CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A003000120001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 62
• Document Creation Date: December 21, 2016
• Document Release Date: September 24, 2008
• Sequence Number: 1
• Publication Date: February 2, 1961
• Content Type: SUMMARY

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CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO.
OCI NO. 0265/61
2 February 1961
DOCUMENT W").
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CLASS. CHANGED T O: 1'S s 7
NEXT REVIEW DATE: ~r~
AUT R
DAT . REVIEWER:
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
DIA and DOS review(s) completed.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
T H E W E E K I N B R I E F
OF IMMEDIATE INTEREST
EAST-WEST RELATIONS . . . . . . . . .. . . . . . . . . . . . Page 1
Bloc spokesmen and propaganda media, still conveying
an impression of optimism over the prospects for improving
Soviet American relations, have begun to stress the need
for American actions. Khrushchevis holding open the
possibility of returning to New York for the UN General
Assembly session'next month. Soviet reporting of Ambas-
sador Stevenson's remarks on the possibility of a meeting
at the UN between the President and Khrushchev omitted
the ambassador's qualification that this was his personal
opinion. Soviet accounts of President Kennedy's State
of the. Union message were composed of direct quotes with 25X1
. . . . . . . 4 . . . Page 3
Following the USSR, Communist China, Czechoslovakia,
and Poland, which have already established embassies in
Havana, most of the seven other bloc countries now recog-
nized by Cuba are expected soon to open missions there.
East Germany remains the only bloc country still not for-
mally recognized by the Castro regime. Castro now has pub-
licly acknowledged the threat of counterrevolutionaries in
Las Villas Province. Cuban propaganda media have moved
away from the earlier wait-and-see attitude toward the
new US administration and now are asserting that the
administration has adopted the "old Eisenhower-Dulles
line."
. . Page 4
Fragmentation of the Congo continues as the leader
of the northwestern province of Equateur negotiates with
the President of the neighboring Central African Republic
for military assistance in exchange for some form of merger
of the two areas. Meanwhile, the UN Command is losing
about a quarter of its military strength as a result of
the withdrawal of troops by Guinea, the UAR, and Morocco.
The Sudan"s refusal to permit transit of its territory
has been hindering efforts by the UAR and bloc coun-
tries to furnish aid to the pro-Communist Gizenga regime
in Stanleyville. In Katanga, the Baluba tribesmen pose
a growing threat to the administration of President
Tshombd, for whom French support appears to be developing.
CONFIDENTIAL
TNF' wRFw ncr nu TIT'
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2 February 1961
PART I (continued)
LAOS . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 7
The formal installation by Communist elements of a
rival government in Xieng Khouang town makes a political
settlement more remote. According to a Pathet Lao announce-
ment on 2 February, Kamsouk Keola, a member of Souvanna
Phouma's previous cabinet, has been designated acting
premier pending Souvanna's "early" return to Laos. On 2
February Chinese Communist Foreign Minister Chen Yi
pledged aid to the "legal" Laotian government if it is
requested. Recognition of Peiping by the rump govern-
ment in Xieng Khouang would provide the Chinese a pre-
text, such as presently enjoyed by the Soviets, for
intervening more directly in the Laotian affair. On
the military scene, government troops are continuing
their slow advance on the enemy-held junction of the
Luang Prabang - Vientiane road.
NOTES AND COMMENTS
KHRUSHCHEV'S AGRICULTURAL TOUR . . . . . . . . . . . . . . Page 1
Khrushchev completed the Ukrainian leg of his cur-
rent agricultural tour leaving the leaders of the Ukraine
still holding their jobs but apparently much chastened
after a three-day airing of their mismanagement of agri-
culture. On 30 January he arrived in Rostov to attend
a conference of agricultural specialists from the North
Caucasus and Lower Don, areas of the RSFSR, and intends
later to visit the Georgian Republic, Voronezh Oblast,
and the New Lands area. Khrushchev's present tour dif-
fers from similar trips in the past in that he is ac-
companied by an entourage of top agricultural officials,
some of whom are identified in their posts for the
USSR PUBLISHES RESULTS OF 1960 PLAN . . . . . . . . . . . . Page 2
Soviet industrial production continues to increase
at an annual rate greater than needed to achieve the goals
set by the Seven-Year Plan (1959-65). According to the
official report of plan fulfillment, gross industrial
production in 1960 increased 10 percent over 1959 instead
of the planned 8.1 percent and, in the first two years
of the Seven-Year Plan, increased 22.1 percent as com-
pared with the 17 percent originally scheduled.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
PART II (continued)
SOVIET CONSTRUCTION . . . . . . . . . . . . ... . . . . . Page 4
A shake-up has occurred in the administration of the
Soviet construction industry following the industry's fail-
ure by 15 percent to meet the goals of the 1960 plan for
urban housing. While the underfulfillment was probably
due chiefly to a policy decision to cut back private
housing, there are technical and administrative diffi-
culties in the Soviet housing program which, if not
solved, could jeopardize housing objectives set forth
in the Seven-Year Plan.
MANAGEMENT PROBLEMS IN CHINESE COMMUNES . . . . . . . . . Page 5
In recent articles Peiping has expressed dissatisfac-
tion with the operation of communes, and implied that mis-
management and general confusion in organizational
authority have been the principal problems. It is order-
ing an almost complete transfer of communal authority back
to the production brigades, in effect returning farming
to the farmers.
CHINA SEEKING LARGE QUANTITIES OF FREE-WORLD GRAIN . . . . Page 7
Faced with the tightest food situation in its history,
Communist China is negotiating to buy large quantities
of food grains in the West. If current negotiations with
Canada and Australia are successful, total Chinese Commu-
nist grain imports in 1961 will reach as much as 2,500,000
tons--far surpassing that of any year since the Communists
came to power. The heavy expenditure of foreign exchange
to finance these imports may reach proportions which would
nearly exhaust current holdings unless a drastic readjust-
ment is made in China's trade patterns, possibly forcing
Peiping to increase its sales, to the West at the expense
of its exports to the bloc.
Page 9
Peiping's display of generosity in arrangements to
settle its minor border dispute with Burma and Nepal is
intended principally to bring pressure on New Delhi to
agree to a compromise settlement of the Sino-Indian border
controversy. To the same end, the Chinese have recently
renewed their offer to negotiate directly with Bhutan
over the Sino-Bhutanese boundary and have also agreed
in principle to the demarcation of a boundary with
Pakistan, in the highly sensitive Kashmir area. The
Chinese overture to Bhutan also included an offer of
all aid needed if the Bhutanese were to break off
their close ties with India.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
PART II (continued)
COMMUNISTS INTENSIFY ANTI-DIEM CAMPAIGN IN SOUTH VIETNAM . Page 10
The establishment of a "National Front for the Liber
ation of South Vietnam" is the latest move in North Viet-
nams increasingly bold campaign to topple the Saigon
government through a combination of political agitation
and guerrilla terrorism. The number of Communist guer-
rillas has increased from about 3,000 in mid-1959 to
about 10,000 at the present time. The intensification
of subversive activities is indicative of the growing
ability of the Communists to operate with relative
impunity in South Vietnam.
THE NETHERLANDS NEW GUINEA PROBLEM . .
The ten-year-old Dutch-Indonesian dispute over
Netherlands New Guinea has intensified in recent months
as a result of the increasingly militant attitude of the
Indonesians and of moves by the Dutch to strengthen their
military position in the area. Efforts to mediate have
so far been unproductive, and each side is undertaking
diplomatic measures to strengthen its position with a
view to seeking action by the United Nations. The Hague
fears that Indonesia may attempt to block Dutch plans
to set up an indigenous political administration for
New Guinea in early April. Foreign Minister Subandrio
recently stated Indonesia is determined to "regain" the
area and claimed that Khrushchev had offered support
PLEBISCITE IN BRITISH CAMEROONS . . . . . . . .
Page 12
Page 14
The two sectors of the British-administered UN trust
territory of the Cameroons in West Africa are to decide
by separate plebiscites on 11 and 12 February whether to
join the Federation of Nigeria or the Republic of Cameroun,
until last year under French trusteeship. Observers pre-
dict the northern sector will opt for union with Nigeria,
despite an intensive last-minute effort by Cameroun to
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
PART II (continued)
win support in the area. The outcome in the southern
sector may favor Cameroun but will probably be close;
in any case there will likely be local instability and
disorders which will pose new problems for the UK, as
well as Nigeria and Cameroun.
FRANCE--ALGERIA . . . . .
Page 16
The rebel Algerian provisional government continues
to indicate a willingness to reach a negotiated settlement
with the French, and rebel "premier" Ferhat Abbas has
reportedly agreed in principle to meet De Gaulle on
e changes in top French military posts, announced on 1
February, seem designed to assure that the French Army
will be more responsive to De Gaulle's policies.
PORTUGAL . . . . . . . . . . . . . . . . . . . . . . . . . Page 18
While not immediately threatening the stability of
the Salazar regime, the developments following the
Santa Maria's seizure on 22 January have made Lisbon
concerned over the security of its African provinces,
and have renewed the Portuguese public's awareness
that Premier Salazar has active opposition. The in-
cident is likely to increase pressure even from regime
supporters for some change in the status auo
AFTERMATH OF BELGIAN STRIKE . . . . . . . . . . . . . . . Page 19
As a result of the recent prolonged strikes against
the government's economic austerity bill, Belgium's ruling
Social Christian and Liberal parties have agreed to hold
elections this spring rather than wait until parliament's
term expires in May 1962. They believe that Belgium's
economic problems can best be attacked by a new government
with a current popular mandate. The new government is
likely to be a coalition of Social Christians and
Socialists. Such an alignment is already favored by
the labor wing of the Social Christian party, and will
be increasingly acceptable to the rest of the party
now that NATO Secretary General Spaak has decided to
resign and head the Socialist slate.
EL SALVADOR . . . . . . . . . . . . . . . . . . . . . . . Page 20
The governing directorate installed by the Salva-
doran armed forces on 25 January is consolidating its
hold over the country and is taking steps toward early
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
PART II (continued)
elections. The directorate is now turning to the eco-
nomic grievances of the peasantry and has also taken
measures to curb the Communist activity in rural areas
that had reached an advanced stage before the coup.
Communist-led students will probably try to provoke
violence in the capital in an effort to turn public
sentiment against the military.
THE NEW BRAZILIAN GOVERNMENT . .
Page 21
The inaugural address of President Janio Quadros on
31 January did not outline specific programs of his
administration, but asserted the need for a "truly
independent" foreign policy. Outstanding personalities
in the generally conservative cabinet are Foreign Minister
Afonso Arinos, who has been friendly toward the United
States; Finance Minister Clemente Mariani, who seems
capable of pushing needed economic reforms; and War
Minister Denys, a holdover from outgoing President
Kubitschek. Some pro-Quadros circles have criticized
the cabinet as too conservative to accomplish the
policy changes they seek.
PATTERNS AND PERSPECTIVES
BLOC POLICY IN LAOS . . . . . . . . . . . . . . . . . . . Page 1
The negative tone of the initial reaction by Soviet
bloc spokesmen to Britain's compromise proposal of 21
January for reactivating the International Control Commis-
sion in Laos reflects the Communist leaders' belief that
time is working to their advantage in the Laotian con-
flict. Recent bloc diplomatic tactics are designed to
delay any international action or negotiations looking
toward a settlement of the conflict and thus to give
the Kong Le - Pathet Lao forces an opportunity to ex-
ploit their recent military successes.
The present Communist objective is to secure control
of as much territory as possible before negotiations get
under way. Bloc leaders are confident that such military
gains will give them a strong bargaining advantage in
pressing for a "neutralized" Laos with strong Pathet Lao
representation in a reconstituted national coalition
government. If the Communist powers fail to achieve
this goal, they probably would then seek to obtain some
form of international recognition of the de facto divi-
sion of the country. Moscow probably feels that either
result would have repercussions throughout Southeast
Asia which would benefit the Communist bloc.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
PART III (continued)
THE ALBANIAN PARTY ON THE EVE OF ITS FOURTH CONGRESS . . . Page 5
Albania has given no sign of yielding to bloc pres-
sures to abandon the positions which brought it into
disagreement with the USSR in the Sino-Soviet dispute.
Its defiance, facilitated by Chinese Communist support
and by the unity of.the top leaders behind party leader
Hoxha, is motivated in part by fears of a hostile Yugo-
slavia, and centers mainly on Moscow's approach to
t'peaceful coexistence." While an open effort to force
Tirana into line appears unlikely as long as Sino-Soviet
relations continue in their present state, the USSR
and its satellites probably will continue to show their
displeasure and work behind the scenes to effect a
change in Albanian policy or leadership. 25X1
MIDDLE EAST OIL DEVELOPMENTS . . . . . . . . . . . . . . . Page 10
Production of Middle East oil reached an all-time high
in 1960 of about 5,250,000 barrels a day--up more than 15
percent from 1959. The annual rate of increase will de-
cline over the long term, however, reflecting not only
the slower growth in free world oil demand but also the
increase in competing production outside the Middle East.
Output in North Africa--which produced no oil at all two
years ago--may reach 500,000 barrels a day in 1961. In
any event, prospects are that 1961 will be another record
year for Middle East production. The Organization of
Petroleum Exporting Countries set up by several Middle
East oil-producing states and Venezuela last September
is already weakened by the conflicting economic and
political interests of the member states. Frictions
also continue between individual Arab governments and
the oil companies.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
Moscow has continued, to
give relatively factual cover-
age to statements by President
Kennedy and cabinet members. The
Soviet press reported the main
points of the President's news
conference of 25 January and
published summaries of the State
of the Union message, There was
also a marked reduction in So-
viet jamming of the Voice of
America's Russian-language broad-
casts on 29 and 30 January.
Soviet accounts of the
State of the Union message were
composed of direct quotes with
some significant omissions.
The general effect of the edit-
ing was to emphasize economic
and social problems and ignore
the statements on intended cor-
rective measures. While do-
mestic issues were stressed,
statements on foreign policy
were more heavily edited. The
TASS summary, for example, omit-
ted several long passages in-
cluding the references to Com-
munist China, the need to main-
tain free world forces to deter
aggression, the three defense
measures the secretary of de-
fense has been asked to initiate,
and the remarks on foreign aid.
Moscow did report, however, the
President's offer to cooperate
with the Soviet Union, Thus far
Moscow has mde no editorial
comment on the address.
Soviet propaganda commen-
tary on the press conference
generally links the release of
the RB--47 crew tb the President's
statement on U-2 flights and
interprets the steps as a case
of reciprocal concessions initi-
ated by Khrushchev personally.
Top-level Soviet leaders have
told Ambassador Thompson of
their great satisfaction with
the expeditious handling of the
matter by both sides,
the Soviet Union, Khrushchev
is said to have acknowledged
that the US could not change
policy and tactics whenever it
pleased and that changes in pol-
icy were the result of shifts
in public opinion. He implied,
however, that the election re-
sults reflected a desire for a
change in policies. Khrushchev
also forecast greater flexibil-
ity by the new US administration
in its approach to world prob-
lems.
Soviet spokesmen have be-
gun to stress that the next move
is up to the United States. Mar-
shal Bagramyan told Ambassador
Thompson on 26 January that it
was now up to the US which di-
rection the world would go.
Bloc propaganda has begun to.
emphasize that the US bears the
responsibility for following
words with deeds.
Khrushchev is apparently
keeping open the possibility
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
of returning to the UN when
the General Assembly reconvenes
on 7 March. Soviet propaganda
has widely reported Ambassador
Stevenson's press conference
remarks of 27 January on the
possibility of a meeting between
the President and Khrushchev at
the UN but has omitted any men-
tion of the ambassador's state-
ment that he was expressing a
personal opinion. No bloc prop-
aganda media have reported the
comment by the White House press
secretary on Stevenson's state-
Some indication that Khru-
shchev was holding open March
for a return to New York was
indicated by the Soviet Foreign
Ministry's discussions with the
Ceylonese ambassador on arrang-
ing a visit to Moscow for Pre-
mier Bandaranaike in late March.
The Foreign iviinistry could
not agree on a specific date
on the ground that Khru-
shchev's schedule for March
was "vague."
Moscow has also reported
without comment the US request
for a postponement of the re-
sumption of the Geneva nuclear
test ban talks. A Soviet Em-
bassy official in Vienna, who
often expounds freely on Soviet
policies, told an American offi-
cial that the Soviet approach
to inspection provisions would
probably be more "realistic"
in the future. As other Soviet
officials have done, he spoke of
Soviet concern over Chinese
acquisition of nuclear arms and
stressed the common interest of
the US and USSR is stopping the
spread of nuclear weapons tech-
nology.
On the disarmament ques-
tion Chief Soviet UN delegate
Zorin, in a conversation with
Ambassador Stevenson, maintained
the standard Soviet position
that agreement should be reached
on total disarmament before there
is any discussion on controls.
There has been no modera-
tion in Chinese Communist skep-
ticism regarding the new US
administration. The Chinese
published the President's State
of the Union message in the of-
ficial People's Daily-.-under
the heading "An Olive Branch in
His Right Hand, A Bundle of Ar-
rows in His Left.-" The message
was described as "setting the
basic tone of US foreign policy
--to strengthen arms expansion
and war preparations and to
step up economic and cultural
aggression with some peace ges-
tures." Peiping has made no
mention of suggestions that sur-
plus American foodstuffs be of-
fered for distribution on the
Chinese mainland .
East European Reaction
Although East European
satellites blocked VOA and
Radio Free Europe broadcasts
of the President's State of
the Union message, local propa-
ganda media gave it extensive
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
reportorial coverage--particu-
larly those passages which dealt
with the US economic '. situation, the
state of American education and
social medicine, and American
foreign policy. All the East
European satellites, with the
The Sino-Soviet bloc con-
tinues to increase and tighten
its already close ties with the
Castro regime. The four bloc
embassies already established
in Havana--those of the USSR,
Communist China, Czechoslovakia,
and Poland--are shortly to be
joined by diplomatic missions
from all or most of the seven
other bloc countries now recog-
nized by Cuba. East Germany re-
mains the only bloc country still
not formally recognized by
Cuba.
A large number of visits
are being made this month be-
tween Cuba and the bloc. The
Cuban press announced on 26
January that a Soviet labor
group headed by the secretary
general of the USSR's Central
Trade Union Council is en route
to Cuba.
Travel between Cuba and
the bloc has been facilitated
by the weekly flights since
early December between Prague
and Havana by Cubana Airlines.
The representative in Prague
of a West European airline in-
formed the American Embassy on
27 January that these flights
generally carry about 80 persons
to Prague and return to Cuba
with about 50. Meanwhile, the
Czechs are seeking Western
exception of Albania, have as-
sumed a cautiously optimistic
attitude toward the new US ad-
ministration, while displaying
varying degrees of skepticism
concerning future US policy.
overflight 'privileges .for their
own planned flights to Cuba.
More than 250 bloc tech-
nicians--mainly Russians and
Czechs--already in Cuba as of
mid-December include a wide
range of specialists from bank-
ers to geologists and industrial
engineers. Soviet technicians
had earlier shown an interest
in the Moa Bay and Nicaro nickel
installations, which were seized
last year from their American
owners, and Cuban leaders have
announced that production. will
soon resume at these plants with
the help of Soviet bloc tech-
nicians.
Cuba's controlled press
and radio, reacting to Presi-
dent Kennedy's first press con-
ference and his State of the
Union-address, are moving away
from the "wait-and-see" attitude
adopted by Fidel Castro toward
the new US administration in
his 20 January speech. Cuban
radio stations on 30 and 31
January declared that the new
President has "taken off his
mask" and seems to be following
the hostile "old Eisenhower-
Dulles line."
Ecuadorean Foreign Minister
Chiriboga sent word on 23 Jan-
uary to all American republics
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
except the United States, Cuba,
the Dominican Republic, and
Peru proposing joint concili-
ation of "the US-Cuban prob-
lem" by the Latin Americans
acting outside the framework of
the Organization of American
States or the United Nations,
Chiriboga's initiative is a-
rousing little support, in part
because the incumbent Ecua-
dorean Government lacks pres-
tige in the hemisphere.
In, a speech on 28 January
in Las Villas Province, Castro
for the first time publicly
acknowledged the extent of the
counterrevolutionary threat
there. He claimed that anti-
Castro guerrillas, which he
said numbered over 500, in the
Escambray Mountains.are "fenced
in to the point where they can-
not escape. When these fences
are strong enough, battalions
of militia well and specially
trained will advance on them."
Castro blamed the counter-
revolutionary activity in Las
Villas on the "bad" revolution-
aries of the "Second Front of
the Escambray," an independent
group allied with Castro forces
during the latter part of the
anti-Batista revolution and
then integrated into Castro's
army. He said these "subver-
sives have planted diversionist
The efforts of President
Nasavubu and Colonel Mobutu to
counter the activities of the
pro-Communist Gizenga regime
in Stanleyville face a growing
trend toward fragmentation of
the Congo and are hindered by a
shortage of military supplies,
Jean Bolikango, Kasavubu's
information minister and the
leader of Equateur Province,
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seeds throughout this province"
and were awaiting help in their
plans for the US. Therefore,
Castro went on, "We now have
to clean out all our offices in
this province."
Castro pledged that mili-
tary operations in the mountains
and the purges in provincial
offices would convert Las Villas
into "the most revolutionary
province of Cuba." Two days be-
fore Castro's speech, the leader
of the "Second Front of the Es-
cambray," Eloy Guiterrez Menoyo,
and a number of other Cuban army
officers arrived in Key West by
open boat seeking asylum.
Che Guevara, architect of
the regime's statist economy
and the official chiefly re-
sponsible for negotiating last
year's economic agreements with 25X1
the bloc, may soon receive a
Guevara is expected shortly2
to resign as president of the
National Bank to take the new
post of minister of industries.
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2 February 1961
in northwestern Congo, has been
negotiating with groups in
neighboring republics of the
French Community for military
assistance and some form of
Bolikango
has also discussed a possible
merger of territories with
groups in the French Community's
Congo Republic.
Bolikango probably con-
trols the Bangala tribe, which
forms a sizable part of the
Congolese Army. He plans to
raise a force of tribesmen to
protect Equateur Province and
approached the American ambas-
sador on 28 January for US
arms for this purpose. Such
activities illustrate the un-
willingness of local Congolese
leaders to submerge their as-
pirations in order to preserve
unity.
The preparatory political
conference at Leopoldville of
Congolese factions--without
participation of Gizenga's ad-
herents--chose its officers and
engaged in discussion of an
agenda and precedural matters.
Substantive discussions are
expected to take place at a
later date in Elisabethville,
but in view of the conference's
unrepresentative nature and the
continued disagreement between
Kasavubu and Katanga President 25X1
Tshomb6, no significant decisions
are expected. Meanwhile Kasa-
vubu has rejected a military
treaty with Tshomb6 and Kalonji,
leader of the South Kasai state,
but is expected to submit coun-
terproposals. Tshomb6 and
Kalonji have agreed to mutual
recognition as autonomous states.
The military situation on
the frontier of Equateur and
Orientale provinces remains ob-
scure. Kasavubu has made a
plea to the United States for UNCODED
prompt, direct assistance--sug-
gesting 25X1
that Belgian arms be
bought similar to those now in
use in the Congo--so that the
Leopoldville regime could take
the initiative against Gizenga.
Gizenga's regime, too, is
short of supplies and has looked
to Cairo and the bloc for mili-
tary aid. However, Sudan contin-
ues to refuse to allow aid ma-
terial to move across its terri-
tory.TASS announced on 30 Janu-
ary that the USSR had asked
Sudanese President Abboud to
permit the Soviets to send food
and medicine, in 20 trucks
through the Sudan to pro-Lumumba
areas of the Congo.
Sudanese officials fear
that unless there is effective
UN and Western action, the Congo
situation may deteriorate to
the point where the Sudan would
be faced with a de facto Com-
munist-supported government on
it border. The Sudanese foreign
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
Corlullhatvllle
Bukavu
Kongo to
Albertville
L.ke
i'ongony:ko
administration,is re-
portedly already col-
lecting taxes--the
Baluba tribesmen hos-
tile to Tshomb6, to-
gether with Congolese
Army units loyal to
Stanleyville, will be
in a position to launch
attacks against the
mining complex and rail-
roads which are econom-
ically vital to south-
ern Katanga. On 30 Jan-
uary Katanga aircraft
dropped bombs, prob-
ably improvised gaso-
line bombs or grenades,
on Manono.
Tshombe?s regime
in Katanga may also be
entering a difficult
period in his relations
with Belgium. The gov-
ernment has / acided to
replace the Belgian
minister has denied reports that
trucks from the Sudan had en-
tered the Congo with arms for
Gizenga,
Gizenga?s forces in Kivu
Province have taken the offen-
sive by launching an invasion
of remote northern Kasai Prov-
ince; One group reportedly is
aiming at Luluabourg;the other
is trying to reach pro-Lumumba
territory in eastern Leopoldville
Province..
The Gizenga-supported Baluba
tribal state of Lualaba, centered
at Manono in Katanga Province,
appears to be developing into a
serious threat to the Katanga
government. As this regime be-
comes entrenched--its provincial
commander of the Katanga armed
forces with a French officer.
This decision may cause a major-
ity of the several hundred Bel-
gian officers serving with the
Katanga forces to resign and
create a serious military prob-
lem for the state. In addition,
Tshomb6's own position apparently
is under attack by his deputy
premier, Jean Kibwee
In Brussels, the Belgian
foreign minister has won cabinet
approval to enforce a law for-
bidding Belgian citizens to
serve in or recruit for foreign 25X1
armies, which could lessen overt
Belgian assistance to Katanga.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
The United Nations Command
is beset with increasing diffi-
culties as the African nations
implement their threatened
troop withdrawals. Guinea's 740
troops have embarked at Matadi,
the UAR's 500 have been airlifted
from Equateur Province, Morocco's
3,100 men expect to leave in ear-
ly February, and Indonesia's 1,-
150 will leave in March. The re-
maining 13,000 troops are consid-
ered inadequate for policing the
900,000 square miles of the Congo.
Hammarskjold's appeals last
month to Ethiopia, India, Iraq,
and Sudan for additional troops
have not elicited a favorable
response. The problem is the
more critical in the light of
the possible expansion of the
UN's security duties in the
Congo, a policy step being ad-
vocated even by some Afro-
Asians.
A rival government to the
Boun Oum regime has been formal-
ly installed by Communist ele-
ments in Xieng Khouang town,
stronghold of the Kong Le -
Pathet Lao forces. According
to a Pathet Lao announcement of
2 February, former Premier Sou-
vanna Phouma--now in Cambodia--
has designated Kamsouk Keola,
a member of his previous cab-
inet, to be acting premier pend-
ing his own "early" return to
Laos.
Kamsouk is to be assisted in
discharging his functions by
two other leftist supporters of
the former premier: Quinim
Pholsena, appointed minister of
defense, finance, and foreign
affairs, and Tiao Sisoumang,
named minister of social affairs,
economy, and interior. Quinim,
minister of information in the
former Souvanna government,
previously had been acting in
Souvanna's name as the repre-
sentative of the "legal" gov-
ernment of Laos; Sisoumang had
been a secretary of state in
both of Souvanna's post-coup
governments.
This move apparently was
coordinated with Souvanna Phouma
in talks held in Phnom Penh last
week when a high-level Pathet
Lao delegation headed by Phoumi 25X1
Vongvichit visited him en route
from Hanoi to Xieng Khouang.
While there
is a possibility that Souvanna's 25X1
name has been used with some
liberty in connection with set-
ting up the rump regime in
Xieng Khouang, he must have at
least given his tacit approval.
Communist China's Foreign
Minister Chen Yi, speaking at
a Peiping rally on 2 February,
promised aid to the "lawful
Laotian government" of Souvanna
Phouma if it is requested.
Souvanna Phouma, who requested
Soviet aid, has never recognized
Peiping nor formally approached
the Chinese for material assist-
ance, but recognition of Peiping
by the rump government in Xieng
Khouang would provide the Chinese
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
a pretext for intervening more
directly in Laos. There was no
indication in Chen Yi's state-
ment that Peiping is encouraging
any appeal for "volunteers,"
but it implicitly warned that
the Chinese were prepared to
step up the scale of bloc as-
sistance to the pro-Communist
forces in Laos if necessary.
The Soviet Union apparent-
ly intends to delay its reply
to the British proposal of 21
January that the Tnternational
Control Commission (ICC) take
preliminary soundings, through
its Indian chairman, to deter-
mine whether it could perform
any useful role in Laos.
Communist. China has made
it quite apparent that it does
not favor any immediate return
of the ICC. Speaking at a 31 Jan-
uary banquet for a North Viet-
namese trade and economic delega-
tion visiting Peiping, Communist
China's Premier Chou En-lai said,
"Even to reactivate the ICC, it
will be necessary immediate-
ly to convene an interna-
tional conference of all coun-
tries concerned."
The military of-
fensive against the
Chinese Nationalist
irregulars in north-
eastern Burma,
launched by the Chinese
Communists in Novem-
ber and then followed
up by the Burmese,
has caused most of
the irregulars to re-
treat across the Mekong
River into Laos at
at least three points
following Burmese
capture of their main
base, Keng Lap, on
27 January. Although
the Burmese at first
denied Chinese Commu-
nist participation in
the most recent ac-
tion, they subsequently
said that--at Burmese
request--500 Chinese Communist
troops made a "show of
force" on one flank of the
Burmese attack.
Should the irregulars now
in Laos disregard Vientiane's
request that they remain near
the border, Peiping might feel
it had a pretext for sending
its troops into Laos.
Government forces are con-
tinuing to move toward the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
strategic Phou Khoun junction
of the Vientiane - Luang Prabang
road and the road leading east-
ward toward the Plaine des
Jarreso The Kong Le - Pathet
Lao forces, while fighting de-
laying actions, appear to be fol-
lowing the same defensive tac-
tics of orderly withdrawal pre-
viously observed at Vang Vieng
and Muong Kassy. They may be
seeking to conserve their
strength in this general area
in order to provide maximum
protection for the main base
area at the Plaine des Jarres.
However, they may be luring
government forces into a trap
along the Phou Khoun - Plaine
des Jarres road, which passes
through rugged mountain ter-
rain well suited for ambushes,
There were several reports dur-
ing the week of the westward
movement of enemy reinforcements
from the Plaine des Jarres.
In southern Xieng Khouang
Province, pressure on Tha Thom,
the last government outpost in
the area, appears to have sub-
sided, and, for.the moment at
least, government forces appear
to be on the offensive. Ele-
ments of the reinforced govern-
ment garrison are said to have
pushed a few miles in the di-
rection of enemy-held Ban Ta
Viang. Meo partisans appear to
be harassing the Kong Le - Pathet
Lao forces throughout the prov-
ince with increasing effect.
The enemy in Xieng Khouang is
strong, however, and its supply
position is being improved daily
by Soviet air support flights.
It presumably could easily re-
verse the government's recent
gains with sudden thrusts either
southward or westward from the
Plaine des Jarres.
In the Luang Prabang area,
the Pathet Lao is reported to
have begun probing government
defenses at Muong Sai, to the
north of the royal capital,
although the pace of this ac-
tivity seems slow for the mo-
ment. In southern Laos, sporad-
ic guerrilla harassment has
been reported by the numerous,
small but effective Pathet
Lao units scattered throughout
the area. This activity may be
intensified with the aim of
causing General Phoumi to di-
vert some of his forces now
committed to operations in the
north.
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`~ rJGL f(J l
CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1.96.1
PART I I
NOTES AND COMMENTS
KHRUSHCHEV'S AGRICULTURAL TOUR
Khrushchev completed the
Ukrainian leg of his current
agricultural tour leaving the
leaders of the Ukraine still
holding their jobs but appar-
ently much chastened after a
three-day airing of their mi's-
management?of agriculture. On
30 January he arrived in Rostov
for an agricultural conference,
and intends later to visit the
U S
NORTHERN
CAUCASUS
GEORGIA
New Lands
?i
Khrushchev's Agricultural Tour
In the near future I shall leave for the Ukraine, spend some
time In the Northern Caucasus, In Georgia; I am also thinking
of visiting Voronezh and the New Lands of Siberia and Kazakhstan."
Georgian Republic, Voronezh
Oblast, and the New Lands area.
Khrushchev's present tour dif-
fers from similar trips in the
past in that he is accompanied
this time by an entourage of
top USSR agricultural officials,
some of whomcare identified in
their posts for the first time.
Khrushchev arrived in Kiev
on 24 January to attend a ple-
num of the Ukrainian central
committee, only a few days after
his unusually sharp criticism
of the Ukrainian leadership at
the all-union central committee
plenum in Moscow. At the ear-
lier session he had accused
Nikolay Podgorny, Ukrainian
party boss and full member of
the presidium, of deception
and serious mismanagement of
agriculture. Khrushchev's re-
marks about Ukrainian Premier
Kaichenko were even more acid.
After recounting Kalchenko's
gross mishandling of the 1956
harvest, Khrushchev wound up,
"There he sits, a member of the
central committee, and every-
thing rolls off him as water
does off a duck's back. It
doesn't matter to him that he
made a mistake,"
Khrushchev decided to give
these officials another chance,
but not before exacting'public
confessions from them. Podgorny,
addressing the opening session
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
of the Ukrainian plenum on 27
January, repeatedly admitted
that Khrushchev's criticism was
justified, and aired in detail
what emerged as a very sorry
record of leadership in the
Ukraine.
Khrushehev's trip to the
Ukraine, however, had a more
practical object thar hearing
Podgorny's "confession." On 26
January, Khrushchev met with
Ukrainian leaders and examined
their agricultural plans for
1961, suggesting a number of im-
portant changes.
in May 1960; Karlov was apparent-
ly appointed to the post some-
time late last September.
The Rostov agricultural con-
ference was attended by repre-
sentatives from the northern
Caucasus and lower Don areas of
the Russian Republic. The meet-
ing was opened on 31 January by
Gennady Voronov, one of the new
candidate members elected to the
party presidium at the central
committee plenum in January,
and was addressed by Dmitry Pol.-
yansky, presidium member and
RSFSR premier.
Khrushchev was accompanied
by a number of high-ranking
agricultural officials who pre-
sumably assisted him in making
such on-the-spot planning changes..
The group included USSR Minister
of Agriculture Olshansky, Chair-
man Korniyets of the USSR State
Committee for Grain Products,
and academician Trofim Lysenko.
The list also included V. A.
Karlov, identified as head of
the Agriculture Department for
the union republics. The previ-
ous incumbent had been reassigned
Voronov, who gave up his
post as Orenburg Oblast party
boss on 26 January, was identi-
fied at the Rostov meeting as
;:.leputy chairman of the central
committee's important bureau
for the RSFSR, headed by Khru-
shchev. Presidium member Aris-
tov has been Khrushchev's only
deputy on the bureau since 1958.
Whether Voronov replaced Aris-
tov or has been assigned as 25X1
an additional deputy is not
known at this time,
USSrt PUBLISHES tEST.JLTS OF 1360 PLAN
Soviet industrial produc-
tion continues to increase at
an annual rate greater than need.-,
ed to achieve the goals set by t1'
Seven-Year Plan (135i-65) . Ac-
cording to the official report
of plan fulfillment in 1J60,
released on 25 January by the
USSA's Central Statistical
Board, gross industrial produc-
tion in 1360 increased 10 per-
cent over 1359 instead of the
planned 8.1 percent and, in the
first two years of. the Seven-
Year Plan, increased 22.1 per-
cent, as compared with the 17
percent originally scheduled.
'file Sixth Five-';ear Plan,
'rid.c;_h was abandoned in 11.35 in
favor of the Seven-Year Plan,
was to have been completed in
1)60. Comparisons of the ac-
tual record in 1960 with orig-
inal targets of the sixth plan
indicate near achievement of
principal items and some over-
fulfillments in heavy industry,
implying, that most of the plan--
nincgs? and material difficulties
which were the basis for scrap-
ping that plan have been solved.
Uverfulfillment of indus-
trial goals is apparently not
to be as great in the next few
years. To balance over-all
economic achievement, some in-
vestment will be shifted from
heavy industry to support
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
COMPARISONS OF ACTUAL PERFORMANCE WITH 6TH FIVE-YEAR PLAN (1955 -60) GOALS
OFFICIAL USSR FIGURES
ACTUAL PRODUCTION SIXTH FIVE-YEAR PLAN
01 1 i 1 50i
1955 1956 1957 1958 1959 1960 1955 1956 1957
i i 1 1001 i _L j
1958 1959 1960 1955 1956 1957 1958 1959 1960
agriculture. Khrushchev in his
speech to the recent central
committee plenum on agriculture
claimed that the Seven-Year
Plan's steel target could be
surpassed by as much as 10,000,-
000 metric tons but that this
performance might be held back
in order to increase agricul-
ture's contribution to consumer
industries.
There has been no progress
toward achieving the 70-percent
increase in gross agricultural
output called for by the Seven-
Year Plan. While 1960 grain
production was reported as 133,-
000,000 metric tons, indications
are that actual output was prob-
ably closer to 100,000,000
metric tons--about the same as 25X1
the estimated 1959 harvest.
Meat and milk production de-
clined slightly from last year's
level. Cotton production de-
clined 7 percent from the record
1959 crop, but the output of
other industrial crops, such as
sugar beets and sunflowers, was
well above last year's poor
crops. Over-all agricultural
production in 1960. as in 1959,
remains at about the level of
1958, the base year of the plan.
The number of collective
and state farms was not given
in the official statement, but
the approximate 25-percent in-
crease in state farm sown acre-
age reported indicates a
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2 February 1961
substantial increase in the
total number of state farms.
Labor productivity was re-
ported to have increased more
than 5 percent over 1959; an
increase of 5.8 percent was
planned. Any slight underful-
fillment can probaby be at-
tributed to the transfer of
more than one third of all in-
dustrial workers to the seven-
hour day in 1960. This com-
pletes the scheduled transfer
of all of the state labor force
--62,000,000 workers--to the
40- to 41-hour workweek which
was initiated at the 20th par-
ty congress in 1956.
There reportedly was an
increase in 1960 of 5,500,000
persons in the state labor
force (which excludes collec-
tive farms and producer coop-
eratives), in contrast with a
planned increase of only 2,-
000,000. All but some 2,000,-
000 to 2,500,000 of the in-
crease apparently resulted from
the conversion of some collec-
tive farms into state farms and
of many producer cooperatives
into state industrial enterprises.
Total investment in 1960
was reported to have been 30.5
billion rubles. This represents
a 97-percent fulfillment of the
over-all plan for centralized
investment and a 95-percent ful-
fillment of equipment acquisition
plans, according to the report.
Construction-installation plans
were reported to have been 99-
(Prepared by ORR).
percent achieved.
There has been a shake-up
in the Soviet construction in-
dustry. On 26 January Ivan
Grishmanov, the party official
in charge of construction mat-
ters, was appointed chairman of
the State Committee for Con-
struction Affairs. He replaced
V_ladimi.r ?Kucherenko, who had
been in charge of the committee
since 1.955 and who will now
head the Academy of Construction
and Architecture. In a possibly
related move, former construc-
tion minister Nikolay Dygay, who
has been serving for the past
year and a half in staff work
in the construction field as
minister without portfolio in
the USSR Council of Ministers,
was relieved of his post.
The official 1960 plan ful-
fillment report issued on 25
January disclosed that the ur-
ban housing plan for 1960 was
15 percent short of fulfillment
rather than the 9 percent pre-
dicted by Gosplan chief Novikov
in late December. There has
been no indication, however,
that the underfulfillment led
to the personnel changes in the
construction administration.
Private housing accounted
for virtually all of this
shortfall.. The government's
attitude toward private housing
has grown gradually cooler in
recent years--Khrushchev, more
than once,has disparaged it as
wasteful and out of tune with
the Communist way of life. In
the latter half of 1960 it was
disclosed that all state fi-
nancial support for the con-
struction of private housing
had been withdrawn.
Large panel concrete structures such as this Soviet
apartment house are to account for nearly two thirds
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
Private housing may become
an important issue in the USSR
since it is scheduled to account
for a third of the urban hous-
ing to be constructed under the
Seven-Year Plan and has been
eagerly sought by individual
citizens. Continued shortfalls
not offset by overf ulfiliment
in the state housing sector
could jeopardize the Seven-
Year--Plan housing objectives
to satisfy growing demand.
and may cause the regime to
overcome its antipathy to this
form of construction.
State housing in 1957-59
substantially exceeded the plan,
but the 1960 goal was slightly
.underfulf filled . The planners
had difficulty in developing
new methods of construction.
The state housing program, for
example, is presently under-
going a ciangeover from brick
construction to the use of
large precast concrete panels.
By 1964, the volume of con-
struction using this method is
to be 50 times greater than in
1959 and is to comprise 63 per-
cent of all new state housing
planned for 1965. Last year,
however, basic engineering was
rushed and slipshod, and even
the small amount of this type
of construction planned was not
completed. Should such defi-
ciencies continue, there would
be increases over the planned
cost of housing construction
during the 1961-65 period
which could result in plan
shortfalls.
On 25 January a Soviet of-
ficial stated that the establish-
ment of a new construction min-
istry was being considered to
amalgamate all construction or-
ganizations. The chief construc-
tion agency is now the State
Committee for Construction Af-
fairs, which has as one of its
main functions that of develop-
ing and testing new methods of
construction anti subsequently
assisting in their adoption by
republic and local construction
organizations.
(Prepared by O"
In recent articles Peiping
has expressed dissatisfaction
with the operation of communes,
and implied that mismanagement
and general confusion in organ-
izational authority have indeed
been the principal problems.
The abrupt creation of com-
munes in 1958 with only the most
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2 February 1961
vague guidelines of policy made
management problems inevitable.
Folowing the official injunc-
tion for politics to "take com-
mand," agricultural cooperatives
were almost overnight merged in-
to communes. While these units
were fitted easily into Peiping's
political organization, the eco-
nomic structure of the communes
involved new relationships which
could have worked well only if
there had been a large supply
of able administrators with
clear lines of authority and
sufficient time for careful or-
ganization.
duction" from the communes back
to the production brigades, the
regime reduced centralization
but left the commune a rather
empty concept. The grandiose
projects fostered by the
communes were all but elim-
inated, and funds were ap-
plied to more immediate agri-
cultural needs.
Material incentives were
generally ignored by the origi-
nal commune but have since been
restored to their approximate
pre-commune level. Peasants are
again paid wages for labor per-
formed, and this may occasional-
Lacking these, the communes I ly be supplemented by bonus pay-
almost immediately created social', meats for exceeding the produc-
and economic problems that caused tion quota. Welfare services,
a retreat in December 1958 from ;; which were generally provided
the more radical aspects of the
program. The original concept
of the commune was further weak-
ened in the "tidying up" phase
that lasted until August 1959,
during which the cooperatives--
now termed production brigades
--regained authority lost earli-
er to the communes.
The main economic motives
for setting up the communes were
to raise agricultural output
and control consumption in order
to maximize deliveries to the
state. It was apparent to the
regime throughout 1959 that the
communes were not achieving
these fundamental objectives,
despite moderation of some of
the more drastic elements of the
program. Chou En-tai's criti-
cism of the communes in August
1959 as over-centralized, ex-
travagant, and too egalitarian
is believed to be a fairly ac-
curate description.
By shifting financial and
accounting responsibilities and
the "ownership of means of pro-
free by the early communes, now
require payment. The communal
mess hall is still supported,
despite considerable evidence
of its unpopularity and neglect
in most areas. However, pri-
vate plots, the raising of pri-
vate livestock, and secondary
occupations--all virtually elim-
inated in 1958--are now per-
mitted by the regime.
Egalitarianism--equal dis-
tribution--was dealt a serious
blow when the communes lost most
of their authority over the pro-
duction brigades, thus eliminat-
ing the common conipiaint against
the commune that the more effi-
cient production brigades were
penalized by having to support
the less efficient.
Statistical work in rural
China has probably improved since
its low point in the leap for-
ward campaign, when statistical
workers were ordered to serve
political ends. There are still
basic weakenesses in this area,
however, and the lack of precise
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
knowledge of local production
and consumption has almost cer-
tainly complicated Peiping's
problem of collection, distri-
bution, and transportation of
agricultural products.
~?eiping has recently
stressed that the production
plans of the brigades are the
most responsive to natural con-
ditions in different localities,
can best reflect technical re-
quireirien.ts of specific crops,
and can best ,.irouse the initia-
tive of the wori;:ers. By thus
pointing up the advantages of the
brigade over the commune, the regime
is explicitly indicting the communes
for failures in these important
areas of production management.
In effect, Peiping is ask-
ing that farming be returned to
the farmers. Available in.forma.-
tion suggests, however, that the
brigades are still trying to
adjust to the fluctuations of
the political line and are not
yet clear whether political or
practical considerations should
govern their planning.
The brigade is now clearly
expected to exercise control over
production and consumption in the
rural areas, but its role has
been made more difficult by the
mediocre harvests of 1050 and
1960, when bad weather and rural
mismanagement reduced the food sup-
ply. Having squandered most of
the ;good will of the peasants in
ill-conceived yet extraordinari-
ly laborious projects during the
"leap forward.? the brigades now
face the 'task of rebuilding
morale without the wherewithal to
offer incentives for renewed effort,
The heavy use of propaganda
and political coercion during
the past few years has al-
most certainly reduced the
effectiveness of these tech-
niques for meeting current
problems. With food shortages
expected to worsen through-
out China during the winter,
peasant dissatisfaction with
the regime's rural organiza-
tions will probably increase
CHINA SEEKING LARGE QUANTITIES OF FREE-WORLD GRAIN
Faced with the tightest
food situation in its 11-year
history, Communist China has
turned to the West for the pur-
chase of very large amounts of
food grains. Negotiations with
Canada and Australia already
have resulted in firm purchases
of about 500,000 tons of wheat,
flour, and barley. An additional
order for 750,000 tons of Au-
stralian wheat is being dis-
cussed, and, while payment
terms may be a stumbling block,
the Chinese reportedly are
seeking to buy a total of 1,000,-
000 tons of wheat and more
barley from Canada. If con-
cluded successfully, these
purchases, plus a' 350,000-ton
rice deal with Burma, would
bring total Chinese grain im-
ports in 1961 to more than 2,500,--
000 tons--an unprecedented
level for Peiping.
The heavy expenditure of
foreign exchange to finance these
imports may reach proportions
which would nearly exhaust
current holdings unless a drastic
readjustment is made in China's
trade patterns. The Chinese
are said to be pressing for a
deferred-payments arrangement
with Canada, but Ottawa appar-
ently has rejected government
credit backing for this purpose.
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2 February 1961
In the absence of credit ar-
rangements with free-world sup-
pliers, or substantial finan-
cial support from the USSR,
China will be forced either to
cut back sharply on other non-
bloc imports or to greatly in-
crease its sales to the free
world at the expense of ex-
ports to the bloc.
The composition of these
grain purchases is in keeping
with the probable pattern of
damage to the domestic grain
crop. The crop areas most
seriously affected by adverse
weather in 1960 were the major
wheat areas in the north. Crop
conditions in the rest of the
country--especially in the im-
portant central and southern
rice regions--were no worse and
possible a little better than
in 1959--not a particularly
good crop year, but one in which
the regime did not complain so
much about the weather and did
not resort to grain imports.
It is likely, therefore, that
there was serious damage to
the wheat crop in 1960, but
that the rice crop--almost
half of China's total grain
crop--fared no worse than in
1959. Total grain output in
1960 is believed to have been
about the same as in 1959.
As China exports only small
amounts of wheat, nearly all of
the Canadian and Australian im-
ports, consisting chiefly of
wheat, will be for internal con-
sumption. However, the high-
quality Burmese rice being pur-
chased by China this year is
probably chiefly for re-export.
Chinese export prospects
for 1961 are far from clear,
but it is likely that total
grain exports, including re-
exports, will fall well below
1,000,000 tons--an amount ex-
ceeded in rice alone during
1958 and 1959. Recent trade
offers to the bloc probably
have included limited amounts
of rice, but no firm commitments
have been disclosed. Chinese
rice exports to the bloc
amounted to more than 750,000
tons in 1959 and last year may
have been scheduled to rise
even higher. Shipments were
up in early 1960, but by mid-
year they began dropping off,
probably falling well below
the anticipated level. The
current situation suggests that
the downward trend will continue
this year.
Firm Chinese rice commit-
ments in the free world include
at least 100,000 tons to Cuba
and 230,000 tons to Ceylon;
nearly all of this will be
shipped directly from Burma.
Indonesia--China's largest free-
world rice customer in 1959--
did not make any new purchase
of rice last year and probably
will not in 1961. Shipments to
other destinations in Asia,
Africa, and Western Europe will
not exceed 200,000 tons.
Wheat is sold to meet spe-
cial trade situations, usually
with bloc countries, but it is
not a major export commodity
and sometimes is of third-coun-
try origin. The only known
wheat commitment for 1961 is to
Albania, which has received sub-
stantial quantities of wheat
from China in the past. At
least 40,000 tons of the wheat
which China has purchased from
Australia, is being delivered to
Albania and more probably will
be shipped later. It is unlike-
ly, however, that Chinese wheat
will be exported in quantity to
any other area.
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`Gyangtse
CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
COMMUNIST CHINA'S SOUTHERN BORDER PROBLEMS
Peiping is continuing its
efforts to pressure New Delhi
into a compromise solution of
their border controversy by arrang-
ing generous settlements of
relatively minor boundary dif-
ferences with other southern
neighbors.
China failed to gain any:
concessions from India during
the top-level talks between
Chou En-lai and Nehru in March
1960 and several months of dis-
cussion by Foreign Ministry
experts.
As evidence that only New
Delhi's stubbornness continues
to block agreement, the Chinese
are flaunting their final border
settlement with Burma and their
preliminary agreement with Nepal.
China appears also to have re-
newed an offer to negotiate
directly with Bhutan over the
border with that country, and
has agreed, at least in prin-
ciple, to demarcate the Sino-
Pakistani boundary.
IIn 1959 the Chinese
said they would be willing to
discuss historic Bhutanese
claims to eight small exclaves,
inside Tibet near Mt. Kailas.
Peiping reportedly claims about
300 square miles in eastern
Bhutan and' another.' s1 ..ce:,in the
northwest corner.
Direct negotiations be-
tween China and Bhutan would
undermine Indian political in-
fluence in the border state.
In a 1949 treaty, Bhutan agreed
to be "guided"by India in its
foreign affairs; New Delhi has
interpreted this to mean ex-
clusive control. Peiping has
recognized New Delhi's "proper"
rights in Bhutan, but the recent
Chinese initiative reportedly
included an offer of any aid
needed should the Bhutanese
decide to break their ties with
India. Bhutan receives an
annual subsidy of about $150,-
000 from New Delhi and has also
received more than $1,500,000
in grants and loans. The Ma-
haraja hus reportedly decided
to ignore the Chinese approach,
but is attempting to "clarify"
Bhutan's treaty relationship
with India during current talks
with Nehru in New Delhi.
Peiping's willingness to
reach a settlement with Pakistan
Boundary shown on Indian was
Boundary shown on recent
Chinese Connnnnlst map;
Illlllllllf Principal Suro Nepali areas in dispute
Motorable road
__ _ _ __ Motor able road
nder construclion
Minor road or trail
wr
PAKI
N E P A L 6.),J thl
KATMANDU
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SECRET
2 February 1961
is suggested in a recent state-
ment by Pakistani Foreign
Minister Qadir that Peiping
had agreed in principle to de-
marcate the border and that
discussion of a preliminary
agreement was under way. Pei-
ping has not shown any interest
in such negotiations in the
past, probably fearing they
would further complicate the
controversy with India.
Current Sino-Pakistani
boundary negotiations may not
have proceeded substantively
beyond the point reached in ear-
ly 1960. At that time the Chi-
nese indicated they were willing
in principle to discuss demarca-
tion in the Hunza area and perhaps
would 'be interested in negotia-
tions over. Pakistani-held Kashmir.
The Chinese probably feel
that a bilateral boundary set-
tlement with Pakistan might
prejudice Indian claims in the
Ladakh area, The Karakoram
mountain range, which could pro-
vide the basis for demarcating
portions of the Sino-Pakistani
border, also roughly divides
the Indian-occupied sections
of Ladakh from those portions
claimed by India but occupied
by the Chinese Communists,
The Sino-Nepali boundary
discussions, under way for about
six months, have entered a
second round of talks between
joint teams in Peiping. The
Chinese are widely reported to
be taking a very conciliatory
attitude, and an agreement that
the ownership of Mt. Everest
will be left for future negotia-
tions should clear the way for
an early settlement of the minor
areas now under negotiation.,
Encouraged by the de-
teriorating political and se-
curity situation in South
Vietnam, North Vietnam has
become increasingly bold in
its effort to topple the Sai-
gon government. The latest
move: in this campaign is the
establishment in December of
a "National Front for the Lib-
eration of South Vietnam,"
publicized by Radio Hanoi on
29 January along with the
front's manifesto calling on
all South Vietnamese to work
for President Diem's overthrow.
Strong emphasis in the manifes-
to on a program of land reform,
expanded agriculture, and
measures to settle rural griev-
ences against Diem suggests
that a major objective of the
front is to consolidate polit-
tical support in areas now
controlled or actively pene-
trated by Communist guerrillas.
Although Hanoi's delay in
reporting the front and its
citing of foreign press dis-
patches as sources of its
information are apparently
intended to preserve the fic-
tion of a spontaneous South
Vietnamese movement, Saigon
papers have carried stories
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VL/Vf\L f ~~
CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
that the Communists have openly
created a "government" for
"liberation" of South Vietnam.
Last September, Ho Chi
Minh's chief lieutenant, Le
Duan, publicly called for the
formation Of a broad united
front in South Vietnam to in-
clude all elements opposed to
President Diem. The North
Vietnamese apparently hope
through the front--the politi-
cal side of their program for
"reunification"--to organize
anti-Diem sentiment and focus
it on the effort to overthrow
him. If successful, they
would then seek to form a co-
alition government which would
itself be only an interim meas-
ure designed to effect the even-
tual con so 1 i d ati bn . ofothd- -two -'parts
of Vietnam under the Communists.
The other side of Hanoi's
offensive against Diem is the
intensified guerrilla warfare
under way since late 1959.
Nguyen Chi Thanh, the top po-
litical commissar in the North
Vietnamese Army, spelled out
this phase in an article for
the North Vietnamese Com-
munist party's theoretical
journal last August. Extolling
violence as a technique for
achieving power, Thanh vir-
tually pledged the Hanoi regime
to intensify further guerrilla
warfare in the South,
The number of active Com-
munist terrorists in South
Vietnam has increased from an
estimated 3,000 in.` mid-1959 to
between 7,000 and 10,000 at
the present time. This increase
is the result both of recruit-
ment in the South and infiltra-
tion from the North, principally
by way of mountain paths
such as the famous "Ho Chi Minh
trail" which winds through the
rugged border country of Laos,
Cambodia, and South Vietnam.
Extension of Communist
control in Laos would greatly
facilitate this movement.
Despite repeated security
sweeps by paramilitary forces
and units of South Vietnam's
150,000--man army, the Communist
guerrillas have gained ef-
fective control in a signifi-
cant portion of the southern
delta provinces as well as the
outskirts of Saigon, and have
recently intensified activity
in the central highlands to the
north.
The November coup attempt
against Diem has undoubtedly
encouraged North Vietnam in its
assessment that the unsettled
conditions in the South are
ripe for exploitation, and the
Communists are making a serious
effort to cultivate unorganized
opposition elements. Recent
reports also indicate that the
Communists are now working to
organize peasant demonstrations--
several have occurred since mid-
December--partly to provoke mili-
tary.::reprisals against civilians.
Over the past two months
South Vietnamese security units
have had few clashes with large
guerrilla bands. Some reports
suggest that the Communists are
preserving their assets for a
large-scale campaign this spring,
and high-ranking North Vietnamese
of f i i is
(have stated
their belief that events in
South Vietnam will follow the
pattern in Laos, with Diem's
downfall anticipated by April,
Such timetables are boastful,
but South Vietnam has scheduled
a presidential election for
April and the Communists may
feel that the political situa-
tion at this time will provide
further opportunities for
stepped-up political and mili-
tar action
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2 February 1961
THE NETHERLANDS NEW
The ten-year-old dispute
over Netherlands New Guinea has
intensified in recent months as
a result of moves by the Dutch
.to strengthen their military
position in the area and of the
increasingly bellicose tone of
the pronouncements by Indonesian
officials on the issue.
Indonesia severed relations
with the Netherlands last August
when the Dutch sent naval vessels
to New Guinea. By emphasizing
the threat to peace in the area,
Djakarta now is seeking to in-
crease international pressure
on The Hague for a settlement.
Djakarta is confident that it
will be able to rally Afro-Asian
and Communist bloc support in
the United Nations if it decides
to press charges of aggressive
intent against the Netherlands.
The Dutch fear,
however, that the Indonesians
will shortly have a capability
to launch more extensive opera-
tions and that they intend to
provoke a clash with Dutch forces
in order to focus. international
attention on'the dispute.
The Dutch in late 1960 moved
to bolster their forces in New
Guinea, which now total some
4,000-5,000 troops. They
have also planned tours of in-
spection by Defense Minister
Visser and other high military
officials during this winter
and spring. The Indonesian
Government charged in a 28 Decem-
ber letter to UN Secretary Gen-
eral Hammarskjold that these
Dutch actions constituted an
imminent threat to peace; the
Netherlands countered by in-
viting Hammarskjold to send a
personal representative to
New Guinea to investigate.
On the same grounds
Djakarta justified the recent
high-level Indonesian arms-
purchasing mission to Moscow.
The mission, which negotiated
substantial amounts of new
equipment and received Soviet
NETHERLANDS
NEW GUINEA
u 1
TIMOR
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
south
THAILAND
t_ 1
MALAYA
Singapore
MILEg
1-
31548
(STATUS IN DISPUTE)
EIAK
TERRITORY OF
NEW GUINEA
. (AUSTRALIA)
BISMARCK
ARCI1I PELAGO j
SECRET
APUA Port f4gresby
rz
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JGLAIG I
CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
assurances of political support
for Indonesia's claim, was prob-
ably intended to underline to
the Netherlands and the West
the seriousness of Indonesia's
intent.
Foreign Minister Subandrio,
who accompanied the arms mis-
sion, told the American ambas-
sador in Djakarta that the New
Guinea issue largely determines
Indonesian foreign policy; that
Indonesia is determined to "re-
gain" the area and must turn for
help wherever it is available.
He claimed that Khrushchev had
offered to support President
Sukarno "all down the line--po-
litically, militarily, econom-
ically, and psychologically."
Attempts to mediate the
dispute have met with little
success? The most recent, made
by Malayan Prime Minister
Rahman, is floundering as a re--
suit of Indonesian insistence
that mediation from any quarter
must seek the ultimate transfer
of the territory to Indonesia,
which claims that the area was
an integral part of the former
Dutch East Indies. The Dutch
are equally insistent that any
proposed solution must incorpo-
rate the basic principle of
self-determination for the ap-
proximately 700,000 native in-
Zabitants.
In the meantime, the
Netherlands is proceeding with
plans to develop an indigenous
political administration for
New Guinea as the first step
toward independence. The first
elections held in the territory
currently are under way to
choose an electoral college
which in turn will appoint rep-
resentatives to its first leg-
islative body--the council. The
council's immediate function
will be to advise The Hague on
development plans and adminis-
trative matters, and within one
year recommend steps toward
self--determination.
Dutch officials believe
it will take at least ten years
to train enough natives to form
a skeleton administrative and
legislative body as envisaged in
the council. The Dutch believe
that unless New Guinea is given
a sufficient transition period
to develop its own leaders and
political structure, the terri-
tory is certain to fall. under
Indonesian control.
Foreign Ministry offi-
cials in The Hague believe
a critical period will exist
until 5 April, when the New
Guinea council is scheduled
to meet for the first time.
The Dutch reason that Dja-
karta recognizes that the
body will overwhelmingly re-
ject Indonesia's claim to
sovereignty and endorse the
concept of self-determina-
tion; consequently, the In-
donesians must either prevent
or discredit any action by
the council.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
PLEBISCITE IN BRITISH CAMEROONS
The British trust terri-
tory of the Cameroons, adminis~-
tered by Britain since the first
World War, is to decide on 11
and 12 February whether to join
the Federation of Nigeria or to
reunite with the Republic of
Cameroun, a French trust ter-
ritory until it became independ-
ent last year. Pursuant to UN
General Assembly resolutions,
separate plebiscites are being
organized by the UN in the
northern and southern sectors
into which the British terri-
tory was divided for adminis-
trative purposes.
Present indications are.,that
Northern:Camer6ons; governed as
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2 FEaRUARY 1961
STATUTE MILES 30O
2 February 1961
(DYanunde
an integral part of Nigeria's
Northern Region prior to Ni-
gerian independence last Octo-
ber, will vote to link itself
permanently with Nigeria, de-
spite an intensive last-minute
effort by Cameroun to win sup-
port, All major political par-
ties active in the area favor
such a solution, as does the UK,
which has been working quietly
for some time to ensure it.
CHAD
Although in 1959 a decisive
majority of the northern elec-
torate chose to postpone a de-
cision on the future of Northern
Cameroons rather than to agree
then to retain ties with an in-
dependent Nigeria, reforms were
subsequently introduced to re-
dress at least some of the local
grievances which motivated that
decision. Should the forthcom-
ing vote unexpectedly go against
Nigeria, a severe crisis, pos-
sibly involving Nigerian inter-
vention to nullify the plebi_.
sdite,could ensue.
In Southern Cam-
eroons, which Britain
has accorded consider-
able local self-gov-
ernment and has treated
since 1954 as a poten-
tial fourth region of
Nigeria, the outcome
of the plebiscite is
more uncertain and the
potential difficulties
are greater, The sec-
tor's governing party
--by a very slim margin
--favors federation
with Cameroun; however,
popular opinion is
sharply"divided, with
major tribal groups
opposing each other on
the issue. Adherents
of the defeated alter-
native may resort to
violence, and this in
turn could easily lead
to the direct involve-
ment of Nigeria and
Cameroun--despite the
fact that neither gov-
ernment is eager to
acquire the southern
territory.
Any incidents might also
be exploited by radical ele-
ments in Southern Cameroons
who want close integration
with Cameroun. These elements
are affiliated with the ex-
tremist wing of the Commu-
nist-influenced Union of the
Cameroons Populations (UPC)
in the Cameroun Republic. This
wing continues to carry on
terrorist activities in the
southwestern area of the repub-
lic against the pro-Western
government.
Even if immediate disorders
are avoided in Southern Cameroons,
outbreaks may well occur during
the subsequent transition period,
which promises to be especially
trying for Britain if--as London
anticipates--the vote favors
"reunification" with Cameroun.
Although Southern Cameroons
Premier Foncha and Camerounian
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CURRENT INTELLIGENCE WEEKLY SUMMARY"
2 February 1961
President Ahidjo have met on
several occasions in recent
months and apparently are in
agreement on the broad outlines
of a future federal relation-
ship between the two areas, some
time would be likely to elapse
while detailed arrangements are
being negotiated and finally
implemented.
.3ritish officials are con-
cerned that i',ritain's pres-
tige in Africa may be
damaged as a result of some
incident, since 3ritish troops
will continue to be charged
with maintaining security
in the area while the
transition is made.
FRANCE,-ALGERIA
The rebel Algerian Provi-
sional Government (PAG) con-
tinues to indicate a willingness
to reach a negoti ted settle-
ment with France,
The PAG reportedly expects
that the most difficult negoti-
ations will concern the status
and economic interests of the
European population, military
forces and bases, and the future
control of the oil-rich Sahara.
An article in the 27 January
edition of E.l.-Aloudjahid, the
o:Lf:i.cia].. or--an--of the Ali eri.ar.
T,t.aerati.on Front (Fr,N), re-
iterated rebel willingness to
define guarantees for Europeans
remaining in. Algeria, but re-
ports that the PAG is committed
to rapid agrarian reform indi-- 25X1
cate that colons--French set-
tlers--would be required to give
up all land beyond a fixed lim-
it. The PAG will reject any
French proposal for partition,
or for guaranteed participation
of the colons in government.
The rebels are reportedly will-
ing to negotiate a phased with-
drawal of French troops, and
would probably agree to French
retention, at least temporarily,
of the large naval base at Mers
el-Kebir, near Oran.
The general atmosphere in
Algeria is one of passive ex-
pectancy after the tension of
the referendum and in anticipa-
tion of a resumption of French-
PAG contacts. Rumors persist
that colon groups, particularly
in the Algiers region, are at-
tempting to negotiate directly
with the PAG on guarantees for
European property. French au-
thorities, however, are fearful
that the PAG may attempt a new
tactic of popular agitation
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
designed to transform the war
into a violent mass movement.
Abbas' visit to Indonesia,
Malaya, and Ceylon does not ap-
pear to have resulted in much
beyond assurances that these
countries maintain "solidarity"
with the rebels. Abbas was re-
ceived as a state guest only in
Indonesia, although he talked
with the prime ministers in
Malaya and Ceylon. A crowd of
4,000 that heard him speak in
Kuala Lumpur on 27 January was
described as more curious than
enthusiastic.
Paris has made no public
statements on the progress of
contacts with the PAG.
opposition to De Gaulle in
France has been quiet, except
that some leftist newspapers
are begining to criticize the
government for moving too slow-
ly in its attempts to open ne-
gotiations.
The changes in top French
military posts announced on 1 Feb-
ruary to become effective 1
March, as well as a number of
reported shifts of other generals,
seem designed to assure that
the French Army will be more
responsive to De Gaulle's poli-
cies as he moves toward negoti-
ations with the PAG.
At the top of the military
hierarchy, General Jean Olie
replaces General Paul Ely as
chief of staff of national de-
fense. Olie is now personal
military adviser to De Gaulle
and has served as commander of
the important Constantine Army
Corps. Ely, now 63, had been
retained on active duty beyond
the retirement age principally
because there was no successor
of sufficient stature to replace
him.
In the other top-level
change, General Fernand Gambiez,
widely regarded as a liberal
supporter of De Gaulle's Algerian
policy, replaces General Jean
Crepin as commander in chief in
Algeria. Crepin has been de-
scribed as a "narrow but obedient
fighting man" whom De Gaulle may
feel is not equipped to deal
with the complex issues of the
rapidly evolving Algerian sit-
uation.
These changes, together
with the government's acceptance
of the retirement request of
Air Force General Maurice Challe,
who had been NATO commander in
chief for Central Europe, point
up the continuing problem De
Gaulle faces: the degree to
which changes in the top com-
mands can influence in his favor
the numerous disillusioned and
perplexed field-:and company-
grade officers. On this score,
the departure of Ely, who might
have been asked to stay on in
his job at least until there
was a cease-fire, removes a
respected figure from a position
he had repeatedly used to influ-
ence the armed services on De
Gaulle's behalf. His loss,
therefore, may cancel out many
of the advantages which appear
to be gained from the other
command changes.
Meanwhile, French rightist
political leaders are traveling
about Europe seeking support.
from other rightist groups for
their continuing machinations
against De Gaulle.
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2 February 1961
While not threatening the
immediate stability of the
Portuguese Government, the de-
velopments following the seiw
z ure of the Portuguese liner
Santa Maria on 22 January by
Henrique Galvao and his fol-
lowers have made Lisbon con-
cerned over the security of its
African provinces. moreover
they have renewed the Portuguese
public's awareness that Premier
Salazar has active opposition.
The incident is likely to in-
crease pressure from even re-
gime supporters for some change
in the status quo.
Security forces in Portu-
gal are probably capable of
suppressing any pro-Galvao dis-
orders. The opposition is
divided, and the great bulk of
it is politically inexperienced
as a result of more than 30
years of Salazar's rule. Lisbon
is confident of the loyalty of
the officer corps, but it ap-
pears less, sure of the attitude
of some noncommissioned ele-
ments. Ex-army captain Galvao,
who is regarded by the govern-
ment as a determined and capa-
ble adversary, has been bead
in high esteem among Salazar's
opponents in Portugal and even,
reportedly, among some high-
ranking officers.
The government hag been
concerned lest Galvao reach
some port on the West African
coast and stir up trouble among
disaffected groups in one of
the overseas provinces. Humberto
Delgado, in whose name Galvao is
professedly acting, had sub-
stantial support in Angola and
Mozambique when he ran for the
Portuguese presidency in 1958.
Lisbon's concern over possible
defections by white Portuguese
in Angola may stem from recent
statements attributed to Del-
gado and Galvao demanding free-
dom for colonial territories.
Many white Angolese are dissat-
isfied with the government's
economic policies toward the
provinces, and some extremists
might even be tempted to en-
list the support of African
nationalists to work for the
overthrow of the local admin-
stration.
The government recently
sent one platoon of paratroop-
ers to the Cape Verde Islands
and another to Sao Tome in the
Gulf of Guinea. In all the
African holdings, including
the Cape Verde Islands, there
are over 20,000 troops, of
which the great bulk is about
evenly divided between Angola
and Mozambique. On 25 January
the government sent two de-
stroyers and a frigate to the
Cape Verde Islands.
The Santa Maria incident
has encouraged opposition groups
and even some proregime factions
to offer their own candidates
for the National Assembly elec-
tions next October. Their aim
is to end the monopoly of the
assembly's 120 seats hitherto
enjoyed by Salazar's National
Union, even if only by obtain-
ing a few seats.
Since late 1958, there has,
moreover, been a growing feeling
even among regime supporters that
the'71-year-old -Salazar and his
politically restrictive and eco-
nomically conservative policies
have outlived their usefulness,
He has given no indication of
plans for retiring before 1965,
a forced retirement is Possible
either on grounds of health or
from high-ranking military of-
ficers seizing some pretext to
ease him out of office.
A likely successor is De-
fense Minister Botelho Moniz,
Who on two occasions since early
1958 intimated to US officials
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
he might have to take over.
other possibilities are: former
Defense Minister Santos Costa,
a rival of Moniz who is said
to have the loyalty of a sub-
stantial segment of army offi-
cers: former Minister of the
Presidency Marcello Caetano,
who is probably the most capa-
ble of the top pro-regime civ-
ilians; and former Minister of
the Presidency Theotonio Pere-
ira, who is the logical heir
by virtue of his position but
may not have the full support
of the armed forces.
The US position on the Santa
Maria incident has generated con-
siderable adverse reaction among
the Portuguese public--much of it
no doubt government inspired. The
possibility that the regime it-
self may take a tough stand in ne-
gotiations for an extension of the
Azores bases agreement, which ex-
pires in December 1962, is sug-
gested by the statement of the
Portuguese ambassador in Washing-
ton to the State Department on
28 January that the US position on
this incident could have "the grav-
est consequences" for US-Portuguese
relations.
AFTERMATH OF BELGIAN STRIKE
As a result of the recent
prolonged strikes against the
government's economic austerity
bill, Belgium's ruling Social
Christian and Liberal parties
have agreed to hold elections
this spring rather than waitun-
til parliament's term expires
in May 1962. They believe that
Belgium's economic problems can
best be attacked by a new gov-
ernment with a current popular
mandate. The new government
is likely to be a coalition of
Social Christians and Social-
ists. Such an alignment is al-
ready favored by the labor wing
of the Social Christian party,
and will be increasingly ac-
ceptable to the rest of the par-
ty now that NATO Secretary Gen-
eral bpa:ik has decided to resign
and head the Socialist slate.
i'he nation's most pressing
economic problems are govern-
mental fiscal stability and eco-
nomic expansion. The prospects
for a balanced 1961 budget have
been greatly diminished by the
strike, which delayed imposition
of now taxes as well as curtail-
ing production and reducing in-
come. The over-all cost of the
strike has been estimated at
$180,000,000 to $200,000,000,.
Moreover, it will be necessary
to stimulate investment and the
rate of economic growth--current-
ly one of the lowest in Western
Europe--in order to provide more
jobs for young people as well as
for returnees from the Congo and
for coal miners thrown out of
work by the closing of marginal
mines.
The Eyskens coalition, in
power since November 1958, has
not been conspicuously success-
ful in stimulating the lagging
economy. The Congo debacle and
the strike have revived demanel-
for a national government in-
cluding statesmen of Spaak's
caliber. His presence will tend
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to mitigate the bitterness en-
gendered by the str.ihe and by
the dangerous split between the
W lloon and ::Flemish se;(-rmontrs o_'
the population. The k';ocialistrs
need him particularly to heal
the rift in the party bet:veen
the moderates and the Walloon
radicals and to counteract the
3ama ge done by the left -;vin
Socialist leader, i!ndr e" :tenard.
'tenard' s demagogic appeals for
Walloon separatism and incite-
ment to violence during the
strike damaged the party's
reputation.
Both the uocial Christians
and the Liberals are expected
to gain in the upcoming elec-
tions, Jpaak' Ss return, however,
increases the possibility for a
Social Christian - "ocia.list
coalition. h h:c.putation re-
duces
the opposition of right-
wins- mi.?.cile-class elements with-
in the ociai Christian party
to cooperation with Socialists.
The pow.vvr_ ul labor wing of the
3oc al Christiansalready favors
:suc?~. cooperation as an alterna-
tivc to the present alliance
,viti-,. t`: e Liberals, If 3paak
can the Socialist losses
to a mir imurm, he is likely to
become foreign minister in a co-
alition, probably headed by'So-
c:::.:zl Christian party chairman
LnT e ro
EL SALVADOR.
TLr.R: five-man civil-mili-
tary directorate installed by
the Salvadoran armed forces on
25 January has consolidated its
hold over the country, Martial
law was lifted on _0 January,
and the directorate has pronr-
ised an early return to consti-
tutional rule.
The directorate, which is
led by Col. Anibal '7ortillo and
Lt. .cl., Julio ?iver;.., has an-
nounced. that the coup was nec-
assa.ry to prevent a iomrrunist
takeover ,..-id to rep :cve the in--
fluen,^!:: v_'` ~'orurr.. :?:r~es,id nt
3se'ar the directing
power behind the coup that
brought the desposed regime into
power last (ctober. . any of the
Most active r ernrnh~rh 7_..,t agitators,
some members of the former junta,
and Csorio have been sent into
exile. 2tepresentatives of five
political parties have agreed
to assist in drafting an elec-
toral law permitting free ele-
tions in which non-Communist
parties will be able to partici-
pate. They will, however, prob-
ably exclude Gsorio's recently
formed mildly leftist Social
Democratic party,
The directorate has prom-
ised prompt attention to the
economic problems stemming from
a soc >'_ system based on a very
small voalt1.,y class and a large
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
impoverished peasant population.
A prominent member of the new
regime has insisted to the US
army attache that the strong
measures being taken against
Communists are only temporary
means of maintaining order,
and that necessary social re-
forms must follow or El Salva-
dor "will lose its freedom to
Communism." The new government,
he added, believes that the
wealthy must be made to pay
equitable taxes,
The US Embassy reported
on 28 January that the lower
classes seem willing to permit
the directorate to demonstrate
its avowed democratic character,
while the business community
considers the new regime a
change for the better. Mili-
tary support is reportedly al-
most solid, but the detention
of several high-ranking officers
for their association with Oso-
In his inaugural address
on 31 January President Janio
Quadros avoided outlining spe-
cific policies of his new ad-
ministration, but commented on
his political philosophy and
asserted that Brazil should
have a "truly independent"
foreign policy. He contrasted
democracy-.-which he described
as "a pragmatically dynamic
system wherein varied inter-
ests may mingle with no great
danger to the public"--and
Communism, which he alluded to
as the "transformation of a mag-
nanimous philosophy in principle
into neoimperialism."
Despite a similarly allu-
sive attack on Communist tactics
designed to stimulate and
exacerbate hates within the
rio could lead to dangerous
cleavages in the future.
The directorate has taken
measures against any continua-
tion of Communist activity in
rural areas which had reached
an advanced stage before the 25
January coup. Communist and
Castro sympathizers--particular-
ly among students--will probably
continue to agitate in an effort
to provoke violence and turn
public sentiment against the
armed forces.
To date, only Guatemala,
Nicaragua, and Spain have recog-
nized the new regime. A Honduran
Army officer sent to apprise the
situation in San Salvador told
the US army attache on 30 Janu-
ary that he is advising recogni-
tion, but that his government may
delay -a few days pending US ac-
western hemisphere," Quadros
voiced a defensive concern for
Cuba,which he visited in March
1960. He said: "Recently from
the disturbed Antilles there
reached me the echo of voices
of hope with which that fearless
and proud people awaits the new
US government inauguration...,
in hopes of different policies
of cooperation for all the con-
tinent." Quadros reportedly
considers underdevelopment and
dictatorship major factors be-
hind the Cuban revolution and
that Cuba has served to awaken
the US to the seriousness of
these problems.
Outstanding personalities
in Quadros' generally conserva-
tive cabinet include Foreign
Minister Afonso Arinos, who has
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
served as chairman of the Senate
Foreign Relations Committee; he
is friendly toward the US and
unsympathetic with Fidel Castro.
Finance Minister Clemente Mari-
ani is a strong personality
considered capable of pushing
needed economic reform and
dealing with an impending bal-
ance-of.??payments crisis. Labor
Minister Francisco Carlos de
Castro Neves was secretary of
government under Quadros in Sao
Paulo State and is one of the
shrewdest politicians in his
entourage. Some pro-Quadros
circles have criticized the
cabinet as too conservative to
accomplish the 'regenerative"
policy changes they seek.
One of Quadros' campaign pledges
was to legalize the Communist
party--which supported the ad-
ministration candidate, General
Lott, in the elections---but this
promise would not preclude Qua-
dros' support for stronger anti-
Communist measures if it suited
his purposes.
While Quadros attracted
electoral support from business
and middle-income groups as a
result of his sound-money pol-
icies while governor of Sao Paulo,
he also bid for leftist support
by such promises as the pledge
of closer trade and diplomatic
relations with the Soviet bloc.
Quadros was probably referring
to bloc trade when he said
in his inaugural address that
Brazil will welcome any vessel
that arrives at its shores.
Direct trade with the USSR was
initiated after a trade agree-
ment between the two countries
was signed in December 1959.
Trade with the entire bloc
amounted to 4 percent of
Brazil's total trade in 1959
but reached 5.3 percent by
31 August 1960,
counter this proposal,
Cardinal Motta of Soa
Paulo, who is concerned over
the rise in bloc commercial
activities in Brazil, told
the American consul general
in Sao Paulo on 30 January
that the USSR had offered
a loan for the construction
of a hydroelectric power
development on the Sao Paulo
border, and he urged the
US to move promptly to
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
PATTERNS AND PERSPECTIVES
The negative tone of the
initial reaction by Soviet bloc
spokesmen to Britain's compro-
mise proposal of 21 January for
reactivating the International
Control. Commission (ICC) in
Laos reflects the Communist
leaders' belief that time is
working to their advantage in
the Laotian conflict. Recent
bloc diplomatic tactics are de-
signed to delay any interna-
tional action or negotiations
looking toward a settlement of
the conflict and thus to give
the Kong Le - Pathet Lao forces
an opportunity to exploit their
recent military successes and
expand the areas under their
control..
The bloc leaders probably
feel confident that their vig-
orous reaction to General Phou-
mi's recapture of Vientiane in
mid-December has prevented the
pro-Western government from es-
tablishing effective control
and has placed pro-Communist
forces in Laos in a stronger
position than ever to insist
on a "neutralized" Laos with
strong Pathet Lao representa-
tion in a reconstituted nation-
al government.
Attitude Toward Laotian Crisis
The bloc leaders' decision
to respond immediately and force-
fully to Phoumi's assault on
Vientiane probably rested on
two main considerations.
In the first place, they
viewed this attack by US-sup-
ported forces as a direct chal-.
lenge to the power and resolu-
tion of the Communist world.
Phoumi launched his assault
only one week after the publi-
cation of the Moscow declara-
tion of the 81 Communist par-
ties--which cited Laos, along
with the Congo, as an example
of a country in which "criminal
actions by the imperialists"
were being dealt. "an increas-
ingly decisive rebuff." The
declaration proclaimed that
Communist countries "consider
it their duty to render every
moral and material support to
peoples struggling for their
liberation from imperialist
and colonial oppression."
In addition, Khrushchev
and his Soviet colleagues prob-
ably felt that a vigorous in-
tervention in Laos would ef-
fectively undercut Chinese
Communist criticism that So-
viet policy had not been suf-
ficiently aggressive in sup-
porting Afro-Asian "national
liberation movements."
The second major consid-
eration appears to have been
the Communist leaders' belief
that Phoumi's attack on Vien-
tiane offered an excellent op-?
portunity for intervention un-
der the guise of supporting
the ousted "legal government"
of Souvanna Phouma. This made
possible a more far-reaching
action than was feasible in
the 1959 hostilities, when the
Pathet Lao forces were clearly
in revolt against the legiti-
mate government. Souvanna's
insistence that he is still
head of the legal government--
a concept which has received
considerable support among
non-Communist governments--has
strengthened the Communists'
rationale and justification
for intervention.
The bloc's initial reac-
tion to Phoumi's attack was
intended to make it clear to
the world that the Communist
powers were unwilling to ac-
cept the military and political
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
setbacks represented by this
action and that they were de-
termined to take whatever meas-
ures were necessary to support
and maintain the Kong Le -
Pathet Lao forces. Moscow,
Peiping, and Hanoi promptly
initiated a concerted program
of. diplomatic, propaganda,' and
military action ranging from
ostensibly constructive pro-
posals for settling the con-
flict to private threats of
military intervention. This
program made use of political
warfare techniques that bloc
governments have used in al-
most every East-West contest
since World War II.
'Despite the threatening
atmosphere created by the bloc's
effort'to stem support for Boun
Oum and to strain the Western
alliance, bloc leaders have
sought to avoid giving any
pretext for military interven-
tion by Western or pro-Western
countries in Laos. Their ini-
tial decision apparently was
to rely on the Kong Le - Pathet
Lao forces, with whatever in-
creased aid was required, in
order to prevent Phoumi from
consolidating effective control
over the country. Their early
moves followed a cautious, ex-
pedient-line which avoided any
commitments to specific coun-
termeasures. Their initial
pronouncements were confined
to condemning the "aggressive
actions" by the United States
in Laos and calling for united
international action to "protect
the Geneva agreements and to
restore peace in Laos."
Moscow took the lead with
a note on 13 December to the
United States charging direct
American participation in "reb-
el" military operations against
the "lawful" government and
warning that the USSR could not
ignore such a threat to peace
in Southeast Asia. Peiping and
Hanoi issued similar statements
the following day.
The first private threat
of bloc military counteraction
came on 14 December.
The Soviet airlift which
had been bringing in petroleum
and food supplies at the re-
quest of the Souvanna govern-
ment since 3 December shifted.
on 10 December to delivering
weapons and ammunition.
The North Vietnamese on
17 December called for reac-
tivating the ICC for Laos and
reconvening the 1954 Geneva
Conference participants. Pei-
ping endorsed this proposal on
19 December, and Moscow, act-
ing as one of the two cochair-
men of the Geneva Conference,
formally conveyed the proposal
to Britain, the other cochair-
man, on 22 December.
The bloc leaders took pains
to make it clear to the West
that they did not want to see
the conflict expand. At the
same time, however, they served
notice that the extent of bloc
intervention would be deter-
mined by the scope of Western
military commitments in Laos.
During the closing weeks
of December, Radio Moscow commen-
tary stressed the fact that the
Communist bloc would continue
to recognize the "legal govern-
ment" of Souvanna Phouma and
implicitly asserted that aid to
his regime would continue. Bloc
propaganda also emphasized the
probability that the fighting
in Laos would go on for some
time. It stressed that the time
had passed when the United States
could arbitrarily have its way,
and that Washington now must
take into account the views of
other countries, including the
USSR, relative to Southeast
Asia.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
Chou En-lai, in a speech
on 18 December, implied that
the Chinese Communists were ..
seeking to avoid a major conflict
in,Laos.. He declared that the
crisis should be "Solved by the
Laotian people themselves" with-
out foreign intervention.
The first days of January
1961 produced further private
indications from bloc sources
that the decision as to whether
the Laotian war would be ex-
panded rests exclusively with
Moscow's desire to main-
tain freedom of maneuver and
guard against any accidental
expansion of the conflict was
evident in Ambassador Menshi-
kov's denial to American offi-
cials on 10 January that the
USSR was operating an airlift
into Laos. One of the USSR',s
purposes in this apparently is
to be able to ignore officially
the loss of any of its aircraft
as a result of Laotian efforts
to interdict the airlift. The
official denial probably is also
calculated to retain an avenue
of retreat should unfore-
seeable developments dictate
a termination of the air-
lift. In addition, the So-
viet leaders may have in-
tended their denial as a hint
that the Soviet Union would
halt its airlift if the United
States discontinued assistance
to the Boun Qum govern-
ment.
The fact that the USSR
rather than China has operated
the airlift stems from a Com-
munist desire to maintain the
fiction of nonintervention and
to give the appearance of cor-
rect legal procedure. The air-
lift originated with Souvanna
Phouma's request to the Soviet
ambassador for petroleum and
food supplies. It was Quinim
Pholsena, leftist member of the
Souvanna cabinet and self-
styled "acting premier," who
requested Soviet military aid.
The use of Chinese aircraft
would have been more difficult
to disguise as nonintervention
and to justify as a response
to a request of the "lawful"
Laotian authorities.
Second Phase
Two events on 1 January
1961 altered the Laotian pic-
ture in the.eyes of the bloc
leaders and gave them consid-
erably greater freedom of ac-
tion. The Kong Le - Pathet
Lao forces captured the Plaine
des Jarres and the town of
Xieng Khouang, and Prince Si-
hanouk of Cambodia announced
his plan for a 14-nation con-
ference on Laos.
The military success
greatly improved the strategic
position of the pro-Communist
forces and enabled them to pose
a constant threat to Luang
Prabang, Vientiane, Pak Sane,
or southern Laos. Sihanouk's
initiative provided valuable
non-Communist support for the
bloc's diplomatic position and
gave the Communists an opportu-
nity to delay any international
action or negotiation by pro-
longing East-West exchanges
over the timing, composition,
and agenda of a conference.
The bloc attitude on nego-
tiations stiffened at this point,
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2 February 1961
and Communist spokesmen played
down their proposal to reactivate
the ICC--now favored by Britain,
India, and other free world gov-
ernments--and stressed the im-
portance of convening an inter-
national conference. The bloc
governments reacted strongly to
the introductio:L of T-6 aircraft
into Laos, again warning that
US action tending to expand the
war could lead the bloc to coun-
ter with similar measures. The
threat of "volunteers" was
raised in both private and pub-
lic statements.
Sino-Soviet Relations and Laos
Soviet spokesmen in recent
weeks have tried to turn the
dispute with China to advantage
in the Laotian crisis, In talks
with Western representatives,
they have deliberately planted
the idea that there is a split
between Moscow and Peiping over
proper tactics in Laos.
the USSR was
obliged to deal on two fronts in
Laos: the West on one side, and
the Chinese on the other. These
tactics are probably designed
to increase pressure on the
US' allies to urge it to re-
frain from any action that
carries a risk of expanding the
conflict.
Despite these calculated
hints of a Sino-Soviet diver-
gence of views, the weight of
evidence points to close co-
ordination and consultation be-
tween Moscow and Peiping. How-
ever, the Possibility of dis-
agreement', on the question of
timing and tactics in negotia-
tions cannot be ruled out.
The Chinese are particu-
larly sensitive about Khru-
shchev's past tendency to ne-
gotiate without consulting his
bloc colleagues. They may feel
that his interest in improving
Soviet-American relations as a
prelude to a new summit confer-
ence may incline him to agree
to begin negotiations for a
Laotian settlement before the
Kong Le - Pathet Lao forces can
fully exploit their military
advantage.
Outlook
Khrushchev pointed out to
Ambassador Thompson on 21 Jan-
uary that Laos had little impor-
tance to either the USSR or the
US, but that it was of great
importance to the Southeast
Asian neighbors of Laos. He
said the solution was to "put
out the flames" and let the
Laotian National Assembly choose
the government, but not under
duress. He reaffirmed Soviet
support of Sihanouk's proposal
for a 14-nation conference and
claimed that Nehru and De Gaulle
are favorably disposed to this
idea and that even Britain is
not opposed.
The present Communist ob-
jective in Laos is to secure
control of as much territory as
possible before international
negotiations for a settlement
of the conflict get under way.
Bloc leaders are confident that
such military gains will give
them a strong bargaining ad-
vantage in pressing for a neu-
tral government with strong
Pathet Lao representation. If
the Communist powers failed to
achieve this goal,,they would
then seek to obtain some form
of international recognition
of the de facto division of the
country.
The Soviet leaders prob-
ably feel that either result
would have serious and far-
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CURRENT INTELLIGNECE WEEKLY SUMMARY
2 February 1961
reaching repercussions through-
out Southeast' Asia which would
open up new avenues of exploi-
tation for the bloc. The Com-
munist bloc is probably confi-
dent that American influence in
the area is being dealt a se-
vere blow and that neutralist
sentiment thereby will be great-
ly encouraged.
In any event, bloc leaders
regard the present hostilities
as only the beginning of a new
phase in a protracted struggle
for control of Laos
THE ALBANIAN PARTY ON THE EVE OF ITS FOURTH CONGRESS
The twice-postponed fourth
congress of the Albanian Workers'
(Communist) party, now sched-
uled to convene on 13 February,
will serve as the forum for an
exposition of the regime's for-
eign and domestic policies.
There is no indication that
Tirana intends to alter these
policies--which in the past
nine months have brought it
into close and open support of
the Chinese in their political
and doctrinal dispute with Mos-
cow"
The Albanians differ with
Moscow on basic foreign policy
11t * SAM Site'
IIg, Durres Tirana
1 )/d
ALBANIA
~,I 1 SS,t~ -~~ Elbasan
Lushnje/ \.
"Sites of strategic importance
to the USSR
- a Fceauewv is
O 9 2g_
issues, particularly those in-
volving bloc relations with their
old enemy, Yugoslavia, and with
the West. Tirana would like the
bloc to assume an uncompromis-
ingly hostile stance toward Yu-
goslav "revisionism," but Mos-
cow, it feels, prefers a policy
of accommodation. Geographical-
ly isolated from the bloc and
historically a victim of the am-
bitions of its larger neighbors,
Albania also dissents from Khru-
shchev's "peaceful coexistence"
policy, preferring, as does Pei-
ping, hostility and tension.
In determining whether to
continue with their dissident
policies or to recant, the
Albanians have to weigh three
grave problems. In addition
to agricultural difficulties
and economic dependence on for-
eign assistance, the regime
must contend with the uncertain
loyalties of the people and of
the party rank and file. Most
importantly, if it persists in
its heresies, Tirana must ac-
cept the probability of continu-
ing disapproval from the USSR
and its European satellites and
the possibility of future retri-
bution.
Far from being chastened,
the regime has shown no incli-
nation to recant. On the con-
trary, it is attempting to make
its deviationist policies fully
respectable by finding justifi-
cation for them in the declaration
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
strength and is prob-
ably the keystone to
the decision to main-
tain its policy posi-
tions. Only two lead-
ers are known to have
been removed in the
last year--politburo
member Liri Belishova
and central auditing
commission chairman
Koco Tashko were ousted
on 9 September.
KHRUSHCHa;V: ...We must not devote
more attention to the Yugoslav re-
visionists than they are worth. he
more attention ee pay them, the
greater will be their belief that
they are playing a great part."
(Address of 11 July LOh'h to 3dst
('erman.party congress)
L "V;: '.;uch an action (persistent
strJpcle a.gainot Yugoslav revision-
ist would not raise the authority
of the revisionists, as certain
people pretend. On the contrary, it
would nullify this authority from
the ideolo,vical point of view."
;r,tress of 25 October 1960 to Al-
hanian ational Assembly)
issued by the conference of
world Communist parties in Mos-
cow last November. In so doing,
it undoubtedly hopes to fore-
stall and undercut additional
bloc criticism.
In a probable preview of
the line to be presented at
their congress, regime leaders
addressed district party con-
ferences which met in January
to elect delegates to the na-
tional meeting. These speeches
consistently emphasized the
anti-Yugoslav and anti-Western
fundamentals of Albanian for-
eign policy. The conferences
have also been used to mobi-
lize and express the party's
unity around the leadership and
its policies.
Party Unity
The decision of the party
leaders to hold the congress
this month--without first alter-
ing the internal or foreign pol-
icy line--reflects confidence
in their ability to overcome any
dissension within the party mem-
bership. The =top party leader-
ship is remarkably unified--this
is the prime source of its
This essential
unity has been ex-
pressed in the state-
ments made by various
leaders both before
and after the Moscow
conference. Since
the conference, eight
of the top 13 leaders
have publicly voiced
their agreement with
the party line, and
remainder--except for two
who are out of the country--
will probably put themselves
on record prior to the congress.
Party Opposition
On the other hand, district
party and government officials
are probably not as united, nor
do they necessarily accord full
support to the leadership. The
regime's purge of these levels
last summer probably was to
stem local pressure for a pro-
Soviet orientation of policy.
Since March 1960, the chairmen
of eight of the nation's 28 re-
gional people's councils--the
principal administrative organs
of the state--have been replaced.
Moreover, three regional party
secretaries have been ousted.
Among these was the head of the
Tirana city party committee,
Rrapo Dervishi, who was re-
placed by Premier Mehmet She-
hu's wife, Fiqrete.
Numerous unconfirmed re-
ports state that as many as
500 party members in all have
been ousted since last summer.
Many of these could have been
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CURRENT INTELLIGENCE, WEEKLY SUMMARY
2 February 1961
connected with the abortive re-
volt attempt at that time in-
volving military and "high"
party officials, perhaps in-
cluding 3elishova and Tashko,
This coup, probably Soviet ori-
ented and perhaps Soviet in-
spired, apparently was quashed
before it could assume major
proportions.
Party opposition is not
confined to the functionary
level, and it goes beyond the
question of following Moscow
or Peiping, Pressure for a
moderation of the regime's tra-
ditionally hard-line, Stalinist
internal policies has come not
only from the people but also
from the party rank and file.
The regime has withstood such
pressures--practically no con-
cessions to moderation were
made in 1956 when the bloc "de-
Stalinized"--and it has consist-
ently labeled all pleas for mod-
eration as "revisionist" in-
spired, thus linking reformers
with traitors.
On the other hand, the re-
gime's present pro-Chinese ori-
entation may have been wel-
comed by those party members
at all levels who have resent-
ed Tirana's subservience to
Moscow and has advo-
cated a greater de-
gree of independence
in Albanian foreign
policy. The Yugo-
slav break with the
Cominform in 1948
was welcomed by much
of the Albanian-par-
ty because it ended
an artificial friend-
ship with--and de-
pendence on--the
traditional Serbian
enemy. However, par-
ticularly since the
inauguration of
KhrushchevIs "peace-
ful coexistence"
line, the exchange
of 3e:igrade-.' ~:, over-
lordship l or a sim-
ilar relationship
with Moscow may have
been viewed by many Albanians
as a particularly bad bargain.
13loc Disapproval
The USSR and its European
satellites have exerted vari-
ous, and to date unavailing,
forms of pressure on Tirana in
an attempt to force it back
into line behind Moscow.
The most obvious forms of
pressures have been snubs of
various types. The Soviets in-
formally withdrew their ambas-
sador, V. I. Ivanov, late last
summer, and a successor, Iosif
Shikin, did not arrive in
Tirana until 20 January. Mos-
cow's New Year's greetings to
Albania, omitting the usual
introductory phrase "dear
comrades," conveyed cordial
greetings only to the "fra-
ternal Albanian people" with-
out the traditional reference
to the party or government.
Simi arly, on the 11 Jan-
uary anniversary of the proc-
lamaa.tion of the "people's re-
gime," the only official Soviet
greeting--a cable from Leonid
f3rezhnev to Albania's titular
head of sta-;e, HIaxhi Lleshi--
congratu? ated only the Albanian
peoplo on their:' successes. On
L'LI3: ICJJT: "At the meeting of the
Coraruntst and wor.ksers' parties 1-the
I?.oscoz, conference "the Albanian
representative xhg7 developed a
:dogmatic and sectarian concept."
(:.e?ort on Ioscoze conference to salt
';ervnan. party central corvnittee
nleavL, 13-15 December 1960)
SECRET
HOXFIA: "Our party has never made
and will never make concessions on
questions of principle.... Any
concessions made to the enemies of
principle lead to the weakening of
the party.... There is no force
which could divert our party from
this path." (Address to 4-6 Janu-
ary 1961 meeting of Tirana party
organization)
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(.:TJRRaENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
the same (:lay, an article about
Albania in Bulgaria's chief par-
ty net+,, spaper omitted the custom-
ary tit:' "comrade" when refer-
rink, to oxha.
Previously, East German
party boss Ulbricht made an
unprecedented attack on another
bloc leader when on 10 December
he publicly accused Albanian par-
ty leader Enver Hoxha of having
maintained a "dogmatic and see-
tarian position" at thugs-
cow conference. This
degree of public po-
litical pressure has
never been exerted
against a bloc mem-
ber. The bloc used
such tactics against
Tito, but only after
he had been ousted
from the Cominform.
Ulbricht's pub-
lic charges have not
as yet been echoed
by other Communist
leaders,
Vulnerability
the .'cononly
k;V idCnCe is in-
conclusive as to how
much economic pres-
sure the bloc may
have exerted on Al-
bania prior -to the
Moscow conference,
'It is. :n.own, f: owevor,
that J.t was Co1iffimu-
t.iist CIii.?ia---not the
i;'it~- _ G17.at -purchased
;:;rain i`o ' Albania
rom ~2011.~ ioc sources
sion of education to the coun-
tryside, and public health
programs.
Albania has adopted a gen-
erally conservative Third Five-
Year Plan (1961-65), probably
because of the regime's doubts
about the extent of foreign aid.
likely to be received during
the plan period.
For over 40 years Albania
as had :. serinns yearly o.oln-
J /
FINANCING OF ALBANIAN COMMODITY
TRADE DEFICIT, 1950 -1965
(ESTIMATES IN MILLIONS US DOLLARS)
Known other hloc long-
term credits
Known Soviet long-term
credits
1950-55 1956-60 1961-65
" Based on an assumed growth in inports of 25% ( the estimated
minimum increase needed to meet Third Five Year Plan Goal:.)
and the scheduled growth in exports of 55%.
in I1;t0 v'lh.e:nx Albanian (do"llest,ic
production fell short
third coa ecutive year.
The; past ten years of eco-
nomic progress have not altered
Alba -1i.a'S. position as the least
econc:nical.ly developed country
in Europe. The regime has
sought with some success to di-
vert public attention from the
lot=,' i ca zdard of l iv:_ng by insti.-
tutirlg loss ,: ?~~,;; with a high
propaganda value, such as highly
public-.zee' price cuts, exten-
:iiodity trade del
'i.c:it-?-rail i11-
since 1950) from about 50 to 75
percent of the value of imports--
and has had to depend on outuide
hel.p. Credits already promised
.
for 1.961-65 from the Soviet
bloc--the main. source of aid--
are insufficient -to achieve the
1965 goal of a 50- to 55-percent
increase in Albanian exports to
balance trade even at the 1960
level of imports, WVithout ad-
ditional credits, further indus-
trialization of Albania could
be inhibited, although the
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CURRR ENT INTFT.,LIGENCE WEEKLY SUMMARY
2 February 1961
population's simple level of
living would not necessarily
sae lowered.
The Soviet bloc could cre-
ate a very difficult economic
situation in Albania by refusing
to grant new credits, by with-
drawing aid already promised,
or by imposing an embargo on
exports. Moscow, however, ap-
parently is not contemplating
using extensive sanctions at
this time. Albania either has
signed or is about to sign a-
greements with Moscow and its
satellites for trade and pos-
sibly aid for 1961 and the en-
suing four years--although not
necessarily in the amounts need-
ed to support even the modest
Third Five-Year Plan.
Other Courses of Bloc Action
Moscow has already estab-
lished the justification for
any action it may take against
Albania. Although the Moscow
declaration is loose enough to
permit varying interpretations,
it explicitly condemned both
dogmatism and sectarianism.
There are a number of le-
vers--other than economic--
with which Moscow could seek to
affect a change in Albania.
These include overt disapproval,
direct encouragement of anti-
Hoxha elements in the Albanian
party, and military interven-
tion. Nevertheless, Moscow
has been--and, for the immediate
future, apparently will continue
to be--unwilling, if not unable,
to utilize such measures fully.
A major Soviet considera-
tion is, of course, Chinese Com-
munist support of the Albanian
position, Sterner Soviet stric-
tures against Albania might lead
to a worsening of already poor
Soviet-Chinese relations, with
China viewing any severe crack-
down on Albanian "dogmatism';' as
a challenge to its own position.
During the January visit
of an Albanian economic mis-
sion, the Chinese assured the
Albanians of continued political
support. However, only in the
expectation of reaping further
major political gains would the
Chinese be likely to give large-
scale economic aid to Albania.
Despite the small size of the
aid that would be involved in
relation to China's total eco-
nomic capabilities, a significant
additional burden would be im-
posed on its already strained
balance of payments. Either a
substantial increase in its total
aid program or a considerable
cut in its aid commitments to
other countries would be required.
Other deterrents to conclu-
sive Soviet action against Tirana
include the lack of responsible,
pro-Soviet Albanian leaders as
replacements for the Hoxha leader-
ship and the resulting possi-
bility that any change in the Al-
banian leadershipmight.bring forth
even greater problems. More-
over, the image Moscow wishes
to project before the world,
particularly before the emergent
nations--already damaged by sup-
pression of the Hungarian revo-
lution--would be further black-
ened by any overt move against
Albania.
Given these considerations,
the USSR for the time being will
probably seek to demonstrate its
displeasure with Tirana overtly
with words rather than dramatic
deeds. It will, however, prob-
ably work covertly within the
Albanian party to force an even-
tuaai change in Albanian policy or
a shake-up in the Tirana regime.
Moscow will probably maintain a
veneer of normal party relations
by sending a delegation to the
Albanian congress, but the level
of the delegation is likely to
be so low as to constitute a snub.
The Soviets would almost
certainly feel considerably.. less
restraint in taking. more force-
ful forms of actions against
Tirana should S.ino-Soviet re-
lations worsen or should Pei-
ping somehow be persuaded to
cease support for Albania.
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SECRET
oil--especially in Europe--but
more importantly the growing
competition of oil produced out-
side the Middle East. By the
fall of 1961, at least 500,000
b/d of North African oil could
be competing--with substantial
advantages--with Persian Gulf
crude.
CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
MIDDLE EAST OIL DEVELOPMENTS
Production of oil in the
Middle East--Kuwait, Saudi
Arabia, Iran, Iraq, Qatar, and
the Neutral Zone--reached an
all-time high of about 5,250,000
barrels a day (b/d) in 1960--up
more than 15 percent from 1959
--and prospects are for another
record year in 1961. The annual
rate of increase will decline
over the long term, however,
and future increases will fall
far short of the 23-percent
yearly average for 1949-59.
This reflects the slower
growth in free world demand for
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
639 '- 5.3
446 30.2
728 63.2
B52
17.0
975114.4
r 1950 59 FINAL; 1960 TENTATIVE
10123 A 2 FEBRUARY 1963
The production pattern
within the Persian Gulf remains
relatively constant. Kuwait is
the dominant producer, followed
by Saudi Arabia, Iran, and Iraq;
this year Kuwait will certainly
retain leadership, although Iran
might outproduce Saudi Arabia.
The Shah recently stated that
Iran must regain the position of
leading producer, which it held
from 1913 to 1950, when the
Mossadeq nationalization fiasco
shut down the country's oil in-
dustry.
Arab plans to set up a re-
gional organization of oil-ex-
porting states were realized in
September 1960 when Saudi Arabia,
Kuwait, Iraq, Iran, and Venezuela
announced the formation of the
Organization of Petroleum Ex-
porting ,Countries (OPEC). The
leaders of the scheme were the
Saudi oil minister, Sheik.. Ab-
dullah Tariki, and Venezuela's
minister of mines and hydrocarbons,
Juan Perez Alfonzo. Its members
have about 80, percent of the
free world's known oil reserves
and account for almost two thirds
of the oil moving i.n ;:in'ternational
trade. However, OPEC has serious
structural and conceptual weak-
nesses which reduce its threat
to the international oil industry.
A major scheme of Tariki
and Perez calls for international
prorationing--a plan whereby
Iran, Venezuela, and the major
Arab producers would limit pro-
duction, share markets, and thus
maintain high prices. However,
international prorationing would
be extremely difficult, if not im-
possible-without the cooperation
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MIDDLE EAST CRUDE OIL PRODUCTION
THOUSAND BARRELS PER DAY
OD PERCENT INCREASE OVER PREVIOUS YEAR
344 39
1,091115
1,094 0.3
21 -94
26 23
60 131
1, 396 122.6
1,383 -0.9
1;625 17.5
2
953 13
96511
1 015 2.3
1,05 7.
1,240 13.2
1711 31 IRAQ
387 117
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2 February 1961
FREE WORLD OIL PRODUCTION
THOUSAND BARRELS PER DAY
us
7,019
(39.8%)
VENEZUELA
2,835
(16.1%)
IRAN 329(2.4%)
IRAQ 675(4.9%)
SAUDI ARABIA 1,095 (6.6%)
IRAN 927 (5.6%)
IRAQ 852(5.2%)
NEUTRAL ZONE 116(0.7%)
QATAR 169 (1.0%)
OTHER
2,580
(14.7%)
SAUDI ARABIA 1,240 (7.0%)
IRAN 1,050 (6.0%)
IRAQ 975 (5.5%)
NEUTRAL ZONE 132(0.7%)
of the Western oil industry and
the major consumers.
For the Middle East, the
principal consumers are Western
European countries, which also
take a sizable portion of Vene-
zuelan petroleum exports. They
are,not:,:as dependent. on Middle
East-oil as,the Arabs believe;
EuropeLIs plagued with a coal
surplus, partly because of the
heretofore cheaper price of oil.
Proration implies at least
stable and possibly increased
oil prices. Under such condi-
tions the continuing shift from
coal to oil might be slowed
down and perhaps even reversed.
In addition, the Algerian
and Libyan oil fields will pro-
vide Europe with increasing
quantities of crude oil. France
already has cut its imports of
Middle East crude sharply.
Neither Libya nor Algeria was
represented at the Baghdad talks,
and neither is likely to sub-
scribe to a prorationing scheme.
France sees Algerian oil as a
means to end the potential
danger to its economy which
could result from an Arab de-
nial of oil. Libya is planning
to increase output as quickly
and to as large an extent as
possible, because without oil
revenues it remains dependent
on foreign aid for survival,
Since September the apparent
unity of the OPEC members has
been eroding. The Shah of Iran
already has characterized pro-
rationing as "a nice theory but
unrealistic in practice." Rather
than calling for a slowdown in
Iran's rate of growth, the Shah
demanded that his country re-
turn to its pre-1951 position
of accounting for 60 percent of
the area's output. He also de-
manded that Iran receive at
least half of the annual in-
crease in Middle East production.
Iran currently accounts for
slightly more than 20 percent
of the total.
In Venezuela, Perez' oil
policies are coming under severe
criticism. Caracas, facing a
financial crisis, appears to be
in no mood to voluntarily re-
strict its potential for in-
creasing its oil revenues. Oil
activity in that nation has
dropped sharply since 1958. In-
fluential Venezuelan business
groups, citing substantial pro-
duction increases in the Middle
East, and noting that Venezuela
is losing oil markets even in
SECRET
SAUDI ARABIA 965(7.0%)
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
Latin America, are urging the
government to create an atmos-
phere more favorable to the oil
industry.
Sayid Ahmad Said Omar, a
prominant Kuwaiti oil official,
recently said: "The more I look
at it, the less I see how prora-
tioning could work in reality.
To be effective it would have
to be joined by every single
producing country. Otherwise
OPEC would only lose markets to
any of the sources of supply
that failed to participate."
I R A N
~\\h``\\1C//fY
U
K
WAIT
~ra,4
SAUDI
ARABIA
Nevertheless, efforts to widen
the area of control and the
leverage which the producin.?
countries can exercise are cer-
tain to continue and to exacer?
bate periodically relations be-
tween Riddle East governments
and the oil companies and their
governments.
Kuwait
In early December 1950 the
puler of Kuwait awarded the
Royal Dutch Shell Company the
country's offshore concession
in exchange for a standard 50-
50 profit-sharing formula plus
.an $84,000,000 bonus--payable
in installments--the largest
ever made in the area. Although
Kuwait's offshore territory is
still unproven, it is almost
certain that the geological
Magwa trend--the source of much .
of Kuwait's oil--extends off-
shore. Bidding for this con-
cession---the last significant
unleased area in the Persian
Gulf--was intense. Italy's
government-owned oil company,
the National Hydrocarbons Enter-
prise (ENT), offered a 75-25:
split in favor of Kuwait but
was turned down because it
Aramco
Shell
Italian concessions(SIRIP)
Dubai Marine Areas Ltd.
Arabian Oil Co. (Japanese)
Abu Dhabi Marine Areas Ltd.
Iran-Pan American Oil Co.
Development Petroleum
0 (Trucial Coast)
Iranian Oil Exploration
and Producing Co.
lacked assured international.
markets.
The basic reason for
awarding Shell the concession
was the company's international
marketing facilities, Also,
other major bidders already had
access to more Persian Gulf oil
than they could currently use,
and the government felt they
would have less incentive to in-
crease production, rapidly.
According to the Kuwaiti
Government, Shell's bid offered
almost the smallest share of
the prof its-; with all "fringe
benefits" included, it amounted
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
Petroleum Development
(OMAN) Limited
Petroleum Development
(TRUCIAL COAST) Limited
Aramco
Aramco, preferential
concession rights
Kuwait Oil Company
Getty Oil Company and
American Independent Oil Co.
Qatar Petroleum Company
a record 1,625,000 b/d of the
lowest cost crude oil in the
world--an increase of 17.5
percent over 1959. Oil revenues
reached about $418,000,000,
including relatively small pay-
ments from the Japanese-owned
Arabian Oil Company (AOC) and
the American Independent Oil
Company (P4nnoil). AOC holds
the concession for Kuwait's--
as well as Saudi Arabia's--
half-interest in the neutral
zone offshore area, and Amnoil
has that for Kuwait's onshore
half-interest in the Neutral
Zone. Kuwaiti officials, an-
ticipating revenues of $460,-
000,000, were concerned when
the August cut in posted crude
oil prices reduced that amount
by more than $30,000,000. They
readily joined in setting up
OPEC.
Subsequent claims by OPEC
tiiiat iiuWF~it a. greed L t,
SECRET
to only 66.3 percent, as com-
pared with the Italians' 78.9
percent and 82.8 percent from
a Japanese company. However,
the Shell contract offered the
prospect of by far the greatest
volume of total sales and thus profits.
The Shell concession in-
cludes a provision granting
Kuwait the right to buy a 20-
percent participation in the
company exploiting the oil--to
be paid for when a deposit of
commercial quantity is found.
The government will probably
assign this right to the Kuwait
National Petroleum Company
(KNPC), formed on 9 December
1960. KNPC will be held
60 percent by the government
and 40 percent by Kuwaiti citi-
zens.
The Kuwait Oil Company
(KOC), which holds the onshore
concession, during 1V30 Produt;eu
Petroleum Concessions, Limited
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
cut production have been de-
nied. It appears, however,
that Kuwait would be willing
to consider increasing produc-.
tion at a rate slightly less
than that of the annual increase
in the world demand for oil.
Even this vague position is
well qualified. The government
apparently would insist that
AOC, Amnoil, and Royal Dutch
Shell be excluded from such
market restraints.
Production in 1961 might
exceed 2,000,000 b/d. Physical
capacity--wells already drilled
and transportation facilities
already in operation--would en-
able KOC to increase output to
more than 4,000,000 b/d on very
short notice.
Saudi Arabia
Saudi crude oil output in
1960 was 1,240,000 b/d--up 13.2
percent over 1959, the first
sharp increase in four years.
Most of the 145,000-b/d increase
came from the Arabian American
Oil Company (Aramco), field at
Safaniya. Demand for Safaniya
heavy crude, which has a high
fuel-oil content, is increasing
--especially in Europe. In Oc-
tober Aramco completed construc-
tion of an $11,000,000, 73-mile,
30-inch pipeline connecting the
Safaniya field to the Persian
Gulf oil port of Ras Tanura.
With this line, plus the exist-
ing 22-inch line, Safaniya out-
put can be increased to 215,000
b/d.
While Saudi petroleum ex-
ports as a whole increased sub-
stantially in 1960, shipments
through the American-owned Trans
Arabian Pipeline (Tapline),
which carries Saudi oil to the
Mediterranean, were down. Tap-
line operated at 242,000 b/d
in 1960, or about 52 percent of
capacity.
The decrease reflects the
Saudi Government's insistence
on pressing its so-called Sidon
claim, a demand for half the
profits of Tapline retroactive
to December 1950--amounting to
more than $200,000,000 in back
royalties and charges. Tapline
officials now are operating the
line at about the break-even
point to avoid a further build-
up of the Saudi claim. Under
the terms of the present Tapline
agreement, which the company is
attempting to change, operation
A An Aramco seismograph party in Empty Quarter of Saudi Arabia.
B SIRIP drilling platform under construction in Persian Gulf.
C Oil "lake" formed by blowout at Qom, Iran.
D Esso pipe being floated ashore along Libyan coast.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
of the line would cease to be
prof itable beyond 1964 in any
event.
Aramco on 13 July opened
a new 17.5-mile, 34-inch pipeline
from the Qatif field to Ras
Tanury.. This line would make
it possible for the oil now go-
ing through Tapline to be di-
verted to the Persian Gulf port
for marketing.
Relations between Aramco
and the government were correct
if not cordial during 1960. None
of their disagreements were
settled but neither side pressed
hard for a solution. Instead,
Saudi oil boss Tariki, with the
backing of Crown Prince Faysal,
devoted most of his efforts to
winning, approval of the other
Arab oil producers and Iran for
a common front against the oil
companies. Largely out of these
efforts sprang the OPEC.
The reassumption of power
by King Saud on 21 December prob-
ably presages some improvement
in the Saudi Government's rela-
tions with Aramco. Although
Tariki's title has been elevated
from director of petroleum af-
fairs to that of minister of oil
and mineral resources, he will
probably no longer have so power-
ful a voice in formulating gov-
ernment oil policy. On 6 Jan-
uary, Mecca radio announced the
formation of a Higher Council
for Planning and Petroleum which
will be presided over by King
Saud or, more usually, by Prince
Talal, minister of finance and
economy. ,'embers include the
ministers of trade, communica-
tions, agriculture, and oil.
The council will probably
concentrate on achieving short-
run increases in oil revenue-
which in 1960 was more than
$320,000,000--in order to finance
the government's new development
program and the anticipated in-
crease in the King's expenses.
Thus, the Sidon dispute might
be settled for a substantial
cash payment, and other issues
outstanding between Aramco and
and the government might be re-
solved in similar fashion.
A sharp increase in crude
production in the last half of
1960 lifted Iranian output to
1,050,000 b/d for the year. As
a result, revenues are expected
to total about $287,000,000, at
least $25,000,000 more than the
government expected. Production
from the fields of the Consor-
tium--the group of Western
companies operating most of the
country's oil industry--reached
a record 1,214,192' b/d in Oc-
tober 1960 and might average
1,300,000 b/d in 1961,a level
not previously expected before
'I ncn
The Consortium-built Kharg
Island oil terminal was opened
on 8 November 1960 and will be
a major factor in increasing
Iranian output. The new 100-
mile, 26- to 30-inch pipeline
from the Gach Saran field to
Kharg Island, 26 miles offshore,
has a capacity of 390,000 b/d.
Production at Gach Saran--dis-
covered in 1928 and considered
by some the world's largest
oil field--had been limited to
about 57,000 b/d until 1960,
chiefly because there was little
demand for the field's relative-
ly heavy crude. With the
switchover from coal to fuel
oil, however, Gach Saran is
assuming more importance.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
25X1
In addition to the Consor-
tium, three other groups are
active in Iran. The Societe
Irano-Italienne des Petroles
(SIRIP), jointly owned by the
Iranian Government and ENI, re-
portedly has a major discovery
in the company's offshore Per-
sian Gulf concession. While
reports are conflicting, it now
appears probable that the capac-
ity of the test well is 16,000
b/d, large even by Middle East
standards. SIRIP's onshore
activities have been singularly
unsuccessful. ENI was the first
company to break the standard
50-50 profit-sharing formula by
giving the government a 75-per-
cent share of the profits.
The Iran Pan American Oil
Company (IPAC), a joint Iranian
Government and private American
venture, after months of off-
shore drilling failed to find
oil in commercial quantities.
According to last reports IPAC's
test well was down nearly 12,-
000 feet--almost a mile deeper
than SIRIP's test--but prospects
for success are slight. IPAC
also agreed to a 75-25 split
with Tehran.
The Iran Oil Company (IOC)--
the exploration arm of the gov-
ernment-owned National Iranian
Oil Company (NIOC)--after nine
years' effort has successfully
tapped the 30-mile-long Alborz
field near Qom in north-central
Iran 100 miles south of Tehran.
In 1956, Alborz 5--the fifth
well drilled on the structure--
blew wild for 82 days at a rate
of 60,000 b/d; before it col-
lapsed. Alborz 8, however, has
been confirmed as a production
well in excess of 20,000 b/d.
Exploitation of this field is
certain to be slow, since it
is handicapped by its great
distance from the Persian Gulf
oil terminals.
IOC has also announced that
the Sarajeh field, discovered
in 1958, has proved reserves
of 7 trillion cubic feet, making
it one of the world's largest
gas fields. One test well pro-
duced at the rate of 2,800
barrels of crude and 40,000,000
cubic feet of gas daily.
The Shah has warned the
Consortium not to make further
price cuts without consulting
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Oil field
Oil pipeline
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
the government.
He also demands
a change in the
50-50
formula
and an all-out effort
by the com
panies to re-establish Iran as
the leading producer in the
Persian Gulf. If the SIRIP find
is fully confirmed, pressure on
the Consortium for a more favor-
able deal will increase.
Iraq
-
The Iraq Petroleum Company
(IPC) has been negotiating in-
termittently with Baghdad since
Prime Minister Qasim came to
power in mid-1958. At almost
every bargaining session Qasim
has put forth new demands, and
the company has ultimately-albeit
reluctantly--acceded to them in
some dgree. Last July, IPC re-
fused to pay new Basrah port
dues---increased unilaterally
about 1,300 percent--and halted
production from Iraq's southern
fields, which normally account
for about 25 percent of the
country's total output. However,
the company eventually capitu-
lated, paid the new fees under
protest, resumed production on
a reduced scale in August, and
by September was producing a
normal 240,000 b/d.
Last year IPC produced
about 975,000 b/d--14?.4 percent
more than in 1959--and this
year, barring political problems,
will exceed 1,000,000 b/d. Work
continues on expanding the ca-
pacity of the pipelines which
carry oil from Iraq's northern
fields to the Syrian port of
F3aniyas and the Lebanese port
of Tripoli. By the end of 1960,
capacity had been lifted to
700,000 b/d--up 200,000 b/d over
1959; plans call for 960,000
b/d by 1962.
Construction of a tanker
terminal in the Persian Gulf
24 miles off Fao has been slowed
by technical problems but is
expected to be completed later
this year. Export capacity from
the southern fields will then
increase from the ?present.
240,000 b/d to about 440,000
b/d.
Under concession terms, the
government is entitled to 12.5
percent of IPC crude production
either in cash or kind; last
year this amounted to more than
120,000 b/d. The Baghdad regime,
however, failed in its efforts
during 1960 to market any of
its share of crude and probably
will never succeed.until,it is
willing to take less than the
going market price or accept
payment in soft currency.
Partial French ownership of
IPC continues to muddy govern-
ment-company relations. The
Iraqi press is calling on
Baghdad to nationalize the
23.75-percent French share in
IPC as a gesture of solidarity
with the Algerian rebels. Qasim
would be reluctant to jeopardize
oil revenues, which in 1960 ap-
proximated $270,000,000, but he
might make such a move in.an
emotional moment.
Neutral Zone
Kuwait and Saudi Arabia
share half-interests in the
Neutral Zone, which was estab-
lished by the Uqair Boundary
Convention of 1922. Kuwait in
19.48 assigned its onshore in-
terest to the American-owned
Amnoi:l,, and Saudi Arabia gave
the concession for its share
onshore to the Getty Oil Company.
Recently the two countries have
been attempting to abolish the
zone by dividing the area be-
tween themselves.
The American companies in-
creased output almost 14 per-
cent last year over 1959 to
132,000 b/d. The Neutral Zone,
however, probably will never
become a major oil producer. It
is the only Persian Gulf oil
area which must pump some of
its oil.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
The Japanese AOC secured
both the Kuwaiti and Saudi in-
terests in the Neutral Zone's
offshore territory in late 1958
and early 1959. Using American
drilling companies, it discovered
oil quickly, and now has six
producing wells rated at a total
of about 32,500 b/d. The AOC's
plans call for drilling 30 wells
this year and 36 wells each year
in 1962, 1963, and 1964. Ex-
ports to Japan are expected to
begin in either January or Feb-
ruary this year. To begin pro-
duction:as quickly as possible,
the company will use five old
tankers as floating storage
tanks.
Libya and Algeria
Libya and Algeria soon
will become important world
suppliers of crude oil. Algeri-
an crude is already flowing to
European markets through two
major pipelines. The 412-mile,
24-inch pipeline, from the Hassi
Messaoud fields to the Mediter-
ranean, whi ch opened in October
1959,
is expected to average
about
180,000 b/d this year;
plans
call for
increasing
out-
put to
500,000
b/d by 1963
or
1964.
A second
24-inch line
from Edjele to the Tunisian
port of Cekhira, 460 miles away,
was inaugurated on 10 October
1960, and also is expected to
average about 180,000 b/d
throughout 1961; in 1962 the
French hope to increase this
to 220,000 b/d.
Although Algerian rebel
activity interrupted early French
efforts to move oil to the coast,
there has been no appreciable
difficulty with either of the
24-inch lines, and the French
apparently expect none. Paris
has been seeking favorable
treatment for Algerian crude
within the Common Market, thus
far without success. In 1958,
the six members of the European
Community imported about 1,600,-
000 b/d of crude oil, of which
1,200,000 came from the Persian
Gulf. By 1965-67 Common Market
demand is expected to reach
2 FEBRUARY 1981
5.L
iL Bahi*'; : Marsa al Burayqah
?C~adame I P0 L I T A N I A Amal
~Oued Tahra Dahra ~Zeltenl
IOPT-(I ? (ESSO)
A .Atshan Beda
C,
F E Z Z A N
/ NIGER
??T''`,
OSssoil Company
TezasGulf P ducng
Gulf Oil Conpany lbya
Royal Duleh Shell
Standard Oil Company (N 1.)
Compagnie Patrols Tumsm-lrbya
Compagnie des Pet1.1ns d'Algena
Comgagnie Fran- to des Petroles (Algeria)
Sle Nallonete des Petroles d'ASuRaine
Compagnie de Recherches at d'FFp sirefipn ne Petroles Cu Sehasa
51 e Nationale de Racherches el d'Geploilalion des Petroles no Algiers
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MOROCCO
1 ??
MAURITANIA N
I ?`
J MALI
JHassi R' Mel (Gas)?
A L G E R I
In AzzeneO
0
In Salah? Gas Fields
0 0 (CREPS)
Oil field
Oil pipeline
"""""' Proposed oil pipeline
---'-- Oil pipeline under construction
On-
T ras Gulf
Gulf
Wit
E..
CPT L
CPA
OFF A
SNPA
CROPS
$N Repal
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CURRENT INTELLIGENCE WEEKLY SUMMARY
2 February 1961
2,500,000 b/d, of which Paris
hopes to supply about 1,000,000
b/d.
Even without special treat-
ment.Algerian crude could com-
pete with that of the Persian
Gulf because of its close prox-
imity to the'. European market .-The
'The
recent activities of OPEC might
also lead Europeans to seek to
limit dependence on Persian Gulf
crudes.
By mid-1961 the Standard
Oil Company (N.J.) probably will
have completed construction on
its 100-mile 30-inch pipeline
from the prolific Zelten fields
in north-central Libya to a
newly constructed oil port at
Marsa al Burayqah. Initially
the line will have a capacity of
100,000 b/d by gravity flow, but
this can be increased substan-
tially through the addition of
pumps. Another American group,
the Oasis Oil Company, is also
planning to construct a pipeline
this year.
Libyan oil, found relatively
close to the surface, and gener-
ally between 100 and 150 miles
from the coast via a flat plain
should have a substantial com-
petitive edge--a saving of 40
cents per barrel in transporta-
tion costs alone--over Persian
Gulf crude. Operations should
be highly profitable, as they
avoid the high cost--as well as
possible interference--of the
Suez Canal and intercountry
pipeline routes.
Whom>the: OPEC was estab-
lished, Cairo lost part of its
voice in Arab oil affairs, at
least temporarily. Technically
the UAR was excluded because it
is not a net--exporting country.
Actually,Iran, whose membership
was considered vital to the OPEC,
would not have joined if the
organization included the UAR,
which has severed diplomatic
relations with Iran.
This year Cairo will buy
11,250,000 barrels of crude Oil
from the USSR and an additional.
9,375,000 barrels of Saudi oil
from the American-owned Caltex
company. Egypt will also have
to import more than 4,000,000
barrels of refined petroleum.
Local crude production amounted
to-ionly 62,000 b/d in 1960 and
much of this had to be exported,
largely to Italy, since it was
unsuitable for Egyptian refin-
eries. Expansion of local re-
fineries this year with Soviet
bloc aid should enable Cairo to
refine most of its own output,
In Syria, a West German
firm continued to expand its
modest oil discovery at Suwaydah
in the northwestern corner of
the country. The eighth well
at Karatchok reportedly tested
at 3,500 b/d of very heavy
crude oil. The Karatchok field,
discovered by an American firm,
was taken over bye the govern-
ment in 1958. The 20,000 b/d
Czech-built refinery at Homs
continues to supply most of
the region's needs. Crude for
the refinery is supplied by the
Iraq Petroleum Company and Tap-
line.
The UAR has not pressed
its claim for increased transit
lees from Tapline pending a
solution of the closely related
Saudi Sidon claim. If the Saudi
claim remains unresolved, how-
ever, the UAR might make good
on its still-.outstanding threat
to force a shutdown of the line.
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