IRAN: POLITICAL INSTABILITY AND ECONOMIC DISARRAY

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• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06070597
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• Document Page Count: 23
• Document Creation Date: March 16, 2022
• Document Release Date: February 25, 2016
• Case Number: F-2015-02516
• Publication Date: March 3, 1981

Director of
Central
Intelligence
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NOFORN-NS TRACT
Iran: Political Instability
and Economic Disarray
Special National Intelligence Estimate
Se et
SNIE 34-81
3 March 1981
Copy 307
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SNIE 34-81
IRAN: POLITICAL INSTABILITY
AND ECONOMIC DISARRAY
Information available as of 25 February 1981 was
used in the preparation of this Estimate.
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THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL
INTELLIGENCE.
THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS,
EXCEPT AS NOTED IN THE TEXT.
The following intelligence organizations participated in the preparation of the
Estimate:
The Central Intelligence Agency, the intelligence organizations of the Departments of
State and Defense, and the National Security Agency.
Also Participating:
The Assistant Chief of Staff for Intelligence, Department of the Army
The Director of Naval Intelligence, Department of the Navy
The Assistant Chief of Staff, Intelligence, Department of the Air Force
The Director of Intelligence, Headquarters, Marine Corps
--s�esk
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CONTENTS
Page
OVERVIEW 1
DISCUSSION 3
The Power Struggle in Tehran 3
The Current Political Situation
Political Prospects
8
9
The War With Iraq 9
Economic Conditions 11
Foreign Relations 13
Soviet Policy Toward Iran 15
Implications for the United States 16
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OVERVIEW
The near-term outlook in Iran is for ongoing political instability
and economic disarray as the fundamentalists continue their efforts to
monopolize power and transform Iran into a truly Islamic state. This
complicates decisionmaking at all levels, although release of the hos-
tages demonstrates that controversy can be overcome when a majority
of key political actors reach consensus.
Ayatollah Khomeini retains his widespread personal popularity and
will probably remain Iran's preeminent figure and ultimate arbiter of
disputes for at least the next six months. So long as Khomeini is well
enough to influence the political scene, the power struggle in Tehran
will not be resolved. Khomeini's sudden death or incapacitation would
almost certainly lead to intensified violence and possibly civil war.
Both the military and the leftists would be tempted to try to seize
power if political stability further deteriorates. Dissatisfaction and plot-
ting have been endemic in the armed forces since the revolution, but a
coup faces many obstacles. A united left would represent a potent force
for disruption, but the leftists are splintered along ideological lines. The
various exile groups are weak, divided, and have little popular appeal.
Still, even an unsuccessful attempt to assassinate Khomeini or other key
leaders would tip Iran toward greater chaos.
The ethnic minorities, which make up about half of Iran's popula-
tion, will continue to seek increased local autonomy. They are more
likely to be exploiters of political change rather than instigators of it.
The Iranian economy, already severely depressed by events flow-
ing from the revolution, has been further disrupted by the war with
Iraq. Significant improvement will not occur over the next several
months, although food and fuel shortages will probably ease somewhat
in the spring. At present levels, Iranian oil exports are sufficient to pay
for much-needed military supplies and food, and to avoid a foreign
exchange crunch. If the flow of oil were cut off or dramatically re-
duced, however, Iran's situation would become very bleak within six to
10 months. Meanwhile, disruptive inflation, unemployment, and raw
materials shortages will persist, but economic conditions alone are un-
likely to result in decisive popular discontent or cause the regime to seek
an end to the conflict with Baghdad.
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The war has settled into a stalemate that will last at least through
the spring. The outcome will probably not be (resolved on the bat-
tlefield. The failure of Iran's January counteroffensive in the Susangerd
area resulted in losses of both men and equipment which cannot be
quickly replaced. Although Iran will not be capable of conducting oper-
ations on a similar scale before midsummer, it does have a continuing
capability to strike highly vulnerable petroleum facilities in neighboring
oil-producing states.
Iranian foreign policy, like the domestic scene, will remain highly
volatile. It will probably begin to take shape in efforts to achieve non-
alignment, eliminate both US and Soviet regional influence, encourage
fundamentalist uprisings in other Islamic states, and guarantee eco-
nomic self-sufficiency. At best, the chaotic internal political situation
will eventually produce both a government and a policy approach
which are at once highly nationalistic, anti-Communist, and nOnaligned.
The Iranians remain deeply suspicious of Soviet intentions toward
Iran and critical of Moscow's involvement in Afghanistan. Soviet policy
is based largely on the judgment that there is little hope for a thaw in
relations as long as Khomeini remains on the scene. Because of the
unstable political climate in Iran, the Soviets want to quietly build an
infrastructure that could be quickly used to exploit new opportunities.
Moscow therefore believes that its most promising current option is to
curry favor with the present government and to play on its anti-West-
ern orientation while awaiting future opportunities.
Iran will remain hostile to the United States, and the US Govern-
ment will have little direct leverage to channel developments in ways
that serve its interests. Given the fluid situation, US moves which main-
tain flexibility, serve long-term interests, and operate in an indirect
manner probably have the best chance of achieving lasting benefits.
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DISCUSSION �
The Power Struggle in Tehran
1. The most inll5ortant factor affecting Iran's in-
ternal political stability over' the next six months will
be the continuing power struggle between the Islamic
fundamentalists and the secular moderates who have
clustered around President Bani-Sadr (see figure 1).
This rivalry will dominate the Iranian political scene
and set the tone, direction, and pace of events to fol-
low. Other players�such as the various leftist
' Political factions and actors are difficult to label in Iran. In this
Estimate, the term "fundamentalist" is used to denote religious and
lay personalities and groups who have demanded that Iran be trans-
formed into a strict Islamic state with the virtual elimination of all
secular influence. Generally, this group has been associated with the
Islamic Republic Party. Within the fundamentalist group there is an
extremist faction which is referred to as -the hardliners." The term
"fundamentalist- is not used to identify the entire religious estab-
lishment, because not all of Iran's clergy share the fundamentalists'
outlook. The term "moderate" is used only for comparative pur-
poses. Although the moderates are sometimes referred to as
-secularists," many of them do profess to be devout Muslims.
groups�will react to key developments and seek tac-
tical advantages as opportunities present themselves.
This paper analyzes the key actors, issues, and forces
shaping the complex Iranian political scene and specu-
lates on future political trends.
2. The revolution that swept Iran in 1978 and 1979
was unique in modern Middle Eastern history: a genu-
ine popular upheaval with nearly every element of
society opposing the monarchy. Following the
revolutionary victory, this broad coalition rapidly dis-
integrated into competing factions, with each group
striving for political dominance. It is the continuation
of that power struggle that lies at the heart of Iran's
current political woes. Until the issue is resolved, the
country cannot begin to rebuild itself or to establish
any durable institutions.
3. The focus of the controversy lies in the failure of
key elements of Iranian society to agree on the aim of
Figure 1
Iran: Political Power Centers
Opposition
Groups
Minorities
(Kurds, Qashqais, Arabs,
Baluchis, etc.)
Leftist Groups
(Fedayeen, Mujahedin,
and Tudeh Party)
Exile Opposition
Ayatollah Khomeini
Hardline
� Faction
(Ayat)
Senior Clergy
Opposed to
Khomeini
(Shariat-Madari
and Others)
Secularist
Revolutionaries
(Bani-Sadr)
Armed Forces
Fundamentalist
Revolutionaries
(Beheshti)
Islamic
Republic Party
I
Prime
Minister
Majles
(Oveisi, Bakhtiar,
(Rajai)
(Rafsanjani)
, and Others):
Revolutionary
Supreme
Guards and
Court
Committees
1-01"Erassi4iP-d
583771 2.81
3
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the Islamic revolution. Three rival points of view are
currently in contention:
� Those who favor an authoritarian Islamic state
dominated by the clergy.
� Protagonists of a more open society, but one still
guided by Islamic principles.
� Leftists seeking to remodel society using further
revolutionary upheaval.
4. The first position is supported by the clerical and
lay fundamentalists who, since February 1979, have
attempted to monopolize power and to eliminate the
influence of the other elements of the anti-Shah coali-
tion. The fundamentalists are loosely organized under
the banner of the Islamic Republic Party (IRP) and
are led by several senior clergymen, most notably the
head of the Supreme Court, Ayatollah Beheshti. Most
�are unswerving ideologues, unwilling to compromise
or negotiate on many political and social issues. They
are by no means unified. Some of the hardline Islamic
fundamentalists are only nominally a part of the IRP
,and have pressed for even more radical change. As a
result, further fragmentation is likely.
5. The second group is represented by President
Bani-Sadr, an Islamic ideologue but a tactical realist.
Bani-Sadr appears to have wide personal support, but
,has no effective grass-roots organization. He serves as
spokesman for a loose coalition of antifundamentalist
politicians who do not necessarily accept his leadership
on all issues. Last year, he lost much of his political
power, in part because of his controversial efforts to
resolve the hostage crisis. The war with Iraq, however,
has given Bani-Sadr an opportunity to strengthen his
position by associating himself closely with the mili-
tary at the front and creating the leadership image of a
president battling to preserve Iran's national integrity.
Nevertheless, this opportunity could backfire if the
fundamentalists find a way to blame Bani-Sadr for any
future battlefield reverses.
6. Ayatollah Khomeini plays a critical and com-
plicated role in the power struggle as the ultimate ar-
biter of disputes between these two factions. He favors
fundamentalist control in Iran, but is less concerned
with ensuring the political fortunes of individual fun-
damentalists than with maintaining a consensus that
the revolution must be guided by Islamic principles.
Khomeini could attempt to end the power struggle by
choosing one side or the other or by allowing it to
4
RACT ,
reach a decisive climax. Instead, he seems to engage in
a delicate balancing act by identifying himself with
those who support Bani-Sadr and criticize fundamen-
talist abuses, while supporting the fundamentalists'
government and limiting Bani-Sadr's presidential
powers.
7. Khomeini's own power and influence, however,
are not absolute. In repeated calls for unity among
rival factions, for example, he apparently feels con-
strained to shape pronouncements in accordance with
perceived popular opinion. Khomeini is as much a fol-
lower of such opinion as he is a shaper of it. He avoids
day-to-day details and is content to offer general guid-
ance. This gives others the opportunity to speak in his
name�often in conflicting terms. Moreover, percep-
tions of Khomeini's health also influence the dynamic
of the power struggle.
8. Several other groups are waiting in the wings to
challenge the regime. Apart from an isolated military
act 2�such as an assassination attempt against
Khomeini�a united left represents the greatest even-
tual threat to the regime. At present the left is not
strong enough to challenge the government directly.
Deep divisions have thus far prevented organization of
a single, united front. Recent reporting indicates that
the leftists will become more active and may attempt
to exploit the political chaos for their own purposes.
They are likely to gain strength over the next six
months.
9. Three leftist organizations are particularly sig-
nificant:
� The Mujahedin-e Khalq is the largest leftist
group and espouses a vague ideological mix of
Marxism and Islam. It is armed, has wide popu-
lar appeal, especially among the young, and is
intensely anti-American. However, it claims to
have a "nationalist" (that is, neither East nor
West) foreign policy approach.
� The People's Fedayeen, a radical leftist group
with no Islamic pretentions, recently split into at
least two factions but is still capable of some ter-
2 A classical military coup is not likely to occur in Iran in the next
six months. The regime is vulnerable, however, to an isolated strike
against Khomeini and/or other key figures by a relatively small
group of officers and men. Transfers of regular and Revolutionary
Guard forces to the war zone have left leading figures and key
locations in Tehran less well protected.
..-"Strba
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rorist operations like the attack on the US Em-
bassy in February 1979. At _least one faction has
allied itself with the Tudeh in support of
Khomeini's regime.
� The Soviet-Sponsored Communist Tudeh Party,
which is relatively small but well organized, pub-
licly, backs Khomeini on all key issues, while
clandestinely seeking to build its strength in gov-
ernment institutions and other political factions.
By itself the Tudeh could probably seize power
only through a coup during a period of extreme
unrest and would require massive Soviet support
to retain control.
10. The exiles (see table 1) are another source of
opposition to the regime. Virtually all have pegged
their hopes for a return to Tehran on growing disillu-
sion with the revolution. Most hope that popular sup-
port for Khomeini will wane as chaos in Iran grows.
They are attempting to convince a number of Arab
and Western governments to support them. The war
with Iraq, has highlighted early ties which some of the
exile groups had developed with Baghdad. This set-
back, coupled with the association of many exile lead-
ers and the royal family, has prevented them from
winning much internal support. Moreover, their in-
ability to agree on a single leadership figure or to
Table I
Prominent Iranian Exiles
Former Position
Base of Support
Level of
Support a
Shahpur Bakhtiar
Last Prime Minister under
Shah
Officer corps; mid-
die-class support
dwindling
Weak
Qolam Ali Oveisi
Ground Forces Commander
under Shah
Military
Weak
Ahmad Madani
Defense Minister under
Khomeini
Military; anticlerical
elements
Moderate
Ali Amini
Prime Minister under Shah
Middle class
Very weak
Fereydun Jam
Chief of Staff under Shah
Military
Very weak
Hasan Nazih
Head of Iran National Oil
Azerbaijanis
Weak
Company
Azizollah Palizban
Chief of Military Intelli-
gence under Shah
Kurds
Weak
Ahmad Bani-Ahmad
Azerbaijani political leader
associated with Muslim Peo-
ple's Republic Party in Azer-
baijan
Azerbaijanis
Weak
Bahram Ariana
Chief of Staff under Shah
Military; possibly
some wealthy exiles
Very weak
Rahmatollah Mogadam-
Aide to Ayatollah Shariat-
Azerbaijanis
Weak
Maragei
Madari, official of the Mus-
lim People's Republic Party
a The Director, Defense Intelligence Agency, believes this column is ambiguous because it ad-
dresses only current internal political support.
5
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effectively cooperate in even the most general way has
prevented the formation of a viable opposition move-
ment abroad. There is an alternative view which holds
that, if these movements should resolve their dif-
ferences and coalesce under a unified leadership, they
could add an important external element to the
nonleftist internal opposition. 3
11. The ethnic minorities (see figure 2) make up
about half the nation's population, and have presented
problems for the Khomeini regime since it came to
power. Minority unrest will plague the government for
the foreseeable future, but ethnic groups are more
likely to be exploiters of political change rather than
instigators. In general, the minorities continue to await
the denouement of the polifical contest in Tehran.
12. Minority leaders have traditionally sought to re-
duce the influence of the central government in their
affairs while gaining as much developmental aid as
can be absorbed without disturbing tribal ways. The
ineffectiveness and disorganization of the present re-
gime have given the minorities de facto autonomy, but
they have not sought complete independence. Instead,
they seek some control over local affairs, increased
investment by Tehran in development projects in their
homelands, and consultation over the role of military
units stationed there.
13. The most important of the minorities are:
� The Kurds. They are the only group to have
maintained a sustained armed resistance to the
government. They have well-organized paramili-
tary parties, a passion for autonomy, and access
to support from Iraq and some East European
states. The Kurds, however, are internally
factionalized.
� The Arabs. Although concentrated in oil-rich
Khuzestan, the Arabs by and large have not sup-
ported the Iraqi invasion. The small Iranian Arab
dissident groups�long supported by Iraq�have
had little effect on the course of the conflict.
� The Azarbayjanis. They are Iran's largest
minority group and hold senior positions in the
political, military, and economic bureaucracies.
Most are loyal to moderate Ayatollah Shariat-
Madari, who opposes Khomeini but has resisted
confrontation with the fundamentalists. There
3 The holder of this view is the Director, Defense Intelligence
Agency.
6
CT
have been sporadic clashes with pro-Khomeini
forces in Azarbayjani areas, but many have been
provoked by leftish groups, which are relatively
strong there.
� The Turkomans. Sporadic incidents have oc-
curred in the Turkomans' homelands since the
clashes of early 1979, but their area has remained
generally calm.
� The Baluchis. The Khomeini regime remains
suspicious of alleged Baluchi contacts with leftist
Baluchis in Pakistan and of Soviet contacts with
Baluchi dissidents. These suspicions probably are
exaggerated. The government has been denied
effective control of Baluchi territory outside of
the major towns, but the tribal leadership re-
mains divided and unwilling to expose its people
to retaliation by attempting to push out govern-
ment forces. Recent reports suggest that Iraq is
attempting to support Baluchi dissidents through
clandestine arms shipments across the Persian
Gulf.
� The Qadmais. They are the most Western-ori-
ented of Iranian minorities. Their opposition to
fundamentalist attacks on traditional tribal or-
ganizations have resulted in several armed
clashes. Qashqai leaders are arming their follow-
ers and have had some contacts with foreign gov-
ernments and Iranian exile groups abroad. De-
spite their disenchantment with the present
regime, however, the Qashqais are political re-
alists who will not move alone against Khomeini.
14. Two other groups eventually could play a piv-
otal role on the Iranian political scene: the military
and the Revolutionary Guard. Plotting has been en-
demic in the armed forces since 1978; the most serious
coup attempt failed in July 1980. Another such at-
tempt would face major obstacles.�the Revolutionary
Guard, spies, divided rank-and-file loyalties�but even
an unsuccessful effort to assassinate Khomeini or other
senior officials could throw Iran into chaos.
15. The revolution dramatically altered the status
of Iran's military forces. Chaotic conditions in the gov-
ernment and country, major purges and desertions,
lack of long-range government planning, and a general
distrust of the officer corps have all contributed to a
significant reduction in both their size and overall
effectiveness. The creation of a Revolutiona6/ Guard
Corps (Pasdaran) to protect the Islamic movement,
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Figure 2
Selected Minority Groups
Turkey
kr+ .� ���-'
� �.
Iraq-Saudi Arabia
Neutral Zone
Kuwait
Saudi Arabia
0 200
Kilometers
629115 2-81
Caspian
Sea
TEHRAN
ase.
Soviet Union
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ITY -�-: . . ;
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Iran
1"
Afghanistan
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All�nan
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United
Arab
Emirates
Pakistan
_
Gulf of Oman Boundary representation is
not necessarily authoritative.
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and the war with Iraq have aggravated the internal
situation and precluded any major rebuilding of the
armed forces in the near term.
16. While all services have suffered from the
revolution, the Army and the Air Force have been
hardest hit. Both have sustained substantial losses of
men and equipment due to purges and the war. (See
table 2.) These changes have put less experienced of-
ficers in command positions, with a resulting reduced
capability to coordinate military action.
17. The Revolutionary Guard, a force of about
20,000 full-time regulars and substantial numbers of
irregulars, was organized with the express purpose of
protecting the revolution and its clerical leaders from
all opponents, particularly the military. It proclaims
loyalty to Ayatollah Khomeini and works in tandem
with the Islamic Republic Party and other revolu-
tionary institutions. A strict command and control
structure has not been established, and local Guard
units (particularly in the provinces) have of ten op-
erated autonomously and in a near lawless fashion.
The Guard has also clashed with military leaders by
commandeering equipment, issuing unauthorized or-
Table 2
Equipment in Iran's Armed Forces a
Army
August 1980
February 1981
Tanks
1,765
1,200-1,250
Armored personnel
carriers
3,135
2,800-2,900
Artillery Pieces
1,228
1,000-1,050
(100-mm and over)
Navy
Destroyers
3
3
Frigates
4
4
Missile boats
9
8
Other patrol craft
48
30-35
Hovercraft
14
14
Mine warfare types
5
5
Air Force
Fighters
448
300-325
Transports
96
95
Tankers
17
15
Helicopters
853
743-753
a Much of the equipment in Iran's current inventory is not
functional.
8
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ders to military units, and ref using to cooperate with
local commanders.
18. While some Guard personnel reportedly have
been trained to employ tanks and artillery, the corps
remains primarily equipped with light infantry weap-
ons and is subject to many of the same recruiting and
logistic difficulties that plague the regular forces. It is
unlikely that the Guard will be able to improve its
military capabilities in the near term, although it will
continue to outclass armed leftist groups and other
street protesters. In an urban setting it is capable of
putting up formidable resistance as the fighting in
Khorramshahr and Abadan demonstrated.
19. The economic situation and the war also affect
internal political events. Significant improvement in
the economy will not occur over the next several
months, although the fuel and food shortages exacer-
bated by winter weather will ease somewhat in late
spring. Inflation, unemployment, and continual short-
ages will, however, remain important problems for the
regime and will continue to contribute to popular un-
rest. (See economic section, beginning at paragraph 35,
for a more detailed discussion.)
20. Both Bani-Sadr and the leftists are likely to con-
tinue to use the country's dismal economic condition
to challenge the fundamentalists. Meanwhile, the fun-
damentalists have been prevented from using Iran's
military setbacks to counter 13ani-Sadr because of
Khomeini's increasingly strong defense of his role in
the war effort.
The Current Political Situation
21. At present, the fundamentalists have the upper
hand in Iran because they dominate the legislative,
judicial, and executive branches of government and
the revolutionary organizations (including the Revolu-
tionary Guard). Factors which account for the fun-
damentalists' current success include the following:
� They gave the revolution its ideology, its orga-
nization, and the leadership which led to its
success.
� They have retained a large reservoir of popular
support and are bolstered by Khomeini's cha-
risma. By and large, Khomeini's core support-
ers�the uneducated urban masses�do not be-
lieve that he has betrayed the ideals or goals of
the revolution, although there is growing dis-
enchantment with the clergy in general and dis-
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dam n for certain individual clergymen and lay
fundamentalists.
� They have acted forcefully in the political arena
by executing opponents, using the Revolutionary
Guard and street toughs to undercut their opposi-
tion, appointing oversight committees in the
bureaucracies, and buying mass support through
financial donations.
22. Bani-Sadr's popularity and position as President
and Commander in Chief give his supporters a toehold
in the government. Technical skills also provide his
supporters with influence in such organizations as the
Iranian National Oil Company and the Central Bank.
The fundamentalists have removed many Western-
educated technocrats but have not been able to dis-
lodge all of them.
23. Since the release of the hostages, various opposi-
tion groups have become much more aggressive in
their efforts to erode clerical domination in Iran. They
have more openly denounced fundamentalist policies
and actions, and Bani-Sadr has gone so far as to say
that Iran's -destiny will be bleak, unless the nation
stands up to those [the fundamentalists] who rule with
lies, imprisonment, and torture.-
(b)(1)
Political Prospects
24. The highly charged political environment has
several implications for ongoing developments:
� It assures that Iranian society will remain politi-
cally mobilized.
� It politicizes and radicalizes every issue on the
Iranian political scene, because a victory by one
faction on a given issue is seen as a defeat for the
other.
� It makes any proposal or idea that smacks of
moderation or compromise suspect and open to
the charge of being antirevolutionary.
� Media warfare, street demonstrations, and occa-
sional assassinations will continue.
25. As long as octogenarian Khomeini is alive and
reasonably well, the power struggle will not be re-
solved. Khomeini's death will probably lead to a cli-
max of this phase of the power struggle.
there is only a
10-percent chance Khomeini will die during the next six months.
9
26. Khomeini is said to have chosen Ayatollah
Montazeri as his successor. The clerics, however, are
deeply concerned about the prospects for a smooth
transition. Montazari does not possess Khomeini's ap-
peal and has no significant independent base of sup-
port. Montazari, Beheshti, and the fundamentalists
will almost certainly attempt to complete the
Islamization of Iran but, since these senior clergymen
do not possess Khomeini's charisma, their grip on
power will be tenuous.
27. If the fundamentalists move to fully consolidate
their position, Bani-Sadr will have to decide whether
to submit or actively resist: a decision that could lead
to civil war.
28. An alignment among Bani-Sadr, some of the ba-
zaar merchants, elements of the military, and mod-
erate clerics is possible. Some of the exiles and ethnic
groups might also become a part of this alliance. The
Mujahedin, which is currently confronting the fun-
damentalists in the streets, could also decide to throw
its weight behind Bani-Sadr. The Mujahedin welcomes
continued political instability as a means of expanding
its influence. On the other hand, the Tudeh and parts
of the Fedayeen will probably continue to support the
hardliners.
29. In sum, political prospects during the term of
this Estimate point to continued instability�and to
intensified violence if Khomeini dies or is incapaci-
tated during this period.
The War With Iraq
30. The war has settled into a stalemate that prob-
ably will last at least through spring. The frontline has
changed little since the first two weeks of fighting.
(See figure 3.) Except for the unsuccessful Iranian
counteroffensive in January, the war on the ground
had been essentially limited to occasional probes and
artillery exchanges. The failure of the Iranian counter-
offensive in the Susangerd salient has left Tehran's
forces more vulnerable to further Iraqi offensive oper-
ations. In the coming months, the Iranians will not be
able to overcome Iraqi advantages in troops and ar-
mored vehicles�particularly tanks. Still, the outcome
of the war will be determined primarily by political
developments in Baghdad and Tehran and not on the
battlefield.
31. The air war thus far has been far more impor-
tant economically and psychologically than militarily.
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Figure 3
Iraq-Iran War: Disposition of Forces
Turkey
� 1.4 Mosul
J
Lk ----/ s`Ns
urmi.
� Tip) 'tr.
.'
Urumiyeh
Kirkuk
As Sulaymfiniyah
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�
Al 'Amara
Territory captured
by Iraq
Iraq Iranit
Infantry division
Infantry brigade
Armored division
Mechanized division
Airborne brigade
Saudi Arabia
629116 2-81 CIA
-
\
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it
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Caspian
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'Secret
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Although major military and economic targets have
been attacked, both sides now use fighter aircraft pri-
marily for defensive patrols and are likely to be able to
maintain the potential for attacking key economic tar-
gets over the next several months. Despite its war
losses and reduced military strength, Iran also retains
the capability to strike targets on the Arabian Penin-
sula. Iran has operational fighter-bombers stationed at
three bases on the Persian Gulf, it has successfully con-
ducted amphibious commando raids, and its Navy still
operates behind a fascade of unchallenged supremacy.
32. The Iranian military probably cannot be ade-
quately prepared for another campaign before mid-
summer. The actual timing of any future offensive,
however, is highly dependent on political decisions in
Tehran, and Iran's ability to:
� Offset its combat losses by repair and/or consoli-
dation of remaining assets.
� Acquire badly needed spare parts and munitions.
� Develop effective combat logistics and command
and control mechanisms at the front.
� Recruit, train, and integrate new personnel into
combat units.
33. In spite of its worldwide search for military sup-
plies, Tehran has obtained only limited quantities of
arms from North Korea, Libya, Syria, and independ-
ent arms brokers. Iranian foreign exchange reserves
are sufficient to continue or expand such purchases
over the near term. Iran's ability to pay for needed
defense imports ultimately depends on its capability to
maintain or increase oil exports�a capability highly
vulnerable to Iraqi attack. In any case, bureaucratic
inefficiency and transportation bottlenecks are likely
to continue to constrain Iran's quest for additional
military hardware.
34. Mediation efforts have bogged down because of
the intransigence of both sides on the issue of Iraqi
withdrawal from Iran and differences over sov-
ereignty and access to the Shatt al Arab.
Economic Conditions
35. The Iranian economy, already severely de-
pressed as a result of the revolution, has been further
disrupted by the war. Shortages and unemployment
are widespread, and there have been some overt mani-
festations of popular discontent. Most basic needs are
being met. Worsening economic conditions, however,
are contributing to popular unrest, and beginning to
influence Iran's internal political situation.
36. This situation could be further exacerbated by
Iraqi military action against a very few key facilities.
Specifically:
� The most important oil export facility, Kharg Is-
land. (Oil facilities are shown on figure 4.) If Iran
does not continue to export oil, it will be faced
with a severe foreign exchange shortage in six to
nine months.
The two remaining major operating refineries at
Tehran and Esfahan. If these were out of
commission, or the flow of oil through the pipe-
lines which service them was stopped, Iran
would have great difficulty getting enough petro-
leum products to continue the war, generate
electricity, and distribute even basic foods to the
population.
37. The Economy. Overall industrial activity has
declined to only one-quarter to one-third of the
prerevolutionary levels. (See table 3.) Government at-
tempts to use the war to cajole increased production
have been ineffective. Furthermore, political infight-
ing at the top prevents formulation of coherent eco-
nomic policies.
38. Inflation is accelerating as shortages worsen.
Rationing has been imposed on food and fuel. While
the war effort has generated additional jobs in some
areas, it has probably added 500,000 workers from
wartorn Khuzestan Province to the already large un-
employment rolls. Altogether about 1.5-2 million peo-
ple have been displaced by the war, creating a serious,
refugee problem.
39. Shortages. Only a portion of normally im-
ported food supplies is now available, but, ale country
can muddle through the remainder of the winter be-
cause of carryover stocks from this year's harvests,
through rationing, and by giving high priority to food
imports. Bread, rice, potatoes, sugar, eggs, milk, and,
vegetable oil have been added to the -growing list of
goods covered by government rationing. Food import
requirements will remain high, especially since impor-
tant agricultural areas have been hurt by the war.
40. Iran's domestic oil supply situation remains
precarious. Operating refineries can provide roughly
80 percent of normal winter demand, but kerosene
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Figure 4
Iranian Oil Facilities
Turkey
4'1
Tabriz
BAGHDAD
Iraq-Saudi Arabia
Neutral Zone
Saudi Arabia
� Oilfield
Pipeline
111 Refinery
Tanker
terminal
n ied
629114 2-81
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Caspian
Sea
Khiirg?
Island
tr>cp-
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,
y pahrai
V V
Qatar
TRACT
Soviet Union
Mathhail '
�
Eafahan
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I,
Zbhedin
43\
,
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tfr ir43ztv
0,0,0=
Island
.
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."1
hanistan
Pakistan
`OA
Sirri
0 200
Kilometers
12
United
Arab 1
Emirates
---- -
Gulf of Oman
Boundary representation is
not necessarily authoritative.
.site.RE1�
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Table 3
Iran: The Economy at a Glance
Since the Revolution
Overall economic activity Operating at about one-third pre-
revolution levels.
Industrial activity Down to one-quarter to one-third
of normal.
Agricultural output
Oil production
Down slightly in foodstuffs; meat/
poultry down moderately or worse.
Down by more than two-thirds to
around 1.6 million b/d.
Oil exports Down to around 1.1 million b/d.
Oil earnings About $40-45 million a day.
Imports
Down by almost half in value terms
and about two-thirds in volume.
Available reserve assets Down to around $8.5 billion.
Unemployment Up threefold to 3-4 million persons,
mostly urban workers.
Inflation
Up sharply to around 60 percent
per annum.
and gasoline are in very short supply. The situation
would deteriorate quickly if either of the two remain-
ing major operating refineries at Tehran and Esfahan
were put out of commission. Port and transportation
constraints keep Iran from importing more than 10
percent of its refined petroleum requirements.
41. Access to Imports. The fighting has further re-
duced Iran's import capabilities, largely limiting the
flow of imports through the Persian Gulf to a single
major port, Bandar-e Abbas. Contraction of Iran's
trade with the West has somewhat increased its de-
pendence on trade with the Communist countries, but
transport bottlenecks prevent a major shift in that
direction.
42. Oil Exports. Oil exports are critical to Iran's
continued ability to keep the economy functioning.
Oil has been shipped from Sirri and Lavan Island in
the southern Persian Gulf and from some of the facili-
ties at Kharg Island. Exports averaged about 260,000
barrels a day during October and November and
13
surged to about 740,000 b/d for the period 22 Novem-
ber through 21 December. The latest Iranian statistics
indicate that oil exports totaled about 1.1 million b/d
for the period 22 December through 17 February. (See
figure 5.)
43. Financial Conditions. Iran no longer faces an
immediate foreign exchange shortage, although its
financial situation could rapidly deteriorate if oil ex-
ports drop much below the present rite of 1.1 million
b/d. Following the unblocking of US bank accounts,
Iran's central bank had about $5 billion in foreign ex-
change reserves; given the estimated current level of
revenues and expenditures, it is drawing down re-
serves by about $150 million a month. A sustained
drop in exports to, say, 800,000 or 900,000 b/d would
precipitate roughly $400-500 million in monthly
drawdowns. If so, at current import levels, Iran's for-
eign exchange could be exhausted in about 10 months,
forcing liquidation of some of its $2.8 billion in gold or
a draw on its $700 million position at the International
Monetary Fund to prevent a financial crisis.
44. Economic Prospects. The lifting of economic
sanctions will have minimal effect on Iran's economy,
and there is little chance of substantial economic im-
provement in the foreseeable future. Should the tempo
or scope of the war accelerate substantially, some of
Iran's vital and highly vulnerable economic infrastruc-
ture would likely be subject to Iraqi attack. Similarly,
serious domestic unrest could affect the internal dis-
tribution of goods, the operation of the oil sector, and
Iran's ports.
45. The arrival of warm weather will relieve some
of the burdens on the population as winter heating
needs are eliminated and Iran's own food harvests be-
gin. Despite those factors, food and other goods short-
ages will persist and Unemployment and inflation will
remain major problems for the regime.
Foreign Relations
46. Iran's ability to effectively project its policy
views onto the world stage will remain circumscribed
until its domestic house ,and internal stability problems
are put in order. All revolutionary elements agree on
the broad outline of "Islamic foreign policy,- the main
points of which include:
� Strict nonalignment.
� Elimination of superpower influence in the
region.
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Figure 5
Iran: Crude Oil Production and Exports, 23 August 1980 � 17 February 19818
Thousand barrels per day
Production
Exports
,
583772 2-81 CIA
1,570
800
630
760
1,600
1,250
740
1,100
260
Aug
23
Sep
23
Oct
23
Nov
a Including product exports. Data are averages-for each period.
� Economic self-sufficiency.
� Xenophobic nationalisni.
� Exporting the Islamic revolution.
Despite this fundamental construct, even bilateral
relations are often confused and contradictory. This is
not surprising, given the shifting nature of internal
olitical dynamics. Iran's regional goals are dominated
by the desire to curtail or eliminate great-power influ-
ence and to encourage Islamization of governments in
the Persian Gulf region, especially where substantial
Shiite communities exist.
47. The Gulf States. For months, Iran has pursued
an almost schizophrenic policy toward the Persian
Gulf states. Statements expressing a desire for good
relations have been followed by derogatory and men-
14
22
Dec
22
Jan Feb
21 17
acing comments. The war intensified this already pro-
nounced tendency.
48. Iran's revolution is seen as a major source of
regional destabilization by the other countries of the
Persian Gulf. The revolution has opened regional re-
gimes to some of the same charges that the Iranian
clergy used so effectively against the Shah: corruption
and the failure to adhere to Islamic principles. All
Gulf states must cope with problems of social and eco-
nomic dislocations associated with modernization and
oil wealth that so undermined the Shah's regime. Most
of these countries have Shia communities and large
expatriate populations open to outside manipulation.
The various regimes have been slow in developing
strategies to deal with these problems or with the new
regime in Tehran.
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49. Afghanistan. The Iranians have consistently
denounced the Soviet invasion of Afghanistan and
have rebuffed all Soviet efforts to have Tehran deal
with the Babrak regime. We would not expect them to
participate in any scheme or conference which im-
plied de facto recognition of the present Kabul govern-
ment and which did not require as a precondition the
withdrawal of Soviet troops.
50. The Arab Radicals. Tehran's diplomatic isola-
tion in the early days of the war encouraged it to seek
practical alliances with some radical Arabs. Ties be-
tween Syria�Iraq's traditional ideological rival�and
Iran were cordial even before the war. Syria has pro-
vided Iran with small arms and ammunition and has
served as a transshipment point for supplies from East
European countries to Iran. Some reports also suggest
that Damascus may purchase Soviet arms for resale to
Tehran.
51. Tehran's relations with Libya have improved.
Although Libyan leader Qadhafi has long expressed
support for Iran's Islamic revolution, relations between
the two states were clouded by the disappearance in
Tripoli of a prominent Lebanese Shia leader�the
Musa-Sadr affair.
52. At least for the moment, the Iranians appear
willing to forget about the missing imam. For its part,
Libya has agreed to serve as a middleman for Iranian
arms purchases and has agreed to improve economic
relations with Tehran. It has likewise professed a
willingness to provide Iran with tanks, artillery, and
antitank missiles, and has already supplied some spare
parts, small arms, and ammunition.
53. The war with Iraq has complicated Iranian ties
with the Palestine Liberation Organization because
the PLO must also preserve its ties with Arab Bagh-
dad. PLO leader Arafat initially hoped to mediate the
differences between the two sides and traveled to both
capitals in the early days of the war, but his mission
failed and led to further strains with both.
Soviet Policy Toward Iran
54. Moscow's policy with respect to Iran is based
largely on the judgment that there is little hope for any
significant Soviet breakthrough as long as Khomeini
remains on the scene. Given the instability of the situa-
tion in Iran, however, the Soviets want to build up an
infrastructure that could be used quickly to exploit
any new opportunities. Consequently, the Soviets are
ACT
continuing to support the Tudeh in hopes that it can
ultimately play a decisive role in Iranian politics. They
are also encouraging greater cooperation between the
Tudeh and other leftist elements. Similarly, Moscow is
reportedly in contact with and providing assistance to
some dissident minority groups.
55. Moscow appears to believe that its most promis-
ing current option is to curry favor with the present
government in Tehran and to play on its anti-Western
orientation. Thus, while paying lipservice to the prin-
ciple that the hostage seizure was a breach of interna-
tional law, the Soviets nonetheless portrayed Tehran's
demands as "legitimate" and assisted in thwarting US
economic sanctions during the crisis.
56. The Soviets have largely been frustrated in their
efforts to improve relations. The Iranians remain
highly suspicious of Soviet intentions toward Iran and
critical of Moscow's involvement in Afghanistan.
57. While possibly creating some future opportu-
nities in Iran for the Soviets, the Iran-Iraq war has
complicated Moscow's relations with Tehran, already
wary of Soviet support for Iraq. To counter this the
Soviets throughout most of the conflict have inclined
toward Iran. Moscow has refused to satisfy Iraqi re-
quests for new major weapon systems and has been
equally reluctant to proceed with previously sched-
uled deliveries. The Soviets have, on the other hand,
suggested an interest in broadening their arms rela-
tionship with Tehran while stalling on deliveries of
specific items, including spare parts covered by agree-
ments signed with the former imperial government.
58. Moscow is well aware that this balancing act
risks alienating Baghdad and pushing Iraq closer to the
other Persian Gulf Arabs and the West. Consequently,
the Soviets have opted for a strategy of allowing East
European arms deliveries to Iraq while withholding
their own. The very fact that Moscow is willing to run
the potential risk of losing the friendship of Iraqi
President Saddam Hussein clearly underscores the
geopolitical importance of Iran to the USSR.
59. Underlying Soviet policy is the judgment that
Iran is the main geopolitical prize in the region. Mos-
cow fears that the war could lead to closer ties be-
tween Iran and the West and a resurgence of US influ-
ence. The release of the US hostages heightened Soviet
concern, and since the hostages' release the Soviets
have tried to keep Iranian attention focused on the
alleged threat the United States continues to pose. At
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the same time, Moscow�concerned over the vulner-
ability of its own representatives in Tehran�has re-
minded the Iranians of its past support and warned
that Soviet tolerance and patience are limited.
60. The Soviets are not sanguine about the near-
term prospects for a leftist seizure of power in Tehran.
Nor is it clear that they see a fragmentation of Iran as
necessarily in their best interest.5 Moscow is proceed-
ing cautiously in its relations with both the left and the
minorities for fear of derailing its efforts to improve
state-to-state relations with the government in Tehran
and triggering a government crackdown against the
left.
61. Given the risk of confrontation with the United
States, Moscow would clearly prefer to achieve its aims
in Iran without using military force. While a full-scale
Soviet invasion currently seems unlikely, there are cer-
tain developments that could lead the Soviets to con-
sider military intervention. A serious threat of US mili-
tary involvement could prompt a Soviet reaction or
preemptive move. If a leftist coalition were able to
seize power and called for Soviet armed forces sup-
port, Moscow might honor its request. Similarly, if
Iran were to fragment along ethnic lines and the Sovi-
ets thought this process irreversible, they might inter-
vene militarily.
62. According to,an alternative view, the Soviets are
seeking to ultimately control Iran and are working to
achieve this through, a leftist takeover or by taking
advantage of fragmentation. While the holders of this
view agree that Moscow clearly would prefer to
achieve its aims in Iran without direct overt military
force, they note that Soviet forces in the border region
have the capability to intervene there while Iranian
ability to offer meaningful resistance has been sapped
by the revolution and the Iran-Iraq war. Soviet direct
Military intervention could be prompted by a request
from a leftist coaliton if such a coalition managed to
seize power or create a Plausible basis for requesting
intervention. The Soviets might intervene if Iran were
to fragment along ethnic lines in an apparently ir-
reversible mariner. The holders of this view expect the
USSR' to continue gradual improvement in its readi-
ness to intervene. Any final decision to do so and the
extent of its intervention will be 'affected by many
factors�including those cited above�and a Soviet
5 See the alternative 0ew paragraph 62.
RACT
assessment of the probability and risks of a direct mili-
tary confrontation with the United States.'
Implications for the United States
63. Several major conclusions which have implica-
tions for the development of future US policy toward
Iran emerge from this study:
� A return to the status quo ante is not possible.
The Iran of the 1950s, '60s, and '70s died in the
convulsions of the past three years.
� For the foreseeable future, the Iranian political
context will be characterized by instability and
anti-Americanism. Moreover, the power struggle
for Khomeini's attention now and legacy later
will continue, with no clear victor discernible at
this juncture.
� The potential for, increased violence is high,
particularly after Khomeini dies.
� At best a government will emerge which is at
once highly nationalistic, nonaligned, and anti-
Communist.
64. Implementation of the hostage agreement, even
without complications, will not affect these generaliza-
tions. An adversary relationship with the United States
will persist. Any perceived footdragging on im-
plementation would heighten the already prevalent
belief that the United States is a malevolent power
which cannot be trusted and which has sinister designs
toward the revolution.
65. In view of this suspicion and negativism, the
United States has no direct leverage with which to
channel developments in ways that serve its interests.
Quick resumption .of US commercial activity in Iran
would likely prove counterproductive. Indeed, such a
presence would offer convenient scapegoats for future
Iranian economic failures, rekindle violent anti-
Americanism, and provide a new crop of potential ter-
rorist targets.
66. Given the fluid situation in Iran, US moves
which maintain flexibility, serve long-term interests,
and operate in an indirect manner�that is, through
third countries�probably have the best chance of
achieving lasting beneficial results.
The holders of this view are the Director, Defense Intelligence
Agency, and the Assistant Chief of Staff for Intelligene, Depart-
ment of the Army. -
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