CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001200030001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 52
• Document Creation Date: December 16, 2016
• Document Release Date: February 3, 2005
• Sequence Number: 1
• Publication Date: April 4, 1957
• Content Type: SUMMARY

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C4NFIDENTI
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 16
OCI NO. 141.8/57
4 April 1957
OOCU9NI W
C$4NGE.oa Cam. O
CLAS . c GEo TO;
AEV1 WDATe:
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
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State Department review completed
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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 Summary has been prepared
primarily 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 immediate appraisal of the Office of Current Intelligence.
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MIDDLE EAST DEVELOPMENTS . . . . . . . . . . . . . . . Page 1
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Egypt gives no sign of willingness to make signif-
icant modifications in its memorandum on the operation
of the Suez Canal; France and Britain are planning to
call an early meeting of the UN Security Council on this
issue. Hammarskjold, who says he is satisfied with the
arrangements for the UNEF's operations in Gaza, has asked
the Israelis to accept the UNEF on their side of the
border. King Saud has again voiced his determination to
oppose Israeli use of the Gulf of Aqaba. Leftist elements
in Syria and Jordan still appear to have the upper hand.
In Syria, leaders of.the opposing factions have joined
to protest Israeli activity in the demilitarized zone
near Lake Hula.
CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957 -
T H E W E E K I N B R I E F
SOVIET INDUSTRIAL REORGANIZATION PUSHED . . . . . . . . Page 3
On 30 March, the Soviet press published for public
discussion Khrushchev's "theses" calling for the re-
organization of industry on a territorial basis. These pro-
posals are to receive formal consideration at the
Supreme Soviet session scheduled to begin on 7 May.
Khrushchev hopes through these changes to return the
rate of industrial growth to the `1Q,=- or 12 Apercent re-
quired to meet the present Five-Year Plan goals.
SOVIET DIPLOMATIC MOVES DIRECTED AGAINST NUCLEAR
TESTS AND BASES . .. . . . . . . . . . . . . . Page 6
for the suspension of nuclear testing.
In response to recent announdements on Western mili-
tary planning, the Soviet Union in the last t.wo weeks
issued blunt warnings to Great Britain, Norway, Denmark
and Greece of the dangers inherent in allowing nuclear
bases to be established on their soil. These warnings
followed a campaign of propaganda threats and informal
diplomatic approaches to other countries, including
Japan, Turkey and Ethiopia. At the same time, the USSR
is maneuvering through diplomatic channels to gain
support for its proposal at the London disarmament talks
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
NOTES AND COMMENTS
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SOVIET ACTIVITY IN THE MIDDLE EAST . . . . . . . . Page
The USSR continues to support the Arabs against the
West and to back anti-Western factions in the Middle East,
while warning Israel and France against renewing the
military conflict with Egypt. The Soviet Union, last week
aligned itself with the Nabulsi faction against the
Jordanian king and, in order to help Syrian leftists,
spread alarmist rumors of Israeli troop concentrations.
NEW BRITISH DEFENSE PROGRAM . . . . . . . . . . . Page 2
The substantially reduced British defense program
is based on what Prime Minister Macmillan described at
Bermuda as Britain's entrance on a new phase as a nuclear
power, as well as the need to reduce the defense burden
on the nation's economy. Macmillan envisages cutting
the armed forces by nearly half over the next four years,
drastically reducing overseas garrisons, and no longer
attempting effective over-all air cover for the United
FURTHER STRAINS ON THE MACMILLAN GOVERNMENT . . . Page 4
Prime Minister Macmillan has sustained further
serious losses in domestic prestige as a result of Lord
Salisbury's resignation on 29 March, charges that the
Bermuda conference increased Britain's dependence on the
United States, and the government's handling of the ex-
tensive labor disputes. Differences within the Conserv-
ative Party now center on the annual budget, scheduled
for presentation arliament on 9 Apriil..
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CYPRUS DEVELOPMENTS . . . . . . . . . . . . . . . . . . Page 5
The Greek majority on Cyprus apparently regards
Britain's release of Archbishop Makarios as a victory for
the union-with-Greece movement. The Greek Cypriots show
no willingness to compromise on the self-determination
issue and are unlikely to agree to any self-government
program which fails to provide a mechanism for an eventual
change in the island's status. Although Athens has pub-
licly rejected any negotiations with Britain and Turkey,
as Ankara in particular demands, it has hinted that secret
negotiations among`.the?tbree.governments would be acceptable
if at the same time Britain negotiated ,with Makarios.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
INDONESIA . . . . . . . . . . . . . . . . . . . . . . . Page 6
Continued Moslem party unity against the inclusion of
several prominent fellow travelers in the Indonesian cab-
inet has forced formateur Suwirjo to return his mandate
to President Sukarno. Sukarno has now reportedly invited
party and provincial leaders to a meeting in Djakarta to
discuss ways to solve the crisis. The president, who
apparently is attempting to intimidate his opponents,
may be stalling, hoping that dissension within the auton-
omous areas will force the provinces to ease their
political and economic demands.
RIOTS IN CHILE . . . . . . . . . . . . . . . . . . . Page 7
The future of the Ibanez government in Chile is in
doubt following "ry.serious rioting over the government's
economic stabilization program. A state of siege was
declared on 2 April, and President Ibanez convoked an
emergency session of congress on 3 April to request
"
extraordinary powers" for six months.
ARMY TAKES OVER IN HAITI . . . . . . . . . . . . . . . Page 7
Provisional president Sylvain of Haiti was forced
out of office on 2 April by a general strike, and the
Haitian army has assumed control until a provisional
government or a permanent president can take office.
Presidential and senatorial elections previously announced
for 28 April are reportedly still to be held as scheduled,
but potential rifts within the army and lack of agree-
ment on provisional government arrangements suggest that
a more serious breakdown in civil order may occur before
ARGENTINE ELECTION TIMING PROVOKES CRISIS . . . . . . Page 8
President Aramburu's announcement on 30 March that
national elections will be held on 23 February 1958 in-
stead of late in 1957 provoked near rebellion by the
Argentine air force. The army and navy are reported
supporting Aramburu against ousted air noinister Krause,
who appeared to be playing partisan politics on the
question of the election date.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
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PHILIPPINE POLITICAL SITUATION ... . .
In the absence of a highly popular figure such as the
late president Magsaysay, the campaign for the Philippine
election in November is shaping up as a fight between
the two major parties. Maneuvering for nominations is
intense. President Garcia appears to be in the strongest
position for the Nacionalista nomination, but the possi-
bility that the administration party may split over rival
contenders has improved Liberal Party prospects.
Page
SOVIET-JAPANESE RELATIONS . . . . . .. . . . . . Page 10
A Soviet statement to the Japanese that the Okhotsk
Sea will be closed to foreign fishing by 1959 indicates
an intention to pre-empt the area for the rapidly growing
Soviet fishing industry and may also be related to
security considerations and weapons testing. The Japanese
have called Soviet terms in the fishery negotiations un-
acceptable, but their weak position may force them to
agree, in the hope that benefits might come from subse-
nest trade development and atomic energy co-operation.
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JAPANESE SOCIALISTS SENDING GOOD-WILL MISSION TO
COMMUNIST CHINA . . . . . . . . . . . . . . . . . . . Page 12
The Japanese Socialist Party is sending,a mission
to Communist China on 10 April for a two-week stay. The
Socialists, planning to make relations with China an
issue in an anticipated general election, probably hope
for some specific gesture indicating Chinese willingness
to negotiate with their party.
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SINO-CZECH TREATY SIGNED DURING SIROKY VISIT TO PEIPING . Page 13
The Sino-Czech treaty and the joint communique`
issued by Chou En-lai and Czech premier Siroky during
Siroky's visit to Peiping suggest that the Chinese in-
tend to play an increasingly active role in East European
affairs. The treaty calls for co-operation on matters
of economic, scientific and cultural development.
ECONOMIC PROVISIONS OF SOVIET-HUNGARIAN COMMUNIQUE . . . Page 13
The comprehensive Soviet-Hungarian economic agree-
ment concluded on 28 March strengthens Moscow's control
over Hungary's economic future. In return for substan-
tial immediate concessions in the form of goods and cred-
its, Hungary pledged to expand shipment, to the USSR over
a long-term period.
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YUGOSLAVIA REORIENTING FOREIGN ECONOMIC POLICY TOWARD
THE WEST . . . . . . . . . . . . . . . . . . . . . . . . Page 14.
The political dispute with Moscow has forced Yugo-
slavia to re-evaluate its long-term foreign economic
relationships. It apparently now feels it must rely on
a greater extent on the West, in.particular on the United
States. Yugoslav officials state that the shift in
attitude is prompted by growing distrust of the Soviet
Union.
PRINCE,PETSARATH RETURNS TO LAOS . . . . . . . . . . . Page 15
Since his return to Laos, Prince Pletsarath has
called for a policy of "strict neutrality" and for dip-
lomatic relations with Communist China and North Vietnam.
While disclaiming anti-American bias and any intention
to accept Chinese Communist aid, he has been sharply
critical of the "bad utilization" of American assistance.
The arrest of one of Petsarath's"followers in connection
with a political murder unsolved since 1954 may intensify
disunity in Laotian political circles.
Page 16
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SINO-BURMESE BORDER DISPUTE . .. . . . . . . . . . . . Page 17
Burmese premier U Nu's 11-day visit to Communist China
ended on 2 April without a final agreement on the Sino-
Burmese border dispute. Peiping is politely evading the
issue but is maintaining the appearance of reasonableness.
Rangoon can be expected to press for a settlement and,
failing that, to revive its previous tactic of publi-
cizing the issue. E__ I
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4 April 1957
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MOLLET GOVERNMENT WEAKENED . . . . . . . . . . . . . . . Page 19
The sharply reduced margin which the French National
Assembly gave Premier Mollet in the 28 March vote of
confidence underlined his dependence on rightist votes
for survival. Mollet's next period of crisis is expected
during the debate on budgetary and tax issues in May when
the right ma attempt to overthrow his government.
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PATTERNS AND PERSPEC"CIVES
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RESISTANCE CONTINUES IN HUNGARIAN SCHOOLS . . . . . . . . Page
The Hungarian Communist regime is meeting with
strong, united opposition in the nation ''s,scbools%..Stu~
dents of all ages, in many cases acting in concert with
their teachers, are maintaining the spirit of the revo-
lution in the classroom. The party and the government
have responded with traditional techniques of intimidation
and force.
ECONOMIC REFORMS IN RUMANIA . . . . . . . . . . . . . . Page 3
The Rumanian regime is overhauling its economic plan-
ning and the organization of the central government in
order to deal with inefficient production and unrest
brought about by shortages, mounting unemployment and high
prices. New responsibilities delegated to the people's
councils--the local unit of government--give them a key
role in eeonom; c .,l
' "_
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4 April 1957
INDIAN NATIONAL ELECTION RESULTS . . . . . . . . . . . . Page 5
In India's second national election, Prime Minister
Nehru's Congress Party retained its firm hold in parlia-
ment but lost ground in nine of the 13 state governments.
It lost Kerala to the Communists and has such a small
plurality in Orissa that it may not be able to form a
stable government there. Serious declines in the Congress
Party's power in some other states, coupled with an over-
all increase in Communist strength at both state and
national levels, raise problems regarding the amount of
co-operation a Congress-dominated parliament can obtain
from the states during the next few years.
NORTH VIETNAM'S STATUS IN THE BLOC . . . . . . . . . . . Page 7
The Viet Minh leadership, while drawing on Soviet and
Chinese sources for guidance, is setting its own pace in
the management of North Vietnam's internal affairs. In
foreign affairs, the leadership has re]Luctantly subordi-
nated its own aspirations to the lines of policy drawn
in Moscow and Peiping. Chinese commitments to North
Vietnam are somewhat larger than those of the USSR, and
Chinese influence seems to be correspondingly greater.
This influence, however, has been exerted in full aware-
ness of Vietnamese nationalist sensibilities and with
the declared intention of avoidin the error of "great-
nation chauvinism."
INFLATIONARY TRENDS IN WESTERN EUROPE . . . . . . . . . Page 11
At a time when Western Europe's attention is increas-
ingly centering on such major plans as the Common Market,
inflationary pressures are slowing the general rate of
economic growth, weakening the area's dollar position
and, in France, threatening:a finanoia:l".crisis'.with serious
political repercussions.
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CURRENT INTELLIGENCE WEEKLY SUMMARY,
4 April 1957
PART i
OF IMMEDIATE INTEREST
MIDDLE EAST DEVELOPMENTS
Suez Canal
British and French UN rep-
resentatives have indicated that
their governments intend to
call for an early meeting of
the UN Security Council unless
Egypt makes substantial modifi-
cations in its memorandum on
Suez Canal operations. The
essence of the Western objet
tions is that nowhere in the
document is there reference to
the six points agreed on last
October, nor is there any pro-
vision for international par-;
ticipation in the operation or
in decisions on the development
of the canal.
Egyptian foreign minister
Fawzithas'vaguely indicated
Egypt would agree to some of
the changes of language proposed
by the United States, but there
has been no sign yet that Cairo
will make concessions of a kind
that would appease British and
French leaders.
The Israelis, who have
said they would riot "push to
the head of the queue",on the
question of canal passage, at
the same time have shown some-
fear that their claims are'being
?ignored... To counter this, Tel
Aviv is repeating at frequent
intervals its threat to try to
send a. test ship through=-but
does not say when.
Ships flying the flags of
more than a dozen nations,--in-
cluding Greece, Liberia, Norway,
Panama, West Germany, Italy and
.the USSR--have already passed
through the canal and paid tolls
to Egypt. Some vessels have
not had the.types of currency
C
PART T
called for by the Egyptian pay-
Iment regulations, however, which
fare designed to replenish
Egypt's hard currency resources
and to assure that toll pay-
~ments will not simply be debited
from blocked Egyptian accounts
in Britain or France.
A pilot force equal to.
that-which was operating in the
canal before hostilities re=
porteelly is again available,
ands, it: is believed,,will do at
least an adequate job under the
favorable climatic conditions
which should prevail during
the next few monthsl A shortage
of tugs and other ancillary
.equipment may lead to some
abnormal delays in traffic,
!however.
I The Egyptian authorities
formally raised their flag over
Ithe Gaza strip on 2 April. UN
Secretary General Hammarskiol4
`reported to his advisory com-
mittee that he believed the
arrangements being worked out
between the UNEF and the Egyp'
tianss will be satisfactory.
General Burns, the UNEF
commander, does not seem to be
as sanguine as Hammarskiold
appears to be. Burns has re-
ported that the UNEF still does
.not have authority to shoot at
cross-border'.iifiltratorr, alp
though it can otherwise try to
capture them . Certain national
cont:Lngents of the UNEF, such
as tine Indian, are precluded
from using force by policies
of their governments. The
Palestine police, a force under
Egyptain control which existed
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
in the strip prior to the Isra-
eli occupation, reportedly has
joined the UNEF in border pa-
trolling.
Hammarskjold has formally
asked the Israelis to permit
the UNEF to function on their
side of the border. The Israe-
lis: have already indicated that
their response will be negative;
they assert that they see no
relationship between such a
request and their own disap-
pointed "assumptions and expec-
tations" regarding the func-
tions of the UNEF in Gaza.
Hammarskj old and the UN
advisory committee have empha-
sized the importance of the
Cairo government's making clear
publicly that it is against
border-crossing by individual
marauders as well as by organ-
ized fedayeen. This is the
kind of undertaking Cairo has
in the past found very difficult
to fulfill, and the present
situation is unlikely to be an
exception.
Veteran refugees are not
easily discouraged from return-
ing to their old habits, and the
Israelis will take full propa-
ganda advantage of the incidents
these elements are almost cer-
tain sooner or later to become
involved in. An even more im-
mediate danger of a resumption
of serious incidents comes from
the fedayeen believed to have
returned to the strip in civil-
ian clothes.
Aqaba
The situation in the Gulf
of Aqaba remains quiet. While
the Egyptians avoid comment,
the Saudis remain adamant against
allowing Israel free passage.,
King Saud told American charge
Jenkins on 30 March that this
question is "a matter of life
and death to us and to our
country." There has been no
interference with shipping under
Israeli charter passing through
the straits, however.
Jordan
King Hussain's position
in Jordan appears to be becoming
more precarious. The Nabulsi
cabinet, which had decided to
resign on 1 April in protest
against Hussain's sending a
personal emissary to Cairo with-
out consulting it, remains in
office. Nabulsi is seeking
support wherever he can get it.
He reportedly has made a person-
al appeal to local Communist
leaders, who are co-ordinating
their efforts with left-wing
nationalist elements.
The announcement on 3 April
that the cabinet intends to
establish diplomatic relations
with the Soviet Union is almost
certainly a calculated blow
at the king's prestige, and,
through him, at the West.
Syria
The various Syrian army
factions remain stalemated in
their efforts to gain ascen-
dancy. The only action dur-
ing the past week was the bomb-
ing of the headquarters of
the conservative Populist Party.
It is not clear whether this
act was a provocation, aimed
at spurring the conservatives
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
to new action against the
leftists, or whether it was
a leftist move to further in-
timidate the conservatives and
at the same time justify the
perpetuation of the martial
law which has covered the arbi-
trary proceedings of the leftist
military faction.
Against Israel, however,
the Syrians can always demon-
strate unity. Last week they
did so. Colonels Sarraj and
Nufuri, representatives of the
contending factions, jointly
summoned the chairman o-.0 the
Israeli-Syrian armistice com-
mission to deliver an ultimatum.
Either Israel would withdraw
all its' troops east:.of the''
Jordan River, in the neighbor-
hood of Lake Hula, or the
Syrian army would eject them
by force--deadline 1200 hours,
31 March.
government.
After the deadline had
passed, the Syrians agreed
they would be willing to nego-
tiate on this matter; they pro-
tested strongly, however,
against Israeli bridge-building
activity in the demilitarized
zone just south of the lake
and against the alleged pres-
ence of Israeli troops in the
zone. The Syrian UN repre-
sentative in New York said he
might take this issue to the
Security Council if he could
get more information from his
On 30 March, the Soviet
press published for public
discussion.Khrushchev's "theses"
calling for the reorganization
of industry and construction
activities on a territorial
basis. The proposals:.a:re_,to.,re-
ceive formal consideration and
approval of the Supreme Soviet
session scheduled to begin on 7
May. Khrushchev hopes through
these changes to return the
rate of industrial growth to
the 10 or 12 percent required
to meet the present Five-Year
Plan goals. The new structure
would retain the advantages of
central planning while main-
taining the rights of the
union republics. Economic
councils would be responsible
for administering industrial
and construction activity
within geographic areas. Ex-
amples described in the theses
as ideal areas include the
Bashkir ASSR, Sverdlovsk
Oblast and Chelyabinsk Oblast.
The Urals area is said to be
too large. Though also
large, the Yakutsk ASSR and
Magadan Oblast are to have
councils because of their
geographic remoteness.
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The councils and the ter-
ritorial governments would be
able to allocate manpower,
finances, material supply, and,
within the framework of the
national plan, could allocate
products, locate new construc-
tion and exercise operational
control over individual enter-
prises in their areas..
The new Council of Minis-
ters of the USSR would include
the chairmen of the republican
Councils of Ministers much as
the USSR Supreme Court now in-
cludes the 15 Republic Supreme
Court chairmen. It would also
include some subordinate offi-
cials from the State Planning
Commission (Gosplan), and the
.January 1955
FlAreas mentioned by Khrushchev
4 APRIL 1957
24500
Magadan Oblast
head of the Central Statisti-
cal Board.
Khrushchev urged that Gos-
plan, now responsible for long-
range planning, should be
strengthened and expanded to as-
sume responsibility for the year-
ly plans and their implementation
and also some of the responsi-
bilities of the present special-
ized ministries. It would also
allocate resources among re-
gions, handle plans for strate-
gic stockpiles, review the work
of regional planning bodies and
control the distribution of
certain items in short supply.
The State Economic Com-
mission, headed by Mikhail
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4 April 1957
Pervukhin, would then be un-
necessary and should be dis-
solved. Khrushchev's discussion
of this point did not reflect
any dissatisfaction with the
work of Pervukhin's commission.
Khrushchev urged, in fact, that
All-Union
Ministries
ORGANIZATION OF SOVIET INDUSTRY
JANUARY 1957
Union Republic
Ministries
COUNCIL OF
MINISTERS USSR
COUNCIL OF MINISTERS
OF REPUBLICS
Combines,
trusts
Counterpart
Union Republic
Ministries
Combines,
trusts
1
Commission might be
transferred to the
new State Planning
Commission. Failure
to assign Pervukhin
to an important post
Gosplan, USSR in the reorganization,
II
Gosplan of
Republic
Republic
Ministries
1
COUNCIL OF
MINISTERS USSR
+-- Line of command
- Line of planning
This step may not
exist in some cases.
Gosplan, USSR
COUNCIL OF MINISTERS
Territorial and
Regional Gov'ts.
(I{rais ahd Oblasts)
Council of National Economy
Technical and Divisions
Economic Council Construction Planning
(advisory board Labor Material-technical Supply
of specialists) Finance Others
Combines, Trusts, etc.
(factories, mills, construction sites, supply organizations, etc.)
'4-.APRIL 1957
however, would suggest
dissatisfaction with
his performance in
the preparation of
the 1957 plan.
The Ministry of
State Control, headed
by Vyacheslav Molotov,
was sharply criticized,
and Khrushchev called
for a new statute re-
quiring the organiza-
tion to bring its work
in line with "Leninist"
directives on control
work. This probably
means making its work
more responsive to di-
rection by the col-
lective leadership.
Accounting and
statistical matters
are to be centralized
in a greatly strength-
ened Central Statisti-
cal Board. The board
would also provide
for machine data proc-
essing centers to be
established regional-
ly under its control.
Khrushchev hopes
that his proposals
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Gosplan of
Republic
key personnel assigned to Gos-
plan should have ministerial
rank. as "in the case of the
State Economic Commission."
This suggests that the present
top-level administrators as-
signed to the State Economic
CURRENT INTELLIGENCE WEEKLY SUMMARY
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
will buoy up Soviet industry
and construction as the virgin
lands program did for Soviet
agriculture in 1956. His
theses reiterate the goal
of catching up with the West
and put unusually strong empha-
sis on the continued primacy of
heavy over light industry. He
stated that the nation's future
growth would suffer "if we yield
to an incorrect and false in-
terpretation" that light indus-
try should,have priority. This
suggests that the issue may
have been the subject of recent
debate. Khrushchev apparently
feels that present unrest in
the Soviet Union does not call
for such improvement in living
standards as to require further
diversion of effort from heavy
industry to housing or consumer
goods.
Soviet vulnerability to at-
tack will eventually be reduced
by the decentralization, although
this is not a reason for the
reorganization. In fact, Khrush-
chev emphatically stated that
SOVIET DIPLOMATIC MOVES DIRECTED
In response to recent an-
nouncements on Western military
planning, the Soviet Union in
the last few weeks issued blunt
warnings to four NATO countries--
Great Britain, Norway, Denmark,
and Greece--of the dangers in-
herent in allowing nuclear bases
to be established on their soil.
These warnings followed a So-
viet campaign of propaganda
threats and informal diplomatic
approaches to other countries,
including Japan, Turkey and
any tendency toward regional
sell'-sufficiency was undesirable.
Soviet economic objectives
would not be changed in any
fundamental way by the reorgan-
ization, nor any of its major
chronic problems be solved.
The key economic goals and the
tempo of development will still
be set by the central adminis-
tration monitored by the party.
Nevertheless the ramifi-
cations of such a reorganiza-
tion are numerous. Thousands
of middle-level bureaucrats and
technicians may be ordered to
leave the relative comforts of
Moscow and Leningrad for the
rigors of life in the prov-
inces. Initial confusion will
be considerable. Once overcome,
however, there.may be some im-
provement in Soviet industrial
efficiency, though probably not
enough to warrant the present
confidence of the Soviet press
in the USSR's ability to meet
the original Sixth Five-Year
(Prepared jointly with ORR)
Plan goals.
AGAINST NUCLEAR TESTS AND BASES
Ethiopia. The campaign began
in January with an official
TASS statement on "US atomic
bases and preparation for
atomic war."
The Soviet campaign is
tailored primarily to generate
strong popular reaction and to
give new impetus to political
partiLes and independent groups
already on record as opposing
atomic bases in Europe and
favoring a , cessation of
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4 April 1.957
nuclear tests. These groups
are by no means all Communist
or Communist-inspired. Mos-
cow hopes it can.so spur pub-
lic opinion on these issues
that the incumbent governments
will have to accede at least
partially to these pressures.
Moscow's warnings of nu-
clear retaliation complement
its campaign for an immediate
ban on nuclear tests, a subject
which, on Soviet insistence,
is being given priority at the
disarmament subcommittee talks
in London. Soviet chief dele-
gate Zorin had pressed for per-
sonal appearances before the
subcommittee of representatives
from Japan, Norway, India and
Yugoslavia, but later settled
for subcommittee consideration
of written statements from
these countries, all of which
NATO.
PART I
are promoting either a limita-
tion or ban of nuclear tests.
Moscow has capitalized on
widespread efforts by the Jap-
anese to promote at least limited
agreement on the cessation of
tests. In a note to the Japa-
nese government on 1 April, de-
voted solely to the tests is-
sue and in reply to the Japanese
note, of 5 March requesting a
cessation of tests, the USSR
urged Japan to support the So-
viet proposal for an immediate
ending of nuclear tests.
Following the USSR's pro-
posal on 26 March for a "tem-
porary" ban on testing, Moscow
propaganda media have given
high priority to this issue,
especially in broadcasts to
"densely populated" Western
European states associated with
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4 April 1957
NOTES AND COMMENTS
25X1
SOVIET ACTIVITY IN
The USSR continues to
support the Arabs in their de-
mands against the West and to
back anti-Western elements in
the Middle East, while warning
Israel and France against re-
newing the military conflict
with Egypt. The Soviet Foreign
Ministry has recently set up
two separate divisions to deal
with the Middle East area in
apparent anticipation of even
heavier commitments there.
The Cairo press reports
that a Soviet UN delegate de-
clared publicly on 28 March
that the "Gulf of Aqaba is
Arab landlocked territorial
water," which would be the
flattest public statement of
support by a Soviet official
thus far on the issue.
A TASS statement on 28
March that the Soviet govern-
ment "resolutely condemns"
Israeli and French preparations
for a "new aggression against
Egypt" may have been inspired
by Soviet' reports from Parish
The TASS statement made
no specific threats of Soviet
action, merely pointing to
the "heavy consequences for
the cause of peace"of any
Israeli action.
Soviet ambassador to Israel
Abramov, who was recalled to
Moscow last November, is re-
ported en route to Israel via
Paris. The USSR will probably
seek to convince the Arabs that
Abramov's return will aid in a
renewal of Soviet pressures on
Israel. Israeli press reports
of talks "now under way'" on
the resumption of Soviet oil
shipments have not been con-
f i rmed .
Moscow recently attempted
a rumor campaign in Syria simi-
lar to the one it conducted
last November. I
Soviet propaganda directed
to Jordan, like that broad-
cast to Libya and Lebanon re-
cently, has distinguished be-
tween internal segments of
political power in order to
support one faction over an-
other. Since 30 March, Soviet
broadcasts have lauded Jordan's
action in terminating its treaty
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4 April 1957
with Britain, praised the
Nabulsi government and criti-
cized King Hussain for his order
banning ""all progressive papers
in opposition to the people's
demands."
- Izvestia on 30 March com-
memorated the first anniver-
sary of the treaty of friend-
ship between the USSR and Yemen
by promises of continued sup-
port and by a reference to re-
cent reports of "thousands of
people" volunteering to fight
on Yemen's side, a renewed
attempt to focus attention on
Britain's position on the Ara-
bian peninsula.
The Soviet Foreign Ministry
recently divided its Near and
Middle East Division into a
Near East Division under A. P.
Pavlov, formerly assistant
chief of the parent division,
and a Middle East Division
under G. T. Zaitsev, formerly
chief, apparently in anticipa-
tion of greater participation 25X1
in the area's affairs.
NEW BRITISH DEFENSE PROGRAM
A substantially reduced
British defense program has
emerged after many months of
reappraisal. Its underlying
philosophy, as described by
Prime Minister Macmillan at
Bermuda, is recognition of Brit-
ain's entrance on a new phase
as a nuclear power, as well as
the need to reduce the defense
burden on the nation's economy
in the face of the growing So-
viet economic threat.
At the Bermuda conference,
Prime Minister Macmillan said
he hoped to reduce the present
armed forces
strength of
750,-
000 by nearly
50 percent
over
the next four
years. Instead
of maintaining a chain of over-
seas garrisons, Britain would
station forces only in a few
key areas, relying on quick
25X1
reinforcements airlifted from a
central reserve--presumably in
the United Kingdom. He said
the Persian Gulf area would be
defended by a combination of
forces based at Aden, plus re-
serves stationed in East Africa
and a naval task force in the
Indian Ocean. Macmillan hoped
all forces might eventually be
withdrawn from Libya. In
Malaya and Singapore, the air
force will be maintained, but
there and in Hong Kong as well
the ground forces will be re-
duced.
The mission of fighter
aircraft will be to defend the
sites of "deterrent forces."
Effective over-all air cover
for the United Kingdom is no
longer envisaged. The navy is
to be organized in carrier task.
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4 April 1957
groups consisting of more modern
vessels, with a reduction of
about one third in present D-day
strength.
More details of this gen-
eral plan will probably appear
in the defense white paper being
issued this week.
Some of the reductions seem
to be already under way. No re-
placements are scheduled so far
for a battalion which left
Singapore last month and for
three leaving Hong Kong by the
end of April, although another
unit leaving Malaya in May has
a replacement.
Britain recently informed
the United States that it would
witlidraw its 1,600 remaining
ground forces in Korea by
October, leaving a small liaison
mission, and maintaining "for
the present" its warships in
Korean waters.
Scheduled cuts in Germany
will in the next 12 months re-
duce the 76,000 ground troops
by 13,500, consisting about
equally of combat and adminis-
trative units. Another 8,500
are to be removed in the second
year, but the British say they
are "open to convincing" on an
additional 5,000-man strategic
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4 April 1957
reserve element they wish to
withdraw.
British troops must be
withdrawn from Jordan by 13
September--six months after
termination of the 1948 Anglo-
Jordanian treaty on 13 March.
For Libya, the timetable is not
yet firm and may await the
forthcoming talks in Tripoli on
this and economic aid. Several
reports before the Bermuda con-
ference predicted the 7,800
troops would be reduced by half
within about a year, but re-
placements are now scheduled for
two battalions to return home
during April. Cyprus was men-
tioned in Bermuda as having a
declining military importance,
and a recent London press re-
port states that a massive
troop withdrawal is planned as
soon as the political situation
settles down.
The contemplated decrease
in over-all armed forces strength
to under 400,000, consisting as
far as possible of regular
troops, would bring nearer the
abolition of conscription--a
long-standing demand of the
Labor opposition, rather in-
effectively countered by govern-
ment promises to achieve it as
soon as practicable.
25X1
FURTHER STRAINS ON THE MACMILLAN GOVERNMENT
British confidence in Prime
Minister Macmillan's leader-
ship has been further weakened
by the resignation on policy
grounds of Lord Salisbury, one
of the most highly respected
members of his cabinet, and by
the widespread belief that
Britain's dependence on the
United States has been increased
as a result of the Bermuda con-
ference. Criticism centers on
the Anglo-American missile agree-
ment and the government's ap-
parent reversal of policy in re-
jecting limitation of H-bomb
tests outside a general dis-
armament agreement. Conservative
Party dissension now turns on
conflicting approaches to the
annual budget to be presented
to Parliament on 9 April,
The growing feeling of
frustration among Conservative
Supporters, accentuated by the
unfavorable trend in recent by-
elections, has produced a split
among party leaders on the budget.
Convinced that "bread and butter"
issues are the main concern of
the average voter, they believe
that increasing dissatisfaction
with the government's economic
prog:ram is the primary cause of
its present unpopularity at the
polls. Some party officials in-
sist that major income tax
concessions to middle-class groups
are the only effective way of
regaining their electoral sup-
port., Abstentions by Conservative
MP's on votes on controversial
clauses in the rent decontrol
bill recently reduced the govern-
ment majority in the House of
Commons to 25, the lowest since
the ]!955 general election.
Other party leaders, aware
that the Conservatives must con-
tinue to draw substantial support
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4 April 1957
from the working-class voter,
oppose granting any favors to
special groups, Still others
contend that the budget must
continue to be a restrictive
one if Britain is to expand its
industrial potential. They
view the recent nationwide
strikes in heavy industry and
shipbuilding as proof that in-
flationary pressures are still
endangering Britain's economic
progress.
The government's award of
a 5-percent wage increase to
its 500,000 railway employees
on 22 March has undercut the
widespread belief in industrial
circles that a period of wage
and price stabilization was in
sight. Macmillance~s evident
willingness to risk inflationary
pressures, despite his previous
insistence that he would take
"unpopular decisions" to stimu-
late industrial expansion, will
accelerate what the American
embassy in London has called
"a spreading defeatist philosophy"
in Conservative ranks, and
could render the government's
program completely ineffectual.
CYPRUS DEVELOPMENTS
The Greek majority on
Cyprus apparently regards
Britain's release of Archbishop
Makarios as a victory for the
union-with-Greece (enosis)
movement. The Greek Cypriots
show no willingness to compromise
on self-determination and are
unlikely to agree to any self-
government program which fails
to provide a mechanism for an
eventual change in the island's
status.
The American consul in
Nicosia reports that news of
Makarios' release brought a
general and spontaneous favorable
reaction and belief that a great
victory for enosis had been
achieved. Not least among those
sharing the glory of this vic-
tory was EOKA, and the consul
believes it is "quite doubtful"
that EOKA, chief. Grivas;~or._}is .t
organization will withdraw soon.
EOKA, still apparently command-
ing the support of most Greek
Cypriots, would probably con-
tinue to do so it it decided
to resume its anti-British
operations.
Because of the opposing
stands of Greece and Turkey on
the Cyprus issue, tension be-
tween the Greeks and Turks on
Cyprus has increased and the
Turkish Cypriots are increasing-
ly nervous. During the celebra-
tions on 28 March, Greek Cypriots
apparently sought opportunities
to taunt and threaten the Turks
for their public opposition to
Maka,rios' release.
King Paul. of Greece told
Ambassador Allen on 31 March
that Prime Minister Karamanlis
is "furious" at Makarios because
of the latter's statement re-
jecting negotiations with the
British unless he could return
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4 April 1957
to Cyprus. Makarios also told
the press on 2 April that nego-
tiations regarding Cyprus could
be held only by himself and the
British; while he was willing
that the rights of Turkish
Cypriots be "internationally
safeguarded," he rejected their
participation in any negoti-
ations.
Athens apparently expects,
however, that Turkish Cypriot
representatives and Makarios
will. be brought to London for
negotiations. Although it has
publicly rejected any negoti-
ations with Britain and Turkey,
as Ankara in particular demands,
Athens has hinted that simul-
taneous secret negotiations
between the three governments
would be acceptable, provided
there were prior assurances
'
of "no leaks."
Continued Moslem unity
forced cabinet formateur Su-
wirjo to return his mandate
on 2 April. The Moslem parties
objected principally to the
participation in the cabinet,
as demanded by Sukarno, of sev-
eral prominent fellow travelers.
Sukarno reportedly has now
invited leaders of various par-
ties and outlying provinces to
an early meeting to discuss ways
and means to solve the crisis.
There is no indication, however,
that former vice president Ratta,
a Sumatran and a strong anti-
Communist, has been invited,
even though his participation
in the next government has been
consistently demanded by the
Moslem and Christian parties
and leaders in non-Javanese
areas.
Although Sukarno is prob-
ably considering further limit-
ed concessions, he undoubtedly
still hopes to preserve the es-
sentials of his concept. This
calls for at least a gesture to-
ward Communist participation in
the government and the establish-
ment of an appointed national
council which will represent
all significant elements of
organized Indonesian life.
The army has arrested
several prominent political
leaders in Djakarta and summoned
for questioning at least 30
others as part of an alleged
anticorruption drive, which
may well be designed to intimi-
date Sukarno's opponents. In
this connection, Sukarno has
publicly identified himself
with the drive and has also
charged that certain political
leaders are being utilized in
an "'imperialist plot" to "dis-
integrate the nation."
The president may be
stalling, hoping that in the
interim, dissension within the
autonomous areas will so weaken
resistance to the central gov-
ernment that the provinces will
be forced to withdraw their
political and economic demands.
The governing council in Central
Sumatra is said already to be
suffering from political fac-
tionalism and economic deteri-
oration as the result of in-
sufficient planning before the
local government was seized
in December. In South Sumatra,
an abortive countercoup on 31
March may have been stimulated
by Sukarno, who had visited the
area only a few days previously.
A weakening of Sumatran resist-
ance could be expected to im-
pair seriously the determina-
tion of similar movements in
East Indonesia and Borneo.
0
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4 April 1957
RIOTS IN CHILE
Serious rioting, apparent-
ly rooted in a general resent-
ment of the government's econom-
ic stabilization program, broke
out in Chile on 29 March and
several hundred have been killed
or wounded. Despite the dec-
laration of a state of siege
late on 2 April, the stability
of the Ibanez government is
still threatened.
The economic stabiliza-
tion program, initiated in Jan-
uary 1956 on the advice of an
American investment firm, was
responsible for keeping the
cost-of-living rise down to
37 percent in 1956 as compared
with over 80 percent in 1955.
Real worker income is declin-
ing, however, since the govern-
ment has limited compensating
wage increases to under 31 per-
cent. Furthermore, during the
period from November 1956 to
February 1957, the government--
with an eye to the 3 March
congressional elections--used
price controls and subsidies to
give an appearance of almost
complete price stabilization.
Consequently, price increases
in March were particularly
sharp and bitterly resented by
a public lulled into a feeling
that stabilization had been ac-
comtplished.
A 50-percent increase in
public transportation fares
sparked the rioting, which was
originally directed by leaders
of a non-Communist student fed-
eration. Leaders of the Com-
munist-dominated labor federa-
tion, the Communist Youth or-
ganization, and individual Com-
munists reportedly were aiding
the disturbances. On 2 April,
Communist Party officials, pre-
viously standing back, reported-
ly decided to join the disorders.
A call from the student federa-
tion for an end to the demonstra-
tions.was ineffective, despite
government annulment of the
transit fare increase.
President Ibanez convoked
an emergency session of congress
on .3 April to ratify the decla-
ration of a state of siege which
will permit the transfer of in-
dividuals to outlying parts of
the country. He is also re-
questing "extraordinary powers"
for six months to suspend con-
stitutional guarantees, thus
suggesting that he feels the
stability of his regime is still
threatened. 25X1
ARMY TAKES OVER IN HAITI
Increasing. instability.
in Haiti culminated in the oust-
ing of provisional president
Sylvain on 2 April after a two-
day general strike. Similar
strikes overthrew president
Magloire on 21 December 1956
and provisional president Pierre-
Louis on 3 February.
The latest strike was the
climax of a week-long campaign
against Sylvain's government
led by six of the seven major
presidential candidates in the
PART II
national elections scheduled
for 28 April. By the evening
of 2 April, Sylvain was under
house arrest in the presiden=-
tial palace, and the army chief
of staff, General Leon Cantave,
was in charge of a military
regime until a provisional gov-
ernment could be appointed or
a permanent president inaugurated.
It is reported that all presi-
dential candidates continue to
favor holding elections as
scheduled.
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4 April 1957
A more serious breakdown
in civil order may occur dur-
ing the interim period. Can-
tave has reportedly announced
that the army will maintain
peace and stay neutral in re-
gard to a new provisional gov-
ernment. A rift between Can-
tave's senior officer faction
and junior officers may, how-.
ever, disorganize the army.
While Cantave recently assured
American embassy officers that
he has assumed a nonpolitical
attitude, he played a big role
early in the current election
campaign and may become active
again. There may also be con-
siderable delay before the
elections in reaching agree-
ment on the make-up of a pro-
visional government.
25X1
ARGENTINE ELECTION TIMING PROVOKES CRISIS
President Aramburu's an-
nouncement on 30 March that
national elections will be held
on 23 February 1958 instead of
late in 1957 provoked near re-
bellion by the air force, add-
ing another crisis to those
straining the stability of the
provisional government in re-
cent weeks. The army and navy,
along with most of the political
parties, are reported support-
ing Aramburu and his timetable
against ousted air minister
Krause, Who appeared to be play-
ing partisan politics on the
question of the election date.
Aramburu's "political
calendar," which he said was
"irrevocable," calls for elect-
ing a constituent assembly on
28 July to revise the constitu-
tion, issuing the call and con-
ditions for general elections
on 15 November, holding general
elections on 23 February, and
transferring power on 1 May 1958.
Previously no firm election date
had been set, and Aramburu ex-
plained the February date as
dictated by "technical diffi-
culties,"' presumably the time
required for revising the con-
stitution.
This calendar indicates
that constitutional revision,
to be undertaken in September
or October, would have to be
completed prior to the call for
elections on 15 November, a
relatively short period for air-
ing conflicting views. Virtual-
ly all political leaders agree
that the 1853 constitution needs
revision.
25X1
25X1
ical calendar, the near rebel-
lion. has added to the political
strain caused by the recent cab-
inet crisis over proposals to
meet Argentina's economic dif-
ficulties, the escape to Chile
of important Peronista prisoner, 25X1
and the forced resignation of
the formerly powerful under
secretary of the navy.
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4 April 1957
PHILIPPINE POLITICAL SITUATION
In the absence of a public
figure capable of capturing the
public imagination as the late
president Magsaysay had done,
the campaign for the Philippine
election in November appears
to be shaping up as a straight
fight between the Nacionalista
and Liberal Parties. During
the short time since Magsaysay's
death, political maneuvering
by a steadily rising number of
aspirants for the presidential
nominations of both parties
has become increasingly intense.
President Garcia, with the
powers of office at his dis-
posal, holds the inside track
for the top spot of the Nacion-
alista Party ticket. The presi-
dent's nomination would satis-
fy the party's "old guard."
It might also be acceptable to
a large segment of the party's
younger membership, despite
their fears of re-emergence of
old-guard rule. Garcia's prompt
pledge to carry on Magsaysay's
policies was calculated to win
wide popular'support, while
reports that Garcia has the
backing of party president
Rodriguez suggest that "pro-
fessional" assistance in con-
solidating Garcia's party
and popular strength may al-
ready be assured.
Another important Nacional-
ista figure is Senator Josd
Laurel, puppet president during
the Japanese occupation in World
War II. Laurel has let it be
known that he is available, and
is reported working assiduously
to The "drafted." There are
some indications, however, that
Laurel is not a serious candi-
date because of his age and un-
certain health, and is serving
as it stalking-horse to gain at
least the vice-presidential
nomination for his son, House
Speaker Josd, Jr.
Neutralist-inclined Sena-
tor Claro Recto appears deter-
mined to maintain his candidacy,
although entertaining little
hope for the Nacionalista nomi-
nations Recto will face major
difficulties as an independent
candidate. The intense public
emotional reaction to Magsay-
say's death lends substance to
the view that Recto's candidacy
will suffer from his identity
as the chief opponent of Mag-
saysay's policies. He is,more-
over, persona non grata with
the Roman Catholic hierarchy
in the Philippines.
The possibility that the
Nacionalistas will split over
the rival contenders has im-
proved the prospects of the
otherwise weakened Liberal op-
position. Liberal leaders,
who have considerable financial
.resources, are now being ap-
proached by politicians of all
shades. The Liberals reportedly
hope to hold an.. early conven-
tion and nominate the respected
elder statesman, former house
speaker Jose Yulo, who they be-
lieve can unite their party
and possibly be elected despite
his age. For the vice presi-
dency the Liberals are casting
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4 April 1957
about for a younger man who
would stand to win back the
support of,the sugar bloc, and
the Democratic Party followers
of Ambassador Carlos Romulo,
and--above all--appeal to the
admirers of the late president.
In an effort to prevent
their own political eclipse and
to maintain pressure for con-
tinuing the Magsaysay policies,
close associates of Magsaysay
have launched a "Spirit of Mag-
saysay Movement" and are groom-
ing as a vice-presidential
hopeful former customs commis-
sioner, Manuel Manahan, a man
personally and politically close
to Magsaysay. Although their
cohesiveness against the pres-
sures of more seasoned politi-
cians remains to be tested,
they may well exercise some in-
fluence in the election through
the movement's ability to trade
on the name of a revered public
hero.
Moscow's statement to the
Japanese that the Sea of Okhot-
sk would be permanently and
entirely closed to all foreign
fishing by 1959 at the latest
was apparently motivated by a
combination of economic,
foreign policy and military
security considerations. Clo-
sure of the sea would both
strengthen military security
of the Soviet Far East and pro-
vide a restricted area for
military activity or weapons
testing.
The Soviet Far East has
become the most important fish-
ing region in the USSR, and
this move would pre-empt the
Okhotsk area for the rapidly
expanding Soviet fisheries.
This sea provided 29 percent
of the Soviet 1956 catch in
the Far East.
Permanent closure of the
Sea of Okhotsk would also les-
sen the possibility of any
future return of the southern
Kurils to Japan. Setting of
the 1959 deadline may be aimed
at pushing Japan into negotia-
tions for a peace treaty which
will involve discussions con-
cerning return of the islands.
Fishery negotiations, in
which agreement was reached on
a total Japanese catch of 120,-
000 tons, are again deadlocked
on the conditions attached by
the USSR to that figure. The
Japanese have informed the USSR
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they -cannot agree that the
120,000-ton quota for all
types of fish in the restricted
area is exceptional and good
only for 1957, and that the
Okhotsk Sea is to be closed
to all foreign fishing. Ex-
clusion from the Okhotsk area
would have a serious impact
on the Japanese fishing indus-
try since, even with a short
season and a reduced number of
fleets, the 9,363,000 salmon
caught in that area in 1956
constituted 32 percent of the
catch from the Soviet-restricted
area and 10 percent of Japan's
total catch.
The Japanese are vig-
orously pressing for some con-
cessions from the USSR which
will provide a compromise. The
Japanese especially desire that
the quota for this year be des-
ignated as provisional rather
than as exceptional in order to
avoid setting a precedent for
a maximum Japanese catch.
The need to avoid delay
in preparing for the coming
fishing season, however, may
force Tokyo to agree to Moscow's
terns. There is an unconfirmed
press report that an agreement
will be signed 6 April.
ThCtUSSR` :,,has made of-
ficial overtures for a trade
agreement. In response, the
Japanese have maintained that
a satisfactory fishing settle-
ment,.is .aprerequisite for
negotiations on trade and other
matters. While the Japanese
discount Soviet trade prospects,
the idea has political appeal
and the bait of potential mar'5-
kets held out by the five-year
development plan for the So-
vieit Far East may stimulate
pressure in Japan for a com-
mercial treaty.
The Japanese cabinet de-
cided on 29 March to open ne-
gotiations for an atomic power
agreement with the USSR, appar-
ently in an effort to provide
a broad technical and material
base for Japan's atomic energy
industry. The Japanese prob-
ably have been attracted by re-
ports that the USSR will supply
atomic facilities and materials
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4 April 1957
on a commercial basis with no
strings attached. Leftists
among Japanese scientists also
have exerted pressure for co-
operation with the USSR in
nuclear energy development.
JAPANESE SOCIALISTS SENDING GOOD-WILL MISSION TO COMMUNIST CHINA
The Japanese Socialist
Party is sending an official
"good-will mission" to Commu-
nist China on 10 April for a
two-week stay, The mission
will sound out Peiping's reac-
tion to recent modifications
in Socialist policies which
call for early normalization
of relations with Peiping and
for treating Taiwan's status
as an "internal" Chinese prob-
lem. The Socialists favor
Japan's maintaining relations
with Taiwan, however, as long
as the island remains independ-
ent.
The party hopes eventually
to replace both the Sino-Soviet
treaty of friendship, which
designates Japan as a potential
enemy, and the US-Japanese se-
curity treaty with a Locarno-
type pact among the four na-
tions. In the interim, however,
it expects Peiping to agree that
American bases in Japan are no
bar to the restoration of rela-
tions. It also expects the
Chinese to renounce reparations
claims.
In sending the mission, the
Socialists are motivated by a
desire to create a "big issue"
for an anticipated general elec-
tion. For maximum political
advantage, the Socialists prob-
ably Dope for some specific
Communist gesture indicating
that the Chinese will negotiate
with party representatives on
some such subject as a renun-
ciation of reparations claims
or a declaration ending the
state of war. The party also
hopes the inclusion of repre-
sentatives of all factions in
the mission will help to unify
the party's views on closer
relations with the mainland.
There is some evidence
than the Socialists hope to
become a "go-between" on the
Taiwan problem. One of the
mission's objectives will be
to determine the truth of rumors
of direct Communist-Nationalist
talks. The Chinese may exploit
the Japanese visit to enlarge
their psychological warfare
claims on this subject.
The most important member
of the mission probably will
be Shichiro Hozumi, because of
his ability as a "go-between"
with the Japanese government.
A high Socialist Party official
has indicated also that the
party hopes to send a mission
to Washington after the one to
China returns.
Chinese interest in the mis-
sion may be reflected by a re-
port that "Peiping representa-
tives" in Japan asked that it
be headed by a top party leader.
Nevertheless, the Chinese Commu-
nists are not likely to make any
genuine concessions before for-
mal government-to-government
talks begin.
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4 April 1957
SINO-CZECH TREATY SIGNED DURING S[ROKY VISIT TO PEIPING
The Sino-Czech treaty and
.the joint statement issued on
27 March during Czech premier
Siroky's visit to Peiping sug-
gest that Peiping's role as
moderator during the bloc crisis
in Europe last year was not a
one-shot performance: the Chi-
nese apparently intend to play
an increasingly active role in
bloc European affairs. The
Czechs have been steadfastly
loyal to Moscow, and Sirkoy's
trip, which is in line with
Peiping's growing interest in
East Europe, almost certainly
had the approval of the Kremlin.
The Sino-Czech treaty is
the second Peiping has signed
with an East European Satellite
--the other, a similar one,
being the .tr.eaty, with the
East Germans in 1955. The oper-
ating clauses of the new treaty,
like those of the Sino-Soviet
alliance, call for consulta-
tions concerning important
questions affecting the inter-
ests of both parties while
promising co-operation on matters
of economic, technical, scien-
tific and cultural development.
The agreement has no provision
for military co-operation. It
will confer prestige on the
Czechs and open the way for
further expansion of bilateral
relations between Peiping and
Prague. Chou has already agreed
to return Siroky's visit at an
unspecified future date.
The lengthy joint state-
ment issued by Chou and Siroky
is stodgily orthodox in most
respects, but the discussion
of iLntrabloc relations indicates
that Peiping intends to keep
reminding the Kremlin of the
good behavior promised by its
declaration of 30 October last
year in this matter. In the
communique the two parties
affirm that the October declara-
tion is of "extremely important
significance to the improvement
of mutual relations of the
socialist countries...."
The communique states that
both, Prague and Peiping will
continue to regard strengthening
the unity of the bloc "headed
by the Soviet Union" as their.
"prime international duty."
This is the only reference
in the statement, however, to
the Kremlin's sole leadership
of the Communist world. In
Hanoi a week earlier, Siroky
signed a communique with the
Viet Minh which called for unity
of the socialist countries
"around the Soviet Union and
the People's Republic of China."
Speaking in North Korea on 1
April,Siroky used a similar
formulation. Both Siroky and
North Korean premier Kim Il-
sung affirmed, however, that
the USSR is "heading" the bloc.
F__ I
ECONOMIC PROVISIONS OF SOVIET-HUNGARIAN COMMUNIQUE
The comprehensive Soviet-
Hungarian economic agreement
concluded on 28 March strengthens
Moscow's control over Hungary's
economic future. In return for
substantial immediate conces
sions in the form of goods and
credits, Hungary pledged to ex-
pand shipments to the USSR over
a long-term period.
In response to Hungary's
request for a considerable in-
crease in 1957 deliveries of
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4 April 1957
raw materials, semimanufactured
products, equipment and other
commodities, Moscow agreed to
deliver, largely on credit,
goods totaling over $250,000,-
000. Under the agreement, So-
viet credits available to Hun-
gary in 1957'will total about
$220,000,000, consisting princi-
pally of a $190,000,000 com-
modity and foreign currency loan
at 2-percent interest repayable
in kind over a 10-year period
beginning in 1961.
Recognizing the inability
of the Hungarian economy to
fulfill all its obligations,
the USSR deferred repayment of
almost $40,000,000 in earlier
loans and canceled a Hungarian
debt of approximately $90,000,-
000 "incurred" when Moscow
turned over to Hungary the
former German assets and the
Soviet share of joint Soviet-
Hungarian companies.
The USSR agreed further to
consider requests for economic
and technical aid in reconstruc-
tion and building of "'certain
industrial establishments" and
to continue to help in pros',-
pecting for uranium, building
YUGOSLAVIA REORIENTING FOREIGN
The political dispute with
Moscow has forced Yugoslavia to
re-evaluate its long-term for-
eign economic relationships.
It apparently now feel;s*it must
rely to a greater extent on the
West, in particular on the
United States. Yugoslav offi-
cials clearly state'.that the
shift in attitude is prompted
by growing distrust of the So-
viet Union,
Yugoslav vice president
Vukmanovic-Tempo told an Amer-
ican official on 4 March his
country must now orient itself
toward the United States and
Canada, adding that the key
factor in Yugoslavia's long-run
economic development is Amer-
ican. aid. The Yugoslavs,
according to Tempo, feel that
the Soviet bloc has interrupted
its investment agreements with
Belgrade to undercut the economy
of Yugoslavia and demonstrate,
particularly to the Satellites,
that what he termed the "liberal"
methods of the country's eco-
nomic system would inevitably
bring about`'its collapse.
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atomic power stations and pro-
viding necessary fissionable
materials. Hungary is to ship
to the USSR all uranium "not
needed"' in Hungary.
The provision for repay-
ment in goods over a 10-year
period will ensure Hungary's
continued economic orientation
toward Moscow. The Soviet in-
tention in this regard is
brought out by emphasis in the
communiqud on "the positive
effect of long-term agreements
in the planned development of
the economy of both countries."
Furthermore, agreement by
both sides to discuss mutual
commodity deliveries through
1960 suggests that Hungary's
trade with the West may be some-
what curtailed. Expanded Hun-
garian commitments to the USSR
under this agreement will tend
to impair Hungary's credit in
trade with the West and may dis-
courage Western traders who have
recently been actively seeking
new markets in Hungary. Hun-
gary,l's future trade relations
with the West will be developed
only under Moscow's watchful
eye? (Prepared 25X1
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Further, he stated that although
it cannot completely ignore its
trade relationship with the
USSR, Yugoslavia simply does
not "believe" in Soviet equip-
ment.
Yugoslav officials assert
they are fully aware that a
breakdown of deliveries under
the seemingly favorable 1957
trade agreements with the USSR
and all the Satellites except
East Germany could occur at any
time, as proved to be the case
with the investment agreements.
These attitudes contrast
sharply with those revealed in
Yugoslav-American economic dis-
cussions in 1956. Yugoslav
officials then emphasized their
desire to maintain a balanced
economic position between East
and West, not being overly com-
mitted to either. Although
they sporadically mentioned
some lack of faith in Moscow,
their behavior did not confirm
this. They consistently played
East against West, endeavoring
to obtain the most advantageous
arrangements for financing large
industrial investments in alu-
minum, electric power and cop-
per. This was most sharply
emphasized last August when
they abruptly agreed to'the
Soviet-East German $175,000,000
aluminum deal while in the midst
of discussions with Western
nations for aluminum develop-
ment.
Implementation of the So-
viet-East German aluminum agree-
ment has, however, been "de-
layed, " and Belgrade now ap-
pears to have lost hope that
the East will give it economic
aid without political strings.
Further evidence of this dis-
illusionment is the interest
displayed by Foreign Minister
Popovic to the French ambassador
in Belgrade in the possible
association of Yugoslavia with
the European Common Market.
While the Yugoslavs are prob-
ably not yet ready to commit
themselves fully to such a
move, for the first time since
1954 they apparently want to
avoid being left out of a major
Western European development.
(Concurred-in by
ORR)
Laotian prince Petsarath,
half brother of both Premier
Souvanna Phouma and Pathet Lao
chief Souvannouvong, has seized
the center of public attention
since his widely acclaimed re-
turn to Laos on 22 March. De-
spite his 11 years of self-im-
posed exile, he has not hesi=-
tated to speak out almost as
though he were the head of state.
The prince had hardly set
foot in Laos before he began to
advocate a "mass reduction" in
the Laotian army and the estab-
lishment of diplomatic relations
with Communist China and North
Vietnam. In a press interview
on 28 March, he endorsed a
policy of "strict neutrality,"
and sharply criticized the "bad
utilization" of American aid,
which he said "enriches a minor-
ity while the population re-
mains poor." He contended that
this poses a greater danger of
Communist subversion than the
integration into the national
community of the Pathet Lao,
whom he regards as "sincere
patriots above all." Souvanna
reportedly stated that the ideas
expounded by Petsarath matched
his own.
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4 April 1957
In a conversation with the
American ambassador in Vien-
tiane, Petsarath disclaimed any
anti-American sentiments and
said his concern over American
aid was merely directed toward
making it more effective. He
said Laos would never accept
Chinese Communist aid because
of Laos' historical fear of
Chinese expansion. The Amer-
ican ambassador found Petsarath
well informed, "sharper" than
Souvanna, but evasive on con-
troversial issues in Laotian-
American relations.
Petsarath has indicated
that he will visit the prov-
inces, including Pathet-held
territory, before he determines
his future plans. Firsthand
contact with the realities of
the Laotian scene may cause
him to modify some of his pres-
ent ideas.
One immediate consequence
of Petsarath's return is the re-
opening of a murder case, un-
solved since 1954, in which
major political figures have
been implicated. An individual
in Petsarath's entourage has
been arrested for alleged par-
ticipation in the crime. It is
quite possible that a public
trial may rekindle animosity
and intensify disunity in Lao-
tian political. circles..
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4 April 1957'
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SINO-BURMESE BORDER DISPUTE
Burmese premier U Nu's 11-
day visit to Communist China
ended,on 2 April without pro-
ducing a final agreement on
the Sino-Burmese border dispute.
Chou En-lai in his speech
of farewell emphasized, however,
the growth of Sino-Burmese
friendship and predicted that
"ties of kinship will develop
ceaselessly" between the two
countries.
Peiping's shift to a poli-
cy of polite evasion on the
border question may well have
started during Chou En-lai's
"good-will" visit to Burma last
December, when Chou began to
emphasize that the complicated
problems involved in a border
settlement would have to be
worked out "step by step" and
could not be resolved "at one
stroke."
Following Chou's visit,
the Chinese began to display
renewed sensitivity on the
border question. At the same
time! Peiping became increas-
ingly evasive regarding Burmese
suggestions that negotiations
be quickly concluded.
Chou's decision to meet
with Nu last week despite a
heavy schedule of important
business demonstrates Peiping's
concern for maintaining appear-
ances. It seems clear, however,
that the Chinese intend to pur-
sue a dilatory course for some
time to come, possibly to chas-
tise Rangoon for its temerity
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4 April 1957
last summer in launching a
propaganda campaign which great-
ly embarrassed Peiping and
eventually brought about with-
drawal of Chinese Communist
troops from disputed territory
along the frontier.
Peiping's temporizing::stand
on the border question is un-
doubtedly a great disappoint-
ment to the Burmese government.
Once it had overcome opposition
of the Kachin minority to the
cession of three border villages
to China, it confidently ex-
pected the agreement to go
through quickly and with a min-
imum of difficulty. Rangoon
can be expected to keep press-
ing for a settlement, and, fail-
ing that, is likely to revive
its previously successful tactic
of publicizing the issue.
Nu was probably especially
disappointed at the failure to
reach a final agreement on the
border during his visit to Com-
munist China. He had undoubt-
edly counted on such a ceremony
to get his new term as prime
minister off to an auspicious
start.
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The confidence vote in
the French National Assembly
on 28 March showed a serious
weakening of the Mollet govern-
ment's position and underlined
its dependence on rightist votes
for survival. Mollet's next
period of crisis is expected
after the Easter recess during
the debate on budgetary and
tax issues, when the right may
attempt to overthrow his gov-
ernment.
Although the deputies voted
221 to 188 in favor of the gov-
ernment, the 110 recorded ab-
stentions, largely from such
right-center parties as the
Independents and Social Action
Peasants, have weakened Mollet's
position. It is apparent that
these groups were deterred from
throwing their support against
Mollet largely because they
lacked fully developed plans
for an alternative government.
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4 April 1957
They may now be expected to be
more insistent on policy con-
cessions.
The debate also underlined
the growing splits among the
parties of the left and center
which have tended to strengthen
the key position of the right.
Within the Socialist Party,
whose long-standing division
over Algerian policy has been
masked by Mollet's control over
the party organization, there
are signs that elements opposed
to Minister Resident in Algeria
Lacoste's pacification policy
have been strengthened. The
Radicals, which have already
split into three groups, now
show signs of generating yet
another splinter party follow-
ing the failure of Mendes-
France's followers to vote as a
bloc against the government.
The.Popular Republicans,
whose assembly leader proposed
that the base of Mollet's minor-
ity government be broadened, ap-
pear to have supported the gov-
ernment with an eye to obtain-
ing a bid for participation in
the cabinet. While they are
still separated from the So-
cialists on the church school
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question, the Popular Republi-
cans espouse a social and eco-
nomic program similar to Mot=
let's party and must stay close
to it to maintain their dwin-
dling popular support.
Unresolved overseas prob-
lems such as Algeria and Suez,
for which no one has a clear-
cut alternative policy, still
tend to work in Mollet's favor.
The imminence of the ratifica-
tion debate on EURATOM and Com-
mon Market treaties also deters
some deputies from bringing
down the government now.
On the other hand, the
government's vulnerability con-
tinues to be increased by
France's melting foreign ex-
change reserves, mounting in-
flation, and Finance Minister
Ramadier's politically unpalat-
able proposals for budget
cutting and new taxes as solu-
tions. The mid-May debates on
tax bills and other provisions
of the budget will offer the
opposition a more clear-cut
opportunity than the recent
general policy debate to use
their own increased potential
and exploit the reduction in
Mollet's support.
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COFtDENTl
4 April 1957
PATTERNS AND PERSPECTIVES
The Hungarian Communist
regime is meeting with strong,
united opposition in the nation's'
schools. Students of all ages,
in many cases acting in concert
with their teachers, are engaged
in a not-so-silent conspiracy
against all central authority
and are maintaining the spirit
of the revolution in the class-
room, The party and the govern-
ment, reneging on earlier prom-
ises of reform in the schools
despite occasional apologies,
have responded with traditional
techniques of intimidation and
force.
According to First Deputy
Minister of Education Magda
Joboru, speaking in late Janu-
ary, demonstrations in the
schools had been universal dur-
ing the revolution, She admit-
ted that revolutionary theories
are still alive among students
and teachers, and that there fie
"complete disillusionment" with
the doctrines of the past.
Teachers are refusing to follow
orders on grounds that the ad-
mitted errors in school books
invalidate that obligation.
She added that students are in
the habit of quoting sarcasti-
cally and with "malicious glee"
the "erroneous, unscientific
statements of the textbooks
that offend the intellect and
feelings."
In some schools, resistance
to Russian language instruction
has taken the form of "stupidity
strikes," while in others there
have., apparently been incidents
of students persecuting col-
leagues who refused to accept
religious instruction. In re-
gard to the regime's political
reirLdoctrination program,;some
students and teachers appear to
have made gentlemen's agreements
to avoid discussion of political
topics altogether.
The regime's reactions to
these forms of resistance and
ideological anarchy have been
mixed. Some members of the
regime continue to search their
souls in public. The party
press printed an open letter
which claimed that youth has
turned away from the party be-
cause it had frustrated their
ideals. In a speech on 1 March,
Joboru attributed the "serious
evils" in the political and
moral development of youth to
the Rakosi-Gero "sins," and
spiritual and moral conflicts,
to the "frequent contradictions
between what the children were
taught at school and what they
learned in the family and in
life."
Basically, however, the
regime seeks a return to pre-
revolution standards.- It has,
--Hungarian First Deputy Minister of Education
Speaking on "Current Problems in Education, " 29 January 1957.
How is life in our schools today? In our opinion in the majority of
the schools the atmosphere is tense and agitated. We believe the
main cause is that many pupils and teachers still do not appraise
the events following 23 October correctly; they do not see their
counterrevolutionary character and they take them for a revolution
anda fight for freedom. A part of the teachers and pupils who hold
this view do not speak openly and use allusions to express their
secret understanding. It is said on these grounds there are ex-
cellent relations in many places between teachers and pupils and
there is discipline and order in the schools.
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4 April 1957
--Comment by a Budapest Schoolteacher
In Magyar Ifjusag, 2 February 1957.
I am surrounded by an atmosphere in which to utter the name of Lenin
in our class amounts to a sin.
The instructions say that teachers who can tell the story of the Octo-
ber Revolution (Soviet) properly, may speak about it. The answer of
my colleagues is that they cannot tell it properly.
I cannot understand why it is considered a sin if a teacher tells the
children the Russian folk tale "The Cat With The Grey Whiskers." That
is what a colleague of mine did and he was attacked by the other teach-
ers, who said that if foreign folk tales had to be taught, he should
have chosen a French or other folk tale instead of the Russian one.
Recently children attending the first form staged a demonstration in
the corridors. They shouted at the top of their voices: "We won't
learn Russian! I tell you, these were children from the first form,
who do not have to learn any foreign language
Little Peter is one of our best pupils. Some days ago I went into the
classroom and saw his name written in huge block letters on the black-
board with the label "Pagan." Little Peter was the only child who had
not enrolled for religious instruction. The stronger boys boxed his
ears, the rest scoffed at him, and nobody played with him during the
break.
for example, restricted foreign
language classes to those con-
ducted by "qualified" teachers,
virtually assuring compulsory
Russian instruction since.a
"shortage of teachers" limits
instruction in Western languages..
In addition, the government has
decreed--contrary to earlier
promises--that only those stu-
dents enrolled'in classes for
religious instruction in Septem-
ber can now be enrolled; the
regime's complete intolerance
of religion in state schools
has been openly declared.
The party apparently recog-
nizes that a return to tradi'
tional educational policies can-
not be achieved without some
force and the issuance of some
sensational threats. A party
organ suggested in February that
Hungarian children might more or
less permanently be separated
from their parents and brought
up in "special towns" where
unreliable influences could be
eliminated. On a more practi-
cal note, the regime has organ-
ized a successor to the discred-
ited prerevolutionary youth or-
ganization and has-re-established
the younger "Pioneer" groups.
Teachers of elementary and
secondary schoolchildren are
being forced by the party to
attend lectures on how to deal
with "counterrevolutionary"
children, One city's party
executive committee has ruled
that most of the teachers who
participated in the revolution
"can only be blamed for a mo-
mentary blunder for which they
should not be condemned and
branded," but this tolerance
is not typical. In February,;
the regime reportedly was
threatening that teachers must
either join the new party or
be deported to the countryside.
Moving against both teach-
ers and students, the regime
has introduced the police into
the schoolroom. Stories of the
secret police examination of
the personal papers of 12-year-
old boys in class have been
confirmed, and on 1 March,
Joboru frankly stated that units
of the militia appear from time
to time in some schools, a
measure, she said, which is
"absolutely unavoidable" in
these "extraordinary" times.
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4 April 1957
ECONOMIC REFORMS IN RUMANIA
Rumania has followed the
example of Hungary and Bulgaria
in "rationalizing" its govern-
ment structure. On 16 March,
the politburo demanded a reduc-
tion in the number of central
ministries from 26 to 15. It
proposed the creation of an
all-encompassing, ministerial-
level economic council to "solve
economic problems" and recom-
mended an extension of the pre-
rogatives of local government
organs.
Addressing the Grand Na-
tional Assembly three days
later, Premier Stoica outlined
important fundamental changes
to be made in the economic or-
ganization of the country. He
decried "excessive centraliza-
tion" and advocated relieving
the ministries of many tasks
which "should be allocated to
lesser units."
As a part of the general
streamlining of the government,
the people's councils--the lo-
cal units of government--are
to assume far-reaching responsi-
bilities for management of lo-
cal industries, including dis-
tribution of output and the
management of a large percentage
of the profits of these enter-
prises in the development of
public works and social and
cultural activities.
The councils will be em-
powered to draft and execute
construction projects of local
interest, such as workshops
and mills, earnings of which
will be used to raise the eco-
nomic level of the communities.
When compulsory quotas were
abolished for most produce on
1 January, the councils took
over supervision of local pro-
curement of agricultural com-
modities for the state. The
councils are "to lead the en-
tire local activity in the
economic, management, social,
cultural, and administrative
fields of the territorial ad-
ministration units where they,
are elected."
the Rumanians have
been forced into decentralizing
industry by the realization
that "a heavy-handed bureaucracy"
rog
ress impossible.
The nee o re-
duce government expenditures
and increase production by giv-
ing greater incentive to pro-
ducers has become all too ap-
parent to Rumanian officials
at higher government levels.
State revenues in 1956
were about 7 percent less than
expected and the financing of
the new agricultural contract
purchase system and wage in-
creases presents problems. The
inadequacy of Rumania's foreign
exchange position was pointed
out by the need for a 270,000,-
000-ruble Soviet loan in De-
cember 1956. The appointment
of "rehabilitated" Aurel Vijoli
as minister of finance may be
particularly significant in
the light of these difficulties.
Vi'oli, a former deputy finance
minister, was purged in 1952 for
rightist deviations and opposi-
tion to a currency revaluation.
According to the American lega-
tion in Bucharest, his return
may presage orthodox banking
techniques and perhaps serious
monetary reforms.
Unemployment is more seri-
ous now than at any time since
the war. A recent resolution
calling for dismissals of state
or state enterprise employees
with. more than one source of
income was a tacit admission
by the regime that there are
not enough jobs to go around.
The resolution, withdrawn after
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4 April 1957
a storm of protests, apparently
was interpreted by the employees
as an ultimatum threatening
their very existence by permit-
ting only one wage earner per
family, many of which barely
manage to exist at a substand
ard level by having two wage
earners-in the family or through
extra jobs in addition to regu-
lar employment.
Major causes of general
discontent in Rumania, aside
from unemployment, are high
prices, consumer goods shortages
and totally inadequate housing.
The 30 Decembers communique 'of
the party central committee
called for a major overhaul of
,the economy in order to increase
agricultural and consumer goods
.output to raise the standard
of living. Industrial expan-
sion is to be slowed as a re-
sult, although continued "pri-
ority development" of heavy
industry is ensured as the
"guarantee of continual progress
for the economy." To alleviate
the lack of housing, over one bil-
lion lei ($167A 000, 000 at the un-
realistic official rate) will
be allocated in 1957 alone,
compared with two billion for
the entire First Five-Year Plan.
The government is to spend
five billion lei ($833,000,000)
.in 1957 to improve salaries,
.pensions, and subsidies for
children, to develop socio-cul-
tural projects and increase
peasant income.
Poor crops in 1956 resulted
in a decrease in agricultural
exports and necessitated in-
creased imports of wheat and
other foodstuffs, with a re-
sultant deterioration in Ru-
mania's foreign exchange posi-
tion. Yields in the socialized
sector continue to be disappoint-
ing compared to those in the
privately held acreage, and
Agriculture Minister Stanco has
called the problems to be faced
in organizing and strengthening
the socialist sector a "gigantic
task." In this connection, some
272 state farms are to be reor-
ganized into 377 smaller ones
to achieve more effective opera-
tion and control. The cost of
replacement of the compulsory
collections system by a con-
tract-purchase system for agri-
cultural commodities will be
considerable and will add to
inflationary pressures in the
economy.
Workers will receive some
benefit from a resolution passed
in December to raise wages an
average of 15 percent and estab-
lish a new system of basic wage
rates. Under the new system,
which is being extended gradual-
ly, a worker's basic wage will
represent up to 75-85 percent
of his total salary in contrast
to present levels as low as
40-50 percent supplemented by
bonuses.
The new basic wage will be
based on the total the worker
is presently earning, and his
new norm will be increased to
approximately. his current out-
put. As before, he will receive
a premium for output over the
norm. Thus, the worker will
no :longer be completely at the
mercy of his machinery or his
factory's supply of materials
and power since he will have a
more adequate basic wage to
count on. Production is expected
to :increase since the worker
will have'an incentive to pro-
duce more than formerly in order
to obtain bonuses.
The deterioration of the
Rumanian economy has caused the
regime to take a new look at
its planning. A serious attempt
is apparently. being made to re-
duce administrative inefficiency
in the government and to improve
incentives as it means of increas-
ing production. Some economic
aid is being given by the Soviet
Union in the form of raw mate-
rials and goods, but much de-
pends on the extent to which
the workers can be induced to
co-operate and the effectiveness
of the people's councils and
other reorganized units in im-
leraentin the new program.
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CURRENT INTELLIGENCE WEEKLY SAY
4 April 1957
INDIAN NATIONAL ELECTION RESULTS
Prime Minister Nehru's
Congress Party has retained its
firm hold over parliament,. .
Virtually complete returns from
India's second national elec-
tions show the party has lost
ground in nine of the 13 state
governments, however, despite
the fact that it still holds
an absolute majority in 11 of
them. The loss of Kerala State
to the Communists, the very
small size of the Congress
Party's plurality in Orissa,
and the serious reduction. in
Congress strength in Bombay and
Uttar Pradesh state assemblies
raise questions regarding the
amount of co-operation a Con-
gress-dominated parliament can
expect to obtain from state
governments during the five
years until the next elections.
While final figures are
not yet available, the Congress,
the Communists, and the rightist
Jan Sangh appear to have in-?
creased their shares of the
popular vote for parliament
over the 45, 4.5, and 3 percent,
respectively, they polled in
1952. The fourth national
party, the Praja Socialists,
lost some of the 11 percent
polled in 1952. All four na-
tional parties increased their
shares of the popular vote in
state contests compared to 1952
returns. The Congress Party,
however, suffered a net loss
in state seats.
In addition, the Congress
Party suffered a considerable
number of "prestige" defeats
as a result of opposition ef-
forts to concentrate on unseat-
ing prominent Congress leaders.
The party lost two minis
tens and two deputy ministers
in the national government and
at least 15 state ministers and
six state deputy ministers.
Other important defeats involved
the Congress Party boss in Uttar
Pradesh, the party presidents
in Assam and Mysore, and other
important party members not in
the government structure. Since
in many states a considerable
number of successful Congress
Party candidates lack previous
government experience, the de-
feat of these party leaders as
well as of numerous members of
state assemblies will result in
a "new look" on Congress Party
benches in the future.
The Situation in Parliament
Of the 488 parliamentary
seats for which elections have
been held, the Congress Party
has won 365, the Communist
Party 27, the Praja Socialist
Party 19, the rightist Jan
San;gh 4, other parties 45, and
independents 28. Elections to
four seats in Himachal Pradesh
and two seats in the Punjab
will be held in June, when snows
have melted and weather permits
polling. The Congress Party is
expected to win most of these
seats. An additional six seats,
completing the total of 500 in
the lower house, will be filled
when the president of India
appoints this number of dele-
gates from Indian-held Kashmir.
In 1952 the Congress Party
won 364, the Communists 16, the
Socialists 21,, the Jan Sangh 3,
other parties 40, and independ-
ents 38, out of a total of 489
elected seats.
These totals indicate, that
the Congress Party itself with
over 75 percent of the seats
will be slightly stronger in
parliament than it was in 1952,
when it held 74 percent of the
seats. On the other hand, less
outside support may gravitate
toward the Congress Party than
in the past because of stronger
anti-Congress feeling on the
part of deputies from small
parties and independents who
represent linguistic groups and
defectors from the Congress
Party.
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4 April 19517
The most important change
in the parliament's line-up is
that the Communists replaced
the Socialists as the leading
opposition group, the Communist
Party alone having won nearly
as many seats as it and its
allies have held since 1952.
This presumably will increase
Communist prestige somewhat,
though the party is still too
weak to affect the nature 'of
legislation signi?ficantly..
?.ADHYA
.'.ZAULS I
80%
SIKKIM
(FROTI-TORnre)
ARABIAN
SEA
GOA
(Port.)
CEYLON
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At the state assembly level,,
the Congress Party, in winning
1,889 of the 2,901 seats an-
nounced to date, has obtained
only 65 percent of the total
2,906 seats as against 68 per-
cent in 1952.
In Kerala, the Communists
wore 60 out of 126 seats and,
with the aid of at least five
independents, are to form a
INDIA
State Assembly Seats Won by Congress Party
60% and below M 61% to 70% 0 71% and over
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CURRENT INTELLIGENCE WEEKLY SU 7
4 April 1951'
government. In Orissa, the Con-
gress Party repeated its 1952
failure to win an absolute ma-
jority, but unlike 1952 its
present plurality of 56 seats
out of 140 is so slight that
it may not be able to form a
workable government. Both the
Congress Party and the Ganatantra,
Parishad, which won 51 seats,
face the prospect of having to
work with ideologically incom-
patible parties to obtain the
71-man majority required.
In both Kerala and Orissa,
the ruling party's majority
margin may be so slight as to
make stable government impossi-
ble. This would represent a
distinct setback to the prestige
of the Indian government. So
also should the fact that the
Communists, Nehru's "Enemy Num-
ber One,"" are now represented
for the first time in every
state assembly in the country.
Future Prospects
The state election results
demonstrate that the Congress
Party must increase its grass-
roots activity, even in those
states it considers most safe,
if it hopes to remain in power.
Party factionalism, linguistic
controversy, and provincialism
may be expected to plague the
Congress Party's national and
state governments during the
five years until the next
scheduled eletion.
Aside from rivalries with-
in its own organization, many
of which are expected to re-
emerge now that elections are
over, the Congress Party may
be hard pressed to maintain
amicable relations with the
Sikhs in the Punjab, an alliance
which was presumably responsible
for the Congress victory there.
Linguistic agitation is almost
certain to continue in Bombay,
where the Congress Party enjoys
only a small majority. The pro-
vincialism shown by the voters
of Kerala, Orissa, and Assam
especially has not been over-
come by the Congress Party.
This last is a particularly
important battle for Nehru's
government to win if it expects
to build a strong federal
structure in India and if it
hopes to mobilize India's max-
imum effort in making the Sec-
ond Five-Year Plan a success.
The Viet Minh leadership
is setting its own pace in the
management of North Vietnam's
internal affairs, while drawing
on both Soviet-and Chinese
sources for inspiration. In
foreign affairs, the leadership
has reluctantly acquiesced in
the subordination of its own
aspirations to the lines of bloc
policy drawn in Moscow and
Peiping. With Chinese activity
in North Vietnam and Peiping's
economic commitments to the Viet
Minh exceeding those of the USSR,
Chinese influence may be corre
spondingly-greater. This in-
fluence, however, has been ex-
erted in full awareness of
Vietnamese nationalist sensi-
bilities and with the declared
intention of avoiding the error
of "'great-nation chauvinism."
The Viet Minh leaders have
applied distinctively Chinese
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RAILROADS
Operable (selected)
-+-- -+- Inoperable (selected)
methods in their efforts to
consolidate Communist control
in North Vietnam, faithfully
copying Peiping's policies on
land reform, taxation, and
.relatively moderate treatment
of native capitalists. The ex-
tension of Communist control
to the entire China mainland
in 1949 gave the Viet Minh ac-
cess to substantial outside
Communist support for the first
time. Completion of the. Chinese
railroad to Munankuan on the
border greatly increased the
Sino-Soviet bloc's ability to
provide military support and
undercut the French military
position.
The Chinese Communist aid
which contributed so much to
Viet Minh successes, including
that at Dien Bien Phu, greatly
increased Peiping's prestige
among the Vietnamese Communists.
Vietnamese theoreticians under-
scored their common doctrinal
position with the Chinese on
agrarian revolution. In March
1951, Vietnamese.Communists pro-
mulgated'party statutes which
declared that Marxism-Leninism
and the "thoughts of Mao Tse-
tung" constituted the
party's guiding doc-
trines--a formulation
taken from the Chinese
Communist Party con-
stitution and infer-
entially acknowledg-
ing the Chinese claim
to a unique develop-
ment of Communist
theory.
Soviet theorists
in November 1951
criticized the con-
cept of "Mao's road"
and cautioned Asian
Communist parties
against viewing the
Chinese revolution
as a "stereotype" for
revolutions in Asia.
Nevertheless, the
Viet Minh continued
to advise its cadres
that the "valuable
experiences of the Chinese revo-
lution" were a major subject
for. their studies. The post-
Stalin leadership has conceded
that Mao and the Chinese Com-
munist Party have made a "major
contribution to Marxist-Leninist
theory," which can serve as "a
model for many peoples."
Deferring to Vietnamese
nationalist sensibilities, the
Chinese Communists exert their
influence without bullying meth-
ods. Chinese Communist advisers
probably several thousand, are
present in North Vietnam in
various areas but
have not been
placed in positions of authori-
ty. In a December 1052 hand-
book, Peiping instructed its
cadres that they were going to
North Vietnam as allies to help
Ho Chi Minh in "his leadership"
of the Viet Minh armed forces,
with whom they were instructed
to "live and die." In the
charged atmosphere following
the East European disorders,
Premier Chou En-lai took pains
during his visit to Hanoi last
November to stress Peiping's
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intention to avoid the error
of "great-nation chauvinism."
Soviet interest in the
Viet Minh prior to 1949 was
almost negligible. The Chinese
Communist victory, however,
heightened Moscow's apprecia-
tion of the prospects for fur-
ther Communist successes in
Asia, and Soviet propaganda
and diplomatic support of the
Viet Minh greatly increased as
Ho's armies launched ageneral
offensive in early 1950. Re-
ports suggest the continuing
presence of a few Soviet mili-
tary and economic advisers.
In accepting Soviet as-
sistance, the Viet Minh became
correspondingly responsive to
Soviet policy. By offering to
negotiate a settlement with
the French in late 1953, Ho Chi
Minh subordinated his own fa-
vorable prospects for further
military successes. to the USSR's
broader international objectives.
There is evidence that many
North Vietnamese party members
opposed Ho's move.
Ho may have been persuaded
by Moscow that political meth-
ods offered the best chance for
attaining Communist control
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Viet Minh hopes for a coa-
lition government in Vietnam
waned as Soviet officials began
to suggest in April that an
Indo-China settlement might be
based on partition. Objections
were registered by Hanoi, but
the Kremlin disregarded Viet
Minh desires in the matter.
Peiping, which had not taken
a public stand on the division
of the country, concurred in
the Soviet-imposed partition
solution.
Chinese Primacy
The Chinese Communists
have persistently projected
themselves as the principal
champion of the Viet Minh.
Chou En-lai's leading role
as spokesman for the Communists
at the Geneva conference, while
perhaps entirely acceptable to
Moscow, was probably meant by
Peiping to illustrate Commu-
nist China's intention to re-
main the Viet Minh's closest
"brother."
Aid commitments to North
Vietnam further illustrate
Peiping's determination to ap-
pear as the principal patron of
the Viet Minh. There are con-
siderably more Chinese than
Soviet military and economic
advisers in North Vietnam. In
the course of Ho's visits to
Peiping and Moscow in July
1955, the Chinese made a $326,-
000,000 aid grant to the Viet
Minh, while the value of the
Soviet aid was $100,000,000.
Less inclined than Peiping
to defer to Viet Minh national
sensibilities, Moscow has paid
only, lip service to Viet Minh
demands for national elections
and has shown continued willing-
ness to accept the indefinite
existence of two Vietnamese
states.
After endorsing a proposal
by Hanoi and Peiping for re-
convening the 1954 Geneva con-
ference, Moscow last May agreed
to a British counterproposal,
for talks by the Geneva co-
chairmen, the USSR and Britain.
During the talks, Soviet repre-
sentative Gromyko gave the im-
pression of only perfunctory
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support for Chinese Communist
and Viet Minh demands for a
new conference.
This difference between
Soviet and Chinese attitudes
was also evident in the USSR's
move last January to counter
an American proposal to admit
South Vietnam and South Korea
to the United Nations. The
Soviet delegate proposed that
both North and South Vietnam
and North and South Korea
should be admitted simultane-
ously as "separate states."
Hanoi and Peiping avoided
direct comment on this pro-
posal, but continued publicly
to reject the concept of dual
membership.
Ho continues to defer to
Moscow's wishes and publicly
to oppose a return to forceful
methods for unifying Vietnam.
In view of Peiping's agreement
with Moscow that bloc soli-
darity must remain the primary
consideration in relations among
Communist countries, Ho prob-
ably sees no other course open
to him,for the present. In
an implicit rebuke of party
militants last summer, Ho re-
jected the notion that Hanoi's
problems are a "'personal af-
fair' which no longer concerns
the international proletariat."
Viet Minh Maintains Independence
While dependence on bloc
military and economic support
severely circumscribes Viet
Minh freedom in foreign policy,
Hanoi continues to set its own
pace in the management of in-
ternal affairs. In contrast
to the Chinese Communists, for
example, the Viet Minh leader-
ship has virtually suspended
its liberalization program.
Hanoi's position is that the
Chinese policy to "let all
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schools of thought contend"
will not be applied to North
Vietnam until social and ideo-
logical "reform" has neutralized
the threat from "counterrevolu-
tionaries."
In their public statements,
the Viet Minh leaders display
no undue subservience toward
either the USSR or Communist
China, balancing each off in a
show of impartiality. Hanoi
often refers to the Communist
camp "headed by the Soviet
Union and China"--a phrase
originally formulated by So-
viet speakers for occasions
demanding flattery of Peiping
but borrowed for frequent usage
only by North Vietnam.
The party apparatus devel-
oped by the Ho leadership in
the long years when communica-
tion channels to the USSR
and Chinese Communists were
poor apparently is still free
from outside domination. Minor
reshufflings in the leadership
have been inspired by domestic
considerations rather than by
Moscow or Peiping. Truong
Chink, for example, was dropped
from his post of secretary
general last fall because of
"mistakes in land reform." He
nevertheless continues active
in party affairs and remains
an influential member of the
politburo.
With its own Vietnamese ca-
dres advising the Pathet Lao dis-
sidents, the Viet Minh plays the
primary role in implementing and
possibly formulating bloc policy
toward Laos. The injection of a
Chinese Communist economic aid
offer into the current negotia-
tions with Laos suggests that
Hanoi is consulting with Peiping
on major policy decisions, but
the Pathet Lao looks to Hanoi
for guidance on day-to-day tac-
tics.
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support for Chinese Communist
and Viet Minh demands for a
new conference.
This difference between
Soviet and Chinese attitudes
was also evident in the USSR's
move last January to counter
an American proposal to admit
South Vietnam and South Korea
to the United Nations. The
Soviet delegate proposed that
both North and South Vietnam
and North and.South Korea
should be admitted simultane-
ously as "separate states."
Hanoi and Peiping avoided
direct comment on this pro-
posal, but continued publicly
to reject the concept of dual
membership.
Ho continues to defer to
Moscow's wishes and publicly
to oppose a return to forceful
methods for unifying Vietnam.
In view of Peiping's agreement
with Moscow that bloc soli-
darity must remain the primary
consideration in relations among
Communist countries, Ho prob-
ably sees no other course open
to him.f or the present. In
an implicit rebuke of party
militants last summer, Ho re-
jected the notion that Hanoi's
problems are a "'personal af-
fair' which no longer concerns
the international proletariat."
Viet Minh Maintains Independence
While dependence on bloc
military and economic support
severely circumscribes Viet
Minh freedom in foreign policy
Hanoi continues to set its own
pace in the management of in-
ternal affairs. In contrast
to the Chinese Communists, for
example, the Viet Minh leader-
ship has virtually suspended
its liberalization program.
Hanoi's position is that the
Chinese policy to "let all
SECRET
schools of thought contend"
will not be applied to North
Vietnam until social and ideo-
logical "reform" has neutralized
the threat from "counterrevolu-
tionaries."
In their public statements,
the Viet Minh leaders display
no undue subservience toward
either the USSR or Communist
China, balancing each off in a
shove of impartiality. Hanoi
often refers to the Communist
camp "headed by the Soviet
Union and China."--a phrase
originally formulated by So-
viet: speakers for occasions
demanding flattery of Peiping
but borrowed for frequent usage
only by North Vietnam.
The party apparatus devel-
oped by the Ho leadership in
the long years when communica-
tion channels to the USSR
and Chinese Communists were
poor apparently is still free
from outside domination. Minor
reshufflings in the leadership
have been inspired by domestic
considerations rather than by
Moscow or Peiping. Truong
Chinh, for example, was dropped
from his post of secretary
general last fall because of
"mistakes in land reform." He
nevertheless continues active
in party affairs and remains
an influential member of the
politburo.
With its own Vietnamese ca-
dres advising the Pathet Lao dis-
sidents, the Viet Minh plays the
primary role in implementing and
possibly formulating bloc policy
toward Laos. The injection of a
Chinese Communist economic aid
offer into the current negotia-
tions with Laos suggests that
Hanoi is consulting with Peiping
on major policy decisions, but
the :Pathet Lao looks to Hanoi
for guidance on day-to-day tac-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
INFLATIONARY TRENDS IN WESTERN EUROPE
At a time when Western
Europe's attention is increas-
ingly centering on such major
plans as the Common Market,
inflationary pressures are slow-
ing.the general rate of econom-
ic growth, weakening the area's
dollar position and, at least
in France, threatening a finan-
cial crisis with serious po-
litical repercussions. The
oil shortage caused by the
closing of the Suez Canal did
not reduce industrial produc-
tion to the extent widely an-
ticipated but raised costs and
dollar outlays for oil, coal,
and freight.
The past three boom years
have seen rising in-
ternal demand press-
ing increasingly on
limited resources of
skilled manpower,
key materials and
plant capacity.
Since early 1955,to-
tal monetary expend-
itures have risen
faster than output,
and wage rises have
exceeded increases
in productivity. For
Western Europe as a
whole, the gross na-
tional product grew
6 percent in 1955
but slowed to a 3.9-
percent increase in
The extent of inflation
varies widely in the Western
European countries, depending
largely on the time each entered
the boom phase, approached the
limits of availability of key
resources and then applied cor-
rective measures. Britain,
Sweden and Norway entered this
cycle in late 1953 and their
1955 disinflationary measures
have now begun to have some
stabilizing effect. The Benelux
countries, on the other hand,
entered the cycle comparatively
late and have only in the past
few months reached the stage
of preparing disinflationary
measures. France entered its
boom. phase in 1954, encountered
MONETARY _ EMAND
OUTPUT (GNP)
5.3
2.5%
1956 and is expected to rise
only 3.7 percent in 1957.
Average price increases
for the 17 OEEC countries were
4 percent for 1956 as contrasted
with only 1.3 percent in 1954
and 2.5 percent in 1955. This
compares with a rise in the
United States of 3.0 percent in
retail prices for the entire
three-year period. Despite
this accelerating rise, econom-
ic experts of the OEEC believe
the inflationary problems and
related trade and payments dif-
ficulties can be managed if the
various governments adopt suf-
ficiently firm policies in co-
operation with each other.
inflation late in 1955 and has
not yet taken adequate cor-
rective steps.
The Italian economy, with
extensive American assistance,
has shown impressive gains in
production and trade for three
years and consumer prices ap-
pear to have reached a plateau
in 1956--though their rise
since 1953 is above the average
for major Western European
countries and unemployment re-
mains high.
'West Germany,is in a cate-
gory by itself; its production
and trade have expanded more
than -those of any other Western
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,e L~l
CURRENT INTELLIGENCE WEEKLY S T
4 April 19 57
European country. Large re-
serves in a labor force, which
has been moderate in demands
for wage increases, and prompt
application of disinflationary
measures have promoted inter-
nal financial balance. How-
ever, this balance may now be
threatened by labor shortages
and more aggressive wage de-
mands, by the added strain of
armaments production,, and pos-
sibly by excessive political
concessions to particular in-
terests in an election year.
Effects of the Oil Shortage
The oil shortage, which
amounted to only 17 percent
of normal supplies during the
first quarter of 1957 and is
estimated at 5 percent for the
second quarter, has proved much
less serious in its over-all
effects than was feared in the
weeks immediately following
the Suez intervention. In the
United Kingdom, it actually
SURPLUS;
reinforced disinflationary ef-
forts by further curtailing de-
mand for labor and materials
through its retarding effect
on some industries. In such
countries as France, however,
where adequate disinflationary
measures have not been under-
taken, the oil shortage has
significantly added to the up-
ward pressure on prices.
Outlook in Britain
UNITED !
KINGDOM ?
Britain's eco-
nomic outlook, though
still extremely un-
certain, is consider-
ably better than in
December. The Brit-
ish had previously
expected a $560,000,-
000 surplus for the
fiscal year ending
30 :.June and still fcre-
see:.:some improvement
in the gold and dol-
lar reserves during
the second half of
1957 if the interna-
tional situation de-
velops satisfactorily.
Britain now expects
to achieve an approx-
imate balance on its
current international
account by mid-1957.
By mid-1956 the
measures taken dur-
ing the previous 18
months to tighten
credit, trim govern-
ment expenditures
SECRET
OEEC COUNTRIES: CURRENT BALANCE OF PAYMENTS
MILLIONS OF DOLLARS
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
and curtail consumption already
had a discernible effect in
curbing inflation and improving
Britain's international trading
position. For the year as a
whole, industrial production
remained at the same level as
in 1955 and the upward movement
of prices was less pronounced.
The government will, however,
probably continue its broad
disinflationary program. There
is considerable pressure for
some slight concession to par-
ticularly hard-hit middle-in-
come taxpayers in the budget
to be presented to parliament
on 9 April.
The Suez crisis initially
posed a greater financial threat
to Britain than to any other
European country because of
loss of revenues from sales of
Middle East oil, the need to
substitute dollar oil for Con-
tinental customers as well as
in the domestic market, and
consequent speculation against
the pound. Pressure on ster-
ling had intensified in July
1956 because of uncertainties..
in the international situation
and increased until the govern-
ment took vigorous measures in
December by obtaining $1.8 bil-
lion in emergency'assistance
from the United States and the
International Monetary Fund
(IMF). The pound's dollar rate
thereafter improved gradually
until the shipbuilding and
engineering strikes in March
brought a renewal of short sales
against sterling on the Conti-
nent4 Support operations by
the Exchange Equalization Ac-
count probably wiped out the
early March gains in the gold
and dollar reserves, and the
pound continues under pressure.
France has long been ex-
pected by the experts to en-
counter a crisis in its external
financial relations during 1957
and the added Suez dollar drain
of an estimated $100,000,000 to
$150,000,000 may bring this
about in the first half of the
year rather than in the second,
as previously anticipated. The
government's persistent reluc-
tance to disinflate is fostered
by an urgent desire to continue
the rapid growth of industrial
production, which increased by
11 percent in 1956--more than
in any other Western European
country.
Gold and dollar reserves of
nearly $2 billion at the be-
ginning of 1956 made it possible
until mid-1956 to suppress in-
flation artificially through
subsidies on living essentials
and through increased imports,
but it has since become in-
creasingly apparent that this
policy is leading France into
a balance of payments crisis.
Heavy losses of gold and dollar
reserves began in the second
quarter of 1956, when severe
winter weather necessitated
large wheat imports, and the
Suez crisis added an estimated
$100,000,000 to $150,000,000
to the drain. By the end of
the year the reserves had fall-
en by about $600,000,000 and
were only $358,000,000 above the
$1 billion minimum safe working
level.
In recent months the gov-
ernment has even resorted to
subsidizing the production and
marketing of key items in the
cost-of-living index to keep
it from rising to 149.1, at
which point negotiations for an
increase in the minimum wage
.would become mandatory under the
terms of the July wage-price
freeze. By March the index had
reached 148.0 and the unions
were increasingly bitter at
what they term the practice of
"cooling the thermometer to
cure the patient.
With France's EPU deficit
for March near a record high
of $150,000,000, the government
has approached Washington for
assistance totaling about $300,-
000,000 and has announced new
corrective measures at home.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
4 April 1957
These measures reveal no
intention of sacrificing the
policy of continued economic
expansion, and the specific
economies to effect an announced
budget cut of $750,000,000
are still under cabinet negotia-
tion. Right-center dissatisfac-
tion with the government's han-
dling of, the economic situation
nearly brought about the Mollet
government's overthrow in a
confidence vote on 28 March.
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