WEEKLY SUMMARY NUMBER 33

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002100120001-4
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 27, 2016
• Document Release Date: July 29, 2013
• Sequence Number: 1
• Publication Date: January 7, 1949
• Content Type: REPORT

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1 WEEKLY SUMMARY
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33
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7 JAN 1949
4114W
Document No.
NO CHANGE in Class. E]
DECLASSIFIED
,lass. CHANGED TO: TS S C
DDA Memo, 4 Apr 77
kuth: D k :G. 77 1763
Date: BY:
CENTRAL INTELLIGENCE AGENCY
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1. This This publication contains current intelligence exclusively
and therefore has not been coordinated with the intelli-
gence organizations of the departments of State, Army,
Navy, and Air Force.
2. This copy may be either retained, or destroyed by burning
in accordance with applicable. security regulations, or
returned to the Central Intelligence Agency.
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WARNING
This document contains information affecting the na-
tional defense of the United States within the meaning
of the Espionage Act, 50 U.S.C., 31 and 32, as amended.
Its transmission or the revelation of its contents in any
manner to an unauthorized person is prohibited by law.
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HIGHLIGHTS
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WESTERN EUROPE 2
I NEAR EAST - AFRICA 4
I FAR EAST 6
I A NNE X: DANGERS OF UNCONTROLLED NON-
SC HEDU LED AIR OPERATIONS 11
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HIGHLIGHTS
The Israeli offensive in the Negeb, which began
on 22 December, has apparently been brought to a halt this
week through the expressed willingness of Egypt and the
Provisional Government of Israel to accept a cease 41re
and begin negotiations for an armistice. Before indicat-
ing their acceptance of the cease-fire, however, the Jews
had apparently achieved their major military objectives
In the Negela and had strengthened their bargaining post-
tion in the whole Palestine situation (see page 4).
While Chinese battle zones remained strangely
? quiet during the past week, military and political leaders
made efforts individually to begin peace negotiations.
Chiang Kai-shek's bid for peace, made in a speech on
New Year's Day, was hedged by conditions entirely un-
acceptable to the Communists and represented an attempt
to place the onus on the Communists for continuing the
civil Altar (see page 6). Meanwhile, evidence continues
to gram that the National Government is preparing for
an eventual move to Taiwan (see page 7).
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WESTE nN EUROPE
European Recovery Sabstantial progress in -western European
recovery is discernible at the conclueion
of the first nine mentil;.s of the Euro-vaan recovery program.
Although the ECA countries raay not be able to eliminate their
abnormal trade deficit 'iv 1.92 43, four major accomplislunents
iave alresxly been attained: (I) skice 1947, orer -all production
merits will be about a half !Anion dollars 7ess in 1949-50 than
in ECA couatries bas rhsen substantially; (2) dollar aid require -
in 1548-4S: (3) an intro.-European payments plan, based largely
on conditional ECA aid, las been established and will increase
trade between participating countries; and (4) a real though
through the Organization for European Economic Cooperation.
limited degree of economic cooperation has been achieved
This provess has been achieved despite necessary initial
emphasis both on problems of organisation and on relief rather
than on recovery. Several basic, long-range problents remain
to be solved, if the European recovery program is to achieve
its objectises. Many countries, especially France and Germany,
have yet to reach monehry and fiscal stability. All ECA colts-
! national four-year recovery plans into a coor_linateci whole.
tries must exert greater effort to integrate their respective
ECA nations must figure out a way to reduce a proepec-
tive trade deficit (mostly with the dollar area) of some three
billion loners in 1952-53.
FRANCE
Gaullist Strength De Gaul's chances for returning to power
soon on his own terms have been reduced
by his recent public statements,which have disturbed both Labor
and businesstand by his failure to capture control of the Council
of the Republic. Moreover, his stand for state aid to Catholic
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FRANC:::
revved a ;Jitter eontreeee: y ead has probably jeop-
.11'diZee his chances of winnteg (ver Vie majority of hitherto
-,yairetthetic Raciieal lIts failure to muster en
absetnie majority in the Council of the Re:Albite on Ray of
three reajor Issuea (eteetten '4)restdent, Vas speed -ep
)rormoere for const:ieration of i.he budget, an the bedget
,h-ts temporartiy blocked his &torte to -rzturn to
lower
A constitutiorr.i men.
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UNITED KINGDOM
Foreign Trade The sizeable trade and financial agreements
nearing conclusion between the UK and
Yugoslavia and Poland constitute further moves toward the
re-establishment of prewar European trade relations. The
agreement with Poland, which calls for an exchange (1 goccis
totalling $600 million during 5 years, is more iznportent eco-
nomically than the Yugoslav agreement which provides for
$60 million trade for I year. ikloreover, Poland's willing-
ness to meet British demands for settlement of nationaliza-
tion claims indicates Poland's need for industrial equipment
end raw materials which the USSR has apparently been un-
able to provide. The Yugoslav agrequents, however, may
have some political implications. Tito's difference with
the Kremlin evidently contributed substantially to his will-
ingness to meet British terms. Tito will receive some of
the industrial goods which he needs to continue Yugoslavia's
ambitious economic program. These agreements further
illustrate the economic pressure on both sides for expand-
ing trade relations across the Iror.Curtain despite ideolo-
gical differences.
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NEAR EAST - AFRICA
PALESTINE
Israeli Offensive International repercussions arising out
of the UK's treaty obligations to Egypt
will probably induce Israel to withdraw its task force from
Egyptian territory. Nevertheless, the 22 December offensive
In the Negeb has pit the Israelis in a strong position to force
the remaining Egyptian troops out of the Negeb entirely.
Before accepting the UN cease-fire, the Jews had apparently
achieved both of their major military objectives in the Negeb
itself. Except for a narrow escape route, the Egyptian
garrison at Gaza has been encircled and the main road from
Beersheba south to the Egyptian border has been cleared.
There appears to be little likelihood that Israel will accept
in their' entirety the provisions of the UN Security Council's
29 December resolution for a withdrawal to the 14 October
positions in the Negeb. Moreover, if the Egyptian Govern-
ment (which has now indicated its acceptance of a cease-fire)
fails to negotiate the definitive armistice which the Israelis
want, the Jews will probably resume the offensive to drive the
remaining Egyptian troops out of the Negeb. With the Egyptian
threat sharply reduced, Israel can next concentrate on the two
remaining Arab forces in Palestine: the Iraqi Army and the
Transjordan Arab Legion. Although international complications
caused by the drive into Egypt may for a time deter the Israelis
from undertaking a new offensive against these two armies,
the Jews are likely to take matters Into their own hands and
drive the remaining Arab armies completely out of Palestine
If Israel and the Arab states are unable to find a basis for
negotiating a definite settlement.
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EGYPT
Cabinet Changes 7 he Egyptian Government will be materially
strongther.ed, if the new Prime rani.ster,
Andel RAI iA successful in, his afforts to broaden his Cabinet
by including members ci the Wald (Egypt's largest party). At
present the Cabinet is a minority party coalition like its
rudecttssor, an the new Cabinet members twith the excep-
tion of Abdel Hata) are little know. A number al prc:ninent
Waidists, however, nm.' appear willing to enter the govern-
mmt. For several yeart, the ?Ttfd has declined Cabinot post-
tions largely becausc of'4. peisolul :eud between King Farouk
and Nahas Pasha, leader of the Wafd. Consequently the Wafd,
as a strong opposition party, has frequently been able to pre -
I vent the government from taking effective action on important
issues. Inclusion of Wafdists in the Cabinet, In addition to
strengthening the cotuttry's internal security, would enable
the government to present a united front in attempting to force
the Egyptian people to accept a compromise on the two most
critical foreign issues: a settlement in Palestine and re-
', negotiation of the Anglo-Egyptian Treaty.
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FAR
CilLNA
Milry situation The focus of China's civil war shifted Ws
of (v-th and Central China to Cie individual peace effects cf mill-
week from the strangely inactive battle zones
tar y leaders and politicians in Peiping. Tientsin, and Nanking.
Altgh the superior Communist forces now slurs:lading Peiping
ardi! Stentsin remain inactive, recent Cscsraunist trosp movements
tsward Tientsin indicate this North China Industrial center may
be seized in the near future. In Central China, the Nationallets
have withdrawn nearly all their remaining forces south of the
Yangtze River, leaving only an inadequate holding force between
Pangfou and Pukou. Effective Nationalist resistance has been
virtually eliminated and the Communists are capable of admini-
stering the coup de grace at any time. Despite this, both National-
ists and Communists appear to be awaiting the outcome of current
peace feelers.
Chiang's P1 a ns Chiang Kai-shek's New Year's speech indicates
that he is reluctant to give up power despite his
offer of peace to the Communists and the genezal expectancy that
he would retire in favor of Vice President Li Tsung-jen. In making
his bid for peace, which was hedged by conditions entirely unaccept-
able to the Communists, Chiang seised the initiative from the Com-
! the unpopular and destructive war. However, the peace move-
znunists and attempted to place upon them the onus for continuing
znent in Nationalist China is now so strong that Chiang may attempt
Ito appease political opposition and facilitate Nationalist-Communist
negotiations by going into retirement, with the idea of subsequently
returning to power, as he has done twice previously in his career.
Peace Rejected Recent Chinese Communist broadcasts have
and made clear the Communist view that the Kuomintang, as a
rejected Chiang's New Year's peace proposal
party, will not be included in the coalition government which the
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CHINA
Communists plan for 1949. In addition, the Communists have
declared that their armies will cross the Yangtze and carry their
operations into South China. One of the broadcasts summarized
an editorial "exposing the peace intrigues of the reactionary
party" and calling upon "the Chinese people and the Chinese
Communist Party" to work "hand in hand to eradicate all re-
actionary elements and to oust American imperialism from
China."
Resistance Conference The Nanking conference of leading
generals and governors, which Chiang
called recently in an effort to obtain a vote of confidence for
continued resistance to the Communists, has little chance for
success. Fu Tso-yi, reliably reported to be negotiating with
the Communists in North China, and Ma Bung-kwei, Indepen-
dent Moslem warlord of the northwest, declined to attend.
Pat Chung-hail Central China commander prominent in current
attempts to force Chiang to resign, also failed to appear. Ap-
parently, none at the generals in threatened areas favor con-
tinued resistance, although Yen lisi-shan, governor of Shansi,
might drive a bargain with the National Government for supplies.
Both Yen and Kwangtung Governor T. V. Soong have made per-
sonal Inquiries regarding future US aid and support.
Taiwan Refuge The sudden appointment of General Chen
Cheng, former Nationalist chief of staff, as
governor of Taiwan is further evidence that the National Govern-
ment is preparing a haven or a base for future operations there.
General Chen is an able military administrator and fully loyal
to Chiang Kai-shek. Also, Chiang Ching-kuo, the Generalissimo's
son and former economic czar of Shanghai, has been appointed
chairman of the Taiwan provincial Kuomintang headquarters.
These appointments coincide with the arrival in Taiwan of many
Nationalist officials (with their families), who are members of
the Kuomintang right wing. Recent shipment to Taiwan of some
of the Generalissimo's personal property also suggests that
Chiang Kai-shek himself plans to go there.
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C IMP%
Szechwan Autonomy Growing sentiment in Szechwan for
autonomy may indicate the pattern
for efforts by the western provinces to establish regional
regimes as the complete collapse of the Nanking Govern-
ment approaches. In Szechwan, the desire for autonomy is
being manifested by failure to meet quotas of rice shipments.
demands for the return of gold and silver released to the
National Government under the 1,9 August measures, tilt:
Issue of provincial auxiliary currency, and growing independ-
ence of provincial defense units. Vir'autl autonomy within the
National Government orbit is apparently the first objective
of the Szechwanese.
Sinkiang Governor The appointment of a new governor of
Sinkiang, who is reported to be accept-
able to the pro-Soviet lii. group in the province, will probably
lead to increased Soviet influence throughout Sinkiang. Ili
leaders withdrew in 1947 from the provincial government in
protest against the appointment of the new governor's prede-
cessor, and they refused to return so long as he remained in
office. A reorganized provincial government, including 111
leaders, may also eliminate the threat of a new anti-Chinese
rebellion.
INDONESIA
Security Council Although Asiatic bloc pressure will prevent
the Security Council from dropping the Indo-
nesian case, nothing more effective than a mild censure of the
Dutch attitude is likely to occur. Any more positive action,
such as the application of sanctions, is exceedingly unlikely.
The UK and France are most unlikely to permit strong anti-
Dutch action. Norway will probably join Argentina and Canada
in abstaining from vigorous action and thus successfully block
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INDONESIA
efforts by Egypt, Chinaland Cuba effectively to settle the
Indonesian dispute and thereby restore UN prestige. Mean-
while, the USSR and Ukraine, despite their extreme anti-
colonial stand, will probably abstain from any resolution on
Indonesia in the hope of prolonging chaos in the Far East
and further undermining the position of the western powers
there.
Astatic Reaction Public and official opinion in India continues
to run high regarding Dutch military action
in Indonesia on 18 December and the weakness of the UN
Security Council's attempts to deal with the situation. bxlia,
which considers itself the champion of Asiatic interests, was
persuaded to take no action on its threat to break off diplomatic
relations with the Netherlands. Prime Minister Nehru, how-
ever, has now reaffirmed India's desire to act on the matter
by calling a conference of sixteen Middle and Far Eastern
governments to consider the Indonesian question. India has
cancelled landing rights and transit privileges of the Royal
Dutch Airlines, and, although they feel less strongly on the
subject, Pakistan and Ceylon have done likewise. Ceylon has
also closed its ports to Dutch ships bearing troops or arms
to Indonesia.
Although the Dutch have naturally borne the brunt of
popular indignation in the subcontinent, the UK and the US
have also been under fire. India is out of sympathy with the
UK's position on Indonesia. The Indians are less dissatisfied
with the US performance, apparently having been convinced
that the US is doing what it can in the Security Council. Never-
theless, the failure of the US to restrain the Dutch Ms dis-
couraged both the Indians and their neighbors regarding the
ability and willingness of the US to assist the Asiatic peoples.
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INDONESIA
Dutch Plans In an effort to allay world opinion and to win
the cooperation of influential Indonesian
nationalist leaders, the Netherlands Government has adopted
an ostensibly more conciliatory attitude toward the Indonesian
problem. Plans are being expedited to establish a Dutch-
Indonesian interim government and the Dutch are reported
to be considering the removal of High Commissioner Bee/
in a further attempt to win Indonesian support. There is
nothing to indicate, however, that such conciliatory Dutch
moves will have any success. Guerrilla resistance is con-
tinuing and the strong Asiatic support which the Republic
has attracted will cause Indonesian leaders to hesitate be-
fore accepting positions under the Dutch.
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DANGERS OF UNCONTROLLED NON-SCHEDULED
AIR OPERATIONS
The lack of adequate international controls over non-
scheduled air operators has permitted the development of
evasive techniques for clandestine air operations which could
conceivably place a fleet of transport aircraft at the disposal
of a foreign power for a mission threatening the national
security of the US. It is entirely possible that, under the
present loose and laxly enforced regulations, some of these
aircraft would be US-owned.
Numerous factors encourage clandestine air operations
by unscrupulous individuals. Aircraft are frequently permitted
to operate almost indefinitely in a virtual vacuum of sovereignty
because of: (1) the poor coordination of aircraft controls at
the international level; (2) the lack of uniformity in international
regulations; and (3) the lack of enforcement machinery for even
these inadequate regulations.
The principal clandestine air activity during the past
year has been the ferrying of military aircraft and the transporta-
tion of arms, combat personnel, and even dismantled fighter
planes. Other activities have included the evasion of immigra-
tion laws by covert passenger traffic; the smuggling of gold,
securities, narcotics, and other valuable cargoes; and the mainte-
nance of communications by dissident or rebellious factions with
their agents and supporters in distant areas. Subversive agents,
moreover, have been moved from one country to another for
political or military sabotage.
An elaborate technique Ms been perfected for these
clandestine air operations. The unscrupulous promoters have
had no difficulty finding pilots and air crews willing to engage
In illicit operations and they have been successful in bribing
airfield and customs officials outside the US. For other illegal
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errands, these "rromoters" have utilized highly specialized
methods developed by underground resisiance movemeeis during
World War 'CI. The use of false .pasaprarts, miarepreaentation
of true dentittationa, mislabeling of cargoes on raanifeats, and
contemptuous disregard for local regulations have been 5tanciArd
practice. The intricacies of these operations are illuatrated by
the oxampie of a C'-54 which was chartered from a Ca iatiornia
owner by a US non-scheduled carrier in Philadelphia for use
under contract with a I,,uxemLo urg Company (owned by a :14etv
Zealander) purporting to hold a aubcontract with a Br Mali air
travel concern acting on behalf of an agency responaible for
transportation of displaced persons from France to LaraeI.
Although the agency in question controls the movement of only
500 passengers, the US carrier has asked the-..4.`rench for permits
for sufficient flights to carry 2,400 passengers or equivalent
cargo. The principal European promoter of this operation
actually include unscrupulous individuals with little financial
backing and with disreputable connections throughout the continent.
Although other illicit operations have been organized in
Central America and Southeast Asia during the past year, the
principal clandestine air activity has been in the interests of
Israel. Two transport aircraft are probably en route to or have
recently arrived in Israel, in direct violation of the UN ban on
the export of aircraft to the Near East. As opportunities for
profits in the Israel tra,ffic diminish, the "promoters" will
certainly direct their energies into other channels. For example,
Implementation of the proposed policy by which the US and the
UK hope to contain the Satellite air lines may provide an oppor-
tunity to develop a lucrative black market in aircraft and parts.
these specialists In clandestine air operations exploit this
market to the full eatent of their proven capabilities, this US-UK
policy can be effectively nullified.
In the continued absence of adequate international controls
over non-scheduled operators, even more serious developments
could occur. For example, a fleet of transport aircraft presently
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available for charter operations in western Europe (including
pilules of Ult registry) could conceivably be obtained by clan-
destine promoters for agents pretending to be engaged in
normal trade activities, but is reality representing a foreign
power. Under such an arrangement, one flight each by forty
planes could distribute a task force of one thousand trained
saboteurs throughout 'western Europe without the nature d
the operation becoming appareat until the mission was ac -
compliehed.
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DISTRIBUTION
1 . , . . ? . . The President
2. . .. ? Secretary of State
3. Chief of Staff to Commander in Chief
4. ? Secretary of Defense
5. , ? ? 6 Secretary of the Army ?
6 . ? Secretary of the Navy
7, . . . . Secretary of the Air Force
8,70. . . . Chairman, Nattoral Security Resources Board
9. . . .... . . Executive Secretary, National Security Coupon
10 . . . . . ? . , Assistant Secretary of the Navy for Air
11,69..... . . Chief of Staif, U.S. Army
12,13,14. . ? ? Chief of Naval Operations
15,16,17. ? . . Chief of Staff, U.S, Air Force -
18. Director of Plans and Operations, General Staff, U.S.Army
19. Deputy Chief of Staff (Operations) U.S. Air Force
20. Deputy Chief of Naval Operations (Operations)
21 Director of Plans and Operations, U.S. Air Force
22,23,24. . . . Special Assistant to Secretary of State for Research
and Intelligence
25,26,27,28,29, Director of Intelligence, General Staff, U.S. Army
30,31,32,33,34.
35,36,37,38,39, Chief of Naval Intelligence
40,41,42,43,44.
46,46,47,48,49. Director of Intelligence, U.S. Air Force
50. ? ? ? , ? . ? . Director cd Security and Intelligenceottomic Energy Comm.
51 Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
52,53,54,55,56. Chief,Acquisition di Distribution Division,01CD,Dept.8tate
57. . ? ? .... Director, Federal Bureau of Investigation
SS Secretary, Joint Chiefs at Staff
69 Chief, Policy Planning Staff, Department of State
60....? ? . . ?
. Secretary of State (Attention: Chief, Policy Reports Staff)
.
61 Deputy Director, joint Intelligence Group, joint Staff
62,63. . , . . ? ? Secretary, joint Intelligence Group, joint Staff
64 Director, joint Planning Group, Joint Chiefs of Staff
65.. . . . . . U.S. Air Forc.e Representative on joint Strategic
Survey Committee
66,67.. , . . . . Secretary, State-Army-Navy-Air Coordinating Committee
68 Administrator, Economic Cooperation Administration
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U. S. GOVERNMENT PRINTING OFFICE
2631-8-1948
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