DAILY SUMMARY - 1947/06

• Document Type: SPECIALCOLLECTION
• Collection: Daily Summary Collection
• Document Number (FOIA) /ESDN (CREST): 02996865
• Document Creation Date: October 8, 2018

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1 April 19147 (043)
DAILY SUIDARY
30 _,Juske 19147 (#143.
EDITOR S
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$0 JUN 1947
419
1. US to call conference on Eurmean citrialmoticluction--Secretary Marshall
is requesting telX-Prim'6-MiiTiste-Frttlee to seinTip-level representatives
to Washington to confer on the currently unsatisfactory European coal
production, with particular reference to the Ruhr. General Clay will also
be asked to participate in the conference.
2. TARS use of titaliah airfield�Acting US Representative Melbourne in
Bucharest susgeste that the State Department consider representations
to the Italian Government with regard to the reported use of an Italian
airfield by the Soteeteeontrolled Rumanian airline TARS on a recent
flight to Paris, TARS had originally requested permission to overfly US
Zone Austria but chose the alternate Italian route without waiting for US
permission. Melbourne fears that If there are no repercussions the satel-
lites will continue this practice.
(CIG Comment: Rumania may have obtained authorization for such
through flights under a reported provisional air agreement with Italy. The
Czechs and Swedes have also been using Italian airfields for circuitous
international nights to Cairo.)
S. US thihmets Italiniartitciiolion econoini tallls--The Department of State
has instructed US Ambassador Douglas to-eorna the UK Foreign Office
that Italy should be brought into the discussions of European aid at the
earliest possible moment, The Department does not agree with the UK
that Italian ratification of the Treaty should be a prerequisite to partici-
pation in these discussions.
EUROPE
4. USSR: Soviet tilansimIsiloitiliz_Maid_mgrarci--Commanding General
US Forces Austria has learned from a Soviet Major, formerly a trusted
Communist Party member, that certain Communists among the Soviet
Forces in Austria recently have been directed by the Party Central Com-
mittee in Moscow to make a study of "US aid, its effects, and how it can
be made to serve Soviet aims.'' The Moscow directive reportedly,sugges
that the US aid program should be encouraged for the purposes of 'exploit-
ing and/or eliminating vital materials in America" and of creating inflation 3o
in the US. The achievement of either objective would, according to the
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directive, "be in line with the necessity to destroy our greatest enemy --
the US economy and its capabilities."
(CM Comment: In view of the initial enthusiasm with which the
Marshall proposals have been greeted throughout Europe, the USSR may
well conclude that' implementation of the proposals is inevitable and that
open opposition would be futile. The Kremlin may therefore seek a sub-
stantial share of US assistance for the Soviet satellites, and perhaps even
for the USSR itself; and it may encourage increased US assistance in the
hope of depleting US resources and inflating the US economy.)
FAR EAST
5. CHINA: Char es of Soviet assistance to Communists--US Consul General
Shanghai reports that Shanghai Mayor K.C. Wu has told visiting US publish-
ers that China now has conclusive proof that Chinese Communists are
using several divisions of Korean troops trained in North Korea and six
divisions of Chinese trained in the USSR.
� A high Chinese Foreign Office official, in response to inquiries by
Embassy Nanking, has declared that he expects to complete within a few
days his investigation of the "evidence" regarding direct Soviet aid to
the Chinese Communists. The official expressed the personal opinion
that certain recent statements by Chinese leaders were ill-advised and he
indicated that much of the "evidence" is bogus.
South China h_lckne_n_t_leis..e_s_e_ imit:_lenip_c1:-US Consul General Canton
reports that Chiang Kai-shek s local headquarters and other Chinese offi-
cials in the Canton area deny any knowledge of the reported declaration of
Kwangtung-Kwangsi independence (see Daily Summary of 27 June, item 5).
O. KOREA: USSR moves to exclude It liraquqt parties from consultation--
According to US Political Adviser Jacobs, the USSR has announced that it
will insist on excluding from consultation, in the formation of a provisional
government, all parties opposing trusteeship. The USSR has specifically
named eight parties (with a declared membership of 3,000,000) which should
be excluded and has stated that all other organizations unwilling to withdraw
from the anti-trusteeship committee formed last January also should be
barred. Jacobs believes that if the USSR maintains this position most partici-
pating Rightists will probably be forced to withdraw, leaving only Leftists to
be consulted. Jacobs foresees the possibility of a deadlock over this question.
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(CIG Comment: This new Soviet move is probably designed to
improve the USSR's bargaining position, not to halt the progress of the
negotiations. It is, therefore, doubtful that the Soviet delegation will
prove intransigent on this particular point.)
Agreement on a ment for electric power--General MacArthur
reports that the US and SoiFommandisrea have finally reached
agreement on the method of payment for electric power supplied by North
Korea to South Korea from August 1945 until May 1947. Payment will be
In the form of equipment and materials to the value of approximately 16
million yen (roughly 4 million dollars at the 1941 rate of exchange which
Is stipulated in the agreement). North Korea' moreover, will continue to
supply electric power to the US Zone and will henceforth present bills
monthly.
(CIG Comment: The present agreement repreeents a notable con-
cession on the part of the USSR. The original North Korean demand for
payment, addressed to the US Command on 27 March in the form of an
ultimatum, stipulated that the US deal directly with the North Korean
People's Committee and pay a considerably greater rate.)
THE AMERICAS
7. PARAGUAY: Mediation efforts fail--US Charge Trueblood reports that
the Brazilian mediator, Negrao de Lima, now considers that he has failed
In his attempt to bring about a negotiated peace in Paraguay's civil war
and attributes his failure to the uncompromising attitude adopted by an
extremist wing of the major Party supporting the Government (the Colorado
Party).
8. URUGUAY: Views ra __E:92912digter-American defense treaty�The
Uruguayan Foreign Minister has informedt repre-
sentatives of the American Republics plan to exchange views on the pro-
posed inter-American defense treaty in Washington. He added that Uruguay
will insist on an agreement at least as strong as that decided upon at the
Chapultepec Conference.
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28 JUN 1947
418
. USc..sposed to DuteltSoviet:Air_ay,roofnent�The State Department has
requested UR Embassy gaguelciTaTolFrn the Netherlands Government
that the US is surprised and concerned by the Dutch intention to conclude
a civil air agreement with the USSR (providing for air traffic exchange
at Berlin in lieu of direct Amsterdam-Moscow service; see Daily Sum-
mary of 24 )une, item n). The:: Embassy is to say that the US considers
that the USSR would profit by such an arrangement, while the Netherlands
would derive no substantial advantage. The Department also has retpested
Embassy London to ascertain whether the UK would be willing to join the
US in blocking Dutch flights to Ba in, if such action. appears necessary to
head off the Dutch-Soviet agreement.
� EUROPE
2. FRANCE: Info3I'ma.p..p2roach on ,recoRstruction Itined--Ambassador
Caffery, acknowledging that it is "Fobably for the best" that the UK has
taken the lead in working out a European reconstruction program, never-
-ale/28s recommends that the US use extreme care to treat the French
"as being in a position parallel to that of the British." It would be helpful,
he believes, if the US undertook early informal exploratory talks with out-
standing individual French statemen, and it would be "particularly desira-
ble" not to channel e. all communications on this subject through the For
Office (whose economic leadership Caffery considers uninspiring).
3. HUNGARY: Nam reported to have lost his_follovft--According to US
Embassy London, the Hungarian Ambassador in London and the UK For-
eign Office believe that Nagy has lost most of his following in Hungary
and is a discredited man, because he "left his Party at the mercy of the
Communists, and preferred the safety of a foreign refuge."
4. RUMANIA: Drastic effort to cur? inflation expected--US Representative
Melbourne riForls thaTt ii-c-aidiriaT6-r-e.SIZiFibTel'in3urces, the Rumanian
Government in the near future will make sudden and drastic efforts to
stem the currency tflrthon� Melbourne adds that while currency stabili-
zation is essential for any improvement of the economic situation, smch
efforts would unew.stiounbly form a .part of the greatly intensified Cc m-
munist drive to obtaia complete contfol of the lim:nanian economy.
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FAR EAST
5. NEI: Dutch Saw -According to information
supplied US Embassy London by the UK Foreign Office,
Lieutenant-Gov-
ernor General Van Mook told UK Consul General Mitcheson on 25 Tune
that he believed Premier Sjahrir would be unable to bring back a satis-
factory Republican reply to the Dutch aide memoire of 2a June. Van Mook
said that in such event he had been authorized by the Netherlands Govern-
ment to take military action and he implied that he was ready to do so
Immediately. The UK Consul General has recommended that the UK re-
quest the Dutch Government to withdraw such authorization to Van Mook.
The UK Foreign Office, however, is awaiting information on the Indo-
nesian reply before taking any action.
6. CHINA: _nate offensive to gain support--US Ambassador Stuart
points to-iiii�tn -statements by leading Chinese officials and the Govern-
ment-controlled press: (a) charging Soviet assistance to the Chinese
Communists; (b) accusing the USSR of beginning the third World War in
China; and (c) predicting China's political disintegration. Stuart concludes
that key Government officials are carrying out a diplomatic offensive to
encourage the US to take a firm stand against Soviet political expansion in
China, similar to that the US has taken in Eurge and the Middle East. It
is a regrettable fact, Stuart adds, that this is "the only discernible current
action being undertaken in the face of a prevalent and increasing atmosphere
of defeatism."
(CIG Comment: The concept of challenging Communist ideologies
and programs by an aggressive reform in Nationalist China has been
given little recognition by Chiang Kai-shek or his more responsible ad-
visers. They still tend to rely on the policy of suppression by force,
partly because of an almost pathological fear of the Communist threat
and partly because they feel reasonably certain that US support will be
forthcoming.)
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GENERAL
1. US position on SC's discussion of Greek case�The State Department has
Wormed US Delegate Austin that, in the forthcoming discussion of the
Greek case ',afore the Security Council, the US should not accept any
resolution which places any blame upon Greece for the armed interfer-
ence by other countries in Greece's internal affairs, though no attempt
should be made to justify all acts of the Greek Government. In keeping
with the report of the Balkan Investigation Commission, the Department
considers that Yugoslavia and,to a lesser extent,Bulgaria and Albania
are guilty of armed intervention in Greece.
Regarding the terms of reference of a continuing Balkan Commis-
sion, the Department states that the US should refuse to agree to amend-
ments which would permit such a Commission to concern itself in Greek
Internal affairs or in the work of the American Mission for Aid to Greece.
The Department adds that a Soviet veto of a resolution providing for the
establishment of a continuing Commission would be preferable to US _
acceptance of compromises which would impair' the effectiveness of such
a Commission. The Department authorizes Austin to support the recom-
mendations of the Balkan Investigation Commission (see Daily Summary
of 10 June, item 1).
2.�13,eyht.1.tews on c _plevelo� meg of European -Bevin has in-
formed US Embassy London that he wishes a small representative body
of perhaps five Western European countries to prepare by early August
a program on European reconstruction. Bevin hopes that Italy, by expedit-
ing ratification of the peace treaty, can be represented.
EUROPE
3. FRANCE: CRAW; crisis ms ImigiLl.--US Ambassador Caffery reports
that the impending Cabinet crisis (see Daily Summary of 26 June, item 1)
has been postponed in view of the desire of all political parties to avoid
the collapse of the Government during the conferences in Paris between
Foreign,Ministers Bevin, Bidault, and Molotov. Caffery adds that Rama-
(tier will ask fora vote of confidence on 2 July and that there is increased
hope that the Government will survive.
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4. AUSTRIA: tiLomktigtsi_l _hanced--US Legation Vienna reports that the
US decleion to pay occupation costs beginning 1 July has significantly
enhanced US prestige in Austria. In the Legation's opinion this action,
coupled ith other recent US decisions in regard to Austria, "has not
only greatly strengthened public morale but also the position of the
present Government."
FAR EAST
5. CHINA: South Chi�a_ere ndence--The Director of
Chinese Military Intelligence has informed US Embassy Nanking that Chen
CM-tang, former military governor of Kwangtung Province, has declared
the independence of Kwangtung and neighboring Kwangsi Province. The
new Government is reportedly headed by General Li Chi-shen, with Chen
as military commander. Li is still reported to be in Hong Kong, where
a "military committee" containing at least two Chinese Communist mem-
bers has been established.
(CIG Comment: South China has for many years been the scene
of separatist movements, which tend to rise and fall with the authority
of the Central Government, and that authority is now significantly weak.
Moreover, the vulnerability of S uth China to separatist movements has
been increased in recent months by the withdrawal of Nationalist troops
for assignment to North China. General Li, an old Kuomintang revolution-
ary who has frequently denounced the KMT and the Central Government,
has been in Prong Kong for several months, reportedly organizing a sepa-
ratist movement for South China and seeking UK support.)
6. KOREA: Korean rties a 1 for consultation with oint Commission--
General Hodge reports that at the c ose �1 registration on23 Ju�e, thi�
political parties and 35 social organisations in North Korea, with a com-
bined declared membership of about 13 million, filed applications for
consultation with the Joint Commission. In South Korea 425 political
parties with a combined declared membership of 02 million have applied
for consultation. Hodge points out that the population of all Korea is only
30 million. A tentative estimate for all Korea indicates that such mem-
bership is roughly 55% Rightist and 45% Leftist. This slight advantage
of the Rightists is more apparent then real because the Right is seriously
divided, whereas the Left constitutes a well-integrated bloc.
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THE AMERICAS
7. NICARAGUA: Continuation of MiIitasy Mission--According to US Embassy
Managua, the US Military Mission in Nicaragua favors its continuation
there despite the expiration of its contract. The Embassy comments that
a temporary withdrawal of the mission would weaken Soraoza's prestige
and perhaps "turn the scales in favor of his retirement."
(CIG Comment: While it is improbable that withdrawal of the
mission would turn the scales against Somoza, it would certainly be wel-
comed by opponents of his regime as a logical sequel to the American
Republics' non-recognition policy.)
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EUROPE
1. FRANCE: Blum not optimistic over Cabinet's survival�Leon Blum has
told US Anib�s�r Caffery confidentially that Socialist delegates raised
the question of France's economic policy in the Assembly on 25 Pine be-
cause certain Socialists wished to force Ramadier's resignation. Blum
is not at all certain that the Socialist National Cotmcillwhich meets on
I july, will approve continued Socialist direction of the present Govern-
ment, particularly in view of the "heavy responsibilities" which the Gov-
ernment must sustain now that it has abandoned the Blum wage and price
policy. Blum considers that a "Bidault or Tietgen government" is possible.
Communists ct breaku of Ramadier Government--Caffery has
been told by a fellow-traveller source, utilized by Di tilt as an inter-
mediary between himself and 'the French Communist leaders, that the Com-
munists expect the Ramadier Government to "break up within the next few
days." The source also said that: (a) the Communist leaders have told
Bidault that he would be acceptable to them as Foreign Minister, but if
MRP does not participate in the Government Pierre Cot would be their
candidate; (b) the Communists are "delighted over the prospect of exercis-
ing a governmental voice at the time when the Secretary's Harvard proposal
will be discussed" by the USSR, France, and the UK; and (c) the Commu-
nists now believe that the USSR hopes to obtain a compromise solution on
German reparations, while urging that a plan, corresponding to the Secre-
tary's proposal, be prepared and executed within the United Nations frame-
work.
2:5 ForeigngAst.comment on French situation�The UK Foreign
Office has observed to US Embassy London tha-ITa7Ws the Ramadier Gov-
ernment has lost its economic program it is difficult to see how it can
last; and (b) unless something changes the existing French mental attitude
the French situation will continue to deteriorate. The official added that
the UK Foreign Office disagrees emphatically with the opinion of UK Am-
bassador Duff-Cooper in Paris that: (a) the current French strikes are
spontaneous and not Communist-instigated; and (b) a Communist govern-
ment in France would not be disadvantageous to France or the UK, because
it would not have sufficient strength to be a threat and would need outside
help.
2. USSR: Berta reniejl_i Berlin�According to a reliable CIG source,
L.P.Beria was in Berlin on 23 time.
(CIG Comment: Berta, a mbmber of the .Politburo and one of the
three or four key figures in the Soviet hierarchy, was until last year chief
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of the NKVD (now MVD). It is believed that he still retains control of
this and other Soviet security agencies. This is his second visit to Berlin
In the past six months.)
NEAR EAST-AFRICA
3. TURKEY: Concern over Turkish minorities in western Thrace--Foreign
Minister Saka has iniSin-Ti-d-U-nmbassador Wilson of the Turkish Govern-
ment's concern over persecution by the guerrillas of the 70,000-80,000
Turks living in Greek Thrace. According to Saka, the Turkish Government
Is considering the possibility of requesting the United Nations to take steps
to protect the Turkish minorities and would like the views of the US and
the UK on this matter. Saka added that the Turkish Government would not
appeal to the UN without first consulting the Greek Government, as the
Turks desire to do nothing which would embarrass the Greeks.
FAR EAST
4. CHINA: New pl_�otest to the on Dairen--US Embassy Nanking reports
that on 25 Tune the Central Government sent a note to the USSR referring
In detail to the means by which the "Kwantung Administration" and Soviet
military authorities prevented the Chinese Inspection Mission from carry-
ing out its examination of the Dairen-Port Arthur area. The note declared
that this obstruction has "further justified the decision of the Chinese Gov-
ernment to dispatch adequate military and police forces to the naval base
area of Port Arthur and to Dairen, in order to insure the free exercise of
its functions by the Chinese administration when it is re-established there-
in." The note concluded with a formal request for a favorable Soviet re-
ply to the original Chinese aide-memoire concerning China's assumption
of administration in the area.
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GENERAL
25
JUN 1947
415
1. US will not offer d offices in NE/ dis ute--The State Department has
Informed UK mbassy ash on a e S is not prepared to join
the UK in an offer of good offices in the current Dutch-Indonesian nego-
tiations (as requested by the UK; see Daily Summary of 17 June, item 1).
The US aide-memoire points out that US representatives in The Hague
and in the NEI have been instructed to make representations to both sides
(see Daily SumMary of 18 June, item 4), and the US hopes that these repre-
sentations will bring both sides together to seek a solution.
EUROPE
2. FRANCE: Communists my block action on Marshall proposal--US
Embassy Paris reports that the French Communists continue to make
it clear that: (a) they regard the Secretary's Harvard proposal as a
"tactical application of the Truman Doctrine"; and (b) they intend to
Intensify their efforts to re-enter the French Government in order to
exercise a more direct influence over internal as well as foreign policies.
The Embassy adds that, according to qualified observers, Molotov and
the French Communists will try to obstruct UK-French attempts to pro-
duce a practicable plan in response to the Secretary's proposal.
FAR EAST
3. AUSTRALIA: Eratt plans unofficial visit to Jap--Minister for External
Affairs Evatt has told US Ambassador Butler he plans to leave on 5 July
for a personal visit to General MacArthur in order to observe conditions
in japan and discuss problems unofficially. Evatt added that he thinks
the US Government is taking an unreasonable position in discouraging
his visit to japan (see Daily Summary of 11 June, item 6). Butler notes
that the Australian press has played up Evatt's intended visit so much
that he could hardly afford to cancel it.
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THE AMERICAS
4. PARAGUAY: Rebel mediation terms revealed--The Brazilian emissary,
Negrao de Lima, (who is attempting to bring about a negotiated peace in
Paraguay's civil war) has told US Charge Asuncion that the rebels whom
he recently consulted remain convinced they can win after a prolonged
struggle. According to Negrao, the rebels will agree to the termination
of hostilities and to President Morinigo's continuation in office until his
present term expires, provided they receive guarantees of free elections
and a reorganization of the armed forces.
5. VENEZUELA: Government aware of revolutionary plan--US Military
Attache Caracas reports that the Minister of Defense and the Assistant
Chief of Staff are aware of a new revolutionary plot against the Betan-
court Government but seem "unworried and confident."
(CIG Comment: Available evidence suggests that the Betancourt
Government has the situation well in hand, and can speedily put down any
revolutionary attempt.)
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GENERAL
24
JUN 1947
414
1. Ambassador Smith foresees Soviet obstruction at Paris conversations--US
Ambassador Smith in Moscow feels certain that Molotov s participation
In the forthcoming Paris conversations will be for destructive rather than
constructive purposes. The Ambassador adds that his British and French
colleagues are of the same opinion, and he points out that any real Euro-
pean economic recovery would militate against the realization of present
Soviet political objectives.
2. Dutch-Soviet aitmeeit--US Embassy London reports that the Dutch
Civil Air Attache in London: (a) following talks with UK officials, has in-
formed his Government of his opposition to a formal government-level
agreement with the USSR for an air traffic exchange at Berlin in lieu of
a direct Amsterdam-Moscow service; but (b) believes that the Dutch Gov-
ernment is now "virtually committed to the arrangement." The Embassy
adds that, if the US agrees with the UK that the exchange agreement is
"both foolish and dangerous," the US should take strong and immediate
action with the Dutch Government. (This latest information reverses
earlier indications that the recent Dutch-Soviet negotiations in Moscow
were inconclusive; see Weekly Summary of 20 June, page 1.)
3. Ibn Saucismisasizes concern over Middle East situation--US Minister
Inlit7s reports t at,in a series o au iences wi n ,aud, the King stress
the gravity of the situation in the Middle East. The King expressed particu-
lar concern over the activities of Iraq and Transjordan in connection with
"Greater Syria." which, he considers, are directed entirely against him-
self and the result of British jealousy over the favorable economic position
of the US in seudi Arabia. Ibn Saud urged that the US approach the UK for
an agreement, to which the Arab States could adhere, on the key issues in
the Middle East, including not only the Greater Syria question but also the
problems of Palestine and Anglo-Egyptian relations (see Daily Summary
of 18 June, item 3).
EUROPE
4. UK: Government's views on strialmi_.L situation�US Embassy officials
have told the US Naval Attaches,. Conference (in London) that the UK be-
lieves that any future war will stivt in or about Germany, and that the
Middle East is low on the Soviet prfority list at the present time. , ,,,,,,,,
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5. NETHERLANDS: Forejgn Office hopeful ofI settlement--US ement--US Embassy
The Hague reports that recent negotiations between the Dutch and the Indo-
nesian Republic have now encouraged the Netherlands Foreign Office to
believe that a "basis for understanding with the Republic could be reached
shortly."
FAR EAST
6. CHINA: Iff it official l Increas of Chiang Kai-shek--US
Embassy Nanking reports that the Governor ofiiie Bank ofChlna, in a
conversation with an Embassy official, for the first time was openly
critical of the Generalissimo. The Embassy adds that this type of critical
comment -- which has sprung up among high Chinese officials in the past
few weeks -- is "a noteworthy development, but it has not reached pro-
portions indicative of a decided decline in the Generalissimo's authority."
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GENERAL
23 JUN 1947
413
1. US Embass favors di lomatic relations with the Ukraine and B elorussia--
US Ambassador Smith concurs in the III?' s reasons for desiring to establish
diplomatic relations with the Ukranian Soviet Republic (see Daily Summary
of 19 June, item 2) and strongly recommends that the US establish such re-
lations with both the Ukranian and Byelorussian Republics. Smith considers
the widest possible extension of US sources of information and contact
through the USSR as of the "utmost importance."
2. UMW Austoiian. atm_g_n_p_amool bill--US Deputy Delegate Wilcox to
the International Trade Organization (ITO) in Geneva quotes the Australian
delegate to the ITO as saying thatisif the wool bill recently passed by Con-
gress becomes law, the Australian delegation will move for an adjourn-
ment of the Geneva Conference of ITO in order to "review" Australian
policy. Furthermore, Wilcox has been informed by the UK delegate that
the UK Government believes that the enactment of the wool bill into law
would endanger not only the tariff negotiations but the adoption of an ITO
Charter.
EUROPE
3. YUGOSLAVIA: Possible reoriejatteasiirmilavforeign --US
Charge Cabot, during a recent conversation with prominent Yugoslav For-
eign Office officials, received the distinct impression that they were
troubled by the course of events in Greece and Hungary and realized that
they were caught in an increasingly embarrassing and dangerous situation.
Cabot believes that the local atmosphere has now improved sufficiently
(see Daily Summary of 4 June, item 5) to permit frank talks with Yugoslav
officials that might determine lines of Yugoslav thinking and convince the
Yugoslays of the unvrisdom of "keeping all their diplomatic eggs in the
Soviet basket." Although Cabot believes there is no reason for optimism,
he adds that such conversations might conceivably produce a face-saving
formula which would permit the Yugoslays to stop intervention in Greece
and to help with the Hungarian situation.
4. CZECHOSLOVATqA: Ec9nornic and pollta1 scene_ relatively stable--US
Ambassador Steinhardt reports that: a there is an adequate supply of
food in Czechoslovakia; (b) the increasing tendency of the Social Democrats
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to side with the moderate parties continues to weaken the Communists'
Influence; (c) improvement in general economic conditions continues.
although at a slower rate because of difficulties encountered by the nation-
alized industries; and (d) privately owned industries are making substantial
progress. Steinhardt adds that the Communists would welcome US credits
to meet expected deficits in the nationalized industries and that Czechoslo-
vakia is in no immediate need of substantial foreign aid. He therefore sug-
gests the advisability of encouraging US credits to Czechoslovak private
industry, and delaying or minimizing for the present any direct credits
to the Czechoslovak Government.
5. RUMANIA: US to protest treatment of Opposition--The State Department
has instructed the US Political R��t��iBucharest to inform the
Rumanian Government that the US is "seriously concerned" by the drastic
deprivation of civil liberties to which the Rumanian people are being sub-
jected. The note adds that the arbitrary arrest of hundreds of Opposition
members is in conflict with Article 3 of the Peace Treaty and contravenes
formal and informal assurances given to the US by the Rumanian Govern-
ment. (The UK intends to approach the Rumanian Government along
similar lines.)
6. BULGARIA: Heavy registration for US visas--The US Mission Sofia esti-
flutes that more than 6,000 persons lined up outside the Mission on 18 and
19 June to register for US visas in spite of repeated statements that the
Bulgarian quota is only 100. The US Acting Representative comments that
this heavy registration (an estimated total of 12,000 names were registered)
is all the more remarkable as it is widely-believed that the mere act of
coming to the Mission would be regarded by the Fatherland Front as a sign
of disloyalty to Bulgaria and would be followed by reprisals.
7. GERMANY: Evidence of labor conscription in Soviet Zone--Headquarters
European Command Frankfurt reports that: (a) German males between the
ages of 18 and 45 are being given physical examinations in the Soviet Zone;
(b) some of these men are being selected for pitchblend mining operations
In the area of Aue Oberschlema (Saxony); and (c) a wave of illegal border
crossings into the US Zone apparently has accompanied this Soviet program
of conscription.
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8. ITALY: Dunn ur es es IS ment of Arm and Air Force--US Ambassador
Dunn believes that the prospective withdrawal o troops upon ratifi-
cation of the Peace Treaty makes it a matter of immediate urgency to
equip the Italian Army and Air Force by transferring to them the US com-
bat materiel now in the theater. Dunn urges immediate action in the matter
on the grounds that the present Italian military forces are inadequate to
maintain even a token protection of the ftalo-Yugoslav frontier. He suggests,
as an "unobtrusive" way to convey such equipment, that combat materiel be
included in a general surplus settlement.
FAR EAST
9. CHINA: Nationalist withdrawal to Mukden held necessary,--US Embassy
Nanking believes that, while complete Nationalist withdrawal from Man-
churia would be premature and highly undesirable under present circum-
stances, the withdrawal of Nationalist forces within central Manchuria for
regrouping in the Mukden area seems mandatory. The fundamental weak-
ness in the present Nationalist position, in the Embassy's opinion, stems
from over-extended initial deployment and incompetency in the Nationalist
High Command, centered in General Tu Li-ming. The Embassy believes
that General Tu would have to be removed from command in order for the
Central Government to carry out partial withdrawal effectively and to
maintain, even temporarily, a strong salient in southern Manchuria.
10. JAPAN: Philippine concern with reparations delays--The Chief of the US
Reparations and Restitution Delegation in Japan reports that the Chief of
the Philippines Reparations Delegation has been recalled to Manila for
consultation, because of mounting concern in the Philippines over con-
tinued delay in the execution of the advance reparations transfer program.
This delay is holding up economic reconstruction in the Philippines, be-
cause the Philippine Government fears political attack at home if it pur-
chases equipment from the US which might later become available as
reparations from Japan. (The Chief of the US Delegation has indicated
that it will require at least three months to review the present unsatis-
factory selections of equipment for advance transfer.)
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11. NEI: S ahrir conciliato but Re ublic intrans ent--US Consul General
Foote repo s ; rem er s conc a ry roadcast of 19 June
represented a personal statement and was not prepared in consultation
with the other members of the Indonesian Republic Government. On the
basis of talks with Sjahrir, Foote is convinced that the Republic has no
real intention of modifying its position.
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EUROPE
1. FRANCE: figsmence of inflationar trends-- US Embassy Paris
notes a recurrence in Frana of inflationary trends and la& of
public confidence in the future of the franc.
412
map, .fiww
2. GREECE: Wheat and milk urga_needed�US Ambassador Mac-
Veagh reports that the situation in Greece regarding wheat and milk,
has now become so critical thatounless immediate relief is forthcoming,
a breakdown of bread rationing and milk distribution to infants and preg-
nant women seems certain before the aid program 2.6 now planned gets
under way. MacVeagh recommends that: (a) the State Department take
over direct responsibility for shipments of wheat and milk; and (b) im-
mediate advance be made to the Greek Government under the aid program
for other vital dollar expenditures to be made under the supervision of
the Embassy p end in g GriswozlId's arrival, "which should by all means
be expedited.''
3. RUMANIA: rfigrain distributed to Communist trade unions--On the
basis of reports from qualified observers in the famine areas, the US
Military ReTresentation Bucharest has grave doubts that the distribution
of US grain is being carried out in accordance with the purchase agree-
ment. The grain is apparently being distributed to Communist trade
unions and government supporters in rural areas, none reaching the
famine region.
IY.,m_extrase ast�According to the Acting US Representa-
tive in Bucharest, the Rumanian Minister of Interior told the Secretary
of the British Labor Party that the Rumanian Government is now holding
1 303 political prisoners. The Minister added that he expected a new
seriee of arrests which might raise the total to 5,000. ,
FAR EAST
4. CIIINA: General C112.2Lgi comments on Sinkiang incident�With reference
to the recent events intang see-baily Summary of 11 lime, item 12
'And of 14 June, item 4). General Chang has stated to the US Consul in
that province his opinion that the conflict at Peitashan occurred because
of confusion as to the exact location of the frontier, complicated by cumu-
lative tension between the Soviets and the Chinese. He ascribes subsequent
Chinese publicity to an "apparent willingness of the Central Government'
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to magnify the incident in order to direct the mind of the public away
from student strikes and other domestic difficulties."
(CIG Comment: The General Chang in question is apparently
General Chih-chung, until recently Governor of Sinkiang.)
Rerorted resignation of Chen Li-Fu--Ambassador Stuart cables
that he has "been given to understand from a reliable source" that
Chen Li-Fu has been removed from the Secretary Generalship of the
Political Committee of the KMT by order of the Generalissimo. No
public announcement of this event has been made and no confirmation
has yet been obtained.
(CIG Comment: Chen Li-Fu is the leader of the CC Clique,
extreme right wing of the Kuomintang Party.)
5. KOREA: taPlangiatgabiliWUMDLDiELQIISiDDAUDIrernment--b1
rerly to the US Political Adviser's recent report on Soviet attitudes
in the Joint Commission (see Daily Summary of 13 June, item 3), the
Department of State has instructed him that the US may agree to let
the joint Commission appoint the members of the provisional govern-
ment of Korea, but will insist that "definite provision be made for
holding a general election at the earliest practicable date, such election
to be either for a legislature which in turn will select a Government or
for direct election of the personnel of the Government." In order to
make certain that these elections are free, the US would insist on the
use of the secret ballot as well as multi-party slates and would favor
supervision by a commission of the UN which would exclude nationals
of the four trustee powers.
Rightist abstentionjrom consultatipn--The US Political A iviser
reports that followers of Rhee Syngman are making every effort to
persuade Rightist elements to abstain from consulation with the Joint
Commission, asserting that in that case the US would not go through
with the establishment of a provisional government. This propaganda
has had effect on Rightist leaders who desire to cooperate, but greatly
fear an eventual seizure of control by the Communists, as in Hungary.
Although all Leftist organizations have taken the first step toward par-
ticipation in the consultations, five important Rightist groups have so
far refrained from doing so.
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O JUN 1947
411
1. UK: Labor Part s left-win "rebels" lack stre -US Embassy London
considers that the left-wing Socialist rebels have no significant influence
on Labor Party foreign policy, although on certain specific issues they may
win occasional concessions. The Embassy adds that, while Bevin secured
an overwhelming victory at the recent Labor Party conference, he will proba-
bly encounter a strong Communist-inspired opposition at the September con-
ference of the Trade Union Congress. According to the Embassy, steps are
being "quietly" taken inside the TUC in an effort to cope with the situation.
FAR EAST
2. CHINA: Generalissimo stresses seriousness of situation-1n an interview
with US Ambassador Stuart on 19 June, Chiang Kai-shek declared that it
would be impossible to maintain the Nationalist position in Manchuria much
longer, adding that he had only fully realized the gravity of this situation
three days earlier. Chiang added that a decision regarding Manchuria must
be made in "a very few days." He said that the Chinese Communists, aided
by the USSR, had been growing stronger in numbers and equipment, while
the Nationalists were unable to replace their losses. He also referred to
Soviet obstructionist tactics regarding Dairen, and concluded that "the loss
of Manchuria would threaten north China and the danger would spread all
over the country." Chiang asked Stuart to seek Secretary Marshall's
advice as to future policy and also requested Stuart's own views.
Stuart replied that the time may now have arrived for Chiang to
organize a small but capable group of policy advisers to work with him, to
reduce all but emergency expenditures, and to launch a new revolutionary
movement in China under determined, progressive leadership in order to
win popular support. To this end, Stuart said, the Government should
courageously carry out civil reforms, urge the people to hold the Commu-
nist Party responsible if it refused the latest peace proposals, and should
in other ways � including a country-wide tour by Chiang himself -- seek
to "win back popular support or ask to be relieved of the task." With the
people behind him, Stuart added, Chiang need not fear the Communists and
should continue to "keep the door wide open" for a resumption of peace
negotiations.
At the conclusion of the inteiview Chiang said that he had been
"thinking along very much the same lines."
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GENERAL
1 9 JUN 1947
410
1. Sp�views on UN and recent US or� osals--Henri Spaak, former
Pre-Went eneral sse y an now remier of Belgium, has
� told US Charge Achilles in Brussels that to bring the Hungarian question
before UN would do much to prove the present powerlessness of UN and
might fatally weaken public confidence in it. Spaak said that UN would
remain powerless as long as the veto exists and that the Truman Doctrine
and the Marshall proposals were bringing the western world closer to a
decision as to whether to form a strong organization without the USSR.
Spaak referred to Secretary Marshall's Harvard speech as
"world shaking?' and said it would have his fullest support. He declared
that everyone knew that the USSR would either not participate at all or
would participate only to sabotage the program. The decision to organize
Europe economically without the USSR would mean, according to Spaak,
"the definitive splitting of Europe. . . with consequences of the greatest
political and possibly military significance."
2. UK desires di lomatic relations with the Ukraine--The British Embassy
in as ion las reque-ireTtiTh7FOTIFFIVE5artrnent of State concern-
ing a British desire to establish diplomatic relations with the Ukrainian
SSR. The UK believes that advantages accruing from representation in
Kiev would include: (a) a source of reports on an area of great economic
and military importance; (b) an additional center for cultural contacts; and
(c) an opportunity to observe the operation of the Soviet Government out-
side of Moscow. In return. the UK considers it would only have to accept
Ukrainian representatives in the London diplomatic corps.
3. Arab States warn of populaLyeactioAlgaist US and UK--The Iraqi Gov-
ernment has presented to US Ambassador Wadsworth a-detailed statement
of the Arab case on Palestine. The Ambassador was informed that similar
notes had been given to US and British Missions in all Arab capitals. The
note "demands" that the US: (a) immediately stop any action which might
encourage or continue Jewish immigration into Palestine; and (b) support
before the UN the Arab demand for the termination of the Palestine Man-
date and the proclamation of Palestine's independence as a sovereign
Arab state.
The Iraqi Prime Minister commented to Wadsworth, apropos of
the note, that, while Iraq's foreign policy was oriented toward the fullest
collaboration with the US and UK and.diametricany opposed to the USSR,
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he feared that the Iraqi and other Arab governments might not be able
to control the internal situations in their countries if the US and UK
continued to support the Zionist cause.
4. Dutch views on US swest_los regaysl_W.gEI--US Ambassador Baruch
has been told by the Netherlands Foreign Minister that, although the Gov-
ernment is aware of the importance of US suggestions (concerning the
desirability of a peaceful settlement in the NET; see Daily Summary of
18 June, item 4) it feels that "time is of the essence" and that there
always remains "the unhappy possibility of the limited military opera-
tions." Baruch gained the impression from this conversation that, while
the Dutch Government would sincerely try to avoid armed conflict, it did
not believe that the NET situation "would brook prolonged and unproductive
negotiations in the eastern manner."
EUROPE
5. ITALY: President resign vote on De Gas peri--US Ambassador
Dunn reports that according to a member of Premier De Gasperes staff,
President De Nicola will resign after the Assembly takes a vote of con-
Adence on the present Government but will remain until his successor
has been chosen.
(CIG Comment: B0110Mi and Sforza have been mentioned as
possible successors to De Nicola; if either is chosen, De Gasper' would
undoubtedly be reappointed Premier. This occasion might offer De
Gasper' an opportunity to broaden his Cabinet to include the right-wing
Socialists who have already indicated their willingness to share in the
Government; see Daily Summary of 12 June, item 3.)
6. GREECE; Tsaldaris woulcome Soviet veto in sq:--us Ambassador
MacVeagh reports that Foreign Minister Tsaldaris, in a conversation
on the Greek situation, stated his opinion that the Security Council's
decision on the Balkan Investigation Commission's report was of para-
mount importance, and that the US aim should be to attract rather than
avert a Soviet veto. Tsaldaris feels that such a veto would free the West-
ern Powers to take appropriate action, while Soviet agreement to in-
adequate recommendations would permit indefinite continuance of the
USSR's present clandestine but highly effective tactics.
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7. CHINA: Continued stalemate over Dairen--US Consul General Mukden
has learned gihiission to Dairen (now en route to
Nanking to report) that the USSR sought to have the Mission negotiate
with the Dairen puppet government. The Mission was willing to meet
members of the puppet government as local residents but declined to
meet them as authorities. Negotiations with Soviet authorities, mean-
while, remain deadlocked because the USSR is unwilling to admit Chinese
armed forces to former leased territory and because the Chinese are un-
willing to recognize the delimitation of a new Soviet military district in
the Dairen area. The Consul General has further been informed that
US Consul General Bennhighoff in Dairen is "effectively isolated from
local contacts."
position on EximBank credit--The Department of State has
advised US Embassy Nanking that it told the EximBank on 11 June that
It would not presS for extension beyond 30 June 1947 of the US$ 500,000,000
credit now earmarked for China. The Department's decision is based on:
(a) the necessity of avoiding sterilization of US$ 500,000,000 of the Exim-
Bank's funds in view of competing needs, as in Europe; (b) the unlikelihood
in any event that China would receive that amount in actual advances during
the next fiscal year; and (c) the belief that such action would not prejudice
favorable action on individual projects for China considered after 30 June.
The Department, in fact, will support early favorable action on Chinese
applications for individual projects which can qualify for EximBank
financing.
8. PHILIPPINES: Roxas views on basis for trea ne otiations --President
Roxas has advised Vice resident irino in Paris, in connection with a
proposed treaty of friendship with France, not to change Philippine policy
with foreign nations (with respect to trade, ownership of property, and
travel) from a most-favored-nation basis to a reciprocity basis. Roxas
has instructed Quirino, if feasible, to negotiate the French treaty on a
most-favored-nation basis. "with the usual exception in favor of the US."
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9. BOLIVIA: Mine union threateneneral strike�US Ambassador Flack
reports that leaders of one of Bolivia's two large tin-mining workers'
unions have threatened to strike the entire tin-mining industry unless
300 discharged Patino Company miners are rehired. The company has
told the Government that it will order a shutdown unless its terms
(undisclosed) are met. The Embassy comments that a shutdown would
result in Government seizure and operation of the Patino mines.
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18 JUN 194.,
403
1. Views on results of Bel rade conference--US Charge Cabot in Belgrade
reports that, according to the es loca information, the reported con-
ference in Belgrade between political and military representatives of
Yugoslavia, Rumania. Bulgaria. Hungary, and Czechoslovakia did not
yield sensational results and did not involve military discussions as
serious and definite as indicated in recent reports from Bucharest. (The
Acting US Representative in Bucharest had reported that the purpose of
the conference was "to determine the prospective roles of the partici-
pants in a general military alliance"; see Daily Summary of 16 June,
item 2.) Cabot believes, as does the US Military Attache Belgrade, that:
(a) the Bulgarian military delegation comprised political rather than tech-
nical military experts; (b) the Czechoslovak representatives were not in-
formed of the Bulgarian visit and believed they were made "innocent
pieces of a war of nerves"; and (c) there is no evidence of the presence
in Belgrade of either a Rumanian or Hungarian military delegation.
2. Tito's talks with UK Air Minister--According to US Embassy Belgrade,
British Ir Minister Noel-Baker'(ostensibly in Belgrade to open a UK
book exhibit) had conversations with Tito and other Yugoslav officials in
which the Yugoslays: (a) emphasized their hope that the Governor of
Trieste would not be anti-Yugoslav; (b) indicated they would be satisfied
with about one-thirtieth of their original claim for Carinthia; and (c)
offered the UK a civil air agreement. The UK Foreign Office has told
US Embassy London that the conversations also indicated the Yugoslays:
(a) would be more tolerant of the British cultural activities in Yugoslavia;
(o) would be more conciliatory toward settlement of UK property claims;
and (c) were eager to foster trade with the UK. The UK Foreign Office
believes that Tito may have been carried away by the presence of a UK
Cabinet Minister and may never implement this show of friendliness.
3. Saudi Arabia suggests treaties between US UK, and Arab States --The
Saudi Arabian Deputy Foreign Minister has informally suggested to US
Minister Childs that the US consider multilateral treaties between the
US, the UK, and the Arab States. The Deputy Foreign Minister explained
that: (a) the US had sought to create a first line of defense by aiding
Greece, Turkey, and !ran; and (b) a second line of defense of great im-
portance to the US consists of Saudi Arabia, Yemen, Iraq, Syria, Lebanon,
Palestine, and Egypt. The suggested treaties, he said, would remove such
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problems as the Greater Syria plan and the Anglo-Egyptian dispute.
Despite the Deputy Foreign Minister's statement that his remarks were
unofficial, Childs believes they reflect recent discussions among mem-
bers of the Arab League in Cairo and possibly ideas of King Farouk of
Egypt, with whom the Deputy Foreign Minister is very close.
4. p_p_views on use of force in NEI--The Department of State has requested
US Embassy The Hague to-Tgai:m the Netherlands Foreign Office that the
US Government is increasingly concerned over indications that the Dutch
may resort to military force in an effort to break the deadlock in Indo-
nesia. The Embassy is to state that such action would be regarded un-
favorably by the US, would arouse serious adverse US public reaction,
and would be self-defeating. The US, furthermore, "feels very strongly
that the door should not be closed to further negotiations" between the
Netherlands Government and the Indonesian Republic.
The Department has also instructed the US Consul General at
Batavia to inform the Indonesian authorities of the US view that the Dutch
proposals of 27 May offer "a timely opportunity to achieve an essential
step toward obtaining the objectives of the Ltnggadjati Agreement." an
the meantime, US Embassy The Hague has reported thatswhile the latest
report from the Dutch Commission General takes the view that further
negotiations would not be useful, the Dutch Foreign Office thinks a re-
statement of the Dutch position should be incorporated in an aide-memoire
to the Indonesians as a basis for one final discussion.)
EUROPE
5. ITALY: Outside Ivtja.ed to reserve deraocrac --US Ambassador Dunn
believes that the political situation in taly reached a point of delicate
balance where the outcome between totalitarianism of the extreme Left
and democracy may be decided by the extent to which outside aid will
support the democratic elements which are attempting to meet the here-
tofore unchecked drive of the Communists.
President's intention to resign denied kulds..--Dunn reports that,
in spite of the rumorg that President -5e Nicola may resign, the President's
aide has categorically denied to the Embassy that De Nicola contemplates
such action at this time.
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11.7 JUN 1947
11 03
1. U1Szest3_ US initiative ti joint offer on NEI--US Embassy London re-
ports thariliMrFortagn Mee plans isia file State Department- whether
the US is prepared to take the initiative with the UK in a joint offer of good
offices in the current Dutch-Indonesian negotiations. The UK Foreign
Office believes that time is now "running out" and that, as the UK has
Intervened on three previous occasions in order to prevent Dutch-Indo-
nesian conflicts US initiative at this time would be more welcome.
2. US riv1:2fsni.ations. to 114.i.sc_otr, might arrest atao�elsionomaiList Iran--US
Ambassador Allen reports that, although it is difficult for him to evaluate
Iranian opinion on the likelihood of a Soviet attack (see Daily Summary
of 16 June, item 1), he agrees with Iranian officials that some representa-
tions to Moscow by the US regarding Iran might have a salutary effect and
might possibly arrest any idea of Soviet aggression against !ran which may
be developing in Moscow.
3. liebanon szng Syria .,.grefLon Mellne--US Minister Pinkerton reports
from Beirut that Lebanon and SyK la \gIVO. agreed on the division of the
benefits from the projected trans-Arabi'an pipeline. Pinkerton adds that
the negotiation of a Transit Convention between Syria and the Trans-Arabian
Pipeline Company is therefore not expected to encounter any cifficulties.
(The signing of the Transit Convention would establish the northern route
of the pipeline across southern Syria to a terminus on the south Lebanon
coast.)
EUROPE
4. HUNGARY: Publio x:eactiollQUS not�1--According to US Charge Budapest,
there are indications that the US note on the recent "coup" in Hungary:
(a) has bolstered the Opposition which was momentarily paralyzed by the
sudden and decisive nature of the Communist putsch; co) may have prompted
Sulyok's courageous and vigorous speech in Parliament; and (c) has given
hope to many Hungarians who recollect successful UN action on the Iranian
sale and now anticipate further action by the US.
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5. POLAND: Widening split between Communists and Socialists�US Military
Attache Warsaw reports a widening breach between the Polish Communists
and Socialists and cites as evidence: (a) increasing police pressure on the
Socialists to merge with the Communists; and (b) public attacks by each
Party upon the other's political and economic views. The MA points out
that the Communist attacks on the Socialists are similar to those used
against Mikolajczyk's Peasant Party prior to the January 1947 elections;
however, he does not expect an imminent showdown between the two parties.
6. RUMANIA: Inequitable distributiono ht ereals�Information
reaching the US Mission in Bucharest indicates that, contrary to official
Rumanian Government reports, cereals bought in the US are not being
distributed equitably throughout the country, but are being diverted to
trade union and industrial commissaries and. in rural areas, to Govern-
ment supporters. The Mission adds that famine conditions in certain parts
of the country are more serious than during last winter.
7. UK: Bevin's comments on Harvard speech--Foreign Minister Bevin has
Informed US Embassy London, in connection with Secretary Marshall's
Harvard speech and his own visit to France, that he is "thinking along the
lines of a British-French Monnet plan for Europe as a first step," and
that he believed the UN should be associated with the plan.
8. FRANCE:die&mLforgi_esgmaisAtedisa r --Premier Ramadier has
told US Ambassador Caffery that the French Government is vastly inter-
ested in the plan advanced by Secretary Marshall at Harvard and that,
unless some such program is carried out, France, as well as other west-
ern European countries, Is headed for economic and financial disaster,
probably during the latter part of next year. While deferring any discus-
sion of the plan pending Bevin's arrival in Paris, Ramadier indicated that
he is considerably worried by the Soviet attitude toward the speech as
shown by the French Communist press.
jflsthfavoMarshaflsals�US Embassy Paris reports
that militant Socialists in general regard the Secretary's plan as evidence
that the US is not an imperialistic power seeking to transform Europe into
semi-colonial dependency. According to a Socialist active in the trade-
union movement. US policy as reflected in the Harvard speech gives to
European Socialism its "greatest chance of survival."
lasjaultailmsa_p_grut's visit�Foreign Minister Bidault has
told US Ambassador Caffery that he is "not too happy" about Bevin coming
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to Paris at this juncture, because Biclault does not want to give the im-
pression to the small nations of Europe that a Franco-British condominium
is out to dominate western Europe. Bidault told Caffery that he will work
wholeheartedly with Bevin, but he prefers that France and the UK approach
Washington separately in regard to the Marshall proposals.
NEAR EAST-AFRICA
9. IRAN: Cabinet el :es re � �rtedl a roved--The Shah has informed US
Ambassa r en ; e as approv � a new Cabinet, in which almost
all the present ministers except Qavam are replaced, in order to "put
some honest men in the Government." The Shah added that he would re-
tain Qavam to handle the Soviet oil question but would dismiss him, if it
appeared that Qavam "was not handling the matter well."
FAR EAST
%ow 10. CHINA: Apath rowi amo. Nationalist militar leaders--The French
Military .1r., c e, w�o has us re rne roma pa ong e east-west
Lunghai railway (adjacent to the North China area of conflict), has con-
firmed to US Embassy Nanking previous reports that apathy in Nationalist
military circles is growing rapidly. In addition to a general reluctance to
fight other Chinese, the MA cites "inadequate and irregular pay, poor
rations, and long separation from home" as reasons why Nationalist
officers, even senior commanders, are talking in terms of a political
rather than a military settlement of the Chinese Communist problem.
THE AMERICAS
11. ARGENTINA: Reported A entine o � tosition to arms plan--The Argentine
Ambassador in Idoscow has I � e re can m. ssador, according to
US Embassy Moscow, that Argentina: (a) is not greatly interested in acquir-
ing arms from the USSR (see Daily Summary of 2 June. item 3); (b) will
oppose the US plan for Hemisphere arms standardization; and (c) can count
on support in the matter from Chile, Bolivia, Paraguay, and Uruguay.
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(CIG Comment: US Embassy Buenos Aires has in recent months
consistently reported that Argentina is postponing large-scale arms
purchases pending the negotiation of a Hemisphere Defense Pact. Ambassa-
dor Messersmith has frequently reiterated Argentina's intention to cooperate
loyally with the other American Republics. Defeat of the arms-standardiza-
tion plan would invite the perpetuation, through bilateral negotiations of
Brazil's present armaments advantage over Argentina. Argentina, therefore,
is not likely to oppose the plan.)
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II1N 1941
407
1. Iran fears possibility of govieLmgression�Prime Minister Qavam has
informed US Ambassador Allen that Soviet officials in Moscow recently
warned the Iranian Embassy that it would be "very dangerous for Iran
if the Iranian Government procrastinated regarding the Soviet oil pro-
posal. Qavam added that on 13 June he stated, for publication, to a corre-
spondent of a Paris newspaper that: (a) newly-elected members of Parlia-
ment have indicated that the proposal would not be ratified if submitted in
its present form; (b) failure of the bill to pass would be an indignity both
to himself and to the Soviet Government; and (c) consequently, he would
not present the existing proposal to Parliament. Qavam concluded that
further negotiations were therefore necessary before the proposal could
be submitted to Parliament with any likelihood of passage.
Qavam expressed his fear to Allen that, in view of recent Soviet
activities in Hungary, Austria, Bulgaria, and Mongolia, Soviet reaction
to his published statement might extend even to invasion of Iran. He re-
quested Allen to ask the US to inform the Soviet Government at this time
that the US: (a) would support fully Iran's right to make its own decisions
on the petroleum question; and (b) would "make a declaration of hostilities
against Russia in case Iran, a member of the United Nations, should be-
come the victim of aggression in this matter."
2. Danubian milfrusast_temilted�According to Acting US Political Repre-
sentative Melbourne in Bucharest, a "qualified source" has definitely con-
firmed previous reports that responsible military officials of Rumania,
Bulgaria, Yugoslavia, and Hungary (with the Czechoslovaks as observers)
are meeting in Belgrade in order to "determine the respective roles of
the participants in a general military alliance." The Representative
interprets the conference -- which has also reached cultural, political,
and economic agreements -- as "unmistakable evidence" of a Commu-
nist plan to unite all Danubian states in a single political bloc.
3. Danubian air transFort conference reportedly planned�Melbourne also
reports that, according to a usually reliable source within the Rumanian
Civil Aviation Bureau, a general Danubian air transport conference will
also be held in Belgrade which will be closely coordinated with the current
military conference. Source states that the conference � which will be
attended by Yugoslavia, Czechoslovakia, Hungary, Rumania, and Bulgaria --
will attempt to conclude a multilattiral air pact: This pact, according to
Document No. 063"
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source, would be designed to "escape the obligation of using foreign air-
lines and to defend the economic independence of Danubian countries
which is endangered by the intention of certain powers to establish eco-
nomic supremacy by extending air lines in and through these countries."
4. Soviet Civil Air Attache Deak, currently in
Budapest, reports that continued stalling by Hungary, Poland, and Rumania
in air negotiations with the US clearly indicates the USSR's determination
to exclude US and UK civil aviation from its zone of influence and to extend
satellite lines into Western Europe where they will connect with overseas
services through Czechoslovakia. Deak suggests as possible retaliatory
measures that the US might: (a) block satellite airline expansion, direct
and indirect, into Western Europe and the Near East; and (b) prevent
satellite countries, as well as the USSR, from obtaining US aircraft or
air equipment.
5. UK 1A1.Hp 'ose Dutch-Indonesian round-table conference--US Embassy
London reports that the UK Foreign Office feels that continued exchanges
of notes between the Dutch and the Indonesian Republic will resolve nothing
and is therefore considering suggesting to Dutch and Indonesian representa-
tives that a round-table conference be held to thresh out existing differences.
EUROPE
6. RUMANIA: Soviet civilian migration continues�Melbourne also reports
that Soviet civilians continue their immigration into Rumania; such immi-
grants fall into the following categories: (a) officials and technicians en-
gaged in the operation of joint Soviet-Rumanian enterprises; (b) secret
police; and (c) civilians performing auxiliary military functions for Soviet
occupation forces. The over-all Soviet plan, according to Melbourne,
appears to call for tight control of the Rumanian economy and the mainte-
nance of a Soviet-type police system capable of controlling Rumanian poli-
tics. In the opinion of US observers in Rumania, the USSR plans to dominate
and eventually to annex Dobruja.
(CIG Comment: Dobruja lies along Rumania's Black Sea coast; its
annexation would give the USSR a strategic corridor in the direction of the
Turkish Straits and would connect Soviet and Bulgarian territory; see
Weekly Summary of 23 May, page 8.)
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7. GREECE: Government stresses need for hele--The Greek Government,
in a note presenFiaWffonlijiiiiii7iales that Greece is virtually
involved in an undeclared war which it is compelled at present to wage
alone. The Government declares that it is unable to see how long the
situation can be kept under control or how lOf1 the collapse of Greek
Army orale can be averted. The Government adds that it is counting
upon the Security Council to seeguctrd the independence of Greece. It
asserts that, if the SC proves inadequate and Greece remains unaided,
the situation could lead to fresh disasters of which the eclipse of Greece
would be but the opening phase.
MacVeagh considers s eedz_aatlimmtim--US Ambassador
MacVea.gh reports his lief that the pyschological and material results
of continued delay in opening the US aid program on the highest level
ill make final success more difficult to achieve. MacVeagh urges that
Dwight P. Griswold (head of the aid program) come to Athens at the
earliest possible date and be accompanied by a Major General to help
evaluate the increasingly difficult military and security situation in
Greece. MacVeagh adds that the situation in northern Greece in particu-
lar is steadily deteriorating toward a point where economic operations
In "that vital area" may prove impossible.
FAR EAST
8. JAPAN: Atcheson's comments on Soviet charges against occupation--
US Political Adviser Atcheson comments that charges made by the Soviet
de.le te in a UN committee meeting on 14 June (including the allegation
that "the American-controlled Japanese Government is closing its eyes
to fascist activities") appear to be the initial attempt of the USSR to
attack the occupation openly in the UN. The Political Adviser urges that
these Soviet charges, which "are a repetition of a Soviet propaganda line
which has long been familiar to us in Japan" (see Daily Summary of
14 April, item 13), be refuted and that the War and State Departments
act to meet false propaganda directed against the occupation.
9. CHINA: Embassy's views on UK concern,--US Embassy Nanking (in reply
to the State Depar entsrequest for its views on UK concern over the
situation in China; see Daily Summary of 10 lime, item 7) reports that it
sees no reason for the presence of UK warships in China waters specifically
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for "rescue and protective action" because there is as yet no serious
breakdown of government authority in areas where foreign nationals are
concentrated. The Embassy believes that the responsibility for protection
of US life and property should. for the time being, remain with civil authori-
ties and that the US should not permit the "indiscriminate stationing of
naval vessels along the coast of China" until a real need arises. The Em-
bassy notes, however, that under certain circumstances the rescue of
Americans or other nationals would be both "necessary and advisable"
but points out that at present a large number of newly-created Soviet
citizens reside in the same areas as American citizens and that "protec-
tive action" by either UK or US fleets "could well lead to undesirable
Soviet intervention."
THE AMERICAS
10. NICARAGUA: All Re ublics reportedlyfavor non-recognition--US Embassy
La Paz reports at, according EiejIies rece1�by theo vian Foreign
Minister, all the American Republics support non-recognition of the Nica-
raguan regime.
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14 JUN 1947
406
1. FRANCE: Government te'ehnical victor in strike settlement--US Embassy
Paris reports that the settlement of the railway strike came as a relief
both to the Government and the General Confederation of Labor(CGT).
According to the Embassy, the Government technically scored a moral
victory in that the men returned to work before it discussed terms di-
rectly with the union. CGT headquarters have privately admitted to the
Embassy that public and worker opinion is opposed to large-scale strikes
in basic industries at this time.
2. AUSTRIA: Fischer-Flglincident strerigthens Socialists�US Legation
Vienna reports that excitement over the disclosure of the meeting be-
tween Chancellor Leopold Figl (People's Party) and Communist Leader
Ernst Fischer is subsiding. Although Fischer's demarche failed to
effect a change in the composition of the government, the Legation be-
lieves that it has to some extent compromised both Figl and his con-
servative People's Party and at the same time has weakened the coali-
tion between the People s Party and the Socialists. The Legation ex-
pects that the Socialists, who alone emerged untarnished from the inci-
dent, will probably win increased support in consequence.
FAR EAST
3. NEI: Tension increasine between Dutch and Indonesians�The US Naval
Liaison Officer in Batavia reports that the Indonesian reply to the Com-
mission General memorandum is considered by the Dutch in the NEI as
"unsatisfactory and impertinent." He adds that tension is increasing
between Dutch and Indonesian military forces in all occupied areas and
particularly near Semarang in Java where the Indonesians are burning
villages and constructing defenses.
Dutch FoLcia Office views�US Embassy The Hague reports that
the Netherla d Foreign Office continues to take a pessimistic view re-
garding the chances of implementing the Linggadjati Agreement and sees
no solution �then than military taction or Dutch withdrawal. The Foreign
Office considers the Republic's reply to the Commission General's
note a rejection of Dutch proposals; The Foreign Office has ob-
served to the Embassy that, as thb US and UK now are on record with
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the Dutch Government as indicating that the Dutch proposals are "reason-
able," the Netherlands cannot be expected to recede to an "unreasonable"
position. According to the Foreign Office, orders again have been given
to the military to take every precaution against possibility of "incidents",
even in face of evidence of a scorched earth campaign near Dutch areas.
Views of Dutch Catholic ILa_Et--The leader of the Dutch Catholic
Party has told the Embassy that: (a) the Republican reply to the 27 May
note was somewhat of a surprise and disappointing; (b) Dutch armed forces
may have to be used to return Dutch owners to their estates; and (c) a
majority of Dutch workers would not support a general strike in Holland,
if the Dutch resorted to limited military action.
4. CHINA: Embassy comment on Sinkiang incident�US Embassy Nanking,
on the basis of available information, considers that the report of an
Outer Mongolian invasion of Sinkiang has three possible explanations:
(a) a minor border clash lacking significance; (b) a Soviet attempt to
embarrass the Chinese Government while it is having difficulties in
Manchuria and North China; or (c) the current Chinese policy of exploiting
any incident involving the USSR in order to influence US public
support for financial aid to China. According to the Embassy, the manner
In which the Chinese Government reported the alleged incident tends to
support explanation (c). The Embassy notes that the information appar-
� ently was in the hands of the Chinese Government several days before
action was taken and that the resultant flurry of excitement in official
nationalist circles appeared "somewhat artificial and out of proportion."
The Embassy adds, however, that "Soviet interest in Sinkiang and Soviet
readiness to exploit any opportunity to its own ends are beyond reasonable
doubt."
5. NEW ZEALAND: Views on ja a_p_tie_ke PeaceTizslyAelgti_ationz-US Min-
ister Warren has been informed in strict confidence by New Zealand Sec-
retary of External Affairs McIntosh of New Zealand's belief that Australia's
Minister for External Affairs Evatt is maneuvering to exclude New Zealand
in the negotiation of the Japanese Peace Treaty. McIntosh indicates that
New Zealand is determined to maintain complete independence and "under
no circumstances will acquiesce in Australia representing Australasia."
McIntosh added that he and other members of the New Zealand Government
will try to persuade New Zealand Minister of External Affairs Fraser not
to raise the questton of the veto in connection with the Japanese Treaty, as
they are convinced that the exercise of the veto will have to be accepted in
principle.
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THE AMERICAS
6. BRAZIL: Government studies imm ation .lan-.-US Ambassador Fawley
reports that e Brazil �vernment has under consideration a plan for
a joint US-Brazilian immigration program which would bring to Brazil
an initial 60,000 displaced persons from the US Zone Germany and would
call for a $50,000,000 US contribution against a larger sum from Brazil.
In Fawley's view the plan offers the US an "excellent opportunity."
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18 JUN 1947
405
1. CZECHOSLOVAKIA: Steinhardt's views on recent Communist statement--
According to US Ambassador Steinhardt, a recent speech by Communist
Premier Gottwald indicates that the Czechoslovak Communists: (a) have
launched a strong offensive against the Slovak Democratic Party aimed
at splitting it or forcing a basic modification of its program; and (b) are
angered by� the effectiveness with which some of their pet measures have
been whittled down in Parliamentary committees. Steinhardt adds that
the speech suggests an increasing cleavage between the Communists and
the other parties which will increase the difficulties of continuing the
national front.
2. GREECE: Xrouble:petyzaen _Z.,.ctryas.a,,,,v1,141ea0 of,13ritksh Polly Mission--
A reliable CIG source in Athens reports that Sir Charles Wickam, Chief
of the British Police Mission in Greece (which is expected to continue
its work in cooperation with the program of US aid), has been having
difficulties with Minister of Public Order Zervas; Zervas has been ig-
noring Wickam and :refusing to take any advice. Source adds that Wickam
has stated categorically that either Zervas must go or the Mission will
be withdrawn, and a showdown is expected in a matter of days.
(CIG Comment: As Zervas has also been under strong attack
- from members of the Greek Government and from opposition elements
throughout the country, it is expected that he will be forced out of office.)
FAR EAST
3. KOREA: Soviet plaints for establishment olprovisioRal government--US
' Political Adviser Langdon reports that "it is almost a foregone con-
clusion" that the Soviet delegates to the Joint Commission will oppose
the establishment of a provisional Korean government by free, multi-
party electoral processes despite the USSR's recent acquiescence to US
conditions for consultation with all Korean democratic parties. The USSR
has already Indicated to the US delegation that, while it favors an elected
legislature, it desires that members of the provisional government be
appointed. Langdon interprets this position as indicating that the USSR
expects to gain control of the proilsional government.
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Langdon expects expects that the Soviet delegation will press for a highly-
centralized government "with the intention of Communizing Korea," and
he suggests that the "politically immature Koreans probably will be
strongly influenced along oriental lines and will gravitate" in the direc-
tion of centralization while giving lip service to democracy.
THE AMERICAS
4. COLOMBIA: Pr9sicilejltirsis_�s bilateral arms discussions--US Embassy
Bogota reports that, according to the Colombian Foreign Minister, Presi-
dent �spina considers that the apportionment of US arms among Latin
America Republics should be discussed bilaterally (by the US and each
Government) rather than at the forthcoming Rio Conference.
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GENERAL
1. orceadeis_� nee_DLC,Ard ta0.11�LWVQW.,1 Lag --The US
Military Attache vana reports that Cardinal Arteaga has been in-
formed by the Vati an that the Conference of Cardinals (scheduled to
open in Ottawa on 8 June) has been cancelled. The Conference, accord-
ing to the MA, wa called to discuss "the seriousness of the world sit-
uation and the iminence of war," and it was cancelled because of In-
creased tension ad possibly because of concern that there is not .
sufficient time no for the Cardinals to attend and return to their home
stations."
(Cardinal trisserant, Vatican authority on the USSR, believed in
September 1946 that there was a fifty-fifty chance that the USSR would
provoke war in 1046; see Daily Summary of 19 September 1946.)
EUROPE
2. FRANCE: Near-hysterical fears of western diplomats--US Ambassador
Caffery reports that recent events i Hungary have almost hysterically
frightened officials of 'western European nations in Paris who ssume
that Austria will be the next to fall and that the entire Continent will
eventually fall under Soviet domination.
3. ITALY: Sara at as_....gftirn stmajLties Esalan_flpinet--Giuseppe
Saragat, leader of the right-wing Socialist Party, has told US Ambassador
Dunn that he is willing enter the De Gasperi Government along with the
minor parties of the ,Left (excluding the left-wing Neami Socialists and the
Communists) now that the Christian Democrats have taken the responsi-
bility for excluding the extreme Left. Saragat believes that: (a) the
proper solution for the present situation in Italy would be a government
of the Center and the Left without the Communists; (b) the present De
Gasperi Government would not receive more than, a ten or fifteen vote
majority and thus would be too weak to govern; and (c) the proposed en-
largement of the Cabinet could be effected before a vote of confidence is
taken in the Assembly and thus insure a larger majority for the Govern-
ment.
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� ULGARIA: 122.m.rted anti-Communist underground--A "usually re-
liable" CIG source in Athens believesthat armed opposition to the
Dimitrov regime has begun in the mountains along the Greek border.
Source states that 135 Pomaks (Bulgarian Moslems who advocate that
the Bulgarian border area where they reside be transferred to Greece)
and another small armed group have taken to the hills. Representatives
of Petkov have reportedly promised to support Pomak desires in return
for aid in ousting the Communists.
(CIG Comment: Many unverified reports have been received re-
cently concerning an armed anti-Communist underground in southern
Bulgaria. In view of Greece's claim to territory in Bulgarian Thrace,
the existence of such an underground will further strain Greek-Bulgarian
relations and may lead to more frequent border incidents.)
9pInionsi US and UK_Lcsmilkm.. of 39.10L.,ta--According to US
Representative Sofia, his British colleague has suggested to the UK
Foreign Office that: (a) the present time is inopportune for the resump-
tion of full diplomatic relations with Bulgaria; and (b) the US and UK have
a strong weapon in their ability to withhold approval of Bulgaria's admis-
sion to the UN. The US Representative believes that Premier Dimitrov
Is "tremendously anxious" that Bulgaria be recognized and admitted to
the UN.
FAR EAST
5. FRENCH INDOCHINA: French n otiations with Bao Dal�US Consul
Saigon reports that the Fre�ilIgh Commissioner in Indochina and
Several of his staff left for Paris yesterday, following the return of his
representative from Hongkong where the latter had contacted Bao Dat,
former Annamese Emperor. Reports from US sources indicate that the
Iligh Commissioner's representative had little success in urging Bao Dal
to side with the French; the former Emperor allegedly said that his best
offer to dat.2, had been from President Ho CM Minh's party, the Viet Minh.
THE AMERICAS
0, COLOMBU.: Government thinks consultation on yleaseae_Ests_aunn. rz--
US Embassy Bogota repo t e Colombian. Government has determined
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that the American Republics (except Venezuela and Argentina,which
have not yet officially made known their attitudes) do not intend to recog-
nize the new Nicaraguan regime and favor postponing action with respect
to it. Colombia is willing to sponsor an immediate consultation regard-
ing Nicaragua if the US Department of State so desires but sees no
necessity for such action' sat this time."
7. PARAGUAY: Government offensive Charge Trueblood
Asuncion reports indications that the Government is about to launch an
offensive in the north. According to the Paraguayan Minister of Foreign
Affairs, the Government has reports that two rebel gunboats have been
receiving Uruguayan arms and supplies, and may try to proceed to
Asuncion; the Minister added that Government artillery in Asuncion
should be able to prevent their approach.
8. PANAMA: itax_s_gad_c_m41.1,2yeelanama "weaken1w:--US Ambassador
Hines comments, with reference to a recent statement by President
Jimenez (that Panama is "on the road" toward accepting the US position
on the defense sites agreement), that the Panamanian stand is "weakening."
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GENERAL
403
1. Possibleluiiti_ntentions-vis-a-vis Iran--US Military Attache Tehran
summarizes reports from unconfirmed Iranian sources concerning in-
creased Soviet activities vis-a-vis Iran which he feels may indicate that
the USSR intends: (a) to reoccupy northern Iran; or (b) to create a situ-
ation similar to that which existed during the "democratic" regime in
Azerbaijan last year; or (c) merely to bluff the Iranians into granting oil
and other concessions. The MA adds that the USSR "at least appears
prepared for direct military action, if the Iranian Parliament should re-
ject the oil concession. He considers it unlikely, however, that the USSR
would overtly enter Iran, and he believes that any action taken would
probably be restricted to the re-entry of Pishevari (former leader of the
Communist movement in Azerbaijan) and his henchmen, supported by
Soviet troops in civilian clothes.
2. SoviAlsklicyjn southeastern E_Amps_Emrted_Ats_lirsstec_lin, Dv--
A highly-qualified source has told US Acting Political Representa-
tive in Bucharest of his belief that: (a) Bulgarian Premier Dimitrov
is charged with implementing Soviet policy in southeastern Europe; (b)
this Soviet policy follows the original pre-war Comintern program which
envisaged integration of the area into a political and economic unit on the
Soviet model; and (c) the program is to be implemented in three general
stages: cultural, economic, and political. Source added that Rumanian-
Yugoslav cultural and economic agreements will probably be signed at
Belgrade (see Daily Summary of 9 June, item 1), and that the recent
Rumanian-Bulgarian cultural agreement will be followed by an economic
pact. Source also believes Hungary will shortly be included in the over-
all scheme.
3. Itcmrted Soviet off.gyIELN,yri_i stock--US Embassy Tehran
reports that, according to fairly reit-gig" information, the USSR has
offered to buy 3,000 cases a opium, representing most of the stock held
by the Iranian Government, for resale in the Far East at highly-inflated
black market prices.
(CIG Comment: The 3,000 cases referred to amount to about
three times the annual peacetime requirements of the USSR. However,
the suggestion that the USSR is purchasing opium stocks for resale in
the Far East is not supported by aimavailable evidence. It is more
probable that the USSR is stock-piling opium for "emergency medical use.
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4. US vie270_91Loisible UK cora_pEomise wkatomic controls--US Ambassador
Douglas has been instructed by Secretary 'Marshall to conveyto Foreign
Minister Bevin the US Government's great concern over the possibility
that the UK is prepared to compromise on the rigid international control
of atomic energy through international ownership and management, which
was approved by the UN Atomic Energy Committee last December. The
Secretary adds that, if the UK should submit a proposal calling for less
strict control in an effort to reach agreement with the USSR, such action
would be most unfortunate and would create great confusion by indicating
apparent division among the Western Powers.
5. UK to divert more flour to Germany�According to US Embassy London,
Bevin has concluded that he will not authorize the diversion of UK grain
to France (see Daily Summary of 7 June, item 4) in the light of projected
forthcoming US deliveries to France, but he has agreed to divert two ad-
ditional cargoes of UK-bound Canadian flour to Germany.
6. US re_s_e_tw_e to Australian tactics on JaAanese Pr y--The Department
of State has requested US Embassy Canberra to inform the Department
as to Australian views on the 'Japanese peace treaty, and has instructed
the Embassy to make it clear to the Australian Government -- without
initiating discussions on the subject -- that the US is not yet prepared to
enter into bilateral discussions. The Department has also indicated that
it does not feel that any useful purpose would be served by implementing
the Australian proposal that Minister for External Affairs Evatt and US
Ambassador Butler visit Japan (see Daily Summary of 3 June, item 4).
EUROPE
7. USSR: Molotov denies Sovan.fer_ence Embassy Mos-
cow reports that Soviet Foreign Minister Molotov, in a conversation with
the British Ambassador about the Hungarian situation, denied any Soviet
interference and charged the British with repeated attempts to intervene
In Hungarian internal affairs. Molotov further denied Soviet secretiveness
with respect to the western representatives on the Control Council, and he
observed that the Soviet member only assisted his US and UK colleagues
In matters directly concerning them, whereas "this question did not.
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The British Ambassador describes the conversation as a "school-
boy's argument"; he considers Molotov's accusations a positive indication
of Soviet interference, In accordance with the established Soviet practice
of charging others with the crimes which the USSR itself is committing.
EmbasEy_14.2�.EL)v_714:gtuAtea.sures to counter
US Embassy Moscow considers it essential that the US endeavor, by all
possible means, to counteract the anti-American campaign now being
waged by the Soviet propaganda machine and the Comintern apparatus
abroad. The Embassy suggests the release for press and radio dissemi-
nation of documentary evidence illustrative of Soviet duplicity and hypocrisy,
as one of several possible means of combatting the Soviet campaign.
8. BULGARIA: Increased aid_t_o_g/T2ismrilsans--According to Acting US
Representative Sofia, the US Military Mission believes that Bulgarian aid
to the Greek partisans is at an all-time high.
9. CZECHOSLOVAKIA: No immediate internal ypheaval anticloted--In view
of the relatively stable internal situation in Czechoslovalda, US Ambassa-
dor Steinhardt believes it improbable that any such revolutionary events
as those which recently occurred in Hungary will be repeated in Czecho-
slovakia in the near future. Steinhardt confirms that Vice Foreign Minis-
ter Vyshinsky and Marshals Koniev and Budenny are taking the cure at
Karlovy Vary, but he has found no evidence that the Soviet visitors have
conferred with high Czech officials.
10. AUSTRIA: Current public odepressed--US Legation Vienna reports
that the internal political situation is less alarming than represented in
the press abroad. The Legation adds, however, that the recent events in
Hungary and the slow progress of the Treaty Commission are having a
seriously depressing effect on public opinion.
11. FRANCE: Socialists want Communists to share Government--US Ambassa-
dor Caffery reports that Socialist observers, who strongly approve of con-
tinuing the present Government, are concerned over the mounting sentiment
in the Socialist Party in favor of bringing the Communists back into the
Cabinet. This sentiment is based on a belief that: (a) the Socialists are
on weak ground in their efforts to oppose the Communists on the wage issue;
and (b) in view of the municipal elections this fall, the Communists should
share the trials and tribulations of government." As a result, important
Socialists are seriously discussing the possibility of a new tri-partite cabinet.
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12. CHINA: Ultimate Communist control of Manchuria nicety�US Minister-
Counselor Butterworth, who has recently visited Mukden, reports that the
Chinese Communists apparently have the means and ability to gain ultimate
control of Manchuria. Butterworth believes that the Communists will not
"force the issue prematurely." as they are convinced that any Nationalist
reinforcements arriving in Manchuria will "in due course be infected by
the dry-rot" which now seems to pervade Nationalist forces there.
As reflections of the ineptitude with which the Central Government
has run its military and civil affairs in Manchuria, Butterworth notes:
(a) a decided anti-Government feeling on the part of native Manchurians;
and (b) a lack of unity within the Nationalist Army in Manchuria where many
military and civil officials are distinctly critical of the Government.
ChInese-Mool in Sinkiang�The US Consul in Sinkiang
Province has received Chinese Nationalist reports that on 5 June, four
Soviet-marked planes bombed a town in northeastern Sinkiang, near the
Outer Mongolian border. The attack reportedly took place upon expiration
of a Mongolian ultimatum demanding the return of eight Outer Mongolian
soldiers captured by Nationalist defense troops in an earlier clash; the
Soviet-marked planes appear to have flown Into Sinkiang from Mongolian
territory. (Other Central Government reports indicate that the air attack
was followed by the arrival of Outer Mongolian troops, and that fighting
is continuing in the area.)
(CIG Comment: All reports thus far have come from Central Gov-
ernment sources, who appear to have become increasingly articulate of
late in their charges of Soviet interference in Chinese affairs, possibly
owing to recent Nationalist reversals in Manchuria and continued frustra-
tion of Nationalist negotiations with the USSR regarding both Dairen and
Sinkiang. The current fighting in Sinkiang may develop into a large-scale
conflict with international implications, but, in its present form, it re-
sembles similar clashes that have occurred in the past, arising from a
long-standing dispute over delineation of the Sinkiang-Outer Mongolian
border.)
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1O JUN 1941
402
1. US ho es to obtain a eement in SC on Greece--The Department of State
has informed the US delegate to the UN its principal objective in the
Greek case is to enable the Security Council to fulfill its responsibilities
with respect to the dispute by terminating border violations by Greece's
northern neighbors through the adoption of the substance of the SC Investi-
gation Commission's proposals. In an effort to avoid a Soviet veto and to
obtain agreement in the SC, the Department feels that the SC should not
make: (a) any decision with respect to the facts of aggression in the
Ethridge Report; (b) any formal finding with respect to responsibility; and (c)
any determination with regard to a threat to the peace.
The Department recommends, furthermore, that the US delegate
consult with SC members, prior to the SC proceeding, in order to obtain
� agreement in the SC to the Commission's constructive proposals for
settlement of the dispute. If the SC is prevented by the veto from adopting
these proposals, the US is determined to pursue the matter until a satis-
factory solution is reached.
2. Possible Soviet-Hunprian mutual assistanceeRact�US Legation Budapest
has unverified information that Hungarian military leaders are drafting
a mutual assistance pact between Hungary and the USSR which may pro-
vide for eight Soviet garrisons in Hungary.
3. Brazil rai 1_,Ws_c_gats,from US-UK Zones E_Lamage-US Ambassador
Pawley reports that Brazil might conceivably be persuaded to enter into
an arrangement under which Brazil would receive most of the displaced
persons in the US-UK Zones in Europe under a program financed and
directed jointly by the US, UK, and Brazilian Governments.
Pawley had previously been assured by Brazilian officials that
Brazil would accept a percentage of Jewish immigrants equal to the
Jewish proportion of the present population of the US Zone (reportedly
/5%). Brazilian missions, according to Pawley, at present seem to be
under instructions to exclude all Jewish immigrants.
4. g_ttnot recommends pg_ci_kr_cleallairoth Yugoslavia�US Charge
Cabot in Belgrade believes that the basic US policy toward Yugoslavia
should exploit possible conflict between Yugoslav and Soviet interests and
between pro and anti-western elements within the Yugoslav Government,
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Cabot believes that, in the face of continuous irritations caused by the
Yugoslav Government's lack of courtesy, the US should: (a) avoid adverse
official publicity except when positive arguments clearly overbalance the
resentment caused by such publicity; (b) make serious attempts to elimi-
nate just Yugoslav grievances; and (c) take prejudicial actions against
Yugoslavia only as specific retaliation for some legitimate grievance.
Although Cabot is not optimistic over the success of such a policy, he
believes it "well-calculated to place the US in a favorable position."
EUROPE
5. USSR: NA suspects Soviets have e_mx_erated economic plight�US Naval
Attache Moscow suspects that previous reports of Soviet economic weak-
ness have been deliberately exaggerated by the Kremlin and comments
that, under cover of the allegedly "worst drought in 50 years," the USSR
has: (a) maintained food reserves; (b) threatened the people into all-out
production efforts; (c) acquired sympathy abroad; (d) gained support for
Soviet reparation demands; (e) avoided contributions to European welfare;
and (1) executed population shifts with a minimum of resentment. When
current crops are harvested, the NA believes, the Kremlin will have
valuable economic ammunition for its struggle for control of Europe and
Asia and can readily overcome the low domestic morale resulting from
Its recent policies.
6. HUNGARY: Status of Smallholders' Path�Several leading Smallholders
have told US Legation Budapest of their belief that: (a) the Smallholders'
Party has ceased to exist as an independent political party; (b) Commu-
nist stooges using political terrorism completely control the Party and
resistance to them is impossible; and (c) although the moderate majority
In the Party could in theory expel the Communist stooges, it fears retali-
ation by the Communists which would throw the country into chaos.
Possible Communist-Social Democrat split--The Legation believes
that the intended visit of Social Democrat Deputy Premier Szakasits to
Paris may be an effort to suggest to the Hungarian Communists that the
Hungarian Social Democrats might follow the French Socialist example,
if the Communists continue their attacks on the Socialist right-wing.
According to the Legation, the belief is growing among Social Democrats
that the Communists will attack them with the same tactics which were so
successful against the Smallholders.
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7. CHINA: UK Government concernedover situation--The UK Embassy
Washington has orally informed the Department of State that the UK
Government is concerned over the situation In China, particularly in
Shanghai. UK representatives in China have been authorized to appeal
to the Commander of the British Fleet for warships to undertake' rescue
and protective action" in the event that disturbances endanger British
lives and property. The State Department has informed the UK Embassy
that the situation had not appeared to warrant the preparation of a similar
US plan and has requested the views of US Embassy Nanking.
Presence of Soviet-trained North Korgans in IVfial_kciu_i ia doxbte--
With regard to Central Government press claims that Chinese Commu-
nist forces in Manchuria were being aided by troops from North Korea,
US Consul General Changchun points out that about 1,400,000 Koreans
were located in Manchuria in 1944,arAd that concrete proof that the troops
in question actually came from North Korea "would probably be very
difficult to obtain. (The US Naval Attache Nanking has also questioned
the reliability of Central Government claims, terming them "highly
exaggerated' he adds that there is no evidence that Korean units in
Manchuria were Soviet-trained.)
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GENERAL
9 JUN 1947
401
1. Fur se of oslav-Itumanian discussions--According to US Charge
e :r, .e, e s ze an .m. eup e tunaniarrdelegation now in Bel-
grade indicate that discussions concerning economic relations and a
customs union, rather than a cultural convention, may be the real pur-
pose of the meeting. US Acting Representative Bucharest reports that,
according to Palace sources, Rumanian Foreign Minister Tatarescii was
reluctant to attend the meeting which he feared was called to discuss: (a)
political questions; and (b) a verbal agreement on an eventual Balkan
political alliance in answer to the US aid to Greece and Turkey.
EUROPE
2. GREECE: Marked deterioration in northern Greece--Lt. Col. Allen
Miller, US member ofgroup offfilre Border Investigation
Commission, reports from Salonika that the situation in northern Greece
is marked by a new low in civilian morale and a loss of faith among many
Greeks in the ability of any political party or of UK-US help to rectify the
situation. Miller attributes the deterioration chiefly to: (a) politics with-
in the Army and the Gendarmerie; (b) the Greek tendency to class all
Macedonians as collaborators; and (c) the Government's failure to deal
successfully with the guerrilla situation either by force or by amnesty.
Miller adds that many loyal citizens have deserted to the left-wing camp.
Miller concludes that prolongation of the present situation may seriously
threaten the success of the entire US-aid policy. Be feels that a solution
of the political problem which will provide some sense of security among
the people is a prerequisite to any effort toward reconstruction.
US Consul Salonika reports an appare t change in guerrilla tac-
tics; the guerrillas now are launching major attacks which may force the
Greek Army to change from the offensive to the defensive. Be adds that
the economic situation In northern Greece is deteriorating further because
of interrupted communications, harvesting, and distribution arising from
fear of bandit activities.
3. POLAND: Opposition to interim US air rights--According to US Charge
Keith in Walgaii77ieliuikiDirector orthe Polish airline LOT, has told
US representatives that he will "oppose with all vigor" the US desire to
obtain interim air rights into Warsaw:� Zielinski argues that there is not
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enough traffic now between Berlin and Warsaw to support his own line.
Re indicates, however, that: (a) he will support American Overseas Air-
line operations into Warsaw as soon as LOT is in a position to make
reciprocal flights to New York; and (b) if current negotiations for the
purchase of Douglas DC-6's are successful, LOT will be able to begin
such flights. Embassy Warsaw maintains its previous opposition to US
credits for this purpose.
4. ITALY: 1241Eusles delay in dposit of Treaty ratification�US Ambas-
sador Dunn believes that a "very serious situation would arise" if, as a
result of the deposit of ratification by the Big Four, the Italian Treaty
were to go into effect before Yugoslavia ratifies. Dunn points out that,
in such an event, the US military commitment in Italy would conflict with
the strict obligation under the Treaty to withdraw US troops from all of
Venezia Giulia except the Free Territory of Trieste. In view of this
possibility, Dunn believes that if Yugoslavia does not soon ratify, the de-
posit of ratification should be delayed pending Bog Four discussions.
Trade wftliY:avia viewed as necessary--Dunn has been in-
formed b-y- an absolutely ur position of the Italian
Foreign Office in regard to Italian trade arrangements is that: (a) empha-
sis must be placed on satisfactory trade arrangements with the US; and
(b) second only to this, Italy must establish trade relations with Yugoslavia
In compensation to the USSR for Italy's efforts to improve its trade re-
lations with the US.
US ho s ri ht-wi Socialists will share Cabinet--Dunn has been
informe y ecretary Marsha I a , in ew o e propaganda value in
Italy of the Communist charge that the US is supporting reactionary ele-
ments in the new Government, the leaders of the right-wing Socialist
Party (PSLI) should be informed of the US view that the situation requires
the loyal cooperation of all truly democratic elements in the national
Interest. The Secretary adds that all European governments today need
the support of the democratic Left and the fullest possible representation
of the working classes. The US hope (which is to be presented to De
Gasperi as well as to Saragat) is that the way may yet be cleared for
eventual participation of the PSLI in the Government.
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5. HUNGARY: Ipetion recommends broadcast b N -US Legation
Budapest recommends that ex-Pre er egg male a carefullymorded
radio statement concerning recent events in Hungary. The Legation be-
lieves that such a broadcast might be helpful: (a) in combatting the full
force of intensive and locally-uncontested Soviet propaganda; (b) in slow-
ing down implementation of the Soviet program in Hungary; (c) in providing
the basis for possible resistance within Hungary; and (d) in suggesting the
possible organization of Hungarian forces outside Hungary. In this last
connection, the State Department has instructed its representatives abroad
to avoid giving encouragement to the formation of a Hungarian Government-
in-exile, because such action would serve no useful purpose (see Daily
Summary of 4 June, item 4).
Communistlace TiId --Ex-Hungarian Minister Gordon
In Bern has told US Minister Harr son of Ms belief that the Communists
will soon get rid of Hungarian President Tildy by offering him an estate
to which he could retire, and that Tildy might be replaced by Count
Michael Karolyi, whose "weakness" was instrumental in paving the way
for the Communist coup led by Bela Kim in 1919.
Communists desire early arrival of new US Minister--A Foreign
Office officiI has told US Legatlor Budapest tharffiWisg are most
anxious for the arrival of the new US Minister and plan to exploit his ar-
rival as an indication of US acceptance of the legality of recent events
In Hungary.
C. BULGARIA: Views on US recognition of Government--US Acting Repre-
sentative Sofia believes that it would be a great mistake if the US were to
recognize the present Bulgarian regime after the Peace Treaty without
making assiduous efforts to obtain specific assurances In advance on
outstanding problems between the US and Bulgaria. The Representative
adds that, unless such minimum assurances are received, the US should
face the fact that it will have no influence in Bulgaria in the future and
must abandon any hope of implementing the Peace Treaty guarantees for
freedom of speech and assembly.
7. USSR: US cit_yets palyented from leaving USSR�US Embassy Moscow
reports a number of cases in which persons, wffose US citizenship has
been verified and who are not dual nationals, have been prevented from
leaving the Soviet Union. In some such instances, requests for exit visas
have been ignored and, in others, departure has been prevented even after
the issuance of exit visas.
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8. AUSTRIA: Communist leader seeks champ_ government--US Legation
Vienna reports that, according to Foreign Minister Gruber, Communist
Leader Fischer has told Chancellor Figl that the USSR has indicated it
will never agree to a treaty with the pre ;ea Austrian Government.
Fischer proposed that a "new governme it of strong men" be formed
without elections and include elements regarded favorably by the USSR.
The Legation reports that Figl flatly rej acted the proposal and adds that
Gruber has released the story to the prcss, hoping: (a) to elicit Soviet
repudiation of the proposal; or (b) to rally US and Austrian support to re-
sist the Soviet demands. The Legation observes that for several weeks
Fischer has been making overtures in regard to such changes in the
Government; but that it is not clear whether Fischer is acting on firm
Instructions from Moscow or seeking to rehabilitate himself within his
Party.
9. GERMANY: French stepto consolidate the Saar--The Department of
State has informed the US TOW-aic Bei11n that the French Embas-
sy has revealed in strictest confidence plans to set up on 7 June a uni-
laterally-established Saar frontier and to announce on 10 June that the
conversion of the Saar currency will be effected on 15 June. Furthermore,
Ambassador Bonnet has reported to the Department of State that, in the
recent Anglo-French coal discussions, the French proposed that the US,
UK, and French representatives advise the European Coal Organization
that Saar coal henceforth should be regarded as French.
NEAR EAST-AFRICA
10. INDIA: First obstacle to appjication of British lan--US Embassy New
Delhi reports that thist materia obs cle to tlirapplication of the
British plan for India has arisen over opposition by Jinnah to the method
of selecting a partition committee.
FAR EAST
11. CHINA: Nationalist sisition in Manchuria not e - cted to improve--In
the opinion of US E - -sy Nanking, t is high y . .ey t e Central
Government can reinforce Manchuria sufficiently to effect any immediate
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improvement there. The Embassy points out that: (a) reinforcement
of the isolated Nationalist garrisons in Manchuria raises difficult
transportation and supply problems; and (b) in view of the insecure
Nationalist position in Shantung and other North China areas, where re-
inforcements are also needed, any attempt to send 'troops to Manchuria
would be "robbing Peter to pay Paul." The Embassy believes that the
Chinese Communists in Manchuria have the power either to continue
undermining Nationalist strength or to force further Nationalist with-
drawals.
According to the Embassy, the Chinese Minister of Communica-
tions has told a US official that the Government may have to withdraw its
main base of operations to the port of Hulutao (midway between Tientsin
and Mukden); the Commander in Chief of the Chinese Navy has gone to
Hulutao to make plans for this eventuality.
THE AMERICAS
12. PARAGUAY: Mediator to confer with rebels--US Charge Trueblood has
been informed by Negrao de Lima, the Brazilian diplomat who is seeking
a negotiated peace in Paraguay's civil war, that: (a) he will shortly con-
fer again with rebel spokesmen; and (b) the Morinigo Government is now
prepared to pension (but not to leave on active duty) officers who have
participated in the revolt and to grant an amnesty to the remaining rebels.
The Paraguayan Foreign Minister has informed Trueblood that his Govern-
ment wishes the US to be a participant in any mediation that may be under-
taken, but reiterates his view that the Government "needs a military
victory."
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GENERAL
04 JUN 19ir
400
. oliot-Curie seen as anti-US influence in Latin America�US Ambassa-
dor Caffery reports that a Comintern agent who has probably broken
with Moscow" has told the Embassy that Joliot-Curie, French scientist
and militant Communist, intends to mobilize Latin-American sentiment
against such US policies as "standardization of armaments for hemisphere
defense." This source said that Curie will work through Professor jean
Thomas, assistant to Director General of UNESCO Julian Huxley. The
source also said that Toledano, prominent Mexican labor leader and a
vice-president of the World Federation of Trade Unions recently visited
Paris to confer "in this connection" with French labor leader Toilet,
who has recently been designated by the Communist Party to act as liaison
between the WFTU and UNESCO.
2. UK Foreign glist atqa_._sed by President's statement on Palestim�A
Foreign Office official has informed US Embassy London that he was
greatly pleased by President Truman's 5 June statement on the Palestine
situation; he thought it "contained all the right things."
3. Bevin praises Marshall's 5 Tune_gptesk�US Embassy London has trans-
mitted to Secretary Marshall evin's "personal appreciation" of the
Secretary's 5 June speech at Harvard. Bevin has approved an official
comment for press release that "official quarters" warmly welcome
the speech and consider it an encouragement to the UK and European
countries to know that their efforts towards economic recovery will be
supported and aided by the US. The comment concludes that, at the same
time, the UK is pursuing trade talks with the USSR which, if successful,
will help restore Europe's equilibrium.
(CIG Comment: In recent months the UK Foreign Office has rarely
neglected any opportunity to publicize the UK-USSR trade negotiations.
This policy helps disarm the Government's extreme-left critics and is
designed to fix respo sibility on the USSR if negotiations break down.)
4. UK anxiouS to divert wheat to France--Bevin has informed US Ambassador
Douglas that he would probably be able to divert up to 24,000 tons of grains
to France, as requested by the French Government; Bevin has asked if the
US will replace the quantity. Bevin voiced his anxiety over the threat,
which he takes seriously, of a French political upset. He said that the
food situation in France is critical, (Bevin had previously expressed in
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confidence to Douglas his concern over the European food situation in
general and in particular over its effect on the French political situation;
see Daily Summary of 5 June, item I.)
5. Bevin/s views on US and UK protests over Hungary--Bevin has also told
Douglas that he is considering instructing the UK Ambassador in Moscow
to make an oral protest to Molotov concerning the Hungarian "coup" after
all the facts have been examined. Sevin believes that it might be more
effective, if the US and UK followed different procedures in making their
protests.
1. Mentrade accord reached--US Legation Reykjavik
%spy reports that the USSR, after more than four months of stalling, intensified
trade negotiations with the Icelandic representatives in Moscow immedi-
ately following signature of the recent British-Ieelandic trade agreement.
The Legation adds that a tentative accord has been reached which on the
surface appears highly favorable to Iceland and will thus be exploited by
the Icelandic Communists but actually imposes conditions which Iceland
may be unable to meet.
As the USSR defaulted on a previous agreement when Communists
were eliminated from the Cabinet, the Icelandic Foreign Minister is puzzled
by the current Soviet willingness to come to terms which may strengthen
the prestige of the non-Communist Government at a time when local Com-
munists are attempting to weaken it by strike agitation. The Legation be-.
neves that the USSR has abandoned its dilatory tactics in anticipation of
a collaRse of the present Government, in order to "go the British one
better."
7.art negotiationsanreported near breakdown--The Acting
US Political Representative in Sofia has been informed by several Govern-
ment sources that the USSR is driving a very hard bargain in its trade and
financial negotiations with the Bulgarian Government. As a result the
Bulgarian Communist Minister of Commerce has virtually broken off the
negotiations and Communist Vice Premier Kostov has flown to Moscow in
an attempt to obtain more favorable terms. The US Representative be-
lieves that the Bulgarian Communists are finding it hard to reconcile
Communist loyalty with Bulgarian nationalism.
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8. �2v_itt_f2Ectqipinz_tedl Increased near Iranian border--US Military
Attache Tehran reports that, according to the Iranian Chief of Staff,
Soviet forces in the vicinity of Lenkoran (on the Caspian Sea) have been
increased by possibly one division, including aircraft and an estimated
200 tanks. (Similar unconfirmed reports regarding Soviet troop concen-
trations have been received from Prime Minister Qavam and other
Iranian officials; see Daily Summary of 4 June, item 9.)
EUROPE
9. FRANCE: Ramadier favors economic coo ration with Euro -US Am-
bassador Caf ery has been told by a reliable and highly placed informant
specializing in economic affairs (who is also very close to Ramadier)"
that Premier Ramadier, after long consideration, has concluded that (a)
France's economic recovery depends on the rehabilitation of the rest of
Europe; and (b) France should cooperate closely with other European
countries with a view to utilizing the Continent's economic resources
for the good of Europe as a whole. The informant reports that the Premier
Is considering making overtures along this line in the near future, although
he is fearful that the British (whose participation he considers essential)
may delay or be reluctant to cooperate fully in such a program.
10. GREFCE: US concurs in temporar increaym --The State
Department has informed US Embassy Athens that, if the Embassy agrees,
the Greek Government may be informed that the US concurs in a temporary
Increase in the Greek Army of 20,000 troops to replace veterans of long
service (see Daily Summary of 28 May, item 2). The Department adds
that the increase should be for a period of approximately three months,
after which the Army should be reduced to the original ceiling of 120,000.
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I. International Brigade reportedly to assist Greek guerrillas--US
Military Attache Paris reports that a gh o ca o e renc '..stry
of the Interior confirms the general accuracy of a Paris press report of
2 June that the Comtrnmists are recruiting cadres from the Tnternational
Brigades (in southern France) into a new Brigade for operations in Greece.
The MA adds that the Ministry of the Interior has started a thorough investi-
gation of the matter.
2. Turkish fear of Soviekonetration in Middle East--US Ambassador Wilson
reports tharn�ierarAli( r&iiTiient Turkish statesman),
who has returned from a three-month visit to Lebanon, Syria, and Egypt,
is deeply concerned over the extent of Soviet activities in those countries,
and "the ignorance and naivete of responsible people there regarding the
real aims of Soviet policy." According to Wilson, Cebesoy believes that
the disappearance of British influence in the Levant leaves a vacuum
whichewill be filled either by the US or the USSR.
(CIG Comment: Although Cebesoy is unquestionably intelligent
and sincere, his belief that "responsible people" in the Levant are blind
to Soviet aims is considered exaggerated and is probably due to the con-
viction of the Turks that they alone appreciate fully the extent of the
Soviet menace to the Middle East.)
EUROPE
3. BULGARIA: communists intensify camialgsmiast0 p../ osi_li.ax--Accord-
ing to Acting US Representative Solca7pro-Communists in the Fatherland
Front Agrarian Party have, with overt Communist aid, wrested leader-
ship from the Party's more moderate elements. Vice Premier Obbov
and Georg! Dragnev, Minister of Public Works, have been replaced by
FF Agrarians more willing to follow the dictates of the Communist
Party.
(CIG Comment: This action, coupled with the reported arrest of
Opposition leaders -- including Nikola Petkov, the most outspoken leader
of the opposition Agrarian Party -- may indicate Communist determina-
tion to wipe out all effective Opposition elements in anticipation of (a) the
withdrawal of Soviet troops; (b) more.aggressive ;action toward Greece; or
(c) participation in a possible Balkan Pederation.
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4. HUNGARY: Po ular reaction to recent "coup"--US Legation Budapest
reports thato e laary s caused profound pessimism and
full realization that the country is again in the hands of an unscrupulous
totalitarian power. The Legation believes that widespread fear, pessimism,
and weariness have led the Hungarian people to accept their position as
"hopeless."
5. FRANCE: German Socialists invited to Co ess in Paris--US Ambassa-
dor Caner/ reports that two erman ocial ye een invited to
attend the 18-23 June Congress of Euiopean and British Socialists in
Paris. Caffery believes it significant that, for the first time since the
war, the French Socialists have dared to extend such an invitation. He
adds that when the question of a similar invitation arose last year, it
was not even seriously discussed on the grounds that it would 'shock"
many Socialists, as well as the general public.
NEAR EAST-AFRICA
6. IRAN: Army plans against southern tribes believed ill-advised--US
Embassy e an reports that e Iranian 1Vriiiriter of 9Ta-FWinformed
the US Military Attache of the Army's plans to move against the southern
tribes following "disarmament" of the northern Kurds, "probably a week
or 10 days from now." The Embassy believes that: (a) the well-armed
and politically-organized Qashqais, who recently won a sweeping victory
In parliamentary elections in Shiraz (capital of Fars Province), will be
joined by a considerable group of Bakhtiaris and minor tribes in resist-
ing the Army; (b) a military campaign against the southern tribes at
present would be ill-advised, as the situation is quiet and the regulation
of tribal disarmament by peaceful means might still be accomplished;
and (c) large-scale fighting in Iran at this time might lead to serious
results.
Soviets ma be planning to extend covert activities in Iran--US
Military�Wc oscow be eves tha ie e m ssa r and the
Military Attache returned to Moscow from Iran for a conference "which
will probably result in increased support for Iranian underground activity
for which present timing is believed good." (The MA in Tehran had previ-
ously suggested that the departure of these two Soviet officials for Moscow
might foreshadow a purge of Soviet representatives in Iran; see Daily Sum-
mary of 2 June, item 8.)
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FAR EAST
7. CHINA: Communists have psychological advantage In Manchuria�US
Consul General Ilukcrniinr.eports nriiiit and
hatred" of the Manchurian people toward Nationalist forces represents
an even greater threat to the Nationalist position in Manchuria than the
recent military reversals. Moreover, Nationalist troops from northern
China no longer conceal their resentment against their predominantly-
southern Chinese officers. The Consul General adds that the Chinese
Communists have been treating wounded and captured Nationalist person-
nel with such apparent kindness, that Nationalist soldiers "no longer fear
capture"; the Communists thus have been able to take over important
Nationalist units and valuable equipment.
8. NET: Scorched earth opEalion believed planned--US Embassy The Hague
reports that, according to thiTirg-iiarroai-,-the Dutch Marine Minis-
try claims to have intercepted messages from the Indonesian General
Soedirman ordering Indonesian troop commanders to prepare to put into
immediate operation a scorched earth campaign; Dutch Navy circles
believe that this plan is entirely Soviet-inspired.
9. FRENCH INDOCHINA: Rejrted Vietnam intentions�Foreign Minister
Bidault has told US Ambassador Caffery that, on the basis of information
obtained from intercepted messages, President Ho Chi Minh of the Vietham--
Republic has instructed his representatives that: (a) they should convey
the impression that they desire to reach an agreement with the French;
and (b) their real aim IS to drive the French from Indochina. According
to Bidault, these messages show "definite pro-Soviet orientation."
THE AMERICAS
10. PARAGUAY: Brazil refuses mediator's request�US Charge Trueblood
has been informed by the Brazilian diplomat who is seeking a negotiated
peace in Paraguay's civil war that: (a) the Brazilian Foreign Office has
refused to raise the question of possible US-Argentine support for his
mediation plan; and (b) the diplomat is now pessimistic regarding the out-
come of his negotiations.
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1. Bevin concerned over effect of food on Etua--Foreign Minis-
ter Bevin has expressed to US Ambassador Douglas in London his view
that, if both the US and UK fail to "deal appropriately" with the food situ-
ation in Western Europe, the USSR after July will attempt to exploit such
failure and "may be successful in achieving coups d'etat." Bevin said
he is particularly anxious about France and is currently formulating a
proposal for dealing with Western Europe's food situation as "one entire
problem." Bevin requested Douglas to guard his statements with the
"greatest secrecy."
� 2. _Bevin to divert UK-bound flour Germany-te___ -According to US Embassy
London, Bevin has finally agreed to divert 17,500 tons of flour; now en
route to the UK, to Germany and will make efforts to obtain an additional
diversion (see Daily Summary of 24 May, item 1) in return for the US
promise to replace the quantities.
3. Food situation in UK "critical"--Bevin added that the current wheat
situation in is ("critical" arid that a recent, unpublicized 5% re-
duction in flour made available to bakeries is shortly to be increased by
another 5% in order to build up stocks for the coming winter. If there
should be a further reduction in the ration, he said, the "fellow-travellers"
would be quick to make trouble.
4. UK not "overly sanguine" Cabinet--A UK Foreign Office
official has told� US Embassy London that although the UK Government
hopes that the De Gasperi Government will be a success, it is not "overly
sanguine" that this will be the case.
5. Proposed US protest to the USSR concerning Hungary�Subject to comments
by US Embassies Moscow and London and the views of the UK Foreign
Office concerning possible parallel British action, the State Department
proposes to inform the Soviet Acting Chairman ACC Budapest that: (a)
the US believes that there has been the most serious intervention by Soviet
authorities in the internal affairs of Hungary without consultation of any
kind with the ACC; (b) this intervention has forced the resignation of the
Prime Minister and caused the formation of a government dominated by
the minority parties; and (c) the Soviet Chairman of the ACC has failed to
fulfill his responsibility to keep hfs ;UK and US .colleagues informed and
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has even assisted In the execution of these actions. The note proposes
the immediate formation of an international fact-finding body comprising
representatives of the three ACC and Yalta Powers and adds that, if such
a body is not established or cannot function effectively, the US may refer
the matter to the UN.
EUROPE
6. USSR: Morale reported at low ebb--US Embassy Moscow reports that,
according to a veteran US correspondent with 14 years' residence in the
USSR, public morale is worse now than at any time since the Revolution,
but that the Soviet people are counting on a good harvest to effect some
improvement in the general situation. The Embassy comments that this
statement should be viewed in light of the general disappointment and
disillusionment arising from over-emphasis by official propaganda on
the threat of war and from the failure of peace to bring material benefits
to the Soviet population. The Embassy cites, as an indication of official
concern over public morale, a recent TRUD editorial which devoted more
than a page to a discussion of labor discipline.
7. BELGIUM: Re ort of Lpoldist cou --A CIG representative has been
reliably informed that the head of the Belgian National Security has can-
celled a trip abroad because of a report that followers of King Leopold
(who is in exile in Switzerland) plan to stage a coup following the depar-
ture of the Regent on 18 June to visit the Congo.
8. GERMANY: Soviet officer denies USSR will form separate government--
Headquarters European Command Frankfurt reports that Marshal
Sololovksy, Soviet Commander in Germany, has stated officially that no
central German government for eastern Germany will be established, at
least prior to the London Conference of Foreign Ministers (see Daily
Summary of 21 May, item 5).
FAR EAST
9. CHINA: Government ains "superficial success" in re rettuc_Isiut
With regard to the recent subsidence of student demonstrations in China
(see Daily Summary of 4 June, item 10), US Embassy Nanking observes
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that the Central government's "superficial success in preventing wide-
spread disorders" does not mean that the impetus of student discontent
has been destroyed. Informed opinion in Nanking, the Embassy adds, is
that "something has now been started which cannot be destroyed by force,
especially as the economic and military position of the Government
deteriorates."
Manchurian milita situation�According to US Consul Mukden,
the preset�TiMinese ommuni m ry strategy in Manchuria is to by-
pass and contain Nationalist strong points and then to isolate these strong-
holds by cutting their lines of communication. The Consul states that the
Nationalists are now withdrawing to a restricted defense perimeter around
Mukden. Many refugees entering the Mukden area, the Consul adds, report
that the heavier weapons -- artillery and heavy machine-guns � now being
employed by the Communist forces are Soviet-made.
THE AMERICAS
10. CHILE: Bretton Woods commitments may be withdrawn�President
Gonzalez Videla has told US Ambassador Bowers th�iir (a) he fears that
the attitude toward Chile in the US, as reported by a recent Chilean eco-
nomic mission, closes the door to further US-Chilean economic coopera-
tion; and (b) failing a "better understanding," Chile's Bretton Woods
commitments may have to go by the board. Bowers predicts, however,
an early willingness on the part of Chilean authorities to "put their
financial house in order," and considers the moment ripe for negotiations
(regarding Chile's debts to the US) looking to possible reopening of the
question of a Chilean loan from the International Bank.
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1. Greek Communists reportedly plan lar e-scale operations--US Military
Attache Athens has received orma on, as ye unchec ed," from the
Greek General Staff that Dimitrov (President of the Bulgarian Council
of Ministers) has requested the Greek Communist Party: (a) to intensify
bandit warfare and guerrilla activity in cities, thus restricting Govern-
ment influence in Athens and Piraeus, and to bring the rest of Greece
under complete bandit control; (b) to achieve bandit control of Crete as
soon as possible; (c) to occupy Salonika for submarine bases; (d) to mine
the Gulf of Salonika; (e) to intensify demolition of communication routes;
and (f) to increase Communist activities generally in the eastern Mediter-
ranean.
(MG Comment: Other recent reports of Soviet determination to
intensify guerrilla activity and to forestall effective implementation of
the Truman Doctrine tend to substantiate the information received by
the MA. A Special Evaluation of reported Soviet anti-US activities in
Greece is being prepared.)
2. Reported Soviet willimRaLtas2pssitne on Trieste frontier--The French
Embassy in Belgrade has informed the US Embassy-EFITh7cording to the
Yugoslav Deputy Foreign Minister, the USSR has told the Yugoslav Am-
bassador in Moscow that it is now willing to cooperate in the demarcation
of the Free Territory of Trieste. In view of its two previous refusals to
participate, however, the USSR reportedly desires the other three Powers
to reopen the matter first. (US authorities have already begun demarca-
tion of the Italo-Trieste border, but the USSR and Yugoslavia have thus
far obstructed all efforts to delimit the much longer boundary between
Yugoslavia and Trieste.)
3. Proposed US-UK action regarding Hungarian "coup.: --In view of general
agreement that the resignation of Premier Nagy resulted from the trans-
mission of information to the Hungarian Government by the Soviet Chair-
man ACC, the State Department has asked the US Delegate ACC to join
with his British colleague in requesting copies of all information con-
nected with Kovacs' case handed to the Hungarian Government by the
Soviet Chairman ACC. (Testimony allegedly given by Kovacs -- former
Secretary-General of the Smallholders Party who is being held by Soviet
authorities -- implicated Nagy in a ponspiracy against the Government
and was largely responsible for Nees decision to remain in Switzerland.)
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EUROPE
4. HUNGARY: Reported plans for Government-in-Exile�Hungarian Plenipo-
tentiary Forgach in Prague has told US Ambassador Steinhardt of an im-
pending attempt to establish a Hungarian Government-in-Exile by ex-
Premier Nagy and a group of anti-Comnrmist Hungarian diplomats(includ-
ing the Chiefs of Missions at Washington,London, Paris, Brussels, and
possibly Rome, Bern, and Ankara). The plan contemplates the establish-
ment of such a Government only after Communist control in Hungary has
become open and complete. Forgach believes that the present nominal
Smallholders Government will last only until after "framed" elections
permit an "out-and-out Communist Government" to assume power.
5. YUGOSLAVIA: Sudden frieeridliness to US awl UK Embablatts�US Embassy
Belgrade reports that the Yugoslav authorities have recently shown greater
courtesy and friendliness towards both the US and UK Embassies. The
Embassy does not know the reason for this change of attitude and "is not
certain if it is a favorable sign."
6. USSR: US Embasasiptied contact with claimants to US citizenship.--US
Embassy Moscow reports that Soviet Deputy Foreign Minister Vyshinski
has refused permission for an Embassy representative to visit claimants
to US citizenship now in the USSR (see Daily Summary of 28 February,
item 4). Vyshinski stated that "those persons whose presence on Soviet
territory has been established are either citizens of the USSR or citizens
of a third state"; he added that the US-Soviet agreement of 16 November
1933, affording legal protection to American citizens in the Soviet Union,
therefore "is not applicable."
Vyshinski also denied the Embassy's request that US citizens
living in Latvia, Lithuania, and Estonia be permitted to return to the US,
contending that these people "cannot be divested of Soviet citizenship
merely by force of the fact of their birth on American territory."
1.11-JLE com2spzo_ndents denied observation of UNRRAsm.otions--
US UNRRA RepresentativeWller Minsk igFoTirchr.tilii Soviet Minis-
try of Foreign Affairs has refused permission for Anglo-American corre-
spondents to visit Minsk to observe the final phase of the UNRRA program
In that area.
7. FRANCE: Ramadier governing on dm-tsim_day basis�US Ambassador
Caffery has been told by a high official close to Ramadier that the Cabinet
Is governing on a day-to-day basis and may fall within two weeks unless
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the critical food and strike situations improve. The informant stated
that, unless the bread shortage can be improved by the arrival of grain
vessels during the next four weeks, there is a definite possibility of a
near collapse of public morale. According to the same source, the Com-
munist Party appears unable to control the strikes which it at first
secretly encouraged; the Communists fear that the spread of strikes may
strengthen De Gaulle.
8. ITALY: Pro-Communist speech im.CIO rekres9ntative--US Consul
Florence reports that a recent speech by CIO Representative De Novellis
at the National Congress of the General Confederation of Italian Labor,
which opened on 1 June in Florence, was a "shocking example of how an
irresponsible American or fellow-traveller can misrepresent the position
of labor in the US policy." De Novellis declared that recent trends in US
policy had brought the US to the very threshold of fascism. Ills remarks
were warmly applauded by the Communists and Nenni Socialists.
NEAR EAST-AFRICA
9. MAN: Qavam expresses concern oversp_ssi._ble SwietzaggLe_p�12R--US
Ambassador Allen reports that Prime Minister Qavam, referring to un-
authorized Soviet air operations in Iran, expressed concern over the
possibility of forceful Soviet action, if the Iranian Government "did not
handle the situation carefully." Qavam commented on reports of Soviet
troop concentrations in the Caucasus and asked Allen what the US was
prepared to do in case Iran was attacked. In reply, Allen pointed to US
actions in the Security Council on Iran's behalf as convincing evidence
of US determination to make the UN succeed. Allen is "by no means
certain" that Qavam is genuinely afraid of Soviet aggression, and he
considers it more likely that Qavam wants to keep alive local fear of
such aggression for his own purposes.
FAR EAST
10.4"-HMA: Qinenunentresorts to u,thless______Em_�essi22"--According to the
US Military Attache Nanking, the Central Government appears to have
"no answer except Gestapo action" to Chinese student, labor, and liberal
press agitation for economic improvement and cessation of China's civil
conflict. Martial law exists in practically all important cities except
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Nanking. The MA believes that the Government will "weather the storm
by ruthless repression" as the various demonstrations and movements
are poorly organized.
11. KOREA: Reversal of Soviet osition on consultation--US Political Adviser
Langdon reports that developments at the 31 May meeting of the Joint Com-
mission "give the definite impression that the Soviet delegation is under
some driving compulsion to complete something concrete in the way of
plans for a provisional government within the next two months." Langdon
adds that the Soviet position concerning parties to be consulted in the
formation of a Korean government, as outlined at this meeting, reflects
the "progressive collapse of the Soviets' stubborn defense of restrictive
consultation and the complete surrenders on the record at least, to our
insistence on leaving the question open.
12. NEI: Dutch seek US aid in obtaining Republic acceptance of
US Embassy London has been informed by the UK Foreign Office that the
UK Consul General in Batavia has been instructed to urge Indonesian
Republic authorities to accept the new Dutch proposals. A Netherlands
Foreign Office representative, now in London, has expressed the hope
that the US will also use its influence to this end. According to Embassy
London, the Dutch believe that a concurrent US approach would increase
the likelihood that the Republic would accept the proposals. The Embassy
gained the impression that, if the Republic rejects the proposals, the
Dutch will either withdraw from Java and Sumatra or, more likely, resort
to "limited military action."
THE AMERICAS
13. NICARAGUA: Plan to dissolve Cmgress and call Constituent Assembly--
According to US Military Attache Managua, General Somoza is completiiig
arrangements to dissolve Congress and to summon a Constituent Assembly
which will elect a new president, provide for minority participation in the
Government, and outlaw Communism.
14. PARAGUAY: Government retarded--US Charge Trueblood re-
ports that the Government s northern campaign is being retarded by the
recent rains, which have made the river frontier impassable, and by the
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acute shortage shortage of gasoline. Trueblood has been told by President
Morinigo'.s secretary, however, that the rebels "in the face of imminent
defeat'? are. no longer insisting that Morinfgo relinquish his office and
are prepared to consider terms that will 'save their military careers."
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1. ELC zp_mposes talks with US&on Gerrnarmament trey--The UK For-
eign Office has proposed that, before the next meeting of the CFM, the US
and UK enter into discussions ("perhaps" including the French) with a
view to modifying the draft Four-Power German disarmament treaty so
as: (a) to make it more acceptable to the USSR "without losing its orig-
inal character"; and (b) to examine certain points in the draft which, the
UK believes, require clarification.
EUROPE
2. FRANCE: G_I dollar reserves nearin exhaustion�The French
Finance Ministry has informed Embassy Paris that France's dollar posi-
tion is such that in June or early July the Government will have to ask the
Assembly to authorize another withdrawal from the Bank of France's
present gold reserve of $695,000,000; an unfavorable public reaction to
this withdrawal is expected.
3. NETHERLANDS: Baruch's views on 27 May note--US Ambassador Baruch
believes that: (a) the Dutch note of 27 May to the Indonesian Republic con-
tains sound proposals; (b) the US might advantageously seek jointly with
the UK to persuade the Republic to accept the terms; and (c) if present
Dutch efforts fail, the US will be asked to mediate, unless("hot-headed"
minorities precipitate a resort to force.
FAR EAST
4. JAPAN: Australian maneuver on peace treaty--A spokesman for Aus-
tralia's Department of External Affairs has suggested to US Embassy
Canberra that US Ambassador Butler might go to japan with Minister
for External Affairs Evatt and possibly return from Japan with General
MacArthur in order that Evatt could exchange views on a Japanese Peace
Treaty with a US official "without necessitatinF inclusion of powers less
directly concerned than the US and Australia.' The spokesman declared
flatly that he did not think that Australia would participate in a Japanese
peace conference if the conference' were arranged within the framework
of the Far Eastern Commission, as slich a procedure would permit the
major powers to exercise the veto.
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5. PHILIPPINES: Joint body agrees on US loan issue--US Embassy Manila
reports that the joint US-Philippine Financial Commission has agreed in
principle not to recommend a further budgetary loan from the US but to
suggest that the Philippine Government should seek to balance its 1948
fiscal budget by taxes and domestic borrowing.
THE AMERICAS
6. PANAMA; Argentine proposal expected regarding loan and trade--The
Panamanian Minister of Public Works has informed US Embassy Panama
that Argentine Senator Molinari (who headed the recent Argentine "good-
will" tour) is expected to bring to Panama in the near future a definite
proposition regarding a loan and the establishment of a "free trade area"
as between Panama and Argentina.
Canal defense may...be raised at Rio Conference--The Minister of
Public Works has also informed the Embassy that: (Ya group of Latin
American countries intends to "press for the immediate holding of the
Rio Conference"; and (b) questions will be raised regarding the defense
of the Panama Canal and the current defense-sites negotiations between
the US and Panama.
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2 JUN 1947
395
1. USSR encosves unauthoFized overflights of US occupation zones--US
Civil Air Attache Deak reports that according to a "reliable source" the
Soviet Director of the Hungarian airline MASZOVLET had advised his
Soviet colleague in the Rumanian airline TARS to overfly the US Zones
without authorization, as the US forces in Germany _and Austria "could
not put one fighter, in the air even if they wanted to." Deak further re-
ports that MASZOVLET has already made two unauth rized overflights
on an outright commercial basis to Zurich, using Soviet crews, and is
planning other such flights. (The State Department on 31 May mom-.
mended to US Legation Budapest that an expression of strong dissatis-
faction be made to the Hungarian Government.) The French Embassy in
Warsaw has informed the ,US Embassy that the Polish airline LOT may
fly to Paris across the US Zone Germany under the impending Franco-
Polish air agreement. In view of "continued tolerance by the US of un-
authorized overflights, Dealt now expects that TARS, as well as all other
satellite airlines, will deliberately flaunt US control of air space over
US Zones.
' (CIG Comment: The USSR has been forcing Poland, Hungary, and
Rumania to employ delaying tactics in respect to US attempts to nego-
tiate air agreements with these Soviet satellites. Although the USSR ap-
parently is still considering whether such agreements would be to its
advantage, it is not hesitating to use the satellites in an aggressive civil
air policy toward the US.)
2. Imam wants to interest US companies_ in Yemen oil--US Minister Childs
reports from Jidda that the Imam recently requested K.S. Twitchell
(a US engineer acting as advisor to the Yemen Government in its pur-
chases of US Surplus Property) to attempt to interest US companies in
Yemen oil. Childs adds that the presence of low-grade coal deposits as
well as oil indications in the High Yemen has been confirmed by Twitchell.
3. Axe entina seelailUm.su lies irom USSR--US Embassy Moscow has
been informed by the Brazilian Ambassador that Argentina s newly ar-
rived Ambassador to the USSR has "confided" that he hopes to negotiate
a "fairly large-scale" exchange of, Argentine produce for military sup-
plies from the USSR.
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US Military Attache Moscow comments that the Argentine Army
is familiar with the "technical use" of German military materiel, of
which the USSR now possesses large quantities.
(CIG Comment: Any report from a Brazilian source on Argentine
military policy should be viewed with skepticism.)
4. Action to end US-Greenland eement � .8 oned--US Embassy Copen-
hagen reports that the ommun s reso u oncefor action to termi-
nate the US-Greenland agreement, presented to the Parliament on 29 May
(see Daily Summary of 26 May, item 4), was withdrawn after a statement by
Prime Minister Kristensen that on 27 May a note had been handed to the
US Government requesting early US-Danish negotiations over the issue.
The Embassy adds that the Greenland question in the Danish Parliament
is thus "evidently disposed of for the time being."
EUROPE
5. HUNGARY: Status of Nagy resignation--US Legation Bern reports that
Prime Minister Nagy has confirmed his resignation but declared that he
would not release his letter of resignation until the arrival of his small
son from Hungary. Nagy said that before his departure for Switzerland
on 14 May, he had requested the USSR to release Bela Kovacs to Hungar-
ian authorities. On 28 May he was advised that his request had been
denied on the grounds that the Kovacs investigation was incomplete and
that Kovacs already had made confessions allegedly implicating Nagy.
On 29 May he had prepared to return to Hungary, but before his departure
was advised by Foreign Minister Gyongyosi not to leave,,. Switzerland.
Nagy denied the accusations made against him and emphasized that "no
parliamentary action but a conspiracy between Russian occupation author-
ities and local Communists forced his resignation."
According to a CIG source, Nagy may be compelled to include in
his resignation a statement exonerating President Tildy; the latter re-
portedly is cooperating with Communist Deputy Premier Rakosi.
US Minister Schoenfeld in Budapest reports that, in a 30 May Joint
communique, the Communist and Social Democrat Parties stated that they
"believe it necessary to uphold the coalition government, in order, to
liquidate the crisis quickly and to permit the smooth continuation of the
administration."
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6. BULGARIA: Dimitrov uses incident to counteract Truman Doctrine--
Acting US Representative Horner believes that Prime Minister Dimitrov
is magnifying the incident involving a US official of the ACC and the Bul-
garian doctor employed by the US Mission (see Daily Summary of 31 May,
item 2) in order to demonstrate that he is not intimidated by the Truman
Doctrine. Communist leaders are reportedly disturbed by freely ex-
pressed hopes that the US, through further implementation of the Truman
Doctrine, may force the present Bulgarian regime out of office.
NEAR EAST-AFRICA
7. TURKEY: Turks reluctant to reduce size of armed forces--US Military
Attache Ankara reports that the Turkish General Staff,its initial meet-
ings with the US Survey Mission, has adopted a cooperative attitude but
Is showing some hesitancy about any reduction in the size of the Turkish
armed forces unless the Soviet threat is "reduced materially." The MA
adds that the Turks themselves have proposed an army of smaller size,
but that its formation would be dependent upon almost complete US re-
equipment.
US Ambassador Wilson reports that the Mission has made most
satisfactory progress. In a discussion with the British Charge, Wilson
declared his opinions that the Mission: (a) should not dictate to the Turks
the size of their armed forces; and (b) may, if requested, act in an ad-
visory capacity but should concern itself primarily with determining how
US aid may best be applied to contribute to Turkey's security.
8. MAN: Moscow may be contemylating pur e of Soviet representatives--
US Military Attache Tehran, commenting on the recent departures f�I
Moscow of the Soviet Ambassador and Military Attache, reports that a
Kremlin purge of its representatives in Iran may be imminent because
of "their obvious failure properly to implement Soviet interests" in Iran.
FAR EAST
9. CHINA: Tenuous Nationalist position in Manchuria�US Consul Mukden
reports that during the past two months the morale of Nationalist forces
In Manchuria has deteriorated rapidly, and that apathy, resentment, and
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defeatism are spreading rapidly through Nationalist ranks. The Consul
adds that Nationalist morale has reached a point where there is a possi-
bility of "a sudden debacle, laying all Manchuria open to the Chinese
Communists."
10. JAPAN: Preliminar UK Commonwealth talks on Peace Treaty--US Era-
bassy London reports that the :rits, .oreign ce s verbally con-
firmed recent press reports of an impending Commonwealth conference,
which will probably be held in Canberra during August, in order to unify
Commonwealth policy on a Japanese Peace Treaty. The meeting appar-
ently is being held on the initiative Of Minister for External Affairs Evatt
of Australia, who is expected to present "some rather radical proposals,"
which the British hope to moderate. As the British Government has barely
started formulating its views on the Japanese Peace Treaty, the Embassy
adds, the UK will probably propose that the Japanese peace conference be
delayed until after the Four-Power London Conference on Germany.
11. NEI: US Consul General elnitii_moL2p_tin.A..,stic--US Consul General Foote
in Batavia reports that Premier Sjalu.ir of the Indonesian Republic appears
very hopeful that armed clashes will be avoided and that agreement be-
tween the Dutch and the Republic will be reached and promptly implemen-
ted. Premier Sjahrir expressed to Foote his belief that the Indonesian
Cabinet now understands the situation better and feels less bitter toward
the Dutch. Consul General Foote himself believes that "military action
will be avoided and peace restored."
Thatalaktsiews on use of force--Vorrink, moderate chairman
of the Netherlands Labor Party, has told US Embassy The Hague that he
has tried to dissuade Schermerhorn, NEI Commissioner General, from
attempting to use force to seize the Republican capital in the NEI.
Vorrink declares that he is urging that, if military action becomes neces-
sary, it should be aimed at seizing the sources of supplies of rice, water,
and sugar on humanitarian grounds to alleviate famine conditions. Vorrink
believes that the Netherlands Labor Party would support the latter action,
but that a "colonial war" would cause a Party split, as a result of which
left-wing Socialists would join with the Communists in national strikes.
12. PHILIPPINES: ......Lno_Azggp Raxas to sideste collaboration issue--The
Commanding General of the Philippines-Ryukyus Command reports that,
according to a usually reliable source, Vice President Quirino has cabled
President ROI= to sidestep the issue of a general amnesty for collabora-
tionists because the subject is "still too sensitive in the US."
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Chinese disturbed bylegislation--US Military
Attache Manila reports that the Chinese Minister is greatly disturbed
about anti-Chinese legislation pending in the Philippine Congress. The
Chinese Minister has complained to President Roxas against a senate
bill which would reduce the immigration quota to 50 annually.
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