CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001400050001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 48
• Document Creation Date: December 16, 2016
• Document Release Date: February 7, 2005
• Sequence Number: 1
• Publication Date: September 5, 1957
• Content Type: SUMMARY

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CO FI~AL
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 17
OCi NO. 5247/57
5 September 1957
NO CHANGE IN 04-ASS. f
Lt DECLA.SSIF1E0
,,wss. CHANGED
NEXT F{E'VIEW DATE: ---
CENT.RA.L INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
DIA and DOS
review(s) completed.
CONFIDENTIAL
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THEVNITED 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.
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USSR ANNOUNCES LARGE AIR-NAVAL EXERCISE . . . . . . . . . Page
The Soviet Ministry of Defense announced on 2 Sep-
tember that Northern Fleet exercises involving air-
craft and "various types of modern weapons" would be
conducted in the Barents and Kara Seas between 10 Sep-
tember and 15 October. This unusual announcement is
probably designed to impress world opinion with Soviet
military strength in the same way as the TASS statement
concerning the successful launching of an ICBM. The
exercise probably will involve at least the simulated
use of nuclear weapons.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
5 September 1957
ISRAELIS RESUME WORK ON LAKE HULA DRAINAGE PROJECT . . . . Page 4
Israel began work on 1 September to complete the
Lake Hula drainage project this fall in the demilitarized
zone along the Syrian border, increasing the possibility
of border incidents in the area. The present Damascus
regime could use this development as an excuse to reim-
pose martial law and still further tighten the grip of
the extreme nationalist and pro-Soviet elements on Syria.
SYRIAN DEVELOPMENTS
While continuing to attack alleged "imperialist"
plotting, the Syrian press is now emphasizing internal af-
fairs, and the leftist magazine al-Baath has declared
that the victory against imperialism must be consoli-
dated by immediate social and economic reform. Presi-
dent Quwatli in a speech opening the Damascus Fair as-
sured the world that Syria is not a Soviet satellite and
re-emphasized Syria's policy of neutralism.
NOTES AND COMMENTS
. Page 6
THE HUNGARIAN QUESTION IN THE UNITED NATIONS . . . . . . Page 1
The 11th United Nations General Assembly, which re-
convenes for a final session on 10 September to discuss
the report on Hungary by the five-member UN special com-
mittee, probably will commend the report, call for an end
to repressive measures in Hungary, continue the special
committee; and appoint a special UN representative to
investigate the situation. The Kadar regime has had little
success to date with a mission it sent to South Asia to
gain support for its case in the UN, but a number of the
uncommitted countries may abstain on any specific endorse-
ment of the report or condemnation of Soviet actions.
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5 September 1957
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MIDDLE EAST ISSUES AT 12TH UN GENERAL ASSEMBLY . . . . Page 1
The primary Middle East issues to be dealt with at
the 12th United Nations General Assembly, which opens
17 September, are the future of the UN Emergency Force,
the Palestine refugee problem, and the payment of costs
incurred in UN clearance of the Suez Canal. Secretary
General Hammarskjold believes that Israeli acceptance
of at least a token patrol of its territory by UNEF will
ensure continuation of the force and aid in negotiations
on the refugee problem. The assembly will probably rec-
ommend a surcharge on canal tolls to pay for the
CURRENT INTELLIGENCE WEEKLY SUMMARY
BRITISH PLANS FOR ARABIAN PENINSULA . . Page 2
As the first step toward solving long-standing prob-
lems in the Arabian peninsula, Britain is seeking to re-
establish diplomatic relations with Saudi Arabia. At the
same time, London is trying to strengthen the Sultan of
Muscat's authority by military and other means. Regard-
ing Yemen, the British are considering the idea of border
talks but are reluctant to become involved in the succes-
sion question.
PAKISTANI PRESIDENT WINS LATEST ROUND AGAINST PRIME
MINISTER . . . . . . . . . . . . . . . . . . . . . . . . . Page 3
Pakistani President Mirza apparently bas won the lat-
est round in his political rivalry with Prime Minister
Suhrawardy. By dismissing the governor of West Pakistan,
an ally of Suhrawardy's, Mirza has taken the political ini-
tiative away from the prime minister. Suhrawardy apparent-
ly does not intend to contest Mirza's move at present, but
may lend his support to a new political grouping whose main
aim will be to prevent further consolidation of Mirza's
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INDONESIA . . . . . . . . . . . . . . . . . . . . . . . . Page
The national round-table conference proposed by
Prime Minister Djuanda has now been definitely scheduled
for 10 to 12 September in Djakarta. Although most par-
ticipants appear to"view the meeting with guarded opti-
mism, they seem to be working primarily to maintain or
to improve their personal and regional positions. Mean-
while, the most recent returns from local elections in
Java show some gains by the non-Communist parties.
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5 September 1957
JAPAN TO EXPLORE COMMUNIST TRADE OFFERS . . . . . . . . Page 5
Japan will begin in September a series of discus-
sions with the USSR, Communist China, and Poland for
the conclusion of trade agreements. The Kishi govern-
ment, although hoping to avoid political discussions,
is being forced by domestic pressures to explore the
possibilities for economic relations with the Sino-So-
viet bloc.
ARAMBURU ATTACKS "ECONOMIC NATIONALISM" IN ARGENTINA . . . Page 7
Just prior to the convening of Argentina's con-
3tituent assembly on 2 September, President Aramburu
::;ailed a series of high-level meetings with military
ind political leaders in which he stressed the serious-
ness of the country's foreign payments position and the
need for abandoning excessive "economic nationalism."
His immediate aim seemed to be to dissuade the assembly--
which is to revise the constitution preparatory to gen-
eral elections in February--from enacting constitution-
al amendments nationalizing petroleum and power resources.
TITO AND GOMULKA TO MEET . . . . . . . . . . . . . . . . . Page 8
Polish Party First Secretary Gomulka, accompanied
by other party and government leaders, will visit Marshal
Tito this month. This first face-to-face meeting of Tito
and Gomulka since 1947 will give them an opportunity to
consider points of common interest, to develop closer
personal understanding, and to define their respective re-
lationships with the Soviet bloc.
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NEW SHAKE-UP THREATENS IN BULGARIAN PARTY . . . . . . . . Page 9
In the campaign for party unity, the official organ
of the Bulgarian Communist party in a 27 August editori-
al strongly hinted at further high-level purging in the
near future. The urgent and ominous tone of this piece
indicates that there are still elements who oppose the
ruling triumvirate.
SOVIET FOREIGN AID ACTIVITIES .
. . . . . . . . Page 10
The recent upswing in Soviet foreign aid offers to
the Middle East and Asia reveals the continuing high
priority being given to increased participation in the
economic affairs of underdeveloped countries. The USSR
has continued to encourage applications for aid from
"neutral" states, and the Soviet organization responsi-
ble for these aid programs'is assuming a larger role in
planning within the USSR.
SOVIET GOVERNMENT REORGANIZES CONTROL BODY . . . . . . . . Page 12
The USSR Ministry of State Control has been abolished
and a Soviet Control Commission organized in its stead, ac-
cording to an announcement of 28 August. This change is
in line with the recent trend toward use of committees and
commissions in Soviet state administration and may have
been made to provide a structure more nearly parallel to
the party control committee, thus facilitating closer par-
ty supervision over the fulfillment of state directives.
The new organization will apparently play a major role in
combating the growth of regionalism.
PEIPING EXCHANGES TRADE DELEGATIONS WITH WESTERN EUROPE Page 13
French and West German economic delegations are in
Peiping and a British group is expected soon. A Chi-
nese Communist trade mission will Visit Britain this
month. Confronted by a decline in its foreign exchange
holdings and an inability to offer substantially in-
creased exports, Peiping had offered various excuses
to postpone these visits. Peiping has nevertheless
now accepted the trade delegations, probably mainly for
political reasons. F7 I
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PEIPING PUSHES CULTURAL OFFENSIVE THROUGH
MOTION PICTURES . . . . . . . . . . . . . . . . . . Page 14
In its campaign to advance its cultural offensive
abroad through the use of motion pictures, Peiping has
participated in a number of international film events
and is at present sponsoring an Asian Film Festival at-
tended by the USSR and 14 Asian-African nations. The
primary target of Chinese film exports is the Overseas
Chinese population in Southeast Asia, but motion pic-
ture exchange agreements are in effect or being nego-
tiated with Middle East, African, European, other Asian
nations, and at least one Latin American country.
HO CHI MINH CONCLUDES TOUR OF BLOC..
The two-month tour of the Sino-Soviet bloc just
concluded by Ho Chi Minh consisted largely of a series
of ceremonial visits designed to demonstrate North
Vietnam's general allegiance to the bloc. The trip
was noteworthy for the cordiality of Ho's meeting with
Tito, the only Communist leader with whom he signed a
joint communique.
. Page 15
SOVIET ""GREAT PROJECTS" . . . . . . . Page 16
Several long-range projects to "adjust nature" to
Soviet ends have been under public discussion in the
USSR during the past year. These have included grandiose
schemes, such as damming the Bering Strait, which are
merely being debated and others which are under serious
consideration. Although some are reminiscent of the
"Great Projects" of Stalin's time, the ones now being
actively considered, such as certain river diversion
plans, appear to have an economic rationale which was
usually lacking in the very costly plans of Stalin.
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PATTERNS AND PERSPECTIVES
KHRUSHCHEV'S PRIMACY IN THE SOVIET LEADERSHIP . . . . . . Page 1
Since Khrushchev's solid victory in the June plenum
of the Soviet party central committee, the measure of
collectivity in the Kremlin has been the measure of
Khrushchev's willingness to solicit and accept the views
of others. Thus, Khrushchev already possesses a great
deal of the political power he would need to make him-
self the sole ruler of the Soviet Union. He is likely
to be deterred from using his power for this purpose,
however, by the post-Stalin diffusion of political au-
thority and by the safeguards which Khrushchev himself
has helped erect against the capricious exercise of
power by one man. If party leaders should fall out
among themselves, there might be a call for a military
strong man to restore "law and order."
INDIA'S ECONOMIC CRISIS . . . . . . . . . . . . . . . . . Page 6
India's rapidly deteriorating foreign exchange po-
sition, which jeopardizes the government's chances of
carrying out the Second Five-Year Plan as scheduled,
has created a crisis of major proportions. Basically
economic, it has political overtones which could lead
to the defeat of the Congress party in the 1962 national
elections. The Congress party leadership will soon have
to make far-reaching decisions on how to cut the cost or
lower the goals of the plan.
RISING STEEL PRODUCTION IN LATIN AMERICA . . . . . . . . Page 10
Five Latin American countries--Brazil, Mexico, Chile,
Argentina and Colombia--now produce almost 3,000,000 tons
of steel annually, a 250-percent increase over 1947 pro-
duction. A 100-percent rise over 1956 is likely by 1960
and, because of the political importance of the drive
for industrialization, the trend is likely to continue.
Most of the large-scale foreign financing required has
been supplied by the United States thus far, although
French, German, Japanese, Belgian, and Italian interests
now are playing substantial roles in some countries.
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5 September 1957
USSR ANNOUNCES LARGE AIR-NAVAL EXERCISE
The Soviet Ministry of
Defense announced on 2 September
that Northern Fleet exercises
involving aircraft and "various
types of modern weapons" would
be conducted in the Barents and
Kara Seas between 10 September
and 15 October. The statement
warned all Soviet and foreign
vessels and planes that the
USSR would assume no responsi-
bility for damages incurred in
the danger zone.
This unusual announcement
is probably designed to impress
world opinion with Soviet
strength in the same way as the
TASS statement concerning the
successful launching of an ICBM.
The USSR may wish to demonstrate
that it is capable of large-
scale air-naval exercises sim-
ilar to NATO operations planned
for the latter part of this
month in the North Atlantic
and the Norwegian Sea.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
5 September 1957
ESTIMATED NAVAL AND NAVAL AIR STRENGTH
OF THE NORTHERN FLEET
AS OF 1 APRIL 1957
Cruisers - 6 Fighter (Jet) 355
Destroyers- 33 Light bomber (Jet)- 70
Med. bomber(Jet)- 10
Submarines -116 Med, bomber (Prop.)-10
Escort vessels- 12 Reconnaissance
(Prop Seaplane)- 35
Others - 25
Proposed area of the Soviet Naval exercises
77?30'N 10 September-15 October 1957 77'30'N
Q
USSR
72?20'N
65?00'E
1 a
fl
SEVERNAYA ZEMLY
Dudin
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\?
lushya Gub
Reference to "various types
of modern weapons" may indicate
that the USSR will include the
tactical use of at least prac-
tice nuclear weapons, i.e., weap-
ons with nonnuclear cores, and
missiles adapted for naval use
in this exercise. E__ I 25X1
(Concurred in by OSI)
ISRAELIS RESUME WORK ON LAKE HULA DRAINAGE PROJECT
Israel began work on 1
September to complete the Lake
Hula drainage project this fall
in the demilitarized zone along
the Syrian border. This re-
newed activity is likely to add
substantially to the tensions
produced by past border clashes
and Syria's latest internal
crisis. The present Damascus
regime could use this develop-
ment as art excuse to reimpose-
martial law and still further
tighten the grip of the extreme
nationalist and pro-Soviet ele-
ments on Syria. Though the
Israelis profess to be aware of
the political effect on Syria
of their action, they apparent-
ly feel the Hula project is so
important that they are willing
to accept the consequences.
Begun in 1950, the project
aims at reclaiming 15,000 acres
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CURRENT INTELLIGENCE WEEKLY SUMMARY
5 September 1957
of potentially rich farm land
from Lake Hula and adjacent
marshes, to prevent seasonal
flooding of another 17,000
acres adjacent to the marshes,
and to eliminate malaria.
The project has been a
source of friction between Isra-
el and Syria from its inception.
Syria had unsuccessfully pro-
tested twice, in 1951 and 1953,
against.the :project
before its complaint
to the Security Coun-
cil last spring con-
cerning a new Bailey
bridge set up at the
southern end of the
lake. The Syrians
argued on the first
two occasions that
by reclaiming the
area Israel would
derive a military
advantage, contrary
to provisions of the
Syrian-Israeli armi-
stice agreement. In
addition, they con-
tended that the work
was proceeding on
Arab-owned lands and
that Syria had a
veto right over de-
velopment activity
in the demilitarized
zone.
Enlargement of
some 500 yards of the
Jordan River channel
south of the lake to
a depth of 21 feet
and a width of 150
feet is the major
work now needed to
drain the lake and
marshes completely.
This stretch is with-
in the demilitarized
zone, just north of
the Banat Yacov
bridge, a site of
perennial border friction.
Estimates of the time required
to complete the work have been
as long as two months.
In anticipation of possible
trouble on resumption of works
in the Hula region, Israel has
made arrangements with the UN
Truce Supervisory Organization
to have observers in the area
while the work progresses. An
-----Channel to be enlarged
-Road
---Trail
Bridge
= Causeway
Demilitarized zone
,SECRET
app-im$tgly
137p yords `i Banat Yaacov bridge
SYRIA
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Israeli official has stated that
while the Arabs may again pro-
test the project to the Secu-
rity Council, Israel regards
it as too vital to be deterred.
This attitude, coupled with de-
velopments within Syria which
have resulted in the assumption
of Syrian border commands by
officers described as young and
impetuous, appears to increase
the likelihood of border in-
cidents in the area.
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While continuing to attack
the alleged threats from for-
eign "imperialism," the Syrian
press and radio, especially the
leftist press, is now shifting
its emphasis toward internal af-
fairs. The leftist weekly, al-
Baath, often an administration
moouu hipiece, has declared that
the Syrian victory against im-
perialism will be meaningless
unless consolidated by immediate
economic- and social reform ac-
companied by a purge of the
civil service. It charges the
present administration with
being "slow, hesitant, weak,
incapable, and infested."
Al-Baath claims that the
first step in carrying out a
constructive liberal policy
must be a decisive, quick purge
of the corrupt, subverted bu-
reaucracy and its replacement by
qualified citizens believing in
a "liberative policy." The ed-
itorial concludes with the
statement that.'.if the government
cannot develop a new internal
policy, it should be replaced by
one having a "constructive"
mentality and definite reform
program.
organs.; the Supreme Economic
Council and the Economic Develop-
ment Institution. Kallas has
stated that the trade and eco-
nomic agreements concluded with
East European states have been
of little benefit under a system
of economic freedom.
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The purge of the army con-
tinues, with the replacement of
lower-echelon police and brigade
commanders and the creation of
a long-range planning department
to serve as a "stable" for "trai-
tors" and Christians. The army
now appears divided into three 25X1
groupings: the leftist Baathist
element, which is the majorit
the conservative ' is
and mem- 25X1
religious minorities
--Druze, Alwites, and Christians.
The minorities fear further dis-
crimination, and it has been re-
ported that Moslem enlisted men
sometimes have assumed authority
over non-Moslem officers.
The prevailing opinion
among the Damascus diplomatic
corps is that President Quwatli's
days are numbered.
In line with the "reform"
demand of al-Baath, Minister of
National Economy, Khalik al-
Kallas has called for the end
of "complete" economic freedom
and its replacement with a
"special economic system" of
the "progressive and guided"
type in order to speed develop-
ment, Steps toward this goal
have already been taken in the
organization of two government
Quwatli opened the Damascus In-
ternational Fair; with a flowery
speech whose main theses were
maintenance of Syrian sovereign-
ty against all Zionist imperial-
ist machinations and reassurance
to the world that Syria is not
"revolving around the Soviet
orbit" and that Syria is re-
emphasizing a basic palinu of
positive neutralism.
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NOTES AND COMMENTS
THE HUNGARIAN QUESTION IN THE UNITED NATIONS
The 11th United Nations
General Assembly, which recon-
venes for a final session on
10 September to discuss the
report on Hungary by the five-
member UN special committee,
is expected to commend the re-
port, call for an end to repres-
sive measures in Hungary, con-
tinue the special committee,
and appoint a special UN repre-
sentative to investigate the
situation. The assembly session
will probably also recommend
that the Hungarian question be
placed on the agenda of the
12th General Assembly, opening
on 17 September.
The report of the committee
--composed of Australia, Ceylon,
Denmark, Tunisia, and Uruguay--
on 21 June was a powerful in-
dictment of the Soviet inter-
vention and of subsequent Krem-
lin policy toward Hungary.
Following issuance of the
report, the Kadar regime sent
a mission headed by a deputy
foreign minister to various
countries in the Asian-African
bloc in an attempt to prevent
or at least soften further UN
action. The mission has had
little success. India and
Ceylon have both stated that
the UN should discuss the spe-
cial committee's report. Burma,
although agreeing to study the
documents left by the group,
is expected to maintain its
strong stand against the Kadar
regime, and Tunisia has refused
even to discuss the matter.
The uncommitted countries
are generally agreed that the
assembly must consider the re-
port and would most likely sup-
port a continuation of the com-
mittee and the appointment of
a special representative in the
hope of ameliorating the lot
of the Hungarian people. Some
of these countries, however,
particularly those in the Asian-
African bloc, might abstain on
those parts of a UN resolution
endorsing the report or con-
demning the Soviet actions.
The British Foreign Office
believes the special committee
should be terminated "before
it disintegrates." The most
likely outcome is continuation
of the committee with new mem-
bers replacing those resigning.
There is a strong possibility
Ceylon may withdraw.
The idea of appointing a
special UN representative with
a mandate to use his best ef-
forts to better conditions in
Hungary seems to have widespread
appeal. The individual being
considered most seriously is
Prince Wan of Thailand, who
was assembly president during
the earlier UN debates on
Hungary. The Norwegian govern-
ment has suggested Charles
Malik of Lebanon, both because
he is capable and because his
appointment would provide a
convenient means of "driving a
wedge between the A i n-African
and Soviet blocs." 25X1
The primary Middle East
issues to be dealt with at the
12th United Nations General
Assembly, which opens 17 Sep-
tember, are the future of the
UN Emergency Force, the Pales-
tine refugee problem, and the
payment of costs incurred in
UN clearance of the Suez Canal.
UN Secretary General Hammarskjold
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believes that to minimize con-
troversy these questions should
be treated separately rather
than under one general item as
was done by last year's assem-
bly.
Hammarskjold believes de-
ployment of the UN Emergency
Force (UNEF) on both sides of
the Egyptian-Israeli armistice
line will be a critical issue
at this assembly unless Israel
soon agrees to at least a token
patrol of its territory by UNEF.
The 11th General Assembly's
resolution of 2 February 1957
is generally interpreted to
mean that the UN force should
be on both sides of the line.
For this reason, the secretary
general feels this assembly will
probably specifically call for
such deployment and that Israeli
refusal to comply would probably
result in an Egyptian demand
for UNEF's withdrawal--which,
for practical purposes, would
mean the end of the UN force.
This assembly must also re-
solve the problem of financing
the force, since contributions
have been insufficient. Moscow
has refused to contribute,
Taipei has indicated inability
to pay, and other countries are
in arrears. The Scandinavian
countries, whose troops comprise
a large portion of the force,
are having difficulty in meet-
ing costs of equipping and pay-
ing their contingents. In-
donesia has already withdrawn
its troops for financial
reasons.
Hammarskjold hopes, given
Israeli compliance,on UNEF
deployment, to initiate dis-
cussions with Egypt, and per-
haps Iraq, on the question of
resettlement of the Palestine
refugees. In July, Egyptian
Foreign Minister Fawzi had
suggested that the secretary
general undertake consultations
between the Arabs and Israel
under cover of efforts to
achieve border tranquility.
Hammarskjold evidently intends
to pursue these negotiations
privately during the forthcom-
ing session.
The assembly must increase
contributions to the UN relief
organization which cares for
the refugees. In the past,
over 90 percent of its funds
have come from the United
States, Britain, Canada, and
France, and strong efforts will
be made this fall to get other
countries tc contribute.
The total cost of clearing
the Suez Canal was approximately
$8,500,000, covered by advances
from various UN members. The
secretary general, in consul-
tation with India, Egypt, and
several Western countries,
has drafted a plan whereby these
loans would be repaid by levy-
ing a surcharge on all shipping
through the canal. This assem-
bly will probably recommend
the imposition of such a sur-
charge. Effectiveness of the
UN recommendation would depend
to a great extent on the widest
possible assembly approval,
strong support from public
opinion, and the cooperation
of a large majority of pri-
vate shipping companies.
25X1
BRITISH PLANS FOR ARABIAN PENINSULA
In an effort to make some
progress toward solving long-
standing problems in the Arabian
peninsula, Britain is seeking
to re-establish diplomatic
relations with Saudi Arabia.
At the same time, London is
trying to strengthen the Sul-
tan of Muscat's authority by
military and other means.
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The British no longer in-
sist that King Saud make the
first move and will reopen
their diplomatic post if the
Saudis will do so simultaneous-
ly. Having already conveyed to
Saud its desire to re-establish
relations, London asked the
United States on 26 August to
act as an intermediary.
Britain probably wishes to
re-establish diplomatic contact
with Saud before the Sultan of
Muscat's visit to London in
October. It believes the
Sultan's position would be
strengthened if he conferred
with Saud on border problems.
To help the Sultan con-
solidate his authority over his
domain, the British chiefs of
staff have decided to send a
"fairly sizable" military
training mission to Muscat
soon. Of British forces brought
in to quell the July rebellion,
only an armored car platoon
and some RAF elements are
scheduled to remain to provide
support for local units.
While aware of the need,
London apparently is not con-
sidering nonmilitary aid be-
yond the $16,000 annual rent
for the airstrips at Salala
and Masira Island. The Iraq
Petroleum Company pays the
Sultan about $400,000 annually
for its concession, and London
hopes the new American oil dis-
covery in Dhofar will in time
prove profitable to the Sultan.
25X1
ence at the frontier
Though expressing some con-
cern on 29 August that Yemen
might be "slipping down the same
path as Syria," the Foreign Of-
fice appears inclined to tem-
porize for the time being. While
the British are still consider-
ing Crown Prince, Badr's offer
to visit London for talks on the
Aden-Yemen border dispute, they
are unenthusiastic, not wishing
to become openly involved in the
Yemeni succession question. As a
counterproposal, Britain may,how-
ever, suggest a low-level confe -
PAKISTANI PRESIDENT WINS LATEST ROUND AGAINST PRIME MINISTER
Pakistani President Mirza
apparently has won the latest
round in his political rivalry
with Prime Minister Suhrawardy.
By obtaining on 27 August the
resignation of Governor Gurmani
of West Pakistan, a leading con-
tender for the presidency of
Pakistan in any future election,
Mirza has eliminated one of
Suhrawardy's major allies in
his struggle against the Presi-
dent. Suhrawardy, who apparent-
ly was offered the choice of
accepting Gurmani's dismissal
or of resigning his own post,
seems to have lost the political
initiative which had been gain-
ing him increasing popular sup-
port in Pakistan.
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5 September 1957
The new governor of West
Pakistan, Akhtar Hussayn, who
was appointed on 28 August, is
--like Mirza--a senior civil
servant. He reportedly is
close to Mirza and seems likely
to accede to Mirza's wishes.
His appointment is rumored to
be a temporary one, to last
only until the Republican party
can afford to spare some other
leader from the very slim ma-
jority it now controls in the
National Assembly. Hussayn's
appointment has raised some
criticism from orthodox Sunni
Moslems regarding the addition
of another dissident Shia sect
member to the number already
occupying high positions in the
government.
President Mirza, also a
Shia, faces a disciplinary
problem within his Republican
party as a result of the Gurmani
ouster. Three Northwest Fron-
tier tribal members of the
National Assembly resigned from
the party on 24 August, appar-
ently at Gurmani's instigation,
and have turned independent.
Parliamentary Affairs and In-
formation Minister Amir Azam
Khan, a friend of Gurmani's,
also has resigned his posts in
protest. Gurmani, who reportedly
controls about eight of the 79
National Assemblymen and about
30 of the 300-odd West Pakistan
assembly members, presumably
will lead his followers out of
the Republican camp. Probably
in the fear that others may
follow, the Republican party is
offering provincial ministries
to several legislators with
political followings. .
At the moment, it appears
that a new political combination
may develop in West Pakistan as
a result of efforts to prevent
Mirza's acquisition of further
power. This would include
Suhrawardy's Awami League, the
Moslem League--whose leaders in
West Pakistan hate Mirza,
Gurmani's forces, and other dis-
sident Republicans. Three par-
liament members of the orthodox
Nizam-i-Islam party, who on 25
August withdrew from the ruling
Republican-Awami League coali-
tion, may also join this group.
ber.
The Moslem League and others
have already opened a campaign
charging Mirza with "stifling
democracy" in order to keep the
Republican party in power. It
is also being publicized--prob-
ably rightly--that Mirza wishes
to postpone for some time the
national elections which Suhra-
wardy had hoped to hold next
March. If the charges of Mirza's
opponents gain any popular back-
ing, he may find that the Repub-
lican party cannot command a
clear majority in either the
national or West Pakistan as-
semblies, both of which are
scheduled to meet in mid-Septem-
The national round-table
conference proposed by Indone-
sian Prime Minister Djuanda now
has been definitely scheduled
for 10 to 12 September in
Djakarta. Although most partic-
ipants appear to view the meet-
ing with guarded optimism, they
seem primarily interested in
maintaining or improving their
personal political positions.
Djuanda is involved in a
series of private discussions
before the conference with some
regional leaders and has sent
cabinet ministers throughout
the islands to urge attendance
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5 September 1957
at the conference. Army Chief
of Staff General Nasution called
a meeting in Bandung on 29 Au-
gust of all territorial com-
manders whom he regards as per-
sonally loyal. In South Sumatra,
Lt. Col. Barlian scheduled an
interregional conference for
4 September, and President Su-
karno is touring East Indonesia
to appeal for national unity
and to stimulate demands for
incorporation of Netherlands
New Guinea;
The regions, including the
disaffected areas, have each
been asked to send five repre-
sentatives to the conference.
Lt. Col. Sumual of North Celebes
has agreed to attend, and since
no refusals have been reported,
it is assumed that the disaf-
fected Sumatran commanders will
also be present.
Former vice president Hatta,
whose scheduled presence at the
meeting has been regarded as a
factor in favor of its success,
feels that the most that can be
expected to result is an im-
provement in the atmosphere be-
tween Djakarta and the provinces..
He told the American ambassador
that his own activity at the
conference would be conditioned
by the attitude of President
Sukarno. He said he would not
participate actively if Sukarno
adopted an uncompromising posi-
tion toward regional grievances.
Meanwhile, late returns
from local elections in Java
have been favorable for the
non-Communist parties. The pic-
ture is still unclear, however,
and the interior minister esti-
mates official returns will not
be available before the end of
October.
In East Java, where unof-
ficial returns are 75 percent
complete, the Nahdlatul Ulama
now has forged slightly ahead
of the Communists and is in
first place. In West Java, the
Masjumi maintained its lead
with the Communists in third
place. In Central Java, where
unofficial returns are largely
complete, the Communists main-
tained their plurality on a
provincial level with absolute
majorities in a number of re-
gency and municipal councils.
The fact remains that the Com-
munists have made impressive
gains throughout Java since the
1955 national elections.
In anticipation of provin-
cial elections in Jogjakarta
sometime this month, the Na-
tional party, which lost heavily
to the Communists in Central
Java, has reportedly voted to
end electoral cooperation with
the Communist party.
JAPAN TO EXPLORE COMMUNIST TRADE OFFERS
Japan will begin in Septem-
ber a series of discussions with
the USSR, Communist China, and
Poland to determine whether
economic relations with those
countries can be expanded prof-
itably without jeopardizing its
relations with the free world.
The Japanese government believes
that Communist trade offers are
in reality politically motivated
and doubts that significant
trade opportunities can be de-
veloped. However, the demands
of Japanese businessmen eager
to take advantage of the lucra-
tive-sounding trade offers from
the Sino-Soviet bloc in the
last year have compelled Tokyo
at least to discuss the offers.
A Soviet trade delegation
headed by Deputy Minister of
Foreign Trade I. F. Semichastnov
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5 September 1957
is scheduled to arrive in Tokyo
on 7 September to begin trade
discussions requested by the
Kishi government. Sadao Hirose,
chief Japanese negotiator, led
a trade mission to Moscow in
July and reportedly has dis-
carded as propaganda Soviet al-
lusions to Japan's participa-
tion in Siberian economic de-
velopment. The Japanese intend
to appear unenthusiastic in
order to avoid a Soviet attempt
to use the talks to obtain po-
litical concessions. Japan de-
sires a one-year agreement with
a flexible trade goal of about
$28,000,000 each way and a pay-
ments agreement calling for
cash settlement in sterling.
Foreign Minister Fujiyama
on 30 August outlined for Am-
bassador MacArthur his govern-
ment's plans for expanding trade
with Communist China. Negotia-
tions are complicated by the
lack of official relations with
Peiping and by fear that in-
creased Sino-Japanese trade will
threaten Tokyo's economic rela-
tions with the United States.
Moreover, Japanese officials
seriously question the ability
of Communist China to become
an important trade partner.
Nevertheless, the ruling
Liberal-Democratic party is
sending a delegation to Peiping
in mid-September to conclude a
new private trade agreement--
the fourth since 1952--calling
for trade in the amount of $90,-
000,000 each way. Kishi has
relaxed requirements for finger-
printing of aliens in Japan in
order to facilitate an exchange
of permanent trade missions with
Communist China.
Tokyo also has responded
affirmatively to Polish over-
tures for trade discussions.
These talks are expected to be-
gin in Tokyo early in October,
and Japan hopes to conclude
an agreement for $10,000,000
each way annually. Past trade
between the two nations has
been insignificant
(Concurred in by ORR)
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5 September 1957
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ARAMBURU ATTACKS "ECONOMIC NATIONALISM" IN ARGENTINA
Just prior to the convening
of Argentina's constituent as-
sembly on 2 September, Presi-
dent Aramburu called a series
of high-level meetings with
military and political leaders
in which he stressed the seri-
ousness of the country's for-
eign payments position and the
need for abandoning excessive
"economic nationalism." His
immediate aim seemed to be to
dissuade the assembly--which
is to revise the constitution
preparatory to general elections
in February--from enacting con-
stitutional amendments national-
izing petroleum and power re-
sources.
During the meetings to "re-
view the country's situation,"
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5 September 1957
the treasury minister reportedly
predicted a continuing balance
of payments deficit of at least
$75,000,000 despite limited im-
ports falling short of essential
needs. The commerce minister
emphasized the inability of the
government to meet the countrys
need for additional investment:
in power, petroleum, and indus
try and in effect confessed that
it had not done all it could to
make Argentina credit worthy.
He was apparently referring to
the strong nationalistic pres-;
sures which have blocked meas
ures to attract new foreign in=
vestment into the two critical
fieldsl of electric power and
petroleum development. ?Aram-
buru reportedly forecast eco-
nomic and political disaster
unles ,the armed forcest the
politicians, and the public a-
bandoned "excessive economic
nationalism."
The note of urgency in the
government's recommendations
probably stems not only from
present financial difficulties
but also from the fact that a
majority of the constituent
assembly members belong, to
parties which favor federal con-
trol over power resources.
The assembly's first of-
ficial meeting in Santa Fe was
postponed to 3 September by
bitter political arguments
which delayed organizational
procedures. By then only 120
.of the 205 assembly members
were present, and the 77 dele-
gates of the antigovernment
Intransigent Radical Civic
Union--the-largest single bloc--
had'withdrawn from the assembly.
The assembly proceedings are
expected to be protracted and
complicated by jockeying for
party position in February's
election.
TITO AND 6OMULKA TO MEET
Polish Party First Secre-
tary Gomulka, accompanied by
other party and government lead-
ers, will visit Marshal Tito
this month. This first face-to-
face meeting of Tito and Gomulka
since 1947 is being warmly weI4
corned by both Warsaw and Belgrade
and-will be a most significant'
event;,'in view of the delicate
positions of Yugoslavia and
Poland in the Communist world.
Tito and Gomulka deny that they
are "national Communists," but
both advocate separate roads to
socialism and a nationally inde-
pendent development of Communism.
In certain areas of internal
affairs, Poland has departed more
sharply from Stalinist practices
since last fall than Yugoslavia
has in its nine years of inde-
pendence. In foreign affairs,
Yugoslavia formulates and fol-
lows its own independent policy,
whereas Poland tends to adhere
more closely to the Moscow line.
An atmosphere more favorable
to Polish-Yugoslav talks has
probably been created by the re-
buff administered Soviet "dog-
matists" at the Soviet party
plenum in June and by the Tito-'
Khrushchev meeting in August.
The meeting will afford an op-
portunity for Tito and Gomulka'
to consider points of common in-
terest, to develop closer per
sonal understanding,1and to define
their respective relationships;
to the Soviet bloc. ' Gomulka rej-
portedly has been in the Soviet
Union during the past week, pre-
sumably in order to probe the
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5 September 1957
Soviet view on the recent Tito-
Khrushchev talks.
Shortly after Gomulka's
rise to power in October 1956,
the Yugoslavs expressed their
willingness to consult with top
Polish leaders but indicated
that they realized the political
situation might make such a
move impossible for Poland at
that time. When Yugoslav-Soviet
relations began to deteriorate
last winter, the Yugoslavs were
reluctant to promote such a
meeting or to sympathize openly
with Polish developments for
fear of causing a new crisis in
Polish-Soviet relations. Po-
land, sensitive to charges of
Titoism, looked more to China
for support, pending restored
Soviet acceptance of Yugoslavia.
Poland's interest in Yugoslavia
was maintained during this
period, however, through dis-
creet exchanges of low-level
delegations.
After Tito and Khrushchev
consulted in Bucharest last
month, favorable official refer-
ences to Yugoslavia began to
appear in Poland. The most re-
cent such reference was an ar-
ticle in the Polish party's
official theoretical journal
by a member of its editorial
board who had attended the
Yugoslav workers' council con-
gress in June as the representa-
tive of the Polish party.
This article, itself an
explosive contribution to the
Communist ideological contro-
versy, declared that every at-
tempt to deny the value and
benefits which Yugoslavia can
confer on the "progress of
socialism was a manifestation of
megalomania." The article
singled out for special praise
the Yugoslav attempt to create
economic democracy through self-
government at the lowest levels.
The Yugoslav concept of the
party's role in government as
one limited to policy-making
was also praised by the Poles
as one precluding an overbear-
ing and unpopular bureaucracy
and reducing the constant tend-
ency for the leadership to become
isolated from the people.
Although tactical differ-
ences in domestic application
exist, the Yugoslavs have ap-
proved basic Polish methodology
and successes. Tito probably
personally welcomes developments
in Poland as a vindication of
his own long fight with Moscow.
There are certain elements
in foreign affairs as well which
are common to both countries.
They both oppose formation of a
new Cominform and rankle at vari-
ous forms of Soviet hegemony.
The Yugoslavs have supported the
Poles on the question of the
Oder-Neisse line, although no
formal agreement has incorporated
such support. The Yugoslavs have
also encouraged closer relations
between Warsaw and the West.
The campaign for party
unity being conducted in the
official organ of the Bulgarian
Communist party reached a climax
in a 27 August editorial which
hinted at further high-level
purging in the near future. The
.urgent and ominous tone of this
piece--strongly resembling the
3 July Pravda editorial which
precede announcement of the
Moscow presidium shake-up--in-
dicates that, despite the elim-
ination of Chankov, Terpeshev,
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5 September 1957
and Panov in July, there are
still elements, probably con-
stituting a significant minority
in the central committee, who
oppose the ruling triumvirate
of Yugov, Zhivkov, and Cherven-
kov.
The July shake-up appears
to have been intended to intim-
idate a faction led by politburo
member Chankov, the former num-
ber-two man of the party, and
a nativist group led by Terpe-
shev and Panov. The latter and
more important faction is com-
posed of remnants of the old
revolutionary party which lost
out during the Stalinist purges
of the early 50's but was re-
instated at the central commit-
tee level when collective lead-
ership was established in 1954.
Apparently, both Chankov and
the Terpeshev faction seized
the opportunity provided by the
Soviet 20th party congress and
the demotion of Chervenkov in
1956 to enhance their positions.
The present leadership is
seeking to play down the fight
against the "cult of the indi-
vidual" in order to restore par-
ty unity and consolidate its
power. The continued attack
against sympathizers of the
purgees indicates that the July
shake-up neither removed all
the opposing elements nor sat-
isfactorily silenced them. 0
The charge of "revisionism"
apparently applied specifically
to the Terpeshev group, which
had a traditional affinity for
the Yugoslav party and would
welcome any loosening of ties
with Moscow.
The campaign against party
dissidents has been accompanied
by renewed efforts to discipline
liberal elements remaining in the
Bulgarian Writers' Union who
have been criticizing the party
under the guise of a struggle
against the "cult of the indi-
vidual." This campaign against
"revisionist" writers was under-
lined by an 18 July editorial in
Literaturen Front, the union's
daily newspaper, which denounced
"unhealthy and nonparty manifes-
tations," and linked these writ-
ers with "the campaign against
socialist realism and socialism
in general as conducted in cert2 i-~,,
People's Democracies." These
and similar articles may reflect
a clash within the leadership of
the union itself, presently
headed by Khristo Radevsky, a
lieutenant of Minister of Edu-
cation and Culture Chervenkov,
former party boss.
the country.
member Kirichenko throughout
The present leadership of
the Bulgarian party possibly
feels the need for outside sup-
port in the present situation
and it may be for this reason
that Party First Secretary
Tudor Zhivkov is escorting
"vacationing" Soviet presidium
The recent-upswing in Soviet
foreign aid offers to the Middle
East and Asia reveals the con-
tinuing high priority being given
to increased participation in
the economic affairs of underde-
veloped countries. The USSR has
continued to encourage applica-
tions for aid from "neutral"
states, and the Soviet organ-
ization responsible for these
aid programs is assuming a larg-
er role in planning within the
USSR to assure attainment of
Soviet foreign policy objectives.
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The importance of the issue
of aid to underdeveloped coun-
tries-in the Moscow shake-up in
June is not known, but shortly
thereafter, added impetus was
given to the promotion of for-
eign economic relations by the
creation of a State Committee
of the Council of Ministers for
Foreign Economic Relations to
replace the less influential.
Chief Directorate for Economic
Relations (GUES).
In the Middle East, the
USSR acted rapidly when the po-
litical climate in Syria ap-
peared favorable and offered to
underwrite a broad economic de-
velopment program in that coun-
try. This was the first firm
offer of this nature the USSR
made in the Middle East. As has
been the case in nearly all re-
cent economic assistance offers,
the USSR offered to purchase raw
materials or agricultural prod-
ucts to convince Syria that
necessary foreign exchange to
finance the plan would also be
available.
The Sudanese government,
about to face national elections
and confronted with cotton sur-
pluses, has been offered an op-
portunity simultaneously to re-
duce this surplus and to receive
Soviet equipment and technicians
to aid in the construction of
industrial enterprises.
Both Iran and Turkey have
been targets for Soviet aid.
Iran has agreed to permit im-
provement of its Caspian sea-
ports and in the past two months
has entered into a joint venture
with the USSR to study the de-
velopment of water resources
along the common border.r-
Under a recently concluded agree-
ment, the USSR will construct a
glass and two chemical factories
in Turkey, and recent reports
indicate that general Soviet
offers of additional assistance
to Turkey have also been re-
newed.
In Asia, Ceylon has been
told that the USSR would be will-
ing to assist in developing the
country's rubber industry and
to purchase the additional rub-
ber which would be produced. The
USSR reportedly is also express-
ing interest in Thai industrial
development. Although there
has been no significant economic
exchange with Thailand, the
Soviets are reported to have in-
dicated that the USSR can, "at
any time," promote commercial
interchanges.
The USSR continues to seek
an expansion of economic rela-
tions with those Asian countries
which have formerly been, ap-
proached. A new understanding
with Afghanistan provides addi-
tional economic assistance,
Indonesia is being urged to
ratify and implement the $100,-
000,000 loan granted last year,
and a Soviet mission in India
is negotiating the details of
the $126,000,000 loan granted
in late 1956.
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SOVIET GOVERNMENT REORGANIZES CONTROL BODY
The USSR Ministry of State
Control, which was headed by
Molotov from November 1956 un-
til his purge in June, has been
abolished and a Soviet Control
Commission organized in its
stead. This change is in line
with the recent trend toward
use of committees and commis-
sions in Soviet state adminis-
tration and is probably designed
to introduce greater flexibility
in supervision and checking on
fulfillment of state directives,
particularly in the implementa-
tion of economic plans. At the
same time it permits inclusion
of representatives of the popu-
lation and other state
organs, thus broad-
SS . .,__EVOLUTIONOF PARTY AND STAB
CENTRAL CONTROL
COMMISSION
PARTY CONTROL
COMMISSION
A su perminisleri al body consrsnng ot:
rna-
-hmi,
air Al the Council of People's Commissars
0,P ty hutP oplir man:
People's Com miSSar of Workers=Pea sa nt s'In spection
Members
Sncrelary,Peily Central Committee
Secretary. All.Ummn Canhal Cnuned of Trade Unions
Secrelary, All Union Central Unroll of Agricultural Collecflee
SOVIET CONTROL
COMMISSION
MAIN MILITARY
CONTROL
Date of creation unknown
PARTY CONTROL
COMMITTEE
PEOPLE'S COMMISSARIAT OF
WORKERS-PEASANTS INSPECTION
PEOPLES COMMISSARIAT
OF STATE CONTROL
MINISTRY OF
STATE CONTROL
SOVIET CONTROL
COMMISSION
SECRET
ening the control
base and enlisting
greater numbers of
people in carrying
out its functions.
The move appar-
ently marks a return
to the kind of organ-
ization which existed
from 1934 to 1940. It
may have been made to
provide a structure
more nearly parallel
to the party control
committee and hence
facilitate closer
party supervision and
coordination over con-
trol work. The stat-
ute on the 1934 So-
viet Control Commis-
sion, for example,
stated that the com-
mission should carry
on its work "in close
liaison" with the
party's control body.
The Ministry of
State Control was un-
der fire even before
Molotov took over.
At the 20th party con-
gress in February
1956, Khrushchev
sharply criticized
the ministry as "fee-
ble" and called for
a fundamental reorgan-
ization in its work.
Molotov was apparently
appointed minister in
the hope that he could
straighten it out, His
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CURRENT INTELLIGENCE WEEKLY SUMMARY
5 September 1957
opposition to Khrushchev's gov-
ernment reorganization, how-
ever, suggests that he was not
in sympathy with the kind of
reorganization Khrushchev wanted
in the state control field.
The political importance
of the Soviet government's con-
trol body has fluctuated rather
widely. It has been compara-
tively low during recent years.
The new control commission may
carry increased political
weight, but the extent of the
increase will not be fully ap-
parent for some time. The im-
portance of the person selected
to head it could provide a clue,
but no announcement of an.ap-
pointment to the post has yet
been made. The chairman of
the party control committee is
Nikolai Shvernik, appointed
full member of the party pre-
sidium following Molotov's
purge.
The new commission has
been charged with most of the
responsibilities of the former
ministry, but with additional
mention of the task of over-
coming "manifestations of local
administrative and parochial
tendencies." Khrushchev on
several occasions warned against
the danger of "localism" in-
herent in his new system of
industrial management. The
new Soviet Control Commission,
possibly in conjunction with
the-party control committee,
appears called on to play a
major role in preventing lo-
cal self-interest from under-
mining national objectives.
PEIPING EXCHANGES TRADE DELEGATIONS WITH WESTERN EUROPE
French and West German
economic delegations have ar-
rived in Communist China, and
a British delegation is expected
soon. A Chinese Communist trade
mission will visit Britain this
month. Confronted by a decline
in its foreign exchange hold-
ings and an inability to offer
substantially increased exports,
Peiping had made various excuses
to postpone these visits. The
Chinese Communists have, never-
theless, now accepted the trade
delegations, probably mainly
for political reasons..
China's exchange of trade
with Western Europe in the first
quarter of 1957 suggests that
the total for the year will not
exceed the 1956 level and pos-
sibly may decrease slightly.
France and West Germany, how-
ever, are increasing their share
of this total.
Peiping has intimated to
France and Italy that political
recognition would enhance pros-
pects for more formal trade ar-
rangements. A member of the
French mission now in China was
informed last May that adequate
trade relations had already
been established by the earlier
Rochereau mission in 1956 and
that a political mission would
prove most beneficial to ex-
panded trade. French officials
believe Communist China prob-
ably will demand a break with
the Chinese Nationalist govern-
ment before permanent trade
representation can be estab-
lished.
Traders from the UK and
the Netherlands, whose govern-
ments already have diplomatic
relations with Peiping, are
under pressure from the Chinese
Communists to remove the trade
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5 September 1957
embargo completely. The Brit-
ish are expected to announce
shortly the removal of voyage
licensing and bunker controls
on vessels in the China trade.
Such a proposal might be pre-
sented when a Chinese Communist
trade mission, the first since
the relaxation of the embargo,
visits Britain later this month.
Negotiations for the exchange
of permanent trade missions be-
tween Britain and Communist
China have been in progress
since British action on the
embargo in June.
The West German government,
noting Peiping's emphasis on
political rather than economic
features of the recent reduction
of the embargo, is not optimistic
over the prospects for the
West German mission to China.
Bonn has stated that the main
advantage it hopes to achieve
is to obtain more direct trade,
eliminating intermediary coun-
tries.
While negotiating with
these delegations, Peiping will
try to mask its real trade prob-
lem, a lack of sufficient trad-
ing resources, and may seek
short-term credits, although this
would be a departure from pre-
vious practice. By manipula-
tion of its trade with Western
Europe, Peiping hopes to in-
crease its prestige and advance
its ultimate objective of for-
mal recognition.
(Prepared jointly with
UHH) 25X1
PEIPING PUSHES CULTURAL OFFENSIVE THROUGH MOTION PICTURES
The Asian Film Festival
now under way in Peiping and
nine other cities on the main-
land reflects Communist China's
growing emphasis on motion pic-
tures in advancing its cultural
offensive for greater prestige
and influence abroad. Repre-
sented in the celebrations are
delegations from the USSR and
14 Asian-African nations--Burma,
Cambodia, Ceylon, India, Japan,
Lebanon, Syria, North Korea,
North Vietnam, Mongolia, Paki-
Sstan, Singapore, Thailand, and
Indonesia. The film festival
has been hailed by the Chinese
as "an unprecedented get-to-
gether" and a "new step in
cultural interchange."
Peiping first entered the
international film market about
18 months ago;and now has mo-
tion picture exchange agreements
with some 14 countries. Plans
are being made to increase this
number to 30 by the end of this
year. In addition to bloc coun-
tries, nonbloc nations such as
Pakistan, Indonesia, Ceylon,
Burma, Egypt, and Yugoslavia
have signed exchange agreements
with Peiping. Chinese Communist
films have also appeared in
Chile, Finland, Australia, West
Germany, Italy, the UK, Thailand,
Cambodia, Laos, Malaya, and Singa-
pore.
The primary target in the
free world for Chinese Communists
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5 September 1957
films seems to be the Overseas
Chinese population in Southeast
Asia. Employing a "soft-sell"
technique, the movies emphasize
traditional Chinese life.
Travelogues, films on Chinese
folk music and dancing, and
productions dealing with main-
land achievements since the ad-
vent of the Communist regime
are all pitched to create
nostalgic reminders of mainland
life and to win the "patriotic"
sympathy of Overseas Chinese
viewers.
Last spring, however,
Peiping began to export to the
area a few movies with blatant-
ly propagandistic content.
Among these was the "White-
Haired Woman," shown to date
in Cambodia, Laos, and Thailand,
which depicts the glories of
Communist society in contrast
to life under the Nationalists.
These films, which have a much
weaker box-office draw, are
directed particularly toward
Overseas Chinese youth.
To Peiping, the economic
benefits resulting from the
large-scale export of motion
pictures are clearly secondary
to the opportunity provided for
advertising the regime's ac-
complishments and spreading
its influence. In Indonesia,
the Chinese have sought to widen
the distribution of their films
by proposing that Djakarta re-
tain all profits for its own use.
UOU 111m center is nearing com-
pletion at Canton, however, and
another major studio is being
built at Sian in Northwest
China. When these are com-
pleted, there will be a total
of nine studios operating on
the mainland.
The Communists are making
a major effort to improve the
technical quality of their
movies. Foreign film techni-
cians, among them French and
Italian, have been invited to
produce films jointly with the
Chinese, Stereophonic sound
has been introduced, and the
Chinese plan to increase the
number of wide-screen and color
productions.
Artistic and technically
well made, Chinese Communist
films last month were exhibited
for the second consecutive year
at the Edinburgh film festival,
where the Chinese last year won
three prizes. Later this month,
Peiping plans to exhibit films
at the Damascus festival. Par-
ticipation in such internation-
al film events advances Pei-
ping's objective of winning
accreditation of its repre-
sentatives to international
art and professional groups.
HO CHI MINH CONCLUDES TOUR OF BLOC
The two-month tour of the
Sino-Soviet bloc just concluded
by Ho Chi Minh was noteworthy
for the cordiality of his meet-
ing with Tito. Only in Bel-
grade did he sign a joint com-
munique, and Ho's trip was ap-
parently an attempt to improve
North Vietnam's status in the
Communist world through
publicity and personal contact.
It was largely a series of
ceremonial visits which under-
scored North Vietnam's general
allegiance to the bloc but
which also reflected differing
attitudes on intrabloc relations.
North Korea gave Ho the
heartiest official welcome,
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5 September 1957
with "hundreds of thousands"
of persons marshaled to greet
him. In Eastern Europe, he did
not refer to his audiences as
"brothers and sisters" as he
had in Pyongyang--his whole
attitude was more restrained.
HO CHI MINH
In capital after capital he
noted that despite the great
distances separating his hosts
from Vietnam, their common goals
made them all part of "the great
socialist family." With the
exceptions of Warsaw and Bel-
grade, his hosts continually
praised the solidarity of the
"socialist camp, headed by the
Soviet Union," while Ho re-
peatedly referred to the "so-
cialist camp, headed by the
Soviet Union and China."
Perhaps because of this
inability to agree on ideolog-
ical phrasing, all government
communiques with the exception
of the one from Yugoslavia were
unilaterally issued by the host
country just after Ho departed.
The communiques were fairly
stereotyped: all supported
Hanoi's efforts to unify Viet-
nam peacefully, backed the
USSR's disarmament proposals,
affirmed a desire for world
peace, and stated that a "com-
plete identity of views had
been reached on international
questions."
. The Tito-Ho communique was
a more precise document. It
contained the only reference to
coexistence and professed a
"real similarity of views" be-
tween the two leaders. Also,
the statement gave more space
than did the unilateral com-
muniques to the formula for re-
lations among "socialist states,"
i.e., relations based on "full
equality-and having a creative
approach toward solving the
social and international prob-
lems which face mankind."
The USSR seems to have
gone out of its way to express
approval of the Tito-Ho com-
munique. In its only radio
commentary on the results of
Ho's visit in Eastern Europe,
Moscow lauded the communique
as."good news" and remarked
that an exchange of experiences
between the two countries would
undoubtedly be in the interests
of both.
During Ho's tour, pacts
providing for cultural exchanges
were signed with Albania, East
Germany, and Hungary. North
Korean Premier Kim I1-sung,
Chairman of the Polish Council
of State Zawadzki, East German
President Dieckmann, Chairman
of the Bulgarian Council of
Ministers Yugov, and Tito all
agreed to visit Hanoi.
25X1
SOVIET "GREAT PROJECTS"
Several long-range projects
to "adjust nature" to Soviet
ends have been discussed pub-
licly in the USSR during the
past year. Such discussion
has included grandiose schemes
which are merely being debated
and others which are under
serious consideration. Although
some are reminiscent of the
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"Great Projects" of Stalin's
time, the ones now being active-
ly considered appear to have
an economic rationale which
was usually lacking in the very
costly plans of Stalin.
One problem under con-
sideration is the falling level
of the Caspian Sea, a conse-
quence of inadequate planning
in the past which permitted not
only diversion of water from
the rivers flowing into the
Caspian Sea but also made little
or no provision to correct ur-
ban or industrial pollution of
these rivers. Three solutions
were proposed at a meeting in
Astrakhan in September 1956;
two of these were unrealistic
and apparently have been re-
jected, while a third ma be
feasible.
The third plan, at one
time discussed by Malenkov,
involves. reversing the Pechora
and Vychegda Rivers to flow
into the Kama and Volga,and
construction to bring this
about may actually be under.
way. A recent announcement of
a plan to increase the in-
stalled capacity of the Nizhne
Kamsk hydroelectric station by
400,000 kilowatts and the
Votkinsk station on the Kama
River by 360,000 kilowatts
indicates that the diversion
scheme will be carried out
since such large increases
would appear justifiable only
if the water flow were in-
creased.
Another project involves
plans to supply water to cen-
tral Kazakhstan by building a
770-kilometer canal from the
Irtysh River to Karaganda.
This canal, although reminiscent
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CURRENT INTELLIGENCE WEEKLY: SUMMARY
5 September 1957
of Stalin's projected 1,100-
kilometer Main Turkmen Canal,
is to be different in scope
and purpose. The Main Turkmen
Canal was to have provided for
the irrigation of cotton in
relatively poor lands. The
Karaganda Canal, not designed
for irrigation, would provide
water needed by the huge iron
and steel center now under con-
struction near Karaganda.
The most sensational proj-
ect mentioned in the Soviet
press is the suggested construc-
tion of a dam across the Bering
Straits. This dam would al-
legedly divert warm Pacific
currents southward along the
northeastern coast of Asia and
aloiig the coast of Alaska and
Canada, improving the climates
of both areas. This project
could, not be initiated without
SECRET
American, cooperation,, which
has not yet been sought.
The vast and expensive
"Great Projects" of Stalin
were abandoned as a result
of a review of investment
projects undertaken immediately
after the dictator's death.
The. pressing requirements for
investment resources which
motivated their abandonment
persist, and as long as the
present leadership is motivated
less by whimsy than was Stalin,
it will avoid resurrecting
such economically unjustifiable
projects as the ''Volga-Ural
Canal, the South Ukrainian and
North Crimean Canals, and'cer-
tain land reclamation schemes,
whose immense investment re-
quirements promise only the
most remote returns. 25X1
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5 September 1957
PATTERNS AND PERSPECTIVES
KHRUSHCHEV'S PRIMACY IN THE SOVIET LEADERSHIP
Since Khrushchev's solid
victory in the June plenum of
the Soviet party central com-
mittee, the measure of collec-
tivity in the Kremlin has been
the measure of Khrushchev's
willingness to solicit and ac-
cept the views of others. Thus,
Khrushchev already possesses a
great deal of the political
power he would need to make
himself the sole ruler of the
Soviet Union. He is likely to
be deterred from using his
power for this purpose, how-
ever, by the post-Stalin dif-
fusion of political authority
and by the safeguards which
Khrushchev himself has helped
erect against the capricious
exercise of power by one man.
If party leaders should fall
out among themselves, there
might be a call for a military
strong man to restore "law and
order."
Under the pressure of the
need for unanimity, Khrushchev
has expelled his opposition
from the presidium and has,
willingly or not, thereby taken
a step in the direction of
Stalinism. Yet revulsion from
Stalinist methods contributed,
at least indirectly, to the
outcome, and Khrushchev has
felt obliged to justify the ac-
tion as a guarantee against the
resurgence of these methods.
Despite contizi ing personal and
policy conflicts within the
post-Stalin leadership, it has
been shaped around the hope or
need for some kind of stable
arrangement for the sharing
of power.
The search has not been
successful--it ended in a power
struggle which, if less bloody
than some in the USSR's earlier
history, was still full of dan-
ger for the participants and for
the stability of the regime and
state. The threat of new out-
breaks, from which the regime
may not. always emerge intact,
will remain until Khrushchev
or someone else achieves abso-
lute control or until binding
restraints on the use of power
have been imposed.
For the moment, there are
few apparent limitations on
Khrushchev's power, He is rid-
ing the crest of victory. The
enlargement of the presidium is
likely to have the effect of
magnifying his authority. The
new body has been, in any case,
heavily weighted in his favor
by the appointment of individ-
uals who are where they are
because they performed loyally
in Khrushchev's party machine
and are nothing by themselves.
The holdovers from the pre-June
presidium are hardly strong
enough to challenge him individ-
ually or jointly.
Voroshilov is a figurehead.
Bulganin has slipped badly, if,
indeed, he was ever much in his
own right. Mikoyan may not be
completely in Khrushchev's pock-
et, but has made a career of
being on the right side at the
right time and is hardly likely
to change his tactics now.
Suslov is more of an unknown
quantity than the others--before.
June, the Yugoslavs consistently
placed him among the ultraconserv-
atives with Molotov and Kagano-
vich. He ranks second only to
Khrushchev on the secretariat,
which may have become the
effective seat of power, and it
would probably be a mistake to
write him off as simply a long-
haired ideologist. It remains
to be seen, however, whether he
will use his present position
to build the kind of personal
following and organizational
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5 September 1957
control which would give him
the power of initiative. Kiri-
chenko is what he has been all
along--a solid Khrushchev man.
With the possible exception of
Zhukov, a possibility which
will be discussed later, there
does not seem to be any person
or group in the present pre-
sidium capable of opposing
Khrushchev on any point on
which he is really determined
to have his way.
Stalin did not stop at the
point which Khrushchev has now
reached but went on to build
an enormous autocracy which was
institutionalized in the "cult
of personality" and supported
.by a semireligious awe and the
apparatus of terror. Khrushchev
does not and may never inspire
respect as Lenin did nor fear
as Stalin did. His style of
leadership and his policies are
also, as events since 1953 have
shown, capable of arousing mis-
givings, resentment and enmity
among his colleagues.
He has set high goals in
domestic and foreign policies
and, despite his assurance, is
confronted with many complex
problems for which it is by no
means certain solutions will be
found. His present strength in
the presidium and, beyond it,
in the central committee, is
not necessarily unshakeable.
Political loyalty in the USSR
is a rather ephemeral thing--
e.g. Shepilov--and Khrushchev's
man today might be someone
else's man tomorrow. Moreover,
Khrushchev is old enough--63--
that some of his colleagues
may already be thinking about
the post-Khrushchev future, and
it will not be surprising if
the Aristovs, the Brezhnevs
and the Koslovs, willing fol-
lowers as they might be, be-
gin'soon to feather their own
nests.
With greater power Khru-
shchev will take on greater re-
sponsibility and in the future
will not find it as easy to
cover himself with the cloak
of collective decision as he
did after Hungary. As long as
things are going well, Khru-
shchev may consider himself
secure in his present powers.
But there are obviously many
difficulties inherent in the
policies on which Khrushchev
has chosen to base his leader-
ship--the policies confirmed by
the June plenum. These policies,:
though barely tested, have
already produced unforeseen
(and, in the case of Hungary,
alarming) results for the So-
viet regime and have yet to
prove themselves workable in
the long run.
A Western commentator has
pointed out that "a totalitarian
system attempting to reform it-
self in a more 'liberal' direc-
tion invariably finds that, at
least to a certain degree, it
loses control of the situation,
that the dynamism of released
forces proves stronger than
the channels created to contain
them, and that unanticipated
consequences result." To his
complex task Khrushchev brings
a temperament which is aggressive,
and self-assured but also, to
a degree, impulsive and quixotic.
He is.shrewd, pragmatic, and
relatively flexible, but is also
driven by a visceral optimism
which seems often to get the
better of good judgment and
foresight.
He certainly did not fore-
see some of the more important
consequences of his peacemaking
with Tito or of his anti-Stalin
speech, and he has been forced
to improvise on and compromise
his original intention. Re-
sponding to the pressure for
economic readjustment, he has
overridden the economic special-
ists, supplanting them with
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5 September 1957
party functionaries in the
process, and has launched a.
program whose experimental or
unrealistic features are
concealed behind euphoric slo-
gans about new upsurges and
overtaking the West.
It may be that the combina-
tion of high goals with Khrush-
chev's approach to them will
eventually produce a situation
in which Khrushchev would be
obliged to convert his dominance
into unchallenged supremacy
or, failing that, to surrender
part or all of his present
power.
There undoubtedly are many
similarities between the course
taken by Khrushchev and the one
followed by Stalin in the 20's
--the creation of combinations
against first one rival and
then another, the piecemeal
weakening and eventual expul-
sion of the opposition from the
leadership, the resort to the
party apparatus and the central
committee, and the barefaced
adoption of policies once es-
poused by opponents. There
are, however, many factors in
the present situation which
were absent in the 20's, and
although there is no way of
demonstrating that they will
force the development of the
Soviet leadership one way or
the other, they are certainly
important enough to prevent
foreclosure of the issue.
Khrushchev has not yet de-
veloped Stalin's megalomania.
He is domineering, impatient
of restraint, and has a fondness
for the center of the stage
and, like Stalin, has made good
use of organizational manipula-
tion and the power play. Never-
theless, he has so far built
his position partly on aggres-
siveness, bravura, and political
compromise, and not solely on
intrigue and intimidation of
his colleagues and lieutenants.
With all his bluster and bellig-
erence he must seem far less
ominous to other Soviet and
satellite leaders than Stalin,
and he has not yet displayed
those qualities which led Stalin
to base his leadership on
sycophantic subservience and
paralyzed awe.
Khrushchev's conduct in
Warsaw last October may have.
been typical of him--he charged
breathing fire but retreated
quickly when he had measured
the strength and determination
of his antagonists. Though he
can spout slogans with the
best of them and probably says
what he thinks when he talks
about whistling shrimps and the
oncoming era. of universal
communism, Khrushchev is less
of an ideologue than Stalin,
just as the latter was less of
an ideologue than Lenin, and
is probably far more inclined
to swim with the tide wherever
possible.
Certainly the character
and motivation of one man will
not tell the whole story. They
could be important, though, be-
cause there undoubtedly are
currents in the USSR today which
run strongly against the kind of
organized repression which was
the core of Stalin's dictator-
ship. Stalin's successors, and
Khrushchev not the least among
them, have given way to them in
many ways. The relaxation of
.police control, the amnesties,
and the emphasis on "socialist
legality" have been plainly
noted by the Soviet population
and taken as a guarantee of
greater personal security.
These measures were not
taken from humanitarianism but
because the regime regarded the
tensions and sullen apathy in
Soviet society and in the Com-
munist bloc as a whole as a,
handicap and sought ways to en-
gender a more affirmative ac-
ceptance of its leadership. A
movement in the opposite direc-
tion would obviously endanger
this objective. Nevertheless,
the pendulum could swing the
other way.
Much the same can be said
about the related program of
intellectual and ideological
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CURRENT INTELLIGENCE WEEKLY SUMMARY
5 September 1957
reform, in which Khrushchev's
attack on Stalin provided the
most dramatic passage. It has
released forces within the USSR
and
in the satellites which had
been
largely concealed. They
have
not. yet come to rest.
The
ferment within
the USSR is
not
likely to lead
to an ex-
plosive outbreak after the
Hungarian example and may even
be safely canalized. But as
Kaganovich said about de-Stalin-
ization at the 20th party con-
gress: "This is no easy mat-
ter."
Outright repression would
restore an atmosphere considered
to be undesirable, but if " the
questioning which has been
stirred up is allowed to grow
unchecked, the mental habits
essential to a totalitarian
system could be seriously under-
mined. Whether or not a safe
middle ground can be found,
the anti-Stalin campaign has
destroyed an image which can-
not be restored and has made
difficult, if not impossible,
the foisting of a new leader
cult on a society whose sophis-
tication has almost certainly
increased since the days when
the Stalin myth 'was founded.
Stalin's forced-draft in-
dustrialization had behind it
primarily a ruthless and single-
minded concentration of man-
power and resources in stra-
tegic areas of the economy.
The economic problem has become
more complex since the Soviet
Union has set out to compete
with the industrially advanced
West in terms of output, pro-
ductivity, and technological
achievement while, at the same
time, it has some commitment
to support the economic develop-
ment of the Communist empire
as a whole.
The economic machine has
come under pressure to adjust
itself to a greater flexibility
and diversification and to bring
into play greater initiative.
Even though there is no impla-
cable law which demands it, less
reliance on the knout and ful-
ler engagement of the wills
and energies of the population
may best serve this purpose,
and many of the measures taken
since Stalin's death in the
direction of increasing incen-
tives and relaxing economic
discipline reflect a preference
for this solution.
Khrushchev's industrial
reorganization plan carries
the tendency further and is at
least a step away from Stalin-
ist''centralization. Even
Mikoyan agreed with Ambassador
Bohlen that "once in force and
over a period of time,decen-
tralization of industry will
inevitably have an effect on
the political structure of the
Soviet Union," thus raising
the possibility of an eventual
devolution downward of politi-
cal power. But as yet there
has been no irrevocable sur-
render of central authority:
failure of the new arrangement
to produce rapid results or
the appearance of strong cen-
trifugal tendencies could quick-
ly bring intervention from the
center.
Khrushchev is dealing with
other, trends which diverge from
those which Stalin controlled
in the 20's. He himself has
given them a push. He has re-
asserted the party's claims
agains't'those of the police
and the governmental bureauc-
racy, both of whose powers
Stalin consistently enlarged.
He has appealed to the central
committee over the heads of
other presidium members and
has, deliberately or not, given
it a role it has not played
since the 20's.
When Khrushchev's use of
the central committee is com-
pared with Stalin's, one dif-
ference is noted. Stalin in-
herited the central committee
from Lenin--it was still more
or less a going concern. He
did not contribute ;to an
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increase in its authority--he
recognized its powers only as
long as it was expedient to do
so, and as soon as he could
he ignored it entirely. Since
his death, whether anyone has
willed it or not, there has
been some movement in the op-
posite direction--the central.
committee has gone from total
impotence to a point where, on
at least one occasion, it was
called on to referee a conflict
within the presidium.
Here again we cannot say
we are dealing with an irre-
versible trend. Having es-
tablished his dominance in the
presidium, Khrushchev may
choose increasingly to ignore
the central committee or,
through his power of appoint-
ment, to make it once again a
rubber-stamp body. But this'
is not a foregone conclusion.
In one sense, the central com-
mittee's role has been a re-
sponse to the circumstances of
an .interregnum--it has helped
to fill the gap between.the
powers of an absolute ruler
and a committee divided within
itself. The June plenum nar-
rowed that gap.
At the same time, the
resurrection of the image of
a Leninist party, with all its
artificialities and irrelevan-
cies, is not entirely a propa-
ganda exercise. The isolation
of the leadership from the par-
ty and the population at large
has evidently been recognized
as a real problem. The people
who make up the central com-
mittee are important enough to
be vital cogs-in the function-
ing of Khrushchev's organiza-
tion and program, and his in-
clination seems to be not to
operate in a vacuum. With the
support he can count on there,
Khrushchev would seem to be
risking little in continuing
the practice of consulting the
central committee. If he does,
however, he will be reinforcing
precedent and may instill in
the central committee a feeling
of authority which a successor
would find difficult to over-
ride.
A final factor in the
present equation which Stalin
did not reckon with to the ex-
tent Khrushchev does is the
Soviet military. Experienced
analysts of Soviet affairs see
Zhukov in many different parts
--from kingmaker and an indi-
spensable prop to Khrushchev's
authority to Khrushchev's
"disciplined Yes-man marshal."
Accounts of how Zhukov figured
in the June conflict differ
and, in the circumstances, it
is mostly a matter of opinion
as to whether one sees his
elevation to full membership
on the presidium as payment-
on-demand or as a gesture with
little relation to his politi-
cal power.
The London Observer cor-
respondent, is ar Lowenthal,
has made the point in a recent
article that, even if he had
simply looked on in silence,
Zhukov, as the personification
of force, could have influenced
the outcome of the struggle.
This suggests that the mere
fact of Zhukov's presence on
the presidium, rather than the
circumstances and intent which
brought it about, is the es-
sential thing. It has been
pointed out that, before his
latest promotion, Zhukov had
precedence among the presidium
candidates and it would have
been awkward to pass him over.
But this raises the ques-
tion: How did it happen that
he was the ranking candidate
member? At Stalin's death he
had been merely a candidate
member of the central committee.
Because of the downgrading of
the police and the unresolved
problem of the succession, the
Soviet military has been per-
sistently wooed over the past
four years and has,: been given
a number of concessions which
have included, perhaps willy-
nilly, increased political
authorityo
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. There are, of course, both
advantages and dangers for
Zhukov in his present position.
His advice can hardly be ig-
nored within the presidium when
it relates to matters affecting
Soviet defense and strategic
position--an area which, di-
rectly or indirectly, embraces
a broad range of political de-
cision. To the extent that
Khrushchev seeks an accommoda-
tion with him and attempts to
hold his support as a .political
asset, Khrushchev will:have.ac-
cepted limitations. on his' own','.
authority.
In the event of a serious
disagreement, Khrushchev would
be faced with a real dilemma
since, at this point, it would
be risky to try to unseat Zhukov
as were Malenkov, Molotov and
Kaganovich. At the same time,
there is no evidence one way
or the other as to whether
Zhukov drew any concessions
from the party leaders beyond
his own promotion, nor. any trust-
worthy assurance that his ownin-
terests and those he represents
will always be protected. This
will be something to be closely
watched--whether the military
.will receive larger representa-
tion on the central committee
or whether there are signs of
a relaxation of political con-
trol of the military organiza-
tion.
As.it now stands, Zhukov
is only one man among 15 and
he has barely tested his po-
litical wings. Khrushchev and
his coterie of party secretaries
would be more than a match for
him if it came to political
maneuvering and infighting.
An outright break would be as
dangerous for Zhukov as for
Khrushchev, and an attempted
coup at this stage is an un-.
likely course for a man who is
used to massing his weapons
and men before opening a cam-
paign.
At several critical junc-
tures since Stalin's death,
however, Zhukov and the mili-
tary have, willingly or not,
been drawn into purely politi-
cal decisions. They have be-
come a political factor as
they never were before. Their
gains have been at the expense
of groups or interests which,
under Stalin's close control,
ruled the USSR in coalition
with the party--namely, the
secret police and the economic
bureaucracy.
Lowenthal points out that
the weakening of those two pil-
lars may well have the effect
of making the military pillar
all the more essential. If the
party leaders fall out among
themselves again at some time
in the future and threaten to
throw the USSR into the turmoil
of a new purge, :he asks, "would
not the call for a strong man
who could stop the bloodshed
and the ideological nonsense
and restore law and order be-
come irresistible-if addressed
to the only possible candidate
for that role--the head of the
army?"
INDIA'S ECONOMIC CRISIS
.India's rapidly deterio-?..
rating foreign exchange posi-
tion, which jeopardizes the
government's chances of carrying
out the Second Five-Year Plan
as scheduled, has created a
crisis.of major proportions.
Basically economic, it has po-
litical overtones which could,
lead to the defeat of the Con-
gress party in the 1962 national
elections. The Congress party
leaders will soon have to
make far-reaching decisions on
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how to cut the cost or lower
the goals of the plan.
Prime Minister Nehru and
his government, openly engaged
in a rivalry with Communist
China for economic and politi-
ca:l leadership in Asia., have
staked their political future
on the rate of India's economic
development, which depends on
the successful completion of
the Second Five-Year Plan. De-
velopments and expenditures
not anticipated when the plan
was drawn. up in 1955, however,
have made it more expensive
than originally foreseen and
jeopardized its success.
When the final draft of
the plan was'completed, it was
found the cost would be about
$15 billion, over one billion
dollars more than earlier esti-
mates. Rising costs, chiefly
of imported industrial equip-
ment, have added another bil-
lion dollars to the cost of
the plan since it began on 1
April 1956. Because the plan
emphasizes industrial rather
than agricultural development,
the necessity of importing
machinery and raw materials
has placed a heavy burden on
foreign exchange reserves.
These reserves have fallen from
$1.566 billion when the plan
began to $809,400,000 on 23
August 1957, and would have
fallen even further if India
had not borrowed $200,000,000
from the International Monetary
Fund late in 1956.
Industrial production,
which was scheduled to increase
by about 45 percent during the
plan, increased by 9 percent
during 1956 and appears to be
increasing at least as rapidly
in 1957. Textile production
during the first six months
of 1957. was as high as was
scheduled for 1961. Although
the central and state govern-
ments made only 85 percent of
their planned expenditures dur-
ing 1956, the private sector
apparently invested at a rate
that more than made up for the
shortfall in the government
activities.
Much of the industrial
growth, however, is in construc-
tion of major projects which
will not be productive for
several years, and the increase
in personal incomes resulting
from development expenditures
has caused inflationary pres-
sures. Since the Indian people
are spending a large proportion
of their incomes on food, these
pressures have made their
greatest impact on food prices.
Despite the 30-percent increase
in food-grain production in
recent years--1956-57 was the
second best year on record--
the growth in population and
per capita consumption have
forced food prices upward. The
government has found it impos-
sible to limit food-grain im-
ports to about 1,000,000 tons
a year as had been hoped; in-
stead it has had to import sever-
al million tons annually. This
in turn has added several hun-
dred million dollars a year to
the drain on foreign exchange.
In fiscal 1957-58, more-
over, India has for the first
time increased military
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expenditures significantly
above normal levels, partly
because American military aid
deliveries to Pakistan are be-
ginning to show a marked effect
on Pakistani capabilities.
Most of India's military ex-
penditures abroad are for heavy
equipment that can neither be
manufactured locally nor be.
paid for in .Indian currency.
New Factors
India has in the past met
and conquered crises of con-
siderable magnitude in the
fields of finance, transporta-
tion, and food. Under Nehru,
the government has shown itself
to be capable and willing to
attack forcefully problems re-
quiring administrative talent
and domestic resources. At
the time of independence in
1947, however, India was one
of the great creditor nations
of the world, having supplied
the World War II allies with
great quantities of war ma-
terials. The Congress party
government in 1947 was a mono-
lithic organization supported
by the vast majority of the
Indian population. That popu-
lation, facing the new adven-
ture of independence, was also
full of hope and willing to
sacrifice and suffer in the
task of nation-building.
The situation today is
vastly different. Despite in-
controvertible progress in .
many fields--administration,
technology, and production--
India's political and economic
future is uncertain. Years
of telling the people that they
can live a better life have
resulted in greater expecta
tions. The problems of indus-
trialization, the heart of the
Second Five-Year Plan, have
been found to be more compli-
cated'than those of the first
plan, which was mainly agri-
cultural. Nehru's Congress
party has progressively lost
touch with the people, and
many continue to support it
only for lack of a suitable
alternative.
Most important of all, the
chief problem India faces to-
day--a shortage of foreign ex-
change--is one which it.is
virtually powerless to do any-
thing about. Further austerity
measures for the Indian people,
nationalization of industry,
heavier taxation, and more
stringent control of consumer
goods imports can affect this
difficulty only slightly. With-
out the machinery to produce,
India cannot materially in-
crease its exchange-earning
exports. India therefore. is
almost entirely dependent on
the good will of other nations
to supply the capital or the
credit for the heavy industrial
equipment it must import to
make its plan a success.
Deputations which during
the past year have visited
Europe, Great Britain, and the
United States in search of
public and private funds, cred
it, or investment capital have
found. both public and private
sources to be either incapable
or unwilling to provide large-
scale. assistance of the billion-
dollar magnitude which India
requires. Finance Minister
Krishnamachari reportedly is
pessimistic about obtaining
additional funds during his
September visit to the United
States. The situation, there-
fore, presumably will remain
beyond the Indian government's
control unless it basically
alters its political and eco-
nomic outlook or makes major
modifications of its Second
Five-Year Plan.
Dangerous. Features
This situation is politi-
cally explosive. For instance,
it sharpens the division with-
in the Congress party high
command between the liberals
committed to the welfare-state
concept and the conservative
group which favors private
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capital and traditionally cau-
tious financial policies. Nehru
presumably would be disinclined
to see wasted his strenuous
efforts to create a welfare-
state economy capable of creat-
ing its own forward momentum.
On the other hand, a strong
group in his cabinet--probably
including Home Minister Pant,
Commerce and Industry Minister
Desai, and Irrigation and Power
Minister S. K. Patil--is prob-
ably arguing that India's eco-
nomic future should not be
jeopardized for the sake of
the welfare-state principle.
The government may alien-
ate important segments of the
population by whatever action
it takes. The Communists, en-
couraged by their election suc-
cesses of 1957, are eager to
criticize the government for
mismanagement and submission
to "capitalistic" conservatives.
Linguistic groups, which are
still agitating against the
Congress party in Bombay, the
Punjab, and Madras States, are
ready to turn against the gov-
ernment on any new issue. A
recent noticeable increase in
labor's demands for higher
wages, caused by the rising
cost of living and by the fact
that the Congress party advo-
cated general wage increases
in its pre-election campaign,
also raises an acute financial
problem for the government,
whose resources are already
extended to the utmost. Final-
ly, there seems to be increas-
ing opinion that Nehru should
cut down on his foreign policy
moralizing and spend more time
on domestic affairs.
Available Choices of Action
After six years of planned
economic development, Nehru
and the Congress party probably
cannot basically alter the
'socialistic course they have
set. The government therefore
presumably faces three possible
choices in attempting to re-
solve the crisis.
The first is to preserve
the present scope of the plan,
cut foreign exchange reserves
far below the margin of safety,
and hope that subsequent eco-
nomic improvement will be rapid
enough to eliminate any risk
of the Indian public's losing
faith in the government. Such
a course would provide more
time in which to search for.
foreign aid. It could, how-
ever, lead to such pressure on
Nehru that he -could be forced
to resign, to desertion by
significant elements of his
cabinet and party, to wide-
spread, violent criticism by
the business community, which
hitherto has overfulfilled its
portions of both the First and
Second Five-Year Plans, or to
possible economic chaos if
continued too long.
A second choice would be
openly to cut the size of the
Second Five-Year Plan and bring
it within the limits of India's
capabilities. A major diffi-
culty with this choice is in
determining what portions of
the closely integrated indus-
trialization program to cut.
A cut of a billion dollars in
industrial goods imports would
force elimination of considera-
ble portions of the most vital
part of the plan and leave
other important installations
half completed. Present strains
on ports, shipping, and rail-
roads are such that these fa-
cilities probably could not
handle increased traffic caused
by an expanding economy if
they themselves do not grow.
The politically trouble-
some specter of increasing un-
employment would also be raised
by any slowdown of industrial
construction. This choice
would be a severe blow to the
Congress party's prestige and.
would provide Communists and
others with an opportunity to
criticize the government's
handling of planning problems.
It would probably also disjoint
the operation of the plan, the
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factors of which are intricate-
ly geared to each other, and
cause an over-all loss of mo-
mentum which the plan might
never regain. Each cutback
would probably become a politi-
cal issue in the state affected,
and charges of favoritism or
neglect would be rife.
Major cuts in the scope
of the plan would also pre-
sumably necessitate Nehru's
subordination of his own de-
sires to those of the conserva-
tive group in his cabinet and
to increasing efforts on the
part of this group to dictate
to the prime minister. Whether
Nehru would accept such a posi-
tion is debatable.
A third choice would be
to make no formally drawn and
publicized cut in the plane
but to make minor adjustments,
possibly to alter basic eco-
nomic policies slightly to at.-
tract foreign capital, and to
draw do,"n foreign exchange re-
serves below safe levels but
not to a point of extreme dan-
ger. Such a compromise would
minimize the most serious prob-
lems of the other two courses
of action and still leave some
hope of "muddling through."
It could, however, unless care-
fully handled, lead merely to
increased criticism from all
sides.
Probable Course of Action
Public statements by Fi-
nance Minister Krishnamachari
and others indicate that the
government has already made
some cutbacks in its plans and
is seriously considering others
in the face of its unsuccessful
efforts to obtain foreign aid.
Nehru probably recognizes
that neither he nor any other
individual can eliminate the
foreign exchange problem, and
that under this condition re-
tention of the full plan pro-
gram would make a potentially
disastrous failure virtually
certain. He seems likely,
therefore, to acquiesce to pro-
posals eliminating or curtail-
ing certain projects, especial-
ly in the housing and education
sectors. However, since pre-
sumably neither he nor conserva-
tive Congress party leaders wish
to expose themselves to the dan-
gers attending the adoption of
extreme positions, it is prob-
able that they will. choose the
third alternative as the most
acceptable course of action.
This choice would, in effect,
be a play for time and, with-
out new large-scale foreign
aid, would merely postpone more
drastic action.
Whatever the Congress party
high command decides, its de-
cision probably will be made
before the end of 1957. The
government must soon seek par-
liamentary authorization for a
further reduction in foreign
exchange reserves, which prob-
ably will continue to decline
for some time whether or not
cuts are made in the plan. If
cuts are to be made, they should
be made in the near future to
save as much foreign exchange
as possible. A series of com-
promise measures would give
Indian leaders a little more
time in which to study the situa-
tion, but even the choice of a
compromise cannot be postponed
for long.
RISING STEEL PRODUCTION IN LATIN AMERICA
Five Latin American coun-
tries--Brazil, Mexico, Chile,
Argentina, and Colombia--now
produce almost 3,000,000 tons
of steel annually--a.250 per-
cent increase over the past
ten years--and continued growth
of the industry in Latin Amer-
ica is likely, even though fuel
shortages severely handicap the
potential for economical produc-
tion in many areas. Expansion
planned in the five countries
which now are producers and
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new production proposed in
three others would double the
1956 output by 1960. Virtu-
ally all plans require large-
scale foreign financing, thus
far supplied largely by the US
Export-Import Bank, although
French, German, Japanese, Bel-
gian, and Italian interests are
playing substantial roles in
some countries.
? _=A Gulf of Mexico
Thf1 continuing upward
trend in steel production, which
is one of the more prominent
aspects of Latin America's drive
for economic development, is
in part politically motivated.
It reflects not only a general
desire to raise living standards
but also a strong conviction
that the countries which live
by producing raw materials have
rLATIN AMERICAN STEEL PRODUCTION
207.000
380.000
879.000
1.364,000
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`Puer` toOtdazIIL
VENEZUELA
Major Steel Producing Locations
4 Present AD Planned
5 SEPTEMBER 1957
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an inferior semicolonial status,
in world affairs. The Latin
Americans believe economic sta-
bility can be achieved only by
developing local industry and by
lessening their dependence on
the export of primary commodi-
ties. The progress of its steel
industry is regarded as a key
index of a.country's success
in industrialization.
The Brazilian steel in-
dustry is the largest in Latin
America. Its intensive develop'
ment is continuing, despite
such handicaps as a lack of
suitable domestic coking coal,
increasing difficulties in the
supply and accessibility of
charcoal, a serious transpor-
tation problem, and a critical
power shortage which limits
use of the coke-saving electric
reduction process.
Brazil's largest steel
mill is the government-owned
plant at Volta Redonda in Rio
de Janeiro, founded and con-
structed in 1940-41 with Export-
Import Bank aid. A new $35,-
000,000 line of credit from
the Export-Import Bank--which
brings the total aid to Volta
Redonda from that source to
$105,000,000--is to help the
company complete its third and
last construction stage and
will raise its annual produc-
tion of steel ingots from 740,-
000 to 1,000,000 tons by 1960.
Three privately owned steel
mills representing German, Bel-
gian, and domestic financial
interests make up most of the
rest of the industry. They
plan a 280,000-ton expansion in
annual production by 1960.
A further increase is to
result .:from a proposed
Japanese-Brazilian steel mill
to be built near Brazil's high-
grade iron ore deposits in
Minas Gerais. According to
present plans, the plant will
be in partial operation in
three years and in six years
will reach
its
full production
of 500,000
tons
of ingot steel
annually.
Two
of the five
directors
and a
third of the
employees
are to be Japanese.,
the latter
provision reflecting
Japan's search for an outlet
for industrial emigrants. The
plant is also seen as a source
of steel plate for a shipyard
the Japanese plan to build'in
Brazil.
In addition, a project in
Sao Paulo State for a steel
mill producing 210,000 tons
annually is scheduled for com-
pletion by 1960. The location
of the plant at Piassaguera near
Santos will permit the use of
marine transport for raw mate-
rials--formerly wasted iron ore
particles from the port of
Vitoria and low-grade coal from
Santa Catarina for the con-
templated electric reduction
CRUDE
STEEL
PRODUCTION
1956
process. The site is also close
to good road and rail transport
to Brazil's fastest growing in-
dustrial. area, of which the
city of Sao Paulo is the center.
The first of Latin Ameri-
ca's modern steel plants was
constructed in Mexico in 1900.
The country's present total
production capacity of 1,100,-
000 tons--double that of 1953--
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5 September 1957
represents an investment esti-
mated at $240,000,000,with the
Mexican government owning
about.10 percent and the rest
in the hands of private stock-
holders. The industry plans
an $80,000,000 expansion over
the next few years and produc-
tion is expected to rise to
1,500,000 tons annually by 1960.
While present plans for a new
steel mill of 150,000-ton ca--
pacity'in.western Mexico con-
template a $35,000,000 French
banking loan, foreign financing
of Mexican steel production has
thus far come largely from the
United States--principally the
Export-Import Bank.
Mexico currently relies
on locally produced primary
iron or local scrap for about
63 percent of its steel pro-
duction, the remainder coming
from imported raw materials.
Long-term factors making it
difficult for Mexico to produce
in free competition with other
countries are the high gaseous
content and poor coking quality
of Mexican coal and the fact
that coal and iron ore are not
found in the same areas.
Chile's new and growing
steel producer, Compania de
Acero del Pacifico, has in re-
cent years been exporting about
15 percent of its output to
Japan, Argentina, Brazil, the
United States, the United King-
dom, and Canada. In the first
half of 1957, it set a new
production record of 193,800
tons of steel ingots and shows
promise of reaching the 400,-
000-ton mark for total yearly
production. The company has
shown steadily increasing prof-
its since 1952 and has apparent-
ly yielded Chile considerable
net dollar savings in each
year's balance of payments.
The US Export-Import Bank
has authorized about $77,500,-
000 in loans for the construc-
tion and expansion of. the com-
pany since it was begun in 1950.
Of this sum, $16,000,000 was
approved in March for expansion
to include a strip mill to be
completed in 1961. The plant
uses high-grade Chilean iron
ore--provided for the most part
by the US-owned Bethlehem Com-
pany--and domestic coal.
Argentina and Colombia
Argentina has probably the
highest steel consumption in
Latin America--about 2,000,000
tons annually--but as a steel
manufacturing country is handi-
capped by its dependence on im-
ported raw materials. Local
finishing mills have a total
rated capacity of about 1,000,-
000 tons yearly, but domestic
ingot production in 1956 was
only about one fifth of that
needed. Government and private
interests are utilizing a $60,-
000,000 Export-Import Bank
credit to build an integrated
mill at San Nicolas with an
annual capacity of 588,000 tons
of ingots. The plant is to be
completed in 1960 and is to use
imported coal and iron ore.
In Colombia, the govern-
ment-controlled Paz de Rio
steel mill--financed and
equipped by French interests--
produced about 90,000 tons of
steel in 1956 but has 'been,
operating at a loss because of
poor=management and unreliable
cost .accountin .
the equipment is adequate, and
conveniently located resources
are sufficient to meet plant
needs for the next 50 years.
Moreover, 70 percent of Colom-
bia's 200,000-ton market lies
in the immediate vicinity of
Paz de Rio. The mill reportedly
showed a profit for the first
six months of 1957, which prob-
ably indicates a recent improve-
ment in management.
Cuba, Peru, and Venezuela
Three additional Latin
American countries are seeking
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CURRENT INTELLIGENCE WEEKLY SUMMARY
5 September 1957
industrial status through con-
struction of steel plants. In
Cuba, the cornerstone for a
predominantly Cuban-financed
72,000-ton steel plant near
Havana was laid last February.
Most raw materials, however,
including 80 percent of the
pig iron, will be imported. In
Peru, a French-financed Peru-
vian government plant at
Chimbote is expected to produce
52,000 tons of steel products,
possibly by 1958. For finan-
cial and technical reasons
it promises, however, to be an
uneconomic operation, despite
the use of domestic high-grade
iron ore and hydroelectric
power.
The third and most ambi-
tious of all Latin America's
new steel projects is the Vene-
zuelan National Steel Mill at
Puerto Ordaz with a projected
annual capacity of 1,200,000
metric tons. It will depend
almost entirely on local sources
of raw materials, drawing on
Venezuela's large reserves of
high-grade iron ore and employ-
ing electric smelting furnaces
to allow use of low-grade do-
mestic coking coal. Major in-
stallationsare to be completed
in March 1958, with all units
in full operation in 1960.
Payment of the $342,000,000
contract price to the Italian
construction firm is to be com-
pleted by fiscal 1963-64.
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