CURRENT INTELLIGENCE WEEKLY SUMMARY

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CONFIDENTIAL
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CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO.
OCI NO. 0298/61
21 September 1961
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
DOCUMENT NO.
NO CRi3NGE IN CLASS.
^ DEC";ASStFIED
CLASS. CW: ijEO TO:
N NT DATE:
AUTH: HR T 2
TS sic otU
DATE: REVIEWER:
-' p
State Department review completed
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent the
immediate appraisal of the Office of Current Intelligence.
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T
CURRENT INTELLIGENCE WEEKLY SUM
WEEKLY REVIEW
EAST-WEST RELATIONS
Moscow promptly responded
to President Kennedy's state-
ment of 13 September to neutral
leaders with a Foreign Ministry
announcement that Gromyko would
enter into an "exchange of
opinions" on Berlin with Sec-
retary Rusk during the UN
General Assembly session. This
suggests that Moscow has not
foreclosed the possibility
of negotiating a settlement
rather than proceeding with an
East German peace treaty by the
end of the year, and is in line
with the increased Soviet stress
on negotiations following
Khrushchev's speech of 10 Sep-
tember in Stalingrad.
The Foreign Ministry
statement noted that both the
President and the British Gov-
ernment had made statements
expressing readiness for
"serious talks" on Germany
and other problems. This line
was apparently intended to
mean that the President's
statement had overcome Khru-
shchev's doubts of US willing-
ness to conduct "businesslike
negotiations." The Soviet
statement also sought to imply
a tacit assumption that Soviet
terms--a peace treaty and a
settlement on Berlin in that
context--would be the basis
for the talks.
Soviet propaganda has
given wide publicity to the
Rusk-Gromyko talks but has
maintained an ambivalent line
on the possibility for a success-
ful outcome. Moscow noted that,
while President Kennedy in his
letters to Presidents Sukarno
and Keita had expressed a
21 Sept 61
willingness to find a way out
of the impasse over Berlin, the
US still held to "old, unrealis-
tic positions." The communique
of the Western foreign ministers
meeting in Washington was criti-
cized as "vague" and "failing
to answer the main question" of
whether the West was willing to
seek a "peaceful solution to the
German and Berlin problems through
negotiations."
On the other hand, a Polish
diplomat told an American ob-
server that he was convinced
that the negotiations during
the UN session could lead to a
solution which would safeguard
the prestige of all concerned,
The US Embassy in Moscow reports
that according to contacts with
the Foreign Ministry and information
from other diplomats, it is
clear the Soviets are deliberate-
ly taking the line that the
Berlin question will be resolved
peacefully. Gromyko told the
Danish foreign minister during
a stopover in Copenhagen that
the USSR was receptive to nego-
tiations, presumably referring to
formal East-West talks.
In anticipation of the
talks in New York, Moscow has
sought to exhibit a flexible
approach to possible alternative
solutions for Berlin. In his
conversations with former French
Premier Paul Reynaud, Khrushchev
agreed that'a settlement based
on the status quo was a sensible
policy and that the USSR sought
only a "Juridical" basis for the
status quo. He went on to add
that such a settlement need not
involve de jure recognition of
East Germany. As for access to
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Berlin, Khrushchev told Reynaud
that after a peace treaty it
would be handled "practically"
as it is now but on a different
basis--that is, no longer on
the basis of occupation rights.
He also made it clear that
access arrangements would have
to be worked out with the East
Germans. Khrushchev said that
all forms of access could be
guaranteed by an "international
agreement" which would be de-
posited at the UN, implying
that the Soviets would partici-
pate in guarantees.
Khrushchev also used a
message to the Interparliamentary
Union to stress the possibility
of adequate guarantees for Ber-
lin. Although he was vague as
to the form and procedure for
implementing any guarantees,
his message of 13 September
asserted that "full freedom'
of communications for
the free city of West Berlin
will be guaranteed by agree-
ment with the German Democratic
Republic and through active
guarantees." While denouncing
"warlike circles" in the West
for resorting to threats and
provocations, Khrushchev claimed
that the Soviet Union would
"spare no effort to have the
question of Germany resolved
on the basis of agreement."
He added that the Soviet Govern-
ment was ready to negotiate
"with leaders of the Western
powers," provided that the
talks would not be used to delay
the signing of a peace treaty.
In the week preceding the
opening of the UN General
Assembly, Moscow raised the
possibility of a UN role in the
German problem. In reply
to a question by Reynaud, Khru-
shchev said he would favor
transferring the UN headquarters
to West Berlin. He pointed out
21 Sept 61
to Reynaud that the USSR had
offered to have the security
of West Berlin guaranteed by
either the UN, neutral states,
or the three Western powers plus
the Soviet Union. Izvestia
picked up this idea of a transfer
of the UN in its editorial on
the opening of the General
Assembly session. It stated
that such a plan would deserve
serious consideration and that
transferring the UN to West
Berlin was an example of the
"favorable opportunities" which
the creation of a free city
would provide for West Berlin.
Both Izvestia and Pravda
stresse at the admission
of both German states would
"benefit the cause of peace."
Pravda also asserted that in
view of the tense international
situation, "new and even greater
efforts" are demanded from the
statesmen attending the UN session.
The more conciliatory Soviet
line on Germany has been balanced,
as in the past months, by pro-
nouncements on Soviet military
preparations in connection with
the heightened tensions over
Berlin. In a series of articles,
Marshals Malinovsky, Vershinin,
and Moskalenko have stressed the
quality of Soviet armaments and
the continued preparations to
strengthen Soviet defenses.
Malinovsky stated that "we must
prepare our armed forces for a
strenuous, heavy, and excep-
tionally fierce war." Moskalenko
boasted that Soviet forces pos-
sessed powerful strategic rockets
which made it possible "to at-
tain the strategic goals of a
war within a short period of
time."
Moscow apparently hopes to
exploit the disarmament issue
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CURRENT INTELLIGENCE .'WEEKLY SUMMARY
in an effort to influence the
Western positions on negotiations
over Berlin. The Soviet repre-
sentative in the bilateral US-
Soviet disarmament talks in
New York virtually accepted a US.
declaration on principles to
govern a future disarmament con-
ference. He stressed the import.
tance of a joint statement "at
this juncture" as a means of
lessening international tension
and claimed that the USSR was
compromising for the sake of
"major political considerations."
The switch in the Soviet
attitude toward the US position;:
suggests that the Soviet leaders
hope to use an agreement on
disarmament principles as a
sign of their interest in con-
structive negotiation with the
US. The Soviet leader may also
see an agreement on disarmament
principles as a useful gesture
to improve the general atmosphere
for the talks with Secretary
Rusk.
The Soviet reaction to
the US resumption of nuclear
testing followed the line fore-
shadowed in Moscow's justifi-
cation"of its own test. Bloc
propaganda charged that the US
tests proved that preparations
had been under way for some time,
and that US haste in resuming
tests exposed the "hypocrisy"
of the Geneva negotiations on a
test ban.
On 14 September two West
German F-84 fighters, en route
to a West German base on a
training flight from France,
strayed into the Soviet Zone
21 Sept 61
and, when the pilots radioed that
they had less than 20 minutes'
fuel, were directed by West
Berlin's air traffic control to
land at Tegel airfield in the
city's French .rector. The Soviet
controller . at`'-'the Berlin Air
Safety Center (BASC) requested the
French to detain the aircraft
and pilots, and in a formal
statement the Soviet section of
the BASC warned that other air-
craft in the corridors would
suffer if the violators were
released.
The Soviets and East
Germans lodged vigorous protests,
denounced.the Western power`s
for complicity in staging a
provocation to torpedo negotia-
tions between the USSR and the
US, and sought to assert East
German responsibility for air
traffic. On 17 September the
East Germans delivered a note
to the French headquarters re-
questing the French authorities
to surrender the two pilots "for
a limited period of time for the
purpose of conducting an in-
vestigation.'" The Soviet con-
troller at BASC notified the
French that if the fighters
flew out without Soviet permis-
sion, it would cause the most
serious consequences. Simultane-
ously the USSR sent protests
to the three Western powers
and Bonn warning that in "similar
cases" of violations by fighters,
the aircraft would be destroyed
if they refused a request to land.
On 19 September the Soviet repre-
sentative in BASC supported the
demarche of the East Germans
for participation in a investi-
gation of the incident.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SUCCESSOR TO THE UN SECRETARY GENERAL
The UN faces a long period
of turmoil over constitutional
problems arising from the search
for a new secretary general
who will be acceptable to both
the USSR and the West. Soviet
delegates continue to insist
on their "troika" concept, but
Afro-Asian pressure may lead
to eventual appointment of a
single successor. Selection
of so authoritative a figure as
was Hammarskjold, however, is
unlikely.
Burma, the UAR, Sudan, Morocco,
and Iraq. Under this plan the
General Assembly would designate
either the president of the
current session--Mongi Slim of
Tunisia--or outgoing president
Boland of Ireland as interim
secretary general. The pro-
cedure was designed to avoid,
for the present, expected
Soviet vetoes in the Security
Council of any nominee for
the ? 'poS.i,t'i(>n ' of~ Secretary
general.
Hammarskjold's death brought
to a head the fight between East
and West over the 1960 Soviet
proposal for replacing the sec-
retary general with a triumvirate
representing the West, the Soviet
bloc, and the neutrals. The ttroi
ka~ idea was not well received
by the Afro-Asian members, many
of whom recognized that such a
reorganization would paralyze
the Secretariat. However, it
is possible that, in order to
avoid a Soviet veto, UN members
might agree to some version of
the troika in the lower echelons
of the Office of the Secretary
General.
The appointment of a new.
secretary general is subject
to the concurrence of the five
permanent members of the council
plus endorsement by a majority
of the 99-member General As-
sembly. The assembly can, how-
ever, decide that the choice of
a new secretary general is an
"important question" requiring
a two-thirds majority vote.
As a stopgap measure, the
concept of having the president
of the General Assembly tem-
porarily handle the duties of
the secretary general was ap-
parently well received by sev-
eral UN members, including
Boland told the US delega-
tion on 18 September his canvass
of UN members showed that the
procedure would not be easy to-
put across. He reported that
opposition came from "well-
intentioned" delegations which
believe that one man could not
handle both jobs. Other oppo-
sition came from countries
which are promoting specific
candidates for the post and
from the Soviet bloc, which is
sticking to its troika proposal.
Prior to Hammarskjold's
death, most UN members were
agreed that the next secretary
general would come from Asia
or Africa. Mongi Slim, U"Thaint
of Burma, and C. V. Narasimhan
and Krishna Menon of India
have been mentioned as possi-
bilities.
In the meantime, the ad-
ministrative duties of the
,;Secretary General's Office have
been assumed by Narasimhan,
recently appointed chef de cab-
inet in that office; Andrew
Cordier of the United States,
under secretary for General
Assembly affairs; and another
American, Ralph Bunche, under
secretary for political affairs.
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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
EAST GERMANY
The repressive.:policies
pursued by the Ulbri.t ht, . regime
since sealing off West Berlin
on 13 August appear to have
evoked widespread opposition
among the East German populace.,
judging from continued reports
in East German publications of
arrests and trials of antire-
gime elements, particularly
youths. However, legislation
of 20 September gives Ulbricht
legal means to invoke a state
of emergency, suspend constitu-
tional guarantees of individual
rights, regiment the population,
seize property, and change over-
all state planning.. Typical of
the., steps : possible under.: .
these sweeping emergency powers
is the eviction of unreliable
elements from homes along the
Berlin sector and zonal border
and probably the East - West
German frontier areas.
There are indications that
opposition elements in the pop-
ulation boycotted the local
elections of 17 ' September ; an
East German newspaper admits
that Protestant pastors did
not vote.. The general attitude
of the population, nevertheless,
appears to be one ofhopeless-
ness. The regime claims that
"almost 98 percent" of eligible
voters-cast ballots, that 99.96
percent of valid votes approved
the regime's single:slate,, andtt
that only 322 of 215,000 .candi=
dates were not elected.
The forced recruiting of
young men for the armed forces
and security forces apparently
has been one of the major causes
of public resentment. Letters
from most East German areas con-
firm that the regime has used a
variety of pressures, including
imprisonment in labor camps, to
induce young persons--both men
and women--to "volunteer."
The regime claims to have
enlisted more than 174,000 youths
in this manner. Prior to the re-
cruitment drive, over-all GDR
mi.,litary 'strength.., iticludingj;security
for ces, "was.;:'?e$ti sated at 143, 500.
The defense bill of 20 Sep-
tember further increases Ulbricht's
already great powers as chairman
of the State Council and of the
National Defense Council. Keyed
to the alleged threat of "inten-
sifi.ed war preparations by the
West German militarists," the
measure specifies that service
in the armed. forces, as well as
in civil defense, is "an honorable
national duty of the citizens"
of East Germany. All men between
16 and 65 and all women between
16 and 60 are liable to civil
defense duty;.
The key section empowers
Ulbrich, to invoke, a state of
: emergency "ih the event of danger,"
in order to counter an attack
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CURRENT INTELLIGENCE WEEKLY SUMMARY
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against East Germany, or to
fulfill an international treaty.
It does not make clear whether
he has in fact been acting
under this power since 13
August a
The regime's move to im-
prove security in East - West
German border areas has been
building up since 13 August.
The regime is concentrat-
ing a variety of pressures on
the church, which still has a
potential for rallying opposi-
tion.` Evangelical Church
leaders, such as Scharf, who
are identified with the group
supporting continued ties with
West Germany are being publicly
charged with "fascism" and
other crimes, especially cur-
rency manipulations. On 7 Sep-
tember, Neues Deutschland bit-
terly attar ed c ar , reviving
old charges that he had engaged
in unlawful currency trans-
actions and noting that legal
proceedings had been instituted
against him in 1957 for this
offense and still stood on the
books.
Other churchmen are being
similarly blackmailed in an
effort to induce them to make
public endorsements of the re-
gime's "two Germanys" policies.
For example, Bishop Krummacher
of Greifswald was recently
warned by the state secretary
for church affairs that unless
he ,would sign a declaration of
support for the+:regime, "facts"
about his sympathies for Nazism
would be published.
-The Catholic Church is also
being subjected to special pres-
sures in an effort.to induce
churchmen to support the re-
gime. Many of these pressures
are directed against newly 'con-
secrated Bishop Bengsch of Ber-
lin, an East Berliner. Bengsch
is to meet with Ulbricht on 30
September. Another Catholic
prelate-the bishop of Meissen
--was warned on 30 August that
he would have to take a "posi-
tive position" concerning the
13 August events, including
an expression of political
loyalty to the regime as the
sole temporal authority to
which he is answerable.
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CONFIDENTIAL
Moise Tshombe and Mahmound
Khiari, the Tunisian head of
the UN's civil operations in
the Congo, reached agreement
late on 20 September for a pro-
visional cease-fire in Katanga.
This will provide an opportu-..
nity for substantive negotia-
tions concerning Katanga's re-
integration with the Congo.
Tshombe probably believes
that the stipulated "freeze" on
the movement of troops and sup-
plies will permit him to main-
tain his military superiority
and to drive a hard bargain in
the negotiations. UN officials
in Leopoldville indicated on 20
September that he was continuing
to demand major concessions from
the UN. Earlceer he. had insisted
that the UN not only forego any
reinforcements but that its
forces retire to their Katanga
bases in return for a cease-
fire.
The UN's military position
had been deteriorating. A
besieged Irish unit at Jadot-
ville was overcome early this
week, and UN officials in New
York told American represent-
atives that the 3,000 Katangans
who had been engaged in the
operation were being organized
by Interior Minister Munongo
for a move to Elisabethville.
The tJN garrison at Kamina was
under attack from 1,000 well-
armed tribesmen with Belgian
officers.
A planned UN airlift of
one Indian and one or two
Ethiopian battalions into Katanga
had been halted by a combinition
of Katangan air activity and.
the inadequacy of night-flying
aids.
The flight to Elisabethville
of three Ethiopian F-86 jets,
which the UN had counted on to
end Katangan air superiority,
was held up pending UN as-
surances that adequate naviga-
tional aids, fuel, and spare
parts were available.. According
to information received by the
American delegation in New York,
UN chief representative Linner
had told his headquarters that
unless the airlift could be
resumed, "we seriously risk the
defeat of UN forces."
Brigadier Inder Jit Rikhye,
--an Indian who was Hammarskjold's
military adviser and who, with
Under Secretary Ralph Bunche,
seems to have assumed direction
of the Congo operation--on 18
September gave American officials
his analysis of the difficulties
encountered by-the UN forces in
Katanga. According to Rikhye,
the original UN plan had had the
limited objective of closing
down the Elisabethville radio
station. However, the action
triggered the return to their
units of many of the European
mercenaries who were in the proc-
ess of repatriation, and fight-
ing spread unexpectedly. The
UN then found that the Katangans,
in addition to their overwhelming
numerical superiority, often
were better armed than the UN
troops.
Rikhye added that the
limited UN airlift capability--
no aircraft larger than a DC-4
is available--has prevented the
use of either support artillery
or transport in adequate quantity.
He criticized the organization.'s
intelligence staff, which he
said frequently depended on re-
ports from diplomatic posts in
the Congo, and he stated that
the Swedish and Irish troops had
been trained mainly in police func-
tions and thus were ineffective
in combat.
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UN
1940 -
Stanleyville
Gorna
?
U
18 5
Bukavul
CURRENT INTELLIGENCE WEEKLY SUMMARY
p
Luanda
UN
3160
Coquilhatville
i
bi of the Congo
United Nations Forces*
UN
640
L
Kabul
UN
120
Mano n o
U N 925 Lulu
scattered
According to reports from
Leopoldville, Premier Adoula'
has been under increasing pres-
sure to order the Congolese
Army to intervene in Katanga.
UN
620
UN
1500
UN
2800
According to the American
Embassy, sentiment among Con-
golese legislators is vir-
tually unanimous in favor of
army intervention. The Congolese
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Bak,anga
Buta
UN
450
Kamina
UN
120
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senate has already passed a
resolution favoring military
action, and General Lundula,
Gizenga's former military
commander, has offered to
place his troops at the dis-
posal of the government for
an operation against Katanga.
Adoula, in a conversation
on 18 September, indicated to
Ambassador Gullion that he
realized such intervention
probably would lead to civil
war and stated that he hoped
to head off pressure for mil-
itary action through a series
of delaying tactics. Bunche
told American officials on
the same day, however, that
the Adoula government had
asked the UN to put its troops
in a position to fight on
equal terms with the Katangans
within 24 hours. Leopoldville
added that if the UN could not
continue the fight, the Congo-
lese Government would under-
take operations of its own
and would ask friendly coun-
tries for assistance.
On 19 September, Adoula
informed the UN that his
government would not give
its approval to negotiations
for a cease-fire and would not
consider itself in any way
bound by one. Aware that his
army is not equipped at this
time for an operation against
Katanga, Adoula probably took
this step to appease the ele-
ments seeking strong action
against "Katanga.
Anti-American sentiment
is increasing in Belgium as
a result of Congo developments,
and
even
responsible Belgians
feel
that
the United States
has
been
lax in assuring it-
self
that
the UN would prop-
erly
use
the material and
political support placed at
its disposal." The Belgians
bitterly resent UN accusations
that the Belgian military
are responsible for the fight-
ing in Katanga, with the im
plication that Tshomb6's
mercenaries are under the
control of the government of
Belgium. The American ambas-
sador in Brussels believes
that Belgian resentment can
easily lead to a rapid in-
crease in neutralism in a
country where fatalism and
apathy are already strong.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Ambassador Harriman, re-
porting on his talks with Sou-
vanna Phouma in Rangoon from
15 to 17 September, stated
that the discussions were more
satisfactory than expected.
Sotvanna, he said, showed a
realistic awareness of the
threat posed by the Pathet Lao
to the future independence of
Laos. Discussing the elections
to be held after a coalition
government is established, Sou-
vanna said that if the Pathet
Lao forces emerged in control
of the government there would
be no recourse but to fight,
as he and his followers were
unwilling to see the country
go Communist. He expressed
his loyalty to the monarchy and
his belief that demobilization
of surplus forces of both sides
must precede national elections.
The question of the com-
position of a neutralist center
group in the proposed coalition
cabinet remains unresolved.
Souvanna persisted in his op-
position to the admission of
Vientiane moderates to the cen-
ter group, contending that the
Vientiane candidates were not
"good material" and lacked pop-
ular support. He held that in
the formation of a unified army,
integration should be by indi-
viduals rather than by units;
he recalled unsatisfactory past
experience with unit integration.
Talks at Ban Namone be-
tween the representatives of the
Vientiane government, the Sou-
vanna group, and the Neo Lao Hak
Sat, suspended since August, were
resumed on 20 September, but no
progress was made. Souvanna's
proposal to meet with Boun Oum
and Souphannouvong has been ac-
cepted in principle by the royal
government; time, place, and
other details are to be arranged
by the representatives at Ban
Namone. Vientiane, however,
continues to question Souvanna's
suitability as premier. General
Phoumi, fearing a negotiated
settlement and a resultant Sou-
vanna-led coalition government
but hoping to avoid the onus of
breaking off the talks, may seek
to prevent the meeting by impos-
ing conditions unacceptable to
the Souvanna and Pathet Lao
groups.
The military situation is
marked by occasional skirmishing
and artillery exchanges in north-
ern Luang Prabang Province, where
each side continues to consolidate
its position in anticipation of
possible renewed fighting at the
conclusion of the rainy season
next month. Meo units continue
to harass the enemy in Xieng
Khouang Province. Enemy efforts
to eliminate the numerous Meo
pockets have been notably un-
successful in this area. Al-
though forced on occasion to
withdraw to fall-back positions,
the Meo units have maintained
their capability for effective
guerrilla-type action.
At Geneva the Soviet dele-
gation continues to indicate its
desire for an early agreement,
even in the absence of a pro-
visional Laotian government.
Discussions are being held on
the procedure for dealing with
a number of questions over
which there remains a wide diver-
gence between the Western and
Communist delegations. While
the UK and Soviet representa-
tives, as co-chairmen of the
conference, have agreed to dis-
pose of routine matters in pri-
vate meetings, there is no in-
dication that a speedy agreement
can be reached on the more dif-
ficult questions, which will
continue to be discussed'in re-
stricted session by the various
delegations.
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FRANCE-ALGERIA
French security officials
are increasingly concerned over
the covert rightist and military
opposition to De Gaulle; other
officials fear he is not taking
sufficient steps necessary to
retain the backing of politically
important elements. De Gaulle
reportedly ignored pleas by
cabinet ministers to call off
his 21-24 September speaking
tour of south-central depart-
ments.
A well-placed Interior
Ministry official feels that
unless De Gaulle creates a
more solid popular basis for
the regime as opposed to his
person, "the days of the Fi'fth's
Republic are numbered." This
official said Interior Minister
Frey has been advised that
security forces cannot guarantee
their ability to maintain order
in event of assassination.
sition by increasing milk prices,
as demanded by restive farmers,
and by announcing his intention
to relinquish at the end of the,
month the special powers which
he assumed in April. These
powers have particularly aroused
parliamentary ire.
Despite the continuing
large number of arrests of sus-
pected members of the Secret
Army Organization ' (OAS) --of-
ficially blamed for the 8 Sep-
tember assassination attempt--
security officials admit that
the OAS network has not been
seriously damaged, even in
metropolitan France, where it
is much weaker than in Algeria.
Security officers assigned to
ferret out the OAS are only
halfheartedly complying with
orders, and it is questionable
whether they would back De Gaulle
or turn against him in a crisis.
Minister for Algerian Af-
fairs Joxe remarked to a US
Embassy officer on 13 September
that De Gaulle creates many
difficulties for himself by
his highhanded manner, and
that he hoped De Gaulle would
soon explain to the French
people in detail "exactly what
is happening" with reference to
Algeria. Joxe commented to
another US observer, however,
that even though no coup is
expected in Paris, another one
is sure to take place in Algeria.
De Gaulle has, however,
taken steps in the last few
days to reduce some of the oppo
It is reported that 80
percent of the army officers
are opposed to De Gaulle, but
that only 10 percent would par-
ticipate in a coup attempt.
Moderate elements concerned over
the prospects of assassination
are hopeful the bulk of the army
can be influenced to back a
democratic succession.
The 19 September order
of the day in which General
Ailleret, commander in chief
in Algeria, instructed his
forces to fight the OAS as
vigorously as the rebels prob-
ably is a reaction to recent
OAS propaganda urging individual
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CURRENT INTELLIGENCE WEEKLY SUMMARY
officers unwilling to join a
future insurrection to keep
fighting the enemy rather
than obstruct their activist
comrades,
With respect to prospects
for resumption of negotiations
between the French and the pro-
visional Algerian government
(PAG), both sides have indicated
a desire that it be soon. A
French UN delegation member
stated that the Foreign Ministry
is very concerned lest the
Algerians not agree to early
renewal of the talks. Rebel
information minister Yazid, in
the presence of premier Ben
Khedda, told an American
reporter on 15 September that,
provided the Bizerte issue was
not in the fighting stage,
formal talks might resume before
the end of.this month.
The reported decision to
include on the French negotiating
team Jacques Aubert, Suretd
Nationale director for Algeria
who is one of the more ardent
supporters of the provisional
executive idea, is regarded by
the American consul general at
Algiers as an indication that
Paris envisages direct discussion
with the PAG on security problems
and arrangements during the
transitional stage.
ments are made.
quash their power positions, and
will continue to be the real leaders
no matter what transitional arranee-
Krim and Chanderli have mean-
while indicated that the rebel
leaders are willing to cooperate on
transitional arrangements for the
transfer of power in Algeria, but
Chanderli stressed that this co-
operation would be forthcoming only
after successful negotiations. He
immplied that the PAG as such might
phase out, and not assume direct
control in Algeria. However, it
seems quite clear that none of the
present PAG members intend to relin-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
GOVERNMENT AND PARTY CHANGES IN HUNGARY
The changes among Hungar-
ian party and government offi-
cials announced on 13 September
appear to be in the general
pattern of steps recently taken
in other satellite regimes.
They are probably designed to
facilitate the satellites' de-
velopment along the economic
and social lines called for by
the Soviet bloc's blueprint
for the achievement of social-
ism. The measures taken in
East Germany, Czechoslovakia,
and Rumania also involved re-
organization of the government
structure, so far not forthcom-
ing in Hungary.
Party First Secretary
Janos Kadar, who assumed the
additional position of premier,
now is the titular as well as
the actual head of government.
Four newly appointed deputy
premiers form an inner cabinet
composed of politburo members
who had been and presumably
continue to be responsible for
propaganda (Gyula Kallai), se-
curity (Bela Biszku), interna-
tional economic relations
(Antal Apro), and domestic
economic planning (Jeno Fock).
The concentration of these
talents at the head of the gov-
ernment implies that there will
be much more extensive efforts
made to achieve planned eco-
nomic and social goals. The
greater emphasis to be placed
on the achievement of economic
goals is also suggested by the
reorganization of the national
economic planning function. The
former chief of the National
Planning Office, Arpad Kiss,
now heads a new committee con-
cerned with long-range planning;
his replacement in the old job
is the former deputy, Miklos
Ajtai,
The complementary func-
tions of persuasion and control
will be administered respective-
ly by Pal Ilku, the new minis-
ter of culture and education,
and by Janos Papp, the new min-
ister of interiors Ilku was
chief of the political direc-
torate of the Defense Ministry
in 1956 and number-two man in
the Culture Ministry until this
appointment. Papp is a rela-
tively unknown party secretary
from Veszprem County who pre-
sumably will continue to work
under the supervision of Biszku.
The post of foreign minister,
left vacant by the retirement
of elderly Endre Sik, goes to
the former deputy, Janos Peter,
one-time delegate to the United
Nations and a Protestant "peace"
bishop. The retiring premier,
75-year-old Ferenc Muennich,
was given the honorary post of
minister of state.
The gaps left by party
leaders moving into government
posts were filled by capable
men already active in the party
apparatus under Kadar's leader-
ship. Politburo members Dezso
Nemes and Sandor Gaspar joined
the party secretariat, left un-
derstaffed by the departure of
Karoly Kiss for an undesignated
government post and Fock for
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CURRENT INTELLIGENCE WEEKLY SUMMARY
the deputy premiership. Other
ranking members of the party
moved into the chief editorial
posts of the party's theoret-
ical journal and daily vacated
by politburo members Nemes and
Kallai.
Along with the announce-
ment of the new appointments,
the party published revised es-
timates for the second Five-
Year Plan, to be approved at a
forthcoming National Assembly
meeting. The plan directives,
which supersede those issued at
the time of the seventh party
congress in September 1959,
take a more conservative view
of the prospects for developing
the economy from 1961 to 1965.
Investment targets have been
reduced. The plan directives,
emphasizing the need to meet
international commitments and
to strengthen national defense
expenditures, appear to preclude
any improvement in living stand-
ards.
Kadar also announced that
the assembly will consider edu-
cational reforms emphasizing
technological training. A terri-
torial reorganization to estab-
lish new economic regions and
simplify administrative pro-
cedures may also be promulgated.
The party campaign against the
church, a recently rumored
tightening of control over the
intellectuals, and a drive for
more effective party activity
all contribute to an atmosphere
of pressure on the Hungarian
people to accept the goal of a
socialist state and societ .
25X1
NORTH KOREAN PARTY CONGRESS
Treading carefully the
tightrope of Sino-Soviet com-
promise, North Korea's Kim
Il-sung opened the fourth con-
gress of the Korean Worker's
party on 11 September. Flanked
by his two chief guests--Frol
Kozlov, secretary of the Soviet
party central committee, and
Teng Hsiao-ping, secretary gen-
eral of the Chinese party--Kim
ranged for six hours across a
wide spectrum of North Korea's
political and economic ambi-
tions, always balancing his
gratitude for Soviet assistance
with similar expressions of ap-
preciation for Chinese support.
Both of the major antag-
onists in last year's ideolog-
ical controversy showed their
competitive interest in North
Korean party matters by the
level of their delegations.,
They avoided open polemics,
however; like their Korean hosts,
the Chinese and Soviet delegates
echoed formulations from last
November's Moscow conference
statement and stressed the im-
portance of bloc unity.
Both Kozlov and Teng, never-
theless, reaffirmed the guide-
lines of their respective parties--
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CURRENT INTELLIGENCE WEEKLY BUZ
the Soviet party draft program,
for which the Chinese show some
reserve, and China's "great
leap forward" and communes,
which have come in for Soviet
criticism. Teng in his speech
grudgingly offered Peiping's
first comment on the Soviet
program, citing it along with
Soviet space achievements as
proof of the socialist Sys-
tem's superiority, but care-
fully limiting its applicabil-
ity to the Soviet people. Koz-
lov provided the most tenden-
tious remark when he told the
Korean congress that the USSR
was ready for a "great leap in
its forward movement" because
it had the necessary material
standards--an implicit crit-
icism of China's disregard of
material factors when attempt-
ing its own "leap." Both Teng
and Kozlov made a point of
praising Kim I1-sung's "cor-
rect" leadership of the Korean
party.
Kim and the Koreans who
followed him to the rostrum un-
til the congress closed on 17
September devoted the bulk of
their attention to the two
prime Pyongyang objectives--
economic development and Korean
reunification.
Outlining the new seven-
year plan which started this
year, Kim described final pro-
duction targets that are rough-
ly those set in August 1960
when the plan was first made
public. The regime has refined
the original plan, however, to
give itself more ~eeway; in al-
most every case the figures
announced in August have become
the upper limit of a more com-
fortable range. The new targets
still represent significant
increases in output of major in-
dustrial products. The only
major revision was in the grain
target for 1967: originally put
at over 9,500,000 tons, it now
is at 6,700,000 tons, a much
more realistic goal.
While there is little
chance that the average North
Korean is going to see much im-
provement in his living standard
over the next seven years, Kim
painted a glowing picture of
life in the North when the plan
is completed. He contrasted
this with the "bankruptcy" of
South Korea.
Arguing that unification
makes economic sense, Kim
termed "peaceful reunification"
the "supreme national task which
brooks no delay." The North
Korean premier and party chief
urged South Koreans'to form a
"united anti-US national salva-
tion front," and, in a portion
of his speech that was virtually
an incitement to civil disobedi-
ence and military mutiny, called
on Southern civilians to con-
duct strikes and demonstrations.
The South Korean Army, Kim said,
must wrest command from the "US
imperialists" and become a "na-
tional army defending the inter-
ests of peasants and workers.".
The party appointments an-
nounced at the end of the con-
gress include a politburo that
reflects Kim I1-sung's predom-
inance. Through purge and skill-
ful reshufflings, Kim apparently 25X1
has consolidated his hold since
the abortive challenge to his
leadershin in 1 a+A 145.
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CURRENT INTELLIGENCE WEEKLY S 'RY
COMMUNIST GUERRILLA ACTIVITY IN SOUTH VIETNAM
A series of Communist at-
tacks since the first of Sep-
tember provides evidence of in-
creased guerrilla capability
in South Vietnam, particularly
in the northern part of the
country. On 1 September, a
Viet Cong force estimated at
two battalions totaling about
1,000 men temporarily overran
two Civil Guard outposts in the
mountainous terrain adjacent
to southern Laos.. The temporary
capture on 18 September of a
provincial capital only 40 miles
north of Saigon by a Communist
force of two. battalions--which
killed the provincial governor
and..set fires in the town--is
the most striking indication to
date of increased Viet Cong
aggressiveness recently evident
in the capital area. In these
and other actions by smaller
units, the Viet Cong displayed
better organization, direction,
and equipment than previously
noted.
Although there have been
several reports of a Vietnamese
Communist build-up.across the
border in Laos, there is no
evidence that regular North
Vietnamese forces were used in the
1 September attack. As was the
case in similar attacks in this
area in October 1960, the bulk
of the Viet Cong force probably
consisted of local recruits--
principally from among the
minority tribes in this high
plateau area where the Com-
munists have been promoting an
autonomous movement--with a
hard core of North Vietnamese
or North Vietnamese - trained
leaders infiltrated through
Laos.
Increased Pathet Lao in-
fluence in southern Laos. and
the difficulty of d'etect'ing
movements along remote mountain
trails have given the Communists
virtually unrestricted access
for the infiltration of personnel
and supplies from North to South
Vietnam via Laos. As a result,
the Communists are expected to
step up their armed effort,
particularly in the northern part
of South Vietnam,and may intend
to develop a major base of
operations in the high plateau
area bordering Laos.
Armed Communist strength
throughout South Vietnam has
increased since the beginning
of the year despite casualties
totaling, according to South
Vietnamese figures, about 1,000
monthly. The Viet Cong is es-
timated to have about 15,000
men under arms, as compared with
about 10,000 at the end of 1960.
During July, the rate of Commu-
nist activity reached close to
an all-time high, with a weekly
average of about 350 incidents of
all kinds reported; after some de-
cline in August, the rate in early
September was about 300. During
the past three months, nearly 70
percent of Viet Cong attacks have
been directed at the less effec-
tive Civil Guard and Self-Defense
Forces rather than at regular
army units.
There is as yet no area where
control by the Viet Cong is suf-
ficiently entrenched to beat off
strong government challenges, al-
though they approach that state in
some parts of the southernmost prov-
inces, their major stronghold. Recent
sweeps by government forces have
probably dealt some setbacks - to the
Viet Cong in this region, but the
government's ability to maintain
the advantages gained by such action
is uncertain. The general insecurity
and frequent interdiction of main
routes leading to Saigon has disrupted
South Vietnam's rice and hog exports for
is reported.
1961, and growing harrassment of
rubber plantations north of Saigon
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CURRENT INTELLIGENCE WEEKLY SUMMARY
The compromise reached last
week by Turkey's ruling Committee
of National Union (CNU)--to
uphold the,Yassiada tribunal's
death sentences for former Prime.
Minister Menderes and two as-
sociates but to commute 12
others to life.id,xnprisonment,-
has somewhat lessened the)tchances
that supporters of Menderes' out-
lawed Democratic party will spark
disorders. There now appear to
be no impediments to beginning
the campaign--scheduled to open
on 24 September--for the 15
October elections.
The 22-man CNU reached
its decision at a long.ses-
sion on the evening of 15
September, apparently under
pressure from younger mili-
tary officers outside the
committee who pressed for up-
holding the death sentences
of all persons condemned. These
officers feel that failure to
execute all leaders of the
Menderes regime constitutes
disavowal of the military coup
which overthrew Menderes in May
1960.
The CNU apparently felt
that its final decision would
prevent the younger officers
from venting their frustration
in a new coup attempt, but by
upholding the three death
sentences it has introduced into
Turkish. politics an element of
bitterness which is likely to
persist for years.
!- Ismet Inonu, leader of the
Republican People's party (RPP)
and long an adversary of Menderes,
privately urged the CNU not to
permit executions, as did other
party leaders and influential
leaders of the press. If the
CNU.p,ermits free balloting to
take~,place, the RPP may fall
short.-of a majority as voters
protest the executions by voting
for one of the parties openly
appealing t0 ,Menderes' former
supporters. Earlier this month
the CNU sought the agreement of
all,)political party leaders to
forego any discussion of the past
and particularly the justification
of the May 1960 coup. All poi-1
litical party leaders except Osman
Bolukbasi, the leader of the small
Republican Peasant Nation party,
signed this declaration,.. Despite
the present restrictions on
freedom of speech and of the press,
it-appears virtually impossible
for the CNU to enforce this ban.
THE DOMINICAN REPUBLIC
The Dominican Government
succeeded inenaingahead of sched-
ule'`,the commercial shutdown in
the capital city that began on
12 September as a gesture of na-
tiona-l mourning for the opposi-
tiondemonstrators killed in
clashed with the police early
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CURRENT. INTELLIGENCE WEEKLY SUMMARY
that day. Elements of the op-
position continue to favor a
general strike against the
government, and proponents of
violent action are gaining the
ascendancy in 'Various opposition
groups--even the politically
moderate National Civic Union
(UCN), which has wide backing
among business, professional,
and other mi.ddl.e class elements.
Although President Bala-
guer's liberalization program
has almost universal acceptance
in principle, the opposition
is convinced that the President
is not sufficiently forceful
in implementing his program
and that, in any event, meaning-
ful progress is impossible as
long as the essential elements
of power are ;held by General
Ramfis Trujillo. The opposition
groups are Obsessed by the
desire to rid the country
quickly of all remnants of the
Trujillo dictatorship and em-
boldened by the wide national
solidarity their movement has
generated.
Although opposition groups
encompass the bulk of literate
Dominicans, they probably at
present lack the capability of
taking over from Balaguer
:h+gainst the;::entrbnnhrad- military,
which seems to be united if
only temporarily and in the in-
terests of self-preservation.
The immediate danger to the
present regime is the pos-
sibility of a military take-
over, with or without the con-
currence of General Ramfis Tru-
jillo. The military was appar-
ently on the verge of such
action twice during the past
month, Such an event would
prolong and further embitter
the transition period and in-
crease the likelihood of a
concerted campaign of violence
by the opposition. It would
also almost certainly lead to
the eventual factionalization
of the military.
The OAS subcommittee, which
arrived on 12 September to
determine whether conditions
warrant partial removal of the
OAS sanctions against the regime,
Is receiving the full coopera-
tion of the government. The
opposition is urging continua-
tion or even intensification
of the sanctions until political
liberties are fully guaranteed;
any easing of the sanctions
now would result in widespread
public bitterness against the
OAS and, by extension, against
the United States.
The Apposition's complaint
that the US is giving moral sup-
port to Balaguer's gradual ap-
proach to democratization has
reduced the opposition's regard
for the US to the lowest point of
any time in the past two years,
in the opinion of the consul
general. He reports that some
opposition members say that if
the June 1959 invasion of the
country, which was mounted by
the (Castro regime, were to be
repeated now, "everyone would
side with the invaders."
The United States is likely
to be attacked as a result of
the signing on 16 September of
a contract between the Dominican
Government and a private US
firm for the construction of
an oil refinery in the Dominican
Republic. Petraleum:,. is one of 25X1
the products now embar oed under
the OAS sanctions.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
The 7-21 September visit
of Cuba's President Osvaldo
Dorticos and Foreign Minister
Raul Roa to Czechoslovakia and
the USSR appears thus far to
have produced little but routine
assurances of bloc "solidarity"
with Cuba. A trip to Communist
China is to follow, D6rticos'
trip to the bloc, coming im-
mediately after his attendance
at the conference of nonaligned
nations in Belgrade., may further
help to convince some of the
neutralist nations of Cuba's
full alignment with the bloc.
The Cubans' actions in
railing against the United
States and in echoing the
Soviet line on most of the
issues taken up at the con-
ference largely destroyed
the sympathetic attitude to-
ward. Cuba initially held by
many conference delegates
Bloc countries, besides
taking 4,000,000 tons of Cuban
sugar this year at a price
equivalent to four cents a
pound, are in some instances
also acting as. middlemen in
arranging purchases of Cuban
sugar by Asian, Middle Eastern,
and-African states.
Cuba is similarly relying
on three-way trading arrange-
ments with nonbloc countries
to dispose of some of its ex-
ports and to obtain imports not
available in the bloc.
Within Cuba, the antiregime
outbursts of churchgoers on.two
occasions within the past two
weeks were the first serious
manifestations of opposition,:;to
Castro in many months. The re-
gime has reacted with a concerted
government campaign against the
Roman Catholic Church. The ex-
pulsion on 16 September of 136
priests--including Havana Bishop
Eduardo Boza Masvidal and 45
other Cuban priests reduced by
almost half the number of
priests remaining in Cuba. Fur-
ther religious demonstrations
may give impetus to a government
move to establish a "national
church" with loyal pro-Castro
clergy.
Sporadic outbreaks of fight-
ing between dissidents and Cas-
tro's militiamen have occurred
in at least two of Cuba's six
provinces. in 'Pinar del Rio,
the island's westernmost prov-
ince, a small group of insur-
gents was operating as recently
as mid-September under the com-
mand of an anti-Castro leader
known as "Cara Linda," while
another group was reported active
in northern Las Villas Province.
In all cases, government forces
possess greatly superior. resources
and are capable of eliminating
the outbreaks eventually.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
ARGENTINA
President Frondizi, demon-
strating growing confidence in
his ability to deal with Argen-
tina's domestic problems, has
increased his attention to for-
eign policy in recent months,
and with the resignation of Pres-
ident Quadros in Brazil he will
bid for a dominant position
among Latin American leaders.
During the earlier part
of his term, Frondizi was pre-
occupied with the repercussions
of his US-backed economic stabi-
lization program--the austerity
aspects of which are still a
source of labor difficulties.
During 1961, however, he has
seemed increasingly interested
in reasserting Argentina's claim
to diplomatic leadership of the
Latin American nations. Unlike
many of his predecessors, Fron-
dizi has generally sought to ex-
ercise this leadership in sup-
port of US objectives rather
than in rivalry with Washington,
as shown in his strong backing
of the "Alliance for Progress"
and his more cautious assistance
to US policy on Cuba.
Frondizi has engaged in a
series of consultations with
other Latin American presidents.
Following earlier visits with
the chief executives of Uruguay,
Brazil, and Bolivia, he visited
President Stroessner of Para-
guay on 2 July and made a
public promise to improve high-
way connections between the two
distant capitals. His most re-
cent visit was to President
Alessandri of Chile from 9 to
11 September, concluding with
the gn1n of the joint "Dec-
laration of Vina del Mar," which
called for "total compliance"
with the United Nations Charter
to maintain peace, and expressed
concern over "the renewal of
nuclear testing." Later this
month Frondizi is to confer
briefly with President Betancourt
of Venezuela.
Frondizi's diplomatic
efforts have been indirectly
aided by the events in Brazil,
which has traditionally vied
with Argentina for leadership
among the Latin American states.
Brazilian prestige has suffered
considerably from the develop-
ments ending in Joao Goulart's
replacement of Quadros, and
Ambassador Rubottom in Buenos
Aires believes Frondizi now
will "more openly wear the man-
tle of hemisphere leadership."
He will probably make an effort
to assume such a role in his
address'to the United Nations
General Assembly scheduled for
27 September.
In his pro-US and anti-
Castro moves Frondizi has had
the strong support of the Argen-
tine military; he has at the
same time tried to conciliate
more radical opinion by moves
apparently designed in part to
demonstrate his independence
of Washington. One of these
was his widely publicized meeting
with Che Guevara on 18 August,
which raised a political storm.
Frondizi reassured military
leaders that the meeting would
in no way modify Argentina's
firm position on Cuba and Commu-
nism, but controversy as to how
the meeting was brought about
led eventually to the resignation
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CURRENT INTELLIGENCE WEEKLY '9RT
President Roberto Chiari's
announcement on 11 September
that Panama would seek a new
treaty with the United States
is the result both of mounting
domestic political pressures
and of the assumption that the
international climate is propi-
tious for Panama's reassertion
of its claims against the US
position in the Canal Zone.
Chiari has been unable after
a year in office to gain control
of his country's chaotic polit-
ical situation or to stem its
economic deterioration. He
must therefore identify himself
strongly with the Panamanian
peoples' mounting determination
to assert their claims against
the United States if he is to
maintain popular support.
The President is impatient
to raise the Canal Zone treaty
issue now so as to appear the
champion of national interest.
Expecting to come under heavy
attack on various counts when
the National Assembly convenes
on I October, Chiari has al-
ready announced that his address
that day will detail Panama's
new treaty requests.
The Sovereignty Issue
Panama's national aspira-
tions in the Canal Zone have
a strong appeal to its people
and constitute the most power-
ful unifying factor in a country
of wide social, political, and
economic divisions. The 1936
and 1955 revisions of the
original 1903 Conventiomm betseen the
US and Panama have not satisfied
these aspirations, particularly
the almost obsessive desire for
recognition of Panamanian sov-
ereignty in the zone.
Panama realizes it is not
now equipped to operate the
canal itself and is unlikely to
ask to do so in the course of
this attempt to renegotiate the
basic treaty. Rather, it will
probably want a clear acknowledg-
ment of Panamanian sovereignty
in the Canal Zone; an increase
in the $1,930,000 annuity; re-
duction of US commercial ac-
tivities in the zone; stricter
interpretation of the US treaty
rights of "operation, maintenance,
sanitation, and protection of
the canal"; and possibly the
turnover of some lands within
the zone border for agriculture.
Panamanians have long con-
tended that the 1903 treaty was
hastily drawn up before the newly
independent country's government
was properly consulted. They
point out also that the treaty
was signed for Panama by a
Frenchman, Buneau Varilla, who
was acting as diplomatic agent
for the newly independent country
while promoting the interests
of a French canal company.
They object particularly to the
US interpretation of the sovereign-
ty clauses and to the treaty's use
of the words "in perpetuity,"
claiming the term is not valid
in international law.
Exploitation of the Issue
Panamanian sensitivity
over the sovereignty issue
extends into many fields. In
a note of 31 August protesting
a recent National Labor Relations
Board decision permitting US
unions to organize crews of US-
controlled ships flying the
Panamanian flag, the Chiari
government termed this an in-
fringement of sovereignty. The
decision also threatens lucrative
public and private income from
registry and representation of
foreign ships in Panama and the
prestige of at least nominal
possession of one of the world's
largest merchant fleets.
Panamanian spokesmen have
applied the sovereignty question
to so many aspects of US activity
relative to their country that
the issue has become basic to
national policy. They insist that
recognition of their "sovereign
rights" is more important than
financial assistance for their
economy and their unbalanced,
potentially explosive social
system. Almost 10 percent of
Panama's labor force is unemployed.
Unlike other urban Latin Americans,
most of these idle workers can
1 MOM
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CURRENT INTELLIGENCE WEEKLY SU 1RT
read. They congregate along the
streets of Panama City and Colon,
a receptive audience for Panama's
sensationalist press and radio.
Both emphasize nationalist issues
constantly.
One group of newsmen, ap-
pearing on a US television
program, argued that since canal
tolls have been unchanged since
1914, they could be raised to
increase Panama's annuity with-
out cost to the United States.
All Panamanian elements
actively engaged in exploiting
the canal issue firmly believe
that the United States is par-
ticularly vulnerable to world
opinion. This has led on the
one hand to discussion of the
canal issue by Panamanian
diplomats at international
meetings, such as the United
Nations and the Organization
of American States, and on
the other hand to threats to
instigate violence in order to
dramatize the issue. Extremist-
led mobs had this strategy in
mind in November 1959, when US
troops held back efforts to
plant Panamanian flags in the
Canal Zone during Panamanian
independence day demonstrations.
The subsequent display of the
Panamanian flag on a zone staff
near the border and the re-
sumption of more amicable re-
lations with zone residents
and administration have not
dissipated the basic aspirations,
Panama's leaders indignantly
reject any suggestion that Pana -
ma's record of political and
economic instability or its
failure to effect reforms can
have any bearing on the basic
issue of the sovereignty of
the Canal Zone, or could affect
the security of the canal itself.
The Economy
Panama's entire economy
has been'geared to the canal
since construction was begun
in 1904. Population and
economic activity are dis-
proportionately concentrated
in the two cities adjoining
the canal terminals, Panama
City and Colon, while develop-
ment of agriculture, industry,
and transportation in the
interior has been virtually
ignored. Large and potentially
valuable agricultural areas
are either inaccessible or left
idle by large landholders.
A small clique representing
about 5 percent of Panama's million
people controls the sources of
both economic and political power.
This group invests its funds in
commercial, real estate, and
shipping registry and represen-
tation ventures which are highly
profitable but create little or
no economic growth or employment.
Thus while Panama ranks near the
top among Latin American countries
in per capita income, prices are
high and most of its people
contribute little to the economy
and live in great poverty.
The Oligarchy
The ruling clique has long
been adept at deflecting toward
the United States any internal
dissatisfaction with its actions
In promoting this antagonism its
members often associate closely
with anti-American extremists.
The latter, many of them sus-
pected Communists, have access
to sensitive government positions,
influential news columns, and
teaching posts.
Many of the oligarchy are
well educated, experienced in
business, and knowledgeable in
world affairs but refuse to
admit the danger of fomenting
nationalism through these extrem-
ists and do nothing to develop
Panama's capacity to order its
own affairs. These leaders
offer plans for the improvement
of their country, but have taken
no steps to end the long-standing
corruption, indifference, and
self-serving political and
financial scheming which defeat
such plans.
Two important factions in
the government are headed by de-
termined rivals for the presi-
dency. Finance Minister Gilberto
Arias of the Third Nationalist
party is a member of the Arias
Madrid family, probably the
single most powerful influence
in Panamanian economic and news
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CURRENT INTELLIGENCE WEEKLY SU R
affairs. He is opposed by
Second Vice President Jose
Dominador Bazan,.a shrewd poli-
tician with the calculated
backing of economic interests
centered in Panama's Republican
party. Although both have finan-
cial resources, neither bears
the onus of membership in the
small handful of Spanish families
which has long dominated the
ruling oligarchy. If either
Arias or Bazan should decide
that association with the ad-
ministration is a liability
and break with Chiari, the
President's already limited
ability to govern effectively
would be weakened and many
political dissidents would be
encouraged to become active.
The opposition press and
radio have already referred to
the need for a new cabinet if
Panama is to realize any benefit
from President Kennedy's Al-
liance for Progress program,
and Chiari's cancellation of
a planned vacation in September
indicates some political ma-
neuvering is probably going on.
Chiari's coalition does not
have a majority of the deputies,
and what positive programs he
may present for tax, land, and
other reforms seem to have
little chance of legislative
approval.by the highly volatile
multi-party assembly.
While other Latin American
countries usually support Pan-
amanian claims in the Canal Zorn
they have never pressed the issue.
Foreign Minister. Solis refused
a renewed invitation for Panama
to join the Central American
economic and political organ-
izations in July, saying the
decision must wait until his
country could "integrate" into
its economy all its lands and
referring specifically to the
Canal Zone. He was disappointed
to receive only a mild statement
of backing from his Central
American colleagues meeting in
Tegucigalpa.
From time to time there
have been suggestions that the
canal be "inter-Americanized,"
but Panama feels that any change
in the canal's status should
be its reversion to Panama as
its only natural resource.
Communists and Castroites
Stronger but unsolicited
support has come from Latin Amer-
ican Communists. The Communist*i
sponsored Latin American Congress
for National Sovereignty, Economic
Emancipation, and Peace, which
met in Mexico in March, strongly
backed Panama as another vic-
tim of "US imperialism." Al-
though Panama's relations with
Cuba are not friendly, they have
not been broken off, and Castro
officials periodically use the
canal issue in diatribes again.25X1
the United States.
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