CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A003700050001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 38
• Document Creation Date: December 21, 2016
• Document Release Date: May 20, 2008
• Sequence Number: 1
• Publication Date: July 27, 1962
• Content Type: SUMMARY

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SECRET
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 77
OCI NO. 0427/62
27 July 1962
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
SECRET
State Dept. review
completed
GROUP I
Excluded from automatic downgrading
and declassification
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 July 1962
T H E W E E K I N B R I E F
(Information as of 1200 EDT 26 July)
SOVIET FOREIGN POLICY DEVELOPMENTS .
Page 1
Soviet leaders appear intent on creating the impression
that they cannot allow the Berlin issue to drag on much
longer unchanged. There has been an increasing and strong
emphasis on Moscow's intention to sign a separate peace
treaty, linked with a demand that Western forces be with-
drawn from West Berlin. Although the possible areas for
compromise have been narrowed, Moscow still appears inter-
ested in pursuing bilateral talks with the TtJh.ited States.
Discussions..atthe disarmament conference were
overshadowed by the USSR's announcement on 21 July that it
intended to resume nuclear testing. Tests will probably
begin in the Arctic about 5 August and may come earlier in
other areas.
Mikoyan's truncated visit to Indonesia was marked
by an uninformative communiqud, signs of strained relations
between him and Sukarno, and suggestions of a slowdown in
utilization of Soviet developmental credits already granted
to Djakarta.
Economic matters appear to have occupied an important
part of Mikoyan.'s one-day stopover in New Delhi. The Sino-
Indian border dispute/
may also have been discussed
SOVIET MIDYEAR PLAN REPORT , , . , , . . . , , , , . . . Page 5
The Soviet economy appears to have resumed the high
growth rate for industrial output achieved during the first
two years of the Seven-Year Plan (1959-65) after a lag in
1961. According to the official plan fulfillment report,
industrial production for the first half of 1962 was
nearly 10 percent higher than in the corresponding period
of 1961. The plan as a whole was fulfilled by 103 per-
cent, and the production of most basic commodities con-
tinues to increase rapidly. The most notable gains were
in completions of pro'ects under construction and in housing
SOVIET AGRICULTURE FACES LABOR PROBLEMS . , , . , , . . , Page 7
Khrushchev's new crop rotation program is aggravating
agricultural problems this year and will ultimately require
almost as much additional labor and machinery as was needed
to carry out his grandiose program for cultivating the New
Lands. Faced with this situation, agricultural authorities
in the provinces are flodding Moscow with requests for
additional labor. A decree issued on 12 July sharply cur-
tailed the usual seasonal transfer of industrial workers
to help with the harvest, but an exception has been made
in the case of Kazakhstan where the labor shortage is most
severe.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 July 1962
NEW CIRCUMSPECTION IN YUGOSLAV COMMENT ON WESTERN AFFAIRS. Page 8
For the past month, the customary distortion of Western
motives and actions has been generally absent from Yugoslav
comments on international affairs. This is not indicative
of a change of heart in Belgrade, but rather of a desire
to soften the impact on the West of improving Soviet-Yugoslav
relations and to demonstrate that Yugoslavia is still "neu-
tral." It comes at a time when the US Congress in consider-
ing aid and trade policy toward Yugoslavia.
. . . . . . . . Page 9
The Pathet Lao, having reneged on their agreement to
support the establishment of three composite battalions,
now have demanded that Vientiane be made a "neutral city."
Laotian acceptance of the Chinese Nationalist ambassador
threatens to bring the China recognition issue to a head.
The military situation remains generally quiet, and the
coalition government is marking time pending Souvanna's
return in early August.
UAR MISSILE DEVELOPMENTS . . . . .
. . . . . . . . . Page 11
The Nasir government is trying to derive full propaganda
advantage from the progress in missile development which
it demonstrated during the tenth anniversary celebration
of the Egyptian revolution.
Israel
will probably soon ask again: for missiles
from the United States and other Western countries
CONGO . , . . . . . .
. . . . . . . . . . . . . . . Page 14
Adoula's political position continues to weaken. Ten-
sions between Katangan and UN forces have declined following
UN representative Gardiner's visit to Elisabethville, but
Tshombd still shows no inclination to resume talks with the
central overnment.
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CURRENT INTELLIGENCE WEI9KLY SUMMARY
27 July 1962
U Thant reports that Britain is still
firmly opposed to use of force, and that De Gaulle is op-
posed even to economic pressures.
Page 16
Ben Bella and his followers appear to be in a position
to assume control in Algeria following the PAG's acceptance
of the political bureau he announced earlier this week.
Ben Bella's remaining major adversary is Vice Premier
Belkacem Krim, who is said to be irreconcilably opposed to
him, but there is no firm indication that Krim intends to
use troops presumably still loyal to him to oppose Ben
Bella's entry into Algiers. The Algerian National Army
now appears to hold the balance of power in the country,
AFTERMATH OF ALGERIAN INDEPENDENCE INFRANCE
Page 18
French official and public attention is more concerned
with problems raised by the influx of 1Tdropean refugees from
Algeria.than With developments within Algeria. Of nearly
400,000 refugees arriving since the beginning of this year,
about one third have concentrated in the Marseilles re-
gion, where they have considerably disrupted public order.
Page 19
The Portuguese Government appears to be adopting a
somewhat more favorable attitude than it held a few weeks
ago toward negotiations for renewal of the Azores base
agreement. Nevertheless the negotiations are likely to be
long drawn out and accompanied by considerable friction
over US positi?ns on Portuguese colonial policy.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
27 July 1962
PERU . . . . 4 . . o n 0 . . . . . . . . . . . . 0 . . . . Page 21
Public apathy and the failure ,df' a general strike
called to protest the military takeover have left Haya
de la Torre's APRA party isolated in its opposition to the
new military junta. The armed forces leaders, finding
themselves in an awkward but useful alliance with the
Communists, may attempt to break APRA's domination of organ-
ized labor. Acquiescent civilian politicians apparently
hope to provide the facade of a provisional civilian govern-
ment which the junta could use in an effort to offset censure
by other countries of the hemisphere.
SPECIAL ARTICLE'S
THE BLOC AND THE COMMON MARKET . .
Page 1
The USSR's growing concern over the Common Market
stems more from the direct political challenge posed by
West European unity than from the threat-to East-West trade.
With only limited opportunities for effective counterblows,
the USSR will continue its attempts to aggravate divisions
among the major powers and may look toward tightened intra -
bloc economic ties as the best - n~swer to Western
economic unificaton.
INSURGENCY IN BURMA . . 0 0 . . . . , . . . . . . . . . Page 9
Insurgency, which has plagued Burma since independence in
1948, continues to prevent stability and hamper economic
growth. In the early postindependence period, Communist forces
presented the gravest danger to the government, but today the
threat arises mainly from the antagonisms of the ethnic minori-
ties toward Rangoon. Ne Win cited the need to control in-
surgency as the primary justification for his seizure of
power last March. The present level of insurgency does not
pose any threat to the central government, but it could rise
to more serious proportions. Regardless of the outcome of
the government's military campaigns against the insurgents,
embittered intercommunal relations are likel to continue.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SOVIET FOREIGN POLICY DEVELOPMENTS
Berlin and Germany
Soviet leaders seem intent
on creating the impression that
they cannot allow the Berlin
issue to drag on much longer
without a settlement. Recent
statements have increasingly
emphasized Moscow'.s intention
to sign a separate peace treaty
with East Germany, and Communist
spokesmen have underscored the
demand for withdrawal of
Western forces from West Berlin
as the critical issue in the US-
Soviet talks. The Soviet Union's
public commitment to this posi-
tion seems to have restricted
its freedom of maneuver in these
negotiations and has seriously
narrowed the possible areas of
compromise. The Communists
still appear to be interested
in pursuing bilateral talks,
however. They are attempting
to determine if an increase in
pressure will lead to Western
concessions which will result
in an agreement allowing them
to sign a separate peace treaty
with relatively, little risk.
A 23 July Pravda article
accused US occupation forces
of /encouraging the West Berlin
police in their "criminal
activities" against East Germany.
Pravda pointed out, as had a 12
July Soviet Government statement,
that such actions make a peace
treaty "more imperative." In
its effort to play up the nega-
tive attitude of the United
States toward various Soviet
proposals for the withdrawal
of Western troops from West
Berlin, Fravda went on to claim
that the-U7-position had remained
rigid. It asserted that the
fulfillment of "certain hopes"
which have been placed in the
Rusk-Gromyko talks in Geneva
will depend on whether the
"Western powers revise their
position or continue to resort
to threats."
The increasing emphasis
the USSR has given to the peace
27 July A9
treaty issue was highlighted by
a .24 July East German appeal
to all world governments to
"support the signature of a
German peace treaty and a
peaceful solution of the West
Berlin problem on this basis."
This twenty-page appeal detailed
all alleged "provocations" by
West Berliners against the Ber-
lin Wall since 1 January. The
statement went on to claim that
the US, UK, and France must bear
the responsibility for these
actions and that it was "high
time for the occupation troops,
which have proved unable to
prevent these acts of aggression,
to withdraw from West Berlin."
Mirroring recent Soviet pro-
posals, the statement called
for the replacement of the oc-
cupation troops by "police
forces of neutral nations or
allies of both sides operating
under the UN flag."
The hardened tone of Com-
munist statements suggests
that Moscow hopes to create a
record of Western intransigence
on the Berlin issue to provide
a justification for any new
movies it may plan against Western
interests in Berlin. While the
Soviet Union will be careful
to avoid any unilateral action
which poses a direct challenge
to the West, the Communists
appear to be preparing the ground
for 'a new round of harassment
in West Berlin. Ambassador
Thompson believes that a grad-
ual build-up of tension can be
expected, and he conjectures
that as part of this increase
in tension, the USSR may explode
a "large" bomb in its next round
of nuclear tests.
Recent statements warning
against the consequences of
S-Bahn incidents in West Berlin
suggest the likelihood of some
move against rail access. The
Communists may also step up
harassment of Allied traffic
in the air corridors. On 23
July, eight Allied aircraft were
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CURRENT INTELLIGENCE WEEKLY SUMMARY
buzzed by Soviet fighters--the
highest number of such incidents
since the crisis period of last
February and March. While this
increased activity could stem
from training exercises, the
timing suggests a deliberate
harassing pressure tactic to
support the current hard Soviet
diplomatic and progaganda line.
Nuclear Testing and Disarmament
Discussions at the 17-nation
disarmament conference were
overshadowed by the Soviet
Government's formal announcement
on 21 July that the USSR in-
tended to resume nuclear test-
ing. The statement claimed
that this step was necessitated
by the latest series of US
tests and charged that the US had
sabotaged any hope for agree-
ment on a test ban by its re-
jection of the "compromise"
proposal advanced by the neu-
trals last April. The announce-
ment asserted that the "newest
types of Soviet nuclear weapons"
would be tested--language repeated
by Gromyko in his address to the
conference four days later--but
that all measures would be taken
to reduce radioactive fallout
to a minimum.
The Soviet Union will prob-
ably begin nuclear testing in
the western Arctic on or shortly
after 5 August, the day on which,
according to a Soviet announce-
ment of 24 July, a ban on ship-
ping and aircraft goes into
effect in the Barents and Kara
Seas. The announcement makes
no specific .aention of nuclear
tests, but its wording is simi-
lar to that used prior to the
initiation of the 1,9.61--,. ' nuclear
test series in the. Arctic. The
first test of that series came
on the first day of the closure.
Tests could begin in areas
other than the Arctic earlier
than 5 August. Last year the
USSR conducted four nuclear
tests in the Semipalatinsk
area and one in the Kapustin
STAT
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Yar area in the ten-day period
between their announcement and
the first test in the Arctic.
With their own test series
imminent, Soviet leaders are
clearly not interested in creat-
ing an atmosphere favorable to
agreement with the West on even
minor issues concerning disarma-
ment. At the Geneva talks on
banning nuclear tests, Soviet
delegate Zorin has attempted
to create the impression that
the stalemate there is due to
US intransigence on means of
detection. He cited past
US statements in his insistent
charge that, although new data
provided by US underground tests
(Project VELA) amounted to a
proof of the adequacy of nation-
al detection systems.,'the US
refuses to change its position
that such systems are not wholly
adequate despite efforts by
the neutralists to provide a
framework in which both sides
could reach a mutually acceptable
solution.
On 19 July, in the full
committee of the disarmament
conference, Zorin introduced
a proposal on the nondissemina-
tion of nuclear weapons. At
the same"time, he indicated that
agreement with the West on this
matter was dependent on the pro-
hibition of US transfer of nuclear
weapons to multilateral Western
defense groupings such as NATO
as well as to individual states.
He made a strong attack on the
"militaristic" policies of the
'West German Government and
charged that if Bonn obtained
nuclear weapons, the socialist
states would have to strengthen
their own defenses and disarma-
ment would be that much harder
to attain. The Soviet delegate,
vigorously supported by the Czech
representative, argued that
nuclear powers must not transmit
weapons to such "military blocs"
and that nonnuclear powers must
agree not to produce, acquire,
or admit such weapons into their
territory.
In his 24 July address
before the conference, Gromyko
reflected the uncompromising
attitude the USSR has adopted
in recent weeks on the disarma-
ment and other issues as well.
Gromyko reiterated standard
Communist themes as he rejected
the Western proposal for "zonal
inspection" on the grounds that
it amounted to "legalized es-
pionage." He said that there
will be no agreement on general
and complete disarmament with-
out provision for the elimina-
tion of all foreign military
bases on alien territories in
the first stage of such a treaty.
Indonesia
The communique which con-
cluded the 21-24 July visit
of Soviet First Deputy Premier
Mikoyan to Indonesia gives
little indication of the purpose
or :result of this hastily ar-
ranged "good-will mission" made
at Sukarno's invitation. The
composition of the delegation
suggests that discussions con-
cerned economic and political
relations, particularly in light
of Indonesia's serious economic
difficulties, and the status
of the Vest New Guinea negotia-
tiorts. Yet the speeches made
during the visit did not go be-
yond the traditional expressions
of friendship, and the communi-
que mentioned no new agreements
and merely repeated the previous
Soviet position of "sympathy
and support" for "the liberation"
of West New Guinea. Although
Mikoyan described Sukarno as
the Soviet Union's "best friend,"
there was evidence of strained
relations between the two, and
Mikoyan's visit was shortened
without explanation from its
original seven days to four.
In discussing Soviet eco-
nomic; aid projects Mikoyan
apparently promised to consider
other ventures only after the
completion of those now under
construction--suggesting some-
thing of a slowdown in the
further utilization of Soviet
developmental credits already
granted to Djakarta. One of
the primary reasons for Mikoyan's
visit may have been to explain
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CURRENT INTELLIGENCE WEEKLY SUMMARY
personally to Sukarno that while
Moscow was willing to accelerate
its arms aid, the Soviet economic
assistance program could not
be appreciably speeded up in
the near future. Unpleasant
news of this kind might explain
the pique exhibited by Sukarno.
Such a decision would fit logi-
cally with other indications
that the USSR has become re-
luctant to expand its economic
aid commitments in the under-
developed areas during the next
few years.
During his one-day visit
to New Delhi on his way back
to Moscow, Mikoyan conferred
with Nehru and other Indian
officials. Soviet assistance
to India was apparently a major
topic of their discussions, and
a Soviet economic adviser re-
mained in New Delhi for further
talks. Mikoyan may also have
sought to conclude arrangements
for the Indian purchase of MIG-
21 fighters.
The question of the Sino-
Indian border ma also have been
raised.
The Soviet Union
has long urged a negotiated set-
tlement of the dispute and may
have felt that the recent in-
crease in tensions on the bor-
der required it to abandon its
previous public policy of nonin-
terference in order to help fore-
stall a situation in which it
would again be faced with
another unpleasant choice
of which side to support.
The Chinese have re-
cently shown an increased in-
terest in getting negotiations
under way, probably as a re-
sult of the Indian military
initiatives this spring,
In, the past, Peiping has re-
peatedly indicated a willing-
ness to accept a settlement,
but only one based on the
status quo; i.e., a solution
which would in general award
the Chinese those portions
of Ladakh they now occupy
in return for relinquishing
their claims to Assam.f
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SOVIET MIDYEAR PLAN REPORT
The Soviet economy appears
to have resumed the high growth
rate for industrial output at-
tained in the first two years
of the Seven-Year Plan (1959-65)
after a lag in 1961. Accord-
ing to the official plan-ful-
fillment report at midyear,
the plan as a whole was fulfilled
by 103 percent, industrial pro-
duction was nearly 10 percent
higher than at mid-1961, and
production of most basic com-
modities continues to increase
rapidly.
State "centralized" invest-
ment increased moderately over
last year, although the plan was
underfulfilled and rates of in-
crease in this type of invest-
ment in some important branches
of industry continued to drop.
This does not necessarily re-
flect comparable progress in
total investment, which is not
reported at. midyear. Last year,
for example, state plan invest-
ment increased 7.8 percent while
total investment rose only 3
percent. It does show some im-
provement, however, from the
unsatisfactory experience of
1961. Concentration of resources
on completion of projects under
construction resulted in a re-
ported 25-percent increase in
fixed capital put into operation,
compared with only about 5 per-
cent last year.
The low priority accorded
state housing construc~tjon in
1959 and 1960--which had result-
ed in underfulfillmenf--of plans
for the last three years--was
reversed in the first half of
1962, with completions reported-
ly 26 percent higher than in
the comparable period of 1961.
If this priority is maintained,
the 1962 plan for state housing
will be fulfilled, and the USSR
will be in an excellent posi-
tion to fulfill or exceed the
Seven-Year Plan for state and
cooperative housing. Private
housing, however, continues to
receive only limited support.
This improvement in housing
means that the position of the
Soviet consumer improved slight-
ly in comparison with 1961;more-
over, retail sales rose a
healthy 7.7 percent over last
year. Production by light in-
dustry, however, improved only
slightly. Growth rates for
cotton fabric improved, but
not enough to meet Seven-Year
Plan goals, and the growth rate
for leather footwear declined.
Problems which began to emerge
in light industry in 1960--shortages
PERCENTAGE INCREASES
PRODUCTION
FIRST HALF
PRODUCTION
FIRST HALF
FIRST HALF
1961 OVER
FIRST HALF
1962 OVER
ANNUAL PLAN
1962
1961
1962
1960
1961
CRUDE STEEL
(million metric tons)
34.9
37.6
8.7
7.7
8.7
PIC IRON
(million metric tons)
25.0
27.1
9.1
8.4
10.0
ROILED STEEL
(million motric tons)
27.2
29.1
PETLOLEUM
(million metric tons)
79.7
89.3
12.7
12.0
Not
Avoi lablo
11.4
CEMENT
(million metric tons)
24.3
27.7
12.0
13.9
12.0
ELECTRIC POWER
(billion kilowatt hours)
157.0
180.0
10.5
14.6
11.9
GAS
(billion cubic maters)
28.8
36.5
CHEAICAL EQUIPMENT
(million rubles)
118.0
128.0
HOL SING (STATE PLAN)
(million s
uare meters)
0
0
Not
q
-1
.
26.0
Available
GRCSS INDUSTRIAL PRODUCTION
8.4
10.0
8.1
LABOR PRODUCTIVITY IN INDUSTRY
3.5
6.0
5.6
LABOR PRODUCTIVITY IN CONSTRUCTION
5.0
5.0
6.8
VOLUME OF CAPITAL INVESTMENT (STATE PLAN ONLY)
8.0
10.0
8:1
STAT
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CURRENT INTELLIGENCE WEEKLY SUMMARY
of raw materials and machinery,
labor troubles resulting from
the shortened workday, and
failure to bring new capacity
into production--have worsened.
As a result, the industry as a
whole grew only 4 percent? while
increases exceeding 6 percent
are required by the Seven-Year
Plan.
According to the report,
the state labor force increased
by 2.8 million, considerably
less than the increase of 4.2
million reported a year ago.
Last year's figure, however,
included about one million farm
workers who transferred into
the state labor force as a
result of conversions of col-
lective farms into state farms.
In addition, a larger gain in
industrial productivity this
year meant that fewer workers
had to be added to the indus-
trial sector.
Labor productivity in-
creases of 6 percent in industry
and 5 percent in construction
during the first half of 1962
represent some recovery from 1961,
when effects of the shorter work-
week were being felt.
Some improvement is also
apparent in agriculture. The
capital investment situation
has improved slightly over 1961
and machinery continues to be
produced at a high rate, but
resource allocations apparently
will continue to fall far short
of what is required, especially
in view of the expanded sown
area and hence workload in
1962. Production of fertilizer
increased 9 percent, far less
than the increase implied by
the original Seven-Year Plan
directives.
SOVIET STATE PLAN INVESTMENT IN INDUSTRY
(PERCENTAGE INCREASES)
CHEMICALS
METALLURGY
OIL, AND GAS
LIGHT INDUSTRY
MACHINE BUILDING
1960 1961
OVER MID-1961 OVER OVER MID-1962 OVER
1959 MID-1960 1960 MID-1961
1962
PLAN
Livestock herds in the
socialized sector, in general,
reportedly continued to expand.
State procurements of meat and
milk also increased over 1961--
a reported 18 and 8 percent
respectively. These increases,
however, reflect the poor per-
formance in the first half of
1961 as well as favorable
weather early this spring, and
plans were underfulfilled in
some cases; the milk plan was
fulfilled by only 90 percent.
The report specifically points
out that the increase in state
procurement prices which became
effective on 1 June has not been
reflected in the level of prices
on the kolkhoz market for live-
stock products.
STAT
The rate of increase in
foreign trade jumped from 2 per-
cent in mid-1961 to 13 percent
in ;mid-1962. This reflects ~, among
other things, a leveling-off
after the sharp drop in trade
with China, a large increase in
trade with Cuba, and the imple- 25X1
mentation of numerous earlier
aid agreements with underdevel-
oped countries.
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SOVIET AGRICULTURE FACES LABOR PROBLEMS
Khrushchev's new crop ro-
tation program is aggravating
agricultural problems this year
and will ultimately require al-
most as much additional labor
and machinery as was needed to
carry out his grandiose program
for cultivating the New Lands.
In 1961 about a quarter of the
cultivated acreage in the USSR
was planted to grass or left in
clean fallow. This year, under
the program introduced by Khru-
shchev at the 22nd party congress
last October, about a third of
this land was planted to high-
yield row crops such as corn,
peas, and sugar beets. Even-
tually the grass rotation sys-
tem is to be virtually elimi-
nated and the practice of clean
fallowing greatly restricted
This will mean that peak labor
requirements will rise, because
of the nature of the crops and
the record acreage under cultiva-
tion.
Faced with this situation,
agricultural authorities in
the provinces are flooding Mos-
cow with requests for additional
labor, partly to ensure that the
harvest is completed and partly
to protect their own political
futures. They do not want to
be accused--as was former Kazakh
party chief Belyayev immediately
prior to his downfall in 1958--
of not asking for labor when they
need it. Traditionally, indus-
trial workers have been trans-
ferred to the farms to help with
the harvest. This year, however,
a government-party decision issued
on 12 July sharply curtailed the
seasonal transfer, which dis-
rupts industry, loads the trans-
portation system, and brings in
workers unfamiliar with farm-
ing methods and inefficient
as farm labor.
Issuance of such a decree
in a year when labor require-
ments have increased may indi-
cate an effort to force agri-
cultural management to use its
labor more efficiently. Belya-
yEv's successor in Kazakhstan
has been chided for his "un-
reasonable" demands for labor-
ers, and Moscow newspapers
have scored Kazakh leaders
for not providing adequate
living conditions. The Georgian
Council of Ministers has for-
bidden private individuals to
export fruits and vegetables from
the republic because farm workers
had been leaving the farms to
sell produce in the cities,
thereby causing a shortage of
labor for harvesting.
The decree curbing labor
transfers is qualified by a
proviso that in exceptional
conditions farm managers are
to be permitted to augment the
labor force from the urban popu-
lation. Such an exception has
already been made this year for
Kazakhstan, where the shortage
is always most acute. The re-
gi!.me may also decide, as it has
in the past, to use military 25X1
personnel in areas where the
need for additional labor be-
comes apparent.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
NEW CIRCUMSPECTION 114 YUGOSLAV COMMENT ON WESTERN AFFAIRS
For the past month the
Tito regime's comments on a
wide range of issues concerning
the West, and particularly the
US, have been unusually cir-
cumspect. Belgrade's general
abstention from,the ^ustomarly
distortion of Western actions
and motives does not fore-
shadow any basic change in its
desire to avoid commitment to
either East or West but in-
dicates its hope to maintain
good relations with the West
at the same time its relations
with the Soviet Union are im-
proving. Belgrade probably also
wishes to forestall its critics
in the West at a time when the
US Congress is considering` aid
and trade policy toward Yugo-
slavia.
Belgrade's reaction to
efforts in Congress to deny
US aid and most-favored-nation
status to Yugoslavia, for
example, has been restrained.
News reports were for the most
part factual, and editorial
comment explained away the
action as either a desire to
economize in an election year
or the work of the adminis-
tration's business opposition.
The administration escaped
censure, and statements by
Secretary Rusk and Ambassador
Kennan in support of aid were
given prominence in the Yugo-
slav press. When Congress
rescinded a Senate amendment
barring aid--other than surplus
food--to Yugoslavia, the Foreign
Ministry spokesman on 20 July
enthusiastically greeted the
action as doing away with "a
measure that would artificially
impede economic and commercial
cooperation."
These statements contrast
markedly with Yugoslavia's
reaction last fall to Western
press criticism of its
activities at the Belgrade con-
ference of the nonaligned
states and to a review of
American policy toward Yugoslavia.
At that time, Belgrade mounted
a propaganda campaign which
charged that Thai-Cambodian
differences, Syria's break
from the UAR, and Iraq's prob-
lems with the Kurds, like
the criticisms of Yugoslavia,
were part of a general campaign
being conducted by the West
against "almost all participants
in the Belgrade group."
At the recent Economic
Conference of the Developing
Countries, a ready-made forum
for another Yugoslav diatribe
against the Common Market (EEC),
the remarks of the chief
Yugoslav representative were
relatively restrained. The
US Embassy in Belgrade reported
that in connection with the
conference the Yugoslav press
mentioned the dangers of dis-
criminatory economic groupings
"in a more oblique fashion
than usual." This effort to
avoid irritating the West
probably reflects the policy
decision--revealed privately
by a Yugoslav politburo mem-
ber--to seek some accommoda-
tion with the EEC in the fall.
A Yugoslav Foreign Ministry
official told US diplomats
on 19 July that at the con-
ference Belgrade attempted
to moderate the extremists
such as Cuba which allegedly
sought condemnation of the
US in the conference's com-
muniqu6.
In a number of other ways,
Belgrade has exhibited an ap-
preciation of Western sensitiv-
ities. Reporting on the dis-
armament negotiations has been
generally factual and recog-
nizes the West's good intent.
Tito's greetings to the US on
4 July were unusually warm.
On every appropriate occasion,
Belgrade has wholeheartedly
supported the UN. On events
in Peru, Belgrade did dis-
play ideological bias in
.speculations that the West
is more sensitive to leftist
than rightist coups in Latin
America, but otherwise gen-
erally reported objectively
US actions toward the new
military regime.
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After 14 months of inter-
mittent negotiations, the con-
ference on the neutrality of Laos
concluded on 23 July when rep-
resentatives of the 14 partici-
pating nations signed the ac-
cords at Geneva. The agreement
is composed of a declaration
of neutrality by the Laotian
Government, a responsive declara-
tion by the 13 other signatories
tOu Neu
O~ Tay.,'
... Phong Saly
,...Noun Aq%G
Wong 'SALT
B n rty~Mraa 1 Muongll~-;
uer Sal / Sai LUA
P RA BAS
gan Muong Haun/
Luang
PLabang
Sayabour ` Phou
Khouj
Muopg?
K gsy
Ban Hin
Heun
agreeing to respect that neu-
trality, and a protocol spelling
out; provisions for implementing
the accords.
Chinese Communist Foreign
Minister Chen Yi delivered an
unusually moderate speech at the
closing plenary session on 21
July, probably with a view to
leaving the assembled Western
'i10ul Javes
s,~aXIENG O pffAMGUa g
ll Pa Donngg. hAI Orn
Vieng
VIENTIANE Pak Sane 1 kam
_Keel
KHAAMc
1 Nho
SECRET
L A O S
Royal Army base area Road
0 Meo base area Trail
Kong Le/Pathet Lao/North ? Route number
Vietnamese areas Road under
construction
SaJannakhet
AVANNAKHE
1)/ SrA
1 Saravar
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CURRENT INTELLIGENCE WEEKLY SUMMARY
and neutral representatives with 1 the three factions. Phoumi in
an impression of China's "reason-
ableness" on international issues.
He expressed satisfaction with
the Laotian settlement, and
voiced the hope'.that it would
be a starting point for the re-
laxation of tension in Southeast
Asia. He also made a plea for
"peaceful consultations" on
South Vietnam, underscoring the
interest Peiping had previously
displayed on this subject.
Current Chinese and North
Vietnamese propaganda, however,
suggests both estimate further
military pressure will be neces-
sary before any negotiations on
South Vietnam can be productive
of Communist gains. Hanoi and
Peiping have hailed the Laotian
settlement as a lesson in the
value of combining militant
struggle with negotiations.
In Laos, the coalition
government is marking time
pending Premier Souvanna's re-
turn in early August. Deputy
Premiers Phoumi and Souphannouvong
have both notified Souvanna that
his presence is needed to resolve
growing difficulties among the
various factions.
The Pathet Lao have reneged
on their agreement earlier this
month for the formation of three
composite battalions to be sta-
tioned at administrative centers.
Souphannouvong's refusal to per-
mit a company of Phoumi's troops
in Khang Khay probably stems
from a desire to avoid exposure
of North Vietnamese activity in
the Plaine des Jarres. The Pathet
Lao now have demanded that Vien-
tiane be made a "neutral city,"
garrisoned by forces drawn from
turn has requested that Souphan-
nouvong withdraw his forces
from Vientiane and Luang Prabang.
Pathet Lao forces have begun
their withdrawal from Luang Pra-
bang, but elements of both Kong
Le and Pathet Lao troops remain
in Vientiane.
Han Li-wu, Chinese national-
ist ambassador-designate to Laos,
on 19 July presented his creden-
tials to King Savang. By this
action, the Nationalists
achieved accreditation prior
to the Chinese Communists,
whose representative, Liu Chun,
has been waiting for a royal
audience to present his letter
of credence.
It is likely'
that Liu Chun will be received
as an ambassador in the near 25X1
future, a move which would bring
the China recognition issue to
a head.
The military situation,
meanwhile, continues generally
quiet. Pathet Lao and Phoumi
units engaged in minor skirmishes
in the Attopeu area of southern
Laos during the past week. To
the north, in the mountains
northeast of Thakhek, combined
Kong Le, Pathet Lao, and North
Vietnamese forces conducted
clearing operations against
Phoumi-supported guerrilla
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CURRENT INTELLIGENCE WEEKLY SUMMARY
UAR MISSILE DEVELOPMENTS
The Nasir government is
continuing its campaign to derive
full propaganda advantage from
its progress in missile develop-
ment. Nasir made this the real
theme of the week-long celebra-
tions of the tenth anniversary
of the Egyptian revolution. It
serves as ideal propaganda mate-
rial for the peoples of all the
Arab countries, long frustrated
by the fact that Arab scientific
and technological achievement
has for many generations lagged
far behind that of the vVestern
nations. Radio Cairo claims
that UAR missile accomplishments
"testify to the greatness of
Arab socialism, destroy the myth
of Israeli scientific and mili-
tary superiority, and shake the
earth under the feet of Arab
reactionaries and feudalists."
Nasir's own observations to
the press--after the launching
on 21 July of.jol?r single-stage
missiles from a site about 50
miles northwest of Cairo, and
some six or seven miles from
the point where reporters had
been brought to watch--were more
restrained. He said that the
two types tested were "of Egyptian
manufacture and in large-scale
production." He added that their
real significance was their
range--great enough in the case
of the larger of the two, the
Conqueror, to reach "a little
south of Beirut"--that is,
anywhere in Israel. Cairo
claims a range of some 370 miles
for the Conqueror and 235 miles
for the Victor.
The Conqueror, ten of which
were displayed in Cairo's 23
July military parade, is reported
to be 40 feet long and four feet
in diameter with a cluster of
four nozzles visible at the rear.
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CURRENT INTELLIGENCE WE]3KLY SUMMARY
The larger missiles were
carried in cradles resting on
flat-bed truck trailers--the
smaller ones on trucks, These
arrangements appear to have been
specially rigged for the parade.
This suggests that operational
ground support equipment of a
mobile nature for the missiles'
erection and firing is lacking.
There is, moreover, no con-
vincing evidence as yet that
the Conqueror has been success-
fully tested. The vehicles
launched on 21 July might not
have included the Conqueror and
perhaps not even the smaller
Victor. Egypt still had several
two-stage meteorological sounding
rockets obtained many months
ago from a US firm; these could
easily have been separated into
single stages and launched with
a near certainty that they would
fire successfully. Thus, it is
likely that the Egyptian missiles
displayed will require consider-
SECRET
ably more testing and develop-
ment before they can be re-
garded as operational. In
addLtion, there is considerable
doubt whether the UAR has the
resources or will be able to im-
port the components necessary
to produce these rockets in the
hundreds.
The Nasir government has
nevertheless taken a step to-
ward the development of an op-
erational surface-to-surface
rocket of significant range.
This, would be an important ad-
dition to other up-to-date
weapons
Israel will
probably, in the near future,
ask again for missiles from
the 1'JS and other Western na-
tions.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Adoula's political position
continues to deteriorate. The
opposition groups are trying to
generate sentiment against him
in the provinces, and rumors
are current in Leopoldville that
several of his new ministers may
resign.
Lumumbist leaders in Orientale
Province have joined with Tshom-
be in declaring that the Adoula
government is illegal, since it
failed to win absolute majority
approval in parliament. Govern-
ment leaders believe that parlia-
ment's adjournment on 25 July
will reduce political pressures.
The decline in Adoula's
strength is also evident in his
decision not to press for the
re-installation of former
Orientale provincial president
Manzikala or former Kasai presi-
dent Mukenge. Adoula said on
21 July they would be given
honorific positions-in order "to
avoid a showdown" with the anti-
Leopoldville forces which ousted
them.
General Mobutu has told
US officials that "the only
answer" for the Congo was to
keep President Kasavubu and
Premier Adoula in office. He
was disheartened by the UN's
futile efforts to solve the
Katanga problem. Ile said only
a lack of equipment prevented
him from mounting a Congolese
Army (ANC) attack in northern
Katanga. The general com-
plained that the slowness of
the West's response to his
call for military equipment
had caused his officers to ask
why aid could not be obtained
elsewhere.
Tensions between UN and
Katangan forces have declined
following UN representative
Gardiner's visit to Elisabeth-
ville, but further Katangan
harassments are likely. Gardiner
stood firm against Tshombe's
requests to remove UN roadblocks.
Gardiner agreed, however, to re-
place local UN representative
Jean Back, to let Katangan po-
lice be posted at UN roadblocks,
and to permit Tshombe's presi-
dential guard to pass through
the newest one. Gardiner was
not optimistic that TshombC
would agree to reopen talks
with Adoula soon and gained the
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CURRENT INTELLIGENCE 11TEKLY SUMMARY
Impression that Tshomb6 felt
he had already gone too far in
negotiations.
In a further effort to under-
mine Adoula, Tshomb6 announced
on 24 July that he would not
deal with him again because the
premier no longer had the sup-
port of parliament or the Congo
popu-la-t-i-on :----..T;s.homb6 once more
REPUBLIC OF THE CONGO
lieves that Tshomb6 can be brought
around by economic pressures such
as cutting Katanga's rail links
to halt its exports and persuad-
ing Union Miniere (UMHK) to stop
its payments to Tshomb6 in re.r
turn for UN protection of its
installations.
Thant told US officials that
Britain was still unwilling to
support any measures requiring
the use of force, and that De
Gaulle, who Thant said congratu-
lated him for "beginning the UN
disengagement from the Congo,"
was opposed even to any economic
pressures.
Although Foreign Minister
Spaak has given the impression
over the last few months that he
favored taking a strong line with
both the UMHK and Tshomb6 to re-
unify the Congo, he now seems to
be backing down in view of the
strong opposition at home to such
a move.
if the UN attempts to end
Katangan secession by force.
%RUANj7
?URUN
k VI
NYnnzu v
has threatened guerrilla warfare
UN Undersecretary Bunche
says that U Thant returned from
Europe determined to push forward
with a Security Council meeting
on the Congo, but had since coaled
off considerably. US officials
in New York report that Thant is
still firmly opposed to using
force against Katanga, but he be-
27 Tuly 62
On 18 July Spaak told
Assistant Secretary of State
Williams in the presence of two
h:Lgh UMHK officials that while
the UMHK should take steps to
improve it: tarnished image and
pLace a certain percentage of
STAT
its tax payments in escrow pend-
ing settlement of the Adoula-
Tschomb6 dispute, it was an "over-
simplification" to hold the UMHK
wholly responsible for continued
Kaltangan secession. Spaak agreed
with the UMHK officials that it
was wrong to place a private
company in a position of what
was in effect engaging in eco-
nomic warfare against Tshomb6
and taking risks which the big
powers are not prepared to take.
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Ben Bella and his followers
appear to be in a position to
assume control in Algeria follow-
ing the acceptance by Ben
Khedda's provisional Algerian
Government (PAG) of he po-
litical bureau announ ed by Ben
Bella earlier this week. Ben
Bella's remaining major adveyl-
sary is Vice Premier Belkape'm
Krim, who is said to be if-
reconcilably opposed to him, but
there is no firm indication that
Krim intends to use troops pre-
sumably still loyal to him to
oppose Ben Bella's entry into
Algiers. The Algerian National
Army (ALN) now appears to hold
the balance of power in the
country
Ben Bella claimed on 25
July that the National Revolu-
tionaly Council had already
approved the composition of the
political bureau which, dominat-
ed by Ben Bella and his followers,
will ostensibly organize the
National Liberation Front into
a political party and prepare
for Algerian elections. This
bureau will, however, in effect
rule the country, at least until
a constituent assembly designates
an Algerian government. There
are indications that the bureau
will actually control the govern-
ment even after these steps.
ALN troops loyal to Ben
Bella occupied Constantine and
Bone in eastern Algeria on 25
July, suggesting that Ben Bella
intends to press his advantage.
The US consul in Oran
visited Ben Bella on 20 July
in Tlemcen, and found him less
bombastic than press accounts
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have indicated, and more in-
terested in urgent problems of
the Algerian economy than in
grand designs. The consul
commented that he appeared
to be in full control of his
entourage, and was surrounded
by ex-PAG officials and secre-
taries that amounted to a
"government in waiting" that
could take over intact.
PAG Information Minister
Yazid last week told the US
consul general in Algiers that
Ben Bella is aware of the "army
problem,"
ella also told the US con-
sul that the ALN could perform
needed agricultural tasks, such
as reforestation and erosion
control, which "would tend to
keep it out of mischief."
Meanwhile, with law en-
forcemeit,processes virtually
halted, M slem kidnaping and
other reprisals against the
European serttlers remaining
in Algeria have increased to
200 daily,
Paris announced 25X1
on 25 July that French troops
will intervene to prote
Europeans if necessary.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
AFTERMATH OF ALGERIAN INDEPENDENCE IN FRANCE
Problems raised by the in-
flux of European refugees from
Algeria continue to take preced-
ence in French official and
public attention over develop-
ments within Algeria. Some of-
ficial concern about the safe-
ty of French nationals there
was voiced this week, and the
prospect that the radical Ben
Bella faction will dominate the
country is likely to convince
many otherwise moderate French
rightists and military elements
that the Secret Army Organiza-
tion (OAS) has been correct in
its opposition to De Gaulle's
Algerian policy. Although the
power struggle within Algeria
could jeopardize the Evian ac-
cords, the public attitude in
France is mainly one of relief
that it has not thus far pro-
duced more violence than it has.
Most government and press
statements have focused on the
continuing flow of Europeans
from Algeria to France--nearly
400,000 since the beginning of
the year. Fragmentary official
estimates suggest that the in-
flux may already have reached
the total envisaged by the re-
patriation program for a three-
year period.
The main external apparatus
of the OAS is the "French Council'
of National Resistance" (CNRF)
headed by ex-premier Georges 25X1
Bidault and by Jacques Soustelle
in Italy, Switzerland, and else-
where.
French authorities are con-
cerned especially because the
refugees have preferred to
settle in the Paris area, al-
ways politically volatile, and
in Marseilles. The estimated
125,000 who have already moved
into the Marseilles area have
not only overburdened municipal
services, housing, and the em-
ployment market but also have
unleashed a wave of violence
involving assaults 'on Moslem
workers and numerous gangster-
style holdups. Three companies
of riot police were sent there
this week to bring the situa-
tion under control.
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CURRENT INTELLIGENCE TEEKLY SUMMARY
The Portuguese_4Gpvernment,
since its decision on 5 July to
begin talks with the US for re-
newal of the Azores base agree-
ment, seems to be adopting a
somewhat more favorable attitude.
The five-year agreement expires
at the end of December, and
Lisbon had earlier dropped hints
that it was not interested in
renewal.
In an apparent attempt to
pave the way for negotiations,
Lisbon has compiled a "long list
of US-Portuguese problems"
which, according to Foreign Min-
ister Nogueira, will be presented
this week to US Ambassador El-
brick. Similarly, it seems to
be showing somewhat less in-
transigence with regard to US
proposals for Portuguese co-
operation with the UN. Accord-
ing to the US Embassy at Lisbon,
government officials have seemed
interested in a recent US
suggestion that an "independent
rapporteur"--selected by the
UN subject to Portuguese ap-
proval--be permitted to visit
Angola and prepare an "impartial"
report.
The increased burden of
the campaign against the rebels
there, which in early July
necessitated a 29-percent in-
crease in the Portuguese mil-
itary budget, may account in
part for Lisbon's present at-
titude. It probably hopes that
US financial aid in return for
the base agreement will be of
substantial help in Portugal's
effort to hold the overseas
territories.
Lisbon may also hope that
US expressions of sympathy for
its African problems imply a
change in the US position on
Portuguese colonial policies.
Such an expectation could prove
a :Further source of difficulty
in any base negotiations as
long as disorders persist in
Angola and Portugal continues
to be attacked in the UN. Lis-
bon will probably convey a
clearer idea of its position
by the time the UN General As-
sembly opens in the fall.
The regime's domestic diffi-
culties appear to have diminished
during the summer lull, but the
failure of the Salazar government
to attack basic causes can be ex-
pected to result in a revival of
political pressures--such as re-
newed student "strikes" at Lisbon
and Coimbra and a renewal of op-
position activities in the fall.
.Strains within the cabinet ap-
pear to be building up because
of ;pressures from powerful diamond
interests in Angola against tax
and other reforms instituted
in the area by Overseas Minister
More Ira.
Premier Salazar is expected
shortly to replace the governor-
general of Angola--a move that
might also be motivated by a de-
sire to undermine Moreira. Moreira
in the past has been reported to
have! ambitions to replace Salazar.
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1*00 1%10
CURRENT INTELLIGENCE WEEKLY SUMMARY
The failure of the general
strike called by Haya de la
Torre's APRA party on 23 July
has left the military junta in
complete and almost undisputed
control of Peru. The junta,
which took over the government
on 18 July after President Prado
refused to annul the results of
the 10 June elections, under-
mined APRA leaders' efforts to
organize the protest strike by
promising to settle pending and
future labor problems in favor
of the workers and by implying
that striking workers would be
subjected to reprisals, includ-.
ing the loss of the traditional
bonus paid during the three-
day Independence Day holiday
beginning 28 July.
The junta was aided in its
antistrike efforts by the Com-
munist party and the Communist-
led unions. This awkward alli-
ance of armed forces leaders and
the Communists appears to have
evolved almost accidentally from
the coincidence that both backed
Fernando Belaunde Terry during
the presidential campaign and
both are totally opposed to Haya.
The Communists, APRA's main
competitors in the Peruvian
labor movement, now have junta
backing in the reorganization
of the APRA-dominated Confedera-
tion of Peruvian Workers (CTP).
The Communists have called Ior
a workers' congress in mid-Au-
gust,and plan at that time to
force new elections in the CTP
by presenting a petition signed
by a majority of its members.
Another cause for the
failure of the general strike
was the apparent apathy of the
Peruvian public. Indignant
editorials in the newspapers
which supported losing candi-
dates--except those favoring
Belaunde, who approves of the
junta--have stirred little re-
action among their readers.
After the long period of bicker-
ing; before and after the elec-
tions among politicians seeking
to form coalitions, all under the
constant threat of military in-
tervention, the public seems
to feel that the present situa-
tion offers sufficient stability
to permit business as usual.
APRA was rapidly finding
itself isolated in its overt
opposition to the junta. The
Democratic Civic Front which
former prime minister Pedro
Beltran hastily organized to
coordinate opposition to the
junta originally included APRA
leaders, as well as candidates
and leaders of all the non-
Communist parties except Belaunde.
The Front now appears to be
little more than a device by
which civilians hope to regain a
role in a militarily controlled
government, and increasingly
seems to be a vehicle for the
furtherance of Beltran's polit-
ical ambitions.
The junta probably feels
that a facade of civilian gov-
ernment would make the new re-
gime more acceptable to the
United States and other countries
which have withheld recognition.
Such a government would have
even more success than the junta
has had in appealing to US busi-
ness interests in Peru to argue
the junta's case in Washington.
The outlook for APRA is
uncertain. It probably will
disassociate itself from the
Front, and may revert to its
former status of political out-
law. It is also possible,
considering the lack of public
approval, that APRA will dis-
solve altogether.
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NW4
Press reports contend, how-
ever, that Haya reached an "un-
derstanding" with the junta on
25 July during a'conversation
with General Juan Bossio, the
new minister of government.
Bossio earlier had urged APRA
to abandon its plans for a gen-
eral strike, claiming that it
had "nothing to worry about
from the junta," but the APRA
leaders did not trust him.
International repercussions
to the Peruvian coup continue.
Thus far, Haiti is the only
Western Hemisphere country to
SECRET
recognize the new regime, al-
though several European coun-
tries have done so. At a meet-
in3; of the NATO political ad-
visory committee on 24 July,
NATO members reported that their
governments had been approached
by Peruvian representatives
with requests to recognize the
junta. The governments of Bel-
gium, France, Italy, the Neth-
erlands, West Germany, and the
UK were reported as undecided.
The representatives of the oth-
er NATO countries did not com-
ment.
Venezuela's President Be-
tancourt fears that the success
of the Peruvian coup may encour-
age plot-minded officers in
Venezuela to take similar ac-
tion. He has proposed a meet-
ing of foreign ministers in
the Organization of American
States (OAS) to consider possible
collective measures against the 25X1
junta. Argentina and Brazil are
expected to vote against the con-
vocation of the meeting.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SPECIAL ARTICLES
THE BLOC AND THE COMMON MARKET
The USSR's growing concern
over the Common Market (EEC)stems
more from the direct political
challenge posed by West European
unity than from the threat to
East-West trade.
The bloc reacted initially
to the formation of EEC in 1957
with the sterotyped formula that
preordained "contradictions"
among the "imperialists" would
forestall any effective move
toward economic, much less polit
ical, unity. This view was
strengthened by the UK's refusal
at that time to join the six-
nation EEC, followed soon there-
after by the formation, at Brit-
ish initiative, of the rival
European Free Trade Association
(EFTA). About 1960, however, it
became apparent to Moscow that
progress was being made toward
economic unity, and the USSR
then began trying to create dis-
sension among EEC members and to
dissuade EFTA members from seek-
ing association. Its major ap-
peal in this attempt was to
fears that a resurgent and re-
armed West Germany would soon
dominate the Market. Since Brit-
ain~s decision in mid-1961 to
apply for EEC membership, and
particularly since the begin-
ing of 1962, when the movement
toward economic integration be-
came virtually irreversible, the
USSR has been attacking the
whole concept of Western eco-
nomic unification.
Basis of Bloc Concern
Moscow's concern about
European integration stems pri-
marily from the fact that it
poses a threat to the existing
balance of power between East
and West. The FEC, with its avowed
aims of political union, has the
potential to become a politico-
economic entity as powerful as,
if not more powerful than, the
USSR. The military and economic
strength of the Atlantic Com-
munity, effectively linking a
united Europe and the US, would
far surpass that of the Sino-
Saviet bloc.
The USSR has begun to take
a more serious view of US sup-
port for the movement toward
European unity, and is playing
up the line that the US seeks
a mutual partnership with the
Common Market in order to trans-
form it into a NATO-dominated
economic base in which West Ger-
many will play the leading role.
Moscow's stress on West German
economic and military power in
the EEC underscores Soviet con-
cern with European integration
as a direct threat to the bloc's
security.
Also of concern is the chal-
lenge the EEC poses to bloc claims
that Communism is the "wave of
the future" and will soon out-
strip the West in industrial and
agricultural production. At a
time when Common Market coun-
tries have achieved unprecedent-
ed Elconomic expansion, the much-
vaunted rate of economic growth
in the Sino-Soviet bloc has
slowed. Moreover, while agricul-
tural surpluses continue to plague
the US, the bloc must look to
the West to remedy some of its
most pressing agricultural short-
comings. These facts undermine
claims by the Soviet Un-
ion that the Soviet bloc's
present strength insulates it
from any danger from the EEC and
may even shake Khrushchev's
avowed confidence in "competitive
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." 131iC.1[C.L
coexistence" as a device for
achieving worldwide Communist
victory...
The bloc would find it ex-
tremely difficult to match the
substantial advantages in terms
of trade and aid the EEC offers
to those underdeveloped countries
willing to cooperate with it.
The current negotiations of six-
teen new African republics over
precise terms for their associa-
tion with the EEC may be a de-
cisive,development in the future
orientation of Africa. With the
expected entry of the UK into
the Common Market, a number of
British territories and former
territories are expected to seek
a similar association with the
Market. Thus the ties between
the industrial West and at least
some of the underdeveloped coun-
tries--especially in Africa--are
likely to be strengthened by even
closer and more important links
with the EEC rather than weakened,
and the opportunities for estab-
lishing and expanding bloc con-
tacts in these areas will be re-
duced correspondingly.
Although trade with the six
EEC countries accounts for
only about 10 percent of total
Soviet bloc trade, the EEC is
an important source of essential
bloc imports of complex machinery
and equipment, special steel
products, selected chemicals,
and advanced technology. To sup-
port an increased flow of these
imports--as required by overall
economic plans--the bloc must
expand and diversify its exports,
and has launched a determined
drive in this direction. Like
many nations outside the EEC,
bloc countries see in the Com-
mon Market's gradual establish-
ment of a common tariff wall
against nonmembers a direct
threat to their ability to ex-
pand, or even maintain, exports
to EEC countries'.
Within the Soviet bloc,
the USSR probably has the least
economic cause for concern over
the EEC. Approximately two
thirds of Soviet exports to Com-
mon Market countries tradition-
ally have consisted of indus-
trial raw materials and fuels on
which EEC external tariffs are
low or nonexistent. The future
of Soviet exports of coal and
petroleum to the EEC, however,
will depend on the nature of
the common energy policy the
Market eventually adopts. A
recent statement by a top Soviet
petroleum official called for
the, EEC to "benefit" from in-
creased use of Soviet oil and
condemned the idea of applying
quota restrictions to this trade.
EEC agricultural imports, which
generally are to be controlled
under a variable levy system,
make up only slightly more than
10 percent of Soviet exports
to the EEC.
While the direct economic
effects of the EEC on the USSR
appear minor--certainly far less
serious than those faced by many
other countries--the growth of
the EEC will lead to greater co-
ordination and unification of pol-
icies on trade with the bloc.
This will reduce Moscow's ability
to extract commercial advantages
from EEC countries, and to a
lesser extent, to circumvent at-
tempts to apply strategic trade
controls. The USSR in the past
has frequently been successful
in playing one country against
another in gaining price, quota,
and credit concessions.
In the European satellites,
concern with the Common Market,
while frequently couched in
political or ideological terms,
is based more solidly on eco-
nomic considerations. For example,
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I
t"W
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CURRENT INTELLIGENCE WEEKLY SUMMARY
temperate-zone agricultural
products account for a major
share of hard-currency earn-
ings for a number of the satel-
lites--notably Poland, Hungary,
and Bulgaria. Their past com-
petitive advantage will be off-
set by the implementation of
the EEC's common agricultural
policy subjecting most of these
exports to a sliding scale of
duties.
The Polish Ministry of
Foreign Trade reportedly pre-
dicts some decline in Poland's
exports to the EEC in 1963.
Inasmuch as the Poles fear that
eventually some 40 to 50 per-
cent of the products they cur-
rently export to the UK and the
EEC may be affected, plans have
been made to promote substitute
exports. Poland, as well as
some of the other satellites,
plans to expand and diversify
industrial and consumer manufac-
tures to compensate for the
expected decline in agricultur-
al exports. However, they are
likely to be hard pressed to
compete in quality and price
with manufacturers within the
EEC.
Satellite concern ulti-
mately may not be justified in
fact. EEC spokesmen maintain
that the expected economic
growth within the Market will
result in a higher level of ex-
ternal trade than would prevail
in the absence of integration--
a view supported by many inde-
pendent observers. Neverthe-
less, this assessment does
little to ease the fears shared
by both bloc and nonbloc coun-
tries of the immediate damage
to established trade patterns.
The Chinese Communists,
largely preoccupied with issues
unrelated to the Common Market,
have stressed its harmful conse-
quences for underdeveloped
countries but have not opened
a sustained drive against it.
China's exports may be hurt
somewhat by EEC tariffs, but
Western Europe is not the pri-
mary nonbloc market for these
exports. If a Chinese economic
recovery should result in in-
creased use of Western equip-
ment and technology, as seems
likely, Peiping probably would
rely on maximizing exports to
other regions, particularly
sterling areas in Southeast
As:La, to pay for imports from
Western Europe, thus limiting
the potential danger of the
Common Market.
The Bloc Response
In trying to impede the
progress of European integra-
tion, Soviet leaders are well
aware of their limited capabili-
ties. Nevertheless, because
Moscow's fundamental political
interests lie in setting back
the movement, the Communists
have adopted a course designed
to aggravate any division within
the EEC, particularly among
West Germany, the UK, and France.
Moscow's tactics toward the Ber-
lin question will continue to
be manipulated with this in mind.
The Soviets probably will
renew their pressures, when
suitable opportunities are pre-
sented, on such countries as
Finland and Austria. During
the recent visit of Austrian
leaders to the Soviet Union,
Soviet officials expressed
strong opposition to full Austri-
an membership in the EEC. They
tempered their earlier attacks
on any form of "association" but
made it clear that any "political
overtones" would not be sanctioned.
Meanwhile, in the underde-
veloped countries, the bloc is
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
conducting an all-out campaign
to counteract the appeal inher-
ent in the development of West-
ern economic integration and to
point up the alleged disadvan-
tages the Common Market pre-
sents to these countries. Khru-
shchev's assault on the EEC in
his address on 30 May during
the visit of Mali's President
was the most authoritative
statement on the Common Market
yet made by a Soviet leader.
Khrushchev's remarks, in the
presence of the head of an
African state enjoying amicable
relations with both the USSR
and the EEC, were intended as
a sharp reminder to such coun-
tries that the Common Market was
simply another "neocolonialist"
device to maintain former colo-
nial territories as "agrarian
and raw material appendages"
of Europe. The USSR probably
is deeply concerned with the
probability of a successful
conclusion of a new EEC-
African association convention.
In addition, bloc spokes-
men are warning countries out-
side the Market's orbit of the
threat posed to their economies
by EEC barriers and preferences.
Khrushchev's appeal for a con-
ference to discuss founding an
international trade organiza-
tion "embracing all regions and
countries of the world without
any discrimination" is a propos-
al repeatedly raised in the
past by the USSR. This time,
however, it is likely to be
followed up with a formal move
at the UN General Assembly ses-
sion this autumn. The proposal
parallels a resolution sponsored
last December by eight Latin
American countries and favored
by the great majority of the
underdeveloped countries--most
of which fear the impact of
regional trade groupings. The
African states already associ- i
SECRET
27 July 69
a-ted with the EEC, however,
were less than enthusiastic in
their response.
Bloc suggestions that trade
wiLth the "socialist camp" pro-
vides an alternative to the
loss of markets in Western
Europe are likely to be aimed
at: more advance dountries as
well. Soviet negotiators are
likely to urge Japan to con-
tinue increasing its trade with
the USSR and may switch certain
purchases from EEC countries to
Tokyo. Communist commercial
offers to New Zealand and
Australia, both threatened
with the eventual loss of Com-
monwealth preferences by the
UK's proposed entry into the
EEC, are also likely.
In attempting to induce EEC
exporters to request favorable
treatment by their governments
for imports of Soviet goods,
the USSR so far has relied
primarily on threats of invok-
ing its maximum tariff rates
against Common Market countries
and demanding tariff concessions
equal to those EEC members accord
to each other. Soviet moves
such as the sudden suspension
of trade negotiations with
France in June, however, amount
to little more than formal
protests and are not likely to
be effective.
Similarly, the USSR's dual
tariff system, enacted in Octo-
ber 1961 at least in part for
use in bargaining with coun-
tries being drawn into the EEC,
has aroused little concern. The
system gives Soviet negotiators
no levers not already available
through possession of state con-
trol over all foreign trade
transactions. Because trade
with the USSR--or ever. the
entire bloc--is not sufficient-
ly important to most EEC coun-
tries to risk jeopardizing
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CURRENT INTELLIGENCE WEEKLY SUMMARY
relations with other members,
Moscow's ability to extract
concessions through tariff de-
mands is severely limited.
Moreover, the USSR cannot make
much use of such demands with-
out causing a reduction in its
imports of key Western products.
Current East German attempts
to raise the level of trade
with West Germany substantially
over a long-term period, in
addition to being aimed at
easing East Germany's economic
problems, may constitute a
less direct Soviet effort to
reduce the economic costs to
the bloc arising from the Common
Market. An EEC treaty protocol
treats trade between East and
West Germany as internal trade,
a provision which technically
affords East Germany--and indi-
rectly the rest of the bloc--the
opportunity to assume a "pre-
ferred" position in the Common
Market via West Germany. East
German proposals to enlarge
the format of interzonal trade
may also be aimed at creating
friction between West Germany
and the rest of the EEC.
For at least some of the
European satellites the reac-
tion to the Common Market has
been directed chiefly at protect-
ing their economies and main-
taining their links with the in-
dustrial West. Poland, in partic-
ular, apparently intends to
stimulate production! of those
goods least affected by EEC
tariffs and to pay increased
attention to quality and the
search for new markets.
The recent economic confer-
ence in Moscow, convened in the
wake of Khrushchev's denounce-
ment of the Common Market, while
27 July 62
probably not, as widely billed
in the Western press, a direct
response to EEC developments,
undoubtedly increased the
prospects for strengthening
ties among Soviet countries
through the Council for Mutual
Economic Assistance (CEMA).
In all probability the confer-
ence discussions centered on
long-term policies for bloc
economic development and on cur-
rent bloc economic difficulties.
The USSR may be using the
EEC "threat" to show the satel-
lites that they cannot hope to
compete in or with the West ex-
cept through a strengthened
CEMA organization in which de-
cisions are more closely co-
ordinated. The creation of a
CED?IA Executive Committee to
ensure that commitments are met
appears to be a step in this
direction. The appointment on
17 July of Soviet Deputy
Premier Novikov, former chair-
man of the State Planning Com-
mittee, as the USSR's permanent
representative on the newly formed
CEMA Executive Committee also
suggests that Moscow may be giving
more attention to closer CEMA ties.
On 11 July, Czech politburo
member Sinumek, also former
chairman of the State Planning
Commission, was appointed
Prague's permanent CEMA repre-
sentative, and East Germany's
representative to CEMA, with a
similar background, probably
will also be on the Executive
Committee. The Soviet bloc
probably views closer coordina-
tion, of planning, through CEMA,
as the best of its limited al-
ternatives in maintaining bloc
unity and strength in the face
of Nest European integration.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Insurgency, which has
plagued Burma since independence
in 1948 and once directly
threatened the Rangoon govern-
ment, continues to prevent
stability and hamper economic
growth. When General Ne Win
seized power last March, he cited
this problem--specifically the
threat of Shan State secession--
as a primary reason for ousting
Prime Minister Nu's civilian
government and abandoning democ-
racy. The eight organized armed
insurgent organizations do not
pose any threat to the central
government, but their activities
could rise to more serious pro-
portions.
Origins
The forces giving rise to
insurgency stem from tradition-
ally delicate relations, among
Burma's many ethnic communities.
Each tribal group, the product
of successive waves of migration
from central Asia, has remained
deeply suspicious of the others'
motives and jealous of its own
cultural and linguistic identity.
A half century of British
rule failed to change the
pattern, and postindependence
actions of the Burman majority
which dominates the Irrawaddy
basin have intensified animosity.
Although the Burmans agreed to
a bill of rights in order to
persuade the "hill peoples" to
join the independent Union of
Burma, following independence
they began a long-range program
of Burmanization to give the
nation. a single linguistic and
cultural base. Most of the
country's modernization effort
has been expended in the Burman
areas around Rangoon and Mandalay,
and little in the Shan, Kachin,
and Karen minority areas. The
army, when in ethnic minority
regions, has often acted with
SECRET
the arrogance of an army of
occupation.
It was the Communists,
rather than any ethnic minority,
who first took up arms against
Rangoon after their two prin-
cipal personalities lost out to
Nu in the selection in 1947 of
a new leader of the Anti-Fascist
People's Freedom League, the
coalition of all groups pressing
for Burma's independence.
Thakin Soe took his Red' Flag
extremist faction underground
when he failed to wrest the
leadership of the Communist
party from Thakin Than Tun. A
few months after independence
Than Tun took the more numerous
White Flag Communists into the
jungle in the belief that he
could overthrow Nu's government.
Even after Nu had offered to
capitulate on all ideological
differences except the mainte-
nance of parliamentary democracy,
neither Communist group would
give up its military campaign.
The Communists gradually
buckled under the weight of
Rangoon's superior resources.
The personality clash that gave
rise to their split continues,
and each leader has conducted a
personal vendetta against the
other which so far has precluded
any consideration of uniting the
two forces. The government's
success in driving the Communists
into the hills away from their
Burman compatriots has seriously
weakened them. There is little
indication that either group
has received any encouragement
from Moscow or Peiping. The
orthodox, pro-Moscow White Flag
Communists have fallen from a
high mark of about 25,000 to an
estimated 1,500, and the extrem-
ist, pro-Peiping Red Flag Commu-
nists from about 2,000 down to 500.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
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