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Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 CONFIDENTIAS CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. 54 OCI NO. 1116/59 19 March 1959 DOCUMENT NO. NO CHANGE IN CLASS. ^ ^ DECLASSIFIED CLASS. CHANGED TO; T NEXT REVIEW DATE: DAT~.L REVIEWER CENTRAL INTELLIGENCE AGENCY III OFFICE OF CURRENT INTELLIGENCE CONFIDENTIAL State Department review completed _ - *C696 COVE E~1 Al t Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001 6~" /1 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 18. 1JSC. SECTIONS 793 AND 794, TIIE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. The Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Next 5 Page(s) In Document Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 CONFIDENTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 OF IMMEDIATE INTEREST EAST-WEST NEGOTIATIONS In the wake of the Soviet note of 2 March and Khrushchev's speeches in East Germany, Mos- cow is continuing its efforts to give the appearance of flex- ibility and reasonableness. Public and private Soviet state- ments have stressed the USSR's desire for a negotiated settle- ment of the Berlin issue and criticized as warlike recent speeches by American military and political leaders. None of these Soviet statements, however, indicate any important deviation from established positions. Khrushchev, in a move de- signed to retain the initiative on the German question after President Eisenhower's 16 March speech, held a press conference in Moscow on 19 March. He as- serted that'the Soviet proposals have received wide support and referred to the President's re- marks to show the increasing sentiment in favor of negotiations. He further stated that the USSR,,,al- though preferring a summit meeting, has accepted the Western propos- al for a foreign minister's-.con- ference and is now awaiting a reply from the Western powers. He indicated willingness to meet on 11 May if that date is pro- posed. Khrushchev again denied that his Berlin proposal was intended as an ultimatum and stated that the 27 May deadline could be postponed. However, he evaded a direct reply when asked if the USSR would refrain from any specific political ac- tions regarding Berlin until the summer, in view of President Eisenhower's qualified agree- ment to a summit meeting this summer. The counselor of the Soviet Embassy in Paris told an Ameri- can official on 16 March that the USSR takes it for granted that a foreign ministers' con- ference will take place in May in Geneva. Stating that agree- ment to hold a summi',, meeting later would not be a precondi- tion for foreign ministers' meet- ing but',merely would follow log- ically, he seemed to indicate a Soviet conviction that once a foreign ministers' meeting is held, pressure on the Western powers to go on to the summit would be irresistible, While Soviet official in- dicated that the question of German reunification should not be included on the agenda, he said the USSR would not object if the West raised the subject. He repeated Khrushchev's 5 March statement that the 27 May dead- line would be postponed if a foreign ministers' meeting were in progress that offered a chance for agreement, On 16 March the chief of the political section of the Soviet Embassy in East Berlin declared that he and his dol- .leagues are "deeply disturbed" by the tenor of speeches in the last few weeks by American lead- ers. Saying the situation is too dangerous for such talks, he insisted "our objective is negotiation, not tension" and added,"War is out of the ques- tion for both of us. We can have disagreements but they must and will be negotiated." In a talk with a Swiss cor- respondent a few days earlier, Soviet diplomats in East Berlin suggested, as a "compromise COql1 iAL PART I OF IMMEDIATE INTEREST Page 1 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 solution" of the Berlin issue, that a four-power guarantee of the free-city status could in- clude the stationing of Soviet soldiers at Western checkpoints along with Allied troops. This, they said, would enable Soviet soldiers to ease the way and minimize necessary procedures by East German representatives. speech was devoted to "extolling American military might." But it quoted in entirety the Pres- ident's expressions of willing- ness to negotiate under any cir- cumstances which offer prospects of worthwhile results. Other commentators welcomed the Pre- ident's "qualified acceptance" of summit talks. East German Developments Soviet propaganda contin- ues to point to US officials' "belligerent" actions and state- ments and the American public's alleged opposition to theme A TASS commentary on President Eisenhower's 16 March speech was moderate in tone, however. It asserted that the United States Government desires to continue the occupation of Berlin for an indefinite period and stated that the second part of the The East Germans are re- iterating demands for Western withdrawal from Berlin, but re- cent high-level statements have soft-pedaled references to sign- ing a separate peace treaty with the USSR. In an effort to dem- onstrate East German reasonable- ness, party boss Ulbricht, in an interview with a correspond- ent of the London Daily Express published on 17 March, repeated the offer of an East German guarantee of the "free city's" unhampered communications and economic and cultural links with the outside world, provided East German sovereignty and laws are respected. He declared, however, that any peace treaty would not permit Bonn to main- tain certain offices in West Berlin nor to hold Bundestag meetings in the city. under which the East Germans In response to a question concerning the circumstances would conclude a separate treaty with the USSR or other Warsaw bloc countries, Ulbricht de- clared he did not know the words "separate peace." SECRET PART I OF IMMEDIATE INTEREST Page 2 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 %0V *40 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 Western Positions In the four-power discus- Paris to prepare pro- posals for the 31 March Western foreign ministers' meeting in Washington, Bonn has introduced a new plan for a phased unifi- cation process which would post- pone free elections for three years. An all-German committee of East and West Germans would draw up plans for and supervise elections for a German council, which in turn would prepare for elections to a German National Assembly. The draft election law and a law establishing pro- visional central authority would be submitted to a referendum in both Germanys. The elections to the Na- tional Assembly would be super- vised by the four powers and the council. Following these elections a provisional govern- ment would negotiate:a peace treaty. Bonn's plan, a depar- ture from its previous approach to free elections, is an effort to forestall a separate Soviet peace treaty with East Germany by accepting some elements of the Soviet demand for a German confederation. Both the French and Germans are reluctant to submit a West- ern peace treaty draft at an East-West meeting, fearing it would provide Moscow with the opportunity to focus the meet- ing on negotiation; of the mili- tary and boundary clauses in a German peace settlement. The British, however, feel that such issues will be raised in any event. Despite the appearance of complete unanimity in the 12-13 March Macmillan-Adenauer talks, the subject of reducing troops PART I in Central Europe continues to strain German-British relations. On 16 March, Adenauer rejected outright all such plans and stressed that any military solu- tions must be accompanied by political solutions. American observers report that although Macmillan's visit to Bonn helped to alleviate Ger- man anxiety on British "soft- ness," a deep suspicion persists in Bonn and will continue to play an important role in Ade= nauer?''s estimate of reliability of the "Anglo-Saxon" position on Berlin. on the problem of maintain- ing land and air access to Ber- lin, Paris continues to stand by its position that access routes must be kept open at all costs. The French also oppose any prior Western concessions to Moscow as only encouraging fur- SECRET OF IMMEDIATE INTEREST Page 3 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 25X1 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 CAIRO-BAGHDAD DEVELOPMENTS Iraq Anti-Qasim elements in Iraq appear thoroughly discouraged. A number of reports confirm that a large-scale purge of antire- gime and anti-Communist elements is taking place. Qasim has not, however, acceded to the demands of the Communists that he exe- cute leaders of the former re- gime, arm the Communist-con- trolled Popular Resistance Force (PRF), or publicly withdraw from the Baghdad Pact. Some statements of Iraqi officials suggest that attempts are being made to limit the PRF's activities; arrests in Basra, for example, are report- ed to have been made by army officers armed with submachine guns, while PRF members, armed only with sticks, acted as guides. Anyone associated with the UAR is liable to physical attack. While spokesmen of the Qasim regime have said they do not intend to reply of- ficially to the barrage of in- vective hurled against them by Nasir, the Baghdad press is replying effectively in kind, and the mere possession of a picture of Nasir, once the sym- bol of Arab nationalist feel- ing, is now cause for a mob at- tack. Cairo evidently intends to continue propaganda and other types of pressure on Iraq. The UAR has given extensive play to frontier incidents which ap- parently occurred in the course of the Iraqi Army's effort to pacify the Shammar and other tribesmen along the Syrian-, Iraqi border. Nasir's bitter attacks on Qasim and Arab Communists as h "agents of the foreigner," at first ignored by Moscow, led to a reply by Khrushchev on 16 March and a further exchange of radio and press recriminations which have brought relations between Moscow and Cairo to their low- est ;point since Nasir accepted bloc arms in late 1955. Khrushchev, blamed Nasir's "in- sistence" on unifying Iraq with the 1JAR "against the will of the Iraq:L people" as the cause of the dispute, and upbraided the UAR President for using the "language of imperialists" in attacking Arab Communists. Khrushchev's remarks that the USSR is not indifferent to the situation and that Na- sir's anti-Communist campaign, if continued, will inevitably fail point to possible Soviet retaliatory moves against the UAR. Pravda, foreshadowing So- viet a ors to build up Qasim in the radical Arab national- ist movement as a counterweight to Nasir, declared on 13 March SECRET 25X1 25X1 PART I OF IMMEDIATE INTEREST Page 4 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 SECRET *00 CURRENT INTELLIGENCE WEEKLY SUMMARY that Baghdad is more and more becoming an important center of the ."liberation movement" in the Near and Middle East. Khru- shchev also praised the "pro- gressive" reforms of the Qasim regime--contrasting them to at- tempts by the UAR to ignore the "interests of the working peo- ple"--and asserted that Iraq has a "more progressive system .,.than neighboring countries of the Arab world." Nasir's speedy reply on 16 March Ito Khrushchev declared that the Soviet premier's state- ment regarding Nasir's "insist- ence" on unity was a distortion of facts and that his defense of Arab Communists was "a mat- ter which the Arab people can- not accept." Israel Tel Aviv may be taking ad- vantage of both the UAR-Iraq and the Jordanian situations to apply new pressures to se- cure long-sought objectives. The Israelis have complained that cargoes of Israeli origin on foreign-flag vessels have been seized by Egyptian author- ities, This is in effect a revival of an Israeli complaint last voiced in 1957 over Egyp- tian activity enforcing the Arab League's economic boycott of Israel and Egypt's policy on restricting Israeli use of the Suez Canal. Nasir presuma- bly would not wish to become involved with Israel at a time when he is heavily engaged elsewhere, and the Israelis may be playing on this proba- bility, The Israelis are reported to have moved some armor--13 or 14 tanks, according to a UN truce team count--into the Jerusalem area in violation of the Israeli-Jordanian armi- stice agreement. The tanks are said to have been moved in at night over a two-week period. An Israeli official has laugh- ingly denied any intention to "invade Amman," but the tank movement may be part of precau- tions the Israelis are taking against any upheaval in Jordan 25X1 Israeli of- ficials have long claimed that it is vital to their country's SECRET PART I OF IMMEDIATE INTEREST Page 5 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 SECRET V"V security that West Jordan be kept out of UAR hands, al- though they have also recognized the serious problems involved in.taking over the mass Arab refugees there. Sudan Thus far the Ansar sect, which formed the principal sup- port of the more pro-Western officers who have already been removed from the Supreme Army Council and from the cabinet, has not seriously resisted the demands of the dissidents. Al- though a substantial number of Ansar tribesmen were reported to have moved into the Khartoum area in anticipation of force- ful action, their leader, Say- yid Abdul Rahman al-Mahdi, sent them back home to avoid blood- shed. Should Al-Mahdi feel, how- ever, that a new coup threatened the complete eclipse of his influence, he might well call on the tribesmen, and violence would almost certainly ensue. SECRET PART I OF IMMEDIATE INTEREST Page 6 of 6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 VtJ{11 1UL111 iril.. CURRENT INTELLIGENCE W981CLY SUMMA Y 1.9'.rch 195: :. PAi r I I NOTES AYE? COMMENTS NEW SOVIET ECONOMIC PACT V i IT T #JIIAQ The Soviet Union granted Iraq a $137,500,000 credit un- der an economic and technical cooperation agreement concluded in Moscow on 16 March. The long-term, low-interest credit will be used to finance Soviet participation in about half the 50-odd projects called for under the new Iraqi development pro- gram. Moscow will provide technical assistance for con- structing a number of indus- trial enterprises, including heavy engineering, chemical, and food-processing projects. Soviet specialists will conduct surveys designed to lead to an expansion of the Iraqi irriga- tion systems and development of road networks. They will also m-,gage in geological prospect- ing for developing Iraq's min- eral resources. The talks in Moscow pre- ceding the announcement of the Soviet credit apparently pro- gressed a..,:)otily and rapidly, suggesting the USSR was ex- tremely willing to accommodate Iraqi requests for aid. Mos- cow, however, was not acting precipitously, since a Soviet delegation had an opportunity earlier this year to study most of the projects. In an effort to underscore its support of Qasim, Moscow will probably speedily dispatch Soviet tech- nicians to Iraq to conduct sur- veys which are necessary before work can actually begin on the projects. Work on the projects themselves, however, will prob- ably not begin for some time. In addition to aid, the bloc continues to exploit other opportunities to develop closer economic relations with Iraq. Talks between Soviet Embassy officials and the Iraqi Ministry of Communications concerning the establishment of air routes were held in Baghdad earlier this month. The discussions may have included a preliminary Soviet offer to re-equip the Iraqi airline with modern Soviet civil aircraft. Iraqi officials reportedly are also studying drafts of proposed civil air agreements submitted by Czech- oslovakia and Hungary. The Hungarian minister of transport, who visited Baghdad in January for talks with the Iraqi minis- ter of communications, an- nounced at that time that his business dealt with "the open- ing of an air service between Iraq and Hungary." Military support of the Iraqi. Government by Moscow also is cantinuing~ Thus far, arms deliveries under the $170,000,000 agreement have been limited to 25X1 25X1 land armaments and military trans- port vehicles, but Iraq is sched- uled to receive jet fighters and bombers as well as motor torpedo boats from the Soviet Union . Prepared 25X1 by OI,,R CONFIDENTIAL PA-.T II NOTES AND COMMENTS Page 1 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 SOVIET-IRANIAN RELA'.C IONS Apparently in response to the signing of the US-Iran de- fense agreement on 5 March, Soviet Ambassador Pegov is leaving Tehran in the near fu- ture. This move would be in line with remarks by a Soviet official in Tehran in late Feb- ruary that once the bilateral treaty was signed, every form of political, economic, and progaganda pressure would be used against Iran, including an economic boycott. Iran for its part has postponed the de- parture of its ambassador-des- ignate to the USSR "until re- lations improve." Soviet radiobroadcasts to Iranian listeners have renewed explicit personal attacks on the Shah. A 12 March broad- cast, which described the Shah as a "lackey" of the United States, alleged that his "anti- national" economic policy had turned Iran into a market for foreign goods and subjugated the country to foreign monop- olies. Moscow could cause Iran considerable internal difficul- ties by refusing to trade. Trade with the bloc accounts for about 15 percent of Iran's total, excluding oil; about 25 percent of Iran's exports and 10 percent of its imports in- volve bloc sources, principally the 1JSSR. Soviet economic re- prisals will not seriously dis- turb Iran's foreign-exchange earnings, however, most of which are derived f rom oil royalties and oil- consortium purchases of local currencies -- $245;,000,000 and $75,000,000 respectively in 1958. The USSR and its satellites account for a large percentage of Iran.'s foreign sales of wool, cotton, and minerals other than oil, and substitutes for these markets would be difficult to develop elsewhere. Iran's econ- omy could also be disturbed by Soviet failure to deliver a wide variety of construction materials, consumer goods, and light industrial goods which it f ind;s convenient to import from the bloc for use in the north- ern part of the country. In several cases, more than one third of Iran's imports of such materials comes.from the bloc. Tehran, with funds from its oil earnings, can find alternate sources of supply in Western Europe, but Soviet cancellation of deliveries would be disrupt- ing, at least temporarily. with ORR) (Prepared jointly 25X1 BRITAIN'S DILEMMA IN EAST AND CENTRAL AFRICA The continuing unrest in Nyasaland and potential trouble in Kenya have forced Britain to hasten planning of constitution- al evolution of its East and Central African territories, and. a new general policy statement is expected shortly. Lord Perth, the government's second in command on colonial affairs, will report to Parliament on his present fact-finding tour, As the white-settler minor- ity is hardening in its deter- mination to maintain political dominance, London find its ability to influence this group decreasing. The settler- contrrolled Federation of Rho- desia, and Nyasaland is already partly self-governing and will be considered for full independ- ence in.. 1960. African nation- alisin's turn toward violence, SECRET PART II NOTES AND COMMEN'CS Page 2 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 ik~ %00 SECRET CURRENT INTELLIGENCE WEEKLY S however, is putting Britain un- der heavy pressure to provide the Africans a political role commensurate with their numeri- cal majority. With a British general election likely this year, the Labor party's strong pro-Afri- Lake Tanganyika SOUTH-WEST AFRICA RHODESIA 1 ya 12'. /2ND can views iurther complicate the current policy review. Re- cent events and Labor's stand may force the government to consider separating the Nyasa- land protectorate from the fed- eration. Disorders such as Belgium's political reform program for the Congo, announced on 13 January, is winning Afri- can support but provoking op- position among conservative elements in Brussels and Euro- pean settlers in the Congo. Conservative settler groups have begun to organize political parties and to issue manifestoes against the allegedly pro-Afri- can efforts of Minister of the Congo and Ruanda-Urundi van Hemelrijck. They demand recog- airfield sabotage continue in Nyasaland, and isolated violence has erupted in Northern Rhodesia. A meeting of the All-Afri- can People's Conference secre- tariat reportedly has been called for April in Accra to plan a campaign of action in Nyasaland. The British hope moderate Nyasa leader Chirwa will discuss the new constitution they have been devising, but even Chirwa wants self-government outside t1e fed- eration. In Kenya, new program may not go far enough to prevent the faction favoring violence from gaining control of the African national- ist movement. At the same time, it may provoke European extrem- ists. 25X1 25X1 In Tanganyika, where there is no large entrenched settler minority, current progress to- ward a self-governing African state provides a relatively bright spot for London, but does 25X1 not help mitigate the fundamen- tal conflicts in the surrounding nition of white cultural superi- ority and call for a division of the Congo into three sectors to permit a coexistence of races on the general principle of South African apartheid. When Van Hemelrijck arrived in Leopoldville on 11 March, the settlers showed their dissatis- faction by staging a hostile demonstration. Several large mining and industrial com- panies are pressing Premier Eyskens to dismiss Van Hemelrijck. SECRET PART II NOTES AND COMMENTS Page 3 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 Van Hemelrijck. has visited the Congo twice since January and has promised to spend four months a year in the area. As part of a policy of decentraliz- ing administrative functions from Brussels, he plans to ap- point a deputy minister to act locally. He has already re- placed several top officials for their conduct during the January riots. Draft legisla- tion has been prepared to set up legislative and consultative councils, to extend Belgian civil liberties to the Congo, to permit legal parties, and to end racial discrimination. Already 459 Congolese have been admitted'to civil service jobs formerly reserved for Europeans, Among African circles there is an increasingly favorable re- sponse to the reform program, and Van Hemelrijck reportedly has won the support of nation- alist leader Joseph Kasavubu. Kasavubu, now in Brussels,prob- ably will not be brought to trial for his part in the Jan- uary riots, and another jailed leader, Arthur Pinzi, is to be restored as mayor of an African suburb of Leopoldville. How- ever, the National Congolese Movement is demanding that Bel- gium prove its good will by abolishing restrictions on free political activities, by creating a commission--including Congo- lese representatives--to over- see the development of politi- cal institutions, and by fixing dates for the establishment of government councils. Belgium's determination to remain in the Congo is shown by its plans to contribute at least $20,000,000 to the lo- cal budget this year and to make expenditures totaling about $1 billion over a ten- year period from 1960 for the next development plan. Results of the municipal elections held in France on 8 and 15 March showed a swing back toward Fourth Republic voting patterns, following the pro-Gaullist landslide in the November 1958 National Assembly elections. Although total figures for the new municipal councils show a slight over-all shift to the right since the last local elec- tions in 1953, the pro-Gaullist Union for the New Republic failed to establish the strong grass-roots position necessary for its long-term development as a major political force.. The greatest change was a dou - blingof the already large number of successful "nonparty" candi- dates, most of them apparently drawn from the Radicals or other centrist groups. The Communists regained about half the popular votes they lost in 1958, but these gains were concentrated in the largest cities. Fewer Commu- nists, however, were actually elected to municipal posts than in 1953, because proportional representation has been abol- ished in all but the very large cities. In Paris, they won two additional seats for a total of 29 on the 90-member municipal council. Despite the working of the new electoral law which awards all the council seats to the party or list winning a plurality in the runoff, the Communists won control over some municipalities, particu- larly in the southwest, which they had not previously held. Mayors are elected sepa- rately by the new town councils. SECRET PART II NOTES AND COMMENTS Page 4 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY In Le Havre, the only major city which previously had a Communist-dominated administra- tion, violence broke out on 17 March when Mayor Canoe was de- feated for re-election by one vote in the council. This oc- curred against a background of rising labor unrest over the government's austerity program. Le Havre port workers affiliat- ed with both Communist and non- Communist labor unions tied up the harbor briefly last week, and may respond to the call for nationwide protest "action" this week. The new municipal councils, together with the cantonal coun- cils, form the electoral college fox the Senate, Reflecting the results of the 8-15 March elec- tions, the new Senate to be cho- sen on 26 April is expected to be somewhat more center oriented than the predominantly rightist National Assembly chosen by the pro-Gaullist rightist landslide in November. This shift may assist President de Gaulle in keeping the assembly in line, especially since the new con- stitution accords the Senate a greatly strengthened role. NUCLEAR TEST TALKS Moscow has attempted this week to keep discussion at Ge- neva focused primarily on the American draft article on dura- tion. It probably believes that the Soviet position favoring a "permanent" and unconditional cessation of nuclear tests con- trasts favorably with Western insistence on an escape clause based on the effectiveness of the control, system. Soviet chief delegate Tsarapkin has charged that the American draft proposal is "ab- surd," since it would make the entire fate of the treaty de- pendent on each party's uni- lateral determination of the effectiveness of controls. He said that one could possibly understand the Western position if withdrawal were made depend- ent on a nuclear explosion in violation of the treaty, but not where the treaty could be ab- rogated by a party even if there had been no illegal explosion. On 19 March'Soviet dele- gate Tsarapkin approved the PART II Western suggestion made pri- vately on 16 March to adjourn the talks from 20 March until 13 April. The Soviet delegate himself-?had earlier suggested the meetings be cut down to one or two per week. Soviet propaganda has also focused on the American draft duration article. Claiming that, if translated into "plain and simple language," the Ameri- can formula is "an empty decla-. ration intended to deceive pub- lic opinion," Moscow has attempt- ed `to portray the escape clause as evidence of a Western desire to "guarantee" the legal right to resume testing at any time. A 15 March commentary relates this "attempt to impose on the Geneva conference the adoption of a false declaration" to Ame.r- icar.n interest in preparing a nuclear war. Soviet propagan- dists earlier called the intro- duction of the proposal "an- other maneuver aimed at prevent- ing at any cost a totaluncondi- tional and permanent cessation of tests," Con- 25X1 curred in by OSI) SECRET NOTES AND COMMENTS Page 5 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 MOSCOW REMOVING INEFFECTIVE AND CORRUPT REGIONAL OFFICIALS Khrushchev apparently has launched a campaign to strength- en the second-level leadership of the Soviet Union by replac- ing some of the more corrupt and inefficient party and gov- ernment officials. Shake-ups have taken place in the Uzbek Republic and Moscow Oblast, with- in the past two weeks, follow- ing similar action in Turkmeni- stan. Party chiefs in a number of other areas, including the Chechen-Ingush Autonomous Re- public, Novosibirsk Oblast, and Jewish Autonomous Oblast, have also been removed, and there are some indications that a similar house cleaning may soon extend to other republics. On 14 March both party First Secretary Sabir Kamalov and Premier Mirza Akhmedov of Uzbekistan were ousted for "se- rious mistakes" in their work. A similar move had taken place in Moscow Oblast on 2 March, when First Secretary Ivan Kapi- tonov and oblast government chief Nikolay F. Ignatov were fired at a meeting attended by some of the Kremlin's top per- sonnel specialists, including party presidium members Aristov and Kirichenko. No details have been published on the charges against the two The principal victims of the Turkmen affair last Decem- ber were party First Secretary Sukhan Babayev and another sec- retary, both of whom were ac- cused of "gross mistakes in their work," including national- ism;, nepotism, and malfeasance. These charges were sufficiently NOVOSIBIRSK OBLAST 7 IA Localities where recent leadership changes have occurred SECRET STALING OBLAST MOSCOW OBLAS V CHECHEN-INGUSH I OBLAST URKMEN JEWISH (YEVREYSK) AUTONOMOUS OBLAS o -~ PART II NOTES AND COMMENTS nn-- 6 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 SECRET serious to warrant Babayev's removal from the all-union par- ty central committee and to raise the question of his con- tinued membership in the Commu- nist party. Further changes in the com- position of the party's central organs could result from the current purge. Kapitonov, Igna- tov, and former Novosibirsk party chief Boris Kobelev are full members of the central com- mittee; Kamalov and former Chechen-Ingush party chief A. I.. Yakovlev are members of the Central Auditing Commission. The shake-up in Turkmen- istan has extended to lower echelons in that republic's leadership, where several offi- cials have been fired for prac- ticing Babayev's methods. A similar widening of the purge may follow the changes in Moscow Oblast and Uzbekistan, and the leadership in at least two other areas has been warned to improve or suffer the consequences. In- efficiencies in the work of the Minsk Oblast government came under heavy fire at the Belo- russian party congress in Jan- uary, and on 14 March a Pravda editorial called for the elimina- tion of "serious deficiencies" in mass political work being carried out in Stalino Oblast in the Ukraine. not be tolerated. Khrushchev has recently stressed the availability of de- serving and qualified younger men capable of providing vigor- ous leadership for his programs, and he has warned party and gov- 25X1 ernment functionaries that short- comin;s in their leadership will FURTHER REORGANIZATION OF SOVIET AGRICULTURAL ADMINISTRATION Soviet agriculture may soon undergo further reorganization which could involve the weaken- ing if not the outright aboli- tion of the Ministry of Agri- culture. Just prior to the opening of the 21st party congress, Agriculture Minister Matskevich and his ministry were sharply criticized in an Izvestia edi- torial for mismanagement of the forestry program. Furthermore, Matskevich did not speak at the congress, although government spokesmen for most of the other priority sectors of the economy were heard. The Third All-Union Collective Farmers' Congress, which had been scheduled for the "beginning of 1959," has apparently been postponed, prob- ably to provide the regime more time to resolve questions of agricultural organization. In recent months, the So- viet press has carried several articles discussing the advan- tage of transferring from the ministry its jurisdiction over the Repair and Technical Sta- tions (RTS) and over forestry, and of reducing its role in ad- ministering state farms. These articles suggest that "kolkhoz unions" should be established and that the RTS should be ab- sorbed either by them or by in- terkolkhoz construction organiza- tions. The latter organizations, which have been in existence for several years, are coopera- tive agencies engaged in rural construction, and are financed by member collective farms. These articles further sug- gest that state farm trusts of the ministry be eliminated and rayon executive committees be strengthened as the main link SECRET PART II NOTES AND COMMENTS Page 7 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY l 15 March in administering both state and collective farms, and that either USSR Gosplan or the USSR Council of Ministers assume responsibility for forest con- servation, The Yerevan Kommunist on 8 December suggested in an article that kolkhoz unions re- place the Ministry of Agricul- ture in administering collective farms. The article called for the abolition of the ministry and proposed that kolkhoz un- ions be established at the ray- on, oblast, and republic levels, with rayon kolkhoz unions as the main administrative link? In administering state farms, grealter agricultural decentrali- zation has been requested in Kazakhstan, the stronghold of the state-farm system, I. Slazlnnev, deputy chairman of the Kazakh Council of Ministers, writing in the 25 January issue of Izvestia, called for aboli- tion of ssTate-farm trusts and the transfer of certain plan- ning, financing, and sup- ply functions from the Kazakh Ministry of Agricul- ture to the rayon and ob- last executive committees. by ORR) The Yugoslav economy in 1958 exhibited a considerable degree of stability as infla- tionary pressures particularly evident during the first half of the year were brought under control, Real wages of indus- trial workers, which had been 13 percent below the 1957 level in the first half of 1958, in- creased by October to 13 per- cent above that level, Further- more, current indications of stability and vigor augur favor- ably for 1959, Industrial and mining pro- duction rose 11 percent in 1958 over 1957, and production levels stood 7 percent above the level called for in Yugoslavia's Five- Year Plan (1957-61), A drought in the south caused agricultural production to fall 10 percent below the 1958 planned levels, but this was still 11 percent above the original Five-Year Plan goal, According to Belgrade, trade with the bloc fell 15 to 20 percent short of agreed lev- (Prepared 25X1 els, In addition, planning was further disrupted when the USSR delayed delivery of 200,- 000 tons of wheat and 800,000 tons of coking coal? Thdyear's export plan fell 6 percent be- low expectations, but Yugosla- via's chronic import surplus was decreased 9,2 percents. Yugoslavia has signed 1959 trade protocols with all bloc members except Rumania, If the planned levels of these agree- ments are reached, which is doubtful, trade would be raised SECRET PART II NOTES AND COMMENTS Page 8 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET above above the amounts actually ex- changed in 1958. Most of the negotiations were lengthy and were accompanied by angry ex- changes over who was to blame for the decrease in trade and cancellation of Sino-Soviet bloc credits. Belgrade has further charged that the bloc is unwill- ing to supply many of the prod- ucts Yugoslavia wants or to ac- cept some goods for which it has no alternative market. In- creases in trade with the West are expected to reduce the bloc share of Yugoslav trade to be- low 30 percent. The greatest upset to Yugo- slavia's plans was the "post- ponement" by the USSR and East Germany of $244,000,000 and by Czechoslovakia of $57,000,000 in credits. The damage of these measures was offset somewhat by a $23,500,000 loan from the US Development Loan Fund for the Pancevo fertilizer plant, another $5,000,000 Development Fund loan for purchase of diesel locomotives, and a $8,430,000 loan from the United Kingdom for agricultural and other equip" merit. Nevertheless, the $175,- 175, - 000,000 Montenegrin aluminum combine project apparently had to be shelved for lack of f unds. (Con- curred in by ORR) TAIWAN ECONOMY SHOWS CONTINUED SHORT-TERM A boom in textile produc- tion and exports now under way highlighted the year 1958 in which the Taiwan economy in some respects made better prog- ress than had been anticipated, despite the serious military crisis over the offshore islands. Gross national product increased 6 percent in 1958 as compared with 5 percent in 1957, while prices rose only about 4 per- cent. A record rice crop was produced during 1958. In ad- dition, a $14,600,000 favorable balance of payments on current account, exclusive of American aid goods, was recorded despite a drop in exports of sugar, the main dollar-earning product. The Chinese Nationalists' most pressing problem involves a prospective increase of up-to $28,000,000 in proposed spend- ing for fiscal 1960 ending on 1 July 1960; this will serious- ly unbalance the budget. This prospect, together with a sharp increase in the money supply, raises prospects of ser4,--,s in- flation. n GE ICLILTURAL 120 (INDEX .-52-54-ID0) 1 A/ 00- // ~ ,/ 910 80 INDUSTRIAL PRODUCTION GROSS NATIONAL 200 --- 175 - 150 125 (MILLION DOLLARS) -(IP-1 957 PRICES) POPULATION 11o (MILLION) 9 tffif WHOLESALE PRICIIS Unless inflation gets out of hand, the prospects are good SECRET 7 6i 5 1938 '54 '55 '56 '57 '58 (ESTIMATE) PART II NOTES AND COMMENTS Page 9 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY for a further growth of the Tai- wan economy in 1959. The re- "ision of the exchange rate last November should stimulate ex- ports and rationalize the price structure. Exports of sugar, however, are expected to de- cline further in view of a re- Lt cut of 56,250 tons in Tai- wan's 1959 international sugar quota. Total production in 1958 was approximately 930,000 tons, not all of which was mar- keted. A number of basic economic problems remain for which no solution is in sight. The pop- ulation continues to increase at a rate, which, if unimpeded, will approximately double the 10,500,000 inhabitants in a generation. This will provide a serious problem for a pre- dominantly agricultural coun- try, with per-capita arable land already only one fifth of an acre. Investment of about 16 percent of gross national product per year is estimated to be necessary to avert a de- cline in poor-capita gross na- tional product. It is question- able whether adequate capital grovit can be maintained in the Maintenance of a large standing army constitutes the second tajor basic problem. A Chiang Kai-shek government is not likely to undertake a dras- tic reduction of the armed forces, now some 670,000 men, since this would virtually necessitate abandonment of the present pol- icy of maintaining large forces 25X1 in readiness to exploit any "Hungarian-type" uprising on the China mainland. The Japanese Socialist par- ty is shifting from its "neu- tralist" policy and moving to- ward a pro-Communist foreign policy. In the absence of most of the party's right-wing lead- ers, party executives pushed through a decision to form a joint front with the Communist party, the leftist Sohyo labor federation, and other leftists in an all-out attack on the US- Japan security treaty. Mean- while, a Socialist mission to Peiping has identified itself with the Communist position on Asian questions and termed the United States the "common enemy" of Japan and China. The decision to form a joint front with the Communists was a marked triumph for the Socialist left wing and assured that the campaign against the security treaty will be under pro-Communist leadership. The right wing, however, does not fully share the left wing's de- sire to abolish the security treaty or its willingness to sever relations with Taiwan. Neither does it fully support the policy of cooperating with the Japanese Communists. Fac- tionalism in the party ranks thus will probably continue, and a reversal of the Socialist de- cisions is unlikely. Socialist Secretary General Inejiro Asanuma, who is heading the party mission to Peiping, on 17 March issued a joint SECRET ?A'?T II NOTES AND COMMENTS Page 10 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARI 19 March 1959 communique with Chinese Commu- nist leaders in which he agreed that Japan must sever relations with Nationalist China and sign a peace treaty with Peiping. He also subscribed to Peiping's denunciation of the Kishi gov- ernment, its call for a nuclear- free zone in Asia, the "liber- ation" of Taiwan, and to Pei- ping's linking of political questions to that of trade with Japan. Asanuma's actions are an apparent effort to induce Pei- ping to ?-nd its trade embargo against Japan and to give the Socialists credit for an achieve- ment which could be exploited in the forthcoming local and upper- house elections. However, there have been no indications of any such concession. The Japanese press has been strongly critical of the Social- ist party's new policies and has accused it of "slavish servility" to Peiping. The governing Lib- eral-Democratic party is seek- ing to drive a wedge in Social- ists ranks by publicly charging Asanuma with irresponsibility. It also apparently intends to fight the forthcoming election campaign on the issue of conserv- ative advocacy of close cooper- 25X1 ation with the United States versus Socialist anti-American- ism. NEW STRAINS ON PAKISTAN'S MILITARY GOVERNMENT Pakistan's military leaders are encountering new tensions as the regime nears the end of its first six months in power. Their growing impatience with the per- formance of the civilian admin- istrators, coupled with the first signs of popular dissatis- faction, apparently is forcing President Ayub and the army to assume a firmer and more direct command of the government. The top military leaders recently have stepped up their pressure on senior officials of the civil service, on whom they have relied heavily since Octo- ber to provide the specialized knowledge and administrative techniques necessary to carry out the regime's extensive re- forms. Ayub and his army col- leagues are reported increas- ingly critical of the effective- ness of some civilian officials. At the same time, there have been growing indications of pop- ular dissatisfaction over the army's reliance on discredited officials to run the government instead of retaining full martial in-law administration. These reactions among sec- tions of the army and the public apparently were responsible for Ayub's order of 10 March provid- ing for summary dismissal or re- tirement of civil servants with- out appeal if they are found to be corrupt or inefficient. No- tice has already been served on a number of high-ranking govern- ment officers. The morale of the civil service, long one of the most stable and protected career organizations in Paki 4an, is reported to be extremely low following Ayub's action. Since the army is neither desirous nor capable of adminis- tering the country solely at all levels, the regime will remain dependent on civil officials. The growing strain between the two groups is likely to make it more difficult for the army lead- ers to implement their complex political and economic programs. The martial-law administra- tion in East Pakistan demon- strated its concern over the first serious challenge to its authority by recently imposing SECRET PART II NOTES AND COMMENTS Page 11. of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 SECRET CURL RENT INTELLIGENCE S EXLY SUMMARY 19 March 1959 severe sentences on leaders of a strike by jute mill worko:;s in February. Despite their con- cern for popular good will, the military leaders apparently felt this first indication of unrest had to be met with a show of government firmness. The stiff penalties may result, however, in serious dis- affection among working groups in East 1-:: istan, where there is traditioA.:ial sensitivity to outside authority. A current unseasonal price rise in East Pakistan towns may promote additional dissatisfaction among the working classes. A conference of all top govern- ment leaders will be held in East Pakistan next month to take stock of internal conditions. CUBA'S CAMPAIGN AGAINST DICTATORSHIPS Fidel Castro's campaign against dictatorships places him in the same camp with such liberal leaders as Venezuelan President Romulo Betancourt and former Costa Rican President Jose Figueres, but his predi- lection for revolutionary meth- ods and his recent tendency to deal with Communist-influenced exile groups have prevented concerted efforts by these three leaders. Although Castro has denied any intention to intervene mili- tarily, he has publicly declared his intention to assist anti- dictator revolutionary groups, and Cuba has become a meeting place for revolutionaries seek- ing material or financial sup- port. Castro has authorized :Ernesto "Che" Guevara, the con- troversial leftist Argentine revolutionary, who worked close- ly with Castro during the rev- olution, to deal with such groups. Revolutionary plotting in Cuba. is directed primarily a- gainst the governments of Haiti, the Dominican Republic, and Nic- aragua.. Activities against Haitian President Duvalier--al- ready weakened by internal dif- ficulties--have progressed the farthest. Haitian exiles have been permitted to broadcast in- flammatory propaganda and to operate freely, but there is no firm evidence that a Haitian invasion force is training in Cuba. Castro's interest in Haiti is primarily as a potential base of operations against Dominican dictator Trujillo. Anti-Trujillo groups have become active in several countries other than Cuba, notably in Venezuela, but so far have failed to achieve unity, Castro's apparent sup- port for the Communist-influenced Dominican Patriotic Union has met with opposition from Betan-. court and Figueres. Despite a great deal of Dominican exile activity in Cuba, including radio propaganda and possibly some recruitment, preparations for an attack can Trujillo are not believed to have progressed beyond the planning stage. The Dominican foreign minister has stated that an attack on Haiti would be considered an attack on the Dominican Republic. Activities against Nicara- gua, which is of less immediate Interest to Cuba, have also been hampered by lack of unity among the opposition groups involved; Castro is believed to support the pro-Communist Nicaraguan :Patriotic Union, Castro's efforts to exclude "dictatorships" from the Organi- zation of American States--a proposal originally made by 3etancourt--will probably be limited by the reluctance of many :Latin American countries to intervene in the inter- nal affairs of member na- SECRET PART II NOTES AND COMMENTS Page 12 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 HONDURAN-NICARAGUAN TENSIONS Long-standing tensions be- tween Honduras and Nicaragua have flared again despite the signature in Washington on 26 February of an agreement between the two countries designed to control revolutionary exile ac- tivities. Honduras has public- ly charged Nicaragua with vio- lating the agreement by arming the rebel band that clashed with a Honduran patrol near the border on 11 March, Nicaraguan officials look with suspicion on the Honduran delay in ratify- ing the agreement and-'fear that the exiles now at- tempting to secure Cuban and Venezuelan support for an inva- sion of Nicaragua may be permitted to use Honduran terri- tory, Shortly after signing the 26 Feb- ruary agreement, Nic- aragua deported Hon- duran rebel leader Armando Velasquez to Costa Rica, Velas- quez had stimulated several small out- breaks in Honduras by broadcasts over a clandestine radio failed on 12 March when, despite official Honduran assurances that they could return peacefully, they were fired on by unidenti- fied civilian groups a few miles inside Honduras, About 600 of them then came back to Nicaragua. There is some danger of a serious border incident between the armed forces of the two countries. Nicaraguan officials told the US Embassy on 15 March that the presence of a large Honduran Army force near the border caused them to withdraw 0. SALVA&SR)Y '--. NICAAAOUA COS- A. '14 ! CAN. It' LQ Nicaraguan troops to a prudent distance. station announcing an "imminent uprising" in Honduras. Other immediate effects of the agreement were to be an end to the clandestine radiobroad- casts and the repatriation of the several hundred Hondurans who had taken refuge across the Nicaraguan border. The radio, however, continued sporadic broadcasting at least until 15 March from its as-still-undis- closed location. An attempt to repatriate the refugees Meanwhile, the Nicaraguan Government has called for in- vestigation of the refugee prob- lem by the mixed Honduran-Nicara- guan military commission, a group set up under the auspices of the Organization of American States (OAS) after earlier border trou tiles, Honduran President Villeda 25X1 has authorized his ambassador in Washington to take the case to the OAS if other means fail. SECRET PA' 2T II NOTES AND COMMENTS Page 13 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET 1WF CURRE'NT' INnELLTO:ENCE' WEEKLY SUMMARY THE BOLIVIAN CRI,3IS The Bolivian crisis, which caused the US Embassy to start sending American dependents out of the country on 13 March, eased at least temporarily on 16 March when tin miners sus- pended their strike. The Sales government appeared initially to have won a showdown with dis- sident government party members headed by the key leftist labor leader Juan Lechin. Postponement to 1 April of the controversial unfreezing of mine commissary prices, however, suggests that this key issue may not be definitively settled and that a new contest between the Sales and Lechin factions may break out. Sales usually can count on a minority of the miners and of the central labor organization, while the majority tend to back Lechin. Siles in- creased his support from the militia in the recent crisis by appointing ;Quechua Indian lead- er Josd Rojas to the cabinet. Rojas is widely feared in Bolivia for brutality and wields dic- tatorial power over a key seg- ment of the rural population. The Bolivian Government's avowed adherence to the Interna- tional Monetary Fund's require- ment on wage policy permitted the US Government on 16 March to release ICA funds of $500,000 to Bolivia, but the Bolivian Cen- tral Bank still has a deficit of approximately $2,000,000. The bank was able to operate at a deficit in part by making use of $1,400,000 in guarantee de- posits of foreign oil companies. The :remaining deficit is ex- plaixned by a time lag. between the bank's writing of dollar drafts and their being presented for payment; these dollar drafts may "bounce" whenever the bank's deficit is much over $1,400,000. External factors may facil- itate the implementation of Bo- livia's economic program over the next year. Tin prices are showing unexpected strength and reached $1,035 per pound on 16 March, while Bolivia's 1959 budg- et predicated a price of $0.95. Furthermore, a foreign oil com- pany operating in a field with proved reserves is expected to. begin producing shortly, while other foreign oil companies plan to spend $12,000,000 in Bolivia this year, and the new pipeline to Chile may increase oil ex- ports. Bolivia achieved a 15- percent decrease in the cost- of-living between January 1957 and September 1958, thus suggesting that the Bolivian Government has a fair chance of carrying out its economic stabilization program. OUTLOOK IN THE NETHERLANDS FOLLOWING ELECTIONS The indecisive results of the Netherlands' national elec- tions on 12 March will make for- mation of the next cabinet dif- ficult and may leave the country without an effective government for months. The slight trend to the right--seen mainly in gains by the Liberal party--reflects the gradual postwar improvement in the Netherlands' economy and a protest against the "rigidity" of the successive postwar four- party coalition cabinets. The Labor party, which suffered con- sider-able losses in last year's provincial and municipal elec- tions, held its loss to only two SECRET PART II NOTES AND COMMENTS Page 14 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 seats, while the conservative Protestant parties suffered just enough losses to eliminate the possibility of Catholic re- liance on them for a "denomina- tional majority" alliance. Largely because of a split in the party, Communist represen- tation was cut in half. As the largest party in the chamber, the Catholics are being asked to make the first effort to form the new govern- ment, and they prefer a coalition with the Labor party, Labor, however, may feel it will do better as an opposition party for the next few years. In this case, there will be no alterna- tive to forming a right-wing coalition, but even this would for years because of inter- party bickering. If the Labor party--which pressed during the campaign for an "interna- tional" solution in West New Guinea, possibly under UN aus- pices--makes an issue of it by going into opposition or making it a necessary compromise to jointing the government, the deadlock may be broken. The inte:rim government of Catholic 12 MARCH 1959 ELECTION (0) FROM 1936 FltCTION PEOPLE'ffol 21_T.V . _; 150 SEATS CHRISTIAN HISTORICAL 12(-1) UN% PACIFIST SOCIALIST PARTY 2(+2) call for protracted negotia- tions, since the parties seem more conscious than ever of differences in their domestic political objectives, No fundamental change in Dutch foreign policy is expect- ed,except possibly on the Netherlands New Guinea question, where there has been a deadlock AFETI - . REVOLUTIONARY PARTY POLITICAL REFORMED PARTY Premier Beel, however, is still taking a strong line on 'West New Guinea and has threatened to divert NATO- committed equipment to its defense if American aid is not forthcoming and if NATO countries continue to sell arms to Indonesia, SECRET PART II NOTES AND COMMENTS Page 15 of 15 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 iwi CONFIDENTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY PATTERNS AND PERSPECTIVES Since the end of the block- ade in May 1949 West Berlin's economy has expanded steadily but remains vulnerable in its complete dependence on West Ger- many. The Communists could at any time cut the 110-mile life- line which carries over one bil- lion dollars in goods each way, West Berlin is one of Eu- rope's major industrial pro- ducers, Including such world- famous firms as Telefunken and Siemens-Halske, Berlin indus- tries produced goods valued at $1.66 billion in 1958, a 6-per- cent increase over 1957 produc- tion, of some 880,000 now em- ployed, about 300,000 are industrial workers mainly pro- ducing electrical equipment, chemicals, and metal products. The clothing industry has made the city a major fashion center for West Germany. Berlin's prosperity is also reflected in rising incomes and increased production of consumer goods. Wages and salaries in- creased by 7 percent in 1958. Per-capita production of con- sumer goods surpassed the pre- war level in 1955 and now is over 38 percent above .the prewar level.. Prices have remained relatively stable, and the cost of some major items such as clothing has declined gradually. As the Berlin economy has regained its prewar position, the high level of unemployment-- 20 percent of the labor force in 1954--has been brought down to only 8 percent in 1958. Un- employment still fluctuates be- tween 60,000 and 100,000 because of seasonal factors. Some 14,000 West Berliners still work in the Soviet sector and almost 40,000 East Berlin res- idents work in the western part. Average wages 'lave moved up from about $,30 an hour in 1950 to almost $.50 in 1957, for an average workweek of 45 hours.. The over-all economy has certain weaknesses, however. Its rate of growth has begun begun to fall off. Industrial production, in particular, while still expanding, is doing so at a decreasing rate., Large num- bers of older persons are with- drawing from the labor force, thereby increasing the city's WEST BERLIN'S ECONOMY GROSS PRODUCT (BILLIO'V DOLLARS) EMPLOYMENT (THOUSANDS) INDUSTRIAL PRODUCTION 11935-100) 800 749 700 120 EXPORTS- 1.0 MDSH. ONLY i6Y pension payments. Skilled in- dustrial workers, many of whom are refugees from East Germany, are gradually moving the West Germany. Dependence on the West The major weakness in the economy is the city's physical isolation from its main markets and sources of supply in West Germany. During 1958`about one billion dollars in goods were shipped to West Germany, almost all of which traveled over sc.x?- face routes subject to East A L PATTERNS N P SPECTI IVES Page i of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 TRAFFIC BETWEEN WEST GERMANY AND WEST BERLIN (in thousands of tons) COMMUNICATION ROUTES BETWEEN WEST GERMANY AND BERLIN IN OUT L5ENMARK1 LAND 2,633.6 789.5 O RAIL 2,265.6 191.2 WATER 2,385.1 280.3 KieL AIR 1.1 11.9 Y , oP 9C V Neuruppin -- ' EA S T Lk emerge Liebenwalde Railroad - Autobahn - Road Canal Air Corridor. West German East German A rail checkpoints i 50 100 STATUTE MILES 0 50 100 KILOMETERS German control. West Berlin also imported almost $1.4 bil- lion in goods from West Germany over these same routes. Ber- lin's complete dependence on the West is reflected by the small amount of trade with East Germany and the other bloc coun- tries, amounting to only about 2 to 3 percent of the total. Berlin industry exports about 65 percent of its pro- duction to West Germany, The electrical equipment industry, Berlin's most important man- ufacturer, produces almost $500,000,000 worth of equip- ment, and exports 73 percent of its output to West Germany. The clothing industry exports SECRET PART III PATTERNS AND PERSPECTIVES Page 2 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Now SECRET CURRENT 'INTELLIGENCE WEEKLY SUMMARY over 70 percent of its output to the West. If deliveries to the West were to decline by 50 percent, it is estimated that 80,000 to 90,000 workers would be added to the 90,000 already unemployed. Even more important to the city's existence than the West German market is its dependence on the West for vital supplies of raw materials, food, and agricultural products, Although East Germany supplies some fresh food, the total food ship- ments from West Germany to Ber- lin are far greater in both volume and value. In 1957 only 17,000 tons of foodstuffs came from East Germany while 600,000 tons of food were imported from West Germany. West Berlin in- dustries import over $300,000,?- 000 annually in iron, steel, and metal products. West Germany even supplies over 1,000,000 tons of stone and earth, mostly by canal barge, for the con- struction industry, East Germany supplies the major proportion--1,300,000 tons --of West Berlin's vital supply of brown coal briquettes, used extensively for heating private dwellings. Technical factors as well as cost rule out any large-scale conversion to other forms of fuels for heating. However, a stockpile of brown coal of about 780,000 tons, or about four to six months' sup- ply, is maintained. The Federal Republic's fi- nancial aid has also been neces- sary to maintain the economy. Thus far Bonn has extended al- most $600,000,000 in grant aid. In the city's budget for 1958- 59, more than one half of the receipts are from Bonn. In ad- dition, American aid, $5,500,000 in 1958, has amounted to approx- imately $600,000,000, Thus, the present prosperity has been achieved with the help of well over a billion dollars of ex- ternal aids Much of this external aid went into creating the early FREE WORLD 11% WEST GERMANY 86% momentum for the present indus- trial prosperity. The city's continuing need for assistance today: arises from factors at- tributable to geographical iso- lation, such as the cost of sup- porting refugees until they can be absorbed or resettled, and the high transportation costs of imports and exports. An at- tempt to recover any signifi- cant portion of these costs from Berlin's booming industry would run counter to the need for keeping taxation sufficiently comparable to that in West Ger- many so that industrial enter- prises will not move to the Fed- eral Republic and thus compound Berlin's unemployment. Present Economic Stability Mayor Willy Brandt has often stressed that one of Mos- cow's objectives in the present crisis is to undermine the econ- omy and create conditions of po- litical unrest. In an effort to bolster the economy, both the West Berlin and Bonn governments have taken steps to ensure new orders and investment for Ber- lin's industrial plants. At a meeting between Brandt and West Germany's leading industrialists in December, German industry pledged all-out support for the Berlin economy. Bonn now allows increased depreciation for tax purposes on new capital goods installed in Berlin, and has SECRET PART III PATTERNS AND PERSPEC^rIVES Page 3 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET extended government-guaranteed insurance coverage against non- delivery of Berlin exports be- cause of East German or Soviet interference with access. Spe- cial construction projects, such as the rebuilding of the Reich- stag, are also being accelerated. Despite these measures, political uncertainty seems to be slowly producing some eco- nomic soft spots. The direc- tor of a leading bank believes this.'uncertainty-is holding?up new . investment ;... Most',iarge , firms are filling orders placed before the present crisis, and new orders have fallen off. One prominent industrialist has com- plained that West German cus- tomers are now placing orders in West Germany rather than in Berlin. The Berlin stock market remains 18.3 percent below the level prior to Khrushchev's 10 November speech, while West German stocks have declined only 1 percent. Private bank deposits also are slowly drift- ing downward. Private savings have decreased $2,000,000 (1 percent), time deposits are down $14,000,000 (17 percent) and checking accounts have de- clined $13,000,000 (6 percent) since 31 October 1958. A fur- ther reflection of the political uncertainty is the increasing value of the Eastmark in terms of the Westmark. The Eastmark is now 21 percent more valuable than in November. Current Outlook Despite the signs of ap- prehension, which some Berlin observers feel is natural, the fear of any major panic has abated at least for the pres- ent,. Having withstood Soviet occupation in 1945, industrial dismantling, and the blockade, most Berliners remain calm in the face of Khrushchev's threats, Signs of panic in November were only temporary. Mayor Brandt has pointed to his meeting with German industrialists and the NATO meeting, both in December, as the major turning points for the Berlin economy. As the 27 May deadline approaches? however, increased anxiety may become apparent. Any sign of lack of confi- dence from Western Europe could lead to reduced orders for Ber- lin's industry and flights of capital, goods, and persons. Total tonnage of the world's oil-tanker fleet climbed to a record of 55,716,- 000 dead-weight tons by the end of 1958 despite a sharp decline in tanker charter rates. Some 5,291,000 tons were added during the year, even though as much as 6,000,000 tons were laid up for lack of business during the year--including 800,000 tons of American-flag tankers. The increase in new tankers was distributed un- evenly among various countries. Liberia, the major flag-of- convenience country, moved substantially ahead of second- place Britain by registering a 27.-percent gain. The trend toward construc- tion of supertankers--24,000 dead-weight tons and over--con- tinued, Sand !the world ; tanker fleet boasted 18,214,000 tons of SECRET 25X1 PART III PATTERNS AND PERSPECTIVES Page 4 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 THE JAPANESE-BUILT, GREEK-OWNED UNIVERSE APOLLO these giants on 1 January 1959. The largest of these--the 104,- 500-ton Universe Apollo, built by the Japanese and owned by Greek interests--was launched in December 1958. The Universe Apollo, like most very large supertankers, is unable to transit either the Suez or the Panama canal,: apd will be used principally to carry Kuwaiti crude oil to Japan. Three more such ships are on order; two are to be built in the United States. Major interest,however, appears to be in supertankers ranging between 45,000 and 50,- 000 tons; 154 of the 525 super- tankers now on order are in this category. Declining Charter Rates Tanker charter rates,which have fluctuated widely since the end of World War II, now have dropped to near record lows. Record highs were regis- tered during the Korean war and the Suez crisis in July 1956. At the height of the Suez crisis, rates were more than four times their present level. This year, they should be somewhat higher than last year, but may ships still will be operating at a loss; the loss, however, probably will be less than if they were laid up. SEC The low charter rates also are seriously affecting the com- petitive position of various sections of the international petroleum industry. Middle Eastern crude oil now may be sold competitively in areas which normally have purchased Venezuelan oil. With profits of oil operations in Venezuela reduced because of tax rises there and with oil prices cut more sharply in the Middle East than in Venezuela, more Arab oil may be sold in Latin America and Europe. For Middle Eastern oil to be competitive with Venezuelan crude at present prices, charter rates for tankers need be only 7 to 25 percent below the United States Maritime Commission scale; present rates are from 50 to 70 percent below scale. Fiagyof-Convenience,Dispute A bitter controversy over the flag-of-convenience issue came into focus at the meeting of the Intergovernmental Mari- time Consultative Organization held in London between 6 and 21 January. Most European mari- time countries, led by Britain, joined in a successful fight against seating flags-of-con- venience countries--chiefly ET PART III PATTERNS AND PERSPECTIVES Page 5 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 Liberia and Panama--on important committees. European maritime countries for years have opposed the grow- ing practice of registering in Liberia and Panama tankers o''ned by nationals of other countries. These nations claim these proce- dures merely.-create "tax havens" which enable "runaway" vessels to compete unfairly with the traditional maritime powers. More recently these powers have had the active support of the International Transport Workers' Federation, which boycotted a number of "tax-dodging ships" in late 1958. The boycott was successful only in American ports. The USSR has sided with other European countries and has imposed penalties on "con- venience" shipping using Soviet ports. American and Greek owners are the chief targets of this campaign because they own most of the tonnage registered under Liberian and Panamanian flags. The bulk of this tonnage con- sists of oil tankers, especially supertankers. Liberian-;flag tankers on the average are five years old, have a speed of 15.5 knots, and weigh 24,800 tons, By comparison, British-flag tankers on the average are almost (18.9%) 1 0,531 8%1 (14 8,376 ' 8 262 , (20%) 479 7 z 0 , (18%) X 295 6 Uj 6,000 , (15%) 3 C C 4,000 4,104 (10%) ~P X V ~ 1 ~ * ~P 5 04 . QP~P~P (6.6%) r 3,691 3,169 (8%) ~~F 10 1P~ - P1p~ 1h~ SECRET DEADWEIGHT TONS 3,231 I NUMBER OF SHIPS (4.7%) 2,602 (4.1%) 1 2,299 (3.3%) (31%1 , 15 1707-. 1 552 , (2.0'6) 1,OE3 (1.4%) (1.2%) (0 6%) 5%) 0 ' . . ( (0.5%) 437 4ig 333 267 259 1141, IP' Pte. \y`2' 011 \\P~ MVP? F~l- ~1~~ .\\~F' - J R PP aP 5 -F. 5 4P 11 ~~~ O \ Q -4~ V QP PQ'V F?~J 1 .` ~5 ~ ~ ~ P 1~ 12 years old, have a speed of only 13.5 knots, and weigh only 15,500 tons, Ownership of Liberian, Panamanian, and Honduran tankers is roughly divided between Amer- icans and Greeks. About 44 per- cent of Liberian-flag tankers are controlled by American firms, while Greek interests control about 53 percent. In Panama, the percentages are probably reversed. American oil companies, which own about 10,000,000 tons of the world oil-tanker fleet, have most of their` ton- nage under traditional flags, although 1,340,000 tons were registered in Liberia and an additional 1,826,000 tons flew the Panamanian flag on 1 January 1958. The great bulk of "con- venience flag" shipping--about 70 percent--is controlled by American or Greek "tramp com- panies"--those which hire out their vessels as opposed 'to owners who use their ships in their own trade. Suez Canal Limitations At present only super- tankers up to 40,000 tons can transit the Suez Canal fully loaded, although larger tankers--, WORLD TANKER FLEET BY FLAG OF REGISTRY VESSELS OF 2,000 DEAD-WEIGHT TONS AND OVER 1 JAN 1959 I TOTAL WORLD I I JAN 1956 TANKER FLEET PART III PATTERNS AND PERSPECTIVES Page 6 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 DRAFT: 30 FT LENGTH: 503 FT THE WARTIME 'T-2' DRAFT: 35-36 FT LENGTH: 660-685 FT LARGEST TANKER THAT CAN PASS THROUGH SUEZ CANAL FULLY LOADED COMPARATIVE TANKIER SIZES 85,000 DRAFT: 39 FT LENGTH: 808 FT CAN PASS THROUGH SUEZ CANAL PARTLY LOADED OR IN BALLAST DRAFT: 48 FT LENGTH: 950 FT CANNOT USE SUEZ CANAL perhaps up to 65,000 tons--can transit in ballast or partially loaded, Of the existing super- tanker, fleet, over 3,300,000 tons cannot use the canal or can use it only when partially loaded. In coming years, how- ever, the number of ships unable to use the canal will probably rise sharply despite Egypt?s ef- forts to deepen it, Of the 22,- 000,000 tons of supertankers now on order, more than 60 percent-- 13,841,000 tons--will be unable to transit the canal fully loaded, if at all. While the increasing size of tankers will lessen the im- portance of Suez as a major oil. transport route, the amount of oil passing through the canal will continue to rise. In the six months before Egypt national- 1zed" the canal in July 1956, about 1,4009000"barrels a day (b/d) passed the canal to the West. This amount had already SECRET PART III PATTERNS AND PERSPECTIVES Page 7 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 risen to an average of 1,881,000 b/d for the first eight months of 1958, but the actual capacity of the canal at present is over 3,000,000 b/d. Tankers carry through the canal almost 82.6 percent of Middle East oil des- tined for: Western markets. New Flag Vessels Despite the surplus of tank- ers, several major oil-producing states are planning to develop their own tanker fleets. Plans to set up an Arab Navigation Company, largely to ;operate. tankers, may be completed by early spring. The United Arab Republic, hoping to provide the nucleus of the fleet, is seeking a deal with Japan for the con- struction of two 20,000-ton tank- ers. The Kuwaiti Government re- portedly has approved the tanker plan, and the privately owned Kuwaiti Tanker Company will par- ticipate. The rest of the pro- posed Arab fleet probably will be government--owned. CEYLON'S DETERIORATING.'ECONOMIC SITUATION Economic conditions in Cey- lon have deteriorated steadily since the Bandaranaike govern- ment came to power in April 1956. The standard of living has de- clined, unemployment has in- creased, and numerous strikes have disrupted the economy. While some of the causes~of the economic deterioration are be- yond the government's control, Colombo's weak administration and lack of an economic develop- ment program to reverse the trend have been major factors in the government's loss of pop- ular support. When Bandaranaike took of- fice, economic conditions were generally good, The economic policies of the United National party (UNP) government, plus the improvement in export prices, had enabled Ceylon to recover K on-Arab Iran also plans to carry a. part of its oil pro- duction in Iranian-flag vessels. The first 33,500-t6n supertank- er for, Iran was commissioned on 21 January; another of the same tonnage is to be commissioned in about six months, Five other supertankers of 50,000 tons are being built in Swedish yards and will be delivered to Iran at the rate of one each year beginning in 1960. Venezuela also has plans to build a government-owned tanker fleet, On 1 January, 33 tankers totaling 207,146 tons were under Venezuelan registry, one tanker of 46,550 tons flew the Saudi Arabian flag, and four ships totaling 42,560 tons flew the Egyptian flag. Other oil- producing countries had their own flag tankers, but their numbe:r and tonnage were re- latively insignificant, (Concurred in by ORR) from the collapse of commodity prices which followed the Korean war. Per-capita gross national product had been rising for sev- eral years, the cost of living was relatively stable, and un- employment was not yet too se- rious a problem. The'high for- eign-exchange reserves reflected the favorable prices Ceylon was receiving for its principal ex- port crops, tea and rubber. Bandaranaike's Program The Sri Lanka Freedom par- ty, led by Bandaranaike, called during its campaign for national- ization of tea, rubber, and co- conut plantations and other im- portant businesses, most of which are foreign-owned, and an economic development program providing for higher employment and rising living standards. SECRET PART III PATTEINS AND P2 ',SPECTIV'Ea Page 8 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 G N P* POPULATION PER CAPITA GNP 1953 $ 928,000,000 8,290,000 $112 1954 986,000,000 8,520,000 116 1955 1,108,000,000 8,723,000 127 1956 1,049,000,000 8,929,000 117 1957 1,035,000,000 9,179,000 (estimate) 113 1958 1 ,000,00 , 0 estimate 9,445,000 estimate 106 On taking office, however, the party soon was faced with declining prices for Ceylon's major export crops and with the realization that the costs in- volved in nationalization would be considerably greater than anticipated. The government therefore postponed most of its plans for nationalization, but has reiterated its intention to nationalize eventually, thereby discouraging private investment. Economic Deterioration The government's assurances that it would expand economic development as soon as a plan could be formulated apparently satisfied the people until late 1957. At that time, however, Bandaranaike began to lose much of his populat support, largely because of the steady decline in living standards. Per-capita gross national product dropped about 11 percent between 1955 and 1957, and probably fell fur- ther during 1958 despite good rice and tea crops. Although the official price index shows only a small increase, there is general agreement that the cost of living has actually risen about 5 percent a year. Unemployment has increased steadily and Ceylon now is esti- mated to be adding 70,000 to 80,000 a year to its pool of an estimated 500,000 unemployed out of a labor force of about 3,700,000. Exports have de- creased and imports increased, causing Ceylon's holdings of gold and foreign exchange to decline from $254,000,000 in April 1956 to $193,000,000 at the end of November 1958. The government's prestige has also been severely shaken by its inability to halt the repeated strikes since late 1957. The government, as a self-styled socialist regime, has generally urged employers to yield to the strikers, despite the fact that most strikes have been staged by the politically oriented un- ion leaders to build up their political strength rather than to improve labor conditions. Man-hours lost by strikes in 1958 were over 30 percent great- er than in 1957, and the strikes disrupted business activities, raised prices, and antagonized Ceylon's rural population. The situation in Colombo port has been the most serious problem. Conditions there be- came so bad during 1958 that even increased use of such minor ports as Jaffna, Galle, and Trincomalee did not eliminate long delays at Colombo. This led some shippers to bypass Co- lombo and others to raise ship- ping :rates for products originat- ing at or destined for Colombo. The government claims that its port-modernization program, formulated since the port of Colombo was nationalized in Au- gust :1958, will eliminate future bottlenecks. This seems un- likely, however, unless labor discipline is enforced. This would require a more forceful policy than the government seems likely to adopt. CEYLON GOLD AND FOREIGN EXCHANGE RESERVES MILLION DOLLARS 2I0 1 SECRET 798 1958 PART III PATTERNS AND PERSPECTIVES Page 9 of 11_ Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 SECRET CURRENT. INTELLIGENCE WEEKLY SUMMARY 19 March 1959 The formulation of a well- conceived economic development plan would be only the first step in dealing with such prob- lems as growing unemployment and diversification of the econ- omy. This would, however, en- able the government to focus the people's attention on eco- nomic development and hold out CEYLON: EXPORTS AND IMPORTS (THOUSAND DOLLARS) EXPORTS IMPORTS TOTAL TEXTILES MACHINERY TEA CRUDE RUBBER COCONUT PRODUCTS OTHER TOTAL FOODSTUFFS (RICE) PETROLEUM PRODUCTS AND RELATED AND TRANSPORT OTHER TOTAL PRODUCTS EQUIPMENT 1953 173,269 70,892 51,781 33,345 329,287 25,151 33,919 37,041 78,821 337,646 1954 235,788 59,913 45,143 39,108 379,952 r 21,585 30,862 26,667 78,755 293,424 1955 250,788 73,573 47,929 35,134 407,424 27,716 28,356 32,825 90,788 306,546 1956 219,208 61,436 45,328 38,287 364,259 14292 , 25,208 33,684 39,450 100,899 342,162 1957 214,483 63,063 33,390 42,180 353,116 149,569 (53,632) 43,113 34,396 42.492 109,283 378,853 1958 200,935 42,386 22,582 32,139 298,042 117,667 (37,399) 21,362 28,808 38,792 75,811 282,440 uaR OCT) While some of the factors causing the economic deteri- oration, such as the decline of export prices and the severe floods in late 1957, have been beyond the government's control, at least part of the deterioration results from the government's habit of placing po- litical ahead of eco- nomic considerations. It has a consistent EUROPEAN SATELLITES USSR COMMUNIST CHINA TOTAL SINO-SOVIET BLOC TOTAL WORLD IMPORTS EXPORTS IMPORTS EXPORTS IMPORTS EXPORTS IMPORTS EXPORTS IMPORTS EXPORTS 1952 863 2,445 263 501 6,898 25,950 8,042 28,896 357,513 315,478 1953 1,574 665 14 - 43,899 50,865 45,487 51,530 337,846 329,287 1954 858 349 402 - 33,252 48,529 34,312 46,878 293,424 379,952 1955 1,484 333 128 - 16,785 25,479 18,397 25,812 308,546 407,424 1956 1,418 275 184 - 28,102 38,270 29,704 38,545 342,252 364,259 1957 1,781 1,242 298 137 17,597 35,151 19,874 36,530 378,854 353,116 1958 1,342 948 187 2,833 26,858 11,331 38,387 15,112 282,440 298,042 often proclaimed belief in a planned economy, the government has failed to formulate an eco- nomic development program. When the government took office, it discarded the development pro- gram, of the former UNP govern- ment as too conservative and established the National Plan- ning Council in September 1956 to formulate a socialist plan, This council has sought, the ad- vice of foreign economists and is working on a plan, but prog- ress. has been slow, chiefly because of Bandaranaike?s pre- occupation with political ma- euvering. record of being amenable to the demands of pressure groups. The prime minister as well as the other ministers interfere in all organs of the government at all levels, disregarding the recommendations of the officials involved. This is 'particularly true in the labor field, in which the government, to achieve temporary political gains by granting labor demands, has con- sistently overruled the deci- sions of the wage boards and industrial courts. In addition, the communal violence which erupted in May 1958 severely disrupted economic activities, and can be attributed at least in part to the government's ap- peasement of Singhalese extrem- ists, Lack of Economic Planning Despite Ceylon's growing economic difficulties and its SECRET PART III PATTERNS AND PERSPECTIVES Page 10 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 CURRENT INTELLIGENCE WEEKLY SUMMARY 19 March 1959 the hope that living conditions would improve in the future. Government leaders appear confused about what is needed to stimulate Ceylon's economic development. They have in- creased expenditures for social services, partly to win polit- ical support and partly in the belief that such projects con- stitute economic development. The Soviet and free world eco- nomic aid that is available is being utilized very slowly, for the government has few income- generating projects ready for execution. While the government may succeed in producing a general- ized ;plan during the coming year, it is unlikely that any plan will be vigorously imple- mented in view of Bandaranaike's past performance. Under these circumstances it seems likely that economic conditions will con- tinue to deteriorate unless there is a sharp and unexpected rise in the prices of Ceylonese exports. Even such a develop- ment, while strengthening the country's financial position, would have little effect on the rapid growth of unemployment. .fir PART III PATTERNS AND PERSPECTIVES Page 11 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927AO02200020001-6 Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6 CONFIDENTIAL pp 4 sEPREofA Approved For Release 2007/10/23: CIA-RDP79-00927A002200020001-6