CURRENT INTELLIGENCE WEEKLY SUMMARY

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• Collection: General CIA Records
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• Document Creation Date: December 20, 2016
• Document Release Date: August 17, 2005
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• Publication Date: October 26, 1999
• Content Type: SUMMARY

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CONE NTIAL
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
DOCUMENT NO.
CENTRAL INTELLIGENCE AGENCY
NO CHANGE IN CLASS. EJ
0 DECLASSIFIED
CLASS. CHANGED TO:
NEXT REVIEW DATE: .
AUTH? HR 7n_a_~
DATE:
OCI NO- 0025/59
29 January 1959
jjj~tejj di
J0~ 2i!Z2
COPY NO. 53
OFFICE OF CURRENT INTELLIGENCE ~..- _
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 SUMMAR1
29 January 1959
OF IMMEDIATE INTEREST
The Soviet leaders are
continuing their efforts to
create a political climate which
they believe will force the West
to agree to negotiations on
terms favorable to the USSR or,
failing this, make it more dif-
ficult for the Western powers
to react firmly to a transfer
of Soviet controls over Allied
access to Berlin to the East
Germans. Khrushchev and Miko-
yan have made public statements
intended to demonstrate Soviet
flexibility and reasonableness
on the German issue, while So-
viet propagandists are stressing
the lack of public support for
Western policies on Berlin and
Germany and Soviet sources are
circulating rumors of a Soviet-
American deal at the expense
of the NATO allies.
Soviet Moves
Soviet First Deputy Premier
Mikoyan in his press conference
in Moscow on 24 January. sought
to demonstrate Soviet "?r?eason-
ableness" and flexibility on
the Berlin issue by stating that
the six-month period for nego-
tiations fixed by Moscow's note
got the impression there is at
least a possibility of a thaw
in our relations" with the West.
He asserted the USSR is "doing
everything possible" but added
that if the West is unwilling
to thaw out the cold war, "we
can make it colder."
Soviet spokesmen and prop-
aganda are also trying to cast
doubt on the firmness of the
American positions on Berlin and
German reunification by suggest-
ing that Washington's policies
do'not command the support of
the American people. In his
public statements in Copenhagen
and Moscow, Mikoyan stressed the
alleged divergence between the
desire of "most Americans" to
end the cold war and the poli-
cies of the US Government.
Trud, Literary Gazette, and
Red Star have carried articles
on this theme, the latter at-
tacking the President's State
of the Union and budget mes-
sages and claiming that "the
alienation of the government
from the people is clearly
demonstrated by the November
Congressional elections."
of 27 November could be extended In a lecture in Moscow on
two or three months, if the USSR 22 January, a speaker from the
were convinced of Western will- main political administration
ingness to negotiate "with the of the Soviet armed forces de-
object of ending the occupation scribed alleged Western weakness
regime in West Berlin." He in- and vacillation on the Berlin
sisted that the "main thing in question and predicted that the
our proposal is not the date for j issue would be settled on Soviet
ending the talks, but the neces- terms. He stated that the
situa- tion:appears:more:.criti'al,~.than
i
i
t
Khrushchev struck a similar
note in his remarks at the
Indian National Day reception
on 26 January in Moscow. From
Mikoyan's report, he said;"we
n
,hesa 0)
it is.. The~cruciai:.po
is that,the West will not fight
over Berlin becausc.'.it cannot.
The speaker claimed that
Secretary Dulles has already
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
started maneuvers to get out of
a dead-end position because he
realizes Western impotence in
the face of the USSR's challenge.
Dulles' "retreat" from his pre-
vious stand on free elections
as the essential precondition
for German reunification has
triggered similar maneuvers in
other Western capitals, accord-
ing to the speaker. He noted
there is already discussion of
accepting a German confederation
and that even West German of-
ficials are calling for a posi-
tive approach and alternate
proposals.
Soviet spokesmen are seek-
ing to capitalize on Mikoyan's
visit to the United States by
again circulating rumors of an
impending bilateral deal between
the United States and the USSR
to settle world problems at the
expense of the NATO allies.
Soviet correspondents in Paris
are promoting the line that the
Mikoyan trip marked a "historic
turning" in world affairs and
that, while the results will
emerge only gradually, the
United States and the USSR--
the only two real world powers--
have embarked on bilateral ar-
rangements to resolve outstand-
ing issues on the basis of co-
existence.
East Germany Seeks Recognition
The East German regime has
continued its determined bid for
international recognition, pin-
ring'its hopes on the expectation
that the West will eventually
have to deal with it on access
to Berlin. The East Germans
probably feel the Soviet Union
is obligated to turn over its
quadripartite responsibilities
in Berlin as promised, no mat-
ter what else occurs on the in-
ternational scene to alter the
German situation. This
expectation was reflected in
East German party boss Ulbricht's
blustery assurance in an inter-
view on 23 January that it is
"absolutely certain" that the
Soviet Union will carry out
its plan to transfer access
controls.
The East Germans' expecta-
tion that the controls will be
turned over to them is also re-
flected in plans to force the
West to negotiate with them for
commercial air rights. They
reportedly hope the West will
refuse to accept their represen-
tation on the Berlin Air Safety
Center, for they would then feel
justified in taking up individual
negotiations with the Western
airlines for flights across East
Germany that would terminate
at Schoenefeld airfield in East
Germany outside East Berlin,
rather than at Tempelhof in
West Berlin.
Such negotiations would
not necessarily require diplomat-
ic recognition, but they would
substantially enhance East Ger-
many's status as a sovereign
state. Negotiations are said
to be already under way with
Swissair for air service to
Switzerland--a logical begin
hing,since the Swiss are not
bound by NATO's responsibilities
regarding Berlin.
At the same time, Grot-
ewohl's perambulations through
Asia failed to gain a higher 25X1
standing for East Germany in
that area.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
Western Attitudes
Against the background of
Soviet probing and efforts to
appear reasonable, the West
European powers are considering
how to reply to Moscow's 10
January note calling for a con-
ference to conclude a peace
treaty with Germany. Chancellor
Adenauer would prefer that dis-
armament be the sole theme of
any meeting, whereas London ap-
pears more interested in Euro-
pean security proposals.
The West German opposition
parties continue to call for new
counterproposals from Adenauer's
government, and alternate solu-
tions to the Berlin question are
receiving wider consideration
To satisfy its allies,Bonn
is attempting to display some
flexibility. Government offi-
cials have indicated that free
elections are not necessarily
the first step toward unifica-
tion. Adenauer no longer in-
sists on a flat rejection of
the 10 January Soviet note,
and the Foreign Ministry is
preparing the basis for a "con-
structive" reply.
Bonn, however, is unlikely
to offer any major concession
on German unification in an East-
West meeting. A top West German
official recently said that his
government's task was to main-
tain the "core of free Germany."
He ruled out any disengagement
plan or German confederation
scheme by claiming that Moscow
is not willing to permit German
reunification, regardless of
concessions the West might make.
In a recent British public-
opinion poll, 37 percent of
those supporting the government
said they would prefer a Com-
munist Britain to a war with
the USSR over Berlin. A Foreign
Office official explained that
the imminence of general elections
was making politicians unneces-
sarily nervous about public
opinion and hesitant to take
firm positions.
De Gaulle and other French
officials, although reiterating
French determination to meet
force with force on retaining
Western access to Berlin, are
maintaining their opposition
to any prior agreed-military
plan which would automatically
result in the use of force.
Their insistence that the ulti-
mate decision to use force is
a political one--to be taken
by the West in the light of
circumstances at the time--
basically reflects their fear
of involvement without ckoice.
THE SOVIET PARTY CONGRESS
Khrushchev opened the spe-
cial 21st party congress on 27
January with a six-hour report
on the USSR's new seven-year
economic plan. The TASS sum-
mary of his speech does not
reveal any significant changes
in the plan goals approved by
the central committee last Novem-
ber. His optimistic estimates
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NOW
CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
about future Soviet economic
prospects indicate that the
chief purpose of the congress
is to launch the plan on a wave
of self-confidence.and give it
maximum propaganda support.
Khrushchev asserted that
the domestic and international
position of the Soviet Union
"has never been as stable as
it is today." With attainment
of the USSR's economic goals,
he went on, the world balance
of forces will show a "decisive
edge" in favor of the bloc, and
then "even the most die-hard im-
perialists" will not dare use
force against Communists. He
claimed that by the end of the
plan in 1965 the Soviet Union
will have overtaken the United
States in many areas of produc-
tion, and that by 1970 the USSR
will surpass the US in per capita
industrial production. He also
predicted that agricultural out-
put would increase 70 percent
in that period.
In his extended remarks on
foreign policy, Khrushchev re-
iterated the USSR's position on
a number of issues. His con-
fident emphasis on the strength
of the Soviet Union and of the
bloc as a whole, and his pres-
entation of such subjects as
East-West relations, the German
problem, and disarmament point
to a continuation of Moscow's
vigorous probing for weak spots
in free world defenses.
Khrushchev called disarma-
ment the "main task today" but
offered nothing new in the
Soviet formula for a permanent
ban on the testing',. production,
and use of nuclear weapons and
guided missiles and the destruc-
tion of stockpiles. He repeated,
without apparent softening, the
Soviet position on Germany set
forth in Moscow's note of 10
January proposing a peace
treaty with the two German
states which would "solve" the
future status of Berlin by mak-
ing the Western sector a free
city under UN "guarantees."
Khrushchev was quite
vigorous in asserting "full
and complete agreement" with
the Chinese Communists, al-
though Peiping had adopted many
"original" practices. Chou
En-lai,the first foreign
representative to address the
congress, spoke in a similar
vein, declaring that "the
Soviet Union and'China share a
common fate and joint interests.
Their friendship is eternal and
unbreakable." Chou acknowl-
edged Soviet leadership in world
Communism by declaring: "The
practice of the Soviet people
is showing the whole world the
way of transition to Communism.
In the USSR of today, the people
of the entire world see their
tomorrow."
The speech showed no re-
laxation in the Soviet attitude
toward the Yugoslavs, whom he
again blasted for taking the
path of "revisionism."
Khrushchev renewed the
verbal assault on his "anti-
party" opponents--Malenkov,
Molotov, Bulganin, Kaganovich,
and Shepilov. He asserted that
they had "resorted to the vilest
methods of factional struggle
and splitting tactics" and called
them a "despicable group of
dissenters." Later, Leningrad
party First Secretary Spiridonov,
speaking to the congress, sound-
ed the call for further moves
against the group by declaring
that it was "now time for it to
answer to the highest organ of
the party--the congress."
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
The only hint of other
dramatic internal party devel-
opments has come from a Warsaw
radio report stating':that the
congress would discuss "cer-
tain other, wider problems
of a politict1 nature."
DEVELOPMENTS IN YEMEN
Recent reports from Yemen
reflect growing instability
there and suggest that the coun-
try could be close to open re-
bellion. The harsh regime of
ailing Imam Ahmad has long been
the act of conspiracy by
dynastic rivals and revolution-
aries based in Aden. The pre-
vailing widespread opposition,
however, is primarily aimed at
the Imam's son, pro-Soviet
Crown Prince Badr, whose claims
to succession are opposed by
leaders of those Yemeni tribes
who traditionally elect each
new Imam. These chieftains
appear generally to support the
present Imam's brother, Prince
Hasan, former premier, who has
been in virtual exile as head
of Yemen's UN de].e,gatiozi...
Popular dissatisfactioi) .'.
Yemen is furthered by the deteri-
oration in the central govern-
ment's authority, caused by
the Imam's increasingly fre-
quent lapses and by the ex-
ecutive ineptitude of the crown
prince. As a result of a
severe drought, Yemen is also
experiencing a widespread famine.
This may affect up to 90 per-
cent of the 4,500,000 inhabitants.
Both the United States and the
USSR are providing emergency
aid wheat.
Since 1955 the Yemeni Gov-
ernment has accepted approxi-
mately $65,000,000 in military
and economic aid credits from
the Sino-Soviet bloc, apparent-
ly without regard to its ability
to repay, Yemen remains virtual-
ly bankrupt and has failed to
meet obligations due Saudi
Arabia, Czechoslovakia, Commu-
nist China, and the USSR. About
350 Sino-Soviet bloc personnel
now are in Yemen in connection
with aid programs; most of them
are Chinese Communists who have
arrived in tic last two months.
A major factor in Yemen's
arms deals with the bloc was
Badr's hope that possession of
modern weapons would encourage
army loyalty and permit effec-
tive control of rebellious tribes.
While some of the lighter equip-
ment has been employed in sup-
pressing local unrest, and in
sporadic action on the disputed
frontier with Aden Protectorate,
most of the weapons--including;
tanks, artillery, and piston
aircraft--remain in "storage."
In addition to UAR military
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
instructors, there are bloc
military personnel in Yemen
including aircraft pilots. A
successful uprising against
Badr would require some army
support. Recent arrests of
several officers of the army
and the crown prince's body-
guard suggest that Badr is
concerned over the army's loy--
alty.
The influential northern
Yemeni tribes apparently oppose
the government's association
with Egypt in the United Arab
States--the loose federation of
the UAR and Yemen. The attitude
of these patricians of the Mos-
lem Zaidi Shia sect derives in
part from fear that Sunni Mos-
lem Egypt will ultimately as-
sist Yemen's plebian Shafai
Sunnis, who make up the majority
of the population, to reform
Yemen's social order.
The Zaidis' traditional
suspicion of Egypt appears
justified by evidence that
Cairo has permitted resumption
of "free Yemeni" propaganda ac-
tivity by antimonarchical
Yemeni exiles in the UAR. While
this trend may be caused in
part by Cairo's disenchantment
with Badr, it probably reflects
its long-range designs to over-
throw remaining monarchies in
the area
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
PRESSURES ON DE GAULLE FOR AN ALGERIAN SETTLEMENT
Mounting political and pro-integration sentiment in
economic pressures centered it the assembly.
around the Algerian problem make
it increasingly urgent for Frencht The settlers in Algeria
President de Gaulle to continue are putting pressure on Minister-
his efforts to find an accept- delegate Delouvrier for more
able basis for negotiating with troops. In view of renewed
Algerian rebel leaders. He is terrorist outbreaks, uneasiness
gradually losing the political over the military situation
advantages of his hitherto delib- has also spread to the press in
erately ambiguous public posi- France, where the conservative
tion on the question of Algeria's Paris daily Figaro has com-
future and may soon feel com- pared official opEimism with that
pelled to clarify his views, prevalent under the Fourth
Republic.
Proponents of total in-
tegration of Algeria with France,
alarmed by the series of recent
government moves apparently aimed
at facilitating a cease-fire,
are now trying openly to block
anything beyond an invitation to
the rebels to surrender. Most
of the 46 "tame" Moslem deputies
from Algeria have united with
the rightist settler deputies
to make their weight felt in
Parliament. Deputy Pierre
Lagaillarde, a settler extremist
active in the 13 May revolt, is
reported prodding the Moslem
deputies to collect signatures
for an early special parliamen-
tary session on Algeria.
The Independent party now
has come out unequivocally for
integration, and the Union for
the New Republic (UNR) of Pre-
mier Debr6 and Vice Premier
Soustelle was apparently con-
strained only by its "Gaullist"
label from a similarly forth-
right statement. Even though
many Independents and UNR depu-
'ties would probably follow De
Gaulle if he soon proposed a
clear-cut alternative to integra-
tion, such leaders as Finance
Minister Pinay, an Independent,
have expressed doubts that De
Gaulle realizes the extent of
Growing opposition in France
to De Gaulle's economic austerity
program is another factor mak-
ing an Algerian solution urgent.
The Socialists are attacking
the program as unfair to low-
income groups, particularly in
view of budgetary increases for
military expenditures in Algeria
and for the nuclear weapon pro-
gram. The Communist party is
taking a similar line.
The March municipal elec-
tions, which will be held in
Algeria as well as in France,
will probably be De Gaulle's
last opportunity to induce
representative Moslems to stand
for public office and thus under-
cut extremist rebel elements'
claims to be the sole val-
id spokesmen for Algeria.
Unless a cease-fire with
the rebels is achieved,
however, probably not enough
Moslems will be willing
to risk rebel reprisals
as candidates for the 15,-
000 posts involved, and
French claims of broad
Moslem support will be
proved to be unfounded.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
ITALY'S SEARCH FOR A NEW GOVERNMENT
The Fanfani government's
resignation on 26 January is
one consequence of the decision
of the Nenni Socialist party
congress to pursue a line inde-
pendent of the Communists. The
resignation came about when Dem-
ocratic Socialist Labor Minis-
ter Vigorelli quit the cabinet
to work toward reunification of
his party with the Nenni Social-
ists.
The Democratic Socialists
face an initial struggle on
this issue at the 31 January
meeting of their central commit-
tee. The chief of the party's
.labor union, UIL, has already
announced that some of its mem-
bers are ready to join
Nenni's party at some
future date. Unless
Democratic Socialists
arrive at a policy
leading toward reuni-
fication, serious de-
fections to Nenni ap-
pear certain.
President Gronchi,
who reportedly has
asked Fanfani to try
to re-form a coali-
tion government, thus
faces the fact that at best only
a fragmented Democratic Social-
ist party is likely to join a
government coalition. At the
same time, the six Republican
deputies, on whose abstention
the Fanfani government had de-
pended for a three-vote parlia-
mentary margin, show a disposi-
tion to make no commitments.
ing to prevent a victory of the
reformist wing at the party's
11-13 April congress, where the
right-wingers fear they may be
isolated if a decision is
made to seek Nenni Social-
ist parliamentary support
for a future government.
A temporary solution may be
an all - Christian Democratic
cabinet headed by left-of-
center former Premier Segni or
by a rightist such as former
Foreign Minister Piccioni or
Fanfani's interior minister,
Tambroni. Such a minority gov-
ernment, which would probably
count on ad hoc support from
parties on the right or left,
depending on the issue, would of
necessity be unstable and do-
nothing. A prolonged political
crisis could lead to national
elections this year or early
1960.
Meanwhile the Christian
Democratic right wing is work-
ITALIAN PARLIAMENT
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
E1.-ST: GERRMAN.:. PLENUM !REFLECTS HARDENING LINE
East German party boss
.Walter Ulbricht at a central
committee meeting from 15 to 17
January defended measures aimed
at further stepping up the tempo
of socialization--measures which
are likely to increase unrest
among the populace and place a
further strain on the party, al-
ready split by the purge of im-
portant leaders. To deter any
opposition to these policies
from central committee members,
Ulbricht again attacked his
former heir apparent, Karl
Schirdewan.
Ulbricht emphasized the
necessity of developing a "com-
munal spirit" in East Germany.
To this end he unveiled a new
type of labor brigade--the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
so-called "socialist work com-
munity," whose members are pledged
to "work together, learn together,
live together." This program
calls, for labor production
pledges, including obligatory
daily overfulfillment of plans,
self-education--especially
technical education--and "so-
cialist behavior."
The main purpose of this
innovation appears to be to in-
crease labor productivity, prob-
ably as part of the drive to
secure fulfillment of the cur-
rent five-year plan in four
years.
The central committee also
approved the politburo's orders
that all party, government, and
"mass organization" function-
aries must perform at least one
month's physical labor each
year; that army officers who
have not yet taken part in pro-
duction must do so; and that
higher officers--including gen-
erals--must serve one month in
the ranks annually.
Ulbricht revealed his con-
cern with the continued opposi-
tion of East German intellec-
tuals to his policies and lead-
ership, which have spurred mass
flights to the West. He never-
theless made it clear that he
is pushing forward with his pol-
icies, although he made a grudging
admission of blame for the harsh
methods used by many function-
aries toward the intelligentsia.
He secured central com-
mittee re-endorsement of his
controversial plans for the
"socialist transformation" of
the universities and for "poly-
technical education." The-lat-
ter requires all children aged
13 to 18 to work one day of
each school week in a factory
or on a collective farm.
Ulbricht reiterated his
condemnation of the ousted
Schirdewan party faction because
it advocated less drastic cul-
tural and economic policies.
Another top party official ac-
cused the group of permitting
the growth of "revisionism and
bourgeois views" by its opposi-
tion to Ulbricht's educational
policies.
Ulbricht asserted that
new evidence of Schirdewan's
"fractional" activities has
recently come to light, but
did not indicate what fur-
ther punishment would be im-
posed on the Schirdewan group.
KHRUSHCHEV OUTLINES FUTURE SOVIET-FINNISH RELATIONS.
The USSR has apparent-
ly ended the pressures on
Finland which toppled the
Fagerholm government,in_early
December, but Moscow's suc-
cess in replacing the dis-
trusted coalition will fur-
ther Finland's free-
dom of choice in the
composition of future gov-
ernments.
Khrushchev on 22 January
made a sudden trip to Lenin-
grad, where Finnish President
Kekkonen was making a"private
visit," and renewed earlier So-
viet offers of credit and aid in
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CURRENT .'INTELLIGENCE ?WEEKLY SUMMARY
29 January 1959
developing Finnish industries.
Khrushchev also agreed to be-
gin long-delayed trade negotia-
tions in early February.
In a highly publicized
speech on 23 January, however,
he warned Finland against form-
ing such a government as'.the
Fagerholm coalition, which he
claimed contained individuals
"notorious for their hostility
toward the USSR." Khrushchev
stated that the "question of
whether or not our relations
will be cold-depends on the
government of the country," and
he expressed the hope that the
newly formed Sukselainen govern-
ment would "help strengthen
friendship between the two coun-
tries." Khrushchev also warned
Kekkonen against allowing ele-
ments in the Finnish press--
"financed by reactionary circles
and possibly subsidized by third
countries"--to criticize the USSR
and to prejudice Soviet-Finnish
relations.
Khrushchev acknowledged
the recent Soviet chill campaign
toward Finland, but he denied
that it was interference in Fin-
nish affairs. He said that the
USSR wants "improved" relations
with Finland "that could be a
model" for other non-Socialist
states.
TASS announced that Foreign
Minister Gromyko had accompanied
Khrushchev to Leningrad and that
"some problems of the interna-
tional situation" were also dis-
cussed there. Moscow probably
hopes its measures to restore
good relations will encourage
Finland to support the USSR's
specific proposals on Berlin and
a German peace treaty. The Mos-
cow press promptly reported Fin-
land's favorable reply to the
Soviet note on a German peace
treaty conference.
The Finns have indicated
relief over the thaw in rela-
tions with Moscow but are con-
cerned that President Kekkonen,
despite denials, may have fur-
ther circumscribed Finland's
"neutrality" to suit the USSR.
Kekkonen and other Finnish
leaders reportedly feel the
USSR will use force if necessary
to achieve its aims in Berlin
and that Finland must meet Mos-
cow "halfway." In a broadcast
on his return from Leningrad,
Kekkonen emphasized the neces-
sity for maintaining the con-
fidence of the USSR and in ef-
fect placed the entire respon-
sibility for future good re-
lations on Helsinki, and Foreign
Minister Torngren has appealed
to the press to exercise "re-
straint and responsibility."
Khrushchev's warning will
almost certainly have a dampen-
ing effect on Finland's tenta-
tive interest in Western Euro-
pean economic cooperation and
will make it circumspect in
seeking economic assistance
from the West.
The reported appointment
of Deputy Foreign Minister
Zakharov, a trade specialist,
as the new Soviet ambassador
to Finland suggests that Mos-
cow intends to keep a close
watch over Finnish foreign
trade developments and ensure
the USSR'.s continued im-
portance in Finland's for-
eign-trade pattern.
RR)
(Concurred in Y
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
Moscow, concerned over f a-
vorable public reaction to the
Western concession dropping the
link between nuclear test-ces-
sion and progress on disarma-
ment, officially charged on 22
January that the American re-
port on underground explosions
is intended to "torpedo" the
talks in Geneva. The disarma-
ment link had long been cited'
as evidence of Western unwill-
ingness to agree to a test ban.
Moscow has claimed repeatedly
that Soviet concessions and in-
itiative alone are responsible
for progress in the negotiations
thus far.
The Western concession
threatened this propaganda posi-
tion, impelling the Soviet lead-
ers to intensify their attacks
on those remaining issues on
which they believe the'Soviet
position still contrasts favor-
ably with that of the United
States and Great Britain. Mos-
cow appears to be reverting to
its stand insisting on Western
acceptance of permanent cessa-
tion prior to agreement on a
control system.
In discussions this week
on control-post and inspection--
team staffing, the USSR tried
to appear willing to negotiate,
but in fact remained obdurate
on basic issues. In what he
termed a "great concession" to
the West, the Soviet delegate
proposed that the "other side"
be represented in each control
post by a larger number of its
nationals than originally con-
templated by Moscow. The USSR
had insisted that all except one
or two "controllers" at each
post be indigenous personnel,
in contrast with the Western
concept of truly international
staffs chosen without regard to
nationality. Under the new So-
viet proposal, Moscow would
still retain control over the
operation of the posts on bloc
territory.
On 28 January the Soviet
delegate attacked the Western
concept of permanent inspection
teams to be staffed entirely by
foreign personnel.and activated
without further political de-
cision by the control. commission.
In the Soviet viewpoint, inspec-
tion would require a political
decision of the commission and,
except for foreign "controllers"
to represent the "other side,"
all personnel and equipment for
the ad hoc teams would be pro-
vided by the host country. The
Soviet delegate charged that it
would be "naive" to suppose that
the commission could conduct an
inspection on the territory of
a sovereign state without its
permission.
The Kremlin probably be-
lieves such maneuvering will
enable it to avoid the appearance
of blocking further negotiations
while leaving it free to focus
its propaganda attack on West-
ern failure to accept a perma--
nent. unconditional test-cessa-
tion agreement. Moscow has
charged that rejection of this
Soviet "compromise" illustrates
Anglo-American disinterest in
reaching agreement.
The Soviet delegate stated
on 27 January that the confer-
ees must now agree to the number
of controllers on the basis of
the Soviet "concession" or re-
port back to their respective
government that there..is a basic
disagreement. This statement,
coupled with the Soviet delegate's
generally harsh tone, apparently.
is intended as a warning of an
early breakoff of negotiations.
Moscow may feel it has already
established a substantial record
which would contrast favorably
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CURRENT INTELLIGENCE WEEKLY SUM MY
29 January 1959
with that of the United States
and Great Britain if the talks
break down.
Khrushchev, in his opening
speech to the 21st party congress
on 27 January, emphasized the
efforts made by the Soviet
Union at the conference in order
to demonstrate the serious light
in which Moscow regards the talks.
(Concurred in by 25X1
OS
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
PROSPECTS FOR CONTINUED ARMY RULE IN BURMA
General Ne Win has apparent-
ly been convinced by the politi-
cally oriented "young colonels"
in his entourage that a six-
month-extension of his term as
prime minister beyond the April
expiration date is required to
achieve the immediate tasks the
army has set for itself in revi-
talizing the government. He
will therefore ask Parliament,
some time after it convenes on
9 February, for such an exten-
sion. The Ba Swe - Kyaw Nyein
faction of the Anti-Fascist Peo-
ple's Freedom League (AFPFL) has
already given its informal
sanction to an extension, and
Ne Win is believed to be seeking
a similar assurance from former
Prime Minister U Nu, who leads
the rival AFPFL faction.
Nu has not yet shown his
hand on the question, but the
army's recent arrest of Thakin
Kyaw Dun, the secretary general
of the Nu faction, may well have
left the former prime minister
in a vindictive mood. Ne Win
might win a bare parliamentary
majority even without the votes
of Nu's followers, but he would
doubtless prefer to have army
rule legitimatized by the over-
whelming vote of both factions.
Even if Parliament should
insist on national elections in
April as originally planned by
Ne Win after the army take-over
last September, the army clearly
intends to retain a substantial
voice in civil affairs. Ne Win
told Ambassador McConaughy re-
cently that he would abide by
Parliament's decision as to
whether to reconfirm him in
office, name another prime
minister, or insist on new elec-
tions, but that in any case
certain key army colonels would
retain their administrative
posts for at least two years.
Furthermore, the army in-
tended to guide the country and
re-educate the politicians for
another "twenty years." The
prime minister indicated dis-
gust over the behavior in of-
fice of both AFPFL groups, which
before the party's split last
spring had ruled Burma for ten
years, and expressed the opin-
ion that the Communist-led
National United Front would win
by default if the public knew
the truth about the mismanage-
ment and corruption his investi-
gations had uncovered.
Meanwhile, the army con-
tinues to move vigorously in
its efforts to reform almost
every facet of public life in
Burma. It is becoming increas-
ingly apparent, however, that
the army probably will not ful-
fill its promise to eliminate
the Communist insurrection in
Burma this year. Only two or 25X1
three months of good campaign
weather remain before the annual
monsoon rains begin.
SOUTH VIETNAM
President Ngo Dinh Diem's
government continues to make
appreciable progress toward po-
litical and economic consoli-
dation in South Vietnam. Em-
phasis is being placed on the
rapid build-up of a strong mili-
tary establishment to counter
the threats of internal and
external Communist aggression.
The government's preoccupation
with national security matters
has been accentuated by grow.
ing Communist influence' in
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
neighboring Cambodia, and by
Communist North Vietnam's mili-
tary activity along the Laotian
frontier.
South Vietnam's armed forces
of some 146,000 men now have a
relatively high degree of combat
effectiveness, although they are
still capable of offering only
limited resistance to external
aggression by the numerically
superior North Vietnamese Army.
At the same time, South Vietnam's
two major paramilitary forces--
the Civil Guard and the Self-
Defense Corps--are undergoing
streamlining and training suit-
able to their primary responsi-
bility of maintaining internal
security. Communist terrorism
remains a problem, particularly
in rural areas, where security
sweeps are mounted periodically
to break up bands of dissidents.
In the economic field, the
Diem government is giving high
priority to its agrarian reform,
land development, and road-
building programs in an attempt
to undercut Communist subversion
and infiltration. The govern-
ment has also decided to expand
rice production as a primary
source of income, rather than
to concentrate on agricultural
diversification or rapid in-
dustrial development. The
country hopes to be in a position
by ,1961 to export 600,000 tons
of rice annually, compared with
exports of less than 200,000
tons in recent years.
The authoritarian nature
of the Diem government and the
repressive aspects of its mili-
tant anti-Communist posture con-
tinue to alienate various seg-
ments of the South Vietnamese
community. The ever-tightening
control of the government's Can
Lao party over all aspects of
political activity is a special
source of irritation. At the
same time, the nation's first
popularly elected National
Assembly is showing signs of
increasing maturity and of be-
coming more than a rubber stamp.
President Diem, aware of the
shortcomings of his government,
has stepped up his inspection 25X1
trips throughout the country in
an effort to generate broader
popular support.
THE NEW LAOTIAN CABINET
The new Laotian cabinet of
old-line politicians and reform-
minded army officers and young
civilians is a considerable im-
provement over its predecessor.
Premier Phoui Sananikone's re-
cent grant of full powers en-
abled him to appoint his cabinet
without reference to the as-
sembly. However, his freedom
of action was limited by the
necessity of satisfying the
demands of his party--the con-
servative Rally of the Lao
People (RLP)--while meeting the
pressures of the reformers for
an action cabinet. Phoui's
solution was to retain all the
members of his preceding govern-
ment, but to reshuffle port-
folios and add three army of-
ficers. The result is probably
the strongest cabinet in years,
but some deadwood and several
opponents of reform remain.
The key portfolios of
finance, defense, foreign af-
fairs and information now are
held by young and apparently
capable civilians or army of-
ficers. The removal as minister
of religion of Bong Souvanna-
vong, whose patronizing attitude
had alienated members of the
Buddhist hierarchy, should im-
prove the government's relations.
with that group. The transfer
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CURRENT INTELLIGENCE WEEKLY
29 January 1959
"of the Defense Ministry from
Vice Premier Katay to General
Sounthone appears to be the most
significant consequence of the
cabinet reshuffle. Katay's,poor
health and preoccupation with
his power position had prevented
the reorganization of the army
command. Katay managed, how-
ever, to retain the Interior
Ministry and he could become
a focal point for any dis4tis-
faction that develops within
the cabinet.
The Communist-dominated
Neo Lao Hak. Zat (NLHZ) is re-
acting to the new situation
with caution but so far is ap-
parently not sufficiently alarmed
to return to armed resistance.
There is continuing evidence
of apprehension and confusion
among the pro-NLHZ minority
groups.along the North Vietnauma
frontier. Recent developments
have probably unsettled NLHZ
activists throughout the country,
and their loss of confidence
may be reflected by some im-
mediate decline in influence
in rural areas.
Communist North Vietnam
is mainta.iciin? its pressure on
the border, although there is no
evidence that it has reinforced
its two companies occupying dis-
puted territory on Laos' south-
eastern frontier. Hanoi's Prop
aganda attacks now include
charges of American meddling in
Laos and ct1.1 for the reacti-
vation o1:.the International Con-
trol Commission. 25X1.
KISHI TEMPORARILY SECURE AS PRIME MINISTER
The re-election of Kishi
to a two-year term as president
of Japan's governing Liberal-
Democratic party temporarily
secures his position as prime
minister. However, the slight-
ly more than one-third support
given to the party dissidents'
'candidate, Kenzo Matsumura, is
evidence of significant intra-
party dissatisfaction with Kishi
and will preclude'his exercise
of firm control of the party
and government.
Rival factions, unable to
agree on a candidate to chal-
lenge Kishi, allowed the party
presidential election,to pro-
ceed on 24 January as originally
scheduled, being content for the
time being to express their pro-test by supporting Matsumura.
Nevertheless, several of the
major party leaders are ex-
cluded from positions in both
the party and cabinet, and Kishi
probably will have to work out
new compromises in a reshuffle
which he reportedly is planning
around 31. March. In the mean-
time, Kishi hopes the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
conservatives will close ranks
at least until the budget passes
the Diet.
Even those party leaders
who remained loyal to Kishi dur-
ing the recent crisis tend to
doubt that he can last out his
two-year term as party president.
Rival leaders may temporarily
refrain from overt attacks on
Kishi for the sake of party unity,
but he will nevertheless have to
move cautiously on controversial
issues to avoid any further
crises..
Kishi faces strong attacks
from the Socialists in the cur-
rent Diet session, including pos-
sible charges of his involvement
in reparations scandals. He
must weather these attacks and
bring his party through local
elections this spring and upper
house elections in June unim-
paired to preclude a resumption
of the dissidents' challenge to
his leadership.
Indicative of Kishi's need
to compromise his policies be-
cause of the party factionalism
is his willingness to relax his
previous "firm" policy toward
Peiping. Both Kishi and Foreign
Minister Fujiyama have expressed
a desire to undertake govern-
ment-to-government talks with. 25X1
Communist China to break the
trade impasse which has existed
since May 1958.
MEXICAN-GUATEMALAN DISPUTE
Mexico's severance of dip-
lomatic relations with Guatemala
on 23 January arose from a
shrimp boat incident which Gua-
temalan President Ydigoras now
is exploiting for domestic po-
litical capital. There is no.
confirmation of charges by
Ydigoras that Mexican forces
are massing on the frontier.
Further incidents could result
from Guatemalan Air Force re-
connaissance flights along the
border.
The dispute grew out of
the strafing of 'Mexican shrimp
boats by Guatemalan planes on
31 December. The boats may well
have been within three miles of
Guatemala's Pacific coast, where
Americans and Mexicans often
fish for the shrimp which are
found usually close to the
shore. Mexico's..strongest
argument is that the strafing,
in which three fishermen were
killed and 14 injured, was not
justifiable "police action,"
as claimed by Ydigoras.
The Guatemalan President's
intransigence in subsequent ne-
gotiations appears to be primari-
ly a nationalistic move designed
to strengthen his domestic
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SECRET w-.
CURRENT INTELLIGENCE WEEKLY 'SUMMY
29 January 1959
political-situation. Mexican
President Lopez Mateos said
when he suspended relations
that further diplomatic ex-
changes were impractical be-
*Mexico City
Veracruz'
MEXICO
Belize
BRITISH
HONDURAS
Justice--and his refusal to
offer alternatives.
Ydigoras on 26 January
protested to the United Nations
and the Organization of American
States an alleged reinforcement
of Mexican border forces. The
American Embassy in Mexico City
can find no evidence of troop
movements, which, if on the
scale claimed by Ydigoras,
would be difficult to hide.
However, existing forces in the
area have increased their pa-
trols.
Trade and border traffic
between the two countries con-
tinues and Mexico appears gen-
uinely determined to settle the
issue peacefully, despite in-
flammatory attacks on Ydigoras
by Guatemalan exiles in Mexico
and by nationalistic Mexican
newspapers and labor groups.
cause of Ydigoras' complete
rejection of proposals--includ-
ing one to submit the issue to
the International Court of
FIDEL CASTRO'S ATTACKS ON UNITED STATES
Fidel Castro, who appar-
ently plans eventually to visit
a number of Latin American
countries, bitterly attacked
the United States in his many
speeches during a triumphant
trip to Venezuela from 23 to
27 January. He called on the
Latin American "democratic"
nations to form a common front
against the "encroachment of
alien interests'.' and to seek
the overthrow of the remaining
Latin American dictators.
Before wildly cheering
crowds in Caracas on 24 January
he charged the United States
with intervening in Cuba in
favor of compliant dictators
ever since the country became
independent. He claimed that
even now "international monopo-
lies," which he identifies with
the United States, are campaign-
ing to discredit the revolu-
tionary government of Cuba.
The US military missions in
Latin America were established,
he charged, to protect the dic-
tators and make them more ef-
fectively serve the interests
of the United States. His
earlier attacks on the US Army,
Navy, and Air missions in Cuba
led the Cuban Government on 24
January to officially request
the removal of the missions.
SECRET
* Tequciq.lp.
HAMPER ICO *
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
Castro has made a very
strong impression on his Vene-
zuelan audiences. His attacks
on the United States were in-
variably applauded, and the
Communists, as well as other
groups in Venezuela, are now
attempting to exploit his popu-
larity there. The US Army mis-
sion in Venezuela is again un-
der strong attack in the Commu-
nist press..- More responsible
Venezuelans fear the effect
Castro's visit may have on
orderly political development
in Venezuela.
Castro has announced that,
while he will not lead, he
certainly intends to support,
revolutionary groups intent on
ousting the three remaining
regimes in Latin American he
considers dictatorships: those
in the Dominican Republic,
Nicaragua, and Paraguay. He
considers the Organization of
American States a "worthless
organization"; he has also
joined Venezuelan President-
elect Betancourt in urging that
it eject dictatorial regimes
which are members.
The policy of materially
aiding revolutionary opposition
to the "dictators" apparently
has wide support among Venezue-
lan leaders also. When Castro,
at a university meeting in
Caracas on 24 January began a
collection to finance the over-
throw of Trujillo in the Domini-
can Republic, Admiral Larrazabal,
former Venezuelan junta chief,
was prominent among those in the
audience in donating.
SPAIN'S ECONOMIC PLIGHT
The Spanish economy is
approaching a stage of finan-
cial crisis as a result of the
Franco regime's continued fail-
ure to take realistic remedial
measures. In mid-January, Com-
merce Minister Ullastres visit-
ed Paris to request financial
assistance from the OEEC at
the earliest possible date.
During 1958, Spain's imports
exceeded exports by some $300,-
000,000, and even with exten-
sive American aid in this
perin%-i its gold and foreign
exchange reserves now are ex-
hausted. Ullastres informed
the OEEC that his grvcrnment
had decided to modify the en-
tire economic system, includ-
ing present credit and invest-
ment policies, the import sys-
tem, and the exchange rate.
The OEEC is not likely to
extend aid until the Spanish
Government has undertaken very
comprehensive changes, involv-
ing a radical reform of the ex-
change system coupled with
stringent internal financial
measures, in order to prevent
a foreign exchange crisis.
There is no indication that the
rest of Franco's cabinet shares
Ullastres' sense of urgency;
in fact some members are opposed
to any kind of retrenchment.
Catalan textile manufac-
turers are already complaining
that lack of domestic outlets
for their goods will soon force
them to shut down. Unemploy-
ment continues to rise in that
area, and plans are reportedly
being made for a 24-hour strike..
this spring. If economic con-
ditions deteriorate further, as
seems likely, strikes could also
break out in other parts of
the country.
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CURRENT INTELLIGENCE WF KLY SUMMARY
29 January 1959
Meanwhile, renewed infla-
tionary pressures are further
boosting the cost of living.
By,last October the Madrid in-
dex had risen to 141 from a
base of 100 two years before,
and various food prices have
risen sharply in the past three
months. Despite Ullastres'
public statement on 25 January
that the peseta would not be
devalued, rumors that such ac-
tion is imminent and will lead
to further price increases are
exacerbating popular discontent.
The regime has already in-
curred much opprobrium because
of its soft-pedaling of the fi-
nancial scandal uncovered in
December, which involved many
prominent Spaniards in illegal
foreign exchange transactions
in Switzerland, and its al-
leged negligence in the recent
bursting of a dam in northern
Spain which cost 150-200 lives.
These two developments rein-
force public belief that the
regime is corrupt and ineffec-
tive.
WEST AFRICANS CREATING NEW REGIONAL FEDERATION
The approval on 17 January
by African leaders representing
Senegal, French Sudan, Upper
Volta, and Dahomey of a draft
constitution providing for a
meaningful federal regime re-
flects the growing urge among
politically conscious Africans
for greater unity. Popular
[FRENCH TROPICAL AFRICA
SPANISHSAHARA
vine cy~/sin qro
MAURITANIA
FRENCH WEST :AFRICA
off .r i........... ..........
4z_SENEGALr'"'~ SUDAN : ?~" ''
.AP121CA
Proposed Federation of Mali
FRENCH yr
SOMALILA~ T)
Djibouti p
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endorsement of the new group-
ing, to be called the "Federa-'
tion of Mali" after an ancient,
semilegendary African empire,
is expected within a few weeks.
The assemblies of Senegal and
French Sudan overwhelmingly
approved the draft constitution
on 21 and 22 January, thereby
U A R SAUDI
(EGYPT)
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CURRENT INTELLIGENCE WEEKLY . SUMMARY
29 January 1959
completing the adoption pro-
cedure, and eliminating in these
two states the need for a pop-
ular referendum which had been
scheduled for 22 February.
The new federation would
include four of seven autono-
mws West African "republics"
which opted to join the new
French Community and some 60
percent of the approximately
19,000,000 inhabitants of I or-
m 'French West Africa. Its
draft constitution--although
limiting the federal powers--
provides for a federal execu-
tive, an assembly, and a sep-
arate judiciary and places the
federal security forces in the
hands of the chief of the fed-
eration, who is authorized to
communicate with "foreign pow-
ers in Africa" insofar as spe-
cial agreements with France and
the community permit. The draft
allows for new members and for
secession.
This agreement between im-
portant elements of the;two
leading parties of French tropi-
cal Africa is a substantial
victory for those who favor a
supraterritorial regional or-
ganization. Its achievement
seems certain to heighten the
serious rift which the federa-
tion issue has already produced
in the largest African party--
the African Democratic Rally
(RDA)--and to contribute to
the undermining of the position
of pro-French party president
Houphouet-Boigny. He is already
under increasing attack in his
home bailiwick of the Ivory
Coast.
The existence of the new
federation is likely to encour-
age proponents of a similar or-
ganization in French Equatorial
Africa who have for the time
being, however, settled for a
"coordinative association" of
that area's four republics.
Furthermore, Guinea, independ-
ent'; since rejecting the De
Gaulle constitution last Sep-
tember, and the trust territory
of Togo, which is;.to become in-
dependent in 1960, might eventu-
ali rner.ge -with-the Mali groupings.
For-.the present, the new fed-
eration can be expected to remain
within the new French Community.
Most of the African nationalists
who are forming the Mali Federa-
tion, however, have not disguised
their intention eventually to take
advantage of the community's pro-
vision enabling a member to become
fully independent when it chooses.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
PATTERNS AND PERSPECTIVES
AUSTRIAN POLITICS AND NEUTRALITY
Vienna's interest in re-
cent Soviet moves vis-a-vis
Finland and Berlin reflect an
underlying uneasiness with which
Austria regards its own future
as a similarly exposed area on
the Western borders of the Com-
munist bloc. Compared with Fin-
land's, Austria's political
situation--even in an election
year--is relatively stable,
and its economic and interna-
tional position is strong.
Nevertheless, the possibility
cannot be excluded that Vienna
may at some point find itself
in a "Finnish situation*" pri-
marily of its own making, and
there have been some signs re-
cently of Soviet pressures on
Austria not unlike those put
on Finland.
Foreign Policy Uncertainty
Of the reasons for the
Austrian concern over the po-
litical outlook, one of the
most important is the continu-
ing uncertainty over the de-
mands both East and West may
make on Austria's neutrality.
While most Austrians are agreed
on the fundamentals of Austria's
pro-Western policy, domestic
politics--particularly the ma-
neuvering of Chancellor Raab--
have tended to play an increas-
ingly larger role in its imple-
mentation. Essentially parti-
san. and opportunistic reasons
appear to have influenced the
more disturbing developments
of Austria's foreign policy
during the past year--the sharp
increase in official and cul-
tural exchanges with the bloc,
Raab's persistent efforts to
mediate East-West issues, his
toadying performance during his
midyear visit to Moscow, and
his agreement to take Austria
into the bloc-dominated Eastern
Danube Commission.
front World Youth Festival is
scheduled to convene in Vienna
despite the increasing opposi-
j-tion to the conference on the
That some of the commit-
ments of recent months will
fall due during the 1959 elec-
tion campaign may prove unfor-
tunate. The bill authorizing
Austria's adherence to the
Danube commission is expected
to be submitted to Parliament
this spring and could coincide
with an increase in East-West
tensions over the Berlin issue.
There are several outstanding
invitations for visits between
top Austrian and bloc officials
--including an expected trip by
President Schaerf to Moscow and
visits to Vienna by Premier
Khrushchev and Defense Minister
Malinovsky. A serious test of
Austria's neutrality is expected
in July when the Communist-
part of Austria's non-Communist
youth organizations.
The frequency with which
problems of this type arise is
attributable in part to Vienna's
uncertainty over its place in
world affairs. As the Berlin
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
crisis has developed, for ex-
ample, Austrians have made
clear their conviction that a
firm Western stand is essential
to Austria's security. While
Vienna has often advocated
four-power talks on Germany
such as those which led to the
Austrian State Treaty, a neu-
tral Germany after the Austrian
model would cause Vienna great
anxiety.
Such objectivity, however,
is weakened by the inclination
in Vienna to exaggerate both
the vulnerabilities and the
strengths of its position. Spore
responsible officials'tend to
equate Austria's position with
that of Finland--despite the
greater disadvantages Finland
suffers as a result of geogra-
phy, history, and current eco-
nomic and treaty commitments.
Other officials, who recollect
the historic position of Vienna
as a central European capital,
tend to cast modern Vienna in
the role of bridge builder bet
between East and West. Accord-
ingly, Austria's foreign policy
is inclined to some extent to
oscillate between East and West
--and to seize opportunities
which may look good at the mo-
ment.
Economic Uncertainties
Vienna's tendency toward
opportunism has been especially
evident in the economic field,
where Austria, in comparison
with Finland, enjoys many ad-
vantages. Although 1958 was
not a particularly favorable
year, the gross national prod-
uct has continued to expand, and
there is no substantial unem-
ployment.
Reparations payments have
proved to be no major burden.
Unlike Finland, Austria did not
undertake major economic ad-
justments to fulfill reparations
commitments and is not heavily
dependent on bloc supplies.
Whereas nearly one third of
Finland's foreign trade is with
the bloc, such trade accounted
for less than 15 percent of
Austria's world trade in 1957
and, by value, declined con-
siderably during the first
half of 1958.
Most Austrians are aware
of the perennial payments prob-
lems encountered in trade with
the East, of the considerable
obstacles to any increases in
that trade, and of the political
dangers that may be involved.
Nevertheless, the noisy East-
West trade lobby has made sub-
stantial inroads on Austrian
thinking, and a number of in-
fluential businessmen believe
it desirable that Austria's
Eastern European trade be re-
stored to "traditional" levels
--i.e.,about 30 percent of to-
tal trade.
0
Increased competition in
1959 in the international export
market, enhanced by year-end
moves to institute external
convertibility of currencies,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
can be expected to increase I to Austria as a -nation.
pressure on the government to ! Vienna's problem now has
look for markets in the
bloc,
especially in Communist
China.
The Chamber of Commerce
de-
cided in principle last
year to
establish
an unofficial
trade
mission in
Peiping, and
imple-
mentation of this decision ap-
pears to have been delayed only
by the increase in East-West
tensions over the Taiwan Strait.
As in the case of Finland,
where it is generally believed
the government's interest in
the OEEC was a factor in the
Soviet dislike for the Fager-
hoim cabinet, continued progress
toward the closer economic
integration of Western Europe
seems certain to increase
Austria's problems in retain-
ing its Western markets. Since
some 50 percent of Austria's
exports now go to the member
countries of the European Com-
mon Market (EEC), Austrian par-
ticipation in some form in the
EEC is deemed essential.
Past Soviet statements
have apparently helped to con-
vince Vienna, however, that
full EEC membership is ruled
out by the neutrality law, if
not by the danger that West
German influence in the Common
Market would pose a real threat
been further. complicated:: by,
Soviet statements that bilateral
association with the EEC, even
of the most tenuous sort, would
I be considered a violation of
Austria's neutrality commitment.
Should Austria decide to heed
these warnings, it would ulti-
mately face a serious economic
squeeze.
Political Uncertainty
Austria's capacity to deal
with these difficult external
problems would be greater if
the future of the government
coalition were less doubtful.
Since 1945, when the middle-of-
the-road People's party and the
moderate Socialists formed the
first of their four postwar
governments, interparty friction,
while endemic, has not gotten
out of bounds. During the past
two years, however, coalition
relations have steadily wors-
ened, the elections previously
expected in 1960 have been ad-
vanced to next October, and
there is a strong possibility
they may, be called as early as
May.
The increased difficulty
of the coalition government is
generally traced to the unex-
pected victory of the Socialist
candidate--Vice Chancellor
Schaerf--in the 1957 presiden-
tial elections. A heavy blow
to Chancellor Raab, who had
hand-picked 'the People's party
candidate, Schaerf's victory
also resulted in a reshuffle
of the Socialist command. In
consequence, personal working
relationships have suffered,
Raab has made a vigorous effort
to recoup his lost prestige,
and, in effect, both parties
for many months have been cam-
paigning for the next elections.
These frictions differ in
degree rather than kind from
those which previously beset the
coalition, but a reconstitution
of the present government will be
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
more difficult than ever before.
Public confidence in the coali-
tion has been shaken by a series
of corruption cases in which
high officials of both parties
have been involved. There may
be more revelations of this
type during the campaign, which,
in any case, is likely to be
embittered by the increasing
tendency of party leaders to
recall the near civil war con-
ditions which prevailed prior
to World War II. Moreover, re-
cent signs of life in the mori--
bund right-wing Liberal party
renew the old threat that elec-
tion gains by the Liberals, com-
bined with Socialist losses,
might permit the People's par-
ty to form a coalition of the
right.
Collapse of the coalition
would almost certainly usher in
a period of political instabil-
ity which Moscow could exploit
as it did in Finland. The coal-
ition formula made possible the,
gradual reconciliation of the
constituent parties which,be-
tween World War I and II, en-
gaged in armed combat; it was
the essential condition for
the restoration of democratic
procedures; and it was the
basis for Austria's spectacu-
lar economic recovery and re-
sistance to Soviet and local
Communist pressures during the
occupation period. Most ob-
servers agree that even now
there is no workable alterna-
tive to it.
On balance, Austria has
shown a strength and resiliency
that it did not seem likely to
have at the conclusion of the
state treaty in 1955. The pres-
ent weaknesses of the coalition
must be balanced against the
continuing reluctance to experi-
ment with dangerous domestic
political alternatives; the
tendency to run foreign policy
risks evident to some extent
during the past year must be
weighed against the stanch
anti-Communism demonstrated
during the ten occupation years;
and present trade problems must
be seen in the context of an
Austrian prosperity unknown
since World War I.
Austria, however, cannot
afford the weaknesses of other
countries. Cast again in its
historic role as the "eastern
marches" of European civiliza-
tion, Austria's future is also
contingent on the strength of
the Western alliance at its
rear. During the next few
months, Vienna can be expected
to watch carefully for any
signs of weakness in the West-
ern approach to a solution of
the Berlin and German problems.
ECONOMIC PROBLEMS IN THE SUDAN
The Sudanese economic cri-
sis is becoming increasingly
critical as harvesting of the
record cotton crop::, nears com-
pletion. Thus far the regime
of General Abboud has made no
more progress in easing the
country's economic plight than
the previous Khalil government.
Although the prices of long-
staple cotton have been cut
slightly, these cuts have fall-
en far short of making Sudanese
cotton competitive, especially
with Egyptian cottons. Khar-
toum probably would be recep-
tive to any offers of large
cotton barter deals or of par-
ticipation in Nile River de-
velopment work. A Soviet eco-
nomic delegation is scheduled
to visit the Sudan In early
February.
Crisis in Cotton
The Sudan before March
1957 was relatively stable
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CURRENT INTELLIGENCE WEEKLY SUMMARY
29 January 1959
financially and economically,
despite its dependence on cotton
sales for about 70 percent of
government revenue. Heavy So-
viet-bloc purchases of Egyptian
cottons during 1956 and early
1957, however,