200000
104-10302-10030 2025 RELEASE UNDER THE PRESIDENT JOHN F. KENNEDY ASSASSINATION RECORDS ACT OF 1992
27 December 1963
SC No. 00624/63
Copy
WEEKLY
REVIEW
OFFICE OF CURRENT INTELLIGENCE
CENTRAL INTELLIGENCE AGENCY
THIS DOCUMENT CONTAINS CODE WORD MATERIAL NO FOREIGN DISSEM
52728703
TOP SECRET
GROUP Excluded from automatic
downgrading and declassification
13-00000
T
This document contains classified information affecting the national
security of the United States within the meaning of the espionage
laws, US Code Title 18, Sections 793, 794, and 798. The law prohibits
its transmission or the revelation of its contents in any manner to
an unauthorized person, as well as its use in any manner prejudicial
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It is to be seen only by US personnel especially indoctrinated
and authorized to receive COMMUNICATIONS INTELLIGENCE
information; its security must be maintained in accordance with
COMMUNICATIONS INTELLIGENCE REGULATIONS.
No action is to be taken on any COMMUNICATIONS INTELLI-
GENCE which may be contained herein, regardless of the advantages
to be gained, unless such action is first approved by the Director
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DISSEMINATION CONTROLS
This document MUST NOT BE RELEASED TO FOREIGN
GOVERNMENTS. If marked with specific dissemination
controls in accordance with the provisions of DCID 1/7,
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13-00000
(TOP SECRET DINAR (
CONTENTS
(Information as of 1200 EST, 26 December 1963)
THE COMMUNIST WORLD
SOVIET TRADE ACTIVITY IN THE INDUSTRIAL WEST.
Within a week after the central committee approved
Khrushchev's plan for the chemical industry, Soviet
traders apparently had their instructions and were
renewing contacts in the industrial West.
CHINESE COMMUNIST LEADERS' AFRICAN TOUR
While Chou En-lai and Chen Yi have been able to
project an aura of Afro-Asian amity during the
first two weeks of their two-month tour, they have
not scored comparable successes in the political or
economic fields.
EAST GERMAN REACTION TO RELAXATION OF BERLIN TRAVEL
The East German people, while elated over the holi-
day travel arrangements in Berlin, are publicly-
voicing hope that they may be permitted to visit
their relatives in West Berlin and West Germany.
NORTH KOREA IMPROVES AIR DEFENSE CAPABILITY
Pyongyang has more widely dispersed its supersonic
MIG-21s, has acquired relatively sophisticated new
radar, and has equipped its IL-28s with an improved
blind bombing and navigational system.
NORTH VIETNAM'S MILITARY ESTABLISHMENT
This military force, primarily a ground army with
no tactical air and little naval capability, is
nevertheless the most formidable in Southeast Asia!
Its most notable achievement is its highly special-
ized capability to support and maintain insurgency
operations in adjacent countries. (Published-sep-³
arately as Special Report SC No. 00624/63B)
ASIA-AFRICA
ENTHUSIASM FOR SOUTH VIETNAM REGIME FLAGGING
LAOS
The military regime is beginning to take steps to
make its counterinsurgency effort more effective,
but the generals still seem to have little idea of
how to rally significant popular support.
Communist forces have moved to erase recent gains by
rightist units in central Laos. Neutralist and Pathet
Lao representatives are continuing their efforts to
ease tension between the two factions..
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
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1
2
3
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ASIA-AFRICA (continued)
Page
7
FRENCH CABINET MINISTER TO VISIT CAMBODIA
Armed Forces Minister Messmer's visit in early Jan-
uary is designed primarily to strengthen French in-
fluence in the wake of Sihanouk's call for an end
to the US aid program.
ARABS PLAN NO OVERT ACTION AGAINST ISRAELI PROJECT
Arab military chiefs apparently feel that overt mil-
itary action against Israel's Jordan River diversion
project is not feasible, but sabotage of its facili-
ties may be attempted.
CYPRUS DISPUTE FLARES AGAIN
The new outbreak of fighting on Cyprus is a reaction
to President Makarios' determination to change the
constitution so as to limit the role of the Turkish
minority.
BREAKUP OF THE FEDERATION OF RHODESIA AND NYASALAND
The ten-year-old federation is being dissolved on
31 December because its black African population
has persistently opposed it as a device to perpet-
uate white rule. Its dissolution will end London's
hopes for an economically integrated, multiracial
state and increase the danger of bitter clashes
between white and black nationalists in its three
erstwhile constituent territories. (Published sep-
arately as Special Report SC No. 00624/63A)
AREA NOTE
Saudi Arabia
8
9
10
EUROPE
THE COMMON MARKET CRISIS
11
Agreements reached on agricultural policy on 23 De
cember are apparently sufficient to discourage De
Gaulle from breaking up the community. The agreement
on a position for the Kennedy Round is not necessarily
favorable to the US.
UK-US FRICTIONS OVER SHIPPING POLICY.
The British Government has advised shipping circles
not to comply with US demands for information relat-
ing to rate discrimination against US exports.
WEST GERMAN POLITICAL DEVELOPMENTS
5
Willy Brandt has again taken the center of the polit-
ical stage with the success of negotiations to open
the Wall for the holiday season. He has been named
acting chairman of the SPD.
12
13
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
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EUROPE (continued)
AREA NOTES
NATO and Iceland
WESTERN HEMISPHERE
DOMESTIC POLITICS IN CUBA
Castro has cautiously continued efforts to reduce
the influence of the Moscow-oriented Cuban Com-
munists, who are said to have banded together to
work clandestinely against him.
DOMINICAN REGIME FACES NEW POLITICAL CHALLENGES
The killing of 15 guerrillas by army troops ap-
parently removes the insurgent threat but could
The
provoke dangerous political repercussions.
head of the provisional government has already re
signed.
BRAZIL
Page
14
15
16
17
Appointment of Ney Galvao as finance minister
reduces the already slight prospect that Brazil's
critical financial problems would be handled ef-
fectively. Other cabinet changes may follow.
AREA NOTE
Bolivia
18
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
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The Communist World
SOVIET TRADE ACTIVITY IN THE INDUSTRIAL WEST
Within a week after the
central committee approved
Khrushchev's plan for the chem-
ical industry, Soviet traders
apparently had their instruc-
tions and budget allocations
and were renewing their activ-
ity in trade circles of the in-
dustrial West.
Contracts for fertilizer
installations, plastics and syn-
thetic plants, petrochemical
equipment, and mining machinery
are already in various stages of
negotiation. Officials in Bonn
report they have under consider-
ation a proposal by a West Ger-
man consortium to supply the
USSR with $400 million worth of
petrochemical equipment. A
Soviet mission is negotiating
with the British Imperial Chem-
ical Industry (ICI), which here-
tofore has supplied the USSR
with technical know-how. ICI
reportedly has offered to de-
liver equipment and processes
for the production of fertiliz-
ers, herbicides, rubber chem-
icals, and plastics. Negotia-
tions also are under way for
large numbers of Japanese chemi-
cal fertilizer plants.
Another Western consortium,
involving US equipment and proc-
esses, is discussing delivery
of a large oil refinery. In
addition, contracts for a wide
range of other machinery and
equipment will probably soon be
signed. These contracts appar-
ently had been postponed until
the new chemical equipment buy-
ing program was presented to
the plenum and allocations for
various trade corporations for
next year were approved.
The Soviet need for addi-
tional credit to finance planned
expanded purchases is crucial.
The USSR presumably can generate
sufficient funds to meet down
payments on sizable orders.
However, credit arrangements
must be set now to spread out
the heavy crush of payments
which otherwise would fall due
in 1965-66 when equipment con-
tracted for next year will be
delivered. Soviet ability to
increase hard-currency reserves
is not likely to improve in the
near future. Moscow's current
grain imports will reduce its
gold reserves by 25 percent.
If these continue beyond mid-
1964, the Soviet hard-currency
position will be under further
strain.
Despite the bleak foreign
exchange prospects for the USSR,
Soviet officials appear hopeful
that Western competition for
Soviet orders will be adequate
to foster Western governmental
and banking opinion favorable
to more and longer term credit.
Moscow may also hope that a
continuation of its relatively
restrained foreign policy will
be helpful in this context.
While viewing the USSR as an
acceptable commercial risk, the
banking community has hereto-
fore been unwilling to extend
credits beyond a five-year pe-
riod because of uncertainty
about future political develop-
ments. (SECRET)
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
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Page 1
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The Communist World
CHINESE COMMUNIST LEADERS' AFRICAN TOUR
With two weeks of their pro-
jected two-month tour of Africa
completed, Chou En-lai and For-
eign Minister Chen Yi can claim
high marks for their efforts to
project an aura of Afro-Asian
amity and to identify Peiping
with African aspirations. There
is no evidence, however, that
they have scored any comparable
success in the political or eco-
nomic fields.
The joint communiqué issued
on 21 December at the conclusion
of the Chinese leaders' visit to
Cairo contains few surprises,
and reports from Algiers suggest
that discussions with Ben Bella
are following predictable lines.
Thus far the Chinese have at-
tempted to minimize differences,
play up past contacts, and press
such themes as militant struggle
against colonialism and "US im-
perialism."
In both Algiers and Cairo,
Chou's hosts sought to demon-
strate their nonalignment by
actions designed to play down
the impact of the Chinese lead-
ers' arrival. Chou was greeted
in Cairo with a 21-gun salute,
but Nasir was not on hand. In
Algeria, Ben Bella was on hand
to greet his guests, but the top-
level delegation he sent to the
Soviet Union just before Chou's
arrival is receiving more pub-
licity than the Chinese guests.
It has become increasingly
apparent that a major objective
of the trip has been to undercut
Soviet influence throughout the
| continent. Criticism of the
USSR was reportedly a recurrent
theme in Chou's four lengthy
talks with Nasir. Nasir report-
edly said that Chou talked about
the USSR the way the Soviets
used to talk about the US. He
accused the Soviets of trying
to colonize China, of breaking
political and economic promises,
and of becoming tools of the
US, and he warned that any Afro-
Asian country which became de-
pendent on Moscow would suffer
the same fate as Peiping.
In Algeria, Chou sounded a
similar note. He cited China' 's
early support for Algerian rev-
olutionaries--support which ac-
tually pre-dated that of the USSR.
He has also undoubtedly scored
Soviet unreliability. The Chi-
nese may be pressing the Algerians
to use some of the $50-million
credit offered in October. This
offer was made to counter a $100-
million Soviet credit offered
earlier the same month.
Sino-Soviet rivalry for
African support also flared at
the UN, where Peiping outmaneu-
vered Moscow on the question of
enlarging the representation in
principal UN organs to accommo-
date the African bloc. Soviet
delegate Fedorenko had attempted
to make it appear that the Chi-
nese were opposed to the African-
sponsored expansion plan because
they insisted that any change
in the UN be tied to Peiping's
own admission to the Security
Council. The USSR found itself
holding a suddenly emptied bag,
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
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however, when Peiping loudly
repudiated Fedorenko's statement
and accused the Soviets of using
the issue as a pretext for op-
posing Afro-Asian demands.
Chou can be expected to
capitalize on this during next
week's visit to Morocco and in
subsequent stops in Guinea,
Ghana, and Mali. No details of
Chou's itinerary beyond Rabat
have been made public by Peiping.
The Communist World
Such secrecy may well be prompted
by security considerations. Chi-
nese officials were apparently
seriously shaken by the abortive
plot to kill Liu Shao-chi in
Cambodia last spring. The Chi-
nese envoy in Cairo reportedly
told Nasir of concern for Chou's
safety and asked that travel
plans during the Chinese leader
visit to the UAR not be made
public. (SECRET NO FOREIGN DIS-
SEM)
EAST GERMAN REACTION TO RELAXATION OF BERLIN TRAVEL
Reaction of East Germans
to the agreement to let West
Berliners visit relatives in
East Berlin is hopeful but still
fairly cautious, judging by re-
ports from local party officials.
The party central head-
quarters, obviously concerned
that the agreement might have
domestic repercussions, ordered
district officials to submit
immediate reports and detailed
follow-ups on reactions to this
partial relaxation of travel
curbs imposed in connection
with the building of the Berlin
Wall. Most of the responses
state that the people are elated
but are publicly voicing hope
that they may be permitted to
visit their relatives in West
Berlin and West Germany. Many
East Germans express hope that
the present move will be followed
by other relaxations--a reaction
probably quite unpalatable to
the regime.
Public comment--at least
as reported by the various
party headquarters--is still
fairly cautious: One party
member in Magdeburg said: "The
reason we don't let our citizens
go to West Germany is that we
are afraid they will defect."
But he was promptly silenced by
comrades who parroted the party
line on "the terror against our
GDR citizens in West Germany."
Public expression of dis-
satisfaction with harsh travel
and internal controls has been
recurrent in recent months,
reaching a peak prior to the
20 October parliamentary elec-
tions.
The people's reaction to
the pass agreement with West
Berlin points up one of the re-
gime's major problems: how to
project an image of itself as a
sovereign state and of East Ber-
lin as its capital without in-
creasing discontent among its
population, who still risk shoot-
ing if they attempt to escape
to West Berlin. (SECRET KIMBO)
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
Page
TOP SECRET DINAR
3
13-00000
UIJU
TOP SECRET DINAK
CHINA
CHONG'AN
KIMCHAEK
NORTH
KOREA
NAMSI
AMCHAM
CHONGJU
SONDOK
FUKCHANGNI
PYONGNI
KOREA
SUNAN
gyang
MIRIANI
PYONGYANG
CHANGJON
HWANGJU
⚫SINGYE
PYONGGANG
CHONGNI
YONAN
SAM site
Bomber elements
✓ Fighter defense elements
Combined command headquarters
• Radar station
.5
▲ East coast filter center
_ ☑Early warning radar coverage
TOP SECRET DINAR
27 DECEMBER 1963
MILES
34447
100
SOUTH KO
SINCHANGNI
ال
TOP SECRET DINAR
TSUSHIMA
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The Communist World
NORTH KOREA IMPROVES AIR DEFENSE CAPABILITY
North Korea has recently
taken several steps which signif-
icantly strengthen its air de-
fenses. MIG-21 (Fishbed) jet
fighters, which were first de-
tected only at Pukchang-ni air-
field, now are being stationed
at other airfields. Pyongyang
has also apparently just acquired
a large number of relatively
sophisticated types of radar
sets. In addition, the North
Korean bomber force, which has
a total of about 100 IL-28
(Beagle) jet light bombers, is
in part now equipped with, and
has been training with, an im-
proved blind bombing and naviga-
tional system.
Testing of and flight train-
ing with the new fighters--10
to 14 of which were apparently
obtained from the USSR in the
fall of 1962--were first noted
in communications intelligence
in June 1963. Since that time
the MIG-21s have been detected
frequently in flight activity
involving ground controlled in-
tercept exercises.
Beginning in October, MIG-
21s have been noted operating
from Wonsan on the east coast
of North Korea. Their deploy-
ment to this airfield places
supersonic fighters on both the
east and west coasts of North
Korea.
The North Koreans have re-
cently expanded their radar
coverage. Six new types of
radar, at least one of which
is believed to be exclusively
of Chinese Communist manufacture,
have been detected. For the
present these radars will ap-
parently supplement rather than
replace North Korea's original
three types--Kniferest A, SCR-
270, and Token.
The identifiable new types
include Kniferest B, Spoonrest
A, and a new type of Chinese Com-
munist origin which is probably
a substantial modification of
the SCR-270. Spoonrest A is
sometimes used as the acquisi-
tion radar for surface-to-air
missile sites, but it is also
used in an early warning role
and is probably intended for that
use in North Korea. Acquisition
of these new radars reflects
North Korea's efforts to extend
the range of its early warning
detection system. To improve
height-finding capability, Pyong-
yang has also introduced more
sophisticated radars such as
Rockcake and Stonecake.
Another improvement in North
Korea's air capability is the
equipment of about twenty IL-28s
with an improved blind bombing
and navigational radar system des-
ignated Shorewalk. When properly
used, this system permits preci-
sion navigation and blind bombing
without the use of ground communi-
cations which would betray the di-
rection of the flight and the tar-
get designation. (TOP SECRET DINAR)
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CURRENT INTELLIGENCE WEEKLY REVIEW
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Southeast Asia
ENTHUSIASM FOR SOUTH VIETNAM REGIME FLAGGING
_ Communist guerrilla activ-
ity increased only slightly in
connection with the third anni-
versary, on 20 December, of the
Viet Cong's Liberation Front,
despite advance Communist propa-
ganda exhortation for a major
military effort. The Viet Cong
continued to direct attacks and
harassing activities primarily
at strategic hamlets.
South Vietnam's new govern-
ment is showing extreme sensi-
tivity to discussion of a "neu-
tralist solution" to its in-
surgency problem. The Communists'
Liberation Front has repeatedly
proposed such a settlement, and
the idea is gaining new advocates
as a result of Cambodia's call
for an international conference.
Saigon's military rulers last
week closed down a newspaper
which was expressing interest in
neutralism. However, editorials
in the vernacular press, even
though attacking neutralism, have
kept the debate in the public eye.
On 20 December, Saigon students--
possibly encouraged by the re-
gime--demonstrated against neu-
tralism.
On the military front, the
government is beginning to take
some steps to overcome the leth-
argy that has affected its coun-
terinsurgency effort since the
coup. A long-range pacification
program has been launched in one
of the most troublesome provinces
in the northern part of the coun-
try, and broad command changes
have been introduced in two prov-
inces south of Saigon where
security has been deteriorating.
In the political field,
the government has named-60-
members of the civilian advisory
Council of Notables. Returned
exiles apparently are not rep-
resented, and there is a dearth
of direct provincial represen-
tation. Many appointees, how-
ever, are prominent political,
professional and lay religious
leaders who could provide effec-
tive guidance to the regime if
they are given a chance.
Apathy and disenchantment
over the new government are wide-
spread among such key elements
as middle-grade officers, stu-
dents and politicians. Criti-
cism centers on the lack of
firm direction by the ruling gen-
erals, on repeated reshuffling
of local officials deemed in-
competent, corrupt or close to
the Diem regime, and on the rise
in Viet Cong activity. There
are signs that junta members
themselves are beginning to share
the disillusionment of some cir-
cles with Premier Tho's provi-
sional cabinet, which is described
as ineffective and regional in
outlook.
Leading generals nevertheless
seem to have few effective steps
in mind to rally popular support.
Three generals recently complained
to US officials that they were hav-
ing trouble finding qualified
Vietnamese to fill government posi-
tions and that press criticism
of their efforts was unhelpful.
General "Big" Minh, the chief of
state, has indicated a personal
distaste for a prominent role,
and has asserted that the people
would gradually come to appreciate
the new government as problems
were solved on a province-by
province-basis. (SECRET NO FOR-
"EIGN DISSEM/BACKGROUND USE ONLY)
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
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34435
LAOS
Ssumao
CHINA
Nam
Phong Saly
5 Dien Bien Phu
BURMA
Nam Tha
Muong Sai
Sam Neua
NORTH VIETNAM
✓ HANOI
CHINA
مل
Ban Houei Sai
Mekong
Luang Prabang
Ban Ban
Sayaboury
P'cine
Jarres
Xieng
Khouang
Vang Vieng
13
Vinh
GULF OF TONKIN
Pak Sane
Kam 8
Keut
VIENTIANE
Lak
Sao
Mekong
(8)
Nhommarath
Thakhek
Ichepone
|Savannakhet
OUTH
VIETNAM
THAILAND
Road
Track or trai!
Railroad
STATUTE MILES 100
CAMBODIA
Pakse
Saravane
CODE WORD MATERIAL ON REVERSE OF PAGE
Attopeu
13-00000
LAOS
✓ TOP SECRET DINAR (
Asia-Africa
Communist forces have
moved to erase recent gains
* made by rightist units in cen-
tral Laos. Pathet Lao troops,
reportedly supported by sub-
stantial numbers of North Viet-
namese, on 19 December captured
Kam Keut and the nearby airfield,
three days after occupying the
key route junction at Lak Sao.
Right-wing messages have de-
scribed a key rightist parabattal-
ion as "completely smashed."
Communist units have advanced
south of Lak Sao toward neutral-
ist positions along Route 8-A,
but there have been no indica-
tions that they intend to press
their advantage by a major drive
on Nhommarath, which is still
held by rightist forces. In
other areas, there have been
reports of only limited activ-
ity, involving scattered skir-
mishes and artillery exchanges.
Meanwhile, neutralist and
Pathet Lao representatives are
continuing their efforts to
negotiate an easing of tensions
between the two factions. At
a meeting on 20 December in the
Plaine des Jarres, both sides
called for an "early" meeting
between Premier Souvanna and
Prince Souphannouvong. They
also agreed, in principle, that
elements of the coalition govern-
ment should be transferred from
Vientiane to the royal capital
at Luang Prabang, which would be
neutralized and placed under tri-
partite control. Both factions
reiterated their support for
the formation of a mixed police
force in a neutralized Vientiane.
General Phoumi's right-
wing faction, which was not
represented at the meeting,
remains skeptical of Pathet
Lao intentions. Phoumi apparently
believes that an agreement for
the neutralization of Luang
Prabang is unlikely, but he may
join in talks on the subject.
He has indicated, however, that
the neutralization of Vientiane
is contingent on the willingness
of the Pathet Lao to allow free
movement in areas of Laos now
under their control. (TOP SE-
CRET DINAR)
*
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
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Asia-Africa
FRENCH CABINET MINISTER TO VISIT CAMBODIA
Armed Forces Minister
Pierre Messmer's visit to Cam-
bodia from 4-7 January is de-
signed primarily to strengthen
French influence there in the
wake of Prince Sihanouk's call
for an end to the US aid pro-
gram. Messmer's high-level
entourage, which includes the
chiefs of the Foreign Ministry's
Indochina and Cultural and Tech-
nical divisions, will probably
recommend some increases in aid,
but De Gaulle apparently has
no intention of taking on any
large new commitments.
French-grant aid to Cam-
podia since 1956 has amounted
to only $15 million. Current
assistance is threefold: a
military training mission of at
least 250 men%; cultural aid in
the form of a university mission
and 319 teachers in Cambodian
schools; and the maintenance of
about 40 experts in the fields
of health and public works. In
addition, a number of French
nationals hired by the Cambodian
Government hold positions of
considerable influence in the
Ministry of Finance, the Treas-
ury, and the premier's office,
and are among Prince Sihanouk's
advisers.
Paris has indicated it has
no intention of equaling the
US aid program. Any increase
in military aid probably would
be limited to reconditioned and
obsolete equipment, such as
trucks and light armored vehicles.
Increased cultural and technical
assistance probably would include
further help for the French uni-
versity mission, more teachers,
and 30 or 40 additional technical
experts, especially agricultural-
ists.
The extension of French aid
will be complicated by Cambodia's
claims for compensation for
losses incurred as a result of
the 1958 devaluation of the
French franc. Since 1958 France
has asserted that a large-scale
aid program would be impossi-
ble until there is agreement on
an exchange rate, but a compro-
mise may now be in sight.
Sihanouk has sought French
help in maintaining Cambodia's
policy of neutrality, and in
recent talks with the US and the
UK, France has supported his
call for an international con-
ference on Cambodian neutral-
ity, despite US objections.
Indeed, De Gaulle has consist-
ently sought to meet Sihanouk
more than half way, and Paris
may now encourage Sihanouk
to press this issue. (CON-
FIDENTIAL)
27 Dec 63
CURRENT INTELLIGENCE WEEKLY REVIEW
Page 7
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ISRAEL'S
JORDAN RIVER
DIVERSION PROJECT
Canal or conduit,
proposed or under construction
Lituni
Demilitarized Zone
LEBANON,
Sea
BYR
ISRAEL
NEGEV
DESERT
GAZA
STRIP
34446
Jordan
JORDAN
Mediterranean
Sea
Tel Aviv-Jaffa
NEGEV
DESERT
LEBANON
Haifa
Trained
Pumping Station
(Under Construction)
Reservoirs
Tunnel
Tunnel
Tunnel ISRAEL
JORDAN
Jerusalem
DEAD
SEA
2. STATUTE MILES
SYRIA
CODE WORD MATERIAL ON REVERSE OF PAGE
13-00000
TOP SECRET DINAR
Asia-Africa
ARABS PLAN NO OVERT ACTION AGAINST ISRAELI PROJECT
The Arab states evidently
do not plan any overt military
action against Israel when in
late January or early February
the Israelis begin pumping tests
for their Jordan River diversion
project, but sabotage of the
project's facilities may be at-
tempted.
The Arab military chiefs
who met in Cairo in mid-December
apparently decided that direct
military attacks are not feasi-
ble. The chiefs reportedly
agreed, however, that the states
bordering on Israel should
mount independent and uncoor-
dinated clandestine operations.
The Arab League Defense
Council, which meets in January,
probably will approve this rec-
ommendation, but its implementa-
tion is another matter. Egyp-
tian, Jordanian, and Lebanese
officials have indicated pri-
vately that their governments
have no intention of taking
aggressive action of any kind
against the Israeli project.
Nasir, however, told the
Canadian ambassador in early
December that he was worried
that Syria might act unilater-
ally and present the other Arab
states with a dilemma. Damascus
will be under strong pressure
to fulfill its threats against
the Israeli scheme, particularly
in view of the close proximity
of the Syrian border to Israel's
pumping station on Lake Tiberias.
Nasir's wariness about be-
coming involved in a war with
Israel over Jordan waters was
also evident in a speech he
made on 23 December. He empha-
sized that the problem is polit-
ical rather than military in
nature and that the chiefs of
staff cannot solve it. He
called for a summit meeting of
Arab presidents and kings to
seek a solution.
Israel, according to the
chief of Israeli military in-
telligence, considers there is
an outside possibility that
Syria might bomb or shell the
pumping facility's transformer
station. However, the Israelis
believe the primary threat stems
from former Palestinians now
living in Syria, Jordan or
Lebanon, who might make a dra-
matic effort to sabotage the
project even though they prob-
ably could not cause serious
damage. (SECRET NO FOREIGN
DISSEM/BACKGROUND USE ONLY)
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CYPRUS DISPUTE FLARES AGAIN
Fighting between the Greek
and Turkish Cypriot communities,
which began on 21 December and
was continuing on 26 December
despite efforts to obtain a cease-
fire, is the culmination of a
steady growth of tension on the
island during the past few weeks.
The new tension followed Presi-
dent Makarios' presentation to
Turkish Cypriot leaders of propos-
als for changing the Cyprus con-
stitution. The proposals, which
essentially involved removing the
guarantees to the Turkish minor-
ity that had been written into
the Cyprus settlement of 1959,
were rejected by the Turkish Gov-
ernment even before the Turkish
Cypriots had made their views
known.
Most of the initial fight-
ing appears to have been between
Greek Cypriot police and the Turk-
ish underground, and to have taken
place in the Turkish areas of Nic-
osia.. The situation there de-
teriorated progressively during
the week, as the police lost con-
trol to extremist groups of ir-
regulars from both communities.
A cease-fire, to be supervised
by the British, had not been ef-
fective as of the morning of 26
December. Fighting had also con-
tinued at the port city of Lar-
naca; the rest of the island was
quiet but tense.
In the face of these de=
velopments, the Turkish Govern-
ment threatened to exercise its
right under the 1959 agreement
to intervene on Cyprus. Three
Turkish jet fighters flew over
Nicosia on 25 December, and
Turkish naval units appeared off
the island. Part of the 650-man
Turkish garrison on Cyprus left
its barracks to move into one
of the Turkish quarters of the
capital. Part of the 950-man
Greek contingent then moved to
protect Greek areas. The situa-
tion evidently prodded Athens
and London into a more active
role, and Greek, Turkish and
British forces on Cyprus have
been placed under a unified Brit-
ish-led command. Britain has an-
nounced it is sending 150 ad-
ditional troops.
The violence may make lead-
ers of both sides more cautious
in pressing political demands.
Soon after the outbreak, Makarios
told the US ambassador he would
go more slowly in pushing his con-
stitutional revisions. Both eth-
nic groups, however, will be fur-
ther embittered--particularly
the Turkish community, which
is believed to have suffered
much the heavier casualties.
(CONFIDENTIAL)
27 Dec 63
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AREA NOTE
Saudi Arabia: Crown Prince
Faysal appears to have weathered
his latest dispute with King
Saud without making any conces-
sions. The details of a new
arrangement between the two are
not known, but Faysal is still
firmly in control of the govern-
ment. Royal Guard elements
which the King ordered to posi-
tions around his palace at the
height of the dispute have now
been withdrawn.
!
The dispute centered on
Saud's attempt to resume per-
sonal control of the government,
which he relinquished to Faysal
a year ago when his health
broke. The immediate issues
were variously reported to have
been the new budget, which cuts
funds allotted to the royal
family, and Faysal's refusal
to give cabinet posts to two
of Saud's sons.
In blocking Saud's chal-
lenge, Faysal apparently was
supported by most of the im-
portant members of the royal
family. Throughout the crisis
the Saudi regular army remained
under the orders of the minis-
ter of defense, Prince Sultan,
a Faysal adherent. Some ob-
servers have reported that the
King's action has actually served
to strengthen Faysal's position.
(CONFIDENTIAL NO FOREIGN DISSEM)
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THE TARIFF DISPARITIES ISSUE-
The tariff disparities issue which has plagued preparations for the Kennedy Round for many
months originates in the fact that there are substantial differences between the EEC and US.
fariffs on individual items, even though over-all tariff levels are roughly the same. Because
the EEC common external tariff was arrived at by averaging the tariffs of the member states,
the EEC tariff schedule is characterized by the absence of "peaks and lows"; in the US schedule,
on the other hand, the rates vary much more, and some individual tariffs remain very high in
comparison with those of the EEC. Accordingly, the EEC and the French in particular have
long insisted that a 50-percent cut in tariffs by both the US and the EEC would leave the US
with substantial protection on certain items and deprive the EEC of bargaining power to effect
their future reduction..
The disparities issue was believed to have been settled at the GATT ministerial meeting
last May with a formula which provided that tariffs on industrial items would in general be
reduced equally and across, the board, except that "special rules" would apply "where sig-
nificant adverse effects on trade would result from disparities in tariff levels:" In fact, how-
;ever, this formula merely shifted the argument to the problem of determining what disparifies
are "significant" or "meaningful in trade terms." Because the "special rules" would mean in
most cases a smaller tariff reduction by the EEC than by the US, the EEC has attempted to
maximize the area to which these rules would apply while the US has sought to minimize their
application.
After lengthy negotiation, a GATT subcommittee reached a considerable measure of.
agreement last month on a formula which would identify a "significant" tariff disparity in
the first instance as one in which the high rate is at least 30 percent of value and at least.
.10 percent above the lower rate. Because this formula would identify some 850 US items as
eligible for "special treatment," the subcommittee proposed seven additional qualitative cri-
teria which would reduce considerably the number of eligible items. The three to which the
US attaches special importance would (1) require that there be substantial imports of the item
concerned from the high tariff country into the low; (2) exclude items where there are sub-
stantial imports into the high tariff country; and (3) exclude items on which the low tariff,
country maintains quotas.
The formula approved by the EEC on 23 December would substitute for the 30/10 criterion
a 2/1 formula. A disparity would be identified as one in which the high tariff is twice as
high as the low one, apparently with the additional qualification that, in most cases, there
would have to be a ten-point percentage spread between the two rates. This formula would
provide for special treatment for far more than 850 items, including items of special US
export interest. The arrangements for qualitative criteria also seem to have been modified
to the US' disadvantage.
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Europe
THE COMMON MARKET CRISIS
The Common Market appears to
have averted disaster for the sec-
ond time in less than a year. The
eleventh-hour agreements reached
on agricultural policy on 23 De-
cember are apparently sufficient
to discourage De Gaulle from carry-
ing out his threat to break up the
community. Moreover, the Germans
and Dutch succeeded in extracting
limited commitments from Paris on
EEC participation in the Kennedy
Round of tariff negotiations. These
agreements do not cover all the out-
standing issues, however, and the
manner in which they were reached
will leave a residue of bitterness.
Nor is it certain that major US
interests have fared well.
The main agricultural elements
in the "package" deal are the reg-
ulations concerning intracommunity
trade in beef, rice, and dairy prod-
ucts and the rules governing the
community farm fund. Their effect
is to open the large West German
market to farm exports of France,
Italy, and the Netherlands--gen-
erally at a substantial advantage
over the exports of nonmembers. Al-
though approval of these and the
financial regulations is an im-
portant step forward, the key ques-
tion of grain price unification is
still unsettled. Further considera-
tion of the formula proposed by Com-
missioner Mansholt has been delayed
until next year.
The agreement on a Kennedy
Round position is likewise an ad-
vance for the community, but from
the US view not necessarily favor-
able. On the long-standing problem
of tariff "disparities," the EEC
adopted a formula which would
exempt from the proposed 50-per-
cent linear reduction in tariffs
a far larger number of items than
the US hoped for. The EEC position
on farm products in the trade ne-
gotiations--although an improvement
over the initial Mansholt propos-
als--also leaves much to be desired
from the US view. In general, the
EEC proposes that, if its levy sys-
tem operates in such a way as to
cause difficulties for the exports
of nonmembers, then the EEC Commis-
sion will be called on to propose
"appropriate," but unspecified,
measures. These would not apply
if it is technically impossible to
determine how much protection is
actually involved in the levy sys-
tem.
The general relief within
the community which greeted these
agreements reflects both the
depth of the crisis and some op-
timism that the Common Market's
unity may have been restored. The
prominent role played by the
EEC's commission in achieving
the compromise has in particu-
lar encouraged those who hope to
strengthen the community's in-
stitutional structure.
In France the conviction
was evidently widespread, how-
ever, that both Bonn and The
Hague were quite prepared to see
the French "leave" the Common Mar-
ket, and in the event of its
breakup, to seek alternative
ties with the Outer Seven. More-
over, while it may prove healthy
that Bonn "stood up" to De Gaulle
in this instance, its motive was
strongly colored by a desire to pro-
tect its inefficient farmers. Nor
does it augur well for US-EEC re-
lations that the French blame the
US for much of the opposition
they encountered. (SECRET NO-
FOREIGN DISSEM)
27 Dec 63
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UK-US FRICTIONS OVER SHIPPING POLICY
British shipping and offi-
cial circles are incensed over
recent US demands for informa-
tion relating to rate discrim-
ination against US exports.
The British Government has ad-
vised against compliance on
the grounds that this informa-
tion is commercially confiden-
tial, and that the US cannot
demand what the UK Government
cannot obtain.
the
Following a recent con-
gressional investigation into
alleged rate discrimination
against American exports,
US Maritime Commission asked
the North Atlantic Freight Con-
ference to explain the differ-
entials on a long list of items,
setting a 20 January deadline
for compliance under penalty
of heavy fines. The US posi-
tion is that US exporters are
being penalized because outward
rates are higher on the average
than the inward rates.
The
British and other shipping
lines regard the differentials
as economically justified.
tonnage of US exports is much
greater than import tonnage,
and shipping lines--anxious to
avoid half-loaded or in-ballast
westbound voyages--have tradi-
tionally charged lower rates
for items imported into the US
than for exports from this
country.
Thus, what are seen as
American efforts to regulate
international shipping lines in
order to improve the unfavorable
US balance of payments have
caused increasing rancor in
Britain. Before Parliament ad-
journed for its Christmas recess
on 20 December, some Conserva-
tive MPs called for retaliatory
restrictions on US ships arriv-
ing at UK ports. Although the
MPŚ did not specify what re-
strictions they had in mind,
the government cannot afford
in the present pre-election
period to leave itself open
to charges that it is not atten-
tive enough to domestic interests.
The Douglas-Home government,
while hopeful of some compromise
before the 20 January deadline,
is busily lining up international
support. At the recently con-
cluded conference of transport
ministers of 10 European mari-
time nations, Britain proposed
that Japan be invited to join
the united front of European
maritime countries in a general
protest against US shipping
policies, thereby aligning
roughly three quarters of the
world's shipping business against
the US position. Japan agreed
to do so, and the collective
protest was filed with the
State Department on 23 Decem-
ber. (CONFIDENTIAL NO FOR-
"EIGN DISSEM)
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Europe
WEST GERMAN POLITICAL DEVELOPMENTS
The opening of the Berlin
Wall during the holiday season
and the death of Social Demo-
cratic Party (SPD) chairman
Erich Ollenhauer have placed
Willy Brandt once again in the
center of the German political
stage.
The agreement to open the
Wall resulted from Brandt's un-
ceasing efforts to ease condi-
tions for Berliners. His will-
ingness to reach agreement with
the East Zone authorities on
the pass issue is being criticized
by some Christian Democratic
Union (CDU) leaders and by the
CDU-oriented press in West Ger-
many. Brandt, however, is bank-
ing on the expectation that most
West Germans, like the Berliners,
will approve his action. He
has even hinted that there may
be further negotiations with the
East Germans to extend the period
of the passes beyond the 5 Jan-
uary cutoff date. There is also
speculation that both East and
West Germany will find the pass
agreement a model for agreement
on other issues.
Brandt, who was the most
logical choice, was named acting
chairman of the SPD immediately
after Ollenhauer's death on 14
December. Deputy Chairman Her-
bert Wehner has proposed that
Brandt's position be formalized
at a special party convention
next month. Fritz Erler, the
party's foreign and defense
expert, is slated to take
Brandt's place in the hierarchy
as second deputy chairman. As
the SPD leader, Brandt would
stand to be candidate for chan-
cellor in the 1965 general elec-
tions. If current opinion polls
are any indication, the SPD
will give the CDU a strong race
in that contest.
Brandt, however, has not
yet committed himself, since
to accept the SPD chairmanship
might require him to resign as
mayor of Berlin and move to Bonn.
In so doing he would have to
operate at a distance from his
political bastion.
Whatever Brandt decides,
the SPD is bound to miss the
conciliating influence of Ollen-
hauer, who was able to hold
together the often highly
antagonistic factions of the
party. Brandt, with his ideas
of greater flexibility in
foreign policy, may be expected
to clash more frequently with
Wehner, who--despite his Com-
munist past--has come to rep-
resent the SPD's right wing.
(SECRET NO FOREIGN DISSEM)
27 Dec 63
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AREA NOTES
TOP SECRET DINAR (
Europe
NATO: The NATO ministe-
rial meeting in Paris, which
ended on 17 December, avoided
serious discussion of the more
contentious issues facing the
alliance. There was, for in-
stance, only passing reference
to the matter of nuclear shar-
ing. While NATO's military
posture was generally recognized )
as still inadequate, the Force
Planning exercise--which is
designed to help correct this
situation--was not discussed
at all. The dispute over basic
strategy, the chief stumbling
block to the exercise, was put
off until after De Gaulle's
press conference. sometime in
January.
All but the French agreed
that the alliance should explore
possibilities of negotiating
with the Soviets on outstanding
East-West issues. The Germans,
as usual, indicated some reser
vations because of their sensi-
tivity regarding Berlin and Ger-
man reunification. The question
of restricting Western credits
to the Soviet bloc was reserved
for future consideration. (SE-
CRET NO FOREIGN DISSEM)
Iceland's near general
strike was settled on 21 Decem-
ber when labor and management
agreed to a 25-percent wage in-
crease. The 11-day work stop-
page was led by Communist-dom-
inated unions seeking, as in
the past, to force the resigna-
tion of the Conservative - So-
cial Democratic government by
discrediting its economic poli-
cies. The settlement is regarded
as a political victory for Prime
Minister Benediktsson's govern-
ment, since the Communists were
unable to maintain a solid grip
on labor.
The settlement, however,
will intensify inflationary
pressures and will probably
force Benediktsson to take ex-
traordinary measures to maintain
economic stability. For polit-
ical reasons he will try to avoid
another currency devaluation,
but it is doubtful that the
government can maintain its
economic stabilization program
without resorting to this meas-
(CONFIDENTIAL)
ure..
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DOMESTIC POLITICS IN CUBA
Fidel Castro is continuing his
effort to reduce the influence of
the veteran Communists who were lead-
ers of the Moscow-oriented, pre-rev-
olutionary Communist party of Cuba.
Castro's campaign against them,
launched in a bitter attack in March
1962, subsequently seemed to lose
steam. Recent reports from knowl-
edgeable clandestine sources, how-
ever, indicate that the old liners
are again on the defensive and are
likely to suffer further in govern-
ment shake-ups which may be in the
offing. Castro nevertheless con-
tinues to move slowly in order to
avoid undue disruption within his
regime.
The only major veteran Commu-
nist figure to remain in Castro's
good graces is Carlos Rafael Rod-
riguez, the head of the National
Agrarian Reform Institute. Rod-
riguez' position has actually been
strengthened in recent weeks with
the raising of his job to cabinet
level. He has evidently convinced
Castro of his personal loyalty and
of his ability as an administrator.
It is also possible that Rodriguez
performs a useful and trusted liai-
son role between Castro and Soviet
leaders. He returned to Havana on
22 December after a two-week trip
to the USSR and several Soviet satel-
lites where, according to press ac-
counts, he was in contact with high-
ranking Communist Party officials.
The old-line Cuban Communists
remain strong, according to a re-
cent clandestine report, in the in-
termediate and lower echelons of
the military and party hierarchies.
Wherever possible, they continue
their "sectarian" efforts to secure
positions for their comrades at the
expense of Fidelistas. A clandes-
tine source reported hearing "ru-
mors" in high regime circles late
last month that veteran Communists
have banded together in clandestine
cells to work against Castro.
Che Guevara continues to be the
Cuban leader most openly critical of
the Soviet Union and the most insist-
ent on the "necessity" of accelerat-
ing the revolution in Latin America.
Fidel Castro is said to agree with
Guevara's position, but awareness of
Cuba's own self-interest still com-
pels him to be more cautious in pur-
suing policies that could be inter-
preted as anti-Soviet. It neverthe-
less remains a key regime policy to
encourage Communist revolution in
Latin America.
A clandestine source who is a
high-level Cuban diplomat asserts
that Cuban leaders privately recog-
nize that popular discontent with
the regime is widespread. He claims,
however, that they are confident
their unpopularity has reached its
nadir, and that they are beginning
to make up lost ground. They ex-
pect, for instance, that economic
difficulties--a major source of
discontent--will be largely over-
come within three years. The strat-
egy of the government, this source re-
ports, is to hold on until the econ-
omy improves and until Cuban subver-
sive efforts elsewhere in Latin
America result in the establishment
of one or more Communist allies in
the hemisphere. Then, the regime
feels, it will be secure. (SECRET NO
FOREIGN DISSEM/BACKGROUND USE ONLY)
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DOMINICAN REGIME FACES NEW POLITICAL CHALLENGES
The killing of 15 guerrillas
by Dominican Army troops on 21
December apparently removes the
last pocket of insurgents op-
posing the government. However,
the incident could provoke dan-
gerous political repercussions.
Emilio De Los Santos, head
of the governing military-in-
"stalled triumvirate, resigned in
protest over what he regarded as
the brutal and unnecessary kill-
ing of the insurgents, includ-
ing the president of the pro-
Castro 14th of June Political
Group. The army commander of
the area in which the incident
took place insists the deaths
were the unavoidable result of
a fire fight. If stories of
armed forces "brutality" be-
come widespread, however, they
could provoke dangerous hostility
toward the regime from rank-and-
file Dominicans, who recall the
repressive measures of former
dictator Trujillo.
The resignation of De Los
Santos precipitated frantic ma-
neuvering within the government
Western Hemisphere
among civilian and military
elements. Only the prompt ap-
pointment of Foreign Minister
Donald Reid to the vacant post
in the triumvirate appears to
have helped avert a serious
political crisis for the moment.
The triumvirate has asked
the cabinet--which was chosen
from and is responsible to six
minority political parties--to
resign to permit the appoint-
ment of a more independent group.
This move has prompted strong
protests from four of the splinter
parties backing the regime, who
stand to lose patronage; the
outcome is unclear.
However, the National
Civic Union, the only sizable
party in the government, backs
the cabinet reorganization.
More important, the key leaders
of the armed forces are provid-
ing the triumvirate with their
support, which could prove cru-
cial in a political showdown.
(SECRET_NO FOREIGN DISSEM)
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BRAZIL
Further changes in the Bra-
zilian cabinet are expected fol-
lowing the resignation last week
of Finance Minister Carvalho
Pinto. A moderate leftist, Ney
Galvao, was appointed Pinto's
successor, but there remains a
possibility that Leonel Brizola --
who had been actively pushed for
the post by the extreme left--
may eventually receive some min-
istry. There is widespread be-
lief in the army that War Min-
ister Jair Ribeiro will also be
replaced in the near future.
one responsible Brazilian com-
mentator has remarked, with Gou-
lart "every minister is an in-
terim one. "
As
Ney Galvao's appointment
actually reduces the previously
slight prospect that Brazil's
critical financial problems would
be handled effectively. Galvao's
qualifications in the economic
field are weak at best and his rec-
ord as head of the Bank of Brazil
does not command confidence with-
in the business community. Be-
fore taking his new post, he
served as minister without port-
folio in charge of coordinating
foreign trade policies, a job
he performed without any par-
ticular distinction.
Although his views are
(perhaps somewhat to the right of
Goulart's, Galvao can be expected
to toe the adminstration line
faithfully. Moreover, Galvao's
appointment may be a temporary
expedient designed to allay
fears that Brizola would succeed
Pinto. Galvao is a personal.
friend of Brizola and there is
speculation that Brizola will,
in fact, eventually move into
the Finance Ministry.
The new finance minister
inherits almost insurmountable
economic and financial problems.
Chief among these are a rampant
inflation that may see the cost
of living increase 80 percent
this year, and a staggering
foreign debt involving approxi-
mately $1 billion in payments
due over the next two years.
The severity of the eco-
nomic situation and Goulart's
apparent intention to assume
greater personal direction over
financial policies increase
the possibility of radical meas-
ures that might be detrimental
to foreign creditors and in-
vestors. Goulart reportedly is
considering nationalization of
all public utilities and can-
cellation of mining concessions.
Measures such as these could
lead to further deterioration
of Brazil's economic position.
(SECRET)
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AREA NOTE
Bolivia: The political
competition between Bolivian
Vice President Juan Lechin and
President Victor Paz Estenssoro
is bound to intensify sharply
as each maneuvers to line up
șupport for the presidential
nomination at next month's con-
vention of the Nationalist
Revolutionary Movement (MNR).
Lechin probably still hopes to
pull an upset by dislodging Paz
or at least to demonstrate suf-
ficient strength to assure him-
self of retaining his vice-
presidential post. Paz seems
certain, however, to be able to
control the party's convention,
assure his renomination, and
designate his own running mate.
If the forthcoming conven-
tion repudiates Lechin, he may
well withdraw from the MNR and
establish a "popular front" po-
litical party. He probably
could count on the support of
political groups ranging from
leftist extremists to disgruntled
factions within right-wing parties.
It would seem unlikely, though,
that these disparate groups could
coalesce into an organization
powerful enough to defeat Paz'
well-organized machine in the
elections set for June. (SECRET)
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