CURRENT INTELLIGENCE REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79S01060A000100280001-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 21, 2016
• Sequence Number: 1
• Content Type: CIAPER

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VOL. II No. 1
2 January 1952
Copy No.
73
OSD review completed
CURRENT INTELLIGENCE REVIEW
DOCUMENTNO
NO CHANGI; IN CLASS,
n DECI_ASSIF ED
CLASS. CHANGED TO:
N
EXT REVIEW DATE:
AUT : HR 70-2
State Dept. review
completed
DATII~s'
REVlEWER:
Office of Current Intelligence
CENTRAL INTELLIGENCE AGENCY
TOP SECRET
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THE SOVIET WORLD . . . ? ? < < Page 4
ANALYSIS OF THE SITUATION IN IRAN . . . . . . . . . . . . . . . Page 6
Prime Minister Mossadeq's continuation in office indicates
no change-in those policies which have led Iran to the brink of
economic, and financial. collapse. There is little hope,"under
present conditions; that oil revenues, will be restored or that
,an appreciable change in Iran's economic status can be achieved.
The opposition is unorganized and the Shah appears afraid to act
decisively.
LIBYAN INDEPENDENCE GIVES IMPETUS TO NATIONALISM IN FRENCH
NORTH AFRICA . . . . . . . . . . . . . . . . . . . . . . . . Page 8
Libya's achievement of independence has encouraged nation-
alist hopes for sovereign rights in French North Africa, Al-
though French determination to maintain control has helped to
prevent a strong united movement, the nationalists will intensify
their agitation to obtain international support for self-government.
THE PRESENT STATUS OF THE GERMAN CONTRACT . . . . . . . .. . . . Page 10
Basic agreement has been reached on the contract which is
to govern the relationship between West Germany and the Allied
powers, but many details must yet be worked out before the 0-n-
-[German parliamentary
ratification of the contractual arrangements'seems assured.
CHINESE NATIONALIST POLITICAL DEPARTMENT IMPEDES US EFFORTS TO
REORGANIZE ARMED FORCES . . . . - . . . . . . . . . . . . . . . . Page 12
The activities of the Political Department of the Chinese
Nationalist Ministry of National Defense are seriously impeding
US efforts to reorganize the Nationalist Armed Forces. Recently,
however, some modifications have been made in the program of that
Department in an attempt to assure continued American support for
the Nationalist Government.
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SPECIAL ARTICLE. CURRENT SOVIET POLICY TOWARD JAPAN . . . . . . Page JA
Since the San Francisco Conference., Moscow has apparently
adopted a.policy designed to neutralize Japan as a potential
threat to the Soviet Union. A secondary objective of the
Kremlin is to create a trade pattern which will obtain some
benefits from Japanese industry for the Soviet Orbit in the
Far East. Soviet plans also call for a militant Japanese
Communist Party program.
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Soviet propaganda has recently characterized the guerrilla struggles
in Indochina, Burma, Malaya, the Philippines and Indonesia as examples
of "just wars." In a theoretical discussion carried-by Red Star, members
of the Soviet armed forces were warned against "bourgeois pacifism" in
a manner reminiscent of a similar article in Red Fleet two years ago
which pointed out that Bolsheviks would not necessarily be opposed to all
wars.
In the Soviet lexicon, "just wars" are divided into three cate-
gories: revolutionary wars, wars of national liberation, and "the sacred
war in defense of the first Socialist state in the world." The war of
national liberation differs from the revolutionary war in that it pro-
vid@s for the sort of assistance North Korea is receiving from the USSR
and China, and the aid afforded the Viet Minh by Communist China.
The Red Star article apparently has the purpose of further delineat-
ing the dialectical line between "aggressive" military moves of the
West and "liberative" military actions of the Communists.
ssa is ac on with a security setup in the
USSR, at least in the Central Asian area, had already been indicated
by high-level personnel shifts in October and November resulting in the
replacement of both the Kazakh and Uzbek MGB Ministers.
These shifts were preceded by reports of "widespread" peasant re-
volts in Kazakhstan last August, which were considered exaggerated at
the time. In December, however, there was a shakeup in the political
apparatus governing that area. It is possible, therefore, that a
deterioration of the security situation in Kazakhstan, and perhaps else-
where in Central Asia, resulted in dismissals on an even higher level.
Further evidence of the stresses and strains on the Soviet trans-
portation system is noted in some recent developments. The new Soviet
trade agreement with Finland provides that Finland supply foodstuffs
and other commodities directly to the city of Leningrad. This highly
unusual arrangement will relieve overburdened Soviet rail transport
facilities of the necessity of bringing perishable foods over longer
hauls from within the USSR to Leningrad, and also obviates the necessity
of tying up scarce refrigerator cars.
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Deficiencies in rail operations, possibly in vital links serving
the Trans-Siberian Railway, were indicated by sharp criticisms directed
at the USSR Minister of Rail Transport and the Chairman of the Rail Trade
Union Central Committee, during a recent conference in Moscow. Veiled
references were made to accidents on the Gorky and Ufa sectors of the
railroad, and it was apparent that responsible officials had recently
been either actually tried in court or penalized.
The comparatively prompt release of the four US fliers by Hungary
following US agreement to pay their fines, and the fact that the fliers
were finally tried only on the charge of intentional border. violation.
are in distinct contrast to the violent public accusations by Vyshinsky
in the UN and Hungarian propaganda that the fliers were engaged in an
espionage mission. These developments suggest that. the Communists felt
they had gained the maximum initial propaganda value from the case and,
anticipating a strong US reaction such as economic reprisals should the
matter drag on much longer, desired to prevent an irreparable worsening
of US-Hungarian relations. Since the fliers' release, Orbit propaganda
has pointed to the payment of the fine as proof that the fliers were
guilty of the Hungarian charges.
Because of the increasing amount of money in circulation in Czecho-
slovakia, there is the possibility that a currency reform may take place
there in the near future. The new currency is reportedly being printed
in Hungary where a number of printers have been confined to their plants
since 19 December.
In Poland, the recently announced charter for shipbuilders, which
provides a large number of special economic benefits and premiums for
workers in this industry, suggests that the Soviet bloc realizes the
growing difficulty'in obtaining ships elsewhere and the fact that it
will have to depend increasingly upon the Polish merchant marine.
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ANALYSIS OF THE SITUATION IN IRAN
Prime Minister Mossadegts actions since taking. office indicate that he
will continue those policies which have helped create the present rift
between Iran and the Western powers. Since he is expected to remain in
office following the current elections, this would mean further economic and
political deterioration in Iran and a general weakening of the Western posi-
tion theree This in turn would lead ultimately to a disintegration of
central authority and pave the way for a Communist coup* ?
Mossadegrs policies have driven Iran to the brink of financial and
economic collapse. British economic restrictions and loss of the oil revenues
have left the government with financial resources sufficientfbr only a few
more months. Mossadeq may be able to delay full financial breakdown with
such stopgap measures as foreign aid or debasement of the currency, There
appears, however,, little chance on the basis of recent Iranian statements
that the oil dispute will be settled and oil revenues restored.
Moreover, Mossadeq has insisted that he will not sign the agreement
called for under the Mutual Security Act,, signature of which is necessary
if Iran is to receive either economic or military aid from the US as
provided for by that Act. Mossadeq has stated that if wformal signature
is required, the Iranian Parliament will have to approve, something which
it is unlikely to do in its present mood.
The pressure'of economic necessity may already have induced Mossadeq
to bargain with the Soviet bloc. Through barter agreements, trade missions
and the possible purchase of oil, the USSR will have the opportunity of
increasing its influence in Iran.
Mossadeges insistence on civil liberties has already greatly facilitated
increased leftist influence and activity inside Iran. In view of the prob-
able success of the reported plan of Communists and pro-Communists to run
disguised candidates for Parliament under other labels, the next Parliament
may be expected to contain a tow such men. Unless M"ossadeq radically re-
verses his attitude, he will resist their expulsion.
Opposition to Mossadeq is unorganized. The Shah,, pivot of any opposi-
tion attempt to replace Mossadeq with a more conservative prime minister,
appears to be torn between his fear that Mossadeq's policies will prove
disastrous for Iran and his long-standing distrust of the leading opposition
candidate.
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The army is at present considered loyal to the Shah and capable of
supporting the military rule which would be necessary. if the Shah were to
While financial difficulties are endemic to Iran and complaints normal
in any army, there is the risk that an enlargement of these conditions
within the Iranian army will seriously reduce its capability of supporting
the central government. Mossadeq's known bias against the army is an ad-
ditional factor making for its deteriorations
A key factor in the situation is the Shah's unwillingness to assume
the responsibility for instituting a new government by force. In recent
days he has appeared not only impressed by Moseadeq's success in ousting
the Anglo-Iranian Oil Company, but paralyzed by the-fear that an attempt
to overthrow Mossadeq might react against the monarchy and result in its
removal. The present trend, if continued, may result in a steady lessen-
ing of the Shah's influence to a point where decisive action on his part
would not only be improbable but impossible.
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LIBYAN INDEPENDENCE GIVES IMPETUS TO NATIONALISM IN FRENCH NORTH AFRICA
United Nations' sponsorship of Libyan independence has had a strong
influence on nationalism in Tunisia, Morocco, and Algeria. By .ts close
and consistent interest in Libyan affairs, the United Nations h4s given
North African nationalists hope that independence may be achieved by peaceful
means. Although outwardly French North Africa has shown few signs of
interest in Libyan independence, nationalist leaders, particularly in
Tunisia, are acutely conscious that a more backward area has quickly
achieved the goal for which they have struggled for decades.
French determination to maintain control of these countries has placed
serious obstacles in the way of a strong and united nationalist'movement.
The French have also adroitly emphasized racial and religious animosities,
have alienated leaders from their followings by successfully appealing to
their venality, and have attempted to diminish the parties' pregtige by
charging that nationalist leaders are under Communist domination.
In order to still the increasingly vocal nationalism of Tunisia, the
French reorganized the Tunisian administration with nationalist participation
in mid-1950. There were no real concessions, however, to the demand for
greater self-government, and Tunisian nationalists are now seeking means
of securing UN intervention.
The encouragement given Moroccan nationalism by Libyan independence
has thus far been more than counterbalanced by French efforts to quash
it. Police and military forces have been employed, and nationalist leaders
have been imprisoned or their movements restricted. After directappepls
to the United Nations proved fruitless, Moroccan nationalists prevailed
upon Arab League states to present their charges that France is violating
human rights in Morocco, Postponement last month of the UN discussion
has somewhat alleviated French-Moroccan tension, but the threat of eveptual
inquiry challenges the French to accelerate and liberalize proposed
administrative changes. It also compels the Moroccan nationali9tsto
strengthen their organization and draw up a workable program which could
command consideration.
Although Algeria is politically an integral part of metropolitan
France and the Algerians have,been fairly well assimilated in the l20
years of French rule, a strong desire for independence exists. The
French have employed somewhat more subtle means to destroy nationalism
in Algeria than in the protectorates, but elections have been rigged
order to eliminate the few nationalist representatives who could have
been elected.
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For its own part, nationalism has not yet eliminated intraparty strife
and jealousy, and national unity has not been achieved in any area.
Resentment against French rule is strong and widespread, however,'and the
framework for collaboration among the various nationalist groups,has boen
constructed. Growing political awareness, continued agitation, and.
constant appeals for international, attention may be expected.
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THE PRESENT STATUS OF THE GERMAN CONTRACT
The Allied powers and the West German Government reached a basic
agreement on 22 November regarding the contract which is to mark the
end of the occupation and establish a new relationship. Many con-
flicting interests still need to be reconciled and many of the main
points of the General Agreement remain to be worked out in detail.
Five annexed conventions are being negotiated to settle these difficult
Allied-German problems.
The preamble of the proposed General Agreement stipulates that
the Federal Republic must join the Schuman Plan and the European Defense
Community either before or at the time the agreement is promulgated.
The agreement grants the Republic full authority over its foreign and
domestic affairs, except for the rights the Allies now enjoy in respect
to (a) Berlin, (b) the security and status of their troops in Germany,
and (c) problems relating to Germany as a whole, including unification
and the peace treaty.
The Allies are empowered to declare a state of emergency if their
forces are endangered, but they have agreed to consult with the Federal
Republic before doing so, and they will permit the Germans to appeal
to the North Atlantic Council. A mixed arbitrational tribunal will
act on all disputes arising under the agreement save those involving
the three reserved rights and the emergency declaration power.
Concurrence has not as yet been reached on any of the conventions,
but little difficulty is anticipated in at least three of the five.
On the first of these, which relates to the arbitrational tribunal,
only minor procedural differences remain. The second convention
exempts Allied troops and their dependents from certain German taxes
and from criminal and, in special instances, civil court jurisdiction.
The third convention is a catchall transferring responsibility for
certain occupation programs to the Germans.
The Germans will probably agree to enact legislation preserving
occupation laws in these fields, and to provide information concerning
the execution of these programs as the Allies may direct.
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The fourth convention, which deals with German security controls
rovides the most difficult problem at present.
~ France would like to
impose stringent restrictions on German arms production, particularly
of heavy weapons, but the US would like to make fuller use of Germany's
productive capacity. A compromise solution may permit Germany to
manufacture some types of heavy weapons under the direction of the
European Defense Communit
The last convention treats of German logistical support to the
Allied forces.
Allied negotiators
may ask the Germans to accept the general principles upon which this
allotment will be based, leaving the specific sum for further discussion.
The proposed contract may be unacceptable under the present West
German constitution.
' Although agreement may be reached in January, the contract and its
conventions cannot be ratified until France and Italy, at least, have
joined the EDC. Adenauer will then present Parliament with the contract,
its conventions, and the proposal for membership in the EDC in a package
bill. Observers believe that this bill will be passed, but that subse-
quent bills to carry out the terms of the contract may face sterner
tests, including constitutional court scrutiny.
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CHINESE NATIONALIST POLITICAL DEPARTMENT IMPEDES US
EFFORTS TO REORGANIZE ARMED FORCES
The Chinese Nationalist Armed Forces have not been considered an effect-
ive combat organization for some years and, since the Nationalist retreat
to Formosa in 1949, have been regarded by most American military observers
as incapable of defending that island from Communist attack. In the spring
of 1951 the US Military Assistance and Advisory Group was dispatched to
Formosa for the purpose of reorganizing the Nationalist Armed Forces. One
of the most serious impediments encountered by the MAAG has been the program
of the Political Department of the Ministry of National Defense, headed by
Major General Chiang Ching-kuo, the Moscow-trained elder son of Chiang
Kai-shek.
The ostensible functions of the Political Department within the Armed
Forces include psychological warfare, political indoctrination, and other
"morale-building" activities. Actually, however, the political officers
devote themselves primarily to counterintelligence activities, seeking to
detect both Communist agents and other personnel in the Armed Forces who
are not completely loyal to Chiang Kai-shek. The latter include both
patriotic Chinese who oppose Communism but reject the present Kuomintang
leadership, and those who have no strong political convictions.
To implement this program, political officers are assigned to accompany
all units and to report on the activities of the unit commanders. American
observers have estimated that there are between 330,000 and 70,000 political
officers in all on Formosa, while the political officers assigned to the
Army alone reportedly number 15,000.
Aside from detection of Communist agents, the other activities of the
Political Department are considered by US observers to be detrimental to
the morale and efficient operation of the Armed Forces. More specifically,
the system is said to nullify the normal chain of command,'and make coordi-
nated operations impossible. It is reported that 15 to 25 percent of
training time in the Armed Forces is devoted to political indoctrination
alone.
Realizing that the continued existence of the Nationalist regime depends
on US support, the Nationalist Government has recently made minor modifica-
tions in the program of the Political Department. General Chiang Ching-kuo
has requested that an American adviser be appointed to the Political Depart-
ment and that US observers go into the field with the political officers to
observe their methods of operation. Time spent in political indoctrination
will be out to 10 percent to allow more time to be devoted to military sub-
jects. To assure further American support, the Nationalists have consented
to prepare the military sections of the budget in consultation with the MAAG
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and to allow subsequent review by the. Economic Stabilization Board, on which
US officials are represented as observers.
Despite these concessions, the political officer system as now consti-
tuted will impair the capabilities of the Nationalist Armed Forces as long
as Chiang Kai-shek considers the existence of this-system essential to his
continuation in powers
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SPECIAL ARTICLE
CURRENT SOVIET POLICY TOWARD JAPAN
After its diplomatic defeat at San Francisco, the USSR has apparent-
ly adopted a policy designed to neutralize Japan as a potential threat
to the Soviet Union. A secondary objective of the Kremlin is to create
a trade pattern which will obtain some benefits from Japanese industry
for the Soviet Orbit in the Far East. Soviet plans also call for a
militant Japanese Communist Party program ,devoted to obstructionism and
the weakening of a US-Japanese alliance.
In the Soviet view, it is improbable that the West can create an
effective military alliance in the Far East without Japan, any more than
the West can hope to create an effective military alliance in Europe
without Germany.
As a means of fostering Japanese good will, the USSR recently, for
the first time since the end of the war, made several direct and con-
ciliatory overtures to prominent Japanese. Two Soviet Mission representa-
tives called on Diet members on 2 November to propose a resumption of
Soviet-Japanese trade; there was also a conference with Japanese business-
men on 26 November for the same purpose; and top Japanese officials
were invited to the Mission's October Revolution celebration on 7 Novem-
ber.
Perhaps to implement this initiative, the USSR recalled a fairly
large number of Soviet Mission military personnel about 1 December and
replaced them with a smaller group of economic specialists. Moscow
has requested a model copy of Japan?s trade agreements.and has shown
an interest in Japanese trade procedures.
This action may be an indication that the Soviet Government plans
to retain representatives in Japan under the guise of a trade office.
When the peace treaty comes into force, possibly in the spring of 1952,
the USSR will still be technically at war with Japan and therefore will
have no clear legal basis for continued operation of its present Mission
in Tokyo. As early as August 1950, however, Soviet officials made
several surveys of the former Russian Consulate on Hokkaido and offered
bids for its reconstruction, and in August 1951 Moscow applied for the
acquisition of property rights for "diplomatic purposes."
A trade office, aside from serving as a convenient observation
post and liaison center with the Japanese Communist Party, would have
the obvious advantage of offering Soviet Orbit trade inducements
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The Soviet Govern-
i5 ~ k, '
fore the development of any substantial Chinese-Japanese trade. From
the Kremlin's viewpoint an early development of such relations between
the two most important Far Eastern nations might tend to enhance Commu-
nist China's position as a power in that area while reducing Peiping's
dependence on the USSR.
It seems unlikely that the prewar pattern of economic relations
between the Soviet Union and Japan can be restored, particularly in the
matter of fisheries. Since the Soviet Union's occupation of all of
Sakhalin as well as the Kurile Islands, Moscow has undertaken to de-
velop its Far Eastern fishing resources, and, with the added considera-
tions of frontier security, may be reluctant to renew prewar fishing
agreements unless Japan is willing to make political or economic con-
cessions.
While its foreign policy is thus devoted to securing the neutraliza-
tion of Japan and exploiting the Japanese economy for the Soviet Orbit,
the USSR has also endorsed a militant Japanese Communist Party program
designed to obstruct recovery, foster nationalism, and weaken Japan's
alliance with the US.
rvda's endorsement on 24 November crf the Japanese Communist pro-
gram adopted in August apparently gave the green light for the abandonment
of the more moderate Communist tactics of recent years and the revival
of the militant policy advocated in the early days of the occupation.
Recently, Radio Moscow increased its charges that Japanese military forces
are assuming greater importance in US plans for "world aggression" and
again constitute a threat to all nations in the Far East.
commerc~i ?~l relations with Japan be-
ci vv re-establish
The Japanese Communists are not considered capable of establishing
The
an effective armed organization without substantial foreign aid. Increased
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outside Communist assistance for subversive activities in Japan, particu-
th
coming.
larly in sensitive spots such as Hokkaido, may soon be for
There is no
reliable evidence that the USSR intends an ear y invasi on of Japan; the
new Soviet policy would rather indicate a long-term effort to gain major
Soviet influence by otter means.
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