CURRENT INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000300190001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 23
• Document Creation Date: December 15, 2016
• Document Release Date: May 17, 2004
• Sequence Number: 1
• Publication Date: September 3, 1964
• Content Type: REPORT

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OC! NO. 9628
3 September 1954
CONFIDENTIAL,
CURRENT
INTELLIGENCE
WEEKLY
DOCUMENT NO.
NO CHANGE IN CLASS. Li
DECLASSIFIED
CLASS CHANGED TO: TS S
NC;(1- REVIEW DATE:
AUT
DATe
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
t.
State Dept. review completed
"F 'Z
kit t,
1141111AL
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly has been prepared prima-
rily for the internal use of the Central Intelligence Agency.
It does not represent a complete coverage of all current
situations. Comments and conclusions represent the im-
mediate appraisal of the Office of Current Intelligence.
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Approved Focaelease 2004/06/
THE SOVIET WORLD .
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SUMMARY OF CONTENTS
0 0 o
000 0 0 a 0 0 D 0 0 0 . Page 4
BRITISH POLICY IN THE MIDDLE EAST FOLLOWING THE SUEZ
AND IRANIAN SETTLEMENTS . .
0 0 0 0 0 0 0 0 0 0 0 0 Page 6
The preliminary agreements on the Suez base and
Iranian oil will give Britain greater leeway in develop-
ing its military and economic policies in the Middle
East, and in attempting to regain its prestige there.
Britain and the United States agree on basic objectives
in the area, but co-operation is being hampered by
continued disagreement on the nature of a Middle
Eastern defense system and by growing economic rivalry.
THE ARAB WORLD AFTER SUEZ . 00 0 0 C 0 0 0 0 0 0 . Page 11
The Suez settlement represents real progress in the
Middle East but also releases traditional rivalries and
new tensions. There will probably be no early improvement
in Arab-Israeli relations, and the Arabs are still un-
willing to co-operate with Western defense planners
except on their own terms.
JAPAN VULNERABLE TO CHINESE COMMUNIST PEACE OFFENSIVE . Page 13
The prestige Communist China gained at the Geneva
conference and the atmosphere created by the Indochina
cease-fire have made Japan increasingly vulnerable to
a Peiping peace offensive. The Chinese are likely to
intensify their diplomatic maneuvers which are aimed
at the Japanese people rather than the government.
THE OUTLOOK FOR THE CAFE FILHO GOVERNMENT IN BRAZIL . . Page 15
The essentially nonpolitical cabinet chosen by
Brazil's new president, Joao Caf?ilho, faces not
only serious economic difficulties, but also the
likelihood of continued harassment from Communist and
pro-Vargas elements exploiting the economic nation-
alism of the late president's farewell letter.
3 Sept 54
CURRENT INTELLIGENCE WEEKLY
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1954 HARVEST PROSPECTS IN THE SOVIET ORBIT Page 16
The Orbit will probably be unsuccessful in its
efforts to achieve an increase in agricultural output
during 1954. Harvest prospects for the major crops in
the USSR and the European Satellites vary from somewhat
below to about the same as 1953, a relatively poor year.
In China, the summer floods probably will reduce total
food output about 9 percent below last year's level,
probably causing famine in some areas.
SPECIAL ARTICLE. COMMUNIST STRATEGY FOR THE FAR EAST . Page 18
With the ending of the "hot war" in Indochina,
Communist policy in the Far East is expected to give
new emphasis to political tactics aimed at dividing
the non-Communist world and expanding the bloc's power
in Asia. The Communists' immediate objective is to
prevent the West from organizing a broad Asian defense
system.
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THE SOVIET WORLD
The Soviet Orbit last week concentrated a barrage of
promises and threats on France, which besides the immediate
aim of influencing the assembly debate on EDC, had the longer-
range purpose of cultivating French opposition to German re-
armament in any form. A major Pravda article reiterated
Soviet opposition to any form of German remilitarization,
either within EDC or outside of it. Pravda said that such
a step aggravating international tension wouldbe incompatible
with a solution of the disarmament question, and hinted that
further disarmament talks would be fruitful if tension were
lessened.
Pravda was reflecting a statement made privately by
SovieTiaSsador Vinogradov to Premier Mendes-France on
26 August that Moscow now felt there was a large measure of
agreement between the Soviet and French positions on disarm-
ament, as developed in the UN disarmament subcommission in
June. This approach was obviously aimed at those trench poli-
ticians who see the prospect of disarmament talks as the best
excuse for postponing German rearmament. It probably does not
indicate willingness on the part of the USSR to modify its
rigid opposition to the British-French disarmament plan pro-
posed in London in June.
The Polish note to France on 25 August, proposing a
treaty of friendship and mutual assistance, climaxed the
Satellite campaign of the last few weeks to improve relations
with France. Despite the cool reaction of the French govern-
ment, it seems possible that other Satellites might follow
up this blunt Polish proposal for an alliance against Germany
with similar offers. This new tactic, supplementary to the
Molotov all-European security plan, would offer France an
alternative to German rearmament. It would ostensibly revive
the prewar system of alliances, but would, in facts orient
Paris toward Moscow.
Moscow's exploitation of the defection of Karl Schmidt-
Wittmack, former Christian Democratic member of the Bundestag,
and the suggestion by the local Communist Party that it had
made high-level penetrations of the West German criminal po-
lice were probably designed to destroy public confidence in
the Bonn government during the present foreign policy crisis.
3 Sept 54 CURRENT INTELLIGENCE WEEKLY
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Inside the USSR, the Soviet leaders have over the past
,three months shown a new concern with the problem of crime.
Besides reinstituting in May--after a lapse of 300 years--
capital punishment for "premeditated murder," the regime has
shown a new willingness to publicize murder, rape, and other
crimes of violence, along with the sentences meted out to the
guilty parties.
This is a direct and striiting reversal of previous prac-
tice, The Soviet government had, in the past, always regarded
nonpolitical crime as far less serious than political offenses,
and in its official pronouncements had gone so far as to claim
that since capitalism, the basis of crime, had been erased in
the Soviet Union, only minor crime remained as a vanishing
holdover of the capitalist era. In addition, it had proudly
declared that the Soviet press was free of the salacious content
of. Western ,newspapers, where articles about murder and rape
reflected the decadence of the capitalist system.
Since the announcement of last May, however, many reports
of the application of the new death penalty have appeared in
the press. Longer sentences are now being given in Soviet
courts, and maximum terms go to criminals rearrested after
their release under the amnesty of April 1953.
In conjunction with demands that criminals get their
just deserts, the police and the courts are adjured to protect
the inviolable rights of decent Soviet citizens. This theme
of protection by Soviet law is contained in speeches, articles
and short stories, each stressing "socialist legality." They
emphasize that Soviet leaders are now as much concerned with
suppressing crime against the individual as they have always
been with crimes directed against the state.
It appears, then, that the regime has decided to mete out
and publicize stiffer punishments in order to allay public con-
cern over the problem of major crime made sharper by the re-
lease into society of large numbers of criminals under the
amnesty, and to deter a further increase in crime. This de-
cision probably springs from a recognition on the part of the
leaders that the refusal to admit the existence of crime was
no answer to a growing problem.
3 Sept 54
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BRITISH POLICY IN THE MIDDLE EAST FOLLOWING
THE SUEZ AND IRANIAN SETTLEMENTS
The preliminary agreements on the future of the Suez
base and operation of the Iranian oil industry will give Brit-
ain greater leeway in developing its military and economic
policies in the Middle East, and in attempting to regain its
prestige there. Britain and the United States agree on basic
objectives in the area, but co-operation is being hampered by
continued disagreement on the nature of a Middle Eastern de-
fense system and by growing economic rivalry.
After withdrawing from India in 1947, Britain suffered
a series of attacks on its predominant position in the Middle
East, culminating in 1951 with Egypt's abrogation of its
treaty with the United Kingdom and Iran's nationalization of
the Anglo-Iranian Oil Company's holdings. As a result, Brit-
ain's postwar policy in the area has been devoted largely to
seeking the settlement of specific disputes and trying to
maintain its prestige.
Despite these assaults and the change in Britain's stra-
tegic capabilities and requirements resulting from India's
independence, the United Kingdom's strategic interest in the
Middle East remains subordinate only to its interest in de-
fending the home islands and Western Europe.
The Suez Settlement and Current British Plans
The final Suez agreement will formally mark the end of
British political dominance in Egypt. Moreover, London gained
neither of the major military objectives it had been seeking
since 1946, namely, continued British operation of the base
and an Egyptian commitment to co-operate with Western plans
for Middle East defense.
Britain's acceptance of the reduced importance of the
Suez base also reflects a reassessment of its global strategy
and capabilities. The build-up of a strategic reserve in the
United Kingdom prevented by extensive troop commitments in
Suez and elsewhere has come to seem more important than pre-
viously. London has also acknowledged the undesirability of
maintaining garrisons in the face of local hostility. Troops
in the Canal zone will be relocated mainly in Britain itself,
with some going to Cyprus, Libya, and Malta (see map, p. 10).
Storage depots for the vast amounts of materiel still at Suez
are yet to be found.
3 Sept 54
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British Views on Middle Eastern Defense Plans
The British believe that if the Middle East is to be
defended successfully, it must be defended along its fron-
tiers with the Soviet Union. They do not feel, however,
that the nations of the "northern tier" are capable of this
defense on their own, and they regard the Turkish-Pakistani
pact primarily as window dressing for American military aid
to Pakistan.
The British argue that the "northern tier" concept
cannot be a practical basis for a defense system without
Iran, and that Iran can probably never be strong enough to
make a significant military contribution to any such
arrangement.
Beginning with the Middle East Command plan proposed
in 1951, the British plans for defense of the area have
involved sharing responsibilities with both the United
States and the Middle Eastern nations. Britain still main-
tains, however, that even with its reduced capabilities it
should play the leading role in defense plans.
In all the planning for Middle Eastern defense, the
British have insisted that Western forces must participate.
Primarily for this reason Foreign Secretary Eden is "most
interested" in the proposal of Iraqi prime minister, Nuri
Said that the Arab League Collective Security Pact be modi-
fied and expanded to include non-Arab members. Eden feels
that one of the greatest advantages of this plan is that it
represents indigenous rather than Western initiative.
Britain's interest in direct participation is height-
ened by its treaty commitments to Iraq and Jordan. Although
the Anglo-Iraqi treaty does not expire until 1957, there
is rising hostility in Iraq to the continued presence of
foreign troops. On the other hand, Jordan's fear of Israeli
aggression makes it receptive to the stationing of British
troops. Only small additions to these forces have been made,
but the Jordanian government wants the British garrison
strengthened.
Immediate Impact of the Iranian Oil Settlement
Following Iran's nationalization of the holdings of the
Anglo-Iranian Oil Company (AIC), which were the largest
3 Sept 54
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single British asset in the Middle East, most of the other
British financial and commercial enterprises were forced to
withdraw from the country. The former basis for British
economic activity in Iran has been destroyed, and British ef-
forts will now be directed toward establishing a new kind of
basis.
The preliminary agreement on the future operation of the
oil industry provides that AIOC shall receive 25,000,000
pounds sterling ($70,000,000) for its assets in Iran, that the
other consortium partners pay $600,000,000 .for the right to
participate, and that AIOC receive 40 percent of the con-
sortium's share of future profits.
The oil agreement stipulates that oil revenues shall
be paid in sterling. Although Iran will be permitted to con-
vert a large portion of this income into dollars,'. it has
agreea with uriLain co do this only to buy goods not ob-
tainable from sterling sources. The British admit that they
cannot force Iran to abide by this commitment, but they have
gained a powerful economic lever.
London gains another advantage through the arrangement:
the consortium's purchasing organization will be located in
the United Kingdom and is to buy British goods whenever possi-
ble.
Anglo-American Economic Differences
British firms, backed by the embassy in Tehran, are
making a concerted drive in Iran to sell British goods such
as railroad equipment and farm tractors on liberal credit terms.
Iran has already purchased 100,000 tons of steel rails and more
than $2,000,000 worth of locomotives.
These efforts foreshadow friction with American plans for
Iran's economic recovery. American officials in Iran hold that
liberal credit offers by the British encourage the Iranian gov-
ernment to use its meager financial resources unwisely. The
British government fears that increased American aid could re-
sult in discrimination against private British commercial in-
terests.
The British government plans to extend Iran 5,000,000
pounds ($14,000,000) in credit, presumably for sterling area
purchases. In connection with this offer, the British am-
bassador in Tehran has inquired about Washington's plans,
suggesting that they be "co-ordinated" with London.
3 Sept 54
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single British asset in the Middle East, most of the other
British financial and commercial enterprises were forced to
withdraw from the country. The former basis for British
economic activity in Iran has been destroyed, and British ef-
forts will now be directed toward establishing a new kind of
basis.
The preliminary agreement on the future operation of the
oil industry provides that AIOC shall receive 25,000,000
pounds sterling ($70,000,000) for its assets in Iran, that the
other consortium partners pay $600,000,000 for the right to
participate, and that AIOC receive 40 percent of the con-
sortium's share of future profits.
The oil agreement stipulates that oil revenues shall
be paid in sterling. Although Iran will be permitted to con-
vert a large portion of this income into dollars, it has
agreea with Lsr1Lain to do this only to buy goods not ob-
tainable from sterling sources. The British admit that they
cannot force Iran to abide by this commitment, but they have
gained a powerful economic lever.
London gains another advantage through the arrangement:
the consortium's purchasing organization will be located in
the United Kingdom and is to buy British goods whenever possi-
ble.
Anglo-American Economic Differences
British firms, backed by the embassy in Tehran, are
making a concerted drive in Iran to sell British goods such
as railroad equipment and farm tractors on liberal credit terms.
Iran has already purchased 100,000 tons of steel rails and more
than $2,000,000 worth of locomotives.
These efforts foreshadow friction with American plans for
Iran's economic recovery. American officials in Iran hold that
liberal credit offers by the British encourage the Iranian gov-
ernment to use its meager financial resources unwisely. The
British government fears that increased American aid could re-
sult in discrimination against private British commercial in-
terests.
The British government plans to extend Iran 5,000,000
pounds ($14,000,000) in credit, presumably for sterling area
purchases. In connection with this offer, the British am-
bassador in Tehran has inquired about Washington's plans,
suggesting that they be "co-ordinated" with London.
3 Sept 54
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Britain recognizes that economic aid is essential, not
only for Iran but for other Middle Eastern countries such as
Egypt, and that it cannot make a large contribution to such
a program. Primarily for reasons of prestige, the British
want aid programs to be presented as joint efforts, not as
, separate ones emphasizing the size of the American contribu-
tion.
Ambassador Henderson has commented that "strengthened
commercial relations are vitally important in ensuring con-
tinued United States influence to achieve American objectives"
in Iran. Commercial rivalry could add a new dimension to
Anglo-American differences throughout the area.
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Broad gauge raiir..d ? Oil field
Standard gauge railroad AL. 011 refinery
Narrow gauge railroad ------_pdi piwiiae
gain motor road ,;j_-'3,1'. Sand
234 I British troop dispositions. Salt waste
Cyprus
(1.I. K.) ?,,,ok
LEBANON
Baas
let. eedeele,ueet
27200
to be moved later
18 600
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THE ARAB WORLD AFTER SUEZ
The Suez settlement represents real progress in the Middle
East but also releases traditional rivalries and new tensions.
There will probably be no early improvement in Arab-Israeli re-
lations, and the Arabs are still unwilling to co-operate with
Western defense planners except OD their OWD terms.
The signing of the Anglo-Egyptian agreement on the princi-
ples covering the withdrawal of British troops from the Suez Canal
zone brought Egypt a flood of congratulatory telegrams from promi-
nent Arab leaders. Most Egyptian, Iraqi and Lebanese newspapers
viewed the settlement as an Arab victory. They saw it as offer-
ing new hope for the solution of other problems and as inaugurat-
ing a new era in relations with the West.
The rejoicing, however, was not unanimous. Leftist groups,
especially in Iraq, denounced the accord. In Egypt, the powerful
Moslem Brotherhood criticized it for permitting any British return
to the canal zone and also argued that the agreement should be
submitted to a parliament, which Egypt does not have at present.
Syrian newspapers claimed that British occupation would actually
continue as long as British technicians in mufti remained. Of 15
Lebanese dailies, three were noncommittal and three sharply
critical--alleging that British domination persisted and that
Egypt had been yoked to the West.
Subsequent reaction shows that the Arabs are only slowly ad-
justing to Egypt's reassertion of leadership of the Arab League,
which was badly split in the past two years by Egypt's insistence
that the Arab world support it fully and take no action on Western
defense proposals. In recent months, it had appeared as if Iraq
might act unilaterally and join the Turkish-Pakistani pact. At
the same time, Baghdad seemed to be promoting an Iraqi-Syrian-
Lebanese bloc in opposition to Egypt. Responsible Iraqis doubt
that Egypt will take a more liberal attitude toward the other Arab
states. Lebanese officials are uncertain as to the direction of
current Egyptian policy.
25X1
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This return to the normal pattern of Arab politics also fore-
shadows the continuation of Arab hostility to Israel. During the
Suez negotiations, Egypt frequently hinted at better things to
come on the Palestine issue if a settlement were reached. Now,
possibly restrained by evidence of considerable unfavorable in-
ternal reaction to the settlement, Egypt apparently will proceed
cautiously, and its partner, Saudi Arabia, will strongly oppose
any lessening of hostility toward Israel.
Iraq would probably consider any Egyptian move toward recon-
ciliation with Israel as defection from the Arab cause. Syrians
are in no mood for peace, and the Jordanians want Egypt to take
the lead in developing a stronger policy against Israel. Only
Lebanon, which is ineffective in Arab politics, hopes for an im-
provement in relations. In any event, before Egypt could move
toward reconciliation, it would need Israeli concessions which do
not appear to be in the making.
On Middle East defense, the Arab world is demonstrating more
willingness to consider co-operation with the West than in the
past, but it is still unable to escape from its fixation on the
Arab League Collective Security Pact as the basis for co-operation.
Reports on this proposal are conflicting. Prime Minister Nasr
stated on 30 August that the Arabs will reject formal military
partnership with the West as "colonialism" in disguise. Even Iraq
is not enthusiastic over the approach and may hope that the non-
Arab powers will reject the plan, thereby freeing it to join the
Turkish-Pakistani pact or to push its own idea of a bilateral ar-
rangement with Pakistan with provision for Arab and Western ad-
herence.
The Suez settlement represents real progress in the Middle
East, but, as Ambassador Hare in Beirut cautioned, one "can't
squeeze more juice out of the agreement than it actually contains."
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JAPAN VULNERABLE TO CHINESE COMMUNIST PEACE OFFENSIVE
The prestige Communist China gained at the Geneva conference
and the peace atmosphere created by the Indochina settlement
have made Japan increasingly vulnerable to a Peiping offensive.
Although the Communists may make some dramatic overture to
the Japanese government, it is more likely that they will step
up unofficial Chinese Communist maneuvers aimed at the Japanese
people.
The Indochina cease-fire in late July gave fresh impetus
to the already strong popular enthusiasm for working relations
with mainland China. The press at that time emphasized that a
revision of Japan's foreign policy was essential in the light
of the new international situation, and it gave currency to
rumors that the Foreign Ministry favored accommodations with
the Communist bloc. Conservative leaders inside and outside
the government felt obliged to acknowledge the need for a "new
approach" and called for increased trade with Communist China
and less dependence on the United States.
Strong neutralist sentiment in Japan is behind the popular.
interest in "peaceful coexistence" with the Communists. Prime
Minister Yoshida's government and Liberal Party leaders, bowing
to increasing criticism of their "pro-American policies," appar-
ently hope to gain political benefits by displaying friendliness
toward Peiping.
The government on 3 August for the first time officially
granted permission for Chinese Communist representatives--in
this case a Red Cross mission--to visit Japan. This phase of
Japan's response to China's new international status culminated
in the statement by new Liberal Party secretary general Hayato
Ikeda on 9 August?a statement he later denied making--that
American foreign policy on China had failed and Japan should
follow the British line in the Far East.
British labor leader Aneurin Devan's visit in early Septem-
ber may strengthen this view, but government leaders realize
that Japan's dependence on the United States makes any early
radical change in orientation unwise. Japan's continued align-
ment with the West is further confirmed by the fact that it is
willing to risk Peiping's displeasure by recognizing Vietnam.
Furthermore, Ikeda, following unfavorable reaction to his re-
ported policy statement, assured American ambassldor Allison
that co-operation with the United States was basic to Japanese
policy.
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Peiping's announcement on 19 August of the release of 417
Japanese war criminals produced a dramatic reaction in Japan
and revealed the great potential for arousing popular pressure
for a rapprochement with Communist China. The forthcoming visit
of the Chinese Red Cross mission undoubtedly will provide an
opportunity for peace gestures designed to exploit a friendly
sentiment toward the mainland.
This potential for popular pressure suggests a serious
vulnerability, because of the Japanese leaders' desire to stay
in power, their belief that they can deal advantageously with
Peiping, and their resentment over American policies. Such
popular pressure might develop, for example, from a Chinese
Communist offer of a peace treaty or even from intensified
"people's diplomacy." This might well cause a serious move
toward neutralism in Japan and hard opportunistic bargaining
with both the free and Communist worlds.
Peiping could best exploit Japanese sentiment--in the
government and among the people--by offering Japan a favorable
peace treaty, establishing diplomatic relations and perhaps
bidding for a nonaggression pact. Peiping has thus far
insisted that the "major obstacle" to normal relations is
Japan's association with American policies toward both Communist
China and Formosa.
Although Peiping may make a sudden dramatic overture to the
Japanese government in the near future, the Communists seem
still to be waiting for good evidence of a change in Tokyo's
basic views. Peiping is likely to increase its efforts to
promote economic and "cultural" contacts below the governmental
level--for example, by stepping up the tempo of visits of
Chinese Communist front groups to Japan and of Japanese business-
men and Diet members to China.
The Japan Communist Party's program has been--and is
expected increasingly to be?designed to support the Chinese
Communists' popular maneuvers. While the party in orthodox
fashion looks toward eventual armed struggle, its activity is
directed mainly toward exploiting popular feeling against
rearmament, the Yoshida government, and the United States,
and at encouraging popular support for closer relations with
the Orbit.
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THE OUTLOOK FOR THE CAFE FILHO GOVERNMENT IN BRAZIL
The essentially nonpolitical cabinet chosen by Brazil's
new president, Joao Cafe Filho, faces not only serious
economic difficulties, but also the likelihood of continued
harassment from both Communist and pro-Vargas elements
exploiting the economic nationalism of the late president's
farewell letter. While the government appears to be in no
immediate danger, the situation will remain confused until
after the congressional and state elections on 3 October.
Finance Minister Eugenio Gudin, a conservative economist
of international repute, will almost certainly meet opposition
from important business and labor groups when he pushes his
program to curb inflation, conserve foreign exchange, and
encourage foreign investment.
Vargas' farewell letter strongly implied that American
financial interests were among the "vultures" pressing for
an end to his protection of the working man. While the entire
new cabinet, including the experienced, pro-American foreign
minister, Raoul Fernandes, can be expected to resist anti-
American pressures, politically important forces have al-
ready begun to capitalize on the letter.
Vargas' Labor Party, which now controls 20 percent of
the badly splintered legislature, has denounced the new
government. The party, now under the exclusive control of
Vargas' Communist-oriented former labor minister, Joao
Goulart, can be expected to step up its campaign assertions
that foreign capitalists and not Brazil's growing pains are
responsible for the country's economic ills. The Communist
Party which, though outlawed, doubled its size to an estimated
110,000 in the past two years and hopes for political gains
in the October elections, has ceased its previous criticism
of Vargas and has used his "martyrdom" to incite attacks on
American installations. It reportedly plans a series of
strikes and further riots.
The major stabilizing forces appear to be the powerful
air minister, General Eduardo Gomes, and the president him-
self, who has cultivated a reputation as friend of the "little
man." Gomes heads the country's second biggest party and was
largely responsible for Vargas' ouster. These men, together
with Conservative army leaders who have already started purging
pro-Communist officers, are believed capable of keeping the
situation in hand for the present.
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1954 HARVEST PROSPECTS IN THE SOVIET ORBIT*
The Orbit will probably be unauccessful in its present
efforts to achieve an increase in agricultural output. The
present outlook is that the total harvest of the USSR and
East European Satellites will be no larger than that of 1953,
a relatively poor year. In China, the second-worst floods
of the century may reduce total food output 8 to 9 percent
below last year's level. This will probably cause famine in
some areas of China, and may result in failure to fulfill Five-
Year Plan goals for industry aS_Well as agriculture.
, --
Faced with e2cPanding domestic avicultural requirements un-
matched by increas---1h-PrOdUctien, the USSR and the Satellites
will priibably continue the shift of their exports to the West
from the traditional agricultural goods to such commodities
as petroleum, manganese, chrome, precious metals and manu-
factured goods. The inability to resume exports of foodstuffs
to Western Europe may be expected to hinder a permanent large-
scale expansion of trade with that area.
Prospects for the yields of major crops in the USSR vary
from somewhat below to about the same as 1953. Even this year
had been below the 1935-1939 average. According to preliminary
estimates, the Soviet grain harvest will be about equal to last
year's, which was the lowest since 1949. The below-normal crop
yields expected in the western USSR should be just about offset
by the successful expansion of output on the "new" and re-
claimed lands of Kazakhstan and Siberia.
The Ukrainian grain crop has suffered from a major summer
drought, climaxing a poor 12-month period. Agricultural officers
of the American embassy in Moscow estimate that Ukrainian crop
yields will not exceed two thirds of average. In the Lower Don-
North Caucasus and in the central European USSR areas, the
prospective grain yields are believed to be about the same as
last year. Growing conditions have been generally good in
western Siberia and northern Kazakhstan, the regions most
affected by the program for the expansion of grain acreage
initiated this year.
In order to maintain grain consumption at last year's
level the regime will have to release significant quantities
of grain from reserves. The new agricultural program will
probably be continued at full throttle to reduce the dissat-
isfaction of the population over not receiving more food,
especially quality foods such as livestock products. Evidence
of this is already available in the recent expansion of the
"new lands" program.
*Prepared by the Office of Research and Reports.
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For the European Satellites, this year is the third
of the past six that crop yields have been under the low
postwar average. The 1954 harvests of bread grains, oats,
barley, early vegetables, and fruit will probably be less than
1953. Warmer weather during the latter part of August and
September is needed to raise yields of corn, root crops,
late vegetables, and oil seeds over 1953 levels.
Drought last fall, the lack of winter snow cover, a late
spring, and heavy rains in early July adversely affected agricul-
tural output. An expected shortfall in harvest of the major
crops will cause failure in the first year of the program to
raise agricultural production. This failure will result in
shortages of meat, animal fats, and possibly bread for most
areas during the spring of 1955, and possible further food
rationing in the Satellites. As a whole, the Satellites will
again be net importers of food.
In China, severe floods probably A.11 cause agricultural
output to be below normal. From F,000,000 to 8,000,000 hec-
tares have been flooded in the Yangtze River Basin and
2,000,000 hectares in the Huai River Basin, resulting in a
loss of 12,000,000 to 15,000,000 metric tons of food crops.
This loss, however, is partially offset by a good winter
crop. In addition,the crop prospects for the upper North China
plain and Manchuria appear better than In 1953. Thus the net
food production in 1954 will probably be 9,000,000 to 12,000,000
metric tons (8 to 9 percent) below 1953.
The springs of 1953 and 1954 witnessed localized famines
in various areas of China. The problem of famine is almost
certain to recur and will probably be at its worst in the
spring of 1955. This will be an especially acute problem as
the flood areas are normally surplus food areas.
The Chinese goal of building a strategic emergency re-
serve of 16,000,000 to 20,000,000 tons of grain by 1957 is
one more year nearer failure. Any curtailment of exports or
any imports to assist in feeding the population will increase
payments problems for industrial goods imports.
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SPECIAL ARTICLE
COMMUNIST STRATEGY FOR THE FAR EAST*
With the ending of the "hot war" in Indochina, Communist
policy in the Far East is expected to give new emphasis to
political tactics aimed at dividing the non-Communist world
and expanding the bloc's power in Asia. The Communists' im-
mediate objective is to prevent the West from organizing a
broad Asian defense system.
The Strategy Before the Geneva Conference
Since 1951, and particularly in the post-Stalin period,
the major objective of Soviet global strategy has been to
isolate the United States, disrupt the Western alliance and
create dissension throughout the non-Communist world. In re-
lation to these long-range objectives, Communist leaders evi-
dently became increasingly aware of the fact that their post-
1945 program of "armed struggle" tactics, particularly as mani-
fested in the Korean and Indochina conflicts, was at variance
with the needs and objectives of their global strategy. More-
over, for some time, other "liberation" movements in the Far
East had been suffering reverses.
The wars in Korea and Indochina were the two outstanding
issues which provoked Western defense efforts and threatened
to make a mockery of the "peace offensive." Soviet policy
in Europe, designed to produce schisms and paralysis in France
and to split Britain from the United States, demanded that an
end be brought to these conflicts. There are indications that
the USSR considered France the weakest link in the Atlantic
Alliance and felt that a policy of restraint and conciliation
was called for if French fears of German rearmament and French
neutralist-pacifist sentiment were to be exploited.
Communist leaders apparently also feared that any further
military advances in Indochina, particularly in Laos and Cam-
bodia, would have alienated non-Communist Asian opinion on
which they were relying to defeat Western defense plans in
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Southeast Asia and might have led to a strong anti-Communist
alliance including some of the hitherto uncommitted Asian
states. Finally, with the example of Korea before them, the
Communists could not ignore the possibility that a continued
offensive in Indochina would greatly increase the risk of
American intervention and a global war. In agreeing to a
compromise settlement at Geneva, they were probably guided
by the assumption that final victory in Indochina could safely
be postponed for the furtherance of their wider strategic ob-
jectives.
The Strategy Since Geneva
The Indochina settlement thus appears to have created a
favorable atmosphere for a new stage in the Communist program
for the Far East. The principal aims of this program will be
to isolate the United States from as many non-Communist Asian
states as possible, to .improve Moscow's and Peiping's diplo-
matic, economic and cultural relations with these states, and
to take advantage of local Communist Party capabilities with-
out prejudice to global strategy and domestic programs.
Taking advantage of the psychological momentum gained at
Geneva, the Communists have moved quickly to demonstrate their
peacefulness and reasonableness toward Asian states. Communist
propaganda has stressed the theme of Asian solidarity and hailed
"the new relationship" being formed between Asian powers. Moscow
and Peiping have made a number of conciliatory gestures toward
the Colombo powers and Japan, and Communist spokesmen have re-
ferred to the need for improving relations through "mutual ob-
ligations" assumed by Asian states. Specifically, Moscow has
been supporting Peiping's suggestion that these relations should
develop along the lines of Chou En-lai's "five principles" em-
bodied in the Sino-Indian agreement on Tibet for friendly re-
lations between Asian states: respect for territorial integrity,
nonaggression, noninterference, eqqality and mutual benefit and
peaceful coexistence.
In attempting to undermine preparations for an anti-
Communist defense system in Southeast Asia, Moscow and Peiping
have emphasized that Asian states should work out their own
system of collective security and have no need to participate
in the "aggressive" pact sponsored by the United States. Chou
En-lai has informed Indian, Pakistani, Indonesian and Burmese
leaders that their security can be guaranteed by his "five
principles." At the same time, Communist propaganda has been
insisting that the Geneva agreements bar all three Indochina
states from any military alliance, and Peiping has been de-
nouncing Thai and Philippine co-operation with the United States.
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Future Strategy
The situation seems ripe for a dramatic Communist offer
to negotiate an all-Asian nonaggression pact. However, since
only Pakistan, Thailand and the Philippines have indicated
willingness to join the Western-sponsored defense system for
Southeast Asia, Moscow and Peiping may feel that it is un-
necessary to make such an offer. Communist leaders may be-
lieve that a series of bilateral pacts along the lines of
Chou's "five principles" would serve their objective of
frustrating Western efforts to build an effective defense
system for the area and at the same time give them greater
maneuverability with individual governments.
The attempt to extend Communist influence will probably
be supported by an increase in Peiping's provocative actions
regarding Formosa and the offshore islands, and by threats
toward other non-Communist governments of the region, with
the immediate purpose of preventing them from establishing
closer ties with the West. In addition, the local Communist
movements possess substantial capability for internal sub-
version in south Vietnam and Laos and have recently indicated
their intention to seek further gains by political action in
Indochina, Thailand and Burma.
Relations Between Moscow and Peiping
In the post-Geneva atmosphere Soviet diplomacy and
propaganda have given great emphasis to Peiping's claim to
great-power status in world affairs. Both parties have sug-
gested that there will be an increase in diplomatic approaches,
with Peiping exploiting the "Asia for the Asians" theme.
Soviet spokesmen have also given increased publicity
to Peiping's role as a friend and model for other Asian "liber-
ation" movements. In both Korea and Indochina, the Chinese have
an expanded role because of the large-scale support they have
given the local Communist forces. Elsewhere in the Far East,
the Chinese control the Communist organization in Thailand and
have considerable influence with the Burmese, Philippine,
Malayan and Indonesian Communist movements.
In the long run,China's increased stature along all these
lines may prove incompatible with Moscow's long-range interests
in the area, and the Kremlin may oppose any further expansion
of Peiping's influence.
Moscow
nas also taxen steps to maintain its own influence in Asia.
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In general, however, Moscow and Peiping are expected
to present a solid front to the West in regard to their re-
spective roles in the Far Eastern program. The USSR is ex-
pected to persi$t in its demand that Communist China assume
its "rightful place" in all international deliberations and
will almost certainly exploit the issues of China's seat in
the UN and the status of Formosa as devices to widen diver-
gencies in the non-Communist world.
Peiping, for its part, will undoubtedly continue to
acknowledge Moscow as the leader of the world Communist move-
ment. The Chinese probably will also continue, at least pub-
licly, to defer to Soviet primacy with the "liberation" move-
ments, even though Peiping's leading role in the execution of
the Far Eastern program will add to Chinese capabilities for
eventually challenging this Soviet position.
3 Sept 54
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