THE 9 NOVEMBER 1978 PRC MEETING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81B00401R002000110002-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 60
• Document Creation Date: December 15, 2016
• Document Release Date: December 16, 2003
• Sequence Number: 2
• Publication Date: November 8, 1978
• Content Type: MF

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III
8 November 1978
0
MEMORANDUM FOR: Director of Central Intelligence
VIA Director, National Foreign Assessment
Center
FROM Maurice C. Ernst
SUBJECT The 9 November 1978 PRC Meeting
1. Action Requested: None. For your information.
2. Background: The purpose of this PRC meeting is to
brief Secretary B umenthal prior to his visit to the Middle
East (Iran, Saudi Arabia, Kuwait, and the UAE) from 16 to 22
November. The general agenda includes:
a. A brief rundown on the situation in the
b. A discussion of current oil price and
supply policy problems, including probably
a brief report by Under Secretary Cooper
on his recent trip to Iran, Kuwait, and
the UAE.
?
c. A report on the current status of the
Egyptian-Israeli negotiations
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3. The general agenda has not been changed by events in
Iran, but an update on the Iranian situation since the
Monday PRC meeting probably will be needed. Moreover,
Iran's political instability and the current loss of most
Iranian oil obviously add important new policy questions to
those Secretary Blumenthal intends to discuss during his trip.
4. State prepared a brief paper on questions Secretary
Blumenthal may address during his visit (paper attached).
Although it is slightly out of date as a result of the
changing Iranian situation and we have other minor problems
with it (see our attached comments), on the whole, we believe
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DIA and DOS review(s) completed.
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it is an excellent paper. Its main recommendation is that
Secretary Blumenthal should make a case, in a low key, for
minimizing the next OPEC price increase.
5. The question of how to compensate for the loss of
Iranian oil is not covered in the paper. As we have
indicated in your draft briefing for the President, it
looks as if:
o Saudi Arabia has agreed to let Aramco
produce at capacity.
o Kuwait and the UAE have turned down
company requests to increase liftings.
6. The PRC may want to consider whether Secretary
Blumenthal should approach Kuwait and the UAE on this subject,
and, if so, how. One concern is the possible link between
the next OPEC price increase and Kuwaiti and n
21 policy.
e question is how the December price increase might
a ec uture oil production decisions and whether any tradeoffs
exist.
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Attachments:
As stated
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Comments on State Discussion Paper
for PRC Meeting on Secretary Blumenthal's
Trip to the Middle East
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1. In general we have no serious difficulties with
the State report for the PRC Meeting. One difficulty, however,
is the need to update events in the light of Iran's political
turmoil. It should be pointed out that, while the Shah no
doubt welcomes US concern and support, much of the rioting
had an anti-US tone. We suspect that the Saudis may want to
spend more time on a US assessment of the Iranian situation
than is supported in the discussion paper. Certainly, Riyahd
views recent events with a good deal of alarm.
2. Reporting on the Saudi price position has indicated
that the country would favor an increase for crude oil in
the range of 2-7 percent in January 1979, with a possible
add-on by mid-year. It had been assumed that Iran would
back the Saudis position; the combination of these two
countries probably would have been sufficient to secure a
very moderate price outcome. The sharp drop in Iranian
production since late October, if anything, has altered this
position toward the prospect of a higher price increase.
From Iran's standpoint, the immediate revenue loss from
reduced oil sales and the greatly increased budgetary outlays
which are anticipated, could well cause Iran to shift its
position at the December OPEC price deliberations. With the
market very tight, and most other OPEC countries favoring
a price increase, there will be a vigorous push for high
prices of 10 percent or more. (Some OPEC members will
keep an eye to the international crude spot markets which,
although representing only marginal sales volumes, are
virtually closed down and are encountering spot sales prices
in excess of 15 percent above official government selling
prices.)
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3. As for the Saudis, we suspect that the State position V
is too optimistic over chances of Saudi success in holding
down OPEC oil price increases. The Saudis are under tremendous
pressure from OPEC members for a large price hike, 25X1
25X1 strongly suggest that they will acquiesce in at least
_er ent hike. Because of the current cash flow problem,
and loss of`rea purchasing power due to the decline of the
dollar, the Saudis also have domestic political opposition
calling for oil price increases. Moreover, even oil-price
moderates such as Saudi Oil Minister Yamani appear to favor
small periodic price rises at least sufficient to cover the
loss of purchasing power from inflation. On balance, the
Saudis appear less inclined than at any time in recent years
to fight the battle of price moderates.
4. Kuwait has been very impatient with requests that
the country temporarily increase oil output to make up for
the loss of Iranian production. Rather, they prefer that
the West live off of oil stocks at the present time. What
the government really wants is an oil price increase. Given
their own security concerns, the Kuwaitis may yet be susceptible
to an early demarche by the US and/or Saudi Arabia to increase
oil output. The same is true for the UAE, even though their
reluctance to increase oil output is based on technical grounds.
These two countries, distrustful of company motives in the
marketplace, might be more willing to accede to requests
from governments to raise oil production.
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MEMORANDUM
Briefing Support for Secretary Blumenthal's
Trip to the Near East
1. Secretary Blumenthal is scheduled to depart
on 16 November 1978 for a tour of moderate Arab states
in the Near East. The trip includes visits to Saudi
Arabia, the United Arab Emirates, Kuwait, and Iran.
His mission is designed to focus on economic issues
where the US and moderate Arab states can cooperate
to bring about desired order in the world economy
in areas such as oil-pricing policy, support for the
US dollar, and coordinated aid programs. It is
recognized that the Secretary inevitably will have
occasion to discuss the dynamics of political change
in the region, including Arab reaction to the peace
process, political problems in Iran, and concern
of the countries over a perceived Soviet encircle-
ment.
2. Events of the past few weeks may have
radically altered the agenda of the original mission.
In at least two important areas -- political turmoil
in Iran and President Carter's program to defend the
US dollar -- a new focus will have to be given in the
approach of the coming discussions. Iran as well
as the other Gulf states will be looking for renewed
assurances of support for the Shah's regime. Moreover,
defense of the dollar should give Saudi Arabia
additional leverage to damp demands for OPEC oil
price increases.
3. In support of the Secretary's trip, OER pre-
pared a set of briefing g papers, which are attached,*
in response to specific queries from Foster Collins
at Treasury. These papers cover various aspects of
Saudi economic developments and foreign aid programs
of Persian Gulf countries; background papers on oil
pricing and production are also presented. Since
*Papers available from NIO/NESA; listed on next page.
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OER Papers Supplied to Treasury:
1 - Iran: Economy in Upheaval
2 - Saudi Arabia: Fiscal 1979 Budget
3 - Saudi Arabian Development Plans
4 - Saudi Arabia: Act Two of the Third Development Plan
5 - Saudi Arabia: Petrochemical Plans
6 - North Africa and Near East: Expansion of Petrochemical Industry
7 - Recent Trends in Iranian Foreign Assistance
8 - Official Development Assistance Commitments to LDCs
9 - Recent Trends in Kuwaiti Foreign Assistance
10 - Recent Trends in UAE Foreign Assistance
11 - OPEC: Outlook for Productive Capacity
12 - The Oil Market Through 1985
13 - The Status of Saudi Arabian Oilfields
14 - OPEC: Production Falls in First Half
15 - OPEC Prices: State of Play
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Iran: Economy in Upheaval
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The Iranian economy, which managed real growth of less
than three percent last year, is reeling from the several
months of intermittent private and public sector strikes,
culminating in the recent oil walkout. Oil workers ignored
the government ultimatum that they return to work by 4
November or be fired and face possible legal action. Else-
where in the economy, additional groups of workers staged
walkouts while some who had returned to work following
resolution of earlier strikes resumed their walkouts. The
ability of the new military government to convince strikers
to return to work will provide a major test of the leadership's
effectiveness.
The effect of the turmoil will clearly be felt for years
to come. While a reordering of development priorities and a
cleanup of government corruption would have considerable
beneficial effects, further economic difficulties seem
inevitable over the intermediate term.
Current Account Into the Red
The slowdown in oil exports from 5.5 million b/d to
1-1 1/2 million b/d at present has already cost Tehran $600
to $700 million in forefeited oil revenues; the losses now
are running at roughly at $50 to $60 million a day. Even
before the losses, Iran's current account was headed for a
substantial ($1.5 billion) deficit in 1979 in the absence
of an oil price increase. These and any further losses
will have their greatest impact during calendar year 1979 due
to the normal 45-75 day credit terms extended oil buyers.
Moreover, when the workers settle down, the sizable wage
gains granted in recent months will sharply increase the
demand for imported consumer items.
The value of Iran's imports was already picking up
substantially earlier this year due to both volume increases
and price inflation. For the year, payments for foreign
goods are expected to total about $18 billion, 17 percent
above last year's total, even though strikes and civil
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disorders have curtailed imports in recent months, The
current account surplus should fall from $4.6 billion in 1977
to $1.0 billion in 1978. A ten percent oil price hike next
January would just about balance Iran's current account for
1979, provided oil exports return to normal.
Iran is also losing capital and access to capital.
Capital flight -- which cannot be accurately measured -- has
been vario shy estimated at $3 billion to $5 billion since
the start of the year, with a reported $500 million leaving
the country in one week in September. On 5 November the
central bank advised commercial banks that limits of $20,000
per transaction and $40,000 per year should be placed on
non-commercial transfers. Up until the 5th, Iran had
practically no exchange controls. Transfers abroad for
education, medical care, and tourism (which already is limited
by the government) and for normal commercial transactions
will not be affected. In addition, the new limits may be
exceeded with permission of the Central Bank. The exemption
for educational purposes is a potentially large loophole
since many families have relatives studying abroad.
The political strife has at least temporarily impaired
Iran's strong external credit rating. Foreign bankers have
? warned that new international issues might prove embarrassingly
unmarketable at this time and that Iran should no longer expect
to get prime rates. At the moment, only Japanese and several
continental European banks appear willing to extend funds to
Iran, because their current exposure is much lower than that
of US and UK banks.
So far, neither the outflow of capital nor the damage
to Tehran's credit rating has hurt Iran's ability to pay
for imports. The recent outflow of capital appears to have
come mainly from liquid assets built up over many years and
from Iran's "gray market" of noncommercial foreign exchange
dealers. International reserves, a healthy $11.6 billion
at the end of September, remain a bright spot in the external
account picture. Iran also has an additional $6 billion in
non-reserve assets, mostly non-liquid private placements
abroad and large blocks of foreign corporate stocks, which
could be liquidated only with a substantial loss.
Domestic Implications
On the domestic front, once a measure of political
stability is established, the government will find that its
problems have been made more complex and immediate by recent
events. The Shah recently stated his willingness to reassess
? economic priorities with a view to cutting back on high-
posture industrial, military, and nuclear power projects in
favor of agriculture and rural development. The financing
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projects, however, will have to take
? of any new development
a back seat to covering costs generated by pay hikes and
increased fringe benefits.
The diversion of resources from investment to consumption will
refuel inflation in the short run.and cut into real economic
growth in the.long run.- Holding down the cost of living has
been the one successful economic policy of the past-year.' The
living cost increased at an annual rate of less than 10 per-
cent during the first eight months of 1978, compared with..
,a 24-percent increase in 1977. We anticipate a near term
jump to at least 25 to 30 percent because of pay hikes and output
disruptions. Even if additional imports help meet this
demand, time lags and distribution problems will blunt their
effect.
In order to remain afloat, Iranian industry, already
suffering from high capital costs and low labor productivity,
will need a relaxation of price controls to pass on to consumers
the costs of extravagant wage settlements. Moreover, domestic
producers almost certainly will petition the government for
special tax treatment and protection against imports so that
they can retain their share of domestic markets. Hopes of
achieving competitiveness in world markets have been further
? dashed. Private investment, which declined last year, will
continue to fall.
Within the Iranian labor force, those least well off
and unorganized -- i.e., agricultural and construction workers --
will experience a further worsening of their relative incomes.
Moreover, the leverage of the construction sector has declined
with the substantial cooling of construction activity during the
next12 months. Widening in income differentials and worsening
inflation could breed future unrest among the unskilled,
underemployed laborers who have not participated in recent
wage gains.
Iran's nas.cent`.labor movement, previously consisting of
weak, unaffiliated, company unions can be expected to evolve
rapidly based on its recent experiences. Having seen the
benefits of direct confrontations with the government, workers
will presumably be more willing to defy the authorities for
economic gains. The workers' actions, of course, will be
tempered by the severity of any military crackdown.
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IMPACT OF IRANIAN OIL STRIKES ?O B ? AJoV
Current Situation
A. Striking oil workers apparently failed to return to
work on 4 November despite the government's ultimatum.
1. As of 6 November, Iran's crude oil production
was running at about 1.3-1.4 million b/d; prestrike
output was more than 6 million b/d.
25X1 a. output will remain at
strikes are
il th
e
about 1.4-1.8 million D /d unt
settled.
b. The most severe labor problems are in the
oilfields, particularly. the four largest fields
that normally account for two-thirds of Iran's
oil output.
c. Gas shipments from these fields to the Soviet
Union have ceased.
20 As of 6 November, crude oil exports were running
t about 1.0 million b/d, compared with the prestrike
a
level of about 5.5 million b/d.
? a. During the early days of the strike a principal
bottleneck was the Kharg island loading facilities,
which normally handle 4 to 5 million b/d. By
4 November, additional walkouts occured at the
offshore joint ventures.
A large load, curtailed
land lifters of Iranian crude have
deliveries.
household supplies of petroleum products
B. Domestically,
were threatened by a resumption of the strike by employees
of the distribution system in Tehran. Moreover, through-.
put at the major Abadan refinery was only 200,000 b/dering
as of 4 November, about one-third of capacity, enda
supplies to the industrial sector.
C. Government efforts to end the oil strikes continue.
1. The previous government's response to strikers throughout
the economy had been conciliatory. But wage and benefit
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 hikes as high as 50 to 100 percent given to some
groups have led additional workers to go out.
2. Hushang Ansary, Chairman of the National Iranian
Oil Company, claims he has satisfied the economic
demands of most striking oil personnel and that only
a small minority, insisting on political concessions,
is preventing full resolution.
3. The government was trying to isolate the resisting
workers from their more amenable colleagues. A back-
to-work order was delivered on a unit-by-unit basis.
Workers who fail to report were threatened with dismissal.
We have no evidence that this tactic had met with any
significant'measure of success.
D. Iran's current productive capacity declined. sharply
since the strike began.
1. Oil company reservoir engineers officially estimate
the decline at 900,000 b/d. A wide difference of
opinion exists among consortium specialists and the
reduction in capacity may be far more severe.
2.. The decline is attributable to reservoir conditions.
a. In the types of reservoirs typical of Iran,
when oil wells are shut-in and then production
is resumed, water saturation increases.
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b. This has the effect of reducing the portion
of oil column that is water free. It increases
the salt and water content in the total fluid flow
and, hence, reduces the proportion of oil
produced.
c. In many cases, it may force the shutdown of
oil wells where surface facilities (desalting
equipment) are not available to handle higher
volumes of water production.
d. This condition tends to affect heavy crude
fields because the higher viscosity of oil is
relatively less mobile than light crude in
comparison to water.
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The quickest remedy is an acceleration of the
3.
planning
and well workover programs above previously Thes planned levesince theeworkeractivistwenties onen at a
strike.
standstill s probably will not
However, a resumption of work p
result in a rapid restoration of pre-strike-level
capacity.
Ii. OPT upply Availabili -
at about
f
A. Unused OPEC capacity outside o
Ira-.One of the tables
5 million b/d at the end of September. acit
that has been passed out shows our production and cap
estimates.
About half of this unused capacity would have been
event to meet fourth-quarter demand.
needed in any increase in the winter. Moreover,
Purchases normally in anticipation of an
demand was already increasing increase.
end-of-year OPEC price
acit - located in
2. Some of the remaining unused cap y -
Kuwait and Abu Dhabi -- probably is not readily
available as a substitute for Iranian oil. For a
variety of technical, economic, and political reasons,
both have imposed below-capacity ceilings on output.
were to lift restraints on production,
3, Even if they required to bxing a large
at least two months wouldc e rn line.
f additional cap Y 25X1
share o
aced 10a Arabia, excluding t-11e
stainable oil production in Saudi
E? sustainable tion rules
Neutral zone, is estrm e assumption that pro uc
4-
b
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A_S mil ion b/a an
ou
r -quarter production to a
ou trod have been lifted.
ce an increase
n
duction averaged
October pro
that out ut reached 10 million b/d
ast fourth-quarter
forec
million before the Iranian strike.
b/d is possible in
of about 1 million
He
November and December.
however consider the 10 mb /d
elieves
2.
h
e
leve 00 op imis -- weat er con 1 ions in
than
h
Persian
9 million b/d in the last two on s
accurate, little actual improvement would occur beyond
production levels planned earl
that anticipated noxma limit exports to less
Gulf will probably
of 1978. If
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3. The Saudis apparently were going along with
higher fourth-quarter levels of about 9 million b/d
even before the Iranian strikes.
a. They may have been trying to keep the market
slack to hold down the OPEC price hike.
b.
They may also have wanted to demonstrate --
in
the
that
face of the US Congressional investigation
there are no technical impediments to
--
expansion.
C. Kuwait and Abu Dhabi have already been asked by oil
companies to expand output during the Iranian strike.
1. Kuwait, with about 1 million b/d of unused capacity,
responded that it would not increase output before
OPEC revealed its decision on a price increase. (Kuwait
is a leader of the price hawks.) .
2. The response from Abu Dhabi, with another half million
b/d of unused capacity, was also negative.
3. Either might be more receptive to an approach at
the political level.
D. The other nine OPEC countries -- Venezuela, Iraq, Libya,
Indonesia, Nigeria, Algeria, Qatar, Gabon, and Ecuador --
would be producing close-to capacity in the fourth quarter
in any case. Spare capacity is small.
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 Other Supplies
A. Outside OPEC, not more than 500,000 b/d excess capacity
is believed to be available.
together are importing about 500,000
B. The us and Japan
b/d for strategic stockpiles that could be diverted to
cover current demand.
IV. stocks
ber were
consequences.
tu
A. Free World oil streisyl74 dayshofenormalsconswt-ption.
about 3.8 billion bar,
1. One-half of'these stocks ca be ndein inntrag
is needed to keep the distribution system
smoothly. ual to
B. While the amount that rcoule oauationarconsumersihave shown
nearly a year of Iranian p
strong reluctance to draw down inventories during an
emergency.
Im pact on World Market exports to further
,A.. Thus, we expect the loss of Iranian oil etighten the short-term oil market.
1. spot market prices spurted and supplies dried up
when news of the Iranian cutbacks broke out.
2. But the inventory situation means that market
in the near term will reflect speculative
activity
buying more than real shortages.
few more days, the impact
B. Even if the strike lasts only a Buyers will have
of 7oil Buythey want in
i earl he?amount y
a at least t
will spill over
harder time purchasing
late 1978. After the shock'of recent events Iryearan,
as
companies will want to keep inventories high
a hedge against further trouble.
liens are
market impact
C. if the strike is sustained tand he gaPertheOPEC
unwilling or unable to make up roimpacting.
will be severe. Companies will have to turn topproration.
A cold winter would compound the economic and political
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D. On the other hand, even if other OPEC deliveries are
not increased, a complete shutoff of oil exports from Iran
would have to continue unabated for more than six months
to produce the same total loss of oil to world markets as
during the 1973/74 embargo.
E. In some respects, oil-consuming countries are better able
to withstand a supply interruption similar to the embargo.
1. Stocks are higher.
2. The International Energy Agency has a standby oil-
sharing scheme.
3. Companies are experienced in spreading supplies.
F. But the ability of the major consuming countries to easily
reduce oil consumption is probably less; the quick savings
have already been realized.
G. As shown on the second table, South Africa and Israel have
the heaviest import dependence on Iranian oil. But both --
especially South Africa -- have sizable oil stockpiles. Spain,
The Netherlands, Japan, Italy, and the United Kingdom also
rely to a significant degree on Iranian oil. These nations
will be looking hard to find alternative supplies.
VI. Influence on OPEC Price Deliberations
A. The tightening of the oil market should strengthen OPEC
.price hawks. A majority of OPEC nations have been arguing
for a price increase of at least 10 percent for January 1979.
Only Saudi Arabia, Iran, and the UAE had indicated a
willingness to support a lower price increase.
B. In Iran, high wage settlements and lost oil revenues are
new reasons to support the larger increases.
1. The Iranians still do not want to split with the
Saudis but indicate they are now willing to go for
up to 10 percent.
2. Politically, the Shah may.benefit from taking a
stand -- i.e., a substantial price increase -- that
appears to demonstrate independence of the United
States.
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C. The Saudis have made no final decision on a price increase.
In the face of recent events, however, they may be more
willing than before to agree to 10 percent.
VII. The Iranian Economy
A. The Iranian economy, which was virtually stagnant
throughout 1977, has been sent reeling by the month-long
series of strikes. Even if they are settled soon, it will
be many months before the effects work their way through
the economy.
1. The current account surplus will fall from
$4.6 million in 1977 to about $1.6 million for 1978.
It almost certainly will go into substantial deficit
in 1979 (when payments for today's lost oil revenues
normally would be received) unless the OPEC price
increase is more than 10 percent.
2. Increased wages and benefits for oil workers and
other public-sector employees will add several
billion dollars to the Iranian budget this year and
next. Deficit spending and increased paychecks will
? refuel inflation, which had been slowed during the
first half of 1978.
3. Industrial production has already been curtailed by
the strikes. The wage settlements will add to already
high costs, and Iranian industry will need further
government assistance even to retain domestic markets.
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 OPEC. Crude Oit' Production and Copaeiry
Total ..................................
Iran ................
Saudi Arabia .???........'
Kuwait ................
United Arab Emirates ..???????.
(Abu Dhabi) ..........................
Iran ......................................
Venezue
Libya ....................................
Nigel ..............?...............
Thousand b/d
4th Quarter 1978
Maximum
Sustainable
Capacity
September 1978
Underutilized
Productive
capacity
production
5.285
Estimated
Available
Capacity.
27,090-28.090'
36.905
31,620
440
6.500
6,060
~
8,700.9,000
8
050
2.3
0
2,200.2.600
10,400
.
150
2
85
1.860
000
3
,
545
(1,460)
.
,830
1
(515)
000
2,375
(1.)
(1,450)
000
0
2.700.3,
2,600
3, 000
3,
0
330
2,300
~
2
6
2,27
200
2,300
'2.
00
2,100
120
180
1,700
2300
.
2.
0
110
1,700
1,59
---
Indonesia ........... 2,450
Other. including Neutral 2730 b/' of which is from Iran.
lIaulds production in OPEC, 45.000
Zone ........ ......................... of natural gas
i Excluding an estimated 575.000 b/d
excluding Iran
;i.W,- capacity.
tars of Iranian O;t, 1977
1Ad;or Impot
South Africa ......................
Israel ......
Netherlands .
Spain ..................... .................
Japan .......................................... .....
...
Italy
..........
United kingdom
France ..................
...........
Thousand b/a
Imports as it
of
t
consumption ?
Imports from
Iran
Percen
Consumption
8o
240
74
100
36
135
270
23
745
220
16
943
870
15
5.401
.293
14
1,893
259
8
1.809
189
2,286
786
18.418
.
......
United States ."'. amounted
Including bunkers
Estimated. refining center. Imports from Iran as a she of total supply
a The Netheila ina 197711 --port
to about 20 percent e
Approved For Release 2004/01/20
5X1
 Approved For Release 2004/01/20 : CIA-RDP81 800401 R002000110002-9
Iran: Crude Oil Production and Current Capacity
.8 r- (Million b/d)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
his sharp decline In caoacity is attributable to anticipated reservoir performance at the heavy crude fields as production is
Ought back on lino. Capacity will stabalize at a new lower level.
2. Company projections of sustainable production given a continuation of the Iranian oil strikes.
Approved For Release 2004/01/20 : CIA-RDP81 800401 R002000110002-9
 Approved For Release. 2004/01/20: CIA-RDP81 B00401 R002b00110002-9
Indicators of Oil Availability Fourth Quarter 19,78
0
18.0 '.,.(Million b/d)
?
Additions to
U.S.
Strategic
Reserve
? Not currently evallabla.
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U pecityiizad
 Approved For Release 2004/01/20 : CIA-RDP81 BOO401 ROO2000110002-9
Estimated Free World Crude Oil Production
?lIMiIIion B/D)
53.7 CRUDE PRODUCTIVE CAPACITY
1978
1. Fourth quarter capacity has been adjusted to reflect the decline In Iranian capacity attributable to the strike - from 6.5
million bid to 5.G million bid.
2. Prior to the Iranian strike. Free World crude oil production was projected to average 49.1 million b/d In the fourth
quarter. Should the Iranian strike continue for the remainder of the year, with total output remaining at, 1.8 million bid.
and Saudi production expand to a fourth quarter average of 9.5 million bid. Free World output would average 46.6
million bid.
3. Forecast before the strike in Iran. It capacity Is available. actual first quarter production will increase as the system
replenishes its stocks.
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 S E C R E T
Approved For Release 2004/01/20 : CIA-RDP81 800401 R002000110002-9
SUBJECT: Sharif-Emami's Claim to Ambassador Sullivan that
SAVAK was Behind the Recent Oil Field Strikes in
Iran
There is no evidence to the effect that SAVAK was
behind the strikes. For reasons best known to him,
Sharif-Emami has made a number of statements about SAVAK's
hand being behind recent events in Iran.
25X1
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 25X1 Approved For Release 2004/01/20 : CIA-RDP81 800401 R002000110002-9
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 Approved For Release 2004/0~fP A-RDP81 B00401 R002000110002-9
A BRIEF ASSESSMENT OF
THE IRANIAN MILITARY
The senior military officers are believed to be
loyal to the Shah and will support his decisions as
long as they perceive that he is acting decisively.
Senior officers were pressing the Shah for firm action
against demonstrations and disorder for two weeks before
he formed the military government. As long as they think
the Shah is in control, they probably will acquiesce to
replacement of the military government by a civilian one
at a..later point.if .civil order can be restored.
There is virtually no reporting on the loyalty of
other levels of the armed forces. At one point some
unhappiness was reported from middle grade officers but
it was caused, apparently, by professional gripes, lack
of promotions and poor pay as compared to civilian
counterparts.
Noncommissioned officers and other ranks are an
unknown quantity and no reporting has ever been received
on their attitudes or morale. Most of them are two-
year conscripts, serving reluctantly and with no loyalty
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 Approved For Release 2004%Jg iPIA-RDP81 B00401 R002000110002-9
to the Shah or the military as an institution. Under
normal circumstances there seems to have been no ex-
ceptional problem with military discipline among the
conscripts.
The security of Tehran under martial law has been
assigned to elite Ground Forces units, the Imperial Guard
and Special Forces. Regular army units are assigned to
martial law duties in other cities. The Imperial Guard
is said to contain many orphans who have been deliberately
recruited and provided with a career and who owe allegiance
only to the Shah.
The military will probably be able to maintain order
in the country as long as they do not have to engage in
prolonged and bloody operations against civilians. Some
commanders have already complained that their units have
been on alert for many weeks and that their efficiency
is being impaired. Regular Army troops do not receive riot
control training, a deficiency that has resulted in sub-
stantial casualties among demonstrators in clashes this
year.
-2-
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SECRET
 Approved For Release 2004/01/20 : CIA-RDP81 800401 R002000110002-9
SECRET NOT TO FOREIGN NATIONALS
THE IRANIAN MILITARY GOVERNMENT:
ITS CAPACITY TO GOVERN AND ITS EXPECTED POLICIES
I. (S/NOFORN) PURPOSE. On 6 November, after months of increasingly violent
religious, student and labor unrest, the Shah of Iran appointed a military
government with the Chief of the Supreme Commander's Staff, General Gholam
Reza Azhari, as Prime Minister. The Shah took this step reluctantly, after
failing to persuade the disparate elements of his religious and political
opposition to cooperate with him in forming a civilian coalition government.
The purpose of this paper is to provide a preliminary assessment of the capacity
of Iran's new military government to restore law and order and carry out its _
civil functions. It also provides an assessment of the political, economic
and foreign policies that it can be expected to undertake. This assessment
is solely a Defense Intelligence Agency product and has not been coordinated
with other agencies within the Intelligence Community.
II. (S/NOFORN) FORM AND STYLE OF NEW IRANIAN MILITARY GOVERNMENT.
A. Character and Style. In supporting the constitutional monarchy, the
military will initially strictly enforce the martial law which was imposed
8 September. It will use the force it judges necessary to control demonstrators
and intimidate the protestors. Any opposition will be dealt with firmly --
even harshly.
The Shah will attempt to reassert himself as a strong leader and will
endeavor to convince the people that military rule is necessary for the resto-
ration of peace and order. On the other hand the military will likely attempt
to establish a substantial degree of independence from the Shah in the belief
that too close an identification will hinder their mission of restoring stability.
The Shah and the government will attempt to persuade the moderates and uncommitted
within Iran's population that military rule is a temporary but necessary measure
until a suitable atmosphere for free elections can be established. The military
can be expected to remain in control for at least 90 days. Beyond this, the
longevity of the military government will depend primarily upon its success in
,restoring order, promoting reconciliation and leading the nation to elections.
There is no evidence the military is planning to remain in power indefinitely
or beyond the time that stability is established and elections become possible.
ed by ---- DIA_VP--------------------
0'Vi GENE?=L CECL SS:FiCAT1Oy E' T
EpolopmrT Fr. 11 X52
SHEDU1 E GF E:._: r .: -t C?7 =~
EnEMPT10N CATEGORY---- AZ ------------
DECLASSIFY ONO one s ti.oeleas 20Q Ein [T L
For Release 20 1 RDF~ Qi714R0GN NATIONALS
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SECRET
B. Positions Within the New Government.
1. Prime Minister. General Gholam Reza Azhari, age 69, is a very
experienced army administrator totally loyal to the Shah. He has the respect
of the three service chiefs and should be capable of ensuring the loyalty and
cooperation of the other military leaders recently named. to cabinet posts. .
2. Cabinet Posts (see Annexes-1 and 2). Most of the cabinet posts
have been assigned to senior military officers, who will undertake these new
responsibilities in addition to their regular military tasks. Only the
Ministries of Posts, Telegraph, and Telephone; Industries and Mines; and
Foreign Affairs remain under civilian leadership. While the military officers
are to serve in a supervisory function, the incumbent undersecretaries are
charged with the day-to-day operation of the various ministries.
3. Provinces and Towns. The senior military officer resident in a
province has traditionally played an important role in the governmental affairs
of the region. Therefore, the military should experience little difficulty in
administering the local government and the provincial bureaucracy will probably
ive its cooperation. In most towns with populations under 5,000, the
gendarmerie chiefs will be the senior government authorities, but, if necessary,
will be able to draw on military support from nearby garrisons. The other
security forces, including SAVAK, will be required to support the police and
military in identifying and arresting opposition leaders and imposing censor-
ship.
III. (S/NOFORN) POLITICAL POLICIES AND PRIORITIES
A. Law and,Order. The military authorities will act very firmly in quelling
disturbances and cannot be expected to exercise the restraint displayed earlier
this year. They will not hesitate to disperse public gatherings and to enforce
martial law throughout the country. The security services will identify and
arrest opposition leaders and other subversive activists. Close control of
personnel movements and departures from Iran can be expected.
B. Censorship. Most newspapers will be shutdown and those allowed to be
be printed will be tightly censored by SAVAK or military representatives located
in the editorial offices. Those responsible for writing of printing articles
not approved by the government will be arrested. After an initial period,
"responsible" free speech will probably be encouraged; however, any "antinational"
or "antigovernment" speeches will not be permitted.
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`J CHET
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SECRET
C. Elections. Iran's constitution requires that new elections must-be
held within 90 days after the naming of a new government. Though nominally
committed to upholding the constitution the new military government will be
hard pressed to do this. The Shah had been planning for elections in June
1979, but the military government may try to hold them sooner if it is
successful in establishing stability and promoting a conciliatory attitude
on the part of the opposition. The elections,.when held, will provide the
basis for returning the country to civilian rule under a coalition government.
To this point, there is no evidence of plans to delay the elections unnecessarily.
D. Corruption. Both the Shah and the military leaders have acknowledged
the existence of widespread corruption within the government and strong efforts
will be made to curtail it; the prosecution of offenders will be accorded.wide
publicity. No doubt some former ministers will be arrested for corrupt
practices; however, unless the military similarly cleans its own house, public
support for the anticorruption campaign will quickly turn to cynicism.
E. Minorities. Some members of minority groups, particularly Jews,
Armenians and Zoroastrians, have been leaving Iran fearing that an overthrow
ilit
ary
f the Pahlavis would lead to bigotry and Shiite persecution. Inc m
11 attempt to dispel fears within these. groups and will encourage them to
support the government.
F. Islam. While refusing to even consider the Islamic republic desired
.by some Muslim leaders, the military government will attempt to appease and
i
les
i
i
I
l
p
nc
c pr
am
s
coopt the more moderate Muslim spokesmen. They will reaffirm
and traditions and probably increase both the status and role of the Ministry
for Islamic Endowments. However, they will try to muzzle inflammatory political
declarations by the mullahs and try to establish some measure of control over
their activities.
G. Parliament. The Majlis has been dissolved and will not reconvene until
elections are held anda new government named. In the interim, former members
of the Majlis will be permitted. only limited expression of their political
views.
H. Justice. Civil courts will still have jurisdiction over ordinary crimes,
but military tribunals will be instituted to.handle cases involving antiregime
activities and violations of martial law.
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9RRET
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SECRET
IV. (S/NOFORN) DOMESTIC ACCEPTABILITY.
A. Religious Conservatives. For the time being, key religious leaders,
particularly Ayatollahs Shariat Madari and the exiled Khomeini, will continue to
express publicly their opposition to the military government or any government
appointed by or beholden to the Shah. They will stress publicly that there can
be no compromise with any such government; such obstinacy is necessary if the
mullahs are to retain their credibility with their followers. Shariat-Madari
and more moderate mullahs have requested that Khomeini modify his demands for
governmental reforms, but he has refused to compromise his demand for an end
to the Pahlavi Dynasty. Because of Khomeini's strong following, Shariat-Madari
has been forced to publicly support him. Nevertheless, it is almost certain
the military government will work very hard to gain the support of this small
but powerful and influential group..
B. Professionals (lawyers, doctors, businessmen). Though mixed reactions
have been noted within this group, there is general approval for the Shah's
action. While many would rather have seen a political settlement, their
concern for national survival and personal property and position will likely
lead them to support the firm measures necessary to control widespread public
isorder. Support for the military takeover will be short-lived, however,
unless the new government takes positive and visible steps to deal with long-
standing grievances such as corruption, bureaucratic ineptitude and economic
mismanagement.
C. Military. The senior military leaders had for several months expressed
their impatience with the government's lack of forceful action against opposition
groups. The vast majority of the officer corps will support the military govern-
ment. Out of discipline and fear, the two-year conscripts -- who make up
three-fourths of the enlisted force -- will obey their superiors in the enforce-
ment of government orders. If, in the initial stages, the military is successful
in restoring order, the confidence and self-esteem of the conscript group will
be greatly enhanced and will contribute to-long-term cohesiveness, morale and
esprit. If called upon repeatedly to fire upon their fellow countrymen, however,
disaffection and desertion in the lower ranks will almost certainly rise. These
trends would be accelerated if troop casualties are incurred in the suppression
of disturbances (see Annex 3).
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 ?
SECRET
D. Intellectuals, Students and Teachers. These, as a group, are highly
vocal in their discontent and almost certainly view the military government
only as a continuation of the autocratic rule of the Shah. Left and right
wing agitators can be expected to continue to play upon the sentiments of this
disaffected segment of the society which will criticize and, when possible,
demonstrate against the military government. With the closing of universities
and secondary schools, organized student opposition will be fragmented, but
conversely, idle students can be expected to be in the forefront of any mob
whether directed against university administrators, the government or foreign
interests. Any resulting student casualties will elicit an emotional response
from the population at large.
E. Workers and Farmers. This group is largely influenced by local religious
leaders, yet will probably-acquiesce in military rule, especially if agricultural
and labor reforms are pledged. If the religious leaders are muzzled in voicing
their opposition, the easily influenced working class can be expected. to respond
to the visible power of the military at least in the short run.
F. Bureaucracy. Although strikes by government workers have contributed
o the current crisis, most government workers will be retained in their present
ositions. The majority will probably support any action that alleviates the
chaos that has prevailed in 1978. They now'likely consider the military take-
over as a necessary step to avert a complete breakdown of law and order and to
avert a wholesale government reorganization that. would affect them personally.
V. (S/NOFORN) ECONOMIC POLICIES AND PRIORITIES.
A. General. Iran's economy has been seriously disrupted by the recent
domestic turmoil. Even before the disturbances there were clear signs that
the Shah's priorities had been misplaced. Inflation has been a serious problem
and will almost certainly, in the wake of the recent high wage increases and
because of shortages caused by.the political disturbances, increase rapidly.
The private sector, particularly agriculture has been neglected. Self-sufficient
in food before 1970, Iran now provides only 75 per cent of its needs. Iran's
current account may go into deficit in a year or two even if full oil production
is restored.
These and other problems have had a serious effect on economic confidence.
Many Iranians are moving their capital out of the country. International
bankers and foreign nations are becoming more concerned about future economic
prospects.
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SECRET
B. Oil Production and Pricing. The military government is likely to favor
more hawkish approach to oil pricing policy, believing somewhat simplistically
k
l
The military government is unlikely to attempt to make major changes in
Iran's economic structure and programs, at least in the short run. They may,
however, institute some stop-gap measures which will probably include restrictions
.on capital outflows and imports of luxury or nonessential items; wage controls
(eschewing rollbacks); price controls particularly on essential commodities such
as foods and medicines; and perhaps some public service projects to soak up the
urban unempbyed. They may also want to change some banking practices. They will
likely direct attention to the agricultural sector and will try to restore
normal commodity distribution patterns as soon as possible.
The military will rely heavily on the bureaucracy, particularly in the
short run, since their immediate concerns will lie elsewhere. But even if they
should remain in office for a lengthy period, it seems unlikely that they will
attempt to change the basic.free enterprise nature of the Iranian economic
system. Basically conservative, they are likely to move slowly in instituting
fundamental changes and will probably be cautious in adopting even minor reforms.
Over the long term, if they remain in power, they will have to give serious
consideration to meeting the rising tide of economic expectations set off by the
oil boom.
e
y
that higher oil prices mean higher revenues. Nevertheless, it seems li
they will be willing to listen to the advice of knowledgeable civilian experts
in the various ministries particularly in the short run. Not only-will they
be reluctant to assert themselves in a critical area in which they recognize
the limitations of their own expertise, but they will be preoccupied with more
important considerations, i.e., restoring law and order and essential services.
In sum, if the military government continues to rely on the oil professionals,
as expected, they will support an OPEC price increase of approximately 10 per
cent in December, but will not vigorously push for more. On the other hand,
they will not be as active in promoting restraint on other OPEC members. They
will make a maximum effort to restore oil production reduced by recent strikes
as soon as possible.
C. Arms Purchase Policies. Military modernization programs will likely be
continued. The Shah has ordered a drastic cutback in his arms purchases (as
well as in nuclear power and transportation programs), but those contracts
already signed assure that military imports will remain at a high level for
some time. They will also seek to obtain additional equipment more suitable
to the mission of restoring law and order. The military government will likely
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 Approved For Release 2004/01120: CIA-RDP81 B00401 R002000110002-9
SECRET
be sensitive, at least in the short term, to charges of advancing its own military
interests at the expense of the rest of Iranian society. Iran has shown flexibil-
ity in modifying its budget in the past. Thus, if the national income picks up
in 1979, some military programs that have been postponed could be resumed, although
cutbacks in construction and peripheral projects are likely. Co-production
projects might very well be jeopardized because of their initial high cost and
visibility and because of the reluctance of many Western technicians to remain
in Iran. Because of the security and political problems connected with a highly
visible presence, the new government may carefully reevaluate its requirements
for foreign advisers and technicians.
VI. (S/NOFORN) FOREIGN POLICY. The military government is not likely to change
the basic character of Iranian foreign policy, although some modifications are
probable.
A. Toward the US. A military government under the Shah will not change
.its policy toward the US. Iran will be dependent upon US technicians, both
military and industrial, for the next few years at least while absorbing new
technology although the new government may wish to reduce the numbers. However,
ran will likely retain a special interest in US investment opportunities and
w generations of advanced technology. The US will continue to enjoy the
argest investment in and sales to Iran and opportunities to expand commerce
will continue.
The US, however, is identified closely with the Shah and is thus perceived
as sharing responsibility for many of Iran's current problems. In view of US
involvement in returning the Shah to power in 1953, US actions and high level
visits will likely be closely watched by the opposition. In general, Iranians
will be less willing in the future to accept the US relationship uncritically.
The military government has the ability to curtail US opportunities in
Iran and to manipulate the pricing and supply of oil in the longer term.
However, any US attempt to exert influence through a manipulation of arms,
project assistance, or trade would likely result in counter pressures. These
limitations on
Iran
t i
id
,
n
en
might include restrictions on US citizens res
repatriation of US funds in Iran, and perhaps reduction of the numbers of
Iranian students in the US. In the short term, it is unlikely that the new
government would seek
25X1
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SECRET
B. Toward the USSR. Despite better relations with the Soviet Union and
the series of aid, trade, and development agreements since 1962, the Shah
remains deeply suspicious of Soviet intentions towards Iran and the Middle
East. Undoubtedly this view will be shared by the new military government.
Worried about increasing Soviet activity in Africa, the military fears that
the USSR will now turn with increased vigor to expanding its influence in the.
Gulf through closer ties with Iraq and Afghanistan and through support of
leftist attempts to topple conservative governments in the littoral states.
Though there is no real evidence to support the thesis of Soviet involve-
ment in the current crisis, the military government likely perceives a Soviet
hand behind the activities of the extremists. With a;record of two major
Soviet espionage cases over the past two years, one involving an Iranian
General, the military government will likely crackdown on Soviet. activities
within the country. However, in spite of current strains and widely divergent
interests, a military government will continue to believe that it is essential
to maintain satisfactory relations with the USSR.
The Soviet Union is heavily involved in Iran primarily through its huge
sfahan steel mill project, gas pipelines into the USSR and deliveries of
unsophisticated military equipment. Apparently, as an alternative to closer
Iran has made a number of overtures to
USSR
h th
i
,
e
t
relations directly w
Eastern Europe, having entered into several financial and economic agreements,
primarily with Poland, Rumania and Yugoslavia. If the military regime remains
in power over the long term, Iran's relationship with these countries would
likely improve at the expense of the Soviet Union, but would not become close.
C. Toward the Bordering States.. The military government's approach to
neighboring countries will likely be conservative and restrained. The military
government, if it remains in power over.an extended period, might be inclined
to act more rashly toward Afghanistan and possibly toward Iraq if problems
arose with those two countries. The "communist" overthrow in Afghanistan has
deeply concerned Iranian military leaders. They see it as a danger to Iran
through possible subversion in Iranian Baluchistan and in neighbdring Pakistan..
In time, they may become more venturesome -- perhaps by trying to exploit
the antigovernment feelings of Afghanistan's conservative muslim population.
The military,, government will view Iraq with deep suspicion, but will continue
to act with restraint. Iraq, for its part, apparently values the current detente
with Iran. Though rapprochement has been primarily a result of the Shah's
personal efforts - both governments will attempt to preserve it. Iraq appears
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SECRET
to be genuinely concerned over events in Iran. Occurring so shortly after the coup
in Afghanistan, the Iraqi government is apprehensive over the possible dangers of a
spread of similar activity to Iraq. Iraq has been cooperative in the Khomeni affair
is Iranin
unlikely overtures,
tucontinue to be rn, Iran's new receptive
to u renew at
support to Kurdish
and s te mm. In to
government to
short
dissidents in Iraq.
Iran's relations with Pakistan will likely remain unchanged, though the Iranian
military government will not share the Shah's concern over former Prime Minister
Bhutto'.s status. Iran's policy toward Turkey will not change.
With regard to the Persian Gulf'and Saudi Arabia, the military government may
undertake subtle changes in policy, although in the short run the preoccupation with
internal concerns will mitigate against any significant policy alterations. In the
longer term, however, the military government will probably not push as strongly for
cooperative mutual security arrangements in the Gulf, as did the Shah, and will be
more likely to follow a less activist policy toward its Arab neighbors in the Gulf.
D. Toward CENTO. Iranian policy toward CENTO is not likely to change. The
military leadership in Iran sees little military usefulness in CENTO and will continue
to seek better assurance against external dangers. They nevertheless value the
lliance for the political support it provides and as a vehicle for cooperation. The
litary also values the training opportunities provided by CENTO in major exercises.
us, the military government will retain its CENTO ties and also the pragmatic
commercial bonds existing in the economic counterpart organization, the Regional
Cooperation for Development (RCD).
E. Toward Israel. The military has supported the Shah's policy of maintaining
cordial relations with Israel. They view the Jewish state as a strong pro-Western
and anti-Communist counterbalance to Arab nationalism in the Middle East. Though
continuing to admire Israeli achievements, the military government will likely look
at the relationship with Israel as a conspicuous embarrassment. The rejection of
the Israeli connection by radical left wing elements and the Shiite clergy has
already forced a reevaluation of relations with Israel. However, the future adjust-
ment of relations with Israel by the military government is not likely to go as far
as a total turnabout in the relationship or a cessation of Iranian oil shipments.
VII. (S/NOFORN) IMPACT ON IRANIAN STABILITY.
A. Short Run. The military government, will use its available force to stabilize
the country, ,enforce law and order, prosecute corrupt officials and neutralize the
opposition. By pgsitive and determined responses to any opposition activity, the
military can at least temporarily control demonstrations. To achieve this objective,
however, harsh measures will likely have to be taken initially against demonstrators
and strikers; thus raising the prospect of numerous arrests and even much bloodshed.
During the initial stages, the terrorists and the more violent radical elements
will retrench and begin clandestine planning for renewed activity against the regime.
Therefore in the somewhat longer term outbreaks of terrorism directed against both
he security forces and resident foreigners can be anticipated. Further repressive
easures will cause support for the military to erode rapidly after the first few
months of rule unless political compromises are achieved.
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B. Long Run. Unless the military lays the foundation for a coalition
government that will include supporters of the Shah, the religious community,
and opposition political groups, the situation is likely to deteriorate after
a few months. The military, perhaps faced with mounting popular opposition
and growing insubordination within its own ranks, will-likely lose public
acceptance of its mandate and opposition leaders gain in influence. Polariza-
tion between the opposing elements will increase and-hopes for a moderating
long-term political settlement will diminish. Bloodshed and political/economical
turmoil may again become commonplace. Even without opposition, the military
cannot be expected to operate vital facilities, particularly those in the oil
industry, and manage the national economy successfully for any protracted
period of time. Failure will. jeopardize economic stability, enhance the
appeal of the opposition, and weaken the credibility of the military government.
VIII.(S/NOFORN) FUTURE POLITICAL ADJUSTMENTS. The Iranian military government
has been in power only 72 hours at this writing. There is much that we do not
know about how they intend to go about the tasks entrusted to them or how success-
ful they will be. Nevertheless, we have developed three scenarios which reflect
our opinion on how the situation may develop in Iran in the months ahead.
-- The military government is successful in restoring law and
order, and has reasonable success in restoring economic
confidence. Several former advisers to the Shah are
prosecuted for corrupt practices and convicted. Universities
reopen, helping to defuse student discontent. Censorship is
relaxed.. Accommodations are worked out with the religious
opposition, elections are held in June 1979 and a new Majlis
is selected. The military government steps down, the Shah
continues to reign but with greatly reduced powers as a
genuine constitutional monarch.
The military government has difficulty in controlling
disturbances, blood flows and the lower ranks in the armed
forces become reluctant to take action. Censorship continues
and many harsh measures are undertaken to restore order. The
religious leaders and students remain unreconciled. Economic
conditions deteriorate and many foreigners leave. Disputes
over policy occur among the military-leaders and one of them
assumes dictatorial powers and asks the Shah to abdicate.
The resulting regime is even more repressive in violating
the human rights of most Iranians.. It rules by fiat and-in
character is not unlike one of the repressive Latin military
regimes.
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-- The religious elements and students remain unreconciled.
Repressive measures are taken. The economy becomes chaotic.
Religious and opposition leaders press for removal of the
Shah. The military government accedes and requests or
forces the Shah to abdicate. In order to gain an aura of
legitimacy, the military institutes a regency under the
Shahbanou, and Crown Prince Reza assumes the-Peacock
Throne. The military carefully and discreetly manages
the regency from behind the scene. A period of relative
tranquility is inaugurated as the country tries to get
back on its feet.
The first scenario approximates the,one the Shah is apparently hoping
to pursue; it is clearly in his. best interest. We believe that this scenario
has the greatest likelihood of being realized, and would involve minimal
changes in US-Iranian relations. If, on the other hand, the current crisis
is not defused by the imposition of a military government, it seems likely
that the regency arrangement noted in the third scenario would be the next
most likely outcome. Since the military would continue to shape the country's
0 ffairs, the tenor of relations with the US would not be appreciably changed.
inally, we envision the second scenario as a more remote and unfortunate
possibility which would necessitate substantial changes in our relationship
with Iran. Scenarios two or three, if one or another came to pass, may well
be played out well past next summer. However, we believe that at some point,
under the conditions described, the military would take action to greatly
reduce the role of the Shah or even, in the extreme, to arrange his abdication.
Obviously, developments are unlikely to take place exactly as we have
described above, but they are illustrative of the direction Iran is likely
to take in the months ahead. The exact course of events will be largely
determined by the relative success which the military government achieves
in carrying out its new responsibilities.
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S E C R E T NOT RELEASABLE TO FOREIGN NATIONALS
ANNEX 1
NEW IRANIAN CABINET
Prime Minister:
Foreign Minister:
Minister of War:
Post, Telephone and Telegraph:
Industry/Mines:
Interior; )
Economic and Finance:,)
Minister of Labor/Social Affairs:
Minister of Information/Tourism:
Minister of Housing/Urban Development:
Minister of Energy:
Minister of Culture/Arts: )
Minister of Education/Training: )
Minister of Science: )
Gen Gholam Reza Azhari
Amir Afshar Qasemlu
Gen Reza Azimi
Mr. Karim Motamedi
Mr. Mohammed Reza Amin
Gen Abbas Karim Gharabaghi
Gen Gholam Ali Oveisi
Lt Gen Abdol Hassan Sa'adatmand
Lt Gen Amir Hossein Rabii
Lt Gen Iraj Moghadam
Adm Kamal-ed-Din Mir-Habibollahi
*fied by DIA-VP-------------------
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SECRET NOT R~?--~IISa TO FOREIGN NATIONALI
ANNEX 2.
BIOGRAPHICS OF THE CABINET'
(MILITARY MEMBERS ONLY)
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CONFIDENTIAL
IRAN
Gen Gholam Reza AZHARI
February 1978
BIOGRAPHIC SKETCH
(U) NAME: Gen Gholam Reza Azhari.
(az-hah-REE), Army (Infantry).
Variants: Qolam; Ezhari.
(U) POSITION: Chief, Supreme
Commander's Staff (SCS) , since
20 July 1971.*
(C/NOFORN) SIGNIF I_C_iNCE: Respected
for his professional competence,
honesty and moral courage, the
General has held the senior position
in the armed forces for the past
seven years. Azhari is in no way
however, all =owerful, for the SCS is
(FOUO) 1974
designed to assist the Supreme Commander, Shah Mohammad
Reza Pahlavi (ruler since 1941), who directly oversees
the military establishment. There are recurring reports
of Azhari's impending retirement (he will be 69 years old
in 1978).
(C/NOFORIN) POLITICS: Strong supporter of the Shah; first
and foremost an Iranian nationalist. Friendly toward the
West and coooerati7e with American military advisors. In
1964, U.S. advisors co=ended him for his excellent per-
formance as Supreme Commander for "Exercise Delawar", a
combined Iranian-U.S. military exercise held under the
auspices of the Central Treaty Organization (CENTO).
(C/NOFORN)? CAREER:. Obtained early schooling in Shiraz
and earned his commission from the Iranian Military Academy
in Tehran, 1935. Served in junior officer infantry -
assignments, 1935 until 1945 when he was assigned to the
%lilitarylPolice. =ppointed Chief of Staff, Military Police
Bde, Tehran, -"948;. student, U.S. Army Military Police
School, Fort Gordon, Georgia 1950; graduate, U.S. Army
Command and General Staff College, Fort Leavenworth, Kansas,
1954; attached to the staff of the War University, Tehran,
1955. Deputy Commander for Administration, 1956. Later
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f.CLASSIFYDN 31 DECEMBER 2 0 0 8 nAyIINGTON DC. 20301
 CONFIDENTIAL
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IRAN
Gen Gholam Reza AZHARI
February 1978
key positions include: Commander, 11th Inf Div, 1958-59;
Commandant, War University, 1960; Chief of Staff, IIGF,
1960-64;-Commander, First Army, including serving as
Supreme Commander,"Exercise Delawar", CENTO, Apr 1964-67.
Azhari represented his country as the Permanent Military
Deputy for Iran and Chairman, Permanent Military Deputies
Group, CENTO, Ankara, Turkey, 1967-70. Served as Deputy
Chief, SCS, becoming Chief of the SCS, Jul 1971. Pro-,
rooted in orderly sequence; he became a Brig Gen, 1956;
Maj Gen, 1959; Lt Gen, 1963; Gen, 1971.
(C/NOFORN) PERSONAL DATA: Born 1909 in Shiraz, Iran.
Presents a fine military bearing. Stocky build; gray
hair, black eyes (wears tinted glasses because of
photophobia). Competent, dynamic officer; congenial and
warm; lives austerely. Smokes and drinks moderately.
Enjoys fishing. Divorced in 1951, presently married to
Efat. Three daughters: Golnar, who lives in Richmond,
Virginia; Rana and Lila. Speaks native Persian; fluent
English; good French.
PREPARED BY: Muriel C. Riddick, DB-3C2
*CURRENT UPDATE:
Appointed Prime Minister (continues in military position),
6 November 1978.
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gpGPAPMICAL DATA RV IMMEDIATELY FORWARDING
CONFIDENTIAL MIAy.MCCTO,L CD2OOT RcCTlr TO DIA/08
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CONFIDENTIAL
BIOGRAPHIC SKETCH
(U) NAME: Can Abbas Karim Gharabaghi,
Army (Infantry).
(U) POSITION: Commander, Imperial Iranian
Gendarmerie (IIG) since 22 April 1974.*
(C/NOFORN) SIGNIFICANCE: The General is an
exacting commander and a dedicated officer
with long and faithful service to the Shah.
As the IIG, Commander, Gharabaghi is
responsible for national security and
law enforcement in rural areas of Iran.
He is directly subordinate to. the Minister
of Interior.
IRAN
Gen Abbas Karim GHARABAGHI
May 1978
No photo available.
(C/NOFORN) POLITICS: Western oriented; pro-U.S.--
very cooperative with U.S. advisors. A classmate of the Shah in
the 1938 class of the Imperial Iranian Military College, Gharabaghi as
Commander, 1st Guard Div, IIGF, 1965-69, was responsible for the
personal protection of the Shah. He enjoys the trust and respect
of the Shah. He has visited the U.S. on official missions.
(C/NOFORN) CAREER: Gen Gharabaghi graduated in 1938 from the Military
College (now the Imperial Iranian Military Academy) and has-served in
a variety of command and staff positions. His first command position
was the Independent Antiaircraft Battery, 1st Division about 1939.
He was CofS, Imperial Iranian Ground Forces (IIGF) from May 1972
becoming Commander, I Corps, I1GF until it was deactivated on 22 Apr
1974. He has a strong educational background including a Doctor of
Laws (LLD) degree from the University of Paris; also a graduate of
the Superior War College, Paris, France.
(C) PERSONAL DATA: Born 1918 in Tabriz, Iran. .Presents a fine
military bearing; capable, sincere and honest. Married; has children.
Speaks native Persian; fluent French, fair English.
PREPARED BY: Muriel C. Riddick, DB-3C2
Appointed Minister of Interior, August 1978; Minister of Economic and
Finance, 6 November 1978.
C- A"-FD 91 PA -06
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DC CLASSIFY ON 4. 3I CCCE :!SCR VVV
 Approved For Release. 2004/01/207r-CIA-RDP81 B004fl1 RG02000110002-9
SECRET
BIOGRAPHIC SKETCH
?
(U) NAME: Gen Gholam Ali Oveisi
(oh VAY see), Army (Infantry).
Variant: Qolam-Ali Oveiisi.
(U) POSITION: Commanding General,
Imperial Iranian Ground Forces (IIGF),
since 16 November 1972.*
(S/NOPORN) SIGNIFICANCE.: During
Oveisi's six years as the Commanding
General of,the Imperial Iranian
Ground Forces, he has been a team
player,-without any apparent desire
for personal publicity or political
IRAN
Gen Gholam?Ali OVEISI
March 1978
influence. A strict di-sciplinarian, he is.well-informed on
the problems and objectives of the imperial Iranian Armed
Forces, and understands modern command techniques. While in
command of the Gendarmerie, he showed an appreciation for the
importance of field training in which he carried out a number
of major improvements (1965-Nov 1972). A strong leader highly
respected; U.S. military officials regard Oveisi as one of the
most outstanding of the general officers in the Iranian Armed
Forces.
(S/NOFORN) POLITICS: Anti-communist; Western oriented;
friendly toward the U.S. He works closely-with U.S.
advisers, readily accepts advice and quick to take action
when required. Sensitive to any implied criticism of Iran."
Complete loyalty, to the Shah, who holds Oveisi in high regard.
(C/NOFORN) CAREER: Graduate, Military High School, Tehran,
1936; and the Iranian Military College, Tehran (a classmate
of the.Shah) in 1938.. During his early career he served in
various command infantry assignments, 1938-44, becoming
Commandant, 2d Division Noncommissioned Officer School,
1944-50. Following graduation from the Command and General
Staff College, Tehran, 1952, he served primarily as a
regimental commander until his appointment as Chief of Staff
CLASSIFIED BY OIA De
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EXEMPTIO C ON'1 DECEMBER 2 0 0 8 91 WASHINGTON. DC. 20301 IRECTLr TO OIA/DB
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 Approved For Release -2004/01/20: CIA-RDP81 B00401 R002000110002-9
CG, ISGF, since Nov 1972. Promoted to Brig Gen,. 1950; Maj
assigned Commanding General (CG)-, Imperial Guard, 1960-65;
concurrently appointed Honorary Adjutant to the Shah,'1961.
Oveisi advanced to?CG, Imperial Iranian Gendarmerie, 1965-'12;
ID r
of.the:Imperial Guard, 1955-58. Graduate,..U.S. Army Command,
and General Staff College, Fort Leavenworth, Kansas, 1960;
of Iran majoring in English, 1975. The General'speaks
native Persian, fluent French and excellent English.
attractive young woman; studied at the National University
Max Gen Sarmad (former--Gendarmerie). An intelligent,
He has two sons and a daughter by his first wife (deceased)
,one son by his present wife, Sharareh. She is the daughter-of
including Iran's highest decoration, the Taj (Crown).
avid hunter-. He holds numerous awards and decorations,
a ceremonial glass of wine). An accomplished horseman; an
(C/NOFORN) PERSONAL DATA: Born 1918 in Qom, Iran. Slight
build (517", 140 lbs); excellent physical condition.
Conservative, quiet disposition; informal with those close
to him. Intelligent, diligent and firm in his dealings with
associates. A Muslim; adheres to his religious proscriptions.
Oveisi neither smokes nor drinks (will occasionally accept
PREPARED BY: Muriel C. Riddick, DB-3C2
*CURRENT UPDATE:
Appointed Minister of Labor and Social Affairs (in addition to military'
position), 6 November 1978.
WDS
1 1O.
TLY TOADIA/DB
RY TO
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 --Approved For Release 2004/01/20: CIA-RDP81 B00401 R002000110002-9
CONFIDENTIALNUT ha-'-`";s; 10 FOREIGN NATIONALS
A biography on Lt. Gen Abdol Hassan Sa'adatmand
is not available. He is the Minister of
Information and Tourism. He has been the
Information Officer on the Supreme Commander's
Staff for a number of years.
'If
Classified by ___ DIA-D6__________________
EXEMPT FROM GENE??L DECLAS2FICATION
SCHEDULE CF E-'7-70'-' ORDER 1-;.'!:2
EXEiviPT1CN CA 7 EGORY_ - 2 ----------------
DECLASSIFY ONUpon_ Noti fi ca_ti_gn _qt _Qcigi nator
CO N FI D EN T I A LNOT RELEASABLE TO FOREIGN NATIONALS
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 Approved For Release 2004/01/20 : CIA-RDP81 B00401 R002000110002-9
CONFIDENTIAL
IRAN
Lt Gen Amir Hossein RABII
August i978
BIOGRAPHIC SKETCH
(U) NAME: Lt Gan Amir. Hossein. Rabii
Air Force.
(U). POSITION: Commander, Imperial-
Iranian Air Force (IIAF), since
8 February 1977.*
(C/NOFORN) SIGN=FICA.NCE: Gen Rabii,.
a highly effect.-:a, charismatic leader
was appointed Cc-ander, IIAF, follow-
ing the accidental death of the Iranian
Air Force Chief, Zen Tadayon on 7 Feb
1977. An excellent pilot with strong
command experience, Rabii provides the
positive leaders-'-4= necessary for the
fast-growing air force. He has received extensive military
training in the =nited States and has been cooperative with
US officials in ==an.
(C/:OFORN) POLE-=_S: Loyal to the Shah and has expressed
pride in the two decorations he has received from His Imperial.
:??ajesty. Pro-US, particularly toward members of the USAF.
(C/NOFORN) CARE : Rabii obtained his secondary schooling
locally and hecan is military career as a cadet, Imperial
Iranian Air Force Academy, 1950; commissioned-2d Lt, 1953.
Attended US pilot training at Reese AFB, Texas 1953, and
Williams,AFB, Ar_zcna, 1960; grad uate.USAF Instructor Pilot
Course, Furstenfeld,bruck AFB, Germany. He returned to the
United States for additional training, Squadron Officer School,
Maxwell AFB, Ala=.& a, 1964; Instructor Pilot course (F-5),
Williams AFB, 1954; Air Command and Staff College course,
Maxwell AFB, 1966. Rabii's early career includes: fighter
pilot, 1st-Fighter Wing, Tehran; assistant jet instructor for
the USAF at Furs=enfeldbruck AFB, Germany; Squadron Commander,
2d Fighter Wing; Director of Operations, 1st Fighter Wing,
Tehran; leader of the Golden Crown (IIAF Aero-team) and Squadron
Commander servir.; with the United Nations forces in the Congo
during the 1960s. ,he General has made many trips to the US,
including a four =cnt:1 visit to the Tactical Air Command bases
~I ASSIFIFD 9Y ! AD9
EREMPT Fxy .EIIEPAL DE:AApr4Dved For Relear RN9s4~Ae1T 0R51GN1?NF~@Fa81 B0040-1RO&2OOO44ORIS7~"/" IT fI1PPCMi
'6.EDULESF FrECa TrJE OPTJE 1.552 ? IOGPAPMICAL DATA AY IMMFDIATFLY FDPWAPOING
~ EMPT'/)Nr:ATFr.GRY2 2008 CONFIDENTIAL --PPECTONSANOADOITIONSOIPECTIYTQOIA,CB
:.ECLASSIF Y ON 31 DECEMBER NASMINGTON DC 20301
 Approved For Release 2004/01/20 : CIA-RDR81 B00401 R00200011-0002-9
CONFIDENTIAL
.RAN
Lt Gen Amir Hossein RADII
...:aus= 1978
throughout the country. During 1974, Rabii attended the Senior
Officers International Mangement Course, :donterey, California.
Progression in rank: Maj, 1963; Lt Col,-1965; Col, 1967; Brig
Gen, 1971; Maj Gen, 1973 and Lt Gen, Mar 1976. Served as Com-
mander, 1st Tactical Fighter Base, Tehran, 1973-Dec 74. Com-
mander,-Tactical Air Command, IIAF,"Jan 1975-Feb 77; a-pointed
Commander, I IAF , 8 'Feb 1977.
-
(C/NOFORN) PERSONAL DATA: Born 1932 in Kermanshah, !ran.
medium build, handsome, well groomed officer. He is married
to Gerda, whom he met while stationed in Germany in 1957; they
have two sons. A Muslim; his children are being instr::cted in
the Christian Religion. Does not drink and believes in physical
fitness as a matter of pride. A loyal tribes.-an whose
grandfather was a Tribal Chief, he steaks of this relationship
with pride. Has some degree of wealth but does not .:.ake a show
of money. Active in all sports, water skiing, swimming,
volley-ball. In addition to his native Persian, a steaks
fluent English and German.
PREPARED BY: Muriel C. Riddick, DB-3C2
Appointed Minister of Housing and Urban Development (continues in military
position), 6 November 1978.
!OT PELEASABLE TO FOREIGN NATIONALS rEASE AS".i N:PaCT CL'?F!+T
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2-301
 ir~~ Hr '~t TO FOA GN NATIONALS
CONFIDENT!A('
I RAN
Lt Gen Iraj.MOGHADAM
November 1978
BIOGRAPHIC SKETCH
NAME: Lt Gen Iraj Moghadam
POSITION: Minister of Energy.
(C/NOFORN) Lt Gen Moghadam is a longtime Vice Deputy for Administration,
Military Industries Organization. A corporate type officer, widely
experienced in managerial matters, considered by Americans who deal
with him as astute, congenial and competent. Can be Expected to
perpetuate Shah's policies.
SOURCE: US Embassy Tehran
Classified by _ . DIA _ .. .
EXEMPT FROM CE` CEPIL CECL.,:39IFICATION
~' :.DuLE OF a. i Vi1V4:R 11'.82
0 PTIe'j,' \a:i_uuIJR,/ 1 .?...... ......r.^
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CONFIDE A',
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 CONFIDENTIAL
(U)
IRAN
Adm Kamal-ed-Din -Mir-RABIBOLLAHI
August 19 88
CLASSIFIED 9Y OiA 06
FROM T N
EXEMPT GENEUTTVE?p coveRK ICATION NO
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CfC"L; FYON3 CE~ER.:loo CONFIDENTIAL ASHI o;;ACO T70NSaRECTLYTOOwOe
1977
Gulf. He assumed the top IIN naval position following the Shah's
dismissal of the previous CINC VAdm Attaie and his deputy as a
result of a major corruption scandal. Habibollahi is highly re-
spected by his superiors and colleagues.
(C/NOFORN) POLITICS: Western oriented; anti-Communist. Friend-
ly toward the US and favors US presence in the India Ocean. He
has received military training in the US. Has traveled exten-
sively in Europe, the US, Indian and various Middle Eastern coun-
tries.
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BIOGRAPHIC SKETCH.
(U) NAME: Adm Kamal-ed-Din Mir-
Habibollahi, Navy. Variants: Kamel
Mir Ha i eelahi, Addressed as Adm
Habibollahi.
(U) POSITION: Commander in Chief,
Imperial Iranian Navy (IIN), since
7 January 1976.*
(C/NOFORN) SIGNIFICANCE: Habibollahi's
January 1978 promotion to Admiral is
a reflection of the Shah's confidence
in his leadership. An effective
career officer, the-Admiral commands
the major naval force in the Persian
Frigates (purchased from the UK) and was stationed in England
during outfittings and trials, Aug 1968-Sep 69. Promoted to Cdr,
(C/NOFORN) CAREER: Obtained early schooling locally and enter-
ed the Navy in 1949. Graduated from the Royal Naval Academy,.UK,'
1949-51 and earned his commission upon completion of additional
training at the Imperial Iranian Military Academy,. Tehran, Sep
1952.. Advanced naval training includes: graduate, US Naval
Postgraduate School, Montery, California, Mar-Dec 1961, and the
US Naval War College, Newport, Rhode Island, Sep.1967-Jul 68.
An excellent shiphandler, he has commanded the IIS Yabakbar, IIS
Larak, IIS Palang, IIS Babr and the IIS Naahid, 1954-65. From
1965 until 1966, he served as Commander, Escort Div; Operations
Assistant to Commander, Southern Naval District and the Persian
Gulf Fleet, 1966-67. Assigned Division Commander of the Vosper
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CONFIDENTIAL
IRAN
Ndm Kamal-ed-Din Mir-HABIBOLLAHI
August 1978
?
*CURRENT UPDATE:
Appointed Minister of Culture and Arts; Minister of Education and
Training; Minister of Science, (continues in military position),
6 November 1978.
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