WEEKLY SUMMARY #91

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002300230001-0
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 23, 2016
• Document Release Date: May 22, 2013
• Sequence Number: 1
• Publication Date: February 1, 1950
• Content Type: REPORT

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V tEKLY SUMMARY
Number 91
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CENTRAL INTELLIGENCE AGENCY
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 1. 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.
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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EASTERN EUROPE,,,,,,,,,,,8 .
FAR EAST , , . , . , , , , , , , , , , , , , , , 12
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As the French Government hastened its prepara-
tions to deal with Communist sabotage of US arms ship-
ments, the Communists, in. a tactical maneuver designed
to conceal the political objectives of their anti-MDAP
campaign, appeared to be concentrating on exploiting the
legitimate economic grievances of workers in defense
industries (see page 2). In this effort, the French Com-
munists will take full advantage of the return to collective
bargaining by promoting industry-wide and local strikes
which )nay have serious political and economic consequences
(see page 4).
The break in US-Bulgarian relations, which reflects
the importance attached by the USSR to sealing off the Sat-
ellite peoples from contact with the US, is one more mani-
festationk of the greatly increased pressure being exerted
against US missions throughout the Satellites and particularly
in Hungary and Rumania (see page 9). Meanwhile, Yugoslavia
recognized the Ho Chi Minh regime in Indochina in an
attempt to foster the spread of national Communists, parti-
cularly in the Far East, and to refute Cominform allegations
that Yugoslavia had sold out to the West (see page 10).
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Anti-MDAP Campaign Communist recognition of the
probable failure of open and direct
attempts to interfere with the shipment of arms to Europe
under the Mutual Defense Assistance Program (MDAP) has
led to a marked change in Communist strategy. In an ap-
parent attempt to conceal the political objectives of its anti-
MDAP campaign, the Communist high command now seems
to be working toward its goal by concentrating on building
up popular war fears and exploiting the legitimate economic
grievances of workers engaged in defense, transport, and
port activities. 'Communist labor is also shifting from
attempted direct interference with MDAP deliveries to
efforts to impair production in armament plants, The Com-
munists evidently hope that these indirect tactics will be
equally effective in delaying Western European defense
preparations but less offensive to Western European peoples
than direct strikes against the national defense. Meanwhile,
in France, where the major Communist effort is centered,
the French Government will take sufficiently strong measures
against the Communist campaign to prevent serious inter-
ference with the unloading and distribution of MDAP equip-
ment,
Economic Policy The serious economic problems facing
. West Germany, combined with mounting
criticism of the Government's failure to take positive mea-
sures to alleviate them, may force the Adenauer regime to
reimpose regulations over the domestic economy and foreign
to
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trade. With unemployment at the two-million mark and
industrial expansion leveling off (except in the steel in-
dustry), Adenauer is being criticized for his "laissez
faire and defeatist attitude" toward steps which would
alleviate unemployment, stimulate exports,. and encour-
age deficit spending for investment and public works
projects. This criticism has emanated not only from
the opposition parties in the Bundestag but from the
social reform wing in Adenauer's own Christian Demo-
cratic Union. Although Adenauer is likely to resist any
permanent alliance with the Social Democratic Party,
he will probably make more concessions to the left wing
in his party. Such concessions will probably take the form
of greater controls over the economy and more aggressive
efforts to alleviate the country's economic ills. Adenauer
will continue, however, to oppose any move toward out-
right socialization or nationalization of industry.
Steel Embargo The West German embargo on steel
deliveries to the Soviet zone will
inconvenience West German iron and steel producers,
but long-term maintenance of the embargo will have far
more serious effects on the economy of East Germany.
West Germany could probably have found ready markets
in areas outside the Soviet sphere for approximately 80
percent of the steel products shipped in 1949 to the Soviet
zone, and the steadily rising domestic and foreign demand
for. West German steel should eliminate any temporary
dislocations caused by the embargo. On the other hand,
the steel embargo has already so aggravated the metal
shortage in the Soviet zone that authorities have issued
an order confiscating all"present and future iron., steel,
and non-ferrous scrap metal. Moreover, unemployment
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GERMANY
has grown to such an extent. that plans are being com-
pleted for shifting manpower within.the zone. The Soviet
zone iron and steel industry is also suffering from a
shortage of metallurgical coke, scrap, and iron ore, and
unless -these-cx itical strortages are alleviated in the near
future, the Soviet iron and steel industry cannot hope to
meet the scheduled 1950 production requirements.
5
Labor Strife The return to collective bargaining in.
France threatens to have serious political
and economic consequences. With,the level. of wages
virtually unchanged since 1948 despite a 17 percent in-
crease in the cost of living, the stage is set for the. Com-
munist-dominatedGeneral Confederation of Labor (CGT)
to exploit the new situation in a campaign which will be
unintentionally abetted by both the Government and man-
agement and which will probably lead to industry-wide
and local strikes, The Government will probably attempt
to set the new minimum wage as low as possible; while
management will probably play into the CGT's hands
by encouraging local. rather than regional or national
contract negotiations and by spurning the assistance of
the Force Ouvriere (FO) in combatting the CGT's tactics,
Meanwhile, if the CGT is successful in gaining wage in-
creases from local str?ikes,ihe FO may also be forced to
adopt more aggressive strike tactics, In any event, a 15
to 20 percent rise in general wage levels is anticipated
during the coming months. Moreover, an increase in strikes
would retard progress toward increased industrial production
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FRANCE
and act as a strong impetus to existing inflationary pres-
sures. Such a trend would in turn hamper French export
efforts and therefore tend to discourage further French
agreement to proposals for Western European trade
liberalization,
Reform Program The Italian Government will have
difficulty financing the 'reform and
investment program currently being planned. The total
program as now envisaged would require an investment
:equal to almost 20 percent of the estimated national
income, The Government will be unable to raise this
sum without resorting to inflationary financing and is
unlikely to take such a course at this time. It is thus
probable that primary emphasis will, be placed on. those
aspects of the program which have the greatest socio-
political urgency, namely: (1) agrarian reform; (2) public
works to alleviate conditions in southern Italy and Sicily;
and (3) expansion of. the low-cost housing program. With
available funds concentrated on these projects, the Govern-
ment will probably be forced to slight the investment pro-
gram that is needed in the industrial and associated fields to
reduce industrial, unemployment, to increase the availability
of capital and consumer goods, and to absorb the increased
consumer spending power injected into the economy by the
socio-political reforms,
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Wages and Prices Despite efforts by the Trades Union
Congress to delay demands for wage
increases, the UK Government may soon be faced with re-
newed wage controversies; Although the cost-of-living
index, based on retail prices, must reach 118 (qt is now
113) before widespread demands can be expected, sharp
increases in wholesale prices since devaluation in. September
should soon be reflected in higher retail prices, especially
since the Government is not inclined to increase subsidies.
Food is up 20 percent and prices for wool, cotton, and hides
have risen sharply and will affect the retail price of clothing
and-footwear. The price of industrial materials and manu-
factures may also increase as `existing stocks become ex:-
hausted and purchases reflect higher world prices.
Defense Policy Growing realization of Ireland's vul-
nerability in the event of war is leading
the Irish Government to reassess the possibilities of
strengthening Ireland's defenses, Defense Minister O'Higgins
recently consulted two tetired British general officers and
apparently concurred in their view that Ireland's :inadequate
military defense imperils British and Western European
security. Although the Irish are still unwilling to enter into
a direct alliance with the UK. while the Partition question
remains unsolved, they are probably now willing toe (1) enter
with the US, or the US and Canada, into a formal alliance
paralleling the North Atlantic Pact; (2) seek allocation of
military equipment from the US and additional equipment
and training from the, UK; (3) expand the Irish Army by
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40 percent and increase military expenditures; and
(4)-refrain from raising the partition-issue during the
negotiations. Strong disapproval by opposition leader
De Valera would probably discourage the'Costello . ..
Government from entering such negotiations; De Valera,
however, influenced by strong Catholic support for Irish
participation in Europe's defense; is apparently no longer,
as adamantly neutrality -minded as he was during World
War II.
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Trade Controls By channeling East-West trade through
Soviet-controlled middlemen in Western
Europe, the USSR is facilitating the acquisition of strategic
goods in contravention of Western export controls, obtaining
supplementary funds for Communist parties in Western
Europe, and establishing a net for economic espionage. To
an increasing extent, all East-West trade must be handled
through agents designated by the USSR. The great majority
of these agents are either Eastern European nationals
operating primarily for their respective countries or local
Communists directed through the regular international Com-
munist apparatus. This type of international commercial
operation not only provides it large measure of control over
East-West trade channels but permits the realization of
large profits. Thus, the Italian Communists have been able
to support a program well. beyond that which would have
been possible from domestic resources or direct assistance
from the USSR.-.Similarly, in Switzerland, profits realized by
such Cominunistrcontrolled firms as Intra Handels, which
has a preferred position in trade with the Balkans, have been
used, in part to finance such operations as the French strikes
and Italian Communist electoral campaigns.
FINLAND
Economic Stability If current Soviet stalling tactics in
trade negotiations with Finland cul-
minate in Soviet refusal to conclude a 1950 trade pact,
Finland's economy would be temporarily affected, but
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FINLAND
Finland's economic and political independence would not be
jeopardized. Finland relied on the USSR in 1949 for more
than half its petroleum imports and'for substantial quantities
of wheat. (The greater part of Finland's non-ferrous ores
and metal requirements were supplied by Western Europe;)
Finland could; probably switch fairly easily to non-Soviet
suppliers for its petroleum requirements, and the country's
grain problem has been eased somewhat by the prospect that
1950's grain crops will be 16 percent above 1949's production.
Some of the foreign exchange required for shifting Finland's
imports to non-Soviet sources would be met by increasing
the export of wood products to Western Europe and the US0
.A major shift to non-Soviet sources because of Soviet re-
fusal to negotiate a trade treaty, however, may force Finland
to ask for some financial assistance from the West to com-
pensate for the unfavorable balance of payments which will
last until 1952, when Soviet reparations payments are
concluded,
US Relations The formal break in US-Bulgarian relations,
when viewed in the light of an increase in
pressure against US missions in the other Satellites, marks
the furthest advance in the USSR's campaign to seal off the
Satellite peoples from the West. An immediate effect of the
break has been the initiation of a ruthless extermination in
Bulgaria of those accused. of collaborating in espionage
activity with the US legation. By permitting an open rupture
in US-Bulgarian relations, the USSR has apparently indicated
its belief that maintaining US-Satellite relations is less
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BULGARIA
important than overcoming the serious obstacles to
complete consolidation of Soviet control represented
by the presence of US missions. Moreover; in the case
of Bulgaria, as may also be the case in Hungary and
Rumania, the USSR may have been anxious to expel US
personnel, in order to prepare with greater secrecy for
further anti-Tito operations. Although anti-US moves
have already increasedlin Poland and Czechoslovakia
as well, the USSR may move more slowly toward forcing
a break in relations between the US and these Satellites,
which not only are members of the UN but still have more
exploitable trade and diplomatic channels with the West
than do the other Satellites.
Ho Recognition Yugoslav recognition of the Ho Chi
Minh regime in Indochina was a
carefully considered move designed both to foster the
spread of national Communism, especially in the Far.
East, and to refute current Cominform allegations that
Yugoslavia has sold out to the West. The Yugoslav Govern-
ment, convinced that Mao Tse-tung will eventually break
free of Moscow, has long been anxious to establish con-
tact with the Chinese Communists, and Tito apparently
believes that contact with Ho' will enable Yugoslavia to
establish closer ties with Mao. Through such ties, Yugo-
slavia probably hopes eventually to win adherents to the
Yugoslav brand of independent Communism and end Yugo-
slavia's isolation as the only "national" Communist state,
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FAR EAST
TREATY WITH USSR
The recently announced treaty between
China and the USSR was almost certainly
accompanied by secret protocols designed to provide for a
stronger Soviet position in the Chinese military organization,
in strategic segments of the Chinese economy, and in China's
.bonier regions. It is not likely that protracted negotiations
would have been necessary to reach agreement on the pub-
lished text of the treaty.
Military Agreements Unpublished military agreements
probably provide for. (1) Soviet
assistance to the Chinese Communist ground and naval. forces
and their embryonic air force; (2) Soviet access to Chinese
naval and air bases; (3) the "joint" development of such
bases using Soviet equipment and technicians; (4) the ex-
change of military and technical personnel; and (5) the dis-
patch of a Soviet military mission to China. The USSR will
probably give special attention to the development of the
Chinese Communist air arm, which it will be in a position
to dominate from the outset; to Chinese Communist service
schools; and to the selection of reliable Chinese Stalinists
as political and intelligence officers.
. Economic Terms In the economic field, the USSR has
probably obtained secret rights to main-
tain its preferred position in Manchuria, establish Soviet
trading firms, assign Soviet advisers and technicians to
strategic segments of the Chinese economy, extend Soviet air
privileges in the border regions and to China-proper, and
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CHINA
engage in preclusive buying of strategic minerals; One
economic pact may deal specifically with Sinkiang; an
arrangement for the joint development of that province,.
together with provision for Soviet advisers with the pro-
vincial government, would make it unnecessary for the
USSR to seek territorial concessions in Sinkiang at this
time.
Possible Friction Meanwhile, friction will probably
develop between China and the USSR
over implementation of the published $ 300 million credit
agreement. As in the case of similar Soviet credits to the
European Satellites, the USSR may use the agreement as
a lever to extract concessions from the Chinese. The
USSR will not only tend to overrate the value of Soviet
goods but may insist on deducting from the credit any
costs of technical advisory assistance, on receiving credit
for the return of equipment originally obtained in the dis-
mantling of Manchurian industrial installations, and on
charging exorbitant transportation costs.
JAPAN
Strike Threat The strike of government workers
threatened for early March still finds
the Yoshida regime firm in its refusal to grant wage in-
creases. In answer to mass demonstrations in prepara-
tion for the "illegal" strike, the Government has warned
that strong action will be taken and maintains that its
efforts to reduce the cost of living will eventually result
in real wage increases, The Socialists, however, in an
attempt to hold trade union support, state that wage in-
creases could be made from funds now proposed for debt
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JAPAN
retirement in the Government's "over-ambitious" 1950
budget, and blame the present labor crisis on the Yoshida
regime. Although the Socialists have petitioned SCAP to
intervene on behalf. of. the government workers, no action
by the occupation authorities has thus far- been indicated.
Meanwhile, the present crisis tends to undermine the
current moderate leadership of the Japanese trade union
movement, and labor may become increasingly susceptible
to Communist influence.
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US-UK DIVERGENCE ON CHINA ISSUE
Recent developments in connection with shipping
and civil aviation in. the Far East have clearly demonstrated
that despite general agreement in over-all policy on con-
tainment of Communism in. Asia., the UK will continue to
differ with the US,on specific issues -and that the UKIis in
general reluctant to cooperate fully with. the US on issues
where there is a serious risk of antagonizing the Chinese
Communist Government.
.This reluctance by the UK has been reflected in
.the attitude of most of, the British Empire ,,courts in which
repossession. action was instituted in respect to the Chinese m
flag ships on which the US has held defaulted mortgages.
Although the US is still pressing the issue, the UK is clearly
not prepared to take any positive steps to prevent such ship=
ping from, falling under Communist control. With respect
to approximately 60 transport aircraft at.Hong Kong, which
had been purchased by Chennault interests from the Chinese
Nationalists while the UK. still recognized the Nationalist
.Government, a Hong Kong court has now rendered a decision
which would appear to permit the aircraft shortly to be
-flown to the mainland of. China for integration., into the Com-
munist civil. and military air fleets. Although the UK may
detain the aircraft at Hong Kong on technical grounds pending
further appeal, continued British reluctance to antagonize the
Chinese Communists offers little assurance of full British
.cooperation with the US on. similar issues in the future.
Meanwhile, the British must soon decide officially
whether. to apply to Communist China, the existing joint
US-UK' policy for restriction of Satellite international
aviation activities. The UK will probably decline for the
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present the US request that it support the representations
already made by the US in Bangkok and Jakarta to refuse
any requests for landing rights for Chinese Communist
aircraft.
Although the UK is as anxious as the US to prevent
Communist expansion into Southeast Asia, the desire to
protect its valuable holdings in China and its position in
Hong Kong will cause the British to move with caution'
in matters concerning Chinese Communist civil aviation.
Any pressure by the UK on Bangkok and Jakarta, further-
more, would conflict with the British objective of culti
vating trdde relations with the Chinese. Pending the
establishment of satasfa~tory diplomatic relations with
China, therefore, expediency will govern British decisions
with respect to Chinese Communist aviation activities.
When full diplomatic status has been accorded the UK's
representative at Peiping and when the future course of
British-Chinese relations seems clearer, the UK may
then find it possible to take a more positive attitude. In
any -case, the UK will seek to conceal as far as possible
any alignment with the US in actions prejudicial to Com-
munist Chinese interests in air transport operations.
Over-all British policy toward Communist China
will probably be largely shaped for some time by desires
to protect the British commercial position in China and
to retain Hong Kong. The British will hope that their actions
will coincide substantially with those taken by the US, but
preoccupation with what the UK conceives to be its major
interests will lead to further situations in which the actions
of the two nations differ. For example, British representatives
in China who have assumed the protection of US citizens and
property may not in all cases be able to defend US interests
vigorously.
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0
a DISTRIBUTION
O 1e The President
2,64; ? ; Secretary of State
3,1 , , , , , e Secretary of Defense
O 5..... ... Secretary of the Army
6, , e , , , , a e Secretary of the Navy
7e e o o , e , o , Secretary of the Air Force
8,70, e e o a , o Chairman, National Security Resources Board
9,71? e , , > , , Executive Secretary, National Security Council
Q 10, , , > , , o e e Assistant Secretary of the Navy for Air
1'1,69a e , , e e , Chief of Staff, US Army
12,13,'14. , e , , Chief of Naval Operations
O 15916917 , e e , Chief of. Staff, US Air Force
18. e o , e e a e , Director of Plans and Operations, Gen.Staff,US Army
19. , a , o , , e , Deputy Chief of. Staff (Operations),US Air Force
20, , , , o o , , e Deputy Chief of, Naval Operations (Operations)
21, o o ; , o e a Director:of Plans and Operations, US Air Force
22,23,24, , , , , Special Assistant, Intelligence, Department of State
25,26,27,28,29,
30,31,32,33,34, Director of Intelligence, General Staff,US Army
35,36,37,38.,39,
40,41,42,43,44. Director of Naval Intelligence
p 45,46,47,48,49,72,
73,74,75? Director of Intelligence, Headquarters, USAF
50, ; , , , e , , o Director of Intelligence, Atomic Energy Commission
O 51, , , , Executive Secretary, Military Liaison Committee,
At
E
.mac
nergy Commission
52,53,54,55,56, Chiet,'Acqui.sition & Distribution Div., OCD, State
57, , , , , , e Directot, Federal Bureau of Investigation
58. , , , , , , , , Secretary, Joint Chiefs of Staff
59, , , , , , , , , Chief., Policy: Planning Staff, Department of State
600 , , , , , , e o Secretary of State (Attention: Policy Reports Staff)
61, o , , o , o e > . Deputy Director for. Intelligence, The Joint Staff.
62,63? , , , o o , Secretary, Joint Intelligence Group, Joint Staff
65a . , o , , , , US Air Force Representative of Joint Strategic
.Survey Committee
68, Administrator, Economic Cooperation Administration
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Document No.
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U. S. GOVERNMENT PRINTING OFFICE
'931-S-1948
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