CURRENT INTELLIGENCE WEEKLY SUMMARY

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A002300070001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 46
• Document Creation Date: December 16, 2016
• Document Release Date: February 22, 2005
• Sequence Number: 1
• Publication Date: July 1, 1959
• Content Type: SUMMARY

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CONFIDENTIAL
COPY NO. 56
OCR NO. 3527/59
1 July 1959
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
AUTHij-IR 70-2
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CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
State Department review completed
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 7 94, 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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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
T H E W E E K I N B R I E F
OF IMMEDIATE INTEREST
THE SITUATION IN THE CARIBBEAN . . . . . . . . . . . . . . Page 1
The situation in the Caribbean area remains explosive.
Leftists and liberals, led by the Fidel Castro government
of Cuba and apparently supported by President Betancourt
of Venezuela, still seem determined to overthrow the
Trujillo dictatorship in the Dominican Republic and the
Somoza regime in Nicaragua. The majority of Latin Ameri-
can governments appear ready to support a meeting of
foreign ministers, the highest policy-making group of the
Organization of American State to attempt to deal with
the entire Caribbean problem.
MIDDLE EAST HIGHLIGHTS . . . . . . . . . . . . . . . . . . Page 2
The Iraqi Communists continue at odds with recent
actions of the Qasim regime. The regime's decision to
restrict the activities of the Popular Resistance Force
is being carried out, and non-Communist "nationalists"
are being further encouraged. UAR President Nasir is
building up the Palestine issue again, and both he and
the Israelis are undercutting UN Secretary General
Hammarskjold's efforts to ease tension. The Israeli
cabinet crisis, a result of maneuvering by minority mem-
bers of Prime Minister Ben-Gurion's cabinet, marks the
opening of the campaign for the parliamentary elections
scheduled to be held in November.
EAST-WEST NEGOTIATIONS . . . . . . . . . . . . . . . . . . Page 4
Moscow is maintaining its posture of hopeful optimism
regarding prospects for agreement when the foreign minis-
ters' conference resumes on 13 July. In Western Europe
there appears but little sentiment favoring concessions to
the USSR to achieve a Berlin settlement except in Britain,
where a general election is expected this fall. The
British Governement continues to emphasize its hopes on
summit talks, and the West Germans and French suspect that
Britain will press for Western concessions when talks
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PART I (continued)
BRITISH LABOR PARTY'S NUCLEAR ARMS POLICY . . . . . . . . Page 8
The British Labor party's evident success in compro-
mising its internal differences over nuclear disarmament
policy is likely to add to the already considerable pres-
sures on the Macmillan government to achieve a test-sus-
pension agreement. Labor's new policy, adopted in expec-
tation of general elections this fall, calls for indefinite
suspension of British nuclear tests. It also calls for
complete abandonment of Britain's nuclear weapons if all
other nations except the United States and the USSR agree
to forego them, a proposal which most top Labor leaders
recognize as unacceptable to France. 17
NOTES AND COMMENTS
PROTOTYPE AIRCRAFT USED BY KOZLOV . . . . . . . . . . . . Page 1
The CLEAT (TU-114) turboprop passenger airliner which
transported Soviet First Deputy Premier Frol Kozlov non-
stop from Moscow to New York on 28 June is the prototype
aircraft first displayed in Moscow in November 1957. The
use of a prototype to transport a Soviet high official is
unprecedented. The last-minute change in the type of air-
craft used by Kozlov was made apparently in an attempt to
acquire prestige and give an impression of equality with
the United States in the development of heavy transoceanic
transport aircraft. No other CLEAT aircraft is known to
be in service or in production.
ARGENTINE MOVES TO COUNTER MILITARY UNREST . .
. . . . . . Page 2
Argentine President Frondizi appears to be weathering
threats of a military coup. Having reorganized the cabi-
net, he is considering the appointment of compromise offi-
cers to top positions to meet demands made by moderate
military elements as well as by those still advocating a
coup. Moreover, the new economy and labor minister,
Alvaro Alsogaray, a strong exponent of :Free enterprise,
has included among his policy announcements various meas-
ures to counter popular discontent--particularly the
ending of army control over labor in three industries and
the strict enforcement of price controls on about a dozen
essential consumer items.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
PART II (continued)
PRESSURES ON THE BOLIVIAN GOVERNMENT . . . . . . . . . . . Page
The Bolivian Government of moderate President Siles,
periodically threatened by leftists within the ruling
party who object to the US-backed stabilization program,
was confronted on 26 June with an uprising of opposition
elements in the eastern provincial city of Santa Cruz.
The government's extensive use of armed force to suppress
the outbreak and its subsequent military operations
against rebel groups reflect its well-grounded fear of
further trouble in the area, but also seem to have been
designed in part to unify hostile factions in its own
party. The powerful Miners' Federation reportedly has
threatened a strike if Sites goes through with the sched-
uled unfreezing of mine commissary prices in mid-July.
DE GAULLE'S ALGERIAN POLICY . . . . . . . . . . . . . . . Page
De Gaulle's policy toward Algeria is emerging with
increasing clarity after a year of sometimes ambiguous
pronouncements. Measures now being pressed vigorously
on all economic, military, diplomatic, and political
levels indicate that De Gaulle's ultimate goal is the
retention of French sovereignty over an Algeria remaining
within the aramework of French political institutions,
but having a distinctive culture, a greatly expanded
economy, and predominantly Moslem local governments.
MOSCOW TO PRESS FOR CLOSER RELATIONS DURING VISIT OF
HAILE SELASSIE . . . . . . . . . . . . . . . . . . . . . Page 5
Soviet leaders will probably utilize the official
state visit of Ethiopian Emperor Haile Selassie as their
best chance thus far to press for closer economic and
cultural relations with Addis Ababa and to encourage his
desire to appear as a neutralist. The Emperor, who is
trying to stress his independence of the West and to
associate Ethiopia more closely with pain-Africanism, will
probably accept some aid as a demonstration
of this policy.
NEW AGRICULTURAL PROGRAM IN POLAND . . . . . . . . . . . . Page 5
Party First Secretary Gomulka has recently given new
impetus to the Polish seven-year agricultural program
(1959-65). The program will be administered by "agricul-
tural circles," which are voluntary cooperative peasant
associations. For the past three years, agriculture in
Poland has been largely private, so this move is probably
intended to identify Poland more closely with standard
bloc agricultural policies. The peasant, traditionally
suspicious of government actions and offended by regime
plans to continue compulsory deliveries for seven years,
may be laggard in joining these "circles." 25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
PART II (continued)
YUGOSLAVIA WOOS WESTERN SOCIALISTS . . . . . . . . . . . . Page 6
In the past month Yugoslavia has again started wooing
West European socialist parties--a policy it has followed
in the past whenever the bloc has succeeded in partially
isolating it. While no dramatic move has accompanied this
campaign, recent visits by prominent Yugoslavs to. foreign
socialist parties may open the.doors for greater economic
and--to a much lesser extent--political cooperation, and
help deepen Belgrade's ideological rift with the bloc,
SOVIET BLOC MOVES TO EXPAND CREDIT RELATIONS WITH WEST . . Page 7
The Soviet bloc is attempting to obtain additional
credits in the West for the purchase of technologically
advanced equipment, principally for the plastics, synthet-
ics, and petrochemical industries, fields to which the
bloc has only recently given high priority. The emphasis
has been on medium-term credits--up to five years--for
which the USSR has been trying to get government guaran-
tees in order to encourage the flow of private credits.
Besides wanting to expand exports, the bloc appears anx-
ious to establish a new field of economic competition.
DEVELOPMENTS IN CHINA'S TRADE WITH THE :FREE WORLD . . . . Page 9
Continued reports of serious difficulties affecting
Communist China's foreign trade position are supported in
part by trade statistics for the first months of 1959.
Imports from Western Europe of manufactured goods and
semifinished products to bolster the "leap forward" indus-
trialization program have declined from the high levels of
late 1958. China's difficult export position was reflected
at this spring's Canton Trade Fair, where Western business-
men were disappointed by Peiping's reluctance to make new
export commitments.
PEIPING "WARNS" WASHINGTON ON PARACEL RECONNAISSANCE . . . Page 10
Peiping's recent "serious warnings"--numbers 50, 51,
52, and 53--protesting the "intrusions" of American naval
reconnaissance aircraft are the first regarding the Para-
cel Islands in the South China Sea, which the Communists
assert are part of Kwangtung Province. The Chinese
Communists apparently intend the warnings to add weight
to their claim to the islands--also claimed by Saigon
and Taipei. The warnings contain no threat to take
military action against US flights in the area.
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PART II (continued)
SITUATION IN KERALA STATE . . . . . . . . . . .. . . . . . Page 11
Agitation against the Communist government in India's
Kerala State has been intensified following high-level
Congress party discussions in New Delhi. National party
leaders gave qualified support to the ainti-Communist cam-
paign by calling for elections in Kerala on grounds that
the Communists no longer represent majority sentiment.
Both sides in the state now are more determined than ever
to hold out. A renewal of serious violence is likely to
result from the stepped-up agitation, and New Delhi may
yet impose direct rule.
THAI - NORTH VIETNAMESE REPATRIATION TALKS . . . . . . . . Page 11
Negotiations on the repatriation of the approximately
50,000 Vietnamese refugees in northeast Thailand opened on
20 June in Rangoon between representatives of the North
Vietnamese and Thai Red Cross Societies. Initial conver-
sations have bogged down over a procedural dispute. Thai-
land regards the predominantly pro-Commmnist refugees as
a security threat in the northeast and appears determined
to repatriate them--even at the risk of' offending South
Vietnam.
. . . . . . . . . . . . . . . . . Page 13
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President Sukarno, who returned to Djakarta on 29
June from a two-month trip, is consulting political leaders
on the constitutional crisis and the acute financial situ-
ation. even-
tually Sukarno will request Parliament for permission to
impose the 1945 constitution by decree. Another problem
which had been pigeonholed pending Sukarno's return is the
resolution of a "mutiny" in the Indonesian Navy and the
demand of junior officers for the replacement of Navy Chief
of Staff Vice Admiral Subijakto. 25X1
SHANS BECOMING INCREASINGLY TROUBLESOME FOR BURMESE
GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . Page 13
Growing restiveness among Burma's one million Shans,
stemming from the central government's efforts to e x e..r t
more direct control over the Shan State, is causing Rangoon
serious concern. The Ne Win regime seems particularly
worried over the threat by Chinese Nationalist irregulars
in eastern Burma to support a group of Shan dissidents
operating in the area near the Thai frontier. Such
support might enable the Shan dissidents to extend their
operations to other parts of the Shan State, weakening
Rangoon's authority in a large area contiguous to Com-
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PART II (continued)
COMMUNISTS LOSE STRENGTH IN ICELANDIC ELECTIONS . . . . . Page 15
The Communist-front Labor Alliance suffered a setback
in Ice-Land's general elections on 28 June, losing some 20
percent of its popular vote--largely to the pro-NATO Con-
servatives and the rural Progressive party. The Social
Democrats will try to form an interim government, having
as its principal tasks the final passage of the electoral
reform bill and preparation for a new general election in
the fall. Such a government would have to depend on Con-
servative and Communist support, however, for a parliamen-
tary majority.
PATTERNS AND PERSPECTIVES
INDIGENOUS MINORITY PROBLEMS IN SOUTHEAST ASIA . . . . . . Page
The indigenous ethnic minorities throughout Southeast
Asia, proud of their cultural traditions and often subject
to government repression, are highly susceptible to dissi-
dent and subversive activities. Communist China and North
Vietnam have already exploited these tendencies to gain
influence with the Laotian, Cambodian, and Vietnamese minor-
ities, and, through the Burmese Communist insurgents, have
on occasion assisted the Karen rebels. The Karens have
confronted the Burmese Government with a troublesome insur-
gent force, and minorities in Laos have lent considerable
support to the local pro-Communist movement.
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LATIN AMERICAN FINANCIAL PROBLEMS AND THE INTERNATIONAL
MONETARY FUND . . . . . . . . . . . . . . . . . . . . . Page 4
Political repercussions from financial reform measures
stipulated as a condition of assistance by the Interna-
tional Monetary Fund (IMF) have led to critical situations
in several Latin American countries, largely because of
exploitation of the austerity aspects of these measures by
extreme nationalist and Marxist-influenced groups. At the
same time, the over-all economic outlook in Latin America
is improving, with export earnings expected to be back at
their 1957 peak by the end of this year. Undermining of
the IMF-sponsored stabilization efforts would intensify
deficit financing, inflation, and foreign-exchange mal-
adjustments, and prevent the area from taking advantage
of these favorable developments. F__ I 25X1
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1 July 1959
PART III (continued)
POLITICAL TENSION IN NIGERIA . . . . . . . . . . Page 8
There is increasing friction among political parties
of Nigeria in anticipation of the general elections this
autumn. Basic political and social problems in Nigeria,
scheduled for independence in October 1960, may increase
the difficulties the British colony will encounter in
attempting to function as a unified state and to exercise
the moderate influence it expects to exert in West African
nationalist circles.
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CONFIDENTIAL
HAITI
CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
THE SITUATION IN THE CARIBBEAN
The situation in the Carib-
bean remains explosive. Left-
ists and liberals led by the
Fidel Castro government of
Cuba, and apparently supported
by President Betancourt of Ven-
ezuela, still seem determined
to force the overthrow of the
Trujillo dictatorship in the
Dominican Republic and the So-
moza regime in Nicaragua. The
majority of Latin American gov-
ernments appear ready to sup-
port a meeting of foreign min-
isters, the highest policy-mak-
ing group of the Organization
of American States, to attempt
to deal with the entire Carib-
bean-problem.
Evidence is accumulating
that the Cuban Government has
been actively supporting and
directing reh&l. i,ncursions into
THE CARIBBEAN AREA'
l I
MEXICO,'.
BRITISH
HONDURAS
E`L
SALVADOR
NICARAGUA
Nicaragua and the Dominican
Republic during June. Arms and
other equipment captured by
Costa Rican and Honduran au-
thorities during the week of
22 June from Nicaraguan rebel
groups attempting to cross in-
to Nicaragua clearly reveal
their recent Cuban origin. Sim-
ilarly, there is little doubt
that the Dominican insurgents
were trained and equipped in
Cuba and possibly even, as the
Dominican Government charges,
escorted part way to the land-
ing; areas in the Dominican Re-
public by Cuban naval vessels.
During the last week in June,
the American Embassy in Cuba
received persistent reports
that as many as 2,000 troops
are being trained there
to reinforce the Dominican
rebels
DOMINICAN
REPUBLIC
PUERTO _ VIRGIN
RICO ISLANDS
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1 July 1959
Venezulean President Betan-
court, an implacable foe of
Dominican dictator Trujillo, has
probably also provided material
support for the Nicaraguan and
Dominican rebels, although he
has repeatedly denied it and
appears careful to avoid com-
promising his announced policy
of nonintervention or alienating
the Venezuelan military. Ven-
ezuelan civil aircraft may have
been used to transport. arms,
equipment, and Nicaraguan exiles
to rebel bases in Costa Rica.
Generalissimo Trujillo as-
sured the American ambassador
on 27 June that he will resist
the sentiment he says exists in
the Dominican military in favor
of an armed attack on Cuba. How-
ever, further Cuban-backed rebel
incursions, which the Dominicans
expect, could provoke an attack,
and Trujillo has said he will
provide Haiti with military
assistance if that country is
attacked and requests help.
There have been frequent re-
ports,
ng that the Cuban prime
minister is preparing a group
of Haitian exiles for an attack
on Haiti in the near future.
Meanwhile, Nicaraguan Pres-
ident Somoza says he has re-
fused to aid a perennial Honduran
revolutionary who has been seek-
ing Nicaraguan backing fora coup
against Honduran President Vil-
leda Morales.
MIDDLE EAST HIGHLIGHTS
Iraq
The Iraqi Government's or-
ders to disarm the Communist-
infiltrated Popular Resistance
Force (PRF) and to curtail its
activities are being implemented.
A statement by Military
Governor and Army Chief of Staff
Abdi on 25 June confirmed that
the PRF has been relieved of
all security duties. While it
is not to be disbanded, the or-
ganization is to confine itself
to training activities. There
have been no PRF street patrols
in Baghdad since the night of
21 June and none in Basra since
23 June. The government issued
a public proclamation on 29 June
forbidding any individual from
carrying any kind of firearm
or lethal weapon without a spe-
cial permit from the governor
general's office.
The Communist party organ
and other Communist-line jour-
nals have refrained from comment
on the PRF issue but have con-
tinued to attack other aspects
of governmental policy. The
press battle between the Com-
munist and National Democratic
party (NDP) newspapers continues.
The formerly pro-Communist but
now pro-NDP daily Al Thawra has
accused the Communist party of
"spreading terror and trying
to dominate the political sit-
uation." The Communist press
has countered by describing this
journal as 'distinguished for
malice and for encouraging op-
portunists, imperialists, and
stooges."
The Communist party re-
sorted to a new strategem on 29
June with the announcement that
the "national front," now com-
posed of the Communist party,
"the NDP," and the United Demo-
cratic party of Kurdistan, had
been reconstituted. This trans-
parent effort by the Communists
to re-establish an appearance of
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respectable association with
other parties will probably
deepen the antagonism between
important NDP leaders and the
Communist party, since the "NDP"
with which the Communists have
created this "national front"
is only the extreme, Communist-
permeated splinter group of
that party.
While the effect of Qasim's
recent moves has been to place
the Communists on the defensive
psychologically and to reduce
'their power to some extent,
there is little reason to be-
lieve that he wants either to
suppress their influence alto-
gether or to force a showdown
with them. His past reference
to Iraqi Communists as "patriots
who do not plot against the
nation" and his obvious lack of
concern about the danger from
Communist ideology suggest that
his real aim is to move toward
what he may consider a healthier
political balance, in which the
Communist party becomes one of
several political organizations
and sources of influence, all
of which remain susceptible to
his control. His measures to
assure his own control over the
military and paramilitary
forces are an essential first
step toward redressing the po-
litical balance.
Nasir seems to be making
the most of the emotions aroused
in the Arab world by the publi-
cation of the UN report on the
Palestine refugees, which en-
visages the possibility of the
refugees' being absorbed in part
by their present host gov-
ernments. A new Palestine
"study" committee has been
formed.
In a speech on 30 June in
which he charged that the "im-
perialists" and the Israelis
were cooperating to create an
incident over the issue of the Is-
raeli use of the Suez Canal,
Nasir called again on the West--
ern powers to take some action
on behalf of the refugees.
Nasir's two main Arab opponents,
the Iraqi and Jordanian govern-
ments, have also sought to capi-
talize on the issue and to por-
tray Nasir as a compromiser.
.Nasir's remarks, made just be-
fore the arrival in Cairo on 1
July of UN Secretary General
Hammarskjold, will make the
latter's attempt to mediate
even, less likely to succeed.
The UAR's stand on the
canal issue remains somewhat
cloudy, because Cairo does not
want to make any statement or
agreement which would be con-
strued as a concession to the
Israelis. It appears, however,
that Israeli cargoes would be
allowed through the canal if the
ships carrying them were not
under Israeli charter or other
Israeli control and if the Is-
raeli-origin cargo is to be
sold F.O.B., but the really im-
portant thing to the UAR au-
thorities would seem to be that
no reference to Israel appear
in the ship's papers. The Is-
raelis hinted they might be
interested in some such arrange-
ment, but the Tel Aviv Foreign
Ministry subsequently unoffi-
cially rejected a compromise
along these lines.
The UAR continues to show
concern that the Israelis might
retaliate for the seizures of
canal cargoes by interfering
with UAR air and sea traffic be-
tween Egypt and Syria. At least
some UAR vessels are taking a
northerly route around Cyprus.
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The cabinet crisis which
developed in Israel late last
week is the opening gun in the
political campaign which will
culminate in parliamentary elec-
tions next November. Members
of'minority parties in Prime
Minister Ben-Gurion's cabinet
again, as in December 1957,
seized on the emotion-charged
issue of Israel's relations
with West Germany as an oppor-
tunity to dissociate themselves
from the policies of the prime
minister's predominant Mapai
party. The actual question in-
volved the revelation that the
Israeli Government was prepar-
ing to sell a quantity of gre-
nade launchers to Bonn.
Ben-Gurion has insisted,
since the 1957 crisis on the
principle of cabinet discipline,
that critics must either be
silent or get out of the govern-
ment. He apparently intends now
to force out the minority critics
and may preside for the next
four months over a caretaker
government or over a new coali-
tion with moderate right-wing
parties--the Progressives and
General Zionists. These two
parties joined Mapai in winning
a confidence vote on 1 July.
Western Divergencies
The recess in the foreign
ministers' conference finds the
major Western European countries
clinging firmly to their diver-
gent viewpoints. Pressures for
acco':.modation with the USSR re-
main high in Britain, where gen-
eral elections are expected this
fall, but German and French lead-
ers are determined to oppose any
concessions to the USSR.
Prime Minister Macmillan's
public statements continue to
lead the British public toward
relatively optimistic expecta-
tions when the negotiations
are resumed. On 25 June
he spoke of the "great
gain" in East-West relations
over the past six months
as the atmosphere changed
from one of "ultimatum" to one
of "negotiation." Reiterating
his hope that a summit confer-
ence would take place, Macmillan
indirectly chided his European
critics by affirming that flex-
ibil;Lty was based on confidence
"in the moral strength of our
position."
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1 July 1959
I The
British press, while unimpressed
by Soviet proposals at Geneva,
supports the government's in-
tention to keep negotiations
going, preferably proceeding to
the heads-of-government level.
Gromyko's statement of 28 June
has been reported as a withdraw-
al of the Soviet ultimatum.
Substantial criticism of Ade-
nauer and De Gaulle for insuf-
ficient flexibility is also
evident.
Although discussion of
specific issues has waned,
George Brown and Aneurin Bevan,
responsible for defense and
foreign affairs respectively in
the Labor party's "shadow cab-
inet," told the American Embassy
on 23 June that they favored
greater Western willingness to
deal with the East German re-
gime on a de facto basis. Bevan
favors acceptance of the parity
principle for an all-German com-
mission to prepare for reunifi-
cation.
Official circles in Bonn
and Paris in the past week have
renewed their warnings against
Western concessions. The French
press continues to support the
De Gaulle government's firmness,
and several papers have charged
the West with conceding too
much without Soviet countercon-
cessions.
Chancellor Adenauer's simi-
lar feeling that the West had
already made "risky" concessions
on Berlin has received mixed
support from the governing
Christian Democratic Union (CDU).
While some CDTJ members share
the chancellor's view that firm-
ness will be needed in the re-
sumed negotiations, others
have called for a new pro-
posal on German reunification,
possibly reviving the idea
of a four-power commission
to direct the work of some
all-German groups.
Berlin's Mayor Brandt told
the Berlin legislature on 25
June that the Western proposals
were the "extreme limit which
can be tolerated." He sug-
gested, however, a return to
discussions on German reunifica-
tion and European security along
the lines of the official policy
of the Social Democratic party,
which, envisages a neutral Ger-
many. Since returning from
his mid-,June visit to Geneva,
Brandt has been in close touch
with Herbert Wehner, the
party's left-wing deputy
chairman.
Pressures for Consultation
Other Western differences
have emerged regarding procedures
for consultation in advance of
the resumption of the Geneva
talks on 13 July. Italy's pro-
posal for a meeting of NATO
foreign ministers, coolly re-
ceived in the North Atlantic
Council, has been offered pub-
licly by Belgium. Italy now
will be satisfied to have For-
eign Minister Pella included in
consultations with his American.,
French, British, and West Ger-
man counterparts before the
talks with the USSR are resumed,
as initially proposed by De
Gaulle in the communique is-
sued on 27 June at the end of
his Italian visit. De Gaulle
also introduced into the com-
munique what has apparently be-
come his pet topic for summit
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1 July 195.9
discussion--aid to underdevel-
oped areas.
In those European countries
not directly involved in the
conference, the belief has grown
that a negotiated settlement
with the USSR regarding Berlin
may not prove possible. The US
Embassy in Oslo believes that
the stiffening of Norwegian
public and official opinion is
partly attributable to the coun-
terproductive Soviet efforts
to influence Norwegian foreign
policy. The desire for summit
talks appears only in spots, as
in the Italian Government's ad-
vice to the West to go to con-
siderable lengths, including a
summit meeting, to try to elim-
inatO any kind of Soviet dead-
line on Berlin.
Moscow's Stand
Moscow is maintaining its
posture of hopeful optimism re-
garding prospects for agreement
when the foreign ministers' con-
ference resumes on 13 July. The
statement issued by Gromyko on
28 June in reply to Secretary
Herter's report to the nation
on the Geneva talks said the
first phase had been "definite-
ly useful" in defining positions,
making disagreements more pre:-Oise, and helping bring the two
sides "nearer on certain ques-
tions."
Gromyko declared that "there
exist points of departure which
make it possible to hope that
the Geneva conference will have
a positive outcome" if the West
adopts a cooperative attitude,
He went out of his way to en-
dorse the British approach,
stating: "We share to a great
extent the evaluation of the
prospects of the Geneva confer-
ence and that of the following
summit conference voiced in the
House of Commons on 24 June by
Foreign Secretary Selwyn Lloyd,
who spoke about the chance of
the success of the conference."
The high priority Moscow
attaches to using the Geneva
conference to promote East
Germany's international status
was again evident in Gromyko's
statement. He declared that the
presence of representatives of
the two German states "has a
great significance as a matter
of principle" and stated that,
although the Western powers
"have not yet recognized East
Germany diplomatically, they
have nonetheless been forced
to recognize its de facto ex-
istence.." This, he said, con-
sti.tutes an "important success
for the Geneva conference and
the German people."
The Soviet foreign min'
ister's review of his proposals
on Germany and Berlin contained
no hints of future modifications.
He again attempted to refute the
Western charge that the Soviet
proposals for an "interim agree-
ment" on Berlin would leave the
Western powers without any
rights in negotiations at the
end. of the 18-month time limit
and give the USSR freedom to
take unilateral action at the
expiration of that period.
Gromyko carefully evaded
a direct reply to this charge,.
however, stating only that the
Soviet proposal for further
negotiations at the end of the
18-month period "speaks for it-
self." He also attempted to
blur the issue by saying Moscow
would not have proposed a
guaranteed "temporary status"
for West Berlin if it had con-
templated a "unilateral solution
of the question of Western rights
in Berlin."
As part of its tactics to
:make its Berlin proposals the
basis for discussion when the
conference resumes, the USSR
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1 July 1959
probably will attempt to create
the impression of willingness to
work out a compromise on this
crucial issue of Western rights
under an interim agreement. In
this connection, a TASS corre-
spondent in Geneva stated private-
ly on 22 June that the Soviet
delegation believes that a com-
promise formula on this point
could be negotiated.
Following Gromyko's line,
the correspondent evaded a direct
reply when asked why the USSR
had not specified that Western
rights in Berlin would remain
unchallenged and undisturbed
after the expiration of the
18-month period. He implied,
however, that Western rights
would be preserved not only
during a review by the big four
of the problem at the end of
the 18-month period, but also
during subsequent "periodic"
foreign ministers' and summit
talks on the German problem. He
remarked that. Berlin would "fall
into second place" and stated
that the USSR "does not want to
force the West out of Berlin."
Khrushchev reportedly prom-
ised party chief Ulbricht
during the recent visit of East
German leaders to Moscow that
no further concessions would be
made to the West when the Geneva
talks resume,
The firm stand attributed
to Khrushchev against further
concessions probably was in-
tended mainly to reassure the
East Germans that the USSR would
protect their interests in
negotiations with the We 25X1
25X1
Britain is the most reasonable
of the Western powers and that
they will. continue their efforts
to exploit differences between
London and the other Western
powers.
Balkan' "Zone 'of Peace',
Continued Soviet attention
to the issue of Balkan and
Baltic atom-free zones suggests
that: the USSR anticipates that
the broader questions of dis-
engagement and disarmament in
Europe will be raised in future
high-level East-West negotiations.
In notes on 25 June to the
United States, France, Britain,
Italy, Greece, Turkey, Yugoslovia,
Bulgaria, Albania, and Rumania,
the Soviet Union formally pro-
pased creation of an atom-.and
rocket-free zone for the Balkan
and Adriatic area.
According to the Soviet
plan;, the United States, Britain,
and France would join the USSR
in "guaranteeing the security
and independence" of the countries
in the zone--expanding a recent
Rumanian proposal--and "facili-
tate in every way its establish-
ment." The notes expressed re-
gret that, in favbr~ng estallish-
rrent ?of missile bases on their
territories, Italy, Turkey, and
Greece had created a "serious
obstacle" to the creation of
such a zone. The statements
suggested that these nations
"need the sensible voice of their
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1 July 1959
25X1
neighbors before it is too
late."
The notes pointed with fa-
vor to the Rumanian proposal
for a conference of the heads
of government of the Balkan
countries to "discuss pressing
matters concerning that area"
and cited a statement on 8 June
by President Tito as support
for creation of the zone.
This latest move on the
part of the USSR climaxes the
Soviet-bloc diplomatic and prop-
aganda attack on projected-Amer-
ican missile bases, in Italy,
Greece, and Turkey. Since Khru-
shchev's call during his recent
Albanian visit for the creation
of an atom-free zone, formal
notes have been issued to Greece
and Italy by the Soviet Union,
Rumania, Bulgaria, and Albania,
interspersed with a strong prop-
aganda campaign on the subject.
The notes of 25 June were
probably designed to elicit a
more direct American, British,
and French reaction to the bloc
campaign. The Soviet leaders
probably calculated that any
Western rejection of this for-
mal proposal could be used to
justify the installation of
Soviet missile bases in Albania
and the other satellites.
BRITISH LABOR PARTY'S
Nuclear Test Ban Talks
The Soviet delegation to
the technical talks on high-
altitude detection has carefully
tied all discussions with'the
1958 Geneva Technical Report,
claiming that no new information
has been introduced which would
"in principle" modify last year's
conclusions. The Soviet ex-
perts have hoped to confine the
fin,al.report to little more than
a confirmation of the accuracy
of :Last year's experts' con-
clusions to avoid setting any
precedent which could be used
to support Western efforts to
consider basic modifications.in
these conclusions in light of
new American data on detecting
underground explosions,
In plenary sessions Moscow
has announced that it will drop
its insistence on veto rights
over the appointment and dis-
charge of control system per-
sonnel if agreement can be
reached on control post staff-
ing and on an annual inspection
quota unrelated to the-number
of unidentified seismic events,
The Soviet delegate also agreed
to drop the veto over commis-
sion actions to deal with pos-
sible treaty iolations, 0 25X1
Concurred in
Y
NUCLEAR ARMS POLICY
The British Labor party's
evident success in compromising
its internal differences over
nuclear disarmament policy seems
likely to add to the pressures
on the Macmillan government to
achieve a test-suspension agree-
ment..
With the Labor party's
former policy calling for a uni-
lateral one-year suspension of
tests outdated by the present
suspension, which began when the
Geneva talks started, the party
and eight-wing trade-union lead-
ership faced an unexpected chal-
lenge from union ranks demand-
ing unilateral banning of all
nuclear weapons from British
territory,
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1 July 1959
The new policy, agreed to
on 23,June, represents a clear
victory over the rebels, It
demands the indefinite suspen-
sion of British nuclear weapons
tests and calls for Britain's
ultimate abandonment of these
weapons through the organization
of a "nonnuclear club" embracing
all nations except the United
States and the USSR. While ad-
vocating "tighter control" over
American bases in Britain, the
statement emphatically reaffirms
that the next Labor government
will honor Britain's NATO com-
mitments.
The initially favorable
British press reaction suggests
that the public will view this
statement as a moderate, respon-
sible attempt to prevent nuclear
war. Although Aneurin Bevan,
foreign secretary in Labor's
"shadow cabinet," has privately
stated that Britain would never
have to make good on its "non-
nuclear club" plan because
France would never accept it,
the American Embassy believes
the proposal is meant as a gen-
25X1
uineeffort to reduce the
risks
of nuclear war by stemming
the
spread of nuclear weapons
to
other
countries. Any cred
it
gained
by the Labor party indi-
rectly
puts additional pressure
on Macmillan to show clear
progress in the Geneva test-sus-
pension talks before the general
elections expected in the fall,
An outside chance remains
that. Bevan and party leader
Gaitskell will find themselves
in trouble on this moderate pol-
icy as elections approach. The
6Juily . conference of the Trans-
port, and General Workers Union--
Britain's largest--will provide
a crucial test, since its lead-
er, Frank Cousins, dissented
from the statement agreed to on
23 June. In the unlikely event
that Cousins pushes through a
significantly more radical res-
olution by his union, the Gait-
skell-Bevan leadership would
:face a grave threat that would
probably come to a head at
the annual party conference
in early October.
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CURRENT 99ROP;RAILY SUMMARY
1 July 1959
NOTES AND COMMENTS
PROTOTYPE AIRCRAFT USED BY KOZLOY
The CLEAT (TU-114) turbo-
prop~passenger airliner with
fuselage number 5611, which
transported Soviet First Depu-
ty Premier Frol Kozlov nonstop
from Moscow to New York on 28
June, is the prototype air-
craft first displayed in Mos-
cow in November 1957. The use
of a prototype to transport a
Soviet high official is unprec-
edented. The last-minute change
in the type of aircraft used by
Kozlov appears to be an attempt
to acquire prestige and give an
impression of equality with the
United States in the develop-
ment of heavy transoceanic
transport aircraft.
Development of the CLEAT
was first indicated by Soviet
officials in January 1956.
Subsequent publicity for about
20 months lauded the aircraft
and indicated it would be in
service soon. In early 1958,
however, publicity was directed
to a TU-114D, a modified BEAR
(TU-95) four-engine turboprop
bomber.
In May 1959 the CLEAT made
a rLonstop flight from Moscow to
Khabarovsk. The Soviet press
claimed the world record for a
long-distance transport aircraft
flight, and identified A. P.
Yakimov as the chief test pilot.
He also flew the aircraft to
the United States.
The first flight outside
the USSR was to Tirana, Albania,
in early June. In mid-June the
CLEAT apparently carried its
designer, A. N. Tupolev, to Paris
for the International Aeronau-
tical Exhibition. While at the
exhibition the Russians indi-
cated the CLEAT could not give
a flying display as the tractors
could not haul it into position
on the runway--although a trac-
tor had towed
ramp. 25X1
dicate Is une prototype has numer-
ous fatigue cracks stopped with
drilled holes at both ends.
Buckling, caused by heat, has
scarred the engine nacelles.
Other CLEAT aircraft are
not known to be in service or
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1 July 1959
in production. Impressive as
it is in size, the obvious com-
promises made in using avail-
able bomber components detract
from the aircraft's potential
as a profitable civil or mili-
tary transport.
Wings, power plants, and
landing-gear assembly of the
types used in BEAR bombers,were?
probably used for the CLEAT,
These components are mounted
low on the transport fuselage,
giving it an extremely high
ground clearance of at least 12
feet. Less practical is the
resulting placement of passenger
and cargo decks about 18 feet
above the ground, necessitating
ground equipment of unique
design for loading and main-
tenance.
in by OR
ARGENTINE MOVES TO COUNTER MILITARY UNREST
Argentine President Fron-
dizi appears to be weathering
threats of a military coup.
Having re-organized the cabi-
net, he is considering the ap-
pointment of compromise offi-
cers to top positions to satisfy
demands made by moderate mili-
tary elements as well as by
those still advocating a coup.
The new economy and labor min-
ister, Alvaro Alsogaray, has
included among his policy an-
nouncements various steps to
counter popular discontent
which stems primarily from aus-
terity measures under the US-
backed stabilization program.
Probably because of suspi-
cion in left-of-center circles
of .Alsogaray's.outspoken ad-
vocacy of free enterprise, his
first official act was to an-
nounce a decree effective 30
June ending army control over
personnel in the petroleum in-
dustry, railways, and the Buenos
Aires bus system. This move
will eliminate one issue used
by the Peronistas and Communists
for strike agitation and possi-
bly mollify somewhat the con-
siderable number of Intransi-
gent Radicals--members of Fron-
dizi's own party--who consider
Alsogaray too conservative,.
Emphasizing the necessity
of the stabilization program,
Alsogaray said the government
intends to bear the brunt of
austerity for the people by re-
ducing bureaucratic and mili-
tary expenditures. State con-
trols over the economy, will be
lessened, and price controls
enforced over about a dozen es-
sential consumer items.
In a clear reference to
military complaints about Peron-
ista and Communist influence,
Alsogaray stated that the cabi-
net reorganization was not a
change in policy but in person-
nel, giving responsibility to
those having clearly defined
political, economic, and social
views. He asked a six months'
trial period--which would be
bleak at the outset--before
judgment is passed on the gov-
ernment's policies,
While the majority of the
armed forces reportedly are
satisfied with Alsogaray, they
still insist, ,on shifts in mili-
tary commands. Frondizi de-
scribed the situation to Ambas-
sador Beaulac as an institution-
al crisis in the armed forces,
mainly the army. This break-
down in discipline.in both army
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and navy has resulted in con-
flicting demands, but negotia-
tions are under.wayltoward a
compromise, which may include
soft treatment of rebellious
officers.
25X1
25X1
PRESSURES ON THE BOLIVIAN GOVERNMENT
The Bolivian Government of
moderate President Siles, peri-
odically threatened by the left-
ists within the ruling party
who object to the US-backed
stabilization program, was con-
fronted on.26 June with an up-
rising of opposition elements
in the eastern provincial city
of Santa Cruz. The govern-
ment's extensive use of.armed
force to suppress the outbreak
and its subsequent military op-
erations against rebel groups.
reflect its well-grounded fear
of further trouble in the area,
but also seem to have been de-
signed in part to unify the
hostile leftist and moderate
factions in its own party.
The government apparently
precipitated the Santa Cruz un-
rest by removing local offi-
cials allegedly subservient to
the opposition "Santa Cruz Com-
mittee" as a step toward reim-
posing its authority over the
area, long a center of resent-
ment against the ruling Nation-
alist Revolutionary Movement
(MNR). The government also was
concerned over renewed reports
of subversive activity in the
Santa Cruz Department by the
principal rightist group, which
perennially plots against the
regime and made its most recent
25X1 coup attempt on 19 April.
25X1
25X1
CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
the Siles
regime aces serious civil war
in the department, where an armed
rebel force of an estimated 1,000
men is reportedly being pursued
by strong government forces.
The government's apparent
provocation of this unrest could
have been timed to distract
growing discontent against stabi-
lization, to reduce dissension
within the MNR, and to undercut
the threat of a general strike
of the miners. Unions in the
Miners' Federation, including
those which have backed Siles
in previous clashes with the
leftist labor leader Juan Lechin
over stabilization, reportedly
are unanimous in support of a
strike against the unfreezing
of all mine commissary prices
scheduled by the government
about mid-July. This move, de-
signed to meet a commitment to
the International Monetary Fund
under the stabilization program,
caused considerable political
tension when it was partially
implemented last March.
Bolivia's economy, which
deteriorated sharply in 1958
and has poor prospects for im-
provirement in 1959, is largely
dependent on mineral production
and exports. A fully effective
and protracted strike by the
miners would threaten both the
stability of the President's
regJLme and the stabilization
effort.
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1 July 1959
Siles,who may covertly set-
tle with the miners to evade the
commitment to the IMF, could find
his position further compromised
by the expected return of former
President Paz in early July. Ac-
cording to the press, Paz--head
of the MNR -has been traveling
in the Soviet bloc and is prob-
ably investigating recent re-
ported bloc offers of economic
aid to Bolivia. He may use any
such proposal in an attempt to
extract concessions from the IMF
or to reduce the country's de-
pendence on US assistance. Paz
is likely to weaken the govern-
ment's determination to unfreeze
commissary prices if he inter-
venes in the dispute between
Silas and the Miners' Federa-
tion.
De Gaulle's policy toward
Algeria is emerging with in-
creasing clarity after a year
of sometimes deliberately am-
biguous pronouncements. Meas-
ures now being pressed vigor-
ously on all economic, military,
diplomatic, and political levels
indicate that De Gaulle's ulti-
/nate goal is the retention of
French sovereignty over an Al-
geria. remaining within the
framework of French political in-
stitutions, but having a dis-
tinctive culture,a greatly ex-
panded economy, and predominantly
Moslem local governments.
According to an apparently
authentic "top secret" document
leaked this month to a French
magazine, the government's plan
for Algeria gives priority to
the pacification program to
force the rebels to accept a
cease-fire without political
preconditions. It also pre-
cludes using any outside "good
offices." Once peace is re-
stored, Algeria's own elected
representatives would be permit-
ted to work out gradually a po-
litical program for the area.
Economic and social develop-
ments are aimed at giving the
Moslems a standard of living
nearer to that of the French and
at encouraging the emergence of
a Moslem elite.
The key element in this
scheme is the ten-year Constan-
tine Plan for economic develop-
ment announced by De Gaulle last
fall which is now moving into
advanced planning stages. Plans
are being made to raise locally
some of the very considerable
funds required--a move which
may slow up the rate at which
the program can provide new
jobs for Algerians.
French spokesmen are con-
tinuing their recently optimis-
tic statements about the mili-
tary situation following De
Gaulle's May prediction that the
end of.the war is "in sight."
Indications of low morale and
supply shortages among the reb-
els are probably strengthening
French confidence, despite the
resurgence of terrorism and the
rebels' apparent ability to main-
tain their level of strength.
Paris is pressing the dip-
lomatic phase of its policy on
the premise that it can toler-
ate no foreign aid to the rebels.
A ""black list" of foreign firms.
doing business with the rebels
has been prepared, and France
has protested to the United
States and other countries about
the activities of Algerians with-
in their borders.
25X1
In the light of recent de-
velopments on Algeria, the key
statement in De Gaulle's policy
seems to be his original refer-
ence to "realizing the Algerian
personality" through consulta-
tiorts with duly elected politi-
cal representatives after hos-
tilities have ended. 25X1
1 I
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1 July 1959
MARY.
MOSCOW TO PRESS FOR CLOSER RELATIONS DURING VISIT OF HAILE SELASSIE
Ethiopian Emperor Haile
Selassie arrived in Moscow on
29 June for what is expected to
be.a tiro-week visit, his first
to the USSR. Soviet leaders
ill probably utilize the occa-
sion to press for closer economic
and cultural relations with
Addis Ababa and to encourage the
Emperor's desire to appear'as a
neutralist. On 30 June Soviet
Premier Khrushchev hailed Ethi-
opia as "practically the only
island of independence. and na-
tional freedom in an Africa
enslaved by the colonizers."
tine Soviet Government would
present a broad selection of
proposals for educational., eco-
nomic, agricultural, and military
assistance to Ethiopia during
the visitr
oscow
is seeking to reduce American
influence and is particularly
interested in undercutting US
7
military assistance and in elim-
inating US military installations
in the Asmara area.
The Emperor, who is trying
to stress his independence of
the West and to associate Ethi-
opia more closely with pan-
Africanism, probably will accept
some form of Soviet aid as a
demonstration of this policy,
although he said he does not
want additional bloc personnel
in Ethiopia. A Soviet Embassy
official'inn Addis Ababa stated
in April, "If the Emperor
asks for a loan, he will
get it."
A visiting Soviet agricul-
tural team expressed interest
in an assistance program in
February, and a five-man dele-
gation which arrived in Ethiopia
on 10 June reportedly has entered
into preliminary fegotiations
for a commerce agreement to be
signed at the end of the Emperor's
visit and has discussed with
Ethiopian officials plans to
expand the Soviet hospital in
Addis Ababa.
Prague is the only other
blocs capital the Emperor is
scheduled to visit during this
tour.
NEW AGRICULTURAL PROGRAM IN POLAND
A new agricultural program
introduced by Poland's party First
Secretary Gomulka on 22 June at
the party's second plenum is in'
tended to help attain by 1965
a 30-percent increase over the
1958 level of production and
to provide a large increase--25.
billion:. zlotys ($833,000,000),
or 33 percent more than originally-.
planned-?in funds available for
investment in agricultural
development projects, such as
land improvement and partial
mechanization of farm operations.
The vehicle of the program
is to be the "agricultural cir?-
cle. "' . These "circles" are
eventually to encompass all vil-
lages and the majority of peas--
ants and will be the administra-
tors of funds and machinery to
be dispensed to their members,
ers,
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1 July 1959
The funds for the investment in-
crease are to come from the dif-
ference between what the gov-
ernment pays the peasants for
compulsory deliveries and what
these products would bring on
the free market.
A companion move essential
to an improved situation for
Polish agriculture is the re-
cent postponement of all "her-
itage" payments by farm owners
for four years. This is said
to free a half million farms
from an annual debt charge of
approximately 6 billion zlotys
($200,000,000) which can be
used for investment also. The
regime is also working on a
draft bill to prevent a division
by inheritance of medium-size
and small farms.
These steps are necessary,
according to the regime, because
Polish agriculture has failed
to maintain the rate of produc-
tion increase that occurred
soon after Gomulka came to power.
Although Polish agricultural
output increased about 7 percent
in 1957 and 1958 and contributed
much to halting inflationary
trends,, the regime feels the
increase in agricultural output
must continue high, given the
lack of land reserves, large
food imports, and the rapidly
growing population. Gomulka
therefore has introduced a
milder measure than the brutal
collectivization drives being im-
plemented in'the other satellites.
The success of this program
will depend on the peasants'
reaction, since only 14 percent
of the peasantry are now in
"agricultural circles." The
peasant probably will not be
enthusiastic at first. Conserv-
ative: and distrustful by na-
ture, he has come to doubt--
largely because of past experi-
ence--the benefits of government
actions. Increased party par-'
ticipation in the circles, ini-
tially to oversee fund alloca-
tions, may hinder the growth
of the "circle" movement. The
moderate tone of Gomulka's
speech, however, was designed
to allay peasant fears of a new
collectivization campaign.
This fear may be enhanced
by the prospect that, despite
promises to the contrary, com-
pulsory deliveries are to be
continued for at least another
seven years, The party appar-
ently is somewhat divided over
the outlook for this program,
for violent discussions report-
edly have taken place. However,
if the regime is trying to find
a plan which is feasible yet
can appear to show progress
toward bloc agricultural ortho-
doxy at the time of the Khru.-
shchev visit in mid-July, it has
chosen the mildest available
method and the one most likely
25X1
to be successful.
(Prepared by ORR)
YUGOSLAVIA WOOS WESTERN SOCIALISTS
In the past month Yugoslavia
has again started wooing West
European socialist parties with
considerable vigor--a policy it
has followed in the past when-
ever the bloc has succeeded in
partially isolating it. Vice
President Edvard Kardelj made
a tour of the Scandinavian coun-
tries from 26 May to 12 June
and reportedly stopped for two
days in Hamburg en route home,
presumably to talk with West
German Social Democratic party
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CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
(SPD) leaders. On 22 June,
Under Secretary of Foreign Af-
fairs Ales Bebler and Croatian
party boss Vladimir Bakaric be-
gan visits to the socialist par-
ties of West Germany, Belgium,
and Great Britain.
The Yugoslavs exchanged
views with their socialist hosts
on international affairs and
their experiences in establish-
ing a socialist system. While
it is difficult to gauge the
influence of the Western social-
ists on Yugoslavia's internal
system, the visits have fur-
nished support for such concepts
in Yugoslavia's ideological po-
sition as the one that all coun-
tries of the world are moving
toward socialism--a view unac-
ceptable to the bloc.
The visits cannot be ex-
pected to result in specific
steps toward closer political
cooperation between Belgrade
and the governments of these
states--most of which are ori-
ented toward NATO. Belgrade's
claim that it is a neutral be-
tween the "two blocs" partic-
ularly necessitates caution.
Kardelj's visit to Denmark was
somewhat marred, for example,
when his statement that excel-
lent political cooperation
existed between Denmark and
Yugoslavia compelled Danish
Premier Hansen in his 28 May
press conference to reaffirm
Denmark's NATO ties. The visits
do, however, create a favorable
climate for increased economic
activity and cooperation toward
regional European economic
groupings such as the Common
Market.
The imprisonment of Milovan
Dji:las--author of The New Class
--and the leaders o! Yugos a a's
prewar socialist party has also
hampered the development of
closer relations with West
European socialist parties.
All three Scandinavian premiers
brought up this question when
they visited Belgrade in 1957
and 1958, The British Labor
party apparently also protested
these arrests to Foreign Minis-
ter Popovic in October 1958,
The friendly atmosphere of the
present visits, however, sug-
gests that the Djilas issue is
losing some of its negative ef-
fect, and there is no evidence
that the subject was broached
during Kardelj's trip.
The two Yugoslav visits
to West Germany appear to have
resulted in fruitful discussions
with the SPD and general agree-
ment on such questions as the
Geneva conference and the SPD's
program for the reunification
of Germany. The SPD also served
as an intermediary in setting
a meeting between the Yugoslavs
and a West German Foreign Min-
istry representative. Such a
meeting was held on 24 June to
discuss the possible re-estab-
lishment of diplomatic relations
between the two states but had
no positive results.
SOVIET BLOC MOVES TO EXPAND CREDIT RELATIONS WITH WEST
The Soviet bloc is attempt-
ing to obtain additional credits
in the West for the purchase of
technologically advanced equip-
ment, principally for the plas-
tics, synthetics, and petrochem-
ical industries, fields to which
the bloc has only recently given
high priority. The import of
such equipment has recently
been stepped up and is facil-
itated by the extension of
credits.
The current credit drive
stems from a variety of economic
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1 July 1959
and political motivations. The
receipt of credits from Western
sources will support Soviet at-
tempts to expand exports, and
the introduction of credit dis-
cussions with some West European
countries will establish a new
area of competition in East-West
trade. The emphasis has been on
medium-term credits--up to five
years--for which the USSR has
been trying to get government
guarantees in order to en-
courage the flow of private
credits. Future repayment will
be made through the export of
bloc goods drawn from the larg-
er productive base the bloc
is establishing.
tential private credit extensions
are greatest in this field.
Within the past two years
complete West European indus-
triaal units have been sold to
the bloc on medium-term credits,
All of these have been financed
privately, but in some cases
government credit guarantees
have also been made available.
At the same time the bloc it-
self also extends such credits
to the free world, to less de-
veloped countries. Turkey,
Iran, Indonesia, and Argentina,
for example, have purchased
less sophisticated factories
financed by bloc loans of less
than five years'
duration.
The largest num-
ber of and most often
used credits remain,
however, commercial
credits of up to a
year connected with
the financing of or-
dinary trade. These
credits are designed
primarily to ease the
flow of trade, but,
beyond facilitating
the expansion of eco-
nomic relations, are
of only minor impor-
tance to the bloc.
Duration of credits grant-
ed the bloc in recent years has
ranged from 30-day commercial
credits to a 20-year loan. Of
chief significance to bloc coun-
tries are credits permitting
lengthy deferment of payments
for purchases of advanced West-
ern equipment and plants for
industrial modernization and
development. Only Poland has
received such loans; two West
European and one American loan
for 9-, 12-, and 20-year periods
for the purchase of miscellane-
ous manufactured goods. The
bloc has chosen the field of
medium-term Western credits
as the most promising, and po-
Bilateral trade agreements
concluded by the bloc frequently
contain "swing" credit provisions
These are designed to permit
temporary lances in trade
under clearing agreements and
usually are settled at the end
of the year with payments in
goods or cash. These temporary
credit accounts, however, some-
times are carried over periods
longer than one year and have
been used by the bloc to force
free world creditors into ex-
panding imports of bloc
goods.
(Prepare by OR
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1 July 1959
DEVELOPMENTS IN CHINA'S TRADE WITH THE FREE WORLD
Continued reports of seri-
ous difficulties affecting Com-
munist China's foreign trade
position are supported in part
by trade statistics for the
first months of 1959. Trade
with the free world has declined
from the extremely high volumes
recorded during the latter part
of 1958--particularly in imports
from Western Europe, where China
was making heavy purchases of
manufactured goods and semi-
finished products to bolster
its "leap. forward" industriali-
zation program. Trade this year
with Western Europe is greater
than in.early 1958, but this
has been largely due to fulfill-
ment of contracts concluded last
year and there has been a marked
slack in signing of new export
contracts, Thus it is unlikely
that trade with the free world
will reach the high levels of
1958 during the rest of this
yearn
There is no indication that
China's trade with bloc countries
has declined, and if existing
commitments are fulfilled,a
substantial increase in Chinese
trade with. the bloc can be ex-
pected this year.
The greatest decline in
Chinese sales to the free world
occurred in trade with Hong Kong.
Last year Peiping exported nearly
$245,000,000 to that colony,
but after rising to a record
monthly total of $28,000,000 in
December 1958, its exports there
fell to a four-year low of $50,
000,000,in the first four months
of this year,, Sales of Chinese
foodstuffs and other traditional
exports have been severely re-
duced,-reflecting shortages on
the mainland.
in 1958--there is little evidence
of renewed Chinese efforts to
mount another trade offensive.
Normal trade is continuing, but
without the emphasis on sales-
promotion techniques character-
istic of last year's program.
This situation was accu-
rately reflected in reports
from the Canton Trade Fair held
in April and May 1959, at which
transactions were less than
45 ,percent of those claimed for
each of the two 1958 fairs,.
Chinese reluctance to make
new trade commitments proved
disappointing to representatives
from West European firms who
came expecting to place large
orders for Chinese goods.
In contrast to its previous
practices, Peiping gave little
publicity to the fair and re-
fused applications from many
who planned to attend. Most
foreign businessmen agreed
that the Chinese seemed gen-
uninely eager to promote
further trade but simply were
unable to accept orders in
quantities comparable to those
of last year. They also
complained that the quality
of many products was far be-
low previous standards and
unacceptable to Western cus-
tomers,
Chinese officials gave
assurances earlier this year
that any delays and difficulties
in fulfilling export commitments
would be overcome quickly and
that. trade conditions soon would
return to normal. Recently
they have been less optimistic,
however, and refuse to speculate
when solutions will be found to
the economic dislocations caused
by the "leap forward" and com-
In Southeast Asia--the
scene of vigorous export activity
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PEIPING"WARNS?"WASHINGTON ON PARACEL RECONNAISSANCE
1 July 1959
Peiping has recently is-
ued "serious warnings" 50, 51,
52, and 53, charging US naval
aircraft with "violating the
skies"over the Paracel Islands,
referred to as part of Kwangtung
Province, 300 miles to the north.
These warnings of "intrusions"
are the first to involve the
islands, although a long series
of similar protests have al-
leged US violations of Commu-
nist-claimed sea and air space
along the East China coast.
O R LEE .00
Paracel Islands
Peiping appears anxious to
stress US "provocations and
aggression" against Communist
China0 It probably feels the
Paracel warn itgs mill'reinforce
its claim to the islands--a
claim disputed by Nationalist
China and South Vietnam--and
might result in elimination of
US aerial reconnaissance. Should
the patrols be halted, Peiping
would probably portray such a
halt as implied recognition of
Communist claims. Chinese be-
lief that the "warnings" might
result in an end to the patrols
: AMPHITRITE GROUP
~..Wn?~iy 1};
CRESCENT GROUP%j Ii Ilv 1. :::l.inroIn 1.
may be based on the alteration
last October of a US naval
patrol in the Matsu area. When
a portion of this patrol near
Matsu ceased, the continuous
warnings concerning it also
stopped.
The Chinese Communists have
maintained a permanent colony
in the Paracels since 1955.
In its intensive effort to
exploit the limited natural re-
sources, Peiping within the
past six months has increased
the colony's size; an-estimated
500-600 Chinese now are engaged
in fishing and JA .excavating
guano deposits. Most of this
activity is centered around the
base at Woody Island in the
Amphitrite group, although
construction has recently been
observed on Lincoln Island, 25
miles to the east.
Chinese fishing junks have
visited most of the islands in
the Paracels--including the
Crescent group, where a small
South Vietnamese garrison 45
miles southwest of Woody rep-
resents Saigon's "sphere of
influence." Several of these
Chinese boats and their crews
were seized in February and
britfly detained by the South
Vietnamese. Peiping protested
strongly and small Chinese Com-
munist naval vessels were sub-
sequently sighted near Woody,
but no further action was
taken.
Peiping apparently is de-
termined to defend the Amphi-
trite operations from any Chi-
nese Nationalist or South Viet-
namese attack. The "warnings,"
however, contain no threat to
take military action against
American air reconnaissance over
the islands, The Communists
appear intent on commercial ac-
tivity and strengthening their
claim to the islands.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
Agitation against the Com-
munist government in India's
Kerala State has been intensi-
fied following high-level Con-
gress party meetings in New
Delhi. Clashes between Communist-
directed police and demonstra-
tors continue, with nearly 20,-
000 arrested thus far. The Con-
gress party's top executive
board on 29 June gave qualified
support to the three-week-old
opposition campaign by calling
for general elections in Kerala
on grounds that the Communists
no longer represent majority
opinion in the state.
Prime Minister Nehru re-
turned from his 22-24 June visit
to Kerala apparently convinced
that the anti-Communist movement
had wider popular support than
originally estimated and that
the local Congress party could
not be withdrawn from the agita-
tion. Nehru conferred with the
Congress high command in New
Delhi from 25 to 29 June to con-
sider charges that the party was
using "unconstitutional" methods
to force the Communists out of
office. While no firm decision
either to condemn the agitation
or give it full support apparent-
ly was taken, the national lead-
ers' neutral position has been
interpreted by state party chiefs
as a green light to step up the
campaign.
The president of the Kerala
Congress party--who was summoned
to New Delhi to join the dis-
cussions on 29 June--at the same
time has been persuaded to direct.
the party's effort into more con-
stitutional channels. A new
phase of "absolute noncoopera-
tion" has been launched aimed at
forcing the Communists to submit
to immediate elections. One
tactic being considered by opposi-
tion strategists is to paralyze
they state administration through
mass resignations of non-Commu-
nist civil officials. Congress
leaders in Kerala are receiving
increasing cooperation from
other opposition parties, who
appear equally determined to press
the agitation until the Commu-
nists are ousted.
The Communist party's na-
tional leaders maintain that the
Kerala government will not re-
sign under pressure and that
there is no proof that new elec-
tions are needed. The party's
general secretary on 30 June
condemned the Congress high com-
mand's call for elections as
"dishonest" and a "complete en-
dorsement" of the opposition's
"undemocratic" demand. Commu-
nist officials in Kerala may
decide to revert to repressive
police action to intimidate the
agitators.
A renewal of serious vio-
lence seems likely. Catholic
and. Hindu communal leaders--un-
der less restraint than politi-
cal leaders--will be encouraged
to strengthen their resistance
to the government as well. Extrem-
ists may try to touch off wide-
spread disturbances so that New
Delhi will have sufficient cause 25X1
to suspend parliamentary govern-
ment and impose direct rule.
Negotiations on the repa-
triation of the approximately
50,000 Vietnamese refugees in
northeast Thailand opened on
20 June in Rangoon between rep-
resentatives of the North Viet-
namese and Thai Red Cross So-
cieties. The talks, an impor-
tant departure from Thailand's
policy of avoiding direct contact
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1 July 1959
with North Vietnam, climax
months of serious consideration
of the refugee problem by the
Thai authorities.
Thailand regards the pre-
dominantly pro-Communist refu-
gees as a security threat in
the northeast and appears de-
termined to repatriate them--
even at the risk of offending
South Vietnam. Practically all
of the refugees came originally
from North Vietnam or are de-
of the International Committee
of the Red Cross (ICRC), has
made on-the-scene studies of
the refugee communities and
acted as informal negotiator
between the Thai and Vietnamese
governments. He is sitting in
on the talks in Rangoon, but
they have bogged down in a pro-
cedural dispute about his role.
The North Vietnamese are trying
to minimize his part in an
obvious effort to give the ap-
pearance of a direct confronta-
tion between North Vietnam and
Thailand. The Thais insist,
however, that Durand, as ICRC
representative, play a central
role.
Durand is considerably less
optimistic than he was a few
months ago. He now believes
it likely that the North Viet-
namese representatives will have
no specific proposals prepared
for the conference and that they
will use the Rangoon talks pri-
marily for propaganda purposes,
since they have had no previous
opportunity for regional con-
tacts of this kind.
North Vietnam is reported
to have been "slightly taken
aback" at the prospect that
most of the 50,000 refugees
would opt for repatriation to
the north. It would probably
prefer to keep them in place,
both because of their subversive
potential and the problems posed
by their resettlement, but it
is publicly committed to taking
back all who want to return,and it
may consider the propaganda ad-
vantages sufficient to allow an
eventual settlement.
scended from inhabitants of the
north, and the vast majority
feel an allegiance to Hanoi
rather than Saigon.
The prospects for tangible
results from the present dis-
cussions remain uncertain.
Andre Durand, a representative
The recent successful con-
clusion of the Geneva negotiations
on the repatriation of Koreans
in Japan to North Korea may
give added impetus for agreement
in Rangoon. Bangkok may feel that
the precedent established at Ge-
neva giving the ICRC an "advisory" 25X1
role will minimize any adverse
reaction from Thailand's Western
allies.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
INDONESIA
President Sukarno, who re-
turned to Djakarta on 29 June
from a two-month trip, is con-
sulting political leaders on
Indonesia's constitutional crisis
and acute financial situation.
even ua y u ar-
no will request parliament for
permission to impose the 1945
constitution by decree, thereby
strengthening presidential pow-
ers vis-a-vis the legislature.
The Communist party con-
tinues its policy of ostensible
all-out support for Sukarno. and
has instructed the party faction
in the Constituent Assembly to
attend no further sessions of
that body unless one is called
for the sole purpose of voting
the assembly's dissolution.
Should the National party adopt
the same tactic, the two parties
together could block a quorum and
thereby prevent further function-
iig of the assembly. Both the
Communist and National parties
have publicly called on Sukarno
to impose the constitution by
decree.
Another problem which had
been pigeonholed pending Sukar-
no's return is the resolution of
a "mutiny" in the Indonesian
Navy and the demand by junior of-
ficeers for the replacement of
Navy Chief of Staff Vice Admiral
Subijakto. The admiral appears
to be under house arrest. The
navy's difficulties appear to
stem from discontent with Subi-
jakt.o's policies and are uncon-
nected with either the provincial
revolt or the current political
crisis.
The Indonesian Government
reportedly has gained the agree-
ment of the Malayan and Singa-
pore governments to deny resi-
dence and entry to Indonesian
dissident representatives after
July. This action, which Djakar-
ta has been seeking for some
time, would force the dissidents
to transfer their major overseas
operations from Singapore to
Hong Kong. The greater distance
involved is likely to add to
rebel difficulties, particularly
in their smuggling activities.
Prime Minister Djuanda,
who was scheduled to visit Mos-
cow in July, reportedly has post-
poned his visit in view of the
continuing..; crisis in Indonesia.
SHANS BECOMING INCREASINGLY TROUBLESOME.'FOR BURMESE' GOVERNMENT
Growing restiveness among
Burma's one million Shans, who
make up the country's second
largest ethnic minority group,
is a source of serious concern
to the central government in Ran-
goon. Much of the tension stems
from the efforts of the central.
government, which is dominated
by the country's Burman majority,
to eliminate the feudal privi-
leges of the 33 sawbwas (petty
princes) who have traditionally
ruled the Shans and whose terri-
tories make up the Shan State.
Many Shans--probably the vast
majority of them--fear that Ran-
goon?s drive to remove this "un-
democratic anachronism" is merely
a cloak for the "Burmanization"
of the Shan State. The mutual
distrust of the Burmans and
the Shans is of long stand-
ing and borders on open hos-
tility in many cases.
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1 July 1959
After several years of dick-
ering, the central government
and the sawbwas finally came to
terms this spring regarding the
phased abolition of the sawbwas'
privileged position in Shan
State affairs. In return'for the
formal renunciation of their
judicial and administrative pow-
ers, the princes received cash
equivalent to 15 times the an-
nual revenue of their respective
principalities. The sawbwas are
guaranteed continued control of
the state government until at
least 1964, at which time they
will have to contest in free
elections for the 25 seats in
the upper house of the national
parliament which had hitherto
been theirs by appointment. Un-
der the Burmese constitution,
control of, the minority state
governments is exercised by the
members of both houses of parlia-
ment from the respective states.
Contrary to expectations,
the formal agreement between
Rangoon and the sawbwas has ag-
gravated, rather than reduced,
tensions. The Ne Win govern-
ment's sensitivity and concern
over developments in the Shan
State are reflected in the un-
usual security precautions it
has imposed on travel by for-
eign nationals there. It is
also reflected in a recent ap-
peal to Shan youths not to join
a group of Shan dissidents which
has been sporadically attacking
Burmese Army installations in
eastern Burma near the Thai
frontier. This appeal is the
first open admission by Rangoon
that there is serious trouble
in the Shan State,
Rangoon's difficulties in
containing the Shan dissidents,
whose strength is variously es-
timated at from 1,000 to 5,000,
will be further complicated if
the 3,000 Chinese Nationalist ir-
regulars who operate in the same
general area carry out their
threat, contained in a recent
letter to the Burmese Government,
to support the Shans with weapons
and ammunition. Chinese National-
ist - Shan collaboration would
negate any hope the Burmese Army
might have of suppressing the
Shah dissidents. It might better
enable the latter to feed on dis-
content in other parts of the
Shan State to swell their ranks
and extend their operations. Such
a development would weaken Ran-
goon's authority in a large area
contiguous to Communist China and
make more difficult the suppres-
sion of the several other insur-
gent groups still in the field in
Burma.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
COMMUNISTS LOSE STRENGTH IN ICELANDIC ELECTIONS
The Communist-dominated
Labor Alliance suffered a set-
back in the general elections
in Iceland on 28 June, losing
some 20 percent of its popular
vote and one of its eight seats
in the 52-member Parliament.
The pro-NATO Conservative party
,and the largely rural and iso-
lationist Progressives both in-
creased their representation,
gaining one and two seats re-
spectively. The Social Democrats,
who with the tacit
support of the Con-
servatives have been
conducting a'minor-
ity government since
last December, lost
two seats.
The Communists
pushed hard on the
popular issue of the
fishing-limits dis-
however, the Progressives will
challenge the Conservative -
Social Democratic group and
attempt to bloc electoral reform.
Despite their losses, the
Communists are in a key position.
The Conservatives and Social
Democrats need their support
to assure final passage by the
new Parliament of the electoral
reform bill. Although the
Communists are pledged to elec-
ICELANDIC PARLIAMENT
SOCIAL
DEMOCRATS
PROGRESSIVES
(17)
pute with Britain and the dor-
mant issue of American forces
in Iceland, but apparently
failed to benefit from either
one. All parties oppose any
concessions to Britain on fish-
ing limits.
The Social Democrats with
conservative support will try
to form an interim government,
with the objective of passing
for the necessary second time
the electoral reform bill,
which will partially rectify
the heavy overrepresentation of
the rural areas. On the basis
of their considerable gains,
'60 1JNE 1959 GENERAL
F cT!c NS
CONSERVATIVES
(19)
toral reform, as a price for
their cooperation they may seek
assurances of representation in
the government to be formed
after the fall general election.
In the autumn elections
which must follow the second
passage of the ref or* bill, the
Progressives are likely to lose
strength to the other three
parties. The Conservatives and
the Social Democrats would prob-
ably command a firm majority
in the Parliament, which would
be expanded to 60 seats, and
they would be in a position
to forma viable coalition gov-
ernment.
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and cultural patterns and an
intense fear of being swal-
lowed up by the alien culture
of the ethnic majority.
1 July 1951)
PART - I I I
PATTERNS AND PERSPECTIVES
INDIGENOUS-MINORITY PROBLEMS IN-SOUTHEAST ASIA
Throughout non-Communist
Southeast Asia, indigenous mi-
nority groups constitute ele-
ments in the national societies
which are highly susceptible to
dissidence and subversive ac-
tivities. The power of large
alien groups such as the Over-
seas Chinese and Indians--and,
to a lesser extent, such dis-
placed local groups as the
Vietnamese refugees in north-
eastern Thailand--has long been
recognized and feared by the
national governments. Minor-
ities which have no prospects
of foreign support, however,
have generally been ignored
and even repressed--the national
governments often overriding or
undermining their cultural at-
tainments and group interests.
Communist China and North
Vietnam have already exploited
these tendencies to gain influ-
ence with the Laotian, Cambo-
dian, and Vietnamese minorities
and, through the Burmese Commu-
nist insurgents, have on occa-
sion assisted the Karen rebels.
The minorities of South-
east Asia vary in size, impor-
tance, and cultural attainment.
The Shans of Burma, numbering
about 1,000,000, have their own
state within the national gov-
ernment and a tradition of a
hereditary feudal form of gov-
ernment. Like the Shans, though
less numerous, the Kachins form
a well-defined ethnic unit as
Burma's northern buffer state
bordering upon China and Tibet.
At the other end of the spec-
trum are the linguistically and
culturally disparate "montag-
nards"--hill tribes--of the
Laotian-Cambodian-Vietnamese.:
border area and the scattered
aborigines of the Malay penin-
sula. Sharply differentiated
from one another, these groups
have in common their fierce
pride in their own organizations
Burma
The ethnic diversities in
Burma were recognized even be-
fore independence as a potential
INDIGENOUS MINORITIES OF SOUTHEAST ASIA
(ESTIMATES)
T;URMA (total population 20,000,000)
Chin 423,000-\
Kachin 361,000 Estimates
of 1953
Karen 814,000 projected
from 1931
Kayah 60,000 census.
LAOS (total population 2,100,000)
Statistics are inadequate for any esti-
mate of the size of minority groups.
However, the Meo and Kha peoples, to-
gether with lesser minorities, make up
approximately half the total population.
MALAYA (total population 6,250,000)
Aborigines 100,000
SOUTH VIETNAM (total population 12,100,000)
No minority figures available.
source of trouble. Special ef-
forts were made to ensure peace-
able working relations between
the dominant Burmans, making up
70 percent of the population,
and, the ethnic minorities. The
Shans, Kachins, Karens, and
Kayahs have all been given their
own states within the union,
while the Chins have a special
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'.1 July'.1959
Southeast
Asia
b]A'LAYA
NORTWI-.
BORN`EQ _`
BRUNEI
SARA
,r,
t
a. s ?..~.=NETN_
N D 0 NPE`"OS I A
administrative district. By
specific provision of the con-
stitution, the minorities were
given representation in the up-
per house of parliament out of
proportion to their population
and, by the decision of the
Burman-dominated Constituent
Assembly, the provisional pres-
idency of the union was given
to a Shan feudal prince. The
current President is a Karen
named in an effort to gain sup-
port of that minority.
Despite these efforts,
Burma has been plagued with
minority dissidence almost con-
tinuously since independence.
The Karen National Defense Or-
ganization has been ruthlessly
fighting for an independent
state. Its leaders would throw
in their lot with any power at-
tempting to overthrow the cen-
tral government in return for a
guaranteed independent Karen
state. On different occasions
in the past they have cooperated
with the various Burmese Commu-
nist insurgents, the Chinese
Nationalist irregulars, and the
Mon ethnic minority. They have
continuously sought the help of
the Thai Government and today
are attempting to cooperate
with incipient Shan dissidence
in eastern Kengtung State. On
Burma's western frontier the
Arakanese, ethnically Burman
but culturally divergent, have
continuously fought in parlia-
ment for an autonomous Arakanese
state, while the Mujahid, Mos-
lem, bandits in the Arakan, have
been a source of dissidence
along the Pakistan border.
The sensitivity of the
minorities to Burman domina-
tion has been reinforced by
Rangoon's failure to make any
specific contributions to mi-
nority welfare. The govern-
ment's educational program re-
quires the study of Burmese
and makes no place for the mi-
nority languages or cultural
heritage. The economic devel-
opment programs have been cen-
tered almost entirely in the
Burman-dominated Rangoon
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CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
and Mandalay areas. In the po-
litical arena, despite formal
concessions to the minorities,
the government program of "Bur-
manization" has tended to un-
dermine the status of indigenous
as well as alien minority groups.
Cambodian Government under
present conditions, they are a
potential source of dissidence,
available for exploitation
should the state of Cambodia's
relations with the Sino-Soviet
bloc make this desirable.
Minority peoples make up
almost half the population of
Laos but, except for occasional
attempts at exploitation, have
been neglected by the Lao-dom-
inated government. The domestic
pro-Communists, on the other
hand, have presented themselves
as the champion and the polit-
ical vehicle of the minorities
and, unlike the government,
have taken special care to re-
spect their cultural patterns.
As a result, the candidates of
the Communist-front Neo Lao Hak
Zat (NLHZ) party--political suc-
cessor of the rebel Pathet Lao--
in the 1958 elections won heavy
support from the Kha tribesmen,
who form a majority of the pop-
ulation in several provinces of
southern Laos.
The NLHZ has also made con-
siderable inroads among the
heavy concentrations of Meo
tribesmen in northern and cen-
tral Laos. The recent escape
and successful resistance of
the former Pathet Lao bat-
talion was made possible, in
part, by the sympathy and sup-
port of the Meo tribesmen in
east-central Laos.
Cambodia
Although Cambodia is eth-
nically the most cohesive coun-
try in Southeast Asia, with
most of its minority elements
fairly well integrated into the
Khmer community, a small num-
ber of hill peoples inhabit the
remote northeast near the Viet-
namese border. Shunned by the
Cambodians, these primitive
aborigines are fair prey for
Communist propagandists, who
have been active in the area
since it was occupied by the
Vietnamese Communists during
the Indochina War. While these
tribesmen pose no threat to the
South Vietnam
South Vietnam, on the other
hand, already has a serious prob-
lem of Vietnamese Communist agi-
tation among the mountain tribes-
men, who predominate in the
strategic highland plateau in
Central Vietnam. The tribes-
men's basic animosity toward
the Vietnamese has been inten-
sified by the Diem government's
ambitious development and re-
settlement program in the pla-
teau area, heretofore their ex-
clusive domain.. The Communists,
through agents and radiobroad-
casts in various native dialects,
are active in fanning unrest in
the highlands and backing an
embryonic autonomy movement.
Saigon is concerned over these
developments and has taken steps
designed to allay the resent-
ment and suspicion. Inherent
Vietnamese prejudice against the
aborigines, however, remains an
impediment in implementing the
reforms.
Thailand
Thailand's indigenous mi-
norities, like those of Cambodia,
are mainly assimilated into Thai
society. Only along the border
with Malaya is there any poten-
tial minority dissidence. Mos-
lem Malays in the southern prov-
inces of Thailand have been the
indirect victims of Bangkok's
efforts to assimilate the large
Chinese minorities. In the past,
when pressures to conform to
Thai standards of language, re-
ligion, and culture have become
too strong, these Malays have
threatened to secede and join
their Malay kinsmen to the
south. The Thai problem, how-
ever.is moderate compared with
those of Burma, Laos, and Viet-
nan,: as the government has shown
itself sensitive to local demands
and has granted a large degree
of local autonomy to the Moslem
minority.
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1 July 1959
Malaya
Often overlooked in the ma-
jor problem of Malay-Chinese
relations in the Federation of
Malaya is the status of the 100{
000 aborigines, Although they
are scattered', throughout the
jungle and make little trouble
on their own, they served dur-
ing the height of the Communist
terrorism as a source of sup-
plies and information for the
insurgents. In the event of
renewed insurgency, these jungle
people, out of fear or ignorance,
would probably aid jungle-based
forces against the government.
Philippines and Indonesia
The Philippines and Indo-
nesia present problems somewhat
different from those of main-
land Southeast Asia.
In the Philippines, al-
though the population is a
heterogeneous mixture of tribal
and linguistic groups, a common
sense of nationality and reli-
gion tends to bind the country
together. Only the Moslem Moros
of southern Mindanao stand aloof.
Representing the farthest east-
ward spread of Islam in the 16th
century, they have withstood
Spanish, American, and Filipino
efforts at integration and cen-
tralized control, On the other
hand, unless swept up into a
pan-Islamic movement which might
have had its roots in Indonesia,
they do not appear particularly
vulnerable to either Communist
propaganda or other outside in-
fluences and are satisfied with
the autonomy informally ac-
corded them by Manila.
While minority differences
in Indonesia are potentially
ex=plosive--and even now one of
the basic problems which the gov-
ernment must overcome--the dif-
ferences are essentially geo-
graphic in origin. The recent In-
donesian revolt and the suspic-
ions of the central government
on the part of residents of Su-
matra, Celebes, and other islands
illustrate the outer islands" dis-
trust of Java and Javanese domi-
nation. Currently? however, this
divisive factor is not providing
Communists the opportunity for
penetration among the minority
groups. On the contrary, as the
Communist party has gained ad-
herents in Java, there has been 25X1
a strengthening of anti-Commu-
nismm elsewhere as a corollas of
anti-Javanese sentiment.
LATIN AMERICAN FINANCIAL PROBLEMS
Political repercussions
from financial reform measures
stipulated by the International
Monetary Fund (IMF) as a condi-
tion of assistance have led
to''critical' situations in
several : Latin American coun-
tries, 'largely. -because
of exploitation of the austerity
aspects of these measures by
extreme nationalist and Marxist-
influenced groups. At the same
time, the over-all economic out-
look in Latin America is improv-
ing, with export earnings ex-
pected to be back at their 1957
AND THE INTERNATIONAL MONETARY FUND
peak by the end of this year and
with new investment capital be-
coming available from US and
international lending institu-
tions.
Undermining of the IMF-
sponsored stabilization efforts
would intensify deficit financ-
ing, inflation, and foreign-
exchange maladjustments, and
prevent the area from tak-
ing advantage of these f a-
vorable developments.
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1 July 1959
Export Earnings
Renewed economic expansion
in industrial countries of the
Western world promises to re-
verse the decline in all Latin
American export earnings, which
fell by 8 percent or $700,000,-
000 in 1958 and occasioned pay-
ments crises or financial stress
in over half the 20 republics.
Western Europe's imports of raw
materials--which normally ;ac-
count for 40 percent of Latin
American exports, but had fallen
off 15 percent in the recent
recession--are expected to go
up 5 percent in 1959 and by
year's end, as expansion gains
momentum, to reach the peak
1957 rate. Latin American ex-
ports to the United States,
amounting to about 45 percent
of the total, held up well in
volume but declined in price
in 1957-58; they are expected
to rise moderately in 1959.
World prices of several
primary commodities important
in Latin American exports--non--
ferrous metals account for one
third of the total--such as
copper, lead, tin, zinc, and
wool have already strengthened
appreciably in response to bet-
ter business conditions in the
United States and restocking in
anticipation of renewed expan-
sion in Western Europe. Paral-
lel increases in prices of cof-
GOLD AND FO HANGE RESERVES
(AS PERCENT OF ANNUAL IMPORTS)
1955 1956 1957 1958
UNITED STATES 176 160 ? 161 = 147
LATIN AMERICA 42
6
41
37
ARGENTINA
40
34
34
24
2
10
BOLIVIA
7
5 I
I
BRAZIL *
i 38
50
32
,
34-1
CHILE
22
21
10
COLOMBIA
20
20
30
..
MEXICO
47
47
36
38
PERU
17
19
9
8
VENEZUELA
4 8
75
77
71
*Including $200, 000, 000, or about 40%, of the
reserves not freely available because com-
mitted as collateral for a gold loan.
90529 2A 1 JULY 1959
WORLD COMMODITY PRICE INDEXES
1952=100
1956
MID JUNE
1957
MID-JUNE
1958
MID JUNE
1959
i MID-MAY
ALL ITEMS
92
95
87
91
FOOD
98
98.8
94.8
84.9
FIBERS
81.5
95.9
80.1
82.3
METALS
95.6
79.7
70.8
78.0
OTIHER ITEMS
101.8 0
107.2
104.3
131.9
fee, sugar, cotton, wheat, and
petroleum are not expected be-
cause of the world oversupply
of these commodities.
Some''progr'ess has been
made, however, toward multi-
lateral control of marketing
to. discourage further seri-
ous decline'in the price of>'
coffee, which 'vitally affects
the' economies of. Brazil,."
Colombia, Ecuador, and the Cen-
tral American countries.
Capital Funds
The prospects for addition-
al investment', capital are im-
proved. Early in May a specia:t
committee of the Organization of
American States (OAS), meeting
in Biuenos Aires in connection
with the establishment of the
new Inter-American Development
Bank long sought by Latin Ameri-
cans", noted that "capital export-
ing countries have recently tak-
en important initiatives to in-
crease capital resources of both
national and international pub-
lic ]lending institutions" and
that "the establishment of the
inter-American bank is a timely
step toward meeting Latin Ameri.-
can needs for external capital
for development purposes."
Ratification of the new
bank's charter by 85 percent of
its anticipated voting member-
ship is expected by the end of
this year. Of the total capital-
ization of $850,000,000, the
United States will contribute
$50,000,000 by September 1960--
with additional installments
later.--and also underwrite $200,-
000,000 of the callable capital
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1 July 1959
to back up issues of bonds by
the bank. The United States
will put up additional funds
for the bank's special "soft
loans"--i.e., loans in incon-
vertible currencies.
Existing lending institu-
tions are preparing to expand
their activities. The Interna-
tional.Bank for Reconstruction
and Development (IBRD)--the
World Bank--is expected to
double its capitalization by
September. Other things being
equal, this would permit in the
current fiscal year loans to
Latin America of $240,000,000,
as compared with $120,000,000
in fiscal 1958. Among national
lending institutions, the re-
cent 40-percent increase in the
lending authority of the United
States Export-Import Bank (Exim-
bank) would similarly permit a
rise in its 1959 development
loans to Latin America--to $200,-
000,000 from the $140,000,000
advanced in 1957-58.
Private investors in West-
ern Europe and Japan, as well
as the United States, also ap-
pear disposed to provide larger
capital resources to Latin Amer-
ica. There are already indica-
tions of a resumption of the
rising trend in US private long-
term capital flowing to the area
--a trend reversed in 1958, when
the amount fell to about $400,-
000,000 from an average of $600,-
000,000 over the previous four
years.
Financial Stability
The United Nations Economic
Commission for Latin America:
(ECLA) has recently attributed
the increasing severity of Latin
America:'s balance-of-payments
problem to inflation aggravated
by governmental attempts to
achieve higher living standards
through development programs
based on misguided economic pol-
icies, particularly in the fiscal
and monetary fields. Since 1957
the IMF has used a large part of
its resources--which are also to
be increased by 50 percent this
autumn--to relieve and correct
these payments problems in Latin
America. During the year ended
last March it extended financial
assistance to 13 Latin American
countries, compared with only
seven elsewhere.
In providing increasing
balance-of-payments assistance
to Latin America, the IMF is
extensively employing--in eight
of the 13 client countries--a
technique used with conspicuous
success in assisting the res-
toration of financial and eco-
nomic balance in Western Europe
following the Suez crisis, Aid
in meeting payments deficits is
madle contingent on a commitment
to the IMF--politically much
easier to give than to an in-
dividual lending nation--to un-
dertake a stabilization program
financed jointly by the IMF and
other credit sources such as the
IBRD or Eximbank. The benefici-
ary nation agrees to reduce budg-
et deficits, curtail credit,
and correct foreign-exchange
maladjustments. In return, it
receives not only the IMF bal-
ance-of-payments assistance,
but also more massive financial
aid" from other credit sources
which it can apply to specific
economic needs such as develop-
ment of resources.
Commenting recently on the
increased commitment of Latin
American countries to stabili-
zation agreements, Per Jacobson,
chairman of the IMF Executive
Board, cited as the most grate
ifying aspect of present-day
developments the growing aware-
ness of the dangers of inflation
and of the importance of finan-
cial stability for economic
growth. Jacobson referred to'
the temptation to governments
of the less-developed countries
--short of capital and under
strong pressures from rapidly
growing populations for higher
living standards--to resort to
inflationary expansion of credit
in efforts to 'accelerate
development. He also conceded
that it is often painful and
politically difficult to take
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the alternative approach of
avoiding inflation and encourag-
ing investment by cooperating
in IMF stabilization programs,
since this approach involves
"some austerity."
The present position of
several Latin American govern-
ments in respect to IMF-spon-
sored stabilization measures
illustrates both the economic
advantage and the political
difficulty of carrying out the
financial-reform aspects of
such programs.
In Mexico, a stabilization
program sponsored by the United
States and the IMF was readily
accepted in March of this year
and has been adhered to since.
Benefits are already apparent
in a stronger currency, less
acute inflation, and improved
foreign trade partly as a re-
sult of budgetary and credit
restraint.
On the other hand, the
success of governments of other
countries which have partici-
pated in IMF-recommended finan-
cial reforms--including Chile,
Bolivia, and particularly
Argentina--has been serious-
ly jeopardized by formidable
political resistance from both
narrow nationalist and leftist-
oriented labor elements. This
opposition enjoys widespread
support in its attacks on the
financial reform measures--par-
ticularly the austerity aspect
requiring anti-inflationary
restraint in wage increases--
as intervention by the United
States in domestic affairs.
The Argentine Government's
efforts to implement its ambi-
tious financial rehabilitation
program,in close collaboration
with the United States and the
IMF, is particularly vulnerable
because of the relatively dras-
tic measures required following
a decade of mismanagement. Per-
onLsta-Communist cooperation
in strike resistance, the dis-
content of the military, and
the resulting violence are add-
ing to the difficulty.
Brazil's attitude is re-
flected in its recent suspen-
sion of negotiations with the
IMF after refusing to make ad-
ditional anti-inflationary com-
mitments to obtain further aid
and after failing even to carry
out previous commitments. This
attitude derives largely from
excess confidence in the coun
try's abundant resources as a
basis for independent growth,
as well as fear of the kind of
po'Litical unrest Argentina is
experiencing under its stabili-
zation program.
Such confidence is sup-
ported by an annual industrial
growth of 8 percent over the
past decade. However, the re-
sources remain largely unde-
veloped, Brazil continues de-
pendent on coffee for 60 per-
cent of its foreign exchange,
and the high growth rate has
been achieved only at a cost
of severe inflation and repeated
payments crises.
If Brazil flouts the IMF
by obtaining assistance else-
where or if other countries
conspicuously reject or under-
mine IMF stabilization programs,
there will be a strengthening
of the widespread opposition
throughout Latin America to fi-
nancial stability as the approach
to economic health and develop-
ment. Resort to inflationary
wage increases and discriminatory
exchange rates will be encourr
aged, with resulting impairment
of competitive positions in in-
ternational trade and export
earnings. There would be a cor-
responding discouragement to
the influx of foreign capital 25X1
prospectively available to ease
Latin American economic diffi-
culties.
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1 July 1959
POLITICAL TENSIONS.IN NIGERIA..
Ibadan
WESTERN
REGION
Lagos
its three main regions, which
have local self-government, are
divided along tribal and reli-
gious lines, and cooperate large-
ly because of British rule.
The two southern regions
have experienced the greatest
amount of political evolution.
European contact, dating from
the early 17th century along
the Gulf of Guinea, began with
the slave trade and was followed
by commercial and missionary
interest. The Western Region
is peopled predominantly by
Yoruba tribesmen who have had
centuries of experience in state-
craft and whose. strong tribal
loyalties conflict with the
pan-Africanism espoused by Ghana's
Prime Minister Nkrumah and Guinea's
President Sekou Tourd. There
is a sizable Anglican Christian
as well as Moslem influence
among a pagan people. The West-
ern Region's prime minister,
EATERN
R ION
25X1
Port
1-Iarcourt
SECRET
Britain's efforts to pre-
pare its colony of Nigeria for
independence in October 1960
have resulted in the development
of political institutions which
function under British guidance
but which may disintegrate under
the impact of Nigerian tribal,
religious, and political disunity.
Elections this fall will pro-
vide a test of national cohesion,
and could establish the pattern
of political power for the emer-
gent nation. If it can achieve
unity, Nigeria could become an
important spokesman for Negro
Africa and exercise a moderating
influence on West African na-
tionalism.
Regional Disunity
Nigeria--with a population
of 35,000,000, the largest in
Africa--is a British political
creation dating from 1914. It
lacks political and social unity;
sou
CA
ERN
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Chief Obafemi Awolowo, is gener-
ally considered a leading Afri-
can moderate.
The Ibo tribesmen of the
Eastern Region are extroverts,
informal, and friendly to Ameri-
cans. Their tribal ties are
weaker than those of the Yoruba.
and they are more adaptable to
European innovations. As traders
they have penetrated to all parts
of West Africa and they are
eager supporters of pan-African-
ism. Roman Catholicism is a con-
siderable force in this region.
The prime minister, Dr. Nnamdi
Azikiwe, studied in the United
Nigeria's third division--
the Northern Region--probably
is the scene of the greatest
political tension. Although
containing over half of Nigeria's
area and population, two-thirds:
of it Moslem, the region has
few local administrators or
-technicians.. Only about 2 per-
cent of its population is liter-
ate in the Roman script and 5.5
percent in Arabic. The agri-
cultural masses have been kept
in ignorance by the Moslem rulers
of the area's city states, and
political reform is coming slow-
ly. The rulers are firmly pro-
British and have relied on Lon-
don for protection against the
dynamic nationalist forces in
the south. The rulers have
sympathetic ties with the Sudan,
but pro-Nasir sentiment is not
yet of significance. The re-
gional prime minister is the
Sardauna of Sokoto, Alhaji Sir:
Ahmadu Bello.
The Nigerian constitution
helps the forces of isolation in
the north because matters affect-
ing local government, the judi-
ciary, and education are subject
to :local regional control. The
northern regional government
resents the non-Moslem influence
of technicians from the south and
hopes to'.eliminate them from its
civil service, commerce, trade
unions, and university program.
The region has not been able
to remain aloof from political
evolution, however; the franchise
has recently been extended to all
men, and judicial reforms will
give the people access to English
law instead of customary Moslem
justice.
Political Factionalism
In consultation with the
Nigerian leaders, London in 1957
and 1958 established a Federal
House of Representatives, an of-
fice of prime minister, a cabinet,
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l Jul jr.' 1939''
and a federal police force.
The 312 seats in the federal
legislature--not counting the
eight representatives from the
British trust territory of
Cameroons--are apportioned among
the various regions on the basis
of population. The North has
174 seats, over half of the tot-
al; the East, 73; the West, 62;
and the federal capital of Lagos,
3,
One-party rule appears im-
probable because of the regional
limitation of each major party
and the inability of the north's
governing party to win enough
of that region's seats. At
present the three major parties
are represented in the federal
government with a northerner,
Abubakar Tafawa Balewa, as prime
minister. In the House of Repre-
sentatives, the Northern Peoples.'
Congress (NPC) has 110 seats, a
coalition of the National Council
of Nigeria and the Cameroons
(NCNC) and the Northern Elements
Progressive Union has 109 seats,
and the Action Group has 93. The
political confusion leads to
coalition government and unreal-
istic temporary alliances between
regional parties with conflicting
principles.
The Northern People's Con-
gress--led by the Sardauna of
Sokoto--is expected to win the
largest number of seats in the
December elections. Its strength
rests on the Moslem rulers'
support and their influence over
the backward peasantry, but it
is losing influence in a number
of urban constituencies and may
be sharply challenged by the
Action Group in 70 districts of
the non-Moslem section of the
Northern Region.
The leaders of the NPC, in
order to achieve a legislative
majority, have renewed their
working arrangement with the
leading party of the Eastern
Region, the NCNC, led by regional
Prime Minister Azikiwe. The
bonds are weak, however, and
might be broken abruptly if
either party should feel it
could do better separately. The
NCNC is a more extremist party
and is separately allied with
the main opposition group in
they north.
Nigeria's best organized,
most efficient, and best financed
party is the Action Group (AG)
of Chief Awolowo. Its appeal is
strong in the Western Region,
in minority areas in the Eastern
Region, and among the non-Moslem
areas of the north, but it is
unlikely to gather enough seats
to defeat the NPC-NCNC coalition.
In the event of a surprising show
of strength and capture of legis-
lative co;.'Lrol, the threat of AG
rule might lead to a violent
reaction in the Moslem north and
regional -secession because of
Awolowo's outspoken criticism of
a "reactionary, feudal, and Mos-
lem North."
The political confusion in
Nigeria is increased by the under-
the-surface controversy over
the continued leadership of fed-
eral Prime Minister Balewa.
Balewa was originally selected
as an agent of the Sardauna of
Sokoto, who declined to enter
federal politics, but recently
there has been a serious falling
out between the two men, and
Balewa now is not even assured of
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CURRENT INTELLIGENCE WEEKLY SUMMARY
1 July 1959
sufficient support in his own
constituency. Balewa, who is
not of royal blood, is unaccept-
able to the northern emirs now
that the post of federal prime
minister is to assume real power.
West African Nationalism
Most of the Nigerian polit-
ical leaders are strongly pro-
Western in orientation and be-
lieve that Nigeria should exert
a moderating role in West African
politics. Awolowo, Balewa, and
the Sardauna of Sokoto have shown
considerable coolness toward
Nkrumah's efforts to promote
African nationalism, and they
have leaned toward the more con-
servative proposals of President
Tubman of Liberia for a looser
association of African states.
Azikiwe, on the other hand, has
favored the Ghana-Guinea brand
of extremism.
At the time of Nkrumah's
February visit to Nigeria, he
was not given an enthusiastic
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popular reception in the West,
and Awolowo reportedly told him
that Nigeria would think about
West African union only after the
consolidation of the Nigerian
federation. He also stated that
Lagos would not follow the neu-
tralist line of Ghana because a
small nation could not afford to
be neutral. The Action Group
is cautious about pan-Africanism
because of a deep distrust of
UAR President Nasir's influence
in the movement. They also have
little confidence in Nkrumah and
are determined that the "union"
of Ghana and Guinea will not be
the nucleus of a West African
state.
On the other hand, Azikiwe's
NCNC supports a federation of
West Africa, it hailed the
"union" of Ghana and Guinea, and
assisted in organizing the Accra
conference of African political
parties. Both Azikiwe and Awolowo, 25X1
however, believe Nigeria must
dominate any West African re-
gional union.
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CONFIDENTIAL
CON
4DENTIRI,
CONFIDENTIAL
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