CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A002400030001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 41
• Document Creation Date: December 20, 2016
• Document Release Date: December 22, 2005
• Sequence Number: 1
• Publication Date: October 19, 1999
• Content Type: SUMMARY

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ift"a N"-Vi
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CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 57
OCI NO.4063/59
20 August 1959
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CENTRAL INTELLIGENCE AGENCY
I I I OFFICE OF CURRENT INTELLIGENCE
State Department review completed
CONFIDENTIAL
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I!F"_"' - .
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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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
OF IMMEDIATE INTEREST
Communist partisans in
northeastern Laos intensified
and expanded their operations
during the past week. The Lao-
tian defense secretary believes
the guerrilla operational plan
is to isolate iSam Neua and Phong
Saly provinces. Many small-
scale skirmishes have been re-
potted and the guerrillas are
considered to be spreading out
in smaller groups.
The former Communist Path-
et Lao battalion which refused
integration into the Laotian
Army in May is reported moving
northward toward the Sam Neua
operational zone from its ref-
uge, athwart the Laotian - North
Vietnamese border opposite Zieng
Khouang Province. This group
presumably has been refitted and
equipped by North Vietnam.
Antigovernment disturbances
have been reported iii..widely
scattered areas of Laos, and
there are indications that Com-
munist partisans are planning
terrorist actions, possibly di-
rected at Americans in Laos,
The Laotian Army reportedly sur-
prised a group of Communist
agents last week while planning
the assassination of Americans
and harassment of the US Em-
bassy in Vientiane. An arms
chache was discovered in Vien-
tiane on 13 August., and Commu-
nist cadres
have marked top provincial
The government is moving
the former Communist battalion
which chose integration in May
out of northern Laos to a
southern area farther from the
operational zone. This action
was taken following the escape
of 114 men of this unit on 8
August. The ultimate disposi-
tion of the unit is un-
determined,but it will probably
continue to pose a security
problem.
The extent of North Viet-
namese involvement in Laos re-
mains unknown. North Vietnam
is probably supplying arms and
clandestine direction to the
Laotian insurgents, but there
is no evidence to indicate that
organized North Vietnamese
units are participating in the
fighting.
Thus far, there is still
no evidence that Communist
China has stepped up its logis-
tical support to North Vietnam.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
On 17 August, London for-
mally presented to Soviet Ambas-
sador Malik its proposal that,
as cochairmen of the 1954 Ge-
neva agreements, Britain and
the USSR should re-
quest:the secretary
general of the United
Nations to send an
observer to Laos.
British Foreign Of-
fice officials have
told the American
Embassy in London
that, while Malik
"grudgingly" indi-
cated he would pass
on the proposal to
his government, he
had taken a very
negative attitude and
had repeated Soviet
arguments that the
International Con-
trol Commission (ICC)
should be reconvened.
UN Secretary
General Hammarskjold
is reluctant to in-
tervene actively in
the Laotian situa-
tion unless request-
ed by both Geneva co-
chairmen. He would
not respond to a
unilateral request
for an observer un-
less such a request
were backed by in-
fluential UN mem-
bers privately or
by the UN publicly.
Moreover, Hammar-
skjold reportedly
or the Security Council. Al-
though unconvinced that the
Vientiane government has a
strong enough case to warrant
formal UN action, Hammarskjold
PHONG
SALY
r"LUANG PRABANG
favors reconvening the ICC in
an attempt to resolve the dis-
pute prior to any request for
action by the General Assembly
4VIETNAM
ti\\o
TH Al LAND
is willing to advise and as-
sist Laos to the full extent
his terms of office allow.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
Both Peiping and Hanoi in-
sist that the ICC is the only
body competent to take steps to
reduce tension in Laos. On 19
August a Chinese Communist radio
commentary stated that UN action
on the issue "would only com-
plicate and aggravate'' the situa-
tion in Laos. In accordance
with Peiping's penchant for
blaming the crisis on US activi-
ties, the commentary also stated
that only through "the withdraw-
al of all US military personnel
and arms, the abolition of all
US military bases," and strict
compliance with the Geneva agree-
ments could tension be elimi-
nated,
The USSR in a 17 August
Foreign Ministry statement, which
appears largely "for the record,"
blamed the crisis on the Phoui
Sananikone government in Vien-
tiane and maintained its posi-
tion that the Laotian ICC should
be reconvened. The statement
charged that "war preparations
in Laotian territory" were be-
ing made under the direction of
US personnel. A Moscow broad-
cast the following day referred
to "the facts contained in the
Soviet Foreign Ministry's state-
ment testifying to US inter-
ference in Laos," Moscow did
not specifically rule out UN
intervention in Laos :or ex-
plicitly demand the withdrawal
of US advisers, as did a Chi-
nese Communist Foreign Ministry
spokesman on 12 August. The
USSR's approach in pressing for
reactivation: of the ICC is
probably designed to gain Indian
and British support.
A Soviet broadcast on 18
August charged that Admiral
Burke's recent statement regard-
ing the possibility of US Navy
involvement in the Laotian
conflict demonstrates "once
again" that the US "is pre-
pared to embark on a mili-
tary adventure" in Southeast
Apia to retain Laos "within
the sphere of its military
blocs."
North Vietnam is acting
as the channel through which
appeals--allegedly originat-
ing with the central committee
of the Neo Lao Hak Zat, politi-
cal successor of the Pathet
Lao--are being forwarded to
international bodies. As the
majority of the central com-
mittee is under arrest in Vien-
tiane, it seems probable that
the letters, one to the ICC and
the other to the UK and the USSR,
actually were composed in Hanoi.
It is by "quoting" the insurgent
leaders, however, that Hanoi
ventilates its most bellicose
statements on the situation. On
16 August North Vietnam publi-
cized rebel claims to have "lib-
erated vast territories" in Laos,
and the use of the word "liberated"
strongly suggests that the insur-
gents intend to hold the terri-
tory they have already taken,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
THE CARIBBEAN SITUATION
The Fidel Castro regime in
Cuba has made thousands of ar-
rests following the frustration
of the 8-9 August counterrevolu-
tionary conspiracy. The actual
extent of the plot is not yet
clear, but thousands of suspects
have been arrested, chiefly
among holdovers in the army
from the Batista regime and
large landowners affected by
Castro's agrarian reform law.
Castro's contention that the
Trujillo dictatorship is a
menace to the peace of the
Caribbean area. The Santiago
foreign ministers' meeting was
condemned by Fidel Castro as a
"farce" and as one part of a
"gigantic conspiracy against
the Cuban democratic revolution."
"It was convoked at Trujillo's
request," Castro said, "and is
playing his game." Castro's
15 August speech "explaining"
recent events to the Cuban
The Caribbean Area
BAHAMA
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Trujillo Rico ' ANTIGUA
P ,GUADELOUPE
Q MARTINIQUE
b BARBADOS
public included further in-
nuendoes against the United
States and "powerful foreign
interests." He "wondered" how
arms could have been supplied
to the counterrevolutionaries
from Florida without the com-
plicity of US officials.
making the most of the con-
spiracy to intimidate the op-
position and to strengthen
Meanwhile, Sino-Soviet bloc
propaganda is paying increasing
attention to Cuban developments
and is picturing the Santiago
conference as part of a US
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SECRET 1
20 August 1959
maneuver that will ultimately
end in US intervention against
the Castro regime.
The latest incident provoc-
ative of Caribbean tensions was
a landing in Haiti on 13 August,
apparently staged from Cuba,
by a small group of about 30
men whose objective is probably
the overthrow of President
Duvalier. Haitian. armed forces
were sent to the landing area,
but by 17 August had not made
contact with the invaders, who
presumably dispersed into the
rugged interior. The landings
were made on the extreme west-
ern tip of Haiti's southern
peninsula, the farthest possi-
ble point from the Dominican
border. The Dominican Gover-
ment had previously warned that
it would consider any invasion
of Haiti an invasion of its
own territory, and on 18 August
the Dominicans offered Haiti
their "full cooperation" to
repel the invaders.
The weak Duvalier govern-
ment, which dreads Dominican
"assistance" almost as much as
a pro-Castro invasion, has
asked the Organization of Ameri-
can States for aid. This will
be the first test for the Inter-
American Peace Committee under
the new powers granted it at the
Santiago. conference.
Nicaraguan rebels are con-
tinuing their efforts to oust
the Somoza regime, Two Costa
Rican legislators sympathetic to
the rebel cause made a trip to
Cuba on 9 August seeking further
assistance from the Castro gov-
ernment, but returned without
being able to see the Cuban prime
minister. Cuban officials, how-
ever, had already supplied the
Nicaraguan rebels with some
weapons, and at least two Cuban
officers were identified among
the rebels killed or captured
inside Nicaragua. Further aid
may eventually be forthcoming.
Meanwhile, the Nicaraguan
rebels in the Costa Rican border
area are apparently being
successfully dispersed by the
Costa Rican armed forces. Some
of the rebels may regroup, how-
ever, and attack Nicaragua
from another point.
Prime Minister Qasim has
again demonstrated his policy
of balancing the turbulent po-
litical 'forces 'in Iraq by giv-
ing strong support to the chief
of the notorious "people's
court," his cousin Colonel
Mahdawi. When Brigadier Tabaq-
chali, former commander of the
Iraqi Army's Second Division,
was brought to trial in Mahdawi's
court on 12 August, he and his
fellow defendants defied the
Iraq
court. Some prosecution wit-
nesses even asserted that any
confessions they had made had
been extracted under duress.
This defiance of Mahdawi, who
had the witnesses dismissed as
soon as their testimony began
to deviate from the expected,
led the anti-Communist. "na-
tionalists" to believe Qasim
might be using the trial as
a devious method of bringing
Mahdawi, a Communist tool, into
ridicule and disgrace. Qasim's
speech on 13 August, in which
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SECRET "`"'
20 August 1959
he said he supported "every
work" of Mahdawi's, was a bit-
ter disappointment to them.
The pro-Communists have
been concurrently heartened.
They reportedly are again cir-
.culating petitions and engag-
ing in fights with nationalists
in the Baghdad area.
The situation in Yemen re-
mains confused and tense, as the
Imam strikes out against those
he suspects of having acted
against his interests during his
absence in Italy. A number of
Yemeni officials are reported to
have fled the country; others
apparently are scheduled for ex-
ecution or maiming,
If Crown Prince Badr is
planning any countermove against:
his father, the most favorable
moment may have passed, since
press reports state that propo:,.?
nents of Badr's policy of close
Yemeni-UAR relations are among
those who have fled to Aden or
Saudi Arabia.
Possible new irritations in
Israeli-Arab relations have ap-
peared recently in two sectors.
The more important sector
is the Gulf of Aqaba, where the
issue of Israeli freedom of
transit has arisen as a result
of the purchase by Ceylon of
two Israeli frigates stationed
at Eilat, the Israeli port at
the head of the gulf. Ceylon
has sent a ship with crews for
the frigates, but the UAR and
Saudi Arabia raised such stren-
uous objections that the ship
carrying the crews was delayed
at Aden.
If this imbroglio should
receive publicity, the UAR at
least might feel compelled to
make some move in support of
its diplomatic protests. Israeli
Foreign Minister Meir recently
warned, however, that any UAR
interference with Israeli use
of the gulf would bring a reac-
tion in a "matter of minutes."
The second area where new
tensions are developing is
around the old issue of Jorda-
nian and Israeli access to
Mount Scopus, the Israeli en-
clave in Jordanian Jerusalem.
The Jordanians have complained
that the Israelis are harassing
Arab villagers who live on the
edge of the Israeli-occupied
territory, and they have .
threatened to halt the convoy
which the Israelis are permit-
ted to send to Mount Scopus
through Jordanian territory,
While this dispute can lead to
considerable local irritation
and consume much of the energy
of UN officials, it does not
seem in the interest of either
Israel or Jordan at the present
time to allow any significant
incident. Both sides, however,
can be expected to call on the
United States for diplomatic
support for their respective
cases.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
NOTES AND COMMENTS
Bloc spokesmen continue to
describe the announcement of the
Eisenhower-Khrushchev exchange
of visits in terms of a victory
for Moscow's policy of peaceful
coexistence and as ''.a .serious
blow to the stand of the cold-
war enthusiasts." Soviet prop-
agandists are offering assur-
ances that the meetings "can in
no way harm the interests of
any state, whether big or small.:'
Stressing the importance of the
visits between the leaders of
the "two great powers," Soviet
propagandists contend that "any
agreement, even a most limited
one, would mean the end of the
cold war and beginning of a new
era of peaceful cooperation."
At the same time, however,
critical bloc comment on spe-
cific aspects of American for-
eign policy continues. Bloc
spokesmen have attacked US pol-
icy on.the Laos situation,
Latin America, rumored resump-
tion of American nuclear tests
after 31 October, NATO naval
maneuvers in the North Atlantic,
US military installations abroad,
calls in the United States to
show Khrushchev military bases
during his visit, and selected
comments of Vice President Nixon
made during his visit to the
USSR. A 13 August Soviet com-
ment criticized at some length
US foreign policy since World
War II, implying, however, that
the visits may signal a change
in that policy.
Communist China's Foreign
Minister Chen Yi, in a speech
on 15 August, endorsed the ex-
change of visits as "a major
Soviet victory" but at the same
time accused the US of "die-hard
attitudes" on Berlin, Taiwan,
Laos, and nuclear testing, and
called for an "unremitting strug-
gle" to defeat the Western pol-
icy of "war and aggression."
This strong statement may indi-
cate Peiping's concern that a
real relaxation of tension might
limit its efforts to exploit
potential "trouble spots" in
the Far East.
Bulgarian party lead- 25X1
ers look on the visits with
"dismay" and "apprehension."
The Bulgarian leadership con-
tains many hard-line Stalinists
who reportedly have never be-
come completely reconciled to
Khrushchev or his policies, and
such an attitude might well
exist among Stalinist elements
in the other satellites who_ fear
increased East-West contacts.
Bulgarian press comment has fol-
lowed the general bloc line,
and no party officials have made
any public comment.
The East German regime open-
ly welcomed the visits in a
statement on 3 August from For-
eign Minister Bolz in Geneva.
Bolz' theme was reiterated by
party First Secretary Ulbricht
in a speech at Leipzig on 13 Au-
gust when he said, "The time has
come to advance gradually through
discussions and conferences to
the peaceful coexistence of the
states of the two systems." The
East Germans probably hope the
talks will open the way to a
summit conference and to an
agreement on the Berlin and Ger-
man questions which will enhance
East Germany's chances for
achieving recognition in the
West.
Polish party leaders, hope-
ful of a detente with the West,
undoubtedly share the reaction
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
of the press that the exchange
of visits will mean a distinct
thaw in the cold war and repre-
sents a "personal success" for
Khrushchev. No official comment
has been made, however.
In Czechoslovakia, Hungary,
and Rumania, as well as in North
Korea and North Vietnam, the
press and radio have generally
treated the visits as a triumph
for Soviet diplomacy. The Al-
banian handling of the situation
reveals what may be a subtle
attempt to indicate doubt as
to a favorable outcome. The
Albanian news agency ATA on 4
August warmly greeted the an-
nouncement of the visits button
the next day, a week behind
other Communist nations, issued
a statement condemning "Captive
Nations' Week" and containing
the most vicious attack on the
United States in months. While
all Communist countries have
attacked the United States on
this issue, the timing of the
Albanian statement may have been
designed to indicate a lack of
confidence in a successful
detente With the` West.
Western Reaction
Official statements in
Paris and Bonn and extensive
press commentary in West Germany,
France, and Britain underline
the differing attitudes of the
major Western European allies
to the Eisenhower-Khrushchev
exchange.
Continued French press and
official apprehension concern-
ing the Eisenhower-Khrushchev
talks is evident. While some
commentators affirmed that the
United States would make no bi-
lateral decisions with the USSR
affecting Europe, the press is
agreed that President Eisen-
hower must not be given any
mandate to speak for the West.
President de Gaulle, according
to well-informed press circles,
privately criticized the up-
coming US-Soviet talks as hav-
ing already seriously damaged
NATO solidarity, and recom-
mended that France strengthen
its ties with its neighbors so
that it could speak in their
name for a. European "third
force." Premier Debr6 added
a public warning on 16 August
that France must make itself
heard and understood in order
"not to be crushed between
the very great powers."
Debre's statement fur-
nished the British popular
press with further ammunition
for its current highlighting
of differences between the
British and French-German
attitudes. The influential
Manchester Guardian charged
that French "defiance" of
the United States might hin-
der prospects for an East-
West agreement, and advised
closer political consulta-
tion at a higher level in the
North Atlantic Council to
tighten the alliance.
A Gallup poll confirms
the overwhelming British ap-
proval of the Eisenhower-
Khrushchev talks and belief
that a summit meeting will
follow. A preponderance of
Britishers, according to the
poll, are not disappointed
that Macmillan has not been
invited to participate in
the talks.
Against the background
of worsening relations be-
tween their two countries,
Bonn and London officials
are discussing plans for
Chancellor Adenauer to visit
Prime Minister Macmillan in
the fall. No date has been
set, but the visit is likely
to occur .sometime between 15
September and 10 October,
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CURRENT INTELLIGENCE WEEKLY. SUMMARY
20 August 1959
FRENCH-AMERICAN RELATIONS
French ::officials view
President Eisenhower's 2-4 Sep-
tember visit to Paris princi-
pally as an opportunity to re-
view French-American rather
than East-West relations. De
Gaulle believes France should
be given increased status in
NATO, an equal voice in Western
global political and strategic
policy determination, admission
to the "nuclear club," and full
Allied support in Algeria.
Since De Gaulle came to
power he has become increasing-
ly insistent on Western recog-
nition of France's rights and
opinions as a strong independent
,power. Premier Debr6 on 16 Au-
gust referred publicly to
France's "bondage" within the
Western alliance. Having "ren-
ovated" France politically, and
with economic stability in the
offing, De Gaulle now insists
that the United States change
what one French observer char-
acterized as a policy of "un-
written inequality" toward
France. His principal concern
appears to be his September
1958 proposals for the estab-
lishment of tripartite global
policy determination by the
United States, Britain, and
France, including a voice in
the use of nuclear weapons. His
determination to achieve this
objective suggests he will con-
tinue to block further commit-
ments to NATO until he is sat-
isfied.
De Gaulle, who will visit
Algeria from 27 to 30 August,
is likely to press for solid US
support of French policy in North
Africa, particularly in view of
prospective UN General Assembly
criticism on Algeria. Fifth Re-
public spokesmen have repeated-
ly equated retention of oil-rich
Algeria with France's future as
a world power. They demand sup-
port on the ground that France's
fight in Algeria is actually
part of the West's battle against
Communism. Debre`said on 16 Au-
gust that France has a "right
to demand" full Allied support
in Algeria.
While France now appears
determined to build and test nu-
clear devices by its own ef-
forts, De Gaulle is likely to
press for clarification of the
US attitude on nuclear aid once
France has made its first atomic
test. Achievement of an inde-
pendent French nuclear capabili-
ty is a cardinal objective of
De Gaulle, and French officials
have expressed resentment that
France is denied information
which the Soviet Union already
has.
The Eisenhower-Khrushehev
meeting has aroused French
suspicions of a separate Wash-
ington-Moscow deal at France's
expense _F
THE YUGOSLAV ECONOMY AT MIDYEAR
The Yugoslav economy has
achieved significant successes
during the first six months of
1959. Except for foreign trade,
nearly all plan goals have been
exceeded,and fulfillment of the
1959 plan, which calls for an
increase of 11 to 12 percent in
total output, is virtually as-
sured. The Yugoslavs hope that
many of the basic objectives of
the 1957-1961 Five-Year Plan can
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
be reached a year ahead of time.
In anticipation of this,a draft
of a new plan for the period
1961-1965 is being prepared.
Yugoslavia's record 4,000,-
000-ton wheat harvest--largely
attributable to the use of
high-yield,high-quality varie-
ties of Italian wheat--and ex-
pected record production of
corn, sugar beets, vegetables,
fruit, meat, and milk indicate
the achievement of agricultur-
al targets and will: make for-
eign exchange available for
other sectors of the economy.
Industry ; as a' whole is
meeting the plan, but ferrous
metal, textile, and food-proc-
essing industries have lagged.
The economy is progressing
satisfactorily in most other
areas. The rate of investment
of the $1,553 billion total
planned for 1959 is running
slightly behind the 1958 rate,
but it is probably being de-
liberately controlled since ex-
cessive expenditure in the past,
such as the 17-percent over-
fulfillment in 1958, created
inflationary problems. Even
though wages were raised in Oc-
tober 1958, prices have re-
mained stable so far this year.
The margi.nal..road and: rail
transportation system has con-
tinued to worry Yugoslav admin-
istrators. Although improve-
ments are being made and the
system has been able to handle
traffic in this year's harvest
period, expanded facilities will
be needed soon to cope with ex-
panding'industrial:and agricul-
tural traffic,, as well as in-
creases . in. toujrism:=-a :source of
vital. foreign exchange.
Exports rose 8.3 percent,
reaching a total of $221,400,-
000 for the six-month period,
but a 13.4-percent increase had
been planned. Imports for the
period, which totaled $342,300,-
000, were 3 percent under the
same period in 1958. Although
it is.doubtful that Yugoslavia
can achieve its goal of a fa-
vorable balance of trade, the
decision not to import wheat
as a result of this year's rec-
ord harvest and the continued
prospect of self-sufficiency
in grains will aid in reducing
the imbalance.
Employment in industry in
Yugoslavia has been at an all-
time high, but the steady in-
flux from rural areas to the
cities makes unemployment a con-
tinuing and serious problem.
Efforts to alleviate this have
included introduction of voca-
tional training for unskilled
laborers, many of whom have
re-
cently left the farms,
RELATIVELY POOR GRAIN CROP EXPECTED IN USSR
Recent weather and acreage
information indicates that the
grain harvest this year in the
USSR may fall short of the medi-
ocre_: 1957 crop, thus making
it the smallest harvest since
1954--the initial year of the
New Lands expansion.
As in 1957, the weather
this year has not been favor-
able for grain yields. Precip-
itation from October 1958 through
April 1959 was 10 to 20 percent
below normal, and soil-moisture
reserves were limited at the
beginning of the growing season.
During May, June, and July--
the most critical months for
crop development--rainfall in
almost all of the major agri-
cultural regions was less than
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1 North C'auca'sus-
.1611 1 1 1 1
CURRENT-INTELLIGENCE WEEKLY SUMMARY
20 August 1959
P
BALTIC SEA
Minsk, ` 1.1 -
RUSSIA
f!
lG.ev,v MOSCOW
L.~ CENTRAL t
UKRAINE NON-BLACK SOIL
'
CASPIAN
I SEAL
half the normal amount. Most
of the principal agricultural
areas received less rainfall
during May-July 1959 than dur-
ing May-July 1957. The early
maturity of the grain crop in
most areas is further evidence
that soil moisture.has been in-
adequate this year.
The Soviet press had ad-
mitted that poor yields are ex-
pected in the Volga area and
in some portions of the western
New Lands and the Ukraine. A
high Soviet official recently
told an American Embassy offi-
cer that, although the winter
grain crop in the Ukraine was
satisfactory, spring grain was
faring badly because of the ex-
tended drought. The prolonged
drought has broken in the
Ukraine, but rain has probably
come too late to. benefit grain
yields.
Karag?ttda
In the eastern portion of
the New Lands, the only impor-
tant exception to the unfavor-
able weather, rainfall from
April through July averaged 30
to 40 percent above normal,
and good yields are expected
in that area.
The weather picture in the
USSR this year has been similar
to that of 1957, and average
yield per hectar may not run
above the 1957 level. It is
estimated that in the country
as a whole about 295,000,Q00
acres of grain will be harvest-
ed, as compared with 308,000,-
000 acres in 1957. Thus the
1959 crop may fall short of the
105,000,000 tons harvested two
years ago.
The shortage of moisture
has also had an adverse affect
on the late crops such as sugar
SECRET
ZONE v
4
CENTRALtin,~ GOrkS
BLACK SOIL
ZONE
`~ -~1~1rJ~cJ
-~ Rostov SSStalingrad
LOWER~~
NORTH ,VOLGA
CAUCASUS~ r`
t (r N
Precipitation
in Selected Agricultural Areas
of the Soviet Union
JANUARY-JULY 1959
_ Monthly Averages as Percent of Normal
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
USSR GRAIN PRODUCTION 1950-1958 (MILLION METRIC TONS)
GRAIN ACREAGE 1950-1958 (MILLIONS Of ACRES)
beets, sunflowers, and potatoes,
as well as on the amount of
livestock feed that will be
produced. Weather during the
remainder of the growing season
is of such importance in de-
termining the output of these
late crops, however, that pro-
duction estimates made now
would be of little use.
The recent rapid growth
in the production of livestock
may well be interrupted because
of limited supplies of feed.
Also the USSR's grain export
capability will be more re-
stricted this year. However,
as a result of large reserves
and the additional yields from
New Lands brought un-
der cultivation, even
the expected poor har-
vest would not create
a general domestic
food shortage.
The abrupt con-
trast between this
year's .,poor harvest
prospects and last
year's record crop is
particularly distaste-
ful '.to the regime,
since this is the first
year of the Seven-Year
Plan. A poor harvest would also
be likely to heighten criticism
of organizational features and
shortcomings in the agricultur-
al program. Khrushchev has al-
ready indicated that some modi-
fications will be forthcoming.
At the June plenum he called
for closer party supervision and
control over agriculture, reduc-
tion of inflated administrative
staffs, promotion of young and
energetic administrators to po-
sitions of greater responsibil-
ity, demotion of ineffectual
collective-farm managers, and
the shifting of outstanding
collective-farm chairmen to
backward farms.
(Prepared by 0
CONTINUING SHAKE-UPS IN SOVIET PARTY RANKS
The appointment on 13 Au-
gust of Vladimir Semichastny
as party second secretary in
Soviet Azerbaydzhan continues
Khrushchev's drive to tighten
party administration. Since
last December, major shake-ups
have taken place in the party
leadership of four Soviet re-
publics and in Moscow Oblast.
While these changes have been
effected for a variety of rea-
sons, they all reflect Khru-
shchev's determination to,toler
ate, no deficiency which threat-
ens fulfillment of the Seven-
Year Plan.
The appointment of Semi-
chastny, a veteran ,gpecial-
1st in youth ~ and cadre af-
fairs, underlines continuing
Kremlin concern over the state
of affairs in Azerbaydzhan,
where the lagging economy and
unacceptable political situa-
tion caused the ouster of par-
ty "First Secretary Imam
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
Mustafayev last month. Musta-
fayev was apparently unable to
cope effectively with expansion
of Azerbaydzhan's vital oil in-
dustry and with serious agri-
cultural problems such as de-
creasing cotton yields. In
addition, he may have been in-
clined to promote and protect
local officials and close per-
sonal friends.
Although Mustafayev was
the only Azerbaydzhani official
to be fired last month, the as-
signment of Semichastny indi-
cates that further personnel
changes will be forthcoming.
Since last March, he has been
chief of the central committee
department of party organs for
the union republics, a job in
which he was responsible for
personnel appointments in all
the constituent republics ex-
cept the Rudsian Federation
(RSFSR). His assignment to
Azerbaydzhan follows the stand-
ard practice of seeking to over-
come local deficiencies by send-
ing a troubleshooter from Mos-
cow, and it is likely that he
will try to remedy the situa-
tion by means of the "replen-
ishment of cadres" repeatedly
urged by Khrushchev.
What this means for the
career party official was re-
cently explained by Viktor
Churayev, head of the depart-
ment of party organs for the
RSFSR. Writing on "inner patty
democracy" in the international
Communist journal Problems of
Peace and Socialism, a claimed
-fu1Ti men of the Seven-
Year Plan makes it necessary to
promote cadres who are "well
trained and principled, who have
feeling for the new, and who
are implacable in respect to
shortcomings." Churayev cau-
tioned, however, that Moscow
is as opposed to the current
"30- to 40-percent annual turn-
over in party secretaries" as
it is to excessive permanence
of cadres, thus implying that
efficient workers need not be
concerned with the possibility
of being shifted arbitrarily
from post to post, and at the
same time warning that well-en-
trenched party bureaucrats may
face sudden removal.
He went on to condemn as
incorrect the common practice
of electing officials to party
committees simply because they
hold important jobs in manage-
ment. Curtailment of this long-
standing practice will have the
effect of weakening the repre-
sentation in local party organ-
izations traditionally enjoyed
by management personnel and will
correspondingly increase the
role of the professional party
workers.
Specifically denying that
the continuing series of shake-
ups in party ranks amounts to
interference by Moscow in local
affairs, Churayev cited the re-
cent dismissals of the party
first secretaries in Uzbekistan
and Moscow Oblast as correct ex-
amples of "inner party democracy."
He neg-lected to mention the di-
rect involvement of the party
central committee, and possibly
of Khrushchev himself, in the
removal last December of Turk-
men party chief Sukhan Babayev
and the ensuing mass dismissal
of lower ranking Turkmen func-
tionaries. The article was
published before the removal
of Mustafayev, over which Presi-
dium member Muritdin Mukhitdi- 25X1
nov presided, and the subse-
quent assignment of Semichastny
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NO
rr1-
SECRET
20 August 1959
SINO-INDIAN RELATIONS
Relations between New Delhi
and Peiping--seriously strained
since the Tibetan uprising-
continue to be disturbed by
Chinese harassment of Indians
in Tibet and by renewed public
criticism in India of Peiping's
Tibetan policies. Communist
China's failure to act on re-
peated complaints from Iddian
officials has caused increas-
ing irritation in New Delhi,
but India probably will not al-
ter its public position that
Communist China be represented
in the UN.
Despite gestures by both
capitals to ease tension fol'-
lowing the bitter exchanges
over Tibet this spring, the
Chinese have initiated a con-
certed effort to reduce Indian
influence north of the aima1ayan
frontier.
Traditional trade across
the Tibetan frontier has also
Indian Trade Agenc
In Tibet
--Selected road
--'Selected trail
SECRET
been seriously hindered by new
Chinese restrictions.
The Tibetan question was
the subject of heated debate in
the Indian Parliament for more
than a week in mid-August. Prime
Minister Nehru and his ranking
foreign affairs deputy indicated
their irritation with Peiping
by reviewing Sino-Indian prob-
lems in detail on several oc-
casions. Nehru stated that
Chinese replies to official
Indian complaints had "not been
satisfactory," and implied that
some of Peiping's actions in
Tibet were not in keeping with
the 1954 treaty. He also dis=
closed that New Delhi has pro-
tested Peiping's use in its
propaganda material of the word
"imperialists" to describe In-
dians. On 13 August,Nehru re-
iterated his government's determi-
nation `toy' resist any' 'in-
fringement of Indian rights
in Tibet.
1~.
PUNAKHA
BHUTAN
S
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Nwe
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
In response to opposition
queries about press reports of
Chinese expansionist,plans in
the Himalayan border--region,,
Nehru repeated earlier assure
ances that India ?`s frontier
would be defended against Any
Chinese encroachment.
The Tibetan issue may be
raked over again in the. Indian
Parliament when a motion support-
ing referral of the question to
the UN is presented on 21 August.
Peiping wants to avoid, publicity
on the Tibetan revolt and would
likely.protest the parliamentary
motion as renewed "interference."
The Chinese already are report-
;ed to have indicated to New
Delhi some reluctance to have
the representation issue raised
this year in the UN for fear it
would be linked to a debate on
Tibet. However, Peiping ap-
parently has made no official
request on the matter,.and a
high Indian official indicated
that New Delhi still plans to
present the issue to the Gen-
eral Assembly.
THAI - NORTH VIETNAMESE REPATRIATION AGREEMENT
On 14 August, after near-
ly two months of negotiations,
Thai and North Vietnamese Red
Cross representatives signed
an agreement in Rangoon provid-
ing for repatriation of those
Vietnamese refugees in north-
east Thailand who wish to go
to North Vietnam. The first
refugees are to be returned by
ship in January 1960, and the
costs reportedly will be shared
by Thailand and North Vietnam.
It is not yet ,clear how many of
the 40,000 to 50,000 Vietnamese
in Thailand will actually ac-
cept repatriation, but an es-
timated 90 percent of them are
pro - North Vietnamese in sen-
timent.
Under the terms of the re-
patriation agreement, two North
Vietnamese Red Cross "advisers"
will.be dispatched to Bangkok
to "assist" the Thai Red Cross
in the execution of the accord.
Thailand chose such wording to
emphasize the nongovernmental
nature of the agreement add of
the bodies responsible for its
implementation, but the accept-
ance of.even unofficial repre-
sentatives from Hanoi underscores
BURMA
IBangkok CAMBODIA
Songkhla
SECRET
.Chiengmai
Uttarkdit
r ! i 1
4Tak Area where Oes
refugees are concehira
Ayutthaya't
.?~n'oSra.E~1A
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
Bangkok's anxiety to rid it-
self of an unwanted minority
group it has long considered
an internal security threat in
the strategic frontier provinces
adjoining Laos.
North Vietnam is reported
to have been "slightly taken
aback" by predictions that the
majority of the refugees will
choose to be repatriatedto the
North. Hanoi is, however, pub-
licly committed to accepting
all who wish to return and prob-
ably feels that the propaganda
potential of such a majority
choice will compensate for do-
mestic relocation difficulties
and loss of a possible fifth
column in Thailand.
The International Commit-
tee of the Red Cross (ICRC) was
instrumental in bringing about
the Rangoon talks, and a special.
representative from Geneva sat
in on the negotiations. North
Vietnam, which has had no pre-
vious opportunity for regional
contacts of this kind, sought
from the beginning to minimize
the role of the ICRC delegate,
in an obvious effort to give
the appearance of a direct con-
frontation between North Viet-
nam and Thailand.
There is no indication
that the ICRC will perform on-
the-scene supervision of the
actual repatriation procedures,
as has been provided in the re-
cently concluded repatriation
agreement between the Japanese
and North Koreans. The present
agreement will apparently be
implemented solely by the two
Red Cross societies.
Despite the administrative
nature of the proposed mission
in Bangkok, Hanoi will probably
attempt to magnify its impor-
tance in accordance with North
Vietnam's policy of increasing
contacts with nonbloc nations.
The Communists may also seek to
retard the implementation of the 25X1
repatriation agreement in an ef-
fort to prolong the mission's
stay in Thailand.
The heaviest rains in 60
years on central and southern
Taiwan brought floods on 8 and
9 August which left 645 per-
sons dead, over 28,000 homes
destroyed and property damage
provisionally estimated at $30,-
000,000. Since then more rain
has fallen, causing some addi-
tional damage, and an earth-
quake has struck the southern
tip of the island, killing 16
persons and damaging several
villages.
Destruction of communica-
tion lines was severe.:. Damage
to rail and highway bridges
over the Tatu River in central
Taiwan temporarily isolated
the northern part of the island
and forced reliance on air trav-
el. Highway traffic is again
moving by means of bypass roads,
but it may take as long as 30
days to repair the bridges and
permit through rail traffic.
Damage to military installations
appears to have been slight.
The most serious immediate
effect on the economy of the
island is likely to be infla-
tionary pressure. The island
has a swollen money supply and
a badly unbalanced budget for
this fiscal year; if confidence
is shaken, a serious round of
price increases may be in the
offing, depressing still fur-
ther the position of fixed-in-
come middle-level government
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
officials and army officers.
The most serious long-term ef-
fect will probably be damage
done to rice-growing areas near
rivers. Arable land, already
scarce on the island, was lost
when several rivers changed
their courses and destroyed
areas under cultivation. Ensue
ing rice crops probably will
also be affected by lowered
productivity of the fields which
were flooded. Enough time re-
mains, however, to replant
seedlings for the next crop.
The Chinese Nationalists
are pressing for maximum aid
Archbishop Makarios, whose
moderate and conciliatory poli-
cies are being attacked by ex-
tremists, continues to enjoy
the support of the great major-
ity of the Greek Cypriot popu-
lation, including many former
high-ranking leaders of the
EOKA organization. However,
fanatic Greek Cypriot national-
ists, some of whom may resort
to violence to achieve their
aims, have formed a new Greek
Cypriot underground organiza-
tion, the Cyprus Enosis Front
(KEM).
KEM leaders regard the
present Cyprus agreement merely
as a point of departure toward
eventual enosis--union of Greece
with Cyprus--and threaten to
use force if necessary to a-
chieve Greek C Griot "national
rights."
KEM's first proclamation--
issued on leaflets distributed
have fallen.
from the United States to re-
pair the damage. Their already
unbalanced budget for the next
fiscal year makes the task of
reconstruction a heavy burden;
nevertheless the job is being
tackled energetically. The
military services are being
used extensively for work on
bridges,dams, railroads, and
other engineering projects, and
the Provincial Government is
directing civilian relief.
This prompt demonstration of
official concern should benefit
relations between the government 25X1
and the local Taiwanese inhabit-
ants, on whom the main losses
in Nicosia--denounces those who
criticize former EOKA leader
George Grivas and warns Makarios
that he must follow a national-
ist line or risk active opposi-
tion. The archbishop has re-
sponded in two stinging public
statements criticizing those
"who plot against the peace"
and who are afraid to fight
openly for their program.
Open opposition to Makarios
on Cyprus is led by his long-
time rival within the Cypriot
church's hierarchy, Bishop
Kyprianos of Kyrenia. Kyprianos
has repeatedly called for con-
tinuation of the struggle for
enosis, which he anticipates
will be accelerated as soon as
"great politicians like Gener-
al Grivas" come to power in
Greece. Kyprianos, however, has
little support on Cyprus at pres-
ent, and his speeches frequent-
ly have been interrupted by
demonstrations favoring Maka-
rios.
The split within the Greek
Cypriot leadership complicates
Makarios' task of reconciling
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141~ SECRET Mao
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August
Greek and Turkish Cypriot views
toward the new constitution for
Cyprus, particularly since any
conciliatory move by him will
be denounced by his opponents
as a sellout to the Turks. A
grave dispute has already a-risen over the executive powers
of the future Turkish Cypriot
vice president, and the prob-
lem has been referred back to
Athens and Ankara for resolu-
tion.
Meanwhile, benefiting from
the split within right-wing
ranks, leaders of the illegal
Communist party on Cyprus have
become more aggressive. They
have recently announced a party
congress in late August and
boasted that the party's member-
ship has risen to 7,000--the
highest in the party's history.
The Communists' open defiance of
the proscription imposed on them
in 1955 may force the British
to make a decision on legaliza-
tion of the party--a decision
which is likely to create new
ill will toward London on the
part of one or another Cypriot
faction.
WEST AFRICA SEEKS CHANGE IN FORM OF FRENCH COMMUNITY
Nationalist leaders in West
Africa are pressing Paris to
redefine the status of the 12
autonomous African states in
the French Community. African
Leaders are divided on the fu-
ture evolution of the Community.
Officials at Dakar--capital of
the Mali Federation--want rapid
independence and the transfor-
mation of the Community into a
commonwealth of independent na-
tions; leaders in the Ivory
FFREN~FITROPICAL AFRICA
FrS IERR-
[LEO
LEONE
M0, 0
IVORY
COAST
Abidjan,
SOU DAN NIGER
SECRET
Coast, who value a close rela-
tionship with France, are using
the threat of secession to com-
bat any such commonwealth. The
scheduled September meeting of
the Community's Executive Coun-
cil is expected to define the
future status of the autonomous
republics.
The main proponent of early
independence is the Federation
of Mali, which unites the two
CENTRAL AFRICA
EGYPT) \ SAUDI
UrNCi \
BELGIAN CdNGO
1
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NOW SECRET `"Wo
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
republics of Senegal and Sou-
dan under the leadership of
the Soudanese nationalist,Mo-
dibo Keita. The Soudanese,
influenced by the independent
status of neighboring Guinea,
are pressing their more con-
servative Senegalese colleagues
and now envisage independence
by early 1961 at the latest,
despite the probable loss of
French economic assistance.
The Soudanese do not expect
the Community to be changed
to their liking; their leaders
are already contacting influ-
ential local groups and propa-
gandizing throughout the re-
public to prepare the popula-
tion for a break with the Com-
munity.
Mali's leaders are spurred
on in their demands by the sched-
uled independence in 1960 of
several nearby West African
states--Nigeria, Togo, and
Cameroun. Keita, who views
Guinea's President Sekou Tourd
with some reserve, expects
Guinea to associate with Mali
in the spirit of African unity,
and apparently anticipates that
some republics now having close
political and economic relations
with the Ivory Coast might join
a free Mali.
Ivory Coast Premier Hou-
phouet-Boigny, the main pro-
ponent of the present organi-
zation of the Community and a
leading pro-French African
spokesman, has recently indi-
cated that serious difficulties
have arisen between his govern-
ment and Paris. In late July
the premier said he wanted the
Community to evolve toward a
federal republic of France and
the African states; he denounced
African leaders who contemplated
eventual secession from the Com-
munity after receiving large
amounts of economic aid from
France. Upon his return to the
Ivory Coast from Paris in early
August, however, Houphouet-Boigny
was reported unusually bitter. At
a scheduled early September meet-
ing of his political party, he 25X1
may try to force France to choose
between Mali and the Ivory Coast.
AUSTRIA, ITALY, AND THE SOUTH TIROL-.
Austria's new foreign minis
ter; Dr. Bruno Kreisky, has
expressed grave concern that
the long-standing problem of
Italy's Austrian minority may
.be taking a turn for the worse.
Following a recent trip to the
South Tirol, Kreisky told Am-
erican Embassy officials in
Vienna he found that the popu-
lation is surprisingly "worked-
up" and that moderate leaders
are losing control to extremists
who for the first time demand
a` plebiscite to determine wheth-
er :the..: area should revert to
Austria. He sees a growing
danger of violence which, he
presumes, might lead a "panicky
Italian government" to send
armed forces to the area at the
further risk of bloodshed.
Austria and Italy have been
quarreling over.the South Tirol
since World War I, when it was
awarded to Italy by the Treaty
of Saint Germain: While Vienna
again recognized this territo
rial settlement after World War
II, it has long contended that
Rome has failed to abide by the
terms of a bilateral agreement
guaranteeing cultural autonomy
to the South Tirol's 230,000
German-speaking residents. In
late July, an Italian Foreign
Ministry spokesman privately
acknowledged that the Italian
performance to date "leaves
something to be desired."
Austria has contended that
merging the South Tirol with
the predominantly Italian
SECRET
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
Approximate area of German-
speaking population in
Northern Italy (South Tyrol)
--- Region boundary
...... Province boundary
Trentino under one regional
government violated the spirit
of the 1946 agreement, that
the German language is dis-
criminated against in public
offices, and that Rome has
attempted to encourage Italian
immigration into the area.
Earlier this year, frictions
between Rome and Vienna reached
a new high, partly as a result
of the Tirol-wide celebrations
of the 150th anniversary of the
death of the Austrian patriot,
Andreas Hofer. A prominent
Viennese publisher has for some
months warned that guerrilla
activity would occur in the
South Tirol this fall.
If the new concessions pre-
pared by Italy fail to satisfy
the Austrians and agitation
continues, the question may
be referred to an international
body, such as the UN General
Assembly or the International
Court of Justice. Kreisky has
already described the current
Italian proposals as "utterly
inadequate" and is under strong
pressure from the Tiroleans to
try to inscribe the issue on the
UN agenda. He has declared his
intention to treat the South
Tirol as an "important subject"
in his address to the assembly
this fall.
Internationalization of the
dispute in this way might
ultimately confront the Western
powers with the dilemma of taking
sides between two friendly
countries--one a member of
NATO and the other militarily
neutral. In such an embarrass-
ing situation, Austria would 25X1
seem likely to have the unso-
licited support of the Communist
bloc.
IMPLICATIONS OF SICILIAN POLITICAL SITUATION
Italy's ruling Christian
Democratic party has lost pres-
tige as a result of the politi-
cal line-up that has developed
1n Sicily, and faces increased
difficulty in maintaining party
discipline at the national
level. Renegade Christian Demo-
crat Silvio Milazzo has formed
a regional government in Sicily
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
made up of some of his follow-
ing and dissidents from the
rightist,- parties. He is sup-
ported by the Communists and
Nenni Socialists, who now con-
trol the assembly's seven leg-
islative committees. Rome is
unlikely to take legal steps to
oust the Sicilian government,
but the Christian Democrats may
see fit to postpone their na-
tional congress--now scheduled
for October--until they have
made'further attempts to make
a deal with Milazzo.
move which would increase its
unpopularity among Sicilian au-
tonomists, give the left addi-
tional ammunition against an
"autocratic" regime, and result
in new Sicilian elections which
might produce a government:1much
like the present one.
The Christian Democrats
may feel that a more satisfac-
tory arrangement can still be
worked out in Sicily, and that
meanwhile it would be prudent
to avoid a party congress. In
any event, friction
within the party has
been exacerbated as a
result of Milazzo's
successful defiance
and the Christian Demo-
crats' exclusion from
the Sicilian govern-
ment. Former party sec-
retary Fanfani, lead-
er of the party's left
wing, is accused of
sparking the Sicilian
rebellion by his "au-
thoritarian" methods
toward the Sicilian
.Government when he
was Italian premier.On
the other hand, right-wing
Christian Democrats
!OQ?
Milazzo, re-elected chief
of government by the 90-man Si-
cilian assembly, heads a cabi-
net consisting of three members
of his Social Christian '_ party,
two Monarchist dissidents,one
former neo-Fascist, and another
former Christian Democrat. A
Democratic Socialist who re-
fused the eighth cabinet post
will be replaced in October.
The four deputy ministers: are
all members of Milazzo's party.
Rome has the power to dis-
solve the regional government,
but would hesitate to make a
PRESUMED SUPPORTERS OF MILAZZO IN 28 JULY SECRET
BALLOT FOR ELECTION OF REGIONAL PRESIDENT
who are believed to have en-
couraged Milazzo as a thorn in
Fanfani's flesh now find that
Milazzo has become a danger not
to Fanfani alone, but to the
party as a whole.
The Communists are expected
to draw national propaganda
advantages from their in-
creased powers in Sicily and
the Aosta Valley in northern
Italy, where they also partici-
pated in an election coalition
which excluded the Christian
Democrats.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
ICELAND PREPARING FOR:: NEW''ELECTIONS
The controversial election-
reform measures adopted in Ice-
land on 15 August will result
in a marked redistribution of
power in the new parliament to
be elected on 25 and 26 October.
Passage of the measure resulted
from a tactical alliance in
parliament of the urban-based
parties--the Conservatives,
Social Democrats, and the Com-
munist-dominated Labor Alliance
--and' was opposed only by the
largely rural Progressive party.
It provides for more equitable
representation of the urban
areas by reducing the electoral
districts to eight and increas-
VESTR)DIR
5,835 voters)
(5}eats)
REYKJAVI
(37,603 vote
(12 flats)
MIDVESTURLAND
(6,234 voters)
G
(1 0,90T voter
(5 seats)
NORDURLAND
VESTRA
(5,876 voters)
(5 seats)
SUDURLAND
(8,552 voters)
(6 seats)
AUSTURLAND
(5,712 voters)
(5 seats)
The Communists are also ex-
pected to profit from the in-
crease in urban representation.
They are .expected to use these
gains and their cooperation with
the democratic parties in pass-
ing the electoral reform meas-
ure: to demand participation in
the postelection government.
Although the Labor Alliance
suffered a setback in the June
general elections and was unable
to exploit the fishing-limits
dispute with Britain, or arouse
anti-American sentiment on the
once-popular US base issue, the
Communists retain a strong bar-
gaining point through their
Icelar&dic Elec
Under New
NORDURLAND
EYSTRA
(10,893 voters)
(6 seats)
that no understanding 25X1
ing the parliamentary seats
from 52 to 60.
The new system enhances the
prospect that the two Icelandic
political parties most firmly
committed to NATO--the Conserv-
atives. and the Social Demo-
crats--will emerge with a com-
bined majority. There is some
speculation that the Conserva-
tives alone might win a riajor-
ity in parliament, but this
appears unlikely.
position among the
workers.
The Communists
control some 40 per-
cent of organized
labor as well as the
Icelandic Federation
of Labor. Some dem-
ocra;tiC:: politicians
probably would not be
averse to including
the Communists as a
price for securing
labor peace, but the
Conservative party
leadership insists
exists with regard to
postelection coopera-
tion with them.
The Soviet Union is under-
taking some moves to bolster the
political fortunes of the Labor
Alliance. At Iceland's request,
the USSR has agreed to purchase
some of the surplus herring re-
sulting from this year's unexpect-
edly heavy catch. The Communist 25X1
press credits the USSR with
"bail'ine Iceland out."
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
THE SITUATION IN PANAMA
Panama's period of compar-
ative ::tranquility following
the surrender of a Cuban-based
invasion force in May has been
disturbed by sharp opposition
attacks on US Canal Zone poli-
cies as the various political
factions prepare for the May
1960 presidential elections.
The ruling National Patri-
otic Coalition party (CPN) will
hold a convention early next
month and will probably nomi-
nate as its presidential can-
didate ex-President Ricardo
Arias, now ambassador to the
United States. His chief rival,
Education Minister Carlos Sucre,
has threatened to form his own
party if he fails to receive
CPN backing.
Meanwhile, opposition fac-
tions are apparently laying the
groundwork for making a campaign
issue of the administration's
alleged ineptitude in handling
Panama's demands on the United
States in regard to canal ques-
tions. They are reviving the
perennial demands that Panama
receive a larger share of canal
revenues and be recognized as
retaining complete sovereignty
over the Canal Zone. They also
charge that the United States
has failed to fulfill a 1955
promise to end wage discrimina-
tion against Panamanian employ-
ees in the zone.
A three-week anti-US cam-
paign developed during July when
the Panamanian Government re-
fused to accept a State Depart-
ment aide-memoire on the wage
issue. Prominent politicians
called for a mass movement of
Panamanians into the. Canal Zone
on 3 November--Panama's Inde-
pendence Day--to "occupy" the
zone and plant Panamanian flags.
Agitation continues for the pres-
entation. of Panamanian com-
plaints about US treaty "viola--
tions" to the International
Court l'of Justice.
The weak De la Guardia re-
gime is troubled by :.rising un--
employment,and popular dissatis-
faction with the administration
could provoke serious incidents
at any time. Panama's volatile
student groups, although cur-
rently quiet,and orderly, are
likely to continue as the focal
point of such disturbances. Po--
litical tensions have been fur-
ther increased by reports of a
new invasion attempt being
plotted in Cuba. Although the
government claims it is prepared
to cope with such an incursion,
any successful, well-timed land-
ing could be a serious__~ reat.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
PROBLEMS IN THE EUROPEAN COMMUNITY
A combination of recent
events will soon bring to a
head some of the fundamental
problems which have plagued the
European integration movement
since the European Coal-Steel
Community (CSC) was formed by
France, West Germany, Italy,
and the Benelux countries. The
unity of the six in the CSC,
EURATOM, and the European Eco-
nomic Community (EEC)--or Com-
mon Market--may be seriously
strained, the supranational
principle which ac-
tivated these proj-
ects will be tested,
and the ultimate re-
lationship between
the European Commu-
nity and the rest of
the free world will
probably be decided.
Problems of the CSC
The continuing
coal crisis in West-
ern Europe is one of
the problems which
has raised these
basic issues. Last
May the CSC Council--
primarily at French
and German instiga-
tion--rejected the
High Authority's
plan to impose com-
munity-wide produc-
tion controls to deal
with the coal glut.
20 AUGUST 1959
30600
This setback has become a seri-
ous political burden for the
European Community as a whole.
The council's action--although
based in part on the technical
difficulties of applying such
controls--has been widely in-
terpreted as a significant turn-
ing away from the Community ap-
proach. It has helped to bring
into the open the dangers which
the Paris-Bonn entente may in-
volve for the European movement,
and it has added to the growing
friction between the large coun-
tries of the Community and the
small.
The CSC has become increas-
ingly unpopular in the Ruhr,
and the dispute over the plan
for controlling coal produc-
tion is probably responsible
in part for the waning enthu-
siasm for the Common Market
which has recently been noted
among German industrialists.
While the CSC High Authority's
difficulties have not much af-
fected French interests as such,
Premier Debrb has long been hos-
tile to the integration movement,
European Community (Coal Steel Community,
EUAATOM, European Economic Community,
Applicants for association with the
European Economic Community
Organization for European Economic Cooperation
? (Polential members of a larger European
economic association)
and his administration has been
encouraged to hope for two major
revisions in the CSC treaty. One
would be a broadening of the
coverage to include petroleum
and electric power as well as
coal, the other a simultaneous
"adjustment" of the High Author-
ity's powers.
The CSC in October 1957
was given responsibility for
coordinating the energy policies
of the six member countries. Un-
der normal circumstances, an
over-all energy Community might
be a real European advance.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
However, a strengthening of the
CSC would hardly be the French
objective. Pressure for revi-
sions of the CSC happen to coin-
cide with France's burgeoning
hopes for its Saharan oil in-
dustry. If these hopes are jus-
tified, it would be to the clear
advantage of France--and to the
disadvantage of the Ruhr--if
the CSC were replaced with a
new energy community not pri-
marily concerned with the mar-
ket for coal.
Beyond this, French anti-
integrationists apparently hope
that "adjustment" of the powers
of the High Authority would
check the progress toward an
integrated Europe with inde-
pendent European institutions
and turn the tide in favor of
President de Gaulle's concept
of a "Europe of nations"--in
the Gaullist view, a coalition
led by France in which the in-
terests of the smaller powers
would be subordinated to those
of the large.
Institutional Problems
French advocacy of this
version of the European idea
tends to aggravate the polit-
ical difficulties which have
progressively become the pri-
mary problem confronting the
entire integration movement.
In the year and a half since
EURATOM and the EEC formally
came into effect, remarkable
economic strides have been
made, and industry's adapta-
tion to the Common Market has
caused some observers to pre-
dict a shortening of the inte-
gration timetable foreseen by
the treaty. The EEC in particu-
lar is generating pressures for
further steps in this direction,
as its architects anticipated,
and the American Mission in
Brussels sees increasing signs
of early moves toward a coordi-
nation of economic and financial
policies.
In the political field,
however, a similar measure of
progress is not evident. Rela-
tions between the Commissions?
representing the Community as
a whole--and the Councils--repre-
senting '.member states--continue
to be delicate. Highly partisan
attacks are made on the Commis-
sions by government officials,
not only in Paris but in stanch-
ly pro-European capitals such as
The Hague. The ministers again
failed on 25 July to reach agree-
ment on a site for the European
institutions, and Belgian aspi-
rations for Brussels face seri-
ous obstacles from the French,
who apparently feel that any
location but Paris would under-
cut their pretensions to commu-
nity leadership.
Political Coordination
The controversy caused by
recent proposals that the EEC
countries establish mechanisms
for permanent political consul-
tations among themselves is in-
dicative of the problems con-
fronting a political consolida-
tion of the community. The
origins of this plan are ob-
scure, but it was apparently
first proposed by Italian For-
eign Minister Pella last May
and subsequently discussed by
Presidents de Gaulle and Gron-
chi during the former's visit to
Rome in June. Typically, De
Gaulle preferred that any such
consultations be restricted to
the EEC's "big three," but was
persuaded by the Italians to
include the three smaller coun-
tries as well.
The plan has received a
mixed reaction in Bonn. Stanch
integrationists of the Adenauer-
Etzel school, who are worried
by the restiveness of German
industry, believe that early
steps toward political inte-
gration are essential if the
vitality and integrity of the
Common Market are to be pre-
served. They are confronted,
however, by a growing public
antipathy to closer ties with
France and a suspicion that the
present plan would advance the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
aspirations of De Gaulle with-
out producing solid French com-
mitments to the European ideal.
Similar suspicions are es-
pecially evident in the Nether--
lands and Belgium. Both consid-
er the supranational approach
a guarantee that the national
interests of the smaller coun-
tries will be respected, and
both are skeptical that--given
the well-known views of Debrg---
France now is prepared to make
concessions to that principle.
They fear that a political con-
sultative committee would com-
pete with the institutions now
developing in Brussels and pro-
vide a framework for French-
German dictation of Community
policies,
External Pressures
London has also expressed
grave concern over the prospect
that the six might attempt to
set up a permanent political
secretariat. Although initially
not disturbed by the idea of in-
tensified diplomatic contacts
among the six, the British now
feel that these should take
place in the framework of the
Western European Union, of
which Britain is a member. High
Italian officials have angrily
declared that the UK is once
more "sabotaging" European
unity, and, in the opinion of
the American Embassy in London,
Britain's attitude is new evi-
dence of the persisting British
refusal to recognize the polit-
ical implications of an econom-
ically integrated Europe.
There is every likelihood
that the stresses stemming from
the "division" of Europe will
become worse before they become
better. The decision in July
of Britain, the Scandinavian
countries, Switzerland, Austria,
and Portugal to launch the so-
called little free-trade area--
or Outer Seven project--was
calculated in part to exploit
the difficulties which this di-
vision has caused within the
EEC by encouraging West Germany
and the Benelux countries to
press France--assumed to be the
major obstacle--to assent to a
larger free-trade area, Since
West Germany and the Benelux
countries have major trading
interests in the Outer Seven
and France does not, Paris may
come under increasing pressure
from the other EEC capitals to
agree to renewed negotiations
on a larger economic associa-
tion.
A similar conflict of in-
terests has been evident in the
EEC's relations with the less
developed countries on its
periphery. The recent applica-
tion by Greece for association
with the Common Market--followed
by one from Turkey--was opposed
primarily by The Hague and by
elements in Bonn close to Vice
Chancellor Erhard who fear that
bilateral Greek-EEC ties would
"complicate" efforts to achieve
an all-European association.
That these objections were over-
come at the 25 July EEC minis-
terial meeting was at least a
temporary victory for those who
fear a broad European economic
association would weaken the
Common Market, who are anxious
to consolidate the community of
six, and who want to demonstrate
the thesis that integration of
the "heart of Europe" exerts an
irresistible attraction on the
rest of Europe.
Growing Pains
These problems are serious
to the extent that they involve
the deeper conflicts within the
European Community: that the Com-
munity's members are not fully
reconciled to a purely Continen-
tal integration; that the "divi-
sion" of Europe between "the
six" and the rest of Europe
generates frictions on both
sides; and that the role of the
European Community within the
Atlantic Alliance is far from
settled.
In the broader perspective
of European integration since
1945, these problems seem less
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20 August 1959
serious. While prospects for
any immediate advance toward a
European political community
are probably poor so long as
the French Government retains
its present national orienta-
tion, it is conceivable that
the operations of existing in-
stitutions are laying the
groundwork for a future ad-
vance and that a more generally
acceptable political formula
can be devised.
.It is also possible that
the conflict between national
and supranational principleshas
been overemphasized by the Euro-
pean federalists. In a recent
plea for "full functioning of
existing institutions in a com-
munity spirit," EEC Commissioner
Rey has suggested that an essen-
tial feature of the three com-
munities is the "judicious bal-
ance" between the community and
the national elements. Commis-
sioner- Marjolin, in a similar
vein, has stressed the impor-
tance of the European Assembly,
the need to proceed with the
projected popular election of
this body, and the delineation
of its relationship to the Coun-
cils.
The smaller EEC countries
are clearly in need of some such
reassurance against the poten-
tial domination by the larger.
However, while they now are wor-
ried over the political influence
of De Gaulle's France, they would
be equally disturbed if there
were no counterbalance to the
economic power of the Germans.
The Bonn-Paris rapprochement,
which has astonished many and
disturbed some, was also one of
the original objectives of the
integration movement.
The "division" of Europe has
existed since 1950 when Britain
declined to participate in the
CSC. That this breach has deep-
ened in the last nine years is
largely due to the forging
ahead of the European Community.
Peiping's hopes of convert-
ing Tibet into a docile append-
age of China have received
fresh encouragement from the
Communist suppression of strong
anti-Chinese groups and the
flight of their leaders to
India following the revolution
last spring. In the wake of
the revolt, the Communists an-
nounced a program of "democratic
reform" designed to eliminate
the last vestiges of opposition
to Chinese rule in Tibet. While
the Chinese appear more deter-
mined than ever to replace
the traditional Tibetan society
with a Communist way of life,
their success is by no means
assured. Operating against
them are the Tibetan's strong
faith in his traditions and
religion and the rugged ter-
rain, which lends itself to
guerrilla activity and aggra-
vates crucial Chinese supply
problems.
Communist Policy Before 1959
The Communist record in
Tibet thus far adds up.to a
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
series of frustrations in the
face of smoldering Tibetan as-
pirations for independence from
Chinese control. Peiping's ar-
mies entered Lhasa in the fall
of 1951 with good reason for
hoping that the integration of
Tibet could be effected in sev-
eral years. The regime had al-
ready consolidated its control
over a so-called autonomous
region in Inner Mongdlia in
1947 and was. making progress
with the Uighurs in China's
vast northwest province of
Sinkiang. There the Chinese
were able to complete land re-
form by the end of 1952 and to
declare the region "autonomous"
in 1955.
In Tibet, the spiritual
authority of the Dalai Lama
confronted the Communists with
a unique obstacle to their
plans for integrating the area
into the Chinese body politic.
To dissipate the loyalties of
the people to their god-king,
the Chinese imported an alter-
native in the person of the
Panchen Lama, theoretically
the equal of the Dalai Lama in
spiritual matters. Peiping was
able to bring the Panchen Lama
back into Tibet from China,
effect his reconciliation with
the Dalai Lama, and even re-
establish him as the temporal
ruler of the Zhikatse area, but
the loyalties of the people re-
mained with the Dalai Lama and
still do, even though he now
is in exile in India.
Peiping's attempts to un-
dercut'the political author-
ity of the Tibetan Government
were equally frustrating. The
Chinese reduced the govern-
ment's jurisdiction somewhat
by creating separate admin-
istrations for the Zhikatse
area under the Panchen Lama
and for the Chamdo region of
eastern Tibet. The Communists
nevertheless had to deal
with the Lhasa authorities
through the Dalai Lama, who
often advanced the intransi-
gence of his subordinates as
an excuse for his own uncooper-
ativeness. Peiping's major
attempt in 1956 to replace the
local government with the Com-
munist-sponsored Preparatory
Committee for the Tibet Auton-
omous Region fell flat; in fact,
the preparatory committee failed
to function until after the rev-
olution this year.
Peiping's most successful
venture in Tibet was the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
Punakhi
BHUTAN
construction . , of two major
highways leading from China to
Lhasa. While these highways
greatly facilitated the move-
ment of troops and eased the
crucial problem of supply in a
remote and unfriendly country,
they were frequently interdicted
by Tibetan guerrilla forces.
This unrest erupted on a
major scale in 1956 and con-
tinued on a high level, reach-
ing a peak last March. The
causes of the unrest, aside
from a desire for independence,
were heavy taxation, resentment
of the undermining of the Dalai
Lama and the indoctrination of
youth, and the introduction of
social changes in neighboring
Tibetan-inhabited areas of
western China. In 1957 the
Communists decided on a more
conciliatory policy and with-
drew large numbers of troops
and nonmilitary personnel,
while announcing the postpone-
ment. of reforms for five years.
BURMA
The Chinese apparently were
reluctant to employ harsh tac-
tics in suppressing the dissi-
dence until the revolution
threatened their control of
much of Tibet.
Current Communist Policy
The new outbreaks in Tibet
last March decided Peiping on
a shift to a hard line. The
Chinese have abolished the
Tibetan local government and`
army, replaced the Dalai Lama
by the Panchen Lama, and ini-
tiated a program of social re-
form.
The "democratic reforms"
announced for Tibet leave un-
answered a number of important
questions. Perhaps deliber-
ately, the Chinese have not in-
dicated a time schedule for de-
velopments in Tibet and have so
far avoided a specific commit-
ment to distribute land to the
peasants. Most spokesmen
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Railroad
Motorable road
---Minor road or trail
Motorable road under
construction
T.saidam
Has in
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20 August 1959
on the subject--including sen-
ior Chinese Communist officials
in Tibet and some Tibetans--
have promised only that tillers
of confiscated land will be able
to keep their harvest this year
without paying rent, and only
the Panchen Lama has stated
that confiscated land will be
distributed to the peasants.
Peiping may distribute
land to groups of peasants
rather than to individuals--a
step that would enable the Chi-
nese to pass quickly to Tibetan
collectives or possibly even to
communes. A precedent for such
swift action can be found in
areas of western China inhabited
by ethnic Tibetans.
What the Chinese have made
clear about their intentions in
Tibet is that those groups op-
posed to Chinese control will
ultimately be destroyed. This
will be accomplished by a di-
rect assault on the feudal pow-
ers and special privileges of
the upper classes and monas-
teries. Forced labor and
slavery are to be abolished,
and rents and interest rates
reduced. Under this program
the land belonging to rebels
will be confiscated, while
other lands will be "bought
out" by the government.
Attack on Religion
Freedom of religion is
ostensibly guaranteed in Tibet,
but the privileges of the mon-
asteries, assailed as "exploi-
tation and oppression under the
cloak of religion," will. be
abolished, and monks will be
considered ordinary citizens.
Peiping hopes by these meas-
ures to eliminate the religious
traditions that bind Tibetan so-
ciety, but there is a question
of how rapidly this goal can be
pursued. The substitution of
the Panchen for the Dalai Lama
is a giant step which may be
followed by attempts to dis-
credit the Dalai Lama in the
eyes of the Tibetans. Time and
unrelenting Communist pressure
promise to erode the power of
the religious hierarchy in Ti-
bet, just as they have in Mon-
golia.
Chinese Migration Into Tibet
Peiping has already indi-
cated it intends to introduce
large numbers of Chinese settlers
into Tibet. This policy of over-
whelming the ethnic minorities
has been used effectively by
the Chinese in most of their
autonomous areas; in Inner
Mongolia, for example, they out-
number the Mongolians 7 to 1.
An intimation of how the Chi-
nese view Tibet's demographic
future was given by Mao Tse-
tung in 1950, when he predicted
that Tibet--which now has a pop-
ulation of about 1,300,000--
could support as many as 10,000,-
000 people.
The resettlement program
in Tibet was not vigorously
pushed, however, until 1958.
The Dalai Lama now claims that
5,009,000 Chinese have settled
in Tibet. While this is clear-
ly an exaggeration, it ap-
pears that large numbers of
Chinese settlers have moved
into Tibetan areas of West
China and into Tibet prop-
er..
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PART III PATTERNS AND PERSPECTIVES Page 7 of 12
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 CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
The Chinese have also
sharply increased their troop
strength in Tibet, and may now
have as many as 100,000 troops
there. Moreover, since the
revolution, large numbers of
Chinese-trained Tibetans and
Tibetan-speaking Chinese cadres
--may of whom were withdrawn
in 1957--have returned.
These migrations will com-
plicate an already acute logis-
tics problem. The Communists
must expect occasional interrup-
tions to transport activities on
the two major highways to Lhasa
both from guerrilla activity
and natural obstructions; ef-
forts are being made to correct
these interruptions. In addi-
tion, improvements are being
made in air facilities from the
mainland and in road transport
from the Indian border, and
the construction of a railroad
from China prdper--probably
paralleling the Tsinghai-Lhasa
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SINO-SOVIET BLOC'S ECONOMIC RELATIONS WITH THE FREE WORLD
Sino-Soviet bloc economic
relations with the free world
continue to expand with the ex-
tension of additional bloc aid
to underdeveloped areas and the
growth of trade with industrial-
ized nonbloc countries. To com-
pete with American aid, the USSR
road--is planned. Peiping also
is counting on improved agri-
cultural and animal-husbandry
techniques and the development
of industry to support a much
larger population in Tibet.
Chinese Success Uncertain
Frustrated-during most of
its occupation of Tibet, Pei-
ping has been forced to
crawl when it wanted to
soar. Now the Chinese
Communists appear to be
in a position to push
ahead rapidly with inte-
gration of the area. While
Tibetan recalcitrance will
continue to retard the
program, the regime seems
determined this time that
Tibet will be brought in- 25X1
to line with "socialist"
developments in the
rest of China.
this year made its first major
grant--to Afghanistan--and com-
mitted itself to long-term new
assistance in India. So far in
1959, the bloc, primarily the
USSR, has extended $840,000,000
in new aid, two thirds of which
is for South and Southeast Asia
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PART III PATTERNS AND PERSPECTIVES Page 8 of 12
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 CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
and the remainder for the Mid-
dle East and Africa.
The bloc now accounts for
about 4 percent of free-world
trade--twice as much as in 1954.
While trade with the underdevel-
oped areas has grown more rapid-
ECONOMIC ASSISTANCE EXTENDED BY SINO-SOVIET BLOC SINCE 1954
(MILLION DOLLARS)
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SECRET
32%
90814 49
ly, that with the industrialized
countries still accounts for 70
percent of total bloc trade.
The USSR's recent emphasis on
seeking Western credits to pro-
cure advanced Western plants and
machinery for its chemical in-
dustry expansion and
increased satellite
purchases of Western
plants--some on medi-
um-term credits--sug-
gest that industrial
ized countries will
remain the bloc's
more important trad-
ing partners for some
time.
Underdeveloped
Countries
The value of
Sino-Soviet bloc eco-
nomic and military
assistance extended
to underdeveloped
countries now totals
to exploit opportunities as they
arise elsewhere. Economic prob-
lems in Latin America, for ex-
ample, offer extensive opportuni-
ties for trade and aid proposals.
Following general offers of
aid to Africa over the past two
SINO-SOVIET BLOC TRADE WITH NONBLOC COUNTRIES
(BILLION DOLLARS)
$3.5 billion. Credits and grants
offered this year to gain in-
fluence at the expense of the
Weft indicate the bloc's con-
tinuing,interest in South and
Southeast Asia.and the.expansion
of. its, interests in Africa. Bloc
leaders will continue, however,
Bloc economic activity in
Africa is aided by local hostil-
ity to Western Europeans and the
large financial needs for proj-
ects not usually attractive to
private investors--such as roads,
irrigation works, and other
years, the bloc last
month concluded an
aid agreement with
Ethiopia during Em-
peror Haile Selassie's
visit to Moscow and
Prague. This was the
bloc's first major
aid agreement with
an African country
other than the UAR.
The USSR offered its
standard $100,000,000
credit--probably be-
cause Ethiopia has
no clear-cut develop-
ment plans. Czech-
oslovakia reportedly
will provide $20,-
000,000 in aid.
UNDERDEVELOPED INDUSTRIAL
COUNTRIES NONEILOC
COUNTRIES
25Yo
USSR
EASTERN
EUROPE
utilities. The requirements
for foreign governmental aid by
independent African countries
are so large and varied that the
bloc probably will be able to
choose to assist those areas
where political turmoil would
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
reap the greatest propaganda
benefits and where local export
resources match bloc require-
ments for raw materials.
In Asia, Moscow probably
hopes to achieve an extra prop-
aganda benefit by the announce-
ment in late July of a $375,000,
000 credit to be used for key
industrial projects during In-
dia's Third Five-Year Plan (1961-
66). The new Soviet credit, how-
ever, is only about 7 percent
of the $5 billion in aid needed
under this plan. Moscow also
has indicated that further aid
for New Delhi's plans, includ-
ing those beyond 1966, would
be made available. The July
credit is to be used largely to
expand Soviet heavy industrial
projects agreed to earlier but
which, for the most part, are
still only in the survey stage.
Only $134,000,000 worth of
aid goods has been delivered to
India under credits granted be-
tween 1955 and mid-1959 totaling
$323,000,000. While total bloc
credits extended to India are
equal to About 20 percent of the
foreign government loans and
credits New Delhi has been of-
fered thus far, the bloc role
tsurm,'
..1
fz~ RX an
^
in the economic development of
India has been considerably less
to date, since only one fifth
of bloc aid has actually been
spent.
To ensure the primacy of
its position in Afghanistan and
to counter American aid grants
there, the USSR relaxed its pol-
icy against grants and agreed
to build--as a gift--a road and
an airfield valued by the Soviet
Union at $80,000,000, as well as
to expand military assistance.
The USSR is not expected to in-
crease the role of grants gen-
erally, but it probably will
continue to promote long-term,
low-interest loans which develop
more lasting economic ties.
American aid programs, taking
cognizance of the monetary and
investment problems arising from
the rapid expansion of economic
development, have featured grants
covering domestic costs. Nearly
three quarters of American for-
eign aid has been composed of
grants, as compared with 7 per"
cent of Sino-Soviet bloc economic
assistance.
Bloc credit offers to un-
derdeveloped countries--unlike
those of private investors or
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2
Brazil
u
in mil ions of dollars
iI
Mditar
I ' Sino-Soviet Bloc Assistance to Non-Bloc World ~
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Nw~
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20 August 1959
Western. governmental authori-
ties, who must consider the eco-
nomic merits and consequences
of development plans and their
prospects for success--leave to
the recipient governments the
problem of meeting the domestic
financial drains occasioned by
rapid economic growth. Burma
and Afghanistan have found that
the debt burden and inflation-
ary effects of Soviet foreign
aid limit the use of loans.
Burma has canceled some Soviet
aid. Afghanistan was able to
convince the USSR to supply con-
sumer goods, which could be sold
to earn local funds for domestic
costs of projects and absorb
some currency, the circulation
of which was increased by.:
stepped-up construction under
foreign aid.
The bloc's own economic
capabilities impose no serious
limitation on its ability to
continue and expand its aid pro-
gram, particularly if it con-
tinues to concentrate on projects
for which it has extensive pro-
ductive and technical facili-
ties. The apportionment among
the satellites and the USSR of
contracts for actual construc-
tion or delivery of equipment
tends to minimize the demand on
any particular bloc economy. The
immediate demand on bloc econ-
omies is also lessened by prob-
lems of economic planning and
.local finance in the underdevel-
oped countries themselves. Be-
fore drawing on a bloc line of
credit, the recipient country
must raise funds to meet the
:local costs of starting a project.
In several countries, internal
political and economic difficul-
ties have limited the amount of
local funds which could be sup-
plied to development projects,
restricting full use of bloc
credits.
For most underdeveloped
countries, the capital surplus
available for investment is us-
ually so small that any serious
political or economic disturbance
may require revision of original
economic development plans. The
bloc, therefore, can make gen-
erous offers of aid, aware that
it may not be used rapidly or
that domestic political consid-
erations make acceptance unlike-
ly.
Industrialized countries
continue to be the major markets
for Soviet bloc exports to the
free world and a chief source
of imports. Through extensive
propaganda and some new purchas-
ing activity, the bloc has en-
couraged the development of a
trade drive in these countries
for increased exchanges with the
bloc. The bloc has recently
stepped up purchases of tech-
nologically advanced equipment
--principally for the plastics,
synthetics, and petrochemical
industries--and is securing
credits for new purchases.
Under recent trade agree-
ments the USSR has specified it
will place additional "substan-
tial" orders for chemical equip-
ment. During negotiations in
May for a trade pact with Brit-
ain, the USSR provided a list-
of desired imports during the
next five years--factories and
equipment worth more than $1
billion. Moscow has publicized
its potential purchases to foster
competition among Western Euro-
pean countries, both in price and
in offers of credits.
The satellites also are in-
creasing their purchases of West-
ern equipment. In negotiations
for American aid, Poland has in-
dicated a large demand for free-
world mining equipment and other
machinery. Rumania has purchased
--largely on credit--Western
tire plants, refinery equipment,
and textile and paper mills. To
expand such purchases despite
limited foreign exchange resourc-
es, the satellites are pressing
Western suppliers to barter ad-
ditional industrial equipment
for bloc raw materials and agri-
cultural products. Both Poland
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 August 1959
and Czechoslovakia, as well as
the USSR, are stepping up sales
of industrial goods to the West.
Poland reports that, during the
first half of 1959, exports of
machinery rose by more than 20
percent; sales to the free
world were a significant fea-
ture of this increase.
During 1958 the Chinese
Communists also stepped up pur-
chases of Western goods, large-
ly semifinished industrial
products. Such purchases, sup-
porting their "leap forward"
program, have fallen off from
the level of last year but are
expected to remain an important
part of China's imports. Pei-
ping continually strives to in-
crease its exports to nonbloc
Asian markets in order to earn
foreign exchange for expanding
its purchases in Western Europe.
Soviet sales activities in
commodity markets--tin, aluminum,
oil, and wheat, for example--
are primarily designed to earn
foreign exchange. Soviet prices
occasionally are below others
prevailing in the market, chief-
ly in order to overcome a gener-
al reluctance to buy Soviet
goods. The USSR's restraint in
gold sales probably is explained
by its preference for an expan-
sion of economic relations and
for barter trade. The Soviet
Union drives hard bargains in
its trade-pact negotiations and
is almost always insistent on bal-
anced trade: in an effort to promote
its exports,, but at a. higher, level
than in preceding agreements.
SECRET
By offering a wider range
of exports and expressing an
almost limitless desire for the
free world's heavy manufactured
goods, the USSR is creating an
atmosphere for a significant
growth in its trade with indus-
trial countries. Moscow, for
instance, is making increased
purchases from Japan for the
economic development of the So-
viet Far East, and British,
French, West German, and Italian
firms in the past year have se-
cured orders for major industrial
installations.
Economic considerations
play the chief role in Sino-
Soviet bloc trade with free-
world industrial countries,
as contrasted with the large
measure of political motiva-
tion in its trade with un-
derdeveloped areas. However,
the bloc--primarily the USSR--
has occasionally employed
economic pressure to fur-
ther its political objectives
toward weaker states. An ex-
cellent example is Moscow's
dealings with Finland, includ-
ing postponement last fall of
negotiations for a new trade
agreement and a cessation of
Soviet purchases in order
to topple Helsinki's coali-
tion government. The USSR
presumably can be expected
to use such tactics as long 25X1
as they have no measurable
adverse impact on its world
economic relations.
(;Prepared by ORR)
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