CURRENT INTELLIGENCE WEEKLY SUMMARY

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• Publication Date: October 27, 1999
• Content Type: SUMMARY

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CONFIDENTIAL
COPY NO. 56
OCI NO. 07581/59
3 December 1959
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
Document No. ------
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No Change In --'~..
Class. D
D Declassified
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text Review Cate:
h.: NR 70.3
CENTRAL INTELLIGENCE AGENCY
I I I OFFICE OF CURRENT INTELLIGENCE
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CONFIDENTIAL
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RETURN TO ARCHIVES Ft RECORDS CENTER
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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 SUIIARY
OF IMMEDIATE INTEREST
KHRUSHCHEV'S FOREIGN POLICY PRONOUNCEMENTS
Recent Soviet statements
on summit talks are designed
to convey the impression of an
immediate readiness for such a
meeting while implying that Mos-
cow is adopting a conciliatory
posture in accommodating differ-
ent Western views on the timing
of a summit meeting. In his
address to the Hungarian party
congress on 1 December, Soviet
Premier Khrushchev maintained
the moderate and flexible line
that has characterized his for-
eign policy pronouncements since
his visit to the United States.
He took pains to deny "fabrica-
tions" in the Western press that
the USSR is no longer interested
in an early summit meeting and
said, "The Soviet Government is
prepared to attend such a meet-
ing at a time and place that
would be acceptable to all the
participants."
In another gesture toward
De Gaulle, Khrushchev observed
that the French President's
desire to have an exchange of
views with him prior to a sum-
mit meeting was "not-unreason-
abl.e" and stated, "Perhaps this
will make for better understand-
ing at the summit." This treat-
ment of De Gaulle, coupled with
previous efforts to appear re-
sponsive to French views on the
summit, reflects Khrushchev's
confidence that De Gaulle's
ambitions to enhance France's
international prestige and in-
fluence can be exploited to
divide the Western allies and
weaken their negotiating posi-
tion at the summit.
Khrushchev's relative re-
straint in avoiding pressure on
the West to agree to an earlier
summit conference is another
indication of Moscow's estimate
that the passage of time will
sharpen Western differences.
Khrushchev may feel that dur-
ing his visit to Paris beginning
on 15 March he will be able to
prove De Gaulle's intentions
more deeply and seek ways of
manipulating Western differences
to Soviet advantage.
In dealing with the East-
West issues, Khrushchev Again
used recent statements by Chan-
cellor Adenauer as a pretext
for restating the Soviet posi-
tion on Berlin and Germany.
Throughout the speech Khrushchev
stressed the warning contained
in the TASS statement on 18 No-
vember that if the West refused
to conclude a treaty with both
German states, the USSR would
be "compelled" to sign a sepa-
rate treaty with East Germany.
Citing the Western peace treaty
with Japan as a precedent, he
claimed that the USSR had every
moral and legal right to con-
clude a separate treaty. The
premier avoided any suggestion
that such unilateral Soviet ac-
tion was imminent or related
directly to the outcome of the
summit meeting next spring.
For the first time since
his initial statement on return-
ing from the United States, Khru-
shchev repeated his commitment
to President Eisenhower that the
USSR would not impose a time
limit or present an ultimatum
on the Berlin negotiations. He
declared, however, that a peace
treaty must be signed which
would include provisions for
converting West Berlin into a
free city.
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CURRENT INTELLIGENCE WEEKLY $INIKABY
3 December 1959
The threat of a separate
peace treaty was also echoed
in the 25 November communique
following the talks between
East German and Czech leaders
in Berlin. The Czech Govern-
ment expressed its readiness
to sign a peace treaty with
both German states or the "one
which is willing to do so."
The possibility of East
German participation in the
summit discussions on a peace
treaty was again raised by East
German leaders. Party leader
Ulbricht declared that the Ger-
mans would participate in such
phases of summit talks. Ear-
lier, on 12 November, East Ger-
man Foreign Minister Bolz made
a similar claim.
Although Moscow has failed
to endorse the East German
statements specifically, Gromyko
said at the end of the Geneva
foreign ministers' conference
that "questions affecting the
vital interests of the Germans
cannot be settled without the
Germans themselves, without
the participation of both Ger-
man states in the discussions."
Moscow may be using the East
German statements as a trial
balloon to elicit Western reac-
tion to the question of includ-
ing German advisers at some
phase of the summit negotiations.
In its official statements
and propaganda, Moscow has un-
derlined its contention that a
new phase of international re-
lations based on peaceful co-
existence is developing as a
result of Khrushchev's initia-
tive. In his speech on 1 De-
cember Khrushchev listed his
visit to the United States, his
talks with President Eisenhower,
and the Soviet proposal for uni-
versal disarmament as having
produced a certain relaxation
of tension, stressing, however,
that this was only the begin-
ning. He expressed hope that
a summit meeting would provide
a "new step" forward in the
struggle for peaceful coexist-
ence.
In assessing Western reac-
tion to Moscow's peace offen-
sive, Khrushchev claimed in
Budapest that the West was di
viding into two forces--"those
statesmen and political lead-
ers" who recognize the necessity
of liquidating the cold war, and
other Western circles bent on
halting this trend. Khrushchev
claimed that every "sober-
minded" statesman has realized
that the balance of forces "has
tilted in favor of the social-
ist nations," and he cited Ade-
nauer as an example of those
political leaders who refuse to
recognize that the "past is
disappearing, never to return."
The recent publication in
the Soviet press of statements
by prominent Americans also
is apparently designed to create
the impression that the West is
in the throes of a major re-ex-
amination of its policies.
The speech to the Hungarian
party congress, like Khrushchev's
two previous foreign policy
addresses on 31 October and 14
November, contains evidence
that he is concerned over Pei-
ping's challenge to Moscow's
ideological primacy and hegemony
in the Communist world and the
Chinese Communists' apparent
misgivings regarding his peace-
ful coexistence strategy. In
a passage almost certainly ad-
dressed to the Chinese Commu-
nists, Khrushchev invoked the
"principle of proletarian inter-
nationalism" as the "supreme
immutable law of the interna-
tional Communist movement" and
warned that "if the leadership
of this or that country becomes
conceited, this can only play
into the hands of the enemy."
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CURRENT INTELLIGENCE WEEKLY SUMMARY
3 December 1959
The Soviet premier then
returned to some of the main
themes of his major address at
the Soviet 21st party congress
last February. At that time he
took a line which contrasted
sharply with Peiping's position
up to late 1958, later partial-
ly modified, on the rapidity of
Chinese approach to a Communist
society, the importance of "ma-
terial incentives" in the econ-
omy, and the organization of
agriculture.
He warned that the "Lenin-
ist principle of economic in-
centives is of great importance
for the advancement of a social-
ist economy" and said, "We must
not fall behind or go too far
ahead. We must, figuratively
speaking, synchronize our
watches." This is a reminder
of his dictum at the 21st con-
gress that all "socialist coun-
tries ...will more or less si-
multaneously reach the highest
phase of Communist society."
Khrushchev's statement that
the Soviet Union has a stock-
pile of rockets with nuclear
warheads sufficient, if at-
tacked, "to raze to the ground
all our potential enemies" im-
plies a greater Soviet capacity
than is believed to exist, par-
ticularly with respect to the
ICBM. The USSR may,,however,
be able to launch a few opera-
tional ICBMs against several
key US urban areas. On the
other hand, the USSR probably
already possesses sufficient
numbers of 700- and 1,100-nau-
tical-mile missiles to destroy
most major European cities.
Khrushchev recently re-
ferred to his missiles in an-
other way. In a speech on 14
November he stated, as an ex-
ample of the mighty weapons at
the USSR's disposal, that "in
one year 250 missiles with
hydrogen warheads came off the
assembly line in the factory
we visited." The context im-
plied he was referring to So-
viet ICBM production, but avail-
able evidence suggests that he
probably was referring to the
700-nautical-mile missile or to
the combined output of 700-and
1,100-nautical-mile missiles.
West German Attitudes
West German Chancellor
Adenauer's recent statements
suggest that he intends to take
a hard line at the Western pre-
paratory meetings. He sought
to secure solid French backing
for his hard-line position dur-
ing his-talks on 1 and 2 Decem-
ber with De Gaulle in Paris.
In an address to a Christian
Democratic party meeting on 27
November, Adeanuer called for
patient, careful summit prepara-
tions and warned that haste
could mean disaster for Germany.
There are indications that
Adenauer will strongly oppose
any proposals which he feels
might undermine Western pres-
ence in West Berlin or weaken
the city's ties with the Fed-
eral Republic. On 30 November,
West Berlin Mayor Willy Brandt
warned against making changes
in Berlin merely for the sake
of change and termed hopes for
a "perfect" solution of the
Berlin question an "illusion."
The chancellor demanded
that the East Germans be given
the same right of self-deter-
mination now being granted to
the peoples of Africa and Asia
and urged Germans to stress "res-
titution of freedom" for the 25X1
17,000,000 East Germans, rather
than place all emphasis on re-
unification.
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CURRENT INTELLIGENCE WEEKLY SUNNARY
3 December 1959
Throughout the border dis-
pute between India and Commu-
nist China, the USSR has at-
tempted to maintain an appear-
ance of impartiality in support
of a peaceful settlement. This
stand, without precedent in the
case of a dispute between a Com-
munist and a nonbloc country,
reflects the embarrassment the
dispute has caused Khrushchev
at a time when he is attempting
to foster a detente with the
West and encourage Nehru's
"benevolent4' neutralism.
The latest diplomatic move
occurred on 22 November when
Khrushchev sent word to Nehru
that the USSR had given Commu-
nist China "friendly advice"
to negotiate a settlement of
the border dispute with India.
The Soviet leader stressed his
desire to see negotiations be-
gun as soon as possible.
Khrushchev has sought by
various other means to prevent
any further deterioration of
the situation which might harm
the USSR's relations with India.
He has consistently adhered to
a neutral position in public
pronouncements, expressing re-
gret over the border incidents
and hope that the dispute can
be settled "by means of friendly
negotiations to the mutual satis-
faction of both sides." He has
characterized the dispute as a
"little matter" that has been
given too much importance, and
he has publicly played down the
strategic importance of the dis-
puted areas.
The Soviet press has also
maintained this balance between
the contesting parties. On 10
November Pravda led off with
Peiping's position while discuss-
ing an earlier exchange of notes
between Peiping and New Delhi,
whereas Izvestia led off with
New Delhi s~ -On 25 November,
Moscow broadcast a paraphrase
of those parts of Nehru's speech
to Parliament opening the debate.
over the border problem which
stressed Nehru's desire to ne-
gotiate the issue.
While Moscow has probably
been counseling moderation to
the Chinese, it is doubtful that
at this stage its advice is
either a determining factor or
at variance with Peiping's own
views on how to deal with the
issue. The USSR is careful,
however, to impress the Indian
Government with its attempts to
bring the dispute to a mutually
satisfactory conclusion so as
to gain as much credit as pos-
sible for any moves which the
Chinese Communists might make,
even on their own initiative.
Nehru apparently welcomes
the continued Soviet attempts
to ease Sino-Indian tension and
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probably regards them as evi-
dence of Moscow's adherence to
the "Camp David spirit."
Nehru is unlikely to take
any further step toward negotia-
tions until he receives Pei-
ping's reply to his proposal of
16 November calling for Chinese
evacuation of Longju outpost in
Assam and withdrawal of both
Chinese and Indian troops from
border areas claimed by either
side in the Ladakh region of
Kashmir.
The Chinese Communists also
have indicated some concern that
the border dispute might lead to
a shift in New Delhi's foreign
policy. Peiping has repeatedly
expressed its willingness to
negotiate but has been unwilling
to make prior concessions to
India. The Chinese would like
to have strong Soviet support
for their position although they
realize Moscow has policy inter-
ests which dictate a different
approach to New Delhi. If Mos-
cow cannot give public support,
however, the Chinese probably
would prefer that it be less
diligent in expressing its
neutrality.
Peiping, which has not yet
replied to Nehru's letter of 16
November, has sought to contrast
Chinese "reasonableness" with
Indian "intransigence" by highly
slanted press reporting. The
Chinese, however, have avoided
any comments which could be in- 25X1
terpreted as official criticism
of Nehru or New Delhi
Iraq
After two months in the
hospital, Qasim returned on 3
December to his office in the
Defense Ministry where residen-
tial quarters had been prepared
for him. A "great march" was
scheduled for 4 December, and
a special student holiday for
the following day.
Just prior to Qasim's de-
parture, the American Embassy
in Baghdad reported that an un-
easy calm prevailed throughout
Iraq. Qasim's impending de-
parture from the hospital en-
gendered a feeling that some-
thing would "break" very soon.
The first physical clash between
Communists and nationalists in
Baghdad in some weeks occurred
on 28 November.
The Communists have made
two small but potentially im-
portant gains during the past
two weeks. The government has
licensed the Communist-dominated
Federation of Trade Unions,
whose activities were curbed
last August as a consequence of
the general crackdown on
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Communist activity, and the
Communists scored a substan-
tial victory in the Iraqi Stu-
dent Federation elections. In
addition, a new Communist daily
began publishing in Baghdad on
29 November.
The Iraqi economy, mean-
while, is stagnating, and the
already high unemployment is
rising. Because of a restric-
tive import policy and this
year's poor crops, prices have
risen considerably. Peasants
are reported eating next year's
seed grain, which would mean
poor crops again next year.
The highly publicized agrarian
reform program is lagging.
The important development
program also is thoroughly
bogged down because of the lack
of adequate planning and an al-
most total absence of compe-
tent government technicians to
carry it out. Although capital
funds, derived largely from oil
revenues, are available, gov-
ernmental mismanagement is
widespread. Soviet bloc eco-
nomic assistance appears un-
likely to bring about any early
improvement in the country's
economic situation.
In a rambi.Lng speech on
26 November celebrating the
implementation of the Aswan
High Dam project, UAR President
Nasir made a direct attack on
Qasim, the first in several
months. Spicing his comments
with ridicule--particularly with
regard to Qasim's messianic
complex--Nasir charged the Iraqi
leader with disrupting Arab
unity and parroting 'Israel's
Ben-Gurion and former Iraqi
Premier Nuri Said.
Nasir said Qasim's ego had
become so' inflated that he
might next be claiming credit
for nationalizing the Suez Ca-
nal. Referring to a recent
press interview in which the
Iraqi premier disclaimed any
desire to speak of himself, Na-
sir noted that Qasim had never-
theless used the personal pro-
noun more than 30 times.
Nasir also attacked Qasim's
recent statements about the Fer-
tile Crescent scheme--a concept
which would unite Syria with
Iraq rather than with Egypt;
he invited Qasim to "try" send-
ing troops to Syria, claiming
that Iraqi soldiers would re-
fuse any such order.
On 1 December, London and
Cairo announced the resumption
of diplomatic relations at the
charge level. Nasir's long
hesitance to take this step--
reflecting his distrust of Brit-
ish activities in the Arab
world--was probably overcome by
his desire to improve his rela-
tions with the West in general
and, in particular, to ensure
British acquiescence to a World
Bank loan for his Suez Canal
improvement program.
UN military officers at-
tached to the Israeli-Syrian
Mixed Armistice Committee have
expressed concern over the pos-
sibility of renewed incidents
along the Israeli-Syrian bor-
der. They say Israeli officers
have assumed a new "hard line"
since the Israeli elections in
early November. According to
the UN officials, these Israelis
--apparently relatively junior
officers--have said that the
border has been quiet only be-
cause Israel has taken no ac-
tion, but that since this
course has gained nothing,
"other steps" to achieve Is-
raeli aims were being considered.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
There is no other evidence of
belligerent Israeli intentions,
but increased bellicosity on
the part of local Israeli com-
manders--even if unrelated to
any higher policy--would make
clashes more likely.
UN officers are particular-
ly concerned about the effect
on the border situation of re-
cent Israeli irrigation work
involving Jordan River waters
and of recent Israeli over-
flights of Syrian territory.
Since mid-November, four sepa-
-rate overflights have been re-
ported. Some of them may have
been intended to observe Syrian
Army maneuvers which occurred
between 18 and 22 November. The
situation along the Israeli-
Egyptian border is quiet, al-
through UN Emergency Force of-
ficers .,report' 'that 'both
sides' have. increased their
Military strength in the
area.
CUBAN GOVERNMENT CHANGES
The shake-up in high Cuban
Government posts on 26 November
demonstrates Fidel -Castro's'-ap-
parently complete commitment to
extremism in his efforts to re-
make Cuba. He now has rejected
practically all experienced and
moderate advisers. He is re-
sorting increasingly to charges
of persecution of the Cuban
revolution and is continuing
his vicious attacks against
the United States. Ambassador
Bonsai believes this trend is
accompanied by a growing re-
ceptivity to guidance by Com-
munist-oriented elements.
The pro-Communist Ernesto
"Che" Guevara, new head of the
National Bank, now is in a po-
sition to determine the allo-
cation of the foreign exchange,
on which Cuba's economp is
based because of its large sug-
ar sales. He can thus imple-
ment his precept that to
achieve true independence Cuba
must shift the pattern of its
trade away from dependence on
the United States.
Guevara laid the basis
for expanded trade contacts
during a three-month trip last
summer to'nine Afro-Asian coun-
tries and Yugoslavia. Numerous
trade missions he has sent to
Europe have found evident in-
terest in supplying Cuba--par-
ticularly the well-financed
National Agrarian Reform In-
stitute (JNRA)--with credits,
arms, agricultural equipment,
industrial machinery, and tech-
nical assistance. Guevara is
also likely to be instrumental
in implementing Castro's long-
planned nationalization of
private banking in Cuba.
The prime minister relies
heavily for advice on Guevara,
whose economic knowledge is
basically weak and colored by
his concept of the Cuban revo-
lution as a class struggle in
which the government must
"change the economic panorama"
of the country and its social
system.
The new minister of public
works--also a powerful post--is
Captain Osmani Cienfuegos, who
is probably a Communist. He
has served since last March as
director of the Cuban Army's
indoctrination program. The
new "minister for recovery of
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CURRENT INTELLIGENCE WEEKLY SUMMARY
3 December 1959
misappropriated assets," Lt.
Commander Rolando Diaz, is a
naval officer of unknown po-
litical orientation but con-
sidered an opportunist approved
by Raul Castro.
The few remaining moder-
ate officials, including the
ministers of finance and commu-
nications, now are virtually
without influence and almost
certain to be replaced soon.
They are convinced that Cuba
is rapidly headed for economic
collapse and a Communist take-
over. Moderate elements ap-
pear despondent and disorganized
and have made no evident move
toward unity. Despite the po-
litical overtones of the re-
cent successful Catholic con-
gress, the church hierarchy
lacks unity and firm leader- 25X1
ship and is reluctant to take
a stand on internal political
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NUCLEAR TEST CESSATION TALKS
Soviet representatives at
Geneva are seeking to create
the impression of favoring an
early settlement of all remain-
ing issues in the political
talks and are showing a rela-
tively cooperative attitude in
the technical talks on the de-
tection of underground tests.
American delegate Wadsworth
believes that recent Soviet
concessions in agreeing to
American terms of reference and
proposed agenda for the technical
discussions show an increasing
Soviet interest in bringing the
Geneva talks to an early and
successful conclusion. He be-
lieves that in the political
conference the Soviet delega-
tion is seeking to expedite a
settlement of outstanding is-
sues, such as control commis-
sion composition and voting
procedures.
Wadsworth reports that
Soviet delegate Tsarapkin has
told a United Nations official
at Geneva that he would like,
at the Christmas recess, to
take back to the USSR various
"new approaches" on the out-
standing problems.
The Soviet experts at the
technical talks have sought,
since the talks opened on 25
November, to limit the mission
of the experts to reaching con-
clusions on the use of instru-
ment readings at the control
posts and the improvement of
techniques and instrumentation
of a nuclear test detection sys-
tem. They probably hope there-
by to undercut Western insist-
ence on the need to re-evaluate
the effectiveness of the inspec-
tion system as outlined in the
1958 experts' report.
The Soviet experts have,
nevertheless, been willing to
discuss and analyze new US data
on underground test detection
problems, apparently hoping they
can reach early agreement in the
technical talks without alter-
ing the basic conclusion in
1958 that a control system under
a treaty banning all tests is
presently feasible.
At the opening session the
Soviet experts repeated the as-
sertion that Moscow had agreed
to the talks in order to re-
move what
it hoped was the "last
obstacle"
to agreement.
They
indicated
willingness to
study
different
"improvements"
re-
lated to the underground
prob-
lem and said Moscow had
definite
data leading them to believe
that the talks would be success-
ful. They charged that, while
Moscow could accept parts of the
American report on detection and
identification of underground
explosions, it was "too specific."
They expressed readiness to con-
sider all proposals "of princi-
ple" concerning the detection
and identification of seismic
events, and to recommend the
"best of them" for adoption.
On 27 November the Soviet
experts belittled the quality
and completeness of the data sub-
mitted by the United States.
They presented a report evalu-
ating the new data in terms of
both US records and data from
Soviet stations, concluding with
an even lower estimate than that
in the 1958 experts' report of
the number of earthquakes which
could be confused with the kind
of nuclear explosions on which
the US information was based.
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CURRENT INTELLIGENCE WEEKLY SUMARY
3 December 1959
Soviet tactics in both the
political and technical talks
suggest that Khrushchev has
instructed his representatives
in Geneva to make a concerted
effort to press the negotiations
to a decisive stage. The USSR
apparently hopes to focus the
negotiations on obtaining
United States agreement in
principle to the concept of a
predetermined number of on-site
inspections of suspected nuclear
explosions in any given year.
SOVIET SECURITY CHIEF RESHUFFLES TOP STAFF
The top central and re-
gional command of the Soviet
Committee of State Security
(KGB) is undergoing a broad
reorganization at the hands
of Aleksandr Shelepin, who
replaced Ivan Serov as
security chief nearly a year
ago. The appointment of a
new KGB head in the Lithuanian
Republic on 23 November brings
to six the number of regional
changes effected since the
first of"September. In ad-
dition to the regional reas-
signments, two new deputy chair-
men have recently been
identified'in'the'central or-
ganization, suggesting that
Shelepin is intent on a union-
wide reshuffle of key posts in
the apparatus.
The six republics in which
new security chiefs have been
appointed during the past
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in by
Khrushchev may hope that
a treaty, complete except for
agreement on the actual number
of annual inspections, can be
prepared in time to be pre-
sented for final decision and
approval at the summit meeting
next spring. He has consistent-
ly argued that the determination
of the actual figure should be
a "high-level political" deci-
sion. (Concurred 25X1
three months are Azerbaydzhan,
Moldavia, Turkmenistan,
Kazakhstan, Lithuania, and
Belorussia. The officials re-
placed had all held their security
positions at least three years,
and several of them have been
3 1S
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CURRENT INTELLIGENCE WEEKLY Y
3 December 1959
in place since the creation of
the KGB in 1954. In some in-
stances their replacements are
veteran, security officials who
have been sent out from impor-
tant posts in the KGB apparatus
in Moscow.
The new KGB chief in Ka-
zakhstan is Konstantin Lunev,
who had been first deputy
chairman of the central organi-
zation since at least January
1955. Since his transfer, two
new deputy chairmen--Pavel
Ivashutin and'.Vadim Tikhunov
have been. identified in the
Soviet press. Tikhunov, long
associated with Shelepin in
Komsomol and party work, gives
every sign of being the hand-
picked appointee of the KGB
chief. Thus, while particular
regional problems such as localism
may have influenced the series of
KGB changes, Shelepin;appears in- 25X1
creasingly to have._.taken the? op-
portunity to put his own candi-
dates in key posts.
Recent changes in assign-
ments of top Soviet leaders
are probably symptomatic of po-
litical jockeying among Khru-
shchev's lieutenants. The po-
litical maneuvering is not be-
lieved directed in any way
against Khrushchev, whose
leadership remains firmly es-
tablished; on the contrary, the
Soviet premier could be playing
Stalin's old game of encourag-
ing rivalries and playing one
lieutenant off against another.
Further changes can be expected,
possibly at the central com-
mittee plenum scheduled for 22
December.
Yan Kalnberzin was suc-
ceeded as Latvian first secre-
tary on 24 November by Arvid
Pelshe, who had been a close
associate of the veteran party
boss for the past 19 years as
Latvian party secretary with
responsibilities in the propa-
ganda, education, and cultural
fields. The Latvian Supreme
Soviet on 27 November "elected"
Kalnberzin president of the re-
public, a post devoid of po-
litical significance. At the
same time, republic Premier
Vilis Latsis was retired "be-
cause of illness" and was suc-
ceeded by Yan Peyve, president
of the Latvian Academy of
Sciences.
These shifts, which amount
to a complete shuffle of the
KHRUSHCHEV'S AIDES
Latvian Republic leadership, are
similar to the shake-ups that
have taken place in other repub-
lics during the past year, and
the underlying reason may there-
fore be similar--failure to pro-
vide vigorous leadership, par-
ticularly in coping with na-
tionalist sentiments and localist
tendencies. So far, however,
neither Kalnberzin nor Latsis
has been criticized, and the So-
viet press reported that they
were replaced at their own re-
quest.
The party faithful, however,
will interpret Kalnberzin's trans-
fer as a demotion, or at least
semiretirement. On the other
hand, his reputation for faith-
ful service has not been sullied,
and he may be held in somewhat
the same light as Voroshilov--a
respected "old Bolshevik" who is
largely without influence or
power. Whether or not Kalnberzin
will remain a candidate member of
the party presidium remains to be
seen. Nikolay was released on
26 November from the job of presi-
dent of the RSFSR, a post to which
he had been assigned last April.
Party Secretary Petr Pospelov
told the RSFSR Supreme Soviet that
the all-union central committee
had found it necessary to recall
Ignatov to "his main work" in the
party secretariat.
On 16 April 1959, when
party secretary Averky Aristov
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CURRENT INTELLIGENCE WEEKLY SUMMARY
"proposed" Ignatov for the
RSFSR post, Aristov stated that
the party central committee,
considering the great tasks
which the RSFSR Supreme Soviet
was called on to perform, had
decided that it was "necessary
for the RSFSR Supreme Soviet
to be headed by a member of the
party presidium." Nothing hap-
pened during Ignatov's tenure,
however, to indicate any in-
crease in importance of the
RSFSR job, and now, seven months
later, the "party presidium
member" has been replaced with
a lesser light--Nikolay Organov,
who had been serving as deputy
premier of the republic.
Aristov's April statement
was patently a bit of sugar-
coating to make Ignatov's as-
signment to such a politically
insignificant post appear im-
portant. The real object could
have been to weaken Ignatov's
political position by transfer-
ring him away from the party
secretariat. As it turned out,
however, the maneuver was only
partially successful, for Igna':ov
managed to stay on the secre-
tariat and retain some of his
former responsibilities in the
field of supervision over agri-
culture while performing the
ceremonial functions of the new
post.
On the face of it, the ac-
tion taken last April has now 25X1
been reversed. Ignatov has made
a comeback and may seek venge-
ance.
CZECH PARTY PREPARING TO SPEED "TRANSITION TO COMMUNISM"
The USSR proclaimed At the
21st party congress in January
1959 that it had completed the
"building of socialism" and had
begun the "building of Commu-
nism." The Czech regime is
hoping to claim this same stage
of development by early 1961.
Recent publication of a Septem-
ber speech by party First Sec-
retary Novotny to the central
committee revealed that changes
in the structure of the party
and government will be necessary
to accomplish the program of
"completing socialism." Novotny
recommended that these changes
be completed prior to the na-
tional elections in late 1960.
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CURRENT INTELLIGENCE WEEKLY SVMMASY
3 December 1959
A new constitution is to
be written that apparently will
provide for collective leader-
ship and a one-party system
similar to that adopted by Mos-
cow in 1936. This is now con-
sidered a prerequisite to pro-
motion from the stage of a peo-
ple's democracy which is "build-
ing socialism" to a socialist
nation "building Communism."
The new constitution will re-
place one which, although writ-
Region (Kraje) boundary
District (Okras) boundary
ten by Communists in 1948, re-
tained some trappings of West-
ern democracy; e.g., the office
of president of the republic,
guarantees for private enter-
prise, and a national-front sys-
tem which allows various non-
Communist political parties to
be represented in the National
Assembly.
The system of lower courts
is to be superseded in large
CZECHOSLOVAK ADMINISTRATIVE REFORM OF GOVERNMENT AND PARTY
PRESENT REFORM
NATIONAL ASSEMBLY
COUNCIL OF MINISTERS
SLOVAK BOARD OF
COMMISSIONERS
DISTRICTS
fOKRE;I
93
REGIONS
13
DISTRICTS
213
COMMUNITY U COMMUNITY
i OBEG 15,000
CENTRAL COMMITTEE
POLITBURO
SLOVAK
CC
REGIONS
6
DISTRICTS
93
REGIONS
13
DISTRICTS
213
COMMUNITY U COMMUNITY
15,000
NATIONAL ASSEMBLY'
COUNCIL OF MINISTERS
SLOVAK BOARD OF
COMMISSIONERS
SECRET
PART II NOTES AND COMMENTS
EXISTING ADMINISTRATIVE DIVISIONS
0 so"
s AMIF
OF CZECHOSLOVAKIA
3 December 1959
CENTRAL COMMITTEE
POLITBURO
SLOVAK
C I & MBMYEA
TERRITORIES
3
DISTRICTS
46'
TERRITORIES
505 7
DISTRICTS
106
COMMUNITY Lf COMMUNITY
15,000
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CURRENT INTELLIGENCE WEEKLY SUMMARY
3 December 1959
measure by "comrades' courts,"
where regime-appointed "workers"
will sit in judgment'over their
colleagues at open trials in
the factories and on the farms.
This system is designed to in-
still in the workers a fear of
censure by their own associates
for any deviation from the es-
tablished regime discipline.
It may also permit the Czech
regime to reduce somewhat the
constant secret police super-
vision of the general popula-
tion. In this respect Czech-
oslovakia is far behind other
bloc countries in making the
secret police a less ostenta-
tious feature of everyday life.
Novotny proposed a reduc-
tion in the number of internal
political divisions. The 19
regions are to be cut down to
8 or 10 territories, and the
306 districts are to be cut to
approximately half that number.
As the party structure will
continue to parallel that of
the government, a reduction will
take place in the number of
party units, a process which will
enable Novotny to weed out the
overgrown party bureaucracy.
The regime, which has already
admitted some opposition to
these moves, has warned that
no localism or traditionalism
will be tolerated.
Novotny's innovations will
not affect the economy drastical-
ly. The Soviet system of sov-
narkhozes will not be copied
because it is not adaptable to
smaller nations. However, col-
lective farms, now averaging
some 900 acres, will be merged
to form 2,471-acre units.
Novotny has taken a unique
step in Eastern Europe by im-
plying that his nation has ad-
vanced to second place after
the Soviet Union in the race
toward Communism. Although it
previously had been accepted
that the various people's democ-
racies would "complete social-
ism" simultaneously in 1965,
a prominent worker in the Czech
party Institute of History
hinted on 25 October that this
,could occur at different times.
Bulgaria, which has rivaled
Czechoslovakia over the past
year in claims to advanced
status in "building socialism,"
has not been as explicit as
Czechoslovakia as to when it
hopes to begin the "transition
to Communism," but has stated
that the "prerequisites" for .
this will be established by the
end of 1961.
Many Czech leaders have at-
tributed their success to the
highly developed industrial
nature of the country at the
time the Communists tboh over,
and they offer Czechoslovakia
as an example of how Communism
can succeed in improving an al-
tion.
ready advanced industrial na-
MIKOYAN'S TRIP TO MEXICO
The recent ten-day visit
to Mexico of Soviet First Deputy
Premier Mikoyan--for the an-
nounced purpose of opening the
Soviet scientific, technologi-
cal and cultural exhibition in
Mexico City on 22 November--
underlines the increased impor-
tance Moscow attaches to its
efforts at political and eco-
nomic penetration in Latin
America. Moscow probably es-
timates it can take advantage
of anti-US sentiment existing
in Latin America and is con-
fident these nations will find
it increasingly difficult in
this period of "thaw" to con-
tinue policies of opposition
to increased economic, political,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
3 December 1959
and cultural relations with
the bloc.
In his meetings with prom-
inent Mexican officials, busi-
nessmen, and industrialists,
Mikoyan--the highest ranking
Soviet official ever to visit
Latin America--carried forward
.the current Soviet campaign
for "peaceful coexistence" and
"peaceful competition." When
addressing industrial and farm
workers, however, Mikoyan at-
tacked colonialism and imperial-
ism--at times referring specif-
ically to US activities in
Latin America. He expressed
Soviet support for the Cuban
revolution and attempted to
identify the USSR with the
struggle of peoples everywhere
for independence.
Mikoyan apparently was
more bent on impressing his
Latin American audiences with
the strength and achievements
of the USSR, its peaceful aims,
and the desirability of friend-
ly relations than with con-
cluding any specific trade
agreements. He is reliably re-
ported, however, to have dis-
cussed with Mexican officials
a $100,000,000 credit for eco-
nomic development as part of
the Soviet plan to establish a
successful economic program in
at least one Latin American
country as an example for
others.
Mexican officials considered
the aid proposal merely a repe-
tition in slightly more specif-
ic terms of previously rejected
Soviet offers and are unlikely
to be more receptive now than
in the past. Although the pro-
posal reportedly is "firm and
official," no details have been
revealed.
During the first week
the visit received twice as much
attention on Radio Moscow as did
the first week of Mikoyan's trip
to the United States last Janu-
ary. Reminiscent of the early
Soviet propaganda treatment of
Khrushchev's US trip, commen-
tators told the Soviet people
that Mikoyan's reception in
Mexico was "warm" and "enthusi-
astic" and made no mention of
Mexican press criticism or anti-
Soviet demonstrations at the
exhibition.
Most Mexican Government
officials exhibited a cool but
correct attitude toward Mikoyan.
Mexican press comment on the
trip, however, has been pre-
dominantly critical, particular-
ly of Mikoyan's attabks on the
United States. The government-
oriented daily Excelsior took
the lead in criticizing-the
propagandistic nature both of
Mikoyan's public speeches and of
the Soviet exhibition. On 19 No-
vember, in line with its recent
efforts to play a more important
role on the international scene
and probably to avoid the appear-
ance of too close dependence on
the US, the Mexican Government
announced that President Adolfo
Lopez Mateos has accepted "in
principle" an invitation to visit
the USSR extended by Mikoyan. No
date for the visit has been set.
25X1
CHINESE LEADERS MAY BE IN SECRET SESSION
The absence from Peiping
of many of Communist China's
top leaders suggests that a
high-level party meeting is in
progress or may be imminent.
Mao Tse-tung and his first dep-
uty, Liu Shao-chi, have been
away from the capital since
late October and may have been
joined in November by Premier
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Chou En-lai and other polit-
buro members.
A high-level party meet-
ing at this time would probably
be concerned with an evaluation
of developments following Pei-
ping's admission of serious
economic shortcomings last
summer. Plans for a new "leap
forward" in 1960 and the dis-
position of "right opportunist"
critics are likely agenda top-
ics. The absence of the for-
eign minister from Peiping sug-
gests that foreign policy mat-
ters may also come up for con-
sideration, including Peiping's
deteriorating relations with
India and Indonesia, Sino-So-
viet relations, and the Taiwan
and Laotian situations.
Mao Tse-tung's last ap-
pearance in Peiping--where he
had spent the previous six
weeks--was on 22 October. On
23 and 24 October he reported-
ly visited Tientsin, and on 25
and 26 October he received, re-
spectively, Brazilian and Aus-
tralian Communist party leaders
in Tsinan, capital of Shangtung
Province. Sometime late in Oc-
tober he inspected two areas of
Anhwei Province. He may also
have visited Shanghai then.
Liu Shao-chi has also been
away from Peiping since late
October and probably joined
Mao in East China. A foreign
visitor to Peiping was told by
Chinese authorities that Mao
and Liu were together on a gen-
eral inspection tour to see
that "directives were being
carried out." The foreigner
was further told that they were
both in Kunming in southwest
China, a location which does
not fit in with other known
points on their junket but
which may have been visited
as a side trip.
Mao's present tour of
East China is his fourth in-
spection trip this year. His
tours in the past often for-
shadowed conclaves of regional
and national leaders. Last sum-
mer, following a tour of the
provinces, he convened the
eighth central committee plenum
at Lushan which revised economic
targets sharply downward.
Several other developments
also suggest that a conference
of party leaders in Hangchow or
Shanghai has been or still is
in session. Members of the par-
ty politburo have been absent
from Peiping for the past sev-
eral weeks. Premier Chou En-lai
may have joined the meeting after
17 November, and Foreign Minister
Chen Yi, who was last reported
in Chengtu on 7 November,
probably also attended. In ad-
dition, American officials in
Hong Kong have noted that pro-
vincial party first secretaries,
who generally were at their
posts early in November, have
made no, recent - appearances and may
also have been present at the meeting.
The pattern of Chinese Com-
munist conferences in recent
years suggests that a national
party conclave can be expected
before the end of the year. The
meeting may take the form of a
central committee plenum, although
a session of the party congress-- 25X1
which last met in May 1958 and is
supposed to hold annual sessions
--is also a possibility.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
3 December 1959
PEIPING'S TENTH ANNIVERSARY MILITARY REVIEW
Unlike most recent Soviet
and European satellite cele-
brations, Communist China ex-
hibited considerab&e military
equipment in a review held dur-
ing its tenth anniversary cele-
bration on 1 October; the mili-
tary part of the review equaled
that of last year, and military
formations led the parade. Re-
cently received photographs
show military equipment not
previously identified in Com-
munist China, including tanks,
artillery pieces, and jet air-
craft.
The parade was led by ca-
dets from military academies,
followed by personnel from mili-
tary training schools, the rail-
way corps, the navy, and the
infantry, motorized and para-
troop units in trucks, 144
pieces of artillery drawn by
trucks and tractors, a mobile
searchlight and antiaircraft
unit, and a large number of
tanks and assault guns.
Two pieces of artillery
were new to the annual parade--
the 130-mm. field gun (M-46)
and the 152-mm. howitzer (M-38).
The 130-mm. gun had not hither-
to been observed outside the
Soviet Union. According to a
Chinese account, some of the
larger Artillery pieces were
made in China.
Ninety-nine Soviet T-54
medium tanks, likewise said to
have been of native manufacture,
were seen for the first time
in China. These took the place
of the T-34 medium tanks shown
last year. In the latter por-
tion of the parade, 8,000 men
of the Capital Militia Division
marched by. The militia were
not in uniform but carried
rifles, automatic rifles, ma-
chine guns, and rocket launch-
ers. Observers noted that the
militia appeared to be more im-
pressive and businesslike than
previously.
Possibly the most signif-
icant piece of equipment shown
was the Farmer (MIG-19) super-
sonic jet fighter, which par-
ticipated in a 155-aircraft
fly-by that coincided with the
ground force parade.
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Some of the Farmers may
also have been of native manu-
facture. People's Daily stated
on 2 October na t "hew, faster-
than sound jet interceptors
manufactured by our country"
participated in the review.
BLOC ECONOMIC AID NEGOTIATIONS WITH ETHIOPIA
Two bloc economic missions,
one Soviet and the other Czech,
arrived in Addis Ababa early
last month to discuss the use
of credits accepted by Emperor
Haile Selassie during his vis-
its to Moscow and Prague last
summer. While the bloc appar-
ently is eager to set up an
economic aid program in Ethi-
opia, the primitive stage of
the local economy presumably
will make extensive surveys
necessary before any signifi-
cant projects can be under-
taken. It is more probable,
therefore, that the bloc will
tend to concentrate initially
on projects which can be im-
plemented easily and which have
inherent propaganda potential,
such as construction of medi-
cal and educational facilities.
In addition to agricul-
tural aid and light industrial
projects, including a pharma-
ceutical plant, the Soviet eco-
nomic delegation apparently is
investigating possibilities
for Soviet aid in mining and
reportedly offered to con-
struct an oil refinery at As-
sab. The delegation presum-
ably will also draw up plans
for constructing a secondary
school and supplying medical
equipment for a hospital--
gifts which the USSR promised
the Emperor last summer.
The Soviet nine-man dele-
gation now in Ethiopia is also
exploring possibilities for
assisting Ethiopia's agricul-
tural development program.
The Soviet Union, having offered
to participate in the Emperor's
new, ambitious "land reform"
program, probably will provide
both technical assistance and
modern agricultural equipment.
Haile Selassie, who has
long sought to modernize agri-
culture in Ethiopia and thereby
increase the living standard of
his 16,000,000 subjects, first
announced the "land reform" pro-
gram in late August following
his return from the bloc. The
program, still in the formula-
tion stage, would make available
50,000,000 acres of government-
owned land on both a cooperative
and an individual settlement
basis. Four to six "coopera-
tives" of 200 families each are
to be established in the Awash
Valley, and individual farmers
are to settle on 40- to 50-acre
tracts in the south. The Emperor
apparently believes that early
implementation of a land reform
program is necessary in order
to expand agricultural exports
sufficiently to reverse Ethio-
pia's deteriorating financial
situation.
Judging from the make-up of
the 21-man Czech economic mis-
sion, Prague may offer a wider
variety of projects, although
they will probably be less ex-
pensive than those of the Soviet
Union. In keeping with its past
performances in the field of eco-
nomic aid, Czechoslovakia pre-
sumably will concentrate on light
industrial projects for which
Ethiopia has a great need. After
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CURRENT INTELLIGENCE WEEKLY SUMMARY
exploratory talks with Ethio-
pian officials and initial
surveys, Prague. probably will
offer a formal credit--presum-
ably about $20,000,000--based
on the estimated costs of the
projects planned.
The Czech delegation in-
cludes experts in the fields
of medicine and education, sug-
gesting Prague, too, intends to
offer to build both medical
and educational facilities.
Nigeria's general parlia-
mentary election on 12 December
will determine the make-up of
the federal government which
will probably be in power when
this most populous of African
countries becomes independent
next October. The election is
regarded as crucial by Nigeria's
tribally based three major par-
ties--the Northern People's
Congress (NPC), the National
Council of Nigeria and the
Cameroons (NCNC), and the Ac-
tion Group (AG)--which, re-
spectively, control the federa-
tion's self-govern-
ing Northern, East-
ern, and Western Re-
gions.
Especially con-
cerned about the out-
come, however, are
the traditional Mos-
lem rulers of the
north, who fear dom-
ination by the more
advanced Christian
and pagan tribesmen
of the south. Led
by Sir Ahmadu Bello,
the Sardauna of Soko-
to and premier of the
Northern Region, these
rulers and their ad-
herents can be ex-
pected to react vio-
Bloc credits are attractive
to Ethiopia because of the favor-
able repayment terms. The Soviet
credit, reportedly to be repaid
at, 2.5-percent interest over a 17-
year period, apparently will be
repaid, at least partially, in
Ethiopian commodities--primarily
agricultural products. Addis
Ababa, for its part, hopes that
bloc economic aid will in turn 25X1
encourage the extension of addi-
tional Western aid to Ethiopia.
(Prepared by ORR)
lently and might even try to
secede should their NPC fail to
secure a controlling voice in
the new regime to be installed
in Lagos early in January.
Although provision has been
made for the new federal House
of Representatives to have 320
members--an increase of 130 over
the former partially appointed
House--only 312 seats are being
contested in the present increas-
ingly explosive campaign. The
remaining eight seats, allocated
to the Southern Cameroons Trust
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Territory, will remain vacant
until the future of that area
is determined, probably in
early 1961.
The Northern Region--which
encompasses about two thirds of
Nigeria's total area and in-
cludes slightly more than half
the total population, estimated
at 35,000,000--has been al-
lotted 174 seats. The Eastern
and Western Regions received 73
and 62 seats, respectively, and
the federal district of Lagos
three.
American observers in Ni-
geria expect that the ballot-
ing will result in an almost
even, three-way division of seats
among the three major parties
and their minor party allies.
Forecasting is generally con-
ceded to be more than normally
hazardous in this instance,
however, since it is Nigeria's
first federal election in which
the entire legislature will be
directly elected on the basis
of universal male--and in the
two southern regions also female
--suffrage.
In any event, intense trib-
al and regional loyalties and
the personal popularity of major
party leaders--especially the
NCNC's flamboyant, US-educated
Azikiwe and the AG's North-bait-
ing Awolowo--and certain local
candidates will be the most in-
fluential factors in determining
the outcome. Intimidation and
harassment of opposition ele-
ments may also play a signifi-
cant role, particularly in the
north. There the traditional
rulers, pressed by parties al-
lied with NCNC or AG, are not
subject to the same legal re-
straints with respect to con-
trol over local police as are
the southern governments.
PRE-ELECTION TENSION IN BELGIAN CONGO
Political tension is mount-
ing in the Belgian Congo, with
two major groups still planning
to boycott local elections
scheduled by Brussels for early
and mid-December. The ballot-
ing for communal and territori-
al councilors--the first colony-
wide elections held in the Con-
go--a .visioned by Brussels
as a first step toward increased
Congolese autonomy leading to
independence in about four
years. Nationalist groups, how-
ever, demand "immediate" inde-
pendence and have threatened
to boycott the elections unless
they are preceded by round-table
talks with Belgian authorities
concerning the Congo's future.
In a last-minute attempt
to develop a formula for Congo-
lese participation, leaders of
the Abako and National Congo
Movement (MNC) parties, which
oppose the election, left for
Brussels on 2 December for fur-
ther talks with Belgian offi-
cials. At present only one of
the three major Congolese group-
ings--the Party of National
Progress--has indicated that it
will participate in the elec-
tions. Reports from Leopoldville
indicate that the Abako is split
on the issue, however, and the
absence of united backing may
make party leader Joseph Kasavubu
receptive to a compromise pro-
posal.
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CURRENT iNTELL1ltENCE WEEKLY SUMMARY
The over-all political sit- balloting supervis by mobile
uation in the Congo is marked-by-j- election teams.
a profusion of small, trioal-
oriented parties and by a lack
of responsible African leader-
ship. Infiammatot y .u, W i-election
oratory at an MNC convention in
late October set off riots which
cost over 25 lives.
Barring a
last-minute comprom se between
the Belgians and the national-
ists, the elections may be ac-
companied by new violence. They
are expected to begin on 5 De-
cember in rural areas with the
In Brussels, political ma-
neuvering continues to ban pe-r.,.e
Schrijver's attempts to restore
a common front on the Congo.
The opposition Socialist party
has withheld support of the gov-
ernment's policies, while leav-
ing the door open for a future
accommodation. The Socialists
have supported Congolese demands
for a round-table conference
but without specifying the tim-
ing in relation to the December
elections. The American Embassy
observes that the Socialists are
themselves divided on Congo pol- 25X1
icy, with an important element
wanting the party to support the
government position.
No apparent progress has
been made in breaking the im-
passe within the Laotian Govern-
ment over whether to extend the
mandate of the present National
Assembly, due to end on 25 De-
cember, and when to hold elec-
tions for a new assembly. Pre-
mier Phoui continues to press
for a one-year extension of the
assembly, with elections in De-
cember 1960. The King, the re-
formist Committee for Defense of
National Interests (CDNI), and
influential elements in the ar--
my, with varying degrees of
firmness, favor letting the as-
sembly expire and holding elec-
tions shortly.
At stake in this dispute is
the balance of power within the
government between conservative
elements, led by Phoui, and the
CDNI, which has strong army sup-
port and is viewed with great
favor by King Savang. Phoui's
main base of power is the dom-
inant conservative element in
the assembly. The premier prob-
ably fears that if the assembly
were allowed to lapse he would
be reduced to the role of a fig-
urehead even if retained as pre-
mier in any reconstituted govern-
ment. The CDNI, on the other
hand, probably calculates that
with the assembly dissolved it
could gain more posts in the
cabinet and a greater voice in
determining the complexion of
a new assembly returned in pos-
sibly army-controlled elections
in the spring or summer of 1960.
Phoui, possibly feeling
that his implied threat to re-
sign is sufficient to whip his
opponents into line, is proceed-
ing with the preliminary steps
necessary to extend the legis-
lature's mandate. The CDNI, 25X1
however, gives no sign of aban-
doning its opposition to his
plans.
Although there is a con-
tinuing possibility that the
CONI may be tempted to assume,
with army help, full control
of the government, a compromise
is more likely to be reached.
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JAPANESE SOCIALISTS HURT BY VIOLENT TACTICS
The violence which accom-
panied leftist-led demonstra-
tions opposing the US-Japan Se-
curity Treaty near the Japanese
Diet on 27 November has resilted
in widespread public criticism
and is having an adverse effect
on the Japanese Socialist party.
The party leadership has been
put on the defensive because of
its major role in the demonstra-
tions and is reappraising its
program for opposing the treaty,
which is undergoing revision.
Socialist efforts to pin
the blame for the riot on the
pro-Communist student organiza-
tion, Zengakuren, and to claim
that the police, on orders of
the ruling Liberal-Democratic
party, provoked the incident
have been discounted by the
press and public. A top Social-
ist official has indicated that
the party might have to fall
back on propaganda as its main
weapon in its campaign against
the security treaty.
The Socialists probably
will be less enthusiastic for
the next demonstration, sched-
uled for 10 December to coincide
with the party's introduction
into the Diet of a resolution
against the treaty. There have
been no indications, however,
that the demonstration will be
abandoned.
The government has acted
quickly to utilize in its
protracted effort to curb left-
ist excesses the popular criti-
cism aroused by the demonstra-
tions. It is preparing legis-
lation which would ban demon-
strations in the vicinity of
the Diet and court buildings--
a move which will be strongly
opposed by the Socialists. A
top government party official
has stated that his party will
pass the measure despite any
action undertaken by the oppo-
sition.'
While there is strong
public opposition to any in-
creased police powers, the gov-
ernment does appear to have a
favorable opportunity to achieve
some limitation on leftist ac-
tivities, provided it avoids
overemphasis on the repression
of demonstrations and is not
too arbitrary in forcing legis-
lation through the Diet.
Japanese bases.
The Activities of the So-
cialists and other extreme left-
ists in opposing the security
treaty have suffered from the
lack of an issue which would
inflame popular opinion against
it. The Socialists, however,
will continue to maintain pres-
sure on the government in the
hope of finding an unpopular
issue, such as the introduction
of nuclear weapons into Japan
or the possibility for involun-
tary Japanese involvement in
hostilities through the deploy-
ment of American troops from
THE PANAMANIAN SITUATION
Anti-US feeling, recently
described by long-time US resi-
dents of Panama as stronger than
at any time within memory, remains
high following renewed mob dem-
onstrations in the capital on
28 November against the Canal
Zone and US installations. The
effective role played by the
National Guard in dispersing
demonstrators is being criti-
cized by opposition politicians
in an effort to weaken the De
la Guardia administration before
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CURRENT INTELLIGENCE WEEKLY -S-DNKARY
the May 1960 presidential elec-
tion. All political factions
are expected to continue press-
ing for additional canal bene-
fits, especially the right to
fly the Panamanian flag in the
Canal Zone.
A small number of Commu-
nists, extreme nationalists,
and several Cuban newsmen ap-
pear to have been responsible
for instigating several hundred
Panamanians to stage a three-
hour outburst of anti-American
violence on 28 November follow-
ing a large, relatively orderly
"reaffirmation of sovereignty"
rally. The failure of the out-
burst to achieve the serious
proportions previously predicted
can be attributed to an easing
of tension following the recent
mission of Under Secretary Mer-
chant to Panama, to strong pleas
for peace and order by President
de la Guardia and several civic
organizations, and particularly
to the determination of the
National Guard to back up the
President's peace plea.
In contrast to its inac-
tivity on 3 and 4 November, the
National Guard made every ef-
fort to control the situation
and proved to be effective.
The vigorous guard action on
28 November may have been in-
spired by reports that the anti-
US demonstration would be turned.
into a general revolt against
the regime.
Further anti-US agitation
and disturbances may result from
continued Panamanian demands
for more economic and political
concessions in the Canal Zone
during the months preceding the
May 1960 presidential election.
PERU AND CHILE PROPOSE ARMS LIMITATION
Official Peruvian and Chil-
ean suggestions for a South
American conference on arms
limitation to reduce defense
spending in favor of increased
economic development funds have
interested the governments of
Ecuador and Colombia. Political
leaders of all four countries
seem conscious that any large
military purchases could wipe
out the recent improvement in
their foreign exchange balances.
The scheduled area-wide discus-
sion--in accordance with an
Ecuadoran suggestion--at the
Inter-American Conference in
Quito next February is likely
to be influenced by the pre-
liminary negotiations initiated
by Peru on 27 November.
The disclosure--which seems
imminent--of the Peruvian naval
minister's purchase in late No-
vember of a second British
cruiser would probably disrupt
the proposed cooperation, how-
ever, unless the purchase is
canceled by Peru's prime minis-
ter, who is publicly committed
to the disarmament move.
Public opinion in both
Chile and Peru strongly favors
arms limitation.. The issue
was raised by Peru's purchase
last October of a British cruis-
er, which greatly alarmed the
Chileans and led President
Ales~sandri to warn the American
ambassador in Quito that the
Peruvian action was the latest
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CURRENT INTELLIGENCE WEEKLY iS1 MARY
3 December 1959
FOREIGN EXCHANGE POSITIONS
MILITARY EXPENDITURES
(% of total proposed budgets-1959)
December 1958
90 Latest available data
,step in a "destructive Latin
American arms race." He re-
called his suggestion of a year
ago that the United States
should refuse to sell arms to
Latin American nations and
should withhold economic aid
from those that bought else
where. His public statement
in late November condemning
arms purchases by underdeveloped
countries probably made the best
impression on Chilean public
opinion of any of his official
acts.
This view also
prevailed in Peru,
where public opinion
pressures enabled the
Peruvian prime minis-
ter to get the three
armed forces minis-
ters to agree to the
move toward arms lim-
itation.
In addition to
the Peruvian purchase,
Argentina and Brazil
had each bought a car-
rier from the United
Kingdom, notwithstand-
ing the difficult eco-
nomic conditions in
all three countries.
Many Latin American
countries spend about
one fifth of their 25X1
total budgets for de-
fense, although most
of the area's polit-
ical leaders appear
to believe that the
peace machinery of
the Organization of
American States is
an effective protec-
tionagainst aggres-
sion. Most civilian
Latin American gov-
ernments fear that
consistent refusal
of military requests
for new arms would
invite a military
coup, particularly if armed
forces in neighboring states
were growing in relative
strength.
The four West Coast govern-
ments are among the most conserv-
ative in Latin America, and their
interest in diverting defense
expenditures to economic devel-
opment projects no doubt arises
in part from their reluctance
to join the more leftist Latin
American governments in looking
to the Soviet bloc for economic
aid.
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3 December 1959
Several compromises af-
fecting the future political
and commercial orientation of
the European Economic Commu
pity (EEC) were reached by the
EEC foreign ministers who met
in Strasbourg in late November.
The ministers agreed to
proceed with the organization
of periodic political consulta-
tions, long advocated by the
French and Italians. Reflect-
ing suspicions primarily on the
part of the Benelux countries
that the proposed talks might
become a vehicle for a French-
dominated Continental political
bloc within NATO, it was de-
cided that no permanent polit-
ical secretariat would be set
up and that the consultations
would be rotated among the cap-
itals of the six member coun-
tries. The first of the quarter-
ly foreign ministers' meetings
is scheduled for 25 January in
' Rome .
A similar compromise of
French and Benelux views was
also reached on EEC tariff and
quota changes scheduled for
1960. In effect, it was agreed
that the intra-EEC commodity
quota enlargements due in
January would be extended to
nonmember countries, that the
internal tariff cuts due in
July might be extended to other
"most-favored" nations, and
that contact would be estab-
lished with other European
countries--primarily the mem-
bers of the Outer Seven--to
discuss trade problems.
This three-part policy,
together with a renewed dec-
laration of intent to negotiate
in the GATT a reduction in the
EEC's common external tariff,
is substantially the program
proposed by EEC President Hall-
stein. By leaving the July
tariff generalization on a
discretionary basis, however,
the ministers in effect gave
in to French complaints that
across-the-board generaliza-
tion would involve a "speed-
up" of the Common Market for
France, but not for the other
members.
Despite this concession
to Paris, EEC sources believe
the proposed acceleration of
the development of the Common
Market as a whole is by no
means dead. According to them,
some compromise between the
French and Benelux positions
can perhaps be worked out--
possibly Benelux agreement
to earlier institution of the
Common EEC tariff, provided
the French agree to a 10-percent
reduction in the target rates.
Although generally liberal
in nature, the ministerial de-
cisions leave largely unresolved
the difficult question of re-
lations between the Common
Market and the Outer Seven.
On this issue, there is ap-
parently increasing disposition
to await some clarification of
American views. Indicative
possibly of a desire to solve
the problem in'an "Atlantic
framework," President Hallstein
declared at a press conference
after the meetings that "prac-
tical policy" would require
that the United States be
brought into any talks between
the Six and the Seven.
The strident pro-German
character of the 'recent Salz-
burg congress of Austria's
Liberal (or Freedom) party,
typical for the past ten years,
both of the Liberal party and
its predecessor, the Union of
Independents, now may be cause
for greater concern than here-
tofore. Since last May's
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CURRENT INTELLIGENCE WEEKLY SNAKY
3 December 1959
national elections, when they
received 7.7 percent of the
vote and won eight seats in
the 165-seat lower house, the
Liberals have shown signs of
slow recovery from the long de-
cline which followed their suc-
cess in winning 16 seats in
1949. They have also shown
some strength in local elec-
tions, and recently claimed
A 25-percent increase in par-
ty membership.
During the Salzburg con-
gress, the party.'s energetic
young leader, Friedrich Peter,
professed loyalty to the Aus-
trian republic as a "homeland,"
but he also declared that "safe-
guarding the German character
of Austria" is a major Liberal
objective. He condemned as
"nonsense" the concept of an
Austrian nation in a country
which "in spirit, mind, and soul
has been German for a thousand
years."
Whether this still-limited
revival of pan-Germanism will
in the future become a menace
to Austrian stability will de-
pend as much on the outlook
for government coalition of the
People's and Socialist parties
as it will on the Liberal or-
ganization itself. In the past,
the Liberals have tended to
attract ultraconservatives from
the People's party, anticleri-
cals from the Socialist, and
ex-Nazis from both--only to be
deprived of real influence on
government policies by the in-
herent strength of the coali-
tion.
If, however, the Liberals
now are succeeding in overcom-
ing their past factionalism,
they may be in a better position
to capitalize... on the weaknesses
which have become apparent in
the coalition--particularly the
disunity in the People's party
and its growing fear of the
Socialists' strength.
In the meantime, there are
several foreign policy issues
which the Liberals may exploit
to their advantage. Untroubled
by the problem of Soviet hostil-
ity toward the European Economic
Community (EEC) or the alleged
danger of increasing West German
economic influence in Austria,
they have come out strongly
for Austrian EEC association.
This is already a popular stand
with Austrian business interests,
and it may become increasingly
so if the European Free Trade
Area (Outer Seven) does not
produce the benefits the govern-
ment has promised.
factory concessions.
The Liberals may be simi-
larly benefited by Austria's
dispute with Italy over the
South Tirol--waiting to press
for more radical measures in th? 25X1
likely event Foreign Minister
Kreisky should fail to win satis-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
PATTERNS AND PERSPECTIVES
EGYPT'S ECONOMY UNDER NASIR
President Nasir's regime
has halted, at least temporari-
ly, the steady deterioration in
Egyptian living standards
which characterized the quar-
ter century preceding the rev-
olution in 1952. This improve-
ment has occurred partly through
a redistribution of income fa-
voring urban workers particu-
larly, through the expenditure
of large amounts of foreign ex-
change reserves, and through a
substantial increase in the na-
tional debt.
There has been a major
shift in investment from the
luxury housing and public works
programs of earlier regimes to
projects which yield returns
quickly. Increases in invest-
ment and in agricultural and
industrial production have been
impressive but not large enough
to assure economic growth at a
rate faster than that of the
population. Thus, despite the
optimistic goals set forth in
Egypt's Second Five-Year Plan
(1960-64), prospects for the
future are not bright. The
Syrian region has separate
long-term economic development
schemes of its own.
Assets and Liabilities
Egypt is extremely poor
in natural resources. Although
it occupies 386,198 square
miles, about 96 percent of the
area is desert. Thus 25,500,000
people are crowded into the
13,900-square-mile Nile Valley,
which is some 900 miles in
length but only from one to 12
miles wide for most of this dis-
tance. Below Cairo the Nile
delta fans out to about 125
miles in width at the Mediter-
ranean coast.
From the 1920s to 1952,
Egyptian living standards had
continually declined, partly
because of the feudal character
of the society, but mostly--
since industry was relatively
unimportant--because of the pop-
ulation pressure on the narrow
and virtually unexpandable agri-
cultural base. The population
now is increasing at a rate of
2.5 percent, by more than 600,-
000 people annually. Although
Egypt's crop yields per acre are
among the highest in the world,
its agriculture is inefficient,
since it employs at near-sub-
sistence levels an agricultural
labor force somewhat larger than
that of the United States.
Further expansion of farm
land can occur only at tremen-
dous cost. The Aswan High Dam
will bring an additional 1,000,-
000 acres into production over
the next 15 years, but the cost
will exceed $1.2 billion. Because
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CURRENT INTELLIGENCE WEEKLY SUMMARY
3 December 1959
of the population increase, the
High Dam's addition to the
6,383,700 acres now irrigated
will not prevent the amount of
farm land per capita from de-
clining even further.
Aside from modest petro-
leum reserves and some iron
ore, the country is virtually
devoid of natural resources in
commercial quantities. Coal
must be imported from Europe
for the new steel mill, which
probably puts the plant into
the category of an economic
liability, although it is wide-
ly viewed in Egypt as a major
achievement of the revolution.
Egypt's population is not
trained in the skills necessary
for industrial expansion. New
plants have required extensive
training programs for their la-
bor forces, with the result
that operations have been rel-
atively inefficient and prob-
ably will continue so for some
time.
Egypt's almost complete
dependence on cotton as an
earner of foreign exchange is
a major liability of the econ-
omy which the Nasir regime in-
herited. In the short run,
the surest way to add to the
national income is to increase
the production of cotton and
especially extra-long-staple
cottons. This was successful,
notably in 1954 and 1957. Like
most primary commodities, how-
ever, cotton is not a dependable
foreign exchange earner, for
sales are subject to wide
swings in demand. For Egypt,
which specializes in long-
staple cottons, this is espe-
cially true, since the growth
of the world demand for this
type of cotton has been fall-
ing off. For the next several
years, however, the country
will have little choice but to
continue to place heavy empha-
sis on cotton production.
Agricultural Reform
The revolutionary regime
in 1952 was convinced that all
of Egypt's economic ills could
be blamed on the feudalistic
partnership of the landowners
and foreigners. The problem of
reform was tackled immediately
with few inhibitions. Foreign
businessmen, however, were not
ousted on a large scale until
the 1956 Suez crisis, which
brought with it the side ef-
fects of Egyptianization of
businesses and sequestration
of foreign assets.
One of the first acts of
the revolutionary government
was to destroy the economic and
political power of the land-
owners and end the feudalistic
system in agriculture. The
goals set forth in the Egyptian
Agrarian Reform Law of September
1952 were achieved in late 1958,
by which time all land in excess
of 207.6 acres owned by individ-
uals had been seized and dis-
tributed to new owners. Over
586,000 acres, almost 10 percent
of Egypt's agricultural land,
were redistributed. By 1960 the
government plans to distribute
an additional 207,600 acres now
held in trust by Moslem institu-
tions.
Agricultural output of ma-
jor field crops increased about
14 percent between 1952 and 1957,
but this resulted largely from
increased use of fertilizer and
improved seed rather than from
an increase in acreage or from
improved cultivation techniques.
A significant aspect of the
land reform program was a sub-
stantial reallocation of income.
It has been estimated that be-
fore the revolution about 30
percent of the national income
went to a few individuals as
"unearned" income, primarily in
the form of land rents. The
government, chiefly through tax-
ation, has transferred a large
amount of this income to its
own budget and used it to fi-
nance welfare projects and de-
fense.
Ousting the Foreigner
Egyptianizing the economy
began in earnest with the na-
tionalization of the Suez Canal
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CURRENT INTELLIGENCE WEEKLY SUMMARY
3 December 1959
Company in 1956. This action
won for Egypt a major source
of badly needed foreign ex-
change--in 1958 about $120,000,-
000, or four times the amount
received before nationaliza-
tion. During and after the
Suez crisis, the bulk of for-
eign business was subjected to
some form of Egyptian control.
Foreign firms now have
been largely eliminated from
banking and insurance, while
in other industries government
participation has been fostered
through the establishment of
an Economic Organization to
provide a framework for gov-
ernment control of the economy.
Since the formation of this or-
ganization in 1957, there has
been a steady expansion of
state control over business.
Until very recently, foreign
investment was discouraged,
particularly by Minister of
Industry Sidky, whose anti-
foreign bias blocked foreign
investment in several specific
instances. Sidky's apparently
declining influence may presage
new government inter-
est in encouraging
foreign investment.
Egyptianization
has not been. without.
cost to Cairo. Payments
to Britain alone for
properties taken over
amount to about
$80,000,000, and
since 1956 Egypt has
lost many of its tra-
ditional Western cot-
ton markets.
Industry
According to of-
ficial statistics,
Egyptian industrial
output rose 38 per-
cent from 1952 to
1957, or an average
of 8 percent annual-
ly, and this rate of
increase probably
continued through
1958 and 1959. In-
vestment in industry
has increased mark-
edly from $43,000,-
000 in 1952 toabout
$144,000,000 in 1958.
Despite this increase, in-
vestment appears to be too low
to ensure satisfactory growth
of the economy. Gross invest-
ment in 1957 probably amounted
to about $280,000,000, or about
8 to 10 percent of gross na-
tional product; gross invest-
ment would have to be increased
to nearly 20 percent of gross
national product to expand pro-
duction as fast as the popula-
tion is growing. Not only is
total investment in Egypt too
low in terms of the gross na-
tional product, but there is
some evidence that the share of
income devoted to investment
may have fallen recently.
Consumption Expands
Consumption in Egypt is
admittedly low but still too
high to permit the capital ac-
cumulation required for rapid
economic development. Much of
the increased consumption has
been financed by spending the
country's foreign exchange re-
serves, largely acquired during
World War 11, and by increasing
GOLD AND FOREIGN EXCHANGE HOLDINGS I
OF THE EGYPTIAN REGION 1950-(AUG) 1959
MILLIONS OF DOLLARS
1000
900 ---
800 -
OFOREIGN EXCHANGE
HOLDINGS ---
OUTSTANDING DEBTS OF THE EGYPTIAN REGION
1951-(FEB)1959
1100
1000,
900
800
700.
600
500,
400---
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Lill I
1958 1959
;FEBRUARY)
3 DECEMBER 1959 I 25X1
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a fertilizer factory at the ex-
isting Aswan Dam, an automobile
and truck plant, and various
chemical and cement factories.
the national debt. At the
time of the revolution in 1952,
Egyptian gold and foreign ex-
change holdings amounted to
about $900,000,000; by July
1959 these had fallen to
$382,000,000. Similarly, the
government's debts amounted to
about $475,000,000 in 1952 but
had soared to more than one
billion dollars by February of
this year.
Development Plans
Nasir's overly optimistic
goal of doubling the national
income in the next five years
is embodied in the $2.736 bil-
lion Second Five-Year Plan
(1960-64).
The foreign exchange costs
of the plan are estimated to be
EXPENDITURES IN EGYPTIAN REGION'S
SECOND RYE YEAR PLAN
AORKIKTURE
AND m$RA1tON
T*MIS'QRT Ale
tOMOWWATICM3
POLIO WORKS
SERVICES
CURRENT INTELLIGENCE WEEKLY StfARY
$1.152 billion, and Cairo
claims that more than half--
$567,000,000--is already ac-
counted for. Complete details
are not yet available, but the
plan apparently includes about
$180,000,000 for expansion of
the Suez Canal and at least
$288,000,000 for the Aswan
High Dam and related schemes.
In the industrial sector, 125
projects are involved, including
Credits from the Communist
bloc are expected to play a major
SOURCES OF FINANCING FOR EGYPTIAN
REGION'S SECOND RYE-YEAR PLAN
mom
M $)
1 tttNt
USSR (ASWAN DAM)
19.4
USSR (EDH1tAL ECONOMIC)
175
33.,
EAST OLVAM
30
54
SUEZ CANAL LOAN FROM
56.5
10.9
2$
S.4
127
24.6
516.5 1
100.0 1
3 DECEMBER 1959
role in financing exchange costs
of the development plan. The
Communist countries are committed
to provide about 54 percent of
the foreign exchange credits so
far arranged, and additional
loans appear likely.
Progress and Prospects
The regime has registered
impressive gains in agricultural
and industrial production since
1952. Industrial output has
increased about 50 percent in
established industries, and a
number of new plants have been
constructed. Agricultural out-
put has also increased. These
improvements, plus heavy de-
fense spending and increased
consumption, have been made
without serious inflation. The
groundwork has been laid for
expansion along the lines en-
visaged in the Second Five-
Year Plan, but it appears ex-
tremely unlikely that the goals
of the plan will be met within
the five-year period. The in-
crease in production thus far
is not attributable to the sub-
stantial economic aid from the
Communist bloc; however, Com-
munist assistance will be of
major importance in the Second
Five-Year Plan. Cairo's improv-
ing relations with the West,
promising an incr-easing.,favailabil-
ity"of Western:funds, should also
Aid',iaeplementatioa: Of the plan.
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The Nasir regime could have
made a sounder start on indus-
trialization had it not felt
compelled for security reasons
to spend large sums for the mil-
itary and if it had not felt
obliged for political reasons
to allow an immediate improvement
in living standards. There is a
possibility, that the demands
of economic development will
cause some decline in living
standards, especially in urban
areas, during the next few
years.
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Spain's economic stabili-
zation program, inaugurated in
July, appears to have made an
auspicious, start toward curb-
ing inflationary pressures,
stabilizing prices, retarding
the rise in living costs, end-
ing the drain on gold and for-
eign exchange reserves, and
eliminating the country's seri-
ous balance-of-payments defi-
cit. The program, which is
sponsored by the finance and
commerce- ministers with the as-
sistance of the Organization
for European Economic Coopera-
tion (OEEC) and the Internation-
al Monetary Fund (IMF), has
brought Spain over $400,000,000
in financial aid. The program
faces strong opposition from
influential vested interests
and is handicapped by Franco's
failure to support it publicly.
Curbs on bank credit to
private industry and the reluc-
tance of businessmen to make
future commitments have slowed
economic activity. The feeling
is widespread among the public
that the government will not be
able to carry out the program
efficiently and fairly. Unem-
ployment has increased substan-
tially, and the great majority
of workers have lost up to a
fourth of their take-home pay
because of shorter hours.
Should the economy deteri-
orate so seriously this winter
as to pose a threat to political
stability, the regime might
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CURRENT INTELLIGENCE WEEKLY SUMMARY
delay further implementation
of the program. This would
probably result in a worsening
of the problems it is now seek-
ing to combat.
Economic Recession
The decline in industrial
output and employment evident
early in 1959 has been intensi-
fied since stabilization went
into effect. This trend has
been particularly apparent in
the major industrial centers
of Barcelona, Bilbao, and Va-
lencia and has been most marked
in the textile, paper, and
leather industries. A number of
firms have closed down, and
others have suspended payments.
Tight credit, reduced domestic
demand, and a lack of foreign
exchange for imports of machin-
ery and raw materials have con-
tributed heavily to this situa-
tion, but a major factor is the
uncertain outlook for business.
Many businessmen have adopted
a "wait-and-see" attitude and
are avoiding new commitments.
Layoffs to cut production
costs have swelled the number
of enemployed. Nearly all in-
dustries have eliminated over-
time, which usually averaged
two to four hours daily, and
many are not working full time.
Because of these cuts, take-home
pay is inadequate for workers'
basic needs, even though the
rise in the cost of living from
January to October 1959 has been
moderate compared with that of
the past two years.
Nearly one tenth of the
total labor force is unneeded
but is maintained on the job
because the law makes it very
difficult for permanent employ-
ees to be discharged. Labor is
increasingly concerned that man-
agement will find a way to re-
lease these surplus workers,
who reportedly number some one
million. Some firms are said to
have instituted bankruptcy pro-
ceedings as a move in this di-
rection, and many industrialists
have been clamoring for remedial
governmental action. One step
toward a solution is a recent
government decree providing some
unemployment insurance.
The government continues
to oppose an across-the-board
pay raise. Only about 265,000
workers have gained economic
benefits through the collective
bargaining system which went
into effect late in 1958. The
government refuses to approve
any collective agreements which
provide for price increases to
offset wage boosts, and for this
reason it recently turned down
an agreement which would have
benefited over 200,000 workers
in Barcelona's cotton textile
industry.
Attitude of the Government
The government's attitude
on the stabilization program has
been ambivalent. Some officials,
including Finance Minister Na-
varro Rubio, enthusiastic over
the favorable initial results,
believe that such restrictive
measures as the curbs on pri-
vate credit can now be relaxed.
Others have shown increasing
concern that the anti-inflation-
ary aspects of the program will
produce economic stagnation.
They feel that private banks
and business should be encouraged
to take'advantage of the $262,-
000,000 allowed for credit ex-
pansion in 1959, almost all of
which is still available.
There are indications that
Navarro Rubio, seemingly the
chief exponent of the program,
is encountering difficulties
from other cabinet members who
fear political repercussions
from the economic adjustments
necessitated by the program
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CURRENT INTELLIGENCE WEEKLY SUMMARY
3 December 1959
and therefore want to increase
public expenditures above the
$1.905 billion ceiling set for
1959. In addition, there is
opposition from vested inter-
ests apprehensive over the com-
petition generated by liber-
alized trade and a freer for-
eign investment climate and
from nationalists who prefer
that Spain remain politically
and economically isolated.
The major shortcoming,
however, has been the govern-
ment's continued failure to
explain clearly to labor and
business the objectives and im-
plications of the plan. Gov-
ernment officials seem unaware
of the need to develop public
confidence and support. Even
more serious, Franco has re-
frained from putting his per-
sonal leadership and prestige
behind the plan, so that in
the event of a serious wave of
popular discontent over its
impact or the plan's failure,
its chief proponents can be
made the scapegoats.
The future of the stabili-
zation program is likely to de-
SECRET
Pend mainly on the government's
awareness of the need to build
up public confidence in it and
to convince business that the
sacrifices demanded of it are
temporary. The government is
not agreed on what the program
really means or on the next
steps to be taken, particularly
with regard to decisions on fu-
ture economic policy to stimu-
late plans for private invest-
ment. Some remedial action is
likely to be suggested by the
OEEC mission which is scheduled
to arrive in Madrid on 4 Decem-
ber to evaluate the effect of
the measures taken thus far
under the program.
The threat of rising unem-
ployment, which some fear may
reach 500,000 by early 1960,
will generate social unrest and
possibly widespread worker dis-
turbances. Should political
pressures force a general wage
rise, removal of the curbs
on bank credit to the private
sector, or an increase in pub-
lic spending, the program would
be in serious difficulties.
Such steps would be tantamount
to rejecting the plan and would
probably result in a renewal
of the 'inflationary cycle.
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