ENGLISH NATO CONFIDENTIAL 15Th March, 1957 . . WORKING PAPER ^^ • Acynj-Wpy^R

ORIGINAL: ENGLISH NATO CONFIDENTIAL 15th March, 1957 . . WORKING PAPER ^^ • Acynj-wpy^r

COMMITTEE OF POLITICAL ADVISERS

TRENDS AND IMPLICATIONS OF SOVIET POLICY

Draft prepared "by the Expert Working Group

PART ONE - SUMMARY

General Since December there has "been no indication of a change in "basic Soviet intentions. These are: to strengthen the Soviet Union and reconstruct the solidarity of the Communist Bloc; to weaken the non-Communist world - particularly NATO; to cause the withdrawal of allied troops, from Europe and the abandonment of bases around the Soviet periphery; and to encourage neutralism and extend Soviet influence and Communism throughout the world. In pursuing these policies the Soviet leaders recognise the dangers of war in the thermonuclear age and, though maintaining and probably increasing their programme of re-equipment with complex modern weapons, are anxious to avoid a world conflict.

2. Soviet leadership remains stable and there is no sign of a serious split within the Presidium. Khrushchev continues to act as its principal spokesman although his prestige may have been 6omewhnt tarnished. Internal

3. At home, relaxation in some of the harsher and more arbitrary aspects of the régime has led in intellectual circles to more open expression of discontent. This does not amount to a threat to the system. In response, the régime has mounted a vigilance campaign without applying major repressive measures. De-Stalinisation has not been abandoned although efforts to limit its scope hove been made.

k* For the economy, 1957 may be a year of readjustment: the planned increase in industrial output for 1957» though considerable

DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED (7-1/5) > is the smallest since 19U6, and there are plans for reorganizing the control of the economy. Somewhat greater attention is being paid to consumer interests. Relations among Communist countries

5. In thoir efforts to reconstruct the solidarity of the bloc, the most serious problem facing the Soviet leaders is the Gomulka experiment in Poland and its possible repercussions on the other satellite countries. NATO CONFIDENTIAL *c/l Ig-WP^j

6. Sino-Soviet ties are closer than ever, and China has recently been playing a larger rôle in intra-bloc affairs. 7. Although the Soviet leaders do not seem to want a com- plote break with Yugoslavia, relations have deteriorated sharply since last June as a result of the Soviet efforts to prevent the spread of Titoist influence within the bloc. Foreign policy

8. Although Soviet external policies have faced a period of unexpected tension, the Soviet Union is now seeking to reassert the policy of "peaceful co-existence". The USSR has embarked on a diplomatic offensive in order to regain the initiative and to restore her prestige, so badly tarnished in Hungary. Soviet proposals on disarmament and the Middle East are designed to show the USSR in a peaceful constructive light, while at the same time, through attacks on the Western powers and particularly the United States and the "Eisenhower doctrine", the USSR tries to shift the onus for world tensions to the West. 9. Europe remains the key factor in Soviet foreign policy. The Soviet attitude there is negative and gives no indication that they are considering any withdrawal from their positions in Eastern Europe or any weakening of the military control, which they at present exercise through the Warsaw Pact. They still block the reunification of Germany in freedom, and show no readiness to take into account the legitimate security interests of the West.

10. The Soviet leaders have taken advantage of the Suez crisis to encourage Middle Eastern States in the pursuit of policies which they hope will in the long run lead to the denial of the area s resources to Western nations. Particular attention has been paid to the oil-transit states of Egypt and Syria. Now that the immediate danger of a wider conflagration has passed, they are using their enhanced prestige and influence to encourage Egypt to be intransigent, to prevent a permanent settlement in the Middle Ea3t and especially to counteract any increase in United States influence in this area. 11. Soviet policies in Asia and Africa, although hampered by events in Hungary, have been maintained. Assessment

12. In sum, the Soviet leaders, while faced with serious problems of maintaining bloc solidarity and of keeping internal dissidence under control, still possess a strong, expanding economic base in the USSR and increasingly powerful aimed forces. They have succeeded in surmounting the immediate danger of defections from DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED the bloc. They are now trying to regain the initiative and pur- sue their long-term aims through the policy of peaceful co-existence, but their attitude towards the West remains fundamentally hostile and is accompanied by extreme touchiness in reacting to Western initiatives (e.g. the Eisenhower doctrine). This, with the growing campaign of vigilance within the bloc, suggests that the Soviet leaders are rather less confident than formerly and are now to some extent on the defensive. 13. There is unlikely to "be any radical modification in the present fundamentally hostile Soviet attitude unless there are internal changes within the bloc. Such changes may be assisted by the continuing pressure exerted by the very existence of a strong arid united Western Alliance. There are also certain other fields of action where the policies of Western nations can have an effect. In particular, the Western nations, without relaxing their opposition to Communism, should make the most of any possibilities for assisting evolutionary trends in the bloc.

PART TWO

LEADERSHIP

1U. The Hungarian crisis gave rise to many rumours about differences within the Soviet leadership over Eastern European problems. No important changes have, however, taken place since December which would appear to affect adversely the relative stabilit; and unity of the political leadership. The meeting of the Supreme Soviet and the Plenum of the Central Committee in February would havo been a convenient opportunity for making such charges, had any been intended. Khrushchev continues to act as principal spokesman for the Party Presidium and although his prestige may have "been slightly tarnished, he has suffered no discernable diminution in authority. Molotov's appointment in late November 1956 as Minister of State Control, and his assumption of the position of overseer of cultural matters probably reflected a desire to put an experienced Bolshevik of conservative views in these posts and did not in itself imply an increase in his overall influence. The reorganization of economic control following the Plenum of the Central Committee, ?0th-2hth December, did not involve any of the older party leaders personally, but concerned primarily high-ranking specialists in the economic field. There are a few signs that Malenkov's position is gradually improving although it may be noted that, whether by design or otherwise, the shift of six Deputy Premiers to the reorganized State Economic Commission leaves Malenkov as the only Deputy Premier who in not also a First Deputy.

15- Shepilov's replacement by Gromyko released him for other duties with the party. It does not necessarily imply a shift in the relative positions of Khrushchev, Molotov and other leaders. Marshal Zhukov received extensive publicity in connection, inter alia, with his 60th birthday on Ist December and his trip to India in February 1957; but it is doubtful if this attention, which reflected Zhukov1 s enhanced personal stature, indicated any change in the role of the armed forces in policy formulation. As previously estimated, the views of the Soviet military, while given increasing weight in Soviet political councils (certainly more than DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED in Stalin's time), do not appear to be determining. In sum, therefore, there seems to be little real change in the make-up of the top Soviet leadership since December, although the interplay cf forces within the collective leadership m .ay be somewhat more balanced. SOVIET INTERNZtL POLICY

16. The foundation of the Soviet leaders' policy is their desire to expand Soviet economic, industrial and military power until it equals and finally surpasses that of the United States and hcr allies, to strengthen the Soviet Union as a base for the international Communist movement, and to further that movement. These policies have remained unchanged although several new factors have recently appeared on tho scene.

17. A new element of major potential importance emerged within tho,Soviet Union as .a result of the process of de-Stalinisation and of û period of rule in which the more "brutal methods of intimidation ï.ave been eschewed. The Soviet leaders have had to take account of long-standing dissatisfaction with Soviet living standards, and with a new mood of dissent amongst students, intellectuals and some of the minority nationalities. This mood has not developed into a concerted movement capable of formulating a series of demands: i; should rather be seen as evidence that a number of persons, notably the young and the thoughtful, hold heteredox opinions which tend to reject the practices current in the party and State system. Ai the same time the Soviet leaders have also to bear in mind the aspirations of the managerial and technological class. This cannot be described as a threat to the régime, although the Soviet authorities can hardly ignore the signs. In response, selective disciplinary measures have been adopted which should lead to a firmer control over the cultural sector, and ensure that the activities of the intelligentsia correspond more closely to the party conception of its proper function.

18. De-Stallnisation. Ever since November 1956 there has been an effort to define more clearly the limits of de-Stalinisation. Khrishchev's reference on New Year's Eve to the current leaders as "Stalinists", and his statement on 19th January that every Conimunist should know how to fight as Stalin did in the interests of sjcialism, were sympatomatic of this effort. The new twist given to the de-Stalinisation campaign was probably prompted not only by Tito's division of the Soviet rulers into "Stalinists" and "anti-Stalinists" but also by a more serious concern and irritation over dissidence among students and intellectuals at home, and over criticism from Communists abroad. The publication of Khrushchev's remarks and the prominence given te the Chinese statement of 28th December, which emphasised Stalin's good points, marked a new tack in de-Stalinisation: increased stress on Stalin's virtues, while recognising his errors. (It may be recalled that Stalin as de- picted at the 20th Party Congress was not a completely bad figure: this basic line has not been altered). The overall trend toward undoing the worst excesses of Stalin's er continues.

19. Political and Ideological Dissidence. References in the Soviet press to ideological deviation and to the need for vigilance have markedly increased in the past few months. These warnings

DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED issued by the régime indicate that criticism by Soviet citizens has ranged from demands for less party control over the arts to complaints about Soviet policy in the satellites and questioning of basic aspects of the Soviet system. While official reaction has been firm, it has been confined to such measures as dismissals, expulsions from school, and warnings. No arrests have been reported. For the present, the regime appears reluctant to undertake any all-out repression and thereby reverse the post- Stalin policies which have led to a somewhat eased atmosphere. NATO CONFIDENTIAL Ac/iig^/??

20. "Socialist Legality". The Soviet régime has continued to take action aimed at bolstering claims to "socialist legality" and progress toward "normalisation" following Stalin's death. With regard to régularisation of the Soviet legal system, the Supreme Soviet in February (1) restored to the union republics the right to adopt their own legal codes, but in conformity with principles laid down in Moscow; (2) streamlined the USSR Supreme Court; and (3) abolished or limited various special courts. The Supreme Soviet also approved decrees permitting five of the seven national minorities deported during World war II to return home and to have their territorial units restored. The lack of action on the two remaining minorities - the Volga Germans and the Crimean Tartars - may indicate reservations about the practicality of such a move or a belief that the deportation in their case was more justified.

21. Economic. Some adjustments in Soviet economic policies have taken place over the last few months. Last December the Central Committee announced substantial changes in the planning organisms and a downward revision of some of the output and invest-1 ment targets in the Five Year Plan. The 1957 plan, which was announced two months later, laid down unexpectedly moderate objectives. Industrial output this year is planned to rise by 7*1%> the smallest increase scheduled or realised in any year since 1946, and well below the annual average which must be maintained to achieve the Sixth Five Year Plan. The low targets for such basic commodities as coal, steel and cement suggest that the objectives set for them in the Five Year Plan will not be achieved. There are also indications that the over-ambitious agricultural plan has been revised downwards.

22. This reduction in the rate of economic growth seems to reflect in part the growing strains which had become apparent during the course of 1956. The 1956 plan fulfilment report indicated that the targets for certain key materials had not been met. Since output of industries using these materials rose rapidly, a reduction in stocks resulted. Difficulties seem to have become more acute during the course of 1956, and industrial expansion slackened between the first and the second halves of the year. It is also stated in the report that too much capital investment was undertaken simultaneously, with the result that resources were not used efficiently. 23. It may be that to some extent the cautious 1957 objectivee take account of the temporary dislocation which may be caused by the announced changes in economic administration. These changes would transfer part of the administrative responsibilities from the economic ministries in Moscow to local boards. At the same time, the state economic commission for current planning has been re- DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED organized into what appears to be an economic cabinet, entrusted with great powers of decision. In effect, the bodies responsible for administrative decisions would be brought in closer contact with local problems, with control at the policy-making level strengthened to safeguard the government's ability to direct the economy. it would seem that this reorganization is too sweeping in nature to be completed in a short time;, it remains to be seen whether the changes which the government has in mind will in fact be fully carried out.

2lu The recent events in the satellites have had a marginal impact on the Russian economy. They have reduced somewhat supplies of certain scarce raw materials. The Soviet Union has had to accept NATO CONFIDENTIAL ACqiJ-VJP/H

a reduction in coal imports from Poland, and has agrocd to deliver more coal and coke to Hungary and East Germany. It has also promised to sond more iron ore to Czechoslovakia and East Germany. There are indications in the 1957 plan that more cotton and wool will "be exported this year to Eastern Europe. Russia has also agreed to concessions, such as the cancellation of certain debts rind other obligations and the granting of credits. It seems that those concessions may cost the USSR around one billion dollars in 1957. 'iVhilo this is a sizeable sum, it should not involve the USSR in excessive difficulties. A large part of the loans take the form of exports of grain, available from last year's good harvest. Some of the loans consist of free exchange, and could be met by drawing on the large gold reserves. 25. In the 1957 plan great emphasis appears to be given to developing the production of energy and metals, which had fallen behind the targets for last year. Stocks of steel, coal and other basic materials are to be built up again, and investment ex- penditure will be concentrated on existing projects rather than on new ones. It seems that 1957 will bc a year of oconomic regroup- ing, and that, barring political. troubles, resumption of higher growth rates may be obtained in the remaining three years of the Sifcth Five Year Plvan. 26. It is typical of today's conditions in the USSR that the adjustment to unexpected difficulties in fulfilling the plan has been made without the sacrifice of consumer interests, which would have characterised Stalin's approach to the problem. The planned increase in retail sales is slightly greater than the increase achieved last year. The increases in pensions and in minimum wages and the reductions in direct taxes which were announced last year, will raise incomes significantly above the level of the* preceding year. The budget provides for a reduction in the un- < popular forced loan. There is no indication of a reduction in the: housing programme, though it may be doubted whether enough con- struction materials will be available to achieve, the 28% increase whi«ch is planned for the coming year. The development of agriculture continues to roceive a great deal of emphasis, and investment in agriculture will again rise sharply. Lastly, there are in- structions that investment in light industries will take up a larger fraction of- total investment than last year. 27. Military. Despite the publicity given in the Soviet press to an announced cut of 5.7$ in the 1957 budget appropria- tion for defence, it seems that Soviet procurement of military equipment will increase in 1957. The allocation of 96.7 billion . roubles in that year is 5.8 billion roubles less than appropriated in 1956, but only 1.1 billion roubles less than actually spent. In evaluating these figures, consideration must be given to the de- DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED mobilisation, promised by May 1957, of 1.2 million men from the Soviet armed forces. The Soviet government stated in January 1957 that this demobilisation had been completed ahead of schedule, and it has also boon claimed that 375 ships had been put in reserve. If these réductions have really been carried out, the USSR should be able to save a far bigger amount than that indicated by the actual figure of the 1957 budget. The small budgetary reduction for 1957 indicates that the USSR either has not fully demobilised or is increasing the appropriations for weapons and munitions. Moreover, the announced defence allocation gives only part of the picture of Soviet military expenditures. Appropriations for research and development and for higher military institutions are carried NATO COKFIDENTIiVL Atyii9-wp/»

elsewhere in the Soviet budget. Unspecified "budgetary allocations ••'lso hide military spending and this year they showed an appreciable incro .so over last year. The probable rise in Soviet military OXVHjnditures indicated by these Circumstances is in accordance with the continued high priority being given by the USSR to the development of modern weapons - long-range aircraft, nuclear arms, guided missiles - which are extremely expensive and require skilled per- sonnel to operate them.

26. The USSP continues to develop an ambitious nuclear armaments and power programme. Several further test explosions took place during the period under review, and' Zhukov boasted of the capabilities of Soviet armaments during his tour of India.

RELATIONS AlviONG COMMUNIST COUNTRIES 29. Since the autumn of 1956 the Soviet leaders have been obliged to devote much time and energy to their relationships with the leaders of foreign Communist parties. The position in Eastern Europe, including Yugoslavia, is discussed in a separate paper. Perhaps the most important developments since December have been the assumption of a more prominent rôle by China in intra-bloc relatione, and the Soviet leaders' need of a Chinese rescue operat ion .. 30. Although some indications wero given earlier, the fullest and meet authoritative exposition of Chinese views was contained in a long article which appeared in the "People's Daily" on December 29th. In this document the Chinese dispassionately apportioned bio among the various Communist parties, and spoke critically of "great- power chauvinism". But thoy concluded that unity of the bloc must come first: the Soviet intervention in Hungary was fully justified under the circumstances. Chou's subsequent trip to Moscow, Warsaw and Bu fi. a pc et appeared to bo an even more direct effort to enhance bloc unity. Tho Soviet leaders' undoubtedly felt that Chou was well fitted for this rßle, since there was a general impression that Poiping sympathised with satellite aspirations for greater independence. Tho most important effoct of Chou's trip to Europe was its impact on the Polish situation and elections. In addition, it supplemented such other aspects of Moscow's campaign to restore conformity in the Communist world as (I) to stabilise the Hungarian situation and to promote Communist acceptance of the Moscow explanation of the uprising; (2) to minimise Tito's influence cxmuni• the satellites; and (3) to play up the theme of an extorn.al threat .to Comr'.unism ,,hich calls for greater vigilance. 31. It may well bo that Peiplng is syrrqpathotic to more flexible relations within the bloc and would not wish to see a

DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED return to Stalinist policies in Moscow's dealing with other Communist states. The not impact, however, of Communist China's moves in the past few months has boon to give timely endorsement to l'oscrw's pjolicy and to proclaim, oven at the risk of a loss -of Chinese prestige in Asia, Chinese recognition of the correctness of Soviet action in Hungnry. w 32. Thoro has boon no discernible change irt the long-term factors governing the Sino-Soviet relationship. Strategic needs on the Soviet side combine with similar needs ^n China's side, with ideological tics, and with China's economic dependence, to bring the two countries together. There is therefore no prospect at present of a split in the alliance. SOVIET FOREIGN POLICY

33. General. In recent menthe Soviet foreign policy has been subjected to modification and improvisation under the pressure of violent and largely unexpected events. In her relations with countries in the Communist bloc, the USSR has been chiefly ooncerned with the re-establishment of international Communist solidarity. In the Western and uncommitted world, the pursuit of a policy of "peaceful co-existence", as elaborated at the' 20th Party Congress, was disrupted by events in the Middle East and Hungary. Newly won Soviet friendship with some of the Arab States confronted the S viet leaders with unexpected tension at the time of the Suez crisis, when they came near having to choose between failure to c u.e to the aid of Egypt (and thus disappointment with the Soviet Union in the Arab world), and the risk of a wider conflict. In addition, Russian brutality in Hungary caused some loss of Soviet prestige in the new states of Asia and Africa.

3k. The Soviet leaders have now placed renewed stress on their policy of co-existence: their remedy for current difficulties is that the West sho uld overlook what has happened since last, Oct' ber while the Soviet Union consolidates its gains outcide the bloc and repairs the damage within it.

35- Two further general conclusions can be drawn from Soviet p Iicy in this eventful period. In the first place,, the nuclear deterrent worked: the risk of a wider conflict in which nuclear weapons would be used discouraged the Soviet leaders from embarking on the undue risks which would have been involved by supporting their Egyptian alliea to the hilt. Secondly, it is clear that the Soviet loaders are prepared to ignore world opinion and United Nations resolutions condemning the use of Soviet force within the bloc, to prevent a defection from it.

36. The main goals of current Soviet external policies are:

(a) to reconstruct the solidarity of the Soviet bloc;

(b) to we;akcn Western defences, disrupt NATO and bring about withdrawal of all Western forces from foreign bases; (c) to undermine Western-orientated alliances in the Middle East and Asia, and to work with the forces of neutralism and nationalism in those areas, in Africa and elsewhere, in order to damage Wectern interests and extend Commiinist influence*

DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED In general, the Soviet aim is to consolidate their positions vis- Vvis the west without making concessions on m&ttërs .of substance.

37. Soviet diplomatic initiatives. Shepilov's replacement by Gromyko as Foreign Minister on 15th February is unlikely to have much effect on the broad objectives of Soviet foreign policy, although it may foreshadow a change àf tactics. His spcech of 12th February to the Supreme Soviet represented a statement of the party leadership's ideas, not his own, and the Soviet press and the declaration made by Khruohchov since then 'give ample evidence that the views enunciated in Shepilov's speech remain the basis of Soviet foreign policy. His replacement may have been caused by S-

differences of opinion over foreign policy» or over his conduct of it, especially in the Middle East; it may also have been felt that ho would be more useful in the Secretariat of the Central Committee. Gromyko is a highly qualified professional diplomat who is the first career man to head the Foreign Ministry. He is ufllikely to exert much independent influence on Soviet foreign policy. He is a sicilled negotiator, and his appointment may possibly reflect, inter alia, a Soviet intention to push for four-power talks at the ministerial level in the near future.

38. The USSR has recently launched an active diplomatic and propaganda effort to recover the momentum which Soviet policy lost as a result of the intervention in Hungary and to counter recent moves on the part of the West. Shepilov's speech of 12th February showed that the Soviet leaders still hope for the best of both world®; on the one hand, they wish to obtain the benefits of co-existence v/ith the West, and on the other hand, they want to profit from their pretensions to be the friend of the underdeveloped world. The following steps have been taken by Moscow to regain the initiative: the visit to India of Marshal Zhukov and the trip to Moscow of the Finnish premier; the announcement of a Bulganin- Khrushchev visit to Finland in the spring; the renewal of the invitation for a visit to Moscow by the United Kingdom Prime Minister a relatively conciliatory letter from Bulganin to Chancellor Adenauer; a Soviet statement on disarmament in November and a later proposal that the disarmament meetings in London in March should be held on the Foreign Minister level; signature of a Soviet-French trade agreement providing for a eteady increase in trade over the next three years; and Soviet notes to France, the United Kingdom and the United States proposing a four-power declaration on principles to govern Middle Eastern policy. Concurrently with these stepo, however, Moscow began a campaign to stigmatise United States policy as aggressive. This is designed to shift the onus for increased world tension from Soviet to American shoulders; to dis- credit recent American measures to combat Soviet influence in the Middle Fast and elsewhere; and also to emphasise to the bloc popu- lations the need for vigilance and the limits of co-existence. « 39« Co-existence and the non-inevitability of war were re- emphasised in Shepilov's speech of 12th February. His speech, however, contained this edifying definition of co-existence: "Peaceful co-existence does not mean a quiet life. As long as difficult social and political systems exist, contradictions between them are inevitable. Peaceful co-existence is a struggle - a political struggle, an economic struggle, an ideological struggle". UO. Western Europe. Soviet prestige has lost ground in Western Europe as a result of Soviet actions in Eastern Europe and

DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED the Middle East. It has been a difficult time for the Communist parties in the West, which have been subjected to continuing internal strains. In the period under review the atmosphere was scarcely propitious for Soviet efforts to persuade Western peoples of their pacific intentions, and their propaganda reverted to abuse more frequently than at any period since the death of Stalin. They have shown growing concern at their inability to frustrate efforts • (EURATOM, Common Market) to strengthen Western unity and economic potential.

41. The Soviet policy of building up the Eastern zone of Germany as an equal and rival to^ the Federal Republic has suffered a reverse. The East German economy has been subjected to strain -IO-

because of the present trading policy of Poland and the collapse of Hungary. Pankow has betrayed some signs of nervousness, e.g. in its attacks on "national Communism". There has been no indication of a change in the rigid approach of the Soviet Union to the German question: the Bulganin letter to Chancellor Adenauer did not contain any concessions in respect of reunification. The Soviet attitude to the German problem is unlikely to change so long as they are not completely sure of their control over the satellites, and particularly Poland: the 22 divisions stationed in the Soviet zone of Germany are essential for this control.

U2. Although no major Soviet initiative has been launched on any of the principal European questions, the policy of co-existence has been reacsertcd in Europe in other ways. Cultural contacts, which were broken off by the West in November after a year of rapid growth aro beginning to regain ground, and resumption on a Iait^e scale has been proposed by Mikhailov, the Soviet Minister of Culture. This will increase the need for co-ordination of policy within NATO in this field. It looks, therefore, as if East-West relations may be entering a more active phase.

I43. Middle East. Before the Suez crisis the USSR was relying on tactics of subversion and infiltration, including the supply of arms, to deprive the Western states of their traditional influence in the area. The criais presented the Russians with marked opportunities to pose as the-protector of Arab national interests. These opportunities were fully exploited. Limits were imposed on Soviet readiness to come to the aid of Egypt and Syria by the Russian desire to avoid a direct commitment in an area which was not of primary strategic importance to the Soviet Union. In the event, these limitations did not prevent the USSR from emerging from the crisis with greatly enhanced prestige throughout the area. Nevertheless, the existing political structure of the Middle East was not shaken as drastically as the Soviet leaders may at one time have hoped, and thoy must now face an increase in United States activity there, foreshadowed by the Eisenhower doctrine. If only for this reason, they cannot regard the outcome of the crisis with unalloyed satisfaction.

kU* * The reassertion of the Soviet doctrine of co-existence in Shepilov's speech of 12th February sought to make the most of % the opportunities now open to the USSR in the Middle East. Ptllôwin a series of propaganda moves directed against the Eisenhower doctrine, the USSR proposed a declaration by the four-powers on their Middle East policies. This proposal asks the West, in effect, to withdraw militarily from the Middle East in return for the termina- tion (which probably could not be checked reliably) of Soviet arms shipments to the region. It is unlikely that Moscow expected the DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED West to accept this proposal. However, by offering an alternative to the Eisenhower doctrine4 the USSR probably hoped to stem any tendencies in the area to accept the doctrine, to assert its right to a voice there, and more generally to help restore the image of the Soviet .Union as a peace-loving power.

45« Soviet efforts have been concentrated particularly on the oil-transit states of Egypt and Syria, who appear to expect re-equipment with Soviet arms and may hope to receive somo Soviet bloc aid. The Yemen is also receiving close attention from the bloc and has received arms. The Soviet Union is now supporting Egyptian claims regarding the Suez Canal and the conditions for its operation. 46. Asia. Soviet policies in Asia have "been maintained. They have Been hampered as a result of the Hungarian crisis, which to some extent affected Soviet prestige. However, events in the Middle East have tended to divert Asian attention from Soviet actions in Eastern Europe. Marshal Zhukov's goodwill mission to India and Burma was intended to emphasise the ties of friendship between the USSR and Asia, and to demonstrate to the Asian peoples that Soviet policy towards them is unchanged. The desire to increase Asian goodwill towards the Soviet Union is also likely to have been one of the motives behind the decision of the Supreme Soviet in February to allow one Buddhist and four Moslem national minorities to return to those areas in the Soviet Union from which they were expelled toward the end of the war. Progress made in the establishment of further economic links between Asia and the USSR seemed less striking than in the earlier part of 1956. There was, however, a steady execution of programmes initiated during that period. 47. The normalisation of relations with Japan is intended to pctve the way for a gradual loosening of Japan from the present orientation of her policies. 48. "Economic Penetration". The USSR continues to give attention to economic penetration. The Soviet leaders will probably wish to go more slowly than in the preceding two years in expanding assistance outside the bloc, in part because they face the need of economic concessions to cope with problems of bloc solidarity. Also, it will be difficult for Poland and Hungary particularly to play much of a rôle in bloc efforts to penetrate underdeveloped areas. It would be unwise, however, to expect that the economic difficulties of the bloc will be so serious as to preclude any new Soviet undertakings abroad. On the contrary, it is probable that the USSR will continue to use its totalitarian controls over the soviet economy, and to some extent over the satellite economies, to enable it to continue to employ Soviet economic aid and technical assistance as important elements of Soviet policy in the period of "competitive co-existence". The programmes begun over the past two years have developed a momentum of their own which should pro- duce a steadily expanding level of bloc trade with less developed countries and enlarged technical assistance activities. The USSR can aleo be expected to exploit situations offering prospects of political gain in exchange for economic assistance. DECLASSIFIED - PUBLIC DISCLOSURE / DÉCLASSIFIÉ - MISE EN LECTURE PUBLIQUE LECTURE EN - MISE / DÉCLASSIFIÉ DISCLOSURE - PUBLIC DECLASSIFIED