NATIONAL INTELLIGENCE DAILY

Created: 11/1/1980

OCR scan of the original document, errors are possible

SPLCIAL ANALYSIS

I RAN-1RAO: Prospectsettlement

Aftvr i'uc wcoka of war, th* outlineutually acceptable baniacillcncnt lice yet to emerge. Vilh the war proving more difficult than expected, Baghdad already eppcaro to be redefining victory in we nodeet tcr-za to dcoonatrctc flexibility cida aettlenent that could etilZ plausibly be temci an Iraqi euc-ceaa. At thio point, however, there io no eigr. of.IraAi give on tite baoio objective of control over the Shatt si Arab. From Bajjhdad'o vcrvpectioa, thia will determine victory or defeat.

For Ayatollahialogue with Iraq isas long as Iraqi President Saddam Hussein and

Baath Party rule in Baghdad. During hisears in Iraq, Khomeinieep-seated animosity for the Baathists, whom he sees both as Sunni Arab oppressors of the country's majority Shias and as secular modernists with the same weaknesses as the Shah.

Iranian intransigence also is directly linked to the domestic political struggle for control of the revolution. The clerics have seized on theas they have used the USradicalize the revolution further and direct it against their opponents. Under the circumstances, President Bani-Sadr and others more inclined to lookompromise will be reluctant to assume the "dove" role.

The long-term prospectsettlement thus arc likely to hinge on the continued ability of Khomeini and the clerics to capitalize on the strong national andsentiment aroused by the Iraqi invasion. this will be the deprivations that tho Iranian people will face if Iroq continues to disrupt most of the oil supplies to da-nestle refineriesizable percentage of Iran's normal port operations, tfe believe the Iranian capacity to endure hardship is considerable, however, and thus far there is little indication that Khomeini ls being blamed for the war and its effects.

Saddam's Weakening Position

Iraq's failure to wrapuick military victory seriously threatens Saddam's hopes for regional leadership.

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lie has not won solid Arab backing and has insteadsplit among the Arab countries arrayed againstthe Camp David accords.

Arabs in both camps see "Saddam's war" as hurtingcause. Many of Iraq's conservativenot want an Iraqi victory as much as simply an endfighting.

The war, meanwhile, has stimulated greater USin the Gulf and greater willingness ofS security role, developments that prewarsought to combat.

The domestic implicationsrolonged war are just as grim. The economy will suffer, and Sunni-Shia tension will mount. Plotting against Saddam is likely and,inimum, would bringore repressive period. F^

Saddam has two tactical approaches by which he can try to bring Iran around to renegotiating the Iran-Iraq border, especially the Shatt al Arab. He could soften his terms for settlement, or he could intensify the war in an effort to ensure maximum economic cost to Iran. oftening appear? already under way. Intensification of the military effort is not now evident, but it is possible for Iraq to pursue both options simultaneously.

Minimum Demands

The war was intended to correct, at Iran'sfundamental strategiclack ofand defensible maritime access to the Gulf. Iraqlikely to negotiate seriously until it takes controland Abadcn and, thereby, of the Shatt althisiplomatic peace offensivo stressingto trade Iraq's withdrawal for acknowledgment ofof the Shatt is likely.

We cannot be certain if "control" in Iraq's eyescontinued occupationorder strip alongthat includes Khorramshahr and Abadan. Virtuallyremaining territory seized by Iraq probably couldas bargaining chips.

Saddam might consider withdrawal from the area along the Shatt if the international situation were to turn against him, and if Iran were to agree to return the border in the Shatt to the low watermark on the Iranian side. He also could ask for UN supervisionuffer zone.

ompromise would not solve Iraq's strategic problem because it would not significantly enlarge Iraq's land access to the Gulf and the Shatt would remain highly vulnerable to Iranian interdiction.

The Search for Iranian Flexibility

At this point, Iran probably would reject even the minimum Iraqi terms. Tehran has refused to discuss the Shatt dispute andull Iraqi withdrawal from KhU2estan before there can be any talkease-fire or possible mediation.

The Iraqi invasion nevertheless hasobering" effect on Tehran. The clerics have accepted tho return to duty of previously purged Army and Air Force officers and generally appear toetter appreciation of the dangers of Iran's international isolation.

On the other hand, the war has not ended thebetween the clerics and the more moderate secularists. In fact, Bani-Sadr probably further increased his political vulnerability by recently raising the possibility of Iranian territorial concessions. The creationupreme Defense Council, although nominally headed by Bani-Sadr, was almost certainly an effort to circumscribe both his and therole in war policy.

Further military setbacks in Khuzestan, however, could cause problems for the clerics. Bani-Sadr already has charged that their purges of the military and the insertion of clerical committees in all units of the armed forces have weakened Iran's ability to resist.

The outlook is for continued Iranian intransigencerotracted "people's war." The dire economic consequences of this policy could oventually induce Tehran to reconsider. For the t'se being, however, Khomeini and the clerics appear dctcrmi.i. . able to continue the war in order to destroy Saddam a. consolidate the revolution.

1 November IMQ

Original document.

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