IRAN: PROSPECTS FOR NEAR-TERM INSTABILITY

Created: 3/28/1985

OCR scan of the original document, errors are possible

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Jock Covey

Special Assistant to the President

for National Security Affairs National Security Council

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The attached memorandum addresses the near-term prospects for instability in Iran,hought you would find it of interest. umber of forces are coalescing that could result in serious political instability even before Khomeini dies. We believe the regime would attempt new policy-initiatives to regain support If seriously threatened.

rpprdved for release date: aug zdii

GCCITCT

DIRECTORATE OF INTELLIGENCE

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Iran: Prospects for Near-Term Instability

Summary

Owlndling oil income, increasing domestic unrest, and the recent battlefield defeateemingly unending war are confronting the Khomeini regime with its greatest challenges since consolidating power three yearseadership problems are emerging as Ayatollahhysical and mental health are faltering. esult, Tehran is losing its margin forpolitical andmeeting popular expectations. We now believe that serious political instability could occur in Iran before Khomeinithan after his death as was concluded late last yearpecial National Intelligence Estimate. If the clerics believe their control Is seriously threatened, they would attempt to survive by initiating radical changesil sales policies, war strategy, terrorism, and relations with the USSR that would have major implications for the West.

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reiauivery staoie immediately after Ayatollah Khomeini's death, but that factional rivalries and consequent instability would likely increase over

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time. We now believe that most of the major economic, political, military, and social trends are working against the Khomeini regime and that Instability could increase significantly In Iran before the Ayatollah dies. This would make the period after Khomeini's death less smooth than we anticipated late last year, and probably would advance the timeframe of the power struggle within the regime that the Estimate concluded might produce civil war before the emergence of another strong leader f

Latest Defeat. Iran's latest offensiveismal failure despite months of preparation. Iran gained no territory and suffered at0 casualties.inimum0 killed. Unlike the aftermath of past Iranian attacks, Baghdad this time is not allowing the Iranians time to regroup and Is launching small ground attacks along the front, bombing Iranian cities, and continuing Its attacks against tankers carrying Iranian oil. Although the regime will try to limit news of the defeat through control of the media, the heavy casualties eventually will becone nown and further depress those already tired of the unending war.

The Iraqi air raids on Iranian cities have shaken the Khomeini regime, are lowering morale, and disrupting the economy. 1

The greatest Impact of these developments likely will be felt within the regime itself. Senior leaders undoubtedly are aware of the dimensions of Iran's defeat. They already are split over the question of continuing the fight, and their differences now are likely to become more bitter. This dissension will In turn sharpen the controversy over other issues such .as the succession question and how to deal with Iran's economic problems.

Economic Downturn. The regime's economic troubles stem in large part from snarply reduced oil Income. The soft oil market and Iraqi attacks against oil tankers have reduced Iranian oil receipts by aboutercent since esult, the government can no longer rely on oil-financed imports to maintain consumption levels and provide materials for donestic industry. |

Iran has tapped foreign currency reserves In the past year tobut this option is rapidly disappearing. Readilyare now down to aboutillion--the lowest level sincewith SBear ago. Thismonths of Importfar below what Tehranto cover an emergency. Moreover, Iran has little access toforeign credit. esult, Tehran has relmposed strictcontrols and has been forced to slash imports.

Lower oil revenues also have caused spending cuts. With receipts about S5 billion below budget projections, Tehran cut spendingercent

durlng the recent budget year that ended onarch. In late February, the Consultative Assembly passed budget guidelines for the new fiscal year that calledurtherercent cut0 percent rise in taxes, and higher heating oil and gasoline prices. | |

Emerging Opposition. Economic austerity is adding to donestlc unrest and regime spokesmen are warning publicly that the populace must lower Its expectations. This is in sharp contrast to the regime's earlier advice that the present hardships would lead to better times in the future. Increased shortages, inflation, and unemployment have already triggered strikes and anttgovernmcnt

recent economic troubles have hit hard the lower 'class--the base of the clerics' political support--and that these people are now more willing to show their dissatisfaction openly. We also believe that critics of the regime probably have gained support among poor urban migrants and war refugees who have flocked to the cities and are overloading public services. I

There are tentative signs of coordinated opposition amongariety of sources have reported that strikers incities recently timed their actions to support each other. probablyarticularly concerned about labor unrestIran's second largest city and an industrial center, wherelong-standing leftist strength. According to the Iranian exile press,Iranian labor organization--the Solidarity Cornmi ttee ofclaimed responsibility for the strikes.

Political Fennent. Infighting among factions within the regime Isbecause leading Iranians realize that Khomeini maymuchis complicating regime efforts to deal with Radicals are trying to win Khomeini's endorsement ofhoping to silence their rivals' call for more moderateradicals want to use an aggressive foreign policy to keep Iranrevolutionary.

Adding to factional disputes, the Hojatieh--an ultraconservative faction that has strong support among merchants and the armed forces--recently announced its supportenior cleric in Mashhad--AyatoIlahfter he publicly declared that concepts used to justify Khomeini's position as supreme pol'tical-religlous leader were unlslamlc. Qomi has long articulated popular frustration with the regime, but he Is now emergingpokesman for those who oppose radical efforts to proaotc Ayatollah Hontazeri as Khomeini's successor, in February, Qcni also declared that the continuation of the war with Iraq was unlslamlc Just

after Khomeiniajor speech calling for Iranians to fight on until the Iraqi government is toppled. At about the same time, Ayatollah Khoithe most senior Shia cleric, long time foe of Khomeini, and predominant spiritual leader of the Hojatieh--broke six years of self-imposed silence toward the Khomeini regime to condemn the war as unlslamlc.

in the Revolutionary Guard. Although never cohesive, the Revolutionary Guard has become even less unified as the commitment of young men to the regime has decreased. Experienced Guard officers are especially disillusioned.

Moreover, factfonal political infighting recently has spilled over into the Guard. All factions fn the regime recognize the Guard as crucial to maintaining clerical control and want to line up support within the

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the struggle should continue, but they also could there is no shame If Iran ends the war.

Khomeini's Insistence on continuing the war has been the main obstacleore flexible Iranian position. His remarks on war policyhe latestopen to various interpretations, one being that he is softening his position. Khomeini said that God would not punish Iran for falling to defeat an enemy if Iran had tried its best to fulfill God's command to fight "oppression." His remarks could mean there is no shame in defeat be interpreted as

Regime Strengths

The Khomeini regime still possesses several assets that it can use to helpurvive the current pressures as well as the death of the Ayatollah:

he Iranian people are unlikely to shift their allegiance completely untfl another strong individual emerges who can enunciate andompelling alternative to Khomeinisnu

o group or individual capable of exploiting popular

dissatisfaction with the Khomeini regime has emerged. Anti-regime exiles are factionallzed and have little following in-country.

he Iranian populaceowerful desireovernment guided by Islamic principles and independent of both the superpowers.

Tehran has recently removed some individuals who abused their positions, such as Asadollah Lajvardi, the infamous Tehran Revolutionary Court Prosecutor and warden of Evin Prison.

Despite problems in the Guard, Tehran maintains means of repression that cannot be matched by any of its Iranian opponents and the regime does not hesitate to use them. Even influential moderates fear that if they press their views too aggressively they will be eliminated by security forces or thugs controlled by their radical rivals.

he regime controls the media tightly, and is able to disseminate its own interpretation of events or suppress information ft does not want known.

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Perhaps most Importantly, the clerics and their secular allies appear to understand the consequences of unbridled competition among themselves. Khomeini's withdrawal has encouraged negotiations among faction leaders over bow to cope with Iran's problems without Khomeini. Assembly Speakerwe believeecond only to Khomeini Inin early February, for example, that factional disagreements over the management of foreign trade had been overcome and that legislationompromise between central control of the economyominant role for the private sector would soon be passed.

Iranian Options

Despite these strengths, the Khomeini regime is now facing thechallenges to its control since it crushed thehalq in The absence ofeversal of the trends against the regime meansmargin of error has narrowed to the point that it canerrors, intensification of existing problems, or If the clerical regime concludes that Its control 1sit may look for ways to save Itself by initiatingshifts on the war, oil sales, terrorism, or relations with thewould have major implications for the West.

Ending the War: Negotiate. Iran could reverse its position andend tne fighting. Inhen Iran facedKhomeini suddenly announced guidelines for resolution of thecrisis through the Consultative Assembly. Prior to thathad seeoed as adamantly opposed to negotiating with the United Stateshas been about dealing with Iraq. The Iranian constitution alsoa popular referendum on "very Important problems" at the requestof the Assembly. egotiated end to the conflict,would provide the regimerief respiteikely to fall again unless the regime reverses the Ending the war would free some economic resources, but wouldthe oil market, which would be further weakenedran andoil exports.

Ending the War: Attack. Iran could attempt another "last ditch" military offensive, hoping to eliminate Iraqi President Saddam Husayn and set the stage for resolution of the conflict. Tehran still has large forces intact, but probably would need some time to prepare another large ground attack. Many Iranian moderates probably have supported this option-promoted bya successful effort would put Irantronger position, while failure would discredit the radicals and might trigger Khomeini's agreement to pursue peace. Although we still believe Iran is unlikely to achieve Its political alms against Iraq with military force, shouldictory occur, the influence of Iranian radicals would be dramatically strengthened and the confidence of regional governmentshe United States seriously undermined. I-

Boost Oil Production. Tehran could sharply Increase oil production and discount prices to try to generate greater revenues. Inehran reversed its oil pricing policies and dramatically lowered prices 1n

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line wi tn the rest cf CPEC to restore Iran's finances.

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-TT^oiracxTOn quota since last summer because its professionalisastrous collapse of prices. Iran--the secondoil producer--could cause strong downward pressure on prices Ifto undersell its competitors. Given the soft oilove would risk discounts by other OPEC members that would morewhatever revenue gain for Iran that additional oil sales

Deal with Moscow. The Khomeini regime could mute Its strong antl-Sovietfsm "in" order to help ease external pressures. During the hostage crisis, Tehran apparently felt It bought some protection by reducing anti-Soviet propaganda and playing down its anger over the Invasion of Afghanistan. Moscow Is now publicly demanding progress on these issues before relations can improve. Tehran has made recent overtures toward Moscow because of Baghdad's Improved ties with the United States and Iranian concern that the United States may be preparing to retaliate for Tehran's Involvement with Muslim terrorists. Even moderates could go along with radical proposals for closer ties with Moscow if the regime believed US action against Iran was

Terrorist Spectacular. Iran has adopted terrorismtate policy to advance Its foreign and domestic goals and could Increase significantly its efforts in this field. Iranian moderates have become Increasingly skeptical of the usefulness of terrorism, especially when Innocent bystanders are hurt, but the radicals considerrimary "wans of protecting Iran's revolutionary image abroad and undercutting their rivals at home. Both factions might agreeroad program of strikes against US interests In the region and in Western Europe, however, to rally the populace against perceived threats by the United States.

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