WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A004700100001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 30
• Document Creation Date: December 21, 2016
• Document Release Date: July 28, 2008
• Sequence Number: 1
• Publication Date: January 15, 1965
• Content Type: SUMMARY

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CON T E N T S
(Information as of 1200 EST, 14 January 1965)
THE COMMUNIST WORLD Page
SOVIET--AMERICAN RELATIONS: A TEMPERATURE READING 1
The present generally cool Soviet attitude toward the
US, capped by Moscow's negative reaction to President
Johnson's State of the Union message, appears to be
prompted largely by the tactical considerations of the
Sino-Soviet dispute and by the desire of the new Soviet
leaders to strike a balanced and orthodox posture in
their relations with the new US administration so long
as key East-West issues are in a state of flux.
SOVIET ATTITUDE TOWARD THE INDOCHINA CONFLICT 3
The USSR's concern over the possibility of escalation
in the Indochina conflict has caused an upsurge in its
propaganda attention to the subject and has prompted
attempts to stimulate initiatives by other governments
to arrange negotiations.
SINO-SOVIET RESPONSE TO THE INDONESIAN UN WALKOUT 4
Peiping, although initially taken by surprise, now is
giving strong propaganda support. Moscow does not ap-
prove Sukarno's action but is reluctant to apply any
pressure on him.
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ASIA-AFRICA Page
POLITICAL CRISIS EASES IN SOUTH VIETNAM
The civilian government and the military have announced
a detente in their struggle for authority. The problem
of the armed forces' relations with the government re-
mains unsettled, however, and the Buddhist hierarchy is
pursuing its campaign against Premier Huong.
YEMEN:I REPUBLICAN REGIME FURTHER WEAKENED
The new government formed in the wake of the mass res-
ignation of republican ministers is led by the same
pro-Egyptian figures who previously aroused sharp in-
ternal opposition. Cairo has recently allowed the
republicans' military position to deteriorate.
MILITARY ACTIVITY SLACKENS IN THE CONGO 9
Tshombe meanwhile has canceled his
trip to russe s.
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1
DEVELOPMENTS ON EEC TIES WITH OUTSIDE COUNTRIES
The EEC is making some progress in dealing with requests
for special trade or associative ties. Arrangements
with Austria, Nigeria, and the Maghreb states (Tunisia,
Morocco, and Algeria) are among the priority items now
being discussed.
STALEMATE ON NATO NUCLEAR FORCE PROPOSALS
There now seems to be little prospect for an early con-
ference to discuss the MLF and related proposals, and
interested countries doubt the usefulness of bilateral
talks Britain,is conducting on its Atlantic Nuclear
Force scheme.
11
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EUROPE (continued)
Page
FRENCH CONVERTING DOLLAR HOLDINGS INTO GOLD
12
France's decision last week to convert $150 million of
its dollar holdings into gold was dictated partly by eco
-
nomic and financial considerations but also reflects
De Gaulle's hostility to "US economic hegemony."
WEST GERMANY PONDERS NEXT UNIFICATION MOVE
13
Bonn seems anxious to push ah
sue despite the failure of th
rocate German enthusiasm for
regime in Moscow.
ead on the unification is-
e Western Allies to recip-
a prompt bid to the new
DE GAULLE AND ERHARD TO MEET NEXT WEEK IN PARIS
Their talks could produce some new initiative on Euro-
pean political unity but not on another key agenda item,
German reunification. Erhard hopes in any case for a
renewal of French-German rapport that could benefit his
party in this year's national elections.
GREEK PRIME MINISTER QUELLS POLITICAL MUTINY
Papandreou has forced left-wing dissidents within his
Center Union back into line, but maneuvering around the
issue of future party leadership can be expected to con-
tinue.
WESTERN HEMISPHERE
BOLIVIAN JUNTA LEADER PREPARES TO BE ELECTED PRESIDENT 16
General Barrientos takes for granted his candidacy for
the presidency in elections on 30 May. He is seeking
the backing of centrist parties and trying also to at-
I tract extremist ones. The
regards Barrientos'
presidency as inevitable.
BRAZILIAN MILITARY QUARREL CAUSES MINOR CRISIS
The resignation of two air ministers within four weeks
has highlighted the dispute as to whether the air force
or the navy should control embarked naval aviation ac-
tivities. The issue does not appear serious enough,
however, to affect the loyalty of either service.
VENEZUELAN GOVERNMENT PLACATES LEFTISTS
President Leoni is pursuing a "national understanding"
with the extreme left. He has paroled or pardoned some
250 terrorists and commuted the sentences of others to
exile. The Communists and their allies now are expect-
ed, to confine themselves to legal opposition activities.
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WESTERN HEMISPHERE (continued) Page
UNCERTAINTY SURROUNDS GUATEMALA'S PRESIDENTIAL ELECTION 19
The inability of the country's military rulers to agree
on a single candidate may be feeding the ambitions of
Chief of Government Peralta, whom the politicians sus-
pect of deliberately fanning rivalries to weaken all
opposition to himself.
MAJOR. DISORDERS AVERTED IN PANAMA
President Robles' position has been strengthened by the
failure of student and labor leaders to incite large-
scale incidents this week, but the extremists will be
seeking new opportunities to make trouble for the US.
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The present generally cool
Soviet attitude toward the US
--capped by Moscow's negative
reaction to President Johnson's
State of the Union message--a.p-
pea.rs to be prompted largely
by the tactical considerations
of the Sino-Soviet dispute and
by the desire of the new Soviet
leaders to strike a balanced
and orthodox posture in their
relations with the new US a.d-
ministration so long as key
East-West issues are in a state
of flux.
The new regime seems to
be trea.ding a. middle course,
avoiding both open confrontation
and serious discussions of sub-
stantive issues. Its main in-
tention appears to be to keep
open lines of contact and ex-
change with the US and to con-
tinue efforts to reach a.gree-
ments of a. strictly bilateral
nature, such as a. civil air
agreement.
In his.initia.l interview
with Ambassador Kohler, Soviet
Premier Kosygin stressed the
USSR's desire to continue efforts
to improve relations. In a
calculated step to prove this
point, Soviet officials promptly
moved to conclude negotiations
on two long-standing bilateral
questions. A desalination a.c-
cord was signed on 18 November,
and the special communications
facility for the US Embassy was
approved a. week later.
The new Soviet leaders
also put on a red-carpet recep-
tion for a group of US business-
men in late November and stressed
their desire for the "normaliza-
tion" of US-Soviet trade rela-
tions. While serious obstacles
in this sphere remain, Soviet
concern with the vital problems
of long-term investment prior-
ities and access to technology
and equipment from advanced in-
dustrial countries will prompt
Moscow to promote a. favorable
political atmosphere.
The December discussions
between Foreign Minister Gromyko
and Secretary Rusk underscored
Moscow's reluctance to under-
take any major foreign policy
initiatives until the new lead-
ers have consolidated their do-
mestic position and assessed
the views and policies of the
new US administration.
The increased sharpness of
Soviet propa.ga.nda, has been high-
lighted by authoritative commen-
taries on 6 January in Izvestia,
and Pra.vda.,which lashed out at
"ccems to special rights"
throughout the world and con-
demned US policies and actions
in Southeast Asia, Africa, and
Latin America. This line.rein-
forces the view that Soviet
leaders are intent on building
up a "good record" on these
issues in order to forestall
Chinese allegations of Soviet
cooperation with American
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"imperialists," especially in
the period prior to the proposed
1 March meeting to prepare for
a. new world Communist conference.
This verbal harshness has
been offset to some extent by
statements of Soviet officials
in Washington. They tried to
play down suggestions that Mos-
cow's reaction to the President's
4 January speech was "unusually
harsh," and voiced optimism
about the early opening of new
consulates, conclusion of a.
civil air agreement, and expan-
sion of trade.
These officials, however,
reflected Moscow's increasing
sensitivity on the question of
Soviet relations with Eastern
Europe. Referring to the Presi-
dent's speech, Soviet Ambassa-
dor Dobrynin remarked that the
USSR was "disturbed" that ref-
erences to improving US rela-
tions with Eastern Europe al-
ways took the form of "separat-
ing these countries from the
Soviet Union." This line sug-
gests that the new regime in
Moscow realizes that the chances
for instability and shifts in
policy have increased in East-
ern Europe in the wake of Khru-
shchev's ouster.
The Communist World
The USSR has also moved
to discount prospects for an
early US-Soviet summit meeting.
Soviet officials expressed sur-
prise at what they claimed were
US press interpretations of the
President's 4 January remarks
as an "invitation" to Soviet
leaders. They suggested that
the new leaders could not "rush
off" to Washington so soon after
coming to power. Moscow is
probably deferring high-level
contacts until the US has com-
pleted its review of such cru-
cial issues as MLF and the In-
dochina. conflict and the Presi-
dent has made his visits to
Western Europe and Latin America..
In any event, Premier Kosygin
and other Soviet leaders already
have made commitments on meet-
ings with foreign statesmen
which extend into midsummer.
Over the longer term, the
Soviet leaders probably have a.
real interest in direct contacts
with President Johnson. They
are likely, however, to propose
that the President visit the
USSR first to repay Khrushchev's
trip to the US in 1959. They
would regard a. presidential
visit as a. valuable a.cknowledg-
.ment of the authority and legit-
imacy of the ost-Khrushchev
regime.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
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The USSR's increased con-
cern over the possibility of
escalation in the Indochina
conflict has caused an upsurge
in its propaganda and diplomatic
attention to the subject since
the end of November.
This effort coincided with
Ambassador Taylor's consulta-
tions in Washington in late
November and early December.
in this situation, the
Russians have followed a familiar
pattern of combining vague
warnings of possible Soviet
intervention in an expanded
conflict with attempts to stim-
ulate initiatives by other
governments to arrange nego-
tiations. Moscow clearly hopes
that the mere existence of an
international conference or
some other kind of formal talks
would reduce the risks of es-
calation.
Recent Soviet approaches
to the French have reflected
Moscow's judgment that Laos
provides the only possible
opening for negotiations at
this point.
There are indications that
the Soviets and Poles may be
developing a scheme to force
the reconvening of the 1962
conference on Laos next summer.
In a talk with the US ambassador
on 12 January, the Polish member
of the International Control
Commission in Laos noted that
the Geneva protocol required
the co-chairmen--the UK and
USSR--to report to members of
the conference by 23 July on
the question of terminating
the ICC. He advocated early
termination and said that the
co-chairmen's report would
provide a logical occasion for
reconvening the conference.
The Soviets may calculate
that a deadlock between the
co-chairmen over the ICC rec-
ommendations might increase
pressure for a conference. They
may also hope to exploit exist-
ing misgivings among the Indians
and Canadians about their con-
tinued role in the ICC.
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SINO-SOVIET RESPONSE TO THE INDONESIAN UN WALKOUT
The Chinese Communists,
eager to increase their influ-
ence in Indonesia and to encour-
age further anti-Western moves
there, have vigorously endorsed
Suka.rno's decision to bolt the
UN. The Soviets do not approve
the action, but the need to pro-
tect their political stake has
apparently forstalled heavy
pressure on Indonesia..
The Sukarno ultimatum on
31 December threatening to leave
the UN if Malaysia were seated
in the Security Council appears
to have taken the Chinese by
surprise. Although Peiping has
been encouraging the Indonesians
to press the "confrontation"
with Malaysia, Sukarno's latest
maneuver probably went further
than the Chinese expected.
Peiping's first public
response was a broadcast on 3
Ja.nuary--under a D.ja.ka.rta date-
line--reporting that Chairman
Aidit of the Indonesian Commu-
nist Party had given his full
support to the decision. The
first Chinese commentary, an
editorial in People's Daily
three days la Ter, came only
after it had become evident
that the Indonesians did not
intend to back off. The current
Chinese propaganda drive did
not get rolling until 9 January,
two days after Sukarno's public
announcement that Indonesia had
withdrawn from the UN.
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Page 4
Since then it has developed
into a major campaign designed
to stiffen Djakarta's resolve
and generate additional problems
for the US. The Chinese have
launched an attack of unprece-
dented violence on the UN as a.
"tool of US imperialism" and
called for fundamental reorgani-
zation of the international body.
Their formal statements and
press coverage of events pander
to Sukarno's vanity by quoting
extensively from his speeches
and lauding his "bold revolution-
ary action."
Despite the violence of
Peiping's propaganda., the Chi-
nese are displaying notable cau-
tion in their treatment of the
fight to "crush" Ma.laysia--which
lies at the root of Djakarta's
decision to pull out of the UN.
Although the Chinese Government
statement of 10 January charges
that Ma.la.ysia is a "dagger thrust
in the heart of Southeast Asia,"
Peiping has carefully avoided
any new public commitment of
support for eliminating the "im-
perialist" menace. Chen Yi
referred to Malaysia as a
"springboard for aggression"
in a speech on 11 January, but
he stressed Chinese confidence
that the "united Indonesian
people" would triumph in the
end. Liu Shao-chi, in his
remarks to an Indonesian friend-
ship delegation the following
day, applauded Djakarta's "self-
reliance" but did not go beyond
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a. declaration that Peiping
would The honored if it could
make "some contributions" to
the cause.
This caution suggests that
while :Peiping is trying to
strengthen its ties with Dja-
karta-looking ahead to closer
cooperation at the Afro-Asian
conference next spring--and at-
tempting to increase the strain
on Indonesian relations with
the Soviet Union, the Chinese
wish to avoid any major military
escalation in the "confrontation"
at this time and prefer to keep
it as a running sore which adds
to general tension in the area..
Sukarno's sudden move has
placed the USSR in a. difficult
position and the Soviets have
indicated their displeasure to
the Indonesians. In contrast
to Peiping's strong endorsement
of Sukarno's action, Moscow has
merely reported it. This treat-
ment is calculated not only to
underline expressions of disap-
proval by the Soviet ambassador
in Djakarta. and the Soviet UN
delegation; it also reflects
Moscow's desire to a.void being
isolated from the vast majority
of Afro-Asian governments which
have criticized Sukarno's a.c-
tion.
Despite their obvious dis-
pleasure, the Soviets have no
choice but to protect their
great investment in Indonesia..
(Soviet propaganda.
continues to assert Soviet sup-
port for the Indonesian people
and to draw attention to the
modern arms supplied by the
USSR.
Over the longer term, how-
ever, the Soviets probably are
genuinely concerned that Sukar-
no's impulsive action will give
Peiping and the pro-Chinese In-
donesian Communist Party (PKI)
greater leverage in Djakarta.
In recent months, the Soviets
have made clear to Sukarno their
dissatisfaction with the PKI's
growing influence over Indonesian
policy. They must fear a strug-
gle for power between the PKI
and the Indonesian armed forces
when Sukarno's failing health
removes him from the scene--a.
prospect which would confront
the USSR with very awkward and
dangerous decisions.
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15 Jan 65 CURRENT INTELLIGENCE WEEKLY REVIEW
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The sense of political
crisis in Saigon has eased as
a result of a joint communiqud
issued on 9 January by the gov-
ernment and military, announc-
ing a detente in their conflict
of authority. Premier Huong
also moved to clear the atmos-
phere in relations with the US
by issuing a statement on 12
January pointing out that the
US had not sought to impose any
particular formula on Vietnamese
authorities for settling the
recent crisis, and declaring
that :relations remain cordial
as in the past.
.Both the government and
the military, however, are aware
that their detente has not really
settled the issue of the rela-
tionship between the armed
forces and civilian authorities.
General Khanh has left no doubt
that he and the "young Turk"
generals consider themselves
the real power in the country,
and intend to exert political
influence in the future. The
government, by focusing interest
on early National Assembly elec-
tions, is attempting to draw
attention away from an armed
forces plan to exercise a watch-
dog function. Huong has appar-
ently succeeded in getting the
military to consider filling
some posts in a pending cabinet
reshuffle, a switch in the
earlier military attitude of re-
maining apart from the govern-
ment.
The detente has already
provoked an angry reaction from
the Buddhist hierarchy, which
remains determined to force
Huong's removal as premier. The
Buddhists have taken no open
action this week in Saigon, but
have obviously encouraged a new
rash of student agitation against
Huong in several northern cities.
Some of the "young Turk" gen-
erals have shown some sympathy
for the position of the Bud-
dhists and students. The gen-
erals, including Khanh, may
harbor ideas of using Buddhist
support as a base for their
political ambitions. Buddhist
leaders have shown some interest
in the armed forces, watch-dog
proposal, which would set up.a
military-civilian committee to
exert influence on the govern-
ment.
Although no large-scale
military actions were reported
during the past week, there
are indications that the large
Viet Cong force which conducted
sustained operations around
Binh Gia in Phuoc Tuy Province
is still in the general area.
The mortar shelling of 14 dis-
trict capitals south of Saigon
during the past week, and a
marked increase in harassing ac-
tions in the Capital Military
District around Saigon, indi-
cate that the Communists are
stepping up a campaign to reap
political and psychological
benefits by demonstrating their
military strength in densely
populated areas.
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Egypt has apparently re-
jected the opportunity offered
by the mass resignation last
month of the Yemeni republican
cabinet to change its relation-
ship with the republicans. The
new Yemeni Government which was
formed last week is dominated
by the familiar pro-Egyptian
elements which have previously
aroused sharp internal opposi-
tion. At the same time, Egypt
has allowed the republican mili-
tary position in northern Yemen
to disintegrate.
The new government, led
once more by President Sallal,
has former vice president Hasan
al-Amri as premier as well as
several other pro-Egyptian minis-
ters. Several of the "rebel"
republican ministers have been
given portfolios, but it is not
clear whether they have in fact
accepted them. A threat of trial
for treason has led many former
cabinet ministers to leave the
capital and seek the safety of
their tribes.
The recent Arab prime minis-
ter's conference made no state-
ment on the failure of the Yemeni
cease-fire after Saudi Arabia
assured the conference that bi-
lateral discussions on a settle-
ment were still in progress.
SE ORE T
15 Jan 65 CURRENT INTELLIGENCE WEEKLY SUMMARY
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Little military activity
occurred last week in the Congo,
reports that sizable groups of
rebels now are receiving train-
ing in neighboring countries.
During the lull in the
fighting, a, barge convoy--
stalled for over a, month at
Bumba, 260 miles downriver--
fina.lly reached Sta.nleyville
with food and other supplies.
On 10 January, the Stanleyville
garrison fought off several
small rebel raids.
Government forces at Pa.ulis
and Bunia--near the Uga.nda.n
border--have been reinforced
with troops and equipment for a.
major offensive which is planned
against the Congolese border
towns of Aba and Aru. These
towns are the principal entry
points for arms to the rebels.
In the east, rebels con-
tinue to harass government
troops in Uvira.. South of
Uvira, the rebels attacked gov-
ernment detachments 75 miles
below Fizi. The rebel force
in this area.--probably supplied
by arms carried across Lake
Ta.nganyika.--has failed so far
to drive government troops from
their positions.
Arms shipments to the
rebels continue.
No foreign "volunteers"
have yet been seen with the in-
surgents, however.
If southern Sudanese dissi-
dents step up harassment a.ctivi-
ties, Khartoum might press 25X1
Egypt and Algeria, to find an-
other route for their shipments.
The capabilities of t e sou ern
Sudanese are uncertain, but in
any event the deteriorating
Sudanese internal situation
could well complicate matters
in the northeastern Congo bor-
der area.
Belgium's plans to assist
the Congo remain stalled, pending
the outcome of talks between
Congolese and Belgian officials.
25X1
cause Spaak received former Con-
golese remier Adoula..
At stake in these meetings are
unresolved financial questions
from pre-independence days, as
well as the Congolese decree
of last November expropriating
mineral rights held by Belgian
mining companies. This week,
Premier Tshombd canceled his
meeting with Belgia.n Foreign
Minister Spaa.k, ostensibly be-
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The EEC is making some
progress in dealing with re-
quests for special trade or
associative ties. Arrangements
with Austria, Nigeria, and the
Maghreb states (Tunisia, Morocco,
and Algeria) are among the pri-
ority items now being discussed.
Although no early decision
on Austria's three-year-old re-
quest for Common Market ties
appears in sight, recent com-
munity discussions may have
narrowed the issue to a choice
between a customs-union and a
free-trade-area type of associ-
ation. The possibility of a
simple preferential trade agree-
ment remains open, but only
Italy still inclines toward such
a solution.
West Germany and France
favor the tighter integration
implied in a customs-union link,
but France's position may even-
tually depend on whether it
wishes to risk stirring up strong
Soviet opposition. The USSR
still declares that Austrian
participation in the EEC would
violate Vienna's neutrality
commitment. The Netherlands
strongly advocates Austria's
retention of ties with the Eu-
ropean Free Trade Area (EFTA)
and thus favors according it
only a free-trade-area type of
association. The Dutch argue
that if dual membership were
allowed Austria within a cus-
toms-union formula, the insti-
tutional nature of the EEC
could be jeopardized.
The EEC Council of Ministers
will try again this month to
reach agreement on the objectives
of negotiations with Nigeria, one
third of whose trade is with the
EEC. Nigeria wants the same
treatment for its exports the
EEC gives the 18 associated Af-
rican states, but is willing not
to press for the aid, financial,
and other advantages which the
EEC now grants these former col-
onies--mainly of France. Last
month Lagos sent a delegation
to several of these states to
convince them that Nigerian as-
sociation with the EEC would not
harm their interests, an endeavor
which could undercut the French
argument that acceptance of Ni-
geria would adversely affect
Paris' African protegds.
Paris, moreover, insists
that any eventual agreement con-
tain preferences in the Nigerian
market for EEC exports. Such a
condition--thus far opposed in
the Council by the other five
EEC members--would strain Ni-
geria's Commonwealth ties, hurt
both UK and US exports, and al-
most certainly force the US and
the UK openly to oppose. Thus,
the onus for blocking Nigeria's
ties to the EEC would be removed
from France. On the other hand,
US acceptance of a Nigerian offer
of similar preferences could then
be used to discredit the general
US position of opposition to pref-
erential arrangements--favored
by France--outside the framework
of established trade blocs.
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During the first quarter of
1965 the EEC Council is expected
to approve a negotiating mandate
defining the scope of an even-
tual EEC-Maghreb relationship.
In its most recent exploratory
talks with the EEC Commission,
Algeria apparently showed greater
eagerness than before in defining
its position and thus has prob-
ably facilitated a uniform EEC
approach to all three North Af-
rican states. Algeria's inter-
est in coming to terms with the
EEC may have been partially mo-
tivated by reminders from the
French and the Commission that
its present privileged position
with respect to the Community
cannot be continued indefinitely.
If formal negotiations open,
however, the demands of the
Maghreb states for favorable
treatment of their citrus fruit
exports will be a delicate polit-
ical problem for the EEC. Such
preferences would conflict with
existing trade commitments within
the Six as well as with the in-
terests of the Mediterranean
countries--such as Greece and
Israel--with which the Common 25X1
Market has either association
agreements or s ecial trade rela-
tions.
STALEMATE ON NATO NUCLEAR FORCE PROPOSALS
There now seems to be little
prospect of an early conference
to discuss the Atlantic Nuclear
Force (ANF), multilateral nu-
clear force (MLF), and related
proposals. The idea of such a
meeting was tentatively accepted
by five NATO members--the UK,
the US, Italy, West Germany, and
the Netherlands--during the NATO
ministerial meeting in Paris in
December. The UK, interested
in a broader forum, subsequently
proposed, however, that there be
instead a full-dress NATO Coun-
cil meeting. No agreement on
the British suggestion has been
forthcoming, largely because of
prevailing reluctance to risk a
clash with France--almost a cer-
tainty if nuclear force plans
are discussed in the NATO frame-
work.
gotiations on the ANF which now
are taking place under Britain's
leadership. They feel that, in
the absence of a US initiative,
no one in Europe will go to bat
for the MLF, while bilateral
talks between the UK and non-
nuclear powers can really decide
nothing. Under the circumstances,
the nonnuclear powers might turn
to France for nuclear leadership.
The visit of Prime Minister
Wilson to Bonn on 22 January
for further talks on the ANF
with Chancellor Erhard is not
expected to overcome West German
objections to Britain's propo-
sals. Something closer to a
common position between London 25X1
and Bonn would appear to be pre-
requisite to any further progress
on a NATO nuclear force
Interested countries doubt
the usefulness of bilateral ne-
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FRENCH HOLDINGS IN GOLD AND CONVERTIBLE CURRENCIES
(MILLIONS OF US DOLLARS)
Convertible
Currencies
(mainly US dollars)
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FRENCH CONVERTING DOLLAR HOLDINGS INTO GOLD
France's decision last
week to convert $150 million
of its dollar holdings into
gold was dictated only partly
by economic and financial con-
siderations. The absence of
any pressing need at this time
for gold purchases of this mag-
nitude suggests that the deci-
sion was motivated by De Gaulle's
hostility to "US economic hege-
mony" and his concern to make
Europe independent of foreign
influence in all spheres.
The French nevertheless
have stressed the economic and
financial aspects of the move.
They insist that, in view of
the continuing US balance-of-
payments strain and the recent
sterling crisis, they must pro-
tect themselves against the pos-
sible devaluation of the dollar.
Under these circumstances they
profess the need to maintain at
least 75 percent of their re-
serves in gold.
It, is expected that Paris
will continue to keep its dol-
lar holdings above the billion
mark, which would provide for a
working balance and also cover
certain dollar debts to the US
and Canada. The expected large
inflow of US dollars in 1965,
however, could lead to French
gold purchases of some $800-900
million.
Recently the issue of
French gold conversions has been
explicitly linked to the ques-
tion of US investments in Eu-
rope. Paris is unofficially
taking the line that France's
holding of large dollar balances
has helped to finance the take-
over by American companies of
significant sectors of the French
economy. The French probably
hope their demand for gold will
force the US to reassess its abil-
ity to sustain further capital
outflows to finance investments
abroad.
France probably also hopes
that increased conversions,
which point up the vulnerability
of the dollar, will promote sup-
port for the international cur-
rency reforms which the French
proposed in September. Their
proposals have been criticized
because they reduce rather than
expand international liquidity,
but there is widespread sympa-
thy with reform measures which
would diminish the key role of
the dollar and the pound in in-
ternational finance.
French Finance Minister Gis-
card d'Estaing, in the first pub-
lic statement by any French of-
ficial on the conversion, in-
sisted that the French acted for
"technical" reasons but acknowl-
edged that the move had "po-
litical effects." The French
have made clear, however, that
they are interested in lessen-
ing US economic prestige and in-
fluence in Europe, and economic
differences between the two
countries are expected to be a
major issue in US-French rela-
tions in 1965.
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WEST GERMANY PONDERS NEXT UNIFICATION MOVE
West German Government
leaders seem anxious to push
ahead on the unification issue
despite the failure of the
Western Allies to reciprocate
Bonn's enthusiasm for a prompt
bid to the new regime in Moscow.
At the same time, the Erhard
administration apparently wishes
to avoid antagonizing Germany's
closest friends.
Meeting in West Berlin on
13 January, the cabinet decided
to continue to press for the
formation of a four-power coun-
cil, made up of the US, the UK,
France;, and the USSR, with power
to determine how to continue
efforts toward the reunification
of Germany. Bonn first proposed
such a procedural initiative at
the mid-December NATO Council
meeting in Paris, but failed at
that time to get public endorse-
ment for it from the Western
Allies.
Following a cabinet meeting
on 5 January, an official spokes-
man also noted that Bonn's
August 1963 plan was still on
the table. This proposal called
for creation of a body of the
wartime "big four" under whose
auspices East and West German
commissions would prepare the
ground for unification. The
spokesman shied away from call-
ing his government's position
an initiative, preferring to
term it "an active policy."
Chancellor Erhard is
expected to make known his
wish to get moving on unification
when he meets with De Gaulle on
19 and 20 January and with Wilson
on 22 and 23 January. Erhard
told a party rally on 12 January
that Bonn would constantly ex-
plore with its allies the possi-
bility for progress, but warned
against expectations of immediate
results.
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The De Gaulle
-
talks
in Paris on
19
uary
are expected
to
such
complex topics
Erhard
and 20 Jan-
deal with
as European
political unity, German reuni-
fication, and Atlantic defense.
The lack of progress re-
cently on the reunification is-
sue and the MLF make Erhard all
the more anxious for political
gains in some other sphere--
such as a renewal of French-Ger-
man rapport--which could benefit
his party in the national elec-
tions this year. He is expected
therefore to try to play down
such contentious issues as West-
ern defense strategy, although
he may feel obliged to bring
the subject up while in Paris.
De Gaulle in this case can be
expected to male clear his com-
mitment to the French nuclear
program and the importance he
attaches to his goal of making
Europeans eventually responsi-
ble for their own defense.
On German unification also,
Erhard may be disappointed. De
Gaulle probably will support a
united Germany in principle but
will argue that his goal of an
eventual pan-European structure
is the only realistic approach
to the long-term solution of
Germany's, and Europe's,prob-
lems.
De Gaulle is likely to
stress the prospects for evolu-
tion in Eastern Europe and point
to France's increasing cultural
and economic exchanges with the
area as paving the way for an
East-West European reconcilia-
tion. In the past:, he has as-
serted that an autonomous West-
ern Europe would contribute to
undermining Soviet hegemony in
Eastern Europe. In his speech
in Strasbourg last November, he
cited the Eastern Europeans'
recovery of national self-deter-
mination as "the only means that
can permit contemplating the
rapprochement of all Europe."
The other key agenda item
for the Erhard - De Gaulle talks
--European political unity--
would seem to offer greater op-
portunities for movement, such
as the scheduling of further
talks among the six EEC nations.
Erhard expects De Gaulle to sup-
port a German initiative in
this regard. The development
of a close entente with Bonn re-
mains the foundation of DeGaulle's
design for Western Europe.
Moreover, in De Gaulle's
view, the settlement last month
of the EEC grain price issue
and current German dissatisfac-
tion with the US attitude toward
the MLF and reunification have
improved the prospects for con-
sidering European political,
economic, and defense questions
along Gaullist lines. During
his talks with Erhard, he is
likely to develop further his
arguments for European "inde-
pendence" and intra-European
cooperation. Thus he may place
heavy emphasis on the adverse
effect of US direct investment
on key sectors of the European
economy.
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In particular, De Gaulle will
use the occasion to press his view
that the crucial question is not
whether, but how, Western Europe
will become politically organized.
He will argue that any proposals
providing for a, supranational or-
ganization and Atlantic integration
could lead to a Europe of US-domin-
ated satellites which would in the
long run prove less acceptable to
both Western and Eastern Europeans
than his scheme for an autonomous
confederation.
The Greek political scene
has been threatened with new
squalls recently. Prime Minister
Papandreou has moved rapidly and
effectively, however, to end the
rebellion which broke out within
the ranks of his Center Union
(EK) following a, cabinet reshuf-
fle on 6 January.
Some 13 EK deputies in Par-
liament had announced their inten-
tion to vote henceforth as inde-
pendents, although remaining in
the party.. These deputies were
supporters of left-of-center EK
deputy Savva.s Pa.papolitis, who
had not been included among the
new cabinet members. While the
defections would have left Papan-
dreou with the support of 158 of
the 300 parliamentary deputies,
there was some danger that other
dissident elements within the EK
might follow the lead of the reb-
els, thus threatening the govern-
ment's majority.
Papandreou therefore publicly
warned that unless the 13 defec-
tors immediately repudiated their
statement, he would resign. This
would have forced new elections,
and the rebels were also informed
that they would be read out of
the EK, making their re-election
highly unlikely. Pa.papolitis and
his followers capitulated.
The cabinet reshuffle, involv-
ing four ministries, was largely
routine, with the exception of the
appointment of Elias Tsirimokos as
minister of interior. Tsirimokos
has a long history of collaboration
with the extreme left, although re-
cent reports have indicated that
he may have moved slightly to the
right. Along with Papapolitis,
Tsirimokos was leader of a. left-of-
center dissident group of about 30
EK deputies who had been demanding
greater representation in the gov-
ernment.
Tsirimokos' appointment and
Pa.pa.politis' humiliating defeat
should temporarily mute criticism
of the prime minister from the
left-of-center members of the EK.
Some of the EK's right wing, how-
ever, probably share the consterna-
tion expressed by the conservative
opposition National Radical Union
at the appointment of Tsirimokos.
The police and gendarmerie were re-
moved from the Interior Ministry's
control last year, but the minis-
try continues to exercise author-
ity over provincial a.dministra-
tion.
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Western Hemisphere
Bolivian Junta President
Rene Barrientos, during one of
his weekly trips to the prov-
inces, declared that he would
"consent" to be a. compromise
presidential candidate in the
elections scheduled for 30 May.
His recent casual remark to
Ambassador Henderson--"I do not
know what I should do about a
vice--presidential candidate"--
reveals that he takes his can-
didacy for granted.
Meanwhile, earlier indica.-
tions that Barrientos would seek
political support from centrist
groups, as well as his own Pop-
ular Christian Movement (MPC)
which was launched on 1 Ja.nuary,
are being borne out. He claims
to have the support of Herna.n
Sites' reorganized National Rev-
olutionary Movement. He also
seems to be interested in
recruiting the Authentic Revolu-
tionary Party, headed by Walter
Guevara Arze.
Extremist parties--the
rightist Bolivian Socialist
Falange (FSB) and Jua.n Lechin's
National Leftist Revolutionary
Party (PRIN)--apparently will
be excluded from the Barrientos
bandwagon. Campaign tactics,
however, include efforts to
undercut these parties and to
draw off some of their member-
ship. In such a maneuver last
week, Barr ientos heatedly attacked
pro-Communist labor leader Lechin
during a, press conference but
refrained from criticizing the
PRIN.
Barrientos continues to be-
lieve that he can trust or use
a number of persons with Commu-
nist backgrounds. Antonio Ar-
gueda.s
has become one
of his top campaign managers
and was instrumental in organ-
izing the MPC. Moreover, Ireneo
Pimentel, a. mine leader who has
been known as pro-Communist,
has received substantial payments
from Barrientos to assure his
cooperation in splitting mine
unions which support Lechin.
Pimentel and Lechin were both
involved in the December 1963
crisis when miners held Ameri-
cans hostage.
General Ba.rrientos appears
to be growing more self-assured
and seems confident that he can
compete successfully with the
professional politicians. Appar-
ently he is working well with
the commander of the armed
forces. General Ovando
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Western Hemisphere
The 6 January resignation
of Brigadier Marcio Souza e Mello
as air minister--the second of-
ficer to leave this post within
a four-week period--has again
highlighted the sharp rivalry
between Brazil's air force and
navy over which service is to
control embarked naval aviation
activities. Interservice ten-
sions over this issue are cur-
rently high and probably will
subside only gradually, despite
the 11 January assumption of the
air minister's post by Air Mar-
shal Eduardo Gomes, a widely re-
spected. retired air force leader
and former presidential candi-
date.
The latest flareup in the
old controversy was touched off
on 5 December, when air force
personnel shot at and damaged a
navy helicopter. A presidential
review of the incident led to
unofficial reports that Castello
Branco had decided to give the
navy a larger role in the avia-
tion field, including the right
to operate aircraft from the
decks of Brazil's only aircraft
carrier. As the result of such
reports, the then air minister,
Brigadier Nelson Wanderley, and
his chief of staff resigned on
13 December. Mello was sworn in
as the new air minister two days
later.
Although there are differ-
ing accounts of the reasons for
Mello's resignation, US Embassy
officers in Brazil regard the
move as a tactical maneuver to
gain leverage for the air force
as the presidential decision on
control of naval aviation ap-
proaches. President Castello
Branco had planned earlier to
resolve the issue by the turn
of the year, but the emotional-
ism of the components involved
evidently made a suspension of
such plans advisable.
resident told the
in a ecem er
versa on that he regarded
the embarked-aviation issue as
the thorniest problem facing him.
He said that although its reso-
lution one way or the other would
not endanger his government's
stability, he was reluctant to
stir up the deep resentment of
either service at a time when he
needed united military support.
One prominent air force of-
ficer observed on 10 January that
underlying the current outburst
of emotions on this, problem is
concern over the administration's
plans to press for the creation
of a single, unified Ministry of
Defense. Many air force and na-
val officers are believed to op-
pose such a move since they fear
that the army--far and away the
most powerful of Brazil's armed
forces--would dominate the new
ministry. On neither this prob-
lem nor the embarked-aviation
issue, however, do divisions
within the military appear suf- 25X1
ficiently serious to affect either
the basic loyalty of all three
services to the government or
their support of the Castello
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Western Hemisphere
President Leoni of Vene-
zuela. is doggedly pursuing his
course toward "nationa.l under-
standing" by relaxing pressure
on the Communists and their al-
lies. Since 22 December, Leoni
has paroled or pardoned about
250 extremists jailed during the
terrorist outbreak designed to
prevent his election in December
1963. He has also commuted a.
few other prison sentences to
exile at the prisoners' request.
If the leftists now keep
their part of wha.t appears to
be a. bargain, the Communist Party
of Venezuela (PCV) will publicly
withdraw its support from ter-
rorist and guerrilla activities.
The "soft-liners" of the Move-
ment of the Revolutionary Left
(MIR) will also adopt a. peace-
ful attitude, leaving only hard-
line extremists of the PCV and
the MIR in the field as guer-
rillas or in the streets as ter-
rorists.
The political secretary of
Leoni's Democratic Action (AD)
party said on 5 January that a
series of mea.sures leading to
"national understanding" will
be initiated when the PCV and
the MIR agree to confine them-
selves to legal activities. The
nature of the anticipated "na-
tional understanding" has not
been defined by Leoni or any
other government spokesmen, but
the catch phrase presumably re-
fers to the inclusion of the PCV
and the MIR in some sort of non-
violent "loyal opposition."
Urban terrorism in 1964
was at a much lower level than
in 1963. The most recent major
act was the kidnaping of US Air
Force Colonel Smolen in Caracas
in October. However, sporadic
activity by roving bands of guer-
rillas in the countryside ha.s
increased somewhat. Pipelines
of US oil companies have been
sa.botaged, as have other iso-
lated installations. Guerrilla
raids on small villages have
caused several deaths. The Vene-
zuelan Army, with air force sup-
port, has maintained steady pres-
sure on the guerrillas, encir-
cling the infested areas and
generally preventing major out-
breaks. The security forces,
however, have not been fully
committed, apparently in prefer-
ence to a, strategy of restraint
and attrition rather than oblit-
eration.
On 7 January a. ra.diobroad-
ca.st reported that the governor
of the state of Falcon, in west-
ern Venezuela., had been told by
the central government to "wel-
come all guerrillas who wished
to return to a normal life, and
to resolve their cases in the
most convenient fashion as long
as they put down their arms and
adapt themselves to the consti-
tutional system."
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Western Hemisphere
UNCERTAINTY SURROUNDS GUATEMALA'S PRESIDENTIAL ELECTION
The inability of Guate-
mala'=s military rulers to unite
behind a single presidential
nominee may be feeding ambi-
tions of Chief of Government
Peralta to remain in power. In
fact, some politicians are grow-
ing increasingly suspicious of
Peralta's motives as the prom-
ised time for elections grows
near with continued indecision
on a candidate; they believe
that Peralta may be deliberately
fanning rivalries to weaken all
opposition to himself.
The government has an-
nounced that presidential elec-
tions are to follow "shortly"
after the scheduled promulgation
of a new constitution on 15
March 1965. As several top mil-
itary men have sought the offi-
cial candidacy and as profes-
sional politicians have grown
unhappier over their apparent
exclusion, rivalries have be-
come manifold and bitter. The
parties which have provided
Pera.lta's political support have
expressed willingness to support
Chief of Staff Miguel Angel Pon-
ciano. Ponciano, however, has
engaged in a power struggle with
Peralta and is completely objec-
tionable to him.
Peralta's position has been
equivocal and provocative. He
has continually professed to
favor Minister of Finance Jorge
Lucas Caballeros in the face of
strong opposition from political
and military elements.
~ Sus-
picion is mounting that Peralta
is in fact playing off the con-
tending forces against each other
so that he himself will emerge as
the only one who can promise sta-
bility. There is growing evidence
that he is intent on seeing the
programs begun under his adminis-
tration carried out, and that if
he finds no candidate he can con-
trol, he may attempt to prolong
his own tenure. Over the past few
months Peralta has made progress
in neutralizing his prime adver-
sary, Ponciano, by shifts in key
military posts designed to weaken
Ponciano's position.
An open bid to stay in power
would be almost certain to alien-
ate those parties which have been
giving Peralta support and would
probably crystallize the latent
dissent of those parties excluded
from the coalition. Such a de-
velopment could provide the mor-
tar for unity among the politi-
cal outs who have been kept weak
by their internal squabbling.
The inevitable plotting and ten-
sion that would accompany Per-
alta's loss of political support
would provide a useful ambient
for Guatemala's persistent and
well-organized guerrillas and
terrorists.
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Western Hemisphere
The Panamanian National
Guard's firm but restrained
handling of repeated provoca-
tions by Communist-led students
prevented major disorders dur-
ing the first anniversary of
the riots of 9-12
As a result
to face new challenges from dis-
gruntled politicians and from
Communists still titillated by
the prospects open to them to
cause trouble for the US in Pan-
ama. Extremist student and la-
January
1964.
bor leaders now will be seeking
new opportunities to restore the
prestige they lost by failing
President
Ro-
to incite any large-scale inci-
bles' position has been strength-
ened. However he will continue
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