NATIONAL INTELLIGENCE DAILY (CABLE)

Created: 11/1/1980

OCR scan of the original document, errors are possible

SPECIAL ANALYSIS

IRAN-IRAQ: Prospects ettlement

After aue wcekc of war, the outlineutually acceptable bar.iel has yet to trxrge. With ike war proving *orc difficult than expected, Baghdad already avpearo to be redefining victory in more modcitt Umo to demomjtrate flexibility andrttlcment that could till plauaibly be termed an Iraqi euc-occc. At thin point, however, there io no cign of Iraqi give on the bacic objective of control over the Shatt al Arab. From Baghdad 'e perspective, this will determine victory or defeat.

For Ayatollahialogue with Iraq isas long as Iraqi President Saddam Hussein and the 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 niaiority 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 look for a

compromise 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 tho Iraqi invasion. this will be the deprivations that the Iranian people will face if Iraq continues to disrupt most of tho oil supplies to domestic refinoricsizable percentage of Iran's normal port operations. We believe the Iranian capacity to endure hardship is considerable, however, and thus far there is little indication that Khomeini is being blamed for the war and its effects.

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

lie haii not won solid Arab backing and has instead deepened the split among the Arab countries arrayed against Egypt and tho Camp David accords. | j

Arabs in both camps seear" as hurting the Palestinian cause. Many of Iraq's conservative supporters do not want an Iraqi victory as much as simply an end to the fighting.

war, meanwhile, has stimulated greater USin the Gulf and greater willingness of Gulf monarchies toS security role, developments that prewar Iraqi policy sought to combat.

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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

At this point, 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 ho could intensify the war in an effort to ensure maximum economic cost tooftening appoars already under way. Intensification of the military effort is not now evident, but it is pos-siblo for Iraq to pursue both options simultaneously.

The war was intended to correct, at Iran's expense, Iraq's fundamental strategiclack ofand defensible maritime access to the Gulf. Iraq is not likely to negotiate seriously until it takes control of Khorramshanr and Abadan and, thereby, of the Shatt al Arab. When thisiplomatic peace offensive stressing an offer to trade Iraq's withdrawal for acknowledgment of its control of the Shatt is likely.

We cannot be certain if "control" in Iraq's eyescontinued occupationorder strip along the Shatt that includes Khorramshahr and Abadan. Virtually all the remaining territory seized by Iraq probably could be used as bargaining chips.

Saddam might consider withdrawal from the area along the Shatt if the international situation were to turn

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against hira, and if Iran wore to agree to return the border

in the Shatt to the low watermark on the Iranian

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.

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

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

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." Tho dire economic consequences of this policy could eventually induce Tehran to reconsider. For tho time being, however, Khomeini and the clerics appear determined and able to continue the war in order to destroy Saddam and consolidate the revolution.

Original document.

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