CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A003600100001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 40
• Document Creation Date: December 21, 2016
• Document Release Date: June 9, 2008
• Sequence Number: 1
• Publication Date: June 8, 1962
• Content Type: SUMMARY

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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
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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.
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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.
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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
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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.
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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
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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
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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-
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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
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Nasy' j Pa Dong ha Thq
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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
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CURRENT INTELLIGENCE WEEKLY SUMMARY
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this "version" false from
beginning to end.
Soviet propaganda also
continues to allege that
the US is seeking to aggra-
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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.
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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-
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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.
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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
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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
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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.
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)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.
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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.
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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
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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.
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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.
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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.
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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.
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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
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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
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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
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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.
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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-
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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
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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-
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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..
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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
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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
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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
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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
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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
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,%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
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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.
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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.
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