CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001000080001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 43
• Document Creation Date: December 16, 2016
• Document Release Date: March 30, 2005
• Sequence Number: 1
• Publication Date: November 5, 1956
• Content Type: SUMMARY

Approved Foraesipase 2005/04/13 : CIA-RDP79-00927fte1000080001-4
(V /4T27
CO=L
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. is
OCI NO. 7261/56
15 November 1956
DOCUMENT NO.
NO CHANGE et CLASS. CI
(3 DECLASSIFIED
CLASS. CHANGED TO:
NEXT RF.VIEW DATE. /
AUTH. H 70
PATE; REVIEWER: J
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
State Department review
completed
DIA review(s) completed.
CONFIDENTIAL
rift
25X1
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved Fo?laeiease 2005/04/13 : CIA-RDP79-00924,&,PW1000080001-4
THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
?
25X1
25X1
CONFIDENTIAL
Approved For Ridemose 2005/04/S15079-00927/4641441)0080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
THE WEEK IN BRIEF
PART I
OF IMMEDIATE INTEREST
MIDDLE EAST CRISIS Page 1
Israel is maintaining a large proportion of its
military manpower in alert status along the Jordanian
and Syrian borders. Fedayeen attacks from Jordan
and Syria continue. The continued mobilization of
the Israeli army suggests that the Israelis contemplate
becoming involved in hostilities on their eastern
borders. In Egypt, Nasr remains in full control of
the government
The Soviets have taken an increasingly harsh
attitude toward Israel, and may demand that Israel
withdraw to the 1947 demarcation lines. Meanwhile,
the USSR is making preparations to provide "volunteers"
and additional equipment to the Arab states and has
threatened to do so if Anglo-French-Israeli troops are
not withdrawn.
Britain and France have reiterated their intention
to keep their troops in Port Said at least until sub-
stantial United Nations forces are well established in
the canal zone.
THE SITUATION IN HUNGARY Page 6
Although the new puppet regime in Hungary is
continuing its desperate efforts to assert its authority,
its effective control apparently does not extend beyond
the range of Soviet guns. The fighting, for the most
part, appears to have ended, but the general strike in
Budapest continues; many "freedom fighters" apparently
have retained their arms and come out at night to snipe
at the Soviet and Hungarian police. The government has,
to date, been unable to cope with the widespread
25X1 passive resistance.
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
THE WEEK IN BRIEF
Approved For Release 2005/0t
likt7A444410080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
PART II
NOTES AND COMMENTS
ASIAN REACTION TO SUEZ AND HUNGARIAN CRISES Page 1
With very few exceptions, Asian countries have been
far more deeply moved by events in Egypt than in Hungary.
Egypt is identified in the Asian mind as a brother nation
fighting the old, common enemies of freedom, while
Hungary is regarded as remote and is considered as
essentially the white man's problem. Moreover, Suez
Canal operations are of economic concern to many Asian
nations, which have no economic interest in the
outcome of the Hungarian rebellion.
BULGARIAN OFFICIALS CONCERNED
OVER DOMESTIC PROBLEMS Page 2
Some Bulgarian officials at home and abroad believe
the Bulgarian domestic situation is similar in many
respects to that in Poland and Hungary prior to the
recent upheavals. While they do not believe popular
uprisings are imminent, they feel the regime must take
immediate steps to correct the domestic situation. Dis-
agreements over what these steps should be have brought
to the surface the factionalism which has developed,.
largely as a result of Moscow's changed attitude toward
Titoyin the regime in the past year.
THE GOMULKA REGIME IN POLAND
The Polish regime is confronted with the difficult
task of formulating policies that will satisfy popular
aspirations and yet not antagonize the Kremlin. In the
face of an "unnatural calm" on the Polish scene, party
first secretary Gomulka continues to implement his
policy of national Communism while the Kremlin looks on
with suspicion. He is now in Moscow to discuss out-
standing differences. Meanwhile, the new regime is
taking steps to strengthen the economy and carry out
the economic program Gomulka outlined when he took
office.
i
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
THE WEEK IN BRIEF
Page 4
Approved For Jatejse2005/04SlaREIrP79-0092740.01000080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
EFFECT OF SUEZ CANAL CLOSURE
ON BLOC ECONOMIES Page 6
Closure of the Suez Canal will have only a negligible
impact on the economies and shipping of the USSR and the
Eastern European Satellites, whose vessels accounted for
only 2 percent of Suez Canal transits in 1955. Communist
China, however, depends on substantial sea-borne deliv-
eries through the Suez Canal. Cargoes carried by Soviet
bloc and Finnish ships to China support industrial con-
struction, while nonbloc vessels carry materials for
China's agricultural development program. If the canal
is closed for only a few months, it is probable that
supplies adequate to meet China's normal petroleum re-
quirements can be furnished from existing stocks and by a
Trans-Siberian rail movement.
TURKEY'S TRADE WITH SOVIET BLOC
RISING Page 7
The continuing deterioration of Turkey's economy
over recent months has made Turkish businessmen in-
creasingly receptive to Soviet bloc trade and credit
offers. Turkey has accumulated debts of about
$300,000,000 to its Western trading partners and is now
In a very poor payments position with free world coun-
tries.
TENSION IN KOREA Page 8
Officially inspired demonstrations in South Korea
continue to call for North Korean revolts. The demon-
strations reportedly are apathetic and are failing to
create any enthusiasm among the populace for a "march
north." The North Koreans apparently are not looking
for a pretext to initiate hostilities and have been
increasing their emphasis on "peaceful unification."
Recently reported troop movements in North Korea are
believed to have been on a small scale and probably
reflect defensive redispositions.
LAOS Page 10
The Pathet Lao will probably seek to integrate
many more insurgents into the Laotian army than ex-
pected by the royal government, whose negotiators
suggest they may be unable to prevent it. Should the
government continue to make concessions to the Pathets,
it will reduce its ability to maintain an independent
Laotian policy. The crown prince is pessimistic over
the drift of events in Laos and believes a political
crisis may develop during the special session of the
National Assembly which begins on 20 November.
SECRET
iii
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
THE WEEK IN BRIEF
25X1
Approved Forgalgase 2005/13BOUNADP79-00927-AQQ41300080001-4
SINGAPORE .
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
. ? S OOOOOOOOOOOOOOO 0 .
Chief Minister Lim Yew Hock, who on 7 November won
a 25-to-4 vote of confidence for his handling of the
recent Communist-led riots, is continuing to press his
campaign against subversion. Government and local
British officials are cautiously optimistic, but fear
there may be further disturbances following the release
of those persons now in custody and the reopening of
two Chinese middle schools.
Page 11
EURATOM AND THE EUROPEAN COMMON MARKET Page 13
Compromise proposals on EURATOM and the European
common market approved by Chancellor Adenauer and
Premier Mollet at their 6 November meeting have evidently
cleared away some of the major obstacles to both proj-
ects.. Prospects for resolving the serious problems
which remain have improved in Bonn, but there is some
feeling in France that Mollet has conceded too much.
PART III
PATTERNS AND PERSPECTIVES
COMMONWEALTH STRAINED BY NEAR EAST CRISIS
The Eden government's military intervention in
Egypt has seriously shaken the confidence of the other
Commonwealth governments in its leadership. Particularly
in India, Pakistan, and Ceylon, elements opposed to the
"!ommonwealth connection may be expected to bring heavy
.essure against co-operation with Britain. While no
thdrawals from the Commonwealth are expected, London's
tion with with all members may have suffered extensive
25X1
Page 1
CAIN'S NEW INTEREST
A WEST EUROPEAN FREE TRADE AREA Page 3
Britain is promoting the formation of an extensive
uropean "free trade area" that would be associated with
the customs union now under consideration by the six
nations of the European Coal-Steel Community (CSC)?-
,Such a customs union would give West Germany and the
other CSC nations competitive advantages over Britain
unless Britain becomes a member.
SECRET
iv
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
THE WEEK IN BRIEF
Approved For Release 2005/04AEMERTP79-00927AqQa,00080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
25X6
NATIONALIST CHINA AND THE OVERSEAS CHINESE Page 9
Since last May the Chinese Nationalist government
has renewed its efforts to gain the loyalty of the
numerous and influential Overseas Chinese, most of whom
have been indifferent toward the Taiwan regime. Limited
success has been achieved in encouraging visits to
Taiwan and promoting better economic relations between
local Chinese and the Nationalist government. Obstacles
to the Nationalist program are formidable, however, and
it is questionable whether sentiment favoring Taipei
is being significantly increased.
SECRET
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
HE WEEK IN BRIEF
Approved Forgfaase 200
274=000080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
PART I
OF IMMEDIATE INTEREST
MIDDLE
Israel is maintaining a
large proportion of its mili-
tary manpower in alert status
despite the government's
announcement that Israeli
troops would withdraw from
Egypt--though not from Gaza,
nor presumably from the Saudi-
owned islands commanding the
entrance to the Gulf of Aqaba.
Prime Minister Ben-Gurion has
said he believes there are
still "battles" to come.
The Israelis apparently
feel pressure from at least
two directions. First is the
continued hostile attitude
of Syria and Jordan, inspired
by Egypt and supported by the
prospect of "volunteers" and
other assistance from the
USSR.
EAST CRISIS
Neither Syria nor Jordan
is militarily ready for action;
but fedayeen attacks
from these countries
have continued
Israel's repqrd in-
dicates it will not
long tolerate a sit-
uation of this kind,
and the Israeli
army's continued
mobilization suggests
that the Israelis may
contemplate striking
at Syria and Jordan
before being attacked
by them.
A second pos-
sible development
which may weigh in Israel's
calculations is the possibility
that the great powers, acting
through the UN, may seek to
take from Israel the fruits
of its victory in Sinai.
The Israeli army is re-
ported to be hurrying to evac-
uate captured Egyptian equip-
ment from the desert before the
UN police force moves from the
Suez Canal zone to the old
armistice lines. The recall
on 11-12 November of Israeli
units and personnel which had
recently been demobilized was
explained to the American army
attach?n Tel Aviv as necessi-
tated by the urgency of this
evacuation operation. Beyond
this immediate need, Israel
probably desires to be able to
bargain from strength, to head
off or if necessary defy future
Soviet-or Arab-Asian-sponsored
demands that Israel return to
BLACK SEA
NORM
TURKEY
mins
LIBYAi
24153
GIRO.
SINAI
SYRIA
tion7)./
J.
1, /JORDAN\
EGYPT
SUDAN
RED
SEA
SAGhOflD
IRAQ
IRAN
1..
PERSIAN
SAUDI ARABIA
4, SIVA
IS NOVEMBER 1.56
VACS
MENT111
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
PART I OF IMMEDIATE INTEREST Page 1 of
Approved For Releage 2005/04/13 : CIA-RDP79-00927ACC.100080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
Egypt the occupied territory
without at the same time call-
ing on Egypt to make a defini-
tive peace settlement.
Egypt
The Nasr regime is making
a major propaganda effort to
convince the Egyptian public
that the "heroic" defense put
up at Port Said--the "Stalin-
grad of the Arabs"--and what
is alleged to have been a last-
ditch stand in Sinai, are the
result of the regime's effi-
ciency and patriotism.
In his concept of future
developments, Nasr appears
even less willing to compromise
than he has been on the question
of the activity of the UN
force. He told Ambassador
Hare on 13 November that "peace"
PART I
could be re-established with
Israel only if the Israelis in
no way profited from their
attack on Egypt. In this con-
text, Nasr specifically men-
tioned the Gaza strip. More-
over, he said he could not see
any possibility for early
negotiation of a "settlement"
of the Palestine issue. Israeli
spokesmen have insisted that
such an over-all settlement is
a condition for Israeli com-
pliance with the most recent
UN resolutions.
Soviet Moves
The Soviet line this week
credited Bulganin's notes to
Eden, Mollet and Ben-Gurion on
5 November with forcing the
three powers to accept a cease-
fire.
An increasingly harsh
attitude toward Israel has be-
come apparent and is likely to
be followed shortly by a Soviet
demand that Israel withdraw to
its former boundaries, evacuating
the Gaza strip.
Ambassador Bohlen believes
any Soviet assistance given
during the cease-fire would be
to Syria and possibly Jordan and
Iraq. A Soviet broadcast of 13
November again called into ques-
tion the "whole future" of Is-
rael, stating that "what happened
to Hitlerite Germany may happen
to Israel."
Last weeks Soviet propa-
ganda frequently mentioned that
the USSR, within the context
of the UN, would help "crush
aggression." This week, however,
SECRET
Approved For Releath,219R/0413 : CIA-RDP79-00927A001000080001-4
DIATE INTEREST Page 2 of 9
Approved For ReaIse 2005/04/13 : CIA-RDP79-00927AQM00080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
the USSR avoided mention of
UN forces on the way to Egypt,
used the slogan "No foreign
soldiers on Egyptian soil,"
and reportedly distributed
a call-up notice to an un-
specified number of Soviet
citizens requiring them to
"volunteer" for service in
Egypt and Arab countries.
The TABS statement on 10
November is the clearest to
date on the USSR's intention
regarding Soviet volunteers.
It declared that if Great Brit-
ain, France and Israel did not
withdraw their troops in
accordance with UN decisions,
"the appropriate authorities
of the USSR will not hinder
the departure of citizen volun-
teers who wish to take part in
the struggle of the Egyptian
people for their independence."
This is the first time since
the attack on Egypt that the
USSR has suggested that it
might send volunteers to the
Middle East unilaterally And
outside the framework of the
United Nations.
Moscow's continuing sus-
picion of any UN-sponsored
police action was indicated by
Secretary General Hammarskjold's
remark to Ambassador Lodge on
11 November that he is sure
that Egyptian reservations con-
cerning the composition of the
police force were the direct
result of Soviet influence
since, in his conversations
during the past week, the
Egyptians had never hinted at
them.
\ Soviet UN delegate
Sobolev told representatives
on 7 November that a conspiracy
would develop during the next
two to three weeks to impose
on the Arabs a settlement in
line with the two resolutions
introduced by the United States
on 1 November which deal with
a settlement of the Suez Canal
question and the entire Arab-
Israeli question.
President Nasr's reserva-
tions concerning the UN police
action, and Sobolev's attempt
to arouse further Arab suspi-
cions, may foreshadow an attenpt
by the USSR to get Egypt to
voice such strong objections
to the plan that it will be
ineffective unless it is al-
tered. Soviet propaganda is
declaring that the Soviet
government is apprehensive lest
the cease-fire was merely a
maneuver to gain time.
Britain and France
Britain and France intend
to keep their forces at Port
Said until substantial United
Nations troops are well estab-
lished in the canal zone, and
may be preparing to hold on
longer. The two brigades of
British assault troops there
are being replaced by an equiva-
lent strength in infantry.
British and French leaders
have indicated that before with-
drawing their forces they in-
tend to make sure the UN forces
will prevent the canal from
reverting to Nasr's control.
Eden told parliament on 9 Novem-
ber that withdrawal would come
only when UN forces were able
to carry out their mission
"effectively." In a 14 Novem-
ber conversation with Ambassa-
dor Lodge, Foreign Secretary
Lloyd said these forces must
be far more substantial than
the present contingent of
"Finns, Scandinavians, and
Colombians." Lloyd expressed
confidence of British and French
SECRET
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
PART I OF IMMEDIATE INTEREST Page 3 of 9
Approved For Reate 2005/04/13-: CIA-RDP79-00927A4010,90080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
ability to take care of as
many as 50,000 "volunteers"
from the Soviet bloc.
London and Paris clearly
believe that UN policing of
the canal is essential--de-
spite the lack of any UN resolu-
tion providing for this and
statements from UN officials
that it is not part of the UN
mission. This view has been
indicated by public statements
from Eden, Mollet, and Pineau,
and by Lloyd in his conversa-
tion with Ambassador Lodge.
Several supporters of the Eden
government have told the Ameri-
can embassy in London that the
Conservative Party will be
split wide open if Britain is
pressured into evacuating Egypt
before the UN can assure free-
dom of navigation in the canal.
Domestic Opinion
Domestic opinion in Brit-
ain and France remains highly
agitated over the intervention,
cease-fire, and likelihood of
a withdrawal from Egypt with-
out any principal goal having
been achieved.
Prime Minister Eden's
standing has been shaken by a
series of resignations from
his government. Two junior min-
isters quit, and five back-bench
MP's have refused to support
the government. Several in-
fluential journals, including
the independent Economist,
believe his usefulness as Brit-
ain's leader is ended and he
should resign.
The government won its
latest vote of confidence,
however, by 62 votes, just one
short of its over-all majority;
and Eden's standing with the
general public appears to have
risen. Some of the fire of
Labor's attacks on Eden has
now turned toward the Soviet
Union for its intervention in
Hungary. The last of the oil
tankers to pass through Suez
arrives in Britain this week,
so the impending oil shortage
is yet to have any impact on
popular attitudes.
French public dismay at
the abortive intervention is
reflected in the renewed search
for a foreign scapegoat. The
United States has received a
major share of the blame. Non-
Communist members of the
National Assembly foreign af-
fairs committee are said to
accuse the United States of
supporting the Asian-African
bloc rather than its European
allies. French leaders also
compare unfavorably the United
Nations' quick action on Suez
with its response on Hungary.
Foreign Minister Pineau told
the foreign affairs committee
that the UN is controlled by
irresponsibles and is no longer
an effective instrument.
Signs of French-British
differences over the responsi-
bility for instigating the
intervention and causes of its
failure are receiving more
notice as well. Press reports
In Paris hint at excessive
British pressure for the cease-
fire and for an Israeli with-
drawal.
British Middle East Position
Meanwhile, British offi-
cials profess to believe that
conditions in the Middle East
will allow Britain to retain
considerable influence. In
sum, they see Nasr's prestige
suffering from the quick de-
feat and believe that the
SECRET
Approved For ReleaV095/09113 : CJA-ME79-00927A001000080001-4
PART I IMEDIATE INTE;REST Page 4 of 9
Approved For Release 2005/gcBg/TRDP79-009274W000080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
Western show of strength may
eventually redound to their
favor. London also hopes that
its claims to have averted
the threat of Soviet dominance
will also gain it favor a-
mong the Arab rulers, if not
among the people.
Britain evidently believes
the Baghdad pact can still
serve its interests. The
relatively pro-British stand
of Iran and Turkey at the
meeting of Moslem Baghdad pact
members on 8 November, as well
as Pakistan's intention to ask
Saudi Arabia to join, pre-
sumably encouraged London.
Despite Iraq's announced re-
fusal on 9 November to partici-
pate in any pact council meet-
ings attended by Britain,
British officials note they
can continue to participate in
the committees.
Officials also express
confidence they can control
any disaffection in the Persian
Gulf principalities, despite
the likelihood of further sabo-
tage, and in Aden, despite
Yemeni distribution of arms
to dissident tribesmen.
Despite the break in dip-
lomatic relations with Syria .
and Saudi Arabia, as well as
Egypt, London seems to believe
that a basis for resuming re-
lations still exists and that
other breaks can be prevented.
As yet the British give no
evidence of abandoning their
long-term hope of weaning
Saudi Arabia away from its
close Egyptian ties. Signs
that Jordan is considering
accepting aid from the Soviet
Union have not deterred Britain
from furnishing a $700,000
installment on its promised
$34,000,000 annual aid.
UN Police Force
UN secretary general
Hammarskjold has obtained
Egyptian agreement to the use
of Colombian, Danish, Finnish,
Norwegian, Swedish, and Indo-
nesian troops in the UN emer-
gency police force. At Egypt's
request the force will also
include Indian and Yugoslav
units. Canadian participation
in principle has been accepted
by Egyptian foreign minister
Fawzi but remains subject to
negotiations between Nasr and
Hammarskjold this week in Cairo.
The Egyptians reportedly are
concerned that the Canadian
troops' resemblance to British
troops creates the possibility
of incidents with the populace.
Egypt rejected Pakistani
troops because of Karachi's
adherence to the Baghdad pact.
However, Hammarskjold over-
came Egyptian objection to the
use of Danish and Norwegian
troops because of their NATO
ties by insisting that the
Scandinavian contingent could
only come as an integrated one.
Hammarskjold rejected
troop offers from Czechoslo-
vakia and Rumania, and believes
the Indonesian troops will
never materialize.
SECRET
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
PART I OF IMMEDIATE INTEREST Page 5 of 9
Approved For Rejs,ase 2005/04agt-TDP79-00927A144000080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
Twenty-three UN members
have offered troops to the UN
police force. Of the Common-
wealth countries, Australia,
Canada, Ceylon, India, New
Zealand, and Pakistan have
volunteered forces. Western
European volunteers are Bel-
gium, Denmark, Finland, Greece,
Italy, the Netherlands, Norway,
and Sweden. Brazil and Colom-
bia are the only Latin Ameri-
can UN members so far to have
offered to contribute troops.
Other offers came from Burma,
Ethiopia, the Philippines and
Yugoslavia. An advance con-
tingent of Scandinavian and
Colombian troops landed at
Ismailia on 15 November.
Afghanistan was the first
country to respond to Egypt's
call for volunteers, and "floods"
of Afghans are preparing to go
to Egypt, according to press
reports from Cairo and Moscow.
Afghanistan's relations
with the USSR have become in-
creasingly close over the past
year, and Kabul is keenly in-
terested in the Egyptian situa-
tion. Soviet use of Afghani-
stan to support a volunteer
movement into Egypt is con- '
ceivable, despite the country's
geographic isolation and its
primitive stage of develop-
ment.
Hammarskjold believes
that the clearance of the canal
is not within the mandate of
the UN police force, but is
subject to negotiation, along
with arrangements for control
and operation of the canal,
in accordance with the six
principles previously accepted
by the parties concerned. How-
ever, Hammarskjold is optimis-
tic about getting Egyptian con-
sent for the UN to use Danish
and Norwegian technicians, on a
commercial basis, for clearance
operations.
THE SITUATION IN HUNGARY
Although the new puppet
regime in Hungary is continu-
ing its desperate efforts
to assert its authority, its
effective control apparently
does not extend beyond the
range of Soviet guns. The
Approved For Releasg0
PART I
25X1
25X1
fighting, for the most part,
appears to have ended, but the
general strike in Budapest
continues; many "freedom
fighters" apparently have
retained their arms and come
out at night, singly or in
EAR-Nyingpmool0000soomg
CRET
ge 6 of 9
Approved For Ria.kgive 2005/04/13 : CIA-RDP79-00927A0=80080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
small groups, to snipe at the
Soviet and Hungarian police.
The government has, to date,
been unable to cope with the
widespread passive resist-
ance.
Military Situation
No Soviet troop move-
ments in Hungary have been
reported since the large-
scale withdrawal of some
Soviet tanks and motorized
equipment from Budapest on
the evening of 8 November.
Possibly some additional
elements departed on 10 No-
vember. Soviet military
units in and around Budapest
are, according to the Ameri-
can army attache, digging in
and fortifying artillery and
infantry positions along all
major routes leading into the
city. They control all major
street intersections and
guard government buildings
within the city. The Ameri-
can legation opined on 12 No-
vember that "a protracted
period of absolute Soviet
military occupation" of Hun-
gary or of "stations so near
as to represent a visible
threat of immediate reoccupa-
tion" is probable.
Popular Attitude
The over-all situation in
Hungary, particularly in the
capital and the western areas,
has been characterized by ob-
servers as a form of "quiet
chaos," with little work being
done, transportation at a
virtual standstill, and indus-
try stopped by a general
strike.
The strike, which the
legation reports is in deadly
earnest, is based on the
demand that the Soviets must
leave Hungary--a demand which
many Hungarians seem to be-
lieve will be met. Groups of
workers have held meetings in
which new demands were for-
mulated, including the for-
mation of a government under
ex-premier Imre Nagy, which
would then enter into immedi-
ate negotiations for the with-
drawal of Soviet troops.
Kadar's Program
The Kadar regime, faced
with this "quiet chaos" and
confronted with overwhelming
popular hostility, is attempt-
ing to get the country back on
its feet. It has reversed its
policy on Western relief aid,
and is now admitting Inter-
national Red Cross relief
convoys, and is increasingly
declaring its support of Nagy-
like policies--including a
hedged promise of "free" elec-
tions in the "near future."
The regime has adopted
the national Kossuth emblem
as the nation's coat of arms
and has pledged an alteratiop
of the army uniform to con-
form with national traditions.
It has reaffirmed the Nagy
regime's disbanding of the
security police and has
avoided accusations of treach-
ery against ex-premier Nagy
for his tactics during the
revolution.
Budapest radio announced on
14 November the removal from
the central committee of a
dozen top party figures of the
prerevolution days. These
individuals, including Gero
and ex-premier Hegedus, had
been earlier demoted by Nagy.
SECRET
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
PART I OF IMMEDIATE INTEREST Page 7 of 9
25X1
25X1
25X1
Approved For Rause 2005/0SECkJUDP79-00927AQ=00080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
In additional efforts to
win support, the regime has
pledged itself to an extremely
liberal labor program based on
workers' councils, which would
ensure worker autonomy, and
declared trade union independ-
ence from political parties
and the government. Specif-
ically, the regime promised
wage increases up to 11 per-
cent by 1 January, the aboli-
tion of certain unfair taxes,
and adjustments of insurance
for those who suffered a loss
during the revolution. The
government has also announced
that "all restrictions of
private retail trade in the
markets have been abolished"
and that market trading is now
"completely free."
The regime, despite these
"liberal" moves, has specif-
ically rejected demands for
Hungarian neutrality and an
Immediate withdrawal of Soviet
troops, although Kadar is
pledged to negotiate for Soviet
troop withdrawal after order is
restored.
Regime's Prospects
Kadar's ability to
achieve control and to serve
as another Gomulka--appar-
ently the original Soviet
plan--is very much in doubt.
The chaotic economic situa-
tion--now made graphically
clear by threatened famine--
a decimated party and state
apparatus, and popular hostil-
ity--aggravated by reports of
large-scale deportations--con-
front the regime with monu-
mental tasks. Any successes
Kadar may achieve in meeting
these problems would depend
on the support of the USSR,
which can remove its troops
In order to enhance the pres-
tige of the Hungarian hierarchy or
which can continue using force
to support the regime.
Soviet Policy
A number of Soviet lead-
ers, including Mikoyan and
Suslov, and possibly Khru-
shchev, reportedly were in
Budapest on 12 November, ap-
parently in order to look the
situation over and to advise
the local Communist leader-
ship. Pravda's favorable
coverage-Zia-13 ilovember of
Kadar's 11 November policy
address represented general
support for the Hungarian
leader's liberal national Com-
munist program. Another Pravda
article two days later ixid177.- "
cated, however, no deviation
in the Soviet insistance that
"counterrevolutionary" activ-
ities in Hungary were prepared
well in advance.
As a consequence, the
Hungarian regime may try to
gain some measure of popular
support and perhaps work out
a popular-front government
with Communist and Soviet con-
trol as well concealed as pos-
sible, while simultaneously
quietly pursuing a course of
repression.
The Soviet estimate of
Hungarian public opinion is
probably realistic and the
USSR presumably would take
some insurance measures to
prevent any "soft" policy
from getting out of hand.
The large-scale deportation
of Hungarians--including many
who have demonstrated leader-
ship qualities--for continued
resistance has been reliably
reported under way for several
days. The American legation
in Budapest estimates that, at
a minimum, 16,000 have already
been deported from Budapest.
SECRET
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
PART I OF IMMEDIATE INTEREST Page 8 of 9
Approved For Reiga,se 2005/0gFINDP79-00927A4=1180080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
The continued adherence
to the principles of the 20th
party congress and the 30 Oc-
tober resolution concerning
relations with the socialist
states suggests that Moscow
may contemplete the with-
drawal of Soviet forces to
positions outside the coun-
try at such time as it feels
that a stable Gomulka-like
regime in Hungary is estab-
lished.
SECRET
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
PART I OF IMMEDIATE INTEREST Page 9 of 9
Approved For Ria !awe 2005/04/
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
PART II
NOTES AND COMMENTS
ASIAN REACTION TO SUEZ AND HUNGARIAN CRISES
With very few exceptions,
Asian countries have been far
more deeply moved by events in
Egypt than in Hungary.
Egypt is identified in the
Asian mind as a brother nation
fighting the old, common ene-
mies of freedom, while Hungary
is regarded as remote and is
considered essentially the
white man's problem. More-
over, Suez Canal operations
are of economic concern to
many Asian nations, which
have no economic interest in
the outcome of the Hungarian
rebellion.
South Asia
Nehru's statements during
the last two weeks typify the
thinking of most leaders in
neighboring Asian countries.
He quickly condemned British-
French action as "naked aggres-
sion" but delayed comment on
Hungary for several days. When
he finally spoke on Hungary on
9 November, he linked Egypt and
Hungary as "small countries
made to suffer because of the
rivalries of great powers."
This expression of sympathy,
however, was offset by an ob-
servation that the fighting in
Hungary appeared to be merely
"civil conflict."
Krishna Menon on 9 No-
vember voted against the UN
resolution on Soviet interven-
tion in Hungary, probably be-
cause Nehru feared that the
section calling for free elec-
tions in Hungary might set a
bad precedent for Kashmir. De-
spite hints of Indian officials
that Menon violated his in-
structions, it seems likely his
vote accorded with guidance
given him by Nehru.
Nehru is reluctant to ad-
mit that his vision of a lib-
eralized Soviet Union as a
force for peace has been proved
erroneous, and he is apparently
satisfied with Bulganin's
prompt and lengthy explanation
to him of the situation in
Hungary.
Pakistan, Ceylon and Af-
ghanistan also have concen-
trated their attention on
Egypt, almost to the exclusion
of Hungary. Pakistani presi-
dent Mirza called a meeting on
8-9 November of Moslem members
of the Baghdad pact to discuss
Egypt. At this meeting a de-
mand was made for foreign
troops to leave Egypt, threats
were made to force the British
out of the pact, and Pakistan
talked of leaving the Common-
wealth. No mention was made
of Hungary.
On 14 November, the prime
ministers of India, Burma, Cey-
lon and Indonesia issued a cam-
munique'from New Delhi denounc-
ing attacks against Egypt and
Hungary, but using much harsher
language against Britain and
France than against the Soviet
Union.
Southeast Asia
The strongest reaction in
Southeast Asia has occurred in
Indonesia, where both the gov-
ermment and parliament have
violently attacked the British,
French and Israelis as aggres-
sors. The British and French
embassies have been the targets
of mobs, and labor unions are
refusing to service British and
French planes or ships. The
government was quick to support
the Soviet proposal for another
Bandung conference, indicating
10P1
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
PART II NOTES AND COMMENTS Page 1 of 13
Approved For42,123,se 2005/04,6tlipP79-00927A01,1900080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
impatience with UN efforts,
and President Sukarno publicly
suggested that the Anglo-French
action was the forerunner of
a Dutch attempt to retake Indo-
nesia,
Indonesian foreign min-
ister Abdulgani's attitude to-
ward Hungary is believed typi-
cal. He told his parliament
on 13 November that although
Indonesia was in sympathy with
the resolution condemning
Soviet intervention in Hungary,
an "important consideration in
our decision to abstain was
the fact that we were faced
with a resolution which could
easily be made into a tool to
transfer world attention from
a more serious issue, namely
the British-French-Israeli
aggression against Egypt."
In Burma, news coverage
of the Middle East overshadows
that of developments in Hungary,
and demonstrations have in-
cluded the posting of anti-
Western slogans on American
embassy walls. Premier Ba Swe
stated the British and French--
along with the Russians--were
"scuttling the United Nations."
In Malaya, it is feared
ultranationalist political
leaders may split the govern-
ment party by demanding an
anti-British declaration.
In Thailand, four minor
parties issued a joint condem-
nation of the British and
French and a march was staged
through Bangkok demanding Thai
withdrawal from SEATO. Further
and more serious demonstrations
are feared.
Despite a surface calm a-
mong SEATO representatives in
Bangkok, underlying tensions
and hostilities have reported-
ly been created by the attack
on Egypt. The American ambas-
sador in Thailand believes
that for some time it will be
difficult for Asian members to
defend domestically their mem-
bership, and that hope for ex-
pansion of membership has been
seriously set back.
Far East
South Korea and Taiwan have
been greatly stimulated over
events in Hungary and had high
hopes the revolt there was the
beginning of the collapse of
the Communist world. On Taiwan,
the Chinese Nationalists have
alerted their forces and or-
dered them to intensify their
state of readiness. Taipei
has criticized other Asian
countries for condemning Brit-
ish and French aggression
while remaining silent on
Soviet action in Hungary.
The prestige of Britain
and France is undoubtedly at an
all-time low in Asia and will
probably not be recouped quick-
ly. The USSR's prestige has
been tarnished, but its strong
threats to Britain, France and
Israel have had a balancing
effect. Thus far, the stock
of the United States has risen
high, but the Communists are
working hard to link the US
with the British and French
and to gain crrdit for the cease-
25X1
fire in Egypt.
BULGARIAN OFFICIALS CONCERNED OVER DOMESTIC PROBLEMS
Bulgarian officials at
home and abroad believe the
situation in Bulgaria is sim-
ilar in many respects to that
in Poland and Hungary prior to
PART II
the recent upheavals. While
the Bulgarian officials do not
believe uprisings are imminent,
they feel the regime must take
immediate steps to correct the
SECRET
NOTES AND COMMENTS Page 2 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Release 2005/04/13 : CIA-RDP79-009274W000080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
domestic situation. Disagree-
ments over what these steps
should be have brought to the
surface the factionalism which,
largely as a result of Moscow's
changed attitude toward Tito,
has developed in the regime
in the past year.
Bulgarian officials re-
portedly believe that wide-
spread discontent, economic
privation, and exploitation
of domestic unrest by foreign
elements were the major factors
which led to the "troubles" in
Hungary and Poland. These
officials believe the same
factors exist in Bulgaria.
The officials note particular-
ly the acute shortage of bread,
generally poor living condi-
tions, failure of the press to
provide r,ccurate news, lack of
party democracy, and failure
of the regime to implement
the liberal reforms being
publicized elsewhere in the
Soviet bloc. Other probable
causes of discontent are un-
employment, the intensive
agricultural collectivization
program last spring, the re-
ported increase of armed mili-
tia patrols, and the arrest of
former army officers and stu-
dents.
Some officials believe
immediate measures must be in-
stituted to correct the eco-
nomic situation. Others be-
lieve that events in Hungary
and Poland have proved the
correctness of the Stalinist
policies toward the Satellite
nations and that any liberali-
zation measures would appear
to be signs of weakness.
Until these apparently
loose factions join forces, no
significant policy changes in
Bulgaria are likely, even if
there is some juggling of posi-
tions within the leadership.
Yugoslavia could have a
considerable influence upon the
development of these factions.
It has indicated that its dif-
ferences with Bulgaria were
not resolved when their parties
agreed to renew relations last
October. Furthermore, it has
implied that Bulgaria can make
no progress toward development
of independent national Com-
munism until all its present
leaders are removed from power.
The Yugoslays now claim that
Bulgarian party groups are
blaming Tito for the Polish and
Hungarian "troubles."
25X1
Most Bulgarians, including
the Communists, fear Tito's as-
pirations toward hegemony in
the Balkans. Therefore, any
tendencies toward emulating
Tito's independent national
Communism are tempered by the 25X1
possibility that Bulgaria's
dependence on Moscow would be
replaced rv dependence on
Belgrade.
Approved For Release 2005/04/10g79-00927A001000080001-4
Page 3 of 13
PART II NOTES AND COMMENTS
Approved ForNlaragiase 2005/041WWRIP79-009274=900080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
THE GOMULKA REGIME IN
The Polish regime is con-
fronted with the difficult task
of formulating policies that
will satisfy popular aspirations
and yet not antagonize the Krem-
lin. In the face of what is
described as an "unnatural calm"
on the Polish scene, party first
secretary Gomulka continues to
implement his policy of na-
tional Communism while the Krem-
lin looks on with suspicion. He
Is now in Moscow to discuss out-
standing differences. Meanwhile,
the new regime is taking steps
to strengthen the economy and
carry out the economic program
Gomulka outlined when he took
office.
Relations With the USSR
Private statements attrib-
uted to Gomulka, as well as
Polish press comments, have made
clear that Poland considers the
Soviet Union its "best friend"
and believes close relations be-
tween the countries must continue.
Gomulka is said to have stated
recently that only friendship
with the Soviet Union would
guarantee for Poland the main-
tenance of the Oder-Neisse line.
Indications that Soviet
forces in and around the country
were alerted on 8 and 9 November
reflected the Kremlin's sensi-
tivity to possible dangerous
trends. However, American mili-
tary attaches in Warsaw, after
an extensive tour of the country
on 10 and 11 November, reported
no abnormal troop activity.
PART 11
POLAND
25X1
The removal of Soviet
ficers from the armed services
and antiliberal Polish officials
from the party apparently con-
tinues. The purge of one more
Stalinist Polish leader--trade
union federation chairman Wiktor
Klosiewicz--appears imminent.
of-
Despite the expressions of
friendship for the Soviet Union,
Polish propaganda has refrained
from endorsing the Kremlin's
intervention in Hungary. The
American embassy in Warsaw re-
ported that the press was ap-
proaching this subject "as
though disarming a time bomb,"
and that most of its statements
on the Hungarian situation have
been in general terms.
Meanwhile, popular ex-
pressions of sympathy with the
rebels in Hungary--and concom-
itant anti-Sovietism--have been
noted, including a demonstration
in Krakow on 5 November of
20,000 students bearing black-
bordered Hungarian flags.
SECRET
NOTES AND COMMENTS
Page 4 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
31GW7
Approved For Releap 2005/04/1 . - 9-00927A001000080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
THE GOMULKA REGIME
The Polish regime is con-
fronted with the difficult task
of formulating policies that
will satisfy popular aspirations
and yet not antagonize the Krem-
lin. In the face of what is
described as an "unnatural calm"
on the Polish scene, party first
secretary Gomulka continues to
implement his policy of na-
tional Communism while the Krem-
lin looks on with suspicion. He
is now in Moscow to discuss out-
standing differences. Meanwhile,
the new regime is taking steps
to strengthen the economy and
carry out the economic program
Gomulka outlined when he took
office.
Relations With the USSR
Private statements attrib-
uted to Gomulka, as well as
Polish press comments, have made
clear that Poland considers the
Soviet Union its "best friend"
and believes close relations be-
tween the countries must continue.
Gomulka is said to have stated
recently that only friendship
with the Soviet Union would
guarantee for Poland the main-
tenance of the Oder-Neisse line.
Indications that Soviet
forces in and around the country
were alerted on 8 and 9 November
reflected ?the Kremlin's sensi-
tivity to possible dangerous
trends. However, American mili-
tary attaches in Warsaw, after
an extensive tour of the country
on 10 and 11 November, reported
no abnormal troop activity.
25X1
IN POLAND
PART II
The removal
ficers from the armed services
and antiliberal Polish officials
from the party apparently con-
tinues. The purge of one more
Stalinist Polish leader--trade
union federation chairman Wiktor
Klosiewicz--appears imminent.
of Soviet of-
Despite the expressions of
friendship for the Soviet Union,
Polish propaganda has refrained
from endorsing the Kremlin's
intervention in Hungary. The
American embassy in Warsaw re-
ported that the press was ap-
proaching this subject "as
though disarming a time bomb,"
and that most of its statements
on the Hungarian situation have
been in general terms.
Meanwhile, popular ex-
pressions of sympathy with the
rebels in Hungary--and concom-
itant anti-Sovietism--have been
noted, including a demonstration
in Krakow on 5 November of
20,000 students bearing black-
bordered Hungarian flags.
SECRET
NOTES AND COMMENTS
Page 4 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Release 2005/04/13: CIA-RDP79-00927.aa01000080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
Domestic Economic Program
The new regime is taking
steps to strengthen the economy
and implement the program
Gomulka outlined when he took
office. Trybuna Ludu, the
leading organ of the Polish
press, has recommended that the
draft five-year plan be abandoned
as of dubious practical impor-
tance, and that a two-year pro-
gram geared to immediate econom-
ic problems be initiated. At
a meeting of the Sejm on 7 No-
vember, the draft five-year plan
was accepted merely as a "guide
for action and a basis on which
to work out the 1957 plan."
A revised economic program
will apparently not be approved
until the new Sejm convenes
after the January elections. By
that time, the Gomulka regime
should have a clearer conception
of available foreign aid and
should have had an opportunity
to "re-examine" certain premises
of the five-year plan, "hitherto
considered inviolable, especial-
ly regarding agricultural pol-
icy." The regime should also
be able by then to detail the
"considerable amendments" called
for in the provisions of the
five-year plan concerning con-
sumer goods and housing.
A party and government com-
mission has approved the estab-
lishment of workers' councils
and the participation of work-
ers' representatives in decisions
affecting the more important
problems of economic enterprises.
Accepting earlier demands
of Polish merchant seamen, the
central board of the Polish mer-
chant marine stated that for-
eign shipowners had been ap-
proached about the employment
of Polish sailors. It was an-
nounced that two seamen had al-
ready gone to work for a Swedish
line. In the future, such
matters are to be decided by
the sailors' trade unions.
PART II
In agriculture, the govern-
ment is trying to halt the re-
cent rush of peasants from co-
operatives. It has stated that
"weak and unprofitable" farm
co-operatives should be dis-
banded, but has asked that mem-
bers of co-operatives delay the
breakup until the year's farm
work has been completed and the
annual meeting of each co-
operative has been held. Deputy
Premier Ignar has promised that
in the future, private farms will
receive the same encouragement
from the state as co-operative
farms.
A special government com-
mittee has recommended that the
Ministries of Agriculture, State
Farms, Forestry and Purchasing
be combined and the prewar
agricultural crops re-established
in Polish agriculture. These
recommendations will probably
be accepted by Gomulka and,
when implemented, will eliminate
certain crops whose production
was pushed in recent years but
which are not suited to the
Polish climate.
The Ministry of Agriculture
is preparing a draft law abolish-
ing ownership limitations apply-
ing to farms acquired in the
postwar agrarian reform. The
peasants are to receive full
title to these properties and
will then be able to sell or
lease them.
The regime is also modify-
ing previous policy in numerous
other fields. Measures have
been initiated to increase the
amount of foreign exchange
available to Poland, to boost
imports and to eliminate the
black market. A devaluation of the
zloty is reportedly to be an-
nounced in several weeks in order
to encourage trade with the West.
Poland's economic policies
as revised will strengthen the
economy but will allow only a
gradual improvement in living
SECRET
NOTES AND COMMENTS Page 5 of 13
Approved For Release 2005/04/13: CIA-RDP79-00927A001000080001-4
Approved For Release 2005/04/13
SECRE1.LCIA-RDP79-00921424)01000080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
conditions. Barring large-scale
foreign aid, the economic pro-
gram set forth by Gomulka can-
not rapidly eliminate the hard-
ships and discontent which were
a major cause of his return 25X1
to nower in mid-October.'
25X1
EFFECT OF SUEZ CANAL CLOSURE ON BLOC ECONOMIES
Closure of the Suez Canal
will have onlya negligible
im-
pact on the economies and ship-
ping of the USSR and the Eastern
European Satellites, whose ves-
sels accounted for only 2 per-
cent of Suez Canal transits in
1955. Communist China, however,
depends on substantial sea-borne
deliveries through the Suez
Canal. Cargoes carried by So-
viet bloc and Finnish ships
to China support industrial
construction, while nonbloc ves-
sels carry materials for China's
agricultural development pro-
gram.
Sea-borne deliveries of
petroleum products by bloc
tankers from the Black Sea to
the Communist Far East, which
increased by 300 percent in
1955 over 1954 and rose further
in 1956, will also be reduced.
However, the November to Janu-
ary period has been the slack
season for such deliveries in
past years. If the canal is
closed for only this period,
it is probable that supplies
adequate to meet China's normal
requirements can be furnished
from existing stocks and over
the Trans-Siberian Railroad.
25X1
PART II
SECRET
NOTES AND COMMENTS Page 6 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For RetessF2005/04/13EariP79-00927A01401480001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
Due to increased
freight rates and the limited
number of vessels offered for
Far East runs, such deliveries
this year will probably be cur-
tailed, resulting in a decreased
availability of chemical ferti-
lizers for China's spring plant-
ing. The small amount of manu-
factured foodstuffs which com-
prise the remaining deliveries
from Europe could be obtained
by China in Southeast Asia.
Peiping will undoubtedly
arrange for rail shipment of
industrial items necessary for
China's construction program
which are usually shipped by
sea from Gdynia.
Rail facilities, although
heavily burdened between Omsk
and Novosibirsk, could handle
the additional tonnage of China-
bound industrial products. In-
creased petroleum shipments
could present difficulties, how-
ever. The growth of the Soviet
tank car park has not kept pace
with rapidly increasing petroleum
production. China's less urgent
demands will continue to be met
by diverting vessels around
Africa. It is probable, how-
ever, that increased freight
rates will cause China to defer
delivery of many items. Non-
Communist shipping agencies
will probably hold their ves-
sels for the expected increase 25X1
in transatlantic runs.
The
lack of vessels to carry these
goods, primarily agricultural
commodities, may well cause a
storage problem in China, al-
though the delay in their ar-
rival in Europe will not vitally
affect East European consignees.
Exports of raw materials re-
quired by Soviet and East Euro-
pean industries are exported
for the most part via the Trans-
Siberian Railroad. Iron ore
which China provides Czech and
Polish steel industries could 25X1
be purchased by these countries
from Scandinavia.
25X1
TURKEY T3 TRADE WITH sangT BLOC RISING
The continuing deteriora-
tion of Turkey's economy re-
cently has made Turkish busi-
nessmen increasingly receptive
to Soviet bloc trade and credit
offers. Turkey has accumulated
debts of about $300,000,000 to its
Western trading partners and
is now in a very poor payments
position with free world coun-
tries.
Because inflationary prices
have made traditional buyers
reluctant to purchase Turkish
goods, Turkish exporters and
producers have pressed the gov-
ernment to permit an increase
of exports to bloc countries,
which are willing to pay the
25X1
high prices. In this situation
the government was unable to
prevent a rise in exports to
the bloc, but it held down im-
ports as a deliberate policy
during the first half of 1956.
As 4 result, the Soviet bloc
is the only area in which Tur-
key has a favorable balance of
trade and is in a credit posi-
tion.
The reluctance of. Western
countries to extend further
credit or to buy Turkish goods
at inflationary prices has
created such a scarcity of for-
eign exchange that Turkey is
suffering severe and widespread
shortages of essential imports.
SECRET
PART II NOTES AND COMMENTS
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Page 7, of 13
Approved For Releqata005/04/13 : CIA-RDP79-00927A00149,9400001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
This has made it inevitable
that Turkey use its credits
with the bloc to alleviate the
situation.
Turkey's annual trade with
the bloc in recent years has
been largely with the Satel-
lites; trade with the USSR has
been negligible. During the
first six months of this year,
Turkish exports to the bloc
reached the highest level ever
recorded, accounting for 25
percent of total exports, and
imports from the bloc were 13
percent of the total. It is
likely that bloc imports will
incre4ze substantially during
the next few months, and, un-
less the disparity between
internal and world prices is
remedied, Turkey will probably
direct its commerce more and
more toward the Soviet bloc.
The government itself has
been and continues to be opposed
to any large-scale, government-
to-government aid agreements,
and all official Russian ap-
proaches thus far have met a
negative response. The Turkish
government does not seem to
take the same attitude, however,
toward limited and specific
credits, especially from the
Satellites, and there are a
TENSION
Officially inspired &mon-
strations in South Korea con-
tinue to call for North Korean
revolts. The demonstrations
reportedly are apathetic and
are failing to creat an enthu-
siasm among the populace for a
"march north." The North
Koreans apparently are not
looking for a pretext to ini-
iate hostilities and have been
ircreasing their emphasis on
"peaceful unification." Re-
cently reported troop movements
are believed to have been on a
small scale and probably re-
flect defensive redispositions.
number of projects now under
way with bloc financing, as
well as several instances of
government purchases of bloc
products on long-term credit.
Soviet and Satellite com-
mercial representatives dili-
gently toured the country in
1956, offering credit to
private businessmen and state
enterprises. Several of these
offers have been accepted and
licensed. Poland has offered
a $6,000,000 credit to .a
group of private firms to fur-
nish and install a foundry for
manufacturing steel spare
parts. There are indications
the government will approve
the transaction.
With the export season
beginning, the shortage of
foreign exchange may be some-
what alleviated and the pres-
sure on the government to ac-
cept Soviet aid will be less-
ened. The relief may be only
temporary, however, and Ankara
has made several overtures to
the United States for increased
aid, implying that it would be
forced to accept some of the
large-scale loan offers of the
USSR if American help were not
forthcoming.
25X1
25X1
IN KOREA
South Korean Developments
North Korean troop move-
ments along the demilitarized
zone have been reported, and an
emergency meeting of the South
Korean cabinet was called on
10 November to discuss this
situation.
25X1
25X1
SECRET
PART II 70TES AND COMMENTS
Page 8 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For RelsW005/04/1AM77'9-00927A0040080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
25X1
25X1
the North at present
President Rhee informed
the American ambassador on 14
November that while he had
given much thought to encourag-
ing a North Korean revolt, he
had finally decided against it.
He said he could not encourage
North Koreans to risk their
lives unless South Koreans
were able to come to their aid,
which could not be done with-
out American support.
It seems likely that Rhee
has no definite plans against
North Korean Reactions
On 2 November, North
Korean premier Kim Il-sung de-
clared that the North did not
want "internecine civil war" and
strongly reaffirmed the peace-
ful unification theme. North
SECRET
PART II NOTES AND COMMENTS
Page 9 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
25X1
Approved For Relevugj.005/044g0FIU79-00927A0012W0001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
Korea's protest on 8 November
against two overflights of
South Korean aircraft was
phrased in routine language and
was followed by an appeal for
"friendly" North-South parlia-
mentary meetings "at an early
date."
In the meantime, the Pyong-
yang regime is calling on
North Koreans for "higher vigi-
lance" against "provocations."
The indications of a North
Korean military build-up and
of troop movements underscore
the continuing improvements in
North Korean combat capabili-
ties since the cessation of
hostilities in 1953. Pyong-
yang has recently reorganized
its army command structure and
re-equipped its artillery, re-
placing the 120-mm. mortars
with guns and howitzers up to
152-mm, caliber. These new
weapons triple the range of
North Korean corps artillery.
LAOS
The Pathet Lao will prob-
ably seek to integrate many
more insurgents into the Lao-
tian army than expected by the
royal government, whose nego-
tiators suggest they may be
unable to prevent it. Laos
has already granted dangerous
concessions to the Pathet Lao
on the question of neutrality,
which paves the way for diplo-
matic relations with bloc coun-
In the unlikely event
President Rhee implements his
threats to march north, his
650,000-man army win find it-
self almost matched numerically
by Communist forces consisting
of 350,000 North Koreans and
over 290,000 Chinese Communists.
In addition, the Communists
could bring in at least 250,000
more troops from nearby Man-
churia within eight or nine
days.
In the air, the South
Korean air force of some 240
aircraft--of which only 84 are
jet fighters--is no match for
the North Koreans, who are
equipped with over 500 aircraft,
about half of them jet fighters.
Apart from their own planes,
the North Koreans would be as-
sisted by the Chinese Communist
air force, now estimated at
some 2,200 aircraft, more than
half of them Jet filhters and
jet aight bombers.
25X1
tries and the acceptance of
bloc economic aid.
Should the government con-
tinue to make concessions to
the Pathets, it will reduce
its ability to maintain an
independent Laotian policy.
General Sounthone, the
commanding general of the Laotian
SECRET
PART II NOTES AND COMMENTS
25X1
Page 10 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Releaui2305/04/13 : CIA-RDP79-00927A004.14080001-4
SECRET
CURRENTL INTELLIGENCE WEEKLY SUMMARY
15 November 1956
army, estimates that some
5,000 Pathet Lao troops will
be ordered to "volunteer" for
Integration into the royal
army. He feels that 3,000
of them "might" be eliminated
by various screening devices.
This contrasts with an earlier
Laotian statement that only
300 Pathet Lao soldiers would
be integrated.
Although aware that re-
indoctrination of Pathet Lao
troops is imperative to reduce
the prospect of widespread
subversion throughout the royal
army, Sounthone said nothing
could be done if the Pathets
were to "balk" at the prospect.
Questioned about a report that
the Pathet Lao had increased
its effective force by 1,600
men since the 5 August cease-
fire, he replied that the
government had no way of prov-
ing figures of Pathet strength.
Crown Prince Savang is
pessimistic about the drift
of events in Laos, which he
attributes to internal intrigues
and the lack of an effective
government. He believes, how-
ever, that it would be extreme-
ly difficult to form another
25X1
25X1
government at this time.
He told Ambassador Parson=
there was much opposition to
Souvanna in the cabinet and
indicated that a political
crisis might develop during
the special session of the
National Assembly which begins
on 20 November.
The crown prince offered
no solution and cited the con-
stitutional limitation on his
direct participation in poli-
tics. His ability to take
action is circumscribed by the
lack of an acceptable alterna-
tive to Souvanna. Vice Premier
Katay's political position has
suffered a serious decline in
recent months, and there is an
apparent general lack of con-
fidence in Phoui Sananikone,
the only otherprominent pro-
Western candidate. The only
other strong contenders are
Bong Souvannavong and Prince
Petsarath, both of whom, in
varying degrees, have taken
positions favorable to the
Pathet Lao.
SINGAPORE
Chief Minister Lim Yew
Hock, who on 7 November won a
25-to-4 vote of confidence for
25X1
his handling of the recent
Communist-led riots in Singa-
pore, is continuing to press
SECRET
PART II NOTES AND COMMENTS
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Page 11 of 13
Approved For Re!Nur...2005/04/13 : CIA-RDP79-00927A001Q1080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
his campaign against subver-
sion. Government and local
British officials are cautiously
optimistic, but are aware that
Communist influence is still
extensive among Chinese stu-
dents and labor unions. They
have expressed concern that
there may be further disturb-
ances following the release
of those persons now in custody
and the reopening of two
Chinese middle schools.
The government, meanwhile,
faces the problem of overcoming
the suspicions of a large ele-
ment of Singapore's predomi-
nantly Chinese population, which
believes the antisubversion
program is directed at eradicat-
ing Chinese culture. The
government may also have to
cope with increasing under-
PART II
25X1
25X1
ground activity.
Chief Minister Lim has the
added difficulty of dealing
with former chief minister
David Marshall, who returned
to Singapore on 24 October
after three and a half months
in Japan and Communist China.
Lim defeated an attempt by
Marshall to regain control of
their party, the Labor Front,
but Marshall was successful in
forcing Lim's hand on the
subject of Singapore elections
by demanding that an election
date be set. Lim has announced
he will request the British to
grant Singapore self-government
by August 1957 and that full
general elections will be held
at that time.
In the separately admin-
istered Federation of Malaya,
where Communist subversion is
less advanced than in Singapore,
the October riots reportedly
have stiffened the opposition
of Chief Minister Rahman to an
early merger with Singapore.
Rahman has, however, agreed to
consider a merger as an aid to
containing Communism in Singa-
pore sometime after August 1957,
when Malaya will receive its
independence.
25X1
SECRET
NOTES AND COMMENTS Page 12 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Releuga005/04/13 : CIA-RDP79-00927A001,900S80001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
EURATOM AND THE EUROPEAN COMMON MARKET
Compromise proposals on
EURATOM and the European common
market worked out by French
and West German experts and
approved by Chancellor Adenauer
and Premier Mallet in Paris on
6 November have evidently
cleared away some of the major
obstacles to the treaties for
the two projects. Other serious
problems remain, however, which
may delay the signature of the
treaties, and there is some
belief in France that Mollet
may have yielded too much al-
ready.
The new French-German
proposals embody major con-
cessions by both countries.
The position of Bonn's Defense
Minister Strauss has been re-
jected by Adenauer, who has
agreed to give EURATOM prior-
ity in the purchase of nuclear
materials and a monopoly over
their supply--subject to later
review, but with exceptions
only in the event of shortages
or excessive prices.
Mollet in turn has relin-
quished long-standing French
insistence on the prior equali-
zation of wages, hours, and
social benefits, on the under-
standing this would come about
in the first four-year period
of the common market. French
industry would be protected
until this has been achieved,
but the protective measures
would be subject to multi-
lateral review, and France
would have no veto over the
progression of the common
market from one stage to the
next.
These proposals are not
expected to cause serious
difficulty in Italy or the
Benelux countries. If they
can be translated into treaty
PART II
form, they will resolve two
key issues which have plagued
the negotiations since their
inception. They should also
facilitate agreement on other
issues, such as ownership of
nuclear fuels, national weap-
ons programs, the level of
common tariffs, the role of
agriculture in the common mar-
ket, and institutional arrange-
ments.
ment
seem
Prospects for a settle-
of these serious ?rob
bri hter
25X1
ee ommuni y vice presi ent
Franz Etzel as co-ordinator
among the ministries concerned
with EURATOM and the common
market--a move which promises
a definite policy as well as a
more "European" one.
In France, Mollet evident-
ly is willing to run consider-
able risks in order to complete
the treaties. Some French
officials have cautioned, how-
ever, that further concessions
might seriously jeopardize
French parliamentary support
once the treaties are signed.
Mollet's willingness to bargain
on both EURATOM and the common
market has inevitably forged
links between the two--a linkage
which is advantageous elsewhere,
but not in France, where the
assembly is not likely to ac-
cept both treaties at once.
25X1
SECRET
NOTES AND COMMENTS
Page 13 of 13
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Releau,2005/tO ? 101k7A00402080001-4
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
PART III
PATTERNS AND PERSPECTIVES
COMMONWEALTH STRAINED BY NEAR EAST CRISIS
The British government's
relations with the other inde-
pendent Commonwealth members
have suffered a severe shock
as a result of its military
intervention in Egypt. All
members, including those which
have publicly supported Brit-
ain's policy, are angry with
the Eden government for under-
taking such risks affecting
them all without informing
them of its general intentions
beforehand.
While the other members
may regard Eden's behavior as
greatly out of character, Brit-
ain's demonstration that it
is capable of radical depar-
tures in foreign policy with-
out regard to its responsibili-
ties as the leader of the Com-
monwealth may diminish their
long-term willingness to ac-
cept Britain's claim to such
leadership. At the minimum,
the confidence of even the
most loyal Commonwealth members
in the quality of Britain's
present government leadership
has been shaken.
From Britain's point of
view, the Commonwealth is the
basis of its position as a
world power, and represents
the measure of its success
in transforming its colonial
empire into a community of
free and independent states
bound by the common ideals
of the peaceful settlement of
differences and the rule of
law and the obligation to
consult closely together on
mutual problems.
Commonwealth Opposition
Britain's apparent con-
spiracy with France and Israel,
therefore, appears to many Com-
monwealth observers as a be-
trayal of the fundamental prin-
ciples on which the Common-
wealth tie rests. Prime Minister
Nehru said he regarded Britain's
move against Egypt as a clear
case of aggression. An official
of the Indian Foreign Ministry
told the American embassy on
1 November that the Indian
cabinet believes the presence
of British troops in Egypt runs
counter to Britain's previous
commendable transformation of
the empire, and is a "terrible
thing." High government of-
ficials of Pakistan and Ceylon
15 NOVEMBER 1956
150
1510461
60
120
THE COMMONWEALTH OF NATIONS
'UNITED KINGDOM
a
UNION OF
SOUTH AFRICA
PAKISTAN
INDIA
CEYLON6
120
NEW ZEALAND
PART III
PATTERNS AND PERSPECTIVES Page
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
1 :of 12
Approved For Releag2005/04/13 : CIA-RDP79-00927A001401180001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
have expressed similar senti-
ments.
Officials of the New Zea-
land Foreign Ministry told the
American embassy on 6 November
it has been a "difficult wrench"
to support Britain publicly.
The embassy at Canberra reports
that in referring to his public
policy of supporting Britain,
Prime Minister Menzies stated,
"You can't let your own side
down, can you?"
Canada and South Africa
have similarly deploredBrit-
ain's actions. External
Affairs Minister Pearson on
30 October publicly regretted
that Britian had found it
necessary to resort to force.
External Affairs Minister Louw
"indignantly" told the embassy
in Pretoria on 31 October he
believed Britain's actions to-
ward Egypt were about as fla-
grant a case of "intervention"
as that of the Soviet Union in
Hungary.
The Commonwealth govern-
ments evidently hold Eden per-
sonally responsible for aggra-
vating the crisis in the Middle
2 5 X 1
The erican em sassy a
lington reports that some New
Zealand officials privately
feel Eden was "precipitate"and
"ill-advised." The Labor Party
now is regarded, particularly
among the Asian member countries,
as the main proponent of the
principles of the Commonwealth.
Lack of Consultation
Contrary to Prime Minister
Eden's statement to the House
of Commons on 31 October, it
appears that his government
did not inform any of the Com-
monwealth governments before
announcing the Anglo-French
ultimatum to Egypt. Officials
in all the Commonwealth cap-
itals have denied being so in-
formed, and Louw of South
Africa complained on 2 November
that London has apparently
changed its policy on consul-
tation with the Commonwealth
on foreign affairs. Louw said
his government had not been
officially informed of the
ultimatum until 18 hours after
the event.
It appears that concern
in London over Britain's ne-
glectof Commonwealth practice
and opinion has been nearly as
influential as the United
States' reaction in inducing
the Eden government to accept
the UN cease-fire proposal and
seek to abate the Middle East
crisis. Press reports indicate
that Leader of the House Butler
and his supporters within the
cabinet relied heavily on the
Commonwealth argument to per-
suade the Eden group of the
wisdom of such a policy.
Even Chancellor of the
Exchequer Macmillan, a propo-
nent of intervention, referred
to the strain upon "our Com-
monwealth" after "estrangement"
from America as a danger the
Eden government knew it would
encounter in the process of
intervening in Egypt. In Labor
Party circles too, the feeling
appears to be that the serious-
ness of the effects of Eden's
actions lies primarily in his
failure to consult the Common-
wealth and Britain's allies.
Fear for Commonwealth
The British fear, there-
fore, is that their relations
with the Commonwealth have
been extensively injured. An
official of the Commonwealth
Relations Office expressed his
SECRET
PART III PATTERNS AND PERSPECTIVES Page 2 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Rettus,2005/04/13 : CIA-RDP79-00927A0I3=1080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
personal view to the American
embassy in London on 3 No-
vember that he did not expect
the Commonwealth to break up
"in form." He said, however,
that the effects of the Middle
East developments could cause
it to do so "in substance."
All three Asian Common-
wealth prime ministers have
indicated they have no inten-
tion of "leaving" the Com-
monwealth, but Britain's
actions have aroused elements
in all three countries that
oppose the Commonwealth con-
nection, and their influence
may be expected to bear heavily
against co-operation with Brit-
ain in the future. In partic-
ular, Prime Minister Bandar-
anaike appears likely to be
subjected to such pressure to
raise his demands on Britain
in the forthcoming negotiations
in London on the Ceylonese
air and naval bases. The Amer-
ican embassy in New Delhi com-
ments that Nehru's reference
on 9 November to severing Com-
monwealth ties "if circumstances
compel us" carried an implied
threat to do so if Indian
views are not heeded.
25X1
BRITAIN'S NEW INTEREST IN A WEST EUROPEAN FREE TRADE AREA
Britain is promoting the
formation of an extensive
European "free trade area"
that would be associated with
the customs union now under
consideration by the six na-
tions of the European Coal-
Steel Community ,(CSC)*. Such a
customs union would give West
Germany and other CSC nations
competitive advantages over Brit-
ain unless it becomes a member.
Another important factor in
British thinking is the con-
tinuing pressure of the Scan-
dinavian countries and other
members of the 17-nation Organ-
ization for European Economic
Co-operation (OEEC)** for spe-
cific tariff reductions which
the UK is unwilling to grant.
Free Trade Area Proposal
Because of tariff arrange-
ments with the Commonwealth
countries, Britain cannot enter
a customs union which requires
*The CSC consists of
France, West Germany, Italy, and
the Benelux countries.
all members to have common
tariffs against all other
countries.
25X1
At the July meeting of
the OEEC, Britain suggested
instead a free trade area, to
be directed by a committee of
the OEEC. By definition, par-
ticipants in a free trade area,
while gradually eliminating
their tariffs against fellow
members, as in a customs union,
remain free to determine their
own tariffs against outsiders.
As a member, Britain could con-
tinue its present preferential
tariff rates on agricultural
and raw materials sold by Com-
monwealth countries and retain
the advantage of preferentially
lower tariffs imposed by Com-
monwealth members against British
manufactures,
**The OEEC consists of
Austria, Belgium, Denmark, West
Germany, France, Greece, Ice-
land, Ireland, Italy, Luxembourg,
the Netherlands, Norway, Sweden,
Portugal, Switzerland, Turkey,
and the United Kingdom.
SECRET
PART III PATTERNS AND PERSPECTIVES Page 3 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Relea.u.2.005/04/13 : CIA-RDP79-00927A00100001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
In actual prac-
tice, most British
imports from the
Commonwealth are raw
materials not pro-
duced in Western
Europe. Britain's
plan in any case
specifically excludes
all agricultural com-
modities--both for
Commonwealth consid-
erations and to pro-
tect its domestic
agriculture. It
does not anticipate
that any Commonwealth
countries would join
the proposed free
trade area, but that
the Scandinavian countries,
Austria and Switzerland, and
possibly other OEEC countries
would.
15 November 1956
15 NOVEMBER 1956
GROSS NATIONAL PRODUCT 1955
(NIWONS OF DOLLARS)
POSSIBLE FREE
TRADE AREA
178,611
BELGIUM 8,700
FRANCE 40,571
CUSTOMS
W. GERMANY 33,123
UNION
ITALY 18,741
UNITED
STATES
LUXEMBOURG 337
108,325
387,200
NETHERLANDS 6,853
UNITED
KINGDOM 47,001
NORWAY 3,143
PROBABLE
SWEDEN 7,954
ASSOCIATES
DENMARK 3,689
70,286
SWITZERLAND 5,137
AUSTRIA 3,362
61018 D
Entry into Such a free
trade area would involve a
fundamental change in the
Kingdom's trade rela-
tions with the Con-
tinent and would pre-
sent many political
and technical hurdles.
Nevertheless, the
chancellor of the ex-
chequer and the Board
of Trade are recom-
mending participa-
tion; initial reac-
tions in Britain and
the Commonwealth and
on the Continent are
mostly favorable:
United
PERCENT OF INTRA-EUROPEAN
IMPORTS QUANTITIVELY RESTRICTED
100
PERCENT'
AUSTRIA
BENELUX
DENMARK
FRANCE
GERMANY
GREECE
ICELAND
IRELAND
ITALY
NORWAY
PORTUGAL
SWEDEN
SWITZERLAND
TURKEY
UNITED
KINGDOM
15 NOVEMBER 1956
1953
1956
.03
09
71
,1953 AVERAGE
(excluding Greece)
37
1956 AVERAGE
(excluding Greece)
56
SECRET
61018 A
Rationale of Proposal
Britain's out-
standing economic
problem, like that of
most other European
nations, is how to
continue expansion
and avoid inflation.
When Chancellor of
the Exchequer Mac-
millan endorsed the
free trade area proj-
ect on 13 September,
he made the point
that "small-nation
units of 40,000,000
to 60,000,000 people
are entirely inad-
equate to provide
markets and economic
PART III PATTERNS AND PERSPECTIVES Page 4 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
25X1
Approved For Re1vaug,2005/04/13 : CIA-RDP79-00927A09=9080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
UNITED KINGDOM AND TOTAL OEEC GOLD AND
SHORT TERM DOLLAR RESERVES
( BILLIONS OF DOLLARS)
UNITED KINGDOM
3.5
3
2
June
June
Year and
June
Oct
1954
1955
1955
1956
1956
TOTAL OEEC
15
111.=MMI
10
5
June
June
Year end
June
Oct
1954 1955 1955
15 NOVEMBER 1956
1956 1956
61016C
opportunities for modern mass
production."
The British are known to
be particularly concerned over
the competitive advantages West
Germany would gain from free
access to a CSC common market
of some 160,000,000 people,
These advantages would operate
not only in the CSC trading
area--where the United Kingdom
would be handicapped by tariffs--
but would also extend to world
trade because of the much larg-
er resources base German indus-
try would then have.
As Commonwealth bonds are
being loosened by political as
well as economic factors,Brit-
ain sees an urgent need to
expand alternative markets.
Although its exports to the
Commonwealth are still many
times greater than those to the
CSC countries, they have re-
mained static at approximately
$12 billion annually since 1950
and may decline with the Com-
monwealth countries' drive for
self-sufficiency. In the same
period, on the other hand, the
United Kingdom's exports to the
CSC rose from $700,000,000 to
$1.1 billion, and this area is
considered to be the world's
fastest growing market for for-
eign imports.
OEEC Considerations
Recent developments with-
in the OEEC, where the United
PERCENT CHANGE IN EXPORT VOLUMES AND PRICES
VOLUME INCREASE
25 20 15 10 5
1 1 1 1 I I I I 1 1 1 1 1 1 1 1
15 NOVEMBER 1956
1954 - 1955
UNITED KINGDOM
FRANCE
ITALY
WEST GERMANY
AUSTRIA
UNITED STATES
NETHERLANDS
SWITZERLAND
BELG- LUX
SWEDEN
NORWAY
SECRET
PRICES
0 1 2 3 4 5
6
78%
61018 B
PART III PATTERNS AND PERSPECTIVES Page 5 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
25X1
Approved For ealgose 2005/04/13 : CIA-RDP79-009274=100080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
Kingdom has always tried to
maintain a position of leader-
ship, have also influenced
British officials in favor of
the free trade area project.
The OEEC has achieved some 90
percent of its goal of freeing
intra-European trade from quan-
titative restrictions, but it
is now evident that the accept-
ed goal of trade liberalization
cannot be achieved by Present
methods. The low-tariff mem-
bers, principally the Scandi-
navian and Benelux countries,
have accordingly been pressing
Britain to commit itself to a
program of automatic tariff
reduction; even going so far as
to threaten to reinstate their
own import quotas if such ac-
tion is not taken.
Britain considers that its
adverse trade payments and re-
serves position precludes any
commitment to such a program.
Problems and Prospects
Of the many obstacles to
Britain's participation in the
proposed free trade area,po-
litical opposition by affected
interests at home and in the
Commonwealth would probably
prove most serious. Certain
British industries would suf-
fer from intensified competi-
tion in the home market. On
the other hand, it is argued
that only marginal firms would
be affected, that gradual elim-
ination of tariffs would pro-
vide time for adjustment, and
that for the economy as a
whole, the added competition
would have the salutary effect
of forcing costs down, making
Britain's exports more competi-
tive in world markets.
A recent survey by the
Federation of British Indus-
tries showed approximately 70
percent of management in favor
of Britain's participation if
adequate safeguards against
increased foreign competition
could be devised. Preliminary
responses of the finance min-
isters of the Commonwealth
countries were also generally
sympathetic, as were those of
most of the trade unions that have
been heard from thus far. Re-
sistance can be expected in
some quarters, however, as
workers in vulnerable industries
realize that a free trade area
arrangement may put them out
of work.
There is some skepticism
on the Continent concerning
Britain's sincerity, and some
apprehension that the proposal
may be a ruse designed to weak-
en the common market. On the
other hand, if Britain were to
adopt the free market area
plan as a national policy, it
might reassure France and has-
ten formation of a customs
union by the CSC nations, which
have long sought Britain's
association in one form or
another.
25X1
SECRET
PART III PATTERNS AND PERSPECTIVES Page 6 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
25X6 Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Next 1 Page(s) In Document Exempt
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Releaag,X05/04/13 : CIA-RDP79-00927A00140a30001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
25X6
NATIONALIST CHINA AND THE OVERSEAS CHINESE
Since last spring, the
Chinese Nationalist government
has revived its efforts to gain
the loyalty of the 10,000,000
Overseas Chinese living in non-
Communist Asia. The campaign
was stepped up following Gen-
eralissimo Chiang Kai-shek's
appeal at the Kuomintang Party
convention in early May for re-
vitalization of the Kuomintang
at home and abroad.
Half-hearted efforts, bogged
down in red tape and bu-
reaucratic indifference, had
been made before. Many high
officials had felt that the
attitude of the Overseas Chinese
did not matter--it would change
as soon as Nationalist troops
began the reconquest of the
mainland. The initiative of
younger Nationalist officials
is now gradually overcoming
SECRET
PART III PATTERNS AND PERSPECTIVES Page 9 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Releami,2005/04/13 : CIA-RDP79-00927A04920.080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
the inertia of older Kuomintang
stalwarts who have resisted ef-
forts to launch an all-out cam-
paign.
Attraction of Visitors
One of the first steps
the government took was to
announce in late May that Over-
seas Chinese who had been to
Communist China were also wel-
come to come to Taiwan and
freely compare free China's
manner of living with Communist
China's. This was a reversal
of policy, for heretofore the
Nationalists had regarded all
Chinese lured to the mainland
as blackguards and potential
USSR
traitors, too dangerous to be
allowed to visit Taiwan. This
new policy was followed by an
announcement that entrance
requirements would be simpli-
fied, and on 1 August the Na-
tionalist diplomatic representa-
tive in Macao was allowed to
issue passports and visas with-
out referring each case to Tai-
pei for approval.
Several Nationalist holi-
days in October attracted over-
seas visitors. Gala festivi-
ties took place on the 10
October "Double Tenth" holiday
commemorating the birth of the
Chinese Republic, and on Over-
seas Chinese Day (21 October),
DISTRIBUTION OF CHINESE IN SOUTHEAST ASIA
MONGOLIA
TICEYLON
BAY OF BENGAL
MALAYA
INDIAN OCEAN
SUMATRA\
15 NOVEMBER 1956
24352
SOUTH
CHINA
SEA
SRUNM
. ? SARA K
NGAPORE
BORNEO
SEA
Thailand
Indonesia
Malaya
Hong Kong
South Vietnam
Singapore
Burma
Philippines
Cambodia
Sarawak
Macao
North Borneo
North Vietnam
Laos
6 Brunei
Total Pop.
20,000,000
80,000,000
5,300,000
2,500,000
12,100,000
1,000,009
18,300,000
21,000,000
4,500,000
550,600
120,000
330,000
13,000,000
1,500,000
50,000
Chinese Pop. Percent
3,000,000 151
2.500,000 3%
2,500,000 471,z
2,500,000 99-r,
1,000,000 84%
800.000 801
350,000 2%
300,000 1%%
250.000 51/2%
145,000 261
120,000 99,1/2%
WM 23%
IAA
30,000 21
10,000 20%
PHILIPPI NES
,
N. ORNEO
I N p 0 E SI A
p
A
NET
NEW OF
GUINEA GUINEX\e::,
NE .
,
D5 N PAPUA
SECRET
RAL(A
PART III PATTERNS AND PERSPECTIVES Page 10 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Releartaa005/04/13 : CIA-RDP79-00927A00144080001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
15 November 1956
United Nations Day (24 October),
and Taiwan Restoration Day
(25 October). The American
embassy in Taipei comments
that curiosity to see Taiwan
is beginning to outweigh po-
litical qualms.
Southeast Asia Visits
Ignorance of local con-
ditions within individual Asian
countries has been one of the
greatest difficulties facing
the Nationalist government in
preparing an effective program
to woo the Overseas Chinese.
In this connection, visits to
Southeast Asian countries in
June and July by Dr. Sampson
Shen, director of the Government
Information Office, and Foreign
Minister George Yeh were of con-
siderable importance. Dr. Shen,
one of the younger, dynamic and
more foresighted Nationalist
officials, produced a detailed
report stressing the need for
early, positive measures to im-
prove the Nationalists' rela-
tions with Overseas Chinese.
Although Yeh's trip was
much shorter and confined to
Thailand and Cambodia, it con-
vinced him Taipei's diplomatic
representatives in Thailand were
failing in their liaison tasks
with kcal Chinese and that an over-
haul of embassy personnel was
in order-. A new press attach?
and ambassador were promptly
assigned and their intensive
spadework prior to the 10 Oc-
tober Nationalist holiday pro-
duced a turnout in Bangkok
markedly larger than in recent
years. Ambassador Rankin said
Yeh returned from his trip
"brimming with ideas" and appar-
ently spoiling for a fight with
the Kuomintang stalwarts eperat-
ing the Overseas Chinese program.
Economic Measures
The Nationalist government
has long recognized that the
Overseas Chinese are particularly
sensitive to business opportuni-
ties. A few limited steps have
been taken to expand trade with
Overseas Chinese firms and
merchants and provide them
with opportunities for invest-
ment on the home island.
In August samples of 185
different varieties of Taiwan-
produced consumer goods were
sent to various Southeast Asian
countries, where Nationalist
officials believe a ready market
exists among Overseas Chinese
communities now purchasing
cheap but shoddy Communist
items. A commission was also
established to plan for Taiwan's
participation in various inter-
national trade fairs, notably
the Bangkok fair in December,
where free China's goods will
be displayed alongside those
from Communist China. At the
end of August, the government
announced the establishment of
a semiofficial trade center on
Taiwan to promote foreign
commerce.
Beginning in November 1955,
limited measures were taken to
stimulate overseas investment
in Taiwan by easing tax burdens
on importers of commodities.
This was followed by other
measures, of which the latest
and most important is a decision
made on 23 October by the
Ministry of Finance to extend
the preferential exchange rate
now enjoyed by diplcmatic and
American official personnel
to remittances of foreigners
and Overseas Chinese for ap-
proved investments.
Whether effective government
action will be taken remains to
be seen. The fundamental problem
Is to develop a sympathy for
foreign trade within the Nation-
alist government. Many officials
at present are opposed to con-
sumer goods exports; they prefer
to maintain a high level of
domestic consumption and rely
on American aid to make up the
imbalance in foreign exchange.
Increased exports, they argue,
will merely lead to reduced
American aid.
SECRET
PART III PATTERNS AND PERSPECTIVES Page 11 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Relea,w2005/04/13 : CIA-RDP79-00927A001441/180001-4
SECRET
CURRENT INTELLIGENCE WEEKLY SUMMA4y
15 November 1956
Diplomatic Support
The Overseas Chinese have
traditionally looked to the
homeland for guidance and pro-
tection, and the Nationalist
government has traditionally
maintained that all Chinese are
citizens entitled to protection,
In practice, however, Taipei
has been unable to furnish pro-
tection, and certain highly
nationalistic Asian nations--
notably South Vietnam and Indo-
nesia--have discriminated against
local Chinese despite Taipei's
protests.
Under these conditions,
Nationalist "diplomatic support"
has harmed rather than helped
the local Chinese. Many are
resentful because of this, and
Taipei is now beginning to real-
ize that a totally different
approach to the problem is need-
ed if the loyalty of the Over-
seas Chinese is to be won.
25X1
25X1
The Taipei government
eviaently has concluded that
quiet attempts to improve the
relations between local Chinese
and their countries of residence
will help to mollify the strong
nationalistic feelings promoting
discrimination and ultimately
better serve the interests of
the Overseas Chinese than official
protests, At the same time, it
probably hopes that the policy
will help improve relations
between Taipei and these coun-
tries.
Campaign Progress
The revitalized Chinese
Nationalist campaign to win the
loyalty of the Overseas Chinese
has achieved limited successes,
of which the 10 October celebra-
tions in South Vietnam and Thai-
land are examples. While the in-
creasing appreciation on the part
of Nationalist government of-
ficials of the urgency of the
problem is encouraging, it is
questionable whether sentiment
favoring Taipei is being signifi-
cantly increased by the campaign.
25X1
SECRET
PART III PATTERNS AND PERSPECTIVES Page 12 of 12
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
25X1 Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4
Approved F4cogaLease 2005/04/13 : CIA-RDP79-00940k1000080001-4
CONFIDEM1k4
Approved For Release 2005/04/13 : CIA-RDP79-00927A001000080001-4