CONSULTANT'S REPORT ON THE INTELLIGENCE SUPPORT FOR ECONOMIC WARFARE (REVISED 5 OCT 1954)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP69-00642R000100070001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 118
• Document Creation Date: November 9, 2016
• Document Release Date: March 3, 1999
• Sequence Number: 1
• Publication Date: October 5, 1954
• Content Type: REPORT

CONSULTANT'S REPORT
ON THE
INTELLIGENCE SUPPORT FOR ECONOMIC WARFARE
(Revised 5 Oct 1954)
-Copy #1
RETURN M
SECRET ARCHIVES & REC01,10S CEN
IMMEKTELY AFTER USE
JOB,_62:2ABOX
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STANDARD FORM NO. 64 :PROD UCTION
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0 tttce Memorandum ? UNITED STATES GOVERNMENr
TO Assistant Director, ORR DATE: 20 October 1954
THRU t Chief, Coordination
PROM : Acting Chief, D/E/RR
suaywn Consultant's Report on "The Intelligence Support for Economic Warfare."
1. Transmitted herewith is a copy of the above cited report.
2. The purpose of the report is to provide a background
paper for the consideration of economic warfare planning, with
particular reference to the intelligence support required. In
the perspective of the experience in both world wars and the cold
war to date, it points out the comprehensive nature of economic
warfare intelligence, the manifold uses and applications of that
intelligence, and the need of an integrated organization to
provide it.
3. This report should be a useful contribution to the
consideration of the nature and scope of economic warfare
(economic defense) intelligence support by IAC Agencies and of
economic warfare planning by the responsible agencies. The
report should be immediately useful in connection with the
Bureau of the Budget's current study relating to the coordina-
tion of economic, psychological, and other nonmilitary defense
measures.
L. The report is now under review in p/E as a basis for
the formulation of specific recommendations along the lines
requested by Mr. Amory.
25X1A
Enclosure
D/E/RR:HDG:aa (20 Oct 54)
Distribution
- Addressee
1 - Ch/C
3 - D/E
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DRAFT
To : Assistant Director, ORR
Thru : Chief, Coordination
From : Chief, DA
subject: Consultant's Report on "The Intelligence Support for
Economic Warfare."
1. Transmitted herewith is a copy of the above cited report.
2. The purpose of the report is to provide a background paper
for the consideration of economic warfare planning, with particular
reference to the intelligence support required. In the perspective
of the experience in both world wars and the cold war to date, it
points out the comprehensive nature of economic warfare intelligence,
the manifold uses and applications of that intelligence, and the
need of an integrated organization to provide it.
3. This report should be a useful contribution to the consid-
eration of the nature and scope of economic warfare (economic defense)
intelliyence support I,gencies
of economic warfare planning
by the responsible agencies. The report should be immediately use-
ful in connection with the Bureau of the Budget's current study re-
lating to the coordination of economic, psychological, and other
nonmilitary defense measures.
4. The report is now under review in DIE as a basis for the
formulation of specific recommendations along the lines requested by
Mr. Amory.
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GCE SUP
WARFARE
Ie 2320gallal 1
A. Purpose and Scope of Study 1
B. Definitions 3
C. Assumptions 5
D. The Role of Economic Warfare in any War
with the Soviet Union
_ 00000 ......0.0.0000. 6
E, The Role of Economic Warfare in a Limited
9
F. The Transition from Peacetime to Wartime
Intelligence Becul
rements................ 9
II. zwangtiagmEgEzgashla_Utr_fl ARE
POLICL?000 OOOOOOOOOO 0000000000 OOOOOOOOOO 00 13
AO Gignera10000000000,00000.0000 OOOOO 00090000 13
IL As to Enemy Nations..?..? ?00?00000000?0 14
C. As to Allied Nations...... ............. 15
D. As to Neutral Nations .................. 15
E. The Transition from Peacetime to Wartime
Policy and000 Plarming., 15
THE WARFARE
OPERATIONS. 18
A. General. e000000000000000000000000000000 18
B. Control at the19
1. Export Licensing 3.9
20 Import 20
3. War Trade Agreements with Neutrals.. 21
4. Preclusive BUldi41.00000000000000000 21
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C. Prevention of Trading. ******** 00. o,.0000000. 22
1. Proclaimed Listing and Blacklisting 04,0000000 22
2. Financial Mea8ure8OOOUOODOOQOOOOOOOQOOOOOOO 26
3. PreventionofSmugg1ingODOOQOOOOOOOOOQQO27
4. Prevention of Enemy 28
D. Prevention of Transport00000?0000000000000?00000 28
E. Military Measures... 31
10 Genera10000000000000000,00000000?00000000000 31
2. Disruption and Destruction of Enemy
Transport. 32
3. Disruption and Destruction of Enemy
Industrial Power.... 000090000?0000?00000000
Fo Other MeasureeQ 0000 0 0 0C 0 0OOOOOOOOO ??........ 00
1. General.......00? ?0000?000o?ocoo?oo?e0000?00
26 Promotion of Subversion and Disaffection
in Enemy Industrial Areas. ?
32
34
34
34
2. Sabotage of Enemy Supplies and In
..?........................... 34
Go Counter Economic Warfare 00000oo00000000000000000 35
IV. THE INTELLIGENCE PROCESS IN ECONOMIC WARFARE. ....... 37
A. Collection... 37
1. Sources Available in Peacetime. 0000.10,10000 0 37
a. International Economic Organizations.... 37
Central Intelligence Agency 00000000000 37
State Department. ....................... 39
d. Foreign Operations Administration....... 40
-
geoeye ???? 411?10, .y01 :Me MOW
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e. The Armed Forces ..................... 41
f. Department of Commerce.............., 42
g. Department of Agriculture.00000000000 42
h. Department of Justice.o........ ...... 43
1. Department of Interior............... 43
je Treasury Department.................. 44
k. Federal Reserve System...0...o 00000. 44
1. Department of Labor? 0000000000000000 44
m. Tariff Commission... 00000000000000000 45
n. The National Archives and Records
SerViCe009000000000000000000000000000 45
o. Other Ag
45
Po
Library 46
q. Private Foundations, Scientific Assoc-
iations and Economic Study Groups?.. 46
r. Foreign Broadcasts................. 0 47
25X1 C 10007000:M -51efUgees and Displaced Persons....... 47
25X1 D
2. Additional Sources Available in wartime.. 51
a. Censorship.. 0?00000000000000000000000 51
c. Captured Enemy Naterials............. 53
d. Prisoners of War.... 00000?00,00000000 54
e. Covert Collection. ................... 55
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25X6
25X6
25X6
8 .
f. Aerial Reconnaissance0000000000.500000 55
PrOdUetiOn00000000000011000.000000000000000000 56
C. DietributiouofInte11igenca0000Qo.0000eo 58
V. ORGANIZATION FOR INTELLIGENCE SUPPORT OF ECONOMIC
WARFARE.......... 000000 .......................... 59'
A. NOrld War Iii4
59
1. 59
3. The US Experience ........................ 61
B. World War II...........?..........-......??... 63
2. The US cperienaeOOOQOCOOOOOOOG..00OQOOO 66
3. Allied Operations.. 00090.0000000000000000 69
Co The Korean War..... 71
D. The Cold War.. 0000 o .......................... 72
1. The NSRB Studies. ........................ 72
2, Planning Study for Intelligence for
Economic Warfare. ........................ 73
3. The NSC Request and Subsequent Action.... 74
4. The Clamorous Customer vs the Basic
Study00000000000000000,000o0000e0?000000 o 75
5. The Economic Intelligence Committee.... 76
6. The Intelligence Working Group........... 78
E. Wartime Organizational Requirements..., 80
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1. Organization for Economic Warfare o00000000 SO
2, Organization for Intelligence Supporte..., 83
F. Intelligence Support for Allied Economic
87
VI. CONCLUSIONS.??............?.....,................. 92
Appendix I - Chart Showing Intelligence Support for
Economic Defense
_______...00.00.00.....00.0.000,000 97
Appendix II - Chart Showing Organization for Mutuai
Defense Assistance Control Operations. ..0 98
Appendix III - A List of Reference Material Relating to
Economic Warfare' with Special Refer-
ence to Intelligence Support ...........0 99
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. INTRODUCTION
A. bmittixit?s..so,,..eolAket
"A comprehensive economic warfare program aimed at supporting
our national security in times of peace as well as war" was a major
recommendation of the Hoover Commission in 1948. Six years and two
wars later, that recommendation has not been given effect. The
intervening years have not lessened the importance of the recommen-
dation. The threatening situations in many parts of the world have
now accented its urgency.
It is true that the National Security Resources Hoard in 1949
prepared a series of excellent monographs on certain economic war-
fare measures, but these cannot be said to constitute a "compre-
hensive economic warfare progrms," and did not purport to do no
A prerequisite to such a program must be provision for ad-
? equate intelligence support. Intelligence support represents a major
part of economic warfare activities. Intelligence, of course, is a
vital part of military warfare, but the scale of military operations
is 'vastly greater than that of the intelligence operations on which it
is based; whereas in economic warfare, a large part of the total personnel
employed is engaged in intelligence activities, and intelligence and
operations are even more closely integrated.
The recent annual report of the Chairman of the Intelligence Working
Group suggests that this group may undertake a study of the
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fligence support ehat wooi d b emotired for economic warfare,
7 hoped that the
nt reoort may serve as a contribution to
eht study, Its purpose i to :gest erre nature of the intelli-
gen- required and the orgavie eion tecessary to provide
Auch material has been drawn from nrevio?e relevant studies,
as been included nitro, at the risk f being unduly academic feg
?
),-((r to provide a be:Aground and perspoctive for the consideration
x"
:is important problen, and to ahoy ehe comprehensive nature of
the inte.LLigencc which must be drawn on in support of economic war
-
fart., the manifold uses and an.ication of that intelligence, and
the need of an integratco organization to provide it
-eneeon I a2eks to define economic warfare, to evaluate its
ro3e ln any war with the Soviet Union ard to consider the effect on
veoramic intelligence eouirmeente of the traniition from peacetime
to eertime,
eention II deals with the intelligence support required for ec.
euele ewertare policy- latrine vie Vie enemy, neutralseand allied natioreto
2-cct..ion III attemetio to aeseee the intelligence requirements of
ecenemic warfare operaeions in tcs telde of international trade and
traneactione, iiooinp vntrIe and in military and politica
loafteres
.ection IV is coneerned with the collection, production, and dine
tib ion of economic warfare ineeIlieenee with epeeriel reference to
time and wartime mimeo of entellieeree-
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Section V considers, against the background of two world wars,
Warp
the Koreariand the "cold war," the organizational arrangements needed
for the intelligence support of economic warfare,
B. Definitiou
Economic warfare is a relatively new word in the bright lexicon
of logistics As such it has been variously defined. For a long
time the Industrial College of the Armed Forces, which began its
study of economic warfare in the period between the world wars, con-
sidered.it ae "the use of economic, military, political or other
measures to injure an enemy ,s economic support of his war effort, or
a possible enemyos economic potential for war." The objection to
this definition was that it made no distinction between peacetime
and wartime operations. Economic warfare has also been defined simply
as the use of economic measures against economic targets. This simp-
lification overlooks the fact that economic measuree such as the ec-
onomic blockade or "paper blockade" depend on the armed forces for
their enforcement* In intercepting an unnavicerted ship, for example,
the non-military and military measures are integrated. -?-/
As used herein* "economic warfare" is the use of all measures
to impair an enemy's economic support of his war effort. "Economic
defense" is the use of such of these measures as may be employed in
peacetime to impair the economic potential for war of an unfriendly
or aggressor nation, and may embrace economic sanctions and reprisals,
including even pacific blockade,
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Th aliference bttween econamic ael'ense and economic warfare is
yefore largely legtlistic and semantic - legalistic, because of
L- difference between measures which can legally be taken in peace-
toA0 and those which can be taken only in war; semantic, because in
p-;oetime "defense" it a good word and "war" is a bad word, while in
1AM4 0 e the reverspis true. Immediately after Pearl Harbor, the Ec-
onomic Defense Board became the Hoard of Economic Warfare. There is
,,5.0? unfortunately, a difference in the extent and intensity of the
T'ams a economic Cefenee and. economic Ilarfare. Economic defense,,
in the sense of ftab, effective sanctions, has never been applied in
peacetime
the concept of the totality of economic warfare is generally
aepted, there is no such acceptance of the totality of economic
defense. Even in the so-ealled limited war in Korea, full economic
warfare was not employed by the United Nations. There was noJAock-
ade of the China coast and no complete eMbargo of exports to Communiit
China, Although the nature and extent of economic warfare may Vary
in a limited war as compared with a general war, the character of the
intelligence support required is the same in both. There must be
cognisance of all area: enemy, allied, and neutral, and of all ec-
nomic resources
The term "economil warfare" was first adopted by the British in
the period between the World Wars. In World War II economic warfare
bt.,Ame the substitubefor and an enlargement of the blockade operations
in the first war, The Ministry of Blockade in the first war became
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the Ministry of Economic Warfare in the second. Economic warfare
thus became synonymous with the figurative meaning of blockade.
"Intelligence support," as used herein, includes substantive
intelligence and also the organizational arrangements for its co-
ordination and application to economic warfare problems.
C. jimm_jpilsm
It is assumed that the various economic warfare measures will be
implemented by the appropriate existing agencies of the government;
for example, diplomatic negotiations by the Department of State; export
-
Import licensing and the mwatch lists by the Department of Commerce;
actual implementation of export-import controls by the Bureau of
Customs; foreign exchange controls by the Treasury Department and the
Federal Reserve Banks; alien property control by the Department of
Justice; off-shore procurement and preclusive buying by the Department
of Defense and General Services Administration; the ship warrant and
navicert system by the Maritime Administration, the Navy, and the Bureau
of Customs; and naval interception and military attack on economic tar-
gets by the armed forces. Same of these measures are now in effect
with the machinery for their administration already functioning. Others
are closely related to the normal operations of the respective agencies
and experienced personnel are available to implement them. It is fur-
ther assumed that the coordination of these measures will be administered
by a foreign economic administrationo under the guidance of or with the
advice of an interagency oommittee,,
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D. he Rolekt_asmais_Eid_arfass_k_afi?toL_AILaLleteg.agga.lifax
Originally it was believed by many persons in this country and
abroad that economic warfare would have a relatively minor role in
any war with the Soviet Union. This reasoning was based on the follow-
ing assumptions:
(1) that the Soviet Union is largely self-sufficient, with
relatively limited dependence on overseas trade, and is,
therefore, not vulnerable to blockade;
(2) that in any future world conflict there will be
few if any neutral areas, neutral areas being the
principal battleground of economic warfare;
(3) that the new weapons of war preclude the possi-
bility of a long war of attrition and make obsolete
other methods of warfare, including economic warfare.
Each of these assumptions may now be challenged. It is true that
the Soviet Union is largely self-sufficient for its austere civilian
economy, and its overseas trade is relatively small. This is not true,
however, of Communist China and the Asiatic neutrals, who are dependent
on seaborne commerce. The European satellites are also dependent on
imports from the WestYFurthermore? the Soviet industrial system lacks
flexibility and diversification and specialisation and is or was highly
vulnerable to a denial of certain strategic materials and products
(e.g. natural rubber, copper, antibiotics), of ships and shipping ser-
vices, and of equipment and components incorporating advanced tech-
nology (e.g. high-speed, high production precision tools, anti-friction
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bearings, electrical generating equipment, electronics components,
and precision instruments). This is indicated by the Soviet trade
offensive and the frantic efforts to acquire strategic materials from
the western nations. It is not to be inferred from the foregoing that
other materials may not also be strategic* indeed, in tfare or in
the case of a nation striving for autarky or preparing for war, any
imports permitted may be assumed to be strategic and in short supply.
The "strategic materials fallacy," i.e. that some imports by such a
nation or by a belligerent are not strategic, had its origin in the
pre-total-war period of modern history.-4/ The Declaration of London
in 1909 considered commodity trade in three categories - absolute contraband,
conditional contraband, and non-contraband. This distinction was voided
in both world wars by the U-boat sinkings and the compulsory navicert.
All trade with the enemy was contraband.
It is recognized that there are differing opinions within the
intelligence community regarding the relative strategic advantage te
the Soviet bloc and to the free world of current trade between them.
It is a difference that cannot be reconciled because there are no means of
measuring the relative strategic advantage. Whether coal, grain, timberi,
and gold are more strategic to Western Europe than are ships and shipping,
machine tools, anti-friction bearings, natural rubber, and tractors to
the Soviet bloc, is a matter of judgment. These and many other items are
presently traded in. With respect to economic warfare (i.e in wartime),
however, there is virtual unanimity of opinion that "trading with the enemy?
is legally, strategically and morally wrong. There is no such unanimity
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as to trading with the enemy in a cold war. There are those who thus
seem to doubt the hostile intentions of the Soviet Union and Communist
China or who make a distinction between trading with an enemy who is
actually waging war and trading with one who is merely preparing to
wage war.Itiotof course, in the period of build-up and preparation
for war that economic sanctions could be most effective. History teaches
us, however, that not until the aggressor has filled his stockpiles,
completed his preparations and launched his aggression; are other
nations willing to lock the export stable. Nevertheless, in spite of
all the enemyes preparation there still remains in wartime an opportunity
for economic warfare to aggravate the critical stresses and strains Of
his war economy.
Also subject to review is the assumption as to limited areas of
neutrality in a future world conflict, especially one between the USSR
and Western Nations. As a result of mAlitary exigency and political
expediency, there is a reasonable prospect of varying degrees of neu-
trality and non-belligerency for important and strategically placed areas.
As to, the third assumption, that the new weapons of war have made
obsolete all other means of warfare, including economic warfare, it may
be said that similar assumptions have been made erroneously as to each
war since the invention of gunpowder. The possible use of nuclear
weapons compels a revision of many previous concepts, but most author-
ities are agreed that other methods of warfare cannot be abandoned.
Indeed it is possible that the belligerents in a future war may refrain
from the use of atomic weapons for fear of the awesome retaliation, or that
they may limit them to tactical employment against Adlitary targets. This
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World War II in the use of poison gas. There is also strong support for
the view that the East-West struggle may be a prolonged one, fought with
diplomacy, propaganda, subversion and economic measures, with or without
military warfare.
E. The Role of Boarmie Warfare in a Idmited War.
It is in order to consider also the role of economic warfare Ina
so-called "limited," i.e a war in which the military operations are
confined to a limited area. In principle, the measures of economic war-
fare which should be employed and the intelligence support required do
not vary in such a conflict from those employed in a global war between
.major powers. The coast line to be blockaded may not be as long and the
volume of shipping to be interdicted may not be as large. The armed forces
engaged and the logistical support required for them may not be as great.
Nonetheless, while the sdlitary conflict may thus be confined to a limited
area, the economic war may be expected to have global ramifications. The
trade of belligerents, non-belligercnts, and neutrals and world-wide
shipping and financial servicesmay be involved.
P. The Transition from Peace
to art
e -
Inte once Re ? uiremen s
In peacetime the principal intelligence requirements of economic
warfare are basic studies or the capabilities and vulnerabilities of
various areas, studies of foreign trade and finance, basic commodity
studies, and Planning
studies for economic warfare operations. In
wartime and in the period of strained relations often preceding a war,
there is a shift to the analysis and evaluation of current spot intelli-
gence against the background of these basic studies. In peacetime prob-
ably three-fourths of the information on which economic intelligence is
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based is from open unclassified source*. In wartime probably nine4enths
of current intelligence information in from
censor- 25X1D
ship gleanings, and other classified and covert sources. In peacetime
most economic intelligence is basic and strategic in character. In
wartime there is an additional requi?ement for current and tactical
intelligence. Intelligence as to a country is economic potential, --
manpower, productive capacity, foreign trade, internal economy, tech-
nological development, -- all this IA strategic economic warfare
intelligence? In the category of tactical economic warfare intelli-
gence are such reports as the followingt aninumvicerted ship is about
to leave a neutral port; censorship reveals an illegaa financial trans-
action; a member of a ship os crew is suspected of smuggting jewel bearings;
a neutral trader is shipping to a suspected cloak;
Al]. of
thisls tactical economic warfare intelligeace.
Stated another way, in the processing of information ,into etrategie
intelligence in peacetime, the emphasis is on the production of r3ports
and estimates. In a period of strained relations or in Wartime, it is
cn analysis, interpretation, and evaluation of current, tactical, and epot
reports, against a background of personal knowlt*ge and studies And
estimates for the most part previously prepared. Intelligence4n peace-
time is largely static. In wartime it becomes dynamic? Even more
portant now than refinement of estimates on the degree of capability or
vulnerability in production of strategic commoditigmis intelligence
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as to how the enemy supply of strategic materials, whatever it is, can
be out off or reduced, Also needed is new intelligence of new enemy
requirements 'for new methods, new products, new weapons, and new materials
previously without significance which, as substitutes for strategic
materials, have themselves become strategic,
Basic research and analysis in support of economic warfare operations
were of somewhat greater relative importance in World War II than they
may be expected to be in a future conflict because it was necessary
in 1941 to "start from scratch." In the present situation there is a
vast body of material .prepared in World War II and the experience of
that war is available to us, The period of the cold war, furthermore,
has afforded the opportunity and the necessity for may studies, This
is not to discount the importance and urgent necessity for continued
research and analysis. The Soviet situation and the Soviet methods
differ radically from those of the Germans, Less basic information is
available as to their foreign trade and still less as to their domestic
production. A greater emphasis, therefore, is placed on the analysis
and synthesis of current intelligence to supply this deficiency,
And so in organisation for economic intelligence there is necessarily
a conversion of at least part of an organisation designed for the
production of basic reports and estimates to one for the analysis and
.
evaluation of current information and the support Of daily operations.
To borrow terminology of the Industrial world, what is indicated in
the transition from peacetime to wartime intelligence production for
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economic warfare, is the partial conversion and retooling of a factory
producing capital goods (basic studies) to one producting also consumer
goods (operational intelligence),
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II. THE INTEk4IGENCE..,UPT'ORT _OLMONOMIC WARiAliE POLI_QT,
410 2gBagl
The distinction between intelligence in support ok policymaking
and that in support of operations is, of course, large:y arbitrary.
Many of the same basic and current intelligence report!! support both
policy-making and operations. This is true eeppeially in wartime when
policremaking, plans, and operations are often telescoped and integr.ec
ptherwise events would overtake intelligence and planning.
In broad principle the intelligence requirements Per policyemakng
and strategy in the field of economic warfare are not essentially
different from those of polioyemaking in other fields. Against a back-
ground of historical precedent and a comprehension of the foreign
policy objectives of the US and other countries, they include areestemate
of the current situation and of the probable conseqpenees of alternative
courses - of action. More specifically, they include esttmates of the ec-
onomic capabilities and vulnerabilities of enemy, allied, and neutral
nations; estimates of intention; and estimates of consequences of prob-
able courses of tion While the outline of the National Intelligenee
Surveys and other basic peacetime economic studies of foreign countries
is essentially the same or all countries? the pattern of the economic
warfare estimates and thesipporting data required for economic warfare
policy and planning will vary aecordeng to the status of the country as
enemy, ally, or neutral
5tudies of economic eganimation? manpower, food and agriculture,
forest preducts:. mineraf,, fuels and power, manufacturen& transportation,
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communications, international trade and finance --- all furnish support
for economic warfare policy and operations. The need is largely for the
analysis, synthesis, interpretation and application of that part of the
various fields of economic and other intelligence pertinent to the
particular problem. The resulting production of reports and estimates will
"cut across the board". For example, as estimate of The Vulnerability
of the Swedish Iron and Steel Industry to Pressures from the East and
the West" requires intelligence as to mining, manufacturing, transportation,
finance, economic organization, international trade, and other aUbJects.
So also would a study of "The Feasibility of Increasing Stockpile
Objectives'to the Point of Pre-emption of Certain Strategic Minerals,"
or "Transit Trade to Eastern EUrope through Trieste," (or Swiiland or
Austria), or "The Feasibility of Preventing export to the Soviet Bloc of
tigic Materials from Spath.4 Such reports and estimates, nnot be
epared on an effective 'and timely basis by an inteUigeflc nization
-
P*04 to Soviet or nonSoViet areas? Neither can thetj;
anprganization limited to research or to current inteIll
.,,.As to Enemy Nations
In the case of an snow or potential enemy' nation,' tWe141:1Ose
of the estimates of capabilities and vulnerabilities is to determine
(1) its economic potential for war, (2) its intentions and probable
courses of action, and (3) its deficiencies in raw materials, in technology,
in facilities, in transportation, in mummer, and its vulnerability
to interdiction of its international trade and the disruption by strategic
bombing or other means, of its domestic production and transport?
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C. As to Allied Nations
In the case of allied nations or probable a) ii the policies
for which intelligence support is required have to do with (1)
combined or parallel action in the execution of ec-
onomic warfare measures against the common enemy (especially in ax-
port-import controls, control of port facilities, and blacklisting),
(2) the ability of the allies to contribute to the allocation of
essential civilian suppliestocooperating neutrals, and (3) the dea.
pendence of allies an neutral sources of supply.
D. As to Neutral Nations
The neutral nationss as stated above, constitute the principal
lettleground of economic warfare, and in this area will arise the
majority of economic warfarsproblems.requiring policy determination.
Estimates of capabilities and vulnerabilities are for the purpose of
determining the position of the neutral nation as a possible source
of supply for the enemy. Intelligence support will be required for
the negotiation of war trade agreements, which will seek to Unit
its exports to the enemy and to secure supplies for the DS and allied
nations; for preclusive bpying programs, where expoil,lindtation
agreements are not feasible or effective; and for determining the Vul-
nerability of the neutral to pressures from the enemy or from the
allies, and its ability to emittain its neutrality.
E. The Transition from Peacetime to Wartime Poll d
In peacetime these estimates are in broad and comprehensive term .
Even though based on detailed studies of raw materials, manpower, and
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productive capabity and on economic organization, technological prog-
ress, and international trade and finance, and on all the factors
enumerated in the National Intelligence Surveye, they necessarily in-
clude !mew assumptions as to possible future situation and conditime.
After the outbreak of war these estimates can be brought into sharper
focus as the status of various countries is revealed as that of enemy,
ally, or neutral black, white, or varying shades of grey. In the
war period, furthermore, evaluation of the effects of existing policies
and estimates of probable effects of proposed policies are largely the
by-products of operational intelligence. As stated above, the economic
warfare policy and strategy are dynamic, not static, and the policy-
making process is necessarily a continuing one. The same is true to
a large extent of economic defense in a cold war. New policies and
changes in policy evolve from operational experience. In World War I
the US, as late as October, 1915, vigorously protested to Great Britain
that "the methods employed by Great Britain to obtain evidence of eneny
destination of cargoes bound for neutral portssndto inpose a contra-
band character on such cargoes are without juntiMmetion indefen-
sib's 0... illegal in conception mad nature lau5 task of championing
the integrity of neutral rights theUnited States unhesitatingly assumes."
But later as public sentiment became aroused in Britain's behalf, the
US devised the "navicert" which was to become the principal instrument
of economic warfare, and in 1917, the US became the full Ally of Great
Britain in the Ward Sometimes the events that force changes of econamic
warfare policy come with dramatic suddenness, Today's events may make
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today's policies obsolete tomorrow. For example, Russia WAS delivering
strategic supplies ii Germany up to and including the week preceding the
German invasion of Russia on 22 June 1941,
In general, broad and basic estimates of capabilities and vulner-
abilities are a requirement .of peacetime planning, After the outbreak
of war, these previously prepared studies furnish a basis or background
for the evaluation of current intelligence and a point of departure for
more specific estimates of capabilities, vulnerabilities, and probable
courses of action. The necessary integration of the production of
these latter estimates with the operational intelligence process and in
fact with the close support of actual execution of economic warfare
measures is illustrated in the experience of both the US and the UK in
World War II. (See Section V)
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TAB
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TIE INTELLIGINUE SUPPORT OF ECONOMIC WARFARE OPMATIONS
A, General
The intelligence support for economic warfare operation draws
on the entire field of economic intelligence - on both at area and a
functional basis, The coaprehensive nature of this support may best
be understood by considering tho successive steps in seeking to pre-
vent the enemy's acquisition of materialst
(1) We seek to stop the goods at the source by
control of our own exports and the exports of
allies and frienaynamtrals, by war trade agree-
ments with neutrals, ar46 where necessary and
feasible, by preclusive buying.
(2) If this fails, we seek to ,prevent the trading
for them by blacklisting suspect traders, by
financial controls, by prevention of smuggling,
by interference with enemy exports, and by a
close watch on all enegetransactions.
(3) But if the geode are available, and if they
are traded for, then ve seek to prevent their
transport, by control of bunkering, repair fetal-
itiee, and detistl of marine insurance.
(4) And if they are available, aid are traded, and
if they are started on the:Irv/vs the Navy seeks
to intercept the unnaviaerted ship, the Aravramd
Air force attack the transport of such supp1i16'48
do get through,: or bomb the factories producing
the same or substitute supplies.
That is economic warfare from export control to strategic boMbing,
Some of these measures are taken concurrently. All are interreaate4
and umtual4 supporting. There are other measures ulth economic objec-
tives, including pe7ohological warfare and subversion4 dittaffectien
and Sabotage by dissident groups in enemy industrial areas, And tieral,ly
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there is counter-economic warfare - the prevention or the detection
and frustretion of the enemy's efforts to interfere with our overseas
trade or otherwise impair the economic support of our war effort.
B. Control at the Source /-
1. Export Licensing,0 Export licensing is usually the first
measure of economic sanction or economic warfare to be invoked by a
nation, for the reason that the implementation is entirely within its
own power. Most other measures involve negotiation with other nations.
Furthermore, export licensing may be and actually is employed to con-
serve supplies needed for the domestic economy or national defense and
does not necessarily imply a sanction against any other country. Export
licensing may be administered on a selective basis as to the coarodities
to be controlled, and as to destinations and consignees, or there may be
embargoes or limitative controls by categories of commoditiea to all or
certain areas. In peacetime or in the period preceding the outbreak? of
yaw, the controls are usually instituted on a selective basis. In war-
time, of course, all exports to the enemy are embargoed, some coesmdities
are embargoed to all destinationo, materials in short supply are alio*
eated among allies, minimum essential civilian supplies are rationed to
neutrals, and non-strategic items in ample supply are uncontrolled ex-
cept as to enemy destinations, or are controlled under general licenses.
In any event, the intelligence support required draws on the entire
field of international trade, oriell major categories of commodities,
and on politico-economic intelligence as to all areas, but especially
on intelligence as to deficiences of the enemy or probable enemy,
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telligenoe is required for export licensing policy, programming, des
termination of the ertent of ccotrols? and the fixing of quotas* Ine
telligence is also required for the processing of the individual li-
cense, especially intelligence as to intermediaries and the ultimate
consignee* This includes not merely checking againet watch lists but
poeitive intelligence as to his acceptability and also as to the ulti.
mate end-use of the material. A vigorous and aggreesive intelligence
support is required for the enforcement of controls tad the apprehension
and treatment of vio1ators0 The burden of the intelligence support is
more onerous in the case of the selective aeproach than in the cate-
gorical classification becalms of the necessary refinement of technical
definition, process, and endeuse, as well as the inveetigation of the
consignee and end-use of the materia14
20 IeplEt_lAcensints Import licensing may be used in the
exerciee of prsseures on aad iniunements to neutrals in connection with
the negotiation of mar trade agreements mad coppeiniticet in other respects*
It mme,also be used to rapplesent and reinforce the controls of enemr
exports, by denying licenses for the import of commodities any part of
which is of enemy origin* It may also supplement foreign exchange cone
trols in conserving or controlling US dollars* Perhaps the most inpore
tent use of import licensing, however, is in the conservation and alloe
cation of shipping space, but this objective is, largely outside the field
of eommedmmarfare4 The nature of the intelligence support required
for inport licensing is very similar to that repine' for export licensing
ieee as to international trade, various commodities, and the political
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N?
and economic situation in the exporting country and in the country of
origin, if it represents a reexport. Commercial intelligence is also
required as to the consignor instead of the consignee as in the case
of export licensing.
3. MAL_Tra_jehgreements with Neutrals. This represents
in some respests one of the most important areas of economic warfare
because, when satisfactory agreements can be reached, they may fdr-
nish the basis for export-import licensing, limitation of exports to
the enemy, compliance with the navicert and ship warrant system,
supply-purchase agreements, and other cooperative relations consistent
with neutrality. The negotiation of war trade agreements requires
intelligence as to the neutral nations o production, imports, consump-
tion, and exports of the prinpipal commodities, in order that import
? quotas may be agreed upon, against which all export licenses and all
approved navieerts may be charged. In addition to this, estimates are
required of the current political and economic situation of the country.
#quired is biographical intelligence regarding prcminent:Persons
'....101/1404-: in trade and Industry and the leading political per$Onelities,
especially those engaged inthe ?negotiatione.
4. Preclusive Buying._ Preclusive buYing requiretthetame
types of economic reporting and intelligence estimates is are required
support of export-import licensing, negotiation of war trade. :'agree
and in the administration of the nevicert system.
-requires current intelligence as to market fluctuations
In adclit Ion it
and the,':oper-
ations and manipulations of .enemy purchasing agents and black
operators. It also requires estimates of the feasibility. of
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buying programs, including projections of the effect of such programs,
lest they defeat their purpose by stimulating more and more production
to be precluded at higher and higher prices. In general, preclusive
buying is a useful measure only in situations (a) where it is combined
with an agreement to limit production and to prohibit export to an
enemy or potential enemy and (b) in mopping up individual non-recurring
pockets of strategic material which cannot otherwise be denied to the
enemy, The experience of World War II Shows that "a general program"
of preclusive buying defeats its purpose by stimulating an increase in
production of otherwise uncontrolled supplies available to the enemy.
Prevention of
1. laglAimed LAding_m_tuallguns, In peacetime, persons
on a Black List or Watch List may be denied export license or
may have funds blocked, as was done prior to
US entry into World War II. In wartime, persons on such lists are re-
gar ed as enemy nationals. They become untouchables, No allied national
can trade with them, and if they or their property come within allied
control, they are subject to seizure, The threat of postwar reprisal
in trade also hangs over their heads.
The US "Proclaimed List of Certain Blocked Nationals" published
first by Presidential proclamation 17 July 1941 was a list of
(a) "certain persons deemed to be, or to have been
acting or purporting to act, directly or indirectly,
for the benefit of, or under the direction of, or
under the jurisdiction of, or on behalf of, or in
collaboration with Germany or Italy or a national
thereof."
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(b) "certain persons to whom, or on whose be-
half, or for whose account, the exportation
directly or indirectly of any article or ma-
terial exported from the United States, is
deemed to be detrimertal to the interest of the
25X6 national defense."
In World War I from Jan 1918 to April 1919, 127,000 reports were
digested by the Bureau of War Trade IntelligenceV The sources of these
reports were identified as follows: Censorship 40%, Foreign Service 30%,
and Miscellaneous 30%. Ne comparable statistics are available as to the
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World War II experience, but there is evidence that the percentage
distribution was similar, and the vole, of course, vastly greater.
At the present time several "watch lists" are maintained within
the US Government. The Treasury Department maintains a "Consolidated
List of Designated Nationals, including Specially Designated Nationals;"
the Defense Department has a list of firms to whom overseas procurement
contracts are denied; the Commerce Department maintains an "EXport
Screen," pepularly known as "Watch Lists?": the State Department main-
tains a "List of Registrants" in the Office Of Munitions Control, and
a Visa List in the Visa Division. The CIA mAintains an extensive
Biggraphical Register and Industrial Register, which are valuable for
background and more extensive development of cases, and a Current
Reference Section in ORR/DE; all of which support the several lists
maintained within the Government.
The Administrative Action Panel (LAP composed of representatives
a the interested agencies, provides a mechanism by which information
win be eoordinated to provide uniformity of action in placing names on
V
their respective watch lists; where such uniformity is practicable.
(See p and App. III - 12)
In the event of war with the Soviet Union, it may be assumed that
blacklists will attain even larger proportions and their maintenance
pre en't serious problems in intelligence and in administration. The
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fifth column of fellow travellirs in many countries will result in the
addition of many thousands of names.
The problems of intelligence support and administration of black-
lists are so great, in fact, as to warrant consideration of "White Lists"
instead of blacklists. The navicert and ship warrant system is essen-
tially based on the principle of the"White List," as are most of our
licensing systems in both domestic and international affairs. The
burden is on the licensee to prove his good faith in a number of under- 25X1C
takings, including in some circumstances the giving of bond,
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2. Financial Measures.. In general the objectives of financial
measures in economic warfare are (1) to interfere with enegy's foreign
trade (2) to prevent the building up of enemy external financial assets,
(3) to vest or sequester such tweets as exist or (4) to immobilize them
by preventing their transfer between different centers, and (5) to bring
financial pressures on neutral nations and their nationals. These ob-
jectives may be accomplished by the control of foreign funds and other
transactions controls;
assets; by foreign exchange controls; the export and import licensing
of gold, silver, and currency; the mainipulation of foreign markets,
eeg., the dumping of gdelor silver on foreign markets where the enemy
is selling bullion or specie for the purpose of procuring foreign ex-
change; and by the granting or withholding of credit, exchange facilities,
and insurance protection to neutral traders.
To support these operations, there are requirements for estimates
and avalyses of the fiscal position, financial resources, aad monetary
systems of enemy and neutral countries; observation and interpretation
of clearing balances between enemy and neutral countries; analysis of
international cartels and other international corporate and financial
relationships; and examination and analysis of inventories of foreign
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funds and other foreign assets. There is also a requirement for the
evaluation, interpretation, and analysis of financial information in
censorship subnissionm, foreign publication
interrogations, and other sources of current information with special
reference to evidence of "cloaking" and other OVEIBione and violations
of the exchange controls.
3. FreventienA.2Facam. ? The prevention of the smugglinb
of industrial diamonds, Platinum, quartz crystals, mics1 certain drugs
and other highly strategic items of small bulk was one of the most
difficult problems of the allied economic warfare agencies in World
War II. The effort was made to control at the source the production
and sale of strategic items susceptible to smuggling. Where possible,
agreements were negotiated with the producing countries whereby the
entire output was to be sold to the US or its allies. NOvements of
suspected black market operators were carefully watchedby undercover
operatives. Black market prime were wutched as an indication of the
presence of buyers. It vas noted that prices rose sharply when certain
neutral ships put into port. This led sometimes to interception and
search of the vessels and seizure of the contraband. Few vessels were
given a thorough search at control ports and even when this was done,
it was difficult to discover email iteme in the absence of clues.
In addition to these eources, there is a requirement for foreign service
reporting of market fluctuations, especially in the black market,' and of
transshipments, diversions, irregular movements, and other evasions of
the controls.
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4o? .Pi,....:......21eveof toso The primary purpose of tor.
trol of the enemy's exports is to deny him foreign exchange.' The in..
telligence required includes analyses of the normal peacetime export
channel and the effectiveness of the measures adopted to close theme
the requirements of neutral nations *doh were formerly met by Laporte
fro the enemy and the feasitAlity of supplying them from allied seurces
in consideration of the interdiction of the former trade; and analysis
of proposed neutral exports to determine those which, or any parts or
components of which, are of enemy origin, in order that pavicerta may
be denied. Censorship submissions gem" ewe 25X1 D
clue to enemy exports. The difficulty in controlling enemy exports
to contiguous neutrals, however, is that the negotiations looking to
the export and the financial transactions in connection therewith do
not /come under surrsillancstor control except to a limited extent.
D, Prevention of Transport
He come now to the principal weapons in the arsenal of economic
warfare - the =Acerb, the ship navicert, and the ship warrent - the
instruments of the *paper blockade." It is in fact a paper blockade.
It depends for its effectiveness on political End economic pressures
and inducements as set out else:severe in this study, and of course, as
a last resort, on enforcement by and naval power. But its
extent and effectiveness are far greater than could be achieved by
physical enforcement alone.
40,
ow. ???? 400 ?iwei
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DialliCartS are In essence commercial passports. It is interesting
to note that the navicert was invented by the AmerbuniConsul General
in London during World War I; its purpose was to facilitate American
exports during the period of neutrality* The British instituted the
navioert device early in December 1939, and made it compulsory in July
1940. All uneramicerted shipe and cargo vessels were subjdet to seizure'.
The ehip navicert, as its text indicates, wee given when all the
item Of the manifest had been navicerted. It permitted a ship to
make a single voyage through naval oontrole. It provided a description
of the ship and its proposed itinerary; a list of its officers, crew,
and passeagers; a description of its cargo, slip stores, mail, and
money; an acqount of the source and destinations consignor and cone
signal* When an application for a shiple navicert was received, the
crew and passenger lists-were checked and a requirement made that
objectionable persona be removed1
if the Anericans devised the navicert, it was the British who
invented the ship warrant* A ship warrant entitled a ship to the use
of British and Allied port facilities N.. bunkering, ships stores, re-
pairs, etc. To receive a warrant, the owner agreed that no vessel awned
or controlled or operated by him would sail to or from the navicert area
without a ship navicert; that he would not sell or part with effective
contra of any veesel awned by him without the approval of the Ministry
of War Transport; that he would not employ my enemy company for the
purpose of obtaining insuranre or any other facilities; and many other
amements. In addition, fleet owners were required by the British to
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chortler to the Minietry ?flier iraneport a portion or their fleets
All of this constituted the price which the British put an the port
facilities which they owned or controlled. It is claimed for the alit',
warrant system that it in a pure commercial bargain and avoids all
questions of international law or oven of dal:acrostic discussion. After
the US entered the war this country* was associated, of course, in the
ship warrant system and in fact cooperated during the period of "aid to
Britain short of war". But it was the global chain of British ports
that made the ystem most effective.
The intelligence support required for the administration of the
micert and chip warrant system and tale control of enemy and neutral
chipping requires first of all intelligence as to the movements of
tinmy shipping and the movement of all ships carrying unnericerted
cargo and all blacklisted ships, i.e. ships not having a ship warrant.
Close liaison must be maintained with the Maritime Commiasion and
uith commercial shipping information services.
In addition to intelligence regarding voyages, the administration
of the navicert system requires all of the economic intelligence re-
wired in the administration of export licensing. As the export
licensing would control the export of materials from this country arA
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from allied countries, so the navicet.t system would control the ex-
ports from neutral countries, and the Lyame intelligence as to aommod-
ities? requirements, production and trade would be necessary*
The administration of the ship warrant system requires detailed
intelligence regarding port facilities - allied, einem, neutral -
around the globe. This is neoessary to know those facilities that are
available and those that are not available to enemy and blacklisted
neutral ships. Estimates are required of the possibility of *block-
ade voyagee in the light of refuelling facilities and other factors.
E. MIllau Measures.
1, General. Military action as a weapon of economic war-
fare denotes the use of the armed Xorces to deny to the enemy concoct-
ities required for the prosecutiou of the war. This action is directed
(a) at the disruption and destruction of the enemy's! transport by all
or of blockade and (b) at the disruption and destruction of enemy
industrial power by strategic bombing or other military attack on
economic targets. Obviously, these measures frequently serve immediate
military objectives as well as economic warfare objectives, as in the
case of the capture of a port or other strategic tratugmlation gate-
way, Thiel should occasion no conoroversy? however, as to whether a
particular measure or operatim is military or economic wrarfare. The
ultimate objective of all economic warfare is to support tbe militery
objective by the strangulation mad attrition of the enemy's economy.,
and as stated above, economic, d.1itary, psychological End political
weapons maybe employed. And it is axiomatic that military operations
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are not an end in themeeleves but an instrument of national policy.
Military operations in support of economic warfare, by sea, lends and
air, are necessarily controlled and directed by the military an the
basis of operational factors, but much of the intelligence on which
they are based and the desired order of priority of targets are matters
of economic warfare.
2. pistio.m.n....andDestructlonof Ene Trans_L.ort. This in-
cludes (a) air and naval patrole (both surface and submarine), inter..
caption, and blockade, and (b) attack on strategic transportation tar-
gets, by air, land, or sea. It is the former that we are concerned
with,primarily in economic warfare not only because of the importance
of the actual phynical interception of contraband shipping, but even
more so because of the fact that an this ultimate physical enforce-
ment depends the effectiveness of the whole system of the 'paper Wock-
aden. The intelligence required in support of the military blocklde
includes that previously outlined for export licensing. In addition
there is a requirement for technical information as to anew aad neutral
shipping, including identification* speed, fuel capacity* etc. As it
is probable that nothing in the ship's papers of a blockade rummy -ter
indicate its destination and that nothing on the manifest of un-
navicerted ships will indicate the contraband character of are, of tilt
cargo, there is a requirement for covert intelligence as to therv
covert shinments.
3? ap.p.tiz_ru on and Deetr....,:dust7 1.....tow
addition to all of the basic intelligence regarding evoy capabilities
and vulnerabilities in certain industries and the desired order of
priority of economic targets, such, as electric poser plants, petroleum
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mfineries? munitions factories, synthetic rubber plants, or trans-
portation gateways, there is a requirement for evaluated information
RS to the specific installation* including:
a, Location of target, and identifying infor-
mation as to nearby atlas, industrial instaD-
lations, housing, railroads, rivers, mountains,
and other terrain features.
25X1B
b, Physical description of plant and points of
vulnerability,
c. Administrative information, including owner-
ship, government agency having authority, and names
of key officials of the facility.
d, Labor force, including numbers employed, work
shifts, nationality, skins, percentage of forced
labor, conditions as to housing, food, aid other
morale factors,
f. Importance of this facility as determined by
its contribution to the industry aggregate, by the
distribution of its nroduct, and by the dependence
of other facilities an this source,
g, Possible importance of this facility to US
and allied occupation forces, in the event of occu-
pation of the area.
h, Appraisal of the effect of bomb damage.
In addition to the intellirenee as to individual facilities, there
is a requirement for similar intelligence as to concentration of such
strategic targets. This is required for area attack either by high
explosive or atomic weapons.
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F0 Other Measures
1. General. The foregoing represent the principal measures
of economic warfare, but they are not exclusive of others, which may,
in a given circumstance, be of great effect. Among thase are psycho.-
logical measures, sabotage, and a variety of activities to plague and
confound the enemy and his friends, Examples of the laat category
are the dropping of counterfeit ration cards over enemy territory to
confuse his rationing system, and counterfeiting his money,
2. Promotion of Subversion and Disaffentioa in Enemy In-
dustrial Areas. Just as military operations maybe directed to ec-
onomic objectives, so may psychological mempons be araixiered in
support of economic warfare, Pmpaganda maybe directed to., certain
industrial areas and individual facilities in coordination a?th
tary, economic and political strategy. The intelligence requimml in
the selection of targets and in the choice of psychological amwation
would include reports of conditions and incidents in the area csme.erned,
evaluated against a background of knowledge of political, sociolog:oal
and economic factors,
3. ELLStbtatat.......Esemjazlies_ and InstaUations, Sabotage
will ordinarily be the work of forced labor, dissident groups and in-
dividuals in the enemy country, and reaisting patriots in the satellite
and occupied areas. Sabotage is no longer as simple as the throwing
of a shoe in the machinery, but :may be a highly technical and comp-
licated operation. Intelligence estimates will deal with the feasi-
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billty and probability of sabetage, the anticipated effects, and the
requirements in material and supplies fax the operation,
Collpter Economic. Warfare
The enemy?s economic warlare riLt. probably fall into these major
nategoriesg
(1) Hls efferts to disrupter impair the economies
of the rree nations by. the sudden termination or threat
ef termination of their trade with the Soviet bloc
This can best be countered by the avoidance of depend-
eney. on the bloc either as a source of supply or as a
market. To the extent that such trade is permitted In
peacetime, efforts shoued be made to develop alternative
eourcee of supply and aeternative markets for the
tommodities traded.
(2) His efforts to no cite favorable war trade
agreements with neutrals. The competition with our own
efforts to do the eame thing will be a battle of di-
plomacy and economie pressures.
(3) His infiltration and sabotage of the productive
capacity of the free natione. Counter measures against
this are the responsibality of the Departments of De-
fense and of Justice, and of industry itself.
(4) Bleokade or allied or neutral ports, especially
seme in the Far East where he may have the capability
ef doing so, The countering of this measure will be the
responsibility of the Department of Defense, but economic.
warfare intelligenee will be useful in developing di-
versionary routes and alternative sourees.
(5) Military attack on our sources of supply and trans-
port of war materialse The defense against this is also
the responeibility of the armed forces.
Foremoet among the measures te offtet the effect of the enemy's
aeonemic warfare is our 3tocitptUn,g program, but this is a part of
our industrial mobilization pregram and the responsibility of other
agencies. Tee ecoromic wafare agency, however, and partieularly the
intelligenee element eau be c-2 great assistance in studying the enemnOs
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economic warfare in competitive buying and in his embargoes and
blockades. The countering of these measures is primarily a problem
of procurement, but where they involve the techniques of economic
warfare, the economic warfare agency can be of assistance to the
procurement agencies.
A valuable study on "The Nature of the Policy and Tactics of Soviet-
type Economic Warrant 1949-1952" was prepared by the Economic Defense
Staff of the Department of State in October 1952, and a National
Intelligence Estimate (NIE 10-54), published in March 1954 dealt with
Soviet bloc capabilities in economic warfare, the vulnerability of the
free world to economic warfare measures, and the probable courses of
action by the Soviet bloc in this field?
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IV. THE INTELLIGENCE PROCESS IN ECONOMIC WARFARE
A. Collection
1. Sources Available in Peacetime ?
a. International Economic Organizations. Comprehensive
international statistics on production, consumption, domestic dis-
tribution, and international trade, if such were available, would
be first on the list of materials to be exploited for economic Warfare
policy-making and planning in peacetime. It has been said, in fact,
that the complete and uniform reporting of such data by all nations
would have tended to prevent wars by indicating warlike intentions.
This ideal of statistical compilation, however, has never been attained.
The lack of uniformity in reporting and other deficiencies have long
plagued economists. This was true even when there was the best of in-
tentions. It has been greatly aggravated by the recalcitrance and
secretiveness of the Soviet Union and its satellites. Nonetheless, to
the extent that such data are available in the United Nations and other
international organizations, and in international cartels and study
groups, they constitute an important source.
b. Central Intelligence Agency. Exploitation of domestic STATSPEC
sources of foreign intelligence, covert collection overseas,
- all important sources of economic war-
fare intelligence - are among the services performed by of common
concern to all intelligence agencies. CIA is charged by statue with
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responsibility for correlating all intelligence relating to the
national security and with making recommendations to the National
Security Council for the coordination of intelligence activities.
Frequent references to its functions appear throughout this report
and especially in Section V on Organization.
The Director of Central Intelligence is the Chairman of the In-
telligence Advisory Committee, under the aegis of the National Security
Council, and CIA furnishes the chairman and the secretariat of the
Economic Intelligence Committee and of the Economic Defense Intelligence
Committee, formerly the Intelligence Working Group. In economic re-
search, CIA has cognizance of the Soviet bloc. Its current intelli-
gence is on a world-wide basis. Among other important services it
publishes the daily and weekly Current Intelligence Digest and pro-
vides special situation briefings. CIAlis facilities include, among
others, the Industrial Register, the Biographical Register, the Graphics
Resister, the Foreign Documents Division, and the CIA Library with its
Intellofax System of indexing, digesting and filing intelligence docu-
ments. CIA coordinates and supervises the publication of the encyclo-
pedic National Intelligence Surveys. It has extensive geographical in-
telligence resources.
Of particular interest for this report, it has a small unit - the
Economic Defense Division - which supports the EDAC agencies respon-
sible for the strategic control of commodities and services, and also
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provides current intelligence required especially by the Diversion
C.ntrol Net and the Administrative Action Panel to which reference
is made in Section V.
The following paragraphs suggest the vast resources of intelli-
gence material pertinent to economic warfare in the various governmental
and other agencies. While baoed in part on the CIA/OCD survey of "The
Primary. Economic Information Interests of Certain Government Agencies.
(1951)1 it does not purport to be congas) but is merely suggestive of
major areas of interest.
C. State DemArsqnt. The periodic and special reports of our
foreign service fficers are the most fruitful sources of intelligence
for ea nomic defense operations and economic warfare policy and plan-
ning in peacetime and a valuable source for operational intelligence,*
in wartime. Economic Defense Officers (MOO have been designated
at the principal posts overseas and peripheral reporting officers at
appropriate points. In wartime the geographical area of direct foreign
service reporting te_reduced by the recall of our representatives from
enemy countries and by somewhat restricted opportunities in WM nem-
tral countries. Quantitatively, the intelligence for econmnic warfare
purpoaes from foreign service reporting officers in wartime is much
less than that from censor 25X1D ship, and other wertime
sources. The Economic Manual t A Guide for Reporting Officers in
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the Foreign Service of the United States" is an excellent and compre-
hensive statement of economic intelligence requirements for all:pur-.
pose*, and 60 organised as to be of great use in economic warfare re-
porting.
The Department has cognisance of economic intelligence research
covering non-Soviet areas. It publishes "Current Economic Developments"
(bi-weekly) and "Current Foreign Relations" (week.ly) and Soviet Affairs
(monthly.). The Office of Intelligence Research (caR) and the Office
of Libraries and Intelligence Acquisition (OLI) provide the noWns for
processing intelligence within the Department0
d, prejitaandiat Afts.g:tut_mi.u___Artr, The Foreign Operations
Administration is concerned primarily with assistance to friendly
nations. Its information regarding countries receiving aid is tempt,
lanantary to that regarding the Soviet and satellite countries
irk-
cluding some of the most prominent of the prebibIe neutrals? The
_statistical and other economic reports contain much intelligence of
iMport in economic warfare. The FOA does liOt have an intelligence
division as such, It does have a Research, Statistics and Report.
Dijeigicii4 but its eeenomi4 analysis in Washington is largely integrated
with the work of the various !Unctions' divisions. In the Us Roglotal
Office at Paris, a small staff is maintained for the collation of =-
Omni* dgfense intelligence and the coordination 0 *venom/4 defense
operations in Europe.
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of the Nbtual Defense Assistance Control (NDAC) Act in the Director
of the Foreign Operations Aaninistration, in harrow with the foreign
policy direction of theDeperbment of State, This has to do with the
international program of security trade control. Calateral with this
is the domestic program of security. trade control, represented by the
rt Control Act, administered by Department of CotMerce. The
former program is coordinated through the Econonic Defense Advisory
Committee (MAC), and the latter through the Advisory Committee on
Export Policy (ACEP): These two committees are intact winbeel,=king
directorates, ft coordinated at the vorking level by the daub Operating
Comattee. A nuMber of working groups, under the EDAO Executive
Committee, provide for interagenayconsideration in connection*Lth
their respective functions. Of speelel interest for the purpose of
this study is the Intelitgence Working Groups which is discussed ter-
therle(SeationV4-60
040.41 4
_ -
-ea The Armed Forces. Each of the armed forces main
.mormementmemntervreVnt.11....
tains attaches attached to the DS diplomatic missions. They report
primarily= subjects of special interest to their reepective services,
but also make economic estimates. The Intelligence Division of the
Army. (G-2) is interested in intelligence required for logistical oper-
ations, plannieg for civil affairs, administration in the moupied
areas, and in economic uarfare. The Industrial College of the Armed
Forces includes Economic Warfare in its curriculum. Infect. the study
of economic warfare, as such, had its genesis in the DS in the In..
dustrial College in 1940. The Office of Naval Intelligence (ONI) is
interested in these subjects and particularly in ehip building, port
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facilities and related subjects., Air Force intelligence (AMIN) is
interested particularly in target information for strategic bombing,
and its Strategic Vulnerability Branch has done extensive work in this
field0
f. istmrtnter_Simmq. The Department of Comnerce is
of outstanding importance in economic intelligence, Its Division of
CommerCial Intelligence publishes the World Trade Dirmetonrindmain-
tains the &port Screen (Watch List). Foreign service reports, espes-
Jelly thoee of the commercial attaches, are available to all depart-
ments and in the Deeartment of Commerce are the Oasis for oommodity,
imdustry, and regional economic studies. While these studio* are
primarily for Us benefit of US industry, theyere of great,valie in
economic warfare. The Bateau of Foreign Commerce, especially in con-
neetion with the administration and enforcement of exert'cOntrols?
the Civil Aeronautics Administration, the Office of Technical Services,
The Patent Office, the Bateau of Standards, the Maritime Administration,
The Weather Bureau, bureau of Public Roads, the Bureau of the Census),
and US Coast and Geodetic Surveys, -- all have a signifidant tiontii-
bution to economic warfere intelligence?
g. .2gMsit_.tr_bgrlienillm. In the Department of Agri..;
culture, the Office of Foreign Agricultural Relations, and other units
have furnished basic studies and current reports on agrioatural
commodities and on agricultural conditions in foreign areas.
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plpartmTt of Justice. Because of its interest
in international cartels, the vesting or sequestration of foreigi..
owned assets, and other matters ratted to economic warfare, the De-
partment of Justice maintained in World War II an Economic Warfare
Division. Since that time the Office of Alien Property has been
placed in the Justice Department and in addition to the administration
of control or -vesting of alien property, handles all litigation growing
out of toreignfUnds program of the Treasury Department. The Federal
Bureau of Investigation (FBI) rendered valuable assistance in World
War' II especially in 00311390.1022wLth detection of smuggling operations
and other violations. The lamigration and Naturalization Service,
charged with the admission, exclusion, and deportation of aliens, and
their registration and finger printing, vas a amerce of biographical
intelligence =deem= of the discovery of sources for investigation,
atertment of Interior. Minerals represent the
,largest category of strategic naterials, and the Bureau of Mines? and
the US Geological Survey have been sources of much of the basic material.
The mineral attaches in oertain diplomatic missions have furnished
much of the current information csamatial to economic warfare operations
regarding minerals, fuels, power, and water resources.
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A.T.F.e.itmaar........tment. The Treasury Department was
the first agency of the Government to implement an economic warfare
measure inlicubldWar II, or, more properly; to apply an econonic sanc-
tion, since the US was not at war at the time* This was the freezing
of the assets of Norway and Denmark in April 1940 and the extension
of the order in June and July 1940 to the Axis countries and the European
neutrals, While this was for the purpose of protecting the interests
of rightful owners of these assets from Nazi exploitation, item also
impressed with economic warfare considerations* From that time on the
Treasury Department was actively interested in the implementation of
economic 'warfare measures .through its Foreign Funds Controls and the
Bureau of Customs, and in intelligence through its Ihnetary Research
Division* It has statutory mOhnirity? for foreign assets control nudism,
the authority of the Trading with the Enemy Act* The Office of Inter-
national Finance collects and analyzes current information concerning
economic policies and positions of foreign countries, having ,a, bearing
an US financial or monetary policy.
k. Federal Reserve System. In intelligence support
through its Division of Research and,Statistice and Division of Inter-
national. Finance, and in implementation of foreign exchange controls
through member banks the Federal Reserve System also has apart in
economic warfare.
Department of Labor. The Bureau of Labor Sta-
tistics prepares studies of labor conditions in foreign Countries,
based in part an reports of labor attaches abroad*
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140 Tariff Commission. Because of the emphasis on inter-
national trade and world wide commodity atudies? many of the reports and
analyses of the Tariff Commission are germane also to economic warfare,
The National Archives aad Records Service is the
repository of a vast store of official documexts and records, in amazingly
available arrangement when the quantity and diversity of the material are
considered, The Department is engaged in the pmearation of a series of
? handbooks of records of World War II that will make these records even
more serviceable.
.0.0 Other Aglasies. The foregoing list ts not intended
to be exclusive of a number of agencies, some of them very closely
fled with economic warfare, but otherwise than in intelligencv support, for
example, the Office of Defense Mobilisation and the Bureau of tLy Budget
in connection with mobilization planning and organization; the General
Services Administration in the implementation of preclusive buying; tie
Export-Import Bank in financial intelligence and in the negotiation of
? foreign loans; the Federal Communications Commission in international
telecommunications; the Department of Labor in its Office of International
Labor Affairs; and the various wartime agencies, notably the Office of
Censorship, an important source of economic warfare intelligence in wartime
discussed elsewhere in this study.
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p. Library Material. First among the sources of library
material is the Library of Congress. In addition to its min un-
equalled resources9 it publishes the "Library Reference Facilities
in the Area of the District of Columbian covering more than two
hundred general and specialized libraries. These facilities and in-
deed the resources of the research libraries throughout the nation
may be tapped through inter-library loans. The Interdepartmental
Committee for the Acquisition of Foreign Publications (INDEC) pro-
vided much material for research analysts in the field of economic
warfare. The Foreign Documents Division of CIA has done and is doing
a vast amount of translation and analysis for this and other agencies.
q. Private Foundations. ScientifiC Aseociations and Economic
Studs,' Croups. The Rockefoller Foundation, the Ford Foundation. the
Carnegie Endommt for International Peace, the Brookings Institution,
the National and American Geographic Societies, the various engineering,
scientific, and professional associations, the American Economic Associ-
ation, and international commercial study greups such as the International
Rubber Study Group and the International Tin Study Group, and research
centers at various educational institutions, many of them under government
contracts, - all are invaluable sources of basic studies and current
information. The list is intermled merely to suggest many other organi-
zations of which these are typical. Some of them sponsor research pro-
jects of considerable scope and depth, some organize special missions and
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expeditions, some conduct institutes of International affairs. The published
and unpublished records or most or them yield valuable material to the
economic warfare analyst.
r. Forelosd_casts. In World War II the Radio Unit of the
Economic Intelligence Division in the Board of Economic Warfare processed
reports and transcripts of foreign broadcasts. These broadcasts were
monitored for the most part by the Federal Communications Commission, the
output at times approximating three thousand pages per day of monitors'
reports and transcripts, in addition there was an exchange of selected
material with the British Broadcasting Corporation and other allied sources.
Only a small portion of the broadcasts contained information of value, but
the potential significance of that small portion was frequently very great.
It required a vase amount of winnowing to separate the grain from the chaff.
Evaluation and interpretation were very important. For example, the theme
of the propaganda to condition the public mind might be an indication of
a erebahle course of action. It is also freouentiv necesRArv to hroadcasiti
official announcements to the people even at the calculated risk of its
disclosure.
. q litNets anmdAillzt_ace_Versons. Never before in h $ ory
have there been so many displaced persons in the world as the millions
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H?1 -13.;.;" fr,s Fal3i and then from Soviet tyrannz.
:rola the Baltic states, frorli Polandp
Hungary, iabania, from
when they ce-old., from the .3ov1et VItiOrk itself, Most of them have
to return to aleir fom.er homelande now held by the Communists?
rtv have resi.steci or ?heaped tue Soviet kidnap gangs which operated in the
ilave ral)atrlat'i.on. inong their number are statesmen., scholarsoncietktists,
:1Eineern, artist fl lawy(37:11, doctors, rarmers and laborers. Their value
ici of intelligence ha 3 bets recognized. They E?re being developed
7och as time End available personnel wial permit. The first intallf_gence
3.0:i.z.ement is as to thf..3e peot.Le themselves, as groups, as types, as
LA.d.uals; then the ezbloite.tioni of a, lected sources both for the
they have ark' ror what they can acquire, not merely passive
.tive intelligence. And not merely intelligence but operations or
i..:46ance, of liberatioa. But this is beyond the scope of this study?
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U? Firms on4 Tra4eilispciAtins, The foreign economic
uy.e:Iligence in the possession of 113 exporters and importers, moulded-mere,
engineers, banks and insurance companies, and trade associations is pia?.
ticany unlimited. They have traded with or in competition with intfi.
national traders all over the world. They have supplied equipment a'Ad
technical "kmowhown? for industrial facilities. They have built an
operated subsidiaries in many of the leading countries, They have sunducted
research into markets, actual and potential. They have financed capftal
improvements and commercial transactions, They know the capabilities
and vulnerabilities of the major industries and the individual faelities,
They know the requirements and sources of essential raw materials, and
possible substitutes for those in short supply, The intelligence is there.
It is freely available, and yet its adequate exploitation prosene serious
difficulties in administration, in collection, evaluation, a:10.'8JB,
interuretation and dissemination,
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2. Additional Sources Available in Wartime, In addition to the
foregoing catalog of some of the sources of economic intelligence available
in peacetime, important additional sources are available in wartime. Among
these are censorship, intercepted messages, interrogation of prisoners of
war, analysis of captured enemy materials, espionage and aerial recennais-
sance.
a. Censors412. As has already been indicated, censorship
Is the source of the greater part of current economic intelligence in war-
time. The extent to which the principals or agents in illegal or inimical
transactions will go in their communications is almost incredible. Some-
times, it is due to carelessness or ignorance; sometimes the parties think
they have successfully concealed the significance of the message; sometimes
they a calculated risk, such is the urgency of the communication:
sometimes the information is revealed by collateral reference of innocent
parties; sometimes a clue is gleaned from the mere fact of correspondence
between certain parties even though a private code is used; sometimes the
volume of communications from or to a given source is an indication to an
alert censor or intelligence officer of suspicious circumstances.
Whatever the explanations, censorship in World War II
10/
spotted a number of targets for the economic warfare batteries74'Amone
these were the following:.
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Obtained information pinpointing for the Air Force targets
of strategic and tactical importance: such as the exact engineer.
ing details of the dams in the Rhine area and previously un-
known defense being constructed in the Hague Forest of the
Netherlands capital.
Obtained information concerning strategic and critical
materials making it possible to increase allied war production
and weaken the enemygs production; one censorship item alone
enabled the War Production Board to obtain $25,0000000 worth
of much needed textiles; other censorship items uncovered some
$2,000,000 worth of dragline dredges, galoshes, cocoa, cattle
hair and other diversified commodities.
Exposed black market activities.
Discovered and reported violations of export license
controls: at one time, according to an official of the
Foreign Economic Administration, 60% of the eases of vio-
lations of export licenses were discovered through censor-
hip
Aided in preventing the outward flow of technical data.
Helped to implement controls of the international transfer
of funds: one group of censorship items dhowing how funds had
been provided to build up a stock of goods at a Latin American
port for transport by a German blockade runners while in another
instance censorship material showed that a considerable amount
of money sent to the Bank of China was intended for beneficiaries
in Japanese-Occupied territory.
Assisted in the enforcement of restrictions applicable
to the Proclaimed List of Blocked Nationals; one of censor -
shipgs greatest contributions in this respect being to supply
data indicating that listed parties were using intermediaries
or cloaks to mask their activities.
Detected commercial transactions which might have
resulted in the Nazi obtaining vitally needed commodities.
It would be desirable for the Economic Intelligence Committee and the
Intelligence dorking Group to direct the preparation of a manual of instruc-
tions to censors and to keep it current. It is also important to post
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economic intelligence officers in the principal censorship control offices.
Even so, with the vast volume of material handled, it is not feasible to
be too discriminating in the first selection as to what may or may not be
of value to ecommic warfare. Accordingly, a unit in the latter agency
must further selieen and analyze the material and prepare copies or extracts
or digests for the interested branches. Thousands of these are handled dailye
c. fispAtitel.Jasy Materials. From the beginning of World War IT,
and in fact in the period between the wars, the British had made careful
technical examination and analysis of German material and supplies and
found it an important source of intelligence regarding the enemy ,s supplies
of raw materials, his use of substitutee, manufacturing processes, technical
innovationsond other factors in production. It was not until 1943 that
the Economic Intelligence Division of PEA undertook similar activities with
regard to Japanese materials. Prior to that time the War and Navy Depart-
ments had been examining enemy material primarily with a view to determining
the military operational potentialities and limitations of such equipment,
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and the possibility of any improvement that might be introduced into
our own design. This work is now directed by the Joint Materials Intelli-
gence Agency (JMIA) in the Department of Defense.
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do Prisoners of War. While the first objective in the interrogation
of prisoners of war is to extract information of immediate military signifi-
cance, it is also true that many of them are possible sources of economic
intelligence of great value. Due to lack of coordination and sometimes
cooperations the economic intelligence agencies in World War II had only
12/
limited opportunity for interrogation of prieoners of war7-"In 501219
theaters, however, notably at New Delhi, where the Combined Services Depart-
mental Intelligence Center (CSDIC) was organized, very important results
were achieved. A valuable aid to intelligence officer ss whether economics
military scientific, political, -- would be an Economic Interrogation
54
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Manual kept up to date, and classified not only by industries and regions,
but according to the experience and competence of the type of individual
being interrogated.
e. Covert Collection. Covert intelligence in World War II was
the responsibility of the OSS. In this as in so many other respects
there was for a time an unwillingness to make the intelligence available
to the Economic Intelligence Division of FEA. After FEA took proper
security measures, however, the economic intelligence obtained through
covert means was made available to them. Since the establishment of CIA,
with responsibility for this type of intelligence collection overseas,
this is a valuable source of voluntary reports as well as reports in
response to specific economic intelligence requirements, and should be
given high priority,
f? Aerial Reconnaissance.. Great progress wat made during and
after World War II in the development of aerial photography. The new
techniques of making mosaics and the specialized Skills in interpretation
have greatly increased the value of this intelligence especially for
economic purposes. It is frequently possible to assess with fair accuracy
new industrial developments, the extent of industrial activity at a
particular facility, the nature of bemb damage, condition of agricultural
crops, congestion in transportation gateways, and character and direction
of transportation movements.
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The Graphics Register in CIA contains a large collection of photo-
graphs and motion picture films collected in both peacetime and wartime,
covering areas and subjects of intelligence value in economic warfare.
Intellofax tapes, giving abstracts of the content of films, and machine
listings of etill photographs, covering various subjects and geogr-phies1
areas can be supplied.
B. Productionc, Having considered, in barest outlf.ne and suggestion, k
the requirements of economic warfere intelligence am. the sources for
collection of the information on which it is based, it is in order now to
look at the methods of processing that information into intelligence..
Again, as in the case of the requirements and the sources, it is to be
noted that, in the event of actual war, and even now with the accelereting
tempo of the economic war, significant changes will be necessary in the
processing and production of the supporting intelligence, Now, more than
ever, time is of the essence. Comprehensive treatment of the subject, the
manner of organization and presentation, perfection of style, complete
coordination - all always desirable - are less important now than speed,?
the greatest possible speed in distribution to the. usine agency consistent
with accuracy of the evaluation and soundness of the estimate.
The steps in the processing of information into intalligence are
usually identified somewhat as follows: classification, indexing,
synthesis, analysis, interpretation? evaluation. The steps frequently
eccur in that order, although, of course, not necessarily so. Evaluation
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and interpretation may be necessary at various stages in the process
from the source to the finished product. Classification and indexing
have a much greater significance in economic warfare intelligence than
these words usually connote The claesifying and indexing are done not
merely for future convenient reference,, They serve an immediate purpose
that of matching up the pieces of the jig-saw puzzle into an identifiable
intelligence picture. Interpretation and evaluation are both more
difficult and more important than in the peacetime process
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And as the uses and the sources and the methods of processing economic
intelligence undergo radical.. changes in the transition from a peacetime to
a wartime economy? so does the form which the production takes, As stated
In the Introduction, while there will be a greater need than ever for
reports and estimates, periodical and special, in support of economic
warfare policy and operations, there will be an even greater requirement
for current intelligence memoranda and spot reports. Quantitatively, these
latter fiMmms will constitute by far the greater part of the production
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Ca Distribution of Intelliglam, The ideal distribution is to
deliver as promptly as possible to every analyst all the information
he need d nothing else; to deliver to each using agency the intell-
igence which it requires and nothing else; and within each agency to
distribute the intelligence to each officer who requires it and to no
othersa Only the lees important material should be "circulated".
Within the agency all reports from overseas, and 25X1D
other information requiring action, should be duplicated, or digested
and then duplicated, and distributed as fast as received throughout
the day and night - to the responsible brenches? with one copy des-
ignated as the action copy?
So much for the distribution within the Agency. The final product
may be no more than this bare message properly interpreted and evaluated.
Or it maybe an estimate or a study based on this and many other items
and the result of much research and analysis. In any event, the final
product should be delivered as speedily as possible to the Agency or
Agencies, the individual or individuals, who require it, Then, and not
before, is the intelligence process complete?
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- V. ORGANIZATION FOR INTELLIGENCE SUPPORT OF ECONOMIC WARFARE
A. World War I
1. General. The purposes to be served by economic intelligence
are as numerous and varied as the many departments and agencies of the
government which have responsibilities in the economic field. They
maybe grouped, in wartime, under four main headings: economic war-
fare, economic mobilisation, military strategy, and military occupation.
In volume of intelligence required, economic warfare is the largest
customer.
Prior to World War I and in the period between the wars, economic
intelligence was limited largely to commercial intelligence, hydrographic
data, foreign service reports, occasional economic reports of the military
attaches as a part of strategic intelligence, and published data in sta-
tistical year books and similar publications. In wartime, as we have
seen, new sources of intelligence are developed and new objectives
Served. The experience of two world warn and the present cold war in-
dicates that by far the greater mxt of the economic intelligence effort
is required for the support of economic defense we of economic warfare.
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3. The US Experience. The principal agency of economic warfare
in the US in the first world war (although the term "economic warfare"
had not been coined at that time) was the War Trade Board. It con-
sisted of representatives of the Departments of State, Commerce, Agri-
culture, the Food Administration and the War Shipping Board. At the
12/
peak of its activity in 1918 it had 2897 employees? Of these 230
were in the Division of Research (dividedinto Country Studies, Commodity
Studies, and Special Studies), 275 in the Division of Tabulation and
Statistics, and 409 in the Bureau of War Trade Intelligence. There were
thus a total of 914 employees engaged in intelligence Whereas the largest
of the operational units, of the Board, the Bureau of &ports, had 599
employees?
The Bureau of War Trade Intelligence was largely an intelligence
support and liaison organization, serving as the "repository and clearing.-
house" for other agencies of the US Government, other bureaus of the War
Trade Board, and the embassies of the allied governments in Washington,
supporting export-import licensing, blacklisting and control of enemy
property.
All of the measures of blockade and mar trade control were admin-
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istered by the War Trade Board.
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2. The ullmtrinsit. The succession of agencies -the
Administrator of Export Control, the '-;conomic Defense Board, the
Board of Economic Warfare, the Office of Economic Warfare, and finally
the Foreign Economic Administration (NA), and concurrently with this
the Coordinator of Information which became the Office of Strategic
4,4ms Services (OSS) -- tells a sad story of costly improvisation,
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25X6 Both the FEA and the OSS had
intelligence and operational responsibilities in the field of economic
warfare, but after a period of duplication and jurisdictional disputes,
collaborated in the collection, analysis, and application of economic
intelligence, and worked out a satisfactory modus vivendi.
Economic warfare intelligence in World 'Jar IT began with the
establishment in 1940 of a Projects Section in the office of the
Administrator of Export Control. This later became a Research Division,
with an intelligence Section in the Economic Defense Board. Shortly
after Pearl Harbor, the Board (now called the Board of Economic Warfare)
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divided this Research Division into four geoeraphical divisions --
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Ruropean, nritish Empire, American Hemisphere and Far East:? Each
division had an analysis section and an intelligence section. By
the end of April 19n2, the intelligence sections of the four geograph-
ical divisions were combined into a single Economic intelligence
Division. It should be noted that this division was concerned pri-
marily with procurement of intelligence. The work of analysis, with
or without positive recommendation, was the responsibility of the
Office of rconomic Warfare Ana4sis. It should also be noted that BEW
and its successcr agencies also had a Trade Intelligence Division which
had the responsibility of procuring, analyzing and applying economic
intelligence to the export licensing procedure. Following a visit of
the Chief of the Economic Intelligence Division to London in July
191.L2 the economic intelligence function was brought closer to operations
by making the Economic Intelligence Division a part of a newly organ-
ized Enemy Branch.. The functions of the Intelligence Division were
16/
described as followsr-
25X1D
"a. The compiling, classifying, and routing of informa-
tion obtained from censorshipIMMIE, foreign
radio broadcasts, foreign publications, British MEW,
American business firms with foreign interests,
refugees, returned travelers, foreign representatives
of other Government agencies and all sources other
than espionage;
"b. The answering of specific requests for economic
intelligence information from other Divisions of the
BIM, the armed forces, the Ministry of Economic
Warfare;
The continual search for new sources of economic
intelligence;
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"d. The indexing, routing and safeguarding of all
restricted, confidential, and secret documents
which originate in the Board or come to the Board
from other sources."
Later, on 30 November, 1942, the Assistant Director, Office of
Economic Warfare Analysis, Board of Economic Warfare, stated the
essence of the intelligence function to be "to find and exploit All
possible sources of economic information useful in the work of economic
warfare ,,.. and to mobilize this infOrmation in such a way that it
makee the maximum possible contribution to the work of the Board4"
The Economic Intelligence Division lived happily ever afterwards, or
rather to the end of the war and the liquidation of PEA and its
absorption into the State Department. At that time some of the
intelligence personnel were transferred into the research area of
the State Department. In fact some of the personnel in both the
Intelligence Division of FEA and the OSS formed the nuclei of the
Office of Intelligence Researcn (OIR) in the State Department and the
Central Intelligence Group (GIG), the predecessor of the Central Intel-
ligenee Agency. In a sense, therefore our major economic intelligence
units today grew out of the intelligence support for economic warfare
in the last war.
For a documented accoant of the costly and tragic lack of
coordination in World 'Jar II, see the report The Enemy Branch of the
Board of Economic Warfaret A Study in the Relation of esearch to
(Appo III, Item 3)
Operation,"/and also "The Procurement of Economic Information for
Strategic Purpoyes - Analysis of the Experience of the Economic
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Intelligence Division of the Board of Economic Warfare, the Office of
Economic Warfare, and the Foreign Economic Administration, 1942-44 with
Observations Pertinent to Future Operations of Intelligence Series."
(App. III, Item 15) The conclusions supported the later proposal for
a central intelligence agency.
3. Allied Operations. A strong case for allied cooperation in
the waging of economic warfare was stated by the Allied (Britain, France,
Ilelgium Netherlands) Ministerial Emoting in London on 17 June 1940. It
asserted that the vigorous prosecution of economic warfare was an essential
factor in victory and that, as the four allied empires commanded the major
portion of the world g0 essential roe materials and commodities, it should
totally deny them to the enemy. The statement is reproduced here as a
fine declaration of principle and high resolver.;
'The representatives of the four Allies in consultation
1) Consider that the vigorous prosecution of the economic
war against the enemy constitutes an essential factor
in the ultimate victory of the allies;
2) resolve that, since the four Allied Empires jointly
command the major part of the essential raw mater-
ials and commodities of the world, the export of
these commodities and materials shall be so con-
trolled as totally to deny theme of them to the
enemy;
3) agree that such control cannot satisfaetorily be
established without the imposition in all terri-
tories of the Allied EWpires of a system for licens-
ing exports;
4)
resolve that such wystems ehail, where not already in
existence, be imposed and that they should be co-.-
ordinated in scope and practice and in the poliwy
governing their operation;
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5) direct theta Committee of experts, representing the
four Allies, shall canine how best these resolutions
and this policy may be implemented;
6) agree to Meet again from time to time as required to
receive reports from the committee of experts and to
Undertake any necessary action*"
Unfortunately this same too late, Owing to the fall of France a
few days later, the committee of experts never met, and no allied commit-
-tie was established until nearly two years later*
Cengress enacted the export control
law on 2 July 1940? and the US began the progressive control of its sac.
ports, both to conserve its supply of critical materials and, to deny
them to the Germans,
The cooperation was greatly handicapped, however, throughout 1941
and the first few months of 1942, by the lack of an integrated economic
defense organization, supported by an integrated intelligence office*
Hedlicott in his monumental work on "The Economic Blockade" in the series
on the History of the Second World War says, in speaking of American
cooperation during this period:
"A genuine handicap was the absence from the Adminis-
strati= of any single administrative organfsation charged
with planning economic defense, and therefore able to take
a comprehensive view of the prebleme involved and to see
that Plans were carried through in all departments of
government*"
In discussing the confusion in the famoue "Sheherasade" (French
tanker) case, Hedlicott refers to it as an illustration of the sort of
Blind Mange Buff that was going an inside the US administration*
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An outstanding example of a situation in which an economic Warfare
measure 'toed have saved American lives, Ships, and material would have
been the stoppage earlier of the Italian Air Lines (LATI) service to
South America. At a time when US national policy was one of "all aid to
Britain short of war," these Axis planes were spotting American convoys
on the South Atlantic route and notifying German submarine cemmanders.
They were also transporting Axis agents and industrial diamonds and other
strategic materiale, And they were flying with tetraethyl lead produced
In the USo
The Korean War
In the Korean War economic warfare was employed by the United
Nations only to a limited extent. In response to the "Unitin&for
Peace" resolution and the appeal of the Additional Measures Committee
of the UN, many of the natiOns imposed embargoes on the most strategie
categorieu of materials, The US imposcd a ccmplete embargo on exports
00,811.
OM fa.
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to China and North Korea. There was no blockade, however-of the China
oast, no interception of allied or neutral shipping, no attack on
transport sordsa the !al% and no interference with sources of supply
in Chins,
D, The Cold War
1. The NSRB Studies? In 190-49, the National Security Resources
Board, in the exercise of its statutory responsibility for the planning
of mobilisation measures, undertook the production of a series of inter-
agency studies on mobilisation planning for foreign economic measures?
Comprehensive studies were later condensed into Shorter monographs as
follows:
NSRB 118/1 Proclaimed Listing
NSRB 118/2 Preclusive Buying
NSRB 118/2 Export Controls
NSRB 110/4 Import Controls
NSRB 118/5 Foreign Economic Assistance
NSRB 118/6 Foreign Assets Control
NSRB 48/1 Foreign Precurmnent and
Development,
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These useful studies dealt with the substantive nature of these
instruments of economic warfare and proposed "readiness measures" and
"wartime measures," for their implementation but carefully avoided
ally' consideration of jurisdictional responsibility. There are two
notable omissions in the series. The first is the absence of any paper
on shipping controls (the ship warrant and navioert systems), probably
one of the most important measures of economic warfare. The second
omission is the absence of any coordinated study of intelligence
support for economic warfare. This latter omission was attributed to
the statutory responsibility of CIA in this field.
2. Planning StRdr_pr Economic Warfare.
An excellent preliminary "Planning Study on Intelligence for Economic
Warfare" had been prepared in the intelligence area of the Department
of State, dated 19 April 1949, which recommended creation of an inter-
departmental committee under the chairmanship of CIA. "The committee
should concern itself', said the report, "with delineation of responsi-
bility in the fields of procurement of economic intelligence and its
analyais or exploitation. The mere assigning of responsibility is, of
course, meaningless unless it is carried out by action, It will be
necessary therefore to devise some type of clearing machinery to insure
that major questions received by an intelligence unit through its
policy or operating officers will be subjected to all the talent avail-
able in all the agencies concerned. At the same time such a mechanism
must not deprive the individual agencies of the freedom to handle
quick or spot requests."
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Following this report and a series of conferences between the
NSRD staff.and the Chief of the Office of Reports andFatimates of
CIA and the Chief of the Economic Warfare Banat of that office, the
NSRSturler date of 2 February 2.95o requested the National Security
Council to direct the CIA to organize and conduct a study oft
a, foreign economic intalligenee requirements
requirements rel:tieg to the national securitr,
including requirements for mobilization
planning;
bc, facilities and arrancements currently employed
for meeting those requiremente;
a, the adequacy of such facilities and arrange.
ments; and, where appropriate, means for
their improvement.
30 111.2212m22122142AL.;_litlees This Mae" became the
basis of BSC Action 282 which set off a chain reaction in CIA. It
was originally intended to cal for another planning study in the
NSW series of interagency studies on mobilization planning for
foreign economic measures (economic warfare)* Nowrenmas, it was broadly
interpreted and became the basis of an extensive interagency survey
by OIAIOCD and for a survey by an office.wide task force in CIA to
determine the "areas of ignorance in intelligence regarding the Soviet
bloon* It was made the basis for planning a future research produo.
tion program, and finally on 31 Mgy 1951 in a regY to the BSC, the
Director of Central Intelligence proposed the establishment of am
itonomic Intelligence Committee and recommended the issuance by the
NSC of an intelligence directive ,which was issued as NSOID.150
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Thus what was originally sought as a Planning study in the NSRB
economic warfare series, emerged many months later as a general survey
of economic intelligence requirements - a larger and perhaps more useful
study - but it left still unsatisfied the need for a study of the
intelligence support required for economic warfare.
4. 211EMETERealletmerel----22-tttatialtRgE, The agencies
of the Government, charged with responsibilities in the economic cold
wars had made since 1946 continuing demands on CIA for intelligence
-auppott. The-"clamerout customers", as they were called, were told in
;to' intelligence require-
ments and of CIA capabilities to meet those requirements. This was
facetiously called the "survey of ignorance" and was followed by an
effort to close the gaps. The effort is still continuing. As soon
as one area of research is completed the result tends to become
obsolete, as the situation does not remain static. The concept that
current demands can wait until basic research is completed was dis-
credited early in the last war. Research and current analysis and
evaluation are all continuing and interrelated processes.
The dilemma of "the clamorous customer vs the basic study" was
forcibly expressed in one of the supporting papers on "The Role of
ORR in Economic Intelligence," 1 August 1951:
"The problems to whose solution we are asked to con-
tAbute are very urgent. Events will not wait for
the orderly, patient, exhaustive research which
alone can give satisfactory answers to these problems.
If we were to devote ourselves exclusively to amassing
all the facts we need, we would have to tell harried
policy-makers that we would be glad to advise them--
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beginning in two years. (Ed. note: three years has
now elapsed.) We neither should nor can stay in an
ivory tower that long. Even if it were possible ...
it is highly likely that at the end of that period
many that we would be asked to help with would have
changed so that our results would no longer be
particularly applicable. On the other hand if we
succumb to the very real pressure on us to answer
all current requests for prompt information, we will
never have any information better than the slim
fragments that we can now supply. Thus our dilemma
is, in a sense, whether to be encyclopedic and
irrelevant, or operational and incompetent. Clearly
the only tolerable solution is a compromise between
these two extremes."
In the three years intervening since that plaintive plea, the
preponderance of effort in ORR has been in the field of research on
the Soviet bloc. There is now an urgent need for a redirection of
economic intelligence to serve the needs of economic defense/warfare
in both research and current intelligence regarding both Soviet and
now-Soviet areas. Research must be continuing and diligent, but at
the same time there should be a timely and adequate response to the
intelligence demands of economic defense and economic warfare planning.
The vast amount of intelligence in the various research projects will
remain sterile unless it is brought into the focus of those charged
with policy-making and operations in economic warfare.
S. The Economic Intelligence Committee. The several
periodic reports of the work of the Economic Intelligence Committee
and the Intelligence Working Group reveal that those committees, with
certain limitations, serve admirably as advisory and even as coordt4
nating groups. They also reveal, however, the difficulty, if not the
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futility, of attempting to do in committees what should be done by
individuals or individual agencies.
Some of the difficulties of intelligence production by committee
are implicit in the following statement from the current EIC progress
report: When the EIC agrees as to the priority need for particular
economic-intelligence studies, and as to the agencies which should be
responsible for making detailed contributions thereto, the results
must not be invalidated by inability of the contributing offices to
provide competent staff and required data which should be available
through their channels. It is not sufficient for other agencies with
greater and more flexible facilities (perhaps CIA) to be in position
to "pinch hit" and undertake studies for which it was agreed other
agencies should be responsible."
An economic defense or economic warfare agency wouldbe in a
peculiarly helpless position if it had to await first the assignment
of responsibility for such contributions and then the production of
the intelligence by diverse agencies, each probably giving priority
to its own departmental requirements.
"In general" says the report "the EIC has been developing into
a planning and service mechanism by Which the intelligence community
seeks to coordinate the economic intelligence needs or the government
as a whole with a minimum of duplication and a maximum of mutual support
among the several agencies. During this period) however, the initial
emphasis on the Soviet bloc has continued."
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In calling for a full-dress evaluation of the US economic
Intelligence program as a whole, the same EIC report states that
"without pre-judging the results of such an overall evaluation, it
soems clear that the econom1c0intell1gence community nhould supplement
its stadies of 0.0 the economic strength of the Soviet Union to
support hostilities, by considerably greater attention to the emerging
economic patterns of principal countries in peripheral areas and in
the free world, and to those developing economic pressures which might
influence alignments of particular regional or nations1 economies
towards the Soviet bloc or non-bloc systems..." It would also seem
that somewhere in the intelligence community, either in CIA or in the
economic defense/warfare agency, these emerging patter eJs should be
kept current as a back-drop for the evaluation of the daily scene in
economic defense and economic warfare operationa. The Office of
Current Intelligence in CIA (CIA/OCI) publishes in loose-leaf form and
keeps current a series of excellent Handbooks an major countries of the
world, but they are "far CIA internal use only".
6, The Intelligence WOrkihgAmp2iain April 1952, the
Administrator of the Yutual Defense Assistance Control Act and the
Secretary of State requested the Director of Central Intelligence to
establish an Intelligence Working Group for direct intelligence support
of the EDAC, The Secretary of Defense endorsed the proposal and
requested well of the. Services to designate representatives. The IAC
approved the terms of reference and the IWG began to function., One
of its first undertakings was to tackle the problem of the rapid
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collation and dissemination of operational intelligence to the using
agencies. Its recommendations resulted in the establishment of the
Current Reference and Transactions Sectionsin the Strategic Trade
Branch of the Economic Defense Division of CIA, This Branch supports
the work of the Diversion Control Net, the Administrative Action Panel,
and other agencies and other elements of
CIA in curreit operational intelligence and serves one of the purposes
for which the An was originally created. The difficulties which the
11,0 has encountered are the necessary preoccupation of members with
their departmental responsibilities and the other usual difficulties
of action by committee. Nevertheless, the IWO has performed a useful
service and its program includes (1) further review of the intelligence
produced in the course of the security list review and additional
intelligence on the hard core items as required, (2) preparation of
papers on Soviet trade trends and tact'ins for the fall sessions of
cocam2 (3) efforts to improve the priorities for the collection of
economic defense intelligence and to expedite its transmission, (4)
consideration of the problem of bilateral and multilateral exchange of
economic defense intelligence with allies, (5) an indoctrination program
and arrangements for briefing and debriefing personnel assigned to
overseas posts and (6) compilation of enforcement regulations of other
countries. This would certainly appear to be a useful and constructive
program. However, continuation of IWO would seem to be justified if
only as a stand-by facility in the event of war or a worsening of the
international situation,
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A periodical economic defense intelligence digest was proposed
and authorised in 1953. It was never instittted tecause it was felt
that the problem of the prompt collation and diss:nination of mrrent
operational intelligence to the using agencies had been partly solved
for the time being by the establishment of the Current Reference and
Transactions Sections in the Economic Defense Division of CIA and by
the work of the Diversion Control Net and the Administrative Action
Panel. However, the preparation of such a digest by the secretariat
of IWG and its dissemination to member agencies would serve a highly
useful purposec Thi, would seem particularly timely in view of the
um allied export contra policy.
E0
1, azanization for :EcononiclWarfareo It was pointed out in the
Introduction tlat although the floover Commission in 1948 recommended
that a comprehensive economic Trarfare program be developed, that
recommendation had not becn given full effect* The I= studies referred
to above which follow3d in 1949, dealt with certain measures of economic
warfare but did not pnopose an organization for their administration,
The developments of the cold war, however, have resulted in the evolution
of an interagency enganization for the coordination of economic defense
measures, which may be adapted to serve a shmilar rmrpose in economic
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warfare. The responsibility for tee administration of the Mutual
Defense Assistance Control Act was vested in the Director of the
Foreign Operations Administration, In harmony with the foreign policy
direction of the Secretary of State (p;EL supra). The diverse elements
of economic defense and the necessarr implementation of its measures
by various other agencies of the government under constitutional or
statutory authority, required that these measures also be coordinated
by an interagency mechanism. This has been accomplished by the forma-
tion of the Economic Defense Advisory Committee (EDAC). It is not the
purpose of this paper to review in detail the EMC structure, with ito
Executive Committee, Working Groupe, and staff and secretariat
furnished by the Vuteal Defense Assistance Control (MDAC) element of
FOA. This is described succinctly in "The Economic Defense Structura
of the US" (EDAC-D-85, 14 May '54). It is pertinent, however, to
consider this structure as the possible prototype of an economic war-
17/
fare committee structure, in order to determine the arrangements
required for its intelligence support. Indeed, it furnishee more than
a prototype. It furnishes an interagency organization in being whose
present activities could be continued and expanded and adapted te
wartime conditions as needed. In this respect we are now years ahead
of our position at the outbreak of World War II. There should thus be
no necessity for the costly improvisations, "empire building," and
jurisdictional disputes that characterized the early months of that
war?
Whatever organization structure is required for ?concede warfare
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(and its intelligence support) in wartime, should be planned MANIN
To the extent that it is applicable to economic defense operations
in the cold war, it should be implemented now. Then, in the event
of war, we would have an organisation in being, which would merely
have to change to a belligerent status? as do the armed forces.
Some additional measures would need to be implemented, e.g. tht ship
warrant and navicert systems; some new sources of intelligence would
need to be exploited, e.g. censorship. Basically, however, the
objective is the same -- the limitation of the Soviet bloc's economic
potential for war -- in economic defense and in economic warfare, and
the same expertise is required in their administration. Some addi-
tional executive orders and directives perhaps some legislation,
will be required. It is presumed that some of these exist now in
draft. They should be brought togeliher now in an "Economic Warfare
Plan" and kept under review, so that they might be promulgated
immediately in the event of war. Personnel assignments to "battle
stations" in economic warfare should be made now. At least the
organization structure and the job descriptions for the key posialH
should be determined. When the eombe begin to fall, it will be too
late to be drafting plans unieh could better have 1)003 prepared in
advance. It would be tvagic Irces if after biX years of economic war
(euphemistically called "economy denanleA) it should be necessary
on the outbreak of war to lose irrapiae in hastily prepared
improvisations for the prosecution of economic warfare,. It would se
as illogical as waiting until the outbreak of hostilities to establish
the armed forces.
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A comprehensive plan for an eaonoiic defense organization and
a collateral plan for its augmentation, in the event of hostilities,
to an economic warfare organization, should be made now.
The EDAC structure was devised for economic defense in the cold
war. It can be adapted, insofar as interagency coordination is con-
cerned, to the mission of economic warfare in a hot war. What is
needed is an administrative organization with the authority and
ability to take action. The EDAC committee structure could serve
such an agency in an advisory capacity. Any lack of effectiveness
of EDAC in economic defense measures thus far, particelavly in
international controls, may be attributed to policy limitations
rather than to operational deficiencies. In the event of war, it is
assumed that policy objectives will be clear and definite.
2. ariesiie,t_,ion for Intellatnniklupport. As previously
pointed out intelligence constitutes a large part, perhaps the
activities.
greater part, of economic warfare/ There are vast redources of per-
sonnel and data and facilities within the Government devoted to intelli-
gence. And much of it is relevant to economic defense/Warfare. The
irony of the situation is that there is no office within the Government
prepared to furnish promptly as required adequate intelligence in
support of economic defense or economic warfare. Witnin CIA, ORR has
devoted practically its entire resources to research regarding the
Soviet hloc. Only a skeleton staff in the Economic Defense Division
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has served in close support of the vast economic defense operations
of the cold war. OCI produces a substantial volume of current
economic intelligence concerning Soviet and non-Soviet areas, but
much of it cannot be used outside CIA. (p69 Supra). Much of the
intelligence being produced in and out of the Government is pertinent
to economic warfare, but is not recognised as such and is not directed
to economic warfare needs. This is illustrated by the Intelligence
Publications Index for July-December 1953, prepared by the CIA Library,
This is a cumulative index by subject and area of some forty intelli-
gence periodicals and monographic intelligence studies, The index
"economic defense" or
contains no classification off "economic warfare," although the
Library Reference Code for the Intellofax System contains "Economic
Warfare" (790), Included under "warfare" in addition to the various
aspects of military warfare, are "Biological Warfare," "Guerilla
Warfare," "Psychological Warfare," "Radiological Warfare," but nothing
on "Economic Warfare",, Under "Economic" appear "Conditions," "Develop-
ment," "Plans," "Policy," "Relations," "Problems," and "Resources".
Of course many of these have economic warfare implications but they
are not pointed to economic warfare needs, and are not listed under
"Economic Warfare."
The effective prosecution of economic warfare calls for an
Intelligence office within the responsible agency, Such an office
would have cognizance of relevant intelligence regarding all areas
and all commodities and essential services.. It need not duplicate
the facilitilis or the production of any existing agency, but would
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bring into the focus of the economic warfare agency all pertinent
available information. Its nist;ion would not be primarily one of
collection or researdh. It would be rather one of collation and
evaluation, for its own departmental use, of intelligence and in-
telligence information produced by the other agencies, This being
trees, its staff need not be large. It should have a Trade Division
with three branches - enemy, allied* and neutral with "desks" for
the principal countries in each, It should have a Steagegic Resources
Divieice6 Mi.th bxerohee for the major categories of oommodlties and the
principal services, except shipping which should constitute a separate
division It should have a Liaison Division, mhiehmould include a
Sup .ort Staff and furnish the Secretariat for the.Intalligence Working
Group, It should have a Current Reference! Division .to culvert the
diversion control program, the adhinistration of the watch lists and
black lists, and other current operations,
The responsibility for econouic defense measures and for the intelli.
gene? rapport of such wasures is now diffused among several departments
and agencies of the government - State, FOA (4DIC), Commerce, Treasury
and others, Under the National Security Act of 1947, it is the duty of
CIA "To make recommendations to the NSC for the coordination of eadh
intelligence activities of the departments and agencies of the government
as relate to the national security; to correlate and evaluate intelligence
relating to the national security (provided that the departments-and
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moot OOP 0.110 IMMO 011.1.
other agenciesof the government shall continue to collect, evaluate,
correixte and disseminate department intelligence); g.e. and to
perform for the benefit of ell.sting intelligence agenciessuch additional
services of comma concern as the USC determines can be more efficiently
accomplished centraAy,"
Accordingly, if an existing department or agency of the government
were given responsibility for the coordination of economic defense
measures now an of economic warfare me_sures in the event of war, such
department or agency would doubtlessThe empowered under the National
Security Act to establish an intel3genc0 ooMponont with authority to
correlate for; departmental use the relevant inteiligenoS produced by the.
various intelligence agencies, Until such time as a department or agency
is designated or established to coordinate economic defense and economic
warfare measures, an office should be established within the intelligence
community to correlate economic defense and economic warfare intelligence.
It is believed that such an office could Le esteblisl:ed without additional
personnel by re-assigning existing persomnel in keeping with a re.directed
emphasis and the elimination of duplication of effort,
In the meantime the deficiency is being met in part by the coordination
of economic research in the Economic Intelligence Committee and direct
support of economic defense cverations by the Intelligence Worktng Group,
but with the difficulties cited by each of those groups in the preceding
section. In addition the rtversion Control Net (DCN) and the Administrative
Action Panel (AAP) are supported by the Economic
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i?
Defense Diviesion of CIAMR. The former is the prototype of a war-
time Blockade Committee and the latter of a Blacklisting Committee,
In the event of the establishment of an economic defense agency or
an economic warfare agency, with its own intelligence unit, the need
would still exist for the EIC and the IWG? not as produce" of in-
telligence but as means of the mutual interchange of -ideas and facilities,
F, AL11g_filLamtelermv_itior Allapd Economic Warfare
The intelligence support needed for combined economic warfare
may be considered in three major categories: (I) economic infor-
mation concerning the allied or cooperating countries themselves,
(2) intelligence concerning neutral countries and (3) intelligence
concerning the enemy or potential enemy As to the first category,
each country will be the logical source of data regarding its own
situation, All such intelligence must be carefully examined and
evaluated for subjective elements and national bias,. Each of the
allies may be presumed to have information and intelligence re-
garding the others but ordinarily it would not be consistent with
protocol to introduce it at the intergovernmental level, ILs ex-
istence, however, may be useful in making the subject country care-
ful of the accuracy of its facts and the validity of its estimates
As to the second category, the problem is more difficult. Diplomatic
and trade relations will continue with the neutrals, but there will
be more reluctance on their part to disclose significant data to the
belligerents, The neutrals have a vital interest in establishing
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favorable import quotas for themseivee and in preserving some trade
with one or both belligerents, The neutral countries which, by the
way, may be expected to represent various gradations of neutralityo
constitute, as stated elsewhere in this report, the principal battle
ground f economic warfare, Basic intelligence is needed as to their
economic capabilitiea and vulnerabilitiea and cufwent intelligence is
required as to their surpluses and shortages, their re-exports and
diversions and the activities of persons trading with the enemy, The
greatest difficulty in collecting intelligence, and therefore the
greatest need and opportunity for international exchange of intelli-
gence, oocurs in the ease of the third category - intelligence con-
cerning the enemy.
Economic warfare, even more than any other phase of the war effort,
requires combined or parallel and noordinated operations among allies.
In economio warfare the measures and the weapons are largely the same
and they are employed on a worldwide basis, It is the same firms and
individuals to be blacklisted by the allies for trading with the enemy,
the same >ship s to be navicerted or intercepted., as the case may be, and
the !lame commodities to be preempted, By the freest exchange of in-
telligence consistent with seeurity and by a division of labor to avoid
duplication and to conserve manpower, each of the allies can have more
complete and valid economic inteleigence than would otherwise be possible,
The opinion is widely held in the intelligence community that effective
eooperation between intelligence agencies of allied nations can best
be acc-dplished on an agency to agency or bilateral basis and on a
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foundation of mutual confidence? similarity of interests and the
supplying of quid pro quo, The very nature of an intelligence system,
it is said, precludes its participation in an international organ-
ization. At the same time it id recognized9 as stated above 9 that the
successful waging of economic warfare requires combined, or parallel
and coordinated9 operations by allies and this requires combined or
coordinated intelligence, The arrangements by which appropriate in-
telligence will be brought to bear on economic warfare policies and ?
operations at the intergovernmental level will necessarily depend on
the type of allied organization adopted for waging economic warfare.
It is assumed that same structure will be built on the foundation of
the Coordinating Committee at Paris extended to a worldwide scope.
It remains to be determined the organization ueuld be a come
bined one under a single allied command as in military operations
or if it will be a coordinating mechanism as at present* If
the former.. the combined economic warfare organization should have its
own small intelligence staff responsible directly to the organizaticn
'Itself:, This staff as in the case of military commands9 would draw on
the resources of the economic intelligence agencies of the member nations,,
If the allied economic warfare organization is one for coordination only
then it is to be expected that the intelligence would be furnished by
each nation to its delegation on the Coordinating Committee and its
sub-rommittees, notably the Black List Committee and other operational
eommittees such as Diversion9 Transaction59 Permits, etc,
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In a period of threatening hostilities it is important to make
an Inventory of document. collettions and of individuals with special
knowledge regarding them and with expertness in specialized asides
who are in areas in danger of invasion by the enemy, Arrangements
should be made for the microfilming of many of these records and their
storage in other areas less likely to invasion and far the evacuation
of the intelligence personnel ta the event of invasion, In Germany and
Mustrles for encamples ar large reservoirs of intelligence coneerning
Eastern Europe, In, France and Belgium tilers is a vast amount of infor-?
nation on Africa9 of it in dcatments some in the knowledge of 1et-
dividuals9 Which if lost would Le largely irreraaceable, In the Nether-,
lands and the UK arc similar resmrees regarding the Far East,
The experience in allied economic varfare in both world wars haa
been cited above. Another case history in intergovernmental economic
operstiona, with magy applications to the present situation is that of
the Middle East Supply Centers which controlled the import and exports
and many aspects of the econony of 17 diverse political entities in the
25X6Dliddle Finsto
The nultilateral approach in the Coordinating Cont.ttec at Paris has
presented difficulties in vi ete of the divergent national interests and
policies Irith respect to East4rest trade, It ha e reeulted too often in a
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ad. mm m. mow milO =IF
course of action based on tne .A..owest common denominator- Intelligence,
(or the lack of it in the specificity demanded, was frequently made to
bear the onus of the failure to sere effective united action, But
the results were frewently no dlfterent where the intelligence was
adequate and even whore there was wanimity in ite evaluation, A
different situation wouA4 be expected in wartime, however, with com.
pieta Interdiction of enlsy.trade and a concentration on the pre-
vention of violations ard evacioLs., A reconsituted and rededicated
nCocom" might thus ert as the oordilating mechanism f,41. Lhe Allied
economic warfare,,
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ahlw ame
VI. ccIJ3XONS
1, The otruggle between the Coemunists and the free world will
probably be a prolOnged one, fought with political9 psychologitele
and economic measures, uith or eithcat military warfare* In ouch a
continued cold war or in armed conpActo economic meaeures will play
an important role becauae of (a) the reqeirements of the Soviet bloc
eopecially Communist Chine and the Surepean aatellites, for certain
strategic imports and (b) the probable existtnce at important artes
of neutra11ty0 which constitute the principal battlegrourd of economic
warfare.
20 The experience of twowceld wars and the cold war to date
emphasises the urgent nese ea comprehensive economic uarfare .nlans
coordinated by a single agency ni the Jovernment* Our allies in both
woad wars provided a Peovero operatioe in economic warfare as in
etilltary warfare, while the US uas mobilising* In any fUture liar the
reeponeibility for the enitiattee will doubtless davdive on the US*
3* An essential part of any ecemegio warfare plan is a. provision
for adequate intalligenee support() This can beet be aceemplished an ;i
timely and effective beelen by an intelligence component of the &game
responsible for the conduet at evecomie warfare*
40 In order to avoid the lone and coetly lead time for ths settee,
liehment of ouch an organisation alter the outbreskeef war, an ?fries
ee Economic Defense butelligerce ehoeed be establiehed now for the support
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of economic defense operations in the cold war and as a nucleus for
an Office of Economic Warfare Intelligence in the event of war.
50 Under the provisions of the National Security Act such an
Office can be established only in CIA or, for dspertmental purposes,
in the agency designated to coordinate economic warfare.
60 The intelligence required in support of economic defense and
economic warfare embraces all geographical, areas and all major re-
sources. It is inter-related and cannot be produced on a satisfactory
basis by an intelligence organization limited to Soviet or non-Soviet
areas* or devoted primarily to basic research or to current and oper,-?
ational intelligence. Furthermares economic warfare requires not only
economic letelligence* but military and political intelligence as well?
It thus represents the most important area of correlated intelligence
O' common concern*
76 The Mission of suchen office should be the collation and eval-
uetions for economic defense and economic warfare purposes* of all
pertinent intelligence. The office would not engage in collection or
in primary research. Ite staff need not be large and could be re-
cruited from existing personnel in the intelligence community0 Plans
should be made, however* for: some expansion in the event of war.
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FOOTNOTES
+111ff,60.1.0.3 V011ar Ismet
Other Definitions:
"The use of diplomatic, economic, financial, and sometimes
military means to cut the Axis off from the supplies they needed
to fight, and to destroy their economic Dower throughout the world."
- The Hidden Wepp. Gordon and Dangerkield. N.Y. Harper Brothers
l9h77
"All actions other than military taken to weaken, disrupt, or
interfere with the ability of an enemy or potential enemy to provide
economic support for his national policy. As defined hero, economic
warfare might be employed during periods of general war, limited war,
or cold war." - Economics of National Security. US Military Academy.
Uest Point 19530 ----------------
"Economic warfare is defined in this estimate as the use of
economic measures to alter the power positions and alignments of
opposing nations or groups of nations," - GIAINIE 10-54. (Secret)
"A process of conflict in which measures are employed to ? ro e
an enemyls trade, destroy his foreign credit, and/or prevent him from
acquiring supplies necessary for the prosecution of warfare. Among
the measures used in this connection are export restrictions, foreign
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funds control, blacklisting of nationals of foreign countries,
the purchasing. of goods to prevent others from getting them and
naval blockade." - Dio_jltiom_afj1914Es_aczemlat NY Public
Affairs Press, 1949.
"Economic warfare has many definitions... Generally speaking,
economic uarfare is the use of diplomatic, economic, and financial
power in peace or in war directed toward the weakening of enemy
resources, and the strengthening of one's oun position.., it is non.
military in character, except in actual war when blockading and stra-
tegic bombing takes it into the field of military operations -- but
its objectives are the same as the objectives of military victories,
In time of peace, its theater is universal, but particular emphasis
is placed on the sources on which the enemy depends, and on the
sources from which he would hope to operate his springboards of
offense* Examples of economic warfare used by the Allies in 1-!or1d
Warn were the blockade, export and import controls, preclusive
buying, the safe haven program, and the blacklist technique. Examples
of economic warfare currently being used by the Wet3tern powers are
export contra on military items against the Soviet and its satellites
in Eat-West trade; the economic aid programs; and technical and
capital assistance progranm." - Mobilization PlAnnillg and the National
Uko Y. Elliott, Public Affairs Bulletinigr.ui..y 1.500
2, For further discussion of military measures in economic warfare,
see "Military Measures", page 24.
For mamas,
3. the captain of the P p Pram, in descrating the Soviet
, .."
Shipping situation basil- ? ?itrt if other western nations followed
the DS lead in denying shipping services and shipyard facilities,
Soviet and Satellite shipping would be virtually immobilized.
4. Mon, Li-Wu. Economic Warfare. nr. Prentice-Hall. 1952.
5. Mote of Secretary Lansing to Ambassador Page at London,
October 20, 1915.
6. Report of the War Trade Board 1917-1919. Washington, D.C. GPO 1920.
pp 268-90
7. Economic Defense Adninistrative Action Pro ram. (EDAC D-46a;
7.-"Selit"Mrir-Zi-ErWar-V2777-2-7une
9* Ritchie, H. The Navicert tem Dari the World ler. WashIngton,
D.C., Carnegie En owmen or n erne eace.
10. Censorshi ? Mobilization
Mobilize on
ESRB Doc. 119 1949, and Censorslia
gt ea se easures. 17SRB Doc. 119/1. 15b0
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11. The Procurement of Economic Information for Strategic Purposes.
(An yaeo e eence ? * onomic Intelligence Division
of the Board of Economic Warfare, Office of Economic Warfare and
Foreign Economic Administration 1942..19a.) Foreign Economic Admini-
stration. (Secret) p 80.
12. Ibids p 57.
25X1AReP3. Report of the War Trade Board, 1917-19.
25X6
150 Foreign Economic Administration op0 cit. p 7.
16. Ibid. p 9.
180 %melee, Maurice. Blockade and Sea Power, No Yo Crowell. 1924
(out of print)
190 Medlicott, 1.4 No The Economic Blockade* London ? Ho No Stationery
office,
20. At the time of the preparation of this report, a change in the
name of the Intelligence Working Group to the ',Economic Defense
Intelligence Committeeti was awaiting approval 'by the Intelligence
Advisory Committee*
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INTELLIGENCE SUPPORT FOR ECONOMIC DEFENSE
DIRECTOR OF FOREIGN
OPERATIONS ADMINISTRATION
(P.L. 213, 82nd CONGRESS)
SECRETARY OF STATE
EDAC WORKING GROUPS
Export Control Programs
Application and Enforcement
Cargo Transport Controls
Transit Trade
Economic Defense Programs
and Policy
Decreasing Reliance
Far Eastern Economic Defense
ECONOMIC DEFENSE
ADVISORY COMMITTEE
(EDAC)
(1, 6-16)
EDAC EXECUTIVE
COMMITTEE
(EDAC/EC)
(1, 7-9, 15, 16)
ADMINISTRATIVE
ACTION PANEL
(AAP)
(1,7-10,15,16)
DIVERSION
CONTROL NET
(DCN)
(1,7-10,15)
NOTE: Dashed lines indicate flow
of intelligence support form IWG
13501 CIA, 9 -54
1. CIA
2. STATE (RI
3. G-2
4. ON)
5. AFOIN
6. AEC
JOINT OPERATING
COMMITTEE
(JOC)
(1, 7-9, 15, 16)
SECRET
SECRETARY OF COMMERCE
(P.L. 11, 81st CONGRESS)
INTELLIGENCE
WORKING GROUP (IWG)
Members Responsible
(1-5)
to the IAC
Associate
Members
(7-10, 15-171
PARTICIPATING AGENCIES
NUMBERS ON CHART INDICATE PARTICIPANTS
7. DEFENSE (OSD)
8. STATE (E)
9. COMMERCE
10. TREASURY
11. ODM
12. EX-IM BANK
SECRET
13.
14.
15.
16.
17.
AGRICULTURE
INTERIOR
MDAC
FOA
STATE (MC)
ADVISORY COMMITTEE
ON EXPORT POLICY
(ACEP)
(1, 6-10, 13-161
OPERATING
COMMITTEE (0C)
(1, 6-10, 13-161
COORDINATOR
TECHNICAL TASK GROUPS
Construction and Mining
Transportation
Metal-Working Machinery
General Industrial Equipment
Iron and Steel
Nonferrous Metals
and Minerals
Chemicals and
Agricultural Products
Electronics
Electrical
Rubber
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/RUCT4JRE7oo?1 5
ECONOMIC DEFENSE &mow COMTE
CHAIRMAN: FOA DEPUTY DIRECTOR FOR BATTLE ACT
*STATE *TREASURY ? AEC
? DEFENSE ? CIA ? AGRICULTURE
? COMMERCE ? ODM ? EX-IM BANK
?FOA
EXECUTIVE COMMITTEE
CHAIRMAN; ASSISTANT DEPUTY DIRECTOR FOR
BATTLE ACT
? STATE ? COMMERCE
? DEFENSE ? FOA *CIA
SPECIAL JOINT COMMITTEES
JOINT OPERATING
COMMITTEE
ADVISES ON BOTH LI S. AND
INTERNATIONAL SECURITY EXPORT
CONTROL LEVELS_
INTELLIGENCE
WORKING CROUP
(COORDINATES BETWEEN EDAC
AND
INTELLIGENCE AGENCIES)
WORIONG MOWS (inter- Agency)
APPLICATP3N
AND
ENFORCEMENT
TRANSIT
TRADE
ECONOMIC I
DEFENSE
I PROGRAMS
MC MUM'
DECREASING
RELINICE
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APPIA011 111
1?11. 011...1111.E, ttyy.
A LIST OF NEFLIENCE TERIALS 1ATING TO ECONOMIC WARFAR
--IMFTOM REFERENCE
1. Abbott, Charles C. "Economic Defense of the United States."
Harvard Business Review. Sept. 1948. Vol. XXVI, No. 5.
2. Army Industrial College. Economic Sanctions: A Project in
Economic Warfare. 27 VII 115. (SeadnarTo. t3451
3. Bureau of the Budget. Enemy Branch. War Records Section.
The Enenrj Branch of the Board of Economic Warfare: A
Cat1oniip orResear"-Ers one.? 19414.
L. Central Intelligence Agency. Appraisal of Foreign Economic
Intelligence R raments Pacilifies and Arra 7agia""
related-to the'Si..
5.
---Forei Economic Intelli once
6. ---Guide to OCD Reference Service and Facilities. Jan 1954.
7. --7Ettary. of Ecomal..!1.21LensILem421. CIA-ORR-DE. July 1954.
8. ---Tbe Role of ORR in Economic Intelli ence. CIA.,ORR. 1 Aug 1951.
9. The Economic Information Interests of Certain Govern-
urtqf
Commission on Organisation of the Executive Branch of the
Government. Appendix G, National SecuriMasraniaation.
Jan 1949.
Economic Defense Advisory Committee, The Economic Defense
Structure of thejlE.... EDAC D-85. 14 14 19L.
-.Economic Defense Administrative Action Proem. EDAG4)-4642
7?t
rations of the Diversion Control Network. ED/EC D-58.
1
EconoMic Intelligence Committee. Terms of Reference, IAC-D-22/1,
29 May 1951.- Third Annual Progress Report. sept 1954.
- 99 -
S-E.C.Rp.E.Jr
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15. Foreign Econcad.c Administration. The Procurement of
Economic Information for StrategLc Purposeu. Analysis
of the Experience of the Economic Intelligoce Division
of the Board of Economic 'Warfare, Office of Economic War.
fare, and Foreign Economic Administration, 194249440
May 1945.
160 Georgetown Univereity. School of Foreign Service* The Political
Economy of Total War, a llabus. 1942. Part
tqarfare -Stratszu_seckmicas.
17. Gordon, David L. Techniques in Economic Warfare. Army In.
dustrial College. May SI, J? ? (5ntnRr 5BT
...and Rayden Dangerfield. The Hidden eapon, the Sto.TA
Economic Warfare. N.Y. Hirper Bros., 19147.
18. Industrial College of the Armed Forces. Economicliarfaav
A Selected List of References. Jan 1950.
19. -.Economic Warfare. Student Officers' Report SR 49-43. 1949.
20. ...Numerous Lectures and Student Reports on Economic Warfare
and Economic Intelligence.
21. Intelligence Working Group. First Annual Provess Rsr..yle
Sept 1953.
22. -.Second Annual Progress Report. Sept. 1953.
23. ...Terms of Reference. IAC-D..3/1. 25 July 1952*
24. -.Intelligence Working Group Procedures. EDAC D.48. 25 Na 19S3
Kent, Sherman W. Strategic Intelli.ence for American World
Policy:. Princeton. Princeton 1,4 versity Press, 1949.
26. National Security Resources Board* Record Sources Relatinli
to Foreign Economic Operations in woridwar II. 10 Mgr 1949.
27. -Proclaimed Listing. IISRI4 1.14/1. 19149?
28. ...Preclusive Buying. NSRB 118/2. 1949.
29. -Export Controls* NSRB 118/3. 1949.
300 -Import Controls. NSRB 118/4. 1949.
31. ...Foreign Economic Assistance. NSRB 118/5. 1949.
32. ...Foreign Assets Control. BERB 118/6. 1949.
33. ...Censorship. NSRB 119/1. 1950.
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Parurelees, Maurice. BloOkade and Sea Power. E. Y0
_
Crowell. 1924.
35. Pettee, George S. The Future of American Secret Intellimcc,
Washington, InaiEFF7MairPress. 10460
360 Series of Lectures on Economic Intelligence Before the
Industrial College of the Armed Forces. (L46-97; 12i7-63;
149-133; L50-101.)
38. ---......4Iandbot_1(.322s...2.Atrame Revised Draft, 1953.
39. ---Medlicott, W. N. The Economic Blockade. Vol I. London.
H. M. Stationery Office. 1951-.
40. United Nations. General Assembly. Report of the Collective
Measures Committee. Supplement No. I') (1/1591) 1951.
hl. War Department. Military Intelligence Division. Economic
Warfare British Exeerlence. Aug 1941 (I.E. 117).
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