IRAN: POLITICAL INSTABILITY AND ECONOMIC DISARRAY

Created: 3/3/1981

OCR scan of the original document, errors are possible

IRAN, POLITICAL INSTABILITY ANO ECONOMIC DISARRAY

THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL INTELLIGENCE.

THE NATIONAL FOREIGN INTELLIGENCE BOONCURS EXCEPT AS NOTED IN THE TEXT.

i^Wfr*

Aetataa* CnM el KeH,lwPHdef etli^itunu,wv-

OVERVIEW

The near-term ourioo* inor ongoing political instability and economic disarray ai Ihe fundamental bis continue their efforts to rnonopohze power and transform Iranruly Islamic state This complicates decisionmaking at all levels, although release of thedemonstrate* that controversy can be overcomeajority of key political actors reach consensus.

Ayatollah Khomeini retains his widespread personal popularity and will probably remain Iran's preeminent figure and ultimate arbiter of disputes for si least tbe neat sta months. So long asell enough to influence Ibe political scene, the power struggle in Tehran will nut be resolved. Khomeini's sudden death or incapacitatk* would almost certainly lead to intensified violence and possibly civil war.

Both the military and the leftists would be tempted to try to scire power If political stability further deteriorate* Dissatisfaction andhave been endemic In the armed forces since the revolution,oup faces manynited left would reotent force for disruption, but the leftists are splintered alec* Idecfeglcal tine* The various eiile groups are wiak, divided, and have little popular appeal Still, even an unsuccessful attempt to assassinate Khomeini or other key leaders would Up Iran toward greater chaos.

The ethnic minorities, which make up about half of Iran'swill continue to leak; increased local autonomy. They are more likely to be exploiters of political change rather than iratigatori of It

The Iranian economy, already severely depressed by eventsfrom the revolution, has been further disrupted by the war with Iraq. Significant improvement will not occur over the next several months, although food end fuel shortages will probably ease somewhat In the spring. At present levels, banian oil exports are sufficient to pay for much-needed military supplies and food, and tooreign exchange crunch- If the flow of oil were cut off or dramaticallyhowever. Iran's situation would become very bleak within sis toonths. Meanwhile, disruptive inflation, unemployment, and raw materials shortages will persist, but economic conditions alone areto result in decisive popular discontent or cause the regime to seek an end to the conflict wilh Baghdad.

I

The war has settledtalemate thai will last at least through the spring- The outcome will probably not be resolved on theThe failure of Iran's January counteroffenslve in the Susangcrd area resulted in losses of both men and equipment which cannot be quickly replaced Although Iran will not be capable ofimilar scale before midsummer, it doesontinuing capability to strike highly vulnerable petroleum facilities in neighboring oil-producing states,

Iranian foreign policy, like the domestic scene, will remain highly volatile. It will probably begin to take shape In efforts to achieve non-alignment, eliminate both US and Soviet regional influence, encourage fundamentalist uprisings in other Islamic states, and guaranteeself-sufficiency. At best, the chaotic Internal political situation will eventually produceovernment andpolicy approach which are at once highly nationalistic. anti-Communist, and nonaligned.

The Iranians remain deeply suspicious of Soviet intentions toward Iran and critical ofnvolvement in Afghanistan. Soviet policy is based largely on the juo^ment that there Is little hopehaw in relations as long as Khomeini remains on the scene. Because of the unstable politicalran, the Soviets want to Quietly build an infrastructure that could be quickly used to exploit new opportunities. Moscow therefore believes that Its meet promising current option is to curry favor with the present government and to play on itsorientation while awaiting future opportunities.

Iran will remain hostile to the United States, and the USwill have little direct leverage to channel developments in ways that serve its interests. Given the fluid situation, US moves whichflexibility, serve long-term interests, and operate in an Indirect manner probably have the best chance of achieving lasting benefits.

DISCUSSION

Power Struggle tn Tehran

he most important factor .fleeting Lru'*politicalver the next rii merit hs will be the corrMuuing power straggle between the Islamic fundamentalists and the secular moderates1 who have clustered around Residenttee injurehb rivalry will dominate the Iranian polttkal scene and set the lone, direction, and pace of events to Otheras the various leftist

' PolltW faetSmacaon ara dkMloaN to label In baa In IhU Balauta. sha tana "luadaaii nnlsst" Is ased tarrftalnus and lay nusssssstlSsa andIsi aaaaiiatM tool Iran be traaa-Sarasadrks hhaak aBU art* OW sOmssIaf alSalmans* Caaaaafc. thb anas) kaa hasa aasarasMdrha

ritr rasas saattwis *BWW Sanaa

hshnwM, booaaaaaaS aBof Iranidrray ahemBaaSunatsaarauhjo'

assisDok. TV tana "an duals" Is asad aalrpanaJii'Ii ska nsadarom an woaotlaaM rrtnmsd ta asassay of thaos doe afcnM Muslimswill react to key developments and seek lac-ticnl advantages as oppotturutlrs peearnt themselves Toss paper analyzes the key actors, issues, and forces shaprag the cornplei Iranian pohtkal scene andon future political trends

2 The revolution lhal swept Iran88 was unique La modern Middle Eastern history- apopular upheaval with neatly every element of society Opposing the monarchy. Folio wins the revolutionary victory, llsb broad coalllion rapidly dia-Intwjjited Into compel Ifactions, with each group striving for fH'^s1 dominance II la Use continuation of that powas straggle lhal lies al the bean of Iran's current political woea Until Use btur fas rescived. Use country casaact begin to rebuild starkf or to establish any durable bs^urkssts

he tocos of the controlrrsy tea in tbe failure of key eiemersU of Iranian society lo agree on the aim of

a

Ihe Islamic revolution. Three rival point* oi view ate current It In contention*

Thote -ho favor an authoritarian Itbrnir Kale dominatedthe clenrv

Prcaaaonbttore opm tortrty. but one OiFI guided by Itbmlc principle*

itlo remodel society uilng further revolutionary upheavaL

4'Hy (he clerical and by fundanvnaaltsU oho. matxave attempted to ntonopohrr own and to eliminate the influence ol thr other eiernentt of the antt ShahThe fundamenlalltu arr* loiarly oraanirrd under Ihe banner of the liberie Hepcbllc Party (IRPJ and are led by several irnlor cbra-yrnen. meal notably ihe head of ihr Supreme Court. Ayatollah Behmhtl. Moil are uniwrrvlneamrtlbna to comprornbe oe rteaotlate oa nunv political and aortal but* Tbe* arr by do meant unilird Sorne of the hardbne Idamtc fundarneotaluti are onlyart ol ihr IBP and have pcrntwdm more radical oharau.esult, fun! vilkrry.

he wcond group l> represented by Prrtldc-nt Banl-Sedr. an tibmir ideologuractical realttl Bani-Sadr apprari lo have vide peitamal support, bul has no effective araaa-roots oreaaUaltun He aerves a* spokesmancee ralilM el aMifurtoainenasM pnlrtktaia who do not necenanl> acceptIcadcrtrup on all mun Im* year, he leal much of hu political power. In part became of hb roMroverUal efforts to revolve ihr hnitagr cum. The war wilh Iraq, howrvrr. hot given Bani-Sadr an opportunity to tltrnalhrn hu position by aatorialins himself chnrly wilh thral Ihe front and crealms ihr IraCtrrthip bnaajrresident ball line to prrwrw Irani anlipwalevertrtfbw. Ihb nprjcartintM'v rrrild Urifirr if ihr lundamrMaliatiay to Ma me Bani Sadr for snv fulure batik-field reverses

yatollah Khomeiniritical and com-pllcaled rob in the power ttruask- at Ihr ultimateof dm-eir two lactknm. Hr favort fundament aim control in Iran,ru concerned with erourtne ihr political fortunes ol titdittdoal fun-rbinrnulbts lhan withootrmut thai Ihr revolution miifl be guttled by Itbmir principles. Khomeini could attempt to end the power arugcle by rhoonna- one tldr or ihe other or b> allowing II loecinve climax Instead, he teeno to rniurlrhCalr babncina art by identifying himtrlfear who lupporl Banind criticise fundarrten-taloi abuan. while support inn the fundamrnialitti' aot-rrrimrW and Untiling BaniSadr't prnldrntial power*

KrHntrlnt't own power and infkience. however, arr wol absolute. In repeated calh for unity amonact ton* for eumpb. be apparently frrb con-strabtrtl lo shape pranomv* mfW) in accord titer with perceived popular opinion Khomeini Is ai much aof tuch opinion as hehape* of It He avoids day-to-cby detail*ontent lo offer generalThai give* when tbe opporfunilv to tpesk In hisin coofbclina Irtm* Mocrovrtof Khontrini't health abo influence the dynaouc of Ihe power ttrugsle

Several olher groupa arr waiting in Ihe wlnsi lo challrnBr Ihr irapiBr Apart from an bobtrd mililary acta*aturation attempt agalntiunited left reoteaettu iheo-lual ibrral lo ihr renimr AI preienl the Irll is not ctroraj rrtouchhalLrnar Ihr rovrrmrenl directly Deep dlvbiont hate thus far prevented organ lulion of

a tineJe. united front |

Lrltutt wiB beeoane more active and mat attempt lo nplott Ihe political ebtoa for ibro own pttrpoar) The* are Wire, to aain ttrrttrth over thr nril tit monlht

krftlsl or garu1-ration* are particularly sbj-mf leant

Mafahcdia*he brgvw. Irflial gnaip and npouaei aideologKel ntii of Martbm and Ubm* timed, hai wide popu-br appeal, rapeclatly arnona the youna. and it inlrntely antl-Arnrrlcan However. II dainu lohai b.ormen polwy approach

Propb'ianeal hrllt* gnaap with no Islamic prrlmtiont recenllt >pbl inln at beat Iwo facliont bul it Mill capable ol tome ter-

'rlwucl atUturr- an Utriimwn la thra> atoMht TWaa Maattd ardtr aaaaag IlaaarwiW> Umm ay a' antem tad am Tatatltn Maad Ir-atalitin

Curd km to ta antlataVae In tad to

laratloni la Trana hw pwamrd

rorlst operations like the attack on tbe USInt lean one fortiori has allied itself with tbc Tudeh in support of Khomeini'5 regime.

The Soviet-Sporaored Communist Tudeh Party,elativelybut well organized,backs Khomeini on all key Issues, while clandestinely seeking lo build its strength in sov-ermnent Institutions and other politKaly Itself Ihe Tudeh could probably seize power onlyouperiod of extreme unrest and would require massive Soviet support to retain control

he etilei (tee table I) are another source of opposition to the regurie. Virtually all have pegged their hopeseturn to Tehran on growingwith Ibe revolution. Most hope that popularfor Khomeini will wane as chaos in Iran grows They are attempting toumber of Arab and Western government lo support them. The war wilh Iraq has highlighted early ties which some of ihe esue group* had developed with Baghdad. Thiscoupled with the association of many eiileand Ihe royal family, has prevented them from winning ranch internal support Moreover, theirto agreeingle leadership figure or to

Table I

Prrvrdua Jim hum Nulh

mbsjbrf**

HSjst.

Pruot Mlalstrr gSSSi Shab Chirt at Staff Mdw SUa

Head of Ira National OS feartattuili Cnmpjni

CM of Mlkarv ludh. tarn)

rai Vcrvvcab Weak

Wnk

SrtMhor Purr In Atw

artua

noW Shit IsAem

AldtUArMotkbSharl*l official of (he Mra-

tln.te-bk. On,

ooperate in even the most general way has prevented lhc formationiable oppositionabroadn alternative view which holdi thai, if these rnuvemrnts shouldeir dif-ferrncea and coalescenified leadership, ihey could add an important external clement to (he nonlcftist internal opposition *

thnic minonfies (see fujure E) make up aboul half the nation's population and have preaenled problems lor the Khomeini regime since it cameower Minority unrest will plague the government for Ihe foreseeable future, but ethnic groups are mote likely to be eiploiters of political change rather than Instigators In general, the minorities continue lo awaM the denouement of iheea1 contest in Tehran

inority leaders have traditionally sou* hi tothr influence of the ceniral government in their aflain while gaining as much oYveiopencriUl aid as can be akaorbed -ithe-ui didurbirsg iribal way* The Ineffectlveeieas and dboeganiration ol the prearathave given the minorities de (ado autonomy, but ihei have not sought complete independence Instead, ihey seek some control over local affairs,y Tehran In develupmenl prulecti in their

I iiIt and consullatiOnihe role ul military

mildere

13 The mosl important of ihe mirtoritica are

TW Kurds. They are the onl* group to hawustained armed mtsfanee to the auvrrrursent They have weB-orairpaignuliassion foe autonomy aad arrcsa to support from Iran and scene tact Eisropeaa slain The Kurds, however, arr urlrriiallv

Thr Arabs. Although citneenlraled In oil-rich1 ihe Arabs by und large have milthe Iraqi Invasion The small lianian Arab .i. ili iisupported byhad lutlr effect on the course of the cooUm t

The Ararbay (arsis. Thev are Iran's lararsa minority ajruup and bold senior pout inns in the political, sniktary. and economic hsweaacracsn Moat are loyal lo moderate Ayatollah Msaisat Madarl. who nppusrs Khomeini hot has restated confrontation with the fiirsdamcntalttft There

tv Man of thai

Aarucy

have been sporadic clashes with pro-Khomeini forces In Aiarbayiani areas, but many have been provoked bv leftish groups, which are relatively strong there

TW Turkomans. Sporadxat* oc ansa In the Turkomans homelands since the clashes oful iheir area has remained genet ally calm.

TW Baltic his. The Khomeini regime remains suspicious ol alleged Baluchi contacla with leftist Bahschs* Us Pakistan and of Soviet contacts with Baluchi disssdeots These suspicions vwobanry are exaggerated. TW govii ranenl has been denied rffeetlvr eorvtrol of ftsduchi territory outside of the iiiDsiii towns, but tW tribal leadership re-malm divided and unwilling to eipose Us people tu retaliation bv attempting: to push outforen Hecent reports suggest lhal Iraq is attempting lo support Balm hi dissidents throuah ctaadrsilar arms shipments across lhc Prraan

TW Qaahqais. They are thr most Western-ori-ented of Iranian minorities. Their opposition tolil attacks on traditional tribal or-ganiialions have resulted in several armed clashes Qathqal kfaders are arming theirandad some contacts with foreign gov-eeiarserNs aad Iranian eslle groups abroad De-spsle iheir ducncssasMasewt with iW presenl regime however. tW fjashqal* are pnhticalwho will not move alone aga'nsl Khnmeini

siu other groups eventually could play arole nr. thr Iranian political scene the military and Use ftcvmulsonart Guard. Plotting has beenin tW armed forcesH. the most serious coup attempt faskrd ra0 Another such at-tempt would (acee Rootutimar. Cuard. span, divsded rank-and-fileeven an unsuccessful eflnrl to assassinate Khnmeini or other senior mifKials cisiild ihrow Iran inlo chant

he revolution dramatically altered ihe flatus ol Iran's mililary forces Chaotic cisrtditioni inc-merit and country, maior purges aisd dcsertsoriv lack ol sWa] range epversmsertl puitMltg.rnrral distrust ol thr ollsirr carpsll lontiioutrdcniiicani reduction in both thes' site and nvrtall effectiveness TW creaiione volut lunar) Guard Corps tPesderaii) to protect tW Islamic mnvement.

6

7

Item*.

-hi thr war with Iraq have aggravated Ihe internal situation and precluded any major rebuilding ot" ihe armed force* In the near term.

While all lervice* have naffered from ibe revolution, ihe Army and ihe Air Force have beenoth have sustained mbatanfial keac* of men and eouiproeot due to panrr* and ihe war (See lablehese change* have puteri* nerd of-ficen in commandraulllna rcducrd capability to coordinate ralhtary action

The lUvoluIionaryorce of0 full-time regular* and lubatanllal number* of irregubrt, waa organized va-itb ihe riprm* purpose of protecttnn lha revolution and its cirrteal traders front all exponent* particularly the mUitarv II proclaims loyalty lo Ayateilab Khomeini and work* In tandem wilh the Idanuc IVepsaSfac Party and otheruttrKt command and control structure ha* not been esubltshed. and local Guard unil* (particularly In theave often op-eialed autonomously andear law lew fashion The Cuard haa alto clathod wilh mililary leader* by commandeering equipment, tenting unauthorlted or

Tablet

Equipntenl inrmed Force* *

den lo militarynd refilling to cooperate with local commander*

IS. Whib aome Guard personnel reportedly have been trained lo employ iir.ai and artillery, the cor pa rrmaim primxnli equipped sllh hahl infanliy wrap on*bjrrt lo many of the same recruiting and logistic ilildculliei lhat plaaue the regularl i* unlikely thai the Cuard *vlU be able to Improve lis militat! capabilities In Ihr near term, although II will continue lo outclass armed leftist tcroupt and Other Street praleaten In an urban lettingapable of puning up formidable iratatance as the Itahting tn Khnrrarnakakr and Abadana led

IV The economic lit nation and the war abo affect internal pollvents Significant improvement in the economy will not occur over the oral arveral month* ahhnuafa the fuel and food shortages rtaeer-baled byweather >UI ease *ornrwhal tn latealblkon. uriecnployrnrnl. and continual thort-aaes wilt however, remain importanl problem* lor ihe regime and will coniinuc lo contribute to popular(fee economic tertian, brtpnnlng at.tare detailed dtanasMon )

tO Bnth Baa. Sadr and the leftist* *xr hkely to coo linur to uar Ihenntal rcratomic rondiiton lo challrnar theMeanwbirr, the fun-damrnlalult have been prevented from using Iran'*baeb lo countcr RaniSidr brvauir uf KhonvrtM* iBcreaslnsly atmng defense of hit role in the war effort

The Curre-rt Powticoi SrtiaOhdn

l preterrt. the lurydamefriauSU hatr ihr upper hand in Iran because they dominate the legblatlvr. iudlrtal. and ctecutive branches of government and the revolutionary or-sartUallon* (Including the fteiotu-tiociary Guard) Factorsh account for iheurrentnclude ihe folio* ing

They gave ibe revolution its ideology, litand Ihr leadership which led to Its turcrt*

They haverge reservoir ol popular tupport and are bohlered byha-rnma By and large, kburrtrtni'* coreuneducated urbannotlhat he has brtrayed ihe Id rail or goals of the revolution, although iherr it growing *hv rncharttment wtlh ihe cbrgy in general and 6a-

*5rtS*ai.

dain for certain individual clergymen and lay (undamenUlWi.

have acted forcefully in the political arena by executing opponents, using ihe Revolutionary Guard and street toughs to undeicut theirappointing oversight committees in the bureaucracies, and buying mass support through financial donations.

ani-Sadropularity and posit son as President and Commander in Chief give hisoehold in the government. Technical skills abo provide hit supporters with influence in such organizations as the Iranian National Oil Company and the Central Bank 'ihe fundamentalists have removed many Western-educated technocrats but have not been able toall of them.

ince ibe release of the hostages, variousgroups have become much more aggressive in their efforts lo erode clerical domination In Iran. They have more openly denounced fursdarnenUmt policies *nd actions, and Bani-Sadr has gone so far a* to say that Iran's "destiny will be bleak, unless the nation Stands up to those [Ihe fundamentalists) who rule with lies, imprbonmenl. and torture "

Political Prospects

highly charged political environmentimplications for ongoing developments

It assure, that Iranian society will remain polrti-colly mobilised

It polillciBrJ and radicalises every issue on Ihe Iranian political scene,ictory by one factioniveneenefeat foe the

other.

It make* any proposal or idea that smacks of moderation or compromise suspect and open to the charge of Isring anlircvolutioiiary

Media warfare, street drmonslralions. and oeca stonal assassinations will continue

long as octogenarian Khomeini t* alivewell, ihe power struggle will not beKhomeini's death' will probably lead lo aof this phase of the power struggle.

aid lo have chosen Ayalollah Montozeri as hb successor. The clerics, however, are deeply concerned about the prospectsmooth transition Montatari does not possess Khomeinisand has no significant independent base ofMosMazari, Beheshti, and Ihe fundi men la lists wlB almost certainly attempt lo complete the Islamiration of Iran but. since these senior clergymen do not possess Khomeinis charisma, their grip on power will be tenuous

If the fundamentalists move to fully consolidate Iheir position, Bani-Sadr wtfl have lo decide whether to submit or activelyecision that could lead to civil war.

n alignment among Bani-Sadr. some of themerchants, elements of the military, andcleric* is possible. Some of the cities and clhnk groups might alsoart of this alliance. The Muiahedln.urrently confronting the fun-daaveirtalht. in the streets, could also decide to throw Its weight behind Bani-Sadr The Muiahedin welcomes continued political iristabtlllyeans of espanding iu influence On the other hand, the Tudeh and purls of the Fedayeen will probably continue to support the hardliners

sum. political prospects during the termEstimate point to continuedviolence if Khomeini dies or Isduring Ihb period

The War With Iraq

war has setltedtalemate lhatwsH but at least through spring. The frontlinelittle since ihe first Iwo weeksxcept for the uistuccessfulin January, the war on thebeen essentially limited to occassonai probescichanges The failure of tbe Iranianin the Susangerd salient hat leflmore vulnerable to further Irani offensiveIn the coming months, the Iranians will notto overcome Iraqi advantages in troops andtanks Still, theihe war will be determined primarily byin Baghdad and Tehran and not onWield

The air war thus far has been far moreeconomically and psvchologKully than militarily.

Although mija military and economic targets have been attacked, both side* now use lighter aircraftfor defensive pat rob and are likely to be able to maintain the potential for attacktna key economicover theeveral month" Despite it* wai losses and reduced military strength. Iran abo retainscapabihty te ttrike targets on ibe Arabian Penin-sula Iran has operational fujhfrr-bombers stationed at ihree bates on ihe Persianl has luccaatfullyamphibtou* cornmando la-ds. and Us Navy mil operatesascade ol uirch*llengnd supremacy

be Iranian mlbtary probably cannot beprepared for another cam pa tan before mid suinmer. The actual timing of any future offensive,ighly dependent on political oWsstor* in Trhran. and Iran* ability lo

-Hi combat Icaaes by repair and /orof remaining

Acquire badly needed spare parts and munitions

Develop effective combat inaui ics and command and control mechanisms al lltr Ironl

ftecruK, train, and fntegraSr art personrsrl into combat units

n aptte of iu worM-vd* tearch for mutcary nap-pi lea, Tehran ha* obtained only limited quantities of arms from North Korea. Libya, Syria, and indepertd-ent arms broken Iranian foreign rtchanar reserves are sufficient to continue or expandrebate* over the near term Iran'* ability lo pay lor needed defense imports uhlrnately depends on Its capabaaVy lo niaintain or increaae oila capability blgbly vulnerable to Iraqi it tack In any case, bureaucratic inefficiency and IranarjorUtion bottleneck* are Wkefy lo conllnue to (vretralD Iran* quest for additional military hardware

ed latitat effort* have bossed down because of ihe iniraruigenoe of both tide* on the issue of Iraqi withdrawal from Inn and dtftrrrnee* over *ov-oretgnty and SCtes* to ihe Shatl al Arab.

Economic Conditions

he Iranian economy, already severelyevolution, has been further ousrupted by ,he war. Shortages and unemployment are widespread, and there have been some oven roani-festatiom of Popular discontent Most basic needs are bring met Worsen)og reonomic conditions, however, are contributing io popular unrett. and beginning to influence Iran'* Internal political tituelion

his atualion could be further eaaceibaled by Iraqi military actionery few key facilities. SoeciftcaUY.

most Important oil eiport facility. Kharg(CXI facilities are tbown onf Iran doe* not continue io eiport oil. it will be facedevere foreign ctchange shortage In sn lo nine months

two remaining major operating refineries at Tehran and Ktfahan. If these were out of commission, or the flow of oil through thewhichem was (topped, Iran would have great difficulty grtllng enough petro-Irwaa products to renrinoe the war. generate electricity, and distribute even banc foodshe

psTpajlpI'l^Ty.

he fetmvinv- Overall industrial activity has declined lo only one-ciaarter lo one-third of the prerevotutlcatarySeet ernment at-lempt* to use thr war to cajole increased production have been ineffective Furthermore, political inl.ghi-ing al thr top prevents formulation of rohrreni eco-itornlc dolet

M Inflation ks accelerating asoraen. Rationing he* been imooted on food and fuel While Ihe war effort haa generated additional lobs in someas probablyoan winKhuaeslan Province to Ihe already largerolls. Akocetbrcillionbeen displaced by ihe war.erious refugee problem

ratton of normallyfood supplies Is now available, bul the countfy can muddle through the remainder of Ihe winter hr cnaar of carryover ttoct* from thisarvests through rationing, and by giving high priority lo loud imports Bread, rice, potatoes, sugar, eggs milk, and .cnrtablr eat have bren added Is the. of gravel* covrred by aoveromrnt ral Inning Pood Import requirement! will remain high, especially Mnce impur-lam agricultural arras have been hurt by the wai

ran't domestic oil supply slluallnn remains precarious Operating refinrttrs can provide rouehhercent of normal winter demand, but kerosene

"Stow

Iran: The Economyiancc Since tbe Revolution

Ovmll maonaty

u about ow-uJrd mr

Wis.

lulrul MlMly

io one-qnirtBi lo ax-iUid

aorsnal

Output

dlthth In food-ulra mrW/

Aiwn matrnulv cr wottr.

Druduciun

byladj to

tiponi

earnings

ay.

by ibnat ball la aU tarau

about Im-ibtioi In whnno

wnw aaati

to oruuod isbtltsoe.

torloU llbor. prnora.

nsoaiyurfsM.wo.lni

sksrply la around CO

stroma

and- are In very short supply The Wluallon would deteriorateither of the two reotaan-Ine major operating rrllnrrvn at Tehran and Faf ahan were pet Oast of com mln* aa feet aad iraisaportaltoa const ralnli keep Iran from Importing more thanercent o( Hi refirvdlremeots

cctMi to Imports. The list Mi mi has furtherIran's Import capaUktle* largrly Umltlag Ihe flow of imports through Ihe Partian Cellngle major port.Abbas. Contraction of Irani Hade with the West has aowvewbal tncreaaed Itson trade with the Cnraanunrfl ceaarstria* but Itainporl hot tie reelsajor shift la that direction

u Eaporsa. Oil nports are critical lo Iran's continued ability lo keep Ike economy fanctionlng Oil has been shipped from Strrt aad Lain Island in ihe southern Persian Gulf and from sorne of theat Khan Island Exports averageday during October and Noverrtbe* end surged ioor ihehroughecember. Tbe latest Iranian itattsUcs indicate thai oil eiporU totaled about IIor tha periodecember throughebruary (See

I ir.ai.rini' Condiliona. Iran no kynger face* an Immediate foreign exchange shortage, although IU financial situation could rapidly deteriorate If oildrop much below the prnrnt raleollowing the uahieeksng of US bank accounts Iraa's central bank had aboutillion in foreign ea-change reserves; given the animated current level of revenues and expenditures, it is drawing down re-servra by about (ISOustained drop la eiports to,ould pcedpiuir0 million la monthly drawdown* If so. at current Import seven, Iran'sracgnasgr could be eihastvtcd to aboutnoMh* forcing hquldarlon of some ofillion In goldraw on0 million prartlon at the Inter national htortetary Fund to orelrianclal crisis

gconooaicThe lifting of economic sanation) aril have minimal effect on Irani economy, gadole chance of mbaUnbal economic lan-prrsvefnenl in the forrseeabaV future Should the tempo or scope of tbe war acorlrralr substantially. some of Iran's vital and highly vulnerable economic infrastruc*-lure nnuM likely be swbkrct to Iraqi attack Similarly, serious domestic unreal could affect the Internalof (cod* the operation of the oil wet or. and1 port*

he arrival of wane auslhar wiD reomr of the botdrra oa ike population as winter healing nredi arr eliminated andwn food harvest*Drepfle thoseood and other good*will persist and unriii ploy merit and Inflation will remain major problems for ihe regime

Foreign Ketationi

rani ability to efkctlrrty prniscl Us policy views onto ihr world stage will remain circumscribed until Ita domestic house and internal stability problem* are put u* order. AH revolutionary dements agree on the broad outline of "Islamic foreignhe main points of which include

StJKt tarantuqpvntrol

1 [munition ot superpower influence In the region

Figure

Iran: Crude Oil Production and Exports,7

Thousand barrel* par day

91

F.b

11

SSjrnaaajfH^

self -iuf fictertrv-

Xenophobic Mltonausm

Eiport Ins tbe lilamt. revolution

Despite ihii (aridarnenul eorotruet, even bilateral reUtiom are often confuted and eontr**ctorvot *urprcJt>o. given the ihifnna nature of interna! political dynamics Irani iialanal grab ar* dominated by the desire to curtail or Himmatr great-power mfbe ence and to encovrwse lilamlmtlon of gomhe Persian Gulf region, evpncuillytubatantial Shine cennmunttir* eilit

he Gulf Suit. For moatrn, Iran has pursued an almost schizophrenic policy toward tbe Persian Cult states Statenventtesire for good reUtioo* have been followed by derogatory andcnrnsncTrts. The war Intensified thi> alreadytendency

evolution la seenajor sourcedeatabllltaiion by (he other count He* ofCuB Tbe revolution haa opened regionalto tome of the tame charges that theused to effectivelygainst the Shahthe faiknr* to adhere to blaswic principle*Oarr* most cop* wtlb problem* of *ocial anddrslocariora aaaoctated wilh modernisationweahb that to undermined tbe Shah's regimethese cgyuMries have Shia communltir* andpopulation* open to cattttdevarious regimesopi rig

UraU-gvra lo deal with thear problemi or with the new regime tn Tehran.

COWra

Ajgkaniiian. Tbe Iranians have conaBciIIr cleriounced the Soviet in vail on ol Afghanistan and have rebuffed all Soviet effort* to have Tehran deal with the Babrali retime We would not eipeet them to participate in any lehemeonference wbkhde facto recognition of the prrarnt Kabuland which did nol requirerecondition the withdrawal of Soviet troops.

Tht Arab rWiceio. Tehran'* diplomaticin the early day* of the war encouraged it to tret practical alliance* with tome radical Arab*raditional Ideological rival aad Iran were cordial even before the war Syria hasIran with small arm* and ammunition and ha* servedratuahipcaent pntnt for *tappl*e* from East European cmaatrls to Iraa Some reports also suggest that Damascus may purchase Soviei arms for resale to Tehran

Tehran's relations with Ubya have improved Ahhough Libyan leader Oadhafl has long rspreased support for Iran'* Islamic revolution, reUlioru between the Iwo states were clouded by the diatprxarance la Tripolirominent Uhanree ShuMun-Sadr affair.

Al least for Ihc momenl, ihe Iranians appear willing to forget about ihe musing Imam For Us part. Libya has astreed lo serveiddleman for Iranian arms purchase* and has agreed lo improve economic relations with Tehran It has likewiseUhngneas lo provide Iran withrtihery. and antitank misaik-a, and has already supplied some stare parts, small arms, and

war -nth Iraq ha* co.npo.aird IranianIhe PalestinenPLO muat alsat prrarrve st* lie* svsth ArabPLO leader Arafal srUtsaHy hoped to mediatebet nor* the Iwo sides aasd traveled loin ihe early days ol the war. bul hasand led to further strain* with both

Soviet Policy Toward Iron

policy with re*perl to Iran ison the hsdgment thai there Is Ultle hope forSoviet breakthrough as long aaon the scene Given the instability of thein Iran, however, the Soviets ward lo build upthai could be used quickly tonew opportunities Oonarqoeotly. the Soviei*to support the Tudeh In hope* that It can ultimatelyecisive role in Iranian politics They are also eocounglng greater cooperation between the Tudeh and other leftist elemenei Similarly. Moscow l* reportedly ii contact with and providing assistance lo some dissident minority groups

Moscow appssar* to beheve that it* meatcurrento curry favor wKh the present government in Tehran and to play on it* anti-Western orientjtson Thus, while paying lipservlce to thelhal *he hostage seiiuiereach oflaw. Use Soviets nonetheless portrayed Tehran's demands as "lestrtlmale" and assisted In thwarting US economic sand lorn during ihe crisis

The Sovieti have largely been frustrated In their efforts to Improve relations The Iranians remain highly suspicious of Soviei Intentions loward Iran and critical of Moscow's involvement in Afghanistan.

While possibly creating some future opporlu-tuties to Iran for the Soviets. Use Iran-Iraq war has comelations with Tehran, already wary of Soviet support for Iraq To counter this the Scarlett Itsrouehout moat of the con/bet have ieetrned toward Iran Moscow ha* refitted to tatttfy Iraqifor new major weapon interns and has been equally reluctant to proeted with previouslydetrvrrse* The Soviets have, on the other hand, suggested ann broadening their arms rrla-tlorrship wilh Tehran while Mailing on deliveries of specific items. Ineludlrai spare part* covered byturned with the former Imperial government.

ell aware thai Ihb balancing act risks alienallng Baghdad and pushing Iraq closer lo the other Persian Cull Arab* and (he Wet) Consequently, the Soviets have optedtrategy of allowing East European armsto Iraq while withholding their own The very lad lhalilling to run the potential risk ol toning the friendship of Iraqi President Saddam Husssrtn clearly underscores the geopolitical impntarve of Iran loiK

ederiying Smrwthr ludgmcri thaihe main geopoliticalbe risponfears that the war could lead to rioter tiesIraa and thr Wealesurgence of USThe release of the US hostages heightened Soviet concern, and since the hostages' release the Soviets have tried lo keep Iranian atirntson focused on the aileaed threat the United Stales Continues lo pooe. Al

IS

the same time.over Ibeof its own representative. Inthe Iranians of Its past support and warned that Soviet tolerance and patience are limited.

he Soviets are not sanguine about the near-term prospect!eftist leisure of power in Tehran Nor li it dear that thevragmentation of Iran aa necessarily In their beat IMrreat' Moscow iacautiously na Ms relations with both tbe left and the minorities for fear of derailing its efforts to improve sUle-lo-stale relations with the government in Tehran andovernment ersvehdown against the left.

Given tbe rill of confrontation with tbe United States. Moscow would clearly pre!at to achieve ill aims in Iran without using military force.ull-scale Soviet invasion currently seems unlikely, there aredevelopments lhat could lead Ihe Soviets lomilitaryer sous threat of USinvolvement couldoviet reaction or preemptive moveeftist coalition were able lo scire power and -ailed for Soviei armed forcesMoscow might honor its request Similarly, rf Iran were to fragment along et basse liars and thethought this process irreversible they mighl inter-verse militarily

According to an alternative view the Snv.cts arc seeking to ultimately control Iran and are working to achieve thiseftist takeover or by taking advantage of fragmentation. While the holders of ihis view agree lhal Moscow clearly would prefer to achieve its aims in Iran without direct overt military force. Ihey note lhat Soviet forces in the border region have the capability to Intervenr there while Iranian ability to offer meaningful resistance has been tapped by the revolution and the Iron-Iraq war Soviet direct miliury intervention could be promptedequesteftist enahton ifoalition managed to scier power orlauatble basts for lequestioa intervention The Soviets might intervene If Iraa were to fragment along ethnic lines in an apparentlymanner The hoi den nf this view eapect ihe USSH to continue gradual Improvement in itsto intervene Any final decision lo do so and theof its Intervention will be affected by manythose citeda Soviet

Sr> Ihr dlimwiRet-Ktm*

assessment of the probability and risksirectconfrontation with Use United Stales '

tnspakomont for the United Stores

everal major conclusions which hovelor the development of future US policy toward lion emerge from this study:

A return Io the status quo ante is not possible The Iran of ihes,a died In the convublonj of the past three yean

For Ihe forcareable future, ihe Iranian political contest will be characterirrd by instability aad anil Americanism Moreover, the power struggleornetnis attention now and legacy later will continue, with no clear victor discernible at this hisscturc.

The potential for increased violence Is high, part liuflei Khomeini dies.

Alovernment will emerge which is at once highly tsattaulogic, nonaltgned. and anti-Commumat.

Impsrnsentallon of (be hnataasr agreement, even without ceawpltcatlons- will not affect these generalija tsons An adversary relationship with the United Stales will pes slot Any perceived fontd ragging onwould heighten ihe already prevalent belief thai Ihe United Slatesalcvulcnl power which carsnoi be trusted and which has sinister designs loward the revolution

In view of this suspicion and neoalivism. the lasted States has no direct levcroatr with -hich to channel devesoomenti in ways lhat arrve Us interests (Junk naaawptirin of US cumanrrcialran would Itkefy prove counterproductive Indeed,resence would offer convenient scapctsoals for future Iranian economic fadurrs. rekindle violent anti-Amertcanbm. andew crop of potentialisl targets

li.Ihe fluid situation in Iran. US moves which maintain fleiibslitv. serve long-term interests,operate in an indirectis. through thirdhave the best chance of acbievUsg loin* benefscial results

lo

-irdaa l.

DISSEMINATION NOTICE

docuraarn won dfcieminotad by lb* Notional fortygn Aiwmoaot Centn. Thlilot fh. infennrtTon ond inc. of ibe -oc ipinrt and olnder hr. o. her jorudiclloo onbail* AddiHond MvanttoJmay, b* outSorlred by thewirhrnnm

of IrrlaaSpance and (faun-en, for th* Dojyartment of Slot*

Detent* Irrrnfcaenr* Aoaoey, lor tn*of th*of Defame

and rh* orsanliation of Ih* Joint Otlett of Staff

Chief of Statf for IrrtaflTgenta, far the frportrnecit of rh*Director of Navalfor fh*of the Navy

* Aitlttont Chief of Staff, Weillfor ths Depcetmant af the Air lore*

of blafligence, far Keovtrnatert, mark* Carpi

p. Deputy Aulttont Admln-itrotar far Notknol Security, for (heof Erttrav h. Attfltorrt Director, FBI, for fh* Federel Bureau of Irrreaioettan i- Director of NSA, for th* Notlonol Security Apeney

ttitfcrn to ma Secretary tor Noticnol Security, lorpcrtmem of the irMMT

k. The Deputy Director for Ncrtionof Foreign Ajtanantrrt for ony otherr Aneney

TN. ctocv-nant avoy b* ratorned, ory burntrg in ocecedcrtc* with cpobobia-^oioriom, or roTirned tommat Forefcai AnemwM Cant*,.

VrTstei milIirranaea,xuttn redpatntl rvryarlod notwa. At tta. and of rhh period, the rVtcvraanl aVoukf be cWrtroyad or returned to tha for-coVg anarcy, ar fenrantlon nVnaVJ be rattuntte. of thi forwor alr* oaency ta retain ii fa. nrcoronnc* with2

tirln ol thhwn -Jiod leporotwty Iron Thei iinctuiuflM.

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