LETTER TO MR LEO CHERNE FROM ALLEN W. DULLES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01676R004100130002-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 11
• Document Creation Date: December 14, 2016
• Document Release Date: November 7, 2002
• Sequence Number: 2
• Publication Date: August 6, 1959
• Content Type: LETTER

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Approved For Release 2002/11/13 : CIA-RDP80601676R004100130002-3
MEMORANDUM FOR: Mr. Dulles
After you have noted I will send this
on to WH Division. Another copy of this
report has already been sent to the DD/I.
FMC
14. Augustt59
(DATE)
FORM NO.1 REPLACES FORM 10.101
1 AUG 54 '01 WHICH MAY BE USED.
(471
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,I,Y9-X//X -1-1W/iiff 17- 1.
June 6, 1956
The Honorable Allen W. Dulles
Director, Central Intelligence Agency
2430 E Street, N.W.
Washington, D.C.
Dear Mr. Dulles:
I can't tell you how much I appreciated the oppor-
tunity to talk with you during an interval in which you
were obviously (I suspect, as always) terribly busy.
I am enclosing a letter to the President with re-
ference to one of the matters we discussed and also a
special report of the Research Institute which you may
have already seen.
For your information the Board of Directors of the
I.R.C. has been enlarged very recently and now includes
new Board members, Herman Steinkraus, Joseph Mankiewicz,
Mrs. Ellen Lehman McCluskey, Claiborne Pell and Allen
Grover. I wish that the presence of this additional
strength promised a solution to our present acute fin-
ancial need. Unfortunately, almost the contrary is
likely to be the case. Their joining us had already
involved the decision to increase certain aspects of
our functioning.
We are deeply concerred ? th mf7nlent with the
plight of the escapees in I If their fate
proves to be in jeopardy, I know that the I.R.C. will
want to do something helpful in this situation, but
none of us is yet clear about the course of action which
may prove effective. Any guidance would indeed be
welcome.
With my warmest personal wishes,
LC: ck
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STAT
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June 5, 1956
The President
The White House
Washington 25, D.C.
My dear Mr. President:
Some months ago, you urged Congress to amend the
ia*iret Laws to provide sanctuary for those who risked
their lives in escaping from the Iron Certain. Unfortunately,
your recommendations have not yet produced the quick action
you desire.
There is Row new reason for urgency
legislation you proposed. The Donovan Comnission
International Rescue Committee has revealed the a
well-planned, lavishly financed program of the Boviet Onion
to induce redefection. The evident. we collected shows that
escapees consider our Immigration Laws a most tsportast
actual and psychological ber17.ier to their acceptance by us.
Your statements and the actions taken by various
government agencies at your instigation daring recent weeks
have helped the morale of the refugees. lot enactment of
your proposals would be the most effective step we could
take to defeat Isseiate redefeetion campaign.
In view of the data we now have about Aussian
pressure to win back the refugees, I mambo- whether this
might not be the moment for you to lay an earnest appeal
for emergency action before the Congress' Our legislators,
Sod the people, have learned what Russia in attempting to do
with the refegeee. I believe hi-partisan unity would be the
response to a call for legislative action from you as President.
May I use this opportunity to express my appreciation
the leadership you have given in aronsiag American support
the escapees who reside among dig.
respectfully
Leo Chern
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LC:a
Approved or Release 2002/11/13 . CIA-
TOUGHEST CHALLENGE YET IN NEW SOVIET STRATEGY
these underdeveloped nations cannot yet be ex-
pected to respond to the ideological appeal of West-
ern democracies over the authoritarian call of the
Russians. Ignorance abroad is a major Soviet asset,
which they compound with their propaganda. As an
illustration, India's first public opinion poll in West
Bengal showed 31% thinking the U.S. was "willfully
preparing for war" and only 2% thinking the Soviet
was preparing.
7. Is time on the Kremlin's side? The Russians
have reason to believe that the longer the current
situation lasts, the more tempted people in many
countries will be to accommodate themselves to a
pattern that favors the Soviet. This trend has al-
ready started in Asia. Cambodia has broken her
ties with the U. S. on the assumption that Red
China's star is ascending. Great Britain has written
off Formosa on the assumption that Chiang-Kai-
Shek can't win. Even Pakistan, which the U. S.
has helped at the price of increased Indian hostility,
is interested in deals with Russia. Trade paves the
way to political accommodation. Unless we can
counter this trend, the danger is that our allies will
drift into neutralism, and the neutrals will drift into
a pro-Soviet orientation.
Washington and the free world are not without
resources to oppose these challenges successfully.
We're still fax out front as an economic power; we
have no designs on the well-being of other nations;
12
?
we do not seek to impose our ideology on Asians. -
These assets have not yet been brought to bear
effectively in the war of resistance to Communist
domination. Internal political considerations, party
and regional interests, particular industry needs,
have so far prevented a consistent national policy.
Whether we can close ranks and intensify our re-
sistance on a more organi7ed basis is the funda-
mental challenge of our time, it is now clear.
8. Can the U. S. take the lead? The basis for
a potentially powerful counteroffensive is sketched
out in Bertram D. Wolfe's Six Keys to the Soviet
System, published this month. Wolfe points out that
we, not the Communists, are today the advocates of
agrarian reform. We, not they, are the advocates of
a genuine peace, with disarmament under full safe-
guards and controls. We, not they, are the cham-
pions of the rights and freedom of the worker ?
freedom to move, to change jobs, to organize, to
assemble, to elect and control his own officials, to
strike. It is we, not they, who support the most
powerful loyalty in the modem world ? nationalism
? and who are the advocates of self-determination.
"In short," says Wolfe, "the main weapons that the
Bolsheviks thought they could use in the early days
against the rest of the world ? nationalism, labor
rights, agrarian reform, abolition of poverty, an
economy of abundance, anti-imperialism ? are now
in our hands."
It is up to us to use them.
,
1474,
'Tv
44)
SPECIAL REPORT TO MEMBERS
tr/
04 100130002-3
Toughest Challenge Y
ew Soviet Strategy
These are the hard facts: econo ary strength of the Moscow-directed
one-third of the globe is rising ste ly . . . The new Soviet leaders' domestic and
foreign policies are far more subtle and shrewd than those of Stalin. . . Most impor-
tant, the new Soviet policies have been astonishingly successful. . . It adds up to
this: right now, we and our allies are losing the battle against world Communism.
For a bird's eye view of how Soviet strategy
threatens U. S. supply of key raw materials today,
take a look at the map on pages 6 and 7 of this Re-
port. Then, ask yourself these questions:
How did this happen? Which events are really
responsible for this state of affairs? Do we know
what the Soviet Union plans to do in the coming
months? Is there still time to thwart the Kremlin's
plans? How can the West prevent the present
military stalemate from becoming a checkmate?
Here are the conclusions of the Research Insti-
tute's experts who, with Harry Schwartz, the New
York Times specialist on Russia, have been closely
following developments behind the Iron Curtain ?
the shifting events which culminated in the new
policy statements proclaimed at the 20th Communist
Party Congress in Moscow this February . . .
The Soviet Leadership
When Stalin ruled the Soviet empire with an iron
fist, Khrushchev and Bulganin helped execute his
policies ? and his opponents. When the aging Stalin
conducted Soviet foreign policy in full battle dress,
Khrushchev and Bulganin were among his toughest
lieutenants. But Stalin's rigidities during his last
years resulted in strong anti-Communist counter-
moves by the West. So, in order to weaken Western
resistance to the Communist advance, the new Soviet
leaders have gone back to the more flexible ? and
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effective ? policies that Stalin himself used in the
1930's, while pretending to repudiate Stalin's policies
and actually destroying his place in Soviet mytho-
logy.
Chalking up Communist gains in India, Indonesia,
Afghanistan, and elsewhere, the new Soviet leaders
have also largely resolved the domestic problem of
Stalin's succession, and they have done so without
wrecking the Stalinist system and without an excess
of bloodshed and purges. Only one of the original
contenders for Stalin's throne, Beria, had to be shot,
and only two, Malenkov and Molotov, had to be
humiliated publicly.
Although a muted struggle for power in the Soviet
hierarchy must continue until all possible opposition
to a single dictator has been silenced, for all practi-
cal purposes Nikita S. Khrushchev ? First Secretary
of the Communist Party ? is Stalin's successor today.
(This came as no surprise to Members of the Re-
search Institute; as long as three years ago our Re-
ports advised that Khrushchev was the man to
watch.)
Despite the talk in Moscow about "collective
leadership", the fact is that Khrushchev controls the
reins of power. He alone in the Soviet Union today
stands above criticism and need not acknowledge
past mistakes (all errors can now be blamed on
Stalin and Beria, who are safely dead), even though
at least one colossal Khrushchev boner ? the enor-
March 22, 1956
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TOUGHEST CHALLENGE YET IN NEW /JET STRATEGY
mous program to plow and plant 75,000,000 acres
of grain in arid parts of Siberia ? proved to be an
expensive folly last year.
Khrushchev, like Stalin in the early days, is busy
accruing personal prestige and downgrading possible
opponents while putting his own followers into posi-
tions of power. He does not yet have the enormous
prestige that Stalin enjoyed after he led Russia to
victory against Hitler. Khrushchev may not have the
time to win a comparable position of absolute su-
premacy ? he is over 60, Stalin was well under 50
when control slipped from Lenin's dying hands.
Khrushchev, unlike Stalin, has to listen to even if
not heed ? the members of his "team" before making
decisions. But Khrushchev has the tremendous ad-
vantage of Stalin's experience and can therefore
avoid the foreign policy blunders of his predecessor
while working for absolute dictatorial control.
Khrushchev ? unlike Stalin ? must take notice of
the interests of key groups who control great power
levers in the state, particularly the army. The un-
precedented elevation of Marshal Zhukov to the top
dozen of Soviet rulers is the most vivid proof. Stalin
was far too aware of the possibility of a military
coup d'etat to give such stature to a military man.
Today, the promotion of Zhukov to a high party
post assures solid military support of the regime;
also, some of Zhukov's immense popularity, won in
wartime, now rubs off on the ruling clique. But
Zhukov's promotion puts him too close to the throne
for Khrushchev's comfort ? if anything goes wrong.
Khrushchev ? Limited Dictator
To sum up: Khrushchev rules Russia today, but
only with the advice and consent of his immediate
colleagues in the Presidium of the Central Commit-
tee of the Communist Party. The members of this
body give every evidence of understanding that an
out-and-out battle among them could destroy the
whole Soviet power position as well as endanger
their own lives. There are still rivalries and dis-
agreements, but these are now being subordinated to
the task of increasing world-wide Communist power.
Should Khrushchev die, should Soviet foreign
policy be forced to suffer a major setback, the
quiescent struggle !..or Stalin's ..:nantle. could :flare up
again, as it did x the sprig of 1.95S. But for the
t17 ,.17u7rc 7.
tie Soviet State.
2
Within Russia: Less Unrest
One of the great assets of the West after World
War II was the restlessness and resentment of the
staunchest anti-Communists of all: the people of
Russia who live under the boot of totalitarianism. A
Western policy of strength kept alive the spark of
freedom in the Russian people. That spark may now
be going out because of the inertia of the West.
Should it expire, the West will have lost its army of
allies who live on the enemy's home ground.
Why has this happened? First, at Geneva last
summer, whatever the intent of the Western leaders,
the impression was given to the whole world, includ-
ing the people behind the Iron Curtain, that we
actually believed in the possibility that the Russian
leaders wanted to coexist with us. The people most
discouraged by the spurious spirit of Geneva were
the anti-Communists behind the 'Russian curtain.
Second, Stalin's successors have realized that ac-
cumulated pressure under a sewer cover can blow
the lid sky high. To lessen the pressure under their
regime, they have gone part of the way toward meet-
ing some of the basic grievances of the Russian
people . . .
The new leaders have sharply increased peasants'
incomes by raising prices paid for farm produce,
including grain, livestock products, potatoes, etc.
They have increased the supply of food and con-
sumer goods for the population, going so far even
as to buy large quantities of meat and butter abroad
to make up for deficient home production. They
have given greater priority to housing construction.
And they have cut the average work week down
to 46 hours, with further reduction promised.
They have curbed the power of the secret police
and executed some of the highest police leaders.
They have loosened the shackles on the intellectuals
so that writers can write somewhat more freely
and scientists can communicate more easily with
foreign scientists.
They have promised a number of major additional
concessions in the next year or two: the end of
tuition lees in high schools and colleges, higher pay
or the lowest paid workers, higher pensions for the
mill'ons of aged pensioners whose government pay-
ments now are so completely inadequate that even
on and women of 75 an SO must work tc .avoid
starvation.
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sooner; if and when the Russian workers' standard
of living can be raised above that of the French and
Italian working class. Our task really is to prevent
even that much of a narrowing of the gap between
the West and the Soviets.
Historically, the main challenge may well be
whether or not we can continue to expand our own
economy and those of our Western allies, maintain
the well-being of business, provide new jobs for a
growing population, increase investments for new
industries and raise purchasing power to absorb
more consumer goods.
3. Foreign trade and investment. We are al-
ready engaged in competition for trade ties with
other countries. Foreign aid give-aways are not a
sufficient answer to this challenge. Postwar gifts
aimed at emergency stabilization did their job in
preventing Communist capture of depressed and dis-
illusioned countries. tiut for the long haul, the pat-
tern will have to be "trade not aid".
Here the challenge is who can offer the best terms,
who can absorb more of the products that the under-
developed countries want to sell ? the state economy
of Russia or the free economy of the West?
The Russians are free to use their maneuverability
as a world weapon. Part of our problem is that
domestic investment may well be more profitable
and involve less risk during the critical years than
investment in the underdeveloped areas. Look for
increased Washington action along the lines of
Point Four to meet the challenge of Russian bids.
Also expect some increased government regulation
aimed at restraining American businessmen from
competing with the economic interests of countries
we are wooing, especially in the Middle East and
Asia. Current legal requirements like the Buy-
American Act and provisions for shipping foreign-aid
goods in American bottoms may go by the board. In
general, disparities between private business prac-
tices and the policies of the State Department will
come in for a strong scrutiny ? and this will be true
regardless of which political party is in power.
4. Can Russia choke us off from vital raw
materials? Clearer recognition of this Soviet policy
(as pictured on the map in the center fold of this
Report) will 1)1 akg a valid), of. iebpuuse 'Clem the
U S. More Attention will be given to stockpiling
and to the development of substitute materials. But
ti-IP main rPstwii onntirlle to be whether AmericPris
TIP gprop
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.RESEARCH INSTITUTE
keep our lifelines open in the face of a five-fold
pincer action by the Russians:
. . . Guerilla warfare, as in the jungles of Ma-
laya, whose tin and rubber we need.
. . . Bribery, with gold or guns, as in the Middle
East where oil is the prize.
. . . Support of nationalist aspirations, as in North
Africa, whose territory provides important military
bases or impinges on commercial lanes for the West.
. . . Endorsement of territorial claims ? for ex-
ample, to Kashmir and Goa, in the case of India
which is the source of most of our manganese.
? . Political penetration through neutralism or
popular front governments ? techniques that have
been cultivated in France, Italy, Indonesia, Ceylon,
etc.
5. The need for domestic unity. The Russians
are not abandoning any of their old weapons merely
because they have deviseu new ones. iney win
continue to use the fifth column tactics of espionage
and infiltration into government agencies, unions,
political parties, church groups, fraternal organiza-
tions, etc. The popular front tactic that proved so
successful in the Thirties has been dusted off again.
Inside the U. S., the Communists will seek every
opportunity to enlarge and exploit new internal ten-
sions like those in the South over integration. Part
of the new challenge is whether or not our domestic
disputes can be resolved quickly and with a mini-
mum of violence.
6. Who will win the psychological war? The
Kremlin's effort now is to identify Russians as blood.
brothers of the Asians. They are utilizing history
effectively ? identifying the West with Colonialism;
reminding Asians that Russia only recently emerged
from the status of an underdeveloped nation herself;
stressing the U. S. exclusion of immigration under
the McCarran Act, etc. These are keyed to imme-
diate pressures felt by the Asians.
We have valid and persuasive answers. And yet,
we have labored under a real handicap, arid con-
tinue to do so. Washington's psychological warfare
has emphasized appeals that are valued in our cul-
ture ? freedom, respect for the individual, self-
government, competition. All of these have? or
*VIE D-dJs!_
the fact that the ambitions and needs of the people
we are appealing to today are more basic and at-
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TOUGHEST CHALLENGE YET IN NEW SOVIET STRATEGY
lar morale as well as throw more fuel on fires of
domestic inflation. The pledge to raise low wage
rates and low pensions will have to be fulfilled soon
and will add appreciably to the gap between con-
sumer demand and available goods.
3. The entire system of wages and salaries must
be revised in order to raise work norms and to in-
crease the pressure on workers and executives to do
a good job. But any such wholesale revision in the
wage and salary structure inevitably means stepping
on many toes. Kaganovich has already said the
changes must be made slowly, a sure tip-off of the
Soviet leaders' fears on the matter.
4. The Chinese Communists have recently social-
ized their industry and trade and collectivized their
agriculture with a speed that is without parallel, and
so far with only relatively minor resistance. But
as the full implications of this socialization are felt
by the people affected, resistance may rise sharply.
Peiping's demands on its people are sharpening as
industriali7ation and its capital requirements are
speeded up. There could be internal difficulties
in China which would cause Peiping to turn to Mos-
cow for more help ? appeals that might well come
at a time when Moscow's own resources are strained.
As the Chinese hear about Soviet offers of assistance
all over the world, some of them at least must won-
der why there isn't more generous aid for China.
5. One weakness, not to be discounted, is the
Kremlin's adherence to Communist dogma. For in-
stance, after the 20th Party Congress, Khrushchev
announced his intention of proceeding with the abo-
lition of personal farm plots, even though these have
proved to be much more productive per acre than
the collective farms.
Here, realism is being ditched for dogma ? a step
which must be chalked up as a weakness of the
system.
The Challenges to the U. S.
On balance, it's difficult to be encouraging about
the foreseeable future, even when the weaknesses of
the Communist world are taken into account. How-
ever, the free world's great assets of wealth and
freedom are still as important as ever. If they have
recently been less effective than in the past, it is
because our policy has not used our assets as ruth-
lessly, cleverly and with the same willingness to
sacrifice as the Communists have used theirs. To
a large extent, the outcome will depend on the kind
of policy Washington and its allies formulate in re-
sponse to a whole range of sharpened challenges
from the Kremlin . . .
1. Who will win the educational race? The
Russians expect to overtake our economic superior-
ity by producing more engineers, technicians, and
scientists. This manpower challenge is already near
the point of crisis. With a current shortage of en-
gineers, we find fewer high schools teaching mathe-
matics, physics, etc., so that fewer graduates are eli-
gible for scientific study in the colleges. The vicious
cycle finds fewer teachers available because the
qualified men have found it more profitable to spend
their time in industry.
The Russians, on the other hand, are concentrat-
ing their state-controlled educational system on pro-
ducing technicians, to the neglect of other studies.
10
The importance of their lead is sometimes exag-
gerated. Too many Russian technicians spend their
time at paper work, and thus largely waste their
training. Also, Russian technicians tend to over-
specialize, thus making themselves obsolete when re-
tooling and conversion are required. Nevertheless,
Russian gains in the training of technicians make our
own deficiencies seem appalling. In the immediate
future, American businessmen will be asked by
Washington to reverse the tide by releasing some
of their best brains to instruct a new generation of
scientists and technicians.
2. Who will win the economic race? We must
resist the temptation to scoff at Russian hopes that
their production will ever outstrip ours. There are
clear warnings, both in the past and in the present:
. . . The Russian hopes for a collapse of the U. S.
economy are doomed to be disappointed. And yet,
even a series of recessions, slowing down our
growth, could be an invaluable aid to the Soviets
during these next 10 years. The extent to which
Communist plans have been reali7ed in recent
years definitely means that they can count on fur-
ther sharp advances.
. . . It may never become necessary for the Rus-
sians to fully match U. S. economic strength. The
moment of historic peril will actually come much
100130002-3
superior status to their children. This is the system
of boarding schools ? Soviet Etons and Harrows ?
which Khrushchev announced will be set up to train
the Soviet leaders of tomorrow.
An effort is being made to heal the deep wounds
left by Stalin's purges of the 1930's. Many of the
victims are to be rehabilitated, and where such re-
habilitation is posthumous, suitable recompense will
presumably be made to the victims' surviving fami-
lies. The sickening adulation of Stalin and the most
obvious falsification of history are to be ended; at
least, that is the promise.
All this adds up to a considerable revolution
for a period of three years. It has not been accom-
plished without cost, including a substantial infla-
tionary pressure which is causing Khrushchev great
concern. The economic concessions ? which still
leave the Soviet standard of living and the degree
of freedom in the Soviet Union far from satisfactory
to its own people ? have probably strengthened the
regime at home on balance, but they raise the ques-
tion of whether the population will not demand
more. The problem will be particularly acute in the
next few years when the Soviet leaders expect to be
able to reduce high prices only slowly. A great deal
depends on what the West will do to increase the
internal pressures against the Red regime. Strong
opposition to Soviet moves in Asia and the Middle
East would help to reactivate a spirit of resistance
inside the Iron Curtain.
Red Military Strength
Stalin's successors have essentially ended American
nuclear monopoly and created what is for all prac-
tical purposes a military stalemate. In the past
three years they have produced powerful hydrogen
bombs, and long distance jet bombers capable of
delivering such bombs to American cities. They hint,
RESEARCH INSTITUTE
and possibly not without some justification, that
they are ahead of the United States in developing
long-range guided and ballistic missiles. These are
historic accomplishments. They have fundamentally
changed the world balance of power as against what
it was when Stalin died in March, 1953. In these
accomplishments lies much of the explanation for
the Soviet leaders' present genuine confidence.
Red Diplomacy Ascending
Stalin's successors have made deep inroads among
the neutral nations of the world. Khrushchev and
Bulganin's trip to India, Burma and Afghanistan
raised Soviet prestige greatly in those countries. The
swap of Czechoslovak arms for Egyptian cotton,
plus the all-out Kremlin support for the Arab nations
in their dispute with Israel, have greatly heightened
Soviet influence throughout the strategic and oil-rich
Middle East. Pakistan, a key link in the Free World
chain of alliances in Asia, has been softened up by
trade offers from Russia and sweet words from
Communist China. Marshal Tito's regime in Yugo-
slavia, once clearly an ally of the free world because
of Stalin's excommunication of Tito, has been nudged
out of the Western camp closer to the Soviet bloc.
The result of these and similar measures has been
that the prestige of the West, particularly the
U.S., has plummeted in many parts of the world
while Moscow's and Peiping's influence has soared.
It is clear even from the brief recital above that
we now face a much more dangerous and wily foe
than we did in Stalin's last years. His successors, on
his passing, took a penetrating look at the legacy
he had left. They identified the weak spots in their
positions at home and abroad, and took drastic action
to revise their policy accordingly. All this has re-
sulted in a new chapter of modern history to which
Western policy has not adequately adjusted itself.
The Communist Plans for the Future
At the 20th Communist Party Congress in Moscow
in February, 1956, Khrushchev and Co. unveiled
their plans for exploiting the new world situation for
their own benefit. The long-range Communist
strategy is now based on the following premises:
No major nuclear war is likely for the foreseeable
future. This is the meaning of Khrushchev's new
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dictum that there is no "fatal inevitability" of war.
Russia intends to keep militarily strong, and its
leaders do not exclude the possibility of little wars
which might grow into big ones. Soviet leaders now
base their plans on the assumption that a military
stalemate exists between them and the free world,
and that therefore, other weapons ? political and
3
IOWA-JEST CHALLENGE YET IN NEW
economic in the main must be pelied on to attain
their goals.
Soviet Progress to Date
The economic power of the Soviet Bloc will grow
very rapidly during the foreseeable future, increasing
the Communist potential for victory. This rapid
growth is already exerting a tremendous magnetic
effect upon the underdeveloped countries now
searching for quick roads to industrialization. Com-
munist influence will grow in the underdeveloped
countries if the Communist nations can show the
ability to increase production, raise standards of liv-
ing, health and education, and to modernize formerly
backward areas. You should know that particular
importance is being attached to North Korea where,
with great cooperation from other Communist
I
of economic recovery intended to contrast with in-
flation-ridden South Korea. Should the plan succeed,
it could exercise tremendous influence over all Asia.
The Communist confidence in their ability to grow
rapidly in the future is largely based on the bean-
stalking of the Soviet economy in the past ten years.
Perhaps the most dramatic evidence ? though not
entirely pertinent to the future ? is the record of
the Soviet production increase betwen 1945 and 1955
as shown below:
Commodity
Coal
Petroleum
Electricity
Pig Iron
Steel
Cotton Cloth
Leather Shoes
Unit
million metric tons
million metric tons
billion kilowatt-hours
million metric tons
million metric tons
billion meters
million pairs
1945
1955
149.3
390.1
19.4
70.7
43.2
170.2
8.9
33.3
12.3
45.2
1.6
5.9
64.5
297.4
The expansion shown in this table cannot be sus-
,..-Lined since it was the result of very special con-
ditions, It was easier to rebuild war damaged plants
after 1945 than it is to build new ones from scratch.
The Russians moved billions of dollars worth of ma-
chinery and raw materials from Eastern Europe and
ttn_n(ltiii.j,i to their ,-0,vn factories The level of pro.
dnvitv n the early postwar years was so low
that it comparatively easy to raise it rapidly,
,tor?o after i.P,owance has bt en ;made 50,16.
speri"pi ;"-actors it is clear that an impressive M-0 ni
.>ia Lin' east iecaae.
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1E-1 STRATEGI
Nett' Russian Economic Goals
The Soviet leadership fully realizes that their
country has tremendous reserves of untapped raw
materials, particularly in the area beyond the
Urals. In the past few years they have found
extensive deposits of iron ore, coal, petroleum,
bauxite, rare metals, uranium and the like. The
great rivers of Siberia have an enormous electric
power potential. All these vast resources are
scheduled to be exploited in the years immedi-
ately ahead. The final goal is not only to out-
produce the United States but also to turn out
more steel, coal, electricity and the like, per capita,
than this country.
Of course, these ambitious goals are set in com-
parison with present United States output figures.
They ignore the further expansion which will in-
these terms, the advances which Soviet leaders are
eelcing are impressive (same units as above) :
U.S.A.
1955
Actual
Commodity
1955
Actual
Soviet Russia
1965
1960 Probable
Goal Goal*
448
Coal
390.1
593
700
332
Petroleum
70.7
135
200
623
Electricity
170.2
320
600
70.9
Pig Iron
33.3
53
70
106
Steel
45.2
68.3
90
The essential point of this table is that by 1965
Soviet leaders hope to come very close to the
output levels now prevailing in the United States.
This means that unless we can maintain an equal
rate of expansion the gap between the two econo-
mies will have been narrowed significantly within
these next 10 years.
Moreover, since the great bulk of Soviet produc-
tion goes for capital equipment and arms ? not
for passenger cars and other consumer durable
goods ? they expect to surpass the United States
in machinery output earlier than 1965. So far as
armaments go, of course, the maintenance of a
high level of preparedness rill be far less burtien
some on tile Soviet economy uhen and ,f it pro-
duces 70-20 million tons of steel, than is true now
Of: co,irse tne,:e is no ceutointy dint tileSoviet
;enders reacb the itdicated qoals by 19.90 pr-,(3
parties of West Europe, except in Italy, have been
among the most important anti-communist bulwarks.
Now Khrushchev has changed the line and is woo-
ing the Socialists, inviting their leaders to Moscow,
and loudly asserting that the important thing is
the unity of all workers' parties. The immediate
chief target is France, where the goal is the forma-
tion of a Communist-Socialist government which
would take France out of NATO. But ultimately the
campaign could have repercussions all over the
world, from Japan to England ? the Soviets hope ?
with leftist Socialists and Communists working to-
gether in far stronger force than the Communists
could attain alone.
Some top Socialist leaders in Europe have already
indicated they will not allow the wool to be pulled
over their eyes. But there is less understanding of
fhe true rp-ItilrP of Communism among the leaders of
the new Asian countries, such as intim, bunna, aria
Indonesia, who are primarily socialistic in their
orientation. Communist assurances that how a nation
becomes socialist is unimportant can be a potent
force in bringing those countries closer to the Soviet
Union. Addressing the British workers, the Soviet
leaders take the position that past hostility to the
Laborites was Beria's crime, and say in effect that
Russia wants nothing more than a Labor Britain.
It should be noted that on this issue, the Soviet
leaders have pretended to take a leaf from Tito's
RESEARCT-I INSTITUTE
book. Actually, the policy is Lenin's but Khrushchev
knows that countries like India prefer to think it's
Tito's, hence this expedient camouflage ? made pos-
sible by the fact that Tito has been urging such
proposals for a year or more.
The New Psychological War
The desegregation crisis in the southern states
has given the world Communist movement a giant
propaganda handle which it has latched on to with
its customary resourcefulness. Every new tension
between Negroes and whites in the South is being
publicized among the majority of the world's people
who are colored. Needless to say, the extraordinary
progress made by the Negro in the U. S. over the
last 90 years and particularly in the most recent past,
is virtually unknown among the nations being beset
by Soviet propaganda. The result has already been
a greater and greater hostility to we LIiAJICUotatc.
To a lesser but still significant extent the similar
struggle in South Africa is serving the Communist
cause. And because the United States is a major
buyer of South African uranium, diamonds, and
other minerals, this country will be blamed more
and more for not exerting economic pressure against
the rulers of South Africa. The South African prob-
lem is a particularly potent propaganda weapon in
India, because Indian natives of S. A. are among
the victims of South Africa's policies.
Soviet Problems and Weaknesses
The picture painted above is not an encouraging
one, but it is offset to some extent by the difficulties
faced by the Communist leaders . . .
1. Soviet agriculture is still very sick. Khrushchev
has staked his prestige on being able to just about
double Soviet food production by 1960 through his
virgin lands wheat program, his corn-hog program
and other measures, Most of his program failed
last year. but an extraordinarily good harvest in the
Ukraine saved the day. He is now gambling that
weather in Siberia will permit his virgin lands pro-
grain
tn 1-eFii1t,F this 1.,7,ar Aroihot
renetition of last year's droug,ht there. plus a poorer
harvest in the UkraMe, could shake even his post-
ntt , nYc
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bread; what its people want are more meat and
dairy products for a better quality diet.
2. Khrushchev's ambitious industrialization pro-
gram for the next five years, plus his aid commit-
ments to China, Eastern Europe, and such countries
as India, are likely to strain the Soviet economy
greatly. A tremendous capital construction program
must be carried out in the now unpopulated wastes
of Siberia to achieve the production goals. Khrush-
chev is counting on major productivity gains, but he
may soon find be cannot do all the things his pro.-
crani calls for and that he will have to cut hack on
some elements of his economic plans. Traditionally
in such a situation the Co.romunists have cut clown
ecosomer rtoorls 4TavrIsi7rPrt ;T) n7irr1bire. Po7t
Approved For Releabe 2002/11/13 . CIA-
TOUGHEST CHALLENGE YET IN NEW SOVIET STRATEGY
The targets and pattern of this intensified Com-
munist onslaught on the sources of our strategic raw
materials throughout the world are dramatically il-
lustrated in the map which you will find in the
centerfold (pages 6 and 7) of this Report.
The New Economic War
Economic weapons to be used against us include:
. . . Communist offers of greatly increased trade
to countries which drop the embargo on strategic
exports to the Communist Bloc.
. . . Offers of Soviet aid in industrialization ? in
the form of technicians, know-how and capital goods
in return for domestic agricultural and raw material
surpluses. Available, too, will be Communist loans
on easy terms with long repayment periods and in-
terest at 2% or less. Atomic energy will spearhead
this aspect of the Soviet offensive. Reactors, uranium
and atomic know-how will be offered to every un-
derdeveloped country that will play ball with Mos-
cow. Egypt and Yugoslavia have already accepted
such offers.
No country is going to get Soviet aid as charity.
Along with the technicians will come the ready crew
of agents, spies and propagandists. Every gift grant
will be tied to Soviet strategy. The difference is that
the strings on Soviet aid are unobtrusive while the
reasons for United States aid are ventilated in the
halls of Congress, in the columns of the press and in
the red-taped chambers of bureaucracy. Moreover,
we often don't get legitimate credit for our aid,
while local Communists in recipient countries make
sure that every incoming Soviet brick sounds like a
housing development.
. . . Offers of stable markets in Communist areas
at prices guaranteed for long terms to countries hav-
ing particularly valuable raw materials. This tactic
will be particularly attractive to underdeveloped
countries now enjoying the high prices of the
present boom period, but fearful of a possible bust
around the corner.
. . . Where politically desirable, and taking the
other extreme, the Communists will be ready to
dump other key commodities at prices well below
comparable Western levels. Cost of production will
be ignored in such dumping where the political
prize is important enough.
. . Disorganization of some international mar-
kets which is likely to result from American disposal
of some agricultural surpluses ? cotton almost im-
mediately ? will be used by the Communists to
cement economic bonds with countries hurt by the
American program. The Communist maneuvers with
respect to Egyptian cotton and Burmese rice already
illustrate these possibilities.
In all this, remember the great Communist ad-
vantage: the State has a free hand in disposing of
its resources. Neither the necessity of making a
profit nor the domestic needs of the people hamper
the Kremlin's ability to engage in free-wheeling
economic warfare. In the past, the Soviet Union
promised much, delivered little. But now we can
expect fewer token deliveries, fewer empty promises.
Instead, there will be genuine offers of long-term aid
? with completion of delivery contingent on the
continuation of a favorable attitude towards the
Soviet Union, thus tying long-term apron strings to
the U.S.S.R. Moscow puts such high priority on the
political gains it expects to win from these tactics,
that it will make delivery even at great cost. But
Soviet resources are not limitless, and the magnitude
of what the Communists can do in this direction will
grow only as their domestic production increases.
Any sharp setback in their domestic economies ?
such as a major crop failure ? would necessarily
affect this campaign. But for the time being the
outlook is for an indefinite and rapid expansion of
this kind of economic warfare ? starting, to be sure,
from a very low present level of foreign trade and
assistance.
The New Political War
At the 20th Party Congress, Khrushchev acknowl-
edged that: there may be different roads to
socialism. Rather than all countries being bound
by the Soviet pattern, Moscow now calls for
Communist united fronts with all leftists, Social-
ists, and the like all over the world.
This is not a new line, as some suppose, but the
reactivation of one of Lenin's early policies. It was
also used effectively by the Stalin regime during the
popular front" period of the late 1930's. For the
most part, however, under Stalin even the slightest
deviation from his line was denounced and severely
punished. Notably, the powerful Socialist parties
of Western Europe were denounced as "fascists,"
"agents of the capitalists," etc., and where the Com-
munists seized power in Eastern Europe, Socialists
were among the first victims murdered or imprisoned.
The result has been that this past decade the Socialist
?
R004100130002-3
RESEARCH INSTITUTE
-1965. They are counting on a substantial increase
in productivity through the widespread introduc-
tion of automation, and on an ability to continue
giving heavy industry a higher priority than con-
sumer goods. The odds are that rapid Soviet eco-
nomic growth will continue.
The Soviet leaders' perspectives go beyond their
own country to the Communist Bloc as a whole ?
a Bloc which now embraces over one-third of
mankind. For the longer pull, Moscow hopes
that Communist China will become one of the
world's great economic powers. Already the addi-
tion to Communist power provided by Eastern
Europe and Communist Asia is not negligible,
and the Communists intend it shall grow as the
following table shows (same units as above):
USA, Britain
France, W .Germ.
1955 Actual Commodity
Total Total
Soviet Bloc Soviet Bloc
1955 Actual* 1960 Goal*
862.5
Coal
830
1,255
336
Petroleum
ss
163
823
Electricity
240
425
160.2
Steel
60
91
Soviet Strategy Against the West
The Communist leaders believe that the phe-
nomenal economic progress of the free world,
particularly the U. S., is nearing its end, and a
major capitalist depression is in the offing. Khru-
shchev ended his analysis of the current state of
world capitalism with the declaration that "capitalism
is steadily moving towards new economic and social
upheavals." If the difficulties they hope for come,
the Soviet Union and its allies will know full well
how to take advantage of the economic, social, and
political disorg1ni7ation they would produce.
It does not matter that Soviet hopes for a full-
scale depression are doomed to disappointment ? at
least as far as the United States is concerned. Sever-
al of the economies of Western Europe continue to
show a slower rate of economic progress; even more
significant is the fact that they are far more vulner-
able to the possibility of recession than is the United
States. And Russia is no longer betting blindly on
the inevitability of an economic collapse in the West.
Soviet leaders now regret Stalin's earlier ad-
ventures ? such as the Korean War ? which forced
*Research Institute estimates.
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the West to rearm. This rearmament, they have now
come to believe, is the main reason why the de-
pression has not come about. In part, the Soviet
campaign for disarmament now is motivated by the
belief that any substantial decline of Western arms
production could really mean a collapse of Western
economies; at the same time they argue publicly
that for them a decline in arms would be helpful in
freeing resources for developing their economy.
The result of this caution is that Communist the-
orists have decided that world capitalism ? mean-
ing the United States and Western Europe ? has a
fatal weakness aside from the possibility of a full-
scale depression. This is the United States' and
Western dependence on imported raw materials
from Asia, Africa, and South America. A writer
in Pravda recently pointed out that well over half
of all the free world's reserves of such vital re-
sources as oil, iron ore, manganese, chrome, tin,
diamonds, cobalt, copper, bauxite, uranium, lithium,
graphite, natural rubber, and other major raw ma-
terials is to be found in the underdeveloped coun-
tries. In the Communist view, any tactic which tends
to cut the United States and Western Europe off
from these raw materials sources strikes at the real
foundations of Western strength. Also, the narrower
the raw material base available to the Western world
the narrower the market for the West's manufac-
tured products and the more intense the rivalries of
Western countries for the available sources and
markets. It is from this reasoning that the current,
and so far effective, Communist propaganda and aid
campaign has proceeded in the underdeveloped
countries.
On the basis of all these factors, Communist
leaders now believe that, by using a varied series
of tactics, they can conquer world capitalism
without exposing themselves unduly to the risk
of an all-out nuclear war. With greatly expanded
resources at their disposal, the Communists now are
ready to play for the long pull as they have never
done before, taking temporary disadvantages in
stride if that be necessary. Economic, psychological
and political warfare ? all closely coordinated ? will
be stepped up. The objective will be to wreck all
Western political and military alliances, weaken or
destroy political and economic links among free na-
tions, incite wars or near-wars wherever possible,
and create Communist or Communist-dominated
governments wherever possible.
5
VICTORIA
BAFFIN
GLAND
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CANADA
SWEDEN
I Bear Lake
Great Slare Lake
SO ST REPUBLICS
Hudson
Bay
!N TED
III
MONGOLIA
UNITED STATES
Great
Lakes
JAPAN
COBALT
MANGANE
.rt?tt
CuVol Maim
RC'
CUBA O
HONDURAS Caribbean Sea
NICARAGUA
COSTA RI
ROSA
FRENCH
EQUATORIAL
AFRICA
MAIBIA
WRGUIAN
BERYLLI
Arabiats S..
MANGANE
MA
NGSTE
NATURAL RUB
PHIUPPINES
UADOR
INDUSTRIAL DI
cere
TI
ANESE
PER
ROMITE
RUBB
dapcepe*.?
NEW
GUINEA
R1Q,401t
Coral S
CHR
MANG
ELTYLL
(Is\ Africa: Encouragement of nationalist terrorists. Stirring up racial ten-
sions. Psychological warfare against U.S. and West based on colonialism
and color.
CI'FCI IT GNU I
CnpyrIghf 1.956
Techniques
Being Used in Each Red "Thrust"
South America: Subversion. Infiltration of political movements, univer-
sities and trade unions, Economic ponetration. Attacks on 11,S, as "colonial
exploiter," Discouragement of production by threat of dumping own com-
petitive suroly at ruinous prices?e.7... antimony, manganese, tungsren,
Western Europe r Reintroduction of populer-front tactics. East-West trade
held out as bait. Use of threat to ,,,..ithhold coal supply. Subversion, t,mJsiog
French fears of -Germany. Ter.rirt7T, Germans ylith reocitt;ttc,
Middle East Shipments of arms. Offers of technical assistance (e.g., Egypt's
Aswan Dam). Purchase of economic surpluses (Egyptian cotton). Encourage-
ment of nationalist terrorists and dissolution of French empire.
South Asia: Loan of technicians, offers to provide know-how for industriali-
zation. Support of territorial claims (Goa, Kashmir). Liberal trade terms
and aid. Anti-Western propaganda based on past history of colonialism
Southeast Asia: (kerma warfare. Ever-present menace of Cninese miiitary
power. Trade. Ispecially purchase of economic surpluses (Burmese rice)
fechnicai assistance Literal economic F,I6, 1,011-VNete,r plopapn6a case
on past history (If colonialism
Approved For Release 2002/11/13 : CIA-RDP80601676R004100130002-3
1: S T P. A
Executive Registry
Appcoved For Release 2002/11/13 : CIA-RDP80B01676R0041001300024*--
L e)
(72 (72/
CO (
0
SPECIAL DELIVERY
Hon. Allen W. Dulles, Director
Central Intelligence Agency
2430 E Street, N.W.
Washington, D.C.
Dear Mr. Dulles:
-
Nty,
- :/;/
1,11' -7/0// 1 ? "i-.//
January 8, 1959
Knowing the depth of your concern with the
challenges posed by Moscow and Peiping, I am sending
you the enclosed Research Institute assessment of
the new economic programs now being pressed by both
Communist centers.
We believe that this will be the most com-
plete appraisal of the Communist targets which will
be available to the American public although, of
course, there is confidential government data which
In certain respects must exceed the data that is
incorporated in this study.
Because we at the Research Institute feel
the weight of this responsibility very heavily, we
are most eager to have any judgments and opinions
you may feel free to make before we put the study
in final form. In view of the urgency of this matter,
I am hurrying the first uncorrected galleys to you
without the graphs and map of Soviet economic aggres-
sion which will accompany the completed study.
If you can find the time to give us your
valued comment on these findings, the Research Institute
and its Executive Members who are to receive this report
will be deeply in your debt.
LC:ck
Afr.g!"A!
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Sincerely yours,421
/
4.to,944