CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A003700040001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 46
• Document Creation Date: December 21, 2016
• Document Release Date: June 13, 2008
• Sequence Number: 1
• Publication Date: July 20, 1962
• Content Type: SUMMARY

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CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
CENTRAL INTELLIGENCE AGENCY
111 OFFICE OF CURRENT INTELLIGENCE
20 July 1962
SECRET
State Dept. review completed
GROUP I
Excluded from automatic downgrading
and declassification
ARMY review(s) completed.
COPY NO. 74
OCI NO.0426/62
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 July 1962
T H E W E E K I N B R I E F
(Information as of 1200 EDT 19 July)
SOVIET FOREIGN POLICY DEVELOPMENTS . . . . . ... . . . Pa
ge
1
Berlin and Germany: Moscow has again moved the Ber-
lin pro em to center stage and is treating the forthcoming
Rusk-Gromyko talks as a "crucial phase" in the East-West
dialogue.. Tension is being heightened through a tougher
tone in Soviet pronouncements and in new threats to sign
a separate peace treaty with East Germany, but Khrushchev
apparently still hopes negotiations can be used to resolve
the impasse.
Nuclear Testing and Disarmament: Khrushchev reasserted
on 13 July that the USSR must e e "last" to test, but
Soviet tests seem toLbe some time in the future. The dis-
armament conference reconvened in Geneva on 16 July with no
sign of a signjgicant change in Sov.iet~positions.
Moscow Peace Conference and Sino--Soviet Relations: The
congress ended its seven-day meeting with a bland reso u-
tion. The Soviet Union and Communist China used the meeting
to project an outward appearance of bloc unity, but other
developments indicate continued deep hostility.
Cuba: The silence surrounding Raul Castro's departure
from Moscow contrasts sharply with they attention given his
arrival and activities during the visit, and suggests that
difficulties developed during his negotiations.
Indonesia: The composition of the delegation accompany-
ing yan on his visit to Indonesia--to begin on 21 July--
indicates that important political as well as economic mat-
ters are to be discussed.
CZECHOSLOVAKIA . . Pag
e
6
Recent governmental changes and the completion of the
long delayed program for the 12th Czechoslovak party congress
suggest that party and government leader Novotny has beaten
down internal party opposition and is movie to strengthen
the economy.
EAST GERMANY'S ECONOMY AT MIDYEAR . . . . . . . . . . . , Page
The regime at midyear could claim some progress toward
solving its industrial problems, but the East German economy
is suffering more acutely than ever from the effects of
agricultural failures and past inflation. Since last August
the regime has been able to increase labor productivity in
industry while maintaining the former wage level, and to
overfulfill the conservative plan for industrial production.
The effects of last year's very poor harvest, however, can-
not be overcome quickly, and the regime has admitted that
the food supply has declined and will not improve in the
next four months. The addition of key economic officials
to the Presidium of the Council of Ministers represents an
effort to adjust to long-range economic; problems.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 July 1962
SIN0-INDIAN BORDER . . . . . . . . . . . . . . . . . . . . Page 10
Tension remains high in the Sino-,Indian border area,
particularly in the Galwan Valley of Ladakh, where forces
of the two sides have been within rifle shot of one another
for more than a week. Both sides have warned that a clash
may occur at any time, but each seems reluctant to initiate
hostilities. Both for the moment appear content to con-
fine themselves to diplomatic exchanges and military shadow-
boxing. 25X1
NEPAL ? . . . . . o . . . . . . . . . . . . . P . . . . . Page 12
King Mahendra's recent reorganization of his Council
of Ministhrs should increase government efficiency. The
primary aim of the move, however, seems to have been to con-
ciliate India by removing the India-baiting fo?eign min-
ister." Mahendra presumably hopes to encourage New Delhi's
slight but growing sympathy for his administration to the
detriment of the India-based Nepali exiles.
LAOS . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
Souphannouvong's refusal to allow a company of Phoumi's
troops to proceed to Khang Khay presents the Souvanna govern-
ment with its first test of the'"troika" principle. In
antici *tio.n . of eventual national e.lectiois,, Phoumi is organ-
izing a political movement designed to counter the Neo Lao
Hak Sat--the Pathet Lao's political arm. The Geneva con-
ference on Laos is scheduled to conclude on 23 July, and
there is no evidence that Soviet bloc representatives will
raise issues to delay the signing of the neutrality agree-
ments.
. . Page 14
Recent operations reveal a high level of military profes-
sionalism on the part of the Viet Cong. In the northern
part of South Vietnam, 'they appear to be building up a
strong force based on cadre units from re,gu ar North Viet-
namese Army divisions. Wh.iie= South Vietnamese Army sweeps
are destroying Viet Cong ,nstallations and supplies and peep-
ing the Communists off balance, Communist.: forces continue
to elude encirclement by fleeing into the jungle when heli-
copters appear.
The Viet Cong's National Front for the Liberation of
South Vietnam has stepped up efforts to gain acceptance abroad
as spokesman for South Vietnam's people and has proposed that
South Vietnam be "neutralized" along the lines of the Laotian
settlement.
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20 July 1962
WEST NEW GUINEA . . . . . . . . ... . . . . . . . . ... . Page 15
Dutch-Indonesian talks on the West New Guinea dispute
resumed on 13 July near Washington. Certain to impede the
talks, however, is Indonesia's long-standing demand for
transfer of the area before the end of 1962, thereby by-
passing the two-year interim administration fixed by the
Bunker plan. Indonesian military movements have continued
without letup, and there are indications of plans for rela-
tively large-scale action in early August.
. Page 17
The rift between dissident Vice Premier Ben Bella and
Premier Ben Khedda of the Provisional Algerian Government
(PAG) appears to be widening, despite mounting pressure on
both leaders to settle their differences and apply themselves
to the country's economic and administrative problems
Ben Bella, who has been joined by
respected ex-premier Ferhat Abbas, appears to be gaining
prestige and military strength. Although Ben Bella's own
statements continue to be moderate, members of his entou-
rage have demanded the replacement of the PAG, implying that
this would be done by force if necessary. 25X1
CONGO . . . . . . . . . . . . . . . . . . . . . . . . . . Page 18
Adoula is probably in serious trouble as a result of
the 16 July assembly vote on his reorganized government.
The number of his opponents is increasing and, aided by
Tshombe, they are intent on toppling the premier. There
has been no progress toward Katanga's integration, and
Adoula appears increasingly convinced that further negotia-
tions would be fruitless. Tensions between UN and Katangan
forces in Elisabethville have risen sharply following Tshombe's
"independence" day celebrations and the 17 July attack on
a UN roadblock by mobs of Katangan women. 25X1
The change in prime ministers probably means the end
for the time being of economic and social reform in Iran.
Most political elements disliked outgoing All Amini, whose
reform program had alienated the traditional ruling groups
without bringing enough visible benefits to the nationalist
elements. The appointment of Amir Asadollah Alam from
the Shah's entourage marks the Shah's intention:. again to
participate fully in determining government policy. The
nationalists will find him completely unacceptable, and may
show their feelings in demonstrations.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 July 1962
THE EIGHTH WORLD YOUTH FESTIVAL . . . . . . . . . . . . . Page 20
The Communist-sponsored Eighth World Youth Festival
meets in Helsinki from 28 July to 6 August under conditions
more favorable to Moscow's objectives than those at the
Seventh Festival in Vienna in 1959. Unlike the Austrians,
the Finnish Government has given the festival organizers
considerable support. It is trying to minimize the dif-
ficulties caused by the boycott of festival-preparations by
most Finnish youth groups and to forestall possible Soviet
complaints about the lack of Finnish cooperation. While
total attendance will probably fall short of earlier esti-
mates, there will be the usual large delegations from the
Sino-Soviet bloc. A special effort is being made to en$U e
extensive African, Asian, and Latin American participation.
. Page 23
Captain General Augustin Munoz Grandes, appointed to
the newly created post of vice premier in the reorganiza-
tion of the Spanish cabinet on 11 July,. has been designated
to carry on as head of the government when Franco dies or.-
is incapacitated. Munoz Grandes retains his post as chief
of the High General Staff and now has been given control over
the three service ministries. He is known to favor close
cooperation with the ITS in defense matters and may be ex-
pected to press for US assistance in modernizing Spain's
u 4itary establishment.
ITALY'S LABOR PROBLEMS . .
. Page 24
A wave of summer strikes--although normal in Italy--
has raised serious difficulties for Premier Fanfani's ex-
periment in left-center government. Strikes early this
month by metalworkers around Turin were accompanied by
violent disorders apparently sparked by Communists and
rightists to embarrass the government. While these and
otherstrikes are temporarily halted, Labor's grievances
continue to encourage unity of action by Communist and
non-Communist unions at a time when the government parties
are seeking; to isolate the Communists politically.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 July 196,2
GREECE . . . . . . . . . . . . . . . . . . . . . . . . . . Page 25
Premier Karamanlis is facing mounting budgetary prob-
lems and heavy pressure from his opposition. The govern-
ment lacks funds to support a defense program which it and
SHAPE consider adequate. Greece's five-year economic
development program is also in jeopardy, and creation of
an:international consortium to support it is endangered by
foreign demands for prior settlement of greece's prewar
debts. Failure to'resolve these problems could bring on a
BRAZIL . . . . . . . . . . . . . . . . . . . . . . . . . Page ,26
Brazil's government crisis eased on 13 July with
congressional acceptance of Prime Minister Brochado da
Rocha's cabinet. The 17-day struggle between President
Goulart and Congress appears to have resulted in at
least initial victory for:: th'e"'Presidentt. Goulart
and his new prime minister apparently still hope for legal
restoration of a strong presidency but seem likely to face
continuing congressional, .ca.lc.it:rance. The government
now may be inclined to increase restrictions on private
foreign investrgent in Brazil.
PERU . . .
Page
The military junta in Peru faces no immediate physical
challenge to its control of the countr3r, but will prob-
ably have to contend with` a general strike, some outbursts
of violence as well as passive, resistance, and widespread
censure by Western hemisphere governm_e t.p;,;. The United
States and several Latin American governments announced
suspension of diplomatic relations with Peru on the heels
of the coup, President Prado is under arrest, coanst..ittutt:iona.1
guarantees have been suspended, the 10 June presidential
election,?h;as-been annulled, and a cabinet of military of-
ficers has been installed.
FRENCH NUCLEAR STRATEGY . . . . . . .
. . . . Page
French national security policy today, as France moves
toward operational atomic weapons capability, centers on
an independent nuclear deterrent capable of ih.fld.c:ting suf-
ficient retaliatory damage to make it unprofitable: for an
aggressor to attack France. De Gaulle's concept, simplified,
is that modern defense requires nuclear weapons; nations
without them cannot hope to exert their full weight in inter-
national affairs; and multilateral control of France's weap-
ons would mean multilateral control of France's policy.
Hence De Gaulle not only remains firmly opposed to sharing
control of the French nuclear force, but has refused to have
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 July 1962
French forces, except those in Germany, equipped with
nuclear weapons subject to US control, Paris acknowi-
edges a continuing need for the US deterrent and the Atlan-
tic Alliance in the face of the Soviet threat ?but the
sentiment that Europe needs its own defense capability
free of US control is gaining ground Ln France even among
those basically opposed to De Gaulle's nationalistic
policies. France, moreover, has little inclination to
share its new weapons system with its partners at the
present stage of European union
GREEK-BLOC TRADE . . . . . . . . . . .. . . . . . . Page 5
The growing volume of Greek trade with the Soviet bloc
is of concern to Athens in view of its political and de-
fense ties with the West. The bloc offers oil, machinery,
and other items at bargain prices and provides an assured
market for many agr-icultural products which Greece finds
it difficult to sell elsewhere. In recently concluded bilat-
eral trade talks with three bloc nations the Greeks have
shown caution about agreeing to further expansion, but the
economic attractions of trading with the Eastern European
market are very great for Greece-and will remain even after
Athens associates with the Common Market.
SCANDINAVIA AND THE EEC
The question of membership in the Common Market (EEC)
has aroused more controversy in Norway, and to a lesser ex-
tent in Denmark, than any issue since these countries chose
to join NATO in 1949. In Denmark majority opinion strongly
favors EEC membership, but in Norway a powerful. minority
led by agricultural and fishing intersests--with the sup-
port of certain religious groups--is opposed. Norway's
Labor government is firmly committed to seeking full member.:"
ship and has taken preparatory steps toward this end. It
has, however, expressed fears over the political consequences
for.forthern Europe and inter-Nordic ties if provision is
not made for Swedish and Finnish products to compete in the
. Page 8
ECUADOR . . . . . . . . . . . . . . . . . . . . . . . . . Page 9
President Arosemena, who took office through a coup
last November, has successfully resisted several efforts
by the military and rightist elements to depose him. Right-
ist apprehension has been caused by his tolerance of left-
ists in his government And by his advocacy of reform pro-
grams, although the reforms are favored by moderates.
Now faced with the prospect of working with a new Congress
dominated by potentially hostile conservative elements,
Arosemena may encounter more determined efforts to oust
him.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
WEEKLY REVIEW
SOVIET FOREIGN POLICY DEVELOPMENTS
Berlin and Germany
The Soviet Union has re-
activated Berlin as an urgent
problem and appears to regard
the forthcoming Rusk-Gromvko
talks in Geneva as a "crucial
phase" in the East-West dia-
logue. Recent Soviet state-
ments have renewed the threat
of a separate peace treaty with
East Germany if no early nego-
tiated settlement is achieved.
~ The So-
viets apparently feel that this
type of pressure will induce
Western concessions in negotia-
tions, which they continue to
stress as the preferable means
of resolving the question.
Berlin problems. On 17 July
Izvestia published an article
po n t g out that the US-Soviet
bilateral talks have reached a
critical stage without a res-
olution of the main question--
the occupation status of West
Berlin.
The 12 July TASS statement
questioned the "good intentions"
of the Western powers and point-
ed out that it was "common knowl-
edge" that the Soviet Government 25X1
in Khrushchev's 10 July proposal
had taken a "serious step to-
ward meeting the Western powers
halfway." The statement reit-
erated the USSR's decision to
sign a separate peace treaty if
no agreement with the West is
negotiated.
During the past week, the
Soviet Government has issued a
flood of strong statements con-
cerning Berlin. On 12 July,
TASS published a restatement
of the USSR's fundamental posi-
tion on Berlin and Germany; it
was apparently prompted by the
immediate US rejection of Khru-
shchev's 10 July proposal to
replace the Western forces in
West Berlin with contingents
from four of the smaller NATO
and Warsaw Pact members under
United Nations authority. This
was followed on 14 July by a
harsh note to the United States,
Britain, and France formally
rejecting the Western proposal
of four-power talks on local
The 14 July Soviet note
on West Berlin further stressed
the bloc's demand for abolition
of the occupation status in
West Berlin. It called attention
to "fascist and criminal provoc-
ative" activity from West Ber-
lin, pointing out that the
Western powers "by preserving
the occupation regime" must
assume responsibility for the
actions of West Berliners.
It claimed that this "provoc-
at:ive activity" only demon-
strates the necessity for
an "urgent normalization of
the situation on the basis
of a peaceful German settle-
ment."
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CURRENT INTELLIGENCE WEEKLY SUMMARY
East German leader Ulbricht
has also reflected the appar-
ent bloc decision to increase
the tension and pressures
surrounding the Berlin ques-
tion in order to convince the
West that some modification of
its position is necessary. The
official East German Neues
Deutschland gave prominent
attention on 11 July to Ul-
bricht's message to the Moscow
peace congress in which he
emphasized the necessity for
a peace treaty. He maintained
that the current dangers in
the Berlin situation which were
causing concern to "all respon-
sible people" could be eliminated
only when "respect for the
sovereignty and borders of the
German Democratic Republic is
guaranteed." A leading East
German party spokesman, Albert
Norden, echoed Ulbricht's state-
ment at a 13 July press con-
ference in Moscow, stressing
that East Germany "emphatically
demands the conclusion of a
peace treaty as soon as possible.
Following Khrushchev's
Vienna meeting with President
Kennedy, when the Soviet Union
was trying to force the US to
initiate further diplomatic
exchanges on Berlin, there were
repeated Soviet and satellite
statements that Moscow would
sign a treaty with East Ger-
many before the end of that
ea-
Despite the bloc's sharper
attack on the Western position
on Berlin, Moscow has continued
to evidence interest in pursuing
the bilateral talks. Khrushchev's
10 July proposal was probably
aimed at assuring US leaders
that the USSR is prepared to
offer sufficient variants of
its basic position to provide
for further discussion. Similarly,
in :his 13 July interview with
a delegation of US newspaper
editors, Khrushchev was com-
paratively restrained in his
elaboration of the outstanding
East-West issues.
A TASS version of the in-
terview--not published until
11 July and then very carefully
edited and revised--quoted Khru-
shchev as pointing out that he
had not lost hope that the US
Government would come to a
"reasonable understanding" of
the Berlin problem. While
reaffirming Moscow's demand
that, Western occupation troops
be withdrawn from West Berlin,
he attempted tc assure the US
that if its representatives
were more forthcoming in the
private discussions on the
Berlin question the situation
could be quickly settled. He
asserted that on the question
of a separate peace treaty "we
shall not hurry, but neither
shall we tarry," and voiced the
expectation that US leaders
would take a "reasonable
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CURRENT INTELLIGENCE WEEKLY SUMMARY
attitude" toward an eventual
solution.
In addition to the diplo-
matic and propaganda threats,
the Communists may also in-
crease pressure in Berlin it-
self in the hope of inducing
some modification in the West's
position. They will probably
be careful not to undertake a
unilateral action which poses
a direct challenge to the West,
but they may well renew such
harassing tactics as the air
provocation on 17 July over
West Berlin. On that occasion,
in what appears to have been
a deliberately calculated demon-
stration, Soviet fighter air-
craft twice approached dangerous
-~
ly close to US aircraft.
Nuclear Testing
and Disarmament
The USSR has reiterated
its intention to respond to
the current US test series with
another series of its own. Both
a 13 July TASS statement on
nuclear test issues and Khru-
shchev in his interview with
the US editors warned in ef-
fect that the USSR must be the
"last" to test in order to
come "'abreast" of the US in
the number of testing series.
Neither warning, however, con-
veyed a sense of immediacy, and
Soviet tests still seem to be
some time off.
Khrushchev's remarks to
the US editors that a treaty
banning "tests for all time"
could be signed following com-
pletion of the current US test
series and the-next Soviet
series suggest that with the
conclusion of the Soviet series
the USSR will open another
propaganda campaign aimed at
a test ban treaty using "national"
means of detection to police the
agreement without providing
for mandatory on-site inspections
of suspicious events. The So-
viets may also amend their
present draft treaty along the
lines of the neutralists' "com-
promise" memorandum of last
April and provide for invita-
tional on-site inspections by
neutral teams. Soviet leaders
probably believe that such
moves, while clearly unacceptable
to the West, would impress the
nonaligned powers and embarrass
the US.
At the 17-nation disarma-
ment conference, which recon-
vened in Geneva on 16 July,
Soviet delegate Zarin has used
much the same tactics of at-
tempting to demonstrate flexi-
bility by making some minor
changes in the Soviet draft
treaty which in fact do not
amount to a significant modi-
fication of approach. He
characterized his action as a
"new step" to meet the US and
the other Western powers "half
way again." The amendments
provided Soviet acceptance of
the US percentage figures for
conventional armaments reduc-
tion in the first two stages of
a disarmament agreement. Zorin
accepted Western suggestions
that military missions be ex-
changed and "rapid and reliable
communication" be established
among heads of governments
and the UN secretary general
in order to inhibit the acci-
dental outbreak of war.
The Polish delegate, who
argued vigorously at the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
conference session that the So-
viet changes represented an
important move forward, admitted
privately to a Western journalist
that the changes were, in fact,
"not very significant." He
asserted, however, that what
was really important was that
the Soviets now are evidently
willing to consider compromises
and that such an approach, if
applied to other matters in
dispute, might permit East-West
agreement.
Ambassador Dean has com-
mented that regardless of the
specious nature of Moscow's
"acceptance's of percentage re-
duction of conventional arma-
ments and the prevention of
war measures, the Soviets are
gaining credit among the eight
nonaligned delegations for at
least making some move from
their previous position. The
Soviets appear to recognize the
appeal of this position for
Soviet propaganda, stressing
that Dean returned to Geneva
"with his old and not even re-
furbished luggage" to restate
the US "bankrupt policy" of
controls over armaments rather
than disarmament.
Moscow Peace Conference
And Sino-Soviet Relations
Disarmament was the key-
note of the six-day World
Congress for General Disarmament
and Peace, which closed in Mos-
cow on 14 July with a bland
resolution calling for general
and complete disarmament "under
strict international control."
Expressing the fear that the
proliferation of nuclear
weapons and improved delivery
systems will soon make arms
control impossible, the con-
gress appealed for an imme-
diate agreement "on renuncia-
tion of all tests of nuclear
weapons," and for a treaty
banning such tests. Although
avoiding any open attacks on
Western positions and policies,
the resolution reflected Soviet
propaganda themes on disarma-
ment, the advocacy of preven-
tive war in the West, and the
arms race.
Communist China was rep-
resented by a delegation
headed by the writer and
Minister of Culture Mao Tun,
who throughout the congress
sought to give the impression
of Sino-Soviet solidarity, es-
pecially in his remarks hail-
ing Khrushchev's warning
against an invasion of main-
land China. Both the Soviets
and the Chinese, in marked
contrast to their open polemics
at recent front organization
meetings, appear to have been
careful to maintain at least
the outward appearance of bloc
unity and agreement on the
question of disarmament. How-
ever, the prevailing theme at
the congress and in its reso-
lution was that of the over-
riding importance of disarma-
ment at the expense of the
Chinese emphasis on support
for "wars of national libera-
tion." The Soviet and Chinese
accounts of the congress have
differed considerably, with each
side emphasizing aspects which
support its own position.
The current, largely Soviet,
effort to create an illusion
of Sino-Soviet harmony was exem-
plified in the attendance by
Khrushchev and Mikoyan at a
performance of Chinese acrobats
and the Soviet, but not Chi-
nese, accounts of the party
for Chinese delegates. The
Soviet press also played up
the arrival in Moscow, en
route to Geneva, of Chinese
Foreign Minister Chen Yi and
North Vietnamese Foreign
Minister Ung Van Khiem. Both
were guests of honor at a 16
July luncheon given by Mikoyan,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
which the Soviet press described
as being held in "a warm and
friendly atmosphere."
Peiping so far has not
shown the same degree of en-
thusiasm for Sino-Soviet soli-
darity as has Moscow and prob-
ably remains suspicious of So-
viet motives. During the thaw
in March and April, at least
one member of the Chinese party
central committee reportedly
was taken in by the propaganda
truce, believing that Sino-So-
viet tensions had in fact eased
a little. This misguided party
official was sharply rebuked
in front of a party meeting
last May by Secretary General
Teng Hsiao-ping, who insisted
"they have not been eased at all."
Peiping at present seems
to be following guidelines
laid down recently by the For-
eign Ministry not to "recklessly
make trouble" for the Soviets
while showing that China's ideo-
logical position remains "firm
and clear." The Chinese have
publicly ignored signs of the
growing rapprochement between
Moscow and Belgrade and per-
mitted the peace congress to
pass without heatedly challenging
the Soviet emphasis on general
disarmament at the expense of
the national liberation move-
ment. At the same time, Peiping
has reiterated its support for
the Albanian leadership and its
adherence to other basic po-
sitions in dispute with Moscow.
The USSR's failure to is-
sue a communique at the con-
clusion of Raul Castro's talks
in Moscow or to publicize his
departure was in sharp contrast
to the attention given his ar-
rival on 2 July and his sub-
sequent meetings with Soviet
leaders, including Khrushchev.
According to Radio Havana, Castro
arrived in Havana on 17 July,
but no mention was made of the
results of his 14 days in Moscow.
The composition of the
delegation Castro headed strong-
ly suggested that its primary
purpose was to negotiate for
additional Soviet military aid.
The circumstances surrounding
Castro's departure suggest that
difficulties developed during
the negotiations; Moscow may have
rejected new Cuban requests for
advanced military equipment or
a possible Cuban plea for a
firmer Soviet defense commitment.
There has been no indica-
tion that all of the mission has
returned to Cuba, however, and
negotiations on other matters
could be continuing on a lower
level.
Indonesia
The composition of the dele-
gation accompanying Soviet First
Deputy Premier Mikoyan on his
visit to Indonesia indicates
that important political as
well as economic matters are
to be discussed. The visit,
thus far announced only by the
Soviet Embassy in Djakarta, is
to begin on 21 July.
The presence of a deputy
chairman of the State Committee
for Foreign Economic Relations
suggests that one subject of dis-
cussion will be Indonesia's deteri-
orating economic situation and
its difficulties in meeting pay-
ments for previous Soviet assist-
ance. The Foreign Ministry of-
ficials accompanying Mikoyan--
Deputy Foreign Minister Nikolai
Firbyubin together with the chief
of the Southeast Asian Affairs
Bureau--will probably discuss
the state of Indonesia's nego-
tiations with the Dutch over West
New Guinea and may seek assur-
ances that these negotiations,
encouraged by the US, do not re-
flect a change in Indonesia's
attitude toward the USSR.
A delegation of this stature
could also discuss long-range
aspects of relations between the
two countries, particularly in
light of Indonesia's heavy in-
debtedness to the USSR and Mos-
cow's continued willingness
to provide Djakarta with com-
plicated and extremely expen-
sive military items.
SECRET
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
Czechoslovak party and gov-
ernment leader Antonin Novotny
last week made the second
significantshift of a polit-
buro member within a year and
announced that the long-prom-
ised program of the party's
12th congress would be pub-
lished beginning this month.
These moves illustrate his
ability to overcome opposition
within the party and his deter-
mination to put the economy
in order.
On 11 July party central
committee economic specialist
Alois Indra was appointed to
r place deputy premier and
party politburo member Otakar
Simunek as chairman of the
powerful State Planning Com-
mission. At the same time two
first deputy chairmen of the
commission were demoted to
deputy chairmen. These changes
will allow Novotny to divert
some of the blame for the weak
performance of the economy to
dismissed and demoted economic
administrators.
aimunek, who was in Mos-
cow at the CEMA Executive Com-
mittee meeting when the changes
were announced, will continue
as deputy premier responsible
for C :MA matters, foreign
trade, and planning. His as-
sumption of the main CEMA
representative job--previously
held by Stanislav Vlna, one of
the demoted first deputy chair-
men--may reflect the regime's
anticipation of a further in-
tegration of the Czech economy
into CEMA and that organiza-
tion's growing importance to
the bloc in the face of the
growth of the Common Market.
Since Khrushchev at the
22nd Soviet party congress
last November reiterated the
necessity of de-Stalinization,
the Czech party has twice con-
vened its central committee
to take steps to comply. How-
ever, the party apparatus,
probably up to politburo level,
is split over the de-Staliniza-
tion.issue, and agreement has
been reached only on such
minor matters as changing
street names. Novotny's
patently false claims that
deceased President Gottwald
was responsible for Czecho-
slovakia's Stalinist era have
aroused resentment against
the regime.
There were indications
in mid-May that the more liberal
members of the leadership
tried to challenge Novotny re-
garding the continuing fail-
ure of the regime to over-
come economic problems and
his personal inability to
adopt a more liberal outlook.
The seriousness of the attack
on Novotny was suggested by
the decision again to postpone
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CURRENT INTELLIGENCE WEEKLY SUMMARY
the already delayed party
congress, the further delay
in publication of the im-
portant party program, and
rumors that he would be forced
to resign.
Soviet central committee
secretary Ilichev was dis-
patched to Prague in early
May, probably to plumb the
depths of Novotny's difficul-
ties and to make known Soviet
desires on Czech developments.
Moscow continues to support
Novotny, although there are
reports that it is displeased
by the imprisonment of Novotny's!
political rival, politburo
member Rudolf Barak, and Czech
failure to de-Stalinize. The
Soviet party probably feels
that Novotny should remain,
in view of the lack of a suit-
able successor and the neces-
sity of avoiding crises which
would affect bloc political
stability in a time of wide-
spread economic difficulties
and ideological dispute with
Communist China. Novotny,
with Soviet backing assured,
probably forced the decision
to postpone the party congress
from October until December
to gain time to rebuild his
support in the central com-
mittee and to determine the
full. scope of the country's
economic problems.
On 11 July Prague finally
announced the completion and
forthcoming publication of new
party statutes and a draft
program on the further progress
toward socialism which will ad-
vance Czechoslovakia's claim
to being the second socialist
state after the USSR. This
long-delayed move constitutes
further evidence that Novotny
has overcome, at least for
the present, opposition to
his policies.
The completion of the
party program further suggests
that decisions have finally
been made on whether to switch
from the present five-year plan
to a seven-year economic plan,
on the direction of the economy,
and on the scope and pace of
de-S1;alinization. The conduct
of the discussions of the party
program, selection of delegates
to the congress, and the
operation of the congress it-
self will reveal whether
Novotny will have sufficient
strength to implement his
economic programs and his own
particular version of de-
Stalinization.
, SECR h']
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CURRENT INTELLIGENCE WEEKLY SUMMARY
EAST GERMANY'S ECONOMY AT MIDYEAR
The midyear economic re-
port to the East German central
committee indicates that the
effects of agricultural failures
and bast inflation are being
felt more acutely than ever, but
that some success has been
achieved in straightening out
problems in industry.
Prospects for industrial
growth are somewhat better than
in previous years. The closing
of the Berlin sector border last
August increased the govern-
ment's control over labor. It
practically eliminated the pos-
sibilityof escape to West Ger-
many, and has enabled the re-
gime to raise labor productivity
without granting further wage
increases. Under Soviet pres-
sure, planning has become more
realistic and is less affected
by fears of a Western embargo.
The conservative goal for in-
dustrial production is being
ovEerfulfilled--production in
the first five months was up
7.8 percent over the same
period in 1961.
In spite of the improve-
ment in industrial performance
however, investment and export
plans continue to be underful-
filled. Lags in construction
and in delivery of machinery
and, equipment have prevented a
speedup in the completion of
priority investment projects,
and the regime does not expect
the investment plan to be ful-
filled this year. The export
program also is behind schedule,
partly because of frequent shifts
in foreign trade plans. These
same shifts have been afactor
in a piling up of inventories
of semifinished and finished
goods, especially in the machinery
and equipment industries.
EASY GERMAN ECONOMIC INDICATORS
(QUARTERLY AVERAGE FOR 1960 1Q
SECRET
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NWOO, SECRET
Shortfalls in agricultural
production, due in part to pre-
cipitous collectivization, can-
not be quickly overcome. A very
poor harvest in 1961 and a sub-
sequent decline in livestock
numbers and the output of
animal products this year have
led to the current serious food
shortages, and the regime has
admitted that the food supply
has declined and will not im-
prove in the next four months.
Neues Deutschland reported on
30 June that the 1961 harvest,
in comparison with that in 1960,
was lower by 43 percent in
potatoes, 37 percent in corn,
32 percent in sugar beets, and
24 percent in grain. Since June
1961, the number of pigs in the
country had dropped by about
15 percent and cattle by about
2 percent, and the current
attempt to rebuild herds will
limit the output of livestock
products, even if the harvest
is better than last year's.
The regime has said that it will
not increase imports of meat
and butter, but may decide to do
so if production drops below
expected levels.
OF EAST GERMANY'S TOP EC
STRUCTURE
SOCIALIST UNITY
POLITBURO
PARTY (SED)
CENTRAL COMMITTEE
10 Full Members,
9 Secretaries,
including:
Including:
LEUSCHNER - - - - - -
----------
NEUMAt?IN------
^NEUMANN-----
STOPH-------
-----------'
10 Candidate Members,
including:
APEL--------
- - - - - - - - -
BAUMANN -----
--BAUMANN (food and
consumer goods)
GRUENEBERG-----
-GRUENEBERG-----
(agriculture)
MEWIS-------
----------
MITTAG (general
economic planning ?)
of rationing, which consists of
measures to limit buyers to one
retail outlet, is spreading
rapidly.
The food situation is
doubly difficult for the regime
because of the existence of ex-
cess purchasing power, which is
largely directed to food pur-
chases. By making selective
price increases and holding
wages steady thus far this year,
the regime has only just begun
to restrict purchasing power
built up during 1960-61, when
wages outran productivity and
prices of consumer goods remained
fairly stable. The most effec-
tivemeans of bringing supply and
demand into balance--major price
increases or reintroduction of
formal rationing--are being
avoided, undoubtedly for reasons
of prestige. However, a form
The East German regime is
still in the process of adjust-
ing to the existence of long-
range economic problems that
cannot be solved by making up
new slogans or carrying on more
production campaigns. To this
end, the Presidium of the Council
of Ministers has recently been
strengthened by the addition of
four top-flight economic of-
ficials, bringing its total mem-
bership to 13, and the full
Council of Ministers also has
been enlarged. The move is
designed to reduce the duplica-
tion of functions and confusion
which have existed in the gov-
ernmental apparatus since the
economic decentralization in 1958 25X1
and emergency economic and
planning moves in planning moves in July 1961.
SECRET
ONOMIC LEADERSHIP
Or
(chairman, People's
Economic Council
--STOPH (first deputy premier)
(promoted from deputy premier
for coordination and controo
APEL (probably responsible
for industry)
WITTKOWSKI (food and
consumer goods)
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
SINO-INDIAN BORDER
Tension along the Sino-
Indian border in Ladakh remains
high as both New Delhi and Pei-
ping pursue a strategy of occupy-
ing as much of the disputed
territory as possible without
actually fighting for any
single piece of real estate.
This military shadowboxing on
occasion creates a potentially
explosive confrontation of forces
such as the one in the Galwan
Valley, where several hundred
Chinese and Indian troops have
been within rifle shot of one
another for more than a week.
S K~. N G
`\Yang Oawan `
-~ arhand. ,e,ao
25660
OOWIN-AOSTE
ry \tSVn_.
AFGHANISTAN
IRAQ 4j
140 . DehrkDurf
a~higong
Boundary shown on most US and Western maps
-?.- Demarcated
x - Delimited only
Indefinite
Boundary shown on recent Chinese and Indian maps
(where differing from US and Western maps)
Chinese
Indian
~--- Railroad
Road
- - - Major caravan route or trail
Pass
.25645 Spot height (in feet)
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SECRET NW
CURRENT INTELLIGENCE WEEKLY SUMMARY
For the moment the ad-
vantage there seems to be with
the Indians. The Chinese force
is reported to have pulled back
a bit after having advanced at
one point to within 15 yards of
the Indian position. Both sides
have warned that they cannot
and will not submit to threats
or pressure, and for each the
impasse in the remote 15,000-
foot mountain defile has
developed into a test of re-
solve from which it will be
embarrassing to back off.
However, no shots have yet
been exchanged, and the forces
present are apparently under
orders not to fire unless fired
upon. Indian officials have
been quoted publicly to the
effect that, if the Chinese
open fire, the Indians will
"give it back," not only in
the Galwan area but at other
points along the disputed
frontier.
Indian and Chinese
forces con inue their maneuver-
ing in close proximity and the
tempo of public charges and
countercharges is increasing
2tiX-
25X1
Both sides are on record,
repeatedly, in favor of a nego-
tiated settlement, but so long
as each side's version of a
negotiated settlement amounts,
in effect, to the other's
capitulation, productive talks
and a consequent easing of
tensions are unlikel . 25X1
V .ECRE T
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ftw SECRET 1W
CURRENT INTELLIGENCE WEEKLY SUMMARY
Recent changes that King
Mahendra has made in his
Council of Ministers will re-
duce the workload of several
key ministers, make better use
of the country's meager talent,
and--most importantly--make the
government less objectionable
to India. This is the first
major shake-up since the King's
assumption of personal rule in
December 1960.
The principal shift in-
volves the council's two
leading figures after the King,
who is chairman and defense
minister. Tulsi Giri loses
the home and foreign affairs
portfolios, assumes the newly
created post of vice chairman
of the council, and retains
his post as minister for palace
affairs. Rishikesh Shaha, who
had been finance minister, takes
over as foreign minister; he
was once ambassador to Washing-
ton.
at the King's behest, it earned
New Delhi's enmity.
On the other hand, the
King appears to have used
the more moderate Shaha to
soothe New Delhi at times
during the past year. While
Mahendra will continue to de-
termine foreign policy, Shaha's
administration will reflect his
broader awareness of the world
outside the Katmandu Valley and
his recognition that Nepal can-
not afford to alienate its power-
ful southern neighbor.
In moving to mollify the
Indians as well as to improve
his administration, the King
appears to be cautiously follow-
ing through on matters raised
during his visit to New Delhi
in April. He presumably hopes
that by reducing Giri's role
and seeking to,inject new vigor into
his administration, he can per-
suade the Indians to make further
efforts to restrain the hit-and-
Giri's new assignment in
effect kicks him upstairs where
he will have less direct in-
fluence on foreign policy but
where his general usefulness
to the King can continue. As
foreign minister, Giri had been
the intemperate voice of Nepali
nationalism, charging Indian
"dominance," whiplashing New
Delhi for "supporting" the
Nepali exiles, and pressing for
closer relations with other
countries, including Communist
China. Although Giri's India-
baiting was probably undertaken
run activities of the India-
based Nepali exiles and, in
time, to accept his claim
that Nepal needs his type
of personalized authoritar-
ian rule. Although the In-
dian Government still sympa-
thizes with the rebel move-
ment, there are signs that
following the King's meet-
ings with Nehru in April,
New Delhi has begun to show
more willingness to cooperate
SECRET
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NOW
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
LAOS
While the international
conference on Laos appears moving
toward an early conclusion in
Geneva, the coalition govern-
ment in Vientiane faces its first
major test. Souphannouvong,
acting premier in the absence
of Souvanna Phouma, has refused
to permit a company of Phoumi's
troops to proceed to Khang Khay
in fulfillment of the coalition
leaders' decision to establish
composite battalions in admin-
istrative centers. Phoumi has
warned Souphannouvong that if
he persists in this stand, it
would be necessary to request
withdrawal of Pathet Lao and
neutralist companies from Luang
Prabang and Vientiane. Phoumi
has urged Souvanna to return to
Laos to ease the tensions which
have developed since his depar-
ture in mid-June.
Nationalist and Communist
China are continuing to press
for diplomatic representation
to the new Laotian government.
The Nationalist ambassador-
designate was told on 16 July
that arrangements would be made
for him to present his creden-
tials to King Savang. However,
accreditation is also pending
for the Communist charge, who
arrived in Vientiane on 11 July.
The rival Chinese regimes re-
main unequivocally opposed to
any "two-Chinas" solution.
In anticipation of eventual
national elections, General Phoumi
is organizing a political movement
designed to counter the Neo Lao
Hat: Sat--the political arm of the
Pathet Lao. Phoumi's new party,
called the National Movement for
the Defense and Preservation of
the Independence of Laos, aims
at merging existing rightist parties.
It reportedly hopes to collaborate
with Souvanna's fledgling Neutral-
ist Party (Lao Pen Kang) in pre-
senting a single slate of candi-
dates to oppose the Pathet Lao,
who have a widespread, disciplined
grass-roots organization. Strong
regional and vested interests will
hamper formation of a non-Communist
united front. The Neo Lao Hak Sat's
election victories in 1958 largely
resulted from the failure of the
anti-Communists to put up a uni-
fied slate.
Meanwhile] in Geneva, repre-
sentatives of the 14 nations par-
ticipating in the Laotian confer-
ence convened in May 1961 are
scheduled to sign the neutrality
agreements on 23 July. Soviet
bloc foreign ministers are al-
ready arriving in Geneva, and
there are no indications that the
Communists will raise any extra-
neous issues such as Vietnamese
reunification which could delay
the conclusion of the conference.
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illillillillor SECRET
Sweeps by the South Vietnamese
Army are destroying Viet Cong in-
stallations and supplies, but Commu-
nist forces continue to elude en-
circlement by melting into the
jungle when helicopters appear.
Sweep operations apparently are
keeping the Communists off balance
in some areas; the Viet Cong con-
tinue to attack in smaller units
and seldom appear ready to risk
larger concentrations. Several
recent Viet Cong operations reveal
a high level of military profes-
sionalism as well as good intelli-
gence on the government's troop
deployment.
In the southern part of the
country the Viet Cong have mounted
increasingly successful ambushes,
using electrically detonated mines
which are evidently factory-made.
instances during the past three
weeks in which Communist attacks
have been assisted by Self-Defense
Corns or Civil Guam mF?mhPrs
25X1
the Viet Cong may plan intensified
efforts to disrupt the national
economy through "lightning attacks"
on military posts circling Saigon,
the national distribution center.
In the northern part of the
country, which the Communists call
Intersector V, there are indica-
tions that the Viet Cong are build-
ing up a strong military organiza-
tion around cadre units from regu-
lar North Vietnamese Army divisions.
25X11
Small-scale attacks on
militia outposts and strategic
hamlets continue unabated. Viet
Cong success in penetrating some
garrisons protecting these posts
and hamlets is indicated by several
The rugged terrain in Intersector V
and its proximity to trails running
through Laos favor the development
of an effective Viet Cong regular
-Force.
The Hanoi-directed National
Front for the Liberation of South
Vietnam--the Viet Cong political
arm--appears to be making a greater
effort to portray itself to for-
eign governments as spokesman for
the South Vietnamese people and an
alternative to the Diem regime.
][t recently announced plans to set
up in Havana permanent representa-
tion to Latin American countries;
it also has a delegation at the
Moscow disarmament conference.
Isle dekfiut~oc
Rach Gia'
GULP OF
SIAM Quanj
(Ca LM
Sou.% ?JceLn` r n
Communist Guerrilla Activity
-{--f~ Railroad
Road
On 17 July, Hanoi released
a, statement by the Liberation
Front proposing that South Viet-
nam be made a neutral state along
the lines of Laos. This proposal
appears intended to solicit sup-
port for a negotiated withdrawal
of the US military presence which
would enable South Vietnam to join
a "neutral zone" with Laos and Cam-
bodia. North Vietnam has periodi-
cally called for international con-
sultations on the Vietnam issue.
SECRET
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TSOW 410o
CURRENT INTELLIGENCE WEEKLY SUMMARY
WEST NEW GUINEA
Dutch-Indonesian talks on
the West New Guinea dispute re-
sumed on 13 July near Washington.
Certain to impede the talks, how-
ever, is Indonesia's long-standing
demand for transfer of the area
before the end of 1962, thereby
bypassing the two-year interim
administration fixed by the
Bunker plan.
Before Foreign Minister
Subandrio left Djakarta on 18
July to join the talks, he de-
scribed his trip as a "last and
more advanced effort" to meas-
ure the Netherlands' willing-
L E B P S tEh-M
SANGI
Manado~- . Birung
Amurang'
KEPUUUAN
'~ BANGGAI
PuuU \
RARARFLONG
1 - MISOGL
O E R A M \~ FNI:FX
AMRDINR Amboina GES ER"
(AMSON) (Ambon)
0 N E S 10 A
; Ii ;N,', Bo
NMokas
UR)
el
.i A X I) A `. F. A
WE TO 7 b
* ILI
Atambuu b PORTUGUESE
Kupong
Cr
\ TIMOR
SECRET
ness to transfer West New Guin-
ea's administration to Indone-
sia in 1962. He said he would
not remain long in the United
States "if a possibility for
peaceful settlement proves non-
existent."
IR A C I F F
1
B RIAR) \\ t I C F. A N
'Pit.
Djailolo
1
T?m are4~? ?w0 HALMAqFRA
PLLAU-PUTAU EWAO WARI)AU
(NA) ISIANORI '; Gobo,. ..
LoHuan'' : Ior __
AUSTRALIA
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` 0+ SECRET "W-W
CURRENT INTELLIGENCE WEEKLY SUMMARY
Indonesian military move-
ments have continued without
letup, including a 40- to 60-man
amphibious landing on 18 July.
There are indications of plans
for relatively large-scale
action in earl Au ust.
SECRET
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SECRET
The rift between dissident
Vice Premier Ben Bella and Pre-
mier Ben Khedda of the Provi-
sional Algerian Government (PAG)
appears to be widening, despite
mounting pressure on both lead-
ers to settle their differences
and apply themselves to the
country's economic and admin-
istrative problems.
Ben Bella,
who has bee joined by respected
ex-premier Ferhat Abbas, appears
to be gaining in prestige and
military capability. Although
Ben Bella's own statements con-
tinue to be moderate, members
of his entourage have demanded
the replacement of the PAG, im-
plying that this would be done
by force if necessary.
Although spokesmen from
both factions--including Abbas--
have expressed optimism that
the military chiefs would find
a method for settling the dis-
pute, most of those from Ben
Bella's camp stress that they
will not accept any formula
unfavorable to him.
Abbas' alignment with Ben Bella
has probably destroyed his con-
siderable potential as a medi-
ator.
On 17 July two PAG minis-
ters--Foreign Minister Dahlab
and Information Minister Yazid--
threatened to resign if the
present confusion continues.
On the same day the FLN-con-
trolled General Union of Al-
gerian Workers, probably out
of concern over unemployment
and the stagnant economy re-
sia.lting from the exodus of Euro-
peans, sent delegations to the
PAG, Ben Bella, and leaders of
the Algerian National Army (ALN)
to urge a speedy reconciliation.
With Ben Bella in Tlemcen
are recently resigned PAG min-
isters Mohamed Khider and
Ahmed Francis and former PAG
functionary Ahmed Boumendjel,
in addition to Abbas and the
"dismissed" ALN chief of staff.
The US consul general in Al-
giLers reported on 16 July that
the whereabouts of PAG minis-
ters Ben Tobbal and Mohammedi,
assumed to be loyal to Ben
Khedda, is uncertain.
Conflicting public state-
ments by spokesmen claiming to
represent Ben Bella suggest that
he may not be completely in con-
trol of the militant ALN offi-
cers around him. The French
foreign minister told Ambassa-
dor Gavin last week that, in
his opinion, the ALN is a force
independent of both Ben Bella
and Ben Khedda. Ben Bella, more-
over, may calculate that he
must take some action to counter-
balance the PAG's advantage of
being installed in Algiers.
An American journalist who
has spent considerable time in
Algeria told Ambassador Gavin
last week that Ben Bella "is
sure to win" because he has the
support of the Algerian people.
The journalist added that he
felt that Ben Bella is less
oriented toward the Communist
bloc than Ben Khedda, but
opined that Ben Bella would
be difficult to deal with be-
cause, like Nasir, he would
accept aid from both East and
West, and then go his own way.
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Ambassador Gullion notes
that Congolese Premier Adoula's
failure on 16 July to obtain
absolute parliamentary majori-
ties for his reorganized govern-
ment showed "an embarrassing
and unexpected weakness," but
does not point to his early
fall. His opponents marshaled
44 votes against him in the lower
house, and the 60 favorable votes
fell nine short of the absolute
majority specified in the basic
law. In the Senate, no formal
vote was taken because the op-
position walked out. Adoula
contends that no more than a
simple majority was required in
either house, since he was only
reshuffling his government.
The presidents of the as-
sembly and the Senate declared
on 17 July that the new Adoula
government was legally in of-
fice. The opponents, neverthe-
less, charge that the Adoula
government no longer has a legal
basis, and have petitioned Presi-
dent Kasavubu to name a new
premier. Adoula is expected to
move quickly to recess parliament.
The consolidation of forces
against Adoula stems mainly from
his failure to open Katanga's
rich mining coffers to the rest
of the Congo. No progress on
Katanga's reintegration has been
madle since the Adoula-Tshomb6
talks ended on 26 June. Adoula's
position appears in fact to have
hardened. He has flatly stated
he will not appoint the Leopold-
ville members to the joint com-
missions agreed to by the two
leaders, or resume talks until
Tshomb6 gives positive assurances
that he intends to reintegrate.
Adoula seems increasingly con-
vinced that further negotiations
with Tshomb6 are hopeless and that
force is ,he only feasible
answer.
Tension in Elisabethville
is again high, with all the ele-
ments present for a serious
clash.
Adoula's varied opponents
are stronger and better organi-
zed, but are still bound together
only by the negative aim of
overturning the government.
They range from the Gizengists
and Lumumbists--led by Chris-
tophe Gbenye, one of two vice
premiers removed by Adoula--to
Tshombd's Conakat party depu-
ties. Ambassador Gullion re-
ports that the opposition, en-
couraged by its show of strength,
now is building its hopes around
the other ousted vice premier,
Jean Bolikango, a leader in
Equateur Province. Both Gbenye
and Bolikango have reportedly
sent delegations to ask Tshomhe
for more help. Among their
complaints against Adoula is
their charge that he has placed
the Congo under US tutelage.
Tshombd's intro-
duction o ,000 Tatangan troops
into Elisabethville to cele-
brate Katangan "independence" on
11 July so irritated UN officials
that they erected a roadblock on
the only main route remaining
open into the city. Katangan
forces, in turn, erected an
opposing barrier.
Scattered firing has oc-
curred, and on 17 July an offi-
cially organized mob of Katangan
women attacked the Indian-manned
UN roadblock with sticks, stones,
and brush fires, and denounced
the US as well as the UN. Both
sides have strengthened their
barricades, and the UN is
sending 500 reinforcements
from Leopoldville.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
The resignation of Prime
Minister All Amini will be wel-
comed by nearly all political
elements in Iran. The Shah,
who has always been suspicious
of independent-minded prime
ministers, supported him only
reluctantly and probably is
not unhappy to have him leave.
Amini's departure probably al-
so marks the end of any hope
at present for an effective
program of economic and social
reform.
The appointment of Amir
Asadollah Alam as the new prime
minister indicates the Shah's
intention to participate fully
in government operations. Alam
is head of the $130,000,000
Pahlavi foundation set up by
the Shah and is a member of
the Shah's entourage. Although
he has announced a continuation
of land reform and other meas-
ures initiated by Amini, pres-
sure from Alam's close friends
who have been hurt by the re-
forms is likely to end them.
In his 14 months in of-
fice, Amini undertook a series
of measures aimed at evolution-
ary change in Iran's social
and economic patterns. He
started the distribution of
large private landholdings to
the peasants, undertook legal
action against high officials
accused of corruption, and at-
tempted to carry out a stabi-
lization program to put the
country's economic and fiscal
house in order. His effortF
brought him no public support,
however. The landlord-merchant
classes saw his program as a
threat to their control of the
country's economy and political
processes. The nationalists--
primarily antiregime, neutral-
ist-oriented reformers--consid-
ered his program ineffectual
and were especially irritated
at his refusal to hold parlia-
mentary elections.
Amini did manage to sta-
bilize the cost of living tem-
porarily and to reduce Iran's
foreign indebtedness, but only
at the expense of destroying
the superficial prosperity which
had accompanied the inflation
of the earlier period. The
rate of investment dropped, un-
employment rose, and domestic
sources of revenue dried up as
the government's fixed-cost fi-
nancial obligations mounted.
The immediate reason for
Amini's resignation was his in-
ability to balance the budget.
He ordered a 15-percent reduc-
tion in the budgets of all min-
istries. Opposition to this
move, particularly from the
ministers of war and education,
apparently created a deadlock
which Amini was unable to re-
solve. Amini publicly blamed
his troubles partly on Ameri-
can failure to provide aid.
Both he and the Shah have been
disappointed that US budgetary
support, which amounted to
about $44 million last year,
has been discontinued.
The nationalists will find
Alam even less acceptable than
Amini. Alam's appointment will
give them an issue which will
probably draw their disparate
elements closer together. They
will have an opportunity to
show their strength on 21 July,
the tenth anniversary of the
massive nationalist demonstra-
tions which forced Prime Minis-
ter Qavam out of office in fa-
vor of Mossadeq. The National
Front is likely to make some
sort; of demonstration which
could snowball into widespread
disorders should the security
forces be indecisive.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
THE EIGHTH WORLD YOUTH FESTIVAL
The Communist-sponsored
Eighth World Youth Festival
meets in Helsinki from 28 July
to 6 August under conditions
more favorable to Moscow's ob-
jectives than those prevailing
at the Seventh Festival in
Vienna in 1959. In contrast to
the noncooperative attitude of
most Austrian authorities, the
Finnish Government has given
the organizers considerable sup-
port in an attempt to minimize
the difficulties caused by the
boycott of festival preparations
by most Finnish youth groups and
to forestall possible Soviet
complaints about the lack of
Finnish cooperation.
Finnish officials now
expect about 11,550 participants;
previous estimates ran between
12,000 and 15,000. Organizers
of the 1959 festival claimed an
attendance of 18,000. There
will be the usual large delega-
tions from the Sino-Soviet bloc,
headed by a Soviet group of
about 700. In addition the
festival organizers are making
a special effort--its success
unknown--to draw large groups
of Africans, Asians, and Latin
Americans. In the free world,
however, non-Communist youth
groups in general are boycotting
the festival and have announced
their support of Finland's cen-
tral youth organization, which
has objected to holding the
festival in Finland and has
disassociated itself from all
preparations for the meeting.
Helsinki city and business
leaders have taken a cool atti-
tude, and Finnish public opinion
has been generally indifferent.
Sensitive to reported
complaints by the organizers
that Finnish officials and youth
organizations were not providing
a hospitable atmosphere for the
festival, and with the 1961
crisis in Soviet-Finnish rela-
tions still fresh in mind,
the Finnish Government appears
to have surrendered its hopes
to maintain a hands-off atti-
tude. It seems to have under-
taken to assure the sponsors
the cooperation of appropriate
Finnish officials and groups.
Although there has been no
evidence of direct Soviet pres-
sure in this regard, President
Kekkonen would be anxious to
forestall possible Soviet com-
plaints about any unpleasant-
ness that might arise in conse-
quence of a lack of cooperation
with the preparatory committee.
The changed attitude is
reflected in public statements
by government representatives
and. in actions taken by those
organizations most vulnerable
to pressure from the govern-
ment. In April the Agrarian-
dominated government appealed
to the Finnish public to meet
the festival participants
hospitably and warned that
any attempt to cause unrest
or disorder would be prevented.
The Agrarian, dissident Social
Democratic, and Communist
members of the program board
of the Finnish state radio
subsequently pushed through
a resolution providing for
half-hour daily transmissions
from the opening to the clos-
ing day of the festival.F_
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CURRENT INTELLIGENCE WEEKLY SUMMARY
THE NEW SPANISH VICE PREMIER
Franco's purpose in cre-
ating a vice presidency in
Spain's Council of Ministers
for Captain General Augustin
Munoz Grandes was to place an
individual directly in a po-
sition to carry on as head of
the government--but not as chief
of state--when Franco dies or
is incapacitated. The appoint-
ment--announced on 11 July--
also gives Munoz Grandes control
fo the three service ministries,
in addition to his post of chief
of the High General Staff. The
naming at the same time of "pro-
gressive" new ministers of labor
and industry suggests that there
may be some liberalization of
policies in the economic sphere,
but there is little likelihood
of any similar political thaw.
Munoz Grandes is held in
great esteem by Franco, and
their political views are prob-
ably in close accord. There is
some reason to believe that
Munoz Grandes' views on social
and economic matters may be
slightly more liberal than
Franco's, but this is unlikely
materially to affect the cau-
tious policies now being followed
in these fields.
Munoz Grandes' military po-
sition--in addition to his status
as chief military representative
on the three-man Council of the
Regency and on the Council of
the Realm, which are charged with
selecting Franco's successor--
suggests that he would have a key
"role in choosing that successor.
He has great prestige both in
the armed services and in civil-
ian political circles, but his
age (66) and his poor health
make it unlikely that he would
himself be the successor. His
views on a return to the monarchy,
as provided for in the law now 25X1
governing succession, are not
clear.
Although Munoz Grandes has
cultivated a reputation as a 25X1
loyal Franco supporter, some
observers describe him as an
ambitious opportunist.
Although Munoz Grandes was
very critical of the US in
earlier years, his attitude has
gradually warmed and he now is
regarded by the US Embassy in
Madrid as "very friendly" to
the US. He favors close co-
operation in matters of defense
and thus can be expected general-
ly to assist any negotiations
with the US in the military
field. He also may be expected
to press strongly for US as-
sistance in modernizing Spain's
military forces.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
ITALY'S LABOR PROBLEMS
A wave of summer strikes--
although normal in Italy--has
raised serious difficulties
for Premier Fanfani's experiment
in left-center government.
Strikes early this month by
metalworkers around Turin were
accompanied by violent dis-
orders apparently sparked by
Communists and rightists to
embarrass the government.
While these and other strikes
are temporarily halted, labor's
grievances continue to encourage
unity of action by Communist
and non-Communist unions at a
time when the government par-
ties are seeking to isolate
the Communists politically.
There is evidence that the
disorders in the Turin area--
where demonstrators battled
for hours with the police--
involved both Communist- and
rightist-hired hoodlums. Right-
ist parliamentarians, who share
the Communists' aim of bringing
down Fanfani, were quick to
criticize the government as
"ineffectual" in the face of
Communist subversion, while
Communist and Socialist offi-
cials of the Communist-domi-
nated CGIL criticized the "pro-
vocative attitude of the police"
in Turin. Moderates such as
Social Democratic chief Saragat
and Liberal party deputy Alpini
condemned both the Communists
and the "clerical integralists"
--presumably an allusion to
Christian Democratic right-
wingers who would like to sabo-
tage their party's support of
the present government--as in-
citers of the Turin disorders.
On 11 July the minister
of labor offered his services
as mediator of the metalworkers'
dispute with management, and
all three unions have accepted
his offer. They refuse, however,
to sign any agreement with the
manufacturers' association,
Confindustria, less favorable
than one signed earlier with the
organization of government-owned
metal industries, Intersind.
Progress toward a fundamental
resolution of the dispute de-
pends on whether government
pressures can induce the hither-
to rigid Confindustria to nego-
tiate before the October dead-
line for renewal of contracts,
or whether such a development
will be prevented by new strikes.
With national elections scheduled
for the spring of 1963, both
Communists and rightists will
be anxious to find ways to
embarrass the Fanfani govern-
ment at the start of its fall
parliamentary session.
nist hands.
Meanwhile, strikes by
government employees, print-
ers, farm workers, teach-
ers, and doctors have en-
couraged the Communists
to intensify their efforts to
promote a popular front in the
labor field to counteract their
political isolation at the na-
tional level. Democratic trade
union leaders recognize the
dangers behind Communist at-
tempts to exacerbate the labor
disputes, and at the same time
they lament the "myopia" of the
national manufacturers' and
farmers' associations for ob-
duracy which plays into Commu-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
The Greek defense budget
has been the subject of debate
for some weeks both in Athens
and at NATO headquarters in
Paris. Military experts at
SHAPE, in consultation with
leaders of the Greek armed
forces, have proposed a defense
goal which, although considerably
below previous unmet goals,
would still necessitate a large
increase in funds for the Greek
armed forces. The government
regards this program as the mini-
miUm needed for defense against
possible Communist pressure
from the north.
Both present and proposed
Greek defense expenditures
fall far below the level neces-
sary to meet this goal, however,
and it is unlikely that other
NATO powers will supply funds
to fill the gap. Suggestions
from NATO committee members
that in the absence of the
necessary funds the Greek defense
goal may have to be lowered
below this SHAPE-proposed level
have been denounced in Athens
as dangerous for the strategic
defense of both Greece and NATO's
eastern flank.
A shortage of funds is also
threatening the government's
Five-Year Economic Development
Program (1960-64). A NATO-
sponsored plan to establish an
international consortium of
wealthier members to provide
development assistance to Greece
is being considered by the
Organization for Economic Co-
operation and Development (OECD).
The British, however, with the
support of several other mem-
bers of the OECD, have balked at
joining any consortium until
Greece reaches some settlement
on its defaulted pre - World War
II foreign debts.
Within Greece, leaders of
the nationalist opposition
Center Union are continuing their
eight-month-old campaign to
bring down the government by
stagging public rallies and
by applying pressure on King
Paul to intervene directly to
force new national elections.
This campaign will gather new
force if Karamanlis suffers
major reverses in present nego-
tiations for foreign military
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Brazil's government crisis
eased on 13 July with congres-
sional acceptance of Prime
Minister Brochado da Rocha's
cabinet. The 17-day struggle
between President Goulart and
Congress appears to have re-
sulted in at least initial
victory for him. The new
cabinet will probably be more
amenable than its predecessor
to his direction. The ministers
are not representative of po-
litical party strength in
congress, some are apolitical,
and several are personally loyal
to Goulart.
The conservative pro-US finance
minister, Moreira Salles, has
been retained from the previous
cabinet.
The military cabinet min-
isters, like most of those
miilitary figures who support
Goulart, support him on con-
stitutional grounds rather than
because of his politics. The
new navy and air ministers face
substantial opposition within
their respective services, but
War Minister Nelson de Melo
appears to be achieving general
acceptance.
Possibly the most contro-
versial new appointment is that
of Minister of Industry and
Commerce Jose Ermirio de Moraes,
a long-time associate of Gou-
lart's.. Moraes has been giv-
ing financial backing to pro-
Communist Miguel Arraes, who
is the leading candidate for
governor in the key northeastern
state of Pernambuco. He is
"antitrust but only if the
trust is foreign," according to
the US Consulate in Recife.
Labor Minister Hermes Lima
has been a key official in the
Goulart government for the past
ten months. He is a former law
professor who advocates a
socialist economy
Foreign Minister Afonso
Arinos de Mello Franco is
identified with the "independent"
foreign policy he helped im-
plement under both Goulart and
former President Quadros.
Goulart and Brochado da
Rocha apparently still hope for
a -judicial decision favoring
a plebiscite next October on
the abolition of the parliamentary
system and legal restoration
of a strong presidency. The
prime minister has also announced
that he will request a grant of
special powers from Congress
on 6 August--a move which is
likely to be met by a quorum
fai.lure,,since most congressmen
are absent from Brasilia to
compaign for the October elec-
tions.
The government now may be
inclined to increase restrictions
on private foreign investment
in Brazil. Brochado da Rocha in
recent years has been closely 25X1
associated with two expropriations
of US companies in southern Brazil.
His initial speech to congress
stressed that "Brazil is a vic-
tim of international capitalism."
His program proposed "limited
intervention" in the predomi-
nantly foreign-owned drug indus-
anti-US speech.
ultranationalist Governor Leone125X1' 1
Brizola of Rio Grande do Sul,
attacked recently in a violent
try, which his political ally,
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CURRENT INTELLIGENCE MIEKLY SUMMARY
The joint command of the
Peruvian armed forces has taken
control of the government in
order to deny power to the left-
ist but anti-Communist APRA
party. In the early morning
hours of 18 July, a military
junta arrested President Manuel
Prado, installed a military
cabinet, suspended constitutional
guarantees, and set aside the
10 June presidential election,
which had occasioned weeks of
political bickering. APRA can-
didate Haya de la Torre's slight
margin fell short of the one-
third popular vote required for
direct election, but armed
forces leaders apparently feared
that the new Congress, which
was to meet 28 July to settle
the presidential race, could be
controlled by a coalition which
would give APRA a major voice
in government.
The junta acted after
President Prado had resolutely
rejected repeated demands by
the armed forces chiefs that
he annul the 10 June election
or at least nullify as fraudulent
sizable blocs of APRA votes.
Invalidation of the disputed
votes would have given Fernando
Belaunde Terry, the runner-up
candidate, more than one third
of the remaining votes, making
him legal president-elect.
Although Belaunde had been
the choice of the military during
the campaign, his postelection
antics--such as urging armed
rebellion--have discredited him
with the military leaders and
most of his Accion Popular party.
Communist agitators joined him
in Arequipa on 16 July in in-
citing his followers to "over-
throw the government and pun-
ish its wrongdoings," but
he disavowed Communist guid-
ance in making his plans for
an insurrection.
Haya and former dictator
Manuel Odria, who had been
negotiating a coalition of
their parties, announced partial
agreement early in the week,
subsequently broke off nego-
tiations, and finally, the
evening before the coup, an-
nounced agreement that Haya
would withdraw in favor of
Odria. An APRA man pre-
sumably would have been vice-
president with good prospects
for early succession in view
of Odria's age and illness.
Odria and Haya reportedly took
asylum in foreign embassies on
the morning of the coup.
One of the President's last
official acts was to reject
the mass resignation of his
cabinet and to issue a proc-
lamation defending the valid-
ity of the elections and the
integrity of the National
Elections Board. The military
junta installed a new cabinet,
composed exclusively of mili-
tary commanders, about nine
hours after the coup and also
announced that new presidential
elections would be held in
June 1963.
The first outbreak of vio-
lence occurred shortly after the
military cabinet was sworn in.
Students, mostly from San Marcos
University, demonstrated to
protest the suspension of civil
rights. They were quickly
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CURRENT INTELLIGENCE WEEKLY SUMMARY
subdued by police, but minor
disturbances have continued.
the junta's principal antago-
nist in the present situation
is APRA, which has no arms
comparable to those of the
army. Hence the junta is
thoroughly capable of main-
taining physical control of
the country.
The immediate threat to
the junta, which has no broad
public support, lies in in-
ternational censure, disruption
of foreign economic aid, and
the probability of a paralyzing
teener^al strike.
The United States, Colombia,
Costa Rica, Venezuela, and the
Dominican Republic announced the
suspension of diplomatic relations
with Peru within 24 hours of the
coup. Adverse reaction by other
liberal governments in the hemi-
sphere is probable. Venezuela
has recommended.a meeting of
foreign ministers of the Organiza-
tion of American States to con-
sider possible measures against
the junta.
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CURRENT INTELLIGENCE YVEEKLY SUMMARY
SPECIAL ARTICLES
FRENCH NUCLEAR STRATEGY
French national security
policy today, as France moves
toward operational atomic
weapons capability, centers on
an independent nuclear deter-
rent capable of inflicting suf-
ficient retaliatory damage to
make it unprofitable for an ag-
gressor to attack France. De
Gaulle's concept, simplified,
is that modern defense requires
nuclear weapons; nations with-
out them cannot hope to exert
their full weight in interna-
tional affairs; and multilat-
eral control of France's weapons
would mean multilateral control
of France's policy. Hence De
Gaulle not only remains firmly
opposed to sharing control of
the French nuclear force, but
has refused to have French
forces, except those in Germany,
equipped with nuclear weapons
subject to US control.
Nuclear Weapons Doctrine
French defense theorists
both in and out of the govern-
ment are fully aware of the argu-
ment that a nuclear deterrent
requires credibility--not only
sufficient force to damage the
aggressor, but demonstrated
willingness to use that force
if necessary. They argue that
France's proposed force de
frappe will have the necessary
capab ility, even though far
smaller than the nuclear strike
forces of the US and the USSR,
because it will be in proportion
to the stakes being defended:
it can do enough harm to the
aggressor to outweigh the ad-
vantage he could derive from
an attack on France.
As to the second element of
credibility--the readiness to
wage nuclear warfare--the French
theorists hold that only a
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nation, as distinct from an
alliance, has the unity and
cohesive national will to make
a potential aggressor believe
it would in fact resort to
nuclear warfare in defense of
national interests in spite of
the mutual destruction which
would ensue.
Many European military
scientists take a skeptical
attitude toward US statements
that nuclear exchanges in an
all-out war will probably con-
centrate on purely military tar-
gets. The Europeans argue that
the hardening and dispersal of
missile sites and the continu-
ing improvement of weapons and
delivery systems leave less and
less chance of knocking out an
enemy's counterforce, and that
enemy cities will therefore re-
main the major targets. this
conclusion is being used by
the French to reinforce their
view that all powers will be
extremely reluctant to resort
to nuclear weapons.
The admitted limitations of
their own force de frappe give
the French an adTtiona Treason
for opposing a nuclear strategy
that concentrates on military
targets. The aim of their
strike force is to threaten an
aggressor with severe damage
to his country--in De Gaulle's
phrase, "to tear an arm off."
France also differs with
the US and NATO on the advisa-
bi:lity of "raising the nuclear
threshold"--i.e.,, increasing
the capability to resist aggres-
sion by conventional forces
and so postponing the resort
to nuclear weapons. The French,
who propose to cut back army
strength from over 700,000 at
present to 450,000 in 1970,
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make it a point of military
doctrine that conventional
forces alone have little de-
terrent power or capability
to compel an aggressor to
pause in his advance.
Another French argument
against raising the nuclear
threshold is that it could
lead to a separation of tasks
within NATO by tending to create,
in effect, a "varsity" team
with nuclear weapons and a con-
ventionally armed second team.
Such a separation, it is con-
tended, could lead to a weaken-
ing of ties between West Ger-
many--a nonnuclear power--and
its major allies and make the
idea of a denuclearized and
neutralized zone in central
Europe seem more attractive
to the Germans.
France and the Western Alliance
French strategic policy--
specifically, French opposition
to the dilution of full national
control of its military forces--
is reflected in Paris' relations
with NATO. French officials
from De Gaulle down continue in
major foreign policy statements
to acknowledge the need for
allies and, by implication at
least, the US strategic deter-
rent in the face of the Soviet
threat. Speaking before a
Western European Union meeting
early in June, Premier Pompidou
said the relative security re-
sulting from the "current calm"
in Berlin would be "unimaginable"
without the USinilitary effort.
The French maintain, however,
that every area of the world
needs its own deterrent to be
fully safe from attack. They
argue in particular that the
USSR may come to doubt whether
the United States would risk its
own cities in the defense of
Western Europe and that Europe
must thus develop its own de-
terrent. They see France's
national deterrent as fulfilling
two functions: (1) serving as
a European deterrent--although
necessarily a weak one--from the
moment it becomes operational;
and (2) ensuring. France a lead-
ing role in any joint develop-
ment of a more adequate deter-
rent later on.
De Gaulle, moreover, main-
tains that the power relation-
ship within NATO does not prop-
erly reflect the nuclear stand-
off between the US and the USSR,
which in his eyes makes the in-
creased strength of Europe a
decisive factor. French offi-
cials argue that when NATO was
set up, neither a nuclear stale-
mate nor a European power center
was foreseen, but that the
alliance now must be brought
into accord with the "realities
of the situation."
France appears to be seek-
ing a change in the basic nature
of the alliance--giving France more
say on policy--rather than mere
increased representation in top
commands or structural reorgani-
za?tion. De Gaulle suggested in
1958 that a tripartite direc-
torate of the US, the UK, and
France should guide their global
policy. How this directorate
would function and what its
authority would be have not been
fully explained, but De Gaulle
undoubtedly sees this as a
means of increasing the French
voice in allied councils, gain-
ing some influence on US foreign
and military policy decisions
even outside of the NATO area,
and, in the process, adding to
French prestige. Progress in
the French nuclear program and
in achieving closer political
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CURRENT INTELLIGENCE WEEKLY SUMMARY
ties among the Common Market
countries may have led French
officials' to believe they now
have a stronger base from which
to negotiate for these changes.
Recent French statements
that changes in the alliance
relationships can wait until
a decision has been reached on
British accession to the EEC
are probably reflections of a
belief in Paris that the French
bargaining position is getting
stronger with the passage of
time.
De Gaulle will probably
continue to call attention to
what he believes to be NATO's
failure to adjust to a changed
.environment. Pending a re-
organization, France is not
likely to be more forthcoming
in its force contribution to
NATO. For example, French Army
units being withdrawn from Al-
geria will probably remain
under national control in a
status similar to the divisions
transferred from Algeria to
eastern France last summer.
Domestic Opposition and Support
There seems to be consid-
erable public support for the
basic idea of European military
and political self-reliance.
A poll taken in early June by
the reputable French Institute
of Public Opinion showed that
59 percent of hose responding
believed a unified Western Eu-
rope could have its own policy
independent of the US, while 15
percent believed not. Fifty-one
percent thought this desirable,
and only two percent thought not.
Several leading French
political commentators who have
opposed other De Gaulle policies,
including Raymond Aron, have
come out in favor of an inde-
pendent European nuclear deter-
rent as a part of the increased
European strength. Some polit-
ical leaders, including Radical
party leader Maurice Faure
and Popular Republican Maurice
Schumann, have stressed the
value of an independent European
deterrent, and a policy state- 25X1
ment by the prominent, left-
intellectual Jean Moulin club
urged greater European independ-
ence of action within the
Western alliance.
There remains considerable
opposition among parliamentary
leaders to what they see as the
anti-NATO tenor of De Gaulle's
military policy. The motiva-
tion of these opponents is com-
plex, however; some are still
angry about De Gaulle's Al-
gerian policy, some oppose his
anti-inflationary social policy,
and many oppose his personal
hold on the levers of political
power in France. Unable to offer
an alternative policy on Algeria
and without an important bread-
and-butter issue because of
the basic health of the economy,
parliamentary opponents have
concentrated on De Gaulle's
nationalist foreign and military
policy.
Much of the French nuclear
weapons program was begun prior
to De Gaulle, under the govern-
ments of some of those now oppos-
ing him, and it is doubtful if,
in the post - De Gaulle period,
when these present opponents are
likely to be in positions of
authority, they will be able
or willing to modify significant-
ly a policy which, Gaullists
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CURRENT INTELLIGENCE WEEKLY SUMMARY
can point out, has already
strengthened the French bar-
gaining position at least with-
in the Western alliance. The
French proponents of national
nuclear weapons capability can
be expected to argue that grow-
ing European cohesion makes a
national program even more es-
sential.
The French Force and
European Union
The French nuclear force
may develop under strictly
national control, or be merged
with other European forces
under some form of joint con-
trol. There are precedents for
a joint approach in the recent-
ly formed European space re-
search and launcher development
organizations, and the extensive
cooperation among European
nations in conventional weapons
broduction.
French of-
ficials have noted that growing
European ties would, at some
point in the future, extend
to the military and nuclear
weapons fields. De Gaulle,
in his proposals of a politi-
cal treaty for the Common
Market, has specified that the
member nations in the grouping
coordinate defense and military
policy.
Any post - De Gaulle demo-
cratic government, with a greater
"European" sentiment among the
leadership, would probably move
more rapidly toward this al-
ternative. The UK and the
smaller members of the Common
Market, with policies more
firmly rooted in reliance on
the Atlantic alliance, might
influence France to permit a
European deterrent to be placed
under NATO command. It seems
highly likely, however, that
any French government, short
of one dominated by the far
loft, would insist on retaining
some deterrent capability under
national control.
At least as long as De Gaulle
is on the scene, the primary
French effort will be channeled
into a national nuclear force.
In a speech on 19 June, former
premier Debre, reportedly after
a long discussion with De Gaulle,
opposed either a NATO or a Euro-
pean nuclear force. In the lat-
ter case Debre based his opposi-
tion on the argument that, in
addition to the problem of con-
trol of a European force, such
a force would be too costly.
De:bre thus seemed to return
to the argument of proportional-
ity--a European force, to actual-
ly deter, would have to be
raised to the level of "the
other super powers." This,
Debr? thought, would be diffi-
cult because the other Euro=
pean nations would be unwilling 25X1
to contribute the required finan-
cial and scientific resources.
De Gaulle's opposition to
a European deterrent as a substi-
tute for a French deterrent
does .not, however, seem to
preclude joint researbh, de-
velopment, and targeting, as
long as control of the resulting
force remains national. The
extent of such joint effort
largely remains to be worked
out. Future cooperation may
be implied, however, both by
the nature of French - West
German relations and by the
prospect that Britain would be
under increasing pressure--
once admitted to the Common
Market--to go along with any
European deterrent. The way
such cooperation develops will
directly affect the relation- 25X1
ship of the French deterrent
to the Atlantic alliance.
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Greek trade with the USSR
and its European satellites has
nearly tripled since 1955. The
bloc offers good prices for
Greek agricultural exports and
delivers oil, lumber, and manu-
factures at bargain rates. As
a result bloc trade is a higher
percentage of total trade in
Greece than in any other NATO
country--some 22 percent of ex-
ports and 11 percent of imports
Both the Athens government and
Greek businessmen are concerned
about this situation at a time
when the country is negotiating
for continued Western aid and
its association with the Common
bilateral trade with the bloc
absorb a disproportionate share
of Greece's foreign trade.
Greek agriculture, which is just
beginning to enjoy the benefits
of increased productivity com-
birted with access to markets,
could be thrown into a serious
slump if it were suddenly cut
off from Eastern Europe.T
Imports
Market (EEC) awaits ratification Greek imports from the bloc,
only by Italy. considered as a percentage of
Exports
total imports, have leveled off,
although significant increases
occurred during 1961 in imports
of crude oil, industrial machinery
and frozen meat. About one quarte~
Aside from the earnings of the 1,800,000 metric tons of
from tourism, shipping, and petroleum products consumed an-
emigrant remittances, Greece's nually is bought from the USSR,
only important source of foreign coming to Greece by tanker at a
exchange is the export of agri- substantial discount on prevail-
cultural products. Demand for ink; world prices. Greece has
those in which Greece special- established a quota of 450,000
izes--cotton, tobacco, and dried tons per year for petroleum im-
fruits--has increased steadily ports from the bloc.
in Eastern Europe during recent
years. Greece finds little
competition there, since other
producers aim at the more profit-
able Western European market.
The agreements with bloc purchas-
ing commissions save costs of
standardization, packaging, and
sales promotion which Greece
would have to bear if it tried
to compete in Western markets.
Athens recognizes, however,
the dangers inherent in letting
Greek imports of machinery
and transportation equipment from
the Soviet Union have not yet
reached levels where they compete
seriously with imports from the
West, but they may come to do so
as a result of aggressive bloc
selling. The Soviets, for example,
have captured a significant part of,
the Greek ball-bearing market
by engaging in a price war with
the American firm which has been
the traditional major supplier.
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The Soviets and Czechs
have also attempted to tie their
purchases of Greek products to
the sale of their own goods in
Greece, particularly transpor-
tation equipment and tractors.
While the export schedules of
trucks and tractors can be in-
creased or decreased on short
notice, the supply of perishable
Greek agricultural products does
not respond as readily to con-
trol measures.
In general, the quality of
Soviet exports to Greece is in-
ferior to similar Western prod-
ucts, and private Greek import-
ers often prefer the Western
goods even though they are some-
what more costly. The Soviets
realize that their advantage
lies almost entirely in lower
prices, at least for the present,
and they are evidently willing
to place as much emphasis as
necessary on the price factor
in their effort to gain a key
position in the Greek market.
Recent Developments
Greek officials held talks
this spring with representatives
of the Soviet Union, Czechoslo-
vakia, and Bulgaria. The Greeks
recognize the importance of the
USSR as a trading partner, and
the discussions held in Moscow
during April were conducted in
a friendly and businesslike
manner. The Soviets, evidently
anxious about the trade impli-
out, that the two commodities--
petroleum and lumber--which
account for about 90 percent of
Soviet exports to Greece would
not be affected by Greek-EEC
tariff arrangements, but the
Soviets showed great sensitivity
about future sales of their
machinery and automobiles.
Trying to allay Soviet fears
without actually granting most--
favored=nation status to Soviet
goods, the Greeks signed a
vaguely worded trade protocol
promising to negotiate any dif-
ficulties that might arise'in the
future.
In the negotiations with
Bulgarian representatives during
May, discussion was confined
chiefly to the setting of certain
quotas on the export-import com-
modity list. The talks took
place in a relaxed atmosphere,
no special problems arose, and
the Bulgarians made no reference
to the EEC. They suggested that
direct rail and telecommunication
links between the two countries
be re-established, but the Greeks
indicated that this matter was
not ripe for decision.
The talks with the Czechs,
however, have been described by
Greek officials as "the most
difficult and arduous ever."
Negotiations nearly broke down
at the outset over Greek in-
sistence on settlement of some
pre - World War II claims. The
Czechs were unyielding on this
point, and in the end the exist-
cations of Greece's association ing trade protocol was extended
with the EEC, made a strong re- for only one year. The Czechs
quest for most-favored-nation I then raised the issue of Greece's
treatment. The Greeks pointed proposed EEC ties, also asking
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for assurances that their prod-
ucts would receive preferential
treatment. The Greeks thereupon
returned to their demand for
settlement of their 1939 claims,
and the meetings closed on a
sour note.
Greek Policy
On the basis of this and
previous experience, Athens'
policy now is that if trade with
the bloc can be expanded on a
competitive basis, the Greek
Government will not interfere.
Certain inducements will continue
to be offered to bloc or any
other trading partners who ac-
cept important quantities of
"soft" goods--such as citrus
fruit--which are difficult to
sell on a competitive basis,
but these concessions will be
kept at a minimum. A firm policy,
based on customs clearancecertif-
icates, will be followed in an
effort to prevent re-export of
Greek goods. Export quotas for
"hard" products--such as bauxite
--which Greece can sell competi-
tively in the world market have
been established with reference
to the bloc countries and will
be enforced strictly, but no
import quotas are set up in
bilateral trading.
Prospect
Greece is already heavily
dependent on bloc purchases for
sale of its agricultural prod-
ucts. This dependence may be
gradually overcome when the ef-
fects of association with the
EEC take hold, but there is no
immediate prospect of reducing
it by shifting production to
other commodities or developing
other markets. Even though
earnings of Western foreign ex-
change from tourism, shipping,
and expatriate remittances are
increasing rapidly--thereby re-
ducing Greece's overall depend-
ence on the bloc in a purely
economic sense--Greece is basi-
cally a rural country, and main-
taining a high level of agricul-
tural exports remains a major
political problem.
On the import side, the
sale of bloc petroleum prod-
ucts, particularly crude oil,
is the most serious form of
-market penetration so far,
because they compete with
,the Western products in both
qua'Lity and price. Soviet
oil thus far shipped to Greece
has also been a relatively
sweet crude, very desirable
from the standpoint of re-
fining. The USSR may attempt
to improve its position in
the petroleum market during
the next round of trade talks,
.and Western interests may have
to offer substantial induce-
ments to maintain their pres-
ent share of the market.
Even if the bloc's
share of overall trade de-
clines in percentage terms,
Greece will probably con-
tinue for many years to be
the NATO member with the
highest proportion of its
trade in bloc hands.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
The question of membership
in the Common Market (EEC) has
stirred'Norway, and to a lesser
extent Denmark, more than any
other issue since these countries
chose to join NATO in 1949. In
Denmark, majority opinion strong-
ly favors EEC membership, but in
Norway a powerful minority led
by agricultural and fishing in-
terests--with the support of cer-
tain religious groups--is op-
posed.
This opposition has been
the principal factor in the de-
cision supported by all Norwegian
political parties to hold an ad-
visory referendum once the terms
of membership have been negotiated.
In the meantime, the Norwegian
Government is proceeding with
steps preparatory to joining.
On 4 July Foreign Minister Lange
made his initial presentation
to the EEC authorities in Brus-
sels reaffirming that Norway ac-
cepts the general objectives of
the Rome Treaty but citing the
special problems of Norwegian
agriculture and fisheries.
Led by the farming and
fishing interests, anti-EEC ele-
ments have met with considerable
success by appealing to the latent
isolationism and nationalism
of many Norwegians who are fear-
ful that their infant manufac-
turing industries will be over-
whelmed by the giant industrial
groupings within the EEC. They
have sought to broaden their
attack by raising the specter
of domination by "Roman Catholic
continental powers" and by pic-
turing Norway's close association
with the former colonial powers
as detrimental to relations with
the Afro-Asian countries.
A Gallup poll last spring
showed Norwegian public opinion
closely divided on the question
of EEC membership, while a simi-
lar, poll showed Danish opinion
heavily favorable. The relative
success of the anti-EEC campaign
in Norway appears to have con-
vinced the government of the
necessity to press the case for
Norway's membership more vigor-
ously and to educate public
opinion on the necessity for
such a step. Both sides now are
concentrating on their prepara-
tions for the advisory referendum.
Within the Labor government
and its following there appears
to be some concern about the po-
sition of a socialist Norway,
with its emphasis on a planned
economy and a cradle-to-grave
social welfare system, in an or-
ganization most of whose govern-
ments pursue more conservative
economic policies. In addition,
officials in both Norway and Den-
mark want to be assured that EEC
membership for these two will
not adversely affect broad areas
of existing cooperation among
all four Nordic countries, such
as in their common labor market
and in the application of social
welfare benefits.
These officials recognize
that under present conditions
Sweden will not seek full mem-
bership in the Common Market
and instead must negotiate an
associative arrangement with
the Six. They maintain that
concessions on the EEC's part
must be generous enough to
prevent isolating Sweden eco-
nomically from Western Europe,
since this would create serious
political problems for all of
the northern countries. This
would be particularly true of
Finland, which may be forced
to seek a kind of remote asso-
ciation with the Six through
Sweden if Moscow objects to
even a tenuous tie with the
EEC.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Ecuador has been the scene with the United States, and new
of more political turbulence impetus was given planning for
and less political progress I orderly economic development
than any other country in Latin and social reform.
America. At no time in its
history has its government been
secure against invasion or in-
ternal dissension.
Carlos Julio Arosemena
Monroy became president on 8
November 1961 when the stormy
fourth administration of Jose
Maria Velasco Ibarra came to
an abrupt end. Velasco had
incurred the wrath of virtual-
ly every important interest in
the country by reneging on his
promises and commitments, and
he fled into exile after a period
of asylum in a foreign embassy.
Arosemena moved from the
vice presidency to the presi-
dency with the support of the
leftists, most of the armed
forces, and certain parties of
the center-right. Many con-
servatives initially viewed his
ascent to power with consider-
able apprehension, primarily
because of his widely publicized
stand on the need for reforms
in taxation and land tenure,
but his first cabinet was basi
cally nonleftist and included
representatives of every polit-
ical party except the Communist.
Conservative fears were further
assuaged by Arosemena's reso-
lute attack on the economic
degeneration which Velasco's
fiscal mismanagement had pro-
duced. Unpopular but necessary
import restrictions were put
into effect, an emergency'budg-
et support loan was negotiated
Conservatives and rightists
were not pleased, however, with
Arosemena's continued suscepti-
bility to the influence of his
leftist supporters. Several
leftists received high-level
posts in the administration, in-
cluding two on Arosemena's per-
sonal staff, and no effort was
made to inhibit or hinder the
public activities of Communist
and pro-Communist groups.
The animosity between the
President and his appointees
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CURRENT INTELLIGENCE WEEKLY SUMMARY
continued to grow until Arose-
mena broke diplomatic relations
with Cuba, and with Poland and
Czechoslovakia as well, on 2
April. He also replaced three
of the more conservative members
of his cabinet with political
moderates who, like Arosemena,
favored the reform programs
which had long been delayed
in their ministries. By his
delaying tactics, Arosemena
seemingly strengthened his
position.
However, anti-Cuban and
anti-Communist sentiment had
increased sharply during the
previous four months because
of disclosures of subversive
activities by Castroites and
extreme leftist groups. Anti-
leftist sentiment became strong-
er still when members of the
Communist-front Union of Revo-
lutionary Youth of Ecuador
(URJE) staged an abortive "guer-
rilla revolt" on 5 April in
the mountains near Quito. The
army crushed the uprising and
captured the rebels in less
than two days of sporadic fight-
ing.
Military leaders continued
to demand that Arosemena "rid
his government of leftists"--
specifying, among others, two
members of his administrative
staff. The pressure from the
military leaders became so dis-
tasteful to Arosemena that in
mid-May he discharged his minis-
ter of defense and the top com-
manders of the army and the
air force. Three other minis=
ters resigned two days later,
and all were speedily replaced
with independent rightists who
seemed likely to speed up Aro-
semena's reform programs.
The congressional elections
of 3 June were a clear victory
for the rightists, the more-conserv-
ative of whom will tend to op-
pose Arosemena's reform policies.
Arosemena nevertheless has re-
tained considerable freedom of
action by forming his cabinet of
individuals not subject to party
control. Although the ministers
are all anti-Communist, they are
more reform-minded than either
their predecessors or the new
congress. Probably their nonpar-
tisan backgrounds will enable them
to enlist the support of the in-
dependents--who may control the
balance of power in Congress--
and thereby avoid a direct clash
between the Congress and the
President. 25X1
The rightists are being
aidied, probably unwittingly, by
leftists and Communists, who
bel eve Arosemena has "sold out"
to hThe right. The leftists are
encouraging labor unrest and
inciting a widespread wave of 25X1
strikes, a maneuver they used
effectively to discredit Velasco
in 1961.
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