WEEKLY SUMMARY #96

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002300180001-6
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 23, 2016
• Document Release Date: May 22, 2013
• Sequence Number: 1
• Publication Date: March 31, 1950
• Content Type: REPORT

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V. WEEKLY SUMMARY
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Number 96
31 MAR 1950
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Date: 21-1-79 By: t13
CENTRAL INTELLIGENCE AGENCY
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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.
WARNING
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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CONTENTS
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HIGHLIGHTS,..000..006 0 OOOOO
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WESTERN EUROPE 0 0060 0
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EASTERN EUROPE OO OOOO .?.
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NEAR EAST-AFRICA
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FAR EAST...OS...O.C.00OO.00
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ARTICLE
Outlook for Korea .......... .......
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I.
HIGHLIGHTS
iThe UK is currently facing two critical decisions
'which will have an important bearing on the future British
role in Western Europe and the Far East. Present con-
ditions advanced by the UK for entering the proposed
European Payments Union again focus attention on the
1 'vital question of Britain's role in efforts toAthieve full
economic integration in Western Europe (see page 2).
Meanwhile, evident British acquiescence in the removal '
1 of some former Nationalist aircraft and-equipment in Hong
Kong to Chinese Communist territory has evoked.strong
i US protests which will force the UK to review certain aspects
of its policy toward China (see page 11)0
1. In Western Europe; the Communist: offensive was
characterized this week by a shift in emphasis by the Italian
Communists from-strike action to preparations for podia-
!! mentory attacks on the Government (see page 5); a threatened
decline in the popular will to resist Communist pressure in
i Berlin in the face of mounting unemployment (see page 3); and
continued emphasis by the USSR on the "Partisans for Peace"
movement to achieve its ends (see page 6). ,
IIn the Near East, the forthcoming meeting between
1 the Prime Ministers of India and Pakistan may lessen talk
of the inevitability of war between the two countries, but
The underlying factors making for a possible outbreak of
ihostilities remain strong (see page 8)..
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WESTERN EUROPE
Payments Union Present terms offered by the British
for participation in the proposed
European Payments Union (EPU) not only raise the question
as to whether British participation on this basis would pro-
mote the objectives of the EPU but once again, focus attention
on the crucial question of Britain's role in efforts to achieve
the economic integration of Western Europe, The EPU as
presently conceived would be a major step toward liberalizing
trade and payments within the area and bringing about greater
coordination of financial and monetary policies of the member
countries. Fearing drains on gold and dollars and concerned
over possible weakening of the sterling area system, the
British have conditioned participation in the EPU on granting
sterling a special poSition. The UK would reserve the right
both to place exchange controls on sterling and to reimpose
quantitative restrictions on imports. Although the British
proposals would not necessarily hamper the full functioning
of the EPU on the continent, they would exempt the UK from
the very pressures to adjust trade policies which are the.
heart of the EPU and might induce Other countries to demand
the same privileges. Although it is too early to say how far
the UK will modify its position, the ERP nations are approach-
ing the crucial decision between a Western European economic
bloc with full British participation and the alternative develop-
ment of two non-dollar trading areas: continental Western
Europe and one based on sterling.
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GERMANY
Berlin Unemployed Popular will to resist Communist
pressure in West Berlin will be
further weakened unless prompt measures are taken to
relieve unemployment which now stands at 30 percent of
'the labor force. Prospects for early or rapid economic?
recovery in Berlin are slight as. long as the city remains
a beleaguered pawn in the East-West conflict. An improve-
ment in public morale to counteract such Communist pressure
as the propsed 28 May Youth Rally must; therefore, depend
primarily upon a public works program which would absorb
the unemploy.ed. ? The West Berlin government has insufficient
resources for such a program. So long as grants from the
Bonn Government and ECA continue to be received on an in-
adequate and piece-theal basis, long-range planning will be
impossible, with a resultant loss of incentive either for main-
taining financial stability or for constructive use of budgetary
savings accruing froth the elimination of unemployment. ?
FRANCE
Financial Stability With pressure for higher wages in the
nationalized industries declining, the
French Government has a fairly OOd chance of maintaining
financial equilibrium during the. next few months and is
not likely to fall back on inflationary financing. Although a
general increase in wages is being granted in the nationalized
industries, it will probably be held to approximately 6 percent
and be covered by price increases already authorized or now
being considered. Over-all government economies may soon
be effected, tax collections are encouraging, and public interest
will probably increase in the expected government offerings in
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FRANCE
April of non-inflationary bonds. The danger exists, however,
that later in the year the government may have to indulge in
inflationary financing in order to meet unbudgeted military
expenditures required for the Mutpal Defense Assistance
Program and operations in Indochina. It is not likely that
the French can effect sufficient economies to cover in-
creased production for defense, and expenditures for the
war in Indochina will probably rise well beyond the limit
presently set for them.
Tax Reform Progress toward economic and political
stability in France is being aided by the
government's expanding efforts to effect fiscal reforms.
Although this program is severely handicapped by tradi-
tional and political considerations, reforms in the tax system
will tend progressively to: (1) bolster public faith in the ?
Government's financial position, thereby reinforcing the
present hard-won stability of the franc; (2) lessen social
discontent and stimulate business activity by distributing the
tax burden more equitably: and (3) permit some non-inflation-
ary increases in outlays for defense and higher wages in
nationalized industries. _Since 1948, tax reforms have sub-
stantially increased government revenues by raising the
percentage of revenue derived from income taxes, providing
for better enforcement, and introducing a single control system
for auditing business tax records. Despite this auspicious start,
fully effective fiscal controls and a sound fiscal program will
be retarded by the politically powerful agricultural interests
which have blocked the imposition of equitable taxes on farm
income and by such factors as the prevalence of small, in-
dividually-owned enterprises, the backwardness of bookkeeping
methods and the traditional use of cash instead of checks.
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ITALY
Communist Strategy Although local strikes and land
seizures will continue in Italy,
the brunt of the present Communist offenisve will be
temporarily shifted to the parliamentary arena. The
Communists will launch .a violent Parlianientary attack
on the Governmentrnot with any expectation of securing
their major demands, but-to larthe-prnpaganda-basis for
renewed public disturbances. In addition to keeping the
country in a state of ferment,-the Communists hope to
advance both their immediate objectives of discrediting
Italy in US eyes, as a stable ally and hindering effective
implementation of MDAP, as well as their limo' range
objective of retarding,the-aconomic and social progress
which would remove the popular basis of Communist
strength.
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EASTERN EUROPE
SOVIET UNION
"Peace" Motif Soviet reaction to Secretary Acheson's
recent public pronouncements on US- ?
-Soviet relations not onlyreflects a -continuing lack of interest
in-negotiating a basic settlement with- the West, but demon-
strates-the Kremlin's -ability and intention to distort and ex-
ploit Western actions and propaganda in support of the Soviet
.1"peace" campaign; The denunciations of Acheson's proposals
for? reducing international tension;- although- designed In 'part
.to counteract their world-wide impact; were not defensive in
nature.-- On the contrary,- they were a part of the continuing
Kremlin offensive designed to raise doubt in the West con-
cerning-the sincerity of Western efforts toward peace and to
intensify Soviet bloc hostility to and isolation from the "im-
perialists." Meanwhile, the Kremlin appearssatisfied with
the Partisans for.Peace movement and will intensify its ?
efforts to use the "peace front" technique. -Eleven peace
.congresses- are scheduled for 1950, attesting to-Soviet success
in least a- measure -of non-Communist support
and participation for this movement.
GREECE
Instability Likely The recent formation of a new government
by Liberal leader Venizelos will have
unfavorable repercussions in Greece and abroad. Having
alienated the other center parties and a significant portion
of his own following by withdrawing at the instigation of
King Paul from his earlier promise to participate in a
centrist coalition under General Plastiras, Venizelos now
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GREECE
heads a weak cabinet representing less than one fourth
of the new Parliament and dependent for its existence on
the tolerance of basically unsympathetic rightist parties.
Under these circumstances, there is little likelihood of ?
stable and effective government. Unless the broadly based
centrist coalition can be Teconstituted?a move for which-
there is now -considerable pressure?Greece will probably
have to face new elections soon..
The key role of the Palace in thwarting the forma-
tion of a new government accurately reflecting the election
swing toward the center has not escaped popular notice
and can scarcely fail tb involve the King in charges of
political favoritism and intrigue. In the event of a new
election,fthe King would probably attempt to promote a
royalist movement 'under' Marshal Papagos? in the hope
of eclipsing the established political parties, including the
.new left-center group led by General Plastiras. Such a
development would revive dissension over the monarchy
and would probably divide Greece into rival republican
and monarchist.camps, thus severely damaging the stability
of the nation and the effectiveness of the US aid program.
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NEAR EAST-AFRICA
INDIA-PAKISTAN
.War Tendencies The announcement that the-Prime
Ministers of Pakistan and India
will soon meet in New Delhi to discuss means of curbing
the tension between their two countries emphasizes the
fact that neither government wants war and may lessen
spread of talk on both sides about the inevitability of a
resort to hostilities. Nevertheless, the underlying factors -
making for a possible outbreak of hostilities remain potent.
One of these is the possibility of a new wave of large-scale
destruction of Hindu life-and property in East Bengal?T -
possibly in retaliation for a similar. outburst in West Bengal,
now seething with anti-Moslem feeling.. Such an outbreak might
well create an irresistible popular demand for the sending
of Indian troops across the border. While Pakistan might
then rely on an appeal to the UN, the far greater probability
is that it would initiate retaliatory action.of its own. The
possibility also remains that India's increasingly clear deter-
mination to hold on to the territory it occupies in Kashmir
may lead to a popular invasion of Kashmir by Pakistani
nationals, a move which would probably be followed by an
Indian invasion. of West.Pakistan and a full-scale war. Mean-
while, the recent buildup of Indian troops and supplies near
the West Punjab border intensifies the danger that one side
of the other may attempt to anticipate what it regards as an
imminent attack by the other.
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IRAN
The New Premier The sudden appointment of Al!
Mansur. as prime minister-represents
a severe-blow to the..hopes of inany Iranians that the Shah
could be counted .on tareplace-the.-wealt?Sae&at the-head -
of the government with someone who wouldthketenergetic
measures-for needed scicial and econ.dmic reform: The
designation of Mansur 'may possibly be a temporary measure
reflecting the Shah:s belief that a man of Mansur's shrewd-
ness and political connections is needed to steer the new
'Anglo-Iranian Oil Company concession agreement through
the Ma:ills; the Shah may contemplate replacing Mansur with
a strongly reformist premier (perhaps even Chief of Staff
liazmara) after the Majlis acts on. the matter. Nevertheless, ?
the appointment is an obvious gesture in the direction of
,the powerful elements in the ruling class which strongly
oppose the Shah's social and economic reform program.
Mansur himself has not only an unenviable reputation. for
corruptness but also a record of persistent obstruction with
respect to the Seven Year Plan for economic development. -
Many progressive Iranians consequently will probably follow
the lead of the two. Most prominent men in the planning pro-
gram, Prince Abdor Reza and Minister of National Economy
Nasr, in declining active participation in the Mansur Govern-
ment;
ERITREA
Partition Sentiment Sentiment for partitioning Eritrea
along?the lines of the US-UK pro-
posal at the last UN General Assembly is growing not
only in the UN Commission,of Inquiry but in Eritrea itself.
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ERITREA
Under this plan the bulk of Eritrea would be federated
with Ethiopia and the West Province would be linked to
the Anglo-Egyptian Sudan. Federation sentiment is
apparently rising in Eritrea, with the Independence Bloc
disintegrating and the former Moslem League climbing
on the federation bandwagon. Of the five members of,
the UN Commission, Norway, South Africa and Burma
are likely to favor a partition-federation scheme; Pakistan
will back the Moslem view in Eritrea and only Guatemala
is insisting on independence. Because _Italy has renounced
all hope for gaining direct control over Eritrea and is
likely to accept the partition-lederation scheme, success of
the plan now depends primarily on whether Ethiopia can be
persuaded to renounce its claims to the entire area and
reach agreement with Italy.
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FAR EAST
CHINA
Military Plans Despite repeated reports that the
Chinese Communists are preparing
for a large military campaign aimed at gaining control
over all of Southeast Asia, it is unlikely that -such a
campaign will be launched in the near future. The
primary objective of the Communists in China for 1950
continues to be the Complete elimination of all Nationalist
resistance and the extension of.Communist control over ?
all territories formerly held by the Nationalists. Present
international Communist strategy, formulated and announced
by the USSR and endorsed by the Chinese Communist Party,
does not envisage the employment of the regular armed
forces of a Communist nation for large-scale operations as
a means of gaining control over non-Communist nations.
Moreover, a military adventure by the Chinese Communists
into Southeast Asia would contribute little to an early solu-
tion of the economic difficulties which derive at least in
part from the Nationalist blockade and air attacks. Despite
reported Communist dissension over such matters as the
degree of subservience to the USSR, policy toward the West
and methods to alleviate peasant unrest,, there is. no con-
clusive evidence of disagreement concerning the necessity .
for early occupation of Taiwan. and Haitian and the elimination
of the?Nationalist Navy and Air Force.
British Dilemma US-British Policy disagreements regard-
ing China have been sharpened by evident
British acquiescence in the removal to Chinese Communist
territory of the former Chinese Nationalist aircraft and aircraft ?
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CHINA
equipment in Hong Kong. Although litigation is still in
process, some of the equipment hap already left Hong
Kong by road and sea and Communist Counsel in one of
the cases has categorically stated the intention of his
clients to remove everything before completion of the
court proceedings. The US has sent a strong protest to
the UK Government, asking on security grounds for ex-
ecutive action in Hong Hong to deny this equipment to the
Communists, and hinting that further withdrawals by the
Communists might prejudice Britain's. current prospects
fOr US military and economic aid. This US action places
the British in a dilemma. Having decided that the pro-
tection of their extensive interests in China required .
formal recognition Of the Communist regime, the British
have been trying for several weeks to establish normal
diplomatic relations in Peiping. The Communists, however,
have pointedly indicated to the British that disposition of
Chinese Nationalist assets in Hong Kong is a significant
factor in the establishment of normal relations at this
time. Unless convinced that failure to take action in
Hong Kong would have very serious effects on general
Anglo-American relations, the UK is therefore unlikely
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to make any move which might strongly antagonize the
Peiping regime at this critical moment.
AUSTRALIA
Labor Policy By acting vigorously to arrest the Com-
munist-led waterfront strike, the recently-
elected Australian Government has taken the first step in
its campaign pledge to outlaw the Communist Party. Initial
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AUSTRALIA
labor reaction indicates that the Liberal-Country coalition
Government will have greater support on the Communist
Issue from moderate trade union leaders than had been
predicted. Continued support, however, will depend upon
adroit handling of the governmenCs labor policy including
as little interference as possible in intra-trade union
affairs.
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OUTLOOK FOR KOREA
Recent-Korean advances against Communist
guerrilla forces, while successfully containing the
guerrilla threat for the immediate future and strengthen-
ing the young-Republic's internal security, were made pos-
sible-only at the expense of economic and political measures
essential for the nation's long-term survival. President Rhee's
nearly blind concentration on Korea's security,:moreover; has
produced economic and political difficulties which pose an
immediate and serious threat to the new nation's existence.
President Rhee has consistently felt that his primary
tasks have been to unify Korea and to counter the immediate
Communist threats of subversion, guerrilla warfare and
invasion from the North. In his approach to these tasks, Rhee
has given top priority to the development of the Republic's
armed forces and the forging of a unified, anti-Communist
"national front" in political affairs.
In this process, the nation's economic welfare has
been neglected to the point where the inflationary threat is
critical. Korea's economic ills, in addition te being magnified
by the extravagent and uncontrolled Army and Police require-
ments for funds, equipment and raw materials, can be traced
directly to: (1) fiscal ineptitude on the part of Korean officials;
(2) failure to collect taxes; (3) politically motivated large-scale
government subsidies; and (4) continued government use of
inflationary overdrafts with the Central Bank, in order to meet
currency requirements. Although Rhee has made some effort
to cure these basic ills, he and his advisers apparently still
believe that Korea's inflation is merely seasonal and are not
yet entirely convinced of the need for drastic and constructive
measures to stabilize the Korean economy.
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In the political field, the threat to stability, while
perhaps not so obvious as in the field of economics, is
equally serious. Faced with the problem of Communist
infiltration and subversion, Korea's Government has re-
sorted to the only counter-measures familiar to the mass of
its officials?Japanese police state methods. The Govern-
ment has been successful in suppressing Communist activities
and in ferreting out Communist cells in the Army, police,
and Government. In the process, however, most of the human
rights and civil liberties guaranteed by the Korean Constitution
have been severely compromised.. Although" abstract ideas of
human rights-are understbod by only a small minority of
Koreans, the support of this influential group of intelligentsia
is essential to the success of the Government. Furthermore,
all Koreans, educated or not, understand and resent the physi-
cal violence and intimidation to which many innocents have
been subjected in the course of the Government's program to
"purify" thoughts and develop "unity."
The recent unsuccessful attempts by the National
Assembly to reduce the powers of President Rhee and
establish a "responsible cabinet" system of government,
for example, was more than a mere power play on the part
of the conservative, wealthy and relatively talented opposition
Democratic-Nationalist Party. It was, rather, a measure
of the Assembly's disgust with the Government's failure to
curb inflation, and a protest against the excesses of the
police.
The net result of Rhee's attempt simultaneously
to eliminate both factionalism and the Communist threat
has been to silence and intimidate practically all constructive
critics of his regime, to alienate much of his popular support
both in the provinces and in the Assembly, and to pave the
way for a possible split in Korea's nationalist, anti-Com-
munist camp. Such a schism would leave the young Republic
hopelessly torn by internal dissension and an easy prey to
Communist penetration,
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DISTRIBUTION
1
2,64
3,4
5
6
7
8,70
9,71
10
11,69
12,13,14
15,16,17
18
19
2a
21
22,23,24 . .
25,26,27,28,29,
30,31,32,33,34
35,36,37,38,39,
40,41,42,43,44. Director of Naval Intelligence
45,46,47,48,49,72,
73,74,75. Director of Intelligence, Headquarters, USAF
50. ...... Director of Intelligence, Atomic Energy Commission
51 Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
52,53,54,55,56. Chief, Acquisition & Distribution Div.,0CD, 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 (Attention: Policy Reports Staff)
61 Deputy Director for Intelligence, The Joint Staff
62,63 Secretary, Joint Intelligence. Group, joint Staff
65 US Air Force Representative of Joint Strategic
SurVey Committee
68 Administrator, Economic Cooperation Administration
. ?
The President
Secretary of State
Secretary of Defense
Secretary of the Army
Secretary of the Navy
Secretary of the Air Force
Chairman, National Security Resources Board
Executive Secretary, National Security Council
Assistant Secretary of the Navy for Air
Chief of Staff, US Army
Chief of Naval Operations
Chief of Staff, US Air Force
Assistant Chief of Staff, G-3, Operations
Deputy Chief of Staff (Operations), US Air Force
Deputy Chief of Naval Operations (Operations)
Director of Plans and Operations, US Air Force
Special Assistant, Intelligence, Department of State
. Assistant Chief of Staff, G-2, Intelligence
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NO Cri72.7.17.. in Class. n
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U. S. GOVERNMENT PRINTING OFFICE
2631-S-194%
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