(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A005900010002-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 94
• Document Creation Date: December 12, 2016
• Document Release Date: June 26, 2002
• Sequence Number: 2
• Publication Date: August 30, 1947
• Content Type: SUMMARY

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ONFI r TIAt
3 0 AUG 1947
.471
p T, AN HAS NO OBJECTION
THF,
THE PFCI,ASSIEICATION OF
GE RAL jgj~ DQou i1T.
1. Rio Pact not to alter US Antarctic t i . c - - T A ! 'D1 f inept of State
r mmar0ng o roposal to inelu e a part of Antarctica in the
"heo isphere defense zone," has suggested to the US Delegation at
Rio that because Argentina, Chile, and the UK have conflicting claims
to that part of Antarctica, Great Britain might protest its inclusion
in tht "'defense zone,' Is and Argentina and Chile th ht later invoke
the treaty provisions against the UK.
The Department has also suggested to the US Delegation that
it r4 k e a formal statement reaffirming the US policy of non-
recogni-tion of any- claims to Antarctic territory. 25X6
EUROPE
onsiderirs ao eal caw for wheat--US Am-
.3. FRANCE- Cabinet
bassado? Cax"fery in Paris has been informed liy two independent
and trustworthy sources" that: (a) the Ramadier Cabinet is considering
an appeal to Moscow for wheat; (b) the appeal is being urged not only
by Communists but also by certain Socialists who consider that the
"USSR should be "put on the spot.
4. RUMANIA: Triage of Armed Forces undertaken without wag`s, permission--
US Military Representative C1, Rumania reportrst1w e long-awaited
purge of the Rumanian Armed Forces will begin on 1 September. The
ensue has been secretly ordered by the Deputy Chief of Staff, despite
Michaels oblectlons, and is viewed by the US Representative as
an t e r .example of the Icing's waning authority.
DIA and DOS Reviews Completed Document No. e)- !r2
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DDA Memo, 4 Apr 77
Auth: DDA REG. 7711763
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NEAR EAST-AFRICA
5, r.,A : ,USSR presents threatf:nin _no a to --US Ambassador
.l.t=n reports that Soviet Ambassador Sadchikoff has delivered to
Minister Qavam a note which: (a) states that Qavam's uncooperative
sttixude in the oil. matter is regarded as a sign of enmity toward the
.' SSR; and -) insists that the Soviet-Iranian oil agreement of 4 April
1943 be implemented by the Iranian Government without delay.
I ile a states that neither Qavam nor members of the Majlis
give any indication of wavering In their determination to reject any
zvlet oil proposals and that Iranian opinion against the USSR has
olidified?
FAR EAST
8. C: kNA: Conscription program marked by usual incompetency --U3
`:`o s ,Iate General
Shanghai reports that the Mat o-nal Government's
8 onscriptio a program in Shanghai and surrounding provinces is
R,tefx g carried out with "`disgraceful incompetency and corruption."
- Const late General believes that this development "augurs ill"
`-r the Government's recently announced all out anti-Communist
:-,aig;n.
(CIG Comment: Despite announced plans for sweeping reforms
a ; the recommendations of the US Army Advisory Group, the Chinese
Xai. cta.l Government continues to weaken its current military position
_ y - .dbering to its age-old conscription system.)
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~ . `Ty.K .,.AL SI.T 1~`? ~A+t
EUROPEAN RECOVERY
Secretary. Marshall has requested that the US joint Chiefs of Staff,_
study the problem of the withdrawal of UK troops from Greece'and
Italy (see item 1).
GREECE
As the Cabinet crisis continues, it is becoming increasingly evident
that any government which may be formed will retain most of the
Rightists from' the old Cabinet and will be unable to inspire the
confidence of the people.
INDONESIA
It is believed that the Netherlands Cabinet has agreed to accept the
good offices offered by the Security Council on 25 August. The
Security Council's offer will probably also be accepted by the Indonesian
Republic in the hope that the good offices will eventually take the form
of arbitration in the Dutch; donesta n dispute. The Netherlands is
opposed t o settleraw mt by arbittration on the g ,ounnds that the problem
is of an Internal co stltutio l nature and thus not susceptible of out--
side Judgment.
I'ORFA
The US proposalfor a conference in Washington on the Korean problem
has been delivered to the Ulf, the USSR, and China, the other three
signers of the Mote cow Agr oeranerr?t. Ambassador Smith in Moscow
indicates that the USSR is unlikely to accept the US suggestion of
Immediate zo. .l elections (see item. 8).
CHINA
Secretai.7 Marshall has directed a letter to the Foreign Minister
indicating US unwillingness to participate in Four Power discussions
preliminary to the Japanese peace conference.. (see item 2).
Document No. o sl
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DDA Menio, 4 Apr 77
Auth: DDA REG. 77 1763
Date : ` APR 197a Sy:
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GENERAL
1. US requests that the JCS studU troowithdrawals--`T'he De-
partment of State has informed US Em assyon on of Secretary
Marshall's request that the US Joint Chiefs of Staff: (a) study the
implications of the intended withdrawals of UK troops from Greece
and Italy (see Daily Summary of 25 August, item 2), exploring the
possibility of the alternative withdrawal of even larger numbers
of UK troops from less sensitive areas; and (b) consult with the
British Chiefs of Staff with a view to formulating positive recom-
mendations on this problem to the US and UK Governments.
(The Department had recently suggested to Secretary Marshall
in Petropolis that the problem of retaining UK troops in Greece
and Italy be approached through military channels, after conclud-
Ing that diplomatic representations had failed.)
2. US reply to Chinas statement on Japanese peace- -Secretary Mar-
shall has dihecte awe eto the ese Foreign Minister pointing
out that the "principle of eleven-power participation" would be
compromised if the Four Powers met separately to reach agree-
ment on a Japanese peace conference as suggested earlier by the
Foreign Minister (see Daily Summary of 25 August, item 4).
The Secretary's letter: (a) states that the purpose of a Four
Power meeting can be better achieved if China and other Interested
governments individually attempt to obtain Soviet participation in
the peace conference; and (b) re-emphasizes the need for an early
start on a peace settlement.
US Ambassador Stuart has been instructed to inform the
Foreign Minister orally of Secretary Marshall's opinion that the
Chinese National Government is overly-concerned about the effect
on the Dairen issue of peace treaty discussions without Soviet par-
ticipation, since there is no prospect that the USSR, even if it takes
part in peace discussions, will make any early change in its policy
of effectively denying Dairen to the Chinese.
(CIG Comment: While Secretary Marshall's reply should
convince the Chinese Government that the US intends to maintain
a firm position toward the USSR on Japanese peace questions,
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Chinese policy will probably continue to be dominated by fears of:
(a) Soviet reaction to a peace treaty concluded without USSR par-
ticipation; and (b) a new Japanese menace in the Far East.)
3. UK economic difficulties affect civil air_ olicyr--An official of the
Ministry of Civil Aviation has told the US Civil Air Attache in
London that because of the world trend toward "restrictionism"
in international trade, he feels that the October Rio Conference
will offer the last chance for a liberal multilateral air agreement
which will be favorable to the "strong" air transport countries.
The Attache reports that the official indicated that British economic
difficulties are beginning to affect air policy and that a program of
retrenchment for British civil aviation is contemplated.. The Civil
Air Attache believes that the UK may lead a movement directed
against US air policy if the Rio negotiations fail.
(CIG Comment: It is unlikely that the UK will make a clear
break with the US on civil air policy so long as there is the pros-
pect of a successful outcome of the European economic recovery
program.)
EUROPE
4. FRANCE: Communists an "famine committees"--US Embassy
Paris reports that according to a `trustworthy informant" the
Communist Party is preparing to set up "committees against
famine and misery" throughout France. According to the inform-
ant, the Communist-led General Confederation of Labor is to call
upon both Socialists and Communists to join committees of this
nature with a view to organizing manifestations, agitations, propa-
ganda, and incidents.
(CIG Comment: Such Communist moves have every pros-
pect of success as long as the French food shortage continues.)
5. GERMANY: Possible demilitarization SMA-_Ac!cnrdjng to
25X1 C F7 ~ have
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stated that the Soviet Military Administration (SMA) Is about to
be converted into a civilian administration by placing leading
political officers in a civilian status and sending additional ci-
vilians from the USSR.
(CIG Comment: Such a reorganization of the SMA would:
(a) place under the Soviet Foreign Office those SMA officials who
have reportedly tended to disagree. with the policy of the Foreign
Office--see Daily Summary of 20 August, item 6; and (b) ease the
transition of the Soviet Zone Germany from the status of a con-
quered area to that of a Soviet Satellite.)
5. AUSTRIA: Assets negotiations with the USSR postpc sed--US
Legation Vienna, reports that the Foreign Ministry has agreed to
postpone bilateral negotiations with the USSR on the German
assets problem (see Daily Summary of 25 August, item 7). The
decision whether to initiate such talks will not be made until
after the Austrian Treaty Commission completes its discussions.
7. YUGOSLAVIA: U tence ofInternational BrITade doubted--Am-
bassador Cannon in Belgrad expresses doubt that an international
brigade is being formed to take part in Greek guerrilla warfare.
Cannon points out that adequate personnel is readily available to
the guerillas in the border areas of Yugoslavia, Albania, and
Bulgaria and that the use of such personnel instead of an inter-
national. brigade does not involve the risk of "serious internation-
al repercussions." Cannon believes that the rumors of recruit-
ing personnel for an international brigade may have originated
from the recruitment of European youth for Yugoslavia labor
projects.
(CIG Comment. The existence or non-existence of an in-
ternational brigade has not yet been definitely established. Am-
bassador Cannon's opinion cannot be accepted as final in view of:
(a) continuing rumors; and some evidence to the contrary
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FAR EAST
8. KOREA: m a~ TS , r~ s ,ls--Am ssador
Smith in Moscow believes that the USSR is not likely to accept
the US proposals for Immediate zonal elections in Korea. Smith
xvarns~however, that if the USSR does accept the proposals, such
acceptance will a clear indication that the USSR is confident
of achieving final control of Korea through the carrying out of
the US program.
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CRITICAL S KTUAT!Cr s
EUROPEAN RECOVERY
Departments of State and War have approved the communique
on the London tripartite level-of.-industry talks.
GREECE
Prolongation of the Cabinet crisis will lead to further loss of
confidence in the Government and will therefore enable the guer-
rilla forces to operate with increased effectiveness.
INDONESIA
Hi
officials of East Indonesia and West Borneo, whose states
have been denied a voice in Security Council discussions on
the Indonesian situation, condemn the present Indonesian Republi-
ca.a Government as unrepr; eseantatjy e and undemocratic.
KOREA
The Department of State has instructed the US Delegation to the
joint Commission not to propose a recess while awaiting a reply
to the proposal of a four-power? conference.
CHINA
Wedemeyer"s departing statements in China have come as a
rude shock to the Chinese National Government and have apparently
made Chiang Kai-shek concerned over the security of his orm
position (see item 5).
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Auth: 11DQ. ;?.; ~. ? 1763
Date: I By:
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GENERAL
1. Turkey considering declaration of solidarity with Greece--The
Turkish Government has asked US Ambassador Wilson for an ex-
pression of US views concerning a possible Turkish declaration of
political and economic solidarity with Greece. Wilson interprets
Turkey's proposed move as an effort to counter Yugoslav-Bulgarian
cooperation directed against Greece. Wilson believes that the Turk-
ish Government should defer its decision on this matter until after
the UN General Assembly has considered the Greek case.
2. USSR rejects US note on Dairen--The USSR, In reply to the US note
on NEW see ally ummary of 13 August, item 7), has categori-
cally rejected "any attempt to burden the USSR with responsibility
for treatment of American interests" in Dairen. The Soviet note
declares that: (a) Dairen must remain under the Port Arthur Naval
Base regime until the Japanese peace treaty is signed; and (b) the
Chinese National Government has failed to fulfill its administrative
functions in Dairen "for reasons beyond Soviet control:'
(CIG Comment: The Soviet line of reasoning indicates clearly
that the USSR intends to retain exclusive control over Dairen as long
as possible.)
3. UK to sell aircraft to new Iranian airline--The Ministry of Civil
Aviation has advised US Ambassador Douglas in London that British
aircraft will be sold to Eagle Airways, a new Iranian airline, and
that British Overseas Airways Corporation (BOAC) will conclude a
management contract with the line.
(GIG Comment: The UK had previously assured the US that
BOAC would not "intervene in Transcontinental and Western Air
(TWA) affairs" in Iran. Although the UK now asserts that Eagle
Airways will not compete with Iranian Airways (Iranair), with which
TWA has a virtually inoperative management contract, Eagle opera-
tions will probably be disadvantageous to Iranair and reduce the
chances that US technical assistance in Iranian air transport will
be maintained; see Daily Summary of 25 August, item 10.)
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EUROPE
4. USSR: US to answer Soviet note on Petkov case --The Department
of State has instructed US embassy Moscow to join with the UK
Embassy Moscow in informing the USSR that its rejection of the
US proposals on the Petkov case (see Daily Summary of 26 August,
item 4). constitutes a violation of. the obligations assumed by the
USSR at Yalta and negates the rights of the US as a signatory to
the Bulgarian armistice.
FAR EAST
5. CHINA: Government shocked byWedemeyer statements--US Am-
bassador Stuart reports t e epar ng s emen made by
General Wedemeyer unquestionably came as a "rude shock" to the
Chinese National Government, even though most nonpartisan and
liberal Chinese largely endorsed Wedemeyer's views. Stuart adds
that Chiang Kai-shek had tried earlier to persuade Stuart to caution
Wedemeyer against being too critical and is now preoccupied with
the question whether the US may be planning to force the General-
issimo's retirement from office.
6. BURMA: AFL rejects Communist proposal for reunion--US Consul
General Rangoon has been orme by a member f Burmese
Cabinet that the re-entry of the White Flag Communist Party into
the Anti-Fascist League (AFL) has been blocked by the refusal of
the Communists to accept the terms of reunion as laid down by the
AFL.
(CIG Comment: The possibility that the White Flag and Red
Flag Communists will join forces Is now greater, but the union is
still improbable. However, in view of the mounting political tension
in Burma, widespread violence is likely to increase and may result
in another attempted coup d'etat.)
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CRITICAL SITUATIONS
C
EUROPEAN RECOVERY
The US, UK, and French delegations to the tripartite talks in London
on German level of industry have reached agreement on a communique
(see item 1).
GREECE
Tsa.ldarris has apparently abandoned his efforts to secure the coopera-
tion of the Liberal Party in forming a cabinet and now threatens to
form an Extreme Rightist government. It is believed that such a
government could not survive in view of present Parliamentary and
popular opposition.
INDONESIA
The UN Security Council has agahi called on the Netherlands and the
Indonesian Republic to comply with the cease-fire order of I August.
Meanwhile, the Netherlands has taken another step toward the forma-
tion of the projected United States of Indonesia by recognizing an
autonomous government i_n East Borneo.
KOREA
In an attempt to reach some decision on the Korean problem, the
Department of State has sent a note to the four signatories to the
mission negotiations and asking those governments to send delegates
to a conference beginning 3 September in Washington (see item 3).
Moscow Agreement calling attention to the deadlock in joust Co
CHINA
One of the outstanding obstacles faced by the Chinese National
Government in its efforts to reinforce Manchuria is that senior
Nationalist commanders In North China are reluctant to release a
portion of their owe tr?o~)ps because of the uncertain political situation
within China (see item 4).
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1 DDA Memo, 4 Apr 77
Auth: DDA R.G. 77/1763
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Date: 1-0 APR 197T By:
CONFIDENTIAL
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GENERAL
1. C'on,rffiuniqueosed on level-of-industr talks--US Ambassador
Douglas reports that K, an renc a egations to the Lon-
don talks have agreed on a communique which will be referred to
the respective governments for approval. The communique will
include a statement that the French delegation cannot withdraw its
objections to the level-of-industry agreement until there is "a satis-
factory outcome" to the forthcoming Berlin discussions of French
proposals on the export of Ruhr coal. The US delegation recommends
US agreement to the communique and recommends further that, even
if the French Government refuses to agree to the communique, the
new level of industry be published on 1 September.
2. UK seeks Immediate discussion of bizonal financing--The UK Gov-
ern ten - s sxagges iio 'o "t ae `D-epar f en -of State that US -
UK discussions leading to a revision of the present agreement for
the financing of the US and UK Zones Germany be initiated at the
earliest possible moment. The note declared that the UK will be
unable to provide further dollars for German expenditures when the
current appropriation is exhausted (approximately at the end of
December), but is prepared to discuss possible contributions from
non-dollar sources.
FAR EAST
3. KOREA: Soviet Delegation continues dilatory tactics--The US Dele-
gation to the joint Commission reports that the present deadlock is
so complete that it will be difficult to agree on even a factual joint
report. General Hodge states that Soviet tactics still consist of un-
acceptable counter-proposals and propaganda against "oppressive"
US policies in South Korea.
(CIG Comment: The complete failure of the Soviet Delegation
to make a plausible case for the continuing of the joint Commission,
combined with the rather weak USSR propaganda line, indicates the
possibility that a surprise Soviet proposal will be made at a forth-
coming conference in Washington. This might be a suggestion for
the immediate withdrawal of both US and USSR occupation forces.)
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4. CHINA: Nationalist commanders unwillin release troops for Manchuria--
According to U Ambassador Stuart, the British Military Attache in Nan-
king has been reliably informed that Chiang Kai-shek was unable to per-
suade General Hu Tsung-nan in Yenan to release part of his troops for
reinforcement of Manchuria. (General Hu, Nationalist Commander in
the Yenan area, is regarded as one of Chiang c most faithful supporters.)
Stuart adds that General Fu Tso-yi, commanding Nationalist forces in
the Nalgan area, may be similarly reluctant to part with any of his troops
during the current political instability in China. Stuart observes that
Chiang's Government is still compelled to effect troop movements "largely
by negotiations rather than,by the issuance of orders. "
THE AMERICAS
5. PARAGUAY: Government to hold elections--US Embassy Asuncion re-
ports that President Morinigo has told a group of foreign diplomats that
he intends to hold elections "in due :course," and that he will turn over
the Government to the victorious party.
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C R I T I C A L S I T U A T I O N S
EUROPEAN RECOVERY
The Chairman of the CEEC doubts whether Western Europe can be
self-supporting by 1952. Clayton recommends that the US im-
pose certain necessary conditions upon US acceptance of the
CEEC report (see item. 1).
GREECE
Continued resistance on the part of the opposition makes it highly
unlikely that any effective government under Tsaldaris can be
formed (see item 6).
INDONESIA
US Embassy The Hague reports a growing belief in the Nether-
lands that Russia will sabotage any decisions of the UN not favor-
able to the Indonesian Republic.
KOREA
US -USSR negotiations have reached a critical stage and significant
developments are expected within the next few days.
CHINA
A political and economic crisis of record severity is likely to
follow the 24 August statement made by General Wedemeyer on
his departure from China. In reaction to this statement, the
Chinese National Government will probably reiterate that govern-
mental reforms cannot be carried out so long as it is compelled
to prosecute the civil war without foreign aid.
Doau mcnt No. 0 4 c
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Auth: DDA REG. 77 1763
10 APR By. 2 X1
Date:
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GENERAL
1. Requirements desired in CEEC report--The Department of State
believes that there must be major changes in both the content and
conclusions of the report which is being drawn up by the Com-
mittee for European Economic Cooperation (CEEC). The Depart-
ment feels that the report in its present form does not meet the
following essential standards: (a) achievement of a self-sustain-
ing European economy; (b) maximum realization of mutual aid;
and (c) concentration of aid at points where it will produce the
maximum immediate recovery. While the Department believes
that the US must not create the impression that it is directing the
specific content of the report or delaying its preparation, publi-
cation of a report not meeting the essential requirements of the
recovery program would do irreparable harm by evoking serious
criticism in the US and by further undermining the confidence of
European nations in their ability to help themselves.
cia ,Y top's views on the CEEC9 rest-Under Secretary Clayton
has told Sir Oliver Franks, Chairman of CEEC, that the figure
for US aid of 28.2 billion dollars, tentatively reached by the CEEC,
is "out of the question." Clayton got the impression that: (a)
Franks is very reluctant to initiate discussion in the Conference
of living standards relative to pre-war and post-war conditions;
and (b) the Conference is not likely to arrive at a program which
would bring actual dollar requirements much below the prelimi-
nary summation. Upon being informed of the Department of
States objections to the report in its present form, Franks ex-
pressed doubt whether Western Europe, under any reasonable
assumptions, can reach a completely self-supporting status by
1952.
Clayton recommends that the US inform the Conference
that it must plan on the annual export of 25 to 30 million tons of
coal by the UK by 1951 and consider that France will again be
practically self-sustaining in bread grains by that date. Clayton
is convinced that the only way for the US to deal with the CEEC
report is to impose necessary conditions.
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2. Australian position on Japanese peace talks- -US Ambassador
IIr reports that the viedo Aus ra ian Minister of External
Affairs Evatt concerning possible delay In convening a Japanese
peace conference is that: (a) it is urgently necessary to hold the
peace conference before the UN General Assembly meeting, be-
cause the otherwise crowded program may postpone the con-
ference several months; and (b) the conference must be held
promptly, even if the USSR refuses to attend.
3. Partial Turkish demobilization unlikel to affect USSR policy--US
Ambassa or Smith in Moscow reports his opinion a partial
demobilization of the Turkish Army (see Daily Summary of 19
August, item 6) would not materially affect Soviet policy toward
Greece, Turkey, and Iran, particularly if accompanied by an of-
ficial Turkish statement which would: (a) reiterate Turkish de-
termination to defend itself against aggression; and (b) point out
that a reduction in the financial burden of maintaining large forces
under arms would improve Turkey's capacity to resist aggression,
should the need arise.
4. USSR rejects US protest on Petkov case--The Soviet Government
has refused the recent US propoi that the Bulgarian Government
be directed by the ACC to delay the execution of Nikola Petkov,
pending ACC review of the case. The USSR contends that ACC
Bulgaria has no authority to review decisions of Bulgarian courts,
and that such a review would be an infringement upon Bulgarian
sovereignty. The Soviet note likewise rejects the US proposal
that consultations be undertaken among the three powers repre-
sented at the Yalta Conference in an effort to work out a concerted
policy regarding the Petkov case.
(CIG Comment: A similar Soviet position may be expected
in the September trial of Maniu in Rumania or in any future case
in which the Western Powers seek to check the elimination of non-
Communist elements from Satellite politics.)
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EUROPE
5. AUSTRIA: Keyes desires US aid for Soviet zone--US Commanding
General Keyes believes that, in view of the Soviet refusal to admit
US relief into eastern Austria under the control provisions of the
US-Austrian Relief Agreement, it is necessary to protect Austria's
economic unity by supplying eastern Austria with food from US
military relief stocks. Keyes declares that failure to supply this
aid will: (a) result in greater over-all US relief requirements for
Austria; and (b) be a first step toward the division of Austria.
6. GREECE: Government impasse continues--According to US Am-
bassador Mac eag , r me s er s darts has proposed to
Sophoulis (leader of the Liberal Party) that: (a) Populists and
Liberals unite to form a new government, with Sophoulis presid-
ing over the Council of Ministers and with Tsaldaris functioning
as "active"' Prime Minister because of Sophoults' advanced age;
(b) the portfolios be distributed equally between Populists and
Liberals; and (c) Tsaldaris and Sophoulis each have veto power
over any Cabinet appointment.
Sophoulis replied that: (a) because the Government has
failed, the opposition (Liberal Party) should form the new govern-
ment; and (b) if the Liberals collaborate with the Populists, the
Cabinet's policy must be wholly that of the Liberal Party. Mac
Veagh is not hopeful of an effective coalition between Populists
and Liberals, because he believes that Sophoulis considers
Tsaldaris' proposals a sign of weakness and is therefore pos-
sibly anticipating that, by holding out a little longer, the Liberals
may be able to take over the whole government.
NEAR EAST-AFRICA
7. IRAN: Soviet intimidation of Iran continues--US Ambassador Al-
len Tehran has been informed by a confidential representative of
Qavam that the Iranian Government has received reports of 10,000
Rarzani (Kurdish) tribesmen concentrated on the Azerbaijan border
by the USSR, for the purpose of creating disturbances in Iran which
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-;P9P
will serve as a pretext for Soviet Embassy to
informant also stated that the Soviet mbassy is
start "a pro-Soviet movement" among Iranian officials on the
ground that "great turmoil" is imminent in Iran.
(CIG Comment:
more The
e-
than 1500 It is in
conside~ed likely
lieved to number
that the USSR will use them, as well as other tribal elements,
to promote Iranian unrest.)
FAR EAST
8. C A: VT5SR _01i r China--According to the US Naval
Attache Nanking, USSR officials in China have stated that: `a)
Soviet Ambassador Petrov will return to China, probably in
September; and (b) there will be no change in Soviet policy in
China until US policy changes. (Petrov left Nanking for Moscow
in June. At that time Soviet officials in China reportedly inter-
preted his departure as the first step in a new USSR policy of
`getting tough with China. )
-(CIG Comment: It is believed likely that the Kremlin
will maintain an outwardly "correct" attitude toward China, at
least until the USSR is in a position to judge the effectiveness
of any additional US assistance that might be extended to the
Chinese Nationalist Government.)
THE AMERICAS
0. PARAGUAY: Reactivation ?f US Miss ons recommended--US
Charge Trueblood in Asuncion has recommended that the US Air
and Ground Missions in Paraguay be authorized to resume oper-
ation. (The Missions were suspended in March in view of the pos-
sibility that their activities would be considered military inter-
vention by the US in Paraguay's civil war.)
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466
CV-11TICAL SITUATIONS
EUROPEAN RECOVERY
The French have indicated that unless there is agreement be-
tween France and the US e Ruhr coal and coke, the French
Government will probably as nounce that the level-of industry
agreement is unsatisfactory (see item 1).
GREECE
The fall of the Greek Government will not have any immediate
deleterious effect on the general situation In Greece and may even
result in the formation of a more representative government if
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the present regime. However, early de facto recognition of the regime
is likely to follow as a matter of course. If it does, General Somoza
will probably make his long-deferred trip to the US, and his departure
will force a political realignment in Nicaragua.)
10. PARAGUAY: Government successes in civil war--US Charge Asuncion
reports, as of 18 August: (a) the apparently assured" safety of Asun-
cion, with present acute food shortages expected to improve rapidly;
(b) the recapture of the civil' airport by the Government; and (c) the
absence of rebel planes over the city through the last two days.
(CIG Comment: I 25X1 C
confirms press reports the remainder of the attacking
rebel forces have split into several groups. If other recent press re-
ports are also confirmed, the military phase of the civil war, except
for possible continuing guerrilla action in localities remote from the
capital, may be considered ended.)
11. URUGUAY: Arms shipments to ParER!a
an rebels--The Acting Minis-
ter of Foreign Affairs of Pa ay has Infor-m-ed-We- US Embassy in
Asuncion and the diplomatic representatives of the American Republics
that a plane that crashed near Montevideo on 15 August was carrying
Uruguayan Government munitions to the Paraguayan rebels. In this
connection, the US Military Attache Montevideo reports his convt ^tion,
based in part on a document discovered among the effects of the co-
pilot of the plane in question, that high Uruguayan officials have been
sponsoring arms shipments to the Paraguayan rebels.
12. ECUADOR: US comments on ammunition chase--The Department
of State has informed US Embassy Quito in connection with the report
that Ecuador might purchase from Czechoslovakia large quantities of
7.92 calibre ammunition (see Daily Summary of 18 August, item 9),
that: (a) the purchase would commit Ecuador to a rifle that is not
standard US equipment; and (b) Ecuador is still eligible to receive a
small amount of ammunition under the US interim arms program at a
considerably lower price than that quoted by the Czechoslovakian firm.
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CRITICAL SITUATIONS
EUROPEAN RECOVERY .
UK officials estimate that at the present rate of drain on British
dollar resources the balance of the US loan will last only about two
weeks; the Cabinet has therefore decided to take unilateral stop-gap
action to forestall a break in sterling (see item 1).
GREECE
Intensified guerrilla activity will follow the recent announcement by
General Markos of the establishment of a "free" Greek government.
The guerrillas will attempt to extend their control in northern Greece
before the Greek Army can make effective use of the equipment supplied
by AMAG.
I1 'DONESIIA
Despite pressure from liberal elements in the Netherlands to curtail
military action, Dutch forces may soon reopen "police operations,""
possibly with the occupation of the Republican capital of Jogjakarta as
their objective.
KOREA
No significant new development.
CHINA
A plan currently proposed by the UNRRA office in China, which would
with
. hold UNRRA supplies fro-in military areas under Nationalist con,
trol (as well as from Chinese Communist areas), would probably in-
tensify Chinese reaction against any foreign demands for the "privilege
of interfering in Chinese affairs" as a condition for extending aid to
China,
Document No. 04
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DDA Memo, 4 Apr 77
`,?Auth: DDA REG. 77/1763
Bate: A 0 APR 1975
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GENERAL
1. UK to act unilaterally to protect sterling- Bevin has informed
US Ambassador Douglas that, because the run on UK dollar re-
sources has accelerated so greatly that the remainder of the US
loan may be exhausted in two weeks, the Government has decided
to take Immediate action unilaterally to protect sterling. Bevin
stated that while he would have opposed such a step, if the Issue
were purely monetary, he Is convinced that a break in sterling
would: (a) "impair. if not destroy" all US and UK efforts In the
political field over the past two years; (b) lead to increased ag-
gressive action by the USSR; and (c) have a "profound adverse ef-
feet" politically and economically in France and Italy.
Bevin emphasized that this action is to be taken as a stop-
gap to maintain the status quo while the US and the UK are review-
ing the situation and Is not to be construed as a repudiation of the
financial agreement: In this connection, Douglas feels confident
that Uevin was expressing the UK Government's sincere convictions.
2. US representatives in Moscow discount overt Soviet move in Iran--
The US Military Attache Moscow reports his belief that: (a) the
USSR does hot intend to make an overt hostile move against Iran;
and (b) any changes which may have been made in Soviet troop
dispositions in the area were probably for the purpose of intimi-
dating the Iranian Government. US Ambassador Smith reports
that there Is neither anything definite to substantiate recent rumors
of increased Soviet strength on the Iranian border nor any concrete
indication that the USSR is preparing to occupy Iranian territory.
EUROPE
3. USSR: Note relects US view on former Axis assets--US Embassy
Moscow has received a note from thcontending that Soviet
acquisition of former Axis assets in Hungary, Bulgaria, Rumania,
and Finland is final. The note rejects the US contention that trans-
fers of such assets thus far have been only provisional, pending the
implementation of peace treaties.
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Smith expo delay of ratification--US Ambassador Smith
in Moscow believes that the Soviet delay in ratifying the Italian
and Satellite peace treaties reflects a Eremllin estimate that
ratification would not be advantageous to the USSR at present.
Smith points out that through delay the USSR can. (a), avoid the
termination of armistice regimes, thus allowing more time for
the consolidation of Soviet control; (b) disturb the precarious
political balance in Italy; and (c) maintain troops in bulgaria
for continuation of the `war of nerves" on Greece and Turkey.
4. HUNGARY: Secret treaty for retention of Soviet troops--The US
Military Representative Budapest has learned from 61a usually re-
liable source" that the Chief of the Military Committee of the
Hungarian Communist Party recently stated that a mutual assist-
ance treaty between the USSR and Hungary is being prepared which
will include provisions for the retention of Soviet troops in Hungary.
(CIG Comment: dging by previous reports, such an agree-
ment is quite possible. It is unlikely, however, that the USSR would
make such a treaty with Hungary without making similar pacts with
Bulgaria and Rumania.)
5. BULGARIA: Mission suggests direct appeal for Petk y--The US
Mission in Sofia states its view that a direct appeal by the US for
clemency for Opposition Leader Petkov should be made to the
Bulgarian Government in addition to the representations already
made to the Allied Control Council.
NEAR EAST-AFRICA
S. TURKEY: 29yernment, a lorin~ ssibili of reduc!ag armed forces--
US Ambassador Wilson reports that the Turkish Government, in at-
tempting to decide whether a reduction in the Turkish armed forces
should be made,, wants to be Informed of US views on the international
situation. While Wilson believes that Turkish forces should not be
reduced for at least a year, he suggests that the Government be given
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a frank estimate of the international situation, on the basis of which
it can make its own decision. Wilson feels that Turkey would then
maintain the armed forces at present strength.
THE AMERICAS
7. URUGUAY: US cattle shipment infected with hoof-and-mouth--US
Charge Montevideo has received a note from the Uruguayan Govern-
ment stating that in a shipment of dairy cows arriving direct from
New Orleans on 17 June: (a) one animal was infected with hoof -and-
mouth disease on arrival; and (b) by 12 July, all but two of twenty-
nine animals had developed the disease.
(CIG Comment: The latest US epidemic of the highly con-
tagious hoof-and-mouth disease occurred in 1929 and was stamped
out by slaughtering all cattle in the infected areas. The US is now
cooperating with the Mexican Government in a similar slaughter
campaign in that country. several months
ago referred to a plot looking to a deliberate a empt to 'cause the
disease to spread to the US.)
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CRITICAL SITUATIONS THEC.!.A.HASNOO1-?ECTION
TO THE DECLASSIFICATION OF
THIS DOCUMENT.
t
25X1
EUROPEAN RECOVERY l o.
French officials favor the establishment of a customs union
through the European economic recovery program (see item 1).
GREECE
The "free" Greek government proclaimed by General Markos
(Greek guerrilla leader) is merely provisional and military.
Markos proclamation will probably be followed by the announce-
ment of a more permanent political government which will be
recognized by the Satellites, if not by the USSR. Meanwhile, Satel-
lite representatives are withdrawing from Athens and leaving
Greece in virtual diplomatic isolation from its northern neighbors.
INDONESIA
The Netherlands Reconstruction Minister has been sent to Batavia
with Instructions to Van Mook that Dutch forces must cease advances
and take only protective measures.
KOREA
The Soviet delegation on the joint Commission, continues to insist
that it has no instructions to meet with US delegates for the purpose
of drawing up a statement on the present deadlock in the negoti-
ations, as, proposed. by Secretary Marshall's recent letter to 'olot?v.
CHINA
The Central Government's new foreign exchange plan, which recog-
nizes the depreciated open market rate for all exchange transactions
except those covering essential Imports, will not succeed in materi-
ally reducing the drain on Government foreign exchange and gold
resources unless the plan is capably administered and is accompa-
nied by a revival of public confidence in the Government and its
currency.
Document No.
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Class. CHANGED TO IT$
DDA Memo, 4 Apr 77
Auth: DDA REG. 77/1763
di
BY:
Dee: Wrn ~..
reP 90sRSz
W flENT1AL
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1. French favor customs union of Western Europe--Under Secretary
Slayton reports that French off icials strong y favor provisions within
the European economic recovery program for: (a) financial and mone-
tary reform; and (b) the eventual establishment of a customs union.
Clayton adds, however, that there is general agreement that the UK
empire-preference system is a barrier to taking even preliminary
steps toward a customs union.
2. UK will consult US before mmakin trod withdrawals --US Ambassa-
dor Douglas reports that the UK Foreign Office has assured him that
the UK will undertake no troop withdrawals from Italy or Greece with-
out full, prior consultation with the US.
3. atrQ r Stevie olic r to bran expected--US Ambassador Smith in Moscow
?
reports his conviction that the USSR
is in a position to follow a strong
policy in Iran. He believes that the recent demands made by the Soviet
Ambassador on Prime Minister Qavam (see Daily Summary of 15 August,
item 5) create a situation which the USSR may exploit either to gain
an oil concession in northern Iran or to weaken seriously the British
oil position in southern Iran.,
WIG Comment: The USSR will undoubtedly resort to every
means of intimidation short of military force in attempting to procure
a concession. If, as seems certain, the Majlis fails to ratify the original
agreement or to grant a concession comparable to that of the UK, the
USSR will intensify its efforts to secure a government In Iran more
amenable to its objectives.)
EUROPE
4. AUSTRIA: lodes urges continuance of ATC talks--US Representative
Dodge at the Austrian Treaty omm ssion TC) urges that ATC talks
be continued during his absence in Washington for consultation (see
Daily Summary of 9 August, item 2). Dodge believes that continuance
of the discussions is necessary to: (a) establish the record of untenable
Soviet positions; (b) provide better factual basis for the US position; and
(c) facilitate agreement in the ATC among the US, UK, and France.,
GENERAL
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5. NETHERLANDS: Labor Party split averted--US Embassy The Hague
reports that according to the Chairman of the Labor Party the
threatened split within the Party (see Daily Summary of 15 August,
item 3) has been averted by the recognition that: (a) initiative in the
Indonesian dispute is no longer in Dutch hands; and (b) no further
military action would be tolerated by Labor members of the Cabinet.
25X1
6. FRANCE: Reduction of bread ration imminent--US Embassy Paris
reports that the French Government is considering the reduction of
the bread ration to the lowest ration since the war. The Embassy,
believing that such a reduction would be intolerable during the fall
and winter when other foods are scarce, urges. that an effort be made
to expedite grain shipments in order to: (a) maintain the present
ration; (b) facilitate domestic grain collections; and (c) prevent further
unbalance in the general economic situation.
7. RUMANIA: Announcement of monetary stabilization creates panic--
US Mission Bucharest states that the recent publication of the Govern-
ment monetary stabilization decree has resulted in panic and almost
complete commercial ralysis. The Mission 25X1
the Government intends use e stabilization
program as a means o expropriating certain business and industrial
enterprises.
NEAR EAST-AFRICA
8. PALESTINE: Anti-Jewish riots cause alarm--US Consul General
Jerusalem reports as "highly disturbing'" continuance for six
successive days of Arab anti-Jewish riots in Palestine. He adds that
the riots are similar in pattern to events which in the past have led
to widespread trouble in Palestine.
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THE AMERICAS
9. ECUADOR: Czechoslovakia offers ammunition to Ecuador--The
Chief of the US Army Mission in Ecuador has told US Ambassador
Simmons that: (a) Czechoslovak salesmen have offered 30 million
'1.92 cartridges to the Ecuadoran Government and have promised
delivery of 5 million rounds within 30 days; (b) only an immediate US
offer of comparable materiel at "substantially cheaper prices" can
prevent the purchase by,Ecuador; and (c) the Minister of Defense
favors the buying of US ammunition and promises to delay the con-
tract pending new information on US prices. The Chief of the US
Mission believes that the Czechoslovak offer is bona fide.
10. PERU: - US -manufactured planes lacspare, parts --The Commanding
General Caribbean Air Command reports that many Peruvian Air
Force planes of US manufacture are now grounded for lack of spare
parts. He comments that unless a solution is found to this general
problem the goodwill initially created by making US surplus military
equipment available to Latin American countries will be destroyed.
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GENERAL
1. Australian a argo on Dutch trade en tiered Communists--US
Naval Attache Melbourne repute that Communists have maneuvered
the Australian Council of Trade Unions Into supporting a blanket
embargo on Dutch trade. The NA believes that the Australian Prime
Minister has disregarded fundamental principles by merely request-
Ing the Unions to modify the ban (permitting trade with the Nether-
lands but not with the k I) instead of questioning the right of private
persons to direct Australian policy. The NA declares that Australia,
having offered to mediate in the Indonesian dispute, has now intervened
in favor of the Indonesian Republic.
2. US still favors settlement of A W, .o-Egv tIan d 1i t e eene a tiat1on--
The Department of State ha.o unformed e U elegation to te l_
of its view that the Anglo-Egyptian dispute can best be resolved by
an SC recommendation that the two disputants renegotiate and report
later to the SC.
3. UNSCOP reportedly favors an independent Palestine --The British
ore t has n orn ed WEn~ asst a~ondornMa"t (a) the UN
Special Committee on Palestine (UNSCOP) apparently favors the
establishment of an independent Palestine, although there is no indi.-
catton whether the delegates are considering one or two Palestine
states; and (b) it is increasingly apparent that the Grand Mufti is
determined to test his strength by promoting a campaign of violence
by the Arabs in Palestine, possibly before the end of the year.
EUROPE
4. ITALY: Dunn urges increased aid--US Ambassador Dunn urges a
substantial increase in food shipments to Italy, preferably of wheat,
to arrive as soon as possible and to.reach a peak in March. Dunn
doubts whether the democratic leaders can defeat the Communists
at the April 1948 national elections if Italian expectations of extensive
US aid have not been fulfilled before that time.
Document No. 040
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DDA Memo, 4 Apr 77
Auth: DDA RyG. '7/1763
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THE AMERICAS
5. CUBA: US Navy Reconnaisance locates military stores--According
to the US Naval Base at Guantanamo, Cuba, aerial photographs re-
veal about 400 men, military stores, and camouflaged buildings on
a small island off the northern coast of Cuba. The report also states
that an LCI and three other small vessels were nearby. (The US
Naval Attache Havana had reported previously that Dominican revo-
lutionists were on this island.)
6. PARAGUAY: Relief of Capital confirmed--The US Military Attache
Asuncion has repor e that one st loyal troops reached the
city from the north and "relieved the critical situation."
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CRITIC L SITUATXONS
EUROPEAN )RECOVERY
US officials believe that new proposals to France will clear the way
for the economic revival o we :,tern Germany (see item 1). The
Department of State believes that the nations of Western Europe
must adjust themselves to basic changes In their international pozi-
fion and must stress self-aid in any economy program to be accept-
able to the US.
GREECE
A u"olAo announcer-i-ant of the, e slime aw of , " ree" Greek gov
ernment, accompanied by intensified guerrilla activity, is believed
to fore shadowed by eonntluiR rumors of the formation of such
a government, by Gronyko s recent outburst in ' he Security Council,
and by veiled Soviet tahreatsn to sever diplomatic re tionss with
Greece.
DO Sf-d
As a means of seMRo , the Indonesian question, the Netherlands
Government now favors a ? bltration by tree representatives, one
each to be appointed the Republic and the Dutch, and a third to
be chosen by both sides. Firm in. Its opposition to arbitration by a
single third party, the .e-publican Government has broadcast
appeal to the Security Council to conduct a plebiscite on the future
of Indonesia?
KOREA
No significant new developments.
C il:TA.
The Chinese, a ble to fill their i anediate needs for aircraft
ammunition by ptrchases from the US Go'verment, are now attintpt-
in g to obtain such ammunition from private man acturers in the
U,13 (see Item 6).
Document No. 0-7.9
CONFIDENTIAL
NQ CHANGE in Class.
DECLASSIFIED
Class. CHARMED TO: TS S
DDA Menio, 4 Apr 77
Auth: DDA REG. 77/1763
Date: . i. 2 1 By:
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GENERAL
1. US officials' recommendation for eement with France on Ruhr--.
under Secretary Clayton and US Ambass dors Doug as iiiff a
fery recommend, on the basis of French suggestions, that the US
Inform the French Government of its willingness to join with France
and the In establishing by the German peace settlement an in-
ternational board which would allocate Ri nhr coal, coke, and steel
and limit German consumption to peaceful uses. The US officials
recommend further that this board be composed of representatives
from the US, UK, France, Benelux, and Germany. The officials
add that in return the French will be expected to. (a) raise no
objection to the revised level of industry ,agreement, (b) agree to
its early publicati ; and (c) take steps not later than the close of
the November meeting of the CFM to merge the French Zone with
the US- Zones Germany. Clayton, Douglas, and Caffery believe
that if action can be taken along these lines, no important problems
will arise with the French on the level of industry agreement.
2. Complications in US-Portuguese air ne otiations--US Ambassador
Wiley in his reports his bee at e'o - guese Foreign
Minister has been unable to carry out his intentions to facilitate
the agreement with the US for air rights in the Azores. Wiley
points out tha4although the Foreign Minister once asserted that the
Portuguese would henceforth be politically oriented toward the US
and implied that there would be a complete break with the "Portu-
guese historic affiliation" (presumably the alliance), he has
recently absented himself from discussions. Wiley believes that
the ex-Secretary General of the Foreign Ministry, Mathias, and
possibly the Minister of War, who advises Premier Salazar on
aviation matters, were able to get Salazaar's approval of the "`oral'
formula" which contained Portuguese proposals unacceptable to
the US.
(CIG Comment: These developments indicate a continuation
of the tug-of-war between two opposing Portuguese factions. Salazar
has probably not yet made up his mind on the ultimate Portuguese
attitude. Unless definite progress in the Azores negotiations is
achieved almost immediately, it will be necessary to discontinue
US military air operations through the Azores on the existing basis.)
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EUROPE
3. NETHERLANDS: Split within Labor Party may be imminent--US
Embassy The Hague reports that tension within the Labor
Party may lead to an open split over the Government's "`practical
abrogation" of the Linggadjati Agreement with the Indonesian Re-
public. The Embassy adds that repercussions may affect the make-
up of the present Government.
4. HUNGARY: Recommend US-UK action before elections--US Minis-
ter Chapin in Bu pest in agreement with his British colleague)
recommends that joint US-UK action be taken before 31 August in
order to provide a basis for non-recognition of the Hungarian
national elections. Chapin suggests: (a) immediate protests to
Hungary concerning reported widespread abuses of disenfranchise-
ment procedures, estimated to affect at least 20% of electorate
(see Daily Summary of 11 August, item 2); % lid (b) joint proposals
to the Allied Control Commission for postponement of elections.
NEAR EAST-AFRICA
5. IRAN: USSR adamant re ardin Soviet-Iranian oil agreement--
Prime Minister Qavam has informed US Ambassador Allen that
Soviet Ambassador Sadchikoff has formally insisted that the original
proposal for the formation of a joint Soviet-Iranian oil company be
presented to the. Majlis promptly for ratification. Qavam replied to
Sadchikoff that the Majiis would unquestionably reject the original
terms and suggested that the USSR enter into further negotiations.
Sadchikoff rejected this suggestion and stated that if Iran refuses to
ratify the original agreement, his Government will immediately
demand a northern concession similar to that held by the British
in the south. (The Anglo-Iranian Oil Company is an all-British
company In which the British Government owns a controlling Inter-
est.; expresses his belief that the USSR realizes it will be un-
able to obtain any kind of Iranian oil concession and is consequently
maneuvering to save face and to make more difficult the British oil
position in Iran.
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FAR EAST
6. CHIhiA: US position on Chian&'s request for aircraft ammunition--
With reference to Chiang Kai-shek 's inquiries about the purchase of
aircraft ammunition from the US (see Daily Summary of 2 August,
item 7), the Department of State has authorized Ambassador Stuart
to state that: (a) no facilities exist for a temporary loan from US
Army stocks; and (b) the Army at present has no surplus stocks
available. The Department, noting that the Chinese are now ne-
gotiating with private ammunition dealers in the US, authorizes
Stuart to Inform the Chinese Government that it is at liberty to
procure ammunition through such channels.
7. PHILIPPINES: Transfer_ of war materiel to Philippine Government_
The Department of State, indicating concern over requests for trans-
fer of large amounts of ammunition, bombs, and military stores to
the Philippine Government, has instructed US Embassy Manila to
determine specifically the use to be made of the materiel. The De-
partment calls attention to the possibility that the falling of war
materiel into undesirable hands in the Philippines and elsewhere
will embarrass the US.
(CIG Comment: The Philippines have been, since the end of
the war' a center for illegal, arms, traffic which has been effective
in sustaining armed conflicts in southeast Asia.)
THE AMERICAS
8. CHILE: Impending crisis In Chile--US Ambassador Bowers reports
that Chilean armed forces are trying to operate the country's postal
and telegraph services in the face of a Communist-led strike and
that a presidential spokesman has asked the striking employees to
return to their jobs because a "coup d'etat is being prepared that
will endanger the country's democratic regime." Bowers describes
the situation as chaotic.
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9. PARAGUAY: Develo?lanients in Civil War--US Charge Trueblood
reports that a Rebel break-through into Asuncion in the early
morning of 14 August was checked by the "opportune arrival of
some 1,000 mounted troops in battle trim belonging to Govern-
ment's First Corps . ". (The First Corps to the Governn nt force
that occupied Concepcion in northern Paraguay. Troops of this
corps are reported to have been marching to the relief of
Asuncion) However, the US Military Attache, reporting the
same day, does not mention the "1,000 mounted troops"' and
states that the actual strength of the expected Government re-
lief from the north is unknown.
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THE C.I.A. HAS NO OBJECTION
C 7 T I C A L SIT U A T 10 N 8 TO THE DECLASSIFICATION OF
THIS DOCUMENT.
Btdault has retreated from his former position concerning inter-
national management of the Ruhr; US officials recommend that the
proposed tripartite talks be suspended until some agreement has
been reached with Bidault (see item 1).
E W OPEAN RECOVERY
GREECE
No signif'i.cant new develop cents..
ll DONESIA
The denesian Republic will protest to the Security Council against
the admission of delegations from the Daatch.-sponsored states of
West Borneo and Mast Indonesia to Council hearings on the Dutch-
Indonesia dispute? US Consul General Batavia warns of the di fi-
culties of securing Republic implement?,tic,n. of any deep lions pro-.
duced through US good .. ot't'ic ,s (see Vera V.,
KOREA
No signific at ne' v . vellCopm ants.
RNA
No significant nn n.ew devejapmen as
Document No. Qlt
NO CHANGE in Class. 0
C7 DECLASSIFIED
Class. CHANGED TO: TS S
DDA Memo, 4 Apr 77
Auth: DDA REG. 77/1763
Date: 10 APR 1,7,8 By:j
CONFIDENTIAL
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GENERAL
1. Bidault raises new difficulties on Ruhr settlement--Under Secretary
ln an Ef TJS m sadors `a erq an oiig report from Paris
that French Foreign Minister Bidault has retreated from his former
position on the Ruhr question and has insisted,in an informal con-
versation, that he does not favor international control over Ruhr
management (see Daily Summary of 8 August, item 1). Bidault em-
phasized that French acceptance of the new lever of Industry agree-
ment is contingent upon: (a) guarantees that the Ruhr industrial
capacity will never again be used for military purposes against
France; and (b) some arrangement assuring that Western Europe's
access to Ruhr production will not depend upon the will of Germany.
The US officials fear that unless there is agreement with
Bidault prior to the forthcoming tripartite talks, French opposition
to the level of industry agreement will be so violent as to involve
the possible fall of the present French Government and the loss of
French support and leadership in the European economic program.
The US officials advise therefore that no date be fixed at present
for the London conference.
2. US reply to Soviet counter proposals r rding Japanese Peace Treaty--
i"e epa en o e, in- a rep p the o e a a memo e o
22 July regarding the forthcoming Japanese Peace Treaty, has main-
tained that: (a) the agreements reached at Cairo, Yalta, or Potsdam
do not invest the CFM with any authority concerning the Treaty; (b)
the establishment by the Moscow Conference of the Far Eastern
Commission recognized the primary interest of the eleven powers
in the Commission In all Japanese post-surrender policies; (c) since
only an exchange of views on such a conference was desired, any
interpretation of unilateral action by the US is erroneous; and (d) the
proposed conference will decide its own procedure. The Department's
reply expresses the hope that, because the other nine interested gov-
ernments have accepted these proposals, the USSR will also accept.
The Department has indicated to its embassies that if the
USSR does not reply w{thin two weeks, the US will consider dispatching
formal invitations for a Japanese Treaty Conference to the other nine
powers, such a conference to be held in Washington on 8 September.
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3. 'FlE desires is bases in Gyrenaica- US Embassy London re-
ports that the UK Foreign Office and the War Office are seeking
some means of obtaining strategic bases in the Cyrenaica area. The
Embassy adds that in the opinion of the Foreign Office no satisfactory
solution to the Italian colonies problem will be found by the CFM and
that the problem will eventually have to be placed before the UN.
(The Daily Summary of 5 July, item 5, reported the insistence of the
UK General. Staff that Cyrenaica bases were absolutely essential to
their strategy, owing to forthcoming troop withdrawals from Egypt
and very possibly from Palestine.)
4. Debt ,d ult holds resumvdon UK-,Soviet trade talks--The UK
Foreign Office has advised US Embassy London that the USSR has
been firmly informed that trade talks cannot be resumed until the
Soviet debt default of 1 August is cleared up. The British are re-
ported to feel increasingly that the USSR will not have grain avail-
able for export.
(CIG Comment: This information differs from an Embassy
report of 11 August Indicating a British move to reopen trade nego-
tiations. The reported British initiative appears actually to have
consisted only of asking the Soviets to pay the defaulted sum, to-
gether with a proposed commitment that the terms of any new pay-
ments agreement would be retroactive to the date of collapse of the
last Moscow talks.)
5. ITS ?b ecttons to Azores sro osais - ,The State Department has
pointed out to US Ambassador `Wiley in Lisbon that the text of a
recent Portuguese memorandum regarding US air rights in the
Azores (see Daily Summary of 28 July, item 2) would exclude
US Navy transport aircraft and might exclude all combat aircraft.
The Department proposes that Wiley inform Portuguese officials,
if they cite the US -Icelandic agreement in arguing against the use
of military personnel, that the use of civil personnel in Iceland has
proved most unsatisfactory and that the US hopes for a much more
satisfactory arrangement with Portugal. The Department suggests
that Wiley approach Premier Salazar directly if necessary.
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EUROPE
6. USSR: Further Lela in ratification of peace treaties--The Soviet
Government has Informed Ambassador Smiffi o is view that
the US, the UK, the USSR, and France cannot deposit ratifications
of the Italian and Balkan peace treaties until the treaties have
been ratified by the ex-enemy states. Smith points out that as
recently as January the USSR supported an opposite view. The
Ambassador believes that the USSR is attempting to delay rati-
fication because it wishes to maintain its armistice regime in
Hungary until the scheduled elections occur In that country.
(See Weekly Summary of 25 July, page 1, for additional consider-
ations prompting Soviet obstruction.)
FAR EAST
7. NEI: Foote warns acceptance of US offices unlikely--US Consul
General Fite in Batavia be eves at a ones an Republic
will not accept the US offer of good offices unless it is endorsed
by the Security Council because It wishes arbitration by repre-
sentatives of countries selected by the Republic. Foote warns
that no decisions produced through US good offices could be
implemented by the Republican Cabinet without the agreement of
Republican military leaders.
THE AMERICAS
8. DOMINICAN REPUBLIC: Government rejects Cuban protest--
The Cuban Charge in Ciudad Trujillo has Informed US Ambassador
Butler that the Dominican Government has rejected a Cuban pro-
test regarding alleged Dominican press attacks on President Grau
of Cuba. The Charge believes the Dominican Government is try-
ing to force a break in relations with the Cuban Government, but
he indicates that the Cuban Government does not Intend to permit
such a break.
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9. PANAMA: Defense sites negotiations--US Ambassador Hines, in
reply to a request for comments on a War Department draft for a
new US -Panama defense sites agreement, observes that the draft
would entail an "awkward" withdrawal from the US commitment
to "Joint authority, in some form," Hines believes that such a
withdrawal would "inevitably lead to public char
" "Fes of bad faith"
and that delay can only prejudice our position.
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CRITICAL SITUATIONS
EUROPEAN RECOVERY
US Ambassador Douglas is pessimistic concerning the effectiveness
of the measures taken by the to remedy the present economic
crisis (see item 2).
GREECE
AMAG Chief Griswold reiterates his belief that no increase in the
permanent size of the Greek Army should be permitted (see item 3).
INDONESIA
Despite vigorous pretests from the Netherlands Ambassador and the
British, French, and Belgian delegates, representatives of the Indo-
nesian Republic have, been permitted to participate in Security Council
discussions, As a counter-move, Netherlands Ambassador van Kleffens
has proposed that the same privilege be given to delegations from the
Dutch-sponsored states of East Indonesia and West Borneo.
In an effort to prolong joint Commission negotiations until Foreign
Minister Molotov replies to Secretary Marshall's letter, the US dele-
gation has proposed that oral consultations be abandoned and that plans
for a provisional government be evolved from the questionnaires filed
by applicants for oral consultation.
CHINA
The US note protesting Soviet delay in implementing the Sino-Soviet
Treaty of 14 August 1945 will strengthen the Chinese National Govern-
ment in 'its negotiations with the USSR on the Dairen issue (see item 7).
CONFIDENTIAL
O T
NO CHANGE in Class. o
0 DECLASSIFIED
Class. C"JANGED TO: TS S "
DDA Memo, 4 Apr 77
Auth: DDA F?G. 77/1763
Date: I C Sys
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GENERAL
1. UK seeks common front with US on E~rptian case--A high UK Foreign
five official has told US Embassy London that Bevin has been keenly
disappointed by the lack of clear-cut US support of the UK in the
Egyptian case now before the UN. The Foreign Office fears that fail-
ure of the US and UK to present a common front on the principle of
the sanctity of treaties may result in adverse long-range effects in
the Near East.
EUROPE
MA's views of effect of troop reductions overseas--US Mili-
tary Attache London reports his conviction that any appreciable
reduction of UK military forces overseas will require a "softer''
defense policy and foreign policy, despite Attlee's official statement
that the planned reductions (some 40% by 1 April 1948) imply no
policy changes. The MA adds that substantial withdrawals of troops,
unless commitments are assumed by the US, would tend to create
partial vacuums offering opportunities for the USSR to gain the
initiative.'
3. GREECE: AMAG opposes increasing size of Greek Army--AMAG
Chief Griswold reiterates his belief that i is no necessary to in-
crease the permanent size of the Greek Army because: (a) In-
creases made now would not improve the fighting strength of the
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Army for at least three months; and (b) the General Staff is not
making full use of the present strength of the Army and is too
much concerned with political considerations. The military, sec-
tion of AMAG believes that "present Army strength properly and
energetically utilized can decisively defeat the present strength
of the bandits."
4. HUNGARY: Suggests bringing Hungarian case before the UN--
US Minister Chapin in Budapest reports tin the op on o
Undersecretary of State Pongracz (a member of the Conservative
Smallholders Party), the forthcoming national elections of 31
August represent `the last opportunity for the US to halt the
Soviet -Communist drive in Hungary." Pongracz declared that
probably the only effective measure for the US to take in the situ-
ation would be to bring the Hungarian case before the UN.
NEAR EAST-AFRICA
5. IRAN: British propose Iranian air merger--According to US
Ambassador Allen in Tehran, British Overseas Airways Corpo-
ration (BOAC) has proposed that Iranian Airways (Iranair) be
merged with a hitherto inactive Iranian airline, and that BOAC
operate the consolidated concern with British aircraft under a
management contract.
(CIG Comment: US interests in Iranian Airways, which
have consisted of 10% ownership and a management contract
by TWA, would be eliminated by such an agreement.)
FAR EAST
6. FRENCH INDOCHINA: Meaning of Bollaert's departure for Paris--
US Consul O'Sullivan in Hanoi reports his belief that French High
Commissioner Bollaert apparently had planned, before his sud-
den departure for Paris, to present terms to the Vietnam Govern-
ment, the almost certain rejection oLwhich would justify a
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conclusive military campaign during the coming dry season.
Consul O'Sullivan feels that Bollaert desires to defend this plan
personally before officials in Paris who are divided on French
policy in Indochina.
7. CHINA: US protests Soviet deia on Dairen--The State Depart-
ment has instructed massy oscow transmit to the
Soviet Foreign Office a note again calling attention to the delay
in opening Dairen to international commerce as a free port in
accordance with terms of the Soviet-Sino Treaty of 14 August
1945. The Department's note reminds the USSR that,although
two years have passed since the Japanese surrender, repre-
sentatives of US firms have not yet been allowed to visit their
properties in Dairen. The note also states that until the USSR
and China reach agreement on Dairen, the US holds the USSR
responsible for treatment accorded to US interests there and
requests information on the steps which the Soviet Government
will take to assure equitable treatment to US Interests.
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CRITICAL SITUATIONS
E ,QPEAN RECOVERY .
Bevin has agreed to tripartite discussions of the German coal and
steel problems on the condition that there be no implications that
the French will have power of veto. THE C.I.A. HAS NO OBJECTION
TO THE DECLASSIFICATION OF
GREECE THIS DOCUMENT.
No significant new developments.
110.
INDONESIA
The Dutch have proposed to set up immediately an interim federal
government composed of Dutch-sponsored Indies states and have
invited the Indonesian Republic's cooperation. This government
would administer areas occupied by the Dutch in recent weeks in
addition to the Dutch-sponsored states.
KOREA
Secretary Marshall has addressed a personal letter to Molotov
expressing concern over the stalemate in the joint Commission.
The letter suggests that by 21 August a report be made by the
Commission oIi the present status of its deliberations..
CRINA
Even if the National Government's military power in north China
is strengthened, the military advantage in Manchuria will probably
remain with the Chinese Communists unless the National Govern-
ment carries out major reforms and receives substantial mili-
tary assistance from abroad.
Document No.
NO CHANGE in Class. ^
DECLASSIFIED
Class. C`1ANGED TO: TS S
DDA Memo, 4 Apr 77
Auth: DDA ^..G. 77 1763
Dato: APR 976 By:
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101
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EUROPE
1. ITALY: Seeks equality with France in aid program--US Embassy
Rome reports that the Italian Foreign - - - Office has instructed its dele-
gates at the Paris Conference to Insist upon the principle of equality
between France and Italy in the aid that may be sought under the
European recovery program. The Embassy believes that these in-
structions may have been elicited by representations made in Rome
recently by northern Italian industrialists, supported by the General
Confederation of Labor.
(CIG Comment: The support of the Italian industrialists by
the Communist-led General Confederation of Labor probably indicates
that the Communists are maneuvering in this way to create disharmony
within the Parts Conference.)
FAR EAST
2. FRENCH INDOCHINA: Postponement of High Commissioner's speech--
US Consulate General Saigon reports the postponemen o e presenta-
tion of new French terms to Vietnam by M. Bdllaert, French High Com-
missioner for Indochina. US Consul Hanoi has been Informed by the
International Red Cross there that M. Bollaert proposed returning to
Paris on 13 August, apparently to- confer on French policy. US Consul
Saigon believes that contributing factors to French indecision may be
the Indonesian situation and Leon Blum's recent statement on Indochina.
(CIG Comment: Blum, who opposes the current French policy
in Indochina, expressed in a recent editorial his belief that negotiations
must be undertaken with authentic representatives of the Vietnam
people and that Ho Chi Minh remains qualified to speak for the Viet-
namese.)
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CRITYCAL SITUATIONS
EUROPEAN RECOVERY, Bidault has accepted the opportunity to confer with US and UK officials
on the level of industry in the US-UK Zones Germany.
GREECE
Recent reports indicate increased political activity in the Balkan
Satellite States directed toward the formation and support of an "inde-
pendent' Gomimnh;t Greek government.
INDONESIA
The Netherlands Gever ument will not consent to the appearance of
Indonesi Republican representatives before the Security Council
(see item 3).
KOREA
NO significant anew developments.
C HIN A
Chinese Nationalist assertions--that the real strength of the Chinese
Communist Parity and its most effective pro-Soviet leaders are in
Manetkuria--appear to be part of the current Nationalist effort to
develop political and military objectives in Manchuria which would
warrant US support.
Document No. 0,74-1--
140 N0 CHANGE in Class. El
[] DECLASSIFIED
Class. CHANGED TO: TS S
DDA Memo, 4 Apr 77
Auth: DDA REG. 77 176 3
Date: Sy
CONFIDENTIAL
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GENERAL
1. No immediate UK troop withdrawals from Greece or Italy--Revin
has informs US Aaassador Douglas that the UK Government is
contemplating no troop withdrawals from either Greece or Italy
"in the immediate future," but that he expects pressure from the
left wing of the Labor Party favoring such withdrawals.
EUROPE
3. HUNGARY: 900,000 voters disenfranchised before elections--US
Minister Chapin 'in Budapest states. that a major scandal has deve-
loped over the disenfranchisement of an estimated 900,000 voters.
These persons are "disqualified" from voting in the 31 August
national elections by direction of the Communist Minister of Interior
on the grounds that they are Fascists.
PAR EAST
3. NEI: Dutch o ose appearance of Re ublican officials before SC --
US Embassy The ague luis been Informed by a Dutch official that.
his Government will not consent to the appearance of Republican
Foreign Minister Salim or former Premier Sjahrir before the
Security Council to present the Republic's position. Such repre-
sentation, the Dutch believe, would recognize Republican sovereignty.
THE AMERICAS
4. ARGENTINA: Fore! Minister promises Argentine support to US--
Argentine Foreign Minister Rramuglia has informed US Charge Ray
that Argentina "'must and will" support the US internationally, and
that any indications to the contrary are solely for domestic con-
sumption. Bramuglia adds that the Argentine Government: (a) before
the Rio Conference, would like to discuss with Secretary Marshall
and Assistant Secretary Armour a possible US Argentine anti-Com-
munist agreement, preferably to be kept secret; (b) favors separate
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Rio treaties for tra-Hemisphere and extra-Hemisphere aggression;
nd (c) would welcome steps the US toward a special economic
:, m rence prior to the Bogota Con ereaxce.
(CIG Connnent: joint action on aggression by American or
i? rn-American rattans alike was agreed upon for the first time at
The C`hapultepec Conference in 1945. The. Argentine position on
separate treaties, if accepted by the Rio Conference, would cancel
the progress ache red in this matter at Chapultepec.)
PARAGUAY: R beis ma occu Asuncion--US Charge Trueblood
in Asuncion rc~p~r, as o ug6 a e rioration in the Gov-
rnruent$s military situation, and (b) Government loss of ground at
a z ate that might result in rebel occupation of Asuncion before the
arrival of reinl'orc man4ts from the north.
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THE? C. I. A. HAS NO OBJECTION
TO THE DECLASSIFICATION OF
THIS DOCUMENT.
GENERAL
No.
1. U$ ready tg disc Germ,-:"dust
Department of State has instructed US Ambassador Caffery to
inform Bidault that the US is prepared to confer jointly with France
and the UK on a possible revision of the level of industry in the US-
UK Zone Germany. Caffery is to assure Bidault that the fullest
consideration will be given to French views, but is to explain that
without a fusion of the French Zone in Germany with the US-UK
Zone, all final decisions regarding German industry in the bizonal
area must remain the responsibility of the US and' he UK.
'?xP~~is ~".di ~. dons o~ steep-Caffery reports
that technical committees of the Paris Conference have been halted
in their work by the reluctance of the French delegates to participate
in the preparation of reports based on the possibility of an increase
of steel production in the US-UK Zone Germany.
EUROPE
2. AUSTRIA: I a ,ile fraxzn ATC--The Department
of State has requested US Representative Dodge at the Austrian
Treaty Commission (ATC) to return to Washington at once for
consultation. Dodge is instructed to amiounce at the next ATC
meeting that because of Soviet unilateral action in seizing Austrian
industrial plants and Soviet indifference to factual material pre-
sented by other ATC delegates, the Department considers it neces-
sary to consult with Dodge about the future work of the ATC.
FAR EAST
3. NEIL Dutch favor US mission -- US Embassy The Hague reports
that the Netherlands Government now regards the Linggadjati
Agreement as abrogated but still considers itself "morally bound"'
to maintain the principles of the agreement as a basis for future
dealings with the It donesian Republic. The Netberlands Foreign
Document No. :r'?"'
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Class. C IANCED TO: TS S
DDA Memo, 4 Apr 77
Auth: DDA REG. 7711763
Date: 1 0 APB 1979 By
25X1
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Office continues to oppose arbitration of the Dutch-Republican
dispute and hopes that the US will send a mediating commission
to Indonesia as soon as possible. The Foreign Office believes
that the Republic would accept this US action despite its request
that US good offices be used only to secure arbitration by an inter-
national commission.
US to repeat offer of good offices to Republic--The State
Department has instructed US Consul General in Batavia to repeat
the 'US offer of good offices to the Republican authorities. The
Consul General is to point out, however, that the US does not intend
that other nationsparticipate in the exercise of these good offices
which are intended only to bring both parties together to work out
a mutually equitable settlement.
4. CHINA: Possible unified control l annchuria- US Embassy Nan-
king has been informed by a source "believed reliable" that mili-
tary and political control in Manchuria will shortly be unified under
the overall command of General Chen Cheng, present Chief of Staff
of the Central Government Army. US Embassy comments that while
such a move to eliminate the present inefficient duality of control
would indicate that the Central Government is attempting construc-
tive action in Manchuria, these measures would not solve the pres-
sing military problems in Manchuria or end major criticism of
that Government's political administration there.
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CRITICAL SITUATIONS
E OPEAN RECOVERY
J3idault proposes international board to allocate the production
of the Ruhr (see item I).
GREECE
While guerrilla activity continues on a slightly reduced scale,
unconfirmed reports point to large troop concentrations and
movements along the Greek border in the Satellite States.
BONE S.IA.
The Indonesian Republic has accepted the US offer of good offices
but has requested that those offices be used to secure the dispatch
of a UN arbitration commission to : rndoznesia as soon as possible.
KOREA
The US delegation to the Tel at Commission report', that further
discussion in the Commis ,ion aionng present lines has become
absurd. ,
CIUNA
No significant new developments.
Document No. 0
.
NO CHANGE in Class.
:...
fl DECLASSIFIED
Class. CHANCED TO: TS
S
DDA Memo, 4 Apr 77
Auth: DDA R3G. 77/1763
Date; ~. 0 ApP 1g7P By:
CONFIDENTIAL
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GENERAL
1. Bidault favors international board to allocate Ruhr products-Under
Secretary Clayton has been told by Foreign Minister Bidault that
France would not object to any US-UK agreement for the level of
industry in western Germany, provided the French had assurance
that the resources of the Ruhr would not again be employed in war
on France. Bidault believes that such assurance could be obtained
by the creation of an international board (composed of representatives
from the US, UK, Benelux, France, and eventually Germany) to allocate
the production of the Ruhr.
Clayton expresses the opinion that Bidault's suggestions
should be accepted by the US as the basis for further conversations.
Clayton believes that "France is the key country of the sixteen par-
ticipating in the Paris Conference," and that French withdrawal or
the fall of the present government, as a consequence of French dis-
satisfaction relating to Germany, would probably gravely jeopardise ,
the whole European recovery program.
2. US believes Greek problem should go to UN General Assembly--The
State Department has notified the US delegation to the UN that it is
considering a statement informing the majority members of the
Security Council of the US conviction that: (a) the Greek problem
must be carried to the General Assembly, If the SC is unable to
afford Greece the necessary protection; and (b) the General Assembly,
in the event of the SC's continued failure to act, will exercise its
powers "to the limit" for the protection of Greece (see Daily Sum-
mary of 7 August, item 2).
3. Douglas to stress US views on UK withdrawals--The Department of
State has instructed US Ambassador Douglas to reiterate to Foreign
Secretary Bevin our views concerning the unfortunate effects of an
immediate withdrawal of British troops from Greece and Italy.
4. UK to postpone declaring end of war with Austria--The Department
of State has been informed by the UK Embassy Washington that the
-re~eeex~F.
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Foreign Office will postpone any statement terminating the `'state
of war with Austria (see Daily Summary of 7 August, item 3).
The UK is now waiting for a Soviet reply to the last UK query on
Soviet ratification of the Italian and Balkan Treaties. If the Soviet
reply is unsatisfactory, or if no reply is received within a reason-
able time, the UK will then issue statements simultaneously termi-
nating the state of war with Italy and Austria.
EUROPE
5. CZECHOSLOVAKIA: Soviet infr nsent of so_ vereignty criticized --
US Embassy Prague reports that the leader of the moderate MARG-511c
Peoples Party made a public statement recently declaring that his
Party intends to resist Communist domination as long as circum-
stances permit. The Party leader is reported also to have made an
"
implied but quite obvious criticism of Soviet limitations on Czecho-
slovak sovereignty.''
NEAR EAST-AFRICA
6. IRAN: vain enda; ers position as Prime Minister--US Ambassa-
dor Allen reports that rime s er vam may ffave lost his
chances, of remaining Prime Minister by permitting Muzafar Firuz
to continue as Ambassador in Moscow. Allen believes that the Shah
now will almost certainly endeavor to remove vam.
(CIG Comment: The Shah is bitterly opposed to Firuz, who
has consistently urged Qavam to appease Moscow. Firuz claims
that the USSR will probably take drastic action if bran rejects the
Soviet oil proposals.)
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CUIT.lti?rAL SITUATIONS
EUROPEAN RECOVERY'
US officials Meeting in Paris consider that US objectives in Western
Europe may not attained without further US aid this year (see
item 1).
GREECE
Dwight Griswold and Greek Government leaders in Athens are
discussing the Government's recent request for greatly increased
US military supplies to meet the growing guerrilla threat.
DO ESI.A
The press agency of the donesian Republic has released a state-
ment by Premier SiarifoeddLa. c ncerning the Republican attitude
toward settlement of the dispute (see item 5). Dutch authorities
accuse the Repa-blic of violat.in g the cease-fire order, paralleling
earlier Republican charges of now Dutch operations.
XOREA
The Joint Commission continues deadlocked as the Soviet deleg-a-
tion accuses the US of causing delays and violating joint decisions.,
C;A
The Chinese Nationalist Coniniand is apparently becoming inereas..
ingly concerned over the probability that the Chinese Communists
will launch strong Offensives in Manchuria and north China within
one or two months.
Document No. 032.
NO CHANGE in Class. El
DECLASSIFIED
Class. 'CHA.!:k~_-ED TO: TS S
DDA Memo, 4 Apr 77
Auth: DDA REG. 77/1763
Date: 10 APR 19M By
CONFIDENTIAL
25X1
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 ringlpfM
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GENERAL
1. US officials recommend further US aid to Europe in 1947--Under
Secretary Clayton and Ambassadors Douglas, Caffery, and Murphy
believe that in the absence of additional assistance from the US this
year, conditions in the UK, France, and Italy may so deteriorate
that US objectives in Western Europe and elsewhere may become
unattainable. They suggest, therefore, that every conceivable avenue
of providing interim assistance be carefully reviewed, possibly in-
cluding the calling of a special session of Congress.
These US officials suggest, furthermore, that the US inform-
ally present specific recommendations to the Paris Conference on
European economic recovery. They cite. maximum coal production,
monetary stabilization, and progressive reduction of trade barriers
between participating countries as essential elements in the recovery
program; and they suggest that failure by any participant to take
effective action in these respects will be ground for reconsideration
of the aid it is receiving.
2. Austin recommends US anticipation of Soviet veto--US Delegate
Austin' believes that the Department of State, in anticipation of a
second Soviet veto on the Greek case, should make a policy decision
by which the US will press the case in the General Assembly and
will urge the Assembly to take action against Yugoslavia, Bulgaria,
and Albania under Article 41 of the Charter, if developments warrant..
(Article 41 provides for the complete or partial severance of trans-
port communications and economic and diplomatic relations.) Austin
feels that such a decision would bolster the friendly members of the
SC who are now skeptical concerning further action on the Greek
case.
EUROPE
3. ITALY: UK ma declare end of "state of war" with Aus a--US
Ambassador Dunn has been informed by the UK Ambassador that the
UK may soon declare the "state of war between England and Austria
to be at an end." Dunn recommends that the US should overlook no
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.
opportunity to deter the UK from making such a declaration, in view
of "`the devastating blow it would give to Anglo -Italian relations by
placing Austria in a position of official preference over Italy."
NEAR EAST-AFRICA
4. IRAN: Qaya seeks delay in Soviet oil matter--Prime Minister
Qavam{has confidentially Informed US Ambassador Allen that he has
in mind a plan which would delay decision on the Soviet oil, question
for perhaps two years. Qavam would first engage neutral geologists
to determine the areas in which oil exists and then restrict any con-
cession to such areas.
FAR EAST
5. INDONESIA: Republic demands UN arbitration--US Consul General
in Batavia reports that a statement has been issued by Premier
S jartfoeddin declaring that the Republic will not negotiate with the
Dutch until the arrival of a UN Commission. The statement announces
-that the Republic will reject all mediation and will agree wily to arbi-
tration, stressing in this connection the importance to the Republic of
the demarcation lines between Dutch and Indonesian forces at the com-
mencement of hostilities on 20 July 1947. Consul General Foote warns
that Premier Sjartfoeddin's statement may be for internal consumption
and suggests that the Republic's reply to the US offer of good offices
may differ In tone.
(CIG Comment: The emphasis by the Republic upon the prob-
lem of the demarcation lines indicates that the Republicans will proba-
bly insist on the withdrawal of Dutch forces to the 20 July positions
before entering into any negotiations. Such a stand will seriously de-
lay any moves toward settling the dispute.)
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6. CHINA: Fear a ressed that US aid will be d"ad--A reliable
source, according to the Rival c e , quotes the Deputy
Commander of Chinese Nationalist Ground Forces as saying that
"US aid to China will be overly delayed by the necessity of waiting
for the next session of Congress, unless the US President can be per-
suaded to declassify certain material." The Commander cited as
precedent "a similar method of handling aid to Britain prior to war."
(He was presumably referring to such transactions as the classifica-
tion of 50 US destroyers as obsolete and their subsequent transfer
to Great Britain.)
(CIG Comment: It is doubted that any such US action would
materially alter the Nationalist military outlook for the near future.
Moreover, there is a real possibility that US military equipment, if
supplied to the presently Inadequate and disorganized Nationalist
military administration, would be grossly mis used and might even
find Its way Into Chinese Communist hands.)
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 UUI1I ILL LU4L r; (Y 1947
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C ,t~, ` " ut ..a SITUATIONS THE C.T.A. HAS NO OBJECTION
TO THE DECLASSIFICATION 0
THIS DOCUMENT.
EUROPEAN RECOVERY - No.
The K Government has informed Parliament that it will immediately
reduce food purchases from hard-currency areas as one means of
slashing dollar expenditures.
GREECE
In an effort to insure the success of t.he,US aid program, Dwight
Gri.s old has recommended that the US replace )British troops in
Greece with US troops (see item 1).
INDONESIA
l'adosuiaax Rep gAblic authorities charge that the Dutch have violated
the agreement to comply w,yyithh t o cease-fire request by capturing
two more towns since the truce deadlw e, The Republic also announces
that it no longer considers, itself bond, by the Linggadjati Agreement.
and desires solution. of the conflict h an international commission.
" O EA
Negotiations in the Joii. std Sazi:?:{m sio are expected to break off within
the next two weeks. Fresh political disorders In Korea will Undoubted-
ly ensue.
CHi
Deep..rooted fears that japan, v ith US backing, Vr ll regain a position
of economic supremacy in Asia ~h %derlie the f
uet outbursts against
the growing Japanese menace fro official Chinese sources and broad
secti s~ of the Chinese , u I
b Such fears are likely to be increasingly
reflected Chinese Government policy toward Japan, especially if
China itself fails to receive US assistance.
Document No. 017/
NO CHANGE in Class. []
0 DECLASSIFIED Q
Class. CHANGED TO: TS S '0'z
DDA Memo, 4 Apr 77
Auth: DDA REG. 77 1763
Date : 1 0 APP '976 By :
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 Approved For Release 20 CiE1k78-01617A005900010002-1
GENERAL
1. Griswold recommends US replace UK trop in Greece--AMAG Chief
Dwight Griswold has recommended that British troops are withdrawn
from Greece, they should be replaced by US troops. He believes, how-
ever, that this plan should be adopted only after Greek political leaders
have agreed to broaden the present Government. US Ambassador Mac-
Veagh questions the wisdom of making the decision to send troops con-
tingent on the willingness of Greek politicians to form, a more repre-
sentative Government because: (a) such a decision must rest on con-
siderations far transcending Greek internal problems and involving
US-Near Eastern policy; and (b) Greek politicians, understanding this
situation, will probably delay broadening the Government, "if they do
so at all."
2. US officials approve immediate high-level US-UK discussions--Under
Secretary Clayton and Ambassador Douglas have recommended ap-
proval of Bevin's proposal for immediate high level US-UK discussions
of the British financial position and its international implications.
3. Suter Act and Rio Conference--US Ambassador Pawley reports that:
he feels reasonably certain" that at the forthcoming Rio Confer-
ence an attempt will be made to force discussion of Clause 202E of
the recent US Sugar Act; (b) Mexico and Uruguay, and perhaps Bolivia
and Colombia, will possibly support such an attempt; and (c) a high
Brazilian official believes that Brazil will support the US "should
a controversy arise." (Clause 202E permits the cancellation of any
increased sugar quotas for any country that in the US view discrimi-
nates against US commercial interests.)
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CRITICAL SITUATIONS
EUROPEAN RECOVERY
Under Secretary Clayton reports from Geneva his conviction that
the British, French, and Italian economic situations "are almost
certain to blow up" if US aid is not forthcoming before March 1948.
GREECE
Although recent reports indicate dissension between Communist
leaders sent to Greece from the Satellite states and their Greek
opposite numbers, such disagreement is having no visible effect
on the conduct of the guerrilla war.
43
INDONES.
Dutch forces have achieved the principal objectives of their "police
action," but implementation of the ;ease-fire agreement requested
by the UN Security Council may be impeded by the Republican demand
that Dutch troops be withdrawn be hind demarcation lines fixed on
14 October 1 46
KOREA
The joint Commission remains deadlocked.
CHINA
Recent reports from Manchuria fail to substantiate Chinese Govern-
ment charges that the USSR has supplied the Chinese Communists
with Soviet-made military equipment.
aY
NO CHANGE in Class. F1
0 DECLASSIFIED
Class. CHANGED TO: TS S
DDA Memo, 4 Apr 77
Auth: DDA REG. 77/1763
Date: 10 APR 197' By: T
CONFIDENTIAL.
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 Approved For Release 2Q)WEbP78-01617A005900010002-1
GENERAL
1. USSR re ortedl threatens Iran on oil ro osal--The State Department
has been informed by the British Embassy in Washington that Molotov
reportedly told the Iranian Ambassador in Moscow recently that: (a)
the Iranian Parliament's action on the Soviet oil proposal will be the
"acid test" of friendly Soviet-Iranian relations; and (b) should Parlia-
ment fail to ratify the proposals, the "independence of Iran would be
at an end."
2. President of SC reportedly ordered to favor E tian case-
25X1 X President Quwwatil of yr s informed
the Egyptian overnment tit may look upon Faris al-Khuri (Syrian
delegate to the UN and currently president of the Security Council)
as an Egyptian delegate. Quwwatli reportedly added that al-Khuri will
carry out Egyptian instructions to the letter during the hearing of the
Egyptian case against the UK..
(CIG Comment: Egypt has timed its appeal to coincide with
al-Khuri's term as president of the SC. Even with the assurance of
his support, however, the success of the Egyptian case is doubtful.)
EUROPE
3. HUNGARY: Socialists protest Communist rigg!nS of 31 August elections--
US Minister Chap reports eports from Budapest that the national electoral
campaign has begun with an angry protest by the Social Democratic
Party against the illegal tactics of the Communists. Despite a previous
joint declaration of unanimity, the Socialists have sent an ultimatum
declaring that unless the Communists stop cheating and intimidating,
the Socialist Democratic Party will withdraw from the elections.
4. BULGARIA: Government prepares Soviet-type "trial" for Petkov--
US Political Representative Horner in Sofia reports that prior to the
trial of Opposition Agrarian Leader Petkov, the Rumanian Govern-
ment: (a) coerced factory and government workers to participate in
mass meetings which demanded the death penalty for Petkov; (b) ar-
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r
rested two attorneys whom Petkov had designated to represent him;
(c) extracted by torture "confessions" from three Agrarian Deputies
known to be faithful Petkov supporters. Horner adds that on the open-
ing day both US and UK Representatives in Sofia were refused admit-
tance to the trial. He also reports that the Government is expected
to impose the death penalty.
FAR EAST
5. CHINA: Soviet assistance to Chinese Communists- According to
Assistant US Military Attache Barrett, twenty Japanese and Koreans
taken prisoner by Chinese Nationalist forces at Ssupingkai stated
that: (a) they were not forced to enter military service but-joined
the Communist troops in order to get food and employment; and (b)
they had seen no evidence of Soviet aid to Communists in Manchuria.
(The Acting Commander of the Nationalist forces in Manchuria has
also expressed to Barrett his belief that the USSR is supplying the
Communists with Japanese equipment only, because the supplying of
Soviet equipment "would give away Soviet policy to the US. ')
THE AMERICAS
6. D?MINiCAN REPUBLIC: Sea and air search yields negative results--
Commander, Caribbean Sea Frontier reports a 2-4 August sea
and air search of Caribbean waters for Dominican revolutionaries
allegedly en route to Hispaniola from Cuba yielded negative results.
According to the US Military Attache Havana, aircraft belonging to
Dominican revolutionaries have been seized by the Cuban Army Air
Force.
(CIG Comment: The Inability of the Commander, Caribbean
Sea Frontier to discover evidence of unusual movement of either
ships or men from Cuba toward the Dominican Republic confirms
earlier CIG analysis regarding the exaggerated character of these
reports.)
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CRITICAL SITUATIONS
EUROPE4N RECOVERY'-GREECE
Bevin has proposed immediate high-level US-UK discussions on
the UK financial position and its international implications. In
response to US expression of concern over UK intentions, Sevin
insists that no fundamental change in foreign policy is implied in
the sudden IlK decision to reduce its troops in Greece and Italy
(see item 1). US representatives deplore the disturbing effects
of this "ill-timed" decision on the stability of the Italian and
Greek Governments (see item 2).
INDONESIA
Although both Dutch and Indc nesiagn Republic leaders have agreed
to cea,se fire in response to the UN request, considerable doubt
exists whether such an order can be enforced by both sides, in view
of the continuing causes for tension between the two parties.
KOREA
The US delegation to the Joint Commission believes it will be able
to spin out negotiations with the USSR for only two more weeks,
barring unexpected developments.
CAA
Chiang Kai-shek's current all-out effort to improve the Nationalist
military position in Shantung prior to the departure of General
Wedemeyer appears designed to justify a request for sufficient
US aid to extend Nationalist offensive operations to Manchuria.
Document No. OR (7 -
NO CHANGE in Class.
LI DECLASSIFIED
Class. CHANGED TO: TS
AUth. DD
Date :X 0 APR Shia BY:
DDA Memo, 4 Apr 77
A '=fl 77/1763
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GENERAL
1. Benin intends no form policy change--In response to Secretary
Marshall's expression of concern over the announced withdrawal of
British troops from Greece and Italy (see Daily Summary of 2 August,
item 1), Benin has assured US Ambassador Douglas that UK foreign
policy changes are not implied In this decision. He added that the
precise extent of UK troop reductions abroad has not definitely been
settled and that the Cabinet's announcement in Commons will proba-
bly be made only in the most general terms. Bevin asked how long
the US desired UK troops to remain In Greece and stated that before
the Cabinet makes any final decision regarding UK troops In Italy,
he will communicate with Douglas.
3. USSR asks Austria for copies of economic conference ocum -
US Ambassador Caffery reports that Voligruber, Austrian delegate
to the Committee of European Economic Cooperation, has been re-
quested by the Soviet Embassy in Parts to make available to the USSR
copies of all Parts conference documents. The Chairman of the Com-
mittee has suggested to Voligruber that this is a matter which the
USSR should take up with the Austrian Government at a top level.
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EUROPE
4. UK: Anti-US sentiment Increasing--US Ambassador Douglas reports,
after conversations a n-,_t anti US sentiment seems to be
growing within the UK Labor Party and that this sentiment may be
increased when the impending drastic measures to save dollars are
announced by the Government. As causes for this sentiment, Bevin
laid particular emphasis on US financial contributions to illicit
Palestine activities, criticism in the US of British management of
the Ruhr coal operation, the burdensome conditions of the US loan,
and the 50-50 sharing of German occupation costs.
Douglas adds that Bevin believes a US UK schism may be
developing. Douglas comments that if the USSR notes a deteriora-
tion in US -UK relations, it may "step up the pattern" of its tactics.
THE AMERICAS
5. PARAGUAY: Rebel force 32 miles from Asuncion--US Charge True-
blood reports that the Rebel flee , now re-p-oiUd f6 consist of some
20 vessels with several thousand troops, reached on 2 August a
point 32 miles north of Asuncion where Government opposition com-
pelled them to turn back upstream.
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 ii~ A U G 1947
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CRITICAL, SITUATIONS
EUROPEAN RECOVERY
The Executive Committee at the Paris Conference has demonstrated
a readiness to tackle such basic questions as multilateral elimina-
tion of quota restrictions and progressive reduction of tariff barriers
with a view to reaching a customs union. French representatives
have expressed concern for France's economic and political stability
if US assistance under, the European plan Is not forthcoming until
March 1948.
GREECE
In view of the Soviet veto in the Security Council, US and UK repre-
sentatives in Athens are re-estimating the military situation. They
agree that the Greek Army, properly deployed, will be able to cope
with present guerrilla strength. UK representatives, however, doubt
that the AMAG program will immediately discourage further guerrilla
recruitment. The US Governs entt has expressed its concern over the
UK decision to wit hdraxw its troops (see item 1),
INDONESU
The UN resolution calling .for cessation of the Dutch-.Indonesian
hostilities and arbitration offers both parties a final opportunity to
reach a settlement prior to any UN decision to claim full jurisdiction,
in the controversy.
KOREA
Stalemate in the Joint Commis ,ion conntinuues.
CHINA
Chiang is seeking to purchase ten million rounds of US aircraft
ammunition (see item 7).,
Document No. 028
NO CHANGE in Class. E]
M DECLASSIFIED
Class. CHANGED TO: TS S
DDA Memo, 4 Apr 77
Auth: DDA REG. 77 1763
Date: 1.0 APR 19 y:
5X1
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 Approved For ReleasC fi TtAt-RDP78-01617A005900010002-1
GENERAL
2. Ar tin~a proposes re-Conference t nderstandiial with US--US Em-
bassy Buenos Aires has been assured by Enrique Coromiinas, one of
the 'principal Argentine delegates to the Rio Conference, that Argen-
tina will bring up no controversial matters at the Conference, and
that in Argentina's view: (a) a completely united front against
aggression by an extra -continental power, especially the USSR, must
override "all other considerations"; and (b) because Argentina is
the "only nation which counts besides the US," a pre-Conference
understanding between the two countries would eliminate all diffi-
culties. Corominas, whose remarks were in the Embassy's opinion
"Inspired" by Foreign Minister Bramuglia, offered to arrange a
conversation between the Embassy and the Foreign Minister to dis-
cuss such a pre-Conference understanding.
3. "Southeast Asia Federation Committee" appeals to UN--US Military
Attache angkok reports that a Southeast Asia Federation Committee,
composed of a "local Viet Minh committee, free Laos, free Cambo-
dians, Indonesians, Burmese, and free Thai," has been formed in
Bangkok. The Committee has issued a manifesto appealing to the UN
for aid for the conflict areas and has requested that the problems of
Southeast Asia be considered as a whole.
(CIG Comment: Continued efforts by nationalist groups in
Southeast Asia to obtain regional action by the UN may be expected.)
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EUROPE
4. GERMANY: Creation of a German Government for the Soviet Zone--
the Soviet Military Authority (SMA) has re-
newed discussions with German political leaders concerning the
creation of a government for the Soviet Zone, including the Soviet
sector of Berlin. (see Daily Summary of 1 July, item 2). The USSR
reportedly desires that the formation of such a government be com-
pleted by 14 August.
(CIG Comment: The USSR has denounced the union of the US
and British Zones in Germany as political rather than economic.
Having already matched the US-UK bizonal economic administration
with a central economic administration for the Soviet Zone, the SMA
would regard the creation of a zonal Government as a logical devel-
opment. Manifestly such a Government could readily be converted
into a Soviet satellite state in Germany, its nominal independence
exerting considerable attraction upon Germans in the Western Zones.
That further step, however, would compromise the USSR's present
effective pose as the champion of German unity in opposition to
separation and partition. It is not likely to be taken unless and until
the CFM meeting in November proves unification on Soviet terms
to be impossible and partition an accomplished fact perversely
attributable to Western "imperialism:')
5. AUSTRIA: Influx of Jewish DPs into US- Zone--US Minister Erhardt
reports that the steady influx of Jewish refugees into the US Zone of
Vienna, which is currently caring for 7,000 persons in camps with
a normal total capacity of 2,000, is creating serious problems of
crowding, feeding, and sanitation.
6. BULGARIA: Division in Communist Party rumored--Acting US Rep-
resentative Horner reports a revival of rumors in Sofia that a differ-
ence of opinion exists within the Bulgarian Communist Party. The
"moderates," headed by Provisional President Kolarov and Tsola
Dragoicheva (National Secretary of the Fatherland Front) reportedly
favor a more independent Bulgarian policy in contradistinction to
complete subservience to the USSR. Horner considers that the
existence of such a rift was in part substantiated by Finance Minister
Stephanov, who, to a conversation with the Acting US Representative 9
dismissed the anti-US press campaign as "propaganda for the masses"
and expressed great interest in the revival of Bulgarian-US economic
relations.
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FAR EAST
7. CHINA: Chiang request 10 million rounds of aircraft ammunition--
Generalissimo Chiang Kai-shek has indicated to US Ambassador Stuart
his desire to purchase 10 million rounds of M-2 .50 caliber aircraft
machine gun ammunition, with links, from the US for immediate
delivery and use. Stuart has advised Chiang to communicate directly
with the Chinese Embassy in Washington for negotiations with the
War and Navy Departments.
THE AMERICAS
8. DO CAN REPUBLIC: Developments in rumored invasion--US
Ambassador Butler reports that: (a) Ciudad Trujillo is quiet and
orderly although a newspaper has now published reports of the sup-
posed Imminent invasion; and (b) both Army and Navy air forces are
conducting patrol missions. According to the US Military Attache,
the Dominican Army expects landings to be attempted on the island's
north coast.
US Ambassador Corrigan transmits from the Venezuelan
capital a report from an informant whom he considers trustworthy
that 350 Dominicans and Venezuelans, some of whom are allegedly
Communists, have left Venezuela over the past five days to partici-
pate in the attempted ouster of Dominican President Trujillo.
Corrigan believes high Venezuelan officials are "countenancing" the
movements of men and equipment from Venezuela for use against
Trujillo.
fates that: (a) Haiti's Chief
of Sta is apprehensive raga army's ability to repel any
large invasion force that might attempt to land In Haiti; and (b) Hai-
ttan civil and military officials have a report that large Dominican
forces are ready to cross the border into Haiti to engage any forces
that may attempt to land there.
The State Department has informed US Embassy Ciudad
.Trujillo that it will henceforth permit arms exports to the Dominican
Republic on the same basis as those to the other American Republics--
that is, whenever in the Department's view they are "reasonable and
necessary" from the standpoint of internal order, self-defense, or
international obligations vis-a-vis the Security Council.
?
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GUNHUEOff
9. PARAGUAY: Rebels attack Government High Command--U5 Charge
Trueblood Asuncion reports that; a some 1,000 rebels proceeding
from Asuncion in two armed boats have surprised the Government
High Command at Ypapobo (between Concepcion and Asuncion on the
Paraguay River) with an attempted landing operation; (b) conflicting
reports of an imminent rebel attack on Asuncion itself have caused
the Government to adopt precautionary measures there; and (c) he is
inclined to credit the Government claim that Concepcion has fallen
to its troops.
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C B4 Tr,'- L T U a ,' 10 14 S
EUROPEAN RECOVERY.
Fa .'iaer retrenchments to the Mr domestic economy are under dis-
25X6 S-si.mn the UK Government.
25X6
GREECE
Dissension in the Greek Cabinet concerning the organization and
direction of the Army has resulted in the withdrawal from a Cabinet
meeting of Ger c' al _ ;r as, Minister of Public Order. Interference
by politicians co nti a