COPT NO. OO
iV^&r
r." 0f
DEPT. OF n
national intelligence estimate
PROBABLE DEVELOPMENTS IN IRAN4
Of
Intelligence Advisory Committee concurred In this estimate on. The FBI abstained, the subject being outside of its jurisdiction.
The lollowino member organisations of the Intelligence Aduliory Committee participated with the CentralAgency in the preparation of this estimate The intelligence organisations Ot the Departments Ol State, tht Army, the Navy, tht Air Force, and the Joint Staff
- Sip.ft
central intelligence agency
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PROBABLE DEVELOPMENTS IN IRAN4
THE PROBLEM
To estimate probable developments Ln Iran
CONCLUSIONS
moderate governments are likely to continue in Iranlthough hampered by: (a) theof 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 minister4 are not good.
Few significant steps toward theof 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 detennined 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. Withoutoutside financial aid, an Iranianprobably 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 encounterand with difficulty probably keep in checkmounting pressures fromgroups.
The security forces, which are loyal to the Shah, are considered capable ofprompt and successful action tointernal disorders and recurrent rioting if provided timely politicalThis capability will continue Lf, during the period of this estimate:orces receive adequate financial support; (b) differences between the Shah and top level leaders over control of the security forces are not seriouslyand (c) strong publicto the regime does not develop.
Tudeh's capabilities do noterious present threat to the Iranian Government, and the Tudeh Party will probably be unable to gain control of the countryven if it combines with other extremist groups. It willa capability for acts of sabotage and terrorism.
Iran will attempt to maintain friendly relations with the USSR, but will almost certainly resist any Soviet efforts toits Influence in Iran's internal affairs.
Failure to receive continued financial aid from the US or an acceptable oilwill probably result in acoming to power which will be less friendly to the US than the present one.
-oaonsT
discussion
PRESENT SITUATION Political and Military T. The overthrow of the Mossadeq government on3 checked the drift in Iran toward Communism and isolation from the West. The authority of the Shah has been reasserted,oderate governmentGeneral Zahedi is in power. Thisis committed to maintaining the constitutional position of the monarchy and the parliament, suppressing the Communist Tudeh Party, and launching an economicprogram 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.
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 theif given timely political leadership.
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 Batmangellch to undermine each other and place their own men In key positions.political maneuvering to this degree is unusual, even in the Iranian highthere is no evidence that it has as yet impaired the effectiveness of the security forces.
he Zahedi government has takenaction 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 theare limited, even If current efforts to obtain the cooperation of die-hard nationalist and extremist groups are successful. Tudeh retains,apability for acts ofand terrorism.
It. Outside the security field, the Zahedihas made little progress- The Majlis hasuorum since the withdrawal of pro-Mossadeq members in the summerence the government is presentlyto obtain legislation needed to carry out Its announced program. Moreover, thehas reached no Arm decision on how and when tounctioningAlthough the Shah and Zahedi agree on the necessity of holding elecUons. they apparently fear that new elections mayesurgence of extremist sentiment, arehow to insure the election of aMajlis, and have not yet definitely scheduled the holding of elections,
eanwhile, the government has done little to strengthen its political position In preparation for new elections. Zahedi has enlisted few if any real allies among theformerly associated in opposition to Mossadeq. The present cabinet is dominated by members of the old ruling class, many of whom have little genuine sympathy forcommand little political support, or are suspect because of former identification with the British. Zahedi himself has had little success ln 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.
hese developments have hastened the breakup of the loose array of politicians aligned against Mossadeq and havean early revival of factionalism andPublic criticism ot the government and preliminary maneuvering lo undermine Zahedi are already beginning to emerge. Nationalist and extremist elements are most active Ln these respects. However, National
Front leaders who supported Mossadeq until the end are still publicly discredited, and open opposition to the government in otheris not united. The government's strained relations with the Qashqal tribes, which have been traditionally hostile lo the present dynasty and were closely associated with Mossadeq. are under present circumstances an Irritant ratherajor threat
economic
The Zahedl government faces serious budgetary and monetary problems.1 policy resulted in reduction of public revenues byhird, and he was able to meet government operating expenses and keep Ihe oil workers paid only by curtailing the development program, reducing the level of imports, depleting the government'sreserves, and illegally expanding theZahedi has thus been left with atreasuryizeable operating deficit. The emergency grantillion extended by the US soon after Zahedl took office will enable him to meet current operatinguntil about February or Marchrovided that the government takes effective steps to cope with Its conversion problem.
Zahedi will also have to contend withdissatisfactions engendered orbyconomiceries 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 seriousdifficulties have not emerged elsewhere. To some extent, essential goods are beingby barter trade with the USSR. On the other hand, foreign exchange for essential imports from other countries hasan on the Import of luxury and semi-luxury goods. Politically activeclass groups resent this ban and almost certainly will seek to have It lifted. Themiddle and lower classes haveituation In which the prospect for economic and social improvements hasmore remote and in which their already low level of living has gradually deteriorated.
Zahedi government clearlyimportance of settling the oil disputethe Iranian oil industry backIt has Indicated that its attitude toward oil negotiationsbeen arbitrary and unrealistic, andmade some halting efforts topublic opinionettlementInvolve some retreat fromTbe obstacles to solution of thenevertheless remain great, mainlythe Iranians hope for greateroil operations and higher financialthan are likely to be acceptable tooil Industry.
Foreign Affairs
The Shah and Zahedl are cooperating with the US and have indicated their desire torelations with the UK. Although the new government has signed the barterwith the USSR which was underat the time of Mossadeq's downfall. It has at least for the present discontinuedpolicy of attempting to play the USSR off against the West.
The government's Interest In cooperating with the US and its receptiveness lo US advice are due in large measure to its currenton US financial aid. and probably alsoelief that Communism is thethreat to Iran's Independence The government's good standing with the US, as demonstrated by its receipt of emergencyaid. is at present one cf its mainassets within Iran. Anti-US agitation has died down except for spasmodic efforts on the part of Tudeh.
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 forma! diplomatic relations with the UK before there is tangible progress toward an oil settlement.
ii. probable developments
significant steps toward theIran's basic social, economic, andare likely to be taken during the
odor bf
period of this estimate. The efTectiveness 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 Lo continueithout further outsideaid. an Iranian government probably would manage to cope with lis Immediate fiscal and monetary problems by resorting to deficit financing and other "unorthodox" measures. Under such circumstances, it would encounterand with difficultyhold in checkmounting pressures from extremist groups.
the Shah were assassinated, amight arise. The succession tois not clearly established, andhis death might permitwith or without Tudeh Partyto gain power.
Economic
Shah and the Zahedi regime areto be more reasonable than Mossadeqapproach to the oil problem, but ansatisfactory solution is not likely.generalizations can be made:
oil issue ls still politicallyIran and will be an issue in theThe Zahedi regime willwish toormal oil agreementBritish before the completion of thewhich usually take several months.case no Iranian regime could survive ifto be compromising the provisionsoil nationalization law or retreatingMossadeq's basic demands. Onceis reconstituted, it can probablyto ratify an agreement whichappreciably violate these conditions,after vigorous political pressure andpropaganda by the government.
there appears to bethat the marketing of Iranianhave to be undertaken by aWestern firms rather than by theOil Companyultiplicitylegal, commercial, andmust be worked outefinite 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.
therefore appears that sometimeIran will encounter difficulties inits budgetary expenses. After theemergency grant is exhausted, thewill either require additionalfinancial assistance or will be forcedMajlis authorizationesumptionfinancing of the sort that Mossadeqin illegally. The Majlis wouldsuch authorization, but with greatand only If there appeared to beof timely outside aid. Moreover,would in the long run probablya progressive weakening of Iran'sExports will probably continuefor essential imports, and barringfailure, general economic activity isto continue at approximately thelevel. If there is an oil settlement,with the USSR is not expected toproportions. However, in theofettlement or continuedfinancial aid, Iran will be forced toupon USSR barter trade for
Politico I
Although Zahedi faces no immediatethe chances that his government will survive4 arc not good. Basic conflicts continue within and between thegoverning groups, who are eager to regain the position of privilege they heldMossadeq, and the urban middle and lower classes, who are demanding economic and social reforms and greater participation Ln 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
Mossadeqroblem for theSo long as he remains alive, he willotential leader for extremist opposition
r-
the regime. On the other hand, ifwere executed in the near future the resultant disturbances would be serious but could probably be suppressed.
necessity of reconstituting thea serious problem for the ZahedlThe new regime lseturn to parliamentaryand appears unwilling to face theof deliberately postponingis lately that elections will be heldperiod of this estimate. However,instability is likely to be increased bycampaign and by the nature oflikely to be elected. Once thebegins, political groups nowcovertly for position will come outopen, with Increasing danger thatemotions will again become arousedto mob violence.
new Majlis will almost certainly bebody includingthe traditional governing groups,former Mossadeq supporters,nationalists like Mullah KashaniBag hai. Many members will bein stable government or willunsympathetic to theprogram- Others will suspecttoo close association with thegroups and will opposethe oil dispute and rapprochement with From these disunitedariety of conflictingmust put together majorities forfiscal and monetary legislationpolitically explosive measures asto an oilThese difficulties Zahedi wilt be ableonly so long as he has theof the Shah, who has oncea key factor in Iranian politics. apparently feels that his restorationls due to his high personalthe Iranian people, and he appearsto assert his authority. Therehowever, that he Is stillgive strong backing to any primeat the same tune ls not willing torole of dictator himself. His latentof Zahedi. his attempts to appoint court favorites to key government posts, and his by-passing of Zahedl in exercising hisof the armed forces might at any time leadituation In which Zahedi would become ineffective. If strong opposition to Zahedi develops in the Majlis, the Shah will probably Jettison Zahedi andew cabinet, thus In effect returning to the chronic governmental ineffectiveness and Instability of the pre-Mossadeq era.
he Shah would probably be successful In replacing the Zahedi government withrelatively 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 orgreater concessions to extremist elements. If additional US financial assistance is not forthcoming when the current grant Isin the springnd if at that time Iranian public opinion were already greatly aroused over such issues as Majlis elections or an oilerious crisis might develop. The Shahovernment enjoying his support could probably surviverisis, although they would loseelements of their following.
he 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 winbe able to capitalize on any decrease in popular confidence in the government. It will alsoapability for acts ofand terrorism. The strength of pro-Shah anU-Tudeh sentiment in the armed forces, while atajor deterrent to Tudeh assumption of power, will be weakened if therearked Increase In popularfor Tudeh.
Foreign Affairs
he hope of obtaining continued andUS aid. both in restoring oil revenues and in providing funds In their absence, makes it almost certain that the Shah and his gov-
u
will continue to cooperate with theharp curtailment in US aid to Iran would not only make Iran less receptive lo US advice and influence, but would significantly reduce public confidence in the government's ability to improve social and economicand maintain Internal security. There will also be increasing pressure, particularly from the Shah, for an expansion of USaid. Even if the Shah should be offered considerable inducement In the form ofaid. he would not agree to Join with the US In formal arrangements for defense of the Middle East, sinceommitment would be strongly opposed by many Iranians, would not obtain Majlis approval, and might, in his mind, provoke the USSR into invoking1 Treaty.
Iranian relations with the UK will largely depend on progress in settling the oil dispute. Settlement of the dispute would almostresult in some gradual revival ofpolitical and commercial influence in Iran.
4 Iran will attempt to maintain friendly relations with the USSR and willefforts to settle questions in dispute. It will almost certainly resist any Soviet efforts to Increase Its influence in Iran's Internal affairs.
SECRET
Original document.
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