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Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 QJ1fJDENTIAL rP - SECRET-'CONFIDENTIALCURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. 50 OCI NO. 4049/58 2 October 1958 Next Review Date: 4__f(--------- Class. Changed to: TS S G) 25X1 No Change In Class. ^ ^ Declassified Document No. ---- ------------ Auth.: HR 70-3 Dxte: By CENTRAL INTELLIGENCE AGEN ONFIDENTIAL %45111 State Department review completed OFFICE OF CURRENT INTELLIGENCE 01 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Next 7 Page(s) In Document Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Nwe 1W ...SECRET. CURRENT INTELLIGENCE WEEKLY SUMMARY 2 October 1958 OF IMMEDIATE INTEREST TAIWAN STRAIT SITUATION Propaganda - Diplomacy The absence of Mao Tse- tung and Liu Shoa-chi from Pei- ping during the latter two thirds of September, at a time when the standing committee of the Chinese Communist party politburo would be expected to meet frequently over the Taiwan Strait situation, suggests that Chou En-tai has been directing China's campaign to recover the offshore islands within the framework of policy: laid down at a politburo meeting in late August. Peiping's propaganda con- tinues to reflect a desire to continue the Warsaw talks, blam- ing the deadlock on American in- sistence on an immediate cease- fire but making no threat to suspend the negotiations. Brit- ish Foreign Secretary Lloyd told Secretary Dulles on 25 September that the British charge in Pei- ping reported a conversation with an Indian Embassy officer there, from which it appeared that the Chinese Communists "want to keep the Warsaw talks going." The charge's report apparently con- tained a hint that India might undertake mediation between the Chinese Communists and the United States. Peiping is un- likely, however, to desire such mediation at this time. The Chinese Communists ap- parently hope to derive from the Warsaw talks substantial politi- cal benefits which will further their campaign to achieve wider international acceptance. They clearly believe that bilateral negotiations further their ef- forts to appear as "near equals" with the United States. Their negotiator, Wang Ping-nan, publicly declared on 29 Septem- ber that Communist China's au- thority in the "international arena is rising ever higher." Peiping's propaganda strongly suggests a willingness to consider "recovery" of the offshore islands as the price for a temporary renunciation of force in the Taiwan Strait area. Repeated commentaries state that Communist China has "every right and necessity" to take "military measures" against the offshore islands and imply that other territo- ries--Taiwan and the Penghus (Pescadores)--could be '!liber- ated" by peaceful means. In his National Day speech on 1 October, Defense Minister Peng Te-huai continued this approach, distinguishing between the "direct menace" from the off- shore islands and Communist China's aim to liberate Taiwan "at a suitable time." Mao Tse-tung, appealing for international condemnation of the United States, recently declared that in its threats of "atomic war,;" the United States has alienated more than 90 percent of the "people of the whole world." This approach was repeated in a People's Daily editorial on 30 September wTi1c'h stated that American SECRET PART I OF IMMEDIATE INTEREST Page 1 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 - Brid Bridge (under construction) Lungchi threats of nuclear war confront the "people of the world" with the task of "staying the hands" of the United States. Pravda on 29 September echoed andamplified Peiping's position that American insist- ence on a the strait area and "renunciation of force" is completely "out of the question," inasmuch as a state of war does not exist between the United States and Communist China. Pravda also charged that the United States is seeking to break off the talks in order to bring the 16TAfAN EHRTAN question before the United Na- .tions, where American pressure tactics and intimidation could be employed. Soviet propagan- dists have instead stressed the seating of Communist China in the UN, and some have stated this to be the "only solution" to the crisis. The first Soviet hint since the onset of the Taiwan Strait crisis of willingness to supply "volunteer" assistance to Communist China appeared in the army newspaper Red Star on 25 September. In an article recounting how Soviet pilot volunteers had fought in China against the Japanese, it was claimed that Soviet pilots are SECRET PART I OF IMMEDIATE INTEREST Page 2 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 2 October 1958 "ready, if necessary, to come to the aid of their true Chi- nese friends...." Soviet Avia- tion has subsequently rie similar items hinting at mili- tary support of Peiping; it re- ferred on 28 September to the comradeship-in-arms of Soviet and Chinese Communist pilots and asserted that "like brothers we will fight the hated enemy together if they dare attack us." The American Embassy in Moscow believes these articles provide the first indications that Soviet military personnel are being psychologically pre- pared for service in China. So- viet military press organs have been consistently 1_less:~? re- strained inscommenting on the Taiwan Strait issue than other Soviet propaganda media. A Pravda editorial of I October repeated previous warn- ings that the Soviet Govern- ment regards an attack on Com- munist China as an attack on the USSR itself, adding that the Soviet people "are prepared at any moment to go to the assist- ance" of the Chinese Communists. The Chinese Communist De- fense Ministry's announcement that parts of Sidewinder mis- siles fired by Nationalist planes have been recovered and brought to Peiping for "public exhibition" indicates that Amer- ican "warmongering" will con- tinue to be a major theme in Communist propaganda during the Warsaw talks. The announcement promised "punitive" action against the Chinese Nationalist Air Force: Premier Chou En-lai on 30 September made a similar promise. Military Situation Communist artillery con- tinues its harassing and inter- dictory fire on the Chinmens. Delayed-action fuses are being used to increase shell penetra- tion of Nationalist defenses. there are 200 new Communist gun positions in the Chinmen area, making a total of over 1,000 positions, of which about 650 have guns. There has been a corresponding rtillery increase in the Matsu area, where there are now 105 guns as compared with 70 on 30 June. The resupply of the Chin- men Islands has improved during the past week despite bad weather and continued Communist artillery fire. The average tonnage delivered per day has risen from approximately 100 to nearly 200 tons. A number of innovations have been re- sponsible for this increase, including off-loading of bulk cargo from LST's offshore to LCM's for delivery to the beach, stepping-up of air drops, use of motor junks for delivery of foodstuffs, and off-loading of partly filled drums into the sea to be towed ashore. As of 30 September, the Chinmen gar- rison still had a supply of ap- proximately 30 days of food- stuffs and ammunition. The loan by the United States of 16 C-119 transport aircraft should substantially increase air-drop deliveries as soon as these are placed in operation. The Taiwan Defense Command expects that improvement in air-drop tonnage and in sea supply will raise tonnages de- livered to a total adequate to support the islands indefinite- ly. Civilian food stocks on Chinmen are believed to be ade- quate to support the civil pop- ulation through next spring. The supply is believed adequate to permit some diversion to SECRET PART I OF IMMEDIATE INTEREST Page 3 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 .SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 2 October 1958 military use without causing undue hardship. The Nationalist press, however, reports that the situation of the civilians on Little Chinmen is critical,, with only a 15-day supply of food remaining on the island. Chinese Nationalist of- ficials now are optimistic that the blockade of Chinmen has been broken and that the island is "strangulation proof" unless the Communists use new weapons or new interdiction tactics. They are also more hopeful that means will be found to supply the gar- risons on the hard-pressed lesser islands of Tatan an d~ rhtan. 25X1 MIDDLE EAST DEVELOPMENTS Lebanon President Shihab has post- poned until next week the spe- cial session of Parliament which will be asked to return A vote of confidence for the cabinet of Tripoli rebel leader Rashid Karame. The delay will permit more time to consider proposals for increasing the size of the cabinet to admit some members acceptable to the pro-Chamoun faction. Karame, however, has declared that he will not agree to enlarge the cabinet until it has received parliamentary approval. Chamoun, on the other hand, has asserted that his supporters in the legislature will not approve Karame's cab- inet. Shihab has threatened to dissolve the chamber, which is dominated by Chamoun supporters, if the cabinet does not win support. Dissolution would re- quire Karame-controlled elec- tions within three months, with results unfavorable to Chamoun. Shihab intends to add 22 seats to the 66-man legislature in order to provide "balanced" representation, and he has in- dicated that he would also like to obtain decree powers and sus- pend the legislature for six months. He then could rule without interference from the pro-Chamoun Parliament. All seven ministers origi- nally proposed for membership in the Karame cabinet are op- posed to Chamoun's pro-Western foreign policy, and four sided with the rebels against Chamoun during the rebellion. Militant pro-Chamoun forces have adopted the tactics former- ly used by the anti-Chamoun rebels by employing violence to seek more favorable repre- sentation in the cabinet. The reported intention of two anti- Chamoun Maronite Christian min- isterial candidates to resign could open the way for a polit- ical compromise and for the ap- pointment of pro-Chamoun rep- resentatives to the cabinet. An outright increase in cabinet seats is also being discussed as a possible solution, failing which, the Moslem-Christian split will widen. Shihab appar- ently has already embarked on a policy of removing or reas- signing members of security forces who actively opposed the rebellion this summer. Syrian Interior Minister Sarraj recently told a European diplomat in Damascus that "noth- ing would stop Lebanon's associa- tion with the UAR," and that he SECRET PART I OF'IMMEDIATE INTEREST Page 4 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 WNW SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY was prepared to use violence, mented was probably timed to deprive advocates of union with the UAR, which just proclaimed such reforms in Syria, of a ma- jor popular issue. Iraqi land reforms would probably increase agitation in Iran against the Shah, whose chief support is from large landowners. Some Soviet bloc arms have been furnished Iraq in the recent past by the UAR. Iraq has also permitted stationing of UAR MIG fighters in Iraq. if necessary, to accomplish this. j Jordan Extensive political maneu- vering by military and civilian leaders in Jordan is continuing. New rumors are spreading in Amman and Jerusalem that King Husayn is preparing to bring representatives of opposition groups, possibly including the National Socialist party, into the government, presumably in a bid to avert antigovernment violence after British troops are withdrawn. Such a move could also establish a basis for an orderly transition toward a policy of accommodation with Jordan's Arab neighbors. In- stallation of a neutral govern- ment in Jordan could also pre- pare the way for the King's de- parture for a "vacation and medical checkup," following withdrawal of British troops. The UAR-operated "Jorda- nian People's Radio," which broadcasts from Syria, has con- tinued a torrent of unusually fierce exhortations to over- throw the pro-Western government in Jordan. Iraq Baghdad authorities con- tinue cautious maneuvering to reduce the influence and pres- tige of the faction within the government favoring union with the UAR. Premier Qasim has further strengthened his posi- tion by dismissing pro-UAR Dep- uty Premier and Interior Min- ister Arif, as well as two otheri pro-UAR cabinet members. Arif is being sent to West Germany as ambassador. Announcement that a land reform program is to be imple- Reports from Baghdad re- flect the existence of a group of senior officers, apparently emerging as the actual locus of power in Iraq. This group, which includes the four division commanders, did not participate directly in the 14 July revolt. Arif's former brigade has been sent on a security mission to southern Iraq, and elements of Qasim's brigade may also have been withdrawn from Baghdad. These moves may be intended to reduce the possibility of a countercoup by politically oriented units in the capital. Middle East Oil Nasir's expected attempt to gain ultimate control over the terms under which Western oil interests operate in the Arab states has apparently be- gun. His establishment of a Public Corporation for Petro- leum Affairs to plan UAR petro- leum policy will assure Cairo of control in all details over Syrian oil matters. Cairo has already stymied Syrian negotia- tions with the American company (Tapline) operating the pipe- line from Saudi Arabia--a~ move presumably intended to shift decisive negotiations to Cairo. The new petroleum authority SECRET PART I OF IMMEDIATE INTEREST Page 5 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY may well emerge as the instru- ment for implementing Nasir's over-all Arab oil policy toward Western oil companies. A spokesman for the Egyp- tian-dominated Arab League an- nounced in Cairo on 29 September that Kuwait, the Middle East's largest oil producer, had ap- plied for membership, and that the league's secretary general would visit Kuwait in response to an invitation from the Ruler. Kuwait's adherence could set a precedent for the oil-producing Persian Gulf states of Bahrein and Qatar. According to the Cairo press, Kuwait's deputy ruler declared in Cairo on 24 Septem- ber that Kuwait was prepared to join the league and contribute to an Arab development bank. Britain is empowered by treaty and custom to handle Kuwait's foreign relations, but in Arab affairs the Ruler, who feels that accommodation with Nasir is necessary, has recently as- sumed an increasingly independ- ent position. The Foreign Office in Lon- don has stated that it was not consulted on the deputy ruler's move. The Kuwaiti Government secretariat has also denied that Kuwait would join the league. The denial, however, suggests that the powerful deputy ruler may be attempting to cultivate favor with Nasir and with the Kuwaiti nationalists at the ex- pense of the Ruler, who is tied to treaty relations with Brit- ain. Saudi Arabia In Saudi Arabia, Crown Prince Faysal's frustration over budgetary problems has led him to charge that the Arabian- SECRET American Oil Company (Aramco)' is indifferent to'Saudi finan- cial difficulties. Faysal, ap- parently reflecting the influ- ence of his pro-Egyptian petro- leum adviser, hinted to the American ambassador that action to curtail Aramco's rights may be under consideration. The ambassador also in- ferred that some form of re la- tione with the Sino-Soviet bloc was under consideration. Saudi banks have been notified ver- bally that the unofficial ban on Soviet bloc imports has been lifted. This is in line with Faysal's intention to promote a "neutral" foreign policy. PART I OF IMMEDIATE INTEREST Page 6 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Nasir's Reorganization Plan Nasir is expected to re- veal soon the details of his plan to centralize the govern- ment of the United Arab Repub- lic, giving Egypt greater con- trol over Syria. His choice of personnel is not yet known, but it appears certain that several prominent officials, including Vice Presidents Hawrani, Asali, and Baghdadi, will be dropped because of their past disagreements with Nasir's policies. Syrian strong man Sarraj, at present minister of interior for the Syrian re- gion, has been mentioned as Nasir's choice to head a new "executive council" for that region, with the task of im- plementing Cairo's policies. Preliminary steps have al- ready been taken. Nasir has promulgated a state-of-emergency decree, announced a land-reform program for Syria, abolished the extralegal status of Syrian tribes, and is reported to be transferring numerous Syrian military personnel to duty in Egypt. The land-reform'law, limit- ing individual holdings to about 175 acres of irrigated or 650 of nonirrigated land, 'will arouse resentment among Syria's numerous large landholders. The law will virtually confiscate excess acreage, since compensa- tion will be in nonnegotiable 40-year bonds at only 1.5-per- cent interest, Syrian tribes, previously exempt from many state laws and regulations effective in urban Syrai, are now "subject to all laws, decrees, and arrangements applying to townsfolk in the Syrian region." dominance. The number of Syrian offi- cers who have actually moved to Egypt seems to have been significant, and reports that many of them were followers of Akram Hawrani's dissident Baath party indicate that their transfer was a delib- erate effort to remove from 25X1 Syria another possible source of resistance to Cairo's SECRET PART I OF IMMEDIATE INTEREST Page 7 of 7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Napp, SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 2 October 1958 NOTES AND COMMENTS BRITISH.PUT CYPRUS PLAN INTO EFFECT Despite the fact that Brit- ain started on 1 October to im- plement its Cyprus plan, NATO Secretary General Spaak is still trying to persuade Britain, Greece, and Turkey to confer about the island and head off a major crisis to the alliance. Greece considers any con- ference useless now in view of Britain's start in implementing its Cyprus plan. Athens is still re-examining its ties with the West. The cabinet, however, apparently has reject- ed, at least for the present, :Foreign Minister Averoff's recommendation that Greece break relations with Turkey, de- nounce the Balkan Pact, and with- draw from NATO. Averoff may re- sign over this rebuff to his policies--a move which would probably precipitate a new cri- sis in the Greek Government. The developing political situ- ation in Greece has caused King Paul to interrupt his vacation in Austria and hurry back to Athens. On Cyprus, the first of Oc- tober and the prior announcement of the appointment of the Turkish consul general in Nicosia as the official Turkish representative to the governor of Cyprus were celebrated by Turkish Cypriots, but Greek Cypriots called a gen- eral strike which brought vir- tually all activity on the-is- land to a halt. Meanwhile, sporadic attacks on British de- pendents, ambushes of British troops, and island-wide sabotage occurred with increasing fre- quency. While the Predicted 1 October "all-out offensive" by EOKA did not materialize, British officials continue to predict that a major campaign of violence will occur but may not be n for another two weeks. France's overwhelming ap- proval of De Gaulle's constitu- tion will probably encourage the premier to seek an early solution to the Algerian prob- lem, even at the risk of alien- ating his rightist and perhaps some of his military supporters. The forthcoming electoral re- form will be aimed at reducing Communist representation in the National Assembly, but there is some fear it may also favor the right at the expense of the center parties. Under pressure of a public mandate to bring peace to Al- geria, De Gaulle must now main- tain the momentum of a drive for an early solution within the framework of his promise in June to negotiate with the elected representative of the Algerian people. His immediate SECRET PART II NOTES AND COMMENTS Pave 1 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET V CURRENT INTELLIGENCE WEEKLY SUMMARY 2 October 1958 aim, therefore, is to indicate the broad lines of the solution he favors, so that extremists on both sides will not be dis- illusioned too abruptly. In view of the almost unanimously favorable referendum vote in Algeria, De Gaulle may be in no hurry to assuage FLN sensibili- ties, but his unwillingness to support the integration theme runs the danger of further ex- citing irreconcilable elements among the settlers and army. The Algerian solution De Gaulle envisages will have a direct bearing on the electoral law under which the new assem- bly will be chosen in November. He would like to reduce Commu- nist strength to perhaps 30 deputies, compared with 150 at present. The fear has been ex- pressed, however, that this could be achieved only at the cost of a heavily rightist ori- entation of the assembly, which would sharply reduce the possi- bility of a liberal solution in Algeria. Moreover, such a dis- tribution of assembly strength would play into the hands of the Communist party by forcing other leftist deputies to align themselves in a single bloc with the Communists. If De Gaulle is to avoid eventual capitulation to the right, he will therefore have to consider an electoral law which would foster a respon- sible left and center. De Gaulle has long been disinclined to take measures to outlaw the Communist party, as Soustelle and other rightists have demanded publicly. He believes that Communist electoral strength--averaging a quarter of the electorate under the 1946 constitution--has been essen- tially a protest vote against the old system and this convic- tion has been reinforced by the party's inability to muster all its former supporters to oppose the constitution. Instead of trying to reduce Communist strength solely by electoral de- vices, De Gaulle will probably offer a program of socio-eco- nomic reforms to lure the pro- test vote away from the Commu- nists. FRENCH WEST The secession of Guinea and the reported intention of the rich Ivory Coast, and per- haps also of Mauritania, vir- tually to cut their ties with the Federation of French West Africa are likely to destroy the federation's ability to function effectively. French West Africa--a fed- eration of eight territories with a total population of over 19,000,000 diverse peoples-- covers almost 2,000,000 square miles of desert, steppes, and jungle. Only since 1946 has the federation, centered at Dakar, had real administrative significance. Recently many African na- tionalists have sought to en- hance the powers of the federal government as a means of gain- ing greater independence from France, but representatives of at least two territories--the agriculturally rich Ivory Coast and the backward, predominate- ly Caucasian Mauritania--have opposed Dakar's growing power and have demanded stronger individual ties With France. The Ivory Coast is expected to break its ties with Dakar soon and to take measures to halt the flow of its tax money for use by the federa- tion's poorer territories. SECRET PART II NOTES AND COMMENTS Page 2 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET Most French West African leaders urged their followers to vote yes in the constitution- al referendum in order to assure the continuation of French eco- nomic development funds. At the same time, they expect to take advantage of the constitution's provisions permitting a later request for independence. In contrast, Premier Sekou Toure of Guinea received the support of about 98 percent of the Guin- ea electorate when he urged a vote for immediate independence. Toure has frequently indi- cated his desire to retain close ties with France after gaining independence, and hopes to re- main within the franc zone and to associate with the French com- munity provided for by the new constitu- tion. He has prom- ised no "great up- heaval" in the social and economic struc- tures, since Guinea, which is rich in min- eral wealth, urgently needs assistance for economic development. His past record as a leftist labor leader, however, suggests he will favor socialist, economic policies. In view of his(previ- ous political activ- ities, he will proba- bly pursue a dynamic nationalist program Paris has already announces that Guinea is no longer entitled to representation in the govern- ment councils at Dakar and Par- is, that French economic aid is being curtailed, and that the services of French administrators and technicians will be phased out over a two-month period. Al- though Guinea gained at least de facto independence on 30 Septem- ber, France is withholding de jure recognition until the con- clusion of diplomatic and eco- nomic negotiations, which are expected to be rather lengthy and difficult. Paris has warned that diplomatic recognition by other countries could lead to "unpleasantness" with France, o MUNL.. 2 j BELGIAN GABON CONGO Brazzaville to gain recognition as the out- standing leader in West Africa, and he may eventually attempt to enlarge Guinea at the ex- pense of neighboring Liberia and Sierra Leone. its recognition and similar ac- tion is likely on the pars of several other African, Aram Communist governments. BLOC MOVES ON RECOGNITION OF ALGERIAN GOVERNMENT Moscow is hesitating to recognize the Algerian provi- sional government. The USSR is faced with the problem of attempting, as it has in the past, to avoid undue provocation of France while at the same time upholding the Soviet pose as the champion of anticolonialism. The USSR has apparently adopted SECRET Fort Lamy FRENCH CAM._J ~EQUATORI //77 / r RICA AMEROUN NGX' SHARI I ,? s) 0~ \..`/.. PART II NOTES AND COMMENTS Page 3 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET a firmer pro-Algerian line, how- ever, in view of Khrushchev's recent strong attack on the De Gaulle government's policies, including its failure to end the "iniquitous colonial war against the Algerian people." N. A. Mukhitdinov, a top Soviet spokesman on Middle East- ern and Arab affairs, had two "frank and sincere" meetings with "ministers" of the Algerian provisional government during his recent visit to the UAR. The heavy publicity given by Moscow to these meetings--the first such high-level Soviet contact with the rebels--is de- signed to impress Afro-Asian opinion with its sympathy for the new regime. Soviet leaders may be deferring a decision on the question of recognition, however, pending receipt of Mukhitdinov's report on the prospects of the new government and an assessment of De Gaulle's policies following the consti- tutional referendum. The European satellites will probably follow Moscow's lead, although East Germany, which does not have diplomatic relations with France, might undertake recognition in advance of the other Communist regimes in Europe. Communist China, the first bloc country to recognize the provisional Algerian regime, clearly sought to gain the sym- pathy of Arab countries--par- CHINESE COMMUNIST ECONOMIC ACTIVITIES IN AFRICA Communist China this year is seeking greater economic ad- vantage in its trade with Africa now that it has begun to achieve its earlier objective in this trade--enhanced political status in the area. Peiping established ticularly Morocco and Tunisia-- for its own efforts to win in- creased foreign recognition. North Korea and North Vietnam, which quickly followed Peiping's lead, have found it very diffi- cult to gain international ac- ceptability. Hanoi's relations outside the bloc are limited to a few consulates,while Pyongyang has never received even de facto recognition from the most strin- gently neutral countries. Al- though neither North Vietnam nor North Korea is represented in the United Nations, both try hard to identify themselves with the Asian-African bloc, and recognition of the Algerians is a logical extension of this policy. Peiping's move undoubtedly reflects its impatience with Paris, which, despite sporadic signs of interest, has neverthe- less refused to take actual steps to establish diplomatic exchanges. The risk of offending France thus has little meaning for Pei- ping, and North Vietnam and North Korea are in a similar position. movement." First-hand, high-level con- tact could be made between the Algerians and the Chinese Commu- nists later this year, as numer- ous reports have stated that Premier Chou En-lai will travel to Cairo. The Chinese would ex- ploit any meeting with the rebel leaders to demonstrate their good will toward the "liberation its first economic ties with Africa in the belief that trade eventually would lead to diplo- matic recognition. Now offi- cially recognized by Egypt, Chi- na has a permanent trade office in Cairo and has laid the SECRET PART II NOTES AND COMMENTS Page 4 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET groundwork for closer ties through initial trade agreements with Tunisia and Southern Rho- desia. Negotiations are also under way for a trade protocol with the Sudan and renewal of the Sino-Moroccan trade pact. Under its original agree- ment with Egypt, which expires this month, Peiping was willing to import substantial quantities of cotton for cash in order to promote political ties. It now insists on a barter deal to re- duce its sterling payments, which have totaled $50,000,000 during the past three years; for the same reason, a barter agreement is being arranged with the Su- dan. Peiping's imports from Communist China's 1957 Trade with Africa T Trade agreement in existence UGANDA II 3 FEDERATION OF 113 RHODESIA AND NYASALAND 0 KENYA 16 160 22 L450 I UNION OF 1,450 SOUTH AFRICA 3 FRENCH ? 1,500 WEST AFRICA 0 1 700 1,700 0 l 2 550 EXPORTS IMPORTS Figures are in thousand dollars 30 ^ Egypt amounted to $42,000,000 last year, nearly equal to China's total exports to Africa. China has been trying to increase purchases in Western Europe following the break in economic relations with Japan and is negotiating barter ex- changes with France and the United Kingdom involving Africa. To secure a larger share of China's West European contracts, France, which normally sells more to China than it buys, has agreed to a barter basis for its trade. This will enable Peiping to retain much of the foreign exchange earned in the African franc area, where its sales greatly exceed its purchases. Y. BR0 FR- BELGIAN CONGO LIBYAEGYPT FRENCH EQl ATORD g AFRICA io~nwo I\ UNION OF SOUTH AFRICA )MAD TOTALS 43,527 44,346 SECRET FED. OF - RHODESIA AND r_ NYSALAND PART II NOTES AND COMMENTS Page 5 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET delegation sent to Southern Rhodesia in July has concluded a six-month agreement for the export of Chinese products, in- cluding rice, in return for to- bacco. The mission also ex- pressed interest in obtaining African minerals in exchange for a wide range of machinery and machine tools. Similar offers were made to the Union of South Africa during August, and Pei- ping has proposed to export tires and tubes to Ghana. CURRENT INTELLIGENCE WEEKLY SUMMARY To save foreign exchange, Pei- ping is also proposing to im- port British tractors on the condition that London negotiate the delivery of Chinese tex- West Africa. In 1957, China traded with 14 African areas; although it imported from only half of them, total Sino-African trade, which amounted to $100,000,000, was balanced. To help gain a creditor trade position, Com- munist China continues to seek new markets in Africa. A trade (Prepared by The Sino-Soviet bloc is conducting an apparently well- planned attack on Yugoslav state affairs, despite Moscow's repeated allegations that it desires to maintain correct state relations with Belgrade. In this attack, definite limits appear to have been set. Bloc countries are not to sever re- lations with Belgrade,csince blame for any diplomatic rup- ture must clearly fall on Yugo- slavia. Each member of the bloc is attacking Yugoslavia on specific issues which each has determined would be most embarrassing. Moscow probably feels that a return to the heavy-handed approach Stalin adopted after 1948 would only increase international sympathy for Tito and permit him to re- taliate in a manner embarrass- ing to Khrushchev's interna- tional position. The pyrotechnics charac- teristic of the anti-Yugoslav campaign last spring have sub- sided, and ideological argumen- tation, previously the primary element in the dispute, now plays a role secondary to spe- cific attacks against the Yugo- slav state. Moscow has not swerved from its stated inten- tion of destroying Yugoslav revisionism theoretically and politically, but it is appar- ently in no hurry to accomplish this. To date, the USSR, Commu- nist China, and Albania have led the anti-Yugoslav campaign. Moscow has restricted the dis- tribution of Yugoslav publica- tions in the USSR, has vacil- lated regarding a promised shipment of 200,000 tons of wheat to Yugoslavia, and re- portedly has refused outright to ship coking coal. The Chi- nese Communists are allegedly boycotting Yugoslav ships and ports, and Belgrade's diplomatic relations with Peiping, as well SECRET PART II NOTES AND COMMENTS Page 6 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 2 October 1958 as with Tirana, are becoming increasingly strained. While such developments are reminis- cent of Moscow's dispute with Belgrade after 1958, it still appears unlikely that differ- ences this fall will reach the intensity of the earlier dis- pute, Yugoslav allegations not- withstanding. The other Commu- nist states still confine them- selves to propaganda assaults, except for Poland which has re- mained virtually aloof from the arguments. The USSR, in what-is prob- ably a tactical move, appears now to have reversed its earlier decision to withold its wheat shipment, hoping thereby to discredit insistent Yugoslav arguments that economic rela- tions with the USSR are corre- lated with political compati- bility and to undermine Bel- grade's position in its economic talks with the United States. Such economic harassment will probably continue, and the bloc can be expected to take an equivocal position on the de- livery of vital commodities to Yugoslavia. Khrushchev has stated, however, that trade will continue when mutually advantageous. SECRET As more and more elements of Yugoslav public life have become involved in the polemics,- the sensitive question of Yugo- slavia's policy toward its Al- banian and Macedonian minori- ties has arisen again. Tirana and Sofia have become exceed- ingly vituperative on the sub- ject, and the Yugoslavs have publicly accused both of "openly expressing aspirations to some territories of our country." The Yugoslavs have main- tained a fairly calm and re- strained attitude throughout the campaign, but have--when they considered it necessary-- stubbornly defended their position. For the present, Tito's objective apparently is to prove to the world that Moscow is carrying the fight to extremes by interfering in the internal affairs of Yugoslavia, attempt- ing to discredit his policies, and seeking to separate him from his people. Whether Tito will abandon this policy. in favor of specific steps in retaliation for bloc harassment seems to depend on how' much further Moscow wil 25X1 25X1 PART II NOTES AND COMMENTS Page.7.of 19 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY USSR DISCLOSES LARGE NUCLEAR POWER PLANT The Soviet delegation to the Second International Confer- ence on the Peaceful Uses of Atomic Energy at Geneva an- nounced-that a nuclear electric- power plant is in operation at an undisclosed location in Si-.- beria. The announcement stated that the power plant, now oper- ating at a power level of 100,- 000 electrical kilowatts, was to be expanded to a total capacity of 600,000 kilowatts, which would make it the largest in the world. The plant may be located at the large atomic energy com- plex just north of Tomsk, where what appeared to be dual-purpose reactors and associated power- generating facilities were ob- served under construction in 1957. Some or all of the elec- tric power generated may be con- sumed by the gaseous-diffusion plant being expanded at this highly secret nuclear-energy complex. This plant was not specifi- cally mentioned among those which, according to the Sixth Five-Year Plan, would make up most of the 2,000,000-'to 2,500,,- 000-kilowatt nuclear-power plant capacity scheduled to be in op- eration by 1960. Present indi- cations are that the installed capacity of stations specifi- cally designed for power produc- tion will not exceed 700 mega- watts by that time. It is be- lieved that the lag in the con- struction program of these plants prompted the USSR to publicize this dual-purpose reactor, and that it considers the propaganda advantages sufficient to out- weigh the possible security hazards involved. Only one of the large nu- clear-power plants scheduled under the Sixth Five-Year Plan was reported by V. S. Yemelyanov, chief of the Main Administra- tion for Peaceful Uses of Atomic Energy, to be under construction-- SECRET PART II NOTES AND COMMENTS Page 9 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY the 420-megawatt nuclear power the Urals near Beloyarsk, east plant at Voronezh. He said a of Sverdlovsk. No mention was similar plant in the Leningrad made of the fourth or fifth area will be built. He also large plant in the original reported that a large nuclear- Sixth Five-Year Plan. power plant with a capacity of 400 megawatts would be built in "LOCALISM" IN SOVIET INDUSTRIAL MANAGEMENT While Soviet leaders have suppressed in time, they may expressed satisfaction with the disorganize our socialist econ- reorganized system of industrial omy." management, the press during the past year has attacked various problems arising from the new system for industrial adminis- Shortly after the plenum, the first articles appeared attacking investment practices tration which are indiscrimi- by officials of the regional nately classified .as "localist economic councils (sovnarkhozy). tendencies.." The removal, four days after the At first, official crit- icism was leveled primarily against nonfulfillment of deliveries among the various economic regions. This culmi- nated in decrees in late spring which provided for a reorgan- ization of the supply system and the application of criminal sanctions to repeating violators of cooperative delivery con- tracts. In mid-May the attack shifted to misuse of investment funds by regional administrators acting against central direc- tives in pursuance of projects primarily of local significance. This campaign probably resulted from an unpublicized decision of the central committee at its May plenum. Although official statements have claimed that the plenum was devoted entirely to development of the chemical industry, Party Life last Au- gust, in criticizing illegal investments, referred for the first time to "the decisions of the May plenum which noted that if violations of state discipline are not resolutely plenum, of N. K. Baybakov, planning chief of the Russian Republic (RSFSR), may also have been connected with the central committee decision. About the same time, an investigation by the Industrial Bank into the financial opera- tions of 89 sovnarkhozy revealed that 29 had diverted some 428,- 000,000 rubles($75,000,000) from centrally planned capital construction into local projects. In mid-August, Pravda, Izvestia, and Party Life singled out nine prominent sovnarkhozy for partic- ularly serious malfeasance. The Karaganda Sovnarkhoz, for in- stance, was castigated for using almost 75, 000, 000 rubles ($13,- 000,000) of the funds assigned for development of the coal and metal industries for such things as the construction of theaters, rest homes, and a circus. Khrushchev has placed heavy reliance on regional party or- ganizations to check on their counterpart economic councils. At times, however, regional party officials are faced with a conflict of interests between SECRET PART II NOTES AND COMMENTS Page 10 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET national demands and local re- are serious limitations on ac- quirements. The severe criti- tions the regime can take to cigm of regional party commit- improve the efficiency of the tees responsible for the errant industrial administration by sovnarkhozy attests to the prob- encouraging local initiative. lem of keeping local party units A pointed example stems from a responsive to Moscow's demands. Khrushchev proposal last April "Localism," though not a new phenomenon in the Soviet system, has taken new forms un- der the reorganized industrial management and perhaps has been given a wider framework in which to operate. While Soviet lead- ers are well aware of the prob- lem and will continue to take measures to prevent serious dis- ruptions of the economy, there to decentralize planning of capital construction to permit the sovnarkhozy, rather than the Moscow planning authorities, to choose construction projects. Recent signs indicate that Khru- shchev's suggestion has been severely watered down, at least temporarily, partly because of sovnarkhoz investment malfea- sance. (Con- 25X1 curred in by ORR) EAST GERMANS MAY EASE DOMESTIC POLICIES The East German regime, cultural and economic policies disturbed by the mass flights of intellectuals, professional personnel, and technicians to the West and by other signs of increasing popular dissatisfac- tion is reconsidering the se- vere domestic program enunciat- ed at the fifth congress of the East German Communist party in July. A party plenum scheduled for mid-October may decide on a new approach intended to slow the exodus and to encourage greater productivity. In following a less rigid course, the Ulbricht regime would in part be adopting the moderate program advocated by the purged Schirdewan and Oels- sner and by Fritz Selbmann, whose opposition to Ulbricht cost him his central committee seat and, quite recently, his post as deputy premier. Selb- mann remains a deputy planning commissioner., however, and may yet have a hand in carrying out a more liberal economic program. The recent concession to physicians and an easement of hinted at by regime leaders at a recent central committee meet- ing suggest that a relaxation is in the offing. The decree affecting the status of physi- cians stated that the "apoliti- cal specialist" has a place in East Germany, suggesting that the replacement of industrial specialists by party hacks dur- ing the current reorganization of the economic admistrative structure will cease. The ranks of specialists and technicians have been the hardest hit of all manpower categories by the flights to the West, and East German manpower reserves are almost exhausted. The propaganda campaign which was to prepare the way for an increase in work norms throughout industry has stopped abruptly. In an apparent effort to avoid raising norms but still to increase labor productivity, the worker is to be ex- ploited by the "voluntary brigade" system, and stu- dents and children are to be drafted for part-time work. SECRET PART II NOTES AND COMMENTS Page 11 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET There is a. possibility that pressure on the private business sector will be eased, since large-scale flights of retailers have caused distribu- tion problems. A slowdown in the collectivization of agri- culture also appears likely, because so far in 1958 over six tunes as many cooperatives have been formed as in 1957. The regime could use an interim period in which to bring the newly seized lands of these co- PRE-ELECTION DEVELOPMENTS IN PAKISTAN The success of Pakistan's ruling parties in dealing with political disturbances in East and West Pakistan fomented by the opposition has apparently strengthened the national gov- ernment's position. It should lso reduce the possibility of authoritarian moves to suspend parliamentary government or to curtail political party activ- ity. These developments should clear the way for holding the country's first national elec- tions as expected in February, although the government's sin- cerity in this respect is still open to question. In East Pakistan, sessions of the provincial assembly on 20 and 23 September ended in violent clashes and the arrest of 12 opposition members. The deputy speaker later died of injuries. While the ruling Awami League members appear' to have shared responsibility for the disorders, the opposition politicians probably sparked the violence in an attempt to force the national government to impose President's Rule and SECRET operatives into "socialist pro- duction." (Prepared jointly with URRY_ Germany by 1961. to bring its standard of living up to that of West A general relaxation of hard policies will probably not be effective in reducing de- fections from East Germany, but it is one of the few posi- tive steps the regime can take to further its ambitious plan 25X1 thus deprive, the Awami League of its control of the adminis- tration during the crucial elec- tion period. The provincial leaders managed to pass the re- quired budget in the absence of the opposition, however, and adjourned with no further test of their strength likely prior to the February elections. In West Pakistan, Karachi was the scene of violent agita- tion by the Moslem League, an opposition party, in protest against a recent government ban on semimilitary party auxilia- ries. The outlawing of the Moslem League's "national guard" robs it of an instrument which would have been of considerable use during the elections. In the face of indications that the government was prepared to take drastic counteraction against the party if it decided to defy the ban, its leaders postponed plans for a civil disobedience campaign. Their retreat may damage the party's prestige and stop the recent growth in its popular support. 25X1 PART II NOTES AND COMMENTS Page 12 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET COMMUNIST WEAKNESSES APPEAR IN INDIA'S KERALA STATE Attention in India now is becoming focused on the failure of Kerala's Communist-controlled government during 18 months in power to make any progress in solving the state's basic eco- nomic problems. Prior to July, the Commu- nists had appeared to be firmly entrenched in Kerala. In July, however, violent Communist at- tacks on student and labor agi- tators resulted in several deaths, producing widespread fear that the government would not maintain law and order ex- cept in favor of the Communists. Popular indignation in India reached such a pitch that the Kerala government finally granted all student demands, thus suffering its first major defeat since it took office in April 1957. Additional pub- licity regarding the possibility of an investigation by New Delhi has put the state government on the defensive and made it neces- sary for Communists in other states to abandon attacks on New Delhi and spring to the de- f ense of the Kerala regime. More significant, however, is the fact that public atten- tion is turning from immediate incidents to longer range ap- praisals which are bringing to light the Communists' failure to keep pace with other states over. Kerala ministers have un- successfully toured India and foreign countries attempting to attract private capital and as- sure Kerala's achievement of its Second Five-Year Plan targets. Preliminary negotiations with Indian industrial interests for establishing a rayon pulp factory in Kerala have produced much adverse publicity for the Com- munist government, whose tenta- tive agreement to assist the project and to give management considerable control over factory labor raised a storm of criticism not only from Indian labor circles but also from the national head- in increasing agricultural pro- I quarters of the Communist party. duction and their inability to attract much-needed industry to I Increasing publicity regard- Kerala to relieve widespread ing these failures in long-range unemployment. objectives will tend to weaken the Communists' hold on Kerala. Indian Planning Commission The non-Communist opposition statistics show that Kerala has there, which includes the Con- the poorest 'record in South In- 1 gress party, is not likely to dia in increasing its food pro- attempt to take over in the im- duction. Furthermore, no im- j mediate future, however, as it 25X1 portant Indian or foreign pri- vate industry has invested in Kerala since the Communists took is not sufficiently well or- ganized to improve on the Com- munists' record. SECRET PART II NOTES AND COMMENTS Page 13 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY General Ne Win's military take-over in Burma on 26 Sep- tember, welcomed by all but the Communists and the crypto-Com- munists, appears to have halted the country's drift toward po- litical violence and chaos. Government authorities in Ran- goon insist there has been no "coup," that the full cabinet approved the move, and that Premier Nu "invited" Ne Win to Strongly anti-Communist General Ne Win can expect nearly unanimous support from the feud- ing factions of the Anti-Fascist People's Freedom League (AFPFL) when he is nominated in Parlia- ment on 28 October as interim premier. He is pledged to give the country six months of non- partisan government and to sup- ervise national elections next April. The rival leaders of the factions of 'the AFPFL--U Nu on the one hand and Ba Swe and Kyaw Nyein on the other--will have an opportunity for a reconcilia- tion under conditions involving a minimum loss of prestige to either side. Members of the Communist People's Comrade party have left Rangoon and returned to the jungle. This group, con- sidered the best disciplined of the Communist-front organiza- tions, has maintained close liaison with the Burma Communist party of Than Tun. Presumably, it now will resume its guerrilla warfare with weapons known to have been cached in the jungle as its members surrendered dur- ing recent months. The crypto- Communists of the National United Front, who have supported Nu since June, have denounced the government move, charging that Ne Win has been made a tool of right-wing reactionaries. Ne Win, apparently prompted by Home Ministry plans to con- vert the army into a government party instrument through arrest or retirement of its top lead- ers, delivered an ultimatum to U Nu on 23 September. Although this demand was backed by the armed forces surrounding Rangoon, Nu appears to have accepted the move as a much-needed reprieve. His gamble to continue control with Communist support was fail- ing, he appeared to have lost his parliamentary majority, and the prospects were for inconclu- sive returns and large Communist gains in the projected November national elections. The AFPFL faction of Ba Swe and Kyaw Nyein is favored by the development. Under the heavy and clumsy hand of Home Minister Bo Min Gaung, its mem- bers had been persecuted and could have expected increasingly severe repression as the elec- tion date approached. Now government pressures have 25X1 been halted and the faction's prospects for election gains have much improved, SECRET PART II NOTES AND COMMENTS Page 14 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET The lack of progress by Singapore's moderate parties toward developing an. effective political coalition during more than a year of negotiations points'up the growing Communist threat as this British colony approaches internal self-govern- ment next year. Formation of the United Socialist Front (USF), proposed by Chief Minister Lim Yew Hock in June, has again been postponed several times. Even if formed in the near future, there seems to be little chance that the USF, or any other mod- erate coalition, can develop in time to compete effectively with the Communist-influenced Peo- ple's Action party (PAP) in the Legislative Assembly elections which are to precede self-rule. The party's strength appears un- diminished since its candidates won 13 of the 14 seats it con- tested in last December's city council election and since, more recently, it won a by-elec- tion against united moderate opposition. The Singapore government's chief legal weapon against Com- munist subversion, the Preser- vation of Public Security Ordi- nance (PPSO), will probably be extended by the Legislative As- sembly prior to its expiration this month. While the PPSO has been an effective weapon under Chief Minister Lim's strongly anti-Communist government, a PAP victory in the elections next year would put leftists in a position to set aside the law and obtain the release of key leftist leaders now imprisoned under the law's detention clause. These leftists could then rejoin the PAP with the prospect of achieving early Communist con- trol over the party, now "moder- ately" led. Thus, the Communist position in the PAP and the like- lihood of a PAP election victory next year increase the Commu- nists' chances of controlling the new government of the state of Singapore. Communist domination of the PAP, and through it the govern- ment, might still lead to the appearance of a moderate govern- ment in Singapore, however, for the Communists presumably would wish to avoid any provocation which would cause the British to use their reserve powers to rescind the constitution. Fur- thermore, the Communists know their hope of an eventual merger of Singapore and the Federation of Malaya can be realized only 25X1 by allaying Malayan fears of an extreme left-wing government in Singapore. The inauguration this month of the first international pe- troleum pipeline in South Amer- ica, from Sicasica in Boliva to Chile's Pacific port of Arica, will provide. a new impetus to Bolivian petroleum development. The capacity of the new pipe- line is 50,000 barrels a day, an indication of the great in- crease contemplated for Boliv- ian production. Present pro- duction, however, cannot provide a steady flow, even at the ini- tially planned rate of 7,000 barrels a day. Exploitation by the Bolivian Government amounted to only 2,000 barrels a day in 1952, but it jumped nearly 300 percent by 1954 and almost equaled local demand. Steady increases since then have pro- vided about 5 percent of the country's export earnings. SECRET PART II NOTES AND COMMENTS Page 15 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET Bolivia's successful ef- forts to become a net exporter of oil increased its. awareness of the costs of oil development, and in 1955 the government pro- mulgatbd a new oil code that attracted substantial invest- ment by American companies, as well as by Royal Dutch Shell. These com- panies have complet- ed considerable geo- logical exploration and seismic work, but production still comes exclusively from the national company, which in- creased its produc- tion only 12 percent in 1957, basically because of the ab- sence of adequate transportation from the fields to ports. The Bolivian- Brazilian impasse over the development of promising oil land in eastern Bo- livia has been over- come, and several private Brazilian companies have taken initial steps to meet the requirement of beginning operations in Bra- zil's sector before Septem- ber 1959. All land not under concession by that date will revert to Bolivian control. Because of its acute financial crisis, Bolivia has been inter- ested in granting the land to foreign concessionaires, who would not only bear the produc- tion costs but also pay royal- ties and provide foreign ex- change. Leftist forces are threat- ening this source of new foreign exchange earnings with a con- gressional amendment to Boliv- ia's oil code. Leftist labor leader Juan Lechin, President Siles' chief political rival, has proposed an amendment pro- viding for ratification of cer- tain oil contracts by Bolivia's erratic and frequently leftist- inclined Congress. Such a change would be likely to have an unfavorable effect on the development plans of foreign companies now operating in Bo- livia, as well as on prospec- tive investors. SECRET BOLIVIA l Oil field Oil pipeline ~- Railroad Promising oil are. PART II NOTES AND COMMENTS Page 16 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET An adjustment of Austria's pro-Western foreign policy has become apparent since Chancel- lor Raab's visit to Moscow last July. Vienna's ties with the West basically are still strong, but a continuation of this trend may make uncertain Vienna's sup- port on major East-West issues. Austria's intention to pursue a "balanced" policy has been evidenced in various ways in recent weeks--including ab- stention in the UN vote on the Chinese moratorium issue. Vienna is still maintaining most of the restrictions placed on Amer- ican overflights during the Mid- dle Eastern crisis, and pros- pects are fora much less lenient policy than heretofore. By con- trast, Austria is trying to im- prove relations with Prague and has hesitated to take a strong stand with the Kadar regime in Hungary over serious border provocations. There has also been a sharp increase in offi- cial visits between Austria and the bloc--Defense Minister Graf is expected to leave for a week's visit to Moscow on 4 October. Various factors are in- svolved in these developments. Many Austrians, including Chan- cellor Raab, think of Vienna as a central European capital and ICELAND SEEKING UN CONSIDERATION OF FISHING DISPUTE WITH BRITAIN The Icelandic-British "fish I The Icelandic Government war," now beginning its second month, continues to be marked by sporadic encounters between patrol vessels and trawlers of the two countries. Iceland plans to seek early UN consid- eration of the dispute, appar- ently in the belief that polit- ical decisions must be made of Austria as a potential medi- ator in East-West affairs. Com- petition between the Socialists and the People's party in the coalition government has made the chancellor particularly anx- ious to score successes in nego- tiations with the bloc. Other Austrians, from a feeling of in- security, want to pattern Aus- tria's neutrality after that of Sweden or Switzerland, or even to equate Austria's inter- national status with that of Finland. A "policy of no principles," however, does not appeal to many Austrians, and, with elections in prospect next year, Raab may hesitate to expose himself to Socialist charges of too cordial a relationship with the Kremlin. Austrian politicians in the past have been disillusioned by de- velopments in the bloc. Shrewd calculation may in part underlie Vienna's flirta- tions. Gestures toward the East may make it possible for Austria to make more impor- tant moves toward the West, such as joining the free 25X1 trade area or working out some association with the European Common Market. has rejected proposals to refer the problem either to a minis- terial-level meeting of the NATO countries or to the Internation- al Court. It does not desire another Conference on the Law of the Sea; it wants the matter discussed during the present session of the UN General As- since talks among legal experts sembly. According to Foreign have proved fruitless. Minister Gudmundsson, the fact SECRET PART II NOTES AND COMMENTS Page 17 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY extension of its fish- ing limits. London's principal concern ap- pears to be in main- taining a posture that will be firm enough to discourage other nations from declar- ing any similar ex- tensions, while keep- ing the door open for negotiations. Brit- ain has also declared its willingness to have the dispute sub- mitted to the Inter- national Court. that the question of calling another Conference on the Law of the Sea is on the assembly agenda means that the Icelandic dispute will come up for dis- cussion "as a matter of course." The Icelandic position has hardened and the government be- lieves time is on its side. Icelanders are confident that their position enjoys widespread sympathy among UN members and that pressure resulting from assembly discussion of the mat- ter would force Britain to back down. While London is ready to negotiate a settlement, it doubts that Iceland would agree to any compromise not explicitly recognizing Iceland's unilateral Britain and Denmark, mean- while, are scheduled to resume talks in London on 2 October in an effort to reach agreement on extending the fishing bound- aries around the Faeroe Islands. While the Danes appear anxious to reach an amicable settlement with Britain on this issue, they are fearful that any compromise now would affect the Faroese provincial elections scheduled for 8 November, since dissident separatist elements would claim that Denmark had failed to protect Faroese interests. British Foreign Office offi- 25X1 cials reportedly are pessi- mistic about the talks and anticipate a deadlock. THE COMMON MARKET AND THE FREE TRADE AREA The meeting of the Council of the European Common Market (EEC) in Venice from 18 to 20 September appears to have dimmed considerably the prospects for an early conclusion of the nego- tiations on the free trade area (FTA). Although progress was made toward the objective of a joint policy toward the free trade project, the six EEC mem- bers--France, Italy, West Ger- many,.and the Benelux countries --are still some distance from that goal. Both in timing and substance there appears to have been a general retreat from more negotiable positions taken earlier this year. The most serious problems seem likely to arise from a SECRET PART II NOTES AND COMMENTS Page 18 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET rangemen-bm proposed for the FTA by the EEC Council seem par- ticularly cumbersome. The Com- mon Market countries would be individually represented on the FTA council, but the pro- cedures for arriving at the "common positions" they would 25X1 take have yet to be worked out. proposed study of the "distor- tions" which the Commonwealth's preferential system--among other things--would allegedly cause in the FTA: The findings of this study, to be carried out by a committee under the direc- tion of the EEC Commission and to be completed in three to six months, could serve as a basis for excluding from the FTA or otherwise restricting those products in which the United Kingdom has an advantage be- cause of its preferred access to raw materials in other Com- monwealth countries. It will not be easy to agree on the composition of such a list of products, and in any case the conclusion of the FTA treaty will probably be impossible while the EEC is making its study. Further difficulties seem implicit in the council's views on the timing of tariff reduc- tions. The French have report- edly reneged on their agreement of last July that the tariff re- ductions of the FTA would coin- cide with those of the EEC, and they apparently have had some success in persuading other EEC countries to accept this posi- tion. The institutional ar- SECRET responsible for the FTA are re- ported under strong pressure to 25X1 procrastinate, and, in view of this, the other EEC countries may be reluctant to push the French too hard less this jeop- ardize French commitments under the Common Market. A default on these commitments, which be- gin to fall due in January, would be a serious blow to the Common Market, and without the Common Market there would be little reason for and perhaps' PART II NOTES AND COMMENTS Page 19 of 19 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 PATTERNS AND PERSPECTIVES UAR President Nasir, seek- ing to expand his influence in the Middle East and Africa, is faced with problems which may severely test his leadership. Divisive forces in the Cairo regime and within the UAR, an independent attitude on the part of Iraq, and possible new alignments within the Arab League are all potential sources of difficulty. Although he con- tinues to depend heavily on Soviet economic and military aid, he is concerned over the USSR's backing of Middle Eastern Communists and over activities of UAR elements in Iraq and Syria. Nasir's attitude of suspicion and his uncompromis- ing actions toward the West show little sign that he will try to better relations. Nasir has become deeply committed through propaganda and subversive ac- tivities to an ex- pansion of UAR in- fluence throughout the Middle East and Africa, and he would probably be unable to withdraw without risking loss of sup- port at home, since SECRET Egypt's stagnating economy and restrictions on individual free- dom are continuing causes of public discontent. Nasir has indicated dissatisfaction with his subordinates' handling of domestic problems, and the re- ported plan for reorganization of the UAR Government is likely to include measures designed to provide scapegoats and give the appearance of positive steps toward improving unsatisfactory conditions. Trouble within the regime's inner circle has been widely re- ported. Able Egyptian Vice President for Economic Affairs Abd al-Latif Baghdadi is slated for removal, and rumors are grow- ing of the pending dismissal of Nasir's heretofore closest .adviser, All Sabri. Past differences in- volving key figures in the regime have been settled rela- tively smoothly, how- ever, and the present difficulties will probably be handled in the same fashion. Rumors of these dis- putes nevertheless it is primarily the appearance of dynamism which sustains his regime. In Egypt, Nasir has never been free from concern over his regime's stability, but judi- cious placement of personnel in lucrative or influential posi- tions and the maintenance of extreme security precautions have stifled individual and group opposition. The forma- tion of any potentially suc- cessful opposition in the near future appears unlikely, but reach the public and increase popular distrust of the regime's motives and activities. After the first surge of enthusiasm, the process of merg- ing Egypt and Syria into a United Arab Republic slowed down markedly. The reality of Egyp- tian dominance instead of the hoped-for goal of equal partner- ship has not been well received in Syria. Although Nasir's per- sonal popularity does not appear to have suffered appreciably, Cairo's efforts to suppress some of the individualistic tendencies of the Syrians have met resistance, SECRET PART III PATTERNS AND PERSPECTIVES Page 1 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 2 .October 1958 Syrian politicians and businessmen appear particularly disillusioned by Nasir's at- tempts to curb party activities and to regulate the free Syrian economy. Syria's outstanding political figure before the union, Akram Hawrani, has re- portedly alienated Nasir by his independent behavior. He may lose his vice presidency and perhaps all real authority if Nasir effects his govern- ment reorganization plan, which would centralize control in Cairo over both the Syrian and Egyptian regions. Syria's reaction to a pro- gram patently designed to tighten Cairo's control of Syrian affairs is likely to be an intensification of the re- sentment already prevalent there. The compulsory land re- form program recently announced may well mitigate the resent- ment of the public, even though it antagonizes large landhold- ers who stand to lose both eco- nomic and political influence. Another problem facing Na- sir, which also involves Syria, is the independent spirit being shown by the new leaders of Iraq. The natural affinity be- tween Syria and Iraq, based on geographic, economic, and cul- tural factors, may be accentuat- ed by Syrian dissatisfaction with union and the possibility that Iraqi leaders may attempt to challenge Nasir's pre-emi- nence in the Arab world. Egyp- tian efforts to rush Iraq into formal union or federation with the UAR have been at least temporarily parried. Iraq's ardently pro-UAR deputy premier Abd al-Salaam Arif, appears to have been stripped of much of his authority by Premier Qasim, who is showing extreme caution on the question of union and is assuming a more individualis- tic,nationalistic role. Egyptians believe that the Iraqi Communists, fearing that a growth in Nasir's influence would result in their suppres- sion as in Syria and Egypt, have done much to retard a move- ment toward union. Nasir has said he complained to Soviet party presidium member Mukhit- dinov, during the latter's re- cent nine-day visit to Cairo, about Soviet backing of Commu- nist activity in the area, especially in Iraq. The role of Iraq in the recent accession of Morocco and Tunis to the Arab League immediately following the visit of Iraqi Foreign Minister Jumard to each country is not clear. There is evidence, however, that Iraq may hope to form a bloc to counter UAR influence and change the league from an Egyptian in- strument to a more nearly rep- resentative Arab body. The Cairo meeting of the league be- ginning on 1 October may pro- vide some indication of whether or not Nasir will continue to dominate the organization. The future role in the league of oil-rich Kuwait, which has re- cently indicated its intent to join, may prove important on this question. The apparent, if not always real, success of Nasir's for- eign ventures has been the main- stay of his regime. "Victories" in the name of Arab nationalism and anti-imperialism have fore- stalled internal opposition by diverting public attention from the regime's failure to cope with basic problems at home. Nasir's appreciation of the ef- fectiveness of such a policy will probably compel him to con- tinue intrigues abroad. Nasir continues publicly to use opposition to "Western imperialism" as a popular rally- ing point, despite private as- surances that he desires friend- ship with the West. He has main- tained a steady attack on Amer- ican and British intervention in Lebanon and Jordan, and has SECRET PART III PATTERNS AND PERSPECTIVES Page 2 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY' not completely stopped the UAR subversive activities which helped precipitate the crises in those countries. The pos- sibility of a rapprochement with the British was set back by Nasir's refusal to ease his demands in the UK-UAR financial discussions in Rome early in September. He now appears to be planning to put pressure on the West by assuming a stronger role in determining Arab oil policy. As a first step he has made an impossible demand for higher revenues from the Tapline operation in Syria, which car- ries Saudi oil to the Mediter- ranean. The UAR offensive in Africa shows signs of receiving great- er emphasis and wider scope. Cairo radio continues to incite East Africans to struggle for independence from "imperialism," and the recent completion of new transmitting facilities in Egypt probably presages a great- er effort. is also provid- The basic Soviet political objective of maximizing the growth of national power con- tinues to dominate economic planning five years after the death of Stalin. Toward this end, the traditional emphasis on a rapid growth of heavy in- dus.try and maintenance of a strong military position have been preserved, but the new leadership has embellished Stalin's central theme with the additional objectives of creat- ing the world's show place of Communist economic achievement and generating active popular support for the regime. In place of the rigidity of approach to economic problems which characterized the Stalin period, the past five years have been marked. by innovation and experimentation. A more flexible system of economic priorities SECRET ing refuge, funds, and facili- ties in Cairo for exiled na- tionalist leaders from French territories. Within the Arab world--par- ticularly Jordan, Libya, and the Sudan--the UAR campaign of propaganda and subversion is likely to be intensified. The recent installation of a Lebanese Government devoted to accommodation with the UAR prom- ises to encourage the growth of pro-Nasir sentiment and the type of neutralism espoused by Cairo, an advantage which Nasir can be expected to follow up. Saudi Arabian and, more recently, Kuwaiti moves toward "living with Nasir" provide definite opportunities for exploitation. The result of Moroccan and Tuni- sian alignment with the Arab League remains to be determined. 25X1 25X1 PART III PATTERNS AND PERSPECTIVES Page 3 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET those of the United States. The desire to overtake the United States even more rapidly than these rates permit will probably induce the leadership to con- tinue its efforts to obtain greater efficiency. has permitted the introduction of economic incentives as a re- placement for some of the more oppressive coercive measures used by Stalin. Pursuit of these new objectives has created a situation in which the Soviet consumer and Soviet agriculture, recognized by the post-Stalin leadership as possible deter- rents to continued high growth rates in heavy industry, no longer face the certain prospect of being sacrificed to industry with each new problem in that area. The post-Stalin regime has brought the economy through a difficult period of adjustment with only a slight decline in rates of industrial growth and with considerable im- provement in agri- culture. Further- more, the regime's innovations in the operation of the economy probably have increased its ability to cope with future obstacles to continu- ing high rates of growth, such as ris- ing investment costs and the rising ab- solute increases in output which are re- quired to maintain Industry The economic innovations of the 1953-55 period--first Malenkov's program for manu- factured consumer goods and then Khrushchev's agricultural consumer-goods program--did not deprive heavy industry of the resources required for continued rapid growth. A new program of automation and re-equipment was expected to raise industrial productivity to the desired USSR: AVERAGE ANNUAL RATES OF GROWTH REPORTED FIFTH E(yE_,?EAAR -P1AN (1951"55) ORIGINAL SIXTH FIVE-YEAR PLAN (1956-60) REPORTED 1957 PLANNED 1958 SEVEN-YEAR PLAN GOALS (1959-65) 13.1 10.5 10.0 7.6 ~BUDE STEEL 10.6 8.6 4.9 5.0 5.9 Al ` 8.4 8.7 7.9 5.6 - = PE1 RQUR 13.3 13.3 17.3 14.5 10.5 ELECTRIC POWER 13.3 13.5 9.1 10.3 11.7 EMENT_ _ .. 17.1 19.5 16.0 17.3 12.9 constant percentage gains from a growing base. The individual output goals revealed thus far for 1965 and the broader objectives of the forthcoming Seven-Year Plan (1959-1965), suggest no letup in the continuing Soviet ambi- tion to catch up with the West in the shortest possible time. Industrial growth goals during the period of the Seven-Year Plan--to be discussed at the 21st party congress in January --probably will be maintained at rates nearly as high as those achieved during the past two years. Those rates, although lower than those of the Fifth Five-Year Plan (1951-55), were still considerably higher than level soon. Limited changes in industrial administration and increased use of incentives were expected to give another boost to industry. However, during those years faulty coordination of plans for new plant capacity with plans for increases in the output of raw-material industries led to a severe shortage of in- dustrial raw materials during 1956. The Sixth Five-Year Plan (1956-60), which relied on mod- ernization of industry and great- er use of raw materials from the eastern areas to solve the productivity and raw-material problem, proved inadequate to cope with the emergency. The regime therefore abandoned the SECRET PART III PATTERNS AND PERSPECTIVES Page 4 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET plan, cut back industrial out- put goals for 1957 and subse- quently for 1958, and ordered the formulation of a seven-year plan. It also launched a re- medial investment program in raw-material industries, while maintaining ambitious programs in agriculture and housing, and in July 1957 instituted a sweep- ing reorganization of the in- dustrial administrative struc- ture. The industrial reorganiza- tion was intended to achieve a more efficient management of the economy by reducing the amount of detail planned in Moscow and thereby giving greater opportu- nity for local initiative. The revised industrial out- put goals, calling for increases of'only 7 and 7.5 percent in 1957 and 1958, proved unneces- sarily low, since actual growth was reported to be 10 percent in 1957 and 10.5 percent at mid- year 1958. Nevertheless, the performance of some basic ma- terials industries, particular- ly those producing ferrous met- als, remained poor. Production capacity additions in these in- dustries fell considerably short of goals in 1957 and will be inadequate in 1958 as well. Production goals for 1965 in the basic materials industries suggest that priority treatment for these industries will have to be continued. There will probably be no increase in the industrial growth rate above the 10-per- cent level of the past two years, since this would require a substantial overfulfillment of production goals in the basic materials industries. An an- nual rate of 8 to 10 percent over the next seven years is more likely. In ferrous met- allurgy the present investment plan is likely to produce an average annual growth rate of only some 6 percent during the next seven years. Even if re- sources devoted to this indus- try were increased, it is un- likely that the growth of steel output could approach the aver- age annual rate of 9.5 percent achieved during the past seven years. The slower growth of steel output will in turn limit the growth of machinery output at a time when the slower increase of the labor force is heighten- ing the demand for labor-saving machinery. The construction portion of investment is not subject to the same raw materials constraints as machinery and equipment, but industrial con- struction growth is restricted by the availability of equipment and manpower for use in new fac- tories. In order to assure suf- ficient industrial manpower to maintain projected industrial growth rates, substantial trans- fers of labor from agriculture to industry will be required, since the total increase in the labor force over the next seven years will be approximately 3,000,000 men fewer than during the past seven years. The hous- ing program promises to provide continuing improvement in the well-being of the labor force and will facilitate the transfer of workers from agriculture to industry, but present ambitious agricultural programs will ex- ert pressures to hold labor in agriculture. The reorganization of the industrial administrative struc- ture, now in existence for a year, has not greatly eased the regime's problems in removing the restraints on future high industrial growth rates. Some simplification of decision-mak- ing at the center has been achieved, the role of the party has been strengthened, and Gos- plan's influence in planning and controlling economic activ- ity has been increased. However, the exercise of local initia- tive has been hindered by a num- ber of measures designed to SECRET PART III PATTERNS AND PERSPECTIVES Page 5 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY forestall any serious erosion of central leadership and con- trol. These actions have pre- cluded the freedom of action at the local level which would be necessary to bring about great- er efficiency in the use of re- sources. Agriculture The average annual rate of increase in agricultural pro- duction during the next seven years will probably be about 3 percent, compared with the 7.5- percent average annual rate dur- ing the past five years. There are several reasons for this: the average annual rate of in- crease in sown acreage will be only about one fourth that achieved in recent years; the corn program will not contribute to future agricultural output on the same scale as in the past; and the new "single-price system" may provide less in- centive than the previous multi- price system. Transfer to collective- farm control of most of the machinery formerly under the machine-tractor stations (MTS) may help to increase output, as it will eliminate the area of conflict between the collec- tive farm chairman and the MTS director. The collective farm chairman now has a free hand in managing the utilization of machinery and has the undivided use of more skilled labor. On the other Band, the central or- gans continue to determine pro- curement goals, and there are few indications that the enter- prise manager is exercising a significant choice in what and how much he will produce. State control over agri- cultural activities apparently will not be weakened by recent organizational changes, as po- litical functions of the former MTS's are being shifted to other organizations. The Soviet leaders, with an eye to propaganda gains, have' designated per capita consump- tion as a new area of competi- tion with capitalist countries. Even if the USSR succeeds with- in the next seven years in its effort to match the United States in per capita consump- tion of selected food products such as meat and milk, over- all per capita consumption in the USSR will remain well below that in the United States and most of Western Europe because of the lag in other areas, es- pecially consumer durables and housing. Moreover, the Soviet consumer will not experience as rapid an increase in over-all consumption as he did during the past seven years, but there will be a qualitative improve- ment in consumption, and the USSR- PER CAPITA CONSUMPTION 1957=100 OTHER GOODS SOFT GOODS DURABLE GOODS SECRET housing situation will improve. The post-Stalin leadership has sought to distribute in- creases in consumption selectively by raising the cash income of lower paid groups in the population while holding retail prices relatively stable. The first to be af- fected were the peas- ants, whose total real income rose about 18 percent from 1953 to PART III PATTERNS AND PERSPECTIVES Page 6 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 N SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 2 October 1958 1957. Another group to benefit was the urban labor force; since 1955 a major wage and salary reform, the first since 1932, has been under way with the aim of relating wages more closely to productivity. These meas- ures, together with a higher minimum wage level and the in- crease in consumer supplies POTENTIAL POLITICAL INSTABILITY IN GREECE Prime Minister Karamanlis' pro-Western government retains a solid working majority in the Greek Parliament, but there are some indications that the rel- ative government stability which Greece has enjoyed for six years may be threatened. Foreign and domestic problems alike are mounting. Developments in the explosive Cyprus issue could at almost any time lead Karaman lis to resign and in time even result in some degree of Greek disengagement from NATO obli- gations. There is no potential successor to Karamanlis who would be better able to cope with the government's pressing issues. The Communists or Com- munist-front groups in Greece are not likely to gain control of the gove:rnmentt by either legal or extralegal means, but available from the growth of agricultural output, raised the real income of the average ur- ban wage earner about 18 per- cent. A doubling of pension levels late in 1956 put. pen- sioners at about the same con- sumption level as employed workers. Prepared by ORR) an authoritarian regime even- tually might be instituted by the army to counter the left- ists. Present Political Parties Greek politics today are dominated by Premier Karamanlis and his National Radical Union (ERE), which controls 170 of the 300 seats in the Greek Chamber of Deputies but had the support of only 41 percent of the electorate in the May 1958 election. The ERE is a heterogeneous group of right-center politicians held together by Karamanlis, the absence of effective non-Com- munist opposition parties to which-disaffected politicians might defect, and.the fear of the increasing strength of the Commu- nist-front United Democratic Left (EDA). PROGRESSIVE AGRARIAN DEMOCRATIC UNION (PADE) DEMOCRATIC UNION (DE) SECRET PART III PATTERNS AND PERSPECTIVES Page 7 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 2 October 1958 The premier has the sup- port of the monarchy, and Greeks generally believe he also enjoys the backing of the United States He has often threatened to re- sign and has actually taken steps to do so on several occa- sions during the recurrent crises over Cyprus. A further deterioration in the Cyprus situation--particularly if com- bined with publicly proclaimed American support for the Brit- ish--could cause him to insist that the King accept his resig- nation. The major opposition to Karamanlis is furnished by EDA, the legal front for the out- lawed Communist party of Greece (KKE). While EDA has the back- ing of international Communism, it also has the support of many non-Communists. Its figurehead chairman, John Passalides, is apparently a left-wing social- ist. EDA, as a tactical move to attract left-of-center sup- port, espouses a neutralist for- eign policy and domestic objec- tives in line with generally propounded "socialist" aims rather than openly advocating out-and-out Communist pol- icies. Because of its known con- nection with the KKR, EDA for years seemed incapable of gain- ing more than 15 percent of:the vote in a national election. The 25 percent it received in May 1958, which enlarged its parliamentary representation from 17 to 79, has caused a general reappraisal of Greek politics. While the number of Communist votes in Greece has grown signif- icantly in recent years, as shown in the last election, it is be- lieved that not more than 15 per- cent of the EDA vater came from ideological supporters of the ex- treme left. The rest of the EDA vote came from a large and grow- ing section of the Greek elec- torate which is dissatisfied with the economic situation and the foreign policies of the national- ist parties. The non-Communist opposi- tion parties in Greece were seriously-weakened in the May elections. The traditional centrist pro-Western Liberal par- ty fell behind EDA in the vote and had its parliamentary repre- sentation cut from 67 to 35. A lack of constructive leadership, a program not easily differenti- ated from that of ERE, and a growing polarization of Greek politics between the right and extreme left caused the Liberal loss.. There is no indication at present that the Liberals can regain their former position in Greece. Their parliamentary leader, George Papandreou, is striving without appreciable SECRET PART III PATTERNS AND PERSPECTIVES Page 8 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMM MY success to unite all national- ist opposition parties into a new political party. Several small parties in the Chamber of Deputies, al- though relatively insignificant in size, contain ambitious and controversial politicians. Of these, the most vocal is the brilliant but erratic Spyros Markezinis, a spokesman for the Progressive Agrarian Democratic Union, who considers himself Greece's "man of destiny." a a z s, ea o the Agrarian party, is actively attempting to keep the Greek rural vote, a current target of EDA, from going to the far left. Karamanlis' major internal problems are related--the growth of Communist influence,which in turn has resulted in part from the government's failure to more rapidly develop the economy of the nation. Following EDA's success in the elections, Karamanlis estab- lished an anti-Communist commit- tee within the government to recommend action against the ex- treme left. A subsequent gov- ernment campaign to acquaint the public with EDA's close ties with the KKE has been accompa- nied by the arrest of several EDA leaders and other harassing tactics. Rumors are increasing in Athens that EDA will soon be outlawed. . Such a move might destroy EDA as an organization and at least temporarily crush the morale of the extreme leftists. On the other hand, other camou- flaged left-wing parties would probably soon arise, while popu- lar dissatisfaction with the nationalist parties and support for EDA's principles would not be erased.. Possibly anticipat- ing repressive action, EDA re- cently created a new left-wing party--the Democratic Union. This new party, and others which are expected to appear, probably was formed as'a haven for EDA members when and if the parent party is proscribed and also will be used by EDA as a bridge to the political center. The armed forces are an element of stability in Greece, since their leaders are anti- Communist and almost universally loyal to the crown. The Sacred Bond of Greek Officers (IDEA), formed during World War II, is SECRET PART III PATTERNS AND PERSPECTIVES Page 9 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 SECRET a secret, ultrapatriotic, and anti-Communist organization within the armed forces. IDEA has been largely quiescent since 1951 but EDA's recent success at the polls may lead to a re- vival of IDEA activity. If a leftist rise to power appeared imminent, by either legal or extralegal means, the armed forces would probably attempt to establish a right-wing au- thoritarian regime. In the economic field,Kara- manlis has; recently indicated that he intends to put increased emphasis on the development of agriculture--backbone of the Greek economy. Also, partly to combat left-wing charges that the government has failed to solve economic problems, he has proposed measures aimed at slashing imports of luxury goods, stamping out tax eva- sion, and ensuring a more equitable distribution of the national wealth. The drive to speed development of the Greek economy is handicapped by a lack of available capital, how- ever, and this largely accounts for the emphasis in the press on the need to secure large- scale West German credits--pres- ently under discussion in Bonn. Soviet blandishments in the economic field have largely been ignored thus far. Foreign Problems Nearly all foreign and do- mestic issues in Greece are af- fected by the Cyprus problem. This highly emotional issue could result in the govern- ment's resignation, and both Communist and nationalist oppo- sition leaders have vainly sought to bring this about. The premier and foreign minister have long since tired of the Cyprus controversy and desire a settlement, but they are forced by intense Greek nationalism and the leaders of the Greek Cyp- riots to take the lead in the fight against British "colonial- ism." The Cyprus problem has at least temporarily ended Turkish- Greek collaboration in NATO, has damaged traditionally friendly Anglo-Greek relations, and has caused a steady decline in Amer- ican prestige in Greece--the United States being accused of supporting Britain and Turkey in the dispute--and has even re- sulted in recurrent Greek threats to leave NATO. Greek disillu- sionment with the West was re- cently reflected in the UN Gen- eral Assembly, when the Greek delegate abstained on the Indian resolution for Chinese Communist representation. This indication of a new "independent" Greek foreign policy was warmly ap- plauded by all segments of the Greek press. Traditional good relations between Greece and certain Arab states, notably the UAR, have improved during the past two years. This results partly from the existence of Greek communi- ties in the Middle East and the position of the Greek Orthodox Church in that area, but is also based on UAR support for Greece in the Cyprus dispute. Conse- quently, when American and Brit- ish troops were dispatched to Lebanon and Jordan in July, the Greek press was nearly unanimous in criticizing the Western moves, although the government quietly cooperated with the United States by granting facilities for Amer- ican planes. Many Greek Govern- ment leaders have expressed the view that the United States fails to appreciate Greece's potential value as a bridge between. the West and Nasir. Diplomatic relations with the Soviet Union are correct but cool. A recent agreement with the USSR envisages a large in- crease in trade between the two countries, but the level pro- posed remains a small percent- age of total Greek foreign trade. However, in certain products, such as tobacco, the increased levels will have an important economic and political impact. Moscow's attempts to expand cul- tural exchanges have recently SECRET PART III PATTERNS AND PERSPECTIVES Page 10 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY been rebuffed by Athens, which also took action to reduce the volume of Soviet propaganda disseminated in Greece. Never- theless, the entire Soviet bloc has backed Greece on the Cyprus issue, although not as vigorous- ly as might have been expected. In light of the supreme impor- tance of this problem to the Greek people, the USSR can ex- ploit this support in an effort to reduce the traditional ties of Greece with its Western al- lies. FIDEL CASTRO'S "26TH OF JULY" MOVEMENT Fidel Castro's "26th of July" movement has in less than two years become the symbol of revolutionary opposition to the regime of Cuban' President Fulgencio Batista. As the revolutionary move- ment has spread and become more violent, heretofore uncommitted Cubans have been forced to take a stand for or against the gov- ernment, but the bulk of the population probably still favors a peaceful transition to con- stitutional government through elections. It is more the move- ment's success than its revolu- tionary program which has won it a widely varied following, including some respected civic, business, and religious groups. A good many supporters, however, would not want to see Castro become president. De- spite his frequent statements to the contrary, Castro is be- lieved to entertain personal political ambitions, and many responsible members of Cuba's political opposition fear he could become a more formidable dictator than Batista. Organization, Accomplishments The "26th of July" move- ment, so called after the date of an unsuccessful coup in 1953, is a loose organization nominal- ly headed by Fidel Castro,'whose long record of revolutionary activity and whose penchant for the dramatic. provide a strong emotional appeal for Cuban youth. In practice, Castro wields direct control only over the rebels under his command in the Sierra Maestra of Oriente Province. Other rebel groups, such as that under the command of his brother Raul in eastern- most Oriente, are at least semi- autonomous, principally because of difficult communications. The Castro movement has grown from 12 survivors of the expedition which landed in Oriente in December 1956 to an island-wide organization with ef- fective branches in -several other American republics. Re- cent estimates place the number of armed rebels in Oriente Province-between 4,000 and 6,000, with the majority under Raul's command in the larger "second- front" area. There are prob- ably a substantial number of "part-time" rebels who take up arms during night raids and others who could be counted on to join the movement under con- ditions of intensified hostili- ties. A shortage of arms and other supplies has limited the size of the fighting force. SECRET PART III PATTERNS AND PERSPECTIVES Page 11 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY The rebels control, most of Oriente Province, except the cities and areas of army con- centration, and reportedly have opened "fronts" in Camaguey, Las Villas, and Pinar del Rio provinces. One of Fidel Castro's principal lieutenants has re- cently moved into Camaguey Pi,ov- ince with a column of men, in- dicating that the movement may attempt to gain control over Camaguey similar to that exer- cised in Oriente, The rebels have demonstrated their ability to paralyze transportation in Oriente Province*at will. They have not, however, shown them- selves capable of inspiring spontaneous popular support for "all-out" offensives and twice have failed in attempts to call nationwide general strikes. An underground organization of nonfighting members operates in many cities and carries on liaison with other opposition groups, both inside and outside Cuba, as well as with "26th of July" groups in exile. Exile groups are most active in Mexico, Venezuela, and the United States, and provide the rebels with im- portant financial and logistical support; Smaller groups operate in other Latin American coun- tries. At present the Castro move- ment is supported by the, major- ity of opposition groups, both in Cuba and in exile, although this unity, as in the case of earlier movements, could prove short-lived. The two opposi- tion political parties which have offered presidential candi- dates for the 3 November general elections--the "autenticos" of former President Ramon Grau Sari Martin and the Free People's party formed in August 1957 and led by Carlos Marquez Sterling-- have been excluded from the unity pact and have renounced revolution as a means of solv- ing Cuba's political problems. Support for the rebels also emanates from such groups as the Civic Resistance Movement-, an organization of respected businessmen-and civic leaders which has provided important financial backing. Some indi- vidual members of the Roman Cath- olic hierarchy are believed to support the movement, but the church itself, although increas- ingly anti-Batista, has never indicated a pro-Castro policy and officially favors a peace- ful change in government. Organized labor, although declaring itself neutral, has placed itself firmly in Batista's camp and has endorsed the labor program offered by the govern- ment's presidential candidate, Andres Rivero Aguero. SECRET PART III PATTERNS AND PERSPECTIVES Page 12 of 16 Approved For Release 2007/10/23: CIA-RDP79-00927A001900070001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO01900070001-5 1`W SECRET `'W CURRENT INTELLIGENCE WEEKLY SUMMARY rC U B A ? -~j ~ ?es zA % N A R Z v B_ A oolong \\ iMATAN`LAS) S.n