CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001300090001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 43
• Document Creation Date: December 20, 2016
• Document Release Date: November 17, 2005
• Sequence Number: 1
• Publication Date: July 25, 1957
• Content Type: SUMMARY

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CONFIDENTIAL
I I
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
/l
COPY NO. 17
OCI NO. 3956/57
25 July 1957
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CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
DIA and DOS review(s) 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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UUIV1 JUENIIAL
A
CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
OF IMMEDIATE INTEREST
Following the Soviet lead-
ership shake-up, some changes
are apparently being made in
the USSR Council of Ministers,
and there are persistent re-
ports that Bulganin will even-
tually be removed as chairman.
Since their return from Czech-
oslovakia, Khrushchev and Bul-
ganin have been holding meet-
ings with delegations from the
principal Communist parties
from inside and outside the
bloc, and a number of Soviet
ambassadors have been recalled
for consultation.
The primary aim of these
meetings probably was to give
the foreign Communist leaders
the official version of the
presidium shake-up and pos-
sibly to set out guidelines
for the establishment of a new
international Communist journal,
as some foreign Communists have
urged.
Bulganin's Position
It seems that a deliberate
effort is being made to diminish
Bulganin's prestige, perhaps in
preparation for a demotion. In
view of the announcement that
he is to accompany Khrushchev
to East Germany in early August,
however, any action involving
his position will probably be
delayed at least until after
the visit.
by the central committee plenum
that followed. During the
visit to Czechoslovakia, Bul-
ganin was very much in the back-
ground and his speeches received
only cursory treatment in the
Soviet press. Following his
return to Moscow, he appeared
regularly at diplomatic and
state functions but did not
personally receive either the
King of Afghanistan or the
former premier of Indonesia.
Bulganin's somewhat anom-
alous position may be explained
by the circumstance that his re-
moval at the central committee
plenum would have amounted to
a public admission that Khru-
shchev had been in a minority
in the presidium fight. This,
coupled with the possibility
that Bulganin was primarily
guilty only of fence-sitting,
suggests that his official sta-
tus, at least, may continue
unchanged for some time to come.
Molotov, who was censured in
July 1955 by the central com-
mittee and discredited publicly,
retained his post as foreign
minister until June 1956.
There are a number of
rumors circulating in Moscow
as to Bulganin's possible suc-
cessor. Marshal Zhukov has
been mentioned, as well as pre-
sidium member Shvernik and
Chairman of the RSFSR Council
of Ministers Yasnov.
Most reports on the June
purge claim that in the presid-
ium fight, Bulganin aided the
opposition and was reprimanded
Council of Ministers
CONFIDENTIAL of Bulganin is the question of
,.ate
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SECRET
CURRENT INTELLIGENCE WEEKLY ISU9k&RY
25 July 1957
the organization of the Council
of Ministers. Adjustments are
overdue both in regard to the
changed role assigned it under
the economic reorganization and
the loss of five deputy pre-
miers in the June shake-up.
An indication that some deci-
sions have been made is the
identification in the Soviet
press since 17 July of the two
remaining first deputy chair-
men, Anastas Mikoyan and Iosif
Kuzmin, merely as "deputy"
chairmen of the Council of Min-
isters. For the time being at
least there apparently are no
first deputy chairmen.
There has been no announce-
ment on the future of the "anti-
party group" ousted in June be-
yond Moscow radio's 10 July
broadcast on Malenkov`s appoint-
ment as manager of the Ust-
Kamenogorsk power plant. The
appointment was mentioned in a
rumor picked up by the American
embassy in Moscow two days ear-
lier which also said that Kag-
anovich had been assigned to be
director of a cement plant in
the Urals, Molotov a member of
the collegium of the Ministry
of Foreign Affairs, and Shepilov
a professor of economics in a
higher educational institute.
Variations on the rumor have
apparently become widespread
in Moscow. Molotov also alleged-
ly has been offered the post of
ambassador to Argentina or Af-
ghanistan.
Mikhail Pervukhin,who was
demoted from a full member of
the presidium to candidate sta-
tus at the June central commit-
tee plenum, though never public-
ly implicated with the "anti-
party" faction, was appointed
head of a newly reorganized
State Committee of Foreign
Economic Relations on 24 July.
He was relieved as head of the
Ministry of Medium Machine Build-
ing, the chief nuclear energy
organization in the USSR, and
replaced by Yefim Slavsky, f or-
mer chief of the atomic energy
board under the USSR Council
of Ministers. Pervukhin's new
state committee was formed from
the Chief Directorate for Econom-
ic Relations (GUES) and will ap-
parently be responsible for pro-
moting economic relations with
all foreign countries.
Although the country-wide
meetings called to denounce
the deposed leaders have ended,
Pravda warned on 21 July that
the issue was not closed. It
accused a number of local jour-
nals of neglect, and demanded
that all propagandists explain
repeatedly the reasons for the
ouster of Malenkov, Molotov,
and Kaganovich.
The tone of the article
suggested that the regime was
not completely happy with the
reactions of the Soviet people
to the purge. The American
embassy in Moscow reports that
in conversations with about
100 Soviet citizens following
the July announcement, none ex-
pressed any "wrath" or "indigna-
tion" at the "perfidious ac-
tions" of the ousted leaders.
On the contrary, most expressed
disapproval of the central com-
mittee's action and a number
showed open sympathy, particular-
ly for Molotov. Another Western
embassy in Moscow was informed
that mimeographed leaflets de-
manding that the opposition group
be given the right to state its
case in public were posted on
some public bulletin boards in 25X1
Moscow. The leaflets, allegedly
seen around 6 July, were
quickly confiscated.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
The Sultan of Muscat's
forces have been outmaneuvered
by the Omani rebels, and the
British fear that some Muscati
forces may have defected. Lon-
don, concerned over possible
adverse repercussions on its
position in the oil states of
the Persian Gulf, responded
promptly to the Sultan's re-
quest for military aid. The
British strategy is to try to
seal off the area from further
arms importation and to intimi-
date the rebels with air strikes
--begun on 24 July. British
troops have been flown to neigh-
boring Sharja, but London hopes
it will not be necessary to.com-
mit them.
On 24 July, a British of-
ficial at Bahrein stated that
the Sultan of Muscat's 400-man
Oman Regiment had been
outmaneuvered at every turn by
the rebel leader and that some of
the Sultan's men had fled and
presumably defected to the reb-
els. He stated that the remain-
der of the force could not be
committed to a serious engage-
ment and that the Sultan had
no effective force which could
be used in the interior. Mean-
while, the American consul gen-
eral in Dhahran was visited by
a self-styled Omani representa-
tive who appealed for American
intercession to halt British
counteraction.
British Foreign Secretary
Selwyn Lloyd, in a statement in
Parliament on 23 July, promised
"full support" to the Sultan;
the day before he had announced
that British officials in the
area have been given discretion
"within certain limits" to take
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25 July 19 57
action without consulting Lon-
don. The Muscati foreign min-
ister and the army commander,
who are both British subjects,
have returned from London re-
cently.
The British have already
airlifted to Sharja from Bah-
rein and Kenya one rifle com-
pany and one support company
equipped with mortars and heavy
machine guns. The rifle com-
pany will probably be moved
shortly to secure the strategic
Buraimi Oasis.
The British War Office
does not contemplate any other
troop movements and has alerted
no other units. A frigate
scheduled to leave Aden for Cey-
lon has been diverted to Muscat,
making a total of three British
frigates patrolling the coast
to prevent arms smuggling. An
unspecified number of the 16
Venom jet fighters based at
Aden have been flown to Sharja.
After dropping warning leaflets
over the rebellious area, the
RAF on 24 July launched rocket
attacks on rebel forts. The
British hope to break the rebel-
lion with air strikes against
mud forts held by the dissidents.
London hopes to avoid committing
British forces in the torrid
mountainous interior, and may
try to use the 800-man British-
officered Trucial Oman Scouts
to move against the rebels from
Buraimi. However, the British
believe that the loyalty of the
Scouts may be shaken when they
encounter deserters from the
Muscati forces.
London appears very con-
cerned lest a successful rebel-
lion cause other Persian Gulf
rulers to question the value
of British protection and en-
danger the chances of an even-
tual rapprochement with King
Saud. Selwyn Lloyd indicated
on 24 July that his government
still hopes to arrange talks
between Saudi Arabia and Mus-
cat on border problems. For
some time, the British have been
interested in improving rela-
tions with Saud and perhaps
even working with him on area
problems.
British officials at Bah-
rein report that there is al-
ready tension in the Trucial
States and that trouble is ex-
pected in Qatar. Kuwait and
Bahrein are reported quiet.
Moscow reacted quickly fol-
lowing the dispatch of British
units. TASS in London charged
on 23 July that London's "inter-
ference" was unwarranted by any
agreement with the "puppet Sul-
tan" of Muscat, and TASS in
Cairo the same day attempted
to shift responsibility for the
flare-up on "American oil monop-
olies involved in the affair."
25X1
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 19 57
With approximately a quar
ter of the Central Java vote
counted, the Indonesian Commu-
nist Party has established a
two-to-one lead over its closest
rival, the National Party, in
the provincial and local elec-
tions held on 17 July. At
stake in the elections are the
Central Java provincial coun-
cil, 26 of 28 subprovincial
(regency) councils, and several
municipal councils. As of 23
July, returns were available
from 18 regencies and municipal-
ities, 14 of which had swung
to the Communists. Elections
for the remaining two regency
councils are scheduled for 27
July, when the Communists are
expected to continue their suc-
cess,
Although perhaps half of
the counted vote is from the
cities where the Communists
showed their greatest strength
in 1955, enough of the rural
vote is available to indicate
Communist gains in these areas
also. The Communist margin of
victory, however, is lower in
rural than in urban areas.
Elections are scheduled in
East Java for 29 July and in
Jogjakarta, a sultanate having
JAVA
Elections held
Elections to be held
-?Province boundary
---Regency boundary
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PART I
OF IMMEDIATE INTEREST Page 5 of 6
provincial status, some time in
September. The East Java elec-
tions will test the capacity of
the Communists to win votes from
the Moslem parties. Whereas
Central Java has been an area
of National Party strength, East
Java is the stronghold of the
Nahdlatul Ulama (NU). So far
the Communists have made their
principal gains at the expense
of the Nationalists rather than
the NU or the Masjumi. The Com-
munists reportedly have waged
a somewhat less spectacular
campaign in East Java than in
the central province. They have
been very active, however, in
Jogjakarta despite the strongly
anti-Communist position of the
Sultan, and may well duplicate
in September their Central Java
gains.
Official results of the
Djakarta municipal elections
of 22 June, in which the Commu-
nists finished a strong second,
will give the party eight of
the 41 city council seats. This
compares with nine for the Mas-
jumi, eight for the Nationalists,
and six for the Nahdlatul Ulama,
with the remainder going to
nine minor parties.
President Sukarno returned
to Java on 20 July after a highly
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 19 57
successful week's tour of
Borneo in the interests of main-
taining his personal political
popularity and promoting the
prestige of the Djakarta gov-
ernment. Borneo, although f ol-
lowing the lead of the other
non-Javanese provinces in set-
ting up an autonomous regional
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PART I OF IMMEDIATE INTEREST Page 6 of 6
council and demanding more
funds for local economic de-
velopment, has not gone as far
in defying Djakarta as either
East Indonesia or Sumatra.
In all his talks, the president 25X1
asked whether the people wished
to secede and reportedly the
reply was a "roaring no."
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CONFIDENTIAL -
CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
NOTES AND COMMENTS
In its midyear economic
review, the Soviet Union has
reported substantial gains in
agriculture and a rate of in-
crease in industrial output
above that planned for 1957 but
slightly below the rate neces-
sary to achieve the 1960 Five-
Year Plan goals. The strong
note of optimism in the report
may be a reflection of Khru-
shchev's desire to retain the
goal of a 65-percent increase
in industrial output from 1955
to 1960, while simultaneously
trying to catch up with the
United States in per capita
production of meat and dairy
products. Since the natural in-
crement to the labor force in
the next three years will de-
cline sharply and since little
has been accomplished in making
up for failures to expand plant
capacity in most basic indus-
tries to the extent planned,
the original 1960 goals will be
very difficult to achieve.
Industry
Soviet industry showed
substantial progress in the
first half of the year, reflect-
ing additions to the labor force
--probably including many dis-
charged servicemen--and no sig-
nificant deleterious effects
from the industrial reorganiza-
tion. According to the offical
report, industrial production.
increased 10 percent in the first
six months of 1957 over the com-
parable period of 1956, com-
pared with the modest planned.7.1-
percent increase for the full
year of 1957. Correspondingly
large increases were reported
for producer (11 percent) and
consumer (8 percent) goods.
Nevertheless, the optimis-
tic tone of the report does not
appear to be fully justified.
Although expenditures for cap-
ital investment are running
ahead of schedule, completion
USSR: PRINCIPAL
INDICATORS OF
ECONOMIC GROWTH
% INCREASE 1956 OVER 1955
ME RATE OF INCREASE AT MID 1957
%PLANNED INCREASE 1957
OVER 1956
APPROXIMATE ANNUAL RATE
OF INCREASE REQUIRED FOR
ORIGINAL 1960 GOALS
REDUCTION IN
INDUSTRIAL
PRODUCTION COSTS
(PERCENTAGE DECREASE)
BFI EN
CONFIDENTIAL
,49,69IRCYRf 7%%%
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25 July 1957
% INCREASE 1956 OVER 1955
of-productive capacity is behind
the 1957 schedules for such
crucial item as "rolling mills,
coal, electric power, cement,
and iron ore.
Production of coal and
cement has shown a marked im-
provement thus far in 1957, but
production is still lagging in
ferrous metals, timber, and
probably in copper, and is just
barely satisfactory in electric
power. Difficulties in ferrous
metallurgy are further indicated
by a. 10-percent drop in the
production of metallurgical
equipment, probably the result
of difficulties in producing
rolling mill equipment.
In the face of an extreme-
ly short supply of metals, the
reported increase of 13 percent
in machine building and metal-
working (which accounts for
about 50 percent of gross in-
dustrial output) suggests that
inventories of raw and semi-
fabricated materials are not
j/ RATE OF INCREASE AT MID-1957
being raised as planned. The
over-all growth rate of the
first half year probably cannot
be maintained throughout 1957
unless there is a very rapid
increase in the output of fer
rous and nonferrous metals in
the next six months.
Labor
The industrial labor pro-
ductivity goal for 1960 is now
clearly unattainable. Although
the increment to the labor
force thus far--possibly from
demobilization of the armed
forces--has largely offset the
low increase in productivity,
the declining natural increment
to the labor force will require
demobilization or drastic re-
allocation of labor to industry
from other sectors in order to
offset the weakness in produc-
tivity.
Agriculture
Increases of 30 percent
for meat production and 26
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NOTES AND COMMENTS Page 2 of 21
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AFPROXIMATE ANNUAL RATE OF INCREASE
REQUIRED FOR ORIGINAL 196000AL5
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
percent for milk production by
collective and state farms over
the first half of 1956 were an-
nounced. Livestock production,
however, has probably not in-
creased at the same rate in the
private sector, which accounts
for about half of the cattle
and about 40 percent of the hogs.
The plan to even out meat
production throughout the year
probably is one reason why the
socialized sector shows such a
large increase. In former
years, only a third of the an-
nual meat output came in the
first half.
Although total production
of meat and milk in 1957 will
be substantially above 1956,
the increases for the full year
will probably be considerably
less than those for the first
half, when livestock production
benefited from the large grain
harvest of 1956 and good spring
pasture conditions. Preliminary
information indicates that
weather conditions are not so
favorable for this year?s har-
vest.
The continued rapid rise
in output of agricultural ma-
chinery reflects not only the
drive to obtain greater harvests
and more feed for the livestock
program but also the continued
high priority of agriculture in
general. The greatest gains
were in machinery for corn
production and for two-stage
harvesting to reduce harvest
losses of small grains. These
deliveries are well ahead of
the annual schedule implied in
the Sixth Five-Year Plan and
if this-rate is maintained, the
agricultural machinery park
in 1960 will be much larger or
newer (as a result of replace-
ments) than planned. With
an improved agricultural
machinery park, there is a
strong possibility that toward
the end of the current plan
some farm labor could be shifted
to industry.
During the first half of
1957, the number of state farms
grew by 674, six times the net
increase in the preceding six
years. State farms now work
approximately one quarter of
the total sown area of the
USSR, in contrast to only 10
percent in 1953. This expan-
sion in the number of state
farms has thus far been pri-
marily in the "new lands," but
the conversion of collective
farms into state farms, which
has taken place in the "new
lands," may spread to other
agricultural areas. The
emphasis on state farms is
aimed at increasing output by
bolstering backward farms with
state aid in the form of in-
creased capital investment
and adoption of better techr
nology.
Retail Trade and Housing
Retail trade volume, 16
percent larger than for the
first half of 1956, is well
ahead of plan. This rapid
growth is about double the in-
crease in output of food and
nonfood industrial consumer
goods. Perishable foods were
more plentiful because of the
large 1956 harvest. Inventories
of industrial products may
have been drawn on, however.
The rapid increase in availa-
bilities of consumer goods is
providing material incentives
to the labor force and partly
absorbs recent increases in
disposable income from wage
and pension measures.
In housing, the volume of
construction activity has in-
creased 39 percent in comparison
with the first half of 1956,
but completions are running as
far behind schedule as they
were at the middle of last year.
Thus far only 9,000,000 square
meters out of an estimated
plan of 34,000,000 square meters
for 1957 have been completed.
ORR)
SECRET
PART II NOTES AND COMMENTS
(Prepared by 25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
? 25 July 1957
NATURAL DISASTERS IMPERIL COMMUNIST CHINA'S AGRICULTURE
Heavy rainfall and flood-
ing in widespread areas of China
following on the heels of what
was apparently a disappointing
spring crop have placed Pei
pint's agricultural goals for
1957 in jeopardy. Last year's
natural calamities put a serious
strain on food supplies and re-
lief:"funds, and a crop failure
for the second straight year
could cause the government
serious difficulties.
Reports from Hong Kong
state that failure of the early
rice crop in South China has
caused a great increase in il-
legal entries into Hong Kong
and that the immigrants show
signs of hunger. Peiping has
25 JULY 1957
MILES
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alga mangle,
_, nPeiD~ng
PART II NOTES AND COMMENTS Page 4 of 21
Flood Areas in Communist China
announced that in late May
about 10 percent of the early
rice crop in Kwangtung Prov-
ince was flooded, swamping over
250,000 acres of paddy. In
mid-July Typhoon Wendy swept.
the province, and first estimates
were that 20 percent of the
unharvested rice crop was
destroyed.
Extremely heavy rains in
early July in the Yangtze River
delta caused waterlogging on
a large scale. The main course
of the Yangtze has been at the
warning level, but below the
danger mark, for the past week.
In addition, Shantung's heavi-
est rains in years have inun-
dated an area along the
an a or
M O N G O L I A
say
-"l/ I CoiNng~
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
Shantung-Kiangsu border. Sev-
eral thousand villages were
isolated and a million people
were "affected," according to
Chinese Communist broadcasts.
great areas o south--
ern an ung looked like huge
lakes. A Communist news agency
is quoted as saying that the
Yellow River broke its dikes
"somewhere in Shantung" and
the prospects are "alarming."
The Yellow River also has ap-
parently overflowed its banks
in Honan Province around Kai-
feng.
Peiping radio has been
quoted as saying that the Huai
River burst its banks in north-
ern Anhwei and that civil and
military air units had been
mobilized for relief work. In
addition to Anhwei, the provinces
of Chekiang, Hupeh, Kiangsu,
Nonan, Shensi, and rice-rich
Szechwan have been mentioned
in other reports of flooding.
These disasters followed a lo-
cust plague in June which
struck five winter wheat growing
provinces and forced a hurried
harvest.
About half the Chinese
government's income comes from
agriculture, and the regime's
economic planners had hoped to
achieve a 5-percent increase in
grain production to ease the
tight financial situation that
developed late last year and
carried over into 1957. A poor
crop this year would aggravate
the already serious situa-
tion that has made 1957 a
year of retrenchment and aus-
terity.
The floods will compound
Peiping's difficulties in deal-
ing with peasant discontent.
There are widespread indications
in the countryside of dissatis-
faction with the rapid social-
ization movement that now has
97 percent of China's peasants
in cooperatives. The Communist
Party in Kwangtung, one of the
hard-hit areas, has admitted
that over 100,000 peasant house-
holds in the province have with-
drawn from the cooperate
since last winter.
(Prepared by O R
Egyptian President Nasr,
in his speech on 22 July, re-
cited his regime's record and
included some general announce-
ments about future economic
plans, but made no dramatic
revelations or gave any signs
of new departures in Egyptian
policy. Nasr referred to Egyp-
tian-Syrian union only in pass-
ing as a worthy step toward
the broader objective of all-
Arab unity. He emphasized the
magnitude of the problems faced
by the regime during its five
years in power and admitted
rather obliquely that it had
committed some errors of judg-
ment. While Nasr reaffirmed
"nonalignment" as the basis of
Egypt's policy toward the East
and West, his list of dangers
still faced by Egypt--frozen
balances, war of nerves, propa-
ganda campaigns--was aimed en-
tirely against the West.
The three-hour address was
apparently designed to appeal
chiefly to the Egyptian popu-
lace. A major announcement re-
portedly scheduled in connection
with the naval review in Alex-
andria on 25 July and Nasr's
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
"people's day" speech on 26
July--the anniversary of the
nationalization of the Suez
Canal Company--may be more
tailored for foreign consump-
tion.
while Nasr was speaking illus-
trates the kind of problem he
did not face directly in his
speech. The Egyptian authori-
ties, conforming to practice
before hostilities and to hints
they have given in recent
months, allowed the ship to
pass
25X1
25X1
25X1
A Danish-flag vessel with
a cargo of rice for Israel on
its way through the Suez Canal
Another canal problem,
Egypt's formal acceptance of
the jurisdiction of the Inter-
national Court of Justice over
disputes arising from the
Egyptian declaration of 24
April, appears to have been re-
solved by a notice from Cairo
to the UN secretary general.
As far as the Egyptian public
is concerned, this announcement
of what might appear to be a
retreat before "imperialist"
pressure was drowned out by the
speeches and Parades this week.
The focus of attention in
the Israeli-Arab situation has
shifted, at least momentarily,
to the Jordanian-Israeli border
in Jerusalem. Jordanian author-
ities and UN observers have
warned that shooting may result
from Israeli tree-planting
activity in the neutral zone
which passes through the city.
The Jordanians view the plant-
ing as an attempt by Israel to
establish unilaterally a more
permanent demarcation line, and
they report that the Israelis
have moved troops into the zone
to support the labor force
working on the trees.
The Jordanians regard occu-
pation of this area as tanta-
mount to establishing a com-
manding position over the Arab-
held Old City of Jerusalem.
Although the Israelis reportedly
withdrew their troops on the
afternoon of 24 July, the Jor-
danians expect them to return.
King Hussain, in notifying
the American embassy that Jor-
danian troops were being shifted
into positions to oppose an
Israeli move, warned that the
necessity of making such a de-
ployment could have a critical
effect on Jordan's internal se-
curity. Hussain was particu-
larly concerned that the problem
had come up at this time, since
the "treason trials" of Jordanian
officers who allegedly partici-
pated in last spring's plotting
against him are scheduled to
start on 27 July and might be an
occasion for attempts to or-
ganize disorders or hostile
demonstrations.
The Syrian-Israeli border
was relatively quiet last week,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
while the UN sought to imple-
ment Israel's agreement to
establish new truce observation
posts in the demilitarized zone
south of Lake Huleh. Top
Israeli officers were showing
no public signs of special con-
cern for their military situa-
tion along that front.
Syrian Defense Minister
Khalid al-Azm arrived in Moscow
on 24 July and was met at the
airport by Marshal Zhukov.
The Soviet news agency said
Azm heads a delegation which
had come for "economic" talks,
and a Syrian Foreign Ministry
official stated Azm's sole
purpose is to obtain easier
payment terms for the arms
Syria has bought from the USSR.
The
American military attache
observes that the gaps which
previously existed in the
Syrian army's ma eriel are
already filled.
indefinite.
the remaining contingents is
The Indonesian government
has announced that it plans to
withdraw its troops from the
UNEF. The question of replace-
ment is still undecided. The
Indonesian withdrawal would not
immediately affect the position
of the UNEF at the entrance to
the Gulf of Aqaba, since the
troops there are Finnish and
Swedish. Finland, Norway, Sweden,
and Denmark have agreed to keep
their troops in the Middle
East until October. The stay of
25X1
The rapid decline in the
health of the Imam of Yemen
presages a period of instability
and possibly violence over the
naming of his successor. The
Imam's oldest son, Crown Prince
Badr, has told the American
ambassador that the Imam may
soon have to relinquish some
responsibility, since, when
he is indisposed, the activity
of the country virtually stops.
The crown prince, who prob-
ably intends to use newly ar-
rived Soviet arms as a means of
securing his succession, has
claimed to have the support of
Yemen's religious and tribal
leaders and of King Saud. Badr
has admitted, however, that he
is opposed by antimonarchical
"free Yemeni" revolutionaries
residing in Egypt and Aden,
and by some members of his own
ruling family, who are supported
by Cairo. He thinks the Brit-
ish might support the claim of
his uncle, Prince Hassan.
Enemies of the Imam and
his son have told American
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CURRENT INTELLIGENCE WEEKLY SUMMARY
officials that the
Imam is so hated,
even within the rul-
ing family, that he
is unlikely to die a
natural death. Many
of this group con"
sider Prince Hassan
the most suitable
choice for the
throne. They be-
lieve that if, with
British approval,
Hassan could be
induced to estab-
25 July 1957
_....... Protectorate boundary
- - Indefinite boundary
ny\
\ SAUDIA ARABIA
YEMEN \\ /~ Shibarn
. Bideid, ~Edhan
Yerim
Taizp..xbnala,~,.i.r,.nu
his father against his uncles,
who attempted to seize power
in 1955. After the revolt was
put down, at least one of the
Imam's brothers was executed
and many other members of his
family imprisoned or exiled.
SULTANATE OF MUSCAT
The'd, AND OMAN I Y
SOMALIA
lish himself in Aden and
lead opposition to the crown
prince, Yemenis would rally to
his support and he could march
in and take over as the new
imam. This group also report-
edly opposes the Imam's
IMAM OF YEMAN
provocation of trouble with
Britain on the Aden frontier.
Opposition to the Imam
and the crown prince is also
based on the contention that
the Imam had no right to desig-
nate his son as crown prince,
since the ruler has been
traditionally selected by trib-
al leaders of the patrician
Zaidi sect. Badr was appointed
crown prince after supporting
Prince Hassan, who was
formerly prime minister, left
Yemen shortly after the failure
of the revolt and has since
headed the Yemeni delegation to
the United Nations. He is re-
ported to enjoy the support of
the northern tribal leaders,
who have traditionally chosen
the successors to the Imam.
It seems questionable, however,
whether these traditionalists,
without considerable outside
help, could win in a struggle
with the new forces represent-
ed on the one side by Badr
and Soviet arms, and on the
other by the revolutionaries
from Cairo.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
In the West German-Soviet
trade and repatriation negotia-
tions, which opened on 23 July
in Moscow, the USSR is interested
primarily in an expansion of
trade and official representa-
tion, while Bonn wants chiefly
to secure the return of German
nationals it alleges are held
in Russia,
The USSR reportedly hopes
for a five-year agreement which
will double the annual trade
between the two countries, now
amounting to $122,400,000, and
representing some 2 percent of
Germany's world trade. In
particular, it wants more chem-
icals, railway equipment and
consumer goods--especially
textiles and shoes--in return
for wood, ores, hides, and
furs. In addition, the USSR
desires to establish a number
of consulates in West Germany,
while Bonn wants merely to con-
fer consular rights on the
existing embassy staffs.
Neither the Bonn Foreign
Ministry nor West German busi-
nessmen see any great advantage
in a formal trade agreement
and the negotiators hope to
commit themselves for only one
or two years, with no definite
schedule for commodities to
be delivered. Bonn had pre-
viously reversed its opposition
to a formal trade and consular
agreement because Moscow, in
the course of a six-month ex-
change of notes, had agreed to
discuss the repatriation of
the West German citizens in
the USSR.
Adenauer?s chief interest,
with the election pending, is
in the repatriation question.
As a result of his Moscow trip
in September 1955, about 10,000
German prisoners of war were
returned, but an estimated
80,000 civilians remain unac-
counted for. In the past,
Moscow has maintained that
these were nearly all Soviet
citizens and not eligible for
repatriation, while the German
contention is that they were
victims of the shifts in popula-
tions after the war and that
their citizenship should be
determined as of May 1945.
The USSR has indicated t will-
ingness to consider repatria-
tion
its
in individual cases.
Bonn will probably use
main talking point the
as
29
West German atomic scientists
and their families now in the
USSR. They were part of a
group of 900 scientists working
for the USSR since 1945, and,
though their German citizenship
has never been questioned, they
were not permitted to return
to West Germany when their con-
tracts expired in 1956, or even
to contact the German embassy
in Moscow. Bonn will probably
meet the USSR's expected counter-
claim that 19,000 of its citi-
zens are being held in the
Federal Republic by reiterating
that they are all free to return
but do not wish to.
Khrushchev's recent state-
ments indicate that Soviet
policy toward Germany has not
undergone any change as a re-
sult of the Kremlin purge.
The USSR's immediate tactical
aim, however, is to effect a
"normalization" of relations
with the Federal Republic. To
do so, the Soviet negotiators
will probably be willing to
make concessions on the repa-
triation issue; otherwise, the
talks will probably break down.
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CURRENT INTELLIGENCE WEEKLY SU)(M RY
25 July 1957
NACIONALISTA PARTY TO NOMINATE TICKET FOR PHILIPPINE ELECTIONS
The Nacionalista Party of
the Philippines will open its
nominating convention on 27
July in an atmosphere of ten-
sion and uncertainty which some
observers fear could erupt in
violence. By most accounts
President Carlos Garcia is fa-
vored to win the presidential
nomination and is confidently
predicting victory on the first
ballot.
ace an up i att a on the
convention floor. Garcia has
asserted that if he is denied
the nomination, he will seek
re-election in November even
without his party's endorse-
ment.
Garcia's opponents argue
that his lack of popular appeal
and evidence of his involve-
ment in corruption could cost
the Nacionalistas the election.
The chief threat facing Garcia
appears to be the plan of cer-
tain members of his party to
force a convention deadlock
and then nominate Eulogio
Rodriguez, 73-year-old Naciona-
lista Party head and Senate
president. Behind-the-scenes
maneuvers by Senator Claro
Recto, an independent presi-
dential candidate, suggest that
he may have agreed to withdraw
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Page 11 of 21
from the race if Rodriguez
is nominated.
The success of such a
convention move depends heavily
on Rodriguez. Garcia reportedly
believes the party president,
long a close political associate
who has publicly urged nomina-
tion of Garcia, will not
"doublecross" him. Rodriguez
has nevertheless declared his
willingness to be "drafted"
for the sake of party unity.
Garcia has carefully
sought to prevent a rival can-
didacy of politically powerful
Senator Jose Laurel by avoiding
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
an open commitment on a possible
running mate. It is felt, how-
ever, that he may have made a
private commitment along these
lines to accept Laurel's son,
House Speaker Jose, Jr. The
pledges Garcia has of support
from provincial officials and
Speaker Laurel's reported con-
gressional following may be
sufficient to put through such
a ticket.
Garcia allegedly fears,
however, that the vice presi-
dential candidacy of Speaker
Laurel may alienate voters be-
cause of Laurel's poor standing
with the Roman Catholic Church
hierarchy and his frequent anti-
American pronouncements. Garcia
would probably prefer a less
controversial running mate.
Senators Puyat,Primicias,and
Paredes have all been mentioned
in this connection.
Garcia's strongest weapon
against a convention bid by
Rodriguez is his implied threat
to destroy the Nacionalista Par-
ty by running on his own. As
the incumbent during the elec-
tions, he would be in a position
to use the powers of the Philip-
pine presidency--policy deci-
sions, patronage, and release
of "pork barrel" and contingent
funds--for his own political
purposes. He has so far main-
tained the loyalty of the armed
forces and the constabulary, al-
though his effort to wear the
mantle of the late president
Magsaysay has been weakened by
the defection of several Mag-
saysay associates to a new third
party.
Inflation, again a polit-
ical issue in Britain, has for
the first time subjected Chan-
cellor of the Exchequer Thorney-
croft to public criticism from
his own party. Conservative
backbenchers in Parliament
fear that the government cannot
hope to regain its popularity
unless it takes effective meas-
ures to deal with rising prices;
but the cabinet, despite some
divided views on the subject,
will probably continue to rely
on the stabilizing effect of
present credit restrictions.
Much of the criticism cen-
ters on recent price rises in
coal, gas, electricity, postal,
and telephone rates--which are
controlled by the government.
Though the cost of living has
risen only one point since Jan-
uary, these price increases
have made the public sympathetic
to the position taken by sever-
al large trade unions in reject-
ing the government's proposal
for an impartial advisory board
to consider wages, costs, and
prices.
The government is also
accused of vacillation in its
anti-inflationary policy in that
it depends mainly on a long-
standing plea to the trade un-
ions for self-restraint on wage
demands and yet was the first
to capitulate in this year's
round of wage bargaining by
granting a 5-percent increase
to workers of the nationalized
British transport system.
Thorneycroft has insisted
that the British economy is
fundamentally strong and is
merely "passing through an
awkward stage," while warning
that the government would not
hesitate to adjust even the most
essential investment program--
a course some Conservatives
have attacked as inconsistent
with the government's much-pub-
licized intention of raising
British production through the
expansion of capital investment.
Other members of the cab-
inet, apparently more disturbed
by their party's poor showing
in the 11 by-elections since
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
Macmillan took office, have
urged cutting back the govern-
ment's investment program.now.
The government will probably
try to ride out the present wave
of criticism in the expectation 25X1
that existing measures will
gradually take effect during
the next year.
Japan's lifing of the China
differential trade embargo has
freed a wide range of industrial
and agricultural equipment for
shipment to the Communist main-
land and will, according to the
most optimistic government esti-
mates, increase Japan's trade
with Communist China to $100,-
000,000 annually each way.
The Kishi government's de=
cision, announced on 16 July,
freed 207 items on the China
Special List and 63 on COCOM
List III, including some ma-
chine tools, communications
equipment, iron, steel, chemical,,
oil, and rubber products. Japan,
however, will continue to ob-
serve COCOM List I and II em-
bargoes on strategic goods.
During 1956, Japanese ex-
ports to China--primarily tex-
tiles, textile equipment, and
fertilizers--totaled $67,000,-
000. Imports--soybeans, salt,
and coking coal--amounted to
$83,000,000.
and that Peiping's foreign ex-
change holdings are limited.
Peiping on 18 July declared
Japan had not gone far enough
in relaxing its embargo. Calling
for further "positive steps" to
maximize Sino-Japanese trade,
the Chinese Communists insisted
that new trade and payments
agreements be signed, and that
permanent official trade mis-
sions be exchanged between the
two countries. The principal
JAPAN'S TRADE WITH CHINA MAINLAND
( MILLIONS OF DOLLARS)
0.0 PERCENT OF JAPAN'S TOTAL TRADE
EXPORTS
IMPORTS
TOTAL
1957(JAN-MAT)
24.7
35.9
60.6
1956
67.2
2.7
83.6
1955
28.3
1.4
80.8
3.3
109.2
1954
19.3
1.2
40.8
1.7
60.1
1.5
1953
4.5
0.4
29.7
1.2
34.2
0.9
1952
0.6
-
14.9
0.7
15.5
0.5
1939.44(AVE.)
364.9
38.9
258.3
30.0
623.2
34.6
1930.38 (AVE.)
155.8
24.3
107.3
13.1
263.1
15.1
. Officials in Tokyo are
aware that Peiping's policy of
exchanging goods only within
comparative strategic categories
has denied Japan some earnestly
sought materials, especially
iron ore, and is likely to con-
tinue to do so as long as Japan
observes the COCOM control
system. Likewise, the Japanese
believe that their costs of
production in many instances
prevent them from competing
successfully in the China market
obstacle to agreement on the
latter point appears to be To-
kyo's insistence, and Peiping's
refusal, that Chinese trade
representatives be fingerprinted
as required by the Japanese
alien registration law.
Peiping probably counts on
an official exchange of trade
missions with Japan to stimulate
a rush by Western nations to
compete for the China market.
Peiping's further objective is
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
eventually to expand its cul-
tural and economic relations
with Japan to include diplomat-
ic relations, while attempting
to persuade Tokyo to cancel
its ties with the Chinese Na-
tionalists and be less respon-
sive to American interests.
(Concurred in 25X1
by ORR)
INDIAN TRADE WITH THE SINO-SOVIET BLOC
India's trade with the
Sino-Soviet bloc in 1956 more
than doubled that of 1955 and
is likely to continue rising
for the next few years. Despite
this growth, approximately 96
percent of India's trade re-
mains with the free world and
no major shift in this pattern
is likely.
Throughout the First Five-
Year Plan period (1951-56),
when India's major goal was to
increase agricultural produc-
tion, trade with the Sino-So-
viet bloc amounted to less than
2 percent of the country's
total trade. During this period
India's trade with Communist
China alone was over 50 percent
greater than trade with the re-
mainder of the bloc. This pat-
tern changed in 1956--the first
EXPORT IMPORT
EXPORT IMPORT I
EXPORT IMPORT I
EXPORT IMPORT I
EXPORT IMPORT I
EXPORT IMPORT
BULGARIA
-
-
8
6
-
-
19
10
36
76
115
471
CZECHOSLOVAKIA
3166
6102
1 696
3 386
5 735
2 704
4 235
2 789
2 360
4 241
6106
13 175
EAST GERMANY
723
91
126
425
229
50
401
54
727
579
596
HUNGARY
8
465
64
589
61
199
414
188
125
559
1074
1637
POLAND
869
795
115
539
197
345
559
236
763
2 787
2167
4563
RUMANIA
4
13
-
54
1
65
419
49
737
178
508
USSR
136181
1 609
4 221
1 768
752
931
5 284
2 367
5 192
5 980
26 244
31 292
TOTAL SOVIET BLOC
17 665
9 694
6208
6 414
7 224
4 409
10 626
6 410
8 5 79
15 107
36 463
52 242
COMMUNIST CHINA
13 233
28 673
10 206
33 980
17 340
3 499
8 647
4 829
18 019
7 256
12 971
20 092
TOTAL SINO-
SOVIET BLOC
30 898
38 367
16 414
40 394
14 564
7 908
19 273
11 239
26 598
22 363
49 434
72 334
PERCENT OF
TOTAL TRADE
TO
1.9%
2.2%
1.3%
2.4%
1.3%
0.7%
1.6%
0.9%
2.1 %
1 7%
3.9%
4.3%
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PART II NOTES AND COMMENTS Page 14 of 21
year of the Second Five-Year
Plan (1956-61), which emphasizes
rapid industrialization--when
India's trade turnover with the
USSR reached $57,536,000 com-
pared with only $33,063,000 for
Communist China.
The sharp increase. in Indi-
an imports from the bloc in
1956 stemmed from the arrival
of equipment for the Bhilai
steel mill and large-scale pur-
chases of steel for general con-
struction purposes. India's
imports of iron and steel prod-
ucts from the Sino-Soviet bloc in
1956 totaled $35,344,000--over
$13,000,000 more than total im-
ports from the bloc in 1955.
Of this amount, $21,548,000 came
from the USSR and $7,770,000
from Communist China.
INDIA'S TRADE WITH THE SINO-SOVIET BLOC
(THOUSANDS OF DOLLARS)
1951 1952 1953 1954 1955 1956
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25 July 1957
While India's imports of
industrial equipment are likely
to grow, particularly if the
USSR continues to allow it to
purchase on easy credit terms,
India should become nearly self-
sufficient in iron and steel
products in a few years, thus
practically eliminating its
major item of current imports
from the bloc.
India has had a surplus in
its trade with the Sino-Soviet
bloc since 1953, but the pat-
tern reversed in 1956 when im-
ports became nearly $23,000,-
000 larger than exports. The
USSR has extended $261,500,000
in credits to India--of which
$126,000,000 cannot be utilized
until 1959--and the gap between
imports and exports is likely
to grow during the next few
years despite efforts to expand
exports. India's exports to
the bloc at present consist
mainly of raw materials and
agricultural products, although
the bloc's willingness to pur-
chase some manufactured consumer
goods--which India cannot sell
to the West--adds to the at- 25X1
tractiveness of the bloc coun-
tries
ding partners.
(Concurred in by ORR
During its first months in
office, the Communist govern-
ment in the Indian state of
Kerala has apparently improved
its prospects for remaining in
power. However, the Communist
ministry's record to date is
based largely on measures with
an immediate appeal to the
masses rather than on action to
solve Kerala's basic problems.
The tactics adopted by the
Communist leaders for consoli-
dating their rule are revealed
in the gestures made to gain
the support of underprivileged
groups in the state. Measures
introduced by the new govern=
ment have included distribution
of government land to landless
families, a ban on the eviction
of tenant farmers pending com-
prehensive land reform legisla-
tion, a raise in pay for low-
level government employees, solu-
tion of major labor disputes,
and a variety of benefits for
backward classes such as the
"untouchables."
The financial outlay in-
volved in these minor improve-
ments is not great, but the
dividends in terms of psycholog-
ical impact apparently are sub-
stantial. The initial impres-
sion reportedly created among
large segments of the popula-
tion is that a Communist govern-
ment acts while Congress Party
leaders only talk.
The consensus of qualified
observers in Kerala. now is that
the Communists cannot be ousted
in the near future. The gover-
nor of the state, a leading
Congress Party politician, be-
lieves in fact that if the Com-
munist government continues the
policy of moderation it has so
far demonstrated, it can last
"at least a year or two and may
survive the whole five-year
term."
Political opposition to
the government party reportedly
is frustrated and confused.
Local Congress Party leaders
have failed as yet to develop
a positive program to oppose
the Communists' tactics. The
Congress high command's concern
over party affairs in Kerala
and the danger posed by pro-
longed Communist rule is indi-
cated by the naming on 21 July
of Defense Minister . V. K.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
Krishna Menon, one of Prime
Minister Nehru's closest as-
sociates, to head a special
committee to strengthen the
state party.
The Communist posture of
"reasonableness," both in re-
lations with the national gov-
ernment and in local affairs,
leaves the opposition with
little ammunition. As long as
the Communist Party leaders
pursue a "respectable" policy
aimed at improving economic
conditions in Kerala within the
framework of India's Second
Five-Year Plan, there is little
likelihood in the near future
that, the Congress Party high com-
mand can find the means to turn
the Communists out of office.
The Kerala ministry has
not yet come to grips, however,
with the chronic economic prob-
lems on which previous govern-
ments have foundered. Popula-
tion pressure in the state has
produced a situation in which
food shortages and unemployment
constitute nearly insuperable
obstacles to progress. The new
administration probably will be
given a trial period of a year
or more.
During this period the
Communists can be expected to
entrench themselves in the state
government and spare no effort
to establish an administration
more efficient and free of cor-
ruption than its predecessors.
In this respect they may be
relatively successful. However,
if the Communist regime is un-
able to make noticeable progress
toward solving Kerala's basic
economic problems after a rea-
sonable period, it may lose the
popular support gained during
its first months in office.
Communists in Honduras and
El Salvador have benefited from
the failure of new governments
in both countries to institute
effective antisubversive pro-
grams. Though the two govern-
ments are anti-Communist, they
have permitted Communists to
make significant gains during
the past nine months, especial-
ly among organized labor.
After the repressive Lozano
regime was overthrown in Hon-
duras last October, the Com-
munists found the new military
junta too busy with other prob-
lems to be concerned with Com-
munism. Communist leaders were
released from jail and others
returned from exile. An ac-
celerated Communist labor or-
ganizing campaign resulted in
the founding of two Communist-
dominated regional labor federa-
tions by May.
The Communists, with about
600 hard-core party members,
clearly understand the value of
getting in on the ground floor
in Honduras' new and rapidly
growing labor movement, which
has considerable political po-
tential. They have also been
active in student and teacher
groups.
An official bulletin on
18 July announcing the initia-
tion of the antisubversive cam-
paign in Honduras states the
government's determination to
prevent labor disturbances,
which it
asserts are
being
planned
by
"elements
influenced
by foreign doctrines
a
disruptive elements."
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
CARIBBEAN SEA
V 0i
25 JULY 1957
culty distinguishing
a Communist from a
political opponent or
an independent labor
leader. The popular
Liberal Party, which
is opposed by many
officials now in pow-
er, is attempting to
use labor for its po-
litical ends. There
is therefore some
danger that the pres-
ent anti-Communist
campaign might become
more of an anti-Liberal
campaign--a develop-
ment from which only
the Communists would
gain.
In El Salvador,
in the period since
last September, when
the popular Lemus ad-
r_ ministration was in-
augurated, the esti-
mated 1,000 Communists
and Communist sympathizers in
the country have made notable
gains in the labor movement and
now reportedly control about 40
percent of the labor unions.
The Salvadoran government hesi-
tates to use the repressive,
extralegal measures employed
against the Communists by past 25X1
Most Honduran officials
seem to have little understand-
ing of Communism and have diffi-
governments, but lacks the legal
machinery to deal with the mount-
ing Communist threat.
The Sixth World Festival
of Youth and Students will be
held in Moscow from 28 July to
11 August. It is being spon-
sored by two major Communist
youth fronts, the World Federa-
tion of Democratic Youth (WEDY)
and the International Union of
Students.(IUS).
The de-Stalinization pro-
gram and the disturbances of
last fall in Poland and Hungary
have caused dissatisfaction among
youths formerly susceptible to
Communist blandishments both
within and outside the bloc.
The sponsors therefore are out
to convince the participants
that the Soviet Union is genuine
in its desire for "peaceful
coexistence" and more cultural
exchanges.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
Attendance is expected to
reach more than 30,000, with
representatives from 120 coun-
tries and territories; 80,000
Russian "tourists" are also ex-
pected to be in Moscow for the
event.
Most satellites are known
to be readying delegations.
Even Yugoslavia will send about
200 participants, for the first
time since 1947. Peiping has
given very little publicity to
the event, but is sending what
is described as its largest
delegation to date to the festi-
val.
The organizers apparently
have made a special effort to
arouse interest in the festival
among the underdeveloped coun-
tries of the free world. Com-
munists and followers in a
number of Latin American coun-
tries have engaged in various
preparations, giving relatively
wide publicity to the meeting.
In 14 of these countries,more-
over, Communist international
bodies have made generous of-
fers to meet travel and other
costs for delegations, attempt-
ing to attract students, labor
leaders, intellectuals, artists,
musicians, sports groups, and
political leaders. Uruguay is
sending a 55-member delegation.
In Brazil, over 20 legislators
from a single state have been
invited to attend with most ex-
penses paid.
In the Asian-African area,
delegations from several coun-
tries whose relations with the
Sino-Soviet bloc have been ex-
panded during the past 12 months
are much larger than at previous
youth festivals. The Egyptian
delegation numbers 663; next in
size is the Ceylonese group of
280; 55 Japanese will attend
and 128 Indonesians are already
en route. Attendance from Equa-
torial Africa probably will also
be substantial. Communists or
pro-Communists presumably figure
largely in all these delegations.
On the other hand, Turkey,
Iran, Pakistan, Jordan, Saudi
Arabia, and Yemen apparently in-
tend to ban any attendance. The
Athens government intends to
pack the Greek delegation with
non-Communists. Israel, despite
its frustrations over Soviet
policy, is sending a delegation,
about half of whom are non-Com- 25X1
persons invited to go.
munists. The Indian government
may permit about 200 of the 1.000
On 20 July, the Soviet
Council of Ministers prohibited
the movement of foreign ships
and aircraft in Peter the Great
Bay "without the permission of
competent Soviet authorities."
In closing the seaward ap-
proaches to Vladivostok, the
USSR defined inland waters in
this area as starting at a line
connecting Cape Povorotny with
the mouth of the Tumen River.
The announcement stated that
the nearby port of Nakhodka
would remain accessible through
a prescribed shipping lane.
The USSR gave no reason
for its announcement. However,
the Russians have shown an in-
creasing sensitivity to recon-
naissance efforts in this area,
which is the major center of
Soviet naval and air power in
the Far East. American aircraft
venturing close to the Soviet
coast have usually been inter-
cepted but seldom attacked. The
announcement may be part of an
attempt to establish a firmer
quasi-legal basis for retaliat-
ing against intruders who stray
too close.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
The USSR may be attempting
to establish a closure precedent
as well as providing a basis
for extending the 12-mile ter-
ritorial limit beyond this line.
Vladivostok has been off-
limits to foreign travelers
and Western shipping since
shortly after'World War II, and
Nakhodka has served as the prin-
cipal postwar commercial port
for the Southern Maritime area.
Foreign commercial fishing has
not been extensive in the af-
fected area.
The Japanese government
is preparing to protest the So-
viet action, feeling that failure
to do so would -imply that it
accepted the closure and would
encourage similar Soviet moves
which could have important ef-
fects on Japanese fishing rights
in other areas. During the
Soviet-Japanese fishery talks
this spring Moscow announced
its intention to exclude Japa-
nese and other foreign fishing
from the Okhotsk Sea by 1959
"at the latest." It is not
clear whether the USSR gave
this notice to enhance its bar-
gaining position in future nego-
tiations or whether operations
of a sensitive nature are
planned for that area.
There is a possibility that
the USSR may have changed the
status of Vladivostok "for the
record" in case the subject of
US-Soviet exchange naval visits
is revived for discussion. The
USSR could then have the option
of denying a visit to Vladivostok,
or else attempt to extract some
.;oncession from the United
States in exchange for admit-
tance to a closed Soviet area.
Whatever the specific rea-
son may be for announcing the
closure of an area which has in
effect been closed for many
years, the USSR undoubtedly is
aware of the need for strict
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
security for the vast concentra-
tion of air and naval power
which has been steadily built
up in the Vladivostok area
during the past ten years.
Also, the introduction of new
and more advanced Soviet weapons
into an area less than 500
miles from American forces in
Japan may have prompted a
further tightening of Soviet
security restrictions.
CURRENCY REVALUATION IN SOVIET BLOC
Most of the East European
countries have recently de-
creased the values of their cur-
rencies in relation to Western
currencies for selected transac-
tions and at the same time have
adjusted intrabloc exchange
rates. The revaluation in re-
spect to Western currencies is
designed to increase foreign
exchange by encouraging tourism
and stimulating remittances
from abroad while relieving
some of the expense of foreign
diplomatic representation in
the bloc, especially burdensome
to small countries. The purpose
of intrabloc revaluation is
probably to reduce the cost of
sending delegations and students
to the Soviet Union and of main-
taining representation there.
In February 1957, Poland
depreciated the zloty in terms
of the dollar from four to one
to 24 to one. The new rate
was described as being appli-
cable "only to Western countries
and Yugoslavia." It is to
govern purchases to travel tick-
ets, pensions from abroad,
royalties, fees, travel, and
other such transactions. The
move was frankly aimed at in-
creasing tourism, stimulating
remittances from abroad, and
demonstrating'to prospective
=OLD = NEW
RUMANIA
( LEI )
USSR
RUBLE
POLAND
( ZLOTY)
RUMANIA
(LEI)
E. GERMANY
( MARK )
HUNGARY
( FORINT)
trade partners the
realism of present
Polish financial
policies. Poles who
receive dollars or
other foreign exchange
from abroad are to
benefit by being al-
lowed to cash them
at the new rate.
These new rates are
to have no effect on
trade settlements,
since trade agreements
between the bloc and
nonbloc countries are
normally regulated by
world prices.
In a similar move,
the Soviet Union in
late March upped the
ruble rate from four
to 10 to the dollar
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NOTES AND COMMENTS Page 20 of 21
POLAND
( ZLOTY )
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
for noncommercial transactions
and a few days later Hungary
doubled its old rate of 11.7
forints to the dollar for the
same type of transactions. By
July, Czechoslovakia and Rumania
had fallen in step and doubled
their rates. They all made
comparable adjustments for
various other nonbloc curren-
cies, especially the Western
ones.
East Germany, however, was
reported to be in the process
of threshing out a solution,
since one faction in the polit-
buro maintained stoutly that
such a devaluation would under-
mine East German prestige and
reflect adversely on the entire
East German economic program,.
The East Germans will probably
fall in line, however, since
foreign exchange is reported
to be very scarce.
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PART II NOTES AND COMMENTS Page 21 of 21
Parallel to these develop-
ments, a less radical readjust-
ment was taking place in the
exchange rates of satellite
and Soviet currencies. The
new rates have generally pro-
vided for a depreciation of
the ruble. The East German
mark was appreciated almost
30 percent in terms of the
Soviet ruble for noncommercial
transactions, the Hungarian
forint about 50 percent, and
the Rumanian lei about 30 per-
cent. Poland was the excep-
tion, increasing the value of
the ruble 50 percent in zloty
terms.
Neither Albania nor Bul-
garia seems to have made any
revaluation. Depreciation in
terms of the dollar would prob-
ably benefit them but little.
They may fall in line for the
sake of form, nonetheless.
(Prepared by ORR) 25X1
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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
PATTERNS AND PERSPECTIVES
THE POLITICAL ROLE OF MARSHAL ZHUKOV AND THE SOVIET MILITARY
The ascendancy of Marshal
Zhukov to political position in
the Soviet Union in the past
four years reflects the increas-
ing influence of the military
in Soviet affairs. He has be-
come a full member of the party
presidium, the first profes-
sional soldier to achieve this
position. The interest of the
military appears to be in har-
mony with that of the party,
leadership at this'time. How-
ever, inherent in the present
situation is the possibility of
early 19th centuries, there
has been no tradition in Russia
of military coups.
In the Soviet period, vir-
tually all high-ranking officers
and large numbers of junior of-
ficers were absorbed into the
Communist Party. Moreover, the
establishment of a triple chain
of command--the professional
military hierarchy, the secret
police, and the political of-
ficers responsible to the party--
fragmented the army and encour-
aged the traditional apolitical
attitude of the Russian soldier.
The legacy of the drastic purges
of the Red Army high command in
the 1930's also served to deter
any political maneuvering on
the part of military leaders.
personal rivalry between Khru-
shchev and Zhukov. Through
Zhukov, the military may in-
crease its influence on Soviet
policy but there is a serious
question whether it, as an or-
ganization, could effectively
oppose the party in the politi-
cal arena.
Background
During the Stalin era the
Soviet military establishment,
like the Imperial Army of
Tsarist days, played no inde-
pendent role in internal poli-
tics. Although groups of of-
ficers assisted in the "palace
revolutions" of the 18th and
Since Stalin's death the
rise of Zhukov has suggested
that the traditional role of
the military in Soviet political
life might be in the process of
transformation. Zhukov rose
from candidate (nonvoting) mem-
ber of the party's central com-
mittee to full member of the
top political body in the Soviet
Union, the party presidium--a
rise marked at several points
by the involvement of the mili-
tary in political affairs.
Zhukov was elevated to
full member of the central com-
mittee in July 1953 following
the purge of Beria, in which the
military reportedly played an
important role. In January 1955,
military leaders apparently sided
with Khrushchev against Malenkov
on the issue of heavy versus
light industry. Zhukov was pro-
moted to candidate member of the
party presidium at the 20th party
congress in February 1956.
Whether or not military support
of Khrushchev was vital in his
victory over Malenkov, Molotov
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 19 57
and Kaganovich in June 1957 is
uncertain, but had the military
actively opposed Khrushchev,
the outcome might have been
different. In any case, Zhukov
was promoted to full voting
member of the presidium.
These events suggest a
number of questions related to
dicates either that Zhukov's
actual political power was in-
sufficient to secure such ap-
pointments or that he did not
attempt to dictate other
appointments, because he has
no aspirations to greater.
political power and feels
that his own presence on the
presidium and . his. personal re-
PARTY OFFICIALS
CENTRAL PROVINCIAL
Khrushchev ignatov
Aristov Kirichenko
Belyayev Kozlov
Brezhnev
Furtseva
Kuusinen
Shvernik
Suslov
25 JULY 1957
the position of military lead-
ers in the present political
system and the conditions under
which they might feel impelled
to assert their authority out-
side or in defiance of that
system.
The Party Leadership
If Soviet military leaders
are to influence decision mak-
ing, they must be able to bring
their point of view to bear
within the party presidium.
Marshal Zhukovis probably in a
position to press his point of
view vigorously, perhaps even
against Khrushchev on specific
issues. Although Zhukov's
elevation to voting membership
in the presidium could have been
the reward for his support of
Khrushchev, it may have been
only the natural consequence
of Khrushchev's victory. Since
he had been elected the number-
one candidate member of the pre-
sidium at the 20th party congress
and was thus first in line for
promotion, it would have been
a slap in the face had he not
been elevated.
The fact that no other
military men were appointed in-
OTHER
Bulganin
Mikoyan
VoroshUov
lations with Khru-
shchev are sufficient
to safeguard the in-
terests of the mili-
tary.
The Central Committee
The central com-
mittee elected by the
20th party congress
in February 1956 in,
cluded six military
leaders among its 133
voting members and 12
among its 122 candidate members.
The Ministry of Defense was more
heavily represented than any
other ministry, but the military
representatives were only an
insignificant number compared
to the array of professional
party officials.
The central committee,hav-
ing on several recent occasions
CPSU
CENTRAL COMMITTEE
MEMBERS CANDIDATES
73 46
GOVERNMENT 'OFFICIALS 57 64
MILITARY 6 12
POLICE 2 1
FOREIGN OFFICE 6 6
OTHER 43 45
MISCELLANEOUS 3 2
TOTAL 133 122
been consulted on policy matters,
may also want to make its in-
fluence felt in the future,
And though control by the cen-
tral party apparatus over per-
sonnel appointments might pre-
clude the committee's operating
in opposition to the presidium,
the presidium will probably
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
consult the central committee
more often than in the past.
In that case, membership of
military leaders on the central
committee conceivably could
serve to make the weight of the
military point of view addi-
tionally felt in the presidium.
The Soviet Government
The USSR Council of Min-
isters makes policy in imple-
mentation of the over-all lines
decided on by the party presid-
ium.. Until the June purge,
the distinction between these
two bodies in policy-making
functions was somewhat obscured
by the fact that seven of the
11 full members and one of the
seven candidate members of the
party presidium were also mem-
bers of the Council of Ministers.
Today, however, only three of
the presidium's 15 full members
and two of its candidate members
sit on the council.
The governmental reorganiza-
tion which resulted from Khru-
shchev's schemes for revamping
industrial management has not
been completed so that the ul-
timate weight of the military
in the Council of Ministers is
difficult to assess. Currently
there are approximately 42 mem-
bers on the council, only one
of whom, Zhukov, is a profes-
sional military man. Certain
ministers concerned with defense
production, however, might be
counted on to agree with the
professional military viewpoint
on most issues.
The council itself, however,
is so large that effective de-
liberation and policy making on
important issues are doubtless
undertaken by the council's
presidium or "inner circle,"
made up of the premier and first
deputy premiers. At present no
military leader is a member,
but Zhukov might be named a
first deputy premier to fill
USSR: MINISTRY OF DEFENSE
1st Deputy Minister
for General Affairs
1st Deputy Minister
1st Deputy Minister
S G Gorshkov .
Deputy Minister
8 8 BirpuZov
Main Political
Directorate
A S Zheltov
Main Inspectbrate
K K Rokossovsky(?)
Main Directorate
of the Rear
V I Vinogradov
1st Deputy Minister
K A Vershinin
Deputy Minister
K K Rokossovsky
Naval Forces
S G Gorsbkov
Air Forces
K A Vershinin
Air Defense
3 S Biryuzov
SECRET
Deputy Minister
for Construction
V Ye Bolokosov
18 Military Districts
3 Groups of Forces
4 Naval Fleets
Full Member, Central
Committee, Soviet
Communist Party
Candidate Member,
Central Committee,
Soviet Communist
Party
one of the slots left
vacant by the removal
of Molotov, Kaganovich,
Pervukhin and Saburov.
Personal Alignments
Soviet military
leaders are probably
in general agreement
on basic foreign and
domestic policies as
they affect the wel-
fare of the military
and the military posi-
tion of the USSR.
Factional groupings
probably exist, how-
ever, arising from
patronage within the
military establishment,
association with dif-
ferent political lead-
ers, and divergent views
on strategic questions.
Cleavages within mili-
tary councils could
limit Zhukov's influ-
ence within the party
presidium should he
disagree with Khru-
shchev.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
25 July 1957
There is reason to believe
that there is or was a Konev
group in the military. In mid-
1955, it appeared that Marshal
Konev was being built up by
Khrushchev, perhaps as a coun-
terweight to Zhukov. One area
of conflict between Zhukov and
Konev has been reported: Konev
allegedly favored strengthening
the political control system
in the armed forces in contrast
to Zhukov's insistence on strict
one-man command of.units. There
may also be professional jeal-
ousy between the two, since
Konev succeeded Zhukov as com-
mander in chief of the ground
forces in 1946 when Zhukov was
reduced to a military district
commander. Again in 1955, fac-
tionalism among the top mili-
tary leaders became apparent
in connection with assigning
credit for World War II vic-
tories. Konev's position,
particularly, was glorified,
at the expense of Zhukov. The
lines of cleavage, however,
are obscure; the opposing fac-
tions have not become fully
crystallized, and may have
changed or even fallen apart.
In the fall of 1956, Konev be-
came the second-ranking man in
the Defense Ministry.
There is considerable evi-
dence to suggest that Zhukov
and Khrushchev frequently col-
laborated in the political in-
fighting which took place dur-
ing the latter's climb to power
between 1953 and 1957. The
two men probably had some kind
of working contact during the
war, and during his tour in
Odessa (1946-1949), Zhukov prob-
ably came in contact with Khru-
shchev, who was at that time
first secretary of the Ukrainian
party. Zhukov's re-emergence in-
to prominence may have been ef-
fected by Khrushchev and Malen-
kov, and certainly Khrushchev
went to some pains in his secret
speech at the 20th congress to
imply that he had def ended Zhukov
against attacks by Stalin both
during and after the war.
After his rehabilitation,
Zhukov and the military as a
whole apparently made common
cause with Khrushchev against
Malenkov in opposing the lat-
ter's program of increased con-
sumer goods production at the
expense of heavy industry.
The military reaped the rewards
for their services when Malen-
kov was deposed in 1955. Zhukov
was named minister of defense,
and shortly thereafter, 12 gen-
eral officers were promoted,
six to the coveted rank of mar-
shal of the Soviet Union.
Zhukov and Bulganin
Zhukov's earlier relations
with Bulganin suggest that he
may harbor an abiding contempt,
and perhaps some resentment, for
the Soviet premier. The roots
of any animosity would probably
lie in the dislike of the pro-
fessional soldier for armchair
generals. It is well established
that Zhukov, responsible for the
defense of Moscow in the autumn
of 1941, resented the interfer-
ence of Bulganin, who relayed
Stalin's battle plans to the front.
There is no information
providing clues to the nature
of the personal relations of
Zhukov and Bulganin in recent
years. Several reports, how-
ever, have linked Bulganin with
the "antiparty" opposition dur-
ing the opening phases of the
June power struggle and suggested
that his position was shaky.
Zhukov might be a leading con-
tender for the premier's mantle
if Khrushchev is contemplating
removing Bulganin.
On the basis of administra-
tive experience, both Mikoyan
and Shvernik would have a greater
claim to the job. But if the
Soviet leaders wished to exploit
Zhukov's wartime relations with
President Eisenhower to the
fullest in their attempts to
rejuvenate their coexistence
policies, Zhukov might take pre-
cedence. Such a promotion for
Zhukov would obviously enhance
his personal prestige and
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25 July 1957
influence but might not neces-
sarily increase the voice of
the military in Soviet policy
decisions. The premiership,
while broadening his responsi-
bilities, would leave him less
free to push the military point
of view and might even put him
in the position of having to
defend the interests of other
segments of the state against
the military's parochial in-
terests.
Foreign Policy
The military, charged
with defending the country, is
certain to oppose any foreign
policy which would act to re-
duce the military potential of
the Soviet Union vis-a-vis the
rest of the world or to involve
the USSR in adventurous under-
takings likely to endanger the
army's prestige. There is
every reason to suppose that
present Soviet efforts to re-
duce international tensions
are agreeable to the military
and that there is no signifi-
cant disagreement over the So-
viet position on disarmament.
There are probably few
areas in which the preserves of
political and military leaders
more clearly overlap than the
area of satellite security.
Neither the party leader, in-
tent on preserving postwar ter-
ritorial gains and eventually
of securing the widest possible
spread of the Communist system,
nor the professional military
man, thinking in terms of buf-
fer zones and the lines of com-
munication between the USSR and
Western Europe, would welcome
developments threatening the
Soviet hold on Eastern Europe.
Khrushchev and Zhukov, for ex-
ample, were probably of one
mind with respect to the Soviet
Union's reaction to the Hun-
garian revolt.
The Soviet position with
respect to bloc relations set
out at the 20th party congress
has been reaffirmed since the
June purge. Khrushchev and
his backers apparently are still
in favor of an outward relaxa-
tion of Soviet control in order
to promote more voluntary ac-
ceptance of Soviet leadership
in the satellites. This policy,
however, will probably be ap-
plied in the immediate future
with far more caution than in
1956. After events in Poland
and Hungary last fall, the
military will undoubtedly fol-
low developments in Eastern
Europe with closest attention.
If Khrushchev gets into trouble
again there, the support he
has from the military might
suddenly evaporate.
Internal Policy
The regime's major domestic
problems at present arise from
the de-Stalinization program,
which is attempting to break
down the intellectual dams raised
by the Stalinist state religion,
and from the industrial reor-
ganization, which seeks to bring
greater flexibility and higher
productivity into the Soviet
economy.
Among the more serious
issues which this effort has
brought to the fore are the
proportions of consumption and
production. The military has
supported the reduction of po-
lice power, a major facet of
de-Stalinization. Its attitude
on other results of the pro-
gram--student unrest and in-
tellectual ferment--is uncer-
tain, although there probably
is less concern with the ideo-
logical implications of de-
Stalinization than with effects
on popular morale. Perhaps
the attitude of the military
here would be analagous to its
attitude with respect to satel-
lite policy--if the regime's
policies showed promise of
strengthening the loyalty and
reliability of the rank and
file, the military would go
along. However, should these
same policies threaten to pro-
duce public disorder and
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25 July 1957
diminished cohesion among the
people of the USSR, the mili-
tary could be expected to be-
come alarmed.
Where economic policy is
concerned, the military is again
probably less interested in
theoretical positions than in
end results. The part, played
by Zhukov in Malenkov's demo-
tion in 1955 seems to indicate
that the military has opposed
and will continue to oppose any
economic policy which appears
to lessen the capacity of So-
viet industry and agriculture
to produce for the military.
With the June purge, Khrushchev
has promised to continue to give
priority to heavy industry and,
at the same time, to raise the
level of consumption apprecia-
bly. His ability to do this will
depend, in large part, on the
success or failure of industrial
reorganization, which is still
in its first stages. In this,
as in other things, the mili-
tary has given him its initial
support, but the permanence of
its commitment will depend in
the end on results.
Military Coup Outlook
If, through the person of
Zhukov, the military has become
an important element in the So-
viet political picture, how is
its influence most likely to
be exerted? If circumstances
should arise to cause the mili-
tary to seek an ever larger
role in the formulation of So-
viet policy, could this be ex-
pected to take place largely
within the present institution-
al framework of the USSR, or
through outright conversion of
the military organization into
an agency of political rule?
Conceivably, the latter alter-
native might apply in the event
of an upheaval threatening con-
tinued Soviet hegemony in East-
ern Europe or of a dangerous
economic dislocation at home.
However, given the fact that
the military organization is
completely without experience
or tradition in dealing with
the complex political, social
and economic problems with
which it would inevitably be
faced, this could only be a
last resort.
Should the military high
command decide to attempt to
seize control of the state and
establish a military dictator-
ship, there is no assurance that
it could succeed. The party
may lack the "monolithic unity"
claimed for it, but it is never-
theless a formidable organiza-
tion with 40 years' experience
in ruling the USSR. Further-
more, its authority has in-
creased substantially under
the proprietorship of Khrushchev,
a development symbolized by the
fact that the new 24-member pre-
sidium includes 16 purely party
functionaries.
There is a further question
as to whether the military as an
organization could cope effec-
tively with the party in the
political arena. It is still
honeycombed at all levels with
party and secret police (KGB)
representatives who could be
expected to stand in the way of
any concerted political action
on its part. Finally, it would
be difficult for any military
leader to carry the entire mili-
tary establishment with him.
Some top military leaders might
support the party against a
revolt for opportunistic reasons,
others because they disliked
the leaders of the revolt, and
still others because they con-
sidered support of the regime
their duty.
Exertion of Military Influence
Short of this extreme,
there is another way which,
over the long run, the military
might enlarge its influence with-
in the present political system.
Zhukov as an individual may be
in a position to play a part of
pivotal significance in this
respect. Almost certainly, he
has a personal prestige and
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25 July 1957
popularity with the public which
no other Soviet leader can match.
This was shown again recently
in the warm and apparently spon-
taneous reception given him at
the 14 July Navy Day ceremonies
in Leningrad. However large
Khrushchev's appetite for power
and precedence, he is enough of
a political realist and oppor-
tunist to use this asset rather
than react with resentment and
suspicion, as Stalin did. For
this reason, Zhukov may have
an opportunity to win greater
influence for himself and the
military simply by bringing
professional competence and
judgment to bear on the many
problems with which he will be
concerned.
So far Zhukov has appeared
reasonably content in his role
as principal military spokesman
in political circles. He has
reportedly stated in informal
conversation that he is a sol-
dier, not a politician, but he
seems to speak as a professional
military leader who is also a
party chief. There is no sug-
gestion that he feels there
need be any basic conflict be-
tween the two roles. He might,
however, without intending it,
be thrust into the role of a
soldier-statesman by some crisis
threatening the stability of the
state. Even without such a
crisis he might, conceivably, at
some point try to utilize his
personal popularity to depose
Khrushchev and become "first
among equals" in a new regime.
Khrushchev, however, is highly
skilled at a political infight-
ing and has a personal popularity
second only to Zhukov's. The
marshal might well think twice
before taking on such a formid-
able opponent.
BRAZILIAN-BOLIVIAN OIL DISPUTE
The dispute between Brazil
and Bolivia over the policies
to be pursued in developing
jointly held oil areas in east-
ern Bolivia is likely to become
increasingly acute. The Boliv-
ian government wants private
American or European oil com-
panies to take over a neglected
8,500,000-acre concession area
in Santa Cruz where Brazil has
treaty rights. Brazil is un-
willing to give up its rights
even though it does not have
the technical facilities to de-
velop the area efficiently.
Secret negotiations bj-
tween Bolivia and Brazil on the
oil question were temporarily
disrupted on 18 June when the
Bolivian minister of mines de-
clared unofficially that he
favored abrogation of the 1938
treaty by which Brazil was
awarded the oil rights in ex-
change for building the recent-
ly completed internatonal
Corumba-Santa Cruz railway.
Brazil, in an apparent holding
action, announced it had pro-
posed a quick exploratory survey
of the area for which it would
provide $400,000. Meanwhile,
Argentina an 29 June requested
Bolivia to exclude "foreigners"
and allow the Argentine nation-
al oil company (YPF) to engage
in joint government operations
in the Madrejones area near the
Argentine border.
Bolivian Foreign Minister
Manuel Barrau replied informally
that private Argentine companies
would be welcomed in competitive
bidding, but he asked Argentina
to withdraw the note asking
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25 July 1957
official participa-
tion. He pointed out
that if Argentina
persisted in assert-
ing a legal right to
such participation,
negotiations with
Brazil would become
even more complicated.
Barrau told the Amex-
ican ambassador in
La Paz that he had
also renewed an earlier
complaint against
the "wasteful" meth-
ods employed by YPF
in exploiting that
part of the Madrejones
area lying within
Argentine territory.
The YPF, unlike Bra-
zil's national com-
pany (Petrobras),
does not have an ex-
clusive monopoly of
production, but it is
subject to some of
the same bureaucratic
ills.
Bolivian Situation
about 1,600,000 barrels a year.
Since then, steady increases
have taken place and Bolivia's
1956 production was over 3,000,-
000 barrels.
The joint Brazilian-Boliv-
ian oil zone was set up on the
basis of exploration data gath-
ered by Standard Oil before its
expropriation by Bolivia in
1937, and operations were to be
carried out by mixed Bolivian-
Brazilian private companies.
Although no real operations
were undertaken, Bolivia did
not protest until 1955, ap-
parently preoccupied until then
with utilizing an $8,500,000
loan authorized in 1942 by the
US Export-Import Bank for.de-
veloping other oil areas.
When the American loan was
authorized in 1942, Bolivian
production was less than 1,000
barrels a day. In 1952, five
years after the full amount of
the loan had been released to
Bolivia, production was still
only about 2,000 barrels a day.
Between 1953 and 1954, however,
production jumped nearly 300
percent and became about equal
to local demand, which was then
Since the 1952 leftist
revolution, Bolivia's successful
efforts to become a net export-
er--between 800,000 and 1,000,-
000 barrels in 1956-- have in-
creased its awareness of the
costs of oil development. In
1955, the government promulgated
a new oil code that has already
attracted American investors
as well as Royal Dutch Shell.
Since promulgation of the
new code, Bolivia has held
back from foreign bidding only
about 1,000,000 acres for the
use of its national petroleum
agency. Its hope is that all
other promising areas will be
taken over by foreign companies,
which will not only bear the
costs of production but also
pay royalties and provide for-
eign exchange.
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BOLIVIA
Oil Concessions
I on rem
Other Foreign
Oil l Concessions
BRAZIL/_
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Bolivia is increasingly
convinced that the Brazilian
treaty area will never become
productive under present ar-
rangements, and the government,
in view of its acute financial
crisis, is increasingly resent-
ful of Brazil's continued in-
action and its simultaneous
refusal to cancel the treaty.
Brazil, while eager to
avoid an open failure of its
diplomacy, seems determined to
prolong its inaction and re-
portedly plans at most to re-
turn only about 15 percent of
the area--the portion lying
below 19? 13' latitude. Agree-
ment to any of the solutions
believed acceptable to Bolivia
would further inflame the ex-
plosive domestic controversy
over Petrobras.
Bolivia insists that Petro-
bras--as a foreign government
agency--cannot be permitted to
operate on Bolivian soil. At
the same time, the La Paz gov-
ernment is apparently unable
to supply a satisfactory formula
for creating the "mixed com-
panies" envisaged in the 1938
treaty.
Brazil's only present al-
ternative--the use of hastily
rigged private companies--would
almost inevitably be used by
the politically powerful pro-
Petrobras groups as further
"evidence" that President Kubi-
tschek is attempting to sabotage
the national monopoly. Ultra-
nationalist and Communist groups
have recently been joined by
the major opposition party in
this campaign and are quoting
an American publication to
prove that Kubitschek has been
bribed by Washington to act as
a fifth column for "Wall Street
oil interests."
A decision to use private
Brazilian companies at this
time would probably also en-
courage a new wave of demands
from the increasingly vocal
anti-Petrobras groups, which
are insisting that Kubitschek
face up to the nationalists and
abolish Petrobras altogether.
These groups, some of which
agree that Kubitschek would like
to scuttle Petrobras, are now
variously accusing the govern-
ment of moral cowardice or neo-
Communist tendencies for refus-
ing to demand revocation of the
Petrobras law.
Proponents of Petrobras
are giving wide publicity to
the fact that Brazilian oil
production was doubled last year
and that the rate of production
for the last months of the year
was nearly four times the aver-
age for 1955. Opponents, on
the other hand, are pointing
out that this increase was more
apparent than real in that it
does not represent new discov-
eries but merely the uncapping
of previously shut-in produc-
tion. They also point out that
1956 production--about 4,000,-
000 barrels--was less than 6
percent of domestic requirements
and that imports of oil still
drain off about $250,000,000
in scarce dollar exchange an-
nually.
In this situation, Brazil's
reluctance to choose a course
of action in Bolivia is likely.
to_come into increasing con-
flict with Bolivia's pressing
need for oil royalties to miti-
gate its financial crisis.
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POLITICAL SITUATION IN THE SUDAN
The Sudan's first parlia-
ment, elected in 1953, was dis-
solved the end of June and new
elections are not to be held
until February 1958. In the
interim, the country will con-
tinue to be governed by the
cabinet coalition established
in July 1956 under the premier-
ship of Abdullah Khalil. The
coming months will almost
certainly bring intensified ef-
forts among contending parties
and foreign influences to secure
an alignment capable of shaping
definitive policies and to gain
control of the next parliament.
Foreign Relations
Foreign relations remain
the principal point of contro-
versy, and the question of for-
eign aid has split opinion in
the Sudan. Following the visit
of the Richards mission last
April, the cabinet neither ac-
cepted nor rejected the American
aid proposals. Prime Minister
Khalil, leader of the Umma Party
and strongly in favor of accept-
ing American aid, possessed
sufficient strength within the
cabinet, aided by members of
the People's Democratic (PDP)
and Southern Liberal (SLP) Par-
ties, to force through approval..
However, the vigorous opposi-
tion of some of the more strong-
ly pro-Egyptian PDP members,
combined with widespread Com-
munist and Egyptian-inspired
propaganda against alignment
with the "imperialists," made
such action too dangerous for
the coalition.
The often parallel efforts
of the Communists and pro-Egyp-
tians have been the major de-
terrents to the assumption of
an official pro-Western orienta-
tion by the government. The
Communist Party is probably the
best organized political group
in the Sudan. Although it has
only about 300 members and an
estimated, 2,000 to 3,000 follow-
ers, it has infiltrated the
labor movement, particularly
the Sudan Workers Trade Union
Federation, and has outlets for
extensive propaganda through
leftist newspapers with rela-
tively large circulations.
The party is well financed
through a combination of member-
ship dues, gifts, and the sale
of books furnished without
charge by Egypt and the Soviet
bloc. There is also evidence
of intermittent Egyptian aid
through the provision of news-
print and printing facilities.
The Communists' present .
party line fosters a Nasr-type
Arab nationalism with adherence
to the concept of "positive neu-
trality." At the-same time
cooperation with the Soviet
bloc and Communist China is
urged, and the propaganda value
of visits from Communist trade
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missions has been exploited
fully. Khalil's coalition has
managed to delay diplomatic rec-
ognition of Communist China by
making such recognition depend-
ent on similar action by the
United Nations, but support for
such a move has been of signif-
icant proportions.
Egypt's latest overt ap-
proaches to the Sudanese have
been directed toward securing
a prompt bilateral settlement
on the division of the Nile
waters. The Nasr regime, com-
mitted at home to at least be-
ginning construction of the
high dam at Aswan, must obtain
an agreement with the Sudan.
Egypt has used most methods
available,
to secure agreement on its own
terms, but it is doubtful that
any exclusive arrangement be-
tween the two countries will be
made soon.
While an equitable division
of the waters is wanted by the
Sudan so that badly needed ir-
rigation and power programs can
be started, domestic pressure
for immediate settlement is not
extreme. Khalil is apparently
trying to strengthen the Sudan's
hand by including other inter-
ested nations, particularly
Uganda and Ethiopia, in the
negotiations.
Prime Minister Khalil has-
proved a capable administrator
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25 July 1957
and has been able to reconcile
differences within the coali-
tion. His pro-Western inclina-
tion is perhaps as much due to
his dislike for the Egyptian
record of intrigue in Sudanese
affairs as it is to respect for
the Western powers. He has been
friendly but objective with re-
gard to the British role in the
Sudan and has consistently sup-
ported those advocating complete
independence.
Khalil's cabinet is com-
posed of five members from his-
own Umma Party, along with.six
from the PDP, three from the
SLP, and one Republican Social-
ist. The parliament just ended
consisted of about 25 Umma mem-
bers, 20 from the PDP, 15 from
the SLP, 30 from the NUP, and
a small number from lesser par-
ties. Uncertain and shifting
loyalties make an accurate count
practically impossible.
The four-way division in
the cabinet, plus the relatively
even division of opinion repre-
sented in the last parliament,
are further obstacles to obtain-
ing a clear field for any strong
policy, pro-Egyptian or pro-
Western. This division will
probably act as a brake on
Khalil during the coming months, 25X1
even though he is freed for a
period from the burden of oar-
7 i m -nt rv criticism.
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