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CURRENT SITUATION IN IRAN
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THE CURRENT SITUATION IN IRAN SUMMARY
Iran still suffersariety of political, social, and economic weaknesses, the country has been more stable in recent months than at any timeince thcon his life last February, the Shah has emergedominant, unifying Influence, at least for the present, In national affairs; an unusual degree of harmony has existed in the relations between thc court, the cabinet, and the Majlis; and greatly needed currenthas been passed, includingchanges strengthening thc Shah's hand In dealing with the legislature.
The economic situation is favorable in that thc country's finances are sound, but Iran faces serious immediate problems. Crophas brought distress, particularly tounemployment has increased; and there arc indications that the badly run-down railway system will not be able to meetrequirements this winter. Eventual economic Improvement should result from thc new seven-year program for economicand social betterment
Iran's military establishment has continued to improveesult of the arrival of USsupplies under the arms creditand the training and reorganization which are being carried out with thcof the US military mission. The policy of close army cooperation with thc tribes is apparently having considerable success. Iran's army is still incapable of offering more than token resistance to large-scale invasion, but the Shah is now planning to enlarge it to
nd hopes that, with US aid, this force can be developeducleus for effective guerrilla resistance.
Iran's relations with other countries have been relatively quiet In recent months. Tbe USSR has at least temporarily abandoned the tlireatenlng gestures of the past and may even beore conciliatory attitude in pursuing its basic objectives of expelling US influence and establishing Its own dominance in the area. Meanwhile, Iran has continued its policy of firmness toward the Soviets.
As to the US, the most notable development has been the growth of the Iranian feeling that, having committed Itselfro-US alignment, Iran should receive moreeconomic and military support from the US than has been forthcoming. Thc Shah has been particularly dissatisfied because of his belief that the amount to be allocated to Iran from the Mutual Defense Assistancewill not provide adequate assistance for Iran's current military expansion He lssensitive on matters of personal and national prestige and will undoubtedly take advantage of liis trip to the US to seekevidence that thc US takes Iran and its problems seriously, particularly In regard to aid for thc Iranian Army. Whateverof US Interest the Shah takes back with him will undoubtedly color future Iranian dealings with the US. Even though hisare highly unfavorable, however, there is little danger that he will abandon his basic leanings toward the Western Powers.
Mute: Thc intelligence organizations of lhe Departments of Slate, Army, Navy, and thc Air Force have concurred In this report which is based on information available to CIA ast has been prepared for use In connection with the visit of the Shah lo the US
THE CURRENT SITUATION IN IRAN
Political Situation.
The Iranian politicaltill afflic-;tedumber of fundamental weaknesses, .The government is handicapped by corruption and lassitude, and by its limited experience with parliamentary procedures. The extreme poverty of the population as opposed to the concentrated power and wealthelatively small group of individualsotential source of unrest. In addition, therearge and restless tribal population which Is still only partially integrated Into the social andfabric of the country.
Nevertheless, largelyesult ofstemming from the attemptedof the Shahebruary, theGovernment has in recent monthsgreater stability and internal harmony than al any timehe pro-Soviet Tudeh Party, which was Just beginning to re-emergeotentially serious threat to the regime, was banned, and its operations were further disrupted by the arrest of several hundred members. The Majlis, whose chronic procrastination and bickering had previously rendered cabinet after cabinet ineffective, began toemarkable willingness to heed the demands of the Shah and of Prime Minister Saed for constructive action andthe spring and summer cleared up most of the items on its agenda. Among the bills passed were such items as the first fullbudget to be enacted in sixeven-year economic development plan, and legislationeries ofreforms called for by the Shah. The Majlis alsoong-pending bill for the activation of the Senate as provided for in the Constitution. Inonstituent Assembly enacted amendments authorizing the Shah to dissolve thc legislative bodies andtandard procedure for future amendments
The effect of these developments has been to elevate the Shahosition of dominance
in Iranian political life: he now possesses not only the traditional backing of the army but also sufficient constitutional power and general support to make him the greatest single Influence ln the government. The membership of the new (XVIth) MaJUs will probably be generally responsive to the courts wishes, even though the traditional armyof fixing the elections ln favor of the court is less than In the past. The Senate (half to be named by the Shah and half to be designated by popularly chosen electors) will be made up largely of conservative, pro-court members, many of them elder statesmen. Moreover, no one ln the Majlis is expected to have sufficient stature to act as the rallying point for an effective political opposition. Prime Minister Saed, in office fora year, has demonstrated unexpected ability in obtaining legislative support, but his continuation in office after the newmeets will depend primarily on tbe Shah's wishes. Most of the other majorfigures lack the necessary leadership toajority in the Majlis. Even soersonality as ex-PrimeQavam, who recently returned to Iran after several months of self-imposed exile, probably could notosition of political power without first settling his differences with the ruler.
Eventually the factionalism characteristic of Iranian polities will probably reassertto thc detriment of the cooperation now existing be'.wecn the legislative and executive branches of the government, even so, the Shah will beosition to exert pressure on the legislators by threatening dissolution and new elections There has been some fear that the Shah might wish to emulate his father by assuming dictatorial powers, but it appears unlikely at present that he will do so.inexperienceduler and lacking Reza Shah's dominating and forcefulhe seems content with the considerable power he has already obtained constllutlon-
SECHET
Nevertheless, his new position ofand his ambitions for himself and Iran will doubtless prompt him tooreinterest In all aspects of Iranian an"airs. Be will continue to emphasize military matters as In the past, but he will probably alsoreater Interest ln foreign affairs and In efforts to promote economic and socialat home. Ills principal advisers wiU probably continue to be Army Chief of Staff Razmara and former Prime Minister Ilajlr. who was installed as Minister of Court In July and now appears firmly entrenched ln the Shah's favor.
2. Economic Situation.
Iran's economic position continues to be favorable in certain important respects. Its foreign debt Is insignificant, and Its currency coverage ls ample. The Anglo-Iranian Oil Company, through Its payment of royalties and Its purchases of rials to meet operating expenses, hasavorable foreignposition, even though the country's commodity trade balanceeficit. There are no present Indications that theof the pound will have any drastic effects on Iran, hut there may be someshifting In Iranian purchases from the US to Europe and (because the rial has not been devalued) some difficulty inIran's agricultural export trade to Europe The country's substantial sterling balances and future royalties have beenagainst depreciation by prior
Meanwhile, thc government's revenues,more than sufficient to meet normalwill probably Increase. Oilwhich accounted forercent of the government's Incomeill be larger if theercent increase in production during thc first half9 is sustained and may be more than doubledentativeagreement with the company is ratified by thc Majlis.
There arc,ariety of immediate economic dislocations. Although Iran Isself-sufficient in foodstuffs, cropthis year in several importantareas has resulted in an estimated
wheat shortageons Inwhich has been particularly hard hit and where friction between governmenthas been especially acute, there have been bread riotsumber of points.ons of wheat from Pakistan, Canada, the US, and Iraq, and after protracted efforts to obtain wheatarter or loan basis from the US, has finallyanons from the USSR.
Economic conditions in tbc northern cities and towns have also deteriorated In recent months. Numerous industrial establishments, handicapped by government regulations against the discharge of surplus labor and by inefficient management, have had difficulty in meeting their payrolls. Some have shut down becauseecent faUlng-off of business activity and because of their inability towith imported goods. Meanwhile, the chronic unemployment problem has been further aggravated in Azerbaijan, wherepeasants have flocked to the cities. At the same time. Iran's badly run-downsystem Is showing signs of strain, and it is likely that when winter comes the system will be unable, even with emergency measures, to carry adequate amounts of fuel and other supplies from the Persian Gulf to the interior.
After three years of discussion andIran hat finally embarkedong-range program for economic development and social Improvement, the so-called Seven Year Plan. Early last spring thc basic program was given legislative approval, nnd in July the Majlis authorised the newly created Planning Organization to undertake projects of up to one year's duration.illion worth of contracts, primarily for railroadand sugar refineries, are being let.thc organization Isoad and agricultural rehabilitation program as anrelief measure In Azerbaijan.the government Is now financing thc program, which is expected to cost0 million, out of current revenues, some fore:rn borrowing may be considered advisable,
The program was drafted largely byConsultantsS engineering group, which has been engaged to supply much-
needed technical assistance for anotherumber of capable Iranians fill tbe topof the Planning Organization, in which the energetic, US-educated half-brother of the Shah. Prince Abdor Rcza. is actively The planners, however, face seriousinternal pressure tothe program to military improvements (which might result in diversion of oilnow allocated to theranian Inexperience, and the perennial problems of graft and Inefficiency. Unless these obstacles are overcome and tangible Improvements achieved hi thc general living standard and economic well-being of Iran, the government will be confronted with increasingand dissatisfaction on the part of the people, and the task of maintaining thc present regime will become correspondingly more difficult.
3. Military Situation.
The Iranian Army, which Includes small naval and air as well as gendarmerie forces, has an estimated strength, most of wliich is detailed to border control andsecurity duties. Approximately one-third of the army's combat troops arc stationed along the border, the greatest concentration being alongile Irano-Soviet land frontier. The remaining troops and theare disposed in the ulterior, where theyajor Influence in local communities through their exercise ofcivil functions (even when martial law does notrotection for the Shah's person Is providedattalion of Imperial Guards and by the regular 1st Division, which was re-dcxignatcduards Division in August
The armed forces as presently constituted are primarily the creation of the Shah (who, as Commander in Cliicf,eeninterest in militarynd of his highly capable and industrious Chief of Staff, General Razmara. Although there is some question as to Razmara's ultimate loyalty to the regime, he has worked closely with the Shah in reorganizing the army. Thc Minister of War, who is personally hostile to Razmara. exercises only limited influence in theof lhe army.
In June, the long-planned merger of the gendarmerie with the army was started. Of0 men formerly In the0 were transferred to theave been discharged,ere left with the Ministry of the Interior. The gendarmerie strength under the Ministry of Interior will probably be built upen before the merger Is made permanent by the Majlis.
Some notable improvements have taken place In the field establishment during the last few months. The military suppliesunder the arms credit agreements made with thc USegan arriving at Bandar Shahpur inraining courses in the care and use of the new equipment are being organized under the supervision of the US military mission, which has also helpedariety of other measures for improving the army's combat efficiency. Meanwhile,elderly officers are being weeded out; thc quality of rations has been Improved; and the program for educating Illiterateis progressing on an expanded basis.
The government's policy of cooperation with tbe tribes (which represent the traditionalsecurity problem) has also goneSpecial intelligence officers for tribal matters are now attached to each division headquarters; liaison officers are stationed with the tribes; and for tho second successive year young tribal leaders are taking six-month courses in weapons and communications to qualify for the rank of tribal lieutenant
These developments have producedimprovement both In the effectiveness and morale of the army and in thc internal security situation.ood deal of mutual hostility and suspicion still existsarmy and tribes, the fact remains that In contrast to former periods there have been no serious conflicts between the two groups for moreear. The combat efficiency of the army appears equal to the Immediate task of maintaining Internal order andIncursions across the frontier by small Soviet troop detachments or guerrilla forces.
The credH include* JI0 million for the supplies Uwnseives and Sift million to cover picking jnd shipping eosu The materiel, much ot which was surplus, has mi estimated valueillion
(In border Incident* to date, the Iranian forces nave reacted promptly and firmly.)
Definite weaknesses remain, however, and the present forces could offer only limited localized resistance to an Invading army. The army Is still lacking in mobility despite new US transportation materiel The quality of some senior and of many Junior officers ls doubtful, particularly since the underpaid younger officers are often forced to resort to graft in order to make ends meet. Moreover, there Is serious doubt whether the rankswould have the will to fight against superior forces in open warfare.
Both the Shall and General Razmara are convincedarge-scale Soviet Invasion will Inevitably take place, and their plans are directed toward the developmentarger, better-trained, and better-equipped armyof delaying such an Invasion long enough to permit the concentration of picked units (Including trained and.armed tribesmen)elected defensive area from whichwarfare could be waged. Steps arc now being taken to Increase the armynd the formation of on auxiliary forceribesmen Is also planned.
The Shah has made It clear that he looks to the US for substantial material help ln Implementing these plans and has asserted that he will have to divert money from the economic development program if such aid Is not forthcoming. Together with other Iranian leaders, he has expressed bitterwithillion jointlyto Iran. Korea, and the Philippines under the US Mutual Defenseuring Ids stay lnhe will almost certainly ask that additional funds be diverted to Iran under thepowers provided lhe MDAPThe Iranian Government has already asked that the US military mission's services be extended for another year tond the Shah win probably also askreater number of Iranian officers be given training in the US.
Shah and his advisers have now abandoned their Idea or increasing the army.
4. Foreign Affairs.
a. Relations with the USSR.
Although there Is no reason to believe that the USSR has modified Its objective ofdominating Iran, the Soviet attitude toward Iran (on the surface, at least) hasbecome somewhat more moderate. The USSR, whose Ambassador has been absent from Tehran since April, has made no official demands on Iran since the series of notesduring the first halflthough Soviet radio propaganda continues Its efforts to buildase for Invoking Article VI of1 Irano-Sovletorderhave become less frequent, and recent replacements among the Soviet frontier guards have allegedly been instructed to be more cooperative with the Iranian troops across the border. The USSR has alsoa willingness to resolve thedifferences arising from the Caspian Sea Fisheries Agreement.
The Iranian Government maintains abut firm attitude toward the USSR as, for example, when it threatened to bring the question of border violations before the UN if Iranian soldiers held by the USSR were not returned. At the same time, the government has carried on its efforts to counter Soviet propaganda (which remains vitriolic) and to stem subversive activities within Iran. In the long run, Iran's ability to continue this policy Is contingent on the reduction of the sources of unrest among the great mass of Iranians and on the encouragement and support of the US and the UK
Soviet propaganda via radio and press is directed principally against the Iranianand thc reactionary upper classes, and against the Interests and activities of the US and UK in Iran Although Radio Tehran has counterattacked by impugning thennd actions of the Soviet Government, some of the Soviet charges, particularly those alleging US-UK rivalry in Iran, have found ready credence among Iranians. Soviet prop-
ArUcle VI perrrtiui Soviet forces to enter Iran under cert kin circumstance* IT it appear* that tbe latter li being usedhird parly (currently Identified Byhc US)aie olacainal the USStt.
SnfRKT
organs are capitalizing on the recent wheat deal, taking the line that the USSR stepped In and saved the Iranian populace from starvation while the Iranian Government did nothing and thc US sent arms Instead of bread.
Although Soviet subversive activity has been restricted through the outlawing of the Tudeh Tarty following the attempt on the Shah's life and through the closing of theconsulates inoviet agents are still active in the country, and there are still Soviet efforts tourdish National Stateeturn to6 regime of the Democratic Party of Azerbaijan. Propaganda in support of these aims emanates from the Free Azerbaijan radio and the Kurdishradio, both thought to be at Baku. The broadcasts attack thc Shah and thein the usual vein and stress the ethnic differences between Persians. Kurds, and Axer-baijanls. They also charge the US withIran's corrupt and reactionary ruling classes. The Iranian Government has taken measures to combat and forestall Sovietin Iran and remains determined to resist whatever pressure the USSR may apply.
b. Relations with the US.
A major theme of Iran's current foreign policy (as expounded by the Shah, the Chief of Staff, and other leaders, is Iran's urgent need for large-scale US military and economic aid. Thc Shah is particularly sensitive about US-Iranion relations. He leads hisIn expressing chagrin that US aid to Iran falls far below that allocated to Turkey despite Iran's strategic importance and vulnerability and its record of resistance to SovietIranian leaders haveeries of uncoordinated and frequently unrealisticfor additional grants from the US. and Iran's former allies (particularly the US, have been charged with failing to provide thcassistance allegedly due Iran under the Tehran Declaration. Although the Iranian
USSR closed its eleven consulates in Iran because Iran (which had only one consulate In Uie USSKi displayed an allcrtcdly "hostile altitude" In demanding that the consular reprcsen;at!On of the two countries beeciprocal basis. Iran has also closed its consulate al Baku.
Government expresses gratitude for USof Interest In Iran, It asserts that what Iran really needs Is tangible evidence of US support against Soviet aggression.
Another source of resentment toward the US Is the belief of certain public figures that, although thc US is unwilling to grantaid to Iran, US representatives In Iran are attempting toervasiveIn Internal affairs, of the sortassociated with the British Embassy in Tehran.
xoith the UK.
Although many Iranians believe. In line with Soviet propaganda, that the policies of the UK and the US in Iran are at variance. British policy continues In accord with that of the US, both countries fostering social andreform and encouraging resistance to Soviet pressure. The British Embassy still has strong Influence with certain Iranianleaders.
The UK's chief commercial Interest in Iran ls the Anglo-Iranian Oil CompanyIOC Is the chief source of Iran's foreign exchange and employs about one third of the Industrial labor In Iran. The controlling shareholder Lt the BritishThc company will continue totrong Indirect Influence on the economic and social situation In Iran. The secondBritish interest in the country is theBank of Iran and the Middle Eastthe Imperial Bank ofhe Bank's long-term concession recently expired, and thc Iranian Government his now placed certain restrictions on the Bank which have forced it to curtail its activities and mayprofitable operations in the future.
with Other Middle East States.
There has been little change In thefriendly relations between Iran and its neighbors. Intcnriittcnt friction withcontinues, however, over the distribution of the Hclmand River waters. Differences with other neighboring countries may arise over the division of Persian Oulf sub-surface mineral rights and over Iran's continuing claim to the Bahrein Islands.
Iran recently established generalof friendship with Iraq and Jordan
7
state visits to Iran by tbe Regent of Iraq and King Abdullah of Jordan.an-Islamic alliance Is also In the minds of Iranian leaders, and the Shah lsto sponsor discussions with thc beads of other Moslem states.
5. Probable Future Developments,
No sweeping changes In the Iranian Internal situation appear Imminent. The next few months should, however,est of the capabilities, determination, and maturity of the Shah in discharging his IncreasedEven If disharmony breaks outhe government, the Shah may bo expected to retain the upper hand. The Internalsituation will probably remain favorable despite the fact that the outlawed Tudeh Party will take advantage of the suspension of martial law to accelerate its clandestine operations and thaturdish, andelements In the sensitive province of Azerbaijan will continue to be attractivefor subversive agitation and propaganda. The advancement of the economicprogram will have some immediateIn alleviating unemployment and inbusiness activity, but its majorwill not be achieved for some time to come.
Some clarification of Iran's relationships with other countries appears to be In prospect. Lately the USSR, whose tactics toward Iran in recent months have been less openlythan in the past, has provided slightthat It might be settlingore
conciliatory approach in pursuing Its basic objectives of eliminating US influence from Iran and of establishing its own domination over at least the northern portions of the country. Such an attitude might be of some advantage to the USSR in that it might strengthen the position of the Tudeh Party and other pro-Soviet elements and encourage Iranian chauvinists toorepolicy toward the Western Powers. It would probably not, however, have anyeffect on Iranianesumption by the USSR of thc old threatening tactics would probably only stimulate diplomatic counter-moves and reprisals against Soviet agencies in Iran. An armed invasion ofand other northern provinces continuesleast in the near future.
Iran has experienced an increasing sense of disappointment with the extent of USand military aid, and the Shah, who is very sensitive on questions of personal and national prestige, will undoubtedly seek more definite assurances on these matters while in Washington If he decides that the US is not sufficiently convinced of Iran's importance, his resentment will probably flavor futuredealings with the US. If Iranian faith in the US and its allies were severely shaken, at this time or later, thc government might feel obliged to make some concessions to the Soviets in an effort to Improve Iran's positionls the USSR. Both the Shah and his advisers arc too familiar with Soviet designs, however, to abandon their basic leaningsthe Western Powers.
Original document.
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