WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A006500050001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 37
• Document Creation Date: December 20, 2016
• Document Release Date: April 18, 2006
• Sequence Number: 1
• Publication Date: July 5, 1968
• Content Type: SUMMARY

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DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Secret
44
State Dept. review completed
5 July 1968
No. 0027/68
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(Information as of noon EDT, 3 July 1968)
VIETNAM
Hanoi and Peking have made special efforts to counter
a growing public impression that disagreements over
the Paris talks had led to serious frictions in their
relations. In Saigon, the gradual erosion of the
power and influence of the generals who had been
politically dominant since 1965 continues. The for-
mation of a progovernment political front has moved
forward and the front may be officially proclaimed
next week. A relatively low rate of enemy activity
continued throughout South Vietnam this week.
THAI OPERATIONS AGAINST INSURGENTS HAVE MIXED RESULTS
Communist insurgents in the critical northeast area
apparently are being hard pressed by army operations,
but the guerrilla bands have been able to keep them-
selves intact.
HANOI LOOKS TOWARD REBUILDING
Hanoi appears to be developing plans for economic
rehabilitation although construction work under way
continues to be limited to repairing bomb damage.
INSTABILITY AND UNREST INTENSIFY IN CHINA
Signs of disorder and instability have been multiply-
ing in recent weeks in many areas of China. Clashes
between rival Red Guard organizations have grown more
severe in a number of provinces and have become par-
ticularly virulent in Kwangtung and in the border prov-
ince of Kwangsi, through which the rail line to North
Vietnam runs.
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Europe
THE WEEK IN PERSPECTIVE 11
MOSCOW OKAYS MISSILE LIMITATION TALKS
Moscow's decision to enter into an "exchange of
opinions" on the limitation of offensive and defen-
sive missiles was influenced in part by the judgment
that its strategic position had improved but would
begin to slip over the next few years if current
military plans take effect.
GAULLISTS WIN SWEEPING ELECTION VICTORY
There is some fear the landslide may lead De Gaulle
to lose sight of the substantial grievances that led
to the rebellion in May, but it could give impetus
to new reforms.
EC ACTS ON FRENCH TRADE MEASURES
The Commission was sympathetic to France's plight but
firm in noting the unacceptability of unilateral act-
ion. "Mutual aid" is said to be available but France
must work within the Community.
FRENCH MILITARY PROGRAMS FACE DELAYS
The new budget makes no provision for increased wages
and equipment prices, costs which will now have to be
absorbed by cuts in military spending. Prime targets
for delays are systems related to De Gaulle's nuclear
strike force.
CONSTRUCTION OF SOVIET FIAT PLANT CLOSE TO SCHEDULE
Cars may start coming off the line by the end of next
year and by 1972 are scheduled to do so at the rate
of 660,000 a year.
EAST GERMANY FACING BACKLASH FROM ACCESS TACTICS
Bonn's grudging compliance with new Berlin access
regulations while refusing East Germany's demand for
recognition may be raising some doubts in Pankow
about the effectiveness of its recent tactics.
THE STRUGGLE WITHIN THE CZECHOSLOVAK PARTY CONTINUES
District party organizations selected delegates to
the party congress amid controversy over a published
appeal calling for conservatives to be driven from
power.
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DAHOMEY'S MILITARY REGIME TO INSTALL CIVILIAN GOVERNMENT
The army's nominee for president is a respected mod-
erate, but lacks a political base. He will be depen-
dent on continued army support in dealing with the
country's deep-seated political divisions and eco-
nomic problems.
Western Hemisphere
DISCONTENT STILL SIMMERING IN BRAZIL
The rash of student-led disorders that shook Brazil
in June have made clear the gulf separating the Costa
e Silva government from the majority of the Brazilian
people.
CENTRAL AMERICAN COMMON MARKET THREATENED
Nicaragua reportedly has threatened to break up the
Common Market if the other members do not promptly
ratify a 30-percent tariff surcharge on imports from
outside the area.
CRISIS CONTINUES IN URUGUAY
President Pacheco has decreed a temporary freeze on
wages and prices but strong opposition forces con-
tinue to threaten his efforts to restore economic
and political stability.
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The lull in Communist military activity throughout South Vietnam
since early June continues.
There has been no shelling in the Saigon area for the past two weeks.
It probably is too early to conclude that this decline in the level of
Communist military action to the lowest point so far this year represents a
deliberate signal of military restraint designed to influence the US position
on the issue of a complete cessation of bombing. There are strong
indications that Communist plans for a major attack against Saigon have
had to be postponed because of intensive allied ground operations and
incomplete preparations.
Hanoi's announced intention to release three more captured US
pilots, however, suggests that the North Vietnamese may be seeking to
create a favorable atmosphere for breaking the impasse in the Paris talks.
Politburo member Le Duc Tho, the "senior adviser" to the North Viet-
namese delegation, has returned to Hanoi for consultations but a delega-
tion spokesman indicated that' he would come back to Paris soon. Al-
though Hanoi radio has rejected the idea of an early cease-fire and has
carefully avoided any hint of flexibility on the bombing issue, Le Duc Tho
reportedly has indicated that the North Vietnamese are prepared to con-
tinue the talks beyond the US elections in November.
Both Hanoi and Peking are making deliberate efforts to counter
recent reports of growing friction in their relations. The North Vietnamese
publicly praised Chinese assistance and made an unusual gesture in ex-
pressing a wish for the success of the Cultural Revolution. Peking, for its
part, broke a long silence on Vietnam by hailing Hanoi's claim of having
destroyed the 3,000th US aircraft. Foreign Minister Chen Yi met Le Duc
Tho when the latter passed through Peking en route to Hanoi.
An apparent effort by radical Maoists to recover the initiative in the
domestic struggle is reflected in Peking's inflammatory propaganda since
the fall of the acting chief of staff in late March. This agitation has led to
a marked upsurge in political disorder and clashes between rival Red
Guard groups in many areas of China. The situation is particularly chaotic
in Kwangtung and in the border province of Kwangsi through which the
rail line to North Vietnam runs. 25X1
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VIETNAM
Hanoi's high ranking ad-
viser at the Paris talks has re-
turned home for consultations.
Le Duc Tho is expected back in
Paris shortly
25X1 and any for-
ward motion on Hanoi's part in
the Paris talks will probably
25X1 await his return.
Tho had well publicized
discussions with top Soviet lead-
ers on his way home and was met
in Peking by Foreign Minister
Chen Yi. He spent equal time in
both Communist capitals.
Within the past week, both
Hanoi and Peking have made spe-
cial efforts to counter a grow-
ing public impression that dis-
agreements over the Paris talks
had led to a serious deteriora-
tion in over-all relations between
the two. On 28 June Peking broke
its propaganda silence on the
Vietnam war, congratulating the
North Vietnamese on their claim
of having shot down 3,000 US air-
craft. Hanoi, for its part, went
out of its way to praise the Chi-
nese on the occasion of the party
anniversary.
Political Developments
In the South
The gradual erosion of the
power and influence of generals
who had been politically domi-
nant since at least 1965 con-
tinues. Having earlier removed
some officers from posts in the
Saigon area, President Thieu
last week accepted the resigna-
tion of one general in command
of a corps area and may take
early action on the offer to re-
sign of another. General Thang
replaced in IV Corps by General
Nguyen Viet Thanh of the 7th
Division, has been reportedly
assigned as a special assistant
to the Chief of the Joint Gen-
eral Staff. III Corps commander
Khang, who has reportedly been
assured by President Thieu that
his resignation will be acted
on "in a few days," expects to
be offered the ambassadorship
to Taipei. There are reports
that General Do Cao Tri, who was
exiled a few years ago by the
senior generals and later be-
came ambassador to South Korea,
will be named to replace Khang.
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Meanwhile, the formation
of a progovernment political
front took a major step forward
at a meeting in Saigon on 29
June of some 200 delegates, rep-
resenting a number of existing
fronts, political parties, re-
ligious sects, and National As-
sembly blocs. Addressing the
delegates, President Thieu urged
them to unify and noted that the
constitution committed the state
to "encourage" the development of
a two-party system. He expressed
a hope for cooperation between
the government and emerging "major
parties" as the country moved
toward the day when the struggle
against the Communists would
shift from the military to the
political arena.
Senator Tran Van Don, who
hopes to chair the new front
when it is formed, scheduled a
further organizational meeting
for 1 July. Various reports
indicate that the front will be
officially proclaimed during the
coming week and will be accom-
panied by a specific endorsement
of Thieu and his programs. Some
groups which do not endorse Thieu
evidently are expected to become
the nucleus of a formal opposi-
tion party.
It appears that one of the
conditions for possible adher-
ence to the new front by one key
group, the Citizens Front for All
Religions, was the release on 30
June of militant Buddhist leader
Tri Quang and other monks held
in protective custody since Tet.
The War in the South
The relatively low rate of
enemy activity which followed
the offensive against Saigon in
early May continued throughout
South Vietnam this week. Enemy
actions are now at the lowest
level of the year. Communist
ground assaults and rocket and
mortar attacks have also re-
turned to the pre-Tet level.
Following the general pat-
tern of recent weeks, the most
significant clashes between allied
and Communist troops this week
took place in I and III Corps.
The majority resulted from allied
efforts to find and destroy enemy
troop concentrations, base
areas, and supply points.
Early in the week a Commu-
nist force struck US Marine de-
fensive positions southeast of
Khe Sanh. Extensive allied air
strikes and supporting artillery
were used to repulse the attackers.
A subsequent sweep of the battle-
field found 157 enemy bodies and
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73 weapons. Enemy forces in the
northern provinces concentrated
on rice procurement and refitting
maneuvers; offensive action was
limited for the most part to
bombardment of allied installa-
tions and harassment of lines of
communication.
Around Saigon and in III
Corps generally, scattered clashes
resulted from intensive allied
maneuvers designed to pre-empt
any renewed enemy moves against
the capital. As of midweek, the
respite in enemy shellings of Sai-
gon was well into its second week.
There is considerable evi-
dence that the Communists have
been forced to reschedule their
timetable for a new campaign
against Saigon, but their exact
timing for another try remains un-
clear. Interrogation of a Viet
Cong infantryman who defected to
allied forces on 26 June indicates
that the third and final phase of
their so-called "second general
offensive" against Saigon was to
have begun on 28 June, but was
delayed. The rallier's informa-
tion is in line with a recently
captured document which suggested
that the planned offensive phase
may have been postponed from mid-
June - early July until perhaps
as late as August. Another high- 25X1
ranking prisoner,
also stated that a delay became
necessary because of incomplete 25X1
preparations and the stepped-up
allied operations.
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THAILAND: AREAS OF INSURGENT ACTIVITY
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THAI OPERATIONS AGAINST INSURGENTS HAVE MIXED RESULTS
Communist insurgents in the
critical northeast area apparently
are being hard pressed by army
operations.
Despite some monthly varia-
tions, statistical indicators
show that over-all Communist ac-
tivity in the northeast has lev-
elled off well below the highs
established in early 1967. In
addition, defectors and captured
documents reveal that army sweeps
have forced insurgent bands to
move out of base areas, have dis-
rupted their supply sources, and
have undermined insurgent morale.
One high-level Communist docu-
ment, for example, has revealed
that long-standing problems of
leadership and recruitment are
being severely aggravated by gov-
ernment operations.
The picture in the north-
east is not entirely favorable,
however. Although army opera-
tions have put strains on the
Communists, the guerrilla bands
are still intact, their casual-
ties have been low, and they are
still able to avoid contact with
superior government forces. In
addition, one unforeseen conse-
quence of the government's mili-
tary operations appears to be
that the Communists are making a
greater effort to remedy their
organizational weakness in the
villages.
The government's village se-
curity program recently received
a sharp setback when the police
refused to sign a US-sponsored
agreement providing for the train-
ing and arming of villagers.
The government, meanwhile,
still has its hands full with
tribal insurgents in the northern
provinces. In recent weeks, the
guerrillas have become more ag-
gressive and for the first time
have struck army truck convoys.
Although the northeast remains
the key area for the Communists,
it is increasingly clear that the
north has also become a major
target.
Bangkok may also be faced
with a growing problem from the
activities of the Malaysian Com-
munist guerrillas based in south-
ern Thailand. On 17 June guer-
rillas ambushed a Malaysian po-
lice unit across the border and
killed 16 policemen. Kuala Lum-
pur now is seeking greater coop-
eration from Bangkok in improving
joint border security operations.
In response to a Malaysian re-
quest, senior officials of the
two countries are meeting this
week in Kuala Lumpur to discuss
more effective tactics.
Bangkok is expected to re-
spond to Malaysia's request by
increasing security forces in the
area while avoiding the politi-
cally sensitive issue of inde-
pendent Malaysian operations on
Thai soil. Should the guerrillas
step up their cross-border activi-
ties, however, the Thai will come
under increasing Malaysian pres- 25X1
sure to overcome their compla-
cency toward this security prob-
lem.
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HANOI LOOKS TOWARD REBUILDING
Hanoi appears to be develop-
ing plans for economic rehabili-
tation although construction work
under way continues to be limited
to repairing bomb damage.
itating their economy. Hanoi has
continuously maintained a modest
but positive trade balance with
hard currency countries but could
make only small purchases of West-
ern equipment and technology.
Deputy Premier Le Thanh
Nghi's current aid-seeking mis-
sion to Eastern Europe and the
USSR appears to be oriented in
part toward finding out how much
assistance is available for a rel-
atively long-range rehabilitation
plan. Some of the agreements con-
cluded during his tour call ex-
plicitly for acquiring complete
plants in addition to the usual
immediate economic and military
support for North Vietnam's war
effort which, until this spring,
had been the primary concern of
Nghi's visits.
Hanoi also has made prelim-
inary contacts with Western in-
dustrial sources. Several months
ago a North Vietnamese delegation
visited Paris to discuss economic
development with French firms and
more recently a number of Japa-
nese firms indicated that they
were interested in participating
in any efforts to rebuild North
Vietnam.
The Vietnamese, however,
will rely primarily on their Com-
munist allies for aid in rehabil-
Current construction work
in North Vietnam continues to
be limited primarily to repairing
essential transport and power
services. Since the beginning of
the limited bombing halt on
31 March, the seven dropped spans
of the Doumer Bridge over the Red
River at Hanoi have been replaced
and the bridge opened to rail traf-
fic. The main rail line from Ha-
noi to the Chinese border has also
been cleared. The repair of power
plants has restored about 45 per-
cent of the Hanoi-Haiphong power
grid compared with 36 percent in
March.
Construction has not resumed
at the Thac Ba hydroelectric plant
where work was suspended during
the bombing of North Vietnam.
Construction of the steel plant
at the Thai Nguyen Iron and Steel
Complex also has not been resumed
and repair of bomb damage has not
been started. Some foreign Com-
munist technicians remain at these
projects, however, providing main-
tenance assistance. 25X1
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INSTABILITY AND UNREST INTENSIFY IN CHINA
Signs of disorder and insta-
bility have been multiplying in re-
cent weeks in many areas of China.
Clashes between rival Red Guard or-
ganizations have grown more severe
in a number of provinces, particu-
larly in Kwangtung and in the border
province of Kwangsi, through which
the rail line to North Vietnam runs.
Much of the ensuing violence has
been fed--and in many cases may have
been initially encouraged--by in-
flammatory propaganda from Peking.
This propaganda has grown increas-
ingly shrill since late March, when
acting chief of staff Yang Cheng-wu
fell.
Clashes and other indications
of instability have been especially
noticeable in those few provinces
where no "revolutionary committees,"
the new provincial governing organs,
have been set up, but they have by
no means been confined to these
areas. Supposedly "pacified" prov-
inces--Kwangtung is a prominent ex-
ample--have been hard hit by con-
tinuing problems.
Troubles are also besetting the
"revolutionary committees" them-
selves. On 20 June, the nationally
distributed Shanghai newspaper Wen
Wai Pao stated that splits among
mass organizations, between "old
and new" cadres, and among leading
officials have rendered many pro-
vincial revolutionary committees in-
capable of "effectively grasping the
struggle against enemies." This
theme has been echoed by editorials
from cities in several other prov-
inces. In Shanghai itself, posters
have appeared attacking the munici-
pal revolutionary committee. Mem-
bers of the municipal committee in
Hangchow, Chekiang, reportedly
have themselves been involved in
brawling.
In addition to political tur-
moil, South China has been afflicted
by heavy rains, which have caused
flooding in many provinces. The
most severe flooding has been re-
ported from Kwangtung, where both
local traffic and traffic to North
China has evidently been disrupted.
Elsewhere floods along the main
rail line to North Vietnam have
been described as serious and pre-
sumably may be adding to traffic
disruptions caused by civil disor-
ders.
Signs of instability and ten-
sion are also evident in Peking,
where new poster attacks on leading 25X1
officials have been observed.
Other posters denounce a ege -
tacks on Chou En-lai and Peking city 25X1
boss Hsieh Fu-chih. Still others
call for defense of Mao's wife, who
has played an increasingly promi-
nent role in the past several months.
Such attacks reflect continuing
crosscurrents in the central govern-
ing group as well as in the prov-
inces. F :1
25X1
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In Moscow, party leader Brezhnev gave a speech reviling American
society. It was clearly meant to counterbalance any impression held by
Moscow's friends and allies that the Soviets would be soft in their
relations with the US.
East Germany's Walter Ulbricht had his 75th birthday to celebrate
this week but little else. The East Germans are making their new restric-
tions on West German access to Berlin stick but are not achieving their
basic aim of gaining recognition by Bonn. Instead, East Germany's moves
could have a backlash effect detrimental to its trade and commercial
interests. Concern in Bonn over Pankow's restrictions seems to have
receded to a seasonal low as the annual summer vacation exodus got under
way this week. Few if any senior officials will be available until after
Labor Day.
Czechoslovak affairs during the week were characterized by conflict,
concern, and confusion. Preliminary selection of delegates to the Sep-
tember party congress began amid controversy over a published appeal to
drive conservatives from their positions of power. The timing of the
withdrawal of the Soviet and Eastern European military units which
participated in the Warsaw Pact maneuvers in Czechoslovakia that ended
30 June remains unclear. The confusion that has arisen seems to be
another reflection of the hasty planning for these exercises and points
again to the political nature of the entire action.
Plans went ahead in Poland for a party central committee plenary
session to open next week; no offical announcement has been made yet,
however.
The minority Christian Democratic government in Italy expects to
survive a vote of confidence to be held soon. The Unified Socialist party
and the small, Republican Party will probably either support the govern-
ment or abstain.
The last tariff barriers between members of the Common Market 25X1
were eliminated on 1 July. Jean Rey, head of the Market's Executive
Commission, used the occasion to put forth a strong declaration calling for
more dynamism in the European Community.
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MOSCOW OKAYS MISSILE LIMITATION TALKS
Moscow's decision to enter
into an "exchange of opinions"
on the limitation of offensive
and defensive missiles was in-
fluenced in part by the judgment
that its strategic position had
improved but would begin to slip
over the next few years if cur-
rent US military plans take ef-
fect.
Negotiations will be long
and hard, but some Soviet leaders
probably are convinced that it
would be advantageous for the
USSR to attempt to halt or slow
the arms race and they were able
to persuade others on the polit-
buro to agree at least to ex-
plore the prospects.
Economic, political, and
military considerations all
played a part in the Soviet
decision. The possibility of
a de-escalation of the Vietnam
war raised for Moscow the pros-
pect that the US would be free
to channel more funds into new
and better offensive and defen-
sive missile systems. With com-
peting demands on its own scarce
resources, the USSR would be
hard pressed to match additional
US spending. The length of time
that Moscow took to reply to the
US offers to hold talks, however,
suggests that the decision in
Moscow was made only after con-
siderable weighing of the al-
ternatives. Foreign Minister
Gromyko's speech on 27 June and
Brezhnev's remarks on 3 July in-
dicate that there are lingering
misgivings among the Soviet
leaders.
The list of nine disarma-
ment topics subject to negoti-
ation put forth in the Soviet
memorandum made public on 1
July also suggests that Moscow
will seek a high price for any
agreement. The list contains
familiar Soviet proposals--such
as a ban on nuclear overflights
and the liquidation of foreign
military bases--that have been
advanced in various forums over
the years. It makes no explicit
mention of limiting antiballistic
missile deployment, but it does
propose restrictions on offen-
sive strategic missiles and mis-
sile carrying submarines. The
memorandum's treatment of re-
gional disarmament was aimed
particularly at the Middle East,
but a disarmament agreement was
made conditional on Israeli with-
drawal from occupied Arab ter-
ritories.
The memorandum appears to
be a more serious offering than
the usual "general and complete"
disarmament propaganda package.
In publicizing the memorandum,
Kosygin said that "stage-by-
stage" implementation would be
a "serious contribution" to
slowing the arms race. Some of
its elements probably are in-
tended for independent consid-
eration in the UN or its sub-
sidiary bodies. Other elements
may be the quid pro quo sought
bilateral talks with the US.
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GAULLISTS WIN SWEEPING ELECTION VICTORY
The spectacular Gaullist
election victory on 30 June
gave the Union of Democrats
for the Fifth Republic an abso-
lute parliamentary majority,
something no single party has
had before in French republican
history. Many Frenchmen, appar-
ently frightened by the student-
labor rebellion in May, chose
public order and stability as
represented by the status quo.
The combined French left lost
more than 50 percent of its par-
liamentary strength and the cen-
ter declined still further as a
viable political force.
The Union of Democrats and
Valery Giscard d'Estaing's Gaull-
ist-allied Independent Republi-
cans, who together held a near-
majority of 242 seats in the
previous National Assembly, won
a total of 355 seats. Although
the Giscard group increased its
representation by one third, it
has lost its bargaining power,
since the government no longer
has to depend on it for a major-
ity. Ill feeling between Premier
Pompidou and Giscard, which
flared during the crisis and
the campaign, may make it dif-
ficult for Giscard to continue
his supporting role. Pompidou
may try to use the Gaullist
victory to undercut him as a
potential rival for power in a
post - De Gaulle era.
The left saw significant
numbers of its traditional sup-
porters, particularly workers,
shift to the Gaullists. It lost
seats in such areas of leftist
strength as the industrial and
coal mining north, the Paris
"red belt," and departments in
the southwest and around Marseille.
Party Strengths in French National Assembly Elected June 1968
Independent Republican
Progress and Modern Democrac
Federation of the Le
Communist Part
487 Deputies*
TWO SEATS STILL UNACCOUNTED FOR ARE IN FRENCH OVERSEAS TERRITORIES
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Francois Mitterrand's Federation
of the Left paid a heavy price
for its electoral cooperation
with the Communists. Although
Mitterrand was re-elected, a
number of his key associates were
not and the future of the Feder-
ation as well as Mitterrand's
own future as leader of the non-
Communist left are in doubt.
The Communists, who now
have the smallest number of dep-
uties since the 1958 legislative
elections, must decide whether
the moderate line of Secretary-
General Waldeck Rochet is ap-
propriate for the future or
whether the party must exchange
respectability for militancy.
De Gaulle's opposition,
faced with the possibility of
a rubber stamp parliament, may
seek other "avenues" to express
dissent. Whether the dissatis-
faction becomes great enough to
erupt again into overt action
against the establishment depends
primarily on De Gaulle. There
is some fear that the landslide
may lead him to lose sight of
the substantial grievances that
still exist. De Gaulle, however,
during the campaign emphasized
the need for massive changes and
the victory could give impetus
to meaningful reform. The 154
new deputies in the parliament
are an unknown quantity but may
prove to be an effective force
EC ACTS ON FRENCH TRADE MEASURES
The exceptional trade meas-
ures that Paris has announced have
cast a shadow on the elimination
of virtually all customs duties
within the European Community on
1 July, and its institution of,
and the first cuts in, their com-
mon external tariffs under the
Kennedy Round.
The EC Commission's response
was sympathetic to the French
plight, but firm in pointing to
the unacceptability of unilateral
action. It evidently intended to
get Paris to acknowledge the
primacy of Community procedures
in return for approval of special
economic measures beneficial to
France.
The new French measures limit
certain imports and provide sub-
sidies to exporters hit by wage
increases resulting from strike
settlements. The immediate reac-
tion among most Community and
member state officials was hos-
tile, sometimes bitterly so. Al-
though there was general recogni-
tion that special consideration
for France was in order, the
French justification for specific
measures was regarded skeptically
and, in particular, Paris' virtual
ignoring of treaty provisions was
held a danger both to the Common
Market and international trade
rules. This feeling was some-
what balanced by satisfaction that
France would respect the 1 July
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abolition of tariffs and sched-
uled Kennedy Round reductions.
The Commission deliberated
for nearly three days on its
note to the French, then se-
riously questioned the extent
and duration of the new French
trade measures. The main thrust
of the message, however, was to
emphasize putting into operation
"appropriate Community pro-
cedures." Under the treaty, the
Commission can recommend "mu-
tual aid" to the Council for a
member state in "difficulties
or threatened by difficulties" in
its balance of payments. The
French measures, and specific
Commission responses to them,
will be examined at a Council
meeting during the week of 15
July. Before that, the EC Mone-
tary Committee will be consulted.
The Commission's firm re-
sponse--probably the least it
could have done to preserve its
role as defender of the treaty
and Community interests--has
been welcomed by the Five. The
French have not yet taken issue
with it. Prospects are uncertain
of getting any substantial
change in the French measures,
although Paris has already held
off on the quotas set on steel
imports from the Five because of
Community rules. There will be
considerable pressure, however,
to assure that the measures are
brought into a Community context
and are temporary.
The Council debate neverthe-
less may not be easy. The Ital-
ians are hard hit by the French
actions; the Germans, though
reluctant to oppose Paris' move,
have specific and pointed reser-
vations; the Dutch have already
delivered a strong note of pro-
test to Paris.
In addition to holding out
to the French the prospect of
Community-sanctioned aid, the Com-
mission expects to remind the
French how important it is to
them to adopt measures which the
Community could support in the
GATT and OECD. In fact, a prin-
cipal concern of the Community
is that Paris' actions do not
provoke retaliation from the US
and other countries.
The Commission's bid to
use France's economic difficul-
ties as a means to revive Commu-
nity solidarity is paralleled by
the unprecedented--for this Com-
mission--political tone of a
"manifesto" it issued on 1 July.
It is not only critical of the
nation-state's ability to solve
the fundamental problems of so-
ciety, but also specifically
endorses majority voting, in-
creased democratization of and
powers for the European Parlia-
ment, and enlargement of the
six.
The Commission is also try-
ing to seize the initiative in
bringing labor and management,
youth, and farm groups into a
greater direct participation in
Community affairs.
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FRENCH MILITARY PROGRAMS FACE DELAYS
The economic costs of the
recent crisis will significantly
set back France's military pro-
grams. Minister of Defense
Messmer announced on 24 June
that the 1969 military budget
will be maintained at its 1968
level of $5 billion. This new
budget makes no provision for
the additional costs resulting
from higher wages and increases
in equipment prices; consequently
these costs must be absorbed by
cuts in military programs.
Foreign Minister Debre stated
on 14 June that the nuclear strike
force, so dear to the De Gaulle
government, would incur delays.
The first nuclear-powered mis-
sile submarine may become opera-
tional in 1970 as scheduled, but
construction of each of the re-
maining four units at scheduled
two-year intervals may be de-
layed.
The French will probably
try to prevent significant slip-
page in the program to deploy
27 silo-based IRBMs, but deploy-
ment of the first nine may still
be delayed beyond the current
scheduled completion date of
1970. The Pluton tactical mis-
sile may also have its opera-
tional date of 1972 delayed.
The ICBM program, which has been
in the early planning stages and
has had no precise schedule for
development, has been abandoned
for the present.
Plans to replace the super-
sonic Mirage IV bombers appar-
ently have been shelved, and an
extended delay in the previously
planned phase-out now seems
likely.
While neither Debre nor
Messmer has specifically men-
tioned cuts in the conventional
forces, there are possibilities
for economies in this field,
e.g., a reorganization of the
conscription system, slower de-
livery of new tanks and artillery,
and a phasing out of aircraft
carriers. In recognition of the
role of the army in the recent
crisis, however, the budget for
conventional army forces probably
will not be cut and may in fact
be increased.
A detailed breakdown of the
military budget will not be
available until the fall, when
the entire budget will be debated
in the assembly. Ultimate de-
lays in military programs and
reductions in defense spending
probably will be even greater
than those specified thus far
by Debre and Messmer.
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CONSTRUCTION OF SOVIET FIAT PLANT CLOSE TO SCHEDULE
The midpoint between the
signing of the contract for the
Fiat plant in the USSR and the
target date for initial produc-
tion has passed. The assembly of
cars may begin by the end of 1969,
as scheduled.
The plant at Tol'yatti on
the Volga will be a significant
step forward for the Soviet motor
vehicle industry. The 660,000
cars a year that this plant is
scheduled to produce by 1972 is
more than two-and-one-half times
the number of passenger cars made
in the USSR in 1967. The Soviets
have given the project a high pri-
ority and are trying hard to en-
sure its completion within the
three-and-one-half year period
set up in the contract.
Construction is under way on
all major production buildings,
scheduled to be completed by the
end of this year. Despite severe
weather and difficulties in hiring
and retaining workers, the build-
ings will apparently be far enough
along by then to permit the in-
stallation of large amounts of
equipment.
Contracting for plant and
machinery is probably completed
now. The Soviets have been hard
bargainers in placing contracts
for Western-built machinery but
have managed to stay within the
time limits of the contract sched-
ule. Italy and other Western
European countries are supplying
more than 75 percent of the ma-
chinery for the plant; 18 percent
will be supplied by the USSR and
Eastern Europe. Deliveries are
scheduled to begin in the last
quarter of 1968.
Orders for US machinery, for
which export licenses have been
granted or requested, so far total
about $29 million or about 5 per-
cent of the total. Without fi-
nancing by the Export-Import Bank,
it is doubtful that all of the
$40 to $50 million worth of US-
made machinery that Fiat origi-
nally recommended will be bought.
European licensees of US firms,
however, have contracts for ma-
chinery that total between $100
and $150 million. The Soviets
will be able to pay cash for US-
made machinery through credits
granted by the Italian state-owned
investment bank. These credits
are for 11 years at 5.6 percent.
The stipulation in the Fiat
contract that some cars must be
produced by the end of 1969 can
be met, although the first cars
off the line mainly will have
Italian parts. If the 1970 goal
of 200,000 cars is not met, the
reason more likely will be trouble
in getting equipment and putting
it into operation rather than fail-
ing to have the buildings ready.
The Soviet motor vehicle industry
has normally taken prolonged pe-
riods to master production proces-
ses but even this problem may be
eased with Italian technical as- 25X1
sistance and the availability of
foreign parts.
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EAST GERMANY FACING BACKLASH FROM ACCESS TACTICS
Bonn's grudging compliance
with new Berlin access regula-
tions while refusing East Ger-
many's demand for recognition,
may be raising some doubts in
Pankow about the effectiveness
of its recent tactics.
High-ranking East German
foreign trade officials are ap-
prehensive that West Germany may
take countermeasures against GDR
representations abroad, despite
Bonn's policy of avoiding such
restrictions.
There are indications that
East Germany's neighbors also
may be dissatisfied with its
tactics. The Czechoslovaks pri-
vately have expressed their dis-
approval of the East German regu-
lations, and the Soviets have
made it clear they want no crisis
over Berlin. Nevertheless, the
East Germans again have rejected
a West German proposal for an all-
German renunciation-of-force
agreement, which serves to remind
their neighbors that they would
not be dissuaded from their hard-
line policy toward Bonn.
Ulbricht may now be having
some reservations about the pro-
priety of this policy, however,
as he reflects on the type of
delegation dispatched by Eastern
European countries to his 75th
birthday celebration on 30 June.
While the Soviet Union and Poland,
his closest allies, sent Presi-
dents Podgorny and Spychalski,
most other "bloc" countries sent
low-level or back-bench party
members.
The East Germans also may
have cause to question their
stringent policy. Over the week-
end West German canal authorities
stopped and detained an East Ger-
man barge headed for Rotterdam
via West German waterways when
Pankow failed to respond to a
Bonn request for reciprocal rights
on East German waterways to trans-
port goods to Poland and Czecho-
slovakia. The action has the ef-
fect of negating a recently con-
cluded shipping agreement between
East Germany and the Netherlands.
Bonn notified the East German
Transport Ministry that it must
transfer the goods to either a
West German or a Dutch vessel or
return.
The East Germans, however,
have tried to process as expedi-
tiously as possible both West
German travelers and goods to
Berlin during the past week.
Nevertheless, the red tape stem-
ming from the voluminous proce-
dures and levies on such traffic
is beginning to take its toll.
The Berlin trucking association
reports that transporters are
finding it difficult to hold on
to or hire drivers because of
the additional paper work. Many 25X1
reportedly have sought employment
in West Germany or with local
inner-city services.
F_ I
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THE STRUGGLE WITHIN THE CZECHOSLOVAK PARTY CONTINUES
Czechoslovak district party
organizations began preliminary
selection of delegates to the
party congress amid controversy
over a published appeal to drive
out conservatives from their po-
sitions of power. There also ap-
parently are differences between
Prague and Moscow about the
final phase of the Warsaw Pact
exercise.
The district conferences se-
lected delegates to regional con-
ferences which, in turn, will
pick representatives for the party
congress in September. The con-
ferences also discussed a variety
of topics, particularly the appeal
published on 27 June in three
papers and the writers' journal.
This emotional statement charged
that a majority of entrenched
party functionaries are prevent-
ing change and it called on
progressives to hold public dem-
onstrations, strikes, and boy-
cotts in order to force these
conservatives to resign. It also
suggested that workers in various
enterprises elect their "natural
leaders,... irrespective of party
affiliation." It voiced concern
over the possibility of foreign
intervention--obviously Soviet
and pledged to support the gov-
ernment with arms, if need be.
Reactions to the appeal
varied with the views of the
factions within the party and
bared the dissensions existing
among the reformers themselves.
One conservative denounced the ap-
peal as a "call to counterrevolu-
tion." Secretariat member Alois
Indra, who is emerging as a spokes-
man of the conservative wing of
the new leadership, called it an
attempt to disintegrate the party
and establish anarchy.
The party presidium immedi-
ately commented critically, de-
nying the appeal's major theses,
calling it "politically irrespon-
sible," and vowing to oppose any
attempts to implement it. In a
more moderate vein, however, the
presidium stated that it did not
question the good intentions of
the appeal's signers. It urged
them to re-examine their views
and called on the public not to
disturb the calm, constitutional
nature of the changes which are
taking place.
Premier Cernik, addressing
the National Assembly, echoed the
presidium's views, and the assembly
voted unanimously to support the
government's stand. The unanimity
of this vote suggests that even
some liberals were afraid that it
was too contentious.
Some of the district con-
ferences, however, criticized the
presidium's commentary, and called
for an active discussion of the ap-
peal. Several conferences elected
as delegates to the regional meet-
ings supporters of the appeal,
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including at least one of its
signers.
all foreign troops were prepar-
ing to leave Czechoslovakia.
An apparent controversy
over the disposition of Soviet
troops ensued after TASS an-
nounced that the exercise had
ended, then withdrew the announce-
ment. A German correspondent
claimed that TASS had stated that
the item was withdrawn because
it was "wrong." Czechoslovak of-
ficials, however, repeated that
the exercise was over and that
SECRET
TASS, however, finally an-
nounced on 3 July that Marshal
Yakubovsky had participated in an
evaluation of the exercise with
many of the top Czechoslovak lead-
ers. The TASS statement indirectly
confirmed the completion of the ex-
ercise, but made no mention of troop
withdrawals. In a probable effort
to allay public apprehensions,
Prague scheduled a press conference
on 3 July to discuss the results of
the meeting. F__ I 25X1
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Israeli border settlements were not harassed by Arab artillery this
week. The Jordanians apparently heeded Israel's warning that such shell-
ings would provoke a major strike against Jordanian villages. The possibil-
ity of Israeli retaliation is always present, however, should Israeli civilians
be killed in some isolated terrorist incident.
The Israeli cabinet on 2 July approved Prime Minister Eshkol's
protege, Yigal Allon, as deputy prime minister. The approval is a victory
for Eshkol over Defense Minister Dayan in the struggle for control of the
Israel Labor Party.
In Greece, a dispute within the junta may be holding up publication
of its version of the new constitution. The military leaders apparently are
sharply divided over constitutional provisions defining the future role of
King Constantine.
In northern India, another state coalition government has unraveled.
After the fall of the third successive coalition regime in Bihar since the
1967 general elections, New Delhi has dissolved the state assembly and
imposed direct rule. Bihar, like neighboring West Bengal and Uttar Pra-
desh, will now have to hold new elections.
In the Nigerian civil war, one year old on 6 July, federal military
forces continue to push slowly into the oil-rich Rivers area of southern
Biafra, and have captured a number of key towns. The federal commander
in the area is still anxious to push on into the Ibo heartland, but General
Gowon remains reluctant to expose the Ibo masses to further slaughter. In
the northern sector federal forces under new leadership are again beginning
to move slowly south. Biafran resistance, however, continues to be stub-
born and well organized, and although military supplies are critically low,
an early end to the fighting remains unlikely.
Sierra Leone is again in a state of high excitement as a result of wild
rumors that an American-Belgian mercenary force is gathering to invade
the country. The fact that a large segment of the new government of
Prime Minister Stevens apparently believes the rumors is likely to em-
bolden regime radicals to ste up their anti-Western and especially anti-US
propaganda campaign. 25X1
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DAHOMEY'S MILITARY REGIME TO INSTALL CIVILIAN GOVERNMENT
Dahomey's volatile provisional
military regime has moved to im-
pose a new civilian government
after failing to get the country's
rival political factions to agree
on a presidential candidate. The
military named former foreign min-
ister Emile Zinsou to head the
projected new government, which
is supposed to assume power on 1
August for a five-year period.
He is a capable moderate, but does
not have a political base.
The predominantly junior
officer regime headed by Lt. Col.
Alley had promised, after taking
over from senior officers in a
coup last December, to withdraw
to the barracks in six months.
Subsequently Alley sought in vain
to lay the foundation for a viable
elected civilian government
through consultation and agree-
ment with Dahomey's three exiled
political kingpins, each of whom
heads one of the three regionally
based political factions. Pres-
sure from younger officers anxious
to hand over the government to
civilians finally forced Alley
reluctantly to agree to impose
Zinsou on the country. Apparently
no early elections to legitimize
the new government are contem-
plated.
The military's selection of
Zinsou, who is well regarded in
Paris, was almost certainly in-
fluenced in part by a desire to
get desperately needed French
budgetary subsidies resumed.
These have been curtailed since
the coup last December in which
former president Soglo was ousted
just after he had been on a visit
to Paris.
Even with a restoration of
French aid, Zinsou will have to
rely on the army for his basic
support. He is not especially
popular with any of the three
major political factions, and
tracts attacking him have already
begun to appear. Rumors of pos-
sible demonstrations against his
nomination suggest that he will
be confronted with mounting polit-
ical pressures over the next
month.
Zinsou will also have to
contend shortly with strong pres-
sures from labor, whose long-
standing demands for higher wages
and reduced taxes were ignored
by both previous regimes. Al-
though politically divided,
Dahomey's labor leaders are united
in their determination to secure
a redress of the workers' griev-
ances and will probably not wait
long before applyin r sure by
new demonstrations.
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The five Central American presidents will meet in El Salvador over
the coming weekend to examine the progress of the Central American
Common Market and to lay the basis for more rapid economic and social
development in the area. President Johnson will join them on 6 July, and
will visit each of the other four countries briefly on his way home on 8
July.
Bolivian President Barrientos will also meet with President John-
son-in Texas on 5 July. An irritant in US-Bolivian relations was removed
on 28 June when Bolivia finally signed a $4.5-million special budgetary
assistance loan after agreeing to the prerequisite self-help measure of a
10-percent surcharge on imports.
Recalcitrant students and obstreperous labor unions continue to make
trouble in Argentina, Brazil, and Uruguay. In Argentina, police put down a
series of student demonstrations on 28 June, the second anniversary of the
coup that placed General Ongania in the presidency. Students and workers
may attempt more demonstrations in July, but the government has made
it clear that it will not tolerate violence.
Disaffected Brazilian students continued to stage sporadic demonstra-
tions throughout the week. They have gained popular support, and are
now a major problem for the government. In spite of continuing unrest
and frequent strikes in Uruguay, President Pacheco is attempting to main-
tain essential services. He has mobilized public service employees as well as
all retired military personnel, putting the latter at the disposal of the
minister of defense.
West of the Andes, things were generally quiet. In Chile, the resigna-
tion of the army chief of staff last week has renewed public concern over
the deteriorating economic position and morale of the armed forces.
Although there is no indication at this time of any strong sentiment
within the armed forces for antigovernment action, a delay in the prom-
ised pay raise and further deterioration of the military's economic position
could increase the number of hotheads within the armed forces.
In Peru, public and private reaction to the government's financial
stabilization program has been generally favorable. The program calls for
new and increased taxes, restrictions on imports, and cuts in government
spending. The military reportedly will take the largest budget cut
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DISCONTENT STILL SIMMERING IN BRAZIL
The rash of student-led dis-
orders that shook Brazil in June
have made clear the gulf separa-
ting the Costa e Silva government
from themajority of the Brazil-
ian people.
Students in most large
cities--except Sao Paulo--were
able to generate substantial popu-
lar support for their complaints
about the archaic Brazilian educa-
tional system. Clergy, profes-
sors, parents, teachers, opposi-
tion congressmen, and some work-
ers supported the legitimate pro-
tests, and in so doing became
more aware of the government's
long-standing unresponsiveness
to popular needs and aspirations.
Student leaders, many with ties
to Communist and other extreme
leftist groups, had no trouble
in broadening the protests to
include antigovernment and some
anti-US themes. In Sao Paulo,
however, many citizens are irri-
tated at student-caused destruc-
tion and fearful of terrorist
violence.
Although Education Minister
Tarso Dutra was a principal target
of student disgust, President
Costa e Silva himself came in for
criticism. He has been charged
with poor leadership and with
the failure to produce signifi-
cant reforms not only in education
but in other critical social fields
as well. In a recent address, the
President said the government
wanted to talk with students and
to study their problems, but that
they must realize the outmoded ed-
ucational system was developed
over many decades and cannot be re-
paired during one administration.
Such platitudes are not likely
to satisfy the students who have
called for further peaceful demon-
strations in both Rio de Janeiro
and the northeast if their demands
are not met. These demands now in-
clude the release of those arrested
in the June demonstrations and an
end to "political repression and ar-
tistic censorship." Outspoken Arch-
bishop Dom Helder Camara of Recife
and other liberal churchmen have
given their support to the students.
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25X1
undermine his government.
expressed his belief that there
is a vast, subversive plot to
The President has frequen y
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CENTRAL AMERICA
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CENTRAL AMERICAN COMMON MARKET THREATENED
Nicaraguan pressure tactics
have strained relations among
members of the Central American
Common Market (CACM) on the eve
of the presidential summit meet-
ing in El Salvador the weekend
of 6-7 July.
Nicaragua has reportedly
threatened to break up the Com-
mon Market if the other members
do not follow its lead and
promptly ratify a 30-percent tar-
iff surcharge on imports from
outside the area.
Nicaragua's intention was
probably to get early action on
a measure that would help ease
its balance-of-payments problem,
but the effect may be just the
opposite. Business interests
in the area already oppose the
surcharge and congressmen in the
other countries may be reluctant
to give the impression that they
are obediently complying with
Somoza's demands.
The Common Market was es-
tablished in 1961. Favorable
economic circumstances followed,
but the booming economies of its
members have slowed substantially
in the last year. The surcharge
was agreed on early last month
as a means of dealing with a
rising trade deficit in the Com-
mon Market and was not to go
into effect until at least three
legislatures had ratified it.
Nicaragua, however, imposed it
unilaterally, and then began
stopping shipments of goods from
other members at its borders.
Denials that the detention of
goods was related to the tariff
measure probably have not con-
vinced other Central Americans,
who see this action as another
pressure move.
In El Salvador, legislative
action has been postponed, and
the government has called for
an urgent meeting of the Central
American Economic Council. The
minister of economy, in an ob-
vious reference to Somoza, as-
serted on 26 June that "his
foolish acts could be attributed
to youth or Just personal business
interests."
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CRISIS CONTINUES IN URUGUAY
President Pacheco is at-
tempting to curb runaway infla-
tion and suppress labor-student
disorders in Uruguay, but strong
opposition forces continue to
threaten his efforts.
On 28 June Pacheco decreed
a temporary freeze on wages and
prices in a desperate effort to
end the inflationary spiral that
is seriously weakening the econ-
omy. The cost of living has
risen approximately 50 percent
during the first five months of
this year.
Past government attempts
to control inflation have been
blocked by congress, and this
decree faces many challenges.
The Communist labor unions, al-
ready engaged in a series of
strikes protesting government
economic policies, will be even
more intransigent. Furthermore,
congress might override the
President. It has already ap-
proved some salary increases
and it is not clear if the
President can keep them from
going into effect. The Senate
is discussing a committee re-
port on the devaluation on 29
April. The report is highly
critical of the President and
his top economic advisers.
Pacheco is attempting to
maintain essential services, but
the government-operated natural
gas company and the municipal
transportation system were in-
terrupted during the successful
general strike on 2 July. Last
week Pacheco reorganized the
directorates of the national
telephone and power company and
the railroads in order to ex-
ercise greater control over the
workers. He has since mobilized
all public service employees,
as well as all retired military
personnel, putting them at the
disposal of the Defense Ministry.
Pacheco apparently felt that
subjecting workers to military
discipline would lessen the
probability of a full strike,
but police estimated that 70-80
percent of the workers were out
on strike on 2 July.
Although Pacheco is trying
to impose tighter security meas-
ures, he has been unable to crack
down on key agitators. Last week
he ordered the arrest of about
fifty labor and student leaders,
and since then more names have
been added to the list. Only
a few have been rounded up thus
far.
Rumors of an impending coup
appear unfounded, but Pacheco's
position will become increasingly
difficult. His efforts to employ
tougher measures against agita-
tors will not solve his basic
problems. He continues to head
a minority government that has
been unable to halt economic
deterioration or restore public
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