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To assess the implications of recent developments in Saigon and to estimate the probable actions of interested parties in the current crisis.

IMPLICATIONS Of CURRENT DEVELOPMENTS IN SAIGON

1. The success of Premier Diem in operations against the Binh Xuyen, and in his stand against Bao Dai, the French, and General Vy, has created a new and potentially revolutionary situation in Vietnam. While the situation in Vietnam is extremely fluid, Diem appears to hold the initiative in the phase that is about to begin. In this phase, the interested parties — particularly the French and Bao Dai — will have to adapt themselves to a radically new political situation dominated by Diem or by more extreme nationalist elements. If they do not adapt and if there arc any substantial efforts by Bao Dai or the French to frustrate Diem's government, the chances of anti-French violence and the deposal of Bao Dai would be greatly increased.

2. Diem's relations with the Revolutionary Council which has been actively injecting itself into this situation have not yet been clarified. This council, designated by a self-appointed assembly, takes a more extreme position than: Diem, particularly in regard to the withdrawal of French forces and the immediate deposal of Bao Dai. It is dominated by Cao Dai generals Trinh Minh The and Nguyen Thanh Phuong and by Hoa Hao General Ngo and includes a number of extreme nationalist politicians. General Ely now charges that the Council is Communist infiltrated but so far has not produced evidence to substantiate this charge. We have no significant evidence to indicate that any of the members of the Council are Communist. In a proclamation the Council announced a broad program couched in social revolutionary terms but including a denunciation of "red colonialism" in North Vietnam. Its activities have been denounced by the Communist radio in Hanoi as have those of Premier Diem.

PROBABLE COURSES OF ACTION OF INTERESTED PARTIES

3. Premier Diem. The virtual expulsion of the Binh Xuyen from Saigon-Cholon has increased Diem's prestige throughout Vietnam. The confidence of Diem and his supporters in their own strength, judgment, and popular appeal has been considerably enhanced. In this situation, Diem will almost certainly continue to resist any efforts to remove him from office.

4. His actions and those of his followers have taken on an increasingly nationalistic, anti-French tone over the past few days and Diem may now be convinced that a continuation of this anti-French policy is essential to the rallying of popular support. Nevertheless, he has exercised a moderating influence on the anti-French and anti-Bao Dai position of the Revolutionary Council. However, if he believed the French were continuing their efforts to depose him, he would almost certainly permit intensified anti-French manifestations. Such a course would carry grave dangers of anti-French violence, particularly in Saigon. Rh