125. National Intelligence Estimate1

NIE 34–66

IRAN

The Problem

To estimate the main trends in Iranian foreign policy and domestic affairs over the next two to three years.

Conclusions

A.
Iran is adopting a more active and independent foreign policy as a result of the Shah’s increased confidence in Iran’s economic situation, his declining fear of the USSR, and his increasing anxiety about Nasser and other Arab nationalists. Iran’s new international stance will provide opportunities for the USSR to expand its presence in the country and will cause difficulties for the US. However, the Shah is well aware that his domestic position and Iran’s security depends heavily on US support. Thus he is unlikely to move deliberately to alter the alliance or reduce US activities in Iran. (Paras. 1–10, 13–15)
B.
Domestic considerations are unlikely to alter Iran’s foreign policy to any great extent over the next two to three years. The Shah will [Page 224] probably remain firmly in control, though the bulk of the educated middle class probably will remain estranged from the regime. (Paras. 16–19)
C.
Iran’s rate of economic growth may be adversely affected by the Shah’s ambitious military expansion program. Oil revenues, which are Iran’s main source of foreign exchange, are not rising as fast as in the past; the reform program is unlikely to have much effect on the pace of economic development. If, as is likely, the Shah gives priority to his military program, the economic growth rate would probably slow somewhat, accompanied by periods of inflation and recession. (Paras. 21–24)

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  1. Source: Central Intelligence Agency Files: Job 79–R01012A, ODDI Registry of NIE and SNIE Files. Secret; Controlled Dissem. According to a note on the cover sheet, the estimate was submitted by Raborn and concurred in by the U.S. Intelligence Board on March 24.