CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 03160589
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• Original Classification: U
• Document Page Count: 41
• Document Creation Date: March 8, 2023
• Document Release Date: April 24, 2019
• Case Number: F-2019-01279
• Publication Date: December 15, 1955

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CONF1DEMLAN
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
DOCUMENT NO.
NO CHANGE IN CLASS. I
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CLASS. CHANGED TO: TS S
NEXT REVIEW DATE:
AUTH
HIV.01%d
DATE/141 REVIEWER:
COPY NO. 21
OCI NO. 9429/55
15 December 1955
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
DIA, USAF and DOS
review(s) completed.
IDENITAR
RET
INV.
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
THE WEEK IN BRIEF
PART I
OF IMMEDIATE INTEREST
BERLIN SITUATION Page 1
The USSR is permitting the East German government to continue
its public claims of authority over East Berlin, but apparently
will not authorize at this time direct East German interference
with the position of the Allies in West Berlin. Tension and pres-
sure are being maintained by recurrent Soviet emphasis on East
German sovereignty over East Berlin, alternating with statements
by Soviet and East German officials that the four-power status of
the divided city is unchanged.
THE BULGANIN!-KHRUSHCHEV TOUR ..
.......... �
Page 2
In their joint communiqu�f 13 December, the Soviet leaders
and Prime Minister Nehru went on record as being in agreement on
a number of international issues. Moscow, for its part, will use
the communique to show India's support for the Soviet Union's
policies. A new trade agreement announced at the conclusion of
Bulganin's and Khrushchev's visit to India commits Moscow to supply
India with 1,000,000 tons of steel over the next three years and
sets the stage for considerably axpanded Soviet-Indian economic
relations. In Burma, the Soviet leaders' visit may have had the
effect of adding impetus to the trend toward closer relations with
the Sino-Soviet bloc. During their stay in Afghanistan, the Soviet
leaders undoubtedly will also make favorable economic offers,
including arms shipments.
FRENCH ELECTION PROSPECTS Page 4
The large number of party slates in the 2 January elections
for the French National Assembly and the restricted scope of party
alliances rule out the possibility of achieving a stable majority.
The Communists are almost certain to increase their representation--
possibly by as much as 30 to a total of about 125. Mendes-France
admits privately that his alliance, including the Socialists and
part of the Radicals, can win only about 150 of the 596 seats.
The support of the Gaullist groups will probably be spread from
the Socialists to the extreme right, the bulk going to Pinay's
Independent bloc which may obtain about 150 seats. With little
change anticipated in the strength of the Popular Republicans and
Faure's Radicals, the present government coalition could muster
about 275.
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CUTLRENT INTELLIGENCE -WEEKLY SUMMARY
15 December 1955
NATIONALIST CHINA'S VETO
IN THE UNITED NATIONS Page 6
Nationalist China's veto on 13 December of Outer Mongolia's
application for UN membership was cast in full knowledge that such
action might lead to moves in the UN to unseat it. Brazil, Colombia,
and Sweden had previously said they would move for Taipei's ouster
if it used the veto on the issue. The admission of the 16 natiens
on 14 December, however, removes much of the pressure behind any
movement to exclude the Chinese Nationalists at this session.
The rejection of Japan's membership application may have extensive
political repercussions in Japan
JORDAN AND THE BAGHDAD PACT. y Page 7
Jordanian political leaders are split sharply over the issue
of the country's adherence to the Baghdad pact. While King Hussain
and leaders from East Jordan favor adherence, representatives from
the western area where Palestine refugees are concentrated are
strongly opposed. There is a possibility of serious agitation
and rioting in West Jordan should the government announce adherence.
PART II
NOTES AND COMMENTS
Arab-Israeli Situation: Israeli troops raided Syrian positions
near the shore of Lake Tiberias on 11 December. The latest
round of talks between UN truce chief, General Burns, and
the Egyptian and Israeli leaders has resulted in no appreci-
able progress toward adoption of the UN proposals for main-
taining peace in the El Auja demilitarized zone.
Page 1
French North Africa: The movement for complete independence is
gathering strength in French North Africa. Encouraged by the
gains the nationalists have made in Tunisia and by French-
Moroccan negotiations, the Algerians are preparing to seek
a new relationship with France. The French government has
indefinitely postponed parliamentary elections in the four
Algerian departments. Page 2
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
Cyprus: The prospects for renewed discussions of the Cyprus
problem between the British governor of the colony and
Cypriot archbishop Makarios appear to have improved since
the British on 9 December suggested to Athens a revised
formula for settling the dispute. Athens is likely to
urge Makarios to resume negotiations on the basis of the
British proposal. The archbishop stated publicly on 11 De-
cember that his talks with Governor Harding might soon be -
resumed. Page 4
Turkey: The new Turkish cabinet has been approved by the Dem-
ocratic Party caucus and should have no major difficulty
winning a vote of confidence in the Grand National Assembly,
probably on 16 December. The vote in the assembly, where
party loyalties are reflected, is not likely to indicate the
extent and intensity of the opposition to Prime Minister
Menderes or his policies. Unless Menderes proves his will-
ingness and ability to cope with Turkey's basic economic
problems, the cabinet may fall again within a few months.
Page 5
Plans for Egyptian Parliament: Egyptian prime minister Nasr
5as set 16 January as the date on which he will announce
plans for re-establishing a national parliament. The
narrow range of powers which the regime intends to allow
the parliament makes it unlikely that the move will arouse
much popular enthusiasm. Page 5 (3)(3)
Electrification of Soviet Railways: According to recent an-
nouncements, the USSR intends to electrify the Trans-
Siberian railway from Moscow to Irkutsk during the sixth
Five-Year Plan (1956-1960). Mainline steam locomotives
are to go out of production during 1957, and the percentage
of total freight hauled by diesel and electric locomotives
Is to increase from about 10 percent to 40-45 percent by
1960. Page 6
South Vietnam: Communist propaganda from Hanoi is denouncing
the forthcoming election of a national assembly in South
Vietnam, and according to President Diem, the Viet Minh
has intensified subversive activities in the country.
Diem is seeking to counter Communist influence by estab-
lishing a village defense force and resettling anti-Commu-
nist refugees from the north in areas where Communist cadres
are active. � � � Page 8
Laos: The Pathet Lao attack against royal government troops
southeast of Muong Penn on 5 December appears to have been
a localized skirmish rather than the signal for military
action throughout northern Laos. The government forces
repulsed the attempt to cut their line of communications
and have forced the enemy's retreat. � Page 8 (13)(3)
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
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Satellites Move to Improve Relations With United States: Ex-
pressions of interest by East European countries in improv-
ing relations with the United States have now been followed
by action. On 28 November, negotiations on outstanding �
economic problems began in Prague between the United States
and Czechoslovakia, and on 7 December, Rumania granted 13
long-denied exit visas requested by the United States,
Polish and Hungarian officials have also expressed interest
In negotiating outstanding problems with the United States.
............ . Page
USSR Returning Satellite Prisoners: A former anti-Communist
Hungarian political leader who had been imprisoned in the
USSR for more than eight years is reported to have been
returned to his homeland and to be under detention there.
This is the first indication that Soviet authorities may
have begun to return Satellite nationals accused of polit-
inal crimes as well as those sentenced for war crimes.
Pagel()
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Hungary's Relations With Yugoslavia: Recent reports indicate
that the Hungarian regime may be falling in line with the
other Satellites in improving relations with Yugoslavia.
Hungary apparently is prepared to begin payments on Yugoslav
economic claims and to repudiate the anti-Tito Rajk trial
held in 1949. Page 11
Argentina: The Aramburu government is continuing efforts to
reduce Peronista strength and placate divergent political
elements among its own supporters. No substantial threat
to the regime has materialized to date. page 12 (3)(3)
PART III
PATTERNS AND PERSPECTIVES
MENDES-FRANCE AND THE FRENCH ELECTION Page 1
Much of ex-premier Mendes-France's effort in the French
election on 2 January will be directed toward those Frenchmen
who have traditionally voted against the government in power
in protest against the established order. He feels that this
protest vote, which has been a major part of Communist strength,
must be won over to a new and dynamic non-Communist program if
France is to achieve political stability. He is counting heavily
on the Socialists for the base of his "Republican Front," but
his success will depend to a large extent on retaining the sup-
port of his own Radical Socialists.
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'CURRENT INTELLIGENCE INTELLIGENCE WEEKLY SUMMARY
15 December 1955
REVOLUTIONARY PLOTTING IN CENTRAL AMERICA Page 4
Central America is again being shaken by rumors of impending
revolutions. High officials of the Venezuelan and Nicaraguan
governments claim to have evidence that Costa Rica is the center
of an international conspiracy aimed at ousting various anti-
Communist governments in the area, including that of Nicaragua.
The Costa Rican government, on the other hand, gives credence to
rumors that is is about to be attacked from Venezuela and/or
Nicaragua. Internal pressures are building up in Nicaragua and
El Salvador which may lead to violence in these countries.
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SHORTAGES OF KEY RESOURCES SLOW WESTERN EUROPEAN BOOM. . . Page�6
Western Europe's three-year economic boom is being slowed
down by shortages of skilled manpower and coal and steel. These
shortages have generated inflationary pressures and contributed
to trade deficits. There will probably be a further slowdown in
the rate of economic expansion in 1956, but improved basic con-
ditions and the financial policies of the governments make the
recurrence of an economic crisis unlikely at this time.
STRAINED RELATIONS BETWEEN GREECE AND TURKEY INTERFERE WITH
REGIONAL CO-OPERATION Page 12
The continuing diplomatic "cold war" between Greece and
Turkey makes unlikely the resumption of full Greek participation
in the Balkan pact and NATO until Athens can present some semblance
of a diplomatic victory over Turkey to the Greek people. The
jockeying between the two countries over issues arising from the
anti-Greek riots in Istanbul and Izmir last September reflects
their traditional competition for prestige in the eastern
Mediterranean and more recently for American favors. Athens
apparently feels that the riots and the Greek defeat in the UN
on the Cyprus issue seriously damaged Greek prestige, and is
seeking a way to redress the balance.
PART IV
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
PART I
OF IMMEDIATE INTEREST
BERLIN SITUATION
The USSR is permitting the
East German government to con-
tinue its public claims of au-
thority over East Berlin, but
apparently will not authorize
at this time direct East German
interference with the position
of the Allies in West Berlin.
Tension and pressure are being
maintained by recurrent Soviet
emphasis on East German sover-
eignty over East Berlin, al-
ternating with statements by
Soviet and East German officials
that the four-power status of
the divided ciV is unchanged.
A Soviet 'protocol officer
told several correspondents on
8 December that the USSR had no
intention of tearing up any four-
power agreements and would con-
tinue to respect Allied rights
in East Berlin. He said that
nothing had been changed, de-
spite Soviet camundant Dibrova's
statements on the incident in-
volving American congressmen.
He repeated Dibrova's assertion,
however, that East Berlin is no
longer occupied territory and
is the capital of a sovereign
East Germany. Soviet ambassador
to East Germany Pushkin, in a
formal note of 14 December to
the three Western ambassadors,
reiterated completely Dibrova's
position that East German au-
thorit5 extends o East Berlin.
As long as Soviet authori-
ties act as intermediaries for
American nationals on duty in
Germarly, the USSR will argue
that the four-power status of
Berlin remains unchanged. The
West considers, however, this
concept to have been narrOwed by
the Soviet assertion of East
German sovereign authority in
East Berlin.
East German leputy premier
Nuschke told a correspondent
that the Allies had uncontested
freedom of movement in East Ber-
lin, and that there would prob-
ably be no further arrests like
that of the congressmen on k..7
November, which he said was made
by a "simple-minded" policeman.
He argued, however, that inci-
dents would be less likely if
American authorities provided
the East Germans with advance
notice of such trips. He ruled
out the possibility of a new
blockade of Berlin.
It appears that the Soviet
Union, desiring to build up the
prestige of the East German gov-
ernment, is permitting it to as-
sert authority in East Berlin,
and that Soviet authorities will
step in to prevent any serious
inte7.ference with Allied travP1
to West Berlin or in East Berlin.
East Jermany will probably be
given more latitude to exploit
every opportunity to press the
West Germans to negotiate and
submit to East German authority
on such matters as visas, per-
mits and police regulations,
� PART I OV TWARMATR TWTRIIRST
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15 December 1955
Bonn ministries are cur-
rently studying what reply
should be sent to East German
transport minister Kramer, who
in November sent a letter to
his West German counterpart,
Seebohm, proposing the joint
issuance of permits for new
THE BULGANIN-KHRUSHCHEV TOUR
India
The Soviet leaders ended
their visit in India on 13 De-
cember with another denuncia-
tion of the West and colonial-
ism, with special emphasis on
the status of Goa and Kashmir.
Their speeches continued to be
strikingly indicative of the
differences in the personali-
ties and positions of the two
men. Khrushchev has been out-
spoken and taken stands on
specific issues while Bulganin,
on the other hand, has been
much more conservative and
general in his approach.
In their joint communique
of 13 December, the Soviet lead-
ers and Prime Minister Nehru
sought to go on record as being
in agreement on a number of
international issues. Moscow,
for its part, has tried to use
the communique to show India's
support for the Soviet Union's
policies. The absence of any
statement on anticolonialism
was probably the result of the
restraining influence of Prime
Minister Nehru, who reportedly
was pressed by the Soviet
leaders to include statements
on Goa and Kashmir.
The declaration supported
the Nehru-Chou "five principles,
Communist China's claims to Tai-
wan and a UN seat, and elevation
barges using interzonal water-
ways. Bonn is aware that to
act on Kramer's proposal would
lead to a joint meeting of min-
isters, which would be unprec-
edented and might convey an
impression of GDR legitimacy.
of the Geneva ambassadorial
talks between the United States
and Communist China to a higher
level. The declaration also
condemned the formation of mil-
itary blocs--a statement not
contained in the declaration
issued at the conclusion of
Nehru's visit to Moscow in
June and apparently aimed pri-
marily at the Baghdad pact:
A supplementary communique
on Soviet-Indian economic rela-
tions suggested that for prac-
tical purposes New Delhi has
accepted the formal Soviet pro-
posal to construct a steel
works at Bhilai. The $95,000,-
000 project, the largest ever
undertaken by Moscow in a non-
Communist country, will prob-
ably become a central theme in
the USSR's current drive to im-
press underdeveloped countries
with the sincerity of its offers
and its ability to deliver.
Although no other specific
projects are mentioned, in the
communique, earlier reports
indicate that Moscow is inter-
ested in many phases of the
forthcoming Indian second Five-
Year Plan, particularly in the
electrification program.
While the agreement sets
the stage for considerably ex-
panded economic relations and
calls for an exchange of
delegations to work on further
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
contracts, there is no state-
ment on the extent to which
trade will play in the picture.
The communiqu�nnounced, how-
ever, that Moscow will "con-
siderably" increase its pur-
chases of Indian goods in the
next year in an effort to cover
the cost of the Soviet ship-
ments of plants and equipment.
To assure a smooth flow of goods,
Moscow and New Delhi will or-
ganize a shipping route be-
tween Indian and Soviet ports
using ships of both countries.
The new trade agreement
announced at the same time as
the communiqu�ommits Moscow
to supply India with 1,000,000
tons of steel over the next
three years. Moscow's willing-
ness to alleviate the severe
Indian steel shortage at the
expense of Soviet domestic re-
quirements underlines the Krem-
lin's desire for Indian good
will.
The USSR apparently plans,
as part of its new assistance
program, to use increased num-
bers of Communist technicians
to construct industrial installa-
tions in foreign countries. In
this connection the decision
to supply India with equipment
for oil and mining activities
is obviously tied to the pres-
ence of Soviet technicians now
investigating the possibilities
of developing these industries
in India.
Burma
In addition to the Soviet-
Burmese declaration at the end
of the leaders' visit, new a-
greements were reached under
which the USSR apparently will take
additional quantities of surplus
Burmese rice in exchange for
Soviet agricultural and indus-
trial assistance. The Soviet
Union's willingness to permit
deferred payment in rice for
the goods and services it will
provide indicates that it en-
visions a program considerably
larger in scope than could be
arranged under the existing
three-year barter agreement.
In an initial analysis of
the Khrushchev-Bulganin visit,
the American embassy commented
that it provided added impetus
to the trend toward closer re-
lations between the Sino-Soviet
bloc and Burma. The embassy
believes the trend can be checked,
however, especially if markets
can be found in friendly non-
Communist countries for Burmese
rice.
Local Communist tactics in
Burma--particularly the surrender
of to be aimed at
influencing the Burmese govern-
ment, rather than overthrowing
it, according to the American
embassy. The Soviet Union and
Communist China are believed
to have convinced most Burmese
that they support the present
government and that local Com-
munists are no longer a threat.
Afghanistan
iBulganin and Khrushchev ar-
rived in Kabul on 15 December
alter a day's delay because of
bad weather. Soviet efforts to
extend the stay of Bulganin and
Khrushchev in Afghanistan from
three days--as preferred by the
Afghans--to five days apparently
have been successful. Invita-
tions for a reception on the
fifth day of their visit have
been sent out by the Afghan gov-
ernment. In view of the length
of the visit, original Afghan
plans will have to be consider-
ably expanded. Soviet repre-
sentatives in Kabul have been
busily preparing for the visit
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
but, according to Foreign Min-
ister Naim, their requests
for mass rallies to greet the
Soviet leaders have been de-
nied because of "bad weather."
Nairn believes the visit
of the Soviet- leaders will be
"less triumphal" than was the
case in India. and Burma, with
only a. minimum of speeches sched-
uled. In vieW of Khrushchev's
informal behavior in India and
Burma, however, there appears
to be only an outside chance
that he can be restrained from
addressing the Afghan populace.
The Soviet leaders are al-
most certain to take a stand
on supporting the Afghans and
denouncing the Pakistanis on
the Pushtoonistan issue, just
as they supported India on the
status of Kashmir. In view
of the widely publicized con-
cern in non-Communist countries
FRENCH ELECTION PROSPECTS
The large number of party
slates in the 2 January elec-
tions for the French National
Assembly and the restricted
scope of party alliances rule
out the possibility of achiev-
ing a stable majority.
The Communists are almost
certain to increase their rep-
resentation�possibly by as
much as 30 to a total of about
125. Mendes-France admits pri-
vately that his alliance, in-
cluding the Socialists and part
of the Radicals, can win only
about 150 of the 596 seats.
The support of the Gaullist
groups will probably be spread
over Afghanistan's increasing
economic dependence on the So-
viet bloc, the Soviet leaders
probably will make a special
effort to convince the Afghans
that the USSR has no designs on
Afghanistan and that Moscow's
'erimary wish is to conduct its
relations along the lines of
good-neighbor lines and the
"five principles."
The American embassy be-
lieves the Soviet leaders will
make the most headway in further
economic agreements, possibly
including deals for Soviet bloc
arms. According to press re-
ports of 13 December, the USSR
plans to facilitate Afghani-
stan's trade with the Far East
by shipping Japanese goods des-
tined for the Afghans via So-
viet Siberia, thereby avoiding
the delays that have been en-
countered by sending these ship-
ments through Pakistan.
(Concurred in by ORR)
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from the Socialists to the ex-
treme right, the bulk going to
Pinay's Independent bloc which
may obtain about 150 seats. With
little change anticipated in the
strength of the Popular Repub-
licans and Faure's Radicals, the
present government coalition
could muster about ,275. ,(For
an analysis of Mendes-France's
role in the elections, see Part
III, p. 1.)
With elections for the 30
Algerian deputies indefinitely
postponed because of the local
situation, the 103 districts
of metropolitan France have
nearly 1,000 party lists and
over 5,000 candidates--25percent
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
more than in 1951. Many of
these lists have only nuisance
value, but local issues may emir-
plicate the situation for most
of the national parties to the
advantage of the better disci-
plined Communists.
The Communist Party's im-
proved prospects, despite its
lack of alliances, stems mostly
from dissension among the mid-
dle-of-the road parties. Un-
like 1951, when the center groups
combined forces in 83 election
districts to block both Communists
and Gaullists, major non-Com-
munist alliances are competing
with each other in 56 of the
95 constituencies where af-
filiation of party lists is
permitted. In 28 other dis-
tricts, a single alliance in-
volving some of the non-Com-
munist parties has been made,
and only in 11 constituencies
have no alliances been reached.
The chances of any one al-
filiation winning a majority
of the votes in a given district
are considerably reduced in com-
parison with 1951, when 38 al-
liances got all the seats in
their respective districts on
that basis. An increase in the
number of Communist deputies
is practically assured because
the percentage of Communist
votes is not expected to drop
appreciably, and in 1951 the
party's popular vote warranted
about 50 more deputies if pro-
portional representation had
applied generally, as it will
this time.
Mendes-France has split
the Radical Socialist Party in
an effort to build a, non-Com-
munist left-wing majority. His
"Republican Front" is based pri-
marily on the Socialists, with
minority Gaullist support. The
government coalition has formed
less extensive lists than had
been anticipated, partly because
the Popular Republicans, re-
luctant to widen their drift
from the Socialists, with Whom
they had 51 affiliations in 1951,
rejected alliances with Lae in-
dependents in a number of districts.
The major factor which will
be difficult to assess is the
remarkable increase in regis-
tration, which boosts the number
of those eligible to vote to over
26,000,000--some press reports
give 30,000,000--compared to
24,500,000 in 1951. An increase
of over 1,000,000 voters in the
17 November social security e-
lections was distributed evenly
over all the major party lists,
and there is little evidence of
a stampede to any one party now,
despite the efforts of the Mendes-
France group to play up the large
registration as evidence of op-
position to the Faure coalition.
Many late registrants seem
to be under the impression that
voting is now compulsory, be-
cause the assembly had approved
such a measure on first reading
in November. Moveover, there
will be an unusually high pro-
portion of young voters. Both
Pinay and Mendes-France opened
their campaigns on 13 December
by direct appeals to this group,
stressing the desirability of
reduced compulsory military
service.
Another uncertain factor
is the strength of the Poujade
antitax candidates. They may
be able to whittle Away enough
support from moderate rightist
candidates to bring proportional
representation into play and
thus help the Communists in Some
districts where Communist rep-
resentation would have otherwise
been effectively excluded. Lead-
ers of the Independent-Peasant-
ex-Gaullist bloc have already ex-
pressed some concern over this
danger.
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15 December 1955
NATIONALIST CHINA'S VETO
IN THE UNITED NATIONS
Effect on Taiwan's Position
Nationalist China's veto
on 13 December of Outer Mongo-
lia's application for UN member-
ship was cast in full knowledge
of threats that such action
might lead to moves in the UN
to unseat Taipei. China's veto
was followed by the Soviet veto
of the 13 free world applica-
tions, thus defeating the 18-na-
tion membership proposal. ararn,
Colombia, and Sweden had pre-
viously threatened to move for
Taipei's ouster if it used the
veto on the issue. The admissim
of 16 nations on 14 December,
however, removed much of the pm-
sure behind any movement to ex-
clude the Chinese Nationalists
at this session.
If the General Assembly
concludes its session as sched-
uled on 16 December, the motion
to oust Taipei from its permanent
seat could be originated in the
Security Council. Any attempt
by one of the five permanent mem-
bers to use the veto would prob-
ably result in the referral of
the issue to the International
Court of Justice for a ruling on
whether the veto could legally
be applied to such a motion.
The imminence of this ses-
sion's closing and the need for
UN members to get instructions
frow their sovernments make it
more ely that the Chinese rep-
resentation issue will arise at
a possible spring session of the
General Assembly and in any event
at the regularly scheduled fall
session. At that time, a residue
of ill will over the sacrifice of
Japan and the increase in stragth
of the Arab-Asian bloc, added to
the growing UN desire to settle
the Chinese representation issue,
may result in a defeat for the
Chinese Nationalists.
In a 1950 resolution, the
General Assembly reserved to
itself the power to decide which
membership credentials are valid.
It further requested the other
organs of the UN to abide by
the will of the assmbly. Any
General Assembly action pre-
sumably would not legally en-
danger Taipei's permanent seat
on the Security Council.
Taipei, however, may fore-
stall attempts to remove it
from the UN by walking
the international body.
On 8 December Chiang informed
Ambassador Rankin that Nation-
alist China would remain in the
UN only as a symbol of anti-Com-
munism. Except for this con-
sideration, Chiang said, the
Nationalists would be better
off outside the UN because their
continued presence could bring
"more shame and disgrace to
China."
Effect in Japan
In Japan, where support for
the hdang Kai-shek regime has
never been strong, criticism is
being directed primarily against
Taiwan,, but also against the
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15 December 1955
United States and the USSR.
Japan's rejection is likely to
further weaken Japanese support
for continued recognition of the
Nationalist regime, and increase
the already strong pressure for
widening relations with the main-
land. The government is also
being attacked by the Socialists
and even some members of the gov-
ernment party for its overde-
pendence on the United States
and for its refusal to conclude
an early agreement with the USSR
on normalization of relations.
Foreign Minister Shigemit-
su, who is the greatest Japanese
exponent for continued close co-
operation with the United States,
has told Ambassador Allison he
JORDAN AND THE BAGHDAD PACT
Jordanian political lead-
ers are split sharply over the
issue of the country's adherence
to the Baghdad pact. While King
Hussain and leaders from East
Jordan favor adherence, repre-
sentatives from the western area,
where Palestine refugees are
concentrated, are strongly op-
posed. There is a possibility
of serious agitation and rioting
in West Jordan should the gov-
ernment announce adherence.
The British offer to re-
vise the Anglo-Jordanian treaty
of 1948 and to increase equip-
ment and financial aid to the
Jordanian Arab Legion in return
for adherence to the pact ap-
parently won the support of the
king and those members of the
previous government who come
from the eastern part of the
country--"old Jordan" as it was
called before the Palestine
war.
may be forced to assume respon-
sibility for Japan's UN defeat
and resign. The Socialists are
plannin a no-confidence vote
against Shigemitsu in the Diet,
and although it will probably
fail, Prime Minister Hatoyama
may take the opportunity to
shelve the foreign minister for
differing with his own more con-
ciliatory policy toward the USSR.
Hatoyama has told the Japa-
msepress that the only way now
to ensure Japan's entry into the
UN is to bring about an early
normalization of relations with
the USSR. He indicated he
would be willing if necessary
to visit the Soviet Union.
Loaders from west Jordan,
the area annexed after the
Palestine war which contains
the bulk of the half million
Arab refugees who fled to Jor-
dan from what is now Israel,
see in the Baghdad pact a de-
vice which at least tends to
distract attention from the
Arab-Israeli dispute and which
may limit Jordan's freedom of
action in regard to Israel.
The west Jordan outlook
was manifest in the hostile
public attitude toward the visit
of Turkish president Bayer to
Jordan in November. It was also
responsible for the fall of
the Jordanian cabinet on 13
December, when four west Jor-
dan ministers who refused to
approve adherence to the pact
resigned.
For these reasons King
Hussain asked General Templer,
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15 December 1955
chief of the British Imperial
General Staff and Michael Rose,
head of the Levant Department
of the Foreign Office, who
brought the British offers to
Jordan, for time to prepare
public opinion for the step.
Templer was scheduled to leave
for London on 15 December, but
he is prepared to return to
Jordan should further talks
with the new government be
needed. 0
The British Foreign Office
is inclined to believe that the
new government will be stronger
than the last and will not
hesitate to join the pact.
Egyptian intrigue and
Saudi Arabian money will be
brought to bear against a fa-
vorable decision. The memory
of the assassination in 1951
of King Abdullah, who also was
accused of softness toward
Israel, is likely to be evoked.
Rigorous security measures will
therefore be necessary if Jor-
dan does join the pact, and the
decision, whichever way it goes,
will probably continue to be an
issue dividing the country frvr
some time to come.
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15 December 1955
PART II
NOTES AND COMMENTS
Arab-Israeli Situation
Israel raided Syrian posi-
tions near the shore of Lake
Tiberias on 11 December. The
latest round of talks between
UN truce chief General Burns
and the Egyptian and Israeli
leaders has resulted in no
appreciable progress toward
adoption of the UN proposals
for maintaining peace in the
El Auja demilitarized zone.
An Israeli official told
the American embassy in Tel
Aviv that the raid was really
"preventive" rather than "re-
taliatory," since the Israelis
wished to teach the Syrians
that they could not interfere
with Israeli activities on Lake
Tiberias. Israel claims the
lake and all its shores are in
Israeli territory.
The action may also have
been intended to test the newly
created Syrian-Egyptian joint
command. If Tel Aviv's object
is to discredit the effectivenem
LAKE TIBERIAS
ATTACK
ISRAEL
15 DECEMBER 1955
of this alliance, it may well
have had initial success; the
joint command headquarters re-
portedly refused to make any
comment on the attack. Should
the Israelis pursue these tac-
tics further, however, Egyptian
prime minister Nasr will be
under considerable pressure to
take some counteraction, since
his failure to do so could
result in a serious loss of
Egyptian influence in Syria.
Egyptian recognition of
this possibility is presumably
behind Nasr's announcement on
15 December that Egypt and
Syria will attack Israel on two
fronts if there is "any further
Israeli aggression."
Both the Israeli action
and General Burns' conspicuous
lack of success in bringing
Egypt and Israel closer to a
solution of the El Auja problem
suggest that neither side any
longer considers the UN a seri-
out factor in the situation.
The Israelis have shown for
some time that this was their
attitude by their tactic of
calling the truce organization's
attention to border violations
and shooting incidents while
neglecting to ask for formal
investigations.
Reports from Cairo and Tel
Aviv indicate that basic deci-
sions on future policy are being
held up pending the return of
Israeli foreign minister Sharett
from his trip to the United
States and some announcement
of the Western attitude toward
Israel's request for arms.
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-SteREP
Rabat
.Casablanca
t
1-49Marrakach
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
French North Africa
The movement for complete
independence is gathering
strength in French North Africa.
Encouraged by the gains the
nationalists have made in Tuni-
sia and by French-Moroccan ne-
gotiations, the Algerians are
preparing to seek a new rela-
tionship with France. The
French government has indefi-
nitely postponed parliamentary
elections in the four Algerian
departments.
major routes, one extending
south through Spanish Morocco
from Melilla and the other across
the Algerian border. Should
the Spanish authorities tighten
existing controls, the tribes
would probably be supplied from
Algeria.
In an apparent effort to
force the Spanish high commis-
sioner to proceed with his re-
ported plan to establish an
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15 DECEMBER 1955
FRENCH MOROCCO
Berber tribal attacks con-
tinue in northeastern Morocco.
French authorities fear that
the rebellion may spread to the
Beni Snassen tribe in the fer-
tile Oujda area. Moroccan
prime minister Si Bekkai, a mem-
ber and former chieftain of this
tribe, probably is being pressed
by the French to exert his in-
fluence to prevent such a devel-
opment.
American air force offi-
cials in Morocco believe the
tribesmen are supplied by two
51214
autonomous Moroccan government
in Tetuan subordinate to the
sultan in Rabat, Istiqlal leader
Allal el Fassi and Isiah (Span-
ish Mnrocco) leader Abdelkhalek
Torres issued a joint communique
on 30 December requesting Spain
to five and unite its protector-
ate with the rest of Morocco.
The eventual unification of
Morocco, including the inter-
nationalized zone of Tangier,
is a basic policy of all Moroc-
can nationalist groups.
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15 December 1955
Meanwhile, the Moroccan
Communist Party has stepped up
its propaganda activities. Al-
legations by the French resident
general that the Communists are
involved in the tribal rebellion
in the Rif have not been sub-
stantiated. The Moroccan Com-
munist Party, however, is at-
tempting to take credit for
participation in the independ-
ence movement.
ALGERIA
The French government has
indefinitely postponed the 2
January parliamentary elections
in the four Algerian departments
because of deteriorating public
safety and indications of a
widespread boycott by potential
Algerian Moslem candidates as
well as the voters.
SixtT-One: of the 91_:Alger-
ian Moslem members of various
national elected bodies, known
as the "61,." appear to have so-
lidified their organization
formed in September. An "Action
Committee of the 61" recently
issued a communique calling for
immediate negotiations by all'
representative political groups
aimed at establishing a new Al-
gerian Charter. This group may
ally itself with the organization
of liberal French settlers now
being formed by Jacques Cheval-
lier, mayor of Algiers.
TUNISIA
The French high commissioner
announced on 8 December that
France had turned over several
internal security police units
to the Tunisian government.
Other units will be transferred
gradually to Tunisian authori-
ties. This development should
strengthen the hand of the Ben
Amar government, which is
strongly criticized by sympathiz-
ers of extremist nationalist
Salah ben Youssef as being too
conciliatory toward the French.
Under the French-Tunisian con-
ventions, transfer of control
over internal security forces
was not scheduled until late
1957.
Ben Youssef is continuing
his campaign both to discredit
moderate leader Habib Bourghiba
and to undermine the Tunisian
government. On 10 December, sev-
eral hundred demonstrators,
probably followers of Ben Youssef,
clashed with French troops while
attempting to loot the Neo-
Destour party headquarters in
Medenine, southern Tunisia,.
Such clashes will probably
continue unless the government
soon acts to suppress Ben
Youssef's activities.
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15 December 1955
The prospects for renewed
discussions of the Cyprus prob-
lem between the British governor
of the colony and Cypriot arch-
bishop Makarios appear to have
improved since the British de-
livery in Athens on 9 December
of a revised formula for set-
tling the dispute. Athens is
exerting pressure on Makarios
to ensure that their positions
are co-ordinated, and the arch-
bishop stated publicly on 11
December that his talks with
Governor Harding might soon be
resumed.
Although the British am-
bassador in Athens was not en-
couraged by the initial reaction
of the Greek foreign minister
to the latest British revised
formula, Athens is nevertheless
likely to urge Makarios to re-
sume negotiations on the basis
of that proposal. Prime Minis-
ter Karamanlis evidently wants
to continue his bargaining,
and he would probably like to
see new Makarios-Harding ne-
gotiations protracted until
after Greek elections early
next year in order to minimize
the Cyprus issue during the
election campaign.
Since the prime minister
is now primarily concerned with
avoiding Cyprus as an election
issue, he will probably soft-
pedal the controversy to avoid
further incitement of popular
emotions in Greece. King Paul,
who reportedly favored support
of London's original formula,
and Foreign Minister Theotokis
are probably reconciled to
Britain's refusal to guarantee
a time limit for self-determina-
tion.
In any new talks with
Harding, Makarios will probably
continue the moderate approach
he took in the talks last month.
Although Makarios has been crit-
icized by the Communists and
terrorist groups for his moder-
ate stand, his position has
probably been strengthened as a
result of several recent develop-
ments. The British military
operation in the Troodos Moun-
tains on 11 December, for ex-
ample, resulted in what appears
to have been the first signifi-
cant success of the British
security forces to date against
guerrillas of the terrorist
organization EOKA.
Moreover, the Nicosia
newspaper controlled by the
Cyprus ethnarchy recently began
warning the Cypriots against
Communist intrigue to undermine
Nationalist unity and destroy
the gains already achieved
under Makarios' leadership.
The outlawing of the Cypriot
Communist Party on 14 December
and the arrest of 135 party
leaders in an island-wide
roundup by the British may also
have the effect of easing the
pressure of the extremists on
Makarios and further strength-
ening his position.
In general, the circum-
stances appear favorable for an
interim settlement at an early
date. Although some extremists
will probably persist in terror-
ist activities, gradual pacifi-
cation of the island may follow
as Makarios' followers in the
countryside discontinue support
of EOKA guerrillas.
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15 December 1955
Turkey
The new Turkish cabinet
has been approved by the Demo-
cratic Party caucus and should
have no major difficulty win-
ning a vote of confidence in the
Grand National Assembly, proba-
bly on 16 December. The vote
in the assembly, where party
loyalties are reflected, is not
likely to indiCate the extent
and intensity of the opposition
to Prime Minister Menderes or
his policies.
Menderes' decision to keep
the national defense portfolio
suggests his intention to con-
tinue personal domination of
the government.
When the previous cabinet
was forced to resign on 29 No-
vember, Menderes was able to
obtain a narrow vote of "per-
sonal confidence:' The party
caucus agreed to give him an-
other chance. Unless he proves
his willingness and ability to
handle Turkey's economic
problems, the cabinet may fall
again within a few months.
Menderes' new program pro-
vides several administrative
and judicial reforms but ap-
parently includes no major
economic reforms.
A second cabinet crisis,
possibly when the budget is
debated in March, might end
Menderes' political career.
If he were dropped from the
premiership, President Bayar
would probably assume a more
active leadership of the Demo-
cratic Party and of government
affairs.
In a policy statement to
the assembly on 14 December,
the new government confirmed
its position on the Cyprus
question and its intention to
continue working for the de-
velopment of the Balkan pact.
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Plans for Egyptian Parliament
Egyptian prime minister
Nasr has set 16 January as the
date on which he will announce
plans re-establishing a nation-
al parliament. This action will
fulfill one of the long-stand-
ing promises made by Nasr's
military regime. However, the
narrow range of powers which
the regime intends to allow the
parliament makes it unlikely
that the move will arouse much
popular enthusiasm.
Ever since they overthrew
the monarchy in 1952, the army
officers who led the revolution
have considered ways and means
of returning Egypt to at least
ostensible civil control. A
constitutional committee, named
in January 1953, has produced
drafts, but none of these
seems to have found much favor
with Nasr, in whose hands the
decision rests Nasr's prob-
lem is to institute consti-
tutional arrangements which
will preserve his own power
against possible opponents both
in and outside the present
governing body, the Revolution-
ary Command Council (RCC), and
which, at the same time, will
not be too patently rubber-
stamp in nature.
The solution Nasr and his
close advisers have chosen
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15 December 1955
is a strong executive, with Nasr
as president and with the pres-
ent members of the RCC--minus
any who may be purged in the
interim--as cabinet officers.
The proposed parliament is
usually envisaged as a largely
appointed one in which interest
groups, such as industrial and
agricultural labor, industry,
etc., rather than geographic
constituencies will be repre-
sented.
Such a constitutional struc-
ture closely resembles the cor-
porate state outlined in Ital-
ian Fascist theory. The proto-
type of the Cairo regime's con-
ception, however, is reportedly
Portugal under Salazar, whose
example presumably is more pal-
atable than Mussolini's. A
parliament composed on these
lines has the advantage of
avoiding popular elections.
Such a parliament of interest
groups also practically ensures
the political anonymity of its
members, who, if known to the
Electrification
OX Soviet Railways
According to recent an-
nouncements, the USSR intends to
electrify the Trans-Siberian
from Moscow to Irkutsk. Main-
line steam locomotives are to
go out of production during 1957,
and the percentage of total
freight hauled by diesel and
electric locomotives is to in-
crease from about 10 percent to
43-45 percent by 1960.
public at all, are identified
with the groups they represent
rather than as individual lead-
ers.
The RCC has indicated that
a considerable share in a new
parliament would be given to
organized industrial labor, a
group which the regime has �
sought to use to develop the
mass base of support which it
lacks. During the last six
months, however, this still
relatively small group has
shown little interest in the
RCC's proposal, regarding with
indifference the possibiiy of
representation in a powerless
parliament whose members would
be hand-picked. Regardless of
how adroit the constitutional
arrangements are, this indif-
ference is likely to be the re-
action of the Egyptian public
as well, and the regime may find
that in instituting a parlia-
ment of this kind it will lose
rather than aai7 popularity.
Plans for electrification
after 1960 include the remain-
ing stretch of the Trans-Sibe-
rian from Irkutsk to Vladivostok,
a Moscow-nlack Sea-Sochi line,
a Moscow-Sverdlovsk line, a
Moscow-Leningrad line, and
several important shorter stretches.
By 1965 diesel and electric loco-
motive fright haulage is sched-
uled to rise to 30-85 percent
of total haulage.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
Advantages of railway
electrification over steam
location are higher speeds,
heavier loads, lower mainte-
nance costs, higher degree of
readiness for operation, and
savings of high-quality coal.
Diesel engines have, in general,
similar advantages over steam
locomotion. Dieselization costs
less than electrification, and
is therefore preferred in areas
of relatively lower traffic
densities and longer hauls.
Less than one fourth of
the 3,320-mile stretch from
Moscow to Irkutsk is now elec-
trified, and the remaining dis-
tance is about equal to the
2,500 miles of line electrified
in the Soviet Union in the past
quarter century.
When this project is com-
pleted, the electrified por-
tion of the Trans-Siberian,
with a sizable increase in
capacity, will not only serve
the rapidly developing Irkutsk
area but will also reach almost
to Ulan Ude, the junction with
the new Mongolian railway to
China. Electrification to this
junction, including a difficult
stretch around the southern tip
of Lake Baikal with many tun-
nels, will probably soon follow.
The intention to end steam
locomotive production in 1957
indicates that plans have been
radically revised since May
1954, when First Deputy Premier
Kaganovich announced that during
the 1956-60 plan, 6,000 steam,
2,000 diesel-electric, and
2,000 electric locomotives
would be needed. If steam loco-
motive production ends in 1957,
only 2,000 or 2,500 will prob-
ably be built during the coming
plan period.
pared by ORR)
Railroad, to be electrified by 1960
Railroad, to be electrified after 1960
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
South Vietnam
Viet Minh propaganda is
devoting considerable attention
to the forthcoming elections for
a national assembly in South
Vietnam, which will probably be
held sometime before mid-
February. It describes them as
an integral part of a plot to
"wreck the Geneva agreement,
integrate South Vietnam into
the SEATO bloc, and rekindle
the war." One broadcast noted
that the experiences gained in
struggling against the October
referendum on Bao Dai's future
provides "ample means of op-
posing the American-Diem plot
for wrecking peace and unifi-
cation."
Recent reports credit the
Viet Minh with an increased
capacity for infiltration,
sabotage and terrorism at the
village level in South Vietnam,
Laos
The Pathet Lao attack a-
gainst royal government troops
southeast of Muong Peun on 5
December now appears to have
been a localized skirmish rather
than the signal for military
action throughout northern Laos.
The government forces repulsed
the attempt to cut their line
of communications and have
forced the enemy's retreat.
The American army attache
in Vientiane reports that the
government troops demonstrated
a reasonably good degree of com-
bat effectiveness. French air
supply, on which the troops
especially in the area west of
Saigon. Viet Minh infiltration
of the Hoa Hao dissidents in
this area is apparently making
headway and President Diem has
described the situation as
critical. The Viet Minh may
hope to utilize the Hoa Hao
rebels as a front to harass
the Diem government, and thus
avoid open violation of the
Geneva terms.
To counter Viet Minh in-
fluence in rural areas, Diem
has inaugurated a village self-
defense corps. In addition,
he has decided to resettle ap-
proximately 100,000 northern
refugees in western South Viet-
nam. The presence of these
anti-Communist refugees will
ultimately aid greatly in
eliminating the security prob-
lem in that region,
involved were totally dependent,
continued during the operation.
Government commando units
reportedly have also retaliated
in other areas, attacking Pathet
Lao munitions depots. Reports
on the extent of this activity,
which could provoke a strong
enemy reaction and expand the
present hostilities, are frag-
mentary. Premier Katay, how-
ever, has told the American am-
bassador that the government
does not wish to press a counter-
offensive prior to the National
Assembly elections on 25 Decem-
ber.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
Satellites Move to Improve
Relations With United States
Expressions of interest
by East European countries in
improving relations with the
United States have now been
followed by action. On 28 No-
vember negotiations on outstand-
ing economic problems began in
Prague between the United
States and Czechoslovakia, and
since 7 December Rumania has
granted 13 long-denied exit
visas requested by the United
States. Polish and Hungarian
officials have also expressed
interest in negotiating out-
standing problems with the US,
but no formal action has yet
been taken by either government
comparable to the Czech and
Rumanian initiatives.
CZECHOSLOVAKIA
The announced objective
of the talks in Prague is to
normalize economic relations be-
tween the United States and
Czechoslovakia insofar as pos-
sible under existing political
circumstances. The current
series of meetings caps several
years of efforts to establish
some mutual basis of discussion.
Czechoslovakia's approach
however, makes it improbable
that any quick settlement will
be reached. Czechoslovakia has
included in its agenda) proposals
for a general discussion of all
outstanding economic issues, in-
cluding the problem of "economic
discrimination" against Czecho-
slovakia, which is very important
"since the United States had dis-
criminated insarupulously against
Czechoslovakia." The Czechs
are maintaining that there is a
close relationship between the
problem of discrimination and
matters of compensation, which
the United States is attempting
to settle.
The American negotiators
have, nevertheless, succeeded
in introducing into the discus-
sion their proposal for a lump-
sum settlement of $45,000,000
for an estimated $200,000,000
worth of American property na-
tionalized, confiscated, ex-
propriated or otherwise taken
over in Czechoslovakia.
Other American objectives
are a resumption of current
payments and arrears under the
surplus property agreement, in
default since 1952; release of
Czech crowns in the blocked US
army crown account and the film
account; resumption of service
on defaulted dollar bonds; and
the fulfillment of Czechoslova-
kia's contractual obligations
to the International Business
Machines Corporation.
Czechoslovakia hopes to
re-establish economic relations
as they existed prior to the
Oatis case in 1951; to regain
its GATT membership; and to
secure American aid in the set-
tlement of its Gold Pool claims,
the proceeds of which would net
it from $7,000,000 to $14,000,-
000. It also wishes the return
of funds used to purchase a
steel mill, later sold to
Argentina by the United States.
RUMANIA
The Rumanian government,
in its first specific action
to comply with an American re-
quest that 371 American citizens
and dual nationals be permitted
to leave the country, granted
ten long-denied exit visas on 7
December, and three more on 11
December.
Since early fall Rumania
has evidenced interest in im-
proving relations with the
United States. In a two-hour
converstaion with American
minister Thayer on 29 November,
Rumanian-party leader Gheorghiu-
Dej stressed the need to estab-
lish close cultural and economic
relations and promised Rumanian
co-operation in destroying the
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pyramid of retaliatory measures
which has been built up. On 2
December, at Gheorghiu-Dej's
suggestion, the American minis-
ter met with the Rumanian for-
eign minister to review rela-
tions between the two countries
and delineate the specific prob-
lems affecting these relations.
The Rumanian position is
that closer relationships could
be developed. The Rumanians
have indicated iaterest in ex-
changes of scientific and cul-
tural personnel and have also
made clear that they are willing
to discuss a reopening of the
USIS reading room in Bucharest,
which was closed under Rumanian
USSR Returning Satellite
Prisoners
A former anti-Communist
Hungarian political leader who
has been imprisoned in the USSR
for more than eight years is
reported to have been returned
to his homeland and to be under
detention there. This is the
first indication that Soviet
authorities may have begun to
release Satellite nationals
accused of political crimes as
well as those sentenced for war
crimes.
hBela Kovacs, the
former first secretary of the
Hungarian Smallholders Party,
was among a group of 500 Hungar-
ians returned by the USSR last
month. Over half of the group
reportedly has been freed, but
Kovacs, along with 230 others,
allegedly is being held in a
detention camp by Hungarian
authorities, apparently await-
ing an official review of his
"case." Kovacs disappeared in
1947 after being accused of
pressure in 1950. They have
also evidenced an intense desire
to develop trade with the United
States, particularly for agri-
cultural and chemical industry
machinery. The Rumanian of-
ficials proposed the exchange
of permanent trade representa-
tions between the two countries.
On the other hand, Rumanian
officials have evidenced extreme
sensitivity to VOA and RFE propa-
ganda, complained about US travel
restrictions on the Rumanian
diplomatic corps, and criticized
the failure of the United States
to support Rumanian membership
in the United Nations.
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espionage against the Soviet
Union, and had long been pre-
sumed dead.
Polish press reports since
early November reveal that from
2,500 to 4,000 Polish nationals
have been returned from the USSR.
These returnees include World
War II "war criminals," and
possibly postwar political pris-
oners. The regime is appareri-,-
ly releasing and resettling
these repatriates as quickly as
possible.
The Hungarians and Poles
may have been released in ac-
cordance with the terms of the
17 September Soviet amnesty,
which, although technically
applied only to Soviet citizens,
may have been extended to in-
clude Satellite nationals as
well. The return of these
Satellite prisoners may reflect
a Soviet and Satellite feeling
that their reappearance will
support the program to relax
domestic political atmospheres.
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15 December 1955
The Satellite regimes may
also intend to release such for-
mer Soviet-held anti-Communist
leaders as Kovacs, especially if
they can be persuaded to recant
their former opposition and to
support the present governments.
Hungary's Aelations
IT3.1"1-h�TigosiTh.=�
Recent reports indicate
that the Hungarian regime may
be taking steps to catch up with
the other Satellites in improv-
ing relations with Yugoslavia AT
removing the two major obstacles
to such a development. Hungary
may now be prepared to begin
payments on Yugoslav economic
claims and to repudiate the anti-
Tito Rajk trial held. in 1949.
In a major address last
July, Yugoslav president Tito
aharged that certain persons ia
the Satellites, especially in
Hungary, were finding it dif-
ficult to admit oistaLes such
as the Rajk trial and to pursue
a course of friendship with Yugo-
slavia. On 24 September, the
Yugoslays broi:e off financial
talks with Hungary because it
failed to agree to Belgrade's
demauds for about $100,000,000
in reparations and $20,000,000
in damages for unfulfilled anlas
for capital goods. On 15 Octo-
ber, Yugoslavia reportedly in-
formed Budapest that financial
discussions could not be resumed
until Hungary began to fulfill
its financial obligations.
Last week the American
legation in Budapest received
an unconfirmed report that
Hungary was willing to begin
payment immediately on Belgrade's
claims for World War II repara-
tions and the balance owed on
the pre-1949 trade account.
Such action would pave the way
for the reopening of the finan-
cial talks.
A number of onetime antiregime
figures, who had fled to the
West and returned or who had
been imprisoned by the Satellites
themselves, have been used in
this manner during the past two
years.
One of the problems to be
settled in such talks would be
the terms of settlement for the
$120,000,000 in claims; this may
cause difficulty in view of
lungary's lack of available
foreign exchange. In addition,
Yugoslav claims for damages stem-
ming from loss of trade after
the 1948 break must still be
negotiated.
The Hungarian leadership
has publicly blamed purged po-
lice chief Gabor Peter for the
)ad relations with Yugoslavia.
During the past 15 months the
regime has quietly released
several important individuals who
never received public trials but
who were arrested in connection
with the Rajk trial. About 30
Social Democrats jailed in con-
nection with that trial are re-
ported to have been released
recently, perhaps in an effort
to improve the atmosphere for
the resumption of economic nego-
tiations with Yugoslavia. One
of those released, Pal Justus,
was tried with Rajk in 1949 and
received a life sentence on
charges which included working
for Yugoslav intelligence in
Hungary.
It is unlikely that the
Yugoslays will be satisfied with
anything less than a public re-
pudiation by Budapest of the
Rajk trial. Reports that Hun-
garian party activists have been
told that Peter foisted the trial
on the party suggests that such a
.,:7epudiation may be in the offing.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1G55
Argentina
The Aramburu government is
continuing efYorts to isolate
and reduce surviving Peronista
strength, and to placate and
control those divergent politi-
cal elements among its own sup-
porters who appear_dissatisfied
with the regime. To date the
government has succeeded in pre-
venting the materialization of
opposition to a degree which
would seriously threaten the re-
gime.
The Peronistas who have
been excluded from participation
in government and labor councils
and also deprived of their major
organizations, must depend on
covert activity for antigovern-
ment action. The Peronista Par,
ty was ordered dissolved by a
decree of 30 November, and the
General Confederation of Labor
and its two newspapers have been
placed under the control of
government-
trators.
The government seems less
concerned over any organized
move by the Peronistas than over
dissatisfaction among anti-Peron-
ista groups, especially the
right-wing clericalists who SUP-
ported former president Lonardi.
An official communique of 4 Decem-
ber outlined reasons for Lonar-
di's "resignation," stressing
that it represented a defense of
Oemocratic action in that "per-
sons with a totalitarian outlook"
were usurping authority from
Lonardi. The statement made g
point of denying charges that the
government is anti-Catholic or
antilabor, or that the armed
forceS are divided.
A statement on 8 December
by the highly regarded interior
minister, Busso, clOarly outlined
the government's basic policy
as one of re-establishing
democratic practices--within
the labor unions and elsewhere--
guaranteeing freedom of con-
science, and providing a healthy
economy which will respect pri-
vate property and encourage
foreign investment. Busso em-
phasized that no government
official would run for office in
the forthcoming elections, and
that the "revolutionary govern-
ment" would maintain strict neu-
trality toward the "various tend-
encies of the democratic politi-
cal parties."
The government also seems
to be trying to conciliate
Catholic elements which are
disturbed by the new regime's
failure to restore to the Church
all the prerogatives Peron took
from it in his last months in
office. On the important reli-
gious holiday of 8 December,
President Aramburu and other high
officials attended the large out-
door mass celebrated by
Bishop Tato, who had been ex-
pelled by Peron in June. Tato,
in speaking at some length on
the general subject of the Catho-
lic role on Argentina's politi-
cal scene, made no reference to
any of the points of current
Catholic dissatisfaction with
the new government, though the
leaflets advertising the cele-
bration had made an issue of
them.
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CURRENT INTELLIGENCE WEEKLY 'SUMMARY
15 December 1955
PART III
PATTERNS AND PERSPECTIVES
MENDES-FRANCE AND
THE FRENCH ELECTION
Much of ex-premier Mendes-
France's effort in the French
election on 2 January will be
directed toward those French-
men who have traditionally
voted against the government in
power in protest against the
established order. He feels
that this protest vote, which
has been a major part of Com-
munist strength, must be won
over to a new and dynamic non-
Communist program if France is
to achieve political stability.
He is counting heavily on the
Socialists for the base of his
"Republican Front," but his suc-
cess will depend to a large
extent on retaining the support
of his own Radical Socialists.
Mendes-France's campaign
to win control of the Radical
Socialist Party machinery began
shortly after he lost the pre-
miership in February 1955. Ini-
tially, the campaign was ham-
pered by the widespread popu-
larity of his successor., Edgar
Faure, also a Radical Socialist
and formerly a friendly rival.
Faure's unequivocal stand in
favor of the Atlantic alliance
was a major factor in his popu-
larity, and he also was in a
position to attribute the cur-
rent prosperity to his guidance
as finance minister under Laniel
and Mendes-France.
Mendes-France argued that
since there is a potentially
large electorate for the non-
Communist left, a clearly
leftist-oriented Radical Social-
ist Party would be the better
vote getter and would preclude
either Socialist-Communist co-
operation or draining off sup-
port from the center parties
into a rightist coalition. He
was opposed by the older, more
conservative Radical Socialists
who were against identifying
the party too closely with a
movement that would endanger
its, "hinge" position in the
assembly. By building up sup-
port for his position in the
local federations, Mendes-
France gained control of the
party machinery at the May and
November congresses of the party.
Political Approach
Mendes-France bases his
political attitudes on economic
analysis. He has long main-
tained that France must adjust
its commitments to its capabili-
ties, and has advanced a policy
of austerity involving currency
reform, economic controls to
cut nonproductive expenditures,
and heavy emphasis on invest-
ment in basic industries.
His approach to problems
beyond metropolitan France have
been largely determined by appre-
hensions over the nation's eco-
nmic health. He was one of the
iirst to point to the Indochina
war as a conspicuous example
of French economic and political
overextension. He emphasized
the inflationary threat of the
military budget in general,
maintaining that only by decreas-
ing its consumption could France
develop.
He made quick concessions
to the Tunisians to conserve
domestic strength and block
continued disintegration of
France's overseas holdings. He
discarded EDC because he feared
France's weakness would lead
to domination by Germany. While
he still hopes for closer ties
between Britain and the Conti-
nent, he wants other European
integration schemes delayed so
that France can strengthen its
economy before entering into
freer international competition.
He was eager for an East-
West detente ecause he claimed
that heavy military expenditures
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15 December 1955
would in the long run force the
French standard of living below
that of the Satellites. Con-
sequently, East-West negotia-
tions, closer relations with
the East, and even a restricted
experiment in coexistence in
Vietnam, were all peripheral
efforts necessary to the main
task of building at home.
His Aims Questioned
Because of his policies
� and tactics and the staff he
assembled when he became pre-
mier, Mendes-France has been
called a pro-Communist and a
neutralist intent on selling
out the West. Most of these
charges appear to have origi-
nated with rightists or Euro-
pean integrationists, others
with victims of his biting
tongue or critics of his unwill-
ingness to compromise.
Some of the men he chose
for key staff positions, such
as George Boris, have been
identified with leftist-neutral-
ism, and others were known to
be sympathetic to Communism or
had dubious moral or financial
reputations. Mendes-France re-
jected criticism of his entou-
rage, however, on the grounds
that he made all decisions and
indeed was reluctant to dele-
gate authority.
His approach, as premier,
tc EDC and Indochina culminated
in the charge that he was not
sincere in his protestation of
adherence to the Western alli-
ance. His rejection of EDC does
not seem to have stemmed from
any desire to appease the USSR,
�and his subsequent fight for
the Paris agreements removed
much of the stigma attached to
his role in the EDC defeat.
Mendes-France's extensive
reshuffling of key government
personnel also caused concern.
Many high officials with
pro-American attitudes were
removed to unimportant posts,
and officials in the information
media were shifted to give the
premier tighter control. More-
over, appointments to sensitive
posts in defense and research
were construed to show a "soft"
policy toward Communists.
Many shifts of personnel,
particularly in the Foreign
Ministry, were probably the
normal aftermath of an unusually
extensive change in the govern-
ment itself. Nevertheless, it
is hard to discount the tenden-
cies toward authoritarianism
he showed in this period. He
ran the nearest thing to a one-
man government that France has
had in the Fourth Republic.
Current Views
Mendes-France will probably
not change his views on the
basic elements of his policy,
although his experience as
premier seems to have disabused
him of certain misconceptions.
In regard to foreign affairs,
for example, he apparently came
around to accepting the opinion
of experts in the Foreign Min-
istry regardless of the views
of his entourage.
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15 December 1955
Barring an international
crisis, he will probably try
to concentrate on economic af-
fairs both in the electoral
campaign and in the new assembly.
Despite the current prosperity,
any new government must concern
itself with the continuing basic
weaknesses in France's economy,
such as the noncompetitive
prices, which have again raised
the question of devaluation,
and the.. fears of inflation fol-
lowing a leveling off of in-
dustrial production. Housing
construction, social allowances
and wage-price relationships
will also be major issues in
the next assembly.
It is likely that he will
continue to believe in negotia-
tions with the East to lessen
world tension- While he will
probably not carry this view to
the point of advocating bilat-
eral talks, he will probably
press the United States and
Britain for frequent contacts
with the Soviet bloc. He will
probably also press for expanded
trade with the East.
His major long-run drive
will, however, continue to be
the rejuvenation of France both
economically and politically.
The platform he put through the
Radical Socialist November con-
gress included cutting France's
military buildup. In an August
speech to a group of NATO of-
ficers, he held to the view
that European integration must
have British participation, and
his recent attack on Faure for
"abandoning WEU" is interpreted
as being aimed against Monnet's
continental atomic energy inte-
gration. In the NATO speech he
also clearly indicated his con-
tinuing hope for East-West co-
operation and discussion by
advocating eventual joint ac-
tivities of WEU and Warsaw pact
countries.
Concurrently with his
success in gaining control of
the Radical Socialists, Mendes-
France seems to have regained
popular support. More news-
papers are backing him now,
and he has stepped up his own
press campaign in L'Express,
which became a daily in October.
His own press attacks, however,
may boomerang as may also the
expulsion from the party of
such prominent Mendes-France
opponents as Rene Mayer. Free-
dom from direct party control
has been traditional among
Radical Socialists, and candi-
dates and deputies may balk
at Mendes-France's strong dis-
ciplinary tactics.
Attitude Toward Communism
In the last few months
Mendes-France has appeared
particularly sensitive to charges
of pro-Communism and has pointed
to L'Humanite's bitter attacks
againsf him as evidence to the
contrary. The French Communists
did consistently support him
during the first few months of
his premiership in the belief
that he offered the best chance
of reorienting French foreign
policy, but since then they
have attacked him relentlessly.
In a speech at Lyon on 13 Octo-
ber, he castigated the Communist
position and based his demand
for a new electoral law on the
need to block Communist gains.
The Communist Party has
also been making a strong ef-
fort to counter Mendes-France's
appeal to the Socialists. Thorez
had stressed the unity of the
working class as a prop for Com-
minist desires to revive the
"popular front." They had some
success in local elections in
the spring of 1955, which
prompted their attempts to form
alliances with the Socialists
for 2 January.
General Communist prospects�
in the coming elections are
fairly good, since the party
will probably receive close
to the same percentage of the
popular vote as in 1951, and
splits among the center parties
will mean more seats for the
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-.1...111004110v
CURRENT,INTELLIQENCE WEEKLY SUMMARY
15 December 1955
CommunistA.- The Communists
supported Paure's Call for early
elections under the 1951 law
largely to have elections under
the proportional representation
feature of the 1951 law, and
to block Mendes-France before
he could organize an effective
electoral campaign.
REVOLUTIONARY PLOTTINO IN CENTRAL AMERICA
Central America.is again
being shaken by rumors of
Im-
pending revolutions.. High :
officials Of the Venezuelan
and Nicaraguan governments
claim to have evidence that
Costa Rica is the center of an
international Conspiracy
aimed at ousting various Anti-
Communist governments in the
:area, including Nicaragua.
The Costa Rican government, on
the other hand, gives credence
to rumors that it is about to
be Attacked from Venezuela
and/or Nicaragua. Internal
pressures are.Ohilding up in
Nicaragua and El Salvador
Which may lead to violence in
those.coUhtries
Charges Against Costa Rica
_ The authoritarian regimes
in Nicaragua And Venezuela,
which supplied and directed the
Costa Rican ekiles whO launched
the abortive invasion of Costa
Rica last January,. still hate
President Figuerps and would
like to see him overthrown.
They blame the United States
for supporting the decisive
action'Wthe, Organization of
American Sta;teS' -(OAS) last
January which brought an end
to the'fighting in Costa Rica.
'They cOnsider Figueres a
danger because Of the sym-
pathetic attitude he-has-shown,
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to exiled Nicaraguan, and
Venezuelan oppositionists.
Their attempts to convince the
United States and other govern-
ments of the danger to peace
represented by Fiperes have
led them to charge Figueres
with being the leader of a vast
international conspiracy fi-
nanced by the Soviet Union And
dedicated to promoting revo-
lutions against the anti-Com-
munist regimes in the Caribbean
area.
� There is ho evidence to
support the charges of Figuerest
involvement in a Communist
plot.
he has a long anti-
'Communist record. He has an
equally long record of active
opposition to area "dictator-
ships."
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-There is some
evidence that certain Costa
Rican officials.. have more
recently been aPsisting Nicara-
guan plotters, despite, obvious
Costa Rican efforts during the
past month to convince Nicaragua
that it will not permit anti-
Somoza revolutionary preparations
in Costa Rica.
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15 December 1955
Nicaragua
An attempt by domestic op-
position elements to oust the
Somoza regime in Nicaragua is
probable some time prior to
the presidential election sched-
uled for next November. There
is no evidence that these would-
be rebels expect any signifi-
cant aid from Costa Rica.
Somoza, who has been in
power for over 20 years, had
the constitution revised last
year to permit him to serve
another six-year term. Leaders
of the opposition Conservative
Party, who apparently- have .
lost hope of a peaceful change
in government have reportedly
allied themselves with Nicara-
guan exiles in neighboring
countries and plan an attack,
possibly from a. base near the
Honduran border. Some sources
have predicted revolt in Decem-
ber,.when the opening of the
5-month dry season will favor.
military operations.
Somoza would almost cer-
tainly accuse Costa Rica's
Figueres of being involved in
any attellipt against him,
He intimated
that, in the event of a revolu-
tionary move against him, he
might be forced to take 'puni-
tive action" against Figueres.
Rumors in Costa Rica
The Figueres administra-
tion is giving credence to
rumors that preparations for
a new "revolt" in Costa Rica,
similar to that of last Janu-
ary, are under way in Venezuela
and/or Nicaragua. Leading
Costa Rican oppositionists are
in Venezuela and apparently have
access to high Venezuelan offi-
cials.
Investigation of the
Costa Rican allegations
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in early
December failed to substantiate
the reports.
Apparently the Venezuelan
government was seriously con-
sidering backing such a plan
as late as November, but no
such attempt against Costa Rica
now seems imminent. The possi-
bility still remains, however.
El Salvador
� In El Salvador, where a
bitter presidential campaign
is now in progress, a military
coup by one of the several
factions in the politically im-
portant army is a distinct pos-
sibility prior to the election,
which is scheduled for next
March. The administration can-
didate, the capable pro-American
Lt. Col. Lemus, and two of the
three opposition presidential
candidates are army men and
each claims to have a personal
following in the army. Presi-
dent Osorio, whose term ends
in September, is probably
weakening in his control of the
army. United action by the
opposition, which is reportedly
being planned, would have a
good chance of ousting the
government. Several sources
have predicted revolution in
December.
The Salvadoran political
scene also has ramifications
extending to nearby countries.
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CURRENT INTELLIGENCE WEEKLY -SUMMARY
15 December 1955
Though Salvadoran would-
be revolutionaries have prob-
ably sought foreign financial
and arms assistance, it is
unlikely that they have asked
or received any from the Costa
Rican government, which has
been on good terms with the
Osorio regime. Any foreign
assistance would be more like3y
to come from Nicaragua, Vene-
zuela or Guatemala, eacn of
which has shown deep distrust
of Osorio during the past year.
Possible OAS Investigation
On 7 December Costa Rican
foreign minister Esquivel
suggested that ODECA, the newly
formed organization of the five
Central American countries,
request the OAS to investigate
Nicaraguan charges of a Commu-
nist plot in Central America.
(b)(1)
(b)(3)
The mere proposal of an
OAS investigation tends to
seize the initiative from Vene- (N(1)
zuela and Nicaragua in the (b)(3)
current "war of nerves." In
any actual investigation, Costa
Rica would undoubtedly press
for consideration by the OAS
of the rumors of an impending
attack on Costa Rica by exiles
supported by Vene u a and
Nicaragua.
SHORTAGES OF KEY RESOURCES SLOW WESTERN EUROPEAN BOOM
Western Europe's three-
year economic boom is being
slowed down by shortages of
skilled manpower, coal and steel
These shortages have generated
inflationary pressures and con-
tributed to trade deficits.
There will probably be a fur-
ther slowdown in the rate of
economic expansion in 1956, but
improved basic conditions and
stabilizing policies of govern-
ments make the recurrence of
an economic crisis unlikely at
this time.
The upsurge, striking
enough in terms of increased
gross national product and gold
anddollar reserves, had a sig-
nificance beyond the mere fig-
ures. The sharp recovery from
the post-Korean slump clearly
demonstrated the success of
the Marshall Plan in relieving
war induced Alortages of sup-
lies, plants and equipment. It
also produced a revival of con-
fidence' which was expressed
domestically in increased sav-
ings and investment, and in-
ternationally in the removal of
many postwar import quotas and
other barriers to trade. Govern-
ments generally abandoned
di-
rect controls in favor of flex-
ible monetary policies to curb
inflation or deflation.
The increasein industrial
production, moreover, was rath-
er evenly spread over all the
OEEC member countries.* It
was significantly higher in
West Germany, which had larger
reserves of labor, and somewhat
lower in Belgium, Denmark and
Sweden. On an over-all basis,
it amounted to 25 percent over
the past two and a. half years.
*The 17 members of the organiza-
tion for European Economic Co-operation
are Austria, Belgium, Denmark, France,
West Germany, Greece, Iceland, Ire-
land, Italy, Luxembourg, the Nether-
lands, Norway, Portugal, Sweden,
Switzerland, Turkey�, ,and the United
Kingdom.
(b)(3)
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CURRENT INTELLIGENCE WEEKL1 SUMMARY
15 December 1955
OE EC COUNTRIES
GROSS NATIONAL PRODUCT AND EXPENDITURE
(BILLIONS OF DOLLARS AT 1951 PRICES)
164
166
184
175
195
1951 1952 1953 1934
15 DECEMBER 1955
Strain of Demand on Resources
Two outstanding features
of the boom, highly favorable
In themselves, combined to pro-
duce incipient trouble for the
European economy in the form
of shortages of key resources.
One feature was the rapid
development of consumer demand
for durable goods. Sales of
automobiles and trucks, for ex-
ample, increased by 50 percent
In the two-year period 1953-54
and have apparently retained
this rate of expansion in 1955.
The other feature was the
marked rise in the rate of in-
vestment. In most OEEC coun-
tries the proportion of national
product going into fixed invest-
ment rose by 20 percent or more
in the three-year period 1953-
1955, and in residential build-
ing the rise was even greater.
For West Germany and the United
Kingdom the continuing increase
in factory building starts was
particularly noteworthy, the
first quarter of 1955 in Britain
seeing a 30-percent rise over
the first quarter of 1954.
The two features in com-
bination had their heaviest im-
pact on the metals ana machinery
industries; the latter industry
increased its output by 16
1955
200
150
100
percent in the first
half of 1955 over the
same period in 1954.
It is in the resources
most essential fox
this industry that
Western Europe's sup-
ply deficiencies are
most acute--notably
in skilled manpower,
coal and steel.
The Manpower Shortage
Lack of skilled
manpower is Western
Europe's most disturb-
ing shortage. It is
0 particularly severe
In Britain, where to-
tal unemployment was
below 1 percent in the first
half of 1955 and vacancies in
the machinery industry rose by
30 percent over the same period
in 1954.
50
The shortage is also acute
in Scandinavia, the Netherlands
and increasingly so in West
Germany. It has not yet be-
come a serious problem in France,
which entered the boom phase
six months late, or in Italy,
where there is a labor surplus.
Both countries have expanded
production largely through more
intensive utilization of re-
sources, including manpower.
Through 1954, wage in-
creases appear generally to
have been offset by increased
productivity and to have been
closely in line with price rises.
In 1955, however, as the labor
market tightened, wage rates
tended to increase more rapidly.
For example, wage rate increases
in Britain were 5.5 percent
larger in the first half of 1955
than in the first half of 1954,
but the corresponding increase
in hourly output per man in in-
dustry was only 3.5 percent.
Numerous important wage in-
creases are being demanded in
Western Europe and others are
anticipated. In general, the
present rate of wage increases
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CURRENT INTELLIGENCE WEEKLY SUMMARY:
15 December 1955
is the most serious threat so
far to financial stability of
OEEC member countries.
The Coal Shortage
Coal production in Western
Europe has not expanded to meet
growing energy requirements,
and there is an increasing con-
version to oil, gas and hydro-
electric power.
There are large reserves
of coal in the area and consid-
erable scope for increasing the
output of existing mines through
further mechanization. There
has been no significant over-
all expansion of output since
1913, owing to a steady decline
in the mine labor force and to
restrictionist attitudes toward
investment intensified by coal
surpluses in the between-war
years.
Production did not regain
its prewar level until 1951,
and during the past three and
a half years has fluctuated
around 475,000,000 tons annually,
with no indication of an upward
trend. Increased investment
since the inauguration of the
Coal and Steel Community (CSC)
in 1953 has apparently been
counterbalanced by an acceler-
ated decline in the labor force,
and Western Europe still remains
� occasionally dependent on
American coal.�
Britain has been called .
by OEEC experts the key to
Europe's coal shortage problem.
Despite strenuous efforts to
expand production, output in
1954 was still only 224,000,000
tons--as against an average
annual figure of 240,000,000
before World War II, when Brit-
ish consumption was much less
ana subsi;antii LiaanLities
coal were exported.
In 1955, Britain's coal
position has progressively
deteriorated. The United King-
dom has now lost to West Ger-
many its position as Western
Europe's largest coal exporter
and has become a net coal im-
porter. By mid-October, pro-
duction was 3,900,000 tons be-
low that:?or the corresponding
period of the previous year,
and imports were over four times
as great. Britain has warned
the OEEC Fuel Committee that
it will be obliged to cut ex-
ports from 12,000,000 tons in
1955 to 6,500,000 in 1956 while
maintaining imports from the
United r_Jtates of at least
5,000,000.
On
pact of
delayed
-IMPORTS OF BITUMINOUS COAL
FROM THE UNITED STATES
-
15 DECEMBER 1955
the Continent, the im-
the coal shortage was
by the availability in
1954 of large pithead
stocks and by greater
success than in Brt-
ain at substituting
oil, gas and nyuro
electric power. In
the latter half of
1954, however, West
Germany, France and
Belgium had to draw
on these pithead
stocks.
In the first half
of 1955, there was an
intensified demand for
the coking coal needed
to support a high lev-
el of steel operations.
Imports of coal from
the United States more
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CURRENT� INTELLIGENCE WEEKLY SUMMARY
15 December 1955
than doubled as compared with
the first half of 1954, and
the OEEC estimates that 1955s
total Western European imports
of American coal will reach
22,000,000 tons at a cost of
$400,000,000 including freight
14
13
12
11
10
9
8
MMIEKOFFWEIGHTIMMSONeWa.
(OCT 1954-100Y
T
mp
I
I
.0�1
illindex
PIP
I
MUM
'----
.
AUG S 0
1954
ND FM
AM
1955
A
2
51209-2 F
J
The resulting sharp rise
in ocean freight rates--which
in September of this year
reached a temporary peak al-
most double that of the previ-
ous September--so disturbed
European officials that they
reconvened the Commercial Advi-
sory Group which had served in
the shipping crisis provoked
by the Korean war. This body
agreed that increased 1956 re-
quirements could not be met
by European production or
through imports from the Soviet
bloc, and indicated concern
over the possibility of an At-
lantic shipping crisis and para-
lyzing European coal shortages
in the winter months. With the
OEEC Fuel Committee projecting
1956 imports from the United
States of over 27,000,000 tons,
there is continuing concern
among European coal experts as
to the capacity of the American
coal industry and port facili-
ties as illustrated by an in-
quiry on these points from the
CSC High Authority early in
November.
The Steel Shortage
Steel production in West-
ern Europe has thus far re-
sponded more favorably to
increased demand than has coal,
but there Are serious shortages,
particularly of scrap and high-
quality steels, and steel could
become a more important bottle-
neck than coal because there
are fewer substitutes available.
111119 �
_
9_� � � 0 0 % OUTPUT
96.0% OF CAPACITY
34,752,000
=X-7.
1313P-
37,627, 000
OUTPUT
1ST
38,073,000 6 MO'S.
St
Drr: Mabi 1955 M0fid 51209 2G
Failure of the steel in-
dustry to expand sufficiently
to supply peak demand results
largely from inadequate invest-
ment between World Wars I and II.
There are large reserves of
iron ore distributed among many
countries, but the mining of
ore, as measured in metal con-
tent, stood at almost the same
figure in 1951 as in 1913.
Vigorous postwar expansion
programs, particularly in the
steel industries of France and
West Germany, began to show re-
sults in rapidly rising steel
output on the continent from
1950 on, despite periodic scar-
cities of coke and other raw
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 December 1955
materials. By late 1953 there
was even a mild glut, apparently
because producers in the six
CSC countries had previously
maintained a high level of open.-
tions in order to maximize their
respective shares of the CSC4s
common market which opened in
May of that year.
As in the case of coal,
the present steel shortage
came earlier and more acutely
in Britain than on the Conti-
nent. British steel cai;acity
has expanded less rapidly and
supply has been continuously
tight, even during the Conti-
nental steel market's slack
period in the winter of 1953-
54. As early as mid-1954, ex-
panded demand in the steel-
consuming industries prompt,3d
the British government to re-
move restrictions on imports
of certain types of steel and
at the beginning of 1935 to ,
suspend import duties on prac-
tically all steel products un-
til new. capacity should become
available in 1956.
On the Continent, orders
for steel went up sharply to-
ward the end of 1954, outrun-
ning the inadequate production
capacity for pig iron and,
accordingly, forcing up steel
scrap prices from the equiva-
lent of $36 per ton in August
1954 to $65 per ton a year
later. The acute shortage of
scrap has in turn led to great-
ly expanded imports from the
United States. These are ex-
pected to total 4,300,000 tons
for Europe as a whole in 1955,
as compared with only 1,300,-
000 tons in 1954.
Effects of Shortages
The shortages of key re-
sources, though accompanied by
inflationary pressures appar-
ent in credit expansion and
in stock market quotations,
have not yet led to any sub-
stantial rise in general price
levels. Consumer prices rose
by 2 percent in eight OEEC
member countries in 1954 and
somewhat faster in the United
Kingdom and Scandinavia in
the first half of 1955--rates
of increase which would be dis-
turbing if long continued.
GOLD AND SHORT-TERM DOLLAR RESERVES
(Billions of Dollars End of Period)
14
12
10
8
1951 1952
15 DECEMBER 1955
1953
1954
1955
51209 28
Of more immediate coacern
is the rapid widening of the
dollar gap from the enforced
reliance on the United States
for certain key commodites such
as steel, steel scrap and coal.,
Since the first half of 1954,
imports from the dollar area
have risen by 40 percent, or
eight times as fast as from
other areas. Meanwhile, West-
ern European exports to the
dollar area, which had declined
during the American economic
downturn and which were 3 per-
cent below the 1953 rate in
the first half of 1955, did
not recover their previous lev-
els until the third quarter of
1955.
The impact of this dete-
rioration in the dollar trade
balance has so far been cush-
ioned by increased military
aid from the United States, and
Western Europe as a whole has
thus been able to continue its
build-up of gold and dollar re-
serves at about half of the
$2 billion annual rate of 1953.
Military receipts rose from
an annual rate of $1.4 billion
in the second half of 1953 to
an annual rate of $2.2 billion
in the first half of 1955, off-
setting the decline in American
economic aid.
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CURRENT INTELLIGENCE WEEKLY SUMMARY.
15 December 1955
MI6-NT TRANSACTIONS OF OEEC COUNTRIES
- (Billions of Dollars)
15 DtCEMBER 1955
II
1952
These military receipts,
however, will decline as off-
shore procurement contracts
are completed, while dollar im-
port requirements are expected
to rise. Furthermore, the
relative stability of the over-
all dollar balance conceals
a divergent trend aMong OEEC
member countries. Over the
past two years, .a downward
trend in dollar earnings has
alreae, been experienced by
Britain, West Germany, Austria,
the Netherlands, the Scandina-
vian countries and Switzerland.
In Britain's case the
growing dollar deficit has
assumed serious proportion,
Between June of 1954 and Novem-
ber 1955, Britain's gold and
dollar reserves declined from
$3,017 million to $2,283 mil-
lion, a precariously low level
to support the global trading
role of sterling. Sterling
mr--1
convertibility has been indef-
initely postponed.
A further effect of the
present shortages and impending
price rises will probably be
to add economic pressures to
the political ones already re-
ducing the defense programs of
various European countries.
Defense appropriations as a
whole have fallen off moderately
in 1954 and 1955, and the cost
of military equipment has tended
to increase.
Correttive Measures
Britain, West Germany,
Belgium, the Netherlands and
the Scandinavian countries have
already taken restrictive mone-
tary and credit measures to curb
excessive demand. These meas-
ures have had some disinfla
tionary effect and have been
accompanied by some slowing down
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CURRENT INTELLIGENCE WEEKLY :SUMMARY
15 December 1955
in the rate of increase in
industrial production.
In Britain, for example,
the rate of increasein indus-
trial production declined from
6 percent in the first quarter
of 1955 to 4 percent in the
third quarter and to 3 percent
in October. A further decline
is probable unless labor and
materials become more plenti-
ful. Even in France, which
has not yet felt the impact of
inflationary pressures as much
as the rest of Western Europe,
the rate of increase in indus-
trial output declined from 13
percent in the first quarter
to 8 percent in the third.
Prospects
Western Europe's present
economic situation contrasts
favorably with conditions which
led to crises in 1947, 1949
and 1951. The resurgence of
financial policy as the pri-
mary instrument for guiding the
economy is itself a measure of
how far Western Europe has moved
since wartime and the early
postwar years, when direct con-
trols were resorted to.
The trade liberalization
and the degree of economic
integration achieved since these
years permit national shortages
and price distortions to be
countered to a greater extent
on a regional basis. The tend-
ency of demand to outrun sup-
ply has been much more gradual
and limited on this occasion,
offering more time for the
application of remedial meas-
ures. Another factor which
should help ease trade and pay-
ments problems has been the
general adherence, in the face
of difficulty, to multilateral
co-operation within the GEEC.
Furthermore, the high lev-
el of investment--which was one
of the main :actors responsible
for current inflationary pres-
sures--will in due course bring
new capacity into operation
and tend to relieve some of the
Pressure.
The managing director of
the International Monetary Fund,
in a recent statement charac-
terizing the nature and impor-
tance of these problems, said
of them: "They are net now
transitional problems arising
from worLime destruction and
postwar distortion in trade and
payments. They are the ordi-
nary, problems of a dynamic
world economy.'
STRAINED RELATIONS B.FTWEEN GREECE AND TURKEY
INTERFERE WITH REGIONAL CO-OPERATION
The continuing diplomatic
"cold war" between Greece and
Turkey makes unlikely the re-
sumption of 'full Greek partici-
pation in NATO and the Balkan
alliance, until Athens can
present some semblance of a
diplomatic victory over Turkey
to the Greek people. The jock-
eying between the two countries
over issues arising from the .
anti-Greek riots in Istanbul and
Izmir last September reflects
their traditional competition
for prestige in the eastern
Mediterranean and more recently
for American favors. Athens ap-
parently feels that the riots
and the Greek defeat in the Mon
the Cyprus issue seriously dam-
aged Gre&i prestige, and is seek-
ing a way to redress the balance.
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CURRENT INTELLIGENCE WEEKLY 'SUMMARY
15 December 1955
Greece has resented Turkeyb
aggressive assumption of leader-
ship in the organization of
Middle East defense and is at-
tempting to counter this by
strengthening its influence
among the Arab states. A Greek
military mission to Egypt last
spring reportedly hoped to
negotiate a Greek-Egyptian al-
liance, and a state visit to
Lebanon is planned by the Greek
king and queen. Although the
problem of Cyprus is long-
standing, the Greek government's
sponsorship of Cypriot claims
in the last two years partly
reflects Athens' desire to
balance the rise in Turkish
prestige.
The Greek foreign minister
recently professed concern over
tt neo-Ottoman imperialistic
tendencies" of Turkish foreign
policy and urged the United
States to "help the Turkish
government and nation to remain
as steadily as possible on the
road of proper democratic think-
ing and behavior." The Turks,
absorbed in efforts to create
a Middle East defense organiza-
tion, apparently took no notice
of Greek maneuvers until it
appeared that Britain was weak-
ening in its determination to
maintain the status quo in the
area. The Cyprus issue reached
a climax in the London con-
ference at the end of August.
Asserting that the issue
was another case of Greek ex-
pansionism, Ankara has publicly
assumed an uncompromising stand
against any change in the status
quo on Cyprus, which dominates
the southern ports of Turkey.
The Turkish nationalism whipped
up just before and during the
conference exploded in the
anti-Greek riots of 6 and 7
September. Although the Turks
have sought to normalize re-
lations with Athens since the
riots, Greece is exploiting
them to reduce Turkish prestige
and to force moderation in
Ankara's Cyprus policy.
Athens is aggrieved and
frustrated by the relative in-
crease in Turkish power and
influence, but has limited
means of matching them. Thus
far, Greece has pursued an
international propaganda cam-
paign through the Greek Ortho-
dox Church and philhellenic
organizations abroad to brand
the Turks as anti-Christian
barbarians. It has also held
back from participating in
Western defense arrangements
pending settlement of issues
stemming from the riots in
Turkey. Ankara has retaliated
with an aide memoire to foreign
missions in Turkey which at-
tempts to counter Greek charges
and place the onus on Greece
for the disruption of defense
co-operation.
Athens' relations within
NATO are no longer at issue,
but Athens continues to tempo-
rize on co-operation within
the Balkan alliance. However,
Athens remains attached to its
alliance with Yugoslavia and
Turkey. Since compensation
claims of Greek victims of the
riots are the sole ostensible
obstacles to renewed co-wen:Lion,
Athens will resume participa-
tion in the alliance when
Ankara liquidates the compensa-
tion problem. The traditional
competition and antagonisms
between Greece and Turkey in
the eastern Mediterranean will
nevertheless present a continu-
ing possibility for new es-
trangement.
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