IRAN S ARAB WORLD INITIATIVES AND THEIR IMPLICATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00353R000100130004-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 14
• Document Creation Date: December 14, 2016
• Document Release Date: July 15, 2003
• Sequence Number: 4
• Publication Date: January 14, 1975
• Content Type: MEMO

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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
January 14, 1975
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MEMORANDUM
SUBJECT: Iran's Arab World Initiatives and their Implications
On October 27, 1967--26 years after his accession to the
throne--Mohammed Reza Pahlavi crowned himself Shah of Iran.
That event symbolized the Iranian monarch's transition from an
inexperienced figurehead placed on a shaky throne by foreign
powers to a leader increasingly confident of his right to rule.
Domestic political stability had been attained, Iran's inde-
pendence from foreign powers had been asserted, and the coun-
try's growing military strength gave it the ability to protect
its territory from all but its most powerful neighbor, the
Soviet Union.
The Shah's gamble--some would argue that it was essential
to forestall revolution--in placing the government on the side
of social and economic reforms with the launching of the "White
Revolution" in 1963 had paid off by 1967. The "White Revolu-
tion" was a domestic political success, if not yet an economic
one. The religious reactionaries on the right and the Iranian
leftists, both of whom had opposed the Shah's program, had
been crushed, and the issue of social reform had for the moment
been denied to dissidents.
From this domestic powerbase, the Shah embarked in the
early 1970s upon a more activist foreign policy designed to
extend Iran's influence in regional and world councils. Two
events lent momentum to this outward thrust. The UK gave up
its peacekeeping role in the Persian Gulf in late 1971 and the
sharp rise in oil prices in 1973-74 increased Iran's foreign
reserves from $1.3 billion to $6.3 billion. Monetary reserves
stood at $7.6 billion at the end of 1974.
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The termination of the UK's Gulf role sharpened Tehran's
traditional concern over the security situation in the Persian
Gulf. The sharp rise in oil prices gave Iran the ability
simultaneously to sustain its developmental programs, to build
the most powerful armed force in the region, and to use its
economic leverage abroad to enhance political and strategic
objectives.
The flow of visitors to and from Tehran since the October
1973 war has been heavy. In the first six months of 1974 some
thirty countries--including many from Western Europe--sent high-
level delegations seeking aid and trade agreements, and in many
cases offering "political IOUs" in exchange. Since August
1974 the Shah has visited the Soviet Union, France, Southeast
Asia, Australia, New Zealand, Jordan, and Egypt. Trips to
Pakistan and Latin America are planned for later this year.
Major Iranian foreign policy initiatives included
strengthening ties with India, Afghanistan, and the most impor-
tant Arab states, and increasing Tehran's influence in Africa
through economic deals. Iran proposed in the UN that the
Middle East be declared a nuclear weapons-free zone; the Shah
advocated a "zone of peace" for the Indian Ocean, and advanced
general plans for a common market and closer security coopera-
tion among its littoral states.
Iranian financial commitments to some 17 countries during
1974 totaled over $6 billion. They included individual offers
of $1 billion or more to India, France, and the United Kingdom;
over one half billion to Pakistan, and an aid package worth
nearly $1 billion to Egypt. The Shah also proposed the estab-
lishment of a development fund for LDCs, and promised large
loans to the IMF and IBRD to cushion the effects of higher oil
prices on the LDCs.
Military equipment purchases totaling more than $7 billion
during 1973-74--it will go up to $9.3 billion next year--reflect
the Shah's determination to ensure Iran's preeminent military
position in the Persian Gulf region. Virtually all new weapons
ordered will enter the inventory by 1978. New additions include
nearly 800 chieftain tanks and 250 Scorpion light tanks from the
UK, the British-made Rapier and the US Hawk air defense missile
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systems, 280 F-4E and F-5E; jet fighters and 80 F-14 jet
fighters from the US, and several new ships for Iran's
navy.
Iran has shown itself willing to commit its military
forces in the Persian Gulf region on three occasions since
1971, once unilaterally, once at the request of rebellious
Kurds,: and once at the request :of an Arab. ruler.. On the eve.
B
of the
ritish withdrawal in late 1971, Iran occupied three
small islands near the Strait of Hormuz, climaxing more than
a decade of unsuccessful negotiations over their ownership.
Although the Shah has often indicated his preference
for collaboration among Gulf states on security matters, the
examples of the islands and Iraq show clearly his willingness
to act alone and against Arab governments when he feels
Iranian interests are directly involved. Aid to Oman shows
his willingness to aid Gulf sheikdoms threatened by leftists.
The View From Iran
Iran's arms buildup, the Shah's diplomatic forays, and
his numerous pledges to transform Iran into a world power,
have raised questions about his objectives and ambitions, and
their impact on regional stability. Do Iranian ambitions
exacerbate to a dangerous degree historical Arab-Persian ten-
sions? Can Anwar Sadat's vision of the "Arab nation" coexist
with the Shah's vision of the "Great Civilization?" Does the
Shah have a "grand design?"
It appears to us that the Shah's foreign policy objectives
are to:
-- undercut radical influence in the underdeveloped coun-
tries of the region and increase Iran's influence with
the LDCs.
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-- assure a viable economic future for Iran after the
country's oil resources are depleted. (Current reserves
are estimated at 60 billion barrels; at current produc-
tion rates, reserves will begin to dwindle rapidly in the
early 1990s.)
assure a dominant political and military role for
Iran in the Persian Gulf and eventually an'effective
influence in Indian Ocean affairs.
-- isolate Iraq, thwart the spread of radical influences
in the Persian Gulf, and combat what the Shah sees as
the continuing threat to Iran through encirclement and
subversion of Gulf and subcontinent states.
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At the moment, the most crucial of these is to thwart
subversion and prevent the emergence of radical governments in
the Gulf and, as a corollary, to prevent further Soviet pene-
tration of the Middle East. This objective is the force behind
the Shah's diplomatic effort to create a rapprochement with the
moderate Arab states.
The Shah's outlook and goals about the Middle East are a
blend of attitudes common to most Iranians, as well as events
of his lifetime. The Shah is heir to a traditional Persian
sense of isolation in a largely hostile world. Surrounded by
peoples of different origins and cultures, the Persians believe
they have no natural allies. To some extent, this perception
explains the Shah's emphasis on arms and security.
The direct role of foreigners in putting the Shah on the
throne and in saving his position in 1953, the bitter Arab
propaganda attacks on Iran during the Nasir era, and the
Soviet designs on Iranian territory following World War II
have all acted to reinforce in the Shah that sense of Persian
isolation and insecurity. These events have also strengthened
his determination to free Iran from all manner of foreign domi-
nation and dependence.
The Shah also has the notion--Faysal feels the same way
about Saudi Arabia--that Iran is threatened with encirclement.
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The hostility of the Iraga_s, Baghdad's support for the Dhofar
rebellion and for tribal unrest on Iran's border with Pakistan,
is linked by the Shah to the Soviet friendship treaties with
Iraq and India, the dismemberment of Pakistan through the
secession of Bangladesh, and the overthrow of the monarchy in
Afghanistan to present a picture of Iran beset from all sides
by revolution and chaos. Although distant. from Iran's borders,
the'ouster of'Emperor Haile Selassie, new 'speculations about
the survivability of his fellow monarchs Husayn of Jordan and
Hassan of Morocco, and the prospect of a Fatah-led Palestinian
state, have all reinforced the Shah's view of regional insta-
bility and the need for him to counter these developments.
The Arabs
It is the vulnerability of the Arab Gulf states to subver-
sion that the Shah sees as the most dangerous challenge to
Iran's well-being. Above all, and at any cost, the Shah
intends to safeguard the transit of his oil--upon which his plans
to make Iran a major power depend.., The Shah subscribes to the
notion that a power vacuum on the Arab shore was caused by the
UK withdrawal in 1971 and that it poses a danger to him. Iran,
he believes, has the right to take action there, if necessary,
as a last resort.
Before that, however, the Shah is committed to political
and military efforts to enhance the stability of select Arab
governments and to making overtures for closer relations with
the more moderate Arab regimes, not only on the Arabian Penin-
sula, but extending to Egypt, Jordan, and even Syria.
At the same time, there is a recognition in the Arab world
of Iran's growing importance in the Middle East, because of
its economic and military power, its willingness to use that
power, and its key role in the Organization of Petroleum
Exporting Countries.
Saudi Arabia and the Gulf: It is a cardinal principal of
the Shah's foreign policy that security of the Persian Gulf
should be left to the littoral states. Nevertheless, he recog-
nizes their inability to deny influence to the major powers.
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A US naval presence, operating from Bahrain, is, therefore,
seen by the Shah as an appropriate counter to Soviet influence.
It will be welcome to the Shah at least during the eight to ten
years he estimates it will take to build up the Iranian navy.
The'Shah naturally expects that*Iran will lead any grouping
of littoral states. Nevertheless, his goal is a cooperative
arrangement. He tried several years ago--unsuccessfully--to
interest Saudi Arabia and the small Gulf states in formal
security arrangements. The initiatives failed because of tra-
ditional Arab distrust of Iranian motives, and clashes on
specific issues such as Iran's occupation of the Gulf islands
in 1971.
The one exception to the coolness exhibited by the Arabs
was Omani. Sultan Qabus' welcoming Iran's help in fighting the 25X6
Dhofar rebels. Qabus also reached a verbal agreement with the
Shah in March 1974 to cooperate on security matters in the
Strait of Hormuz.
Saudi Arabia and Iran share a fundamental identity of
interests on regional matters. Both are politically conser-
vative and wish to limit Soviet influence in the Middle East,
eliminate or moderate existing radical regimes, and prevent the
further spread of radicalism. Both have an interest in main-
taining high oil prices, although Saudi Arabia--with greater oil
reserves and a lesser ability to absorb the revenues--can afford
to be more flexible on prices. The two countries agree that
cooperation in achieving their political aims is desirable.
Nevertheless, King Faysal and most Saudis retain an under-
lying suspicion of Tehran, particularly with respect to anything
smacking of Iranian expansion to the Arabian peninsula. The
islands issue remains a sore pointwith Fa sal
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Faysal, moreover, recognizes he would be a junior partner
in any formal alliance. Iran's population edge -32 million-to
5 million--and its already strong military machine .give some-
thing of an unreal quality to speculation about Iranian-Saudi
competition for dominance in the area. Iran already is the
dominant power.and will remain so.
The Shah probably has given up hope of achieving substan-
tially closer relations with Riyadh as long as Faysal rules.
He has some hope that Prince Fahd--Faysal's most likely suc-
cessor--will be more amenable to a closer relationship.
Meanwhile, both regional powers proceed independently in
pursuit of objectives which, at least for the moment, coincide.
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Egypt: Cairo is the key to Iran's policy toward the Arab
world. Tehran views Sadat as a strong and moderate leader who
shares Iran's desire to restrict the influence of radical Arabs
and the Soviet Union in the Middle East. The Shah believes
Sadat is in a position to moderate existing radical Arab govern-
ments and to facilitate Iran's efforts to draw Saudi Arabia into
a more cooperative relationship. The Iranian leader, therefore,
has sought to demonstrate his support for Sadat's leadership and
for his approach to regional problems.
The Shah believes that Sadat's domestic position depends
on maintaining the momentum toward a peaceful settlement in the
Middle East. Renewed war in the Shah's eyes would aid only
Arab radicals and would facilitate Soviet penetration and sub-
version in the area. This, in turn, is seen as.a threat to Iran's
security.
Iran had made several moves to improve relations with Egypt
before the October war. After the war, the Shah sent his
minister of economy to Cairo to see if Iranian economic help
would help along the rapprochement process. Egypt's deputy
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prime minister was invited to Tehran in May 1974, and an
aid arrangement was signed amounting to $850 million for
Cairo.
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level Iranian military delegation visited Egypt that same month,
touching off speculation that Iran would provide arms aid.
Iranian officials denied this was in the works.
The latest event in the courtship was the Shah's visit
to Cairo on January 8-12. The visit went well and the joint
communique contained political pluses for both sides. The
Shah reiterated his support for an Israeli pullback, and Sadat
supported Iran's defense of its oil pricing policy. Both
pledged to work for stronger ties between Iran and the Arab
world.
The Shah hopes his political and economic investment in
Egypt will reinforce the split between Egypt and the Soviets,
and Egypt and Libya.
Egypt's interest in improved relations with Iran is
largely economic, but President Sadat also feels a political
affinity for the Shah. Iran's wealth is a powerful attrac-
tion and the Shah's experience with the White Revolution pro-
vides a model for Egypt's own development. Outside the econo-
mic sphere, the two leaders' similar interest in exerting a
moderating influence in the Middle East and ensuring its inde-
pendence from the controlling influence of outside powers pro-
vides a starting point for political cooperation.
Sadat is probably somewhat suspicious of the Shah's designs
on the Arab side of the Persian Gulf, but he undoubtedly also
feels that their common interest in eliminating radical influences
there makes cooperation advantageous in terms both of the security
and stability of the area and of Egypt's long-term economic
advancement. Sadat admires the Shah as a pragmatic leader who
has been able successfully to balance his relations with the US
and the USSR--as Sadat is attempting to do--without sacrificing
Iran's political independence. Sadat recognizes that the Shah
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plays a powerful role in Middle East affairs whether the
Arabs like it or not and that, through cooperation rather than
an effort to exclude him from the smaller area of the Arab
Middle East, the Shah can contribute to the stability of the
area.
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The potential for-an eventual clash between the Shah's
ambitions and those of Sadat does exist, however. The
Egyptians' sense of their Middle Eastern role can probably
tolerate only a limited Iranian influence and leverage with
other Arab governments. The limits of that tolerance obviously
have not been reached
h
,
owever.
Friendship with Iran, moreover, gives Sadat some added
d
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a
l n d i --in Saudi Arabia.
Iranian ai cou no rep ace a rom au i Ar-a ia, u e
Shah's help might make King Faysal more solicitous of his Egyp-
tian partner. Faysal's last-minute addition of Cairo to his
Middle Eastern itinerary--coming on the heels of the Shah's
trip--was perhaps a measure of the King's concern.
Syria and Jordan: Iran has drawn closer to'Syria, for
reasons similar to those leading to its interest in Egypt, using
economic aid as the inducement. A letter of intent was signed
in May 1974 providing for low-interest credits amounting to
$150 million for Damascus. The Shah retains some doubts about
the intentions and trustworthiness of President Asad, but
'trusts Cairo to keep the Syrians on the proper path.
The Shah has had consistently good relations with Jordan's
King Husayn, to whom he has provided both economic and military
assistance. A visit to Amman this month further solidified
ties in all fields, including hints of closer military coopera-
tion. Recent Iranian military assistance included the delivery
of 11 F-5 jet fighters, with an equal number to be delivered
in 1975. Both countries give military assistance to Oman.
Implications
We believe that for the near term the dominant impulse
among the governments of Iran, Saudi Arabia, Egypt, and Jordan
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is for expanded cooperation. Such cooperation is based on
the common objectives of limiting Soviet influence in the
Middle East and reducing the danger of radical takeovers of
governments in the area. Added to this is the common inter-
est of Iran and Saudi Arabia to ensure the unobstructed flow
of oil through the Persian Gulf. Actions based on these common
interests, we believe, will have a positive impact on'politi-
cal stability and will serve to limit the spread of leftist 25X1
subversion in the region.
Certainly the coincidence of goals among these countries
does not extend to all subjects; rational interests and moti-
vations vary, and there is the potential that ultimately ambi-
tions could clash. Any resurgence of Egyptian adventurism on
the Arabian peninsula, for example, would alarm Iran and
Saudi Arabia. Continued unwillingness of Saudi Arabia to
shoulder what the Shah regards as the Saudis' share of the
burden in combating the spread of radicalism would strengthen
the Shah's determination to go it alone.
The substance of Iran's policy on the Arab-Israeli issue
has not changed significantly since the 1967 war. Iran con-
demns Israeli occupation of Arab territory and calls for a
return to the boundaries existing hefcre the 1967 conflict.
Tehran supports UN resolution 242, and does not accept the
change in the status of Jerusalem. These views were repeated
during the Shah's recent visit to Cairo.
Iran's overtures to the Arabs, however, have not surpris-
ingly included a sharpening of its statements of political
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support for their position. The sharpening is characterized
by the Shah's remark to an Arab newspaper, that in the event
of a new war, Iranian sentiments would be with the Arabs. These
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As Iran's ties with the Arabs deepen, its Israeli connec-
tions will.ptobably become an increasing liability. Resump
tion of fighting would bring intense pressure on Tehran to cut
its links with Israel. Those include diplomatic con ts, 4
and sa e
to srae o oil equal to about one-third of its daily domestic
consumption.
The Shah would like to retain those ties, yet avoid Arab
political pressure. To accomplish this he may try to project
Iran into the role of peacemaker--a bridge between Arab and
Israeli. He might argue with Arab leaders that Iran's provi-
sion of badly needed oil to Israel gives him leverage in Tel
Aviv which could benefit the Arab side. He may also encourage
Arab leaders such as Sadat to believe that the Shah's close
relationship with the US will increase the weight of the Arab
case in Washington.
In the future it is conceivable then that the Shah could
become a source of pressure on Tel Aviv to make concessions,
and on Washington to press for such concessions. According
to the Shah, he already has urged Israeli leaders to be more
flexible and has stressed the desirability of not undermining
Sadat's "moderate" approach to negotiations. It is not likely,
however, that the Shah would go much beyond this type of poli-
tical support for the Arab cause.
Certainly the Shah sees a peace settlement as being in
Iran's interest, as is illustrated by his emphasis while in
Cairo and Amman on the need for quick action to regain momentum
toward a peaceful settlement. War, he believes, would under-
mine the position of moderate leaders and result in Soviet gains
in the Middle East.
Selling the mediating role to Arab leaders depends in part
on convincing them that he does'not act in Middle East affairs
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at the behest of the US. The Shah probably sees little advantage
in identification with US Middle East policy. Recent events at
the UN and at the Rabat Summit Conference have probably strength-
ened a view held by some high Iranian officials--and possibly by
the.Shah--that the US is isolated on the question of Israel, and
that Jordan has suffered political reversals, in part, because
of its.close identification with the US..
The Shah's interest and determination to keep the price of
oil up is strong. He will continue to identify Iranian
national interests with a high oil price. It is difficult to
foresee circumstances under which he would agree to lower prices.
At the same time, Iran probably would not agree to partici-
pate in any oil embargo arising out of a new Arab-Israeli war,
despite Arab pressures. The Shah has repeatedly said Iran would
not cut off oil exports for political reasons; Iran did not join
the 1973 embargo.
Prime Minister Hoveyda recently reiterated that Iran would
not participate in any new oil embargo. He certainly spoke at
the Shah's direction, possibly to put Sadat on notice that an
approach on this subject would not be productive.
From the US perspective, the most immeidate conflict with
Iranian ambitions could come not in the Middle East, but in
Western Europe, where an important diplomatic struggle is cur-
rently being played out among the US, European Community member
states, and Iran. The issue is far from the serious stage, but
both the US and Iran have shown a willingness to invest consider-
able political capital. The subject of the struggle is the shape
of Iran's relationship wti the EC. The outcome will provide a
measure of the extent to which political power--not just
wealth--has been transfered to Iran as a result of the increase in
oil prices. It also might serve as a precedent for other oil
producers.
Special treatment by the EC is a prestige goal of the Shah.
He is evidently willing to push the issue despite the strong
objections of the US. The US has made repeated demarches to its
European allies, expressing the view that preferential treatment
for Iran is not in the interest of the oil consuming nations,
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would violate GATT regulations, could not be justified by
existing EC tariff practices, and violates earlier promises
to the US by EC officials.
EC governments are under strong pressure from their own
energy officials, as well as from Iran, to work out a formula
for special preferences. The obvious dilemma of member,govern-
ments is'that they must either anger-.a major oil producer or a
major ally. Most have privately assured the US of their sup-
port; their real preference, of course, is not to have to choose,
and they hope the US will take up the problem with Tehran on a
bilateral basis. Dependence on Arab oil, plus Iran's recently
concluded economic agreements with several West European countries,
constitute powerful arguments for EC governments to risk the
displeasure of Washington rather than Tehran.
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