THE WARM PEACE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002400030001-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 23, 2016
• Document Release Date: May 21, 2013
• Sequence Number: 1
• Publication Date: August 18, 1950
• Content Type: REPORT

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HIGHLIGHTS
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CONTENTS
THE WARM PEACE
Sc Committee on Korea
Taiwan Invasion
The USSR and Iran
WESTERN DEFENSE
French Attitude
Norway and Denmark
Turkish Army
South African Contribution
1.Trexid lin Iceland
THE NEUTRALITY BLOC
Swedish Defense Thinking
Yugoslav Economy
LOCAL DEW LOPME NTS
South Korean Army
Progress on Kashmir
India and Tibet
UK and Communist China
Eritrean Federation Prospects
ARTICLES.
Council of Europe 6.0 . ?? ?
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HIGHLIGHTS
The battle of words continued unabated in the
Security Council, with the Indian proposal that the "Little
Six" members of the SC be appointed to work out a solu-
tion for the Korean situation the only new development on
that stormy verbal front. Although the proposed committee
of the "Little Six" would have more flexibility than the full
SC in working out some solution for Korea' there is always
the possibility that without the restraining influence of the
US, the UK, or France, the committee might come up with
a recommendation which falls short of the minimum West-
ern objectives in Korea (see`page 2). The USSR is again
speaking soft. words and making friendly gestures toward
Iran; trade negotiations between the two nations have been
opened in Tehran and several Iranian border guards have
? been released by the USSR (see page 3).
West European efforts to speed rearmament have
resulted so far in considerable legislative discussion,
some rather promising plans and projected proposals,
but very little material improvement in the over-all de-
fensive capabilities. France continues to insist upon a
genuinely centralized control as the first step in creating
'the desired defenses for Western Europe (see page 4).
Under such a centralized defense organization, France
would probably be more than willing to accept German
participation. While most of the West European nations
are going ahead with increased rearmament plans, they
are waiting for dynamic and aggressive US leadership to
bring some kind of order and meaning out of the present
'confusion.
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THE WARM PEACE
Security Council Security Council approval of the Indian
suggestion that a T:ommittee of the non-
permanent SC members be formed to study proposals for a
"peaceful and just" settlement of the Korean fighting might
complicate US efforts to maintain firm UN support. The gen-
eral hope that a proposal of this nature might open the way
for some fresh approach to the Korean problem will ensure
it a certain amount of support in the SC, especially if the com-
mittee's terms of reference require compliance with the pre-
vious SC resolutions. The USSR, thus far noncommittal,
probably would not welcome having the Korean situation taken
out of the SC but might seek to maneuver the US into rejecting
the Indian proposal in the hope of then being able to charge
that US rejection "proves" US opposition to peace.
A committee of the "little six" would have a greater
degree of flexibility than the SC for exploring new avenues
toward a Korean solution and might offer an opportunity for
reaching an acceptable compromise. However, the six non-
permanent members might, under Indian leadership, be willing
to considers proposals which would fall short of US objectives.
Taiwan Invasion Even though the outcome of the Korean con-
flict remains in balance, Chinese Communist
invasion of Taiwan remains a strong possibility during the next
few weeks when the most favorable weather for crossing the
Formosan straits will prevail. With reduced prospects for
.being seated in the UN during the present session, the Peiping
Government may decide that Taiwan should be invaded before
the worst of the typhoon weather sets in and before the US can
strengthen the island's defenses. Chinese Communist propa-
ganda recently emphasized that the liberation of Taiwan was
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inevitable and, during the civil war on the mainland, Peiping
propaganda was an accurate indicator of the next military
target. Moreover, recent reports indicate that vessels are
:available in sufficient numbers to permit rapid concentration
opposite Taiwan for an invasion, and the Chinese Communists
have stated that they could provide the most effective aid to
North Korea by intensively preparing for the invasion of
Taiwan.
USSR and Iran The opening of Soviet-Iranian trade nego-
tiations .in Tehran this week and the reported
return of four Iranian soldiers who had been held by the USSR
provide additional evidence of a new Soviet attitude toward
Iran. When the Soviet Ambassador recently aired the new line
by suggesting that the Iranian. Government send a delegation to
Moscow to discuss the trade question, and other outstanding
difficulties between the two countries, Prime Minister Razmara
firmly replied that the matter of the soldiers and Iran's repeated
demands for the return. of Iranian gold held by the USSR were
not Matters for negotiation and that, in. any case, he was not
prepared to senda mission to Moscow. Razmara also stated
that no trade agreementwould be ratified unless his conditions
were complied with. Although it remains to be seen whether
the USSR will completely meet Razmara's terms, the Soviet
Union has apparently decided, at least for the moment, that
a "friendly policy will pay bigger dividends than the threat-
ening approach hitherto employed. Although such soft-glove
tactics might encourage some Iranians to believe that the
danger from the north is not immediate and that--particularly
in view of US reverses in Korea--itwonlictiewudentfor:Iran
to avoid closer identification with the Western Powers, it is
most unlikely that Premier Razmara will modify Iran's
present Western orientation or his attitude of vigilant firm-
ness toward the USSR.
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WESTERN DEFENSE
French Attitude The French are not likely to embark on a
vigorous rearmarp.ent program on a national
basis, but they would make greater efforts to speed rearmament if
Western defense planning and control were integrated under
strong US leadership. Also, the French public could probably
be persuaded to accept West German participation in an inte-
grated Western defense system directed by a genuinely inter-
national command. The French people are not convinced that
a coordination of separate national defense programs under the
? North Atlantic Treaty Organization will provide adequate
security for Western Europe, and many other West European
peoples are inclined to agree with the French view.
The French are deeply concerned over present NAT
planning, which they feel would require them to contribute
a major share of the infantry forces in a European war; and
even though the French Government might be willing to make
greater NAT commitments, the Assembly would probably
refuse to endorse suostantial national sacrifices to build up
the French military establishment under the present arrange-
ments. French deputies will place strong emphasis on economic
recovery as a means of curbing the internal Communist threat.
? Furthermore, there is little likelihood that governmental
revenues can be raised appreciably, nor does the tenuous
political position of the "Third Force" coalition permit
major economies through cuts in the heavy expenditures for
? social welfare. Such a move would almost certainly result
in the collapse of the governing coalition. However, a greater
willingness to make the necessary sacrifices could be gen-
erated for an integrated Western defense effort, based on
strong and effective US moral, political, and economic leader-
ship and support. Such an arrangement could imbue the
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French people with a hope of security sufficient to make their'
willing to sacrifice for defense. The French Government con-
ceives integrated defense to include a common military fund
and budget, joint allocation of production responsibilities,
and an international army under a sincje authority. The French
emphasize that defense burdens under a central control should
be shared according to the capacities of each NAT signatory.
Norway and Denmark Norway and Denmark are each planning
additional defense appropriations for
? 1951'and 1952, to be used for the regular armed forces, home
guard, civil defense, and expanded police servicen.-Norway's
proposed increase in appropriations must be submitted to the
Storting in September, bait is virtually assured of approval.
? The additional appropriation, which will bring Norway's defense
expenditures to about 5 percent of the national income, should
not place an undue burden on the Norwegian economy. Den-
mark's expanded defense spending, which will constitute about
34 percent of the national income, should not be a severe strain
to the economy. Both countries, however, realize that their
defense preparations will be far from complete even with
these supplementary funds, and look to the US for more and
faster aid under the MDAP.
Turkish Army Reorganization of Turkey's major tactical units
has now been completed, and a significant im-
provement in the capabilities of the army is expected within the
next twelve months. The Turkish Army is not yet an effective
modern force, however, because many divisions of the army still
lack adequate equipment, armament, trained manpower, and
supporting units,. The Turkish Government, with the advice and
assistance of the US Military Aid Mission, is making a serious
effort to remedy these deficiencies.
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Smith Africa Ensuring of an effective South African contri-
- bution to the long-range Western defense effort
may result from conversations to be held in London in September
between the South African Defense Minister and British defense
officials. Last summer the South Africans secretly committed
themselves to supply an armored division for use outside the
Union in defense of the African continent, and the Union Govern-
ment is now planning a mobile field force with total strength of
18,000 men to fulfill this commitment. In order to carry out
this plan, however, the South African forces will need much
equipment from the US and the UK.
? Trend in Iceland The Iceland Government's recent agreement
to the visit of two US destroyers to the east
coast town of Seydisfjordur constitutes a major departure from
Iceland's previous policy and provides additional evidence that
Iceland is moving toward more active participation in the NAT.
Even after signing the NAT, the Iceland Government continued to
refuse to permit any semblance of foreign military influence on
the island. During the past year, however, the Icelanders have
come to accept and approve membership in NAT, and their
growing awareness of Iceland's vulnerability is causing them
to reexamine Iceland's role in NAT and to reconsider the possi-
bility of creating a security force. Although the Icelanders
basic anti-militarism is still strong enough to preclude immed-
iate permission for foreign military forces to be stationed on
the island, additional security measures will almost certainly be
investigated.
If .Iceland decides additional security measures are
necessary, the most likely lines of action would be either:
(1) to seek NAT discussion of Iceland's security problem and
possibly to request special protection during the coming critical
period of European and North Atlantic defense development; or
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(2) to take steps to establish and train a seeurity force and
posibly even to permit NAT-sponsored military grotiDs to
help train such a force. The establishment of a security force,
of course, would be possible only with US or NAT aid in pro-
viding arms and equipment.
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THE NEUTRALITY BLOC
SWEDEN
Defense Thinking Prime Minister Erlander of Sweden will
call an early conference of the leaders of
the four democratic parties to discuss "Sweden's defense-polit-
ical situation." Up to this time the government, which was
concerned with next month's provincial-municipal election, had
adopted an attitude of complacency with respect to the world
situation and the state of Sweden's military preparedness, and
seemed unwilling to risk lowering the standard of living by
demanding increased defense appropriations. The Social
Democratic Government, belatedly recognizing the leriouszless
of the international situation-..-1argely because of pressure.Wdrn
opposition parties, has decided to reconsider the possibility
of increased defense measures. The Prime Minister is now
apparently seeking to establish a united stand by all demo-
cratic parties on defense requirements before risking allji bakc
change in Sweden's standard of living.
YUGOSLAVIA
Economic Problems The rapid growth of Yugoslavia's
anticipated foreign exchange deficit
between February and June constitutes the latest threat to the
Yugoslav economy and may impair Tito's ability to resist
:soviet pressure. During these four months, the estimated
foreigu exchange deficit almost doubled, rising from 75 to
131million dollars. Apparently, Tito is unwilling to curtail
purchases of expensive industrial machinery and equipment
from the West, preferring to gamble on having the deficit
covered through increased Western aid.
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The magnitude of Yugoslavia's foreign exchange deficit
stems primarily from the high cost of capital _equipment imports
and the necessity of freeing the Yugoslav military establishment
front dependence upon Soviet-Satellite materiel. Other expenses
requiring foreign exchange are payinents on nationalized prop-
erties settlements and servicing of loans already contracted.
Before Yugoslavia's foreign exchange requirements can be met,
export receipts will have to:be increased through the installation
and operation of more efficient modern mining machinery and
timber -handling-eqUipmezit. Meanwhile, export prospects, already
hurt by expected low yields in corn, hemp, and other crops, could
be improved by sacrificing certain long-term features of the
Five Year Plan for industrialization in favor of greater pro-
duction of goods for export.
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LOCAL DEVELOPMENTS
KOREA
South Korean Army The determined stand made by the
reorganized South Korean Army,
currently holding the entire northern front and 90 percent
of the east coast sector, has made possible the present
build-up of UN forces in Korea. Following the decisive
defeat of the ROK forces in the Uijongbu corridor north
? of Seoul during the early days of the invasion and their
subsequent rout south to Suwon, the stand of the US 24th
Division Provided time for battered South Korean forces
to be reorganized and re-equipped. The remaining 5 South
Korean divisions were reorganized into two corps and,
given responsibility for the northern sector to the east
coast, have fought stubbornly as they fell back to successive
defense positions in the UN-delaying action. The 17th Regi-
ment of the Capital Division, which is one of the best units
in the South Korean Army, escaped annihilation when attacked
by a superior force on the Ongjin peninsula at the beginning
of the invasion. The 17th fought its way north into the indus-
trial port of Haeju, and evacuated two battalions by water.
Following this escape, the 17th has been fighting almost
continuously on almost every UN front, and earning a reputa-
tion for providing the best shock troops of the UN forces.
Although the South Korean Army was reduced to
about 50,000 by the rapid advance of the enemy early in the
invasion, the return of stragglers and conscription in UN-
held territory has raised strength to about 75,000. Republi-
can casualties (including missing) have been estimated to
be in excess of 35,000. This heavy toll, coupled with the
lack of a single major unit defection, is a measure of the
South Korean Army's willingness to contribute substantially
to the defense of its homeland.
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INDIA ',PAKISTAN
Kashmir Progress UN Mediator Dixon's new approach
on Kashmir, which abandons an over-
all plebiscite in favor of exploring the best possible compro-
mise on partition, may clear the ground for an eventual
Kashmir settlement. Both sides at last have consented,
Pakistan conditionally, to discuss what appears to be the
most feasible solution of the dispute,- partition coupled with
a plebiscite limited to the Vale and minor disputed areas.
Dixon, having obtained India's agreement by capitalizing on
its strong preference for partition, must now wrest from
Indian Prime Minister Nehru a guarantee to implement a
partial plebiscite before Pakistani Prime Minister LiaqUat
will agree unconditionally to meet Nehru.
If the Prime Ministers hold the proposed meeting,
the plan which Dixon presents must offer Pakistan satis; -
factory assurance regarding the division of vital irrigation
waters, as well as firm Indian guarantees regarding neu-
tralization of the Vale in preparation for the partial plebis-
cite. The Pakistanis are suspicious of Indian good faith,
especially since India has obstructed all UN efforts to
implement the over-all plebiscite previously accepted by
both parties, and Liaquat therefore thust be armed
with these Indian guarantees to get his Cabinet to accept the
partition principle. If Nehru is willing to make the necessary
concessions and commitments, the way for a settlement of
the Kashmir dispute may now be open.
INDIA
Tibet Invasion Although India has manifested serious con-
cern over the recent Chinese Communist
broadcast announcing the approaching "liberation of Tibet,"
it is doubtful that the Indians will actually take strong action
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INDIA
to block Communist invasion of that area. The Indian Gov?
-
ernment has apparently urged the Chinese Communists not
to invade Tibet lest they help bring on a new world war and
has reportedly warned that an unprovoked attack on Tibet
might require India to revise its opinion regarding China's'
peaceful intentions and possibly to take a different view re-
garding Chinese admission to the UN. Because of the
emphasis which India has placed on the maintenance of
friendly relations with the Chinese Communists, however,
it is unlikely that India will follow through on such.state-
ments, even if they have in fact been made in such direct
and-forceful terms. Although Chinese invasion of Tibet
would shake Nehru's confidence in Chinese tractability and
friendship, India will probably do little more than strengthen
its border guards to indicate that invasion of the small states,
along India's frontier would not be tolerated..
UNITED KINGDOM .
China Problem British hopes that the usefulness to the
Chinese Communists of UK business and
commercial organizations in China would convince the
Peiping regime of the, advantages of establishing normal
relations with the Western Powers are rapidly dwindling.
The presence of the British Charge in Peiping has merely
been tolerated, and Chinese Communist commercial policy,
rather than encouraging British business in China, is forcing
several old established firms to consider withdrawing their
representatives from Shanghai. With the failure to obtain
economic cooperation, the British optimism which accom-
panied the extension of recognition in January is disappear-
ing, and the feeling is growing that the UK has lost whatever
prospects existed for weaning the Chinese Communists away
from their close alliance with the USSR.
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? ERITREA
Federation Prospects The failure to date of Italy and
Ethiopia to agree on terms for
the disposition of Eritrea reduces prospetts that the UN
General Assembly will reach a decision that can be imple-
mented. Italy fears that any "federation" plan acceptable
to Ethiopia would be merely a disguised form of annexation,
? while Ethiopia is concerned lest any solution favored by
Italy would be a concealed form of Eritrean independence.
Probable support from the Latin American bloc assures
the adoption of some form of federation by the GA this
fall, but there is no certainty that Ethiopia will put into
effect any recommendation which it considers unsatis-
factory.
?
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COUNCIL OF EUROPE
Developments in the Consultative Assembly of the
Council of Europe, currently meeting in Strasbourg, indi-
cate that the Council may be entering a critical stage which
could determine whether it is to play a major role in European
unification. A sharply increased sense of urgency, touched
off by the Korean crisis, has accentuated the Assembly's
dissatisfaction with its purely consultative status and further
emphasized the rift between the Assembly and the Committee
of Ministers on this question.
The Assembly has displayed great initiative in seeking
to strengthen and unite Europe, especially by calling for
creation of a European army under a European defense min-
ister. This Assembly action constitutes open defiance against
the limited/role given the Council by the sponsoring govern-
ments. The Assembly's call for increased European unity
also carries with it implicit criticism of the Committee of
Ministers, which as the representative of the member govern-
ments, has continually opposed the desire of the Assembly to
increase its own authority and convert the Council of Europe
into a European political authority with real powers.
' The'Assembly delegates, impelled by the serious in:1.1
plications of the international situation for the security of
Europe, are clearly unwilling to have the Council continue
its present limited and passive role. Disgust with the nega-
tive attitude of the Committee of Ministers is mounting in the
Assembly and unless the Assembly is granted additional author-
ity by the signatory pOwers to make the Council rindre effective,
instrument for European unification, the Council of Europe *ill
gradually degenerate into an ineffective debating society.
?
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BERLIN ECONOMY
The general economic situation in Berlin continues
? to be unsatisfactory, and the city will continue to be a drain
on the resources of West Germany until some drastic action
is taken to spread the burden as a part of the over-all West
.European defense effort. _Soviet interference with transporta-
tion and high production costs handicap all Berlin industries,
and even greater financial subsidies will cause only limited
recovery in the city's economy.
Berlin's unemployment remains high, with approximate-
ly 280,000 persons (nearly 25-percent Of thelaboi foree) idle..
The upward trend in unemployment has been arrested during
recent months, but the improvement has been due primarily
to a series of public works projects financed.by ECA counter-
part funds. Because of war damage and isolation from normal
markets and supply sources, Berlin's industry has lagged far
behind the economic progress achieved in the Federal Re-
public. Business and industrial interests, have been reluctant
to invest in Berlin, partly because of its exposed position.
.Tax measures instituted to improve the competitive position
.of Berlin's industries have met with only limited success;
the general production index for West Berlin is less than
30 percent of the 1936 level, compared to 105 percent in
? Western 'Germany.
The continuing financial deficits of the city have so
far been met by the Federal Republic and ECA. Although
the Federal Republic maintains a monthly subsidy far Berg-
lin of deutschniarks (DM)20-million, it is reluctant to e
accept long-range financial responsibility for the city. Such
metiirring crises as the recent inability to meet public,
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tate
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? r
(0) itt) Eida44uij
payrolls have been met by the temporary expedient of releasing
ECA counterpart funds. Current estimates for the coming fiscal
year anticipate a budgetary deficit of DM 650 million. The
Federal Republic hopes to bring this down to DM 500 million,
with the balance to be met equally by the Federal Republic and
ECA. The proposed ECA contribution, however, together with
special works projects financed by ECA, would exceed available
funds. If the UK and France fail to assume a larger share of
the costs, the assumption of the deficit by the Federal Republic
would inevitably entail a departure from the policy of a balanced
budget. With the common interests of Western Europe in Berlin
being stressed, Western European countries, particularly the
Federal Republic, are being urged through the OEEC to take a
larger volume of Berlin's exports, as a means of indirectly
subsidizing Berlin industries and contritiuting to their stability.
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DISTRIBUTION
1
2,64314 .
3,4,78
5
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81701113.1. .
9,71. . .
10
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12,13,14. . .
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21
22,23,24.?
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
52,53,54,55,56,79,
80,81,82,83184,85,
86,87.. . . Chief, Acquisition 8z. 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 (Mt: Policy Reports Staff)
61 Deputy Director for Intelligence, The Joint Staff
62,63 Secretary, Joint Intelligence Group, Joint Staff
6.5 US Air Force Representative on Joint Strategic
Survey Committee
66?76?77.. Director Armed Forces Security Agency
68 Administrator, Economic Cooperation Administration
liglasunaeon
The President
Secretary of Mate?
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Secretary of Defense tet
Secretary of the Army Da
Secretary of the Navy '
Secretary of the Air Forae-
Chairman, National Sedurity Resources Board
Executive Secretary, Natidnal Security Council
Assistant Secretary of the Navy for Air
Chief of Staff, US Arty'
Chief of Naval Operattons',.
Chief of Staff, US Air Force ?
Assistant Chief of Staff; G$; 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
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DECLASSIFIED it jr57.77M
ss..CIWAGED T
. O:- TS S C
? DDA. Nemo, 4 Apr I/
no. 1763
By;
alastiatacita
Declassified in Part - Sanitized Copy Approved for Release 2013/05/21 : CIA-RDP78-01617A002400030001-1