WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A004200030001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 33
• Document Creation Date: December 21, 2016
• Document Release Date: July 9, 2008
• Sequence Number: 1
• Publication Date: September 20, 1963
• Content Type: SUMMARY

low
20 September 1963
OCI N. 0298/63
Copy No 0 7 5
WEEKLY SUMMARY
OFFICE OF CURRENT INTELLIGENCE
SECRET
downgrading and declassification
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CENTRAL INTELLIGENCE AGENCY
DIA review completed.
State Dept. review completed
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(Information as of 1200 EDT, 19 September 1963)
FRICTIONS IN SOVIET-CUBAN RELATIONS
Moscow appears anxious to reassure Castro that US-
Soviet detente will not weaken its support for Cuba,
as he seems to fear. Other probable sources of fric-
tion are: disagreement over means to counter exile
raids, Castro's silence on the test ban treaty, and
his effort to appear neutral in the Sino-Soviet rift.
HAVANA PREPARES FOR ARCHITECTS CONGRESS
The Castro regime is going all-out to make this
bona fide international gathering--scheduled for
Havana before Castro went "socialist"--a resound-
ing propaganda success for Cuba.
MORE POSITIVE SOVIET ATTITUDE ON OUTER SPACE PACT
Soviet delegates at the recent session of the UN
Outer Space Committee indicated Moscow may be se-
riously interested in reaching agreement with the
US on peaceful uses of outer space.
USSR MAKES LARGE WHEAT PURCHASES ABROAD
Persistent harvest shortfalls have forced Moscow
to buy sizable quantities of Canadian and Austra-
lian wheat. These purchases, added to the expense
of building up the chemical fertilizer industry,
are bound to strain the Soviet balance of payments.
GDR THREATENS TO END INTERZONAL TRADE PACT
Its action stems from an EEC-directed proposal by
Bonn to stop paying preferential prices for East
German oil. Since neither side wants to end in-
terzonal trade, mutual concessions can be expected.
20 Sept 63 CURRENT INTEILIGENCT WEEKLY SUMMARY
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ASIA-AFRICA Page
SITUATION IN SOUTH VIETNAM
Martial law has been lifted and a new date an-
nounced for elections
INDONESIA CONTINUES FIGHT AGAINST MALAYSIA
Rioting against British and Malayan installations
and property in Indonesia followed the establish-
ment of Malaysia on 16 September, and further in-
cidents, in the Borneo territories as well as in
Indonesia, are likely.
EGYPT AGAIN FACING ECONOMIC CRISIS
Many of the Nasir regime's economic problems are
chronic, but its recent financial practices and
policies have made the international financial
community most reluctant to come to its aid.
NEW SOVIET MILITARY AID TO EGYPT
Recent shipments of equipment--possibly including
all-weather MIG-2lDs--apparently not covered in
earlier agreements suggest Moscow is rapidly im-
plementing an arms pact concluded in June.
PUBLIC ORDER PROBLEMS STILL PLAGUE CONGO
Tshombd's former Katangan gendarmerie is again
becoming active, while the UN continues to think
primarily of withdrawal.
EUROPE
DIFFERENCES WITH US MAJOR TOPIC OF EEC COUNCIL MEETING 15
Many EEC officials foresee an atmosphere of recrim-
ination at next week's EEC Council meeting that may
doom all chances for the success of the "Kennedy
Round" of tariff negotiations.
POLITICAL IMPACT OF FRANCE'S AUSTERITY PROGRAM
The anti-inflationary program announced last week
is probably aimed at parrying new wage demands, but
could also be intended to create a favorable atmos-
phere for a re-election bid by De Gaulle next spring.
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EUROPE (continued)
AREA NOTE
Finland
WESTERN HEMISPHERE
THREATS TO REGIME OF DOMINICAN PRESIDENT BOSCH
Bosch's growing political isolation seems to be in-
creasing chances of his ouster, with extreme leftist
elements the possible long-range beneficiaries.
EFFECTS OF SERGEANTS' UPRISING IN BRAZIL
The radical left has defended the abortive revolt,
and the possibility of a Communist-instigated gen-
eral strike continues. On balance, the uprising
seems to have undermined President Goulart's author-
ity to some extent, and he may face new pressure
from the military for strong anti-extremist measures.
PERUVIAN INDIANS AGAIN "OCCUPYING" PRIVATE LANDS
The new Belaunde administration fears their incur-
sions--recently instigated by the Communists--will
complicate its efforts to enact land reform, and
possibly lead to bloodshed.
AREA NOTES
Argentina and Uruguay
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Recent Soviet pronouncements
have reflected Moscow's concern
over Western speculation regard-
ing the re-emergence of Soviet-
Cuban frictions and disagreements.
An authoritative Pravda "Observer"
article on 12 Sep e~ er and sev-
eral Moscow broadcasts denounced
alleged US complicity in recent
air and sea raids by Cuban exiles
and reaffirmed the USSR'S vague
pledges to support Cuba against
external attack. Havana radio
promptly welcomed Pravda's
"timely warning" toTUS and
its reiteration of the "un-
changeable position of the Sovi-
et Union to back Cuba militarily
in case of any aggression."
Moscow apparently felt under
growing pressure to restate its
support for Castro in view of
his allegations of US responsi-
bility for increased exile raids
since mid-August. The Russians
appear anxious to reassure
Castro that the improvement in
Soviet-US relations will not
weaken the USSR's support for
his regime against US pressures.
The absence of a formal Soviet
Government statement, however,
reflects Khrushchev's continu-
ing desire to hold Caribbean
tensions down and to avoid pro-
voking the US on the sensitive
Cuban issue.
Added to disagreement over
measures to counter the rising
level of exile activities may
be frictions arising from Cas-
tro's failure to sign the test
ban treaty. In view of the
20 Sept 63
Soviet leaders' strenuous efforts
to win Castro's support during
his visit to the USSR last May,
they are undoubtedly irritated
over his stalling on the treaty.
They may believe he is attempt-
ing to extract further Soviet
support and concessions as the
price for adherence.
Castro's maneuvers to re-
main "neutral" in the Sino-
Soviet dispute have also aroused
Soviet displeasure, especially
when his militant pronouncements
continue to imply greater sym-
pathy for Chinese Communist
views than for the Soviet co-
existence line. The importance
both Moscow and Peiping attach
to Cuba's position is reflected
in their attempts to demonstrate
Cuban support for their respec-
tive views. While Peiping gave
extensive play to an article
by Che Guevara in Cuba Socialis-
ta, the Castro regime's eo-
Togical journal, calling on
Latin Americans to "throw off
the imperialist yoke," Moscow
quoted an article from the same
edition praising the USSR's sup-
port and its peaceful coexist-
ence policy. A Moscow broad-
cast to Cuba on 14 September
warned against the "dangerous
ideas" of the Chinese leaders
and charged that they deny
the importance of Cuba's
"economic successes" in ad-
vancing the "anti-imperial-
ist struggle" in Latin America.
For his part, Castro is
probably skeptical of the
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advantages to Cuba of following
the Soviet lead toward "peace-
ful coexistence." The half-
hearted gestures he made last
spring--almost certainly at
Soviet behest--to improve his
relations with the US have
been, in his view, rudely re-
buffed. In the face of signs
of increasing US pressure
against his regime he probably
fears that a continuing trend
toward a US-Soviet detente
might ultimately leave him
unprotected.
Castro's frustrations with
the Soviets are evidently again
coming to the fore.
Soviet military personnel
continue to leave Cuba
large number of Soviets--as
many as 1,000--were assembled
in the Havana port area be-
tweenl2 and 15 September for
embarkation.
The Soviet passenger ship
Turkmeniya which left Havana
on 14 or 15 September may have:
carried some military rson-
nel. 65 men
and equipment on the deck of
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20 Sept 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
Emotional y more a une o e
Peiping line than to the tedi-
ous task of building an effi-
cient economy that Moscow is
independence and his security.
urging on him, Castro is also
mindful that always in the past
he has responded aggressively
to external pressures and that
this has served him well. While
aware that his dependence on
continued Soviet aid limits
his freedom of action, he may
hope that intensification of
Cuban subversive efforts else-
where in the hemisphere may re-
sult in one or more allies in
Latin America. This would, in
his view, greatly increase his
the Soviet cargo ship Yuri Gaga-
rin, which left Havana on 15
September. The Soviet merchant
ship Kasimov, which left Havana
on 10ep ember, apparently
also carried military person-
nel.
some 100 passengers and tem-
porary personnel facilities
on deck. Some 20 truckloads
of baggage sighted in the Ha-
vana port area on 9 September
may nave belonged to the pas-
sengers of the Kasimov.
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HAVANA PREPARES FOR ARCHITECTS CONGRESS
The full resources of Fidel
Castro's government are being mo-
bilized to make the Seventh Con-
gress of the International Union
of Architects (UIA), to be held in
Havana from 29 September to 3 Octo-
ber, a resounding Cuban propaganda
success.
The congress--a bona fide in-
ternational professional gathering
--scheduled for Havana three years
ago, before Castro went "socialist"
--will open with a speech by Presi-
dent Dorticos. Castro will close
it with a three-hour talk, and Che
Guevara is to address a preliminary
gathering of participants. Cuban
news media are predicting an at-
tendance of 3,000 delegates from
80 different countries. While at-
tendance figures may well reach
3,000,a fair percentage of the
gathering will include relatives
of delegates, students of architec-
ture, and translators. An article
appearing in the Havana daily, Rev-
olucion, has asserted that numer-
ous official personalities, includ-
ing ministers and deputy ministers
of public works from various coun-
tries, will be among the delegates.
Bringing delegates to the con-
gress from Europe and South Amer-
ica are two Soviet ships and one
East German ship, with a combined
passenger capacity upwards of 1,000.
Hundreds more are to arrive by air.
In addition to a chartered Air
France flight from Paris to Havana
on 27 September, the Cuban airline,
Cubana.,has arranged several special
flights from a number of cities
including Mexico City and Sao
Paulo.
Delegates have been offered
fare discounts and an all-expense-
paid stay in Cuba as inducements
to attend the congress. The Cas-
tro regime has also organized a
special seminar for students and
professors of architecture, who
will also be admitted to the of-
ficial activities of the congress.
The theme of the congress--
"the problem of architecture in
countries now engaged in develop-
ing a modern society"--has led
Havana radio to boast that Cuba
is the "perfect place" to hold
it: "Here, the architects will
find a country that in less than
five years has traveled far in
changing from a backward semi-
colonial country to a modern
one."
The Cuban Committees for the
Defense of the Revolution will be
holding a third anniversary cele-
bration on 28 September, and UIA
Congress delegates will be invited
to attend the scheduled mass rally.
In addition, the results of an
international competition for the
design of a monument commemorating
the Bay of Pigs invasion will be
announced during the congress.
Following the activities in
Havana, the major work of the UIA
will take place in Mexico City,
where a general assembly and sym-
posium on architecture will be
held from 6 to 15 October. Many
Western-oriented architects may
possibly decide to forego the 25X1
events in Havana, and participate
solely in the Mexico City meetings.
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During the recent session
of the UN Outer Space Committee,
held in New York 9-13 September,
Soviet delegates indicated that
Moscow may be seriously inter-
ested in reaching agreement
with the US on a declaration of
legal principles for the peace-
ful uses of outer space. Soviet
leaders may regard such an agree-
ment as a further step to keep
alive the "Moscow spirit" created
by the nuclear test ban treaty.
In marked contrast to their
past behavior on this subject,
Soviet officials spoke in moder-
ate and conciliatory tones, made
minor concessions, and repeatedly
stressed the need for agreement
on the basis of "reasonable com-
promise and mutual concessions."
They did not use the committee
as a forum for propaganda at-
tacks on alleged US military ac-
tivities in outer space.
The session ended without
a withdrawal of Soviet insist-
ence that any agreement on legal
principles must prohibit use of
earth satellites for reconnais-
sance or "war propaganda" pur-
poses. However, the deputy
chief of the Soviet UN delega-
tion told a US official on 11
September that he considered
the war propaganda issue an
"area of possible compromise."
In addition, the Russians re-
portedly have indicated pri-
vately that they may eventually
drop their demand for banning
reconnaissance.
The comparatively harmoni-
ous atmosphere during the outer
space committee session was re-
flected in the committee's re-
port to the General Assembly--
which noted a "narrowing of
differences." Ambassador
Stevenson has cautioned that
the US should not be "overly
encouraged," but he expressed
the belief that the Soviet posi-
tion has advanced sufficiently
to offer a basis for continued
consultations. The moderate
attitude taken by the Soviets
in the outer space committee de-
liberations suggests that Moscow
intends to play down outer space
as a cold-war issue when the
General Assembly takes up the
question later this fall, par-
ticularly if US-Soviet bilateral
talks continue in a businesslike
manner.
Since the Soviet leaders
apparently believe there is lit-
tle prospect for multilateral
agreements on such issues as a
NATO-- Warsaw Pact nonaggression
pact in the foreseeable future,
they may intend to press for bi-
lateral agreements on relatively
minor issues to give the im-
pression of a further normaliza-
tion in Soviet-US relations.
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USSR MAKES LARGE WHEAT PURCHASES ABROAD
Recent Soviet purchases of
some $500 million worth of wheat
probably stem in large part from
a drastic reduction in stock-
piles caused by four successive
disappointing harvests and a
need to forestall a critical
grain shortage in the Soviet
bloc. There are indications
that this year's crop will be
one of the poorest in recent
years. Moscow radio implied
on 12 September that state pro-
curement of grain--approximately
40 percent of the crop--will be
well below last year.
The USSR will buy 5.6 mil-
lion tons of wheat and 575,000
tons of flour from Canada by
July 1964, and 1.5 million tons
of wheat from Australia, pre-
sumably within a year. The
Canadian agreement also allows
additional purchases over a two-
year period after July 1964 and
specifies Soviet purchases of
not less than 500,000 tons in
the year July 1965 - July 1966.
The USSR has been granted short-
term credit for the purchase:
25 percent down with three in-
stallments due in 6, 12, and
18 months.
The agreement provides
that Moscow can divert some of
its purchases to Eastern Europe
--as long as they do not im-
pinge on Canadian sales there
--and to Cuba. In recent years
the Soviets have delivered
three to four million tons of
wheat annually to other members
of the bloc; Cuba received 270,-
20 Sept 63
During the period 1955-58
there was marked improvement in
the Soviet diet. Since then,
however, Soviet agriculture has
stagnated, and in 1962 grain
output on a per capita basis
was estimated to be 15 percent
below that of 1958. In addi-
tion, the 1962 potato crop, a
significant factor both in hu-
man consumption and as a live-
stock feed, was the smallest
since the early postwar years.
Isolated civil unrest, reported
in the Soviet Union during the
latter part of 1962, reportedly
resulted in part from failure
to improve the diet, as had
been frequently promised. As
a result stocks have apparently
been used this year to maintain
consumption levels in the hope
that a good crop would allow
some improvement.
To ensure better crops in
the future and reduce the neces-
sity for such stopgap purchases,
the USSR has begun negotiations
to purchase chemical fertilizer
plants from the West. The Soviets
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GRAIN HARVESTS IN USSR
(million metric tons)
Soviet claim U S estimate
for production of production
Soviet claim
for procurement
1958
141.2
125
56.6
1959
125.9
100
46.6
1960
134.4
100
46.7
1961
138.0
115
52.1
1962
147.5
115
56.6
*U S
Intelligence accepts Soviet procurement claims as valid.
630916 3A
USSR: NET EXPORT OF WHEAT
(million metric tons)
1958
1959
1960
1961
1962
Eastern Europe
2.80
4.33
4.16
2.59
2.78
Other Bloc Countries
--
-0.01*
0.02
0.53
0.38
Total Bloc
2.80
4.32
4.18
3.12
3.16
Nonbloc Countries
0.76
1.48
1.34
1.03
1.56
Total
3.56
5.80
5.52
4.15
4.72
* In 1959 the USSR imported more wheat than it exported in trade with the Asian
Communist countries.
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The Communist World
have already signed a contract
with the Dutch for urea plants
with a combined capacity of
about 600,000 tons. The West
German Krupp firm has been ne-
gotiating a deal described as
"huge." Most of these deals
will be negotiated on five-year
credits. Khrushchev has claimed
that some of the funds for the
build-up of the chemical indus-
try will be provided by cutting
back on military spending.
Imports for this build-up,
added to the deals and existing
commitments, are bound to strain
the Soviet balance of payments.
It is estimated that Moscow now
owes Western suppliers of ma-
chinery and equipment about $500
million on medium-term credits
falling due within the next five
years. To meet the added pay-
ments, the USSR will presumably
make an extra effort to expand
exports as well as to sell gold.
Pressure on petroleum, metals,
timber, minerals, and sugar ex-
port markets may develop as the
Soviets move to meet the addi-
tional drain on financial re-
serves.
The USSR in recent years
has sold an average of $220 mil-
lion worth of gold annually to
maintain its payments and re-
serve position. Normally these
sales are made in the period
October-April.
the Soviets have sold substantial
amounts of gold, apparently in
preparation for the wheat deals.
Gold production in the USSR in
1963 is estimated at $175 mil-
lion and reserve stocks at about
$2 billion.
Walter Ulbricht's German
Democratic Republic (GDR) has
threatened to announce on or be-
fore 30 September abrogation of
the interzonal trade (IZT)
agreement, effective 1 January
1964. This tactic was employed
successfully by the Federal Re-
public in 1960 when the Ulbricht
regime imposed arbitrary con-
trols on West German traffic to
East Berlin. The GDR probably
now views it as a low-risk means
of pressuring Bonn into continu-
ing to pay the present high prices
for oil and some services now
channeled through IZT. Since
neither side is willing to break
off permanently, some agreement
--and mutual concessions--can be
expected, at least in the area
of trade itself. However, the
East Germans are likely to press
for advantages in the areas of
Berlin access--also covered in
the IZT agreement--and "techni-
cal-level" relations.
The present controversy
arises over the question of East
German petroleum sales to West
Germany. Bonn heretofore has
not considered East Germany a
foreign state whose products
are subject to import tariffs
and has collected excise duties
at the preferential rate levied
on domestic producers. As a
consequence of this favorable
treatment, the East Germans re-
ceived almost three times the
price paid the non-German sup-
pliers from whom Bonn receives
more than 90 percent of its re-
quirements.
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Effective on 1 January, in
response to Common Market regu-
lations, Bonn proposes to elim-
inate the tariff on foreign
petroleum and to levy the same
excise taxes on foreign and
domestic producers. This means
that approximately the same
prices would be paid for East
German fuels as for petroleum
products imported from else-
where. More importantly, it
would reduce the amount of
what is in effect a West German
subsidy by $17-25 million in
1964.
West German IZT negotiator
Leopold has told the US Mission
in Berlin that as a short-term
palliative the East Germans may
be permitted to make above-quota
deliveries of diesel and gasoline
fuels for the balance of 1963--
thus partially offsetting the
anticipated loss for 1964. This
will not, however, solve the
problem unless Bonn finds a
way to continue preferential
treatment for East German pe-
troleum or aermits other conces-
sions within the IZT framework.
One possibility would be
to buy more East German petro-
leum, but it is doubtful that
the GDR could step up its ex-
ports to the Federal Republic
sufficiently to compensate for
the loss of its preferential
sales position without jeopard-
izing its sales to other con-
sumers. The possibility of
substituting other products is
complicated by the fact that
petroleum has been one of a
number of GDR export commod-
ities which the IZT arrange-
ments have required be matched
by specific West German exports,
primarily steel.
Even if the issue of pe-
troleum prices is settled quick-
ly, the East Germans will con-
tinue to press for at least
token progress in raising the
level of East-West German re-
lations and--particularly--
securing greater financial re-
turn from their role in Berlin
access. The original agree-
ment on trade covered civil
access; subsidiary agreements
govern the fees paid for the
use of roads, waterways, and
rail lines to Berlin and tele-
communications between the city
and the Federal Republic, as
well as providing the mecha-
nism whereby the West Germans
reimburse the GDR at a nominal
rate for Allied use of many of
these facilities. Since these
rates never have been adjusted
and apparently do not compen-
sate for even minimal mainte-
nance of the transit routes,
the East Germans seek a more
equitable arrangement--prefer-
ably outside the interzonal
trade mechanism.
Of late, East German trade
specialists have refused to
discuss nontrade subjects,
such as those which pertain to
the Berlin sector border, in
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interzonal trade meetings and
have insisted that such topics
be taken up with "competent"
authorities. Thus, for example,
the East Germans recently in-
sisted that West Berlin city
government officials negotiate
the agreement under which the
GDR was paid 4.25 million
Deutschmarks for maintenance
since August 1961 of the two
U-bahn lines which cross the
sector border into East Berlin
and will receive annual payment
for such services in the future.
In his 9 July Leipzig
speech, Ulbricht stated his
regime's willingness to discuss
joint East - West German - West
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20 Sept 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
Berlin commissions for coopera-
tion in the fields of culture,
education, law, economics,
science, technology, and trans-
portation. The commission for
transportation would not in-
clude West Berliners, presum-
ably because the GDR is seek-
ing direct East German - West
Berlin negotiations. This pro-
posal, along with Ulbricht's
earlier seven-point program
for "minimum good working re-
lations" with the Federal Re-
public, has become the dominant
theme of East German propaganda
and may well figure in whatever
plans the regime has for IZT.
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%10~ Iwo
ARMY CORPS BOUNDARIES
_r
.Quang TO
Phuot Wh'
GON 'Phan Thiet
Capital Military District
bVung Tau
STATUTE MILES IEO
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The regime in South Vietnam
continues its efforts to regain
an outward appearance of normal-
ity, while strong combat police
units remain in Saigon to enforce
civil obedience. Viet Cong
forces have been active in several
areas of the country, and they
continue to employ battalion-
size units in some attacks.
President Diem lifted
martial law on 16 September,
reportedly after considerable
urging from several military
leaders. The military chain of
command has reverted to normal
in the Saigon area,
nut
rumors persist concerning the
present status of some corps
commanders. These rumors may
stem in part from reported plans
to shift corps boundaries in an
attempt to bring more government
troops into the delta area.
An undercurrent of suspi-
cion exists in the capital.
There are conflicting
assessments of the government's
support in the countryside. US
officials with access to pro-
vincial administrators, however,
have apparently detected little
demoralization outside the urban
areas.
The National Assembly elec-
tions have been rescheduled for
27 September, but general in-
security or intensified Viet
Cong activity is likely to
create difficulties in some
areas.
The number of small-scale
attacks in northern South Viet-
nam have increased in recent
days. In the delta area the
Viet Cong also mounted some
larger unit attacks. Govern-
ment forces, however, were able
to inflict heavy casualties.
In several of these engagements
South Vietnamese forces have
captured heavy equipment, and
uncovered weapons and foodstuffs
apparently of bloc, particularly
Chinese Communist, origin.
Ngo Dinh Nhu apparently re-
mains solidly entrenched as his
brother's key adviser and
executive agent. The status of
both Madame Nhu and Diem's
brother Archbishop Thuc appear
unchanged despite their current
absence from the country.
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20 Sept 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
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INDONESIA CONTINUES FIGHT AGAINST MALAYSIA
Indonesia's policy of
"confrontation" against Britain
and Malaysia has been stepped
up since Malaysia was official-
ly established on 16 September.
The report of the UN sur-
vey team was released on 14
September by U Thant. It con-
cluded that a clear majority
of the people in North Borneo
and Sarawak favored Malaysia.
Indonesia and the Philippines
rejected the report and re-
fused to recognize the new
federation.
Their announcement was
promptly followed by anti-
Malaysian rioting throughout
Indonesia--encouraged, if not
actually planned, by the In-
donesian Government, On 17
September a Malayan consul and
his family in Medan, Sumatra,
were forced to seek safety in
the home of the American con-
sul, and on 18 September a
large mob sacked the British
Embassy in Djakarta and sys-
tematically looted and burned
almost all other diplomatic
and privately owned British
and Malayan property. Further
incidents--in the Borneo terri-
tories as well as in Indonesia
--are likely.
Leftist unions in Indonesia
seized control of four private
British companies on 17 Sep-
tember, and British officials
expressed concern that the In-
donesians were preparing to
take over all UK commercial
interests, as they had done in
1957 with Dutch businesses. The
Indonesians, however, have as-
sured the US that this is not
the case.
Shortly after the first
incidents, the Malaysian Gov-
ernment met in emergency ses-
sion and severed diplomatic re-
lations with Indonesia and the
Philippines, asking Thailand to
represent its interests in Manila
and Djakarta.
Indonesian Foreign Secre-
tary Subandrio, en route to
the UN session in New York,
stopped off in Manila on 18
September presumably to try to
keep Manila's policy in line
with Djakarta's. While Philip-
pine Secretary of Foreign Affairs
Lopez has taken a hard line
against recognizing Malaysia,
congressional sentiment in
Manila is reportedly more favor-
able to recognition. President
Macapagal has indicated that the
Philippines would recognize
Malaysia when Prime Minister
Rahman reaffirms his previous
commitment to consider the Phil-
ippine claim to North Borneo.
SECRET
20 Sept 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
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SECRET
Egypt is approaching an
economic crisis that may prove
more severe than any that the
Nasir regime has experienced
in recent years.
Cairo's foreign exchange
position is precarious, and it
has run through the $112.5 mil-
lion made available last year
by the International Monetary
Fund. The regime is counting
on more Western assistance to
get it through the next few
months, before substantial re-
ceipts for this year's cotton
sales come in. There is mount-
ing evidence, however, that
such assistance may be consider-
ably more difficult to obtain
than heretofore.
While the international
financial community has not
looked on Egypt as a first-
class risk at any time in recent
years, the regime's practices
in the past few months have
been especially disturbing.
For example, short-term loans
from foreign lenders have been
a major source of the funds
Cairo uses to meet its obliga-
tions, but since last spring
the regime has frequently
fallen behind in paying off
these loans. Foreign bankers
have expressed concern over
this tendency, and they may
well be reluctant to grant fur-
ther credit, except on stiffer
terms. Moreover, there is a
growing conviction in financial
circles that the statistics
which the regime uses to sup-
port its loan requests are far
from trustworthy.
Last month Cairo announced
another spate of nationaliza-
tions of domestic and foreign-
owned firms. The government
has also indicated that it in-
tends to renege on promises of
equitable compensation for the
interests it took over previously.
Swiss Foreign Minister Wahlen
has stated his government is
much disturbed and may try to
persuade other countries with
heavy investments in Egypt to
undertake a joint effort to
obtain reasonable compensation.
Despite Western advice and
admonitions that austere eco-
nomic measures are called for,
the Nasir regime has continued
to overextend itself. It has
almost completely ignored rec-
ommendations that the overam-
bitious economic development
program and social welfare plans
be cut back. Nor has Nasir in
any way reduced his expenditures
for propaganda and subversion
to promote Egypt's "revolution"
abroad or for subventions to
radical nationalists in other
Arab and African countries.
The major item in this account
is the year-old Yemen war, which
has proved to be a far greater
strain on the economy than Cairo
had anticipated, and which shows
no sign of becoming appreciably
less costly in the near future.
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20 Sept 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
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As Sallum
Alexandria4AA6u Qir
Al `Alamayn
wort Said.,
?Na;r
Inshas
CAIRO, Suez
+A r i
Dashur
Al Fayyum ?
Al Kharijah?
(Kharga Oasis)'
Bahariya Oasis
Surface-to-Air Missile (SAM) Deployment in Egypt
A Confirmed SAM Site - Projected SAM Deployment
SAM Support Facility
0 Nautical Miles 200
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SECRET
The USSR apparently plans
rapid implementation of an arms
agreement with Egypt concluded
during Field Marshal Amer's visit
to Moscow last June. No complete
reports on the scope of the
agreement have been received
but shipments since the end of
July have included 15 MIG-21
(Fishbed) jet fighters, 8 YAK-11
(Moose) trainer piston aircraft,
and other military equipment
which does not appear to have
been covered in earlier agree-
ments.
Some of the recently de-
livered MIG-21s may be the MIG-
21D all-weather fighter, which
would help round out Egypt's
air defense capabilities.F-
Under earlier
arms agreements Moscow already
has delivered as part of Egypt's
air defense.system more than 250
jet fighters, 60 of which have
been MIG-21s.
The Soviet surface-to-air
missile (SAM) program in Egypt
continues to show progress. Two
new SAM sites have recently been
identified--one at Port Said and
one at Suez. With the six sites
in the vicinity of Cairo and the
site at Abu Qir near Alexandria,
the total now is raised to nine.
Another SAM site reportedly is
located 25 miles southwest of
the Abu Qir site, suggesting
that Egypt intends to encircle
the port area of Alexandria,
like Cairo, with SAM sites.
Cairo may also intend to ring
both Port Said and Suez with at
least three sites each.
The USSR also continues to
supply ancillary military equip-
ment and to fulfill earlier
contracts. Almost all Soviet
ships calling at Alexandria
carry deck cargoes of trucks,
many of which probably are con-
signed to the armed forces.
20 Sept 63
SECRET
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SECRET
PUBLIC ORDER PROBLEMS STILL PLAGUE CONGO
A quorum of deputies and
senators has finally shown up
in Leopoldville to enable the
fall session of the Congolese
Parliament to open. Premier
Adoula's opponents again elected
their candidate for president
of the lower house but did not
make a clean sweep of all the
lower house offices as they did
in the spring session. Adoula's
plan to restrict Parliament to
constitution making has failed,
and it seems certain that the
legislators will also insist on
"normal business"--i.e., harry-
ing the government.
Tshombd meanwhile seems
about to reappear in the Congo
limelight. At the moment he
is still in Barcelona, but re-
ports persist that he will soon
return to the Congo. The former
Katangan leader has twice ap-
pealed to Adoula for a recon-
ciliation, but to date the pre-
mier has not replied. Adoula may
actually favor Tshombd's return,
but would probably prefer that
he remain in exile at least un-
til after parliamentary elec-
tions next spring.
UN officials
are convince that fighting
between the gendarmes and the
Congo National Army is likely
when UN forces depart. The
UN is not, however, planning
any military operations against
the gendarmerie groups.
The question of the con-
tinued presence of UN forces
after December remains unset-
tled. U Thant, anxious to
disengage, insists that a mini-
mum UN force would have to con-
sist of 6,000 men and would
cost some $30 million annually.
He feels such an operation can-
not be supported and is beyond
his terms of reference. US
observers believe a highly mo-
bile force half that size would
suffice. There is considerable
African support for the princi-
ple of retention of UN forces
until mid-1964, but Thant is
doubtful the necessary money
can be voted. He has suggested
that the solution might be for
Leopoldville to obtain troops
through bilateral arrangements,
outside the UN framework, with
interested Western countries
paying the bills.
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SECRET
The session of the Common
Market's Council of Ministers
that convenes on 23 September
will be crucial for the outcome
of the poultry dispute with the
US. European officials feel
that the dispute may have gone
so far as to make it impossible
to achieve any significant dis-
mantling of tariff barriers in
the "Kennedy Round" of negotia-
tions next year.
The Council will consider
such continuing issues as a
common agricultural policy for
the EEC, associate status for
Austria, and merging the execu-
tives of the European communi-
ties. The most important topic,
however, will be to decide if
concessions are to be offered
beyond the proposed reduction
of 1.3 cents per pound in the
poultry levy--which the US re-
gards as inadequate. Bonn has
indicated that it is prepared
to reconsider the problem after
a trial period. Should further
measures be necessary, the Ger-
mans would like some arrange-
ment which, in effect, linked
increased purchases from the
US to a corresponding reduction
in purchases from Bonn's EEC
partners.
The prospects for Council
agreement on a settlement along
these lines are dim. The French
particularly would dig in their
heels against such an impair-
SECRET
20 Sept 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
.vent of preferences for EEC
members unless Bonn were to
give in to French pressure on
other important farm commod-
ities. De Gaulle is partic-
ularly anxious for speed in es-
tablishing a community price
for grain which would open up
the German market for relatively
low-priced French grain and
the animal products dependent
upon it.
Failing agreement on a
solution to the poultry dis-
pute, the Council may make im-
portant decisions on alterna-
tive courses of action. EEC
officials have protested that
the projected compensatory in-
creases in US tariff rates are
excessive in comparison with
the damage done to the US by the
EEC poultry levies. They have
stated that if the US proceeds
to increase tariffs to the ex-
tent announced, the EEC will
retaliate.
Many EEC officials fore-
see an atmosphere of recrimina-
tion that may doom all chances
for the success of the "Kennedy
Round" in GATT. In this con-
nection, the West Germans ex-
hibit considerable animosity
against the French, who are
viewed as coolly indifferent
to the possible impact of the
poultry crisis on the Kennedy
Round.
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POLITICAL IMPACT OF FRANCE'S AUSTERITY PROGRAM
The anti-inflationary pro-
gram Paris announced last week
is probably aimed at cutting
the ground from under prospec-
tive union demands for higher
wages, although it could also
be intended to create a favor-
able atmosphere for a re-elec-
tion bid by De Gaulle next
spring. Despite an intensive
government campaign for support,
reaction to the program thus
far has been skeptical or open-
ly hostile. De Gaulle is ex-
pected to give it his personal
backing during his 25-29 Sep-
tember tour of southeastern
France.
The wide-ranging plan in-
cludes measures to restrict
credit, to soak up excess li-
quidity by encouraging long-term
investment and floating a large
government loan, and to increase
the labor force by the early re-
lease of army conscripts. The
military will not share propor-
tionately in the larger budget
although total military expendi-
tures will increase, as will
that portion for the nuclear
force.
Labor unrest is again ex-
pected to trouble the govern-
ment this fall. Demands for in-
creased wages, particularly in
the nationalized enterprises,
were not satisfied last spring,
and legislation curtailing the
right to strike aroused deep re-
sentment in union ranks when it
was passed in July. Free union
leaders have recently been more
militant in their attitude, and
if they flout the new law while
government prestige is at stake
on the wage-price issue, con-
siderable difficulty may be ex-
pected. Farm pressure groups
which reportedly feel govern-
ment measures to modernize the
food distribution system do not
go far enough are also likely to
protest.
Some of the measures in-
cluded in the anti-inflationary
program will require ratification
by Parliament, which reconvenes
in regular fall session on 1
October. Although the Gaullist
majority is sufficient to assure
ultimate passage, Gaullist dep-
uties demonstrated their concern
in the last parliamentary ses-
sion over having to support with-
out modification unpopular meas-
ures which damaged their polit-
ical futures. Premier Pompidou
has made a special effort in
this case to keep Gaullist dep-
uties informed of government
policy.
De Gaulle will use his Sep-
tember tour--his twentieth since
taking office--to call for na-
tional unity in support of the
sound economy program. Some farm
groups have already urged a boy-
cott of the visit, however, and
the opposition will continue to
denounce his pleas for belt-tight-
ening at a time when expenditures
on the nuclear force are rising.
If, as has been widely rumored,
De Gaulle seeks re-election prior
to the expiration of his present
term at the end of 1965, he may
be counting on the government
program to hold down inflation
during the electoral period. The
government has made clear it ex-
pects results from its present
program, but is prepared to take
more vigorous steps if inflation
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low SECRET
Finland: President Kekkonen
has made i tle progress toward re-
solving the government crisis which
developed on 30 August when an in-
tracabinet dispute over economic
policy forced the resignation of
Prime Minister Karjalainen's Ag-
rarian-led coalition. Kekkonen and
party leaders are currently engaged
in canvassing prospects for a new
coalition,but an early solution re-
mains unlikely because of long-stand-
ing disagreements and tension between
the Agrarians and their former cabi-
net partners. Faced with this dead-
lock, Kekkonen may be compelled to re-
sort to the expedient of an Agrarian 25X1
minority government,or failing that,a
cabinet of nonpolitical experts.
SECRET
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SLGREl' ?.
Western Hemisphere
THREATS TO REGIME OF DOMINICAN PRESIDENT BOSCH
The growing political loyalty from military and police
isolation of Dominican Presi- leaders, whose support is crucial
dent Juan Bosch appears to be to his remaining in office. Some
increasing chances of his support of "constitutional gov-
ouster, with extreme leftist ernment" and fear of the alter-
elements the possible long- natives to Bosch--such as would-
range beneficiaries. be strong man Antonio Imbert--
have deterred military leaders
so far. On 15 and 16 September,
they moved quickly and efficiently
to counter a rumored coup attempt
--which failed to occur. There
is genuine fear of unrestricted
Communist activities--the mili-
tary's principal complaint
against Bosch--but this is, in
some cases, a "straw man" raised
by military leaders who want to
deflect public attention from
their misuse of government funds
and materiel. Bosch's political
weakness precludes a strong
stand against corruption or po-
litical pressure involving the
The survival of the Bosch armed forces, however.
regime is increasingly threatened
by the President's inability
to bring about a rapid economic Bosch's announced strategy
and social "revolution" and by of pre-empting the extreme left's
a political atmosphere charged political ground through rapid
with a mixture of opposition socio-economic reform has been
opportunism and genuine concern unsuccessful to date. Meanwhile,
about domestic Communism. Bosch his refusal to act against Com-
has wasted much energy on petty munist political maneuvers has
political debates and has refused fostered conditions favorable
to delegate significant authority. to extreme leftist gains among
His government lacks administra- disaffected PRD members and
tors and technicians, and inef- other "revolutionary" Dominicans.
ficiency in the government-run
sector of the sugar industry is
clouding the originally bright Unless Bosch makes at least
economic outlook. Also, the temporary peace with his power-
PRD-dominated Congress has shown ful foes and moves forward more
a disturbing propensity for pro- vigorously toward meaningful
ducing ominous-sounding legisla- reform, his regime may become
tion guaranteed to antagonize a casualty and the extreme
influential sectors of the nation. left the inheritors of much
The President is especially
handicapped by a lack of personal
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,%W SECRET
The abortive sergeants' up-
rising in Brasilia last week has
had strong repercussions. The
danger of a general strike ap-
parently has abated somewhat, but
isolated strikes are in prospect,
and the Communist-dominated Gen-
eral Workers Command (CGT) is
still in a "state of readiness"
for a possible nationwide walkout.
War Minister Jair Ribeiro has pre-
pared. a decree declaring a state
of siege--which would amount to a
form of martial law--and will pre-
sent the decree to Congress if
the CGT attempts such a strike.
More than 500 enlisted air
force and navy personnel partici-
pated in the 12 September revolt,
ostensibly in protest against a
Supreme Court decision which in
effect prohibits noncommissioned
officers from holding seats in
Congress. The decision immediately
affects three sergeants elected to
the Chamber of Deputies last
October.
The radical left has defended
the uprising, and evidence has be-
come public linking the rebels with
several congressmen associated with
the extreme leftist Leonel
Brizola's National Parliamentary
Front and also with the Communist-
dominated National Students Union.
Some Brazilian Army leaders
are disturbed over the way the
government has been trying to soft-
pedal the significance of the
sergeants' uprising.
the Brazil-
ian Army c ie o s a and other
officers feel that the revolt was
Western Hemisphere
a direct result of the govern-
ment's efforts to "play off" the
leftist sergeants against the of-
ficers. The three armed forces
ministers reportedly have made
strong representations to President
Goulart about the need to halt the
breakdown in discipline caused by
the administration's encouragenLent
of political activity by noncom-
missioned officers.
There is continuing concern,
particularly within the military,
over the danger that "political
strikes" may increase.
War Minister Ribeiro has
taken a strong position against
Communist labor leaders. P
Ribeiro
also has urged Goulart to deal
firmly with the CGT and has assured
him of the full support of the
armed. forces in any action he might
take to prevent further outbreaks.
ftibeiro's prominent role during
the past two weeks suggests that
he is beginning to exert a
strong influence on administra-
tion policies regarding extrem-
ist activities.
On balance, the uprising
appears to have undermined Presi-
dent Goulart's authority to
some extent, and he may face
increased pressure from irate
military leaders for strong anti-
extremist measures.
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*Awl 116W
President Belaunde quaffing Indian "chicha'during recent trip
to Peruvian highlands
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- SECRET
PERUVIAN INDIANS AGAIN "OCCUPYING" PRIVATE LANDS
Many family groups of
Andean Indians, apparently with
Communist assistance and prob-
ably at Communist instigation,
have resumed their movement
from their mountain villages
to privately owned agricultural
land in the central valley of
Peru. Some of the land they
have recently occupied is the
property of the US-owned Cerro
de Pasco Company, whose large
landholdings have been tres-
passed many times before.
The Indians--estimated
to total about three million in
the affected areas--have for
decades attempted to increase
their meager landholdings by
settling on adjacent haciendas.
Formerly, they were usually
quite docile and moved off
when told to do so by police
or troops. In the past year,
however, the Indian communities
have been subjected to con-
siderable Communist agitation.
As a result, there have been
several incidents of blood-
shed since June 1962 because
of the resistance on the part
of the Indians to the author-
ities sent to remove them.
Since the new movement began
in August, however, the au-
thorities have made practical-
ly no effort to eject the
squatters.
The 54-day-old govern-
ment of President Belaunde is
finding the Indian incursions
particularly embarrassing at
a time when it is trying to
push an agrarian reform bill
through a lukewarm congress,
where the opposition has an
overwhelming majority. The
Western Hemisphere
government has already allo-
cated 211,000 acres of public
land to its reform program,
a move its opponents charge
is unconstitutional. This
allocation is insignificant
when compared with the size of
the problem, however, and the
bill under debate is to pro-
vide indemnification to pri-
vate owners for parcels of
land to be doled out in the
future.
Belaunde, accompanied
by half his cabinet, trav-
eled to some of the disputed
areas on 11 September to
discuss his program with
landholders and to appeal to
the Indians to desist from
further incursions. Although
greeted with enthusiasm and
listened to with customary
courtesy by the Indians, the
delegation seems to have had
little success in convincing
either side that patience is
a virtue that will be reward-
ed with agrarian reform.
At the moment, there
seems to be a good chance that
the agrarian reform bill will
indeed eventually become
law, probably after a long
debate in congress. Mean-
while, the government's fail-
ure to use force to expel
squatters undoubtedly will
encourage other Indians to
follow suit. The demonstrated
ability of the Communists to
exploit the situation adds
to the possibility of even-
tual bloodshed, particularly if
the landowners take forceful meas-
ures on their own to drive the
Indians away.
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SECRET
Western Hemisphere
Argentina: President-elect
Illia, whose government will be
inaugurated on 12 October, is
encountering increasing pressure
against his moderate approach to
the emotional issues of petro-
leum exploitation and foreign
investment.
Communist and nationalist
elements are intensifying a
propaganda campaign aimed at
forcing Illia's People's Radi-
cal Party (UCRP) to keep its
campaign pledge to annul Argen-
tina's petroleum contracts with
US firms and to cancel the In-
vestment Guaranty Agreement (IGA)
with the US Government. Among
the nationalists are hard-core
Peronists and.Christian Democrats,
as well as some members of the
UCRP, which has been in an op-
position status since 1930.
The campaign is aimed at
hardening the UCRP position and
probably at hastening govern-
ment action--which is precisely
what Illia wants to avoid. The
campaigners portray the oil con-
tracts as fraudulent and the
IGA as a derogation of Argentine
sovereignty.
Illia has indicated that
he prefers a careful study of
the petroleum problem and de-
tailed conversations with the
oil companies, with a view to
reaching future working arrange-
ments, before he takes any ac-
tion to annul the contracts--
at least symbolically. The im-
pact of the extremist pressure,
however, is reflected in declines
in the stock market and in the
peso exchan e rate. 25X1
Uruguay: Four Soviet party
officials have arrived in Mon-
tevideo to attend the Uruguayan
Communist Party's (PCU) cele-
bration of its 43rd anniversary.
the date of the celebration
has been postponed from 21 Sep-
tember to 5 October, which
would allow time for such a
meeting.
The Soviet officials are
ideological and propaganda
experts. They include V. P.
Stepanov, the chief editor of
the official party journal,
Kommunist, and P. A. Rodionov,
chief editor of the party's
gitator.
orionov,
ternational
tral Com-
hmenev,
tended the
PCU congress last year.
propaganda journal,
The other two are V.
deputy head of the I
Department of the Ce
mittee, and V. E. Ti
a "journalist" who a
The Sino-So-
vie dispute has caused the for-
mation of several small pro-
Chinese factions among the Uru-
guayan Communists.
SECRET
20 Sept 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
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SECRET
Approved For Release 2008/07/09: CIA-RDP79-00927AO04200030001-4