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1704-10302-10030|1 0 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

IA, GRIPIN

THIS DOCUMENT CONTAINS CODE WORD MATERIAL

NO FOREIGN DISSEM

52728703

TOP SECRET

GROUP 1 Excluced from automaric

downgrading and seclassification

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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

to the safety or interest of the United States or for the benefit of any

foreign government to the detriment of the United States.

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

of Central Intelligence.

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

he document must be handled within the framework of

the limitation so imposed.

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-.

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-2ls, 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-

Tarately as Special Report SC No. 00624/63B)

AS IA-AFRICA

ENTHUSIASM FOR SOUTH VIETNAM REGIME FLAGGING

/ 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.

Page

1

2

3

4

LAOS

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.

6

27 Dec 63

CURRENT INTELLIGENCE WEEKLY REVIEW

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ASIA-AFRICA (continued)

FRENCH CABINET MINISTER TO VISIT CAMBODIA

Armed Forces Minister Messmer's visit in early Jan-

úary 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-

¡tary 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

Page

7

8

9

10

EUROPE

THE

COMMON MARKET CRISIS

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

12

The

British Government bas advised Shipping circles

not to comply with US demands for information relat!

ing to rate discrimination against US exports.

WEST GERMAN POLITICAL DEVELOPMENTS

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.

acting chairman of the spo

27 Dec 63

CURRENT INTELLIGENCE WEEKLY REVIEW

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;. TOP SECRET DINAR

EUROPE (continued)

page

14

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

provoke dangerous political repercussions. The

head of the

e provisional government has already re-

signed.

BRAZIL

Appointment

of Ney Galvao as finance minister

reduces the

already slight prospect that Brazil'e

critical financial problems would be handled ef-

fectively.

Other cabinet

changes may follow.

AREA NOTE

Bolivia

15

16

17

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

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.

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-

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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The Communist World

CHINESE COMMUNIST LEADERS' AFRICAN TOUR

With two weeks of their pro=

jected two-month tour of Africa

completed, Chou En-lad and For-

eign Minister Chen Yi can claim

i an 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.

Algeria, Ben Bella was on hand

to greet his guests, but the top-

level delegation he

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

I 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

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.

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 Paiping outmaneu-

vered Moscow on the question of

enlarging the representation in

principal UN organs to accommo-

date the African bloc.

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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The Communist World

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.

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-

Chou can be expected to

nese envoy in Cairo reportedly

capitalize on this during next

told Nasir of concern for Chou's

week's visit to Morocco and in

subsequent stops in Guinea,

plans during the Chinese leader's

Ghana, and Mali.

No details of

visit to the UAR not be made

Chou's itinerary beyond Rabat

public. (SECRET NO FOREIGN DIS-

have been made public by Pelping. 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.

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--1s-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

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TOP SECRET DINAR

CHINA

KIMCHAE:

UIJU

NORTH

KOREA

DIANACHAM

Vi FUXCHANGNI

TOPYONGNI

TSUNAN

PYONGYANG

HWANGIU"

• SINGYE

SINCHANGNI

CHANG

PYONGGANG

KOKCHONGNI

SOUTH KOREN

A SAM site

* Bomber elements

* Fighter defense elements

* Combined command headquarters

• Radar station

A East coast filter center

Early warning radar coverage

TOP SECRET DINAR

27 DECEMBER 1069

MILES

34447

TSUIMIN

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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-2ls have been detected

frequently in flight activity

involving ground controlled in-

tercept exercises.

Beginning in October, MIG-

2ls 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)

27 Dec 63

CURRENT INTELLIGENCE WEEKLY REVIEW

TOP SECRET DINAR

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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.

government is beginning to

some steps to overcome the leth-

argy that bas affected its coun-

terinsurgency effort since the

A long-range pacification

program bas been launched in one

of the most troublesome provinces

in the northern part of the coun

try, and broad

command changes

bave been introduced in two prov-

south of Saigon where

security has been deteriorating.

In the political field,

the governmenthas-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-

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

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" Minb, 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

TOP SECRET DINAR

Page 5

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LAOS

BURMA

Ban Houei Sai

Mekong

Sayabour

CHINA

Nam

"hong Saly

Dien Bien Phu

Muong Sai

Sam Neua

Luang Prabang

P'oing

Ban Ban

• Xieng

Vang Vieng

Pak Sane

VIENTIANE

CHINA

NO

VIETNAM

HANOI

GULF OF TONKIN

Kam

Keut

Sao

Chommarath

Thakhek

-Ichepone

TH

THAILAND

Saravane

Pakse

Road

-- Trock or trail

- Railroad

STATUTE MILES

100

Attopeu

CAMBODIA

34435

CODE WORD MATERIAL ON REVERSE OF PAGE

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Asia-Africa

LAOS

Communist forces

have

i 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

kéy 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

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

TOP SECRET DINAR

Paga

6

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Asia-Africa

FRENCH CABINET MINISTER TO VISIT CAMBODIA

— Armed Forces Minister-

Pierre Messmer's visit to Can-

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,

out De Gaulle apparently has

no intention of taking on any

large new commitments.

French-grant aid to Can-

sodia since 1956 has amounte

co only Slo million.

Current

assistance is threefold:

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-

advisers.

Paris has indicated it has

no intention of equaling the

US aid program. Any Increase

I 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-

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

Jk, 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

TOP SECRET DINAR

Page 7

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ISRAEL'S

JORDAN RIVER

DIVERSION PROJECT

Canal or conduit,

proposed or under constructio

AT Demilitarized Zone

LEBANON

train"

SYRIA

ISRAEL

NEGEY

DESERT

Tunnel

Pumping Station

(Under Construction)

Tunnel

Reservoirs

Tunnel

ISRAEL

JORDAN

Mediterranean

Sea

Tel Aviv, Joffo

JORDAN

DE.D

SEX

GAZA,

STRIP,

34446

NEGE

ESERI

CODE WORD MATERIAL ON REVERSE OF PAGE

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TOP SECRET DINAR

Asia-Africa

ARABS PLAN NO OVERT ACTION AGAINST ISRAELI PROJECT

The Arab States eyidently

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 danuary,

probably will approve this rec-

ommendation, but its implementa-

tion is another matter.

Едур-

tian, Jordanian, and Lebanese

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

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 ONLX)

*

*

27 Dec

63

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Asia-Africa

CYPRUS DISPUTE FLARES AGAIN

Fighting between the Greek

and Turkish Cypriot communities,

which began on 21 December and

was continuing on 26 December

despite errorts to obtain & 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-

c group manner.

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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Asia-Africa

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-

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)

27 Dec

63

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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 substantiol 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 tarifts 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 disparities

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 ottaches special importance would (I) require that there be substantial imports of the item

corcerned 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 quotos.

The formula approved by the EEC on 23 December would substitute for the 30/10 criterion

d' 2/1 formula. A disparity would be identified as one in which the high tariff is twice as

high alive to one, apparently went the did hel dealifie io hes. This formula would

vould have to be a ten-point percentage spread between the two rates.

rovide 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 disodvantoge.

SECRET NO FOREIGN DISSEM

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Europe

THE COLMON 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-

for the community,

but from

the US view

not necessarily favor-

al tariff "disparities," the EEC

On the long-standing problem

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 EEl position

auber pho se 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

FEC'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

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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Europe

UK-US FRICTIONS OVER SHIPPING POLICY

British shipping and off1-

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

tion is commercially confiden-

tial, and that the US cannot

demand what the UK Government

cannot obtain.

Following a recent con-

gressional investigation into

alleged rate discrimination

against American exports, the

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.

British and other shipping

lines regard the differentials

as economically justified.

The

tonnage of US exports is much

greater than import tonnage,

ana shipping lines anxious

to

avoid half-loaded or in-ballast

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

MPS

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-

BEEN DISSENS

(CONFIDENTIAL NO FOR:

27 Dec 63

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Europe

WEST GERMAN POLITICAL DEVELOPHENTS

The opening of the Berlin

Wall during the holiday season

and the death of Social Deno-

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 sone Christian Democratic

Union (CDU) leaders and by the

CDU-oriented press in West Ger-

Brandt, however,

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

Fritz Erler, the

party's foreign and defense

expert, is slated to take

Brandt's place in the hierarchy

as second

deputy chairman.

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 himselt, 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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Europe

AREA NOTES

NATO :

The NATO ministe

rial meeting in Paris, which

ended on IT 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-

1ng.

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.

CRET NO FOREIGN DISSEM)

Iceland's (near general

strike was settled on 21 Decen-

ber when labor and management

agreed to a 25-percent wage in-

crease.

The ll-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 jor 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

förce 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-

ure.. (CONFIDENTIAL)

27 Dec

63

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Western Hemisphere

DOLESTIC 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.

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-

anking Communist Party officials.

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 con-

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 untis 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)

27 Dec 63

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Western Hemisphere

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 "brutality" ben

armed forces

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

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 promnted 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)

*

*

27 Dec

63

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Western Hemisphere

BRAZIL

Further-changes in the Bra-

zilian cabinet are expected fol-

lowing the resignation last week

oi Finance Minister Carvalho

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. As

one responsible Brazilian com-

mentator has remarked, with Gou-

lart "every minister is an in-

terim one."

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

ades 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.

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)

Although his views are

perhaps Somewhat to--the right of

27 Dec 63

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Western Hemisphere

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

support 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)

*

*

27 Dec

63

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doiaicinn ae

r.

• TOP SECRET

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---