PROBABLE DEVELOPMENTS IN IRAN THROUGH 1954

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A003200030001-4
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: September 20, 2012
• Sequence Number: 1
• Publication Date: November 16, 1953
• Content Type: NIE

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;MAID COPY
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4gQA NAL INTELLIGENCE ESTIMATE
t= fxt CDPY
PROBABLE DEVELOPMENTS IN IRAN
THROUGH 1954
` Cf c'~Pr
NIE-102
(Supersedes NIE-75/1)
Approved 10 November 1953
Published 16 November 1953
DOCUMENT NO.
?O0
NO CHANGE IN CLASS.
U DECLASSIFIED
CLASS. CHANGED TO: TS C
NEXT REVIEW DATE: ~~ /
AUTH: HR 0.2
i DATE ' REVIEWER; I
The Intelligence Advisory Committee concurred in this
estimate on 10 November 1953. The FBI abstained, the
subject being outside of its jurisdiction.
The following member organizations of the Intelligence
Advisory Committee participated with the Central Intel-
ligence Agency in the preparation of this estimate: The
intelligence organizations of the Departments of State,
the Army, the Navy, the Air Force, and the Joint Staff.
CENTRAL INTELLIGENCE AGENCY
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1. This copy of this publication is for the information and use of the recipient
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WARNING
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I SECRET
PROBABLE DEVELOPMENTS IN IRAN THROUGH 1954
THE PROBLEM
To estimate probable developments in Iran through 1954.
CONCLUSIONS
1. Relatively moderate governments are
likely to continue in Iran through 1954,
although hampered by: (a) the indeci-
sion of the Shah; (b) the irresponsibility
of the diverse elements making up the
Iranian political community; and (c) the
unruliness of the Majlis. The chances
that Zahedi himself will remain prime
minister through 1954 are not good.
2. Few significant steps toward the solu-
tion of Iran's basic social, economic, and
political problems are likely to be taken
during the period of this estimate. The
effectiveness of the government will
largely be determined by its success in
dealing with Iran's immediate fiscal and
monetary problems and in making some
apparent progress towards settlement of
the oil dispute. An early and satisfactory
oil settlement is.unlikely. Without fur-
ther outside financial aid, an Iranian gov-
ernment probably would manage to cope
with its immediate fiscal and monetary
problems by resorting to deficit financing
and other "unorthodox" means. Under
such circumstances, it would encounter
- and with difficulty probably keep in
check - mounting pressures from ex-
tremist groups.
3. The security forces, which are loyal to
the Shah, are considered capable of tak-
ing prompt and successful action to sup-
press internal disorders and recurrent
rioting if provided timely political leader-
ship. This capability will continue if,
during the period of this estimate : (a) se-
curity forces receive adequate financial
support; (b) differences between the
Shah and top level leaders over control of
the security forces are not seriously ag-
gravated; and -(c) strong public opposi-
tion to the regime does not develop.
4. Tudeh's capabilities do not constitute
a serious present threat to the Iranian
Government, and the Tudeh Party will
probably be unable to gain control of the
country during 1954, even if it combines
with other extremist groups. It will re-
tain a capability for acts of sabotage and
terrorism.
5. Iran will attempt to maintain friendly'
relations with the USSR, but will almost
certainly resist any Soviet efforts to in-
crease its influence in Iran's internal
affairs.
6. Failure to receive continued financial
aid from the US or an acceptable oil set-
tlement will probably result in a govern-
ment coming to power which will be less
friendly to the US than the present one.
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DISCUSSION
1. PRESENT SITUATION
Political and Military
7. The overthrow of the Mossadeq government
on 19 August 1953 checked the drift in Iran
toward Communism and isolation from the
West.. The authority of the Shah has been
reasserted, and a moderate government un-
der General Zahedi is in power. This gov-
ernment is committed to maintaining the
constitutional position of the monarchy and
the parliament, suppressing the Communist
Tudeh Party, and launching an economic de-
velopment program predicated on settlement
of the oil dispute. The accession of Zahedi to
power has eliminated neither the economic
and social problems which have long plagued
Iran, nor the weaknesses and inadequacies of
the Iranian political system.
8. The armed forces are loyal to the Shah,
who has taken prompt action to re-establish
himself as commander-in-chief in fact as well
as in theory. The morale of the security
forces has improved, and they can be expected
to respond promptly in support of the govern-
ment .if given timely political leadership.
9. Increasing friction and uncertainty are
developing within the Imperial General Staff
because of the Shah's tendency to by-pass
Zahedi on military matters and because of
mutual efforts of Zahedi and Chief of Staff
Batmangelich to undermine each other and
place their own men in key positions. Al-
though political maneuvering to this degree
is unusual, even in the Iranian high com-
mand, there is no evidence that it has as yet
impaired the effectiveness of the security
forces.
10. The Zahedi government has taken vigor-
ous action against the Tudeh Party. The
party's organization has been at least tem-
orarily disrupted, and many of its most active
members have been arrested. Most of the
known Tudeh members and sympathizers who
had infiltrated government agencies have
been purged. The Tudeh Party has also lost
.much of its popular support. Its immediate
capabilities for exerting pressure on the gov-
ernment are limited, even if current efforts to
obtain the cooperation of die-hard nationalist
and extremist groups are successful. Tudeh
retains, however, a capability for acts of sabo-
tage and terrorism.
1-1. Outside the security field, the Zahedi gov-
ernment has made little progress. The Majlis
has lacked a quorum since the withdrawal of
pro-Mossadeq members in the summer of
1953. Hence the government is presently un-
able to obtain legislation needed to carry out
its announced program. Moreover, the re-
gime has reached no firm decision on how and
when to reconstitute a functioning legisla-
ture. Although the Shah and Zahedi agree
on the necessity of holding elections, they
apparently fear that new elections may cause
a resurgence of extremist sentiment, are un-
certain how to insure the election of a man-
ageable Majlis, and have not yet definitely
scheduled the holding of elections.
12.. Meanwhile, the government has done
little to strengthen its political position in
preparation for new elections. Zahedi has
enlisted few if any real allies among the poli-
ticians formerly associated in opposition to
Mossadeq. The present cabinet is dominated
by members of the old ruling class, many of
whom have little genuine sympathy for re-
form, command little political support, or are
suspect because of former identification with
the British. Zahedi himself has had, little
success in convincing the public that he will
not compromise the basic objectives of the
National Front, especially with respect to oil
nationalization. Finally, the strength and
standing- of the Zahedi government is being
impaired by friction between Zahedi and the
Shah.
13. These developments have hastened the
breakup of the loose array of politicians
aligned against Mossadeq and have encour-
aged an early revival of factionalism and in-
trigue. Public criticism of the government
and preliminary maneuvering to undermine
Zahedi are already beginning to emerge.
Nationalist and extremist elements are most
active in these respects. However, National
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Front leaders who supported Mossadeq until
the end are still publicly discredited, and open
opposition to the government in other quar-
ters is not united. The government's strained
relations with the Qashqai tribes, which have
been traditionally hostile to the present
dynasty and were closely associated with
Mossadeq, are under present circumstances
an irritant rather than a major threat.
Economic
14. The Zahedi government faces serious
budgetary and monetary problems. Mossa-
deq's oil policy resulted in reduction of public
revenues by about a third, and he was able to
meet government operating expenses and
keep the oil workers paid only by curtailing
the development program, reducing the level
of imports, depleting the government's finan-
cial reserves, and illegally expanding the cur-
rency. Zahedi has thus been left with a de-
pleted treasury and a sizeable operating deficit.
The emergency grant of $45 million extended
by the US soon after Zahedi took office will
enable him to meet current operating ex-
penses until about February or March of 1954,
provided that the government takes effective
steps to cope with its conversion problem.
15. Zahedi will also have to contend with eco-
nomic dissatisfactions engendered or aggra-
vated by Mossadeq's economic policies. Be-
cause of a series of good crops and the
government's success in maintaining essential
imports, the predominant rural sector of the
Iranian economy has suffered little from the
shutdown of the oil industry, and serious eco-
nomic difficulties have not emerged elsewhere.
To some extent, essential goods are being ob-
tained by barter trade with the USSR. On
the other hand, foreign exchange for essential
imports from other countries has been main-
tained through a ban on the import of luxury
and semi-luxury goods. Politically active up-
per class groups resent this ban and almost
certainly will seek to have it lifted. The ur-
ban middle and lower classes have been dis-
appointed by a situation in which the prospect
for economic and social improvements has be-
come more remote and in which their already
low level of living has gradually deteriorated.
16. The Zahedi government clearly recognizes
the importance of settling the oil dispute and
getting the Iranian oil industry back into
operation. It has indicated that it considers
Mossadeq's attitude toward oil negotiations to
have been arbitrary and unrealistic, and has
already made some halting efforts to prepare
Iranian public opinion for a settlement which
might involve some retreat from Mossadeq's
demands. The obstacles to solution of the oil
problem nevertheless remain great, mainly be-
cause the Iranians hope for greater control
over oil operations and higher financial re-
turns than are likely to be acceptable to the
international oil industry.
Foreign Affairs
17. The Shah and Zahedi are cooperating with
the US and have indicated their desire to im-
prove relations with the UK. Although the
new government has signed the barter agree-
ment with the USSR which was under negotia-
tion at the time of Mossadeq's downfall, it has
at least for the present discontinued Mossa-
deq's policy of attempting to play the USSR off
against the West.
18. The government's interest in cooperating
with the US and its receptiveness to US advice
are due in large measure to its current de-
pendence on US financial aid, and probably
also to a belief that Communism is the over-
riding threat to Iran's independence. The
government's good standing with the US, as
demonstrated by its receipt of emergency bud-
getary aid, is at present one of its main polit-
ical assets within Iran. Anti-US agitation
has died down except for spasmodic efforts on
the part of Tudeh.
19. The new government is, conscious of the
need for British agreement in the revival of
Iran's oil industry. However, basic suspicions
of British intentions remain widespread. The
government is still reluctant to resume formal
diplomatic relations with the UK before there
is tangible progress toward an oil settlement.
II. PROBABLE DEVELOPMENTS
20. Few significant steps toward the solution
of Iran's basic social, economic, and political
problems are likely to be taken during the
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SECRET
period of this estimate. The effectiveness of
the government will largely be determined by
its success in dealing with Iran's immediate
fiscal and monetary problems and in making
some apparent progress towards settlement of
the oil dispute. We believe that relatively
moderate governments are likely to continue
through 1954. Without further outside finan-
cial aid, an ,Iranian government probably
would manage to cope with its immediate
fiscal and monetary problems by resorting to
deficit financing and other "unorthodox"
measures. Under such circumstances, it
Would encounter - and with difficulty prob-
ably hold in check - mounting pressures from
extremist groups.
21. If the Shah were assassinated, a confused
situation might arise. The succession to the
throne is not clearly established, and disorders
attending his death might permit extremist
groups, with or without Tudeh Party collabo-
ration, to gain power.
Economic
22. The Shah and the Zahedi regime are like-
ly to be more reasonable than Mossadeq in
their approach to the oil problem, but an early
and satisfactory solution is not likely. The
following generalizations can be made:
a. The oil issue is still politically explosive
in Iran and will be an issue in the electoral
campaign. The Zahedi regime will probably
not wish to reach a formal oil agreement with
the British before the completion of the elec-
tions, which usually take several months.. In
any case no Iranian regime could survive if it
appeared to be compromising the provisions of
the oil nationalization law or retreating far
from Mossadeq's basic demands. Once a
Majlis is reconstituted, it can probably be
brought to ratify an agreement which does
not appreciably violate these conditions, but
only after vigorous political pressure and pub-
lic propaganda by the government.
b. Although there appears to be general
agreement that the marketing of Iranian oil
will have to be undertaken by a combination
of Western firms rather than by the Anglo-
Iranian Oil Company alone, a multiplicity of
complicated legal, commercial, and technical
problems must be worked out before a definite
proposal can be made to Iran. Even if an oil
agreement is reached and ratified, Iran will
not reap sizeable financial benefits at once,
unless through some form of advance against
future oil deliveries.
23. It therefore appears that sometime during
1954 Iran will encounter difficulties in meet-
ing its budgetary expenses. After the present
US emergency grant is exhausted, the Iranian
Government will either require additional out-
side financial assistance or will be forced to
seek Majlis authorization for a resumption of
deficit financing of the sort that Mossadeq en-
gaged in illegally. The Majlis would probably
grant such authorization, but with great re-
luctance, and only if there appeared to be no
hope of timely outside aid. Moreover, this
course would in the long run probably result
in a progressive weakening of Iran's financial
stability. Exports will probably continue to
pay for essential imports, and barring serious
crop failure, general economic activity is ex-
pected to continue at approximately the pres-
ent level. If there is an oil settlement, barter
trade with the USSR is not expected to reach
significant proportions. However, in the ab-
sence of such a settlement or continued grants
of financial aid, Iran will be forced to-depend
heavily upon USSR barter trade for essential
items.
Political
24. Although Zahedi faces no immediate chal-
lenge, the chances that his government will
survive through 1954 are not good. Basic
conflicts continue within and between the tra-
ditional governing groups, who are eager to
regain the position of privilege they held be-
fore Mossadeq, and the urban middle and
lower classes, who are demanding economic
and social reforms and greater participation
in government. These conflicts could flare
out into the open at any time, particularly
during proposed elections or over such issues
as the disposition of Mossadeq or the oil dis-
pute.
25. Mossadeq remains a problem for the re-
gime. So long as he remains alive, he will
be a potential leader for extremist opposition
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to the regime. On, the other hand, if Mossa-
deq were executed in the near future the
resultant disturbances would be serious but
could probably be suppressed.
26. The necessity of reconstituting the Majlis
poses a serious problem for the Zahedi gov-
ernment. The new regime is firmly com-
mitted to a return to parliamentary govern-
ment and appears unwilling to face the con-
sequences of deliberately postponing elections.
It is likely that elections will be held within
the period of this estimate. However, politi-
cal instability is likely to be increased by the
electoral campaign and by the nature of the
Majlis likely to be elected. Once the electoral
campaign begins, political groups now maneu-
vering covertly for position will come out in
the open, with increasing danger that popu-
lar emotions will again become aroused and
lead to mob violence.
27. The new Majlis will almost certainly be a
heterogeneous body including representatives
of the traditional governing groups, tribal
leaders, 'former Mossadeq supporters, and
ardent nationalists like Mullah Kashani.and
Mozafar Baghai. Many members will be little
interested in stable government or will be
basically unsympathetic to the government's
reform program. Others will suspect Zahedi
of too close association with the traditional
governing groups and will oppose settlement
of the oil dispute and rapprochement with the
British. From these disunited groups, repre-
senting a variety of conflicting interests,
Zahedi must put together majorities for con-
troversial fiscal and monetary legislation and
such politically explosive measures as those
relating to an oil settlement.
28. These difficulties Zahedi will be able. to
surmount only so long as he has the firm
backing of the Shah, who has once again
become a key factor in Iranian politics. The
Shah apparently feels that his restoration to
power is due to his high personal popularity
with the Iranian people, and he appears de-
termined to assert his authority. There are
indications, however, that he is still unwilling
to give strong backing to any prime minister,
and at the same time is not willing to assume
the role of dictator himself. His latent jeal-
ousy of Zahedi, his attempts to appoint court
favorites to key government posts, and his
by-passing of Zahedi in exercising his com-
mand of the armed forces might at any time
lead to a situation in which Zahedi would
become ineffective. If strong opposition to
Zahedi develops in the Majlis, the Shah will
probably jettison Zahedi and appoint a new
cabinet, thus in effect returning to the chronic
governmental ineffectiveness and instability
of the pre-Mossadeq era.
29. The Shah would probably be successful in
replacing the Zahedi government with an-
other. relatively moderate one. However, if
foreign aid is substantially reduced and there
is no oil settlement or reasonable prospect of
one, moderate governments would encounter
greater popular opposition. The Shah would
then be faced with the alternatives of ruling
by increasingly authoritarian means or. mak-
ing greater concessions to extremist elements.
If additional US financial assistance is not
forthcoming when the current grant is ex-
hausted in the spring of 1954, and if at that
time Iranian public opinion were already
greatly aroused over such issues as Majlis
elections or an oil settlement, a serious crisis
might develop. The Shah and a government
enjoying his support could probably survive
such a crisis, although they would lose im-
portant elements of their following.
30. The Tudeh Party will probably be unable
to gain control of the country during the
period of this estimate, even if it combines
with other extremist groups. It will never-
theless be able to capitalize on any decrease
in popular confidence in the government. It
will also retain a capability for acts of sabo-
tage and. terrorism. The strength of pro-
Shah anti-Tudeh sentiment in the armed
forces, while at present a major deterrent to
Tudeh assumption of power, will be weakened
if there is a marked increase in popular sup-
port for Tudeh.
Foreign Affairs
31. The hope of obtaining continued and in-
creasing US aid, both in restoring oil revenues
and in providing funds in their absence, makes
it almost certain that the Shah and his gov-
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ernments will continue to cooperate with the
US. A sharp curtailment in US aid to Iran
would not only make Iran'less receptive to US
advice and influence, but would significantly
reduce public confidence in the government's
ability to improve social and economic condi-
tions and maintain internal security. There
will also be increasing pressure, particularly
from the Shah, for an expansion of US mili-
tary aid. Even if the Shah should be offered
considerable inducement in the form of mili-
tary aid, he would not agree to join with the
US in formal arrangements for defense of the
Middle East, since such a commitment would
be strongly opposed by many Iranians, would
not obtain Majlis approval, and might, in his
mind, provoke the USSR into invoking the
1921 Treaty.
32. Iranian relations with the UK will largely
depend on progress in settling the oil dispute.
Settlement of the dispute would almost cer-
tainly result in some gradual revival of Brit-
ish political and commercial influence in Iran.
33. During 1954 Iran will attempt to maintain
friendly relations with the USSR and will con-
tinue efforts to settle questions in dispute. It
will almost certainly resist any Soviet efforts
to increase its influence in Iran's internal
affairs.
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