Foreign Relations of the United States, 1958–1960, Western Europe, Volume VII, Part 2

209. Report by the Operations Coordinating Board⁰

April 30, 1958.

OPERATIONS COORDINATING BOARD REPORT ON ITALY

(NSC 5411/2)¹

(Approved by the President, April 15, 1954)

(Period Covered: From September 4, 1957 Through April 30, 1958)

A. Summary Evaluation

1. Though strong cooperation within the Western Alliance continues to be the basis of its foreign policy, the Italian Government displays increasing anxiety within that framework to achieve wider consultation with its allies, more autonomy, and greater international importance and prestige, particularly with regard to the Middle East and a possible summit conference. The Italian Government continues to take a firm attitude toward the Soviet Union, as evidenced by its close cooperation with the U.S. at the NATO Heads of Government Meeting and its firm reply to the first Bulganin letter.²

2. Despite a constant cooperative spirit on the part of the Italian Government, there was on balance little U.S. progress toward its objectives in Italy during the period under review. A major factor in this lack of progress was the Sputniks³ which shook the Italian public’s previous certainty of U.S. technical and scientific leadership. Other factors include the continued robustness of the Italian Communist movement, the weakness of the present Italian Government, the preoccupation of Parliament with the national elections this spring, the activities inside and outside Italy of Enrico Mattei (head of the Italian petroleum monopoly ENI) and the continuing interferences of President Gronchi in government business and policy.

3. Despite some internal difficulties, the Italian Communist Party remains formidable, and its electoral position is considered strong. In concert with Soviet policy, the Communists are carrying on their largest propaganda campaign in recent years, with primary emphasis on disarmament, the dangers of establishing missile launching sites in Italy, church-state relations, and the recession in the United States.

4. Italian economic expansion continues satisfactorily.

5. A review of policy is not recommended.

B. Major Operating Problems or Difficulties Facing the United States

6. National Elections.

a. If the Center parties, which when combined now have a narrow parliamentary majority⁴ lose ground in the national elections next May 25, there could be serious problems in the formation of an Italian Government and Italian policy might undergo a reorientation. Even if there is some improvement in the overall Center position, there may still be difficulties in the way of establishing an effective post-election Government because of differences among the Center parties.

b. U.S. economic support, which should contribute to a more favorable election atmosphere, includes a $25 million PL 480⁵ Title I program signed March 7, 1958, a six-month Title II rural assistance program ($9.1 million CCC cost) and a Fiscal 1959 Title II child feeding program ($6.5 million at CCC cost). These are in addition to the continuing Title III voluntary agency welfare programs which amount to approximately 300,000 tons of assorted foodstuffs in Fiscal 1958. In this connection, the U.S. has also directed a rehabilitation contract (valued at $1.2 million) for 80 F–86–F aircraft to Fiat, at the lowest cost factor established by competition in Europe. In the past two months the Eximbank has approved $12.0 million in loans to Italian firms. On February 28, 1958 the IBRD announced a further $75 million loan to Italy for economic development.

7. Communism. Despite [less than 1 line of source text not declassified] improved economic conditions in Italy, the Italian Communist Party registered small gains in local by-elections during 1957 (a national gain of 1.1%, with 1,430,00 votes cast in provincial and communal elections) and appears to be emerging from three years on the defensive. The Italian Communist Party was aided by dissension within and among the Moderate Parties, by the weakness and lack of concrete achievement of the present Italian Government, and by favorable external circumstances such as the Sputniks, the unopposed demonstration of Soviet power in repressing the Hungarian revolt, and the Soviet penetration of the Middle East. The shift in international Communist tactics in 1956 and internal dissension in the Italian Communist Party do not appear appreciably to have harmed this Party’s electoral position. One factor which may account for this continued public appeal is an apparent shift of former Nenni-Socialist voters to the Communist banner as a result of Nenni’s 1956 and 1957 maneuvers in the direction of unhooking himself from the Communists. The Nenni Socialist position has recently been more clearly realigned with that of the Communists and the two parties are cooperating in many ways in the present election campaign, although not all Nenni Socialists favor the fellow-traveler line.

8. Petroleum. The competition between the U.S. oil companies and the Italian petroleum agency ENI is an important and irritating problem between our two countries. Under pressure from President Gronchi, the Italian Government has requested consultation between and intervention by the two governments so as to avoid future friction in this field. The U.S. position is that the U.S. Government does not interfere with the operations of U.S. international oil companies and that this matter is therefore one for discussion between ENI and the various U.S. companies. It is believed that Mattei (president of ENI) is now hoping to obtain a more substantial position in the international petroleum field through the medium of Italian diplomacy which, if successful, could in turn provide Italy the basis for a greater voice in international affairs.

9. Gronchi . Taking advantage of the weak Zoli Government and the preoccupation of the country with the coming national elections, Gronchi interfered in ministerial matters and government policy even more during this period than in the past. Unless the elections produce a strong government determined to resist Presidential encroachments on its powers, the U.S. is likely to have to parry an increasing number of [less than 1 line of source text not declassified] Italian foreign policy initiatives. Recent examples of such initiatives include the Gronchi-inspired invitation to Nasser to make a state visit in Italy and the claim to mediate or to participate in mediating Tunisia’s differences with France without being invited to do so by either party to the dispute.

10. Civil Aviation. The Italian Government has formally submitted to our Embassy in Rome proposals for amending the 1948 civil aviation bilateral, which it considers to have become imbalanced in its operation.⁶ The Italians claim that while the bilateral was acceptable in 1948, it is now obsolete, because they believe the broad description of the route annex allows U.S. carriers to operate to and through Italy with little restrictions, while the Italian carrier is severely limited as to traffic points in the United States. Unless some concessions are made to the Italian point of view, the U.S. may expect this to become a serious problem.

11. East-West Trade. Although Italy continues to support the principle of East-West strategic trade controls, it is increasingly dissatisfied with the size of the International Lists⁷ and has even considered, though not gone ahead with, the inclusion of List I items in a trade agreement with the U.S.S.R. Italian proposals for reduction in international lists, however, are more moderate than those of other leading COCOM countries. During 1957, while the mercury tonnage licensed for export to Soviet bloc countries increased over 1956, actual exports through November 30, 1957 were negligible. Italy tried unsuccessfully to get US/COCOM concurrence to include 50 tons of mercury in a trade agreement with Poland, basing its request partially on the fact that Italy’s 160-ton annual “quota” for the Soviet bloc had not been filled. The U.S. took the position that (1) International List I items should not be included in trade agreements, (2) this request should be submitted under established exceptions procedures and (3) Italy was never given a “quota” for mercury by COCOM. U.S. pressure on Italy to reduce mercury shipments to the Soviet bloc continues.

12. Pella Plan.

a. Since the autumn of 1957, much time of U.S. officials has been taken up, at Italian initiative, in studying and discussing a proposal by Italian Foreign Minister Pella for a joint U.S.-European loan fund for economic assistance to Middle Eastern countries.⁸ His plan calls for financing by: (1) contributions from the U.S. utilizing repayments from Marshall Plan loans (estimated at $40–60 million annually), (2) contributions from Marshall Plan debtor nations in the amount of 20 percent additional to the actual Marshall Plan repayments, and (3) contributions from OEEC countries which did not receive Marshall Plan funds. Membership in the fund would be voluntary. Pella envisions the fund as a quasi-independent agency under the OEEC with a nine-man managing board appointed by the OEEC Council and presided over by the U.S. representative. Pella has emphasized that his plan is not a rigid proposal but rather a basis for discussion capable of substantial revision.

b. The present U.S. position on this Plan, which is but one of a number of suggestions under study by the U.S., is as follows: (1) the U.S. is prepared to participate in an OEEC Working Group, if one is formed on European initiative, to consider the establishment of some kind of European-based Middle East development fund; (2) the U.S. cannot indicate whether or not or in what form it would contribute to such a fund, prior to knowledge of what European countries are prepared to make available; (3) however, the U.S. would not consider it fruitful for OEEC countries to go forward in their consideration of the Pella Plan based on the assumption of a U.S. contribution in the form either of earmarking or deferring Marshall Plan repayments; and (4) even if the U.S. should decide to make its contribution in the form of contributions or deferrals of Marshall Plan repayments, the extent and purposes for the use of these loan repayments would be a matter for the U.S. Government itself to decide in the light of its world-wide programs.

Note: See National Intelligence Estimate, NIE 24–56, dated February 7, 1956.⁹

0. Source: Department of State, OCB Files: Lot 61 D 385, Italy 1958–60. Secret. Annex A entitled “Additional Major Developments,” a Financial Annex, and a Pipeline Analysis are not printed. In an undated memorandum attached to the source text, Elmer B. Staats, Executive Officer of the OCB, stated that the Board revised and concurred in the report on April 30. No copies of draft reports have been found. The minutes of the April 30 meeting are ibid.: Lot 62 D 430, OCB Minutes.
1. For text of NSC 5411/2, see Foreign Relations, 1952–1954, vol. VI, Part 2, pp. 1677–1681. For previous OCB reports, see ibid., 1955–1957, vol. XXVII, pp. 317–323, 372, and 400–404.
2. See footnote 3, Document 205.
3. The Soviet Union launched the first unmanned space satellites on October 4 and November 3, 1957.
4. In the Second Legislature (1953–1958), the four “center” parties (Christian Democrats, Social Democrats, Liberals, and Republicans) held a total of 254 seats; the left (Communists and Socialists) had 218; and the right (Monarchists and Neo-Fascists) had 69. Four other seats were held by small parties.
5. For text of P.L. 480, the Agricultural Trade Development and Assistance Act of 1954, see 68 Stat 454.
6. An agreement amending the 1948 civil aviation agreement was signed on August 4, 1960; see Department of State Bulletin, September 5, 1960, p. 365. Documentation on the aviation negotiations is in Department of State, Italian Desk Files: Lot 74 D 177.
7. Reference is to lists of trade items whose sale to countries in the Soviet bloc were either restricted or limited. The lists were maintained by the Coordinating Committee on Multilateral Export Controls. (COCOM).
8. In a July 25, 1957, discussion with Paul Hoffman, former administrator of the Economic Cooperation Administration, Pella proposed that European states put their European Recovery Program repayments into a special fund to finance exports of raw materials, finished goods, and technical assistance to the Middle East from Europe. This would provide a cushion for the disruption which economic unification would create in Europe. Pella discussed these ideas in greater detail with Ambassador Zellerbach on August 2 and Secretary of State Dulles on September 26, 1957. Documentation is in Department of State, Rome Embassy Files: Lot 64 A 532, 350 Pella Plan.
9. See Foreign Relations, 1955–1957, vol. XXVII, pp. 328–330.