CURRENT INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000200160001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: December 15, 2016
• Document Release Date: May 3, 2004
• Sequence Number: 1
• Publication Date: March 12, 1954
• Content Type: REPORT

Reuse 2004/06/24: CIA-RDP79-00927A0O00d 1-i0 13
c uir IAL
OCI NO 4156
12 March 1954
CURRENT
INTELLIGENCE
WEEKLY
DOCUMENT NO.
NO CHANGE IN CLAS :
' DECLASSIFIED
CLASS. CHANGED TO: TS
AUTH H 'J
DATE. :
OFFICE OF CURRENT INTELLIGENCE
25X1
SS T
25X1
CENTRAL INTELLIGENCE AGENCY
State Dept. review completed
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Aft. Ak
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly has been prepared prima-
rily for the internal use of the Central Intelligence Agency.
It does not represent a complete coverage of all current
situations. Comments and conclusions represent the im-
mediate appraisal of the Office of Current Intelligence.
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-
 Approved Forsrelease 20 69#6A-RDP79-00921W002001600W Iftr 54
CONFIDENTIAL
THE SOVIET WORLD . . . . . . . . . . . . . . . . . . . Page 4
PRE-GENEVA PROSPECTS FOR EDC RATIFICATION IN FRANCE . . Pkge 6
Chances for EDC ratification in France have been
gradually improving since the December presidential
election and the government now wants a vote in the
National Assembly before Easter. Final action before
the Geneva conference, however, is still doubtful.
BRITISH STAND MAY FORCE BASIC CHANGE IN EAST-WEST TRADE
CONTROL PROGRAM . . . . . . . . . . . . . . . . . . . . Page 8
Britain's stand in favor of drastic contraction in
controls on Western exports to the Soviet Union and its
European Satellites jeopardizes the present extent of
the COCOM system.
NEW INFLUENCES AFFECTING BRAZILIAN COOPERATION WITH THE
UNITED STATES . . . . . . . . . . . . . . . . . . . . . Page 10
Brazil's traditional policy of cooperation with the
United States may be affected by two recent divergent
trends. One is the government's anti-Communist attitude
domestically, the other is a tendency toward greater
nationalism. The latter may offset to some extent the
effects of the former.
MAGSAYSAY FACING PARTY CHALLENGE . . . . . . . . . . . Page 12
Basic differences have arisen between President
Magsaysay and leading members of the Nacionalista Party,
whi-Le the Philippine Congress, one third through its
regular session, has done nothing on the president's
program.
SHISHAKLI'S DOWNFALL PRECIPITATES STRUGGLE FOR POWER
IN SYRIA . . . . . . . . . . . . . . . . . . . . . . . Page 14
The struggle for power among Syrian politicians
following the removal of Shishakli threatens to revive
the bitter factionalism and the unresolved issues which
brought the army into politics five years ago.
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For,elease 20041'061igk-RDP79-0092600200160001-4
WESTERN STAND ON JERUSALEM BEING UNDERMINED . . . . . . P.ge 16
Western opposition to recognition of Jerusalem as
Israel's capital is being undermined by the necessity
of maintaining diplomatic contacts.
THE RECONSTRUCTION OF THE ELECTRIC POWER INDUSTRY IN
NORTH KOREA . . . . . . . . . . . . . . . . . . . . Page 17
With the aid of technicians, manpower, and equipment
from the Soviet bloc, the rehabilitation of North Korea's
heavily damaged electric power system will probably keep
pace with that of other industries, and the system should
be restored to its pre-1950 condition in three years.
VARGA'S VIEW OF DELAYED CAPITALIST CRISIS MAY HAVE
OFFICIAL SOVIET SUPPORT . . . . . . . . . . . . . . . . Page 20
The Soviet regime's apparent adoption of Varga's
view that the ultimate collapse of capitalism has been
delayed may encourage greater emphasis on the build-up
of long-term strength within the Orbit.
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved Foic,selease 20041`061 At l?ZRDP79-0092?00200169T1 .r S4
Following on the series of meetings of agricultural
managers held in Moscow in February, the central committee,
published on 2 March the first major agricultural decree
since last autumn. While the decree repeated the themes
of "organizational vigilance" given prominence in the
agricultural conferences, it went well beyond any earlier
official statement in its appraisal of the Soviet grain
situation.
Only last autumn, both Malenkov and Khrushchev had
expressed satisfaction with grain production and treated it
as the only aspect of Soviet agriculture which was above
criticism. The latest decree, however, scores both defic_ent
grain yields and acreages and charges that grain production
has failed to keep pace either with the expanding requirements
of the population or with "growing export needs." Part of
the blame for these failings was laid on the faulty judgment
of the State Planning Commission, an organization which h.-td
earlier been spared official censure.
In prescribing a remedy for the grain shortage, the
government supplemented its earlier statements on land reF:-
lamation with the announcement that 100,000 Komsomol workers
are to ue dispatched to the new lands. In addition, tech-
nicians are to be diverted from established Machine Tractor
Stations to the reclaimed areas. To encourage these tran3
fers, the government set up a system of bonuses and incenive
wages.
Within the Soviet Union the first anniversary of Stalin's
death was marked in perfunctory fashion, in contrast to the
elaborate ceremonial surrounding the anniversary of Lenin's
death. The central press confined itself to a front-page
editorial and an inside-page article on the anniversary date
itself, which were as much expositions of current policy as
eulogies of Stalin. The provincial press followed this lead.
The highly inflated Stalin balloon has been gradually
reeled in and deflated during the year since his death. The
image of him which his successors seek to implant in Soviet
minds has been redrawn by degrees, and it appears that hi;
place in the Marxist line of succession is now more or leas
permanently fixed.
4
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved Fqr.Release 2004?"RET-RDP79-0092000200160001-4
He is credited with "developing creatively Marxist-
Leninist teaching, applying it to new historic conditions."
His part in the formulation of the theories of peaceful co-
existence, "socialism in one country," the worker-peasant
alliance and Soviet nationalities policies is acknowledged,
but he is represented, in each case, as merely the elaborator
of Lenin's ideas. It is apparently intended that he should
henceforth play Engels to Lenin's Marx. The resurgent pr?stige
of Lenin, a more remote and thus a more convenient symbol,
will evidently be used to fill the void left by the de-emphasis
of Stalin.
Stalin received somewhat more flattering treatment at, the
hands of the Chinese Communists, who described him as the
"greatest thinker and theoretician of our time," and convoked
the central committee to hear speeches on his achievements by
politburo members. In other parts of the Orbit, treatment,
was limited to press articles which described Stalin as the
"great disciple of Lenin" and stressed the continuity of
Soviet policy under "Lenin's best sons--the central committee
of the Soviet Communist Party."
Foreign Minister Molotov's unusually long statement on
the Berlin conference, which appeared in Pravda on 5 March,
was primarily a propaganda tirade following the line deve-oped
at Berlin. Its emphasis on the alleged threat of a revived
German army probably reflects a genuine Soviet fear and may
foreshadow intensified propaganda against EDC ratification.
The particularly strong attack on NATO may be regarded as
Molotov's answer to the question of its compatibility with
his concept of European security, a question which he per-
sistently evaded at Berlin.
Molotov's contention, in connection with the forthcoming
Geneva conference, that "China will take its lawful ntace at
the conference with the other great powers" is in line with
persistent Soviet efforts to elevate Communist China's in-
ternational position and suggests that the Kremlin intends to
propagandize the Geneva conference as acceptance in principle
of five-power status for China.
5
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For Re se 2004/06 11 C4:?I !f DP79-00927A009t0016000FJ War 54
PRE-GENEVA PROSPECTS FOR EDC RATIFICATION IN FRANC,
Chances for EDC ratification in France have been gi?adu-
ally improving since the December presidential election- Both
opponents and supporters of the treaty, however, are increas-
ingly inclined to delay action until Communist intentions in
the Geneva conference become apparent, and final action before
then seems doubtful.
EDC stock reached a low point in late November 1953 when
Laniel's attempt to force a showdown on the treaty was loiled
by his tactical error in defining the issue as one of over-all
confidence in his government. This alienated the Socialists
who are largely pro-EDC but opposed to the right-center Laniel
coalition. The premier has been hesitant to press the assembly
further until he could assure it that all preconditions have
been met.
On the most important of these preconditions, a satis-
factory settlement with West Germany on the Saar question,
some progress has been made in working level discussions-
Both sides are now believed to be close to agreement on all
the major terms of a settlement except its permanency, but
Chancellor Adenauer wants assurance of French ratification of
the defense treaty prior to a final settlement. Even if the
timetable is accelerated as a result of the Bidault-Adenauer
talks on 9 March, complete French-German agreement on th: Saar
is unlikely before the late March meeting in Brussels of the
six forei,n ministers on the prospective European Political
Community.
Meanwhile Laniel has been casting about for a way toy
obtain support for the treaty from the nationalistic Gaullist
elements in his cabinet. Apparently won over to the argument
that further changes in the treaty to win the support of per-
haps 40 Gaullists will alienate twice as many Socialists. he
now seems resigned to risking a Gaullist withdrawal from the
cabinet, although he is still searching for a "sauce" of ninor
concessions to the rightists in the hope of avoiding a cabinet
split.
It is now generally conceded that ratification will de-
pend on the amount of support obtainable from the Socialist
Party. Socialist leaders have indicated that some 90 of their
votes can be counted on if the party's preconditions are met.
6
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For I7ease 2004/068(CgCffiP79-00927AQp90200160001-4
Its demands for British "association" with EDC and American
guarantees on retaining troops in Europe will probably be
satisfied by pending declarations, but the demand for
"democratic control" over EDC appears more difficult to
satisfy.
The foreign ministers' meeting in Brussels in late March
is expected to devise some formula which will satisfy this
Socialist demand. There is some evidence, however, that the
Socialist deputies favoring EDC will not require agreement on
the basic principles of the proposed European Political Com-
munity before voting for ratification.
The unyielding Soviet stand in the Berlin talks improved
the treaty's chances in France, but the prospective Genet,a
conference has since come to overshadow the EDC issue to such
an extent that a decision may easily be postponed on this
point alone. President Coty told General Gruenther on 26
February that he realized the impatience of the American
Congress, but warned that rapid action would be difficult. A
top Socialist leader further cautioned against any appearance
that pressure was being exerted by the United States.
Laniel has stated that some early decision is necessar y
for national unity.
at the appropriate moment
ey can obtain support in key committees and among party
leaders to force early debate, without straining normal parlia-
mentary procedure. While the government may be able to set a
firm date for debate irrespective of the Geneva conference
schedule, anti-EDC sentiment is still preponderant in the
Foreign Affairs and Military Committees, and the assembly is
very touchy on its prerogatives. Meanwhile a group of
deputies and senators including former premier Daladier bsve
called for a Europe-wide anti-EDC conference to be held in
Paris on 20 March.
Despite the Popular Republican National Council's
resolution of 7 March demanding a debate on the treaty "with-
out delay," many supporters, including former premier Robert
Schuman and a prominent pro-EDC Socialist spokesman, have ex-
pressed the belief that EDC's prospects will be improved no
matter what happens at Geneva. Even President Coty apparently
favors delay, fearing that a close, even though favorable, vote
on EDC would further divide the parliament and the nation.
7
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
25X1
 Approved For Reuse 2004/061VA9RDP79-00927AW00160*1Mar -54
BRITISH STAND MAY FORCE BASIC CHANGE IN EAST-WEST
. TRADE CONTROL PROGRAM
Britain's stand in favor of drastic contraction in con-
trols on Western exports to the Soviet Union and its European
Satellites jeopardizes the present extent of the COCOM system.
Other Western European COCOM countries will probably support
the United Kingdom in its stand, and the United States will
find itself increasingly isolated in its efforts to maintain
.the present controls.
Britain's desire to reduce controls has been evident
for several months. Its general argument is that the threat
of war is less than in 1950, and that the old controls should
be brought in line with the new "long haul" approach to West-
ern defense. Prime Minister Churchill has taken a strong
personal interest in the new British trade policy, and the
Foreign Office has proposed to the United States a specific
list of deletions and changes in export control lists.
Under the new British policy, controls would be retained
on a short list of only about 130 military and near-military
items, while all restrictions would be lifted on such materials
as copper, nickel, and scrap iron and steel. Many engineering
products, including petroleum, metallurgical and railway equip-
ment, motors, engines, and machine tools, would no longer be
embargoed.
Basic in the United Kingdom's approach to the question
is the size of its foreign trade in relation to its gross
national product--in 1952 about 30 percent as opposed to
about 10 percent for the United States. Increased sales of
engineering products are considered crucial for attainment
of Britain's export objectives, and the billion dollar trade
"offer" made by Moscow during the Berlin conference impressed
government circles as containing some solid prospects. The
British Board of Trade estimates there would be a possible
net increase of $250,000,000 in British exports to the USSR
during the 1955-1957 period if COCOM controls are relaxed
as recommended--a figure more than double the United Kingdom's
total exports to the Soviet Union in 1952.
In adopting their new policy, the British were evidently
influenced by the knowledge that they could count on the over-
whelmine support of other Western European countries. These
nations, notably France and Italy, have shown in their trade
8
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For R6'ase 2004/06Y2 i,W- DP79-00927A0'e'200160001-4
negotiations with the USSR and in requests for exceptions from
COCOM regulations an increasing impatience with restraints on
trade with the Orbit. Even the West Germans, who have been
very cooperative in the COCOM program, now apparently want to
expand trade with the Soviet Union, particularly in ship con-
struction. Churchill's speech on 25 February in the House
of Commons outlining the new British trade policy has been
echoed in statements by numerous government and business
leaders on the Continent.
France and other Western European countries have shown
considerable resentment at past American-British cooperation
in developing policy recommendations for COCOM. The American
embassy in London now sees a danger that if Washington and
London do not soon reach agreement, and if other COCOM countries
learn the details of the current British proposals, the list
proposed by Britain may become the most the other nations will
accept, and pressure may even develop for further reductions
in controls.
American representatives in COCOM see three possible
courses of action now open to the United States: (1) retain
the integrity of its own lists, including the Battle iict .fists,
with resultant penalties for noncompliance; (2) retain its own
export controls as they are, but alter the Battle Act lists
along the lines of new COCOM controls; or (3) accept the pro-
posed contraction of COCOM lists and adjust American export
control policies to conform to those of other Western nations.
These officials comment that with adoption of the third course,
American competition would lead to a buyers' market and auto-
matic disappearance of premium prices, thus destroying the
commercial attractiveness of many Orbit "offers" to Western
European countries.
The situation in COCOM represents only one aspect of the
East-West trade problem. The Soviet Union is increasingly
active in promoting division in the West by offering trade
opportunities and encouraging fear of an American depression.
The USSR may be expected to continue contrasting its
trade offers with the United States' failure to lower its
trade barriers. In the immediate future Western nations may
prove seriously vulnerable to Soviet maneuvers in the UN
ECOSOC meeting in New York on 29 March where Vyshinsky pro-
poses to discuss "obstacles to international trade."
9
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For Reialase 2004/0I :RI '- DP79-00927AO 200160001-4
12 Mal, 54
NEW INFLUENCES AFFECTING BRAZILIAN COOPERATION WITH THE UNITED
STATES
Brazil's traditional policy of cooperation with the United
States may be affected by two recent divergent trends. Cne,
connected with the ouster of Labor Minister Joao Goulart, is the
government's strengthened anti-Communist attitude; the other,
seen in developments inside the Foreign Ministry and growing
Brazilian commercial relations with the Orbit, is a tendency
toward greater nationalism. The latter may offset to some ex-
tent the effects of the former.
On 28 January, the Brazilian Communist Party began its new
"national" policy of outright opposition to the Vargas govern-
ment. At a labor rally sponsored by Labor Minister Goulart
the key Communist labor leader, Roberto Morena, attacked Vargas
personally and criticized his administration as one of "cor-
ruption and ineptness controlled by Wall Street imperialism."
Vargas promptly instructed Goulart to discontinue working with
the Communists and to stop helping them expand their influence
in labor unions throughout Brazil.
The new Moscow-inspired line propounded by the Communist
Party on 1 January of this year is one to which Vargas is par-
ticularly sensitive since he has tolerated the Communists for
some time past, and his own appeal to the electorate has for
many years been based on nationalism. His need to combat such
competing appeals to nationalist sentiment suggests that he
will now pursue a vigorous anti-Communist policy.
The army's recent political activities may have provided
further impetus for a vigorous anti-Communist policy. Military
insistence on Goulart's dismissal, although motivated primarily
by resentment over preferential treatment for labor and neglect
of army needs, sprang in part from fear of Communist infiltra-
tion of the government.
Concurrently with his dismissal of Goulart, Vargas called
for the resignation of War Minister Cardoso in an attempt to
divert from himself the blame for bad conditions in the army.
The new war minister, General Zenobio da Costa, led the anti-
Communist forces in a struggle for power within the army in 1952
and may add to their political strength within the administra-
tion4
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For Re ease 2004/0k ?-gI -RDP79-00927Aftt200160001-4
In the Foreign Ministry, on the other hand, old line of-
ficials favorably disposed toward the United States have been
gradually losing influence in recent months to less sympathetic,
and occasionally pro-Communist advisers. Prior to the Caracas
conference, Foreign Ministry officials indicated to the American
embassy that Brazil would follow its customary policy of co-
operation with the United States, but Foreign Minister Rao's
public statements increasingly indicated a position on colonial-
ism and on economic matters which was opposed to Washington's.
A Foreign Ministry official has stated that the instructions
Rao took to Caracas on 17 February were drawn up.under "Com-
munist" influence and without regard for the advice of the
regular staff. He added that the permanent officials had not
even been informed of Brazil's position on the item concerning
Communist intervention in the hemisphere.
Trade negotiations with Hungary, delayed for some time by
Budapest's failure to make sufficient offers to match its bid
for $30,000,000 worth of Brazilian goods, are now reportedly
near completion. Concurrent negotiations with other Orbit
representatives will reportedly result in a sale to Czecho-
slovakia and Poland of 100,000 tons each of iron ore from the
Vale do Rio Doce Company, which in the past received priorities
for American' equipment and substantial Export-Import Bank loans
to raise production for the free world. Informed of Washington's
objections, an official of the Foreign Ministry intimated that
his ministry opposed the sale and that negotiations were being
conducted in response to outside pressure.
The firmer government position against domestic Communists
is a kind of support for Washington's efforts to curb Communist
intervention in the hemisphere, but the response to Orbit trade
offers and the declining influence of the old line foreign
service officials suggest that Brazil's growing nationalism will
create other difficulties in Brazilian-American relations.
11
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For Pease 2004/06'/2''91&-RDP79-00927A``9M20016AOITdr 54
MAGSAYSAY FACING PARTY CHALLENGE
Basic differences between President Magsaysay of the
Philippines and leading members of the Nacionalista Party
have been brought to the surface in a controversy over an
"Asia for Asians" foreign policy. The Philippine Congress,
meanwhile, one third through its regular session, has done
nothing as far as the president's program is concerned.
The controversy began unexpectedly in early February
when Carlos Romulo, recognized abroad as a Philippine spokes-
man but little liked by the older Filipino politicians,
referred to the "Asia for Asians" slogan as the "leaving:
of Japanese propaganda. He was immediately answered by
Under-secretary of Foreign Affairs Leon Guerrero, who sated
that, on the contrary, the slogan represented the highest,
aspirations of the Asian peoples.
Guerrero, who is a protege of the ultranationalistic:
Senator Recto, the traditional Nacionalista foreign policy
spokesman, apparently intended his remarks only as an ati.ack
on Romulo. They touched off widespread speculation in the
Philippine press and Congress, however, to the effect that
the government might be contemplating a neutralist foreir:n
.policy and even perhaps the recognition of Communist China.
In the course of the debate, Senator Recto brought up
American racial discrimination, and Vice President Garci:,
who is also the foreign affairs secretary, made a thinly
veiled attack on American economic policies toward the
Philippines. The opposition Liberals have announced than:
they oppose the Recto-Guerrero position and support Mags.ysay's
foreign policy.
The president himself has neither clearly repudiated
nor fully endorsed the position of his Nacionalista Party
colleagues. He did say that he favored closer cooperation
with Asian countries and that this was in no way incompatible
'with close association with the United States, a point also
made by Recto and his followers. Magsaysay also has stated,
however, that communism is the main threat to Asia today
and observed that it is dangerous to express policy by
means of slogans.
12
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For Lease 2004/04I -RDP79-00927AQpO200160001-4
The "Asia for Asians" debate does not at this time indicate
that any basic shift in Philippine policy is likely. Its
significance lies in the effort of older members of the
Nacionalista Party, who have little in common with Magsaysay's
program in general, to take the lead away from the president.
He has in the past deferred to their greater political experi-
ence, as when he permitted them to name many of his appointees
to policymaking posts throughout the executive department.. He
is reportedly aware of the danger to his program of such a
practice, but he has not yet established his position as the
party leader.
Meanwhile, with one third of the regular congressional
session completed, an emergency appropriation for rat control
is the only measure which has passed both houses and received
the president's signature. Various reform measures, passage
of which is essential to the president's reform program, have
not yet been acted on. The president has been criticized
in Congress for his appointment of army officers to civilian
positions and for his frequent absences from Manila. These
criticisms are of minor importance, but it is noteworthy that
they have come as often from members of Magsaysay's own party
as from the minority Liberals.
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For ease 2004/061f4c'#I-RDP79-00927 &0200160l0R1g4ar 54
SHISHAKLI'S DOWNFALL PRECIPITATES STRUGGLE
FOR POWER IN SYRIA
The struggle for power among Syrian politicians follow-
ing the removal of Shishakii threatens to revive the bitter
factionalism and the unresolved issues which brought the army
into politics five years ago.
The politicians, now weakly banded together in a care-
taker government, have no other basis of unity than opposition
to Shishakli and to military control. The dominant parties,
the Nationalists and Populists, are poorly organized, have no
strong leadership, and have frequently changed their policies.
The Nationalists won independence from the French in 1945,
but were discredited by Syria's performance in the war with
Israel and were overthrown by an army coup in 1949. They now
apparently want the return to power of individuals like ex-
president Quwatli. The Populists, internally divided on do-
mestic policy and the issue of Syrian-Iraqi union, represent
the commercial interests in Aleppo which bitterly oppose the
political supremacy of Damascus, the Nationalists' stronghold.
Smaller parties are grouped around personalities pr:)mot-
ing radical ideas of social reform or Arab nationalism. Most
prominent among these is Akram Hawrani's Arab Socialist Party
and the Arab Resurrection Party, both loosely merged in Decem-
ber 1952 for the fight against Shishakii.
The new cabinet under Nationalist prime minister Sabbri
Asali includes four Nationalists, four Populists, and four in-
dependents. The Populists dominate, however, because of their
hold on the key ministries of foreign affairs, defense, and
interior. The strongest party leaders are not in the cabinet.
Neither is AkramHawrani. They are staying out in order to
campaign more freely in the elections promised for May.
The Asali government is calling for the reassembling of
the parliament which existed at the time of the 1949 coup..
That parliament, however, contained no party majority and will
be unable, if it ever meets, to take any action on the issues
which have been unresolved in five years of military dictator-
ship.
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For Riiease 2004/4t2 'Rf&(RDP79-00927AW0200160001-4
Asali has made favorable references to a Syrian union or
federation with other Arab states. The prospect of union with
Iraq precipitated Shishakli's 1951 coup.
The politicians are not likely to move hastily, but Arab nation-
alism dictates at least cautious exploration of current Iraqi
proposals for federation. Any genuine move in that direction
will provoke stiff opposition from Egypt, Saudi Arabia, Israel,
and France.
The future role of the army is not clear: It is report-
edly fully behind the Aleppo civilians who led the revolt, and
it has promised to withdraw from politics. The fall of Shishak-
li set off a struggle for power within the army. The present
chief of staff is expected to remain in office, but there re-
mains doubt as to who is actually in control. Maruf Dawalibi,
the pro-Soviet minister of defense, is trying to establish
civilian control. The army may be tempted to re-enter poli-
tics if its autonomy is threatened, or if political fragmenta-
tion leads again to parliamentary bankruptcy, as it did in 1951.
The weaknesses of the two major parties may give a deci-
sive role to leftist Akram Hawrani. His party, given to terror-
istic activities, has already stirred up student agitation
against the Asali government. It collaborated with the Commu-
nists in fomenting disturbances during the recent revolt. The
Moslem Brotherhood may also attempt to exploit any parliamentary
impasses.
Syria will be internally unstable for some time. It is
unlikely to deviate from Arab League policies on Israel, the
Arab refugees, the Johnston plan and Middle East defense, but
its instability may make it a pawn of rivals within the Arab
League.
SECRET
25X1
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 c ~pF 12 Ma.:: 54
Approved For l ase 2004/06P~4c~Fk'RTDP79-00927AVM200160001-4
Western opposition to recognition of Jerusalem as Israel's
capital is being undermined by the increasing pressure on foreign
missions to resume normal diplomatic contacts. The unified West-
ern position, based on the 1949 UN resolution for internationali-
zation of the Holy City, stiffened in July 1953 when Israel trans-
ferred its Foreign Ministry to Jerusalem, where other government
offices have been located since 1949. In the last seven months,
several breaches of the Western position have occurred, and
Israel's efforts to strengthen its claim to the city can oe ex-
pected to continue.
The Western missions, which are still in Tel Aviv, agreed
among themselves not to contact the ministry or accept invita-
tions to official functions there. Three main factors, however,
tend to weaken this stand. One is the difficulty of day-to-day
contact with a government physically separated from the diplomats
accredited to it. Another lies in the question of where creden-
tials for newly assigned chiefs of mission will be presented, and
a third derives from the dual role of Prime Minister Sharett, who
has retained the Foreign Ministry portfolio.
In spite of occasional visits to Tel Aviv by Foreign Ministry
officials, the seemingly intentional ineffectiveness of tie liai-
son office there has induced Western missions to increase their
informal diplomatic contacts in Jerusalem.
On the question of presentation of credentials, the Western
front was weakened by two recent incidents. On 7 Decembe.: the
Italian minister presented his credentials at the Foreign Ministry
in Jerusalem. The new Swiss minister was authorized in mid-
February to present his credentials to the president and visit
Prime Minister Sharett there.
In early February the French ambassador, dean of the diplo-
matic corps, further damaged the united front when he called on
Sharett in Jerusalem to congratulate him on his premiership.
Sharett, a shrewd and experienced diplomat, will probably make
subsequent use of his dual position to confuse the Western stand
on Jerusalem. While none of the Soviet bloc countries has moved
its mission to Jerusalem, the new Soviet minister formallj pre-
sented his credentials there on 4 December. The Israelis proba-
bly hope to use the Soviet action as a lever on the West.
The Western powers, apprehensive of a strong Arab reaction
and hesitant to acquiesce in an Israeli fait accompli, will try
to avoid any steps inconsistent with the UN resolution foc inter-
nationalizing Jerusalem. Israel, however, bound to Jerusalem by
emotional ties, will hardly compromise its long-range claim and
will probably become more insistent that diplomatic contacts be
made there.
16
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For Release 2004/0 /24` `?l -RDP79-0092719660200160001-4
12 Mar 54
THE RECONSTRUCTION OF THE ELECTRIC POWER
INDUSTRY IN NORTH KOREL.
A minimum of three more years will be required to restore
North Korea's heavily damaged electric power system to its pre-
1950 condition. Aided by technicians, manpower, and equipment
from other Orbit countries, the restoration will probably keep
pace with, rather than limit, other industrial rehabilitation
(see map, p. 19).
In 1945 North Korea had a capacity of about 1,500,000 KW,
or about 90 percent of Korea's total and approximately two thirds
that of China. The Japanese had planned to double this by 1950,
but the Communists failed to continue the project, and at the
outbreak of the Korean war, North Korea's total capacity was
virtually unchanged.
In June 1952 large-scale air attacks knocked out most of
espite 25X1
the speedy beginning of repair work
generally, it is doubtful that any major rehabilitation was
completed prior to the armistice, as continued UN air attacks
hindered such operations.
In late 1952 orders were placed with East German suppliers
for parts and equipment for reconstruction of the distribution
system. In December 1953 Premier Kim I1-sung reported to the
Supreme People's Assembly on the planned aid to North Korea,
mentioning that the Suiho (Supung) Power Generating Station on
the Yalu River was among the projects to be rehabilitated with
the billion-ruble aid grant from the USSR. Until 1952 about
half of this station's 400,000 KW capacity went to Manchuria.
Czechoslovakia promised material and technical aid to assist in
restoring the generating stations of the Choshin System (Chang-
jin River), the Kyosen System (Hochon River), and the Fusen
System (Pujon River). Hungary and East Germany were to supply
additional electrical equipment.
Since Koreans generally do not have the technical experi-
ence to supervise major repairs, the other Orbit countries
are sending technicians. The'manual labor, on the other hand,
is being done by Korean and Chinese military personnel as well
as local inhabitants, evidencing the general shortage of labor.
17
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved For QWease 2004/069c i4-KDP79-00927ft 0200160001-4
A Pyongyang announcement of 7 August 1953 indicated that
restrictions on power for private use would be lifted before
1 September, and a broadcast of 30 December stated that the
total supply of power to cities and counties had increased three
to four times as compared to the war period. Several unidenti-
fied power plants, probably including Funei Number Two, were
described as restored and in operation by November 1953.
The Koreans have not publicly speculated when Suiho will
be restored to its former operating capacity, but since 1ne,
and possibly two, of the four 100,000 KW generators and inure
than half of the transformers were damaged, from 24 to 3-
months would be a minimum requirement for complete restoation.
North Korea plans to re-establish its over-all industrial
capacity in three years, and it is probable that power
rehabilitation will keep pace with this plan.
Fourteen percent of North Korea's power used to be supplied
to Manchuria. Until 1949 an additional seven percent went to
South Korea, but it is unlikely that the Communists will resume
.this supply. They have lost about the same amount of power
previously supplied from the Kasen (Hwachon) hydroelectric
station, which is located above the 38th Parallel but below
the truce line, and is being restored under the American aid
program.
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved Fo*mRelease 2 - 9-0092744000200160001-4
NORTH KOREAN ELECTRIC POWER INDUSTRY
66,000 volt line
- ~- 110,000 volt line
154,000 volt line
~- - 220,000 volt line
50 100 150
;J'a..k. ('
..)Ii'
? Ton-hua
C H
I' N
A
Hy ~:
Chao-yang-ch'
uan S'u
ny.,ng
Tung-feng'
Inv,
Mns 94E SYS
-
FU SHUN
-!
-
V KDFN
Punt h.a,
_Lin Chiang
Jr/y_-
Nana
~
(~v
np.)in
1
N SYSTEM
YOS
`'
'
t
?Kanggye
e1HO SY E
F N
SYS
M
CHOSHIN
P. ng
AN-TUNG ~y Ina!
S'
71 SYSTEM
ui ch '6n
' HAMH
UN
Na"
.,
c9
Hu gnajn
Chbnelu
~
~
t lc "
!f' ~;
YangnBng
S
na
~~ lu Su
?
nch'an
]~ q
SL
L t
-
\ [L,
I IAi
~
"V10,114 GYANG
WONSAN ..~
v
\
_
!
chi
y-,
,
'!
KONGOSAN SYSTEM
,
I
K
L
R E
A
TRUCE LI
1
S
I
t:
h
S
ang?
h'unch'dn
K
SFOUL/
NGHWAbb ~;"
ukhojinni
Wanj
u
_h'6k
?
128
25X1
25X1
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved Fo%,pelease 2004F9g24#C1T-RDP79-0092 0020016Q(P1 ,r 54
VARGA'S VIEW OF DELAYED CAPITALIST CRISIS
MAY HAVE OFFICIAL SOVIET SUPPORT
The Malenkov regime apparently shares the view of Soviet
economist E. S. Varga that the ultimate collapse of capitalism
has been delayed. Varga was recently awarded the Order o>
Lenin "for long service and irreproachable work." This avard,
the mild treatment he received during his partial disgrace
after 1947, and his reappearance after Stalin's death, suggest
that he consistently has had support at high levels.
In 1946, Varga propounded the view that capitalist coun-
tries were able to undertake economic planning through govern-
ment regulation if they felt their existence depended on it.
He was officially criticized soon after his book was written,
but instead of making the customary immediate recantation,
continued to argue publicly with his critics for two years.
It was not until the spring of 1949 that he finally did recant
publicly.
Since his return to favor, Varga has published three ar-
ticles in Pravda on the American economy and a long book jn
the economy andpolitics of imperialism. In these, he describes
an "inescapable tendency toward overproduction" in the United
States, arising from an ever-increasing productive capacity
coupled with an internal market which is shrinking as a result
of the "growing: impoverishment of the working class."
The demands of war production alleviated the depression
of the 1930's, according to Varga,.but at the same time stim-
ulated an expansion of American productive capacity and thus
compounded the problem of absorbing total output under peace-
time conditions. Thus by 1948 a new crisis of overproduction
threatened the United States, which found it necessary to
launch an extensive export program, a new armaments race, and
finally the war in Korea in order to absorb. the increased out-
put. These measures were temporarily successful, but required
large government expenditures and correspondingly high taxes
which, by cutting into the purchasing power of American con-
sumers, further reduced the internal market for nonmilitary
goods.
Up to this point Varga is pretty well in line with Stalin-
ist analyses, but he then departs from them by asserting that
American capitalists themselves are divided as to the merits
of this warmongering course. He states that the..-shrinking of
the nonmilitary market cut the profits of the peacetime goods
producers and precipitated a bitter conflict between them and
those whose profits came from the production of war materiel.
SECRET
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4
 Approved Forilelease 2004(# RDP79-00927A,000200160001-4
He finds that there has been a "modification in tone"
of American propaganda since President Eisenhower's inaugura-
tion, and attributes this to the activities of the peaceful
monopolists. Inasmuch as he does not exclude the possibility
that this group might be able to force a change in American
"warmongering" policies, he leaves the Soviet reader with a
much more confused impression of American policy than the
specters conjured up by the writers of Stalin's later years.
This same element of uncertainty has crept into Varga's
analysis of the progress of the crisis of overproduction in
the United States. In an article in October 1953 he outlined
such symptoms of crisis in the US as growing inventories, huge
stocks of agricultural produce, and rising unemployment, and
concluded that "the United States economy is heading straight
for a crisis of overproduction." In January 1954 he said:
"Of course, it is difficult to draw an accurate picture of
the further development of the symptoms of crisis under con-
temporary complex conditions of the ever-deepening general
crisis of capitalism. But it is clear that the crisis of
overproduction in the United States is becoming to an ever-
increasing extent an actually operative factor."
This weak conclusion is a marked departure from Stalinist
writings, which almost invariably asserted that the United
States was already in the throes of a serious economic crisis.
By relegating the American "crisis of overproduction" to the
future, Varga also postpones the date of the expected ultimate
collapse of capitalism.
Soviet ideologists have long felt that it is during the
period of "final capitalist disintegration" that the USSR
must possess maximum strength, both to defend itself against
the attacks of the desperate capitalists, and, in case of
need, to give the coup de grace to the capitalist system.
Postponement of this period would direct Soviet attention
to the build-up of long-term strength within the Orbit, and
in this respect is thoroughly consistent with present Kremlin
policies.
If the Varga position has in fact become the official
doctrine of the Soviet leaders, it would appear that they
are uncertain about immediate American economic prospects,
and that they are likely to rely more heavily on empirical
analysis than on Stalinist dogma as a theoretical base for
estimates.
M ,4
CDIMDENTIAL
Approved For Release 2004/06/24: CIA-RDP79-00927A000200160001-4