BOOK ONE: THE SOVIET UNION AND COMMUNIST CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00827A000600010002-5
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 101
• Document Creation Date: December 21, 2016
• Sequence Number: 2
• Content Type: BRIEF

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BRIEFING PACKAGE January 1967
THE SOVIET MILITARY POSTURE
I. The intelligence community has recently completed
the annual review and up-dating of the package of
National Intelligence Estimates which deal with
the military capabilities of the Soviet Union.
II. Each successive year, we are able to base these
estimates on improved and more comprehensive
evidence, and on more detailed and more sophisti-
cated analysis.
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III. The Soviet military estimates can be summarized as
showing another year of continued growth for both
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C. Our estimates, then, show Soviet progress in
both strategic attack and strategic defense.
1. We do not believe, however, that the So-
viets themselves expect to be strong enough
by the mid-1970's to convince the Kremlin
leadership that it can successfully risk
launching an attack on the United States.
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MRBM-IRBM FORCE
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I. During the past year there have been no major
changes noted in the Soviet MRBM/IRBM force of
about 600 medium and 100 intermediate range
launchers.
A. While this force is capable of delivering
a devastating attack on Eurasia--especially
against European targets--it is also highly
vulnerable because it is predominantly soft
and concentrated.
B. Future developments in the MRBM/IRBM force
will probably feature greater dispersion of
missiles in hardened sites and mobile
launchers. Mobile launchers could be con-
cealed and moved at irregular intervals,
making it difficult to determine their
number and location. Mobile launchers
could also be shifted to meet such contin.-
gencies as an increased threat from China.
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2. The strength of Soviet tactical aviation
is concentrated primarily in the Euro-
pean U.S.S.R. and Eastern Europe.
VI. The Soviets continue to help the East European
satellite forces to modernize and improve their
military capabilities. Paradoxically, this im-
provement comes at a time when these countries
are showing increased political independence.
A. The East European governments can contribute
about one million men and 42 divisions for
early commitment to Warsaw Pact needs.
B. Among the East European armed forces, Hungary
has made the greatest qualitative jump in
the past year. Of a total of six Hungarian
divisions, four are now considered combat
ready.
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BRIEFING PACKAGE January 1967
THE SOVIET ECONOMY
Introduction
I now want to discuss the economy of the
Soviet Union, but first I should probably apol-
ogize to those of you who are going to feel that
this is the second or third time you have heard
this briefing.
I can only offer you the explanation of the
schoolboy who was accused of copying his brother's
theme on the family pet--it's the same dog.
By and large, the Soviet economy has the
same strengths, the same weaknesses, the same prob-
lems that it had a year ago, and two years ago, and
three years ago. Only the figures have changed--
to protect the jobs of our analysts.
I intend, therefore, to skip some of the de--,
tail that we have covered before, and concentrate
on the highlights and the latest figures. There
will have to be a certain amount of repetition,
however, to give you a balanced and a comprehen-
sive picture.
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BRIEFING PACKAGE
January 1967
I. The Soviet economy is somewhat less than half
the size of the U.S. economy. The Gross Na-
tional Product of the U.S.S.R. for 1966 is
roughly 45 percent of the U.S. GNP. Indus-
trial production lies in about the same
proportion--somewhat less than half of U.S.
industrial output.
A. The Soviets, however, do not allocate their
output the same way that the pie is divided
here in the United States. The Soviet con-
sumer is way down in the pecking order,
and winds up with barely more than half of
the national product.
(CHART, US AND SOVIET GNP BY END USE).
B. As a result, as this chart for 1965 shows,
Soviet expenditures for defense are able to
approach our own. Outlays for investment
are more than two-thirds those of the U.S.
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As for consumption, the Soviet population
which is nearly one fifth larger than ours
gets only about one-third as much in total
consumer goods.
(CHART, US AND SOVIET NATIONAL POLICY EXPENDITURES)
C. Soviet economic policy is further illus-
trated by the comparison of a group of
strategic components of GNP that may be
termed national policy expenditures. They
include defense, foreign aid, education, and
industrial investment.
1. Although the total Soviet economy. is
less than half the size of ours, in
1965 they virtually matched our expend-
itures in these critical fields sup-
porting foreign policy and the domestic
economy.
2. They accounted for nearly two-fifths
of total GNP in the U.S.S.R., but less
than one-fifth in the United States.
3. The comparisons for 1966 will be quite
similar.
II. Soviet GNP grew by 7 percent in 1966. This
rate was well above the average 1961-65 growth
rate:.of 4 1/2 percent.
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(CHART, US AND SOVIET AVERAGE ANNUAL GNP GROWTH RATES)
A. In 1966 the U.S.S.R. had the largest grain
harvest in its history because of favorable
conditions. Net agricultural production
rose by an estimated 7 percent in 1966 com-
pared to an average annual rate of about
2 1/2 percent in 1961-65. Last year's rate
of increase in agriculture cannot be main-
tained. Hence, the 7 percent rise in GNP
in 1966 should not be interpreted as a re-
turn:to the high growth rates of the 1950's.
(CHART,-US AND SOVIET ABSOLUTE GNP)
B. From 1951 to 1960 the Soviet growth rate
averaged twice that of the U.S.--6 versus
3 percent. In this period the absolute
gap between the two economies actually de-
clined a little.
C. Since 1960, however, both economies have
grown at about 4 1/2 percent. The absolute
increase in the U.S. has been twice that of
the U.S.S.R. The gap between the two eco-
nomics has therefore increased rapidly and
steadily.
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(CHART, INDUSTRIAL PRODUCTION, US vs USSR)
D. The increase in Soviet industrial production
in 1966 was above 7 percent for the first
time since 1962. This rate is an improve-
ment over the average annual rate of 6 1/2
percent for the early 1960's. On the other
hand, it is below the 9 percent average in-
crease of the 1950's.
E. Two factors explain most of the lower in-
dustrial growth rate of the 1960's.
1. First, the Soviets have not been.able
to maintain the rate of growth of in-
vestment in new plant and equipment.
2. Second, the defense and space programs
have taken the high-quality resources
needed to modernize industry.
III. Military and space spending remained fairly stable
between 1962 and 1965. We estimate, however,
that in 1966 outlays on military and space pro-
grams were up by 7 percent. Soviet plans for
1967 seem to include a further substantial rise.
The resource commitment to defense will continue
to act as a drag on the whole economy.
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(CHART, TOTAL DEFENSE EXPENDITURES and proportion
devoted to exotics--R and D, advanced weapons pro-
curement, etc.)
A. Advanced weapons and space programs require
the best and scarcest inputs of skilled
scientists and engineers, new alloys and
other high-cost materials, highly sophis-
ticated electronics, and the most advanced
industrial processes.
(CHART, SPENDING FOR R AND D, etc.)
B. Soviet spending on military research and
development, the space program, and the
procurement of advanced equipment for mis-
siles, radars, and nuclear programs are
growing much faster than total military
spending. They have more than doubled
since 1958. Most of this increase has oc-
cured as a result of the rapid growth of
expenditures on research and development.
C. The state budget for 1967 includes an in-
crease of 1.1 billion rubles in the ac-
knowledged defense budget. Additional spend-
ing on defense, however, is concealed in
other budget allocations such as scientific
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research. Changes in these hidden expen-
ditures may be more influential in determin-
ing the final size of defense spending than
shifts in the explicit budget.
IV. The poor performance in Soviet agriculture since
the late 1950's has been another major reason
for the general slowdown in over.-all growth of
GNP.
A. The problems here are chronic--the inherent
deficiencies of the collective and state
farm system, some important limitations in
soil and rainfall, the difficulty in train-
ing enough skilled farm managers and me-
chanics, and the basic problem of insuffi
cient incentives for the farmers?
(CHART, TOTAL AND PER CAPITA: AGRICULTURAL PRODUCTION)
B. Soon after Khrushchev's ouster in late 1964
the new leadership announced an ambitious
and expensive program to boost farm output.
On a per capita basis, agricultural produc-
tion remained below the 1958 level until
last year.
1. The new program calls for investment of
$80 billion in Soviet agriculture in
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1966-70, twice the rate of the preced-
ing five years. This investment in-
cludes
- provision of large quantities of
chemical fertilizers;
- drainage or irrigation of millions
of acres;
- supply of thousands of additional
tractors and other farm equipment;
and
- construction of many new repair
shops and farm buildings.
2,. In 1966, this agricultural investment
program already was showing signs of
lagging. The program was huge to start
with, and the good 1966 crops may have
weakened the government's resolution to
pour large resources into agriculture.
V. Aside from defense and agriculture, there is a
more general reason for the slowdown of the Soviet
economy. The Soviets must pay a high price for future
technological advance.
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A. The easiest technological gains have been
made, including those gains taken over lock-
stock-and-barrel from the U.S. and Western
Europe. Further technological gains will
require more domestic R .and D--and more re-
sources.
B. The system of management and incentives in
industry places emphasis on physical out-
put. Many known technological advances do
not get put into industrial practice.
C. Furthermore, the Soviet system is notori-
ously clumsy in meeting modern demands for
a wider variety and assortment of products.
D. As a result of all this, every percent of
future growth is a little harder to achieve.
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(CHART, SOVIET FOREIGN TRADE)
VI. Total Soviet foreign trade has increased con-
tinuously, but the rate of growth has slowed
down since 1962. The geographic distribution
of trade has shifted, however, reflecting
both economic and political considerations.
A. Soviet trade with the industrial West has
been affected by the balance of payments
problems.
1. Soviet leaders in 1964 and 1965 cut
back imports of advanced equipment to
make room for large-scale imports of
Western wheat. These have averaged
more than $400 million. annually-over
the..last:.four years.
(CHART, THE HARD CURRENCY DEFICIT)
2. The Soviet Union has been unable to
generate enough foreign exchange to
buy large quantities of wheat, and at
the same time maintain other imports.
B. Even with the reduction in non-grain imports,
the U.S.S.R. had to sell $1.5 billion worth
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of gold in 1963 to 1965. The gold reserve
dwindled to about $1 billion by the end of
1965--only about one-third of the peak.level
in the mid-1950s.
C. Medium-term credits (up to 5 years) helped
to finance plant and equipment purchases
from the West during the early 1960's.
They lost their utility by 1964 or 1965
when the repayments began to offset the new
credits.
1. In 1964 and 1965 the Soviet Union was
offered $700 million in long-term credits
for six to 15 years.
2. The Soviet leaders chose to take up only
about $300 million, apparently because
they were cautious about incurring a
large burden of debt.
D. Last year, however, the Soviet hard currency
deficit fell to roughly $100 million, as ex-
ports rose with little or no growth in im-
ports. The improvement in the Soviet balance
of payments made large gold sales unneces-
sary, and the Soviet gold reserve increased
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by roughly $100 million in 1966. (Domes-
tic production of gold was about $190 mil-
lion in 1966.)
E. The improvement in the Soviet payments posi-
tion in 1966 has been accompanied by a re-
surgence of new Soviet orders for Western
plants and equipment.
1. Roughly $750-800 million in new con-
tracts were signed in 1966 with Western
suppliers, including the Fiat deal with
Italy. About three-fourths of these
contracts involved long-term credit.
:2. Imports of equipment in 1967 probably
will not exceed the $500 million average
of the past two years, because of the
long lead time for delivery. Imports
of wheat in 1967 may fall to $200 mil-
lion. Consequently total Soviet im-
ports from the industrial West probably
will drop in 1967.
:3. The Soviet regime probably will continue
to hold the lid on imports in order to
conserve foreign exchange and to rebuild
its depleted gold reserve.
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(REPEAT FOREIGN TRADE CHART)
VI. Soviet foreign trade with the less-developed
countries has been erratic--static in 1963-64,
up sharply in 1965 and apparently up moderately
in 1966.
A. This trade is largely sustained by deliv-
eries under Soviet aid agreements and their
repayment by the less developed countries.
Growth will be sustained by large unspent
aid commitments, and by a continuing Soviet
interest in trade expansion.
B. Trade with other Communist countries con-
tinues to grow, but at a declining rate.
These countries account for more than two-
thirds of total Soviet foreign trade.
1. Soviet demands for higher prices for
its raw material exports and East
European requests for better terms of
trade with the U.S.S.R. reflect in-
creased economic self-interest by all
parties concerned.
2. Both the U.S.S.R. and Eastern Europe
have been looking more to the West, in
order to acquire the modern equipment
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and technology needed to moder:i7ize'.In-
dustry and spur economic growth. For-
eign exchange availability is one of the
main limiting factors.
C. The Sino-Soviet dispute has been reflected
in the continual decline in Soviet trade
with Communist China, from a high of $2 bil-
lion in 1959 to about $400 million in 1966.
D. Cuba is still dependent on Soviet willing-
ness to take sugar at a high fixed price;
in turn, Cuba buys Soviet machinery, fuels,
and raw materials.
E. Yugoslavia's improved relations with the
U.S.S.R. are reflected in rapidly growing
trade. Cuba and Yugoslavia account for
most of the rapid growth of trade since 1961
in the "other" category.
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VII. Foreign aid programs continue to be one of the
most active and far-ranging instruments of Soviet
foreign policy.
A. Aid has been extended to nearly all other
Communist countries, and to 35 less developed
countries in the Free World. Both economic
and military aid have been provided, and
each is backed up by substantial technical
support.
B. Soviet programs have been small in comparison
to those of the United States. Nevertheless,
the Soviets have proven themselves to be
lively competitors--not only against us,
but against the Chinese--when it comes to
seeking goodwill through aid in the less
developed countries.
1. The long-range Soviet motivation, of
course, IS to win friends and converts
to Communism.
2. The U.S.S.R. appears equally alert, how-
ever, to exploit aid opportunities where
the only prospective pay-off is the
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embarrassment of the West, or a tem-
porary increase in Soviet influence.
Economic Aid
(CHART, SOVIET EXTENSIONS OF ECONOMIC AID)
VIII'.. Total extensions of economic aid in 1966 amounted
to about $1.2 billion, compared with the peak
of $1.9 billion in 1964.
A. This chart shows trends in Soviet economic
aid since 1954. In general, the year-to-
year fluctuations do not reflect changing
Soviet policies, but merely changing needs
and opportunities in the recipient countries.
1. The flow of aid extensions has been
jerky, partly because of economic emer-
gencies, partly because of periodic
commitments to such major programs as
five-year development plans.
B. Economic aid to Communist countries, amount-
ing to $7 billion, has been prompted by var-
ious:'.special situations. Four cpuntries,
which have received more than $1 billion
each, account for two-thirds of the total.
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1. Cuba's trade deficits and the rehabilita-
tion of. itS dislocated economy have re-
quired substantial Soviet aid.
2. Another high priority has been as-
sistance to East Germany, in its
futile effort to compete with West
German prosperity.
3. Development requirements in two of
the more backward Communist countries--
Bulgaria and Mongolia--also have led
to large amounts of Soviet aid.
C. Known Soviet economic aid to North Vietnam
approximates $400 million, most of which con-
sists of credits extended during 1951-60.
The amount of recent economic assistance to
North Vietnam is uncertain but may be size-
able.
D. Communist China is no longer a recipient of
Soviet aid, but it received extensions of
some $500 million before the strain in Sino-
Soviet relations ended the program in 1961.
IX. Soviet efforts to aid the economies of less de-
veloped Free World countries have evolved into
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into a complex and varied program. Credits and
grants of $6 billion have been extended during
the past 13 years. Extensions in 1966 reached
nearly $1 billion, or slightly less than the
previous high in 1964.
A. Much of the Soviet aid to less developed
areas is focused on the largest and most
influential neutralist countries, and on
a few countries situated along the Soviet
Union's southern border. India, the United
Arab Republic, Indonesia, Afghanistan, and
Iran have received nearly two-thirds of
total Soviet economic aid to less developed
countries. More than one-half of the ex-
tensions in 1966 consisted of support for
India's new five-year plan.
B. At the same time, the Soviet Union is los-
ing few chances to extend its influence and
make mischief for the West by extending eco-
nomic aid in small chunks to many of the
newer African countries. Even so, it is en-
couraging recipients to consider their ca-
pacity to absorb aid and to be selective_in
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choosing among possible aid projects, so
as to get the most out of this assistance.
C. The burden of these programs on the Soviet
Union is smaller than appears on the sur-
:face.
:i. Considerable time is needed to implement
programs of project aid, and only about
two-fifths of credits extensions to
less developed countries have been drawn
so far. Current deliveries are being
offset by repayments on previously in-
curred debts.
Repayments, in fact, have already reached
a level that is causing difficulty for
some of the less developed countries.
Several have recently received or re-
quested a rescheduling of payments to
ease the financial strain.
D. :[n spite of occasional political setbacks
for the Soviet Union in countries receiving
aid--for example, the downfall of Ben Bella
in Algeria and of Nkrumah in Ghana--the
Soviet leaders apparently are convinced that
the programs serve their long-term political
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aims. They almost certainly plan to con-
tinue a high level of aid activity, carry-
ing forward existing programs and capital-
izing on new opportunities that may arise.
Military Aid to Free World Countries
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(CHART, SOVIET MILITARY AID)
X. Military aid has been one of the most dynamic
tools employed by the Soviet Union in its re-
lations with less developed countries in the
Free World. Such aid usually has had an imme-
diate.political impact, and has paved the way
for closer economic ties.
A. Since 1955, the Soviet Union has extended
an estimated $4.2 billion in military as-
sistance to 18 less developed countries of
the Free World. As the chart shows, exten-
sions have not been as high recently as in
the early 1960's, but deliveries have been
continuing at a rate of several hundred mil-
lion dollars annually. About 80 percent of
military aid extensions already have been
drawn.
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B. Indonesia and the United Arab Republic
account for about 55 percent of Soviet
military aid to Free World countries.
1. Their armed forces, and those of Af-
ghanistan, Algeria, Iraq, and Syria,
are now equipped almost entirely with
Soviet arms, and are trained in Soviet
methods. These and other less developed
countries now depend heavily on the
Soviet Union for ammunition, spares,
and technical support.
2. This dependence gives the Soviets a
certain amount of political leverage,
which might be employed in a critical
situation.
3. The Soviets are cautious in using such
pressures, however, because of the risk
of endangering long-run political rela-
tions.
C. The Soviets are well aware that the real
power in many of the less developed court=
tries is: held by the.1 armed- :forces:..' Thus,
they have used military aid to establish
contact and rapport with military leaders
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who--if they are not in the government
themselves--are in a position to influence
the government's composition and policies.
D. Soviet objectives also have been served by
the willingness of such countries as the
United Arab Republic to re-export Soviet
arms (with Moscow's concurrence) to third
countries. In this way, Soviet arms have
been channeled to such countries as Algeria,
Cyprus, and Yemen, as well as to dissident
groups in the Congo and other trouble-
spots in Africa.
E. Initially, the Soviet Union supplied. largely
obsolescent weapons from existing stockpiles.
1. Since 1961, however, it has increasingly
provided Free World countries with ad-
vanced weapons such as MIG-21 jet fighters
and surface-to-air missiles.
2. Consequently, about two-thirds of the
equipment delivered to date consists of
types still in standard use in the armed
forces of Communist countries. More than
half of the equipment is of types still
in production in the Soviet Union. These
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proportions should rise as deliveries
of advanced weapons continue.
F. Scheduled payments on debts of about $2.4
billion arising from Soviet military aid
have become a serious drain on the econ-
omies of some of these countries. The
Soviet Union has further ingratiated it-
self with some of the countries by acceding
to their requests for a rescheduling of
payments. More than half a billion dollars
in repayments already have been made. These
repayments, made largely in goods, have re-
suited in a substantial reorientation ,?f_ experts
from traditional markets to the Soviet Union.
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XI. The goals of the new Soviet Five-Year Plan, running
hroi.gh 1970,-show that the. Brez-hnev-Kosygin
regime is making a determined effort to regain
the economic momentum of the 1950's.
A. The plans provide for an average annual
growth of 6 percent in GNP, 8 to .8 1/2
percent in industrial production, and 4 3/4
percent in agricultural production. We do
not believe the regime will be able to
achieve such high rates of increase, unless
unexpected successes are scored in expanding
agricultural production and in improving the
efficiency of industry. We anticipate a
continued drain of high-quality resources
into military and space production.
B. In industry, the growth rate may improve
slightly over the 6 1/2 percent average of
1961 to '65. The Soviet leadership is pin-
ning many of its economic hopes on a series
.of reforms in industrial management. These
reforms may ultimately improve the function-
ing of the system. In our judgment, however,
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they do not provide the essential flexibility
and incentives necessary to a modern eco-
nomy. Specifically, they do not solve the
critical problem of introducing new tech-
nology and new products into industry.
C. If the new regime's program of massive in-
vestments and financial incentives are im-
plemented, agricultural production should
rise by an average of 3 or 4 percent a year
over the balance of the decade. Traditionally,
programs for agriculture have fallen short,
and this ambitious program is not likely to
be carried on in full. Nonetheless, agri-
cultural growth during the balance of the
decade should show a marked improvement over
the near stagnation of 1961 to 1965.
D. The average rate of growth of Soviet GNP
during the Five-Year Plan period should-lie close
to 5 percent. The Soviets will continue-.to
run their economy at full capacity, and to
experience periodic shortages and delays.
Commitments to various programs are already
being cut.
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E. A 5-percent rate of growth is entirely
respectable by world standards. The Soviet
economy will remain a crude but effective
engine of growth. Its energies will con-
tinue to be concentrated on areas ,-6f --cr.i:t-
ical concern to U.S. national security in-
terests.
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I. The policies of the U.S.S.R. today are in an in-
troverted phase, in the sense that Soviet thoughts
these days are mostly about the internal scene
and matters close to home.
A. The U.S.S.R. has not exactly withdrawn into
a shell, but domestic concerns and the Chi-
nese problem are its overriding considera-
tions.
B. At home, many of the familiar economic prob-
lems remain as far from solution as ever.
They may, in fact, be multiplying under the
impact of technological change with its
attendant political and social effects.
C. By the Chinese problem, I mean both the Sino-
Soviet dispute in its bilateral aspect, and
its impact on the Communist movement as a
whole. In both aspects, the struggle has
become more intense and more complex over
the last six months or so.
SOVIET DOMESTIC POLICY
I. The group which ousted Khrushchev more than two
years ago has held together remarkably well,
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considering that the power which was tradition-
ally wielded by a single individual now in effect
lies with a committee which has to make up its
operating rules as it goes along.
A. Those who made the coup against Khrushchev in
October 1964 had one thing in common, other
than political ambition: dismay, even re-
pugnance, at Khrushchev's radical swings in
policy, and his unrealistic promises of
achievement.
B. Otherwise, they made a curious blend of in-
terest and authority. In order to make a
go of it, they needed the kind of undramatic
mic:dle-of-the-road policies--unlikely to
offend grievously--which have been their hall-
mark. They needed the evenness and the gyro-
scopic stability of government-by-committee.
C. There now seems to be a fairly formal mechan-
ism. at the Politburo level for decision-
making, and a fairly rigid code of individual
behavior to ensure collectivity.
D. Only two aging members, Shvernik and Mikoyan,
have left the Politburo. They were given
honorable retirement--something of a novelty
for the Soviet Union.
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0
II. The present leadership, from necessity and en-
lightened self-interest, has accepted certain
broad rules for its collective game. So far,
however, it is anything but certain that it has
designed a piece of political machinery with
any staying power.
A. There are necessarily controversial policies,
such as economic reform, and these are bound
to get mixed into the personal and political
conflicts.
B. It is questionable, too, how much longer
this present set-up will remain "collegial"
in any meaningful sense. There has been a
steady enlargement of the position of Gen-
eral Secretary Brezhnev,
1. On a number of occasions, particularly
at his 60th birthday in December, Brezhnev
was given the kind of personal praise
reminiscent of an earlier era.
2. He now seems to have the most important
voice--probably the final word--in the
making of key assignments.
C. The relationship between Brezhnev and Kosygin
is crucial to the functioning of the current
leadership.
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1. The relationship has stood up for more
than two years, which is no small achieve-
ment in a system of divided authority.
2. There is rather good evidence that the
relationship is one of wary toleration,
however. The extensive overlap of party
and government institutions and interests
inevitably produces strain.
D. Other Politburo leaders have clearly suffered
setbacks in the political struggle.
1. Shelepin had long been a favorite of
Kremlin watchers, because of his ambition,
his ties with the Committee of State Se-
curity (KGB), and his youth--he is still
only 48. He has now lost some of the
broad responsibilities he had in the early
post-Khrushchev period, including his role
in security affairs.
2. Podgorny was kicked upstairs to the So-
viet Presidency. He has since managed
in a small way to enlarge the role of the
Supreme Soviet; i't, serves as a sort of
watch-dog over the government ministries,
but without a full set of teeth.
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3. There is a second rank--from whom the
successors to Brezhnev and Kosygin will
eventually come. These men, with whom I
would include Shelepin, hold important
posts such as deputy premier, and some of
them are relatively young (Polyansky is
49; Mazurov is 53).
Despite the inherent difficulty of decision-
making by consensus, the present leadership has
had some successes in dealing with the problems
of a complex and highly structured society in a
complex and increasingly unstructured Communist
world.
A. The 1966 harvest was the best in Soviet his-
tory, partly because of some sensible changes
in policy, but partly because of good weather.
B. In 1965, the leadership decided to test some
aspects of a market economy in a few carefully
selected industries.
1. These changes might well have been as help-
ful as the changes in agriculture, but
implementation has been slower than planned.
2. This was partly because even limited change
involves immense technical problems in the
Soviet Union.
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0
e
3. It.was also, as the Kremlin admits, be-
cause of bureaucratic inertia, if not
downright obstruction.
IV. This is a cautious regime in Moscow,, and it is
not prepared to venture beyond these small steps.
It has not begun to face up to the larger prob-
lems.
A. The basic question of how to allot economic
resources among competing sectors is un-
answered. This is one reason why the current
Five Year Plan has not yet received final
approval although the Soviet Union is already
heading into the second year of that plan.
B. There is a very uneasy coexistence between
the regime and the intellectuals. The re-
gime is cracking down, as it did in the
Sinyavsky-Daniel trial. The intellectuals
are constantly testing the regime's per-
missiveness in literature and the arts.
C. In all things, the regime has tended to seek
the middle way. It has hesitated to crack
down hard on the unruly elements in Soviet
society, but the trend has been, nevertheless,
toward a tightening of discipline.
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1. The regime increased police powers and
punishment, to deal with a growing inci-
dence of crime and juvenile delinquency.
2. The problem of dealing with minority na-
tionalities may have been made worse by
reversion to a more centralized manage-
ment of the national economy.
3. In education, steps to provide universal
10-year schooling, and to increase the
capacity of higher education institutions,
are going to look like halfway measures to
the youngsters. The new generation looks
on education--rather than the perfection
of a Communist society--as the stepping
stone to a better life.
D. Behind all of these problems lies the major
problem of how the Soviet Communist party
can maintain its dominant place in a society
where decisions must increasingly be based on
technical soundness rather than ideology.
E. The nature of the committee system minimizes
the risk of major failures.
1. A major setback, however, would severely
test the collective system.
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2. Even without such a setback, the present
leadership has not yet proven that it
has the imagination and decisiveness to
manage a complex society in a complex
world.
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0
I. Soviet foreign policy is being made with China
constantly in mind. The Russians now feel that
they have the upper hand in the Sino-Soviet dis-
pute. They are beginning to behave somewhat more
boldly.
A. Tensions between Moscow and Peking have intensi-
fied markedly in recent months. The impact of
the Vietnamese conflict and the upheaval in-
side China have helped to bring Sino-Soviet
relations almost to rock bottom.
1. Moscow's aid to the Vietnamese Communists
..as earned it large dividends in the dis-
pute with Peking. This help has brought
North Vietnamese expressions of gratitude,
which the USSR has been able to use to
good effect to undercut Chinese allegations
of Russian double-dealing.
2. The Russians have also made the most of
Peking's outright rejection of Moscow's
appeals for "united action" in support
of North Vietnam.
3. Moscow has been able to convince most for-
eign Communist parties that the Chinese
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are more interested in fighting Moscow
than in helping Hanoi.
4. Most of the world's Communists have also
been persuaded of the truth of Soviet
charges that Peking is out to split the
movement.
II. Khrushchev's successors can congratulate them-
selves on the results of their anti-Chinese
tactics. They have paid out the rope, and the
Chinese have proceeded to hang themselves.
A. China's recent setbacks are due in large part
to Peking's own rigidity and clumsiness.
1. Advancing age, the pressures of their
struggles with the Soviets, and frustra-
tions over domestic and foreign reverses
have all combined to give Mao and the
other "true believers" around him an
arrogant certitude that is shutting Pe-
king in behind a new Great Wall.
2. The Chinese present themselves as the
fount of all valid revolutionary experi-
ence. They call neutrality in the Sino-
Soviet dispute "impermissible." By try-
ing to force all Communists to choose
sides, they have seriously damaged their
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relations with important parties which
once leaned toward Peking.
B. Three years ago, Peking appeared to be well
on the way to building a bloc of Communist
supporters that could meet Moscow on some-
thing like even terms. Now, although the
Chinese still have a few backers, the pre-
ponderance of influence is so clearly in
Moscow's favor that a significant challenge
to Soviet authority no longer exists.
1. Peking can count with assurance on sup-
port only from Albania, the Communist
Party of New Zealand, and a handful of
tiny splinter groups.
2. The Chinese have suffered their most
serious setbacks in the Far East. The
ruling parties of North Korea and North
Vietnam have edged away from Peking,
and the Japanese Communist Party can no
longer be counted on for support. Further-
more, the Communist party of Indonesia--
long one of China's supporters--was
shattered in the wake of the unsuccessful
coup attempt in the fall of 1965.
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3. China's relations with Cuba have also
sunk to an all-time low, and Peking is
no longer able to work through pro-Castro
activists in Latin America.
C. The so-called "cultural revolution" has
helped immeasurably to discredit and isolate
the Chinese. Red Guard excesses have provided
a real windfall for Moscow's propaganda mill.
1. Early last year the Soviets began a rather
discreet campaign aimed at vilifying the
Chinese leaders through sarcastic, tenden-
tious reporting of events in China.
2. Pravda recounted, for example, the ludi-
crous episode of the Chinese who had been
denounced for claiming that, if a man did
not know how to climb a pole,.a reading
of Mao's works would hardly help him do
it. This, reported Pravda, amounted to
heresy in China, where it is official
doctrine that "a study _ of -Chairman Mao's
works gives immediate results."
3. Gradually, however, Moscow has moved to-
ward more direct and authoritative criti-
cism of Peking. Recently, top Soviet
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leaders have personally attacked Mao Tse-
tung, claiming that his regime has for-
feited the right to call itself Communist.
4. The Russians have gone so far as to align
themselves openly with what they call the
"growing opposition to Mao and his clique"
inside China.
D. Moscow's decision last summer to switch back
to open attack, after two years of ignoring
Peking in public, stemmed primarily from a
determination to capitalize on recent Chinese
setbacks.
L. There is also, however, a significant:,
element of genuine Russian concern over
the excesses oft:the Red Guard upheaval,
and what it may mean for the future.
2? Brezhnev's speech to the central com-
mittee meeting last December showed
clearly that the Chinese problem remains
the main preoccupation an&most press-
ing foreign policy concern of the Russian
leaders. The speech climaxed several
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weeks of vigorous personal effort by
Brezhnev to drum-L.up wide international
support for Moscow's anti-Chinese campaign.
3. The Soviet Union has persuaded many
foreign Communist parties to join in
the public condemnation of Peking's
policies.
~:. Now Moscow is pushing the idea of a
world Communist conference to adopt a
formal, authoritative denunciation.
5. Some foreign parties are still strongly
opposed to such a move, however, and
if the Kremlim leaders push too hard,
they might jeopardize the more~.effec-
tive inter-party working relationships
they have cultivated since they threw
Khrushchev out.
E. It is impossible to predict with any assur-
ance when the final rupture between the
USSR and China might take place, and under
what circumstances.
1. A glance at the few ties that are left,
however, shows how far the deterioration
of relations has already gone.
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.2. As far as relations betwen the two Com-
munist parties are concerned, a break
already exists.
.3. Relations between governments have been
maintained, but at the barest__minimum.
Embassies in both capitals have been
left in the hands of the charges d'af-
faires. The main responsibilities
now seem to be the exchange of pro-
test notes, and ostentatious walk-outs
from ceremonies at which their home-
lands are regularly assailed.
4. The Soviets clearly see little chance of
any appreciable.improvement. In fact,
their ambassador to Peking has been re-
assigned to the Russian UN mission, and a
Soviet diplomat has stated in private
that relations will have to improve con-
siderably before Moscow will think about
replacing' him.
`_i. The embassies are probably regarded as
worth keeping as listening posts, and
as bases for clandestine operations.
Each side is reluctant to accept the
onus of being the first to make a final.
break.
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6. Over recent months student exchanges
have been curtailed, with acrimonious
charges, counter-charges, protest notes
and counter-protest:rnotes. More re-
cently, Peking expelled three of the six
TASS correspondents who has been report-
ing on the disorders in China.
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SOVIET RELATIONS WITH THE UNITED STATES
I. To turn from the Sino-Soviet dispute to the Soviet
relations with the United States--it is clear that
the U.S.S.R. wants to keep some lines of communica-
tion-with Washington open, despite the strains im-
posed by Vietnam and some Kremlin sensitivity to
Chinese charges of Soviet-American collusion.
A. The Kremlin leaders realize that if there is
going to be any meaningful progress along the
lines of their national interests in European
security, arms control, and East-West trade,
sooner or later thay are going to have to
resume the dialogue with the United States.
1. Moscow puts the complete blame for the
Vietnamese war on the United States. This is
a necessary assumption for their policy
lines, but it may also be a matter of con-
viction.
2. In private, however, Soviet leaders have
emphasized that they want to avoid any
showdown between Moscow and Washington
over the Vietnamese issue. Whenever
they have a chance to: make the point
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quietly, they indicate that they hope to
preserve and develop relations with the
US.
3. Ambassaodr Kohler talked to President
Podgorny and Deputy Premier Polyansky be-
fore he left Moscow. Both of them emphasized
their interest in increased trade and scien-
tific and technical exchanges.
4. The recent civil air and space agreements
show that limited cooperation--not affecting
Vietnam--is still possible. There are also,
of course, encouraging signs that a nuclear
nonproliferation treaty may soon be signed.
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OTHER FOREIGN POLICY LINES
I. The U.S.S.R. is working hard to erase its old
image in Western Europe. The familiar Soviet
policy of intimidation, threat, and ultimatum--
to which we have become so accustomed--has been
laid ,aside, or at least placed in reserve.
A. Moscow seems to feel that American pre-
occupation with Southeast Asia provides a
grace period in Europe for the building of
Soviet diplomatic, economic, technological,
and scientific contacts.
B. Moscow has made much ofits rapport with De
Gaulle, hoping that other West Europeans--
particularly members of NATO--will borrow a
leaf or two from the French book.
1.. But talk about a Franco-Soviet alliance
is overwrought. We doubt that even the
French have many illusions, but we are
reasonably sure that the Russians are
not much interested in the French for
their own sake.
2? They do see a chance to use De Gaulle
against both the US and Germany.
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C. Concurrently, Moscow never ceases to play on
distrust of the Germans. Soviet propaganda
compares the professed reasonableness of the
Soviet Union with their picture of West German
and American "militarism and intransigence."
D. All this is contributing to the obvious
growth of unease among Western Europeans who
are eager to depart from old, cold-war for-
mulas which they feel do not now serve their
national interests as well as they used to.
E. The Soviets will probably remain wary of
risking a serious confrontation--for instance,
over Berlin--which might prove counterpro-
ductive by reviving the obvious reasons for
Western unity.
II. In the: less developed areas, the Soviets now seem
to be placing greater reliance on the tools of
traditional diplomacy. They are treating local
revolutionaries with considerably more circumspec-
tion.
A. Latin America is a good case in point. Through-
out the Southern Hemisphere, the Soviet accent
now is on improved state-to-state contacts,
more trade, more cultural exchanges, and the
like.
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1. The Soviets have certainly not abandoned
local Communist parties, nor stopped
giving encouragement to assorted dissident
forces. It is clear, however, that aid
to such antigovernment elements is being
given with increased caution, especially
if these elements have only a questionable
revolutionary potential.
2. This is a sore point between the Soviets
and Castro. The Cuban dictator has made
plain his contempt for what he considers
Moscow's half-hearted view of Latin American
revolution.
B. In the Near East, the Soviets have been making
a special effort to court a number of pro-Western
states.
1,. Premier Kosygin's visit to Turkey last
December--the first by a Soviet premier in
43 years--capped a series of friendly ex-
changes between the two countries. These
are largely in the realm of atmospherics,
but Moscow obviously hopes the future will
bring something of substance.
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2. In Iran, the Soviet steel-mill agreement
of 1965 was followed last August by a
sale of limited military hardware. There
are signs now that a deal in oil and gas
may be in the offing.
3. While Moscow's closest Arab friends--Egypt
.and Syria--have been fostering the overthrow
of Jordan's King Husayn, the USSR has re-
mained remarkably restrained. Moscow even
refrained from attacking Husayn when he
publicly accused the Soviets of being at
the root of all his troubles.
4. Egypt and Syria are at best a mixed blessing
for the Soviets. Friendship with Egypt
turns out to have a pretty high price tag
in terms of wheat and foreign exchange. In
Syria, the Soviets probably have their
hands full dealing with an unpredictable and
adventurist government.
C. In Africa, the Soviet Union would probably
like to follow its Latin American policy of
a trend toward reliance on more normal relations.
The aggressive Chinese Communist presence in
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Africa, however, keeps pressure on Moscow
to keep working with African radicals,--
providing training, weapons, and funds
for the so-called "freedom fighters."
1. Military aid remains one of Moscow's
most effective totals, but its use also
carries risks. Increased aid to Somalia,
for instance, has aroused suspicion
and resentment in Kenya and?Ethiopia.
2. Soviet military shipments to Algeria
have caused uneasiness in.Morocco. Moscow
has tried to placant the Moroccans with
an offer of economic aid.
3. Elsewhere, the Soviets are trying to
establish normal diplomatic relations
with Mobutu's Congo as well as with
Ivory Coast, Upper Volta, and Niger. The
Soviets have only a toehold in the
Brazzaville Congo, and are so concerned
about Chinese influence there that some
Russian diplomats have expressed interest
in cooperating with the French to combat
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D. On the Asian subcontinent, the Soviets have
tried hard to cash in on Xosygin's considerable
diplomatic success in mediating the Kashmir
crisis. Both India and Pakistan have received
sizable Soviet aid packages for their five-year
plans.
1. The Soviets have managed to give India
primary attention without losing much
ground in Pakistan, where Chinese influence
probably causes Moscow some concern.
2. Although favoring India, Moscow has shown
dissatisfaction with the orientation of
Mrs. Gandhi's government. It has been
working quietly to bring about a coalition
of leftist forces for the February elec-
tions in 'Jndia .
E. In Southeast Asia, Moscow has maintained a
cautious step-by-step campaign to increase its
influence in countries where the U.S.S.R.
has not traditionally been very active. Russian
determination to compete effectively with both
Washington and Peking in this, area has been
manifested in various ways.
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L. Numerous Philippine government and press
officials have been invited and well
received in the Soviet Union.
2. A TASS.office and a trade office has also
been established in Singapore.
3. TASS officials in Malaysia have been
proposing the establishment of diplomatic
relations between Moscow and Kuala Lumpur.
.4. A new military aid agreement with Cambodia,
signed last year, indicated continuing
Russian interest in enhancing-Soviet in-
fluence in Phnom Penh.
F. Moscow has watched events in Indonesia with
cautious optimism. TheNSbriets are always
glad to see the Chinese take it on the chin.
L. Soviet propaganda has dutifully deplored
the persecution of Communists in Indonesia,
but in private, Russian officials stop
just short of gloating over the destruction
of the Indonesian Communist Party, which
had sided with Peking against Moscow.
:2. In talks with foreign Communist parties,
the Soviets have made Indonesia a horrible
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example of what can happen to Communists
who follow Peking's adventuristic and
dogmatic line instead of the Moscow
gospel.
III. To sum it up, the new Russian leaders recall
that Khrushchev's often frantic initiatives
tended to lead the Soviet Union up.blind alleys
abroad. They have adopted more cautious lines
of foreign policy.
A. They seem to recognize that it is difficult
enough to shape history in the turbulence of
the underdeveloped countries--let alone to
re-shape this;history into the dogmatic
patterns.predicted for the world in Marxist
dialectics.
B. The Kremlin appears to have decided instead
to concentrate on its own internal interests
and on the affairs of the world Communist
movement, and has managed to stick to this
decision for more than two years.
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January 1967
I. Eastern European governments today are no
longer the subservient, slavish puppets of
Stalin's day. For the past four or five
years, they have been weighing their own
national interests against the suggestions
from the Kremlin. They sing their own
tunes in the international Communist con-
cert.
A. Over the past year, however, the Sino-
Soviet dispute and the Vietnamese con-
flict have increased the pressures for
greater conformity and unity with the
U.S.S.R.
B. Moscow has cleverly used the issue of
support for North Vietnam, a fraternal
Communist country subjected to "imperial-
ist" attack, to emphasize a necessity for
unity.
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1. Peking is made to appear the obstacle
to a concerted Communist effort.
C. Moreover, the fantastic Red Guard phenomenon
in China has made it difficult for some of
the-East European countries to stick to
their line that there can be no conference
to determine a common Communist line until
the two giants of Communism have reached agree-
ment.
II. Moscow can count on the support of all the East
European countries except Albania on most interna-
tional issues, although this support is not auto-
matic, and occasionally requires a selling job.
A. The heads of all these states, except Albania
and Yugoslavia, have met twice in the past
year for a joint consideration of policy mat-
ters.
1. When they met last July as the political
consultative committee of the Warsaw Pact,
three Soviet policies they endorsed were:
(1) further aid to Vietnam, including
volunteers if requested; (2) denial of
nuclear weapons to West Germany; and (3)
convocation of a European security confer-
ence.
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2. These same heads again demonstrated
their togetherness when they met in Mos-
cow in October, though no policy announce-
ments were made at that time.
III. Not surprisingly, therefore, there have been no
dramatic assertions of independence vis-a-vis the
U.S.S.R. in the recent past, but neither has there
been any back-tracking on the part of those East
European states which have assumed divergent posi-
tions.
A. Albania has staunchly maintained its alliance
with China. It shows no inclination to abandon
Stalinism internally.
B. Tito kept alive the idea, if not the substance,
of his nonalignment by holding a summit meet-
ing with Nasir and Mrs. Gandhi last October.
C. And Rumania has again made clear that it op-
poses any, new international Communist meeting.
1. In November, Rumania's party chief
Ceausesco (cho-sess-ku) even compared notes
on this subject with Tito, another staunch
opponent.
D. :Poland is perhaps among the most interested in
maintaining good relations with the United States.
In January, 1966, Warsaw undertook peace soundings
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in Vietnam at Ambassador Harriman's request.
In recent months Poland has been particularly
reasonable in working out bilateral problems.
IV. There has been a proliferation of issues, moreover,
on which the East European states do not agree
among themselves.
A. The possibility that West Germany may seek
to establish diplomatic relations with East
European states, for example, has been wel-
comed by Rumania and Hungary, but has dis-
turbed Poland and East Germany.
B. In recent months, Hungary has criticized
Rumania over the interpretation,of an his-
torical event, while Yugoslavia and Bulgaria
have revived their traditional territorial
dispute over Macedonia.
C. Even the UNITED NATIONS-meetings have be-
come the scene of competition among the
East European states for election to UN
offices and for pre-eminence in UN commit-
tees.
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V. The regimes of Eastern Europe are all stable at
present.
A. The peoples of most of these countries are
generally resigned and apathetic, concerned
primarily with bettering their own individual
economic lot.
1. For example, the authorities in Budapest
were nervous last October about the 10th
anniversary of the Hungarian revolution,
but it passed without incident.
B. During the past year, the Communist parties
of Albania, Bulgaria, Czechoslovakia, and
Hungary all held congresses which demonstrated
there is no serious challenge to the present
leaders from within the ruling elites.
VI. There has, nevertheless, been a revival of faction-
alism within most of the regimes of Eastern Europe.
A. The more moderate leaderships are trying to
undertake economic reforms which involve a
decentralization of economic decision-making.
This has political overtones.
1. Party members are not certain how, precisely,
they are to continue exercising control under
the changed circumstances.
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2. Conservatives in these regimes see a
threat to the retention of their positions
of authority, while liberals get frus-
trated by conservative obstructionism.
VII. In Yugoslavia, the liberal-conservative split has
presented Tito with his greatest crisis since
Milovan Djilas was purged in the early 1950s for
attacking the "new class."
A. The crisis was precipitated last summer when
Tito deposed his heir-apparent, Aleksander
Rankovic, the darling of the conservatives.
1. Rankovic had moved too far too fast in
attempting to ensure his eventual succession,
even to the point of bugging Tito's
residence and office.
2. Rankovic was the leading Serb in the regime,
so his purge also had overtones of being
directed against the country's largest
nationality group.
B. Tito has set out to make sure another Rankovic
can't emerge.
1. The secret police, who were under the control
of Rankovic, are having their authority
curtailed and decentralized.
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2. In October, Tito began a thorough re-
organization of the party and a de-
centralization of political power within
it.
3. The government is also slated for a.;
shake-up; regional authorities are to
receive greater power.
C. These events have produced indiscipline and
confusion within the regime.
1. Some-party leaders have gone so far as
to call for an approved opposition within
the Communist party.
2. And parliamentary bodies have become more
aware of their political prerogatives.
3. Committees no longer rubber-stamp proposed
laws.
4. When a house of the Slovenian parliament
refused to pass a draft bill in October,
the cabinet of the republic resigned.
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EAST EUROPEAN ECONOMY
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VIII. The highly industrialized countries of Eastern Europe
are not doing as well on the economic front as their
neighbors who are less developed.
A. The less developed East Europeans have better
prospects for growth because their non-agricul-
tural work force is still growing.
1. Over the next five years, for instance, the
increase in non-farm jobs will range from
nearly five percent in Rumania, down to per-
hays one percent in Czechoslovakia and vir-
tually zero in East Germany.
B. Foreign trade also affords brighter prospects
for the countries which export raw materials,
particularly foodstuffs and wood products.
1. They can still find growing markets in both
East and West.
2. The industrialized countries have just about
reached the limit in selling processed man-
ufactures in the West, and are running into
growing competition, and a preference for
Free World products, when they try to sell
their goods within the Bloc.
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C. In the first half of this decade, East-West
trade increased by about 50 percent, but the
rate of growth is slowing down. The East
European countries remain interested in West-
ern machinery, and particularly in Western
know-how, but are finding it increasingly
difficult to hold up their end of the trade
balance.
D. Economic relations with the Soviet Union are
under new strains, to some degree because the
U.S.S.R. now seems to be reciprocating the
new East European fashion of measuring deals
by the yardstick of self-interest.
1. The new Soviet leadership concluded in
1965 that trade with East Europe involved
a substantial cost to the Soviet Union,
which must not be increased, and should
be reduced if possible.
2. This decision is reflected in new trade
agreements negotiated over the past 18
months.
3. The Soviet Union has been sending raw
material to the Czechs and East Germans,
and to a lesser extent to Poland and
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Hungary, in exchange for machinery and
finished goods. Now Moscow has deter-
mined that it costs Russia more to produce
the exported raw materials than it would
to produce the additional machinery at
home.
4. As a result, the East Europeans found
when the new trade agreements were nego-
tiated that Moscow was insisting on much
better terms, and being more selective
about the goods it wanted.
E. The Soviet Union, however, still accounts
for 45 percent of total trade for the in-
dustrialized countries of East Europe, and
the Soviet Union remains a key element in
their economic plans.
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BRIEFING PACKAGE January 1967
CHINESE POLITICAL DEVELOPMENTS
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I. Communist China is being racked by the greatest
political convulsions since Mao Tse-tung took
control in 1949.
A. Mao, aging, sick, and more and more inflexible,
is concerned about where Communism is heading
in China, and about who is going to succeed
him.
B. Around Mao, the men who aspire to take his
place have the same concerns.
C. The result has been a naked struggle for power,
accompanied by a drive to re-shape the Commu-
nist Party, or to replace it with a younger
version with the old revolutionary zeal.
D. That is what is behind the phenomenon of the
so-called "cultural revolution" and the Red
Guard today.
II. Any attempt to determine where this revolution
stands today, or who is likely to come out on top,
is like trying to pick a winner when a bunch of
cats are fighting under a rug.
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A. The cultural revolution has already turned
on some of the leaders who ostensibly started
it. The Red Guard is split, and rival units
battle each other or fight with workers in
the streets. There have even been some posters
attacking Mao himself.
(PHOTO CHART, COMMUNIST LEADERSHIP)
B. The prime mover at present is Defense Minister
Lin Piao. (Lin Byaw)
1. He was proclaimed second man in the leader-
ship, and Mao's chosen successor, when
the cultural revolution began last summer.
2. Since that time he has been engaged in
a drive to unseat any potential rivals.
3. His immediate targets are the two men
who have been at the top of the party
machinery, Chief of State Liu Shao-chi
(Lyew Shao-chee), and the general secre-
tary, Teng Hsiao-ping. (Dung Shaw-ping)
C. For the past couple of months, Lin's drive
appeared to be stalled. There was some
reason to believe that a group headed by
Premier Chou En-lai (Joe En-lye) does not
want to see the party machinery completely
s~aattered.
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1. The role of Mao Tse-tung (Mao Dzeh-dung)
during this period was obscure. It
appeared that he was giving general sup-
port to Lin Piao (Lin Byaw), but was
reluctant to condone extreme action
against men as close to him as Liu (Lyew)
and Teng (Tung).
2. Despite violent public and private
criticism, Liu and Teng still showed
up at major rallies. In the new
alignment of the hierarchy, Liu had
dropped from second to eighth, but
still acted as chief of state. Teng
dropped a notch or two, but still ran
the party machinery.
D. Early in January, the leadership struggle
apparently entered a more critical phase.
1. Newspapers and Red Guard organizations
have published authoritative reports of
a bitter personal attack by Mao himself
on Liu and Teng.
2. According to these reports, Mao charged
that the two men had been working ever
since 1958 to push him aside and take
over the country.
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.3. This involvement of Mao's personal
prestige could only be taken as the
signal for a showdown.
E. There was an almost immediate reaction from
the party old-timers around Liu and Teng.
Organized groups of workers in Nanking and
elsewhere were reported fighting pitched
loattles with the youngsters in the Red
Guard.
:L. It remains difficult to determine from
day to day which element of the hierarchy
is backing which mass organization.
It has been apparent in the past,
however, that the extremist faction
of the Red Guard which is probably most
responsive to Lin Piao is the one which
has staged the most violent attacks on
factory workers, on party headquarters,
and on government ministries.
.3. If these street battles spread much
farther, the situation is going to
border on civil war.
III. The final destruction or dismissal of Liu Shao-chi
and Teng Hsiao-ping would be only a first step
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for Lin Piao. His goal all along has been to
accomplish a major reorganization of the party.
A.
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B. Many of the party leaders owe their careers
to Liu and Teng, who have dominated the
party machinery for more than a decade.
1. If Liu and Teng go down in disgrace,
Lin will be able to use their past
associations to demote or dismiss large
numbers of party officials in key posi-
tions.
C. Nobody appears to be above the reach of the
purge.
1. In January, Peking began recalling its
diplomats. At least 150, from 13 major
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capitals, were called home, presumably
for questioning and reindoctrination.
2. Tao Chu (Taow Joo) last fall was promoted
from lower levels of the leadership to
the Number Four spot, and put in charge
of the party propaganda department. He
was also named one of the directors of
the cultural revolution.
3. Now Tao Chu is himself under attack.
Mao's wife and the chairman of cultural
revolution committee say that Tao Chu
is a bourgeois reactionary who supports
Liu and Teng.
D. There are rival Red Guard organizations which
raid each other's headquarters.
1. There are counterfeit Red Guard organiza-
tions organized by party leaders in the
provinces trying to protect themselves
from attack.
2. Schools have been closed for the year in
China to let the students take part in
the cultural revolution, and this makes
masses of volatile, irresponsible
enthusiasts available for the various
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Red Guard organizations. Some of them
are more aptly called children than
students.
,3. Initially an effort was made--particularly
by the more practical governmental leaders
around Chou En-lai, to keep the Red Guards
from disrupting the harvest and the
factories. Now, however, the Red Guards
have a charter to go everywhere in the
name of instilling new revolutionary
fervor and destroying the foes of Mao.
IV. When and how will the turmoil in Peking finally
be resolved?
A. We have no idea. The opposing forces, judging
by the protracted struggle, must be quite
evenly matched.
1. Some days, it looks as though they are
digging in for a long winter of political
trench warfare.
2. The next day, a war of movement and a
showdown may appear imminent.
:3. I would say it is still too early to
speculate usefully on the outcome.
B. There are two points, however, which we can
make.
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1. First, as long as China's leaders are
pre-occupied with this internal wrangling,
they will find it difficult to reach
agreement on any new policy lines. So
we do not expect any radical departures
from existing policies.
2. Second, whoever wins, we can see no reason
for suspecting that there will be any
dilution of Peking's implacable hostility
to the United States. Chinese policy
might become somewhat less aggressive if
the winner turns out to be one of the
more practical leaders--for instance,
Chou En-lai.
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BRIEFING PACKAGE January 1967
CHINESE COMMUNIST FOREIGN POLICY
I. Chinese Communist foreign policy is designed to
serve the ambitions of the Peking leaders to
exterLd their military reach and political sway
in Asia.
A. As Communists, they want to spread Communism,
but they are also Chinese. Their sense of
history invokes the ancient China known as
the "Middle Kingdom," to which the surrounding
lands paid tribute.
B. That was far in the past. And with the
current troubles besetting Peking, the
Chinese must realize that any significant
movement toward a restoration of that hegemony
is probably many years off in the future.
C. In the past year or so, Chinese fortunes in
the outside world have sunk to a new low,
Or, as Peking puts it: there have been many
"twists and turns." For the time being, the
regime will have to seek comfort in Mao's
words--that the path to victory follows a
twisting course.
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II. The Chinese have suffered their most humiliating
defeats in Africa, where their heavy-handed
pressure tactics have alienated a number of
important Afro-Asian leaders.
A. These leaders are increasingly aware that
Peking could as easily support their opponents
against them. China's diplomats have been
largely unsuccessful in assuring the
continent's leaders that African nationalism
is being supported for its own sake and not
for ulterior Chinese motives.
1. Early last year the Central African
Republic and Dahomey broke relations with
Peking.
2. The successful coup in Ghana deprived
the Chinese of another major base of
operations.
3. In Kenya, too, there has been mounting
pressure to throw the Chinese out.
Several Chinese intelligence agents have
already been expelled.
B. The Chinese have always viewed Africa as an
area where over the long run they could score
significant gains at the expense of the US,
Vie USSR, and Nationalist China.
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1. Their present policy, however, appears
to be to keep new commitments to a
minimum and fight what amount to holding
actions.
2. At one briefing, Chinese press officials
were told that Peking would have to be
"realistic," and take current conditions
into account.
III. Of all China's reverses abroad, probably the most
serious has been the elimination of pro-Communist
elements from positions of power in Indonesia.
A. The Indonesian Communist party, one of Peking's
.staunchest and largest supporters in the
world Communist movement, has been so badly
zurt that it will take years to recover.
In the past, Peking often used the Indonesian
government as a front man in such international
enterprises as the Afro-Asian movement. Nov
'they appear to have written off Sukarno, and
must look elsewhere for someone to give a
non-Communist camouflage to their maneuverings
among the international front groups.
IV. There are a few areas where the Chinese may feel
they have scored some measure of success in 1966.
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A. the main Chinese victory was over the tiny
Portuguese colony of Macao, across the
Canton estuary from Hong Kong.
1. Communists fanned a minor disturbance
in Macao into serious rioting, and Peking
made this a pretext for threats which
extracted a wide range of concessions
from the new Portuguese governor.
2. They included, for instance, the surrender
to the Communists of a number of Chinese
Nationalist agents who had taken refuge
in Macao.
3. With a sort of gun-boat diplomacy, Peking
demonstrated that Macao exists only at
China's pleasure. This was supposed to
repair Peking's image as the protector of
Chinese living under foreign rule, and
also serve as a warning to Hong Kong.
B. The Chinese also probably enter Pakistan on
the plus side in their diplomatic ledger.
1. Peking has continued to supply aircraft,
tanks, and artillery to Pakistan. China's
willingness to provide MIG-19s., its most
modern fighters, shows the value Peking
puts on its ties with Rawalpindi.
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2. Actually, the relationship is little more
than a marriage of convenience, based on
mutual hostility to India and on Pakistan's
need for a new source of weapons after the
fighting over Kashmir. The Chinese welcome
anything that disturbs the Indians,V--,and
adds strains to Pakistan's ties with the
U.S.
C. Tanzania is another of the few places where
China's position has improved over the past
year.
1. President Nyerere has come to rely more
and more on Peking for military assistance,
and the Chinese have a large mission
training the Tanzanian police force.
2. The Chinese are also talking about building
a railroad from the Tanzanian coast into
Zambia, which would be useful for bringing
out copper.
3. The Chinese find Tanzania particularly
valuable as their main point of contact
with rebel forces operating in the
southern half of the African continent.
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China will probably increase its support
for subversive efforts against Mozambique
and Rhodesia.
V. Vietnam remains at the center of Chinese foreign
policy. Public Chinese commentary on the war
has dropped off sharply since last spring, but
there has been no softening of Peking's opposition
to a negotiated settlement.
A. In the most recent statement, on December 20,
forcing the Vietnamese to capitulate.
an authoritative newspaper editorial repeated
Peking's familiar position that it is
necessary for the Vietnamese to keep fighting
until all U.S. forces are driven out of
Vietnam.
1. The Chinese Foreign Minister told the
French Ambassador last November that U.S.
troops would have to be pulled out of
Vietnam before there could be any
negotiations at all. This is stiffer
than Hanoi's position.
Peking will almost certainly continue to
denounce any proposals for a compromise
settlement and any new U.S. pause in the
bombings as a US "peace plot" aimed at
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C. The Chinese continue to promise the North
'Vietnamese all necessary support, but their
public pronouncements reveal an increasing
degree of caution.
1. Peking has made no mention of "volunteers"
for Vietnam since the fall of 1965, except
for a brief flurry of statements just
after the U.S. bombing of POL storage
facilities around Hanoi and Haiphong.
:3. The Chinese continue to emphasize that
the Vietnamese must bear the primary
responsibility for the fighting.
:3. Chinese comments about the "inevitability"
of war with the United States have dropped
off from the high level they reached in
mid-1965; they are now infrequent.
VI. The Chinese apparently believe that time, at
least, is on their side in Vietnam. Peking's
efforts are concentrated on keeping the Viet-
namese Communist forces in the field, in the
expectation that the U.S. will eventually grow
weary and pull out.
A. The Chinese are providing a steady flow of
military and economic assistance to
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North Vietnam--and in addition maintain a
sizeable military presence in the northern
part of the country.
B. Peking is probably willing to increase its
logistic support if necessary to keep the
Vietnamese in the war.
C. But the Chinese obviously prefer to fight
the war by proxy. The crunch will come
if the Hanoi leaders should decide to
negotiate, and the only Chinese alternative
is to use its own forces to keep North
Vietnam at war.
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BRIEFING PACKAGE
January 1967
CHINESE ECONOMY
1. The Chinese economy has regained only a part of
the ground lost as the result of the disasters
of 1959-61, and prospects to recover the momentum
of the 1950's appear remote.
A. Nevertheless, the regime has made progress
in some special areas, particularly in its
program to develop advanced weapons.
B. The regime claims it is beginning the second
year of the Third Five-Year Plan, but we
have had no indication that a genuine plan
exists.
1. China's leaders are probably too preoccupied
with political matters to devote themselves
to thorough economic planning.
2. To be realistic, such planning would have
to acknowledge the collapse of the "Great
Leap Forward."
3. Instead, the regime has just issued highly
exaggerated claims of economic accomplishments
in 1966--especially for agriculture.
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4. There are even indications that the
economy may be pushed into a new try
at a Great Leap Forward, not because
there is any better chance of success,
but because Mao regards it as a means
of re-igniting the revolutionary.,
fanaticism he feels the Chinese are
losing.
C. There has not been time for the political
turmoil to show up in the economic statistics,
but workers who are battling with Red Guards
certainly cannot be maintaining production
at the same time.
II. Stagnation in agriculture. is still the chief
obstacle to a resumption of adequate economic
growth, and prolongs the persistent threat to
economic stability. The regime has formally
claimed a record harvest, but hasn't even
bothered to hide the evidence to the contrary.
(CHART, FOOD/POPULATION GROWTH IN CHINA)
A. For the fourth successive year, grain
production has failed to increase. Output
in 1966 was actually somewhat lower than
the preceding year, and below the level of
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:L0 years ago, when there were about 130
million fewer people to be fed.
B. :Food rations during 1966 were cut in many
areas because adverse weather reduced the
:Local harvests below average. -Even
in areas which were not affected, per capita
consumption remained well below the levels
of 1957 but still above the level of the
"lean" year of 1960.
I. The rations could be kept above the
"lean" year of 1960 because China
imported more than 5 million tons of
grain from the Free World in 1966. The
below-average harvest of 1966 will
probably require substantially increased
purchases in 1967.
C. The regime has made little progress in long-
term solutions for the food-population problem.
1.. The birth control program has not been
pushed with enough vigor--particularly
in rural areas--to have a sharp effect
on population growth.
2. Nor has the regime shown any intention
of coming up with any practical "big push"
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for agricultural production--for example,
greatly increased use of chemical
fertilizers, and seed stock that responds
well to such fertilizer.
III. These major deficiencies in agriculture, which
limit new investment, constitute the principal
reason for believing that industrial growth also
will be slow at best during the next several years.
Other important obstacles to industrial expansion
are the scarcity of trained manpower, and the
concentration of the best of China's limited
industrial resources on advanced military programs.
A. Industrial production during 1966 was above
1958, when the "leap forward" collapsed, but
still well below the high level of 1960.
1. Following a sharp drop in 1961-62, there
has been some recovery in industrial
production since 1962, with much of the
increase resulting from greater use of
existing plants. This expansion slowed
down in 1966, largely because heavy
industry has now reached a stage where
additional production must come primarily
from new or expanded facilities.
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B. Top priority has been given to developing
modern weapons. However, a few select
non-military industries have been favored.
1. China has become almost self-sufficient
in petroleum products, including jet
fuel, at the present low level of
consumption. Some imports of some high
quality lubricants and additives continue,
however.
2. Output of chemical fertilizer has doubled
compared to 1960, to an estimated 5 million
tons. Availability of chemical fertilizer,
including imports, is still less than
one-fourth of China's needs, estimated
conservatively.
C. Production of light industrial products continues
to be restricted by shortages of agricultural
raw materials. Average cloth rations in 1966
are believed to have increased slightly, to
three or four meters per person.
(CHART, CHINESE FOREIGN TRADE)
IV. Since 1960, the regime has pointed with pride to
its policy of "self-reliance" and its freedom
from dependency upon the Soviet Union; nevertheless,
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foreign trade--in particular, trade with the
Free World--is playing an increasingly important
role in China's economy.
A. Total trade in 1966 probably reached $4.1
billion, almost equalling the peak year of
1959. However, the character of China's
trade has undergone a major reorientation
since 1959.
1. In 1959 almost 70 percent of trade had
been with the Communist Bloc countries.
In 1966, more than 70 percent of trade
was with the Free World.
Trade with the Soviet Union, which reached
a level of almost $2 billion in 1959,
fell to about $400 million in 1966. Japan
replaced the U.S.S.R. as China's chief
trading partner.
B. This sharp shift in the direction of trade
has taken place largely because of the need
to import grain, which could be obtained
only in the Free World, and because of the
Sino-Soviet dispute, which moved China to
reduce its economic and technological
dependence on Russia.
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C. China's deliberate turn to Japan and Western
Europe as its principal source of foreign
technology takes the form of imports of
complete plants, imports of small but
highly important commodities--for example,
precision instruments and machine tools--
and an increasing exchange of trade missions
and industrial exhibitions.
V. Economic problems at home have not prevented
China from continuing its program of economic
and military aid to selected foreign countries.
Until 1963, most of Peking's aid commitments
to Free World countries were in Asia. Since
then, Peking has also directed its attention
toward Africa and the Middle East.
A. The Chinese have emphasized their support
for revolutionaries in the less developed
countries, but direct military aid has not
been large.
I. The chief recipients of arms aid have
been Algeria, Cambodia, Indonesia, and
Pakistan.
2. Since the fall of 1965, Peking has become
the principal supplier of military aid
to Pakistan.
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3. In addition, China has delivered small
amounts of arms aid, including some
military training, to dissident groups
in Africa, particularly in the Congo
(Brazzaville), and to exiles from
Angola, Mozambique, and Portuguese
Guinea.
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