96. National Intelligence Estimate1

NIE 30–1–71

[Omitted here are a cover sheet, table of contents, and a map.]

THE PERSIAN GULF AFTER THE BRITISH DEPARTURE

Note

This Estimate focuses on the prospects for stability in the Persian Gulf over the next few years. For more detail on Iran, see SNIE 34–70, “Iran’s International Position”, dated 3 September 1970, SECRET; for the world oil situation, see NIE 20/30–70, “The Security of Oil Supply to NATO and Japan”, dated 14 November 1970, SECRET; for Saudi Arabia, see NIE 36.6–70, “The Outlook for Saudi Arabia”, dated 7 April 1970, SECRET.2

Conclusions

A.
The British decision to terminate protective arrangements with the small states of the lower Gulf by the end of 1971 will open the area to accelerating political change. There is little prospect that British-sponsored efforts to organize a federation of these tiny sheikhdoms will come to fruition. The rulers are jealous of their prerogatives. Rivalries, particularly among the four larger principalities, and general lack of sophisticated leadership further complicate federation efforts. Bahrain, Qatar, Abu Dhabi, and Dubai have a reasonable prospect of maintaining their existence as independent states; the five smaller entities probably cannot survive over the longer run, though they do not face immediate challenge.
B.
As ruler of the most effective and powerful state of the region, the Shah of Iran is determined to assert his leadership of the Gulf after the British departure. If, as seems increasingly likely, negotiations [Page 307]with the sheikhs over the tiny islands of the Tunbs and Abu Musa which lie near the Strait of Hormuz fail to end in acceptable compromise, the Shah is likely to seize these islands once the British protectorate is ended. The Arab states of the area lack military capability to challenge this move, although some would protest vigorously.
C.
King Feisal of Saudi Arabia is also attempting—though less skillfully than the Shah—to extend his influence in the Gulf. His dispute with Abu Dhabi and Oman over the Buraimi Oasis has little prospect of amicable solution in the near future. While Feisal would be tempted to use force to occupy this area, he is cautious by nature and probably recognizes at least some of the logistical and political difficulties attendant on such an operation.
D.
If a radical regime should come to power in one of the sheikhdoms—and the chances of this are growing in Bahrain—both Saudi Arabia and Iran would probably seek to unseat it by indirect means. If these tactics did not succeed, they might attempt direct military intervention; both have the capability of launching successful attacks on any of the lower Gulf states. While the Shah and the King have common interest in this regard, their cooperation is not a foregone conclusion. The prospect of an Iranian lodgement on the Arab littoral might spur Feisal as a last resort to commit his own armed forces to pre-empt an Iranian move.
E.
The USSR is certainly interested in establishing greater influence in the Gulf. Once the British leave, the Soviets will seek diplomatic relations with the lower Gulf states and may offer military equipment to the rulers. Soviet naval presence in the Gulf will doubtless increase, but there are constraints which will inhibit any striking upsurge; for example, the risk of disturbing present friendly relations with Iran. Though the Soviets are generally interested in acquiring shore facilities in the Indian Ocean area for regular use by naval vessels, they will probably not attach high priority to securing them in the Gulf. The USSR already is permitted regular naval visits at the Iraqi port of Umm Qasr.
F.
The main US interest in the Gulf resides in assuring the unimpeded flow of oil from the region to consuming countries. The producing countries of the Gulf are displaying far greater regional cooperation than in the past, and are likely to advance new demands before the end of their five-year agreement with the oil companies in February 1976. We do not believe, however, that cooperation among the producing states would soon reach a point where they would concert to withhold oil for an extended period.
G.
Rivalry between Iran and Saudi Arabia in the Gulf could also prove troublesome for the US as it would be difficult to reconcile the many US interests involved. After the British depart, the states of the [Page 308]Gulf will almost certainly seek to involve the US more directly in their problems.

Discussion

[Omitted here are sections I–V, 14 pages of text.]

VI. Implications for the United States

40.
The main US interest in the Gulf is assurance of an uninterrupted flow of oil to Western Europe and Japan and the contribution to the US balance of payments from the profits of American oil companies and US exports. US companies produce over 50 percent of the oil in the Gulf. About half of Western Europe’s oil comes from the Gulf; Japan gets 90 percent of its oil from this region. Because presently most of the world’s spare oil producing capacity (about two million barrels per day) is located here, Gulf oil would be important in compensating for a deficit developing from interruption in supply from any major oil producer elsewhere. Furthermore, only in the Gulf is there the likelihood of developing large increments of additional new production over the next few years.
41.
In the past few years oil has been moving from a buyers to a sellers market. Rapidly rising demand in Western Europe and Japan has strained tanker availability; increasing consumption in the US has significantly reduced its spare oil producing capacity, and spare capacity in the Gulf has also declined. In this situation, the producing countries have become increasingly aware of their leverage and their ability to extract higher prices for oil. At the same time, competition which in the past stimulated eagerness to take advantage of one another’s difficulty is lessening as substantial increases in production for all producers are in prospect. These factors were at work in the sharp confrontation with the international oil companies in the wake of the December 1970 meeting of the Organization of Petroleum Exporting Countries (OPEC). While some disunity in approach was still evident during these negotiations, the producing countries showed a greater degree of unanimity than had been apparent in the past.
42.
In particular, the recent oil negotiations stimulated regional solidarity among the oil producing states of the Gulf. Common interest in higher revenues and an emerging conviction that they held the whip hand animated the Gulf producers to stand behind the Shah who dominated the confrontation with the international companies. While there was a certain amount of bluffing on both sides—neither side was really willing to see the flow of oil stopped—the Shah proved an effective bargainer. His performance in winning a five-year agreement for large and steady increases in posted prices has enhanced Iran’s stature as a leader in this area.
43.
This successful venture in regional cooperation is likely to have lasting effects. At least as long as the world’s excess capacity is not adequate [Page 309]to offset a shutdown by a major producer, the Gulf states are likely to view their interests as collectively pressing for higher per barrel revenues rather than return to the previous intense competition for greater oil revenues which led individual exporters to stress primarily increasing their own production. The Shah, however, would object strongly should Saudi Arabian production grow at a faster rate than production in Iran. But we believe that the Gulf countries will far more than in the past coordinate their bargaining approaches to the international companies.
44.
We believe that the Gulf states are likely to consider ways to extract additional benefits from the oil companies before the end of the five-year term of the February 1971 agreement. The example of Libya and Venezuela which are pressing for more favorable terms will have important impact on the Persian Gulf producers. Hence, if the supply of oil remains tight, and if prices of Western goods rise rapidly, within a year or two the Gulf states are likely to advance new demands. These may include matters not covered by the present agreement, such as greater control and decision-making authority over oil operations in the form of equity participation in oil producing companies or relinquishment of additional concession areas, but they may also involve demands for higher prices. We do not believe, however, that cooperation between the Gulf producing states would soon reach the point where they would concert to withhold oil for an extended period in order to achieve their demands. Both the Shah and King Feisal, whose example would probably determine the actions of the lesser Gulf states, have little uncommitted oil income and would find any interruption in revenue painful.
45.
In matters other than oil, conflicting politics of the larger states in the Gulf may prove troublesome for the US. If Feisal and the Shah, for example, were to fall into dispute over their respective roles in the Gulf, both would expect American support. While both Iran and Saudi Arabia almost certainly would do no more than verbal fencing in any event, a dispute between them would complicate the program of US military aid to Iran. In this situation, deliveries of advanced military equipment to the Shah would undoubtedly disturb the Saudi leadership. In view of the many US interests involved, it would not be easy to find a solution that would satisfy both sides.
46.
The US Navy’s Middle East Force (MIDEASTFOR), operating from Bahrain, consists of a converted seaplane tender flagship and two destroyer-type vessels. The ruler of Bahrain is amenable to the continued operation of this force from his island. While Iran in particular opposes foreign forces moving in as the British leave, there is throughout the Gulf a general acceptance of the continuation of a long-standing activity. Nonetheless, pressure against MIDEASTFOR is likely to grow after the British depart. Should the present regime [Page 310]in Bahrain fall, however, the impetus to oust these naval units will probably accelerate.
47.
In any event, the US is going to have more problems facing it in the Gulf in the future than before the British withdrawal. Not only will the pace of developments accelerate, but the states of the Gulf will almost certainly seek to involve the US more directly in their problems.
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 1276, Saunders Files, Persian Gulf. Secret. Sent to Kissinger under a June 18 covering memorandum entitled “The Persian Gulf: Back-Up.” A note on the cover sheet of this NIE indicates that it superseded NIE 30–1–67, “The Persian Gulf States,” May 18, 1967, printed in Foreign Relations, 1964–1968, volume XXI, Near East Region; Arabian Peninsula, Document 94. The Central Intelligence Agency and the intelligence organizations of the Departments of State and Defense and NSA participated in the preparation of this estimate. The Director of CIA submitted this estimate with the concurrence of all members of the USIB with the exception of the representatives of the AEC and FBI who abstained on the grounds that it was outside their jurisdiction.
  2. SNIE 34–70 is published in Foreign Relations, 1969–1976, volume E–4, Documents on Iran and Iraq, 1969–1972, Document 86; NIE 20/30–70 is scheduled for publication ibid., volume XXXVI, Energy Crisis, 1969–1974; NIE 36–6–70 is Document 140.