IRAN: ROOTS OF DISCONTENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81B00401R002800020069-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 31
• Document Creation Date: December 9, 2016
• Document Release Date: June 18, 2001
• Sequence Number: 69
• Publication Date: October 25, 1978
• Content Type: NOTES

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an. 31 ? ;8
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SECRET/NOFORN DD/NFA notes
0900 25 Oct 1978
IRAN: ROOTS OF DISCONTENT
List of
reforms
Iran Educ, 'A 2
(Pie chart)
Introduction
1. Last week - talked about Shah's state-of-mind; behavior
2. Let's look at underlying problems, causing current troubles.
3. Then what must be done to cope.
Shah too Much in a Hurry _ f ast , ~,r In?,nti.
1. Turned to development only in 1960
a. Two decades to consolidate power (1941-60)
b. Wanted to make Iran middle industrial power
during his regime ( z- - ~ &ca)es'
in anticipation of oil output decline
2. Initial development in '62-163
a. Imposed major land reforms in 1963 but agriculture neglected.
b. Economic planning focussed on industry especially heavy
industry.
c. Education and literacy
Literacy rates 3. Accelerated effort in 173
3rd, 4th,
5th Plan,y
Exports-
Imports
1970-78W
a. Boom in oil revenues (OPEC)
b. Vastly expanded effort - frantic pace
c. Enormous rise in imports of machinery and other goods
d. Serious clogging of ports, transport, construction
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e. Severe shortage of skilled labor
- 100,000 foreign
- one in three skilled jobs unfilled
Iran Defense 4. Defense Spending -
Budget *.,(t
- some $15 billion on order
- diverted funds, + trained manpower
Real growth 5. Economic improvement
in GNP }~rt
pt" Substantial growth + better conditions
r~ H 4
Population growth 3% (nearly 50% under 15; two-thirds
under 24)
Rural to ,~*q 6. But generally expectations set too high - and not met
urban (chart)
Urban growth - Shift from rural to cities (4.7% per year for decade
(map) 0--/0
Consumer vs. 1.1"% rural)
Price Index.0fJ
- Inflation, urban overcrowing (eat up 30% wage gains)
- Unemployment (unskilled urban)
- Conspicuous consumption of a few (rich/poor gap widens)
- Rural 50% have 1/5 average urban income
- Corruption in govt.
III. Sources of Troubles
1. Three groups of discontented:
a. Religious community: Muslim clergy
(1) For decades, have seen social change and modernizing
as threat to:
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(a) Islam's principles (Koran)
(b) own status within society
(2) Offended by --
(a) Changed status of women.
(b) Secular education
(c) Law reform (displacing clergy)
(d) Land reform - lost own large religious estates
(3) Westernized, hedonistic culture.
(3) Two tendencies
(a) Some (Ayatollah Khomeini) condemn whole programs
and demand overthrow of Shah and turn to
theocratic regime.
(b) More moderate want greater religious voice in
the pace and direction of modernization.
b. People who were poorer, disadvantaged especially in cities.
Labor force (1) Peasants coming to the city only to find own
f"d conditions not improved (they lack skills)
(2) Confronted w/unemployment, poor housing, inflation
and inadequate public services.
(3) Turned to mullahs for support (tradition)
c. People benefiting from rapid development
(1) Growth produced a prosperous middle class(including
skilled) with no voice in regime; no mechanism to
make feelings known.
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(2) Student protestors emerge from this milieu
(3) Fear regime of religious leaders in dominant role
(4) But would like to see Shah in lower profile and
more responsive.
2. Recent troubles
a. Blowups; congruence of mullahs, fanning discontent of
poor, abetted by students (1/2 born since 1963)
- Exploit grievances by denouncing gov't and
inequalities in income distribution
- Effective in censuring gov't tolerance of liquor
sales and official support for women's rights.
b. Muslim faithful, agitated by rhetoric, joined the recent
mass protests.
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c. Silent majority stays silent
113. Martial law and security forces can buy some time but do not
resolve problems.
IV. Shah's Long-Term Challenge- Changing Priorities and Maintaining
at Same Time
Anticipated 1. Attempt to maintain law and order - diffuse discontent
shifts in
resources a. Adoption of welfare programs (housing, schools,
hospitals) that meet needs of impoverished - shift
resources from military and nuclear projects to
such programs (time needed for impact).
b. Placate religious leaders: by partly meeting demands
for voice in formulating gov't policy affecting
religion, ethics and morale.
Liberalization c. Demonstrate he has abandoned one-man rule; intends
reforms
to build liberalized gov't based on consent.
2. Such programs risk his basis of support from the military
in three ways:
a. Defense cuts may alienate officer corps
b. Officers may see Shah as soft
c. Senior officers see risks of recruits may refuse
order if rely on martial law too long.
SECRET/NOFORN
se, L'. S+)
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V. If Shah is to Meet this Challenge
1. He must change his methods and style.
a. No longer "god-like"
b. Now must play politics
- "Buy off" modernizers
- Mollify religious leaders
- Mobilize moderates
- Hold military in line
2. This requires "interest group" politics which is an entirely
new game for the Shah.
3. The big question is, "Can he change his whole way of life?"
VI. Can Judge how Shah is Succeeding in Coming Months
1. Getting through December (religious month) without a major
flareup will be the next big test of his ability to manage
situation.
2. Then if elections carried out next July, then period before
(April-June) could be another test.
VII.
Further Downstream His Economic Maneuvering Room Will Shrink
Oil 415
Output
Arable Land
(Map) .(('
1. Oil income decreasing somewhat over next decade.
2. Other planned exports petrochemicals, steel, copper, etc.
face stiff internal demand and stiff external competition.
Food
Imports
3. Problems of getting skilled labor.
4. Imports of food, etc., steadily increasing.
SECRET/NOFORN
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Exports-
5.
Hence, serious balance of payments and resources problems
Imports to
1985
6.
.
Iran will push for higher oil prices.
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G1WHICS AT
TM p o,
N4NIDd UT
No-r RooKJ
1962:,..
kt Land reform
Public sale of state-owned factories to finance land reform
Amendment of electoral law to include women
Profit sharing in industry
Creation of Literacy Corps
2. Nationalization of forests
Creation of a Health Corps
Creation of a Reconstruction and Development Corps
Creation of House of Equity, i.e., rural courts
1967:
10. Nationalization of water resources
11. National reconstruction
Administrative and educational revolution
1975:
Vi3. Sale of corporate stock to workers
14. Control of inflation
/l5. Free Education, primary school through university
16. Government support for expectant mothers and infant children
/17. Universal social security benefits
1977-
18. Ceiling on land prices
19. Personal wealth disclosures by senior civil servants
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Iranian Education
Total Population
Millions
Primary 244,315
Secondary 26,812
Higher 3,405
1974-75
1977-78
Primary 3.1 Million
Secondary 797,292
Higher 123,119
"Primary 5.3 Million
Secondary 2.2 Million
Higher 170,000
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Iran's Literacy Rates
Percent of Population Over 7 Years
70
60
50_
40
30 _ 29.4
20 _
1956 1966 1974
1975 1976 1977 1978
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Comparison of 3rd, 4th, and 5th Iranian
Investment Plans
Total Planned Investment
Billion US $
3rd Plan
1963-68
4th Plan
1968-73
5th Plan
1973-78
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IRAN OIL REVENUES
(in $US billions)
1969
- $1.9
1970
- 2.2
1971
- 3.4
1972
- 3.8
I--- -
1973
- 5.5
1974
- 20.8
1975
- 19.4
1976
- 22.4
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Iran: Current Account
Billion US $
1970 71 72 73 74 75 76 77 78 79 80
-Projected-
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Percent of
Total Budget**
Iranian Defense Budget*
Million US $
Current GNP
0 1 I I I I 1
1970 71 72 73 74 75 76
602512
Percent
100
J0
77
'Adjusted for military related items not carried under National Defense line item
"Capital and current
CONFIDENTIAL
NOFORN
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Value Added (Non-Oil and Non-Agriculture
Sectors)
Percentage change from previous year
Industries and Mines
ervices
1963
12.7
5.3
1964
5.0
13.0
1965
19.9
13.7
1966
9.0
9.0
1967
15.8
9.8
1968
11.4
12.9
1969
7.6
12.1
1970
8.8
13.7
1871
8.2
13.1
1972
14.7
23.2
1973
16.3
19.2
1974
22.4
18.1
1975
15.3
1976
14.8
14.3
1977
8.7
9.6
Sector Composition of CDP (in percent)
1975
1977
Agriculture
10
10
Industries and Mines
17
19
Services
33
36
oil
40
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Real Growth in GNP
1965 66 67 68 69 70 71 72 73 74 75 76 77* 78**
* Projected ** Estimated
Growth in GNP dropped off substantially in 1975 when worldwide recession
reduced demand for Iranian oil. As a result, Iranian oil output declined
11 percent that year.
502810
0
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Real Agricultural Production
Constant 1974 Prices
Billion US $
96 J 8
O 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77
602811
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Rural to Urban Migration in Iran
Millions
Urban
9.8
Rural
19.0 Total Population
16.0
17.9
/l7~ So e/
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Iran: Major Cities-Population Trends
Ci-y
1976 Census
1966 Census
Tehran
4,496,159
2,980,044
Isfahan
671,825
424,045
NNlashad
670,180
409,616
Tabriz
598,576
403,413
Shiraz
416,408
269,865
Ahwaz
329,006
206,375
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Iran's urban population growth, 1900-76...
The growth of cities having 40,000 or more inhabitants (58 such cities in 1976) is traced by rises in the statistical surface.
1900 1940
Tehran
200,000
1966 Tehran
2,720,000
Tabriz
Ahvaz
Tehran
540,000
Tehran
4.400,000
Esfahan
/0
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Percent
1975=100
150 r---
Iran's Consumer Price Index
50 1 i i I i 1 1-.1 I
1963 64 65 66 67 68 69 70 71 72 73 74 75 76 77
602809
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Iran: Composition of Labor Force, 1978
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POSSIBLE SHIFTS IN RESOURCES
Cuts
- Nuclear power program
(originally 20+, now 4)
Some sophisticated weapon
purchases
Broad industrial program -
Highway & railroad
electrification projects
Expansion
e,7.
e~ r~-ra( E~wr~a~-ECoww~~~~tc~~ukS
- Rural development etec#rcitcct,i,A
~aucattoi
- Social welfare-e-%.
kovS~k~
p.c a .t'c a I.
Slee t MA & k 1 K J
Corny cok.plex
pc+va c~P&I J pIRt
-11/
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SECRET
Proposed Agreement Between PM Sharif-Emami and Religious and
National Front Moderates (Note: This is unconfirmed).
A. Nine demands accepted by PM.
1. Support for religious leaders to form their own party.
2. Reopen Hosseiniye religious meeting place.
3. Allow moderates' human rights organization to register.
4. Freedom of the press.
5. Royal family stay out of all business and under tight reign.
6. No postponement of next summer's elections.
7. Law to speed corruption trials (agreed, but must be moderate).
8. Shah to reign, not rule - stay out of daily government business
(agreed, but Shah still commands Army).
9. More religious materials in textbooks.
B. Three demands not met.
1. End to martial law (PM .laid would try to end before 6 months).
2. Dissolve parliament (PM will consider dissolving 1-2 months
early and going into election period before June).
3. Release political prisoners (On Shah's birthday release
prisoners except those convicted of specific crimes of
murder, terrorism, etc.)
/~/07~ ,do4 r~S ,.
SECRET
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Likely Oil Production Scenario for Iran
Millions b/d
1977 1980
1982 1985
Projected -
-01-11511-
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MAIN FEATURES OF THE SHAHS LIBERALIZATION PROGRAM
1976 - 1978
FREE ELECTIONS NEXT JUNE.
POLITICAL PARTIES PERMITTED EXCEPT FOR COMMUNISTS.
PRESS CENSORSHIP LIFTED,
TRIALS OF POLITICAL OFFENSES, EXCEPT TERRORIST
ACTIVITY, SHIFTED FROM MILITARY TO CIVILIAN COURTS.
POLITICAL PRISONERS, EXCEPT TERRORISTS, TO BE RELEASED,
POPULAR CRITICISM OF GOVERNMENT PERFORMANCE IS ENCOURAGED,
PARLIAMENTARY SESSIONS ARE NATIONALLY TELEVISED.
1Z/
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Iran frex-co
Total land area (Km2) 1,647,240 1,978,800
Of Which Cropland (Km2) 98,834 237,456
(c.6%) (c.12%)
Iran
Ba
r~rl...y \ U.S.S..RR~ -'
1~. ~1! c' fit"
6clard
La c with soTe potential
fc, ~u lti vation
Ra
Kii.tsnos~sI
.RU ^ehr
.O
`r J
OAd Dawhah
U. S. S. U.S.S.R.
~Ko, not
groan
United
Arab
Emirates
be/Ir/ /~ / ed,
7 ,s C
106
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Chardzho )
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Iranian Agricultural Imports*
Current Billion US $
7
'Excludes most non-food items,
such as fibers and hides, but
includes tobacco and beverages.
0
1970 2 71 73 74 75 76 77 78 79 80 81 82 83 84 85
602818 10-78
0-/
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24 r
Iran: Current Account Through 1985
(Billion USS)
48
42
36-
1st-
12)-
577053 878 CIA
Confidential
Note: Does not reflect:
1) Any cutbacks of military or nuclear equipment.
2) Any rise in the real price of oil.
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