IRAQ-IRAN: THE WAR MOVES INTO THE GULF

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00420R000200440018-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 10
• Document Creation Date: December 22, 2016
• Document Release Date: November 13, 2009
• Sequence Number: 18
• Publication Date: May 16, 1984
• Content Type: REPORT

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C icy
DIRECTORATE OF INTELLIGENCE
16 May 1984
IRAQ-IRAN: The War Moves Into the Gulf
Summary
The Iran-Iraq war has escalated dangerously in the past
few weeks. Iraq has inflicted serious damage on tankers
calling at Khark Island and Iran has retaliated by striking
tankers calling at Gulf ports. Baghdad is unlikely to cease
its attacks because of Iran's retaliation. The Iraqis are
attempting to internationalize the war and impair Iran's war
making capacity by denying Tehran oil revenues. The
frequency of Iraq's attacks--about once a week--is likely to
increase when Baghdad receives the first of at least 10
Exocet-armed Mirage F-1 aircraft this summer.
Iran raised the stakes in the Gulf on 16 May by
attacking a Saudi oil tanker carrying Kuwaiti crude near the
Saudi oil terminal of Ras Tanura. Iranian leaders have
indicated that they will try to reduce Gulf Arab oil exports
in the same proportion as Iran's exports are reduced by
Iraqi attacks. More Iranian airstrikes against Saudi and
Kuwaiti shipping are likely as are sabotage and terrorist
attacks against Arab Gulf states if the Iraqi strikes
continue. The possibility of a clash between Saudi and
Iranian fighter aircraft also is increasing. There have
been no indications of new Iranian military preparations to
close the Strait of Hormuz. Iran probably would undertake
such an effort it were to lose substantial oil
revenues.
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The most recent Iranian attack is having a strong
initial impact on the spot market, raising North Sea Brent
crude prices by as much as $1.00 a barrel on 16 May. If the
frequency of Iraqi attacks on tankers calling at Khark
Island increases, some tanker owners will stop accepting
charters for Khark relatively quickly. Others will remain
in the trade seeking to make a quick profit. Tehran also
could use a combination of tactics--such as price discounts,
diplomatic pressure, and transshipment of oil in Iranian
tankers--to maintain oil exports. Because of surplus oil
production capacity available in the Free World, a halt in
exports from Khark Island would by itself not have a major
impact on the oil market. If Iran were to seriously disrupt
Gulf Arab oil exports, the impact on world oil supplies and
prices would be greater and more immediate.
negotiating table.
Iraq's Strategy
Iraq is embarked on a strategy to squeeze the Iranian economy and
increase international concern over an escalation in the war. Iraq wants
Japan to stop purchasing Iranian oil, the Western states to curtail arm
shipments to Iran, and the US to find alternate outlets for Iraqi oil.
Baghdad views the economy as Khomeini's achilles' heel and believes cutting
Iran's oil revenues will damage the Iranian economy. Iraq hopes that by
reducing Iran's oil revenues, cutting Iran's arms supplies, and inflicting
heavy battlefield losses on the Iranians, it will force Tehran to the
hit at least five other tankers, but failed to sink any.
On 27 March Iraq escalated the campaign against Iran by launching its
first confirmed attack using Super Etendard aircraft armed with Exocet
missiles against an oil tanker. Iraq mistakenly hit two friendly ships--a
Greek tanker filled with Kuwaiti oil and a workship leased to ARAMCO. In
addition to hitting the wrong targets, the Exocet missiles performed poorly;
the missile that hit the Greek tanker failed to explode. In order to avoid
further strikes against friendly ships, Iraq has shifted the focus of its
attacks to the eastern half of the Gulf. The Iraqis also pressed the French
to improve the performance of the Exocet missile. Since late March, Iraq has
ships were in fact damaged.
To implement its strategy, Iraq recently has broadened its attacks on.
shipping. Until 24 March, Iraq concentrated its airstrikes mainly on merchant
ships calling at the Iranian northern Gulf port of Bandar-e Khomeini. Bandar-
e Khomeini is the only functioning Iranian port with a railhead and thus is
vital to the Iranian economy. Iraq claims to have hit about thirty merchant
ships in six attacks from January 1984 through 24 March 1984. At least five
Iraq is launching strikes against Gulf shipping about every five to ten
days and is likely to maintain this pace as long as it suffers no significant
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aircraft losses. With only five Super Etendard aircraft' Iraq will not he able
to launch suet
a
d
h
c
ne ,
igh-intensity attacks on shipping.
Iraq will be able to increase its attacks on shipping late this summer,
however, after it receives a squadron of Exocet-armed Mirage F-1 fighter
aircraft. Four of the Mirage aircraft have been handed over to the Iraqis in
France and at least ten Iraqi pilots will soon finish training on the aircraft
there. The first Exocet-armed F-1 aircraft should arrive in Iraq next month
and be combat ready by late summer. Iraq then will be able to increase both
the frequency and size of its attacks. Instead of hitting one or two tankers
once a week, the Iraqis could attack four or five tankers every few days.
Iraq is unlikely to launch a sustained attack against Khark Island, however,
unless Baghdad decides its campaign against Iranian shipping has failed to
stop Iranian oil exports.
Shipowners and Oil Market Reactions to Iraqi Attacks
An intensification of Iraqi attacks could lead to a major withdrawal of
trade from Iranian oil ports. Because of depressed shipping market
conditions, however, some shipowners probably will continue calling at Khark
as long as they can obtain insurance. There are about 168 tankers idle
worldwide--with about 28 now awaiting business in the Persian Gulf. Even if
insurance rates rise well beyond the current level of 3 percent, insurance
will
till
s
be only a slight deterrent to shipowners and oil buyers.
As concern over the safety of tankers calling at Khark mounts we would
expect to see the following sequence of indicators.
-- A doubling or tripling in the charter rates for oil carried from
Khark.
-- Dramatic increases by Lloyds in hull and cargo insurance rates under
war risk clauses.
-- Withdrawal of substantial numbers of independent operators from the
trade.
-- Widespread cancellations or a significant drop in nominations of
tankers calling at Khark Island.
-- Denial of insurance by all insurers for ships and cargoes in the
Khark Island trade.
A "domino effect" is not likely in the absence of steadily escalating
Iraqi attacks. An across-the-board denial of insurance by all insurers,
however, would effectively halt tanker traffic to Khark, except for
nationally-owned Iranian vessels and those belonging to a number of
independent shipowners who would accept a much higher risk as long as they
have a chance at a
fit
pro
.
Tehran probably will use a combination of tactics to keep its oil
flowing. We believe these measures would be triggered by any significant drop
in exports, perhaps from 1.8 million to 1.5 million barrels per day. Likely
courses of action are:
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Lower official prices or price discounts in the form of rebates
covering higher insurance and transportation costs, easier credit
terms, direct Iranian payment of insurance premiums, or favorable
terms for commercial oil-barter arrangements.
-- Diplomatic pressure on major bilateral trading partners, such as
the Japanese, who have a large commercial stake in Iran.
-- Transshipment of oil in Iranian ships from Khark Island to the
southern end of the Persian Gulf, where it could transfer oil
directly into waiting third-party tankers.
If the Iranian attacks on Kuwaiti and Saudi tankers during the past few
days prove to be the first in a sustained series of Iranian attacks against
tankers trading with Arab ports on the Gulf, both charter and insurance rates
in that trade will start to move up. Charter rates from both Iranian and Arab
ports have been quite close during recent weeks. War risk insurance rates, on
the other hand, have been much lower for Arab ports--premiums on ships are
currently less than 3 percent of those for tankers carrying oil from Khark
Island; rates on Arab oil cargo are 20 percent of those for Iranian crude.
Even if insurance rates on both ships and cargoes in trade with the Arab ports
rise to the current levels for Khark Island, the impact will be slight, adding
about $.25 to the red cost of a barrel of Kuwaiti crude, for example.
Due to surplus oil productive capacity available in the Free World, the
combined loss of total Iranian and Iraqi exports could be absorbed without
significant impact on overall price levels. Much of this excess capacity,
however, is in the Persian Gulf. Any combination of actions which caused a
net reduction in world oil supplies of about 1 million barrels per day would
probably create strong pressure on prices. Judicious use of government and
commercial stocks could mitigate such pressure, but use of the latter would be
highly dependent on perceptions of the likely length of the disruption.
If Iran were to seriously damage or close the major Gulf oil-export
facilities, the impact on world oil suppliers and prices would be more
immediate. Currently about 10 million barrels per day of oil comes from
Persian Gulf countries. Closure of the Kuwaiti export facility at Ahmadi and
the Saudi terminals at Ju'aymah and Ras Tanura would remove over 3.5 million
barrels per day in exports, a volume slightly above excess productive capacity
outside the Middle East. The disruption of all oil shipments through the
Strait of Hormuz would result in oil supply losses of about 7 million barrels
per day from Gulf countries--the only exports available would be a maximum of
3 million barrels per day carried through pipelines in Saudi Arabia and Iraq--
and would precipitate a significant round of oil price increases.
Iran's Response
Faced with an increase in Iraqi pressure on its oil trade, Iran has begun
to retaliate by attacking tankers enroute from Kuwait. The Iranians so far
have confined the location of their attacks to an area in the northern Gulf
between 25 and 55 nautical miles north of Ras Tanura. Iran is signaling to
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the Arab Gulf states and the West that if the Iraqi campaign continues, Iran
will not hesitate to make the Gulf unsafe for all oil shipments. Iran's
Supreme Defense Council met Tuesday and, according to Iranian press re orts,
laid down guidelines for Iran's strategy of retaliation.
The Iranian attack on a Saudi tanker carrying Kuwaiti crude on 16 May is
significant because it did not directly follow an Iraqi attack on Iranian
shipping and it occurred close to Saudi Arabia near the major Saudi export
facility at Ras Tannura. Iran's Foreign Ministry warned on 13 May that Iran
would not tolerate Iraq's attacks on shipping and on the same day Iranian F-4s
attacked a tanker that had just loaded at Kuwait. On 14 May Iran attacked at
least one additional tanker, inflicting significant damage, probably in
response to an Iraqi attack on two Iranian bound vessels a day earlier.
Baghdad may now feel a need to respond to Iran's latest strike. Even if
it does not, it is likely to attack with the Super Etendards within the next
few days if it keeps to its schedule of tanker strikes. Every time Iraq
attacks a target in the Gulf, Iran probably will lash out at one of the Arab
Gulf states. Kuwaiti targets are the most logical since that country is
militarily weak and is the Gulf country least likely to ask for military
assistance from the US. Kuwait is also the orimarv port for military
equipment coming from the USSR to Iraq.
Iran knows Iraq used Kuwaiti facilities in some of its attacks on Iranian
bound shipping. Tehran also holds all Arab Gulf States accountable for giving
financial aid to Baghdad
Tehran has about 70-80 operational fighter aircraft and has been using F4
fighter aircraft, probably equipped with Maverick TV-guided bombs, against
tankers. Iran also apparently is using P-3 naval reconnaissance aircraft to
target tankers for airstrikes. While Iran can sustain its campaign of
harassment against Gulf shipping indefinitely, it cannot engage in sustained,
large-scale air operations over the Gulf should it become involved in clashes
with Saudi fighter aircraft. Such engagements will become more likely as the
Saudis beef up their defenses along the Gulf and Iran continues its strikes on
If, as we judge likely, attacks against Kuwaiti shipping fail to deter
Baghdad, Tehran likely will mount strikes against targets inside Kuwait or
other Gulf states. It also could shift the focus of its air attacks further
south in the Gulf. Iran could attack oil and desalination facilities in
Kuwait and other Arab Gulf states, hit the Iraq-Turkey oil pipeline, or begin
sabotage and terrorist attacks in the Gulf states using local Shia
sympathizers. Iran has trained Gulf Arabs in terrorism and sabotage and
probably has some already in place. Kuwait's oil facilities are easly
accessible to Iranian aircraft and damage to any of its terminal facilities
could critically impair its production capacity. Saudi Arabia and Abu Dhabi's
oil production and export also dPnand nn a small number of critical
Iran has not substantially strengthened its forces near the Strait of
Hormuz. We believe Iran would only attempt to block the Strait if Iraq
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succeeds in substantially reducing Iranian oil exports, perhaps by more than
50 percent. Mining the Strait could result in a cutoff of Iranian shipping
and would raise the possibility of a Western military response that Iran could
not effectively counter.
Threat to US AWACS
Iraqi President Saddam Hussayn was quoted this week in a British
newspaper as claiming that US AWACS in Saudi Arabia were supplying Baghdad
with information. Tehran has picked up on the story claiming that it proves
the US is behind the Iraqi strikes in the'Gulf. If the strikes in the Gulf
continue to escalate, we believe Iran will consider the AWACS and other US
personnel and facilities as legitimate targets. The Iranians may try to
intercept AWACS or launch terrorist attacks against US military personnel
inside Saudi Arabia or the other Gulf states.
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Iraqi and Iranian Attacks on Shi
31 Jan - 1 Feb
1 Mar
24 Mar
27 Mar
25 Apr Saudi-registered supertanker heavily damaged by Iraq.
27 Apr Four mercha t h
n
Iraq claims 8 ships were sunk during attacks over two days
near Bandar-e Khomeini.
Iraq claims 7 ships were hit near Bandar-e Khomeini.
Iraq claims tankers at Khark Island were attacked. We have
no confirmation that this attack occurred.
Iraq claims 8 ships were sunk near Bandar-e Khomeini.
Iraq claims 4 ships were sunk near near Bandar-e Khomeini.
A Greek tanker is slightly damaged and Korean barge sunk by
Iraq.
29 Mar Four ships attacked near Bandar-e Khomeini by Iraq.
18 Apr British tanker hit and slightly damaged by Iraq.
i
s ps attacked by Iraq near Bandar-e Khomeini.
Tidy Saudi-registered tanker heavily damaged in Iraqi attack.
13 May Iran attacks Kuwaiti tanker.
13 May An Iranian tanker lightly damaged and Panamanian-registered
tanker heavily damaged by an Iraqi attack.
14 May Iran'attacks Kuwaiti tanker.
16 May Iran attacks Saudi-registered tanker.
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iyr JCUKtI
PERSIAN GULF: Current Oil Production and Exports
million b/d
Iran
Prod
Crude
2.4
on
NGlsa
__b
Consumption
Net Exports
Iraq
1.1
0
Kuwait
1.0
0.05
Neutral Zone
0.5
0
0
0.5
Qatar
Saudi Arabia
5.0
0.3
1.3
0.1
11.6
0.45
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a Natural Gas Liquids.
b Negligible.
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istribution:
Copy 1 - Geoffrey Kemp, NSC, Room 351, EOB
2 - William Martin, NSC, Room 365, EOB
3 - Roger Robinson, NSC, Room 373, EOB
4 - Richard Beal, NSC, Room 303 EOB
5 - Donald Fortier, NSC, Room 392 EOB
6 - Under Secretary Eagleburger, State, Room 7240
7 - Under Secretary Wallis, State, Room 7256
8 - Ambassador Fairbanks, State, Room 7511
9 - Assistant Secretary Murphy, NESA, State, Room 6242
10 - Deputy Assistant Secretary Placke, State, Room 6242
11 - Hugh Montgomery, Director/INR/State, Room 6531
12 - George S. Harris, INR/State, Room 4524A
13 - General Vessey, Chairman/JCS, Room 2E873 PNT
14 - Admiral Moreau, JCS, Room 2E782 PNT
15 - General Prillaman, JCS, Room 2D874 PNT
16 - Principal Deputy Assistant Secretary Koch, ISA/DOD, Room 4E813 PNT
17 - Deputy Assistant Secretary Tixier, DOD, Room 4D765 PNT
18 - RAdm John L. Butts, DNI/DOD, Room 5C572
19 - Darnell Whitt, DOD, Room 4D840 PNT
20 - John Stempel, ISA/DOD, Room 4D765 PNT
21 - David Tarbell, DOD, Room 4B938 PNT
22 - LTG Mahaffey, DOD, Room 3E634 PNT
23 - LTG Gast, DSAA/DOD, Room 4E841 PNT
24 - General Williams, Director/DIA, Room 3E258 PNT
25
- IA, Room 2C238 PNT
26 - NSA, T1243/CDB
27 - Roger Pajak, Treasury, Room 4324 MT
28 - Wynne James, Energy, Room GA257
29 - Deputy Assistant Secretary Boykin, Energy, Room GA257
30 - Ron Smith, Energy, Room GA257
31 - DCI
32 - DDCI
33 - EXSec
34 - DCI/SA/IA
35 - EXEC REG
36 - DDI
37 - ADDI
38 - VC/NIC
39 - NIO/W
40 - NIO/GPF
41 - NIO/NESA
42 - DDO/NE
43 - DDO/NE
44 - DDO/NE
45 - DDO/NE
46 - EURA/EI/SI
47 - SOO (2)
48 - DDS&T/DO (2)
49 - SCIO
50 - C/CSG
51 - C/ILS
52 - C/ISS
53 - C/PDB
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 4 - C/NID
55 - CRES
56 - SOVA/CSD
57 - OGI/SRD E
58 - D/OGI
59 - C/OPSCTR
60 - DC/OPSCTR
61 - D/CPAS
62 - DD/CPAS
63-66 - CPAS/CMD/CB Rm. 7G07 Hqs
67 - OGI/IIC/TAB
68 - C/PES
69 - D/NESA
70 - NESA/PPS - 6G02 Hqs
71-74 - DDI NESA PG
ORIG:C/NESA/PG
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