CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A003600260001-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 15, 2016
• Document Release Date: January 7, 2003
• Sequence Number: 1
• Publication Date: March 31, 1958
• Content Type: REPORT

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CENTRAL INTELLIGENCE BULLETIN
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September.
31 March 1958
DAILY BRIEF
I. THE COMMUNIST BLOC
Yugoslavia - Hungary, At their meeting in Yugoslavia
on 27-28 March., Hungarian party First Secretary Kadar
and President Tito probably discussed the status of Imre
Nagy and the program for the Yugoslav April party con-
gress on which the bloc has withheld any public comment.
Tito undoubtedly hopes to regain influence in Eastern Euro-
pean Communist party developments through this first con-
ference with a satellite leader since meeting Gomulka in
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II. ASIA-AFRICA
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PRINCIPAL AREAS O
ISRAELI -SYRIAN CLASF+ S
Demilitarized zone
0 MILES 6 ?I
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30 MARCH 1958 .?-J
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LEBANON
ISRAEL
SYRIA
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Israel-Syria border tension: Resumption of Israeli
drainage operations south of Lake Hula on 30 March re-
sulted in an exchange of machine gun, tank, and. heavy
mortar fire between Syrian and Israeli troops in the heav-
iest fighting in over a year. Both sides suffered casualties
before a UN cease-fire was imposed. Further serious in-
cidents are likely to continue in this disputed area, where
the Syrians have long opposed Israeli cultivation of land.
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Anglo-Saudi relations: Britain appears increasingly
eager to resume diplomatic relations with Saudi Arabia and
is now exploring the possibilities with a Saudi diplomat in
Geneva. London's interest derives from its fear that Faysal
will use his new powers against British interests in the Arab-
ian peninsula, and that his return to office may dim the pros-
pects for using the Iraqi-Jordanian Federation as a counter to
Nasir?s United Arab Republic. F77 I (Page 5)
31 Mar 58 25X1A DAILY RRTEF
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Egyptian financial situation: Recent attempts by Cairo
to improve its foreign exchange position have failed to bring
the expected measure of relief, and the regime apparently
has now decided to sell about $14,350,000 in gold, an action
which it has been considering for several months. Lagging
cotton sales plus failure to make progress in financial talks
with the British have forced this move despite the unfavor-
able reaction likely to occur in the gold.-minded Middle East.
I I
sions with Britain and. the United States.
Libya: The Libyan Government may accept a Soviet of-
fer to build and staff two hospitals. It is reported that de-
lay in official acceptance is due to the government's desire
to protect its bargaining position in current financial discus-
Tunisia - Algeria: President Bourguiba, in an effort to
increase his influence throughout North Africa and to fore-
stall the extension of Cairo's influence, is encouraging the
leaders of the Algerian rebellion to develop the political
character of their now essentially military movement. Should
he succeed in his plan to establish the Algerian directorate
firmly at Tunis with a status approaching but somewhat short
of a formal government-in-exile, existing Tunisian-French
tensions will be further exacerbated.
(Page 8)
Greece: With the passage of a new electoral law by the
Greek Chamber of Deputies on 29 March the caretaker gov-
ernment has submitted a royal decree dissolving the legisla-
ture and proclaiming general elections for 11 May. The new
"reinforced" proportional representation law was supported
by the two largest parties in Greece over the bitter opposi-
tion of leaders of the smaller parties, some of which may
form a coalition with the Communist-front United Demo-
cratic Left for a common electoral ticket.
Japan - Taiwan: Prime Minister Kishi is sending his
ambassador back to Taipei to seek an understanding with
Chiang Kai-shek on Tokyo's handling of the controversial is-
sue of a projected Chinese Communist trade mission in Japan
flying its national flag. Kishi-believes that failure to settle
31 Mar 58
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the issue would have an adverse effect on his own party's
MIN
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III, THE WEST
Brazil: Brazil's foreign exchange crisis is expected
to result shortly in defaults on some foreign obligations.
In that event, the Kubitschek administration may publicly
blame the United States for its predicament. A Commu-
nist-backed campaign that "American imperialism" is re-
sponsible for Brazil's financial plight will probably receive
new impetus from the dramatic reappearance on 26 March
of Communist party chief Luiz Carlos Prestes, who has `
just emerged from ten years in hiding.
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 Tito Confers with Hungary's Kadar
Official commentary on the 27-28 March meeting in
Yugoslavia between Tito and Hungarian party leader Kadar
discloses only that views were exchanged in a "friendly at-
mosphere" on questions of mutual interest between the two
parties. Kadar has long sought a meeting with Tito, and the
Yugoslav leader may have concurred at this time in order to
discuss with some member of the bloc the program for the
22 April congress of the Yugoslav party. The program, pub-
lished on 13 March, has so far received no public comment
from the bloc. It contained many concepts which have re-
cently been labeled "revisionist" in official bloc publications.
The Yugoslavs regard Kadar as the most acceptable of
Hungary's current leaders, and Tito may believe that a meet-
ing with him, will strengthen Kadar and the moderate faction
in the Hungarian party against their powerful opponents who
advocate a return to even harsher policies than those enforced
by Kadar, The Yugoslav ambassador in.. Budapest told a US
Legation official there on 6 March that Hungary's position
would be "definitely worsened" if Kadar did not remain in
control. Tito has met with no satellite leader since his Sep-
tember conference with Poland's Gomulka, and probably re-
gards his meeting with Kadar as another step toward regain-
ing a position of influence among the Communist parties of
Eastern Europe.
It is probable that the case of former Hungarian Premier
Imre Nagy was discussed in an effort to reach some agree-
ment which would not unnecessarily jeopardize the possibility
of further Belgrade-Budapest rapprochement. The eventual
disposition of Nagy has cast a continuing shadow over Yugoslav-
Hungarian relations since the fall of 1956, when Nagy was ab-
ducted by Soviet police despite the Kadar regime's assurance
that he could depart in safety from his refuge in the Yugoslav
Embassy. 25X1 A
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Anglo-Saudi Relations
The British Foreign Office sent a high-level repre-
sentative to Geneva on 26 March to discuss UK-Saudi
relations in response to an approach by the former Saudi
ambassador to London, who is now in Switzerland. Like
the British, the Saudis have also recently displayed in-
creased interest in resuming relations, but they insist
discussions must also cover the question of Buraimi, the
oasis which has been occupied by British-led local forces
since late 1955. London believes peninsular stability re-
quires that the Buraimi issue be settled by the claimants--
principally King Saud and the Sultan of Muscat--and refuses
to make any prior commitments itself. Saud insists the
Sultan must agree on a solution such as arbitration before
a meeting is held. While London feels unable to put pres-
sure on the Sultan, the increased use of land mines by
Saudi- and Egyptian-supported Omani rebels in the Sultan's
domain, and the forthcoming visit of the Sultan to London
now scheduled for May--have added urgency to the search
for a settlement.
If the Saudis continue to reject formal resumption of
relations on British terms, London may suggest sending
only a consular or commercial representative to Jidda.
Although the British formerly considered Faysal easier
to deal with than Saud, they now appear concerned lest he
align himself vehemently with "Nasirite" foreign policy in
attacking the British position in Aden. The governor of
Aden said on 24 March he believes Faysal's rise means
Saudi alignment with the UA:R. This would eliminate any
chance of creating a successful opposition movement in
Yemen and thus of curbing the expected subversion cam-
paign against Aden. It would also weaken prospects that
the rival Iraqi-Jordanian Federation could serve as a
counterweight to Nasir's UAR.
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Egyptian Financial Situation
Recent attempts by Cairo to improve its foreign
exchange position have failed to bring the expected meas-
ure of relief, and.the regime apparently has decided, after
several months of consideration, to sell about $14,350,000
in gold in the near future. lagging cotton sales plus fail-
ure to make progress in financial talks with the British
have forced this move despite the unfavorable reaction
likely to occur in the gold-minded. Middle, East.
Egyptian cotton sales have been extremely slow despite
price cuts up to 30 percent for sales to hard-currency coun-
tries. Although bloc purchases are apparently on the same
level as last year, sales to nonbloc countries have thus far
failed to respond to Egyptian price reductions" Cairo's lat-
est' ; move, on 26 March, a reduction in the export tax on cot-
ton, was largely a response to a similar Sudanese move tak-
en four days earlier.
The introduction of "export account pounds"--worth
about $2010 compared with the official rate of $2,87--has
not yet met with marked success. Egypt's working foreign
exchange balance--which amounted to over $150,000,000 in
June 1956, the last month before Western restrictions came
into force--are now probably on the order of $5,000,000 or
less. The proposed gold sale, amounting to about 7.5 per-
cent of Egypt's currency backing, will provide only transitory
relief and Cairo will probably be forced to find alternative
sources of badly needed foreign exchange. Egypt's critical
foreign exchange may be one of the subjects discussed. by
Nasir-in his reported forthcoming visit to Moscow.
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Libyan Attitude on Soviet Hospital Offer
The Libyan Government appears to have reluctantly
decided to accept a Soviet offer, first reported last year,
to build, equip, and staff two hospitals and train Libyan
personnel in their operation, No official announcement
has been made, but Ire-
cent press reports that agreement has been reached and
suggests that the delay in acceptance is due to the govern-
ment's desire to avoid damaging its position in financial
discussions now going on with Britain and the United States.
Libya is endeavoring to ensure continuation of British aid
at a high level in spite of London's desire to reduce its com-
mitments in the area.
Libyan negotiators have previously used threats of
accepting alleged large-scale Soviet aid offers to increase
their bargaining power with the West
gypt is offering Libya a $28,700,000 subsidy to join the
United Arab Republic. The pronounced internal pressure
favoring acceptance of badly needed medical facilities prob-
ably will compel the generally pro-Western Libyan Govern-
ment to accept the present Soviet offer.
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Bourguiba Seeking to Enhance Political Character of
Algerian Rebel Movement
Tunisian President Bourguiba
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one of his government's chief projects
is to persuade the executive committee of the Algerian Na,
tional Liberation Front (FLN) to establish itself permanently
in Tunis, to drop its clandestine existence,, and, to give the
primarily military FLN a political character similar to that
of the pre-independence Neo-Destour and Istiglal parties in
Tunisia and Morocco.
Bourguiba observed it was in Tunisia's interest to avoid
formation of an Algerian government-in-exile, but said the
the FLN could and should establish a "shadow cabinet" whose
members would concern themselves with such matters as
foreign affairs, finance, and economic development" High-
est priority, said Bourguiba, should go to efforts to ensure
that Algerian cadres--limited numbers of whom are already
undergoing "on the job" training in some of the Tunisian gov-
ernment departments--would be able progressively to assume
administrative control after Algerian independence or autonomy
is won.
Ambassador Jones in Tunis believes Bourguiba's program,
for the FLN is motivated by his desire to make the Algerian
nationalists more acceptable internationally, to prepare them
for ultimate assumption of control in Algeria, and to maxi-
mize Tunisia's future influence in North Africa. If realized,
it is almost certain to add new complications in Tunisian rela-
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Kishi Sending Emissary to Chiang Kai-shek
Japanese Ambassador Horinouchi is returning to his
post in Taipei on 30 March with instructions from Prime
Minister Kishi to seek an understanding with Chiang Kai-
shek on Tokyo~s handling of the private trade agreement
with Communist China. Kishi is attempting to find a mu-
tually acceptable solution for the controversial issue of
flying the Chinese Communist flag over a projected trade
mission in Japan.
Prospects for an understanding are not good, Chiang
has insisted that any solution allowing the flag to be flown
is unacceptable to him. He has already suspended many
commercial contracts with Japan and has threatened to
sever diplomatic relations if the flag is flown. Kishi's pres-
ent position is that he will not recognize the Communist
"right to fly the flag" but that he cannot legally prevent it.
Although Peiping has remained silent during the Tokyo-
Taipei dispute, the Chinese Communists stressed during
the trade agreement negotiations that Japanese Govern-
ment concurrence in the flag provision is necessary be-
fore the agreement can become effective or before trade
can be increased.
Kishi told Ambassador MacArthur on 27 March that
he is delaying decision on the flag issue and other provi-
sions of the trade agreement with Peiping in order to reach
an understanding with Chiang first. He said he attaches
great importance to healing the breach with Taiwan, but
that his government cannot take steps which would, in fact,
upset the trade agreement. He said he is anxious to find a
solution to this problem as well as to the fishery dispute
with the USSR and the deadlock with South Korea prior to
elections which he is contemplating for May. He believes
that if these issues are still pending, conservative elec-
tion chances would suffer.
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Brazilian Communists Move to Exploit Foreign
Exchange Crisis
Despite drastic import restrictions and an all-out cam-
paign to bolster the world price of coffee, Brazil's dollar
reserves have dropped to a new low and, according to the
American Embassy in Rio de Janeiro, the government may
be forced within the next several days to ask postponement
of commercial obligations and payments due on debts to US
banking and government institutions. While the Kubitschek
regime is basically pro-US, it may, if it does default, state
publicly that Brazil's recent requests for stand-by assistance
had met an "unsympathetic response" in Washington.
Brazil's Communist party has been effectively charging
that the country's worsening foreign exchange crisis is due
to "American imperialism" and to the government's refusal
to act quickly to re-establish trade and diplomatic ties with
the USSR. Party chief Luiz Carlos Prestes stressed these
issues in a dramatic press conference on 26 March that
marked his first public appearance after ten years in hiding,
A federal court ruled on 19 March that a ten-year-old
order for Prestes' preventive arrest was not "necessary or
justifiable" for the completion of his sedition trial. The court
action has been appealed. by the government, but Brazilians
will probably feel the ruling adds weight to the party's recent
announcement that it has abandoned revolutionary aims and
will work through constitutional means. Some politicians in
nearly all parties, hoping for Communist support in the Octo-
ber congressional and gubernatorial elections, have already
expressed support for Communist legality and for new ties
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t.tN I KAL IN I I LLIGENCE BULLETIN
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31 March 1958
DAILY BRIEF
I. THE COMMUNIST BLOC
Greece: With the passage of a new electoral law by the
Greek Chamber of Deputies on 29 March the caretaker gov-
ernment has submitted a royal decree dissolving the legisla-
ture and proclaiming general elections for 11 May. The new
"reinforced" proportional representation law was supported.
by the two largest parties in Greece over the bitter opposi-
tion of leaders of the smaller parties, some of which may
form a coalition with the Communist-front United Demo-
cratic Left for a common electoral ticket,
Israel-Syria border tension: Resumption of Israeli
drainage operations south of Lake Hula on 30 March re-
sulted in an exchange of machine gun, tank, and. heavy
mortar fire between Syrian and Israeli troops in the heav-
iest fighting in over a year. Both sides suffered casualties
before a UN cease-fire was imposed, Further serious in-
cidents are likely to continue in this disputed area, where
the Syrians have long opposed Israeli culti Lion of land.
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PRINCIPAL AREAS O
ISRAELI-SYRIAN CLAS S
30 MARCH 1958 .?
I ~r J
MILES 6
LEBANON 1
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