COPI JtO.los THE MHUHI
NATIONAL INTELLIGENCE ESTIMATE
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PROBABLE DEVELOPMENTS IN IRAN2 IN THE ABSENCE OF AN OIL SETTLEMENT
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Aptra ofS. THUJUN WFSineHT'S SBCRKTAfir PJLX
CENTRAL INTELLIGENCE AGENCY " <
DISSEMINATION NOTHS
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D! 6TH[BUTION: Offw el lbsKiUwMj Secorllr Cc-ioell NiUonal Sccurlt* Reiourcw Beard Department of BUle Office of BecrtUr* of Dtfeaat DepailiReot of tha Aral in Department of tha Air Tomointof Surf rtCeral Bony of InmUttUeaand Deickosenl Bc*rf UdMUona Board
BCWTT IXrOKALATlON
NATIONAL INTELLIGENCE ESTIMATE
PROBABLE DEVELOPMENTS IN2 IN THE ABSENCE OF AN OIL SETTLEMENT
The Intelligence organisations of the Departments of State, the Army, the Navy, the Air rorce, end the Joint Staff par-Ucipated with the Centre! Intelligence Agency in theof thli estimate. All members of the Intelligence Advisory Committee concurred In this estimate on It3
PROBABLE DEVELOPMENTS IN KAN2 IN THE ABSENCE OF AN OIL SETTLEMENT
CONCLUSIONS
The probability of Mossadeq or another National Front leader continuing aa Prima Minister at least for the present appears strong. His parliamentarynnd that of the National Front will probably be further strengthened as aof the current elections. It lathat the Shah will Influence events in the immediate future.
he maintenance of National Front strength In the present highly volatile situation will depend primarily on the government's success In solving financial problems resulting from theof oil and in satisfying the basicand social demands which have been intensified by the nationalisation issue.
U Is unlikely that Iran can sellsignificant amounts ol oil to non-Soviet orbit countries without the acquiescence of AIOC, or will obtainoil revenues from sales to the Soviet orbit countries.
However, the Mossadeq government can meet its essential obligations for two or three months by resorting to theexpedients available to It without legislative action by the Majlis. It can probably gain the backing of the new Majlis for measures which wouldiscal breakdown at least through the summer
Never thetoia. (he economic position of Iran will beeane iwogresslvely moreand the ktosadeq government will be uncssr korreasi ng pressure tothe hojra lor social and economic benefits arsewed by the nationalization program,
Failure to arovtte these benefits would be likely to had many National Front supporters to turn to the Tudeh Party.
It is aJnwat certain that the National Front leaden arts have difficulty inon meawuu to satisfy popularfor serial and economic benefits and In obtafcang Majlis support for these mew. res. Therefore, tn order, to put through sack measures, the National Front govesBfawxrt would probably be forced to adapt aatnoritartan methods.
f the Kafcnal Front government Isby aesraserrative government the new govcrnsaent would almost certainly be forced teaake concessions tosen Ultra! and to rule bymethca'a
e thusfttfieve that barringof aatoarttarian rule, either by the National Paaat ar by the conservatives, the Tudeh aotexroal for gaining control over the cawatry will substantiallyHowever, we do not believe that a
Tudehmminent.
Tho Present Situation
Prime Minuter Mcssadeq and the National Iront movement continue to dominate the political scene la Iran. The; hare retained the enthusiastic support, particularly In Tehran, Of the urban workers,eachers, students, government employees and religious sealots who, under Mo&sadeq'a leadership, hare selied the political Initiative from the traditional ruling groups of wealthy mer-Ch&nts and landlords. Although his followers in the Nations] Front do notlrmly-knlt party, and some are ambitious,politicians like Mullah Keshan] and Hoecln Makkl, Mossadeq will most likely be able toplit in the National Front In the near future.
The oU crisis has not had any noticeable effect on the national standard of living, and has only begun to affect payment ofsalaries. Although thecal Industry has provided tha Iranian Government with no royalties since April and no other foreignsince September, Mcssadcq has been able toinancial breakdown byon the reserves maintained to cover issuance of bank notes and by diverting funds from the Seven Year Plan Organliatioo- Civil service, army, and security force salaries are no more in arrears than usual. All the Iran-Ian oU workera formerly employed by the AIOC arc still being paid by the Iranianeven though the vast majority are not fully employed. With regard to most petroleum products, inn's Internal needs have been supplied by the Kermanshahwhich has been kept in operation, and by limited production at the Abadan refinery. Meanwhile, the overwhelmingly peasantof Iran's population has remainedby the present crista Despite some usual Instances of local crop failure, this year's food crop has been approximatelyprices have remained etable, and there have been no shortages of sugar and tea, the only imported staples In Iran's diet
II. Conservative opposition to Mossadeq Is at present disorganized, hesitant, andThis opposition Is drawn mainly from the traditional ruling group, manywhich fear they will lose theirseats in elections conducted by thegovernment.ubstantialin the Majlis Is basically opposedmost of the deputies havehim on the oil Issue and acquiesceddecision to hold elections whilewas high. Mossadeq's criticsto expose themselves to the moband possible violence which theygroup or the Tudeh Partyto bear against them. Motehave been restrained by the Shah'sto commit himself to support theMossadeq. Although the Shah assertsoil policy will prove disastroushe has been unable to agree withuitable successor toapparently fears that an attempt toMossadeq at this time would lead toassassination orevolution
he Communistdominated Tudeh Party has bettered Its position considerably during Moasadeq's tenure of office.asically hostile to Soviet imperialism, his government has failed tolear-cut stand against the Tudeh Party, primarilyMossadeq Is unwilling to take drastic action against an organisation which hacan be kept under control and which supports the government on theIssue. In addition, aome National Front leaders and government officials appear lo be Tudeh sympathisers.esult. Tudeh has been able to carryrogram of agitation and demonstrations and has gained increased support, notably among students. Industrial workers, and civilhile the else of the Tudeh Party cannot be accuratelywe believe Its present strength Is much lower than the several hundredsupporters claimed by Tudeh during Its heydayecent US and British field estimatesotal ofctual members In the Tehranwith perhaps three or four times as many sympathisers)otal ofembers In Ihe oU
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tied, in Azerbaijan, and along thecoast. The Tudeh hasseveral departments of the(notably Education and Justice),not to the extent of seriouslygovernment policy or operations.indicates that Tudeh haa hadtn penetrating the army and
osssdcq's current foreign policya compromise between the basicdesire to eradicate all foreignIn Iran and Iran's need for foreignMossadeq and most of his followets are as much opposed to Soviet as to BritishIn Iran, and also are suspicious of closer ties with the US. They fear that tuch ties would lead to direct political or economic penetration which would oblige Iran toitself to the Weat or antagonise the USSR. Nevertheless, Mossadeq has recognised, as most Iranian leaders have In the past, that Iran cannotompletely Isolationist position, and is following out the traditional policy of balancingthe great powers against each other. Although his followers have not hesitated to attack the US as well as the UK, Mossadeq has asked that the US pro-ride emergency financial assistance to Iran until such time as the oil industry Is restored to production. He haa simultaneously entered Into negotiationsew trade agreement with the USSR and has reportedly sought oil technicians from the Soviet bloc as well as from various Western countries. He has also reportedly entered negotiations with Poland, Chechoslovakia and Hungary for the sale of Iranian oil.
Probable Economic Developments Under Mossodaq
n the absence of an oil settlement, Iran will continue Its efforts to sell to anyIt Is unlikely, however, that Iran could sell financially significant amounts of oil to non-Soviet orbit countries without theof AIOC and the other major Western distributors. Moreover, as further discussed below. It Is unlikely that Iran could obtain significant oil revenues from sales to the Soviet orbit countries.
IS. Although Mossadeq will probably continue to seek US aM to enable him to meet his budgetarywould make it easier for him to stand firm on bis own terms for an oil settlement and would temporarily strengthen his political positionIt isclear that he opposes theof closer military and political ties with the West. He has vacillated on giving formal approval to the continuance of the USmissions and the military aid program. He also has strong objections to becoming subject to the US economic advice. Although be was recently prevailed upon tooint IV agreement, be has thus far refused tothe assurances that would enable Iran to obtain military assistance under the Mutual Security Program. If he falls to receive US aid to relieve has growing budgetaryhe may terminate the contracts of the US military rnisslons and eventually curtail US technical and economic asslstarceIn Iran. However, it is also possible that Interna) pressures may force him to go further in giving commitments to the US than he would personally favor. Meanwhile, he will almost certainly make greater efforts toIran's economic relations with other countries including the Soviet bloc, providing they do not appear to Involve foreignIn Iran's domestic affairs.
IT. As an alternative to U8 aid, Mossadeq almost oertalniy would press forward with negotiations now under way with Poland, Ctechoslovakla and Hungary for the sale of some two million tons of Iranian oil, and will probably also sees oO deals with otherof the Soviet bloc or with the USSR Itself. However, It is unlikely that the Soviet bloc could provide enough tankers to moveIj significant quantities of oQ from Iran, and thus the sale of oil tn the Soviet bloc would probably not provide Mossadeqasting solution of his financial problems.
he USSR might attempt to gain political advantages In Iran by providing Mossadeq with limited advances against future oilor by satisfying Iran's dollar and gold claims against the USSR Such measures would haveemporary effect on the
financial position of tha MossadeqWe do not believe that tha USSR would be willing to give Mossadeq rifQcIent assist-ance to aolve Iran'* financial problems except on lei mi which he would be unable to accept. The Soviets probably estimate that their best chance of gaining control of all or parts of Iran Is by allowing the situation to coatinue to deteriorate rather than by bolstering any Iranian Oovemment.
he loss of foreign exchange as aof the closing of the oil Industry will force the Iranian Government In the coming months to reduce Imports largely to the level which can be financed from the proceeds of non oil exports. Because of the high level of exports which has characterised Iraniantrade In the Korean war period and which Is expected to continue at asimilar level for at least over the. next six months, and because ofill uncommitted Centra] Bank :ioldlnga of foreign exchange of approx'm .iely SO million dollars. It isthat the government would be forced during the nevt sbr months to cut importsoint where the standard of living will be seriously affected. Nevertheless Iran'sposition without oil revenues isThe prospects for Iranian-financed economic development are largelyrop failureecline In exports would lead to quick and serious difficulties. In any event, maintenance of imports at politically aalisfactory levels would leadteady drain on foreign exchange reserves, which, la time, would teste Iran with no margin for
he chief impact of the cessation of oil production has up to now been on the fiscal position of the government. 'The monthly oodgct deficit has increased to about four time* the rate of the first halfAt the new exchange rate of approximatelyials to the dollar the current exrtimaied monthly deficit wouldillion dollars) During the past four months this deficit has been financed largely by drawings upon theillion dollars of sterling transferred last August from the note cover.onth tha remainder of this sterling will have been sold to the Central Bank for local currency. The Oovemment could, without reference to the Majlis, maintain Its current rate of deficit spending through April provided It can-led through with the bond drive more vigorously, and In addition took steps to enable theIranian Oil Company to borrow directly from the Central Bank, drew upon the 8dollars recently acquired from theMonetary, fund, sold government stocks of wheat and sugar, and undertook other possible Improvisations.
It Ifo meet Its essential obligations beyond April, the Mossadeq government will have to seek legislative authority enabling the Central Bank to Increase the currency issue and make additional loans to the gov-emmrnl Resort to such lactic, however, would arouse serious opposition In the present Majlis and therefore Mossadeq will probably not seek this authorisation until after the eonvening of the new Majlis (now scheduled for lata February) in which National Front strength will probably be sufficient to girt the Mocsadeq government legislativeto meet Its obligations through1 The ability of the government to continue to meet Its financial obligations In the absence or adequate oil revenues thus depends upon Its will and determination to resort to the expedients avalkble to It, and upon Its success in persuading the MaJUs to follow lis lead.
Proipects For The Survival Of Tha Mossodeq Regime
tl The survival of the Mossadeq government, however, will not depend solely upon ItsU>inancial breakdown. Theof the Mossadeq government derivesfrom its success in "liberating" Iran from British interference. However, the unrest which has found expression through, and has been intensified by, the oil nationalisation Issue is not Iftely to lubside now that the AIOC has been ejected. Although Mossadeq will conUnue to benefit from popularto the British, he will have Increasingdrawing pobllc attention away from his failure both to fultVJ promises of economic Improvement and to derive significant bene-
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fcora Iran's oil resources. He Is thus likely lo be faced with the possibility of losingsupport
lthough the Dew Majlis wlU probably continue to support Mossadeq on the Issue of British interference, the National FrontIs Itself likely to split on other Issues. The go.ernment will almost certainly hare difficulty In agreeing on and In obtaining Majlis support for measures which would allay popular demand for social and economicFailure to carry through with such measures would probably lead manyof the National Front, both within and outside the Majlis, to turn lo the Tudeh Party, which is the only disciplined party In Iranhar-cut program of social and economic reform. In order to forestallevelopment, the National Frontwould probably be forced lo adopt authoritarian methods.
ti. The tendency of minority groups andleaders to Ignore the writ of thegovernment would also Increase If the National Front government failed either to keep Majlis support or to adopt authoritarian methods. Mossadeq apparently distrusts the army and the gendarmerie and has given them little support. This may eventuallyerious effect on their morale andon their will and ability to maintain the government's authority over suchseparatist elements as the Axeibeijanis, the Kurds, the Bakhtiarls, and the Qaxhqalt, as well as in Tehran. Ihe ability of theto maintain frontier security and collect taxes wouldeakening of the government's central authority would greatly enhance the dangerubstantial Increase In Tudeh influence, not only Inbut particularly among the oil workers In the South and tha population oforthern provinces. There would also be greater opportunities for Soviet exploitaUon.
t I* probable that either Mossadeq or another National Front leader will continue as Prime Minister, at least for the present The Shah has the consUtuUooal power tothe Majlis and can usuallyrime Minister from canoe. Be also IsmCasef of the army and has theof UwAMsj, It Is extremely unlikely that be would war Mi power to remove Mossadeq as long as fa* fatter has the support of tha Majlis,ove might lead to serious civil dLiturawaaea If Mossadeq's popularweaken, the chances of his removal by normal jaMast means will Increase. In this event, the Basal naming group will probably try to rtaaeertsta control over the centra]sad aacy be successfuluitable leader canto abend.
orwovacfee regime, however, would be confronted waft the same social and economic problems saaltmptew government to obtain anal settlement on terms presently acceptable la the West would meet with the snort rtgaasws opposition by the National Front anf vat Tudeh Party, Consequently, In order as stay In power and cope with the situation,uccessor regime wouldcertafaty be forced to make concessions to natic ratast sentlmenl and lo rule byt! saw
* tbaa beheve that2 there will be uvjiwsng demands for social andbrsarfju which Mossadeq and theFreed win find It bard to satisfysdceaang author! tartan methods, partly because at the lack of unity In the National Front anf partly because of cUfBculUee tn meeting tYwavrisl requirements. Barring es tabUshroesa at authoritarian rule either by the Natssaw) Front or by the conservatives, the Tudeh aotentlel for gaining control over the rounarj win substantially Increase.warh coup ts not consideredfor fat avowing reasons:
a These Is do evidence of appreciablepcnrMkai of the armed forces;
b So faeas at known the key ministriesand Interna] security) have net seen effectively penetrated by tha Tudeh;
e. These fa no Indication that ths Tudeh has an sixaed paramilitary organisation of any tdgssakaasee; and,
d Ttana las been strong rivalry between the Nitlsaaf Front and the Tudeh on most maltera We believe this rivalry will continue for the fcrtod of this estimate.
Original document.
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