WEEKLY INTELLIGENCE SUMMARY NO. 23

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A005000010023-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 27, 2016
• Document Release Date: April 24, 2013
• Sequence Number: 23
• Publication Date: August 3, 1948
• Content Type: REPORT

S~.ITIGE in Cla s. ^
~DECL?ASSI.~IED ~ ~/
OFFICE OF Q'ffii3'~.TS ~df~d`'~~It~3'FS TS S (~./
TRAIISPORTATT~I~G~iQIJP 4 Apr 77
Auth: DDA R%G. 77 1763
Date : ~~. BY: ~.
? 3 August 19/.,.8
Czechoslovakia hsa become the principal source of supply snd
the main operational base for certain II5 aircraft operators, whose
clandestine air operations to Palestine, transporting war materiol,
are. still increasing. The Czechoslovak Government is participat-
ing in the contraband traffic by providing arms, ammunition and
fighter aircraft for transport by air to Palestine. It is also
making available airfield facilities, Socurity Police guards and '
other personnel, and fa permitting US personnel to enter the
country'vithout visas.
Although clandestino air transport operations of Service
Airvaga have been terminated la Panama, it appears that a new front
organization has bees eatabliehed is tdaxico and that t7exico has
new replaced Periama as the Western Hemisphere base of these
clandestine operations.
Despite the fact that the IIK itself has purchased Canadian
four~ngine transport aircraft, is recognition of the inaclequaay of
present British transports, it is still oxerting pressure on the
Dominions to buy aircraft of British manufacture. -
Greatly increased operating coats, due to Chinas currency inflation,
have forced the tva Chinose Gov~arnment-controlled airlines to make drastic
reductions in their services. This will seriously affect comaunication
between Nanking and outlying parts of China as well as curtail airlift
'support of the idationaliat Arr,~.
A semi-official French agency has agreed to supply at least ten
small aircraft which could be used for military transport, to the
Bulgarian Government.
The IISSR is taking full advantage of its dominant voting position
at the Danube Conference 3a Belgrade to override the Heet. Soviet
disregard of the IIS-IIK-French positions may force the Hest to consider
withdrawal from the Conference and eatab]3ahment of a separate regime
for the upper Danube.
e
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SECRET `?
Chfnewe whipping continnem to deteriorate, and maxSy cotop~ew
have ceawed operations. This may* adverse2,p affect the chance th?t
Chinese inland uatorm grill bs opened to IIS-flag v?waels.
The UK policq of removing and scrapping vewmelw.walveged off
the & itiwh zone of Cermagy is bein#; protested bq US.authoritiew
is Dizonia.
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~' SEAT `? .
The scone of clandestine air operations to Palestine annears
to be still increa,~iry~. Ftizrthercrore, the isrvolvement of certain US
airl9.ne operators with foreign Co:xninist organs in those activities
has now been positively confirned. ,
Czechoslovakia has become the principal source of supply and
the Hain operational boss for the extensive underground orgautzation
ended in the clandestine air transport of war materiel to Palestine.
The extent of the Czechoslovak Governmentra participation in these
operations is indicated by the following facts:
1.) The Czechoslovak Government has made available airfield
facilities at Zatec (a military installation) and Brno, at which
SEHVICI; kIHI~lAYS, its Panamanian subsidiary LAPSA, sad other US air
carriers have established operational bases.
2.) The evidence indicates that arms; amnuni.tion and bombs have
been provided by Czechoslovakia for traaspcQt to Palestine, presur~ab-
ly from the Skodn mu;iitiona worlu3 at Pilsen (about seventy kila~metere
iron Zatec) and the Zbro~ovka arr~amont works at Brno.
3.) r4E-1C9 fighter aircraft have been flotJn by Czechoslovak
pilots to Zatec, where they have been disassembled and loaded for
transport in IISrowned aircraft.
4.) The Corumxnist-dominated Czechoslovak Security Police have
.protected ell US aircraft from obse_rvation,by means of constant heavy
guarda,tahen not in flight and have supervised the loading of aircraft
by Czechoslovak laborers.
5.) US maintenaneo and flight personnel engaged in these
operations are permitted to enter the country without visas when
traveling on aircraft of LAPSA or Czechoslovak Airlines. In same
cases, "visitor's permits" are issued by Czechoslovak authorities.
In all instances, ft annear8 that the US passports of such personnel
are taken up by the Czechoslovak police upon entry. It is, not yet
known whether the passports are being withheld by the Czeehoalevak
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 Government or try the local directors of the clandestine operations,
as a means of controlling their personnel. However, LAPSA officials have
restricted their personnel to the errvirone of the airport base on the
grounds that proper visas have not been obtained and with direct or
implied threats of arrest by Czechoslovak police if they attempt to
proceed beyond Zatea.
The apparent motive of the Czechoslovak Government in arranging
for the entry of US personnel without vines is to withhold information
concerning these clandestine operations from Czechoslovak diplamatic
missions abroad, ~l4 of which are etil]. staffed with officials assigned
prior to the Cammuniet coup and of doubtful loyalty to the new regime.
The recent action of the Italian Government in i~orcepting and
impounding several contraband air shipments has resulted in the
increased use of a woll-established operating base at A~accio, Corsica
as a transit point sprouts from Czechoslovakia to Palestine. Preach
aontrola over ia-transit aircraft using Corsican facilities appear to
be negligible. It is not known that the US has made represeatationa
to the French Gavertmient concerning the use of Corsican fields in this
traffic.
The pattern of clandestine air t an rte, operations in the Heatern .
H~ni.sphere has recentlp_been alter,~d. Fair several months early 4n 1948,
the IIS~owaed Service Airw~s operated through a Panamanian subsidiary
airline Lineal Aereas de Panama (LAPSA) in order to facilitate evasion
of US controls over the exportation of implements of war, including
aircraft, to Palestine. At least one Constellation and nine C.,46
transport aircraft are known to have reached Panama under the register-
ed ownership of LAPSA; These aircraft are now believed to be is Etiaope,
operating shuttle flights transporting ara~, scrmunition end disassembled
fighter aircraft Pram Czechoslovakia to Palestine. Although LAPSA~s
Panamanian registrations ere still in. effect, the orgeaization appears
to have terminated its Panamanian operations in June, possibly due to
an impending imteatigation by the Panamanian Government at US
instigation.
It ie now known that at least three C~r,6 aircraft of the parent
oompar~, Service Airways, have been transferred to-14e~doan registry
under the alleged ownership of a Mexican airline, Proveedora Mondial.
(Two of these aircraft were tsmporari]y registered in Panama after their
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S~,R'ET
US registrations wore cancelled, but they have never been reported
to be operating out of Panama,) Yery little is yet known of the
corporate structure and ownership of Proveedora Ifiuidial, or of
its actual operations, but it is likely that this organization
is aervit~ es a front for Service Airways' illegal activities in
Latin-America end that tiexico has replaced Panan~s as the liestern
i[emisphere base of clandestine operations.
to the Pact the t e UH in r o o he un
abil3t of sent British trans rt a t, see Transportation
Group Weekly, 27 July has purchased Canadian four-engl.ne, DC?,fi4~a,
they are now exerting pressure on at least tt~ro of the Daminfans
to use "ritiah-manufactured cormercial transports in lieu of more
efficient US types. At a recent UK-Australia-Idew Zealand Air
Transport Conference in Wellington, for example, it was decided,
at British inaiatance, to go ahoad with the purchase of Solent
flying boats for Tasman F;~pire Airways, although Australia and
Ydew Zealand would have preferred US pressurized land planes, and
the company is alrteac7p using American IX:-!,s on a chartor basis.
~oun`ine ~rat'on~ costa have for,,,ggd t e twa Chi:aeae
Go nm nt on,;~lled airlines, China National Aviation Corporation
C~IAC and Central Air Transport Corporation (CATC), to refuse
future passenger reservations and t o introduce radical cuts in service.
Coate increased 800 between February sad Jvly 1945. The present
fare, from Shanghai to [tanking (166 airline-miles), on the other hand,
ie only the equivalent of $1.74 U.S. Although communication between
the Capital and out7,ying parts of China is particular]y @ependent.
upon tho air network, and air lift support for the [iationa].Yet Army
is a function of the cormercial airlines, the astronomical inflation
has made it almost impossible for the air lines to cover even the
currency outlgv for their gasoline supplies,
? At least ten_amall French-~mamxfactvred trananort aircraft are
to be aunalied to the r as Govermneut by asemi-official French
agency (Office Franosis d'FScportation de I~teriel Aeronautigne) in
return for Bulgarian tobacco and &gyptian pounds. While the air-
craft are not outright military types, the US has made representations
in Paris, and the matter has therefore created some sunbarrasament to
the French Government,
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~tyicti
Fiadina itself at~ast in an international conference which it
gun dominate, the IISSR. with evident relish, is nroaeedine to over-
ride the Western powers rouehshod at the current Danube Conference
in Belgrade. The prime USSR objective is obvious],y to demonstrate to,
the uarld the impotence of the US, US and France Sa the Pace of the '
impregnable Soviet position at the mouth of the Damibe a~ within the
lower riparian atatos. In pursuance of Soviet policq the Chief of the
Soviet Delegation, 9iahinsl~, hse gone out of his way Lo place the
Western delegations in an undignified light. Almost immediately after
the Conference opening, viahinalty succeeded in eooeluding English, the
langu~~i~?~w out of four sponsoring nations (US, UK, France, USSR),
f use. then proceeded to introduce a Soviet draft for a new
Danube Convention which would not only bar the Western powers from
a~ participation in Danube oo~rol, bnt would even repudiate all
financial obligations of the pre-war Daauba Commission.
The USSR is in a position to shut off debate in the Danube
Conference, thus preventing at{y real discussion of the expected US
or other Western proposals, and can move to the expeditious adoption
of its Convention. If it doss this, the t~astern powers may ba
forced to withdraw from the Conference, sad after declaring the Hera
Comreation'to be illegal, consider the eatabliahment of a separate
new regime to control the upper reaches of the Danube. A possible,
but relatively ineffectual further move mould be the submission of
the issue to the International Court of Juatiae in order to apply
the stigma of illegalitq against the Hasa Soviet Danube Caumniasion.
The best chanco for a Danube arrangement which in some measure
satisfies the US point of view probably lies in an attempt to drag
out the ConPere~e until the problem can be integrated into Esau-West
negotiations for an over-ell European settlement if such broad
discussions materialize. There are, however, no indications yet
that the USSR would be willing to permit aRY delay in the attainment
of its obvious ob3ectivea in the Belgrade Conference.
Deterioration of transportation nontinuea in China. In.addition
to contending with disruption of rail traffic and deatruation of roads,
the Nationalist f3overnment nov faces further deteraoation of river
shipping, which provide essential supply lines to the interior. Faced
with runaway inflation, fuel shortages and the leak of necessary
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ec~uipnent, twenty five camparsios in the :~occlzow a~.ea havs~
discontinued operations anti others are ~:v.K:ctOd ?t?o"r"'ollo~a
ahartlye
[while early o` the companies that err t+eing f~,~zaec"", oat of
business are probably marginal operators there is ;1.ttle doubt
tisat present conditions also imra~so se~+!rre harie~iceg.s cn the
ma.sor operators such as the China 1?ierehar_te Stcsm i~avl.gatior.
Ganpany*y the principal Chinese flag eperator.
Whi1a the danger of collapse in C~hirese shin F:u=;; is not a
new develoganent 1t is occuring a', a part.c:ularly uni'ortunato
time from the L'S point of vie~a'> Proapaots.that the Ghi.r+ase
Government wi71 left the ban on U.S-flag operations a.n Chinese
3.rland waters Piave recently impravode ?vo~r, however it is
liY.ely 'that Chinese shipping interests, bitterly o;+posing
the vxpeq?L'od Govvrmr,:ent move, will stautl;~ maintain that ChinvE9
shipping, under present emergenc,~ condit3.ons, ca~i+_ot possibly
withstand. the lose of business to AzgrS.can shipp:.ice interests
which wou7.d result ?rom the arrive.'! of U& competition.
Mar:o~ vesae7.s sun:c off the Germ ~~~art have _bean rais