CURRENT INTELLIGENCE REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79S01060A000100190001-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 20
• Document Creation Date: December 22, 2016
• Document Release Date: July 3, 2012
• Sequence Number: 1
• Publication Date: October 31, 1961
• Content Type: CIAPER

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Copy No. 6 8
VOL. I No. 12
31 October 1951
CURRENT INTELLIGENCE REVIEW
Office of Current Intelligence
JTfi. i
DATE REVIEWER:
CLASS. IAT TO: TS
Cam TiicVIEWVtELV DATE:
NO CHANT: E IN CLASS.
f 1 DECLASSIFIED
DOCUMENT NO. _
CENTRAL INTELLIGENCE AGENCY
TOP SECRET
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SUMMARY OF CONTENTS
TEE SOVIET WORLD . . . . . .
EASTERN EUROPE PLAGUED BY MANPOWER PROBLEMS .
Page 3
. Page 5
The failure of the Eastern European Communist regimes to
secure the acquiescence of the people to their economic plan
rning is aggravating manpower problems. Evidence has accumulated
from their propaganda and legislation, that the Communists are
making.a determined effort-to redistribute manpower according
to their economic plans. It is., however, apparent that only by
the ultimate use of force can they accomplish their aims.
CURRENT STRESSES ON COMMUNIST CHINA'S ECONOMY . Page 7
Since the intervention in Korea, Chinas economy has been
subjected to'inflationary pressures, and the popular living.
standard has suffered as a result of high taxes and forced con-
tributions. Overall agricultural and industrial output, however,,
have not fallen, and Peiping has demonstrated its ability to
maintain transport services.. There is no evidence that'Commu-
nist authority will be endangered in the near future by economic
collapse. (SEE GRAPHS)
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POLITICAL INSTABILITY HINDERS GREF}K CONTRIBUTION TO NATO ? . ?., Page 13
The weakness.of the new Greek Government will detract
from Greece's ability to undertake NATO commitments. Diver .
gence of views.between the, leaders of the coalition end the
strong opposition which they will face from Marshal Papagos make
a new election probable. in the near future. Fear of taking un-
popular economic decisions will lead the,government to delay
action on necessary economic reforms.
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WORLD COMMUNISM: ITALIAN COMMUNISTS MAY LOSE SUPPORT OF
NENNI SOCIALISTS . . . . . . . . . . . ? ? . Page 14
The future course of the Nenni Socialists will be a
critical element in the position of the Italian Communist
party. Whether or not their gains at the recent municipal
elections will spur the Socialists eventually to break away
from the Communists is uncertain. Any eventual real split
between the Nenni Socialists and the Communists would further
US objectives in Italy, because it would weaken the Communist
hold over organized labor and would deal a severe blow to the
popular prestige of Italian Communism.
SUPPORT OF REARMAMENT INCREASING IN JAPAN . .
. Page 16
Public opinion polls indicate that a majority of the
Japanese people now support rearmament but desire to post-
pone it until economic reconstruction is further advanced.
Political opposi16ion likewise is diminishing. The implement-
ation of the US-Japan Security Treaty, which will become
effective when the Peace Treaty comes into force, is almost
certain to strengthen sentiment for rearmament.
SPECIAL ARTICLE: THE EFFECT OF RECENT EVENTS IN THE MIDDLE
EAST ON THE WESTERN POSITION IN SOUTH AND SOUTHEAST ASIA Page 18
The recent flare-ups. of nationalism in Iran and Egypt
have produced no strong reactions in South and Southeast Asia,
and are unlikely to affect significantly the relationships of
the colonial powers and the Western world with the area. The
recognized governments of most of the newly independent
countries have already established a state of equilibrium in
their relations with the West and recognize their, ultimate
economic and military dependence upon Western goodwill and
assistance.
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THE SOVIET WORLD
Soviet propaganda media went into high.gear to capitalize on three
important events scheduled over the next week me the meeting of the
World Peace Council in Vienna, the UN General Assembly opening in Paris
on 6 November, and the traditional celebration of the Bolshevik Revolu-
tion anniversary on 6-a7 November.
Two main themes are building to a crescendo; Russia's peaceful
desires and Soviet armed strength. To lend credence to the sincerity
of the USSR9s desire for -oeace.
the truce-talks in Korea were renewed
with a Communist "compromise" offer for an armistice line. TASS cor-
respondents in Paris and Istanbul even hinted that Stalin might be
willing to attend the UN General. Assembly. The possibility of high
level talks was also developed in Pravda's explanation of Labor's de-
feat in the British elections as the result of failure to collaborate
and negotiate with the USSR.
In order to avoid the appearance of leading from weakness, however,
Soviet propagandists stressed the present and potential military strength
of the USSR. A third atomic test in the USSR, large-scale maneuvers of
Soviet'ground forces in East Germany, and highly increased MIG-l5 ac-
tivity in Korea lent realism to these assertions.
In order to convey a picture of Moscow's interest in peaceful
world trade and set the stage for the coming Moscow World Economic
Congress, Soviet. delegates to the recent UN trade conference in Singa-
pore wooed the Southeast Asians with proposals to barter Soviet finished
products for local materials. Pravda's contrast of this offer with
Western inability to export certain goods because of rearmament sug-
gests this lire will be.strongly developed at the Moscow-meeting.
In Eastern Europe, new pressure on the Catholic Church in Hungary
is foreshadowed by an order of the Roman Catholic Bench of Bishops
that every parish submit detailed information on all priests and monks
under its jurisdiction. While the government has successfully pene-
trated and controls the higher echelons of the church, segments of the
lower clergy have remained a strong bastion of resistance to the regime
and its plans to nationalize the Church. The current census of priests
and monks is probably a means to ferret out the recalcitrant ones who
will be defrocked and put to work considered "more socially useful."
Hungary and Poland have again admitted important shortcomings in
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their Five and Six Year Plans for the third quarter of 1951. Specific
failures were noted in various key industries including coal mining.
In both countries the workers were blamed, although officials admit that
the food shortage is a basic cause of poor productivity. The Polish
Government is making extensive efforts through labor recruitment and the
offer of additional bonuses to increase the coal mining force.
In Hungary, where similar inducements are also being offered, there
are indications that the government may be considering more repressive
measures to speed up production. Premier Rakosi in a speech on 22 October
threatened coal miners with coercive action. It may be significant that
these threats against the workers come at a time when the Hungarian-born
Soviet economist Eugen Varga is again reported to be in Budapest direct-
ing Hungarian foreign trade and perhaps other branches of the. economy.
Vargas visit to Hungary in 1950 coincided with increased Soviet demands
on the Hungarian economy and the beginning of.a period of austerity for
the people.
Czechoslovak commercial attaches to the USSR, Bulgaria, Rumania and
Hungary are currently meeting in Prague. The conference was probably
called to correct deficiencies in the 1951 foreign trade program of the
Czech Five Year Plan and to discuss 1952 Czech trade targets. The meet-
ing may also be intended to prepare foreign trade officials for the
annual intra-Orbit talks which normally take place in Moscow near the
end of the year.
Recent evidence suggests that the long-awaited trial of Vladimir 25X1
Clementis, former Czechoslovak Foreign Minister, may be slated for the
near future.
other prominent party members were arrested last winter and charged with
plotting to, turn the party back toward cooperation with the Western im .
Aerialists.
The stage is being set in Poland for the promulgation of a new
constitution. While the other Eastern European countries adopted new
constitutions in the earlier stages of their evolution as people's
democracies, Poland has continued to operate under a February 1947 de-
cree which adopted portions of the Polish Constitution of 1921 as the
legal basis of the government.
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EASTERN EUROPE PLAGUED BY MANPOWER PROBLEMS
The failure of the Eastern European Communist regimes to gain
popular support for their economic planning is aggravating Satellite
manpower problems. Numerically, the male labor supply in the Satellite
area would appear to be adequate to meet Communist planning in all
sectors of the economy, in addition to the rising demands of the'rapidly
expanding armed forces. However, the Satellite governments have been
unable to secure and maintain an adequate labor supply in vital in-
dustries and construction projects. On-the-job performance also falls
short of plan requirements.
During the past year, evidence has accumulated in Eastern European
propaganda and legislation that the Communists are making a determined
effort to increase the industrial labor force by recruiting women and
children, raising wages and extending special economic privileges to
certain key. labor groups, maintaining pressure for collectivization of
agriculture, and impeding the further emigration of dissident minorities.
Emphasis is also being placed on attempts to improve industrial labor
efficiency by the extension of Stakhanovite, piecework and labor-
competition programs. The Communists are also devoting marked attention
to the training of youth for industrial employment.
Certain significant remedial measures have been adopted by the
Satellite governments which point up their failure to secure and main-
tain axi adequate labor force. Rumania and Hungary have in operation
special organizations for the direction of manpower. The announced goal
of the Rumanian Directorate of Labor is the "recruiting and organized
distribution of labor reserves according to the necessities of the
national economy." As yet there is no evidence, however, that these
groups have coercive powers over the assignment of manpower.
Twenty to forty percent of all Rumanian government administrative
employees have been dismissed. Although no specific plans for their
re-employment were announced, they doubtless will be forced into in-
dustrial employment in order to survive. The Czechoslovak Government
in June established a commission to transfer 779500 administrative
employees from economic enterprises and public administration into
"productive work" by the end of this year. These workers were permitted
a choice of place of employment if they "volunteered" for assignment-,
otherwise they would be assigned where needed. Special bonuses were
offered to volunteers for the coal mines.
Attempts to extend the use of women and children in industry are
increasingly evident. In Bulgaria, only women may be employed in "ad-
ministrative" railroad jobs. Poland has ostentatiously propagandized
"protective legislation," while permitting the use of women and children
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as laborers in heavy industry and mining. A significant increase in
the number of women employed in industry has been decreed in Hungary.
Hungary has also designated certain types of work in which only the
aged or disabled may be used. In Rumania,, the Directorate of Labor
has been charged with establishing trade schools to train 45,000 to
55,000 workers "recruited from among young people in towns and vil-
lages." The trainees by law may be arbitrarily assigned to places of
employment for a four year period.
Piece work payment plans and bonuses for Stakhanovites have been
recently adopted in Poland, Hungary and Rumania to induce more and better
production. Wage scales have also been readjusted in most Satellites
to favor industries which are particularly unattractive, notably coal
mines and oil fields.
Communist leaders have admitted that there will be no rapid im-
provement in the Satellite economic situation. Falling living standards
and rising labor norms are increasing the reluctance of the predominant-
ly peasant Satellite peoples to comply with Communist attempts to re-
allocate labor for industrial, military and agricultural plans which do
not benefit the individual worker and his family.
Polish economic planner Hilary Minc recently intimated that agri-
cultural collectivization is the only ultimate Communist solution to
the problem of supplying food for the increasing non-food producing urban
populations. However, all Communist attempts, short of force, have
failed to establish collectivized agriculture in any Satellite. It is
similarly apparent that only by force can the Communists bring about the
redistribution of enough manpower to meet their planning goals.
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CURRENT STRESSES ON COMMUNIST CHINA'S ECONOMY
Intervention in the Korean conflict put new burdens on China's
economy, straining its limited rail facilities, testing the Communists'
skill in mobilizing food supplies, upsetting plans for industrial develop-
ment, and threatening the regime's relatively stable fiscd,l position.
The internal stresses on the nation's economy were further aggravated by
western sanctions, which effectively reduced China's import of essential
industrial supplies.
The Chinese Communists, nevertheless, have demonstrated marked vigor
in getting the most out of their war-weakened economy, and the new strains
do not appear, at the moment, to constitute a serious threat to the
authority of the Peiping regime.
China's entry into the Korean conflict in October 1950 immediately
raised government expenditures, forced an increased issue of paper money
to finance the deficit, and thereby threatened the regime with an infla-
tionary spiral not unlike that which lost public support for the Nation-
alists during World War II and after V-J Day. The extent of the govern-
ment deficit is not known, but reports from Nationalist sources, possibly
exaggerated, state that Communist expenses are now running more than double
receipts.
Despite the strong inflationar, pressure, Communist controls have
thus far proved fairly effective in maintaining the stability of the
currency. (See graphs) Cost-of-living items like food and cotton goods
have gone up, but price increases have not been exorbitant. Manufactured
goods, particularly imported items, have shown the sharpest price increases,
Official rates for foreign exchange have remained stable, although recently
black market quotations have placed a considerable discount on the Chinese
currency.
In the small but strategically important industrial sector of their
economy, the Chinese Communists have been injured by Western export controls
which,, although frequently evaded, have reduced the overall volume of stra.-
tegic imports from the West, Moreover, they have forced the Chinese to pay
exorbitant prices for the tires, petroleum, and other embargoed items that
they can manage to purchase through covert channels.
For two reasons, Western sanctions, although damaging to the Chinese,
have failed to put them in jeopardy of complete economic collapse. First,
the Chinese have developed alternate sources of supply in the Soviet Orbit.
Message intercepts show a large traffic to China from the USSR and Eastern
Europe of petroleum products, industrial items, and military supplies.
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Peoples
Bank
Notes
300
PRICES OF CLOTH AND RICE IN SHANGHAI
October 1950 - October 1951
0 N D F M A
1950 1951-
J
Notes Prices given are those prevailing at the middle of the month.
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Second, the primitive character of the Chinese economic structure,
characterized by small agricultural holdings producing for domestic con-
sumption, makes it in large degree independent of commercial developments
in the world at large. China's level of prosperity is thus governed
more by the size of the food crops than by any other factor. While crop
figures for 1951 are not yet available, present indications are that this
year's harvests will be at least as good as those in 1650 and better than
those in 1949. The proficiency of the Communist regime in mobilizing
food supplies is indicated by its ability this year to export over half
a million tons of food grains, mainly to India. In the postwar years prior
to.the Communist victory, China had to import large quantities of rice and
wheat,
The Communists have also demonstrated competence in the field of
transportation, For several months following Chinese intervention in
Korea, communications intelligence disclosed that railroad traffic was
frequently disrupted by high priority military shipments, More recently,
military interference with commercial traffic has not been so conspicuous.
Communist broadcasts indicate that this result was attained in part by
reducing certain local services and making other adjustments in the rail-
road traffic pattern, In addition, river and coastal vessels have carried
more freight this year, Message intercepts, for example, show that the
Shanghai area, which received nearly 200,000 tons of coal monthly by rail
in 1950, now receives most of its coal from Manchuria by sea,
The Communists have apparently been forced to defer some of their
ambitious plans for rehabilitation and development of industries, but
existing capacity is generally being utilized, A notable exception is the
.textile industry, which employs about half of all the factory workers in
China. Because of the raw cotton shortage, the regime was forced to close
cotton mills for six weeks in June and July. Since then, the mills have
operated part-time, A large cotton harvest this autumn is expected to
permit full-time operations soon,
Although Communist propaganda claims that the purchasing power of the
people is going up, there is evidence that the Korean conflict has had a
depressing effect on living standards, Incomes of the landlord and capitalist
classes have of course suffered as a result of deliberate policy, but the
disaffection of these now politically impotent classes does not menace
Communist authority, Industrial workers, continually urged to increase
productivity, must "volunteer" extra hours of labor and part of their wages
for the "Resist America. Aid Korea" campaign. The peasants, who bear the
brunt of taxation needed to meet increased military expenses, have further
suffered because the prices they pay for manufactured goods are running
ahead of what they realize on the sale of produce,
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There is no evidence, however, that economic tensions are developing
to the point of provoking popular demonstrations against the Connmunists,
Strikes are no longer a feature of the industrial scene; instead all
group activity by workers is channeled into expressions of support for
the regimes Reports of peasant disturbances in some rural areas are
still received but are decreasing in numbers Although the burden of mili-
tary expenditures is draining the purchasing power of individuals, the
economy continues fairly stable at its historically low level of pro-
ductivity. No economic collapse is in sight for the near future.
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POLITICAL INSTABILITY HINDERS GREEK CONTRIBUTION TO NATO
The uncertain future of the new Greek Government will undoubtedly
detract from Greece's capability to meet the responsibilities attendant
to joining the North Atlantic Treaty Organization, The failure of any
one party to gain a majority in the 9 September elections has made a
coalition government necessary. When Marshal Papagos, who received a
plurality of the votes cast, refused to join a coalition, General Plas-
tiras, leader of the left-center Progressive Union of the Center (EPEK)
and recipient of the second largest vote, formed a government with the
cooperation of the centrist liberal party of ex-Prime Minister Venizelos4
The divergence of views held between the coalition leaders and the
slimness of the coalition's Parliamentary majority suggest that the new
government will not last long.- Differences between Plastiras and
Venizelos on such important issues as the proposed general amnesty law
and on economic matters already delayed formation of the government and
will undoubtedly further weaken it when the time comes,to implement the
controversial measures. Plastiras' belief that he c'an win any new elec-
tion based on the 'majority system will mitigate against his cooperating
with Venizelos, once the electoral law is amended.
Pressure for new elections also comes from Marshal Papagos' opposi-
tion party, the Greek Rally, which holds l14 of the 258 seats in Parlia-
ment. There is the possibility that the Rally, quickly put together and
based on the hope that Marshal Papagos would win the last elections, may
disintegrate. However, the ill-feeling engendered among his followers
by.the_,iberal Government's conduct of the last electoral campaign and
Papagos' conviction that he will win any new election held on the ma-
jority system will probably hold his party together and increase the
pressure for the dissolution of the present government.
The seeming inevitability of new elections and the consequent lack
of desire on the part of either the government or the opposition to take
any action which might endanger future chances, reduce the possibility of
effective government moves toward implementing Greek recovery. Rationing
and the other economic measures necessary for building a sound economic
structure are unpopular and neither the government nor the opposition
will want to be responsible for putting them into effect.
Delay, or even refusal to take action on such unpopular measures,
the deleterious influence on army morale of the continued bickering over
political interference in the army, and the apparant conviction of the
present Prime Minister that more economic rather than military aid should
be given Greece will detract from the contribution that Greece can make
in the near future to the collective security of the Mediterranean.
V, e_
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WORLD COMMUNISM: ITALIAN COMMUNISTS MAY LOSE SUPPORT OF NENNI SOCIALISTS
The future course of the Nenni Socialists will be a critical element
in the position of the Italian Communist party. Whether or not their
gains at the recent municipal elections will spur the Socialists eventu-
ally to split with the Communists is uncertain, but Nenni's adoption
of a weaker anti-NATO stand than the Communists has caused much specu-
lation along these lines. Some observers believe that the Communists'
control of the Socialist Party's machinery and press will not deter
a substantial part of the party from breaking away.
The Nenni Socialists, who since 1944 have worked hand-in-hand
with the Communists, were linked with them in an electoral bloc in the
1948 national elections and the 1951 local elections. Besides pro-
viding additional votes, alliance with the Nenni group has contributed
greatly to the influence of the Communists in local governments, trade
union organizations, and the public at large.
Traditionally, the Socialist movement in Italy has represented the
interests and aspirations of the working classes, and to many Italian
workers and respected public figures, Nenni stands as a symbol of
Italian Socialism. Those workers who want to protest against existing
economic and social inequities look upon Nenni's party as a suitable
alternative to the Communists, whose affiliations with the USSR they view
with misgivings. Their preference for the Socialists was demonstrated
in the recent local elections, when percentage-wise the Socialists
made greater gains than the Communists. It is this popular appeal
which the Communists hope to use as a foundation for a popular front
in the next national elections, to take over the government.
A number of Nenni Socialists, however, have begun to chafe under
their alliance with the Communists. There have been important de-
fections from the party -- the Saragat group in 1947, the Romita
group in 1949. These two groups have fused to become an anti-
Communist Socialist party. The defection last spring of Giancarlo
Matteotti, son of the Socialist martyr murdered by Mussolini, has been
interpreted by reliable observers as an indication of serious discontent
within the Socialist Party.
Several other important Socialists, such as Basso and Lombardi,
although they are still members of the party, continue to voice
vigorous opposition to Communist domination of party policies At the
Socialists' national convention last spring, those opposed to alliance
with the Communists were dropped from the party directorate. Nenni,
himself, has been reported as not in full agreement with Communist
world policy as laid down by the Soviet Union and differences of
opinion between him and Togliatti on domestic issues have been reported
from time to time.
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It has been suggested that the Communists and Socialists might
feign a split in order to isolate the government by capturing, for
subsequent Communist domination, the anti-Communist Socialists who now
constitute a "loyal opposition" that supports the government on major
foreign policy issues. However, the fact that the next national
elections are only a short time away would give the Socialists very
little time for political proselyting. If a split does occur, it
will represent a genuine break. In any case, it appears that the
Nenni group is not yet ready for such a step.
Any eventual real split between the Nenni Socialists and the
Communists would further US objectives in Italy, because it would
seriously weaken the Communist hold over organized labor and would
deal a severe blow to the popular prestige of Italian Communism.
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SUPPORT FOR REARMAMENT INCREASING IN.JAPAN
The signing of the Japanese Peace Treaty and the US-Japan Security
Treaty has given impetus within Japan to the arguments for and against
rearmament. While there is still considerable opposition, based primarily
on economic considerations and only secondarily on fears of a revival of
militarism, rearmament now appears to be firmly supported in principle by
a majority of the Japanese peopled The prevailing sentiment, however, is
that rearmament should be postponed until economic reconstruction is fur-
ther advanced.
Prior to the outbreak of hostilities in Korea there was little dis-
oussion of rearmament in Japan and practically no overt support for it.
Influenced by vivid recollections of wartime hardships, the "war renuncia-
tion" clause of the 1947 constitution, which stated that Japan would never
maintain armed forces, commanded wide acceptance. Maintenance of strict
neutrality, rather than rearmament, was the widely-debated subject,
Two days after the Korean conflict started, a public opinion poll
showed that only 14 percent of the respondents favored rearmament, Sub-
sequent polls undertaken by prominent newspapers, while narrow in scope
and inconsistent in geographical coverage, nevertheless were sufficiently
uniform in result to reflect a gradual abandonment of the hope that Japan
could maintain an unarmed neutralityd
Newspaper
In Favor
Opposed
August, 1950
Yomiuri
38.9%
32.7%
September, 1950
Asahi
53.8%
27.6%
March, 1951
Yomiuri
47,3%
23,6%
August, 1951
Yomiuri
50.8%
31.5%
September, 1951
Asahi
71,6%
16 %
September, 1951
Mainicui
76.3%
12.1%
It is significant that the last two polls indicated that approximately
two-thirds of those favoring rearmament desired it to be postponed-pending
further economic rehabilitation. Debate currently is centered on the size,
type, timing and cost of defense forces, and what to do about the legal
ban imposed by the constitution.
The non-Communist political parties have adopted varying attitudes
on the question, Spokesmen of the conservative opposition Democratic Party
have been the most vocal advocates of immediate rearmament, although the
party officially advocates only the strengthening of "self-defense." The
boo ialist alone among the, major parties has remained uncompromising.-in
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its opposition to rearmament, but a series of electoral reverses and a
party split over the peace treaty make 'it unlikely that the party can
exert significant influence on public opinion in the immediate future.
The right wing of the party, which appears to have made an open break
from the left, is not opposed to limited rearmament.
The Liberal Party, which seems likely to be in control of the gov-
ernment for some time to come, is in tune with public sentiment. Its
leader, Prime Minister Yoshida, has. consistently maintained that Japan
cannot now accept the economic burden of a full-scale rearmament program,
and that present measures mupt be limited to ,a strengthening of the police
forces. It is possible, as the US Political Adviser in Tokyo suggests,
that Yoshida desires a further shift in public opinion before advocating
rearmament.
Shortly before the San Francisco conference, Dejean, French Mission
Chief in Tokyo, informed the Quai d Orsay that Yoshida "fears the return
to power of the military caste" and., moreover, "is convinced that Japan
does not have the economic and-.financial resources necessary for a,re-
armament of some scope." The French diplomat believed, however, that
Yoshida is "not aware of the fact that if the Japanese wish to regain
an houprable place.o.and prestige again, they w.11 have to make an ef?
fective contribution and not remain a dead weight."
Fragmentary reports indicate that various groups of high-ranking,
former military officers and nationalist societies are formulating plans
for Japan's future defense forces, most of which envision an army of
from 12 to 20 divisions, supported by small naval and air force units.
These former officers, for the most part, believe that Japan's defense
forces,should be freshly created, and not developed with the-USMtrained
National Police Reserve as its nucleus.
Implementation of the US-Japan Security Treaty is almost certain
to strengthen sentiment for rearmament. -The presence of foreign forces,
while recognized and accepted as necessary for a time by most Japanese,
nevertheless will be an irritant to Japanese national prided Japanese
demands that the nation provide for its own defense will be further
strengthened if the post-treaty arrangements for US troops and bases
appear to infringe upon Japan's full sovereignty, or fail to present a
decided change from the Occupation's present position of privilege.
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SPECIAL ARTICLE
THE EFFECTS OF RECENT EVENTS IN THE MIDDLE EAST ON THE WESTERN
POSITION IN SOUTH AND SOUTHEAST ASIA
The recent flare-ups of nationalism in Iran and Egypt have produced
no strong reactions in South and Southeast Asia,, and are unlikely to have a
significant effect on the relationshipsof the western world with that area.
In much of Southeast Asia, notably in Burma and Indochina, the great
threat to these relationships now lies not in nationalism as such, but in
Communist-inspired movements, behind which looms the power of Red China
and the threat of China's open intervention.
Processes of the sort which culminated in the recent nationalization
of Iranian oil and the denunciation of the Anglo-Egyptian Treaty have been
at work for many years in South and Southeast Asia.. They include Britain's
renunciati.on of imperial authority over India, Ceylon,, end Burma, Indo-
nesia's attainment of independence., the struggle in Indochina,. and France's
concessions to the Vietnamese? The recognized governments of most of the
newly independent countries of the area have already established a state
of equilibrium in their relations with their former masters as well as with
the West as a whole.
The powerful sentiment which brought about these changes in South and
Southeast Asia has led the nations of the area to sympathize with Egypt and
Iran. India, under the leadership of Nehru, tends to act as the champion
of Asian nationalism, and may be tempted to become especially vocal on be-
half of Egyptian and Iranian autonomy and Integrity.
Should Britain use force to maintain its position in Egypt, and should
a generalized anti-Western sentiment develop to the boiling point in the
Near East, most South and Southeast Asian nations would probably speak out
forcefully in the UNp and the Western powers might find votes ranged against
them. 1n any case, the Communist press throughout the area can be expected
to exploit the imperialist theme, and to include the United States in its
attacks because of American support of Britain in Egypto
While the Western powers may thus be subjected to a certain amount of
harassment, there is no evidence that this will lead to serious setbacks
in the Western effort to imprryve relations with the peoples of th'; area.
There are currently no signs in the Asian Commonwealth countries of an in-
crease in anti-Commonwealth sentiment which can be ascribed to the effects
of the Iranian and Egyptian actions.
The Vietnamese are preoccupied with local concerns, and their effort
to win a status of equality within the French Union is overshadowed by the
Communist threat. Burma is similarly threatened, and has only recently
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indicated a willingness to accept Asian and Western assistance in case of
invasion. Although the Indonesians are now preparing to sever their juri-
dical tie with the Dutch crown, certain recent foreign policy decisions
have indicated their growing awareness of the Communist threat and a slight
predilection in favor of the West.
In Malaya., the British would probably welcome any stimulus to Malayan
nationalism among the :indigenous Malaya and the large overseas Chinese
population which the Near Eastern situation might provideuMalayan apathy
and the absence of a developed nationalist movement gravely handicap British
efforts to exterminate the Communist guerrilla army which has terrorized
the country for over two years..
From the economic point of view, the welfare of the area as a whole
is still largely dependent upon trade with and assistance from Western
countries, and nationalist sentiment may be tempered by economic necessity.
The Indian reaction to date particularly suggests this conclusion, by
demonstrating a recognition of India's dependence on Iranian oil, on
Western trade patterns, and on British and Western military and economic
assistance, Since similar factors apply for most of the independent coun-
tries of the area, they are likely to take great care not to disturb the
current status of Western trade and investments.
In Burr,, for example, the government's experience with the national-
ization of foreign-owned capital has not been altogether satisfactory, and
its plans have accordingly been modified, Thus the scheme to nationalize
the Burmah Oil Company involves the purchase of a controlling share interest
rather than forcible seizure of the company's facilities. In order to make
this transaction, Burma has borrowed from Britain a substantial portion of
the sterling required.
Indonesian Communists and ultra-nationalists have long pressed for
nationalization of all important enterprises, but the, elements currently
controlling the government., although they assert Indonesia's right and
eventual intention to nationalize, have shown no desire to do so in the
near future.
The treaties governing the relationships between Indonesia and the
Netherlands protect the extensive Dutch investments in the area. Any new
agreements arising out of the revisions being prepared by the Indonesians
would presumably continue this protection. Indonesia enjoys a favorable
balance of trade with the West, and at present appears unlikely to attack.
the processes which contribute a measure of stability to the otherwise
precarious internal political and economic situation,
In Indochina., nationalist sentiment will not be satisfied until local
elements secure a much greater share in the control of the countryfs economy,
and until the country is politically independent. Although the French
Government realizes that the rigid economic control exercised by metropoli-
tan interests in Indochina must eventually be relaxed, military control of
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the area permits French businessmen to ignore this prospect. Most observers
believe that many years of fighting will be necessary before Ho Chi Mini
is decisively defeated, hence no early change in the pattern of economic
control in Indochina should be expected.
Little change is expected in the military relations between the West
and the countries of South and Southeast Asia as the result of the crisis
in theMiddle East. The area as a whole is dependent upon the West either
for defense in case of invasion or for munitions and other assistance. It
is believed that local recognition of this dependence will temper whatever
impulses are awakened by the apparent successes of Iran and Egypt, In any
events India has already declared its policy of ""neutrality" in the struggle
between the Eastern and Western per blocs. Pakistan is not in a position
to undertake new military commitments as long as the Kashmir situation re-
mains unresolved,
Despite signs of a new realism in Burmese appreciation of its exposed
positions the government is still reluctant to accept Western advice and
assistance in combatting the deteriorating security situation; but there
are no indications that this reluctance will be increased as a result of
the Near East crisis. Thailand shows no signs of abandoning its policy of
opportunism. There are no indications that the Viet Minh forces in Indo-
china will be augmented by heavy Vietnamese defections due to the effect
of the Near East crisis, and French resistance to the Communist threat will
continue.
The peoples of South and Southeast Asia do not respond in stereotyped
anti-imperialist fashion. Though nationalism remains a potent and volatile
force throughout the area., anti-Western emotions have been noticeably tem-
pered wherever native authorities for even a few years have held the re-
sponsibilities of government. While the present governments remain in
control, there will exist a basis for stronger bonds with the West.
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