CURRENT INTELLIGENCE WEEKLY SUMMARY

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001800040001-9
• Release Decision: RIPPUB
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• Document Creation Date: December 20, 2016
• Document Release Date: December 6, 2005
• Sequence Number: 1
• Publication Date: October 27, 1999
• Content Type: SUMMARY

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CONFIDENTIAL
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CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. i0
OCI NO. 1795/58
26 June 1958
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NEXT AEV1EUt' ATE: 7L
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NO CHANGE IN CLA -SO
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CENTRAL. INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
TIAL
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 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
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SWRETIO`
CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
OF IMMEDIATE INTEREST
SOVIET SUMMIT TACTICS
The Soviet aide-memoire of
25 June reflects a major shift
in Moscow's recent tactics for
handling technical test inspec-
tion talks at Geneva. It may
also mark an abrupt and sub-
stantial change in over-all pol-
icy toward the West and signal
the abandonment of negotiations
on inspection and possibly the
resumption of Soviet nuclear
tests. This is in sharp con-
trast with recent Soviet prop-
aganda and diplomatic efforts
to show that the USSR was still
interested in a summit confer-
ence.
The aide-memoire is contrary
to that of the previous day,
which had indicated Soviet agree-
ment to the Geneva talks and had
expressed the moderate hope that
the conference "should aid in
the most rapid cessation" of nu-
clear tests. The 24 June aide-
memoire may have been prepared
by the Foreign Ministry as a
routine matter without clearance
at those levels of government
where the decision for a change
was being prepared. A factor
in the Soviet shift may have
been an American memorandum de-
livered on 24 June,, outlining
briefly for the first time the
scope of issues that should be
discussed by the experts.
On the tactical level, the
new aide-memoire can be viewed
as a bold maneuver to force the
United States to agree in prin-
ciple to a test cessation inde-
pendent of other aspects of the
disarmament problem. The 13
June aide-memoire and subsequent
propaganda indicated that the
USSR desired such a commitment,
oire appeared to confirm the im-
pression that Moscow would not
insist on it.
Now Moscow seems to be seek-
ing American agreement to a def-
inition, of the Geneva meeting's
purpose that would establish a
clear link between technical
talks and the "ultimate end" of
a test cessation agreement. Mos-
cow now insists it had agreed
to talks only on the assumption
that the United States accepted
this principle, although in fact
the American insistence that
there was no commitment to sus-
pend tests had been repeatedly
made clear in notes to Moscow.
The USSR may think that, by fol-
lowing these tactics, it can
force Western agreement to a
test suspension without any in-
spection system.
This latest Soviet move may
indicate a more fundamental
change in Soviet policy and be
intended to prepare the ground
for an abandonment of all pre-
tense of interest in negotiating
a test cessation and may signal
eventual resumption of the Soviet
nuclear test program. Such a
radical turn in the Soviet
Union's stand might well spring
from a major shift in the bal-
ance of forces within the Soviet
leadership or at least a funda-
mental reassessment of over-all
Soviet policy in the light of
recent Eastern European develop-
tnents.
If Moscow is abandoning its
efforts to gain a general test
suspension, perhaps in the belief
that it would have to pay too
high a price in terms of inspec-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
reason for it to seek a summit
conference. The primary purpose
of a summit meeting, from the
Soviet viewpoint, has been the
ratification of an agreement on
test suspension. In any case,
Moscow must realize that its
latest move will greatly reduce
the prospects for a summit con-
ference because it will be taken
by the West as clear proof that
the USSR is unwilling to make
any substantive compromise to
solve outstanding East-West
problems.
Nevertheless, Soviet prop-
aganda prior to 25 June empha-
sized Moscow's continuing desire
for a summit meeting and blamed
the West for using the Hungarian
events as a pretext to bar a
conference.
The demonstrations against
the American, West German,
and Danish embassies in Mos-
cow, while obviously reflect-
ing Moscow's anger at the
strength and violence of re-
action in Western countries
to the Hungarian executions,
appeared to be seriously at
odds with the USSR's pose
as the champion of peaceful
coexistence and negotiations.
The nonviolent nature of the
demonstrations outside the
American Embassy may, how-
ever, indicate a desire
not to raise unnecessary
obstacles to negotiations
with the United States.
LEBANESE SITUATION
UN Secretary General Ham-
marskj old may have reached an
agreement with UAR President
Nasir to bring at least a tem-
porary halt to UAR support for
the Lebanese rebels. It seems
almost certain that he held
out some positive inducement to
the Egyptian leader. The nature
of this inducement is not yet
known, but Nasir is said to be
waiting "with interest" a fur-
ther proposal from Hammarskjold.
The Lebanese Government re-
mains very wary. It seems pos-
sible that the rebels,may make
another military effort to im-
press the government and foreign
observers with their strength.
Certainly Lebanese army commander
Shihab, who recently has become
even more reluctant to engage
the rebels in decisive action,
will regard any agreement as a
reason to hold firmly to his
policy of taking no real
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CURRENT INTELLIGENCE WEEKLY SUMMARY
offensive action against the
rebel forces.
Saib Salam,. one of the
principal rebel leaders in
Beirut, has publicly announced
the formation of a rebel "cen-
tral command" in what may be
an effort to overcome some of
the lack of coordinated effort
which seems to have afflicted
rebel operations. This move
by Sa.lam, could also be aimed
LEBANESE SITUATION
AS OF 26 JUNE 1958
Army Organization and Strengths
Infantry Battalions ........... 6
Artillery Battalions.......... 3
Reconnaissance Battalions ? ? 2
Tank Battalions ..?.. ..?.....?1
Total Army Strength ....... ?9800
Gendarmerie
Total Strength ?... ..??.....2800
Loyalist Partisans. . ? . . ? Aporox. 3500
Air Force
Total Aircraft .... ......... 38 (incl. 10 jets)
Total Personnel ..............332
Lebanese Armed Opposition (Estimated)
Total Strength Approx. 11,500
juny
*Riyaq
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Lebanese Gendarmerie
Syrian Army
Lebanese Armed Opposition
000
? Main Rebel Supply Point
--------- Military Sector
Pipeline
Selected Road
OF IMMEDIATE INTEREST
at giving the rebels something
more closely resembling an or-
ganized political body which
might carry more weight in
future political maneuvering.
The Soviet Union has
not undertaken as aggres-
sive a diplomatic and propa-
ganda offensive in the Leba-
nese situation as it did
during the Syrian crisis
last year or the 1956 Suez
NO
COMMANDO
BEDOUIN
Horns
BIQA SECTOR
105(-1
f2'0001
PROV (~)
*Ablah
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26 June 1958
clash. This may ref lect a
Kremlin feeling that events
in Lebanon are developing
favorably for Soviet in-
terests.
If the Soviet leaders
are convinced that the
likelihood of Western mili-
tary intervention has passed
or diminished, Moscow may
step up its diplomatic and
propaganda attention to
Lebanon, and attempt to
claim credit in the Arab
world for protecting the
Middle East from Western
"aggression."
INCREASED SOVIET PRESSURE ON POLAND LIKELY
The Gomulka experiment
in Poland is the major
obstacle to restoration of
complete Soviet domination
over bloc policies, and
Moscow will probably now
increase its efforts to
bring Gomulka into line. Al-
though Moscow can apply
economic pressures and mili-
tary f orce if Gomulka does
not ultimately support the
bloc positions on Tito and
Nagy, it is more likely to
try through political ac-
tion to unseat Gomulka in
favor of more acceptable
leaders, possibly a Stalin-
ist-conservative coalition.
Former Polish leaders most
hated by the population
would probably be relegated
to behind-the-scenes positions.
The Hungarian executions
are a clear warning to all sat-
ellites that revisionism will
no longer be tolerated in
the bloc. They must be
so interpreted by Gomulka,
whose brand of Communism
embraces many of the prin-
ciples for which Imre Nagy
was killed. Despite this,
neither Gomulka nor the Pol-
ish press has made any
comment on the executions,
although the other satel-
lites have been quick to
endorse the punishment of
Nagy. The Polish central
committee apparently sent a
letter of guidance; to pro-
vincial party committees in-
dicating disapproval of the
Hungarian executions and
stating that they should
be treated without comment
as a Hungarian internal matter.
Pessimism is mounting in
Warsaw as to whether the studied
detachment can be maintained,
and rumors of the presence in
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CURRENT INTELLIGENCE WEEKLY SUMMARY
the capital of a Soviet emissary
are symptomatic of Polish fears
of an imminent crisis with the
USSR. Nonetheless, Gomulka ap-
pears determined to uphold his
principles. His independent
stand vis-a-vis Moscow on the
Yugoslav dispute and other is-
sues is largely responsible for
his popularity.
Gomulka cannot, however,
count on the undivided backing
of his party, which is still
badly torn by factionalism.
Conservative and opportunistic
members of the central commit-
tee, if persuaded that Gomulka's
control was weakening and that
popular uprisings could be
avoided, would probably form a
coalition with the Polish Sta-
linists who have consistently
opposed the Polish leader. It
is the knowledge that Gomulka
is the sole Communist acceptable
to the masses, and therefore
the sole means of maintaining
party rule in Poland, that has
heretofore ensured him the votes
of a considerable section of
the central committee.
In the face of obvious So-
viet intervention, it is likely
that the forces which rallied
to his support in October 1956
would do so again, and for the
same reasons. The Soviet Union,
in deciding how to bring Gomulka
into line, must consider the pos-
sibility that unrest might de-
velop in Poland if strong pres-
sure is brought to bear on him.
Having before it the example
of Hungary and an unstable situa-
tion in East Germany, Moscow
would also have to estimate the
extent to which its broader
world policies would suffer if
armed intervention were used to
suppress the popular riots that
would occur if Gomulka were
summarily ousted.
Under these circumstances,
the Soviet Union is likely to
regard a policy of gradual sub-
version of the Polish party,
which would lead to a "legiti-
mate" overthrow of Gomulka,
as the most feasible course
if Gomulka persists in refusing
to endorse the bloc line on
Tito and Nagy.
GREEK-TURKISH TENSION OVER CYPRUS
Greek belief that Ankara
instigated the recent rioting
on Cyprus has intensified deep-
rooted antagonisms against Tur-
key. Greek Air Force officers
are openly discussing possible
operations against Turkish tar-
gets, and Greek Air Force fight-
ers are on a partial alert
status. A large cross section
of the Greek population, in-
cluding many junior officers
in the armed services, would
welcome military action against
Turkey for what are regarded as
repeated provocative acts by
the Turks. It is doubtful, how-
ever, that Greece would initiate
hostilities against Turkey,
barring large-scale attacks
against Greek minorities in
Istanbul and Izmir.
Gkb6k ?oreign Minister
Averoff has recently emphasized
Greece's strong ties with Yugo-
slavia, but has announced that
Greek-Turkish cooperation within
the Balkan pact or NATO is no
longer possible.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
In Turkey, demonstrations
in favor of partitioning Cyprus
continue, but tension appears
to have lessened. Isolated at-
tacks have occurred against mem-
bers of the Greek minority in
Istanbul and Izmir, but the
Turkish Government took force-
ful action in Izmir on 23 June,
apparently to prevent incidents
involving Greek, British, or
NATO personnel or buildings.
Greece, Turkey, and Cypriot
Archbishop Makarios have re-
jected the British proposals
for Cyprus but emphasize that
negotiations should continue.
The Greek reply to London re-
jected the plan as favoring
partition and giving Turkey a
legal right in Cyprus, but it
suggested further bilateral ne-
gotiations. The Turkish rejec-
SECRET
PART I OF IMMEDIATE INTEREST
tion was based on uneven repre-
sentation on the Governor's
Council and on failure to rec-
ognize partition as the final
solution. Ankara, however,
called for a tripartite confer-
ence. Makarios' reply rejected
the plan as unworkable and as
favoring partition, but called
for direct British-Cypriot nego-
tiations.
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.CON' HDENNTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
NOTES AND COMMENTS
AFTERMATH OF THE EXECUTION OF NAGY
Hungarian party leader
Janos Kadar may now be losing
his usefulness to Moscow be-
cause of his close association
with Imre Nagy during the revo-
lution and his specific endorse-
ment of Nagy policies which are
now condemned as treasonous.
The fact that the two 'initial
authoritative Hungarian state-
ments on Nagy's execution were
made by the reported leaders of
the Stalinist opposition to
Radar supports this speculation
and suggests that he may be los-
ing control of the party. It
is believed in political and
journalistic circles in Buda-
pest that Kadar had opposed this
drastic solution of the Nagy
affair. If so, he will probably
be removed. It is also possi-
ble, however, that the manifest
effort of Kadar to hold aloof
from the execution may be a
face-saving maneuver. Moscow's
action may be governed by the
apparent lack of a suitable suc-
cessor.
In Budapest, although no
overt demonstrations have been
reported and police precautions
are reportedly stringent, gov-
ernment employees are reported
to have stopped work in protest.
According to the American Lega-
tion, "rage and despair at their
own helplessness" are the pre-
vailing emotions. In this at-
mosphere, the Supreme Court has
pressed ahead with hearings on
political offenders. The re-
gime has not yet revealed the
fate of other individuals ac-
cused with Nagy.
The Yugoslavs are not mak-
ing matters any easier for
Kadar. In a note delivered to
Budapest on 23 June, Belgrade
accused the Hungarians of
treachery and quoted Kadar's
assurances that Nagy would not
be punished.
Most of the bloc has con-
tinued to thunder denunciations
of Nagy, "revisionism," and
Yugoslavia, with Communist China,
the USSR, Bulgaria, and Albania
taking the lead. Rumania, while
headlining the "sentiments of
approval and satisfaction" with
which the Rumanian people al-
legedly greeted the news of
Nagy's death, has been somewhat
less severe in its condemnation
of Yugoslavia--perhaps because
of its own involvement in the
Nagy case. The Rumanian foreign
minister had assured the UN
General Assembly on 3 December
1956 that his government "would
observe the international rules
relating to political asylum"
in providing refuge for Nagy
and his companions.
Moscow's reversion to
Stalinist procedures has had a
strong impact on neutralist na-
tions, especially India, where
Nehru declared,Nagy's execution
was "most distressing news both
in itself and in its possible
consequences." In Austria--so
closely involved in the 1956
revolt--the executions appear
to have had an extraordinary
impact on public and official
opinion, and probat1y will kill
plans. for negotiations for im-
provement of Austro-Hungarian
relations.
In Ceylon, the government
reportedly has authorized its
UN representative to vote con-
demnation of the executions in
the UN special committee, if
he feels it is warranted. The
ambassador of the United Arab
Republic in Budapest informed
American officials confiden-
tially that, although his
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CURRENT INTELLIGENCE WEEKLY SUMMARY
,
instructions were to preserve
neutrality, he and his govern-
ment were "profoundly shocked"
at the executions.
Elsewhere in the free world,
the sense of shock has been pro-
found and the Kremlin's action
has been branded "needless folly."
Fellow travelers and some left-
wing parties have been estranged
by Moscow's actions, and some
Western Communist parties, no-
tably the British, appear to be
undergoing conflicts of loyalty
similar to those experienced fol-
lowing the Hungarian revolt in
November 1956.
SOVIET CENTRAL COMMITTEE MEETING
The communiqud issued by
the Soviet Communist party cen-
tral committee after its meeting
of 17-18 June represents on the
surface at least, another gain
for Khrushchev. He has added
two of his proteges as candidate
members of the presidium and has
pushed through a decree which
advances his agricultural poli-
cies by abolishing the present
system of compulsory deliveries
of collective-farm produce to
the state.
It is not likely that the
committee, and especially its
members serving in foreign capi-
tals, would have been called
suddenly into session for the
second time in six weeks to ap-
prove these measures alone. So-
viet leaders are faced with a
number of pressing problems, and
both sessions met in an atmos-
phere of continuing rumors of
opposition to Khrushchev. Both
sessions, however, lasted only
two days, and allegedly passed
only economic resolutions on
the chemical industry and agri-
culture. These resolutions,
although important in themselves,
may have been part of a politi-
cal maneuver in which KhrushcheM
having achieved agreement on
specific issues, turned them
into a vote of confidence for
himself and his policies.
It is now virtually cer-
tain that'relations with Yugo-
slavia were discussed at the
May plenum. Similarly, ques-
tions of bloc unity, particular-
ly the implications of Nagy's
execution, must have weighed
heavily in the decision to con-
voke the June session. Foreign
policy issues dealing with the
summit or the Middle East may
also have been touched on at
the plenum or taken up later in
special conferences. This may
also have been the case with
the new seven-year plan, a draft
of which has been scheduled to
be ready by 1 July.
The addition of two new
candidate members, N. V. Pod-
gorny and D. S. Polyansky, to
the party presidium--the only
personnel changes announced--
brings the membership to 15 full
and 10 candidate members. Both
Polyansky and Podgorny were
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CURRENT INTELLIGENCE WEEKLY SUIOtARY
26 June 1958
elected full members of the par-
ty central committee for the
first time at the 20th party
congress in 1956, both have had
extensive experience in key
agricultural areas, and both
have come into prominence since
Khrushchev became party first
secretary in 1953.
The decision to establish
a single system for procuring
agricultural products of the
collective farms, hitherto ac-
quired under three different
programs, will facilitate plan-
ning and profit calculations in
Soviet agriculture, and is an-
other important step in reducing
the differences between state
and collective farms. Beginning
with the 1958 crop, the state
will have one procurement pro-
gram for collective farm output,
instead of obtaining it partly
by compulsory procurement at
very low prices, partly as pay-
ments in kind for the services
of the MTS, and partly by over-
quota purchases at prices con-
siderably higher than the com-
pulsory procurement prices. The
new state purchase price will
vary from region to region de-
pending on the cost of produc-
tion and from year to year de-
pending on the size of the har-
vest. The free market apparent-
ly will remain as an outlet
for some collective-farm prod-
uce..
A change in the agricultur-
al procurement system applicable
to collective farms was made-
necessary by the reorganization
of the machine tractor stations
(MTS) which virtually eliminated
payments in kind for the services
of the MTS as an important source
of agricultural produce to the
state. The abolition of the
present system of compulsory-de-
liveries probably does not mean
that future sales of agricultur-
al produce by the collective
farms to the state will be vol-
untary. Plans for the procure-
ment of agricultural produce by
the state are to be drawn up for
republics, krais, oblasts, col-
lective farms, and state farms.
The decision states that the
procurement system must guaran-
tee delivery to the state of the
necessary amounts of agricultur-
al produce.
The collective farms' mone-
tary income probably will in-
crease inasmuch as they are
now able to sell to the govern-
ment produce which was formerly
delivered to the MTS in payment
for services. However, this
probable increase in income will
be partially or wholly offset
by increased expenditures en-
tailed in the purchase, mainte-
nance, and operation of the farm
machinery acquired from the MTS
by the collective farms.
The decision does state
that a further increase in the
income of collective farms must
be based on a sharp increase in
the volume of marketable prod-
uce` and on a reduction in costs.
This increase, it is hoped,
will permit a lowering of
procurement prices, which
would in turn enable the
state to lower retail prices.
(Prepared joint- 25X1
y w
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CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
HARVEST PROSPECTS POOR IN SATELLITES
Bad weather during the
past winter and early spring
will probably preclude fulfill-
ment in Eastern Europe of 1958
crop goals, especially for
small grains, and reduce bread-
grain supplies in the southern
satellites, which were hit hard-
est. Government reserves of
bread grains will have to be
drawn on throughout the satel-
lites for an additional four
to six weeks unless strict con-
trols of bread and flour are
imposed in urban areas. The
Soviet Union will probably a-
gain be obliged to deliver ad-
ditional quantities of grain
on credit to Eastern Europe
this winter. Barring further
bad weather, a near-average
crop of corn, sunflower, and
root plants is still a possi-
bility, as is an average sup-
ply of feed for livestock.
A cold, wet spring retard-
ed growth of autumn-sown grains
and delayed spring planting by
an estimated three to six weeks
in the northern satellites and
Hungary, and by about five
weeks in Albania, Bulgaria, and
Rumania. In the southern sat-
ellites and Slovakia, unfavor-
able weather was followed by
subnormal precipitation and as
a result, yields of autumn-
sown grains are expected to be
somewhat below the average for.the
last five years. In East Ger-
many, Poland, and western
Czechoslovakia, yields should
exceed this average and may
approximate the 1957 level.
Near-drought conditions
existed by the first week of
June in the southern satellites
and Slovakia. At the present
time, despite the onset of
rain, spring-sown grains in
these areas have probably suf-
fered damage sufficient to re-
sult in less-than-average yield
per acre, and only with ideal
distribution and supply of
moisture can the southern sat-
ellites now hope for a harvest
only slightly below average.
A sizable portion of spring-
sown grains in the southern sat-
ellites is expected to be cut
for hay rather than grain, thus
compensating for small yields
in nongrain fodder crops, which
so far are considerably below
the 1957 level. Since pastures
suffer earlier and to a greater
extent than do most crops, how-
ever, continued unfavorable
weather could cut still further
into the supply of feed for
livestock. Production of feed
for livestock in the northern
satellites may approach the
1957 level.
Because they are in an
early stage of growth through-
out the satellites, corn, sugar
beets, potatoes, and sunflower
may suffer less from bad weath-
er, if precipitation in the lat-
ter half of June is more nearly
normal. Because of the hot, dry
weather, however, the danger
from insects has increased.
Certain regions of Hungary and
Rumania already report larger
numbers of potato beetles, and
insects injurious to other crops
as well seem to have multiplied
in the southern satellites. In
Bulgaria, too, peasants are
being exhorted to battle the
pest menace.
The food situation for the
southern satellites in the 1958-
59 consumption year is thus to
be less bright than during 1957-
58,even though good harvests
permitted the governments last
year to accumulate large stores.
A further rise in per capita
intake is unlikely in the south-
ern satellites, since bread re-
mains the main food staple in
these countries and supplies of
high-quality foods such as meat
and dairy products should in no
case surpass normal.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
POLAND SEEKS MORE FREE WORLD ECONOMIC TIES
Polish officials are indi-
cating that despite Khrushchev's
criticism of free world aid,
they want additional assistance
from and expanded economic ties
with the West. Polish authori-
ties have shown renewed interest
in additional US credits, par-
ticularly for the purchase of
American machinery.
that Poland was in-
terested in obtain-
ing credits in order
to import West Ger-
man machinery
'S FOREIGN Tit
1955 1956 1957
IMPORTS EXPORTS IMPORTS EXPORTS IMPORTS EXPORTS
counter Soviet criticism of non-
bloc aid, the Polish press has
pointed out that Poland's expe-
rience with such aid proves it
to be of mutual advantage.
Since the establishment of
the Gomulka regime, Poland has
obtained foreign aid worth $760,-
000,000, 40 percent of which is
from the free world. Most of
this total is for use during the
1957-60 period. About $250,000,-
USSR
313
280
OTHER BLOC
288
285
US
3
27
OTHER FREE
WORLD
328
318
344 270 422 2558
324 303 338 361
4 27 73 30
350 385 418 386
The Krupp firm in
West Germany has just W623.4B
granted a $3,000,000
private loan to Po-
land, and a West German spokes-
man reported that stiff credit
and payment terms on trade with
Poland are being eased.
An agreement to supply the
USSR with at least one half of
its planned machinery exports
for the next three years indi-
cates that Poland is aware that
it can move from its position
of dependence on the USSR only
gradually, but with the help
of foreign credits Poland has
begun to shift a larger share
of its trade to the West. So-
viet and total Sino-Soviet bloc
shares of Poland's trade de-
creased from a maximum in 1954
of 38 percent and 70 percent
respectively to 31 percent and
60 percent in 1957.
In order to prepare the
way for new credits and to
000 was used in 1957 and smaller
amounts are to be drawn in the
next three years. During 1959-60,
repayments largely will cancel
receipts derived from these
loans. Poland's present drive
to obtain new aid probably re-
sults from a desire to ensure a
continued influx of foreign cur-
rency and to ensure Western par-
ticipation in its economic pro-
gram to raise consumption and
establish stockpiles without
curtailing industrial growth.
Poland also is planning to
rehabilitate its agriculture
and coal industry in order to
expand exports, but this will
take several years even with
foreign assistance. To support
a growth in foreign trade in
the meantime, Polish plans call
for an increase in machinery ex-
ports. While such exports would
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CURRENT INTELLIGENCE WEEKLY SUMMARY
tablished marketing
facilities.
LOANS AND CREDITS TO POLAND CS 1
VALUE
SOVIET BLOC 462.3
USSR Z7S.0
EAST GERMANY 100.0
CZECHOSLOVAx1624
~.S
FREE WORLD
US
CANADA
FRANCE
OTHER
297.7
95.0
'.o
40.1
1956.5
1437.55
1957-60
1957-65
1957-58
1958
make the most efficient use of
Poland's machine building indus-
try, they would require a cor-
responding increase in raw ma-
terial imports, and Poland will
meet stiff competition from ma-
chinery exporters in the free
world who already have well-es-
The Poles claim
that they still en-
counter difficulty
trading .with the
United States. It is
possible they will
seek to establish com-
mercial agents in the
United States as part
of "an important plan"
in :regard to trade
with the United States
which.the Polish dep-
uty minister of for-
eign trade has said
was being prepared.
The Poles, in an ef-
fort to reduce their
almost complete de-
pendence on the USSR
for raw materials, are partic-
ipating, widely in trade talks
as part of the Soviet bloc 25X1
economic drive in underde-
veloped areas.
(Prepared'by ORR)
25X1
THE CZECHOSLOVAK PARTY CONGRESS
A full-scale campaign
against the remnants of "bour-
geois ideology" and the "revi-
sionist heresies" that Yugo-
slavia exemplifies was launched
at the 11th Czech party congress
which concluded on 21 June. The
condemnation of the Yugoslavs
by party First Secretary Novot-
ny, only slightly less vitriolic
than that: of Premier Siroky,
promises continued public de-
bate of these issues. The con-
gress endorsed the Soviet line
that the 1948 Cominform resolu-
tion was essentially correct.
The elimination of "bour-
geois ideology" at home was
declared to be of "overriding
importance" in order to enable
Czechoslovakia to become the
second country to "achieve so-
cialism"--a status reached by
the Soviet Union in 1936. Se-
curity forces are to be strength-
ened and "legal" measures against
"class -enemies" are to be
stepped up. The Justice Minis-
try and prosecutor's office are
also to be strengthened, and a
full-scale vigilance campaign,
often a sign of internal inse-
curity, has been launched.
The Czech party took great
pleasure in citing its progress
toward full "socialization" in
the agricultural, industrial,
and governmental fields and set
goals for the rapid conclusion of
this phase within approximately
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CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
two years. Agriculture is now
71.5 percent socialized.
The present economic re-
organization, while ostensibly
intended to grant the masses a
greater voice in production,
is actually designed to reduce
costs. Under it some 9,50C
functionaries have already
been eliminated from central
government organs and another
30,000 functionaries in in-
dustrial administration will
be affected, according to
Novotny. Although the regime
promised to increase living
standards through price cuts,
a contemplated wage revision
for 1,800,000 industrial workers
could have an adverse effect
on morale if work norms are
raised out of proportion to
wage increases.
The USSR, in a 17 June
Moscow broadcast, granted its
blessing to the "achievement
of socialism" by Czechoslovakia
ahead of the other satellites.
After declaring that only the
Soviet Union had thus far a-
chieved a "socialist society,"
POTENTIAL FOR UNREST IN
the broadcast stated that "all
the necessary conditions have
already been created in Czech-
oslovakia...." The Soviet del-
egate to the Czech congress,
Kirichenko, strongly hinted in
his congratulatory speech that
Czechoslovakia had won this
honor over its nearest competitor,
Bulgaria, in order to show that
Communism can succeed in an in-
dustrially advanced country just
as well as in a "backward" nation.
The congress ostentatiously
spoke of solidarity with the
Soviet party,but the apparently
smooth relations between this
model satellite and the USSR
may be marred by Prague's dis-
satisfaction with its proposed
new CEMA assignment. This is
reported to call for a reduction
in consumer goods production
under plans for increased spe-
cialization and division of
labor among bloc countries.
Novotny is reported to have
claimed this program would low-
er living standards and create
political difficulties by in- 25X1
nomic reorganization.
creasing the dissatisfaction
already engendered by the eco-
EAST GERMANY INCREASING
Government action in re-
cent months has increased the
dissatisfaction of the East
German people with the regime.
Growing resentment is evidenced
by an outspoken antiregime
attitude among workers, farmers,
independent craftsmen, business-
men, students, intellectuals,
and the Evangelical Church.
Increasingly stringent security
measures have been put into ef-
fect to forestall overt demon-
strations, but an eruption of
unrest in Poland might spread
to East Germany despite these
precautions.
Major factors contributing
to the growth of discontent
have been the pressure on the
workers to increase their out-
put for little if any reward
and the intensified drive to
force private farmers and crafts-
men into state-dominated co-
operatives. Party officials
who are conducting political
rallies and urging "socialist
competitions" in preparation
for the Fifth Socialist Unity
(Communist) party (SED) congress
in July have met with worker
hostility. Workers reportedly
are threatening the lives of
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CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
party functionaries, spreading
"work slow" mottoes, advocating
the liquidation of the Communist
dictatorship, and opposing serv-
ice in the auxiliary factory
militia.
Private farmers are es-
pecially bitter over the dis-
crimination shown against them
in the allocation of seed and
fertilizer and the services of
the machine tractor stations
and over the constant harass-
ment by party and government
functionaries. Farmers are
using every conceivable pretext
to justify their refusal to
join the "socialized sector"
of agriculture.
The discrimination shown
against independent craftsmen
has resulted in a steep drop
in income for many of them,
forcing some into bankruptcy,
and leaving them little choice
but to join the production co-
operatives.
The fixing of higher
prices for food following the
derationing decree of 1 May
has also contributed to the un-
rest. The decree itself has
been followed by additional
travel restrictions, and by ru-
mors of another currency con-
version and imminent redocumen-
tation of all East German citi-
zens.
Strictures leveled against
the Evangelical Church, the only
remaining all-German organiza-
tion, have given the people ad-
ditional grounds for resentment.
The government's withdrawal of
recognition of the church on
19 May may foreshadow an attempt
to create a church in East Ger-
many dominated by the Pankow
regime. Pressures on pastors
and church members to support
such a church would be strongly
resisted.
A major ideological drive
now under way in East German
universities has the objective
of achieving "the socialist
transformation" of institutions
of higher learning. Individuals
are being singled out and ac-
cused of "improper attitudes."
Failure to recant and conform
to regime directives has result-
ed in the loss of posts for fac-
ulty members, expulsion of stu-
dents, and even imprisonment for
some individuals. As a result
of these pressures, there has
been a significant increase in
the number of scientists, stu-
dents, and professional peo-
ple fleeing to West Germany.
GRRM
Prepared jointly with 25X1
PEIPING'S CAMPAIGN AGAINST DOMESTIC REVISIONISM
Communist China's present
"thought-reform" campaign, which
is being implemented in conjunc-
tion with its attacks on Yugo-
slav heresies, is giving spe-
cial attention to Mao Tse-tung
as a theorist. The Chinese
Communists are attempting, in
Mao's recent words, to "write
the newest and most beautiful
words" of Marxism-Leninism on
a "clean sheet of white paper"
--his metaphor for the minds
of the Chinese populace.
Peiping's need for continuing
the steady diet of orthodoxy
as part of the "rectification"
drive suggests that party lead-
ers are faced with a greater
degree of political unreliabil-
ity among the populace than
they had foreseen.
As part of the indoctrina-
tion campaign, the party central
committee has inaugurated a
theoretical organ, Red Flamm,
and most of the provincia and
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CURRENT INTELLIGENCE WEEKLY SUMMARY
municipal party committees have
announced plans to publish theo-
retical journals. The purpose
of these publications is to re-
flect current "theoretical and
practical" problems, combat
"revisionism," criticize "bour-
geois viewpoints," and play up
the regime's cultural achieve-
ments.
The regime also plans to
train political and theoretical
cadres. Hunan Province, with
1,200 full-time theoretical
workers, intends to double that
number in the next five years.
To emphasize the importance
Peiping attaches to these ef-
forts, leading party officials
--including two politburo mem-
bers--have been assigned to
teaching posts in local univer-
sities.
As the key element in Pei-
ping's increased emphasis on
orthodoxy, Mao Tse-tung's pres-
tige and works have received
special attention this spring.
The bolstering of Mao's person-
al prestige reached a peak at
the recent party congress,
where he was credited with
originating the general guide-
lines for Chinese development
during the "transition to so-
cialism." He was further cred-
ited with formulating the
guiding principles of the "rec-
tification" campaign, and the
economic goal of catching up
with Britain in 15 years. This
attention to Mao is apparently
to restore some of the prestige
he lost as a result of the
failure last year of his
"hundred flowers" thesis and
the criticism of "rightists."
Peiping seems anxious to
counter speculation that Mao,
who in 1957 tampered with
Leninist practices of party
control, has any ideological af-
finity with the Yugoslav lead-
ers. The first two issues of
Red Flag in June contained sev-
eral ar icles by politburo al-
ternates attacking Yugoslav
rejection of the concepts
of the Communist party power
monopoly, class struggle, and
strong state control of all
activities. In praising Mao
for his "creative develop-
ment" of the "theory of
state," politburo alternate
Wang Chia-hsiang was careful
to stress that Mao was not
deviating from accepted Leninist
doctrine.
The Chinese Communist lead-
ers, seeing a long road ahead
in their efforts to humble op-
ponents of orthodox doctrine
and to indoctrinate lukewarm
supporters, are planning period-
ic "rectification" drives. Any-
thing other than a "hard" line
toward deviationists in the
bloc would be incompatible with
this zealous domestic emphasis
on conformity. Chinese Commu-
nist propagandists are expected
to continue their attacks on
Yugoslav heresies and to prod
the Poles into an acceptance of
Soviet leadership in the politi-
cal and ideological fields.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
FRENCH POLITICAL OUTLOOK
De Gaulle's first official
contacts with NATO leaders have
confirmed his support for the
West's major defense aims, but
there is growing speculation
that he may demonstrate a more
independent policy on relations
with Communist China and other
bloc countries. Meanwhile, do-
mestic opposition is coalescing
and extremists on both left
and right are preparing to at-
tack his Algerian and constitu-
tional reform proposals.
There is wide speculation
on De Gaulle's attitude toward
various bloc countries. The
Foreign Ministry has denied
recent press rumors that dip-
lomatic recognition of Peiping
is 'imminent, but admits ex-
panded economic contacts are
under consideration. De Gaulle
is reported to have left
the door open on an offer of
credits for raw materials
from Soviet Ambassador Vino-
gradov. A Foreign Ministry
spokesman has said the premier
is toying with the idea of
a European defense plan which
would "help the Poles."
Further clarification of
his North African program is
expected to result from his
visit to Algeria on 2-4 July.
The Tunisian agreement on
troop withdrawals gives him
a respite, and he plans to
meet Moroccan King Mohamed V
in August. Steps to mollify
Moslem opinion will inten-
sify extremist settler re-
actions, however, and many
of the leaders prominent in
the disturbances which brought
him to power are seeking
to organize a strong rightist
movement to oppose any mod-
erate solution. Pierre Pou-
jade is supporting the move-
ment General Chassin is trying
to organize.
Pierre Mendes-France is
reported organizing a "labor
rally" to include the So-
cialist party's left wing
and the Mitterrand group with
his own Radical elements in a
"constructive opposition to
De Gaulle." Claude Bourdet,
editor of the left-wing France-
Observateur, is actively promot-
ing a broad-based Socialist
party. The left wing of the
Socialist party is trying
to build up action groups in
each party unit with the ob-
jective of disavowing Guy
Mollet. All these groups
are potential objects of Com-
munist exploitation and run
the risk of Communist domi-
nation.
Regardless of the policies
De Gaulle eventually proposes
on Algeria, and on constitution-
al reform, opposition from both
extremes will foment discontent.
FRANCE'S FINANCIAL SITUATION
The early response to Fi- Payments Union (EPU) deficit
nance Minister Pinay's mid-June mark at least atemporary
internal gold loan and a sharp halt to last month's speculative
reduction in the June European pressure on the franc. Pinay,
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however, has apparently not yet
been able to attract French
holdings abroad. More economic
adjustments, possibly:with, further
devaluation of the franc, will
be required if France is to
compete effectively in foreign
trade and regain international
financial confidence.
During the first four days
of the 3.5-percent tax-exempt
gold loan, the government took
in $43,000,000 of hoarded gold
as compared with total receipts
of only $34,000,000 from Pinay's
successful gold loan of 1952.
The total of about $100,000,000
subscribed in the four-day
period also represents a high-
er rate than the 1952 loan.
The head of the Treasury has in-
dicated that he would consider
the loan a success if it yielded
$250,000,000 by mid-July, when
it is expected to be closed.
France's deficit in the EPU
is reported at only $25,000,000
by 21 June, in contrast with one
of $115,000,000 during May, and
even this deficit will be large-
ly offset by a surplus with the
dollar area this month. Last
month's strong pressure on the
franc, for which the free market
quotation was about 465, was
accompanied by speculative trans-
fers of funds out of France,
with $50,000,000 in foreign ex-
change flowing to West Germany
alone. The franc recovered
sharply with the accession of
De Gaulle and has since been
quoted in the 430's, as compared
with the official rate of 420.
No further flight of funds is
indicated.
The government succeeded
in maintaining a surplus of re-
ceipts over expenditures through
May in contrast with a $400,-
000,!000 deficit during the same
period in 1957. A deficit can
be expected to recur in a few
months. The 19 June authori-
zation of appropriations for
the Algerian campaign far ex-
ceeds military expenditures
agreed on earlier this year in
negotiating the $655,000,000
emergency loan from the Inter-
national Monetary Fund, the EPU,
and the United States Government.
The total budget deficit may be
forced above the agreed ceiling.
In addition to the prospec-
tive budget deficit, an accumula-
tion of unsatisfied wage demands
in the nationalized industries
also poses a threat of reinvig-
orating inflationary pressures.
These pressures, which have only
very recently shown some tendency
to abate, in line with the gen-
eral recession in the West, have
been largely responsible for
France's adverse trade-and-
payments balance during the
past two years. Any major re-
surgence, would; - cut short the
financial breathing spell now
available to France for placing
its economic affairs in order.
Another step toward for-
mation of a Maghrebian (North
African) federation was taken
at the tripartite conference
of Moroccan, Tunisian, and
Algerian political leaders in
Tunis from 17 to 20 June which
was held concurrently with
Moroccan-Tunisian governmental
discussions. The conference
served to increase the formal
ties between the participants
and to coordinate more closely
their policies toward France.
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As a result, the independent
states of Morocco and Tunisia
now are committed more clearly
than before to support the Al-
gerian National Liberation Front
(FLN) in its fight for independ-
ence. At the same time.. Moroc-
co and Tunisia hope they can
hold the FLN in line and serve
as intermediaries if France
should be willing to negotiate
with the FLN.
In a final communiqud, the
conferees rejected De Gaulle's
policy of integrating Algeria
with metropolitan France and
again proclaimed the right of
the Algerian people to sover-
eignty and independence. Their
decision to proceed with the
formation of a 30-member "pro-
visional consultative assembly"
for North Africa--implementing
a recommendation of the Tangier
conference held late in April--
promises to enhance the FLN's
status. Although the conference
side-stepped the inflammatory
issue of an Algerian government-
in-exile, the FLN's executive
committee seems to have reorgan-
ized itself as a quasi-govern-
mental body under the nominal
leadership of moderate Algerian
spokesman Ferhat Abbas.
The presence of FLN dele-
gates in Tunis seems not to have
hindered conclusion on 17 June
of an agreement providing for
the evacuation of some 9,000
French troops from Tunisia. How-
ever, Tunis' outright support
for Algerian independence prob-
ably will continue to compli-
cate its relations with France,
particularly the negotiations
scheduled to begin by this fall
for a new status for Bizerte.
Morocco's support for Al-
gerian independence may also
make more difficult the Moroc-
can-French negotiations now un-
der way regarding the evacuation
of most of the 30,000 French
ground troops still in Morocco
and the retention of some French
training bases. France may re-
duce its demand for such bases
from 18 to six or eight, but
seems likely to insist on the
retention of the base at Oujda
on the Algerian border. This
is one of the locations which
Morocco on 20 May wanted evacu-
ated immediately.
COMMUNIST GAINS IN GUATEMALA
The Guatemalan Communists
now are more active than at any
time since the Arbenz regime
was ousted four years ago. Pres-
ident Ydigoras, who has been
notably complacent toward the
Communists in the nearly four
months since he took office,
now seems preparing to act
against them. The President,
however, appears to feel more
immediately threatened by right-
ist plotting, and his moves
against the Communists may be
made more to satisfy his anti-
Communist critics, both at home
and abroad, than to cope with
the Communist problem.
Communists have been re-
turning from exile at an ever
increasing rate since the as-
sassination of President Castillo
Armas last July. The political
disturbances in October and the
markedly increased toleration
of leftist political activity
that, followed have permitted
them to operate in an environ-
ment of relative freedom. The
Communists now strongly influ-
ence and perhaps control some
leading labor unions, are ac-
tive in student and intellec-
tual groups, and have infiltrated
the leftist Revolutionary party
(PR), probably the country's
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strongest political party. Anti-
Communist PR leaders have ex-
pelled a few Communists, but
e new R ea ers ip
which emerges from the party
convention which began on 25
June could be pro-Communist.
Two recent events are in-
dicative of the current high
degree of confidence felt by
the Communists. In early June,
the party instructed all but
the four most prominent members
still in exile to return, clan-
destinely if necessary, by 30
July. In mid-June, a leading
Communist gave an arrogant press
interview after he had slipped
back into the country immediate-
ly after having been expelled
by the police. He said he re-.
gretted being the first Guate-
malan deported under Ydigoras
and hoped the President would
punish those guilty of this of-
fense.
Disillusionment with the
President is mounting among
anti-Communist Guatemalans, Who
had expected him resolutely to
goras may now realize that he
must quickly take some action
to restore confidence in his
government.
Adolfo Lopez Mateos, cer-
tain winner in Mexico's presi-
dential elections on 6 July,
may have difficulty in carrying
on the moderate policies of the
present Ruiz Cortines adminis-
tration under which Mexico con-
tinues to enjoy a political
stability and balanced economic
development rare in Latin Amer-
ica. Leftist influence in the
labor movement, an important
component of the governing Par-
ty of Revolutionary Institutions
(PRI), appears to be exploiting
the growing conviction of work-
ers that PRI domination has
helped deprive them of a fair
share in Mexico's rapid econom-
ic growth.
The PRI has run Mexico for
30 years through a highly cen-
tralized organization. Its pol-
icy of favoring groups consid-
ered most capable of advancing
the country's welfare at a giv-
en time while managing to pla-
cate less favored groups has
provided a political unity Mex-
ico sorely needed. At present,
however, the workers say their
union leaders, who are also par-
ty leaders, have gone too far
in accepting the government's
encouragement of investment
while keeping wages low to fight
inflation.
Recent widespread strikes
by telegraphers' and teachers'
groups, which repudiated their
union heads to follow leftist
dissident leaders, resulted in
substantial wage increases and
have influenced other unions.
Unemployment in farming areas
of northern Mexico is high this
year as a result of a sharp
decrease in US hiring of
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CURRENT INTELLIGENCE WEEKLY SUMMARY
agricultural workers. The pro-
Communist Popular party (PP)
has organized mobs of squatters
to occupy private farmlands to
dramatize demands for agrarian
reform, and the government again
made concessions.
Marxist-led electricians
negotiating for higher wages
are meeting with very little
opposition in efforts to organ-
ize a national labor federation
in competition with the govern-
ment-sponsored Labor Unity Bloc.
Their traditional demand for
nationalization of their indus-
try may have influenced a re-
cent miners' convention recom-
mendation for nationalization
of the important mining indus-
try to alleviate the unemploy-
ment caused by the drop in
world prices of metals.
About 75 percent of Mexico's
trade is with the US and its
usual unfavorable trade balance
is offset by US tourist spending.
If the effects of the US economic
recession become more pronounced
in Mexico, the pressure will be
strong on Lopez Mateos to seek
the advice of ex-President La-
zaro Cardenas, who remains a
strong political force and leads
the nationalistic left wing of
the PRI. Cardenas is considered
the leading proponent of the
still respected labor, agrarian,
and social reforms of Mexico's
1910 revolution, and his intense
nationalism has previously been
used to advantage by Communists.
25X1
GOVERNMENT CRISIS IN EAST PAKISTAN
The resignation of two
successive governments in East
Pakistan Province between 18
and 23 June led President Mirza
on 25 June to take over the
provincial administration under
President's Rule. These de-
velopments will facilitate
Mirza's efforts to realign the
national government coalition
so as to increase his control
of the government.
The 21-month-old Awami
League government in East Paki-
stan was defeated on 18 June
in a vote of confidence, follow-
ing weeks of opposition effort
to undermine the government's
majority. A new coalition of
all groups opposing the Awami
League was toppled on 23 June
after only four days in office.
The leftist National Awami party
(NAP) appears to hold the bal-
ance of power in the provincial
assembly. After helping to
bring about the fall of the
Awami League government on 18
June by withdrawing its support,
the NAP later reversed its
stand and on 23 June voted with
the Awami League to defeat the
newly installed government.
The defeat of the Awami
League weakened the national
position of the party's leader,
former Prime Minister Suhrawardy.
Since he provides the chief sup-
port of the present national
government coalition led by
Prime Minister Noon, the devel-
opmentsin East Pakistan are
likely to promote Mirza's ef-
forts to eliminate Suhrawardy's
influence by replacing Noon's
coalition with one more amena-
ble to his control.
Increased instability would
probably force postponement of
the national elections scheduled
for November and encourage Mirza
to carry out his threat to dis-
pense with parliamentary gov-
ernment altogether and impose a
dictatorial regime in Pakistan.
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The Indonesian cabinet re-
shuffle announced on 25 June by
President Sukarno falls short
of the antileftist changes de-
sired by the army and earlier
hinted by government officials
and Sukarno himself. The pro-
Communist A. M. Hanafi appears
to have been demoted, however,
from his post as minister for
manpower mobilization to minis-
ter without portfolio, and the
army now has a representative
in the cabinet, Colonel Supra-
jogi, as minister for stabiliza-
tion of economic affairs.
PRINCIPAL ECONOMIC ASSETS OF SUMATRA
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SECRET
A Refinery
^ PalmOil
? Tobacco
aft Oilfield
Q Rubber
Q Tin
Pipeline +-~ Railroad Road
0 Miles 2U
NOTES AND COMMENTS
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Cabinet changes involve
the abolition of two ministries
but the retention of their in-
cumbents in other posts and the
addition of`three new ministries.
Only one man was dropped from
the cabinet--Sunardj o of the
Nahdlatul Ulama, who had been
minister of trade and charged
with corruption. The army had
demanded his removal.
Four new names have been
added. Two are members of the
non-Communist Nahdlatul Ulama,
an indication that this party's
prestige is growing in the eyes
of President Sukarno. A third
is Mohammed Yamin, who has been
appointed minister without port-
folio. Yamin is anti-Western,
has been in and out of a number
of parties including Murba, the
"national Communist" party, and
has recently joined a small na-
tionalist party. He was prob-
ably included to balance the
appointment of the fourth new-
comer, Colonel Suprajogi. The
principal gainer in the shake-up
seems to be Sukarno, who appears
to have increased his influence
in a cabinet already responsive
to his demands.
Sukarno has announced that
the first job of the reshuffled
cabinet is to establish a na-
tional planning board to super-
vise the nation's economy--a
feature of the President's pro-
gram of "guided democracy." A
preparatory committee consist-
ing of five cabinet ministers
is to be formed to work on the
problem and reportedly will in-
clude both Hanafi and Yamin.
The government announced
on 26 June that the dissident
capital of Menado in North Cele-
bes had fallen. The dissidents
there had been reported in a
critical situation for several
days. In Sumatra
guerrilla harassment of
government forces and attacks
on foreign rubber estates are
continuin .
BURMESE POLITICAL FERMENT CONTINUES
Burmese Premier Nu's coa- i status in return for a cessation
lition government, which depends
on the Communist-dominated Na-
tional Unity Front (NUF) for
its majority, is so unstable
that he is expected to dissolve
Parliament and call for new
elections by October at the lat-
est. The insurgent Burma Com-
munist party, with which Nu is
reported negotiating, has taken
advantage of the government's
instability to demand legal
of hostilities. The NUF is re-
ported seeking three cabinet
ministries in Nu's government.
Burmese politicians, cer-
tain that the premier will call
for elections, have already
started intensive campaigning
within their districts. To
stake firm claim to the party
label of the Anti-Fascist Peo-
ple's Freedom League, the Ba
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CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
Swe - Kyaw Nyein faction has
unilaterally "dissolved" the
AFPFL executive committee, oust-
ing Nu as president, and has
elected one of its own members
as AFPFL president.
In the districts outside Rangoon,
Nu's followers are reported at-
tempting to recruit locally re-
spected retired police and civil
service officials to stand for
Parliament on his ticket.
Both government and army
officials are continuing their
efforts to avert violence in
the political controversy. The
Home Ministry has ordered dis-
trict police officials to pro-
vide each member of Parliament
with a 24-hour, two-man, armed
bodyguard. In addition, police
officials are required to take
immediate action following any
information of planned violence
--"no matter how unlikely the
information may appear to be.,,
The status of the persons in-
volved is not to affect this
order, and four members of Par-
liament have already been brief-
ly detained. Most recently the
Home Ministry has started the
demobilization of the politically
oriented home guard in an ef-
fort to limit armed violence
between the government and op-
position factions.
Army commander Ne Win, de-
termined to maintain the armed
services' prestige and reputa-
tion for political neutrality,
has advanced the date of the
annual Burma Armed Forces Com-
manding Officers' Conference
from September to 23 June and
has insisted on nonparticipation
of officers in politics. Po-
litically inclined officers,
such as Colonel Aung Gyi, a
Socialist and deputy army
chief, will probably be forced
to choose between military
and political careers.
SOUTH VIETNAMESE - CAMBODIAN BORDER DIFFICULTIES
Phnom Penh's accusation
that South Vietnamese troops
have invaded Cambodian terri-
tory, occupying several villages
in the northeast, climaxes a
series of increasingly bitter
border incidents between the
two countries. Cambodian lead-
ers have appealed for American
intervention in Saigon to se-
cure the prompt withdrawal of
the Vietnamese forces, and may
seek Sino-Soviet bloc support
if this proves ineffectual.
Saigon denies any violation of
the poorly defined and disputed
common frontier by its army.
Cambodia's charges against
South Vietnam were aired in a
nationwide radio appeal on 25
June to all Cambodians to "ral-
ly to the defense of their na-
tion." The alleged Vietnamese
incursion is in the same general
region where a border encroach-
ment by Cambodian forces earlier
this month had been reported by
Saigon. The remoteness of the
area, poor communications, and
the vaguely defined boundary
have given rise to exaggerated
reports in Saigon and Phnom Penh
which have heightened tension
in both capitals.
Cambodians have a strong
fear of a Vietnamese invasion,
and are unlikely to handle this
dispute objectively. Although
Cambodia's widely scattered
army of roughly 30,000 is
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CURRENT INTELLIGENCE WEEKLY SUMMARY
completely outclassed
by South Vietnam's
approximately 150,-
000 well-organized
armed forces, the
Cambodians are fierce-
ly patriotic. With
both parties to the
dispute adopting a
self-righteous atti-
tude, there is a dan-
ger that a series of
border aff rays may
develop.
The major dan-
ger in this situa-
tion, however, is
that Cambodia may
enter into diplomatic
relations with Com-
munist China in order
to secure Peiping's
support. Cambodian leaders are
inclined to feel that the West
will not support neutralist Cam-
bodia in its dispute with anti-
Communist Vietnam, and have
hinted broadly on recent occa-
sions at such a development.
Cambodian Prime Minister Sim
Var stated on 25 June that Cam-
bodia will turn to "other friend-
ly powers" if its appeal for
American support is unavailing.
Peiping, which already has a
large economic mission stationed
in Phnom Penh, has been anxious
to enter into political rela-
tions as well, but Cambodia pre-
viously has avoided a diplomatic
exchange because of fear of in-
creased Communist subversion.
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?' r-
COUFI' ENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
PATTERNS AND PERSPECTIVES
ECONOMIC CONDITIONS IN IRAN
Iran has made a relatively
good financial recovery since the
oil nationalization crisis of
1951-1953 plunged it into near
bankruptcy. Over 80 percent of
the Iranian people continue to
live in extreme poverty and see
little prospect of personal ben-
efit from the government's eco-
nomic plans. The per capita
gross national product is esti-
mated to be only slightly over
$100. The living standard of
the average Iranian is unlikely
to be raised as long as the
present feudal landowning sys-
tem is maintained.
The Oil Industry
Although Iran has consid-
erable resources aside from its
oil, the economy depends almost
completely on its oil revenues
for funds, not only for devel-
opment but for day-to-day gov-
ernment operations. Until re-
cently, the oil industry was
almost a complete monopoly of
the Consortium--a group of 17
Western companies formed to ex-
tract, process, and market
Iran's oil as part of the set-
tlement of the nationalization
crisis df 1953. Recently, how-
ever, an Italian government-
controlled firm secured a choice
concession in the Persian Gulf
by promising 75 percent of the
profit to Tehran. Following
the Italian lead, the Pan Amer-
ican Petroleum Corporation, a
wholly owned subsidiary of
Standard Oil Company (Indiana),
signed a similar profit-sharing
agreement for an offshore con-
cession opposite the prolific
Kuwait fields.
Although oil production
did not regain the precrisis
level until 1957, the incor-
poration of the 50/50 profit-
sharing principle in the set-
tlement caused a dramatic rise
in oil revenues. Crude oil
production averaged 725,000 bar-
rels a day last year, compared
with 660,000 barrels a day in
1950, about a 10 percent in-
crease. Oil revenues, however,
were markedly higher. In 1950,
the last full year before the
oil shutdown, Iranian oil rev-
enues amounted to almost $45,000,-
000; in 1957 revenues had in-
creased to about $230,000,000.
Prospects for rapid expan-
sion of Iran's oil production
are quite good, despite a gen-
eral world oversupply of oil,
since the Consortium provides
a wide marketing base for Irani-
an crude. Iran's output last
year increased at a much sharper
rate than in the rest of the
Middle East, and will probably
do so again in 1958. It will
probably be some time, however,
before the new companies on the
scene begin to make a substan-
tial contribution to Iranian
economic progress.
Agriculture and Industry
Aside from the oil indus-
try, agriculture is the main-
stay of Iran's economy. Last
year the value of agricultural
output probably approached $1
billion, largely as a result of
a 9-percent increase in produc-
tion over 1956. Despite its
importance, agriculture is
primitive, wasteful, poorly man-
aged, and dominated by absentee
landowners. These politically
powerful landowners control over
60 percent of the farm land and
thus far have avoided undertak-
ing even the relatively mild re-
form measures suggested by the
throne. In addition, invest-
ment funds allocated to agricul-
ture by the economic plan author-
ities have totaled only about
12 percent of plan investments--
a disproportionate amount in
view of the fact that agriculture
provides a livelihood for about
75 percent of the population.
CONFIDENTIAL
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Except for the Western-
owned petroleum industry, which
employs about 40 percent of the
industrial labor force, indus-
trial enterprises are small and
inefficient by Western standards.
Iranian industry--which supplies
about 60 percent of domestic
cement and glass requirements,
25 percent of sugar, and 38 per-
cent of cotton cloth--employs
only about 70,000 workers.
Economic Development
Economic development in
Iran is dominated by the Plan
Organization, which spent about
$153,000,000.1ast year. The
master development plan--the so-
called Seven-Year Development
Plan which ends in September
1962--scheduled investments of
over $1 billion. This organiza-
tion has been subjected to con-
tinuing criticism
both in and out of
the government. While
some criticism has
been deserved, a good
deal can be attributed
to the organization's
poor public relations
proved with the awarding of con-
struction and planning contracts
to American, Italian, and French
firms.
As a result of growing cen-
tral budget deficits, the gov-
ernment recently reduced the
share of oil revenues allocated
to the Plan Organization. While
this caused some concern, it is
not likely to result in any
serious curtailing of the sched-
uled projects, since plan author-
ities are resorting to foreign
borrowing.
Finance
Iran's over-all financial
situation is sound. Foreign
exchange reserves reached an all-
time high of about $150,000,000
in April,compared with $113,000,-
000 before the crisis and a low
I RAN
SEVEN-YEAR DEVELOPMENT PLAN 1956-1962
ALLOCATION OF INVESTMENT
HEALTH &
EDUCATION
COMMUNICATIONS
like for its appar-
ently competent chief,
Abdol Hassan Ebtehaj,
on the part of most
Iranian politicians,
who block his plans
at every opportunity.
The bulk of the
planned investment
is in transportation,
communications, and
irrigation projects.
While this type of
investment is a pre-
requisite to further
development, con-
struction often takes
place far from cen-
ters of population
and gives rise to the
popular belief--in
part probably correct
--that some develop-
ment funds find their
way into the pockets
of officials. Late-
ly, however, public
relations have im-
TOTAL $1,072,400,000
POPULATION DISTRIBUTION BY
ECONOMIC SECTOR
(ESTIMATED)
75%
14,250,000
TOTAL 19,000,000
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of $58,000,000 in 1952. Total
foreign assets of the national
bank were about 400 percent
higher in April than at the end
of 1956. While the money sup-
ply continues to increase, gains
are modest and in line with
other developments.
The central budget this
year was faced with the possi-
bility of a substantial deficit
prior to the reapportioning of
oil revenues. The deficit was
caused chiefly by the sizable
increase voted for government
and military salaries and an in-
crease--not including the mili-
tary pay increases--of 37 per-
cent in the defense budget.
Prior to the reallocation of oil
revenues, the central budget was
to receive 5 percent of "sched-
uled oil revenues." Under the
IRAN: MONETARY INDICATORS
(MILLION DOLLARS)
oil is moved to markets entirely
by way of the Persian Gulf rath-
er than by pipelines, and the
Iranians are largely indifferent
to Arab causes, especially when
money is involved.
Arab appeals on the basis
of religion or Arab unity usual-
ly leave Tehran's policy unaf-
fected. Iranians have no racial
or linguistic affinities with
the Arabs. Iran sells oil to
Israel despite Arab protests.
Proud of their history and the
high cultural level reached in
ancient times, Iranians consider
themselves superior to the Arabs,
whom they regard as semicultured
tribesmen.
Tehran is also indifferent
to the Arab League economic boy-
cott of Western firms dealing
with Israel. Iran,
- -MONEY SUPPLY - - CLAIMS ON PRIVATE SECTORS
400
300 - - -
2 3 4
1956
2 3
1957
new allocation, and assuming a
substantial increase in oil
production, the government prob-
ably will receive almost $110,-
000,000, about a 65-percent in-
crease over the last fiscal year.
Iran is following a mildly
inflationary path, a concomitant
of almost any development pro-
gram. As long as the country's
liberal import policy prevails,
inflation probably will not
reach serious proportions.
The Iranians actually prof-
ited from the economic disloca-
tion in the Middle East caused
by the Suez crisis. Iranian
4 1 2
'1958
for example, is nego-
tiating for the con-
struction of a jeep 25X1
assembly plant, despite
the fact that the Arabs
refuse to buy jeeps
because some of them
are assembled in Israel.
Numerous Western
vessels which are
banned from Arab ports
for dealing with Israel
ply freely between
Iranian and free world
ports.
Prospects
Although Iran has made sub-
stantial progress in achieving
financial stability, it has made
little progress in solving its
major economic problem--wide-
spread poverty and illiteracy.
Even the ambitious development
program, if fully and honest-
ly implemented, would not
produce a meaningful rise in
the standard of living of
the bulk of the population.
Before any real economic
progress could be made in
this field the dominant po-
litical power of the landed
aristocracy would have to be
broken.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
South Vietnam, nearing its
fourth anniversary as an inde-
pendent state, has made remark-
able strides since the July 1954
armistice, when it was threat-
ened by an early take-over by
Hanoi. Today's surface tran-
quility, however, belies South
Vietnam's continuing struggle
for long-range survival and for
eventual unification of Vietnam
under non-Communist rule. The
acceleration of Communist ter-
rorism in South Vietnam during
the past year, together with a
more aggressive and imaginative
propaganda offensive on the part
of Hanoi, attests to the intens-
ity of this struggle.
Internal Security
Saigon had achieved a high
degree of nationwide stability
by early 1957, but the security
situation in the rural areas of
the delta region and in the
western provinces bordering on
Cambodia has deteriorated. In
addition, there was an anti-Amer-
ican terrorist incident in Sai-
gon last October, when Commu-
nist bombs wounded 13 American
MAAG personnel. Despite tight-
ened security measures, there
is a real threat of further vio-
lence against Americans in view
of the Communist objective of
impairing American support of
the Diem regime.
The resurgence of Communist
terrorism has been marked by the
assassination of provincial of-
ficials and central government
representatives at the village
level. This coincides with in-
tensified efforts by the Commu-
nist underground to gain the
support of entire villages--
either by persuasion or by
threats. There are indications
that these efforts are meeting
with some success in the more
isolated areas. The renewed
security threat has reinforced
the Diem government's determi-
nation to place primary emphasis
on strengthening its military
and paramilitary forces at the
expense of basic economic and
sociological progress. This low
priority for economic matters
constitutes the real danger to
stability over the long run.
A major breakthrough in
Saigon's efforts to improve rural
security occurred in May with
the rallying to the government
of some 1,200 dissidents of the
Hoa Hao sect, the last signifi-
cant force of indigenous rebel
groups whose combined private
armies once threatened the Sai-
gon regime. The remaining few
hundred native dissidents are
widely scattered and are con-
sidered under Communist control.
Actual Communist underground mil-
itary strength in believed to
be 2,100, with a larger number
of political agents and sympa-
thizers. Since 1954, the Commu-
nists have sought to perpetuate
local armed revolt against the
Diem government to further their
own terrorist activities, which
run counter to Hanoi's public
espousal of the Geneva armistice.
Relations With Neighbors
The surrender of the Hoa
Hao force should also help to
improve the chronically poor re-
lations between South Vietnam
and Cambodia, as this dissident
band formerly had operated on
both sides of the frontier. In
instances where Vietnamese troops
have crossed the border in pur-
suit of dissident elements seek-
ing refuge in Cambodian terri-
tory, armed clashes with Cam-
bodian forces often resulted.
South Vietnamese - Cambodian
hostility stems from traditional
animosity between the two races
and from the divergent political
policies of the present-day re-
gimes. The recurrent border in-
cidents have frustrated sporadic
efforts to achieve a modus vi-
vendi.
Saigon, concerned over grow-
ing Communist' influence in
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Cambodia, has vacillated between
conciliation and toughness in
attempting to influence the
Phnom Penh regime. The hard ap-
proach has been particularly
unavailing and risks driving
Cambodia closer to North Viet-
nam and Communist China.
The Diem government is also
alarmed at the recent Communist
electoral gains in Laos. It
fears a leftist-oriented re-
gime will eventually emerge in
Vientiane which will facilitate
Communist infiltration across
Vietnam's remote and hard-to-
defend frontier. The contem-
plation of being isolated as
the only militantly anti-Commu-
nist state on the Indochina
peninsula is disturbing to Sai-
gon. South Vietnam is taking
direct action through its dip-
lomatic mission in Vientiane to
support the merger of Laotian
conservative forces against the
Communist political threat. In
addition, the two governments
recently exchanged preliminary
ideas for closer trade relations
and improved communications.
Military Strength
South Vietnam's military
capability to face the threat
of external Communist aggression
continues to show steady im-
provement under MAAG training.
The army of some 137,000 men is
considered firmly loyal to Pres-
ident Diem and continues to be
the government's main pillar of
support. Together with less
developed air and naval forces
numbering about 4,000 and 5,000
men, respectively, South Viet-
nam's army is capable of initial
limited resistance in the event
of overt aggression from North
Vietnam. Steps are also being
taken to streamline and increase
the effectiveness of two major
paramilitary forces--the Civil
Guard and Self-Defense Corps,
each with about 50,000 men.
In contrast to its military
strength, South Vietnam's econ-
omy continues to be precarious.
Agriculture, the nation's eco-
nomic mainstay, is recovering
slowly from wartime ravages.
A limited start has been made
in industrial development, but
prerequisite foreign capital re-
mains wary of the Diem govern-
ment's suspicious attitude to-
ward private investment. The
government's predilection toward
strict controls and its ultra-
conservative financial policies
have aggravated deflationary
tendencies in the economy. Com-
mercial activity is generally
slow at present, and growing un-
employment is a problem. In re-
sponse to heavy pressure from
business and labor circles, how-
ever, the government recently
has taken a few cautions steps
toward easing the situation.
American aid still accounts
for about 85 percent of Vietnam's
imports and more than two thirds
of its budgetary revenues. In
1957, however, a sizable budget
surplus was realized by stringent
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CURRENT INTELLIGENCE WEEKLY SUMMARY
budgetary controls and imposi-
tion of new taxes. Vietnamese
exports last year, moreover,
earned nearly $60,000,000 in
foreign exchange, compared with
only $34,OOQ,000-. in 1956.
Greater economic progress has
been hampered by the Vietnamese
leaders' lack of experience in
this field as well as by their
primary interest in political
and military matters.
Diem's Leadership
In one sense, the princi-
pal factor in South Vietnam's
early stability--the strong
leadership of President Diem--
today has become somewhat of an
unsettling influence. Diem's
continued unwillingness to del-
egate authority and his reluc
tanceto grant greater individ-
ual freedoms at this time are
hamstringing government opera-
tions and contributing to popu-
lar discontent. Senior Viet-
namese officials, including
Vice President Nguyen Ngoc Tho
and several cabinet members,
have expressed serious alarm in
recent months over the govern-
ment's apparent loss of popu-
larity. These officials believe
Diem's narrow approach to politi-
cal affairs is seriously weak-
ening the regime.
Criticism of Diem,'s author-
itarian ways is not new, but has
become more insistent now that
relative political stability,
which would permit more repre-
sentative government, has been
achieved. Diem is undoubtedly
aware of this criticism but has
given no indication of being
dissuaded from his belief that
more liberal government, however
desirable, cannot be afforded
during the present "national
emergency." He speaks frequent-
ly, however,-of having only "two
or three years" in which to
hammer out a strong political
and economic base for the nation
before ..internal pressures
threaten to force a modifica-
tion of the present driving
pace. Diem has been shrewd and
far-sighted in his leadership;
his decisions on several major
issues in the past have proven
correct.
South Vietnam has made con-
siderable progress since 1954
against great odds, and to-
day is a going concern. There
is a good economic potential
for continued development toward
greater stability and econom-
ic viability.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
NORTH VIETNAM BEGINS NEW THREE-YEAR PLAN
Having completed a three-
year period of economic rehabil-
itation following the Indochina
war, Hanoi has launched its
first three-year plan for eco-
nomic development (1958-60) aimed
h.t transforming backward,
agricultural North Vietnam into
an advanced industrial nation
organized along "socialist"
lines. Hanoi recognizes that
it faces tremendous obstacles,
and President Ho Chi Minh has
estimated that this "intricate
and difficult" task will require
three or four "long-term plans."
Nearly 11,000,000 of the
13,000,000 inhabitants of North
Vietnam are peasants, farming
uneconomical holdings which av-
erage one third of an acre.
In addition to recurring
droughts and floods, the agrar-
ian population, which lives at
a bare subsistence level, is
burdened by high taxes and in-
creasing regimentation. The
industrial sector of the economy
is underdeveloped and ineffi-
cient. The creation of invest-
ment capital in such an economy
poses great problems, and North
Vietnam is forced to rely heav=
ily on the largesse of the rest
of the Sino=Soviet bloc. Hanoi
draws so heavily on Chinese ex-
perience that its economic plans
and policies are almost carbon
copies of those used by its "fra-
ternal" neighbor to the north.
Socialization of Agriculture
The North Vietnamese au-
thorities have proceeded in a
gingerly fashion in socializing
agriculture. This caution is
a reflection partly of Hanoi's
decision to follow the'gradual
precepts Peiping advocated for
socialization and partly of the
opposition generated by attempts
at land reform in late 1956.
By the end of 1957, only 0.05
percent of agriculture was so-
cialized, while 24.4 percent of
industry, 27.6 percent of do-
mestic retail trade, and 61 per-
cent of wholesale trade had been
socialized. Socialization of
foreign trade and the banking,
postal, and railroad systems
is virtually complete.
The land reform program in
North Vietnam, under which land
was taken from farmers with rel-
atively, extensive holdings and
given to the poor and landless,
got under way even before the
Communist occupation of Hanoi.
In 1956 it was described as
"basically complete," but vio-
lent opposition--too strong for
the regime to ignore--forced
179.0
18.9
211.0
RXIMDITUUS
1956
1937
1959
{NAM)
Economic Construction
77.7
89.7
118.4
Social, Cultural and Welfare
22.0
25.1
32.4
Defense
37.2
44.3
51.1
Administration
21.1
19.4
28.9
Other
21.0
32.5
24.8
TOTAL EXP fYRg
179.0
211.0
253.0
Hanoi to undertake a program of
"rectifying" the excesses of
the program and to suspend tem-
porarily the formation of mu-
tual-aid teams, the next step
up the "socialization" ladder.
Hanoi, which did not renew
the drive until late in 1957,
now insists that agriculture
must be collectivized. Party
theoretician Truong Chinh says
the mutual-aid system "must
gradually be advanced toward
low-level cooperatives, and
these in turn to high-level co-
operatives," exactly duplicating
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CURRENT INTELLIGENCE WEEKLY SUMMARY
early Chinese progression.
Hanoi, like Peiping, has sought
to take advantage of tradition-
al peasant joint-planting prac-
tices in the formulation of mu-
tual-aid teams and, more re-
cently, of temporary agrarian
difficulties such as the drought
last winter, to impress on the
peasants the benefits of co-
operative effort. By the end
of this year, Hanoi hopes to
more than double the number of
households in mutual-aid teams.
The controlled press recent-
ly complained of the "conserva-
tive mentality" of a peasantry
"still reluctant to institute
collectivization," and Truong
Chinh has observed that the par-
In pushing a campaign to
socialize agrarian activity at
this time, Hanoi probably feels,
that the peasants will not be
able to oppose it effectively.
Chinese experience showed that
once the blood bath of the land
reform movement has broken down
established patterns of rural
life, the remaining steps toward
socialization came relatively
quickly and easily. It is ques-
tionable just how effective
Hanoi has been in breaking down
these established patterns, and
many observers doubt that the
peasantry will willingly join
the campaign.
Along with the socializa-
tion of agricultural production,
NORTH VIETNAM: PRODUCTION
COMMODITY
1939
1955
1956
1957
1460
RUIN)
POM MILLION K.W H
122
94
94
118
227
test..
MILLION METRIC TONS
3.5
3.6
4.1
3.9
COAL THOUSAND METRIC TONS
2,615
459
1,215
1,240
2,460
CEMENT THOUSAND METRIC TONS
305
100
199
165
335
PNOSPNATE THOUSAND METRIC TONS
35.7
8.7
34.1
34.0
51.8
APATITE THOUSAND METRIC TONS
98.0
-
-
60
78.8
COTTON THOUSAND METRIC TONS
YARN
8.9
1.3
7.1
9.5
13.
(est.)
ty must prevent the peasants'
indulging their natural inclina-
tion to "separate, individual
self-development." The peasants,
resentful of high tax levies,
have persistently frustrated
the efforts of the party to col-
lect the full amount of agri-
cultural taxes demanded by Hanoi.
They have made it impossible
for the cadres to carry out an
accurate estimate of taxable
land and yields. There is lit-
tle doubt that the peasants feel
exploited, and Hanoi has found
it necessary to take special
steps to keep the peasantry
from migrating to the cities.
the regime is pushing
the establishment of
other types of rural
cooperativization,
including credit co-
operatives and supply
and marketing coopera-
tives.
Industry and Commerce
The move toward
socialization in in-
dustry and commerce
has proceeded further
than in agriculture.
In pursuing its cam-
paign against private
business, Hanoi prob-
ably will continue to
use the same restric-
tive trade and financial pro-
cedures, including retributive
taxation, as were employed in
China.
The regime says that it
has already "laid hold" of pri-
vate businessmen by use of the
state trade system. Through
its control of sources of supply
and markets, the state has been
able to restrict-the "external
relationships" of the private
businessman and lead him "along
the lines of the state plan."
In Hanoi's present mood, however,
these procedures do not go far
enough. The regime feels it
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CURRENT INTELLIGENCE WEEKLY SUMMARY
must increasingly concern it-
self with the "internal af-
fairs" of private enterpreneurs
by investing money in their
firms and thus transforming
them into semisocialist enter-
prises similar to the joint pub-
lic-private enterprises now
common in China.
Here again Hanoi faces the
obstacle of a resentful, unco-
operative group .which can
scarcely be expected to cheer
its own liquidation.
In 1957 the to-
tal value of agricul-
tural and industrial
production reached an
estimated $944,000,-
000. Agriculture
contributed about
three quarters, rough-
ly $698,000,000,
while industry and
handicrafts contrib-
uted'some $246,000,-
000. The 1958 plan
envisages an over-
all increase of ap-
proximately 10 per-
cent. The total value
of agricultural out-
put is to go up 5.4
percent, while that of
industrial and handi-
craft production is
to the European satellites.
This has left very little, if
any, for domestic stockpiles.
Current crop conditions suggest
an early rice crop this year
somewhat poorer than last year's
early crop. Rice exports, which
continued through January 1958,
subsequently dropped off sharply,
perhaps in anticipation of a
tight domestic supply situation
this summer.
Although the regime puts
principal stress on food crops,
SOVIET hOC AID TO NORTH VIETNAM
(THOUSAND DOLLARS) 0
COUNTRY
LOANS
GRANTS
MATERIALS
1957 FLOOD
BELIEF
TOTAL
ALBANIA
178
13
191
BULGARIA
4,250
903
15
5,168
CHINA
325,000
19,152
123
344,275
CZECHOSLOVAKIA
8,750
55
8,805
EAST GERMANY
18,143
1,028
19,171
HUNGARY
2,000
13
2,013
POLAND
9,625
13
9,638
RUMANIA
3,750
3,750
USSR
19,250
100,000
50,000
250
169,500
TOTALS
19,250
471,518
71,26L
482
562,511
to rise 35 percent. The current
three-year plan is a loosely
drawn outline of what the re-
gime would like to accomplish
in that period rather than a
carefully balanced set of tar-
gets.
Premier Pham Van Dong has
described the increase in rice
production as the regime's
"biggest success." The output,
according to Hanoi's figures,
rose from 2,400,000 tons in 1939
to 4,100,000 tons in 1956. In
1957 the rice crop came to only
3,900,000 tons, largely because
of a widespread drought during
the fall harvest. The regime
that year exported an estimated
180,000 tons of rice, mainly
it has consistently urged great-
er production of industrial
crops. In 1957, for example,
the authorities programed a 30-
percent increase in such crops.
The targets for oilseeds, pea-
nuts, and tobacco were probably
achieved, while that for cotton,
in which the authorities have
been especially interested, was
not. The 1957 plan to produce
7,500 tons of cotton was not
fulfilled, and the crop prob-
ably totaled only several hun-
dred tons above the 1956 output
of 6,300 tons. The 1958 plan
calls for an output of indus-
trial crops amounting to 106.3
percent of last year.
The industrial sector of
the economy of North Vietnam is
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CURRENT INTELLIGENCE WEEKLY SUMMARY
weak. It revolves around a few
large enterprises such as the
Hongay coal mines and the Hai-
phong cement plant. Inept man-
agement and labor unrest. have
hampered production. Industrial
production targets had to be
lowered in September 1957 when
it became apparent the orginal
goals were not going to be met.
In fact, state enterprises in
nine major fields--coal, cement,
electric power, phosphates, fac-
tory-made cloth, paper, matches,
alcohol, and tin--attained only
about 55 percent of the produc-
tion levels of 1939, generally
considered the peak year. On
the other hand, private indus-
tries in 11 fields--bricks,
wood, sugar, fish, salt, home-
spun cloth, handicraft paper,
leather, soap, aluminum, and
lead--were outproducing their
1939 level by 27 percent.
Foreign Trade and Aid
Without large amounts of
aid from the Sino-Soviet bloc
countries, even the marginal
economic development of North
Vietnam would have been impos-
sible. Hanoi admits that its
capital funds have come largely
from "friendly, countries." This
condition is expected to con-
tinue.
Total bloc aid in all forms
--loans, grants, goods exchanges,
and flood relief--will total an
estimated $563,000,000 by 1960.
Communist China will contribute
over half, with a $326,000,000
five-year (1955-59) grant, plus
another $20,000,000 in other
forms of assistance. During the
past three years, Chinese aid
has gone chiefly into the res-
toration and development of
transportation, communications,
and irrigation.
The Soviet Union provided
a $100,000,000 grant in 1955
and subsequently made available
an additional $70,000,000 in
loans and materials. Some 75
percent of this aid has been
allocated for industrial devel-
opment and construction, includ-
ing North Vietnam's first machine
tool factory, recently opened
in Hanoi. The European satel-
lites have contributed an esti-
mated $100,000,000, of which
East Germany, Poland, and Czech-
oslovakia gave 60 percent.
Satellite aid has consisted
largely of equipment and tech-
nical knowledge in industry and
public health.
The bloc accounts for rough-
ly three quarters of North Viet-
nam's foreign trade. This per-
centage has been declining, how-
ever, as trade with the free
world--chiefly Japan, Hong Kong,
Indonesia, India, and France--
has been increasing. Coal from
Hongay is still the major export
item, accounting for about one
third of.the total value of ex-
ports. In 1957, rice was ex-
ported in considerable quanti-
ties, but prospects for compar-
able amounts this year appear
poor. Other items for export
in significant quantity are
crushed apatite (a phosphatic
fertilizer), cement, and timber,
but these and the country's
other exports are not available
in sufficient bulk to permit
North Vietnam to achieve a more
balanced trade position in the
near future.
With the initiation of a
period of economic development,
the Hanoi regime has begun a
crucial test of its ability to
survive and, parenthetically,
of the applicability of the
Chinese model for developing
backward Asian economies. Hanoi's
success will depend, to a large
extent, on the outcome of its
attempt to inflict socialism
on the economy.
There is discontent in
both the cities and the country-
side, which is reflected in the
government and the party as well.
The official press has found it
necessary to castigate party
cadres for individualism,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
bureaucracy, and the acceptance
of democratic ideas such as the
"creation of opposition parties."
Cadres infected with such tend-
encies have also refused to ex-
ecute collective decisions or
have been acting contrary to ap-
proved policies--sometimes in
consonance with persons outside
the party. Commercial. and:'..
financial cadres have been:
accused of being blinded by
the "glitter of the capital-
ists."
Discontent will doubtless
persist, but in the absence of
major natural disasters, it will
probably lack focus and remain
unorganized, and therefore not
interfere with the ultimate en-
forcement of the regime's poli-
cies. Prepared joint-25X1
ly with ORR)
TRENDS IN SOVIET SHIPBUILDING
Since the end of World War
II, the USSR has developed a
highly efficient shipbuilding
industry, with the result that
it ranks second in world naval
power and first in submarine
power. The Soviet maritime'
fleet has expanded considerably
during this period, along with
the inland waterway and fishing
fleets.
To achieve this build-up,
large capital outlays were made
for the reconstruction of war-
damaged shipyards, for the com-
pletion of shipyards begun be-
fore the war, and for the build-
ing of new shipyards. Probably
the most important capital in-
vestment made during this period
was in the industry responsible
for the production of ship com-
ponents. This investment was
achieved in part through the
appropriation of machines and
equipment from countries over-
run in the war and through war
reparations.
Priority of Naval Construction
About 90 percent of. the
postwar shipbuilding effort in
terms of value has been devoted
to the construction of naval
vessels. To meet the immediate
postwar needs for merchant ves-
sels, the USSR turned, as it
did before World War II, to for-
eign sources. It exploited ship-
building industries in the satel-
lites and procured vessels from
nonbloc sources through trade
agreements.
Cruisers
Destroyers
Destroyer escorts
Submarines
Minesweepers
Patrol craft
Motor torpedo
similar craft
80623
A sharp reduction in the
tonnage output of naval vessels
began, however, in 1955. This
reduction, most marked in sub-
marine production, apparently
resulted from the phasing out
of certain conventional-type
vessels. In the meantime, So-
viet shipbuilders have been
using idle facilities for
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CURRENT INTELLIGENCE WEEKLY SUMMARY
26 June 1958
ii,Major Shipbuilding and Repair Yards
1 ARCTIC OCEAN
e Lie
Kaliningrad(,
E S.
SRAE ~ SYRIA
GASP/AN
u SEA
orkiy
\j elenodolsk
the production of merchant
ships.
SECRET
)ovosibirsk
The huge naval fleet
created by the end of 1955
was composed principally of
vessels using conventional-type
propulsion and weapons systems.
In response to Western develop-
ments in these fields, the USSR
probably has undertaken a pro-
gram to build ships with radi-
cally different propulsion,
weapons, and electronic sys-
tems, and plans for submarines
are believed to be in an ad-
vanced stage of development.
New-type submarines will prob-
ably appear during 1958.
Submarines: The construc-
tion of long-range W-class sub-
marines began in 1949 and con-
tinued to the early part of
1957, when the program appar-
SEA
OF
OKHOTSK
ently was phased out. Four
shipyards were engaged in this
program, and a total of about
240 submarines of this class
were produced.
The construction of medi-
um-range Q-class submarines
began in 1954 and possibly is
still continuing. These ships
are built only at Sudomekh
Shipyard 196 at Leningrad, which
had produced 43 vessels by the
end of 1957. A reduction in
output in 1957 from the previous
year seems to have resulted
from technological difficulties
and alterations, and does not
indicate a phasing out of this
model.
The USSR may be preparing
to produce new submarines in-
corporating high-performance con-
ventional- propulsion or nuclear
propulsion, some of which may
be equipped for guided-missile
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Astrakhan
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CURRENT INTELLIGENCE WEEKLY SUMMARY
launching.
The Kotlin, an improvement
over the earlier Skorry and
Tallinn. was apparently modified.
Separate sightings. in 1957,
one in the Pacific and one in
the Baltic, indicated that the
after-gun mount had been replaced
by a "catapult" or launching
rail, suggesting a possible
missile-launching installation.
The construction of the
Riga-class destroyer escort be-
gan in 1952. About 60 of these
ships hate been built, but the
program appears to have been
completely phased out in early
1957.
Cruisers: Since 1949 four
shipyards have been engaged at
least part time in the construc-
tion of cruisers. A total of
20 cruisers were laid down, of
which only 16 have been completed.
Destroyer and Destroyer Es-
corts: Construction of the
Kotlin-class destroyer began in
1952 and has continued to the
present time, with about 30 pro-
duced in all. Zhdanov Shipyard
190 in Leningrad, Shipyard 445
in Nikolayev, and Shipyard 199
in Komsomolsk have been engaged
in the program. Possibly nine
additional vessels now are in
varying stages of completion.
Bum
DDOLLM
2.5 --
1930
80623 38
Construction of minesweep-
ers, patrol craft, and motor
torpedo boats has continued at
a fairly consistent rate. Im-
provement made in these types
has been in the area of elec-
tronics and in the use of gas-
turbine propulsion and hydro-
foil hulls.
Merchant Vessel Construc-
tion: The characteristics of
new merchant vessels proposed
and under construction in the
USSR suggest a change in policy
toward the merchant fleet.
Cargo vessels and tankers, which
constitute the majority of the
maritime fleet, are of low
USSR: VALUE OF NEWLY CONSTRUCTED NAVAL
AND MERCHANT VESSELS 1950-57
NAVAL VESSELS PRODUCED -
MERCHANT VESSELS PRODUCED
MERCHANT VESSELS IMPORTED -
M
M
1957
26 JUNE 1958
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tonnage and slow speeds. At
present, however, two new ma-
jor vessels are under construc-
tion, one a tanker, one a car-
go vessel. These vessels are
modern in design and are,-com-
parable to the better Western
ships of the same type. The
tanker, however, is small com-
pared with the "supertankers"
of the West.
The most noteworthy non-
naval vessel to be produced by
the USSR is the nuclear-powered
icebreaker Lenin, which was
launched on 5 December 1957 in
Admiralty Shipyard 194 in Lenin-
grad. This is the first ice-
breaker to be built in the USSR
since the war, and is the first
New Tanker: Only one or
two tankers, of an improved de-
sign over the Kazbek, are known
to be under construction. One
was laid down, in the Baltic
Shipyard in Leningrad about the
first of September 1957. Series
production of this class will
probably begin as soon as the
prototype has been satisfacto-
rily tested. The new tanker,
the largest ever built in the
USSR, has a cargo-carrying ca-
pacity of 27,000 metric tons,
is about 660 feet long over-all,
87 feet wide, and has a draft
of 34 feet. Powered by a steam
turbine, the vessel will have
a speed of about 18.5 knots.
New Cargo Shy: Four car-
Y
UM. HANT V 1950-57
(van m MWOM w ts.1l1.9)
MERCHANT VIMMS
C T: ='
MERCHANT VESSELS
IMPORTED FRAM
S'
PRODUCED
BLOC COUNTRIES
NONBIOC
MA TIME
387.8
398.3
392.7
FISHING
212.5
547.6
213.9
INLAND
674.0
181.0
54.1
TOTAL
1,274.3
1126.9
660. 7
known Soviet ship designed to
use nuclear power.
Kazbek-class Tanker: The
program for the production of
the Kazbek-class tanker which
began in 1950 or 1951 and has
produced 48 ships appears to be
nearing an end, although Kherson
Shipyard 102 delivered two tank-
ers in 1958. Two other tankers,
both scheduled for sale to East
Germany, were under construction
at the end of 1957 at the Admi"
ralty yard in Leningrad. Ship-
yards engaged in this program
have undertaken construction of
other nonnaval vessels, with
the result that production of
these tankers will be sharply re-
duced, if not wholly eliminated.
go ships are under
construction at Kher-
son Shipyard 102. As
in the case of the new
tanker under construc-
tion, this type ship
is a vast improvement
over the cargo vessels
presently in the mar-
itime fleet, and will
be the largest dry-
cargo ship ever built
in the USSR. The new
ship, with a cargo-
carrying capacity of
10,000-13,000 metric
tons, is designed to
haul general and grain
cargo in relatively ice-free
waters and also is turbine-pro-
pelled.
Fishing and Inland Water-
way Vessels: Because the fish-
ing fleet is important not only
in the economy of the USSR but
also as a potential naval auxil-
iary, the production of improved
trawlers, seiners, loggers, and
the like continued in 1956 and
1957. The capability of the
fishing industry is being im-
proved by the installation of
electronic aids on trawlers for
the detection of schools of
fish, and in the construction
of special ships to operate with
the fishing fleets for freezing
and processing the catch and
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transporting it between the
fleet and the mainland. In ad-
dition, a large and improved
whale-processing ship is under
construction, and a fleet of
new and improved whale-catchers
is to follow.
Some of the principal ship-
yards in the USSR once engaged
in naval construction are now
building vessels for the inland
fleet; these include Krasnoye
Sormovo Shipyard 112 in Gorkiy,
which was the largest builder
of submarines in the USSR. In
early 1956 this shipyard began
building a series of Bolshaya
Volga-class self-propelled dry-
cargo river vessels.
The inland waterways fleet
is being improved for more rapid
and economical transportation
of freight and passengers. The
trend seems to be away from the
SECRET
use of towed barges to that
of pusher-type tugs and
barges, similar to those
used on the Mississippi
River, and of more self -
propelled dry- and liquid-
cargo vessels.
Foreign Orders
The number of construction
contracts placed with Western
countries, except for Finland,
has been sharply reduced.
As a possible exception to
this trend, the USSR may agree
to purchase Japanese-built ves-
sels because the cost of ship-
building in Japan is low com-
pared with that in other West-
ern countries. In addition,
the Soviet Union may be able
to offer products attractive
to Japan in payment.
(Prepared by ORR)
PART III PATTERNS AND PERSPECTIVES Page 15 of 15
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Approved For Release 2007/10/23: CIA-RDP79-00927AO01800040001-9