THE PERSIAN GULF STATES

Created: 5/18/1967

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NATIONAL INTELLIGENCE ESTIMATE

The Persian Guif States

SubminW by

DIRECTOR OF CENTRAL INTEUKjfNCE

Concurred in by tht UNITED STATES INTEUIGENCE BOARD A> indicated overleaf7

That following initllfgtM* ofoontiof-on* porucipattd in lb* p, wowiofiort of mil tilf'moii'i

Tha Cfiwrol irrtaUiamo Agamy ondIntelligence otgnntioiion. of theof Stole ond Detente, and the NSA.

Concurringi

oylor. Deputy Director of Centrol Intelligence Mi. Gc C. Denney. 'ci the DirePOr of Intelligence ond Research, Deportment of Slot*

U.JotephCorroll. Director, Detente Intelligence Agency

It. Gen. Motihotlofer, <or the DWeetor, NcnSonol Security Agency

Abstaining?

Or. Chofle* M. fUkhordl, (of the AWHont Gcnorolmk Energy Com-mliMn ond Mr. WIHom O. Oegor. for tho Alwrant Director. FedVol Bureau of Investigation, the svbteci being etftilee of 'heir jurisdiction.

WARMING

nlormoiion ofl.alrg-TrrefntiedWithin ih* msoning of tht esp-ocao.Tilio ia,ission or fevetotien ol which in any manner lo on vno-thoflaedr

CENTAL INTELLIGENCE AGENCY

DISSEMINATION NOTICE

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o. Director ot intelligence ond itaiearcn, to* tha Oeparfme>it of Slaie

b. Director. Defemt Intelligent* Agency, for th* Office of the Secretory of

Detente ord ihe orgoftiioiion el ihe Joint Chieft of Stoff CChief of Staff for Intelligence. Deportment of the Army, for the

Department of th* Army

Chief of Novel Operationsor the Deportment of the

Navy

Chief of Staff, Intelligence. USAf. lor the Deportment of ih* Air

fore*

ofC. 'or the Atomic EnergyAulMont Director, FN. for the Fede*ol Bureau al Invettlgotlon

h. Owed a- of NSA. for Ihe Nat.onol Security Agency

I. Direclor of Central Reference, CIA. for ony oihor Departrrteeri of

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DISTB'BU'ION, White Hon**

Notionol Security Council Deportment ol Slot* Depanment ofAtomic Energy Commission FeoVrnl Bcreau of Inveihaa'an

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IRAQ

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THE PERSIAN GULF STATES

the problem

Toprobable developments aod trends over theeveral vean u, the Persian Culf.

NOTE

Trough our basic concern in this estimate is with ,he prospects for KuwaJ and the BnHsh.protec.ed states-Bahrain. Qatar, the Trucial

cap.of the larger states bordering the Culf-Iran. Iraq, and Saudi Arabla-to control or influence developments, as well as the role ol countries outside therticuUrly the UAR and th* USSR In add.tfon, we will eiamine the UkeluSoodrituh withdrawalMs consequences for the Gulf.

CONCLUSIONS

A Massive oil revenues and the accompanying Influ, of people and ideas are bringing change and ferment to the Gulf. At the same time, the UK, as part of iu retrenchment from east-of-Suc* torrtmit-menls, is reassessing its role there. It seems likely that it will be at least three to five years before the UK abandons its special military and pohiicaJ position in the Cull. Buttrouble In the Coif or economic problems at home might hasten British departure.

B. The UAR is the most mfiuenrtaJ of the regional forces workingthe Bntish posiUon and other Western interests. Nasser enjoys some support in the area among reformist and dissident ele-menti. .nd Cairo Radioide audience. N'asser will continue to^iUdbcal forces of discontent, though this will no. be as easy as

, r^lTan-

In Soulh Arabia. Nasser will receive little support from other radical Arab states. The USSR, while supporting Nasser and genrrallymovements directed against Western interests, will be wary of direct or open Involvement in Golf maneuvering,

will be strongly opposed by both King Faisal andand less openly by the Kuwaitis. They all fear that UARin the Gulf wouldhreat not only to their intereststo tbe stability of their own governments.

long as the British remain, wc would expect generalin the Gulf. Kuwait is likely to preserve itsolicy of neutrality in Arab affairs and ofto potentially predatory Arab states. Qatar and someTnicial States that enjoy large oil revenues may successfullyexample after the British leave; tbe others will probablySaudi Arabia for protection.

Bahrain, the situation is more volatile, and instabilityviolence are likely. Terrorism is likely to mark itfinal stagesritish withdrawal, and some form ofwill probably emerge in Bahrain after the British depart.

oil-producing states in the Gulf will continue to pressoil companiesreater share of the profits, andin country company relations are probable. Althoughwill reduce the share of profits to the companies, theymaterially affect the flow oi oil to tbe West.

ritish withdrawal from the Persian Gulf would provide the USSR with some opportunities to expand its influence there.the USSR's course would be complicated,areful balancing of regional forces. On the whole, we do not think it likely that the Soviets will make dramatic advances.

II. The US will be urged to take over some of the Britishin the Gulf. If it did so, it would become the principal target of Arab revolutionary propaganda and subversion and would become involvedariety of dynastic rivalries and troublesome political

disputes.

DISCUSSKON I. INTRODUCTION

Persian Culf region hat entereden era o( fundamentalii increasingly becoming an arena of clashing interests. Tbe Gulf hatpercent of proved world oil reserves, and the oilxploitedUK and US companies (teehe region thui provides anfocus for US and UK interests in the Near East. But the oilbringing about fundamental social changes, and the region is becomingof revolutionary ideas and influences from the outside that are hostilepolitical, social, and economic status quo This not onlyhreat

existence of local dvnaitic regimes, but also raises cjueatsora regardingof US and UK tntereeti there.

Britishey factor in the Persian Cull, though theirand capabilities are changing Trwu- main interest ii access to oil onterms and the preservation of the profitable financial relationship* ofKates with tht sterling area. British flrmi produce about one-third of tbe

from the Gulf area, and earn0 million annually. SixtyUK imports of oi) come from tbe Culf. half of this from Kuwait endstates. Britain also sells0 million worth of Britishservices, in the area yearly. Although lhe ennsrwhebnang bulk of thisu with the independent countries of Saudi Arabia, Kuwait, Iran,it Is growing rapidly in the smaller Bnttih protected elates. TnPer iian Gulf alalre have large investment! and deposits Inre important props (or lhe stability of sterling

3 To safeguard these interests, the British contmue lo provide pobucalBad military protection lo the imailer Culf states. Though withdrawal from Aden8 will limit the UK's ability to provide timelyhe UK plans toen based in the Culf by early IMS. These troop* are to be divided about equally between Sharjeh on tha Truest! Coast and Bahrain, with an air tquaoron al each base. The British will continue iomaller base at Mailrah Island oil the south coast of Muscat and to providefor various local levies, such at Ihe Trucial Oman Scouts.

II. EXTERNAL FORCES

hanging attitudes of the British themselves arcewfeeling among all powers involved in the area that the days ofmilitary and political pmilsun in the Gulf are numbered. Thiscase, the political future of the small, weak.wealthy, ilatnGulf batatter of interest to the nations which have or seek n Iha

Tbe 1MB it lha regional foicc working most actively BgHinit Ihe BrllUh position and dher Westernin the Culf. Nasser regards Faisal as his principal Arab antagonist Nasser is abo attempting tn riiend UAR influence in the smaller Culf states and totrong voice tn the disposition of the aira'i oil wealth. He has some asters tvoilulig fortable class of nutsl-minded Arabs has been created by (he economic and social changes in the area. This element Is strongest in Kuwait and Bahrain, and hai only scattered members elms here. EgypiUnHi enee in the education of Intel youth, chirpy in Kuwait, has over the years generated receptivity lo the doctrines nl Arab racbcaK-m, and Radio Cairo is much irrtersed to tlvoughort the region Over the long term, this propaganda aflects attitudeswns men in favor of political andinge, bntfar il has had relatively little impact on the tredillonal popttlaltoni of Qatar, ihe Tnicial Stales, and Muscat/Oman. The situation in the Cull will be rendered more troublesomeadical, pro-Nasser regime lakes power In Aden on the hrelt of the British departure. This wuuld lend lo undermine conftderice in British protection, enhance Nasser's prestige, and encourage local Arab radicals

airo sponsori vanoui politkel union programs in tha Culf. althoughof distance and attest make support of terrortsls and insurgents more difficult than il hat pruvesl lo be in Smith Arabia. The UAR is willing lo support virtually any radicalanlicolonial movement in the area with moesry and propaganda. In addition, it provklrs training in subversive techniques In Bahrainit, arms to retteli insnd da ret ion lo tbe Beirut based Arab Nationalisti' Movementhasuwait and Bahrain. The t'AR hai also tent its awn agents to the Culf and is working to gain control over the small lalsor movement* in the area. It would eleatly be in Egyptian interest toreponderant influent* with the labor force of the oil industry, but Egyptian efforts to penetrate it have been hindered by countcrrneaeorrs taken by local governments

T. Other Arab radical forces are aUo at work in ihc Culf. There are some supporters of Baathlst Syria in the more advanced Culf states, but they generally oppose Naswrist leadership. An anti-Naurr faction of the ANM has recently emerged In Kuwait,hile remaining nominally in Ihe radical Arab temp, iselatively moderate polity It is not making any active efforts to puih hi claim against Kuwait and scrim mure concerned with densest* prob-Irmt Iban with an activeulf attain Iran, will, however, oppose any attempt by ihe UAR lo extend its influence over Kuwait. Iraq has lent some clandestine aid to the Oman! rebels and provided some training for dissidents from Dltofsr and Bahrain, but these ellnrtt have been neither consilient not particularly successful We doubt llial the presentegime is likelyrease- Its low key involvement in the Culf.

o Soviet policy in the Persian Culf, at in ihc Middleenerally, aims at ihe elimination of special Western positions and the rsclusson of Westernfrom (he area. The USSR's representation in the Culf Is limited tn Basra

and Kuwait, though Moscow (ram time to time hints to Saudi Arabiaould like to establisht present, lhe Soviet! probably bupe to work toward their ibniivo mainly by encouraging and rapponing the anU-tmpmahst policies of theArab nates and by developingstate rclatiun* wilh if* eonservattte and moderate governments in lhe area, seeking lo wean Ihem away from ibe West. They have made: heavy investments in tbe UAR and have begun to sell military equipment to and establish economic relation! with Iran. Thb simultaneous courting of radicals and conservatives involves potential inconsistencies for Moscow, and we llunk that Moscow wit) be wary nfmailer* further by taVing any very open or direct position in maneuver* logs in the smaller Culf states There ant tome Communists in Kuwait, but their organirattun does not appear to be large, the fjjfiraini National Liberation Front is Communist influenced. Communal strength in Ihe remaining Cub* state* appears to be relanvely insignificant.

n the long run. the USSH wishes to end the West's present commanding position in Persian Cult oil. To date, Moscow'* activities In Middle East oil luve been principally with rH-ighbnrtng Iran, which has agreed to pipe substantial amounts of natural gas to the Soviet Union. The pioposed Soviet-Iranian de-vrloprnent of Caspian Se* od fields, which are reputedly eateraave, would give Moscow aciev* to oil supplies fairly close lo niitiug dHtrinution netwurks in lhe USSR The USSR may seek to catend it* activities to other otl-ptoduting areas of Inn. Oil in lhe Culf proper -ould br difficult for tSe USSR to handle in quantity, though it could absorb Ihe output of one ol the lesser producing states should It see political advantages deriving thtrctrom.

audi Arabia feel* Itself threatened by radical Arabarticularly Satan Faisal sees the US as his country'srwark. but he considers the US to be insufficiently cortceriml about thr danger of radical rnoverneni* in the area and find* the British assessment of the Nasserat threat lo br. closer to his ownonsiderable community of interest has developedhim and the UK. and he welcome* Britain's plan to tncrcase its military strength In the Culf. He regards the British presencetabilLung force thai help* to prevent the spread of radicalere.

Faisal believes, however, that the British will oVpart before many years. Hence heattempting to improve hi* relations with the Culf states. In Order to enhance hi* own influence ond to reduce <Vut chance* thai Egyptian end radical Influence there couldource of infection against Saudi Arabia itself after lhe British leave. For their pait, the British haveeutral posture in the Buraimi boundary dispute, where they formerly took the put of the Saudis' rival claimanli, Abu Dhabi and Muscat/Omen. Elsewhere In the Culf. Faisal has been forthcoming in tbe setllernrivl of controversies with Kuwait and Bahrain, and generous in providing aid to some of the Trucial Slates.

Iran, loo, greatly fears the threat of Arab nahonaiUn* in the Culfppichtntive thai ii cannot rely on the US to protect it* interest* there. The 3huh tins nmglil loi* fr-nnJam ofuspeovinu, Iian'* irlalinn*

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wtth (he USSR. He hat long harbored an i'saggcrolcd opinion of Nasser's andBaath's capabilities to cause irethl* hi rhe Culf. partsrtiLirly among the Arabs of ltan's mTrich Khuxlttan Province.esult, he hi buying arms fromiii r. ii increasing his militaryhe Culf, and is planning lo develop the economy nf Iran's Culfhe Shah's asieumenl nf the threat of Nasserlim has also drawn him closer tu Faisal. The two mleri havexposingemen, and are likely to make common cause In matters related to the Culf. at least as snug a* tbey believe theyora-mon threat They have agreed in demarcate otrshore mineral rights ki the Culf, and the Shah has ceased In press his longstanding claim to Bahrain. Thai Shah has also been cultivating Ihe nileti uf the imaUer Cull states.

NOrvrDUAl states

ince achieving independence, Kuwitt has made ill own decuioos on mailers oflxnigh often asking Hntlsh advice. In the remaininghe established niling fnmlllci wcknrne the British presence and tely on it lor defense against enernies, internal and external Operalingmall number of British civilian and military personnel in key positions, the Bntlshorntnani role bi defense and foreign affairs. They help tn shape domestic policies, and they have (retpienttyeciiivr voice in Ihe selection of local rulcn. The lysttmiled extremely well in maintaining liability,a ill-adapted to change because kt is lied lo ihe institution of traditional and aiitosratic govrrnenent by the several rulers, moat of whom are men of litnilcd horiaont. The ideal of nationalism and suciahsrn. whkh are already widespread in Kuwait and Bahrain, ore just beginning lo appear in Ibe lower Culf, and we believe that old fashioned tribal and dynaatlc politics will prevail there for some time to earn*.

A. Kvwoit

he worlds fifth largest producer ol oilood example of what massive oil revenues can do Administered by the relatively enlightened Sabah dynasty, this oil income, which0radle to-grave welfare program lotpcnsulalion of. Half of these are native Kuwaitis, most of the resteign Arabs, mainly Lebanese and Palestinians, who provide ihe technical and admmislrallr* lervrsces that ihe Hate and its ol) industry require- There aieonsiderable number nf Inn.in laborer* Few -liens are granted eitiienihip, and foreigners are lubject to slemdeporttbey engage ia political activity deemed harmful to thenterests Native Kuwaitis are eligible to porttclpale In un elected national assembly, hut ihey chafe at political restrictions and ihe privileged status of the ruling family, whkh retains ultimate authority and occupies meat of the senior cabinet positrons

he present ruler. Scbah Salun. who tends lo permit less political freedom than hb pcedecessiir, arbitrarilyarge number of foreign Arabs in

o aliaorm oi protest Irron opposition dementi by tampering wilh ibr7ontinuation of heavy-handed Sabah family domiuaoce of echoes and government will nrnhahly aikr up antagonism among both local and eapeiriete politicalowever, then efficient gendarmerieritiih equipped military force, of. They would haveimited capability against eattrnal attack but are siiffitrtent to maintain interna) order. On balance, we do not expect any serious threat to spring from internal political elements, although there will almost certainly beins of discontent from time to time.

uwait's principal problem, however, is to maintain its freedom ofand ultimately it*th*of the dcsigni of other Arabs on its wealth. To ensure that Hi Arab hrothmhe status qoo there. Kuwait hasassive program of loans and grants, totaling0 millionhrough the Kuwaiti treasury and Its Kund for Arab Economic Development. Iraq and Egypt have been the principal beneficiaries. Kuwait fears Ihe spread of revolutionary Arab nationalism In the Gulf, and Hi sympathies are generally with the conservative states. Yet it does not want to draw (he Ire of Ihe irvulutionariei hy openly associating itself wilh Saudi Arabia and Iran against thrm, and it hasumber of Arah radical political organizations lo function quietly in Kuwait. It has Iried to rriediata between Saudi Arabia and ihe UAR over Yemen. It has abo made efforts to cultivate tbe rulers oi the smaller Gulf states, in order to build some resistance against tlie incuriam of radical tendencies

B. Bub rain

Bahrain, with its deep water port, international airport, and militaryhe chief British military base in the Persian Culf. Bahrain baaeconomically from three decades of modest but steady income from oil production and refining and from its entrepot bade with other Culf states. Its oilnlyillion yearly, but incomeew field shared with Saudi Arabia will double liasthe neat year or two. The coriservattve and hugely incompetent Khalifah ruling family, alarmed by civil dnoeilee*till Muses lo permit any rmlincal activity. Il has also been reluctant lo introduce social reforms or even to accept mild British-sponsoredchanges.

nique among Culf states inubstantial number of educated unemployed who chafe at political and social irpreeiion.eople, half of thrm town-dwellers, are the most pulitlcally troubled fn the area. This discontent is manifritcd periodically in major riots and dernororiafioeu Although ibe Arab NattoriartttV Movement and lhe National Liberation Front luiKtkoo separalely and draw their supporter* from dtffrrrnt sections of the population, organired elements from bothparalysed theii-mreriial activity foronthhough thr British will corrtrnoc T6 tlipporT TWH.!mjr ftmriy. rney lire li'iItteTyA- iMc lb force more lhan

token advances inthe itiite machinery ot In political liberalisation Thus, further initability anil occasional vioEcnce can be expected.

f and when violence doe* occur, tin; t'K military base and the island* ml opcratinns can probably be protected, and the fan that Bahrain ht aimaH island will make the acquiiltton of weapon* by dissident, more difficult and (he ctantrol of rioting lew to rhan In the case, for example, of Aden But the rupprewion of major or prolonged violence would not be eery and mightairly H'onHy affair. If in, pntiiun Britaui and criticism frinn abroad would be likely to erode the British vvrtlhrigrieai to remaiD.

C. Qatar and the Trwciel $'a*es

Qatar's small popiilalionwo- ihirdi of whom have immigrated rincr oil eiportt beganivet rather comfortably oo an oil income ofillion annually. Qatar, large Piling family if well entrenched tn power, aad the immigrant population opetalei an orderly civil adminlitralion and effective lecunrv apparatui. Although the Urge propcetton of non Qatari oil workers couldonne of unrest, and Ihe unemployed princeling* might Indulge In palace Intrigues, the political climate will probably remain relatively liable for several years

Of the leven Tructalbu Dhabi and Dubai are preeminent, between them tbey contain two-lhlrdt of the total population ofnd control much of the area. Abu Dhabi currently earnsilhnn annually from oil. and Dubai,rovperuu* commercial center, ha> premising oilhe other five states,otal population ofre extreme Iv small and backward and have Utile prospect for economic develoeaxtent- There are some stirring* of political activity along tbe Truesal Coast,ownsftle education is available and where expatriate Arab* are employed in lome numbers. For tome time to conae. however, politics will probably be largely confined to dynastic ii.Eghi.ng and to dup.itel over boundaries snd oil rights.

The British have attempted toense of common purpose byeconomic betterment through the Trutial States Development Fund. They have discussed vorioui way* to federate the Tnicial theikhdomi. but are reluctant lo force ihe Iiiuc, and we ire little prospect that federation of any sort wiltorking reality. Saudi Arabia also is interested in thii region; tt is on eipevially good ttrmi with Dubai and has offered economic osaiilance lo it and to the letieruwait is alto interested in ihe Trueial sheikhdom* and would like to see the itatu* quohis end, it might be willing to supply economic aid to ihe poorern ihe event of British withdrawal, only Abu Dhabi and Dubai have any prospects for remaining completely independent became of prospective large oil wealth. Qatar would probably teek some lurt of alliance with Saudi Arabia, with which tt to Banrnilarty rtrw-rfftgiien tm - swoBer- Tmelal Suin pmhrtty

would alio look lo Saudi Arabia for prolriliufiilde enemies, though the* would irvbt mtcrf lienor in theit internal affair*.

D. Mutest ond Otnon'

hit mountainous, backward, and internally divided Mr, with aof overillion,rhe latest lo enter the ranks of important Persian Culf oily the endShell still begin npatingarrel) per day and paying the Sultanillion annually. Oil development will confront the Sultan,ntensely tuiptciooi of the modem world, wsth some of th* influences he hasor rsrVided liran lb* country. He ii unlikelylterem ol persona) rule or spend much of hii oil wealth on economic development or soon) welfare The impact of oil exploitation and of modernikely lo be very small foe some years However, traditional tribal, sectarian, and rrgional dissidents- probably will timtinue. Outside Arab forces, both revolutionary and Saudi, ihal are opposed lo ihe Sullan will con-limse their .iltrmplt lo rsploit ihM dissident*

successor IV. PROSPECTS

hr Suhan's Erst efforts vstll almost cvrtainry be duecfed to fourtcing and improving hti lecurity forces in order lowith opposition lo hisebellion in ihe general area of live oil field in Oman has sputtered along for more thanecade, bul It ii presently dormant. In DsSofororeai been ia tram for about three years, its partisans lieonsiderable portion nf the Sultan's forces and have once tried to kill the Sullan Both movements have received sporudl, support from ihe UAH, Saudi Arabia, and Iran, However, neither movesnrM presently has ambitions to control the entire country, and their activHirs can probably be contained by the Sultan's Brilbh-afllcrrrd security forces. If, after the BritMh leave South Arabia, the UARtrong position there, it would probably be able lo increase substantially its now limited aid lo the Dhofan dnssdents. In the unlikely event that either movi-tnent succeeded in throwing off theile. the rest of iho stale would ptoliubly remain in ihe hands ol ibe present niter or a'

ver the neat several years, ihe forces in London favoring British with, drawal from Ibe Persian CuH will almost cvrtairK grow. Stnee the etvrl nf World War II, the psTnctpa: rationale for the British political-mililary presence has been ihat it was needed lo insure- Rritiih interests, particularly access to oil on favorable terms Thb argument is beginning to give place to the view that oil producingthey radical or cneiservativethatongIn come ihey will need the markets and distribution facihttrs nf (he Wetlern oil companies. According lo thi* line of reasoning, these economic eon-sidetalinnn make it unnecessary 'or Britain to retain its special position In the

11abouldmved aliaiitt raclusiseh !- Ihe Inawh. ia t| 1jiidnesril ihebis sesiioiiKiitmive.

Cull. Inccnion concerning withdrawal will dependonsiderable degree on much broader consideration* of Britishritain's financial condition, Anglo-American relations,view of its east-ol-Suei role.

hese considerations would obviously also affect the timing of aIf the British were persuaded that their presence in Singapore and Malaysiaecessary bulwark for essential Western interests In Southeast Asia, this would increase the likelihood of theirhe Culf. On the otherevere and prolonged balance of payment! crisis, or extensive and sanguinary disturbances in Bahrain, could speed the day of their withdrawal. It is inipossihle at this point lo arrive al an accurate balance of theseOur best judgment is that the British will remain in the Culf for at leastears, but if the UK's difficulties greatly Increase, itsmight take place sooner.

The UK's abandonment of its special polillcal and military position wouldubstantial effect on the political .situation in the Culf. Britain*!of intent to withdraw would stimulate action among contenders for influence in the region. In particular, Saudi Arabia, Iran, and the UAR would be likely to expand their efforts to Improve their position with rulers and peoples of the Culf. For their pari, the Britiih would aim In mint cases lo hand over their power! directly to the rulers, though they would be likely tothe tiny Trucial States to ally themselves In son* fashion wilh Saudi Arabiarucial neighbor.

Kuwait's present course of manipulating pressures from iti Arabwould become more difficult after tbe British left. The demands of its neighbors would become greater and more urgent. In time, Iraq probably would renew its claim to Kuwait, but any such move would be resisted by the UAR and Syria, which would try to make their own respective influencesthere. Saudi Arabia and Iran would vigorously oppose Kuwait's falling into any revolutionary sphere of influence. If Kuwait still felt its independenceoidd probably also seek big power support; we believe that it would turn first to the US.

In Bahrain, where there are forces willing lo contest with the ruling family for control of the island, the withdrawal of British troops would almostbringrisis. Political agitation and terrorism, supported from abroad and directed at both the ruling family and the British, would be likely to mark at least the final stages of the British withdrawal. Sectarian rivalries might break out again in violence. The ruling family would probably seek to strengthen its security forces by hiring other Peninsula Arabs, Baluchls, anda few European advisors. It might also seek assistance from Saudi Arabia and Iran, but these states would have troubleosition on the island In the faceopulation hostile to conservative rule. Hence, the ruling family woutd be unlikely lo prevail for long after the British depart, and tome form of radical regime would probably emerge on the island. In this event,

Bahrain couldase for agitation in lhe lower Culf states and in Saudi Arabia'a eastern province.

In Qatar ami (be Trucial Slates, the British departure would have far leas impact evenadical regime emerged in Bahrain. The introduction of expatriate Arabs Into the oil mdiutry and into government ilepartmcnts willhe spread of new political ideas, bstt the niling families of the lower Culf arc quite strongly entri-nelied, and most of them would have sufficientto provide job*.ond the like fur iheir scanty populations. The larger and wealthier slates, such a* Abu Dhabi, mightime buy immunity from subversion by radical Arab state* by imitating Kuwaiti policies of political loans and neutrality in inter-Arab disputes.

Over the long term, however, the political structure of the lower Culf will almost certainly cVunge considerably. Such change would more likely be the result of events elsewhere In the Arab world rather than in the Culf states themselves. For example, the disappearance of the conservative monarchy in Saudi Arabia or the emergence of an aggressive radicnl regime in Iraq would greatly threaten Use stability In the Culf slates. And, in any case, some of the smaller states are likely lo be absorbed by their neighbor*.

The large economic *take which the US and lhe West have in the region will continue to makeocus of big power interest The Culfs share of the Western European market will probably decline modestly due to increasing compclition of oil from other area* and of alternative energy sources.VVcslem Europe will remain the Gulfs best curtomet. Although the US, unlike Western Europe, dors not rely upon Persian Culf oil [or iu domestic needs, US firms produce aboutercent of ibe oil lifted from the Culf and earn over MOO million ihere annually. The producing countries have been demanding andreater share of production profits, and recurrent crises in country-com pany relations are probable. Nevertheless, the Culf states are aware that Ihey cannot market their oil without using lhe Western oil companies, particularly the international majors and these companies will probably be able to continue to operate profitably in the Gull

ithdrawal, the process of sorting out the future of the Culf states would offer lhe USSR some opportunity lo eipand Its influence there. The wealthier and larger states, such a* Abu Dhabi and Muscat/Oman, and those states in close association with Saudi Arabia would probably see little advantage in significant ties with the USSR. However,ulf stan-became radical or if il* ruler wished lo avoid dependence on or absorptionegional power, it might sec advantages tn developing close relations with the USSR. The Soviets would prnhubly encouragetate to reduce its Western connections and might oner it military and/or economic aid. But the USSR'* course would be complicated,areful balancingn the whole, we do not think it likely lhat the Soviet* will make dramatic advances.

CM. In Ihe years ahead, Ihe UK will probably try to pertuade the US lo share actively ittIn ihe Cull, aod .'i Arabia and Iran wll] urge the US toreater role there.ull states have already approached tbe US; Kuwait for arm* and Bahrain and Muscat/Oman tor aid In other Beki* But the British position is the product of unique historical drrurMlances aad la not hkety to be felleduceessor. Even tf one tried to playole, it would be lea* acceptable lo local* lhan the UK ha* been, and wouldarget of attack by Arabt would probably alto be drawn into the conflict between tho ruling lumitten and their people* over the pace of poliiicj] and social reforms.

ANNEX

OIL PRODUCTION (laof Wrel* prt day)

Saudi Arab**

*"*

Iran

Kuwait

Saudi-Kuwait Ntotral Zona

BiAnun .

Oniai .

Aba lH-M

holding/ ol Royal Dutch/Shell, of which tha UK own.erceel.percent;IS percent;percent;percent.

Original document.

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