CURRENT INTELLIGENCE WEEKLY SUMMARY

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001800060001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 45
• Document Creation Date: December 16, 2016
• Document Release Date: February 16, 2005
• Sequence Number: 1
• Publication Date: July 10, 1958
• Content Type: SUMMARY

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CONFIDENTIAL
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 50
OCI NO. 1797/58
10 July 1958
NO CHANGE IN CLASS. ^
O DECLASSIFIED
CLASS. CHXNH .Ef} TO: li
NEXT I(EVIEW DATE:
AUTHato 7G-2
!II
CENTRAL INTELLIGENCE AGENCY
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OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
T ARCHIVES & CIE URU0 CENTL
ESA USE
State Department review completed
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
T H E W E E K I N B R I E F
OF IMMEDIATE INTEREST
LEBANESE SITUATION . . . . . . . . . . . . . . . . . . . . Page 1
Rebel forces continue to harass the Lebanese
Government in their effort to wear down President
Chamoun's resistance to opposition demands that he
abandon any effective political role. One group
of opposition leaders has announced it will try to
discourage Parliament members from meeting on 24
July to elect a new president, since it fears the
present Parliament is too favorable to Chamoun.
The President himself is still pursuing a waiting
SOV IET MOVES IN GENEVA TALKS . . . . . . . . . . . . . . . Page 1
The USSR is continuing its efforts to force
the West to agree in principle to a cessation of
nuclear tests or, failing this, to prepare the
ground for future allegations that Western refus-
al to cease tests is responsible for any failure
of the Geneva talks. The-claim in Moscow's aide-
memoire of 9 July that it is already clear.-an ef-
fective control system is "entirely possible."
suggests the bloc experts will seek to create the
impression that the Geneva talks are developing
a wide area of agreement on control measures and
that only the West's unwillingness to halt tests
stands in the way of a final agreement.
INDONESIA . . . . . . . . . . . . . . . . . . . . . . . . Page 3
Rebel guerrilla activity
in Sumatra is increasingly effective. Although
President Sukarno is unlikely to support them, army
leaders in Djakarta are formulating plans to delay
the scheduled 1959 general elections as a means of
obstructing the growth of Communist influence.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
NOTES AND COMMENTS
STATUS OF PRESIDIUM MEMBER SUSLOV . . . . . . . . . . . Page 1
Although Mikhail Suslov, a member of the Soviet
party presidium, has not been formally demoted, his
present standing is equivocal and may not long remain
publicly unchanged.
USSR ESTABLISHES PRICES FOR AGRICULTURAL PROCUREMENT . . . Page 2
A USSR Council of Ministers resolution, pub-
lished in the Soviet press on 1 July 1958, lists
charges which are to be used in establishing region-
al prices at which the state will purchase agricul-
tural products from collective farms. Many fall
somewhere between the low obligatory delivery prices
and the higher ones for above-quota produce previous-
ly in effect. The total cost to the government will
remain approximately the same as last year. The new
livestock charges are generally higher than the old
above-quota purchase prices--a move to spur Khrushchev's
program for "catching-up" with the United States in the
per capita production of meat.
EGYPTIAN SUBVERSIVE ACTIVITY IN LIBYA . . . . . . . . . . Page 3
The widespread Egyptian campaign of propaganda
and subversion in Libya is apparently well organized,
and plans may already be in preparation for over-
throwing the pro-Western government of King Idriss.
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RELIGIOUS ISSUE DISRUPTS ISRAELI GOVERNMENT . . . . . . . Page 4
Israeli Prime Minister Ben-Gurion's government
is engaged in a dispute with the Orthodox Jewish com-
munity involving the over-all relationship between
church and state. Two cabinet ministers have resigned
over the problem. The controversy, which began over
whether the state or the synagogue is to determine who
is Jewish, has become a conflict between progressive,
secular-minded elements and conservative religious
groups.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
PART II (continued)
KASHMIR . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
Attempts by Kashmiri refugees to cross the
cease-fire line into Indian-held Kashmir have pro-
vided the first occasion since the cease-fire went
into effect in 1949 to observe Indian and Pakistani
government reaction to a politically inspired breach
of the peace. Their reaction suggests that in the
event of future unarmed or armed incursions by rela-
tively small groups, both India and Pakistan would
try to localize the incidents.
CAMBODIAN CROWN PRINCE THREATENS CLOSER TIES WITH COMMUNIST
BLOC . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6
Phnom Penh's political instability and strained
relations with South Vietnam and Thailand are creat-
ing, an atmosphere conducive to greater Communist in-
fluence in Cambodia. Convinced of "Western bias"
against Cambodia, Crown Prince Sihanouk appears to be
setting the stage for closer ties with the Communist
bloc, particularly Communist China. The bloc has
been quick to express support for Cambodia's position,
and its propaganda is reiterating Cambodian charges of
a Vietnamese "invasion."
INDIA, JAPAN WORRIED BY RISING CHINESE. EXPORTS TO SOUTH-
EAST ASIA . . . . . . . . . . . . . . . . . . . . . . Page
India and Japan are becoming increasingly con-
cerned over Communist China's rapidly expanding ex-
ports to Southeast Asia. While Japan's total exports
to the area have continued to increase in recent
years, China has displaced Japan as the supplier of
certain goods in several countries. India's exports
to Southeast Asia, formerly considerably larger than
China's, have been surpassed by Chinese exports in
the last two years.
RECALL OF PEIPING'S ENVOYS SUGGESTS NEW F1tEIGN PCUCY LINE . . Page 8
A number of Communist China's senior diplomats,
including-those in the USSR, Yugoslavia, India,
Indonesia, and Pakistan, have returned to Peiping
since April, apparently to participate in the party
congress from 5-23 May. None is known to have left,
and they may be coordinating new foreign policy ap-
proaches. Failure since 1955 to win wider interna-
tional recognition with a conciliatory policy may
have prompted Peiping to adopt a harsher line.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
PART II (continued)
PEIPING EXPLOITING NEW SZECHWAN OIL FIELD . . . . . . . . Page 9
Communist China is moving urgently to exploit
the petroleum deposits recently discovered in cen-
tral Szechwan Province, and it is apparent that
Peiping feels development of this field could go
a long way toward solving its petroleum supply prob-
lem. Prospecting and drilling have been greatly ac-
celerated, refineries are being constructed, and
trans ortation facilities are being improved.
FRENCH GOVERNMENT PROBLEMS . . . . . . . . . . . . . . . . Page 11
Premier de Gaulle's appointment of Jacques
Soustelle to the cabinet is designed partly to ap-
pease extremists in Algeria but also to utilize
Soustelle's past experience as minister of informa-
tion in preparing public opinion for the consti-
tutional changes which his government is now en-
gaged in drafting and on which its hopes of stabil-
ity depend. After the October referendum on con-
stitutional reforms, De Gaulle may make public his
ideas on the Aleerian question.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
PART II (continued)
THE POLITICAL OUTLOOK IN FINLAND . . . . . . . . . . . . . Page 14
Finland faces a period of political uncertain-
ty as a result of the 6-7 July parliamentary elec-
tions. The Communist-front Finnish People's Demo-
cratic League, which increased its seats from 43 to
50 in the 200-member Diet, is certain to demand
participation in the new cabinet, but the democratic
parties will almost certainly balk at this. The
most likely eventual outcome appears to be a renew-
al of Social Democratic - Agrarian cooperation,
which has been the basis for most of Finland's post-
war governments. For the past year, however, the
two parties have been in basic disagreement over
economic policies.
THE SITUATION IN CUBA . . . . . . . . . . . . . . . . . . Page 15
The Cuban Army's renewed all-out offensive
against the rebels in Oriente Province may elicit
new charges of US aid to Batista and further rebel
retaliations against American personnel and prop-
erty. Rebel forces of Fidel and Raul Castro are
evidently effectively separated but will be hard
to defeat in the mountainous terrain.
ARGENTINE MILITARY DISCONTENT . . . . . . . . . . . . . . Page 16
Discontent in Argentine military circles over
President Frondizi's appointments and policies con-
cerning Peronism and over his failure to make key
decisions on economic problems has grown in the last
week. Military dissension precipitated cancella-
tion of the annual armed forces' banquet on 7 July,
and anti-Peronista feeling has been heightened by
the dismissal of several judges. The scale of un-
rest is not sufficient at the moment to upset the
administration, but these expanding controversies
probably increase the opportunities-for a coup b
disaffected military elements.
PATTERNS AND PERSPECTIVES
MAO TSE-TUNG AND HIS LIEUTENANTS . . . . . . . . . . . . . Page 1
Reports that Mao Tse-tung is being "displaced"
by Liu Shao-chi as the dominant figure in Communist
China seem misleading. Mao does appear to be more
vulnerable than he was two years ago, owing to declin-
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10 July 1958
PART III (continued)
ing energy, the failure of some of his personal poli-
cies, and the increasing strength of Liu and his close
associates. However, Mao has apparently taken the
initiative in the past year to correct or conceal his
earlier mistakes, and Liu and Teng Hsiao-ping have
played the major roles in helping him do so. The
Liu-Teng group is so emphatically associated with
Mao's present policies, particularly. with the hazard-
ous campaign for a "giant leap forward," that it will
not be in a good position to force Mao to retire if
the program fails.
BLOC ECONOMIC ACTIVITY IN AFRICA . . . . . . . . . . . . . Page 5
The bloc economic penetration effort in Afri-
ca is primarily focused on Egypt and the independent
nations of North and East Africa, particularly Libya,
Tunisia, Algeria, Ethiopia, and the Sudan. Substan-
tial economic and military aid is being extended to
Egypt, but elsewhere this activity is restricted to
attempts at increasing trade relations. There has,
been a gradual rise in bloc trade with Africa since
1955; in 1957 the bloc accounted for about 5 percent
of the continent's total world trade.
THE FIRST SIX MONTHS OF EURATOM AND THE COMMON MARKET . Page 8
Six months after the EURATOM and Common Market
treaties came into effect, substantial organization-
al progress has been made, and the community's in-
stitutions are increasingly influential in the intern-
al and external policies of the member states. How-
ever, the political and economic problems De Gaulle
faces in France have cast a shadow on these otherwise
encouraging developments.
PANAMA AND THE CANAL ZONE . . . . . . . . . . . . . . . . Page 12
Recurrent agitation among Panamanians for recog-
nition of their country's sovereignty in the Canal
Zone and for a larger share in canal income and opera-
tion has intensified since the seizure of the Suez
Canal by Egypt in 1956. Severe domestic economic and
political difficulties have aggravated this issue.
Pro-US President de la Guardia's position is not se-
cure and he may be forced from office before his term
ends in 1960. The Soviet press and radio have recent-
ly given considerable attention to Panamanian com-
plaints against the United States.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
Lebanese rebel military
operations, while not as vigor-
onsl as in the earlier weeks of
the disorders, maintained pres-
sure on government forces in
the Tripoli and Beirut areas
during the past week. Army
commander Shihab, who had an
opportunity to pursue rebel
Druze forces into the mountains
southeast of the capital, re-
frained from doing so and demon-
strated again his determination
to remain on the defensive un-
til some political compromise
has been reached. A new rebel
effort around Balabakk in the
Biqa Valley may materialize;
meetings to plan such a move
are reported to have been held
last week.
The Syrian region of the
UAR, meanwhile, apparently re-
mains open to Lebanese rebels
as a safe haven where wounded
may be brought and arms ac-
quired, although there have
been no firm reports of new
mass infiltrations from Syria.
Talk of a political com-
promise has increased consid-
erably,but there has been lit-
tle in the way of serious pro-
posals and no signs that lead-
ers of either side are getting
together. In a manifesto is-
sued after a meeting on 6 July,
a group of rebel leaders an-
nounced they oppose a meeting
of Parliament on 24 July to
elect a new president, osten-
sibly on the ground that the
present Parliament is controlled
by Chamoun.
This group insists that
Chamoun resign before an elec-
tion; they offer as candidates
to succeed him two individuals,
neither of whom would be accept-
able to the pro-Chamoun camp.
One of them, former President
Bishara al-Khuri, was himself
overthrown in 1952. Chamoun,
although he has at last let it
be understood publicly that he
does not intend to run again,
shows no signs that he is will-
ing to meet the opposition any-
where near halfway and may yet
hope to succeed himself.
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The USSR is continuing its I equivocal statement" that the
efforts to force the West to
agree in principle to a cessa-
tion of nuclear tests or, fail-
ing this, to prepare the ground
for future allegations that West-
ern refusal to cease tests is
responsible for any failure of
the Geneva talks. The Soviet
aide-memoire of 9 July again
calls on the West for an "un-
conference of experts "must be
subordinated to the solution
of the main task--an immediate
and universal termination of
nuclear tests."
Moscow, reluctant to risk
an early break-off of the talks,
has discontinued attempts to
gain prior commitment from the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
Western experts that the talks
must "pave the way" for an
agreement on test cessation,
but has not abandoned its basic
political objective of forcing
the West to stop tests.
Y. K. Fedorov, chairman of
the bloc delegation, after "re-
gretting" the-"inability" 'of
his Western colleagues to give
a satisfactory definition of
the purpose of the talks, stated
that although "positions as to
the basic aim of the conference
do differ," there exists "gen-
eral ground sufficient for out
work."
The USSR is attempting to
give the impression that the
talks are progressing satisfac-
torily by keeping them on a
purely technical level while
at the same time pressing the
US through diplomatic channels
to agree to test suspension.
Foreign Minister Gromyko, when
handing the latest Soviet note
to Ambassador Thompson, stated
that the experts were continu-
ing their "fruitful work." The
note contains no implied threat
to break up the meeting, and
Moscow apparently feels a facade
of serious negotiation at Geneva,
coupled with more indirect pres-
sures at the official level,
is the most effective tactic
for the present.
The aide-memoire claims
that it is already quite clear
that an effective control system
is "entirely possible," which
suggests that the bloc experts
will seek to create the impres-
sion that the talks are devel-
oping a wide area of agreement
on control measures, and that
only the West's unwillingness
to halt tests stands in the.way
of a final agreement.
At Geneva, the Soviet dele-
gation presented an agenda call-
ing for discussions concerning
a control system and final re-
ports by the delegates to their
respective governments cover-
ing "conclusions and sugges-
tions concerning the control
system to observe an agreement
on nuclear test cessation."
The fact that this agenda was
adopted will probably be used
by Moscow to claim Western
acceptance of the Soviet thesis
linking the conference results
to a future agreement on test
suspension.
In the discussions, the
Soviet experts have concentrated
on the exposition of known
theoretical material with lit-
tle reference to actual recorded
data on nuclear tests. After
each discussion they have pre-
sented a draft "conclusion con-
cerning the suitability" of the
various methods of possible
detection. This attempt to
reach a final decision after
superficial exploration, to-
gether with Fedorov's state-
ment that he wanted the con-
ference `o end as soon as
possible, suggests that the
USSR will push toward an early
conclusion urging the govern-
ments to effect an agreement
banning nuclear tests.
The Soviet delegates are
also attempting to use the pres-
ence of experts from other bloc
nations to reinforce the USSR's
position on parity of repre-
sentation between East and
West. They regard their side
as being composed of four sep-
arate national delegations
and rotate their chairmanship
in turn Among the bloc nation-
alities.
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10 July 1958
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identified foreign aircraft on
15, 18, and 28 June on govern-
ment positions in North Celebes.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
Although President Sukarno
is unlikely to support them,
army leaders in Djakarta are
formulating plans to delay-the
1959 general elections as A
means of obstructing the growth
of Communist influence. The
Communists have sent telegrams
to the prime minister and other
officials urging that no one be
allowed "deliberately to sabo-
tage" election preparations.
Elections are scheduled
for 29 September 1959. The in-
formation minister announced
in late May that the govern*ent
had no intention of postponing
them if the domestic situation
"remains unchanged."
The Communists are already
planning their campaign and in-
tend to concentrate on non-
Javanese areas. Non-Communist
parties do not appear to be mak-
ing any specific election plans
and are engaged in little ac-
tivity to strengthen their posi-
tion.
In the 1955 general elec-
tions, the Communists won 16
percent of the popular vote and
24 percent of the vote in Java,
where 60 percent of Indonesia's
population is concentrated. In
the 1957 local elections in Java,
they jumped from the third larg-
est to the largest party, win-
ning 30 percent of the popular
vote.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
PART II
NOTES AND COMMENTS
STATUS OF ' PRESIDIUM MEMBER SUSLOV
Although Mikhail Suslov,a
member of the Soviet party pre-
sidium, has not been formally
demoted, his present standing
is highly equivocal and may not
long remain publicly unchanged.
Suslov apparently left Moscow
around 17 May and was not pres-
ent at the top-level meeting of
bloc leaders in Moscow toward
the end of the month. On 10
June Aleksei Kirichenko, Otto
Kuusinen, and Boris Ponomarev
conferred with a visiting Aus-
trian Communist party delega-
tion. This is the first time
Kirichenko has participated in
talks of this nature. In the
past year, the Soviet side has
been represented, almost with-
out exception, by Suslov and/or
Pyotr Pospelov, Ponomarev, and
sometimes Kuusinen.
On 12 June Premier Khru-
shchev, in answer to reporters'
questions, stated that Suslov
was vacationing on the Black
Sea and would be back in Mos-
cow in a few days. Khrushchev
added that Suslov had accumu-
lated considerable annual leave
and therefore would be in Mos-
cow only a short time before
taking off again.
On 17 June the central
committee convened--for the
second time in six weeks--osten-
sibly to decide on agricultural
price reforms. There were no
collective public appearances
of top Soviet leaders at that
time which would have indicated
who attended the plenum, but,
on the basis of Khrushchev's
earlier remarks about Suslov's
activities, it was assumed he
was there. However
Suslov
had not returned to Moscow to
attend the plenum.
Suslov was back in Moscow
in time to attend a central com-
mittee dinner in honor of visit-
ing Czech leader Antonin Novotny
on 2 July. He attended a lunch
given by Novotny on the follow-
ing day, but did not participate
in the official talks. The So-
viet side was represented by
Klementi Voroshilov, Anastas
Mikoyan, Khrushchev, Pospelov,
losif Kuzmin, and Andrei Gromyko.
On 8 July Suslov was on hand,
along with Mikoyan and Nikolai
Shvernik, at the airport to see
Khrushchev off to East Germany.
These factors suggest that Sus-
lov is gradually being divested
of some of his responsibilities
for bloc and foreign Communist
party affairs.
Another bit of speculation
concerning Suslov is the view
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committee decree on music was
issued on short notice, possi-
bly to take advantage of Sus-
lov's absence. Suslov might
qwWwrow
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
have protested against the de-
cree's criticism of the earlier
1948 music decree with which he
was associated.
Finally the US Embassy in
Moscow reports that continued
opposition to the February cen-
tral committee plenum decision
to abolish the machine tractor
stations is suggested by the
continued appearance of arti-
cles arguing against "misguided"
views of "some economists" and
occasionally "some comrades"
as well. The embassy points out
that refutation of these "mis-
guided" views is expressed in
gentle and honpolemical terms,
perhaps because of a lack of
confidence by supporters of the
reorganization in the strength
of their theoretical position.
Suslov has been associated with
this opposition because of his
long delay in joining all other
top Soviet leaders in praising
the scheme.
USSR ESTABLISHES PRICES FOR AGRICULTURAL PROCUREMENT
A USSR Council of Minis-
ters' resolution, published in
the Soviet press on 1 July 1958,
lists charges which are to be
used in establishing regional
prices at which the state will
purchase agricultural products
from collective farms. The
prices actually paid are to
vary from year to year, depend-
ing on the size of the harvest.
A preliminary perusal of the
USSR: PROCUREMENT OF COLLECTIVE - FARM
PRODUCTS
NTR
ACT
PAYMENTS
irBLIGATORY
RCHASES
PURCHASES
IN KIND
DELIVERIES
A S
U R C]1
r
published charges indicates
that many fall between the old
obligatory delivery prices
which were very low and the
higher ones for above-quota
produce.
The most notable excep-
tions to this rule are those
for livestock. As compared
with prices established in Sep-
tember 1953, and apparently
still in effect at least through
1956, the new livestock charges
are generally higher than the
old above-quota purchase prices.
These new prices are evidently
intended to provide an incen-
tive for Khrushchev's program
for "catching up" with the
United States in the per capita
production of meat.
In commenting on the gener-
al level of the new prices,
N. S. Khrushchev in his speech
before the June 1958 meeting
of the Soviet party central com-
mittee stated that state ex-
penditures for collective farm
produce were to remain unchanged
from 1957 expenditures, or the
expenditures planned for 1958
under the old system. He went
on to tie in the amounts to be
paid to the collective farms
under the new procurement sys-
tem with funds previously paid
to collective farms and allo-
cated by the state to the ma-
chine tractor stations (MTS's).
The resolution stipulates
that lists of standard whole-
sale prices for agricultural
machinery and spare parts are
to be established. New ma-
chinery is to be sold at cost
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PART II N ?TES AND COMMENTS Page 2 of 16
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
plus 3 percent. Buyers are ex-
pected to pay for the trans-
portation and sales expenses of
the supply organizations. Norms
of these sales expenses are to
be drawn up and approved by
Gosplan within four weeks.
Tractor fuel is to be sold to
the farms at wholesale prices.
All agricultural enterprises
are apparently to pay the same
price for supplies and equip-
ment.
The USSR Council of Minis-
ters has the responsibility for
determining the procurement
plans for most agricultural
products and distributing the
planned quotas to the republics,
according to the resolution.
The Councils of Ministers of
the union republics have re-
sponsibility for formulating
procurement plans for some
minor agricultural products.
The resolution recommends
that the collective farms or-
ganize the collection and trans-
portation of surplus produce
which the individual collective
farmers have for sale in order
to avoid the excessive waste of
time incurred by individuals
each selling their own produce.
The prices paid for such prod-
uce by the state or cooperative
organizations are to be the same
as the new state purchase prices,
and the procurement organiza-
tions are obligated to pay the
collective farms for the trans-
portation costs.
The resolution directs
that proposals be submitted for
increasing the 1958 plan for
the procurement of "cereals,
sugar beets, and other agricul-
tural produce," in view of the
present favorable prospects for
this ear's harvest.
Prepared by ORR)
25X1
EGYPTIAN SUBVERSIVE ACTIVITY IN LIBYA
The widespread Egyptian
campaign of propaganda and sub-
version in Libya is apparently
well organized, and plans may
already be in preparation for
overthrowing the pro-Western
government of King Idriss.
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10 July 1958
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RELIGIOUS ISSUE DISRUPTS ISRAELI GOVERNMENT
Israeli Prime Minister Ben-
Gurion's government is engaged
in a dispute with the Orthodox
Jewish community involving the
over-all relationship between
religion and the state. The
controversy, which began over
whether the state or the syna-
gogue shall determine who is
Jewish, has become a conflict
between progressive secular-
minded elements and conserva-
tive religious groups. Ben-
Gurion is said to believe he
has reached the limit of con-
cessions he can make to the
Orthodox Jewish community with-
out altering the state's basic
secular character. He declared
publicly on 2 July that Israel.
is not a theocracy and will not
be ruled by rabbis.
The dispute concerns the
identification of individuals
as Jews on Israeli personal
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10 July 1958
identity cards--a question of
importance because of the juris-
diction exercised by religious
courts in Israel over matters
affecting personal status. Ac-
cording to Jewish religious lay,
to be a Jew a child must be
born of a Jewish mother. Last
week the National Religious
party (NRP) offered a compro-
mise solution, suggesting that
children of non-Jewish mothers
be required to undergo a con-
version ceremony after which
they would be listed as Jews
on identity cards. In reply,
however, the cabinet reaffirmed
its'. decision of.' 22 June
that a person who declares he
is a Jew, or whose parents de-
clare he is, even though one
parent may not be Jewish, will
be so listed if he does not
profess another faith. The NRP
rejected this decision and has
withdrawn from the governing
coalition; its two cabinet
ministers have resigned.
The NRP may stand firm
on the question in hopes of
exploiting the controversy
before elections to the Israeli
Knesset scheduled for 1959. The
NRP probably feels it can more
readily attract support from
Israel's large proportion of
strongly Orthodox Jewish immi-
grants from North Africa and the
Middle East by emphasizing the
party's independence.
Ben-Gurion maintains that
the government of Israel "does
not consider itself authorized
to decide who is a religious
Jew. The question it has to
consider is: Who is a Jew by
nationality?" The prime minis-
ttr'S adamant position may be
a tactical maneuver since he
probably could not win a pro-
longed dispute against religious
sentiment. His recent remarks,
however, suggest that he, too,
may have decided to make a de-
termined stand on the issue.
As a result of the NRIR's with-
drawal, the parliamentary major-
ity controlled by the government
has been reduced to 64 out of
120 seats, giving the balance
of power to the radical left-
wing Mapam party, which holds
nine seats.
Efforts by unarmed Kash-
miri refugees since 28 June to
march from the Pakistani to the
Indian side of the cease-fire
line in Kashmir have provided
the first occasion since the
cease-fire went into effect on
1 January 1949 to observe the
reaction of the Indian and Pak
istani governments to political-
ly inspired breach of the peace
in this area. Their reaction
suggests that in the event of
future armed or unarmed incur-
sions by relatively small
groups, both India and Pakistan
would try to localize the inci-
dent. Popular reaction to the?
present ~marchelk? alto indicates
that the Pakistani public now
has less interest in Kashmir than
in the past.
The refugees under Choudhri
Ghulam Abbas, leader of the
"Kashmir Liberation Movement,"
have made several attempts to
cross the cease-fire line in
small groups of 50 or less. Al-
though most of them have been
arrested and subsequently re-
leased in rear areas, some 100
persons are reported to have
reached Indian-held territory
and to have been arrested by
civil authorities there. No
marcher has been fired on.
An in the past when trib-
al incursions ? we a threatened,
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10 July 1958
Opposition poli-
ticians are now ap-
parently trying to ex-
ploit the situation
to embarrass the Ka-
rachi government.
There is some danger
that they will eventu-
ally create an inci-
dent involving police
firing. Prime Minis-
ter Noon's cabinet,
however, has author-
ized President Mirza
to take over direct
administration of West
Pakistan if events get
out of hand. This
should discourage the
opposition politicians,
who have little desire
to be deprived by Mirza
of their legislative
Pakistani civil and police of-
ficials took strong action to
prevent any marcher from reach-
ing the cease-fire line. Ka-
rachi also notified New Delhi
of its intentions. The Pak-
istani Army has not intervened,
but is prepared to do so if
necessary. Spontaneous public
reaction in Pakistan to the ar-
rests--even those made in
Indian territory--has been min-
imal, although small, peace-
ful demonstrations in support
of the marchers' movement took
place in various parts of West
Pakistan. In previous years,
Pakistani propaganda has said
that the populace of West Pak-
istan would rise en masse a-
gainst any Karachi government--
no matter how strong--that
tried to prevent any effort to
regain Kashmir.
position. They may also recog-
nize that Mirza could use their
agitation as an excuse for as-
suming dictatorial powers'
throughout Pakistan 'fOr an in,
definite period.
Indian reaction, both mil-
itary and civilian, has been
calm, and the Indian press has
made no effort to inflame the
situation. New Delhi will have
noted the firm action of the
Pakistani Government and the
lack of spontaneous popular en-
thusiasm for Abbas' movement,
however, and may be even less
inclined than before to offer
any concessions on Kashmir. Fu-
ture Pakistani propaganda and
statements to the UN regarding
the intensity of popular feeling
in Pakistan may also carry less
weight.
CAMBODIAN CROWN PRINCE THREATENS CLOSER TIES WITH COMMUNIST BLOC
Phnom Penh's domestic po-
litical troubles and its feuds
with neighboring SoUth Vietnam
and Thailand are creating a
situation favorable to increas-
ed Communist influence in Cam-
bodia. Crown Prince Sihanouk,
confronted by a'rebellious Na-
tional Assembly which last month
overthrew the Sim Var government
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10 July 1958
against his wishes,. has resumed
the premiership on a temporary
basis. Sihanouk's demagogic
inclinations and his resent-
ment at what he considers West-
ern bias against Cambodia raise
the danger that he may lead
Cambodia into closer ties with
Peiping.
There are serious obsta-
cles to an early improvement
in the strained relations be-
tween Cambodia and South Viet-
nam--essential for restoring
a sense of balance to Cambo-
dia's international outlook.
Sihanouk has canceled plans
to visit Saigon for negotiaj-
tions, citing "insulting" Viet-
namese press articles. In
Saigon, President Diem seems
convinced that no effective
settlement can be reached with
the "untrustworthy" Sihanouk.
Sihanouk, capitalizing on
Phnom Penh's charges of 25 June
of a Vietnamese "invasion"
and subsequent appeals for
foreign support, is pictur-
ing Cambodia as a friendless
country in danger of being
"nibbled to death" by its West-
ern-supported neighbors. In
recent public statements he
has cited the necessity for Cam-
bodia to end its "isolation" by
establishing "indispensable
outside contacts,"" although re-
taining a neutral policy. His
references to a forthcoming vis-
it to Communist China and to
the possible need for Cambodia
to find a "new ally" have con-
tributed to the rise of wide-
spread rumors in Phnom Penh that
Cambodia will shortly enter in-
to diplomatic relations with
Peiping.
the Cambodian Government has al-
ready-'decided to grant at least
quasi-diplomatic recognition to
Peiping. At present Communist,
China has only an economic mis-
sion in Phnom Penh.
Expressions of support for
Cambodia have been quickly forth-
coming from the Sino-Soviet bloc,
which is denouncing South Viet-
nam as an "aggressive base of
the imperialists." The head of
the Chinese Communist economic
mission stationed in Phnom Pehh
is also reported to have ..as-
sured King Suramarit of Peiping's
full support in Cambodia's dis-
pute with Vietnam.
INDIA, JAPAN WORRIED BY RISING CHINESE EXPORTS TO SOUTHEAST ASIA
India and Japan are becom-
ing increasingly concerned over
Communist China's rapidly ex-
panding exports to Southeast
Asia. While Japan's total ex-
ports to the area have contin-
ued to increase in recent years
--partly because of reparations
payments--China has displaced
Japan as the supplier of cer-
tain goods in several countries
India's exports to Southeast
Aisa, formerly considerably
larger than those of Communist
China, have been surpassed by
Chinese exports in the last
two years.
In value, Japan's exports
are divided approximately equal-
ly among most of the countries
in the Southeast Asian area and
are composed of a variety of in-
dustrial and consumer goods.
These facts make Japan less
vulnerable to China's trade of-
fensive than India,-.whose less
diversified exports go chiefly
to Burmese and Malayan-Singapore
markets.
Japan and India are partic-
ularly concerned over Chinese
textile sales in view of the de-
pressed state of their own tex-
tile industries. According to
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10 July 1958
Japanese estimates,
Chinese textile sales
in four countries in
the area increased
from approximately
15,000,000 yards in
1954 to about 300,-
000,000 yards in
1957, with Indonesia
the leading buyer.
Indian sales to
Malaya and Singapore
dropped from 52,000,-
000 yards in 1956 to
32,000,000 in 1957.
Both India,and
Japan are particu-
larly worried about
China's ability to
offer goods below
cost in order to es-
PHILIPPINES
tablish its products
in new markets. While
such tactics proba-
bly have not taken
place on a large
scale, their unset-
tling effect on
trade may cause In-
dian and Japanese
businessmen to place
EXPORTS FROM JAPAN, INDIA AND CHINA
TO SOUTHEAST ASIA
1954
45.6
34 .9
1.0
955
1
38.3
28.5
2.3
BURMA
1956
36.3
21.3
22.2
1957
75.9
27.9
12.5
1954
12.9
2.6
8.9
CAMBODIA, 1955
36
8
2.7
LAOS &
VIETNAM 1956
.
65.3
1.3
0.1
1957
73.5
4.0
* 2.4
1954
119.7
11.3
3.5
1955
64.7
23.7
10.1
INDONESIA 1956
75.8
16.4
30.2
1957
66.8
12.0
27.0
1954
47.6
22.3
28.5
MALAYA 1955
72.8
25.9
37.8
AND
1956
9
77
24.6
43.1
SINGAPORE
1957 -
.
82.3
27.8
52.2
1954
31.2
1.9
1.0
1955
51.8
4.0
0.4
1956
55.5
2.1
1957
$9.1
2.8
1954
65.1
5.2
2.9
19ss
63.0
7.1
0.1
THAILAND 195
60.9
5.0
--
1957
6
85 1 . 5
7.6
o_i
more emphasis on expanding do-
mestic sales than on exports.
In addition, Peiping's willing-
ness to balance its exports
with imports makes its offers
attractive to countries having
difficulty disposing of their
normal export commodities.
China's new aid programs
in Southeast Asia, which usu-
(MILLION DOLLARS)
JAPAN INDIA CHINA
4O CI
Ci ha
W 04 C4 00
coo Is
of
J'j ?D d
'S4 '551'56 'S7 'S4 '551'561'57 1'541'55 '56'57
JAPAN INDIA CHINA
10 JULY 195P
ally include the delivery of
Chinese goods to be sold local-
ly to generate counterpart funds
for economic development, are
establishing additional markets
for China's light industrial
goods and textiles in Indonesia,
Cambodia, and Ceylon.
(Concurred in by
UNK) 25X1
RECALL OF PEIPING'S ENVOYS SUGGESTS NEW FOREIGN POLICY LINE
The return of some senior
Chinese Communist diplomats to
Peiping suggests that new Chi-
nese Communist foreign policy
approaches have been devised.
Nine of Peiping's most impor
tacit envoys--ambassadors to the
USSR, Rumania, Yugoslavia,
Outer Mongolia, North Korea,
North Vietnam, India, Indonesia,
and Pakistan--arrived_in the
Chinese capital in April and
May. In late June and early
July, the Chinese Communist am-
bassador to Norway and the
charge at the legation in The
Hague left for home, and there
is reason to suspect that the
chargd'in London is also in
China.
Some of the nine top dip-
lomats probably returned to
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10 July 1958
participate in the Chinese Com-
munist party congress between
5 and 23 May, but their pro-
longed stay in Peiping indicates
this was not the sole purpose
for their return. None is known
to have left, and the gathering
suggests strongly that discus-
sions and coordination of new
foreign policy lines were
planned. All signs point to
a harsher line in the future.
Peiping's unequivocal stand
with the USSR against "revision-
ism," as exemplified by Tito,
reflects the hardening Sino-
Soviet line in bloc affairs,
and the Chinese Communists are
turning a sterner face to the
free world also. Peiping's
embargo on commercial and cul-
tural exchanges with Japan has
continued unabated since May,
and the regime has recently
PEIPING EXPLOITING NEW SZECHWAN OIL FIELD
The Chinese Communists are
moving with energy and speed to
exploit the newly discovered oil
deposits in central Szechwan
Province, and it is apparent
that they believe the new field
could go a long way toward solv-
ing China's petroleum supply
problem. The petroleum indus-
try registered the only signif-
icant industrial shortfall dur-
ing the First Five-Year Plan
(1953-57). Development of a
major source of supply in Szech-
wan--which is better situated
with respect to transportation,
important consuming areas, and
existing refining facilities
than other oil fields now un-
der development--would give a
large boost to China's chances
of reaching the goal of
5,000,000-6,000,000 tons of crude
petroleum annually by 1962 set
up in the original Second Five-
Year Plan.
25X1
Prospecting in central
Szechwan has been greatly ac-
celerated since the discovery
in March of three oil deposits
in the Nanchung area. Some 120
wells are to be drilled this
year--ten times as many as orig-
inally planned--and workers have
been transferred to Szechwan
from other oil fields. Con-
struction is under way on sev-
eral small refineries in the
area. A larger one, capable of
handling 200,000-300,000 tons a
year, has been started near Nan-
chung. A recent press report from
Hong Hong spoke of a 3,000,000-ton
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issued a peremptory statement
demanding that the US agree by
14 July to the resumption of
Sino-American talks at the am-
bassadorial level.
Peiping's conciliatory
foreign policy practiced since
the Bandung conference in 1955
has done little to win wider
international recognition.
Moreover, the Chinese Communists
have shown increasing concern
that their moderate policies
are taken as indications of
weakness. They can probably
be expected to assume a more
unyielding pose in the conduct
of their foreign relations. A
policy of greater firmness
would fit well with Peiping's
intense efforts to whip up pop-
ular fervor for the quick at-
tainment of economic goals.
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10 July 1958
Tsaidam
Chinese Communist Petroleum Industry
Producing Under development
I
I Petroleum refinery it
? Synthetic-oil plant
Railroad . Railroad under construction or planned
10 JULY 1958
MILES Boo
refinery--three times the size
of the largest refinery previous-
ly planned by Peiping--to be
built at Nanking to process
crude from the Szechwan field.
No confirmation of this report
has come from Chinese Communist
sources, and it is unlikely
that Peiping would rush construc-
tion of a refinery of such size
without being sure that the
Szechwan field can keep it sup-
/ M('NGOLIA.N
(Synthetic-oil plant
being expanded) -
A,," T, 1,V11140US -
dnttro tin this
plied. In any case, completion
by the reported target date of
1960 is highly improbable.
Peiping is pushing a pro-
gram of improving land, water,
and air connections between the
Szechwan field and the rest of
China. A highway network is
being constructed to facilitate
movement of equipment and ma-
terials to the field. Efforts
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July 1958
are being made to improve the
navigability of rivers connect-
ing the area with the Yangtze.
Rail lines--part )of =a
larger program for rail con-
struction in this part of China--
are now planned to connect the
central Szechwan field with
Chengtu and Chungking. The
Chengtu-Nanchung link is being
rushed to completion, and a
rail bridge at Nanchung has
already been finished. This
stretch of line will eventually
be extended via Hsinyang on the
Peiping-Hankow line all the way
to Pukow, opposite Nanking.
ORR)
FRENCH GOVERNMENT PROBLEMS
Premier de Gaulle's ap-
pointment of Jacques Soustelle
to the cabinet is designed
partly to appease extremists
in Algeria but also to utilize
Soustelle's past experience as
minister of information in pre-
paring public opinion for the
constitutional changes which
his government is now engaged
in drafting and on which its
hopes of stability depend. Af-
ter the October referendum on
constitutional reforms, De
Gaulle may make public his
ideas on the Algerian question.
De Gaulle's 1-3 July visit
to Algeria probably reduced
somewhat the influence of set-
tler extremists over the army,
and the appointment of Jacques
Soustelle to the cabinet has
mollified much settler discon-
tent. There is, nevertheless,
considerable suspicion among
both settler and army elements
regarding De Gaulle's ultimate
aims for Algeria, and he may
yet be obliged to replace some
military commanders and clamp
down on civilian malcontents.
In the meantime, he can be
expected to step up military ac-
tions against the rebels and
broaden his appeal to the Mos-
lem population. He may attempt
some spectacular move, such as
(Prepared by 25X1
adding a Moslem to the French
cabinet or releasing the five
rebel chiefs seized in October
1956. The adverse effect the re-
lease of rebel leaders would
have on the settlers and army
elements may, however, deter
him from the latter move.
Although the Soustelle ap-
pointment was partly
designed
to appease extremists
in Al-
geria, De
Gaulle will
probably
depend on
Soustelle's
1945 ex-
perience
as minister
of infor-
mation to help him prepare the
campaign for constitutional re-
form. If a referendum is to be
held on the revisions on 5 Oc-
tober, much preparatory work
must be telescoped. The assem-
bly committee draft is to be com-
pleted by the end of July. A
consultative committee of dep-
uties, senators, and jurists
must then consider it on a "crash"
basis in order to give the gov-
ernment time for final changes
before De Gaulle opens the ref-
erendum campaign on 4 September.
Socialist party sources say the
voters will be given a choice in
the referendum on whether they
believe the present constitution
needs changing.
The Communists are already
taking a position against a ref-
erendum and trying to develop
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CURRENT INTELLIGENCE WEEKLY :SPRY
10 July 1958
to De Gaulle's anticipated pro-
posals for strengthening the
executive and reducing the role
of party maneuvering in Parlia-
ment. Most observers believe,
however, that De Gaulle will
have no significant opposition
to the reforms he advocates.
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CURRENT INTELLIGENCE WEEKLY SU"AMT
10 July 1958
Finland faces a period of
political uncertainty as a re-
sult of the sharp Communist
gains in the 6-7 July parlia-
mentary elections. While the
Communist-front Finnish People's
Democratic League (SKDL) will
demand to be included in any
new government, some kind of
center coalition, involving the
Agrarians and the Social Demo-
crats, will in the end probably
form a government.
Its main task will
be to formulate an
effective program
to deal with Fin-
land's pressing eco-
nomic problems.
Nearly complete
returns indicate that
the SKDL increased
its seats from 43 to
50 out of 200 and
became the largest
party in Parliament.
The Social Democrats
and the Agrarians
lost seats, while the conserva-
tive National Coalition party
made gains. The Communists
benefited from the small turn-
out of voters, the apparent
dissatisfaction of farmers
with the economic policies of
the Agrarians, and the two-
year-long factional struggle--
largely personality clashes--
between the Social Democratic
party organization and the
Socialist trade union leader-
ship. Economic questions such
as unemployment, prices and
wages, and farm subsidies
were the primary issues, which
the Communists appear to have
successfully exploited. For-
eign policy questions had lit-
tle effect on the election.
President Kekkonen's recent
visit to the Soviet Union and
the various last-minute Soviet
offers of economic assistance
SECRET
apparently had little effect
on the voters.
Negotiations for the for-
mation of a new government will
be protracted, and the nonpolit-
ical government of Reino Kuusko-
ski, which took office in April,
may remain in office until late
in the summer. The SKDL, which
has not had cabinet representa-
tion since 1948, is certain to
demand participation on the basis
of its increased parliamentary
representation. These Communist
efforts are unlikely, however,
to be successful in view of the
strong stand taken by all the
non-Communist parties against
cabinet cooperation with the
SKDL.
trial wages.
The most likely outcome is
a renewal of the Social Demo-
cratic-Agrarian cooperation
which has been the basis of most
of Finland's postwar govern-
ments. Before this can be
achieved, however, the two
parties must reach agreement
on the deep-seated economic is-
sues which have kept them at
political swords'points for
over a year--particularly the
level of subsidies on farm
products and the relation of
agricultural income to indus-
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CURRENT INTELLIGENCE WEEKLY SUMURY
10 July 1958
25X1
THE SITUATION IN CUBA
New fighting between Cu-
ban rebels and the army of
President Batista in Oriente
Province may further involve
US personnel and interests in
Cuba. The recent rebel kid-
naping of 50 Americans and
Canadians highlighted the in-
terruption of plantation and
mining activities that has been
occurring for some time. The
US consul who negotiated with
the insurgents for the men's
release fears a renewed Cuban
army offensive will elicit new
charges of US aid to Batista
and result in rebel retalia-
tions against US citizens. The
strong government land and air
offensive launched in June was
suspended east,of Santiago at
US request during the release
negotiations, but Batista con-
tinued to reinforce military
units, installing some of them
on American-owned properties.
Batista remains determined
to wipe out rebel leader Fidel
Castro and complete his presi-
dential term--ending in Febru-
ary 1959. His inability thus
far to defeat the rebels, de-
spite a, year and _a half of
fighting and stringent restric-
tions of constitutional~guaran-
tees, has damaged Batista's
prestige.
f Pinar 111o
CARIBBEAN SEA
s _ coLOEU
Castro's brother Raul dom-
inates the area east of Santiago
and is seeking recognition of
his own strength. He flaunted
orders from Fidel to release
the captives and, insisting
.that the United States is giving
military aid to Batista, has
demanded official assurances
that such aid will cease. Raul's
forces, which may be Communist
infiltrated, are isolated from
effective contact with the 1126th
of July" movement headquarters
in the Sierra Maestra, and his
civilian supporters have been
intimidated by army bombings and
terroristic attacks. However,
it appears improbable that Ba-
tista's forces can rout both
rebel groups from their scat-
tered mountain bases
-- Selected road
Selected railroad
10 JULY 1958
FIDEL CASTRO
HEADQUARTERS
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10 July 1958
ARGENTINE MILITARY DISCONTENT
Increasing discontent in
Argentine military circles re-
garding President Frondizi's
policies concern mainly the
generous amnesty for Peronistas,
official appointments, and slow
action on economic problems.
Frondizi has appointed Peron-
istas to important subcabinet
positions, and antigovernment
sources charge that pro-Com-
munists have also received
official posts.
The forced retirement or
change in posts of a number of
military commanders appointed
by the former Aramburu regime
has also contributed to discon-
tent. Unconfirmed rumors that
"many" former supporters of
Peron have received key army
posts were reportedly one cause
for the cancellation of the
annual armed forces "comrade-
ship banquet" scheduled for 7
July.
The immediate reason for
the cancellation was the navy's
announcement on 4 July of plans
to purchase the British air-
craft carrier Warrior, which
would increase the navy's power
relative to the other services.
The army and air force secre-
taries protested to Frondizi
and refused to attend the ban-
quet. Later Frondizi also
refused to attend after reading
the draft of a toast to be
given by Admiral Arturo Rial,
a principal navy spokesman and
a powerful opponent of Peron.
Rial was subsequently put under
eight days' arrest.
Both Aramburu and Rial
believe that Frondizi--in of-
fice only since 1 May--should
be given a chance to prove
himself and that public opinion
would oppose a coup. Anti-
Peronista sentiment, however,
appears gradually hardening.
A Supreme Court decision on
4 July denying an appeal for
reinstatement by a lower civil
court judge--who was one of
several recently dismissed--
prompted riots and the sympa-
thetic resignations of numer-
ous judges throughout the coun-
try. Subsequently, the presi-
dent of the Supreme Court re-
signed. These developments
could help undermine confidence
in the Frondizi regime and pro-
vide political issues for
dissident military elements
to exploit.
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CURRENT INTELLIGENCE WEEKLY SU MRY
10 July.-1958-
PATTERNS AND PERSPECTIVES
25X1
MAO TSE-TUNG,AND HIS
Reports that Mao Tse-tung
is being"displaced"by Liu Shao-
chi as the dominant figure in
Communist China seem misleading.
Mao does appear to be more
vulnerable than he was two
years ago, owing to declining
energy, the failure of some of
his personal policies, and the
increasing strength of Liu and
his close associates. However,
Mao has apparently taken the
initiative in the past year to
correct or conceal his earlier
mistakes, and Liu and Teng
Hsiao-ping have played the major
roles in helping him do so. The
Liu-Teng "organizational" group
is so emphatically associated
with Mao's present. policies,
particularly with the hazardous
campaign for a "giant leap for-
ward," that it will not be in
a good position to force Mao
to retire-if the program fails.
While the Chinese press
emphatically insisted during
Mao's four months of travel fol-
lowing his return to China that
he looked and felt fine, photo-
graphs gave a different impres- 25X1
sion, and the press itself ad-
mitted that Mao was still unable
to walk easily.
Intervention in Planning
In July 1955, Mao personal-
ly imposed the decision to so-
cialize agriculture as rapidly
as possible. In so doing, he
reversed the line of the party
central committee and of every
party leader who had spoken on
this subject, including Liu
Shao-chi. Mao's decision was at
least temporarily vindicated,
however, in that the peasants
were herded into cooperatives
and then collectives without
much bloodshed and without seri-
ous damage to agricultural pro-
duction.
In December 1955, after a
good harvest, Mao announced
that the outstanding problem
was "rightist conservatism"
with respect to production
and construction. Mao is said
to have introduced at that time
the slogan--resurrected in the
fall of 1957--of achieving
"greater, faster, better, and
more economical results" si-
multaneously. In the early
months of 1956, Mao incited the
party to drive ahead in all
spheres of activity as rapidly
as possible. By June 1956, it
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10 July, 1958.
was apparent that the program
was out of balance. In August
and September, the party in ef-
fect declared that Mao had been
wrong. It admitted that its
construction plans would have
to be cut back, and it affirmed
a determination to steer a
course henceforth between
"rightist conservatism" and
"leftist adventurism."
The party congress of
September 1956 somewhat reduced
Mao's supremacy over. his lieu-
tenants. Liu Shao-chi, rather
than Mao as at the previous con-
gress, gave the principal re-
port. Mao remained chairman of
the politburo, but four vice
chairmen were added. Mao, those
four, and Secretary General Teng
Hsiao-ping became the new stand-
ing committee of the politburo.
Teng, who since 1952 had become
closely associated with Liu in
party work, was named the senior
member of the party secretariat,
and thus became the only person
concurrently a member of the
three most important party or-
gans.
Mao's "Liberal" Line
1 0
and Chou En-lai reportedly ex-
nressed sympathy,
aspirations to greater
independence from Moscow. Liu
Shao-chi, who had led the Chi-
nese party's attack on Tito in
1948, apparently took no part
in these talks. Throughout the
autumn of 1956 and winter of
25X
1956-57, Peiping was publicly
critical of certain features of
Soviet behavior.
25
Although Peiping had re-
peatedly made clear its agree-
ment with Moscow on the "basic
laws" of Communist states, Chi-
nese reservations about Soviet
policies were seized on and
greatly exaggerated by Eastern
European deviants. This trend
was accelerated by Mao in Feb-
ruary 1957, in a speech in which
he declared himself in favor
of a liberal policy for handling
China's domestic problems and
made some derisive remarks
about Soviet inflexibility.
Mao did not turn again 'to
Eastern European affairs un-
til his domestic experiment
had failed.
Back in January 1956, Mao
had taken the first step toward
domestic "liberalization" by
proposing, through Chou En-lai,
better treatment of intellectuals.
In May 1956, Mao took another
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:'URRENT INTELLIGENCE WEEKLY SUMP
10 July. 1958
step with his "hundred flowers"
concept. The program began to
catch hold after February 1957,
when Mao reaffirmed his line
and reportedly declared he had
insisted on it despite opposi-
tion from most of the party.
During May and June 1957, after
another urging by Mao, many in-
tellectuals spoke out boldly,
assailing the Communist party's
monopoly of power and all of
its major policies. Mao had
clearly miscalculated the extent
of his regime's popular support.
By June 1957, Mao's pres-
tige among at least some of his
lieutenants had probably de-
clined. To them, he had been
proved wrong in inciting a head-
long course in construction and
production, wrong again in en-
couraging a soft policy in in-
trabloc relations, and wrong
again in insisting on "liberali-
zation" in China. Of his prin-
cipal lieutenants, Chou En-lai
had been the most closely as-
sociated with him in all three
policies, but perhaps not alto-
gether willingly. Liu Shao-chi
and Teng Hsiao-ping had not
been so associated, had ap-
parently opposed the "hundred
flowers" policy, and may well
have opposed Mao's line on in-
trabloc relations. After Mao
took the lead to repair the
damage, Liu and Teng played
the major roles in helping him.
Mao moved first against
"liberalization." He published
in June 1957 a much-revised of-
ficial version of his February
speech which strongly reaffirmed
orthodox positions--for the
benefit of his Eastern European
as well as Chinese audience--
and cut off all fundamental
criticism. In July, Mao called
together the central committee
and laid down lines for a na-
tionwide "rectification" cam-
paign. Teng Hsiao-ping was
chosen in September to state
publicly and in detail the
party's plans for indoctrinat-
ing the Chinese populace in
dogmas henceforth not to be
questioned.
The party leadership turned
next to economic planning, which
had been comparatively conserva-
tive since the summer of 1956.
With the assurance of a good
harvest and the rebuilding of in-
ventories, the party chose to re-
turn to the anticonservative line
of late 1955 and early 1956. Al-
though Mao's initiative is not
certain, Liu in May 1958 declared
that Mao in September 1957 person-
ally issued the call to overtake
Britain within 15 years. "Or-
ganizational" figures made most
of the major statements in the
developing anticonservative cam-
paign during the fall of 1957.
Teng Hsiao-ping and his deputy
Tan Chen-lin attacked in particu-
lar conservative thinking in
agriculture, and Liu Shao-chi
attacked conservatism of every
kind.
Mao then turned to intra-
bloc relations. At the meet-
ings in Moscow of Communist par-
ties in November, Mao, who was
accompanied by Teng Hsiao-ping,
stated Peiping's hardest line
on intrabloc relations since
Liu's denunciation of Tito nine
years earlier. He publicly as-
serted that the "urgent" task was
to oppose "revisionist deviation,"
that maintenance df bloc unity
was the "sacred obligation" of
all Communist states, and that
the Soviet party must act as
the leader of other parties. Mao
took the same line in private
talks, particularly with Gomulka.
After Mao's return and the fail-
ure of Soviet efforts to revise
the Yugoslav party program, the
Chinese in May commenced their
continuing attack on Tito and,
indirectly, Gomulka.
Current Relationships
The party congress of May
1958 well illustrated the state
of relations between Mao and
the most influential group of
his lieutenants. Mao, as in
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10 July, 1958_.
September 1956, limited his
role to a brief speech. The
three major reports were given
by three "organizational"
figures whom Mao regards highly:
Liu, Teng, and Tan Chen-lin.
The congress named to the po-
litburo three party leaders--
Tan and two regional secretaries
--who are friends of Mao and al-
so close to Liu and Teng. Teng's
secretariat was augmented. These
various developments did not
strengthen Mao's existing op-
position, but they did en-
hance the the capability of the
"organizational" group for of-
fering effective opposition if
its leaders should so choose.
Liu Shao-chi's long report
to the congress illustrates how
strongly he and his associates
are committed at this time to
a policy of supporting Mao,
rather than exploiting Mao's
mistakes and their own growing
prestige and strength in an
effort to dislodge him. For
example, Liu praised Mao's
role in Moscow, without refer-
ence to Mao's 1956-57 line
which made so much trouble
for Moscow. Similarly,, Liu
hailed the results of the
"antirightist" campaign, with-
out mentioning that the "hundred
flowers" made it necessary.
Again ?Liu denied that the eco-
nomic planning of 1955-56 was
significantly in error, blamed
the regime's troubles in
that period on the conservatives
--a demonstrable falsehood--and
named Mao as the initiator of
the current "leap forward." Liu
cited Mao as the source of
every main point of the present
"general line" which Liu's re-
port set forth.
Prospects
The prestige of Mao and
his "organizational" lieutenants
seems more dependent now on
the course of the "giant leap
forward" than on any other
issue. Liu Shao-chi said as
much in his May report, in
declaring that the tempo
of economic progress has all
along been the "most important
question" facing the party,
and in pleading for great
achievements in 1958, because
"everybody is watching." Among
those watching, as Liu and
Tan said, are certain Chinese
Communist leaders who believe
that Mao and those now closest
to him have again set them-
selves objectives which in
important respects cannot be
achieved, and who are waiting
for the autumn harvest to
"settle accounts."
Even if there proves to
be a disastrous shortfall in
the "leap forward," Mao himself
will probably be saf e. The
strong "organizational" leaders,
by associating themselves so
emphatically with Mao's line on
this issue, have undercut
any effort on their own
part to unseat him for its
failure. There may, however,
be action by Mao and Liu
to dispose of their opponents
by alleging that they sabo-
taged the "leap," or an
effort by other groups to
induce Mao to make "organi-
zational" leaders the scape-
goats for failure, or ac-
tion by the latter to head
off such an. attempt. In
sum, assuming that Mao is
not forced to retire for
physical reasons, Liu and
Teng are expected during 1958
to try to consolidate their
position as those most like-
ly to succeed Mao, and
others are expected also to
be bidding for Mao's favor.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July ,1958
BLOC ECONOMIC ACTIVITY IN AFRICA
The bloc economic penetra-
tion effort in Africa is pri-
marily focused on Egypt and the
independent nations in North
and East Africa. Substantial
economic and military aid is
being extended to Egypt, but
elsewhere this activity is re-
stricted to attempts at increas-
ing trade relations. There has
been a gradual rise in bloc
trade with Africa since 1955;
in 1957 the bloc accounted for
about 5 percent of the conti-
nent's total world trade.
Egypt
Since the be-
ginning of its eco-
nomic offensive in
1955, the bloc has
concentrated heavily
on Egypt. Beginning
its penetration ef-
fort with spectacular
"arms deals," the
bloc quickly ex-
ploited its advan-
tage by greatly ex-
panding trade rela-
tions with Cairo. In
late 1957 and early
1958, the bloc con-
cluded economic aid
agreements which will
serve to draw Cairo
even closer to Mos-
cow.
The bloc has
granted Egypt more
than $250,000,000 in
economic aid, in-
cluding a $175,000,-
000 line of credit
from the USSR. Al-
though Cairo has not
yet drawn on its
count for at least 20 percent
of the Egyptian Five-Year In-
dustrialization Plan. Among
other things, the Soviet loan
provides for extensive voca-
tional training in Egypt, a pro-
gram already begun.
The USSR also is continuing
to grant Egyptian requests for
military equipment to supple-
ment the $250,000,000 worth of
arms contracted for in 1955 and
1956. The amount of the addi-
tional requests is not known,
but probably is substantial
since Moscow agreed in January
30041
10 JULY 1958
Czechoslovak or East German
credits, worth about $75,000,000,
projects called for under the
Soviet economic agreement are
being implemented. The Soviet
loan program is heavily con-
centrated in the fields of min-
ing, petroleum,and metallurgy.
Egyptian officials estimate
that the Soviet credit will ac-
1957 to meet all of Egypt's
military requirements. Agree-
ments have been negotiated in
Moscow for delivery of such
items as fuel, aircraft spare
parts, ammunition, and military
vehicles for the Egyptian Army,
Navy, and Air Force. In addi-
tion, large numbers of Egyptian
military personnel continue to
train in bloc countries.
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10 Ju'.y_ 1958
The bloc plays a dominant
role in the Egyptian cotton mar-
ket, the primary source of in-
come and foreign exchange for
Cairo, and about 57 percent of
Egyptian sales were with the
bloc in 1957. About 25 percent
of the proceeds from these ex-
ports were used to pay for bloc
arms purchased since 1955.
In Libya the bloc is ap
parently making progress through
direct economic activities, in-
cluding`promises of trade on
favorable terms and the avail-
ability of Soviet aid. The USSR
offered the Libyan Government
a $28,000,000 low-interest,
long-term loan early in 1958.
Khrushchev reiterated this offer
in a letter to the Libyan prime
minister early in April, and
serious consideration is being
given the offer.
The Libyan Government al-
ready appears to have accepted
a Soviet offer to build, equip,
and staff two hospitals and to
train Libyan personnel in their
operation. No official an-
nouncement has been made, but
re-
cent press reports that agree-
ment has been reached and sug-
gests that the delay in ac-
ceptance resulted from the gov-
ernment's desire to avoid
damaging its position in fi-
nancial discussions which were
being held with Britain and
the United States.
The USSR appears to have
achieved initial success in its
efforts to trade with Libya.
According to a government of-
ficial, Libya has agreed to
permit imports from the USSR,
thereby opening the way for
trade exchanges between the two
countries for the first time.
Cotton goods are being obtained
at good prices, and the govern-
ment looks with favor on Soviet
promises to retail gasoline at
cut-rate prices. The govern-
ment has also permitted the im-
port of Soviet printing ma-
chinery at a low price by a pro-
Soviet Libyan publisher. These
moves are aimed at increasing
Soviet respectability in the
eyes of the Libyans and are
another phase in the long-term
campaign to induce Libya to
turn to neutralism.
Soiiiet bloc economic rela-
tions with Tunisia are gradual-
ly increasing. Since Tunisia's
independence in March 1956, the
Tunisian Government has signed
trade agreements with the USSR,
Czechoslovakia, and Bulgaria,
and in 1958 with Poland and
Hungary. The Polish and Hun-
garian agreements are expected
to increase bloc trade with
Tunisia by more than 100 per-
cent in 1958 to a total of
about $10,000,000.
Bloc economic activity in
Algeria has been limited to
trade, which in 1957 almost
doubled, increasing to about
$12,000,000. The bloc has been
rather cautious in its dealings
with Algeria, particularly with
regard to the sale of arms to
dissident forces.
In Morocco there has also
been a gradual increase in bloc
economic activity in the past
few years. Missions from the
USSR, Poland, and Czechoslovakia
already have been established in
Casablanca. Economic activity
has been limited to trade, de-
spite reports of a Czechoslovak
offer of an ammunition factory.
Morocco's trade with the bloc
probably will not account for
much more than 5 percent of
its total trade in 1958.
Bloc economic activity in
West Africa is less pronounced
than that in the African coun-
tries bordering the Mediterrane-
an, although several countries
for which independence is in
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10 July. 1958
the offing provide an attrac-
tive target for the bloc eco-
nomic penetration effort. These
new and embryonic nations rely
on agriculture and mining for
income but require capital for
economic development and manu-
factured products in. order to
improve '.the. standard of
living.
Ghana has limited trade re-
lations with several of the
European satellites, and East
Germany is reported planning
to send a delegation to Accra
with offers for $3,000,000 worth
of industrial credits to en-
courage Ghana's industrializa-
tion'schemes. The new nation's
preoccupying concern with fi-
nancing its proposed
SINO-SOVIET BLOC TRADE WITH AFRICA
MILLION DOLLARS
1955
1956
0
=1957
(%) OF TOTAL TRADE
TOTAL: 1955 - 252 (2.8)
1956 - 318 (3.3)
1957 - 522 (4.9)
43.4 39.8 40.2 32.9 47.4
(1.9) (1.7) (1.8) 29.7 (2 A)
(1.3)
x.9914.615.4
26__..4 3.3
NORTH AFRICA WEST AFRICA SOUTH &CENTRAL AFRICA* EAST AFRICA'
Liberia, Nigeria, and the
French colonies of this area
have not yet been recipients
of special bloc attention, but
their trade with the bloc has
gradually increased during'the
past few years.
The bloc has concentrated
its limited economic activity
in this area on Ghana,the latest:.
of the former colonial terri-
tories to receive independence.
During the 1956-57 season, the
Soviet Union purchased almost
$6,000,000 worth of cacao beans,
Ghana's major export, more than
four times its normal annual tm-
ports from Ghana. Although Mos-
cow was possibly prompted by a
desire to develop its own choco-
late industry, these purchases
were also calculated to present
the USSR to Ghana as a helpful
friend. However, there are no
indications that the USSR will
enter the cacao market on as
large a scale this year. Ghana
has been considering sending a
trade mission to the USSR and
Communist China in addition to
those scheduled to cover the
free world.
$850,000,000 Volta
River hydroelectric
project offers the bloc
a particularly good op-
portunity to gain stat-
ure.:, through legiti-
mate offers of credits
or hints of offers .
Central sand South Africa
The only inde-
pendent state in Cen-
tral and South Africa
--the Union of South
Africa--is closely
tied to the West both
economically and. culturally. The
nonindependent areas,' whose econ-
omies are essentially based on
agriculture and expanding ex-
tractive industries, are fairly
well insulated against bloc
economic penetration efforts
because of their political re-
lations with Western European
mother countries. Nevertheless,
trade relations with the bloc
do exist and are continually
being developed in accordAnce
with the growing need for mar-
kets. Czechoslovakia has been
responsible for 50 percent of
the bloc's exports--primarily
textiles--to the Union of South
Africa.. In 1957 the USSR was
the chief bloc importer of South
African products, with purchases
--mostly of wool--amounting to
$31,000,000.
Communist China this year
also is displaying an interest
in developing trade relations
in the area. An order for
10,000 tons of corn, with hints
of additional purchases up to
100,000 tons, was placed with
the Union of South Africa, and
a Chinese trade delegation
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CURRENT INTELLIGENCE WEEKLY SUMMARY
10 July, 1958
is being sent to Southern Rhodesia
to:negotiate tobacco purchases.
East Africa
The bloc is following up
its successes in Egypt and the
Middle East with efforts to ex-
pand its economic relations with
adjacent East Africa. It is
showing the most interest in
Ethiopia, the Sudan, and most
recently Somalia, which is to
attain independent status in
1960. Moscow reportedly has in.-
formally indicated it would be
willing to entertain applications
from Somalia for long-term, low-
interest credits. At the pres-
ent time, however, its efforts
are concentrated on the Sudan
and Ethiopia.
Czechoslovakia has offered
to supply air force equipment
to Ethiopia, as well as to sell
other arms at bargain prices.
Mote recently, Moscow has offered
to supply Ethiopia with 34 jet
fighters and to train Ethiopian
pilots in the USSR.
The USSR, Czechoslovakia,
and Bulgaria have also made of-
fers of economic assistance--
including expansion of hospital
facilities and construction of
a cement factory and a meat-
packing plant--but practically
no results beyond the granting
of concessions have been
achieved to date.
1 percent of Ethiopian foreign
trade. Coffee sales to the USSR
are a major export to the bloc.
In 1956 Ethiopia concluded its
only bloc trade agreement, with
Czechoslovakia, which supplies
the bulk of Ethiopia's imports
from the bloc, including cotton
goods, metal products, and other
consumer goods. Recently an
Ethiopian commercial delegation
was organized for visits to Bel-
grade, Prague, and Moscow.
In the summer of 1957, when
the Sudan encountered difficulty
in selling its cotton crop at
prices above the world market,
the USSR offered a package trade-
aid deal. The offer, while not
spelled out, involved Soviet ac-
ceptance of Sudanese cotton in
payment for manufactured goods
and for long-term loans to aid
development of the Sudanese econ-
omy. The Khalil government re-
jected the offer; subsequent
reductions in the price of cotton
by the government sharply in-
creased sales to the West and
eased the economic situation.
The Sudan continued to re-
fuse renewals of the Soviet of-
fer until May, when the govern-
ment stated it WAS willing to
accept a Soviet loan offer if
there were no strings attached.
Although the Sudan's trade
with the bloc rose slightly in
1957, the volume continues to
be negligible. Sales to the
bloc--mostly of cotton--totaled
Ethiopia's trade with the
bloc has increased each year
since 1955. In terms of total
trade turnover, however, this
commerce with the bloc is negli-
gible, accounting for less than
less than $5,000,000, or only
3.5 percent of total exports,
while purchases totaled $4,-
25X1
500,000, or 2.5 percent of
total Sudanese imports
25X1
THE FIRST SIX MONTHS OF EURATOM AND THE COMMON MARKET
Six months after EURATOM
and the European Economic Com-
munity (EEC) treaties came into
effect, the future of the two
projects--on which the fate of
the European unity movement
largely depends--is still in
doubt. Both have made substan-
tial progress and are an increas-
ingly important factor in the
internal and external policies
of their member states. However,
the political and economic dif-
ficulties of France have cast a
shadow over these hopeful devel-
opments, and the future course
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10 Ju1p. 1958
Eursfricc (African areas associated with
the European Economic Community
~
&D Negotiations will be opened later to
associate Morocco, Tunisia, and Libya with
the Economic Community [The following
nonAfrican territories have been associated
with the Economic Community or will be the
subject of lurther negotiations to that end:
It, Pierre and Miquelon
New Caledonia and dependencies
French settlements in Oceania
French Anlarctic Territories
Dutch New Guinea, Su main and the
Z_ Dutch Wesl Indies]
CSC, EURATOM, end the European Economic
Community
Potential members of the Free Trade Area
of Europe still hangs to a large
extent on the intentions and
capabilities of whatever govern-
ment is in power in Paris.
Institutional Developments
Organizationally, the de-
velopment of the new communities
has been impressive, and all
the important institutions have
been functioning for some time.
Advisory agencies, such as the
Economic and Social Committees
and the Monetary Committee, have
been named, and the two most
important operating agencies--
the European Investment Bank
and EURATOM's supply agency--
are being set up. The European
Parliamentary Assembly--which
also functions for the Coal-
Steel Community (CSC)--has shown
exceptional vitality, and ob-
servers are encouraged by its
organization on party, rather
than national, lines. It may
also be of considerable impor-
tance to the gradual emergence
of a "European government" that
the three communities are shar-
ing certain service agencies--
for example, in the information-
al field.
The major obstacle to more
rapid organizational development
has been the continued lack of
decision on the site for the
"European capital." This inde-
cision has caused physical incon-
venience and encouraged national
rivalries. Despite agreement
that all major community institu-
tions should be concentrated in
one place, the six governments
again declined on 1 July to make
a choice among the leading con-
tenders--Brussels, Strasbourg,
and Milan. A de facto solution
to this problem may, however,
be in prospect: many EURATOM
and Common Market installations
are now in Brussels, and American
Ambassador Butterworth doubts
they will be moved from there
in the foreseeable future.
Foreign Relations: EURATOM
Pressing problems of an ex-
ternal nature have encouraged
the rapid development of the
EURATOM and Common Market
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10 July,-1958
Commissions which, to a consid-
erable extent, embody the supra-
national features of both com-
munities. At a time when it had
little or no technical staff and
was further handicapped by the
illness of President Armand, the
EURATOM Commission, for example,
launched the negotiations on the
US-EURATOM joint program of nu-
clear power development which now
awaits approval by the US Congress.
The advantages of this
agreement to EURATOM and to the
integration movement as a whole
are increasingly evident. It
has greatly enhanced EURATOM's
prestige and, according to Pres-
ident Armand, gained it increased
support from hitherto unenthusi-
astic quarters such as the French
atomic energy commissariat. It
should provide a major stimulus
to the launching of EURATOM's
research program, and, in view
of the responsibilities which
EURATOM has assumed for the en-
forcement of safeguards, to the
rapid development of a security
system in keeping with American
standards.
Other advantages have also
been evident in the increasingly
friendly attitude toward EURATOM
in London, which along with the
United States has not accred-
ited its CSC mission to EURATOM
as well. Moreover, Britain ap-
parently intends to abandon
pending bilateral agreements
with West Germany and the Neth-
erlands in favor of one with
EURATOM. Although the negotia-
tions are. not expected to result
in a joint program at this time,
the proposed agreement will fa-
cilitate commerce in nuclear ma-
terials and reactors and con-
stitutes an- important recogni-
tion of EURATOM's jurisdiction.
Common Market and GATT
The rapid evolution of Com-
mon Market institutions has
likewise been encouraged by prob-
lems in the "foreign" field.
Both the Common Market Council
.and the commission, as well as
the member states, were repre-
sented, for example, at the April
meeting of the contracting par-
ties to the General Agreement
on Tariffs and Trade. It is an-
ticipated that future negotia-
tions of this type will be han-
dled by the commission, subject
to subsequent approval by the
council.
The importance of this de-
velopment is evident in the in-
fluential role played by the
Common Market representative at
the April meeting in gaining
acceptance of a compromise ar-
rangement which averted a show-
down on the compatibility of the
Common Market treaty with GATT,
avoided the establishment of
GATT supervisory machinery, and
made it possible to use existing
machinery for consulting on fu-
ture trade problems. Should
the commission carry out its in-
tention to seek separate GATT
representation, some of the
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difficulties which have charac-
terized GATT-EEC relations to
date might be eased.
EEC and Free ..Trade, Area
The increasing influence
of the commission is even more
apparent in the difficult nego-
tiations on a mechanism to link
the Common Market with the other
member countries of the OEEC.
Although other agencies and in-
dividuals have also been work-
ing toward a compromise, the
commission has gradually emerged
as the spokesman `for "the six"
and the only real hope for a
reconciliation of British and
French views.
At the same time, the com-
mission's efforts to maintain
the essential integrity of the
Common Market are apparent in
the resolution on the free trade
area adopted by the European
Parliamentary Assembly on 27
June. Suggesting the formation
of a "European Economic Associa-
tion," the assembly proposes
that the necessary agreements
be concluded "between the Euro-
pean Communities and the other
11 countries of the OEEC." To
allow time for negotiations,
interim tariff and quota adjust-
ments would be made next January
by all OEEC countries.
An arrangement such as this,
if approved by the Common Market
Council later this month, would
tend to invest the commission
with major responsibility for
the future conduct of negotia-
tions on the free trade area
and, as representative of the
Common Market "entity," give
it a leading role in any result-
ing association. For negotia-
tions, such a key role for the
commission would have distinct
advantages over the situation
of the past few months in which
the increasing isolation of the
French has threatened the unity
of "the six" and precluded any
major progress. Substantively,
however, it is unclear whether
the De Gaulle government is pre-
pared to make any commitments
regarding a free trade area,
and there may also be reserva-
tions from countries other than
the six about a proposal which
would further change the char-
acter of the free trade area and
fortify the Common Market as
its center.
Internal Problems
On balance, the EEC's in-
stitutions can claim less prog-
ress in facing up to essentially
internal problems on which the
future of the project will great-
ly depend. The treaty, for ex-
ample, left purposely vague the
future organization of the mar-
ket for agricultural products,
and a conference to elaborate
agricultural policy was to have
been called with the coming into
effect of the treaty. This con-
ference is only now taking place,
and it is unlikely to reach ma-
jor decisions on this delicate
issue.
There is reason for concern
as well over the absence of any
detailed policy toward restric-
tive business practices. The
EEC treaty contains blanket
prohibitions against restric-
tive agreements and the abuse
of monopoly positions, but there
are important exceptions. Pend-
ing the development of imple-
mentative policy, moreover, the
member states are obliged to
enforce both the treaty and
their own legislation. So far
as is known, the commission has
made little if any progress to-
ward devising enforcement machin-
ery;; ;add,- in the meantime, re-
ports of business consultations
across national borders suggest
an intent to prevent the compe-
tition which the Common Market-
was designed to encourage.
France's Economic Problems
These urgent problems, how-
ever, have been more than over-
shadowed by the accentuation of
France's economic difficulties
since last May and by the devel-
oping prospect that France might
be unable to afford the 10-per-
cent tariff reduction and 20-
percent quota enlargement sched-
uled 'for next January. These
difficulties were first consid-
ered by the Common Market Com-
mission and council at a special
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lA July.l958;
session on 23 May. At this
meeting, the exchange restric-
tions imposed by the Pflimlin
government were approved, the
possibility of "mutual assist-
tance" to France was endorsed,
and the launching of a study
of France's longer range prob-
lems was announced.
This study is believed now
in abeyance, and there is evi-
dent hesitancy both in Paris
and in Common Market headquar-
ters to make decisions on meas-
ures to cope with a crisis which
everyone hopes will not occur.
A French default next January
would-be a serious blow to the
entire integration movement,
and, in the meantime, there is
only small encouragement in the
recent improvement in France's
foreign exchange position and
speculation that, in a crisis,
Bonn may be willing to provide
some financial assistance.
There will be little dis-
position in any case to face
these decisions until the polit-
ical future of France is clearer.
On balance, the initial pessi-
PANAMA AND THE
Recurrent agitation among
Panamanians for recognition of
their country's sovereignty in
the Canal Zone and for a larger
share in canal income and op-
eration has intensified since
the seizure of the Suez Canal
by Egypt in 1956. Severe.db-
mestic economic and political
difficulties have aggravated
this issue. Pro-US President
de la Guardia's position is
not secure and he may be forced
from office before his term
ends in 1960. World opinion
is often critical of the United
States' role on the isthmus and
mism over'the accession of De
Gaulle has given way to increased
confidence, and officials of the
three communities tend to take
at face value De Gaulle's asser-
tion that he will abide by ex-
isting treaty commitments. The
French bureaucracy is expected
to be difficult to deal with,
as it has in the past, and there
is concern over the impact on
it of such well-known "anti-
Europeans" as Minister of Justice
Michel Debre.
A frontal assault on the
European treaties is thus not
foreseen, but those officials
who favor the European concept
are fully aware that the govern-
ments of France after De Gaulle
will largely determine the shape
of the European Community. The
Coal-Steel Community, however,
is well-established, all three
European treaties are highly
favorable to France, and, in con-
trast with the situation which
prevailed a few years ago, the
extent to which their procedures
and principles have been ac-
cepted in Paris is impressive.
(Concurred in 25X1
Dy Val)
CANAL ZONE
the Soviet press and radio have
recently given considerable at-
tention to Panamanian complaints
against the United States.
The 1903 Treaty
The treaty signed with the
United States soon after Panama
declared itself independent of
Colombia in 1903 made the new
republic a virtual protectorate
of the US. Panama granted "in
perpetuity the use, occupation,
and control" of a ten-mile-wide
zone bisecting the republic and
such other lands and waters as
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10 July. 1958
were deemed necessary by the
US for the "construction, main-
tenance, operation, sanitation,
and protection" of an inter-
oceanic canal. Within these
areas, Panama also granted in
perpetuity to the US "all the
rights, power, and authority"
it would possess "if it were
sovereign.. to' the efltire ex-
clusion of the exercise by the
Republic Of Panama of any such
sovereign rights, power, and
authority." Subsequent con-
tractual agreements on the zone
have not substantially altered
the basic grant. Panama was
paid $10,000,000 plus an an-
nuity of $250, 000, and the United
States guaranteed the repub-
lic's independence and internal
stability, reserving the right
to intervene to maintain either.
Treaty Revisions
Differing interpretations
of the 1903 treaty and frequent
allegations of US injustices
led in 1936 to a revised treaty
in which the US terminated its
protector status, renounced
further land acquisitions,
agreed to restrict some com-
mercial activities of the zone
commissaries which the Panamani-
ans consider competitive with
PANAMA
::-Paved or all-weather road -+-.- Railroad
He,- oaffir,an Highway:
-- all-weather ..... under construction
ESTIMATED POPULATION - 1958
500 inhabitants
Urban area - 5,000 10,000
? Urban area - 10,000-20,000
Colon - 60,000
,ISLA
COIBA
Chtre
Wes,
their own b*sinessgs,: and
raised the annuity to $430,000.
New misunderstandings arose
after World War II, however,
when the United States did not
immediately return military
bases leased in the republic
and asked for long-term lease
renewals. The chronic nation-
alist and anti-US feelings
aroused by the canal issue were
exploited, particularly among
student groups, by various po-
litical factions, and in 1947
the Panamanian National Assembly
rejected a base agreement al-
ready reached between the two-
governments. The United States
abandoned the bases abruptly
and Panama suffered serious
economic dislocations.
A subsequent treaty, signed
in 1955, raised the annuity to
$1,930,000 and further restricted
US commercial activities in the
zone. Additional long-sought
provisions establishing a single
wage scale for Panamanian and
US workers in the zone, ap-
propriating funds for a high-
level bridge spanning the canal
to connect Panama's divided
sections, and returning to Pana-
ma, certain lands previously held
by the United States, have
La Chorre
The labor force in Panama numbers
290,000 (35: of total population); the
total unemployed is 45,000.
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10 Jiily. 1958
recently been or are about to
be approved by the US Congress.
Economic Factors
Population and economic
activity are disproportionately
concentrated in the two termi-
nal cities of the canal--Panama
City and Colon. Development
of agriculture, industry, and
transportation in the interior
has been virtually ignored and
the republic's entire economy
is geared to the Canal Zone,.
which provides an estimated
40 percent of Panama's national
income. A small clique repre-
senting about 5 percent of Pan-
ama's million people controls
the sources of economic and
political power. This group
invests its funds in commercial,
real estate, shipping registry,
and other nonproductive but
highly profitable businesses.
Profits are used speculatively
and not invested in job-produc-
ing industries. Thus Panama
ranks high in Latin America in
per capita income while most
of its people contribute little
to the economy and live.-in
poverty.
Large and potentially
valuable agricultural areas are
either inaccessible or left idle
by large landholders. About
half of the country's population
ekes out a subsistence as squat-
ters living on inadequate plots
of land. Thus Panama is forced
to import considerable agri-
cultural produce and is faced
with a resulting highly un-
favorable trade balance when
it could, with effective agri-
cultural techniques and organi-
zation, produce enough for its
own needs and for export as well.
Chronically high and in-
creasing urban unemployment has
become a potentially explosive
socio-economic problem, posing
a constant threat to political
stability. Inertia, disease,
and lack of education or skills
characterize the labor force
and are used by the wealthy
oligarchy as arguments against
investment in productive eco-
nomic development. About 20 per-
cent of the population are Ne-
groes, descendants of West In-
dians who came to build the ca-
nal. Racial antagonisms have
developed in the cities, where
competition for the shrinking
number of jobs in the zone--at
wages about twice as high as
for similar jobs in Panama--is
fierce.
The corruption pervading
the government makes reforms
difficult. President de la
Guardia has found it almost im-
possible to implement the re-
forms envisaged when he created
the economic development coun-
cil and a housing institute and
tried to reorganize the Labor
Ministry. Powerful leaders of
the oligarchy look on reform as
a threat to their considerable
economic interests.
Panama's present claims
against the United States include
demands for 50 percent of gross
canal revenues, which would make
-its share about $20,000,000 an-
nually. The present annuity is
about one half of net profits.
US defense costs of $50,000,-
000 are figured separately. In
1957, Panama received around
$54,000,000 in wages to nation-
als, purchases, and other canal-
related income. Its 1957 budget
was $52,000,000.
There is also strong na-
tionalistic support for demands
to fly the Panamanian flag in
the zone in recognition of Pana-
ma's alleged "residual" sov-
ereignty there. Nationalistic
students crossed into the zone
last May and raised numerous
Panamanian flags to dramatize
this demand. Thus far, demands
for outright nationalization of
the canal have been infrequent.
Most Panamanians ..-probably
feel that while! eventual
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nationalization is desirable,
their country is not now
equipped to handle the complex
management and operation of
the canal.
International Aspects
Student groups have sug-
gested that Panama present its
case for greater benefits from
the canal to the United Nations
Security Council, of which Pana-
ma is a member until January
1960. Panama could expect
wide support in the UN from
both the Arab-Asian and Soviet
blocs. During the Suez crisis
in 1956, the Panamanian Govern-
ment aggressively promoted at
home and abroad the view that
there are important similarities
in the two cases and that the
status of the Panama Canal is
also subject to change. Panama
will renew these tactics when-
ever it wants to launch a cam-
paign to wrest major concessions
from the US.
Sympathy for Panama's
claims would also be widespread
among nationalistic and anti-
US groups in the rest of the
western hemisphere and might
influence some governments to
support Panamanian demands. In
addition, many Colombians
still blame the US for the
loss of Panama. Suggestions
that the canal be internation-
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ized, or "inter-Americanized,"
which have been made periodical-
ly in Latin America, would prob-
ably not be approved by Panama
unless it were guaranteed a
predominant role. If the US
should make further concessions,
Panama would not want to share
the benefits with others.
The canal issue is an im-
portant one in Panama's present
unstable political situation.
Charges that moderate, pro-US
President Ernesto de la Guardia
has not defended Panama ' s
"rights" in dealing with the
US are part of a virulent
campaign to oust him now being
waged by his powerful opponents.
Political tension and student
unrest are again building up
following the lifting of the
state of siege imposed after
the serious rioting last May.
Many influential politicians,
including some cabinet members,
now feel that De la Guardia
cannot last out his term, which
ends in 1960. Further serious
outbreaks could occur at any
time and might involve anti-US
incidents. It is unlikely that
any government resulting from a
successful coup in the near fu-
ture would be more friendly to
the United States than the pres-
ent one, and a new government
might well be controlled by ex-
treme nationalists 25X1
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