CURRENT INTELLIGENCE WEEKLY SUMMARY

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tUNFIDENTLAL
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
State Dept. review completed
COPY NO. 52
OCI NO. 0023/59
15 January 1959
DOCUMENT NO. 4
NO CHANGE IN CLASS. ^
^ DECLASSIFIED
CLASS. CHANGED TO: T4
NEXT REVIEW DATE: /'I
DATE SAMJ EVIEWER:
CENTRAL INTELLIGENCE AGENCY
I I I OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
T H E W E E K I N B R I E F
OF IMMEDIATE INTEREST
Moscow.
THE BERLIN SITUATION . . . . . . . . . . . . . . . . . . . Page 1
Moscow's notes of 10 January calling for a German
peace conference are intended to retain the initiative
and keep pressure on the West for negotiations. In West-
ern Europe, there was an almost unanimous rejection of
the peace treaty proposals. There was, however, a general
feeling,that eventually there must be negotiations with
MIDDLE EAST DEVELOPMENTS . . . . . . . . . . . . . . . . . Page 3
Qasim, possibly in response to Iragi,_Axmy .prQssnx^e,:..ha?s is~-.
sued a decree making the Communist-dominated Popular Resist-:
ance Front subservient to the army. The UAR is pursuing its
internal anti-Communist campaign. Although overshadowed by
this campaign. and the developments'.in':UAR-Iraqi relations,
the UAR's hostility toward pro-Western area leaders like
Tunisian President Bourguiba and Jordan's King Husayn
CAMBODIA . . . . . . . . . . . . . . . . . . . . . . . . Page 4
Premier Sik anoink .,hab:;been::ihformed,.,of ..:pl ftping A y
South Vietnam and Thailand to overthrow his neutralist re-
gime. Rupture of relations with South Vietnam seems an
immediate prospect. Sihanouk probably believes Chinese
Communist charges of American involvement in this intrigue,
but has not decided wh?t:hdz..- to accept support offered
by Peiping to bolster his position. In Thailand, there are
indications that because of illnesy Marshal Sarit, is not
exercising full control over government affairs.
appears unabated.
RIGHTIST POWER MOVE SUCCEEDS IN LAOS . . . . . . . . . . . Page 5
The Laotian National Assembly's grant of full govern-
mental powers to Prime Minister Phoui,Sananikone gives him
a year in which--unfettered by assembly pressure-,.he can
try to carry out a program to rally public support for a
conservative government. Phoui will reorganize his cabi-
net, presumably to include several military leaders and a
greater proportion of young reformers. In gaining his
12-month respite, Phoui used North Vietnam's military
pressure in the disputed frontier area to justify his
request for full power. Laos has not accepted Hanoi's
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
NOTES AND COMMENTS
UN observer.
SECRET
PART I (continued)
bid for negotiations; it has officially informed, the
United Nations of the border incursion and requested a
MOSCOW SEEKS FURTHER RESTRICTIONS ON JAPANESE FISHING . . Page I
The adamant attitude of the Soviet negotiators at the
annual Soviet-Japanese fishery negotiations which opened
in Tokyo on 12 January suggests that the USSR will propose
increased restrictions on Japanese fishing next year in
the North Pacific treat area
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FOOD SHORTAGES IN COMMUNIST CHINA . . . . . . . . . . . . Page 4
Shortages of some food items in major Chinese Commu-
nist cities are tarnishing the regime's claim of huge in-
creases in agricultural output. The shortages, apparently
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
PApr..C XX (continued)
severe, could become a major source of irritation among
the people at a time when the regime is stepping up its
demands on their time and energy. A promised increase in
the cotton cloth ration will be welcoued by tb.o-Chinese
consumer, but it does not begin to keep pace with the
claim that cotton production doubled in 1958.
'PEIPING PRAISES USSR AS MODEL OF SOCIALISM . . . ? . ? Page
The Chinese Communists are reviving the theme of
"learning from the Soviet Union in building socialism"--
'a line.not prominently mentioned in China during most of
l98 0 This display of deference to the Soviet example
is another step in Peiping's modification of its earlier
claims of a rapid advance toward Communism, and suggests
China will avoid further public statements implying that
its "road" is basically different from the one already
traveled by the USSR. The continuation of-the commune
campaign demonstrates, however, that Peiping to a large
degree is still independent on the practical level.
THE NEW SOVIET VOLUNTEER WORKERS' MILITIA . . . . . Page
Volunteer workers' militia detachments are being
formed in the USSR as civilian auxiliaries to the police.
Although complete details of their organization have not
been worked out,. , tt is known that these detachments are
to be an armed, elite group composed of "th best.off th
best ., the most authoritative and proved comrades t'
SOVIET TACTICS AT THE GENEVA TALKS . . . . . . . Page 7
The Soviet delegate to the talks'in Geneva on a.nu-
clear test-cessation agreement, while agreeing to nego-
tiate treaty articles dealing with relatively noncontro-
versial points, has not deviated from the basic position
taken on 25 December by Gromyko--that alleged "invalid
conditions" of the West were blocking agreement.. Moscow
may believe that ostensible agreement on all matters ex-
cept those "conditions" will further the Soviet effort
to place on the West the onus for any stalemate. The
Soviet bid of 10 January to resume negotiations on the
adjourned surprise-attack talks is intended to contrast
favorably with.the Western insistonce on'Tirst evaluating
the results of previous sessions before setting a specific.
CUBAN COMMUNIST GAINS
LJ/~ I
r a ? ? ? o ? ? ? o ? Page'. 9
The Cuban Communists, whose party was outlawed by
Batista, have been making rapid gains since his fall and
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
PART II (continued)
have been exerting a special effort to influence the labor
movement. Provisional President Urrutia and the leading
members of his cabinet are anti-Communist but seem unlike-
ly to take decisive action against the Communists' Popular
Socialist party. Fidel Castro has declared that the party,
with a membership estimated at 8,000 to 12.000, now will
be permitted legal status.
BLOC ECONOMIC ACTIVITY IN IRAQ . . . . . . . . . . . . . Page 9
The Sino-Soviet bloc, which has made substantial arms
shipments to Baghdad, is making a concentrated effort to
develop economic as well as political relations with the
new Iraqi Government. A Soviet delegation arrived in
Baghdad early this month to discuss economic and technical
cooperation between the two countries, and it is likely that
Moscow will soon offer financial aid.
NEW BELGIAN POLICY TOWARD THE CONGO . . . . . . . . . . . Page 10
Belgium's 13 January announcement of a new policy for
the Congo, given special urgency by the recent rioting in
Leopoldville, promises limited autonomy in the near future
and full independence eventually. The Belgians hope for
some federative ties with their African colony. In the
Congo the new policy pronouncement will probably be re-
ceived with suspicion and distrust by increasingly impa-
tient African Nationalists. Among the colony's approxi-
mately 23,000 permanent white settlers, it may evoke strong
opposition and possibly agitation for the extension of au-
tonomy to defined "European" regions.
NEW FRENCH MOVES ON ALGERIA . .
. . . . . . . . . Page 12
Despite De Gaulle's public position that a political
solution for Algeria is to be delayed pending progress
toward economic and social development, French propaganda
and behind-the-scenes moves appear aimed at early nego-
tiations with the rebels. While rebel leaders remain dis-
trustful of Paris, settler apprehensions over De Gaulle's
intentions are becoming more outspoken, and any evidence
that rebel desires for independence are actively being
discussed will arouse violent reaction.
BERBER DISSIDENCE IN MOROCCO . . . . . . . . . . . . . . . .Page 13
Moroccan authorities appear to have made some prog-
ress--although not as much as they are claiming--toward
re-establishing order in areas of northern Morocco where
Berber tribal dissidence recently assumed serious pro-
portions. However, hard-core dissidents remain active in
the mountains and will probably continue their resistance
at least until Rabat takes measures to alleviate Berber
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
PART II (continued)
economic distress and meet Berber demands for a larger
voice in both the central and local administrations. -Mo-
roccan leaders close to the King and the dominant Istiqlal
party--the principal object of the dissidents' wrath--
continue to play up the theme of foreign--principally
French and Spanish--subversion. 25X1
BAGHDAD PACT MINISTERIAL COUNCIL MEETING . . . . . . . . . Page 14
The Baghdad Pact Ministerial Council, which is to
hold its semiannual session in Karachi from 26 to 28
January, will concern itself primarily with the effects
of the Iraqi revolution last July. Iraq still has not
made clear its official policy toward the pact. Steps
are being taken to strengthen the organization through
bilateral defense agreements between the United States
and Iran, Turkey, and Pakistan.
EFFECTS OF CEYLON'S AGREEMENTS WITH SINO-SOVIET BLOC . . . Page 15
Ceylon's economic and cultural pacts signed with
Peiping and Moscow about a year ago have not yet substan-
tially increased Communist influence on the island or ad-
versely affected the neutralist government's attitude
toward the free world. Sino-Soviet efforts to expand
cultural relations with Ceylon have thus far proved more
successful than the bloc's economic activity.
INDIA PREPARING AMBITIOUS THIRD FIVE-YEAR PLAN . . . . . . Page 16
Recent statements by Indian leaders and resolutions
passed at the 6-11 January annual meeting of the Congress
party indicate that Nehru plans to intensify the pace of
India's economic development under the Third Five-Year
Plan (1961-66) in an effort to keep up with Communist
China's "giant leap forward." New Delhi apparently is
planning a goal of nearly $21 billion for the third plan,
compared with a probable expenditure of $13.5 billion, 80
percent of the original goal, during the second plan. The
target is beyond India's financial capacity and would
probably have a foreign exchange gap of several billion
dollars.
FINLAND'S NEW GOVERNMENT . . . . . . . . . . . . . . . . Page 17
The minority Agrarian government finally formed by
V. J. Sukselainen on 13.January has as its chief task the
normalizing of trade and political relations with the USSR--
a problem made more urgent by Finland's growing economic
difficulties. The Sukselainen government may be forced to
depend on the combined votes of the Communist-front Finnish
People's Democratic League and the splinter Opposition So-
cial Democrats.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
PATTERNS AND PERSPECTIVES
PRESIDENT FRONDIZI?S PROBLEMS IN ARGENTINA . . . . . . . . Page 1
Argentine President Arturo Frondizi, who will visit
the United States from 19 January to'l February, initiated
on 1 January a rigorous austerity and monetary stabiliza-
tion program which will be backed by $329,000,000 in for-
eign credits Opposition
groups, especially the Peronistas, who are trying to regain
control of organized labor through elections now under
way, have already attacked the program, casting doubt
on Frondizi?s ability to carry it out. Frondizi is, how-
ever, determined to push the program,. and the state of
siege imposed on 11 November to quell politically moti-
vated labor disturbances will probably be continued
during the initial stages of the new program.
THE SOVIET COLLECTIVE FARM -- THEORY AND PRACTICE . . . . Page 8
In the face of Chinese Communist claims that the
commune is a "more progressive" form of social organiza-
tion, Moscow has continued to maintain that the collective
farm system must be "consolidated," not eliminated, and
that the arrival of Communism under the formula of "from
each according to his ability, to each according to his
needs" must await the achievement of material abundance,
The Soviet regime's policy in the countryside calls for
the eventual transformation of rural life through evolu-
tionary policies larded with material incentives, rather
than through violent changes in organization such as the
Chinese have employed. Despite these differences in ap-
proach, however, Moscow's final aim, like Peiping's, is
to effect a.fundamental alteration of the collective farm
structure and, in accordance.with,long-standing,, Marxist
doctrine, to convert the peasant to a political, economic,
and social status identical with that of the factory
worker.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
PART III (continued)
THE STATUS OF SOVIET INDUSTRIAL REORGANIZATION , . . Page 13
Further steps in Khruohchev?s evolutionary reshaping
of Soviet economic institutions may be revealed in connec-
tion with the forthcoming 21st party congress, convening
this month to launch the new Seven-Year Plan (1959-1965),
Measures-affecting Soviet industry which might be taken
include ,a redefinition of administrative regions, clearer
assignments of responsibility and authority to republic
and regional organs for deciding investment allocations,
and possibly the re-establishment of a Supreme Economic
Counc,il, Although realignment of relationships within the
chain of command between the controlling center and the
producing enterprise will continue, there is no indication
that the system of directing the economy by command is. to
be altered.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
OF IMMEDIATE INTEREST
Soviet Peace Proposal
The USSR's notes of 10 Jan-
uary to the Western powers call-
ing for a conference in Warsaw
or Prague within two months to
conclude a German peace treaty
and to discuss the Berlin ques-
tion are intended to demon-
strate Soviet desire to nego-
tiate. The USSR wishes to ap-
pear responsive to Western ob-
jections to discussing Berlin
except within the wider frame-
work of Germany and European
security. Soviet leaders ap-
parently expect that the pro-
posal to hold a peace confer-
ence will place the Soviet
Union in a position to exploit
growing pressures wi 111
Western powers
or a gen-
eral policy review of problems
relating to German reunifica-
tion.
The draft peace treaty ap-
pended to the notes elaborates
the 11 "basic provisions" for
a treaty set forth in the aide-
memoire Mikoyan delivered to
Secretary Dulles on 5 January.
It is essentially a formula
for a neutral Germany, with
the central theme that Western
recognition of two Germanys
is necessary to any progress
on a German settlement. It
provides for participation by
both Germanys'in the negotia-
tion and signing of a treaty..
If a German confederation should
then exist, it would also be
represented.
The draft also provides
for the withdrawal of foreign
troops from Germany, a ban on
German possession and produc-
tion of nuclear weapons and oth-
er instruments of mass destruc-
tion as well as bombers and sub-
marines, and a prohibition on
German participation in mili-
tary alliances directed against
any of the signatory powers. It
would bind "Germany" to suppress
any Nazi organizations and ac-
tivities as well as any organi-
zations, including those of
refugees, hostile to any of the
Allied powers. A demilitarized
"free city" of Berlin would be
established pending the reuni-
fication of Germany.
The notes warned again
that Western refusal to nego-
tiate will not prevent the USSR
from "renouncing its functions
in Berlin" and transferring con-
trol over Allied access to Ber-25X6
lin to the East Germans, but
failed to mention again the six-
month deadline. Moscow is
in a position to be able to
hand over its quadripartite
functit>ns in Berlin to the East
German. regime at any time.
Moscow probably does not
expect a conference to take
place now on these terms. So-
viet leaders apparently hope,
however, that constant pressure
will eventually produce a break
in the Western position on Ger-
many and European security or
at least will lead to greater
popular acceptance of the So-
viet view that rapprochement
between the two German states
is the only solution to the re-
unification problem.
West European Reaction
Chancellor Adenauer called
for outright rejection of the
tr~N
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
Soviet draft treaty, and the
West German press backed up
this demand with sharp criti-
cism of the treaty as demanding
a "second surrender" of Germans.
On the question of future nego-
tiations, there was less unanim-
ity in Bonn than elsewhere.
Most-papers saw a high-level
meeting on Germany taking place
within the next few months. The
pro-Social Democratic (SPD)
press and some independent pa-
pers called for negotiations in
the hope of inducing the Soviet
Union.to :modify its "maximum
demands." SPD Deputy Chairman
Wehner warned against flatly
rejecting the Soviet proposals.
French Foreign Ministry of-
ficials believe the Soviet note
is an unacceptable basis for
negotiations and is a tougher
position than previous Soviet
peace treaty proposals. An an-
alysis of Mikoyan's aide-memoire
stressed that the 10 January
note makes clear the Soviet aim
of neutralizing Germany with-
out reunification. Some of the
French press, however, noted a
more conciliatory language,
which was felt to indicate Mos-
cow's desire for negotiations.
The British press with near
unanimity continues to argue
for:. "less negative" Western re-
sponses and discussions of the
revised Rapacki plan. The Man-
chester Guardian observed that
"an unconstructive Russian ap-
proach is not justification for
an unconstructive Western reply."
East Germany - Berlin
Strongly echoing Moscow's
claim that East Germany is a
fully sovereign state, the U1-
bricht regime now appears to be
laying the groundwork for an
eventual claim'that it is the
only legitimate German state.
Its note of 7 January to Moscow
reiterated that West Berlin be-
longs to East Germany. The note
further declared that the East 25X6
Berlin municipal authorities are
the "sole rightful organs" for
the whole city. Premier Grote-
wohi's tour of the Middle East
is also designed to underline
East German claims to sovereign-
ty. Following Grotewohi's minor
successes in Cairo and Baghdad,
he saw Nehru, but apparently
failed to change India's policy
of nonrecognition of East Ger-
many.
Soviet authorities in Ber-
lin are continuing to insist that
American authorities must now
deal with East Germany on all
questions concerning American
military personnel in East Ger-
many and East Berlin.
While the Soviet Kommand-
atura in East Berlin continues
its normal activities at Karls-
horst, a Soviet pamphlet, com-
menting on the Soviet note of
27 November, explicitly stated
that the Kommandatura would be
closed down and the guard troops
attached to it withdrawn from
the city as part of the Soviet
handover of its functions to
East Germans. American of-
ficials note that the USSR is
reported to be closing down
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15 January 1959
the important ordinance facil- occur- *hen? other Soviet
ity at Berlin/Oberschoeneweide forces are withdrawn from
and believe the termination of the city.
this facility will probably
MIDDLE EAST DEVELOPMENTS
Although Iraqi Prime Min-
ister Qasimes speech on 6 Jan-
uary implied that students and
other elements who have en-
gaged in street demonstrations
should get back to work and
that the role of the Communist-
dominated Popular Resistance
Force (PRF) should be limited,
his words seem to have had
"little effect. Street clashes
have continued; the pro-UAR
"nationalists" have had the:l
better .of it ;t?iA M6sul;in'r orth-
ern Iraq but are the underdogs
elsewhere in the country. The
port of Basra, where a mob be-
seiged the army garrison early
in December, remains a hotbed
of radical agitation and of
demands that the PRF be given
arms.
Qasim on 14 January an-
swered this agitation with a
decree which declares that the
PRF functions only under the
command of the army and only in
wartime or specified emergency
conditions. Members must be
in a special uniform,?and carry
documentation when, on duty. The
Communist press in Baghdad has
not printed or referred to this
decree, which most probably is a
result of army-pressure 'on !Qasim.
The newspaper war between
Cairo and Baghdad appears to
have subsided somewhat, although
pro-Communist and UAR-subsidized
papers in Beirut are still vio-
lently assailing each other.
Nasir's internal anti-
Communist campaign reportedly
has : no*1.- ached the :point .
,Where tome of,.;th6se` arrested
in '.the: firdtroufldup b ve been
teleasgd,,because::they' a 'e Uot
regarded as particularly dan-
gerous., Reports from provin-
cial centers, such as Alexandria
and Aleppo, nevertheless continue
to indicate a thoroughgoing:_
sweep which has brought in a
number of leading,Communist
intellectuals as well as party
activists.
In Syria the campaign has
even touched some of Interior
Minister Sarraj's own subordi-
nates, and his passports con-
trol officer and the secretary
general of the Interior Minis-
try, who was responsible for
police and secutity affairs,
have .,:~~bee a~: ;r.emoved,,!,'.fi"om their
posts. The latter official,
known for his Communist sympa-
thiea,: was chief prosecutor
during the so-called "American
conspiracy" trials in 1957.
Sarraj went to Cairo for an
interview with Nasir on 11 Jan-
uary.
Although overshadowed by
the developments in UAR-Iraqi
relations and by the UAR anti-
Communist effort, Cairo's hos-
tility toward pro-Western gov-
ernments in the area appears
unabated. Cairo radio continues
vitriolic attacks on Tunisian
President Bourguiba, promising
that the Arab people will even-
tually deal with him and imply-
ing that he will share the fate
of Nuri Said.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
Cambodian Premier Sihanouk
has been apprised of plotting
by South Vietnam and Thailand
to overthrow his neutralist
regime. Charges of American
involvement have been made by
the Chinese Communist Embassy
in Phnom Penh, which sounded
the initial warning to Sihanouk
of the gathering threat against
him. The French ambassador, who
also discussed the reported plots
with Sihanouk, warned against
the Communist allegations and
urged caution in taking counter-
measures so as to avoid inter-
national repercussions. Rupture
of relations with South Vietnam
seems an immediate prospect.
Sihanouk reportedly is
considering an accord with
Peiping for the stationing of
Chinese Communist troops in
Cambodia to forestall efforts
to unseat him. Sihanouk has
claimed to have received a
standing offer of direct support
for his regime when he visited
Peiping last August. He is
aware, however, that acceptance
of even token Communist mili-
tary aid would jeopardize con-
tinued American assistance,
and would risk alienating the
anti-Communist Cambodian Army.
Unless driven by despera-
tion, Sihanouk will probably
stop short of such measures,
but might enter into some form
of mutual defense pact with
Peiping to intimidate his foes.
He is likely, however, to de-
nounce the plotting against him
as Western-inspired efforts to
draw Cambodia into SEATO, and
will probably portray it as a
threat to destroy the monarchy..
South Vietnam and Thailand
strongly feel that Sihanouk's
accommodation with the Communist
bloc menaces their own security,
and they would like to see him
removed from leadership in Cam-
bodia. Opponents of Sihanouk,
including former Premier Son
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CURRENT INTELLIGENCE WEEKLY SUMMARY.
15 January 1959
Ngoc Thanh and royal councilor
Sam Sary,are meeting increasing-
ly sympathetic response in Bang-
kok and Saigon in their intrigues
against Sihanouk.
In Thailand, there are
growing indications that Mar-
shal Sarit is not exercising
full control over governmental
affairs.
Sarit's juniors in the
ruling military group hesitate
to fill the leadership vacuum,
however, probably fearing that
in one of his occasional mo-
ments of effectiveness Sarit
might suddenly turn on them.
The lesson of Sarit's summary
execution of a number of.sus-
pected Chinese arsonists has
doubtless not been lost on them.
The Laotian National As-
sembly on 14 January granted
Prime Minister Phoui Sanani-
kone full governmental powers
for 12 months to meet what he
terms ,a situation of "national
danger" stemming from internal
subversion and external pres-
sures.from North Vietnam. In
essence, the assembly voted
approval of Phoui's program
and assured him a year to im-
plement it in which he will
be unfettered by assembly pres-
sures. He will also be able
to reorganize his government
as he sees fit. As part of his
program, Phoui will ask the
crown to appoint a commission
to study revision of the con-
stitution, with emphasis pre-
sumably on strengthening the
powers of the executive at the
expense of the legislature.
The conservative Laotian
politicians probably voted the
special powers to Phoui reluc-~.
tantly,with the realization
that the alternative to Phoui
might have been an outright
military coup. Phoui, however,
has sweetened the bitter pill
by promising a number of gov-
ernment sinecures to idled con-
versative deputies. Phoui is
reportedly thinking in terms
of a 12-man cabinet, including
four young reformers from the
Committee for Defense of Na-
tional Interests, two senior
army officers, and six pol-
iticians from conservative ranks.
The considerable jockeying
for position that almost cer-
tainly will accompany selection
of a cabinet could lead to fric-
tion between Phoui and his army
supporters, especially if Phoui
attempts to pack the cabinet
with members of his family.
While three ineffectual members
of the present cabinet will
probably be dropped, there is
a possibility that Defense and
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CURRENT INTELLIGENCE WEEKLY.SUMMARY
15 January 1959
'Interior Minister Katay, who
has not strongly supported es-
sential reforms, may be retained
because of his political
strength in southern Laos.
In gaining his 12-month
respite, Phoui adeptly turned
Hanoi's military pressure to
his advantage when he pointed
to the occupation of Laotian
territory by two companies of
North Vietnamese troops as
justification for his request
for full powers. Laos has not
accepted Foreign Minister Pham
Van Dong's repeated offers to
negotiate; _it has officially
notified the United Nations of
the incident. and requested a
UN observer.
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PART I OF IMMEDIATE INTEREST Page 6 of 6
Laos' Communist-dominated
Neo Lao Hak Zat (NLHZ) party
has been extremely apprehensive
over the prospect of govern-
ment suppression, and many of
its supporters have taken cover
on the North Vietnamese border.
Phoui's repeated. assurances that
the legal status of the NLHZ
would be recognized appears to
have had some effect, since all
NLHZ deputies were present in
Vientiane for the special as-
sembly session and several
NLHZ officials reportedly have
returned from the border area.
NLHZ supporters will be further
heartened by recent Indian moves
that may point to a campaign 25X1
for the reactivation of the
International Control Commission
in Laos.
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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
NOTES AND COMMENTS
MOSCOW SEEKS FURTHER RESTRICTIONS ON JAPANESE FISHING
The adamant attitude of the
Soviet negotiators at the annual
Soviet-Japanese fishery negotia-
tions which opened in Tokyo on
12 January suggests that the
USSR will propose increased re-
strictions on Japanese fishing
next year in the North Pacific
treaty area.
Soviet radiobroadcasts to
Japan during the past three
weeks have charged that exten-
sive depletion of salmon re-
sources has resulted from the
large-scale operations of the
Japanese fishing industry, which 25X6
Moscow alleges "ignored the
terms of the Japanese-Soviet
fishery agreement." The broad-
casts specify in detail the
CONFIDENTIAL
keeer
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
names of fishermen and boats
which Soviet inspectors found
guilty of violations. A 30 De-
cember broadcast, which stated
that uncontrolled fishing was
threatening the Kamchatka king
crab resources, may mean that
the USSR will propose a ban on
this type of fishing--the only
significant Japanese activity
in the Okhotsk Sea.
Moscow hopes to undermine The pattern of previous
the rationale of Japanese court- Soviet tactics has been to ma-
terproposals by presenting an nipulate the annual talks for
array of scientific evidence political benefit
which the chief Soviet delegate
implies must be taken into ac-
count in this year's agreement,
P. A. Moiseyev, acting director
of the All-Union Research In--I F
stitute of Fisheries and Ocea-
nography, heads a Soviet dele-
gation heavily weighted with The,se.at-
experts and officials of the tacks have resulted in widespread
Far Eastern fishing industry. Japanese resentment toward the
The delegation is expected to bloc, however, and have failed
propose that the area restricted to harm Kishi's position.
by the treaty be enlarged and
that drastic cuts be made in
the.catch quotas for various
species.
25X1
the
USSR would settle no
issues"--such as the
"pending
seizures
25X6
of-'Japanese fishing boats in
100
6
U
170 140 16
S S
Yakutsk
0
1 0 160 140
rovideniya
czZzP ALASKA
Cone Novadn
EA
k5~e~ag~
1Jouian ud.
aW
unashiri
V adivostok okkaido
P A C/
F I C 0 C E A N
CHINA
SEA Of
40
JAPAN APAN
KOREA
Q Area prohibited to Japanese salmon fishing as of 1959
\
J
Fishing area open to Japanese only under restrictions
!
defined by Soviet-Japanese fishery treaty of 1956
EAST
^s
a
CHINA
15 JANUARY 1959
SEA
0 NAUTICAL MILES 1000
^0
24887
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
Soviet waters off the Kurils--
until a formal peace treaty is
signed. Soviet officials, how-
ever, may hint that fishing
concessions would be forthcom-
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ming should a Japanese govern-
ment adopt "positive neutrali-
ty" and loosen its ties with
the United States.
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Iwo
CURRENT INTELLIGENCE WEEKLY SUMMARY
15-January 1959
FOOD SHORTAGES IN COMMUNIST CHINA
Shortages of some food
items in major cities and a small
increase in cotton cloth ration
are tarnishing the regime's claim
for huge increases in agricultur-
al output. Although production
of secondary food items--such
as meat, vegetables, fruit, fish,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
and egg products--usually suf-
fers during Peiping's big cam-
paigns, the shortages appear
to be somewhat more severe this
year and could become a major
source of irritation among the
people at a time when the re-
gime is stepping up its de-
mands on their time and energy.
there is a reported shortage of
rice and flour in Peiping;
sweet potatoes have been sub-
stituted to make up the deficit,
but is doubtful that the Chi-
nese will regard them as an
adequate replacement.
Transportation difficul-
ties have added to the problem.
The high priority assigned the
iron and steel campaign has
disrupted the normal flow of
agricultural goods, and there
are numerous accounts of farm
produce being piled up at trans-
portation terminals.
The shortages may be partly
attributable to distribution
shortcomings, and Peiping's eco-
nomic planners would not neces-
sarily feel compelled to in-
crease the consumer's share of
food and textiles in direct pro-
portion to claimed gains.
The food shortages are poor
advertising, however, for the
"leap forward" and the new
commune system. So-called
secondary foods are important
to the Chinese diet, and the
shortages, coming as they do
after months of very hard work
and on the heels of a big prop-
aganda campaign about tremendous
production increases, must be 25X1
exceedingly irritating to the
Chinese.
The recently announced in-
crease of about one third in this
year's cotton cloth ration will
act as a balm to sooth the con-
sumer, but it should be noted
that the measure only restores
cuts made in 1957 and that the
ration now is back to the ap-
proximate level of 1956, when
production of raw cotton was
only 1,500,000 tons. This year's
crop is claimed by the regime
to have reached 3,350,000 tons.
significant production increases
in basic foods, grains, and cot-
ton were probably achieved. De-
spite these successes, imbalances
and shortages, whatever their
causes, have an important im-
pact on the living standard
of the average Chinese.
The Chinese Communists
are reviving the theme of
"learning from the Soviet Union
in building socialism"--a line
not prominently mentioned in
China during most of 1958.This
display of deference to the So-
viet example is another step in
Peiping's modification of its
earlier claims of a rapid ad-
vance toward Communism, and sug-
gests that China will avoid
further public statements imply-
ing its "road" is basically dif-
ferent from the one already
traveled by the USSR. The com-
mune campaign demonstrates, how-
ever, that Peiping to a large
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SECRET
January 1959
degree is still pursuing an in-
dependent course. on the practi-
cal level.
Peiping's wiilingness.to
drop some of its own and reaf-
firm the USSR's doctrinal cri-
teria for "building socialism"
is demonstrated in the party's
18 December resolution on com-
munes. The resolution declares
the communes are a form of col-
lective ownership--therefore a
stage of socialist development--
rather than the complete state
ownership of the ultimate Com-
munist stage, as was implied
by some Chinese commentators
last summer. Thus ownership
in China's countryside is sim-
ilar, in theory at least, to So-
viet rural ownership. The 18
December resolution also ac-
knowledges the correctness of
Soviet doctrine by stressing
that China would be building
socialism for a decade or more
and could begin the "transition
to Communism" only on the basis
of highly developed modern in-
dustry, agriculture, science,
and culture--all prerequisites
recently emphasized by the So-
viet Union.
;led. F`` az _,-,, the top theoreti-
cal journalof the Chinese Com-
munist.party, on 16 December
called for "conscientious study"
of Khrushchev's Seven-Year Plan
and the "brilliant example" of
Soviet experience in building
socialism and Communism. The
article characterized the cur-
rent Soviet program as convinc-
ing proof the USSR is the "core"
of the bloc and of the internal
tional Communist movement. On
5 January People's Daily de-
scribed Chinas ig coal out-
put as a victory attained "after
serious study of advanced So-
viet experience."
These Chinese gestures of
conciliation follow indications
of Soviet displeasure in October
and November. Peiping evidently
feels Soviet good will is too
valuable to be risked for an
ideological position. Chinese
leaders apparently expect Mos-
cow to assert vigorously its
claim to doctrinal pre-eminence
during the forthcoming Soviet
21st party congress. Peiping's
chief delegate to it probably
will find occasion to offer
further remarks on the need for
unity and the value of the So-
viet experience.
Peiping's long-standing
claim that the translation of
Soviet experience to Chinese
conditions constantly requires
new methods of application prob-
ably will continue, however,
with such "creative" activity
attributed to Mao Tse-tung. For-
eign Minister Chen Yi suggested
as much last month when he told
members-of the Peiping diplo-
matic corps that Mao will con-
centrate on ideological and pol-
icy matters, particularly with
respect to underdeveloped areas.
In any doctrinal theses Mao
publishes in the near future
as a result of these studies,
he may avoid insisting his gen-
eralizations were applicable be-
yond China, while permitting
his audience to draw its own
conclusions.
THE NEW SOVIET VOLUNTEER WORKERS' MILITIA
Volunteer workers' militia
detachments are being formed
in the USSR as. civilian auxil-
iaries to the regular police
(militia). This movement, which
began in Leningrad last Novem-
ber, has now spread to Riga,
Rostov-on-Do,n, Yakutsk, and
other localities in the USSR.
Its primary, purpose appears to
be the strengthening of the
SECRET
campaign against drunkards and
hooligans, with whom the mili-
tia apparently has been unable
to cope. Ideological support
had been given to this develop-
ment by describing it as an ex-
ercise in preparation for the
"withering away of the state,"
at which time the functions of
the state will be performed by
the general citizenry.
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15 January 1959
The concept of volunteer
aides to the regular police is
not new in the USSR. Brigades
to assist the militia were
created in the 1930s to supple-
ment the ranks of the police
in providing protection on
special occasions--such as
parades--or in carrying out
special assignments. The chief
of the Leningrad Militia Admin-
istration, describing the new
development, stated that it
would not be the same, however.
He did not elaborate further,
except to say that many details
about the organization of the
volunteer militia were still
unclear:. One difference is
that the new organization is
apparently carrying out regular
patrols rather than awaiting
calls for duty on special oc-
casions.
The Soviet youth organi-
zation Komsomol since the war
has also been called on to
supply brigades to round up
hooligans and drunkards and
generally ride herd on the more
irrepressible.; young people
Articles in the press on Kom-
somol activities, however, re-
veal that the youth organization
has not been altogether success-
ful in carrying out this mission.
The new volunteer militia
detachments, with more stable
and mature personnel, may be
designed to accomplish what the
Komsomols have been unable to
do, Only "the best of the best,
the most authoritative and
proved comrades, are to be en-
rolled in the new detachments.
The members are expected to
influence their friends and
associates through example and
education, thus helping to pre-
vent violations of the law.
Although the original
impetus for the formation of
the detachments came from Len-
ingrad, it appears that Ryazan,
a city about 100 miles south-
east of Moscow, with more than
1,000 volunteers, will be the
first city to have them in
large-scale operation. Tenta-
tive plans call for a detach-
ment of 300 to 500 men, sub-
divided into brigades and groups,
for each rayon in Ryazan.
Guidance will be given the de-
tachments by councils composed
of representatives of the rayon
party committee, the executive
committee, the trade unions,
the Komsomol, and the regular
police.
The detachments, commanded
by persons elected by the mem-
bers themselves, are to pre-
serve order on streets and
streetcars, in stores and clubs,
and to apprehend "anti-social"
elements. The regular police,
however, will retain the primary
responsibility for the inves-
tigation and apprehension of
criminal elements.
The workers' militiamen
will serve in their leisure
hours, without pay, and will
carry arms. Eventually all
will be uniformed or wear badges;
for the present, however, red
armbands will identify them.
Test-Cessation Talks
ccssation agreeni nt,
a,g+ eeir. g to nogoti_v, fit, Lrea Ly
The Soviet delegate to the arrti'c1 Nora,? img with relative-
Geneva on as nuclear test-- ly "noncontroversial points, has
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
not deviated from the basic
position taken on 25 December
by Soviet Foreign Minister
Gromyko--that "invalid condi-
tions" sought by the West were
blocking agreement. Moscow may
believe that ostensible agree-
ment to all points except those
"conditions" would further the
Soviet effort to place on the
West the onus for any stalemate.
Moscow probably hopes to
avoid a breakdown in the nego-
tiations over'this issue, at
least until it has established
a more complete record of its
desire for agreement--in the
form of conference-approved
draft articles on noncontro-
versial issues. The Western
delegations on 13 January re-
jected a Soviet suggestion,
intended to create the false
impression of progress, which
would transfer to a subsequent
portion
of the
treaty those
parts of
a Western-proposed
article
with which Moscow dis-
agreed,
thereby
stripping the
article
of any
real substance.
The
Soviet
delegate on 12
January presented a "compromise""
draft article which would ob-
ligate the parties. to allow an
agreed number of control posts
on their territories and in-
spection, including overflights,
of events suspected of being
nuclear explosions. In list-
ing specific elements of the
control commission to be allowed
in the territories of treaty
members, however, the Soviet
draft omits components in the
Western concept of such a
system with which Moscow takes
exception. Moscow was ap-
parently trying to commit the
SECRET
West to the Soviet version of
the control-commission compo-
sition before the issue is dis-
cussed in detail.
Surprise-Attack Talks
The Soviet call of 10
January to reconvene the tech-
nical conference in Geneva on
measures to prevent surprise
attack is intended to underline
Moscow's claim that the West is
responsible for the stalemate
in the pre-Christmas sessions.
The note charges that, by
rejecting the original Soviet
proposal to reconvene on 5
January, the West had delayed
the search for a mutually
satisfactory solution. Moscow
on 13 January published the
text of the note, probably
believing that its bid to re-
sume negotiations would contrast
favorably with Western insist-
ence that the results of pre-
vious sessions be evaluated
before a specific date is set
for reconvening.
negotiations on this topic.
still does not desire serious
The Soviet Union has not
changed its views on the scope
of these talks. The note re-
affirms its determination to
introduce political considera-
tions and states specifically
that the Soviet "declaration"
on 28 November still applies.
Reaffirmation of this position--
an omnibus plan linking the
surprise-attack problem to So-
viet--conceived disarmament meas-
ures--indicates that Moscow
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CURRENT INTELLIGENCE WEEKLY SUIfl(ARY
15 January 1959
CUBAN COMMUNIST GAINS
The Cuban Communists,
whose party was outlawed by
Batista in 1953, have been
making rapid gains since his
fall and have been exerting a
special effort to influence
the labor movement. Provi-
sional President Urrutia and
the leading members of his
cabinet are anti-Communist
but seem unlikely to take de-
cisive action against the Com-
munists' Popular Socialist
party (PSP). Fidel Castro,
commander of the armed forces
and dominant figure in the new
regime, has declared that the
PSP now will be permitted le-
gal status, "since freedom of
political action is guaranteed
by the constitution." "Che"
Guevara, a leftist colleague
of Castro's who now controls
an army fort in Havana, went
further than his chief and
said he would not oppose Com-
munist participation in the
government.
The PSP, with a member-
ship estimated at 8,000 to
12,000, surfaced immediately
after Batista's fall and suc-
ceeded-in naming five repre-
sentatives to a 22-man "na-
tional labor committee" which
intends to reorganize the po-
litically important labor
movement completely. The party
has opened at least two offices
in Havana and one in Santiago,
has resumed publication of its
daily newspaper Hoy,and held
a public rally inavana on 10
January. Exiled Cuban Commu-
nists, including the dynamic
labor leader Lazaro Pena, have
returned to the island, as
have a number of Venezuelan
and Dominican Communists.
Active opposition to Com-
munism may be developing in
the labor movement, probably
the Communists' main target
and one in which they already
have. formidable assets. David.
Salvador, head of the national
committee for reorganizing the
labor movement, is believed to
be anti-Communist_ He is close
to Fidel Castro
ro-
as ro abor organizers expect
to dominate most unions through
elections planned in each union
in the near future and claim
their objective is to replace
all Communists now holding
union office.
Meanwhile, professional
revolutionaries of all political
views in the Caribbean area are
looking to the new Cuban Gov-
ernment for support in their
aim of ousting area dictator-
ships. "General" Miguel Angel
Ramirez, non-Communist Domin-
ican exile, arrived in Cuba on
5 January. He is chief of the
now inactive Caribbean Legion 25X1
which was involved in revolu-
tionary activity in 1948 and
1949.
BLOC ECONOMIC ACTIVITY IN IRAQ
A Soviet delegation led
by P. A. Maletin, a deputy
chairman of the USSR Council
of Ministers' State Committee
for Foreign Economic Relations,
arrived in Baghdad early this
month to discuss economic and
technical cooperation between
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the two countries. Maletin has
been received by both Premier
Qasim and the Iraqi minister of
finance; in his conversation
with Qasim he discussed Soviet
economic and technical assist-
ance in relation to Baghdad's
plan for economic development.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
Maletin and Qasim report-
edly considered the problems
of developing metallurgical
and machine-building enter-
prises and of establishing
light industrial concerns,fac-
tories for processing agricul-
tural produce, and mineral
fertilizer plants. They also
reportedly discussed possible
Soviet assistance to Iraq in
conducting geological surveys,
remodeling Iraqi ports, and
organizing river navigation
services.
Although there have been
no specific references to So-
viet offers of credits thus
far, it is likely that Moscow
will soon offer financial aid
to Baghdad. The present Iraqi
regime inherited an ambitious
but reasonable economic de-
velopment program from its
predecessor, but Qasim is anx-
ious to promote development
projects--possibly including
a steel mill--which have a more
immediate impact on the popu-
lace than those of the old gov-
ernment.
The projects called for
under the former government's
program were essentially organ-
ized and managed by Western
concerns, but these companies
have recently been discouraged
from implementing their proj-
ects or bidding on new ones.
Thus the door is left open for
offers of technical and prob-
ably financial assistance from
the bloc. The Soviet Union
may offer Iraq technical aid
in searching for oil in areas.
recently relinquished by the
Iraq. Petroleum Company.
Unlike many other under-
developed countries, Iraq has
a steady and abundant earner
of hard currencies in its pri-
mary export--oil, which accounts
for nearly 90 percent of export;
revenues. In 1958 Iraq earned
about $235,000,000 in royalties
from the Western oil companies
operating there. Baghdad is
thus in a position to pay cash
for much of its development
program. It is possible, how-
ever, that revenues and cash
reserves will not be sufficient
to cover expanded economic de-
velopments. In addition, Iraq
must pay for its normal imports
--which reached about $280,000-
000 last year--and the $170,000-
000 Soviet arms aid program.
Since the formation of
the new Iraqi-Government in
July, the Sino-Soviet bloc,
which has made substantial arms
shipments to Baghdad, has also
made a concentrated effort to
develop economic as well as
political relations in order
to underscore its endorsement.
Practically all the members of
the bloc have already concluded
trade agreements with Iraq, and
Bulgaria is presently negotiat-
ing one in Baghdad. Most of
these pacts suggest that the
bloc countries' exports to Iraq
will exceed their imports. In ad-
dition, some of the trade agree-
ments include the bloc countries'
sale of services in the form of
scientific and technical assistance
to Iraq.
usse 1's new policy to- I and, ultimately, establishment of
tihe announced by
2eiwe Minister Eyskens on 13
January, reflects Belgian recog-
nition of the growth of nation-
alism in this African colony.
The policy foresees a period of
accelerated political tutelage
a "democracy capable of deciding
its independence." ' The Belgians,
however, still hope the Congo-
lese will opt for some federa-'.
tive ties with the metropole,
and there is at least some evi-
dence ...that Brussels may see
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
partition as one way of retain-
ing those parts of the Congo
most favorably disposed toward
it.
The new policy, based pri-
marily on the recommendations
of the study group appointed
by Eyskens last summer, calls
for full equality between Bel-
gians and Congolese and for
local council elections this
year by universal male suffrage.
Belgian parties. The Liberals,
who reflect the views of the
large financial interests, ob-
ject to essential features of
the program, and the opposition
Socialists refuse to give it
their unequivocal support be-
cause of insufficient stress on
economic and social reforms.
Despite some early favorable
reaction in the Congo, the Bel-
gian plan will probably be re-
:ceived with skepticism
by most politically
articulate Africans.
Among the permanent
European settlers--
some 20 percent of the
116,000 whites in the
Congo--it may evoke
vociferous opposition
and possibly agitation
for the early exten
sion of some type of
autonomy to "European"
regions in the Eastern
Congo.
African national-
ism in the Congo--
which long seemed im-
mune to the ferment
so noticeable in other
parts of colonial
Africa--first became
apparent in mid-1956
manifestos demanding
political reforms,
then in a spontaneous
race riot in Leopold-
ville in June 1957.
Brussels responded by
finally implementing
Provincial councils are to be
established by March 1960 and
ultimately a colonywide parlia-
ment will be set up. Economi-
cally and socially, the Congolese
will be treated on the same
basis as the Europeans, with
equal access to schools and
other public institutions.
The new policy--a radical
departure from Belgium's past
paternalism--goes not--.have
as yet the full support of all
a long-debated program for con-
trolled municipal elections in
which African district mayors
with circumscribed powers were
selected in three urban centers.
During the past 18 months,
political activity led by Abako,
a tribal cultural movement in-
itially tolerated by Belgium,
has spread within the Congo's
African middle class, which has
been hard hit by an economic re-
cession induced by the sharp
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
break in world copper prices in
1957. Some of the African dis-
trict mayors who have criticized
Belgian policies have become
political symbols.
Earlier this month serious
anti-European rioting, exacer-
bated by hasty police action
against an Abako-sponsored
meeting, again erupted in Leo-
poldville, resulting in casual-
ties officially put at 71 Afri-
can dead and more than 250
Africans and Europeans injured.
In the wake of these disorders
the Belgian authorities arrested
Abako's leaders, including its
president, Joseph Kasavubu, and
finally proscribed the organi-
zation. They have also arrested
two of Leopoldville's African
district mayors who are accused
of coercing seven of their
colleagues into signing a demand
for Kasavubu's release. The
nine African leaders were re-
portedly withholding their co-
operation and threatening to
resign en masse.
Although Leopoldville now
appears outwardly calm, external
forces will continue to stimu-
late Congolese nationalism.
These include the condemnation
of Belgian policy by Moscow,
Cairo, and Accra; the anticolo-
nial blasts which can be expected
from future area conferences
similar to the ones held in
Accra last year; the example of
victorious independence move-
ments elsewhere in Africa; and
the increased Congolese contacts
abroad likely to result from
the new, more liberal Belgian
policy.
NEW FRENCH MOVES ON ALGERIA
Despite General de Gaulle's
public position that a political
solution for Algeria is to be
delayed pending progress toward
economic and social development,
French propaganda and behind-
the-scenes moves appear aimed
at early negotiations with the
rebels. While rebel leaders
remain distrustful of Paris,
settler apprehensions over De
Gaulle's intentions are becoming
more outspoken, and any evidence
that rebel desires for inde-
pendence are actively being dis-
cussed will arouse violent re-
action.
De Gaulle is impelled to
try to ease the drain of the
Algerian war in order not to
jeopardize his austerity pro-
gram. Italian Premier Fanfani
made a quick trip to Paris im-
mediately after returning from
Cairo as an intermediary between
Paris and Egyptian President
Nasir, if not the rebel leaders
themselves. In December, De
Gaulle asked Fanfani to sound
out Nasir on Algeria, and Finance
Minister Pinay made a "flying
trip" to Rome the day before
the Italian premier took off for
Cairo.
A spokesman for the Algerian
provisional government said he
had reason to believe De Gaulle
would follow up the clemency
movement for rebels announced
on 12 January by quietly launch-
ing a new formula for a political
solution. He expects this to
be a call for round-table talks
involving the recently elected
Algerian deputies and Messali
Hadj's Algerian National Move-
ment as well as the Algerian
National Liberation Front. De
Gaulle probably would refuse to
consider the "government's' rep-
resentat iOn . as such, but the
FLN name would not be ob-
jectionable to him.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
Paris probably intended
the clemency measures to be a
show of strength. which would
discourage rebel leaders, but
there is no indication that the
rebels are inclined to abandon
their position on negotiations.
Despite waning military effec-
tiveness, the rebels seem dis-
posed to step up their attacks
--at least in the form of ter-
rorism, which rose sharply last
week after a considerable lull.
They fear French efforts to di-
vide the Moslem factions, but
they maintain that a cease-fire
could be quickly arranged if
Paris seemed tacitly committed
to eventual independence for
Algeria.
De Gaulle's failure to
name Jacques Soustelle premier
and his continued reference to
association rather then inte-
gration of Algeria with France
appear finally to have convinced
extremist elements among the
settlers that De Gaulle is "un-
reliable." Veterans' organiza-
tions in Algeria have criticized
him openly for the first time,
and the settlers have formed a
new political organizatipn,
Movement for French Algeria, in
an effort to regroup the frag-
mented committees of public
safety.
They are certain to
step up
efforts again to win
military
support and to exert
pressure
on both Delegate
General
Delouvrier and Premier
Debre.
BERBER DISSIDENCE IN MOROCCO
Moroccan authorities ap-
pear to have made some progress
--although not as much as they
are claiming--toward re-estab-
lishing order in the
Rif and Middle Atlas
regions of northern
Morocco, where Berber
tribal dissidence
directed against the
dominant Istiglal
party recently as-
sumed serious propor-
tions.
However, signif-
icant numbers of
hard-core dissidents
remain active in the
mountains, where they
appear to be beyond
the reach of the gov-
ernment's security
forces.
For the time
being at least, the
danger of full-scale
January to the insubordinate
elements and a strong display
of military strength. This
display involved redeployment
Po TUG AL S P A I N
MOROCCO
tribal rebellion--which the
Royal Army-would probably be
unable to suppress--appears to
have been averted by King
Mohamed V's ultimatum on 5
GIBRALTAR
and reinforcement of troops
throughout the affected areas,
but especially in the Mediter-
ranean coastal region where
aped Berber partisans, in their
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
most daring show of strength
so far, for five days controlled
the land approaches to the port
of Alhucemas. As of 13 January
the roads leading to this city
were still not considered safe,
despite assurances in the Moroc-
can press that all points of
agitation had been eliminated.
Whatever the government's
gains, they may have been won
at the cost of permanently
alienating at least some of the
important Berber tribes in-
habiting the Rif. Concern, on
this score appears to be re-
flected in numerous statements
by Moroccan authorities--in-
cluding Crown Prince Moulay
Hassan, who personally directed
army operations in the Rif--
minimizing the significance of
the clashes between Berber par-.
tisans and security forces and
insisting that the Royal Army
at no time initiated any
exchange of fire and has been
carrying out more : of an
administrative and educational
than a military mission.
In any event, some dis-
sident elements will almost
certainly continue their re-
sistance, perhaps through guer-
rilla tactics, at least until
Rabat takes measures to allevi-
ate Berber economic distress
and meet Berber demands for a
larger voice in both the cen-
tral and local administrations.
BAGHDAD PACT MINISTERIAL COUNCIL MEETING
The Baghdad Pact Ministe-
rial Council, which is to hold
its semiannual session in Kara-
chi from 26 to 28 January, will
concern itself primarily with
the effects of the Iraqi revolu-
tion last July. Committees will
begin preparatory work on 16
January.
steps which might appear to be
forcing that country to declare
its withdrawal. Most members
agree that the withdrawal of
Iraq, the only Arab member,
would strengthen the organiza-
tion. In October, at the risk
of Iraqi displeasure, the pact's
headquarters was transferred
from Baghdad to Ankara.
Iraq still has not made
clear its official policy toward
the organization. Although the
other members assume that Iraq
has informally left, they con-
tinue to be reluctant to take
SECRET
Steps are being taken to
implement the decision made at
the last session of the council
in London to strengthen the pact
through bilateral defense
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'CURRE INTE,LLIGE?NCE
.. ~.,... _SECRET..., ~...~..
15' January. 1959
agreements between the United
States and Iran, Turkey, and
Pakistan. Strongly worded
counterdrafts, however, have
been proposed by Iran, Turkey,
and Pakistan, and if
the negotiations are
not concluded before
the council convenes,
these proposals could
provoke controversy
at the meeting. The
counterdrafts would
require the United
States to come to the
aid of any of the
countries that might
become the victim of
either direct or in-
direct aggression--
apparently from any
source--and to supply
additional military
Turkey, concerned over its east-
ern flank, probably will strong-
ly support Iran's arguments on
this point.
.ANKARA
and economic aid "to meet the
requirements of the joint de-
fense planning."
Iran'probably will not make
any new proposals at the coun-
cil meeting but can be expected
to bring attention to present
Soviet pressures while making
its perennial plea for addition-
al.American military aid.
UAR
(SYRIA
=Middle East Members
of the Baghdad Pact
In JANUARY 1959
PAKISTAN
Pakistan intends to press
for completion of the Karachi-
Quetta road, a survey for a
microwave communications system
along it, and the locating of
the pact's nuclear center in
Karachi. Pakistan may also 25X1
advocate the establishment of
a pact-command structure similar
to that of NATO.
EFFECTS OF CEYLON'S AGREEMENTS WITH SINO-SOVIET BLOC
Ceylon's contacts with the
Sino-Soviet bloc have expanded
only slowly since the c,onclusiork
of its trade, aid, and cultural
pacts with Peiping and Moscow
in late 1957 and early 1958.
Colombo has lagged in utilizing
the Sino-Soviet economic develop-
ment loans, and efforts to spur'
trade and cultural exchanges have
originated primarily in the
USSR and Communist China.
The Ceylonese Government's
tardiness does not reflect a
significant change in'-its desire
to maintain friendly relations-
with the bloc and to obtain
Communist aid. It is primarily
SECRET
the result of Ceylonese.inex-
perience in economic planning
and the government's preoccupa-
tion with serious domestic prob-
lems. during the past year.
Out of some $60,000,000
in loans and grants which the
bloc has agreed to provide
Ceylon, the government has
allocated some $11,000,000 for
specific projects. A $3,500,000
sugar factory is being'buil+t by
Czechoslovakia, and Ceylon in August
1958 reportedly accepted Peiping's
offer to construct a $3,150,000
textile factory under its $15,-
750,000 five-year aid program.
In December, Colombo decided to
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
buy a $4,200,000 wheat-flour
mill under the USSR's $30,000,-
000 loan.
Colombo's restrictions. on
private trade with Communist
China and the USSR were lifted
about a year ago, although the
government still handles the
substantially reduced rice-
rubber trade with Peiping. The
bloc subsequently intensified
its efforts to attract private
Ceylonese traders. In March the
Chinese Communists held a rel-
atively successful commodity
exhibition with the prime pur-
pose of inducing local importers
to buy Chinese goods. The USSR
may be planning to hold a trade
fair in Colombo within the next
several months. Such efforts
apparently have not yet resulted
in a corresponding increase in
Ceylon's total trade with the
bloc, however.
The Ceylonese-Soviet cul-
tural agreement thus far has
proved a more successful means
of increasing Communist contacts
with Ceylon than have the aid
and trade agreements. Moscow
and Peiping have sent a rela-
tively steady flow of cultural
delegations and materials to the
island. A few Ceylonese groups
and individuals visited tb:: bloc
in 1958, but the number of
Communist invitations and
delegations to the island ex-
ceeded those sent by Ceylon.
The Ceylonese people presum-
ably enjoy such attention, but
bloc overtures have not yet
significantly lessened the
value Ceylon attaches to its
relationships with the Common-
wealth and the free world.
INDIA PREPARING AMBITIOUS THIRD FIVE-YEAR PLAN
"ocent statements by Indian
le .tiers and resolutions passed
at the 6-11 January annual meet-
ing of the Congress party in-
dicate that New Delhi intends
to draft a Third Five-Year Plaa
(1961-66) considerably larger
than the second and to place
increased emphasis on govern-
ment as opposed to private
investment. The government
also plans to step up the pace
of land reform and hopes to in-
duce peasants to undertake
cooperative farming voluntarily.
Prime Minister Nehru appar-
ently believes India must in-
crease the pace of its econom-
ic development program to meet
the challenge of China's "giant.
leap forward" and India's rising
rate of population growth. He
appears to have reached this
decision despite the fact that
the second plan is unlikely to
be fulfilled by more than 80
percent and despite con-
siderable domestic pressure and
foreign advice to concentrate on
consolidating past gains rather
than attempting further rapid
economic expansion.
fical
tu.te- F
the semiof- 25X1
Statistical Insti-
is working on a tentative third25X1
plan calling for the expendi-
ture of $20.79 billion, of which
the public sector would be
$15.12 billion and the private
sector $5.67 billion.
Such a plan would mean an
increase of about 54 percent
over the $13.5 billion that is
likely to be expended during
the second plan period. To
reach the new targets, the
public and private sectors would
have to raise their outlays by
59 and 42 percent respectively
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
over the outlays likely between
1956 and 1961.
A plan of this size is
beyond India's financial capac-
ity,; particularly in view of
the low level of foreign ex-
change reserves and the large
foreign obligations that fall
due during 1961-66. The extent
of the difficulty the country
will face, however, will depend
on whether the plan concentrates
on agricultural development or
calls for sharp increases in in-
dustrial as well as agricultural
production. If, as seems like-
ly, New Delhi decides to follow
the latter course, it will prob-
ably face a foreign exchange gap
of several billion dollars.
While the Ministry of Finance,
which is opposed to such a
large plan, may succeed in cut-
ting its goals somewhat, present
indications are that Nehru in-
tends to increase economic de-
velopment outlays substantially,
counting on Western and Soviet
bloc interest in India to result
fulfill the plan.
FINLAND'S NEW GOVERNMENT
The minority Agrarian
government, finally formed by
V. J. Sukselainen on 13 January
ending the cabinet crisis which
began with the resignation of
the five-party Fagerholm coal-
ition on 4 December, has as its
chief task the normalizing of
trade and political relations
with the USSR--a problem made
more urgent by Finland's growing
economic difficulties. The
Sukselainen government may be
forced to depend on the combined
votes of the Communist-front
Finnish People's Democratic
League (SKDL) and the splinter
Opposition Social Democrats.
The USSR, displeased with
the ',rightist and pro-Western
character" of the previous five-
party government of Karl August
Fagerholm, exerted strong eco_
nanic pressure on Finland by cur-
tailing trade and payments.
This pressure, coupled with the
political maneuvering of the
Agrarians, resulted in Fager-
holm's resignation on 4 December.
As late as 7 January Izvestia
accused "rightist Social Demo-
crats" of trying to divert Fin-
land from the "Paasikivi- Kek-
konen line of friendship with
the USSR" and warned against
seeking Western trade and cre-
dits.
There is no indication as
yet that the suspended trade
payments have been resumed, and
as of 3 January the USSR had
still made no moves regarding
any intergovernmental negoti-
ations, including a trade agree-
ment for 1959. Finnish officials
apparently hope that Moscow will
be reluctant to damage permanent-
ly the image of Finland as a
showpiece of "exemplary" relations
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CURRENT INTELLIGENCE WEEKLY SUMMARY
15 January 1959
between the USSR and a small
neighbor by continuing or in-
creasing pressure.
The new government consists
of nine Agrarian Parliament mem-
bers, five other Agrarians, and
a single member of the Swedish
People's party, Ralf Toerngren,
who holds the Foreign Ministry
portfolio as an individual rath-
er than a party representative.
It must cope with serious domes-
tic economic problems. Unemploy-
ment totaled almost 80,000 on
27 December compared with about
54,000 at the same time last
year.
Commanding only 48 seats
of the 200 in Parliament, the
Agrarians must rely on floating
majorities. In view of the re-
sentment of the regular Social
Democrats and the Conservatives
over the political maneuvering
of the Agrarians, the latter may
come to depend on the combined
63 votes of the SKDL and the Op-
position Social Democrats. The
Communists will be in a good
position to influence the gov-
ernment. In time, the Conser-
vatives and regular Social Demo-
crats can be expected to try to -
overthrow the Agrarian cabinet
in order to force new elections
this summer; at the same time
the Communists will work to
achieve their preference, a 25X1
coalition of the SKDL, the Op-
position Social Democrats, and
the Agrarians.
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CONFIDENTIAL
CURRENT INTELLIGENCE SUMMARY
15 January 1959
PART III
PATTERNS AND PERSPECTIVES
PRESIDENT FRONDIZI'S PROBLEMS IN ARGENTINA
During his seven turbulent
months in office, Argentine
President Frondizi has taken a
number of bold steps to counter
a decade of severe economic de-
terioration and to reduce deep-
seated political animosities,
although aware that over the
short run some of these steps
would feed discontent in most
sectors, according to the in-
terests affected. Frondizi,
who will visit the United States
from 19 January to 1February,
warned that two years of "hard
times and sacrifice" were ahead
for all Argentines when he
initiated on 1 January an aus-
terity and monetary
stabilization pro-
gram which will be
backed by some
$329,000,000 in for-
eign credits, mainly
from the United
States.
Opposition
groups have already
attacked the program,
raising strong
doubts regarding
Frondizi's ability
to carry it out. The
Peronistas, whose
attention is par-
ticularly focused on
the present labor
union elections, have
denounced the plan as "condemn-
ing the nation to the yoke of
foreign capitalism" and a be-
trayal of the promises on
which they backed Frondizi's
election last February.
Economic Problems
Argentina's serious eco-
nomic situation has its roots
in problems which have been
intensifying over the past 10
years: accelerating inflation,
a declining rate of productiv-
ity, a nearly empty treasury,
and a large foreign debt, When
World War II ended, Argentina
had little foreign debt and
$1.6 billion in gold and for-
eign exchange reserves; but by
last December the external
debt had passed a billion dol-
lars and reserves had fallen
to only $148,000,000.
From 1948 to 1957 per cap-
ita gross national product de-
clined nearly 1 percent a year,
since the rise in GNP was only
14 percent, at 1950 prices,
compared with arise of 22 per-
cent in population. During
this period, living costs rose
about 600 percent and in 1958
another 48 percent.
Reduced domestic cap-
ital formation and
negligible foreign
investment prevented
adequate moderniza-
tion or expansion of
capital equipment.
Despite severe import
restrictions, trade
deficits have been
chronic, reaching
$340,000,000 in 1957
and an estimated
$250,000,000 in 1958.
To counteract
this fundamental dis-
equilibrium, Frondizi
laid the groundwork
for his basic stabi-
lization program by taking steps
to resolve a number of problems
affecting Argentina's credit
standing with European countries.
The Frondizi-controlled Congress
also ratified actions in this
field which had already been
taken by the provisional Aram-
buru regime.
Another preparatory step
was Frondizi's oil policy an-
nounced on 24.July calling for
the participation of foreign
companies in the development
of Argentina's oil resources
on a contract basis, The
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r..r
CURRENT INTELLIGENCE SUMMARY
15 January 1959
;,overnment believes this pro-
;;ram will enable it to become
self-sufficient within three
years and to reduce fuel im-
:port costs, which reached
relieved by foreign assistance
for Argentina's stabilization
plan.
ARGENTINA: PER CAPITA GROSS NATIONAL PRODUCT
(1950:100)
97.3 97.2
1 95.4 1
$317,000,000 in 1957.
Contracts for various
activities, includ-
ing services, explo-
ration, and the sup-
ply of equipment, to
tal about $500,000,-
000--half with Amer-
ican companies--and
others are under con
sideration.
ARGENTINA
COST OF LIVING AND MEANS OF PAYMENT
COST
OF
LIVING
(excluding rent)
The Argentine-
Soviet agreement,
proposed by the 1946
USSR on 24 July and
signed in Moscow on 1950
27 October, calls
for the USSR to sup-
ply some $100,000,-
000 worth of petro-
leum equipment at
2.5 percent over a
10-year period. The
agreement was ap-
proved by the Argen-
tine Senate on 10
January. Equipment
already ordered re-
portedly totals only
some $30,000,000,
and there is consid- 1957
erable doubt whether
Argentina will uti-
lize the remainder,
despite the Soviet
a1oc's overtures for increased
trade, Trade with the bloc in
1958 more than doubled the
$45,000,000 of 1957 and seems
likely to rise in 1959. Pres-
sure for bloc trade may be
(1943=100)
Stabilization Plan
The $329,000,000
program of foreign
support announced on
29 December includes
a stand-by arrange-
ment of $75,000,000
with the International
Monetary Fund and ap-
proximately $250,000,-
000 from United
sources
Percent
increase
over
preceding
year
MEANS OF
PAYMENT IN HANDS
OF THE PUBLIC
(1943=100)
Percent
increase
over
preceding
year
149.9
25.1 194.
6
30.8
329.3
27.0 507.
0
25.4
458.5
39.2 615.
0
21.3
645.4
41.8 699
.5
13.7
672.0
4.1 867.
7
24.0
698.3
3.9 1,009
.1
16.3
787.8
12.7 1,186
.9
17.6
902.8
14.6 1,385
.3
16.7
1,132.1
1,561
.1
12.7
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15 JANUARY 1959
25X1
25X1
25X1
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CURRENT INTELLIGENCE SUMMARY
15 January 1959
25X1
somewhat and reduce the appeal
of politically motivated strikes,
the government plans to allow
moderate wage increases and
then to freeze wages for one
or two years.
Argentina's plans for the
program include institution of
a single fluctuating exchange
rate, taxes on both exports and
imports, and the cessation of
trade discrimination against
various trading areas of the
world. Priority attention is
to be given to the reduction
of government deficits--both
federal and provincial--which
have been the principal cause
of inflation. Excess person-
nel are to be released, pro-
cedures streamlined, and sub-
sidies terminated for govern-
ment-owned industries and
services, such as railways and
petroleum. Public works not
immediately aiding economic im-
provement are to be postponed.
By these measures and modest
tax reforms, the government
hopes its 1958-59 deficit will
be less than a third of the
preceding deficit, estimated
at about $800,000,000.
Other measures include
strict credit control and tem-
porary price controls on a few
essential commodities, but
prices for most consumer goods
are rising in seeking their
own level. In view of wide-
spread complaints over these
rises, Frondizi has warned he
will prosecute price gougers;
and, acting independently, a
congressional investigation
committee has closed down a
number of shops for profiteer-
ing. To soften the impact
Within the room for ma-
neuver created by political
pressures, Frondizi has moved
to carry out his campaign
promises, which emphasized
the need for improved living
conditions, economic develop-
ment with foreign investment,
the rule of law, and "national
reconciliation," with amnesty
for all those Peronistas not
charged with serious crimes.
The Peronista attack against
his program is characteristic
of the deep-seated political
divisions within the country
and the widely varying reac-
tions to most of Frondizi's
moves.
These have caused him some
loss of popularity and will
continue to be an inhibiting
factor in carrying out eco-
nomic and political reforms.
The major opposition People's
Radical party, which split
from Frondizi's Intransigent
Radicals before the elections,
is following a policy of oppo-?
sition on all issues and ac-
cuses Frondizi of abandoning
the nationalistic Radical plat-
form he used to fight Peron.
The Communist party, which
urged its 80,000 to 90,000
members to vote for Frondizi,
has also declared its strong
opposition to the government
and has organized neighbor-
hood committees to protest
high living costs.
Frondizi's principal polit-
ical concern at present, how-
ever, is Peronista pressure
through labor, especially in
view of strong wage complaints.
Frondizi apparently considers
it essential to detach Peron-
ista support from Peron if
costly extended strikes are to
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CURRENT INTELLIGENCE SUMMARY
15 January 1959
be avoided. Therefore, last
August he did not veto a new
basic labor law which most ob-
servers believe will help the
Peronistas regain control of
the trade union movement. This
is a source of major political
dissension and concern over
Peronista resurgence.
Despite his amnesty and
labor measures, however, the
Peronistas have increased
strike pressure against Fron-
dizi's policies, and their
protest strike against his
petroleum policies resulted in
the declaration of a state of
siege on 11 November. Possibly
because of dissatisfaction over
living conditions, the Peron-
istas appear to have gained
strength during the past sev-
eral months, although there is
still disunity among Peronista
leaders.
In accordance with Peron's
orders from his exile in the
Dominican Republic, the Peron-
istas will compete in several
provincial elections next March
but under the Justicialista par-
ty label, since the Peronista
party remains outlawed. This
will be the first test of rela-
tive popularity between Fron-
dizi and the Peronista party.
SECRET
While Frondizi and the
military were suspicious of
one another last May, the armed
forces now appear to have be-
come more closely identified
with him--if only temporarily.
This probably stems not only
from their support of him
(luring the confusion result-
ing in Vice President Gomez'
resignation on 18 November but
also from their strong endorse-
ment of his crackdown on Peron-
ista and Communist agitation.
Despite adverse popular reac-
tion, Frondizi will probably
retain the state of siege dur-
ing the initial stages of the
stabilization program.
Frondizi, anticipating
an adverse political reaction,
has warned that he will fight
any obstacle to his program.
Strengthening his stand are
his apparently strong mil-
itary support, his personal
determination, and consider-
able support in informed cir-
cles. If successful, the
program should strengthen Ar-
gentina's trade and friendly
relations with the United
States and have a favorable
Impact on its relations with
other Latin American coun-
tries and Europe.
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..O, SECRET W
CURRENT INTE'LLI`GENCE WEEKLY SUMMARY
15 January 1959
Renewed discussion about
the present and future role of
the collective farm has been
provoked in the USSR by attempts
to provide a theoretical "basis"
for the abolition last spring
of the machine tractor stations
which, with the state farms,
were long considered the ad-
vanced posts of Communism in
the Soviet countryside. The ex-
position of Soviet thinking on
the subject has gone on against
the background of developments
in Communist China, where the
commune has been represented as
an advance over the collective
farm.
Chinese theorists, in the
first flush of enthusiasm, had
described the commune as a'large.
step toward the traditional. Marx-
ist goals of eliminating the dis-
tinction between the peasant and
the urpan worker and of provid-
ing "distribution according to
need." Moscow has continued to
maintain, however, that full com-
munization must await the achieve-
ment of material abundance.
The Kremlin's policy in the
countryside calls for the "con-
so;idation" of the collective-
fa'm system rather than its
elimination and for the eventual.
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CURRENT INTELLIGENCE SUMMARY
15 January 1959
transformation of rural life
through evolutionary policies
larded with material incentives
rather than through violent
changes in organization such as
the Chinese have employed. Al-
though Moscow's policy toward
the vestiges of private property
in the collective farm--the
private plot and privately owned
livestock--remains cautious, it
is clearly anticipated that the
expansion of production and
peasant incomes from the com-
munal sector will gradually
erode the private holdings.
Economic goals--primarily
increased production but also
the reduction of costs and the
transfer of labor to the facto-
ries--will continue to have pri-
macy over purely ideological
objectives in Soviet agricultur-
al policy. It is also clear
that the Soviet Union, recalling
earlier unsuccessful experiments
of its own, views the Chinese
commune as a utopian venture.
At the same time, Moscow
insists that its own agricultur-
al reforms are ideologically
progressive. There is little
doubt that these reforms, no
less than the Chinese policies,
are intended to secure fuller
state control over peasant ac-
tivity and output and to trans-
form the collective farm grad-
ually into a "higher form of
socialist organization"--an or-
ganization which functions very
much like a state farm or fac-
tory.
Theoretical Argument
The ending of forced de-
liveries from the peasant's
private plot on 1 January 1958,
the transfer of machinery to
individual collectives under
the MTS reorganization enacted
last spring, and changes in the
system of agricultural procure-
ment introduced by the June
plenum of the central committee
evidently came as a shock to a
good number of theorists steeped
in orthodox Marxism-Leninism.
On the surface, each of
these measures represented con-
cessions to the collective farmer
and ran counter to the direction
anticipated by many Soviet the-
orists. Some theorists had
supposed, for example, that the
MTS would eventually absorb the
collective farm, rather than
the reverse; others had fore-
seen the direct conversion of
the cooperatively based collec-
tives into fully state-owned
farms. In doctrinaire terms,
the MTS reorganization meant
the transfer of "means of pro-
duction" from state to coopera-
tive ownership.
Khrushchev, in his MTS
theses issued last February,
conceded that "some comrades,
chiefly economists, expressed
their anxiety lest the sale of
technical equipment to collec-
tive farms should cause a weak-
ening in national public owner-
ship. The problem was also
raised as to which form of so-
cialist agriculture is the more
progressive--collective farms
or state farms?... Some com-
rades suggested that perhaps
one should transfer collective
farms to the state-farm system.
Khrushchev asserted in re-
buttal that between ' the collective
and state ;farm there _were
differences of degree but not
of kind; although the state farm
is a "higher"-form, both are
genuinely socialist forms. There-
fore, he stated, the correct
course is to "raise gradually
the level of socialization of
collective-farm ownership and
bring it up to the level of na-
tional ownership. This can be
done only through a further
thorough consolidation and de-
velopment of both state- and
collective-farm ownerships."
Elaborated in various ways by
lesser spokesmen, Khrushchev's
remarks appear to provide not
only the theoretical rationali-
zation for current agricultural
organization but some indication
of its future development as
well.
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Mw" SECRET '.r-'
CURRENT INTELLIGENCE SUMKAR'Y
15 January 1959
State vs. Collective Farms
The number of state farms
and the total size of their
holdings have been substantial-
ly increased by the development
of the "new lands." The pro-
portion of state farms has also
risen in other areas, where in-
stances of the conversion of
collectives into state farms
continue to occur. Moreover,
the regime has recently decreed
that networks of vegetable- and
fruit-producing state farms are
to be set up to supply the USSR's
major cities. Their operation
will inevitably strike directly
at the private plot, from which
hitherto these commodities prin-
cipally came.
Whatever the cumulative
effect of these developments
might be, however, regime spokes -
men emphatically insist that
the future of the collectives
will be determined not by their
wholesale conversion into state
farms, but by changes in the
internal and external structure
of the collective, which will
eventually render it essentially
identical with the state farm.
The regime's organizational
objective with regard to the
collectives is to strengthen the
communal sector at the expense
of the private, primarily through
envelopment tactics and economic
devices calculated to render
private undertakings progres-
sively less attractive. The in-
creased material incentives
which Khrushchev frequently men-
tions refer primarily to com-
munal activity rather than to
private, and the "strengthening"
of collective-farm economy is
to come from the expansion of
communally owned capital stock.
Expansion of capital in-
vestment in the communal economy
is to be effected by increasing
the share of collective-farm in-
come devoted to the "indivisible
fund"--that part of the collec-
tive farm's resources not sub-
ject to distribution among its
members. It is these funds,
regarded as socially owned prop-
erty, to which all newly pur-
chased machinery will belong,
and it is on their growth that
the party theoreticians now
rest their claims that the col-
lective farm contains authentic
seeds of a future Communist
form.
Through the enlargement
of these funds, the ideologists
argue, the collective farm can
be transformed into a form of
public property. Khrushchev
made this point in his MTS
theses, arguing that the improve-
ment of agriculture meant "first
of all the strengthening of col-
lective-farm ownership, the con-
solidation of the indivisible
funds.... The greater the in-
divisible funds, the more ma-
chinery there will be on the
collective farms, the better
the work will be mechanized,
the higher labor productivity
will be, and the quicker the
collective economy will develop.
The work of the collective farms,
based on a broad application of
modern machinery, will approach
in its characteristics the work
of industrial workers."
The regime has not confined
itself to exhortation in this
connection. In March 1956 the
Collective Farm Statutes were
amended to "allow" individual
collective farms to establish
their own limits for additions
to the indivisible funds, pre-
viously set at a minimum of 10
percent and a maximum of 20 per-
cent of their annual incomes.
The press subsequently reported
instances in-whidh collective
farm general meetings had "de-
cided" to increase allocations
to the indivisible fund to any-
where from 25 to 30 percent.
At the March 1958 session
of the USSR Supreme Soviet, Khru-
shchev signaled a further step,
Collective farms should aim, he
said, to put 30 or 35 percent
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CURRENT INTELLIGENCE SUMMARY
15 January 1959
of their incomes into the fund.
}le recommended that such a;change
in the Collective Farm Statutes
be adopted at the Collective
Farm Congress to be held early
this year.
Waning of Labor-Day System
The regime is testing other
measures designed to strengthen
the purely communal sector of
the economy and to effect that
which, in Soviet parlance, is
called the transition from the
kolkhoz-cooperative property,
stage to the higher form of na-
tional property.
One of the most widely dis-
cussed and fully tested of these
measures relates to the labor-
day system, under which collec-
tive farmers are paid annually
in both money and kind on the
basis of accumulated work-day
units. Various schemes for mod-
ifying or abolishing this sys-
tem are already in use in se-
lected collective farms. A de-
cree of March 1956 authorized
advance monthly cash payments
for work-day units earned.
One collective farm, wide-
ly publicized recently as a suc-
cessful pilot model, has re-
placed the labor-day system al-
together with a piece-rate sys-
tem and monthly payment in cash.
In this collective the payment-
in-kind has been abolished: peas -.
ants have traditionally used
this type of payment to trade
on the collective-farm market
or to feed their private live-
stock.
Under 'the new system the
difference between collective
farmers and state-farm workers
is considerably reduced. One
aim of the wage system is to
show the collective farmers
"graphically the direct connec-
tion between the level of pay-
ment for their labor and the
communal economy," and through
such a form of "material incen-
tives" to wean the peasant away
from his private holdings. A
second objective is to facili-
tate the introduction into the
collective farm of cost-account-
ing, which, by permitting a cal-
culation of production costs,
would result in more effective
state and managerial control..
The economic limitations
of many collective farms may
prevent the immediate, universal
introduction of a wage system.
Authoritative spokesmen, includ-
ing Khrushchev, have made it
clear, however, that the labor-.
day system must go. Although
the regime has not indicated
how and when it will act, formal
measures to hasten the conver-
sion apparently are imminent.
One party official has indicated
that the question will be raised
at the 21st party congress later
this month.
Amalgamations
Along with these attempts
to alter the inner structure of
the collective farms, the re-
gime is continuing along an
older line aimed at changing
its character from without. The
amalgamation of collectives is
still going on at a rapid pace.
Figures given by Khrushchev to
the December plenum of the cen-
tral committee indicate that
the number of collective farms
was reduced by 10,000 during
1958--the result mainly of amal-
gamations, presumably.
Reconstruction of farm vil-
lages as a means of "bringing
the daily life of the collective
farmers closer to the conditions
of city life" has also recently
received renewed emphasis. It
has been strongly urged as..a prof -
~table way of spending the col-
lective farm'. increased com-
munal funds and is being carried
out in various areas. An August
1958 article in Izvestia on this
theme quoted from one of Khru-
shchev's 1951 speeches devoted
to'.the controversial "agro-city"
scheme, which would consolidate
rural villages into larger units
resembling urban centers. There
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CURRENT INTELLIGENCE SUMMARY
15 January 1959
was no specific reference to
the "agro-city," which is not
likely to be revived in all its
features at this time, but it
seems likely that Khrushchev en-
visions substantial changes in
the physical layout of villages
and improvement in rural housing
over a period of time through
careful planning of new :con-
struction with collective farms'
funds and labor forces.
A newer but complementary
approach to the goal of tying
individual collective farms
closer to one another and of in-
creasing the peasant's depend-
ence on communal undertakings
is contained in an effort, now
gaining momentum, to expand the
scale of interkolkhoz coopera-
tion. As with the indivisible
fund, projects of this kind--
which include the erection of
interkolkhoz power stations, ir-
rigation canals, schools, hos-
pitals, restaurants, and bak-
eries--are officially portrayed
as an expression of the transi-
tion of the collective farm into
a higher form.
Khrushchev has called for
an extension of such ihtorkolkhoz
links. Some writers, carrying
the idea a significant step fur-
ther, have proposed;. the,:,estab-
lishment of collective-farm-un-
ions with authority to coordi-
nate the production and distri-
bution activities of member col-
lectives and to invest some of
the profits of the efficient
farms into the backward collec-
tives.
The peasant's private hold-
ings of land and livestock are
regarded as the chief mark of
distinction between the collec-
tive farm and more "advanced"
forms of organization. Because
of the important share of farm
output derived from this source
and the peasants' stubborn at-
tachment to it, however, the
private plot remains one of the
most delicate political and eco-
nomic problems facing the re-
gime.
The decree issued by the
December plenum of the central
committee ruled that the state-
farm workers must surrender their
private holdings within the next
few years; in speaking of the
much larger holdings of the col-
lective farmers, however, the
order merely expressed confidence
that these farmers would even-
tually see the economic wisdom
of surrendering their holdings
voluntarily.
Khrushchev's native village
of Kalinovka has been made a
test case in this respect. There
the collective farm has pledged
to move toward abandonment of
the private plot, and the peas-
ants have already turned their
cows over to the communal herd
in return for guaranteed deliv-
eries of milk from the farm for
their own consumption. Although
this practice has been heavily
encouraged"?by the Soviet press,
the regime's hesitancy to push
too hard is evident from a Feb-
ruary .1958 decree of the Ukrai-
nian central committee condemn-
ing officials "who, under the
guise of purchases, have forced
collective farmers to give. their
cows to the collective, thereby
grossly violating the statutes
of the agricultural artel and
the laws of the Soviet state?"
Regime's General Objectives
The collective farm, long
the outstanding exception to
the Marxist rule of full state
ownership of the means of pro-
duction, has been a persistent
problem for the Soviet theoreti-
cians and the most pragmatic of
policy makers alike. From all
appearances, the present party
leadership is more concerned
with meeting the difficult ag-
ricultural goals it has set it-
self than in serving pure theo-
ry. However, since from both
a practical and theoretical
point of view the collective
farm is regarded as an imperfect
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1we SECRET
CURRENT INTELLIGENCE SUMMARY
15 January 1959
and transitory form which even-
tually must disappear, recent
steps aimed at increasing agri-
cultural output also serve as
new chapters in the book of
"creative Marxism."
The Soviet regime, despite
its evident disapproval of the
Chinese communes on the grounds
of timing and method, has staked
out a course the final aim of
which is, similarly, the elimi-
nation of the "differences be-
tween town and country," which
means the conversion of the
peasant to a political, econom-
ic, and social status identi-
cal with that of the
worker.
25X1
THE STATUS OF SOVIET INDUSTRIAL REORGANIZATION
Further steps in Khrush-
chev's evolutionary reshaping
of Soviet economic institu-
tions may be revealed in con-
nection with the forthcoming
21st party congress which is
convening this month to launch
the new Seven-Year Plan (1959-
1965). Measures affecting So-
viet industry which might be
taken include a redefinition
of administrative regions,
clearer assignments of respon-
sibility and authority to re-
public and regional organs for
deciding investment alloca-
tions, and the re-establish-
ment of a Supreme Economic
Council.
Action in these fields
would be consistent with the
trends, persistent problems,
unresolved questions, and pol-
icy tenets noted in the first
18 months since the inaugura-
tion of the industrial reor-
ganization. Although realign-
ment of relationships within
the chain of command between
the controlling center and
the producing enterprise will
continue, there is no indica-
tion that the system of direct-
ing the economy by command is
to be altered.
Despite the industrial
reorganization's present pop-
ularity among Soviet adminis-
trators a sober appraisal of
its success to date must await
the release of more detailed
performance data than that
usually contained in annual
reports of plan fulfillment.
Reorganization Proposals
Khrushchev's program was
first proposed in February
1957, when the continued high
rates of economic growth neces-
sary to catch up swiftly with
the United States were deemed
in jeopardy. The program
sought to promote industrial
expansion both by increasing
efficiency of the administra-
tion of production and by ex-
ploiting hitherto untapped re-
sources. Coming hard on the
heels of Pervukhin's modest
draft for the 1957 economic
plan and of the Hungarian cri-
sis, there were clear political
overtones in the prososals
whereby Khrushchev personally
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CURRENT INTELLIGENCE SUMMARY
15 January 1959
14-25 Feb Twentieth party congress; ratifies Sixth Five-Year Plan.
23 Oct Hungarian uprising.
20-24 Dec Party central committee plenum; names Pervukhin and
"blue-ribbon" group to draft 1957 economic plan and re-
view 1960 goals of Sixth Five-Year Plan.
5-12 Feb USSR Supreme Soviet session; ratifies 1957 economic plan
and budget calling for relatively modest growth.
13-14 Feb Party central committee plenum; hears Khrushchev re-
port proposing administrative reorganization of industry
and construction.
30 Mar Publication of Khrushchev's "Theses" detailing his pro-
posals for reorganization.
Apr "Popular discussion" in mass media of Khrushchev's
scheme as well as "more than 514,000 meetings. "
8-11 May USSR Supreme Soviet session; ratifies reorganization
plan with only minor alterations.
22-29 June Party central committee plenum; ouster of so-called
"antiparty group" (announced 4 July).
1 July Operations begin formally under. territorial system of
administrative linkage involving new councils of national
economy (sovnarkhozy).
29 Aug Announcement of abolition of USSR Ministry of State Con-
trol and establishment of Commission of Soviet Control
of USSR Council of Ministers.
26 Sept Announcement of intention to supplant Sixth Five-Year
Plan with a Seven-Year Plan (1959-65) to be drafted by
1 July 1958.
15 Dec Announcement of abolition of USSR Ministries of Aviation
Industry, Defense Industry, Radiotechnical Industry, and
Shipbuilding, and of establishment of new state committees
in these fields.
19-21 Dec USSR Supreme Soviet session; ratifies 1958 economic
plan and budget.
seized the leadership initia-
tive; at the very least his
March "theses" on the proposal
strongly reaffirmed the party"s
deciding role in Soviet eco-
nomic affairs.
It was proposed that in-
dustrial ministries in Moscow
be replaced by a web of region-
al councils of national economy
;(sovnarkhozy), so that the "cen-
ter of gravity of operational
administration" could be shift-
ed closer to production activ-
ities to facilitate timely and
relevant decisions on day-to-
day economic questions.
The proposal added that
the central planning apparatus
25 Jan Khrushchev asserts success for industrial reorganization
and proposes abolition of most machine-tractor stations
along with revamping of procurement system.
27 Jan Central Statistical Administration report claims 1957plan
fulfillment "at a much higher level" than before reorgani-
zation.
27 Mar Khrushchev assumes chairmanship of USSR Council of Min-
isters--i. e., premiership--retaining post as party first
secretary.
19 May Announcement of revamping of material supply system and
of 24 April decree setting personal financial and criminal
sanctions for officials responsible for repeated failures to
deliver goods according to plan.
10 June Announcement of abolition of USSR Ministry of the Chemi-
cal Industry and of establishment of a State Committee on
Chemistry of USSR Council of Ministers.
3 Aug USSR Transport Minister Beshchev reports that "for the
first time in many years" the average length of haul was
below plan, crediting this to the reorganization.
14 Nov Publication (some 4 months late) of draft Seven-Year Plan
intended to be ratified by the 21st party congress conven-
ing 27 January 1959.
27 Nov Announcement of abolition of USSR Ministries of Trade and
Agricultural Procurement and establishment of new state
committee in the latter field.
2 Dec Academician Strumilin proposes greater local coordination
between agriculture and industry.
3 Jan Announcement of abolition of USSR Ministry of Electric
Power Stations and establishment of new USSR Ministry of
Electric Power Station Construction, 25X1
15 JANUARY 1959
should be simplified, that the
union republics and their gos-
plans should play a greater
role in economic affairs, and
that the "initiative" of work-
ers and administrators should
be "enlisted" in the drive to
improve the efficiency of in-
dustrial production. It was
also proposed that the author-
ity and responsibility of local
organs fot.:detailed industrial
sispply- activities . be expanded.
By his emphasis on "demo-
cratic centralism,." however,
Khrushchev served notice that
he did not question the funda-
mental tenets of what has been
called the "command economy"--
planned operation and central
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 control in support of regime-
determined goals, such as
"catching up with the United
States." These limits were
clearly implied by the extent
of the so-called "popular dis-
cussion" which the proposals
engendered as a technique of
mobilizing the mass support es-
sential to their success.
CURRENT INTELLIGENCE SUMMARY
15 January 1959
The USSR Supreme Soviet
passed Khrushchev's program in
May 1957 with only minor modi-;
fications. The chain of com-
mand through technically spe-
cialized ministries between the
controlling "center" and the
BEFORE MID-1957
LINKAGE THROUGH MINISTRIES
TECHNICALLY SPECIALIZED
THE CENTER"
(CONTROL)
15 UNION -
REPUBLICS
USSR
COUNCIL
OF
MINISTERS
All-Union
Economic
Ministries
Chief
Directorates
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SECRET
Union-Republic
Economic
Ministries
Chir
Directorates
Republic
Councils of
Ministers
Union-Republic
Economic
Ministries
"THE PERIPHERY"
PRODUCTION)
USSR '
Planning
Staffs
Republic
Economic
Ministries
----------
Combines, Trusts
i 1
USSR Gosplan thus became
the most important Soviet eco-
nomic~ organ. It was charged
with long-term and current
planning, with operational mon-
itoring of the course of plan
fulfillment, and with control-
ling flows of materials within
the economy. In addition,
technical industrial research
and design organs of economy-
wide signficance were subordi-
nated to USSR Gosplan.
Control vs. Initiative
The success of the:, - system .
depends largely on the Soviet
CENTRAL
COMMITTEE
-Rayon Committees J
producing enterprises was re-
placed by a new linkage along
territorial lines. This in-
volved the union republic gov-
ernments and, through them,
over 100 sovnarkhozy, which be-
came responsible for administer-
ing enterprises within their
areas. At the same time, cen-
tral planning functions were
consolidated into USSR Gosplan
from the )-number c;of ?'~:torgans
which had functioned at the
center under the ministerial
structure.
Primary
Party Organs
ability to preserve effective
central control while at the
same time providing an envi :o'n-
ment favorable to the develop-
ment of personal initiative--
so important in the drive to
improve efficiency and mobilize
unutilized resources. Besides
being strengthened by the in-
crease in USSR Gosplan's role,
central control was augmented
by increased party participa-
tion in economic matters at all
levels. This increased partic-
ipation-stems from the fact that
SECRET
AFTER MID-1957
LINKAGE THROUGH SOVNARKHOZY
GENERALIZED, TERRITORIAL
Remaining
USSR Economic
Ministries
Republic
Economic
Ministries
USSR
COUNCIL
OF
MINISTERS
State
Committees
Republic
Councils of
Ministers
Councils of National Economy
(Sovnarkhozy)
i Combines, Trusts
Producing
Enterprises
PART III PATTERNS AND PERSPECTIVES Page 15 of 19
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ii'mor moo,
SECRET . .
the new territorial adminis-
trative linkage parallels the
territorial linkages of the
party structure.
15 January 1959
Local party organs were
charged with monitoring local
economic operations, and eco-
nomic officials could no longer
effectively counter their inter-
vention by direct recourse
through ministerial channels
to Moscow. Financial and sta
tistical controls were revamped
to conform to the new structure;
statistical offices with their
own channels with Moscow were
established in each economic ad-
ministrative area to provide
the center with independent
statistical information, as
well as to provide statistical
support to the sovnarkhozy.
Adaptations in the Gosbank
structure were made to facili-
tate close control of financial
flows. Campaigns in mass media
USSR COUNCIL OF MINISTERS
L
r USSR GOSPLAN
------------------
COUNCIL
I
Ferrous Metallurgy
Nonferrous Metallurgy
Coal, Peat, and Shale Industry
Petroleum and Gas Industry
Electrification
Timber, Paper, and Woodwork-
ing Industry
Construction Materials Industry
Heavy Machine Building
Machine Building
Electrotechnical and Instrument
Industry
Automobiles, Tractors, and Agri-
cultural Machine Building
First Division*
Second Division*
Light Industry
Food Industry
Transport and Communications
Construction Industry
Culture and Health
Geology
Defense Industry
Chemical Industry
Agriculture, State Farms, and
Procurements
Fish Industry**
CURRENT INTELLIGENCE SUMMARY
Aggregative Long-Range Planning
and Planning for Union Republic
Development
Aggregative Current National
Economic Planning and Republic
Problems
Material Balances and Aggregate
Planning for Distribution
Labor and Wages
Finance
Trade Turnover
Capital Investment
Foreign Economic Relations
Prices and Costs
Council of Technical-Economic
Expertise
exhorted the populace to be vigi-
lant against actions contrary
to "general state interests."
On the other hand, in order
to promote initiative, republic
and regional economic organs were
assigned many responsibilities
and functions formerly handled
by Moscow ministries and chief
directorates. Republic gosplans
were expanded in scope. Author-
ity for many routine matters was
delegated to sovnarkhoz officials
'ton the spot"--but always with
stress on their expanded respon-
sibility. There was a new em-
phasis on suggestions from work-
ers and administrators of all
levels. Drafts of economic plans
were initiated at the operating
level, to be passed upward for
reconciliation with nationwide
state and party requirements and
then to be transmitted down in
the form of directives. Local
initiative was encouraged in
I in Aduintstrattons or
Interrepubl tcan Sup,22
Complex Equipment**
Coal
Petroleum Products
Timber and Paper**
Construction Materials
Raw Materials for Light and Food
Industries
Machine Building Industry
Electrotechnical Industry
Chemicals**
Metallurgy
Consumer Goods
'Functions not specified.
*'Present status not confirmed.
SECRET
Scientific Research and Design
Institutes of General Signifi-
cance
Higher Economics Curricula
Publishing House for Planning and
Economic Literature
Editorial Board of Planned Economy
PART III PATTERNS AND PERSPECTIVES Page 16 of 19
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Noel
SECRET
ORGANIZATION OF A TYPICAL SOVNARKHOZ, 1958
FUNCTIONAL STAFFS
CHEMICAL
INDUSTRY
FINANCE
MACHINE-
BUILDING
INDUSTRY
MATERIAL-
TECHNICAL
SUPPLY
BRANCH ADMINISTRATIONS
I
METALLURGICAL
INDUSTRY
LIGHT
INDUSTRY
CAPITAL
CONSTRUCT'N
CONSTRUCTION
INDUSTRY
ENTERPRISES AND CONSTRUCTION SITES
matters relating to "how" the
centrally determined tasks were
to be met.
Almost simultaneously with
the initiation of the new sys-
tem, opposition to it and to
Khrushchev erupted within the
top leadership among the so-
called "antiparty group" which,
with an assist from a hastily
called central committee plenum,
Khrushchev promptly ousted.
Khrushchev's personal role in
promoting the reorganization
scheme thus was emphasized.
Initial Policies
The need for avoiding dis-
rupt ion in production operations
was the key to policy during
the initial phases of the re-
organization. The shift took
place in the middle of the plan
year, thus permitting enter-
prise operations to continue
while adjustments were being
made and providing the altered
planning organs a breathing
spell in which to get under way
To avoid disruption of essen-
tial flows of industrial sup-
plies during this period' ei.st-
ing supply relations were
temporarily .'frozen.. and-..,the
sales and supply organs of the
industrial ministries tempo-
rarily consolidated under USSR
Gosplan. This policy of "busi-
ness as usual during altera-
LABOR
AND
WAGES
COUNCIL
OF
NATIONAL ECONOMY
(SOVNARKHOZ)
Top a@ppOistmeats ` ia; . ,the
new sovnarkhozy and the expanded
republic gosplans,were given to
former officials of the abolished
ministries in Moscow and to
local officials. Partly because
of the reluctance of Moscow
bureaucrats ',to. , move 'toy: the
hinterland9 many minor regional
slots had to be filled locally
Generally speaking, the
transition to the new form of
administration was accomplished
with little loss of m.oinenat?nin,
Even before this was confirmed
by the. plan fulfillment rye
at the end of 1957, a seas ,r e
of initial success was su4gpi-:yt.ed
by new steps in the reorganiza-
tion process, severe. lof' the
tained ministries ve.re abolished
--Defense Industry, Sh ipbuildi .g,
Aviation, Industry;.
Industry--and their technics l;a:ad
developmental `unct a s.:Wt~e e