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• Content Type: SUMMARY

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CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
OCI NO. 0446/62
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
State Dept. review completed
SECRET
FBI Review completed
GROUP 1
Excluded from automatic
downgrading aid
declassification
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CURRENT INTELLIGENCE WEEKLY SUMMARY
7 December 1962
T H E W E E K I N B R I E F
(Information as of 1200 EST 6 Dee)
FBI Review completed
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CUBA . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
The IL-28 jet bombers are being shipped out of Cuba
by the USSR, but construction activity is under way at loca-
tions associated with the continued Soviet military presence
in Cuba. Veteran Cuban Communist Carlos Rafael Rodriguez
is heading a Cuban trade mission to Moscow and Peiping. On
28 November, Che Guevara came close to the first public
criticism by any Cuban leader of the Soviet decision to
withdraw the strategic missiles and bombers from Cuba.
SOVIET FOREIGN POLICY DEVELOPMENTS . . . . . . . . . . . . Page 3
grade in September.
Now that the Cuban crisis, in Moscow's view, has been
liquidated for all practical purposes, Khrushchev is
turning his attention to rebuilding his bargaining power
for an eventual resumption of Berlin negotiations. He used
his talk with the Canadian ambassador last week to probe
the Western position and to float further hints regarding
his terms for a settlement. Khrushchev again made it
clear that there can be no real progress on disarmament
prior to a Berlin agreement. Moscow, however, continued
to take a hopeful line concerning prospects for a
nuclear test ban agreement.
The Soviet bloc continued its attacks on Chinese
views at the Italian and Czech party congresses, while
Peiping firmly stood its ground. There were indications
that the Soviet leaders intend to use their talks with
Marshal Tito to continue the discussion of party relations
which was begun during President Brezhnev's visit to Bel-
SINO-INDIAN BORDER . . . . . . . . . . . . . . . . . . . . Page 7
The Chinese Communist withdrawal, which apparently got
under way on 1 December, will by all appearances be a phased
and deliberate operation. The pace and extent of the pull-
back will be strongly conditioned by Peiping's reading of
Indian actions. New Delhi is playing for time, avoiding
provocative actions while regrouping its forces. It has
asked for clarification of Peiping's proposals and inten-
tions, and denies that Peiping's terms provide a basis for
a negotiated settlement. Both sides are working hard to
influence participants in the six-nation nonaligned con-
ference scheduled to convene in Ceylon on 10 December.
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THE NEW SOVIET NAVAL MISSILE . . . . . . . . . . Page 10
The new naval missile shown in the Moscow parade on
7 November is believed to be still in the research and
development stage. The Soviet press claims that it can b
launched either from the surface or from under water.P
KHRUSHCHEV ENCOURAGES ANTI-STALIN LITERARY WORKS . . . . . Page 12
After a lull of almost a year, de-Stalinization has
again become a prominent theme in the Soviet press. Khru-
shchev is personally encouraging the publication of anti-
Stalin literary works, perhaps as a prelude to attacks on
inflexible Soviet bureaucrats whom he intends to brand as
"Stalinists." In view of the tightened controls featured
in the party and government reorganization approved at
last month's central committee plenum, Khrushchev
may again feel it necessary to remind the people of the
essential differences between his rule and Stalin's. Khru-
shchev has nevertheless made it clear that freedom to attack
the Stalin era is not to be interpreted as an across-the-
board relaxation.
POLISH PARTY PROBLEMS. . . . . . . . . . . . . . . . . Page 14
Squabbling between Poland's liberal and hard-line
groups is making it increasingly difficult for party leader
Gomulka to maintain his middle-of-the-road policies. He
himself is not threatened
NEW SATELLITE ECONOMIC CREDITS TO UNDERDEVELOPED COUNTRIES Page 15
The European satellites continue to strengthen and con-
solidate their economic and political relations with the
underdeveloped countries. Official policy statements con-
tinue to stress the importance of these countries as a
market for manufactured goods and a source of food and raw
SOVIET ARMS AID TO THE MIDDLE EAST . . . . . . . . . . . Page 17
Soviet military shipments to the Middle East are be-
ginning to include more sophisticated types of arms. Equip-
ment recently supplied to Iraq included the first deliveries
of-surface-to-air missiles (SAMs) and missile-equipped
MIG-21 jet fighters to that country. The UAR has also re-
ceived SAMs from the USSR in recent weeks.
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THE SITUATION IN YEMEN . . . . . . . . . . . . . . . . . . Page 18
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Egyptian and revolutionary government forces continue
to engage royalist tribes along the northern and eastern
CONGO . . . . . . . . .. . . . . . . . . . . . . . . . . . . Page 19
Adoula's political position remains shaky, and he is
threatening to resign as his opponents, organize new attacks
on him. In an effort to bolster Adoula and to increase
pressure on Tshombd, the UN military command has begun a
build-up of its troops and equipment in Elisabethville.
Tshombf says that he will not bow to Western and UN pres-
sures and that he will destroy the Belgian mining installa-
tions if economic sanctions are imposed.
HONG KONG'S REFUGEE PROBLEMS . . . . . . . . . . . . . . . Page 21
Illegal immigration from the mainland to Hong Kong is
continuing, although in greatly diminished numbers since
Communist authorities halted the massive exodus last spring.
A
on refugees would probably loose a new flood against the
colony. There is no indication at present, however, that
Peiping is contemplating such a move.
relaxation o the currently tight Communist restrictions
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CURRENT INTELLIGENCE WEEKLY SUMMARY
PORTUGUESE CABINET CHANGES . . . . . . . . . . . . . . . . Page 23
Salazar's cabinet reshuffle on 2 December featured the
dismissal of Overseas Minister Moreira, who had advocated
greater autonomy for overseas possessions and was widely
regarded as a possible successor to Salazar. Indications
are that Lisbon intends to slow down the modest reform
measures which had been initiated in the African territories.
NATO MINISTERIAL MEETING . . . . . . . . . . . . . . . . . Page 24
The foreign and defense ministers of the NATO countries
will hold their annual meeting in Paris from 13 to 15 December.
Uncertainty over the future course of Soviet policy and over
the outcome of UK-EEC negotiations is expected to inhibit
any major decisions. The discussion of military questions
will center on the need for stronger conventional forces
and more equitable methods of sharing defense burdens. Al-
though the question of NATO's nuclear role is apt to be
soft-pedaled pending the conclusion of North Atlantic Council
studies currently under way, growing interest in this sub-
ject may evoke some new indications of the attitude of mem-
bers or individual ministers.
ARGENTINA . . . . . . . . . . . . . . . . . . . . . . . . Page 25
Argentina's politico-economic crisis has again inten-
sified. The primary cause is extreme dissatisfaction in
all sectors over the Guido government's failure to reverse
the rapid economic decline. Economy Minister Alsogaray was
forced out on 4 December by pressure from business, labor,
and some military circles but is still maneuvering for
reinstatement. F_ -1
the war secretary says the army will firmly
oppose any type of dictatorship.
TREND TO THE LEFT IN BRAZIL . . . . . . . . . . . . . . . Page 25
The influence of extreme leftists is growing in the
administration of President Goulart. Brazilian officials
concerned with economic development are showing increasing
hostility to US aid, and have accepted the first large
development credit from the Soviet bloc. Anti-Goulart senti-
ment is rising, but Brazil's moderates and conservatives
are making no significant moves toward concerted opposition.
PROSPECTS FOR COMMUNIST SUBVERSION IN COSTA RICA . . . . . Page 27
The Costa Rican Government has begun to show concern
that the country's persistent financial crisis may enable
the small and illegal but well-led and -financed Communist
party to expand its activity. A predominantly middle-class
social structure and relative political maturity afford the
Communists little possibility for mass demonstrations, in-
surgency, or guerrilla activity. Anti--Castro sentiment helps
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CURRENT' INTELLIGENCE WEEKLY SUMMARY
keep them in check. Firing on a mob by troops during a
recent riot over electricity rates, however, has created
an angry public reaction which might g:Lve the Communists
a favorable climate for subversive exploitation of the
economic difficulties.
PRE-ELECTION OUTLOOK IN THE DOMINICAN REPUBLIC . . . . . Page 29
The Dominican Republic's first democratic election in
more than 30 years is to take place. on 20 December. A rela-
tive calm now prevails on the political'. scene following a
period of wrangling by the inexperienced party leaders and
activities of extreme :Leftists and remnants of the Trujillo
regime which threatened to disrupt the election schedule.
One of the principal problems has been the insistence of
two members of the ruling Council of State, the only sur-
vivors of the group which assassinated Trujillo
GUATEMALAN PRESIDENTIAL ASPIRANT AREVALO . . . . . . . . . Page 3
Juan Jose Arevalo's chances to win election next year
to the Guatemalan presidency he held from 1945 to 1951 have
been enchanced by the lack of economic or political prog-
ress and by the fragmentation of existing political parties.
Arevalo has an unrealistic attitude toward individual Com-
munists and lets ambition impair his
judgment of their influence. This is outweighed in Guatemalan
public opinion,however, by recollections of the-favorable
aspects of his administration, and by projection of his image
as a strong Guatemalan nationalist on guard against US in-
fluence in Latin America.
SPECIAL ARTICLES
KHRUSHCHEV'S CUBAN VENTURE IN RETROSPECT . . . . . . . . . Page 1
The basic objective of Khrushchev's bold gamble in
deploying strategic missiles to Cuba was to achieve a
dramatic breakthrough which, in his view, would strengthen
the USSR's position on a whole range of issues in the con-
test with the US. His :immediate purpose, however, was to
strengthen his position for a major diplomatic showdown
on the Berlin and Germaxi questions before the end of the
year. When faced with the vigorous US reaction during the
week of 22 October, Khrushchev recognized that he had no
choice but to cut his losses in Cuba and that any meaning-
ful Soviet military response would carry unacceptable risks
of escalation to general. nuclear war.
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WEST GERMAN ECONOMIC TRENDS . . . . . . . . . . . . . . . Page 8
After a decade of boom, West Germany's economy is ex-
periencing a moderate slowdown characterized by dimin-
ished demand, rising costs and prices, and a decline in the
growth of exports. There are good prospects, however, for
continued prosperity at a reduced growth rate and for a
return to equilibrium in international payments. Govern-
ment efforts to contain inflationary pressures by means of
budgetary restraint threaten to slow the defense build-up
and to reduce Bonn's foreign aid program.
MALAYSIA FEDERATION PROBLEMS AND PROSPECTS . . . . . . . . Page 12
Complex negotiations are in train for the merger by
next August of Malaya, Singapore, and the British Borneo
territories into a single Malaysia Federation. Singapore's
voters approved the project last September, but anti-
Malaysia political parties in Sarawak, Nurth Borneo, and
Brunei are ste in up a itation.
L
Indonesia is manifesting thinly veiled hostility toward
the Malaysia concept. Malaysia's proponents are pressing
forward nonetheless, believing that early formation of the
federation is essential if Singapore and other areas are
to be strengthened against Communist inroads.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
WEEKLY REVIEW
CUBA
The IL-28 (Beagle) jet
light bombers are being shipped
out of Cuba aboard three So-
viet merchant ships. Most of
the IL-28s had left by 5 Decem-
Aerial
photography confirms
that construction of permanent
facilities is continuing at the
Soviet military encampments near
Remedios and Artemisa, and that
additional aircraft revetments
are being built at two Cuban
airfields.
Aerial photography
revealed additional
All 42 IL-28s earlier pho-
tographed in crates at two Cu-
ban airfields have been ac-
counted for. There is no evi-
dence suggesting that a higher
number had been delivered to
Cuba.
One of the four confirmed
coastal-defense cruise-missile
sites set up in Cuba by the So-
viet Union has either been aban-
doned or relocated. Photo-
graphic reconnaissance
over the former
cruise-missile site at La Sierra,
near Cienfuegos in Las Villas
Province, found no missiles or
missile-associated equipment.
The only remnant of the site
is an earth revetment, which is
empty. There is no evidence
that the site is being set up
at any more favorable location
in the same general area.
age shows no apparent change,
however, in the other three
coastal-defense cruise-missile
sites, located at Siguanea on
the Isle of Pines, Santa Cruz
del Norte in Havana Province,
and Banes in Oriente Province.
Continuing Soviet
Military Presence
Construction activity is
continuing at other locations
associated with the Soviet
military presence in Cuba.
Soviet Frog (Free Rocket Over
Ground) rocket transporters
and launchers in Cuba. Four
vehicles tentatively identified
as Frog rocket transporters
were observed on a short wind-
ing road leading to a dead end
at a possible mine or quarry
near the city of Matanzas. Also
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transporters and two launchers
were identified in the Soviet
armored group encampments at
Remedios and Santiago de las
Vegas.
At least three launchers and
eleven transporters associated
with this weapon had been con-
firmed in earlier photography
of the four Soviet armored
group encampments. The Frog
is mounted on an amphibious
tracked chassis and is capable
of ranges between 11 and 26
nautical miles. It can carry
conventional or nuclear war-
heads?
Trade Mission to Moscow
Carlos Rafael Rodriguez
is heading the Cuban mission
in Moscow to negotiate the
annual. protocol to the 1960
Cuban-Soviet trade agreement.
A veteran of the pre-Castro
Communist Party, Rodriguez now
is high in the leadership of
Castro's political machine.
He is president of the Agrarian
Reform Institute. He was
prominent among the Cuban
leaders "ho conferred with
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Mikoyan last month and. appears
to be playing a role of grow-
ing importance in the Cuban
leadership. Havana has announced
that, after the talks in Moscow
are concluded, Rodriguez will
proceed to Peiping for trade
talks with the Chinese Com-
munists.
A lesser official had
orginally been scheduled to
go to Moscow. The sudden
selection of Rodriguez, only
three days before his departure,
suggests that Havana regards
the mission as one of consider-
able importance. Announcement
that he will continue to Peiping
is probably designed to exploit
the Sino-Soviet dispute in an
attempt to gain the maximum pos-
sible support from the USSR.
Guevara Interview
In an interview given on
28 November to a, correspondent
of the London Daily Worker, Che
Guevara came e o ser than any
Cuban leader has come thus far
to public criticism of the So-
viet Union for withdrawing its
strategic missiles and the IL-
28 bombers from Cuba. Guevara
said: "Some people in Europe
are saying that a great; victory
has been won. We say that the
danger is still here..,,. While
war may have been avoided, that
does not mean that peace has
been assured. We ask whether
in exchange for some slight
gain we have only prolonged
the agony."
Later in the interview,
Guevara emphasized the hard-
line views of the Cuban leader-
ship on the importance of the
Cuban revolution in leading the
"anti-imperialist revolution"
in Latin America. "There is
no solution but armed struggle,"
he said. "Cuba has shown that
small guerrilla groups, well
led and located in key points...
can eventually destroy the
armed forces of the class enemy."
He announced that the "objective
conditions" for initiation of
armed struggle exist, and noted
that guerrillas have already
been active in Venezuela,
Guatemala, Paraguay, and Colombia.
Party Organization
Guevara said the developing
Cuban political apparatus, which
is being modeled after bloc Com-
munist parties, will probably
hold its first national congress
next month. He said he expects
an initial membership of from
50,000 to 60,000 in the party.
The congress is expected to
mark the conversion of the
provisional Integrated Rev-
olutionary. Organizations
(ORI) into the United Party
of the Socialist Revolution.
Leadership of the new
party will probably differ
little from that of the ORI.
Fidel and Raul Castro are first
and', second secretaries of the
ORI. Other members of the key
secretariat are Guevara, Presi-
dent Dorticos, veteran Com-
munist leader Blas Roca, and 25X1
Emilio Aragones.
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SOVIET FOREIGN POLICY DEVELOPMENTS
Now that the Cuban crisis,
in Moscow's view, has been liqui-
dated for all practical pur-
poses, Khrushchev is turning
his attention to rebuilding
his bargaining power for an
eventual resumption of Berlin
negotiations. He told the
Canadian ambassador on 28 No-
vember that a new round of talks
should begin soon, and gave the
impression that he meant within
the next few months.
Khrushchev's exposition of
his Berlin position to the Cana-
dian ambassador probably re-
flected the general line the
Soviet premier had planned to
take in a personal appearance
before the UN General Assembly
last month if the Cuban crisis
had not intervened. Khrushchev
characterized Berlin and Ger=
many as the most important
questions requiring "urgent
solution."
He
warned
that failure to
reach a
Berlin
agreement would
create a
"very
dangerous sit-
uation"
which
could gel; out of
hand,
and he
revived the threat
of a
separate
peace treaty with
East
Germany.
He emphasized
that
"Berlin
is not Cuba" and
that
it would
be "dangerous
madness" to expect a further
Soviet retreat.
Khrushchev warned that
the USSR's local tactical and
strategic position is vastly
stronger in Berlin than it was
in Cuba, and that "if people
think the Cuban affair will
restrain us, they don't know
us." He reiterated that after
a separate treaty is signed,
the USSR could and would cut
Allied military access to West
Berlin. He added, however, that
he would not repeat "Stalin's
stupid mistake" in imposing a
blockade on civilian traffic.
Khrushchev said he "knew"
that British Ambassador Roberts
in their 12 November talk had
received the impression that
the USSR would accept the con-
tinued presence of Western
forces in West Berlin, without
the addition of Soviet troops,
provided they were under UN
aegis rather than the existing
occupation status. He denied
categorically that he had said
this and insisted he would
agree only to one of four
variants: (1) the addition of
Soviet troops to the Western
garrisons; (2) replacement of
the Western forces by contingents
of smaller NATO and Warsaw Pact
countries; (3) contingents from
neutral powers; (4) a combination
of (2) and (3).
The Canadian ambassador also
pointed out that Soviet officials
have long tried to create or widen
a wedge between Canada and the US
and to encourage a neutralist at-
titude in Canada. Khrushchev's
more demanding line probably was
aimed at prodding Canada into
urging both the US and Britain
to take a more forthcoming posi-
tion in the next round of Ber-
lin negotiations.
Stress on Soviet Missile Lead
Khrushchev's preoccupation
with strengthening his post-Cuba
bargaining position was also re-
flected in his remarks to the
Canadian ambassador and in re-
newed claims in the Soviet press
of the USSR's superiority in
long-range strategic weapons.
Khrushchev's sensitivity to the
damaging effect of his backdown
in Cuba was evident in his state-
ment to the ambassador that it
was not a matter of much impor-
tance where Soviet rockets are
located. He contended that with-
drawal of stragetic missiles from
Cuba did not seriously affect the
USSR's over-all capabilities and
that the U83R has plenty of ICBMs
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CURRENT INTELLIGENCE WEEKLY SUMMARY
and submarines which could fire
Polaris-type missiles against
the US.
A Red Star article. on 4
December by Marshal Biryuzov,
commander in chief of the So-
viet rocket forces, claimed
that the USSR "still confidently
leads the US in the creation
and development of powerful
rockets." He boasted that the
Soviet Union is "perfecting"
nuclear warheads, with yields
of "50 to 60 and more megatons,"
which can be delivered to any
point on the globe, and that
the USSR has "successfully
solved" the problem of destroy-
ing enemy rockets in flight.
Izvestia also carried an article
on 1 December by Chief Marshal
of Artillery Varentsov which
stressed the "absolute relia-
bility and high precision" of
Soviet missiles which make them
"far superior" to American mis-
siles.
Although Moscow apparently
does not plan to intensify pres-
sure on Berlin in the near future,
it continues to seize any oppor-
tunity to keep the issue alive.
The Soviets sent notes to
the Western powers on 21.) Novem-
ber protesting a West German
action in bringing suit against
an alleged Communist-front
organization before the Federal
Administrative Court in West
Berlin.
Moscow pointed out that
the Western governments agree
that West Berlin is not part of
the Federal Republic and charged
that West German authorities
were illegally interfering in
West Berlin affairs. Although
the notes contended that this
incident underscores the "urgent
necessity" of a German peace
settlement, they made no mention
of a separate peace treaty.
In his first public state-
ment on Berlin and Germany since
the Cuban crisis, East German
leader Ulbricht also omitted all
references to a peace treaty and
echoed Moscow's line that "danger-
ous disputes" must be settled
through compromise. In a 2 De-
cember speech to an East German
party district conference, U1-
bricht adopted a moderate posi-
tion and placed the peace treaty
question in the framework of a
general East German "long-term
policy." He expressed optimism
that the formation of a new gov-
ernment in Bonn may lead to nego-
tiations and an eventual normali-
zation of relations between the
two German states.
Disarmament
In his talk with the Cana-
dian ambassador, Khrushchev re-
iterated his earlier position
that no real progress could be
expected on disarmament prior
to a Berlin settlement. The
USSR, however, continued to take
a hopeful view of prospects for
a nuclear test ban agreement.
At Geneva, Soviet delegate
Tsarapkin continued to stress
the "favorable conditions" for
a test ban agreement. He claimed
that the "black boxes" would en-
hance the efficiency of existing
national detection systems.
Tsarapkin privately acknowledged
that this scheme was designed
to compensate the US for the
absence of on-site inspections.
However, he took the usual po-
sition in a private discussion
with Ambassador Dean that "agree-
ment in principle" on the Use of
the seismic stations should be
reached before the technical de-
tails are discussed.
The USSR maintained its
insistence on a comprehensive
ban on all testing. Tsarapkin
rejected a Swedish proposal
for an interim agreement to
stop underground tests, con-
tending this would only legalize
such tests and give the US a
military advantage.
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TASS reported without comment
the US announcement that the IL-28
jet light bombers are being
withdrawn from Cuba. Following
Mikoyan's talks with President
Kennedy and other US leaders,
Soviet propaganda demands for
a formal US noninvasion pledge
declined sharply. Mikoyan
characterized his talks; as hav-
ing been useful in clarifying
respective positions on Cuba,
Berlin, and other questions.
He said the meetings left the
impression that a "possibility
is in the offing for bringing
the viewpoints of the two sides
closer on a number of important
international questions." He
agreed to further talks in New
York to work out a Cuban settle-
ment and said "we expect progress
in these talks."
In his speech to the Italian
Communist Party congress on 3
December, Kozlov developed Mos-
cow's apologia for Khrushchev's
handling of the Cuban crisis.
He claimed that Moscow's "de-
cisive and far-sighted actions"
had prevented an attack on Cuba
and preserved world peace. He
promised that the USSR would
continue to help "revolutionary
Cuba to defend its independence."
Sino-Indian Border Dispute
Kozlov's 3 December speech
at the Italian Communist Party
congress repeated previous So-
viet statements of satisfaction
that the Sino-Indian border
fighting has stopped. Khru-
shchev had indicated to the
Canadian ambassador on 28 No-
vember that the USSR had been
embarrassed by the recent Chi-
nese offensive and declined
to discuss the subject further.
Kozlov also expressed the hope
that the dispute now could be
solved by peaceful means.
The USSR has reported the
Chinese cease-fire offer in
some detail, and is clearly
seeking to encourage both sides
to use it as at least a basis
for negotiation.
Moscow has shown in a num-
ber of ways its concern with
Indian acceptance of Western
military assistance, warning that25X1
such a step threatens to under-
mine the traditional Indian po-
sition of nonali nment.
it is still not clear whether
Moscow will seek Indian favor to
the point of delivering MIG-21
fighters. Nehru has stated that
delivery will take place in the
near future, but Moscow does not
yet appear to have committed it-
self on this matter.
Sino-Soviet Dispute
Soviet and Chinese delega-
tions to the Italian congress
and to the Czech party congress
continued last week to reiterate
their now sterile formulas of
mutual recriminations. They
still avoided naming each other
directly, but used, as they have
since the Soviet 22nd party
congress, the Albanian and
Yugoslav parties as their os-
tensible targets. The accusations,
however, particularly from the
Soviet side, have become stronger.
In addition, Italian party
leader Togliatti, a firm sup-
porter of the Soviet side in
the dispute, attacked the Chi-
nese by name, deploring their
support for the Albanians and
accusing them of not adhering
to the 1960 Moscow conference
statement. He was followed
later in the congress proceed-
ings by another top Italian
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CURRENT INTELLIGENCE W13EKLY SUMMARY
leader, Giancarlo Pajetto, who
in condemning China's "wrong
positions" asserted that "when
we mean China, we have no need
to say Albania." This is not
the first time the Soviet party
has relied on the Italians to
present its argument with the
Chinese openly. At an earlier
point, when tensions between
them were particularly high,
the Italian party published the
discussion of its delegate to
the 1960 Conference, a, discussion
which explicitly and violently
attacked China and its views.
The attacks by the Italians
at their party congress, how-
ever, reflect an exacerbation
of the Sino-Soviet dispute.
Use of a party congress as
the forum for direct and open
attacks on the Chinese repre-
sents a more formal censure
of the Chinese than had the
earlier publication of similar
strictures. Nevertheless,
Moscow's reporting on proceed-
ings at the congress has not
yet included the direct attacks
on Peiping.
At both the Italian and
the Czech congresses the Chinese
have stood their ground, main-
taining their support for the
Albanian party and for the con-
cepts which have brought them
into opposition to the Soviet
camp. The strongest Chinese
attacks, however, are leveled at
Tito and the Yugoslav party.
In addition to the speeches
its delegates have given at the
congresses, Peiping since 1 De-
cember has publicized four major
attacks on Tito.
Bloc-Yugoslav Relations
Despite the ostensible
"private vacation" nature of
Tito's visit to the Soviet Union,
his welcome by Khrushchev was
of the type generally given only
to official visitors. The dele-
gation accompanying Tito suggests
that he expects to continue the
discussion of party relations,
among other matters, begun during
Soviet President Brezhnev's
September visit to Belgrade.
Among other members of Tito's
party are a prominent Yugoslav
ideologist and Tito's party
deputy.
Another indication of the
Yugoslav party's improved stand-
ing in the international Commu-
nist movement is the presence
of a Yugoslav delegation at the
Italian congress. This caps a
quiet rapprochement that has
been developing between the two
parties since mid-1961. This
conclave is the first interna-
tional gathering since the Mos-
cow conference of November 1957
at which the Yugoslavs have been
allowed representation and been
given an opportunity to defend
their policies. Yugoslavia has
not yet been invited to attend
party congresses in the bloc,
however.
Although the Yugoslav par-
ty pis not present at the Czech
congress, Czech leader Novotny
managed to say some kind things
about his relations with Tito.
Novotny not only refrained from
attacking "Yugoslav revisionism"
but noted that revisionism as
"the main danger" has been suc-
cessfully combated and that
sectarianism and dogmatism can
become "a major danger" in in-
dividual parties. Novotny
also stressed that his party 25X1
intends to work in the future
to accommodate the different
opinions held by it and the
Yugoslavs.
Some practical working ar-
rangement for Yugoslav ties to
CEMA may also come out of the
Tito.-Khrushchev talks. Belgrade
was told last July by Moscow
that a request for association
with CEMA would be sympatheti-
call~;~ received.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SINO-INDIAN BORDER
The Chinese Communist with-
drawal, which apparently got
under way on 1 December, will
by all appearances be a phased
and deliberate operation, the
pace and extent of which will
be strongly conditioned by Pei-
ping's reading of Indian actions.
Thus far, Chinese forces
have pulled back from their
southernmost positions in the
North East Frontier Agency (NEFA),
but no similar troop movements
have been noted in Ladakh. Pei-
ping's Defense Ministry stated
on the eve of the pullback that
initial moves in NEFA would
place Chinese forces in new de-
fensive positions five to ten
miles behind points of farthest
advance. In the Ladakh area,
the ministry announced, Chinese
forces would retire an unspec-
ified distance from eight out-
posts.
Peiping has been directing
Indian and neutralist attention
to the tenuous character of the
present cease-fire by charging
India with acting "provocatively"
at both ends of the frontier.
The Chinese have taken exception
to the alleged forward movement
of Indian forces near the cease-
fire line in NEFA and have cited
numerous air intrusions in the
Ladakh region.
In continuing to hammer
at the twin themes of Indian
truculence and Chinese :reason-
ableness, Peiping apparently
is preparing its progaganda
justification in case it decides
to renew hostilities. Peiping
also doubtless aims at stimulat-
ing further pressure on India
from neutral nations.
Diplomatic Activity
A conference of six non-
aligned countries has been called
to discuss the Sino-Indian con-
flict and is scheduled to con-
vene in Colombo on 10 December
Of the nations represented at
the conference--Indonesia, Burma.,
Cambodia, Ceylon, the UAR, and
Ghana--at least the first four
have given some indication that
their attitudes on negotiat-
ing a settlement would please
the Chinese.
The Egyp-
tians lean toward the Indian
position. Ghana has appeared
to drag its feet, and its rep-
resentative will be the lowest
ranking at Colombo.
Yugoslavia also appears
to have been trying to prevent
Afro-Asian mediation efforts
from favoring the Chinese posi-
tion. Belgrade's Foreign Minis-
ter Popovic made a hasty visit
to Cairo on 27 November follow-
ing a Yugoslav party executive
committee condemnation of Chi-
nese attacks on "the policy of
coexistence and cooperation
among nonaligned states."
Both Peiping and New Delhi
are pressing their intensive
diplomatic campaign to influence
the Colombo participants. High-
level diplomatic missions have
spent the past week shuttling
back and forth among the con-
ference invitees.
Communist China's Deputy
Foreign Minister Huang Chen
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Boundaries and namer are not necessa
those recognized by the U.S. Govemme
AFGHAN t/
IRAN
Boundary shown on most US and Western maps
-..- Demarcated
x - Delimited only
Indefinite
Boundary shown ort recent Chinese and Indian maps
(where differing from US and Western maps)
Chinese
Indian
fllana La
EASTERN SINO-INDIAN BORDER AREA
Tsu mu 1
fT Diu Isung
SECRET
Railroad Airfield
Road r[ Pass
Major caravan route
or trail
50
olur
PANGON
AREA.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
arrived in Cairo on 6 December
and is scheduled to visit Ghana
this weekend, all in an effort
to explain the Chinese position.
quested
Indian Position
The Indian Government's
position has remained cautious
but unyielding. To play for
time, New Delhi acquiesced in
Peiping's unilateral cease-fire
and avoided action which the
Chinese might deem provocative.
The time has been used for
regroupment and reinforcement.
Up to 10,000 soldiers initially
trapped behind Chinese lines
now are being regrouped in the
northeast. More than half the
Indian troops along the Pakistani
borders have been shifted to
Chinese fronts, reducing the
ratio at the Pakistani frontiers
from 2-to-1 in favor of India
to a little less than parity.
Politically the time has
been used to test Chinese inten-
tions and to make India's case
to the world, particularly the
nonaligned countries. The
Chinese withdrawal date arrived
and passed without the "positive
response" the Chinese had re-
New Delhi has requested
several time-consuming clarifi-
cations from the Chinese. In
part this is a genuine effort
since the Chinese proposals on
some points appear purposefully
vague. Mainly, however, the
Indians have used the clarifi-
cation process to restate their
own views--particularly to re-
fute the Chinese contention
that mutual withdrawal holds
the key to a border solution.
They have also charged the
Chinese with attempting to make
good their latest "aggression"
through the use of a flexible
line which--especially in
Ladakh--bears little relation
to positions actually held on
7 November 1959.
Pakistan
Pakistani President Ayub
is unlikely to be deterred by
opposition charges that he has
"bypassed" the National Assembly
in agreeing to negotiate on
Kashmir.
Pakistan has long wanted
serious negotiations on Kashmir,
and Ayub will try to take full
advantage of the new pressures
on Nehru to gain concessions
in the main valley of the dis-
puted state, which India holds.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
THE NEW SOVIET NAVAL MISSILE
The new naval missile
shown in the Moscow parade on
7 November is believed to be
still in the research and
development stage. The Soviet
press claims that it can be
launched either from the sur-
face or from under water.
Presently operational Soviet
submarine-launched ballistic missiles
are believed to. use storable liquid
propellants. Solid fuels of-
fer some advantages in han-
dling ease, however, and the So-
viet Union may have developed
a solid fuel for use in larger
missiles. Short-range solid-
fuel tactical rockets have
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CURRENT INTELLIGENCE VEEKLY SUMMARY
been operational in the Soviet
armed forces for several years.
with the missile tubes on Z-
conversion, G-class, and prob-
ably H-class submarines.
Stages and Ranges
suggest
as more an one stage and
may have as many as three.
Additionally, the short after-
most section may be a separate
unit, perhaps used to eject the
weapon from a tube in a sub-
merged submarine.
Range estimates vary con-
siderably depending on the
number of stages, type of pro-
pellants, and warhead weights
used in calculating these
distances. Assuming three
powered stages, a solid fuel
of moderate specific :impulse,
and a warhead of 1,000 to
1,500 pounds, the missile prob-
ably would be able to achieve
a range of about 2,000 nautical
miles (n.m.).
Compatibility With
Soviet u marines
The diameter of the parade
missile appears to be compatible
IAll three of these
submarine classes now are be-
lieved to carry 300-n.m. bal-
listic missiles.
It is possible that these
submarines could be adapted to
carry the upper sections of the
missile, which total about 27
feet in length. If so, this
would about double the range
of their present weapons system.
In addition to any pos-
sible adaptations to existing
submarines, it is likely that
the complete missile will be
placed on some new class of
submarine .
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CURRENT INTELLIGENCE WEEKLY SUMMARY
KHRUSHCHEV ENCOURAGES ANTI-STALIN LITERARY WORKS
After a lull of almost a
year, de-Stalinization has again
become a prominent theme in the
Soviet press. Khrushchev is
personally encouraging the pub-
lication of anti-Stalin literary
works, perhaps as a prelude to
attacks on inflexible Soviet
bureaucrats whom he intends to
brand as "Stalinists." In view
of the tightened controls fea-
tured in the party and govern-
ment reorganization approved at
last menth's central committee
plenum, Khrushchev may again
feel it necessary to remind the
people of the essential dif-
ferences between his rule and
Stalin's.
articles and literary
worts with anti-Stalin themes
began to appear in the Soviet
press with increasing frequency.
The first, which appeared in
Pravda on 21 October, was
e4 vgeny Yevtushenko's poem
"Stalin's Heirs,"which contended
that the heirs of Stalin, both
foreign and domestic, are still
alive and flourishing. Subse-
quently, the Soviet press has
emphasized the damage done to
Soviet life by the cult of
personality, as well as the
dangers of attempting to minimize
its harmful effects.
One of the most dramatic
anti-Stalin works to appear was
a story entitled "One Day of Ivan
Denisovich," which described
th99 suffering of prisoners
in Stalin's concentration camps.
.:].early in order to emphasize
the official policy behind the
story's publication, both
Pravda and Izvestia promptly
gave it favorable reviews and
pointedly quoted Khrushchev's
statement to the 22nd party
congress that such exposds are
nec:es::-ry to prevent a return
of the Stalin era.
In his closing address
to the central committee plenum
on 23 November--which has not
yet been published--Khru-
shchev is alleged to have spoken
at least part of the time on
further de-Stalinization meas-
ures and to have explained
the policy of publishing anti-
Stalin works. According to
widespread Moscow rumors, he
told the plenum that he had
ordered Pravda to print "Stalin's
Heirs," and said that "One Day
of Ivan Denisovich" was published
at his personal insistence, de-
spite some reservations on the
part of high-level officials.
Particularly because of
the greater cultural freedom
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CURRENT INTELLIGENCE WEEKLY SUMMARY
of the past few years and in-
creased official toleration for
experimentation, intellectuals
apparently interpreted Khru-
shchev's renewal of de--Stalin-
ization as another liberalizing
step: artists in particular
felt encouraged to exhibit some
of their more extreme works.
Khrushchev, however, ap-
parently did not foresee and
clearly never intended that any
connection be made between
freedom to attack Stalin and
freedom to experiment. Thus,
when confronted with examples
of abstract art at an exhibi-
tion on 1 December, he report-
edly lost his temper and created
a "scandalous" scene. His scath-
ing criticisms were followed by
major editorials in Pravda and
Izvestia of 3 December.--Uoth
papers harshly attacked modern-
istic trends and urged inten-
sified party control over the
arts.
These developments suggest
that official controls will
become more stringent for a
time, and have led Moscow
literary circles to anticipate
a ban on stylistic experimenta-
tion. On balance, however,
there seems little likelihood
that a major freeze is in the
offing. Khrushchev may come to
feel that such action would
alienate Soviet intellectuals
at a time when their services
are a vital ingredient of his
de-Stalinization campaign. The
writers themselves believe
that literary denunciations of
the Stalin era--though in a
"realistic" style--will probably
continue to be encouraged.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
PDLISH PARTY PROBLEMS
Continuous and increas-
ingly severe factional squab-
bling within the Polish Commu-
nist Party has so complicated
First Secretary Gomulka's con-
trol that he is finding it dif-
ficult to maintain his middle-
of-the-road policies or to
formulate new ones. Although
his own position is not threat-
ened, constant attempts are
being made by opposing liberal
and hard factions to discredit
and undermine each other's
political power. These activ-
ities have led to a number of
arrests and trials, and to at
least one death--reportedly a
suicide.
Polarization around hard
and liberal groups is fluid;
moderate Gomulka supporters
shift from one to the other
depending on the specific is-
sue involved. The hard and
liberal groups themselves are
unorganized remnants of the
Soviet-backed Natolinists who
fought the return of Gomulka,
and of the "revisionists,"
whose support brought Gomulka
back to power in 1956. The
Kremlin withdrew its support
of the Natolinists when it
became apparent in 1957 that
they were ineffective and
actually harmful to Soviet
aims, and after Gomulka re-
pressed the most outspoken
"revisionists" among his
party leaders.
Each group is constantly
promoting its members within
the party and government struc-
ture in a struggle for addi-
tional political power. Their
aims are not clearly defined,
but they hope to force Gomulka
to choose between the two ex-
tremes.
In the past two years the
struggles have centered largely
on problems of foreign policy
and Polish nationalism, the
future course of the Polish
economy, and internal security
affairs. The hard-liners crit-
icize Gomulka's support of
Khrushchev in the Sino-Soviet
dispute, even though he has at-
tempted, with the concurrence
of the liberals, to "maintain
a long view" of the Chinese
problem in spheres outside party
relations. Too much admira-
tion of the West, particularly
the foreign policies of Presi-
dent Kennedy, has cost a number
of party journalists and radio-
television commentators their
positions at the instance of
party conservatives. Some were
reinstated, however, after inter-
vention by Gomulka.
The hard group was given
a boost by Gomulka's recent
stress on the strictly Polish
origins of his party. Many of
the hard-liners who spent the
war years in Poland are attempt-
ing to capitalize on this fact
to the detriment of liberals.
Anti-Semitism, an old Polish
phenomenon, is officially dis-
couraged but apparently per-
sists.Politburo member Zambrowski
has told Western newspapermen
about the hard group's anti-
Semitic activities.
The frustrating effect of
party infighting on the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
formulation of policy is sug-
gested by the vagueness of
Gomulka's recent statements
on the course of the Polish
economy. Despite impressive
progress, the economy has
suffered frequent dislocations
and is constantly under policy
review and discussion. Gomulka
is attempting to solve part of
the problem by advocating closer
integration of bloc economies,
a solution which has supporters
and opponents in both factions.
Conservative economists strongly
favor a return to rigid centrali-
zation to combat these prob-
lems. Liberals are delighted,
on the other hand, with Khru-
schev's recent recommendation
that serious studies should
be made of Soviet economist
Liberman's theories about the
role of the profit motive and
a broadening of local economic
authority.
Internal security matters
are hotly debated, and any
change in the system which
might give political advantage
to either group is immediately
challenged by the other. While
most changes have resulted
from compromises, a gradual
tightening of internal security
has been effected, and the con-
servative group appears to have
reinstated a significant num-
ber of its adherents in the
security apparatus. It has not
been able, however, to exploit
these gains in order to secure
unobstructed political advan-
tage. Many issues, such as
"reform" of the system of pri-
vate physicians and lawyers,
have been bitterly--if quietly--
fought for more than two years
with no solution in sight.
In short, efficient policy
making, as well as smooth day-
to-day functioning of both the
party and government, has been
frustrated by the underlying
factionalism. The fact that
Gomulka has permitted such
factionalism to exist for so
long has tended to crystallize
resistance to his efforts to
unite the party.
Since June, Gomulka has
avoided risking a central com-
mittee plenum where matters
might come to a head prematurely
and give the appearance of a party
crisis. Instead he recently
staged a "party conference"
with an agenda strictly limited
to discussion of absolutely
necessary business--the eco-
nomic plan for 1963 only and
certain related matters.
Present indi-
cations point to a purge of
hard-liners but with a concomi-
tant tightening of controls over
the liberals.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
The European satellites'
need to strengthen and consoli-
date their economic and politi-
cal relations with the under-
developed countries has led
them to disregard some popular
resentment of their foreign aid
programs, Official policy state
ments continue to stress the
importance of these countries
as a market for manufactured
goods and a source of food and
raw materials.
During the past five months,
about $126 million in new econom-
ic credits have been arranged.
If additional credit offers are
accepted--the largest now pend-
ing is a Czechoslovak offer of $69
million to Egypt--total satel-
lite credits this year may rise
to well over $250 million.
Since the inception of the bloc's
foreign aid program in paid-1955,
the satellites have provided
nearly $1 billion in economic
aid to the underdeveloped
countries.
Poland and Czechoslovakia--
the two most active satellite
participants in the program--
provided the bulk of new credits
extended in 1962. The largest
are two Czechoslovak credits
to Egypt--$57 million extended
last March and the $69 million
credit still to be arranged.
Poland has extended credit of
$32.5 million to India and $26
million to Brazil, the first
major bloc credit accepted by
that country. The remaining
credits are of a modest scale
and have been provided by Hun-
gary, Rumania, and Bulgaria.
Satellite attention this
year was focused primarily on
the Middle East and in particular
on Egypt, where firmly estab-
lished commercial relations
exist. Cairo this year has al-
ready accepted more than $100
million in credits for economic
development from Hungary, Poland,
and Czechoslovakia, while East
Germany agreed to provide some
type of credit arrangement under
the terms of its new trade agree-
ment. New satellite aid over-
tures also have been made to
both Syria and Yemen. Czecho-
slovakia apparently has con-
cluded some type of economic
and technical assistance agree-
ment with the Yemeni Republic,
but details have not yet been
disclosed.
In Asia, Czechoslovakia
extended a small credit of $1.4
million to Burma for the pur-
chase of agricultural equipment,
while Rumania agreed to provide
assistance to the Burmese petro-
leum industry. Poland's $32.5
million credit to India was for
development or its coal in-
dustry.
Although new credits ex-
tended to African countries dur-
ing this year have totaled less
than $21 million--the largest
is a Polish $12 million credit
to Morocco--the satellites are
continuing to press for closer
economic relations on that con;
tinent. Aid overtures have been
made to several countries in-
cluding Tanganyika, Dahomey,
Niger, and Senegal.
In addition, satellite as-
sistance to Algeria appears to
be moving from relief-type aid
to formalized economic and tech-
nical assistance. Czechoslovak,
Polish,.and Bulgarian credit of-
fers apparently now are under con-
sideration by the Algerian Gov-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Soviet military equip-
ment recently supplied to Iraq
has included the first deliveries
of surface-to-air missiles
(SAMs) and missile-equipped
MIG-21 (Fishbed) jet fighters
to that country. The 16 SAMs,
along with associated equipment,
probably are destined for Abu
Ghurayb, near Baghdad,
equipped MIG-21s to the UAR
and has supplied a dozen AN-12
(Cub) heavy transports. Ad-
ditional T-54 tanks and P-6
motor torpedo boats also have
been provided, as well as a
variety of other weapons and
equipment.
As a result of talks
with Yemeni officials late last
month in Moscow, the USSR soon
may begin to provide direct arms
aid to the new regime. The head
of the Yemeni delegation, who
returned late last month from
the USSR, announced that mil-
itary as well as economic agree-
ments had been concluded in
Moscow and Prague.
Other shipments to Iraq
this year provided 10 TU-16
(Badger) jet medium bombers, 20
T-54 medium tanks, and a variet
of other land armaments.
The UAR also received
surface-to-air missiles in re
cent weeks.
In recent months the
USSR has also delivered addi-
tional TU-16s and missile-
Major arms deliveries to
Syria by the USSR under this year's
military aid agreement have not
yet begun, but training now is in
process in the USSR for Syrian
personnel on the equipment to be
provided. Syria, like the UAR
and Iraq, probably will receive 25X1
SAMs, MIG-21s, possibly some
naval craft, and a variety of land
armaments.
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vae SECRET `'
CURRENT INTELLIGENCE WEEKLY SUMMARY
Fighting between royalist
tribes and revolutionary forces
is still centered in the north
around Sadah and in the east
near Sirwah. Egyptian forces
in these areas have recently
been reinforced and resupplied,
and the royalists' chances for
decisive successes appear
Slim.
By 1 December flying con-
ADEN
GULF OF ADEN
32829
ditions over Yemen had improved
sufficiently to allow the
Egyptians to resume their air
operations. In addition to
the strikes by TU-16 (Badger)
jet medium bombers from Egyptian
airfields, operations with small
planes from Yemeni fields have
been stepped up to 25-35 sorties
per day.
There is no evidence that
the Egyptians are preparing any
part of their forces in Yemen
for withdrawal. While Egyptian
troops have made gradual progress,
the tribal resistance in the
north and east is likely to re-
main stubborn enough to make
hazardous any significant Egyp
tia,n withdrawals for some time
to come.
Supplies and materiel, and
possibly some personnel, continue
to move from Egypt to Yemen.
At least six Egyptian merchant
ships are regularly involved on
the run to Yemen, and Egyptian 25X1
transport aircraft fly supplies
to Yemen on a daily basis.
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KAMARAN
(U.K.)
SAUDI ARAI311A
Kajran
i= -'
1Sadah
RED '~~AJHud4yda}t;
Major road
O'kher road or track
'Sf'.4T11~'~ MILES Iqo
N Harib
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Congolese Premier Adoula's
political position remains ex-
tremely shaky in the wake of
opposition attacks on him in
the Chamber of Deputies on 28
November. He appears tired,
uncertain, and acutely depressed,
and has several times threatened
to resign. He has complained
to Ambassador Gullion that the
cabinet and Parliament were be-
coming unmanageable, and that
new US and UN pressures on
Katanga's Tshombe were probably
too late. It seems doubtful
that Adoula can stay in office
long without extensive conces-
sions to the opposition.
One of the concessions
Adoula seems ready to ,make,
despite adverse Western reac-
tion, is to release Antoine
Gizenga, Patrice Lumumba's
leftist "heir," who attempted
to establish his own regime in
Stanleyville with radical Afri-
can and Soviet bloc support.
A government commission visited
Gizenga in his island prison
on 1 December and reportedly
will recommend his release.
Concessions already made
and the prospect of more such
concessions have generated strong
criticism and apprehension
among Adoula's closest tdvisers.
The premier
opponents appear to have the
votes to block his program--or
to wring substantial conces-
sions from him. Efforts to
force him to oust individual
ministers will probably be more
successful than their attack on
the government as a whole.
To try to bolster Adoula
and to exert pressure on
Tshombe, the UN military com-
mand has begun a build-up of
its forces in Elisabethville.
Secretary General Thant's mili-
tary adviser, General Rikhye,
is in the Congo to survey the
situation. Initially, the build-
up is aimed at putting psycholog-
ical pressure on Tshombe; there
are no indications that Thant
has as yet approved any UN mili-
tary initiative.
At the same time, UN offi-
cials in New York reiterate that
there must be progress on Tshombe's
part soon, and they believe that
there are a number of measures
they can take within their pres-
ent UN mandates.
The movements of UN forces,
publicized threats by the UN of
impending economic sanctions,
the current US-Belgian consulta-
tions on the Congo, and rumors
that the Belgian mining compa-
nietwere about to stop their
payments to Tshombe in favor
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CURRENT INTELLIGENCE WEEKLY SUMMARY
of Leopoldville have raised
apprehensions in the Katangan
regime and among the local
Belgian population. About 200
Belgians participated in a
carefully staged protest dem-
onstration ii, Elisabethville
on 4 December.
Tshomb6 told the US con-
sul on 28 November that if eco-
nomic sanctions were imposed
"every bridge, every road,
every plant" in Katanga "will
go into the air." Two days
later Tshomb6 repeated that
"everything will be destroyed,
everything."
The possibility that
Tshomb6 would retaliate against
Belgian mining installations
in Katanga has in the past
served as the basis for Union
Miniere's refusal to halt its
payments to Tshomb6. Local
officers of the company have
repeatedly expressed doubts
that the UN military force could
protect their installations.
Africa's internal affairs.
Congolese sources have
recently given American offi-
cials the impression that So-
viet officials have again of-
fered military assistance to
end the Katanga secession. While
Soviet propaganda has sought to
discredit the UN and the pro-
Western Adoula government, it
is doubtful that Soviet military
assistance to the Congolese army
would materialize unless there
were a radical change in Congo-
lese politics and in the hostil-
ity of other African states to-
ward outside involvement in
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CURRENT INTELLIGENCE WEEKLY SUMMARY
HONG KONG'S REFUGEE PROBLEMS
The flow of refugees from
the mainland of China to the
British colony of Hong Kong,
which reached a monthly peak of
some 70,000 in May, continues
at a diminished rate.
Since the Chinese restored
tight controls over the land
border in late May, most of the
refugees are arriving by sea.
Some of these come directly from
nearby mainland areas, but most
of them come from Macao with
the help of well-established
smuggling an s.
In June and July, after
the Hong Kong land frontier
was closed, the flow of main-
landers into the Portuguese
colony increased substantially.
It now appears to have leveled
off since the Communists tight-
ened security and restricted
exit permits, but a backlog of
some 4,000 refugees hoping to
reach Hong Kong appears to have
built up in Macao.
The influx of mainland
Chinese poses serious problems
for Hong Kong, already hard
pressed to provide employment
and social services for its
swollen population of approxi-
mately 3.3 million. A government
official has estimated that the
population will increase by 272,-
000 in 1962; more than half of
this total--145,000--will be
illegal immigrants. This con-
tinuing increase also puts a
great strain on the colony's
security services.
The smugglers nevertheless
have adopted more ingenious eva-
sion tactics, including the use of
small sampans that are harder to
detect and high-powered speed-
boats that can make a quick run
to shore. As their risks have
increased, these operators have
doubled and reboubled their
charges for transporting the il-
legal immigrants. Many are will-
ing to pay, however, because the
government allows anyone reach-
ing the central metropolitan
areas of Kowloon and Victoria
to remain.
The majority of the refugees
are from Kwangtung Province. Al-
though there has apparently been
a s:Light improvement in living
conditions in Kwangtung since
the summer harvest, disenchant-
ment with the regime is still
strong. Another relaxation of
Chinese Communist restrictions
on refugees might well loose a
new wave at Hong Kong similar
to the one last spring. There
is no indication at present that
Peiping is contemplating such
a move
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?W SECRET *-
CURRENT INTELLIGENCE WEEKLY SUMMARY
PORTUGUESE CABINET CHANGES
The outstanding feature of
Portuguese Prime Minister
Salazar's cabinet reshuffle
of 2 December was the dismissal
of Overseas Minister Adriano
Moreira. Moreira had been an
advocate of greater autonomy
for the overseas possessions
and was widely regarded as a
likely successor to Salazar.
The new overseas minister,
Commander Antonio Peixoto
Correia, showed some pro-Afri-
can tendencies during his re-
cent tenure as governor of
Portuguese Guinea. Most of
the evidence suggests, however,
that Lisbon intends to slow
down reform measures in the
African territories.
in October, was reportedly criti-
cized by the local Portuguese
population for the sympathetic
attitude of his administration
toward the natives. His new
appointment may be intended to
shield the regime from increas-
ing international criticism of
its colonial policies at a time
when Lisbon seems to be holding
up implementation of even the
modest reforms it has so far
enacted.
Angola now has a new governor
general shorn of some of Deslandes'
powers who is not likely to act
without authorization from Lis-
bon. There is widespread suspicion
in the province that Deslandes'
reforms will be largely disre-
garded.
In dismissing Moreira,
Salazar was probably influenced
not only by pressure from vested
interests in Portugal who op-
posed Moreira's reform program
but also by reluctance to keep
in a high post a subordinate
who was astutely developing
his own personal following and
was suspected of planning to
push Salazar aside.
The young and energetic
Moreira had in recent months
clashed increasingly with the
popular governor general of
Angola, Vanancio Deslandes,
over details of the rather modest
reform program in that overseas
province. In September he per-
suaded Salazar to dismiss Des-
landes--apparently by threaten-
ing to resign--and came under
strong criticism himself as a
result.
Peixoto Correia, relieved
as governor of Portuguese Guinea
In Mozambique the resigna-
tion of Governor General Sarmento
Rodrigues, announced on 30 Novem-
ber, has created a public feeling
that the clock is being turned
back. Admiral Sarmento Rodrigues
has increasingly advocated socio-
economic improvements. Appoint-
ment of either of his two most
likely successors would almost
certainly mean the end of re-
cently introduced labor and edu-
cation reforms.
In the cabinet reshuffle,
which involved the replacement
of five ministers, Salazar
turned over the defense port-
folio he himself had held since
April 1961 to General Manuel
Gomes de Araujo, chief of staff
of the armed forces. It is
generally believed that the
new education minister, Galvao 25X1
Teles, will adopt a more concilia-
tory policy toward the restive uni-
versity student groups.
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NATO MINISTERIAL MEETING
NATO foreign and defense
ministers will hold their annual
meeting in Paris from 13 to 15
December. Uncertainty over the
future course of Soviet policy and
over the outcome of UK-EEC nogoti-
ations makes any major decisions
unlikely. The discussion of mil-
itary questions will center on the
need for stronger conventional
forces, and a more equitable method
of sharing defense burdens will be
emphasized. The question of NATO's
nuclear role is apt to be soft-
pedaled pending the conclusion of
North Atlantic Council (NAC) studies
currently under way. Growing in-
terest in this subject, however, may
evoke some new indications of the
attitudes of member countries and
opinions of individual ministers.
Recent NAC discussions on
the outlook for East-West relations
in the light of the Cuban crisis
have reflected differing views.
Belgium, Canada, and the Scandi-
navian countries favor renewed
Western initiatives in negotiating
with the Soviets on a broad front,
including development of a new
basis for a Berlin settlement. Some
of the other members, on the other
hand, believe it would be premature
for the West to make any proposals
before Soviet intentions are
clarified.
The alliance is stall search-
ing for an effective method of
political consultation. The NATO
countries have welcomed efforts to
"inform" NAC of impending national
policy moves during a crisis as
valuable information, but there
are complaints that such procedures
fall short of true advance consul-
tation before policy is finally de-
cided. This criticism currently
applies more to three- and four
power Berlin contingency planning
than to the Cuban affair, which
was generally acknowledged to be
a special case.
Although most NATO countries
admit that the Cuban crisis demon-
strated the value of conventional
forces in reacting to Soviet threats,
the 1962 review of national military
efforts shows that serious deficien-
cies in conventional forces continue
to inhibit the achievement of NATO's
forward defense strategy re-
quirements. The major military
commanders intend to brief the
ministers on what General Norstad
called "critical gaps" when he
addressed the Western European
Union assembly on 3 December.
These gaps result from defense
budgets inadequate to meet NATO
force targets. They reflect the con-
tinuing insistence of some members,
notably Britain and to a lesser extent
Norway and Denmark, that national mil-
itary efforts must be governed not by
NA'rO goals but by economic, financial,
and political feasibility.
The present economic strength
of most alliance members, however,
suggests that national defense budg-
ets can reflect a more positive
support of NATO force goals. Many
of the members now feel that percent-
age of GNP is not a good yardstick
for judging individual defense ef-
forts. The Dutch, accordingly,
intend to suggest a NATO study of
more equitable standards.
The question of a multilateral
nuclear deterrent is not on the
agenda. In order not to interfere
with UK-EEC accession talks, NAC
agreed earlier this year to postpone
discussion of whether and to what
extent NATO members should have a
greater share in the Western nuclear
deterrent. Moreover, a series of
briefings by US technical experts on
the feasibility of a multilateral
seaborne nuclear force has not been
completed.
Nevertheless, there is evidence
of increasing official preoccupation
with this important issue. At the
4 December meeting of the Western
European Union assembly, parliamen-
taries from the EEC countries and
Britain overwhelmingly adopted a
resolution calling for a NATO nu-
clear force, possibly composed of
American and European components,
and controlled by a single political
executive. The resolution represents
the most specific proposal to date25X1
by the Europeans on the organiza-
tional and control problems involved
in creating such a force.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Argentina's politico-
economic crisis has again in-
tensified. The primary cause
is extreme dissatisfaction in
all sectors over the Guido
government's failure to reverse
the downward economic spiral.
The ouster of Economy Minister
Alsogaray on 4 December may
temporarily alleviate the sit-
uation
Asogaray's brother a. general
who is sub-secretary of war, is
trying to get him reinstated,
over the war secretary's op-
position.
Alsogaray, who has dom-
inated economic policy and
advised on political matters,
was forced out following heavy
pressures from business groups,
labor leaders, and leading econ-
omists. They pointed to a
record number of bankruptcies,
inflation, growing unemployment
and labor unrest, and difficutly
in paying government bills on
time. Some of Alsogaray's
strongest critics agreed with
his policies but denounced his
ineffectiveness, which they
ascribed to presidential am-
bitions and poor administrative
ability.
Alsogaray probably en-
couraged his "economic team"
to resign in solidarity with
him. These included five sec-
retaries subordinate to his
ministry, the public works and
labor ministers, and the presi-
dents of four official banks.
The new economy minister
I reportedly will be Dr. Eustaquio
Mendez Delfino, a competent econ-
omist who has been a governor
of the International Monetary
Fund, secretary of the treasury,
and president of the Central
Bank.
War Secretary Rattenbach
issued a communique on 5 De-
cember, probably in reaction to
persistent reports of an im-
pending military coup. He
emphasized the army's "unshak-
able determination" to assure
constitutional government, to
fulfill the government's plan
for national elections, and
to oppose the establishment
of dictatorial regimes. Am-
bassador McClintock reports
that Rattenbach appears to
have the steadfast support of
the army command
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``"W SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
The administration of
Brazilian President Goulart
appears to be giving increasing
influence to the extreme left.
Anti-Goulart sentiment is ris-
ing, particularly in the key
industrial state of Sao Paulo
and in a major conservative
party. Moderates and conserva-
tives, however, are making no
significant moves toward con-
certed opposition.
While most armed forces
officers are moderates or con-
servatives, the recent appoint-
ment of extreme leftist General
Oromar Osorio as commander of
divisional artillery in Rio
de Janeiro continues the Gou-
lart administration policy of
choosing the more leftist of-
ficers for command positions.
Communists are also making
gains in the traditionally
government-dominated. labor
movement. In late November,
Roberto Morena, a prominent
old-line Communist long active
in the international Communist
labor movement, was elected
president of the Industrial
Workers Pension Institute.
The institute has substantial
funds at its disposal, and
Morena can be expected to use
these for Communist purposes.
Brazilian officials con-
cerned with economic develop-
ment are showing increased
hostility toward the United
States and increasingly open
willingness to get along with
Communists. Celso Furtado,
cabinet minister for economic
development and head of a key
economic development agency,
recently told US officials
that "10 percent" of his agency's
personnel, including known Com-
munists, oppose cooperation with
they United States. He said he
has no intention of removing
this element. Furtado and some
of his subordinates have been
sharply critical of the Alliance
for Progress during the past
month.
The Brazilian-Polish agree-
ment of 3 December provides for
a $26 million credit for the
construction of a 200,000-watt
thermal electric plant in Rio
Grande do Sul. A US-owned
I power company in that state
was expropriated in 1959 by
Governor Leonel Brizola, Gou-
lart's ultranationalist brother-
in-law. The Polish credit is
the first sizable bloc credit
to Brazil. The possibility of
Soviet technical and military
aid is reportedly under discus-
sion.
Brazil faces a financial
crisis. Gold and foreign ex-
change reserves are likely to
be exhausted by the end of the
year, and commercial arrears
are substantial. Goulart, how-
ever, appears to be devoting
little attention to this problem.
He is preoccupied with th 6
January plebiscite, expected
to restore full powers to the
presidency.
Moderate and conservative
parliamentary factions voted
on :30 November to confirm Prime
Minister Hermes Lima. They
were probably motivated by the
conclusion that a cabinet
crisis this close to the pleb-
iscite, by adding to exasperation
with the parliamentary system,
would increase significantly 25X1
the expected support for Gou-
lar't's assumption of full resi-
dential powers.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
PROSPECTS FOR COMMUNIST SUBVERSION IN COSTA RICA
The Costa Rican Govern-
ment, which has long refused
to consider internal Communist
subversion a major threat, now
has begun to show some concern
over the activities of the local
party.
The immediate causes are
the growing impact of a long-
standing financial crisis,
and an angry public reaction,
fanned by opposition parties
and Communists, to fatalities
resulting when Civil Guardsmen
used firearms in suppressing a
riot on 23 November in Cartago.
The disorders arose out of a
protest against increased elec-
tricity bills.
President Orlich has
charged that Communists were
involved. He may feel that in
the current atmosphere of crisis
in the Caribbean, this is a
useful argument for US aid. He
wants substantial financial
assistance to enable him to
alleviate the financial crisis
before it becomes a major threat
to his government.
the threat of Commu-
nist-inspired insurgency or
guerrilla warfare in Costa
Rica in the foreseeable future
is minimal. The predominantly
middle-class socio-economic
structure of Costa Rica and
the relative political maturity
of the populace in comparison
with that of neighboring coun-
tries does not afford the Commu-
nists a situation they can
readily exploit.
The illegal Popular Van-
guard (Communist) Party (PVP),
with about 300 members, has
shown little capability in
organizing even minor demon-
strations in the face of well-
organized anti-Castro groups
composed largely of university
students. Local security forces,
which have recently had to pro-
tect PVP members from physical
violence at the hands of local
anti-Communists, appear capable
of dealing with anything which
the PVP in turn might be able
to organize.
The PVP nevertheless is
the most sophisticated Communist
party in Central America and,
has demonstrated a capability
to provide intellectual and
logistical support to its
counterparts in neighboring
countries. The PVP receives
financial aid from the USSR.
Since the poor showing
of a Communist-backed front
party in the February 1962
elections, the PVP has turned
its attention to developing a
capability for insurgency. In
the past 16 months about 100
Communists or Castro sympa-
thizers have received training
in Cuba, some of it presumably
of an activist nature. At the
last party congress in April,
the PVP, which had previously
stressed propaganda, and con-
stitutional political activity,
chose leaders favoring terrorism.
When the US announced the
Cuban quarantine, the PVP
appeared stunned and unprepared
to take strong action in the
face of the enthusiastic support
given the US stand by the Costa
Rican public and government.
Since that date, the Cartago
riot has been the only incident
affording the Communists an
opportunity to turn unrest into
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CURRENT INTELLIGENCE WEEKLY SUMMARY
violence. Despite President
Ohrlich's statement, however,
there is no firm evidence that
Communists precipitated the
violence or had any advance
knowledge of the demonstration.
If the financial crisis
remains unsolved and the attend-
ant problems of unemployment
and declining productivity con-
tinue to grow, the PVP may have
more success in efforts to re-
build its strength among the
banana workers, who form Costa
Rica's largest single rural
labor group and have been a
frequent target for Communist
activity. The Communist labor
union among the banana workers
lost about three quarters of
its members during the past
year largely because of well-
publicized financial irregulari-
ties and of programs instituted
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by management and the govern-
ment to counter the union. The
PVP nevertheless still hopes
eventually to organize guerrilla
activity in the banana-growing
southwestern part of the country.
If a breakdown of public
authority or civil war were to
ensue from strife among the
non-Communist parties, the PVP
would. probably try to establish
a Communist regime. The possi-
bility of such a power void
appears remote, however, and
chances for a successful Commu-
nist takeover even more so.
The PVP is not believed to have
any assets in high public office,
and, the bulk of the Costa Rican
population is firmly anti-
Comimunist and would forcefully
oppose any Communist attempt
to seize power.
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PRE-ELECTION OUTLOOK IN THE DOMINICAN REPUBLIC
The Dominican Republic is
to choose a president and a
bicameral legislature on 20
December in its first democratic
election in more than 30 years.
The relative calm prevailing
in the final three weeks of
the campaign suggests that the
voting will take place on
schedule. Earlier, however,
a tense atmosphere over a period
of two months had resulted from
the activities of extreme left-
ist parties boycotting the
election and of Trujillo rem-
nants, and from the wrangling
of inexperienced party members.
More than a score of
political parties have sprung
up since the ouster of the
Trujillo regime, but those of
the far left have been. sup-
pressed or disrupted since the
Cuban crisis and disavowed the
electoral process in any event.
Others are running only con-
gressional candidates.
Observers believe that
the election, both for the
presidency and congress, will
be dominated by the Dominican
Revolutionary Party (PRD) of
Juan Bosch and the National
Civic Union (UCN) of Viriato
Fiallo. Neither party has
made anti-Americanism an issue,
and either will probably co-
operate with the US, particularly
the UCN. The PRD is left-of-
center. The UCN is a center
party in over-all make-up, but
has conservative elements which
will cause it to gravitate to
the right.
The technical problem of
creating electoral machinery
has touched off heated charges
of political favoritism and
chicanery. Resignation of the
Central Electoral Board, which
would probably have forced
cancellation of the election,
was averted only by a formal
apology from party leaders.
The parties, in a bid for
votes, have been supporting
workers in a rash of illegal
strikes, weakening respect for
the present seven-man ruling
Council of State and in-
creasing the financial prob-
lems which will face the new
government which is to take
office on 27 February.
The major threat, however,
came from two members of the
Council of State, Antonio Im-
be:rt and Luis Amiama. Only
survivors of the group which
assassinated Trujillo
Imbert and Amiama have been
embroiled with President Bon-
neLly, the other members of
the Council, and armed forces
leaders over moves to satisfy
their demand for assured
personal safety. Armed. forces
leaders accepted a Council
decree making the pair brigadier
generals and "supervisors" of
the armed forces, but have re-
fused to allow them any actual
military authority. Imbert
and Amiama have been pushing
for formal control over the
8,000-man police force,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
already responsive to Imbert's
influence.
Recently Imbert appears
to have become convinced that
the armed forces will not per-
mit him to seize power. As
recently as 27 November, how-
ever, in a talk with the US
ambassador, Imbert suggested
that he should reorganize the
Council of State and extend
its rule for two to three years.
He offered to appoint members
acceptable to the ambassador.
Possible intervention by
persons prominent under the
Trujillo family members now in
Europe remains a threat both
to the election and to the
ultimate installation and.
viability of an elected govern-
ment.
Former President Joaquin
Balaguer recently failed in a
well-publicized attempt; to
return as a presidential candi-
date
Now in the lInited
States, Balaguer has been un-
able to book passage because
commercial airlines face heavy
fines if they land. him at Santo
Domingo.
However, former Major
General Rodriguez Echevarria,
also in exile in the US, is a
trained pilot and might fly
Balaguer to the Dominican
Republic. Rodriguez was Bala-
guer's defense minister, and
tried to oust the Council of
State by military coup last
January.
A former Trujillo associate
recently told an FBI representative
in Paris that the late dictator's
brother, Jose Arismendi Trujillo,
claims he is prepared to return
by way of Haiti, and that he ex-
pects support from the Dominican
A rmy.
Military support for the
return of the Trujillos is most
unlikely. Any attempt by the
Trujillos, Balaguer, or Rodri-
guez Echevarria to return, how-
ever, would revive the Trujillo
issue. This would give Imbert
and Amiama the pretext they
needl..to obstruct the election
or try to set up a "little dic-
tatorship," as Amiama proposed
a few months ago.
Election and inauguration
are not likely to end the
problems of installing a democ-
racy. The parties are blends
of idealists, amateurs and op-
portunists, with a leavening of
Trujillo remnants available
to most parties as strong-arm
squads. Dominican political
inexperience and fatalism,
stemming from a history of
despotism interrupted only
by the US occupation from
1916 to 1924, will continue
for the foreseeable future
to make the country vulner-
able to opportunists of every
political brand. 25X1
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GUATEMALAN PRESIDENTIAL ASPIRANT AREVALO
Juan Jose Arevalo, presi-
dent of Guatemala from 1945 to
1951, will try to regain that
post in presidential elections
scheduled for December 1963.
Arevalo cannot formally
become a candidate until March,
when two full presidential terms
will have elapsed since he left
office. He will remain abroad
until formal candidacy protects
him from prosecution on charges
related to his earlier term of
office,. While more than 20
potential rivals are still
jockeying for political backing,
however, Arevalo's campaign is
already under way.
Last month's important
mayoral election in Guatemala
City showed that none of Guate-
mala's political parties have
the appeal they thought they
had. The result has been a
confused scramble for new polit-
ical alignments which, for the
moment at least, leaves Arevalo
in the position of leading can-
didate.
President Ydigoras, with
more than a year of his term
remaining, is determined to
serve out his term despite
strong public dissatisfaction
with his regime. Other politi-
cians and some of the military
feel that the only sure means
of stopping Arevalo is to pre-
vent the elections or rig their
outcome. As a result they are
more concerned with political
manipulations than with the de-
velopment of any genuine appeal
to the voters.
with the successive crises of
subsequent governments. Arevalo
rode into office on a wave of
optimism following a revolt
against a dictator. His program
of broad social and economic
reforms was facilitated by the
postwar economic boom, particu-
larly in coffee, Guatemala's
primary export.
His reform program was
corrupted, however, by venal
and inexperienced officials,
and his ultranationalist govern-
ment moved steadily to the left.
This paved the way for the Com-
munist-dominated Arbenz govern-
ment. Arevalo has been writing
and teaching in exile in Latin
America since Arbenz was over-
thrown in 1954. He settled
in Mexico in February to map
out his campaign for the presi-
dency. He is frequently visited
by his supporters.
The extent of Arevalo's
appeal will be hard to judge
until his return to Guatemala,
but it is believed to be sub-
stantial. It is based on dis-
appointment over Guatemala's
stagnation, and on a broad
Arevalo, meanwhile, is
benefiting from the Guatemalan
public's highly selective re-
call of the high points of his
administration in comparison
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feeling that the Communists
under Arbenz, the rightists
under Castillo Armas, and now
Ydigoras' clique have all gov-
erned Guatemala primarily in
self-interest. Arevalo on the
other hand has carefully nur-
tured his image as a strong
nationalist who rejects US eco-
nomic influence in favor of
solutions of his own,.
Most Guatemalans see no
promise of any new approach in
the preoccupation of the other
candidates with the formation
of new political and economic
power alignments. This en-
hances Arevalo's basic advantage.
A strong and persistent
part of Arevalo's political
philosophy is hostility toward
any US role in Latin America.
He is. convinced that any US
activity, including the Alli-
ance for Progress, is designed
primarily for the economic ad-
vantage of the US. Be fseems to
cling deliberately to, an ex-
aggerated concept of the role
of private economic interests
in the US Government, and a be-
lief that self-seeking economic
motives underlie Washington's
Latin American policy, despite
experience and contacts whicn
might have disabused nim.
He publicly denounced
Castro and Communism earlier
this year, and nas given some
indications that he realizes
the value of at least tacit ac-
ceptance by the US. His basic
attitudes, however, appear
materially unchanged. His
brother told a US official in
August that a new Arevalo
government would mobilize Guate-
malan resources for economic
development without foreign
aid.
As President of Guatemala,
Arevalo felt he could use in-
dividual Communists without
being influenced by them or
giving them a footnold in gov-
ernment. He still maintains
close personal contacts with
a number of Communists, out of
an ambition which makes their
assistance appear desirable.
His persistence in this asso-
ciation constitutes the prin-
cipal danger of his candidacy
to US interests.
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SPECIAL ARTICLES
KHRUSHCHEV'S CUBAN VENTURE
The basic motivation
underlying Khrushchev's bold
gamble in deploying strategic
missiles to Cuba was the com-
pelling need of a dramatic
breakthrough which would
strengthen the USSR's position
on a whole range of questions
in the contest with the US.
The Cuban venture had the
direct and immediate purpose
of strengthening Khrushchev's
position for a major diplo-
matic showdown on the Berlin
and German questions which he
planned to launch before the
end of the year.
Background
Khrushchev had been grop-
ing over the past year and a
half for some means of extricat-
ing himself from the impasse
created by his failure to force
the West to accept a Berlin
settlement on Soviet terms. His
statements during this period
reflected a growing concern
over the steady erosion of
the USSR's over-all position
vis-a-vis the West. The
introduction of straget:ic mis-
siles into Cuba provided, in
his mind, the most effective
means of scoring a dramatic
victory over the US which
would enable the USSR to re-
cover the diplomatic initiative
and achieve a decisive ad-
vantage in a new round of Ber-
lin negotiations.
Khrushchev also believed
the creation of Soviet missile
bases in Cuba would greatly
enhance the USSR's ability to
deter another US-supported at-
tempt to destroy the Castro
regime.
The opportunity for Khru-
shchev's bold stroke arose
when it became apparent last
spring that the rapid deteriora
tion of the Cuban economy and
the growing demands in the US
for active intervention in Cuba
IN RETROSPECT
required prompt and far-reach-
ing action to avert a crisis
for the Castro regime. Moscow
was thus in a strong position
to exchange vital economic
and military assistance for
Castro's consent to the deploy-
ment of missiles in Cuba.
A second major element
in Khrushchev's decision was
a major reassessment in early
May which substantially down-
graded the prospects for achiev-
ing a Berlin settlement on
acceptable terms. This new
estimate represented a marked
change from the optimistic
view which prevailed in Moscow
following Gromyko's talks with
Secretary Rusk at Geneva in
March.
Bloc spokesmen in late
March expressed confidence
in an early Berlin settlement,
and the USSR took a variety
of steps designed to improve
the atmosphere. These included
the suspension of Soviet flights
in the Berlin air corridors
and measures to restore normal
relations between the Soviet
and US commandants in Berlin.
In an interview with an
American publisher on 20 April,
Khrushchev said he was prepared
to meet with President Kennedy
again. and professed to see a
"glimmer of hope" for a Berlin
agreement. Gromyko also took
a hopeful line in his speech
to the Supreme Soviet on 24
April. He stated that, al-
though obstacles remained,
his talks with Secretary Rusk
had demonstrated the desire
of both governments to "search
for a rapprochement of positions."
These hopeful appraisals
were based on Moscow's reading,
or misreading, of the proposals
for a modus vivendi which Rusk
had outlined to Gromyko in
March. The Soviet leaders in-
terpreted these proposals as
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CURRENT INTELLIGENCE WEEKLY SUMMARY
marking a significant change
in the US position and as an
indication that the US was
finally ready to undertake
serious negotiations.
Moscow's euphoria, how-
ever, was short-lived. The
Soviet press began to display
uneasiness over the future
course of the negotiations
after the NATO ministerial
meeting in Athens in early
May. Pravda charged the US
with raising new obstacles in
order to stall the talks and
displayed sensitivity to state-
ments by Secretary Rusk and
General Clay which contradicted the
optimistic assessments of Khru-
shchev and Gromyko in late
April.
By mid-May, the Russians
had begun to draw back from
their earlier efforts to re-
store normal relations between
the Berlin commandants.
By late May or early June,
it seems likely that Khrushchev
had decided to set aside further
diplomatic efforts on Berlin
and to undertake a rapid build-
up of offensive weapons in
Cuba during the summer months.
Buildup in Cuba
Khrushchev would never
have undertaken the Cuban ven-
ture if he had not persuaded
himself that he could complete
the clandestine introduction
of the missiles and confront
the US with a fait accompli
which would deter any effective
US military reaction. He must
have recognized that in advanc-
ing Soviet strategic power to
Cuba he was greatly reducing
the margin of safety which had
characterized his major decisions
in the past. He apparently
permitted himself to believe,
however, that the very high
stakes involved justified
the increased risks.
The outcome of this venture
strongly suggests that Khru-
shchev simply did not candidly
examine the consequences of
failure.
Throughout most of May and
June,, the USSR applied forced-
draft measures to assemble the
necessary personnel and equip-
ment for the rapid shipment
and installation of an advanced
weapons system in Cuba.
The beginning of the heavy
shipments of equipment and
personnel to Cuba in mid-July
was accompanied by new Soviet
political initiatives designed
to set the stage for the diplo-
matic showdown on Berlin planned
for late 1962 and to divert
world attention from the mili-
tary buildup in Cuba. Khru-
shchev announced a new proposal
to replace Western occupation
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forces in West Berlin with
troops of four smaller NATO
and Warsaw Pact powers under
United Nations jurisdiction.
On 2]_ July,
Moscow announce its intention
to resume nuclear testing.
Despite these efforts to
persuade the West to believe
that events were moving toward
a Berlin showdown, Moscow re-
frained from breaking off con-
tacts with the US and from
generating fear of an impend-
ing acute crisis. It aimed
instead at a gradual build-up
of the war of nerves which ap-
parently was intended to reach
a climax after the missiles
were in place and Khrushchev
was ready to make his dramatic
appearance at the UN in late
November.
The Crucial Period
The Soviet leaders appear
to have regarded the period
from late August through the
first part of October as the
time of greatest danger and
vulnerability for their Cuban
operation.
Throughout this crucial
period, the Soviet Union did
its best to divert Western
attention away from the heavy
influx of Soviet equipment and
personnel into Cuba. On the
diplomatic front, the Russians
spread the impression that they
were developing major new pro-
posals with regard to Berlin,
and Khrushchev told visitors
that he was considering placing
Berlin before the General As-
sembly personally. In Berlin,
the Russians exploited inci-
dents along the wall in late
August to fill the air with
charges of Western "provocations"
against East Germany. They
dominated the headlines with
the "crisis" over the use of
Soviet armored personnel car-
riers to transport guards to
the Soviet war memorial in
West Berlin. Moscow also kept
up a steady drumfire against
alleged US preparations for
an invasion of Cuba.
Under the pressure of in-
creasing US attention to So-
viet military deliveries, Moscow
decided in early September to
abandon the pretense about the
nonmilitary character of these
cargoes. In ajoint communique
on 2 September at the end of
the visit to Moscow of Che
Guevara and Emilio Aragones,
Moscow publicly acknowledged
for the first time that it was
providing military assistance
and technicians to Cuba. So-
viet propaganda, however, denied
that the USSR was sending mili-
tary forces to Cuba or establish-
ing military bases on the island.
The Soviet statement of
11 September was Moscow's most
important effort to deter US
intervention in Cuba or US
actions against Soviet shipping
and to gain sufficient time to
complete the installation of the
missiles. It may have been in-
spired by the Soviet leaders'
concern that President Kennedy's
7 September action in requesting
congressional authority to call
up 150,000 reservists might have
been only the first of a series
of US actions against the build-
up and that the US had detected
the true nature of the equipment
being introduced into Cuba.
The statement charged that
the US was "preparing for aggression
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CURRENT INTELLIGENCE WEEKLY SUMMARY
against Cuba and other peace-
loving states" and warned that
an attack on Cuba would signal
the "beginning of the unleashing
of war." It sought to check
the growing alarm in the US
over Moscow's intentions by
stressing that Soviet military
equipment in Cuba was designed
"exclusively for defensive pur-
poses" and by denying that the
USSR planned to establish mis-
sile bases there.
But the USSR's most strik-
ing maneuver to inhibit US
reaction, and undoubtedly the
most effective in Khrushchev's
judgment, was the declaration
in the 11 September statement
of a "pause" in Berlin negotia-
tions until after the US elec-
tions. This was calculated to
establish a link between Berlin
and Cuba, with the clear impli-
cation that the USSR would not
aggravate Berlin tensions if
the US would refrain from inter-
vention in Cuba. Khrushchev
clearly believed that his strong-
est deterrent against US action
to halt the buildup in Cuba
was to portray Berlin as a So-
viet hostage.
Although Moscow displayed
considerable concern in the
first half of October about US
intentions and uncertainty
about the extent of US informa-
tion regarding the nature of
the military equipment; arriving
in Cuban ports, Khrushchev ap-
pears to have remained confident
as late as mid-October that US
reaction would be confined to
verbal protests, agitation in
the UN, and possibly limited
action to reduce the volume of
Soviet shipments to Cuba. He
seems to have interpreted the
US posture in September and
the first half of October as
having confirmed his confidence
that the Cuban gamble would suc-
ceed and that the US in the end
would accept the presence of
Soviet missiles rather than
face a possible direct military
confrontation with the USSR.
When the US reaction dur-
ing the week of 22 October
abruptly transformed what had
been Khrushchev's boldest
foreign policy gamble into his
greatest defeat, the Soviet
premier displayed a very sober
understanding of the real
"correlation of forces" in the
world. He recognized that he
had, no choice but to cut his
losses and that any meaningful
Soviet military response, not
only in Cuba but in Berlin or
elsewhere, was impossible be-
cause the failure of his Cuban
venture also meant the failure
of this bid to overcome US
global strategic superiority,
The Soviet leaders' initial
reaction to President Kennedy's
address on 22 October was de-
signed to deter US military in-
tervention in Cuba and to gain
time in which to extricate
themselves. They were careful
to refrain from any commitments
to specific countermeasures but,
at the same time, they sought to
avoid the appearance of acquiesc-
ing to the measures announced by
the President. One of Moscow's
first actions was to order Soviet
ships en route to Cuba to turn
around long before they reached
the US quarantine line, despite
statements by several Soviet
spokesmen that the ships would
proceed to Cuba and refuse in-
spection by US naval vessels.
Khrushchev's first concern was
to prevent incidents which
might make the crisis more dif-
ficult to control.
The Soviet leaders also
promptly announced measures
intended to underscore the
USSR's military preparedness
to meet any eventualities.
The Soviet statement of 23 Octo-
ber in response to the Presi-
dent's speech was aimed at
gaining time for maneuvers to
generate pressure on the US
to :Lift the quarantine and ab-
stain from military action
against the missile bases.
The statement did not specifically
deny the existence of the mis-
siles but repeated the Septem-
ber claim that Soviet military
equipment in Cuba was "designed
exclusively for defensive pur-
poses."
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Although Moscow denounced
the US quarantine, it avoided
any threats of countermeasures,
The only specific action con-
tained in the statement; was a
call for a UN Security Council
meeting on the US violation of
the UN charter and the threat
to peace.
Khrushchev's immediate
aim was to inhibit Washington's
freedom of action by drawing the
US into negotiations. On 24
October he called for a summit
meeting and, on the following
day, promptly accepted U Thant's
appeal. for negotiations and a
temporary suspension of Soviet
military shipments and the US
quarantine.
The Soviet leaders sought
to convey an impression of com-
posure and calmness in dealing
with the crisis. Khrushchev
and other top leaders went back-
stage to greet an American opera
singer after a performance on
24 October. The Soviet premier
went out of his way to meet with
a US industrialist for over three
hours on the same day.
In this interview, Khru-
shchev adopted a confident stance,
asserting that it was too late
for the US to "take Cuba" and
that the US would have to get
accustomed to living with So-
viet missiles in Cuba. He
warned that the US could stop
Soviet ships a few times, but
at some point he would order
his submarines to sink a US
quarantine ship. Although he
stressed the USSR's readiness
to face up to a war, he con-
cluded by indicating that a
meeting with President Kennedy
was both desirable and necessary.
Moscow's desire to prevent
any escalation of the crisis
and to avoid provoking the US
was also reflected in the lim-
ited military preparedness
measures that were undertaken.
The USSR also avoided any threats
of retaliatory action in Berlin
or at other points of East-West
contention. Soviet propaganda
played down the possibility of
a new Berlin crisis and even
professed to see a "more real-
istic approach" to the German
problem in debates at the UN
General Assembly.
Khrushchev's Retreat
By 25-26 October, Khru-
shchev had become convinced that
the situation was critically
dangerous and hat to be liqui-
dated at once. The firmness of
the US attitude made it clear
that Soviet maneuvers to gain
time and involve the US in pro-
tracted negotiations were failing.
In addition to the rapid con-
centration of US forces in the
Caribbean area, the Soviet lead-
ers probably received information
which led them to believe that
a US air strike against the
missile installations or an in-
vasion of Cuba might be imminent.
Confronted with these
ominous prospects, Khrushchev
decided that immediate action
was required to avert US mil-
itary intervention which would
spell complete disaster for his
Cuban venture, inflict enormous
damage on the USSR's world
position, and make the risks
of any meaningful Soviet response
elsewhere in the world prohib-
itive. On 26 October, he dis-
patched his long, rambling
private letter to President
Kennedy, indicating in guarded
language Soviet willingness to
acce:pt US terms for a settle-
ment.
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In less than 24 hours,
Khrushchev sent another letter
to the President which was pub-
lished immediately in Moscow.
It called for reciprocal Soviet-
US withdrawals of offensive
weapons from Cuba and Turkey
under international supervision
and for mutual nonaggression
guarantees covering these two
countries. This letter may
have been part of a Soviet con-
tingency plan prepared in advance
to provide a line of retreat if
the missile buildup should be
detected prematurely and if US
reaction was stronger than ex-
pected.
In his talk with the US
industrialist on 24 October,
Khrushchev had raised the ques-
tion of US missile bases in
Turkey, suggesting that he had
some move of this nature in
mind at that point.
Despite the inconsistency
between his two letters, Khru-
shchev probably believed that
the US leaders would regard the
unpublished private message of
26 October as his real position
and would dismiss the later one
as a face-saving propaganda
maneuver.
President Kennedy's 27
October reply stating that
Khrushchev's private proposals
of 26 October "seem generally
acceptable" opened the way for
the Soviet premier's public
backdown on 28 October. He
then informed the President
that a "new order" had been
issued to dismantle the mis-
siles and return them to the
USSR. He represented the Presi-
dent's offer to give assurances
against an invasion of Cuba
as a formal commitment and
declared that, in view of this
alleged pledge, "the motives
which induced us to render
assistance of such a kind
(offensive weapons) to Cuba
disappear." Khrushchev also
committed the USSR to reach
agreement "to enable UN
representatives to verify the
dismantling of these means."
Postcrisis Negotiations
Khrushchev then moved
quickly to get negotiations for
a settlement under way, to im-
press the US with his good faith
in carrying out his commitments,
and to minimize Soviet respon,
sibility for any complications
which might arise. Deputy For-
eign Minister Kuznetsov, who was
immediately dispatched to New
York, assured Ambassador Steven-
son on 30 October that the mis-
siles would be dismantled and
removed in two of three weeks,
after which verification could
be carried out by any means the
US desired. Gromyko also re-
affirmed to Ambassador Kohler
on the same day the Soviet desire
to reach an agreement as quickly
as possible.
Mikoyan's urgent trip to
Havana via New York also re-
flected the Soviet leaders' con-
cern that Castro's tactics might
jeopardize the negotiations, re-
vive the danger of US military
action, and thwart the USSR's
efforts to salvage its position
in Cuba and the world.
In the first half of No-
vember, Soviet negotiators took
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advantage of Castro's rejection
of any form of UN inspection
in Cuba and the easing of the
crisis atmosphere to maneuver
the USSR out of the embarrassing
agreement to UN verification
of the removal of the missiles.
Although Khrushchev felt he had
no choice at the height of the
crisis but to agree to a UN
role, Moscow was concerned
that this would create a dan-
gerous precedent in the. future,
particularly with regard to
controls over any disarmament
or nuclear test ban agreements.
Kuznetsov's first step
was to agree to inspection by
an International Red Cross
team of Soviet ships en route
to Cuba. After stalling on
the implementation of this
scheme, he proposed the bilat-
eral arrangement whereby US
naval vessels contacted Soviet
ships carrying missiles back
to the USSR for the purpose of
counting the missiles.
After the withdrawal of
the 42 missiles was completed.
on 10 November, the Russians
turned their attention to
countering U.S pressure for the
removal of the IL-28 jet light
bombers. They charged that
the US was seeking to use this
issue as a means of evading a
formal noninvasion pledge.
Castro's unwillingness to
release the bombers was almost
certainly one of the principal
areas of sharp disagreement in
Mikoyan's protracted talks in
Havana. At one point, Moscow
attempted to evade this problem
by publicly claiming that the
IL-28s were the "property of
Cuban armed forces."
However, the growing in-
dications that the US intended
to impose more stringent quar-
antine measures apparently pro-
vided Mikoyan with the leverage
which finally resulted in Castro's
19 November agreement to remove
the 'bombers, which he now
acknowledged "belong to the
Soviet Government." Castro's
statement--probably following
a bitter "showdown" session
with Mikoyan--enabled Khrush-
chev to inform President Kennedy
that the IL-28s would be with-
drawn just a few hours before
the 'President's press conference
on 20 November.
Moscow probably regarded
this as the final step in liqui-
dating the Cuban crisis. On 21
November, the USSR and other
Warsaw Pact countries announced
the cancellation of the special
military preparedness measures
that were put into effect on 23
October. All that remains, in
the Soviet view, is for the US
and the USSR to issue formal
declarations in the UN,setting
forth the fulfillment of the
commitments contained in the
exchange of letters between
President Kennedy and Khrushchev.
The USSR's final goal,
therefore, will be to obtain a
clear US noninvasion pledge
without undertaking any further
Soviet commitments regarding
UN verification of the removal
of offensive weapons and of the
nonreintroduction of such weap-
ons into Cuba in the future.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
WEST GERMAN ECONOMIC TRENDS
After a decade of boom,
West Germany's economy is ex-
periencing a moderate slowdown
characterized by diminished de-
mand, rising costs and prices,
and a decline in the growth of
exports. There are good pros-
pects, however, for continued
prosperity at a reduced growth
rate and for a return do equilib-
rium in international payments.
Government efforts to contain
inflationary pressures by means
of budgetary restraint threaten
to slow the defense build-up
and to reduce Bonn's foreign
aid program.
The Boom
From 1950 to 1960, the West.
German economy showed an average
increase in GNP of more than 7.3
percent annually. Spurred in-
itially by the postwar reorgan-
ization and reconstruction of
industry, this unusual growth
rate was perpetuated largely
by an excellent export perform-
ance, resulting from the world
demand for German machine tools
and other capital equipment.
The Federal Republic is
the strongest component. of the
European Economic Community
(EEC). In 1961, its GNP was
$74.6 billion and its steel pro-
duction was 33.5 million tons,
accounting for 36 percent and
46 percent respectively of the
EEC totals.
The West German living
standard has become one of the
highest in Europe, as evidenced
by increasingly widespread own-
ership of household appliances,
TV sets, and cars. In 1960,
West Germans were eating twice
as much meat and butter as in
1950 and proportionately' less
bread and potatoes. They were
also drinking 50 percent more
wine than before the war and
considerably more beer. As
tourists they spent $520 mil-
lion outside the country in 1960
--nearly 19 percent above the
previous year.
By 1961 an accumulated
multibillion-dollar trade bal-
ance surplus forced the govern-
ment to take corrective measures.
By such efforts as an upward re-
valuation of the currency and
increased foreign aid and capital
exports, Bonn has returned to
virtual equilibrium in its
balance of payments.
Ironically the success of
these efforts is partially re-
sponsible for a rise of uneasiness
in German business and commercial
circles, which fear that a weak-
ening of the country's competitive
position in foreign trade portends
serious repercussions on the econ-
omy as a whole.
Current Difficulties
Last year the pace of eco-
nomic activity faltered. The
annual expansion in the GNP de-
clined to 5.3 percent from 1960's
8.8 percent and in 1962 is ex-
pected to be only around 4 per-
cent.
Although production growth
was checked by shortages of plant
and skilled manpower, a weaken-
ing of demand was probably also
a factor. Steel production has
declined to about 80 percent of
capacity, and the rate of new in-
vestment in the first half of
1962 was only 4 percent above
that for the same period in 1961
--as compared with increases of
10-12 percent in the previous
two years. A reluctance on the
part of industry to place new
orders for machinery reflects
pessimism over long-term pros-
pects as costs rise and profit
margins are squeezed.
West German labor unions,
after many years of remarkable
self'-restraint, have recently
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CURRENT INTELLIGENCE WEEKLY SUMMARY
begun noisily demanding a larger
slice of the national pie. Wages
and salaries have risen sharply
--by over 10 percent in 1961--
often exceeding productivity
gains. This, in turn, has led
businessmen to pass the differ-
ence on to consumers through
higher prices.
Pressure on profits, politi-
cal tensions, and somber economic
warnings by government officials
have helped depress the German
stock market. Stocks have de-
clined 34 percent so far this
year.
Certain sectors of the econ-
omy are beset with special dif-
ficulties. Since 1958, the coal
industry has faced a sales crisis
arising from competition of
cheaper fuel oil and gas. While
fuel oil sales increased about
275 percent from 4.9 million
tons in 1957 to 18.2 million
tons in 1961, coal production
has stagnated and sales have
even dropped, causing vast ac-
cumulations of unsold stocks.
Since 1959, coal output held
an annual level of about 140
million tons, with unsold pit-
head stocks of 11,874,000 tons
as of May of this year.
Stringent rationalization
measures, including the closing
of marginal producers, are under
way in the coal industry. Econ-
omists fear, however, that such
efforts will be insufficient to
avoid a bitter political struggle
between the oil and coal in-
terests. This could lead to
more drastic fuel oil import
restrictions--such as quotas--
unless an effective energy
policy can be worked out.
The recent collapse of the
Willy Schlieker shipbuilding
and steel empire has focused at-
tention on the shipbuilding in-
dustry, where West German firms
are losing out to foreign competi-
tons. Germany's share in total
world shipbuilding declined from
17.3 percent in 1956 to 12.9
percent last year.
The main problem is the in-
ability of German firms to match
the favorable price and financing
terms offered by Japan, the Neth-
erlands, and other countries.
Thus far German shipbuilders
have refrained from seeking
government subsidies--which are
contrary to the 1957 EEC treaty--
but are stepping up demands for
other forms of government help,
such as longer term export cred-
its, lower interest rates, and
long-term exchange rate guarantees.
Still another problem area
is agriculture. Despite postwar
gains in productivity and con-
siderable progress in land re-
form, farming remains relatively
inefficient and its products high
priced. Difficult adjustments
lie ahead as the competitive
challenges of the Common Market
come into play.
Farmers are becoming in-
creasingly vocal in their demands
for continued protection, as
shown in recent protest demon-
strations by farmers in Lower
Saxony. The need for further
efforts to modernize farm pro-
duction and eliminate uneconomic
units poses thorny political as
well as economic problems.
Trade Developments
Despite a sharp decline
in the growth of exports last
year, Bonn's share of interna-
tional trade has remained steady,
indicating that its competitive
position has not been appreci-
ably weakened by the currency
revaluation and wage increases.
In 3.961 its foreign trade reached
a value of $23.7 billion, putting
West: Germany ahead of the UK as
the nation with the second-largest
--after the US--trade volume in
the free world.
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Since 1950 West Germany's
trade has increased by about
five times from $4.7 billion
to an estimated $25 billion in
1962. In 1961, its trade ac-
counted for 31 percent of its
GNP, as compared with 13 per-
cent in 1936. Export surpluses
have been recorded for every
year since 1951--most recently
$1.2 billion in 1960 and $1.6
billion last year. The surplus
for 1962 is expected again to
surpass the $1 billion level.
The Federal Republic's
trade with the Sino-Soviet bloc
over the last several years has
averaged 6 to 7 percent of its
global trade, and approximately
a third to a fourth of this bloc
trade was with East Germany. In
1961, exports to the Soviet bloc
were 5.6 percent of West Germany's
total, while imports amounted to
6.1 percent of the total.
Alarmed over the effects
of wage and price increases on
exports, Economics Minister Er-
hard since early this year has
been flashing alarm signals. He
has been preaching wage restraint
to :Labor leaders and price re-
sponsibility to businessmen. He
has been demanding a brake on
government spending.
'WEST GERMAN ECONOMY, 1961
CURRENT INTELLIGENCE WEEKLY SUMMARY
INDUSTRIAL
PRODUCTION
GROSS
NATIONAL
PRODUCT
(BILLION
DOLLARS)
REST OF
FREE WORLD
22.4%
!iOVIET BLOC
(INCL EAST GERMANY)
5.6%
U.S.
6.7%
EEC
31.2%
REST OF
WEST EUROPE
34.1%
PERCENT
INCREASE
OVER
PREVIOUS
YEAR
5.7 1
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REST OF
FREE WORLD
25.7 %
SOVIET BLOC
INCLUDING EAST
GERMANY)
6.1% U. S.
13.5%
EEC
30.7%
REST OF
WEST EUROPE
24.0%
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CURRENT INTELLIGENCE WEEKLY SUMMARY
His appeals, however, gen-
erally are being ignored. Labor
leaders rejected his dire warn-
ings on "exorbitant wage demands,"
and industrialists--notably the
Volkswagenwerk--resisted his
pressure to hold down prices.
Chancellor Adenauer has continued
to employ a long-favored device
of handing out budgetary "elec-
tion gifts" to special interest
groups and tolerating wage and
price increases to gain politi-
cal favor.
Undaunted, Erhard has kept
up the pressure and this fall
was able to win government back-
ing for a fairly mild anti-in-
flation program consisting
largely of agreement on an abso-
lute ceiling on the 1963 federal
budget.
Under this budget;, reduc-
tions are scheduled in some
fields such as housing,, and
little or no expansion in other
areas such as agriculture, trans-
port, and labor. Defense is to
get $4.25 billion--a $500 million
increase over last year, but in-
sufficient to achieve agreed NATO-
force goals on schedule.
The foreign aid program is
even harder hit. Budgetary aid
funds for new development as-
sistance projects in 1963 will
come to something between $125
million and $250 million, as
contrasted with this year's
total of around $312 million.
Pressures are also increasing
against Bonn's policy of pro-
viding development aid without
ties to purchase of German
products, and officials have
hinted that a partial departure
from this principle may be forth-
coming soon.
Economic Outlook
Considering the persistent
labor shortage and continued
weak demand for investment goods
and many consumer durables, in-
dustrial production has made a
fairly good showing this year.
In recent months, over-all pro-
duction has been close to 6
percent above comparable 1961
levels, and compares favorably
with the rate of growth recorded
earlier in the year. However,
West German officials are likely
to continue using the inflation
scare, the reduced growth rate,
and a return to equilibrium in
international payments as a
basis for an overly cautious
attitude toward defense con-
tributions, foreign aid com-
mitments, and trade policies.
In September, the cost of living
was only 2.8 percent higher that}
a year ago, indicating that the
threat of price inflation has
eased somewhat. The economy re-
mains basically healthy with no
recession likely in the near fu-
ture.
The labor shortage experi-
enced over recent years remains
the chief inhibiting factor to
a further rapid increase in
the country's GNP. Domestic
labor reserves have dried up
almost completely--the unem-
ployed rate is currently a
phenomenally low 0.5 percent.
At the same time, there has
been virtual cessation of the
East German refugee influx,
which in some years of the past
decade contributed a total of
150,000 new workers.. Further-
more, generally full employment
conditions currently existing
in other countries of Western
Europe reduce the prospects
for recruitment of adequate
foreign labor.
The outlook at present
is for a continued growth rate
at the more modest rate of 3
to 4 percent annually over the
next several years, suggesting
somewhat more normal condi-
tions of a maturing economy
operating at a high level and
full employment with appreci-
ably less scope for expansion
than previously.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
MALAYSIA FEDERATION PROBLEMS AND PROSPECTS
Government leaders in Sing-
apore, the Federation of Malaya,
the British colonies of Sarawak
and North Borneo, and the Brit-
ish protectorate of Brunei are
moving toward the creation of
the long-debated Federation of
Malaysia. Encouraged by their
British mentors, they aim at
having the new federation in
being by August 1963.
Singapore Problem
The objective of the pro-
moters is to form a political
structure which will include
Singapore without allowing its
1.5 million Chinese to gain a dom-
inant role. This was the prob-
lem which led Malay leaders to
exclude Singapore from their pen-
insular federation when it was
set up in 1957.
The problem has become more
acute as it has become more ob-
vious that the present moderate
government of Singapore is un-
likely to survive another elec-
tion. Leftist influence has
been gaining, and if Singapore
itself is to go leftist, the
argument runs, it would be far
better if it did so within the
context of a broad federation--
controlled by moderate or con-
servative leaders--which would
take charge of internal security,
foreign policy, and defense.
A major hurdle for the
Malaysia plan was passed last
September when over 70 percent
of Singapore's voters approved
the government's proposal on the
merger. The vote was a personal
triumph for Prime Minister Lee
Kuan Yew. Lee's Peoples Action
Party has been hard pressed by
the Barisan Socialist Party, an
extreme left group which broke
with Lee over the merger issue.
Antimerger Sentiment
In Borneo Territories
Latent opposition to the
Malaysia plan among the peoples
of the Borneo territories has
become vocal since the publi-
cation last summer of the re-
port of the Cobbold Commission--
a British-Malayan group which
examined local attitudes toward
merger. The commission claimed
to have found that a substantial
majority in North Borneo and
Sarawak favored federation, but
its report makes clear that there
is at the same time widespread
anxiety to protect the "special
interest" of the territories and
"special rights" for its natives.
A number of Borneans apparently
would prefer to receive self-
government themselves before en-
tering a federation.
The strongest opposition to
joining Malaysia comes from Brunei,
culturally the most "Malay" of
the Borneo territories. The Sul-
tan of Brunei favors federation,
largely because he thinks he sees
the possibility of his becoming
its, "paramount ruler." Brunei's
only political party, however,
has, done some successful cam-
paigning against the merger. The
Sultan himself has recently vacil-
lated because he feels an official
delegation from Brunei was slighted
by the Malay Government in Kuala
Lumpur. The possibility that
Brunei might hold back from the
merger encourages the opposition
in other territories.
Both the Sarawak and North
Borneo governments have duti-
fully issued white papers to
advertise the potential benefits
of Malaysia, and North Borneo's
legislative council has unani-
mously endorsed the idea of join-
ing the federation--with ap-
propriate safeguards. In
Sarawak in particular, however,
budding leftist political leaders
are campaigning against the move.
Antimerger representatives from
this territory as well as from
Brunei and North Borneo will
probably appear in January as
petitioners before the UN De-
colonization Committee of 17
in New York.
Even the proponents of
Malaysia are still wrestling
with such problems as the dura-
tion and nature of the transi-
tional period before complete
merger occurs, whether Islam
should be the state religion,
and the position of English as
an official language. The
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OCEAN
PROPOSED FEDERATION
OF MALAYSIA
sible American military base in
North Borneo. This he said would
lead his government to allow the
USSR. to set up a base in the Indo-
nesian portion of Borneo. Such
statements and less direct hints
have provoked a "hands off" warn-
ing from Malaya's Prime Minister
Rahman. Rahman and Singapore's
Lee are the leading spokesmen
for the proponents of Malaysia.
The Philippines, too, have
added to Malaysia's prenatal
problems. Having renewed in
June an ancient claim to North
Borneo, Manila's representative
in 1; he UN demanded on 27 Novem-
ber that Britain discuss the
claim. This demand has been made
in the face of the fact that the
British, prior to June, had not
been approached by any Philippine
government, although North Borneo
has been in British hands for
nearly a hundred years.
Rahman has replied that
he considers the Philippine
claim a product of "pure greed"
rather than concern for security.
However, he has tentatively
agreed to attend a conference
of the Association of Southeast
Asia (Malaya, the Philippines,
and Thailand) in January and
to discuss Malaysia with the
Manila government at that time.
opponents tend to argue more
fundamentally that Malaysia is
being created too fast and too
soon and that the territories
involved are ill-prepared to
work together.
Present Prospects
One of the dangerous trends
in the debate is that the opposi-
tion campaign is assuming an
"anticolonialist" character.
Opponents tend to assert that
only a demand for unconditional
independence for each small
potential state is truly "rev-
olutionary" and "progressive,"
while amicable negotiations for
independence and for merger in
a larger union are "reactionary"'
and "neocolonialist."
Indonesia and
The Philippines,
This line of argument seems
to be inspired in part by Indo-
nesia, which fears the creation
of a competing power complex in
the area. The principal. op-
ponents of merger in Brunei, for
example, declared early in the
debate that any valid concept
of Malaysia must allow for in-
clusion of Indonesia and the
Philippines.
In late September Indo-
nesian Foreign Minister Subandrio
set up the straw man of a pos-
The two factors which will
remain uppermost during the
coming months are the timing
and terms of admission of the
Borneo territories and the
political situation in Singa-
pore. The two are closely re-
lated in that the sooner merger
can be effected, the less chance
there will be for the situation
in Singapore to deteriorate and
weaken Lee's position. The
British appear to be aware of
the need for as much haste as
possible without sacrificing
stability.
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