DAILY SUMMARY - 1947/03

• Document Type: SPECIALCOLLECTION
• Collection: Daily Summary Collection
• Document Number (FOIA) /ESDN (CREST): 02996862
• Document Creation Date: October 8, 2018

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NTIAL 342
GENERAL
I. Secretm_k_h_lars all's recommendations on Japanese peace treaty--
Secretary Marshall has approved the State Departmentrs proposal for
an eleven-power conference in Washington to discuss the preparation
of a Japanese peace treaty (see Daily Summary of 26 March, item 2),
but he considers it inadvisable to raise the question of the treaty at this
time in Moscow. He suggests that an approach be made through normal
diplomatic channels to the nations represented on the Far Eastern Com-
mission.
2. State Department suggests viyorous approach on Soviet lend-lease�The
State Department, in a message to Secretary Marshall, notes the Soviet
Government's failure to reply to recent US requests for negotiation of
a lend-lease settlement and suggests "vigorous representations." The
Department doubts the advisability of setting a deadline for a Soviet re-
ply, which the USSR might consider an ultimatum involving its prestige.
3. UK to conclude monetary agreement with Spain--US Embassy London
reports that the UK is "reluctantl? about to sign a bi-lateral monetary
agreement with Spain. A Foreign Office official has emphasized that
only the unfavorable economic and financial position of the UK "could
bring Britain to enter into an agreement with Spain at this time."
EUROPE
4. GERMANY: Soviet forcesyredominantly mechanized�According to
Headquarters USFET, Soviet occupation forces in Germany are composed
chiefly of mechanized and armored units and appear to be over-equipped.
(CIG Comment: This confirms previous estimates that the USSR,
while reducing the personnel strength of its forces at home and abroad,
Is seeking to maintain its military potential by increased mechanization.)
5. RUMANIA: Expected US im lic__p_a_tioln_Dew mass trials�US Representa-
tive Berry reports that the Rumanian Government now feels that it can
proceed more boldly to eliminate its native and foreign opponents in
Rumania. Berry adds that the Government, in its efforts to expose a
new subversive plot, is attempting (a) to uncover a widespread reaction-
ary conspiracy among members of opposition parties; (b) to link this
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conspiracy with the recent Hungarian plot; and (c) to accuse US Mission
employees of direct relationship with the conspirators.
6. YUGOSLAVIA: UK observer discounts rem:It/Mood shortaAe--Acting
US Charge Hickok has learned from the UK Commercial Sicritary, who
Tria7; just returned from a trip through Dalmatia, Bosnia, Herzegovina.,
id Montenegro (where a serious food shortage has been reported), that
*here are no signs of starvation or of a serious food situation in those
regions.
'Z. UK: Douglas believes on coal rol2lem _ini3.1mIti�--US Ambassa-
dor Douglas reports that the UK appears to be making an "inadequately
vigorous approach" to the coal production problem, but adds that "many
social and political cross-currents" may account for this situation.
8. SWEDEN: Foreign
_...._1n_tg._te_r_ Eimg_ste_s_onference on trade principle--
US Minister Dreyfus reports that in its reply to the US note protesting
the Swedish Government states that it is -preparec
Swedish restriction of imports from the US
to send a delegation to Washington at the earliest convenient date for
a discussion of the questions of principle involved."
9. ITALY: _riuntb_Nbshilikot losing ground--US Ambassa-
dor Dunn reports that in proportion to the total population, the Commu-
nist Party. in Italy is the largest Communist Party in the world, even
larger than the Party in the USSR." Dunn adds that, while Party member-
ship in Italy apparently has not appreciably increased during the past
year, it is likely that the Party has been' strengthened" by replacing
year,
elements" with "more dependable" persons. (In the national
election of June 1948 the Communists polled 18.9% of the total vote.)
10. SPAIN: Franco reported preparing a law on succession-
to be pre-
paring a law on tne succession which would make Spain a Monarchy, with
Franco as Chief of State supported by a Council of the Realm; this law
may be presented to the Cortes in April and later become the subject of
a national referendum.
(CIG Comment: There is no evidence that any evolution contem-
plated by Franco would satisfy either the real Monarchists, who favor
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Don Juan, or the Leftist opposition. Nor is it likely to fulfill the conditions
of popular government suggested to the Spanish people in the joint French,
British, and US note of 4 March 1946.)
NEAR EAST-AFRICA
11. MAN: Shah to "dis rimination" inst 1ran--The Shah has ex-
pressed to US Ambassador Allen some uncertainty over US insistence
that the projected purchase of military supplies by Iran be on a loan basis
with interest. Allen reports that the Shah appreciates US efforts to aid
Greeee and Turkey but cannot understand why Turkey appears "to be
treated so much better than Iran," especially as "Iran's determination
to fight for its independence had been amply demonstrated very recently."
(The purchase by /ran of about $30,000,000 worth of greatly needed mili-
tary supplies from US surplus stock was initiated some four months ago
after Iran had rejected a Soviet offer to furnish the needed supplies.)
FAR EAST
12. CHINA: Renewed interest in US aid shown bv Generalissimo--US Am-
bassador Stuart reports that in a recent interview with Chiang Kai-shek,
the Generalissimo showed an obvious interest in the prospects of US
financial aid for China. Stuart informed him that such aid could not be
considered "while there was civil war and unless there were clear indi-
cations of a trend toward democratic reform." Chiang explained that,
while the Democratic Socialist Party had agreed to take part in govern-
mental reorganization, this move was being delayed by new demands
from the Youth Party. He also reaffirmed to Stuart his intention of per-
mitting the Chinese Communist Party to join the Government once "the
vital railway zones had been recovered."
Conclusion of milltarl.operations by September predicted.-
Chiang told Stuart that military operations against the Chinese Commu-
nists could be concluded "by September at the latest, more probably by
August." (The Nationalist High Command, according to another report
from Stuart, is decidedly more optimistic. The Nationalist Chief of
Staff claims that the main Communist armies will be defeated within
two months.)
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Chianpjavors US technical assistance for Formosa--The General-
issimo also heartily endorsed Stuart's suggestion that US technical assist-
ance might be used to develop the economic resources of Formosa.
13. SIAM: Prime Minister's views on Phibul's return to politics�Prime
Minister Dhamrong has told US Ambassador Stanton that, even if Luang
Phibul Songgram (Siam's Prime Minister under the japanese) should gain
the support of the Parliamentary opposition, he would not have enough
power actually to control Parliament and thus bring about his nomination
to the Premiership. However, there is no constitutional obstacle to his
election as Prime Minister. Dhamrong added that the Commander in
Chief of the Siamese Army could be relied upon to prevent a coup d' etat
headed by Phibul. The British Ambassador to Siam has told Stanton that
he felt sure his Government would "view with consternation" Phibul's
return to power.
14. FRENCH INDOCHINA: French military situation impLoiW--US Consul
Hanoi reports that there are increasing indications that the French mili-
tary situation is improving and that the French apparently have succeeded
in developing anti-Vietnam partisan groups among ethnic minorities.
Meanwhile, Vietnam forces are experiencing an increasing ammunition
shortage and are losing control over North Indochina communications.
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EUROPE
1. ITALY- Cnindifinns few 2reAntince Tire whilliGovmra es el"...
'2 13 MAR 1947
341
that the
=Alan waovernment will accept the British proposal to leave a military
mission in Italy (see Daily Summary of 24 February, item 6), provided
that (a) the US is advised immediately and asked to participate; (b) the
mission is "advisory only;" (c) Italian officers are permitted to train
in the UK and US; and (d) Italy., thus tied to the "western bloc," is
guaranteed protection of her "borders and integrity."
2. VENEZIA GIULIA.: Situation deteriorating--The State Department has
informed Secretary Marshall that the situation in Venezia Giulia is again
deteriorating and that serious disagreements between the Italians and the
Yugoslays have arisen in connection with the work of the boundary com-
mission. The Soviet representative reportedly is supporting all Yugoslav
contentions, regardless of their lOgic, including Yugoslav rejection of a
proposal that the Four Power Boundary Commission arbitrate Italo-
Yugoslav disputes over provisional delimitation of the frontier.
The Department adds that, while no reply has been received from
the USSR to the US proposal for provisional delimitation of the boundaries
of the Free Territory by the present boundary commission, indications
are that the Yugoslays (a) would reject such a proposal, if it were made
to them; and (b) are not prepared to withdraw from those portions of
Zone B to be incorporated into the Free Territory.
NEAR EAST-AFRICA
3. PALESTINE: Difficulties between Jewish Agency and terrorists--US
Consul General Jerusalem has been informed by high officials of the
Jewish Agency that "measures already taken" by the Agency against
the terrorists have brought it very close to armed conflict with the
Stern Gang. The officials also state that conflict may develop between
the Agency and Irgun, which is aided by funds from US sources, and
they point to the difficulty the Agency faces in "educating Jews of the US
as to the destructive and unproductive character of terrorism."
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4. IRAN: Barzani revolt reported Soviet-inspired�US Ambassador
Allen reports that Sadr Qazi, a former Kurdish deputy to the Iranian
Parliament, has sent word to the Embassy that the resistance of the
Barzanis and other renegade elements is Soviet-inspired and "far
more dangerous" than the Iranian Army admits. Sadr Qazi states
that the resistance movement in Kurdistan represents a serious ef-
fort by the Soviets to regain influence among the northern Kurds,
whose leaders have maintained continuous relations with the local
Soviet Consulate.
FAR EAST
5. KOREA: Soyi,pt effort to obtain food for electric power--General
Hodge's Headquarters has received a letter from the Chairman of
the Peoples Committee in North Korea which presents a bill for
$4,625,000 for power furnished South Korea from August 1945 to 31
January 1947. The letter states that payment may be made in such
material as electric power equipment and foodstuffs. The letter
warns that;if settlement is not made by 1 April)the electric power
to South Korea will be stopped by midnight 15 April. (South Korea
obtains two-thirds of its electric power from North Korea.) The
US Army liaison officer in Pyongyang reports that he has been ad-
vised by a Soviet liaison sergeant that the communication is official
and bona fide.
6. FRENCH INDOCHINA: Vietnam indicates willingness to negotiate--
US Consulate Hanoi reports that, according to Radio Vietnam, the
newly-designated Vietnam Minister of Foreign Affairs has declared
his intention to carry on President Ho's policies and to accept the
independence of Vietnam within the framework of the French Union.
This statement is apparently designed to indicate that Vietnam is not
opposed to negotiation and that the new Foreign Minister is
"moderate" enough for the French.
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EUROPE
28 MAR 1947
340
1. FRANCE: Paris increasjImilm_rtant as "Comintern" center--US
Ambassador Caffery reports that, according to information which con-
firms previous data, the importance of Paris as a "Comintern" center
is increasing constantly.
NEAR EAST-AFRICA
2. EGYPT: Premier intends to ask for US militar advisers--Premier
Nokrashy has informed US Ambassador Tuck that he will "terminate
the services of the British military mission" in Egypt. Nokrashy states
that he intends, "possibly in the beginning of 1948," to seek US military
advisers who will serve in a consultative capacity only and not as mem-
bers of a military mission.
3. IRAN: Shah does not intend to remove_gavam--The Shah has informed
US Ambassador Allen that he does not intend to remove Premier Qavam
at present, "despite charges of corruption" against the latter, which
the Shah is receiving daily (see Weekly Summary of 7 March, page 6).
FAR EAST
4. FRENCH INDOCHINA: Bollaeres instructions regarding Ho--US Am-
bassador Caffery has been told by a French Foreign Office official that
the signatures of Vietnam President Ho Chi Minh on recent peace pro-
posals are believed by French handwritinq experts to be forgeries, and
that French authorities are puzzled by Ho s complete disappearance
since 20 November 1946. This official further stated that Bollaert, the
newly-appointed High Commissioner to Indochina, will be instructed to
deal only with persons representing the "broad mass of people" in
Vietnam, because France cannot condone the establishment of a Vietnam
Government which does not follow Western democratic principles. If
110 should establish contact with Bollaert, Ho will be told to broaden the
base of his government and to eliminate extremist participation.
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GENERAL
27 MAR 1947
339
1. Secretary Marshall to allocate coal to UK--Secretaty Marshall,
in regard to the UK request to the European Coal Organization (ECO)
for the allocation of US coal, recommends that the State Department reply
that it is "reluctant" to allocate the coal because the UK's availabilities
from its own production are closer to normal than is the case with con-
tinental countries. Secretary Marshall points out that transport difficul-
ties will probably prevent the US from shipping any more coal to Europe
in the third quarter. Re, therefore, believes that allocations of US coal
to the UK, unless supported by ECG-importing countries, would lead to
"misunderstanding and bitterness."
2. Lie ready to expedite UN session on Palestine--Secretary-General Lie
has informed US Deputy RepiThinta ve Johnson that the best method
of procedure on the Palestine question is for the UK to request a special
session of the General Assembly. Lie would then immediately notify
member nations.
3. Eire re sared to deliver German s les to US--US Legation Dublin re-
ports the s �vernmen s rea . .eliver to US authorities on
15 April the remaining German spies in Etre, presumably eight in num-
ber. (The US and UK have been negotiating with Eire over these German
spies for many months.)
EUROPE
4. FRANCE: May support US on Germany in return for coal settlement--
US Ambassador Caffery has been told by Acting Foreign Minister Teitgen
that the French Government is "still exceedingly worried" about the
Ruhr coal situation. Tett/gen said that the entire Cabinet, except the
Communists, "basically' desires to cooperate with the US, and that if
France can obtain a solution on Ruhr coal it would be much easier for
his Government to support the US "on a number of other points at Mos-
cow." According to Teitgen, his Government (a) considers the Four
Power pact "essential"; (b) would go along with the US in regard to the
economic unity of Germany and also in raising certain production levels;
and (c) believes that a provisional German government based on the
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taender, but with certain delegated powers to a central authority, should
be set up without delay; and (d) considers that the unification of the French
zone with the UK-US zones could be effected "little by little on an informal
basis" and thus avoid the complications with the Communists which
would result from public notice a unification. Teitgen added that "we do
not feel that we can contribute to any of these matters until we have the
coal matter settled. . . If we have an economic collapse because we don't
get coal, the Communists will probably be the gainers."
5. HUNGARY: BBC fails to suppory--US Minister Schoenfeld re-
ports that, according to the US Information Service local radio monitor,
a 'distressing discrepancy" appears to exist between recent BBC Hun-
garian language broadcasts and what is believed to be the official British
policy regarding Hungary. Schoenfeld stated that BBC treatment of the
recent US notes on political conditions in Hungary and of President Tru-
man's speech (a) left the impression that the UK gave only lukewarm
support to the new US policy; (b) intimated that US, UK, and French pub-
lic opinion opposed US aid to Greece; (c) considerably weakened the im-
pact of the US notes on Hungarian public opinion; and (d) confused and
disheartened many Hungarians.
6. RUMANIA: Mass deportations to USSR threatened--According to US
Representative Berry,responsible sources with disturbing frequency"
report that the Groza Gcivernment will soon supplement its current
mass arrests of Opposition members (see Daily Summary of 17 March,
Item 4) with deportation to the USSR of (a) some of those already ar-
rested; (b) many Rumanians who believe themselves cleared of accusa-
tions arising from their activities during the Antonescu regime; and
(c) Bessarabians and Germans still in Rumania.
7. GREECE: US hopes Ministers will not resign--The State Department
has advised US Fmbassy Athens that the res nation at this time of the
liberal Ministers, Venizelos and Nanellopoulos (see Daily Summary of
15 March, item 4), would create an unfavorable impression in this coun-
try, thereby impeding the Department's efforts to secure US aid for
Greece. The Department accordingly hopes that the two Ministers will
remain in the cabinet until this matter is settled, "doing their best mean-
while to keep the Greek Government's polic7 in line with the principles
outlined in President Truman's statement.'
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NEAR EAST-AFRICA
EAST-AFRICA
8. TURKEY: US supervision of_mmditures considered feasible�Foreign
Minister Saka has informed US Charge Bursley that he believes a plan
can be formulated for US supervision of Turkey's use of any funds ad-
vanced by the US, without provoking "domestic and foreign criticism
of Turkey as allegedly controlled by a foreign power." He suggests that
projects could be supervised by US experts employed by the Turkish
Government. (The Bill now before Congress providing financial aid to
Greece and Turkey calls for "free access of US Government officials
lor the purpose of observing whether such assistance is utilized effect-
ively . . .1')
FAR EAST
). CHINA: Concern expressed over_d_xift, into Soviet orbit--
The US Embassy Nanking is apprehensiveuabo t the drift of Sinkiang . .
into the Soviet orbit, which so far remains unchecked," but adds that
there are relatively few ways by which the US can counter this trend,
because of the remoteness and isolation of the Province from outside
influence. One form of counter-pressure which the Embassy strongly
recommends is the immediate establishment of a US Information Service
office in the provincial capital.
THE AMERICAS
10. ARGENTINA: Government will folloyALS_o_ltcyliiky,--The For-
eign Minister has assured US Ambassador Messersmith that the Argen-
tine Government is not taking sides in Paraguay, and intends to follow
the US lead.
� 11. BOLIVIA: Cabinet approves Argentine-Bolivian treaty--US Ambassador
Flack repertr that the Bolivian Cabinet has approved the revised Argen-
tine-Bolivian commercial treaty; it must subsequently be approved by
the Bolivian Congress.
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GENERAL
A 6 MAR 1947
338
1. Acheson ur es eement on Czech transit char es thro h German
Acting Secretary Acheson has urged US Political Adviser Berlin to
do everything possible to reach a satisfactory agreement with Czecho-
slovakia concerning transit charges through the US Zone Germany.
(US authorities have refused Czechoslovakia's offer to pay its transit
charges in German reparations rather than in dollars on the grounds
that such a procedure would in effect amount to subsidization of the
Czechoslovak economy by the US). Acheson points out that failure to
reach an agreement would (a) turn a technical question into a diplomatic
and political issue; (b) have serious repercussions on US diplomatic
relations; (c) in time raise a political issue between Moderates and
Communists in Czechoslovakia; and (d) result in making Czechoslovakia
completely dependent on Eastern Europe for its foreign trade facilities.
2. Acheson_mmts_skyen-power conference on ja,panese Treaty--The
State Department has proposed for Secretary Marshall's approval that
a new international body composed of the eleven nations represented on
the Far Eastern Commission meet at Washington in the near future to
discuss the preparation of a Japanese peace treaty. The Department
points out that the Far Eastern Commission has no authority by its terms
of reference to deal with the Japanese Peace Treaty, and the Council of
Foreign Ministers does not have a sufficiently broad membership. The
Department suggests that Secretary Marshall make such a statement,out-
side the CFM, to the Foreign Ministers of the USSR, the UK, France and
to the Chinese Ambassador at Moscow. (Secretary Marshall had been
prepared to suggest at Moscow that the CFM discuss at a meeting in the
near future procedural questions regarding the preparation of a Japanese
Peace Treaty; see Daily Summary of 12 March, item 1)
sentment of US success in ECOSOC�Stinebower, US Delegate to the
Economic and Social Council, reports that the "complete success"
of the US in electing its slate for the two subcommissions of the Human
Rights Commission has aroused widespread "resentment" among other
delegations. Stinebower adds that this resentment jeopardizes the further
attainment of US objectives,
4. US rescinds invitation to. Spain for conference�The State Department
has informed the US Embassy Madrid that, in view of the resolution
passed on 12 December 1946 by the UN General Assembly (recommending
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that the Franco Government be barred from membership in UN inter-
natbnal agencies), the US must rescind its invitation of 19 September
1946 to Spain to participate in the World Telecommunications Conference
(to be held in the US).
UK official to visit Antarctic bases--US Embassy in London reports that
the UK has sent the Governor of the Falkland Islands on a "routine tour
of Antarctic bases."
EUROPE
6. GERMANY: USSR arrests Berlin youths friendly to US--Acting US
Political Adviser Reath reports that the recent arrests in Berlin of
German youths by the Soviet Military Authority and German police are
believed by the local US military intelligence to have resulted from the
fact that the youths "were almost all" US informants on conditions in
the Soviet Zone. All of those arrested were connected with the (Catholic)
Christian Democratic Union.
Ir. FRANCE; Communists lose 107 of adherents--US Ambassador Caffery
reports, on the basis of decreases in dues payments, that the Cordedera-
lion of Labor (CGT) and the Communist Party itself have lost "at least
10%" of their adherents during the past six months. Caffery adds that
(a) even the workers are beginning to perceive that the Communist
Party is more concerned with "politics" than with a militant defense
of the workers' interests; and (b) `many observers" feel that the Com-
munists are faced with an increasingly urgent need to recapture the
Initiative and "manifest their power."
Communists !night accept Bidault to form government--US Am-
bassador Caffery reports that he has been told by e'two reliable and
Independent sources" that prior to the solution of the recent crisis on
22 March, the Communists let President Auriol know that, if the Ramadier
Government should fall, Auriol should ask Bidault to form a government.
The Communists made this suggestion on the understanding that the Social-
ists might refuse to try to form a government. Caffery comments that the
Communist proposal of Bidault as head of a coalition government "appears
logical" because the Communists believe Bidault would offer "less resist-
ance" to them than any other non-communist candidate.
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'AR EAST
CHINA: Import requirements cut to conserve foreign exchange�The
Governor of the Central Bankof Chilli has informed the US-Treasury
Attache Nanking that, in an effort to conserve the Government's foreign
=Mtge holdings, he is frying to limit China's 1947 import requirements
to US$ 300,0001000 -- which he believes can be covered by current for-
eign exchange receipts and by the use of some privately held foreign
assets. The Governor said he "was not in favor of China's approaching
ihe US for the US$ 5004000,000 Exim Bank loan now," but that small
Exim Bank loans to finance about US$ 40,000,000 worth of railroad and
ituiustrial rehabilitation would ease his foreign exchange problem con-
siderably.
CIG Comment: The Governor's estimate for 1947 imnort re-
quirements is substantially lower than the estimate made by the Chinese
last D4eember. The revised level of inn orts; while alleviating the Gov-
.Irriment's acute foreign exchange problem, will probably not permit any
!ulbstantial relief to Chinese industry and communications.)
THE AMERICAS
9. BOLIVIA: Treaty with Argentina in final stages�US Ambassador Cooper
reports that the Argentine-go-Milan eio-nOmic-ifeaty is in the final stages
of negotiation and will probably provide for (a) the sale of 8,000 tons of
tin annually to Argentina, leaving a balance of 12,000 tons for purchase
by the US; (b) a customs union; and (c) a loan agreement substantially as
provided in the original draft of the treaty (see Daily Summary of 21 March.
item 8).
10. PARAGUAY: Brazil refuses aid to Government--The State Department
has been informed by the Brazilian Ambassador that Brazil has refused
Paraguay's request for arms but has offered to join with neighboring
countries in mediating the Paraguayan civil war, provided the contending
parties desire mediation and agree to elections.
11. PERU: Na seeks US i ment--US Ambassador Cooper recommends
that Peru be permitted lo use Piiuvian currency to purchase surplus US
naval vessels for the US-trained Peruvian Navy which, in Cooper's
opinion, is influential in maintaining friendly relations with the US. (The
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Foreign Liquidation Commission has ruled that US combat eauipment
,vmst be naid for in US dollars. Peru is short of foreign exchange.)
.138 unable to supply Peru's wheat and fat needs--The State Deart-
ient has informed US Ambassador Cooper that the ti� cannot male Peru
:I, long-term commitment for the supply of wheat, fats and other items
Irecitided in the proposed Argentine-Peruvian commercial agreement (see
siailly Summary of 24 March, item 6). It has instructed Cooper to state
s's.51. a personal basis to the Peruvian Government that he assumes that
17,17711 has investigated Argentina's ability to meet its heavy wheat corn-
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GENERAL
25 MAR 1947
337
SC Border Commission will not leave team in Salonika--Mark Ethridge
in Salonika reports that, as the result of opposition by the Soviet and
Polish delegates, the SC Investigating Commission has abandoned the
idea of leaving a team in Salonika while the Commission is writing its
report in Geneva (see Daily Summary of 15 March, item 1). Supporters
of the idea, including the US and UK members, decided not to press the
matter as they feel that a showdown at this time (in the absence of full
evidence and documentation) might seriously jeopardize the establish-
ment by the SC of a semi-permanent border commission.
2. USSR will not participate in Trusteeship Council session--Krasilnikov,
to the Soviet Dilegafion to the Security CounciVhas informed
the US Delegation in New York that the USSR will neither name a repre-
sentative to nor participate in the first Trusteeship Council session
which opens on 26 March. He based this action on the objections raised
by the USSR in the General Assembly that approval of the eight trustee-
sirdp agreements was not in accordance with the UN Charter.
2. Huxley_unlikely to check Communist infiltration of UNESCO--US Embassy
London reports that UK Foreign Office official Gladwyn Jebb feels that
it might be "fruitless" to expect assistance from Julian Huxley, Director
General of UNESCO (United Nations Educational, Scientific and Cultural
Organization), "in efforts to prevent Communist infiltration into UNESCO."
US Ambassador Smith in Moscow finds it "disturbing" that the
Communist infiltration of UNESCO has "progressed so far" and suggests
that the Executive Board of UNESCO has either been "caught napping"
or is "strongly influenced by elements not unreceptive" to Communist
Ideology.
EUROPE
4. GREECE: PossibiliM_of resignations in Cabinet--US Embassy Athens
has been informed by a Greek deputy and former minister that two influ-
ential centrist Cabinet Ministers, Venizelos and Kanellopoulos, are seri-
ously considering resigning, if the Government fails to prosecute "re-
lentlessly" all those responsible for recent political lynchings in the
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Peloponnesus of leftists by rightists. The Embassy adds that both Minis-
ters realize that their resignations at this time would precipitate a crisis
and impair Army morale; but they consider they will have to resign even-
tually because of the "selfish party-line being pursued by Tsaldaris."
Anti-British terrorist cam_Taign_plarmed for Cyprus--A well-
placed CIG source in Greece reports that EKE (Greek Communist Party)
Is organizing a terrorist movement against the British in Cyprus simi-
lar to that in Palestine, and for this purpose has obtained the cooperation
of Jewish terrorists and the collaboration of the leading Greek Commu-
nist organization in Cyprus.
(CIG Comment: Such a move would be in line with Greek Commu-
nist policy which seeks (a) to present the Party as nationalistic by appear-
ing to support Greek territorial claims; and (b) to demonstrate that the
Communist movement in Greece is widespread.)
5. GERMANY: Smith warsIssea.inst merger of SED with KPD--US Ambassa-
dor Smith in Moscow comments that the proposed merger of the Soviet-
led German Socialist Unity Party (SED) with the Communist Party in the
western Zones appears to be a "significant step" in the Soviet pr
for extending the political influence of the USSR into those Zones (
Daily Summary of 17 March, item 3). Smith states that "not to take
active measures to resist this tactic would seem to me a failure in re-
spect to our responsibility to protect democratic elements in the US
Zone." According to Smith, the US would "play right into the hands"
of the USSR, if it permitted this merger without "exacting substantial
concrete reciprocal concessions."
6. AUSTRIA: Winter economic crisis virtually ended--US Legation Vienna
reports that Austria's --irs�vinter economic crisis has virtually ended" as
a result of (a) the spring thaws which have increased the supply of hydro-
electric power; and (b) the larger, deliveries of coal from the Ruhr.
7. BELGIUM: Apparent shift in Communist tactics�US Ambassador Kirk
reports that Belgian trade union leaders believe that the action of the
Belgian Communists (in refraining from participation in Speak's coali-
tion Government; see Daily Summary of 19 March, item 3) indicates
"the beginning of a swing in Moscow's tactics from seeking Communist
objectives through participation in western European governments, to
seeking them through militant trade union action."
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FAR EAST
8. CHINA: Nationalist capture Yenan termed mlitic.a.pi fficant--
-qS Ambassador Stuart believes that the recent capture of enan repre;-
sent.s a "significant psychological and political victory" for the Central
rJovernment that substantially meets the Government's need for "a
striking victory to bolster its position." Stuart believes that an earlier
decision not to attack Team was changed because capture of the Chinese
Communist capital appeared necessary both to bolster the prestige of
the Government (and especially of the Nationalist Chief of Staff) and to
frustrate any Soviet move at the Moscow Conference to accord recogni- .
tion to the Chinese Communist regime. Militarily, Stuart indicates, the
capture of Yenan does not represent a substantial victory. Nationalist
lines are now over-extended and logistic support will be difficult. In
keeping with their usual tactics, the Communists had virtually evacuated
'Zeman at the time of the Nationalist drive, and offered little resistance.
Soviets want only_Nationalispets" Datren--US Consul
General Dairen, in a further report on Soviet plans to limit Nationalist
oontrol in the Dairen area (see Daily Summary of 21 March, Item 6),
states that the local Soviet Consul sees no bests in the Sino-Soviet
Treaty for Nationalist troops even to enter Dairen. In the Consul Gen-
eral's opinion, the Soviets obviously want only "a handful of Nationalist
officials" to carry on Dairen's administrative functions, without the
backing of troops or even Chinese police. Such arrangements, he con-
eludes, would place the Nationalists in a position similar to that of "the
present puppets" in Dairen.
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t 38
GENERAL
24 MAR 1947
336
I. Soviet members of SC Border Commission abandon stallthrOactics--
Mark Ethridge reports from Salonika that, since President Truman's
speech, the Soviet and Polish members of the SC Investigating Com-
mission have abandoned their customary stalling tactics (see Daily Sum-
mary of 12 March, item 7). Ethridge states that they have agreed to
every proposal that would shorten the Commission's work, and have
"facilitated acceptance by the Commission" of the schedule under which
it will start writing its report in Geneva on 7 April (see Daily Summary
of 15 March, item 1).
2. et penetration of Sinisirs pattern --USEmbassy
Moscow, in an analysis of Soviet penetrations northwestern
province of Sinkiang, comments that the Soviet strategy in that area is
modeled on the Iranian-Azerbaijan pattern of 1946. Current Soviet tac-
tics call for (a) consolidation of the influence of native puppets along the
Soviet-Sinkiang border; and (b) political manipulation at Tihwa to under-
mine the authority of the provincial government. Simultaneously, the
USSR is using economic tactics (similar to pressure for oil concessions
in Iran) to insure economic penetration. The Embassy concludes that
these combined pressures will result in absorption of Sinkiang into the
Soviet orbit unless drastic counter-pressures, such as those used to
regain Azerbaijan, are applied.
EUROPE
3. FRANCE: Dubious egucl_s of Ramadier Government--US Ambassador
Caffery reports that independent observers agree that the crisis in
the Ramadier Government has not been solved but "merely made perma-
nent." In Caffery's opinion, the future prospects of the Ramadier Gov-
ernment appear "extremely dubious," although it may hold together
through the Paster recess from 1-24 April.
Possible deal with USSR on Saar--US Ambassador Caffery re-
ports that he has been told "in confidence" by a "reliable" Foreign
Office official that when Bidault brought up the question of the Sari in
his recent meeting with Stalin, the latter stated that the USSR would
"go along with the French on the Saar business," if the French would
go along with the USSR on the question of reparations, especially out of
current production.
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4. ITALY: ineiftsatification ma a_w_aiLatiot by US exia --Foreign
Minister Sforza has to'tYAnibassafliiiiii dime Is a "growing
feeling" that the US Senate will either refuse to ratify the Italian Treaty
or will insist upon modifications favorable to Italy.; Sforza says that
while the De Gasperi Government is "determined' to ratify the Treaty,
it may be necessary to await action by the US Senate before pressing the
Constituent Assembly to take favorable action.
FAR EAST
5. CHINA: Discrimination akainst foreip business.wIrent--The US
Commercial Attache Shanghai believes that there is jtislification for
many of the recent US press charges that the Chinese Government, in
carrying out its foreign exchange and foreign trade regulations, is favor-
ing its own business and purchasing agencies as well as quasi-govern-
mental companies operated by high Chinese financial authorities. He
feels that there is considerable evidence of a definite nationalistic trend
toward "elimination of the foreigner" and that present Chinese tactics
"do not augur well for the permanence of US business in China."
KMT factions envg.:Id in "stimalq Jor.mer"--US Ambassador
Stuart reports that the'imotieriii the current session of the Central
Executive Committee (ruling body of the Kuomintang Party) appears to
be "a struggle for power and position" among various nrr factions,
principally between the right-wing "CC Clique" and the more liberal
"Political Science Group." Several "well-placed Chinese" believe that
the CC Clique will gain control of the Party. Stuart adds, however, that
much depends on how Chiang Kai-shek will "swing his influence" in
balancing one faction against another.
THE AMERICAS
6. PERU:goinnami,lisspred ti_qtm..wit_h_Aawntina--US Ambassador
Cooper reports his opinion that Peru would prefer to deal with the US
rather than to accept the proposed Argentine commercial treaty terms
(see Daily Summary of 17 March, item 10), provided the US can meet
Peru's requirements for fats, vegetable oils, and wheat. As the treaty
terms "appear contrary to some American interests in Peru," Cooper
recommends that the US assure Peru of such assistance.
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OAP
EUROPE
22 MAII 1947
335
FRANCE: MRP showdown with Communists probable--US Ambassador
eery reports that Albert Gortais, head of of the M1P "brain trust;'
.ehose opinions have generally coincided with those of the party's major-
4ty, has declared privately that the MRP now realizes that it is impossible
to postpone a "reckoning with the Communists," and that current develop-
vtents 'undoubtedly herald the crisis or series of crises which we have
-41 been expecting." Gortais added that entering into a new Government
with the Communists would be merely "abject abdication" in the face of
"Cernmunist blackmail;" a statement that Caffery considers may fore-
shadow a change in the MRP's policy of appeasement toward the Com-
munists.
According to Gortais, the MRP executive committee considers
that an "ideal solution" would be a broad coalition embracing Socialists,
the MRP., and the Left Rally (primarily Radical Socialists); but Gortais
iears that it would not be possible at this time to obtain Socialist partici-
pation in a coalition cabinet which does not include the Communists,
Though this might have been possible "in a few more months."
BULGARIA: Soviet treopes believedpemat_ing,for vithdeawal--General
1.0t6oertson, US Delegate Allied' Control Commission Sofia, reports that
the movement of some Soviet forces from Sofia appears to have begun,
but the direction and ultimate destination are not yet known. Robertson
adds that, while these troops may possibly be destined for maneuvers
or summer camps, general indications point to preparations for a with-
deewal of Soviet forces from Bulgaria.
Motives behind monetary reforms--US Representative Barnes
reports that the Governmentli new stringent control of all means of
payment appears to be the first major step to complete the Sovietization
of the Bulgarian economy. Barnes notes that the effect of the new mone-
tary reforms apparently is to withhold means of livelihood from all ex-
ceut wage earners, agricultural producers,and salaried groups. For
many Bulgarians, Barnes believes, life will in fact become a battle for
existence. Several well-informed business men have expressed the
belief to Barnes that the monetary reform presages actual plans for an
early realization of a South Slav Federation as well as an increased
late of socialization. These business sources ascribe the suddenness
or the recent bank note exchange and the stringency of new monetary
regulations to complaints by Tito, in connection with the often-rumored
Federation, that Bulgaria is lagging behind in the socialization of its
economy. poctui?ent Epp �.C6-e3
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3 RUMANIA: Success of US food relief in Moldavia�General Schuyler,
'US Delegate ACC Bucharest-. ofiThils return rijori inseection trip
through the famine areas of Moldavia, reports that the US emergency
load relief effort in that region has been "ae unnualffied success."
3cheyler reports that the food (a) was distributed wieldy, efficiently
and impartially; (b) saved many thousands who woald otherwise have
=lied of starvation; and (c) evoked deep appreciation to the US among
the neople and local officials. Schuyler attributes the success of such
n operation In a Soviet-occupied area (a) to the fact that it was carried
out so swiftly that the Communist Party could not organize effective
eabotage; (b) to the presence in the field of many US observers who gave
necessary support to local Red Cross authorities in the face of Cozn-
efitunist interference; and (c) to the recruitment by the Rumanian Red
Cross of recently purged Rumanian Army Officers to plan the operation
in detail and supervise its execution.
4. HUNGARY: US notes _strengthen democratic elements�US Minister
feehoenfeld in Budapest believes that the US notesof 5 March and
17 March concerning Soviet interference in the Hungarian political
situation are achieving their intended purposes of supoorting democratic
development as opposed to Soviet-supported Communist aggression, and
al clarifying the US position with regard to such aggression.
Schoenfeld believes that the US holds the initiative in this ex-
change and. in order to strengthen further the US position; recommends
a reply along the following lines to General Sviridov's rejection of the
ITS notes: (a) the US regrets Soviet refusal to accept US proposals; (b)
before taking any further action in the matter, the US wishes to observe
developments in Hungary during the immediate future; and (c) in the
interim, the US renews Its request embodied in previous communications
to the Soviet Government that the Soviet authorities in Budapest be in-
atructed to refrain from unilateral action in matters concerning Hungarian
internal political affairs.
Prime Minister Nagy has informed Schoenfeld that US action to
date has resulted in an unpublicized agreement of the coalition parties
which includes (a) cessation of terrorism against non-Leftists; (b) prohi-
Litton of efforts by responsible Government officials to intimidate civil
service subordinates into changing their party affiliations; (c) formulation
of a joint stand toward political groups outside the coalition; and (d) agree-
ment to support an increase in the Smallholders Party's allotment of civil
service positions. Nagy believes that this agreement will probably produce
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Naiitical truce which he hopes can be extended until withdrawal of the
oiCcupation forces. If this can be accomplished, Nagy feels that Hungary
will have been saved from the fate of Poland, Rumania, Bulgaria, and
YuFoslavia.
Soviet trooLstrength estimated at 40,000--On the basis of recent
der; reases in Soviet occupation troops and the closing of two or three
lame ground and air force schools, General Weems, US Delegate Allied
Control Commission Budapest, believes that the estimated total of Soviet
forges in Hungary can be reduced from 55,000 to 40,000.
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7TTROPE
MAR 1947
334
� FRANCE: Government eripte may cause showdown with Comemmiste:�
According to US Ambassador Caffery, a prominent Socialist beputy has
"ted privately" that Premier Ramadier "now feels that the moment
may be opportune to abandon the defensive and attack the Communists."
tioteever, R.amadier is also reported to fear opposition from provincial
delegates who have not realized the "vital significance" of develop-
ments it the past few days. Caffery comments that in view of the world
situation and the feeling that the tide has finally turned against the
Communists in France, the Kremlin may have instructed the Commu-
nists to provoke this crisis and to withdraw from the Government.
Ceifery believes that the fall of the Ramadier Government, "whether it
ilecurs 'within a few hours or a few months," will initiate a period of
"real government crisis which will determine for a long time to come
the political orientation of France" (see Weekly Summary of 21 March,
page 2),
Views on Communist defeat .for eresident of Council�Caffery
:tlo reports that the election of Radical-Socialist Gaston Monnerville as
President of the Council of the Republic is "another step" in the efforts
.14 anti-Cemmunist elements to neutralize the Influence of the C:011117111-
alst Party (see Daily Summary of 17 March, item 2). Caffery adds that
he has been told by 'leaders of the left-center, center" and moderate
,ht" that President Truman's message to Congress was a "factor of
major importance" in Monnervilleis defeat of the Communist candidate.
te.)
. SWEDEN: US action urged to reverse eastward trade trend�US Minister
Dreyfus reports that the Government's recent economic measures (in-
eluding restrictions on imports from the US and new trade commitments
with Poland), have caused the Opposition to demand new elections. While
Dreyfus does not believe new elections will take place at this time, he
emphasizes that this is a most propitious moment for the US to oppose
the trend of Sweden's policy toward the East by suspending export li-
censes for Sweden pending clarification of the Government's policies and
intentions.
te HUNGARY: Forced confessions in conspiracy_triai�US Minister Schoen-
feld has been reliably informed that the confessions of two of the defend-
ents in the current conspiracy trials were extracted under duress and as
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a result of "violent methods" which they could not withstand. One
defendant expects to be forced to make further statements clearly in-
volving US citizens in the conspiracy. Schoenfeld adds that several
of the defendants who have not yet been brought to trial are reported
to be held by the Soviet authorities.
4. RUMANIA: Threatened milt in Groza Goverment�Foreign Minister
Tatarescu--head of the Dissident Liberal Party, which has 18% of the
seats in Parliament and 22% of the Cabinet nosts�has told US Repre-
sentative Berry that, if the Communists insist on passage of the in-
dustrial offices bill (see Weekly Summary of 14 March, page Ii), he will
lead his party to "break openly with the Government Bloc." l'atarescu
believes that the Communists would modify their stand before pushing
him to this extreme. Berry comments that "if any group has to give
In. it will be Tatarescu."
PAR EAST
5. FRENCH INDOCHINA: Intentions of new High Commissioner�Emile
Bollaert, newly appointed High Commissioner for Indochina, has assured
US Ambassador Caffery in Paris that he is well aware that any attempt
to return to previous colonial practice is inconceivable, and that he
leaves for his new post "with the determined intention of carrying out
all promises hitherto made by the French Government in regard to the
independence of various countries within the French Union." Bollaert
added that he intends to come to an agreement with "whatever authori-
ties really represent the people of Indochina."
6. CHINA: Soviet attitude obstructs Nationalists control of Dair_e_R�US
Consul Dairen reported on 15 March that local Soviet officials will per-
mit Chinese Nationalist troop activities only in Dairen City. The USSR
apparently interprets the Sino-Soviet agreement on Port Arthur to mean
that it has sole responsibility for the defense of the broad area surround-
ing Dairen and Port Arthur. The Consul believes, moreover, that when
the Nationalists enter Dairen, the Soviets will attempt to induce the
Central Government to retain the existing framework of police and civil
administration, and will protect known Communists and aid in their
escape.
(CIG Comment: Soviet limitations on the employment of Nation-
alist troops in southern Kwantung Peninsula would greatly impede Nation-
alist efforts to clear the area around Dairen of Chinese Communists
(see Daily Summary of 20 March, item 3).
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Nationalist losses in Shantung reported not critical�In a com-
ment on the reportedly grave military situation in Shantung (see Daily
Summary of 18 March, item 5), US Ambassador Stuart states that the
military situation there cannot be regarded as critical. Stuart be-
lieves that Nationalist losses in the recent fighting, though serious,
probably did not exceed five divisions (only one of which was US-
equipped).
THE AMERICAS
8. BOLIVIA: President favors study_9! A entine ct--US Ambassador
Flack reports, in connection with the e-Bolivian commercial
treaty now awaiting ratification by the two Governments, that a Boliv-
ian Cabinet committee has made "substantial" changes in the draft
terms which the Argentines may find unacceptable; and that President
Rertzog, who has hitherto supported the treaty, now favors further
study because "national and international interests" have directed his
attention to its "far-reaching possibilities."
(CIG Comment: In view of Bolivia's desperate economic situa-
tion, and in the absence of comparable assistance from some country
able to match Argentina's resources, Bolivia probably will not press
its objections to the present draft to the point of endangering the treaty.)
9. PARAGUAY: Dissident army officers arrested.
has arrested six US-trained
army officers who "refused to fight against their brother officers."
The MA comments that the incident is a further indication of "break-
down within the armed forces."
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GENERAL
2o MAR 1947
333
1. US urze early UN consideration of Palestinob --The State De-
partment has informed US Embassy London that the US would like to
see UN give "fundamental consideration" to the Palestine problem "as
soon as possible," and to do so in such a way as to avoid any question
of the legality of UN consideration of the problem. The Department at
present favors calling a special, brief session of the General Assembly
for the purpose of creating an ad hoc committee which would report to
the General Assembly at its scheduled session in September 1947.
EUROPE
FAR EAST
3. CRINA: NationalittuaL_tan Jo take over administration of Dairen--For-
eign Minister Wang Shih-chdeh has inform.-- r Nanking that
the Chinese Government, pursuant to the Soviet proposals on Dairen
(see Daily Summary of 11 March, item 4), will undertake military opera-
tions to clear the 30-40,000 Communists who are near Dairen and will
land officials and police at the port without prior consultation with the
USSR. Wang also observed that the Soviet proposal was not only timed
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for the opening of the Moscow conference, but was delivered at a time
when the Nationalists cannot spare troops from their operations in north
central Manchuria to clear the Communists from the Dairen area.
Cl_Amg_s_ekortedl unwilling to antagonize USSR�The Embassy
also has berm informed that Chiang Kai-shek ordered his Minister of
Education to have the recent anti-Soviet demonstration by Nanking Uni-
versity students held to a minimum because he "did not desire at this
time to permit any steps that might antagonize the Soviet Union." (Chiang
Is also reported to have refused to accept the resignation of his Foreign
Minister, who has been under violent attack by extreme Kuomintang right-
Ms for failing to take a firm stand against the USSR.)
KOREA: rop_d_s_teo_kel. s(jtz._._srobious lem to unification�The US
Economic Adviser in Korea believes that Korea's food shortage might
present a serious problem in any unification of the two zones of occupa-
tion. The Adviser adds that the food situation is now more acute in the
Soviet than in the US Zone, largely because the USSR has requisitioned
sizeable quantities of indigenous foodstuffs for its own use and uses dis-
criminatory rationing while the US is imvorting substantial amounts of
cereals to meet the shortages in its zone.
TIM AMERICAS
. COLOMBIA: Possible threat to Government stabilft�US Ambassador
Wiley reports that (a) the US-owned Tropical Oil Company, Colombia's
sole supplier of petroleum products, may soon be unable, because of
transportation difficulties, to supply the country's urban centers with
gasoline; and (b) President �spina believes the resultant shortage will
precipitate a popular uprising that will enable Eliecer Caftan, leader of
the left-wing Liberals, to seize power.
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EUROPE
1 9 MAR 1947
332
1. RUMANIA: Maniu wishes to overthrow Government�Mu Maniu, head
of the National PeasantParty and recognized leader of the Opposition
o the Groza Government, has told US Representative Berry that his
Party desires to "overthrow" the present Government. Mania said
;hat his plan, which was "not revolution but might entail bloodshed,"
,sould be successful only with the concurrence of "the people, the King
and the Great Powers.� Maniu added that the King and the people were
Willinf and that hei destirPri tA t'�rIi1n tila Hitntla ref this TiC: a riff Mt
Lborpsition to Government--Berry also reports that Indus -
trkal workers are suffering from great economic misery under infla-
ionary conditions," are showing increased "open hostility toward the
mmunists," and have forced the Government to meet their demands
r increased wages. According to Berry, the revised Communist
,trategy will be to permit inflation to continue for the next few months
-6nti1 a permanent stabilization plan is prepared which would give the
Dromunists complete control of the country's economy.
Government reaction to US food relief�Rumantan Foreign Minis- -
ter Tatarescu has thanked US Representative Berry for US aid to relieve
amine conditions in Moldavia. but added that "of course we could have
,-.ilanRged from our own resources." Berry adds that the official Govern-
cnt will be that it has the means to solve its own Problems but
ierates US charitable action in the interest of friendly relations be-
.5en the two countries.
litINGARY: Soviets rrohibit publication of US note--A Hungarian Foreign
Office official has told US Minister Schoenfeld that the Hungarian Govern-
ment, upon verbal orders from the Soviet military authorities, has been
-iorced to rescind its order permitting publication of the second US note
which protested Soviet interference in Hungary's recent political crisis
ee Daily Summary of 17 March, item 1).
BELGIUM: Two leading Parties may form coalition government�US
Embassy Brussels reports that former Premier Paul-Henri SpiCak has
"oractically completed" agreement between the Socialist and Christian
Socialist Parties for the formation of a bi--partisan coalition govern-
went. The Embassy adds that the Communists have refused to partici-
pate in the government in spite of their recently announced intention to
do so. Document No. 6 1�
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(CIG Comment: Such an agreement would mean that, for the first
time since the liberation, Belgium's two leading Parties have been able
to join in a coalition government.)
"REAR EAST-AFRICA
4.. IRAN: Soviets e ys interests in Iran Airways -Ambassador
Allen has been informed by Director Koozbos of Iran Airways that Soviet
sriterests have offered to purchase the 10% stock interest held byTWA
plus an additional 15% and "to provide all necessary technical super-
vision and maintenance" (see Daily Summary of 18 March. item 41_
5. EGYPT: Possibility of im rovement in :lo E wrtian relations�US
Ambassacgr ck cola' ors tha e re
.n o 'Jr ; uddleston
as Governor General of the Sudan and the appointment of Sir Robert Howe
as his successor imply "policy shifts designed to improve Anglo-Egyptian
relations." Huddleston has "resolutely" stood for the non-extension of
Egyptian rule to the Sudan and for Sudanese self -determinatiort, while
Howe is a Foreign Office official without Sudan background or experience.
FAR EAST
6. PHILIPPINES: Trade agreement with aan o ed--US Ambassador
McNutt reports e pp e i �er- ecre of Foreign Affairs
has stated that the Philippines is willing to make ad hoc purchases from
Japan but will not make any general trade agreement with the Japanese
Government or with SCAP acting as representative of the Japanese.
THE AMERICAS
PARAGUAY: US refuses aid to President Morinig9.�The State Depart-
ment has instructed US Embassy Asuncion to inform President Morinigo
that compliance with his request for US planes and tanks to be used
against the Concepcion rebels (see Daily Summary of 18 March, item 8)
would be "wholly inconsistent" with US Hemisphere commitments.
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liS Charge Trueblood reports from Asuncion that (a) the Para-
guayan Government has also requested aid from Brazil and Argentina,
on the grounds that the rebellion is "Communist-directed" and thus
"dangerous to Hemisphere security," and (b) that the Brazilian Charge
has recommended favorable action on the request to his Government.
Trueblood adds that the Govecrunent, which has already seen eight a
Its pliCtis and four of its planes go over to the rebels, Is anlikely to
order further planes off the ground.
8. BOLIVIA: Brazil offers financial --The' Brazilian Ambassador has
Wormed Unmbaseador a) his Government is offering
financial assiebnce that would "free Bolivia from dependence" on the
proposals of the Argentine Economic Missiorg and (b) Brazil has In-
formed Bolivia that it views with disfavor the clauses of the Argentine-
Boltvisn agreement that would result in the "entry of new influences"
in the Amazon regkin.
(CIG Commend: This is apparertly the first move by Brazil to
counteract the current Argentine trade offensive. In view of Brazes
foreign exchange position, it is unlikely that it can outbid Argentina in
negotiations of this kind.)
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38
GENERAL
18 MAR 1947
331
THE C.I.A. HAS NO OBJECTION
TO THE DECLASSIFICATION Olt
THIS DOCUMENT.
1. UK bi.sive full su_ppla_t to US opitctives in Greece and Turkey�US Am-
bassador Douglas recommended to top British officrais thaFthe UK do
"whatever was possible" to show full support of US objectives in
Greece and Turkey and avoid any action which might allow the Inference
that the UK had no further interest in the latter countries. In reply to
Douglas' specific proposals, Attlee declared that (a) the Cabinet proba-
bly would agree to the retention in Greece of the British Military Mis-
sion; (b) all available information on Turkish military needs would be
given the US at once; and (c) funds provided for Greek relief after
31 March and until a US financial commitment becomes effective would
be extended as a gift.
2. Syria timed not to refer Hata uesii_tim_a to UN--The State Department
has instructed US Charge Moose in Damascus to urge the Syrian Govern-
ment not to refer the Hatay problem to the UN as a result of Turkey's
allegedly persistent refusal to enter into direct negotiations (see Daily
Summary of 1 March, item 1). The Department's position is that direct
negotiations between Syria and Turkey could produce no satisfactory
settlement at this time, and that submission of the problem to the UN
would lead the USSR to assert its claims to the eastern provinces of
Turkey.
EUROPE
3. GREECE: "Broad results" of President Truman's smsk--US Ambassa-
dor MacVeagh reports that the "broad results" in Greece of President
Truman's speech include (a) a new tendency toward unity as shown by the
striking similarity of statements by all political leaders except the Com-
munists; (b) strengthening of the drachma in relation to the gold sover-
eign; (c) immediate resumption of real estate transactions and an in-
crease in realty values resulting from the decision of owners to retain
property in Greece; and (d) encouragement of Government forces and
undermining of bandit morale. MacVeagh notes a general reaction
among business circles that a clear assurance of political security is
more important to Greece's recovery than economic aid.
Document No.
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NEAR EAST-AFRICA
4. IRAN: US participation in Iranamain u ed--US Ambassador Allen
reports that negotiations are under way thbtain local financial support
for Iranian Airways and believes the situation can be saved if TWA will
grant a few weeks extension in its schedule of withdrawing personnel.
Allen has emphasized his view that it is "definitely in the US interest"
for some US company to continue to operate the Iranian airline "because
of the important political and strategic considerations involved" (see
Daily Summary of 11 March, item 3).
Reect_jL.oviet oil concession believed likel --US Ambassador
Allen reports that Prime Minister Qavam now believes the new Majlis
(parliament) will probably not consent to any Soviet oil concession in
Iran. According to Allen, Qavam is therefore endeavoring to find means
of minimizing difficulties with the USSR when the concession is refused.
FAR EAST
5. CHINA: Chiang worried over Nationalist militkry_ situ_g_ion- -A source
close to the Generalissimo has informed US Consulate General Shanghai
that Chiang is extremely worried over the military situation in Shantung
Province and that the recent developments in Formosa are a source of
irritation. According to the Consulate, the source "confirmed" reports
that, in recent Shantung operations, seven US -trained and equipped Nation-
alist divisions were taken over almost intact by the Communists and that
two others were similarly lost. The source did not see any possibility
that the Nationalists would be able to liquidate Communist-held areas in
Shantxmg.
(CIG Comment: Reports of such Nationalist losses first came
from Chinese Communist sources and were later admitted by the Nation-
alist Chief of Staff. These losses represent a major setback for the
Nationalists in the very theater of conflict where they had the greatest
hopes of winning a quick and conclusive victory.)
THE AMERICAS
6. ARGENTINA: Soviet envo com lains of Peron's olicies--The Argentine
Foreign Minister has told US Ambassa � or Messersmith t the Soviet
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Ambassador has complained about (a) the fact that Argentina is consider -
lug taldng DPs from the US and UK Zones in Germany and has not ap-
proached the USSR regarding DPs in the Soviet Zone; and (b) Peron 's
recent statements regarding Communism. The Minister says he told
the Soviet Ambassador that it was for Argentina to decide where to seek
Immigrants and what to say or do with respect to the Communist Party
In Argentina, and that he planned to inform Messersmith of their conver-
sation.
3.3(h)(2) Navy negotiating for cruiser from British firm-
argen-
unit Lei negouaung, limn a local urm representing Vickers, for the pur-
chase of a cruiser.
7. COLOMBIA: Flection returns--US Embassy Bogota reports that early
returns from the 18 March congressional elections indicate (a) President
Ospina's Conservative Party has gained strength in both houses and may
control the Senate; (b) the disunited Liberal Party -- which dominated
Colombian politics for many years prior to its defeat in last year's presi-
dential election -- retained control of the lower house; and (c) the rising
left-wing Liberal leader, Eliecer Gaitan, has notably increased his
popular following. The Communist vote was smaller than in 1945.
8. PARAGUAY! Government seeks US arms--US Charge Trueblood reports
that President Morinigetraying the growing weakness of his position,"
has requested US planes, possibly pilots, and tanks to put down the Con-
cepcion revolt. He adds that, according to persistent rumors, the Cavalry
and Navy, which have so far remained loyal, may now throw Morinigo out
and negotiate a. settlement with the rebel group in Concepcion.
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GENERAL
1 7 MAR 1947
330
THE C.I.A. HAS NO OBJECTION
DECLASSIFICATION Or
THIS DOCUMENT.
No. C.) 0 9 ---
1. US reply to Soviet note oa.../1--The State Department, in reply to
the 8 March refusal by the Soviet Chairman of the Allied Control Council
to allow tripartite investigation of the current conspiracy case (see Daily
Summary of 10 March, item 1), denies that such an investigation would
(a) "improperly impair the legal rights of the Hungarian courts"; or (b)
constitute "an infringement on the rights of the Soviets . . to take
reasonable measures for the maintenance of the security of the occupa-
tion forces." The note adds that, under the terms of the Yalta Agree-
ment "the need for such consultation and investigation becomes all the
more imperative" because of US -Soviet disagreement on a matter of
such basic importance to Hungary.
EUROPE
2. FRANCE: Efforts to neutralize Communist influence�US Ambassador
Caffery reports that for the first time since the liberation," elements
of the Center and moderate Left are making "significant efforts" (a)
to "neutralize" Communist infiltration into the Government, and (b)
"even to eject" Communists already in the Government. Caffery adds
that the political leaders who have been carrying on such efforts say
President Truman's address will do "more than anything" to encourage
the liberal elements who, because they feared France would be aban-
doned, have "lacked the will and courage" to resist Communism.
Caffery also comments that Communist maneuvers in the Na-
tional Assembly (which reached a climax on 14 March when Vice Premier
Thorez, in the midst of the uproar occasioned by the debate on Indochina,
temporarily left the government benches and took his old seat among the
Communist Deputies) may constitute the "first warning reaction to
Internal anti-Communist trends." Caffery adds that these Communist
tactics "may not be unconnected with President Truman's speech to
Congress" and may also be designed as a "reminder" to Foreign
Minister Bidault "to keep him in line."
3. GERMANY: S....siv_iets_ILanl SEI) to zones- -Acting US
Political Adviser Heath reports that "leaders of the German Communist
Party in Hesse" have asked the local Military Government how the Party
can change its "identity and name" to that of the Socialist Unity Party
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(SED). Should the change be allowed, Heath comments, it would open
the way for extension throughout Germany of the Soviet led SED. Reath
believes that the position taken by Military Government on this request
"may well be one of the major decisions yet made regarding political
parties," because it now appears that the Communists have decided to
try to spread the SED immediately to the western zones, "presumably
with the objective of presenting the Council of Foreign Ministers with
the fait accompli" of a national SED capable of playing a major role in
the establishment of any central agencies or provisional government.
4. RUMANIA: Arraember_s--US Delegate ACC reports
that the Groza Governraent has arrested several hundred members of
the three leading Opposition parties and that the arrests are "continu-
ing hourly." US Representative Berry comments that the arrests (a)
were prompted by alleged instructions from Moscow to the Rumanian
Communists to take firmer measures "to forestall the growing Govern-
ment unpopularity;" and (b) reflect the Government's recently announced
policy of coercion rather than reconciliation toward the Opposition.
Berry believes that the Communists may justify the arrests by accusing
the Opposition of "reactionary conspiracy" against the Government.
5. BULGARIA: Rp.mx_ted r_m_Liellt for US food shipments�According to US
Representative Barnes, the Bulgarian Minister of Commerce has recom-
mended the Bulgarian representative in Washington request allocation
by the US of 50,000 tons of corn and 30,000 tons of wheat for shipment
to Bulgaria not later than May. Barnes is "by no means convinced" of
the need for these shipments, and believes that if a food crisis actually
develops its cause will be "primarily political."
6. YUGOSLAVIA: US position on food relief- -The State Department plans
to inform the Yugoslav Government, subject to Embassy Belgrade s
comments, that (a) as the Yugoslav need for free relief is not as great
as that of other devastated countries, no relief money appropriated by
Congress will be utilized for Yugoslavia; and (b) several circumstances
make impossible the allocation before May or June of any US grain to
Yugoslavia, either through UNRRA or for direct purchase by the Yugo-
slav Government (see Daily Summary of 11 March, item 1).
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7. TUMMY: Need for economic develo ment stressed--US Ambassador
Wilson reports that many Turkish offtcls,T-TaFigtc u President Inonu,
have expressed warm appreciation of President Truman's speech re-
garding aid to Turkey and Greece. As regards the form which such aid
to Turkey might take, Secretary General Erkin of the Foreign Office
said the Turkish Government earnestly hopes that credits for economic
projects will be included, as economic development would help solve the
general problem of national defense.
8. IRAQ: FBI inve_st ma so.. dize US-Ira. i relations --US Am-
bassador Wadsworth reports that recent notably mprov local relation-
ships" between Iraq and the US -- which resulted from the elevation of
the US Legation to an Embassy -- will be jeopardized by exaggerated
press reports of the FBI search of the Washington Arab Office, unless
prompt and frank explanations are forthcoming from the State Depart-
ment.
THE AMERICAS .
9. PARAGUAY: Revolt apyeads,- that the
defection of the garrison in the Chaco region, now confirmed, gives the
rebels control of a large part of the country and its armed forces.
IQ. PERU: 173.s...,...itine t_ltp..r.tui.gotiatkms--US Ambassador Cooper
reports that the Argentine mission, now in Lima negotiating an economic
treaty (see Daily Summary of 3 March, item 8), is visibly impatient to
reach "some sort of agreement," and Peru therefore considers itself
to be in a strong bargaining position.
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38 329
THE C.I.A. HAS NO OBJECTION
TO THE DECLASSIFICATION Olt
THIS DOCUMENT.
15 MAR 1947
GENERAL
Eo.
1. US opposed to Balkan non-aggression Dact--The State Department
has informed Mark Ethridge in Salonika that it does not believe a
non -aggression pact would serve any useful purpose or be an impor -
taut stabilizing factor in the Balkans i(see Daily Summary of 11 March,
item 2.) The Department does, however, strongly favor the Sc Inves-
tigating Commission's leaving an eleven-man team in the area while
the Commission is drafting its final report in Geneva and subsequently
while the Sc is considering the report. (The Commission expects to
start drafting its report about 10 April.)
EUROPE
2. UK: Labor dissension over economic crisis�US Embassy London
reports that the Parliamentary Labor Party held a private meeting
Just before the recent Commons debate on the economic crisis. During
this "stormy" meeting, many Labor MPs accused the Government of
inefficiency and particularly attacked the Government's decision to
keep 1,500,000 men in the armed forces and on munitions work despite
the manpower shortage. Notwithstanding these developments, Embassy
London believes that (a) the economic crisis and Opposition criticism
are forcing all elements of the Parliamentary Labor Party to rally
around the Party leaders; and (b) intra-Party criticism will not cause
the Government to modify its general policy.
(CIG Comment: The continuation in power of the Labor Govern-
ment will not depend entirely on solidarity within the Labor Party,
because the decisive votes in the last General Election were cast by
elements which had not traditionally been Labor supporters. These
elements appear to be reserving judgment on the effectiveness of the
Labor Government's economic policies.)
FAR EAST
3. CHINA: Attempt to float private US loan--An official of one of the
US banks in Shanghai has confidentially informed the US Treasury As-
sistant Attache there that the new Governor of the Central Bank of
China is attempting to arrange a loan of US $40,000,000 from private
US banks to finance cotton imports into China. The US bank official,
having made inquiries among the local cotton firms, concludes that he
"would not touch the proposal with a ten-foot pole." P_
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401a-SEFGREF
GENERAL
J4 MAR 1947
328
1. UK view on ssible French pacts with eastern Euro - -Under Secretary
Warner of the UK �reign Office iThk1 US Charge Gallma.n in London
that he was "disturbed" over the possibility that the French may sign
treaties with Poland and Czechoslovakia and "perhaps with other east-
ern European countries." The official added that, while he could
"appreciate how much pressure the French Communists were bringing
to bear on Bidault" to enter into mutual assistance pacts with eastern
European countries, he feared that, if such pacts were made, the main
result would be to "pull France closer to Moscow."
2 New Zealand views on SC discussions of mandated Islands�The New Zea-
land Secretary of the Ministry of External Affairs has told US Ambassa-
dor Warren that New Zealand has submitted to the Secretary General
of the UN a request for participation in the discussions concerning the
disposition of the Japanese-mandated islands. He explained for "very
confidential information" that the purpose of the request is to ensure
that all members of the Far Eastern Commission will be included in
the negotiations for the Japanese peace treaty, which the New Zealanders
fear will otherwise be a piecemeal arrangement between the major
powers.
EUROPE
3. FRANCE: Left-Right cleavage increases--US Ambassador Catery re-
ports that recent violence in the Chamber "is another clear indication . . .
of the increasing rift between the Right and Left." Navy Minister
Jacquinot and Acting Foreign Minister Teiigen, both strongly anti-Commu-
nist, have told Caffery that certain elements of the extreme Right "are
making a grave mistake to precipitate trouble with the Communists at
this juncture." They added that such action is "premature" and enables
the Communists to pose as "unjustly provoked by reactionary elements."
Assembly President Herriot is reliably reported to be concerned over
current violence because "there is as yet no solid coalition of anti-
Communist parties which, at this juncture, could successfully cope with
the Communists should the latter seriously go into opposition."
Document No. 061
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CC"
Possible results of wheat shortage�Minister of Agriculture
Tanguy-Prigent has told Caffery that unless France receives an addi-
tional allocation of bread grains the Government would be forced to
reduce the bread ration. Caffery comments that such a reduction
would (a) "undoubtedly" result in general rises in food prices; (b) dis-
rupt the Government's effort to stabilize prices; (c) jeopardize the
rehabilitation affortsrepresented in the Monnet plan; and (d) seriously
weaken the Government and the delicate balance of the economic system.
4. AUSTRIA: Communists fear USSR may yield on German assets�US �
Legation Vienna reports that, according to a document purporting to be
the minutes of the Austrian Communist Central Committee, the Austrian
Communists fear that the USSR may yield to the US-UK on the issue of
German assets in Austria. The document reveals further that Austrian
Communists have urged the Soviet representatives in Vienna to retain
German assets "at least" until the Communist Party in Austria is in a
position to "take full advantage of such a step."
(CIG Comment: The Communist Party in Austria is so weak that,
upon the withdrawal of Soviet forces from eastern Austria, it will be
able to maintain its present political position only if it is given strong
Soviet support.)
5. USSR: Ukrainian underground movatnent-
Ilas been
imormea fly ioviet contacts that (a) the Ukrainian underground has an
important representative in the Kremlin; (b) the underground favors
Zhukov to replace Stalin,and formerly maintained contact with Zhukov;
and (c) the underground has carried out successful industrial sabotage
and has burned the Ode7sa Communist Party headquarters.
evaluates the foregoing as "doubtful", he com-
ments that it is --somewhat" confirmed by other sources, and concludes
that, while food conditions are bad and dissatisfaction apparently is wide-
spread, the situation is being keot under contrn1 hv stPrn nniira memars.
WIG Comment:
the existence of an underground movement in the
Ukraine is accepted,
vrasuc counter-measures may De
foreshadowed by the recent appointment of ICaeanovich, reputedly one of
the Kremlin's most ruthless trouble-shooters, as First Secretary of the
Ukrainian Communist Party.)
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6. GREECE: Strikes and gold shortage threaten econom --US Ambassador
MacVeagh reports that the US and UK members of the Currency Com-
mittee are unwilling to consent to any further diversion of scarce dollar
exchange for purchase of gold supplies for resale, and have strongly
urged the Greek Government to stop gold sales promptly. MacVeagh
agrees but feels that (a) it is essential first to provide a basis for busi-
ness confidence in the stability of the drachma by establishing adequate
monetary and trade controls and assuring sufficient foreign exchange
resources; and (b) the gold crisis emphasizes the importance of speedy
Congressional approval of President Truman's economic program.
MacVeagh also reports that the Currency Committee has appealed
to the Government to refuse higher wage demands of striking workers;
these strikes, coinciding with the gold crisis, threaten to produce
serious political and economic effects.
FAR EAST
7. CHINA: Military and political situation uncertain - - US Ambassador
Stuart, in a summary of recent developments in China, reports that
the present tempo of military activity exceeds "anything seen in many
mon �� ns by either
3.3(h)(2) side. bat reluctance
to f irT4 ;tong . -r .1 o cers as well as troops on
both sides, but particularly among Nationalist forces. Stuart cites
the increase in repressive police activities all over Nationalist China
as evidence of the Central Government's determination not to "loosen
its control as long as It is engaged in a life-and-death struggle."
Communists exhibit confidence -- Stuart also reports that,
according to US observers returning from Yenan, Chinese Communist
leaders (a) are strikingly confident of their ability to make substantial
headway against the Central Government on the military, economic, and
political fronts; (b) are "completely irreconcilable" and can be expect-
ed to increase their demands, if (as they anticipate) the Central Govern-
ment progressively weakens; and (c) would not be deterred under pre-
sent circumstances by a threat of US assistance to the Nationalists but
only by substantial military defeats.
(MG Comment: Defeats that the Communists would regard as
"substantial" are not in prospect.)
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GENERAL
IS MAR 1947
327
1. Unauthorized Polish flicittiver US-UKGerman Zones--US Civil Air
Attache, Bern, urges that the flights made by the Polish airline (LOT)
from Warsaw to Paris be investigated without delay on grounds of secu-
rity in US Zone Germany. He adds that to ignore unauthorized Polish
transit over the US-UK Zones would be likely to encourage other Soviet
satellites to follow suit.
(CIG Comment: Similar unauthorized flights over the US Austrian
Zone may result from the Bucharest-Paris flights proposed by the Soviet-
controlled Rumanian airline, TARS.)
2. GREECE: Milt
EUROPE
Inst guerrillas to start soon-
re-
organizing for a strong offensive against the guerrillas, which will begin
about 10 April and will last an estimated five months. General Rawlins
(British Commander-in-Chief in Greece) has that
the Greek Army may be expected to regard US assistance as an "easy"
source of supply, because the Greeks believe that the US is inexperienced
In "anolvinz brakes or correctly appraising requirements."
should rely heavily on British guidance oca
and controlling Army supplies.
FAR EAST
3. CH/NA: Nationalist withdrawals in Manchuria antic' ted--US Consul
Clubb in Changchun considers that the isIitfliTlW��d of Nationalist
reinforcements being sent to Manchuria at this time. He suggests that
if the Nationalist military position In North China should deteriorate
further, the Nationalists might even abandon Manchuria completely in
an effort to save their position in China proper.
14.9...s. of Soviet withdrawal from Dairen--The Commander of
US Naval Forces In the Western Pacific reports that as late as 7 March
there was no general dismantling of Dairen factories or harbor Installa-
tions, and no indication that the Soviets intend to withdraw from Dairen
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in the near future. (On 8 March, the USSR invited the Chinese Govern-
ment to take over administration of Dairen; see Daily Summary of
II March, item 4.)
4. FRENCH INDOCHINA: French more istic--Actbig French Foreign
Minister Tietgen has told US Ambassador Caffery that the French have
no intention of returning to "any outmoded colonial arrangements" and
that there would be no French objection to "internationalized outposts"
of the UN in Indochina, after peace and order are restored. Tietgen also
said that the French Government is "for the first time optimistic about
the Indochinese situation in view of French military successes," although
it does not know with whom to deal.
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GENERAL
12 MAR 1947
32G
1. US t_sm ....._t_future discussion of lap tr.sq_stS11A�Acting Secretary
Acheson has informed the US Political Adviser in Tokyo that at some
time during the Moscow Conference Secretary Marshall is expected to
suggest that the Council of Foreign Ministers "discuss at a meeting in
the near future, questions of procedure with regard to the preparation
of a peace treaty with japan."
2. US protests treatment of its oil c__nies in Rumania�The State De-
partment has instructed US Representative Berry in Bucharest to pro-
test the Rumanian Government's action in granting the joint Soviet-
Rumanian oil company "domestic" legal status, thereby placing it in
a preferential position vis-a-vis US oil companies (see Daily Summary
of 10 March, item 3). The note demands that, in view of rights granted
US companies in the Rumanian Act of 1942, in the armistice termsiand
In the peace treaty, the Rumanian Government grant US companies no
less favorable treatment than that accorded the joint Soviet-Rumanian
company, particularly in such matters as prices and rights of export
and exploration..
3. _mates Rio Conference �According to US Ambassador
McGurk in Montevideo, the Uruguayan Foreign Minister has stated
publicly that in Uruguay's opinion the Rio Conference should be held
as soon as possible, and that, in view of Uruguay's "special situation
of geographical closeness and fraternal friendship with Argentina as
well as close ties with the USUruguay would endeavor to bring about
a "rapid and total clarification of relations between the US and Argen-
tina.''
In a subsequent conversation with McGurk, the Foreign Minister
expressed (a) fear that Communist and Nationalistic groups opposed to
a Hemisphere defense pact might combine forces and prevent general
agreement, and (b) his conviction that continental unity must be restored
without either the US or Argentina appearing as the victor.
4. French Communists peventh US-UK-French zonal merger in Germanz--
In reply to a suggestion by ecr oscow that France
could work out its coal shortage by joining the US-UK bi-zonal agree-
ment in Germany, French Foreign Minister Bidault declared that the
Communists in his Government were reluctant to permit France to join.
He added that French action in this matter "would depend on how the
whole picture develops." Document No. (1.59
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EUROPE
5. YUGOSLAVIA: Further comments on food situation--US Embassy Bel-
grade has been reliably t Yugoslavia, ugoslavia, despite its promises
to UNRRA that no more food would be exported, has offered to send
30,000 pigs to Poland. The Embassy comments that diversion of Red
Cross rations to Government-sponsored youth organizations further
emphasizes the need for controls to assure that Yugoslavia will abandon
political and export programs in order to feed its needy (see Daily Sum-
mary of 11 March, item 1).
6. ITALY: Premier asks 111r___. amelioration--US Ambassador Dunn re-
ports that Prime Minister De Gasper' has sent a telegram to Senator
Vandenberg asking that consideration be given to ameliorating provi-
sions in the Peace Treaty. The telegram Includes specific requests
for (a) the return to Italy for demolition and use as scrap of some of
the surplus naval vessels which the US would receive from Italy; (b)
further liberalization of the treatment of Italian assets in the US; (c)
support of Italian aspirations for trusteeship of colonies; and (d) allevia-
tion of economic clauses of the Treaty.
7. GREECE: Troubles within SC Commission e--Mark Ethridge
reports from Salonika that the Acting Brazilian delegate to the SC In-
vestigating Commission "requests urgently" that the State Department
use its influence with the Brazilian Government to obtain the recall of
General Anor Santos, principal Brazilian delegate, on grounds that
Santos has feigned sickness to avoid responsibility of the chairmanship,
and is pro-German, anti-US, and anti-Communist. Ethridge favors
"Santos' continued absence from the work of the Commission."
(CIG Comment: In the light of the pro-Soviet bias of the Corn-
MiES1011 Secretariat, the continuing opposition of the Soviet and Polish
delegates, and a lack of experience on the part of several other members
of the Commission, it is clear that Ethridge's task is becoming increas-
ingly difficult.)
NEAR EAST-AFRICA
8. EGYPT: US loan m_ailLe requested�US Ambassador Tuck recommends
that the US give "serious consideration" to a contemplated Egyptian re-
quest for a Yowl of $80,000,000 in order to provide backing for Egypt's
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currency issue and thereby enable Egypt to break its relationship with
sterling. Tuck feels that such a loan "would contribute much to the
termination of sterling area discriminations."
FAR EAST
9. FRENCH INDOCHINA: Negotiations with Free Laos groups--US Minis-
ter Stanton in Bangkok reports that Baron Sur old, who negotiated with
Free Laos groups In November 1946 concerning the French-Laos modus
vivendi, has again held inconclusive conversations in Bangkok with Free
Laos leaders. These leaders are believed to have been dissatisfied with
French offers of a vague independence in return for cessation of Laos
aid to Vietnam and of opposition to the French-sponsored Laos regime,
and to have warned that guerrilla activities may increase unless real
autonomy is given Laos. Stanton comments that Surcouf undoubtedly
reflects the thinking of some French officials that "certain concessions"
may be necessary to prevent Free Laos groups from joining the Viet-
namese against the French.
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EUROPE
ii MAR 1947
325
1. YUGOSLAVIA: US Embasgtis comments on food situation�US Embassy
Belgrade, in answer to an UNRRA request for its opinion as to whether
UNRRA should supply Yugoslavia with additional grain shipments, re-
ports that a serious shortage exists in certain areas and that without
outside relief "people will go hungry. The Embassy adds, however,
that (a) the Yugoslav Government has grossly mismanaged the food
situation; and (b) there are "many evidences that some food supplies
are still available in the country."' The Embassy recommends that the
US agree to an immediate token allocation by UNRRA of one shipload of
grain and that further allocations be made as needed up to 100,000 tons
(as previously recommended by UNRRA), provided the Yugoslav Govern-
ment give full publicity to the UNRRA shipments and agree to full utili-
zation of available local food resources, compliance to be checked by
UNRRA and the US Embassy. Although the Embassy believes that these
stipulations will reduce the danger of Yugoslavia's exporting or using
UNRRA food supplies for political or military purposes, it fears that
"if the situation is serious, the Yugoslays might, like the Soviets under
similar circumstances, let people starve rather than abandon political,
military, or export programs.'
2. GREECE: Balkan non-ggress1onpact considered�US Embassy Athens
reports that the British, French, Australian, Cmblan, Chinese, Belgian,
and Syrian members of the SC Investigating Commission accept in princi-
ple (a) the idea of a Balkan non-aggression pact "with the 1933 definition
of egression," (b) the creation of a supervisory commission to enforce
the pact; and (c) the re-establishment of a free zone at Salonika. (The
1933 definition of egression as laid down in the pact signed by the USSR
and the Little Entente includes "support to armed bands formed on the
territory of a state and invading the territory of another state." The
port of Salonika is probably the most important Soviet satellite objective
in Greece. In 1929, after years of negotiation and a variety of treaties,
a Greek-Yugoslavian pact was drawn up providing a satisfactory free-
zone arrangement for Yugoslavia In Salonika, Although the pact was to
be effective for fifty years and has never been abrogated, it has not been
In operation since the war.)
(CIG Comment: UN action to reactivate the free zone at Salonika
would remove one of Yugoslavia's grounds for anti-Greek agitation.)
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NEAR EAST-AFRICA
3. IRAN: Support for Iranian Airways gsgsl--US Ambassador Allen reports
that strict adherence to the 13 March deadline for settlement of Iranian
Airways debt to TWA "would probably result in the liquidation of Iranian
Airways." Allen adds that such liquidation would be an "unfortunate
blow" to US prestige in Iran because "Iranians regard Iranair as virtually
an American line:'
(CIG Comment Liquidation of Iranian Airways would give the
USSR an opportunity to renew its efforts to gain exclusive air rights In
northern Iran. Moreover, Iranian Airways, in which TWA has 10%
Interest, Is an important link in a US-operated air network extending
from Cairo to Kabul; see Weekly Summary of 28 February, page 7.)
FAR EAST
4. CHINA: Inclusion on Moscow Conference enda o -The Chinese
Foreign Minister, Wang Shih-chteh, has aske US Ambassador Nanking
to inform Secretary Marshall that "China would strenuously object" to
having Its "internal affairs" placed on the Moscow Conference agenda.
USSR Invites Chinese administration of Dairen�Wang also told
Ambassador Stuart that on 8 March the SovietAthbassador to Nanking
had proposed that (a) the Chinese take over the administration of Dairen
and Port Arthur (It is doubtful whether the Soviet proposal includes the
naval base at Port Arthur); and (b) joint operation be undertaken of the
southern leg (Dairen to Changchun) of the Chinese Changchun railway.
Wang's informal response to the Soviet official was that the area around
Dairen would have to be cleared of Chinese Communist forces before the
Soviet proposals could be carried out.
(CIG Comment: The timing of these proposals suggests the USSR's
intent to clear its own record prior to international debate on the Chinese
problem.)
THE AMERICAS
5. BOLIVIA: Brazil concerned over Argentine-Bolivian treaty--US Ambassa-
dor Flack reports that the Brazilian Ambassador in La Paz has been in-
structed to express Brazil's concern over the provisions of the Argentine-
Bolivian economic treaty signed on 8 March which calls for the production
of rubber and iron in Bolivia near the Brazilian frontier.
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GENERAL
10 MAR 1947
324
1. Soviets re rted on defensive in H ,1 � rian cons ir2_j_t.c..u.am.--US Minister
Schoenfeld in Budapest reports that the unaccustomed haste and timing"
with which the Soviet Delegate ACC has refused the US request for tri-
partite investigation of the current conspiracy case (see Daily Summary
of 4 March, item 2) suggests that the Soviets are on the defensive. (US
Delegate ACC, moreover, reports that the Soviet Ambassador to Buda-
pest has left for Moscow to discuss the US note.) Schoenfeld recommends,
therefore, that the US make a prompt reply in order to follow up its ad-
vantage. He adds that, unless the US handles the controversy in a conclu-
sive manner, little help can be expected from the Hungarian Government,
which is obviously "intimidated by direct and indirect Soviet pressure."
EUROPE
3.3(h)(2) 2. FRANCE: Removal ofisemgompfficers tem rar71 blocked-
that the "recent furor over the proposed replace-
ment of Generals de Lathe de Tassigny and Revers (see Daily Summary
of 24 February, item 5) has died down, and that political pressure brought
to bear by the generals' following has "blocked the move for the time
being."
3.
3.3(h)(2)
3.3(h)(2)
RUMANIA: Commercial alEcSILI t witl_OSSLIen --According to US Repre-
sentative Berry, the recently signed Soviet-Rumanian commercial agree-
ment (see Daily Summary of 3 March, item 5) contains a secret annex
which eventually will make the joint Soviet-Rumanian oil company "an
entirely Soviet enterprise with vast exploration and exploitation rights"
In clear violation of the legal rights of US oil interests.
the terms of the secret annex will be made known only
to Premier tiroza and two leading Communists in the Cabinet.
Also not released to the public is the Soviet agreement to reduce
reparations payments from 300 to 100 billion lei and to grant Rumania a
0t, )0 four-yearreci it to pay for Soviet exports.
these concessions may be nullified by Soviet-
imposed prices and exchange rates which are still being negotiated in
Moscow.
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CONr4P1;17'.
4. GREECE: MacVeagh advises Zervas be dropped from Cabinet�US Am-
bassador MacVeagh has privately advised rime Minister Maximos, the
King, and other political figures that, in view of the recent mass arrests
by Minister of Public Order Zervas (see Daily Summary of 6 March,
item 4), the Government would do well to remove Zervas. Maximos
attempted to justify Zervas' actions on grounds of the national emergency
and denied that danger of dictatorship was implied.
FAR EAST
5. CHINA: Formosan situation remains tense--US Consul Taipei reports
that Governor General Chen Yi has apparently accepted in principle a
list of eight demands for political reform prepared by a committee of
Formosans. The demands include: (a) an increased participation by
Formosans in the local Chinese administration; (b) severe restrictions
on the administration's monopoly control over the economy of the island;
and (c) protection of the peoples rights. The Consul also reports that
"about 2,000" troops landed on 8 March; and that two divisions are ex-
pected from the Chinese mainland.
(CIG Comment: The importation of troops by Chen Ti will
probably increase the tension in Formosa; however* there are uncon-
firmed reports that the Central Government may remove Chen Yi him-
self and that a more conciliatory policy may result.)
THE AMERICAS
6. PERU: Arrival of Argentine economic mission in Lima--US Ambassador
Cooper reports that an Argentine mission has arrived in Lima to nego-
tiate an economic treaty with Peru (see Daily Summary of 3 March, item 8).
Cooper believes that the current offer of the Peruvian Government for
settlement of its US dollar debt should not be refused, as failure to accept
the offer would drive Peru into the Argentine economic bloc (see Daily
Summary of 3 March, item 8).
7. BOLIVIA: Agentine-Bolivian trade trel_q�US Ambassador Flack reports
that Bolivia reversed Its stantpparently as a result of Argen-
tine pressure, by signing a trade agreement with Argentina on 8 March
(see Daily Summary of 7 March, item 6).
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EUROPE
1. GREECE: Arrests a
b. it MAR 1947
323
has unanimously approved the
recent mass arrests by Minister of Public Order Zervas (see Daily
Summary of 6 March, item 4). The MA comments that (a) doubt
exists whether the Cabinet had any foreknowledge of the arrests;
(b) while the move was contrary to the Government's stated amnesty
policy, the "Greek mentality" would not permit an amnesty at this
time even though the Government sincerely attempted to implement one;
(c) the arrests, coupled with reports of "more active US interest in
Greece," have improved Army morale; and (d) had the prisoners en-
gaged in similar activities in the US, the majority of them would prob-
ably have been arrested "at an earlier date."
FAR EAST
3. CHINA: Situation deterloratliw lit Consul Taipei, Formosa
has informed US Embassy Nanking that the trend toward civil strife
in that island (see Daily Summary of 7 March, item 5) is developing
rapidly. Re cites continuing reports of secret evacuation of families
of high Chinese officials, and of imminent military reinforcement from
Fukien.
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wketv
38
..T.Qa-sEAR4441-0 322
7 MAR 1941
GENERAL
1. Dutch views on posed alliances--A Netherlands Foreign Office official
has told US Embassy The Hague that (a) he personally does not favor a
network of alliances such as Belgium has proposed (see Daily Summary
of 3 March, item 1), and (b) his Government "still strongly favors" the
four-power pact supported by the US. The official added that his country
believes "no network of alliances" could be "really useful" without US
participation.
2. USSR will acceg_36,000ees from Denmark--The Danish Foreign
Minister has told US Minister Marvel that he has "just received assur-
ances" that the USSR would accept 36,000 German refugees from Den-
mark.
(CIG Comment: Each of the Big Four had previously agreed to
accept 12,000 such refugees. This new Soviet offer probably is intended
to be a gesture of good will on the eve of the Moscow Conference.)
NEAR EAST-AFRICA
3. IRAN: U_SIlpprsifyigspployment of oil eist--US Ambassador Allen,
upon instructions from the State Department has informed Qavam
that the US has no objection to Iran s employing a US expert for advice
on oil matters (see Daily Summary of 4 March, item 5).
4. INDIA: Pos_si10f a limited Pakistan--US Charge Merrell reports
that "an impressive number of Congress Party leaders appear re-
signed to the prospect of jinnah's obtaining a "truncated Pakistan" if
he wants it. Merrell believes, however, that many Congress members
assume that (a) jinnah would not be satisfied with such an arrangement;
and (b) in a showdown, the Congress Party would, with superior economic
and possibly military strength, be able eventually to crush Moslem
League opposition in most parts of India.
FAR EAST
5. CHINA: &mows vilmar likely in absence of US intervention--US
Consul Taipei, Formosa, in a report on the serious civil disturbances
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there, (see Weekly Summary of 7 March, page Hi), states that civil war
will develop if the US does not immediately intervene in its own right
or "on behalf of the UN." Responsible Formosans believe that (a) direct
UN intervention is justifiable because the island is presently under Japa-
nese de jure sovereignty; and (b) the Chinese Government could receive
assurance that, once the island was stabilized on a democratic basis, it
would be returned to Chinese administration.
Foreign Minister's views on reoccupatiouof Dairen�Chinese
Foreign Minister Wang Shih-chleh, on his return from a trip to Man-
churia, told a US Embassy official that (a) he had emphasized to Soviet
authorities the "high desirability" of removing the "de facto obstacles"
to Chinese occupation of Dairen; (b) the presence of "some 30,000"
Chinese Communists between Nationalist lines and the Soviet-controlled
Dairen-Port Arthur area would necessitate "special measures" on the
part of the Government to hold Dairen in case of reoccupation; and (c)
if unverified reports that the Soviets in Dairen are removing locomotives--
joint assets of the Changchun Railway--prove to be correct, the Central
Government intends to file a protest.
THE AMERICAS
6. BOLIVIA: Resistance to ilut_entine weei_n_sg_Increasing--US Ambassa-
dor Flack in La Paz reports that the Bolivian Junta Government has
decided that any trade agreement with Argentina (see Daily Summary
of 5 March, item 8) should be signed by the new Government (which will
take office shortly), and that additional time is necessary to study the
complex problems posed. Flack reiterates that an increase in the price
paid by the US for Bolivian tin would "aid Bolivia's freedom of action."
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GENERAL
6 MAR 1947
321
1. USSR reported unfavorable Treaty Ambassador Dunn
in Rome reports that he has it "on good authority" that the USSR has
replied to the Italian demarche on revision of the Treaty and refused to
favor "any such proposal."
(CM Comment: The US, UK and France have unofficially ex-
pressed sympathy with the principle of revision. A Soviet refusal to
consider revision would increase the anti-Soviet trend in Italian public
opinion.)
2. USSR abettinglmmlav economic metration of Trieste�The US
Treasury Representative in Rome reports that the US, UK and French
delegates to the CFM Commission of Inquiry on Trieste estimate that
there will be a 4.6 billion lire deficit in the Trieste budget for the fiscal
year 1947-48, while the Soviet delegate estimates the deficit will be only
48 million lire. The Representative adds that, in order to provide "Yugo-
slavia an opportunity for economic penetration as the basis for subse-
quent political control," the USSR is apparently taking the position that
the Free Territory will not require external aid.
EUROPE
3. FRANCE:Pr_ApplAlior dial of Germnula --US Ambassa-
dor Caffery has been told by a Foreign Office official that Foreign Minis-
ter Bidault is taking to Moscow a plan for the dispersal of the German
population, "primarily males of military age," among other countries
of Europe.
The source stated that French interest in recruiting "voluntary
laborers" in Germany is based not only on the need for manpower in
France but on the fact that adjustment of frontiers has reduced Germany's
territory while the return of German nationals from other parts of Europe
has increased the density of population in Germany.
4. GREECE: UK to withdraw troops from Greece on schedule�The British
Ambassador in Washington, in an aide-meznoire to the State Department,
has stated that British troops will be withdrawn from Greece according
to the schedule "drawn up long ago." The schedule calls for the reduction
of troops to one brigade by 31 March; this last brigade will be withdrawn
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during the summer. The aide-memoire adds that in any event British
troops could not be kept in Greece after the withdrawal of Soviet troops
from Bulgaria, which is scheduled to take place ninety days after the
Bulgarian Peace Treaty becomes effective.
Political mass air_p_g_ts .W._Z_e_rvas--US Embassy Athens reports
that Minister of Public Order Zerras has arrested 571 persons charged
with "supplying and recruiting for bandits." The arrests, which include
several high officers of the Greek Communist Party (ICKE) Central
Committee, were made without the knowledge of British military and
police missions. The Greek Police Chief informed the Embassy that
he had no foreknowledge of the arrests and that he considered the timing
poor in view of pending US decisions on Greece. He added, however, that
the action corresponds to the "unanimous demand" by army officers who
find it "intolerable" that they should risk their lives fighting the rebels
while the real guerrilla leaders direct the movement safely from Athens.
(Zervas became Minister of Public Order on 23 February despite pro-
tests by the US and UK Ambassadors. The latter objected to his inflex-
ible extreme rightist tendencies, which they believed would alienate the
people from the Government and cause unnecessary bloodshed. 1CICE has
complete plans for going underground should it be forced to do so by
mass arrests.)
NEAR EAST-AFRICA
5. TURKEY: Turks disturbed by reported UK withdrawal from Middle East--
Foreign Minister Saka has informed US Ambassador Wilson that the Turk-
ish Government is "seriously disturbed" by press reports that the UK is
asking the US to assume all political commitments in the Middle East.
Sake said that if these reports are true, Turkey must turn to the US for
the military assistance it had formerly sought from the UK. Wilson
pointed out to Sake that (a) Greece is in a much more serious situation
than Turkey; (b) Greece should be given priority, if the US is called on
to furnish military equipment "anywhere;"and (c) "if Greece should fall
under Communist domination,
Turkey's position would be greatly weakened."
The State Department has instructed Wilson to tell the Turks that
(a) the US and UK have been holding high-level discussions of a general
nature; (b) the US hopes to take a more active part in meeting the economic
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and military needs of Greece and Turkey; (c) Greece will necessarily
be given first consideration; and (d) no immediate international crisis
Is expected.
FAR EAST
6. CRIN'A: Chiang to Intensj on Ambassador Stuart
believes that the Generalissimo intends to Tra�asten" the Chinese Com-
munists within three months by launching an all-out military campaign
to free as much of North China as possible from their control. Stuart
adds that Chiang has become increasingly concerned over the rate of
China's financial deterioration and the ability of the Communists to
"prolong the struggle and create havoc." While the Generalissimo
makes a point of telling Chinese visitors that "China must stand on its
own feet . . . without US assistance," Stuart believes that Chiang actually
has hopes of US aid.
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GENERAL
P 5 MAP 1947
320
1. Tempo clos of B -Turkish frontier--US Representative
Barnes In ia reports t ovie " authorities have ordered
the Bulgarian-Turkish frontier closed from 6 March to 17 March. Barnes
Is uncertain as to whether this action is related to future Soviet troop with-
drawals under the Peace Treaty or to a projected redeployment of troops
In anticipation of an early arrival of members of the Security Council's
Investigation Committee.
2. Anglo-Egyptian sterling discussions end in stalemate--US Embassy
Cairo has been informed by Sir Wilfred Eady, UK treasury represent-
ative, that the Anglo-Egyptian discussions on sterling balances have
ended in a complete stalemate on substantive issues, particularly on
scaling down balances. The official communique, however, will state
that the discussions were exploratory. Egyptian officials have indicated
that further discussions (between Egypt and the UK) will await the out-
come of future Iraqi and Indian negotiations with the British.
3 Stalin re � .rtedi asks for immediate Czechoslovak-Polish tree -US
Embassy 'rave has.:;orm a - e ernmess .); cial
that Stalin has sent a personal message requesting the Czechoslovak
Government (a) to conclude a treaty of alliance with Poland similar to
those Czechoslovakia has with the USSR and Yugoslavia; and (b) to do so
before signing the projected Czechoslovak-French treaty. The USSR
maintains that Czechoslovakia needs such a treaty in order to obtain
foreign trade outlets through Poland, in view of possible US restrictions
on Czechoslovak trade through Germany. The Embassy notes, however,
that the USSR's extreme haste in pressing the matter actually indicates
a desire to bring about Czecho-Polish alignment before the Moscow Con-
ference, thus strengthening Poland's bid for retention of its western
frontier. The Embassy adds that the Soviet request constitutes the
"most glaring example of Soviet intervention in Czechoslovak affairs
since the cession of Ruthenia."
4. French Views on Moscow Conference--On the basis of talks regarding
the ence with h1gi French Foreign Office officials,
Matthews (Director of the Office of European Affairs in the State Depart-
ment) reports that the French (a) attach "considerable importance" to
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the Austrian Treaty and feel there is a "fifty-fifty chance" of complet-
ing it at Moscow; and (b) believe the USSR "really wants" a treaty with
Austria provided a "satisfactory formula" can be found on German
assets. Matthews adds that the French do not expect much agreement
regarding German problems at the Conference.
NEAR EAST-AFRICA
5. TURKEY: S.m._,elitsits_se:_ideratt In --US Ambassador
Wilson suggests that, iny projected program of providing material
US assistance to the Turkish armed forces, the following are among the
factors which should be considered: (a) because the USSR will continue
Its present pressure on Turkey and compel the Turks to maintain large
and costly forces under arms, the US would be playing the "Soviet game"
if it encumbered the Turks with too heavy a financial burden; (b) recom-
mendations�raust depend upon whether, in the event of aggression, the
Turks would be expected to fight a strong delaying action or to serve as
guerrillas; (c) modernization of the Turkish Army would be a long, slow
process, and the men best capable of being adequately trained are those
most needed to increase Turkey's productive capacity.
6. PALESTINE: Terrorists lntendforcthg martial law--US Consul General
Jerusalem rep�iti that, accordt�jl� we armed Jewish Agency
source, the present aim of the terrorists is to force the British to estab-
lish martial law throughout Palestine, thereby inciting the entire Jewish
population to open combat with the military.
FAR EAST
7. KOREA: Re-exam tion ofet reply --A re-exami-
nation of the Soviet reply to General Hodges24�ette December (see
Daily Summary of 3 March, item 6) indicates that, while the reply was
friendly in tone and ostensibly accepted General Hodge's proposals as a
basis for reconvening the Soviet Commission, the USSR has not abandoned
its insistence on excluding from consultation all Koreans who have actively
voiced opposition to the Moscow decision. Such a program would exclude
from consultation virtually all Korean leaders except Communists and
"fellow travellers."
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THE AMERICAS
8. BOLIVIA: A entina offers for trade ment�US Ambassa-
dor Flack reports that a Bolivian negotiator has ormed him "in
strictest ccmfidence that the Argentine Trade Mission now in La Paz
(see Daily Summary of 28 February! item 8) has made proposals identi-
cal with those in the Argentine-Chilean agreement, except for the desig-
nation of amounts for public works and industrial development in Bolivia,
I.
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GENERAL
4 MAR 1947
319
1. US views on UK Greater Syria State Department has
Wormed US Embassy London that, according to numerous reports from
the Near East, the Arab governments take a serious view of increasing
rumors of British support for the establishment of Greater Syria. The
Department also reports allegations that British agents secretly are
encouraging implementation of the plan despite the UK's "official neutral-
ity" in the matter (see Daily Summary of 20 February, item 4). The
Department feels that these rumors are having a disruptive effect on the
Arab world which is not to the advantage of the UK or of the US.
(CIG Comment: Although the formation of Greater Syria in the
long run might deter Soviet infiltration of the Near East, agitation for
Its implementation at the present time only increases the instability of
the area and thereby serves Soviet policy.)
2. US asks tripartite study of Soviet interference in Hungary--The State
Department has instructed US Delegate ACC Budapest, US Legation
Budapest, and US Embassies London and Moscow to request joint US,
UK, and Soviet examination of the USSR's recent unilateral intervention
In Hungary's internal affairs through the arrest of Bela Kovacs, Small-
holder member of Parliament, (see Daily Summary of 27 February,
item 3). The Department believes that this "direct Soviet intervention
In support of the Communist minority appears to preclude a possible
local Hungarian resolution of the crisis and, in threatening to render
Impossible the functioning of democratic processes in Hungary, to raise
the question of the future exercise by the Hungarian people of democratic
sovereign independence as envisaged in the peace treaty."
EUROPE
3. AUSTRIA: Sovielicy on oil indys--US Legation Vienna reports
that Soviet Oil Director Rjabinin has told Brandon Grove (the represent-
ative of local US and UK oil companies) that the USSR is in the Austrian
oil business "to stay" and will not be moved out by "any peace treaty
agreements." Rjabinin added, however, that the USSR recognizes that
US-UK oil interests are also in Austria "to stay," and accordingly wishes
to reach a working agreement with them. It is Grove's impression that
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Riabinin has received a "new policy" from Moscow and will try to obtain
through company agreements maximum advantages for the Soviet Petro-
leum Administration in advance of a peace treaty.
4. ITALY: "Consultation" favored in African territorial issue--The State
DepartmeifacTilrofifieiTiiittier fra-iZ`3-'s-5Toine that an Italian should
be permitted to accompany the Quadripartite Committee of Investigation
which is to be sent to Italian colonies (see Daily Summary of 27 February,
Item 5). However, in view of the importance of reconciling Italian Govern-
ment and public opinion to any decision regarding the ultimate disposition
of these colonies, the Department favors an arrangement by which the
Italians may be given an "opportunity to consult' with the Quadripartite
Commission of Investigation, provided that a similar opportunity is given
to such other interested countries as Egypt and Ethiopia.
NEAR EAST-AFRICA
5, IRAN: Qavam desires to employ_ US oil e rt--Qavam has informed US
Ambassador Allen that he would like o employ a qualified US petroleum
expert as adviser, especially as regards the Northern provinces. Allen
believes that Qavam is inclined to favor granting the USSR a straight
oil concession rather than a mixed company, and desires to have an ex-
pert to "share the responsibility" when he attempts to persuade the
Soviets to give up the idea of a mixed company.
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GENERAL
3 MAR 1947
318
1. BelAttat_t_o_pEppose alliances with �1.7&y:La_nce and USSR�Paul-Henri
Speak, Belgian Foreign Minister and President of UN General Assembly,,
has told US Ambassador 1Cirk that he has received a "favorable reaction'
from French Foreign Minister Bidault to his proposals for a "Belgian
network" of alliances with France, the UK, and the USSR. Although the
USSR has not replied to a Belgian offer of alliance made two years ago,
Speak wishes to include the USSR in the proposed network of alliances
in order to avoid the criticism that he is developing a western bloc.
Speak said that his offer to the USSR "would be sincere," but "develop-
ments would depend on the Soviet attitude.'
2. Bevin's views on the German and UK-Soviet Treaties--Foreign Minister
Bevin has told Matthews (Director of the Office of European Affairs in
the State Department) that he is prepared to support the US in such east-
ward revision of the Polish-German boundary as can be Justified on
economic grounds.
Bevin added that the revision of the Anqlo-Soviet Treaty would
be limited to "excluding the obsolete portions. Matthews observes
that Bevin is "unhappy" to find himself "compelled" to proceed with
"some treaty revision." Matthews adds his belief that the permanent
Foreign Office officials are "fully aware of the dangers ahead and re-
gret that domestic politics have forced this course."
EUROPE
3. FRANCE: Bidaullprofessedly undecided on German issues--Foreign
Minister Bidault has told US Ambassador Caffery that he has made no
"commitments" to Molotov on either the eastern frontier of Germany
or reparations from current production. Bidault stated that he has not
yet taken "any definite position" on these matters and that his final
decision will depend upon the course of events at Moscow. Caffery con-
cludes that "no deal has been made with the Soviets in these matters."
(Caffery previously reported his "impression" that the French
Ambassador to Moscow had been instructed to tell Stalin that France
would support the Soviet position on the Polish-German frontier and
reparations in return for Soviet support of French desires regarding
the Rata. and Saar; see Daily Summary of 3 February, item 3.)
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Montnistjc &e levelric Monick, Governor
of the Bank of France, has told US Ambassador Caffery that he is
"optimistic" about the government's ability to hold prices at the pres-
ent level but does not believe that any reductions of consequence will
be effected by the price-reduction campaign. Monick believes that, if
prices can be held at the present level, France will be able to "work
herself out of the present near-crisis."
4. GERMANY: Pro da s :eSts future Soviet lic on German --US
Political Adviser urphy reports from Berlin that recen Unity
Party (BED) propaganda includes two proposals "suggestive of possible
Soviet moves" at the Moscow Council of Foreign Ministers: that (a) a
people's referendum be held throughout Germany on the country's future
political structure; and (b) any central German agencies or provisional
government should be set up not by Laender Presidents, but as repre-
senting existing political parties and trade unions. Murphy believes
that the first proposal, if adopted, might result in a vote for a central-
ized rather than a federal Germany and that the second would "greatly
over-value the political power of the Left and in particular help the
Communists."
5. RUMANIA: Economic agreement with the USSR�According to US Repre-
sentative Berry, a preliminary examination of the recently concluded
Soviet-Rumanian economic agreement reveals that it "brings no material
benefits to Rumania and places the country further under the economic
domination of the USSR." The agreement (a) does not provide for imports
to revive any industry, including oil, except those under Soviet-Rumanian
ownership; and (b) offers no solution for Rumania's currency and food
problems.
FAR EAST
6. KOREA: Soviet Commanar offers to reconvene oil Commission--
General Hodge s HQ reports that a reply da � F ruary to 31? eral
Hodge's letter of 24 December 1046 has been received from General
Chistiakov, Commander of the North Korean zone. The reply is friendly
and indicates that Hedge's proposals have been accepted.
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7., CHINA: ..S;hai labor official fears worker unrest--According to US
Consul General Shanghai, the Secretary of the Shanghai General Labor
Union believes that the Government plan to fix wages at January 1947
levels and grant certain supplementary rations will not satisfy Chinese
workers, because prices continue to rise despite Government efforts
to fix ceilings. The Secretary predicted that such measures might re-
sult in "grave unrest" and may lead to a "general strike attended by
mass violence and bloodshed."
THE AMERICAS
8. PERU: Economic relations with Argentina--US Embassy Lima reports
that (a) aTicilaWi-o a reliable source, era is now foremost on Argen-
tina's list for further extension of its economic influence; and (b) the
powerful left-wing APRA Party is probably responsible for the delay
In the conclusion of a Peruvian-Argentine Treaty which provides for a
200 million peso loan.
US debt settlement law passed by Peruvian legislature--US Am-
bassador Cooper considers that the law passed by the Peruvian legis-
lature on 28 February, providing for a settlement of Peru's US dollar
debt, constitutes a reasonable offer. (Previous Peruvian dollar debt
settlement offers have been unacceptable to US creditors; see Daily
Summary of 24 February, item 9.)
9. BRAZIL: Hemispheric action inLt Communismsuggested--Accord-
Ing to US Ambassador Pawley, the Brazilian Foreign Minister has stated
Ids opinion that the US must take the initiative in calling an early inter-
American conference to discuss action against Communist activities in
the Western Hemisphere.
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Li
OENERAL
1 MAR 1947
317
1. Syria may reopen flyqiisstion.A British Foreign Office official has
informed US Embassy London that the Syrian delegate to the ON Security
Connell, during a recent visit to London, sought British influence g`to
get talks going" between Syria and Turkey on the Hatay question. (Syria
reining to recognize Turkish sovereignty over the Batay, a Turkish prov-
ince on the Syrian border.) The Syrian delegate stated that Syria does
not wish to take the matter to the UN but will be forced in do se if the
Turks are not "reasonable." The British official feeli that to make any
changes in Turkey's frontiers would be playW into Soviet hands and
considers that It would be "most undesirable" to have the Ilatay question
brought up In the UN. (Note: A ?Medal CKI sited, of the Hatay question
is in process of reproduction and will be distributed in a few *M.)
EUROPE
2. USSR: Estimated 25% of national for � -US
Military Attache -Moscow believes tha b; aimed
at "developing the nation's military potential to the utmost,' and that a
number of expenditures for military purposes are concealed in the bud-
gets of supposedly Eon-military agencies. The MA estimates that the
actual military expenditures this year will be approximately 100 billion
rubles (about one fourth of the government income) rather than the offi-
cially-announced figure of 87 billion rubles. These conclusions are
shared by the Economic Section of the Embassy.
(CIG Comment: Even this figure may fall to give a true picture
of the extent to which the Soviet economy serves military purposes. For
example, the armed forces obtain supplies from Soviet industrial ortsud-
zations at prices which, in many cases, are so low as to bear no rela-
tion to the cost of production. Furthermore, Soviet occupation troops
abroad are quartered, subsisted, and to a large extent supplied by the
occupied nations.)
8. GREECE: Plastiras feels he may soon head --A MG source
reports that General Nikolas Plastiras feels that Greece will soon recall
him to head a temporary government. Considering himself the only per-
son who can inspire fear and confidence among both extreme Rightists
and extreme Leftists, he believes that he could restore Internal order in
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one month. He would then prepare the country for truly free elections,
after which he would step down as he did twenty-three years ago.
(CIG Comment: Nikolas Plastiras, a retired general and con-
firmed democrat, was the first Prime Minister after liberation, but
was forced to resign under Royalist and British pressure. CIO believes
that Plastiras might well be the man behind whom the country could
rally in a political-military crisis, though ha Is prObably unsuited to
lead a long term political-economic program.)
4. SPAIN: Mona_... � 1 :hist Leftist to_h_c_Rrrien In Lisboa--
US Charge Madrid report�hat 1om�Ofre, a representative of the
clandestine National Alliance of Democratic Forces, has informed the
VS Embassy that negotiations between Leftist* and Monarchists "will
be carried on henceforth in Lisbon between the Pretender's advisers
and representatives of (Republican President) Martinez Barrio and the
Llopis government-in-exile." Petro told the Embassy, apparently at
the request of Monarchist General Beigbeder, that Don Juan has ordered
�Seigbeder and KIndelan (leading xtegoftators inside Spain on the Pretend-
er's behalf) to withdraw entirely from such activities. Pei** anticipates
less risk and greater freedom of action in Lisbon.
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