REVIEW OF THE WORLD SITUATION
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Collection:
Document Number (FOIA) /ESDN (CREST):
CIA-RDP67-00059A000500070001-8
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RIFPUB
Original Classification:
S
Document Page Count:
12
Document Creation Date:
November 11, 2016
Document Release Date:
August 20, 1999
Sequence Number:
1
Case Number:
Publication Date:
December 16, 1948
Content Type:
REPORT
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FOR THE CHIEF,CIA LIBRARY
REVIEW OF THE WORLD
SITUATION
Published 16 December 1948
CENTRAL INTELLIGENCE AGENCY
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This document contains information affecting the na-
tionai defense of the United States within the meaning
of the Espionage Act, 50 U.S.C., 31 and 32, as amended.
Its transmission or the revelation of its contents in any
manner to an unauthorized person is prohibited by law.
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DISSEMINATION NOTICE
1. This copy of this publication is for the information and use of the recipient
designated on the front cover and of individuals under the jurisdiction of the recipient's
office who require the information for the performance of their official duties. Further
dissemination elsewhere in the department to other offices which require the informa-
tion for the performance of official duties may be authorized by the following:
a. Special Assistant to the Secretary of State for Research and Intelligence, for
the Department of State
b. Director of Intelligence, GS, USA, for the Department of the Army
c. Chief, Naval Intelligence, for the Department of the Navy
d. Director of Intelligence, USAF, for the Department of the Air Force
e. Director of Security and Intelligence, AEC, for the Atomic Energy Com-
mission
f. Deputy Director for Intelligence, Joint Staff, for the Joint Staff
g. Assistant Director for Collection and Dissemination, CIA, for any other
Department or Agency
2. This copy may be either retained or destroyed by burning in accordance with
applicable security regulations, or returned to the Central Intelligence Agency by
arrangement with the Office of Collection and Dissemination, CIA.
DISTRIBUTION :
Office of the President
National Security Council
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Department of the Air Force
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Joint Chiefs of Staff
Atomic Energy Commission
Research and Development Board
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REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE SECURITY
OF THE UNITED STATES
1. The general world situation in relation to the long-term security interests of the
US is recapitulated as follows :
a. Access or denial of access to the coastal regions of Asia are fundamental
strategic objectives of both the US and USSR. In the Far East, a situation favorable
to the USSR is being shaped. US ability to check and reverse this trend is presently
hampered by the US being in a middle position between the demands of Asiatic nation-
alisms and the policies of Western European states. In the Near East, a moderately
favorable US/UK position is being weakened by the increasing instability of the
Arab States.
b. The approaching virtual partition of Germany will momentarily fill the
power vacuum of Central Europe and explains the increasing evidence of efforts to
consolidate control both in the East and West of Europe.
c. Economic trends suggest the possibility of a slightly higher degree of
political stability in Western Europe.
2. In the Far East, no solution can be foreseen in China beyond a gradual accom-
modation with Communist power. Force of circumstances is concentrating the im-
mediate US security interest in areas peripheral to China and on the off-shore islands.
3. In the Near East, the momentary calm that prevails is misleading. The fac-
tors leading to instability are far from being brought under control. Israel has acquired
a preponderance of applicable power and Arab adjustments to this fact are halting and
confused. In Greece, a dangerous stalemate has developed both militarily and
politically.
4. It is considered that the USSR has accepted the partitioning of Germany as
a fact and is primarily concerned to pursue a policy of consolidating its zone in rela-
tion to this new situation. Corresponding adjustments on the part of the Western
Powers are more difficult to make. Economic factors, however, except with respect to
inflationary forces, favor the West.
5. In Latin America, recent military coups have been primarily the result of
officer corps wishing to regain their dwindling political influence. The examples of
Peru and Venezuela may encourage similarily situated military groups to attempt
similar coups. At the moment, these palace revolutions do not constitute threats
to US security. They do, however, delay the solution of longer-term social and economic
problems.
Note: This review has not been coordinated with the intelligence organizations of the Depart-
ments of State, Army, Navy, and the Air Force. The information herein is as of 13
December 1948.
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REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE SECURITY
OF THE UNITED STATES
The world situation as it has been previously examined in relation to the basic
security interests of the US has not significantly altered during the past month.
Regional situations and localized issues have developed along lines already indicated
and within the framework already described. Consequently, the general part of this
Review, with the exception of some economic notes, will be largely a recapitulation.
1. THE FAR EAST AND NEAR EAST.
The issue of control over these power vacuums-an issue which basically lies
between the US and the USSR-has become more sharply defined in the Far East and
more uncertain in the Near East. The essential nature of the issue has not, however,
changed. It still remains a fundamental question of the relative strategic positions of
two global powers. In the Far East, the snowballing successes of the Chinese Com-
munists suggest the possibility of a trend that might put the USSR in a highly favorable
position. At the same time, effective US counteraction-now largely restricted to
areas outside China-is complicated by the need to come to terms with local Nation-
alist movements and by the problem of coordinating this requirement with the diver-
gent policies and interests of the Western European states whose colonial holdings are
threatened by these same Nationalist movements.
In the Near East, the moderately favorable US-UK position of a year ago is being
somewhat reduced in value by the political instability of the region. The local balance
of power as between Arab and Jew has shifted in favor of the Jews and neither the end
nor the consequences of this shift can be determined. Since the UK still rests its
strategic position in this area on its relations with the Arab States, and since the US
in considerable part still covers its security interests in the area by assuming the viabil-
ity of the UK position, any factor that calls into question the reality of their joint
control is a matter of fundamental concern.
Generally, with respect to Asia, its coastal regions are primary strategic interests
of both the US and the USSR, and the reaction of either to real or apparent pres-
sures from the other is immediate. The advance of the Chinese Communists, by
suggesting that a large sector of the Far Eastern littoral might be closed to US influ-
ence, has already had the effect of increasing the strategic importance to the US of
Southeast Asia and the off-shore islands.
2. EUROPE.
The issue of control over this power vacuum likewise lies between the US and the
USSR. In this instance, however, the issue is approaching a condition of stalemate
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marked, on the one hand, by the increasing sovietization of Eastern Europe and, on
the other, by a mounting pressure for economic unions, military alliances, and politi-
cal federation in Western Europe. Since the most powerless, and hence the most fluid
element in the situation is Germany, the broad issue has been simplified into a German
problem.
The German problem has, in turn, been focussed in Berlin. Consequently, issues
which involve the whole of Europe are being somewhat artificially tested in a highly
concentrated area. Events in Berlin are comparatively insignificant in themselves
when measured against the total security interest involved in the problem of controlling
the European vacuum. The compelling trend is the inevitability with which circum-
stances are leading toward the actual partitioning of Germany. When this point has
been reached the vacuum will be momentarily filled. It is in anticipation of this that
the USSR seeks to consolidate Eastern Europe and to prevent the consolidation of the
West under US influence. By the same token, the US encourages and aids the con-
solidation of Western Europe while seeking to prevent the East from being irreversibly
oriented toward the Soviet Union.
Developments of interest in connection with the establishment and maintenance
of power positions by the US and the USSR are noted as follows :
a. A slightly higher degree of political stability has been made possible in Europe
by the improvement through 1948 of world production and employment. Production
of iron and steel, nonferrous metals, and grains has increased notably. Both produc-
tion and consumption of natural rubber, coal, and petroleum have increased. The
demand for metals, augmented by military requirements, has led to higher prices for
these commodities in spite of greater production; but grain and most other food prices
have declined.
b. The world food harvest has been the largest since 1945, and shows an approxi-
mate increase of 15 percent over that of 1947. The bread-grain harvest is 11 percent
higher than in 1947. The critical food shortages that prevailed in many areas in
1947-48 will be alleviated. Barring unforeseen interferences with world food distribu-
tion, the food deficit countries should be able to maintain rations slightly below
prewar levels until 1949 crops are harvested. Political problems attributable to food
shortages should become less pressing for the US in Western Europe. It should be
noted, however, that the present harvest will be almost entirely consumed within the
year 1948-49 and that the food-importing countries will not be able substantially to
build up their depleted stocks.
c. Items Unfavorable to US.
Abnormally large purchases of natural rubber by the USSR leave no doubt
that this commodity is being stockpiled. In 1947, 43,000 long tons were purchased
from Malaya. In the first ten months of 1948, 93,000 tons were bought and additional
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purchases of between 35,000 and 45,000 tons are estimated for November and December.
An adverse supply situation has been developing in the US in connection with
metallurgical grade manganese ore. Exports of this ore to the US appear likely to
fall from 1.3 million long tons in 1947 to 1 million for 1948. US consumption has
meanwhile increased. Reserve stocks will have to be drawn on to make up the deficit
that has developed. The situation is made more serious by the fact that imports from
areas not under Soviet domination (India, Latin America, the Philippines, and Turkey)
have declined while imports from the USSR have increased. This increase was of the
order of 280,000 tons (1947) to 348,000 tons (1948).
d. Items Unfavorable to USSR.
The rehabilitation of Soviet petroleum facilities as they existed prior to the
war has not yet been completed. The planned development of new facilities is being
hampered by serious shortages of essential materials (drilling machinery and pipe)
and of supplementary facilities (refining capacity and transportation). In conse-
quence there has been active exploitation of the oil shales of Estonia and a shift of
interest to the preparation of synthetic fuels.
US export controls, instituted in March 1948, have cut exports to Eastern
Europe and the Soviet Union by 45 percent during the last nine months as compared
with the first nine months of 1947. In consequence, the Soviet Bloc is turning to West-
ern European countries (through both official and covert channels) in search of
machinery and other goods needed for their industrialization programs and for pro-
duction for military use. ECA's responsibility for discouraging such shipments is
becoming at the same time more difficult and more important.
1. FAR EAST.
The haze created by the communiques of Chinese Nationalist spokesmen has
not hidden the progress of that government toward disintegration. Stated intentions
are invalidated almost as soon as they are announced, either by their own lack of
realism or by events. Briefly there is no practical hope that the Nationalist regime can
recover its balance either by retreating to the south, by the elimination of Chiang Kai-
shek and his personal supporters, or by various combinations of the two devices.
Accommodation with Communist power must increasingly appear to be the only politi-
cal alternative open to those associates of the Nationalist regime who still hold some
vestiges of regional power.
At the moment, one element in the situation stands out as of immediate and prac-
tical concern to US security. This is the possible status of Taiwan (Formosa) if and
when the Chinese mainland is controlled by a Communist-dominated government.
On the assumption that such a development sets the stage for an expansion of the
Soviet strategic position in the Far East, Taiwan, from the US point of view, is strategi-
cally divorced from China and becomes one of the group of off-shore islands on which
the US position will then automatically rest. Soviet penetration of an island thus
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situated would have an adverse effect on the US position on the periphery of China
somewhat similar to that which a Soviet penetration of Greece would have on the
Anglo-American position in the Eastern Mediterranean. There are hints that some of
the Nationalist officials now being increasingly isolated in Taiwan may attempt to build
up a regional authority there. The leaders of such a movement could request US
support on grounds that would have considerable practical appeal if a shift in the
strategic importance of Taiwan had tied it in with the US interest in Japan, the
Philippines, and Southeast Asia.
In this same area, where the available opportunities as well as the pressing neces-
sity for stabilizing US influence are being concentrated, two sectors are becoming
critical: Korea and Indonesia. This concentration is primarily the result of the new
context set by Communist successes in China. At the same time that the existence of
the Korean Republic comes increasingly to depend on a continuation of US military
and economic aid, the South Korean government is reducing the effectiveness of that
aid by its short-sighted ineptness. Its security measures are oppressive and terroristic
and are cutting down its popular support. Its administrative inefficiency is threaten-
ing to undermine the chances of building up a viable economy. Its methods add to
rather than diminish the defeatist spirit of the new Republic; and the strength of its
fears can be measured by the completeness of its demands for US backing.
In Indonesia, it is becoming increasingly unlikely that the determination of
whether Dutch or Republican authority shall prevail will be settled by negotiation. If
the dispute falls back into the violent stage, Indonesian affairs are in graver danger
than ever before of being manipulated by Communist groups and of thus becoming an
extension of developments in China. If the dispute reverts to the United Nations for
action by the Security Council, it can only do so in a way that will call for a clear
definition by the US of its security interests in Indonesia.
In all other sectors of the periphery, except possibly Japan and the Philippines, the
situation remains unfavorable. The bases of stability do not exist and there is little
encouragement for thinking that they can be established in the near future.
The general picture of economic improvement, so clearly drawn in Europe, is more
doubtful in the Far East. As political repercussions of the situation in China become
increasingly felt in Southeast Asia, production is likely to fall off and to become dis-
organized. The problem of food supply in this area may become critical if disorder
spreads and is prolonged. At the moment, increased rubber production in Indonesia
has more than offset the drop in Malayan production that followed Communist activi-
ties. But the growing uncertainty of the situation in Indonesia may lead to a major
curtailment and seriously affect the maintenance of US stocks of natural rubber. The
situation is roughly the same for tin.
Momentary calm prevails at the storm center of Israel. It appears, however, to
result from a growing Arab awareness of impotence in comparison with the strength
that Israel has built up, rather than from a mutual desire for reconciliation. Israel
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has clearly acquired an immediate preponderance of applicable power and has achieved
a position-both on the spot and in international councils- from which to call the
tune. The Arab States, at least at official levels, are becoming concerned with the
problem of limiting the use of Israeli power and are averting their eyes from the now
academic question of its elimination. Israel, with time now on its side, appears to be
reluctant to prejudice its strong position in the UN by needless intransigence. Al-
though an emasculated version of a US and UK resolution calling on Jews and Arabs
to negotiate outstanding issues and setting up a Conciliation Commission to promote a
general settlement has passed the General Assembly of UN, the basic situation in Pales-
tine will remain the same. There is considerable chance that failure will intensify
unrest throughout the Near East, still further reduce the Arab capacity for effective
resistance, and provide Israel with an excuse for expansion by force.
In Greece, a dangerous stalemate has developed on both military and political
fronts. The campaign against the guerrillas has bogged down and low morale ex-
presses itself in the assertion that failure came from insufficient US aid. Politically,
the Greek spirit is equally poor. The recent change in government illustrates political
poverty. The new government is similar to but weaker than the previous one. It is
unlikely that this state of suspended animation will continue. A large section of
Greek opinion-concentrated in Athens-is considering the possibility and the merits
of a dictatorship of the Right. A small non-Communist minority is pressing for con-
ciliation with the rebels. In relation to the stated intention of the US to remain in
Greece and, more significantly, in relation to the Anglo-American strategic position
in the Eastern Mediterranean, two possible conclusions emerge: (1) the capacity and
willingness of the Greek people to play the part assigned to them by US policy has been
overestimated; or, (2) the requirements for enabling them to play this part have been
underestimated.
In Turkey and in Iran there are signs of new diplomatic pressures. The Prime
Minister of Turkey was publicly treated to intemperate reproof by the Soviet Ambas-
sador for his "unrealistic" approach to geopolitical fact. The Turkish Government,
whose firm resistance to Soviet pressure has not been weakened by this new diplomatic
manner, has presented notes to the US and UK expressing the view that Turkey should
not be excluded from any international security agreement whose purpose is to check
Soviet-Communist expansion. In Iran, pressure consists of vigorous propaganda
encouraging Azerbaijan secession, of military forays across the border; and strong diplo-
matic maneuvers to distract an unstable government are expected. Meanwhile Iranian
leaders still find it safer and more profitable to continue to cooperate with the US than
to seek to conciliate the USSR.
3. BERLIN-GERMANY.
The establishment of a Soviet-supported Rump Government in eastern Berlin,
aside from the monkey wrench it throws into the almost stalled machinery of negotia-
tion, justifies the conclusion that the USSR has now focussed its efforts on what has
been called its "alternative objective" in Germany. At the time the Berlin blockade
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was imposed, it was estimated that the Soviet purpose was to check an Allied consolida-
tion of western Germany and to revive the Council of Foreign Ministers with the hope
that the Western Zones would be opened to the USSR. It was also estimated that an
alternative purpose could be presumed and that this was to prepare the ground for a
final consolidation of the Eastern Zone of Germany (including the Berlin area) with
the Soviet security area of Eastern Europe. It is now evident that Soviet policy has
concentrated on this alternative, has accepted its implications, and is taking the
obvious steps to ensure its achievement. This decision and its consequences, since
they were implicit in the situation from the start, cannot be said to introduce any
unexpected factors. The virtual political and economic partitioning of Germany has
now been practically accomplished. The tempo of adjustment to this reality will be
necessarily increased, both on the part of the USSR in the East and the US in the West.
The USSR has already begun to make its adjustments-including new steps to force
the Western Powers out of Berlin-in the field of political and economic control and
security. A Rump German Government, constructed on the Satellite model and
maintained by similar methods, is the obvious end-product of these adjustments.
Since time does not press politically and since the immediate position of the West in
Berlin is difficult and could easily lead to disagreements among the Western Allies
as they are forced to reach tripartite decisions under pressure of circumstances, it is
difficult to estimate the speed with which the USSR will develop its policy.
The US and Western Europe have still a long road to travel before they achieve an
equally effective coordination of their interests and policies with respect to Germany.
French desires and French political stability continue to have a limiting effect on the
formulation and implementation of Allied policy. While it is estimated that a "Third
Force" coalition will govern France for the next few months, it is certain that Com-
munists and Gaullists will be both willing and able to make political capital out of any
concession the French Government may make to the US/UK point of view on western
Germany. Consequently, any position that the US attempts to take in Germany
appears as a unilateral decision which is then halted by French objections and com-
promised in the interest of preserving the solidarity of Western Europe. This is in
sharp contrast with the freedom with which the USSR can maneuver in its own zone.
The speed and success with which the consolidations of Western and Eastern
Europe can be achieved by the US and the USSR, respectively, are directly affected by
economic factors. Although, at the present time, the political and security aspects
of the situation are unfavorable to the US, the general economic aspect is more satis-
factory in spite of an inflationary tendency and may prove to be of considerable signifi-
cance for the longer run.
Within the framework of a general increase in world steel production in the last
half of 1948, important increases were achieved in the US and in Germany (Bizonia).
In contrast, steel production rates have not advanced in Eastern Europe; and in
Poland, owing to a failure to obtain adequate amounts of high-grade ore, the rate of
production has receded from earlier levels.
With respect to coal, world production shows satisfactory gains. Again, the most
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significant from the US point of view have been those in Western Europe, Great Britain,
and Germany (Bizonia). French output was reduced by only 5 million tons by the
recent politically inspired strike. More adequate supplies have made a more rational
use of coal possible. Shortage of coking coal is no longer a bottleneck in steel pro-
duction. Expensive imports from the US have been cut.
Though most countries have brought postwar inflationary forces fairly well under
control, the situation in Western Europe is unsettled by the continued inability of
France to curb the wage-price spiral and by a renewed inflationary pressure in western
Germany and Austria. This constitutes a potential threat to political stability in an
area of critical interest to the US and makes the continuing success of ERP more
difficult to maintain.
The recent army coup in Venezuela, coming so rapidly on the heels of a similar
occurrence in Peru, raises the question of whether or not a trend away from demo-
cratic political institutions is developing in Latin America.
There were common elements in the two situations. In both countries, demo-
cratic governments, established by free elections, were of recent origin (1945 in Peru,
1947 in Venezuela). In both, these popularly chosen governments have now been
overthrown by traditionally conservative army groups. Despite the claims of these
groups that they were motivated by hostility to Communism and by their desire to
eliminate graft and inefficiency, both seem to have been stimulated rather by the grow-
ing dissatisfaction of their officer corps with the declining political influence of military
circles in liberal or left-wing governments.
In other Latin American countries (Guatemala, and perhaps Chile) where similarly,
liberal governments were established in recent years, military circles can also be
expected to re-examine their positions and to consider how best to ensure the continua-
tion of the special and privileged influence they have been accustomed to exert. In
still other countries (Ecuador, Bolivia, Paraguay) with little or no democratic tradi-
tion, army groups will hardly fail to note the advantages of closing their ranks in good
time and of imposing their will in advance on civilian political elements.
As far as Peru and Venezuela are concerned, there is at this time no reason to
believe that the change in government will have any immediately serious adverse effect
on US interests. Nor should it be assumed that army coups of the Peruvian-Vene-
zuelan pattern will necessarily take place elsewhere. But it is certain that, in the
absence of a broad, stable basis for civilian political power-a condition which depends
upon the long-term solution of social and economic problems-the armed forces of
most Latin American states will constitute the social group most eager and most able
to exercise authority. One can interpret the political activities of this group either
as a backward step in the political development of Latin America or merely as a frank
acknowledgment that present difficulties can be most easily controlled by semi-military
methods. In any event, however, it is doubted that governments installed by mili-
tary coups can provide long-term social and political stability.
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U. S. GOVERNMENT PRINTING OFFICE
3283-S-1948
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