CURRENT INTELLIGENCE BULLETIN - 1951/07/06

• Document Type: SPECIALCOLLECTION
• Collection: Current/Central Intelligence Bulletin Collection
• Document Number (FOIA) /ESDN (CREST): 02740737
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 8
• Document Creation Date: April 15, 2019
• Document Release Date: April 22, 2019
• Publication Date: July 6, 1951

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'44 I Ofr �40 n Lr-1
6 July 1951
Copy No. C /-
CURRENT INTELLIGENCE BULLETIN
SOCUMENT NO
NO CHANGE IN CLASS. ye
[1 DECLASSIFIED
CLASS. CHANGED TO: T.'. 3 C 40-
NEX t REVIEW DA I
AUTH: HR 70-1,24
DATE' 7 .4 r.7 REVIEWER:
Office of Current Intelligence
CENTRAL INTELLIGENCE AGENCY.
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SUMMARY
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1. Chinese Communists feel they enter negotiations with strong position
(page 3).
2. Chiang Kai-shek expresses his views on Asian situation (page 3).
3. French abruptly delay Vietnamese ECA agreement with the US (page 4).
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NEAR EAST
6. No progress in Iraqi oil negotiations (page 6).
WESTERN EUROPE
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French import plan would bolster rearmament program and appease
labor 0a;ge 7).
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FAR EAST
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1. Chinese Communists feel they enter negotiations with strong position:
the Chinese
uommunist Field Commander in Korea,
General Peng Teh-huai, advised CCF tactical
commanders on 1 july that Chinese delegates to the cease-fire negoti-
ations represent a victorious army, that South Korean demands will be
ignored, and that, if negotiations prove unsatisfactory, the CCF will
launch their summer offensive. This source also reported that, on the
same date, the logistical commands ,orthe CCF Third and Fourth Field
Armies informed General Peng of the movement of 80,000 new "volun-
teers" from Manchuria to the Korean front, The US Far East Command
endorses the 8th Army warning that, should this report be true, no
significant concessions can be expected -- at least in the political field.
Further, the time� gained by the enemy, during extended negotiations
would permit them to concentrate forces equal to or greater than those
employed during the April offensive and to construct and repair forward
airfields for close air support.
. Chiang Kai-shek expresses his views on Asian, situation:
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Chiang Kai-shek observed privately to the
US Charge at Taipei on 30 June that the
Chinese Communists in Korea badly needed
a respite and quite likely would agree to a
cease-fire and armistice. The Chinese Communists will not move into
Burma, Chiang stated, because it is a "weak link" that will "break auto-
matically" if Thailand or Indochina falls. Further, any overt move into
Burma, he felt, would arouse India. Despite Chinese Communist concen-
trations near the Indochinese border, he does not expect an early operation
there; he concluded, however, that Indochina remains one of the numerous
potential targets for aggression that could be exploited on short notice.
Comment: Supported by a large intelligence
network, Chiang's observations should be based on the best information
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available. However, Nationalist intelligence reports to US officials
regarding Chinese Communist intentions have usually been unreliable.
Chiang's departure from the customary Nationalist prediction of
imminent Chinese Communist aggression throughout Southeast Asia is
of possible significance.
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. French abruptly delay Vietnamese ECA agreement with the US:
US Minister Heath reported on 28 June that
signature of the US-Vietnamese agreement
on economic aid, scheduled for 30 June, was
cancelled as a result of sudden French
insistence that,prior approval of the High
Council of the French Union must be obtained.
Heath, while conceding that the French were
acting within legal rights as prescribed by
the 8 March 1949 agreement with Vietnam,
pointed out that the French were fully aware
of US-Vietnamese negotiations and had
indicated through the French Economic
Counsellor that the exchange of letters between Bao Dai and Auriol con-
stituted legal approval by the French. He added that the French did not
require High Council approval for the agreement on military aid and that
the High Council of the French Union is not yet in existence. In sum-
rnation, Minister Heath characterized the French action as "astonishing"
and expressed his inability to explain it.
On 29 June, De Lattre's office released a
statement, which the ECA Chief in Indochina described as "amazing, "
denying French responsibility in this affair, imputing bad faith to US
negotiators and intimating that French intervention saved the Vietnamese
from a US-laid trap. In reply, Heath drafted an emphatic denial of these
French allegations.
On 2 July, the ECA Chief transmitted a
report from a reliable American journalist that De Lattre himself had
expressly urged Paris to delay the signing of the ECA agreement.
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Comment: On 30 Dine, Minister Heath
cabled a lengthy exposition of the overall situation in Indochina and
urged a review of US policy in Indochina looking to the adoption of a
more sympathetic attitude toward the French. He stressed the para-
mount importance of the French military effort and recommended
that every effort be made to mollify French suspicions of US actions
In Indochina, especially those with regard to ECA. This recommen-
dation was made in the light of a long series of informal criticisms of
the ECA program by French officials and the more serious matter of
the French veto on signature of the ECA agreement.
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NEAR EAST
6. No progress in Iraqi oil negotiations:
The Regent of Iraq has expressed his con-
cern to the British Ambassador over the
lack of progress in the negotiations with the
Iraq Petroleum Company. According to the
Regent, an extraordinary meeting of the Iraqi Cabinet on 30 Tune con-
cluded that the, company was stalling and ended with the Prime Minister
offering his restgnation and that of his Cabinet. The Prime Minister
had previously told the British Ambassador that he felt the IPC was
juggling its figures and that its previous offers were possibly unfair.
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The British Ambassador told the Prime Minister that it was the dom -
pany's impression that Iraq was delaying while awaiting developments
in the Iranian situation. He is recommending that the company's
negotiator return to Baghdad.
The US Ambassador comments that this
development, which comes as a surprise, has no rational explanation;
he advises that every effort should be made to reach prompt settlement.
He suggests that the Iraq Petroleum Company make an offer before any
company negotiator returns to Iraq and that the negotiator should not
come until the Iraqi Government has indicated its willingness to discuss
the terms of a new offer.
Comment: Orderly negotiations with the
Iraq Petroleum Company would be seriously impaired should the present
government resign� for such a development would provide an opportunity
for pro-nationalizatiwrelements to stir up public opinion. It seems
possible that if the Itb,qi Government does not feel compelled to adopt
an uncooperative polity, negotiations will be resumed. The good faith
of the company is difficult to estimate, but up to this point it has been
anxious to continue with the negotiations, fully aware as it is of the
developments in Iran.
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WESTERN EUROPE
7. French import plan would bolster rearmament program and appease
labor:
The French Cabinet has decided to send a
note to the US Government outlining the
"exceptional gravity" of the inflationary
problem resulting from France's military
program and recommending that the problem can be met only by an
expansion in the volume of consumer goods. French Finance Minister
Petsche, who prepared the note, advises that this expansion can best
be accomplished by sharply increasing imports. He argues that these
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imports should be financed by US aid and that such aid must be pro-
grammed over a relatively long period -- in order to prevent hoarding
and to develop the desired confidence among importers, producers and
consumers. The note states that France will be unable to fulfill its
commitments in Indochina and Western Europe without close cooperation
from all NATO countries.
The US Embassy in Paris notes that this
French approach for US financial assistance is preferable to the usual
French request that the franc counterpart of ECA aid be applied directly
to cover budget deficits.
Comment: The inflationary danger in France
is accentuated by the prospect that a new government will not come to
grips with this problem before late September, and is certain to be too
weak to take effective counter-measures. The proposal to curb
inflationary pressures by greatly increasing imports of consumer goods
was shelved in 4946-47 in favor of a plan for concentrating on long-term
Investment, The latter plan has had little immediate effect in mitigating
the French labor problem.
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