NATIONAL INTELLIGENCE DIGEST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00269R000300060001-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 129
• Document Creation Date: December 20, 2016
• Document Release Date: September 21, 2007
• Sequence Number: 1
• Publication Date: November 1, 1952
• Content Type: CIAPER

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tIT1tIMAL INTELLIGENCE DIGEST
..OSD REVIEW COMPLETED
10/31/03
HISTO"PIt.AL 1T""'171? 25X1
Destroy cnni; v. -i ou.naelt
Of tha I t' :rlr?1 n l 1
Name.
Date:
CENTRAL INTELLIGENCE AGENCY
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DOE review
completed.
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INTRODUCTION
INTRO-1 V d
CLASSIFICATION OF THIS DIGEST
This Digest as a whole is classified TOP SECRET and each page is so
marked at the top. Individual sections in many cases have lower
classifications, which are shown on the first page of the section. The
lower classification may be employed if the material is separated from
the Digest.
PURPOSE ANL SCOPE OF THE NATIONAL INTELLIGENCE DIGEST
This Digest has been prepared by the Central Intelligence Agency
pursuant to the direction of the President through the Executive
Secretary, National Security Council. Its immediate purpose is to pro-
vide abstracts of pertinent national and current inte' sgence (keyed to
existing papers and others now in preparation) to accompany the com-
pilation of current national security policies prepared by the National
Security Council. Accordingly, the basic chapter divisions are keyed
to'the order of NSC policies in that compilation, and particularly to the
order in Volume I thereof, containing the NSC policies specifically
directed at particular foreign areas. Thus, if desired, the material in
this Digest could be reassembled in whole or in. part to accompany
particular NSC Statements of Policy.
In addition, this Digest is intended to serve as a summary of high-
lights of national and current intelligence on all major areas and coun-
tries of the world, including both intelligence information and estimates
of probable developments and of probable Communist courses of action.
Emphasis has been placed upon nations hostile to the U.S. and upon
situations now operating or likely to operate to the detriment of U.S.
security interests. There is a relative lack of emphasis upon nations V
with which the U.S. maintains full and substantially frank relations and
upon nations and areas as to which substantially full and accurate
information is available from non-classified sources. So that each
section may be self-contained so far as possible, there is some duplica-
tion of material among the various sections. This applies particularly
to material on Communist courses of action.
Except to the extent that pu.-'Jshed National Intelligence Estimates
or Special Estimates have been quoted or abstracted, CIA assumes full /
and sole- responsibility for the contents of this Digest.
This Digest takes account of all intelligence received by CIA through
? 31 October 1952.
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TABLE OF CONTENTS
INTRO-2
ALPHABETICAL INDEX No. of Pages
2
I. ESTIMATE OF THE WORLD SITUATION THROUGH
1954 . . . . . . . . . . . . . 10
II. SOVIET BLOC . . . . . . . . . . . . . . 19
A. OVER-ALL SITUATION IN THE BLOC THROUGH MID-1953 6
B. SITUATION IN THE .USSR THROUGH MID-1953 . . . 6
C. EUROPEAN SATELLITES . . . . . . . . . . . 4?
D. COMMUNIST CHINA . . . . . . . . 3
III. FAR EAST . . . . . . . . . . . . . . 27
A. COMMUNIST CAPABILITIES AND INTENTIONS IAT ASIA
THROUGH MID-1953 .. . . . . . . . . . . 2
B. STRATEGIC RESOURCES OF THEE FAR EAST .
IV. SOUTH ASIA . . . . . . . . . . . . . . .
INTRODUCTION . . . .. . . . . . . . , . . 1
A. INDIA . . . . . . . . . . . . . . .. . 2
B. PAKISTAN . . . . . . . . . . . . . . . 2
C. KASHMIR DISPUTE . . . . . . . . . . 1
D. AFGHANISTAN . . . . . . . . . . . . . 1
E. CEYLON . . . . . . . . . . . . . . 1
V. MIDDLE EAST AND AFRICA . . . . . . 19
A. IRAN . . . . . . . . . . . . . . . . 2
B. ARAB STATES .. . . . . . . . . . . . . . 8
(Egypt and the Sudan, Syria, Lebanon, Iraq,
Jordan, and Saudi Arabia)
. . . . . . . . . . . . . .
D. TURKEY . . . . . . . . . . . . . . . . 1
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TABLE OF CONTENTS (Continued)
No. of Pages
E. MIDDLE EAST OIL . . . . . . . . . . 1
F. NORTH AFRICA . . . . . . . . . . . . . . 3
(including Libya)
G. UNION OF SOUTH AFRICA . . . . . . . .. 2
H. STRATEGIC FACILITIES AND RESOURCES IN AFRICA 1
VI. EUROPE . . . . . . . . . . . . . . . 34
A.- PROBABLE SOVIET BLOC COURSES OF ACTION IN WESTERN
EUROPE THROUGH MID-1953 . * . . . . . . . . 1 .
B. STATUS OF EUROPEAN DEFENSE . . . . 2
C. STATUS OF EUROPEAN ECONOMIC RECOVERY .
D. STATUS OF EUROPEAN INTEGRATION . . .
VII. LATIN AMERICA . . .
A. OVER-ALL SITUATION . . . . 4
B. ARGENTINA .. . . . . . . . . . 2
C. BRAZIL . . . . . . . . . . . . . . . 1
D. CHILE . . . . . . . . . . . . I
E. COLOMBIA . . . . . . . . . . . 1
F. VENEZUELA . . . . . . . . . . 1
G. GUATEMALA . . . . ... . 1
H. PANAMA . . . . . . . . . . . . . . . . 1
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Afghanistan
Africa
Albania
Arab States
Argentina
Asia (Communist Intentions and
Capabilities in)
ALPHABETICAL INDEX
25X1
25X6
25X1
25X1
Austria
Benelux Countries
Brazil
Burma
Ceylon
Chile
Colombia
China (Communist)
China (Nationalist)
Czechoslovakia
Denmark
Egypt
Europe
European Defense Community
Far East
Finland
France
German Unity Issue
Germany (East)
Greece
Guatemala
Hong Kong
Hungary
Iceland
India
Indochina
Indonesia
Iran
Iraq
Italy
Chapter or Section
IV-D
V-F, G, H
II-C, VI-T
V-B
VII-B
III-F
IV-E
VII-D
VII-E
II-D, III-A
III-E
II-C
VI-P
V-B
VI
(EDC) VI-B, D
III
VI-P
VI-F
VI--J
II-C, VI-J
VII-G
III-K
II-C
VI-Q
IV-A
III-F
III-J
V-A
V-B
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ALPHABETICAL INDEX (Cont.)
Jordan
Kashmir
Korea
Latin America (General)
Libya
Macao
Malaya
Manchuria
Middle East
Nationalist China
NATO
Nepal
North Africa
North Korea
Norway
Oil (Middle East)
Pakistan
Panama
Philippines
Poland
Portugal
Rumania
Saar
Satellites
Saudi Arabia
Siam
South Africa
South Korea
Southeast Asia
Soviet Bloc
Spain
Sweden
Switzerland
Syria
Taiwan
Thailand
Tibet
Trieste
Turkey
United States
USSR
Venezuela
Western Europe
World Situation
Yugoslavia
Chapter or Section
V-B
IV-C
III-C
VII-A
V-F
III-K
III-F
II-D, III-C
V-A, B, C, D, E
III=E
VI-D
ITT-I.
V-F
III-C
VI-P
V-E
IV-B
VII-H
III-I
II-C
VI-R
II-C
VI-I
II-C
V-B
III-F
V-G
III-C
III-F
II
VI-S
VI-P
VI-O
V-B
III-
III.-
II-D, III-L
VI-L
V-D
PASSIM
II-B, PASSIM
VII-F
VI
I
VI-T
INTRO-5
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TOP SECRET I-1
1. ESTIMATE OF THE WORLD SITUATION THROUGH 1954
CONCLUSIONS
1. For the time being the worldwide Communist expansion has ap-
parently been checked. There are indications that the USSR has
recognized this situation and has been shifting to less openly aggressive
tactics. Since Korea the Soviet bloc has undertaken no new military
adventures and it has not increased its aid to Communist insurrec-
tionary movements during the last year. These changes are due in
great part to the fact that the principal Western countries have grown
politically, economically, and militarily stronger.
2. While the formerly widespread fear of imminent global war has
notably lessened, the Soviet leaders have not moderated their hostility
toward the free world. No general settlement between the Bloc and
the free world is in prospect, nor any substantial Soviet concessions.
No new indications of weakness have appeared in the Soviet Bloc; on
the contrary it grows stronger. The Kremlin continues to expect an
ultimate victory over the capitalist world.
3. We believe that the outlook is for a continuation of Soviet efforts
to undermine and destroy the non-Communist world by cold war tactics.
The Communists will resort to armed aggression and to armed revolt
by indigenous Communist parties when they believe these courses of
action are the best means to achieve Communist objectives. If the
growth of free world strength and unity continues, however, the Com-
munists will probably place greater emphasis upon "united front" tac-
tics and upon propaganda and diplomatic moves designed to split the
Western allies and to promote dissension within non-Soviet countries.
4. Thus, great danger to the free world during the period of this
estimate will lie in political and economic difficulties and divisions
within the free world itself which would check the development of free
world unity and strength and lend themselves to Communist
exploitation.
5. We believe it unlikely that the Kremlin will deliberately initiate
general war during the period of this estimate. However, there will be
continuing grave danger that general war may arise from a series of
actions and counteractions in a situation which neither side desired
to develop into general war.
* This chapter has been prepared especially for this Digest, in order to parallel
the NSC 68/114/135 series of policy papers and in order to provide a longer
range global projection than is currently available in any estimate approved
by the Intelligence Advisory Committee. Parts II-VII of this Digest contain
shorter-range and more detailed estimates of probable developments and of
Communist courses of action in areas covered by this Estimate and in indi-
vidual situations not of sufficient importance to be included herein. No
intelligence agency other than CIA has participated in the preparation of
this Estimate. I
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1. The Strengths and Weaknesses of the Soviet Bloc
A. Political.
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ESTIMATE]
-
D. 111c LJvV ,u -b..- ... ----
no apparent prospect of its control being threatened or shaken. In-
ternal stresses and strains appear less serious now than ever before.
Such rivalries and policy disagreements as may exist are unlikely to
affect the unity and resolution of the regime.
7. Soviet control over the European Satellites, now virtually com-
plete, will probably be maintained 'through the skillful and experienced.
use of military and police power and through political and economic
controls. The popular discontent now present will persist and perhaps
increase, but will probably not develop into more than a minor impedi-
ment to the Soviet program.
8. The Chinese Communist regime has firm control over mainland
China, and there is little likelihood of this control being threatened by
domestic forces. Unlike the European Satellites, Communist China is
not directly and completely controlled by the Kremlin. The Chinese
Communists have retained some capacity for independent action and
for influencing the shaping of Communist policy in the Far East. Both
the Chinese and Soviet leaders apparently view their present relation-
ship as advantageous, and appear to recognize that neither side can
substantially change the nature of their relations - by the USSR
attempting to establish complete domination over China, or by Com-
munist China` asserting complete independence of the USSR - without
jeopardizing the attainment of its own objectives.
9. Outside the Bloc, the Communists' political strength derives
mainly from the international Communist movement, the appeal of
Communist doctrine, and the power and size of the Bloc itself. Bloc
size and strength generate fear and defeatism, especially among those
unable to defend themselves. Communist doctrine is used both as an
inspiration to the faithful and an appeal to the frustrated. Through
,the international Communist movement and through front organiza-
tions under its control, the Soviet leaders are able to exploit weaknesses
and divisions throughout the non-Soviet world in the furtherance of
Communist objectives.
$. Military.
10. Soviet Bloc military strength, already formidable, will continue
to increase. The modernization program in the Soviet military services
will continue. Special emphasis will continue to be placed on weapons
of mass destruction and upon defense against such weapons. By mid-
1955, the USSR will probably have about 300 atomic bombs (30 - 100
Kiloton yield) it may have a thermonuclear weapon; it will have
* The actual figure may be from one half to twice as great as the figure given.
This estimate is currently under review.
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developed improved methods for delivering these weapons against the
U.S. and its allies. Soviet air defenses, already substantial, will prob-
ably further improve.
11. In the European Satellites and in Communist China, programs
for the improvement of military strength are also going forward. In
the Satellites, the emphasis is on expansion and equipment of conven-
tional forces and will result in a substantial addition to Soviet military
strength in Europe, offsetting, at least in part, the growth of Western
strength. In Communist China, emphasis is on re-equipping existing
forces, and their combat effectiveness is likely to increase.
C. Economic.
12. We estimate that by 1951 the gross national, product of the
USSR was 20 to 30 percent above the prewar level, and that it is
now increasing at an annual rate of 6 to 7 percent. Soviet production
constitutes about 60 percent of the total production of the Bloc, includ-
ing Communist China. In 1951 the combined gross national product of
all Bloc countries was less than one-third that of NATO countries, and
the Soviet gross national product was about one-fourth that of the U.S.
13. Since the end of World War II, the Bloc as a whole has devoted
a much larger proportion of its gross national product to military pur-
poses than the West. We believe that the USSR now devotes about
one-fifth of its national product to military expenditures. Tradition-
ally low living standards and the controls prevailing within the Bloc
enable the Bloc states consistently to assign to military purposes a
much larger proportion of total output, particularly of scarce materials
and goods, than is feasible in Western countries. Furthermore, the
Bloc is able to assign a higher proportion of its military outlay to actual
munitions production than is done in the West.
14. The Soviet economy is organized with a view to possible
hostilities in the near future as well as in the more remote future.
These two objectives compete to some extent in the allocation of
resources. The Kremlin places a high priority upon stockpiling re-
serves, not only of military end-items but of food, capital equipment,
and materials needed for maintaining the economy under wartime con-
ditions or other emergencies.
15. The Bloc could increase its exports to the non-Communist
world within the period of this estimate. We estimate that even a
slight increase of trade with the non-Communist world would constitute
an important political warfare weapon and might obtain for the Bloc
some critical equipment and materials now difficult or impossible for
it to obtain.
16. The USSR is engaged in a large-scale research and develop-
ment program. This includes both pure and applied research, with
an emphasis upon applied research in fields of military application,
'especially atomic energy, electronics, jet aircraft, guided missiles, and
submarines. In all of these fields, Soviet scientists and technicians
have demonstrated a high level of proficiency.
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U. The Strengths and Weaknesses of the Free World
A. General.
17. The military and economic power of the United States, and
its political and moral influence, still constitute the principal center of
strength and leadership for the free world. The manner in which the
U.S. utilizes its power will greatly influence the extent of progress which
can be made in developing resolution, a common purpose, and strength
within the free world. There is in the rest of the free world a sub-
stantial reservoir of political and economic strength and a growing
realization of the threat which Soviet military power and political
ideology pose for the national interests and aspirations of all peoples.
18. However, the existence of varying interests and aspirations
among the peoples of the free world, though in many respects an ele-
ment of strength, also makes the free world subject to divisive influ-
ences. In particular, conflicts have been created in important world
areas by the rise of nationalism, much of it anti-Western. Within
some areas, a low standard of living, an inflexible social structure, and
ineffective leadership have hindered the growth of internal strength
and have exposed those areas to Communist and extremist pressures.
19. In many parts of the free world there is also resentment, fear,
and distrust of the United States itself. In some quarters there is fear
that the U.S. will precipitate a general war and leave various countries
unprotected after doing so. There is resentment over U.S. trade poli-
cies. There is a feeling among many of the dependent and semi-
dependent peoples that the U.S. is supporting the colonial powers.
Despite their appreciation of the importance of the U.S. to their sur-
vival and a desire for continued U.S. economic aid, many countries are
unhappy over the need to ask for U.S. help, the made-in-America label
on the aid when it is forthcoming, and the open or implied U.S.
requirement for support to U.S. policy in return.
B. Western Europe.
20. During the period of this estimate Western European political
and economic strength will probably increase. The movement toward
continental integration and toward strengthening the NATO structure
will probably make further progress. Ratification of the European
Defense Community agreements and creation of some form of limited
European political authority are likely. There will almost certainly be
some increase in NATO rearmament, including a start toward a German
defense contribution, though. not as rapid as currently planned. Over-
all Communist strength in Western Europe will probably continue to
decline, but the French and Italian Communist parties will retain
substantial propaganda and subversive capabilities and. significant
political strength.
21. However, progress toward the U.S. objective of an econom-
ically viable and militarily defensible Western Europe will still be beset
by numerous political and economic problems and Europe will remain
in need of U.S. leadership and material support. The difficulties in-
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volved in achieving effective action by a coalition will almost certainly
weigh heavily on the military program. Moreover, even with U.S. aid,
the European NATO members probably will not meet current NATO
goals. The allocation of a sufficiently large share of resources to rearm-
ament will continue to be prevented by the political weakness of con-
tinental governments and their reluctance to adopt more effective tax
systems and anti-inflationary controls. Inflation and other economic
difficulties, together with a growing feeling that the Soviet threat has
diminished, will increase the political pressures on Western European
governments for curtailment of the rearmament program.
22. Present indications are that West Germany will become a
full member of the European Defense Community sometime in 1953.
Despite Soviet exploitation of neutralist and unity sentiment in West
Germany, most West Germans now appear to recognize that unity on
anything but Soviet terms is currently almost impossible, and that
Germany should loin the Atlantic . Community. However, Soviet
maneuvers, West German bargaining tactics, and French fears of
German dominance in Europe will probably 'delay West German rearm-
ament.
23. French economic and political instability appears likely to
continue for some years to come, and, as a result, France will almost
'certainly be unable to 'meet its current NATO commitments while
simultaneously maintaining a major effort in Indochina. However,
France almost certainly will remain firmly aligned with the Atlantic
community.
24. In Italy, the present coalition, led by the Christian Democrats,
will probably win the 1953 elections by a narrow margin, but it appears
unlikely that Italy will develop during this period sufficient economic
or political strength to be anything more than a weak ally.
25. The UK will remain the most important European member
of the Atlantic community. Nevertheless, the UK will continue to be
under severe economic pressure, and the government may be compelled
further to reduce its rearmament goals.
26. The Berlin situation will continue to be a potentially ex-
plosive one. Because the Kremlin continues to aim at the expulsion of
the Western Powers, the Soviet and East German governments almost
certainly will continue to apply pressures, upon the Western sectors of
the city.
C. North Africa, the Middle East, and South Asia.
27. The principal reaction of the Middle East to the impact of
Western civilization and the international political situation is a devel-
oping nationalism which is both critical and imitative of the West.
Demands for political and social reform are increasing. The nature and
rate of these developments have varied from country to country. In
some, the colonial powers or the traditional ruling classes (large land-
owners, tribal sheiks, and professional politicians) have retained control
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of the governments and made only minor concessions to nationalist and
reformist demands; In others, Westernized or semi-Westernized urban
elements have seized the political initiative. Simultaneously, a revival
of Islamic traditionalism is fostering resistance to everything Western.
28. Although in most of these countries communism is not likely
to become a threat, at least during the period of this estimate, a gradual
and evolutionary political change in response 'to the new situation seems
unlikely. Political change will probably be uneven and spasmodic and
is likely to be accomplished by coups d'.etat, assassinations, and other
revolutionary and semi-revolutionary processes, accompanied by increas-
ing authoritarianism.
29. There are, however, some countries in this area Greece,
Turkey, Israel, Pakistan, and India - where there are more stable
regimes less susceptible to violent change. Greece, despite recurrent
Cabinet crises, has virtually eliminated the internal Communist threat.
Turkey has demonstrated a capacity for peaceful political change and
is moving toward political democracy on Western lines. Israel, while
confronted with economic difficulties and the problem of integrating
peoples of varying cultural backgrounds, will continue to be relatively
stable. India and Pakistan - though troubled by disputes between
themselves, disturbed by social discontent and economic evolution, and
vulnerable to Communist infiltration and subversion - nevertheless
have accomplished major political revolutions and are engaged in con-
solidating and stabilizing their new societies.
30. In Egypt a revolutionary coup d'etat under the auspices of
young army officers has displaced the traditional ruling class. The
new group appears honest, energetic, and genuinely intent upon building
a new and better society. They have also given indications that they
are prepared to cooperate with the West. It is still unclear whether
the present moderate leadership can retain control over the military
junta, whether it can cope with counterattacks by the traditionally-
dominant elements, and whether it can make sufficient progress in
solving Egypt's social and economic problems to prevent disillusionment.
31. The principal center of instability is Iran. The traditional
ruling classes have lost the initiative to the National Front, which is
an uneasy coalition of secular urban groups and religious fanatics tem-
porarily united by a desire to rid the country of foreign influence.
The Communists have gained strength, but are not yet capable of seiz-
ing.power. - The oil dispute has intensified nationalist and anti.Western
feelings and aggravated economic weaknesses. Regardless of the out-
come of this controversy, instability will probably continue, with a Com-
munist seizure of power remaining a possibility.
32. In French North Africa, growing nationalism conflicts with
French determination to retain control. French concessions to North
African nationalism probably; will forestall serious trouble for the, next
sevefa1 years, but the nationalists will remain unsatisfied. The prob-
lem of North Africa will remain a source of, friction among the non-
Communist states which the Communists will exploit.
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1-7
33. Western military strength in the Mediterranean area will be
increased by growing Turkish military capabilities and by the develop-
ment of Western 'oases in Libya, French North Africa, and Cyprus.
Nevertheless, the free world military position in the Middle East as a
whole is likely to remain weak. Because of suspicions of Western
motives and rivalries within the area, it will be difficult to establish a
Middle East defense organization. Even if this organization is estab-
lished, the countries of the area will be unable to contribute significant
forces to its support, and will continue to resist the stationing of West-
ern forces in their territories.
D. The Far East.
34. The rapid postwar expansion of Communist influence in the
Far East appears to have been checked at least temporarily. Some
non-Communist governments have increased in strength and stability.
However, the area remains vulnerable to further Communist exploita-
tion because of the widespread sentiment against "Western imperi-
alism," the desire for "national independence" and improved economic
status, and the ineffective leadership of most non-Communist Far
Eastern governments. Communist capabilities for exploiting the sit-
uation in the Far East derive largely from the prestige and military
power of Communist China and the USSR, as Well as the disciplined
energy and, in some cases, the armed strength of local Communist
parties.
35. The chief overt threat to established non-Communist govern-
ments in the Far East has been from armed insurrections, most of them
Communist-led "armed liberation" movements.. It now appears that
the "armed liberation" movements have been reduced in effectiveness
or stalemated. In Burma the government has recently gained new
stability and is moving vigorously against the insurgents. In the
Philippines and Malaya, the Communist guerrilla movements have been
contained, but the Indonesian government continues to be threatened
by political factionalism and various insurrectionary movements. In
none of these areas has armed resistance been eliminated, and it will
continue to place a strain on government energy and resources.
36. In Indochina the situation is one of political and military
stalemate. No decisive shift in the balance is likely during the period
of this estimate. The French military effort in that country consti-
tutes a heavy drain on the resources of metropolitan France. We be-
lieve that the French will continue their commitment in Indochina at
approximately the present level, but will attempt to transfer to the
U.S. the burden of any increasing costs or additional effort.
37. In Korea, the Communists have the capability of launching
a large-scale offensive virtually without warning. We believe that the
Communists will protract the armistice negotiations so long as they
consider that they can continue to gain political and military advan-
tages from the situation in Korea and so long as they estimate that a
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continuation of the Korean war does not involve grave risk of global
war..., Even if an armistice is concluded, Korea will almost certainly
remain an area of grave danger, and the object of intensive Communist
political warfare.
38. The emergence of Japan as a. Far Eastern power aligned with
the West has contributed greatly to strengthening the non-Communist
position in that area. During the period of this estimate, Japan will
almost certainly maintain its present alignment with the West and will
probably make gradual progress with its rearmament. In the long run,
however, Japan's continued association with the Western powers will
depend largely upon whether Japan's serious economic problems can
be solved in cooperation with the West. If they are not so solved, the
Japanese may be compelled to seek closer political and economic rela-
tions with the Communist Bloc in order to obtain the trade Japan
requires.
E. Latin America.
39. The traditional social order in Latin America is disintegrat-
ing. This process has produced political instability more profound than
that which in the past characterized the personal politics of Latin
America. The political trend is toward extremely nationalistic regimes
based on support by the depressed masses, of which the Peron regime
in Argentina is the prototype. The numerical strength of the Com-
munists bias declined, but the Communists, operating through various
fronts, can readily exploit the social unrest and ultra-nationalism
,already existing in the non-Communist population. Both Communists
and extreme nationalists seek, by propaganda and intrigue, to curtail
Latin American cooperation with the United States.
40. For the period of this estimate, the present degree and scope
of Latin American cooperation with the United States is likely to
remain basically unchanged. In particular, Latin American strategic
raw materials will continue to be available, but the governments con-
cerned will seek to drive hard bargains in terms of price and economic
concessions, including allotments of goods in short supply. The Com-
munists are unlikely to gain direct control of any Latin American
country. There is, however, a trend toward the development of a bloc
of ultra-nationalistic, isolationist South American states. Eventually,
this development may adversely affect, not only U.S. interests in Latin
America, but also the strength and unity of the free world.
This sentence is quoted from Conclusion 5 of NIE-47, "Communist Capa-
bilities and Intentions in Asia Through Mid-1953," approved by the Intelli-
gence Advisory Committee on 23 October. The Special Assistant, Intelligence,
Department of State, inserted a footnote in NIE-47 stating that he believes
this sentence, "which carries an implication that the Communists might
accept UN cease-fire terms if the UN were to threaten an expansion of the
Korean war, is not supported by available intelligence. He believes that
available intelligence does not enable us to estimate whether the unwilling-
ness of the Communists to conclude an armistice on terms currently offered
by the UN will continue throughout the period of this estimate [i.e., through
mid-1953]."
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Ill. Probable Soviet Estimate of the Situation and Probable Communist.
Courses of Action. _ ..Y
41. We believe that all Kremlin policies and courses of action are
directed toward the attainment of the Kremlin's long-range objective
of a Communist world dominated by Moscow.
42. Soviet Bloc strength has improved greatly since the end of World
War II. Despite this increase in strength, the Kremlin almost cer-
tainly estimates that general war would be a gamble, involving at a
minimum widespread destruction in the Bloc and the risk that the
Kremlin's system of control would be destroyed.
43. The Kremlin almost certainly estimates that the states of West-
ern Europe are now more stable than at any time since World War II;
that the position of most non-Communist states in Asia is somewhat
stronger than in 1950; that progress has been made toward the unifi-
cation and rearmament of Western Europe and toward improving the
West's defenses in the Pacific; and that the U.S. has made great strides
toward developing its economic and military power and toward provid-
ing leadership for the West. Moreover, the Kremlin probably estimates
that the West is making rapid progress in the development and pro-
duction of new weapons.
44. However, the Kremlin almost certainly estimates that oppor-
tunities remain for continued progress toward its long-range objective
without resort to general war. It probably estimates that :
a. The growth of Bloc economic and military power will increase
Bloc prestige and influence throughout the non-Communist
world.
b. The non-Communist great powers, aside from the U.S., are
much weaker than they were before World War II. .
c. The economies of the non-Communist states are highly vul-
nerable to depression and inflationary crises, which would
have serious social and political repercussions. -
d. Future developments, such as the revival of West German
military power, the intrusion of German and Japanese prod-
ucts into export markets now dominated by other states, and
conflicting tariff and trade policies, will undermine, if not de-
stroy, Western political unity and the foundations of Western
prosperity.
e. Opportunity exists for weakening. the position of the Western
powers and strengthening the position of Communism by ex-
ploiting the discontent and nationalist aspirations in Asia,
Africa, and Latin America.
45. The Kremlin almost certainly estimates that the divergent in-
terests of the Western Powers will sooner or later weaken or destroy
their present unity. It probably also believes that no international
organization which does not have the centralized leadership and control
which the USSR provides the Bloc can survive the strains and pressures
of modern political warfare.
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I-10
46. We believe that the outlook is for a continuation of Soviet efforts
to undermine and destroy the non-Communist world by cold war tactics.
The Communists will resort to armed aggression and to armed revolt by
indigenous Communist parties when they believe these courses of action
are the best means to achieve Communist objectives. If the growth of
free world strength and unity continues, however, the Communists will
probably place greater emphasis upon "united front" tactics and upon
propaganda and diplomatic moves designed to split the Western allies
and to promote dissension within non-Soviet countries.
47. Thus, great danger to the free world during the period of this
estimate will lie in political and economic difficulties and divisions
within the free world itself which would check the development of free
world unity and strength and lend themselves to Communist exploi-
tation.
48. We believe it unlikely that the Kremlin will deliberately initiate
general War during the period of this estimate. However, there will be
continuing grave danger that general war may arise from a series of
actions and counteractions in a situation which neither side desired to
develop into general war.
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II., SOVIET BLOC
A. OVER-ALL SITUATION IN THE BLOC THROUGH MID-1953 **
Internal Relationships and Stability
The Soviet regime is securely entrenched in power, and there is no
apparent prospect of its control being threatened or shaken. In the
immediate future, Soviet control over the Satellites will almost certainly
remain virtually complete and insure the subservience and reliability
of the governments; and continued economic and military contributions
to the USSR from the area. The Chinese Communist regime has firm
control over mainland China, and there is little likelihood of its control
being 'threatened or shaken by domestic forces within the immediate
future. The stability of the Bloc regimes is such that fear of internal
repercussions alone will not deter the Kremlin from military policies
which it feels will further its global interests.
The governments of the Bloc will continue to present a solid front
to the non-Communist world. The Kremlin determines the funda-
mentals of Bloc policy, and it will continue to make decisions concerning
courses of action in particular situations in the light of its global policy.
Satellites have no direct influence upon Kremlin decisions, and the
Communist Parties in non-Communist countries none whatever.
The factors tending to divide.the USSR and Communist China will
be far outweighed by close ideological ties and mutual pursuit of com-
mon objectives. Communist China accepts Kremlin leadership in the
determination of international Communist policy, although Communist
China is not completely controlled by the Kremlin. The Chinese Com-
munists retain some capacity to pursue their own interests , and to
influence the shaping of Communist policy in Asia. We believe that
Moscow will try to extend and intensify its control over Communist
This chapter deals with the USSR, the European Satellites, and Communist
China. North Korea is considered in Section III-C, and the Viet Minh
forces in Section III-F. It should be noted that some of the material in
Section II-A is duplicated wholly or in part in later sections, so that each
section is self-contained to a reasonable degree.
With respect to Soviet Bloc courses of action, Chapter I of this Digest
contains an over-all estimate for the period through 1954, while more de-
tailed estimates for Asia and Western Europe are contained in sections III-A
and VI-A respectively. A short-term National Intelligence Estimate cover-
ing Communist intentions in all parts of the world is now in preparation,
entitled NIE-64 (II), "Probable Soviet Bloc Courses of Action through Mid-
1953." This estimate is scheduled for publication in November 1952.
"This section has been largely abstracted from the just-completed NZEE-64
(I), "Soviet Bloc Capabilities through Mid-1953" (approximately 8 pp., with
three accompanying appendixes including statistical material and detailed
figures, to be published approximately 5 November 1952). With reference to
Sino-Soviet relationships and Far Eastern matters, the section also relies on
abstracts from NIE-58, "Relations between, the Chinese Communist Regime
and the USSR: Their Present Character and Probable Future Course" (9
pp., 10 September 1952), and NIE=47, "Communist. Intentions and Capabili-
ties in Asia" (10 pp., 31 October 1952).
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China, and to dominate Communist parties elsewhere in Asia. The
Chinese Communist leaders will resist Soviet efforts to extend control
over the internal affairs of Communist China, and will attempt to..
strengthen Chinese control over Manchuria, Sinkiang, and Inner Mon-
golia, and to expand Chinese Communist power and influence elsewhere
in Asia.
Economic Development
The gross national product of the Bloc has been increasing in the
past few years. Any calculation of its magnitude is necessarily subject
to considerable error, and no meaningful comparison can be made with
the prewar years for the Bloc as a whole. However, we estimate that
the Bloc's national product in 1951 was roughly 15 percent higher than
in 1949. The combined gross national product of the entire Bloc in 1951
was about 30 percent that of the NATO states, and USSR gross national
product was about one-quarter that of the US.
However, comparisons in terms of total output of all types of goods
and services are misleading as indications of relative capacity to produce
military equipment in peacetime. The traditional living standards and
the controls prevailing within the Bloc enable the Bloc states to assign,
a much smaller proportion of total output to civilian consumption,
particularly of scarce materials and goods, than is feasible in the West.
Moreover, these living standards and controls also enable the Bloc to
assign a higher proportion of its military outlay to production of actual
military end items than is feasible in the West.
The Bloc has the economic capability to increase its exports to the
non-Communist world. We believe that even a slight increase of -trade
with the non-Communist world would constitute an important political
warfare weapon.
We believe that Bloc economic policy will almost certainly continue to
place primary emphasis upon expanding Bloc productive capacity, espe-
cially in those industries basic to industrial growth and military produc-
tion. The Kremlin will continue its program for integrating the
Satellites into the Bloc economy and for increasing its economic ties
with Communist China.
Scientific Development
The USSR is by far the leading center of Bloc scientific effort. Since
the war, the USSR has benefited considerably from its control over the
scientific manpower and research facilities of Eastern Europe and from
the German scientists and technicians who were persuaded to go to
the USSR.
The USSR is engaged in a large-scale research and development
program which has made considerate progress toward bridging the
gap between Soviet science and that of the West. The Soviet scientific
program includes both pure and applied research, with an emphasis
upon applied research in fields of military application, especially atomic
energy, electronics, jet aircraft, guided missiles, and submarines. In
all of these fields, Soviet scientists and technicians have demonstrated
a high level of proficiency.
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The number of people engaged in research and in teaching science
in the USSR increased from approximately 30,000 in,1930 to about
150,000 in 1950, when about 200,000 were similarly engaged in the U.S.
We believe that a smaller proportion of the Soviet group are engaged
in research in the physical sciences than in the U.S. and that a larger
proportion are engaged in research in health and agriculture than in
the V.S. The number of people in the USSR who have received college
educations in scientific and technical fields is probably less than the
total in the U.S. However, we estimate that in this school year USSR
colleges will probably graduate as . many students with scientific and
technical training as the U.S.
Military Strength
The armed forces of the USSR, which have undergone modernization
since the end of World War II, constitute the core of Bloc military power
and will remain the basis of the Bloc military threat to the non-Commu-
nist world. The Satellite armed forces, which are still well below those
of the USSR in combat effectiveness but which are growing in strength
and quality at a rapid pace, already represent a substantial addition
to Soviet military strength in Europe. The Chinese Communist Army
is the largest and, aside from that of the USSR, the most effective
indigenous ground combat force in Asia.
The Bloc now possesses a significant quantitative superiority over the
Western Powers in land power, in tactical air power, and in conventional
ground and air armament., We estimate that the Bloc armed forces
now have :
1. Approximately 8,750,000 men, of which about 4,450,000 are Soviet;
1,550,000 Satellite; 2,350,000 Chinese Communist; 290,000 North
Korean; and 130,000 Viet Minh. (These figures include Soviet and
Satellite security forces, but not those of Communist China.)
2. An actual strength of approximately 21,000 aircraft, including
about 6,700 jet fighters and 900 piston medium bombers; an author-
ized strength of about. 25,000 aircraft, including about 8,400 jet
fighters and 1,150 piston medium bombers.
3. A total of at least 164 major surface vessels, and 361 submarines,
including 103 long-range types.
4. As of mid-1952, a stockpile ,of 50 atomic weapons (30-100 kiloton
yield). (The actual figure may be half to twice as many as this
estimate.) -
5. Large stocks of conventional weapons and equipment.
The strength and deployment of Soviet Bloc ground, naval, and air
forces, by principal areas, are shown on the maps and accompanying
tables, Figures II-A-1 and II-A-2, following page II--A-6.
* The strength and equipment data on this page are as of 1 October 1952. The
map and tables in the Figures were prepared from provisional later estimates
and differ slightly. The relative deployments shown remain accurate. The
text of NIE-64 (I) contains statements by the intelligence agencies of the
U.S. Army, Navy, and Air Force as to the reliability of the data on which the
above estimates are based.
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II-A-4
The principal emphasis of the recent Bloc military program has'
apparently been upon enlarging the atomic stockpile and upon improv-
ing Bloc defenses, particularly against air attack. We believe that this
emphasis will continue at least through mid-1953. We also believe
that the Bloc military forces, particularly those 'of the USSR and Com-
munist China, which have remained relatively constant in size during
the past two years, will not increase greatly in size.
The over-all effectiveness of Bloc ground, naval, and air forces will
continue to increase because of progressive modernization and standard-
ization of weapons and equipment, the intensive training program, the
increased combat efficiency of the Satellite armies, and the growth of
the Soviet atomic stockpile, which will probably total 100 atomic weap-
ons (30 - 100 kiloton) by mid-1953. (The actual figure may be from
half to twice as many as this estimate.) * It is unlikely that the USSR
will be able to develop and produce a thermonuclear weapon by mid-
1953.
The USSR maintains a large air defense system which not only in-
cludes the forces assigned to the Soviet air defense organization (PVO-
Strany) but also has available to it the active air defense resources of
the Army, tactical air forces, and Navy not otherwise committed, as
well as the passive defense resources of the police and civil organizations.
The Satellite and Communist Chinese air defenses add to and are
integrated with the Soviet system.' Despite significant improvements
in the air defense system, there will probably continue to be insufficient
numbers of trained and experienced pilots and operators, modern radar,
heavy AA guns, and fighters designed specifically for all-weather inter-
ception to provide defense for all important areas. We estimate that
by mid-1953 the numerical strength of the air defense forces will not
change, although the effectiveness of the air defenses. will improve
through re-equipment and training. (The known radar warning in-
stallations surrounding the USSR are shown in Figure II-A-3, follow-
ing page II-A-6.)
The Blo'c'--p ossesses a good logistical position for military operations
in Europe. We believe that military stockpiles west of the Soviet border
and within the USSR are sufficient to maintain a mobilized army in
combat in Europe for several months without recourse to new produc-
tion, except in the case of POL. The road, rail, and inland waterway
nets in Eastern Europe are adequate to permit. full utilization of those
Bloc divisions now in Eastern Europe and, in addition, to move and
support a considerable number of additional divisions from the USSR.
The economic base for Bloc military operations in the Far East is
limited in comparison with that of the Bloc in Europe. The logistical
position is restricted by the capacity of the Trans-Siberian railroad and
the long sea routes, by the limited transportation facilities of Com-
munist China, and by the underdeveloped status of the Soviet Far
Eastern and Chinese Communist economies. However, despite these
limitations, the USSR has equipped and provisioned the North Korean
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Army and has furnished the Chinese Communists with large amounts
of equipment and POL. While we do not know what proportion of
these supplies were drawn from stocks 'in the Far East, we believe that
Soviet forces in the Far East now have sufficient supplies and equip-
ment (with the exception of POL) to support 30 divisions in combat
from 6 months to one year. We also believe that the Chinese Com-
munist economy, with Soviet economic assistance, could support the
Korean war effort at current levels through mid-1953 and that it would
be able to support, at least in the initial phases, a war in the Far East
which involved, in addition to the Korean war, Chinese Communist
military operations elsewhere in Asia.
Military Capabilities
We believe that in the period through mid-1953 the Bloc will continue
to possess substantial military capabilities. During this period the
Bloc will be capable of undertaking concurrent large-scale operations
in continental Europe, the Middle East, and mainland Asia. The Bloc
could rapidly reinforce with Chinese Communist and Soviet forces the
Communist forces now in Korea, and at the same time undertake an
invasion of Japan by Soviet forces.
The USSR will be capable of undertaking sustained air offensives
against the UK, most of,Continental* Europe, most of the Middle East,
and Japan, with the intensity of individual offensives varying according
to the number of offensives undertaken simultaneously. It is also
capable of undertaking the delivery of its full stockpile of atomic weap-
ons against targets in these areas and against targets in the U.S. and
its overseas bases.
The USSR will also be capable of undertaking both offensive sub-
marine patrols and mining operations along most of the world's
strategically vital sea lanes and short-haul amphibious. operations in
the seas adjacent to its own coasts.
The Bloc air defense organization will be capable of vigorous opposi-
tion to an air offensive against principal Soviet centers. However,
despite marked improvements in the Bloc air defense system (especially
in the USSR, Eastern Germany, Poland, and Manchuria), deficiencies
will remain throughout this period.
Political Warfare Capabilities,
Political warfare plays an unusually important role for Communists,.
who consider military warfare only an extension of political warfare in
+ their persistent campaign to undermine the strength of the non-Com-
munist world. Soviet'Bloc political warfare techniques include political
and economic pressure, diplomatic action in the UN and elsewhere,
propaganda and front activities, the action of Communist Parties and
Communist Party-controlled trade unions outside the Bloc, sabotage,
exploitation of subversive and revolutionary movements and of civil
wars, and psychological warfare.
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The principal sources of strength upon which Bloc political warfare
capabilities are based consist of the Bloc's military capabilities; the
size, power, and centralized leadership of the Bloc; Communist doctrine;
and the Communist international movement.
During the period through mid-1953, the' Communists almost cer-
tainly will not be capable of overthrowing any non-Communist govern-
ment either by constitutional process or by revolution, except possibly
in Iran. However, Bloc capabilities for political warfare will continue
to constitute a serious danger for the non-Communist world throughout
this period. The Communist Parties in the non-Communist world -
with an estimated membership of 3,750,000 -- are tightly organized for
action and form a world-wide network under Kremlin direction.
Through this organization, the Kremlin is able to conduct undermining
attacks on established regimes, to exploit national rivalries, to utilize
minority groups and political factions, and to capitalize on economic,
political, and military difficulties. The organizational effectiveness of
the Parties makes them far more formidable than their numerical size
alone indicates.
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II-B-1
SOVIET BLOC
B. SITUATION IN THE USSR THROUGH MID-1953 *
Political
Stalin will almost certainly remain undisputed Soviet ruler provided
he remains in good health. Although the death of Stalin would be a
shock to the Soviet regime, we estimate that the immediate transfer of
authority to another leader or group would be affected in an orderly
manner.
There probably have been disagreements on major policy matters
within the Politburo and rivalries for Stalin's favor and for positions of
advantage after Stalin's death. However, it is most likely that such
rivalries and disagreements will seriously affect the unity and resolution
of the Politburo or of its successor in the near future.
The Communist Party of the USSR remains the foundation of author-
ity and the principal instrument of rule. Its leadership, organization,
and discipline appear to be firm. Although there may be stresses within
the Communist Party and between the -Communist Party, the Secret
Police, and the Soviet armed :forces, there is no evidence that these
stresses constitute a threat to the regime. Moreover, it is probable
that the unity of the ruling groups would increase if the regime were
subjected to increased external pressure.
The regime's control over all activity within the USSR remains
thorough and apparently effective. Current internal stresses and
strains - such as the dissatisfaction of some of the national minorities,
the resistance of the peasants to recent agricultural programs, and dis-
satisfaction among large numbers of the population over low living
standards and over the severity of police controls-appear less serious
than at any time since the early 1930's.
The areas annexed to the USSR since 1939 have been effectively in-
tegrated into the Soviet system. - Local resistance has been systemati-
cally suppressed, but not altogether eliminated. The economic, political,
social, and demographic reorganizations of those areas have weakened
the foundations for opposition to Soviet rule and have created machinery
for ensuring continued Soviet control and direction.
The years of isolation and indoctrination and the current "Hate
America" campaign have almost certainly reduced the reservoir of pop-
ular good will toward the US.
The proceedings of the recently concluded Nineteenth Congress of the
Communist Party of the USSR presage a continuation of internal eco-
nomic and social policy along the general lines established in the period
immediately prior to World War II. The continued coalescence of Party
* With respect to economic and military matters, this section is based largely
on the just-completed NIE-64 (I), "Soviet Bloc Capabilities through Mid-
1953" (approximately 8 pp., with three accompanying appendixes, to be pub-
lished approximately 5 November 1952).
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and government leadership was clearly indicated by the activities of the
Congress. At the top political level, the- level of the old Politburo, power
over the Soviet state and the Communist Party will continue to be exer-
cised by Stalin and his closest collaborators behind the decorative facade
of the new twenty-five man Presidium of the Party's Central Committee.
Moreover, there are indications that Party leadership at the lower politi-
cal and economic levels will continue to remain in the hands of the same
post-revolutionary generation which Stalin put into power after the
purges of the 1930's.
Economic
The economy of the USSR had recovered its prewar level of total pro-
duction by 1948 and had surpassed that level by an estimated 20-30 per-
cent in 1951. This high rate of advance has been achieved despite fac-
tors severely limiting expansion. Labor productivity in all major sectors
of the economy is low by U.S. standards. A high proportion of the labor
force must still be assigned to agriculture and remains unavailable for
industry. For example, about half of the population of the USSR is
rural, compared with about one-fifth in the U.S. (See Chart, Figure
II-B-2, following page II-B-6.) Shortages of trained engineers and
technicians, specialized machinery, and industrial power Land fuel con-
stitute other major factors limiting industrial expansion, although prog-
ress has been made toward overcoming these deficiencies.
Soviet production in most industries is still far below that of corres-
ponding U.S. industries. For example, Soviet petroleum production in
1951 was only one-eighth that of the U.S.; raw steel, less than one-third;
aluminum, less than one-third; copper, less than one-fifth; lead, less
than one-eighth; zinc, about one-fifth; tin, about one-fourth; coal, slight-
ly over one-half; electric power, less than one-fourth; cotton, less than
one-eighth; and cement, less than one-third. Where Soviet production
exceeds that of the U.S., as in nickel and wool, U.S. imports usually more
than offset the difference. (For present estimates of Soviet production
and projected future growth in selected key fields, compared to the U.S.,
see Chart, Figure II-B-3, following page II-B-6.)
However, production comparisons are misleading as indications of
relative capacity to produce military equipment in peacetime. The tra-
ditional living standards and the controls prevailing enable the Kremlin
to assign amuch smaller proportion of total output to civilian consump-
tion, particularly of scarce materials and products, than is feasible in
the U.S. Moreover, these living standards and controls also enable the
Kremlin to assign a higher proportion of its military outlay to actual
munitions production than is done in the U.S. and other Western coun-
tries.
We believe the USSR now devotes about one-fifth of its gross national
product to military expenditures. We further believe that since 1948
it has annually assigned about one-fourth of its gross national product
* This paragraph should be regarded as a partial and preliminary summary of
the implications of events at the - Congress. More detailed studies are in
progress.
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to investment (compared to about one-fifth, comparably defined, in the
U.S.) It has maintained a large military establishment, accumulated
strategic reserves and inventories of military end-items, and slowly
raised the Soviet standard of living from the wartime low point to a
level approaching, or possibly somewhat exceeding, that : of the immedi-
ate prewar years. Soviet capital development has continued to em-
phasize those industries which constitute the base both for further indus-
trial growth and for direct military production.
The Soviet economy is much better prepared now to support a major
war effort than it was in 1940.
(a) The USSR has basic resources adequate to double its current
production of military end-items, although a mobilization period of
one to two years would be required.
(b) If, by mid-1953, the military expenditures claimed 40 percent
of the Soviet gross national product, as they did in 1944, the USSR
could probably support as large a military establishment ' as in 1944
and at the same time devote twice the volume of resources to the pro-
duction of armaments as in 1944.
(c) Very little evidence is available concerning the size of current
Soviet strategic stockpiles, but we estimate that for at least the last
two years the USSR has annually devoted about 2 percent of its gross
national product to strategic stockpiles, including factory reserves of
raw materials and equipment for emergencies and reserves of capital
equipment to facilitate conversion to full-scale war production.
(d) The Soviet dispersal and expansion of industry as well as the
regional self-sufficiency programs have made the economy less vulner-
able to enemy action.
The extremely high rate of post-war economic expansion probably
cannot be maintained in ' the new Five Year Plan recently announced.
The estimated rate of growth, which was lower in 1950 than in 1949 and
was, still lower in 1951, will probably continue to decline gradually, al-
though it will remain higher than that of any other major world power.
In any event, the absolute growth in gross national product will annually
become greater. With most of the annual increment used to expand war
production, enlarge the economic base, augment stockpiles, and de-
crease industrial vulnerability to enemy action,. the Soviet economic
capability to engage in global war will steadily increase.
Military **
The armed forces of the USSR, which constitute the core of Bloc mili-
tary power, will almost certainly increase in combat effectiveness
through mid-1953. If general war does not occur, we believe that Soviet
ground forces will remain at approximately their present strength,
2,500,000 troops organized into 175 line divisions (of which 105 are rifle,
40 mechanized, 25 tank, and 5 cavalry) and additional artillery and anti-
* The Chart in Figure II-B-1, following page II-B-6, gives a comparison of
U.S. and USSR rates of growth in selected segments of the economies.
** The basic deployment of Soviet ground, naval, and air forces is shown in
Figures II-A-1 and II-A--2, following page 11-4-6 above.
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II-B-4 TOP SECRET
aircraft artillery divisions. The Soviet security forces will probably also
remain at approximately their present strength, 400,000 troops. The
armament, the mobility, and the capability of these forces for sustained
combat will continue to improve, but the various armies, corps, and divi-
sions will continue to vary greatly in ~ quality.
We estimate that the Soviet Air Forces have in operational units an
actual strength of 18,100 aircraft against an authorized strength of
20,400, almost half of which are fighters. * In addition, we estimate that
Soviet reserves of military aircraft total approximately 20,000. There is
insufficient data available to permit a sound estimate of the composition
of the reserve; however, we believe that most reserve aircraft are World
War II piston types and that few, if any, medium bombers or light jet
bombers are stored in reserve. Although the size of the total air estab-
lishment is not likely to 'change appreciably through mid-1953, a sig-
nificant increase in over-all operational effectiveness will result as con-
version to jet fighters and bombers progresses.
We estimate that Soviet Long-Range Aviation, the strategic bombing
force of the USSR, now has an actual strength of 900 TU-4 medium
bombers (modeled after the U.S. B-29) against an authorized strength of
1,150, and that it will have an authorized strength of 1,200 TU-4 medium
bombers by mid-1953. We believe that the fiver-all combat effectiveness
of Soviet Long-Range Aviation remains well below that of the U.S. and
UK strategic air arms. The average Soviet medium bomber crew is con-
sidered less skilled than the average U.S. medium bomber crew, of World
War II. Within the period of this estimate, selected crews probably
could, within limitations set by equipment, approach standards attained
by present average U.S. crews. Soviet staff planners lack the extensive
operational experiences obtained by the U.S. and UK. Soviet Long-
Range Aviation is known to be undergoing an intensive training pro-
gram for strategic bombing missions.
The Soviet Air Forces are becoming increasingly effective, particularly
with respect to bomber interception. However, the combat effectiveness
of Soviet military aviation is still considered low by U.S. standards. We
believe that the general level of training of Soviet ground and air per-?
sonnel is inferior to that of U.S.nd UK personnel. The USSR is con-
ducting an intensive training program to remedy this defect.
The USSR's large Air Defense system (PVO) includes an extensive
early warning network, a force of interceptors with an estimated author-
ized strength of 2,800 (including 2,300 jets), and an unknown number of
antiaircraft divisions. The active air defense resources of the early
warning, fighter, and antiaircraft units of the Soviet armed forces are
also available to the PVO for air defense purposes, as well as the passive
defense resources of the police and civilian organizations. The air de-
fense systems of the Satellites and of Communist China add*to and are
integrated with the Soviet air defense system. Considering tactical
fighters as well as those in air defense units, we estimate total Bloc au=
* The average levels of actual strength for various types are, in terms of
authorized strength, estimated to be 80/85% for jet fighters, 75/80% for
medium bombers and 90/95% for all others.
1 November 1952 TOP SECRET
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TOP SECRET II-B-5
thorized fighter strength at approximately 13,000. Other commitments
would prevent utilization of all this force for air defense purposes. De-
spite marked improvements in this system, deficiencies will continue to
exist during the period of this estimate.
We estimate that the Soviet Navy now has a total of at least 158 major
surface vessels, comprising three old battleships, one monitor, 7 heavy
and 11 light cruisers, and 136 destroyers, one-third of which are coastal
types. In addition, we estimate that there are 361 submarines, of which
103 are long-range types with a combat radius of 6,000 nautical miles.
The Soviet submarine force is already numerically the largest in the
world. All the above vessels, and most of the 1,700 lesser Soviet naval
vessels, carry mines and are equipped to lay them. Naval aviation is
trained in mine warfare. We believe that the USSR now has a stockpile
of approximately 420,000 mines. Although most of these are moored
contact types, there are considerable number of magnetic, acoustic and
pressure-actuated. types, including some which probably combine two or
more of these actuation systems. We.estimate total annual production
at 82,000 mines of all types.
Soviet naval strength will be increased during the period of this
estimate by the construction of an estimated 8 cruisers, 34 destroyers,
and over 40 submarines. However, the Soviet Navy will continue to lack
a carrier air force.
The USSR is now believed capable of quantity production of uranium-
235 and plutonium for the manufacture of atomic weapons. It is esti-
mated that in mid-1952 the USSR had a stockpile of 50 atomic weapons
(30 - 100 kiloton yield), and that by mid-1953 it will probably possess
100 weapons. (The figures in these estimates may be from half as
many to twice as many as indicated.) * It is unlikely that the USSR
will be able to develop and produce a thermonuclear weapon by mid-
1953.
The USSR has achieved marked progress in the field of electronics
since the end of World War II, and is capable of independent research
and development in this field. In addition to the production of im-
proved early warning, ground control intercept, blind bombing, and
modern fire control radar, the Soviets have developed a jamming capa-
bility which is' a serious threat to Western long-range and short-range
military radio communication and navigation systems. If there is any
future limitation on Soviet progress in electronics, it will be due more
to Soviet policy decisions regarding the allocation of resources rather
than to scientific and technical shortcomings.
With the aid of German engineers and labor the USSR has developed
a guided missile program. By mid-1953 it probably will develop and
produce some types of surface-to-surface, surface-to-air, and air-to-air
guided missiles.
Through mid-1953 the Kremlin will almost certainly place a high
priority upon continuing to enlarge its atomic stockpile and to improve
* Estimates of the future Soviet atomic stockpile are currently being reviewed.
TOP SECRET 1 November 1952
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its defenses, especially against air attack. In addition, continued em-
phasis will be placed upon the further dispersion of Soviet industry in
order to reduce the vulnerability of the USSR to air attack.
1 November 1952
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SOVIET BLOC
II-C-1
Political '
The subservience of the Communist regimes of the Eastern European
Satellites to the Soviet Union is insured by the close and effective control
exercised by Moscow. No serious internal threat to the continued Com-
munist enslavement of the area exists.
Despite the apparent hopelessness of their situation, however, the
peoples of Eastern Europe have not lost the will to resist, and overt
,expression of resistance, although varying considerably from Satellite
to Satellite, continues to appear. Tiny individual resistance bands con-
tinue to operate in Poland despite determined efforts of the Polish
Security forces to eradicate them. Throughout the Satellites, peasants
stin.are hostile to collectivization measures.
With the consolidation of Communist control in the Satellites, there
has developed gradually a similarity with the Soviet Union's political,
judicial, and administrative forms. The most recent examples are the
promulgation late this summer of the Polish and Rumanian constitu-
tions, which are very similar to that of the USSR. Following party and
governmental changes in Czechoslovakia in 1951 and in Rumania and
Hungary this summer, the leaders of all Communist Parties now also
hold the top governmental posts. Through alterations of this type the
local Communist regimes have strengthened ties between each other
and with the USSR, gradually eliminated political 'traditions, and in-
creased their security.
'The recent purges in the Satellites follow the Soviet pattern of per-
petually "cleansing" regimes in order to permit the Kremlin to pursue
its policy more effectively. No apparent consistent pattern has emerged
which would permit a satisfactory generalization as to the motivating
factor or factors behind the shifts in leadership in these countries.
In East Germany the Communist government responded to the in-
itialing of the Contractual and.EDC agreements in May 1952 with a
vigorous program, including, as a preliminary step, the isolation of East
Germany from the West. New and severe border security measures
were decreed, new entry and exit regulations imposed, and a sharp
increase in internal surveillance directed.
During the summer months of 1952, a reorganization of the East
German government at the highest level, in provincial administration,
and in the judicial system was' carried out. This reorganization
achieved a rigorous centralization and concentration of authority, guar-
anteed the dominance of the Socialist Unity Party, organized the
*This section is based in part on NIE-33, "Soviet Control of the European
Satellites and Their Economic and Military Contributions to Soviet Power,
through Mid-1953" (17 pp., 7 Nov. 1951). That estimate remains substan-
tially valid.
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II-C-2 TOP SECRET
administrative apparatus to support the implemetation of the eco-
nomic plan, and eliminated the last vestiges of judicial independence.
In Albania recent reports indicate increased resistance activity, and
Albanian government leaders have shown concern over the increase in
Yugoslav and other propaganda against the regime. Despite isolated
resistance activities against the Tirana regime and internal rivalries
within the Communist Party - both of which have been endemic ever
since Albania was isolated from the Bloc in the summer of 1948-the
regime has been and still appears to be able to maintain firm control
of the situation.*
Economic
The Soviet economy has been strengthened by the acquisition of the
resources, productive capacities, and industrial potential of the Satel-
lites. Of current total Bloc output, for example, we estimate that the
Satellites produce approximately 60 percent of the uranium ore concen-
trates, 50 percent of the coal, 30 percent of the electric power, 25 percent
of the steel, 20 percent of the sulphuric acid, and 10 percent of the
copper. In the engineering industries, the Satellites produce an im-
portant proportion ' of a number of items critical within the Bloc : for
example, an estimated 40 percent of total Bloc production of electric
motors and generators, 45 percent of electronic tubes, and 20 percent of
anti-friction bearings. , "i
A revised program of Soviet control over the Satellites began to take
form late in 1948, providing for the carefully planned industrialization
of the Satellite countries and their integration into the Soviet economic
system to achieve the following results:
(a) Control of these countries and of their economic development
by the USSR and the creation of Soviet-type socialized economies.
(b) Maximum Satellite contribution of their present resources and
production to Soviet economic and military strength and the reorgan-
ization of the Satellite economies so that they will become permanent,
constantly more valuable additions to Soviet strength.
(c) Economic dependence of the Satellites upon the USSR and
their independence from the West, depriving the West of the eco-
nomic advantages it formerly enjoyed in Eastern Europe.
(d) Development of the Satellite strength so that the Satellites, or
a group of them, may have the capability of Soviet-sponsored localized
war and so that the Satellites may make their maximum contribution
to Soviet strength in a general war.
Currently, the planned expansion of industry in the Satellites far
exceeds the supply of available skilled labor and management and the
estimated ability to train skilled workers, technicians, and managers.
The Satellites lack adequate supplies of many of the raw materials and
* The situation in Albania is analyzed more fully in NIE-42, "The Current Sit-
uation in Albania with Particular Reference to Greek, Yugoslav and Italian
Interests" (5 pp., 20 November 1951)._ The analysis in that estimate remains
substantially valid.
1 November 1952 TOP SECRET ,
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II-C-3
capital equipment necessary for the development of modern industrial
economies, and these same items are also now in short supply within the
USSR itself.
Military *
The European Satellite armies now have an estimated 1,157,000 troops
(excluding the estimated 82,000 men in the East German Alert Police),
organized into 68 line divisions and various other types of units. In
addition, security forces account for an estimated minimum of 268,000
troops. The Satellite ground forces have grown steadily since World
War II, but their combat efficiency and reliability remain generally
only fair.
The Eastern European forces are closely integrated with those of the
USSR though not with each other. There -is no evidence of joint mili-
tary exercises or maneuvers. Some degree of uniformity has been
achieved, however, through the gradual acquisition of Soviet military
equipment, the adoption of Soviet training and field techniques, the
general use of. Soviet advisers and instructors, and the reorganization
of tactical formations along Soviet lines.
The mission of the Satellite air forces, which now have an estimated
actual strength of approximately 1,500 aircraft (authorized strength
of 2,600 aircraft) is primarily defensive. An extensive program of air-
field construction, in which East Germany has received major emphasis,
has been carried out since 1945 in all of the Satellites except Albania.
There are 66 major operational airfields with runways of 6,000 feet or
over in Eastern Europe and 29 more known to be under construction.
The capabilities of the Satellite navies are currently negligible.
The outstanding recent military development has been the strength-
ening of Soviet air defense by allocation of jet fighters to all the major
Satellites and the modernization of the early warning nets in the Satel-
lite areas (see Figure II-A-3 above, following page II-A-6). For this
latter program East Germany and Czechoslovakia are developing into
sources of components for modern electronic equipment, and Hungary
is manufacturing gun-laying radar.
Estimate of Probable Internal Developments Through Mid-1953
The European Satellites will continue to be dominated by the USSR,
which can be expected to maintain its authority over them through
political, economic, and ideological means and through police power.
The rate of agricultural collectivization will probably be carried on at
the moderately increased tempo noted during 1952. The expansion of
Satellite industrial production, which began to level off during the first
half of 1951, will continue, but will be limited by manpower, manage-
ment, and raw material deficiencies. -
* For detail on the ground, air, and naval forces of individual Satellites, see
the tables in Figures II-A-1 and II-A-2, following page II-A-6 above. The
data in the tables is based on provisional estimates of a later date than the
firm ones used in the text here, which are good as of 1 October 1952. There
may therefore be minor variations.
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II-C-4
TOP SECRET
ably
The Satellite armed forces will 1,750,000 troopsby mid11953~bThis
reach an estimated strength of about
d the East l Alert police.
figure includes security tfes an
he USSR will bring about the integration of Therethe
are no indications that t
Satellite armed forces, but their reliance on Soviet logistic support will' lines. encourage continued military development along iet lines
uniform
and the incor-
The reorganization of East Germany along poration of that area development in Eastte n Europe.
W1 Measures
bly ly constitute itute the principal to be taken to this end are likely to include development of the present
linking East Ge estimated
aos stanoce treaties reaching
People's Police into regular mutual 150,000 troops by mid-1953,
many with the Soviet Union and the Satellites, imina iozation the
bourgeois parties from the National Front, complete
the remaining
business enterprise, and an ideological offensive against ational fields non-Communist institutioo~eno~'hthe religious
ardecalready being
There is evidence that s them
launched, but full propaganda exploitation is not apt to be given
until the Contractual agreements and EDC treaty have been ratified by
the West German Republic.
As to Albania, we estimate that Yugoslavia would e almost certainly
seize any opportunity A bania
to establish a pro-Yugoslav g if it could be done without incurring serious risk of provoking Western
disfavor or Soviet retaliation. We believe,
ve without directly
the Yugoslavs will continue to exert political pressure
intervening or deliberately precipitating a coup attempt.*
* This paragraph is taken from NIE-42/1, "Yugoslav Intentions Toward Albania"
(2 pp., 20 Oct. 1952).
1 November 1952 TOP SECRET
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SOVIET BLOC
TOP SECRET II-D-1
Political
The Peiping regime, established in October 1949, is in firm control of
mainland China. Organized opposition to the regime is estimated to
consist of fewer than 100,000 scattered guerrillas.
Although the Peiping regime is allegedly a multi-party government, it
is completely controlled by the Chinese Communist Party, whose leaders
occupy all key positions at the national, regional,, provincial and local
levels. The leaders of the Chinese Communist Party have repeatedly
proclaimed and demonstrated their commitment to the Soviet world
view and the Soviet world program.* The bulk of the Party, which with
5,800,000 members is second in size and prestige to the Soviet, is being
indoctrinated and purged to conform with the Stalinist orientation of
its leadership.
The Chinese Communist Party is working toward absolute control of
the 475,000,000 Chinese people. The Party's domestic policies toward
the peasantry, urban labor, merchants and industrialists have been
designed with the primary objective of tightening its grip on these "four
friendly classes." At the same time the Communist security apparatus
has moved to eliminate actual and potential opposition and has executed
or forced into slave labor millions of Chinese. Popular support for the
regime has declined greatly since 1949, but the Chinese people are effec-
tively mobilized for Communist purposes.
China plays the leading role in the execution of the Communist pro-
gram in the Far East. It has made a greater manpower contribution
to the Communist cause in Korea than have the North Koreans them-
selves. Peiping also attempts to exert economic and psychological pres-
sure on Japan. It has been the main source of outside aid to Commu-
nist-led "liberation" movements in the Far East, and it remains capable
of intervening on behalf of such movements on the mainland of South-
east Asia.
Although the USSR enjoys extensive political and economic influence
in the border regions of Sinkiang, Inner Mongolia, and Manchuria, the
trend since 1950 in these areas appears to be towards an increase in
Chinese Communist administrative control.
Economic
The consolidation of Communist control, the war in Korea, and West-
ern trade restrictions have placed heavy burdens on China's economy.
Available evidence, although extremely fragmentary, indicates that
Chinese Communist Government military expenditures probably dou-
bled in 1951 over 1950. Austerity has been keynoted by the regime dur-
Sino-Soviet relations are discussed more fully in section II-,A, at pages II-A-1,
2 above.
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ing the past year. The operation of the existing production plant at
near capacity levels has created serious maintenance problems, notably
in the'vital railways and power plants. The requirements of the armed
services and a rapidly expanding bureaucracy have confronted the
regime with severe shortages of administrative and technical personnel.
China's trade with the West has sharply declined. largely as the result of
Western export controls. * Although this decrease has been increas-
ingly offset by commerce with the Soviet Bloc, the Chinese have suffered
shortages of certain critical items such as copper, lubricants, and motor
vehicle tires. There is no evidence, however, that economic tensions are
threatening Communist control, or will force, the Chinese to abandon
their war effort in Korea.
Despite the strains discussed above, the Chinese Communist economy
.exhibits certain elements of strength. Agricultural production, which
is the basis of the Chinese economy, has been favorable for the past two
years. Available evidence indicates that over-all industrial output in
China has increased steadily since 1949. This increase has probably
been due to rehabilitation of existing facilities. Further production in-
creases, however, will be less rapid as operable capacity of existing facili-
ties is approached. The Chinese Communists have made considerable
progress in restoring and extending transportation networks in China.
They have completed a strategic rail line to the Indochina border, con-
structed the first railroad in Szechwan, extended rail surveys and con-
struction toward the Sinkiang-USSR border, and improved motor high
ways. Government finances have been skillfully managed by the
Communists. The record of fairly stable prices in China indicates that
the Communist have not been forced to issue large amounts of paper
money 'to cover their expenditures.
An embargo and blockade against Communist China, if effective,
would probably prevent any further expansion of Communist China's
industrial output. Increasing maintenance and repair difficulties would
be experienced as a result of the denial of replacement capital goods from
the West. In addition, an embargo and blockade would compel Com-
munist China to rely on overland shipments from the USSR for virtually
'all its imports, would tend to lower the quality and increase the costs of
industrial production, would increase the existing strains on the rail-
ways, and would add significantly to inflationary pressures. However,
blockade would not alone insure the regime's collapse. * *
A detailed discussion of this question is contained in SE-27, "Probable Effects
of Various Possible Courses of Action with Respect to Communist China"
(18 pp., 5 June 1952). This estimate considers the consequences of the possible
imposition of an embargo or naval blockade, or of certain air operations not
confined to Korea.
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Military
Chinese Communist' ground forces consist of 2,350,000 regular troops,
organized into four field armies which include 69 armies and 230 divi-
sions. Nearly one-third of these forces - 17 armies, nine artillery divi-
sions and other supporting units, a total of 760,000 troops - are com-
mitted in Korea. In addition to the regular field forces, there are at
least 7 million partially trained and equipped military district, militia
and public security troops. The Chinese Communist Army is the largest
and, aside from that of the USSR, the most effective indigenous ground
combat force in Asia. The combat effectiveness of Chinese Communist
ground forces in the Korea-Manchuria area is substantially greater
than that of the forces located in China proper. The Chinese Commu-
nist Army has the capability of undertaking military operations else-
where in Asia concurrently with operations in Korea. The deployment
of major Chinese Communist ground and air units is shown on the map,
Figure II-D-2, following page II-D-3.
Since the beginning of the Korean war, the Communist Air Force
in China, which is believed to be made up of Chinese Communist, North
Korean, and Soviet elements, lias been built to an impressive size and
now consists of an estimated authorized strength of 2300 combat air-
craft, including 1400 jet fighters, most of which are in Manchuria.*
The capabilities of the CAF in China are largely limited to the air de-
fense of North China, Manchuria, and North Korea under conditions of
good visibility, and to limited attacks against UN forces in Korea and
adjacent waters. The offensive capabilities of this air force will remain
extremely limited, unless some type of light Jet bombardment aircraft
is introduced.
The Chinese Communist Navy consists of approximately 119 combat
vessels, including 70 escort- and patrol vessels and 40 amphibious craft.
The Navy has 25,000 men, including marines. The capabilities of the
Chinese Communist Navy will remain slight. It has limited capabilities
for coastal minelaying, motor torpedo attacks, and short-haul amphi-
bious lifts.
Chinese Communist armed forces are capable of maintaining internal
security; defending China against an attack by any Far Eastern power;
maintaining the commitment in Korea; and overrunning Hong Kong,
Macao, Indochina, Burma, and Thailand if opposed only by the forces
currently in these areas. * *
Estimate of Probable Internal Developments ***
We believe that during the next year, the Chinese Communist regime
will further consolidate its control; there will be increased socialization
of the economy; and some increase in military capabilities for both offen-
sive and *defensive operations.
* No estimate of actual strength has been made.
Provided that U.S. naval and air forces are available to defend Taiwan, a
Chinese Communist invasion of Taiwan would almost certainly fail.
*** External Communist courses of action in Asia are discussed in Section III-A,
below.
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TOP SECRET III-A-i
III. FAR EAST
A. COMMUNIST CAPABILITIES AND INTENTIONS
IN ASIA THROUGH MID-1953 *
We believe that the USSR and Communist China are united in their
determination to eliminate Western power and influence from Asia.'"="
During the period of this estimate, Soviet and/or Chinese Communist
forces in Asia will almost certainly continue to have the capability of
conducting the following operations concurrently: (a) overrunning
Hong Kong, Macao, Indochina, Burma, and Thailand if opposed only
by the forces currently in these areas;*** (b) rapidly reinforcing with
Chinese Communist and Soviet forces the Communist forces now in
Korea, and at the same time undertaking an invasion of Japan by
Soviet forces; and (c) attacking Western shipping in the Pacific by
submarines and mines and conducting air attacks and surface raids
against Western bases and shipping in the western and northern Pacific.
The Communists probably estimate that an attempt to seize addi-
tional territory in Asia by the identifiable use of Chinese Communist
or Soviet forces would stiffen non-Communist opposition, particularly
in Asia, and might create grave danger of war against mainland China,
of general war in the Far East, or even of global war. The Communists
probably also estimate that the economic and military vulnerabilities
of Communist China and the Soviet Far East would make the outcome
of a general war in the Far East at best uncertain. Finally, the Com-
munists are probably confident that further progress can be made
towards the achievement of their objectives in Asia by political warfare.
We believe, therefore, that during the period of this estimate the Com-
munists will refrain from initiating new courses of action involving the
identifiable use of Chinese Communist or,Soviet forces.
We believe that during the period of this estimate the Communists
will not intensify their efforts to overthrow non-Communist Asian gov-
ernments by the open rebellion of indigenous "armed liberation" move-
ments. Such movements have been reduced in effectiveness or
stalemated, and the overthrow of non-Communist governments through
these movements would now require Chinese Communist or Soviet
intervention of such magnitude as to entail the possibility of war against
mainland China, general war in Asia, or even global war.
In Korea, the Communists will probably not take the initiative to
break the military stalemate during the period of this estimate. We
believe that the Communists will protract the armistice negotiations
M This section is the verbatim conclusions of NIE-47, "Communist Capabilities
and Intentions in Asia through Mid-1953" (10 pp., 31 October 1952).
"Asia, as here used, includes Japan, Taiwan, the Philippines, Indonesia, Cey-
lon, and all of mainland Asia east of (but not including) Iran and
Afghanistan.
*. Provided that U.S. naval 'and air forces are available to defend Taiwan, a
Chinese Communist invasion of Taiwan would almost certainly fail.
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III-A-2 TOP SECRET
so long as they consider that they can continue to gain political and
military advantages from the situation in Korea and so long as they
estimate that a continuation of the Korean war does not involve grave
risk of global war.*
With regard to Indochina, the Chinese Communists will probably
continue their present type of support to the Viet Minh, but probably
will not invade Indochina or introduce large numbers of combat troops
in the guise of "volunteers."
In Malaya, the Communists will continue guerrilla warfare against
the British but will probably not receive increased aid from the Chinese
Communists.
Communist political warfare capabilities in Asia continue to be great
although they have declined somewhat in a number of countries since
1950. These capabilities will probably remain substantially unchanged
during the period of this estimate.
Throughout the period of this estimate the Communists will give a
high priority to strengthening their organization in non-Communist
countries, weakening Asian ties with the West and exploiting Asian
neutralism. At the same time, they will make organizational and
psychological preparations for the intensification of "armed liberation"
movements at a later date. The Bloc will increase its use of economic
inducements to influence the governments and peoples of Asia. These
Communist tactics will be used with particular vigor in efforts to
prevent the resurgence of an armed and non-Communist Japan.
We believe that the Communists will not significantly increase their
power and influence in Asia during the period of this estimate. How-
ever, the Communists will probably make some progress in their efforts
to strengthen both their economic and industrial base and their armed
forces in order to increase Communist influence in Asia and become
better prepared to resist possible Western pressures, and, if necessary
for the attainment of Communist objectives, to apply military force
against neighboring countries.
* The Special Assistant, Intelligence, Department of State, concurs in the con-
clusion that the Communists will probably not take the initiative to break
the present military stalemate in Korea. However, he finds that the second
sentence of the paragraph, which carries an implication that the Communists
might accept UN cease-fire terms if the UN were to threaten an expansion
of the Korean war, is not supported by available intelligence. He believes
that available intelligence does not enable us to estimate whether the un-
willingness of the Communists to conclude an armistice on terms currently
offered by the UN will continue throughout the period of this estimate.
(Footnote to NIE-47.)
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FAR EAST
B. STRATEGIC RESOURCES OF THE FAR EAST *
The Far East is an important source of a large number of strategic
and basic commodities required by the U.S. and other areas of the
Free World. Of these, tin, tungsten, chromite, rutile, rubber, abaca,
coconut oil, and wool would probably represent the most serious losses
to the Free World defense potential. The loss of certain basic food
commodities - wheat,,rice, dairy products, and meat - would be critical
to the United Kingdom, South Asia, and other Far East countries.
While no single item is of such importance that its loss would compel an
immediate reduction in defense production and essential civilian con-
sumption, the cumulative. importance of the many commodities is such
that the loss of the area, or important parts of it, would be a severe
one to the rest of the Free World from this standpoint alone.
The Far East now furnishes over 60 percent of the Free World supply
of tin, and loss of this would mean drastic reduction of non-essential
uses and withdrawals from stockpile. The Far East supplies roughly
70 percent of the Free World's supply of rutile, 30 percent of
the tungsten, and 20 percent of the chromite.. Dependence on the Far
East for these commodities can be lessened during the next few years
by further development of alternative sources and substitutes. Even
though the Far East supplies nearly 90 percent of the world's export-
able surplus of natural rubber, it is estimated that loss of the area could
be covered from synthetic production and withdrawals from stockpile
for a period of at least five years.
It is not considered likely that there will be any substantial increase
in the near future in the availability of natural or agriculture resources
in the Far East area. Generally speaking, the loss of the metals and
other natural resources would be most serious to the U.S. and the more
industrialized Free World nations, whereas the loss of the agricultural
commodities, except wool and abaca, would be less serious to the U.S.
than to other areas of the Free World.
Importance of Individual Countries. Individually, countries of the
Far East vary considerably in the importance of their strategic re-
sources. The loss of Indonesia (tin, rubber, bauxite, coconut oil, cin-
chona bark, and others), Malaya (tin, rubber, and coconut oil), Australia
and New Zealand (wool, rutile, lead, zinc, wheat,. meat and dairy
products), the Philippines (chromite, abaca, coconut oil, and others),
and Japan (silk, tea, but primarily her potential industrial capacity)
would be most serious. In the next category of importance would be
Thailand (rice, shellac, relatively small amounts of tin, tungsten, and
f
* This section is an extract from the contribution of the Economic Intelligence
Committee (representing all major intelligence agencies and interested De-
partments) to the pending NIE-56, "Consequences of Loss of Important Eco-
nomic Resources of the Far East." It is expected that this estimate will be
published in December 1952.
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III-B-2
rubber), and South Korea (chief source of tungsten in the Far East).
Of lesser importance are Burma, Indochina, New Caledonia, Formosa
and other countries.
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FAR EAST
C. KOREA
Military Situation and Truce Talks (See Map, Figure III-C-1, following
page III-C-3).
Despite hopeful indications in the early summer of 1952, the Com-
munists, after 15 months of cease-fire negotiations, remain adamant
on the principle that all Chinese captives be returned, and and there. are
no firm indications at present that they will modify this demand. A
complete turnabout, similar to the abrupt reversal in late 1951 over the
issue of the cease-fire line, could occur without advance warning. Cur-
rent Communist propaganda accuses the U.S. of "scuttling" the talks
and of attempting to coerce UN members at the General Assembly into
more aggressive measures.
The relatively stagnant military period since the truce talks began
in July 1951 has provided the enemy with an opportunity roughly to
double his ground forces in Korea and his air forces in Manchuria.
(See table at right in Figure III-C-1.) Over and above the increase
to a million--man army, other changes have taken place. The enemy
now has artillery which is capable of delivering heavy fire support de-
ployed in support of his front-line troops. The continuing reorganiza-
tion of Communist armored strength thay contribute substantially to
the effectiveness of what was heretofore primarily an infantry force.
The Communist air arm has expanded rapidly, principally with MIG-15
jet fighters, despite substantial losses inflicted by UN interceptors.
Communist ground forces in Korea are capable of mounting a major
offensive with little warning. Such an operation, if it resulted in a
major advance, would probably be limited, however, to about two weeks,
because of the inability of front-line logistical units to displace supplies
forward, a handicap which the enemy has apparently, not yet been able
to overcome. There are no indications that the Communists are con-
templating an offensive in the immediate future. Certain prerequisites
to such action --the moving up of reserves, forward displacement of
artillery, and increased reconnaissance --- have not been observed as
late as the end of October.
On the contrary, the enemy's principal military concern in the late
summer and fall of 1952 has apparently been with the possibility of
a UN offensive. Enemy prisoners indicate a 25X1
Communist fear of UN operations on an increased scale. The enemy's
front-line dispositions remain predominantly defensive, and fully one-
third of his available forces were deployed in October in or near coastal
areas vulnerable to UN amphibious attacks. The increase in enemy
aggressiveness in September and October has taken the form of Com-
munist limited-objective attacks, designed to capture or neutralize key
terrain features along the battle line.
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in the air war, Chinese and. Soviet-piloted. MIG-15 jets bear the brunt
of the Communist effort in northwestern Korea. Despite the ratio of
Communist aircraft combat losses to those of the UN -(about 8 to 1),
the enemy continues to fly a large number of daily sorties in an effort
to hinder UN interdiction of Communist lines of supply. There are also
signs of improved enemy pilot ability in combat encounters. There are
no current indications that the Communists will assume the offensive
with their, numerically superior jet force. An attempted expansion of
air defense over eastern Korea appeared to be under way during October,
but there is insufficient evidence 'as yet to determine the extent and
effectiveness of this effort.
Estimate of Probable. Communist Courses of Action
We believe that at least through mid-1953 the Communists could not
drive UN forces from Korea unless a major Soviet effort were applied.
We do not believe that the USSR will be willing to accept the grave risk
of global war which such a commitment would entail.
The Communists in Korea will probably not take the initiative to
break the military stalemate. We believe that the Communists will
protract the armistice negotiations so long as they consider that they
can continue to gain political and military advantages from the situ-
ation in Korea and so long as they estimate that a continuation of the
Korean war does not involve grave risk of global war.
If an armistice is concluded, we believe that the negotiation of a
political settlement will be complicated by Communist injection of Far
Eastern issues unrelated to Korea.
Whether or not a political settlement is achieved, we believe the
Communist objective to gain control of all Korea will remain unchanged.
The Communists will proceed to redevelop North Korea as a militant
and armed Satellite, and to subject South Korea to subversion, sabotage,
espionage, and guerrilla warfare.
Situation in South Korea
Syngman Rhee's recent re-election will insure relative political sta-
bility in South Korea in the near future. The aging president main-
tains virtually absolute control over the affairs of government , and
ruthlessly puts down any political rival. Political opposition exists in
various disunited factions of the legislature, but is not cohesive or
constructive. The government's position on international affairs re-
flects local aspirations such as unification of all Korea, fear and distrust
of the Japanese, and an acute sensitivity- about Korean sovereignty.
Communist guerrilla activities within South Korea are ineffective.
The major economic problem facing the government is a severe cur-
rency inflation. This results mainly from large UN expenditure of local
currency and from huge government deficits. Poor distribution facili-
* This subsection is an abstract of NIE--55/1, "Communist Capabilities and
Probable Courses of Action in Korea" (12 pp., 30 July 1952), as revised by NIE-
47, "Communist Intentions and Capabilities in Asia through Mid-1953" (10
pp., 31 October 1952).
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ties and lower-level government corruption tend to negate the usefulness
of increased imports provided by UN aid groups. The 1952 rice crops
will probably be adequate, but some grain imports will be needed.
The 350,000-man South Korean army is predominantly an infantry
force. Troops in combat units number roughly 150,000; the remainder
are in training, or serving as security and service troops. Armor and
artillery are being-provided in limited quantities, but combat divisions
still generally lack adequate supporting. weapons. The morale and
training of combat units is considered good. Both the South Korean
air force, with only a few piston-engined aircraft, and the naval force,
of which the largest vessels are destroyer escorts, are small. In addi-
tion the South Korean police number approximately 50,000. ?
Situation in North Korea
The Communist regime in North Korea, proclaimed following the
withdrawal of Soviet troops in 1948, is modeled after the Soviet Union.
It is led by Koreans born or educated in the USSR. A considerable
number of Chinese-trained Koreans and a "domestic" group hold subor-
dinate positions. Rigid police controls comparable to those. in any
Communist state insure the loyalty of the populace. Anti-Communist
resistance, although present, has been largely suppressed and is in-
effective.
The North Korean economy has been devastated. Industrial facili-
ties have been destroyed by UN bombing, while the power and trans-
portation systems have been generally disrupted. Severe food and
consumer goods shortages plague the regime, and a large-scale famine
among the civilian populace is possible. Communist China, the Soviet
Union, and other Satellite ' countries provide some relief goods in addi-
tion to massive shipments of military equipment, but civilian suffering
continues.
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FAR EAST"
E. THE CHINESE NATIONALIST SITUATION ON TAIWAN AND
COMMUNIST CAPABILITIES AND INTENTIONS AGAINST TAIWAN
The Nationalist Political Situation *
The Nationalist Government is relatively stable, and serious factional
strife is improbable so long. as President Chiang Iai-shek heads the
government. In the event of the overthrow or death of Chiang, a period
of factional strife and instability would probably follow before another
Nationalist leader could establish his authority.
is not likely seriously to affect Nationalist military capabilities unless
subversive actions were coordinated with a Communist invasion of
Communist activity on Taiwan has been effectively suppresse ana
Taiwan.
The Nationalist Military Situation *
The present combat strength of the Chinese Nationalist Army is
375,000. However, no divisions are -ready for offensive operations at
the present time. Equipment is in short supply, serious shortcomings
exist in unit and combined trainin
The Chinese Nationalist Air Force has in tactical units
a total of 311 aircraft. Morale and leadership in the Air Force are
good, but combat effectiveness is low because of inadequate spare parts,
equipment, and supplies, including POL, and limited operational train-
ing and experience. Most important, however, is the fact that the
Nationalists have no jet aircraft. The Chinese Nationalist Navy is com-
posed of 160 small vessels, the largest of which are 7 destroyer-escort-
type ships. The combat effectiveness of this fleet is low. There are
11,000 Nationalist Marines. In addition to these regular forces, there
are approximately 9,000 organized guerrillas on the Nationalist-held
offshore islands who have had commando training and experience.
Except as otherwise noted, these two subsections are abstracted from SE-29,
"Present and Potential Offensive Capabilities of the Chinese Nationalists,
and Probable Reactions to an Identifiable US Program of Preparing the Na-
tionalists for Offensive Operations aga:iist the Chinese Communists" (9 pp.,
18 June 1952). This estimate remains valid in essential respects.
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Although there may be as many as 100,000 guerrillas in scattered units
on the mainland, few of these units are believed to be effectively con-
trolled or directed by the Chinese Nationalists.
The Chinese Nationalists do not now have the capability to undertake
an invasion of mainland China or Hainan or to participate in combat
operations in Korea or Southeast Asia. At present, the Nationalists are
only capable of conducting minor raids and limited air attacks against
the nearby mainland of China. The scope and nature of these opera-
tions would be limited primarily by lack of equipment and training.
Nationalist air and naval deficiencies will also continue to limit the
scale of Nationalist raiding operations against mainland China.
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Chinese Communist Capabilities and Probable Courses of Action against
Taiwan *
At the present time there are approximately 400,000 Chinese Com-
munist troops deployed in the coastal areas between Shanghai and
Canton which could be utilized for operations against Taiwan. Except
for some inferiority in weapons and equipment and in the scale of
supporting arms and services, the combat effectiveness of these troops
is estimated to be approximately equal to that of the Chinese Com-
munist troops in Korea. In case of an armistice in Korea, up to 300,000
of the troops presently committed to Korean operations could be rede-
ployed to the mainland invasion coast for operations against Taiwan.
The major part of the Chinese Communist Air Force is based in
Manchuria and North China. Elements are based south of the Yangtze,
but redeployment even of these units would be necessary before the
Communists could launch a large-scale air offensive. In the event of
an armistice in Korea, a substantial liart of the aircraft available to the
Communists in China could be redeployed to South China with little
difficulty.
Chinese Communist capabilities for an assault of Taiwan are reduced
by their lack of experience in large-scale amphibious operations. Pre-
vious Chinese Communist amphibious experience has been limited to
short over-water hauls and coastal movements. The Communists have
.few conventional landing craft and consequently would have to employ
a heterogeneous assortment of vessels including junks. Loading and
coordinating the movement of this fleet would present formidable prob-
lems. Air support for such operations would be hampered by the lack
of Communist experience in air-naval.-amphibious operations. Further-
more, disembarkation of troops and equipment would have to be accom-
plished without offshore naval support. Finally, the Communists would
have to seize port facilities on Taiwan before a significant part of their
heavy equipment could be off-loaded.
Provided that 'present U.S. policy with respect to Taiwan continues
unchanged, and provided that U.S. naval and air forces are available to
This subsection is an abstract of NIE-27/1, "Chinese Communist Capabilities
and Intentions with Respect to Taiwan through 1952" (11 pp., 1 April 1952).
This estimate remains valid in essential respects.
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III-E-4
defend Taiwan, Chinese Communist operations against Taiwan would
almost certainly fail. If U.S. policy with respect to Taiwan should
change and the U.S. did not participate in the, defense of Taiwan, the
Chinese Nationalist forces could not successfully defend Taiwan against
a large-scale Communist operation.
Irrespective of developments in Korea., we believe that the Chinese
Communists will not make either a limited surprise attack or a large-
scale attack against Taiwan in the near future provided that present
U.S. policy with respect to Taiwan continues.
The Communists may conduct reconnaissance, nuisance, or destruc-
tion raids (either by air or sea) against Nationalist-held offshore islands
and may assault and capture some of these islands. However, we do
not believe such actions will necessarily indicate an imminent invasion
of Taiwan.
Over the longer term, we believe that the Chinese Communists will
attempt to secure control over Taiwan by political means if possible;
otherwise by military action when a favorable opportunity presents
itself. So long as the relative military strength of the United States
and the Communists in the Far East remains substantially unchanged,
and so long as U.S. policy with respect to Taiwan remains unchanged,
we believe the Chinese Communists will not hazard a military attack
on Taiwan. --
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 FAR EAST
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F. MAINLAND SOUTHEAST ASIA
(Indochina, Burma, Malaya, Thailand)
III-F-1
Introduction
The security of the countries of mainland Southeast Asia is closely
inter-related. Communist control of one mainland Southeast Asia
country would jeopardize the security of the others. Communist dom-
ination of the whole area would make it extremely difficult to prevent
Japan's eventual accommodation to,Communism.
Present Situation
The conflict in Indochina, now in its seventh year, is still a military
stalemate between the Viet Minh and French Union forces. While
there is fighting in all three of the Indochina states, the province of
Tonkin in Vietnam is the area of critical activity.' (See Maps, Figures.
III-F-1 and III--F-2, following page III-F-2.)
French-led forces include 190,000 French expeditionary troops (of
which some 50,000 are Metropolitan French) plus attached Indochinese
troops and the Vietnam National Army, numbering in all approximately
470,000. The Vietnam National Army, at present a force of about 60,000,
is taking shape slowly. It will be several years before it can be built up,
staffed and trained to the point where it might assume responsibility for
Indochina's defense. On the opposing side, there. are roughly 300,000
Viet Minh troops, regular and auxiliary. ,_
Viet Minh units have taken advantage of the summer rainy season,
which limits military operations, to recruit and train replacements for
casualties suffered during last winter's campaigns, and to resupply.
The recent resumption of fighting, in which a heavy concentration of
Viet Minh units has achieved at least temporary successes in the moun-
tainous back country of Tonkin, suggests that the Viet Minh's combat
yefl=iciency is as high, if not higher, than it was last year. French
forces, on the other hand, have built up through U.S. aid a significant
logistic advantage, but their limited numbers and the nature of the
warfare still render them incapable of taking decisive action against
the Viet Minh and at the same time maintaining the security of areas
now held.
The Vietnam government is provisional, and still in the formative
stage. It is headed by Bao Dai, who as a quasi-monarchic chief of state
* This section isslargely abstracted from NIE-35/2, "Probable Developments in
Indochina through Mid-1953" (7 pp., 29 August 1952). This estimate remains
valid in essential respects.
These figures represent the total strength on both sides in all of Indochina.
The strength of the opposing forces in the Tonkin area is shown on the map,
Figure III-F-2.
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appoints the premier. There is no elective legislative body. Compe-
tent administrators are scarce, and most government agencies continue
to rely heavily on French advisers.
Vietnam's international status is that of "independence within the
French Union." This status has been partially defined in a series of
French-Vietnamese agreements which confer on the French final au-
thority in the conduct of military operations and a veto power over
decisions affecting French economic interests. The guarantee of a
special status for France has caused all other Asian states except
Thailand to refrain from establishing diplomatic relations with Vietnam.
Nationalism is the principal motive force in Vietnamese politics. The
immediate and all-important nationalist objective is freedom from
French control. Both the Communist Viet Minh and the French-
sponsored state of Vietnam are attempting to exploit this sentiment,
the former by asserting that the French can be expelled only by armed
force with the support of the Soviet Union and Communist China, the
latter by asserting that cooperation with France in resisting an even
worse brand of imperialism is the path to genuine national inde-
pendence.
Since its formal alliance with the Communist world in February 1950,
the Viet Minh may have lost some of its initial popularity, but during
the same period it has strengthened its military machine and coercive
apparatus. Meanwhile, the Vietnam government has grown, militarily
and administratively, and has taken the initial steps in a reform pro-
gram designed to undercut Viet Minh propaganda. These developments
have not been sufficient, however, to dispel general apathy toward the
Vietnam government. Suspicion of French intentions and low regard
for the leaders of the Vietnam government is retarding the development
of a dynamic and popular anti-Communist regime.
Estimate of Probable' Developments
The outlook in Indochina through mid-1953 is for continued stale-
:mate, with both sides playing a waiting game. We believe the Chinese
Communists will not invade Indochina, but will continue their present
type of support to the Viet Minh. The French will continue their war
effort, but will seek to conduct a "holding action," and to transfer a
progressively larger part of the burdens of the war to the U.S. How-
ever, if present trends continue, the difficulties which France will face,
in supporting military efforts in both Europe and Indochina and in
maintaining its position in North Africa, will- in the longer run weaken
the French Union's ability and determination to continue resistance in
Indochina.
* This estimate is an abstract of the conclusions of NIE--35/2, "probable De-
velopments in Indochina through Mid-1953" (7 pp., August 1952).
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FAR EAST
Mainland Southeast Asia
Present Situation
The government of Burma has gradually strengthened its position
during the past year in the face of widespread Communist and Karen
insurgency and a parliamentary opposition consisting of a pro-Com-
munist coalition and the representatives of ethnic minorities. The
Burma Socialist Party, which controls the government, is suspicious of
both the Communist and Western worlds. While the government has
become markedly less hostile toward the West, it nevertheless attempts
to maintain amicable relations with both Moscow and Peiping.
Burmese leaders are showing increased determination to deal severely
with the insurgents. Burma's military forces have been expanded and
their operations intensified. Progress has been slow, however, and the
rebels, even without significant Chinese Communist aid, still control
large areas and menace much of the country. (See Map, Figure III-
F-s, following page III-F-4.) The Karen rebels, an important ethnic
minority, are reported to be receiving outside aid, and the Communists
expect to receive some help from Peiping. Local cooperation between
two or more of the insurgent groups has occurred, but there is no evi-
dence that reported efforts to create an insurgent alliance have met
with any success. :~
The presence of some 7,000 to 10,000 well-armed Chinese Nationalist
troops in northeast Burma further complicates the military picture,
and could serve as a pretext for Chinese Communist invasion. Efforts
to obtain the removal of these Chinese Nationalist forces have so far been
unsuccessful.
Rice production is the mainstay of the economy and prices obtained
for exports are currently the highest on record; rice production and
exports, however, are much below prewar levels. Burma's solvency has
been maintained by a conservative fiscal policy, 'but deficit spending
has lately been introduced to finance social reforms.
Estimate of Probable Developments
The government of Burma is in no immediate danger of being over-
thrown. The Burma Communist Party, the most dangerous of the in-
surgent groups, will probably decline somewhat in strength over the
next year unless given increased technical and logistical aid by the
Chinese Communists. The internal Communist threat will continue,
however, and may again become critical over the longer run unless
"Probable Developments in Burma through 1953" is the subject of the pending
NIE-74, expected to be published in December 1952, to supersede the now
outdated NIE-36/1.
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the Burmese Government greatly increases its political and , military
strength, and resolves many of the other problems facing it, such as
the Karen minority and the Chinese Nationalist troops in Burma.
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FAR EAST
Mainland Southeast Asia
MALAYA
In Malaya, the principal dollar earning area of the British Common-
wealth, the Communists have waged a ,campaign of guerrilla warfare
and economic sabotage since 1948. An estimated 95 percent of the in-
surgents are recruited from Malaya's large Chinese population, rather
than from the Malay or Indian communities.
Rubber production for 1952 is
expected to be lower than that of the previous year, when it was 32
percent of the world's total. Tin output is expected to be maintained
at approximately the 1951 leyel, 34 percent of world production. Any
drastic fall in rubber or tin prices would have substantial adverse effects
in Malaya.
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FAR EAST
Mainland Southeast Asia
THAILAND
Thailand is the only country in Southeast Asia to have escaped wide-
spread Communist violence, and its pro-Western orientation has been
demonstrated by the dispatch of armed units to Korea. Thailand's
apparent political stability, however, is threatened by a constant struggle
for power between various factions of the dictatorial ruling military
clique. An outbreak of destructive armed conflict is an ever-present
possibility.
The Communists in Thailand, largely Chinese, have recently intensi-
fied their activities and have had some success in extending their influ-
ence. It is probable, however, that Thailand will maintain a reasonable
degree of internal security and continue oriented towards the West,
even though not as enthusiastically as in the past.
1 November 1952
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25X6
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FAR EAST
1. PHILIPPINES
During the past year and a half : a ffEressive military action directed
by Defense Secretary Magsaysay,
has enabled the Philippine Government to reduce the
capabilities of the Communist-led Huks to a postwar low. Current
Communist strategy appears to emphasize propaganda and infiltration.
tactics rather than militant action, pending the achievement of better
organization and a larger following.
The strength of the Huk movement is focused in Central Luzon, where
long-standing agrarian abuses cause unrest. Continued widespread
corruption among government officials and the failure.of the adminis-
tration to take constructive economic and social action provide ready,
targets for Communist exploitation. There is no evidence of direct
Chinese Communist aid to the Philippine Communist Party, and only
a small proportion of the Philippine Chinese population is active in the
Communist movement.
Both major political parties in the Philippines are strongly anti-
Communist. Personalities rather than issues largely mark the difference
between them. With a presidential election scheduled for November
1953, both parties are now devoting their efforts to political maneuver-
ing rather than to the real problems of the country. President Quirino,
the probable Liberal Party candidate for reelection in 1953, strongly
supports American policies while attempting to build up his prestige
as an Asian leader. Largely for political purposes, Jose Laurel, a lead-
ing presidential candidate of the Nacionalista Party (which now con-
trols the Senate), has joined other opposition leaders in becoming
increasingly critical of American policy as it affects the Philippines,
while at the same time carefully denying that they are anti-American.
There have been increasing indications that Defense Secretary Mag-
saysay might also become a presidential candidate.
The economy ' of the Philippines remains closely tied to that of the
United States, and is. dependent upon the export at satisfactory prices
of key agricultural products. Declining prices in recent months have
reduced the level of business activity and the government's revenue.
These factors have contributed to a demand that the trade agreement
of 4 July 1946 with the United States 4e revised.
Until the government seriously undettakes social and economic re-
forms, of which there is no present prospect, containment and.suppres-
sion of the Huk revolutionary threat will continue to depend upon the
efficiency of the Philippine armed forces.
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FAR EAST
J. INDONESIA
Indonesia's coalition government faces two major problems: internal
security and the necessity of increasing production of foodstuffs for
domestic consumption and of raw materials for export. Four successive
cabinets since December 1949 have made little progress in dealing with
either problem.
West and Central Java are insecure principally because of the insur-
gent activities of the Darul Islam, a fanatic Moslem group. Areas of
unrest also exist in the South Celebes, the South Moluccas and South
Borneo. Although in West Java there is evidence of coordination
among guerrilla groups, including Communists, there is no indication
that a cohesive guerrilla coalition is developing. The full extent of
Communist military activity is not known, but Communist forces are
not believed to be large. On the political front, the Communist Party,
in a reversal of earlier tactics, is supporting the government, although
it is not represented in the cabinet.- Communists largely dominate the
Indonesian labor movement.
Two of Indonesia's principal exports are rubber and tin, which in 1951
amounted to 41 percent and 18 percent, respectively, of the world totals.
Decreased world prices for these commodities in 1952 resulted in the
impairment of Indonesia's favorable trade position. The ' country's
continuing population increase highlights the importance of, existing
government programs to increase rice production.
Indonesia's gestures in support of the West have been few, reluctant,
and relatively ineffective. For example, Indonesia signed the Japanese
peace treaty but has not yet ratified it.
On the other
hand, Indonesia has made no significant commitment to the Soviet
Bloc, and has adopted a policy of increasing vigilance over Chinese and
Indonesian Communist activity in Indonesia. Communist China main-
tains an embassy and four consulates in the country; the Soviet Union
has no diplomatic representatives there. In its relations with the
Netherlands, Indonesia seeks the abrogation of agreements regulating
relations between the two countries and demands the cession of Neth-
erlands New Guinea.
On 17 October, the Army and the Defense Ministry forced the in-
definite recess of the appointed parliament and obtained the president's
promise of national elections "as soon as possible." Since this unusual
military intervention, an uneasy balance appears to exist between civil
and military authorities. Although efforts to deal with major problems
will continue to be thwarted by political rivalries, some progress may be
expected. Adherence to an "independent" foreign policy, with occa-
sional indications of preference for the West, is expected to continue.
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FAR EAST
Both the British colony of Hong Kong and the Portuguese colony of
Macao have been economically useful to Communist China as sources of
Western goods. Although this usefulness in their present status does
not appear sufficient to insure the safety of either colony, the Peiping
regime has as yet given no indication that it intends to seize them in the
near future.
Hong Kong and Macao depend on foreign trade for their economic
prosperity.
Both Hong Kong and Macao have suffered from a decline in trade with
the Chinese Communists since mid-1951. (See Chart, Figure III-K-1,
following this page.) This decline is attributable in part to the imposi-
tion of export controls, chiefly by Hong Kong, on shipment of strategic
goods to China. Another contributing factor was a reduction in Chinese
purchases, on their own initiative, in the Hong Kong and Macao, markets.
However, the trade depression is not sufficiently, serious to endanger the
stability of the Hong Kong and Macao Governments. Moreover, pre-
liminary data indicate a revival of trade in the second half of 1952 with
the re-entry of the Chinese Communists into these markets.
Hong Kong and particularly Macao have had unpleasant experiences
with the Chinese Communists during 1952. After exchanges of fire
between Portuguese African troops and Chinese forces on the Macao bor-
der in July 1952, the Communists closed the border and forced the
Portuguese to apologize and pay reparations.
A Chinese Communist attack on either Hong Kong or Macao could be
launched with little or no warning. There are 60,000 troops immedi-
ately available for such operations, with another 150,000 in nearby areas.
Against these, Hong Kong has only 15,000 troops and Macao only 3,000.
Although the Chinese Communists have the capability to seize Hong
Kong and Macao, with significant assistance from internal subversive
elements, it is improbable that the Chinese Communists will attempt to
seize either colony in the near future.
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FAR EAST
Tibet has come under effective Chinese Communist control. Tradi-
tionally governed by a Buddhist hierarchy under the Dalai Lama, Tibet
had been virtually independent for forty years. With the establishment
of the Peiping regime in 1949, the Chinese Communists proclaimed their
intention of "liberating" Tibet. An advance into Tibet began in 1950,
and the Dalai Lama fled from the capital, Lhasa. In May 1951, under
Communist pressure, a Tibetan delegation to Peiping signed an agree-
ment preparing for Chinese Communist control. The Dalai Lama was
induced to return to Lhasa in August, 1951, and has since been used as
a Chinese puppet.
By the end of 1951 the principal cities and settlements of Tibet were
occupied by Communist troops. The trade routes and major passes
from Tibet into India, Bhutan, Sikkim, Nepal and Kashmir also came
under Chinese military control. The occupation force has been built up
to an estimated 15,000 troops, most of them in southeastern Tibet. This
force, living off the land, has caused a serious food shortage. Although
the Tibetans are reported to be increasingly restive as a result of the
food shortage, they are not capable of overthrowing the military govern-
ment.
Control of Tibet facilitates the build-up of Chinese influence. in the
border area between Tibet and India. The border territories of Bhutan,
Aikkim, Nepal and Kashmir, and parts of the Indian states of Assam,
Uttar Pradesh and the Punjab, are very mountainous and thinly settled,
and many of their boundaries have never been clearly defined. Historical
Chinese claims to suzerainty can be and have been advanced to justify
encroachment in undemarcated areas.
The governments of these border regions exercise only limited author-
ity in the areas nominally under their control. In Nepal particularly, a
weak interim government is confronted by both Communist and non-
Communist opposition, and a recent fractionalization of political parties
has made it unlikely that the holding of national elections can bring to
power a group sufficiently strong to improve Nepal's security situation.
Infiltration of Communist agents from Tibet. into India's northern bor-
der area may be expected. There is no indication, however, that the
Chinese Communists will undertake a large-scale military invasion of
this area in the near future.
Economic development of Tibet is being pushed by the Communists,
with emphasis on transport and communications. -Road improvement,
construction of airfields and establishment of a radio network have been
reported. These facilities are needed by, the Chinese Communists to
insure their line of supply and to effect the integration of Tibet with
China Proper. In view of the rudimentary economy of Tibet as, the
Communists found it, and the difficulty- of access from China, the
amount of construction is probably very limited at present.
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IV. SOUTH ASIA
(India, Pakistan, Kashmir, Afghanistan, Ceylon)
Introduction*
The nations of South Asia are significant in the present world situa-
tion chiefly because of their aggregate size and vast population,' their
successful transition from colonial to independent status while main-
taining friendly ties with the former colonial powers, and their role as
suppliers of strategic and other materials to the Commonwealth, the
U.S., and the free world at large. The governments of these countries
are now fairly stable. However, the area is confronted, notably.in the
case of India, with serious economic problems ' and with, developing
Communist subversive. pressures. Meanwhile, the Kashmir dispute
between India and Pakistan continues to be an economic and political
burden on both countries and is a threat to the peace.
* This introductory paragraph is based in part on SE-32, "Consequences of
Communist Control over South Asia" (7 pp., 3 October 1952).
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A. INDIA
Present Situation
Nehru and the Congress Party emerged from the national elections
of early 1952 with a weakened though still dominant position in Indian
politics. Although the Congress Party retained a strong majority in
the national parliament, it lost considerable ground to independents
and leftists who capitalized on the general dissatisfaction over party
corruption and the lack of visible economic progress. It actually failed
to secure a majority in some of the state elections. The Congress Party
is facing difficulty in retaining its hold over northern India, where there
is factionalism within the party and where deposed princes and other
groups, such as the Sikhs, demand special rights. A non-Congress
government already controls the Patiala and East Punjab States Union.
In the south Indian states of Madras, Travancore-Cochin and Hydera-
bad, the Congress Party faces strong opposition from Communist and
other leftist forces.
The Communist Party of India, though still far from an immediate
threat to the stability of the regime, has grown considerably in influence
since early 1951. The 27 Communists in parliament (total member-
ship: 497) have effectively used their opportunity for obstructionism
and propaganda. There are indications that the Indian and Chinese
Communists are making contact along the Himalayan frontier.
Although the Indian Government has exhibited a growing awareness
of the Communist menace, has accepted U.S. economic aid, and has
generally appeared more cordial toward the U.S. in the last year, Nehru
has retained his basic policy of non-involvement in the East-West
struggle and his anti-colonialist identification with the Arab-Asian bloc
in the UN. India has meanwhile taken a strongly nationalistic position
in the Kashmir dispute and in its efforts to gain control of the French
and Portuguese enclaves on the subcontinent. It has also strongly
supported the position of the South African Indian minority.
India faces grave economic problems. A chronic, food deficit area,
India had to import 4 million tons of grain in 1952, including 150,000
tons from Communist China. It will have to increase these. imports if
the expansion of food production fails to keep pace with the rapid
growth of population or if serious crop failures such as those of 1951
recur. India's industrial and transport equipment is qld and insuffi-.
cient for current needs. India's economic problems have been compli-
cated by the Kashmir dispute," which has resulted in heavy military
expenditures and in a disruption of the once-normal flow of Pakistani
jute and cotton to Indian mills. India accepted a U.S. loan of
$190,000,000 in 1951 for food purchases, and $50,000,000 in U.S. grant aid
in 1952, in furtherance of its economic development program. It will
require large-scale external financial assistance for 1953 to prevent
economic deterioration.
*The Kashmir dispute is discussed in more detail in section IV-C, following.
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India maintains about 400,000 ground troops and 1,500,000 trained
but unorganized reserves. These forces, which include one armored
division and an armored brigade, are of generally good fighting quality
but are hampered both by a shortage of fully qualified senior officers
and by their dependence upon foreign sources for equipment heavier
than small arms. They can maintain internal security and defend the
country against such antagonists as Pakistan, but would require assist-
ance to withstand aggression by a major power. Indian naval strength
consists of one light cruiser, three destroyers, and 8,900 personnel. The
Air Force of 17,000 men has only 475 pilots.
Estimate of Probable Developments
Nehru and the Congress Party are not likely to face any serious
political threat over the next year or two. However, the cohesion and.
strength of the Congress Party are likely to decline somewhat under
the impact of internal and external pressures. The influence of the
Communist opposition is likely to grow unless the government succeeds
in achieving some appreciable progress toward economic betterment.
During the period of this estimate, India will probably continue to
desire U.S. help and friendship but will probably hold to its policy of
non-involvement in the East-West struggle and remain critical of a
number of Western policies and actions.
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VII-H-1
LATIN AMERICA
H. PANAMA
Panama's new President, Jose A. Remon, at present heads a strong
and firmly pro-United States government. Along with most Panaman-
ians, he realizes that close relations with the United States are inescap-
able, not only because of the American interest in the Canal and occupa-
de-
announced Panama's
tion of the Canal Zone, States. Remons because
plan
pendence to ask he
o on the United United States for a revision of the Panama Canal Treaty stems from
his belief that Panama should receive a larger share of benefits from,
the Canal; he is not expected to challenge existing American rights
in the Zone.
Remon's overwhelming victory in last May's elections left the opposi-
tion alliance of three political parties greatly weakened. The opposi
however, and is
tion still controls most of the leading newspapers,
influential among politically important student groups. Some mem-
bers of the opposition have in the past been willing to make common
cause with the Communist People's Party which, though it has only
about 400 members and a mere 40 to 50 militants, is active in various
front groups and has infiltrated the educational system and some labor
unions. The Communists, however, are,unlikely to become a threat if
they remain isolated from other opposition groups.
Remon thus begins his term in a strong position. At least 40 of
the 53 deputies in the National Assembly are behind him. If the first
months of his administration are successful, he will increase his al-
ready strong popular following.
On the other hand, the Remon regime must deal with Panama's
serious economic difficulties, stemming basically from an over-depend-
ence on income derived from the Panama Canal and the under-develop-
ment of the country's potentially valuable agricultural esource . A
severe depression has prevailed since 1948, unemployment
increasingly critical, and the government itself ig near `bankruptcy.
Remon, with the assistance of American technicians, plans a con-
structive attack on these problems.
The 2,500-strong Panamanian National Police is the country's only
armed force. It is a relatively effective, well-trained and disciplined
force for the maintenance of internal order. Remon, who rose to power
as Commandant of Police, retains the complete loyalty of the force.
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SOUTH ASIA
Pakistan has a fairly strong and stable government controlled by the
conservative Moslem League. There is no e'Ffective opposition party.
Since late 1951, however, some internal dissension between orthodox
Islamic and secular forces has developed within the government party.
This will probably come to, a head in November, when a draft consti-
tution, which will determine whether Pakistan will. be an Islamic or a
secular state, is to be considered. '
Development of a significant Communist movement has been effec-
tively checked by governmental suppression, but the recent release of.
several Communist- leaders from jail may enable the party again to.
make progress.
Pakistan's foreign policy outlook is dominated by the Kashmir dis-.
pute.'" This dispute is a source of friction between Pakistan and the
West and of domestic political embarrassment to the government. It
also constitutes a continuing financial drain. Although Pakistan. has
Present Situation
manifested some interest in participating in Middle East defense and
at one time hinted that it might send troops to Korea, it has been
unwilling to make such commitments with the Kashmir issue unsettled.
Pakistani bitterness over Western unwillingness to back it on Kashmir
has recently led the government to draw closer to the Arab-Asian bloc
arrd undoubtedly played a large part in its decision to lead the fight
for inscription of the Tunisian issue on the UN General Assembly
agenda.
Pakistan depends primarily on the West for
trade as well as for funds for its economic development. A serious slump
in the prices of jute and cotton in 1952 sharply reduced the country's
income and led to excessive drains of Pakistan foreign currency reserves.
An acute shortage of food-grains has also necessitated the importation
of over 500,000 tons of wheat, including 150,000 tons on a loan from
the U.S. and 300,000 tons from the USSR in exchange for jute and
cotton. This barter deal with the USSR and heavy purchases of cotton
by Communist China will probably not reverse the primarily Western
orientation of Pakistan's trade.
Pakistan's weakened financial position hinders progress in its
economic development program. It received $10,000,000 in grant. aid
from the U.S. in 1952.
Pakistan's armed forces include an army of 206,000 men, supported
by about 85,000 other organized troops. The air force totals 10,100,
of whom 144 are pilots. The navy of 4,800 men has three destroyers
and some smaller vessels. These forces can maintain internal security
* The Kashmir dispute is discussed in more detail in section IV-C, following.
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IV-B-2
and provide strong, though probably unsuccessful, opposition to India.
They are almost completely dependent upon foreign sources for supplies
of equipment and ammunition.
Estimate, of Probable Developments
The situation in Pakistan is likely to remain relatively unchanged
over the next year or two. Although divisions within the Moslem
League will probably become more pronounced, an open split is unlikely.
Externally, the Pakistan Government is likely to remain predominantly
pro-Western in its political and economic orientation but resentful of
the West's failure to back it in Kashmir and critical of the West's, record
on colonial questions.
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TOP SECRET IV-C-1
SOUTH ASIA
C. THE KASHMIR DISPUTE
(See Map, Figure IV-C-1, following this page)
The dispute between India and Pakistan over control of strategically
located Kashmir has been before the UN Security Council since January
1948. Repeated UN efforts to secure agreement on how to prepare for
the plebiscite agreed to by both parties have failed, most recently on the
question of the number of troops to remain in Kashmir during the pro-
posed plebiscite. (At present, there are about 62,000 Indian troops and
about 19,000 Pakistanis in Kashmir.) Currently both sides are awaiting
Security Council disposition of the report of UN Representative Frank
Graham.
Within Kashmir the political situation remains obscure. Sheikh
Abdullah, who was responsible for Kashmir's accession to India at the
very start of the dispute in 1947, has steadily consolidated his position by
instituting a land reform program, and by resorting to authoritarian
methods,
It. is unclear, however, whether he hag successfully era ica e e basic
pro-Pakistani sentiments of the Moslem majority in the state. Abdullah,
whose entourage includes a number of suspected Communists, has mean-
while achieved considerable autonomy for Kashmir, a point of some
concern to India. Chinese Communist patrols occasionally penetrate
northern areas of Kashmir which Communist China has claimed as its
own territory.
There is no present prospect for an early break of the Kashmir dead-
lock. The basic obstacle appears to be India's continuing reluctance to
risk the results of an impartial plebiscite. Although agitation in Pakis-
tan for military action to seize Kashmir may develop from time to time,
we continue to believe that the Pakistan Government is unlikely to ac-
cept the grave military risks such a course would entail. * The Abdullah
government's desire for greater independence, which is being stimulated
by the Communists, will probably cause further friction with India, but
Abdullah is unlikely to break with the government he depends on for
military and economic support.
* The possibility of a reopening of hostilities over Kashmir and the, probable
military consequences thereof were analyzed in NIE-41, "Probable Develop-
ments in the Kashmir Dispute to the End of 1951" (7 pp., 14 September 1951).
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SOUTH ASIA.
D. AFGHANISTAN
The Afghan Government is controlled b a small autocratic rou
headed by the King,
There is no known Afghan Communist
-Party, but Communist-inspired subversive activities are believed to be
growing.
Afghan foreign policy reflects the fact that it is remote from Western
assistance and utterly incapable of resisting, with its weak army of
66,000, any serious Soviet attack. Afghanistan has accepted U.S. aid
missions (it now has an $800,000 U.S. grant for 1953), but has avoided
political involvement in the East-West conflict, in general following the
lead of the Arab-Asian bloc. Afghanistan's vulnerability to Soviet pres-
sure and the possibility that such pressure may increase were indicated
by the delivery of a sharp Soviet note in August protesting plans to per-
mit a French firm to drill for oil in northern Afghanistan. As a result,
the Afghans are now hesitant about implementing these plans.
Relations with Pakistan have been embittered by an intensive Afghan
campaign for the formation of Pushtoonistan, a proposed autonomous
territory for Pathan tribes on the Pakistani side of the, Pakistani-Afghan
frontier. The minimum and maximum claims for Pushtoonistan are
shown on the map, Figure IV-C-1, preceding this page.
Afghanistan depends on imports for products other than food and
clothing. Afghanistan depends upon Pakistan for an outlet to the sea,
and the latter has sometimes retaliated against Pushtoonistan propa-
ganda by cutting off the regular flow of supplies, thus forcing Afghanis-
tan to increase its trade with the USSR.
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SOUTH ASIA
IV-E-1
Ceylon is a member of the Commonwealth and is controlled by the
pro-Western United National Party, with leftist opposition elements like
the Trotskyite and Stalinist Communist groups now occupying a weak
position. Nevertheless, Ceylon has followed a neutral course in the
East-West conflict and has sometimes acted contrary to Western inter-
ests because of its special foreign trade problems.
Forced to import more than half of its food and dependent on sales of
rubber for considerable of the foreign exchange needed to buy it, Cey-
lon shipped 20,000 tons of rubber to Communist China during the first
seven months of 1952 and also turned to Peiping recently for an` emer-
gency shipment of 80,000 tons of rice. Although Ceylon does not wish
to jeopardize its relations with the West, it is faced with a $20 million
deficit in foreign exchange built up over the first seven months of this
year, and is currently considering an even more comprehensive deal with
the Chinese Communists under which it would ship up to.50,000 tons of
rubber to the Chinese and receive 200,000 tons of rice annually.
Ceylon has negligible military forces of its own and depends on the
Commonwealth for protection against attack. It has granted the Brit-
ish some limited base rights in Ceylon.
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V. MIDDLE EAST AND AFRICA
V-A-1
Present Situation
Recent events have produced far-reaching changes in the traditional
political forces in Iran. The National Front. has seized the political
initiative from the Shah and the formerly dominant landowning class.
Premier Mossadeq has become the dominant political figure in Than,
but the coalition of urban nationalists and religious zealots which. he
heads is united primarily by a common desire to rid the country of
foreign influence. Western access to Iranian oil and Iran's ultimate
role in the East-West conflict will depend in large measure on Mossa-
deq's handling of the following serious problems:
a. The Oil Dispute. The oil dispute remains the focal point of politi-
cal activity in Iran. Mossadeq rode to power on the issue of nationali-
zation of oil and his present political strength. derives largely from his
continued defiance of the UK. The political forces which Mossadeq has
himself encouraged require him to insist upon greater concessions than
the British have given any indication of accepting. Nevertheless,
Mossadeq must eventually find some means of selling Iranian oil if he is
to retain popular support and avoid government bankruptcy.
b. Government's Fiscal Position. Loss of oil revenues has seriously
affected the financial position of the government. However, the current
rate of government expenditure can probably be maintained for some
.:months by further internal borrowing and currency expansion. Pro-
longed absence of oil revenues, however, would eventually necessitate
substantial budgetary cuts. Such cuts would weaken Mossadeq's
political strength, reduce the effectiveness of the security forces, under-
mine the authority of the central government, and create favorable
opportunities for the expansion of Communist influence.
c. Economic Deterioration. Although loss of oil revenues has not
.seriously affected the primarily agricultural Iranian economy, the urban
sectors of the economy have suffered from rising prices, curtailment
of imports and increased unemployment. Shortage of foreign exchange
is forcing the government to resort to barter agreements with the Soviet
Bloc countries as well as with Western nations. The Iranian govern-
.ment's economic development program is at a virtual standstill.
d. Control over the National Front. A major threat to Mossadeq's
continued control over the heterogeneous National Front arises from the
activities of Mullah Kashani, ambitious Moslem leader. Kashani's
extreme intransigeance on the oil issue and his uncompromising
demands for the termination of all foreign influence in Iran severely
limit Mossadeq's freedom of action. Agitation by Kashani's followers
among the peasants for quick and sweeping agrarian reform is con-
tributing to unrest throughout the country and playing into the hands
of the Communists.
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e. Security Forces. The Iranian armed forces number about 156,000
and are almost completely dependent upon foreign sources for equip-
ment. Their continued capability for maintaining internal security
will depend upon the extent to which the government gives them effec-
tive direction and is able to pay Army salaries. Mossadeq is having
some success in changing the allegiance 9f the security forces from the
throne to the national government. The. resulting changes in Army
leadership and the effect of recent events have created some confusion
and insecurity among some high ranking Army leaders, but morale in
general is believed to be satisfactory. Communist influence in the se-
curity forces appears to be slight.
f. The Tudeh Party. The Tudeh (Communist) Party with an esti-
mated membership of approximately 15,000 is at present almost cer-
tainly incapable by itself of overthrowing the government by force or
subversion., However, it has become stronger in recent months and has
demonstrated effective organization. Its agitation for social and eco-
nomic reforms is contributing to unrest and its bitter anti-Western
stand is adding to Mossadeq's difficulty in settling the oil dispute. How-
ever, the Party still lacks a legal status as well as either the power in
the Majlis or control of the key Cabinet positions which would be neces-
sary to take over the government by constitutional means.
-Estimate of the Situation
We believe that, barring Mossadeq's death from natural causes or by
assassination, his National Front regime will probably remain in power
for at least six months. Financial or economic factors are not in them-
selves likely to cause the collapse of the Mossadeq regime, even though
oil revenues are not likely to be restored in that period. Mossadeq has
the authority and the resources, and probably has the will and determi-
nation, to prevent a significant deterioration in the ,effectiveness of-the
security forces and to maintain the authority of the central government
throughout the country. However, Mossadeq will face growing demands
for social and economic reform. In his efforts to satisfy these ' demands
in the face of opposition by conservative elements - particularly the
landlords - Mossadeq will probably resort to increasingly authoritarian
measures. Even if Mossadeq were removed from the political scene,
we do not believe that the Tudeh Party would come to power during the
next six, months.
* This estimate is limited to a period of six months in view of the prospective
publication, on or about 8 November, of NIE--75, "Probable Developments in
Iran Through 1953."
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MIDDLE EAST AND AFRICA
V-B-1
B. THE ARAB. STATES
(Egypt and the Sudan, Syria, Lebanon, Iraq, Jordan, Saudi Arabia)
Present Situation
Since the Egyptian coup of 23 July, the army group, around General
Nag'ib has steadily consolidated its control. On 7 September General
Nagib personally assumed the premiership, and the army's inner circle
openly took over direction of the government. On 14 October the three-
man Regency Council was, reduced to one. The present provisional
Regent, Prince Moneim, can be expected to be completely docile.
Rumors persist that Egypt may soon be declared a republic.
The inner circle, which includes General Nagib and eight other offi-
cers, is apparently the supreme policy-making body. These men were
almost unknown before the coup and had rrio experience of civil govern-
ment. There is no clear evidence to date of their political tendencies.
Some members at least are believed to be associated with the extreme
nationalistic Moslem Brotherhood. Spokesmen for the army group,
however, have indicated a desire to align Egypt with the West, partic-
ularly the U.S., and to follow a moderate course. The record of the
government so far has been reformist but moderate.
The regime's anti-corruption and land reform programs have received
widespread support, though they have alienated traditionally influential
elements in the country. There has been delay in achieving tangible
results from the much-publicized land reform, and government efforts
at price control are irritating to the merchant class. Fearing popular
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dissatisfaction with its lack of immediate positive achievements, the
regime has tried to distract public attention by threatening to. indict
the former King for treason.
The Communist Party is outlawed in Egypt, and since assuming
power the military junta has suppressed Communist activities. Nagib's
determined stand against the powerful Wafd Party, and the arrest of
many leading political figures, evidence the army's intent to neutralize
all potential opposition.
Egypt's foreign trade is principally based on cotton. Reduced sales
in world markets and years of speculation under Farouk's regime have
severely depressed the industry. Egypt has recently been bartering
cotton for Russian wheat. The government also faces difficult financial
problems.
The army regime has indicated considerable interest in obtaining
foreign capital to develop Egyptian industries. This policy contrasts
with that of previous governments which restricted foreign investments.
One of the first acts of the new regime was to liberalize the 1947
Company Law to permit 51 percent foreign ownership of Egyptian
concerns. "JAM
The Egyptian armed forces total approximately 86,000, of which
65,000 are in the army, and there are an additional 6,500 in the Royal
Frontier Corps. Both organizations are weak in materiel and combat
efficiency. The air force of 2,800, with 285 aircraft, has a low opera-
tional efficiency.
The Royal Egyptian Police Force is organized as a military unit and
has approximately 100,000 men. The army and the police have worked
closely together since martial law was declared on 26 January 1952.
A number of senior police officers, however, were purged after the 23
July coup, and the army group can be expected to insure that the police
force remains subordinate to the military. The Nagib government has
control of the security forces and can probably put down any counter-
coup.
Since the coup, a prime concern of the army inner circle hag been to
secure new e ui ment for the armed forces.
Estimate of Probable Developments
General Nagib's government will probably be able to cope with any
likely attempt to overthrow it if it can maintain its internal harmony
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and make satisfactory progress toward resolutions of Egypt's domestic
problems. It has already won and will probably keep a large popular
following. The government will probably be weakest on economic and
financial problems, which are bound to be very difficult during the next
few years. The government can be expected to continue to bargain for.
Western military and economic aid by offering to negotiate outstanding
issues and to cooperate in defense of the area. The Egyptian example
will have an important influence upon the other Arab states.
The Sudan '
The Sudan has long been a major stumbling block to all Anglo-
Egyptian negotiations. Administered as a condominium by Great
Britain and Egypt since 1899, it is scheduled to move closer to self-
government in early November 1952 when the British-sponsored con-
stitution is to become effective. In 1951 Egypt denounced the con-
dominium agreement and proclaimed the unity of Egypt and the
Sudan, and since then has refused to recognize British authority or to
negotiate with Great Britain except on,its own terms. Ignoring Egypt's
claims, Great Britain has proceeded alone with preparations for self-
government under a British Governor-General.
Great Britain is anxious to obtain Egyptian cooperation in imple-
menting the constitution, and General Nagib, in contrast to previous
Egyptian prime ministers, has indicated a willingness; to discuss the
future of the Sudan with the British. There is no clear indication of
what final position Nagib's government will take. However, there are
some indications that the Nagib regime may be willing to accept self-
determination in the Sudan, which might afford the basis for a settle-
ment.
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MIDDLE EAST AND AFRICA
Arab States
Lieutenant Colonel Shishakli's military government has controlled
Syria since it came to power by means of a coup d'etat in November,
1951. The government appears to have general popular approval.
However, it has failed in its efforts to get the backing of civilian poli-
ticians, and some opposition has developed in the Army and in political
circles. The Syrian army does not appear to be eager to rule the
country, but has as yet found no civilian political force strong enough
to take its place and protect the army's interests.
In spite of considerable "neutralist" sentiment in Syria, Shishakli has
shown a generally pro-West orientation. This has been accompanied
by periodic demands for economic and military aid, but Shishakli has
'thus far held out against committing himself to MDAP aid
definitely refused U.S. offers of technical assistance.
One of Shishakli's chief concerns has been his relations with neigh-
boring countries. He has taken a strong line against Israel, and there
are periodic incidents between Syria and Israel in the Lake Hule border
region. Shishakli has made a special effort to strengthen his ties with
the other members of the Arab League and has particularly good rela-
tions with Saudi Arabia and Egypt. Relations with Iraq, however, are
not good, because he is opposed to the Iraqi-favored union of Syria,
Jordan and Iraq under the Iraqi Crown.
Communism was made illegal in 1947, but there are still reported to
be some 10,000 Communists working covertly.
Syria's army consists of approximately 30,000 men; its equipment is
mainly obsolescent. It has the capability nevertheless to maintain in-
ternal security.
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MIDDLE EAST AND AFRICA
Arab States
V-B-5
LEBANON
The forced resignation this September of Lebanon's president and
virtual dictator, Bishara el-Khouri, has removed an outstanding symbol
of corruption, nepotism, and indifference to the public interest, but it is
still unclear how much of a change in the pattern of government will
ensue. The new president, Camille Chamoun, was drawn from the old
circle of politicians who have dominated Lebanon since it won inde
pendence, and the reformist element which forced Khouri out is but a
small minority in parliament. Meanwhile, political change continues
to be inhibited by fear of disturbing the balance between Christians and
Moslems, by the local and sectarian loyalties of most politicians, and
by consciousness of Lebanon's weakness vis-a-vis Israel and Syria.
Although Communism is illegal, there is a small active underground.
Lebanon's foreign policy is ambivalent. Lebanon is drawn toward
the West by long-standing cultural, religious and economic ties and by
the fear among its Christians of being swallowed up in a Moslem
"Greater Syria." At the same time it is strongly conscious of being
Arab and fearful of being considered out of step with its Moslem Arab
neighbors. As a result, Lebanon has frequently supported the West. in
the UN but has also tended to follow the majority in the Arab League.
Lebanon's 8,000-man army is valueless except for internal security
purposes.
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MIDDLE EAST AND AFRICA
Arab States
IRAQ
Political power in Iraq has remained in the hands of a small circle of
old-line politicians generally responsive to the Regent, Abdul Ilah, who
is schei~uled to step down when young King Feisal comes of age in May
1953. Although nationalist, anti-colonialist sentiment pervades all
politicallyconscious elements, the more xenophobic political _groups are
still a minority. The small Communist Party has long been subject to
vigorous police action as an illegal organization, but the growing Tudeh
strength in neighboring Iran and the periodic unrest among Iraq's size-
able Kurdish minority has encouraged the moiement, and Communist
strength is growing.
Iraq's Western-oriented leaders have been cautious regarding the
problem of the British, who have airbase rights at Habbaniya and Shaiba
under a twenty-five-year Treaty of Alliance due to expire in 1957. Brit-
ish political and economic influence remains large. Iraq has so far
exerted only slight pressure for revision of the treaty and, in contrast to
Iran's decision to nationalize oil, has this year renewed its contract with
the Iraq Petroleum Company on terms which will about double its pre-
vious oil revenues.
Iraq is semi-isolated in Arab politics because of long-standing rivalries
with Saudi Arabia and Egypt and because of Jordanian and Syrian re-
sentment of Iraqi desires for union of the three countries under King
Feisal.
Iraq's prospects for economic development are good in iiew of the
availability of much additional irrigable land and of large oil revenues
for development purposes.
Iraq's armed forces, totalling some 60,000 men and largely equipped
with British arms, are only capable of 'maintaining internal security.
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MIDDLE EAST AND AFRICA
Arab States
JORDAN
Jordan has changed monarchs twice in the last two years : King Abdul-
lah was assassinated in July 1951 by an opponent of his Israeli policy,
and his demented successor, Talal, was removed from the throne this
year in favor of the latter's young son Hussein. Nevertheless, the inter-
nal political situation remains fairly stable and Jordan retains its spe-
cial tie with the British, on whose subsidies it relies for support of the
Arab Legion and for much of its civil government budget. Prime Min-
ister Abul Huda has generally improved his political position despite
some trouble coping with Palestinian Arab politicians of West Jordan,
who. have in some cases joined forces with Palestinian Communists to
create disturbances.
Since Abdullah's death, Jordan has abandoned his efforts at a settle-
ment with Israel and has generally improved its relations with the other
Arab states.
The Jordanian Arab Legion, with a strength of 16,000 men, is well-
trained and well-equipped.
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MIDDLE EAST AND AFRICA
Arab States
SAUDI ARABIA
Although King Ibn Saud, now in his seventies, has aged noticeably in
the last year or two. and has taken some steps to groom Crown Prince
Saud to succeed to the throne on his death, he remains an absolute
monarch in firm control of the Saudi state. There is a possibility that
palace intriguing may increase as the King's faculties decline, but there
is no present indication that the King will lose control or that the suc-
cession will be contested.
Ibn Saud has continued on good terms with the U.S., which maintains
an Air Force base at Dhahran,
Saudi Arabia has taken
pains to establish good relations with all the Arab states except Iraq. It
has generally sided with Egypt in Arab League councils.
Saudi Arabia has a 12,000-man army and a tribal militia of 85,000.
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MIDDLE EAST AND AFRICA.,
D. TURKEY
Present Situation
h th most stable government and the most powerful mili-
e
Turkey as
tary force in the Middle East and is firmly committed to a pro-Western,
anti-Soviet position. Both the incumbent Democrat Party and the op-
position Popular Republican Party favor a foreign policy of -vigorous
opposition to the USSR, active participation in Western defehse prepara-
tions, and support for the UN. The Turkish security forces have dil-
igently suppressed what little pro-Communist sentiment has appeared.
Turkey still has a long way to go in the direction of economic develop-
ment, in part because of the heavy burden of maintaining a large mili-
tary establishment, which accounts for about 35 percent of the budget.
MSA aid has made a vital contribution to the military budget and has
assisted materially in development of agricultural resources and in im-
provement of Turkey's weak communications system. Establishment of
a strong economy continues to be hindered, however, by lack of trained
personnel, the failure to create a favorable climate for foreign private
investment, and Turkish reluctance to attack basic fiscal and economic
problems. Turkey has used up nearly all of its gold reserve, and its
balance of payment position is serious.
Turkey's military establishment is comprised of a 350,000-man army;
a small navy composed mainly of destroyers, submarines, and mine-
sweepers; and a 20,000-man air force which has 759 aircraft, about half
of them combat types. Although modernization and standardization of
the Turkish Army's equipment and procedures is still incomplete, it has
benefited greatly, from continuing U.S. aid and advice and is estimated
to be capable of carrying out effective delaying action against a Soviet
invasion or invasions. Turkey's military assets include a number of new
airports which are being constructed with U.S. aid and are capable of
supporting allied long-range bombing operations as well as ground sup-
port missions by Turkey's own air force.
Estimate of Probable Developments
Turkey will almost certainly remain one of the staunchest allies of the
U.S. and the other NATO powers. However, it has exhibited a strong
desire to be accepted as an equal partner and will probably continue to
voice strong objections to being placed under British or French command
in any Middle East regional defense organization.
taken an increasing interest in promoting Arab
posed Middle East Defense Organization (MEDO),
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TOP SECRET V-E-1
E. MIDDLE EAST OIL
(See Map, Figure V-E-1, following this page.)
(SECRET)
The economic importance of the Middle East to the non-Communist
world is largely the consequence of Middle East oil. In 1950-51 Western
Europe imported seventy percent of its petroleum from the Middle East.*
The Middle East has more than fifty percent of the world's proved oil
reserves, while oil reserves in other parts of the world are being rapidly
depleted. Thus, Middle East production in 1951 was 17 percent of world
production, far less than the proportion of reserves located in the Middle
East.
The loss of Iran's }production during 1951 was largely compensated for
by an unprecedented increase in the output in Iraq, Kuwait, Qatar and
Saudi Arabia. The principal loss was due to the immobilization of the
giant Abadan refinery. Though a remarkably successful adjustment
has been made to the stoppage of Iranian oil and oil products, the danger
that other oil-producing countries may follow the Iranian example
threatens all Western oil operations in the area: For the moment, how-
ever, other Western oil concessions in the Middle East seem secure.
* This subject is considered in greater detail in NIE-14, "The Importance of
Iranian and Middle East Oil to Western Europe under Peacetime Conditions"
(8 pp., 8 January 1951).
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MIDDLE EAST AND AFRICA
F. NORTH AFRICA
(Including Libya)
FRENCH NORTH AFRICA *
Present Situation
Chiefly because of its location along the southern littoral of the
Mediterranean and its extensive military base network, North Africa is
of major strategic importance to France, the U.S. and other NATO
powers.
The chief problem in the area is the increasing instability created by
growing local nationalism in French North Africa, especially in Tunisia
and Morocco.
Moroccan and Tunisian nationalists are persistently seeking greater
autonomy with independence as the ultimate goal. France, which
maintains protectorates over these two countries, has responded with
varying degrees of political repression, and with reform proposals con-
sidered insufficient by the nationalists; its announced intent is to pave
the way for eventual self-government. Despite recent disturbances,
French control is assured by the presence of more than 130,000 French
troops.
Nationalist disturbances during 1952 have been directed largely to-
ward winning sympathetic attention from a world audience. Within
the past two years the nationalists have expanded. their contacts with
the outside world, particularly in the Near East and South Asia. In
the current UN session, 13 states have joined in a request that the
United Nations discuss French policies and practices in the North Afri-
can protectorates.
Although an Algerian nationalist movement exists, it is neither a
strong nor a unifying force, and its strength is vitiated by internal
struggles for power as well as by the successful French efforts to disrupt
it. Since .Algeria politically is part of Metropolitan France, and since
the natives have no political institutions around which to rally, the
basic response to nationalism is limited in comparison with Morocco
and Tunisia.
*This section is based on NIE-69, "Probable Developments in North Africa"
(9 pp., 12 September 1952, and supplement, 8 pp., 12 September 1952).
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There is little joint action between the three nationalist movements
Only in Algeria is there measurable, if limited, na-
tionalist coopera ion with the Communists. The possibility always
exists that the Communist parties may in the future succeed in their
efforts to penetrate and direct the nationalist organizations.
The backward economy of French North Africa is essentially agricul-
tural; some strategic minerals are found in Morocco. Since the end of
World War. II, with ECA assistance, substantial progress has been made
in the modernization of agricultural. methods, and in expanding irriga-
tion. Experimental projects have introduced cotton, sugar beet, rice and
peanut culture. Essential food imports are sugar and tea. The net bal-
ance of trade is unfavorable.
Estimate of Probable Developments
French reforms and security capabilities probably will forestall the de-
velopment of any serious threat to French control over Morocco and
Tunisia for the next several years. However, we believe that such conces-
sions by the French will not be sufficiently timely or comprehensive to
satisfy the nationalists. The latter will almost certainly increase their
demands for complete independence and might, if they fail to achieve
their objectives, turn to the Communists for support. So long as French
military capabilities are not seriously reduced, we believe that the nation-
alists, acting alone, will not be able to oust the French by force. Never-
theless, increasing native resistance to French control will probably -
over a period of years -- create a serious strain on French resources and
limit the strategic usefulness of French North Africa to the West. We
estimate that eventually France will either have to yield independence,
contenting itself with some form of close military and economic ties, or
else resort to increasingly costly military repression.
" This estimate is an abstract of the conclusions to NIE-69, "Probable Develop-
ments in North Africa" (9 pp., 12 September 1952, and supplement, 8 pp., 12
September 1952).
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I I
MIDDLE EAST AND AFRICA
North Africa
LIBYA
Libya, which gained independent status in December 1951, .has only
begun to face the problems of self-government. Internally, the develop-
ment of an effective state is handicapped by rivalry between Cyrenaica,
the old domain of King Seyyed Idriss, and the more populous province
of Tripolitania, by the lack of experienced Libyan administrators, and by
the political immaturity of the people. Libya has not yet ratified for-
mal arrangements with the UK and the U.S., the chief sponsors of Libyan
independence
i ya has no Koine e Ara League but there are indica ions that
such a move may soon take place.
s
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MIDDLE EAST AND AFRICA
G. UNION OF SOUTH AFRICA
South Africa's fundamental problems arise primarily from the con-
flicting aspirations and outlook of the Union's heterogeneous population
elements. There is a basic division between the dominant white mi-
nority of 2.6 million and the ten million native Africans, Indians and
mixed breeds. In addition the whites themselves are divided into two
hostile political groups, the Nationalists, predominantly Dutch-descent
Afrikaners, and the Opposition, mainly of British descent. During the
four-year. tenure of the Afrikaner Nationalist government of Dr. Malan,
these two conflicts have become acute.
The issue which has inflamed relations between, the Nationalists and
the Opposition has arisen over the government's efforts to perpetuate
itself in power by legislation removing from the common electoral rolls
the mixed-breed voters, who regularly support the principal Opposition
-party. The Supreme Court declared this legislation invalid. The Gov-
ernment then passed new legislation establishing Parliament itself as
the highest "judicial" body empowered to pass on the validity of its own
acts. The Supreme Court will almost certainly rule in the near future
that the second act is also invalid. The Government will probably defy
this ruling and proceed to' transfer the mixed-breed voters, unless de-
terred by the fear that this course might provoke civil war by elements
of the Opposition.
A longer range threat to stability is the growing hostility of non-whites
toward whites, which has been sharply stimulated by the severe repres-
sive actions of the Malan government. The whites now are being chal-
lenged by a non-white passive resistance campaign in which both Native
and Indian organizations are for the first time cooperating. This cam-
paign is almost certainly an early step in a program to overthrow white
supremacy.
The Union's racial policy has been severely criticised, especially by the
Arab-Asian bloc.in the UN. The Union has warned that a UN investiga-
tion would mean its withdrawal from the United Nations. The General
Assembly, at the current session, has voted in favor of an Arab-Asian bloc
motion to discuss the issue.
South Africa's armed forces are at present undermanned, poorly
trained, and inadequately equipped, though the South African military
potential, as demonstrated in the last two wars, is not inconsiderable.
Under present conditions South Africa could probably not contribute
before 1957 the one armored division promised to the UK for Middle East
defense within three months after the outbreak of war. If war should
break out now, South Africa could not provide the division in less than
one year, even with prompt, substantial outside military aid.
The strategic economic importance of the Union of South Africa
arises primarily from its large-scale production of chromite, man-
ganese, and asbestos. From the Union come about one-quarter of the
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West's supply of chromite (including practically all chemical-grade
chromite ore), one-quarter of total Western manganese supply, and the
entire Western supply of the strategic grades of amosite asbestos. The
Union is expected to become an important source of uranium.
Estimate of Probable Developments *
Next year's general election will probably return the Nationalists to
power.
Nationalist and Opposition leaders will endeavor to avert civil war,
but because they intend to press their positions to the limit, short of
such a conflict, and because they may miscalculate their ability to ..con-
trol their followers in inflammable .situations, the possibility of civil war
cannot be excluded.
Over the long run the repressive racial policy of the whites will almost
certainly lead to rebellion of the non-white population. Communist
influence, presently small, will probably play an increasing part in stim-
ulating unrest.
Racial tensions in South Africa will almost certainly have an increas-
ingly adverse effect on race relations elsewhere in Africa and on the
relations of India and the rest of Asia with the West. If the UN intensi-
fies its criticisms of the -Union's racial policy, the Union, may carry out
its threat to withdraw from the UN.
yt'h.e tensions in South Africa are unlikely for the next several years
to interfere seriously with the export of strategic materials, but they
may limit the Union's ability to dispatch forces outside the country in
event of war. In the longer run, when rising racial tensions erupt into
widespread disorders, the outflow of strategic materials will be ham-
pered or evenhalted.
* This estimate is an abstract of NIE-72, "Probable Developments in the Union
of South Africa" (18 pp., 20 October 1952).
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TOP SECRET V-H-1.
MIDDLE EAST AND AFRICA
H. STRATEGIC FACILITIES AND RESOURCES OF AFRICA
(See Map, Figure V-H-1, following this page.)
From a military standpoint, Africa lies athwart U.S. communication
lines with the Near, Middle and Far East. A chain of airfields adequate
for transport and ferrying operations spans Africa from West to East
Roberts Field in Liberia, Kano in Nigeria and Khartoum in the Sudan.
Transcontinental ground communications pose a serious problem. Good
natural harbors are scarce -Dakar, Freetown, Cape Town, Durban,
Lourenco Marques-but artificial ports are being developed and ex-
panded on both coasts.
North Africa occupies a position of particular strategic value to the
, U.S. and NATO because of its location along the southern littoral of the
Mediterranean and its military base network. The U.S. has completed
two strategic air. bases in Morocco, a third is nearing completion and
two more are under construction. Libya, is the site of two large air-
bases, one operated by the U.S. and the other by the UK. While North
African port facilities are good - the French, maintain four naval bases
there - the internal transport network is adequate only for present
peacetime needs.
The economic importance of Africa to the U.S. lies in its strategic
materials, particularly the minerals required for Western defense. The
mineral producing area is a narrow belt one thousand miles in length,
stretching through central Africa from the Belgian Congo through the
Rhodesias to the Union of South Africa.
Within this belt are important sources of asbestos, chromite, cobalt,
copper, corundum, diamonds, lead, manganese, tantalum, uranium,
vanadium and zinc. The increased export of many of these minerals
is curtailed because of low rail capacity to the seaports. Other impor-
tant deposits are as follows : cobalt, lead, manganese and zinc in French
North Africa; columbite, chromite, diamonds, manganese and tin in
British West Africa; kyanite in Kenya and mica and graphite in Mada-
gascar.
The main strategic agricultural products are the palm oils of the
Gulf of Guinea area in Equatorial Africa; and the sisal production in
British East Africa.
* This section has been prepared by CIA. As to economic resources, there is
in preparation a National Intelligence Estimate dealing with the likelihood
and consequences of loss of strategic materials in Africa.
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TOP SECRET VI-A-1
VI. EUROPE
A. PROBABLE SOVIET BLOC COURSES OF ACTION
IN WESTERN EUROPE THROUGH MID-1953 *
In Western Europe the Kremlin will attempt to prevent or delay
Western integration and rearmament by playing upon anti-Americanism
and upon national rivalries and fears, particularly upon French fear
of a revived West Germany. The Communists will probably attempt
to effect alliances with other groups in Western Euiope, with a program
stressing anti-Americanism, the costs. of rearmament, the threat posed to
national sovereignty by the European integration movement, and the
advantages to Western Europe of revived East-West trade.
The Kremlin probably regards West German rearmament and West
German integration with the West as a serious obstacle to the achieve-
ment of Kremlin objectives and as a potential threat to Bloc security.
However, the Kremlin probably estimates that ratification of the EDC
agreements will be delayed until at least the early spring of 1953, that
implementation of the program will be delayed even further, and that
developments in Western Germany, France, or elsewhere may delay
indefinitely, or even prevent, the actual formation of West German
divisions. Therefore, we do not believe that the Kremlin will adopt
courses of action during 1953 which it estimates would involve grave
risk of war in order to prevent German rearmament or prevent West
German integration with the West.
The USSR and/or East German government (GDR) will almost cer-
tainly apply increasing pressures on West Berlin, designed to effect the
strangulation of the West Berlin economy.** However, partly because
of the uncertain effects of a surface blockade and partly because of the
Kremlin desire to avoid an adverse reaction in West German opinion,
the odds are estimated to be less than even that the Kremlin will, before
mid-1953, impose a surface blockade. We estimate that, in the pursuit
of its objectives toward Berlin at least to' mid-1953, the Kremlin will
avoid courses of, action which it estimates would involve grave risk of
general war.
* This section has been prepared by CIA after considering contributions by
IAC agencies to the pending NIE-64 (II), "Probable Soviet Bloc Courses of
Action through Mid-1953," expected to be published about 1 December 1952.
This paragraph is based on SE-30, "Probable Soviet Courses of Action with
Respect to Berlin through Mid-1953" (5 pp., 6 June 1952). For more detailed
discussion, see section VI-H, following.
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VI-B-1
EUROPE
B. STATUS OF* NATO DEFENSE EFFORT AND THE PROSPECTIVE
EUROPEAN DEFENSE COMMUNITY (EDC)
Present Situation
Almost, all European NATO countries substantially increased their
defense budgets in 1952 and increased their combat-ready forces, with
U.S. aid. There has also been further evolution of the NATO organi-
zation and strengthening of combined command structure, while Greece
and Turkey have been admitted as full members. Substantial progress
has been made toward completing the program for building combined-
user airfields, headquarters, communications, and other facilities.
Nevertheless, the European NATO rearmament program has fallen
substantially short of the goals set at the Lisbon Conference in February
1952. The Lisbon goals of roughly 50 divisions and 4,000 aircraft by
the end of this year are unlikely to be met until at least mid-1953.
Moreover, as preparations go forward for the next Annual Review
designed to set new goals for the coming period; there are indications
that the 1953 NATO rearmament effort is also likely to be considerably
less than previously hoped. While all European NATO members remain
convinced that the Soviet threat will continue, many of them appear
less concerned than in 1950 over the danger of early Soviet aggression,
and more concerned over the economic and political impact of higher
rearmament outlays. (The proportion of gross national product de-
voted to defense by individual NATO powers is shown in the chart,
Figure VI-B-1, following, page VI-B-2.) Moreover, the new NATO
Secretary General, Lord Ismay, has raised questions as to the necessity of
such a large military buildup in the light of the development of new
weapons. Meanwhile, the continued drain on UK and especially on
French resources, as a result of their overseas commitments in such
areas as Malaya and Indochina, continues to hamper their achievement
of NATO goals.
The ratification of the 6-nation European Defense Community (EDC)
treaty, which will permit the commencement of German rearmament,
is runnin into serious obstacles in West Germany and particularly
France.
The French, on the other hand, retain misgivings about rearming er-
many at this time, and opposition to EDC ratification remains strong.
Right-wing nationalist groups like the Gaullist RPF oppose yielding
French control over their armed forces to any supra-national authority.
Many French politicians are demanding a satisfactory solution of the
Saar question prior to ratifying the EDC. Several French political
groups are insistent on closer UK links to the European Army. In view
of these factors, French ratification remains in doubt.
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Estimate of Probable Developments
However, in view of French fears
of Germany, the French Assembly Will probably be reluctant to ratify
the EDC treaty until efforts have been made to obtain additional U.S. -
UK guarantees against possible West German withdrawal,, and until
progress has been realized toward an acceptable solution of a number
of other issues, such as the Saar, creation of a European political
authority, and the level of American aid. We believe that France will
eventually ratify the EDC treaty because of its fear that the likely
alternative' would be the creation of German national forces. In view
of prospective delays, however, there is virtually no chance that the
German build-up to 12 EDC divisions by mid-1954, envisaged at Lisbon,
will be achieved.
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EUROPE
C. STATUS OF EUROPEAN ECONOMIC RECOVERY
Western Europe's postwar economic recovery has brought production
to levels substantially above those of the immediate prewar period.
(See Chart, Figure VI-C-1, following this page.) However, in the first
half of 1952, for the first time since the war, the over-all level of indus-
trial production declined slightly. (See Chart, Figure VI-C-1.) A
major factor was the sharp drop in UK production. Soft spots have
appeared in several other European economies, particularly France, and
to a lesser extent Belgium and Italy. A decline in textile and other
consumer-goods industries has -tended to offset continued progress in
capital-goods and rearmament industries. On the other hand, the
Western European countries have made some progress in halting post-
Korean inflationary trends and stabilizing their economies. Moreover,
a few countries like West Germany and the Netherlands have greatly
strengthened their economic positions.*
In its trade with the rest of the world, Western Europe is still suffer-
ing a fundamental balance-of-payments deficit which, in the absence
of basic economic changes, would persist even if rearmament were cut
back and : the conflicts in Korea, Indochina, and Malaya ended. Al-
though very great progress was made in reducing this deficit in the
first two years of the Marshall Plan, since 1950 the deficit has grown
sharply, particularly in the cases of the UK, France, and Italy. (See
Charts, Figures VI-C-2, VI-C-3, VI-C-5, following this page.) In the
case of West Germany, a rapid rise in exports since 1950 has still failed
to keep pace with increased imports. (See Chart, Figure VI-C-4, fol-
lowing this page.) The persistence of these problems is tending to offset
the trend toward multilateralism and liberation of trade which the
OEEC, GATT, EPU, and other postwar institutions have been fostering.
* in connection with West German progress, it should be noted that the chart
in Figure VI-C--l, showing West German industrial production to have in-.
creased less than that of any other country by comparison with 1938, presents
a somewhat misleading picture of West German progress. The year of com-
parison, 1938, was extremely high in West Germany relative to the rest of
Western Europe.
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TOP SECRET VI-D-1
EUROPE
D. STATUS OF EUROPEAN INTEGRATION
Although Western Europe is still far from being "unified," there, has
been substantial, if uneven, progress toward. a higher degree of Western
European political, economic, and military integration since World War
II. A complex series of international alliances and supra-national
institutions have been established or are under consideration. They
vary in membership from the 14-member NATO to the 6=nation "Little
Europe" evolving among the continental Schuman Plan countries.
(See Map and Charts, Figures VI-D-1 and 2, following this page.)
The gradual development of the NATO structure is providing a
central military direction with an elaborate command structure, com-
bined planning, a common defense program, and progressive standardi-
zation of arms, training and doctrine on an unprecedented peacetime
scale. The 6-nation European Defense Community (EDC) treaty, if
ratified, will lead to a far greater degree of supra-national integration.
In the economic field, intega.*ation has been more gradual. Neverthe-
less, the 17-nation Organization for European Economic Cooperation
(OEEC), created in 1948 to coordinate Marshall Plan programs, provides
a forum for joint action in such fields as rationalization of national
recovery programs, trade liberalization, coal production, productivity,
etc. Its offshoot, the European Payments Union (EPU), has facilitated
currency conversion and stimulated intra-European trade. The longest
stride toward economic integration has been the 6-nation Coal-Steel
Community (CSC), recently created pursuant to the Schuman Plan.
The first European institution with supra-national powers, its objective
is to create a single market for continental coal and steel.
The first effort toward close European political association, the 14-
nation Council of Europe, has served primarily as a forum for discuss-
ing common European political problems, largely because the UK and
Scandinavia oppose at this time its assumption of more than consulta-
tive powers. A supra-national political organ, though with a more
limited membership, appears more likely to be developed by the six
Schuman Plan nations, which have asked the CSC Assembly to prepare
a draft treaty for a parallel 6-nation European Political Authority
(EPA) with real though limited powers.
The most significant feature of the European integration movement
has been the trend toward creation of a "Little Europe" composed of
France, Germany, Italy, and the Benelux countries and based on such
supra-national institutions as the CSC, and the projected EDC and
EPA. France took the lead in promoting this development, largely as
a means of controlling and influencing West German revival. However,
this movement is in some danger of losing momentum because of
French reluctance to see German rearmament, even within an EDC.
Moreover, it is impossible to foretell whether a renascent Germany, with
its dominant objective of reunification, will continue to be as ardent a
supporter of European unity as the Adenauer government is now.
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EUROPE
In France, political instability and continued inflationary difficulties
have been compounded by the strain of simultaneously attempting to
meet NATO rearmament commitments, maintain a major effort in Indo-
china, and cope with growing nationalism in French North Africa. At
the same time, the government is confronted with the necessity of crit-
ical decisions on Franco-German problems, such as the Saar issue and
ratification of the EDC Treaty.* Internal tensions generated by these
problems threaten the life of the Pinay government and particularly the
tenure of Foreign Minister Schuman, whose approach to these issues has
most consistently paralleled that of the U.S.
The center-right Pinay Cabinet, which came to power in March 1952,
is the most conservative and the most homogeneous French government
coalition since the war. It has concentrated on stabilizing the French
economy, with an anti-inflationary program keyed to the slogan of "save
the franc." After some success during the summer, Pinay's program
for avoiding tax increases by budget cutting, improved tax collection,
and moderate borrowing has run into increasing difficulties, and, his
imposition of price controls in late, August may be insufficient to arrest
a renewed inflationary trend. The government has paid less attention
to the equally pressing task of stimulating exports to offset increased
balance-of-payments deficits, and has limited itself to the reimposition
of import restrictions at the expense of intra-European trade. (The
trade balance is shown in Figure VI-C-3, following page VI-C-1, above.)
In foreign policy the Pinay government has become increasingly na-
tionalistic in its approach to such issues as Franco-German relations,
North African issues, and relations with the U.S. Pinay's coalition, with'
less than a majority of seats in the Assembly, remains in power on the
sufferance of a group of 28 dissident Gaullists who support Pinay's do-
mestic policy but differ with him and Foreign Minister Schuman on
foreign affairs. Pinay has apparently been seeking to placate both this
group and the Radical Socialist element in his coalition by a more na-
tionalistic foreign policy line. Moreover, the serious strains on French
resources arising from French domestic, NATO, and Indochina com-
mitments have led to renewed French concern over whether France can
maintain parity with a reviving Germany, and to resultant French de-
mands for greater aid from the U.S. France also feels entitled to greater
support from its allies on North African issues. It deems continued
control over French North Africa essential to its great power position,
especially vis-a-vis Germany. These factors largely explain Pinay'ss
harder policy line and French reluctance to ratify the EDC.
* The Saar issue is discussed in more detail in section VI-I, following, and EDC
ratification is discussed in section-VI-B, above.
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French Communist prestige and strength have been declining as a
result of a sharp drop in trade union membership, increasingly drastic
government counter-measures, and the failure of the party's direct action
tactics. There are also apparent internal dissensions, as evidenced by
the recent Marty-Tillon episode, over application of the reported new
Moscow policy calling for "united front" tactics. Nevertheless, the
Communists are still the largest party in France, have the largest press,
and maintain control over by far the largest French trade union federa-
tion, the CGT. They still retain considerable propaganda, subversive,
and sabotage capabilities, particularly in event of war.
France is carrying out a major rearmament effort. (See Chart,Fig-
ure VI-B-1, following page VI-B-1, above.) Its armed forces are in-
creasing in size, morale, and training, and equipment needs are gradually
being met, largely through massive U.S. aid. The Indochina war, which,
takes roughly one-third of the French military budget, constitutes a
heavy drain on French manpower and financial resources. France has
not yet made good the very large defense contribution agreed on at Lis-
bon as the French share of NATO force goals.
Estimate of Probable Developments *
We believe that there will be a continued trend to the right in France
and that French governments between now and the next elections (1956)
will be generally of a moderate rightist character. The primary objec-
tive of their domestic policy probably will be to bring inflation under
greater control and to stabilize the economy. Some success in these
efforts may be achieved at the expense of capital investment, foreign
trade liberalization and rearmament. The government will proceed
more aggressively against the French Comunists but is unlikely to out-
law the party. Moreover, the still uncertain state of French morale,
together with French fears of Germany, will continue to make France
susceptible to Soviet overtures holding out any promise for a detente.
France will continue to make every effort to safeguard French interests
and to maintain its great-power position by: (a) playing a major role in
NATO and in European integration; (b) maintaining parity with a re-
viving Germany, while attempting to influence or control Germany's
revival; and (c). holding firmly to its overseas possessions, particularly
North Africa. However, because of its own political, military, and eco-
nomic weaknesses France will almost certainly be unable to carry out
simultaneously the policies outlined above, and the relinquishment or
replacement of its influence, particularly in its overseas possessions, will
present continuing problems for U.S. policy. We believe that France
* This estimate has been prepared by CIA after considering TAG agency con-
tributions to the pending NIE-63, "France's Prospective Ability to Play a
Major Role in the Western Security System," scheduled for publication in
November 1952.
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will be unable for the next few years to increase its over-all rearmament
efforts substantially above 1952 levels, barring a .large increase in ex-
ternal support. Moreover, France will continue to insist on strong U.S.
support for its position in Europe, Indochina, and North Africa, as essen-
tial to continued French efforts to achieve NATO goals.
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EUROPE
TOP SECRET VI-H-1
H. BERLIN
Present Situation.
There have been recurrent and apparently increasing Soviet and East;
German pressures on the Western position in Berlin since the spring of
1952. The following major forms of pressure have been employed in
this period : ,
a. Restricting the number of rail and road border crossing points,
between the Soviet Zone and West Germany. Only 4 of 10 roads and
7 of 8 passenger rail lines in operation before May 1952 are now open.
(The crossing points now open are shown on the Map, Figure VI-H-1;
following page VI-H-2.)
b. Interrupting the canal routes between the Western sectors of
Berlin and West Germany. These carry an important part of the
commercial traffic.
c. Gradually isolating the Western sectors from East Berlin and
from East Germany, through physical barriers, increased border
patrols, and other means.
d. Attempting to intimidate the West Berliners by arresting them
under East German laws while outside West Berlin, and on occasion
by kidnaping leading anti-Communists from West Berlin itself.
e. Barring hitherto, customary Western MR patrols from the main
autobahn between Berlin and Helmstedt in West Germany.
There are numerous other opportunities for similar Communist pres-
sures, while the 'opportunities for Western retaliation - used effectively
during the 1948-49 blockade - have been sharply reduced, notably by
the construction of new rail and canal links so that no major Communist
transportation routes can now be cut off within West Berlin.
Despite these pressure tactics, the volume of trade between the West
Berlin and West Germany has actually increased. during the last six
months. Moreover, considerable progress has been made by the Western
occupying powers in building up stockpiles of food, fuel, and other
goods. (See Chart, Figure VI-H-2, following page VI-H-2.) Morale in
the city is now good. However, production levels are still low, and it is
estimated that 25 percent of the labor force is unemployed. A large
number of refugees from East Germany entered the Western sectors
during the summer of 1952, and the influx continues.
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I
Estimate of Probable Communist Courses of Action toward Berlin *
The expulsion of the Western Powers from Berlin will remain a basic
Soviet objective. The Kremlin regards the Western position in Berlin
as a troublesome Western intelligence and political warfare base and as
a substantial impediment to the Soviet program for East Germany.
The USSR and/or East German government (GDR) will almost cer-
tainly apply increasing pressures on West Berlin, designed to effect the
strangulation of the West Berlin economy. After the ratification of the
contractual and European Defense Community agreements, the likeli-
hood of extreme harassing tactics will probably increase substantially
and progressively. The GDR may even threaten to use force in order to
test Western unity and resolution. However, partly because of the un-
certain effects of a surface blockade and partly because of the Kremlin
desire to avoid an adverse reaction in West German opinion, the odds
are estimated to be less than even that the Kremlin will, before mid-1953,
impose a surface blockade.
We believe that the Kremlin probably now estimates that the use of
armed force in Berlin either by'the USSR or by the GDR would be met
by force on the part of the U.S. and other Western occupying powers, and
that measures short of force would be countered to the maximum of
Western capabilities. Furthermore, the Kremlin probably estimates
that the U.S. would resort to force if the Western position in Berlin
became or were about to become untenable. The danger of war over
Berlin will remain great. However, we estimate that, in the pursuit of
its. objectives toward Berlin at least to mid-1953, the Kremlin will avoid
courses of action which it estimates would involve grave risk of general
war.
This estimate is an abstract of SE-30, "Probable Soviet Courses of Action with
Respect to Berlin through Mid-1953" (5 pp., 6 June 1952), and amplifies the
discussion in section VI-A, above.
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EUROPE
TOP SECRET VI-I-1
1. SAAR
The Saar issue, which has irritated Fi~anco-German relations continu-
ously since 1950, now threatens final ratification of the European De-
fense Community pact.
The area itself is about three-quarters of the size of Rhode Island, with.
a population, of 900,000, all German-speaking. It produces approxi-
mately 1.5 million tons of coal and 2 million tons of steel annually. The
present status of the Saar is provisional, pending a peace treaty with
Germany, and is based on a Franco-Saar Convention signed in March
1950. Under this Convention, France is responsible for the defense, and
foreign relations of the Saar and exercises substantial control over the
Saar economy through joint management of coal mines and railroads as
well as through a monetary, and customs union. In addition, the French
enjoy a broad right to veto laws passed by the Saar government that
would change the present status of the Saar. Pro-German parties, op-
posed to the present pro-French regime, are presently not permitted in
the Saar. The Saarlanders, who, contrary to occasional German allega-
tions, are free to express their individual opinions openly, regard France-
as an occupying power and consider themselves to be Germans. Most
Saarlanders would prefer to return to Germany, but there has been some
shift of opinion toward favoring a "European" or "Federal" status, pro-
vided that such a solution were permanent and were acceptable to
Germany.
In a series of talks during 1952, Chancellor Adenauer and Foreign
Minister Schuman agreed that the Saar should be internationalized
within the framework of an integrated Western Europe. They also en-
visaged a relaxation of French controls over the Saar economy and
licensing of pro-German parties. They are currently in disagreement,
however, over the permanency of the settlement,. the conditions for ad-
mittance of the pro-German parties, and the phasing out of French con-
trols over the Saar economy. The increasingly charged political atmos-
phere in both Paris and Bonn makes the task of concluding a Saar
settlement particularly difficult. Meanwhile, the issue is likely to en-
danger Franco-German understanding and thus to damage the pros-
pects for European integration, including a German defense contribu-
tion within the EDC framework.
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VI-J-1
EUROPE
J. THE GERMAN UNITY ISSUE
Present Situation
Direct Soviet offers on German unification this year began with the
formal Soviet note of 10 March calling for the negotiation of a German
peace treaty and the formation of a unified German government, with
a national German army. Further Soviet notes were despatched on
9 April, 24 May, and 23 August, and the Allies replied on 25 March, 13
May, 10 July, and 23 September, respectively. The fundamental point
at issue has been that of all-German elections, which the Allies insist
must be preceded by an impartial investigation of political freedom in
East and West Germany, and supervised by a truly, impartial body so as
to guarantee the free character of the elections. While the Soviet
Union accepted the principle of all-`German elections, it has been un-
willing to allow impartial investigation or supervision, and has insisted
on Big Four discussion of other issues such as the peace treaty before
such elections are discussed. The latest Allied and Soviet notes both
state a willingness to commence negotiations in the near future provid-
ing that there is agreement on an agenda. However, the Soviet Union
wants treaty terms discussed first and the election commission last. It
evidently intends to embroil the Allies in long and fruitless discussions
without ever proceeding to the formation of an election commission with
powers of investigation extending to East Germany.
Few West Germans place any faith in Moscow's unity offers, yet
many, including members of the coalition parties as well as the opposi-
tion Social Democratic Party, evidently feel that, before EDC is ratified,
a last attempt should be made to reunify the nation through a four-
power conference. _
Estimate of Probable Developments
We estimate that the Kremlin probably will not permit free elections
to be held in East Germany, nor will it so relax its controls over East
Germany as, to affect the foundations of Soviet authority.*
Nevertheless, we believe that the German unification issue will con-
tinue to be stressed by Soviet diplomacy and political warfare, and that
it .may. further delay Western defense plans. Although the current
exchange of notes between the Western powers and the USSR has
contributed to a somewhat clearer appreciation of Soviet motives, a
last-minute West German or French demand for "one more try" may
force further postponement of final ratification of the accords linking
West Germany with the West.
* This paragraph is an abstract of NIE-53/1, "Review of Probable Soviet Courses
of Action with Respect to Germany during 1952, in the Light of Recent Soviet
Moves" (2 pp., 1 May 1952).
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VI-K-1
'EUROPE
Present Situation
The Italian Government under Premier De Gasperi has consistently
supported NATO, EDC and other organizations for European integra-
tion. However, handicapped by opposition from both the Communists
and growing right-wing nationalist forces, and by its own failure to deal
with Italy's chronic economic weaknesses, the government has been
'declining in popularity, and faces a crucial test in the elections sched-
uled for the spring of 1953. In the local elections of 1951 and 1952,
De Gasperi's Christian Democrats, allied with three minor center
parties, polled only about 51 percent of the vote; and the trend continues
to be toward the two political extremes.
On the right, the neo-fascist Italian Social Movement (MSI) is build-
ing a popular following, partly by exploiting the economic situation and
partly on the issue of Trieste, which has inflamed Italian sentiment.*
Strong elements within the Christian Democratic Party want to counter
this tendency toward right-wing extremism by forming an electoral
alliance with the conservative Monarchists. This maneuver, sponsored
by Luigi Gedda, president of the powerful Catholic Action, appears to be
getting increased Vatican support. The main Christian Democratic
hope for continued parliamentary control after the next elections is
based, however, on a projected new law which alters the electoral
system to increase the parliamentary representation of the parties
getting a majority of the votes.
The Communists and their allies, the Nenni Socialists, slightly im-
proved their strength in the 1951-52 local elections and polled 37 percent
of the vote. The Communist Party is stressing such issues as the high
cost of living, delays in enacting socio-economic reforms, anti-cleri-
calism, and "peace." Particularly on the last issue, the Nenni Socialists
and various front organizations may make an important bid for un-
attached voters. The Communists also control the General Labor
Confederation, which surpasses in size and influence the two anti-Com-
munist labor organizations combined. Although the Communists have
some paramilitary units, there is no indication that they plan a show
of force. On the other hand, they are intensifying efforts to subvert
the armed forces. Some 20 percent of the new recruits in the army
are believed 'o be Communist sympathizers, with a smaller percentage
in the navy and air force, but in view of the stricter surveillance which
the Italian authorities claim they are exercising, all three branches of
the service are probably still overwhelmingly loyal to the Government.
For detailed discussion of Trieste, see section VI-L, following.
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VI-K--2
TQ_P. SECRET,
The Italian economy is going through a difficult deflationary period-
and the balance-of-trade deficit has increased sharply. (See Chart,
and
Figure 'VI-C-5, following page VI-C-1 above.) Unemployment is in-
creasing, exports are decreasing, while defense demands and the invest-
ment expenditures necessary to counterbalance economic deterioration
threaten to increase the already sizeable budgetary deficit. Despite
sizeable post-war U.S. aid, the weaknesses of the economy, resulting
from past wars, present paucity of capital, and lack' of resources to
support a large and growing population, are so profound that the
achievement of economic stability and an appreciably better standard
of living appears very unlikely in the foreseeable future.
The Italian armed forces, with substantial U.S. support, have made
considerable progress. Morale has been raised as a result of the receipt
of some new equipment, increases in pay, and improvement in housing
conditions. Nevertheless, the obsolescent nature of most Italian equip-
ment severely limits offensive and defensive capabilities. The
Carabinieri are an efficient, highly trained police force capable of main-
taining internal order unless revolutionary action were supported by
outside intervention.
Estimate of Probable Developments.
In the 1953 national elections the Italian democratic parties as a
group are likely to receive at best only a narrow majority of the vote.
The Communist vote will probably increase slightly and the rightist
vote substantially compared to the 1948 elections. However, the revised
electoral laws will probably assure the democratic parties an adequate
parliamentary majority for the next five years. A "center" coalition
government will probably be reconstituted, at least for the short run,
with the balance of political power likely to be more toward the con-
servative right of the Christian Democratic Party than at present. In
the longer run, there is some likelihood of a more extreme rightist
regime emerging, particularly should Premier De Gasperi die or retire.
Center-right or rightist governments will probably take more stringent
action against the Communists. However, they are unlikely to make
any forthright attack on Italy's problems of massive unemployment
and maldistribution of wealth. Economic stability will probably con-
tinue to be maintained at the expense of. economic growth. Italy
probably will become increasingly nationalistic in its outlook, particu-
larly on the Trieste issue. As a consequence, Italo-Yugoslav relations
are likely to be rendered still more difficult, to the detriment of any
joint defense planning. However, continued Italian support for Euro-
pean integration measures is likely, especially as long as they hold out
the promise of facilitating international labor mobilit and freer access
to basic resources.
* This estimate has been prepared by CIA on the basis of contributions by IAC
intelligence agencies to the pending NIE-71, "Probable Outlook for Italy,"
expected to be published in December 1952.
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EUROPE.
L. TRIESTE
(See Map, Figure VI-L-1, following this page.)
25X1
Present Situation
Despite recent efforts by the U.S., the UK, and France to bring Italy
and Yugoslavia together on the Trieste issue, the positions of the two
countries have hardened with a wide gap still remaining between them.
Increased Yugoslav intransigence has been indicated b Tito's negative
reaction to the three-power approach of last Au ust
Apparently the Belgrade Government is satisfied
with the present territorial division and is confident that, because of its
strategic value to the West, Yugoslavia cannot be forced to retreat.
Furthermore, the apparent Yugoslav belief that there is no longer any
immediate danger of Soviet aggression has removed any urgency that
Tito may have felt for cooperation with Italy.
The Italian position, formerly predicated on the return of the entire
Free Territory to Italy, was recently modified to permit negotiations
toward an ethnic solution. According to the Italian interpretation
this would give Italy all of Zone A, except for a few ifiland villages," and
at least the north coast of Yugoslav-controlled Zone B, with enclaves
around the west coast cities of Cittanova and Umago. (See map.)
Further compromise by De Gasperi would be extremely hazardous in
view of his precarious political position, the imminence of the 1953
elections, and the strong nationalist sentiment that the Trieste issue
generates in Italy.
Estimate of Probable Developments
The strongly nationalistic attitudes of both Italy and Yugoslavia will
make it extremely difficult to secure any formal bilateral settlement of
the Trieste issue, particularly one which involves any Yugoslav cession
of territory they now control. We estimate that a de facto settlement
.along present zonal lines, with Zone A administered by Italy and Zone
B absorbed by' Yugoslavia, is more-likely to evo1ve. While Yugoslavia
would protest any return of Zone A to Italy, it probably would not
strongly oppose such a move. Italian public opinion, too, would prob-
ably be more willing to accept a de facto solution, not involving official
relinquishment of Italy's ambitions, than a negotiated settlement in
which Italy would be wholly unlikely to secure its territorial demands.
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EUROPE
I
M. AUSTRIA
Present Situation
The Austrian government and overwhelming majority of the Austrian
population are pro-Western in sympathy, but there is some evidence of
increased restiveness over the military occupation. Treaty negotiations,
however, have made no progress since 1949, as the USSR has shown no
willingness to alter the status quo, which protects Russian military and
economic interests in Austria without directly challenging the semi-
sovereignty of the Austrian Government.
A coalition of Austria's two major parties, the Socialists and the
conservative People's Party, has, with minor changes, governed Austria
since the war. The sudden resignation of the cabinet on 23 October
in a dispute over the 1953 budget is symptomatic, however, of the degree
to which basic differences between the coalition parties have hardened
in the last two years. The quadrennial elections, which are now
expected in the early months of 1953, will add new uncertainties to the
Austrian political situation for the next six months.
,The Austrian economy is in chronic difficulties, despite some $1
billion of American aid since 1945. While a tenuous stabilization has
been achieved and dependence upon foreign aid has diminished, serious
problems of unemployment, insufficient private investment, inadequate
credit controls, and restrictive business practices remain.
Certain minor steps toward the creation of a post-occupation Aus-
trian defense force have been undertaken. Police and gendarmerie
units, despite some Communist infiltration, are adequate to maintain
internal security under present circumstances. The Communists, with
only 5 percent of the vote, are of little significance as a party and are
dependent on direct Soviet support even for effective subversive activity.
Estimate of Probable Developments
It is not likely that the USSR will make the concessions necessary to
conclude an Austrian treaty in the foreseeable future. The USSR will
probably continue its policy of delaying tactics because of the strategic,
political, and economic advantages derived from its position in the
Eastern Zone. However, the USSR, though capable of doing so, is
unlikely in the near future to seal off the Eastern Zone of Austria or
impose a blockade of Vienna. Meanwhile, occupied Austria will con-
tinue to be unable to resolve its economic problems and will remain
in need of external aid. A People's Party-Socialist coalition govern-
ment will probably be reconstituted after the forthcoming elections,
but the long-run prospect is for further gradual deterioration of rela-
tions between the two parties.
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EUROPE
N. BENELUX COUNTRIES
The economies of the Benelux countries are basically sound and are
currently in a generally favorable position. The Dutch in particular
have made excellent progress toward monetary and commercial equilib-
rium during the past year. But over-concentration of trade with
France, the UK, and West Germany renders Benelux exports highly
vulnerable to European trade restrictions. The Benelux economic union
was partially implemented in the early postwar period, but negotiations
for its completion have been at a standstill for the past few years.
Moreover, the benefits of the Benelux Union have been one-sided in
favor of the Netherlands.
The policies of the Netherlands coalition government remain rela
tively unchanged after the June elections, although the increase in
Labor Party parliamentary strength has influenced the government
toward greater concern with internal social and economic questions.
In Belgium, the Social Christian (Catholic) government has steadily
lost strength and direction. Following their gains in the recent com-
munal elections, the Socialists are pressing for dissolution of the
government and new elections, but the Social Christians appear deter-
mined to remain in office. The government will thus be forced to
increase its efforts to avoid controversial subjects.
Despite prior reservations, the Benelux countries have participated
fully in European integration measures.. The Belgians fear that inte-
gration is proceeding too rapidly, however, while the Dutch consider
that economic integration should precede military and political unifi-
cation. Furthermore, the Low Countries want firmer British guaran-
tees to counterbalance French and German influence within the
European Defense Force. Although the Dutch government has decided
to press forward with EDC ratification, Belgium tends to await action
by France. The Belgians object to having a longer term of military
service than their continental neighbors, and are insistent on adoption
of the same conscription period by all six EDC members prior to
ratification.
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EUROPE
VI-Oil
0. SWITZERLAND
Switzerland's traditional neutrality, which prevented its applying for
UN membership, has been somewhat qualified by increased cooperation
with the United States in restricting shipments of strategic commodities
to the Bloc
Switzerland con inues to be s a e politically an
prosperous economically, being one of the few countries with no dollar
problem. The capabilities of its armed forces are rated as good, and
their morale as extremely high.
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EUROPE
P. SCANDINAVIA
(Norway, Denmark, Sweden, Finland) *
NORWAY
With the support of all non-Communist parties, Norway's Labor
government firmly adheres to NATO. The Communists have no parlia-
mentary representation and little trade union strength. Merchant
marine earnings have now produced a favorable over-all balance of
payments; but a small dollar deficit persists. The government remains
at present opposed to the occupation by U.S. units of airfields in Norway,
because it fears that the USE will consider such action provocative.
No major concessions on this issue are anticipated before the parlia-
mentary election in September 1953. Following that event, however,
it is possible that Norway's base policy will shift toward accommodating
U.S. wishes, if the international situation remains unchanged. Mean-
while, Norway is proceeding, to improve several airfields in order to meet
U.S. requirements.
* In view of the separate NSC policy, and specific U.S. interest therein, Iceland
is covered separately in the following section, VI-Q.
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VI-P-2 TOP SECRET
EUROPE
Scandinavia
DENMARK
Denmark's adherence to NATO remains firm despite the instability
of its minority coalition government, because the Social Democrats, the
major opposition party, support the government on defense and foreign
policy. The Communists hold seven seats in parliament and control a
few union locals. Although Denmark will probably soon have an over-all
.favorable balance of trade, it still faces a chronic dollar deficit. Military
expenditures have been increased,, and the conscription period raised to
18 months. The government is now planning to expand Danish air-
fields to meet NATO specifications and can be expected eventually to
accept American forces on Danish soil., Denmark already cooperates
closely with the U.S. in allowing U.S. bases in Greenland.
1 November 1952
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EUROPE
Scandinavia
SWEDEN:
Although Sweden, the largest and most important of the Scandi-
navian countries, remains aloof from NATO, there has been a marked
deterioration in Swedish-Soviet relations, and the government is in-
formally cooperating with the NATO powers in restricting strategic
exports to the Bloc. Despite losses in the September election, and grow-
ing opposition, a stable Social Democratic-Agrarian coalition still con-
trols the parliament. Communist strength has fallen to five repre-
sentatives from Gothenburg, Stockholm, and the north. The
Communists retain some trade union strength in these areas. Sweden's
prosperous and highly developed economy enjoys a relatively satisfac-
tory balance-of-payments position. Although Sweden boasts an air
force second only to that of Britain in Western Europe, its aircraft types
are basically defensive and the air force is dependent on imported fuel.
We estimate that Sweden will continue to cooperate informally with
the U.S. on such matters as East-West trade controls, but it will almost
:=certainly cling to its "alliance-free" policy as long as possible, even in
event of war. Sweden would probably not yield to any Soviet pressures
to alter its foreign or military policies; it might, however, make limited
economic concessions. Meanwhile, Sweden will continue to maintain
fairly effective military forces at a size which it hopes would deter
invasion. If attacked by the USSR, the Swedes would resist with all
their resources, but they are at present capable of no more than delay-
ing actions against a major Soviet attack.*
This paragraph is an abstract of NIE-49, "Sweden's Position in the East-West
Conflict" (12 pp., 26 March 1952). That estimate remains valid in essential
respects.
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VI-P-4
EUROPE
Scandinavia
FINLAND
Finland's desire to remain neutral in the East - West struggle is
necessarily qualified by its proximity to the USSR, the Soviet-Finnish
mutual assistance treaty, and the existence of a Soviet naval base on
Finnish. soil. Since all responsible political parties realize the need for
unity against the common danger, an uneasy non-Communist coalition
government seems bound to continue. The Communists, who occupy
about one-fifth of the seats in the Diet, are unable to overthrow the
present government without overt Soviet assistance. However, growing
trade with the East and declining trade with the West pose a real
.danger of Finnish economic integration into the Bloc. Finland's small
armed, forces are adequate only for maintaining internal security.
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VI-Q-1
EUROPE
Iceland's participation in NATO, which'consists largely of permitting
a large American-manned airbase at Keflavik, is complicated by the
population's very strong nationalistic feeling, based on a fear of being
culturally overwhelmed. Iceland has no military units of its own.
The government consists of an uneasy Conservative-Progressive coali-
tion. The Communists enjoy extensive labor support and poll about
20 percent of the vote. The previously severe inflation has eased, but
the economy continues dependent on the fishing industry and is there-
fore extremely vulnerable.
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EUROPE
R. PORTUGAL
Portugal has granted the United States extensive military facilities
in the Azores and made defense commitments to NATO, largely in the
expectation of substantial American assistance. However, Lisbon's
recent disappointment over "inadequate" U.S. financial and military
raid has raised doubts concerning the degree of future Portuguese
cooperation. Portugal's chief diplomatic objective as a NATO member
is to secure Spain's admission to NATO. It already has a separate
alliance with Spain.
Internally, there is no effective opposition to the dictatorial Salazar
regime. A six-year economic development plan was announced last
summer to raise the country's extremely low living standards and
stabilize its precarious foreign trade position. The Portuguese armed
forces remain small in numbers and inadequately equipped.
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EUROPE
S. SPAIN
VI-S-1
Slow progress has been made in the U.S.-Spanish base negotiations
which started last April. The U.S. is seeking to obtain certain air and
naval base rights and in return has offered the financial assistance
already voted Spain by the U.S. Congress, and, certain minimal U.S.
military commitments, primarily such as would be necessary to secure
adequate operational conditions for the bases. The Spanish govern-
inent, on its part, has held that grant of'bases to the U.S. would cause
Spain to come under immediate Soviet attack in the event of war and.
that Spain must therefore be adequately prepared to resist such an
attack. Consequently, the, Spanish have sought to obtain maximum
U.S. commitments to defend Spain and build up the Spanish armed
forces. The Spanish armed forces, large in comparison with other
European armies, and reputedly of high' morale, are very poorly equipped
and lack up-to-date training. Therefore, such U.S. commitments would
entail a considerably giltater cost than originally envisaged by the U.S.
Internally, the Franco regime remains in firm control; opposition
groups are ineffective, and organized Communist activity practically
non-existent. Spain's agricultural position this year is the best since
the Civil War; relatively high employment has raised the per. capita
income to pre-Civil War levels. Although the government has been
mildly successful in stabilizing prices by permitting substantial imports,
this has resulted in a balance-of-payments deficit of about $7,000,000,
as compared to a surplus of about $60,000,000 for the same period last
year. The government is trying,to relieve the acute shortage of sterling
and dollar reserves by increasing exports of textiles, by offering mercury
to the United States at reduced 'prices, and by authorizing the sale of
lead and low-grade pyrites for dollars even when these minerals are
'destined for the Soviet Bloc.
Estimate of Probable Developments
The outcome of the U.S. - Spanish negotiations is uncertain. Because
of the objections of many European NATO members, Spanish entry into
NATO will not be possible at least for some time. The Spanish regime
is likely to remain stable at least while Franco lives. It will be
strengthened for the immediate future by recent good crops and ex-
pected improvement in the economic situation. Spanish standards of
living, however, will remain among the lowest in Western Europe.
*This section is based in part on NI134, "Spain's Potentialities in Western
Defense," (4 pp? 30 July 1951)-; which is out of date in substantial respects,
but contains useful, informatioil.
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EUROPE
T. YUGOSLAVIA
VI-T-1.
Present Situation
The Yugoslav government has maintained a high degree of stability
despite economic difficulties, Soviet pressure tactics, Soviet-inspired
attempts at subversion, and the passive hostility of a majority of the.
Yugoslav people. However, recent government moves to decentralize
the top-heavy Soviet-type bureaucracy have been resisted by some local
Communist officials. The regime has intensified its oppressive measures
against religion, while relaxing somewhat pressure on the peasantry.
The Yugoslav economy is primarily agricultural. World War II
destruction, Tito's overzealous industrial investment program, Soviet
economic boycott, and two serious droughts within the last three years
have forced the standard of living lower and burdened Yugoslavia with
a heavily unfavorable balance of trade. Western economic and military
assistance rescued the Tito regime from an economic breakdown and
the threat of consequent subversion by pro-Soviet forces.
Yugoslavia's controversy with Italy over the future of the Free Terri-
tory of Trieste continues, "` but at the same time Tito is successfully
promoting closer relations with Greece and Turkey. There may be
limited coordination' of Yugoslav - Greek - Turkish defense plans, al-
though Tito is avoiding any entanglement with NATO. Yugoslav sub-
versive activity against the Albanian Communist regime could conflict
with the interests of Greece and Italy, as well as the Soviet Union.
The Yugoslav conscript army of 325,000 men, organized into 33 divi-
sions and other independent units, is relatively well-trained and led by
officers loyal to Tito. Staff work is weak and equipment not of the
best, but Western military assistance is gradually mitigating these
deficiencies. The Yugoslav - Satellite frontiers continue to be the
scene of armed clashes, but the Yugoslav leaders now feel that there
is less threat of a Soviet or Satellite military invasion than at any time
since 1948.
Estimate of Probable Developments
We believe that the present Communist regime in Yugoslavia will
increase its dictatorial control in the country during 1953. Within the
government, some anti-Western feeling will remain, though it will
probably continue to decline gradually. The domestic aims of the
regime - forced industrialization, agricultural collectivization, religious
repression - will continue to exist, but temporary modifications and
adjustments in these programs will be made in response to the local
* This section is based largely on NIE-29/2, "Probable Developments in Yugo-
slavia and the Likelihood of Attack upon Yugoslavia, Through 1952" (6 pp.,
4 San. 1952). The analysis of that estimate is still valid in essential respects.
For discussion of this question, see Section VI-L above.
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VI-T-2
situation and the influence of relations with the West. In foreign
policy, the Yugoslavs will continue to maintain close economic and
military ties with the West, to demand Western economic and military
aid, and to attempt to improve relations with Greece and Turkey. For
the immediate future the Yugoslavs will probably continue to exert
pressure against the Albanian regime without directly intervening or
deliberately precipitating a coup attempt.*
We believe that Satellite capabilities for military aggression against
Yugoslavia will increase during 1953, but that Yugoslav capabilities will
also continue to increase. We believe that a Soviet or Satellite attack
upon Yugoslavia in 1953 is unlikely.
* The sentence relating to Yugoslav intentions toward Albania is taken from
N,IE-42/1, "Yugoslav Intentions Toward Albania" (2 pp., 20 October 1952).
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EUROPE'
VI-U-1
U. GREECE
Present Situation
Greece is scheduled to hold parliamentary elections on 16 November
and currently has a non-political "service" government. The November
balloting, which will follow the majority system rather than the propor-
tional representation system used in previous elections, will be mainly a
contest between Marshal Papagos' rightist Greek Rally, which secured
44 percent of the legislative seats in the vote of September 1951, and
the former government coalition of the left-centrist EPEK and the
centrist Liberal Party. Despite some recent coalition defections to
Papagos, the outcome remains uncertain., The only other important
entry in the field is the Communist-backed EDA, which polled about
10 percent of the vote last year and might conceivably emerge with
the balance of power in the new parliament.. Although the Communist
movement has benefited to some degree from the government's: amnesty
program and EPEK's attempts to recruit leftist support, the party
remains a small outlawed organization and does not present any early
threat to internal stability.
Greece is firmly committed to an anti-Soviet, pro-U.S. position and to
support of Western defense preparations. During the last year it has
made some progress toward closer political and military relations with
Turkey and Yugoslavia and has recently, for a variety of reasons, sought
inclusion in the projected Middle East Defense Organization (MEDO).
However, some friction does exist between Greece and the UK as a
result of the recurrent Greek popular agitation for union 'of British-
held Cyprus with Greece.
The Greek armed forces, numbering about 190,000, have profited
from American training and equipment and their experience in the
guerrilla war and are currently estimated to be capable of defending
all but Thrace against Satellite aggression if given adequate logistical,
naval, and air support from abroad. The recent reduction of U.S. aid
has stimulated increased internal pressure, fox' a cut in the armed forces,
which now_ absorb about one-third of the budget.
Despite Greece's progress under e Mutual ecuri y Agency program,
rehabilitation has been slowed by the reluctance of Greek political lead-
ers to undertake essential economic reforms. A decrease in American
aid and continued emphasis on defense production has caused some
unemployment. Greece's difficulties in selling its normal exports, par-
ticularly tobacco, have increased internal pressure for trade with the
Soviet Orbit.
Estimate of Probable Developments
Regardless of the results of the election, there is no present prospect
for any major change in the Greek situation.
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VII-A-1
VII. LATIN AMERICA
A. OVER-ALL SITUATION *
i
25X1
25X6
brought to power
a regime headed by Paz Estenssoro; the country is currently beset by
financial difficulties and by differences between government officials and
extremist labor leaders over methods of executing the decision to nation-
alize tin properties, the major source of foreign exchange. In Paraguay,
sharp inflation aggravates the dangers of a recent schism within the
small ruling clique under President Chaves.
On the northern coast of South America, Colombia ** is in a state
verging on civil war, while there is strong political tension in Vene-
zuela, * * despite the relative economic strength of both countries.
In Central America, Guatemala ** is currently the principal focus
of concern because of the large Communist influence in its government.
,The situation in Panama * * has apparently been temporarily stabilized
* This section has been prepared by CIA on the basis of contributions to the
pending NIE-70, "Conditions and Trends in Latin America Affecting U.S.
Security," expected to be published about 15 November 1952.
The most important individual countries are discussed in detail in later
sections of this chapter, as follows: VII-B, Argentina; VII-C, Brazil; VII-D,
Chile; VII-E, Colombia; VII-F, Venezuela; VII-G, Guatemala; and VII-H,
Panama.
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Political Trends
The political instability now evident in Latin America results from a
progressive deterioration of the traditional social order. This instability
is therefore much more profound than that which characterized the per-
sonal politics of Latin America in the past.
The immediate political trend in Latin America is toward extremely
nationalistic regimes based on demagogic appeal to the depressed masses
of the population, of which the Peron regime in Argentina is the proto-
type.** This trend is favorable to Peron's efforts to forma bloc of Latin
American states antagonistic to the U.S.
Brazil, * * 0 and Uruguay have gained a relative measure of
stability by partially adjusting to a new social order based on increasing
participation of the middle and lower classes in government and in an
expanding economic life. Even in these countries, however, there are
potential leaders of extremist forces.
In western and central South America, the newly elected President
Ibanez of Chile " has widespread popular backing at least temporarily.
In Ecuador, however, the chronic threat of an army coup is expected to
continue under the recently inaugurated President Velasco Ibarra, whose
two previous terms were ended by army revolts in 1935 and 1947. In
Peru, recent arrests of certain leaders have reportedly not completely
discouraged a revolutionary plot backed by certain army and other ele-.
ments opposed to President Odria. In Bolivia, a revolution in April 1952,
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by the election of the new President Remon. Elsewhere in Central
America, with the possible exception of Costa Rica, there is relative
stability.
In the Caribbean area, there is relative stability in both Haiti and the-
Dominican Republic. In Cuba, however, economic problems such as
those presented by the serious sugar surplus and widespread unemploy-
ment accentuate the unrest caused by extensive opposition to Batista.
This opposition has been growing since Batista overthrew the Prio regime
in March 1952, but it is still probably not strong enough to overthrow
the regime.
The Communist threat to U.S. interests in Latin America is a conse-
quence of the ease with which Communists, operating through various
fronts, can exploit the social unrest and ultra-nationalism already exist-
ing in the non-Communist population. The Communists are unlikely
to gain direct control over the policy of any Latin American state within
the foreseeable future. However, they are capable of obstructing Amer-
ican policy by propagating hostile ideas, encouraging neutralist senti-
ments, and influencing nationalist and other groups which want to cur-
tail American influence. This capability is greatest in Guatemala, but
potentially more dangerous to U.S. security interests in Argentina, Bra-
zil,.and Chile.
Throughout Latin America, local Communists are capable of serious
initial sabotage in certain strategic industries and communications facili-
ties, such as the Venezuelan oil fields and possibly the Panama Canal.
Degrees of Communist influence in individual countries, and countries
having Soviet Bloc diplomatic representatives, are indicated on the maps,
Figures VII-A-1, and VII-A-2, following page VII-A-4.
Economic Trends
Latin America has traditionally served as a supplier of raw materials
and foodstuffs to the highly industrialized countries of North America
and Europe and has depended on those countries for nearly all of its
requirements of manufactured products. The Latin Americans, how-
ever, are no longer willing to accept what they describe as a colonial eco-
nomic status. This feeling was accentuated by their experience during
and after two World Wars, when their supply of manufactured products
from the industrialized countries of North America and Europe was cut
off. They seek a greater degree of economic independence and stability
through such measures of economic nationalism as protective tariffs,
exchange restrictions, export controls, and government-sponsored indus-
trialization.
Progress toward industrialization is difficult to sustain. Development
of new domestic industries and the basic transportation and energy
services requires the diversion of capital and other scarce resources from
the development of the raw material export sector of the economy. For-
eign loans and investment capital for industrial expansion have not
been forthcoming in effective quantity in the postwar period, in large
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part because of the restrictions and uncertainties engendered by the,
prevalent economic nationalism. Industrialization, therefore, has been
for the most part government sponsored and financed, and its form and
direction have often been governed by political rather than economic
purposes. One aspect of the prevalent economic nationalism has been
a tendency toward the expropriation and nationalization of foreign-
owned utilities and industrial enterprises.
Because of Latin America's preoccupation with, industrial develop-
ment, the increased agricultural productivity which might have resulted
from a relatively small increase in agricultural investment has not been
realized. Although 60 to 70 percent of the population is still engaged in
agriculture, the supply of foodstuffs for domestic consumption has not
kept pace with population growth.
Inflation has increased the economic and political strain in Latin
America. Inflated prices of necessities in urban areas have increased the
cost and reduced the efficiency of industrial labor. Increasing distress
among depressed elements in the population has compelled governments
to embark on costly social welfare programs.
A serious economic crisis in Latin America was averted only by the
rise in prices for Latin American export commodities following the out-
break of hostilities in Korea. If the terms of trade should again deterio-
rate, many Latin American economies would be severely shaken. In
those countries where programs of industrialization are under way, a
slackening of those programs would produce social problems of a most
serious order, with grave, political consequences. The countries most
vulnerable in this respect are
those which could render the greatest material support to the United
States in the event of war.
Cooperation with the United States
Since World War II relations between the U.S. and Latin America have
been subjected to new types of strains. Isolationist and anti-U.S. senti-
ment has been kept alive or stren thened b domestic olitical, eco-
nomic, and social roblems.
When war broke out in Korea, there was unanimous initial support in
Latin America for the UN decision to act. The five nations which had
not yet ratified the Inter-American Treaty of Reciprocal Assistance
quickly did so. Later, all but Argentina voted for the UN Uniting for
Peace Resolution. More recently, all Latin American nations except
Argentina and Guatemala have given the U.S. excellent support on all
important political questions in the UN that involved the East-West
struggle.
At the 1951 meeting of Foreign Ministers, the Latin American
na ions pledged increased production and allocation of strategic mate-
rials in short supply. Because of the general desire to industrialize,,
these pledges were reluctantly given, implementation has not been effec-
mnv a~ruIT 1 Nnvamhar 1952
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Live, and production as a whole has not expanded above"postwar levels.
Latin American officials can be expected to continue to demand higher
prices for raw materials in order to advance their industrialization plans.
U.S. imports of Bolivian tin and Chilean copper were interrupted during
the past year pending agreements on price. Increased production of
manganese in Brazil has been held up for some time because of various
legal difficulties which presumably could be quickly settled by the Vargas
administration.
Latin American countries have been cooperative in complying with
U.S. requests to prohibit the shipment of strategic materials to the
Soviet Orbit. Some strategic materials, however,
have nevertheless been reportedly transshipped-to-
Eastern Europe through third parties in Western Europe.
Of the eight Latin American countries approached during the past
year regarding bilateral military agreements, Cuba, Ecuador, Colombia,
Peru, and Chile have signed and ratified agreements, while Brazil and
Uruguay have signed but not yet ratified. Mexico has deferred negotia-
tions, possibly because of a confused pre-election situation. Talks with
the Dominican Republic are now being held. These military agreements
generally fit into the scheme of hemisphere defense drawn up by the
Inter-American Defense Board.
Eventually, exaggerated nationalism may seriously affect U.S. security
interests in Latin America. For the next several years, however, in a
situation short of war, the present degree and scope of Latin American
cooperation with the United States is likely to remain basically un-
changed. In particular, Latin American strategic raw materials will
continue to be available, but the governments concerned will exact a
maximum price for them in dollars, goods in short supply, and other
economic concessions.
1 November 1952 TOP SECRET
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LATIN AMERICA
B. ARGENTINA *
Political and Economic Situation:
The Peron government has been threatened for over a year by a cri-
tical economic situation and by conflict between Peron's two principal
supporting groups, the army, which put him in. power in 1943, and the
increasingly influential General Confederation of Workers (CGT). In
this situation, the death last July of Senora de Peron, who personally
had a tremendous following among labor and the depressed masses, has
left a power vacuum and increased army-labor jockeying for position.
Traditionally the army has been the arbiter of Argentine politics, but
Peron has now curtailed its political capabilities by arming certain labor
groups and by repeated purges since the September 1951 abortive revolt
led by retired officers.
On the labor side, the CGT is the most powerful political force in rgen-
tina and dominates the Peronista Party organization. It contains a
number of leaders with independent tendencies. There are also some
Communists and Socialists in major CGT unions, and Peron has main-
tained advisory relations with a "dissident" group of Communists whose
own relations with Moscow are uncertain. Even the official Communist
Party has recently abandoned its former anti-Peron position. Although
the Communist party is estimated at only 35,000 members, Communist
influence in the labor movement is such that prolonged political and eco-
nomic deterioration might permit the rapid growth of Communist
strength and influence in Argentina.
In the immediate economic crisis, favorable livestock and crop forecasts
for the year-end harvest promise some improvement. Two droughts in
recent years have seriously damaged Argentina's balance-of-payments
position, which depends mostly on exports of farm products, and even if
this year's crops are good the value of exports in 1953 is likely to fall an
estimated 15 percent short of paying for expected increased imports. In
general, Peron's over-ambitious program of industrialization and nation-
alization of public services has increased underlying economic weaknesses
and'created large budgetary deficits.
Foreign Policy
Under Peron, Argentina's basic foreign policies have been the so-called
"Third Position," of non-alignment with either the U.S. or the USSR in
the East-West struggle, and the promotion of Argentine influence in
Latin America in opposition to that of the U.S. Peron aggressively seeks,
* This section is based largely on NIE-66, "Probable Developments in Argen-
tina" (7 pp., 13 June 1952). The analysis in this estimate remains valid in
essential respects.
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by propaganda and diplomatic activity, to induce other Latin American
states to adopt the "Third Position" also. Though nominally impartial,
in practice his policy is predominantly anti-U.S. rather than anti-Soviet.,
Argentina is a signatory to the Hemisphere defense treaty, but it has
strongly criticized U.S. bilateral military pacts with other Latin Amer-
ican countries and recently declined to renew its agreement with the U.S.
military mission; The Argentine armed forces number approximately
132,000 men,, second only to Brazil's in Latin America, and the Navy
would be capable of aiding in wartime patrol of the South Atlantic ship-
ping lanes.
Although the intensity of Argentine anti-U.S. activity and propaganda
might be moderated or increased, depending largely on the /internal sit-
uation, it is unlikely that any presently foreseeable change of govern-
ment would bring about a modification of the "Third Position" or an end
to efforts to promote Argentine influence in Latin America.
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LATIN AMERICA
C. BRAZIL
Brazil continues to have a strong pro-Western orientation. It main-
tains relations and engages in a minor amount of trade with certain
Soviet Satellites, but has no relations with Moscow or Peiping. Al-
though nationalism sometimes plays an important role in the formula-
tion of Brazilian economic legislation, it has otherwise done little to
impair Brazil's cooperation in the East-West struggle.
President Vargas has been sharply criticized by powerful figures in
Brazilian politics
~ In 'recent months he
has been attempting to secure a broader base for his administration
by sponsoring certain pro-labor measures and by offering high-level
positions in the administration to members of the chief opposition party.
Prices for coffee, the chief Brazilian export, are currently high.
Foreign exchange is short, nevertheless, owing principally to the heavy
demand for imports caused by the rapid progress of industrialization.
During the past decade there has been a very great increase in
manufacturing production, in the number of manufacturing establish-
ments, and in the variety of products manufactured in Brazil. Until
the '30's, farm production was more than one-third higher than in-
dustrial output whereas today the relative importance of the two in
national productivity is reversed. An indication of Brazil's current de-
velopment of heavy industry is the'fact that iron and steel production
in 1951 accounted for approximately 800,000 metric, tons of finished
products, about 270 percent more than in 1947. Since July 1951, the
Joint Brazil-U.S. Economic Development Commission has been active in
furthering industrial and commercial progress, and has been well re-
ceived by Brazilian government officials as well as businessmen and
industrialists.
The Brazilian Army numbers approximately 140,000, adequate for
defense against attacks by any probable combination of neighbors and
to assume a proportionate responsibility in joint hemisphere defense.
American training methods are followed as closely as possible, but physi-
cal standards are low.
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LATIN AMERICA
The newly elected regime of President Carlos Ibanez may prove
to have at least a temporary stabilizin g influence in Chile, despite
Ibanez ast dictatorial record.
I He does re-
portedly favor closer La m American economic cooper Lion of the sort
proposed by President Peron, and might turn in the direction of Peronist
policies of greater nationalism and opposition to the U.S.
The new regime currently has the support of a wide cross-section of
the populace l ecause of the expectation that it will take effective meas-
ures to combat corruption, inflation and other economic ills. Ibanez
plans to select his policy-making cabinet after the March elections for
Congress in which his supporters hope to swell their now small repre-
sentation.
Copper sales, which earn about half of Chile's foreign exchange, have
added to dollar reserves, although the latter continue to fall short of
Chile's needs for industrialization purposes. Some 20 percent of United
States 1951 copper requirements, exclusive of stockpiling, were supplied
by Chile. Although Chile has no significant direct trade with the So-
viet Orbit, the Orbit has received some Chilean copper through trans-
shipment. t
Despite reports during, the election campaign, it now appears unlikely
that Ibanez will seek to nationalize the copper industry.
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LATIN AMERICA
E. COLOMBIA
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A state verging on civil war now prevails in Colombia. The Conserva-
tive administration, unable to stop the attacks of guerillas who are ac-
tive in large areas, has permitted its partisans to exercise retaliatory
violence upon the opposition Liberals, who are considered accomplices
of the insurgents. As a result, Liberal leaders have gone into exile, and
the Party's National Directorate has "recessed." ? Many Liberal parti-
sans now see their only hope in open support of the guerillas. The
weak Communist Party, which hitherto disavowed any connection with
guerillas, has now reportedly recognized the guerilla movement as one
of "national liberation" and may join it.
Partly because of the guerilla threat and because of growing doubt
among high army officials as to the competence of the present regime,
the military, encouraged by dissident Conservatives, is currently reported
to be considering a move to assume political power.
Paradoxically, this politically weak nation is economically strong.
Exports and imports are at high levels; retail trade is good; and a com-
munications development program, financed by a recent $25,000,000
International Bank loan, is under way.
The army is only 23,000 strong, and the 15,000 National Police force
is rather ineffective. The Colombian Battalion in Korea has made an
excellent record,
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TOP SECRET VII-F-1
LATIN AMERICA
F. VENEZUELA
Venezuela's basic orientation is unequivocally pro-Western. Despite
growing nationalism, it has generally supported U.S. policies in the UN
and Organization of American States,
Political tension is currently high, with the approach of the 30 Novem-
ber Constituent Assembly elections, the first democratic procedures in
four years. The ruling three-man Junta, which derives its principal
support from the armed forces
Venezuela, the world's second largest producer of petroleum and a
potential major source of iron ore, continues in a sound financial
position. Recent cut-backs in crude oil production, primarily due to
the fact that the Iranian deficit has now been made up, have not
seriously affected the economy and seem unlikely to do so unless pro-
duction is forced below 1950 levels. There is no evidence that the
Junta'contemplates nationalization of the oil companies.
Venezuela entered into a bilateral military agreement with the U.S.
in 1951. It is able and willing to pay cash for all equipment, is eager
to build up its meager military capabilities for the defense of its own
territory including the oil fields, but is reluctant to assume broader
obligations.
* This section is based largely on NIE-67, "Probable Developments in Vene-
zuela" (7 pp., 31 July 1952), which contains a more detailed analysis.
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rrrnp RFC13ET VII-G-1
LATIN AMERICA
G. GU,ATEJv1ALA *
at the growth of Communist influence and
Guatemala is currently the only Latin American country in which
there is significant direct Communist participation in national politics.
The Communists identified themselves with the democratic and nation-
alist goals of the popular revolution of 1944, and now influence virtually
every organization supporting that movement, including the pro-admin-
istration political parties. They dominate the powerful labor confed-
eration, on which the administration has become increasingly depend-
ent. They hold positions within the government and seem to enjoy
the confidence of high government officials.
Communist influence is evident in party-line attacks on the policies
of the United States which regularly appear in the official press, in the
"independent" position taken by Guatemala in the United Nations, and
in the continual harassment of American business firms in Guatemala,
especially the United Fruit Company.
Despite their great influence in the government, the Communists
still lack popular support in Guatemala. The opposition to them, how-
ever, lacks united leadership and organization. President Arbenz, who
is not a Communist, apparently feels it politically inexpedient to alienate
his Communist support at this ' time. The three pro-administration
political parties which, with the Communist Party's four representa-
tives, hold 47 of the 58 seats in the unicameral National Congress,
are now forming an electoral alliance with the Communists for the
Congressional elections expected late this year. The opposition and
anti-Communist groups are unlikely to succeed in increasing substanti-
ally their 11-man representation in Congress.
The Guatemalan Government, despite widespread corruption, is in
sound financial condition and foreign exchange reserves are close to an
all-time high. Agricultural labor supply will probably be at least tem-
porarily reduced by last June's agrarian reform law, which provides for
expropriation of unused lands and their transfer to landless peasants,
most of whom are now working as laborers. The adverse effect on
agricultural production would be particularly, significant since agricul-
ture accounts for about 57 percent of the gross national product and
almost 95 percent of the value of exports.
The 6,000-man army, on which any government ultimately must de-
upend if it is to remain long in power, has been assiduously wooed
by the present administration and still appears loyal to President
Arbenz. However, many high officers are becoming increasingly alarmed
* This section is based in part on NIE-62, "Present Political Situation in Guate-
mala and Possible Developments During 1952" (5 pp., 11 March 1952). The
analysis in that estimate is valid in essential respects.
TOP SECRET 1 November 1952
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