WEEKLY INTELLIGENCE SUMMARY NO. 82

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A005000010077-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 27, 2016
• Document Release Date: May 22, 2013
• Sequence Number: 77
• Publication Date: October 4, 1949
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2013/05/22 : CIA-RDP78-01617A005000010077-1
~.d SEC %T
TRANSPORTATION DIVISION
OFFICE OF REPORTS AND EStTh ATES
CENTRAL INTELLIGENCE AGENCY
NOTICE: This document is a working paper, not
an official CIA issuance. It has been co-ordina-
ted within ORE, but not with the IAC Agencies.
It represents current thinking by specialists in
CIA, and is designed for use by others engaged
in similar or overlapping studies. The opinions
expressed herein may be revised before final and
official publication. It is intended solely for
the information of the addressee and not for
further dissemination.
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OFFICE OF REPORTS AND ESTIMATES
TPANSPORTATIOII DIVISION
The action of a US ship operator in defying the Nationalist
"closure" of Shanghai may provide an advantage to either the Chinese
Nationalists or the Chinese Communists, and has already resulted in a
loss of US prestige. The Chinese Nationalists have enforced their
declared closure of the port of Shanghai by intercepting two US-flag
vessels departing from the port and a third US ship attempting to
enter Shanghai. This incident illustrates the potential danger of
uncontrolled action by US nationals engaged in international commerce,
who can create circumstances in which the US Government may be forced
to take premature action before final US policy has crystallized.
(Item No. 1, A)
The US irregular air carrier, Transocean Air Lines, which operates
the Pakistan airline, Pakair, under contract, and which recently became
associated on a similar basis with Iran's Iranair, is now considering
the possibility of establishing an air service in Afghanistan.
(Item No. 2, C)
The US, UK and France are now considering some form of joint or
concurrent resistance to certain conditions inserted by Iraq in newly
extended temporary operating permits for non-Arab international air
carriers transiting the country. (Item No. 3, B)
Document No. O___
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No ORANGE in Class.
DECLASSIFIED
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SECTION II. CURRENT DEVELOPMFNTS
SURFACE TRANSPORTATION
1. The action of a US ship operator in defying the Nationalist
"closure" of Shanghai may provide an advantage to either the Chinese
Nationalists or the Chinese Communists, and has already resulted in a
loss of US prestige. This incident illustrates the potential danger
of uncontrolled action by US nationals engaged in international com-
merce, who can create circumstances in which the US Government rry be
forced to take premature action before filial US policy has crystallized.
The Chinese Nationalists have enforced their declared closure of
the port of Shanghai by, intercepting two US-flag vessels departing from
the port and a third US ship attempting to enter Shanghai. The Flying
Independent and the Flying Clipper, both Isbrandtsen Line cargo vessels,
sailed from Shanghai 29 September with a reported combined cargo of
10,000 tons and passenger lists consisting principally of about 120
South Korean refugees. This action was taken in spite of a previous
Nationalist notice that the vessels, then in Shanghai, would be per-
mitted to depart only if they carried neither passengers nor cargo and
that they-would be subject to "appropriate action" by the Chinese Navy
if they left port under any other circumstances (see D/Tr Weekly No.
81). The vessels were intercepted at the entrance to the Yangtze by
Nationalist warships which threatened to fire if the US ships were not
anchored immediately. While refusing requests that the Flying Inde-
pendent be permitted to proceed to Korea with the refugees, and that
both vessels be permitted to move to safer waters, the Nationalist naval
units reportedly ordered all Chinese passengers transferred to a Chinese
vessel and the cargo either dumped overboard at once or retunned to
Shanghai for discharge.
The two vessels have been escorted, under threat of fire, to a
Nationalist port in the Chusen Archipelago, about 100 miles southeast
of Shanghai. Following the report to Isbrandtsen's New York office of
a further refusal by the Masters either to return to Shanghai or dump
their cargo overboard, the vessels have been instructed by Ncr, York to
proceed on their scheduled voyage without further delay "barring actual
physical violence or actual shooting across bow." In any case, there
is to be no cooperation whatever with the Chinese naval forces, who may
therefore be compelled, for example, to provide the physical means to
unload the cargo or to move the vessels without use of their engines.
The third Iabrandtsen vessel, the Flying Trader, which had been denied
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entrance to Shanghai by the intercepting Nationalist warships, remained
at anchor until the naval craft escorted. the other vessels southward
and then slipped unobtrusively into Shanghai without incident. It
reportedly carried hbout 3,000 tons of`cargo for Shanghai.
By demonstrating their ability. to enforce the closure, the.
Nationalists have countered, in effect, any contention that the closure
is not legal because it is not effective. The Communists; for their`
part, have expedited the movement of the labrandtsen vessels in the
belief that any resolution of the blockade issue would probably redound
to their advantage. Successful defiance of the Nationalists by the...
Isbrandtsen vessels, for. example, would have opened the way for further
blockade running and the virtual collapse of the Nationalist closure,
thus providing Communist Chine with an outlet for vitally needed trade
with the outside world. Interception of the vessels, on the other hand,
could be hoped by the Communists'& produce. a serious incident in-
volving the US which might, in turn, result in use of.the US Navy to
break the blockade. The:Communists probably hope that the incident
will in any cars lesson sympathy in the US for the. Nationalist cause.
The U% meanwhile, which does not recognize the Nationalist blockade,
has not protested the incident, but has requested the Chinese foreign
Office to state the basis for its action and its intention with respect
to an early release of the vessels. :Repeated requests from the
Isbrandtsein Line for US naval intervention have been denied.
The UK has been involved in sinilar'incidents, and is following
this situation closely. In recent weeks two British.-flag vessels have
been detained by the Nationalists and the cargo of at least one of
them confiscated. This action, which the UK presumably regards as a
violation of;intornational law, led to a relatively :Wild official pro-
test to. the Nationalists, demanding compensation for tie confiscated
property. A patrolling British frigats, which escorted one of the
intercepted British vessels out of Chinese Nationalist waters, is now
reported' to have been in contact with the Isbrandtsen vessels under
British instructions to take no measures to obtain rei?ase of the US
vessels if detained by "non-violent" measures. The. frigate, how6 vor,
was authorized to intervene if necessary on "humanitarian grounds" and
to act in accord with standing instructions if "violent measures" were
attempted "clearly outside territorial waters."
The tactics thus far emplo;yred by the Isbrandtsen.Line in the entire
incident suggest a carefully premeditated attempt to force th -Us,uo of
the Shanghai blockade.undee the most favorable possible circums'canceo,
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with a view to opening up a highly lucrative trading area. The
decision to enter Shanghai and thence to defy threatened action upon
departure was taken by the vessels' owner without the sanction of the
US Government. Entry into Shanghai, moreover, was allegedly obtained by
misleading information given the Nationalists. It has been revealed
that the vessels are carrying, in addition to the Korean refugees,
nationals of both the US and UK, as well as almost 3,000 tons of US
Army "through cargo" consigned to Korea. The company's radio messages,
telegrams and press releases, moreover, have obviously been designed
to exert pressure for US Government intervention. The entire sequence
of events has clearly demonstrated t)-at private US citizens operating
US-flag vessels in foreign waters can play into the hands of foreign
interests desiring to precipitate favorable action in matters conc3rn-
ing US foreign policy. Such contaaotcan lead to consequences unfavor-
able to the US, which may seriously affect US prestige abroad and
commit the US Government to an undesireable course of action, unneces-
sary under other circumstances. (Secret)
SECR .T
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uuv sa ~i
NOW
2. The US irregular air carrier, ^aransocean Air Lines, which operates
the Pakistan air ine, Pakair, under contract., an rrhic recently became
associated on a similar basis with Iran's Iranair, is now considering
the possibility of establishing an air service in Afghanistan.
Although the Afghans have a small air force equipped with six passenger
British Avro Anson XIX aircraft, no civil air connections. with the West
have existed since the German Lufthansa ceased operating from Tehran in
1939. (A Soviet DC-3 courier flight, however, is made to Kabul twice
monthly.)
A US-operated air cargo line would be of great advantage to
Afghanistan as a means for, expediting the export and reducing the trans-
portation costs of karakul skins (Afghanistan's principal source of
foreign exchange). This new Transocean venture, moreover, should be
facilitated by reason of the technical staff and maintenance resources
available at Karachi. While serious reaction by the USSR to an
extension of US aviation interests into Afghanistan is not likely, the
undertaking, if it materializes, will be fully exploited for the pur-
pose of anti-US propaganda. (Secret)
3. The US, UK and France are now considerin some form of joint or
concurrent resistance to oer ain conditions inserted by Iraq in newly
extended temporary operating permits for non-Arab international air .
carriers transiting the country. Strong opposition will certainly be
registered to Iraq's revival of the long discarded Arab League reserva-
tion of air traffic between Arab States to Arab airlines.
Acquiescence by non-Arab countries in Iraq's limitations of "fifth
freedom" rights would: (1) give impetus to the trend toward restriction
of rights for foreign carriers, successfully initiated recently
India in regard to air traffic between India and Pakistan (See D/Tr
Weekly No. 81),and (2) result in establishment of restrictions on
revenue traffic in contiguous areas extending from Cairo to Calcutta,
thus seriously affecting the ability of foreign carriers to pay their
way on route between Europe and the Far East. (Secret)