CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001600060001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 48
• Document Creation Date: December 20, 2016
• Document Release Date: July 19, 2005
• Sequence Number: 1
• Publication Date: January 30, 1958
• Content Type: SUMMARY

Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
CONFIDENTIAL
~e='T
URRENT
INTELLIGENCE
WEEKLY
UMMARY
CENTRAL IN I LLLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
x-aasr2/.v
DATE.JAW"J REVIEWER:
AUTH: HR 7
NE)aREVIEW DATE:
Ci DECLASSIFIED
CLASS. CHANGED 10:
COPY NO. X16
OCR NO. 0030/58
30 January 1958
DOCUMENT N?.
NO CHANGE IN CLASS. 0
CONFIDENTIAL
nr/'f1 T
DIA review(s) completed.
State Department review completed
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
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.
I'he 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
rurrent situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
IJVI~i iii-11I IttL
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
OF IMMEDIATE INTEREST
USSR CONTINUES CAMPAIGN FOR SUMMIT MEETING . . . . . . . . Page 1
Soviet party chief Khrushchev's discussion of foreign
policy in his 22 January speech at Minsk was designed to
maintain diplomatic and propaganda pressure on the West in
the current series of exchanges on the question of a heads-
of-government meeting. Kremlin leaders apparently believe
that mounting popular pressures for summit talks will pro-
gressively weaken the Western powers' position and eventu-
ally force them to agree to negotiations on terms favorable
to the Soviet Union. 25X1
BRITAIN SUGGESTS SUMMIT TALKS THIS SUMMER, . . . . . . . . Page 2
The British Government in its draft reply to Bul-
ganin's second note suggests preparations for a summit
meeting with the Soviet Union. The draft reply says prep-
aration of an agenda should begin "at once" for a top-
level meeting "sometime this summer." The reply may en-
counter some opposition in the North Atlantic Council if
submitted in its present form. 25X1
EGYPTIAN-SYRIAN UNION DEVELOPMENTS . . . . . . . . . . . Page 3
Syria's President Quwatli is scheduled to arrive in
Cairo on 1 February, presumably to join Nasir in announc-
ing Egyptian-Syrian union, but a last-minute postponement
is possible. Proponents of union may try to keep up pop-
ular enthusiasm by inventing new Western "plots" against
Syria and by exploiting the impact of recent Israeli-Syrian
border incidents. To avoid offending proponents of Arab
unity, Moscow may feel obliged to make some gesture ap-
proving the union when announced, despite some indications
that it may continue behind-the-scenes opposition.
NFLLYENTiAL
THE WEEK IN BRIEF
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
30 January 1958
PART I (continued)
VENEZUELAN JUNTA ANNOUNCES ITS PROGRAM . . . . . . . . . . Page 5
The basic program announced by the Venezuelan govern-
ing junta on 27 January calls for the restoration of con-
stitutional government and free presidential elections
within 18 months. The status of Communists, the influence
of leftists in government, the return of exiles, and simi-
lar problems facing the junta could give rise to serious
friction between military and civilian elements which ap-
pear united behind the new regime at present.
KHRUSHCHEV?S PROPOSAL FOR AGRICULTURAL REORGANIZATION . . Page 1
Khrushchev has again proposed shaking up the Soviet
system in his campaign to catch up with the West. Now
he proposes a radical but gradual transformation of the
machine tractor stations (MTS)--for years the stronghold
of economic and political control in the countryside. The
increased strength of the party in rural areas since Sta-
lin's death and recent changes in rural party organiza-
tion have now made f the MTS as a
control mechanism. 7 a t__7
The Algerian rebellion may soon enter a more active
phase. The military potential of the rebels is improv-
ing
SECRET
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
THE ALGERIAN REBELLION . . . . . . . . . . . . . . . . . . Page 2
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
PART II (continued)
Page 4
e e e e o e o e e e e
During the past week Turkish Cypriots have engaged
in the worst rioting since the beginning of the Cyprus
controversy. The demonstrations were set off by the sud-
den departure of Governor Foot to confer with Foreign
Secretary Lloyd, who was in Ankara for the Baghdad Pact
meeting. A serious split in Greek Cypriot ranks has been
emphasized by clashes between right- and left-wing mem-
bers of the community. Unless the anticipated British
statement on a new policy for Cyprus meets the minimum de-
-I- d to resume
CYPRUS . e . ? . . . . e
mands of Archbishop Makarios, EOKA is e c e
oil-rich Arab states to participate an is 25X1
UN Secretary General Hammarskiold plans to push a-
head with his plan for a Middle East development fund
financed. primarily by oil revenues. In his view it is
the only way to prevent serious deterioration in the area.
Members would consist of the Arab League states, includ-
ing Libya and the Sudan but not Tunisia and Morocco. The
plan faces formidable obstacles in thedreluctaancgeenofathexa-
HAMMARSKJOLD'S PLAN FOR A MIDDLE EAST DEVELOPMENT FUND . . Page 4
full-scale violence in the near future.
ability of the Arabs to work on common projec
Page 5
BRITAIN'S FREE TRADE AREA PROJECT NEAR STALEMATE . . . . .
Negotiations to establish a European free trade area
are near a stalemate. Continental nations, particularly
France, find Britain's recent limited concessions toward
freer imports of agricultural products and on relations
with the six-nation European Economic Community inadequate.
Mutual interest in European economic cooperation may lead
to additional concessions on the part of the British and
to the necessary reciprocal concessions, but possibly not
in time t ahlish the free trade area in 1958 as Britain
desires. 25X1
25X1
THREAT OF VIOLENCE REDUCED IN GUATEMALA . . . . . . Page 7
The danger of violence in Guatemala over the still
undecided 19 January presidential election has diminished
but not disappeared as a result of the agreement reached
on 27 January between General Ydigoras, who
plurality, and Cruz Salazar, the apparent
followers are to accept Ydigoras as president, and Ydi-
goras has promised to include his erstwhile opponents in
an anti-Communist coalition and to give them three cabi-
net posts.
SECRET
THE WEEK IN BRIEF
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
PART II (continued)
RUSSIAN SCHOOLS TO TRAIN MORE STUDENTS FOR MANUAL WORK Page 8
The Ministry of Education of the Russian Republic has
announced that 50 secondary schools in the republic have
recently begun a study program designed to place students
on the production line even before graduation. The new study
program is probably`a pilot project intended to ease, the
enrollment pressure on higher educational institutions and
adjust an increasing number of secondary-school graduates
to becoming industrial and agricultural workers rather than
members of the intelligentsia.
POLAND'S ECONOMIC PLAN FOR 1958 . . . . . . . . . . . . . Page 9
Poland's economic plan and budget provide for ap-
preciable economic advances in 1958 over 1957, but the
decline in the rate of growth which began in 1950 is to
continue. Consumer goods production is to be emphasized,
but the necessity of restoring depleted reserves and of
reducing foreign credits precludes any appreciable im-
provement during 1958 in the low standard of living.
The relinquishment of the Hungarian premiership by
Janos Kadar, who retains party leadership, suggests no
significant changes in internal policy, but will enable
him to devote more time to rebuilding the party into an
effective instrument of Communist control. This and
other leadership changes were probably designed primarily
to convince the Hungarians and the non-Communist world
. Page 10
that Hungary has returned to "normalcy."
. Page 11
Peasants in eastern Rumania have been resisting
stepped-up regime pressures for complete collectiviza-
tion, and uprisings have been reported in at least two
villages in which it may have been necessary to use Ru-
manian or Soviet troops to restore order. The reports,
which are not confirmed, center on the Iasi region and
the Danube riparian areas of Galati and Constanta. West-
ern observers have been denied access to most areas east
of Bucharest since 18 January.
SECRET
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
30 January 1958
PART II (continued)
CHINESE COMMUNIST NATIONAL PEOPLE'S CONGRESS . . . . . . . Page 12
The National People's Congress which begins plenary
sessions in Peiping on 1 February after a one-week post-
ponement is scheduled to discuss language reform, the
state budget, the draft economic plan for 1958, and a
program to "readjust" government organs under the State
Council. It is also expected that the congress will be
used as a forum to announce the dismissal of government
officials accused as "rightists." The "conservative"
outlook in economic matters is expected to came under at-
tack, and economic plans will probabl call for large in-
creases in production and investment
. . . . . . Page 14
Peiping has issued new regulations governing the
discharge of all army personnel conscripted after 1 No-
vember 1954. The regulations provide for preparing
servicemen for civilian life and for easing the ten-
sions between civilians and veterans, a problem of con-
siderable concern to the regime.
LAOTIAN GOVERNMENT TAKES OVER FORMER PATHET LAO BASE
AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 14
The Laotian Army has taken control of the former
Pathet Lao provinces without opposition, and most of
the Pathet Lao troops have entered regroupment centers
where they are being processed either for demobiliza-
tion or integration into the army. The Pathet Lao now
is relying primarily on legal political techniques and
subversion in its efforts to gain power in Laos.
ICELANDIC MUNICIPAL ELECTIONS . . . . . . . . . . . . . . Page 16
The Icelandic municipal elections on 26 January re-
sulted in an impressive victory for the Conservative
party--the chief opponent of the governing coalition of
Progressives, Social Democrats, and the Communist-front
Labor Alliance. The result will stimulate Conservative
attacks on the coalition which may force the three par-
ties into greater dependence on each other, thus making
a breakup of the government coalition unlikely in the
near future. The strong position of the pro-US conserva-
tives will discourage the coalition from reviving its
policy of opposition to US bases.
SECRET
V
THE WEEK IN BRIEF
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
PATTERNS AND PERSPECTIVES
CHINESE COMMUNIST POLICIES TOWARD UNDERDEVELOPED AREAS . . Page 1
Communist China, taking an active role in bloc ef-
forts to supplant Western influence in underdeveloped
regions, is concentrating chiefly on a propaganda of-
fensive, cultural exchanges, and trade. Peiping's pri-
mary target is Southeast Asia, but it is becoming in-
creasingly active in the Middle East, Africa, and Latin
America. In addition to working for the advancement of
bloc interests in these areas, the Chinese Communists
hope to win wider diplomatic recognition and internation-
al acceptance. Only recently embarked on their own in-
dustrial development, the Chinese have gained prestige
by extending or offering economic aid to other under-
developed countries--Eg t Yemen, Burma Ne al, Cambodia,
Ceylon, and Indonesia.
SOVIET PRICE REFORM DISCUSSION . . . . . . . . . . . . . . Page 3
For the past year, Soviet economists have been dis-
cussing pricing policies in an effort to cope with the
growing size and complexity of the economy. The apprais-
al is concerned particularly with the pricing of producer
goods--raw materials, semifinished goods, and machinery.
As more decisions are entrusted to lower echelons in con-
nection with the regional reorganization of industrial
management, it becomes increasingly important that these
echelons, as well as planners in Moscow, work with prices
which realistically reflect production and consumption con-
ditions.
MIDDLE EAST OIL DEVELOPMENTS 1957,1958 . . . . . . . . . . Page 5
The prospects for Middle East oil production in
1958 are for a record year, with levels substantially
above those before the Suez crisis in late 1956. All
major Middle East crude producers had fully recovered
from the Suez crisis by mid-1957 with the exception of
Iraq, where production was still down by almost 40 per-
cent because of reduced pipeline capacity. By the end
of 1957, over-all Middle East production had increased
about 2 percent over 1956 and some 8 percent compared
with 1955.
SECRET
vi
THE WEEK IN BRIEF
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
30 January 1958
PART III (continued)
FALLING METAL PRICES DISTURB LATIN AMERICAN ECONOMIES . . Page 13
The downward trend of prices for copper, tin, lead,
and zinc is undercutting the economies of Chile, Bolivia,
Mexico, and Peru and causing concern among these and other
Latin American primary producers over the possible imposi-
tion of tariffs by the United States. The success of US-
backed economic stabilization programs in Chile and
Bolivia is endangered, and Chile is turning-to the Soviet
Union as a customer for its copper. Mexican and Peruvian
export patterns are the most diversified in Latin America,
but falling metal prices are cutting foreign exchange
revenues and retarding economic growth.
SECRET
vii
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
Owefm
k ; . ITU\
30 January 1958
OF IMMEDIATE INTEREST
Soviet party chief Khru-
shchev's discussion of foreign
policy in his 22 January speech
at Minsk was designed to main-
tain diplomatic and propaganda
pressure on the West in the
current series of exchanges on
the question of a heads-of-gov-
ernment meeting. Kremlin lead-
ers apparently believe that
mounting popular pressures for
summit talks will progressive-
ly weaken the Western powers'
position and eventually force
them to agree to negotiations
on terms favorable to the So-
viet Union.
Khrushchev examined in con-
siderable detail the question
of Soviet-American relations in
the context of the current East-
West diplomatic exchange, and
took up a number of points
raised in President Eisenhower's
reply delivered on 20 January
to Bulganin's December letter.
The Soviet party chief sought
to parry the President's propos-
al to establish international
control of outer space for
peaceful purposes by stating
that the Soviet Union would be
willing to discuss this problem
only as part of a general dis-
armament agreement which called
for a ban on nuclear weapons,
suspension of nuclear testing,
and liquidation of foreign mili-
tary bases.
On the question of prepar-
ing for a heads-of-government
conference, Khrushchev avoided
giving the appearance of cate-
gorically rejecting Western
proposals for preparatory nego-
tiations through diplomatic
channels or by foreign ministers.
Although he omitted the refer-
ence in Bulganin's mid-January
letters that a. foreign ministers'
conference might create addi-
tional obstacles to agreement
at the summit, he contrasted
the "urgent" Soviet calls for
a summit meeting with alleged
Western efforts, particularly
on the part of the United States,
to avoid talks by raising the
impossible "demands" that the
East European and German re-
unification questions be dis-
cussed.
The confident and unyield-
ing tone of Khrushchev's re-
marks, together with the hard
terms for discussion of inter-
national control of ballistic
missiles, provides further in-
dication that the USSR's cam-
paign for a summit meeting is
not intended to lead to serious
substantive negotiations but is
actually designed to discredit
Western policy and to disrupt
Western unity.
Soviet propaganda comment
on the Western replies to Bul-
ganin's December letters in-
tially was restricted to brief
factual reporting and the re-
actions of the Western press.
On 27 January Izvestia printed
the full texts of the replies
from the United States, Britain,
and France, together with a long
editorial following the line
of argumentation used by Khru-
shchev in his Minsk speech.
Based on past Soviet practice,
Khrushchev's remarks of 22 Jan-
uary probably were intended by
the Kremlin as the Soviet answer
to the Western replies.
The lag in the Soviet prop-
aganda treatment of the Western
PART I OF IMMEDIATE INTEREST
Page 1 of 6
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
replies, plus. a,
three-day lapse be-
fore the publication
of Khrushchev's for-
eign policy state-
ment-, : indicates
that the Kremlin is
carefully studying
its approach to the
current East-West
exchange--particu-
larly the question
of Soviet-American
relations--and to
its campaign for a
summit meeting.
Soviet Foreign
A
F I N L A N d t ,moo '6e
IAR.E
~It
~4 t
HELSINKI
a
a4e
LENINGRAD
Minister Gromyko
30 JANUARY 1958
told Ambassador
Thompson on 23 January that
the Soviet Government is con-
cerned with the composition of
a heads-of-government meeting
and pressed the ambassador very
hard as to American views on
possible participants.
In his remarks to Western
ambassadors at a 27 January
Indian reception, Khrushchev
again urged the West to partic-
ipate in a heads-of-government
meeting, asserting that such a
conference should first take
up the "simplest problems" such
as a nonaggression pact between
NATO and Warsaw Pact powers.
Soviet diplomats have con-
tinued their efforts to gain
iq?
Western support for the measures
the USSR has proposed for high-
level discussion. There are
indications that-the Soviet
Union is willing to discuss
with Finland the return of the
Saimaa Canal area of Karelia.
Such talks might be undertaken
with the intention of gaining
Finnish support for a "nuclear-
free zone" in northern Europe,
as called for in Bulganin's
letters of 10 January to Norway
and Denmark.
The USSR also appears to
be trying to persuade the Aus-
trian Government to take an
active role in promoting a sum-
mit meeting and the establish-
ment of a "nuclear-free zone"
in central Europe.
BRITAIN SUGGESTS SUMMIT TALKS THIS SUMMER
The British Government in
its draft reply to Bulganin's
second note suggests prepara-
tions should be undertaken for
a summit meeting with the Soviet
Union. The draft reply calls
for the big four foreign min-
isters to start preparing an
agenda "at once" for a top-
level meeting "sometime this
summer."
While emphasizing that the
preparations must be adequate
SECRET
AV TwmrnT ATE TNTEREST va ap 2 of 6
PART Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET_
.
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
and thorough, the Macmillan gov-
ernment would in effect set a
deadline for the meeting, as the
opposition Labor party leaders
have urged. This would turn the
preliminaries into agenda-draft-
ing rather than efforts at sub-
stantive progress to determine
whether a meeting of heads of
government would be productive.
The draft note states a
preference that the British,
French, American,and Soviet
foreign ministers determine
what issues should be discussed,
but also suggests the alterna-
tive method of "confidential
diplomatic exchanges." The
British would reserve judgment
as to which nations should be
included in the summit talks.
If the draft is approved
by Prime Minister Macmillan--
now in Australia--it will be
submitted for North Atlantic
Council discussion. There it
may be expected to encounter
considerable opposition from
West Germany, the Netherlands,
and possibly others for tending
to predetermine the holding of
a summit meeting without pre-
liminary probing of Soviet in-
tentions. London is sensitive
to views expressed in NATO, and
is probably ready to_ make some
adjustments in the note; but
the Macmillan government's evi-
dent belief that public opinion
demands further Western initia-
tives might bring it to risk
some annoyance by other NATO
members rather than acquiesce
completely in the views of the
North Atlantic Council.
France's view of the pre-
liminaries is similar to Brit-
ain's. Foreign Minister'Pineau,
speaking on a French television
program on 27 January, stated
that the best preparations for
summit talks would be establish-
ing an agenda through a foreign
ministers' meeting. He sug-
gested disarmament, German re-
unification, and aid to under-
developed areas as topics,,and
added that those countries
"directly" interested in the
agenda should participate in
the summit conference, pre-
sumably including West Ger-
many.
EGYPTIAN-SYRIAN UNION DEVELOPMENTS
A formal announcement of
Egyptian-Syrian union, made by
Nasir and Syria's President
Quwatli from the rostrum of the
Egyptian National Assembly, was
scheduled for the end of this
week but may be postponed be-
cause of a last-minute revival
in Nasir's mind of doubts he
had previously quieted.
Na.sir is said to be wary
of entering the labyrinth of
Syrian politics. Typical of
the problems he might encounter
here is a reported move by the
the conservative Populist party
to join with the Communists,
remnants of ex-dictator Shi-
shakli's Arab Liberation Move-
ment, and the anti-Nasir Moslem
Brotherhood in an anti-union
alliance. Apparently trying
to overcome Nasir's doubts on
this point, Syrian Foreign Min-
ister Bitar has proposed that
the present Egyptian and Syrian
national parliaments be dis-
solved in favor of a number of
regional bodies in each country
and an over-all union parlia-
ment--a move which might make
SECRET
PART I OF IMMEDIATE INTEREST Page 3 of 6
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
it easier to get rid of some
of the more obstreperous polit-
ical personalities.
The Syrian Communists, how-
evero will probably continue
behind-the-scenes efforts to
block or sabotage the union pro-
posals. Syrian Communist party
leader Bakdash has already an-
nounced that if the new union
is really democratic,there will
be no need for the dissolution
of political parties--one of the
conditions set by Nasir for
Egyptian agreement to union--and
Bakdash pointedly observed that
the party had never dissolved
voluntarily but only under pres-
sure of dictatorships.
Syrian proponents of union
may invent new Western "plots"
in order to maintain popular
enthusiasm for the proposals;
Syrian propaganda media have
pointed to the Ankara meeting
of the Baghdad Pact Council as
a likely hatching place for
conspiracies against the Arabs.
Another line that may be used
once again is the Israeli
threat, which could seem more
real as a result of recent bor-
der incidents in the northern
Israeli-Syrian demilitarized
zone. New impetus to union
would almost certainly be given
should the Israelis undertake
operations in reprisal for the
killing of two policemen in a
skirmish with Syrians this week.
Other Arab leaders con-
tinue to be concerned over the
effect of an early announcement
of Egyptian-Syrian union plans.
Lebanese Foreign Minister Malik
has said such a move would spell
disaster for the pro-Western
Lebanese Government, and has of-
fered to "go any limit" if his
government has American support.
Moscow seems to be faced
with a conflict of interests
in Syrian-Egyptian union, The
Kremlin can hardly welcome any
move affording the possibility
of neutralizing pro-Soviet ele-
ments in Syria. To avoid of-
fending proponents of Arab
unity, however, Moscow may feel
obliged to make some gesture
approving the union when it
is announced. There are indica-
tions that Moscow will there-
fore attempt discreetly to
obstruct the actual implementa-
tion of union. Soviet diplomats
have indicated that the USSR
would have to reconsider eco- 25X1
nomic and military commitments
to Syria if union goes through.
propaganda emphasis, which sug-
gests uncertainty, has been
evident in Moscow, where the
radio has studiously avoided
reference to union, while the
Soviet press has maintained a 25X1
fairly steady low-level atten-
tion to union in positive'terms.
SECRET
A difference In 2
PART I OF IMMEDIATE INTEREST Page 4 of 6
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
VENEZUELAN JUNTA ANNOUNCES ITS PROGRAM
The basic program announced
by the Venezuelan governing
junta on 27 January calls for
the restoration of constitu-
tional government and free
presidential elections within
18 months. The status of Com-
munists, the influence of left-
ists in government, the return
of exiles, and similar problems
SECRET
PART I OF IMMEDIATE INTEREST Page 5 of 6
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
facing the junta could give rise
to serious friction between
military and civilian elements
which appear united behind the
new regime at present.
The junta, by 25 January,
had accomplished its principal
immediate task of restoring
order. It had also added two
civilian representatives, re-
moved two military members under
popular pressure, and appointed
a predominantly civilian cab-
inet.
The armed forces pledged
their full support on 27 Janu-
ary, reportedly to dispel rumors
that they were divided in al-
legiance to the new government.
The junta has expanded its
civilian support. The Patriotic
Front, a coalition of the four
principal parties--the URD, the
AD, the PCV, and the Catholic-
oriented COPEI--has granted it
The PCV, with an estimated
9,000 members, stands to bene-
fit politically as an important
element in the front, particu-
larly if the front is used as
a device for coordinating, party
opinion with the junta. Under
Perez it was allowed to retain
a position in the labor move-
ment, which now may be expanded.
substantial endorsement and has
called for legalization of all
factions, presumably including
the Communists. I
Top leaders of the three
non-Communist members of the
front also agreed, when in ex-
ile, to cooperate with the
junta in preserving order and
to unite their efforts for the
restoration of democracy. They
have not yet indicated their
position toward Communism.
They have also agreed that the
new oil concessions, granted
in 1956 and 1957 to primarily
US-owned companies
for initial
payments of about
$700,000,000,
are illegal and subject to fu-
ture renegotiation--a position
which may arouse military
hostility.
The maintenance of three-
party unity will be tested by
personal ambitions and differ-
ences in party orientation.
The younger leaders of the
Patriotic Front may challenge
the titular party heads, two
of whom have been in exile for
several years.
SECRET
PART I OF IMMEDIATE INTEREST Page 6 of 6
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
G Ns IDLINTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
NOTES AND COMMENTS
KI-URUSHCHEV'S PROPOSAL FOR AGRICULTURAL REORGANIZATION
Khrushchev, in another of
his bold plans for economic
reorganization, has proposed the
radical but gradual transfor-
mation of a historic agricul-
tural institution, the machine
tractor station (MTS). Under
his proposal the large quantity
of production machinery now
owned by the state would be
sold to collective farms--a
step which Stalin as late as
1952 said "could only retard
our advance toward Communism.
Thus the proposal is a contin-
ua.tion of the post-Stalin crit-
ical review which is question-
ing all but the most basic
tenets of the operation of the
Soviet economy. When imple-
mented, it will constitute the
biggest organizational change
in Soviet socialized agricul-
ture since its establishment
in the 1930's.
The MTS, one of the three
basic Soviet agricultural insti-
tutions along with the state
farm and the collective farm,
is a state owned and operated
pool of agricultural machinery
which serves one or more col-
lective farms on a contract
basis. Khrushchev, in outlining
his plan, said the tractor sta-
tions are to be gradually rele-
gated to the status of repair
depots and sellers of spare
parts and machinery.
Khrushchev suggested that
the proposed change be discussed
on a, nationwide basis, as was
the case with the reorganization
of industrial management in the
spring of 1957. In the mean-
time, the MTS are apparently
to service the 1958 crop. The
change-over, when it comes, is
to be gradual.
Control of their own ma-
chinery by the collective farms,
Page 1 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
a step suggested by members of
the American farm delegation
which visited the USSR in 1955,
should result in real savings.
The separation of MTS and col-
lective farm functions has un-
doubtedly been a cause of in-
efficiency, as has the size of
the MTS themselves.
Khrushchev said the reor-
ganization would reduce costs
of grain to the state and in
turn permit a reduction of
retail prices of grain products.
He expected it to lead to a
more rational use of machinery,
to elimination of unnecessary
machinery purchases, and to an
increase in over-all production.
Political Control
The increased strength of
the Communist party in the So-
viet countryside since Stalin's
death and recent changes in
rural party organization have
paved the way for Khrushchev's
proposal. As a result of the
amalgamation of collective
farms and the strengthening of
rural party membership, nearly
all collective farms now have
primary party organizations in
contrast to the situation that
prevailed under Stalin in 1949,
when only 15 percent of the
farms could boast such units.
There has also been a signifi-
cant increase in the number of
collective farm chairmen hold-
ing party membership.
In a move designed to fa-
cilitate greater control by pri-
mary party organizations in
collective farms, the regime
late last year withdrew some of
the powers previously granted
to the MTS. Under the agricul-
tural reform of September 1953
which reinforced the political
role of the MTS in the
CONFIDENTIAL
PART TT NOTES AND COMMENTS
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
countryside, each MTS had been
assigned a district party secre-
tary who had charge of a group
of party instructors, each of
whom in turn supervised the
political and personnel affairs
of one or two collective farms.
These MTS instructor groups
now have been abolished, ac-
cording to an editorial in the
December issue of the party's
organizational journal, Party
Life, on the grounds that t ey
ten ed to duplicate and inter-
f ere with the work of the pri-
mary party organizations in the
collective farms.
The elimination of the MTS
instructor groups, which were
composed of at least 70,000
full-time party officials, was
part of a general 20-percent re-
duction last year in the admin-
istrative staffs of rural party
organizations. These experi-
enced party officials have thus
been made available for assign-
ment directly to collective
farm party organizations, and
they probably comprised the bulk
of the replacements for the
large number of secretaries of
primary party organizations who
were removed last fall at the
rural party conferences.
The effect of recent
changes has been to strengthen
party control at the grass-roots
level in the countryside, making
superfluous the direct political
supervision formerly exercised
by the MTS.
In addition to the proposal
to transform the tractor sta-
tions, the post-Stalin critical
review of the operation of the
Soviet economy has included
last year's industrial reor-
ganization, the abolition of
the doctrine that obsolescence
cannot occur in a socialist
state, and the current discus-
sion of the Soviet pricing system
which tends in its wider impli-
cations to conflict with the
Marxist labor theory of value.
(see Part -III, page 3).
The searching nature of
this review makes unclear the
future status of collective
farms and state farms. Soviet
ideology calls for ultimate
conversion of collective farms
into state farms, and in the
past few years many "economical-
ly weak" collective farms have
been thus converted. Giving
collective farms machinery
could be a step toward more
rapidly converting them into
state farms. However, it is al-
so possible that a long period
of simultaneous operation of the
new-style collective farms and
the state farms, to determine
their relative merits may take
place. (Pre- 25X1
pared jointly with ORR)
The Algerian rebellion,
now well into its fourth year,
may soon enter a more active
phase after several months dur-
ing which the National Libera-
tion Front (FLN) appeared to
have lost the initiative to the
French pacification forces. In
any event, the rebels' military
potential, especially armament,
is improving and there is little
prospect for an early end of
the conflict, which is continuing
to tie down over 400,000 French
Army, Navy, and Air Force person-
nel.
There has so far been no
noticeable increase in the in-
tensity of the rebel campaign
SECRET
Page 2 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 SECRET
mer. They have had no diffi-
culty replacing manpower rbss-
es,, morale is high, and their
performance in recent engage-
ments indicates they are bet-
ter trained and certainly bet-
ter armed' than heretofore.
They may only be awaiting the
arrival of more favorable weath-
er or additional supplies.be-
fore expanding their activities.
30 January 1958
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
as compared with recent months,
Should a new guerrilla of-
fensive materialize this spring,
Reported location of rebel base
The "Morice Line" (electrified
barricade)
it might be centered
in eastern Algeria
and, more specifical-
ly, in the region ad-
jacent to Tunisia,
where armed FLN bands
have for some time
enjoyed safe haven
at training and opera-
tional bases.
90 JANUARY 19'58
T4?
The rebels are not believed
capable at this time of captur-
ing and holding. any urban center
of importance, but they might
sharply increase terrorist ac-
tivities, which have declined
in recent months.
Despite the relative suc-
cess of the French in clearing
rebels from certain areas and
the erection of the much-pub-
licized "Morice line," an elec-
trified barricade near the Tu-
nisian frontier, the rebels are
in some respects stronger mili-
tarily than they were last sum-
The situation may
25X1
25X1
few weeks aimed at neutralizing 25X1
the rebel bases in Tunisia. An
all-out punitive effort against
these targets could easily
develop from France's appli-
cation of the "hot pursuit"
policy without any clear in-
dication of special prepara-
tion.
SECRET
PART II NO'T'ES AND COMMENTS Page 3 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
During the past week Tur-
kish Cypriots have engaged in
the worst rioting since the
beginning of the Cyprus contro-
versy. The riots were appar-
ently triggered by fear that
decisions were being made re-
garding a Cyprus settlement
which did not provide for prompt
partition of the island. The
violent demonstrations, in
which several Turks were killed
and scores injured, were set
off by the sudden departure
for Ankara of Cyprus' Governor
Foot to confer with British
Foreign Secretary Lloyd, who
was in the Turkish capital
for the Baghdad Pact Council
meeting. The riots were aimed
both at Foot, whom the Turks
consider too conciliatory to-
ward the Greeks, and at the
Greek Cypriot community. Only
strenuous efforts by security
forces prevented serious clashes
between Turks and Greeks on
Cyprus.
Meanwhile, within the Greek
Cypriot community, a smoldering_
conflict between right-wing fol-
lowers of Archbishop Makarios
and left-wing members of the Pan-
Cyprian Labor Federation recent-
ly developed into violence.
Masked men, assumed to be act-
ing on orders from EOKA, killed
two prominent left-wing labor
leaders and wounded three
others. The subsequent island-
wide protest strike called by
leaders of the Labor Federation
and clashes between the nation-
alists and the leftists empha-
size the deep split in Greek
Cypriot ranks. Calls for unity
by Makarios and the leaders of
the Labor Federation have re-
stored peace temporarily be-
tween two basically hostile
groups. Barring further armed
attacks by EOKA on labor union
members, an appearance of unity
probably can be ,maintained
until self-government or self-
determination for Cyprus is
secured.
While all parties in the
Cyprus dispute await the antic-
ipated British announcement of
a new policy for Cyprus,"the
authorities'in Nicosia are mak-
ing final security arrangements
for an expected outbreak of
violence by EOKA following is-
suance of the policy statement.
Meanwhile, in Ankara, con-
versations between British and 25X1
Turkish.-=officials have produced 25X1
no mutually acceptable plan for
Cyprus.
Violence can probably
be prevented if Archbishop Ma-
karios accepts the new British
proposals for Cyprus.
HAMMARSKJOLD'S PLAN FOR A MIDDLE EAST DEVELOPMENT FUND
UN Secretary General Ham-
marskjold plans to push ahead
with his plan for a Middle East
development fund financed pri-
marily by oil revenues, which
he believes is the only possible
way to prevent serious deteri-
oration in the area. His pre-
liminary discussions with the
British and French foreign
ministers, as well as with se-
lected Arab statesmen, have
SECRET'
PART II NOTES AND COMMENTS Page 4 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
evidently led him to believe
there are some prospects for
such economic cooperation among
the Arabs. The inability of
the Arabs to work together on
common projects and conflicts
in local interests, however,
will be difficult obstacles to
overcome.
The UN Secretariat is pre-
paring a study on the possibil-
ity of channeling Middle East
oil profits into a central bank-
ing system for Arab development.
Hammarskjold hopes that issuance
of the report will induce the
Arabs to call a meeting to or-
ganize such a bank. He sees
the development fund consisting
of members of the Arab League,
including Libya and the Sudan
but excluding Tunisia and .Mo-
rocco, at least at
the outset. He
thinks inclusion of
Iran, though desir-
able, would raise
the question of Tur-
kish and Pakistani
participation, which
he feels is undesir-
able.
Operation of
the fund during its
first five year is
envisaged at the
level of "hundreds
of millions of dol.=
lars" in short-term
governmental loans.
Later on, the fund
would get into
longer term loans.
Specific organizational
for the fund have not been
worked out.
The idea of utilizing Mid-
dle East oil revenues to fi-
nance inter-Arab development
NUARY 1958
24853
that such an investment on their
part should be politically at-
tractive to them, the principal
oil-producing countries have
so far been reluctant to make
significant cash contributions.
BRITAIN'S FREE TRADE AREA PROJECT NEAR STALEMATE
Mid-January discussions in
the OEEC's intergovernmental
committee on the establishment
of a Free Trade Area (FTA) have
revealed a near stalemate.
SECRET
schemes has been discussed pe-
riodically for several years.
The Arab League "decided" in
early 1956 to form an Arab De-
velopment Bank, and in January
1957 the International Bank for
Reconstruction and Development
submitted, at the league's re-
quest, a draft charter for such
a bank. Last December, Egyp-
tian Foreign Minister Fawzi
discussed a central bank plan
with US officials, indicating
that a preliminary agreement
had been reached by Egypt,
Saudi Arabia, and Iraq. Fawzi
emphasized, however, that
"help was needed" from the
United States and Britain, not
only in technical advice but
also in encouraging oil-rich
Arab states to participate.
Although it has been argued
PROPOSED MEMBERS OF THE
MIDDLE EAST DEVELOPMENT FUND
) T
Malta"
MUSCA
AND
OMAN I/
IRENCH 1
Y 4 -EQUATORIAL
? nR. \ AFRICA
plans
Continental nations, particu-
larly France, find Britain's
recent limited concessions to-
ward freer imports of agricul-
tural products and on relations
SECRET
Cyprusc 'SYRIA ??
LEBANON.' ?''
ISRAEI/.?- 1 IRAQ
AAHRt4N
lA:'AR
PART II NOTES AND COMMENTS Page 5 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
,CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
with the six-nation European
Economic Community inadequate.
Mutual interest in European
economic cooperation may lead
to the necessary reciprocal
concessions but possibly not
in time to establish the free
trade area in 1958 as Britain
desires.
Britain has offered some
slight concessions on the FTA's
institutional relations with
the European Economic Community
and on the British proposal to
exclude all agricultural imports
from the FTA's trade liberaliza-
tion program--a major stumbling
block to the Continental powers.
The Continent still wants
the FTA,but most nations find
Britain's recent concessions
inadequate. The intensity of
their objections varies from
France's obstructionism to a
strong West German desire to
cooperate with Britain. The
French Government accepts the
FTA in principle but urges that
because of the parlous state of
France's trade and finances and
in view of increased West German
competition in the 'European
THE PROPOSED FREE TRADE AREA
POPULATION GNP 1955
1956 (Billion
(Millions) Dollars)
EUROPEAN ECONOMIC COMMUNITY
(EUROPEAN COMMON MARKET):
BELGIUM-LUX......... 9.2 9.75
FRANCE ................43.6 52.00`
WEST GERMANY ..... 51.6 41. SD
ITALY ................48.2 21.70
NETHERLANDS...... 10.9 .6.20
TOTAL ..163.5 133.45
COUNTRIES THAT PROBABLY WILL
JOIN FTA WITH FULL OBLIGATIONS:
AUSTRIA ............... 7.0 4.21
DENMARK .............. 4.5 4.15
NORWAY ............... 3.5 3.38
SWEDEN ............... 7.3 8.74
SWITZERLAND ....... 5.0 6.24
UK ....................... 51.2 57.40"
TOTAL ........ 78.5 84.12
COUNTRIES THAT PROBABLY WILL
JOIN FTA WITH SPECIAL CONDITIONS:
GREECE ................ 8.0 2.15
ICELAND ............... .2 . 16
IRELAND ............... 2.9 1 .52
PORTUGAL............ 8.8 1.78
TURKEY ................24.8 3.92
TOTAL . . ..... 44.7 9.53
GRAND TOTAL ...... 286.7 227.10
Member nations of the Free Trade
u Area and the OEEC
Member nations of the European
Economic Community (European
Common Market)
0 200 410 800 M11-
0 200 400 6G~_ 800 400 1200 Kilometers
24854 30 JANUARY 1958 10
SECRET
PART II NOTES AND COMMENTS Page 6 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
Economic Community, it cannot
now risk additional competition
that would result from estab-
lishment of the FTA. It is
therefore resorting to hard
bargaining and delaying tactics
and now promises to introduce
its own proposal on the FTA in
March.
THREAT OF VIOLENCE REDUCED IN GUATEMALA
The danger of violence in
Guatemala over the still unde-
cided 19 January presidential
election has diminished as a
result of the agreement reached
on 27 January between General
Ydigoras Fuentes, who won a
clear plurality, and followers
of Lt. Col. Jose Luis Cruz Sala-
zar, the apparent runner-up.
Cruz followers are to accept
Ydigoras as president, and
Ydigoras has promised to include
his erstwhile opponents in an
anti-Communist coalition and
to give them three cabinet posts.
Pro-Cruz parties control
the congress, which'began its
review of the votes on 27 Janu-
ary and which, since no one
won a majority, will have the
responsibility of naming one of
the two top runners president-
elect. Congressional leaders
expect the process to take at
least ten days.
The agreement was motivated
by the realization that it was
perhaps the only way to avoid
serious political violence and
also by a desire to form a
united front against leftist
resurgence. The residue of
bitterness between Ydigoras and
Cruz partisans is still strong,
however, and if the pact hits
a snag, serious violence is
still possible. Both Ydigoras
and Cruz followers are armed.
Interim President Flores might
well use any violence to justi-
fy an attempt to continue in
office. There is some suspi-
cion that he may even be spread-
ing rumors of impending dis-
turbances along the Mexican and
Salvadoran borders in an attempt
to accomplish this end.
Ydigoras, though supported
by extreme conservatives, prob-
ably could not impose a repres-
sive dictatorship even if so
inclined. He would, at least
for a time, be checked by a gen-
erally moderate-minded officer
corps which has shown itself
responsive to public opinion,
by a congress in which his par-
tisans will form a minority, at
least until the next congres,
sional elections two years hence,
and by the safeguards written
into the agreement with Cruz.
SECRET
PART II NOTES AND COMMENTS Page 7 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
VL.,A sL a
r'CURRENT
INTELLIGENCE WEEKLY SUMMARY
30 January 1958
The leftist Revolutionary
party, which polled over a quar-
ter of the votes and emerged as
an important political force,
has apparently been left out
of the Ydigoras-Cruz agreement.
It will probably not, however,
stage a violent protest since
RUSSIAN SCHOOLS TO TRAIN MORE
The Russian Republic Minis-
try of Education has announced
that 50 secondary schools in
the republic have recently be-
gun a study program designed
to place students on the pro-
duction line even before gradu-
ation. In city schools, ninth-
and tenth-grade students will
study only three school days
a week and devote the remaining
three to factory work. Rural
pupils in those grades will
spend most of the winter with
their academic studies but dur-
ing agricultural seasons will
apparently work full time for
collective farms or machine
tractor stations.
Not only is it planned to
retain all the general educa-
tional courses taught in stand-
ard ten-year schools, but "spe-
cial disciplines, familiarizing
the students with the theoreti-
cal part of their selected pro-
fession," will be added to the
curriculum. For this season,
the course of study in these
50 schools will be extended
from ten to "11 or 12 years."
After they complete this course,
students wi .l be assigned to
those factories, collective
farms, and machine tractor sta-
tions where they did their
practice work,
The regime is apparently
attempting to solve the growing
its leaders realize that the
public will condemn any group
initiating violence at this
time. Party leaders are avow-
edly anti-Communist, but the
party is a prime Communist tar-
get and is already infiltrated
in its lower echelons.
STUDENTS FOR MANUAL WORK
social problems connected with
the transition to universal
ten-year education. Soviet uni-
versities and two-year higher
technical schools are experienc-
ing difficulty in absorbing the
increasing numbers of secondary-
school graduates who wish to go
on to further training. There
is evidence of dissatisfaction
among many young people who
have been refused admission to
higher institutions and reluc-
tance on their part to enter
the factory and agricultural
labor force.
The regime has instituted
the policy of preferential con-
sideration for university ap-
plicants who have worked one
or two years. On the other
hand, factory and collective
farm managers are often reluc-
tant to hire secondary-school
graduates, apparently because
they feel the young people will
leave at the first opportunity,
and also because of the legal
restrictions on hours and types
of work they may be required
to perform.
This latest development
appears to follow the current
trend in Soviet education to-
ward more specialized training
at the secondary-school level.
In 1956, an experimental study
program was introduced in over
500 schools in the Russian
SECRET
PART TT NOTES AND COMMENTS' Page 8 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
Republic, whereby the number of
hours spent studying "princi-
pies of production" was doubled
in the eighth through the tenth
grades. Under that program,
eighth- and ninth-grade students
spent 24 days during the summer
working at collective or state
farms or factories. Apparently
the program was successful be-
cause in September 1957 it was
extended to cover one fourth
of all the schools in the re-
public.
The new experiment might
ultimately lead to a dual sys-
tem of secondary schools, with
admission to the traditional
academic ten-year schools--and
therefore to higher institutions'
liift fed - to "bright'' students,
and the less able youngsters
shunted first into the 12-year
technical schools and from
there into the labor force. More
immediately, however, the techni-
cal secondary schools are prob-
ably intended to ease the enroll-
ment pressure on universities
and higher technical schools and
to adjust an increasing number
of secondary school students to 25X1
becoming industrial and agricul-
tural workers rather than me
of the inte ligentsiaa
(Concurred in by OSI) 25X1
POLAND'S ECONOMIC PLAN FOR 1958
Poland's economic plan and
budget provide for appreciable
economic advances in 1958 over
1957, but the decline in the
rate of growth which began in
1950 is to continue. Consumer
goods production is to be em-
phasized, but':the necessity of
restoring depleted reserves and
of reducing foreign credits
precludes any appreciable im-
provement during 1958 in the
low standard of living.
Industrial output is slated
to increase during 1958 by about
7 percent'-over the 1957 1 eve1, ...Em-
phasis on the output of consumer
goods is to continue,
production being set
at 8.4 percent above
1957 output, while
heavy industrial pro-
duction is to rise
5,5 percent, in con-
trast to the trend
in the other satel-
lites. Agricultural
output is to increase
about 4 percent but
will not be suffi-
much-publicized abolition of
compulsory farm produce deliv-
eries,
The Polish budget-_12 per-
cent higher than the record 1956
budget--is in line with the
economic plan in programing
increased economic activity in
1958. It provides for a small
increase in national defense
expenditure over the low 1957
figure and an increase in in-
vestments of about 7 percent.
It substantiates the moderate
trend toward administrative
decentralization by reducing
the proportion of budget funds
POLISH INDUSTRIAL PR
(OFFICIAL PERCENTAGE INCREASES
OVER PRECEDING YEAR)
1949 1950 1951
cient to permit the 80JANUARY 1958
SECRET
1952 1953 1954 1955
(PLAN)
80128 4
PART II NOTES AND COMMENTS Page 9 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
passing through state channels
and the proportion of total in-
vestments financed through the
budget.
Despite the increased out-
put scheduled, the standard.of
living will not rise as much
during 1958 as it did during
1956 and 1957. There will be
no significant improvement in
the amount and variety of food
available because food exports
are to increase 33 percent.
Industrial consumer goods and
housing will continue to be
extremely scarce. Reserves of
food and consumer goods which
were depleted in 1957 to satis-
fy demand are to be restored
this year, and the use of ex-
pensive short-term credits is
to be restricted. Possibly as
much as 50 percent of the in-
crease in personal consumption
in 1957 was financed by foreign
credits.
As in 1957, the urban
worker will benefit least from
any small improvement that ma-
terializes in living standards,
and discontent among urbanites
will probably increase. Despite
increases in wages, real incomes
rose little in 1957, except in
the case of selected categories
of workers such as coal miners.
Gomulka has warned all workers
that they can expect higher
wages this year only if they
work harder and more effectively.
In contrast to the Polish
peasant, whose real income rose
18 percent between 1955 and
1957 and whose morale is high-
est among farmers in the bloc,
the depression of the Polish
worker continues to deepen with
the dim prospect of improvement
in his standard of living. His
attitude is exemplified by a
radical increase in absenteeism
and alcoholism and by sporadic
strikes, which will probably
be more frequent in 1958.
Prepared by ORR)
HUNGARIAN GOVERNMENT CHANGES
The changes in the Hungar-
ian Government which occurred
on 27 January during the Nation-
al Assembly session suggest no
significant change in internal
policy, although the replace-
ment of the moderate minister
of culture by a hardline Com-
munist appears to presage a
further tightening in the cul-
tural sphere. The reshuffle,
was probably designed to com-
plete the return to "normalcy"
before Hungary enters 4 period
of rigorous consolidation of
Communist control.
The relinquishment of the
premiership by Kadar, who re-
tains party leadership, will
enable him to devote more time
to rebuilding the party into
an effective instrument of con-
trol for the Communists. At
the same time, some persons
who were of value during the
postrevolutionary phase because
of their national Communist or
liberal backgrounds--offering
the best chance of some support
from the hostile Hungarian pub-
lic--may be forced into the
background in favor of more
reliable, militant figures.
Premier Kadar and Minister
of Culture Kallai, both moder-
ates, stepped down in favor of
First Deputy Premier Muennich
and Valaria Benke, respectively,
allegedly so that Kadar and
Kallai could devote more time
to their party duties. Concur-
rently, Stalinist Antal Apro
moved up to first deputy premier.
Muennich is a Moscow-educated
old-time Communist who proved
SECRET
PART II NOTES AND COMMENTS 1 - 10 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
his loyalty to Moscow by organ-
izing and heading the security
organs after the 1956 revolu-
tion. There is little evidence
of any'rivalry between him and
Kadar. Kadar and Kallai remain
in the government as ministers
of state, positions which will
enable them to oversee but not
to administer government policy.
Kallai is taking over leadership
of the regime's major mass organ-
ization, the Patriotic People"s
Front--perhaps as part of a move
to expand its activities.
Benke, former head of the
Hungarian radio and noted for
her advocacy of a hard cultural
line, will probably be more in-
clined than her predecessor to
follow a repressive policy in
the literary sphere in line with
Stalinist desires.
The position if Kadar, who
may still be regarded with some
suspicion by the USSR because
of his past "national Communist"
associations, appears to have
been restricted by the promotion
of Stalinist members Of the re-
gime. As head of the party, he
nevertheless will retain a
powerful position as long
as he serves Moscow's pur-
poses.
Peasants in eastern Ruma-
nia are resisting stepped-
up regime pressures for complete
collectivization
least two uprisings may have
been suppressed by Rumanian or
Soviet troops
thus far centered on the
Iasi region and the riparian
areas of Galati and Constanta,
along the Danube.
Although peasants in these
areas have been relatively pas-
sive in recent years, they have
been the subject of particular
attention during the regime's
1957-1958 collectivization cam-
paign. During 1957 the total
percentage of-arable land in
collective units rose from 17.5
to 31 throughout Rumania, but
in Constanta, Iasi, and Galati
the increase was- even more
marked. Land which originally
had been taken into intermediate
peasant cooperatives was sum-
marily incorporated into state
farms, thus adding to peasant
resentment.
On 20 October it was an-
nounced that Constanta was the
first of Rumania's 16 regions
to be fully collectivized, and
it is estimated that at least
seven out of Galati's 11 dis-
tricts are also fully collectiv-
ized. Political-organizational
work by an estimated 40,000
agitators, working on a house-
to-house basis, has supplemented
strong economic pressures. The
regime may be willing to risk
even extreme measures at this
SECRET
PART II NOTES ANn rOMMENTS Page 11 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
30 January 1958
time because of the
margin of safety pro-
vided by a record
harvest in 1957.
C2
H UI N G A R V
inhabitants of the
village of Suraia
were killed or hos-
pitalized as a re-
sult of action by So-ry U GO 8 L A'
L A,'
viet troops. On 26
January two "columns'
of Soviet forces were
reported moving to-
ward the city of E
Focsani, ten miles
west of Suraia. A
revolt was also reported in an
unnamed, nearby village. The
Turkish consul in Constanta re-
ported the same day that pres-
sures for collectivization were
meeting strong resistance, re-
quiring armed intervention in
areas of the Galati region, in-
cluding Braila and Focsani, and
in the Tulcea district of the
Constanta region.
Western observers in gen-
eral have been denied access to
these areas since 18 January,
although the Tulcea area was
not closed until 27 January.
Furthermore
Greek nationals
living in Galati have been de-
nied permission to visit Bu-
charest for nearly a month6
The US air attache, however,
was granted permission to fly
to Iasi within the past week.
Earlier speculation that
these restrictions were designed
to hide maneuvers by Warsaw Pact
armies would seem to be weakened
by the inclusion of Tulcea,
where the terrain is not suitable
for large-scale maneuvers. The
US air attache reported the area
blanketed by heavy snows which
delayed his return to Bucharest
from Iasi for more than 24 hours.
The attache, who heard rumors of
Soviet troop rotation while he
was in Iasi, now
believes
they
were a "plan
t,"
intended
to
cloak the
real
reason
for
denying tra
vel
requests
from
Western dip
loma
ts.
CHINESE COMMUNIST NATIONAL PEOPLE'S CONGRESS
Peiping has announced that
plenary sessions of the Nation-
al People's Congress (NPC),
which was originally scheduled
to convene on 25 January, will
begin a week later after con-
clusion of "preparatory" meet-
ings addressed by top regime
leaders. This delay suggests
that the Chinese Communists are
making last-minute changes in
the agenda and want to give
delegates more time to become
familiar with their scripts.
SECRET
PART II NOTES AND COMMENTS Page 12 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
U. SS I
Marasestt?
? ?Ksra
Foceanl Galati
Braila UU ?^Palcea d:
8 L A CI K
ConsItanta.
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
The most likely addition to the
business of the congress is
the removal of government of-
ficials accused of political
deviation. Some recent meet-
ings of the provincial con-
gresses have already been used
for this purpose.
The NPC, on paper the
"highest organ of state power"
but in fact a rubber stamp
body, would be an appropriate
instrument for the latter as-
signment. The last session--
held from 26 June to 15 July--
was used to launch the regime's
antirightist campaign which
followed stormy criticism of
Peiping's policies and the Chi-
nese Communist party during
the spring of 1957. The 1 Feb-
ruary date for convening this
special session of the NPC
coincides with the official
end of the second phase--the:
attack on rightists"-'in 'the
rectification campaign.
Three ministers who have
been under heavy attack since
last summer--Communications
Minister Chang Po-chun, Food
Minister Chang Nai-chi, and
Timber Minister Lo Lung-chi--
are expected to resign in dis-
grace along with some of their
key subordinates. The Ministry
of Building Materials Indus-
try was singled out for of-
ficial criticism about two
weeks ago and will probably
yield additional victims. Lai
Chi-fa, the Communist party
member who heads this organiza-
tion, has already confessed to
mistakes in leadership which
permitted "counterrevolutionary
elements" to penetrate sub-
ordinate offices of the ministry.
The announced agenda of
the congress calls for discus-
sion of the 1958 draft economic
plan and budget, a plan for
phoneticization of the Chinese
language, and a program to
"readjust" government organs
SECRET
PART II NOTES AND COMMENTS Page 13 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
subordinate to the State Coun-
cil. The nature of the contem-
plated readjustments is sug-
gested by resolutions issued
last November which ordered
that certain activities of
ministries dealing with light
industry, the food industry,
forestry, textile industry,
building construction, and com-
munications be removed from
the direct control of the
ministries in Peiping and
placed under the regional and
local authorities. At the
same time, the planning system
was simplified so that economic
plans would be less rigidly
determined from Peiping. Cer-
tain of the ministries and com-
missions which have lost part
of their functions may now be
abolished or amalgamated. This
would be in line with Peiping's
demonstrated determination to
reduce the capital's bureauc-
racy.
(Prepared jointly with ORR)
bitious ones.
The 1958 annual economic
plan and budget to be presented
to the congress will probably
call for large increases in
production and investment over _
last year's relatively modest
goals. Plans of this nature
would be a natural outgrowth
of the regime's campaign over
the past few months against the
"conservative" outlook in eco-
nomic matters. The People's
Daily has defined a "conserva-
tiv as one who thinks that
too much was attempted in 1956,
who regards the long-range
agricultural plan as "too im-
petuous," and who feels that
the five-year plans have been
"off the mark." The regime
has noted approvingly the high
agricultural targets set by
various provinces. Various
enterprises have already re- 25X1
placed goals drawn up since
mid-1957 with new and more am-
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY' SUMMARY
30 January 1958
PEI PI NG' S NEW MILITARY
Peiping has issued new
regulations governing the dis-
charge of all army personnel
conscripted after 1 November
1954. The regulations provide
for preparing servicemen for
civilian life and for easing
the tensions between civilians
and veterans, a problem of
considerable concern to the re-
gime.
The approximately 800,000
army men slated for discharge
this year comprise the first
group conscripted under the
provisions of the military con-
scription law. According to
the new regulations, these men
are to undergo intensive pre-
separation training covering
"socialism, patriotism, produc-
tion through labor, participa-
tion in the militia force, ob-
servance of government decrees,
unity with town and cooperative
cadres, establishment of good
relations with the masses, and
the revised draft national pro-
gram for the development of ag-
riculture."
Farewell parties are to be
held by the military units for
DISCHARGE REGULATIONS
the discharged servicemen, and
welcoming parties are to be or-
ganized by the people's coun-
cils of their home villages.
The new regulations provide
for retirement bonuses and bene-
fits for those disabled on ac-
tive duty. Those discharged
are required to make application
for reserve service.
In September 1956, Defense
Minister Peng Te-huai warned
veterans that they were demand-
ing too much from the party and
government without contributing
their full share to "peaceful
production." Shortly there-
after, a Defense Ministry di-
rective ordered all units to
perfect demobilization work dur-
ing 1957 in order to facilitate
the veterans' transition to
civilian life. The new regula-
tions complement the "Support
the Government--Love the People"
program and the rectification
campaign within the armed forces,
both of which were instituted
last ., year 'to: reduce fric- 25X1
tion between the civilian
populace and servicemen includ-
ing veterans.
LAOTIAN GOVERNMENT TAKES OVER FORMER PATHET LAO BASE AREAS
The Pathet Lao has, for
the most part,, complied with
the military provisions of the
unfication accords. Laotian
Army forces totaling 11 bat-
talions encountered no opposi-
tion in their recently com-
pleted reoccupation of the two
provinces formerly held by the
Pathet Lao. Royal government
functionaries are expected to
proceed into the two provinces
in large numbers once the mili-
tary units are settled in posi-
tion. The main communication
routes to North Vietnam and
China Will be sealed off, and
the government-appointed admin-
istration will begin to func-
tion in the two provinces after
three and one half years of
Pathet Lao control.
The number of Pathet troops
arriving with their weapons at
the regroupment centers prior
SECRET
PART II NOTES AND COMMENTS Page 14 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
as proof that the set-
tlement accords recog-
nized the Pathets on
terms of equality with
the government, and
are urging the people
to disregard the or-
ders of government
functionaries.
Demobilized Pa-
thets returning to
their home villages in
Sam Neua reportedly
are organizing clan-
destine cells, and
this pattern will
doubtless be followed
throughout Laos dur-
ing the next few weeks.
In addition, the gov-
ernment's amnesty to
political prisoners
is already reported
to have given a boost
to both the Pathets
and the fellow-travel-
ing National Union
party.
In taking the
gamble of exchanging
its military base for
to the 18 January deadline
swelled to about 7,200, includ-
ing some dependents, out of the
estimated total Pathet strength
of 7,500. It is still believed
likely, however, that the Pa-
thets have cached some small
arms and that a small nucleus
of armed men will continue to
hold out and engage in harass-
ing activity against the govern-
ment.
Pathet propaganda cadres
in Sam Neua Province have been
holding nightly meetings to con-
dition the population for the
shift to a period of "political
warfare." The cadres are point-
ing to the 50-50 division of
administrative posts in the
two provinces between govern-
ment and Pathet functionaries
tive parties.
with the left-wing National
Union party, and may col-
laborate with the conserva-
legitimate political status, the
Pathet Lao undoubtedly believes
that its dynamism and superior
organization will give it an
edge in competition with the
traditional Laotian political
parties. The conservative par-
ties seem alive to this threat.
Chiefs of the leading conserva-
tive parties--the Nationalists
and Independents--have signed
an agreement to support a joint-
ly approved slate of candidates
for the 4 May supplementary
elections. There are also tenta-
tive signs that the small, con-
servative Democratic party is
breaking its unnatural alliance
SECRET
PART II NOTES AND COMMENTS Page 15 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY $.ARY
30 January 1958
ICELANDIC MUNICIPAL ELECTIONS
The Icelandic municipal
elections on 26 January result-
ed in an impressive victory for
the Conservative party, the
chief opponent of the governing
coalition of Progressives, So-
cial Democrats, and the Commu-
nist-front Labor Alliance.
.Since the popularity of the na-
tional government became an is-
sue in the elections, the re-
sult will stimulate Conservative
attacks on the coalition. The
three parties may thereby be
forced into greater dependence
on each other, thus making it
unlikely that the government
coalition will break up in the
near future. The strong posi-
ICELANDIC PARLIAMENT
24 JUNE 1956 ELECTIONS
that their more favorable show-
ing in the 1956 parliamentary
elections resulted only from
their electoral alliance with
the agrarian Progressives. In
Reykjavik the Progressives in-
creased their popular vote con-
siderably.
The results of the munici-
pal elections and the outcome
last week of the trade union
elections in Dagsbrunn, the un-
skilled workersunion in Reykja-
vik and the largest single un-
ion in Iceland, indicate that
the hard core of Communist
strength remains relatively un-
eroded, Despite a determined
Social Democratic - Conserva-
tive effort to dislodge them,
the Communists in Dagsbrunn ob-
tained 58 percent of the vote--
as against 65 percent in 1954,
the last time their control of
the union was challenged--but
almost the same number of votes.
tion of the pro-US Conservatives
will discourage any intent by
the coalition to revive its
policy of opposition to US bases.
The Conservatives obtained
57.7 percent of the vote in
Reykjavik, winning 10 of the 15
seats in the city council, and
in the country as a whole they
received approximately 52 per-
cent of the vote, obtaining a
majority in 14 of the larger
towns. The Labor Alliance re-
ceived almost 20 percent of the
vote and kept its three seats
on the Reykjavik council, al-
though its total vote declined
some 25 percent in comparison
with the parliamentary elections
of June 1956. The Labor Al-
liance also retained its strong-
holds of Kopavogur, a suburb
of Reykjavik, and Neskaupstadur
on the east coast. The Social
Democrats suffered a serious
defeat, confirming the view
Despite press reports, the
coalition government does not
appear in any danger of disrup-
tion. The government?s majority
in Parliament remains secure,
and the Social Democratic party,
the least enthusiastic member
of the coalition, probably in-
tends to stick with the cabinet
alliance headed by Progressive
Prime Minister Hermann Jonasson.
The Social Democrats would fade
into political impotence with-
out the support of the Progres-
sives, and neither the.Progres-
si've party, nor the Labor Alli-
ance stands to. gain by a breakup.
The outcome of the election
reduces still further the pos-
sibility that the coalition might
revive its opposition to US bases
in the near future, or that it
would call for resumption of ne-
gotiations with the United States
looking toward withdrawal of US
forces from the NATO air base
at Keflavik.
SECRET
PART II NOTES AND COMMENTS Page .16 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
CUNFIDLN I INL
E
CURRENT INTELLIGENCE WEEKLY S'VVM
30 January 1958
PATTERNS AND PERSPECTIVES
CHINESE COMMUNIST POLICIES TOWARD UNDERDEVELOPED AREAS
Communist China, taking an
active role in bloc efforts to
supplant Western influence in
underdeveloped regions, concen-
trates chiefly on a propaganda
offensive, cultural exchanges,
and trade. Peiping's primary
target is Southeast Asia, but
it is becoming increasingly ac-
tive in the Middle East, Africa,
and Latin America. In addition
to working for the advancement
of bloc interests in these areas,
the Chinese hope to win wider
diplomatic recognition and in-
ternational acceptance. Only
recently embarked on their own
industrial development, the
Chinese have gained prestige by
extending or offering economic
aid to other underdeveloped
countries--Egypt, Yemen, Burma,
Nepal, Cambodia, Ceylon, and
Indonesia. Chinese aid thus
far offered to these countries
totals about $100,000,000.
Peiping like Moscow sus-
tains a sizable propaganda ef-
fort in aligning itself with
nationalistic and anticolonial-
ist sentiment. The West, par-
ticularly the United States,
is persistently vilified for
"imperialistic" activities in
underdeveloped regions. Pei-
ping initiated a series of daily
radiobroadcasts to Arab states
in November, and a similar se-
ries to Latin America in De-
cember.
Chinese propaganda direct-
ed to the Middle East and Latin
America invites underdeveloped
countries to model their efforts
on Chinese experience to achieve
independence from the West.
The Chinese pose as members of
the "colored race" who have suc-
cessfully overthrown "imperial-
ist aggression" in acquiring
independence. Chinese books,
pamphlets, and other literature
are found in increasing quanti-
ties in the Middle East and
South America, and all develop
this theme while chronicling
the advances made on the main-
land under the Peiping regime.
To spread their influence
in areas where they lack diplo-
matic representation, the Chi-
nese continue to rely on "peo-
ple's diplomacy'--widely varied
cultural exchanges--and are
financing an increasing number
of mainland visits by groups
from the Middle East, Africa,
and Latin America, as well as
from Asian states. Most of the
travelers return home with glow-
ing accounts of Chinese achieve-
ments and thus can serve to
popularize the Peiping regime.
Businessmen and traders
among the travelers often come
away with dazzling visions of
China with its population of
about 640,000,000 as a poten-
tially lucrative market. Play-
ing on this, the Chinese have
sent trade missions on exten-
sive travels and have received
similar missions from abroad.
Hampered by shortages in for-
eign exchange and committed
largely to the bloc for foreign
trade, the Chinese have signed
no extensive trade agreements
with free world countries, but
they cultivate a belief that
the possibilities for trade in
the future are good. The Chi-
nese frequently equate "maximum"
trade arrangements with early
diplomatic recognition.
There is evidence that
Peiping may be playing an im-
portant role in guiding the
activities of some foreign Com-
munist parties. Peiping has
influenced party affairs in a
number of Asian countries over
the past decade, and some Com_-
munist leaders in Latin America,
as well as those in Egypt, are
beginning to place greater em-
phasis on Peiping as a source
TJAL
'PART TTT PATTERNS AND PFTY.SPVV1rtvie
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 of 16
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
of ideological guidance, with-
out rejecting,
cow9s recognized supremacy.
Communist China's politi-
cal and economic drive in under-
developed areas is concentrated
in South and Southeast Asia, ve
where the long-term objective
is an alignment of states which
can be dominated from Peiping.
One of the means now being em-
ployed is trade. Approximately
25 percent of China's $1 billion
worth of annual trade with the
free world involves this area.
For the most part, Peiping
supplies Southeast Asia with
inexpensive Chinese-manufactured
goods rather than the raw lma-
terials with which it supplies
other free world markets. This
tends to promote the view that
China is rapidly approaching
industrial self-suffncy.
pol-
Moreover, Chinese pricing
icies are designed to eliminate
competition from Japan and Kong and make Southeast Asia
dependent on the mainland. By
quoting prices well below those
prevailing in the market and by
offering favorable payment
terms, Peiping is able to under-
cut the position of private
traders.
The Overseas Chinese, many
of whom are influential in the
politics and economies of their
host countries, are important
targets for Chinese Communist
strategems. Embassy staffs give
advice and guidance to pro-Com-
munist Overseas Chinese indiv-
iduals and organizations and
help promote their causes.
Local branches of the Peiping-
controlled Bank of in
and
Burma, Malaya, Indonesia, loans
Singapore offer easy-term
Overseas Chinese merchants
to purchase exports from the
mainland. In some cases such
loans are extended inreturn
o
for the borrower's promise
support Communist objectives.
The extension of economic
aid is a newer device for Pei-
ping, one which the regime's
officials admit sdifficult
be-
to use to any great
cause of limited resources.
China's first venture in for-
eign aid was made in the sum-
mer mer of 1956, with a grant
$22,400,000 to Cambodia. That
fall it extended aid worth al.
$13,000,000 to neighboring Nepal.
Since then, the Chinese have
offered low-interest loans of
$20,000,000 to Indonesia b used in building up
sumer industries, and $4,200,-
000 to Burma for a textile mill.
Last September, a grant of $15,-
750,000 was made to Ceylon for
the rehabilitation of Ceylonese
rubber plantations. Except for
$4,200,000 in cash given Nepal,
this aid to Asian countries has
involved light industrial
soldgoods,
which in many cases
the receiver countries to gener-
ate funds for the domestic
economy.
Peiping boasts that its
aid has "no strings attached."
It is tailored to the economic
requirements of the countries
concerned and in some cases is
particularly well matched with
Soviet approaches. The aid to
Ceylon's rubber replanting pro-
gram, which was offered at the
con-
end of China's five-year
at prices
tract to buy
well above the market level,
has been followed by a Soviet
offer to buy most of Ceylon's
s
rubber output at top prices.
Middle East and Africa
The Chinese have followed
the Russian lead in noisily
backing Arab causes, and have
aligned themselves with Egypt,
Syria, and Yemen on all issues
involving the Middle East. The
Chinese effort in the area is
almost entirely political, but
in some cases pledges of friend-
ship have been backed byea co-
nomic nomic aid. Peiping gave gift of $5,000,000 to Egypt
SECRET
__ ~A,rq,RRNS AND PERSPECTIVES Page 2 of 16
PAR7 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
during the Suez crisis in 1956
and recently extended an inter-
est-free credit of $16,500,000
to Yemen for purchases of ve-
hicles and other commodities
from China. The Sino-Yemeni
agreement, worked out by Chou
En-lai and Crown Prince Badr
during the latter's visit to
China in December and January,
calls for the Chinese to send
road construction technicians
to Yemen and for the training
of Yemeni students in Chinese
schools. Trade between China
and the Arabs amounts to about
$40,000,000 annually, most"of
it involving Egypt.
Cultural exchanges between
China and the Arab countries
are increasing and visits of
high-level officials are in the
offing. Chou En-lai is planning
to go to Cairo, and probably
Damascus, later this spring.
No date has yet been announced
for Nasir's projected tour of
the Far East.
Peiping is active in Africa
also, working to increase trade
and promote bloc interests.
Chief targets are the newly in-
dependent governments from which
Peiping seeks diplomatic recog-
nition. The Chinese see trade
and "people's diplomacy" as
intermediate steps toward this
goal. Morocco, Tunisia, Ghana,
and Sudan are the prime objects
of Peiping's attentions.
Latin America
As in the Middle East, the
Chinese rely primarily on propa-
ganda in contributing to bloc
attempts to penetrate Latin
America. Chinese activity is
supplemented by a trade drive.
Tours of South America by Chi-
nese Communist entertainment
troupes have helped to focus
some Latin American interest
on China.
There has been limited
trade with Mexico, Argentina,
Brazil, Uruguay, and Cuba, and
a Chinese commercial delegation
in 1957 made a seven-month tour
of Argentina, Chile, and Uru-
guay in hopes of landing sig-
nificant trade contracts. No
trade or payments agreements
were reached, but reports sug-
gest the Chinese may have made
some headway in Uruguay. If,
as the Chinese hope, a perma-
nent trade mission can be posted
there, Peiping will have its
first representation in the
western hemispher
e
(Prepared jointly
ORR)
SOVIET PRICE REFORM DISCUSSION
For the past year, Soviet
economists have been discussing
pricing policies in an effort
to cope with the growing size
add complexity of the economy.
As more decisions are entrusted
to lower echelons in connection
with the regional reorganiza-
tion of industrial management,
it becomes increasingly impor-
tant that these echelons, as
well as planners in Moscow,
work with prices which realis-
tically reflect production and
consumption conditions. Al-
teration of the price system
is also aimed at eliminating
obvious anachronisms such as
the use of prewar labor norms
and wage rates in determining
production costs.
In its wider implications,
the debate could bring into
question certain basic Soviet
tenets which deny that a price
system can be efficient as an
automatic regulator of a so-
cialist economy, and stress the
role of centralized planning.
In view of the increasing at-
tention being given to more ef-
ficient use of resources in the
USSR as one way of promoting
SECRET
PART III PATTERNS AND PERSPECTIVES Paap
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9 of 16
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
economic growth, fundamental
questioning of economic dogma
may well persist.
The debate involves staff
members of the Academy of
Sciences, Gosplan experts, uni-
versity professors, factory
managers, engineers and tech-
nicians, and students. It
began in specialized newspapers
and magazines on economics and
was taken up by statistical
conferences, public meetings,
and by party journals such as
Kommunist and In Aid of Politi-
cal Se -Educati n.
The appraisal is concerned
particularly with the pricing
of producer goods, such as raw
materials, semifinished goods,
and machinery. Prices for some
of these goods now do not cover
the cost of production--a de-
viation from the standard pric-
ing doctrine in the USSR. In
addition, prices often do not
reflect abundance or scarcity
relative to the demand for
goods. Unduly low prices for
high-cost or scarce commodities
encourage their wasteful use.
Two Schools
The proposals advanced to
correct these deficiencies fall
into two general categories.
One school--represented by
Strumilin, Kronrod, and Kondra-
shev of the Academy of Sciences
--has advocated an across-the-
board increase in industrial
wholesale prices. A uniform
percentage markup, combining
profits and excise taxes, would
be fixed for all industrial
production, and would be cal-
culated as a percentage of wage
costs or of total cost.
At present, although the
profit rate is planned in rela-
tion to total cost, rates vary
for different industries and
excise taxes vary widely. Price
differences under the revised
arrangement would reflect dif-
ferences in either labor costs
or total cost. According to
Soviet estimates, however, such
an increase would cause a 100-
percent rise in the producer
goods price level, because of
its cumulative effect, since
some producer goods are used
in the production of other pro-
ducer goods.
The second school is rep-
resented by Professors Bachurin
and Turetsky, Gosplan price ex-
pert Mayzenberg, Ostrovityanov
of the Academy of Sciences, and
Gatovsky, editor of Problems
of Economics. Thisschool op-
poses a general increase in
industrial wholesale prices,
on the grounds that it would
not meet what they consider the
primary need of price reform--
a system of prices which more
accurately reflects scarcities
and real costs. This group
also believes such an increase
would violate the policy of
making periodic reductions in
producer goods prices as costs
decline.
Instead, this school pro-
poses selective increases or
decreases in industrial whole-
sale prices--the differing rates
of profit to reflect relative
scarcities. For example, prof-
its would be higher in extrac-
tive industries than in machine
building, which in turn would
have a higher profit. rate than
light industry. Were industries
to retain and invest their prof-
its, expansion could be ef-
fected in those industries where
it was required. This scheme
would reverse the present
prevalence of higher profit
rates in light industry than
in heavy industry.
Retail Prices Exempt
Neither group, has proposed
major changes in retail prices.
Any increase in costs in light
industry caused by an increase
in producer goods prices would,.
according to both schools, be
at the expense of excise taxes
or profits rather than retail
prices. However, since it is
generally agreed that the level
of retail prices must be high
enough to absorb the money
income of the population,
return to the practice of annual
general retaii'pric a cuts. of
SECRET
PART III PATTERNS AND PERSPECTIVES
Page 4 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
Ift"Aw
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
1948-1954 is unlikely, although
adjustments .inL -the.- prices,
of certain consumer goods and
services are recommended by
some economists.
Neither group has advo-
cated changes in the general
level of agricultural procure-
ment prices. While endorsing
the price increases established
in 1953-1955 as being necessary
to stimulate lagging agricultur-
al output by-increasing farmers'
incomes, Soviet economists also
endorse the principle of keep-
ing agricultural procurement
prices substantially below re-
tail prices. From this "spread,"
the state is reimbursed for the
land and services it provides
agriculture and avoids greater
reliance on direct income taxes.
However, some adjustments have
been advocated in the prices
of individual agricultural prod-
ucts, such as an increase for
livestock and a reduction for
flax. In addition, some writ-
ers have recommended the adop-
tion of a single form of state
procurement at a single price--
instead of the present system
which calls for obligatory de-
liveries to the state at one
price and above-quota sales to
the state at another higher
price.
Recent issues of Kommunist,
the chief party journal, have
given some clue to what the of-
ficial line on price reform may
be. It appears likely that ad-
justments will be made in the
most conspicuous cases of under-
pricing--coal, for example, A
decision may be taken to re-
duce or eliminate subsidies
judging from the price increase
and the elimination of sub-
sidies on timber decreed early
in 1957. Timber had been sold
for many years at a loss. How-
ever, it seems probable that
a general price change will
come only when the planned re-
valuation of fixed assets and
the revision of amortization
rates are completed in 1959.
According to views expressed in
Kommunist, the periodic whole-
sale price changes for industry
should take the form advocated
by the second school--selective,
specific price adjustments.
Prepared by ORR) 25X1
The prospects for Middle
East oil production in 1958
are for, a r0cord - ye;gx, . , with
levels substantially above those
before the Suez crisis in late
1956. All major Middle East
crude producers except Iraq,
had fully recovered from the
Suez crisis by mid-1957. By
the end of 1957, over-all Mid-
dle East production had in-
creased about 2 percent over
1956 and some 8 percent com-
pared with 1955.
Leading the improvement was
Iran, which increased produc-
tion to 725,000 barrels per day,
almost 34 percent over the pre-
vious year, and,exceeded,'for the
first time the output level of
1950, the year before nation-
alization of the oil industry.
Least affected by the Suez
closure, the Iranian oil situa-
tion seemed to be moving-
SECRET
PART III PATTERNS AND PERSPECTIVES Page 5 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SU1- ARY
30 January 1958
contrary to established oil in-
terests for a while last year
when the government-owned Na-
tional Iranian Oil Company
signed an agreement with the
Italian government-controlled
national oil company ENI to ex-
ploit jointly onshore and off-
shore concessions. While this
agreement calls for the usual
50-50 percent profit split, its
provisions are such that the
Iranian Government will receive
75 percent of the profits. The
SECRET
Oil pipeline
------ Proposed oil pipeline
Metline trunk system
Metline feeder system
30 JANUARY 1958
Oil pipeline
----- Proposed oil pipeline
== Metline trunk system
30 JANUARY 1958
O MILES 500
agreement thus poses a potential
threat to the 50-50 formula
widely used in international
oil operations. The Italian
deal, however, is unlikely to
have any appreciable effect in
the next several years on the
operations of other Western
companies, since neighboring
oil countries have adopted a
wait-and-see attitude toward.
possible renegotiation of oil
agreements.
Soviet- proposed pipeline 'ill)' 'fill Sea
Rasht
PART III PATTERNS AND PERSPECTIVES U2174:1 F of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
"CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
CRUDE OIL SITUATION 1957
PROVED RESERVES PRODUCTION
BILLIONS
OF
BARRELS
TOTAL 53 168.7S
The Italian company plans
to spend $6,000,000 in the next
four years and $16,000,000 in
the succeeding eight, whereas
the consortium of almost 20
other Western companies operat-
ing Iran's oil industry will
spend $140,000,000 in 1958
alone. The consortium, moreover,
pays profits in hard currencies
and offers established trans-
port and marketing facilities
--advantages known to area.gov-
ernments.
Iran probably has the most
favorable prospects in the Mid-
dle East for continuing sub-
stantial production increases.
The growing markets of the con-
sortium companies have en-
couraged the group to invest
heavily in the Gach Saran field
in southern Iran--$53,000,000
in the next few years. This
field, discovered in 1928 but
held in reserve because of the
special processing required for
its crude, is believed by some
to be the largest in the world.
In 1956 it had only one pro-
ducing well, with an output of
TOTAL 10,444
OUSANDS
F BARRELS
PER DAY
IRAQ
QATAR 136
only 231 barrels a day. In 1957,
12 wells were producing a total
of 43,000 barrels per day, and
present plans call for construc-
tion of several processing
plants each to handle 150,000
barrels per day.
Progress on the government-
owned and .'-oper.a.ted Qom. st-r.ike
has been steady if unspectacular.
The Qom wildcat, located more
than 200 miles from any other
Iranian field, was brought in
in 1956 and, uncontrolled,
gushed about 80,000 barrels a
day until the well collapsed.
An American syndicate has agreed
to finance construction of a
pipeline from the field across
Turkey to the Mediterranean.
Implementation of this project,
however, depends ultimately on
sizable proved reserves at Qom.
The USSR reportedly has
offered to participate in Iran's
oil industry through a guarantee
to purchase crude from areas
yet to be exploited and to build
a pipeline from Iran under the
Caspian Sea across the USSR to
SECRET
3,498
PART III PATTERNS AND PERSPECTIVES Page 7 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
the Black Sea, apparently ter-
minating near Batumi. There
has been no official Iranian
acknowledgment of the offer.
Iraq
Iraq's crude production in
1957 averaged- only about 440,-
000 barrels per day--35 percent
below 1955--a direct ;result of
the destruction of pumping sta-
tions of the Iraq-Syria-Lebanon
pipelines during the Suez crisis.
These lines, which had a capac-
ity, of about 534,000 barrels
per day just before the Suez
closure, were carrying less
than 390,000 barrels a day in
September 1957. Although they
are to be restored to the pre-
crisis level this year, Iraq's
general transportation bottle-
neck will still keep output at
about the 1955 figure,
During the first. half of
1957 the major Middle East oil
companies discussed construc-
tion of a pipeline--the so-
called Metline--from Iraq through
Turkey to the Mediterranean to
absorb increases in Iraq's
production. The line was also
expected eventually to carry
crude from Kuwait, Iran, and
possibly Saudi Arabia. The
proposal has been indefinitely
shelved, however, largely be-
cause of Iraq's reluctance to
offend its Arab neighbors, and
also because of differences be-
tween the companies concerning
the advantages of a pipeline over
supertankers. Fao, Iraq's only
port, cannot handle more than
200,000 barrels a day. Con-
struction of a second part now-
planned at the mouth of the
Shatt-al-Arab River, however,
would allow substantial produc-
tion increases.
Thus far neither economic
activity in general nor Iraq's
ambitious development plans--
which are completely dependent
on oil revenues--have been meas-
urably affected by decreased
oil production. The cutback
in oil revenue was made up from
substantial reserves built up
in previous years by the Iraq
Development Board--amounting to
over $200,000,000 at the time
of the Suez closure--and loans
from the Iraqi Petroleum Com-
pany (IPC). Minister of Fi-
nance Nadim Pachaci has ac-
knowledged, however, that fiscal
1959 will probably be an "aus-
terity" year. Spending will be
cut somewhat to reduce the
$36,000,000 deficit originally
envisioned, and Pachaci also
hopes to postpone until January
1959 payments on the IPC loan
due this July and to receive
an additional $13,000,000 to
$15,000,000 from the IPC.
Saudi Arabia, almost as
hard hit by the Suez crisis as
Iraq, had only a modest crude
production increase in 1957.
The year's average was 990,000
barrels per day, only 0.4 per-
cent over 1956 and about 12 per-
cent below Kuwait, still the
area's record producer.
There were, however, several
significant petroleum develop-
ments. The Safaniya field--the
Persian Gulf's first offshore
field, discovered in 1951--was
brought into production in April
following completion of a 140-
mile 22-inch pipeline to loading
facilities at Ras Tanura. The
line is expected to carry up to
175,000 barrels a day by mid-
year. The Arabian-American Oil
Company (Aramco) in late Novem-
ber brought in an offshore wild-
cat at Manifa which reportedly
hit a new producing formation
of unknown size.
Onshore, two important dis-
coveries were made this year.
The strike at Khurais may be
one of the most important to
date. Khurais is near the west-
ern border of the Aramco conces-
sion adjacent to a large area
SECRET
PART III PATTERNS AND PERSPECTIVES Page 8 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
30 January 1958
in which the company has only
"preferential rights"--i.e.,
the right to meet any compet-
ing bid. Also in 1957, Ain
Dar Number 56 was brought in,
extending the Ghawar field 12
miles northward. This field,
the largest in Saudi Arabia,
now is 152 miles long and about
16 miles wide 5
The capacity of the 735-
mile Trans-Arabian Pipeline
(Tapline'), which terminates at
Sidon, Lebanon, is being.
stepped up this year to 435,-
000 barrels a day as compared
with 325,000 barrels a day be-
fore the Suez closure.
A Japanese mission which
visited Riyadh in December to
discuss a concession agreement,
in Saudi Arabia made little
progress. The Japanese, how-
ever, did obtain the concession
to exploit Saudi Arabia's half
RAS 1 /If"1 r71'1 F N
.I.-
,CAI Agabah
WADI FEIRA
rr
BELA YIM
`k1 URGHADA
E GYP T
NEUTRAL
ZONES
El
? Oil field
Oil pipeline
- - Proposed oil pipeline
Arabian American Oil Company
concession
Arabian American Oil Company,
area of preferential concession
rights
S A U D I rABQAI
t~ 1 AND DMAN)
,QATAR
Al Huiuf
AD DAWHAH
A WAR
Jidda!o ?MECCA
11
Port Sudana
SUDAN I KHARTOUM J
r
interest in the Neutral Zone's
offshore areas.
Neutral Zone
In terms of Middle East
oil, the Neutral Zone between
Kuwait and Saudi Arabia is in-
significant, with crude pro-
duction averaging only 65,000
barrels a day in 1957. How-
ever, production will probably
increase to 100,000 barrels a
day this year. The Saudi-Japa-
nese agreement, has given the
zone a new importance.
The onshore areas of the
Neutral Zone are under conces-
sion to two American firms, the
Getty Oil Company and the Ameri-
can Independent Oil Company
(Aminoil). Field operations
are on a joint basis. Getty
received its concession from
Saudi Arabia, while Aminoil
is exploiting Kuwait's half
KHURAIS
(discovery
well)
A R A B I A
'YEMEN
6~SANA
-- / COLONY
OF ADEN
FR. SOM. (urc.)
SECRET
Os"
MUSCAT
Z
Q t
PART III PATTERNS AND PERSPECTIVES Page 9 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
?
RAUDHATAIN
(nonproducing)
MILES 50
24846
interest. Each company pays
its consignor country roughly
50 percent of the company's
profits.
The agreement assigning
Saudi Arabia's half interest
in the Neutral Zone offshore
area to the Japanese group is
the first to depart specifically
from the 50-50 profit split
prevailing in the area. Saudi
Arabia will participate in the
management of the company and
apparently will receive 56 per-
cent of the profits of transpor-
tation, refining, and marketing
as well as production.
The agreement is a triumph
for Tariqi, Saudi Arabia's am-
bitious and competent director
of petroleum affairs, who has
been hoping to broaden his coun-
try's participation in Aramco
operations and eventually to
acquire for his country a share
of the transporting, refining,
and marketing profits of the
company's operations.
30 January 1958
K U W A I T OQasr as Sabihiya
KUWAIT
1
Recovering quickly from the
Suez closure, Kuwait crude pro-
duction,still the largest in
the Middle East, reached a rec-
ord high in early December of
1,405,000 barrels a day, up
about 17 percent from the level
just preceding the closure.
The year's daily average, how-
ever, was about 1,111,000 bar-
rels a day, less than 2 percent
above 1956. Expansion of load-
ing facilities to accommodate
the increasing output began at
the Mina-al Ahmadi tanker
SECRET
PART III PATTERNS AND PERSPECTIVES Page 10 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
terminal; a new jetty, expected
to be completed by mid-1959,
is being built. Other facili-
ties enlarged in 1957 increased
loading capacities from 1,200-
000 to 1,500,000 barrels a day.
The Raudhatain field, dis-
covered in 1955, was confirmed
last year and, while probably
not as large as the Burgan field,
promises to be a major producer.
All 1957 production was from
the Burgan and Magwa-Ahmadi
fields, which boast reserves of
60 billion barrels, the largest
in the world.
While Kuwait is negotiat-
ing with Japanese and American
groups for the offshore half-in-
terest in the Neutral Zone,
there has been no activity re-
garding the offshore area of
Kuwait proper. The area on-
shore and out to the six-mile
limit is under concession to
MAURITANIA ??`
SUDAN..-?
~00000?? Kr r n_ r o T r^ u A ri
SECRET
the Kuwait Oil Company, in
which the Gulf Oil Corporation
and the British Petroleum Co.,
Ltd? each have a 50-percent in-
terest.
Algeria
Algerian crude production
was negligible in 1957, with
only one old field about 65
miles south of Algiers produc-
ing an average of 346 barrels
a day. Drilling continued on
four fields discovered in 1955
and 1956, however, and proved
reserves increased from about
15,000,000 barrels in 1956 to
about 500,000,000 last year.
Ultimately, reserves from these
fields may exceed 8 billion
barrels--more than onshore re-
serves in the Neutral Zone.
The main problem in Algeria
is transporting the oil through
rebel-infested territory to the
Algiers. Bougie Phitippeville j
Tunis
Rhardaia?
("''Colomh Bechar
A L G E R I A
?In Salah
1 I
!TUNISIA
Biskra ?
Gabes
uara
Tl `,-
/ Tripoli
?Ouarglaouggour
/
TIGUENTOURINE / Esso concession
r
?, FEZZAN
N
FRENCH
EQUATORIAL
AFRICA
PART III PATTERNS AND PERSPECTIVES Page 11 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
coast. French hopes of utiliz-
ing Hassi Messaoud crude are
pinned on a 112-mile 6-inch
pipeline completed in December
which joins the field to the
railhead at Touggourt, where
the crude would be transferred
into tank cars for the 340-
mile rail journey to the Al-
gerian port of Philippeville.
The first token trainload of
1,500 barrels in mid-January
was delayed when rebels de-
railed 20 cars in a preceding
train. The pipeline, built
under a $3,000,000 crash pro-
gram, is expected to carry
4,000 barrels a day.
An American group has
proposed a $40,000,000, 18-
inch pipeline from Hassi Mes-
saoud to the Edjele field
through Libya to Tripoli. The
line would have an initial
capacity of 100,000 barrels a
day which lager could be stepped
up to 160,000. A French group
has made initial surveys on a
300-mile 24-inch line from Has-
si Messaoud to Bougie On the
Algerian Mediterranean coast.
This line would have an initial
capacity of 100,000 barrels a
day which could ultimately be
raised to 300,000.
Libya
Hopes that Libya might
hold major petroleum deposits
were raised in late December
when the Libyan affiliate of
Esso--Standard Oil Company
(New Jersey)--had favorable
oil shows in its concession
near the Algerian border. A
wildcat, which tested 280 bar-
rels a day, is located just
across the border from the
French discovery at Edjele,
where oil in commercial quan-
tities was found in 1955. While
substantial drilling and ex-
ploration work continues through-
out most of the country, the
Esso well offers the strongest
evidence to date of oil in
commercial quantities in Libya.
The future of Libya as an oil
country may well be determined
by the end of 19 58 .
In other Libyan develop-
ments, Enrico Mattes, Middle
East troublemaker and dynamic
head of Italy's national oil
company, ENI , suffered a major
setback when the Libyan conces-
sion for which he was negotiat-
ing was suddenly awarded to
an American company.
Egypt
In 1957, Egypt made sig-
nificant progress toward its
goal of self-sufficiency in
petroleum. Reversing a long-
term downward trend, Egyptian
crude production from all fields
reached an average of 48,000
barrels a day. This 30-percent
increase over 1956 was due al-
most exclusively to increased
production from the Belayim
field on the Sinai Peninsula,
discovered in 1955. The Rudeis
field on Sinai, discovered last
year, is also expected to be
a major producer by Egyptian
standards.
While production increased
to the equivalent of over 60
percent of total petroleum con-
sumption--about 80,000 barrels
a day--imports of crude remain
at a high level because of the
characteristics of Belayim
crude. In addition to having
a high salt content which ren-
ders it virtually unusable.
in present Egyptian refineries,
Belayim crude yields practical-
ly no kerosene or distillate4,
which are major items in Egypt's
petroleum consumption.
Through its holdings in
the International Egyptian Oil
Company, the Italian govern-
ment-owned ENI has been import-
ing 15,000 barrels a day of
Egyptian crude and hopes to
double that amount this year.
Since the Suez crisis,,
nearly all Egyptian crude pro-
duction and refining have been
dominated by the government.
Following the hostilities,
Cairo sequestered the previously
predominant British interests,
including the largely British
SECRET
PART III PATTERNS AND PERSPECTIVES Page 12 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
owned refinery at Suez, handling
44,000 barrels per day. With
the help of Czechoslovakia,
Egypt is doubling the capacity
of its own plant at Suez to
about 55,000 barrels a day.
Israel
Israel :.ailed to make any
appreciable progress last year
in its search for an adequate
FALLING METAL PRICES DISTURB
The downward trend in
prices for copper, tin, lead,
.,.nd zinc is undercutting the
economies of Chile, Bolivia,
Mexico, and Peru--the four
Latin American countries where
metal ores are critically im-
portant foreign exchange earn-
ers. The success of the US-
backed economic stabilization
programs in formerly inflation-
ridden Chile and Bolivia is
endangered by the loss of for-
eign exchange and by the pos-
sibility that opposition pol-
itical groups will capitalize
on the threat of new US tar_
iffs. Under this pressure
source of domestic oil. Al-
though production from the Heletz
field--the only proved field in
Israel--was double that of 1956,
the amount was still negligible.
The 1,200 barrels a day produced
in 1957 accounted for less than
5 percent of the country's re-
quirements of about 25,000.
Reserves are estimated at about
50,000,000 barrels. Prospects
for a substantial find this year
are not promising.
While production was dis-
appointing, the government
changed its petroleum transport
system markedly. Prior to 1957,
no petroleum was moved through
the port of Eilat on the Gulf
of Aqaba. Last year, however,
a pipeline from Eilat to the
Mediterranean was completed
along with storage facilities
at Eilat for 225,000 barrels
of oil. Probably as much as
50 percent of Israel's 1958
petroleum imports will pass
through Eilat. The origin of
this petroleum is non-Arab Iran,
which continues to allow crude
shipments to Israel despite ap-
eals from its Arab neighbors.
LATIN AMERICAN ECONOMIES
Chile is turning to the Soviet
Union as a customer for its
copper,
The Mexican and Peruvian
export patterns are the most
diversified in Latin America
and these countries are there-
fore not so dependent on a
single category of exports.
The affected metals neverthe-
less make up about 15 and 40
percent respectively of total
exports, and falling prices
rill put a brake on economic
growth.
Only four Latin American
countries are seriously affected
SECRET
PART III PATTERNS AND PERSPECTIVES Page 13 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY BURY
30 January 1958
Chihuahua
o Q A
? MonWWey
Durango w 2 Nirl-AL it-"
Y ?San Luis
Potosi
o?
MEXIICCO CITY
SELECTED MINERAL DEPOSITS
IN LATIN AMERICA
+Copper ^ Tin
A Lead
01111111111111
COSTA RICA
by metal market developments.
Nevertheless, action at a meet-
ing of the Inter-American Eco-
nomic and Social Council in
late December suggests that the
20 Latin American countries have
a strong feeling of solidarity
as producers of primary commod-
ities. Although only three
produce significant quantities
of lead and zinc, 15 members
of the council voted to oppose
an increase in US tariffs on
those ores. Representatives
of five countries were not pres-
:ent',, and the US representative
cast the only negative vote.
Copper
The world supply of cop-
per exceeds the demand for the
first time since before World
War II--a fact with serious im-
plications for Chile, with 65
percent of its export earnings
derived from this metal; Peru,
with 11 percent; and Mexico,
with 6 percent. The spectacu-
lar price drop, from a New York
high of 46 cents per pound in
the first half of 1956 to a
January 1958 low of 25 cents
in New York and 21.2 cents in
London, seriously threatens the
US-backed economic stabiliza-
tion program in Chile. A drop
to 24 cents would bring into
effect a mandatory US tariff
and might result in the deteri-
oration of relations with the
United States in all these cop-
per-producing countries.
S
PANAMA
DOMINICAN
t REPUBLIC
HAITI!;,
PERU
Cerra =
Trujillo *+,` e Pasc
Arequipa yam.,
? EA BOLIVIA"
BR.
GUTA
-~PUTANA
RIN.% ,
r
A PARAGUA
ITIACO
,UIUUGUAY
The high copper prices of
early 1956 led to increased in-
vestment by producers in im-
provements and expansion, shifts
by manufacturers to cheaper
substitute materials, and, in
anticipation of still higher
SECRET
PART III PATTERNS AND PERSPECTIVES Page 14 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
30 January 1958
prices, the accumulation of
inventories by consumers,, but
some readjustments in these
situations have already oc?i
cu=e. A world-wide 10-percent
producers' cutback is now tak-
ing place, and while copper
prices may drop still further
and fall below the 24-cent
minimum, future price cuts will
be minor compared with the drop
that has already taken place.
While the long-range out-
look appears fairly good,'the
immediate problems of overpro-
duction and lower prices have
caused mine shutdowns in Mex-
FROM COPPER, TIN, LEAD & ZINC
(MILLIONS OF DOLLARS)
ico and production cutbacks in
Peru, while in Chile the clos-
ing down of marginal producers
has been stalled only, by gov-
ernment subsidies. In the
event the US tariff is applied,
the difficulties of the Chilean
Government would be greatly in-
creased in pursuing its economic
reform program, which is widely
known to be backed by the
United States. Chile is nego-
tiating with the USSR for sales
of bare copper wire to the
Soviet bloc in the hope of mak-
ing up some of its foreign ex-
change deficit.
Popular. ignorance in Latin
America regarding the world
copper market and latent dis-
trust and dislike of the large
American companies continue to
create a fertile field for po-
litical extremists in Chile and
Peru, particularly in conjunc-
tion with other economic prob-
lems confronting the governments.
Mexico sees the threat to its
copper production as proof that
the United States is not aware
of the effects in Latin America
of US tariffs and economic
policies.
Tin is almost as important
to Bolivia as copper is to
Chile, since tin makes up about
60 percent of total Bolivian
export earnings. Tin prices
have dropped 14 percent, from
$1.09 per pound in early 1956
to about 91 cents in 1958. The
excess supply has resulted pri-
marily from the cessation of
strategic stockpiling by the
United States in 1956 and from
recent Soviet sales in the free
world of an amount equal to
about 4 percent of annual world
consumption.
Open market purchases un-
der the terms of the Interna-
tional Tin Agreement--which
came into force between Bolivia
and five Afro-Asian countries
in mid-1956--have steadied the
market and, by absorbing excess
production, should prevent
prices from declining much be-
low the agreed floor of 91.25
cents per pound. Even these
operations, however, are not
without cost to Bolivia, since
the government has had to bor-
row a considerable sum of
money to contribute to the
buffer-stock fund. Furthermore,
its exports for the first quar-
ter of 1958 are under quanti-
tative limits established by
the Tin Council set up under
the tin agreement.
Lead and Zinc
Lead and zinc--which are
usually mined together--do not
dominate any one of the Latin
American economies but provide
at least a tenth of total ex-
port earnings in Mexico, Peru,
and Bolivia. The fall in lead
prices from 16 to 13 cents over
SECRET
PART III PATTERNS AND PERSPECTIVES Page 15 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
SECRET
CURRENT INTELLIGENCE WEEKLY ;SUMMARY
30 January 1958
the past two years, and in zinc
prices from 13 to 10 cents, is
having a depressing effect on
the economies of these countries.
These two minerals in them-
selves are the most important
for the mining industry in
Mexico, and the production of
other minerals as by-products
contributes a sizable amount
to the economy. For example,
two companies, both primarily
lead and zinc producers, ac-
count for 66 percent of Mexican
silver production.
Falling production will
have an adverse effect on the
Mexican budget as well as on
exchange earnings because,
while certain small producers
have already closed mines, the
larger producing companies are
in an inflexible position re-
garding labor. As in Peru and,
to an even greater extent, in
Bolivia, these companies cannot
lay off workers without legal
complications and without paying
heavy indemnification. Produc-
ers are likely, therefore, to
seek increased Mexican Govern-
ment subsidies to counter fall-
ing production rather than to
cease operations to redress
the balance between supply and
demand..
Peru's lead and zinc ex-
ports are only about half as
large as Mexico's but, since
Peru's economy is much smaller,
these ores play a more impor-
tant role, making up 15 percent
of total export revenues in
1956. As in Mexico, lead'mining
SECRET
in Peru brings with it an in-
creased production of other
metals.
The Peruvian lead and zinc
industry appears in worse con-
dition than the Mexican. Peru
is farther than Mexico from
world markets and its mines
are located at an altitude of
13,000 feet or higher, thus
adding to transportation costs.
Furthermore, the silver content
of the lead and zinc ores some-
times spells the difference
between profit and loss, and
Peruvian ores are not generally
as high in silver content as
Mexican ores. While most pro-
ducers in Peru have thus far
postponed mine shutdowns to
avoid heavy labor layoff costs,
only the lower cost producers
are expected to continue pro-
duction through 1958.
Exports of lead and zinc
ores from Bolivia come to only
about one fourth of Peru's ex-
ports, but in Bolivia's tiny
economy they represented about.10
percent of total foreign exchange
earnings during 1956. Because of
the decline in the earnings of
tin and tungsten--tungsten ore
prices fell more than 50 percent
in 1956-57--lead and zinc ex-
ports provided 18 percent of
foreign exchange earnings during
the first nine months of 1957.
The cost structure of lead and
zinc production appears to be
more precarious in Bolivia than
in Peru, since Bolivia's mines 25X1
have equipment deficiencies and
are even more isolated from world
markets than Peru's.
PART III PATTERNS AND PERSPECTIVES Page 16 of 16
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
 Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9
Approved For Release 2007/10/23: CIA-RDP79-00927AO01600060001-9