WEEKLY SUMMARY #106

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002300080001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 23, 2016
• Document Release Date: May 22, 2013
• Sequence Number: 1
• Publication Date: June 9, 1950
• Content Type: REPORT

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o -WEEKLY
SUMMARY
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Number~l 06
IP9 JUN 195U
Document No. 00/
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Auth: DDA 77
Date: 31-/-78 By; ' 6) i3
CENTRAL INTELLIGENCE AGENCY
 1. This publication contains current intelligence exclusively
and therefore has not been coordinated with the intelli-
gence organizations of the departments of State, Army,
Navy, and Air Force.
2. This copy may be either retained, or destroyed by burning
in accordance with applicable security regulations, or
returned to the Central Intelligence Agency.
This document contains information affecting the na-
tional defense of the United States within the meaning
of the Espionage Act, 50 U.S.C.. 31 and 32, as amended.
Its transmission or the revelation of its contents in any
manner to an unauthorized person is prohibited by law.
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SECRET
C
HIGH LIGHTS .................
WESTERN EUROPE.. ... .. ..................
EASTERN EUROPE ....................
NEAR EAST-AFRICA ...................
FAR EAST ...................
Page
1
ARTICLE:
East-West Trade Problem ................. 14
n SECRET
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 Economic problems and their solution continued to
occupy the attention of Western European leaders during the
past week. On the eve of the talks on the Schuman plan for
pooling coal and steel resources, those leaders are conscious
of an additional impetus for creating a permanently strong
Western. Europe: namely, a growing sentiment favoring a uni-
fied European bloc capable of taking an independent position in
the East-West struggle (see page 2). Although such "third force"
sentiment is still ill-defined and tentative, it reflects a wide-
spread hope among Western Europeans that some way can be
found to reduce East-West tension and thus avert the war they
fear may otherwise be inevitable.
In another phase of the European economic situation, the
effectiveness of the US dike against the shipment of strategic
materials and equipment eastward to the USSR is being lowered
by leaks in Germany, Austria, and Switzerland (see page 14).
Capital goods are moving from Western Germany to Eastern
Germany, both through authorized trade agreements as repara-
tions payments to the USSR and through extensive smuggling. In
Austria, the Soviet Union is able as an occupying power to buy
and ship eastward strategic goods otherwise denied. In Switz-
erland, normally a major transit point for shipments eastward,
lax trade regulations are permitting an increasingly large leak
in the US economic defense system.
In the Far East, a new threat to the success of the anti-
Communist Bao Dal. regime in Indochina has appeared as a con-
sequence of rising public and parliamentary pressure in Indonesia
favoring support for Bao Dai's opponent, pro-Communist Ho Chi
Minh (see page 9). The Hatta Government has been able thus far
to divert a move for immediate Indonesian recognition of Ho, an
action which might be followed by recognition from Burma and India.
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W
"Third Force" In the aftermath of the US-UK-French
conferences in London and on the eve
.of the talks on the Schuman plan for pooling coal and steel
resources, Western.. Europe appears to be on the threshold
of a new phase in its postwar reconstruction. The gains it
has so far made,especially under the stimulus of the Marshall
Plan, have been dramatic and real; with the exception of the
Schuman proposal, however, no similar specific stimulus now
exists for facilitating the far more difficult task ahead of con-
solidating these gains and creating a permanent strong and
united Western Europe.
Paramount in the minds of Western Europeans as
they approach this new phase is the basic conflict between
developing military and economic strength. With no prospect
of creating a Western military establishment equal to that of
the USSR, Western European fear of war has not abated, and
sentiment is growing for the concept of a unified and strength-
ened European bloc capable of taking an independent position
in the East-West struggle.
This "third force" sentiment is still ill-defined and
tentative, but it reflects both a strong and widespread fear
that the present East-West struggle will lead inevitably to war
and the hope that some way can be found to reduce existing
tension. The "neutrality" concept is receiving some support
in France and Italy, and it is evident to a greater extent in
West Germany, where political leaders hope that such an
"independent bloc" would enable Germany to regain a power-
ful role in European affairs. The idea of neutrality would
appeal to the many Germans who are reluctant either to break
all ties with the East or to antagonize the USSR by committing
Germany unconditionally to a Western Europe closely tied to
the US.
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 This growing support for an "independent" Western
Europe would harmonize With German participation in the
Schuman plan. It is still too early to forecast precisely the
long-range influence of this "third force" sentiment. The
concept could conflict with that of an Atlantic community, and
might even tend to lead Western Europe toward a policy of
appeasement with the USSR. On. the other hand, "independence"might
increase European self-confidence and stimulate progress toward
European unification.
Schuman Plan Although French political and popular reaction
to the Schuman pooling plan is not unanimously
favorable, eventual ratification in some form by the Assembly
is reasonably assured. The accession of six nations to the pooling
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S
SECRET
agreement will remove the main doubts of Schuman's Popu-
lar Republican Party, but the Socialists will continue to be
apprehensive of undue advantages which might accrue to
German industrialists. The Gaullists will probably oppose
the agreement on the grounds that it does not go far enough
toward a Franco-German rapprochement and that even the
present limited agreement cannot be carried through success-
fully by the Bidault Government, The remaining rightist groups
are split on the question. The Communist Party will continue to
oppose the move vehemently while emphasizing the economic
dangers of the plan, contending that it is being dictated by US
"Imperialism." Public opinion, excepting pessimistic trade
union sentiment, is favorable, and much helpful support will
come from those influential individuals in France who favor a
federated Europe and see the Schuman plan. as a major step in
that direction,
Parties-in-exile A West German plan to reconstitute the
Soviet zone democratic parties as "parties-
in-exile" in West Berlin could develop into an important aggres-
sive political force for counteracting Communist propaganda in
the Soviet zone and might even encourage the East German popu-
lation to resist further Sovietization. The Soviet zone democratic
parties are no longer able to effectively oppose the zonal regime,
and, on the highest level, the Christian Democratic. Union (CDU)
and the Liberal. Democratic Party merely serve as tools for ex-
ecuting the policies of the Communist-Socialist Unity Party. The
present plan to create parties-in-exile, spearheaded by Ernst
Lemmer, pre-1948 Deputy Chief of the CDU, calls for dissolution
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L SECRET
GERMANY
of the present leadership of the Christian Democratic Union
and the Liberal Democratic Party of the Soviet zone and the
establishment of new party organizations in West Berlin,
made up principally from the many former East German party
functionaries who have fled to Western Germany.
c11 the omb pedal
Democratic Party can be brought into the plan,
political parties could claim to represent the entire Soviet zone
population.
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n
Labor Unrest The growing number of labor unions
terminating their contracts indicates
labor's anxiety to establish a legal basis for Increasing
CI wages which have been adversely affected by the recent
devaluation of Iceland's currency. Iceland's second and
n third largest unions, as well as several smaller ones, have
already terminated their contracts, and Iceland's largest
C union is reportedly contemplating similar action. With the
herring season about to open, the trawler's union (Iceland's
second largest) is in a good position to apply pressure for
wage raises; other unions can support the action by sympathy
strikes. Widespread strike action is not definitely indicated
at this point, but with contracts terminated the unions have
n met the legal requirements for striking at any time the member-
ship wishes.
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 Diplomatic Parity The recent demand by the Rumanian
Government that the French Legation
in Bucharest be cut to the size of the Rumanian Legation in
Paris is the first indication that the diplomatic parity formula,
previously applied only to US missions, may be extended to
all Western missions in the Satellites. Heretofore, the pressure
against Western missions in the various Satellites has followed
no set pattern, The "diplomatic parity" concept offers the
Satellites a flexible means of applying pressure for drastic
personnel reductions to all Western missions while avoiding long
negotiations with each country,
New SEA Policy The recall to Moscow of leading Soviet diplo -
mats from Far Eastern posts and from the
US indicates that the Kremlin may be reviewing its entire Far
Eastern policy in order to plan for more aggressive action to
counter Western anti-Communist efforts in the Far East, es-
pecially in Southeast Asia. Such a conference of Soviet re-
presentatives from Japan, India, Thailand, and possibly North
Korea, together with the recall of the Soviet Ambassador to
the US, who is a Far Eastern expert, emphasizes the importance
of the area to the USSR at this time.
In Japan, the Kremlin might decide to shift from "legi-
timate" activities to concentrate on a subversive program as the
most effective means of obstructing Western progress in Japan.
The issuance of a second Soviet note demanding trial of Hirohito
and the intensification of Communist activity, in the face of a
proposal to outlaw the Party indicate that the USSR is willing to
risk having the Japanese Communist Party driven underground.
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n
Government Problems Increased prospects that Chief of
Staff Razmara will soon be appointed
to head a new Iranian Government reflect the Shah's belief that
only a strong man of Razmara's character and abilities can
provide the leadership needed to bring improvement in Iran's
muddled economic and political situation. Although the Shah
has misgivings about having a soldier as premier and has
apparently stipulated that the Chief of Staff must leave the
army if he takes the post, he seems to have concluded there is
no one save Razmara on whom he can depend. Razmara will
have to fight the vested interests in carrying out the Shah's re-
form and economic development plans, and his success will
depend largely on the effectiveness of the support he gets from
the Shah and the new leadership of the armed forces. Although
Razmara possesses strength of character and considerable
administrative ability, his prestige has been based on his con-
trol of the armed forces rather than any political experience.
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F'
L Pro-Ho Sentiment Rising public and parliamentary pressure
in Indonesia may force the Hatta Govern-
s ment to take some action indicating support of the pro-Commu-
nist Ho Chi Minh regime in Indochina. Hatta has already adroitly
evaded parliamentary pressure for immediate recognition of Ho
by successfully sponsoring a parliamentary motion calling for
[ a further study of the Indochinese question and suggesting a South-
t1 east Asian conference on Indochina. However, the motion pro-
vides Ho sympathizers in Indonesia with a continuing opportunity
to press for support of Ho. A large number of Indonesians view
n the Ho regime as geniunely realistic and worthy of support, and
full recognition remains a possibility. Such recognition might
precipitate similar action by Burma and India and would make
it virtually impossible to arouse the widespread popular confi-
dence in the French-sponsored Bao Dai regime essential to the
j success of efforts to establish an effective, independent, and
non-Communist Vietnamese state. If a Southeast Asian confer-
ence on Indochina is called, Burma, the Philippines, and India
would probably participate. In this situation, Indian Prime
Minister Nehru might'seek primarily to force the French out
of Indochina. It is also possible, however, that he might feel
that his role as champion of all Southeast Asian peoples obliged
him to support Ho Chi Minh as the instrument which can best
Election Results Although still incomplete, returns from the
4 June elections for the Japanese Diet's
House of Councillors give Premier Yoshida s Liberal Party
a clear plurality, and should give him control of the Upper House
f1
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on most issues through a working alliance with the Green
Breeze conservatives. The gain of approximately 15 seats
by the Liberals--the only party favoring a separate peace
treaty and forced to defend an austerity regime imposed by
the Occupation--indicates less popular resentment to Allied
control than was generally believed to exist. The remarkable
rise of the Socialist Party to second rank in the Council (a
gain of 18 seats) reflects: (1) Socialist success in gaining
control of labor during the past year; (2) a switch in the pro-
test vote from the Communists to the Socialists; and (3) the
fact that the Socialists no longer had to defend the govern-
ment's unpopular measures. The emergence of the Liberals
and the Socialists as the two principal parties, however, is
only a small step toward the two-party system advocated by
Yoshida, and the vote in favor of the separate peace treaty
is inconclusive as evidence of pro-US sentiment, because
Yoshida offered conservatives their only prospect of effec-
tive leadership. Meanwhile, Communist popular strength
slumped sharply, primarily because of the Party's open sub-
servience to the USSR, its stand on POW repatriation delays,
and its policy of violence.
New Assembly The newly elected Korean Assembly will
remain predominantly rightist, with the
unorganized "independents," who hold 127 out of a total of
210 seats, it a- position'to exercise the balance of power be-
tween anti-ghee and pro-Rhee forces. In general, voting was
heavy and primarily influenced by local issues such as food
prices. The Koreans showed their dissatisfaction with the con-
duct of the Assembly by turning out all but 31 of the 164 in-
cumbents who ran for reelection. The heavy losses sustained
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 by the opposition Democratic Nationalist Party also resulted
in part from the stigma still attached to the Party as repre-
sentative of the conservative land-owning interests, while the
Great Korean Nationalist Party of President Rhee suffered
because of lack of direct contact with the people,' Although
the general caliber of the new Assembly is higher than the
previous one, the large turnover in Assembly membership
will at first cause considerable inefficiency and delay in the
legislative process.
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 Hemispheric Trend The trend during recent months toward
acceptance in practice of the US criteria
for recognition of new Latin American governments marks an
important gain for Hemisphere solidarity.
All Latin American countries have extended recognition
to the Arias regime in Panama. Cuba and Uruguay (the latter
being a leader of the "democratic" group which has favored
the withholding of recognition from undemocratic governments)'
have recently indicated a willingness to accept US recognition
policy as expedient. All Latin American countries have no{a
either recognized the Haitian military junta or are expected to
do so shortly. Moreover, of the few countries which have as
yet refused to recognize the Peruvian and Venezuelan juntas,
some will probably do so in the near future.
Critical Period President Odria has a good chance of re-
turning to office in the 2 July elections,
but the intervening period during which he plans to campaign
actively may be a critical one. His relaxation of control over
the government during this time may encourage disgruntled
military or civilian groups to attempt to unseat him. Although
Odria has been assured of general army support, continual
reports of subversive plots among influential officers indicate
that he may be exposing his life to real danger during his
election campaign. Further, opposition leaders may attempt
to gain underground support for revolutionary action from the
outlawed APRA party, the largest group now opposing the
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Odria regime. Odria, for his part, has been attempting to
contain his opposition thusfar by: (1) tightening his control
over the electoral machinery; (2) obtaining the limited sup-
port of labor leaders; (3) taking firm measures against op-
position political figures; and (4) forming a new political
party to back his candidacy. If the President can avoid
assassination and continue to command general armed-
forces support during the campaign period, he will probably
be returned to office.
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 The effectiveness of the US policy of denying strategic
materials and equipment fo the USSR is being reduced by leaks
into the Soviet sphere through East-West German trade, by
Soviet purchases in and via Austria, which obtains important
supplies as a full participant in ECA, and by the laxness of Swiss
control over transit trade.
Deliveries of capital goods from Western Germany to the
Soviet zone through both authorized trade agreements and smug -
gling are going, in large part, to the USSR as reparations payments.
Three-quarters of the. total reparations deliveries from the Soviet
zone consist of light and heavy machinery which directly or in-
directly builds up the Soviet war potential. Moreover, smuggling
has increased rapidly during 1950, largely because of lax border
controls and general German resentment of the fact that the re-
strictions on East-West trade for Germany are more severe than
those applied to other countries of Western Europe.
Austria provides a focal point where the USSR is able to
circumvent US trade regulations designed to withhold strategic
materials and equipment from the Soviet sphere. Because of its
standing as an occupation power, the USSR is able to purchase goods
either on the Austrian market or via Austrian middlemen.from other
Western countries and can ship these goods eastward without being
subject to Austrian export controls. These goods are available in
part because of the Western policy of building up the Austrian economy
while maintaining the political status quo and-working for a treaty..
Although this Western policy of treating Austria as an economic
unit has preserved Austrian unity, brought the country a measure
of prosperity, and contributed to Austria's pro-Western orientation,
it has at the same time facilitated Soviet procurement of materials
and equipment otherwise denied.
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 The recent increase in the flow of strategic items
through Switzerland highlights the Swiss conttibution to the
evasion of Western controls over exports to the Soviet sphere.
Switzerland, which is normally a major transit point for ship-
ments eastward, is becoming increasingly important as a break-
through point for Western strategic commodities headed for the
USSR. Although the Swiss continue to assert that they will co-
operate in general with the US export control program, restrictions
over their own exports and transit shipments continue to be mild.
This reluctance of the;'Swiss to institute effective export and
transit controls probably stems from a desire for profit and a
real fear of jeopardizing the very delicate position which Switzer-
land now holds between the East and the West.
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1:. ...... The President
2,64....... Secretary of State
3,4,7& ..... Secretary of Defense
5......... Secretary of the Army
6......... Secretary of the Navy
7:........ Secretary of the Air Force
8,70....... Chairman, National Security Resources Board
9,71....... Executive Secretary, National Security Council
10......... Assistant Secretary of the Navy for Air
11,69....... Chief of Staff, US Army
12,13,14..... Chief of Naval Operations
15,16,17..... Chief of Staff, US Air Force
18......... Assistant Chief of Staff, G-3,Operations
19......... Deputy Chief of Staff (Operations), US Air Force
20......... Deputy Chief of Naval Operations (Operations)
21.......... Director of Plans and Operations, US Air Force
22,23,24..... Special Assistant, Intelligence, Department of State
25,26,27,28,29,
30,31,32,33,34 Assistant Chief of Staff, G-2, Intelligence
35,36,37,38,39,
40,41,42,43,44 Director of Navy Intelligence
45,46,47,48,49,72,
73,74;75...-Director of Intelligence, Headquarters, USAF
50......... Director of Intelligence, Atomic Energy Comm.
51......... Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
52,53,54,55,56. Chief, Acquisition & Distribution Div.,OCD,State
57......... Director, Federal Bureau of Investigation
58......... Secretary, Joint Chiefs of Staff
59......... Chief, Policy Planning Staff, Department of State
60......... Secretary of State (Att: Policy Reports Staff)
61......... Deputy Director for Intelligence, The Joint Staff
62,63....... Secretary, joint Intelligence Group, Joint Staff
65......... US Air Force Representative on joint Strategic
Survey Committee
66,76,77..... Director, Armed Forces Security Agency
68......... Administrator, Economic Cooperation Administration
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U. S. GOVERNMENT PRINTING OFFICE
2631-S-1998
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