CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A003300070001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 46
• Document Creation Date: December 21, 2016
• Document Release Date: November 4, 2008
• Sequence Number: 1
• Publication Date: August 31, 1961
• Content Type: SUMMARY

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CONFIDENTIAL
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
ARMY and DIA
review(s) completed.
COPY NO.
OCI NO. 0295/61
31 August 1961
State Dept. review
completed
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT
INTELLIGENCE
DOCUMENT 110.
NO CHARGE IN CLASS. ^
^ DECLASSIFIED
CLASS. CEs~IaGLD TO: TS S , CCCtO
NEXT RLVIl E9i DATE:
AUTH: FIR 70-2
DATE: C DI ~ ~
25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
31 August 1961
T H E W E E K I N B R I E F
EAST-WEST RELATIONS . . , . , . . . . . . . . . . . .
Page 1
The Soviet Government's announcement on 30 August of
its decision to resume nuclear weapons tests reflects Khru-
shchev's extreme concern that the prospects for extracting
Western concessions on Berlin have diminished, especially since
the closure of the Berlin sector border. The Soviet lead-
ers appear to recognize that the') drastic measures to halt
the refugee flow have heavily damaged their efforts to pre-
sent the East German regime as a sovereign and respectable
negotiating partner and that Khrushchev's objective of
winning Western acceptance of a Berlin settlement implying
de facto recognition of East Germany has been seriously
jeopardized. In this situation, Khrushchev has resorted
to nuclear intimidation in an effort to weaken the ability
of the Western governments to resist Soviet demands. He
probably also feels this announcement will place the bloc
in the strongest possible position to carry out the long-
threatened unilateral action to sign a separate peace
treaty with East Germany in the event negotiations fail or
do not take place;
East German spokesmen now are denying that Western ci-
vilian airlines have the legal right to use the Berlin air
corridors--the only remaining civilian access routes not
under East German control. Ulbricht declared on 25 August
that his regime is abiding by the terms of the notes ex-
changed by the USSR and ?East Germany on 20 September 1955,
calling for the USSR to retain control over Western mili-
tary access to and presence in the city. On 29 August, how-
ever, Deputy Foreign Minister Winzer reiterated, in the
strongest terms used to date by a bloc spokesman, the Soviet
position that use of the corridors by Western civilian air-
craft has no basis in quadripartite agreements relating to
Berlin and that their use is exclusively for Western garri-
sons.
US Mission officials'in Berlin maintain that West Ber-
liners regard unrestricted air access as an essential
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CURRENT INTELLIGENCE WEEKLY SUMMARY
31 August 1961
element of their freedom and that subjecting air access to
any kind of Communist control might set off an exodus from
the city.
BRAZIL . . . ?
. . Page 8
The sudden resignation of Janio Quadros from the Bra-
zilian presidency on 25 August precipitated a constitutional
crisis because of the adamant opposition of War Minister
Denys and other military leaders to the assumption of Qua-
dros' power by leftist Vice President Goulart. Goulart's
right to succession has been supported on constitutional
grounds by most political leaders and a minority of the
military, particularly ex-War Minister Lott and the command-
er~ of the powerful Third Army in southern Brazil. On 31
August congress overwhelmingly passed a resolution to amend
the constitution, transforming the presidency into a figure-
head office in a parliamentary form of government with a
prime minister appointed by congress. No party in congress
has a majority, and the premiership might go to such a leader
as ex-President Kubitschek of the Social Democratic party
or Governor Carvalho Pinto of the National Democratic Union.
CONGO . o a . . . . . a . . . . . a ? a . ? . ? ? . a ? ?
UN troops have taken action to detain for repatriation
approximately 500 white officers of Katanga's armed forces.
Although they were largely successful in this immediate ob-
jective, Tshombd continues to resist UN pressure to rein-
tegrate his province with the Congo and has stated that he
will not negotiate with Premier Adoula under duress,' In
Stanleyville, Gizenga has continued to delay going to
Leopoldville to take up his vice premiership. The man-
handling of the US consul in Stanleyville and his subse-
quent ouster on 29 August appear, to have increased Unrest
in Gizenga's stronghold.
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Page 11
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CURRENT INTELLIGENCE WEEKLY SUMMARY
31 August 1961
B IZERTE . . . . . . . . . . . . . . . . . . . . . . . .
Tunisia does not plan to reopen the Bizerte problem
Page 12
at the regular UN General Assembly, but the Afro-Asian bloc
may press for another airing. French refusal to partici-
pate in the special UN proceedings has drawn some criticism
from conservative as well as liberal circles in Paris.
FRANCE-ALGERIA .
Page
The reorganization of the provisional Algerian gov-
ernment (PAG), in which moderate, pro-Western Ferhat Abbas
was replaced as premier by Ben Youssef Ben Khedda, reflects
the rebels' dissatisfaction over the lack of results so
far in negotiations with France. The new leadership will
probably increase the PAG's contacts with the Sino-Soviet
bloc. Although the rebel announcement of 27 August did
not close the door to a negotiated settlement, it indicated
that the PAG stand would be even less compromising than
heretofore. De Gaulle, who wants progress toward a solu-
tion by the end of the year, can be expected to sound out
the new PAG's position, but if the rebels are unrespon-
sive or delay too long in resuming negotiations, he may
proceed with the establishment of a provisional execu-
tive authority in Algeria without their participation.
LAOS . . . . . . . . . . . . . . . . . . . . . . . . . . .
There have been further indications of the USSR's in-
terest in reaching a speedy settlement of the Laotian
problem. The opposing factions in Laos, however, still
seem far apart on their respective terms for formation
of a government of national union. Meanwhile, their
military forces are continuing preparations for a possible
resumption of hostilities.
CUBA . . . . . . . . . a . . . a
Cuba's mounting economic difficulties were admitted
by Che Guevara and other high officials during a "Nation-
al Production Conference" in Havana. Colombian Foreign
Minister Turbay is sounding out other Latin American
governments to ascertain if there has been any "chipping
away of resolve" for collective action against the Castro
regime as a result of Guevara's efforts at the inter-
American economic conference in Uruguay. President Dorti-
cos will visit the USSR and Communist China after heading
Cuba's delegation to the Belgrade conference.
BLOC OIL EXPORTS TO THE FREE WORLD .
Soviet bloc oil exports to the free world continue
to rise sharply, These exports are Moscow's major source
of foreign exchange. At the present rate-, total exports
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. Page 17
Page 16
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31 August 1961
for 1961 would reach 26,000,000 to 30,000,000 tons, an
increase of about 15 percent over 1960. By 1965, the
export total may rise to 50,000,000 tons. European coun-
tries, mainly members of NATO, now take more than three
quarters of all bloc petroleum exports to the free world.
difficulties in the distribu-
tion of Soviet petroleum products in several widely sep-
arated areas apparently reflect internal Soviet trans-
portation problems caused chiefly by a shortage of tank
cars.
PEIPING ALLEGES US TRYING TO PROVOKE ARMED CLASHES , . Page 19
Peiping has been charging that the US is planning
to provoke clashes with Chinese armed forces in an attempt'
to demonstrate Chinese bellicosity and aggressiveness
prior to the coming UN vote on the Chinese representa-
tion issue. Whether Peiping's propaganda reflects real
condern over potential US moves or is intended to cover
a new military initiative of its own, the Chinese are
laying the groundwork for blaming any armed clash on the
us .
CONSTRUCTION SLUMP IN COMMUNIST CHINA o . . . , , . . . . Page 20
The slowdown in construction activity first noted in
China during mid-1960 has continued through the first half
of 1961, with little chance of a recovery this year. The
difficulties stem from the cumulative effects of two suc-
cessive years of poor harvests, from the excesses of the
"leap forward," and in lesser degree from the withdrawal
of Soviet technicians. This setback in Peiping's con-
struction effort will adversely affect industrial roduc-
tion and economic growth over the next few years.
YUGOSLAVIA'S NEW CONSTITUTION . . . , . . . , . , . . , Page 21
Yugoslavia's new constitution, intended to formalize
the "advances" made since 1953, will be presented to par-
liament this fall and put into effect next spring. Al-
though the regime has divulged few details, the daily
press is beginning to devote more attention to the sig-
nificance of the document. Certain provisions will be
unpopular in government circles, such as one limiting
elected terms of office. The Sino-Soviet bloc will prob-
ably take sharp exception to the new constitution, which
formalizes certain features of the Yugoslav system which
the bloc has already attacked.
. Page 22
Terrorism by extremists of the Communist-influenced
Union of Cameroun People (UPC) is the most immediate prob-
lem which will face the Cameroun Federal Republic, to be
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CONFIDENTIAL
31 August 1961
formed on 1 October when the British trust territory of
Southern Cameroons unites with the present Cameroun
Republic. Federation talks between leaders of the two
areas have been smoother than expected, but UPC terrorists,
with outside African as well as Communist support, are
showing increased confidence and greater coordination.
The only effective military force in Southern Cameroons--
a British battalion--is scheduled to pull out by 1 Octo-
ber, when a French-trained native force will take over.
President Alessandri-,.faced with strikes involving
about a fourth of Chile's total labor force as a result
of the wage policies of his economic stabilization pro-
gram, has strengthened his position by bringing the
Radical party into his rightist coalition, thus obtain-
ing a strong parliamentary majority. Santiago and other
important industrial areas have been put under military
rule. The Communists dominate the leadership of Chile's
over-all labor confederation, which, while it has little
influence over most individual federations and unions,
affords a forum for exploiting general labor unrest.
They also have some strength in Congress and have gained
some cooperation from right-wing political elements in a
nationalistic campaign against private foreign invest-
ment, particularly the US-owned copper companies.
NORWEGIAN ELECTIONS .
. . . . . . . Page 94
Norway's governing Labor party is expected to retain
a majority in the parliamentary elections on 11 September,
which are being fought mainly on the party's record on
economic and social questions. A new Socialist People's
party--.formed by dissident. leftist Labor party members--
is seeking to capitalize on the widespread public concern
over nuclear warfare; a strong showing by this new party
would influence the postelection government toward more
cautious defense policies.
Page 23
Page 25
The instability of Italian Premier Fanfani's minority
Christian Democratic government has been highlighted by a
new controversy which started in mid-August when Giuseppe
Saragat, Social Democratic leader, threatened to withdraw
support and thereby bring down Fanfani. Saragat, supported
by the Republican party, called for formation of a center-
left government dependent on parliamentary support from
Nenni's Socialists. The conservative Liberal party has re-
taliated by asking for a full-scale parliamentary debate,
but a vote of confidence is not likely before the 23-25
September Stei.a1. Democrats' central committee.
President Gronchi might be tempted to force an early crisis
to improve his chancess i i grtSt &A
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CURRENT INTELLIGENCE WEEKLY SUMMARY
31 August 1961
SPECIAL ARTICLES
RECENT TRENDS IN SINO-SOVIET RELATIONS . . . . . . . , . . Page 1
Although Moscow and Peiping have muted the open po-
lemics which attracted world attention to the Sino-Soviet
dispute last year and have managed to act harmoniously in
most areas of foreign policy since the Moscow conference
of world Communist leaders last November, the differences
underlying the dispute remain unresolved. The USSR's con-
duct in such crisis situations as Laos, Congo, Cuba, and
Berlin has not given the Chinese any pretext for renewing
their charge that Moscow's attitude toward the West is not
sufficiently militant. Sino-Soviet relations in the eco-
nomic field have been correct but cool thus far in 1961;
Soviet technicians have not returned to China. Moscow
and Peiping continue to maintain conflicting positions on
the key issue of authority 'within the world Communist
movement. The next confrontation may come at the 22nd
Soviet party congress in October; the congress is to ap-
prove the Soviet party's new 20-year program, which includes
elements unacceptable to the Chinese. 25X1
ECONOMIC ISSUES IN THE COMMON MARKET . . . . . . , . . . Page 7
Britain's application for Common Market (EEC) mem-
bership coincides with preparation by the EEC for an
early showdown on a number of economic issues of vital
importance to its future. Before December, the member
states must decide whether to double the next tariff re-
duction and whether to proceed to the second of the EEC's
three four-year stages. Linked to these decisions is
the necessity of reaching prior agreements on certain
agricultural, transport, social, and anticartel policies
in which major economic and political interests areinvolved.
The talks with London, opening in October, may tempt the
EEC countries to delay on these decisions, but they are
aware that this would risk the loss the EEC's present
momentum.
C~_MTIAL
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CURRENT INTELLIGENCE WEEKLY SUMMARY
WEEKLY REVIEW
EAST-WEST RELATIONS
The Soviet Government's 30
August announcement of its de-
cision to resume nuclear weap-
ons tests reflects Khrushchev's
extreme concern that the pros-
pects for extracting Western
concessions on Berlin have di-
minished, especially since the closure
of the Berlin sector border.
The Soviet leaders appear to
recognize that the drastic meas-
ures to halt the refugee flow
have severely damaged their ef-
forts to present the East German
regime as a sovereign and re-
spectable negotiating partner
and that their objective of win-
ning Western acceptance of a
Berlin settlement implying de
facto recognition of East Ger-
many has been seriously jeop-
ardized
In this situation, Khru-
shchev felt obliged to resort
to nuclear intimidation in an
effort to weaken the ability of
the Western governments to re-
sist Soviet demands. He prob-
ably also feels that this an-
nouncement will place the bloc
in the strongest possible posi-
tion to carry out the long-
threatened unilateral action to
sign a separate peace treaty with
East Germany, in the event nego-
tiations fail or do not take
place.
The Soviet statement linked
the decision to test "new types
of nuclear weapons" to other re-
cenL measures designed to
"strengthen the security of the
USSR." It attempted to justify
this move by citing "threats
and military preparations" by
the US and other NATO powers
and asserted that the USSR had
no choice but to develop the
"most effective types of weapons
that can cool hotheads in the
capitals of some NATO powers."
The statement condemned
recent Western "demonstrations
of strength," particularly US
and British measures to strength-
en the West Berlin garrison. It
also charged that::the US plans
to resume testing in the near
future to develop a "neutron
bomb" and recalled earlier So-
viet warnings that the USSR
would be forced to resume tests
if France did not halt its test-
ing.
Moscow's statement seeks
to counter Western defense meas-
ures and to generate heavy pub-
lic pressure on Western govern-
ments to concede to Soviet de-
mands by stressing that even a
localized armed conflict "would
inevitably grow into a universal
rocket and nuclear war should
the nuclear powers be drawn into
it."
In the hope of containing
the damaging impact of this de-
cision on world opinion, the
Soviet statement closed with
the standard pledge that Soviet
forces "will never be the first
to resort to arms" and an ap-
peal for increased efforts
throughout the world to achieve
general and complete disarma-
ment which will put an end to
nuclear tests.
Support From Peiping
Communist China quickly
supported the Soviet decision
to resume nuclear testing, again
demonstrating its readiness to
endorse Soviet policy when it
takes a militant stand against
the West. The Chinese state-
ment, issued on 31 August, de-
scribes the Soviet decision as
a "cooling dose for the hot-
headed war plotters and a pow-
erful inspiration to all the
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31 Aug 61 WEEKLY REVIEW Page 1 of 26
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CURRENT INTELLIGENCE WEEKLY S
people striving for world peace."
It blames the US for fanning
war hysteria and warns the West
that the entire imperialist sys-
tem will be swept from the earth
in the event of a~:nuclear war.
Free-World Reaction
The Soviet decision will
shock most of the leaders at-
tending the nonaligned summit
in Belgrade and will add a
sobering note to their already
scheduled debate on the subject
of nuclear testing. India's
Nehru, reflecting the view of
most of his fellow conferees,
stated, on his arrival in Bel-
grade, "I am against all nu-
clear tests--any time, any
place, all the time."
The Geneva deadlock on the
testing question must have con-
vinced others too that a test
resumption by one side or the
other was just a matter of time.
They are likely to be critical--
at least in private-.-of :the 'So-
viet Union's decision and will
probably go on record with a
vigorous plea for renewed ef-
forts to restore the test ban.
At the same time, assuming that
Western testing will also be
resumed, the._nonaligned lead-
ers are also likely to resort,
in their deliberations, to
their more familiar "plague on
both your houses" pose.
Echoing the allegations
contained in the Soviet note
that the Western powers are con-
niving in the use of the Berlin
air corridors by West German
"revanchists" and "militarists,"
Deputy Foreign Minister Winzer
on 29 August spelled out, in the
strongest terms bloc spokes-
men have used to date, the So-
viet position that "the profit-
able business of American, Brit-
ish, and French airlines in the
air corridors is illegal." He
asserted that "there is no single
agreement in which the Western
powers were granted the right
to use the air corridors for
civilian flights."
Winzer termed "complete
falsification" Western claims
that the exchange of letters
between president Truman and
Stalin on 14 and 18 June 1945
provided for free access to
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31 Aug 61 WPiiwr.v P TTL'w
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MARY
Elsewhere, Afro-Asian re-
action is spotty and primarily
press in origin at this point.
Japanese officials have de-
clined immediate comment but
the leftist Committee Against
Atomic and Hydrogen Bombs has
termed the Soviet action "re-
gretta.ble .""
East German Actions
East German pronouncements
on Berlin and the Western pow-
ers have taken on an increasing-
ly arrogant tone. In line with
the Soviet note of 23 August,
the brunt of East German prop-
aganda has been directed against
West German ties with West Ber-
lin, in an evident attempt to
increase the sense of isolation
among West Berliners and un-
dermine morale with a view to
softening them up to support
"free city" status or flee to
West Germany.
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CURRENT INTELLIGENCE WEEKLY BUMMARY
AUTHORIZED BORDER
CROSSING POINTS
MEMBERS OF DIPLOMATIC
CORPS AND OCCUPATION
FORCES ONLY
B. Friedrich strasse
WEST GERMANS ONLY
3. Bornholmerstrasse
9. Heinrich Heine Strasse
WEST BERLINERS ONLY
5. Chausseestrasse
6. Invalidenstrasse
10. Oberbaumbruecke
13. Sonnen AIIee
ORIGINAL CROSSING
POINTS OF 13 AUGUST
NOW CLOSED
1. Kopenhagenerstrasse
2. Wollankstrasse
4. Brunnenstrasse
7. Brandenburger Tor
11. Puschkin Al lee
12. Elsenstrasse
14. Rudowerstrasse
Authorized East
Germans and East
Berlin. The Truman letter, in
fact, stipulates "free access
by air, road, and rail from
Frankfurt and Bremen to Berlin
for United States forces." The
right of civilian airlines to
fly the corridors derives from
this and other agreements.
Winzer, however, declared that
Stalin made no "concession re-
garding the communication links
at all."
Walter Ulbricht, in a
speech of 25 August, said that
East Germany recognizes the con-
tinuing validity--until the
signing of a peace treaty--of
the Soviet - East German ex-
change of letters of 20 Septem-
ber 1955 (the Bolz-Zorin let-
ters) under which the USSR re-
31 Aug 61
- Elevated railroad (S-Bahn)
Subway (U-Bahn)
X S-Bahn tracks torn up
at these points
Note: West Staaken area of West
Berlin was turned over to Soviet
control in 1945 by-the British in
return for Gross Glienicke area
needed to expand Gatow airport.
tained jurisdiction over Allied
access to and within Berlin H`'::
despite Soviet recognition of
East German sovereignty. The
Winzer statement included the
observation that flights to
West Berlin such as that of
West German President Luebke
on 29 August via a US military
plane were a "renewed justi-
fication" for the Soviet pro-
test note charging the Western
powers with violation of quadri-
partite agreements. Winzer
stated that "such flights"
would end with the signature
of a Soviet - East German peace
treaty.
East German propaganda is
seeking to picture West Berlin
as a continuing "threat to
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CURRENT INTELLIGENCE WEEKLY SUMMARY
peace." On 28 August, the
East German news agency warned
that the plan to hold a Home-
land Day (Tag der Heimat) in
West Berlin from 1 to 3 Septem-
ber was a "provocation directed
against the entire socialist
camp."
Last year's Homeland Day--
celebrations by expellee groups
from former German territories
in Poland and Czechoslovakia--
furnished the excuse for East
German interference with West
German ground access to Berlin
and for other measures to under-
cut the ties between West Berlin
and Bonn. More than 1,000 per-
sons planning to attend the rally
at that time were turned back
by East German police at the
East - West German frontier, but
some 700 persons were flown in
by Western civilian airlines
without incident despite Com-
munist warnings that use of the
air corridors for such purposes
would not be permitted. This
year, 100 to 150 West Germans
are said to be planning to at-
tend the rally.
7 -7
Note- W.xr Stook.,, o,eo of West &,h? w
ed o . to Soo;er -.,-1 19.1 by the
,9,,t,, h !o, Goa G/o,o,ke o,eo Deeded
ru eeno0d Goro o;,p o, r.
The East Germans may be
preparing to use the occasion
this year to demonstrate their
ability to effectively stop
Western civilian air access to
the city without resort to mili-
itary measures. For example,
if the Soviet controller in the
quadripartite Berlin Air Safety
Center (BASC) were to refuse
air safety guarantees for flights
scheduled to carry participants
in the rally, pilots of the
Western airlines would probably
refuse to fly. Such a step--
which would disrupt air service
CONFIDENTIAL
31 Aug 61
2fkte MTZ W.st -
1911?'19 Staok.n
WEEKLY REVIEW Pave 4 of 26
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RailroaC
Autobahn
--~ Main hlgnway
Canal
Soviet s, t- of fi_i;:,
Un I wm b1t .1-11 of
end ,nou,iry tn,ces ,Hawn
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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
to the city--would probably be
accompanied by steps on the part
of the East Germans to interfere
with ground access by West Ger-
mans':to the city. Further moves
to maintain pressure on the city
--such as publication of the
text of a peace treaty--may al-
so be made in the near future.
Situation in Berlin
The East Germans meanwhile
have somewhat reduced their
military and security forces
in East Berlin but are still
maintaining a substantial show
of force. Tanks have been with-
drawn two or three blocks from
the sector border, where they
are parked in groups of 4 to
10. East German police have
several times used tear gas or
riot hoses to disperse crowds
of West Berliners gathered in
the city sector border area.
There have been several minor
brushes between Allied military
personnel patrolling in East
Berlin and East German security
forces. Aside from this, West-
ern personnel are continuing to
enter the Soviet sector, general-
ly without difficulty, through
the only checkpoint open to them
--at Friedrichstrasse.
Soviet reconnaissance vehi-
cles now are appearing in great-
er numbers in West Berlin than
in the past, evidently in an
effort to underline the USSR's
claim to a role in the occupa-
tion of the Western sectors.
Soviet controllers at BASC, how-
ever, have protested the assign-
ment of US Army vehicles to es-
cort them to and from the sector
border. This Western action was
taken after West Berliners had
demonstrated against the Soviets.
US Mission officials in Ber-
lin believe that the Soviet note
of 23 August has caused further
apprehension among West Berlin-
31 Aug 61
ers, who regard unrestricted
air access as an essential ele-
ment of their freedom. Mayor
Brandt and other leaders of the
Social Democratic party (SPD)
believe that despite the tem-
porary improvement of morale
resulting from the visit of
Vice President Johnson and
reinforcement of the Berlin
garrison, a feeling of frustra-
tion and hopelessness is al-
ready beginning to spread
through the West Berlin popula-
tion.
The West Berlin leaders
told a US official there is a
growing public expectation that,
despite Allied assurances, a
compromise will be reabhed be-
tween the Allies and the USSR
concerning the future status of
West Berlin which will inevita-
bly act to undermine the long-
range viability of the city.
These leaders claimed that fur-
ther blows at the Western posi-
tion--such as Communist inter-
ference with civilian air ac-
cess, which they fear the Al-
lies will be unable to prevent--
will cause many Berliners to
leave the city permanently for
West Germany.
On 24 August West Berlin
police closed and sealed the
thirteen West Berlin offices
of the East German Socialist
Unity party (SED) in retalia-
tion for the closing of the
eight SPD offices in East Ber-
lin. West Berlin officials re-
fused to permit the opening of
two East German "tourist of-
fices" at the Zoo and West Kreuz
stations of the elevated rail-
way (S-Bahn), and instructed
West Berlin police to obstruct
attempts td use the stations to
issue permits for West Berliners
to visit East Berlin. The East
German regime had announced on
22 August that passes for enter-
ing East Berlin would be issued
at such offices.
EA .T1 iiTl A
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Elevated trains have been
.ubj
: ect to some vandalism,, and
A; a,jt Berlin authorities` hat'e',
threatened to discontinue serv-
ice entirely,
Situation in East Germany
.The Ulbricht regime is
steadily hardening its attitude
toward antiregime elements in
East Germany. On26 August
Neues Deutschlaid published a
decree ;,under whieh."in special cases,
on the basis of a judicial:'s-entente or
at the request of, lotcal. government or-
gans, restrictions on residence
can be pronounced." This pro-
vides a legal basis for removing
suspected antiregime elements
from restricted areas along the
East - West German frontier or
from the outskirts of Berlin.
It also will enable the regime
to resettle East Germans and
East Berliners who formerly
worked in West Berlin in dis-
tricts where their labor is
needed. Persons removed from
frontier areas may be subjected
to "educational labor." Another
decree authorizes district and
town officials to declare local
"states of emergency" in order
to impress laborers for the 1961
harvest. Further measures to
tighten up work norms in indus-
trial plants may be in store.
The regime has tightened
security along the East - West
.German frontier over the past
three weeks.
Military Developments
No significant change oc-
curred in either the Soviet or
East German military situation
in the Berlin area during the
past week. There was some evi-
dence,of the presence of Soviet
and perhaps East German ele-
ments in the Letzlinger Heide
training area on 24 August.
There are also indications of
increased tactical reconnais-
sance at various points near
the East - West German border.
The announcement that the
active duty tours of Soviet mil-
itary personnel are being ex-
tended appears merely to formal-
ize a decision taken some time
ago. The long-term effect of
31 Aug 61
this will depend on the. future
rate of induction, but a net in-
crca.se~'iitx 'Soviet military man-
power is to be expected.
Bloc Gestures Toward West
Khrushchev, before Mos-
cow's statement on nuclear
testing, continued last week
to reassure the West of his in-
terest in arranging negotiations
on Germany and Berlin. In an
interview on 24 August with
columnist Drew Pearson, he pre-
sented a written statement, which
Moscow published on 28 August.
The most significant aspect of
this pronouncement was Khrushchev's
reference to his readiness to meet
"at any moment with leaders
of"the Western powers" and to
come to a "round table for peace-
ful negotiations" if the Western
powers--"notably President Ken-
nedy"--want a "peaceful settle-
ment." Khrushchev's designation of
Western. leaders as the partici-
pants and his special reference to
the President suggest that he has
a summit-level meeting in mind,
or possibly bilateral discussions
with Washington.
Rumanian Premier and party
First Secretary Gheorghiu-Dej
last week told an American Em-
bassy official that be plans
to visit New York this fall.
This was apparently a hint that
he might attend the opening of
the UN General Assembly on 19
.September. Since he probably
would not attend unless other
bloc leaders came, as was the
case last fall, the Rumanian
leader's remark may have been
intended as a trial balloon to
determine U$ reaction to a pos-
sible visit by Khrushchev. Mos-
cow would probably assume that
Khrushchev's presence at the
UN would lead to a meeting with
President Kennedy and provide
an. opportunity to arrange sub-
sequent four-power negotiations.
Gheorghiu-Dej stressed in his
private: remarks that Moscow was
'entirely flexible" in its
approach to negotiations and
that a solution could be reached
which would protect the prestige
of both sides.
-
A third move by Moscow was
Khrushchev's letter of 24 Au-
gust to "Italian Premier Fanfani.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
According to press accounts,
Khrushchev confirmed his pre-
vious statements during Fanfani's
visit to Moscow that the USSR"
was prepared to negotiate with
the Western powers on Berlin
and Germany.
While the bloc may hope
to sustain the momentum of re-
cent East German actions and
continue to tighten controls in
Berlin, the Soviets have made a
point of stating that Western
interests have not been touched.
Colonel Solovyev, the Soviet
commandant in Berlin, adopted
a friendly tone in his dis-
cussion with General Watson
on 26 August, stating that he
had taken an interest in the
matter of free passage of US
personnel into East Berlin and
had been "informed" that there
were no obstacles.
Ulbricht's reaffirmation
of the validity of the Bolz-
Zorin letters and Winzer's
subsequent remarks indicate that
Allied air access will not be
affected prior to the signature
of a peace treaty. In addition,
the Soviet Embassy in Bonn has
issued a statement that the USSR
is "in favor of normal communi-
cations" between West Berlin and
the Federal Republic. This was
apparently intended to soften
the earlier remark by Ambassador
Smirnov to an American audience
in Bonn that the "best solution"
for the Berlin air corridor
problem would be to transfer
all civilian flights from
Tempelhof and Tegel airfields
in West Berlin to Schoenefeld
on the outskirts of East Berlin,
West German Position
Last September, Bonn,
citing the interference with the
refugee meeting and an East
German decree of that month
imposing controls on West Ger-
man access to East Berlin, served
notice that it would not extend
the interzonal trade agreement
expiring in December." The
agreement was renewed only after
East Germany gave assurances of
free movement for all persons and
goods to and within Berlin.
Bonn now would consider any
interference with West German
access to Berlin a violation of
these guarantees. Chancellor
Adenauer warned in a speech on
14 August that Bonn was con-
sidering cancellation of its
interzonal trade agreement with
East Germany and that there
would be a complete trade em-
bargo of the Communist bloc if
the Berlin issue could not be
settled. The East Germans
answered Adenauer by threaten-
ing on 15 August to cut off
West German freight traffic to
West Berlin if Bonn interrupted
interzonal trading, and Adenauer
warned again the following day
of economic sanctions "in the
case of a (future) move against
Berlin."
Although West German offi-
cials regard the intensified
controls imposed by the East
Germans in Berlin as a violation
of the assurances of freedom
of movement given last December,
Bonn remains undecided on what
to do about it. For the time
being it does not plan to author-
ize its interzonal trade rep-
resentative to take up the matter
with his East German counterpart.
Fritz Berg, president of the
West German Federation of In-
dustries (BDI), stated on 22 Au-
gust his organization believes can-
cellation of the interzonal trade
pact now would be dangerous to Ber-
lin's security. He said, however,
that West German firms were giving
over-all support to the BDI-recom-
mended boycott of the East German
Leipzig Fair,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
The sudden resignation of
Janio Quadros from the Brazilian
presidency on 25 August has pre-
cipitated a constitutional cri-
sis because of the adamant op-
position of War Minister Denys
and other military leaders to
the assumption. of Quadros' power
by leftist Vice President Joao
Goulart. Goulart's right to
succession has been supported
on constitutional grounds by
most political leaders and a
minority of the military, partic-
ularly?former War Minister Lott
and the commander of the power-
ful Third Army in southern Bra-
zil. On 31 August, Congress
overwhelmingly passed a reso-
lution to amend the constitu-
tion, transforming the presi-
dency into a figurehead office
tinder a parliamentary form of
government with a prime minister
appointed by congress.
Quadros' resignation fol-
lowed a period of growing ten-
sion with the military over his
policy of closer relations with
bloc countries, and an outburst
of public criticism for having
given Brazil's highest decora-
tion to Che Guevara. The pre-
cise mot1vations of his impul-
sive resignation are, however,
still unclear. If he was count-
ing on being swept back quickly
into the presidency by a wave of
public protest, he greatly mis-
judged public opinion. There
were a number of initial expres-
sions of dismay, but the wide-
spread subsequent reaction was
criticism of Quadros for acting
irresponsibly in the face of
admitted difficulties. A state-
ment reportedly made by his ex-
justice minister as Quadros
sailed for Europe on 30 August
suggested that Quadros plans an
effort to swing public opinion
in his favor by attributing his
resignation to US pressure.
Such a statement might touch
off anti-US demonstrations on a
larger scale than those immedi-
ately following his resignation.
Goulart's Career
The 43-year-old "Jango"
Goulart comes from a well-to-do
background in the state of Rio
Grande do Sul, of which his
brother-in-law, Leonel Brizola,
is currently governor. From
the beginning of his national
political career in 1950, Gou-
lart was a protege of President
Vargas and was generally regarded
as his political heir when Vargas
committed suicide in August 1954.
Goulart had tried particularly
to build up labor support for
himself, cooperating in a number
of ways with the Communists for
this purpose. Military resent-
ment of his leftist views and
varied activities as minister
of labor had caused his forced
resignation from Vargas' cabi-
net in February 1954.
Supported by his own Brazil-
ian Labor party and several oth-
ers, and accepted as running mate
by the popular Kubitschek,Gou-
lart won the vice presidency in
the 1955 election and further
strengthened his political or-
ganization during Kubitschek's
presidency. In the 1960 elec-
tion both he and his presiden-
tial running mate, ex-War Minister
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Lott, received Communist en-
dorsement. He defeated Quadros'
running'mate by a considerably
smaller margin than Quadros'
edge over Lott.
Quadros as president tended
to keep Goulart at arm's length
Politically but sent him to the
USSR and Communist China a few
weeks ago; on an official visit.
During his Chinese visit, Gou-
lart went out of his way to
praise the successes of Mao Tse-
tung and the Chinese Communists.
While in Peiping he completed
a pact, caflIthg, for, trade-o.f
$28,000,000 each way annually.
Concern for Constitutionality
The reaction of Denys and
the two other service ministers
to the prospect of Goulart's
wielding Quadros' powers was
a natural consequence of Gou-
lart'$ past career and general
reputation as a political oppor-
tunist, as well as the growing
concern in Brazilian military
circles over Quadros' policy
on closer relations with the
Communist bloc. Much of the
support as Goulart has received
since Quadros' resignation must
be attributed not to his per-
sonal political appeal, but to
the general feeling--much strong-
er in Brazil than in most Latin
American countries--that con-
stitutionality should be re-
spected in times of crisis.
Military leaders first
sought a legal solution where-
by Congress would amend the con-
stitution to bar Goulart from
office and provide for an
acceptable successor. A con-
stitutional amendment can be
proposed by one fourth of
either chamber and becomes
law if passed in two successive
votes, by two thirds of the to-
tal membership of each house of
Congress. Congressmen apparent-
ly felt, however, that barring
Goulart would offend the popu-
lar Brazilian feeling for legal-
ity.
Moreover, the Brazilian
constitution provides that if
both the presidency and the vice
presidency should be vacated
during the first half of a presi-
dential term, elections must be
held within 60 days. While such
elections would normally appeal
to many of Brazil's political
leaders, most of the ambitious
men with a good chance at the
top post now hold posts which
would bar them from becoming
presidential candidates within
the next several months. Con-
stitutional provisions bar from
candidacy those who have been gov-
ernors or cabinet ministers with-
in six months of the election,
as well as "a President who may
have exercised the office for any
time in the term immediately
preceding."'
Reactions Abroad
Latin American public re-
action to Quadros' resignation
has reflected almost universal
surprise, accompanied by a number
of parallels drawn by the press
between this event and President
Vargas' suicide in 1954. Except
from Cuba, there has thus far been
little commentary on the question
of the presidential succession.
tee
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Ecuadorean President Velasco
who has faced growing moderate-
rightist opposition to his pro-
Castro, leftist foreign policy in
recent weeks,: including some
military plotting against his
regime, is reportedly alarmed by
Quadros' action and fears that
similar circumstances in Ecuador
might force him out of office.
The intelligence chief of the
Ecuadorean armed forces advised
the American army attache in Quito
on 28 August that Brazilian devel-
opments could have a pronounced
effect in Ecuador because of the
analogous political-military re-
lations in the two. countries.
The.Argentine Government, which
recently confronted sharply
adverse reactions from its
military leaders when Cuba's
economic czar Che Guevara
visited President Frondizi
immediately after his visit
with Quadros in Brazil, has
maintained a cautious reserve
on the Brazilian situation.
One official characterized
Quadros' retirement and its
aftermath as primarily an
internal Brazilian affair.
The Mexican Government, which
along with Ecuador and Brazil
has followed policies favorable
to the Castro regime, has
limited its comments on Bra-
zilian developments to vague
generalities.
The Castro regime has
attributed Quadros' resigna-
tion to pressures from the US
and branded it as part of the
US "imperialist" plot to en-
circle and:isolate Cuba. The
Cuban reaction reflects con-
siderable concern over the loss
of one of its principal friends
in the hemisphere. In a public
address on 29 August, Castro
urged the Brazilian-people to
"take up arms ...and take to the
mountains and jungles" to fight
the military leaders who are
trying to keep Vice President
Goulart from becoming president.
T4e Brazilian Communist party,
which has often collaborated 25X1
with Goulart, has generally
kept in the back round during the
past few days
Both Moscow and Peiping,
following a line similar to that
of Cuba, have placed the responsi-
bility for the Brazilian situation
on "imperialist" US machinations
designed to oust a statesman who
was attempting to free his coun-
try from the US "monopolistic"
and "colonialist" yoke, and have
also denounced the efforts of
"reactionary" elements to block'
Goulart.
Local Situation
25X1
Many aspects of the situa-
tion in Brazil are still fluid
and confused. Denys on 30 August
relieved the Third Army commander
General Machado Lopes
Early on 31 August a government
communique announced that the
Second Army, with air and naval
support, had undertaken an
"action in force" against Rio
Grande do Sul, but as of 1200
EDT on 31 August there were
no confirmed reports that
there has actually been any
fighting.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
UN troops over the past
week detained for repatriation
approximately 500 Europeans,
most of them Belgians serving
in the Katangan armed forces.
The evacuation of mercenaries
is part of a stepped-up UN
campaign to force Tshomb6 to
drop his claims of Katangan
independence and to enter into
negotiations with Premier Adoula
aimed at reintegrating Katanga
with the Congo.
The UN move began on 25
August with the airlifting of
a battalion of Indian troops
from northern Katanga to Elisa-
bethville. The airlift immedi-
ately triggered rumors that the
UN, in support of Adoula, would
attempt to disarm Katanga's
10,000-man army and 3,000-odd
police. On 26 August, UN repre-
sentative O'Brien delivered a
virtual ultimatum to Tshomb6,
warning that if he did not go
to Leopoldville the "situation
would worsen," and emphasizing
that the UN was prepared to
assist Adoula in military action
against Katanga. Tshomb6 re-
plied that he would not negoti-
ate with Leopoldville under
pressure.
In a swift predawn maneu-
ver on 28 August, Indian troops
seized key points in Elisabeth-
ville and began the roundup of
Belgians. Although Tshomb6
announced that he accepted the
UN action and urged the popu-
lace to remain calm, the UN
placed Ir}terior Minister Munongo
under detention, apparently as
a precautionary measure. On 29
August the UN announced that
most of the 500 white officers
of TshombO's army were "controlled"
by the UN, and O'Brien observed,
"Katanga is in secession without
the means of maintaining it."
Tshomb6 replied on 29 Au-
gust that he had toured military
camps in the past 24 hours and
that "the army will not mutiny."
A major disciplinary breakdown,
however, might well lead to the
collapse of his government.
Even prior to the UN roundup
there were periodic reflections
of poor discipline and morale in
army camps near Elisabethville.
The Belgian consul general has
stated that, as early as 28 Au-
gust, there were several "inci-
dents" between African soldiers
and whites.
Belgian Foreign Minister
Spaak has sent Secretary General
Hammarskjold an "energetic" pro-
test over the UN measures against
Belgian officers in Katanga. Ini-
tially he had indicated that his
government would continue to co-
operate with the UN and would
remove Belgian officers from
Katanga, provided such measures
did not lead either to a panicky
exodus of the European population
or to ,a mutiny of the Katangan
armed forces. However, the dras-
tic action of the UN in taking
Belgian officers into custody
prompted the protest move. Spaak
fears that large-scale humiliation
of Belgian nationals would be
exploited to the fullest by his
right-wing critics at home.
In the Congo proper, atten-
tion has centered on the uncer-
tain relationship between Adoula
and Gizenga and on maneuverings
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concerning Congolese attendance
at the Belgrade conference of
uncommitted nations. Although
Gizenga is believed to favor
Congolese participation in the
conference, his main preoccupa-
tion appears to be with securing
agreement to various condi-
tions he laid down for his sup-
port of the new government. In
the meantime, he has refused
to go to Leopoldville to take
up his vice premiership.
A fifth Air Jordan charter
flight to Stanleyville arrived
on 26 August, reportedly carry-
ing food, clothing, and six
passengers. Unlike previous
occasions, however, the cargo
was inspected by UN officials.
When a US consul attempted to
contact the plane's American
pilot, he was threatened at
the airport by Gizengist sol-
diers, who apparently blamed
him for the UN's detention of
the aircraft. The consul was
placed under UN protection, and
subsequently returned to Leopold-
ville after being "expelled"
from Stanleyville on Gizengass
orders.
Jordanian King Husayn has
indicated concern over the Stan-
leyville flight and has ordered 25X1
the grounding of all Air Jordan
aircraft pending the outcome of
a court of inquiry
President Bourguiba, know-
ing that a majority of the United
Nations supports him in his
quarrel with De Gaulle over
Bizerte, seems inclined to let
the issue ride for the present.
ever, may press for another
airing of the question if Paris
continues; to ignore the UN
resolutions of 22 July and 25
August. In this case Tunisia
probably would not resist the
bloc's initiative.
Although the Tunisian Gov-
ernment would have preferred
some modification of the Arab-
Asian draft so that it might
have secured wider Western sup-
port, it is satisfied with the
action taken at the special UN
General Assembly session. Pres-
ent Tunisian plans are to avoid
reintroducing the issue at the
regular 16th General Assembly
and not to bring the problem
back into the Security Council
unless there is substantial
deterioration of the local
situation in the Bizerte area.
The Afro-Asian bloc, how-
In France, reaction to the
outcome of the UN debate has in-
cluded fairly sharp criticism
in liberal and some conservative
circles of the French Government
for absenting itself and as-
suming a "stance of official
amnesia" during the proceed-
ings. Foreign Minister Couve
de Murville on 29 August ad-
mitted that he did not know
what France was going to do in
Bizerte but acknowledged that
the present situation could not
continue indefinitely
CONFIqL
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CURRENT INTELLIGENCE WEEKLY SUMMARY
FRANCE-ALGERIA
The reorganization of the
provisional Algerian government
(PAG) announced on 27 August, in
which moderate pro-Western
premier Ferhat Abbas was re
placed by 51-year-old Ben
Youssef Ben Khedda, reflects
dissatisfaction over the failure
of negotiations with France.
The new leadership will probably
be even less compromising than
the former PAG regime ; its
composition is in effect a re-
tort to French efforts to break
the deadlocknin negotiations by
threats to set up a provisional
Algerian executive or to pares'.
tition the country. The new
leadership will probably renew
threats, soft-pedaled during
the preparation for negotia4
tions, to obtain increased
diplomatic and material support
from the Sino-Soviet bloc and
to "internationalize" the
Algerian war,
Ben Khedda is regarded as
one of the more extreme Algerian
revolutionaries, although his
name is less well known among
the Algerian masses than that
of Abbas. He was instrumental
in organizing the rebel fight-
ing units within Algeria, where
he several times narrowly a-
voided death or capture, and
has a solid reputation among
the younger members of the rebel
army. His resignation as PAG
minister of social affairs in
January 1960 was apparently
in protest against what he con-
sidered the PAG's failure to
push a more vigorous ;guar
r:Illa war;; against ;the
French and to move the PAG head-
quarters from Tunis into Algeria.
He has had a number of contacts
with bloc nations, especially
Communist China, and is reported
to be an admirer of Communist
organization and an advocate of
Mao Tse-tung's theory of guerrilla
warfare. Ben Khedda is regarded
as intelligent, shrewd, "hard
as nails," and extremely able.
The 62-year-old Abbas, a
rebel elder statesman, had been
premier since the PAG was es-
tablished in 1958,but his in,
fluence was limited by his
French cultural background. His
popularity within Algeria--
which appears to have increased
since the riots last December--
along with his wide acquaintances
and acceptability to the French
made him useful inrestablish?ing
an.; aura:,, of respectability for,
the PAG, which may seek to
utilize these traits in some
other assignment.
In other changes, Ben Khedda
also took over the Ministry of
Finance, replacing Ahmed Francis,
Abbas' brother-in-law, who per-
formed effectively but shared
Abbas' moderate views. Another
moderate, Abdelhamid Mehri, was
dropped as minister of social and
cultural affairs, reportedly
because he had done almost
nothing with his ministry. Said
Mohammedi, frequently identified
as a supporter of Belkacem Krim,
was removed as minister of state,
and another vice premier--Mom
hamed Boudiaf--was added to the
previous two, Krim and Mohamed
Ben Bella. Both Boudiaf and
Ben Bella are detained in France.
Krim was shifted from minister
of foreign affairs to minister
of interior, replacing "hard-
liner" Lakhdar Ben Tobbal, who
was made a minister of state
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without portfoli o. Saad Dahlab,
formerly under Krim in the
Foreign Ministry and a mbmber
of the PAG negotiating team,
was moved up to foreign minister.
Krim and Ben Tobbal appear
to have suffered demotions, which
suggests that minister of arma-
ments Abdelbafid Boussouf, a
ruthless "hard-liner" reported-
ly feared by most of the rebel
leadership, may have enhanced
his already strong position.
He has for some time reportedly
been working to undercut both
Krim and Ben Tobbal.
The PAG communique announc-
ing the changes was careful to
leave the door open for a re-
sumption of negotiations with
the French, although indicating
that the rebels would take an
even less compromising stand,
especially in their demand for
control of the Sahara. The
replacement of Krim as foreign
minister by Dahlab, whom the
French consider more able and
sophisticated than Krim, could
be an effort to provide the FAG
negotiating team with a spokes-
man linguistically and politi-
cally more able to cope with
the French delegation. Reports
indicate that contacts with
the French are being maintained.
De Gaulle's press confer-
ence scheduled for 5 September
will probably elaborate on his
reported statement to the French
cabinet on 30 August that the
new PAG line-up does not alter
France's determination to give
Algeria its independence as
soon as possible. The French
press is interpreting the
situation according to the pro-
or anti - De Gaulle alignment
of individual editors. Rightist
papers call it a defeat for his
policy of negotiating with the
rebels, but some others profess
to see prospects for a more
realistic rebel negotiating team.
negotiations, he may proceed
with establishment of a pro-
visional executive authority in
Algeria without rebel partici-
pation. This would be aimed
at arranging an early referendum
which could form the basis for
any later moves to regroup or
partition. Meanwhile, the chief
straws in the wind are seen in
the French cabinet reshuffle
on 24 August, in which a secre-
tary of state for repatriates
was created and the former Min-
istry of the Sahara was down-
graded to the status of a secre-
taryship. Secretary for Repatri-
ates Boulin has already announced
that when parliament reconvenes,
the government will propose a
"framework law" involving large
credits for repatriates.
The American Embassy in
Paris, in an assessment of De
Gaulle's over-all position last
week, commented that none of the
chief opponents of his Algerian
policy--the Algerian rebels,
the army and European settlers
in Algeria, and rightists in
metropolitan France--bad yet
been won over to it; the embassy
pinpointed the army as still
the key element with which be
must reckon as he continues press-
ing toward an early solution.
In this regard, the absence
from recent Defense Committee
meetings of the chief of staff
for National Defense, General
Jean Olie, has been linked to
reports that he has disagreed
with De Gaulle over Algerian
policy.
Should
Olie resign or be rel eyed soon
for any cause, De Gaulle would
probably have difficulty replac-
ing him with another senior
officer both loyal to himself
and acceptable to the army.
In view of De Gaulle's de-
sire to have a solution under
way by the end of the year, Paris
can be expected to sound out the
new PAG, regardless of the un-
compromising posture of the
new leadership. If the PAG is
unresponsive, however, or if
it delays too long in resuming
The US army attache in
Paris has also noted reports
that military representatives
at the Defense Committee meet-
ing which decided to move a
second division--the.Seventh
Light Armored--from Algeria to
Europe not only opposed this
[7T /"7'Sn i~rsm
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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
move but recommended the return Seventh Light Armored unit re-
to Algeria of the division portedly will being moving on
moved to Europe last month, ,. The 1414eptember .
The Soviet delegates at
Geneva have referred to the
drafting committee a number of
controversial items over which
the US delegation had expected
more lengthy argument. There
has been no indication, how-
ever, that the bloc will make
any substantive concession on
the basic issue of whether or
not the International Control
Commission (ICC) is to be given
sufficient power to accomplish
its mission. Moscow's attempt
to appear reasonable on the
matter of controls may be an
effort to encourage the West to
exercise a greater restraint on
General Phoumi and any inde-
pendent military action the
Vientiane leader may have in
mind. The USSR probably also
feels that its flexible attitude
at this time will make it more
difficult for the West to refuse
agreement on other matters of
concern to the bloc; e.g., re-
tention of Pathet Lao forces
until elections are held.
The opposing factions in
Laos still seem far apart.
Souvanna Phouma, in an inter-
view on 27 August with French
Ambassador Falaize, proposed
a list of seven individuals who,
with himself, should constitute
the "neutralist" center of any
new government. The list in-
cluded the extreme leftist
Quinim Pholsena, the opportun-
istic Pheng Phongsavan, and five
relative nonentities. There is
some possibility that this list
represents Souvanna's initial
bargaining position, and that
when and if serious negotiations
begin on composition of a new
government, he may be willing
to consider substitutions drawn
from stronger and abler moder-
ates now giving nominal support
to the Boun Oum government.
Phoumi, meanwhile, is be-
coming increasingly more open
in his expressions of distaste
for Souvanna and disinclination
to serve under him in a coali-
tion government. He reiter-
ated to Ambassador Brown re-
cently that the Vientiane gov-
ernment had just about decided
Souvanna would be unacceptable
as premier, since it was felt
a government under him would
simply be an instrument of the
Patbet Lao.
The divergence of views
among the opposing factions is
reflected in the continuing
impasse in the Namone talks on
formation of a government and
negotiation of a detailed cease-
fire instrument. The question
of who should be premier has
been bypassed for future nego-
tiations, in view of the ir-
reconcilability of the gov-
ernment's position--that the
King should have some freedom
of choice in naming a premier
--with the insistence of the
Pathet Lao and the Souvanna
group that only Souvanna's name
should be submitted.
There has been a slow but
steady increase in the number
of incidents between the oppos-
ing military forces, which
continue to prepare for the
possible resumption of hostil-
ities. Phoumi over the week
end went to Hue for talks with
South Vietnamese military lead-
ers. The South Vietnamese
authorities are said to have
promised to make available
immediately to Phoumi an infan-
try regiment and a 105-mm. ar-
tillery battery to help defend
central and southern Laos.
These troops would ostensibly
be incorporated into the Laotian
Army. South Vietnam promised
to reconsider Phoumi's request
for a whole light infantry di-
vision in January 1962
?IAL
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'CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
Cuban Minister of Industry
Che Guevara, on his return from
the inter-American economic con-
ference in Uruguay, asserted
that the US failed to achieve
its major objective there, that
of "providing the advance pay-
ment for support against Cuba."
The conference, he concluded,
eliminated the possibility of
isolating Cuba." Colombian
Foreign Minister Turbay, a
leader in Latin American con-
sultations looking toward col-
lective action to isolate the
Castro regime, told the American
ambassador in Bogota on 25 Au"
gust that he is sounding out
other.. Latin American governments
to ascertain if there has been
any "chipping away of resolve"
for action against Castro.
President Dorticos left
Cuba on 29 August as head of
an 18--man delegation to the
conference of nonaligned nations
in Belgrade. After that meeting
he is scheduled to make state
visits to the USSR, Czechoslo-
vakia, and Communist China.
The regime's concern over
growing shortages and economic
dislocations was reflected in
the three-day "National Produc-
tiori Conference'! which opened
in Havana on 26 August. The
meetings were billed as sessions
of "criticism and self-criticism"
to correct the difficulties
hampering the economy. Guevara
delivered a characteristically
frank address, admitting that
"acute" shortages of spare
parts have "adversely affected"
production. He called for more
coordination among the minis-
31 Aug 61
tries and criticized his own min-
istry for "too much bureaucracy."
Guevara also criticized
waste in the armed forces
and "the tendency to keep
some of the militia under arms
when they would be more use-
ful in production," an issue
which on at least one previous
occasion had led to disagree-
ment with Fidel Castro. Castro
responded with a "clarifica-
tion,'' explaining that the
"constant threat of armed
agg ression'' requires the
mobilization of the people.
He agreed, however, that "the
military should take into ac-
count the problems of produc-
tion."
The decree convening the
"production conference" was
the first to be signed jointly
by the government and the
national directorate of the
Integrated Revolutionary
Organization (ORI), the Com-
munist-led mass "political
party" being organized through-
out the country. The ORI thus
appears already to be evolv-
ing toward a relationship with
the state. comparable to that
of Communist parties in the
bloc.
CONFIDENTIAL
WEEKLY REVIEW
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Soviet bloc oil exports to
the free world--Moscow's major
source of foreign exchange--
continue to rise sharply. Dur-
ing the first half of this year
they amounted to about 13,000,-
000 metric tons; if this rate
continues, total petroleum ex-
ports for 1961 should reach
26,000,000 to 30,000,000 tons,
an increase of about 15 percent
over 1960.
The USSR supplied about 85
percent of the bloc's oil ex-
ports in 1960, Rumania most of
the remainder. The ability of
the USSR to expand production
suggests it will continue both
to meet domestic demand and to
increase exports--particularly
of crude oil--to the free world.
By 1965, the bloc may have as
much as 50,000,000 tons avail-
able for export annually--twice
the amount shipped to the free
world in 1960.
The composition of bloc
POL exports continues to reflect
the relative increase in the
supply of crude oil over refined
petroleum products, in keeping
with the demands of the free
world oil markets. In 1960,
crude oil accounted for more
than 40 percent of the bloc's
exports; this year the figure
should reach 50 percent.
31 Aug 61
Bloc oil is exported to
about 30 free world countries.
(METRIC TONS)
Imported from Bloc Percent of
(1,000 metric tons) Total Consumption
NATO
Belgium 452 * 6.2
Denmark 134 2.5
France 1,208 4.4
West Germany 2,826 9.5
Greece 930 40.4
Iceland 335 83.8
Italy 5,228- 17.5
Netherlands 1,341 * 12.5
Norway 262 7.2
Portugal 49 3,1
United Kingdom 175 0.4
6
Total T2; w
OTHER EUROPEAN
COUNTRIES
Austria 1,108 38.2
Finland 2,280 95,0
Sweden 1,900 15.7
Switzerland 50 1.2
Yugoslavia 335 no
Total TIZ7S
MIDDLE EAST
AND AFRICA
Algeria 53 2.6
Guinea 16 no
Lebanon 93 10.3
Morocco 47 4.7
Tunisia 15 3.0
United Arab Republic
Egypt 1,661 34.2
Syria 272 28.6
Total 2
ASI A
Afghanistan 50 no
India 22 0.3
Japan 1,218 4.2
Total 1,
LATIN AMERICA
Argentina 10 0.1
Brazil 120 0,9
Cuba 1,970 43.3
Uruguay 87 6,0
Total -2,797
GRAND TOTAL 24,267
* Includes petroleum transshipped to other free world countries,
610823 4 A 31 AUGUST 1961
CONFI6ENTtAL
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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
Burma, Turkey, and Spain were
added to the list this year.
European countries, mainly mem-
bers of NATO, take more than
three quarters of all bloc pe-
troleum exports. Only in Fin-
land, Iceland, and Greece, how-
ever, do these imports account
for a significant amount of do-
mestic consumption. Bloc oil
sales to the industrial countries
of Western Europe and to Japan--
about $360,000,000 in 1960--
are used primarily to finance
purchases of capital goods and
equipment required for the ful-
fillment of Moscow's seven-year
economic development plan.
The bulk of bloc petroleum
exports to underdeveloped coun-
tries goes to Cuba and the UAR.
Since mid-1960, the bloc has
been the sole source of Cuban
imports of POL, with about
4,500,000 tons scheduled for
delivery this year.
Recent reports concerning
difficulties in the distribution
of Soviet petroleum products to
several widely separated areas
apparently reflect internal So-
viet transportation problems,
caused chiefly by a shortage of
tank cars. In addition, the
oil supply difficulties probably
were aggravated by the demands
placed on the transportation
system in order to meet the POL
BLOC PETROLEUM EXPORTS
TO FREE WORLD
24,267
metric tons
KEY:
TOTAL
ono
Petroleum
Products
5,494
metric tons
12,310
metric tons
requirements called for by the
Soviet harvest and shipping on
the Northern Sea Route, both of
which now are at their highest
levels. (Pre- 25X1
pared by ORR
CO IDENTIAL
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CON IDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
PEIPING ALLEGES US TRYING TO PROVOKE ARMED CLASHES
The Chinese Communists have
expanded their routine propaganda
blasts against American "provo-
cations" during the past two
weeks into a concert of charges
that the US is engaged in an in-
tensive military build-up in
the Far East and that it
hopes prior to the UN vote on
the Chinese representation
issue to provoke Peiping into
armed clashes in an effort to
demonstrate Chinese bellicosity
and aggressiveness. In its
charges, Peiping has taken
particular note of alleged US
military deployments in the
Taiwan Strait. American press
reports that the strengthening
of US forces in the area is
designed to counter any Com-
munist plans for a diversionary
venture in connection with the
Berlin crisis have been labeled
"fantastic" by Peiping, which
calls instead for "vigilance
against the US plot."
The Chinese could well have
anticipated some stiffening of
American forces in the area in
the wake of the Berlin crisis,
and their current propaganda
campaign may be an effort to
capitalize on the US action in
such a manner as to add consider-
able new "evidence" to their
line that the US is engaged
in "aggression" against them.
Peiping may also be trying to
lay the foundation for blaming
the US for any Sino-American
clash--either one that Peiping
itself plans to initiate or one
that it conjectures the US
might provoke in order to capi-
talize on the current low
morale and economic difficulties
of the Chinese populace.
In its propaganda on the
alleged US plot, Peiping is not
at present charging the Nation-
alists with compixcity. The
Communists even passed up a
chance to include Taipei in
their accusations following the
downing on 2 August of a Chinese
Nationalist reconaissance plane
by Communist antiaircraft fire.
To date, all of Peiping's
allegations concerning US
"provocations" have been tied
to the alleged US hope of dis-
crediting Communist China before
the UN session, suggesting that
the Chinese have given at least
some thought to the advisability
of avoiding aggressive displays
prior to the UN vote. A Peiping
broadcast of 24 August cited a
number of American press reports
on the US plans, among them a
statement that US officials be-
lieve an intensive resumption
in Communist shelling of the off-
shore islands would result in
a "definite failure" for coun-
tries advocating Peiping's "im-
mediate admission" to the UN.
Current Chinese Communist
statements concerning the UN re-
veal a greater interest in the
outcome of the vote than the re-
gime usually displays--possibly
because the Chinese feel the is-
sue may be headed for a showdown
at the coming General Assembly
session and wish to do what they
can to influence the outcome.
Peiping doubtless hopes its de-
mands for a UN seat will receive
a boost on the eve of the General
Assembly session in the form of
an endorsement by the conference
of nonaligned nations at Belgrade.
In communiques following their
recent visits to China, both 25X1
Indonesia's Sukarno and Ghana's
Nkhrumah called for Peiping's
admission to the UN.
CONFIDENTIAL
31 Aug 61 WEEKLY REVIEW pA?o - -r --
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MENTIAL41
CURRENT INTELLIGENCE WEEKLY SUMMARY
CONSTRUCTION SLUMP IN COMMUNIST CHINA
The slowdown in construc-
tion activity first noted in
China during mid-1960 has con-
tinued through at least the first
half of 1961. Current delays
and cutbacks suggest little
chance of a recovery this year
to the high levels of the "leap
forward" period. Although there
is considerable evidence that
projects have been delayed or
suspended, the lack of the usual
economic statistics makes it dif-
ficult to estimate the magnitude
of the retrenchment. This set-
back in Peiping's construction
effort will adversely affect in-
dustrial production and economic
growth over the next few years.
a marked ownturn
in the rate of construction, in-
cluding the apparent cessation
of work on many partially com-
pleted projects. Growing short
ages of construction materials
contributed to work stoppages
and resultant failures to
meet ambitious plans.
Accumulation of such dif-
ficulties in late 1960 was suf-
ficient to cause the regime to
retreat openly from its "leap
forward" program and institute
a policy of retrenchment for
1961. The central committee
plenum. in January ordered that
the scope of capital construc-
tion be reduced and more atten-
tion paid to raising quality
standards and filling gaps.
There are indications that,
shortly after this decision,
work on a variety of
projects throughout the
country came to a virtual
standstill.
The poor performance in
agriculture in 1959 and 1960,
reducing the ability of the
regime to pay for imports of
machinery and equipment for
installation in new or planned
projects, was an important
factor in a reduction in capital
investment for 1961. Poor har-
rnmetlt
vests also led the. =gp Ve'
31 Aug 61
to pull labor away from construc-
tion projects in order to boost
efforts in agriculture.
The many construction projects
of peripheral value started dur-
ing the "leap forward" period puta
heavy strain on Peiping's resources.
Transport bottlenecks inhibited
the smooth flow of materials; ma-
chinery in construction materials
plants was not adequately serviced;
and an acute shortage of raw ma-
terials, fuel, spare parts slowed
construction work throughout the
country. Shortages of building
materials, noted as early as mid-
1960, worsened during the balance
of that year and continued into
1961. In addition the widespread
food shortages reduced the ef- 25X1
ficiency of labor and, in some
cases, impaired the physical
'Ability of the workers to carry
a full workload.
The withdrawal of Soviet tech-
nicians probably had its most im-
mediate effect on construction by
disrupting the installation of
machinery and equipment in some
Soviet aid projects. The contin-
ued absence of these specialists
will particularly affect the de-
signing and installation phases
of complex projects such as those
in the defense industries, elec-
tronics, and atomic power. There
is little doubt, however, that
the Chinese would have had to 25X1
cut back their construction pro-
gram irrespective of the depar-
FIDENTIAL
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CURRENT INTELLIGENCE WEEKLY SUMMARY
YUGOSLAVIA'S NEW CONSTITUTION
The preparation of Yugo-
slavia's new constitution is ap-
parently proceeding on schedule.
According to Edvard Kard e.lj,
the regime's top ideologist., and
chairman of the commission charged
with writing the document, a
draft will be submitted late this
fall to parliament, which probably
will approve it before dissolving
prio3,,'to7.,the national elections
next April. Generally, the new
constitution will formalize the
changes made in the Yugoslav
system since the present con-
stitution, was last revised in
1953.
Although Kardelj in an ear-
ly August press interview attempt-
ed to limit discussion of the
new constitution to general
guide lines, he gave enough
details to suggest that it is
likely to engender some con-
fusion and opposition. Rep-
resentatives..tboparliament will
no longer be elected on a
geographic basis but on the basis
of still undefined economic cri-
teria.,. will probably
be resistance in some circles
to a projected provision limiting
elected terms of office. No
one will be allowed to serve two
consecutive terms in parliament
or to be, a member of the Federal
Executive Council (cabinet)--with
some exceptions not yet decided
--for two conaecutiv:e - election
periods. To ensure some conti-
nuity, half the number of depu-
ties will be elected every two
years.
The regime apparently be-
lieves any immediate disadvan-
tages will be offset by the long-
run benefits derived from
allowing more people to hold
office. Such compulsory
turnover would facilitate
the promotion of talented younger
.2officials. The regime probably
also expects to be able to.-,exercise
greater control over the selec-
t ion of deput ies,,most of whom now
will be chosen from candidates
nominated by local government
bodies. These local bodies are
more vulnerable to federal eco-
nomic and political pressures
than SAWPY, the mass political
organization which has nominated
candidates in the past.
The new constitution will
not be favorably received in
either the East or the West.
Kardelj has called the document
"another big step in the imple-
mentation of the program of the
League of Communists of Yugo-
slavia"-i-a_...program which Mos-
cow only recently again attacked
as the fullest existing expres-
sion of "revisionism." The con-
stitution will touch on such
concepts as "the withering away
of the state," workers' councils,
and economic planning, on all of
which Belgrade and Moscow dis-
agree,' Kardelj also stated that
there will be a chapter on the
"relations which ought to evolve
between socialist countries."
The West will find alien
and unacceptable the basic con-
cept of the Yugoslav constitution
that man has rights, not by vir-
tue of being a citizen, but only
by direct participation in the
economic life of the state.
Westerners will also find repug-
nant KardelJ's assertion that
"certain revolutionary restric-
tions of the so-called political
rights are still indispensable!';
i.e., the constitution will nei- 25X1
ther extend civil rights in Yu-
goslavia nor presage a weaken-
ing pf the secret police.
31 Aug 61 WEEKLY REVIEW
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
,CAMEROUN
The federation on 1 October
of the British trust territory
of Southern Cameroons and the
adjoining former French trust
area, now the Cameroun Republic,
will at first be only a paper
union in many respects. The
integration of many normally
federal activities will be de-
layed because of the great dif-
ference in the two areas, and
the two existing governments
will continue to function. Pres-
ident Ahidjo of the former French
area will become federal presi-
dent, Premier Foncha of South-
ern Cameroons vice president.
A federal assembly will in-
clude 40 deputies from the Cam-
eroun Republic and 10 from the
smaller British area. Control
of police is to be a local func-
tion; control of the armed forces
and responsibility for security,
however, will fall to the fed-
eral government. The talks be-
tween leaders of the two areas
on details of the federal opera-
tion have been smoother than ex-
pected.
The principal question mark
is whether the Cameroun security
forces, which become the federal
army, can successfully combat
the long-standing terrorism of
the Communist-influenced Union
of Cameroun People (UPC), which
sees Ahidjo as a French "puppet"
whom it hopes to overthrow.
Ahidjo now has two French-
trained light infantry battal-
ions totaling 1,500 men; a third
is to be ready by 1 October. He
also has a gendarmerie of 3,500
and a special militia of 2,000
raised to control the trouble-
some Bamileke tribal area, where
the UPC has been active. There
is a French force of 1,200 in
the Cameroun Republic, but Ahidjo
and the French are reluctant to
use it.
The only military force in
Southern Cameroons--a British
battalion--is scheduled to pull
out by 1 October, and be replaced
in the area by one of the three
Cameroun battalions,
CAMEROO
n~l~/Kum
d
OCEAN
S.
UPC terrorist activities, 25X1
endemic in the area since 1955,
have recently been stepped up
in both the republic and the
trust territory; a further up-
surge may occur even before 1
October. Recent forays by the
British forces against the ter-
rorists, who form the so-called
Kamerun Army of National Libera-
tion (ALNK), have revealed greater
coordination between bands, the
presence of Peiping-trained lead-
ers, some Czech arms, local
in Conakry, Accra, Casablanca.
armories producing crude fire-
arms, and eight to ten ALNK camps
along the border. Total ALNK
strength is estimated at 1,000-
3,000, and UPC exiles are active
and Cairo,
SECRET
31 Aug 61
WEEKLY REVIEW
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
President Alessandri, faced
with strikes involving about a
fourth of Chile's total labor
force as a result of the wage
policies,of his economic stabi-
lization program, has at least
temporarily strengthened his
position by bringing the Radi-
cal party, the country's large
center party, into his rightist
coalition government. The
government has placed Santiago
and other important industrial
areas under military rule.
The Radicals r.ee6ived the
cabinet posts of foreign re-
lations, economy, agriculture,,.
and public health. In an- ,',
nouncing the new cabinet on 25
August, the President said he
wanted to start immediate and
drastic reforms in the agrarian,
tax, and educational fields
as laid out in the Punta del
Este conference. Until recently
Alessandri had been unable to
win Radical support because
Conservative and Liberal backers
of his government were opposed
to the projected reform meas-
ures.
The Radical party's en;
trance into the government
coalition gives Alessandri the
strong parliamentary majority
needed to hold down wages, a17-
though it is likely that com-
promise wage increases may be
granted in an effort to concil-
iate the workers. He. may still,
however, face concerted and
violent opposition to the
stabilization plan. The Commu-
nist-dominated leadership of
Chile's principal labor confed-
eration, although it has little
influence with most individual
unions and federations, can be
expected to exploit the present
unrest.
Communist spokesmen in Con-
gress and elsewhere have also been
campaigning increasingly against
private foreign investments,
particularly the US-owned copper
companies, and have been joined
in this by various nationalistic
right-wing elements. Proposed
government legislation for the
exploitation of copper, Chile's
principal export, is apparently
designed to accommodate these
political pressures.
This apparent shift in
government policy seems to stem
chiefly from a rise in nationalism,
frustration over the lack of eco-
nomic progress, rightist resent-
ment over US stipulation that
socio-economic reforms are a
prerequisite for participation
in the Alliance for Progress, and
heightened interparty rivalry.
The minister of mines suggested
to US Embassy officials in
Santiago on 21 August that the
companies should reorganize to
become Chilean rather than US
companies in the interest of their
public and political relations.
The next day the Chamber of
Deputies voted unanimously to
appoint a committee to deter-
mtne whether the US companies'
methods of doing business
serve "the best interests of
Chile."
In a separate development,
the American copper companies
may be forced to fill a Chilean
Government contract now under
negotiation to sell 60,000
tons of copper--about 10 per-
cent of Chilean production--
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CURRENT INTELLIGENCE WEEKLY SUMMARY
NORWEGIAN ELECTIONS
Campaigning for Norway's
regular quadrennial elections on
11 September has centered on the
domestic record of the Labor
party, which has governed with-
out interruption since the war.
It may suffer some losses but
is expected to retain its ma-
jority in the 150-seat chamber.
The country is generally
prosperous,and most Norwegians
appear reasonably satisfied
NORWEGIAN PARLIAMENT
(1957 ELECTIONS)
CHRISTIAN LIBERALS
CENTER PARTY 15
(AGRARIAN) 12
15
CONSERVATIVES
LABOR PARTY
78
with the government's social
welfare and economic expansion
programs, despite high taxation
and extensive governmental reg-
ulations. There also appears
to be widespread support for
the government's policy of com-
bining NATO membership and a
modest defense effort with ex-
clusftfl trr foreign troops and
atomic weapons from,Norwegian soil.
Labor's prospects are further
enhanced by the inability of
the divergent opposition parties
to agree on any alternative
program or to cooperate? except
in a few instances, in electoral
alliances.
There is, however, latent
neutralist and pacifist senti-
ment in Norway, which is being
exploited by the new Socialist
People's party, a left-wing
group which was formed in
April largely by dissident Labor
party intellectuals and is at-
tracting some support among
Liberals in the Oslo area. The
new party is seeking to capital-
ize on the widespread concern
over an atomic war Involving
Norway and has denounced as equiv-
ocal the the government's position
of reserving the right to review
its declared policy against nu-
clear weapons in Norway. The
Communists, who received about
3,4 percent of the popular vote
and one mandate in parliament
in the 1957 election, are not
expected to improve this
position.
Prime Minister Gerhardsen,
in his initial election speech
on 20 August, implicitly recog-
nized the strength of pacifist
sentiment in Norway by stressing
the need for negotiation on the
Berlin issue. Gerhardsen's sub-
sequent statement that Norway's
joining the European Economic
Community would be considered
after the elections reflects
in part a desire to pacify
those Norwegians who dislike
close association with Germany
and France.
In view of the proportional
representation system and Labor's
slim margin in several electoral
districts, the governing party
might lose its absolute majority,
but it would still be the dominant
element in any postelection gov-
ernment because of the disunity
among Its opponents. Should the
Socialist People's party make a
strong showing--indicating a
resurgence of neutrality and
pacifist sentiment any post-
election government, whether
Labor or coalition, would be
influenced to proceed more 25X1
cautiously in defense questions,
and even modest increases in
defense appropriations would
probably be precluded.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
ITALY
The instability of Ital-
ian Premier Fanfani's minority
Christian Democratic govern-
ment has been highlighted by a
new controversy touched off in
mid-August by Giuseppe Saragat,
Social Democratic leader. Sar-
agat on 18 August threatened to
withhold his support and thus
bring down Fanfani. He demanded
formation of a center-left gov-
ernment dependent on the sup-
port of Pietro Nenni's Italian
Socialist party. (PSI).
Only a month earlier, Sar-
,agat, in debate over a vote of
confidence forced by the PSI,
had argued that it was not ma-
ture enough to participate in
a coalition government. His
about-face is probably in part
a tactical move to quiet dis-
satisfaction in his own party
over his mid-July statement,
as well as a bid for broad
Socialist support in next April's
presidential election.
His more basic concerns
may be that continuing to sup-
port a government of the center
might reduce his party's chances
in the next general elections,
and that the Christian Demo-
crats, unless he takes the ini-
'tiative, might bypass him and
COMMUNITY MOVEMENT I
DEMOCRATIC SOCIALISTS 17 6 REPUBLICANS (PRI)
(PSD)) 1
seek their own modus vivendi
with the PSI--as hinted in a
recent speech by Aldo Moro,
secretary general of the party.
For.the first time Sar-
agat has rejected the Christian
Democrats' argument that the in-
ternational situation requires the
parties supporting the Italian
Government to remain loyal, and
he cites the similarity of Nenni's
and the Italian Government's
positions on Berlin as indicat-
ing the eligibility of the
Socialists to broaden the gov-
ernment's majority.
The small Republican party
supported`Saragat's call for ac-
commodation with the PSI. How-
ever,'Liberal party leader Mala-
godi, who periodically threatens
to withdraw support from the gov-
ernment, responded quickly to
Saragat by asking for a full-
scale parliamentary debate--
which could well lead to a vote
of confidence--probably hoping
either to call Saragat's bluff
or to push him and Fanfani into
a precipitate attempt--like that
of April 1960--to form a center-
left government.
The US Embassy in Rome be-
lieves that the "situation will
VOTE CONFIRMING
FANFANI GOVERNMENT
5 AUGUST 1960
Q SUPPORT
Q ABSTAIN
E OPPOSITION
5-INDEPEND'T. MONARCHISTS
-NEO-FASCISTS(MSI)
'In the past year, ten deputies have quit the
PDI (monarchists); one now votes with the PSDI.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
be calmed." Parliament, now
in summer recess, is not sched-
Pled to reconvene until late
September or early October. In
any case, a vote of confidence
is not likely before the 23-25
September meeting of the Demo--
cratic.Sbcialists'central com-
mittee. Fanfani would prob-
ably like to avoid such a vote
until after the Nenni Socialists'
central committee meeting on 1
October and the Christian Demo-
crats' own party congress this
December.
President Gronchi, however,
may be tempted to cite the cur-
rent uncertainty as an excuse
to dissolve Parliament. Nation-
al elections are not mandatory
before 1963, but Gronchi prob-
ably believes that a new parlia-
ment might be more likely than
the present one to re-elect him
next spring. Unwillingness to
face national elections or aid
Gronchi, however, has thus far
kept all the government's sup-
porters in line.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SPECIAL ARTICLES
RECENT TRENDS IN SINO-SOVIET RELATIONS
The meeting of world Com-
munist parties in Moscow in No-
vember1960 closed one phase of
the Sino-..,Soviet dispute--that
of open and violent recrimina-
tions. However, the decisions
reached there and the resolution
adopted have not led to any
fundamental resolution of dif-
ferences. The relationship
between the two powers since
November has been an uneasy
and erratic one, cooperative
at some times and places, com-
petitive at others.
The Ideological Argument
Immediately after publi-
cation on 6 December of the
Moscow Declaration which emanated
from the November meeting, So-
viet and Chinese media began
to offer tendentious inter-
pretations of it. By late
January both Moscow and Peiping,
without resorting to polemics,
had reaffirmed their positions
on virtually all the issues of
strategy which had been in dis-
pute before and during the
conference.
The principal role in re-
affirming, amplifying, and
clarifying Soviet positions was
played by Khrushchev himself,
in his report on 6 January to
a party audience in Moscow. He
is reported to have criticized
the Chinese heavily--to have
said that they were "stupid"
but that it was necessary to
reach an agreement with them.
The published version contained
only a defense of Soviet views
without vituperation.
Since then, the Soviet
party has been restrained in its
treatment of disputed questions
of strategy. In the first seven
months of 1961, Moscow's line
has continued to differ signifi-
cantly from Peiping's in references
to the destructive consequences of
nuclear war and the possibility of
averting it, in maintaining the
need for "peaceful coexistence,"
in reiterating the view that
negotiations with the West can
be fruitful, in agitating for
"universal disarmament" and a
"world without arms and without
wars," in holding to the doctrine
that Communist parties through-
out the world should cooperate
with "democratic" forces for
limited "democratic" aims. How-
ever, none of these subjects has
been treated polemically. The
trend during this period, more-
over, has been toward a more
militant propaganda stance
toward the West.
The Chinese party in the same
period has also found occasion to
reaffirm--also without argumenta-
tion--all of its own positions.
Several articles have explicitly
reaffirmed the validity and con-
tinuing importance of Peiping's
Lenin Anniversary articles of
April 1960, which set forth
systematically its differences
with Moscow on world Communist
strategy. Chinese views on the
balance of power were reaffirmed
in a much-advertised article
on "not fearing ghosts," in
comment on the failure of the
Cuban venture as showing again
that the United States was a
paper tiger, and in assurances
to various visitors that the "east
wind" was prevailing. The Cuban
venture and the anniversary of
the Korean war were used to argue
that the Chinese party had been
right in the full range of its
positions on local wars. The
fighting in Algeria and Angola
served as texts on the importance
and example of "liberation" wars
and the need to support them.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Peiping's audience has
often been reminded of the immu-
tably evil character of the
United States and of Mao Tse-
tung's estimate that the Kennedy
administration is "even worse"
than its predecessor. In join-
ing the Soviet quarrel with Nasir
in May and June, Peiping in
effect reminded Moscow that the
Chinese had for two years been
contending that the UAR leader
was a bad risk and that aid to
him would harm the cause of the
deserving Arab Communists. The
anniversary of the Paris Commune
was the occasion for emphasizing
the need for armed struggle in
gaining and keeping power, and
Japanese Communist visitors
were praised for their role in
leading violent mass actions
in the past two years.
In its latest pronouncement
--the draft of the new Soviet
party program, released on 30
July--Moscow has followed the
recent pattern of standing firm
on most of the positions earlier
disputed with Peiping while re-
treating somewhat on others.
Despite the minor modifications
which bring the Soviet viewpoint
closer to Peiping's in certain
instances, the Soviet program
poses a dilemma for the Chinese
leaders. They have not yet
originated any comment on it,
although they have reprinted
a TASS summary.
Foreign Policy Coordination
In addition to this basic
one, the Chinese apparently made
two other decisions during or
soon after the Moscow conference
which are of importance in
judging bloc foreign policy
since that time. Having been
heavily criticized at the
conference for openly attacking
the Soviet conduct of foreign
policy (rather than attempting
to negotiate differences in
bilateral meetings), the Chinese
apparently agreed not to resume
such attacks. Although there
is evidence that some of Moscow's
foreign policy initiatives in
1961 have not had Peiping's whole-
hearted approval, there has been
no recurrence of its vitriolic
comment on Soviet moves.
Further, the Chinese seem
to have agreed at Moscow to
another attempt by Khrushchev
to probe the intentions of the
West--particularly those of the
new US administration--through
personal confrontations. This
is not to say that the Chinese
were agreeable to the kind of
unorthodox activity that
characterized Khrushehev'a
approach to President Eisenhower,
or even that they endorsed a
new initiative, but they apparent-
ly promised not to attempt to
scuttle any new negotiations
while they were being launched.
Although the concept of
"peaceful coexistence" was held
high in the Moscow Declaration
and the way was left open for new
negotiations with the West, Khru-
shchev's flexibility in operating
within these general policy lines
was constrained by the bitter
condemnations of Western (particu-
larly American) "imperialism"
and the emphasis on the need to
support anticolonial actions in
underdeveloped areas.
The contradictions inherent
in Moscow's support for revolution-
ary situations while it attempted
to carry forward negotiations
with the West became apparent
almost immediately. During
December 1960 and January 1961,
the Soviet Union, through propa-
ganda and diplomatic feelers,
advocated an early meeting
between Khrushchev and the new
US President. At the same time,
however, the rapidly developing
situation in Laos gave the Soviet
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Union an opportunity it could
not afford to miss. By ag-
gressively pursuing common bloc
aims in Laos, the Soviet Union
deterred the Chinese from
charging Moscow with departures
from the December 1960 declara-
tion (as Peiping had persistently
done with regard to the November
1957 declaration), but at the
same time it reduced the pos-
sibility of early and friendly
meetings with the United States.
The Soviet Union's tough
tactics continued through the
next six months. In February,
Patrice Lumumba's death brought
increasingly violent propaganda
attacks on UN policy and on
Secretary General Hammarskjold.
In March, the USSR virtually
ended any chance of agreement in
the nuclear test ban talks by
introducing its "troika" concept.
In April, in the wake of the
Cuban invasion which found
Khrushchev offering to support
Castro "with all possible aid,"
the latest phase of the Berlin
crisis developed. By the time
Khrushchev met with President
Kennedy in June, there was
little possibility that the
result would be a "spirit of
Vienna."
The Chinese have also wel-
comed Khrushchev's challenge to
the structure of the UN. Last
fall, they not only failed to
endorse his activities at the
General Assembly but chided him
for being pushed around by the
United States. During 1961,
however, Peiping has supported
the Soviet line at the UN and has
described it as "fruitful" in
exposing the aggressive nature
of imperialism. Khrushchev's
conduct of the Berlin crisis has
particularly pleased the Chinese,
who have consistently supported
the Soviet deadline on a Berlin
settlement and have emphasized
the militant features of
the Soviet remier's`-,state-
ments.
The only Soviet initiative
in 1961 to which the Chinese have
been cool was Khrushchev's meeting
with President Kennedy. Peiping
has remained concerned about such
approaches; last January's Foreign
Ministry briefing noted that the
USSR was "anxious" to improve its
relations with the US and that
China must be particularly on
guard against a Soviet-Western
"detente." Peiping's public
response to the talks at Vienna,
therefore, was quite reserved.
Thus, while the Soviet
Union has continued throughout
this period to maintain in
abstract doctrinal terms that
the horrors of nuclear war are
such that "peaceful coexistence"
is the only answer, that war
is not inevitable, that the
peaceful road to power is
preferable to the violent, its
specific actions have given the
Chinese little to complain
about.
The Chinese, while similarly
maintaining their doctrinal
positions, have generally sup-
ported all major Soviet diplo-
matic moves during 1961. In
Laos, the bloc's principal of-
fensive during the first half
of 1961, there have been some
indications of possible Sino-
Soviet disagreement over the
timing and terms for a settle-
ment, but both sides have been
able to make adjustments in the
interest of a coordinated bloc
policy.
Relations in Other Fields
Thus far in 1961 the Sino-
Soviet economic relationship
.has seemed correct, but decidedly
cool. Apparently content with ',
the damage done by the withdrawal
of its technicians last summer,
Moscow is not known to have taken
additional measures to contribute
to China's economic difficulties.
Nor has it done anything,.on the
other hand, to assist.
The withdrawal of Soviet
technicians disrupted a program
of Chinese industrialization
for which the USSR had promised
the necessary machinery, blue-
prints, and experts to build
and equip 291 major industrial
plants by 1967. Only half of
these plants had been completed
when the technicians left., Since
then, the program has been
seriously slowed down, especially
in the fields of military industry
and atomic energy, which depended
heavily on the Soviet technicians.
ENTIAL
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CURRENT INTELLIGENCE
The Soviet aid program--
or what remained of it--was
the chief topic of the "eco-
nomic" and "technical-scjentif-
ic"' agreements signed in Moscow
on 19 June 1961. The talks
leading to these agreements had
been going on since February,
apparently with meager results.
Neither the communique signed
by both parties nor Chinese
commentary on the agreements
mentioned Soviet aid projects
or acknowledged, that Soviet aid
still exists in any form. So-
viet officials insist that aid
continues, but they have not
elaborated.
There is a paucity of in-
cations of Soviet military de-
liveries to China thus far in
1961. Although the USSR has
continued to deliver petroleum
products, no shipments have
been noted of major equipment,
such as military aircraft, naval
vessels, arm trucks, tanks, or
artiller
Apparently many of the
Soviet scientists in China were
withdrawn along with the eco-
nomic and military specialists
put in proportionately fewer
numbers. Soviet assistance
in scientific research and
development activities appears
to have continued at a. reduced
level. The program for training
Chinese science students in the
USSR (which had shifted to
graduate students only in 1957)
is still going on, as is that
for purchasing bloc scientific
and medical instruments for
use in China. Both programs,
however, have been limited
by foreign exchange problems.
With respect to the mil-
itary research programs, how-
ever, Soviet aid has been
drastically reduced if not
halted. Moscow's assistance
to Peiping's atomic energy pro-
gram apparently has not been
resumed, in terms of either
engineers or material aid.
SUMMARY
Chinese
weapons development and produc-
tion programs have apparently
bogged down in 1961 for lack of
Soviet cooperation.
Eastern Europe and the Dispute
The Sino-Soviet com-
petition for influence among
members of the bloc has con-
tinued to be best illustrated
in Albania, now privately de-
scribed by Eastern European
leaders as "Moscow's Cuba.
Immediately following the Moscow
conference, East German party
chief Walter:.Ulbricht publicly
criticized Tirana's delegation
for its behavior at Moscow,
and Albanian party boss Enver
Hoxha soon replied that he would
not bow on "matters of principle."
During the Albanian party
congress in February, Hoxha bel-
ligerently reaffirmed the party's
pro-Chinese positions, and the
congress was-the occasion for
another-confrontation of the
parties along the lines of the
Moscow conference. In March,
the same month that the Chinese
agreed to provide Albania with
$125,000,000 worth of economic
aid, an Albanian trade delegation
obtained credit in the European
satellites but apparently did
not even approach the USSR.
An Albanian show trial of
"spies and traitors" last May
was in fact an anti-Soviet
demonstration. It was followed
by Soviet evacuation of the
important submarine base at
Vlone and by indications that
all Soviet military forces might
he leaving Albania. Moscow also
ordered the Albanian military
attach and certain Albanian
students to leave the USSR, and
Tirana expelled the Soviet mil-
itary attache and some military
advisers. Albania may not be
fully participating in the
activities of the Warsaw Pact
or of the bloc's Council for
Mutual Economic Assistance (CEMA).
The leaders of all other
Eastern European states have
continued to support the Soviet
party in the dispute, have taken
measures against factionalism in
their own parties, and have
exerted pressures on the Chinese
and especially the Albanians.
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CURRENT INTELLIGENCE WEEKLY SU
These pressures have included
attacks by party leaders on
Chinese and Albanian positions,
censorship of news about China
and Albania, restrictions on
both official and unofficial
contacts, and a reduction--but
not a cessation--of trade and
technical aid.
The Asian Satellites
Sino-Soviet competition
for influence in the three
other Asian Communist states--
two of which, North Korea and
North Vietnam,, were equivocal
at. the Moscow conference--bass
seemed to increase since the
conference. Although Soviet and
Chinese policies toward these
states have complementary as
well as competitive aspects,
the impression has been ,that
each side is acting quickly to
match the initiatives of the
other.
Last Decembrer, Moscow
provided North Vietnam with
$112,000,000 in loans and
grants for the new economic
plan, The following.month,
Peiping gave Hanoi a loan of
$1,57,000,000. In late 1960,
Moscow had topped a Chinese
credit of $100,000,900 to
North. Korea by canceling $190-
000,000 of Pyongyang's debt to
the USSR.
On 6 July 1961, Moscow and
Pyongyang concluded a mutual
defense pact. In an apparently
hasty decision, the Chinese in-
vited Kim II-sung to stop over
on his way home from the USSRp
be was given a lavish welcome,
and on 11 July Peiping and
Pyongyang signed a mutual de-
fense pact virtually identical
to the one Kim had just signed
in Moscow. Like the latter
accord,. the Peiping-Pyongyang
pact mentioned economic aid,
suggesting a possible Chinese
intention to match the aid Kim
was promised in Moscow.
The Chinese have not
attempted to match the most
recent (April 1961) Soviet aid
to Outer Mongolia. A Chinese
credit,of $50,000,000 to Ulan
Bator in 1960 was soon topped
by a Soviet o..fer three times
as large, and the Mongolian party
lined up. solidly with the
Soviets at the Moscow conference
and has continued to do so;
the Chinese now may feel
that Mongolia is a bad.invest-
ment.
Nonbioc
Parties and Fronts
The Chinese challenge
to Soviet authority in the
world Communist movement was
a principal reason for the
convocation of the Moscow con-
ference in November 1960.
Prior to that conference, both
Moscow and Peiping lobbied
strenuously for support among
other. Communist parties. In
contrast, thus far in 1961 there
has not seemed to be an acute
competition for influence with
the nonbloc parties. The Soviet
and Chinese parties have ap-
peared instead to be strengthen-
ing their positions with the
parties which they already
dominated, rather than moving
aggressively to try to capture
the followers of the other.
The Sino-Soviet dis-
pute on the proper use of
the world Communist fronts
has apparently continued,
however, in the early months
of 1961, The Chinese insisted,
particularly in meetings
sponsored by the World Peace
Council, the International
Union of Students, the World
Federation of Democratic Youth,
and the Afro-Asian Solidarity
Organization, that the fronts
should openly charge US
imperialism with the prime
responsibility for all current
crises and should work primarily
to promote militant anti-im-
perialist, national liberation
struggles, They wished to de-
emphasize those front cam-
paigns which promoted dis-
armament and publicized the
benefits non-Communists might
gain from peaceful coexistence.
Soviet and pro-Soviet partic-
ipants in meetings of these
organizations tried to main-
tain a certain moderation in
the language of resolutions,
to avoid undue emphasis on
anti-American formulas, and
to give priority to appeals for
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struggles for disarmament and
peaceful coexistence. However,
the Soviets have given greater
attention than before to ex-
pressing solidarity with anti-
colonial and national libera-
tion struggles along lines long
advocated by the Chinese.
The clearest evidence of
continuing.Sino-Soviet rivalry
in the fronts has been in or-
ganizational developments. In
the World Federation of Trade
Unions, steps were taken to
set up a three-man presiden-
cy--a Soviet, a Chinese, and an
Italian known to be anti-Chi-
nese. A similar but larger
"collective presidency" has
for some time existed in the
World Peace Council, assuring
pro-Soviet control of the or-
ganization's programs. In the
World Peace Council and the
Afro-Asian Solidarity Committee,
Chinese members--perhaps frus-
trated in efforts to dominate
the organizations--have avoided
participating in the work of
the secretariats.
Roth powers apparently rec-
ognized the dangers inherent
in the intemperate and open ex-
changes of last year, and the
limited agreements which were
reached at the Moscow confer-
ence have served to keep di-
rect attacks to a minimum.
However, the fundamental problem
n--that of authority within the
world Communist movement--re-
mains unresolved, and each side
is apparently determined to
maintain its ground. As a
consequence, competition can
be expected to be most marked
in each party's activities
within the Communist movement,
as each seeks to maintain and
expand its support in and among
the other parties. This com-
petition will probably be
keenest within the Asian par-
ties, where both Soviet and
Chinese influences are strong,
The Chinese view the par-
ties of the underdeveloped
areas as their natural allies
against the developed, European
Communism of the USSR and will
probably.work hard to mobilize
this potential on their behalf.
China will almost certainly
continue its support of Albania
--support which may have to be
increased if Khrushchev takes
further measures open to,'him
to weaken that satellite.
The next big test within
the movement will probably come
in October, when delegates from
all the parties attend the 22nd
Soviet party congress, which is
to approve the party's 20-year
program. The published draft
pays a certain deference to
"national peculiarities," but
it is infused with an author-
itarian spirit and is clearly
meant to reassert and project,
forward the proposition that
Soviet experience is univer-
sally valid. The model of
socialism, it says, is to be
found in the history of the
USSR, and the detailed defin-i--
tion of Communism can be found
in the Soviet program itself.
These are propositions the
Chinese cannot accept. Their
response at the congress may be
moderate, but they will try in
various ways to limit the appli-
cability of the congress pro-
nouncements to the Soviet party.
The Soviets, for their part,
will of course seek to have as
many parties as possible endorse
the theses in a way which stresses
their universality. If either
the Chinese protest or the Soviet
insistence is too strong, it is
possible that another internation-
almeeting,along the lines of the
November 1957 and November 1960 con-
ferences, will take place during or
of ter the congress.
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When the negotiations open
in October on Britain's appli-
cation for membership, the Eu-
ropean Common Market (EEC) will
already be facing other issues
of vital. importance to its fu-
ture. Ostensibly economic,
most of these problems have far-
reaching political implications,
and several affect basic objec-
tives of the organization. While
the EEC has been making notable
advances in the last four years,
particularly in the field of
tariff reductions, these other
measures of nearly equal impor-
tance have been delayed, and
some now have become the subject
of major 'dispute, Should the
present six member countries be
tempted to delay further be-
cause of the impending talks
with London, they would risk
losing the momentum which is an
essential element in the drive
for European union.
The Agricultural Problem
The most complex and po-
tentially most disruptive of all
these problems is the question
of a common agricultural pol-
icy.:The EEC, unlike the Outer
Seven, provides for full cover-
age of the farming industry, in-
cluding gradual creation of a
single market for farm produce,
regulation of competition, and
eventual replacement of national
with community marketing organ-
izations. Article 43 of the
EEC treaty gives the EEC.Com-
mission the task of drafting a
common policy'to achieve these
general objectives, but imple-
mentation is subject to spe-
cific directives issued by the
counci.l.: Until,1966, such di-
-require the unanimous
approval`of the council's na-
tional`representatives--there-
after,'a prescribed weighted
majority is sufficient.
Since 1958, Commissioner
Mansholt, the responsible EEC
official, hap been trying to
produce a program which would
reconcile conflicting national
interests with the facts of Eu-
ropean agriculture--character-
ized by wide variations in ef-
ficiency, major differences in
CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
ECONOMIC ISSUES IN THE COMMON MARKET
price levels, and a panoply of
protective devices. The result
is a complex plan which, while
varying from product to product,
relies heavily on the mechanism
of variable import levies--in
effect, protective tariffs.
These levies would elim-
inate the difference between im-
port and domestic prices, or,
in some cases, differences in
producers' costs. In intra-EEC
trade, the levies would be
progressively reduced and ulti-
mately abandoned as EEC prices
became harmonized. For imports
from abroad, however, they
would be the principal device
for supporting EEC prices and
maintaining a measure of pref-
erence for the Common Market
producer. If these prices are
supported at a high enough level,
competition from abroad could
be eliminated--but at the risk
of encouraging overproduction
within the EEC.
Status of the Mansholt Plan
Despite the Initial crit-
icism which greeted it, the
Mansholt Plan was endorsed in
principle at a council meeting
last December, and the commis-
sion has drafted detailed pro-
grams for many of the products
to which it applies. None of
these programs has yet been
authorized, however, and sev-
eral basic decisions--such as
the criteria for minimum prices--
are still outstanding.
The impasse is largely a
reflection of the differing in-
terests of the major exporters
and importers of foodstuffs
within the EEC. The exporting
countries--France, the Nether-
lands, and Italy--have long in-
sisted on principle that, if
the EEC established free trade
for industrial products only,
West Germany would have intol-
erable commercial advantages.
Moreover, as the discontent of
the French farmer has flared
into violence, De Gaulle has
had increasingly pressing polit-
ical reasons for demanding im-
mediate access to the German
market for French farm products.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Thus far Bonn has done lit-
tle to meet the demands of its
EEC partners. The Mansholt
plan would mean an ultimate re-
duction in German farm prices
and willingness to rely on less
rigorously protective devices
than heretofore. Especially
during the campaign for West
Germany's national election on
17 September, Chancellor Ade-
nauer has been anxious to mol-
lify his own farmers, who, po-
litically powerful themselves,
are supported by commercial
interests which feel that a
reduction of Germany's food im-
ports from non-EEC countries
might lead to a corresponding
reduction of German industrial
sales outside the Common Market.
Observers generally agree
that the only answer in sight is
an eventual retreat by Bonn,
and the other EEC countries are
counting increasingly on a post
election breakthrough. This
possibility, however, now has
been complicated by the uncer-
tain impact of Britain's and
Denmark's bids for EEC member-
ship. The EEC-Danish talks are
likely to center on continued
access of Danish foodstuffs to
the German market. In Britain's
case, one of the major obstacles
to EEC accession is the problem
of amalgamating the Continental
system of farm price supports
with London's system of defi-
ciency payments. Curiously,
both Bonn and Paris are appar-
ently counting on Britain's
support. The French feel that
London shares their interest
in a moderate level for farm
prices, while the Germans see
Britain as a potential new out-
let for French surpluses.
Transitional Problems
Adding both heat and ur-
gency to the farm issue is its
close connection with the EEC's
problems in moving next January
to the second stage of the tran-
sitional period. The EEC treaty
provided for the establishment
of the Common Market over a
period of 12-15 years, divided
into three stages, each with a
"coordinated group of activities
which must be undertaken and
pursued concurrently." Passage
to the second stage is contingent
on unanimous agreement that the
"main aims" of the first stage
have been effectively achieved.
In the absence of such agreement,
the first stage would be auto-
matically extended for as long
as two years, after which major-
ity opinion could prevail.
Major psychological, polit-
ical, and economic importance
now attaches to the advance to
the second stage. At the end of
this stage,'the EEC becomes
more supranational" through
the extension of the majority
rule to a greater number of
council decisions. Even more
important, much of the success
of the EEC has been due to its
provision of a timetable and to
the probability that the actual
transition time would be short-
er than the minimum period pro-
vided for. Reversal of this
expectation might well arrest
the rapid adjustment of indus-
try to a larger market--one of
the most important consequences
of the EEC.
This danger is especially
real, because in the last few
months the EEC's program for ac-
celerating the implementation
of the Common Market has be-
come increasingly enmeshed with
the same problems which have
arisen over the transition to
the second stage. Under this
program, approved in 1960, the
10-percent reductions in EEC
internal tariffs scheduled for
last January and next December
were both to have been doubled.
Added to the 10-percent reduc-
tions effected in January 1959,
this would mean a 50-percent
reduction in intra-EEC tariffs
by the end of this year--rather
than at the end of 1964 as pro-
vided by the treaty.
After considerable contro-
versy, the first doubling has
been carried out, but approval
of the second now is deadlocked
in the EEC Council, with Bonn
again. a ; minority of one. West
Germany contends that since
business conditions are favor-
able, the 20-percent reduction
in tariffs should be carried out
as planned--provided it is con-
fined to industrial items. None
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CURRENT INTELLIGENCE WEEKLY SUM
insufficient and is pressing
for early agreement on the so-
cial security rules--for example,
for frontier, migrant, and sea-
sonal workers.
With strong support from
the Netherlands, Italy also at-
taches special importance to
the EEC provision for a common
transport policy. Rome is pri-
marily interested in easing na-
tional restrictions on highway
transport, and its demands can
probably be met by next Decem-
ber. The Netherlands, however,
with its favorable geographic
location and its already exten-
sive transport services-through-
out the EEC, is more concerned
with the rules for the general
regulation of transportation,
the chances for which are prob-
ably nil, The relevant treaty
provisions in this case are
vague; their coverage (e.g., of
pipelines) is disputed; and the
government interests involved
are deeply entrenched.
of the other countries is pre-
pared to do this, however. Ac-
celeration, like transition,
they say, is contingent on equiv-
alent sacrifices and opportuni
ties--in other words, on common
agreement that all the "main
aims" of the EEC are being
achieved at an approximately
equal pace.
Obstacles to Transition and
Acceleration
As might be expected, the
list of such aims is headed by
the agreement on a farm policy,
but there are a number of other
items also Of considerable im-
portance and delicacy.
Monopoly Practices and Cartels
Finally, within the last
few weeks Bonn has requested
that by the end of the year the
EEC reach an agreement on regu-
lations for the control of car-
tels and the abuse of monopoly
positions--rules which have
been overdue since last January.
Much of this delay is again
attributable to the EEC treaty,
which combines a strong state-
ment of anticartel principle
with a major loophole and a
complete absence of enforce-
ment machinery. For example,
the treaty "prohibits" enter-
prises from taking "unfair ad-
vantage" of dominant positions
and declares null and void any
agreements among them which have
as their object the restriction
of competition. Mergers and
concerted practices are permitted,
however, if they contribute to
an improvement in the production
or distribution of goods or pro-
mote technical or "economic"
progress. Moreover, pending
the issuance of implementative
regulations, enforcement is en-
trusted to the member states--
some of which do not have anti-
cartel laws.
For example, the EEC treaty
confers a general obligation on
its members to foster improve-
ment in working and living con-
ditions of labor, harmonize
their social systems, and col-
laborate generally in the "so-
cial field." These provisions
are so vague and far-reaching
that none of the members really
expects--or probably wants--
their early implementation.
Paris, however, which has long
maintained that its more costly
system of "social legislation"
places French industry at a
competitive disadvantage, has
insisted on the enforcement at
least of Article 119, which spe-
cifically obliges the EEC coun-
tries to "apply the principle"
of equal pay for men and women.
A working group has been set up
to see what can be done to meet
the French demand, but agreement
seems far from certain.
Italy, too, has cited as
"main aims" certain provisions
initially placed in the EEC
treaty at Rome's behest and in-
tended to provide an outlet in
the Comm?n-Market for surplus
Italian workers. Last March,
the EEC instituted a special
program to train some 9,000
Italians for work in West Ger-
many and the Netherlands, and
in June, after months of debate,
regulations were approved look-
ing toward freer movement of
workers and eventual creation
of a single market for labor.
Important though they are,
Rome considers these measures'..
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CURRENT INTELLIGENCE WEEKLY 'SUMMARY
As a result of these con-
tradictory provisions, which
reflect the equivocal attitude
Europeans have traditionally
taken toward cartels, discus-
sion of enforcement machinery
during the past year has tended
to be a dialogue of the deaf.
In general, West Germany and
the Netherlands support the EEC
Commission's proposals which
require enterprises to notify
the EEC of existing cartels
and to seek prior authorization
of new ones and which give the
commission powers of investi-
gation and enforcement. France
leads the opposition, charging
that the notification system
is unworkable and proposing
instead a complaint procedure.
Paris wants a wider participa-
tion~of the member states in
the enforcement procedures and
apparently also fears that the
commission's plan would bear
down harder on French cartels
than on the "giants of German
industry."
The EEC Assembly is sched-
uled to debate these issues at
a meeting in October, and the
council will make another at-
tempt'to reach a compromise in
mid-November. Prospects for any
advance at that time are prob-
ably still poor, although there
have been some signs lately of
increased appreciation of the
importance of the cartel problem
to the EEC. France's influential
Le Monde recently wrote that
Eat is -really at stake is
whether "the new world of the
Common Market, freed from its
customs barriers, now is to be cut
up by the frontiers of cartels."
Conclusions and Prospects
The growing conviction of
the EEC countries that the Com-
mon Market iq in fact an attempt
to create a kind of new European
world may in fact be the basic
reason for the relative optimism
among EEC observers that in the
Yong run there may be no alter-
native to agreement on most if
not all these issues, difficult
though this may be. While the
eventual dreation of a full
customs union is a key feature
of the Common Market, its authors
fully recognized that it is
difficult in a modern industrial
CONFIDE
society to operate such a
union without proceeding to full
economic (and political) unifi-
cation. In a number of-instances,
it was impossible to agree in
detail on the steps to be taken,
so the treaty drafters had to re-
sort tm vague statements of:objectives.
As tariff barriers have
fallen, however, it has become
not only more imperative to put
flesh on the treaty's bones, but
also more difficult for any one
member to block an agreement in-
definitely. Thus, possibly at
midpoint in its transition period
and before its central institu-
tions have yet become established,
the EEC is already being com-
pelled to grapple with problems
which have been among the most
difficult in American history--
regulation of interstate com-
merce, enforcement of antitrust
legislation, and control of com-
petition in agriculture. How-
ever, the creation of new agencies
to accomplish these ends would
in turn enhance the need for more
effective central institutions
to control them.
The last few weeks have pro-
duced another significant example
of this cumulative effect of the
EEC and of its importance to the
objective of European union:. The
monetary provisions of the EEC
treaty are perhaps among its
weakest, no doubt because con-
trol over money is the last bas-
tion of national sovereignty.
However, only four years after
the treaty became effective,
EEC Commissioner Marjolin has
succeeded in placing on the
agenda of the 8 September meet-
ing of the EEC finance ministers
Jean Monnet's recent proposal for
the pooling of the Common Mar-
ket's monetary reserves. In
Marjolin's view, moreover, a
"financial and monetary under-
standing" should accompany Britain's
entry into the European communities.
As he and Monnet have noted, the
EEC's total monetary reserves now
are.. roughly five times as large
as Britain's, the EEC's external
liabilities are small compared
with London's, and the EEC is now
in a position to ease the periodic
pressure on sterling by assuming
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