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Despite the Soviet Union's acceptance of the proposal by the UN neutrals to continue negotiations on the Berlin currency question, Soviet establishmentegime for east Berlin, by completing the political and administrative division of the city, has greatly increased the obstaclesettlement of both tbe Berlin dispute and the entire German question. The USSR has utilized the UN negotiations to gain time for consolidating the Soviet position in Berlin and eastern Germany. Moreover, by exerting greater pressure upon the western powers to withdraw from Berlin, the USSR has now relegated the currency question to relative insignificance in comparison to the far more explosive problem inherent in the establishment of two separate governments in Berlin.
"Rump" Government Establishmentommunist "rump" government tn Berlinoviet attempt to counterecemberIn the western sectors and to block UN interference in city affairs. This latest move has placed the Kremlin in the position of being able toaper" concessions to the west on four-power currency control for Berlin with the knowledge that such concessions can onlyentralized administration in the city. Thus, even If agreement on currency Is reached, theseSoviet moves will make it necessary lor any futureon the Berlin dispute to deal with the problem of cityonference, the USSR mightonsolidation of tbe two separate city governments. Any resulting "compromise" governmentrovide the USSR with Communist representation In key positions, far out of proportion to that which could reasonably be expected In an open generalncrease Communist ability to impair the functioning of the Berlin government; and (S) strengthen the Soviet potential for undermining theof the western powers In Berlin.
Sifter
Economic Consequences The immediate effect in Berlin
of tbe creationeparate Communist government will be to intensify the political and economic impasse by making normal city government virtuallylio wingecember elections in the western sectors of the city, the USSR may complete the economic split of the city by carrying out Its already publicized threats to take measures whichequire workers living ln the Soviet sector and working ln the western sectors or vice versa to change either their place of residence or their place oforce some of the industrial and commercial enterprises In the west sectors to stopwhile municipal gas lines, water mains, and sewers, now functioningity-wide unit, were being reconstructed to fit sector boundaries; (S) seriously Impair maintenance and operation of surfaceut off electricity forahn intercity trains in westerntop subways and elevated trains at zonal boundaries; anddisrupt telephone, telegraph, and postal services while they were being re-established on on east-west zonal basis.
Tightening Blockade In addition to possible Soviet actions which would completely cut off still functioning municipal services from the western sectors of Berlin, recent re-groupings of tbe Brandenburg land police suggest-that the USSR mayordon around the western sectors of the city.onsiderable unofficial barter of goodsively traffic in illicit items between the western sectors of Berlin and Soviet-occupied territory have materially relieved the needs of the western sector population. Although the Soviet noose around Berlin has been deliberately left loose because of trade advantages derived by the USSR, energetic police action could substantially reduce those Importantoperations. If this tightened blockade Is Imposed and effectivelyaterial Increase tn the airlift wttl be necessary in order to maintain the present level of health and economic welfare of western sector residents.
far east
CHINA
Military Situation Th* Communists are entering upon the final phase of their battle for Central China and the Nationalist capital of Nanking.esult of clever strategy, the Conununlsta have stopped the southern drive of the encircled Hsuchou garrison and appear to have nullified any military contribution byh Army Group, which bad been en route from the southwest to relieve the Hsuchou garrison.arge force of first-line Communist troops extracted from the Hsuchou perimeter has driven south In rapid, veil -coordinated moves and is In the process of encircling, bypassing, or eliminating the remaining second-rate Nationalist defenders along the Real River line in the Pangfcu area. US military fieldconsider the Nationalist situation hopeless In Central China. The Nationalist Ministry of Defense will probably make an interim move to Namchang while the key personnel of Chiang Kai-shek'a administratration will probably be divided between Canton and Chungking. The impending Nationalist military collapse in Central China will signify the end of organized, effective Nationalist militaryMoreover, the removal of Chiang's Government from Nanking woulderious loss of prestige and
unable to maintain control In the greater part ofChina for long.
Communist Policy Recent statements from authoritative Chinese Communist sourcesthe strong Ideological affinity existing between the USSR and the Chinese Communist Party (CCP) and indicate
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CHINA
tbat Soviet leadership, especially La foreign affairs, will probably be faithfully followed by any Common 1st-dominated government in China. This pro-Soviet orientation has been revealedecent Chinese Communist statements echoing the Soviet view that "the world ts divided into two camps ';he CCP Central Committee endorsement In July of the Com inform condemnation of Tito. Chinese Communist propaganda has been accusing tbe "US State Department and US espionage organizationsof Jointly plotting to "destroy the national liberation movement' In China.onvenient pretext Is being fabricated for possible future suppression or liquidation of those Chinese Comrnunists unwilling to follow the Stalinist line.
Autonomous Taiwan Chinese officials In Taiwan may
attempt to set up autonomous role If Nanking falls to the Communists. Mounting criticism of the National Government, together with unusual local military conferences, suggests that Governor Wei Tao-ming and other Chinese officials in Taiwan are attempting toon native dislike of rule by mainland Chinese, An autonomous regime under such leadership would appeal to many resident Chinese and upper-class Taiwanese, and Its establishment would be facilitated by the firm control which the present provincial government now exercises.ew regime, however, would have difficulty, on the one hand, absorbing any Nationalist elements which might attempt to use tbe islandsase of operations against the Chinese Communists, and, on tbe other, gaining the support of native Taiwanese who seek completefrom Chinese rule.
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Original document.
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