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Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 1%%w Nmof CONFIDENTIAL see _ CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. OCI NO. 0298/61 21 September 1961 CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE DOCUMENT NO. NO CRi3NGE IN CLASS. ^ DEC";ASStFIED CLASS. CW: ijEO TO: N NT DATE: AUTH: HR T 2 TS sic otU DATE: REVIEWER: -' p State Department review completed Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 -~ ^?.r ~ mar/ THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. The Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Next 4 Page(s) In Document Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 v - - I 1 , M IN L:,.e --use T CURRENT INTELLIGENCE WEEKLY SUM WEEKLY REVIEW EAST-WEST RELATIONS Moscow promptly responded to President Kennedy's state- ment of 13 September to neutral leaders with a Foreign Ministry announcement that Gromyko would enter into an "exchange of opinions" on Berlin with Sec- retary Rusk during the UN General Assembly session. This suggests that Moscow has not foreclosed the possibility of negotiating a settlement rather than proceeding with an East German peace treaty by the end of the year, and is in line with the increased Soviet stress on negotiations following Khrushchev's speech of 10 Sep- tember in Stalingrad. The Foreign Ministry statement noted that both the President and the British Gov- ernment had made statements expressing readiness for "serious talks" on Germany and other problems. This line was apparently intended to mean that the President's statement had overcome Khru- shchev's doubts of US willing- ness to conduct "businesslike negotiations." The Soviet statement also sought to imply a tacit assumption that Soviet terms--a peace treaty and a settlement on Berlin in that context--would be the basis for the talks. Soviet propaganda has given wide publicity to the Rusk-Gromyko talks but has maintained an ambivalent line on the possibility for a success- ful outcome. Moscow noted that, while President Kennedy in his letters to Presidents Sukarno and Keita had expressed a 21 Sept 61 willingness to find a way out of the impasse over Berlin, the US still held to "old, unrealis- tic positions." The communique of the Western foreign ministers meeting in Washington was criti- cized as "vague" and "failing to answer the main question" of whether the West was willing to seek a "peaceful solution to the German and Berlin problems through negotiations." On the other hand, a Polish diplomat told an American ob- server that he was convinced that the negotiations during the UN session could lead to a solution which would safeguard the prestige of all concerned, The US Embassy in Moscow reports that according to contacts with the Foreign Ministry and information from other diplomats, it is clear the Soviets are deliberate- ly taking the line that the Berlin question will be resolved peacefully. Gromyko told the Danish foreign minister during a stopover in Copenhagen that the USSR was receptive to nego- tiations, presumably referring to formal East-West talks. In anticipation of the talks in New York, Moscow has sought to exhibit a flexible approach to possible alternative solutions for Berlin. In his conversations with former French Premier Paul Reynaud, Khrushchev agreed that'a settlement based on the status quo was a sensible policy and that the USSR sought only a "Juridical" basis for the status quo. He went on to add that such a settlement need not involve de jure recognition of East Germany. As for access to CONFIDENTIAL WEEKLY REVIEW Page 1 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 rr\K I rf rr i-- r-?^ . . Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 - 1 '' CURRENT INTELLIGENCE WEEKLY SUMMARY Berlin, Khrushchev told Reynaud that after a peace treaty it would be handled "practically" as it is now but on a different basis--that is, no longer on the basis of occupation rights. He also made it clear that access arrangements would have to be worked out with the East Germans. Khrushchev said that all forms of access could be guaranteed by an "international agreement" which would be de- posited at the UN, implying that the Soviets would partici- pate in guarantees. Khrushchev also used a message to the Interparliamentary Union to stress the possibility of adequate guarantees for Ber- lin. Although he was vague as to the form and procedure for implementing any guarantees, his message of 13 September asserted that "full freedom' of communications for the free city of West Berlin will be guaranteed by agree- ment with the German Democratic Republic and through active guarantees." While denouncing "warlike circles" in the West for resorting to threats and provocations, Khrushchev claimed that the Soviet Union would "spare no effort to have the question of Germany resolved on the basis of agreement." He added that the Soviet Govern- ment was ready to negotiate "with leaders of the Western powers," provided that the talks would not be used to delay the signing of a peace treaty. In the week preceding the opening of the UN General Assembly, Moscow raised the possibility of a UN role in the German problem. In reply to a question by Reynaud, Khru- shchev said he would favor transferring the UN headquarters to West Berlin. He pointed out 21 Sept 61 to Reynaud that the USSR had offered to have the security of West Berlin guaranteed by either the UN, neutral states, or the three Western powers plus the Soviet Union. Izvestia picked up this idea of a transfer of the UN in its editorial on the opening of the General Assembly session. It stated that such a plan would deserve serious consideration and that transferring the UN to West Berlin was an example of the "favorable opportunities" which the creation of a free city would provide for West Berlin. Both Izvestia and Pravda stresse at the admission of both German states would "benefit the cause of peace." Pravda also asserted that in view of the tense international situation, "new and even greater efforts" are demanded from the statesmen attending the UN session. The more conciliatory Soviet line on Germany has been balanced, as in the past months, by pro- nouncements on Soviet military preparations in connection with the heightened tensions over Berlin. In a series of articles, Marshals Malinovsky, Vershinin, and Moskalenko have stressed the quality of Soviet armaments and the continued preparations to strengthen Soviet defenses. Malinovsky stated that "we must prepare our armed forces for a strenuous, heavy, and excep- tionally fierce war." Moskalenko boasted that Soviet forces pos- sessed powerful strategic rockets which made it possible "to at- tain the strategic goals of a war within a short period of time." Moscow apparently hopes to exploit the disarmament issue CONFIDENTIAL WEEKLY REVIEW Page 2 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 CURRENT INTELLIGENCE .'WEEKLY SUMMARY in an effort to influence the Western positions on negotiations over Berlin. The Soviet repre- sentative in the bilateral US- Soviet disarmament talks in New York virtually accepted a US. declaration on principles to govern a future disarmament con- ference. He stressed the import. tance of a joint statement "at this juncture" as a means of lessening international tension and claimed that the USSR was compromising for the sake of "major political considerations." The switch in the Soviet attitude toward the US position;: suggests that the Soviet leaders hope to use an agreement on disarmament principles as a sign of their interest in con- structive negotiation with the US. The Soviet leader may also see an agreement on disarmament principles as a useful gesture to improve the general atmosphere for the talks with Secretary Rusk. The Soviet reaction to the US resumption of nuclear testing followed the line fore- shadowed in Moscow's justifi- cation"of its own test. Bloc propaganda charged that the US tests proved that preparations had been under way for some time, and that US haste in resuming tests exposed the "hypocrisy" of the Geneva negotiations on a test ban. On 14 September two West German F-84 fighters, en route to a West German base on a training flight from France, strayed into the Soviet Zone 21 Sept 61 and, when the pilots radioed that they had less than 20 minutes' fuel, were directed by West Berlin's air traffic control to land at Tegel airfield in the city's French .rector. The Soviet controller . at`'-'the Berlin Air Safety Center (BASC) requested the French to detain the aircraft and pilots, and in a formal statement the Soviet section of the BASC warned that other air- craft in the corridors would suffer if the violators were released. The Soviets and East Germans lodged vigorous protests, denounced.the Western power`s for complicity in staging a provocation to torpedo negotia- tions between the USSR and the US, and sought to assert East German responsibility for air traffic. On 17 September the East Germans delivered a note to the French headquarters re- questing the French authorities to surrender the two pilots "for a limited period of time for the purpose of conducting an in- vestigation.'" The Soviet con- troller at BASC notified the French that if the fighters flew out without Soviet permis- sion, it would cause the most serious consequences. Simultane- ously the USSR sent protests to the three Western powers and Bonn warning that in "similar cases" of violations by fighters, the aircraft would be destroyed if they refused a request to land. On 19 September the Soviet repre- sentative in BASC supported the demarche of the East Germans for participation in a investi- gation of the incident. 25X1 25X1 CONFIDENTIAL WEEKLY REVIEW Page 3 of 26 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 f'P k1rir%rk1T1A1 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Awe *w0f CURRENT INTELLIGENCE WEEKLY SUMMARY SUCCESSOR TO THE UN SECRETARY GENERAL The UN faces a long period of turmoil over constitutional problems arising from the search for a new secretary general who will be acceptable to both the USSR and the West. Soviet delegates continue to insist on their "troika" concept, but Afro-Asian pressure may lead to eventual appointment of a single successor. Selection of so authoritative a figure as was Hammarskjold, however, is unlikely. Burma, the UAR, Sudan, Morocco, and Iraq. Under this plan the General Assembly would designate either the president of the current session--Mongi Slim of Tunisia--or outgoing president Boland of Ireland as interim secretary general. The pro- cedure was designed to avoid, for the present, expected Soviet vetoes in the Security Council of any nominee for the ? 'poS.i,t'i(>n ' of~ Secretary general. Hammarskjold's death brought to a head the fight between East and West over the 1960 Soviet proposal for replacing the sec- retary general with a triumvirate representing the West, the Soviet bloc, and the neutrals. The ttroi ka~ idea was not well received by the Afro-Asian members, many of whom recognized that such a reorganization would paralyze the Secretariat. However, it is possible that, in order to avoid a Soviet veto, UN members might agree to some version of the troika in the lower echelons of the Office of the Secretary General. The appointment of a new. secretary general is subject to the concurrence of the five permanent members of the council plus endorsement by a majority of the 99-member General As- sembly. The assembly can, how- ever, decide that the choice of a new secretary general is an "important question" requiring a two-thirds majority vote. As a stopgap measure, the concept of having the president of the General Assembly tem- porarily handle the duties of the secretary general was ap- parently well received by sev- eral UN members, including Boland told the US delega- tion on 18 September his canvass of UN members showed that the procedure would not be easy to- put across. He reported that opposition came from "well- intentioned" delegations which believe that one man could not handle both jobs. Other oppo- sition came from countries which are promoting specific candidates for the post and from the Soviet bloc, which is sticking to its troika proposal. Prior to Hammarskjold's death, most UN members were agreed that the next secretary general would come from Asia or Africa. Mongi Slim, U"Thaint of Burma, and C. V. Narasimhan and Krishna Menon of India have been mentioned as possi- bilities. In the meantime, the ad- ministrative duties of the ,;Secretary General's Office have been assumed by Narasimhan, recently appointed chef de cab- inet in that office; Andrew Cordier of the United States, under secretary for General Assembly affairs; and another American, Ralph Bunche, under secretary for political affairs. CONFIDENTIAL 21 Sept 61 WEEKLY REVIEW Page 4 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 CONFIDENTIAL CURRENT INTELLIGENCE WEEKLY SUMMARY EAST GERMANY The repressive.:policies pursued by the Ulbri.t ht, . regime since sealing off West Berlin on 13 August appear to have evoked widespread opposition among the East German populace., judging from continued reports in East German publications of arrests and trials of antire- gime elements, particularly youths. However, legislation of 20 September gives Ulbricht legal means to invoke a state of emergency, suspend constitu- tional guarantees of individual rights, regiment the population, seize property, and change over- all state planning.. Typical of the., steps : possible under.: . these sweeping emergency powers is the eviction of unreliable elements from homes along the Berlin sector and zonal border and probably the East - West German frontier areas. There are indications that opposition elements in the pop- ulation boycotted the local elections of 17 ' September ; an East German newspaper admits that Protestant pastors did not vote.. The general attitude of the population, nevertheless, appears to be one ofhopeless- ness. The regime claims that "almost 98 percent" of eligible voters-cast ballots, that 99.96 percent of valid votes approved the regime's single:slate,, andtt that only 322 of 215,000 .candi= dates were not elected. The forced recruiting of young men for the armed forces and security forces apparently has been one of the major causes of public resentment. Letters from most East German areas con- firm that the regime has used a variety of pressures, including imprisonment in labor camps, to induce young persons--both men and women--to "volunteer." The regime claims to have enlisted more than 174,000 youths in this manner. Prior to the re- cruitment drive, over-all GDR mi.,litary 'strength.., iticludingj;security for ces, "was.;:'?e$ti sated at 143, 500. The defense bill of 20 Sep- tember further increases Ulbricht's already great powers as chairman of the State Council and of the National Defense Council. Keyed to the alleged threat of "inten- sifi.ed war preparations by the West German militarists," the measure specifies that service in the armed. forces, as well as in civil defense, is "an honorable national duty of the citizens" of East Germany. All men between 16 and 65 and all women between 16 and 60 are liable to civil defense duty;. The key section empowers Ulbrich, to invoke, a state of : emergency "ih the event of danger," in order to counter an attack CC~NFi~JENTIAL 21 Sept 61 WEEKLY REVIEW Page 5 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 CONFIDENTIAL 1% MAO CURRENT INTELLIGENCE WEEKLY SUMMARY 25X1 against East Germany, or to fulfill an international treaty. It does not make clear whether he has in fact been acting under this power since 13 August a The regime's move to im- prove security in East - West German border areas has been building up since 13 August. The regime is concentrat- ing a variety of pressures on the church, which still has a potential for rallying opposi- tion.` Evangelical Church leaders, such as Scharf, who are identified with the group supporting continued ties with West Germany are being publicly charged with "fascism" and other crimes, especially cur- rency manipulations. On 7 Sep- tember, Neues Deutschland bit- terly attar ed c ar , reviving old charges that he had engaged in unlawful currency trans- actions and noting that legal proceedings had been instituted against him in 1957 for this offense and still stood on the books. Other churchmen are being similarly blackmailed in an effort to induce them to make public endorsements of the re- gime's "two Germanys" policies. For example, Bishop Krummacher of Greifswald was recently warned by the state secretary for church affairs that unless he ,would sign a declaration of support for the+:regime, "facts" about his sympathies for Nazism would be published. -The Catholic Church is also being subjected to special pres- sures in an induce churchmen to support the re- gime. Many of these pressures are directed against newly 'con- secrated Bishop Bengsch of Ber- lin, an East Berliner. Bengsch is to meet with Ulbricht on 30 September. Another Catholic prelate-the bishop of Meissen --was warned on 30 August that he would have to take a "posi- tive position" concerning the 13 August events, including an expression of political loyalty to the regime as the sole temporal authority to which he is answerable. CONFIDENTIAL .%- 25X1 25X1 21 Sept 61 WEEKLY REVIEW Page 6 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 NWP CONFIDENTIAL Moise Tshombe and Mahmound Khiari, the Tunisian head of the UN's civil operations in the Congo, reached agreement late on 20 September for a pro- visional cease-fire in Katanga. This will provide an opportu-.. nity for substantive negotia- tions concerning Katanga's re- integration with the Congo. Tshombe probably believes that the stipulated "freeze" on the movement of troops and sup- plies will permit him to main- tain his military superiority and to drive a hard bargain in the negotiations. UN officials in Leopoldville indicated on 20 September that he was continuing to demand major concessions from the UN. Earlceer he. had insisted that the UN not only forego any reinforcements but that its forces retire to their Katanga bases in return for a cease- fire. The UN's military position had been deteriorating. A besieged Irish unit at Jadot- ville was overcome early this week, and UN officials in New York told American represent- atives that the 3,000 Katangans who had been engaged in the operation were being organized by Interior Minister Munongo for a move to Elisabethville. The tJN garrison at Kamina was under attack from 1,000 well- armed tribesmen with Belgian officers. A planned UN airlift of one Indian and one or two Ethiopian battalions into Katanga had been halted by a combinition of Katangan air activity and. the inadequacy of night-flying aids. The flight to Elisabethville of three Ethiopian F-86 jets, which the UN had counted on to end Katangan air superiority, was held up pending UN as- surances that adequate naviga- tional aids, fuel, and spare parts were available.. According to information received by the American delegation in New York, UN chief representative Linner had told his headquarters that unless the airlift could be resumed, "we seriously risk the defeat of UN forces." Brigadier Inder Jit Rikhye, --an Indian who was Hammarskjold's military adviser and who, with Under Secretary Ralph Bunche, seems to have assumed direction of the Congo operation--on 18 September gave American officials his analysis of the difficulties encountered by-the UN forces in Katanga. According to Rikhye, the original UN plan had had the limited objective of closing down the Elisabethville radio station. However, the action triggered the return to their units of many of the European mercenaries who were in the proc- ess of repatriation, and fight- ing spread unexpectedly. The UN then found that the Katangans, in addition to their overwhelming numerical superiority, often were better armed than the UN troops. Rikhye added that the limited UN airlift capability-- no aircraft larger than a DC-4 is available--has prevented the use of either support artillery or transport in adequate quantity. He criticized the organization.'s intelligence staff, which he said frequently depended on re- ports from diplomatic posts in the Congo, and he stated that the Swedish and Irish troops had been trained mainly in police func- tions and thus were ineffective in combat. CONFIDENTIAL 21 Sept 61 WEEKLY REVIEW P&ge 7 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 f"flklrlrrk iTMrl A I Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 UN 1940 - Stanleyville Gorna ? U 18 5 Bukavul CURRENT INTELLIGENCE WEEKLY SUMMARY p Luanda UN 3160 Coquilhatville i bi of the Congo United Nations Forces* UN 640 L Kabul UN 120 Mano n o U N 925 Lulu scattered According to reports from Leopoldville, Premier Adoula' has been under increasing pres- sure to order the Congolese Army to intervene in Katanga. UN 620 UN 1500 UN 2800 According to the American Embassy, sentiment among Con- golese legislators is vir- tually unanimous in favor of army intervention. The Congolese CONFIDENTIAL Bak,anga Buta UN 450 Kamina UN 120 21 Sept 61 WEEKLY REVIEW Page 8 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 CONFIDENTIAL senate has already passed a resolution favoring military action, and General Lundula, Gizenga's former military commander, has offered to place his troops at the dis- posal of the government for an operation against Katanga. Adoula, in a conversation on 18 September, indicated to Ambassador Gullion that he realized such intervention probably would lead to civil war and stated that he hoped to head off pressure for mil- itary action through a series of delaying tactics. Bunche told American officials on the same day, however, that the Adoula government had asked the UN to put its troops in a position to fight on equal terms with the Katangans within 24 hours. Leopoldville added that if the UN could not continue the fight, the Congo- lese Government would under- take operations of its own and would ask friendly coun- tries for assistance. On 19 September, Adoula informed the UN that his government would not give its approval to negotiations for a cease-fire and would not consider itself in any way bound by one. Aware that his army is not equipped at this time for an operation against Katanga, Adoula probably took this step to appease the ele- ments seeking strong action against "Katanga. Anti-American sentiment is increasing in Belgium as a result of Congo developments, and even responsible Belgians feel that the United States has been lax in assuring it- self that the UN would prop- erly use the material and political support placed at its disposal." The Belgians bitterly resent UN accusations that the Belgian military are responsible for the fight- ing in Katanga, with the im plication that Tshomb6's mercenaries are under the control of the government of Belgium. The American ambas- sador in Brussels believes that Belgian resentment can easily lead to a rapid in- crease in neutralism in a country where fatalism and apathy are already strong. IN a `CONFIDENTIAL 21 Sept 61 WEEKLY REVIEW Page 9 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 r'r-\kvIIr% MTIAI Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY Ambassador Harriman, re- porting on his talks with Sou- vanna Phouma in Rangoon from 15 to 17 September, stated that the discussions were more satisfactory than expected. Sotvanna, he said, showed a realistic awareness of the threat posed by the Pathet Lao to the future independence of Laos. Discussing the elections to be held after a coalition government is established, Sou- vanna said that if the Pathet Lao forces emerged in control of the government there would be no recourse but to fight, as he and his followers were unwilling to see the country go Communist. He expressed his loyalty to the monarchy and his belief that demobilization of surplus forces of both sides must precede national elections. The question of the com- position of a neutralist center group in the proposed coalition cabinet remains unresolved. Souvanna persisted in his op- position to the admission of Vientiane moderates to the cen- ter group, contending that the Vientiane candidates were not "good material" and lacked pop- ular support. He held that in the formation of a unified army, integration should be by indi- viduals rather than by units; he recalled unsatisfactory past experience with unit integration. Talks at Ban Namone be- tween the representatives of the Vientiane government, the Sou- vanna group, and the Neo Lao Hak Sat, suspended since August, were resumed on 20 September, but no progress was made. Souvanna's proposal to meet with Boun Oum and Souphannouvong has been ac- cepted in principle by the royal government; time, place, and other details are to be arranged by the representatives at Ban Namone. Vientiane, however, continues to question Souvanna's suitability as premier. General Phoumi, fearing a negotiated settlement and a resultant Sou- vanna-led coalition government but hoping to avoid the onus of breaking off the talks, may seek to prevent the meeting by impos- ing conditions unacceptable to the Souvanna and Pathet Lao groups. The military situation is marked by occasional skirmishing and artillery exchanges in north- ern Luang Prabang Province, where each side continues to consolidate its position in anticipation of possible renewed fighting at the conclusion of the rainy season next month. Meo units continue to harass the enemy in Xieng Khouang Province. Enemy efforts to eliminate the numerous Meo pockets have been notably un- successful in this area. Al- though forced on occasion to withdraw to fall-back positions, the Meo units have maintained their capability for effective guerrilla-type action. At Geneva the Soviet dele- gation continues to indicate its desire for an early agreement, even in the absence of a pro- visional Laotian government. Discussions are being held on the procedure for dealing with a number of questions over which there remains a wide diver- gence between the Western and Communist delegations. While the UK and Soviet representa- tives, as co-chairmen of the conference, have agreed to dis- pose of routine matters in pri- vate meetings, there is no in- dication that a speedy agreement can be reached on the more dif- ficult questions, which will continue to be discussed'in re- stricted session by the various delegations. CONFIDENTIAL 21 Sepi Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 10. of 22 C nNFIfFNTIAI Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 CURRENT INTELLIGENCE WEEKLY SUMMARY FRANCE-ALGERIA French security officials are increasingly concerned over the covert rightist and military opposition to De Gaulle; other officials fear he is not taking sufficient steps necessary to retain the backing of politically important elements. De Gaulle reportedly ignored pleas by cabinet ministers to call off his 21-24 September speaking tour of south-central depart- ments. A well-placed Interior Ministry official feels that unless De Gaulle creates a more solid popular basis for the regime as opposed to his person, "the days of the Fi'fth's Republic are numbered." This official said Interior Minister Frey has been advised that security forces cannot guarantee their ability to maintain order in event of assassination. sition by increasing milk prices, as demanded by restive farmers, and by announcing his intention to relinquish at the end of the, month the special powers which he assumed in April. These powers have particularly aroused parliamentary ire. Despite the continuing large number of arrests of sus- pected members of the Secret Army Organization ' (OAS) --of- ficially blamed for the 8 Sep- tember assassination attempt-- security officials admit that the OAS network has not been seriously damaged, even in metropolitan France, where it is much weaker than in Algeria. Security officers assigned to ferret out the OAS are only halfheartedly complying with orders, and it is questionable whether they would back De Gaulle or turn against him in a crisis. Minister for Algerian Af- fairs Joxe remarked to a US Embassy officer on 13 September that De Gaulle creates many difficulties for himself by his highhanded manner, and that he hoped De Gaulle would soon explain to the French people in detail "exactly what is happening" with reference to Algeria. Joxe commented to another US observer, however, that even though no coup is expected in Paris, another one is sure to take place in Algeria. De Gaulle has, however, taken steps in the last few days to reduce some of the oppo It is reported that 80 percent of the army officers are opposed to De Gaulle, but that only 10 percent would par- ticipate in a coup attempt. Moderate elements concerned over the prospects of assassination are hopeful the bulk of the army can be influenced to back a democratic succession. The 19 September order of the day in which General Ailleret, commander in chief in Algeria, instructed his forces to fight the OAS as vigorously as the rebels prob- ably is a reaction to recent OAS propaganda urging individual CONFIDENTIAL 21 Sept 61 WEEKLY REVIEW Page 11 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 ANG"T CURRENT INTELLIGENCE WEEKLY SUMMARY officers unwilling to join a future insurrection to keep fighting the enemy rather than obstruct their activist comrades, With respect to prospects for resumption of negotiations between the French and the pro- visional Algerian government (PAG), both sides have indicated a desire that it be soon. A French UN delegation member stated that the Foreign Ministry is very concerned lest the Algerians not agree to early renewal of the talks. Rebel information minister Yazid, in the presence of premier Ben Khedda, told an American reporter on 15 September that, provided the Bizerte issue was not in the fighting stage, formal talks might resume before the end of.this month. The reported decision to include on the French negotiating team Jacques Aubert, Suretd Nationale director for Algeria who is one of the more ardent supporters of the provisional executive idea, is regarded by the American consul general at Algiers as an indication that Paris envisages direct discussion with the PAG on security problems and arrangements during the transitional stage. ments are made. quash their power positions, and will continue to be the real leaders no matter what transitional arranee- Krim and Chanderli have mean- while indicated that the rebel leaders are willing to cooperate on transitional arrangements for the transfer of power in Algeria, but Chanderli stressed that this co- operation would be forthcoming only after successful negotiations. He immplied that the PAG as such might phase out, and not assume direct control in Algeria. However, it seems quite clear that none of the present PAG members intend to relin- CONFIDENTIAL 21 Sept 61 WEEKLY REVIEW Page 12 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Next 1 Page(s) In Document Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY GOVERNMENT AND PARTY CHANGES IN HUNGARY The changes among Hungar- ian party and government offi- cials announced on 13 September appear to be in the general pattern of steps recently taken in other satellite regimes. They are probably designed to facilitate the satellites' de- velopment along the economic and social lines called for by the Soviet bloc's blueprint for the achievement of social- ism. The measures taken in East Germany, Czechoslovakia, and Rumania also involved re- organization of the government structure, so far not forthcom- ing in Hungary. Party First Secretary Janos Kadar, who assumed the additional position of premier, now is the titular as well as the actual head of government. Four newly appointed deputy premiers form an inner cabinet composed of politburo members who had been and presumably continue to be responsible for propaganda (Gyula Kallai), se- curity (Bela Biszku), interna- tional economic relations (Antal Apro), and domestic economic planning (Jeno Fock). The concentration of these talents at the head of the gov- ernment implies that there will be much more extensive efforts made to achieve planned eco- nomic and social goals. The greater emphasis to be placed on the achievement of economic goals is also suggested by the reorganization of the national economic planning function. The former chief of the National Planning Office, Arpad Kiss, now heads a new committee con- cerned with long-range planning; his replacement in the old job is the former deputy, Miklos Ajtai, The complementary func- tions of persuasion and control will be administered respective- ly by Pal Ilku, the new minis- ter of culture and education, and by Janos Papp, the new min- ister of interiors Ilku was chief of the political direc- torate of the Defense Ministry in 1956 and number-two man in the Culture Ministry until this appointment. Papp is a rela- tively unknown party secretary from Veszprem County who pre- sumably will continue to work under the supervision of Biszku. The post of foreign minister, left vacant by the retirement of elderly Endre Sik, goes to the former deputy, Janos Peter, one-time delegate to the United Nations and a Protestant "peace" bishop. The retiring premier, 75-year-old Ferenc Muennich, was given the honorary post of minister of state. The gaps left by party leaders moving into government posts were filled by capable men already active in the party apparatus under Kadar's leader- ship. Politburo members Dezso Nemes and Sandor Gaspar joined the party secretariat, left un- derstaffed by the departure of Karoly Kiss for an undesignated government post and Fock for SECRET 21 Sept 61 WEEKLY REVIEW Pave 15 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY the deputy premiership. Other ranking members of the party moved into the chief editorial posts of the party's theoret- ical journal and daily vacated by politburo members Nemes and Kallai. Along with the announce- ment of the new appointments, the party published revised es- timates for the second Five- Year Plan, to be approved at a forthcoming National Assembly meeting. The plan directives, which supersede those issued at the time of the seventh party congress in September 1959, take a more conservative view of the prospects for developing the economy from 1961 to 1965. Investment targets have been reduced. The plan directives, emphasizing the need to meet international commitments and to strengthen national defense expenditures, appear to preclude any improvement in living stand- ards. Kadar also announced that the assembly will consider edu- cational reforms emphasizing technological training. A terri- torial reorganization to estab- lish new economic regions and simplify administrative pro- cedures may also be promulgated. The party campaign against the church, a recently rumored tightening of control over the intellectuals, and a drive for more effective party activity all contribute to an atmosphere of pressure on the Hungarian people to accept the goal of a socialist state and societ . 25X1 NORTH KOREAN PARTY CONGRESS Treading carefully the tightrope of Sino-Soviet com- promise, North Korea's Kim Il-sung opened the fourth con- gress of the Korean Worker's party on 11 September. Flanked by his two chief guests--Frol Kozlov, secretary of the Soviet party central committee, and Teng Hsiao-ping, secretary gen- eral of the Chinese party--Kim ranged for six hours across a wide spectrum of North Korea's political and economic ambi- tions, always balancing his gratitude for Soviet assistance with similar expressions of ap- preciation for Chinese support. Both of the major antag- onists in last year's ideolog- ical controversy showed their competitive interest in North Korean party matters by the level of their delegations., They avoided open polemics, however; like their Korean hosts, the Chinese and Soviet delegates echoed formulations from last November's Moscow conference statement and stressed the im- portance of bloc unity. Both Kozlov and Teng, never- theless, reaffirmed the guide- lines of their respective parties-- SECRET 21 Sept 61 WEEKLY REVIEW Page 4-6:of 22 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 SECRET CURRENT INTELLIGENCE WEEKLY BUZ the Soviet party draft program, for which the Chinese show some reserve, and China's "great leap forward" and communes, which have come in for Soviet criticism. Teng in his speech grudgingly offered Peiping's first comment on the Soviet program, citing it along with Soviet space achievements as proof of the socialist Sys- tem's superiority, but care- fully limiting its applicabil- ity to the Soviet people. Koz- lov provided the most tenden- tious remark when he told the Korean congress that the USSR was ready for a "great leap in its forward movement" because it had the necessary material standards--an implicit crit- icism of China's disregard of material factors when attempt- ing its own "leap." Both Teng and Kozlov made a point of praising Kim I1-sung's "cor- rect" leadership of the Korean party. Kim and the Koreans who followed him to the rostrum un- til the congress closed on 17 September devoted the bulk of their attention to the two prime Pyongyang objectives-- economic development and Korean reunification. Outlining the new seven- year plan which started this year, Kim described final pro- duction targets that are rough- ly those set in August 1960 when the plan was first made public. The regime has refined the original plan, however, to give itself more ~eeway; in al- most every case the figures announced in August have become the upper limit of a more com- fortable range. The new targets still represent significant increases in output of major in- dustrial products. The only major revision was in the grain target for 1967: originally put at over 9,500,000 tons, it now is at 6,700,000 tons, a much more realistic goal. While there is little chance that the average North Korean is going to see much im- provement in his living standard over the next seven years, Kim painted a glowing picture of life in the North when the plan is completed. He contrasted this with the "bankruptcy" of South Korea. Arguing that unification makes economic sense, Kim termed "peaceful reunification" the "supreme national task which brooks no delay." The North Korean premier and party chief urged South Koreans'to form a "united anti-US national salva- tion front," and, in a portion of his speech that was virtually an incitement to civil disobedi- ence and military mutiny, called on Southern civilians to con- duct strikes and demonstrations. The South Korean Army, Kim said, must wrest command from the "US imperialists" and become a "na- tional army defending the inter- ests of peasants and workers.". The party appointments an- nounced at the end of the con- gress include a politburo that reflects Kim I1-sung's predom- inance. Through purge and skill- ful reshufflings, Kim apparently 25X1 has consolidated his hold since the abortive challenge to his leadershin in 1 a+A 145. SECRET 21-Sept 61 WEEKLY REVIEW age L7 ,.of :22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 I SECRET CURRENT INTELLIGENCE WEEKLY S 'RY COMMUNIST GUERRILLA ACTIVITY IN SOUTH VIETNAM A series of Communist at- tacks since the first of Sep- tember provides evidence of in- creased guerrilla capability in South Vietnam, particularly in the northern part of the country. On 1 September, a Viet Cong force estimated at two battalions totaling about 1,000 men temporarily overran two Civil Guard outposts in the mountainous terrain adjacent to southern Laos.. The temporary capture on 18 September of a provincial capital only 40 miles north of Saigon by a Communist force of two. battalions--which killed the provincial governor and..set fires in the town--is the most striking indication to date of increased Viet Cong aggressiveness recently evident in the capital area. In these and other actions by smaller units, the Viet Cong displayed better organization, direction, and equipment than previously noted. Although there have been several reports of a Vietnamese Communist build-up.across the border in Laos, there is no evidence that regular North Vietnamese forces were used in the 1 September attack. As was the case in similar attacks in this area in October 1960, the bulk of the Viet Cong force probably consisted of local recruits-- principally from among the minority tribes in this high plateau area where the Com- munists have been promoting an autonomous movement--with a hard core of North Vietnamese or North Vietnamese - trained leaders infiltrated through Laos. Increased Pathet Lao in- fluence in southern Laos. and the difficulty of d'etect'ing movements along remote mountain trails have given the Communists virtually unrestricted access for the infiltration of personnel and supplies from North to South Vietnam via Laos. As a result, the Communists are expected to step up their armed effort, particularly in the northern part of South Vietnam,and may intend to develop a major base of operations in the high plateau area bordering Laos. Armed Communist strength throughout South Vietnam has increased since the beginning of the year despite casualties totaling, according to South Vietnamese figures, about 1,000 monthly. The Viet Cong is es- timated to have about 15,000 men under arms, as compared with about 10,000 at the end of 1960. During July, the rate of Commu- nist activity reached close to an all-time high, with a weekly average of about 350 incidents of all kinds reported; after some de- cline in August, the rate in early September was about 300. During the past three months, nearly 70 percent of Viet Cong attacks have been directed at the less effec- tive Civil Guard and Self-Defense Forces rather than at regular army units. There is as yet no area where control by the Viet Cong is suf- ficiently entrenched to beat off strong government challenges, al- though they approach that state in some parts of the southernmost prov- inces, their major stronghold. Recent sweeps by government forces have probably dealt some setbacks - to the Viet Cong in this region, but the government's ability to maintain the advantages gained by such action is uncertain. The general insecurity and frequent interdiction of main routes leading to Saigon has disrupted South Vietnam's rice and hog exports for is reported. 1961, and growing harrassment of rubber plantations north of Saigon SECRET 21 Sept 61 WEEKLY REVIEW Page AA of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 %w LYL:r . 11L 1 _ CURRENT INTELLIGENCE WEEKLY SUMMARY The compromise reached last week by Turkey's ruling Committee of National Union (CNU)--to uphold the,Yassiada tribunal's death sentences for former Prime. Minister Menderes and two as- sociates but to commute 12 others to,xnprisonment,- has somewhat lessened the)tchances that supporters of Menderes' out- lawed Democratic party will spark disorders. There now appear to be no impediments to beginning the campaign--scheduled to open on 24 September--for the 15 October elections. The 22-man CNU reached its decision at a sion on the evening of 15 September, apparently under pressure from younger mili- tary officers outside the committee who pressed for up- holding the death sentences of all persons condemned. These officers feel that failure to execute all leaders of the Menderes regime constitutes disavowal of the military coup which overthrew Menderes in May 1960. The CNU apparently felt that its final decision would prevent the younger officers from venting their frustration in a new coup attempt, but by upholding the three death sentences it has introduced into Turkish. politics an element of bitterness which is likely to persist for years. !- Ismet Inonu, leader of the Republican People's party (RPP) and long an adversary of Menderes, privately urged the CNU not to permit executions, as did other party leaders and influential leaders of the press. If the CNU.p,ermits free balloting to take~,place, the RPP may fall short.-of a majority as voters protest the executions by voting for one of the parties openly appealing t0 ,Menderes' former supporters. Earlier this month the CNU sought the agreement of all,)political party leaders to forego any discussion of the past and particularly the justification of the May 1960 coup. All poi-1 litical party leaders except Osman Bolukbasi, the leader of the small Republican Peasant Nation party, signed this declaration,.. Despite the present restrictions on freedom of speech and of the press, it-appears virtually impossible for the CNU to enforce this ban. THE DOMINICAN REPUBLIC The Dominican Government succeeded inenaingahead of sched- ule'`,the commercial shutdown in the capital city that began on 12 September as a gesture of na- tiona-l mourning for the opposi- tiondemonstrators killed in clashed with the police early SECRET 21 Sept 61 WEEKLY REVIEW Pge?1:9 of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 ~.? SECRET %of CURRENT. INTELLIGENCE WEEKLY SUMMARY that day. Elements of the op- position continue to favor a general strike against the government, and proponents of violent action are gaining the ascendancy in 'Various opposition groups--even the politically moderate National Civic Union (UCN), which has wide backing among business, professional, and other mi.ddl.e class elements. Although President Bala- guer's liberalization program has almost universal acceptance in principle, the opposition is convinced that the President is not sufficiently forceful in implementing his program and that, in any event, meaning- ful progress is impossible as long as the essential elements of power are ;held by General Ramfis Trujillo. The opposition groups are Obsessed by the desire to rid the country quickly of all remnants of the Trujillo dictatorship and em- boldened by the wide national solidarity their movement has generated. Although opposition groups encompass the bulk of literate Dominicans, they probably at present lack the capability of taking over from Balaguer :h+gainst the;::entrbnnhrad- military, which seems to be united if only temporarily and in the in- terests of self-preservation. The immediate danger to the present regime is the pos- sibility of a military take- over, with or without the con- currence of General Ramfis Tru- jillo. The military was appar- ently on the verge of such action twice during the past month, Such an event would prolong and further embitter the transition period and in- crease the likelihood of a concerted campaign of violence by the opposition. It would also almost certainly lead to the eventual factionalization of the military. The OAS subcommittee, which arrived on 12 September to determine whether conditions warrant partial removal of the OAS sanctions against the regime, Is receiving the full coopera- tion of the government. The opposition is urging continua- tion or even intensification of the sanctions until political liberties are fully guaranteed; any easing of the sanctions now would result in widespread public bitterness against the OAS and, by extension, against the United States. The Apposition's complaint that the US is giving moral sup- port to Balaguer's gradual ap- proach to democratization has reduced the opposition's regard for the US to the lowest point of any time in the past two years, in the opinion of the consul general. He reports that some opposition members say that if the June 1959 invasion of the country, which was mounted by the (Castro regime, were to be repeated now, "everyone would side with the invaders." The United States is likely to be attacked as a result of the signing on 16 September of a contract between the Dominican Government and a private US firm for the construction of an oil refinery in the Dominican Republic. Petraleum:,. is one of 25X1 the products now embar oed under the OAS sanctions. SECRET 21 Sept Al WTFxT.V RVVT RW Page 20 . of 22 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY The 7-21 September visit of Cuba's President Osvaldo Dorticos and Foreign Minister Raul Roa to Czechoslovakia and the USSR appears thus far to have produced little but routine assurances of bloc "solidarity" with Cuba. A trip to Communist China is to follow, D6rticos' trip to the bloc, coming im- mediately after his attendance at the conference of nonaligned nations in Belgrade., may further help to convince some of the neutralist nations of Cuba's full alignment with the bloc. The Cubans' actions in railing against the United States and in echoing the Soviet line on most of the issues taken up at the con- ference largely destroyed the sympathetic attitude to- ward. Cuba initially held by many conference delegates Bloc countries, besides taking 4,000,000 tons of Cuban sugar this year at a price equivalent to four cents a pound, are in some instances also acting as. middlemen in arranging purchases of Cuban sugar by Asian, Middle Eastern, and-African states. Cuba is similarly relying on three-way trading arrange- ments with nonbloc countries to dispose of some of its ex- ports and to obtain imports not available in the bloc. Within Cuba, the antiregime outbursts of churchgoers on.two occasions within the past two weeks were the first serious manifestations of opposition,:;to Castro in many months. The re- gime has reacted with a concerted government campaign against the Roman Catholic Church. The ex- pulsion on 16 September of 136 priests--including Havana Bishop Eduardo Boza Masvidal and 45 other Cuban priests reduced by almost half the number of priests remaining in Cuba. Fur- ther religious demonstrations may give impetus to a government move to establish a "national church" with loyal pro-Castro clergy. Sporadic outbreaks of fight- ing between dissidents and Cas- tro's militiamen have occurred in at least two of Cuba's six provinces. in 'Pinar del Rio, the island's westernmost prov- ince, a small group of insur- gents was operating as recently as mid-September under the com- mand of an anti-Castro leader known as "Cara Linda," while another group was reported active in northern Las Villas Province. In all cases, government forces possess greatly superior. resources and are capable of eliminating the outbreaks eventually. SECRET 21 Sept 61 WEEKLY REVIEW Tl-- - Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 ' 21 of 22 ^."I ? I Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 '..v. ?^ . -- - ---JON CURRENT INTELLIGENCE WEEKLY SUMMARY ARGENTINA President Frondizi, demon- strating growing confidence in his ability to deal with Argen- tina's domestic problems, has increased his attention to for- eign policy in recent months, and with the resignation of Pres- ident Quadros in Brazil he will bid for a dominant position among Latin American leaders. During the earlier part of his term, Frondizi was pre- occupied with the repercussions of his US-backed economic stabi- lization program--the austerity aspects of which are still a source of labor difficulties. During 1961, however, he has seemed increasingly interested in reasserting Argentina's claim to diplomatic leadership of the Latin American nations. Unlike many of his predecessors, Fron- dizi has generally sought to ex- ercise this leadership in sup- port of US objectives rather than in rivalry with Washington, as shown in his strong backing of the "Alliance for Progress" and his more cautious assistance to US policy on Cuba. Frondizi has engaged in a series of consultations with other Latin American presidents. Following earlier visits with the chief executives of Uruguay, Brazil, and Bolivia, he visited President Stroessner of Para- guay on 2 July and made a public promise to improve high- way connections between the two distant capitals. His most re- cent visit was to President Alessandri of Chile from 9 to 11 September, concluding with the gn1n of the joint "Dec- laration of Vina del Mar," which called for "total compliance" with the United Nations Charter to maintain peace, and expressed concern over "the renewal of nuclear testing." Later this month Frondizi is to confer briefly with President Betancourt of Venezuela. Frondizi's diplomatic efforts have been indirectly aided by the events in Brazil, which has traditionally vied with Argentina for leadership among the Latin American states. Brazilian prestige has suffered considerably from the develop- ments ending in Joao Goulart's replacement of Quadros, and Ambassador Rubottom in Buenos Aires believes Frondizi now will "more openly wear the man- tle of hemisphere leadership." He will probably make an effort to assume such a role in his address'to the United Nations General Assembly scheduled for 27 September. In his pro-US and anti- Castro moves Frondizi has had the strong support of the Argen- tine military; he has at the same time tried to conciliate more radical opinion by moves apparently designed in part to demonstrate his independence of Washington. One of these was his widely publicized meeting with Che Guevara on 18 August, which raised a political storm. Frondizi reassured military leaders that the meeting would in no way modify Argentina's firm position on Cuba and Commu- nism, but controversy as to how the meeting was brought about led eventually to the resignation CONFIDENTIAL 21 Sept 61 WF.T!KT.V R'G!VTtw 22 -of 22 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 25X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Next Page(s) Next 7 Page,(s) In Doc u ment Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 %.0,-" - %4W VOW CURRENT INTELLIGENCE WEEKLY '9RT President Roberto Chiari's announcement on 11 September that Panama would seek a new treaty with the United States is the result both of mounting domestic political pressures and of the assumption that the international climate is propi- tious for Panama's reassertion of its claims against the US position in the Canal Zone. Chiari has been unable after a year in office to gain control of his country's chaotic polit- ical situation or to stem its economic deterioration. He must therefore identify himself strongly with the Panamanian peoples' mounting determination to assert their claims against the United States if he is to maintain popular support. The President is impatient to raise the Canal Zone treaty issue now so as to appear the champion of national interest. Expecting to come under heavy attack on various counts when the National Assembly convenes on I October, Chiari has al- ready announced that his address that day will detail Panama's new treaty requests. The Sovereignty Issue Panama's national aspira- tions in the Canal Zone have a strong appeal to its people and constitute the most power- ful unifying factor in a country of wide social, political, and economic divisions. The 1936 and 1955 revisions of the original 1903 Conventiomm betseen the US and Panama have not satisfied these aspirations, particularly the almost obsessive desire for recognition of Panamanian sov- ereignty in the zone. Panama realizes it is not now equipped to operate the canal itself and is unlikely to ask to do so in the course of this attempt to renegotiate the basic treaty. Rather, it will probably want a clear acknowledg- ment of Panamanian sovereignty in the Canal Zone; an increase in the $1,930,000 annuity; re- duction of US commercial ac- tivities in the zone; stricter interpretation of the US treaty rights of "operation, maintenance, sanitation, and protection of the canal"; and possibly the turnover of some lands within the zone border for agriculture. Panamanians have long con- tended that the 1903 treaty was hastily drawn up before the newly independent country's government was properly consulted. They point out also that the treaty was signed for Panama by a Frenchman, Buneau Varilla, who was acting as diplomatic agent for the newly independent country while promoting the interests of a French canal company. They object particularly to the US interpretation of the sovereign- ty clauses and to the treaty's use of the words "in perpetuity," claiming the term is not valid in international law. Exploitation of the Issue Panamanian sensitivity over the sovereignty issue extends into many fields. In a note of 31 August protesting a recent National Labor Relations Board decision permitting US unions to organize crews of US- controlled ships flying the Panamanian flag, the Chiari government termed this an in- fringement of sovereignty. The decision also threatens lucrative public and private income from registry and representation of foreign ships in Panama and the prestige of at least nominal possession of one of the world's largest merchant fleets. Panamanian spokesmen have applied the sovereignty question to so many aspects of US activity relative to their country that the issue has become basic to national policy. They insist that recognition of their "sovereign rights" is more important than financial assistance for their economy and their unbalanced, potentially explosive social system. Almost 10 percent of Panama's labor force is unemployed. Unlike other urban Latin Americans, most of these idle workers can 1 MOM CONFIDENTIAL verge 9 of 11 21 Sept Approved For Release 2007/10/23 CIA-RDP79-00927AO03300100001-5 WS'Nowww rP\ti I ri Ncw I TI A 1 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 rrr r./ CURRENT INTELLIGENCE WEEKLY SU 1RT read. They congregate along the streets of Panama City and Colon, a receptive audience for Panama's sensationalist press and radio. Both emphasize nationalist issues constantly. One group of newsmen, ap- pearing on a US television program, argued that since canal tolls have been unchanged since 1914, they could be raised to increase Panama's annuity with- out cost to the United States. All Panamanian elements actively engaged in exploiting the canal issue firmly believe that the United States is par- ticularly vulnerable to world opinion. This has led on the one hand to discussion of the canal issue by Panamanian diplomats at international meetings, such as the United Nations and the Organization of American States, and on the other hand to threats to instigate violence in order to dramatize the issue. Extremist- led mobs had this strategy in mind in November 1959, when US troops held back efforts to plant Panamanian flags in the Canal Zone during Panamanian independence day demonstrations. The subsequent display of the Panamanian flag on a zone staff near the border and the re- sumption of more amicable re- lations with zone residents and administration have not dissipated the basic aspirations, Panama's leaders indignantly reject any suggestion that Pana - ma's record of political and economic instability or its failure to effect reforms can have any bearing on the basic issue of the sovereignty of the Canal Zone, or could affect the security of the canal itself. The Economy Panama's entire economy has been'geared to the canal since construction was begun in 1904. Population and economic activity are dis- proportionately concentrated in the two cities adjoining the canal terminals, Panama City and Colon, while develop- ment of agriculture, industry, and transportation in the interior has been virtually ignored. Large and potentially valuable agricultural areas are either inaccessible or left idle by large landholders. A small clique representing about 5 percent of Panama's million people controls the sources of both economic and political power. This group invests its funds in commercial, real estate, and shipping registry and represen- tation ventures which are highly profitable but create little or no economic growth or employment. Thus while Panama ranks near the top among Latin American countries in per capita income, prices are high and most of its people contribute little to the economy and live in great poverty. The Oligarchy The ruling clique has long been adept at deflecting toward the United States any internal dissatisfaction with its actions In promoting this antagonism its members often associate closely with anti-American extremists. The latter, many of them sus- pected Communists, have access to sensitive government positions, influential news columns, and teaching posts. Many of the oligarchy are well educated, experienced in business, and knowledgeable in world affairs but refuse to admit the danger of fomenting nationalism through these extrem- ists and do nothing to develop Panama's capacity to order its own affairs. These leaders offer plans for the improvement of their country, but have taken no steps to end the long-standing corruption, indifference, and self-serving political and financial scheming which defeat such plans. Two important factions in the government are headed by de- termined rivals for the presi- dency. Finance Minister Gilberto Arias of the Third Nationalist party is a member of the Arias Madrid family, probably the single most powerful influence in Panamanian economic and news IPP J;f NTIA.L E L19 Pane 10 of 11 21 Sept 61 CO Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 f P' k 1111 rb, I I? I Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 Noe Nwr CURRENT INTELLIGENCE WEEKLY SU R affairs. He is opposed by Second Vice President Jose Dominador Bazan,.a shrewd poli- tician with the calculated backing of economic interests centered in Panama's Republican party. Although both have finan- cial resources, neither bears the onus of membership in the small handful of Spanish families which has long dominated the ruling oligarchy. If either Arias or Bazan should decide that association with the ad- ministration is a liability and break with Chiari, the President's already limited ability to govern effectively would be weakened and many political dissidents would be encouraged to become active. The opposition press and radio have already referred to the need for a new cabinet if Panama is to realize any benefit from President Kennedy's Al- liance for Progress program, and Chiari's cancellation of a planned vacation in September indicates some political ma- neuvering is probably going on. Chiari's coalition does not have a majority of the deputies, and what positive programs he may present for tax, land, and other reforms seem to have little chance of legislative the highly volatile multi-party assembly. While other Latin American countries usually support Pan- amanian claims in the Canal Zorn they have never pressed the issue. Foreign Minister. Solis refused a renewed invitation for Panama to join the Central American economic and political organ- izations in July, saying the decision must wait until his country could "integrate" into its economy all its lands and referring specifically to the Canal Zone. He was disappointed to receive only a mild statement of backing from his Central American colleagues meeting in Tegucigalpa. From time to time there have been suggestions that the canal be "inter-Americanized," but Panama feels that any change in the canal's status should be its reversion to Panama as its only natural resource. Communists and Castroites Stronger but unsolicited support has come from Latin Amer- ican Communists. The Communist*i sponsored Latin American Congress for National Sovereignty, Economic Emancipation, and Peace, which met in Mexico in March, strongly backed Panama as another vic- tim of "US imperialism." Al- though Panama's relations with Cuba are not friendly, they have not been broken off, and Castro officials periodically use the canal issue in diatribes again.25X1 the United States. CONFIDENTIAL 21 Sept 61 SPECIAL ARTICLES Page 11 of 11 Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 Approved For Release 2007/10/23: CIA-RDP79-00927AO03300100001-5 o-o-%k inckITt Al Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5 v mw CONFIDENTIAL Approved For Release 2007/10/23: CIA-RDP79-00927A003300100001-5