WEEKLY INTELLIGENCE SUMMARY NO. 81

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000300060017-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 9, 2016
• Document Release Date: January 29, 1999
• Sequence Number: 17
• Publication Date: September 27, 1949
• Content Type: SUMMARY

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OFFICE OF FORTS AND ESTIMATES
`TRANSPORTATION GROUP
WdWeekly Intelligence Summary no. 81
SECTION I. SMUIARY OF TRENDS AND DEVELOPMENTS
27 September 1949
The determination of the Bolivian Government to complete uneconomic
and costly railroad and highway projects is aggravating the financial
instability of a nation which has failed to meet payrients on the major
portion of its external debts for more than a decade. (Item No. 1, B)
The USSR and its Nuropear, Satellites have displayed the same
tactics in the recently concluded negotiations which resulted in a
world convention on road traffic that they have consistently employed
in other UN activities at the technical economic level. Though con-.
tinuing to cooperate generally with the Economic Commission for
Europe, the USSR did not send a delegation to the conference. On the
other hand, Polish. Czechoslovak and Bulgarian delegations attended
the conference and signed the convention, . (Item No,. 2, B)
The US Department of State has authorized the US Legation.,
Buoharest, to make representations to the Rumanian Government with
respect to an apparent plan to force the American Export Lines to use
as its Constafiza agent SOVRO?,MTRANSPORTj a joint Soviet.Rtmanian enter.
prise. Security considerations are probably responsible for the
Soviet determination that US vessels loading in Communist ports in
the Black Sea shall no longer use agents of -their o, choice. This is
an extension of a policy which has long applied to shipping operations
in Soviet ports, but rune counter to accepted international shipping
practice. (Item No, 5, B)
A showdown on the effectiveness of the Nationalist "blockade" of
Shanghai may occur in ? connection with the scheduled departure from this
port of two US-flag vessels in deftenoe of Nationalist threats.
(Item No. 4, A)
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The USSR may be expected to View with suspicion the impending re-
or or US aviation interests in Iran and to repeat its charges of
Iranian subservience to Western imperialism. (Item No. b, B)
The recently established Joint Soviet-Bulgarian airline, TABSO,
will organize and exploit civil air comsaunioations within Bulgaria at,
well as those services formerly operated by the Bulgarian domestic
airline (B'pL) between Sofia and other Satellite capitals,
(Item No. 6, C)
The proposal that Swissair be designated as a reserve air trans.
port component of the Swiss Air Force, If approved, may serve as a
model for other nations of Western Europe. (Item No. 7, C)
The recent success of the GoveraeYat of India in obtaining
aoceptanOe by a Philippine air mission of a bilateral air agreement
containing restrictive clauses vrill strengthen India's position in
its future negotiations with the UK; (Item No, 8, B)
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SECTION II, CURRENT DEVI LMENTS
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SURFACE TRIdI.SPORTATION
I. The determination of the Bolivian Government to complete uneconomic
and costly road and big way .pro jevts is aggravating the financial
instability of a nation which. has failed to most payments on the major
portion of its external debts for more than a decade.
Currant railroad construction projects include a line from La Paz
to Beni, as well as three lines whictt will focus on the Eastern Plain
city of Santa Cruz from Cochabamba. on the Andes Highland, from Corizmba,
over, the Brazilian border, and from Yacuiba, near the Argentine border
Highway construction in progress will link Cochabamba with Santa Cruz
and Potosi with Oran in Argentina. A pipe line has already been com-
pleted, moreover, from Cemiri, 200 miles south. of Santa Cruz, westward
to Cochabamba with a bianoh to Sucre. because of its economic and
political interests in, ;the area, the Argentine Government is providing
substantial financial assistance toward the construction of the Yacuiba-
Santa Crux railway, which will-transport crude oil to Argentine r6-
fineries, and the southern .end of the Oran.-Potosi highway (as far north
as Tarija). The Bolivian Government, in return, will liquidate. its debt
by payments in natural resources from the territory which these trans-
port facilities will open up.
An example of a domestic project which is increasing Bolivia's
external debt, with little likelihood of increasing the Governaent's
revenue and its foreign exchange holdings sufficiently to service the
debt, is the Cochabsmba+'Sants Cruz highway, now under construction. The
Bolivian Cabinet oonsiders this highway to be the most important public
work under construction, anticipating that it will effect an economic
and political integration of the Eastern Plain with the Andes Highland.
By mid-1949, however, with only 216 of the total 501 kilometers
partially or entirely completed, abou4 $15 million had been spent, and
an additional $26 million will be required to complete the highway.
(The 1942 estimate of total cost was $7,661,400.) While negotiations
are underway for additional loans to complete the highway, the
Bolivian Government is continuing slow construction on the railroad
which will parallel the highway. We rail line will divert from the
hig+awr-oy much of the traffic which might provide at least partial
noonomic justification for its completion.. It appears unlikely, how
ever, that there would be enough traffic, in any event to make the high-
way profitable.
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On the other hand, the Coohabaci-ba.Sante. Cruz-Corumba railway,
when completed, will be of considerable atrategio significance, since
it will form part of a direct transcontinental railroad, linking the
Chilean parts Arica and Antofagasta with Santos" the Brazilian port
serving Sao Paulo. This routs, which will be meter gauge to Sao Paulo,
will therefore eliminate the present strategic advantage to Argentina
ace rti.ng from possession of the only railway system for transcontinental
transport requirements. From an economic standpoint, moreover, this'
route, together with the line from Santa Cruz to Argentina., will provide
Bolivia's Eastern Plain with outlets in three directions for its
petroleum, agricultural products and other resources. Bolivia's
economic bargaining position, particularly vis-a-vis Argentina, 'which
does not p rodube sufficient petroleun for its own, needs, will therefore
be strengthened to a certain extent. Despite the considerable ad-
vantages of the Bolivian development prop;rem, however, serious damage
to the country's financial stability may ensue, unless the program is
re'-examined without the bias of local political pressure to eliminate
or postpone those projects which would be loast self. ,amortising, and to
enoourage those of greater economic justification. (Confidential)
Tine USSR and its European Satellites have. m la d~ the some
tactics in the re Gently concludead negotiations 1ahich resulted in a
world convention on road traffic that they have consistently employed
in other UN activities at the technical economic level. Though con-
tinuing to cooperate generally With the Economic Coaurseission. for Europe
(ECE), the USSR did-not send e. delegation to the connferencea On the
other hand, Polish, Czechoslovak and Bulgarian delegations attended
the conference and signed the convention
The only indication of lack of cooperation on the part of the
Satellites occurred in connection with a separate protocol Which makes
provision for -eventual adherence to the convention by presently occu-
pied areas. The Polish, Czechoslovak.and Bulgarian delegations
abstained from voting on this proposal and refrained .f?rom signing .the
protocol. It seems olear that. they desired to avoid any action which
might appear to recognize the existence of the Western German Republic.
Yugoslavia, though signing the convention, reserved its position
with respect to ' than protocol. This action enabled the Yugoslav delegc-
t:i.on to evidence its lack of sol .clarity with the Satellites, while at
the same time failing to follow the course -desired by the Western
1'uropean countries with respect to the occupied areas*
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The foregoing circumstances indicate that the USSR is still
determined to participate in no international arrangements with the
West unless such cemitments bring compelling advantages to the
Soviet Union? It is willing, however, to permit its Satellites to
maintain a measure of cooperation with Western Europe, perceiving in
this action advantages in the form of possible increased trade and
sources of intelligence on the inner workings of international agree-
ments to which it is not a direct party. (Confidential)
3. The US De artuaent of State has authorized the US Legation,
Bucharest, to make represents ions to t e l#unanian Government with
respect to an apparent plan to force the American export Lines to use
as its Constanza agent SOVRC&TRANSPORT, a joint Soviet-Rumanian enter-
prise. The company's present agent is an Italian citizen named Solari,
who has long been a resident of Rumania. According to Solari, the
Rumanian Government has notified him that SOVRCMTRANSPORT is the only
authorized ship's agent in the country. Meanwhile, SOVRCI TRA SPORT
itself has directly contacted Solari relative to its assumption of the
American Export Line representation. (SOVROMMTRANSPORT was the Con-
stanza agent of the Kettlernan Hills, a US tanker which recently trans-
ported a cargo of petroleum to Dairen. See TG Weekly No. 79)
Security considerations are probably responsible for the Soviet
determination that US vessels loading in Communist ports in the Black
Sea shall no longer use agents of their own choice. This is an
extension of a policy which has long applied to shipping operations
in Soviet ports, but runs counter to accepted international shipping
practices, (Confidential)
4. A showdown on the effectiveness of the Nationalist "blockade" of
Shang ai may occur in connect on with th? scheduled departure from this
port of two US-flag vessels in defiance of Nationalist threats.
The Flying Independent and the Flying, Clipper, both Isbrandtsen
Line cargo vessels, recently entered Shanghai (see TG Weekly No. 80),
although the company had not secured clearance from the Nationalist
Government prior to arrival and the company's request for protection
of the US Navy in disregarding the "blockade" had been denied. The
Flying Independent was halted at the entrance of the Yangtze by a
Nationalist naval craft. It was permitted to proceed after a short
delay, however, on the basis of an exchange of messages in which the
Flying Independent's Master advised the naval craft that his vessel
carried mail ror the US Consulate General, Shanghai, and intended Lo
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lea^7o the port with US pasaengers. (The naval unit appears to have de-
fected to the Cexistnriniets shortly after this izso&dent, probably as a
result of mutiny, and moored in the vicinity of the two Isbr?andtsen
%ressels inside the port of Shanghai.)
A protest nr worning this incident was subsequently made to the
US Consulate in Canton by the Chinese Nationalist Foreign Office, which
alleged that the vessel had obtained Permission f'rora the Nationalist
naval craft to proceed into Shanghai by falsely claiming that the US
and Chinese Nationalist Gover mnenta had agreed to the voyage for the
purpose of evacuating US nationals. The Masters of the 1sbrandbwon
vessels vigorously deny this assertion, although they admit that their
messages to the, oonvaanding officer of. the Gbanese craft omitted any
reference to the facet that their vessels were carrying cargo for con-
signees in the Communist port. The :Foreign Office has advised the US
Consul that the Isbrandtaon vessels will be permitted to leave
Shanghai if they are carrying neither passengers nor freight. other
rise they will be subject to "appropriate action" by the Chinese Navy.
Unauthorized departure, moreover, would prejudice future olearanoes for
passenger vessels which the US might wish to send to Shanghai to evaou.
ate US nationals.
The status of the vessels has been further complicated by the
Threat of a serious incident in Connection with 127 Korean refugees,
who are threatening to board the Flying Independent. The Shanghai
representative of Isbraudtsen apparently sold reservations to this
group for passage to South Korea1 although the vessel, a cargo ship,
cannot carry this number of passengers without a waiver of existing
safety regulations from the ii Coast Guard. Since the waiver has not
been obtained, the vessel:cannot transport the refugees without vio-
lating US law. Usanwhilep however, many of the refugees, oonf ident of
evacuation, have disposed of their possessions and are destitute, If
they board the Flying Independent, they could probably not be evicted
without the use of force,whioh might be impractical in view of the
sympathies of local authorities for the refugees.
both Isbrandtsen vessels are scheduled to sail on 28 September
o. If this occurs, there Is
and plan to carry both passengers and care
some possibility that the vessels will be intercepted by. a Nationalist
naval unit. While there is little likelihood that the vessels would be
sunk, the Nationalists might conceivably escort them to a Nationalist-
controlled port on Taiwan or in South China, Any such action might
confront the USwith -he necesaity of either: (1) taking issue with
the Chinese Nationalists in defense of operations by US-flag vessels
which did not bear prior US approval; or (2) risking a loss of US
prestige by failing to oppose vigorously interference with US-flag
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On the other hand, if the Isbrandtaen vessels are permitted to
leave Shanghai unmolested, the Chinese Nationalists will have clearly
revealed their inability or disinclination to enforce the blockade
with respect to US-flag vessels. This weakness might well invite
further "blockade running" by the vessels of other nations, and result
in the virtual collapse of the Shanghai "blockade." (Secret)
CIVIL AVIATION
5. The USSR may be a e?tbd to view with suspicion the impending re-
vival of US aviation interests n ran and to repeat its charges of
Iranian subservience to Western imperialism. International operations
of Iranian Airways (Iranair), henceforth to be conducted jointly with
the large US irregular carrier Transocean. Air Lines, will use American-
owned and US-registered aircraft.
Transoooan will probably offect some economies from its contract
with Iranair because it has a similar commitment for international air
services with the Government of Pakistan, which involves operations
through Iran. Iranair will benefit by tha experienced supervision, in-
cluding maintenance and repair, to be provided by Transocean, and may
now recover from financial difficulties which have plagued its past
operations. (Secret)
a, The recently established joint Soviet-Bulgarian airline, TABSO,
will organize an exploit civia r coramunica ions within Bul aria, as
well as those services formerly operated by the Bulgarian domestic air-
line (BVL) between Sofia and other Satellite capitals. TABSO has
already inaugurated daily passenger and freight flights along the follow.
ing internal routes; Sofia-Plovidiv-Burgas-Varna and Sofia-Gorna-
Oryakhovi tsa-Varna. Burgas.
TABSO;presumably acquired the 3 JU-521s, 2 LI-21s (Soviet-manu-
factured DC-Sts), and I A.A.C. (French-manufactured transport, similar
to the JU-52) formerly operated by BVL. On the other hand, the
Bulgarian press reports that TAB.SO has procured new equipment described
as "the last word of the Soviet aviation industry". Although the flight
crews and ground staff formerly employed by BVL will probably be retained,
unconfirmed reports indicate that Soviet pilots will be employed on some
of TABSO'e flights. (Restricted)
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7. The proposal that Swissair be designated as a reserve air transport
component a e wis8 r Force rcCa s a. suggestion made in 1948 by the
Director of KLM, the Dutch national airline, that the aircraft and per-
sonnel of KI4 be available for immediate incorporation into an Allied
Air Transport Conunand in the event of war. The Swiss plan, therefore,
could acquire added significance if it serves as a model for similar
projects among the other nations of Western Europe,
Swissair's fleot? which comprises a total of 29 aircraft (4 DC-4's,
14 DC-3's, 4 0.47's, 4 Convaira, and 3 smaller aircraft), will be
augmented by 3 Constellations early in 19:0. Swissair's flying per-
sonnel number 164, of which 50 are pilots of Swiss nationality. These
pilots are commissioned or non-commissioned officers in the Swiss Air
Force who have been exempted from active military ,duty. The projected
command will probably consist of two squadrons, located at Sion and
Stans where existing runways are now being extended to over 6,000 feet,
(Secret)
8. The recent success of the Government of India in obtaining
acceptance by a Philippine air mission of a bilateral air agreement
containing restrictive clauses_ will strengthen. India' a position in
its future negotiations with the UK. (The UK is operating airlines
across India on a temporary pernit,but has no formal agreement.)
India, which recently incorporated similar restrictions in an air
agreement with Australia, has declared its basic policy to bes (1) an
arbitrary division of traffic and predetermination of flight frequency
with foreign airlines flying international air routes in competition
with Indian airlines; and (2) denial of "fifth freedom" traffic to
foreign airlines between India and rakistan.
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If' the Government of India decides to resist this pressure, the
may also request the renegotiation of existing bilateral agree-
ment is with th ? US, Franoe, the Neth?rl ends and kkandinavia in order
to impose restrictions on all foreign airlines transiting the,
country Defection from the present common policy by one or more of
these 'countries would place the remainder on notice that India is in
.a position to denounce its unrevised bilateral air agreements.
(confidential)
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