Berlin, the historic capital of Germany, lies 110 miles inside the Soviet-controlled puppet state of East Germany. It is not, however, a part of that state, but is a separate entity. Like Germany itself, it was divided between Soviet and Western (Great Britain. France, and the United States) control at the end of World War II. In the 16 years since the war. West Berlin has become a kind of "showcase" of freedom and prosperity inside the Communist empire. As such, it has been a constant source of discomfort to the Soviet leadership, and the puppet leaders in East Germany, who have repeatedly tried to force out the Western allies.

Berlin exploded into the headlines again early this summer when, in a memorandum to the Western powers, Khrushchev declared that unless the three Western powers in Berlin agreed to a "peace treaty" recognising the Communist government of East Germany, under which West Berlin would become a "free"—that is, demilitarized—city, the Soviet Union would sign a separate treaty with East Germany. This would mean giving the East German puppet government control of Western access to Berlin. If these routes were cut off, the two and a half million people of West Berlin would be isolated and eventually doomed to absorption" into the Soviet bloc.

Reinforcing his challenge to the West, the Soviet Premier announced on July 9 an increase in the Soviet military budget and the suspension of a scheduled, widely publicized, cut in Soviet military manpower. The defence budget for 1961 was increased by 3.1 billion rubles, to a total of 12.4 billion rubles. More than one million men scheduled to be discharged from military service are to be kept under arms.