National Intelligence Daily
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ALERT MEMORANDUM
Border
olaohco between Iran ande escalated oignifi-the tKQitming of September* "
Both Baghdad and Tehran have been constrained fromajor conflict in the past by numerousand economic factors, including the threat of superpower intervention, the proximity of their oilto the border, and the danger that war would exacerbate domestic political unrest. These factors continue to restrain both Iran and Iraq, but Iraq'sto seize and hold disputed torritory and its military movementsualitative Change that increases tho danger that clashes will escalate out of control or that either side's perception of thewill suddenly change.
If major hostilities between Iran and Iraq should Dccur, the US hostage crisis could be further complicated Iran has long accused the United States of encouraging Iraqi aggression, and the militants holding the ushave threatened to kill them if Iraqfull-scale" attack. Although Iranian propaganda cannot be accepted at face value, the threat to the hostages probably could be increased especially if Iranerious defeat*
In the event of major hostilities, Iraq is capable of occupying the Khuzestan oilfields. Iraq's close ties to Iranian dissidents provide the means to setuppet government. ajor Iraqi offensive into
Top Bagggl
Khuzcntan would involve Iraqostly and protracted struggle with Iran. Iran, for Its port, could disrupt Iraqi shipping in tho Gulf.
Doth Iraq and Iran have much of their oillocated near the border--two-thirds of Iraq's exports move through vulnerable Persian Gulfand thcto facilities would probably be damaged byand sabotage if the conflict lasted moreew days. Disruption to Iraq's oil exports would result in immediate renewed pressure on world oil prices. Acutoff of oil exports wouldevere impact on supply availability as well as prices. Iraq currently exportsillion barrels of crude oil per day, most of which is imported by Western Europe, Japan, and Brazil. The United States obtains only about 3 ercent of its requirements for imported oil from Iraq. Iran currently exportsarrels of crude oil and products per day? none goes to the United States.
An expanded conflict could alsoestabilizing impact on other Middle Eastern states. Iraq would seek to portray the conflict as one between Arabs and Persians in order to gain Arab backing. Iran might appeal,unsuccessfully, to Syria for support against their mutual enemy. Tehran would probably step up its appeals to the Shias in Iraq to revolt and might also urge tho Shias in Saudi Arabia, Kuwait, Bahrain, and, other Gulf countries to attack Iraqi and US interests.
The Soviets have long been concerned that military clashes between Iran and Iraq will damage their tics with both countries. They may also be worried that the United States could use intensification of the conflict to Justify intervention in Iran or that Tehran would move to resolve its conflict with the United States in order to better confront Baghdad. Consequently, the Soviets probably consider their interests best served by tho prevention of the outbreak of full-scale
--continued
Should major hostilities occur, the Soviets might offer to actediator and seek to arrange a If this effort fails, the Soviets might attempt to use their arms relationship with the Iraqis tothem to desist. The USSR, however, is unlikely to cut off arms. The consequences of limiting Iraqi arms supplies would be to force Baghdad to search forWestern sources of arms and damage bilateral Soviet-Iraqi relations. If Iraq were to seek to occupy large parts ofas theefforts to dissuade Baghdad would probably bo even stronger,including warnings that Iraqi occupation could lead to Soviet military intervention in Iran to. protect the USSR's interests along its southern border.
in
situation report
iran
Irani President Saddam Hut tain'C abrogation yesterday ofS Algiers Accord vitk Jran ruooerte tha: frag intends to force further border cringes.
Saddam declared the accord "null andaying that Iran had violated its terns by interfering in Iraqi domestic affairs and by failing to return disputed Pointedly warning Iran to benefit from recent militaryaddam called on Iran to return all the land "usurped" from Iraq and the Arab nation, the lattereference to the three islands near the Strait of Hormuz occupied by Iran1 and still claimed by the United Arab mi rates. He also said that Iraq had decided to restore "complete-legal and effective' sovereignty over the Shatt al Arab.
Iraqi leaders have been encouraged to move against Iranariety of reasons. The Iranian military is weak and disorganized, presenting Baghdadnique opportunity to redress the terms of an agreement the Iraqis believe was unfairly forced on themhen superior power. Iran's revolutionary regime is also fragmented politically and isolated internationally with no superpower ally to deter external aggression.
Iraqi leaders may believe that their harshof Shia Muslim dissidents earlier this year has put the security servicesetter position to control Iraq's majority Shia community. Iraqi propagandathe Arab-Persian nature of tho dispute also probably has helped build popular supportonfrontation with Iran.
a more immediate factor in building support for an aggrcr-sivo stance against Iran probably has been the Iraqi military's performance.
ib-seprowie
response to Saddam Hussein's demands.
Iranian Reaction
Tehran has not yet formally replied to Saddam's speech, but press reports indicateember of Presi dent Bani-Sadr's staff characterized itdeclaratior of war/ Iran is unlikely to accept any changes in the border, especially along the Shatt al Arab, The Abadanajor supplier of fuel for domestic*nd the ports of Khorranshar and Abadan, which accounted forercent of Iran's intpqrt tonnage last year, arc located on the Shatt.
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