CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A011300010001-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 16, 2016
• Document Release Date: April 28, 2005
• Sequence Number: 1
• Publication Date: May 24, 1968
• Content Type: REPORT

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D
DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
STATE review(s) completed.
Secret
24 May 1968
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No. 0164/68
24 May 1968
Central Intelligence Bulletin
CONTENTS
France: The government still faces major hurdles.
Page 1)
Czechoslovakia-USSR: Prague's leaders begin new
talks with Kosygin. (Page 2)
USSR: The economic program is allegedly a success,
but many problems remain. (Page 3)
Communist China: Peking media are calling for the
purge of additional "traitors." (Page 4)
West Germany: The government is pushing for quick
approval of controversial emergency legislation.
(Page 5)
Spain: Madrid alleges US balance-of-payments program
has hurt the Spanish economy. (Page 6)
Yugoslavia: A plan to upgrade the status of an
autonomous province could become a divisive issue.
(Page 7)
Panama: The potential remains for a head-on clash
between government and opposition. (Page 8)
Peru: Anti-US sentiment is rising. (Page 9)
Honduras: Opposition party leaders are withdrawing
from government posts. (Page 10)
South Vietnam: Military situation (Page 12)
USSR-Chile: Praise from Moscow (Page 12)
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France: The government still faces major hur-
dles despite its parliamentary victory on 22 May.
The failure of the Communist and other leftist
parties to bring down the government through a cen-
sure motion apparently has not weakened the deter-
mination of the unions to hold out for substantial
concessions. Secretary General Georges Seguy of
the Communist-dominated General Confederation of
Labor (CGT), who is emerging as the chief labor
spokesman, has emphasized that the strikes would
continue to spread until workers were guaranteed
that their demands would be met. The CGT, after
initial hesitancy in the early days of the sponta-
neous strike movement, is now regaining the initi-
ative in the labor arena.
The government also must deal shortly with
rising discontent among police forces. In a com-
munique issued after a meeting yesterday of the
interfederal police union, policemen warned they
might question their orders if police are used sys-
tematically against strikers. The communique' em-
phasized that police could not serve a regime.that
did not respect republican institutions. The govern-
ment has not yet responded to police demands earlier
this week for pay raises.
Police attitudes are particularly critical in
the light of announced student plans for further
mass demonstrations. The government, fearing new
trouble after yesterday's outbreak of violence,
called on students to break with agitators. The
government promised that university reforms would
take place and that the students would "be associ-
ated with them."
Farm organizations also plan to hold demon=
strations today.
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Czechoslovakia-USSR: Czechoslovak leaders
have begun another round of negotiations with So-
viet Premier Kosygin as both sides, despite the un-
derlying tension, continue to conduct business in
routine fashion.
Party leader Dubcek and Premier Cernik flew to
Karlovy Vary on 22 May, presumably for further dis-
cussions with Kosygin. Both sides are attempting
to give the impression that there is no urgency to
the talks.
[The Czechoslovaks may be discussing credit
with Kosygin, but may not be hopeful of obtaining
a loan from the USSR on acceptable terms. Within
the last few days, the Czechoslovaks reportedly re-
quested a $100-million loan from France, "no matter
what the interest rate."
Moscow has yet to reduce its psychological
pressure against Prague by removing its troops po-
sitioned along the Czechoslovak borders, or by end-
ing its press campaign against Czechoslovakia.
Pravda continues to report selectively and to pub-
lish distorted stories on Czechoslovak developments.
Czechoslovak journalists for their part continue to
criticize their Soviet counterparts. The Berlin
correspondent of Rude Pravo, the party's main daily,
also lashed out at the East Germans yesterday.
The Czechoslovak party presidium yesterday re-
affirmed in low-key fashion that the party intends
to remain in effective control by enjoining other
political parties from setting up youth organiza-
tions and by condemning "the attempts of a small
group" to re-establish the Social Democratic Party.
It also affirmed that Czechoslovakia will partici-
pate "actively" in the "international Communist
movement." In another possible gesture to Moscow,
the presidium stressed that Rude Pravo will be the
principal voice of the party. It nevertheless as-
serted again that the party will carry out its re-
form program.
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USSR: A four-day national conference held
last week in Moscow to assess the progress of the
economic reform program apparently accomplished
little.
Scanty press reporting claimed that the con-
ference considered the program in general a success.
The reform, begun in 1965, represents an effort to
increase economic efficiency, chiefly by revising
incentives and increasing the responsibilities of
enterprise personnel.
The conference failed, however, to offer solu-
tions to the many problems mentioned, including
bureaucratic inertia, supply, failures, complicated
systems for calculating incentive funds, unstable
plans, and inadequate credit financing. Moreover,
it apparently tookno action on the fundamental
questions peculiar to the Soviet system, such as
how to achieve the correct balance between central-
ized planning and the economic independence of en-
terprises, and how best to set prices.
The economic reform now embraces 11,000 enter-
prises accounting for about half of total industrial
production as well as a number of enterprises in
transport, construction, and other sectors. Almost
all industry is expected to be included by the end
of this year. Difficulties already evident are
likely to increase in the coming months as thousands
of the smaller, less-efficient enterprises begin to
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Communist China: Peking media have been de-
manding the purge of additional "traitors," but no
significant figures have fallen since the acting
chief of staff was sacked in late March.
The failure to move against new victims sug-
gests that the leadership either is in disagreement
or is not yet ready to act. If the latter is the
case, when action is taken it could be extreme. Of-
ficial pronouncements made since March sound tougher
and shriller than any published since last summer.
Peking has republished inflammatory portions
of a circular of 16 May 1966 which presented Mao's
case against politburo member Peng Chen and started
the overt phase of the Cultural Revolution. A com-
mentary on the second anniversary of this circular,
supplied jointly by editors of People's Daily, Red
Flag, and Liberation Army Daily, referred to ardu-
ous struggles ahead and said that the country must
continue to follow Mao's instruction to "put de-
struction first."
It listed all the key "revisionists" brought
down thus far in the Cultural Revolution, but
omitted mention of the extreme leftist group that
was expelled last fall and winter. This suggests
a decision to stop publicizing the sins of this
group, which was responsible for executing programs
of the radical Cultural Revolution Group last year.
Propaganda accusations in the past two months
against Liu Shao-chi and other victims have shifted
emphasis from their ideological errors to the charge
that they are traitors and Kuomintang or "enemy"
agents. This shift could be a sign that prepara-
tions are under way for applying legal sanctions
against them, although such a move still seems un-
likely, comments that this would
be contrary to Chinese Communist practice, but if
it were attempted it could produce a show that would
make the Moscow trials of the 1930s look like a Sun-
day school picnic.
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West Germany: The government is striving for
swift parliamentary approval of controversial emer-
gency legislation.
A series of laws is involved that would empower
the Bonn government to take extraordinary measures
in a national crisis. This would involve trans-
ferring the so-called reserved rights for emergency
situations from the former Allied occupiers to the
Federal Republic. Those opposed to the legislation
claim that the powers it grants to the government--
including the rights to establish an emergency par-
liament, to enforce economic controls, and to monitor
the mails and telephones--could serve as a prelude
to another dictatorship. The government insists
that it needs emergency powers to defend the Federal
Republic.
Student demonstrations against the legislation
have been taking place, and are likely to intensify
this weekend and early next week. Trade union
leaders by and large have rejected student demands
for massive strike action, but some work stoppages
may occur.
Chancellor Kiesinger has postponed a visit to
Spain and Portugal to be on hand for the third and
final reading by the Bundestag on 29 May. The
leadership of the Social Democratic Party, overrid-
ing strong internal opposition from labor and left-
wing elements, has rallied the bulk of the party's
parliamentary delegation behind the legislation.
This will provide the two-thirds majority necessary
for constitutional amendments.
Government leaders are convinced that the leg-
islation--which has been under consideration in var-
ious forms for more than ten years--can now be
passed. They believe that once this is done the
controversy over the matter will subside.
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Spain: The recent US moratorium on private
investment in Spain has had little impact on the
Spanish economy.
J
Although the US
is the heaviest foreign investor in Spain, foreign
investment in general accounts for only about five
percent of total investment in the economy. Since
the moratorium went into effect, US firms operating
in Europe have been able generally.to finance their
operations from European sources, and so far have
not had to cut back their activity.
he Spanish Government
continues to insist a pain's economy has been
severely injured and that the country should there-
fore be reclassified under the US balance-of-pay-
ments program to permit it to receive some direct
investment. Madrid's stance is intended in part to
relieve Spain's economic situation and in part to
strengthen its bargaining position in the forthcom-
ing renegotiation of the US bases agreement.
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Yugoslvaia: A proposal for upgrading the au-
tonomous province of Kosovo-Metohij.a.(the Kosmet)
to the equivalent of a republic could exacerbate
the traditional Serbian-Albanian conflict.
The proposal by the president of the Kosmet, a
region that is 67-percent Albanian, would establish
the province as an independent unit in the Yugoslav
federal system and remove it from Serbian suzerainty.
Under the plan the area would be represented in the
Chamber of Nationalities, establish independent
courts, and collect its own taxes. Albanians could
observe their national holidays, use their national
symbols and flags, and upgrade the status of the
Albanian language.
The Serbian assembly has intimated that it
will raise the constitutional status of the Kosmet,
but this will meet with strong resistance from the
Serbs generally, for whom the Kosovo historically
is hallowed ground. The Serbs will also be con-
cerned that the plan will remove a large bloc of
votes from their control in the federal assembly.
Fulfillment of Albanian aspirations might
stimulate nationalist feelings of other minorities
in Yugoslavia.
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Panama: The potential for a head-on clash re-
mains as both government and opposition forces per-
sist in claims of victory.
Renewed violence between armed toughs of both
camps erupted on 22 May in a shooting spree in
which 22 persons were injured before the National
Guard restored order. Bombings, sniper fire, and
sporadic terrorism are adding to the tense atmos-
phere in Panama City.
Repeated calls for street violence by irrespon-
sible and inflammatory news media are to blame for
some of the extremist action. One progovernment
tabloid threatened "chaos" if Samudio is defeated
and reported the formation of a "popular militia"
to kill the oligarchs and burn their houses.
The latest official voting results show Arnulfo
Arias' lead continuing to grow in Panama Province;
this may have prompted Samudio partisans to touch
off some of the violence. The US Embassy yesterday
commented that this violence is a sign of the grow-
ing desperation of the die-hard Samudio forces and
of the determination of Arias' followers to pre-
serve his victory.
[In still another desparate effort to offset
Arias' increasing lead in the early vote tabulation,
the government-controlled Electoral Tribunal yester-
day appointed a Samudio sympathizer to replace the
pro-Arias president of the National Elections Board.
Although Arias retains a six-to-four majority on the
board, the president can cast a vote in case of a tie.
This obvious chicanery may hasten a showdown between
the two sides.
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Peru: Anti-US sentiment is rising in reaction
to reports that aid to Peru will be cut off because
of its purchases of Mirage aircraft and Canberra
bombers.
This anti-Americanism is having political re-
percussions despite the fact that the Belaunde ad-
ministration is now trying to play down somewhat
its initial hostile reaction. Both houses of con-
gress have passed resolutions rejecting the supposed
cut-off of US aid. Severe criticism of the US was
heard during the debate on the Senate motion. The
small Christian Democratic Party's presidential
nominee for the 1969 elections called on the exec-
utive to suspend payments on Peru's debt to the US
and to study means of canceling US mining conces-
sions. The finance minister resigned on 22 May
when he realized that the tax reform to which he
was committed was doomed as a result of a US state-
ment that Peruvians interpreted as pressure for tax
reforms.
On 21 May, Air Minister Gagliardi stated that
the military purchases had been made with Peruvian
funds and that Peru would not tolerate being told
what it should buy. He added that Peru would have
bought aircraft from behind the Iron Curtain had
suitable ones been offered. Gagliardi indicated
that the Mirages might be on display during inde-
pendence day ceremonies on 28 July.
The public controversy over US aid to Peru may
also have facilitated the election of an extreme
leftist, Pena Cabrera, to the leadership of the
Lima organization of President Belaunde's Popular
Action Party. In his victory speech, Pena called
for the nationalization of the US-owned Interna-
tional Petroleum Company.--F--
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Honduras: Leading members of the opposition
Liberal Party have stated that they are withdrawing
from their government posts in compliance with or-
ders issued by the recent party convention.
The move is primarily an attempt to force Pres-
ident Lopez to dismiss minister of the Presidency
Ricardo Zuniga, who engineered the widespread fraud
in the municipal elections on 31 March.
Two prominent Liberal deputies and a Supreme
Court justice have already announced they will quit.
Although lesser party members may not give up well-
paying posts, the US Embassy believes that other
leading deputies will comply with the order.
The Liberals lack military backing and have
little prospect of toppling President Lopez. They
hope, however, that Lopez will be reluctant to turn
Honduras into a one-party state and that their uni-
fied stance will prompt him to renew negotiations
with them.
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[ South Vietnam: Communist forces are keeping
up the pressure against selected allied positions
in the nothern provinces. Sharp fighting occurred
near Con Thien and Da Nang on 22-23 May, and ground
probes were mounted elsewhere in I Corps. In ad-
dition, two strong Communist ground attacks were
reported in the III Corps area in the same period,
and light mortar attacks hit the Cholon section of
Saigon.
USSR-Chile: Moscow has defined its attitude
toward President's Frei's Christian Democratic gov-
ernment in an exceptionally laudatory article pub-
lished in Pravda on 18 May. The intention plainly
was to show that Moscow agrees with the Chilean Com-
munist Party's policy of cooperating with Frei on
selected legislative issues in an effort to achieve
a broad front of left-wing elements, including non-
Marxists. The article advises the Christian Demo-
cratic Party that its future depends on a "movement
to the left" and warns it to beware of foreign and
domestic reactionary pressures, which it links with
US policy. In this, the Soviets are supporting the
efforts of the Chilean Communists to move government
policy more to the left and strengthen the role of
leftist element of the Christian Democrats.
F7 the
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