CURRENT INTELLIGENCE BULLETIN - 1955/07/17

• Document Type: SPECIALCOLLECTION
• Collection: Current/Central Intelligence Bulletin Collection
• Document Number (FOIA) /ESDN (CREST): 03448323
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 11
• Document Creation Date: September 20, 2019
• Document Release Date: September 26, 2019
• Publication Date: July 17, 1955

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6-19M.23(h)(2)
17 July 1955 3.5(c) /
Copy No. 99
CURRENT INTELLIGENCE BULLETIN
DOCUMENT NO 22
NO CHANGE IN CLASS.
[ii DECLASSIFIED
CLASS. CHANGED TO: TS S C
NEXT REVIEW DATE:
AUTH: HR 70-2
DATE: ii/1450.. REVIEWER:
Office of Current Intelligence
CENTRAL INTELLIGENCE AGENCY
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SUMMARY
GENERAL
1. Soviet official comments on proposed economic conference (page 3).
2.
FAR EAST
3. South Korea instructs mission to break off Washington aid talks
(page 4).
4. Comment on Peiping's views on de facto cease-fire in Formosa
Straits (page 5).
SOUTHEAST ASIA
5. Comment on Premier Diem's statement regarding Vietnam elections
(page 6).
6. India likely to decide favorably on US-Cambodian military aid
agreement (page 6).
7. Sukarno insists that Prime Minister Ali not resign (page 7).
8. Opposition and president differ on composition of Indonesian
cabinet if Ali falls (page 8).
NEAR EAST - AFRICA
9. Arabs exerting pressure to prevent Iran's adherence to northern
tier (page 8).
10. Casablanca riots may delay Grandval program (page 9).
11. Spanish Moroccan nationalist predicts worsening situation in
French Morocco (page 10).
12. Greece unable to accept British date for talks on Cyprus problem
(page 11).
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GENERAL
1. Soviet official comments on proposed economic conference:
the USSR was very much interested
in a world economic conference to take place no later than the
first half of 1956.
2.
the purpose of the meet-
ing would be to put an end to all discrimination in matters of
trade and that the initial question would be not so much of re-
ducing Western trade controls as of "reviving commercial rela-
tions proper" and rendering the political principle of coexistence
tangible on the economic plane.
Comment: This is the first elaboration
of Molotov's suggestion for a world economic conference. The
Soviet bloc, in the face of considerable evidence to the contrary,
has long maintained that Western trade controls were the main
deterrent to an expansion of East-West trade. This statement of
Is the first official indication
that the Soviet Union recognizes the negligible effect of present
controls on the level of trade. (Prepared by ORR)
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FAR EAST
3. South Korea instructs mission to break off Washington aid talks:
Comment: This is South Korea's response
to the American proposal that aid goods be priced into the Korean
economy at an exchange rate of 700 hwan to the dollar, and that the
UN Command obtain hwan at the same rate. A change in the rate
would also be required whenever the Seoul price index changed by
more than 25 percent.
South Korea has failed to prevent severe
inflation and economic dislocation, which 'has dissipated the ef-
fect of American aid. The exchange rates required to stimulate
imports and exports range from 700 to 850 to one.
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JP,
If the South Korean mission returns
home, President Rhee will continue his efforts to block co-
operation and discredit American motives in an effort to obtain
a windfall through an artifically low exchange rate.
4. Comment on Peiping's views on de facto cease-fire in Formosa
Straits:
The Chinese Communist Party People's
Daily on 15 July hinted that a continua-
tion of the military quiet in the Formosa
Straits--which has persisted since Chou En-lars offer in April
to negotiate with the United States�will depend on whether Peiping
believes that progress is being made toward such negotiations.
Citing recent American remarks to the
effect that a de facto cease-fire exists in the Formosa Straits, the
Chinese commentary asserts that the US secretary of state believes
"it is best to leave the Formosa question alone, . . . without going
into negotiations." The secretary is said to have implied "some-
thing utterly impossible, namely that China has practically accepted
a 'two Chinas' setup and that negotiations are therefore no longer
necessary."
In both public and private statements, the
Chinese Communists have made clear their desire to effect a nego-
tiated withdrawal of American forces from the Formosa area, and
then to arrange a peaceable turnover of Formosa in direct talks
with the Chinese Nationalists. Peiping has frequently denounced
all suggestions for coexistence with Nationalist China, asserting
as long ago as March that "the 'two Chinas' fraud--the American
and British versions alike�will get nowhere."
The 15 July commentary raises the pos-
sibility that Peiping may resume its harassing action in the Formosa
Straits in order to speed negotiations, and that a critical period in
the area will begin whenever Peiping decides that it has nothing fur-
ther to gain either from exploring the prospects for negotiations or
from continuing any talks which may develop.
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SOUTHEAST ASIA
5. comment on Premier Diem's statement regarding Vietnam elec-
tions:
Premier Diem, in his 16 July declara-
tion regarding Vietnamese elections, did
not reject the idea of unifying Vietnam
by means of elections, but insisted that such elections be genuinely
free and expressed skepticism as to whether this was possible in
North Vietnam.
He reiterated that South Vietnam, as a
nonsigpatory of the Geneva accords, was not bound by them. His
statement that his regime would not entertain any proposals by
the Viet Minh until satisfied that the latter places national inter-
ests above those of Communism, clearly indicates that pre-election,
consultations are out of the question for the time being.
Although Diem's position is far from satis-
factory to the French and British, their representatives in Saigon
are agreed that his statement is the best that could be expected un-
der the present circumstances.
Diem's stand on elections will undoubtedly
provoke a vehement Communist propaganda campaign denouncing
the premier, and the United States.
6. India likely to decide favorably on US-Cambodian military aid
agreement:
The International Control Commission is
in the finalphase of making its decision
whether or not the US-Cambodian military
aid agreement violates the Geneva agree-
men, accor ng o e American embassy in Phnom Penh. Am-
bassador- McClinto-ck reports that the Polish delegate has stated
that he has been given carte blanche to vote "as Nehru directs."
The Indian chairman has express satis-
faction with the Cambodian reply to ICC inquiries and has taken the
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position that although there are "legal" reasons to regard the
aid agreement a violation of the truce, these are overridden by
"practical" considerations.
Comment: Nehru's view is the decisive
factor in the final decision of the commission. An official of the
Indian Ministry of External Affairs stated on 15 July that the Cam-
bodian government's explanation of the agreement is acceptable to
New Delhi and that an adverse decision by the ICC was unlikely.
7. Sukarno insists that Prime Minister All not resign:
President Sukarno broke into a "frenzy"
when Prime Minister Ali told him on
14 July he would like to resign, accord-
ing to information passed to the Ameri-
can embassy by Vice President Hatta. Sukarno reportedly ac-
cused Ali of desertion and told him that under no circumstances
would he be allowed to quit.
Meanwhile, Vice President Hatta con-
tinues to maintain that he is a 'bonstitutionalist," although the
source of this report has concluded that Hatta would not oppose
strong action by the army to settle the crisis.
General Simatupang, a former chief of
staff, is said to fear that younger army officers may take force-
ful action on their own if the crisis drags on and if they believe
senior officers are compromising with the government.
Comment: The army is unlikely to be
satisfied with the govern:ment's removal of defense minister Iwa
and its offer to replace Chief of Staff Utoyo in the near future
with an officer acceptable to the army. If the army rejects this,
solution, the government would appear to have no alternative but
to resign, and Sukarno�with no military force to support him
against the army�would have little choice but to accept All's res-
ignation.
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8. Opposition and president differ on composition of Indonesian
cabinet if Ali falls:
In the event the All government should
fall, Indonesia's chief opposition party,
the Masjumi, would prefer a caretaker
cabinet appointed by the president and
accountable to parliament to run the government until elections,
Members of such a cabi-
net would participate as individuals and not as party members,
thus relieving any party of responsibility for the government.
President Sukarno, however,
favors attempting to form a
cabinet in the usual parliamentary way. Only as a last resort
would he appoint a "presidential cabinet!'
Comment: Indonesia's provisional con-
stitution does not provide76Trpresidential cabinet, which, how-
ever, could presumably be authorized by parliament. Vice Pres-
ident Hatta is most frequently mentioned as the most likely candi-
date to head such a cabinet.
In the past, formation of an Indonesian
cabinet has required from five weeksAo two and a half months.
Lengthy cabinet negotiations might necessitate postponement of
Indonesia's first national elections, now scheduled for 29 Septem-
ber,
NEAR EAST - AFRICA
9. Arabs exerting pressure to prevent Iran's adherence to northern
tier:
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Comment:
Such tactics to dissuade Iran from join-
ing the Turkish-Iraqi pact are unlikely to have any decisive in-
fluence on the Shah, whose principal interest is in obtaining large-
scale American military aid without jeopardizing the successful
implementation of the recent Soviet-Iranian agreement.
10. Casablanca riots may delay Grandval program:
Middle-of-the-road elements in Paris
who have favored a more liberal policy
for North Africa fear that the Casablanca
riots, which erupted on 14 July and were
continuing early on 17 July, may set back the program Resident
General Grandval had begun to put into effect, according to the
American embassy in Paris.
Paris still seems to have confidence in
Grandval. One official stated, however, that Grandval may be
instructed to refrain from such public actions as pardoning nation-
alists until order is fully restored in Casablanca and progress is
made in investigating the disturbances.
Comment: While troop reinforcements
and the application of martial law on 16 July should soon restore
order in Casablanca, the possibility exists that serious clashes
may break out elsewhere in Morocco.
The French settlers can be expected to
exert the strongest possible pressure on Paris to replace Grandval.
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%%or' 'time
He has angered them by actively continuing Paris' investigation
of their counterterrorist activities and by ousting from office key
figures in their organization. The Moroccans on their part will
continue to agitate for the return of the former sultan, Mohamed
ben Youssef, and for political reforms leading toward Moroccan
independence.
11. Spanish Moroccan nationalist predicts worsening situation in
French Morocco:
Abdelkhalek Torres, leader of the Span-
ish Moroccan nationalist party, Isiah,
told the American diplomatic agent in
Tangier on 14 July it was certain that
errorism in French Morocco would increase in August. He said
the only thing which would halt terrorism would be a formal guar-
antee by Frahce to return former sultan Ben Youssef or an ar-
rangement freely consented to by the ex-sultan. Torres believes
the Moroccans have finally concluded that the French will yield
only when their enormous economic interests are threatened. He
admitted that France could not leave Morocco immediately, but
suggested a transition period of ten years.
He recommended that Paris return French
Morocco to the status quo existing before the deposition of the sul-
tan in August 1953, permit the reorganization of political parties,
set up a national assembly, and restore civil liberties. He doubted,
however, that the powerful French settlers would permit the French
government to undertake such steps.
Torres stated that the inactive phase for
the Moroccan Communists is now past. He realized that if the Com-
munists,gained influence among the resistance groups, moderate
leaders like himself would be eclipsed.
Comment: Other sources have predicted
the likelihood of widespread disorders prior to 20 August, second
anniversary of the deposition of the former sultan.
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In his conversation with the American
diplomatic agent, Torres implied that during August the nation-
alists will concentrate on economic sabotage.
12. Greece unable to accept British date for talks on Cyprus problem:
The Greek ministers of defense and com-
merce, who are in effect running the Greek
government because of Prime Minister
Papagos' ill health, are greatly distressed
because Britain has set August 29 for the Cyprus conference. They
find it virtually impossible to accept such a late date, according to
the American embassy, because it would prevent UN consideration
of the Cyprus problem this fall if the talks are not productive.
The American embassy believes the only
hope for a reasonable settlement of the Cyprus dispute lies with
the continuance of the present Greek government in office. Any
change would mean a weak coalition and would play into the hands
of extremists.
Comment: The Greek government probably
would be risking its downfall if it agreed to any plan which would pre-
vent immediate UN consideration in the event the Anglo-Greek-Turk
talks fail. If an earlier date cannot be agreed on, Greece is likely to
reject Britain's offer and appeal directly to the UN.
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