CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A002100070001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 48
• Document Creation Date: December 20, 2016
• Document Release Date: December 16, 2005
• Sequence Number: 1
• Publication Date: October 26, 1999
• Content Type: SUMMARY

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F l)
CONFIDENTIAL
T
(CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 54
OCI NO. 0489/59
19 February 1959
DOCUMENT NO.
NO CHANGE IN CLASS. 17
0 DECLASSIFIED
CLASS. CHANGED TO:
NEXT REVIEW DATE:
? AUTH: R70-
DA'TE(5AA#4 REVIEWER
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE RETURN TO ARCHIV S & RECORDS C
IMMEDIATELY AFTER USE
CONFIDENTIAL
State Department review completed
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 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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PFIDENT"'
CURRENT INT IGENCE WEEKLY SUMMARY
19 February 1959
OF IMMEDIATE INTEREST
THE GERMAN QUESTION
In his speech at Tula on
17 February, Khrushchev adopted
a defiant attitude toward the
Western powers' determination,
reaffirmed in their notes of
16 February, to uphold by all
appropriate means their communi-
cations with Berlin. This con-
tinues the Soviet efforts to
confront the Western powers with
an apparent choice between meas-
ures to enforce their right of
access to Berlin--which might
involve a risk of war--or con-
cessions to Soviet demand.
Khrushchev said Soviet
troops in East Germany are not
there to play games and re-
peated previous public Soviet
warnings that "if anybody should
start shooting, this would mean
the beginning of war."
The Soviet premier in his
Tula speech also sought to dis-
courage any belief that Western
access to Berlin could be main-
tained by an airlift if the land
routes are closed. He asserted
that East Germany would obtain
full sovereignty by the conclu-
sion of a peace treaty--either
with both German states or a
separate treaty with East Ger-
many--and would vigorously re-
buff any encroachment on its
territory by land, air, or
water.
Khrushchev's stress on
East German sovereign rights
guaranteed by inter;:iat ional law
after a peace treaty is signed
seems to imply either that the
East Germans would refrain from
attempting to exercise controls
over Allied access which had
been relinquished by the USSR
until after a peace treaty is
signed or that Moscow plans to
conclude a separate peace treaty
prior to or simultaneously .
with transfer of controls to the
East Germans.
Khrushchev's tough line on
negotiations with the West sug-
gests that the USSR will promptly
carry out its announced inten-
tion to transfer controls and
sign a separate treaty if the
West rejects the Soviet pro-
posals on Berlin and a treaty
signed by both German govern-
ments. There may be a transition
period following a transfer of
controls during which East German
authority would be exercise:! in
such a way as to avoid a force-
ful Western reaction and to gain
more time to maneuver the West
toward de facto recognition of
the East German regime. Khru-
shchev ridiculed the Western
formula of "no concessions with-
out counterconcessions" and
said, "We...have nothing to
concede. We made our proposals
without bargaining."
Moscow's apparent belief
that its threatening posture on
Berlin will generate growing
popular pressures on Western
governments to move toward at
least de facto recognition of
East Germany was reflected in
Khrushchev's favorable reference
WIEnTor
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
in his Tula speech to Senator
Mansfield's proposal for direct
negotiations between the two
German governments on unifica-
tion of both Berlin and Germany.
He said such proposals "merit
attention" and declared "it
would be possible to reach
agreement with people who take
such sober positions."
East German Views
Anticipating the Western
notes of 16 February, a Neues
Deutschland editorial on"l
e ruary'insisted that both
German states must not only
sign a peace treaty but also
participate in the negotiations.
"We don't want a finished prod-
uct," said the editorial,-,"in
ultimative form, as was the
case with the Versailles
Treaty, presented for our sig-
nature." Nor does East Ger-
many want to participate merely
as "archivists and consultants,"
but as a "delegation of a sov-
ereign German state represent-
ing the cause of the nation."
In a further effort to
enhance its claim to interna-
tional recognition, the East
German regime, following the
turnover of access, controls,may
seek on the technical level a
civil air agreement with West
Germany. Ambassador Bruce be-
lieves this is especially likely
if the Western carriers present-
ly operating to Berlin cease to
fly because of Soviet refusal
to guarantee flight safety. Such
a development would result in
pressures on the Western gov-
ernments to seek an accommoda-
tion with East Germany permit-
ting their airlines to continue
Service. The East German re-
gime would probably feel that
any financial loss it might
suffer thereby would be more
than compensated for by a gain
in its international stature.
Macmillan Visit
The Soviet leaders appar-
ently believe that British views
on Berlin and Germany and the
likelihood of British elections
this year can be exploited to
weaken Western unity.
the USSR considers Britain
~h"elweakest link" in the West-
ern front and may attempt to
drive a "hard bargain" during
Macmillan's visit.
Moscow probably feels that
the prime minister's desire for
a "peacemaker" role, together
with the pressure of British
public opinion for a relaxation 25X1
of tension, makes him particu- 25X1
larly vulnerable on the German
noted that Macmillan gave a
"very evasive" reply to a ques-
tion about Britain's stand on
this issue.
West German Foreign Minis-
try officials are considering
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? """'~ SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
a counterproposal to Moscow of-
fering to establish a United
Nations commission to supervise
the exercise of human rights
and freedom of political ac-
tivity in both East and West
Germany. They feel such a com-
mission, if active for a "num-
ber of years," could pave the
way for a German federation.
Bonn would also consider legal-
izing the Communist party, out-
lawed since 1956. German of-
ficials claim that the plan has
"official" but not "governmen,
tall' approval.
Bonn Foreign Ministry of-
ficials have also indicated that
a German federation, with wide
powers given to the individual
states in the economic and so
cial lields, would be worth
"examining." Such "informal"
ideas are apparently a part of
a continuing effort by some
German diplomats to probe West-
ern reactions to new approaches
to unification.
Bonn has strongly supp-crted
the participation of both East
and West German representatives
in the proposed foreign minis-
ters' conference despite criti-
cism in NATO that the West may
be confronted with a high-rank-
ing East German delegation.
Bonn intends to claim the
right to address the meeting,
although sitting in the "second
row." Adenauer may feel that
in view of constant reports of
new Western approaches to the
German question, such as Sena-
tor Mansfield's proposals, Bonn
can no longer afford to be ex-
cluded from any high-level dis-
cussions. By participating as
a member of the Western team,
Bonn hopes to establish a claim
to equality with the United
States, Britain, and France
in any talks on Germany,
European security, or disarma-
ment.
Moscow acted quickly to
gain the propaganda initiative
following the breakdown of
talks in Tehran on 10 February
by releasing on the next day
the text of the 14-page memo-
randum the Soviet negotiators
handed to the Iranian foreign
minister before their departure.
The memorandum's step-by-step
account of the talks apparently
was designed to prepare the
ground for retaliatory pressure
on Iran. This pressure prob-
ably will be intensified dur-
ing the final stage in Iran's
negotiations on a bilateral de-
fense agreement with the United
States, which may be signed be-
fore 21 March.
In his speech on 17 Feb-
ruary Khrushchev made a more
explicit attack on the Shah
than in his statements last No-
vember; while he asserted that
the Shah could not "save his
throne" by a pact with the
United States, his statement
that "We shall see to it that
the people of Iran understand
our attitude correctly" ap-
parently presages intensified
attacks on the Shah's regime.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
The Soviet premier also repeats
charges that the Shah:'.s decision
to conclude a bilateral defense
agreement with the United States
will "entail the turning of Iran
into an American military base."
A Pravda article on 14 Feb-
ruary contended that the Soviet
Union did "everything possible"
to meet Iran's wishes,,-and charged
Tehran with following a "double-
dealing, perfidious" policy de-
s'igned to deceive the Iranian
public. Soviet warnings have
stressed that a "turning point"
has been reached in USSR-Iranian
relations, and that the Soviet
Union "cannot overlook such
hostile action" by Iran as the
signing; of a bilateral defense
pact with the United States.
Articles on 17 February in
the Soviet military newspapers
Red Star and Soviet Fleet`,at-
t Ic'T a US-Iran an bilateral
defense agreement, charging
that Iran's armed forces atre
losing their independence` and
that American bases are being
set up in Iran "for attacking
the Soviet Union." The Soviet
press and radio,, as well as Mos-
cow's 10 February memorandum,
charge that the Shah's regime
does not represent the Iranian
people, and Soviet media at-
tempt to portray important seg-
ments in the country as opposed
to the Tehran government.
Moscow claims that "several
prominent Iranian generals" have
spoken in favor of removing all
foreign advisers and have de-
clared that if American troops
enter Iran, the Iranian Army
"will disband as a mark of pro-
test." Pravda warns that Tehran's
policies will bring the rulers
of Iran to an inevitable d.own-
fall--either through flig)at, as
in the "Cuban fashion," or through
destruction, as in the "Baghdad
style."
The Soviet leaders see such
propaganda, if not effective in
dissuading Iran from signing a
bilateral agreement, as prepar-
ing a public rationale for So-
Viet counteraction when the bi-
lateral agreement is signed.
As yet, however, Moscow has
dertaken no move other than pr:.;v-
aganda against the'Tehran regime.
The Iranian Government,
placing full responsibility for
collapse of the negotiations on
the'USSR, is trying to counter
Soviet charges through a vigor-
ous diplomatic and propaganda
effort. At a session of the
Iranian Senate on 14 February,
Foreign Minister Hekmat expressed
the government's determination
not to be intimidated. He
also has threatened to
suppress TASS bulletins is-
sued in Iran. Radio Tehran
has warned that Iran will pub-
lish a "bulky catalog" of
Soviet, misdeeds if Moscow does
not cease its broadcast attacks.
IRAQ AND OTHER MIDDLE EAST DEVELOPMENTS
Iraq
by the newly appointed cabinet
members who adhere to the Nation-
The political situation in al Democratic party (NDP) to
Iraq has been relatively quiet resign has not been carried out.
for the past week, and the threat Propaganda Minister Jamil, whose
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
irritation with Qasim over the
cancellation of an order to
suspend a Communist paper was
the source from which the res-
ignation actions might have
sprung, departed from Baghdad
for New Delhi, ostensibly to
put in order affairs he had
left there when he was Iraqi
ambassador to India.
There are rumors that Kha-
lid Bakdash, the Syrian Commu-
nist leader who spoke for the
Arab Communists at the 21st par-
ty congress in Moscow last month,
has returned to Baghdad, a move
which would strengthen the local
Communist-movement and would
alarm the UAR authorities, who
are continuing to harass local
Communists in Egypt and Syria.
Nasir probably is still
concerned over the situation in
Syria. He is scheduled to visit
Damascus about 22 February, ac-
companied by Yugoslav President
Tito, immediately after an "im-
portant" political speech in
Cairo.
There remain pockets of
political resistance in Syria
to the UAR concept and to Egyp-
tian domination of it. There
are a number of Syrian Army of-
f icers who, retired, transf erred,
or in effect demoted by,
Cairo's orders, form a poten-
tial core of dissidence. For-
mer chief of staff Bizri, whose
whereabouts is unknown but who
may be in Iraq, has been at-
tempting to exploit these ele-
ments. Landowners are still re-
sisting the agrarian reform law;
a slowdown in agriculture is af-
fecting a large part of the econ?-
omy. The scheme for a "nation-
al union" to replace the old
political parties has bogged
down in the face of unanimous
opposition from the party organ-
izations which, although legally
abolished, continue to subsist.
Although none of these dis-
parate elements yet show signs
of linking up, their disgrun-
tlement'is a standing threat to
Nasir's prestige. Adding to UAR
concerns is a possible renewal of
activity by a Communist party
with funds and personnel from Iraq.
UAR propaganda organs, pos-
sibly seeking to distract atten-
tion from the UAR's failure in
Iraq and the grumbling in Syria,
are now concentrating on the in-
creased flow of Israeli immi-
grants coming from Eastern Eu-
rope, especially Rumania. One
press line is that the movement
of these people is the result
of an arrangement made by Soviet
Deputy Premier Mikoyan with the
United States, and that it fore-
shadows another effort by the
great powers to divide the Mid-
dle East into spheres of influ-
ence.
The press campaign thus
serves the UAR as another de-
vice for indirectly criticizing
Soviet bloc policy in the area
while maintaining a "neutral':"
position by including the United
States in the attack. An Arab
League council meeting on 2
March is scheduled to discuss
the problem-formally.
Libya
An intensification of anti-
American propaganda and sentiment
has been reported from Libya
as the American and Libyan
governments begin another round
of negotiations over the level and
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
nature of American economic as-
sistance. Libyan newspapers
have seized on local incidents
involving activities of Wheelus
Air Base to denounce the Ameri-
can "occupation" and the action
of former Premier Ben Halim in
"enslaving" the country by sign-
ing the 1954 Libyan-American
agreement. They are abetted
by Cairo radio's repeated at-
tacks on the existence of West-
ern bases in the area.
Although the government
itself may be generating part
of the campaign as a bargaining
tactic, there apparently is gen-
uine popular pressure over the
issue of neutralism generally
and the air base specifically.
Even Libyan provincial officials
now are pressing their own claims
to consideration in the negotia-
tions. The activities of all
these forces tend to create an
atmosphere favorable for more
neutralist gestures, such as
the acceptance of the two pro-
posed Soviet hospitals and the
perennial proposal, revived again 25X1
last week by an opposition mem-
ber of Parliament, that Libya
recognize Communist China J
Final settlement of the
Cyprus issue was reached at
the London Conference of Brit-
ain, Greece, Turkey, and Greek
and Turkish Cypriot leaders on
19 February. A last-minute
breach which had developed be-
tween Archbishop Makarios and
the Greek Government was re-
solved, and Makarios agreed to
the terms of settlement previ-
ously accepted by all other
parties to the dispute.
The possibility of a final
settlement based on the Zurich
agreement reached between Greece
and Turkey on 11 February had
been received favorably by a
majority of the people on Cy-
prus and in the three countries
directly concerned. In Britain,
only a few far-right con-
servatives opposed a settlement,
denouncing the government for
following "a.policy of surrend-
er."
In Greece, the government
was aided by the initially fa-
vorable reaction to the Zurich
agreement by Makarios and other
leading Greek Cypriots. Spokes-
men for both the nationalist
and Communist opposition, how-
ever, have denounced Premier
Karamanlis for acquiescing in
a plan which permanently pre-
cludes "enosis" and officially
recognizes Turkish interests
on the island.
The Turkish public is large-
ly apathetic. Its satisfaction
at Ankara's having prevented
union of Cyprus with Greece is
tempered by realization that
the Turkish demand for parti-
tion has also been abandoned.
The Zurich agreement, ac-
cording to a Turkish official,
calls for an independent Cypriot
republic with a Greek Cypriot
president and a Turkish Cypriot
vice president--both men with
veto power over foreign affairs
and certain communal matters.
A 12-member cabinet including,
the president and vice president,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
will be composed of eight Greek
and four Turkish Cypriots.
There will be a combined 1
islative assembly, 70 percent
of whose members will be Greek
and 30 percent Turkish, and
separate subsidiary communal
assemblies.
The constabulary is to con-
sist of approximately 60 percent
Greek Cypriots and 40 percent
Turkish Cypriots. Greece and
Turkey will create a combined
military force of around 1,500
on the island, with approximate-
ly two thirds of the troops
from Greece. In the event of
a violation of the Cyprus con-
stitution, Britain, Greece, and
Turkey will have the right to
intervene "jointly or separate-
ly. "
Cypriot Communists--well
organized, with capable lead-
SECRET
ers, and controlling the larg-
est labor union on Cyprus--have
not yet indicated the course
they will follow in the new
republic. While leftist spokes-
men have announced that they
now support Maki: ? , the fact
that Radio Moscow a xc~ lift-wire:
leaders in Greece have denounces',
the. plan for permitting the
British to retain military
bases on the island may :t.n-
dicate their future course
of action.
Some Greek Cypriots, fear-
ing that the Communists will
try to gain control of the
new government and to expand
their activities in all phases
of the island's activities,
have voiced the hope that
EOKA can be used in the
future to maintain control
by the anti-Communist ele-
ments.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
NOTES AND COMMENTS
The split between Cambodian
Premier Sihanouk and General Dap
Chhuon, military commander in
northwestern Cambodia, has come
increasingly into the open.
Sihanouk, who recently returned
from a week's visit in Indonesia,
apparently now is aware that
Chhuon has been plotting a move
against him. He is probably un-
certain of the extent of Chhuon's
support among the 28,000-man
Cambodian military establishment
--beyond the three battalions
Chhuon controls in Siem Reap
and Kompong Thom provinces and
elements in the palace guard--
and seems anxious to avoid a
direct showdown at present.
Defenses in the Phnom Penh
area have been strengthened,
while Sihanouk is attempting to
undercut,Chhuon's position by
such devices as recalling army
equipment from his military
region, ostensibly for routine
exchange. A key question is
the attitude of General Lon
Nol, opportunistic chief of
staff of the Cambodian armed
forces and concurrently defense
minister in Sihanouk's reshuffled
cabinet. The cabinet changes
announced on 18 February ap-
parently are part of Sihanouk's
spreading witch hunt against
officials suspected either of
collusion with antigovernment
elements or of being too inept
to cope with the "present deli-
cate situation."
The premier may be planning
a full-blown expose of the Dap
Chhuon plot, implicating the
United States as well. In an
interview in Indonesia on 14
February, Sihanouk specifically
accused Vietnam's representative,
Ngo Trong Hieu, of being "the
head of foreign subversion in
Cambodia." He also said, "It
is not the Communists who are
attacking us but SEATO dollars
and weapons." Sihanouk extolled
Peiping's friendship toward Cam-
bodia and labeled fears of Chi-
nese Communist subversion "sheer
nonsense." He claimed there
was not a.single Chinese agent
in Cambodia.
Peiping, satisfied with
its growing prestige in Cam-
bodia since Phnom Penh's recog-
nition last summer, now looks
forward to increasing its in-
fluence. Peiping is continuing
its efforts to convince Sihanouk
that closer ties with Communist
China will improve the stability
of his regime but will not ex-
pose him to Chinese domination.
Such an emphasis would also
serve to promote Peiping's ef-
fort to "prove" to Other coun-
tries of Southeast Asia that
neutrality is profitable and
entails no risks.
TUNISIA'S RELATIONS WITH FRANCE
Tunisia's relations with
France are again deteriorating
sharply as the attitude of the
government hardens. Indignant
because the De Gaulle govern-
ment failed to make some con-
cession to alleviate Tunisia's
financial difficulties--caused
in part by the devaluation of
the French franc. in December--
the Tunisian Government now
seems to be tacitly encourag-
ing anti-French feeling stim-
ulated by two recent border
violations and the discovery
of a French espionage network.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
This feeling probably will
mount, and carefully controlled
anti-French demonstrations may
be permitted.
Although border incidents,
including fatalities, are not
uncommon, they usually are soft-
pedaled by the Tunisian Govern-
ment. The controlled press,
however, has extensively re-
ported the shelling by French
Army units in Algeria of a Tu-
nisian village west of Kasse-
rine on 8 February--pointing
out that it occurred just one
year after the French air
strike against Sakiet Sidi
Youssef--and the strafing on
14 February by Algeria-based
French fighter planes of a Tu-
nisian locust control team
farther south, near Nefta.
Many Tunisians will con-
sider the second border inci-
dent a harsh response to Presi-
dent Bourguiba's unusually con-
ciliatory statements toward
France in his weekly radio
talk shortly before. The talk
concerned the discovery of an
extensive French espionage net-
work operating out of the
French Embassy in Tunis. At
about the same time Bourguiba
offered during an interview to
meet De Gaulle to discuss mu-
tual problems, including an
Algerian settlement.
The incident provided
Bourguiba with a new opportu-
nity to pose as champion of Al-
gerian independence. He told
press correspondents on 17 Feb-
ruary that unless peace were
realized in Algeria by 17 June--
the first anniversary of the
agreement to withdraw all
French military forces from
Tunisia except those at Bizerte
and to provide for the negotia-
tion of a provisional agreement
regarding the base--Tunisia may
not permit France to retain the
'base at Bizerte.
Paris is taking a tough
line because Tunisia has re-
fused to permit the French
consul in Tunis to see two Al-
gerian employees of the embassy
held on espionage charges.
Bourguiba's recent claims to a
part of a French petroleum con-
cession area in the Sahara and
his announced intention to buy
all foreign-owned farm lands
have also irritated the French
Government, which now is not
prepared to meet any of Bour-
guiba's demands.
Nevertheless, Bourguiba
probably will insist that the
staff of the French Embassy in
Tunis, which numbers 650 per-
sons, be reduced and may also
demand that some of the 20,000
French Army, Navy and Air per-
sonnel at Bizerte be withdrawn.
The Tunisians probably will
simultaneously seek new arms,
in addition to the American,
'tTAL Ip
Bizerte
Bona` TUNIS`/
01- _
TRIPOLI
T R I P 0 L I T A N I A
LIBYA
Tunisian territorial claim
Approximate area of
petroleum concession
British, and Yugoslav arms they
have already received and the
Turkish weapons which will ar-
rive next month, so that the
Tunisian Army may be rapid-
ly increased from 6,000 to
20,000 men.
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=' , MEDITERRANEAN SEA
Sakiet Sidi ~ousse .
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19 February 1959
The Soviet delegation to the
Geneva conference on the sus-
pension of nuclear tests has en-
deavored this week to improve
its negotiating record in the
event the talks break down. On
17 February the Soviet delegation
accused the West of not wanting
an agreement and warned that
negotiations may collapse if the
United States and Great Britain
do not change their positions.
The chief Soviet delegate claimed
that Anglo-American rejec-
tion of a Soviet proposal for
staffing of control posts proves
that the United States and 'Brit-
ain are interested only in
sending the maximum number of
"foreign agents" into the USSR
for espionage purposes, not in
ending nuclear weapons tests.
On 18 February the Soviet
delegate underlined this warn-
ing, charging that US and Brit-
ish tactics of insisting that
discussion be limited to topics
they specify has created an
"almost hopeless situation."
He said this means the West
wants to maintain the conference
"in a state of impasse,." There
have been no indications, how-
ever, that the USSR will take
the initiative in ending the
negotiations.
The Soviet delegation's
publication on 7 February of
its statement on the talks has
been directed toward blurring
key issues on which its posi-
tion is comparatively weak,
while at the same time main-
taining the appearance of being
willing to negotiate all issues.
In an effort to show that the
USSR holds the initiative in
the talks, the Soviet delegate
last week ;pressed for detailed
Western views on the four key
issues of voting procedure in
the control commission, dura-
tion of a treaty, staffing of
control posts, and composition
of the control commission. On
the last issue, Moscow formally
proposed that the control com-
mission be composed of three
Western and three bloc members
and one neutral.
Discussion centered pri-
marily on the issue of control-
post staffing. The Soviet dele-
gates, claiming that the Anglo-
American proposals for interna-
tional staffing would not guar-
antee against either suppression
or fabrication of evidence, main-
tained that the post should be
staffed by nationals of the host
country supplemented by "con-
trollers" from the "other side."
The Soviet team charged that the
Western plan fails to ensure
"mutual control" or guarantee
to the host country that its
national security would not be
prejudiced by improper activities
on the part of control personnel--
activities which would "create
tension and promote the cold
war."
On 11 February the Soviet
delegate implied that any further
negotiations on the key question
of voting procedures in the con-
trol commission must await pres-
entation of the "Western atti-
tude." He intended thereby to
create the impression that the
Soviet delegation is ready and
willing to discuss this issue,
but is being frustrated by con-
tinued Western refusal to intro-
duce a specific counterproposal
to the Soviet draft article
listing subjects requiring unanim-
ity among the three nuclear
powers.
During the forthcoming visit
of Prime Minister Macmillan to
Moscow, the Soviet leaders will
probably probe for possible
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-COMMUNITY MOVEMENT
-- - I 6-REPUBLICANS(PRI)
FANFANI GOVERNMENT MAJORITY (DEPENDED ON PR[ ABSTENTION)
3-SOUTH
TYROLEANS(SVP).--.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
and Industry are held by left-
of-center Christian Democrats--
Rinaldo Del Bo and Emilio
Colombo, respectively; and the
Budget and Treasury Ministries,
both held by Fernando Tambroni,
were kept out of the hands of
conservative former Budget
Minister Pella.
Instead, Pella was given
the Foreign Ministry, where he
may endeavor to improve rela-
tions with Eastern Europe in
order to promote greater bloc
trade; he may also encourage
expansion of Italian economic
relations with the Near East.
The new government, nevertheless,
will probably continue Italy's
pro-NATO policies.
Such a compromise cabinet
can be expected to accomplish
little in the way of positive
legislation. It will not carry
out the reform legislation
called for in Fanfani's pro-
gram. Segni's announced in-
tention to work out "an eco-
nomic plan" to solve the prob-
lem which led to recent seri-
ous strikes in Florence, Naples,
and the Rome area appears lit-
tle more than wishful thinking.
POLITICAL SITUATION IN CEYLON
Recent developments with-
in Ceylon's Parliament and
Prime Minister Bandaranaike's
Sri Lanka Freedom party (SLFP)
have defined the rivalry be-
tween leftist and relatively
moderate elements in the coun-
try more sharply than at any
time since Bandaranaike's coali-
tion government took office in
April 1956. The strong stand
which the SLFP's relatively
moderate wing is taking for
the first time against the par-
ty's leftist elements could
eventually create a rift in
the SLFP and the ruling coali-
tion impossible for Bandaranaike
to bridge. Such a development
would isolate and further weak-
en Bandaranaike and would pro-
vide the basis for new party
realignments.
At the SLFP's recent ex-
ecutive committee meeting, the
party's moderate elements over-
ruled the prime minister and
unanimously elected a strong
anti-Communist as party general
secretary to succeed the left-
ist incumbent.. They also em-
phatically rejected a proposal
that the government coalition
ally itself with the Communist
and Trotskyite Lanka Sama Samaj
(LSSP) parties to defeat the
United National party (UNP),
formerly the ruling party, in
the Colombo municipal elections
tentatively scheduled for next
November. This conflict has
also been reflected in the cab-
inet, with the renewal of
strong opposition by SLFP cab-
inet members to the far-leftist.
minister of agriculture.
The campaign of the rela-
tively conservative UNP since
September to revive its organ-
ization and regain its former
popularity apparently has met
with some success, and this
could hasten a polarization of
the island's political groups.
Both the LSSP and the Communist
party have admitted that the
UNP would benefit most from
elections at this time. If the
UNP's fortunes continue to
rise, the party could provide
the rallying point for moderate
government members who judge
their political positions jeop-
ardized by the weakness and
factionalism in the Bandar-
anaike government.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
A more immediate and crit-
ical effect of the UNP's re-
surgence and the LSSP-'s recent
defeat at the hands of the
SLFP moderates in Parliament
over a bill to facilitate the
government!:s use of its emer-
gency powers could be direct
counteraction by the LSSP.
widespread unrest.
strike could stimulate countermeas-
ures by nonlef List groups and lead to
The LSSP may feel forced to re-
cover the prestige it lost over
this issue by staging its long-
threatened general strike or by
cooperating with other antigov-
ernment leftist elements. Such a 25X1
BURMA
The Burmese Parliament
seems about to amend the Con-
stitution to permit General Ne
Win to stay on indefinitely as
prime minister. As now writ-
ten, the Constitution forbids
nonmembers of Parliament, like
Ne Win, to stay in'office for
more than six months at a time.
Ne Win's six-month term was
not due to expire until April.
He tendered his resignation to
Parliament on 13 February, how-
ever, stating it would be im-
possible to prepare the coun-
try for elections by April as
he had hoped and inviting Par-
liament to devise alternative
arrangements.
He announced he could not
be induced to return as prime
minister unless the constitu-
tional restrictions on the
length of his tenure were lift-
ed. Ne Win's statement con-
veyed the unmistakable impres-
sion that whatever Parliament's
formal arrangements for a suc-
cessor government, the army in-
tended to retain a substantial
voice in the national policy
sphere.
Former Prime Minister U
Nu's "clean" faction of the
Anti-Fascist People's Freedom
League (AFPFL) had opposed un-
til the last minute an exten-
sion of Ne Win's term beyond
the April deadline. During the
week-end recess of Parliament,
however, the faction reluctant-
ly agreed to go along with Ne
Win's request, probably thus
eliminating opposition to the
proposed amendment except from
the predominantly Communist Na-
tional United Front and perhaps
a sprinkling of non-Communist
mavericks. Nu has declared
that his party hereafter will
use Gandhian passive resistance
to oppose army "oppression."
petted to resign.
such event, Ne Win could be ex-
However.bitter the pill
was to swallow, Nu and his fol-
lowers in reality had little
choice but to bow to Ne Win.
Even if Parliament had decided
on holding the April elections
Nu has been urging, there was
every likelihood that such elec-
tions would have been'managed
by his archrivals, Ba Swe and
Kyaw Nyein, whose "stable" fac-
tion of the AFPFL probably now
has a majority in the Chamber
of Deputies. Even more serious
was the ever-present threat
that the army might drop all
concern for constitutionality
and seize complete power by a coup.
With a constitutional amend-
ment, the way would be cleared for
Ne Win and the army to step up
their program 1o reform Burma's po-
litical and economic life unhamp-
ered by 'the necessity to return pe.--
kiodically to Parliament fora re-
newal of amandate. Perhaps the great-
est danger now facing Ne Win is the
possibility that he may eventually
be supplanted by a ':small , clique of
ambitious, politically motivated
"young colonels," who under the
cover of the army's reformist pro-
gram may arrogate to themselves
such political and economic power 25X1
as to make Ne Win their puppet. In
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19 February 1959
Hanoi and Peiping have been
strongly critical of the Laotian
Government's renunciation on 11
February of the restrictive 1954
Geneva accords. In response to
these pressures, Vientiane on
18 February attempted to clari-
fy its action by explaining that
its earlier statement had mere-
ly recorded the facts: Laotian
commitments under the Geneva
accords had been completed.
There was no intention, it in-
sisted, of changing Laotian pol-
icies but, similarly, there was
no further basis for applying
the accords to the country.
It appears unlikely, how-
ever, that this explanation will
quiet foreign criticisms. Com-
munist sources assert that the
accords are binding on the en-
tire Indochina area until they
all have been fulfilled and
there has been a political set-
tlement in Vietnam.
Internally, Premier Phoui
is faced simultaneously with
growing discontent among. the
conservative elements of his
government. He fears that the
faembers of the conservative
Rally of the Lao People (RLP)
will soon serve him with an
ultimatum to supply the execu-
tive and ambassadorial posts
he promised in return for
their support in the National
Assembly or to resign from the
party. He is unable to fulfill
these promises because the
younger reformist elements
in the army and in the
Committee for the Defense of
National Independence are re-
fusing, in their positions
as cabinet members, to release
funds or establish the posts
for the older political lead-
ers.
Preoccupation with these
pressures and disputes could
dissipate the government's re-
form efforts? Should the con-
servatives become sufficiently
outraged, they are probably
capable of frustratin major
government programsq
Ibngku Abdul Rahman's res-
ignation as prime minister of
Malaya, which becomes effective
on 15 April following a two-
month leave, apparently was dic-
tated by his desire to devote
full time to party affairs in
preparation- for the general
elections this August. He wants
in particular to strengthen his
United Malay National Organiza-
tion (UMNO), the dominant group
in the ruling Alliance party,
His replacement by the present
minister of defense, Data Abdul
Razak bin Hussein, assures the
continuation of the government's
major policies. Rahman plans to
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
return to the premiership if
the Alliance wins the election.
The two largest components
of the Alliance--UMNO and the
Malayan Chinese Association--
seem to be losing some popular
support and are torn by intern-
al friction and mutual suspi-
cion. Probably of most concern
to Rahman are reports that the
Malay voters are apathetic and
that UMNO is losing ground to
the Pan-Malayan Islamic Associa-
tion among rural Malay Moslems,
traditionally the backbone of
UMNO strength.
Rahman believes. strongly
that a large majority is needed
to achieve his goals of elimi-
nating the Communist threat and
building racial harmony. A
two-thirds majority is required
in the new House of Representa-
tives to amend the constitution
and provide safeguards with
which to replace the "emergency
regulations." The steady prog-
ress: toward eliminating the
Communist terrorist threat is
likely to force the government
to declare an early end to the
emergency, possibly this year.
Rahman believes such a declara-
tion would leave the federation
with insufficient legal means
to control Communist subversive
activities.
the federation.
capable of paving the way for
eventual merger, of Singapore and
Rahman may also feel that
his resignation will allow him
greater freedom to play a more
direct role in Singapore's po-
litical affairs prior to gen-
eral elections there in May.
He will probably attempt to use
his position as national presi-
dent of UMNO to force the Singa-
pore branch to cooperate fully
with Chief Minister Lim Yew
Hock's party during the cam-
paign. Rahman's great person-
al prestige could be of con-
siderable value to Lim, especial-
ly if Rahman gives at least
tacit support to Lim's campaign
strategy of depicting himself
as the only Singapore leader 25X1
JAPANESE - SOUTH KOREAN CRISIS
The Japanese Government's
formal decision to proceed with
the voluntary repatriation of
Koreans to North Korea, over
Seoul's strong objections, has
created a new crisis in Japa
nese - South Korean relations.
The decision apparently ends
the negotiations for normaliz-
ing relations, and the Rhee gov-
ernment is threatening to Step
up seizures of Japanese fishing
boats, to suspend trade, and to
intercept any repatriations ves-
sels. Japan has intimated it
might be forced to strengthen
its protective patrols in the
fishing areas, which could lead
to clashes between South Korean
and Japanese vessels. It might,
if necessary, refer the matter
to the United Nations. Both
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19 February 1959
sides appear to be trying to
keep the dispute under control.
The Japanese Government's
decision to act unilaterally on
the repatriation issue probably
stems from South Korea's in-
transigence in the negotiations
and a desire by the Kishi gov-
ernment to avert a major domes-
tic political problem before
the upper-house elections in
June. Other factors, such as
the problem of internal securi-
ty, the expense of maintaining
many destitute Koreans, pressure
on the labor market, and Japan's
vulnerability to charges of
violating human rights also
entered into the decision.
In a rare display of una-
nimity for South Korea, both
administration and opposition
leaders have endorsed nation-
wide demonstrations protesting
Tokyo's decision.
The new anti-Japanese cam-
paign may revitalize President
Rhee's waning popularity, and
give him an opportunity to di-
vert international attention
from the political crisis pre-
cipitated by the administra-
tion's use of force on 24 De-
cember to enact legislation
inimical to the opposition Demo-
cratic party. It might even
lead to a compromise of the
domestic political crisis.
Japan has requested the
International Committee of the
Red Cross (ICRC) to screen and
transport the applicants, who
may number up to 100,000. A
rejection of the request by
the ICRC would force the
Japanese Government to allow
the Japanese Red Cross to
deal directly with the North
Korean Red Cross, as already
requested by Pyongyang. The
North Korean Government has
thus far failed to reiterate
an offer made in September 1958
to provide transportation and
guarantee a livelihood for all
returnees.
ECONOMIC ASPECTS OF THE SOVIET 21ST PARTY CONGRESS
The Soviet Seven-Year Plan
was approved by the 21st party
congress without significant
change. Long-term objectives
remain the "further consolida-
tion of the economic and defense
might of the USSR on the basis
of the priority development of
heavy industry." The consumer
still takes a back seat to the
investment program, but, accord-
ing to Khrushchev, the next 10
years will show that the USSR
leads the world in improving
the material welfare of its
citizens.
This will result, he said,
from accomplishing the goal of
surpassing American ~production
in agriculture in 1965 and in
industry by 1970. In his cal-
culations, however, Khrushchev
overstates the present position
of Soviet industrial output rell-
ative to US output, thus arriv-
ing at the early date of 1970,
and he may be underestimating
future US growth rates, Calcu-
lating Soviet industrial output
at present at 40 percent of that
of the United States, not 50 per-
cent as used by Khrushchev, and
assuming a slightly higher rate
of growth for future American
industrial output, Soviet indus-
trial output would be about 60
percent of that of the US by 1970.
The new nations of Africa
were advised to look at the rate
of economic growth in the United
States, compare it with growth
rates in the USSR and China,
and then decide to adhere to one
system or the other. Khrushchev,
the other speakers at the con-
gress, and the whole Soviet
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19 February 1959
propaganda machine are sparing
no effort to extol the bloc's
faster rate of economic growth,
confident this will persuade un-
committed nations to "choose
socialism."
Khrushchev's ebullient but
almost certainly fallacious
prognosis that the Communist
bloc will produce more than half
of the world's industrial out-
put by the end of seven years
was amplified by the vice pres-
ident of the Academy of
Sciences, Ostrovityanov, who
stated that this projected level
of output would bring about a
situation in which the bloc
would occupy a leading position
in international exchange and
monetary turnover.
Ostrovityanov said Commu-
nist countries, whici now trade
among themselves on the basis
of world market prices, will
begin gradually to set their
own prices based on production
costs in the socialist camp.
The Soviet ruble, he felt, will
begin to enter the arena of the
international market and grad-
ually crowd out the dollar.
To do this, however, the
bloc must be able to provide
quality goods in adequate quan-
tities at competitive prices.
There is no sign that.Soviet
leaders plan soon to make the
ruble a freely convertible cur-
rency. Khrushchev recently said
that if such a plan were con-
templated, he would probably
advise against it.
M.. G. Pervukhin, former
planning expert and quondam
member of the opposition to
Khrushchev, was charged with
espousing policies which the
USSR had to subsequently re-
verse--such as favoring hydro-
electric over thermal power,
favoring coal over petroleum,
and permitting only slow growth
in chemicals. While there may
be some truth in these charges,
certainly the primary reason
for Pervukhin's present dis-
grace is his opposition to
Khrushchev's plan for the re-
organization of industry. His
detractor at the congress, pres-
ent, planning chief Kuzmin,
charged that Pervukhin had de-
rogatorially referred to an al-
leged "organization itch" of
Khrushchev.
Khrushchev repeated at the
congress his statement that
serial production of ICBMs had
been successfully organized,
and in a speech in Ryazan just
after the congress he again
made this remark and added that
Western observers, having given
the matter second thought, have
decided to agree with him. Seri-
al production, in normal Soviet
usage, would mean producing
standardized missiles at a planned
rate for delivery-, to opera-
tional units, and presumably,
this is what Khrushchev has in
mind. Although for some items
a "mass production" stage fol-
lows "serial production," this
is probably inapplicable to
ICBM production.
Minister of Defense Mali-
novsky and Deputy Chairman Usti-
nov of the USSR Council of Min-
isters also made noteworthy
statements on rocket develop-
ment. Malinovsky said Soviet
ICBMs could reach any part of
the world, and precisely any
spot because they are very ac-
curate. He also said the armed
forces have been equipped with
a whole series of military bal-
listic missiles: intercontinen-
tal; short=, medium-, and lo-*
range continental; and a whole
group for tactical purposes.
Ustinov--apparently re-
sponsible for overseeing the mili-
tary production programs--said
the USSR is now "serially pro-
ducing military rockets of all
types and purposes which, in
the hands of Soviet armed forces
...wadll give a. worthy rebuff
to any aggressors and adventur-
ists." (Prepared 25X1
by ORR
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
EAST GERMANY IMPORTS DUTCH WORKERS TO REDUCE LABOR SHORTAGE
About 90 Dutch workers
went to East Germany on 1 Feb-
ruary to take jobs in the East
German shipyards at Warnemuende
in spite of the protests
of local unions and warnings
by Dutch Government officials.
A Rotterdam firm, contracting
with East Germany to supply la-
bor for a one-year period, ad-
vertised locally and received
about 1,000 applications. The
workers--under contract for a
five-week period which is re-
newable after a week's leave
to return home--are to receive
a generous wage compared with
the Dutch and East German
scales, a major part of it in
foreign exchange.
Apparently other workers
from Western Europe, particu-
larly West Germans, will be
brought to East Germany, and
the opportunity to propagandize
the East German provision of
jobs for the unemployed in "cap-
italist" states will be exploit-
ed fully.
Taking this extraordinary
means to overcome its labor
lien a to its economico al
CHU TE LIKELY TO SUCCEED MAO TSE-TUNG AS GOVERNMENT CHAIRMAN
The British Embassy in
Peiping reports that Chu Te's
candidacy for the chairmanship
of the Chinese People's Repub-
lic was being discussed as
early as mid-January by "street
committees"--the local citizens'
organizations which normally
would prepare public opinion
for such changes. Similar ex-
planations:atthe grass-roots
level followed Mao Tse-tung's
decision last December to re-
shortage, the regime risks in-
creasing discontent among ship-
yard workers, who have succeeded
to date in resisting regime ef-
forts to raise work norms. The
East Germans may be concerned
that the Westerners will be
more efficient. Officials appar-
ently plan to reassure East Ger-
man workers on this point or
have the Dutch workers adjust
their efforts.
The East German radio re-
cently mentioned that there is
a labor shortage of as much as
115,000 persons in the country.
These shortages are partly caused
by the large number of refugees
fleeing to the West and to the
fact that some industries,
starved for up-to-date equip-
ment, require more labor than
they should. Refugees number
200,000 or more persons a year,
the majority of whom are in the
productive or potentially pro-
ductive age group, presenting
the regime with a very serious
linquish his largely ceremonial
government post.
The 72-year-old Chu, the
present vice chairman and a re-
spected party elder, is a logi-
cal choice to succeed Mao in
the government job in April.
Chu has been described as a
sort of "lubricating oil" among
the leadership--a man who would
be willing to remain a figurehead
and permit the real political
power to lie elsewhere.
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19 February 1959
The naming of Chu to the
chairmanship would avoid a choice
between Liu Shao-chi or Chou En-
lai, the two Chinese leaders un-
der Mao who hold the major power.
Liu is chairman of the standing
committee, the permanent body
of the National People's Con-
gress, which, along with the
chairman of the Chinese People's
Republic, "Jointly" exercises the
chief authority of the state.
Chou is premier of the State
Council, the cabinet-like ad-
ministrative organ which is the
locus of real power in the gov-
PEIPING SHIFTS EMPHASIS IN RURAL WORK
Peiping's agricultural
programs apparently have been
undergoing a re-evaluation in
a series of national agricul-
tural conferences since December.
Peiping apparently has been forced
to recognize -:.that the, com-
pulsive pursuit of some of its
agricultural program has not
been sound. Peiping almost cer-
tainly overestimated the success
of its experimental plots last
year. Based on these question-
able successes, a number
started to withdraw impor-
tant acreage from production and
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ernment. There is as yet no in-
dication that either Liu or Chou
will relinquish his government
post at the congress.
Chu has been closely as-
sociated with Mao since the
early days of the party and prob-
ably ranks next to him in popu-
larity. Regarded as the "grand
old man" of the Chinese Communist
Army, Chu commanded Peiping's
armed forces from 1928 to 1945,
and nominally until 1954. He
now is an elder statesman of the
regime, occupying a number of
senior party and government
posts in which he acts primarily
as a spokesman for Mao.
Mao's decision to step down
as government chairman apparent-
ly had considerable impact on
the average Chinese, who Peiping
admits was unable to understand
the "logic" of the decision.
Concern over this popular reac-
tion appears to have been an
important factor in the delay
of the congress from January--
when it was originally scheduled
--to April. The discussion of
Chu's candidacy at the local
level appears to be the regime's 25X1
first major effort to build up
Mao's successor in the govern-
ment.
to farm greatly increased areas
by methods used on last year's
experimental plots. This drive
now has been shelved until na-
tional yields reach more than
ten times the 1958 level.
It is evident that last
year's spectacular iron and
steel drive, whatever its suc-
cess, brought some dislocations
to the rural economy. At its
height last October, this drive
took up to 25 percent of the
rural labor force away from press-
ing, harvest and planting tasks.
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Apparently this was too much,
even for China's labor-rich
economy. Crops lay unharvested
in the fields, and normal trans-
portation and distribution chan-
nels were disrupted. Peiping
now describes its iron and steel
program in rural areas as one
to produce "more and better
iron and steel with less man-
power."
Manpower is also to be
taken away from water-conserv-
ancy projects, which were
highly publicized last winter,
and from deep plowing, which
the regime now finds expedient
to restrict. Peiping says that.
it will be satisfied if deep
plowing--which in most in-
stances has meant manual dig-
ging of the soil to a depth of
several feet--is completed on
only one third of the cultivated
area and to a depth of one
foot or only seven or eight
inches.
Rural manpower thus re-
leased is to be employed for
the most part in tasks directly
connected with actual cultiva-
tion. At least half of a com-
mune's labor force is to be
devoted to work in the fields;
one fourth is being devoted to
the current campaign to expand
the production of fertilizer.
More attention is to be paid
to what Peiping describes as
"sideline" occupations--such as
forestry, fishing, and the pro-
duction of meat and vegetables.
Peiping has urged this "diver-
sification" on the communes and
has even suggested that the
communes should look to this
source for higher income.
Peiping at the same time
has been at pains to point out
that it definitely is not a-
bandoning its plans for a bigger
and better "giant leap forward"
in agriculture this year. The
"tempo" of labor activity is
to be stepped up, not just by
lengthening the working day--
Peiping acknowledges that a
"man cannot last long without
eating and sleeping"--but also
by improving tools and organi-
zation and thus raising labor
productivity.
It is apparent, however,
that the immense labor require-
ments of this year's leap for-
ward will not be met by such
measures alone. The regime has
in fact told its rural cadres
that the "efficient measures"
used in last year's mass labor
campaigns should again be used.
THE SITUATION IN CUBA
The provisional Cuban Gov-
ernment has assumed an appear-
ance of greater unity with the
appointment of Fidel Castro as
prime minister. Nevertheless,
the lack of administrative ex-
perience and organizational
ability among many top officials
will probably continue to limit
the administration's effective-
ness. Castro will dominate the
government, as he did before his
position became official, and
all authority and policy will
emanate from the cabinet instead
of the president. Castro him-
self, however, has no government
experience and has demonstrated
little political or administra-
tive ability.
The government is confronted
with pressing financial, social,
and labor problems which will
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19 February 1959
quickly test its competence.
The regime has already lost s me
prestige and popularity because
of delay in tackling these prob-
lems. Criticism, particularly
from certain special interest
groups such as labor and busi-
ness, will become sharper if de-
cisive measures are not initi-
ated quickly. Certain political
groups with no voice in the gov-
ernment, such as the followers
of former President Carlos Prio
Socarras and members of the Rev-
olutionary Directorate, which
have already demonstrated some
opposition to the Castro move-
ment, will try to exploit any
further weakness or delay in the
government program. The admin-
istration will probably give
priority to land reform, long
one of Castro's particular inter-
ests.
The first cabinet meeting
under Castro's leadership, held
on 17 February, launched an aus-
terity program with a decree cut-
ting cabinet salaries in half
and another directed against
graft among government officials.
If enforced, these measures will
be revolutionary to Cuba's try.-
ditionally:~corrupt politics.
Measures were also taken to re-
open Havana's gambling casinos
in order to avert a threatened
hotel employees' strike and to
bolster Cuba''s lagging tourist
trade.
There is no indication of
a letup in Castro's "campaign
against dictatorships," although
activities against the Dominican
Republic, Haiti, Nicaragua, and
Paraguay have apparently not pro-
gressed beyond the planning stage.
Plotting will undoubtedly con-
tinue, and members of the Castro
movement will probably offer ma-
terial aid to exile groups. The
antidictatorship propaganda cam-
paign is now being directed at
the Organization of American
States (OAS), and both the Cuban
ambassador to the OAS and Foreign
Minister Agramonte are attempt-
ing to have all countries under
dictatorship expelled from mem-
bership. Cuba has threatened to
withdraw from the, OAS if its
plan is rejected.
THE NEW VENEZUELAN GOVERNMENT
Venezuelan President Romulo
Betancourt, inaugurated on 13
February, has organized a coal-
ition cabinet without Communists
which apparently is acceptable
to the three major left-of-cen-
ter parties--his own Democratic
Action (AD), the Republican Dem-
ocratic Union (URD), and the
Christian Democratic COPEI. For-
mation of a coalition government
fulfills one of the basic provi-
sions of a unity pact signed by
the three groups prior to the
December elections. None of the
ministers is known to beunfriend-
ly to the United States, and
Betancourt has indicated he will
not make any further precipitate
changes in the relations between
the government and the foreign
oil companies such, as the issu-
ance of the income-tax decree of
last December.
The 14-member cabinet--in-
eluding four holdovers from the
outgoing junta government--has
three members each from the URD
and COPEI but only two from the
AD. The AD members, however,
hold the Ministries of Interior
and of Mines and Hydrocarbons,
the most important political and
economic posts. Moreover, the
six politically "independent"
members appear to g,.ve the cabi-
net a strong AD orientation as
well as considerable prestige
at the outset. Five of them--
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19 February 1959
including the secretary to the
prer=;idency, who will carry cabi-
net rank--seem to have close ties
with the AD. The sixth, a re-
nowned medical specialist and
nephew of a prominent Venezuelan
pro-Communist, is a technical
appointee to the Ministry of
Health.
The URD, which polled a
large vote last December in Cara-
cas, where Betancourt has only
limited support, received the
posts of labor, communications,
and foreign relations. The new
foreign minister, Ignacio Arcaya,
is president of the URD and seems
more moderate in his views on
US-Venezuelan relations than his
key party leaders. Since these
officials are likely to be con-
fronted with serious political
problems, Betancourt may have
assigned them to the URD as a
maneuver camouflaged as gener-
osity. Both the URD and the
Communists, who reportedly were
not included in preliminary dis-
cussions on formation of the cab-
inet, have shown sigr}s of resent-
ment over the election outcome
and may attempt indirectly to
embarrass the direction of the
new government.
The viability of the coal-
ition will depend in large meas-
ure on Betancourt's ability to
URUGUAY'S NEW GOVERNMENT
Almost a century of rule
b, Uruguay's leftist-oriented
Colorado party will end on 1
March when the conservative
National party (NP) takes over
the government. The conserva-
tives scored a resounding vic-
tory last November when the
electorate expressed its re-
sentment of the Colorado party's
Tammany-type politics and its
failure to tackle Uruguay's
serious economic problems.
conciliate divergent views on
socio-economic reforms, to mini-
mize traditional party animosi-
ties, and to maintain the sup-
port of the military. It will
also depend on the willingness
of the URD and COPEI to sacri-
fice their own interests for
the sake of unity, since govern-
ment achievements are likely to
be credited to AD and thus fur-
ther strengthen its position as
Venezuela's largest party. Fur-
thermore, the AD's control of
Congress should enhance Betan-
court's influence over the exec-
utive branch.
Members of the new govern-
ment are generally agreed on
the urgent need for economic
reform but are hampered by in-
experience, divided by factional
struggles over patronage, and
beset by a divergence of re-
gional interests. These dif-
ferences will seriously compli-
cate the difficulties inherent
in Uruguay's cumbersome nine-
man executive in which the oppo-
sition by law has one third
of the seats.
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19 February 1959
The most disabling diffi'
culty is the patronage split
which places the NP's three
"ruralist" councilors, headed
by Benito Nardone, in opposi-
tion to the three "old-line"
members. The "old-line" group
is controlled by 85-year-old
Alberto Herrera, long-time NP
boss, who holds no office but
is determined to run the govern-
ment from behind the scenes.
Herrera has evinced no sign of
placating the third important
faction, the Blanco Democratic
Union, a business-oriented
group which, while not repre-
sented in the nine-man execu-
tive, won almost half the NP's
51 seats in the 99-man Chamber
of Deputies.
The most urgent problems
confronting the new government
are the skyrocketing federal
debt, the nation's decreasing
productivity, and the increas-
ing trade imbalance. The gov-
ernment debt has nearly doubled
since 1954, chiefly as a result
of inefficient state monopolies
and welfare-state activities,
while the gross national product
has decreased in absolute as
well as per-capita terms. For-
eign earnings from Uruguay's
chief exports, wool and meat,
were cut in half between 1953
and 1957, partly because po-
litically inspired subsidies
deflected production into less
profitable channels.
party are resolved.
til power squabbles within the
The .)utgoing government
turned ,,singly to Soviet
bloc trade to alleviate these
difficulties. NP leaders, whi:'.e
deploring this trend, see con-
tinuing bloc trade as an eco-
nomic necessity for the short
run. They plan to seek early
financial aid from the United
States and the International
Monetary Fund, but their pla_-,
for basic economic reforms .,:; . 25X1
almost certainly be stymied un-
Prime Minister Verwoerd of
the Union of South Africa has
recently made proposals to
strengthen white supremacy by
eliminating any African repre-
sentation in Parliament and
stimulating tribal differences.
This is unlike~y, however, to
improve South Africa's reputa-
tion abroad, to satisfy the
Africans, or to prevent even-
tual racial disorders.
Verwoerd proposes to es-
tablish five areas, based on
major tribal groups, in which
the Africans would be allowed
to exercise local control and
to govern through a reconstitut-
ed tribal hierarchy. Each area
would have a native secretary
general with direct access to
the white minister of Bantu de-
velopment who would appoint him.
The area would have a governing
body, subject to the veto power
of the minister, and a white res-
ident commissioner general. It
would appoint an envoy to the
national government.
Although Verwoerd apparent-
ly envisages autonomous Bantu
states as entities within a
"Commonwealth of South Africa,"
with the eventual withdrawal of
white administration from the
African areas, his proposals
are unlikely to lessen the bit-
ter racial tension within South
Africa.
Verwoerd has also asked
Parliament to abolish the pres-
ent system of representation
whereby the 9,000,000 Africans
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19 February 1959
have three European representa-?
tives in South. Africa's T63-mem-
ber House of Assembly. This
would eliminate the Africanb'
last remaining token say in the
legislature controlling their
lives.
The incumbent Nationalist
party apparently believes that
these proposals constitute "posi-
tive" apartheid which would en-
able the Africans, with limited
financial aid from the govern-
ment, to develop their own in-
dustries. The government has
already proposed a Bantu In-
vestment Corporation Bill with
an official share capital of
$1,400,000 to stimulate econom-
ic_: development 'in the native
reserves.
The Verwoerd government has
virtually ignored the problem
of the urbanized Af ricai , in
line with the apartheid theory
which aims at returning the
Africans to their rural tribal
groups. Furthermore, the pro-
posals do not face up to the
economic realities of South Afri-
can life. The economy depends
on non-European labor for about
90 percent of the working force,
the native reserves can barely
provide for the 3,000,000 Afri-
cans now living in these rural
areas, and the $1,400,000 in-
vestment fund now envisaged ap-
pears inadequate when compared
with the $280,000,000 develop-
mental aid considered a mini-
mum by an official commission
which'studied the problem re-
cently.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
PATTERNS AND PERSPECTIVES
KHRUSHCHEV IN ACTION--THE DECEMBER PARTY PLENUM
The Soviet party central
committee met in plenary ses-
sion on 15 December 1958 for
the sixth time in a year and
the second in two months. In
many respects the five-day
session was unique. In con-
trast to the usual secrecy
surrounding plenums, the de-
cision to hold it and the sub-
jects for discussion were an-
nounced publicly a month in
advance. Moreover, the Soviet
press and radio gave a day-by-
day account of the proceedings,
and a "stenographic report" of
the plenum was published in
book form a few weeks later.
Thus there is some ques-
tion as to just how typical the
proceedings of this plenum
were, but when due allowance
is made for the purpose behind
all the publicity, there still
remains a reasonably reliable
picture of Khrushchev and his
central committee in action.
Many of the particularly re-
vealing parts of the plenum
were omitted from Soviet press
and radio accounts; the follow-
ing analysis, therefore, is
based on the stenographic re-
port and concentrates on the
material that was not pub-
lished at the time.
Cult of Personality
The strongest over-all
impression regarding the plenum
is that it was primarily de-
signed to enhance the leader
.mage of Nikita Khrushchev as
the focus of loyalty or obedi-
ence of the Soviet people and
the model for subordinate
leaders. Although he moved
rapidly after Stalin's death
to seize control of the es-
sential elements of power in
the Soviet Union, Khrushchev
has been slow to use propaganda
media deliberately to create
an idealized picture of himself
as the powerful paternal author-
ity in Soviet society possess-
ing all human virtues and no
human frailties. The December
plenum marks the first serious
attempt to develop this leader
image.
This plenum was not a work-
ing body in the sense that it
heard, discussed, and formally
approved new policies. Khru-
shchev said that "the work of
our plenum will evidently con-
stitute a political accounting
by the party to the people on
the condition of agriculture."
Agriculture was chosen as the
topic for discussion, presum-
ably because it provided the
ideal media in which to develop
the Khrushchev leader image. It
is the field Khrushchev knows
most about, the field in which
his policies have been active
for the longest time and in
which he feels they have been
demonstrably successful.
The volume of praise for
Khrushchev at the plenum was
unprecedented. Nearly every
speaker made a point of sin-
glinghim out for eulogy or spe-
cial recognition, and the bulk
of this praise was for him per-
sonally--not, as generally
theretofore, in his capacity as
first secretary, "head" of the
party presidium, or premier.
The strongest praise came from
Moscow Oblast First Secretary
Kapitonov, who called Khru-
shchev }'a paragon of the
Leninist style of leadership."
Most speakers, however, related
their praise to Khrushchev's
specific policies, advice, or
accomplishments in the agricul-
tural sphere.
An effort was evidently
made to keep the praise within
the bounds of realism, to make
it appear genuine, as applying
to a flesh-and-blood person--
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19 February 1959
CULT OF PERSONALITY
EXCERPTS FROM SPEECHES AT DECEMBER
PLENUM OF SOVIET PARTY CENTRAL COMMITTEE
? "If Nikita Sergeyevich Khrushchev had listened
to the doubters even alittle bit, then we would'not
have achieved such brilliant successes in the devel-
opment of livestock growing."
? "himny thanks to you, Nikita Sergeyevich. You
have taught us how to raise corn.-
* "Of great assistance in the expansion of sheep
breeding were the personal instructions of Comrade
N. S. Khrushch?v."
? "And then Comrade N. S. Khrushchev came to visit
Belorussia. This was a great event for the Belorus-
sians."
? "Your criticism, I7tkita Sergeyevich, I accept
as a serious requirement for the Rostov Oblast par-
ty committee, for all rayon party committees, and
for myself."
? "What an outstanding role in the accomplishment
of these exceedingly difficult economic tasks was
played personally by Nikita Sergeyevich Khrushchev."
? "The amazing rise which has occurred in agri-
cultural production would have been unthinkable with-
out the enormous organizational and political work
which is being performed by the whole party, by its
central oommittee, by the party presidium, and by
Nikita Sergeyevich personally."
? "The initiator of the very important measures
for a steep rise in agriculture, and in particular
for the mastering of virgin lands as the chief source
for great development of grain production, was Nikita
Sergeyevich Khrushchev."
? "The remark of Nikita Sergeyevich Khrushchev
that under the conditions of Kalinin Oblast the nat-
ural reservoirs can well be, used for raising ducks--
this we accept for execution as a directive of the
central committee of our party."
not to a superhuman being. The
stereotyped superlatives of the
Stalin era, "omnipotent" or
"infallible," for example, are
conspicuous by their absence.
But as speaker after speaker
added his bit of praise, an un-
mistakable image of charismatic
leadership emerged and the new
"cult of personality" was car-
ried one step closer to reali-
zation.
Attack on the Antiparty Group
In volume of words and ex-
travagance of invective, the at-
tack at the plenum on the "anti-
party group" was the sharpest since
the initial campaign following
the group's defeat in June 1957.
This fact, plus the appearance
of J3ulganin to confess to a role
of "nominal" leader of the
group, led some observers to
conclude that denunciation of
"antiparty" opposition to Khru-
shchev was the real work of
the plenum. Read in the con-
text of the full proceedings,
however, the criticisms of the
antiparty group are clearly
seen to be there for the pur-
pose of dramatically under-
scoring Khrushchev's victorious
leadership, as well as of em-
phasizing the wisdom of his pol-
icies and the deep debt of grati-
tude the Soviet people owe him
for saving them from the "dis-
astroust" policies of the de-
feated leaders.
The major speeches at the
plenum all follow much the same
outline:
1) praise for the policies
of Khrushchev ("The outstand-
ing occurrence in the life of
the people was the September
1953 central committee plenum
which accepted, on the report
of N. S. Khrushchev, the his-
torical decisions on agricul-
ture");
2) comments on efforts
of the "antiparty group" to
frustrate Khrushchev's policies,
and the struggle and victory
of "good" over "evil" ("I was
amazed at the great work, the
will power, the patience, and
the decisiveness which Nikita
Sergeyevich Khrushchev dis-
played when he struggled against
the antiparty group and resolute-
ly routed out their antiparty
intrigues"); and
3) a portrayal of the im-
provement of agricultural con-
ditions in the speaker's bail-
iwick since September 1953 and
a discussion of what is being
done to fulfill the "wise pol-
icies of Nikita Sergeyevich" to
further increase agricultural
production and improve condi-
tions in the countryside.
The "antiparty group" is
thus a symbol of the futility
and danger of opposing Khru-
shchev's policies, a symbol
of obstacles overcome, and an
affirmation of his right to lead.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
The Plenum at Work
The plenum was obviously
carefully planned. There is
virtually no sign of spontane-
ity in any of the speeches and
none at all of debate. Except
for Khrushchev's irrepressible
interjections in many of the
speeches, the whole proceedings
were sca.rsely, distinguishable
from the completely stereotyped
Supreme Soviet sessions, in
which carefully prepared speeches
grind. through to preordained
unanimous conclusions and
only minor changes for the sake
of appearances are made in the
government's proposals.
If the December plenum is
any guide, the meetings of the
central committee are much
larger forums than previously
supposed. In addition to the
full and candidate members of
the central committee, the
members of the central audit-
ing committee were also pres-
ent. Sixty-seven speakers came
to the rostrum during the five-
day session, but only slightly
over half of these were mem-
bers of the central committee.
The others were collective
farm chairmen, tractor brigade
leaders, lower echelon party
workers, and two speakers who
were not even members of the
party.
The general impression
conveyed by the stenographic
report is that the central com-
mittee plenum has become just
another public forum for the
transmission of Khrushchev's
ideals, personality, and drive.
It has evolved from the mori-
bund institution of Stalin's
later years, through a period
in which it was an occasional
arbiter in disputes that could
not be resolved in the party
presidium, to its present sta-
tus--a sort of "Supreme Soviet"
of the party.
A Secret Session?
Although billed as a steno-
graphic report, the published
volume does not include a ver-
batim account of all that went
on at the plenum. Part of one
of the minor speeches was clear-
ly paraphrased, and the report
on the work of the editorial
commission was not given. The
major omission, however, re-
lates to the leadership shake-
up that had taken place in the
Turkmen Republic just a few
days before the December plenum
convened in Moscow, and suggests
that a "secret session" of the
plenum was held to consider the
matter.
In the Turkmen shake-up,
First Secretary Babayev and an-
other secretary, Durdyyeva, were
dismissed for "gross mistakes
in their work"; Dzhuma Karayev
was elected new first secretary.
Karayev reported to the plenum
in Moscow on the affair,, but
his remarks were summarized with
the statement, "Comrade Karayev
then went on to dwell on cer-
tain questions of intraparty
work."
It was later revealed that
Babayev has been ousted from
the all-union party central com-
mittee, presumably at the De-
cember plenum. Babayev is the
only person other than the orig-
inal-Jour of the "antiparty
group" to be ousted from the
central committee since the So-
viet 20th party congress in
February 1956. The secrecy sur-
rounding his ouster indicates
that there are still some func-
tions of the central committee
too sensitive for public scrutiny.
Khrushchev in-Action
Khrushchev delivered the
opening report and the conclud-
ing address, and his name and
spirit dominated every speech.
As the stenographic report re-
veals, he dominated the pro-
ceedings in other ways as well.
Beginning with the first speak-
er and continuing throughout
the plenum, he interrupted
speech after speech to inject
a thought, make a correction,
or call the speaker to task.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
Over half of the speeches were
interrupted in this way. In
some cases the interruptions
were so extensive that the
speech was turned into a dia-
KHRUSHCHEV INTERRUPTS...
GITALOV (tractor brigade leader): the intro
duction o,;' coi: lcx T echanl.,atto;, tr. the cultivation
of corn has done much to promote the high yield of
this crop in all kolkhozes of the oblast.
K11RU JIC1.EV: How is it that you obtained to
little silage, only 66,000 pounds?
GITALOV: Our land is steppe and and zone.
KHRUSHCHEV: I know. IPve been in your steppe.
GITALOV: We are trying to obtain more.
KHRUSHCHEV: I think that Os fine, Comrade Gitalov.
And IN not criticizing you. I only want you to
produce more.
GITA.LOV: Kikita Jergeyevich, we are trying,
but I cantt answer exactly because I spent three
and a half months in America during this period.
KHRUSHCHEV: Now you probably don't understand
Ukrainian any more.
logue between the speaker and
Khrushchev.
There is little question
that this is one of Khrushchev's
ways of working. He has abso-
lute confidence in his own
knowledge and judgment, and is
impatient with others. He
seems to feel an inner neces-
sity to push things along by
injecting the force of his per-
sonality and authority into
the discussions. He is much
more disposed to argue and ex-
plain a point, however, than
simply to order a certain pol-
icy carried out.
SE.HTCHAS17YT (Komsomol secretary): It is our
opinion that we should proceed to establish certain
nonworking days for students (working on kolkhozes),
additional leave, and other advantages.
KHRUSHCHEV: I think we should be careful about
offering paid nonworking days to the workers because
this could be used to advantage not only by the young
men wht want to study but also by those who do not
want to work.
SEMICHAS`THY: Then, perhaps they could be select-
ed on the basis of recommendations by public organi-
sations.
KHRUSHCHEV: Even recommendations may not help
much either, as everyone has an in-law or a brother
and everybody will recommend.
When RSFSR Deputy Minister
of Agriculture Yurkin complained
of an administrative disagree-
ment over the use of sugar beets,
Khrushchev said: "I'll advise
you what to do with the sugar
beets the plants can't process.
fatten hogs and get very good
lard.' Yurkin objected that it
was a problem of commodity pro-
duction, whereupon Khrushchev
explained, "Comrade Yurkin, pork
--that is also commodity pro-
duction. If the sugar plants
cannot process the beets, let
the hogs process them and con-
vert them to lard. That will
be commodity production."
The argument continued in
much the same vein until Yurkin
acknowledged that sugar beets
should be regarded both as a
raw material for sugar produc-
tion and as a product for fat-
tening cattle, Then Khrushchev
said, T,See, we were agreed."
HUSTAFAYEV (Azerbaydzhan party secretary, pro-
posing a system of fees for pasturing of individual-
ly owned livestock): With this money it is possible
to establish an intercollectivefarm monetary fund
and build intercollective farm roads and water lines.
KHRUSHCIiEV: Comrade Ilustafayev, we are not
raising objections against reformation of the coun
tryside, but you are introducing an incorrect pro-
posal. h'hat you are talking about is a tax: it is a
penal policy and is not appropriate for us. Hdu.cu:
ttve work must be introduced among the population.
It is necessary, first of all, that the Communists
working in the village be actual examples in this
matter.
JrUSTAFAYEV: Right, Plikita Sergeyevich, but to
make use of this possibility takes time.
YHRESHCIIEV: Roy is more time needed? Forty-
one years of Soviet power have passed. This is suf-
ficient time.
In this exchange, however, Yurkin
had the last word. He answered,
perhaps more bravely than wise-
ly, "Agreed, except about the
sugar plants." The stenographic
report notes that this sally was
greeted w~;h laughter from the
hall.
Khrushchev's compulsion to
be the center of attraction was
made clear by the occasional
irrelevance of his remarks. Most
of his interruptions, however,
show him off in a better light.
Some of his interjections seem
to have been planned together
with the speaker to enable him
to makes point. This appears
to Piave been the sole purpose
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for one speech in particular--
that of Dubkovetsky, a kolkhoz
chairman from the Ukraine. It
was the shortest speech at the
plenum, consisting of little
more than an introduction and
a dialogue with Khrushchev.
Khrushchev: "Fedor Ivan-
ovich, what is the percentage
of corn to the over-all area
planted to grain crops at your
kolkhoz?"
Dubkovetsky. "Almost 30
percent."
K: "And if corn were to
take up one half of that area?"
D4 "We could do that by
cutting down on other grain."
K: "Perhaps wheat?"
D. "We. get 2,200 pounds
of wheat per acre."
RUDEIJIO (a rayon party secretary): Practice
in applying the new:nethod shows that the best com-
binatton of manual labor and machines is achieved in
the larger field teams. Therefore, the kolkhozes are
currently employed in adding to the staff of these
field teams.
IHIRUSIICHEV: Those aren't field teams, they"re
brigades.
RUDEMO; Field teams ruunbertng 50.60 persons.
U,IIDEm'IFIED VOICES: Those are brigades.
K: "And corn?"
D; ""This year we got 4,-
300 pounds of corn per acre."
K: "This means it's ad-
vantageous to plant corn?"
D "of course, it's advan-
tageous."
Sometimes Khrushchev ap-
peared to nonplus the speaker,
who wasted no time getting
back to his prepared speech.
Occasionally Khrushchev was
not satisfied until he had
made the speaker really squirm.
He interrupted the speech
of Altay Kray Party Secretary
Pysin with a number of pointed
questions to which Pysin respond-
ed, "As a rule..." Khrushchev
countered: "But you keep s,,y-
ing 'As a rule,' staring at the
KHRUSHCHEV INTERRUPTS...
SHI:OLNIKOV (Voronezh Oblast party secretary):
The Ministry of Agriculture and USSR Cosplan should
consider the quostton of productng, within the next
yew years, a sufftotent number of improved machines
for the 2iec7:antzed loading and unloadtng of sugar
beets.
KIIRUSIICHEV., You are correct in raising the
question of attachments. They should be produced.
In line with this, during the gathering of sugar
beets, the harvesting machine should not be over-
loaded. Instead, the sugar beets should be loaded
directly into the drawn attachments, with the at
tachments then being sent off to the refineries
without being unloaded.
SIYOL.'RII:OV: That is very good... Our sole re-
quest is that Gosplan and the ministry devote some
thought to this question.
KHRUSIICHEV: Of course the worloers of the utnis-
try and Gosplan ought to think about it, but so should
you.
ceiling without facts. It
would be a good idea for you,
when you go back, to study this
directly on the collective and
state farms. I say this to
you because you do not have any
figures at hand, and it is a
serious business." Pysin then
returned to his prepared speech,
only to provoke Khrushchev's
anger a moment later by indulg-
ing in a bit of self-criticism--
usually a fairly safe thing to
do.
PODGORNY (Ukratnian party secretary): are are doing everything possible in. order that the
Ukraine may do its bit in this great state cause and
produce 34 million tons of grain.
KHRUSHCHEV: Comrade Podgorny, I have Just had
an idea which I will tell to you. CanFt the percent-
age of corn in the grain sowings be increased? How
much grain in all is the Ukraine sowing now?
PODGORTuY: Forty-four million acres.
KHRUSHCHEV: Couldn't (about half) of this be
put under corn? Loo,' at the ratio between plantings
of grain, wheat, and corn in America. lore than a
third of their sown area is given over to corn.
PODGORVY: I wish to say, Ilikita Sergeyevtch,
that for the Ukraine this would be a major means of
increasing the gross yield.
Pysin recalled a statement
in Khrushchev's report that
meat production in Altay Kray
was poorly managed and admitted
that this was so, whereupon
Khrushchev warned: "Poorly
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19 February 1959
indeed! We have had a tolerant
attitude toward you because you
were given a primary task--ex-
ploitation of the virgin lands,
obtaining grain. Now it is the
second stage. It is necessary
to be occupied properly with
livestock on the virgin lands."
Pysin hastily replied: "We will
do this, of course, Nikita Ser-
geyevich, and will certainly
correct the situation."
Taken as a whole, Khru-
shchev's interruptions contrib-
uted to a picture of him as
wise, paternal, benevolent,
firm but reasonable, accessible,
and human--all elements in the
leader image he is trying to
develop.
Khrushchev's Pet Project
Khrushchev may have chosen
to discuss agriculture at the
plenum for purposes other than
consideration and approval of
new departures in agricultural
policy, but he is not one to
pass up a good opportunity to
plug some of his pet projects.
and do a little pre-21st party
congress thumping for fulfill-
ment of Seven-Year-Plan agri-
cultural goals. The plenum re-
port provides a unique gauge of
the intensity of Khrushchev's
obsession with corn as an agri-
cultural panacea. He not only
seized every opportunity to
extol the merits of corn but,
when no obvious occasion pre-
sented itself, he created one.
He interrupted speech after
speech, many times completely
out of context, to question or
badger the speaker about corn,
and he was particularly impa-
tient with any mention of ob-
stacles.
Khrushchev obviously feels
that the merits of corn are still
insufficiently appreciated.
When one secretary asserted, "In
our attitude toward corn, none
of us are skeptics," Khrushchev
replied, "There are still many;
they have only begun to talk
less." One kolkhoz chairman,
evidently paying close attention
to Khrushchev's sales pitch,
offered sage counsel to the
skeptics: "The only place corn
won't grow is where party and
government organs underestimate
its tremendous-political sig-
nificance."
From these interchanges,
as well as from other aspects
of the plenum, there emerges a
clearer picture of Khrushchev
bent on obtaining his agricul-
tural goals through party per-
suasion, drawing out local ini-
tiative and resources, and
creating competition among the
agricultural areas. His un-
bounded enthusiasm for corn and
his faith in the presence of
vast untapped agricultural re-
sources permeated the plenum
and certainly leaves the impres-
sion that he is genuinely con-
fident that the major agricul-
tural goals of the Seven-Year
Plan can be achieved.
(Prepared jointly witn ca"
25X1
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19 February 1959
THE IMPACT OF THE CHINESE COMMUNES IN EASTr N EUROPE
The East European regimes
reacted cautiously in August,
September, and October 1958 to
the initial Chinese Communist
build-up of the commune program,
probably because of hesitancy
to take a position in the ab-
sence of clear guidance from
Moscow and because of confusion
about the ideological and policy
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19 February 1959
implications of the Chinese com-
mune experiment. Factual ac-
counts of the experiment were
presented sporadically by their
mass media during this period,
but authoritative commentary
was almost nonexistent.
The communes, as initially
built up by Chinese propaganda
media, had to East Europeans in
general an Oriental, rather in-
human aura about them which,
even to confirmed Communists,
did not make them appealing as
an example to follow in Commu-
nist development. This reaction
of the ordinary people was also
true, if to a slightly lesser
degree, of liberally inclined
Communists. Western press re-
ports in October that Polish
Communists were "appalled" at
the degree of regimentation and
conformity in the communes were
probably accurate.
Yugoslavia
Yugoslavia played up for
its own purposes those aspects
of the communes--their mili-
tary appearance, their expropri-
ation of private property, and
their disruptive effect on fam-
ily life--which were most likely
to be distasteful to the satel-
lites. The Yugoslavs were, of
course, influenced strongly by
China's actively hostile role
in the bloc dispute with Bel-
grade. Nonetheless, Belgrade
concluded that its approach would
find a sympathetic audience not
only among the Eastern European
people, but also among eien.3nts
of the Communist parties who
still favored liberal policies.
President Tito spoke on 23
November of the "military com-
munes," claiming the experiment
had little in common with Marx-
ism, and contrasting the Chinese
approach with the humanitarian-
ism and material incentives
which were a part of the Yugo-
slav "road" By early December
the Yugoslavs were goading the
satellite regimes, calling at-
tention to their lack of com-
mentary on the Chinese program
and adding that this was the
first time that an important
innovation. in the affairs of
one of the leading members
of the "camp" had not been
commented On by the oth-
ers.
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19 February 1959
Satellites Reserved
The satellite regimes,
nevertheless, continued to act
with reserve. Only in Poland
did any commentary appear which
might have been construed as
critical. The Polish youth
organ Sztandar Mlodych said in
mid-September: "it is difficult
to foresee the implementation
of this resolution.... Even a
most fanatical disciple of de-
centralization must admit that
during a certain historical pe-
riod, centralism was a useful,
nay, an indispensable thing."
Such criticism appeared to
reflect a more conservative
Cctnmunist outlook, which took
the scheme to task because it
implied that an important phase
of development of the Soviet
model would be skipped. This
may have paralleled similar mis-
givings in the Kremlin about the
experiment. Even doctrinaire
Communists thus reacted unfavor-
ably to the communes, preferring
for the most part to look for
inspiration to the less radical,
more Western-ori. OL& C.ed example
of the Soviet Union.
The satellite leaders had
good reason for their cautious
approach to the commune ques-
tion. If the Chinese approach
to."building Communism" were to
be accepted by Moscow and its
application encouraged in East-
ern Europe, it could be deduced
that radical basic policy changes
were in order, especially in
agriculture. This prospect was
unlikely to be greeted with en-
thusiasm by the party leaders,
particularly in Poland and Hun-
gary.
Stalinists' Reaction
This was by no means the
case, however, among all Commu-
nist leaders in Eastern Europe.
To many of the Stalinists in
the Eastern European parties,
the hard-line, forced-draft,
radically leftist approach of
the Chinese "great leap forward"
evoked a favorable response.
Many of these Stalinists approved
the spirit of the Chinese ap-
proach and saw in the program
features which they could use
to justify their own views on
domestic policies, as well as
to criticize their less zealous
opponents.
During the October 1958
plenum of the Polish United
Workers' (Communist) party,
prominent members of the "Nato-
lin" faction of the party seized
on certain features of the Chi-
nese Communist experiment to
justify their criticism of Go-
mulka's domestic policies. Cer-
tain industrial techniques in
use in Communist China were re-
ferred to with the implication
that Poland's industrial policies
would benefit by emulation.
The Stalinist Stanislaw
Lapot, refuting an argument Go-
mulka had often used to support
his agricultural policy, said
that the experiences of several
bloc countries--and "especially
the People's Republic of China"
--showed that active collectivi-
zation did not necessarily en-
tail a decrease of productivity
in the early stages. The serious-
ness of these attacks is re-
flected in Gomulka's summation
at the end of the plenum in which
he insisted that the Chinese
achievements were not applicable
to Poland.
Although there is little
direct evidence of similar ac-
tions by Stalinists in the other
satellites, they too probably
seized on the Chinese program
to support their arguments.
In Hungary, Kadar has been
under pressure from his Stalinist
opponents for a sharp increase
in collectivization and the em-
ployment of coercive measures
against recalcitrant peasants.
Following a party meeting in
Budapest to discuss the regime's
agricultural policy, Kadar denied
on 25 January that Hungary was
ready for a "big, swift leap
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
forward" in agricultural collec-
tivization. His terminology
suggested that during the de-
bates the Hungarian Stalinists,
like their Polish counterparts,
had drawn on the Chinese Commu-
nist approach to support their
attacks against him.
Bulgaria
The general "hard-line"
spirit of the Chinese Communist
program held considerable ap-
peal for the Bulgarian leaders,
most of whom were entirely sym-
pathetic to a walinist-type
approach. Not the least enthu-
siastic of these was former
party chief Vulko Chervenkov,
who led an official delegation
to China in October, and whose
speeches and official statements
at the conclusion of his visit
reflected clear, although guard-
ed, enthusiasm for the Chinese
program.
In early November the Bul-
garian leaders launched a rad-
ical new economic program which,
while primarily inspired by and
based on Soviet experience, also
reflected inspiration from the
Chinese Communist experiment.
The Soviet-type amalgamated
collective--not the Chinese com-
mune--was adopted as the basic
unit of the Bulgarian program,
but the program was described
in Chinese terminology such as
forward progress by "leaps and
bounds," and used Chinese tech-
niques such as "voluntary" mass
labor and fixed periods of pro-
ductive labor for party and
government officials.
Thus, although there is no
evidence that the Bulgarian pro-
gram ever was consciously mod-
eled on the Chinese example,
during the initial period of
confusion and lack of clear
ideological guidance from Mos-
cow, the Bulgarian leaders may
have seized overly hastily on
the spirit and some of the fea-
tures of the Chinese Communist
program which they felt would
help their own scheme along.
Bulgarian party leaders were
themselves confused at this
time over the extent to which
the Chinese example should be
emulated. Even before party
boss Zhivkov launched his pro-
gram, overly zealous local Com-
munist officials mistakenly
anticipated what it would entail
by taking it on themselves to
organize certain "communes,"
one of them avowedly on the Chi-
nese Communist model.
Despite this initial burst
of excessive zeal, however, once
the Chinese Communists began to
tone down their approach and the
Soviet attitude on the communes
became clearer, the Bulgarian
leaders, by speeches and articles
in publications, emphatically
denied Chinese Communist influ-
ence in their program. They
stressed that the Chinese program
was applicable only to Chinese
conditions, and conversely that
the new Bulgarian economic pro-
gram was based exclusively on
the Soviet model. Analysis of
a subsequent reorganization of
the administrative structure in
January reveals that although
certain Chinese-type features
may have been included, the re-
organization was indeed based
primarily on Soviet practice.
Some of the other satellites
adopted certain features of the
Chinese Communist program during
this initial period. Albania,
Bulgaria, and East Germany adopted
the practice of voluntary labor
by party and government function-
aries, and East Germany went
even further by requiring that
military officers serve in the
ranks for a period of one year.
At the East German central com-
mittee meeting of 15-1.7 January,
moreover, party leader Ulbricht
strongly emphasized the necessity
to develop a "communal spirit"
in East Germany,
For the most part, however,
after late November, when the
Chinese retreat was in process
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
and the Soviet attitude was
clarified, the satellite press,
both in reportage and authorita-
tive commentary, came out in
faithful reflection of the So-
viet line. The communes were
discussed extensively, but it
was always stressed that they
were applicable only to China.
Peiping's View
Although the Chinese claims
in July and August 1958 appar-
ently were not consciously in-
tended as a direct challenge to
Moscow in its role as bloc ideo-
logical preceptor, Moscow's cool
reception of the initial Chinese
claims and the sparse comment
which marked East European sat-
ellite treatment of the communes
probably made it clear to the
Chinese by late October that
they did not have a friendly
audience,
In the interest of improv-
ing relations with Moscow and
the rest of the bloc, Peiping
began to restrict the applica-
bility of the communes to China
--a propaganda treatment which
became more pronounced following
Soviet Ambassador Yudin's speech
in Peiping on 6 November. He
reminded the Chinese that in-
dustrial production, rather than
forms of rural collectivization,
was the key prerequisite for
beginning the "transition to
Communism." In subsequent
statements likely to receive
international publicity, Peiping
stressed that China was still
in the stage of "socialist con-
struction" and dropped the claim
that the commune movement had
brought the country to the verge
of the "transition to Communism:'
The Chinese retreated dras-
tically in subsequent public
statements on the ideological
significance of the communes,
and recent comments indicate
that Peiping's public line for
the time being--as reflected in
Chou En-lai's statements at the
Soviet party congress--will be
to encourage the rest of the
bloc to follow the Soviet ex-
ample in Communist development.
Moscow's View
Moscow probably saw in the
extravagant claims which the Chi-
nese attached to their communes
--the implication that they had
discovered a special and uni-
versally applicable form of
social organization--a potential
threat to its ideological leader-
ship of the Communist bloc. This
leadership has always rested on
the claim that Soviet experience,
by virtue of its length and re-
sults, must serve as the basic
example for all other Communist
parties; acceptance of Peiping's
pretensions would clearly have
tended to undermine this article
of faith.
Moscow's displeasure with
the communes is probably more
directly related, however, to
fears of the unsettling influ-
ence which the Chinese develop-
ment might have in Eastern Eu
rope, where political ambitions
and economic conditions might
render the Chinese example at-
tractive to certain elements,
Moscow has yet to express
any enthusiasm for the communes,
but whatever their future in
China and their effects on Sino-
Soviet relations, Moscow appar-
ently succeeded in persuading
the Chinese to scale down their
claims in the interests of sta-
bility in Eastern Europe and to
publicize this retreat at the
Soviet 21st party congress.
Chou En-lai stressed that China
would follow a common road based
on Soviet experience and empha-
sized the applicability of the
communes only to China, referring
to this four times in one sen-
tence. His comments were rein-
forced by the advice of Soviet
Ambassador Yudin, who stated at
the congress that all Communists
who are "willing to understand
what Communism is" should study
the documents of the con-.
gress.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
Following this display of
Chinese support for the re-
affirmation of Soviet ideologi-
cal leadership, the satellite
leaders assembled in Moscow
could have few illusions that
they would be able to cite Chi-
nese precedents to justify their
views on domestic policies.
Moreover, the Staiini3ts in
the satellite parties, many of
whom were not in Moscow but
nevertheless received the mes-
sage via bloc media, must have
realized that, for the present
at least, it would be dangerous
to look to Peiping rather than
to Moscow for ideological in-
spiration against their polit:- 25X1
cal opponents, especially when
these opponents had Moscow's
endorsement.
The South Korean economy
in 1958 advanced at a far slow-
er pace than in the previous
year and was marred both by a
resumption of inflation and a
precipitate decline in the rate
of increase in gross national
product. Several major factors
indicate that this situation
may worsen in 1959. General
concern with short-run prob-
lems, however, tends to obscure
the broader problem of South
Korea's almost complete depend-
ence on foreign aid--it now
is receiving one fifth of all
American foreign economic
grants--and its continuing
failure to pave the way for
substantial reduction or termi-
nation of such aid.
Although agri-
cultural and indus-
trial production has
increased, it may
soon be overtaken by
population growth.
The basic objective
of the US and UN aid
Budget and Fiscal Operations
The South Korean national
budget for 1959 is nominally
balanced at $780,000,000. In re-
ality, there will be at least
a $30,000,000 deficit. In all
probability, this shortage will
be made up through issuances of
currency and will be accompanied
by credit expansion, with conse-
quent inflationary results. The
resort to monetary expansion, a
course the government prefers
to improving tax collections or
increasing production, is a
major cause of financial insta-
bility in South Korea and may
be even more attractive in the
future when domestic revenue
will be required to replace aid
income,
MILITARY
T 2-iWAR YEAR) 147 (u.9%)
WAR YEAR)-_ 8.35 (69. 1
programs--creating a c 213(3a._5%) _ 392 _ 4
~
viable economy to Jt
221.5(34.7%) 323.1 1 64$
maintain the present 1938 253(31.6%) 553
standard of living-- 9 2106.0%) 494
- ~$
seems beyond Korean
18-MONTH FISCAL YEAR
resources and capa- a0213 4A
bilities.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
Military expenditures,
which constitute 36 percent of
the budget, in effect are fi-
nanced entirely with funds
generated by the domestic sale
of aid goods. Customs and for-
eign-exchange taxes, which pro-
vide another 19 percent of reve-
nues, derive primarily from aid
imports. Thus, aid finances
more than half of the govern-
mental budget.
In 1957 the wholesale price
level, which had increased to
more than 230 times that of
1947, was brought under control
temporarily as a result of cur-
rency stabilization and the ar-
rival of considerable aid goods.
However, the price rise was re-
sumed in the latter half of 1958
and by the end of the year to-
taled 8,8 percent over the pre-
vious year, according to the
Seoul wholesale index. Further
inflation is expected in 1959,
A cardinal factor in this
inflation is the penchant for
speculation among South Korean
businessmen and financiers,
which helps to explain the seri-
ous lack of private long-term
investment.
The government's failure
to adhere to a program of limit-
ing currency and credit expan-
sion in 1958 was the immediate
cause of the renewed price rise.
This expansion of money supply,
amounting to 32 percent by the
end of the year, stemmed from
increased bank loans--many of
them designed to assist the
Liberal party's preparations for
the 1960 elections--from doubled
wages for government and mili-
tary personnel, and from rice
loans to farmers.
Significantly, prices in-
creased despite bumper grain
crops which depressed "'food
prices about 18 percent during
the year, but not enough to
overcome price increases in oth-
er basic consumer commodities.
A survey taken by a major Korean
newspaper indicated that the
farm population, which constitutes
70 percent of total population,
was afflicted not only with gen-
erally increased consumer prices,
but also failed to meet produc-
tion costs because of the de-
pressed prices for grain.
Grain Production and Consumption
South Korean grain produc-
tion--consisting of a barley-
wheat-rye crop in early summer
and a rice crop in autumn--is
increasing and is generally be-
lieved to equal or exceed pre-
World War II levels. The bumper
1958 rice crop set a postwar
record.
1956
*ROUGH MEASURE
90213 4B
However, production is not
keeping pace with the population
growth. Total population is
about 2:;,000,000 and is increas-
ing at the rate of 2 percent an-
nually. Per capita rice con-
sumption, which in 1958 was 125
kilograms and still above prewar
levels, is declining. Agricul-
tural research, with an eye to-
ward combating crop disease and
increasing yields, has been
virtually ignored by the govern-
ment, and grain imports, which
constitute 20 percent of total
consumption, are increasing,
with heavy dependence on Ameri-
can surpluses,
SECRET
PART III PATTERNS AND PERSPECTIVES Page 15 of 19
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SECRET
19 February 1959
Rice is South Korea's best
potential export. During the
late stages of the Japanese oc-
cupation of Korea, more than
1,000,000 tons were exported
annually. In the postwar, pe-
riod, rice shipments from South
Korea, the major producing area,
have been limited to 90,000 tons
to Japan in 1950. A 5,000-ton
sale to Okinawa recently was
concluded, and South Korean of-
ficials finally are contemplat-
ing a rice export program which,
however, would require the sub-
stitution of cheaper grains in
the Korean diet.
Marine production is the
nation's major source of protein
and also frequently is cited for
its export potential. Average
annual production from catches
in South Korean waters during
the period. 1936-1940 was approx-
imately 630,000 metric tons.
Estimated production in 1958 was
only 62 percent of this. Post-
war consumption per capita is
down severely, and marine ex-
ports were valued at slightly
more than $2,000,000 in 1958.
There are several reasons
for the postwar shortfall. Fish-
ery resources, especially sar-
dines, in Korean coastal waters
have been depleted. The Japa-
SOUTH KOREAN NATIONAL PRODUCT
GNP PERCENT PER CAPITA
(BILLION DOLLARS") OFCHANGE GNP(DOLLARS`)
1936-39AVERAGE --- 113
1955 1.89 2.5 88
1956 1.84 2.4 84
1957 2.09 13.4 94
1958(E5T) 2.17 3.7 96
"BASED ON 1955 CONSTANT PRICES (500 HWAN=ONE DOLLAR)
90513 4C 19 FEBRUARY 1959
nese, during their withdrawal
from Korea in 1945, took with
them a major portion of the
Korea-based fishing fleet, and
refrigerating . and canning
facilities were destroyed in the
Korean war,
The present South Korean
fishing industry, which employs
2 percent of the labor force and
contributes only 1 percent of
the gross national product, lacks
boats, ;filled manpower, and
processing facil.,.ties. It also
suffers from a continuing lack
of capital investment for re-
habilitation. Like agriculture,
however, fisheries development
has been secondary to industrial
development.
Industry
Industrial development,
while advancing gradually, 'ias
been unbalanced, with the result
that some industrial and manu-
factured products exceed demand,
a few meet demand adequately,
while most production is unable
to keep pace with the market
growth.
By the end of September 1958
the general production index had
risen 80 percent above the 1955
base. The greatest progress had
been achieved in the manufactur-
ing sector, but South Korea's
heavy dependence on imported raw
materials has not been reduced
appreciably.
Textile production, which
requires imports averaging $30,-
000,000 annually, exceeds domes-
tic demand but cannot compete
pricewise in foreign markets with-
out government subsidy. Tungsten
concentrate production is cur-
tailed due to a lack of foreign
markets, but sales prospects for
1959 have improved. The supply
of anthracite coal exceeds re-
quirements, so that the industry
is depressed generally and sev-
eral mines have been shut down.
Electric power production
is not quite adequate to meet
present requirements, but con-
struction of additional power
facilities is contemplated.
South Korea also hopes to become
self-sufficient in chemical fer-
tilizers on completion of a three-
plant construction program in
1962.
Elsewhere domestic produc-
tion prospects are much less
SECRET
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
SOUTH KOREA: PRODUCTION NAGRICULTURAl. ITEMS
-SANK
COAL
'So
BRICKS
M RI D
i9 S
TUNGSTEN IRON " LL
CONCENTRATE (65.75% W03)
ORETsi~i
2.52
THOUSAND 3.74 322
TONS RIC
TO
306
T4 -
bright. Cement production,
despite a threefold expansion
in 1958, still was 38 percent
short of requirements. South
Korea imported all of its pe-
troleum products--at a cost of
approximately $18,000,000--its
entire consumption of 700,000
tons of bituminous coal, and
20 percent of its food. Vir-
tually all metal and machinery
requirements, except some small
engines, compressors, and ma-
chine parts, must be imported.
A much-publicized steel mill,
built in 1957 against American
advice, has ceased operations
because of a lack of operating
capital and of processing fa-
cilities for the steel ingots
which it produced.
A recent survey of 2,757
fact'Zories conducted by the South
Korean Chamber of Commerce re-
vealed that 35 percent were in
full operation, 31 percent had
cut back operations, and 34
percent were shut down. Some
2,000,000 persons--more than
20 percent of the labor force--
are completely unemployed, while
underemployment is widespread.
CEMENT
THOUSAND
METRIC
TONS
144.6
1388 ,~
Trade
The gap between South Ko-
rea's exports and imports, in-
cluding aid, has averaged ap-
proximately $375,000,000 annual-
ly since 1955, The solution to
narrowing this gap is twofold--
expanding exports and, through
the development of local indus-
try which would convert both
domestic and foreign raw ma-
terials, reducing the need for
imported finished and semi-
finished goods.
The gradual reduction of
American aid automatically will
reduce imports, but the country
will continue to require a high
level of imports to maintain
its industry and present stand-
ard of living. South Korea's
export potential lies in three
principal categories--rice, min-
erals, and marine products--but
the already low level of exports
has declined in the last two
years.
Efforts to expand rice from
the bumper 1958 harvest--at ap-
proximately $150 per ton--failed
SECRET
COTTON
-TARN
POUNDS NDS
'57
SECRET
cdftl
CiTI??._I
'58 '19, 3 _. _ .
ETCTRIC_a.
POWER
BILLION
KILOWATT
HOURS 1.13
1955 '56 '57 '58
PART ITT PATTERNS AND PERSPECTIVES Page 17 of 19
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`we SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
COMMERCIAL
IMPORTS
AID
IMPORTS
DEFIC
322.E
1956
16:1
IMPORT-EXPORT 19:1
RATIO
1957
20:1
Agency provided ad-
ditional economic as-
sistance, amounting
to $150,000,000.
Almost two thirds
of the American aid
grants have been in
the form of salable
commodities--chemical
fertilizers, fuels,
raw cotton, and food-
stuffs--intended to
combat inflation, im-
prove living stand-
ards, and generate
local currency or
counterpart funds for
use by the South Kor-
_ EXPORTS
19 FEBRUARY 1959
because foreign rice markets
have been glutted. However,
rice exports in late 1959 and
in future years could be siz-
able depending on market avail-
ability and, to a certain ex-
tent, on more attractive Korean
pricing. Moreover, the official
South Korean exchange rate of
500 hwan to the dollar more
than doubles its value in the
local market and tends to en-
courage Korean businessmen to
import luxury consumer goods
for domestic resale at the more
advantageous local market rate.
Pending a planned compre-
hensive mineral survey of South
Korea, graphite, tungsten con-
centrate, and iron ore are the
principal mineral exports, but
in each case either the supply
or the market is limited. Ex-
ports of marine products in
1958 were valued at about $2,-
000,000, but further expansion
depends on increased capital
investment and technical com-
petence in this industry.
Foreign Aid
American economic aid ap-
propriations from the end of
the Korean war through fiscal
1959 have totaled $1.7 billion,
not including more than $4 bil-
lion, in direct military assist-
ance for the South Korean
armed forces. The United Na-
tions Korean Reconstruction
can Government. The remaining
one third has been expended on
rehabilitation, developmental
projects, and technical assistance,
The program against infla-
tion, although it has had lim-
ited success, is handicapped by
the failure of South Korean of-
ficials to implement it fully.
Living standards, except for
housing, have been restored to
the 1949-50 level, but the grad-
ual decline in aid and expected
drop in per capita production
makes deterioration in the stand-
ard of living probable.
Foreign aid has rehabili-
tated and expanded the rail and
communications networks, de-
veloped nearly adequate power
facilities, and significantly
expanded anthracite coal pro-
duction. Chemical fertilizer
imports have raised agricultural
production, but farmers frequent-
ly grumble at the price which
AMERICAN ECONOMIC AID TO H KOREA
(M(LLION DOLLARS)
U S FISCAL DEFENSE TECHNICAL
YEAR SUPPORT COOPERATION
1954 178.8 -
1955 247.4 -
195i 3163 4.1
RENDERED RY U N MILITARY PERSONNEL.
902134F
SECRET
TOTAL 1,301.6 15.5 131.6
GRAND TOTAL - 1,448.7
1959 210.0 5.8 49.0
(TENTATIVE)
15.0
47.7
DEVELOPMENT
LOAN FUND
`1957 321.9 5.1 18.9
1958 237.2 6.3 50.0
PART ITT PATTERNS AND PERSPECTIVES Page 18 of 1)
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`W' SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
19 February 1959
often increases 60 percent or
more between the port of entry
and local delivery and at wide
price fluctuations from area
to area, In both rural and
urban areas, too, there are in-
creasing reports of discontent
with the aid program for its
alleged creation of a small
wealthy class,
Prospects
Despite the industrial de-
velopment that has taken place,
the South Korean economy re-
mains predominantly agricultural,
Economic activity involves wide-
spread financial speculation,
and the considerable sums of
available private capital are
utilized for "quick-money"
schemes rather than for long-
term investment. In one sense,
this problem is largely psycho-
logical, reflecting general
pessimism about the future of
the economy and the country.
SECRET
Prospects for foreign invest-
ment in South Korea are poor.
In some instances, indus-
trial projects--as well as
fiscal programs--seem too large
and too complex for the coun-
try's physical, human, and fi-
nancial resources. Even some
small, logically conceived
enterprises, designed to reduce
the import burden, have failed
because private investors were
not forthcoming. The extreme
shortage of managerial, techni-
cal, and labor skills is a
serious liability.
The caliber of top Korean
economic officials has improved
markedly in the last three years,
offering hope for at least limited
progress in the immediate future.
However,the basic handicaps which
the country faces cast strong doubt
on its ability to maintain the 25X1
foreign aid
present standard of living over
the long run without substantial
PART III PATTERNS AND PERSPECTIVES Page 19 of 19
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r..r
VMWI
CONFIDENTIAL
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