CURRENT INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000400130001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 15, 2016
• Document Release Date: May 18, 2004
• Sequence Number: 1
• Publication Date: January 7, 1955
• Content Type: REPORT

CONFIDENTIAL
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OCI NO. 0001/55
CURRENT
INTELLIGENCE
WEEKLY
7 January 1955
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL,
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DOCUMENT NO. /A/
NO CHANGE IN CLASS.
0 DECLASSIFIED
CLASS. CHANGED TO:
NEXT REVIEW DATE:
AUTH;
do8 s goXApPr4Qd Release 2004/06/24: CIA-RDP79
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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.
1
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.
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THE SOVIET WORLD . . . . . . . . . . . . . . . . . Page 4
Emphasis on heavy industry suggests policy dif-
ferences--Reaction to Paris accords being formulated--
Communist activity in the Far East.
PROBABLE SOVIET POSTRATIFICATION PROGRAM IN
EUROPE . . . . . . . . . . . . . . . . . . . . . . Page 6
The Soviet response to ratification of the Paris
agreements is expected to follow closely the courses
of action outlined by the recent Orbit security con-
ference and the series of Soviet notes to the West.
However, the Soviet propaganda claim that French
assembly action has not settled the issue suggests
any measures will be delayed at least until ratifica-
tion is more nearly completed.
PROSPECTS FOR THE MENDES-FRANCE GOVERNMENT . . . . Page $
There is increasing likelihood that the Mendes-
France government will be overthrown in the first
quarter of 1055. The National Assembly's hostility
toward the premier has intensified since October,
but his continued popularity throughout France and
the difficulty expected in agreeing on a successor
will probably have a moderating influence on the
parliamentary opposition.
CHINESE COMMUNIST MILITARY CAPABILITIES AGAINST
OFFSHORE ISLANDS INCREASING . . . . . . . . . .
There has been a several-weeks' lull in Chinese
Communist military activity against Nationalist-held
offshore islands, but the Communists are backing
their propaganda threats by increasing their capa-
bilities for launching future assaults on these
islands.and possibly on Formosa.
CONFIDENTIAL
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 CONFIDENTIAL
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NEHRU INTRODUCES PROGRAM FOR SOCIALIZING INDIA'S
BASIC INDUSTRIES . . . . . . . . . . . . ... . . . . Page 13
Prime Minister Nehru appears to have embarked on
a vigorous campaign to increase India's industrial
production. The manner in which Nehru is conducting
his campaign may lead him into open conflict with
the conservative wing of the Congress Party to the
detriment of political stability in India.
LONG-AWAITED INDONESIAN ELECTIONS MAY BE FURTHER
POSTPONED . . . . . . . . . . . . . . . . . . . Page 15
Indonesia's long-awaited elections, which if held
in mid-1955 as planned might be expected to bring to
power a government friendlier to the West, may be
further postponed. An increasing number of observers,
however, doubt they will be held before the end of
1955. The longer the delay, the greater will be the
inroads by the Nationalists and Communists among the
Moslem electorate.
SPECIAL ARTICLE. POOR 1954 HARVESTS INHIBIT PROGRESS
SOVIET R I IS "NEW COURSE" PROGRAM . . . . . . . Page 17
The agricultural phase of the "new course" program
is slowly making progress in the USSR, but has yet to
achieve any significant results in the European Satel-
lites, Agricultural performance during 1954 will permit
some increase in food supplies in the Soviet Union, but
prospects in the Satellites are far from bright.
7 Jan 55 CURRENT INTELLIGENCE WEEKLY Page 3
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The keynote speech given by First Secretary Khrushchev
at the Soviet construction conference on 7 December, but not
published until 28 December, appeared to emphasize more
strongly than usual that the development of heavy industry
is the main task of the Soviet economy. This strengthens
recent suggestions of differences of opinion among the Soviet
leaders over the relative emphasis to-be given heavy and
light industry during 1955. Such differences could result
from efforts to determine the economic policies the USSR
should pursue if West Germany is rearmed. They could stem,
however, from problems of basic long-range economic doctrine,
rather than current developments.
The fact that Khrushchev gave the main address at the
construction conference suggests that he may now be assuming
top-level responsibility over this vital segment of the
economy. From Stalin's death in March 1953 to the spring of
1954, Khrushchev acted primarily as the regime's major spokes-
man for the new agricultural program. After May 1954, public-
ity connecting him with agriculture fell to a very low level.
Since September, however, attention to Khrushchev's activities
has markedly increased: e.g., his trip to China and tour of
the Soviet far eastern regions, the issuance over his name
of the decree moderating the antireligious campaign, and now
his prominence at the construction conference.
Both Khrushchev and Pravda, the party newspaper, have
emphasized the vital importance of heavy industry and have
pointed to the need for further increases in agriculture and
housing. The American embassy in Moscow reports that the
recent differences between this line and that of the govern-
ment newspaper Izvestia, which has seemed to emphasize more
heavily a need for expanding manufactured consumers' goods
output, continued as late as 31 December.
While these obscure manifestations of policy differences
continued, the Soviet leaders were busy formulating their
responses to the French assembly vote for ratification of the
Paris agreements. Communist propaganda minimized the signif-
icance of the French action, The "insignificant majority of
votes" obtained by "unprecedented pressure" from Washington,
London, and the Vatican, it claimed, had not weakened but
strengthened popular opposition. Pursuing the line that the
"struggle is not over," the Soviet press referred time and
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again to the assembly's negative note of 24 December, and
Izvestia pointed out that the accords must now go to the
ounc of the Republic,"where resistance is great."
This line was juxtaposed to comment on Soviet successes
during 1954, predictions of future victories for the "peace"
camp, and reaffirmations of "enough might to defend" its peace-
ful successes. References to countermeasures continued to be
vague. Malenkov, in his answers to questions posed by an
American newsreel company, maintained the position that there
could be no negotiations with the West on Western European
problems as long as it persisted in rearming West Germany.
At the same time, he sustained Moscow's coexistence line by
offering to negotiate over Far Eastern issues.
The latest Orbit appeal to Japan was made in a Peiping
People's Daily editorial of 30 December which attacked the
charge that Peiping would require Japan to sever relations
with the United States if it wanted to resume normal relations
with Communist China and the USSR. The newspaper's praise
of the position taken by Japan's two Socialist parties re-
garding normalizing relations with the USSR and Communist.
China was apparently intended to influence forthcoming
Japanese elections.
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PROBABLE SOVIET POSTRATIFICATION PROGRAM IN EUROPE
The Soviet response to ratification of the Paris agree-
ments is expected to follow closely the courses of action
outlined by the recent Orbit security conferences in Moscow
and by the series of notes and statements since the London
conference in early October. However, Soviet propaganda has
emphasized the thin margin by which the French assembly
approved West German rearmament and the continuation of the
ratification struggle after this vote. It has given no hint
that Moscow will take new measures until the completion of
the ratification process, The relative success of the world-
wide Soviet policy of moderation may dictate continuing
caution in carrying out the harsh threats the USSR has already
made.
The Orbit security conference which. concluded in Moscow
on 2 December called for the strengthening and co-operation
of Orbit military forces, the details of which would pre-
sumably be announced at a later conference after ratifica-
tion. This would probably reveal the formation of a unified
Orbit military command and formally acknowledge the existence
of national armed forces in East Germany. Resulting actions,
publicly depicted as measures for self-protection, may in-
clude the deployment of additional Soviet military forces in
the Satellites, Besides being an effort to impress the West,
these moves would be designed to assure public opinion in
the Orbit that a firm defense was being readied against West
German remilitarization.
Ratification will probably be followed by the conclusion
of some type of peace treaty and a mutual defense pact be-
tween East Germany and the USSR, which would abolish the
Soviet high commission and formalize the establishment of
East German armed forces and the retention of Soviet troops
in East Germany.
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I I
most of the
rumors o more
extreme measures appear n a
to influence the ratification
debates. If East German military efforts a
re increased,
internal security reasons alone would provi
de a
strong motive
for a strict isolation of West Berlin from
East
Berlin and
East Germany. There is less likelihood of
any
concerted
effort to interfere with West German access
to
Berlin.
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Moscow's offic4al statements and propaganda have made
abundantly clear its threat to refuse negotiations on German
unification and the Austrian treaty after ratification of the
Paris agreements. Moscow will probably maintain this
attitude for some time, perhaps insisting on annulment of
the Paris agreements as a prerequisite to further talks.
In any event, the Soviet Union is likely to avoid negotiations
on European issues for a considerable time because it is not
prepared to make any significant concessions at another con-
ference, and because it is sensitive to negotiating from a
position of apparent weakness. Its attitude might change,
however, if serious splits became apparent in the West.
The surprise attack by Soviet authorities on American
occupation policies in Austria at the Allied Council meeting
on 21 December could possibly foreshadow much stricter con-
trols along the boundary between the Soviet and Western zones.
The Soviet representative emphasized that Allied actions could
have "serious consequences for the integrity" of the Austrian
state. A decision by the USSR to partition Austria following
the German pattern would be in contradiction to its strategy
of conciliation. However, a short-term increase in border
controls--justified as protection against "illegal" Western
activity--is a possibility.
Although Moscow has said that disarmament talks are
incompatible with the rearmament of West Germany, it has not
been so categorical about denying the possibility of negotia-
tions on this issue after ratification. Such a refusal is
possible, but it is less likely because of the unfavorable
effect on world public opinion.
The Soviet notes to Britain and France have indicated
that the USSR will annul its treaties of alliance with these
countries when they complete ratification of the Paris
agreements.
Although Soviet threats have been rather vague on the
question of timing, the implication has been that most of
these measures would not be taken until the completion of the
ratification process. Some preliminary measures are possible,
however, before that, and more explicit threats may be made
to sharpen the division of Germany and the isolation of
Berlin prior to final West German action on the Paris agree-
ments. While Moscow may actually believe that French assembly
action is the decisive step in ratification, it will not miss
any chances to exploit further delays arising either in France
or Germany.
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PROSPECTS FOR THE MENDES-FRANCE GOVERNMENT
There is increasing likelihood that the Mendes-France
government will be overthrown in the first quarter of 1955.
The National Assembly's hostility toward the premier has
intensified since October, but his continued popularity
throughout France and the difficulty expected in agreeing on
a successor will probably have a moderating influence on the
parliamentary opposition. The premier's next test will prob-
ably come after mid-January when he reportedly plans to re-
shuffle his cabinet and attempt to broaden,his parliamentary
support.
Mendes-France lacks some 25 votes for a firm majority
and faces increasing difficulty in standing off the Popular
Republicans and the "classical right" on one side and the
Communists on the other. Only the desire not to delay con-
sideration of the Paris accords prevented the center-right
grouping from overthrowing him in the fall. The rejection
on 23 December of the bill to admit West Germany into the
Western European Union marked a low point in Mendes-France's
control and illustrated the deputies' willingness to use even
an important international issue to vent their hostility
against the premier.
Despite the passage of the Paris agreements on 30
December, most of the deputies still hope that an East-West
conference can obviate the need of putting them into effect,
and the close votes on 27 and 30 December give these deputies
an excuse for demanding delays. In any event, the government
will be badgered both by deputies opposed to any German re-
armament and by those who still hope for an EDC-type solution.
The premier's opposition will renew its attacks when the
assembly reconvenes on 11 January. The Popular Republicans'
attitude toward the premier has hardened since autumn, and in
the 17-20 December debate on Indochina, hostility between
Mendes-France and former foreign minister Bidault reached
extreme proportions. The recent decree boosting family allow-
ances is not expected to mollify the Popular Republicans, de-
spite their sympathy for the premier's economic objectives.
More important, however, is the disaffection of his
parliamentary support. The Socialists' attitude has hardened
since last November when they rejected his offer of cabinet
positions. Furthermore, his more conservative supporters are
less hesitant to oppose him now that the bills on German re-
armament have been passed by the assembly.
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The premier will be vulnerable on both domestic and
foreign policy problems which must be faced soon, with the
budget posing the most serious hurdle. He is exposed on
one hand to the charge of presenting basically the same
budget as his predecessors, and on the other of cutting too
drastically defense and industrial subsidy allotments. More-
over, cutbacks in the nationalized segments of the French
economy will be opposed by the Socialists and the left wing
of the Popular Republicans.
North African policy will again be debated when the
Tunisian negotiations are completed, possibly in February,
and rightist deputies in Mendes-France's coalition as well
as in the opposition are sure to raise the bugaboo of a less-
ening French influence in North Africa. The military budget
debate will present an opportunity for proponents of a strong
defense in Europe to attack the premier. It may also unleash
a renewed attack on the Indochina issue, which could be fatal
to Mendes-France if the French-American difficulties over
Cambodia and Vietnam are publicized.
An additional factor, which will operate both for and
against the premier, is the deputies' desire to strengthen
electoral alliances for the 1956 parliamentary elections.
The recent congress of the National Center of Independents
and Peasants was intended to organize the "classical right"
to this end. The hesitancy of many Socialists on the Paris
accords stemmed from reluctance to face the electorate as
supporters of German rearmament -- a reluctance shared by
many Gaullists and the premier's own Radical Socialists.
On the other hand, the premier's popularity with the
general public continues high, and will probably give his
opponents pause when the next crisis develops. The Popular
Republicans, who would play an important role in any new
coalition, are fearful of rightist encroachments on their
electoral support, and their desire to co-operate with the
Socialists may prevent any early understanding among the
likely members of a successor coalition.
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CHINESE COMMUNIST MILITARY CAPABILITIES AGAINST
OFFSHORE ISLANDS INCREASING
Although there has been a several-weeks' lull in Chinese
Communist military activity against Nationalist-held offshore
islands, the Communists are backing their propaganda threats
by increasing their capabilities for launching future assaults
on these islands and possibly on Formosa (see map, p. 12).
Air facilities have been expanded in Chekiang Province
opposite the Tachen Island group.. A. base suitable.for jets was
nearing completion at Chuhsien in mid-November, and construc-
tion of a new base was begun recently near Haimen, 40 miles
west of the Tachens. Another field., at Taishan in the Choushan
Islands, has reportedly been lengthened.and improved. Still
another air base may be under construction in the southeast,
near Swatow.
Minor improvements necessary to ready the five air bases
in Fukien Province, opposite Formosa, may be awaiting completion
of new transportation f acilities'in the province. Improvements
to the road linking Amoy. with the Chekiang-Kiangsi railroad
were completed in mid-December. Moreover, two railroad
construction divisions have recently moved to Fukien, presumably
to build the province's first. rail lines. With improved trans-
port facilities, Peiping will be able to mass forces in the
area and meet the large logistical requirements of active air
bases there.
In line with Peiping's repeated statement that Communist
forces must "co-ordinate their. training," there have been
increasing reports of specialized training. Ground units near
Amoy, opposite the Quemoy Islands, have carried out small- 25X1
scale amphibious exercises, and similar training was reported
carried out by Communist forces in Chekiang in December.
Two fleet destroyers were apparently transferred from the
Soviet Union to Peiping's control during 1954, .with the aim of
assuring Chinese Communist naval superiority over the National-
ists. With five to seven submarines now at Tsingtao, the
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Chinese Communists are considered capable of reconnaissance of
and landing agents on offshore islands, minelaying in Formosan
waters, and limited attacks on Nationalist shipping.
Crews of Communist torpedo boats--used to sink a National-
ist destroyer escort near the Tachens in November--have
demonstrated an increased proficiency. This growing Communist
naval capability seems certain to have an impact on the
Nationalist navy, which is expected to become more cautious in
operations far from Formosa.
New Year's statements from Peiping have reaffirmed an
intention to "liberate" all Nationalist territory, regardless
of American "interference." These statements, like the military
preparations themselves, do not commit Peiping to any definite
deadline for operations against either the offshore islands
or Formosa. While operations against the islands appear
possible at any time, Peiping's propaganda continues to suggest
that a period of further preparation is necessary before an
operation against Formosa.
Meanwhile, the Communists have intensified their efforts
to subvert Chinese Nationalist personnel. Peiping's New Year's
Day offer to Nationalist armed forces included a promise of
cash rewards for weapons, planes and ships delivered by
defectors, as well as amnesty, land and jobs.
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NEHRU INTRODUCES PROGRAM FOR SOCIALIZING
INDIA'S BASIC INDUSTRIES
Prime Minister Nehru appears to have embarked on a vigor-
ous campaign to increase India's industrial production. The
manner in which Nehru is conducting his campaign may lead him
into open conflict with the conservative wing of the Congress
Party to the detriment of political stability in India.
Nehru was apparently impressed during his visit to China
last October with the economic advancement achieved through
the use of large masses of people. There have been various
signs since his return to New Delhi that he recognizes the
imminent danger of Chinese competition and that he intends to
fight to keep pace with China's economic development.
Nehru's basic philosophy will not permit him to use Ameri-
can capitalistic methods. Neither can he countenance Communist
dictatorial techniques. Rather, he seems to have chosen a
third socialistic way to inspire masses of people, increase
production, and equal the efforts of both China and the West.
The first overt sign of Nehru's new program was his
speech before India's National Development Council on 9 Novem-
ber, in which he said: "The picture I have in mind is defi-
nitely and absolutely socialistic.., the means of production
should be socially owned and controlled for the benefit of so-
ciety as a whole."
Nehru and the Congress Party's high command have long
been committed to the principle of the welfare state, but to
date they have been willing to maintain a balance between pub-
lic and private sectors in economic development programs.
The prime minister's speech of 9 November has been fol-
lowed by such a rapid succession of events, however, that it
is obvious he has a sweeping program in mind which he is pre-
pared to press with unusual vigor. One of Nehru's first
moves was to turn the presidency of the Congress Party over to
U. N. Dhebar, to bring his old colleague G. V. Pant into the
cabinet, and to appoint six new ministers. These men are un-
likely to oppose him.
On 26 November, in a heated cabinet session, the govern-
ment decided that future steel mill production in India would
be publicly owned. In a memorandum to parliament on 18 Decem-
ber, the government reiterated its intention to quicken the
pace of industrialization, primarily through state efforts.
Also,,a more active role for the state was envisaged in the
second Five-Year Plan, due to commence in 1957,
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On 20 December, Nehru himself introduced a bill, which
was passed the next day, to amend the Indian constitution to
restrict the right to challenge nationalization measures af-
fecting land ownership and private industry. Also on the same
day, Finance Minister Deshmukh announced government plans to
nationalize the Imperial Bank of India as the first step in
setting up a state-controlled banking institution for the
whole country.
These events have seriously worried India's business
community, which seems more openly disturbed over its future
prospects than in previous years. The stock market has been
adversely affected. Calming statements by such highly re-
spected individuals as Finance Minister Deshmukh seem not only
to have been fewer in this instance but also to have been less
effective,
If Nehru persists in ignoring some of his most capable
advisers, he may antagonize Congress Party conservatives and
Indian capitalists to the point of an open break. The strong
conservative cabinet team of Deshmukh, Krishnamachari, and
Home Minister Katju is unlikely to submit passively to a pro-
gram which seems to it to upset the existing balance between
home and heavy industries in India's development scheme. The
huge Tata and Birla industrial empires, which are now seeking
independently to expand steel production in India, may feel
themselves endangered. Smaller Indian businessmen and foreign
investors may become even more reluctant than before to risk
capital under the second Five-Year Plan despite the fact that
the first one got off to a fairly good start,
If Congress Party conservatives combine with large indus-
trial interests controlling a considerable proportion of the
party's finances and propaganda media, Nehru could be faced
with strong opposition. There was growing evidence during
1954 that conservatives were trying to take over the Congress
Party machinery,
Though the conservatives may not attempt to oust Nehru or
even to challenge him on matters of foreign policy in the near
future, they may become sufficiently aroused by his new economic
program to bring a party split into the open. This could
materially unsettle the Indian political picture.
Political uncertainty would almost surely lead to economic
stagnation, which the men surrounding Nehru would probably be
unable to combat effectively. Nehru would then be faced with
the necessity of abandoning his economic campaign for lack of
support or of ruling by dictate.
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LONG-AWAITED INDONESIAN ELECTIONS MAY BE FURTHER POSTPONED
Indonesia's long-awaited elections, which if held in mid-
1955 as planned might be expected to bring to power a govern-
ment friendlier to the West, may be further postponed. An
increasing number of observers, however, doubt they will be
held before the end of 1955.
Both the governing National Party and the Communists who
support the government need. additional time to perfect their
organizations. Despite a New.Year'.s statement that elections
would be held this year, President Sukarno,who has linked his
fortunes with the National Party,. would probably support a
postponement.
Delay has already worked to the advantage of the National
Party and the Communists. During the year and nine months
since the election law was promulgated and during which the
elections have been progressively postponed, the Communists
and Nationalists have expanded their organizations at the
expense of the principal opposition party, the Masjumi. That
party, however, is still believed to command more popular
support than any other group as the result of its identification
with the predominant Moslem religion.
Indonesian officials now admit that elections will not be
held in April as scheduled a year ago, but suggest they can be
held by summer and insist that they will take place "sometime"
in 1955. Their principal argument. is that the new home
minister, unlike his predecessor who resigned in November, is
a member of a party which stands to gain by the elections and
is thus interested in pushing election plans as rapidly as
possible. These officials fail to mention, however., that the
Justice Ministry, which exerts influence over election plans
equal to that of the Home Ministry, is headed by a man whose
party would prefer postponement.
President Sukarno has isolated himself from political
factions other than the National Party and some of its govern-
ment associates. He appears convinced that there is little
possibility of the Masjumi's supporting him under any circum-
stances and that his own political future would be best pro-
tected by a National Party victory. Although he made a strong
appeal for accelerated election preparations last August, and
on New Year's Day said elections would be held this year, he
has also stated that he does not want to see elections used
to create disunity and chaos.
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The prospect for elections before late 1955 is dim also
because of the technical problems involved. The process of
setting up machinery for the country's first vote is hampered
by the serious lack of security in certain areas, insufficient
trained personnel, poor transportation and communications
facilities, and inadequate government organization and control
in outlying territories.
.As election delays continue, the initiative and skill dis-
played by leaders of the National and Communist Parties stands
in marked contrast to the lack of organization or vigorous
leadership in the Masjumi. Although possessing great potential
strength, the Masjumi has done little to activate it, appar-
ently planning to depend on an eleventh-hour campaign to bring
out the vote. The longer the delay, however, the greater are
the inroads by the Nationalists and Communists among the Moslem
electorate.
The Communists have found it relatively easy to encourage
anticlericalism among nominal Moslems and have benefited from
the general ignorance of Communism among the more devout, which
permits organizers to equate its principles with those of Islam.
The Nationalists and Communists are also promoting differences
between the Masjumi and other Moslem parties which will splinter
the Masjumi Party vote.
Meanwhile, the Indonesian government has achieved a con-
siderable triumph in getting the stage set for the Asian-African
conference in late April. This conference has been a pet project
of the National Party and was conceived mainly for domestic
political purposes. The Indonesian Communist Party's interest
in it has increased enormously with the decision to invite
Communist China. The government also expects to benefit
politically from the dual nationality negotiations which are
reported proceeding successfully with Communist China.
7 Jan 55 CURRENT INTELLIGENCE WEEKLY Page 16
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SPECIAL ARTICLE
POOR 1954 HARVESTS INHIBIT PROGRESS OF
SOVIET ORBIT'S NEW COURSE PROGRAM*
The agricultural phase of the new course program is
slowly making progress in the USSR, but has yet to achieve
any significant results in the European Satellites. Because
of unsatisfactory 1954 harvests, the anticipated marked im-
provement in the Orbit food supply, which is the keystone of
the whole new course program, will be delayed and must depend
on 1955 crops.
Agricultural performance during 1954 will permit some
increase in food supplies in the Soviet Union, particularly
for the urban population. In the Satellites, however, there
has been no such improvement, and future prospects are far
from bright.
Soviet agricultural production in 1954 was little better
than the relatively low level of 1953 (see chart A. p.20), but
there is some evidence that the government collected a greater
proportion of the crops for distribution through state channels.
The government may therefore be able to increase somewhat the
food supply to industrial centers.
Grain output in the USSR is estimated to have been 5 per-
cent'higher than in 1953 as a result of acreage expansion (see
chart B. p. 20). An excellent crop on the "new lands" area of
northern Kazakhstan and western Siberia, as well as in the
Urals and the Volga region, offset a bad drought in the Ukraine.
In the European Satellites, agricultural output was no
better than a year ago, and. the failure of the peasants to ful-
fill compulsory delivery quotas is further reducing the amounts
entering government channels. The governments will be hard
pressed to maintain the present level of food supply for the
urban population. The diet will be starchy and monotonous;
meat, fats, dairy products and possibly wheat bread will be in
short supply.
Adverse weather was the primary cause of the poor grain
harvest, but; the apathy of the peasants toward the governments'
agricultural program and insufficient farm machinery and fer-
tilizers were also important factors. Only in Poland and
Bulgaria was the total grain crop about the same as in 1953 or
the average of the last few years. Elsewhere in Eastern Europe
the grain harvests, except for corn, were probably 10 to 15
percent below the preceding year.
*Prepared jointly wit Et,,}~ EOffice of Research and Reports.
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The small grain harvests in both 1953 and 1954 have forced
a marked shift in the Orbit's pattern of trade with the West.
The USSR has sharply curtailed its commitments to export grain
to the West, and its deliveries on remaining commitments have
lagged badly in recent months. The Satellites, traditionally
exporters of grain, have contracted to import more than 400,000
tons of bread grains since the 1954 harvests and have partic-
ipated in negotiations which probably will result in further
large imports from the West. These amounts are in addition to
several hundred thousand tons imported earlier in 1954, much
of it from Argentina. Poland and Hungary appear to be the
largest current purchasers, but East Germany and Rumania have
also been seeking Western grain.
The USSR, and to a lesser extent the Satellite's, have
increased imports from the West of "quality foodstuffs" such
as meat, butter and fish. These imports have not been large
enough to improve appreciably the quality of the average diet
in the Orbit. Nor has domestic production of these items in-
creased enough to bring about any significant changes in the
diet for the consumption year ending in July 1955.
The agricultural outlook for the next two years is much
better in the Soviet Union than in the Satellites. The Soviet
acreage expansion program on the climatically marginal lands
of the eastern and central region is to be increased four times
in 1955 and more than eight times in 1956 over the modest achieve-
ment in 1954 which brought 8,900,000 new acres under cultivation.
This project alone would by 1956 add 28 percent to the Soviet
1953 grain acreage.
The scheduled acreage for 1955 has been ploughed. Although
this "new land" may produce adequate yields for several years
under favorable weather conditions, prospects are highly du-
bious after the basic soil moisture reserves are depleted.
The amount of progress achieved through other parts of the
agricultural program, such as incentives to induce the peasants
to produce more and the supply to agriculture of more fertilizer
and machinery, cannot be estimated.
In the Satellites, continued passive resistance of the
peasants will probably prevent achievement of present longer-
run agricultural production goals. While offering increased
material incentives, the Satellite governments are maintaining
that total collectivization of agriculture is still their
ultimate goal. As long as this threat hangs over the heads
of the peasants, their efforts will be halfhearted,.
7 Jan 55 CURRENT INTELLIGENCE WEEKLY Page 18
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 The Satellites will ave to have favorable weather in
the next three or four years if they are to increase agricul-
tural output at a rate higher than that required by the growth
in population. Without such weather conditions, a'substantial
increase in`imports of foodstuffs may be necessary, in order
to maintain the food supply at the present levels, to say
nothing of improving the quality and variety of the diet.
The unsatisfactory 1954 crops will have an adverse
effect on the rate of growth of labor productivity in the Orbit.
By failing so far to achieve a significant increase in food
availabilities, the Orbit governments have failed as well to
provide the key new course incentive to the labor force to
work harder and produce more.
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CHART-A INDEX OF SOVIET AGRICULTURAL OUTPUT
CHART-B
*Based on aggregated production of the nine most important food and fiber commodities:
grains, potatoes, meat, milk, vegetables, cotton, wool, flax, and hemp.
SOVIET GRAIN PRODUCTION
p eet t tery _106
102
100
98
280
GRAIN ACREAGE
(millions of acres)
0
254
0
262
0
265
0
263
279
0
preliminary
estimate
1938
1950
1951
1952
1953
1954
OUTPUT
tri
tons)
(
illi
f
p
relimina
estimate
ry
m
ons o
me
c
1938
1950
1951
1952
1953
1954
PRESENTATION DIVISION JANUARY 1955 50104 ,
-QFrD
CON EUENT IAL