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June 8, 1962
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Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. 73 OCI NO. 0420/62 8 June 1962 CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE State Dept. review completed SECRET Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 25X1 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 161" VA %L i 1W CURRENT INTELLIGENCE WEEKLY SUMMARY 8 June 1962 T H E W E E K I N B R I E F (Information as of 1200 EDT 7 June) LAOS . o . . . . . . . . . . . . . . . . . . . . . . . Page 1 Boun Oum and Phoumi--now at the Plaine des Jarres for talks with Souvanna and Souphannouvong--seemingly have yielded to Western and Thai pressure and,,while still distrustful of a Souvanna solution, appear pre- pared to accept the formation of a coalition govern- ment. Before leaving Vientiane, Phoumi had indicated to Ambassador Brown his willingness to make concessions in several key areas in order to achieve a settlement. During the past week government forces were augmented at Ban Houei Sai, and Pathet Lao - North Vietnamese units continued probing action near the towns of Sara- vane and Attopeu. ALGERIA . . . . . . . . . . . . . . . . . . . . . . . . Page 3 The termination of the OAS "truce" in Algiers by the 7 June renewal of attacks on Moslems probably re- flects OAS realization that the provisional Algerian government will not make any concessions to Europeans beyond the terms of the Evian agreements. The OAS has lost momentum by the truce, however, and many Europeans reportedly feel that Algerian independence now is inevitable. . . . . . . . . . Page 4 The USSR maintained its critical attitude toward the West last week with a statement denouncing US high- altitude nuclear tests and charges that Britain and France are supporting West Germany's aggressive am- bitions and demands for nuclear armaments. The meet- ing of bloc leaders which convened in Moscow on 6 June--with the announced purpose of discussing bloc economic matters--also provides an opportunity for a strong endorsement of recent Soviet warnings that if the West clings to its "unreasonable and unrealistic" position on a Berlin settlement, the bloc will have no alternative but to conclude a separate peace treaty with East Germany. Despite this hardening in Moscow's public attitude, the Soviet leaders have continued their interest in further bilateral new treaty deadline. SECRET 25X1 25X1 BRIEFS Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 8 June 1962 e . e . a . Page 8 A gradual decline in Viet Cong activity during the past month and the use of smaller forces may be due partly to the start of the rainy season and to continued government pressure. Armed Communist at- tacks continue at a faii:y constant rate, however, and the smaller scale actions may indicate that the Viet Cong are regrouping and retraining. The major govern- ment relocation and rehabilitation projects now under way have progressed smoothly, but some delays are being encountered in government funding and overall planning. USSR RAISES PRICES OF LIVESTOCK PRODUCTS . . . . . . . Page The USSR's price increases for livestock products are intended both to stimulate the lagging animal husbandry industry and to draw off the increase in dis- posable income which has raised the demand for the limited supply of consumer commodities. This move will provide some additional funds for agriculture without diverting resources from other uses. Any significant improvement in agriculture, however, will require higher investment priorities for industries producing farm machinery, fertilizers, herbicides, and other products important to basic production. COMMON MARKET DEVELOPMENTS . . . . . . . . . . . . . . Page 10 At Brussels on 29 and 30 May, the UK and EEC minis- ters for the first time got down to serious bargaining over Britain's EEC entry, and one problem--the treat- ment of Commonwealth exports of certain manufactured items--was settled. (there remain formidable pol3tIai and economic obstacles to British accession, including London's inevitable showdown with the Common- wealth. EAST GERMAN ECONOMIC DEVELOPMENTS . . . . . . . . . . . Page 11 The foundation is being laid for closer Soviet.- East German economic relations giving Moscow greater control of the East German economy. In addition, East Germany has indicated an interest in increased trade with West Germany and has repaid j: deficits incurred on interzonal trade accounts. The East Germans are also seeking a trade agreement with West Berlin as part of their continuing effort to cut the city's ties with Bonn. SECRET Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 CURRENT INTELLIGENCE WEEKLY SUMMARY WEST GERMANY . . . . . . . . . . . . . . . . . . . . . Page 13 Opposition continues within the Christian Democrat- ic Union (CDU) to features of the US ;proposals on Berlin, although most critics have lately refrained from public statements. An element of the CDU Bundestag group is threatening an all-out fight against any US- Soviet agreement to ban the transfer of nuclear weap- ons. This element is also opposed to the suggested 13- nation-Berlin access authorit the end of the CDU convention on 5 June, Chancellor Adenauer again attacked the practicability of the proposed access authority. The leftist-inspired revolt of a marine battalion on 2 June has placed President Betancourt under grow- ing pressure to take forceful measures against extrem- ists and has increased the danger of his overthrow by military rightists dissatisfied with the government's failure to end the continued unrest. Betancourt is planning additional steps toward outlawing the Com- munist party and the pro-Castro Movement of the Rev- olutionary Left--the two groups most responsible for the disturbances, His retention of the military's support will depend largely on his success in pre- venting further leftist outbreaks. Sputnik XVII, put in orbit on 28 May and identified in Soviet announcements as Cosmos V, was the fifth space vehicle the USSR has launched this year. Preliminary analysis indicates that it is a scientific research vehicle like the first three of the Cosmos series. P SECRET Page 14 . Page 15 INDUSTRIAL SLUMP IN COMMUNIST CHINA . . . . . . . . . . Page 16 Evidence continues to accumulate that the indus- trial slump evident in 1961 may have worsened. Recent observations of industrial facilities in Cen- tral and South China found advanced sectors of industry "working at half capacity or less"; there were many idle or deserted factories outside the larger cities, and those plants which were operating appeared plagued by shortages of raw materials and capital, by primitive methods, and by a lack of organization. The regime has seemed uncertain as to how to remedy the situation and apparently anticipates no immediate upturn. Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 A4001 %0 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 SECRET CURRENT' INTELLIGENCE WEEKLY SUMMARY 8 June 1962 SINO-INDIAN RELATIONS . . . . . . . . . . . . . . . . . Page 3.8 The growing antagonisms between Peiping.and New Delhi are underscored by their failure to renew the recently expired Sino-Indian treaty governing trade with Tibet and the consequent closing of Indian and Chinese trade agencies. Tensions have been further heightened by the sharp recriminations exchanged after the announcement that Communist China and Pakistan had agreed to negotiate a provisional boundary accord and by recent reports of a possible Sino-Pakistani friend- ship agreement. Chinese and Indian troops continue to patrol along the border, and both sides appear to be improving their military posture. PERUVIAN ELECTION TENSIONS . . . . . . Page As the campaign for the 10 June elections draws to a close, it seems increasingly likely that no presi- dential candidate will receive the required one third of the popular vote, and that the selection will there- fore fall to the new congress. Military leaders have said they will refuse to let the reformist, anti-Com- munist APRA's candidate take office, and they have taken control of the electoral machinery. They are in a position to force the-selection of a candidate ac- ceptable to them, either by resorting to electoral fraud or by intimidating the new congress. CONGRESSIONAL ELECTIONS IN ECUADOR AND BOLIVIA . . . . Page 20 Ecuador's elections on 3 June resulted in a new congress more strongly conservative than its predecessor. In the Bolivian congressional election on the same day conservative elements made some gains, but the leftist government party remains dominant. Despite some elec- tion violence, the public in both countries showed con- siderable apathy. DOMINICAN REPUBLIC . . . . . . . . . . . . . . . . . . Page 21 The Council of State has accomplished much during its first five months in power, although it continues to be hampered by political inexperience, incipient divisions among its own members, and public impatience for more rapid reform. Its difficulties are likely to grow as .the:presidential elections this December ap- proach. Anti-US feeling is rising over the proposed US legislation that would reduce the premium US price for sugar, the Dominican Republic's chief dollar earner. . . . Page 22 Prime Minister Inonu's resignation on 31 May ap- parently was a tactical move designed to improve his position. He is picking up additional support out- side his own party, while the ranks of the major opposing party have split on the issue of an amnesty for sup- porters of the former Menderes regime. Evidently SECRET iv Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY confident of support from the military and with the public calm, Inonu hopes to get on with important legislative work, especially on economic development, which has been stalled by wrangling over amnesty. ACCRA WORLD PEACE ASSEMBLY . Page 23 A nongovernmental "assembly" on world peace co- sponsored by Ghana's Nkrumah and Zuropean advocates of unilateral disarmament is scheduled to meet in Accra from 21 to 28 June. Representatives are being invited from the West as well as from neutral countries and the bloc, but the gathering is almost certain to be heavily weighted with leftists critical of official Western positions on disarmament, Resolutions con- demning nuclear tests and urging establishment of nu- clear-free zones can be expected, and an "Accra plan" for disengagement and disarmament will probably be elaborated. Nkrumah apparently views the exercise primarily as a means of promoting himself as a major neutralist leader. SPECIAL ARTICLES ISRAELI-SYRIAN BORDER , . Page 1 Fundamental Arab-Israeli differences remain un- resolved and continue to threaten stability in the Middle East. The place of greatest tension and poten- tially the most explosive area is Israel's border with Syria. While UN truce teams keep this frontier under observation to try to prevent incidents from develop- ing into open warfare, they are handicapped by an un- wieldy armistice agreement the Syrians for Israel. an the unre]enting hatred of SECRET 25X1 25X6 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 8 June 1962 SOUTH KOREA--A YEAR OF MILITARY RULE . . . . . . . Page The military regime of General Pak Chong-hui during its first year has consolidated its position and embarked with determination on an inadequately planned program to overcome South Korea's many social, political,. and economic problems. The regime has not won wide support. Its authoritarian tactics and the increasingly clear intention of the leadership to dominate a succeeding civilian administration have alienated important political groups. The junta is vigorously seeking to broaden South Korea's inter- national. ties, while promoting closer, regional coopera- SECRE T vi Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 SE02 T Boun Oum and Phoumi--now at the Plaine des Jarres-- seemingly have yielded to West- ern and Thai preference to ac- cept the formation of a coali- tion government under Souvanna. Phoumi told Ambassador Brown on 5 June that he hoped an early settlement might be achieved; he indicated that a draft agree- ment might be completed in one meeting. Prior to his departure for the Plaine des Jarres, Phoumi had modified several of his conditions for acceptance of a Souvanna coalition. While terming the situation "an im- portant question," he assured Ambassador Brown that he would not insist that Pathet Lao forces withdraw from Nam Tha before a settlement. He also expressed his satisfaction with a 6-4 split between Xieng Khouang and Vientiane neutralists in the center group of the antici- pated cabinet; he had earlier pressed--with Western support-- for a 5-5 division of the seats. Perhaps the major concession is his expressed willingness to allow Souvanna to hold the posts of defense and interior; previously, Phoumi had refused to consider neutralist control of these two key ministries. There are indications, however, that Phoumi remains fundamentally suspicious of the possibility of a coalition under Souvanna. he still 1s hopeful that outs e aid--US, UN, or SEATO--will be forthccming to prevent a Com- munist takeover in Laos. His recent army reorganization and his concentration of the bulk of his battalions in southern Laos suggest that he is contem- plating--possibly counting on-- either a breakdown in the talks or the early collapse of the coalition, in either case to be followed by a resumption of hostilities. Military activity has been limited during the past week. Government forces have been augmented at Ban Houei Sai, and Pathet Lao - North Viet- namese units have continued pro- bing action near the towns of Saravane and Attopeu. While the Pathet Lao possess the capability to capture most of the government towns along the Mekong, it is unlikely that any major action will be initiated while the Plaine des Jarres talks are in progress. Hanoi, quoting a Western press story, has charged that members of the US military advisory group in Laos stationed with royal Laotian forces at Ban Houei Sai are really troops from American units sent to Thailand last month. The North Vietnamese broadcast said this gives the lie to US declarations that troops in Thailand will not be sent to Laos, but did not raise this as an obstacle to the Plaine des Jarres talks. Moscow's propaganda suggests that the Soviet leaders anticipate failure of the talks. The USSR has called on the US to halt its assistance to the Vientiane regime in order to prove that it really wants a settlement; Moscow questions the sincerity of SECRET 8 June Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 VOPI" 1`1111111111111110 SECRET Nasy' j Pa Dong ha Thq Vieng expressions of support from Washington and Vientiane for the formation of a coalition government. Moscow radio charged that the US is seek- ing to evade responsibility for the impasse by repeat- edly affirming its support for a settlement, but at the same time alleging that it cannot control Phoumi and Boun Oum. Moscow termed vate the situation in order to create a pretext for "large-scale armed inter- ference" in Laos and has added the charge that US helicopters have transported Thai and Chinese Nationalist troops and weapons into north-western Laos from Thailand. Khrushchev and Defense Minister Malinovskv received j Ban Hm 'V 11 , VIENTIANE Pak Sane Kam f~ I Keut plapgt YIfvN~IANE a';~ ' %I' i No ir Khai IAIL AND -- - - bIt Wahl hani _Thakllek aya ouryi ou, , Muong ae,- Kho4n .>Pyo`ui^ )arras j x KtJoua Muom ( s~XIENQ KHOAG Y SAM NEUA rBeng MuongHogo' `,.~. uang* ~. _? ~, Ban V Ban Pbang Kha ~ S h Ph ~e1a - Nong Het Houei Sal Sai, LUANG Sam Neua PRABA CURRENT INTELLIGENCE WEEKLY SUMMARY ?Phong Saly Boon pi,Nev G .Muong \SALY 0U Nr Us eu Tay muong =+` ~i Y.o Sing Nam i , ? ~, T Vien Tha / ,Na Mo Ran PNAMTHA .! Muongo. L A O S Government base area Meo base area Kong Le/Pathet Lao/North Vietnamese areas this "version" false from beginning to end. Soviet propaganda also continues to allege that the US is seeking to aggra- Pakse 41 . 1_,~ assac ~Attp I PASSAK ' 1TTOPEU ' SOUTH) VIE TN AM a Laotian military delegation on 2 June which included neu- tralist General Kong Le and a Pathet Lao general, but there was no indication of the sub- stance of the talks. r ' \Lak Sa 4KHAMUANC /Mahasay,~,_` Pha Tchepone Quana Trl eng,Lar~~~ ei Sane Saipnakhet '.,SAVANNAK HMuong Phine S RAVAN aravarte -" CAMBODIA i I SECRET Road Trail Route number Road under construction 8 June 6. Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 )f 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY The Secret Army Organiza- tion (GAS) on 7 June broke the "truce" in Algiers by renewing attacks on Moslems. This prob- ably reflects its realization that the provisional Algerian government (PAG) will not make any concessions to Europeans beyond the terms of the Evian agreements. The OAS has lost momentum by the truce, however, and many Europeans reportedly feel that Algerian independence now is inevitable. There are indications that the OAS leaders attempting to negotiate with the Algerian nationalists represent the organization's "civilian" wing, which is concerned with finding a way for Europeans to remain in Algeria rather than seeking political power in France. The extent of contacts is not known, but there is some evidence that this group hopes to exploit rumored differences between the PAG and Algerian nationalist leaders within Algeria. A French Foreign Ministry official told a US Embassy offi- cer on 5 June he was convinced that the OAS "civilian" wing was making a serious effort to find a basis for understanding among members of the "Algerian household"--the GAS and Algerian nationalists, as opposed to the French Government and the Tunis- based PAG. Although nationalist leaders within Algeria have at times apparently acted independ- ently of the PAG, it is unlikely that they could extend guarantees to the Europeans without the concurrence of the PAG. An official PAG press service announcement of 1 June warned Europeans that the Evian guarantees are not applicable to "war criminals" or those who have been guilty of felonies since the cease-fire.. The PAG representative at the UN in- dicated to US officials last week that after independence the Algerian government would take stern measures to remove OAS sympathizers from the coun- SECRET try. He said that Muslem dis- cipline would be maintained until after independence, but said he hoped the world "would under- stand what happened after that," when "up to 400,000" Europeans would be arrested by the new government. Minister for Algerian Affairs Joxe's staff chief told US officials last week that Oran is no longer run by the OAS, as it was some weeks ago, and that the Europeans are again getting in touch with the prefect and seeking ways in which they can assure themselves of some sort of future within Algeria. The Tripoli meeting of the Algerian National Revolutionary Council (CNRA) has lasted longer than expected, but there is no indication that the PAG has lost control of the nationalist move- 25X1 ment to the militant leaders of the Algerian National Army. Political activity in Alge- ria preparatory to the self-de- termination referendum is sched- uled to begin following the 7 June; deadline for the registra- tion of political parties. 8 June 6 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3_ ~.~ Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY SOVIET FOREIGN POLICY DEVELOPMENTS The USSR maintained its Critical public attitude to- ward the West last week with a statement denouncing US high-+ altitude nuclear tests and charges that Britain and France are supporting West Germany's aggressive ambitions and de- mands for nuclear armaments. The meeting of bloc leaders which convened in Moscow on 6 June provides a platform for a strong endorsement of recent Soviet warnings that if the West clings to its "un- reasonable and unrealistic" position on a Berlin settlement, the bloc will have no alterna- tive but to conclude a separate peace treaty with West Germany. The Soviet Government state- ment issued on 3 June character- ized planned US high-altitude tests as "extremely dangerous actions" which could have "dis- astrous consequences" and ac- cused the US of extending the nuclear arms race into outer space. It warned that the tests may jeopardize the lives and safety of astronauts undertaking future space flights and charged that the US objective was to develop methods for paralyzing the defenses of "peace-loving nations," thereby safeguarding the US from retaliatory nu- clear blows. In this context, the statement recalled President Kennedy's interview in March in which he allegedly stated that the US under certain cir- cumstances will take the initia- tive in a nuclear war with the USSR. Moscow warned that the US high-altitude tests will con- front the USSR with the need to take "appropriate measures" to ensure its own security and asserted that the Soviet Govern- ment "will see to it" that the US does not achieve any military advantage from the tests. Soviet propaganda on the Macmillan - De Gaulle talks stressed the contradictions between the two countries on the European Common Market (EEC) and alleged that the two leaders had discussed a deal whereby Britain would provide France with nuclear information which would eventually be passed on to West Germany. The Common Market The conference of bloc leaders may repeat Khrushchev's recent attacks on the EEC, re- new his call for an interna- tional trade conference, and discuss proposals to strengthen cooperation within the bloc's economic organization,CEMA. The USSR will probably give more attention to the theme that the EEC is an aggressive organization which threatens the Soviet bloc and the new states of'Asia and Africa. A Prague commentator said it was "very likely" that Khrushchev's proposal for a trade conference will be discussed at the UN General Assembly next fall. Private Assurances Despite the hardening in Moscow's public attitude to- ward the West, the Soviet leaders have continued their interest in further bilateral US-Soviet talks on Berlin and to avoid threats of a new deadline for unilateral bloc action. F - Moscow's concern and un- certainty over a possible hardening in Western policy on Berlin were reflected in remarks made by Mme. Khru- shchev on 30 May to Ambassador SECRET 25X1 25X1 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 ;e 4 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 Nw~ SECRE2~ CURRENT INTELLIGENCE WEEKLY SUMMARY Thompson and by Izvestia editor Adzhubey during Press Secretary Salinger's visit to Moscow to the effect that this is a particularly critical time in US-Soviet relations. Disarmament The 17-nation Geneva dis- armament conference has agreed to recess for a month beginning on 15 June., In response to a question from a member of the UN secretariat in Geneva as to whether the USSR would use the recess to revise its draft treaty, Soviet delegate Usachev said he intended to oppose any changes at this time. He added that if the negotiations were to succeed, the US would even- tually have to modify its posi- tion on the transition between stages of a disarmament program, as well as to find some way to deal more radically with nuclear weapons at an early stage. He contended that the US has not yet really accepted the goal of general and complete disarmament. Outer Space The Soviet statement on US high-altitude testing al- luded to the harmful prospects of such tests on US-Soviet co- operation in outer space. How- ever, it carefully avoided language which would write off the current US-Soviet bilateral talks on outer space coopera- tion. These talks are being held in Geneva concurrently with the sessions of the legal and technical subcommittees of the UN Committee on Outer Space. Blagonravov, the principal Soviet delegate in the US-So- viet bilateral talks, read the 3 June government state- ment into the record at the 4 June session of the technical subcommittee. He later told chief US delegate Dryden that he had been asked by corre- spondents if, in view of this action, the bilateral talks would continue, and that he had said they would1"no matter what." Blagonravov added to Dryden that he would not con- tinue discussion of US testing in the technical subcommittee. At the 4 June session he and Dryden reached tentative agree- ment on draft agreements on meteorology and geomagnetics. In a private conversation with Dryden on 31 May,Blagonravov strongly indicated that the USSR intends to press for a proposal banning the use of earth satel- lites for purposes of military reconnaissance. He said that while it would not come up in either the technical subcommittee or in the bilateral talks, it "would certainly come up" in the legal subcommittee. After Dryden reiterated resolute US opposition, the Soviet of- ficial said the proposal "would be firmly supported" by the USSR. A formal proposal for such a ban--never before intro- duced--would be aimed primarily at the United States' "spy- in-the-sky" program. During the March and April sessions with the United States on outer space, the Soviet Union for the first time raised the question of such a pro- hibition but did not offer a formal draft statement at that time. Moscow heretofore has avoided pressing this issue. Now that the USSR has launched five Cosmos satellites, how- ever, the Soviet leaders may consider that raising the reconnaissance satellite ques- tion will create an impres- sion of a greater-than-warranted capability on the part of the Soviets to interdict satellites over the USSR and to use recon- naissance satellites of their own. In addition, the USSR is probablY25X1 building a case against the even- tual publicized launching of a US Samos reconnaissance vehicle. P SECRET 8 June ,.,,,...,. .. r.,.,~,.,.. Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001 _3 if 23 25X1 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Next 1 Page(s) In Document Denied Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 AMIC -1 W CURRENT INTELLT(2NCE WEEKLY SUMMARY Viet Cong activity, meas- ured in terms of reported weekly incidents of all kinds, has declined gradually over the past four weeks, and use of smaller units--seldom above company size--has also been noted. This drop probably is due at least partially to the onset of the rainy season as well as to continued pressure from government airstrikes and airlift operations. There is no clear evidence that the Viet Cong have suffered any signifi- cant reduction of their military capability; armed attacks have continued at a fairly constant rate for several months, averag- ing slightly over 100 weekly. Similar periods of relatively slack activity have occurred in the past and-have apparently been used by the Viet Cong to reassess tactics and to re- group and retrain their forces. t` - Isle do PhuQUor. RachGi .;nrr oN Quan La (Ca Mat 25X1 32488 Saab vice a x communist merrnia Activity Major areas of Viet Cong concentration ~- Railroad Road Despite the fact that the government's relocation centers and strategic hamlets are being attacked with increasing fre- quency, the major projects now under way have progressed without disruption. A fourth strategic village is to be constructed this month north of Saigon, where some 2,770 persons have already been resettled. In the central coastal province of Phu Yen, army units have re- gained control of major rice- growing areas south of Song Cau, and completion of 82 strategic hamlets is planned through October. Resettlement of high- lands refugees--largely mountain tribesmen--is reported to have located 39,000 persons in 67 villages, with 66,000 awaiting settlement. Further rapid progress on some of these projects, however, may be held up by de- lays in government funding and priority designations. Action on broader plans for counterin- surgency and pacification in the delta area still awaits President Diem's approval. There are rumors that Diem may replace some officials con- cerned with economic and civic act:ion programs. SECRET 8 June 62 WEEKLY REVIEW Page 8 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 )E L1XL J! 41111110 CURRENT INTELLIGENCE WEEKLY SUMMARY USSR RAISES PRICES OF LIVESTOCK PRODUCTS The USSR's price increases for livestock products are intended to stimulate the lagging animal hus- bandry industry and at the same time draw off the increase in dis- posable income which has raised the demand for the limited supply of consumer commodities. This move, implemented in a decree pub- lished on 1 June,,will provide some additional funds to agriculture without diverting resources from other uses. Any significant im- provement in agriculturea however, will require higher investment priorities for industries producing farm machinery, fertilizers, herbi- cides, and other products important to basic production. Prices for livestock and some livestock products paid by the state to collective farms and individuals will be raised by an average of 35 percent and those to state farms by a somewhat lower rate; retail prices will be raised an average of 30 percent, the first major in- crease in state retail food prices in the post-Stalin era. This apparently reverses the long-standing policy of selectively decreasing prices while wages have been rising. This policy has re- sulted in some inflation,which has become particularly evident in rising. prices for food in the free markets. At the same time, the prices in state stores have been maintained. As a result, free market prices, which were 30 per- cent above state store prices in 1959,rose to nearly 40 percent higher in 1961. This upward trend reflects the over-all stagnation in agricultural output over the past three years, the restictions on livestock holdings of urban residents, and the general rise in wages. of urban workers-.. USSR: INDEX OF FOOD PRICES IN STATE AND FREE MARKETS 1958 1959 1960 1961 State Stores (Fixed Prices) 100 99 99 99 PRICE INDEX OF SELECTED MEAT PRODUCTS IN MOSCOW FREE MARKETS (First Half Year) 1955 1956 1957 1958 1959 1960 1961 1962 100 92 94 25X1 620605 The higher prices to be paid producers should result in some in- creases in emphasis on livestock raising. This effect will be limited, however, by the need to meet planned goals for other com- modities, by apathy regarding prof- its, particularly on state farms which do not retain their earnings, and by such difficulties in ex- panding livestock production as the establishment of an adequate feed supply and the long-term enlargement of the herds. State purchases have amounted only to about two thirds to three fourths as much as it has cost the collective farms to raise the cattle and hogs. The new prices appear intended to cover the current cost of pro- duction, but the average col- lective farm still would be able to realize a profit only be making further reductions in production costs. If consumers maintain the same quantity of purchases from state retail stores for meat and meat products as in 1961, they will spend an additional 1.6 billion rubles, increasing total outlays for food about 4 percent. Consumer reaction should not be severe. Meat production per capita in the USSR is only about one third that in the US, and consequently the increase in the cost of meat should not loom too large in the family budget. Addition- ally, the consumers are used to buying their quality meat in the expensive free markets, and the expected moderate price rise there will not be a great deterrent. SECRET The 1 June decree was ac- companied by an "appeal" from the Council of Ministers and the party central committee to "all the Soviet people" giving reasons for the price changes --an obvious effort to soften public reaction. Khrushchev used most of his 2 June speech to Cuban students in Moscow to a similar end. At the March party plenum, Khrushchev had termed price increases and other measures to limit consumption 25X1 capitalist devices used in balancing supply and demand. 8 June Approved For Release 2008/06/09 CIA-RDP79-00927AO03600100001-3 ,.e 9 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 Nw~ SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY COMMON MARKET Comparatively few decisions were made by the Common Market (EEC) and UK ministers at their meeting on 29 and 30 May, but the sessions were conducted in a friendly atmosphere, and the British confirmed their accept- ance of provisions of the EEC treaty calling for the harmoni- zation of commercial, monetary, and social welfare policies. For the first time, moreover, the key issue of Commonwealth preferences was the subject of serious bargaining. The major result of this bargaining was Britain's agree- ment to phase out over a tran- sitional period the preferences it now accords manufactured goods from Canada, Australia, and New Zealand. On entering the EEC, Britain will apply 30 percent of the EEC's tariff to such imports; an additional 30 percent will be imposed in 1965; and the full EEC rate will be- come applicable by 1970. A pro- vision for review of these steps in 1966 and 1969 is apparently understood by both sides as in- tended to ease London's "polit- ical and presentational prob- lem" with the Commonwealth. Concerning the much more difficult problem of Commonwealth exports of temperate-zone farm products, the discussions were inconclusive. Nevertheless, in rejecting London's bid for guarantees of "comparable out- lets" for the Commonwealth, the EEC proposed to negotiate in- stead special trading arrange- ments for such products,with transitional periods extending to 1970. In addition, as further assurance to all exporters of farm products, the EEC offered to issue two declarations of intent--to pursue such price policies as will not unduly en- courage farm production in the EEC, and to negotiate worldwide, multilateral agreements regulat- ing trade in farm produce. The US ambassador to the European Community sees these developments as definitely en- couraging, but he cautions that thorny economic and political issues remain. The Macmillan DEVELOPMENTS government is still under strong pressure from the protectors of Commonwealth interests. With obvious reference to the farm issue, the Australian prime min:Lster and the New Zealand deputy prime minister have publicly warned that the UK-EEC agreement concerning manufactures cannot be considered an acceptable pattern. The negotiations on Britain's entry into EURATOM and the Coal-Steel Community may prove lengthy and difficult, and the UK is still committed not to enter the EEC until satisfac- tory arrangements have been made for Britain's partners in the Outer Seven. Moverover, there remains un- certainty concerning the ulti- mate attitude of France. Couve de Murville took little part in the Brussels ministerial meeting In any case, there appears to be full awareness on both sides of how much hangs. on the UK-EEC negotiations. Various texts have been proposed in the last :dew weeks to resolve the deadlock over the treaty to con- stitute a European political union., but there appears to be tacit acceptance that such a treaty is not likely to be con- cluded until it is clear whether the union will include six member countries or more. With respect to the role of European union in the Atlantic framework, De Gaulle stated that Europe should stand on-its own feet; Macmillan, how- ever, replied that one should realize that it could not. SECRET 8 June 62 WL UTrT , Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Nwv~ SJCRL1' 1440 CURRENT INTELLIGENCE WEEKLY SUMMARY EAST GERMAN ECONOMIC DEVELOPMENTS East Germany has been active on three economic fronts this year. The foundation is being laid for closer economic relations between East Germany and the Soviet Union. In ad- dition, East Germany has in- dicated an interest in in- creased trade with West Germany and has repaid its deficits incurred on interzonal trade accounts. The East Germans are also seeking a trade agreement with West Berlin as part of their continuing effort to cut the city's ties with Bonn. Khrushchev and Ulbricht agreed in Moscow in late Feb- ruary that the East German economy would be more closely coordinated with that of the USSR. Soviet officials, who had been studying East German imports from the West, especial- ly from West Germany, expanded their review to include all phases of the East German econ- omy. The Soviets are super- vising East German economic activity in 1962 to ensure proper fulfillment of key in- vestments. The East German industries being expanded most rapidly with Soviet assistance are those in which the Soviet Union has the greatest interest. The USSR also has extended considerable economic assistance to East Germany. The $310,000,000 Soviet credit announced in March will. apply mainly to commodities, but Moscow is prepared to provide limited amounts of foreign ex- change for selected priority projects. East Germany's offers to West Germany and West Berlin obviously have been carefully worked out within the frame- work of closer Soviet control of the East German economy. East - West German Relations Despite its long-stated goal of achieving independence from West German imports, East Germany remains vitally interested in interzonal trade--in which it had a sizable deficit at the beginning of 1962. By increas- ing deliveries and curtailing orders, however, it eliminated the deficit by mid-April and since then has achieved a surplus on balance of accounts with the Federal Republic. East Germany's interzonal trade negotiator, Heinz Behrendt, told a meeting of West Berlin business- men on 22 May that he had pro- posed a substantial expansion of this trade. Earlier this year, East Germany approached the West Germans for long-term credits for commodities totaling about SECRET 8 June 69 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Nwv SEC.], CURRENT INTELLIGENCE WEEKLY SUMMARY $780,000,000 in value. In mid- February, the regime proposed purchases of $637,500,000 worth of West German hard coal and coke, to be repaid by deliveries between 1967 and 1983 of East German crude oil (of Soviet origin) and brown coal products. In early April it offered to buy, outside interzonal trade accounts, $125,000,000 worth of West German machinery, including rolling mill equipment, for repayment in goods over an eight- to ten-year period. Later that month the East Germans expressed. interest in purchasing, within the interzonal frame- work, $16,250,000 worth of food, textiles, pharmaceuticals, and similar consumer products. Chancellor Adenauer has pu Icly stated that Bonn will make no commitment unless the East Germans abandon the Berlin wall and restore free traffic in the city. A possible reason for the East Germans' bid for ex- panded trade with West Germany may be their fear of the growing strength of the Common Market. A protocol to the Common Market treaty recognizes the fact that West Germany treats trade with East Germany as internal rather than international, and the East Germans apparently intend to exploit this loophole as long as possible. However, the protocol provides that "each member state may take suitable measures to avert any difficulties which might arise for itself as a result of trade between a member state and East Germany." East German - West Berlin Relations Behrendt suggested at the. 22 May meeting that a separate trade agreement be signed between the East German regime and the West Berlin Senat. The Ulbricht regime reportedly would like to see East Germany's share of West Berlin's trade increase from its present negligible level to 25 percent, and to this` end has ordered state trading agencies to purchase in West Berlin all goods which are com- parably priced with commodities normally purchased in West Germany. East Germany is plac- ing steel, electrotechnical, and machine equipment orders with West Berlin firms. To date, known East Ger- man probes have been almost exclusively economic; other kinds of attempts and pres- sures may be expected, however. SECRET 8 June i Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3_ ,, ~ Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Opposition in West Germany to US proposals on Berlin con- tinues among government offi- cials and Bundestag deputies of Adenauer's Christian Democratic Union (CDU), although these ele- ments have lately made few pub- lic statements. Their objec- tions center on two aspects of the US plan--the idea of setting up a 13-nation Berlin access authority and the proposal that the US and USSR agree not to transfer nuclear weapons to countries not possessing them. Baron Karl Guttenberg, one of the CDU's most influential members on foreign and defense questions, is representative of deputies who feel that the ac- cess authority plan goes much too far toward recognition of the East German regime. These deputies threaten all-out oppo- sition to the proposal for non- transference of nuclear weapons, and believe they will find pop- ular support for their view that no matter how it is worded, this proposal is directed par- ticularly at Germany. Opening the CDU national convention in Dortmund on 3 June, Adena.uer stressed the necessity for the US to remain in its role as leader of the West, and de- clared that there were no differ- ences between Bonn and Washington over goals, although there were differences on "details" of policy. Just before the con- vention opened, he warned the party against offering conces- sions, as Moscow would regard them only as a weakness. In a press conference on 5 June, Adena,uer repeated the criticism he had originally voiced in Berlin on 7 May of the US pro- posals on the composition of access authority. He said, "I am afraid these constructions are nothing but constructions." He again opposed membership in the authority for either East or West Germany, and scorned neutral participation. Like the SPD and FDP, both of which held their own con- ventions within the past two weeks, the CDU insisted on the preservation of the present political and economic ties be- tween West Berlin and the Fed- eral Republic. The CDU convention also adopted a new organization de- signed to provide more effective party leadership while allow- ing Adenauer to continue as party chairman. In the new seven-man presidium, control of party machinery is put largely in the hands of a managing chairman--Josef-Hermann Dufhues, interior minister of the state of North Rhine - Westphalia. SECRET 8 June 62 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 f 23 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 SEC ]r CURRENT INTELLIGENCE WEEKLY 3UMkA11Y The leftist-inspired re- volt of a Venezuelan marine battalion on 2 June has placed President Betancourt under growing pressure to take force- ful measures against extremists and increased the danger of his overthrow by military rightists dissatisfied with the govern- ment's failure to end the con- tinued unrest. Betancourt is planning additional steps to- ward outlawing the Communist party (PCV) and the pro-Castro Movement of the Revolutionary Left (MIR) because of their ef- forts to undermine the govern- ment and their involvement in the recent revolts at Puerto Cabello and Carupano. As a result of the Carupano uprising on 4 May, the records of the PCV and the MIR were' confiscated and their headquar- ters occupied by the govern- ment. However, their represent- atives continue to sit in the national congress and, in al- liance with other opposition parties, have blocked Betan- court's efforts to obtain con- gressional approval of anti- leftist decrees. If Betancourt succeeds in his plan to oust the Communist and MIR members from congress, the deadlock which has persisted since March would be broken and he would be in a favorable position to outlaw both parties. The So- cial Christians (COPEI)--one of the two parties comprising the government coalition--may oppose Betancourt's plan. How- ever, widespread support for strong action is likely to con- vince the COPEI leadership that a rightist coup can be averted only by effective restraints upon the PCV and MIR. The leftists probably do not control sufficient resources to overthrow the government. Both the Communists and MIR are making a concerted ef- fort to organize university and high-school students for insurrection. The extremists have made substantial gains among the students, attaining control of several student or- ganizations in recent elections at itwo large universities. Stu- dent demonstrations provided the only support in Caracas for the military revolt on 2 June, and many students have been captured among guerrilla groups. With the exception of the ma- rinEes there appears to be general support for the government coali- tion among the military, and ef- forts are being made to eliminate the extremist minority in the armed forces. Betancourt's pros- pects for retaining the loyalty of the military will depend large- ly on his success in preventing further leftist violence. Gov- ernment security forces can be expected to take strong measures to suppress any new outbreak. SECRET 8 June F Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 14 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 IWO SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Sputnik XVII, put in orbit on 28 May 1962 and identified as Cosmos V in Soviet announce- ments, was the fifth Soviet space vehicle the USSR has launched this year.. Preliminary analysis indicates that it is a scientific research vehicle like the first three of the Cosmos series, Sputniks XIII, XIV, and XV. Sputnik XVI (Cosmos IV) was launched. Although the charac- teristics of the launch vehicle used to orbit satellites from Kapustin Yar are not known, 25X1 E:~ s different from all other$ employed thus far in the Soviet missile and space program. Sputnik XV, identified by the USSR as Cosmos IV, may have been used for some phases of the scientific research program, but the close similarity of this launch to previous man-in-space operations indicated that it was more probably intended as a step toward the development of a life-support system for pro- longed manned flight. Cosmos V, like the first three Cosmos vehicles, was launched from Kapustin Yar rather than Tyuratam, where At the time the first Cosmos- satellite was launched, Soviet statements indicated the series would investigate the physics of the upper atmosphere and space. Sputnik XIV has apparently been used for experiments in- volving the measurement of solar radiation, ion and elec- tron densities, and the investi- gation of ionospheric refraction. SECRET 8 June C- ---"--' -- ----- Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 J of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 'New S1;GKL1 lftw_ CURRENT INTELLIGENCE WEEKLY SUMMARY Recent observations of in- dustrial facilities in Central and South China, the first com- prehensive crossview of Chinese industry in many months, indi- cate that the industrial slump --evident in 1961--mav ha worsened. a ]Low-pressure boilerworks. At Changsha, all sections of a waterpump factory were operating except the most important--the shop for initial casting of com- ponents. This shop was deserted, and the furnace was cold. Consumer industries gave There were many idle or deserted fac- tories outside the larger towns, and the more advanced sectors of industry were "working at half capacity or less." Plants still operating appeared plagued by shortages of raw materials and capital, by primitive methods, and by a lack of organ- ization. a better impression, although working 25X1 methods were primitive and any rationalization of production processes seemed barely to have begun. At Nanning, for example, a rubber boot and tire factory was using techniques "almost primitive enough to be called handicraft." At the Wuhan Steelworks, only one blast furnance out of three and only two open hearths out of six were in operation. The plant director could not say when capacity operation might be attained. In the large Wuhan Lathe Factory, none of the smelting furnaces was operating, the plant was "lit- tered with scrap iron," and workers were standing about aimlessly. The absence of finished parts at some machines led to the suspicion that the operations there were being con- ducted solely for the benefit of the visitors. The Wuhan Light Industrial Machinery Plant "seemed to be doing al- most nothing," but operations appeared more nearly normal at SECRET 8 June 62 WEEKLY REVIEW pai7P 16 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Furthermore, there have been indications of failures to meet expansion schedules or of lagging production, even in those sectors of industry which have priority in current eco- nomic plans. Efforts to expand chemical fertilizer production continue, with some 15 plants under construction or expansion. A large chemical fertilizer equipment ,~ at the Loyang Trac or ant; 25X1 was only tractors in both 1960 and 1967., compared with targets of 15,000 and 11,000 in those years. The 1962 goal has been reduced to 8,000, but only 1,000 tractors were produced in January and February. Also, People's Daily implied in a May editorial that production of animal-drawn farm tools is lagging. It said tool repair must be the main task through 1963 and did not hold out pros- pects of expanded production of these items until 1964. Numerous interacting fac- tors appear to be causing this downward trend in industrial output, notable among which are the aftereffects of the "leap forward" debacle, the absence of Soviet technical support, and the shortages of food and agricultural raw materials. Administrative indecision and confusion and demoralization among the labor force also figure importantly. plant in Canton was to be com- The regime has seemed uncer- pleted in late 1960, but tain how to stem the decline in March 1962 -- and apparently anticipates no the factory had not yet : E immediate upturn. produced any fertilizer. Equip- ment for some processes was not yet installed, and there were shortages of special steel ma- terials. The regime's failure to announce completion of any major new chemical fertilizer plant suggests the construction situation in Canton and Shanghai is representative. In another priority sector of industry, farm machinery and SECRET annual production 8 June 62 WP.RVT.V RRVTRW Vnap_ 17 of 2$ Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 MAW AND The continuing deteriora- tion of relations between Pei- ping and New Delhi is under- scored by the expiration on 2 June of their 1954 treaty gov- erning trade with Tibet. Both sides are closing the trade agencies provided for by the treaty. The Chinese sought to renegotiate it, but India con- tended that only a cessation of Chinese "aggression" would pro- vide a climate favorable to such talks. The Chinese Communists have attached special importance to the 1954 treaty, since it embodied their first formal com- mitment to the so-called Five Principles of Peaceful Co- existence. The catchphrase Five Principles has become a mainstay in Chinese propaganda to other countries of Asia and was included in the boundary accords with Burma and Nepal. Peiping, sensitive to New Delhi's imputation that the Chinese have dishonored these principles, has therefore gone to considerable lengths to make its point that it was India which disregarded them. The People's Daily editorial of 3 June, amen ng the lapse of the treaty, charged India with openly supporting the Tibetan rebels and crudely interfering in China's internal affairs. Although no new clashes be- tween Chinese and Indian troops along the disputed border have 25X1 been reported, charges of new intrusions continue to be ex- changed. Small-scale clashes are likely this summer, if the troops continue to maneuver in close proximity. In Ladakh, for in- stance, the Indian Army has in the past two months put camps on the flanks of Chinese Commu- nist outposts which New Delhi says were set up in areas that the Chinese did not even claim in 1956. The response thus far from Peiping has been compara- tively mild and largely verbal, a factor which may encourage the Indians to probe further. The Chinese appear to be im- 25X1 provir,. their military posture in the border area in antici- pation of further trouble. / COMMUNIST CHINA -INDIA BORDER =AREA < Point at which Chinese charge Indian ncursion S I N K I A Nr G Boundary shown on most US and Western. maps '\-: i snunnar `h n t Ch y ow oo recen nese and Indian Area of dispute Motorahle road Gartal d Simla _`,, sari Boundaries are not n cessarily those recognized by the U.S. Government. (where differing tram US and Western maps) Chinese SECRET ~ McMahon Line ,ongto a gee j Fcci s 'IINANHA .~hhea ..2 fir' 8 Junc ^? VM..V..WT.V RV.VTT'w nn rrn "8 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 CURRENT INTELLIGENCE WEEKLY SUMMARY Sino-Indian tension has been further heightened by the early May announcement of Pei- ping's agreement with Pakistan to negotiate a boundary accord and by recent Karachi press reports of impending aid and friendship agreements with the Chinese. New Delhi, assuming that these moves were timed to embarrass India, has protested to both Karachi and Peiping. It has denied the existence of a common Sino-Pakistani frontier and takes particular exception to the suggestion that the bound- ary of Pakistani-held Kashmir has never been delimited. The Indians fear that general accept- ance of this proposition would undercut their whole case on the border. In contrast to Soviet support of India on the Kashmir dispute, the Chinese have preferred to remain neutral on this issue and have seemed sensitive to the Indian charge that they are seeking to exploit it for their own advantage. Peiping has denied it is taking sides in the dispute, pointing out that it is seeking only a provisional agreement with Pakistan, pend- ing a final settlement in Kashmir. Peiping's insistence in moving toward negotiations, however, suggests the Chinese have decided that increased con- 25X1 tacts with Pakistan may prove a valuable asset in their war of nerves with New Delhi. The electoral campaign in Peru--required by law to end 48 hours before the polls open at dawn on 10 June--has become increasingly bitter and con- fused. The reformist, anti- Communist APRA probably will win control of the congress, but it now seems unlikely that any of the presidential can- didates will receive the one third of the popular vote needed for election. If no one does, the new congress will elect a president after it is sworn in on 28 July. The APRA candidate, Victor Raul Haya de la Torre, who in January seemed a certain winner, lost his early advantage to leftist-supported Fernando Belaunde Terry of the Accion Popular (AP). Former dictator Manuel A. Odria also cut into Haya's lead, mainly through his appeal to conservative elements. Because of their long- standing enmity to APRA and virtual hatred of Haya personal- ly, military leaders have threatened since March to in- tervene to prevent him from becoming president. Their earlier plans to take over the government and cancel the elec- tion apparently have been aban- doned, but they have established effective control of the election machinery. Widespread falsifica- tion of the returns may result in a fraudulent victory for Belaunde, the candidate favored by the military. APRA leaders, who con- trol labor in Peru, have threatened to call a general strike if Haya is cheated out of the presidency. Such a strike probably would lead to serious violence and extreme repressive measures. If the selection of the president falls to congress, even though congress is con- trolled by APRA,;the opportuni- ties for intimidation by the military leaders will be con- siderable. If the military leaders could not then force the selection of Belaunde, they might agree to let APRA have the presidency provided Haya withdrew in favor of APRA's vice-presidential candidate, Manuel Seone. SECRET 8 June R9 WEEKT,Y REVTT W PALIP 19 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 SECRET President Arosemena prob- ably will continue his efforts to align himself with the moderate right, hoping to at- tract the support of the in- dependents--who may control the balance of power in the new congress. Unless he makes some lasting arrangement dur- ing the next two months, another turbulent period may be expected after congress convenes in Au- gust. CONGRESSIONAL ELECTIONS IN ECUADOR AND BOLIVIA Congressional elections in Ecuador and Bolivia on 3 June resulted in an increase of strength for conservative elements, although Bolivia's leftist government party con- tinues to dominate the elec- torate. Despite some election violence, the public in both countries showed considerable apathy. Unofficial but apparently conclusive returns indicate that the new lower house of congress in Ecuador will be composed of 24 Conservatives, 23 other right-of-center dep- uties from various parties, 18 independent deputies who tend to be rightists, three Social Christians, and five members of the leftist-supported Con- centration of Popular Forces (CFP). The CFP proved generally dominant in Guayaquil, Ecuador's chief commercial city, electing the mayor there as well as the five congressmen and three pro- vincial councilmen. In other principal cities, including Quito, rightists were elected mayors. An effective coalition of the rightist forces in congress could be a formidable antigov- ernment bloc opposed to Presi- dent Arosemena's reform program. One political leader has said he was encouraged by the results of the election and has implied that enthusiasm for a rightist military coup now has waned. No confirmation of the latter point, however, has as yet been forthcoming from a military spokesman. Incomplete returns indicate that Bolivia's governing party, the leftist Nationalist Revo- lutionary Movement (MNR), ran first as expected in rural areas and in all major cities except Oruro, the mining and railway center. In Oruro, the conservative Nationalist Boliv- ian Falange polled more votes than any other party, possibly because the government party list included certain extreme leftists who were not fully supported by President Paz. The anti-Communist Social Chris- tian party, which now has no representation in congress, apparently elected at least one deputy. The Communist party polled some 10,000 votes, about 2 percent of the total, but did not elect a representative. The new congress, which will be inaugurated on 6 August, will,, according to returns thus far, show an increase in opposi- tion strength, mostly on the right. The constitution pro- vides for a strong executive, however, and a.strengthened op- position is unlikely to impede the activity of the Paz adminis- SECRET 8 June 62 WEEKLY REVIEW of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY The seven-man Council of State, the Dominican Republic's caretaker executive, can be credited with important accom- plishments since it came to power five months ago. After more than 31 years of Trujillo tyranny and the seven months of confusion that followed the dictator's assassination a year ago, the bases for demo- cratic government and moderate socio-economic reforms are be- ing laid and the principle of civilian supremacy over the military has been at least ten- tatively established. Next August a constituent assembly is to be elected to revise the constitution. The Council of State, under President Bonnelly's capable if unspectacular leadership, is hampered by political in- experience, by maneuvering by two of its members for per- sonal power, and by public im- patience for more rapid reform. These difficulties are likely to grow with the approach of the December elections for a presi- dent to replace the council. The major political parties have eschewed close association with the council in order to have a free hand in the campaign. There is a threat of sub- version from extremes of right and left: the Trujillo rem- nants, most of whom are in exile; and the Communist-influenced 14th of June party and smaller groups The Communist-influenced groups appear to have lost strength since last year, but they may still become a serious danger if the economy deteriorates or if a guerrilla movement develops with Cuban assistance. The Dominican armed forces probably are not yet capable of effec- tive action against guerrillas. A dangerous situation could result from the maneuver- ing of Antonio Imbert and Luis Amiama, members of the Council of State and the sole survivors of the Trujillo assassination plot. They fear reprisal from the surviving Trujillos and are attempting to build their own power machine, particularly in the armed forces, in an attempt to assure their protec- tion after the council is re- placed. On 27 May they in- spired a public proposal that they be commissioned army generals,,but when opposition developed they rejected the proposal. Anti-US feeling has been rising over the proposed US legislation that would reduce the premium price in the US for sugar. Sugar is the Dominican Republic's chief dollar earner, and the premium price is con- sidered necessary to keep the country from running into debt. Ambassador Martin is concerned whether the council will be strong enough, in the face of rising public feeling, to con- tinue its pro-US posture. Dominicans are particularly susceptible to reminders by leftists that the US occupation from 1916 to 1924 resulted from foreign indebtedness; it is this condition. which leftists claim the United States is trying to re-create by this legislation. 25X1 SECRET Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 1 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 JtI.ICr i CURRENT INTELLIGENCE WEEKLY SUMMARY Turkish Prime Minister Inonu's resignation on 31 May ap- parently was a tactical move de- signed to improve his position. During the first six months of his coalition government, he was unable to obtain badly needed legislation because of the ob- structionism of an extremist faction in the Justice party de- manding amnesty for imprisoned followers of former Prime Minis- ter Menderes. The underlying conflict--whether everything con- nected with Menderes be consid- ered anathema or whether certain remnants of his program be pre- served--is a highly emotional issue. The military leadership, particularly the middle-rank of- ficers, have been most bitterly opposed to any revival of Men- deresipolicies. Their support of Inonu has been dependent on his resisting the extreme demands of the Justice party. There is also a radical military wing which has pressed Inonu for anti- Menderes measures more drastic than he has been willing to un- dertake. Inonu has moved cautiously but firmly against both groups of extremists. After obtaining the support of the highest eche- lons of the military command, be began some weeks ago to transfer from sensitive locations those middle-ranking officers whom he considered most dangerous. He has forced his opponents in the Justice party to make successive concessions on issues which tend to split the party and damage its prestige. On three occasions Inonu got his way by threatening to resign, a move which the Justice party has feared could lead to military intervention. His res- ignation,,when it did come, stemmed from the highly charged amnesty issue. Rank-and-file members of the Justice party parliamentary group refused to honor their party leadership's agreement to let Inonu decide the terms and schedules for release of these prisoners. The military have stayed on the sidelines thus far, and the public has remained quiet. Pres- ident Gursel has asked Inonu to form a new cabinet. The split in the Justice party has widened, and the radical secretary general has been ousted. The titular party chief, Ragip Gumus- pala, remains in office, but ap- pears to have lost control of the party to the moderate wing. gram under way. Inonu's new government will probably have stronger representation from his own Re- publican People's party,. Two minority parties, unrepresented in the last cabinet, may also re- ceive several posts. The Justice party is likely to be left out altogether, although several of its cabinet members with whom Inonu has worked well in the past could keep their posts. Foreign Minister Erkin and Minister of State Feyzioglu--both of Inonu's own party--have an excellent chance of continuing in office. Such a government should provide at least a period of political 25X1 stability--which Inonu needs to gel; a longer range economic pro- SECRET 8 June 62 aW.Vrrrv 1DTi't7TL'w Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 2 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 5ECRET CUcCEENT INTELLIGENCE WEEKLY SUMMARY A nongovernmental world peace gathering, called the Accra As- sembly, is scheduled to convene in the capital of Ghana from 21 to 28 June. The meeting is being spon- sored jointly by Ghana's Nkrumah and European advocates of unilater- al disarmament, and its aim, as publicly stated by a Ghanaian of- ficial last February, is "to sup- port the nonaligned policy as pro- nounced by the Belgrade Conference." Nkrumah's initiativein promoting the assembly reflects his desire to present himself as the foremost African leader and a major world figure. Nkrumah's first public allu- sion to such a meeting, made in a speech about a year ago, was evidently preceded by correspond- ence on the subject with Canon L. John Collins, a pacifist Anglican cleric who heads the Campaign for Nuclear Disarmament in the UK. The first normal announcement about the assembly was made in October 1961, during a meeting in Accra of a preparatory committee which includes other prominent European "unilateralists," a left- ist member of the Indian Parlia- ment, and Brazil's pro-Communist "nutrition expert" Josue de Castro. Last February the committee met again in Zagreb, Yugoslavia, in conjunction with a "preparatory conference" at which some 35 "ex- perts," including 15 from the West and 6 from the bloc, produced a series of reports on the disarma- ment problem. These reports, as "internally inconsistent, frequently naive, and factually in- correct," are being distributed as "working papers" for the assembly. Detailed arrangements for the assembly, which is being subsidized by Ghana, are being handled by a special task force operating from Nkrumah's office. This group in- cludes a Czech national employed as a civil servant in Ghana.F----] about two thirds of the mately 100 participants being sought would come from Asia, Africa, and Latin America, with the balance made up about equally of persons from bloc &nd Western countries. A num- ber of "experts" or "consult- ants" with some official stand- ing or special prestige have been sought from both the US and the USSR. the assembly's organizers have had difficulty developing a final invitation list, especially for Africa, and that firm acceptances are generally lagging despite re- cruiting expeditions last month by two members of the Accra secretariat. In general, the political orientation of the wide assort- ment of persons known to have been invited or considered as regular participants is left- ist, although in most cases non-Communist. Many of them have achieved prominence in the arts or sciences. Writers Ilya Ehrenburg and Mikhail Sholokhov are being sought from the USSR, along with several well-known 25X1 scientists. Apparently no Chi- nese Communists have yet agreed to come Most of the Westerners appe are persons who have been out- spokenly critical of their countries' positions on disarma- ment. However, there will be some responsible Westerners-- for example, former Irish For- eign Minister MacBride--pre- pared to take firm positions and work for balanced resolutions. The emphasis at Accra will almost certainly be on the overriding necessity for disarmament at any price, and the proceedings are likely to be particularly useful to Mos- cow's propaganda build-up for its own peace congress sched- uled for July. In addition to probable resolutions con- demning nuclear testing and urging nuclear-free zones, are "Accra plan" for disengagement and disarmament is likely to receive endorsement,] and some type of permanent organization i approx - may be established.. SECRET 8 June 62 wrpvT v nT.f1TLVU1 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 e 23 of 23 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 *001 Nuo SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY SPECIAL ARTICLES ISRAELI-SYRIAN BORDER Several firing incidents this March on Lake Tiberias cul- minated in an Israeli reprisal raid against a Syrian strong- point and led to a UN Security Council debate and resolution, condemning Israel. The pattern was a familiar one: other Arab-Israeli crises have de- veloped in the same sequence of events during the years since Israel fought its "war of independence" in 1948-49. That war has never formally ended. Israel concluded armi- stice agreements with the com- batant Arab states (except for Iraq, which authorized Jordan to negotiate for Iraqi forces), but the peace treaty it hoped would follow never reached the negotiating stage. The Arab states proclaim their inten- tion to renew the conflict. Their hostility toward the Is- raelis, whom they consider in- truders in "Arab" territory, apparently precludes anything more peaceful than the present armed and occasionally broken truce. If open Arab-Israeli war- fare beyond the scale of border clashes is resumed, it might well start along Israel's Syrian frontier. In recent years, and especially since the Suez War of 1956, incidents have most frequently occurred along that short border. Moreover, it is from that area that the Israelis intend, in the winter of 1963- 64, unilaterally to begin di- verting water from the Jordan River Valley to the arid Negev in southern Israel. The Arabs have said they will forcibly oppose the diversion. The Armistice Agreement The Israeli-Syrian Armistice Agreement of 1949 is the source of the legal problems which arise during the recurrent border clashes. The differences be- tween the two countries--prima- rily affecting the status of Lake Tiberias and the demili- tarized zone--have never been resolved. Syria was the first Arab state to intervene in the Arab- Jewish fighting in Palestine in 1948. A year later, after Israel had signed armistices with Egypt, Lebanon, and Jordan, Syrian forces still occupied three small areas of Palestine adjacent to Syria's frontier. United Na- tions mediator Ralph Bunche made a proposal that these areas, together with adjacent areas controlled by Israel and a small piece of Syrian terri- tory, be made a demilitarized zone under the supervision of a Mixed Armistice Commission with a chairman appointed by the UN, as in similar arrangements in the other armistice agreements. The proposal was accepted by both sides, and an armistice agreement was signed on 20 July 1949. Articles II and V speci- fied that the provisions of the agreement, including those for the demilitarized zone, shall not "prejudice the rights, claims, and positions" of either party, or "have any relation whatso- ever to ultimate territorial arrangements affecting the two." The chairman of the armistice commission and UN military observers attached to it were made responsible for assuring full implementation. Israel regards the demili- tarized zone as part of its sovereign territory, basing its claim on the UN General Assembly's 1947 Palestine partition reso- lution, which awarded to the pro- posed Jewish state all of the land which now comprises the zone except the small bulge into Syrian territory. The Israelis accordingly believe the zone dif- fers from the rest of their terri- tory only in that no activities of a military character are per- mitted and that the MAC chairman possesses authority regarding the return of civilians to the zone and the employment of lo- cally recruited police. Israel considers that even the policing and administration of the zone are essentially its responsibility, however, and ECRET 8 June 6^ Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 . of 11 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 1-411111W Nwir CURRENT INTELLIGENCE WEEKLY SUMMARY further contends that questions involving interpretation of Article V and the competence of the armistice commission are not matters which the commission itself can decide. The Israelis claim the Syrians have no legit- imate concern with development in the zone, but have said they would respect "to the full" whatever private rights as to ownership of land may be in- volved. The Syrians have taken the position that, in accordance with the armistice agreement, Israel has no right to claim sovereignty in the zone. They often refer to it as a "no man's land" and have repeatedly indicat- ed that they regard the armi- stice commission or its chairman, as provided in the agreement, as the competent authority to deal with problems arising in the zone. Syria's stand is based on its military occupation of the zone at the time the agree- ment was signed and on what it asserts is its duty to protect private Arab interests there. Major Disputes The Syrian position that the demilitarized zone is neither Israeli nor Syrian territory is supported by the UN Truce Supervision Organization (LINTSO) and by the Security Council, which passed a resolution to that effect on 18 May 1951. The resolution came about as a re- sult of the council's first consideration of the conflicting positions of the parties. A question had arisen regarding Lake Hula drainage operations which Israel was carrying out in the central sector of the demilitarized zone without first arranging for Syria's agreement through the chairman of the MAC. A similar problem arose in September 1953 with respect to work begun by Israel in the same sector in connection with a diver- sion canal from the Jordan River. The UNTSO chief of staff ordered Israel to cease the work "so long as an agreement is not ar- ranged" between Israel and Syria. The Security Council did not pass a resolution on that oc- casion, but since then Israel has deferred work on the diver- ISRAELI-SYRIAN BORDER ) Defensive area Demilitarized zone -- Armistice line Approximate location of UN observation post; designated by numeral or letter. HULATAA Former bed of Lake Hula- drained in 1958 Approximate alignment of originally proposed diversion canal ESHED KINNEROT ._.: PUMPING STATION UNDER CON T1r5Ft1 There is also a UN OP at Be It Qatsir "on demand. " tic (capable of holding tanks) Banat Yaqub Bridge sion canal and is building a pumping station on Lake Tiberias outside the demilitarized zone for its diversion scheme. Difficulties involving Jewish and Arab farmers in the Tawafiq area of the southern sector of the demilitarized zone were almost an annual occurrence until early 1960. In a report at that time, the present UNTSO chief of staff, General von Horn, indicated that these difficulties SECRET 8 June Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 '? 2 of 11 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 CURRENT INTELLIGENCE WEEKLY SUMMARY resulted from "the progressive extension" of Israeli cultiva- tion eastward. He described how Israeliborder police illegally entered the zone to protect the activities of Israeli set- tlers or to prevent Arab farmers from using lands west of an Israeli ditch which cut across their lands. Clashes occurred in January 1960, when Arab farm- ers crossed the ditch to work in their fields. Israel finally conducted a major reprisal raid against the Arab village of Tawafiq. Control of Lake Tiberias Since the demilitarized zone extends along the eastern shore of Lake Tiberias, riparian rights on. the lake are in abeyance pending a determination of the status of the zone. However, the Israelis, consistent with their claim to sovereignty over the zone, contend the lake is wholly within their territory. Von Horn had been trying to obtain the agreement of both sides to a modus vivendi based on the acceptance of a de facto line of demarcation in the Tawa- fiq area. Although neither the Israelis nor the Syrians have formally accepted the proposal, in practice both parties have, since 1960, more or less tacitly accepted the line as a division between Arab and Jewish culti- vated lands. The zone along the north- eastern shore of the lake is only ten meters wide. During the period of the British admin- istration in Palestine, local Syrians were licensed by the authorities to cross this strip of Palestinian territory and to fish in the lake,as they had long been accustomed to do. The Israelis contend Syrians have no right to fish in the lake, but have offered to continue the licensing procedure. To the Syrians, however, this would25X6 imply recognition of Israel and Israel's control of the entire lake. During the winter months-- the best season for fish--most fishing is concentrated in the northeastern corner of the lake because of the subterranean hot springs there. In these months Syrians frequently have crossed the strip to fish, in defiance of the Israelis. Each year Israel has protested against such "poaching" and has tried to keep the Syrians away. The armistice commission has sup- ported Israel's position on this point, in view of the pro- hibitions, in Article IV of the armistice agreement, against crossing of the zone by civilians. The Syrians also have fired on Israeli fishing boats and, according to Israel, have cut Israeli fishing nets. Israel began escorting its fisher:men with armed boats, despite armistice prohibitions against "naval forces" in a so-called "defensive zone;' which includes the eastern half of the lake. Only limited land forces and specified arms and equipment are permitted in the defensive SECRET 8 June 62 SPECIAL ARTTr!T,x:S Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 - -`- -- Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Nwp~ NW SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY ISRAELI FISHERMEN AND PATROL BOAT ON LAKE TIBERIAS zone, which covers territory on both sides of the demilita- rized zone. In 1955, after a series of flare-ups, Syria declared it would fire on armed boats ap- proaching within 250-400 meters of the shore; i.e., the defensive zone. According to the UNTSO report on the situation at the time, the fact that armed boats were prohibited from the defen- sive zone "might explain though not excuse" the Syrians' firing on the boats. Subsequently the Israelis were permitted by the UNTSO to mount weapons as large as .50 caliber on boats. It was a series of incidents involving fishing activities and exchanges between Syrian gun emplacements in the hills and Israeli patrol boats that created the serious flare-up in March of this year. severely handicapped by Israel's lack of cooperation. Ever since the Security Council resolution on the Lake Hula casein May 1951, Israel has refused to attend reg- ular meetings of the armistice commission. onsi ers the organization an irritating limitation of Israeli sovereignty and says it was originally accepted on the under- standing that it was to last only a year. Israel has alleged, moreover, that the Arabs have persisted in efforts to use the organization to infringe on Israel's rights and attack its very claim to existence. On the other hand, Israeli officials profess to believe the UNTSO has confined itself too legalistically to the terms of its mandate and should instead expand its mediat- ing scope, becoming more "diplo- matic" in character. The truce organization now mans ten observation posts on both sides of the border. It also has sought to acquire facil- ities from the Israelis for the operation of a helicopter and an observation boat on Lake Tiberias. An Israeli official has stated that Israel cannot permit a UN boat to operate on the lake because this might cast doubt on Israel's sovereignty over the lake. The general tenor of Israel's re- sponse has been that in seeking improved facilities the UNTSO has ulterior motives. The operations of General von Horn and his truce super- vision organization have been I L SECRET 8 June 62 SPF.rTAT. ARTTr'r1 4 of 11 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 Nw~ SECRET CURRENT INTELLIGENCE WEE]ELY SUMMARY 25X63 A further hindrance to the UNTSO's effectiveness has been the restriction applied by the Israelis on freedom of movement by UN observers within the de- militarized zone. This problem has been especially acute since 1959, when a former chairman of the MAC agreed that observers should not enter any part of the zone without an Israeli liaison officer as escort--thereby es- tablishing a firm precedent. Although it has been almost 14 years since the armistice agreement was signed, the exact location of the armistice de- marcation line has not yet been accurately determined. Thus, ever since Israel's reprisal in March the armistice commission has been unable to determine whether the Syrian trenches north of Nuqeib are just inside or just outside the demilitarized zone. In 1949, Dag Hammnarskjold got Israel and the UAR, of which Syria was then a part, to agree to an accurate demarcation of only five kilometers of the line, which totals about 90 kilometers--roughly 56 miles-- in length. If a survey of the entire line were ever carried out, both Israel and Syria might be somewhat embarrassed, since each side has fortified areas which appear to the MAC to be in the demilitarized zone. The Military Situation The topography in the area of the border--which was defined as the Palestine-Syrian frontier by Britain and France in 1923-- leaves Syria in possession of the high ground overlooking the Jordan River valley, now occupied by Israel. The Syrians accord- ingly have a distinct military advantage which, Syrian officers are frank to admit, enables them to shell lines of communication in Israel from positions outside the defensive zone. The ad- vantage was clearly demonstrated in a clash in 1958 when Syrian artillery fire severely damaged Israeli border settlements. The depth of Syrian defenses behind the immediate border area, more- over, presents a formidable obstacle to any large-scale Israeli attack. Israel's most recent test of Syrian defenses--the raid in March against Nuqeib, for which Von Horn says at least 1,300 troops were used--reportedly was something less than a suc- cess. Von Horn, indeed, contends the :Israelis were decisively beaten. In any case, it is ap- parent that the encounter had a sobering effect on Israeli estimates of Syrian effective- ness, and that as a result, any future reprisal almost certainly will be on a larger scale. The Israelis, on the other hand, were not chastened by the adverse resolution of the Security Council on 9 April. The resolu- tion determined that the March attack was a "flagrant violation" of a 1956 council resolution which condemned similar Israeli retaliatory action and called on Israel to refrain from such ac- tion in the future. The following day, Israel's Knesset "categorically" rejected the Security Council resolution by a 76-3 vote, and Prime Minister Ben--Gurion strongly criticized the US and Von Horn for applying a "double standard" in judging Israeli and Syrian actions. He reasserted Israel's right of self-defense and sovereignty over all of Lake Tiberias. The Israelis have become especially sensitive to the sovereignty issue as it applies to the lake, because they now tend to identify Syrian firing on Israeli boats with attempts to disrupt, if not stop, Israel's use of water from'the lake in the vital Jordan River project. Former Syrian Prime Minister Dawalibi remarked earlier this year that "the battle of the water has begun." When and how Syria will oppose the project is a major imponderable in the cur- rent border situation. Whatever the outcome of Syria's internal turmoil, it appears that as the Israeli project's 1963-64 comple- tion date approaches, any Syrian regime will be under very strong pressure to take some action. That other Arab states will join in such action, however, seems much more dubious. 25X1 SECRET 8 June eny'rTAT. ARTICLES Page 5 of 11 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 25X6 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Next 2 Page(s) In Document Denied Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 ,%W OLOU.M.DA-i VW CURRENT INTELLIGENCE WEEKLY SUMMARY The military regime of General Pak Chong-hui during its first year has consolidated its control of South Korea and is moving to assure the dominance of the present leadership in a succeeding civilian administra- tion. Power is in the hands of an armed group which has younger and better informed leaders and is providing a more efficient and less corrupt administration than any recent South Korean government. The regime has not won wide support, however, and its au- thoritarian tactics have al- ienated politically important groups. While approving the junta's strong anti-Communist stance and generally recognizing the need for reforms, public opinion increasingly favors an early return to civilian govern- ment. The government has initiated programs for economic reform, many of which have been too hastily developed and poorly administered. There remain the chronic problems of factionalism within the junta, unemployment, poverty, under-industrialization, and an overly large military establishment. Consolidation of Control General Pak has emerged as the key man in the regime as a result of his ability to hold in balance the factions in the Supreme Council for National Reconstruction (SCNR)--the top executive and legislative body. His personal integrity has won the esteem of the military and considerable respect from the general public. Pak's November 1961 visit to Washington and subsequent expressions of US support enhanced his prestige. Following the Washington visit, factional tensions in the SCNR diminished. Most political prisoners seized during the early days of the regime have been released under close police surveillance. Leftist agitation has been suppressed, and the disorderly student demonstrators whose activities highlighted the Chang Myon administration have been returned to the classroom. In June 1961 the junta established the semiofficial National Reconstruction Move- ment (NRM) to build public support for the "revolution" and extend political control to the grass-roots level. Local branches now blanket the country, but the NRM is regarded with apathy and suspicion. 25X1 The students, at first favorably disposed toward the patriotic appeal of the May coup, soon became disaffected. Arrests of students and pro- fessors generated fear and re- sentment. Long-needed educational reforms--the closing of sub- standard institutions and re- duction of liberal arts enroll- ments--were hastily imposed without adequate preparation. The junta's actions toward organized labor have been gov- erned by suspicion and a desire to forestall any actions that might interfere with the regime's economic plans. The unions have been reorganized under new lead- ers, most of them young men re- ported to be dynamic and realis- tic. Strikes are banned, and other activities are circum- scribed by police surveillance. The junta's efforts to court the farmers, about 70 per- cent of the population, have met with only marginal success. Rural conditions appear no worse, possibly even a little better, than before the military take- over. Policies, however, appear to have been based on a "simple soldier's judgment of society," and programs such as the anti- usury law have been well in- tentioned but often ill thought out and hastily implemented. Corrupt politicians were a major initial target of the military group. After having a taste of power, the coup leadership became increasingly SECRET' 8 June Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 9 of 11 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 ?W 43LGLL .Glj VW CURRENT INTELLIGENCE WEEKLY SUMMARY concerned over the danger of a challenge from ousted political leaders who retain strong ties in their local areas. In the eyes of the junta, "corrupt" politicians soon were equated with former politicians. The "Political Purification Law," promulgated on 16 March, gives the junta the authority to bar anyone from political activity for up to six years. Most lead- ing politicians among the 4,374 on the SCNR screening list refuse to apply for permission to re- sume political activity. Of the 2,958 who did, the regime has cleared 1,336. A faction of young politicians who belonged to the opposition during the Chang Myon administration was the only prominent group approved. General Pak has the au- thority to clear anyone who is "conscientious and a good person." How he exercises this power may indicate the extent to which the junta is willing to risk continued al- ienation of responsible older Foreign Relations The junta is vigorously seeking to broaden South Korea's international ties while pro- moting closer regional coopera- tion against the Communists. Eleven additional countries have recognized South Korea since the junta seized power. Consulates have been established in India and Egypt, where the North Koreans also maintain consular relations. Unlike the Rhee government, the present regime has not assumed a 'bellicose policy toward the problem of Korean unification, possibly because the military coup casts a shadow on the gov- ernment's claim to represent the will of the people. - ?ivilian leaders. The most critical period is likely to be the transition to civilian authority. The timetable as outlined by Pak calls for resumption of civilian political activities by early 1963, promulgation of a new constitution before March, and general elections in May. The regime's intention appears to be to elect Pak presi- dent, with a 120-seat, rubber- stamp legislature made up of former military officers and selected civilians. 1 The junta wants Japanese funds to help finance its five- year economic development program and is seeking to end the ten- year impasse in relations with Japan. Pak's policy appears to be to offer Tokyo concessions on minor issues in the hope of eventually receiving a large cash set lement The leaders seem anxious to continue South Korea's close ties with the United States but are highly nationalistic and intent on demonstrating their country's independence. They show an increasing reluctance to accept American advice when they believe South Korea's interests are not parallel with those of the United States. SECRET 8 June E Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 10 of 11 Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 wr SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Pak has agreed to the principle of subordination of the South Korean armed forces to the UN Command, but the Koreans have indicated that they desire greater control over their own forces. This desire could take several forms, including pressure for a reorganization of the army command structure, with a reduc- tion of the number of troops subject to the UN commander's operational control. The au- thority of the UN commander can no longer be taken for granted, particularly in decisions the junta leaders consider vital to their interests. Economic Problems The military government has introduced a sense of direc- tion and discipline that has been missing since the republic was founded in 1948. This has included a concerted effort to control corruption. At the same time, however, the lack of civil administration experience among military officers and their dis- trust of former government and business leaders severely limit the government's ability to deal with the country's over- whelming economic problems. Already in control of the central Bank of Korea, the mili- tary regime administers the nation's financial system by having, in effect, nationalized all commercial banks. Punitive action still in process against major industrialists and business- men--practically all of whom stand accused of securing large profits illegally through col- lusion with former government officials and politicians--may lead to the nationalization of leading business enterprises as well. Uncertainty surrounding the disposition of these cases and businessmen's anxiety about future investments and opportuni- ties led to stagnation of the economy during most of 1961. Only recently has industrial activity shown signs of revival, and these are not definitive. Perhaps most serious of all the government's economic problems, however, is its dis- regard for matching its ambitious spending programs with sound sources of revenue. Improved tax-collection procedures and diminished corruption among government officials are stretch- ing available revenues further, but subsidies to farmers, defense spending, economic development costs, and loss of revenue from business stagnation have magnified the deficit and had a grave inflationary impact. The regime's five-year eco- nomic plan envisages increased agricultural production, indus- trial expansion, an export pro- gram rising by 150 percent to $291,000,000, and the attraction of sizable amounts of foreign investment, both private and official. Earliest attention is being given to increasing electric- power generation on a country- wide basis and to a dramatic $310,000,000 project to create an industrial complex at the southeastern port city of Ulsan, incorporating an oil refinery, a thermal electric power station,a fertilizer plant, and an iron and steel plant. The government is relying heavily on continued massive foreign aid to achieve its goals and presumably will con- tinue, once the projects are com- pleted, to require such assistance to finance raw-material imports. Outlook South Korea's major long- term problem is the poverty of its economy. Large-scale foreign aid. and growing national aspira- tions have generated widespread public expectations for a rising standard of living. Prospects for improvement, however, are limited by the paucity of natural resources and human skills. Immediately, the stability of the regime largely rests on Pak's ability to prevent a reviv- al of factional infighting within the military, and more particularly within the ruling 'unta. His sudden removal 25X1 or his failure to IQ a m~ x ary factions in balance could at any time set 25X1 off a new round of political con- fusion and possible violence. SECRET 8 June 62 SPECIAL ARTTCT.F;s Approved For Release 2008/06/09: CIA-RDP79-00927A003600100001-3 ` "1 1'- 25X1 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3 Approved For Release 2008/06/09: CIA-RDP79-00927AO03600100001-3