NATIONAL INTELLIGENCE DAILY

Created: 10/1/1980

OCR scan of the original document, errors are possible

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Intelligence Daily

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SITUATION REPORT

IRAO-IRAN

Ayatollah Khomeini's stattrr.ent yeaterday opposing any com-promioe uith Baghdad indicates that there may be no early end to

the eonfliat. |

Khomeini ruled out any negotiations unless Baghdadis tough statement reflects theoptimism in Tehran despite Iraq's gains. ]

j Most Iranians appar-

3TS rallying behind the Khomeini regime. Support fur exiJe leaders is said to have dropped, and even Iranian Kurds hnve avoided stepping up their anti-Khoneini activities while the war continues.

We cannot determine how accurately Tehran has assessed the magnitude of its military losses. Wehowevor, that the Iranians will rationalize that military dofoat is not political defeat. By refusing to negotiate away territory, the Khomeini regime is likely to exploit successfully the popular image of Iran standing alone against the challenge, now being posed to its revolution by "the Arabs and the US." So long as the government appears unwilling to capitulate, the Iranians are likely to believe that they haveoral victory despite Iraqi occupation of Khuzestan.

Military Situation

Jhas confirmed press i

Iraqi ground forces renewed their attacks on Abadan, Ahvaz, and Dozful yesterday, while both air forceslimitod airstrikes and supported ground force operations.

reports tnat tw Iranianrignters damaged the Iraqi

nuclear research center in Baghdad, but

secondary buildings were hit. I I

Neither country's military capability has been seriously damaged by the other's air attacks.

Economic: oevelopnents

The Iraqis have experienced more problems than they anticipated in seizing control of Khuzestan's major cities. Should they occupy the province, r. Iran's economy would be in dire straits. Iran could probably resume crude oil exports atarrels perIraq would control the pipelines feeding crude and products to the interior of Iran. It also would control the only rail and the primary road access to Iran's major Persian Gulf ports.

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Soviet. Appeal

Soviet President Brezhnev yesterday issued Moscow's strongest appeal yet to Iraq and Iran to settle their dispute through direct negotiations. (U)

Although Brezhnev's call ettlement was ostensibly ever.handed, it suggested that the USSB wouldease-fire with Iraqi forces in place in Khuzestan. He said that Iraq and Iran should quickly settle issues that can be negotiated now but postpone those issues that cannot be settlod until "tomorrow." (u)

Consistent with previous Soviet commentary, Brezhnev stressed that the Soviet Union has "friendly" relations with both Iran and Iraq and that the fighting can benefit only the US, which ho charged aspiros to reestablish its

influonco in Iran and gtiin control over the region's

oil resources. (U>

Hostage Situation

The seven-member Islamic Consultative Assemblyformed yesterday to investigate the hostage issue is to hear the opinions of parliament members and submit reoorts but will not decide the hostages' fate, which is to"be acted upon by the entire Assembly. The decision that there should bo no deviation from Khomeini's line on the hostage issue probably does not rule out adding conditions to the four required by Khomeini.

Hardliners on the hostage issue have become more vocal. The Assembly session yesterday ended with aover whether or not the new committee should contact US and foreign officials. Ayatollah Khoeini, awho works with the militants at tho US Embassy, and other hardliners are opposed to contacts with the US. Ayatollahardline Islamic Republic Party member, said Monday that no hostages will be freed in the near future. He also said none will be freed unless Khomeini's four demands are met by the US.

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