1 february 1963 current intelligence weekly ......year plan for economic development into effe.ct on...

., JFKL, Schlesinger 'Papers, box 33, Current Weekly Intelligence Summary

1 February 1963

CURRENTINTELLIGENCEWEEKLYSUMMARY

CENTRAL INTELLIGENCE AGENCYOFFICE OF CURRENT ·INTELLIGENCE

'-------------SECRETSANITIZED

E.O. 12958 Sec. 3.8

., JFKL, Schlesinger 'Papers, box 33, Current Weekly Intelligence Summary

1 February 1963

CURRENTINTELLIGENCEWEEKLYSUMMARY

CENTRAL INTELLIGENCE AGENCYOFFICE OF CURRENT ·INTELLIGENCE

'------------SECRET

SANITIZEDE.O. 12958 Sec. 3.8

david

JFKL, Schlesinger Papers, box 33, Current Weekly Intelligence Summary

SECB.E'T

CURRENT INTELLIGENCE WEEKLY SUMMARY

1 February 1963

THE WEE KIN B R I E F(Information as of 1200 EST 31 Jan) .

1

SOVIET FOREIGN POLICY DEVELOPMENTS • • ,. • . • • • • • . • Page 3

Page 4. . . . . . . . . . . . . . . . . .SINO-SOVIET RELATIONS

Soviet commentators aweek regarding developm,and the CoDlltlQ,n t. '

. 'tbat MoScow ··lJel.f,eves piCj;gl"eS's towiarda test 'an may 6,peri the way for renew,ed high-level nego-t iations on a Berlin settlement. He reaff irmed the USSR'sdesire for a "thaw" in East-West relations and sQ;ggestedthat a foreign ministers' meeting to sign a test Diantreaty would provide a suitable oPPE?r't\lP.,it .ing other problems such as Berlin.

Communist China's first editorial comment on Sino-Soviet issues sinoe the East German party congress was noless abusive than its propaganda befoil'e Khrushchev's callfor a cessation of polemics. The latest round in thecontest between the two nations has further demonstrated

ground upon which they can stand.

THE SINO-INDIAN BORDER DISPUTE • • • • • • • . • • • • • • Page 5

The interpretations of the loosely worded Colomboconference proposals made public in the past week by Peipingand New Delhi provide little ground for discussions. NewDelhi is giving increasing play to the warmth and close-ness of its relati,ons with Moscow but, at Soviet request,has prom.ised to avoid public i ty concerning the ar-r iva MIG-21 fighters in Bombay. '

SECRETi

BRIEFS

SECB.E'T


1 February 1963

THE WEE KIN B R I E F(Information as of 1200 EST 31 Jan) .

1

SOVIET FOREIGN POLICY DEVELOPMENTS • • ,. • . • • • • • . • Page 3

Page 4. . . . . . . . . . . . . . . . . .SINO-SOVIET RELATIONS

Soviet commentators aweek regarding developm,and the CoDlltlQ,n t. '

. 'tbat MoScow ··lJel.f,eves piCj;gl"eS's towiarda test 'an may 6,peri the way for renew,ed high-level nego-t iations on a Berlin settlement. He reaff irmed the USSR'sdesire for a "thaw" in East-West relations and sQ;ggestedthat a foreign ministers' meeting to sign a test Diantreaty would provide a suitable oPPE?r't\lP.,it .ing other problems such as Berlin.

Communist China's first editorial comment on Sino-Soviet issues sinoe the East German party congress was noless abusive than its propaganda befoil'e Khrushchev's callfor a cessation of polemics. The latest round in thecontest between the two nations has further demonstrated

ground upon which they can stand.

THE SINO-INDIAN BORDER DISPUTE • • • • • • • . • • • • • • Page 5

The interpretations of the loosely worded Colomboconference proposals made public in the past week by Peipingand New Delhi provide little ground for discussions. NewDelhi is giving increasing play to the warmth and close-ness of its relati,ons with Moscow but, at Soviet request,has prom.ised to avoid public i ty concerning the ar-r iva MIG-21 fighters in Bombay. '

SECRETi

BRIEFS


1 February 1963

THE CUBAN SITUATION . . . . . . . . . . . . . . . . . . . Page 7

With continuing Soviet military assistance and economicsupport, the castro regime appears to be concentrating onan aggres.sive campaign of subversion in Latin America.Havana has announced that about 400 Soviet agriculturaltechn'icians are coming to Cuba' over the next three months.Castro's'guerrilla training program for Latin Americansis and Cuban leaders have given the impressionthat they. c<?nsider the possibilities for sUllversive actionto be especially promising in Venezuela.--."SOVIET ECONOMY_IN 1962 .. Page 9

Soviet heavy industrial development continued in 1962to receive clear priority over consumer goods productionand agriculture. In general, trends of the preceding yearwere maintained. "There are signs of continuing difficulties,

investment in certain industries.

SINO-MONGOLIAN RELATIONS Page 12

There has been some cooling in Sino-Mongolian relationsas a result of Mongolia's role as Khrushchev's advocate inAsia. However, Chinese aid programs continue, and Peipinghas not abandoned its practice of sending workers to labor-short Mongolia. Ulan Bator is attempting to expand itsdiplomatic contacts beyond its two quarreling b .pushing for recognition from nonbloc countries. . .

... "..... -

DEVELOPMENTS IN THE CONGO

Joseph Ileo, Leopoldville' s new minister-resident inElisabethville, has begun taking steps to reintegrateKatanga. Ileo has made it clear that his mission is toexecute reintegration, not negotiate, and he is dealingfirmly with Katangan attempts to obstruct him. Leopold-ville is pressing hard for the introduction of additionalCongo army forces into key cities in South Katanga, but ispresently resisting Baluba tribal pressures for changes inTshombe's government. Tshombe, trying to re-establishhis authority, is insisting 011 rigid application of theUN reintegration plan and is trying to enlist the Ufi torefe:.Fe:e diffe;ences him and Leopoldville._

INSTABILITY CONTINUES IN TOGO

The political situation in Togo has remained unstablesince the assassination of President Olympio in mid-January. Behind Provisional President Grunitsky's weakleadership, the diverse factions represented in the cabinetand the military elements which staged the coup are in-volved in a power strl.lggle.Grunitsky's authority hasbeen undercut by the reluctance of countries in the

to extend diplomatic recognition. i

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Page 15


1 February 1963

THE CUBAN SITUATION . . . . . . . . . . . . . . . . . . . Page 7

With continuing Soviet military assistance and economicsupport, the castro regime appears to be concentrating onan aggres.sive campaign of subversion in Latin America.Havana has announced that about 400 Soviet agriculturaltechn'icians are coming to Cuba' over the next three months.Castro's'guerrilla training program for Latin Americansis and Cuban leaders have given the impressionthat they. c<?nsider the possibilities for sUllversive actionto be especially promising in Venezuela.--."SOVIET ECONOMY_IN 1962 .. Page 9

Soviet heavy industrial development continued in 1962to receive clear priority over consumer goods productionand agriculture. In general, trends of the preceding yearwere maintained. "There are signs of continuing difficulties,

investment in certain industries.

SINO-MONGOLIAN RELATIONS Page 12

There has been some cooling in Sino-Mongolian relationsas a result of Mongolia's role as Khrushchev's advocate inAsia. However, Chinese aid programs continue, and Peipinghas not abandoned its practice of sending workers to labor-short Mongolia. Ulan Bator is attempting to expand itsdiplomatic contacts beyond its two quarreling b .pushing for recognition from nonbloc countries. . .

... "..... -


Joseph Ileo, Leopoldville' s new minister-resident inElisabethville, has begun taking steps to reintegrateKatanga. Ileo has made it clear that his mission is toexecute reintegration, not negotiate, and he is dealingfirmly with Katangan attempts to obstruct him. Leopold-ville is pressing hard for the introduction of additionalCongo army forces into key cities in South Katanga, but ispresently resisting Baluba tribal pressures for changes inTshombe's government. Tshombe, trying to re-establishhis authority, is insisting 011 rigid application of theUN reintegration plan and is trying to enlist the Ufi torefe:.Fe:e diffe;ences him and Leopoldville._


The political situation in Togo has remained unstablesince the assassination of President Olympio in mid-January. Behind Provisional President Grunitsky's weakleadership, the diverse factions represented in the cabinetand the military elements which staged the coup are in-volved in a power strl.lggle.Grunitsky's authority hasbeen undercut by the reluctance of countries in the

to extend diplomatic recognition. i

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Page 15

S1iJ:CB.ET


1 February 19'63

REFERENDUM IN IRAN . • . . . . . . . Page 16

The Shah's overwhelming victory in Iran's reform pro-gram referendum on 26 January will encourage him to acceler-ate reforms and possibly to advance the date of nationalelections now planned for June or JUly. The regime mustereda 99.9-percent affirmative vote, partly by intimidatingthe mullahs, the landlords, and the National Front. Theyappear te·' be demoralized temporarily, and probably havelost many.supporters. Trouble for the regime is in prospectwhen workers and peasants find that progress toward im-plementing the th.,..,n they have been ledto expect.

INDONESIAN INTENTIONS TOWARD MALAYSIA Page 17

Indonesia has announced a policy of "confrontation I'with Malaya over the inclusion of the British Borneo ter-ri tories in the, projected Malaysia Federation. It reportedlyis giving guerrilla training to both Indonesian and rebelelements, and a monthly training capacity of five or sixhundreQm-ay have been reac4ed.

SOUTH KOREAN POLITICAL STRUGGLE

Former security chief Kim Chong-pil has emerged froma fight for control of the new government party with hispower intact for the time being, if not strengthened. How-ever, the factional struggle within the regime almost cer-tainly will continue, with Kim's enemies biding their timefor a new opportunity to attack his position. The openstruggle will make it more difficult for the regime tomaintain the facade of free elections this spring. -

THE POLITICAL SITUATION IN ITALY . . . .

The parliamentary debate occasioned by the Communists'recent no-confidence motion in effect opened the c,ampaignfor national elections to be called some time this spring.Special attention in the debate focused on the new Italiandefense position announced by Premier Fanfani followinghis Washington talks. The Nenni Socialists, in marked con-trast to their position of a year qp-position to a NATO nuclear force.-DENMARK'S FAEROE ISLANDS PROBLEM ..

The new coalition government in the semiautonomousFaeroe Islands is expected to exert pressure on the DanishGovernment to revise the Home Rule Law of 1948 and thestatus of US and NATO defense facilities in the islands.One of the two principal parties in the coalition wantsalmost complete independence and removal of NATO installa-tions. Danish officials will probably insist that specialelections be called before any drastic changes are made.

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Page 19

Page 20

S1iJ:CB.ET


1 February 19'63

REFERENDUM IN IRAN . • . . . . . . . Page 16

The Shah's overwhelming victory in Iran's reform pro-gram referendum on 26 January will encourage him to acceler-ate reforms and possibly to advance the date of nationalelections now planned for June or JUly. The regime mustereda 99.9-percent affirmative vote, partly by intimidatingthe mUllahs, the landlords, and the National Front. Theyappear te·' be demoralized temporarily, and probably havelost many.supporters. Trouble for the regime is in prospectwhen workers and peasants find that progress toward im-plementing the th.,..,n they have been ledto expect.

INDONESIAN INTENTIONS TOWARD MALAYSIA Page 17

Indonesia has announced a policy of "confrontation I'with Malaya over the inclusion of the British Borneo ter-ri tories in the, projected Malaysia Federation. It reportedlyis giving guerrilla training to both Indonesian and rebelelements, and a monthly trairting capacity of five or sixhundreQm-ay have been reac4ed.


Former security chief Kim Chong-pil has emerged froma fight for control of the new government party with hispower intact for the time being, if not strengthened. How-ever, the factional struggle within the regime almost cer-tainly will continue, with Kim's enemies biding their timefor a new opportunity to attack his position. The openstruggle will make it more difficult for the regime tomaintain the facade of free elections this spring. -

THE POLITICAL SITUATION IN ITALY . . . .

The parliamentary debate occasioned by the Communists'recent no-confidence motion in effect opened the c,ampaignfor national elections to be called some time this spring.Special attention in the debate focused on the new Italiandefense position announced by Premier Fanfani followinghis Washington talks. The Nenni Socialists, in marked con-trast to their position of a year qp-position to a NATO nuclear force.-DENMARK'S FAEROE ISLANDS PROBLEM ..

The new coalition government in the semiautonomousFaeroe Islands is expected to exert pressure on the DanishGovernment to revise the Home Rule Law of 1948 and thestatus of US and NATO defense facilities in the islands.One of the two principal parties in the coalition wantsalmost complete independence and removal of NATO installa-tions. Danish officials will probably insist that specialelections be called before any drastic changes are made.

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Page 19

Page 20

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amUNT INTELLIGENCE WEEKLY SUMMARY

1 February 1963

BRAZIL'S NEW CABINET.. -. . . . . . . . . . . . . . . . Page 21

Joao Goulart, who has recently received full pres-idential powers, appears to believe that he can strengthenleftist influences in Brazil without endangering the coun-try's chances for sizable new economic aid from theUni ted States. He has increased the number of leftistsamong his advisers as economic negotiations with Washingtonare about to begin. Brazil is seeking aid to avoid de-faulting,on its international obligations this spring.

ARGENTINA'S FINANCIAL CRISIS Page 22

The Argentine Government's present financial resourcesare inadequate to me-et either foreign or domestic obliga-tions. It is giving priority to paying foreign debts toencourage new aicJ, from abroad in the present crisis. Meanwhileboth the government and businesses are behind in salarypayments, unemployment is growing, and living costs are rising.The economic and sO..Cial unrest are jeopardiZing ..•for scheduled for this June._

SPECIAL ARTICLES

THE CHINESE COMMUNIST NAVY Page 1

The Chinese Communist Navy, although numerically strongerthan that of any other Asian country, is primarily a defensiveforce. Its largest vessels are four obsolescent Gordy-classdestroyers acquired from the USSR before 1955, and no newconstruction of major vessels is likely in China unlessSoviet assistance is resumed. The effectiveness of thesubmarine fleet, the fourth largest in the world, is limitedby i ts .a{p; .:tIl operat iOAS far fromits bases.

TURKEY'S FIRST FIVE-YEAR PLAN

Turkey will be making i.ts first systematic effort tomobilize its resources when it officially puts its Five-Year Plan for economic development into effe.ct on I March.By accelerating the rate of private and government invest-ment, it aims to achieve a 7-percent annual growth inGNP. Recommendations for new taxes to finance the planhave been watered down, however, and an international con-sortium's offer of aid has fallen far short of Turkishhopes . Nevertheless, the Inonu governm,ent se.ekse:arlyvisible accompllsQ,ments that will provide t4e;stimulus necessary for the plan's success. j

SECRBTiv

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Page 4

SEeBET

amUNT INTELLIGENCE WEEKLY SUMMARY

1 February 1963

BRAZIL'S NEW CABINET.. -. . . . . . . . . . . . . . . . Page 21

Joao Goulart, who has recently received full pres-idential powers, appears to believe that he can strengthenleftist influences in Brazil without endangering the coun-try's chances for sizable new economic aid from theUni ted States. He has increased the number of leftistsamong his advisers as economic negotiations with Washingtonare about to begin. Brazil is seeking aid to avoid de-faulting,on its international obligations this spring.

ARGENTINA'S FINANCIAL CRISIS Page 22

The Argentine Government's present financial resourcesare inadequate to me-et either foreign or domestic obliga-tions. It is giving priority to paying foreign debts toencourage new aicJ, from abroad in the present crisis. Meanwhileboth the government and businesses are behind in salarypayments, unemployment is growing, and living costs are rising.The economic and sO..Cial unrest are jeopardiZing ..•for scheduled for this June._

SPECIAL ARTICLES

THE CHINESE COMMUNIST NAVY Page 1

The Chinese Communist Navy, although numerically strongerthan that of any other Asian country, is primarily a defensiveforce. Its largest vessels are four obsolescent Gordy-classdestroyers acquired from the USSR before 1955, and no newconstruction of major vessels is likely in China unlessSoviet assistance is resumed. The effectiveness of thesubmarine fleet, the fourth largest in the world, is limitedby i ts .a{p; .:tIl operat iOAS far fromits bases.


Turkey will be making i.ts first systematic effort tomobilize its resources when it officially puts its Five-Year Plan for economic development into effe.ct on I March.By accelerating the rate of private and government invest-ment, it aims to achieve a 7-percent annual growth inGNP. Recommendations for new taxes to finance the planhave been watered down, however, and an international con-sortium's offer of aid has fallen far short of Turkishhopes . Nevertheless, the Inonu governm,ent se.ekse:arlyvisible accompllsQ,ments that will provide t4e;stimulus necessary for the plan's success. j

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CURRENT I!frELLIGENCE WEEKLY SU14MARY

WEED..Y REVIEW

1 Feb 63 WEEKLY REVIEW Page 1 of 22

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CURRENT I!frELLIGENCE WEEKLY SU14MARY

WEED..Y REVIEW


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CURRENT INTELLIGENCE WEEKLY SUDARY

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SECRET



SOVIET FORE IGN POLICY DEVELOPMENTS

Although there has been nosignificant authoritative com-ment,ary on the Ber lin and Ger-man issues during the past week,Soviet propagandists have at-tempted to rebut alleged Westernassertions that the German questionhas lost its urgency. Bloc com-mentators continue to stress thatKhrushchev's latest proposals pro-vide an acceptable "compromise"solution to the Berlin question,and Red star on 27 January claimedthat"poi'ii'f'S'""of rapprochement arebeginning to crystallize in theposition of both

Soviet propaganda carefullyavoids the question of whether theUS-Soviet discussions on these is-sues should be resumed soon but, inimplicit allusion to the currenttest-ban ne-gotiations, points up-the intrinsic value of negotiationsin res.olving

Berlin and Germany

The USSR has avoided strongattacks on French policy and di-rect criticism of De Gaulle per-sonally. Moscow has apparentlydecided to avoid committing it-self to a clear line of attackpending further developments inthe CommOn Market issue and toretain its freedom of maneuverin any future discussion.s withthe French leader on largerEast-West issues.

i Common MarketIII Moscow has reacted alongfamiliar lines to the breakdownof the UK-EEC talks in Brussels.Soviet propagandists have describedit as a graphic revelation of theinherent contradictions in theNATO partnership and impliedthat West Germany, acting outof purely selfish motives, wasthe principal advocate of com-promise between France and GreatBritain. Soviet commentatorstook much the same line theyfollowed in elaborating onAdenauer's trip to France, claim-ing that West Germany's sole in-terest was in the acquisitionof nuclear arms and that Bonnwould play both sides of theAtlantic fence in order toachieve this ambition.

Moscow reported withoutcomment President Kennedy'sorder postponing uDdergroundtests in Nevada during thepresent tall'..s. The Sovietpress has not repeated Gromyko's21 January insistence on Frenchparticipation in a test-bantreaty, but Moscow radio notedit is not difficult to for,eseeDe Gaulle's "obstruction" of anagreement.

High-level Soviet officials,however, continued to indicatepessimism regarding an earlyagreement. Soviet PresidentBrezhnev complained to Am-bassador Kohler on 24 Januarythat US "delaying" was due moreto diplomatic than to technicalreasons.

The Soviet press continuedto express optimism regardingprospects for a test-ban treaty.In contrast to Moscow's publicinsistence that it cannot grantfurther concessi9Ds .. ' i

althollg teusSR cannot ac-cept 8 to lOon-site inspections,it might consider four such in-spections "reasonalDle." Hs alsoimplied that Moscow would notrigidly insist on the maximumof three automatic seizmicstations indicated in Khru-shchev's recent letters to Presi-dent Kennedy. A further hintof flexibility was containedin a ...-;fiil

Moscow-maintained a cau-tious stance last week regard-ing developments in the nucleartest- .. ! .11- -.' - - . -- .. --..

t••re·$S '!t'(!)hr a test ban may openthe way renewed high-levelnegotiatiOns ()n-aBerlin settle-ment . ...__the USSR's

East-West relations and suggestedthat a foreign ministers' meet-ing to sign a test-ban treatywould provide a suitable op-portunity for discussing otherproblems such as Berlin.

. t aa t il\le 'HI' . tt'ii.:iifC'a'mpr<:nll.iseon seven" inspections.

1 Feb 63SECRET

WEEKLY REVIEW Page 3 of 22 -

CURRENT INTELLIGENCE WlE.KLY SUMMARY

SOVIET FOREIGN POLICY DEVELOPMENTS

Soviet propaganda carefullyaVOids the question of whether theUS-Soviet discussions on these is-sues should be resumed soon but, inimplicit allusion to the currenttest-ban negotiations", points upthe intrinsic value of negotiationsin ...gd1

Although there has been nosignificant authoritative com-ment,ary on the Ber lin and Ger-man issues during the past week,Soviet propagandists have at-tempted to rebut alleged \\Testernassertions that the German questionha.s lost its urgency. Bloc_ com-mentators continue to stress thatKhrushchev's latest proposals pro-vide an acceptable "compromise"solution to the Berlin question,and Red Star on 27 January claimed

rapprochement arebeginning to crystallize in theposition of both

The USSR has avoided strongattacks on French policy and di-rect criticism of De Gaulle per-sonally. Moscow has apparentlydecided to avoid committing it-self to a clear line of attackpending further developments inthe CommOn Market issue and toretain its freedom of maneuverin any future discussions withthe French leader on largerEast-West issues.

Berlin and Germany

i Common MarketII Moscow has reacted alongfamiliar lines to the breakdownof the UK-EEC talks in Brussels.Soviet propagandists have describedit as a graphic revelation of theinherent contradictions in theNATO partnership and impliedthat west Germany, acting outof purely selfish motives, wasthe principal advocate of com-promise between France and GreatBritain. Soviet commentatorstook much the same line theyfollowed in elaborating onAdenauer's trip to France, claim-ing that West Germany's sole in-terest was in the acquisitionof nuclear arms and that Bonnwould play both sides of theAtlantic fence in order toachieve this ambition.

Moscow reported withoutPresident Kennedy's

order postponing uIidergroundtests in Nevada during thepresent talltS. The Sovietpress has not repeated Gromyko's21 January inSistence on Frenchparticipation in a test-bantreaty, but Moscow radio notedit is not difficult to for,eseeDe Gaulle's "obstruction" of anagreement.

The Soviet press continuedto express optimism regardingprospects for a test-ban treaty.In contrast to Moscow's publicinsistence that it cannot grantfurther concessiQDs ' .......:

alth:oug cannot ac-cept 8 to lOon-site inspections,it might consider four such in-spections "reasonalD1e." Us alsoimplied that Moscow would notrigidly insist on the maximumof three automatic seizmicstations indicated in Khru-shchev's recent letters to Presi-dent Kennedy. A further hintof flexibility was containedin a ••

High-level Soviet officials,however, continued to indicatepessimism regarding an earlyagreement. Soviet PresidentBrezhnev complained to Am-bassador Kohler on 24 Januarythat US "delayingtt was due moreto diplomatic than to technicalreasons.

Iievesa test ban may open

the way renewed high-levelnegotiations settle-ment. the llSSR's

East-West relations and suggestedthat a foreign ministers' meet-ing to sign a test-ban treatywould provide a suitable op-portunity for discussing otherproblems such as Berlin.

Moscow-maintained a cau-tious stance last week regard-ing developments in thetest- .... ",p

.

1 Feb 63SECRET

WEEKLY REVIEW Page 3 of 22 -

SECRET


SINO-SOVIET RELATIONS

Communist China's first ed-itorial comment on Sino-Sovietissues since the East Germanparty congress was no less abu-sive than its propaganda beforeKhrushchev's call for a cessa-tion of polemics.

Peiping is anxious,not to potential sup-porters, 'many of ,whom felt thatKhrushchev's appeal made sense.The North Vietnamese, for ex-ample, who attempted tomaintain a balanced positionbetween the two antij..gonists,hailed ."the proposal by Com-rade Kbrusbcbev ••• that polemicsbe stopped."

With this in mind, Peipingis discrediting the truce pro-posal as merely a hypocriticalgrandstand play accompanied byaction designed to aggravaterather than terminate the con-troversy., A long People'sDaily editorial on 27 Januarycharged Khrushchev and his sup-porters with paying only lipservice to bloc unity whileplanning the chorus of boos andcatcalls directed at the headof the Chinese Communist del-egation to the East Germancongress. This charge of adeliberately staged demonstra-tion probably is a-valid one andwill carry weight with many ofPeiping t s sup,porters who wi t-nessed the event from close range.

The editorial goes beyonda disparagement of Khrushchev'ssincerity to insist on impossi-ble conditions for a truce.As Peiping presents the case,the attitude toward Yugoslaviais central to the issue, andthe Chinese will refuse to joinin the "sham unity" that impliesany toleration of bloc amitywith Belgrade. The "real unity"demanded by Peiping would thuspermit it to continue implicitattacks on Soviet policies bymeans of explicit attacks on"Yugoslav revisionism."

To keep their position onrecord, the Chinese are givingwide circulation to the 27 Jan-uary editorial. It has beenreprinted as a pamphlet, andit is being rebroadcast

to domestic and foreign audiences.There were 80 such broadcasts--13 in Russian--on 27 Januaryalone.

In addition, Peiping iscontinuing to circulate otherrecent polemical editorials fromPeoRle's Daily and Red Flag,whicn have been gathered into apamphlet in Chinese and otherlanguages. The Chinese domesticaudience has also been informedby extracts in People's Daily ofspeeches at the East German partycongress that were explicitlycritical of Peiping. The effecthas been to impress on the Chinesepeople the fact of their compara-tive isolation in the bloc. Bynoting in the 27 January editorialthat Sino-Soviet relations havereached "the brink of the prec-ipice," the Chinese leaders havealerted their followers to thepossibility of new dramaticdevelopments.

The next move is in thehands of the Soviet leaders.They may feel that their beststrategy is to continue tomaintain the high and principledstand Khrushchev adopted at theEast German congress and tostress the necessity for apause in the polemics. In thisway, they could take credit fortrying to maintain "unity" inthe face of Chinese intrans.igencewithout impairing their freedomto institute policy moves--like the reported delivery ofMIGs to India--directly contraryto Chinese interests.

On the other hand, theinsults to Khrusb,chev in the27 January editorial may goa,dthe Sovi'ets into t.aking tbeline that Peiping's display ofdogmatism in the face of theirgenerous offer left them nochoice but to point out thedangers the Chinese pose forthe whole international Com-munist movement. In eitherevent, the net result of thelatest round in the contestbetween the two nations setin motion by the East Germancongress has been a furtherdemonstration of the lack ofcommon theycan stand.,

1 Feb 63SB:CRET

WEEKLY REVIEW Page 4 of 22

-

SEOltET


SINO-SOVIET RELATIONS

Communist China's first ed-itorial comment on Sino-Sovietissues since the East Germanparty congress was no less abu-sive than its propaganda beforeKhrushchev's call for a cessa-tion of polemics.

Peiping is anxious,not to alienate potential sup-porters, 'many of ,whom felt thatKhrushchev's appeal made sense.The North Vietnamese, for ex-ample, who attempted fomaintain a balanced positionbetween the two antIJ.gonists,hailed ."the proposal by Com-rade Khrusbobev ••• that polemicsbe stopped. u

With this in mind, Peipingis discrediting the truce pro-posal as merely a bypocriticalgrandstand play accompanied byaction designed to aggravaterather than terminate the con-troversy., A long People'sDaill editorial on 27 Januarycharged Khrushchev and his sup-porters with paying only lipservice to bloc unity whileplanning the chorus of boos andcatcalls directed at the headof the Chinese Communist del-egation to the East Germancongress. This charge of adeliberately staged demonstra-tion probably isa'valid one andwill carry weight with many ofPeiping's supporters who wit-nessed the event from close range.

The editorial goes beyonda disparagement of Kbrusbchev'ssincerity to insist on impossi-ble conditions for a truce.As Peiping presents the case,the attitude toward Yugoslaviais central to the issue, andthe Chinese will refuse to joinin the "sham unity" tbat impliesany toleration of bloc: amitywith Belgrade. The "real un,! tyUdemanded by Peiping would thuspermit it to continue implicitattacks on Soviet policies bymeans of explicit attacks on"Yugoslav revisionism."

To keep their position onrecord, the Chinese are givingwide circulation to the 27 Jan-uary editorial. It has beenreprinted as a pamphlet, andit is being rebroadcast

to domestic and foreign audiences.There were 80 such broadcasts--13 in Russian--on 27 Januaryalone.

In addition, Peiping iscontinuing to circulate otherrecent polemical editorials fromPeoele's Daill and Red Flag,w"hicli have been gadiered into apamphlet in Chinese and otherlanguages. The Chinese domesticaudience has also been informedby extracts in People's Daily ofspeeches at the last German partycongress that were explicitlycritical of Peiping. The effecthas been to impress on the Chinesepeople the fact of their compara-tive isolation in the bloc. Bynoting in the 27 January editorialthat Sino-Soviet relations havereached tIthe brink of the prec-ipice," the Chinese leaders havealerted their followers to thepossibility of new dramaticdevelopments.

The next move is in thehands of the Soviet leaders.They may feel that their beststrategy is to continue tomaintain the high and principledstand Khrushchev adopted at theEast German congress and tostress the necessity for apause in the polemics. In thisway, they could take credit fortrying to maintain "unity" inthe face of Chinese intransigencewithout impairing their freedomto institute policy moves--like the reported delivery ofMIGs to India--directly contraryto Chinese interests.

On the other hand, theinsults to Khrushchev in the27 January editorial may goaQthe Sovfets into t.aking theline that Peiping's display ofdogmatism in the face of theirgenerous offer left them nochoice but to point out thedangers the Chinese pose forthe whole international Com-munist movement. In eitherevent, the net result of thelatest round in the contestbetween the two nations setin motion by the East Germancongress has bee!n a furtherdemonstration of the lack ofCODm)on 'l'1 .. theycan stand.

1 Feb 63SECRET


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THE SINO-INDIAN BORDER DISPUTE

The interpretations of theloosely worded Colombo Con-ference proposals made publicin the past week byPeiping andNew Delhi are largely incom-patible and 'provide little com-mon ground for producfive dis-cussions.

Although the Chineseaccept these proposals "inprinciple," they make it clearthat they will insist on twomajor modifications to whichthe Indian Government cannotagree.

Chou En-lai's formal replyto Prime Minister Bandaranaikeand Peiping's follow-up editori-al on 28 Ja.nuary preclude thereturn of, Indian forces tolarge areas in the North EastFrontier Agency (NEFA) vacatedby the Chinese. The Colomboproposals, as "clarified"during the Bandaranaike missionto New Delhi and discussed in

the Indian Parliament, wouldpermit the return of Indianmilitary forces to the McMahonline everywhere except in theDhola and Longju areas.

The second of Peiping'smodifications excludes Indiancivil administration from theproposed demilitarized zone inLadakh and from BaraLongju, and the Dhola area.The Colombo proposals calledfor a one-sided Chinese pull-back in Ladakh and would havepermitted a return of Indiancivil administration to manypositions from wbich the Chinesebad driven New Delhi's forceslast fall.

As a compensating gesture,Peiping bas offered to take"another step forward on theroad of reconciliation" bywaiving the right to set upcivil administration in certaindisputed border areas. Peiping

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1 Feb 63 WEEKLY REVIEW Pa.ge 5 of 22

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THE SINO-INDIAN BORDER DISPUTE

The interpretations of theloosely worded Colombo Con-ference proposals made publicin the past week byPeiping andNew largely incom-patible and provide little com-mon ground for prQducfive dis-cussions.

-Although the Chineseaccept these proposals "inprinciple." they make it clearthat they will insist on twomajor modifications to whichthe Indian Government cannotagree.

Chou En-Iai's formal replyto Prime Minister Bandaranaikeand Peiping's follow-up editori-al on 28 January preclude thereturn of- Indian forces tolarge areas in the North EastFrontier Agency (NEFA) vacatedby the Chinese. The Colomboproposals, as "clarified"during the Bandaranaike missionto New Delhi and discussed in

the Indian Parliament, wouldpermit the return of Indianmilitary forces to the McMahonline everywhere except in theDhola and Longju areas.

The second of Peiping'smo·dif;Lcations excludes Indiancivil administration from theproposed' demilitarized zone inLadakh and from Bara Hoti,Longju, and the Dhola area.The Colombo proposals calledfor a one-sided Chinese pull-back in Ladakh and would havepermitted a return of Indiancivil administration to manypositions from which the Chinesehad driven New Delhi's forceslast fall.

As a compensating gesture,Peipingbas offered to take"another step forward on theroad of reconclliationt! bywaiving the right to upcivil ad1Dinistration in certaindisputed border areas. Peiping

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OOlmENT INTELLIGENCE WEEKLY SUMMARY

also announced on 28 Jaol1arythat its troop pullbacks would"soon be completed along theentire border," at which timeChinese forces would be "farbehind" the 'line of 8 September1962--which New Delhi ·has de-clared is one essential conditionfor negotiations.

The Indians, aware of Pei-ping's terms earlier this monththrough diplomatic channels, hadflatly called them unacceptable.Both Peipingand New Delhiprobably 10Qk forward to a pro-tracted deadlock on the borderissue and a long period of dip-lomatic jockeying and propagandaexchanges. The Afro-Asian nationswill probably continue their ef-forts at mediation, althoughnew initiatives willbe individual rather thancollective. Indonesian ForeignMinister Subandrio has justvisited New Delhi, and Cambodia'sSihanouk is visi ti.ng India priorto a trip to Peiping.

On a related aspect of theSino-Indian border dispute, NewDelhi is giving increasin:g play

to the warmth and closeness ofits relations with Moscow. R.K.Nehru, secretarygen.eral ofIndia's External Affairs lIin-istry, returned from the USSRon 26 January after a week ofwide-ranging talks wi th Sovietofficials. Included in thetopics discussed, according tothe India.ns, were prospectsfor increased trade, Sovietaid for India's Third (1961-66)a.nd Fourth (1966-71) Five-YearPlans, details concerning theestablishmEimt of the "MIG factory"in India, and possible Soviethelp for other Indian defenseindustries. Nehru also in-vited Deputy Foreign MinisterFiryubin and Defense MinisterMalinovsky to visit Indi'a.

In playing up these develop-ments, the Indian Governmenthas omitted--at Moscow's request--any publicity conc,erning thearri.val of four crated MIG-21 fig'hters in. Bombay this 'we·e'k, a 1t hOiUgh t he I ndianscan beexpect"ed to make themost out oft.:;f; ..1i,

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I Feb 63 Pag,e 6 of 22

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OOlmENTINTELLIGENCE WEEKLY SUMMARY

also announced on 28 Januarythat its troop pullbacks would"soon be completed along theentire border," at which timeChinese forces would be "farbehind" the 'line of 8 September1962--which New Delhi ·has de-clared is one essential conditionfor negotiations.

The Indians, aware of Pei-ping's terms earlier this monththrough diplomatic channels, hadflatly called them unacceptable.Both Peipingand New Delhiprobably 10Qk forward to a pro-tracted deadlock on the borderissue and a long period of dip-lomatic jockeYing and propagandaexchanges. The Afro-Asian nationswill probably continue their ef-forts at mediation, althoughnew initiatives willbe individual rather thancollective. Indonesian ForeignMinister Subanelrio has justvisited New Delhi, and Cambodia'sSihanouk is visi ti.ng India priorto a trip to Peiping.

On a related aspect of theSino-Indian border dispute, NewDelhi is giving increasin:g play

to the warmth and closeness ofits relations with Moscow. R.K.Nehru, secretarygen.eral ofIndia's External Affairs lIin-istry, returned from the USSRon 26 January after a week ofwide-ranging talks wi th Sovietofficials. Included in thetopics discussed, according tothe lndia.ns, were prospectsfor increased trade, Sovietaid for India's Third (1961-66)and Fourth (1966-71) Five-YearPlans, details concerning theestablishmEimt of the "MIG factory"in India, and possible Soviethelp for other Indian defenseindustries. Nehru also in-vited Deputy Foreign MinisterFiryubin and Defense MinisterMalinovsky to visit Indi·a.

In playing up these develop-ments, the Indian Governmenthas omitted--at Moscow's request--any publicity conc,erning thearri.val of four crated MIG-21 fig'hters in. Bombay thiswe·e'k, a 1t lloiugh t he I ndianscan beexpect"ed to make themost out oftha:l' ..:fl,¢!'

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I Feb 63 Pag,e 6 of 22

cuaRENT INTELLIGENCE WEEKLY SU'MMARY

THE CUBAN SITUATION

Cuban press and radio re-ports indicate a resurgence ofsmall-scale insurgent activity.The Castro regime, however, isin no immediate danger from theactivities of the active opposi-tion. While most Cubans areprobably dissatisfied with theregime, only a small minorityactively resist it. Variousforms of passive resistance,such as work slowdowns, however,are probably more widespread.

Internal Developments

Soviet Economic Support

Cuban leaders continue toshow concern over worker apathyand the threat that labor pro-ductivity will not reach plannedlevels. At a 27 January cere-mony honoring t1outstanding"workers, Che Guevara pUbliclyreferred to the "symptomaticand alarming" fact that manyCubans t1do not work hard enough."He said that mally of the sameyoung Cubans who have shown them-selves ready to fight courageouslyon the battlefield in de,fense ofthe fatherland do not show thesame spirit when it "becomes

Moscow announced on 26 Jan-uary that, at Havana's request,it issendlng some 400 special-ists to Cuba during the firstthree months of the year. Thespecialists are to include agrono-mists, zQotecbnicians, agricul-tural machinery operators, agri-cultural economists, and veter-inarians, and are to spend ayear in Cuba helping to improvecrop production, animal husbandry,and farm mechanization.

The Cuban trade delegationwhich had been in Moscow sincemid-December negotiating detailson Cuban-Soviet trade for thecoming year now has left for itsnext stop in Communist China.There has been no indication ofwhat has been agreed upon.

About 46 crates of a typeused for coastal-defense cruisemissiles were recently observednear Guerra, on the north coastof Pinar del Rio Province nearthe port of Mariel. They prob-ably arrived at that site be-tween 6 and 11 January, severaldays before the Simferopol dockedin Havana. It is not known ifthe crates arrived by sea duringthe period immediately priorto 11 January or if they hadbeen in storage in Cuba forsome time.

The tractor trailers alsoobserved in aerial photographyof the' Guerra site have beenthere since 25 November. Thepossible cruise-missile launchpositions near Guerra, first ob-served in photography of 11November, have not yet becomeoperational.

.agreethat the cargo was declared tobe "explosives '," and two ofthem indicate that at least aportion of the cargo consistedof equipment or supplies formilitary aircraft.

Military Developments

There have been furtherreports tending to confirm thatthe Soviet vessel Simferopolunloaded a military cargo inHavana between 17 an 9


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cuaRENT INTELLIGENCE WEEKLY SU'MMARY

THE CUBAN SITUATION

Cuban leaders continue toshow concern over worker apathyand the threat that labor pro-ductivity will not reach plannedlevels. At a 27 January cere-mony honoring t1outstanding"workers, Che Guevara pUbliclyreferred to the "symptomaticand alarming" fact that manyCubans "do not work hard enough."He said that mally of the sameyoung Cubans who have shown them-selves ready to fight courageouslyon the battlefield in de,fense ofthe fatherland do not show thesame spirit when it "becomes

Cuban press and radio re-ports indicate a resurgence ofsmall-scale insurgent activity.The Castro regime, however, isin no immediate danger from theactivities of the active opposi-tion. While most Cubans areprobably dissatisfied with theregime, only a small minorityactively resist it. Variousforms of passive resistance,such as work slowdowns, however,are probably more widespread.

Internal Developments

Soviet Economic Support

The Cuban trade delegationwhich had been in Moscow sincemid-December negotiating detailson Cuban-8oviet trade for thecoming year now has left for itsnext stop in Communist China.There has been no indication ofwhat has been agreed upon.

Moscow announced on 26 Jan-uary that, at Havana's request,it issendlng some 400 special-ists to Cuba during the firstthree months of the year. Thespecialists are to include agrono-mists, zootechnicians, agricul-tural machinery operators, agri-cultural economists, and veter-inarians, and are to spend ayear in Cuba helping to improvecrop production, animal husbandry,and farm mechanization.

The tractor trailers alsoobserved in aerial photographyof the' Guerra site have beenthere since 25 November. Thepossible cruise-missile launchpositions near Guerra, first ob-served in photography of 11November, have not yet becomeoperational.

About 46 crates of a typeused for coastal-defense cruisemissiles were recently observednear Guerra, on the north coastof Pinar del Rio Province nearthe port of Mariel. They prob-ably arrived at that site be-tween 6 and 11 January, severaldays before the Simferopol dockedin Havana. It is not known ifthe crates arrived by sea duringthe period immediately priorto 11 January or if they hadbeen in storage in Cuba forsome time.

.agreethat the cargo was declared tobe "explosives '," and two ofthem indicate that at least aportion of the cargo consistedof equipment or supplies formilitary aircraft.

Military Developments

There have been furtherreports tending to confirm thatthe Soviet vessel Simferopolunloaded a military cargo inHavana between 17 an 9


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ctJRRENT INTELLIGENCE WEEKLY SUMMARY

necessary topertorm obscureand boring daily tasks" on theproduction front. Guevara de-clared that the working classmust learn that the two kindsof sacrifice are equally im-portant ,in· the "building of so-cialism."

In this speech Guevara alsostated--with his characteristicfrankness--that there are nomore spare parts for the factoriesin Cuba which came from theUnited States, and that Cubahas reached more or lesscritical point" in this respect.

Subversion in Latin America

Indications continue tomultiply that the Castro regimehas embarked ona more aggres-sive program of subversion inLatin America since last fall'smissile crisis.

BIas Roca, Cuba's seniorveteran Communist leader, de-livered a public address on 23January in wh ich. he prais'ed theVenezuelan Itpeople tt for theirpresent struggle against the"tyrannyrt of President Betan-court. He expressed Cuban ap-preciation for the acts of sab-otage committed in the Vene-zuelan oil fields during thecrisis last fall. He used thisas an example of "proletarianinternationalism" and statedflatly, "We shall continue togive our support, each day ingreater proportions, to theVenezuelan people."

In his references to Vene-zuela, Roca was even more spe-cific than Fidel Castro hadin two recent speeches singlingout the Hpeople's strug.gle" inVenezuela for special mention.Roca concluded his speech bydeclaring that \men the Vene-zuelan revolution takes place,

then "all Latin America will beablaze." He declared that the"victory of Venezuela will giveCuba a tre'mendous boost .••wewill have a natien on the con-tinent to back us. n

A Honduran who attendedthe fourth anniversary celebra-tions in Cuba early in Januaryreported On his return to Hon-duras that he and other rep-resentatives from Central Americahad discussions with Che Guevaraduring their stay in Cuba.Guevara told them that they mustprepare for united and simul-taneous revolutions in all ofCentral America. Any idea thatthey can gain power by othermeans is a myth, Guevara said,and no Communist Party has evercome to power through elections.Guevara described th,e tacticsbeing used in Venezuela as an ex-ample for the Central Americans.

Cuban officials appear tobe gathering detailed informa-tion from Latin Americans un-dergoing guerrilla training inCuba to aid Cuban planning andsupport of guerrilla campaignsin the other countries. A Peru-vian recently returned fromguerrilla training in Cuba re-ports that he and some 150 ofhis countrymen training in Cubawere asked to answer a 58-pointquestionna'ire.

Questions covered a widerange and included military,political, and geographic sub-Jects, as well as means forlegal and illegal entry intothe country and methods by whichforeigners can lwy property andestablish commercial firms inthe country. Qu-estions onthe feasibility of guerrillawarfare covered drop ZO,Qes suit-ab.le fo;r.:


ctJRRENT INTELLIGENCE WEEKLY SUMMARY

necessary topertorm obscureand boring daily tasks" on theproduction front. Guevara de-clared that the working classmust learn that the two kindsof sacrifice are equally im-portant ,in· the "building of so-cialism."

In this speech Guevara alsostated--with his characteristicfrankness--that there are nomore spare parts for the factoriesin Cuba which came from theUnited States, and that Cubahas reached more or lesscritical point" in this respect.

Subversion in Latin America

Indications continue tomultiply that the Castro regimehas embarked ona more aggres-sive program of subversion inLatin America since last fall'smissile crisis.

BIas Roca, Cuba's seniorveteran Communist leader, de-livered a pUblic address on 23January in wh ich he prais'ed theVenezuelan Itpeople tt for theirpresent struggle against the"tyrannyrt of President Betan-court. He expressed Cuban ap-preciation for the acts of sab-otage committed in the Vene-zuelan oil fields during thecrisis last fall. He used thisas an example of "proletarianinternationalism" and statedflatly, "We shall continue togive our support, each day ingreater proportions, to theVenezuelan people."

In his references to Vene-zuela, Roca was even more spe-cific than Fidel Castro hadin two recent speeches singlingout the Hpeople's strug.gle" inVenezuela for special mention.Roca concluded his speech bydeclaring that \men the Vene-zuelan revolution takes place,

then "all Latin America will beablaze." He declared that the"victory of Venezuela will giveCuba a tre'mendous boost .••wewill have a natien on the con-tinent to back us. 1t

A Honduran who attendedthe fourth anniversary celebra-tions in Cuba early in Januaryreported On his return to Hon-duras that he and other rep-resentatives from Central Americahad discussions with Che Guevaraduring their stay in Cuba.Guevara told them that they mustprepare for united and simul-taneous revolutions in all ofCentral America. Any idea thatthey can gain power by othermeans is myth, Guevara said,and no Communist Party bas evercome to power through elections.Guevara described the tacticsbeing used in Venezuela as an ex-ample for the Central Americans.

Cuban officials appear tobe gathering detailed informa-tion from Latin Americans un-dergoing guerrilla training inCuba to aid Cuban planning andsupport of guerrilla campaignsin the other countries. A Peru-vian recently returned fromguerrilla training in Cuba re-ports that he and some 150 ofhis countrymen training in Cubawere asked to answer a 58-pointquestionna'ire.

Questions covered a widerange and included military,political, and geographic sub-Jects, as well as means forlegal and illegal entry intothe country and methods by whichforeigners can lwy property andestablish commercial firms inthe country. Qu-estions onthe feasibility of guerrillawarfare covered drop zo,nes suit-ab.le fQil:


WBDNT INTELLIGENCE WEEILY SUMMARY

SOVIET ECONOMY IN 1962

Soviet heavy industri.al de-velopment continued in 1962 toreceive clear pri.ority over con-sumer goods prod'Uction and agri-cUlture. ' In general , trends ofthe preceding year were main-tained. There are signs ofcontinuing difficulties, partic-ularly in investment in certainkey industries, in the selecteddata released by the Soviet Gov-ernment on 26 January.

Industry

Industrial output is claimedto have increased by 9.5 percent,very slightly above the 1961rate. As usual, the greatestincrease was in gr9uP ttA': So-viet jargon for the bulk ofheavy industrial output. Theseven percent increase claimedfor the group "Bn industries,mainly consumer goods, is ashade higher than the 1961 rate,but there are many signs in thereport and elsewhere that 1962was a poor year for the Sovietconsumer.

Soviet gross industrialproduction indexes, moreover,give an inflated ofactual . performance...-they con-tain certain technical biasesand reflect considerable double-counting of goods prQduced. Forthis reason, it is theincrease in 1961 was only 7.6percent, rather than the 9.2percent claimed by the USSR.The 1962 claim was probablysimilarly inflated.

Rates for most basic indus-tries were virtually unchangedfrom 1961. Chemical output ad-vanced by a percentage point abovethe preceding year's increase,wbile ferrous and no·nferrousmetallurgy and the machine-build-ing production rates dropped veryslight.!y. output plans for gas,oi1, a.nd electric power wereoverfu1fi11ed. Pig iron andsteel goals were slightly under-fulfilled. This patter-n prob-ably reflects implementation ofUle policy first diseu.sse,Q byKhrushchev near11 two ye:arsago; layi.n:g more str:esson


SOVIET ECONOMY IN 1962

Soviet heavy industri.al de-velopment continued in 1962 toreceive c.lear priority over con-sumer goods prod'Uction and agri-cUlture. ' In general , trends ofthe preceding year were main-tained. There are signs ofcontinuing difficulties, partic-ularly in investment in certainkey industries, in the selecteddata released by the Soviet Gov-ernment on 26 January.

Industry

Industrial output is claimedto have increased by 9.5 percent,very slightly above the 1961rate. As usual, the greatestincrease was in gr9uP ttA': So-viet jargon for the bulk ofheavy industrial output. Theseven percent increase claimedfor the group "B" industries,mainly consumer goods, is ashade higher than the 1961 rate,but there are many signs in thereport and elsewhere that 1962was a poor year for the Sovietconsumer.

Soviet gross industrialproduction indexes, moreover,give an inflated pic1ture ofactual . performance...-they con-tain certain technical biasesand reflect considerable double-counting of goods prQduced. Forthis reason, it is theincrease in 1961 was only 7.6percent, rather than the 9.2percent claimed by the USSR.The 1962 claim was probablysimilarly inflated.

Rates for most basic indus-tries were virtually unchangedfrom 1961. Chemical output ad-vanced by a percentage point abovethe preceding year's increase,while ferrous and no,nferrousmetallurgy and the machine-build-ing production rates dropped veryslight.Iy. output plans for gas,oil, a.nd electric power wereoverfu1fil1ed. Pig iron andsteel goals were slightly under-fulfilled. This patter'n prob-ably reflects implementation ofUle policy first diseu.sse,Q byKhrushchev near11 two ye:arsago; layi.n:g more str:esson


· . ctJRRENT INTELLIGE,NCE WEEKLY SUMMARY

synthetic materials and lesson the output of the ferrousmetallurgical industry.

Moscow's economic reportgives some hints of the dif-ficulties which have inspiredtwo major reorganizations inless than a year. These dif-ficulties--in the areas ofplanning, supply, and invest-ment--stem from the mountingcompetition for resources forthe military programs, for in-dustrial development, and formaintenance of an acceptablelevel of consumption. Thereis little in the report tosuggest that these problemsabated in 1962. A higher rateof introduction of new fixedcapi tal sugge.sts that the policyundertaken late in 1961 to con-centrate investment resourceson those projects nearing com-pletion has had some success.However, investment data, al-though sketchy and ambiguous,show some priority sections--

chemicals, oil, metallurgy, andmachine building--doing poorly.Light industrial investment in-creased only eight percent com-pared witha planned 33.5 per-cent. As usual, no informationwas released on military programs.

Industrial labor productiv-ity increased by six percent afterhaving slackened during the im-plementation of a shorter workingweek in 1960 and 1961. Produc-tivity in construction was alsogreater than in the two previousyears, but was still below plan.

Agriculture

Despite considerable lipservice from Moscow to the needsof agriculture, nothing in thereport suggests that its prioritywas raised substantially in 1962.The output of mineral fertilizerwas slightly above the annualtarget but too low to meetSeven-Ye·ar-Plan goals or tbeactual requirements of Sovietfarming. The production offarm machinery continued to in-crease fairly rapidly, althoughtractor production iocre-ased ata lower rate tban in 1961. Stateinvestment ;in agriculture in-creased 22 percent, but at leasta part of the increase resultedfrom the transfer of collectivefarms to state-farm status andadds nothing to total agricul-tural investment.

Production in ag-ricul ture weremedio.cre in 1962,despi te a fairly large increasein acreage at theexpens.e offallow land and land in grass-rotatio·n. The report claimeda record grain harvest of ninebillion poods (147 millionmetric tons), blilt Western ex-perts after an extensive studyof acreage, crop, and weather

1 Feb 63

SBCJlET


· . ctJRRENT INTELLIGE,NCE WEEKLY SUMMARY

synthetic materials and lesson the output of the ferrousmetallurgical industry.

Moscow's economic reportgives some hints of the dif-ficulties which have inspiredtwo major reorganizations inless than a year. These dif-ficulties--in the areas ofplanning, supply, and invest-ment--stem from the mountingcompetition for resources forthe military programs, for in-dustrial development, and formaintenance of an acceptablelevel of consumption. Thereis little in the report tosuggest that these problemsabated in 1962. A higher rateof introduction of new fixedcapi tal sugge.sts that the policyundertaken late in 1961 to con-centrate investment resourceson those projects nearing com-pletion has had some success.However, investment data, al-though sketchy and ambiguous,show some priority sections--

chemicals, oil, metallurgy, andmachine building--doing poorly.Light industrial investment in-creased only eight percent com-pared witha planned 33.5 per-cent. As usual, no informationwas released on military programs.

Industrial labor productiv-ity increased by six percent afterhaving slackened during the im-plementation of a shorter workingweek in 1960 and 1961. Produc-tivity in construction was alsogreater than in the two previousyears, but was still below plan.

Agriculture

Despite considerable lipservice from Moscow to the needsof agriculture, nothing in thereport suggests that its prioritywas raised substantially in 1962.Tbe output of mineral fertilizerwas slightly above tbeannualtarget but too low to meetSeven-Ye·ar-Plan goals or tbeactual requirements of Sovietfarming. The production offarm machinery continued to in-crease fairly rapidly, althoughtractor production iocre-ased ata lower rate tban in 1961. Stateinvestment in agriculture in-creased 22 percent, but at leasta part of the increase resultedfrom the transfer of collectivefarms to state-farm status andadds nothing to total agricul-tural investment.

Production results in ag-ricul ture weremedio.cre in 1962,despi te a fairly large increasein acreage at theexpens.e offallow land and land in grass-rotatio·n. The report claimeda record grain harvest of ninebillion poods (147 millionmetric tons), blilt Western ex-perts after an extensive studyof acreage, crop, and weather

1 Feb 63

SBcaET



Foreign Trade

Competition With the US

One of the main propagandafeatures of Moscow's report is'theself-styled "competition" withthe United States, which, as inthe past, is presented in termshighly favorable to the Soviets.For example, the claim thatSoviet industrial production hasreached 63 percent of the US level isbased on statistical methodswhich give a strong upward biasto Soviet efforts. No comparisonsbetween two countries with dis-similar economies can be entirelyfair or unbiased, but Sovietindustrial production is in factbelieved to thatof the US.

Consumer Goods and Housing

The urban housing program,for the third year in a row, wassubstantially underfulfilled.Taking into account the 1963plan,it now appears that theurban housing construction willfall about ten percent short ofthe Seven-Year-Plan goal. Like-wise, rural housing is badlybehind schedule.

Soviet foreign trade turn-over amounted to $13.1 billion in1962, an increase of approximately$1.3 or 11.5 percent overthe 1961 level. This was thelargest increase in several yearsand resulted largely from a 17-percent increase in trade withCEMA countries and a 30-percentincrease in trade with nonblocunderdeveloped countries. Moscowgave no data on trade with China,

Other features of the 1962 , but apparently there was someeconomic performance may also dis- decline in 1962.hearten Soviet consumers. Theoutput of light industry increasedonly four percent comparedwi th fivepercent the preceding year. Pro-ductionof cotton fabrics didnot increase at all. Productionof all kinds of textiles rose twopercent. Retail trade turnover,although somewhat improved over1961, was below plan. '

information--estimate it at about115 million tons--well below therecord 1958 crop. There appar-ently was a fair increase in meatproduction, encouraged by thehigher prices for meat introducedin mid-1962 and by the prospectof feed Ahortages this winter.The potato crop was the worstone in over a dec'ade.

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information--estimate it at about115 million tons--well below therecord 1958 crop. There app.ar-ently was a fair increase in meatproduction, encouraged by thehigher prices for meat introducedin mid-1962 and by the prospectof feed shortages this winter.The potato crop Was the worstone in over a dec'ade.

Consumer Goods and Housing

Other features of the 1962economic performance may also dis-hearten Soviet consumers. Theoutput of light industry increasedonly four percent comparedwith fivepercent the preceding year. Pro-duction of cotton fabrics didnot increase at all. Productionof all kinds of textiles rose twopercent. Retail trade turnover,although somewhat improved over1961, was below plan. .

The urban housing program,for the third year in a row, wassubstantially underfulfilled.Taking into account the 1963plan,it now appears that theurban housing construction willfall about ten percent short ofthe Seven-Year-Plan goal. Like-wise, rural housing is badlybehind schedule.

Foreign Trade

Soviet foreign trade turn-over amounted to $13.1 billion in1962, an increase of approximately$1.3 billion or 11.5 percent overthe 1961 level. This was thelargest increase in several yearsand resulted largely from a 17-percent increase in trade withCEMA countries and a 30-percentincrease in trade with nonblocunderdeveloped countries. Moscowgave no data on trade with China,but apparently there was somedecline in 1962.

Competition With the US

One of the main propagandafeatures of Moscow's report is theself-styled "competition" withthe United States, which, as inthe past, is presented in termshighly favorable to the Soviets.For example, the claim thatSoviet industrial production hasreached 63 percent of the US level isbased on statistical methodswhich give a strong upward biasto Soviet efforts. No comparisonsbetween two countries with dis-similar economies can be entirelyfair or unb1ased, but Sovietindustrial production is in factbelieved to be:esiS .ta: ,n.1);llf thatof the US.

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C8MENT INTELLIGENCEWEEKLYSUDARY

SINO-MONGOLIAN RELATIONS

Since the Cuba.n crisas lastfall, Mongolia's advocacy of

views has broughtit to the point of open criti-cism of the·Chinese. Always adependable supporter 'of Sovietforeign policy, Mongolian partychief Tsendenbal has emergedmore and more in recent monthsas Khrusbchev's Asian spokesman.

Tsedenbal has given allappearances of accepting thisrole with enthusiasm. At a re-cent party ideological conf·erencein Ulan Bator, he reiteratedMOscow's explanation of itsCuban policy, in effect defend-ing it against Chinese chargesof appeasement. Disparagingthose "who cling to o'bsoleteformulas" and do not displayflexibility in face of changedworld conditd.ons, the Mongolia.nleader labeled as "irresponsibleand conceited" Peiping's "ground-less criticism" of the USSR'spolicy. He pointedly cbargedthe Chinese with "incorrectand extremely harmful actions"in egging on the Albaniams.

State relations with pei-ping, however, remain outwardlycorrect, althougb MORCo11an of-ficials admit privately therehas been some cooling. The mostconspicuous form of ChiDJeSe as-sistance, the use of Chineseworkers for big constructionprojects around Ulan Bator, ap-parently continues. Labor-shortMongolia has employed as manyas 10,000 of these workers atone time. Mongolian officialshave told recent foreign visitorsthat workers from China who com-pleted their tours of duty inthe past year have all be'en re-placed by the Chinese.

These correct state rela-tions were exemplified by thesigning of a border treaty inlate December. It probably mat-tered little to the Mongoliansthat the Chinese motive in ar-ranging the treaty at that timewas to place India in a bad light.For their part, the Chinese wereprobably und'er no illusions thattheir accommodation on the border,along which the number of inci-dents has been increasing, wouldbudge Ulan Bator from its pro-Soviet orientation.

TSeQenbal, who went 1:0 Pei-ping to sign the treaty, gavethe Chinese no reason to enter-tain any such hope. In returnfor the fanfare with which hewas greeted,. Tsedenbal· dis-comfited his hosts at a pUblicrally in Peiping by hailing Mos-cow's "sensible compromises"on Cuba. His remarks reportedlycaused the a.udience of lSO,OOOto t1buzz with surprise H and weregreeted by Chinese leaders onthe rostrum with impassivesilence.

'Phe Mongolians describetheir position, wedged in be-twee'n the USSR and CommunistChina, as Hoverpowering,H andtake advantage of every op-portunity to cultivate foreigndiplomats and plump for rec.ogni-tiOD. Their record--recognitionby 14 non-Communist countries--is f.ar better than that of theother Asian satellites. Re,cogni-tion last week by the UnitedKingdom--the first from a WestEuropean country wi11 no Q()ubtbe expl,olted as au exam.ple to

other states.


cmmENT INTELLIGENCEDULYSUDARY

SINO-MONGOLIAN RELATIONS

Since the Cuban crisd.s lastfall, Mongolia's advocacy of

views has broughtit to the poiilt of open criti-cism of the 'Chinese. Always adependable supporter'ofSovietforeign policy, Mongolian partychief Tsendenbalhas emergedmore and more in recent monthsas Khrusbchev's Asian spokesman.

Tsedenbal has given allappearances of accepting thisrole with enthusiasm. At a re-cent party ideological conf·erencein Ulan Bator, he reiteratedMOSCOW's explanation of itsCuban policy, in effect defend-ing it against Chinese chargesof appeasement. Disparagingthose "who cling to oosoleteformulas" and do not aisplayflexibility in face of changedworld conditd.ons, the Mongolia.nleader labeled as "irresponsibleand conceited" Peiping's nground-less criticismlt of the USSRfspolicy. He pointedly chargedthe Chinese with 1fincorrectand extremely harmful actions ltin egging on the AlbaniaDs.

State relations with pei-ping, however, r'e,main outwardlycorrect, although Mougolian of-ficials admit priYat.ely therehas been some cooling. The mostconspicuous form of ChiDeSe as-sistance, the use ofworkers for big construetionprojects around. Ulan Ba.tor, ap-parently continues. Labor-shortMongolia has employed as manyas 10,000 of these workers atone time. Mongolia.n officialshave told recent foreign visitorsthat workers from Cbina who com-pleted their tours of duty inthe past year have all been re-placed by the Chinese.

These correct state rela-tions were exemplified by thesigning of a border treat.y inlate December. It probably mat-tered little to the Mongoliansthat the Chinese motive in ar-ranging the treaty at that timewas to place India in a bad light.For their part, the Chinese wereprobably und'er no illusions thattheir accommodation on the border,along which the number of inci-dents has been increasing, wouldbudge Ulan Bator from its pro-Soviet orientation.

Tsed,enbal, wbo went 1:0 Pei-ping to sign the treaty, gavethe Chinese no reason to enter-tain any such hope. In returnfor the fanfare w'ith Which hewas greeted,. Tsedenbal· dis-comfited his hosts at a pUblicrally in Pelping by hailing Mos-cow's "sensible compromises"on Cuba. Bisremarks reportedlycaused the audience of 150,000to Ubuzz with surprise H and weregreeted by Chinese leaders onthe rostrum with impassivesilence.

The Mongolians describetheir position, wedged in be-twee'n the USSR and CommunistChina, as ffoverpowering ,n a.ndtake advantage of every op-portunity to cultivate foreigndiplomats and plump for rec.ogni-tioD. The,ir record--recognitionby 14 l1on-Communist cOtlntries--is far better than that of theother Asian satellites. Be\cogni-t ion last wee·It by the UnitedKingdom--the first from a WestEuropean country will no QQubtbe expl.oited as au exam/pIe to

otber stata;s.


SECRET



Joseph Ileo, the CongoleseGovernment's recently appointedminister-resident in Katanga,has begun what may prove to bea long and difficult period ofreintegrating the .province. Hehas privately described hismission as one .of an executorof integration. While he hasbegun talks with Ileohas made it clear that he doesnot intend to get bogged downin involved negotiations withthe Katangan leader. He saidsoon after his arrival he wouldnot tolerate Katangan obstruc-tionist tactics, and on 28 Jan-uary he ordered the arrest ofdirectors of the former KatanganNational Bank who had been in-structed not to divulge infor-mation on the bank's operations.

Ileo does not intend toadhere to the letter of U Thant'sreintegration plan, according toseveral sources. He is said tofeel it has been "overtaken byevents."

Leopoldville appears atleast temporarily to have droppedthe idea of convening a specialsession of the combined North-South Katanga Assembly as ameans of ousting orreshuffling his government. Ileohas said that such a move wouldbe illegal, since North Katangahas been established. by theCongolese Parliament as a sepa-rate province and this situationcould be changed only by newparliamentary action. Adoulamay be waiting to establish a

firmer grip on the provincebefore moving against

Baluba tribalpressures for a combined sessionremain strong, however. BertinMwamba, president of the Congo-lese Chamber of Deputies, main-tains that North Katanga is toopoor to get along on its own.He apparently is willing to let

remain, but wants to oustsome of his ministers. On theother hand Isaac Kalonji, presi-dent of the Congolese Senate,opposes reunification of Katanga,even though he wants to oust

The behavior of centralgovernment officials irl Elisabeth-ville has alarmed both UN andBelgian officials. UN officialsare trying to rein in Leopold-ville's politicians and to limitthe number of the carpetbaggerhorde until the detailed workof reintegration is completed.Foreign Minister Spaak sayshe fears that replacingwould provoke tribal outbreaksand violence, although he saysBrussels is not seeking toretain "in perpetuity."

Leopoldville is continuingto press for the introductionof more Congo National Army(ANC) troops into South Katanga.Ileo and General Mobutu havesucceeded in persuading UN offi-cials to permit ANC soldiers topatrol with UN troops in Elisa-bethville, and they now are press-ing for the extension of mixed

1 Feb 63

SECRET


SECRET



Joseph Ileo, the CongoleseGovernment's recently appointedminister-resident in Katanga,has begun what may prove to bea long and difficult period ofreintegrating the .province. Hehas privately described hismission as one .of an executorof integration. While he hasbegun talks with Ileohas made it clear that he doesnot intend to get bogged downin involved negotiations withthe Katangan leader. He saidsoon after his arrival he wouldnot tolerate Katangan obstruc-tionist tactics, and on 28 Jan-uary he ordered the arrest ofdirectors of the former KatanganNational Bank who had been in-structed not to divulge infor-mation on the bank's operations.

Ileo does not intend toadhere to the letter of U Thant'sreintegration plan, according toseveral sources. He is said tofeel it has been "overtaken byevents."

Leopoldville appears atleast temporarily to have droppedthe idea of convening a specialsession of the combined North-South Katanga Assembly as ameans of ousting orreshuffling his government. Ileohas said that such a move wouldbe illegal, since North Katangahas been established. by theCongolese Parliament as a sepa-rate province and this situationcould be changed only by newparliamentary action. Adoulamay be waiting to establish a

firmer grip on the provincebefore moving against

Baluba tribalpressures for a combined sessionremain strong, however. BertinMwamba, president of the Congo-lese Chamber of Deputies, main-tains that North Katanga is toopoor to get along on its own.He apparently is willing to let

remain, but wants to oustsome of his ministers. On theother hand Isaac Kalonji, presi-dent of the Congolese Senate,opposes reunification of Katanga,even though he wants to oust

The behavior of centralgovernment officials irl Elisabeth-ville has alarmed both UN andBelgian officials. UN officialsare trying to rein in Leopold-ville's politicians and to limitthe number of the carpetbaggerhorde until the detailed workof reintegration is completed.Foreign Minister Spaak sayshe fears that replacingwould provoke tribal outbreaksand violence, although he saysBrussels is not seeking toretain "in perpetuity."

Leopoldville is continuingto press for the introductionof more Congo National Army(ANC) troops into South Katanga.Ileo and General Mobutu havesucceeded in persuading UN offi-cials to permit ANC soldiers topatrol with UN troops in Elisa-bethville, and they now are press-ing for the extension of mixed

1 Feb 63

SECRET


SECRET


The Katangan leader now isseeking to involve the UN inresolving his differences withLeopoldville; On 24 Januaryhe asked Thant to appointa special UN representative tosettle "certain problems" Whichhad arisen tf iii). of.y;- i"f"

The central thread runningthrough actions sincehis return is strict applicationof the U Thant plan. He has nowoffered to send his officers toLeopoldville to take an oath ofallegiance as provided in the'plan. He protested to the USconsul on 26 January that thetakeover of the Katangan bankswas not consonant with the UNplan, and several times repeatedthat either the plan should beapplied as written or Leopold-ville should declare it nulland votd.

wanted any "conflicts of com-petence" to arise.

has moved quicklyto reassume his mantle of Ka-tanga's provincial president.He has held a series of cabinetmeetings, has toured the Africancommunes of Elisabethville an-nouncing that he is the 5iqle

in Itataa., .

:called ftl,sEflecte\ .filem-bers of the Katanga Assembly 'toremind them he is the legallyelected president and to warnthem to remain loyal. In aletter to Adoula on 27 Januaryhe asked what the exact functionsof Ileo were. said thatneither he nor his government

patrols to the key m1n1ng townof Jadotville, Kolwezi,and Ki-pushi. Mobutu wants to s·endanother ANC battalion to Elisa-bethville-, and one each toJadotville and Kolwezi. UN offi-cials, although fearful of theEuropean reaction; have appar-ently agreed to the gradual.introduction of three or fourmore ANC battalions.

* * *

SECRET


SECRET


The Katangan leader now isseeking to involve the UN inresolving his differences withLeopoldville; On 24 Januaryhe asked Thant to appointa special UN representative tosettle "certain problems" Whichhad ari8en tf iii). of.y;- i"ff

The central thread runningthrough actions sincehis return is strict applicationof the U Thant plan. He has nowoffered to send his officers toLeopoldville to take an oath ofallegiance as provided in the'plan. He protested to the USconsul on 26 January that thetakeover of the Katangan bankswas not consonant with the UNplan, and several times repeatedthat either the plan should beapplied as written or Leopold-ville should declare it nulland votd.

wanted any "conflicts of com-petence" to arise.

has moved quicklyto reassume his mantle of Ka-tanga's provincial president.He has beld a series of cabinetmeetings, has toured the Africancommunes of Elisabethville an-nouncing that he is the $91e

in I{ata2.' .

tca1led ftl,sEflec'ter filem-bers of the Katanga Assembly 'toremind them he is the legallyelected president and to warnthem to remain loyal. In aletter to Adoula on 27 Januaryhe asked what the exact functionsof Ileo were. said thatneither he nor his government

patrols to the key m1n1ng townof Jadotville, Kolwezi,and Ki-pushi. Mobutu wants to s·endanother ANC battalion to Elisa-bethville-, and one each toJadotville and Kolwezi. UN offi-cials, although fearful of theEuropean reaction; have appar-ently agreed to the gradual.introduction of three or fourmore ANC battalions.

* * *

SECRET


SECB.ET

CURRENT iNTELLIGENCE WEEKLY SUMMARY


The political situationin Togo remains has1cally un-stable following the assas'sina-tion of Presidellt inmid-January. Behind Pr0V'lsionalPres ident Gruni tsky 's we·a.kleadership the d1versce factionsrepresented in the cabinet andthe military elements who stagedthe coup are involved' in a powerstruggle. Grunitsky's authorityhas been bythe reluctance of most countries,especially those in the moderateAfrican group, to extend diplo-matic recognition.

Grunitsky is seriouslyhandicapped by his lack of areal political base and thefact that he is widely regardedby Africans as a French stooge.He is further inhibited by fearof the military junta, which isdrifting into a more ass,ertiverole, sometimes even actingindependently of the provisionalgovernment. Grunitsky reportedlyindicated recently that his Irelations with the militaryleaders, who themselves are Iconfused and frightened by thehostile reaction to the coup, Iwere becoming increasinglydifficult.

Among the contendingdomestic politicalFinance Minister Meatchi'snorthern-based Democratic Togo-lese Peoples' Union (UDPT) ap-pears to be in the ascendancywithin the provisional regime.Meatchi, wbo is believed to bereceiving support from Ghana,has been formally designated totake over in the event elf Grunit-sky's absence or inability toact.

Elements of Olympio'sTogolese Unity Party CUT), inwhich southern Ewe and Minatribesmen predominate, arealso attempting to reassertthemselves. As the sole legalparty for a ye.ar prior to thecoup, the t.rr has the only ef-fective national org.anization.However, it is questiQnablewhether this party, whicb is rep-resented in the present coali-

tion regime by Labor MinisterKutuklui, can long surviveOlympio'sdeath. Kutuklui, aspokesm,an for impatient youngerelements in the party, reportedlyis attempting to take controlfrom the more conservative olderleaders, many of whom now arein exile.

Grunitsky has reiteratedhis government's pledg'e tohold free elections, but so farno date has been set. TheAme:rican Emba.ss:y in Lome believesthey are not likely to materializesoon unless the UT drops itsopposition to Grunitsky's planfor prior agreement by all partieson a single list of candidates.This device is clearly aimedat preventing the UT from prof-i tingfrom ts.. present electoralstrength in country. Porthe present, all politicalmeetings have been banned.

Only Ghana--which many.African governments sus:pectwas behind the coup--and Senegalhave a.nnounced un.qualified rec-ognition of Grunitsky's regime.Daho,mey has accorded de factorecognition. It now see,rns likelythat other African states willcontinue to defer any formalac,tion pending a repert by thefive-'country mission of inquirywhich the moderate Monroviapowers dec ided to s,ent to Togoat their 24-2'6 January conferenceat Lagos.

Grunitsky has said he isprepared to receive the mission,but oppos'es as unrealistic theconferees' call for the promptrelease of the imprisonedm1nisters of Olympio's govern-ment and for punis;bme'nt of tbeassassins. Prior to the Lagosmeeting, Grunitsky indicatedto the Fre ncb aDl'Qassador tn'atif general re·cogn.l'tion were de-layedmudl longer he wou ldassumeother st'ates 1'acted confidencein him and woluld siiD1:p,ly n takeoff" f·or ' '.'j.," ··e.' ..Q '.'.i... ;

1 Feb 63

SEcaETWEEKLY REVIEW Page 15 of 22

SECB.ET



The political situationin Togo remains asically un-stable following the assas'sina-tion of Presidellt inmid-January. Behind Pr0V'lsionalPres ident Gruni tsky 's we,a.kleadership the diversce factionsrepresented in the cabinet andthe military elements who stagedthe coup are involved' in a powerstruggle. Grunitsky's authorityhas been bythe reluctance of most countries,especially those in the moderateAfrican group, to extend diplo-matic recognition.

Grunitsky is seriouslyhandicapped by his lack of areal political base and thefact that he is widely regardedby Africans as a French stooge.He is further inhibited by fearof the military junta, which isdrifting into a more ass,ertiverole, sometimes even actingindependently of the provisionalgovernment. Grunitsky reportedlyindicated recently that his Irelations with the militaryleaders, who themselves are Iconfused and frightened by thehostile reaction to the coup, Iwere becoming increasinglydifficult.

Among the contendingdomestic politicalFinance Minister Meatchi'snorthern-based Democratic TogO-lese Peoples' Union (UDPT) ap-pears to be in the ascendancywithin the provisional regime.Meatchi, who is believed to bereceiving support from Ghana,has been formally designated totake over in the event elf Grunit-sky's absence or inability toact.

Elements of Olympio'sTogolese Unity Party CUT), inwhich southern Ewe and Minatribesmen predominate, arealso attempting to reassertthemselves. As tbe sole legalparty for a ye.ar prior to thecoup, the t.rr has the only ef-fective national org.anization.However, it iswhether this party, which is rep-resented in tbepresent coali-

tion regime by Labor MinisterKutuklui, can long surviveOlympio'sdeath. Kutuklui, aspokesm,an for impatient youngerelements in the party, reportedlyis attempting to take controlfrom the more conservative olderleaders, many of whom now arein exile.

Grunitsky has reiteratedhis government's pledg'e tohold free elections, but so farno date has been set. TheAmerican Emba.ss:y in Lome bel ievesthey are not likely to materializesoon unless the UT drops itsopposition to Grunitsky's planfor prio.r agreement by all partieson a single list of candidates.This device is clearly aimedat preventing the UT from prof-i tingfrom ts,' present electoralstrength in country. Porthe present, all politicalmeetings have been banned.

Only Ghana--which many.African governments sus:pectwas behind the coup--and Senegalhave a.nnounced un.qualified rec-ognition of Grunitsky's regime.Dabo,mey bas accorded de factoreeogni tion. It now see,rns likelythat other African state;s willcontinue to defer any formalac,tion pending a repert by thefive-'country mission of inquirywhich the moderate Monroviapowers dec ided to s,ent to Togoat their 24-2'6 January conferenceat Lagos.

Grunitsky has said be isprepared to receive the mission,but oppos'es as unrealistic theconferees' call for the promptrelease of tbe imprisonedm1nisters of Olympio's govern-ment and for punisihme'nt of tbeassassins. Prior to the Lagosmeeting, Grunitsky indicatedto the Fre nch aDl'eassador tlratif general re·cogn.l'tion were de-layedmudl longer he wou ldassumeother st'ates }acted confidencein him and wo,uld si.imp,ly n takeoff" f·or ' ','i,," ··e.' ,,Q ','.i')

1 Feb 63

SEcaJETWEEKLY REVIEW Page 15 of 22


REFERENDUM IN I RAN

The overwhelming approvalof Iran's reform program in thereferendum on 2'6 January willencourage the Shah to acceleratethe program and possibly toadvance the date of nationalelections now planned for Juneor July. The regime now believesit can override any attempts ina new parliament to obstructreforms. The Shah has beenruling without Parliament sinceMay 1961.

The referendum sought ap-proval of six proposals: redis-tribution of large landholdingsto peasants, a requirement that20 percent of industry's profitsbe shared by the workers,nationalization of forests,broadening of the franchise,distribution of shares in gov-ernment-owned industry to reim-burse dispossessed landlords,and use of military draftees toteach reading and writing inbackward areas.

The regime mustered a99.9-percent affirmative vote,partly by intimidating the op-position. Some opponents ofreform were jailed before thevoting began. The use of blueballots to signify a negativevote prevented secrecy, and bus-loads of pro-reform demonstratorscruised through Tehran. Inten-sive security measures and dis-plays of military force imposedcalm during the balloting.

The spectacle of womenvoting for the first time failedto provoke the expected reli-gious protest. The women's votewas not included in the finaltally, however.

The standing of Ministerof Agriculture Kasan Arsanj ani

appears to have been enhanced.Already popular for his keyrole in pushing land reform,he was responsible for organiz-ing sizable peasant demonstra-tions which upset the plans andstrategy of those oppo.sing theShah's. reforms.

The opposition forces--the mullahs, the landlords andthe National Front--appear to bedemoralized temporarily and prob-ably have lost many supporters.The protest demonstrations theysparked were overwhelmed by thosethegovernme.nt staged. However,they can be expected to claimthat the referendum was invalidbecause of rigging. The NationalFront, which favors reform butnot under the Shah's auspices,now intends to concentrate itsattack on the Shah personally.According to its moderate leader,Allahyar Saleh, it will charg.ethat the Shah has profited fromland sold to the peasa.nts andwill demand that such profitsbe distributed to them.

The National Front maybegin to compete with the regimein offering workers and peasantsmore than the Shah· can deliver.The reforms and promises offu.rther reforms have ra ised highhopes which would turn to dis-illusionment in a few monthsas the government encounterscomplex administrative and.financial problems in carryingout its program.

When elections are held,the regime's opponents may againseek to provoke disorders inview of the futility of CiOm:-pet ing at the •. J..1::"""

1 Feb 63

SECRETWEEKLY REVIEW Page 16 of 22

-


REFERENDUM IN I RAN

The overwhelming approvalof Iran's reform program in thereferendum on 2'6 January willencourage the Shah to acceleratethe program and possibly toadvance the date of nationalelections now planned for Juneor July. The regime now believesit can override any attempts ina new parliament to obstructreforms. The Shah has beenruling without Parliament sinceMay 1961.

The referendum sought ap-proval of six proposals: redis-tribution of large landholdingsto peasants, a requirement that20 percent of industry's profitsbe shared by the workers,nationalization of forests,broadening of the franchise,distribution of shares in gov-ernment-owned industry to reim-burse dispossessed landlords,and use of military draftees toteach reading and writing inbackward areas.

The regime mustered a99.9-percent affirmative vote,partly by intimidating the op-position. Some opponents ofreform were jailed before thevoting began. The use of blueballots to signify a negativevote prevented secrecy, and bus-loads of pro-reform demonstratorscruised through Tehran. Inten-sive security measures and dis-plays of military force imposedcalm during the balloting.

The spectacle of womenvoting for the first time failedto provoke the expected reli-gious protest. The women's votewas not included in the finaltally, however.

The standing of Ministerof Agriculture Kasan Arsanj ani

appears to have been enhanced.Already popular for his keyrole in pushing land reform,he was responsible for organiz-ing sizable peasant demonstra-tions which upset the plans andstrategy of those oppo.sing theShah's. reforms.

The opposition forces--the mullahs, the landlords andthe National Front--appear to bedemoralized temporarily and prob-ably have lost many supporters.The protest demonstrations theysparked were overwhelmed by thosethegovernme.nt staged. However,they can be expected to claimthat the referendum was invalidbecause of rigging. The NationalFront, which favors reform butnot under the Shah's auspices,now intends to concentrate itsattack on the Shah personally.According to its moderate leader,Allahyar Saleh, it will charg.ethat the Shah has profited fromland sold to the peasa.nts andwill demand that such profitsbe distributed to them.

The National Front maybegin to compete with the regimein offering workers and peasantsmore than the Shah· can deliver.The reforms and promises offu.rther reforms have ra ised highhopes which would turn to dis-illusionment in a few monthsas the government encounterscomplex administrative andfinancial problems in carryingout its program.

When elections are held,the regime's opponents may againseek to provoke disorders inview of the futility of eotD:-pet tng at the •. J..1::""'·'

1 Feb 63

SECRETWEEKLY REVIEW Page 16 of 22

-

CURRENT INTELLIGENCE WEiEKLY SUMMARY

INDONESIAN INTENTIONS'TOWARD MALAYSIA

PROPOSED F,ED,ERiATfO'NO;F MA1..AYSlA

Guerrilla training areasfor both Indonesians and rebelelements are reported operatingin Indonesia near the Nort.hBorneo and Sarawak borde.rs. Amonthly training capacity of fiveor six hundred may have be,enreached. In mid-January, bothSubandrio and National SecurityM1.nister Nasution told Americanofficials that 1.f 'tinde,pendenceseekers't in the North Borneoterritories request militaryt ra ining

'

Since the December revoltin Brunei was crushed, Indo-nesian army outposts in Borneoreportedly have been orderedto assist those rebels who bavemade their way to "the borderand to regroup the·m insideIndonesian territory. A com-munications post is to be es-tablished in East Borneo tomaintain contact with rebelleaders on the other side ofthe border.

Malaya's Prime MinisterRahman nevertheless claims tohave information that Indonesiais preparing to infiltrate guer-rillas into Brunei in the verynear future in order to rekindlethe abortive revolt stagedthere in December. Rahman warnsthat only a strong show offorce in the area by the Britishwill deter Indonesia.

tories."Confrontation" doesnot appear to imply a directuse of force.

",,coc,

32824

.... H .. £:!II

Steps to carry out Indo-nesia's new policy will probablyinclude anti-Malayan propagand.aactivity in Indonesia, accusa-tions that Malaya encouragesillegal economic and politicalactivity directed against Indo-nesia, harassment of Malayanshipping by Indonesia's anti-smuggling patrol craft in theStraits of Malacca, and harass-ment of Malayan diplomatic andconsular personnel in Indonesia.Presumably the objects of sucha policy are to draw interna-tional attention to the area,to goad Malaya into actionagainst which Indonesia mightretaliate, and to encourage anti-Malaysia elements in Malaya,Singapore, and the Borneo terri-

Indonesia's policy, an-nounced on 20 January, of "con-frontation" with Malaya over theinclusion of the British Borneoterritories in the proposed Ma-laysia Federation has sharpenedBritish and Malayan concern overIndonesian intentions in thenorthern Borneo territories.In declaring the policy,) Indo-nesia's Foreign Minister Suban-drio denounced Malaya as an ac-complice of "neo-colonialists"and "neo-imperialists" and forpursuing a hostile policy towardIndonesia.

o!

..

,?

SECRET1 Feb 63 WEEKLY REVIEW Page 17 of 22

COllENT INTELLIGENCE omT SUMMARY

INDONESIAN INTENTIONS TOWARD MALAYSIA

PROPOS£O F£DERlAT1'ONOF MAi..AYS1A

Guerrilla training areasfor both Indonesians and rebelelements are reported operatingin Indonesia near the NorthBorneo and Barawak borders. Amonthly training capacity of fiveor six hundred may have beenreached. In mid-January, bothSubandrio and National Secu.rityMinister Nasution told Americanofficials that if "inde,peooenceseekers" in the North Borneoterritories request militarytraining :

Since the December revoltin Brune i was crushed , I odo-nesian army outposts in Borneoreportedly have been orderedto assist those rebels who havemade their way to 'the borderand to regroup the'm insideIndonesian territory. A com-munications post is to be es-tablished in East Borneo tomaintain contact with rebelleaders on the other side ofthe border.

Malaya's Prime MinisterRahman nevertheless claims tohave information that Indonesiais preparing to infiltrate guer-rillas into Brunei in the verynear future in order to rekindlethe abortive revolt stagedthere in December. Rahman warnsthat only a strong show offorce in the area by the Britishwill deter Indonesia.

tories."Confrontation" doesnot appear to imply a directuse of force.

"".,coeI

MiLts

'.

Steps to carry out Indo-nesia's new policy will probablyinclude anti-Malayan propagandaactivity in Indonesia, accusa-tions that Malaya encouragesillegal economic and politicalactivity dire,cted against Indo-nesia, harassment of Malayanshipping by Indonesia's anti-smuggling patrol craft in theStraits of Malacca, and harass-ment of Malayan diplomatic andconsular personnel in Indonesia.Presumably the objects of sucha policy are to drawtional attention to the area,to goad Malaya into actionagainst which Indonesia mightretaliate, and to encourage anti-Malaysia elements in Malaya,Singapore, and the Borneo terri-

Indonesia's policy, an-nounced on 20 January, of "con-frontation" with Malaya over theinclusion of the British Borneoterritories in the proposed Ma-laysia Pederation bas sharpenedBritish and Malayan concern overIndonesian intentions in thenorthern Borneo territories.In declaring the policy,) Indo-nesia's Foreign Minister Suban-drio denounced Malaya as an ac-complice of nneo-colonialists"and "neo-imperia1ists lt and forpursuing a hostile policy towardIndonesia.

o!

SECRET1 Feb 63 WEEKLY REVIEW Page 17 of 22

SECRET

CURRENT IftELL,IGENCE WEtEICLY SUMMARY


Kim Chong-pil, controver-sial second man in the SouthKorean Bas emerged froma fight for control of thegovernmen"t-sponsored Democratic-Republican Party with-his powerposition intact, if not strongerthan ever. His official positionin the party is still undecided,and he may exercise controlfrom behind tbe scenes.

The junta intends to usethe party--which Kim organized--to control the new "civilianugovernment scbeduled to comeinto being after elections thisspring. Senior officers in thejunta feared that if Kim con-solidated his control of theparty they would be frozen outof any share in political power.On 21 January a retired marinelieutenant general, Kim Tong-ha,led a move to remove Kim Chong-pil from the party.

The political crisis thatensued demonstrated oncethe close ties between juntaleader Pak Chong-hui and Kim.Pak's decision to allow theparty sponsoring committee toresolve the issue of partyleadership signaled the defeatof Kim's opponents. Kim hadplaced on this committee civil-ians responsive to his controland former members of the SouthKorean Central IntelligenceAgency, which he had headed.

Assurance that the armyleadership would support themove was a key influence inPak's decision favoring Kim.Subsequently, Pakconfirmedthe government party as thenew locus of political powerby warning the junta councilto stop meddling in politics.He stated he would no longertolerate discussion of partyaffairs in the counCil, evenif he had to disband it.

The support of the civilianmembers of the party committeeis enabling Kim to pose as thechampion of civilian supremacyin politics. He also appearsto have isolated his enemies inthe army for the time being.His success, however, couldmake him a possible targe't forassassination--a device notunusual in Korean politics. Pakmay be exposed to the samedanger.

The military forces arelik.ely to remain the key factorin tbe political situation forsome time to come, and powerseekers will have to obtainbacking among the armed forces.For the time being some ofKim's opponents probably willgo along with his leadershipof the party, awaiting a timewhen factional shifts in themilitary will give them anotherchance to challenge his posi-tion. Others may align them-selves with civilian politiciansopposed to the regime and usetheir inside lll:nowledge ofgovernment scandals, includingKim's financial deals, toattack the party during theelection campaign.

In any event, the openstrife surrounding thestruggle for control of theparty will make it increasinglydifficult for the junta tomaintain the facade of freeelections and return tore·presentative government.The regime's narrow base ofpublic support makes it sensi-tive to criticism. An indi-cation of decliniag supportcould cause the P:ak-Kim forcesto impose repressive measuresthat might provoke violence bystudents o.r '.

1 Feb 63

SECRET


-

SECRET

WRUIT INTELL,IGENCE WEEKLY SUWdARY


Kim Chong-pil, controver-sial second man in the SouthKorean re.gime, has emerged froma fight for control of the

Democratic-Re.publican Party with -his powerposition intact, if not strongerthan ever. His official positionin the party is still undecided,and he may exercise controlfrom behind the scenes.

The junta intends to usethe party--which Kim organized--to control the new "civilian"government scheduled to comeinto being after elections thisspring. Senior officers in thejunta feared that if Kim con-solidated his control of theparty they would be frozen outof any share in political power.On 21 January a retired marinelieutenant general, Kim Tong-ha,led a move to remove Kim Chong-pil from the party.

The political crisis thatensued demonstrated oncethe close ties between juntaleader Pak Chong-hui and Kim.Pak's decision to allow theparty sponsoring committee toresolve the is,sue of partyleadership signaled the defeatof Kim's opponents. Kim badplaced on this committee civil-ians responsive to his controland former members of the SouthKorean Central IntelligenceAgency, which he had headed.

Assurance that the armyleadership would support themove was a key influence inPak's decision favoring Kim.Subsequently, Pakconfirmedthe government party as thenew locus of political powerby warning the junta councilto stop meddling 1n politics.He stated he would no longertolerate discussion of partyaffairs in the counCil, evenif he had to disband it.

The support of the civilianmembers of the party committeeis enabling Kim to pose as thechampion of civilian supremacyin politics. He also appearsto have isolated his enemies inthe army for the time being.His success, however, couldmake him a possible targe't forassassination--a device notunusual in Korean politics. Pakmay be exposed to the samedanger.

The military forces arelikely to remain the key factorin the political situati.on forsome time to come, and powerseekers will have to obtainbacking among the armed forces.For the time being some ofKim's opponents probably willgo along with his leadershipof the party, awaiting a timewhen factional shifts in themilitary will give them anotherchance to challenge his posi-tion. Others may align them-selves with civilian politiciansopposed to the regime and usetheir inside knowledge ofgovernment scandals, includ.ingKim's financial deals, toattack the party during theelection campaign.

In any event, the openstrife surrounding thestruggle for control of theparty will make it increasinglydifficult for the junta tomaintain the facade of freeelections and return torepresentative goverwnent.The regime's narrow base ofpublic support makes it sensi-tive to criticism. An indi-cation of decliniag supportcould cause the Palt-Kim forcesto impose repressiveme1tsuresthat might provoke vio1.enc:e bystudents

1 Feb 63

SECRET


-

SRCltET


THE POLITICAL SITUATION IN ITALY

The government, seeking toavoid further no-confidencemotions, will probably try forearly adjournment of parliamentafter pass.age of the Senate re-form law--wihtc'h le'gal izes si-multaneous dissolution of bothhouse,s'--tog'et.ber with certainpatronage and other measures.Election,s are being talked offer as early as TheSoci,a11sts, however, have hintedconfidentially that they mayattempt to prolong tmis legislativesession in order to pres;ent theirelectorate witba$ m1l1;ctb.1 '·,u;'12iM i , ' ,. .

There were numerous state-ments by party leaders deploringDe Gaulle's EEC policy, withSocial Democratic leader Sara-gat declaring that "De Gaulle willpass and Europe remain." PremierFanfani called the Paris-Bonntreaty a particularism harmful toEurope and NATO. Further suchsentiments are likely to be voicedduring Priltte Minister Macmillan'slong-scheduled visit to Italy from1 to 3 February.

ITALIAN PARLlAMINT

en paa.d 0 CCIN,ltvtlonal Ol'IMdm,"t· 1'0 h'CteelMatofS to 31.5 ond the null'iber of Dtlputta to wM'.iU b.

not go il\l'D ."ect# /'et_"" until rhe amlfftdlNnth ChlllTlben a"'.r Q 3",monrll walling ,.rlod aftw .IMl nnt b

As announced by Fanfani,the government's defense position•

The Communist motion wasdefeated 292 to 173 in a show-down vote between governmentand opposition parties, withthe Nenni Socialists abstainingas usual. Indicating their prob-able electoral line, tbe Commu-nists emphasized the government'sfailure to carry out its promisesto take action against privatemonopolies and to set up regionaladministrations. Communist chiefTogliatti also charged Fanfaniwith embarking on a dangerousdefense policy involving exten-sion of Italy's participationin the use of nuclear arms.Nenni, for his part, deploredthe Christian Democrats' fail-ure to meet all program commit-ments but reiterated supportfor the present government anddeclared that his party expect-ed a revival of the center-leftexperiment after· the elections.

The parliamentary debate in is that Hnuclear proliferation"Italy occasioned by the Commu- is to be reduced by removal of thenists' recent no-confidence motion 30 obsolescent Jupiter missilesserved to launch the campaign I from Italian soil and by Italianfor nation'al elections to be Iparticipation, instead, in acalled sometime this spring. Mediterranean but non-Ita1ian-Special attention focused on the I based NATO nuclear force. In thisnew defe.,llse position announced connection the US Embassy in Romeby Premier Fanfani f<?llowing his considers it significant thatWashington talks. Nanni, on whose parliamentary

following the government dependsfor a viable majority, took note--without expressing opposition--ofFanfani's statement approving sucha force, whereas a year ago theSo<:ialists were publicly opposinga NATO nuclear arm. Nenni, despitethe effect his statements mighthave on his electoral supporters,even praised the results of Fan-fani's Washington visit.

SECRET


CUlRENT INTEl.LIGRNCE WEEKLY SUDARY

THE POLITICAL SITUATION IN ITALY

As announced by Fanfani,the government's defense position•

The parliamentary debate inItaly occasioned by the Commu-nists' recent no-confidencemot.1onserved to launch the camp.aignfor elections to becalled sometime this spring.

focused on thenew defepse position announcedby Premier !'anfani hisWashington talks.

The Communist motion wasdefeated 292 to 173 in a show-down vote between governmentand opposition parties, withthe Nenni Socialists abstainingas usual. Indicating their prob-able electoral line, the Commu-nists emphasized the government'sfailure to carry out its promisesto take action against privatemonopolies and to set up regionaladministrations. Communist chiefTogliatti also charged Fanfaniwith embarking on a dangerousdefense policy involving exten-sion of Italy's participationin the use of nuclear arms.Nenni, for his part, deploredthe Christian Democrats' fail-ure to meet all program commit-ments but reiterated supportfor the present government anddeclared that his party expect-ed a revival of the center-leftexperiment after the elections.

ITALIAN PARLlAMINT

,--

is that Hnuclear proliferation"is to be reduced by removal of the30 obsolescent Jupiter missilesfrom Italian soil and by Italianparti'cipation, instead, in aMediterranean but non-Ita1ian-Ibased NATO nuclear force. In thisconnection the US Embassy in Romeconsiders it significant thatNenni, on whose parliamentaryfollowing the government dependsfor a viable majority, took note--Without expressing opposition--ofFanfani's statement approving sucha force, a year ago theSocialists Were publicly op.posinga NATO nuclear arm. Nenni, despitethe effect his statements mighthave on ais electoral supporters,even praised the results of Fan-fani's Washington visit.

There were numerous state-ments by party leaders deploringDe Gaulle's EEC policy,Social Democratic leader Sara-gat declaring that "De Gaulle willpass and Europe remain." PremierFanfani called the Paris-Bonntreaty a particularism harmful toEurope and NATO. Further suchse»:timents are likely to be voicedduring Priltle Minister Macmillan'slong-sebeduled visit to Italy from1 to 3 February.

The government, seeking toavoid further no-confidencemotions, will probably try forearly of parliamentafter passage of the Senate re-form law--wbtc'h le'galizes si-multaneous dissolution of bothhouses--tog'ether with certainpatronage and other measures.Electio·ns are being talked offor as early as April, TheSocLalists, however, bave hintedeonfldentially t:bat they mayattempt to prolong tmis legislativesess ion in order to pr:esent theirelee torate wi thas1 .1l_.,' ..,

1 Feb 63

SECRET


CURRENT 'INTELLIGENCE WEEKLY SUMMARY

DENMARK'S FAEROE ISLANDS PROBLEM

The new coalition governmentin Denmarkts semiautonomous FaeroeIslands is expected to causeCopenhagenconsid·erable diffi-culty over revision of the HomeRule Law of 1948 and the statusof US and NATO defense facilitiesin the islands.

The ,islands have a largemeasure of internal al,ltonomy but,they remain dependent on bucjgetarysubsidies from Copenhagen. Theapproximately 35,000 Faeroese areof Nordic stock and, like theneighboring Icelanders, depend onfishing for their livelihood.Since World War II, an increasinglyinfluential vocal minority hasbeen agitating for Virtually com-plete independence.

One of the two principalparties in the new coalitiongovernment, which was formed inearly January following electionslast November, is the outspokenlyseparatist and anti-NATO Republi-can Party. The Republicans leadthe more militantly nationalisticelements in the cabinet in de-manding basic revisions of theHome Rule Law. Their proposalsenvision retaining only loose tieswith Denmark, flying their ownflag, issuing their own passports,and having the authority to con-clude agreements with foreigncountries. The new governmentmay also demand a l2-mile fisheryconservation limit to go into ef-fect as of 1 April.

.

US and NATO defense facilitiesin the Faeroes include an earlywarning station and radio communi-cations facilities. The Republi-cans maintain that these installa-tions and their personnel must bewithdrawn. They may insist thatprior.agreements concluded betweenDenmark and its NATO allies whichin any way affect the Faeroes areno longer to be binding on the pro-vincial government.

Authorities in Copenhagenprofess to see some hope that theFaeroese Government, in order toaccommodate the divergent interestsit represents, may be compelledto take a more moderate stand thanthe Republicans demand. The govern-ing parties, moreover, control only15 of the 29 seats in the provin-cial parliament, and this may in-fluence them to proceed morecautiously. The Danes retain con-siderable leverage as a result oftheir direct subsidies--whicbamount to about 35 percent of theprovincial government's totalbUdget.

The Danish Government main-tains that at present it has nointention of making any changesin the Home Rule Law. If theFaeroese should formulate concreteproposals affecting future relationswith Denmark, Copenl1a,gen would notaccept them until new elec-tions were held. Tbe coalition'sstand on this issue may becomeclearer when it presents its pro-gram and bUdget to the provincialparliament on 19 February .

-Page 20 of 22

Danish officials have indi-cated that they intend to continuethe current negotiations for addi-tional NATO facilities in the is-lands despite the poor prospectsfor their successful conclusion.

. SldEO·EN

The Danes have also indicatedconcern that the new government maybe tempted to embark on an "adven-turous" policy similar to that ofprevious Icelandic governments,thereby attempting to use the NATObases issue to secure economicassistance from the West. Theseofficials do not even rule. out thepossibility that the- Faeroese mightturn to the bloc for ass;,istance inorder to bringand its

SECRETWEEKLY REVIEW

iNORWAY?

j

,..;..,I.

;"EASTFED. ",Jif-. r , GER

. ..,':. R EP,

'V\...t1 OF GER. "FRANCE ··f .

KINGDOM

./ ." UNIUO.."""'- .

fR&.AND

. ",A.EROEIsl.ANDS

1 Feb 63

ICELAND

CURRENT 'INTELLIGENCE WEEKLY SUMMARY

DENMARK'S FAEROE ISLANDS PROBLEM

The new coalition governmentin Denmarkts semiautonomous FaeroeIslands is expected to causeCopenhagenconsid-erable diffi-culty over revision of the BorneRule Law of 1948 and the statusof US and NATO defense facilitiesin the islands.

The ,islands have a largemeasure of internal al,ltonomy but,they remain dependent on budgetarysubsidies from Copenhagen. :I'heapproximately 35,000 Faeroese areof Nordic stock and, like theneighboring Icelanders, depend onfishing for their livelihood.Since World War II, an increasinglyinfluential vocal minority hasbeen agitating for Virtually com-plete independence.

One of the two principalparties in the new coalitiongovernment, which was formed inearly January following electionslast November, is the outspokenlyseparatist and anti-NATO Republi-can Party. The Republicans leadthe more militantly nationalisticelements in the cabinet in de-manding basic revisions of theHorne Rule Law. Their proposalsenvision retaining only loose tieswith Denmark, flying their ownflag, issuing their own passports,and having the authority to con-clude agreements with foreigncountries. The new governmentmay also demand a l2-mile fisheryconservation limit to go into ef-fect as of 1 April.

.

US and NATO defense facilitiesin the Faeroes include an earlywarning station and radio communi-cations facilities. The Republi-cans maintain that these installa-tions and their personnel must bewithdrawn. They may insist thatprior agreements concluded betweenDenmark and its NATO allies whichin any way affect the Faeroes areno longer to be binding on the pro-vincial government.

Authorities in Copenhagenprofess to see some hope that theFaeroese Government, in order toaccommodate the divergent interestsit represents, may be compelledto take a more moderate stand thanthe Republicans demand. The govern-ing parties, moreover, control only15 of the 29 seats in the provin-cial parliament, and this may in-fluence them to proceed morecautiously. The Danes retain con-siderable leverage as a result oftheir direct subsidies--whicbamount to about 35 percent of theprovincial government's totalbUdget.

The Danish Government main-tains that at present it has nointention of making any changesin the Home Rule Law. If theFaeroese should formulate concreteproposals affecting future relationswith Denmark, Copenl1a,gen would notaccept them until new elec-tions were held. The coalition'sstand on this issue may becomeclearer when it presents its pro-gram and bUdget to the provincialparliament on 19 February .

./ .,.UNIUC..-

Danish officials have indi-cated that they intend to continuethe current negotiations for addi-tional NATO facilities in the is-lands despite the poor prospectsfor their successful conclusion.

The Danes have also indicatedconcern that the new government maybe tempted to embark on an "adven-turous" policy similar to that ofprevious Icelandic governments,thereby attempting to use the NATObases issue to secure econo,roicassistance from the West. Theseofficials do not even rule, out thepossibility that the- Faeroese mightturn to the bloc for ass;,ista.nce inorder to bringand its

SECRET

. SW£O·EN

iNORWAY?

j

KINGDOMfR&.AND

FAEROEIsl.ANDS

ICELANO

1 Feb 63 WEEKLY REVIE\f Page 20 of 22

-

BRAZIL'S NEW CABINET

President Joao Goulart ap-pears to belie'V8 that he canstrengtben leftist influencesin Brazil without endangeri,ngthe country's chances for siz-able new economic aid. from theUnited States. Hefull presidential pow·ers on· 23January following congressionalaction abolishing the parlia-mentary system instituted inSl3ptember 1961. His firstcabinet under the restorationdisplays a more pronouncedleftist bias thAn did its pred-ecessor.

Finance Minister San ThiagoDantas, a former foreig,n min-ister and the most influentialproponent of "independe.nce, tlis likely to be the dominantfigure in the cabinet. Dantas,who ac.cumulated a fortun:e aslegal adviser to US companiesin Brazil before joining Goulart'sleftist Labor Party, has consid-erable financial acumen. Tbereare some indications, bowever,tbathe believes that eCQDomicgrowth is best fostered byautboritariao J,overnment suchas that of the VasR. In Congress,Dantas' closest linksa,ppear tobe with the Nation.alist Parlia-mentary Front, a group of 80-100 federal deputies who votein accordance with ComDlUftistwishes on most critical issues.He appears to be chiefly re-sponsible for Goulart's plannedstate visit to Poland in mid-1963.

The Mini,stry of Labor,which Goulart· has used for thepast ten years to build up theLabor Party, went to Almi..noAfonso, who has in the pastshown himself to be a firmfriend of the Communists andan outspoken foe of theD:ni tedStates. Jos.e Ermirio deaoraes,who helped finance the Pernam-buco gu.bernatorial campa.ign of

pro-Communist Miguel Arraes,is tbe new minister ofagricul-ture.

The US ambassador notest:hat the ret.ention of' GeneralAlbino Silva a.s caief of themilitary household and the ap.-pointment of former Atto·rneyGene.ral Ivanaro Lins as headof the civi 1 househo1d ensurethe continuance among the Presi-dent's closest ad.visers andcon.fldantsof men appare·ntlyfirmly committed to the left-ward sw'ing of Brazil away fromUS influence. Far-leift circlesin Brazil reportedly hope thatthe leftist bias of the cabinetmay be increased several monthshence by dropping Minister ofWar Amaury K'ruel, Goulart'sonly prominBnt supporter whois markedly anti-Commul1:ist.

Finance Dantasplans to begin discussion ofBrazil's finan:cHli problemswi th US offictals in ear IyFeW1Uaryand hopes to co:me toWasbington about the 2..()th.Heh;asalreadysough::t toco.O-ver the1... tbat hiewill help US in meat,drugs, petr·o-che.e1cials, andmini.ng, who have·he·en thrieatenedwi th aGver'$,e governmentala,ctio,n.

With almost no gold orforeign exchange reserves,Br'azi 1 's commercia 1 p,aymentsarrears il'1'creased to $122 millionin e.arlyJ·ann·aI'Y. It is esti-mated that the foreign exchangedefi.citfo·r the fi,pst balfof will 'be $li50milliotlat a minim.. Sr·azil may facedefa:ulton its in1;,,ernatiooalobltgat;..l.o;Rs i.n M:a:l"'Ch in tlle

of: B;ew fioreign aid.

1 Feb 63

SBcaIBT


BRAZIL'S N,EW CABINKT

I pro-Communist Miguel Arraes,is the new minister ofagricu1-ture.

President Joao Goulart ap-pears to believe that he canstrengtben leftist :tnfluencesin Brazil without endangeringthe country's chances for siz-able new economic aid. f'rom theUnited States. lie r-eceivedfull pres.idential powers on· 23January following congressionalaction abolishing the parlia-mentary system instituted inSeptember 1961. His firstcabinet under the restorationdisplays a more pronouncedleftist bias than did its pred-ecessor.

Finance Minister San ThiagoDantas, a former foreign min-ister and the most influentialpropoaent of "indepe:ndence, ffis likely to be the domiaantfigure in the cabinet. Dantas,who accumulated a fortune aslegal adviser to US companiesin Brazil before joining Goulart'sleftist Labor Party, has consid-erable financial aeUmeR. Thereare some indications, how,ever,that he believes that ecOftomicgrowth is best fastered byauthoritarian J.OY'$rnment suchas that of the l.lasa. l'nCongr,ess,Dantas' closest lin'ksap.pear tobe with the Nati(malist Parlia-mentary Front, a group of 80-100 federal deputies who votein accordance with Commumistwishes on most critical issues.He appears to be chiefly re-spans!b1e: for Goulart's plannedstate visit to Poland in mid-1963.

The Mini,stry of Labor,which Goulart has 'Used for thepast ten years to build up theLabor Party, went to Almi.noAfonso, who has in the pastshown himself to be a firmfriend of the Comnunists andan outspo.ken foe of tl1e1J:ni tedStates. Jose Ermirio deitoraes,whohelpe'Ci finance the Pernam-buco gubernatorial campaign of

The US ambassador notest:bat the ret.ention of' GeneralAlbino Silva as chief of themilitary household and the ap.-pointment of former AttorneyGeneral Evandro Lins as headof the civil hOllsehold ensurethe continu.ance among the Presi-dent's closest advisers andconfidantsQf men apparentlyfirmly committed to the left-ward swing of Brazil away fromUS influence. rar-left circlesin Brazil reportedly hope thatthe leftist bias of the cabinetmay be increased several monthshence by dropping Minister ofWar Amaury Kruel, Goulart'sonly prominent supporter whois marked.ly anti-Communist.

Finance Minister Dantasplans to be,in discussion ofBrazil's fi.naD'cial problemswith US officlrals in earlyFebru.1try and hopes to come toWashtn«ton about the 20th.Heh.salready 'Sought to co.l1:-va, the tt:lat bewill belp US tavestors in meat,drugs, petro-ch.m:ic,als, andmining, who have been thr;eatenedwi th afllver'S,e governmentalactio,n.

With almost no gold orforeign exchange reserves,Br,&zil's commscial paymentsarrears iliJicreased to $IZ2 millionin e.arly It is esti-mated that the foreign exchangedeficitfo·r the first balf·of 196,3 w:i 11 be $t50mi11i onat a minima. Br·azi 1 may facedefa\11ton i tat lnt:erll'9..tionalo,bIiga,tlo:Rs 1m tt4l:1"''Ch in the

new foreign aid.

1 Feb 63

SBCUT


SECItET


ARGENTINA'S FINANCIAL CRISIS

Present financial resourcesof the Argentine Government areinadequate to meet either foreignor domestic obligations. It hasgiven priority to meeting itsforeign obligations at the ex-pense of domestic' debts in orderto encourage foreign tocome to Argentina's aid in thepresent crisis.

For more than a year thegovernment has been behind inpaying salaries to its employeesand bills owed to domesticsuppliers. This has contributedto the severe business recession,growing unemployment, and a dropin federal revenues and the grossnational product.

Concomitantly, the govern-ment has limited expansion in themoney supply, despite strongpressure from businesses whichlack credit for normal operations.Business firms have also delayedsalary payments as well as cuttheir labor force. Labor has beenremarkably quiescent despitegrowing economic hardship--in-cluding a 3l-percent rise inliving costs last year--but thiscould change rapidly.

Available foreign exchangereserves approximate o,nly onemonth's imports, or about $100million. At the same time,Argentina faces foreign debtpayments due in 1963 totalingmore than one-half billiondollars. Through 1969 thesepublic and private oblig,ationsowed abroad are estimated tototal $3 billion.

The American Embassy inBuenos Aires believes that Ar-

gent ina will face a severe pay-ments problem for the next sev-eral years, even assuming itcould attain a modest tradesurplus this year and succeedin completing negotiations forpostponement of some paymentsowed abroad.

US Hoyt is increasinglyconcerned over the probablepolit-ieal consequences of a failureby Argentina and the IMF to reacha new a.greement promptly. Hebelieves that if the governmentis unable to pay salaries bythe middle of February, or doesnot receive support from theUS and Europe, confidence inthe Guido government will dropso low that the t'almost naturalresul tot will be the ascendancyof the advocates of recourse tothe printing presses and strongmilitary government. Hoyt statesthat, while cries of "this isthe last chance" have been heardmany times, he is convinced thatfro,m the political standpointthis now is true.

The financial crisis isjeopardizing preparations forthe general elections scheduledfor 23 June. The politicalsituation may become more con-fused by the recent byseven political parties foramendment of the carefullynegotiated electoral statuteto permit openly pro-Peronpolitical activity 'by thevarious Peronist politicalgroupings. Such a move wouldtend to sharpen tbe oppositionto the election schedule ofthose military elements whoagreed to Peronist electoralparticipation only if theydesisted from,. '< , SlolL:'.' .

I Feb 63

SECRET


SECItET


ARGENTINA'S FINANCIAL CRISIS

Present financial resourcesof the Argentine Government areinadequate to meet either foreignor domestic obligations. It hasgiven priority to meeting itsforeign obligations at the ex-pense of domestic' debts in orderto encourage foreign tocome to Argentina's aid in thepresent crisis.

For more than a year thegovernment has been behind inpaying salaries to its employeesand bills owed to domesticsuppliers. This has contributedto the severe business recession,growing unemployment, and a dropin federal revenues and the grossnational product.

Concomitantly, the govern-ment has limited expansion in themoney supply, despite strongpressure from businesses whichlack credit for normal operations.Business firms have also delayedsalary payments as well as cuttheir labor force. Labor has beenremarkably quiescent despitegrowing economic hardship--in-cluding a 3l-percent rise inliving costs last year--but thiscould change rapidly.

Available foreign exchangereserves approximate only onemonth's imports, or about $100million. At the same time,Argentina faces foreign debtpayments due in 1963 totalingmore than one-half billiondollars. Through 1969 thesepublic and private oblig,ationsowed abroad are estimated tototal $3 billion.

The American Embassy inBuenos Aires believes that Ar-

gent ina will face a severe pay-ments problem for the next sev-eral years, even assuming itcould attain a modest tradesurplus this year and succeedin completing negotiations forpostponement of some paymentsowed abroad.

US Hoyt is increasinglyconcerned over the probablepolit-ieal consequences of a failureby Argentina and the IMF to reacha new a.greement promptly. Hebelieves that if the governmentis unable to pay salaries bythe middle of February, or doesnot receive support from theUS and Europe, confidence inthe Guido government will dropso low that the t'almost naturalresul tot will be the ascendancyof the advocates of recourse tothe printing presses and strongmilitary government. Hoyt statesthat, while cries of "this isthe last chance" have been heardmany times, he is convinced thatfro,m the political standpointthis now is true.

The financial crisis isjeopardizing preparations forthe general elections scheduledfor 23 June. The politicalsituation may become more con-fused by the recent byseven political parties foramendment of the carefullynegotiated electoral statuteto permit openly pro-Peronpolitical activity 'by thevarious Peronist politicalgroupings. Such a move wouldtend to sharpen tbe oppositionto the election schedule ofthose military elements whoagreed to Peronist electoralparticipation only if theydesisted frolJl _. '< , S

.

1 Feb 63

SECRET


SECBET

CURRENT INTELLIGENCE WEEKLY SUMJrIARY

SPECIAL ARTICLES

THE CHINESE COMMUNIST NAVY

The Chinese Communist Navy,although'it is numericallystronger than that of.' any otherAsian country, is' primarily adefensive force. Its largestvessels are four obsolescentGordy-class destroyers acquiredfrom the USSR before 1955, andno new construction of majorvessels is likely in China un-less Soviet assistance is re-sumed. The effectiveness ofthe submarine fleet, the fourthlargest of the world, is limitedby its apparent inability toengage in operations far fromits bases.

Beginnings

Peiping acquired its firstnaval vessels in 1949 when theChines:e Nationalists retreatedfrom the mainland. Lackingqualified naval personnel, theCommunist regime staffed thesevessels initially with groundforce officers transferred tonaval duties and with seamenrecruited from among fishermenand coastal inhabitants who hadsome seafaring experience.

By 1954, base facilitieshad been established, and anavy had been organized withthe assistance of a Soviet NavalAdvisory Mission. This mission

operated within the Naval Head-quarters at Peiping, with rep-resentatives attached to everymajor command or installation.Originally the mission probablyhad about 500 members, but itdwindled to about 150 by mid-1960, when Soviet technical aidwas withdrawn.

Apart from the advisorymission, the USSR providedtraining in its own instal-lations for large numbers ofChinese personnel. A few seniorofficers attended the SovietNaval Academy at Leningrad forcommand and staff training.

Beginning in 1953 and con-tinuing through at least 1955,the Chinese received a numberof warships from the USSR.The first Soviet M-II classshort-range submarine arrivedat Tsingtao in July 1953. Itwas follow'ed by four 8-1, four M-V,and four SHCH units in 1955 and1955. Four Gordy-class de-stroyers also arrived in 1954and 1955. These obsolescentdestroyers, with the exceptionof four RIGA-class destroyer- es-corts, are China's only vessels witha modern fire-control system.Other vessels provided by theUSSR included six Kronshtadt-class coastal patrol vessels,

ChInese Communist Riga-ClassUnlts ne'or Shanghai, 1958.

SECRET

1 Feb 63 SPECIAL ARTICLES Page 1 of 7

SECltET

CURRENT IlfrELLIGENCE WEEKLY SUMMARY

SPECIAL ARTICLES

THE CHINESE COMMUNIST NAVY

The Chinese Communist Navy,although'it is numericallystronger than that of' any otherAsian country, is' primarily adefensive force. Its largestvessels are four obsolescentGordy-class destroyers acquiredfrom the USSR before 1955, andno new construction of majorvessels is likely in China un-less Soviet assistance is re-sumed. The effectiveness ofthe submarine fleet, the fourthlargest of the world, is limitedby its apparent inability toengage in operations far fromits bases.

Beginnings

Peiping acquired its firstnaval vessels in 1949 when theChineae Nationalists retreatedfrom the mainland. Lackingqualified naval personnel, theCommunist regime staffed thesevessels initially with groundforce officers transferred tonaval duties and with seamenre.cruited from among fishermenand coastal inbabitants who hadsome seafaring experience.

By 1954, base facilitieshad been established, and anavy had been organized withthe assistance of a Soviet NavalAdvisory Mission. This mission

operated within the Naval Head-quarters at Peiping, with rep-resentatives attached to everymajor command or installation.Originally the mission probablyhad about 500 members, but itdwindled to about 150 by mid-1960, when Soviet technical aidwas withdrawn.

Apart from the advisorymission, the USSR providedtraining in its own instal-lations for large number'S ofChinese personnel. A few seniorofficers attended the SovietNaval Academy at Leningrad forcommand and staff training.

Beginning in 1953 and con-tinuing through at least 1955,the Chinese received a numberof warships from the USSR.The first Soviet M-II classshort-range submarine arrivedat Tsingtao in July 1953. Itwas follow,ed by four 8-1, four M-V,and four SHCH units in 1955 and1955. Four Gordy-class de-stroyers also arrived in 1954and 1955. These obsolescentdestroyers, with the exceptionof four RIGA-class destroyer-es-eorts, are China's only vessels witha modern fire-control system.Other vessels provided by theUSSR included six Kronshtadt-class coastal patrol vessels,

Chinese CommunIst Rigo...ClassUnlts Mar 1958.

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at least two T-43 min.esweepersand 50 to 80 motor-torpedo boats.

Naval Construction

Fol-lowing a Soviet-asststedprogram for the developmentof Chinese Communist ,shipyards,a relatively larg,e-scale programof naval ship construction.be-gan in 1955. Under the super-vision of Soviet technicians,Chinese yards built five distinctclasses of naval ships: W-classlong-range submarines, Riga-classescorts, Kronshtadt-class largesubchasers, T-43 - class mine-sweepers, and P-6 - class motor-torpedo boats.

The Riga and Kronshtadtprograms were completed in 1957with the construction of thelast of four Rigas and eighteenKronshtadts. Both the mine-sweeper and torpedo-boat pro-grams appear to have beenstopped in 1961 with twelveminesweepers and about 80 tor-pedo boats completed. The W-class program continued up tolast year, with 21 (possibly22) units launched and deliveredto the fleet)

A construction programfocused on new submarine anddestroyer designs got underway in 1960 with the arrivalof additional shipbuildingtechnicians, but before anyships were built the Soviettechnicians were withdrawn.The economic crisis in Chinawas an additional factor forcinga sharp reduction in shipbuild-ing activity. Recent ChineseNationalist photographic in-

telligence of Chinese Communistshipbuilding facilities disclosesthat no m.ajor naval shipbui ldingis in pro·gress.

The main Chinese weaknessin ship construction has beenthe inability to produce marineengineering components, andelectronic and ordnance equip-ment. In 19'58 the USSR prob-ably sht"fted the emphasis of itsassistance to providing supportfor the construction of facilitiesproducing engineering components.Although considerable progresswas made, China is still dependenton outside sources of supply.

The Chi neise, however, havedemonstrated a capability forindependent destgn and construc-tion of smaller naval vessels.They are credited wi th the de-sign of the Shanghai-class fastpatrol boat and with th.e modifi-cation, designated Swatow-class,of the P-6 motor-torpedo boat.Both classes were built in China.

Deployment

The Chinese CommunistNavy is currently dividedamongthree major f leetareas: tbeNorth Fleet, with bead:'ql:iiartersat Tsingtao; the East Fleet,with headquarters at Shanghai;and the South Fleet, with head--quarters at Canton.

The East Fleet is numeri-cally the large,st, wi th all fourof the Riga esco,rt vessels,· butit bas only a few submarinesand no destroy,ers. Most of thesubmarines operate un.der the NorthFleet, as do all of the Gordy-

A Soviet W-Class Submarine Similar toCh'i'nese-As$embled Units, 1959.

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CURRENT INTELLIGENCEREICLY SUMMARY

at least two T-43 minesweepersand 50 to 80 motor-torpedo boats.

Naval Construction

Fol'lowing a Soviet-assistedprogram for the developmentof Chinese Communist .shipyards,a relatively large-seale programof naval ship construction.be-gan in 1955. Under the super-vision of Soviet technicians,Chinese yards built five distinctclasses of naval ships: W-classlong-range submarines, Riga-classescorts, Kronshtadt-class largesubchasers, T-43 - class mine-sweepers, and P-6 - class motor-torpedo boats.

The Riga and Kronshtadtprograms were completed in 1957with the construction of thelast of four Rigas and eighteenKronshtadts. Both the mine-sweeper and torpedo-boat pro-grams appear to have beenstopped in with twelveminesweepers and about 80 tor-pedo boats completed. The W-class program continued up tolast year, with 21 (possibly22) units launched and deliveredto the fleet)

A construction programfocused on new submarine anddestroyer designs got underway in 1960 with t.he arrivalof additional shipbuildingtechnicians, but before anyships were built the Soviettechnicians were withdrawn.The economic crisis in Chinawas an additional factor forcinga sharp reduction in shipbuild-ing activity. Recent ChineseNationalist photographic in-

telligence of Chinese Communistshipbuilding facilities disclosesthat no m.ajor naval shipbui Idingis in progress.

The main Chinese weaknessin ship constru·ction has beenthe inability toproduc.e marineengineering components, andelectronic and ordnance eqUip-ment. In 19'58 the USSR prob-ably sllt"fted the emphasis of itsassistance to providing supportfor the construction of facilitiesproducin:g engineering components.Although considerable progresswas 11lade, China is still dependenton outside sources of supply.

The Chinese, however, havedemonstrated a capability forindependent design and construc-tion of smaller naval vessels.They are credited with the de-sign of the Shanghai-class fastpatrol bo'at and with the modifi-cation, designated Swatow-class,of the P-6 motor-torpedo boat.Both classes were built in China.

Deployment

The Chinese CommunistNavy is currently divided .amongthree major f leetareas: tbeNorth Fle,et, wi til headqlltar tersat Tsingtao; the East Fleet,with headquarters at Sbanghai;and the South Fleet, with head.....quarters at Canton.

The East Fleet is numeri-cally the largest, with all fourof the Riga escort vessels,· butit bas only a few submarinesand no destroyers. Most of thesubmarines operate under the NorthFLeet, as do all of the Gordy-

A Soviet W..Clas5 Submsrlne Similar toChl;nese-Astembled Units, 1959.

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PrOco,ab1y the most s ig,ni f i-cant indlca.tlOlft of the limitedcJl,pa&1.lity of 'Chinese Co'mmunistsul;)ma-rill:es t,s tbe ,a'bseuc;e,' of .,amy

Lnst,an,ce,s of extendedp:atrials or

tart"ker south t'nall t h:als1.arJ;d area, well north of thetaiwan Strait.

TQi 0.1 t, wtle,r e they c,ou1dby the Nationalists t

lll;av,a'nd. air force.

'rna Chine:s,e COflU1\;U!ll:,ist Navyhas tbe pTimary fU:Action G;{guarding China tse'xtelRSlv,eco!as<tal area.. ' It can maintainli:JIl,! tedc,e&stalp,atr01:s, en-

m1n,e-laytSf; a:pe:iIl",atio;l1:s,al1::d motOr!' t.0rp,edi-o t)"Q:a"ts,qa:i levie$$ElJJ;,s <a:p,eil"'art i ngnie<;tr I t Q$eS· ft'Qt'b:t!le t!Q Etagqe 1,n,

tons dd:s1i;"a.nti tsbas:es,.

li$it:s :Ute ts:tel\21t ..·SiU••r:i'Ji1e: '. f Ilee t ,'wttli4

:-.";':

Capabilities

The sllbmarlne force is thelargfes,tan:d most lm:po:rt,ant com-ponent of the Ch,!nese Co,mmun! 8 tN..,,"y. It, now h:as 2:8 ( 0:08;s1 b 1Y2i") s,ubm,arhts:$; ,of vthic,tl 21

are of the more, lOBlg-range W c laslS. All

6f tlfe operatloilital W-cla$s sub-1I!.'11,.ri,uesseem, to bave beem llasedat1'sln;gtaoand Dalren in tlleN>orthFleetarea, wi thafewolder S.-l and M-V unitsatS'haftgD&i •

$ Flett :hOdltlllllters./fjY8ISllip¥ud

class destroye.rsF 1e,e t is'thew:eakli!S''toft,bet hre.e , itsa patrol

The factvessels baveto the South '8:&8. llJF'Q!9ablyref lects Peipj,;Rg'fc'W',*:,•.elletli$1.0naboutss&£U.ng: the

COMBINED FLEETS-SELECTED ORDER OF'BATTLE

Submarines (58) . . . ".' , ...••..••• 29 /Old dutroyers (ODD). "GO'ROV" class 4Destroy.er escorts <DE). "RIGA'" eliU 4Pat·r:aIlEt.cort units.(f'F) ................• 51Gu.nbosls/Torplldo ,tloats (PG/PT) .••... , ... 200Mineswo'epers (MSI. . . . ....••.•••• 38. AmP;hibiolJs ....nits (lS/LC) .....•. , .•.•••• 259AUkilliHY units ......•.•......• 434

s·',·IICMT·'. '.. ' , ,: ._ .i _ <,' - --

1 Feb 63 Page 3 of 7

TllJie Chine'sa C'0'tlURi.U'D'.is;t Navyhas the primary fUiQctionofguarding China '8 ·&xte}!tsiv'scoa:s"tal area. ·It can maintainlim! t:edeoastalpa.tr'Cl).ls, en-gia.p 1S mi.n,e-la.yiJil:S o:per'atlo,Bs,allO:demp,'l,py MQ'tOil"prped'O l)Q:ft,ts

1e e:f!el"'acting_at' I t not ilav"S'ti4Jle e'1('pfijJ'1"ledtce ..in.

tons cUst"fiWJ.ti tSba...,. Th;t.$! aevif!o')".eiy

11-.tt.5 t:k-e e;'flf.a..l*,v_BStio-f itsfleet,

.. •.d):

Capabilities

PrG'bably tbemost sign.1fi-cant indicati'Olft of the lim! tedc.a:patld lity of ehiu&se Communistsub_riDes ts the .a.bsG11!Ce; of _.any

inst,anee,s alene-nae!(for mQvem:e:nts

tart:her south than tlle CiP.1;o-usnanl$:ta.\1id area ,'W'e'll nortH of the'faiwan Strait.

The su.bmarine force is thela;rgestlul'E! most i m:po:rtant com-.ponent of tlJle Chinese CommunistNl);vy. It now has 2.8 (oossi bIy.') s.ubmarlnes:, of. 2'1

are of the mo.re10"ng-range W class. All

of tb:e op,era·tio,1ll'8,1 W:"cla$S sub-.2J.-ri·a.s.seem to bave beembasedat 1'slft(lt1loaad Dairen 1'n t D.eN'Orth:r:leetarea, with a fewol4er 8,-1 and M-V units atShaDiBfta..1 •

Tai aj:. t I whe·re they could.e .tt&Qcud by the Natlonalists'.a.y air force.

o Flm ,hOdll<!Jl:rters• N'j,al'SlIi.lfrd

I'EII'INI>*

class destroysrs.Th-eSoutl1Fle,at t,tt.ethree, i t&a patrol

The fact riio·_,;i.Q\'rvessels nave _:en·...to tbe80utb is.a PI"'Olhblyref lect.s

t1b:em·tU:e.• tbe

COMBINED FLEErs-sELECTEO OROER llF'BAITLE

Sub",,,ln.. I,SS). . .. , , .•• 29Old den",• .,. (ODll). "GOllOY" ct 4Oe3troyer e&GO"rts {DE), "RIGA'" cI.u, , 4Pat,.IIE.m>rt unit. ·(PF) • • • • • • . . ••• ••• 51GunboatS/role.doDo,t. tPG/PTI .•........ 20DMinesweepers {MSI •. , . ,. . .•.••••.•••• 38. Amplliblou. unlta (LS/lC).. . .....•.•••• 25SAUk.illl'Y units (AC/VP),. .., .•.••...•••434

1 Feb 63 Page 3 of 7

CURRENT INTELLlG£NCE WEEKLY SUMMARY


Turkey will be making itsfirst systematic effort to mo-bilize its resources wben itofficially puts its Five ...YearPlan for economic developmentinto effect on 1 March. Mostof the funds needed to financethe $6.6--billion-plan--expectedfrom both foreign and do-mestic sources--are still to·be obtained, however.'

Background

Turkey's mineral and agri-cultural resources could supporta considerably higher livingstandard than now prevails.The economy has been sluggish;with gross national product ris-ing by an average of only threepercent annually in the pastfive years. Heavy governmentinvestment and massive foreignaid have not provided self-sufficiency either in food orin simple consumer goods.

Wartime disruptions, polit-ical upheaval, and a successionof disastrous droughts imposedsevere strains on the economyduring a time ofexplos1ve

population growth. In the 19505the Menderes government piled upa staggering debt burden whiletrying to stimulate the economyby forced-draft methods, butfailed to achieve balanced prog-ress.

After the 1960 revolution,the country's new militaryleaders adopt,ed an entirely newapproach. They established aplanning organization chargedwith preparing an integratedprogram for economic growth.They also stabilized the lira,trimmed the government's civilspending, s.crutiniz,ed the taxsystem, and drafted changes infis·cal legislation.

Political instability hasimpeded this approach. Sincethe 1961 elections Premier Inonuhas headed two shaky coalitions.Conflicts Within his currentthree-party coalition causedthe Fiv'e-Year Plan's originaltax recommendations to be con-siderably watered down. Theresurgence in 1962 of the JusticeParty, now in opposition andharboring most of the former

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CURRENT INTELLlG£NCE WEEKLY SUMMARY


Turkey will be making itsfirst systematic effort to mo-bilize its resources wben itofficially puts its Five ...YearPlan for economic developmentinto effect on 1 March. Mostof the funds needed to financethe $6.6--billion-plan--expectedfrom both foreign and do-mestic sources--are still tobe obtained, however.'

Background

Turkey's mineral and agri-cultural resources could supporta considerably higher livingstandard than now prevails.The economy has been sluggish;with gross national product ris-ing by an average of only threepercent annually in the pastfive years. Heavy governmentinvestment and massive foreignaid have not provided self-sufficiency either in food orin simple consumer goods.

Wartime disruptions, polit-ical upheaval, and a successionof disastrous droughts imposedsevere strains on the economyduring a time ofexplos1ve

population growth. In the 1950sthe Menderes government piled upa staggering debt burden whiletrying to stimulate the economyby forced-draft methods, butfailed to achieve balanced prog-ress.

After the 1960 revolution,the country's new militaryleaders adopt,ed an entirely newapproach. They established aplanning organization chargedwith preparing an integratedprogram for economic growth.They also stabilized the lira,trimmed the government's civilspending I s.crutiniz,ed the taxsystem, and drafted changes infis·cal legislation.

Political instability hasimpeded this approach. Sincethe 1961 elections Premier Inonuhas headed two shaky coalitions.Conflicts Within his currentthree-party coalition causedthe Fiv'e-Year Plan's origJnaltax recommendations to be con-siderably watered down. Theresurgence in 1962 of the JusticeParty, now in opposition andharboring most of the former

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Menderes supporters, poses athreat to hopes of increasingtaxes to the level needed tosupport the plan. Nevertheless,the plan itself passed Parlia-ment imtact.

Main Features

The Plan aims to achievea seven-percent annual' growthin gross national ·product. Therate of investment would risefrom the current 15 percent toabout 18 percent of GNP. Theplan is cast within the frame-work of a broad set of socialand economic goalS to beachieved by 1977, by which timeGNP is expected to have risenby about 175 percent. The rapidpopulation growth, however, willhold the rise in per-capitaincome to 78 percent.

The plan is designed tostimulate private investment.During the five-year period,about 40 percent of the invest-ment total, or $2.7 billion,is expected from private sources,and changes in tax and creditpolicies are intended to in-crease domestic private imvest-ment at a faster rate thanpublic investment. In an effortto encourage the flow of per-sonal savings into business,a local money market in whichsecurities may be ·traded is

also to be established. Privateinvestment is to be directedespecially into light manufac-turing which wi 11 benef it thegeneral economy.

The need to meet immediatesocial problems underlies manyof the plan's objectives.Programs in agriculture, manu-facturing, education, and housingare designed partly for theirimpact on the unemployment prob-lem. Top priority goes tohousing, in view of the seriousshortage of low-income dwellings.New health facilities will bebuilt and extended to areasmeagerly served now.

Expanding Production

In agriculture, still thebulwark of Turkey's economy,it is intended wherever possibleto shift production from sub-sistence crops to such high-value crops as cotton and truck-farm products that can be soldto mass markets abroad. Irri-gation wi 11 be increased in th.emore arid sections of the country.

In manufac tur in.g , thegovernment will try to ach.ievenational self-sufficiency inmany items now imported. Anintegrated steel plant is pro-jected for Eregli in north-western Turkey.

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Menderes supporters, poses athreat to hopes of increasingtaxes to the level needed tosupport the plan. Nevertheless,the plan itself passed parlia...ment intact.

lfainFeatures

The Plan aims to achievea seven-percent a;,nnnal' growthin gross national ·product. Therate of investment would risefrom the current 15 percent toabout IS percent of GNP. Theplan is cast Within the frame-work of a broad set of socialand economic goals to beachieved by 1977, by which timeGNP is to have risenby about 175 percent. The rap.idpopulation growth, however, willhold the rise in per-capitaincome to 78 percent.

The plan is designed tostimulate private investment.During the five-year period,about 40 percent of the invest-ment total, or $2.7 billion,is expected from private sources,and changes in tax and creditpolicies are intended to in-crease domestic private imvest-ment at a faster rate thanpublic investment. In an effortto encourage the flow of per-sonal savings into business,a local money market in whichsecurities may be ·traded is

also to be established. Privateinvestment is to be directedespecially into light manufac-turing which wi 11 benef it thegeaeral economy.

The need to meet immediatesocial problems underlies manyof the plan's objectives.Programs in agriculture, manu-facturing, education, and housingare designed partly for theirimp-act on the unemployment prob-lem. Top priority goes tohousing, in view of the seriousshortage of low-income dwellings.New health facilities will bebuilt and extended to areasmeagerly served now.

Expanding Production

In agriculture, st.ill thebulwark of iurkey's econo$Y,it is intended wherever p,ossibleto shift production from sub-sistence crops to such high-value crops as cotton and truck-farm products that can be soldto mass markets abroad. Irri-gation will be increased in themore arid sections of the country.

In 1n&l1Ufac turing , thegovernment will try to achievenaticmal self-sufficiency inmany items now imported. Anintegrated steel plant is pro-jected for Eregli in north-western Turkey.

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In addition, the govern-ment plans to raise nonferrousmining production, in responseto world demand patterns, boththrough incr.eas.ing operatingefficiency and opening newfacilities. The state seeks toextend and rehabilitate therail and telecommunicationssystem it owns and, in order tomeet anticipated growth in de-mands from industry and ruralelectrification projects, toincrease power output by 83percent in five years.

. The relatively new fieldof tourism also receives atten-tion. The number of touristsvisiting Turkey bas shown anannual increase of about 13percent recently. Through

construction and modernizationof tourist facilities, it ishoped that by 1967 tourism willprovide a significant sourceof foreign exchange.

Paying the -Bill

A flow of funds sufficientto meet planned investmentschedules is not yet assured.The Turks estimate that theycan finance about $4.8 billion,nearly three qu.arters of theplan's investment require;ments,fro·m their own resources. Sincepolitical objections resultedin the abandonment of many ofthe plan's original tax reformrecommendations, increased rev-enue stemming from a growth inincome rather than a high rate

1 Feb 63

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SPECIAL ARTICLES Page 6 of 7

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In addition, the govern-ment plans to raise nonferrousmining production, in responseto world demand patterns, boththrough incr.eas.ing operatingefficiency and opening newfacilities. The state seeks toextend and rehabilitate therail and telecommunicationssystem it owns and, in order tomeet anticipated growth in de-mands from industry and ruralelectrification projects, toincrease power output by 83percent in five years.

. The relatively new fieldof tourism also receives atten-tion. The number of touristsvisiting Turkey bas shown anannual increase of about 13percent recently. Through

construction and modernizationof tourist facilities, it ishoped that by 1967 tourism willprovide a significant sourceof foreign exchange.

Paying the -Bill

A flow of funds sufficientto meet planned investmentschedules is not yet assured.The Turks estimate that theycan finance about $4.8 billion,nearly three qu.arters of theplan's investment require;ments,fro·m their own resources. Sincepolitical objections resultedin the abandonment of many ofthe plan's original tax reformrecommendations, increased rev-enue stemming from a growth inincome rather than a high rate

1 Feb 63

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structure now is relied upon toprovide most of the needed funds.New taxes, particularly on agri-culture, together with devicessuch as a "declaration of wealth",and a forced-savings plan, willmake up the rest.

Ankara has been disappointedin the foreign response to itsneed to close the $1.8-billiongap between investment goalsand Turkish resources. Turkey'sWestern allies agreed in prin-ciple to help underwrite theplan's costs, and last year aconsortium consisting of thesix EEC countries plus the US,Britain, Canada, Sweden, andAustria was formed to providean "assured flow" of aid duringthe five-year period. In thefirst "pledging" session heldin December, however, the amountof aid offered fell far shortof what the Turks had plannedon, and much of this was on termsthe Turks felt would be of littlehelp. As a result of Americanand German prodding, the con-sortium is reconsidering theproblem.

The Turks also face theproblem of continuing to serv-ice their $l.4-billion foreigndebt during this period. Thehighest repayments and interestcharges fall due in the plan'sfirst two years--$173 millionin 1963 and $100 million in 1964.

Outlook

It now appears that somescaling down of goals will benecessary. At the level of in-vestment within reach, an annualgrowth rate of f ve , rather than seven,percent might still be achieved.

Despite the loss of someof the anticipated financialsupport, several favorabledevelopments in recent monthsare likely to strengthen Turkey'seconomy. Substantial foreignexchange savings may soon berealized in the country's ,fuelbill due to growing crude-oilproduction. The outlook hasalso improved for Turkey's ad-mission to associate membershipin the EEC. If current nego-tiations succeed, this would ex-pand markets for many ag,ricul-tural and mineral exports.Earnings from tourism and otherinvisibles are rising at anencouraging rate. If such trendscontinue, enough confidence mightbe stimulated both at home andabroad to increase the flow ofcapital into Turkish development.

Much wili depend on thegovernment's success in sellingthe public on the merits of theplan in its early stages byproducing visible accomplishments,as in housing and rural electri-fication. If Turkey's peasantsbecome convinced of the plan'simportance to the country, theywould support it with the fervorthey bring to any national effort.

On the other hand, the lossof psychological momentum involvedin a trimming of goals would makethe surmounting of the plan'smany difficulties all the mo,reformidable. Prolonged indecisionmight even spark a reaction that. the Inonu regime.

1 Feb 63

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structure now is relied upon toprovide most of the needed funds.New taxes, particularly on agri-culture, together with devicessuch as a "declaration of wealth",and a forced-savings plan, willmake up the rest.

Ankara has been disappointedin the foreign response to itsneed to close the $1.8-billiongap between investment goalsand Turkish resources. Turkey'sWestern allies agreed in prin-ciple to help underwrite theplan's costs, and last year aconsortium consisting of thesix EEC countries plus the US,Britain, Canada, Sweden, andAustria was formed to providean "assured flow" of aid duringthe five-year period. In thefirst "pledging" session heldin December, however, the amountof aid offered fell far shortof what the Turks had plannedon, and much of this was on termsthe Turks felt would be of littlehelp. As a result of Americanand German prodding, the con-sortium is reconsidering theproblem.

The Turks also face theproblem of continuing to serv-ice their $l.4-billion foreigndebt during this period. Thehighest repayments and interestcharges fall due in the plan'sfirst two years--$173 millionin 1963 and $100 million in 1964.

Outlook

It now appears that somescaling down of goals will benecessary. At the level of in-vestment within reach, an annualgrowth rate of rather than seven,percent might still be achieved.

Despite the loss of someof the anticipated financialsupport, several favorabledevelopments in recent monthsare likely to strengthen Turkey'seconomy. Substantial foreignexchange saVings may soon berealized in the country's ,fuelbill due to growing crude-oilprQduction. The outlook hasalso improved for Turkey's ad-mission to associate membershipin the EEC. If current nego-tia tions succeed, this w,ould ex-pand markets for many ag,ricul-tural and mineral exports.Earnings from tourism and otherinvisibles are rising at anencouraging rate. If such trendscontinue, enough confidence mightbe stimulated both at home andabroad to increase the flow ofcapital into Turkish development.

Much wili depend on thegovernment's succe·ss in sellingthe public on the merits of theplan in its early stages byproducing visible accomplishments,as in housing and rural electri-fication. If Turkey's peasantsbecome convinced of the plan'simportance to the country, theywould support it with the fervorthey bring to any national effort.

On the other hand, the lossof psychological momentum involvedin a trimming of goals would makethe surmounting of the plan'smany difficulties all the moreformidable. Prolonged indecisionmight even spark a reaction that.WQ\l:J,.g" the Inonu regime.

1 Feb 63

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.•. .<" ..'....

OTHER INTEl\.lGENCE I:SSUANCES

Received during the week of 23-29 January 1963

... p' ..'....

OTHER INTEl\.lGENCE I:SSUANCES

Received during the week of 23-29 January 1963

1 february 1963 current intelligence weekly ......year plan for economic development into effe.ct on...

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