly providing a basis for relieving pressure on sterling, but also for strengthening financial confi- dence among Continental countries as they adjust to the new Com- mon Market. The British press hails it as the most promising American pronouncement since the Marshall Plan, while offi- cials praise it for diverting pressure on the United Kingdom in the recent Commonwealth con- ference for establishing a new Commonwealth lending institu- tion, a project which Britain is not in a position to undertake. SECRET The Latin American diplo- matic corps is united in its enthusiasm for the proposal, with specific endorsements from both Chile, a deficit nation, and Venezuela, a strong surplus country. India and other Asian countries have reacted favorably to the American proposal to ex- pand the resources of the IMF. Several of these countries, how- ever, have shown greater inter- est in the proposal to increase the lending authority of the IBRD and to create an interna- tional development fund, since their main concern is in the flow of long-term capital for development. Most nations can be expected to support the proposals at New Delhi, but paying one fourth of their additional contribu- tion to the IMF in gold or dollars will pose serious problems for man . PART III PATTERNS AND PERSPECTIVES Page 15 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6 CONFIDENTIAL ''-IDENTIAL Approved For Release 2007/10/23: CIA-RDP79-00927AO01900060001-6