SUMMARIES OF TRENDS AND DEVELOPMENTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000300020009-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: November 9, 2016
• Document Release Date: January 29, 1999
• Sequence Number: 9
• Publication Date: September 26, 1950
• Content Type: SUMMARY

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26 September 50
SUMMARIES OFTRENDS AND DEVELOPMENTS
1. It i s lM?nrobaLio that organized units of either
the Soviet Union,orvt Chinese Communists will be committed
to action in Korean It appears that the Soviet Union is will-
ing to write off North Korea militarily rather than risk the
possibility of global war with the UN powers, which the open
intervention of Soviet or Chinese Communist troops in North
Korea would entail. Although it would appear logical to
expect some peace proposals at this juncture, the USSR prob-
ably will not itself attempt to negotiate a peace settlement
in Korea in an effort to preserve the integrity of North
Korea, and any peace offers will probably come from the North
Koreans themselves or from a third party. The Kremlin, for
its part, will seek to thwart any UN efforts to unify Korea
through its usual tactics of obstruction in the UN, and guer-
rilla warfare, subversion, sabotage and propaganda within
Korea, but will probably forego any more decisive action.
(Page 4 )
2. In as Soviet attempt to strengthenthe_political
position ofTythe North_Kore-an government, Communist China and
the Mongolian People's Republic recently sent diplomatic
missions to Pyongyang and negotiations were initiated for the
exchange of diplomatic representatives between North Korea
and Poland and Ozeohoslovakia.
(Page 7 )
3. The USSR and East GermanCommunists have recent_,_?y
intensified theix harf+ssin tactics in Berlin. The primary
h
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O~~E~TIAL
purpose of the intensification appears to be the usual one of
undermining the confidence and morale of the West Berlin and
West German population. The Communists may also estimate
that a display of strength on the eve of the 15 October elec-
tions will reemphasize to the East Germans the futility of
resistance measures, such as non-participation in the voting.
(Page 8 )
4. Creation of now Soviet Administrative units in
the construction industry, changes of top personnel., and
undcerfulfillmont of construction schedules in some republics
indicate that the USSR is attempting to raise productive
capacity in construction work for heavy industrial installa-
tion preparatory to greater effort, probably for the next five
years, 1.951--1955,
(Page 9 )
5. , further indication, of_the sa- th USSR of
inferior gradesof fuel, in this case by the merchant marine,
has recently boon revealed. By insisting that marine Diesels,
being built in Belgium for the USSR, be modified to burn
lower quality fuel, the Soviet Union has indicated that they
are conserving their supply of higher quality Diesel oil for
high priority consumers, such as the Army, or for stockpiling,
(Page iO)
6. The USSR has increased the assembly of tanIs at
the Nizhni-Ta it _FrejEh:L..C ir_ Pl .nt in the Urals while ain--
tainin i'reight-car~procuction, A pattern has thereby been.
developed for the simultaneous growth of tank and freight-car
output in the same plant and throughout the transport equip-
ment industry,
(Page 11)
COI~~~~~j1AL
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7. Increased attention to cotton to the-USSR
during recent months indicates that stronger efforts will
be made to reduce present deficiencies by expanding barter
agreements with other cotton producing countries,
(Page 12)
EASTERN EUROPE
C~NQL ~....~,..~
8. x means of co p.Zica,ted brtorarrangcgent
Poland znd East Germany have contracted
S nlsh~p ,La. Dependence on outside sources for this
strategic mneral is temporary. However, it is currently
of great importance to the economies of the Eastern European
countries,
)
(Page 14
9,s . HuE~~ri~r.gev,rnrnont -=1.42 lmd in
using+tYz 2~ uust hurch. at~sI .Bent to further its
aim of do stroyirig~_theRoman Catholic Church, Even those
provisions which appeared to be victories for the Church
are being twisted by the Government into weapons with
which to attack the episcopate.
(Page 15 )
COS4ENT~'
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USSR
Loyi2j .policy toward Korea
It is improbable that organized units of either
the Soviet Union or the Chinese Communists will be committed
to action in Korea. It appears that the Soviet Union is
willing to write off North Korea militarily rather than risk
the possibility of global war with the UN powers, which the
open intervention of Soviet or Chinese Communist troops in
North Korea would entail, With the success of UN action in
the Seoul area impending, it would appear logical to expect
some efforts by the North Koreans or the USSR to achieve a
negotiated settlement preserving the identity of North
Korea. Peace proposals of this nature might be forthcoming
from the North Koreans or perhaps some third party, but it
appears doubtful. that the USSR itself will make any such
move,
While there is no evidence available indicating
conclusively that a, decision has been made by Soviet leaders
to write off North Korea militarily, the courses of Soviet
conduct both before and after 25 Juno indicate such a course
of action is likely. The Soviet Union, prior to the Korean
conflict, cautiously avoided creating any incident with the
US which could lead to a general warp Such incidents as were
provoked were planned to give the Soviet Union control and
freedom of actions enabling the USSR to back down, if
necessary, When confronted by determined Western Action,
these dangerous situations of Soviet creation were silved
by a Soviet about face. Nowhere in Soviet actions prior to
Korea had there been any firm indication that the Soviet
Union was prepared to run a substantial risk of an East-West
war,
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Since the Korean War began, Soviet policy
toward Korea has scrupulously sought to localize the con-
flict. The failure of the Chinese Communists to launch
an assault on Taiwan thus far, the Soviet return to the UN
without its minimum terms, and Soviet propaganda which has
avoided identifying the outcome of the Korean War with
Soviet national interest, point to a reluctance on the part
of the Soviet Union to take any action which would lead to
the spread of the war beyond Korea.
That the occupation of North Korea by either
Chinese Communist or Soviet forces entails a grave risk of
global war is probably evident to the Kremlin. With the UN
air and naval harassment of lines of communications in North
Korea, the Soviet Union would probably not expose either its
own or Chinese Communist troops without providing them with
substantial air cover. Defensive air units could easily
become engaged in battle with UN aircraft, leading to a
situation which, in Soviet opinion, would be beyond the
ability of the Soviet Union to control, short of a general
war. While the Soviet Union might be able to lessen the
possibility of such a development by a prior warning of its
intentions, it has no assurance that the warning would lead
to the cessation of UN air activities over North Korea.
Soviet or Chinese Communist aid to the North Koreans in the
form of troops would also leave Chinese and Manchurian
supply routes and possible industrial installations, open
to air attack.
Soviet reluctance to take any decisive action,
political or military, with regard to Korea has been em-
phasized by the UN landing at Inchon, The success of the
operation places UN forces dangerously near the 38th Par-
allel, while the major portion of North Korean troops are
engaged in the South. Once Seoul has fallen, neither the
North Koreans nor the Soviet Union have any assurance that
UN forces will not move northward along the principal supply
routes as well as to the south to complete the defeat of
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North Korean forces there. So far as is known, North Korea
does not possess substantial effective combat units north of
the 38th Parallel, The most logical timing, from a psycho-
logical standpoint, for any Soviet move to defend the 38th
Parallel or to preserve it by diplomatic measures? would have
been as an immediate reaction to the Inchon landing. It
appears logical to assume that any basic decision to employ
or not to employ non-Korean forces in support of North Korea
has already been made. Therefore, Soviet failure to act at
this juncture is another indication that the USSR is prob-
ably prepared to permit the complete defeat of the North
Korean field forces rather than to accept the risk of war
with the US and Its UN allies,
In view of the above considerations, Soviet re-
occupation of North Korea, either with its own troops or with
Chinese Communist forces for the purpose of preventing UN
ground forces crossing the 38th Parallel, is considered un-
likely.
If the UN capture of Seoul succeeds in isolating
the North Korean armies in the South, neither North Korea nor
the USSR will have any firm position from which to bargain
for a settlement. North Korea might indicate a willingness
to fulfill the terms of the UN cease fire order; this, however,
would be readily recognizable as merely an effort to withdraw
the North Korean Army from its untenable position in the South
and preserve it as a military force. The UN cease fire order
was applicable in June but the North Koreans have no assurance
that its terms are still acceptable. However, some third
party, perhaps under Soviet influence, may attempt to mediate
the conflict. In any event, the North Korean position would
be so weak that the terms of settlement could virtually be
dictated by the UN.
A Soviet effort to negotiate a settlement pre-
serving North Korea would,, of necessity, have to go beyond a
pious call for a "peaceful settlement" and include specific
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terms, Any such Soviet effort would not only proceed from
a weak position, but also would entail a complete reversal
of the Soviet attitude towards Korea to date. The Soviet
position has thus far rested on two principal allegationss
(a) that the Korean conflict is a civil war in which the
Soviet Union has no part and (b) that UN intervention is
illegal and constitutes aggression against Korea. Although
a Soviet peace effort might be so presented as to preserve
the first fiction, the USSR could hardly negotiate with the
UN without recognizing the legality of the latterts actions.
The weakness of the Soviet bargaining position would seem
to preclude a favorable settlement from the Kremlin's view-
point, and an unfavorable settlement would further depress
Soviet prestige throughout the world.
It seems probable, therefore, that the USSR will
not itself attempt to negotiate a peace in an effort to pre-
serve the integrity of North Korea, but may encourage the
North Koreans or a third party to attempt such a settlement.
Inasmuch as military action by either the USSR or Communist
China to preserve North Korea apparently entails a greater
risk of global war than the USSR is prepared to accept, the
Kremlin probably is prepared to permit the military defeat
of North Korea and the unification of Korea under UN auspices.
The Kremlin, however, will probably seek to thwart UN efforts
through its usual tactics of obstruction in the UN, and guer-
rilla warfare, subversion, sabotage, and propaganda within
Korea, but will probably forego any more decisive action,
(SECRET)
Soviet orbit attempts to strengthen
pelitical p2.s, .Lt2n of North Korean mime
In a Soviet attempt to strengthen the political
position of the North Korean Government, Communist China and
the Mongolian People's Republic recently sent diplomatic
missions to Pyongyang and negotiations were initiated for the
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exchange of diplomatic representatives between North Korea
and Poland and Czechoslovakia.
Soviet policy prior to the outtreak of the Korean
war apparently aimed at diplomatic isolation of the North Korean
regime, perhaps to conceal the North Korean military preparations
from any resident foreign observers, whether Communist or non-
Coimnunist. The present policy, in the face of impending military
defeats for the North Korean armies, probably represents an
attempt on the part of the Soviet Union to strengthen the posi-
tion of the North Korean regime through diplomatic measures,,
If, at the conclusion of the UN operation in Korea, the North
Korean regime retains the territory north of the 38th Parallel,
the present efforts will prove beneficial in maintaining the
fiction of the legality of the regime. On the other hand, if
the Soviet Union is willing to write off North Korea in the
face of UN military operations beyond the 38th Parallel, as now
seems probable, these measures suggest the additional possibility
that the USSR intends to maintain the present regime as a govern-
ment-in-exile. In this event, USSR participation in any negotia-
tions leading to the setting up of a UN sponsored government for
all Korea is virtually precluded. (CONFIDENTIdL)
Soviet harassing tactics intensified in Berlin
The USSR and East German Communists have recently
intensified their harassing tactics in Berlin. The primary
purpose of the intensification appears to be the usual one of
undermining the confidence and morale of the West Berlin and
West German population. The Communists may also estimate that
a display of strength on the eve of the 15 October elections
will reemphasize to the East Germans the futility of resist-
ance measures, such as non-participation in the voting.
Recent harassing tactics have included Soviet Inter-
ference in West Berlin barge traffic, a Soviet attempt to seize
a small piece of territory within the British sector, an East
Berlin decision to cease supplying West Berlin with electrical
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power, and the arrest of West Berlin policemen. British
and Soviet officials have not yet reached agreement on the
disputed border point, and British troops have, from the
beginning of the dispute, kept Soviet troops from taking
possession of it, Although the Communists claim that the
refusal by West Berlin to pay for electrical power already
delivered is the reason for the recent out-off, present
evidence indicates it to be essentially an harassing tactic
rather than a breakdown in present commercial negotiations.
The power cut-off may foreshadow further Communist inter-
ference in Berlin utilities. The series of arrests and counter-
arrests of policemen which have recently taken place between
East and West Berlin seems to have subsided. The majority of
the East German police have apparently now been released by
the West Berlin authorities, and East Berlin will probably
release the West Berlin policemen in the near future. (SECRET)
USSR construction industries pre ari
AS for
shart~ly ~ncroasedroductio - 1515
Creation of now Soviet Administrative units in
the construction industry, changes of top personnel, and
underfulfillment of construction schedules in some republics
indicate that the USSR is attempting to raise productive
capacity in construction work for heavy industrial installa-
tions preparatory to greater effort, probably for the next
five years, 1951-1955.
A new committee with representation in the Council
of Ministers was recently established "for affairs of construc-
tion." At the same time, S. Z. Ginsberg, head of the Ministry
of Construction Materials Industry, was replaced by P. A., Yudin,
former Minister of the Construction of Heavy Industrial Enter-
prises, which is now headed by the former deputy minister, D.
G. Reizer.
Ginsberg was replaced because his ministry thus
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far has failed to raise production and particularly to meet
the 1950 cement quota, which was increased from 10 million
to 1.3.5 million metric tons, Ginsberg was also unsuccessful
in replacing worn machinery, and procuring replacement parts
in connection with the responsibilities of his ministry.
Failure of the Construction Materials Industry to moot now
1950 goals will have serious cumulative effects on industrial
production in the next five-year plan. Yudin, who had suc-
cessfully managed for his ministry the production of heavy
industrial, equipment, was brought in to provide the Construc-
tion Materials Industry with necessary plants and machinery
for increased production schedules.
Underfulfiliment of construction plans for the
first six months of 1950 occurred largely in light industry,
which had a low priority for construction materials. Because
of the large volume of planned construction for 1950, the
available materials were inadequate for the program, Con-
sequently, the high priority assigned to heavy industry caused
a syphoning of construction material from consumer goods
ministries.
The next Five-Year Plan undoubtedly will emphasize
sharply increased production schedules which must be met, in
part, by adding new plants and facilities. This will place a
heavy burden on the construction industry which must be eared
to maximum efficiency for increased construction plans. SECRET)
Bel.ium built Soviet marine-diesel-2-ngines
modified to burn low , uality fuel
A further indication of the use by the USSR of
inferior grades of fuel, in this case by the merchant marine,
has recently been revealed..
In tests completed the latter part of July by
Soviet technicians in Belgium, it was found that the typo of
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Diesel engine installed in the first of seven trawlers being
built for the Soviet Uniori by 9. Belgian shipyard worked satis-
faotorily on high quality fuel but gave faulty performance
when run on the lower quality fuel supplied by the USSR. As
a result, experiments were undertaken to determine what
changes would be necessary to make the engines perform satis-
factorily on Diesel, oil supplied by the USSR and it was found
that modification of the engine was required. The necessary
alterations were made, and the vessel was turned over to the
Soviet Union on 17 August,
The fact that the USSR insisted on modifying
those engines to use a low quality Diesel oil indicates that,
while the availability of high quality Diesel fuel in the USSR
may be largo enough to permit its use, if necessary, by the
merchant marine, the Soviet Union is, in fact, conserving it
for high priority consumers, such as the Lrmy, or is stock-
piling it.
It is significant that the USSR will. not allocate
even a minor amount of high quality Diesel fuel fnr such uses
as trawler operations, (SECRET)
USSR increases tank assembly at
Nizhni-Tail Frc i ht C it Plant
The freight-car plant at Nizhni-Tagil in the
Urals, the largest in the USSR, has steadily increased the
production of freight-cars so that in mid-1949 between 60 and
70 largo Imeriean-type cars were being produced daily. At that
time, the assembly of tanks was increased from about five, to
between ton and fifteen per day without, however, decreasing
the production of freight cars.
This action is significant. Nizhni-Tagil is the
only major transport equipment plant producing armaments on any
largo scale, and in the last war, prior to the conversion to
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freight-car production in mid-1946, this plant assembled up to
40 tanks per day. Consequently tank output, although increased,
is far below the present total production capacity under all-out
conversion to tank manufacture. Moreover, although freight-car
production met planned requirements in 1949, it will be necess-
ary to increase freight-car production in 1950 to about seventy-
five cars per day. Apparently, Nizhni-Tagil had that capacity
in 1949 but the relative priority of tank production kept freight
car manufacture within planned limits.
An estimate of 1950'and future armament expansion
in the important transport equipment production industry must
take into account the fact that a pattern has been set for the
development of armament production without conversion or cut-
back of freight-car manufacture, A 1950 freight-car production
of 75 cars per day may be accomplished without seriously dis-
turbing the present assembly of tanks at Nizhni-Tagil. In
1951, the anticipated easing of Soviet freight-car requirements
may, in fact, permit an increase in the production of tanks at
Nizhni-Tagil which may have serious implications? (SECRET)
Cotton interestsp_the USSR "Br'
indicates sup ly knoss -
Increased attention to cotton in the USSR during
recent months indicates concern over the need for reducing short-
comings of domestic and satellite cotton requirements.
Past actions, designed to effect a long range
improvement of the situation, have been the implementation of a
cotton growing program in Hungary and the creation of a New
Ministry of Cotton in the USSR. The immediate outgrowth of the
latter movement was in the scheduled planting of 540,000 addition-
al hectares of cotton in the Soviet Union this year,
A broader and more indicative action is in progress
on the external cotton markets. Partially because of the lack
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of dollar exchange, purchases of cotton for the Orbit countries
during the past year have been largely financed by direct pay--
ments from Moscow, with the resulting effects noted in a due
in the total volume of purchases. In order to offset this loss,
present activity is directed toward a greater extension of
barter agreements as a means of acquiring supplies without the
expenditure of foreign exchange.
Examples of this trend during the past months have
been noted in the three cotton barter agreements arranged with
the Egyptian Government by the USSR. More specific was the com-
pletion by Poland of a barter agreement with Austria which,
.ccording to the 1.949 trade agreement, would guarantee American
cotton under EGA financing in exchange for Polish coal. This
exchange is noteworthy, in view of the fact that, prior to the
agreement, Poland was buying Brazilian cotton, but apparently
lacked dollars, hence could arrange no further purchases.
Cessation of Brazilian cotton purchases by Poland has enabled
the Czechs to maneuver into a favorable position in the Brazil-
ian market, and under a two year agreement will secure cotton
supplies without dollar expenditures. Hungary also has express-
ed interest for renewing a barter agreement with Austria in
order to secure lnorican cotton through EGA approval..
In addition to the above transactions, heavier
purchases of Pakistan cotton by the USA,, Poland, and Czecho-
slovakia indicate designs for further penetration into this
area as a source of future supplies?
The present activity in trade and domestic pro-
duction has, in all probability, been the result of low reserves
of cotton in the USSR. There has been little opportunity to
build up stocks during the post war years, and present avail-
able supplies are fully utilized in the current production of
textiles and exports to Satellite countries.
By 1953 the planned requirements for cotton in the
European Soviet Satellites will amount to 2,000,,000 bales, which
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is 700#000 more than the present consumption. Of this quan-
tity, domestic production in Bulgaria, Rumania, and more
recently Hungary, can supply approximately 162,000 bales. Max-
imum exportable surplus of the USSR during the past years has
been 400,000 bales annually, which indicates the ratio of
dependence on other producing areas for supplies,
Because large stocks of cotton are essential for
a war economy, the apparent awareness of existing shortages
by the USSR indicate that further active interest in obtaining
supplies will follow. Ian examination of past experience of
cotton growing in the USSR shows that domestic production gains
will not meet future requirements, and, therefore, an expansion
of barter agreements represents the most likely method to be
followed, (SECRET)
EASTERN EUROPE
GENERAL
Soviet Orbit acuires pyrites on, S pain
Dy moans of complicated barter arrangement, Poland
and East Germany have contracted for 206,000 tons of Spanish
pyrites (a basic raw material for sulphuric acid manufacture),
106,000 tons of which is to come through Switzerland and 100,000
tons through Austria in exchange for certain chemicals. The
greater part of these shipments will be destined for East
Germany. This is the first confirmation of the rumors of sub-
stantial trade between Spain and the Soviet Orbit countries.
Thero is some domestic production of pyrites in
Poland, but imports are relied upon to a considerable extent.
East Germany, however, is almost completely dependent upon im-
ports. Production of sulphuric acid in these countries has
boon limited during the postwar years not by plant capacity,
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but by the short supply of ;this mineral. The extent of depend-
ence upon imported-supplies is shown by the fact that 200,000
tons are sufficient for S4: percent of the planned sulphuric
acid production for East Germany for 1950.
.lthough indigenous deposits of pyrites are very
limited every effort is now being made to exploit them to the
maximum and some efforts are being made to develop substitute
raw material. Continued imports from outside sources such as
Norway, Sweden, Cyprus, and Spain will be essential until about
1955 when it is expected that domestic supplies will be suf-
ficiently developed. (SECRET)
POLAND
Church-State agreement utilized as wea -~ ~-
inst th.Ll oman episcopate
The belief of Hungarian Catholic Bishops that an
agreement with the State was the only way to save what could
be saved of religious life in that country is rapidly being
proved groundless. No alternative action could save the Church,
but an agreement at this date is no guarantee of the Church's
continued existence. The first positive indication of how far
the Government will go in using the agreement as a framework
within which it can further destroy the Church, was evident in
the 7 September decree dissolving all except four of the
monastic orders in Hungary. Reported to affect 10,000 monks
and nuns, the decree excludes only those orders which will teach
in the eight schools returned to the Church under the terms of
the agreement. It is ironic that the discussions which resulted
in the agreement signed 29 Lugust were initiated at the request
of the monks and nuns who were being subjected to arrests and
deportations, and who believed that a rapproachement with the
Government would improve their situation,
is in all such.Conmun ist imposed Church-State agree
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monts, the Government is reaping untold benefits while the
Churchts gains appear to be primarily academic. For example,
although the Church claims as a victory the avoidance of
specific reference to the "Stockholm Declaration," Budapest
propaganda is already emphasizing the role the Church may
now play in support of the "peace" movement. Furthermore, by
obtaining the Churchts promise not to oppose the collectiviza-
tion program, the Government has been able to speed up the
formation of cooperatives and the elimination of the ku1aks.
Also ominous is the Budapest press comment that there should
be no lack of good will In putting the agreement into effect,
This throat is undoubtedly directed at certain of the bishops
who have been under attack by the Government as being fascists,
agents of the imperialists, and enemies of the people, and
whose arrests have now been facilitated.
An additional potential weapon in the hands of the
Regime is, paradoxically, the right which the Government has
given the Church of trying, under canon law, those members who
oppose the "lawful order of the Hungarian Peoplest Republic
and the constructive work of its govornment.11- Although the
Hungarian Episcopate considers this a victory, it will actually
moan that the Government can now force the Church to sentence
its own episcopate. This will provide the Communists with
propaganda material of immeasurable value.
With neutralization of its capacity for public
appeal to the people and with its anti-State position under-
mined, the Church will now be forced to rely exclusively on
underground activities in its fight against the Communist
regime. (SECRET)
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