REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE SECURITY OF THE UNITED STATES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP67-00059A000500090012-4
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: November 17, 2016
• Document Release Date: October 5, 1999
• Sequence Number: 12
• Content Type: REPORT

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REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE SECURITY
OF THE UNITED STATES
1. Although substantial economic recovery
has taken place in Europe during the year
since the North Atlantic Treaty was signed,
the West has lagged behind the USSR in terms
of total gain in political, economic, and mili-
tary strength. European interest in the at-
tempt to equalize the East-West balance of
power through a strictly European power com-
plex is shifting toward interest in a broader
grouping, including the Western continental
nations, the British Commonwealth, and the
Us.
2. In Berlin, the USSR may avoid violence
in the 28 May Youth Rally, relying on the
demonstration's propaganda effect to under-
mine morale and increase West Berlin's sense
of political and economic isolation from West
Germany.
3. In Italy, the general strike of 22 March
and attendant disorders marked a new high
in recent Communist activity. The Commu-
nists have been gaining strength through ex-
ploiting industrial unemployment and the
government's ineffective land reform policy.
Present popular support of the Communists
probably is comparable to the level of 1948,
despite the intervening pro-Western political
drift of Italian policy, and the beneficial ef-
fects of almost one billion dollars of ERP aid
granted to Italy.
4. In the Middle East, the imminent threat
of war between India and Pakistan has been
averted, possibly for several months, by the
8 April agreement. In Greece, however, a
period of unstable government appears likely
in view of the political maneuvering which
has followed the recent elections.
5. Prospects for Yugoslavia to develop a
working accord with Western Europe are being
blocked by difficulties with Italy, West Ger-
many, and Greece. Unless the growing ten-
sion over Trieste can be reduced by negotia-
tions with Italy, Yugoslavia's westward orien-
tation will be appreciably retarded.
6. Sino-Soviet collaboration, in the form of
Soviet technical military advice and limited
material aid, will assist the Chinese Com-
munists in their impending attack on the
Chou Shan Islands. In the field of economic
collaboration, the Soviet and Chinese Com-
munist regimes have signed agreements
covering commercial aviation and the future
economic development of Sinkiang.
7. In Southeast Asia, the Chinese Commu-
nists are collaborating more closely with the
resistance forces against the French and
British in Indochina and Malaya. In nearly
all areas, the West is merely holding its de-
fensive position against the expansion of Com-
munist influence.
8. Communist capabilities in Latin Amer-
ica, though still slight, have increased ap-
preciably in Cuba and Guatemala.
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 contained herein is
as of 14 April 1950.
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REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE SECURITY
OF THE UNITED STATES
1. Western Unity.
In the year since the US, Canada, and the
Western European nations signed the North
Atlantic Treaty, committing themselves to a
common defense against the threat of Soviet
military aggression, Soviet power has in-
creased in relation to that of the Atlantic
Treaty nations. The USSR is displaying a
new aggressiveness in international affairs,
evidently based upon : (1) Soviet success in
breaking the US atomic monopoly; (2) the
triumph of Communism in the Far East; (3)
developing economic strength and self-suffi-
ciency in the entire Soviet-Satellite sphere;
and (4) the continued ability of local Com-
munists to disrupt the economy and harass
the anti-Soviet governments in Western Eu-
rope. Major campaigns in an accelerated
cold-war offensive have been intensification
of the Soviet "peace" campaign, a continua-
tion of the battle for Germany, and a coordi-
nated campaign of attacks on the Mutual De-
fense Assistance Program (MDAP) and the
North Atlantic Treaty (NAT).
The past year also -has seen substantial
progress in European economic recovery, but
in terms of total gain in political, economic,
and military strength, the West has lagged
behind the USSR. In the Far East, the West-
ern Powers have not yet developed a unified
strategy for halting the rapid advance of Com-
munism. In Western Europe, progress to-
ward economic integration, which the US con-
siders an element needed to counterbalance
the threat of Soviet power, has been slow and
faltering. Similarly, in the political sphere,
the Council of Europe has been retarded by
the cautious nationalism of Britain and
France.
Combined defense planning under the
North Atlantic and Brussels treaties has
been initiated, and the first steps toward re-
armanent under the MDAP have been taken.
Nevertheless, the Western European govern-
ments recognize the necessity of accelerating
the rate of Western rearmament and consider
that the primary responsibility for reinforc-
ing the Western defenses must lie with the
US. Furthermore, Western Europeans still
hold lingering doubts as to the willingness of
the US to commit its ground forces to the con-
tinent in the event of Soviet invasion.
Europe's prospects for stability and sound
economic development after the Marshall
Plan ends remain uncertain. Unemploy-
ment, particularly in Italy and Western Ger-
many, is dangerous. After some initial suc-
cess, persistent efforts to solve the key trade
problem of developing a mass market through
liberalization of trade and payments have met
strong opposition, mainly from traditional
European economic nationalism. In particu-
lar, the British, while prepared to join the Eu-
ropean Payments Union, are insisting on
special treatment to protect their present
trading position and the gold and dollar re-
serves of the sterling area.
European political, economic, and military
integration still seem to hinge on two related
problems: British willingness to play a major
role in Western Europe as a counterweight
to Western Germany; and the possibility of
bringing Western Germany fully into the
Western European community while the Ger-
man Federal Republic remains amenable to
Western influence. Although the Western
European governments and peoples have
taken the initial steps down the long road
toward a unified Western European commu-
nity, they lack the initiative and the resources
to move rapidly toward the agreed objective.
The UK and the Western continental nations
are increasingly thinking of raising the North
Atlantic Treaty Organization (NATO) above
its present plane of military security to be-
come an economic and political as well as
military association. Such a reinvigorated
NATO would embrace the whole Atlantic com-
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munity, and through it the West would con-
sider its problems within the broader Atlantic
framework (explicitly including the US)
rather than within a purely Western Euro-
pean system.
The impetus toward strengthening the
NATO comes in part from recognition of the
necessity of greater Western unity in carry-
ing on the cold war with the USSR. Even more,
it has come from growing awareness that the
European dollar deficit cannot be eliminated
by the four-year European Recovery Program
and that Europe still, to an appreciable degree,
will be financially dependent on the US after
1952. The Soviet policy of promoting eco-
nomic self-sufficiency in its own sphere has
dimmed previous hopes of reviving East-West
trade to prewar levels (as anticipated in the
Marshall Plan) and left Western Europe de-
pendent on the US for food and raw materials
that might have been obtained from Eastern
Europe. The British, especially anxious to
avoid submerging their global interests in the
narrower European grouping, would welcome
an opportunity to draw the US into an At-
lantic organization encompassing the politi-
cal and economic as well as military fields.
Finally, the Western European countries, con-
scious of their own war-weariness and in-
ability to overcome the economic obstacles to
strictly European integration, almost desper-
ately seek the continued leadership of the US.
Thus European interest in the attempt to
equalize the East-West balance of power
through reviving a strictly European power
complex is shifting toward interest in a
broader grouping, including the Western con-
tinental nations, the British Commonwealth,
and the US.
2. Berlin.
The USSR, in attempting to convince the
German people that their future depends on a
unified country under Communist control,
is making extensive preparations for the Com-
munist Youth Rally to be held on 28 May in
Berlin. To prepare the West Berliners for
this mass demonstration of East German sup-
port for Communist leadership, the USSR is
exerting every effort to heighten the West
Berliners' sense of economic and political iso-
lation from Western Germany and the Bonn
regime.
By continued interference with freight traf-
fic between Western Germany and West Ber-
lin, the Soviets have effectively discouraged
West German businessmen and industrialists
from developing their commercial contacts
with the former capital. Trade continues to
suffer because of the uncertainty of transport-
ing raw materials and finished goods. In
February 1950, West Berlin's production in-
dex was 28 (1936=100) in contrast to an index
of 91 for Western Germany. At present, 30
percent of the West Berlin labor force is un-
employed and 44 percent of the population is
living on relief.
The unwillingness of the West German Re-
public to grant West Berlin more than 35
million DM monthly instead of a minimum re-
quirement of 50 million DM monthly to bal-
ance its budget has added to the Berliners'
sense of separation from the Federal Republic.
Probably West Germans in general expect the
US to contribute, in addition to ECA funds,
a large portion of the one billion DM ($240
million) needed to maintain the minimum
level of economic activity in the fiscal year
beginning 1 April 1950. If West Berlin's
planning is to deal effectively with the city's
problems, long-range financial commitments
from some source, instead of the present hand-
to-mouth grants, will be necessary.
The USSR may well estimate that this de-
terioration of the West Berlin economic and
social situation, with its concomitant effect
on popular morale, makes it unnecessary to
adopt violent tactics to win control of the
whole city. In that event, the USSR probably
would utilize the May Youth Rally primarily
for propaganda effect instead of as a device to
drive the Allies out of Berlin by force. In
any case, bands of East German Communist
youth probably will instigate disturbances
such as street fighting, localized riots, and
traffic interruptions. The armed East Ger-
man Alert Police will participate in the Rally
in some way, although the Soviet leaders ap-
pear anxious to avoid organized fighting be-
tween this East German Communist force and
the military units of the Western Powers. If
a persuasive display of German enthusiasm
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for the Communist East German regime is
staged, it could have an important psycho-
logical effect on the depressed morale of the
West Berliners.
3. Resurgence of Communism in Italy.
The recent Communist disorders in Italy,
culminating on 22 March in the most success-
ful general strike since the national elections
two years ago, are storm signals indicating
the chronic weakness of the Italian economy.
Industrial and agrarian discontent has been
developing in Italy throughout the entire post-
war period. This basic condition has been
obscured by the surface effects of US assist-
ance in the form of food, raw materials, and
industrial equipment. The most serious prob-
lem is unemployment, widespread both in in-
dustry and agriculture, which reflects the
economic unsoundness of an overpopulated
country lacking natural resources and ade-
quate investment capital.
At present there are approximately two mil-
lion unemployed in Italy. To prevent addi-
tional unemployment, the government has
influenced leading industrialists to overstaff
their factories. For example, the Mussolini-
created armaments and heavy metallurgical
industry, a stronghold of the Communist labor
organization, has been sustained by govern-
ment financial assistance despite the fact that
the workers thus subsidized could have been
more efficiently employed in industries better
adapted to Italian resources and potential
overseas markets. The workers in these in-
dustries recognize that their jobs are in con-
stant jeopardy, and they are particularly
susceptible to Communist propaganda.
Fear of increasing unemployment has, in
recent months, been developing among in-
dustrialists and businessmen as well as gov-
ernment officials, because of the continuing
deflationary state of the economy. Many of
them believe that a serious business recession
may be imminent. This pessimistic outlook
has been fostered in the last six months by
an appreciable reduction in Italian exports as
compared with export levels of the correspond-
ing months a year earlier. The Communist
labor unions have capitalized on these un-
settled economic conditions by championing
the workers' grievances.
The Communists have also gained strength
by exploiting discontent arising from Italy's
serious agricultural problems. The Christian
Democratic government has been dilatory in
instituting reforms in the improvement and
distribution of farm land, especially in south-
ern and central Italy. The issue is now being
faced, but fundamental difficulties, such. as
the lack of adequate financing and the scar-
city of necessary agricultural equipment, mili-
tate against any measures that will alleviate
the demands of the land-hungry peasants in
the near future.
The Communists recently have been taking
advantage of the government's ineffective
land reform policy by instigating an active
land seizure program. Popular pressure for
immediate amelioration of the land problem
has become so strong that, for the first time,
the non-Communist trade union organiza-
tions have ' felt it necessary to join in the
movement.
As a consequence of these industrial and
agricultural conditions, Communist pressure
has reached its highest level of activity since
1948. To counter the increasing threat of
Communist strikes and riots, the government
has been adopting more repressive measures.
Chief reliance has been placed on the armed
police under Interior Minister Scelba's vigor-
ous direction. On 18 March, extraordinary
decrees restricting the right of public assem-
bly and political meetings were issued. By
alternating violent direct action with parlia-
mentary attacks, the Communists have been
forcing the government to adopt more au-
thoritarian methods. As a result, moderate
progressive groups, whose support is im-
portant to Premier de Gasperi, are being
alienated.
One consequence of the Communists' re-
newed activity has been to strengthen the
small neo-Fascist Italian Social Movement
(MSI). As Communist-led strikes have more
and more threatened industrial operations
and the government has failed to deal firmly
with land seizures by the peasants, some con-
servative industrialists and landlords have
switched their support to this neo-Fascist
movement. This party cannot yet be con-
sidered an important political influence, but
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the government fears its potential appeal
sufficiently to plan legal action to outlaw it.
The first reliable indication of present Com-
munist popular strength will be the local elec-
tions scheduled this spring in the majority of
all Italian communes. At that time the Com-
munist vote is likely to reveal strength com-
parable to its 1948 showing in spite of the pro-
Western drift of Italian Government policy
and the beneficial economic effects of almost
one billion dollars of ERP aid granted to Italy
since 1948. If US assistance ends in 1952 as
scheduled, economic conditions may deterio-
rate rapidly, in which case the Communists
would have a good chance of securing a plu-
rality in the 1953 national elections.
Communist opposition to the government's
foreign policy has concentrated on efforts to
sabotage the MDAP program. To the extent
that Communist influence has increased in
the past year, it has been stimulating the tra-
ditional neutrality sentiment of the Italian
people, thus jeopardizing effective Italian sup-
port for Western European defense.
4. Near and Middle East.
Persistent instability in the Near and Mid-
dle East continues to be a source of weakness
in the security position of the non-Communist
world. The situation has improved recently
only in the Indian subcontinent where disas-
ter has been narrowly averted.
The threat of imminent war between India
and Pakistan, which would have left the sub-
continent in chaos, has now been postponed,
possibly for a matter of months, by the 8 April
agreement between the two prime ministers.
This agreement paves the way for the orderly
and peaceful handling of the migration of
Hindu and Moslem minorities in the Bengal
area. Although the accord will not silence
the extremists on both sides who have been
clamoring for war, it should lessen the ten-
sions generated by this spring's wave of com-
munal violence in Bengal. Furthermore, if
faithfully carried out by the two parties, the
pact should create a more favorable atmos-
phere for consideration of the Kashmir dis-
pute, the current economic blockade, and
other outstanding differences between the two
countries.
Developments elsewhere in the Near and
Middle East hamper US efforts to promote
greater strength and stability among the
countries along the USSR's southern borders.
In Iran, the dangerous policy of drift in the
face of serious economic and social deterior-
ation continues. The new Mansur Cabinet,
although it contains some competent men,
probably lacks both the will and the power
to take energetic measures to strengthen the
country's economic structure and national
morale. The Arab League's recent demon-
stration of solidarity, in which it was agreed
to expel any member making an independent
agreement with Israel, places a new barrier in
the way of an Arab-Israeli settlement.
Meanwhile, the trend of events in Greece
since the 8 March parliamentary elections has
made it doubtful that any popularly sup-
ported, effective government will soon emerge.
By deciding at the request of the King to
form a minority government of his own, Lib-
eral Party leader Venizelos not only disre-
garded the generally accepted belief that a
broad centrist government would represent
the will of the electorate but also made him-
self dependent on the rightist elements in
parliament most likely to oppose thorough-
going application of ECA's economic stabili-
zation program. Venizelos has now yielded
to popular pressure-and the vigorous rep-
resentations of US Ambassador Grady - by
resigning to permit General Plastiras to form
a broad centrist coalition. Nevertheless, the
seeds of dissension between Venizelos and the
other center parties have been planted, and
the chances of their holding together for any
length of time are poor. There are strong
prospects for an interim period of unstable
government followed by new elections in
which the King would advance Chief of Staff
Papagos as a "strong man" candidate and in
which the question of the King's role in the
government would once again become a major
disruptive issue.
5. Yugoslavia and the West.
Yugoslavia has recently encountered a
number of obstacles in developing a working
accord with Western Europe. The initiative
taken by the Yugoslavs in attempting a bi-
lateral settlement with Italy on the final dis-
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position of the free territory of Trieste is rap-
idly developing into a crisis in which both
countries have publicly assumed intransigent
positions. The situation has been aggra-
vated because Yugoslavia has exceeded its
treaty rights unilaterally and brought about
the economic integration of Zone B with
Yugoslavia, thus causing fears of outright an-
nexation. This action has provided the basis
for an Italian protest to Belgrade, followed
by sharp Yugoslav countercharges, and has
inflamed both Italian irredentism and Yugo-
slav nationalism. Although there apparently
remains a desire on the part of both govern-
ments to reach an understanding over Trieste,
current tensions may lead to a further deteri-
oration in Italian-Yugoslav affairs, possibly
preventing the establishment of a mutually
beneficial economic rapprochement.
The situation has been complicated by the
aggressive tactics of the Italian Communists.
They are in a position to exploit effectively
any concessions which de Gasperi might make
to satisfy some of the Yugoslav claims. For
its part, the Tito Government must regard
any strengthening of Italian, Cominform-
directed Communists as a further threat
against Yugoslavia and therefore might be
inclined to display a reasonable attitude
towards the de Gasperi government.
The resignation of Greek Premier Venizelos
and his replacement by the left-centrist Gen-
eral Plastiras, with whom Tito has indicated
his willingness to do business, opens the way
for closer relations between Belgrade and
Athens. The first step in this direction may
be the early implementation of plans for the
reopening of the Salonika-Belgrade railroad,
which would restore to Yugoslavia its prewar
commercial outlet on the Aegean Sea.
On the other hand, the West German-Yugo-
slav trade agreement, the largest 1950 agree-
ment Belgrade has signed with any country,
has not yet been ratified by the Bonn Govern-
ment. This treaty, which would re-establish
a valuable prewar trade channel, is particu-
larly important to Yugoslavia because it
would provide large quantities of essential in-
dustrial goods, needed during the next few
months. The West Germans have been with-
holding their approval on account of Yugo-
slav trials of German war criminals and the
treatment of German war prisoners in
general.
If Yugoslavia is successful in negotiating
these outstanding issues with the Western
governments of Italy, Greece, and Western
Germany, the anti-Cominform "front" in the
Balkans will be strengthened, and the orien-
tation of Yugoslavia toward Western Europe
materially advanced.
6. Sino-Soviet Collaboration.
The Chinese Communists, deriving some
practical military benefits from the closer as-
sociation between Moscow and Peiping in
recent months, probably soon will direct a
major attack against the Chou Shan Islands
southeast of Shanghai. The objective would
be to eliminate use of these islands as an ad-
vance Nationalist base for air attacks and for
naval blockade of the Yangtze estuary. In
this operation, the new Chinese Communist
air force is expected to make its first major
appearance in the civil war. Soviet military
assistance appears to include Soviet technical
advice and limited material aid to all branches
of the Chinese Communist military establish-
ment. Emphasis, however, is undoubtedly
being placed on the organization, training,
and equipment of a tactical air force. The
USSR .is believed to have turned over to the
Chinese Communists fighter aircraft from
surplus Soviet stocks available at the Port
Arthur naval base and elsewhere in the Far
East. Among the Soviet military personnel
in East China, estimated to number 1,000, are
groups of air advisers probably directing the
air training program. It is probable that the
USSR will take care to prevent overt partici-
pation by Soviet military personnel in Chinese
combat operations.
The Soviet military assistance program may
also include training and operational advice
in amphibious warfare. The Chinese Com-
munists could use such help for their forth-
coming invasion of Taiwan, which they are
expected to launch in the second half of 1950.
As to Hainan, where they have recently made
increasingly heavy infiltration raids, the Com-
munists appear to be following a strategy
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calling for a combination of internal and ex-
ternal pressures.
In the field of economic collaboration, the
USSR and the People's Republic of China
have signed agreements covering commercial
aviation and the future economic development
of Sinkiang. Under the air agreement, serv-
ices are to be established between Peiping and
three Soviet cities. The Sinkiang economic de-
velopment agreement creates two Sino-Soviet
stock companies, one for the production and
refining of petroleum and natural gas, and
the other for the discovery and production
of non-ferrous metals. The expenses and
profits of these joint-stock companies are to
be shared equally by the USSR and the PRC.
Thus China assumes the major contribution
by providing the natural resources and half
the expense of exploitation, while the USSR
will acquire considerable economic control
over this area. Since Sinkiang is too far from
the populous areas of China to enable the Chi-
nese to benefit appreciably from petroleum or
metals produced and refined there, Chinese
investment capital could be more profitably
expended in China proper.
7. Southeast Asia.
In Southeast Asia, the Western Powers are
holding an essentially defensive position
against the pressure of expanding Communist
influence, which is successfully exploiting
local nationalist sentiments there. Chinese
Communists are giving increased support to
the resistance forces opposing the French and
British in Indochina and Malaya. Conditions
in Burma are slightly less chaotic than before.
The Huk rebels in the Philippines, however,
threaten that nation's internal stability.
a. Indochina.
Limited Chinese aid to Ho's forces and the
strengthening of overt Stalinist influence in
the Ho regime indicate that the Communist
leadership of the resistance is closely identify-
ing the movement with Moscow and Peiping.
There is as yet no evidence, however, that the
Chinese Communist regime is engaged in a
large-scale program of military aid to Ho nor
that Peiping-directed Chinese Communist
troops are participating in attacks against
the French in Indochina. A substantial in-
crease in Chinese Communist military assist-
ance can be expected within the next six
months, provided that the Chinese Commu-
nists can consolidate their control over South
China and do not become exclusively pre-
occupied with the projected invasions of the
Chou Shans, Hainan, and Taiwan.
Meanwhile, the shaky structure of Bao Dai's
government has been weakened by the resig-
nations of the Minister of Defense and two
under secretaries from Nguyen Phan Long's
cabinet. At the same time Vietnamese lead-
ers, emboldened by anticipated US economic
and military aid, appear eager to repudiate
the more restrictive aspects of the March 1949
accords and are clamoring for further conces-
sions from the French. Such persistent Viet-
namese pressure on the French is aimed at
putting the Bao Dai government in a position
to become the actual rather than the nominal
recipient of anticipated US aid.
This growing demand for direct Vietnam-
US relations threatens to upset plans for a
quadripartite conference of French, Laotian,
Cambodian, and Vietnamese representatives
scheduled later this month. This meeting is
intended to establish a joint operational or-
ganization to handle services common to all
Indochina, and has been generally regarded by
US observers as the most suitable agency to
coordinate French and Indochinese require-
ments for US assistance. The Vietnamese,
reluctant to be on the same level with the
much weaker states of Laos and Cambodia,
always have suspected that the French would
try to use such a quadripartite organization
as a device to establish French control over
US aid, and are unlikely genuinely to support
any quadripartite agency.
The proposals of the Griffin mission for US
military and economic aid recognize the
necessity of devising a formula that will take
advantage of French experience without ap-
pearing to consolidate French hegemony. If
a method can be developed to insure that US
assistance will not be dissipated by disputes
between the French and the Bao Dai regimes,
prospects appear favorable for its effective use
both against Ho Chi Minh and in defense of
the China border.
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Despite the French reports that US military
equipment must arrive within the next three
months if it is to prevent a debacle, it is
doubtful that a crisis will develop that rap-
idly. Assuming that Chinese aid to Ho does
not exceed the moderate proportions antici-
pated in the near future, the French probably
can maintain their present control of the
chief Indochinese centers during the next six
months while US equipment is in process of
delivery.
b. Burma.
In Burma there has been some recent prog-
ress toward stability, although widespread
unrest continues. Government forces have
established a protected corridor from Ran-
goon to Mandalay and have ended organized
Karen resistance for the present. The re-
opening of channels of trade and communica-
tions between Upper and Lower Burma will
aid the government in reasserting its author-
ity over the country and strengthening
Burma's economy. British confidence in the
Burmese Government has increased, and fur-
ther British military aid for Burma may be
approved. The recent #6 million Common-
wealth loan, which will temporarily ease Bur-
mese internal financial problems, also will
improve strained Anglo-Burmese relations.
Meanwhile, the Burma Communist Party
(BCP), now organized with its own "Govern-
ment" at Prome, 160 miles northwest of Ran-
goon, has weakened itself temporarily by
arresting the leaders of its insurgent partner,
the People's Volunteer Organization (PVO).
The BCP, however, remains the logical recip-
ient of the assistance which the Burmese
Communists expect to get from China. The
BCP may be attempting to develop a smaller
but more effective political and military or-
ganization capable of gradually increasing its
authority along the lines followed by the Chi-
nese Communists. Should it receive aid from
Peiping, the BCP probably could cause
greater difficulties for the Burmese Govern-
ment.
c. Malaya.
After nearly two years of attempting to sup-
press Communist-directed terrorism in Ma-
laya, the British have been unable to make
progress in solving the problem and are faced
with a deteriorating situation. They finally
have come to admit concern over inability to
restore order to a region that is the sterling
area's greatest net dollar earner.
Though there are approximately half as
many bandits operating in Malaya as nearly
two years ago when guerrilla warfare began,
the 3000-odd terrorists, mostly Chinese, have
been conducting a more intensified campaign
since October 1949. Bandit attacks in Feb-
ruary 1950 were the highest recorded since
1948 and British casualties exceeded those of
any month since the campaign began. As a
result, the British recently have strengthened
both the ground and air forces of the Malayan
garrison and have made several administra-
tive changes designed to increase the effi-
ciency of the police and military establish-
ment. At.present there are some 26,000 Brit-
ish and Indian troops, plus approximately
70,000 full and part-time police operating in
the area.
The large Chinese community - approxi-
mately 44 percent of the population - has
complicated the problem for the British. Al-
though Malayan Chinese are not ideologically
attracted to Communism, they tend in typical
opportunist fashion to support the successful
Communists in China. The expected arrival
of Chinese consular representatives, as a con-
sequence of British recognition of Peiping,
probably will accelerate this trend. The Chi-
nese Communists have dispatched trained
agents to assist the terrorists in their mili-
tary campaign, in sabotage operations, and in
infiltration of the trade unions and the edu-
cational system.
On 23 March the Griffin mission recom-
mended a 4.5 million dollar US aid program,
to be expended by 30 June 1951 for the pur-
chase of equipment not available in the ster-
ling area. Most of the funds would be ex-
pended on materiel to increase the efficiency
of police and constabulary operations. It is
extremely doubtful, however, if such a small
volume of US aid will have any considerable
effect on the fight against terrorism.
d. Philippines. ,
Widespread and apparently well-coordi-
nated Huk violence in central Luzon in late
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March indicates increased dissident strength
and a more thorough integration of effort on
the part of the Communist-led guerrilla forces.
The Philippine Government's counteraction
thus far has been largely ineffective. Al-
though Huk violence is not expected to be-
come critical in the immediate future, it rep-
resents the worst outbreak in the past three
years and is a direct consequence of deteri-
orating basic socio-economic conditions which
the Philippine Government appears incapable
of alleviating.
8. Latin America.
In Latin America, the decline of Commu-
nist influence and strength, which extended
from 1947 to 1949, appears to have ended.
Although the potential remains low, Com-
munist capabilities for anti-US action have
increased appreciably during recent months
in Cuba and Guatemala, where opportunist
politicians are collaborating with the Com-
munists to obtain a solid block of votes.
In Cuba the major political parties have
begun to court Communist favor, and one
party has signed an electoral pact with the
Communists, giving them a cloak of respec-
tability and increasing their opportunities to
attract recruits, collect funds, and spread
propaganda designed to undermine US pres-
tige. In Guatemala, some Communists are
employed by the government and have been
utilizing official facilities to advance their
cause. The administration candidate for
President has accepted Communist support,
and virtually all organized labor has come
under Communist domination. In Brazil, al-
though the Communists have not gained in
popular influence, they have been able to or-
ganize anti-US demonstrations, capable, for
example, of providing the additional influ-
ence necessary to delay the passage of a petro-
leum code favorable to US interests.
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590056012-4
F0 THE ASST
mm
.
R
DI
ILiATES,CIA
TRAL INTELLIGE}1CF AGENCY
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WARNING
This document contains information affecting the na-
tional 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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