SUMMARIES OF TRENDS AND DEVELOPMENTS

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CIA-RDP79-01090A000300040001-4
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RIPPUB
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S
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15
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November 9, 2016
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August 18, 1998
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1
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November 7, 1950
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SUMMARY
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Approved For Ruse 1999/09/02 : CIA-RDP79-010QRA000300040001-4 7 November 1950 SUMMARIES OF TRENDS AND DEVELOPMENTS USSR 1. The USSR is e loitinE the resorted Chinese Commu- nist invasion ofTibet.in order to demonstrate support of Peiping in this action and to impress upon India and other Tibetan border areas the inevitable success of Communism in Asia. Reported plans to coordinate a revolt in Nepal with Chinese Communist invasion of Tibet may indicate further Soviet aggression in this part of 'Asia. (Page 4 ) 2. The Soviet_nro,osal for aForeign Ministers' Con- ference to aisscuss the Prague declaration as a basis for the settlemeit, cf the Germanrcblerrl is apparently only another step in the USSR's diplomatic and propaganda effort to Ob- struct a West German military contribution to Western de- fense. The USSR apparently hopes that its proposal for a CFM on. Germany, as well as its recent note to the Western P: wets on German rearmament and the Prague Conmiwiique, will arouse hope in West Germany of obtaining unity by peaceful means, and will strengthen French and Western fears of pro- voking Soviet military action by Western German rearmament. (Page 5 ) 3. There is no firm indication as to Soviet intentions regarding the current attempt of the Austrian Government to ur e Soviet Zone and Sector police of disloyal officials. Statements and actions of local Soviet Commanders indicate intransigence; the Soviet High Commissioner has, however, made unofficial statements which may indicate a desire to find a way out of the present difficulty without too great a loss of prestige to the USSR. (Page 5 ) < No CHANGE IN CLASS. E} DECLAftFIEb *W*R" CLASS. CH A1ut2ar% ,?.,_ "Cow' NE{"Wy DATE AUTtt. HR xo Z ~ --. REVIEWER. 6514 Approved For Release 1999/09/02 : CIA-RDP79-0109OA000300040001-4 Approved For Relase 1999/09/02 : CIA-RDP79-0100$A000300040001-4 COENI1A 4, The UK still ranks as the soviet Orbit's most im- port ant tradin n~x~tner in the West* Moreover, the USSR is absorbing an increasing share of this trade. (Page 6 ) 5. The pros nt_ly_ st iffed ne otiatios between the UK and the US 3R for the Durchase of ooarse rains portends pos- sible failure in the forthcoming East--West grain trade con- ference at Geneva. (Page 9 ) EASTERN EUROPE POLAND ..._...__.......~_ 6, Inter tion of the Polish economy with that of the UaaR will be facilitated bar" the revaluation of the Polish zloty on 2 October 1 50 whiche out a considerable or- tion of uublic._jZ r. char j.L&_,power, (Page 10) 7. Yu osl~evia,I sinability__to maintain an independent economy, which has been accentuated. by the drought induced crisis, has led to a more conciliatory attitude toward its neighbors to the West. (Page 11) INTERNATIONAL COMMUNISM AND PROP1AGANDA. ANALYSIS g. Reliable r~orts deny, that the illnesses of Togliatti and Thorez,_l rtaders respectively~_of e the Italian and French Commun st 1'arteo were timed or "manufactu ed" for ulterior Soviet motives, While Thorez's absence prob- ably will not involve any fundamental change in the French CORFINNTI& Approved For Release 1999/09/02 : CIA-RDP79-0109OA000300040001-4 Approved For ReIse 1999/09/02 : CIA-RDP79-010QA000300040001-4 CP policies, Moscow may make use of Togliatti's incapacita- tion to effect certain changes in the leadership of the Italian CP. (Page 12 ) SPECIAL ARTICLE 9, Two iiclortant _Sovi _personnel shifts announced 28 October provide a basis for certain reflections on the state of both agricultural cultural procurement and security inside the USSR, (Page 13 ) Approved For Release 1999/09/02 : CIA-RDP79-0109OA000300040001-4 Approved For ReI se 1999/09/02 : CIA-RDP79-010 A000300040001-4 Cog I~.NTIAL U S S R Soviet Union ex_loi.ts reported Chinese Communist invvaasion of Tibet The alacrity with which the USSR and its Satellites highlighted Peiping-s announcement of the unconfirmed Chinese Communist invasion of Tibet suggests that Moscow finds this development highly useful as a means. to: (1) support Commu- nist China's tactics against Tibet; and (2) demonstrate to India and other Tibetan border countries the inevitable success of the Communist drive in Asia. Additionally, the USSR probably hopes to focus interest on Tibet in order to assuage Chinese Communist frustration caused by the blocking of the Taiwan invasion and to distract attention from the Soviet setback in Korea. The USSR and Communist China have undoubtedly taken into account the adverse effect of such action on India and are, therefore, prepared to accept the Government of India`s expressions of "shock" and "concern." However, the fact that the USSR is still prepared to accept a calcu- lated risk likely to alienate Indian friendship, may re- flect Moscow's estimate of Indian incapability for strong resistance as well as the importance to the USSR of ex- tending Communist influence to the Indian border. Another indication of willingness of the Soviet bloc to employ aggressive tactics in this area of the Far East is revealed by the report of 30 September 1950, which indicates that the Nepal Congress apparently is not only buying arms and recruiting guerrillas in India, but also has finalized plans for a revolt to coincide with the Chinese Communist invasion of Tibet, (,>ECRET) CO~~ENTIAL. Approved For Release 1999/09/02 : CIA-RDP79-0109OA000300040001-4 Approved For Rel a 1999/09/02 : CIA-RDP79-0109.0A000300040001-4 r,_ Ka' able si nificance of 'Soviet proposal for o *n Hinisters I Conference on German The USSR has made a proposal to the Western Powers to hold a Foreign i'iinisters' Conference to discuss the Prague Declaration as a basis for settl=ement of the German problem. The Soviet Union is undoubtedly aware that the Prague declara- tion, which makes no provision for free elections in all Germany and demands a Constitutional 1assembly with parity representa- tion of East and West Germany, is not acceptable to the Western Powers, Thus the proposal is apparently only another step in the Soviet Union's diplomatic and propaganda effort to obstruct a West German military contribution to Western defense and was well-timed to coincide with 7 November anniversary and the Second World Peace Congress. In its effort to obstruct or at least delay West German rearmament, the USSI'. is apparently attempting to ex- ploit the opposition in France and West Germany. The cur- rent proposal, as well as the recent note to the Western Powers on German rearmament and the declaration of the Prague Conference, give a surface indication of Soviet "willingness" to settle the German problem and, at the same time, serve as a warning to the West regarding West German rearmament. The USSR apparently believes that such tactics will arouse hope in West Germany of obtaining unity by peaceful means, and will strengthen French and West German fear of provoking Soviet military action by West German rearmament, (SECRET) Soviet interference in Austrian Government's '"A" ,Zur sc fiction over__policee force The _ustrian Government is currently attempting to rid the Soviet Zone and Sector police of those officials who proved disloyal in the recent distrubances. Soviet authorities (local commanders) have stated that the ustrian Government will not be permitted to dismiss, transfer, or take any Approved For Release 1999/09/02 : CIA-RDP79-0109OA000300040001-4 Approved For Rel a 1999/09/02 : CIA-RDP79-010 %A000300040001-4 disciplinary action against these officials. Furthermore, the five Coraaunist Police Chiefs of the Soviet Sector in Vienna are continuing, by Soviet order, to exercise their official functions despite an i:.ustrian order suspending them from office. The -ustrian Government, realizing that any con- cession to the USJR on police jurisdiction would invite further Soviet encroachment on Austrian political autonomy, is proceeding with the judicial investigation of the five police chiefs and apparently intends to carry out the ver- dict of the disciplinary court.. Minister of Interior Helmer has intimated that the decision of the court will be dis-- missal for three of them and lesser penalities for the other two. There is not, at present, any firm indication as to whether the UJSR will remain intransigent or will be will- ing to compromise on this issue. The statements and actions of local Soviet commanders would appear to indicate in- transigence. On the other hand, Sovi::A authorities have made such statements in the past and retreated from them upon encountering vigorous reaction on the part of the Austrian Government, Furthermore, in the recent meeting (requested by the Soviet authorities) of Soviet High Com- missioner Sviridov, Chancellor F'igl and Minister Helmer, Sviiridov asked if the investigation of the five Communist Police Chiefs could not be c.ncelled, or at least terminated with reprimands rather than removal from office. This may indicate a Soviet desire to find a way out of the difficulty without too great a loss of nr: sti?e. (SECRET) USSR and Soviet Orbit continue to o exploit UK trade The UK still ranks as the Soviet Orbit's most im- portant trading partner in the West. Moreover, the USSR is Approved For Release 1999/09/02 : CIA-RDP79-01090A000300040001-4 Approved For Rele 1999/09/02 : CIA-RDP79-010A000300040001-4 absorbing an increasing share of this trade. The following table, based on British statistics, reveals that Eastern Europe imports from-the UK declined during the first seven months of 1950, as compared with the same period of 1949, but that Soviat exports rose sharply and that those of Poland and Czechoslovakia also increased substantially, ES TRADE WITH THE UK January-July,_ .1~ . January=Jul, r O Ell Im o~ rts* L ~orts E,E Irnnorts=* EE Exhorts (in 1000 pounds sterling) USSR 7,027 3,584 6,923 17,058 Poland 6,402 6,822 4,288 11,796 Hungary 2,451 5,606 1,283 362 Czechoslo- 3,700 1,124 3,110 4,727 vakira Bulgaria 485 1446 323 39 Rumania 1x2 LK L10 E 154 . - Totals 21,316 18,779 17,031 34,536 `Including UK reexports, Note: Figures are presented in pounds sterling rather than US dollars, in view of the devaluation of the pound in September 1949 from 8'4.03 to .2.80. Conversion to dollars does not, therefore, present a completely accurate picture. On the other hand, devaluation was followed by an increase in prices in some cases. The sharp rise in Soviet exports was due to in- creased shipments of grain and timber, which are imports of fundamental importance to the UK economy, The value of grain exports exceeded L13 million during the first eight months of 1950. :Exports of timber rose to more than L2 million as com- pared with L381,086 during the corresponding period of 1949. In view of current timber contracts and pending negotiations on grain, it seems likely that the increase for the entire year of 1950 will be still greater as compared with 1949. --7- Approved For Release 1999/09/02 : CIA-RDP79-01090A000300040001-4 Approved For Relee 1999/09/02 : CIA-RDP79-010000300040001-4 SECRET In addition to serving as an important buyer of Soviet grain and lumber, the UK also. provides valuable im- ports for Eastern Europe. Despite the decline in total Eastern European imports, purchases of machinery of all types rose from r8 million in the first eight months of 1949 to tll million in the same period of 1950, with the Soviet, share rising from I;5 million to L-7 million. Pur- chases of machine tools rose slightly, to hl.2 million, but the Soviet share jumped from 1111,775 to L-509;493. These are mostly goods which were ordered from British manufac- turers one to three years ago. Similarly, Soviet purchases of rubber directly from the UK rose from 152,124 to L322,5l9 although those of the Satellites decreased. This export balance of trade in favor of Eastern Europe continues to provide an important source of sterling with which to purchase strategic raw materials elsewhere in the sterling area. In contrast to a small unfavorable balance for the first seven months of 1949, British figures show that Eastern Europe enjoyed an export balance of b17.5 millions in the same period of 1950, of which more than L-10 25X6Alions went to the USSR. SECRET Approved For Release 1999/09/02 : CIA-RDP79-0109OA000300040001-4 Approved For Rel6"e 1999/09/02 : CIA-RDP79-010 000300040001-4 East-West ,grain trade talks nat.expected to succeed The presently stymied negotiations between the U.K. and the Soviet Union for purchase of coarse grains portend possible failure in the forthcoming East-West grain trade conference at Geneva. The Geneva grain conference, sponsored by ECE, will be held 14 November when discussions will be held on the multilateral exchange of cereals from the East for Western goods or currencies.. The unilateral talks now taking place in Moscow between the U.K. and the Soviet Union have been deadlocked by price disagreement and Soviet in- sistence that sterling proceeds be usable for purchase of certain sterling area commodities. If the present Moscow negotiations with the U.K. indicate the kind of concessions the Soviet Union will de- mand at Geneva, only negative results can be expected,. Western European countries may be looking forward to a price concession by the East, similar to the relatively low prices agreed to in the International Wheat 'groement by wheat trading nations outside the Orbit. Furthermore, conflict may arise over whether or not Western goods will be guaranteed in return for the grain. Originally, the ECE indicated that the Soviet Union would accept Western currency without asking for specific commodities. The Soviets are now demanding in the unilateral talks with the British that proceeds from grain sales be used for purchase of rubber, wool and other strategic corn oditieso If, on the other hand, the talks are successful and these demands are carried over to the Geneva Conference they may result in an embarrassing situa- tion because of the policy of the West in retarding the flow of strategic materials to the Orbit countries. (SECRET) Approved For Release 1999/09/02 : CIA-RDP79-01090A000300040001-4 Approved For Rele a 1999/09/02 : CIA-RDP79-010SOA000300040001-4 SECRET EASTERN EUROPE POLAND Poland eguatos the zloty to the ruble Integration of the Polish economy with that of the USSR will be facilitated by the revaluation of the Polish zloty on 26 October 1950, which wiped out a considerable portion of public purchasing power. The immediate effect on relations with the West will be a minimum threefold increase in the cost of diplomatic and commercial representation in Warsaw. The initial internal effect will be to reduce the purchasing power of currency in circulation. Wages, prices, forward contracts, deposits in financial institutions, and government bonds and funds will be converted at the rate of three gold zloties for one hundred paper zloties. Cash in the hands of the public will be converted at a rate of one for one hundred. The new zloty is equated to the ruble, having a content of 0.222168 grams pure gold (US-$0,25). No limit is imposed on tha amount of cash which may be con- verted at the 1/100 rate, but, unlike the Soviet monetary reform of 1947, no preferential rate for holders of small balances was allowed. It appears that more damage will be done to the "working classes" than to the remaining capitalistic segment of the Polish economy, because of the relative purchasing power of bank deposits will be unchanged by the deflation. Because checking accounts are not extensively used by the working population of Eastern Europe, the urban worker per- sonally retains his savings in cash. Savings and working capital of the small remaining segment of the capitalistic Polish economy will. retain undiminished purchasing power to the extent that these funds were held in banks. Cash in tills, as well as that in pockets, will lose two-thirds of its value. Approved For Release 1999/09/02 : CIA-RDP79-0109OA000300040001-4 Approved For Rel a 1999/09/02 : CIA-RDP79-0106 A000300040001-4 The official declaration does not make the new zloty a gold standard currency, nor will it produce a stable price level. Neither will a Governmental statement as to the gold content of a currency necessarily increase domestic savings nor produce international., confidence in the zloty. Trade with the West is, and will continue to be, conducted in terms of Western currencies and on a world price basis. The effect of the deflation of relations with Moscow.will probably not have more than minor reactions on daily Polish economic activity. Adjustments in norms, prices, and plans may be expected in Poland, but major adjustments seem to have. been already consummated. The net immediate ef- fect of the revaluation will be reduction of the',Polish stan- dard of living ^nd the faciliation of.Soviet control of Polish affairs for Soviet benefit, In addition, if Poland is over con- verted into a Soviet Socialistic Republic, the most essential single step remaining in its economic preparation has now been accomplished, (CON.FIDENT IAL) Drou ht crisis in rin ,bout j oslav, conomic "A" rra rro 2Lrg(;nt with its non-Communist neighbors Inability to maintain an independent economy, which has been accentuated by the dlroutht-induced crisis, has led to a more conciliatory Yugoslav attitude toward its neighbor to the West. This is :evidenced by the improvement in Yugoslav- Italian economic relations. Recent Yugoslav restrictions on relations between the Yugoslav and Allied Zones of Trieste have been relaxed, Yugoslav cooperation in determinin valuations of former Italian properties will probably lead to a settlement of Italian reparations to Yugoslavia under the 1947 Peace Treaty. The urgent need for food imports to the drought stricken areas of Macedonia and Southern Serbia may cause Tito to become some- what more conciliatory toward Greece, in order to facilitate the reopening of communications through aalonika.. Other actions Approved For Release 1999/09/02 : CIA-RDP79-01090A000300040001-4 Approved For Rel a 1999/09/02 : CIA-RDP79-0109 A000300040001-4 designed to overcome long outstanding problems are the re- turn of German P1,Ws and the apparent soft-pedaling by the Belgrade Government of its claims to Austrian Carinthia. (aECJ;.]T) INTERNATIONAL COMMUNISM r,SNDPR~O 'i G MDA l TtJ: hIS Togliatti f s i lln s is real ?ay eyentual1-result "B" in_,stren,teni~activist Reliable reports. deny that the illnesses of Togliatti and Thoroz, leaders respectively of the Italian and French Communist Parties, were timed or "manufactured" for ulterior Soviet motives, While Thorez's absence probable will not in- volve any fundamental change in French CP policies, Moscow may make use of Togliatti's incapacitation to effect certain changes in the leadership of the Italian CP. Paliniro Togliatti, at 57, has been the effective leader of the Italian CP since 1926, despite frequent rumors that he was losing power to one of his subordinates or fall- ing into disfavor with Moscow. His incapacitation again raises the question of the future leadership of the Party. During his illness, Party matters will probably be directed by a Triuziivirate,, which includes Longo, para-military chieftain of the Party, Secchia, the org??nizational expert and one other prominent member of the Party. Should Togliatti recover from the serious brain operation he has undergone, Moscow may delegate him to the position of "elder statesman" of Italian, if not of :European, Communism. He enjoys the admiration and respect of the rank rind file of Communists throughout Western Europe and his permanent removal from the Italian CP leadership would result in a distinct set- back to the mass party in Italy, By keeping Togliatti in the position of the "grand old man" of Italian Communism and giving the active leadership Approved For Release 1999/09/02 : CIA-RDP79-01090A000300040001-4 Approved For Relee 1999/09/02 : CIA-RDP79-0109DA000300040001-4 to the Longo-Secchia group, the Party would seek to: (1) re- tain a symbolic leader important for mass allegiance, and (2) facilitate the achievement of organizational changes which are badly needed. Should such a leadership remain in con- trol, greater emphasis may ;radually be placed on the strengthening of cadre organization underground preparations., and direct action tactics. (SECRET) SPECIAE Id TICLP, ,1 ortant tersonnel shifts within USSR Two important Soviet personnel shifts, announced in the ;.soviet press on 28 October, provide a basis for cer- tain reflections on the state of both agricultural procure- ment and security inside the USSR. P- K. Ponomarenko, since 194 a member of the all-important five man Secretariat of the Party Central Committee, replaced B. A. Dvinsky as Minister of Agricultural Procurement, a position held by the latter for more than six yea.-^s. Simultaneously, announcement was made that L. Z. Llekhlis, owing to "ill health", had been supplanted as Minister of State.Control by V. N. Merkulov, 1'finister of the NOB until 1946, and more re- cently in charge of the Administration for Soviet Property :";broad, Is a high Party official, Ponomarenkors appoint- ment to a specific ministerial post appears particularly important. The relationship between Party.and Government in the USSR is based on the idea that the Party, naturally has collected at the top of its hierarchy the ablest per- sonnel available and, therefore, is most capable of determin- ing policy and checking on 1_ts correct execution. Theoreti- cally, the Party guides rather than interferes in adminis- trative detail. This ideal is openly contradicted, only in such times of stress as the last war when most Politburo members headed specific Ministries. Ponomarenkots appoint- ment would appear, therefore, as an administrative job to -13- Approved For Release 1999/09/02 : CIA-RDP79-0109OA000300040001-4 Approved For Rele 1999/09/02 : CIA-RDP79-0109A000300040001-4 troubleshoot what must be very important shortcomings in the Ministry of Procurement. This .in.istry is a vital clearing house, collecting from the Ministry of Agriculture and supplying the 'Ministry of State Reserves. Both of these actions proceed according to planned production and planned needs. Since available evidence indicates that grain procurements for 1950 are above those of ..1949 and evidently satisfy the requirements, apparently the trouble does not lie with agricultural pro- duction per se. The two most logical alternatives which might ac- count for this suddenly increased emphasis on Procurement are: (1) Because of the close liaison required between the Ministry of Agriculture and the Ministry of Procurement on the one hand and the Ministry of State Reserves and Ministry of Procurement on the other hand, the Kremlin may have de- cided that in order to attain better coordination of pro- duction, procurement, arid reserves, a top Party man was needed as, at least a temporary administrator, to strengthen the procurement program. (2) There is some reason to be- lieve that the Gov; rnment he.s embarked on a plan to increase state reserves rapidly. This may well have caused local food shortages by way of heavier procurements. Since the officials of the Ministry of Procurement have control over local food supplies they have undoubtedly been exposed to graft as a result of these shortages, The appointment of Ponomarenko might foreshadow a general "tightening up" of the procurement system, further increases in procurements in 1950-1951, and even a purge in those regional offices where procurements have proved unsatisfactory. In considering this second alternative, it is in- teresting to note that one of the duties of the Minister of State Control is the checking on the fulfillment of planned procurements. ivierkulov, with his experience in secret police techniques and his obvious connections with the MGB, is.well -14- Approved For Release 1999/09%02 : CIA-RDP79-0109OA000300040001-4 Approved For Reldse 1999/09/02 : CIA-RDP79-010WA000300040001-4 suited to liquidate any i1 egYal practices which might be interfering with planned procurement. He should also prove adept at-extorting newer and inordinately heavy procure- ments. Merkulovis appointment will have the effect of more closely linking State Control with the MVD and MGB. Even in the Administration for Soviet Property Abroad, it is probable that Merkulov was still primarily engaged in MOB work Indeed, the background of other personnel in his Administration, such as V. G. Dekanozov former Deputy Min- ister of Military Intelligence, hardly emphasized the sup- posedly economic interest of this organization. The removal of L. Z. Mekhlis as Minister of State Control may well have occurred at an earlier date. He was last:, publicly identified in this position on the occasion of Dimitrov's funeral, 4 July 1949, and was one of three sup- posed members of the Party's important Orgburo who were not given the honorary appointment to the Commission which pre- pared Stalin's 70th birthday celebration in December of the same year. Whether his release was in fact because of ill health or because he is now in political decline is not yet apparent,,. (CONF_LDt1PJ'1'1r:L~ -15- CUNFIDENTIAl, Approved For Release 1999/09/02 : CIA-RDP79-01090A000300040001-4