1. Airgram From the Embassy in Iran to the Department of State1


[Omitted here is a table of contents.]


From an inauspicious beginning two decades ago, the Shahanshah of Iran has gradually gathered all the reins of power in his country into his own hands. Every traditional rival for power has fallen by the wayside and, in the ensuing era of political stability and burgeoning oil income, Iran has entered on a dynamic surge of economic and social growth. The Shah’s vision is that his country’s internal strength will gain for Iran recognition as the leading power in this part of the world and one that will command respect even among the great powers.

Since the 1971 celebrations of the 2500th anniversary of the establishment of the Persian Monarchy, the Shah has pushed energetically for worldwide recognition of Iran as a power of consequence and one able to play an important international role. This was particularly notable in 1972 when President Nixon and Willy Brandt visited Tehran; when Empress Farah visited China and the Shah himself visited Moscow; and when a host of leaders from lesser countries paid highly publicized official visits to Tehran. Putting muscle into Iran’s emerging new role, the Shah has launched his country on a major military buildup that when completed within a few years will give Iran a position of overwhelming military superiority in the strategic Persian Gulf and the area as a whole, the Soviet Union excepted.

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The Shah in the coming years will remain heavily dependent on the United States for military advice and matériel. In the long run relations between Iran and the United States are soundly based and mutual inter-dependence is unlikely to diminish. Iran’s dramatic rise is unlikely to be without some accompanying problems, at home perhaps from a growing middle class anxious to share the Shah’s power and abroad perhaps from peoples, especially among certain of the Arabs, uneasy about Iran’s growing power position. But with good sense problems should be manageable and the Shah will remain our best hope to help maintain peace and stability in an area of vital strategic concern to the United States. End Summary

I. Domestic Political Assessment

What follows is not a prediction. It represents our best guess, admittedly speculative, as to what is likely to happen in the Iranian political milieu over the short term and, with less certainty, in the more distant future.

A. Short Term

1. Continued Stability

a. Role of the Shah

Barring unforeseen circumstances, the Shah will retain for the foreseeable future his predominant position; standing astride the Iranian political scene like a colossus, with all the reins of power in his hands and admitting of no rival. At the end of the Mossadeq era in 1953, HIM saw that he must take personal direction of his country’s fortunes to ensure stable national development and the continuation of the Pahlavi Dynasty. His total success has enhanced his prestige and underlined his multifaceted position as stern ruler, national guide and mentor, remote but omniscient father-figure and, to some, reactionary oppressor and destroyer of individual liberties. The imperial influence, real or imagined, now extends to virtually all levels of Iranian society.

b. Development

Regardless of how one views him, there is no denying that HIM has been and will continue to be the prime mover in the extraordinary saga of Iranian national resurgence through his deft use of material and manpower resources and his unexcelled manipulation of the Iranian political system. Even many of his critics admit that he is indispensable. Iran’s phenomenal rate of growth, the highest of any developing country, has been the linchpin of the Shah’s success for it is precisely the vast and constantly increasing level of resources at his disposal which has enabled the monarch to co-opt the disaffected, to offer monetary rewards to bright ambitious young men, to provide the military with new weapons—in short, to respond to the economic needs of most [Page 3]politically important segments of Iranian society and keep them reasonably satisfied while the political course of the nation remains under his personal control. With rising oil prices and augmented petroleum production levels, not to mention utilization of Iran’s other resources, it goes without saying that Iran’s rapid development will continue and the Shah will point to it as proof of the correctness of his policies.

c. Lack of a Viable Opposition

A measure of the Shah’s success is the absence of any group which could conceivably pose a threat to his regime. The political parties, Majlis, judiciary and other organs of government and the press are closely controlled; the growing middle class is kept reasonably satisfied through economic rewards; the power of the conservative landlords was shattered by the White Revolution; the traditional clergy-bazaari alliance could cause trouble but lacks the clout to threaten the regime; the military appears to be loyal; the tribes could cause only extremely localized problems; and the students and terrorists lack a broad base of support, are not well organized, and live in fear of the ruthless and efficient security organization, SAVAK. So long as the Shah is alive and retains both possession of his faculties and the loyalty of the military and security organs, there is little chance that any group or individual could threaten his reign or even substantially weaken his power.

2. Further Development of the Empress’ Image

With a view toward a stable succession, the Shah, since 1966, has been building up the image of the Empress as a concerned and able ruler capable of assuming the Regency. The most recent manifestation of this carefully orchestrated program was Her Majesty’s visit to China, which, though essentially non-substantive, cloaked her with a certain aura of statesmanship. The Shahbanou can be expected to make similar journeys in the future and to increase her involvement with world-wide humanitarian causes such as the 2Red Cross in order to enhance her international image. At the same time, she will maintain her well-publicized interest in charitable endeavors at home and will probably speak out more frequently on political and economic matters of substance in hopes of building on her already widespread popularity.

B. Long Term: Pre-Succession

1. Pressures on Stability

As noted above, the chances of a credible threat to national stability arising from any quarter while the Shah is alive and in good health are remote indeed. However, an unforeseen calamity, such as a serious economic reversal, could increase pressures on his regime and [Page 4]limit his room for maneuver. Moreover, continued economic growth accompanied by broader education and more intimate contacts with the West are producing more strident demands by a broad spectrum of Iranian society for participation in the nation’s political system. Over the long term, pressures for change will gradually build up and it will probably be difficult for the Shah to reduce them without making significant alterations in the conduct of political activity in Iran. To the extent that the regime is subjected to long-term pressure, the impetus is most likely to come from one or more of the following areas:

a. Military

Even over the long term, there seems little reason to expect Iran’s pampered military to threaten the rule of the present Shah. Though the armed forces do not occupy a prestigious position in the Iranian mind, they receive the latest in weaponry and bask in the warmth of the imperial favor. (The head of the Air Force is related to the Royal Family by marriage, while all indications are that the monarch’s nephew will one day command the Navy.) Of course, this does not eliminate a possible change of heart among the military brought about by an event such as an Iranian defeat by the forces of a supposedly weaker neighbor. It is also well to remember that the armed forces are the only organized body in Iran with sufficient cohesion, discipline and power to replace the present regime with one of its own choosing. Despite its potential and occasional signs of disloyalty such as the arrest of several army officers for collaborating with the Russians, there are no indications that the military as a whole is anything other than loyal to the person of the Shah.

b. Corruption

A major source of voiced criticism of the regime is the extensive corruption which seems to permeate the whole of Iranian society from the Royal Family down to the lowest bureaucrat. The bakhsheesh system is traditional in Iran and the average Iranian, who is every bit as corrupt as whoever he may choose to criticize, is completely cynical about it. But many Western-educated Iranians object to corruption on moral grounds and regard its practice as degrading to the nation. Iran’s growing numbers of technocrats are especially opposed to corruption on the grounds that it is inherently inefficient and a waster of resources. To some extent, these classes seem to transfer their resentment of corruption to the regime which permits it and, while they are not numerous, their numbers are growing and they are the builders upon whom much of Iran’s future development depends. Thus, their support is important to the regime over the long term and, though they have no political mechanism for expressing dissatisfaction, they could do so by leaving Iran and depriving the nation of their talents.

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Past GOI anti-corruption drives have proven futile, but the Iranian government must one day come to grips with this problem.

c. Students and Terrorists

Perhaps the group most thoroughly opposed to the Shah and his regime are students, inside and outside Iran, and the terrorists for whom they provide a fertile field for recruitment. Their opposition stems from ideological commitment from both left and right, fashionable student defiance of authority and, in growing numbers, an apparent sense of moral outrage at the political inequalities which exist in Iran and the draconian treatment meted out to fellow oppositionists. The regime’s repressive policies, intended as a control measure, appear to create as many oppositionists as it removes. Overall, however, their numbers are few and their amateurish organizations are often penetrated by SAVAK.3 More importantly, they lack the broad base of support among Iranians which would be necessary if they are ever to become anything more than an irritant at home and an embarrassment abroad. The effectiveness of their dissent is much reduced by the tendency of the majority of graduates to sublimate their dissatisfaction and accept the monetary rewards which Iranian society has to offer.

The students’ one real success to date has been to influence international opinion in their favor, but so long as the Shah is prepared to ignore such opinion, and he is quite capable of doing so, it seems unlikely that the students or the terrorists will succeed in forcing political change on their country.

d. Conservative Resurgence

Every successful Iranian political upheaval of the Twentieth Century has counted among its adherents a conservative alliance of the clergy and the bazaar. As recently as the Mossadeq period, mullahs and professional rabble rousers were used to recruit paid mobs of bazaari types who first marched and later rampaged against the government. This group, particularly the clergy, remains disaffected and religion maintains a still considerable hold over the hearts and minds of less educated Iranians. Perhaps for this reason, the Shah has refrained from a direct confrontation with the clergy but has attempted to whittle away their power slowly through such devices as the Religious Endowment Organization and the so-far abortive Religious Corps. Anti-regime mullahs are jailed or exiled, demonstrations in religious centers such as Qom are broken up and no conceivable mob could withstand the fire[Page 6]power of the military if it chose to defend the Shah. Therefore, it appears that the days when a clergy/bazaari alliance could directly precipitate significant political change are over. They could support or oppose a particular claimant for power, but would be most useful in the period following a change at the top when their influence, especially that of the clergy, would be instrumental in urging public acceptance of a new ruler or rulers.

e. Tribal Dissent

The tribes, too, appear to be finished as a national political force in Iran. The khans and il-khans retain a potential for localized disturbances and, if they could work together and seize the right moment, the Baluchis or the Kurds could easily disturb the stability of entire provinces. However, for political control of Iran only Tehran matters and, in the face of the armed forces no tribe or combination of tribes could put effective pressure on the capital. The tribes might make their influence felt in the confused period following a coup but even then they would be likely to back different contenders and so fragment whatever power they might have.

2. Evolution of the Iranian Governmental Structure

As all government in Iran stems from the Shah, so must any consideration of possible changes in governmental structure be based on his attitudes.

From a playboy prince, this remarkable man metamorphosed into a determined ruler during the years between his accession to the throne in World War II and the fall of Mossadeq in 1953. We believe that two events contributed most to his reformation: The first was the overthrow and exile of his tyrannical and awesome father Reza Shah, as a result of foreign intervention. This has left the monarch with an appreciation of Iran’s position vis-à-vis the great powers and reinforced the natural Persian distrust of foreign nations to a point which sometimes seems to border on paranoia. The second event was the career of Mohammad Mossadeq which culminated in the chaotic period of August 1953 when the Shah was forced to flee the country only to return two weeks later when Mossadeq was ousted.

This experience evidently convinced the Shah that the Iranian people were not ready for democracy and that his firm hand and stern rule were needed to direct the nation into the modern world. He may have succeeded too well for, while he has virtually autocratic control, he has brought the country to a point of economic development where the basic needs of many of its citizens are satisfied and some of the better educated and more affluent are beginning to feel the need for a voice in the running of their own affairs. The Shah has not yet shown himself prepared to divest himself of any significant degree of political control and such is his power that the pressures on the monarchy may [Page 7]not become acute until after his disappearance from the scene. We believe that HIM is at least intellectually committed to democracy for Iran and is aware of the difficulties involved in making free government work, but his unbroken string of successes seems to have given him a sense of infallibility which approaches megalomania and such a man does not easily relinquish power. Moreover, even if he does decide to give a greater voice to the people he is faced with a dilemma: how to release power at a rate at which the people can accept it—not so fast as to generate the chaos of Mossadeq’s day which could destroy much of what the monarch has spent his life creating, and not so slow as to excite expectations and resentment, laying the seeds of future problems which could threaten the succession. The Shah has at least created or maintained some of the forms of democracy though they presently exist only as hollow shells. There are signs that he is beginning to delegate a fraction of his authority to more trusted subordinates but no indication that any of this is filtering down to the people. In any case, even if His Majesty does move toward democratization, we would expect him to err on the side of caution.

The accommodation of the growing demand for meaningful political participation by the people will probably be the most thorny, personally most difficult, and most important domestic problem facing the Shah during the remainder of his reign. His solution will influence the future of this very strategic nation for years to come.

C. Long Term: Post Succession

In Iran, as has traditionally been the case in dictatorships, the problem of succession looms large. If the Shah has not made great strides before his death toward resolution of the problems of Iranian political development, it is a virtual certainty that pressures for change will surface, possibly accompanied by violence, at the moment of succession.

His Majesty has made arrangements for a smooth succession but after he is no longer in control of events we believe that his efforts toward political reform, if any, will be of compelling significance to his successor, be it the Crown Prince or the Empress.

1. Crown Prince Takes Up the Sceptre

There is every reason to assume that the Shah will stay healthy and remain in power until Crown Prince Reza Cyrus Ali assumes his majority. From that moment on the problem of succession will become more simplified and there are those who say that the Shah may even step aside to give his son experience while retaining the final word on matters of importance. This would be the best of all possible worlds as a smooth succession would minimize uncertainty and the possibilities for internal disruption. Much would depend on the personality of the [Page 8]Prince himself, presently a twelve-year-old boy about whom, unfortunately, very little is known. Therefore, any predictions as to the likely success or failure of the Crown Prince as Shah must await a future assessment when more information is available.

2. Farah Becomes Regent

In the unlikely event that the Shah should die before the Crown Prince could assume the mantle, it is provided by the Constitution and by imperial decree that Empress Farah shall become Regent. But just saying it doesn’t make it so.

Especially in the early stages of her Regency, Farah will meet with opposition at the court almost certainly headed by HIM’s twin sister Princess Ashraf, a veteran palace intriguer who has been an enemy to all three of the Shah’s wives (we will report further on possible court infighting at a later date). Ashraf has a circle of supporters at Court but most of them are not the sort who would be brokers in a power struggle. Moreover, she is unpopular at home and abroad and in the end we think she would lose.

Farah, on the other hand, is genuinely popular among the people and is the beneficiary of the carefully orchestrated program of image making noted above. She would enjoy the support of her son the Crown Prince and one of the imperial brothers, Prince Mahmud Reza, would probably favor her over Ashraf, but we have no evidence that she has established a circle of supporters at Court or that she has the intestinal fortitude necessary to ward off threats to her position. Additionally, despite her popularity, the fact of her sex would hamper her with most Iranians and so she would probably seek a supporter and/or protector. One such could be the Air Force Commander, General Khatami, who is ambitious, clever and reportedly corrupt. He could well prefer to side with the Empress thinking to find her more malleable than Ashraf and would be likely to try to rule Iran through Farah. In the beginning at least, we would expect Farah to rely heavily on her supporters, perhaps to the point of giving up real power to one or more of them.

Traditionally, both the press and parliament assume more active roles in times of imperial weakness or uncertainty. In such circumstances, they have also shown themselves vulnerable to foreign influence. They could be expected to become so again until the question of power at the top is settled, after which they would resume their role of quiescence in direct proportion to the degree of control exercised by the Palace.

II. Military Dimension

With an estimated 23 percent of the national budget, or about 12 percent of GNP, assigned to defense and a significant portion of the [Page 9]sovereign’s time devoted to military affairs, the future development of Iran’s defense establishment will clearly play a major role in the country’s political evolution and its relations with its neighbors and the US. Four broad questions should be addressed in assessing that role: (1) the impact of the military buildup on Iran’s foreign relations; (2) public attitudes toward the military; (3) the military’s appetite for political power; and (4) the effect of a large military establishment on national development. In a country where dissembling is an accepted trait and control of even semi-public expression, especially as regards national security, is highly effective, our answers to these questions must necessarily be speculative. Nevertheless, we have attempted to draw the apparent implications for US policy.

The US is deeply involved in the growth of Iran’s military program. We have had a significant and successful team of military advisors in Iran since World War II and the present group of about 140 MAAG advisors will within a year be supplemented by some 900 temporary military technicians. Over 11,000 Iranian military personnel have been trained in the US. Until this fiscal year, Iran had received $840 million in grant assistance and about another $1 billion in credit for hardware and services. Commitments during FY 1973 to buy in the US may reach $3 billion. Although we now treat Iran as completely sovereign in military matters and no longer question for political reasons the acquisition of specific items or the country’s ability to pay for its programs, our position in Iran is clearly very closely associated with the effectiveness, the utilization and the consequences of this buildup.

Military Power and Foreign Relations

Pride and fear, emotions deriving from historical experience and present rivalries, combine to shape Iran’s outlook on the world and its military posture. Determined that the modern Persian Empire shall command respect from even the super powers, the Shah is acquiring the best equipped, non-nuclear military force that his considerable resources will buy. In a sense, the latest supersonic jet fighters and most advanced military technology function as the mosques and monuments of past Persian dynasties. They are the marvels that are intended to dazzle Iran’s neighbors with the power and prestige of the Pahlavi line.

But the new armaments are not intended purely for show, for the Shah has an ever present fear of Iran’s being encircled by hostile or potentially disruptive neighbors. The USSR, Iran’s traditional antagonist, is of course in another class militarily, but the Shah has directed that in the event of a Soviet military intervention his forces would fight a delaying action (“scorched earth”) until help could come from more powerful friends. Meanwhile, in a policy of limited military cooperation, [Page 10]the Shah has purchased from the USSR unsophisticated vehicles, artillery and construction equipment for the Ground Forces. It seems clear the GOI does not want to place itself in a position of dependence on the USSR for supply of spare parts for complex equipment vital to national defense. Also, the Iranians are acquiring equipment which will require only a minimum of Soviet advisors to be sent here or Iranians to be sent for training in the USSR. As a consequence of the Imperial Iranian Ground Forces’ (IIGF) limited experience with Soviet gear, maintenance is becoming a serious problem.

Iran’s chief strategic concern is Soviet military supply for the radical and hostile regime in Iraq which maintains irredentist claims against Iran’s Arab-populated and oil-rich Khuzestan Province. Skirmishes have flared along the remote border where local commanders appear prone to exercise their troops after winter confinement. Yet neither side has been willing to escalate to fighting of major proportions.

Despite Iran’s overwhelming military superiority over Iraq, Iran has thus far not sought trouble with Iraq and has generally reacted with restraint towards Iraqi annoyances. Iran’s forces are untested in battle and their ranks of capable leaders and skilled operators and technicians are very thin. While Iran might best Iraq in a short engagement, a long drawn-out conflict could prove severely damaging, particularly if the Soviet Union or, possibly, India became actively engaged in assisting the Baathists. Apparently owing to this uncertainty and potential limitation of his freedom of action and doubts as to what aid he might expect from the US in an emergency, the Shah feels the higher wisdom is to acquire a modern, unquestioned superiority as quickly as possible.

The tiny and anachronistic Gulf sheikhdoms and Saudi Arabia pose no threat to Iran, but are seen in Tehran as fertile centers for the growth of radical Arab nationalism of the Iraqi or South Yemeni brand. Should the conservative rulers be replaced by hostile adventurers, Iran fears its strategic access through the Gulf would be threatened. Accordingly, the GOI is already involved to some extent in aiding the harassed North Yemeni and Oman governments, including furnishing some military assistance. We would expect this pattern of assistance against radical subversion or invasion to continue. Seeing itself as the only regional nation with the power to preserve stability, Iran may be ready to render aid to those governments with common interests in maintaining the Gulf status quo. Should the situation in the area, as seen from Tehran, seriously deteriorate, and when the Imperial Iranian Armed Forces are further into their buildup program, an Iranian military intervention would become a possibility we should have to watch for.

Similarly, in the East, we believe the Shah might intervene militarily to protect Iran’s interests should, as he fears is a possibility, Pakistan break up and leave the future of Baluchistan in an uncertain [Page 11]status. With that consideration in mind, as well as his apprehensions as to Afghanistan’s ability to continue to resist Soviet influence, the Shah is bolstering Iran’s eastern defenses. A sea, air and land base at Chah Bahar on the Gulf of Oman will be the key installation. From there, air and sea patrols will be made into the Indian Ocean, which the Shah has described as Iran’s “security perimeter.”

Owing to our active and close participation as advisor and supplier of Iran’s new power, the US will be inevitably associated with the direction of any future Iranian foreign initiatives. It is possible that we might wish quietly to endorse a particular GOI military “police action” or program of assistance. It is also possible, but more unlikely, that an Iranian action could seriously damage other US interests in the area and conceivable that we would seek to use our advice/supply leverage to influence the Shah’s decisions. It would, however, be a foolish and sterile policy to restrict our role at this time in an attempt to forestall possibly undesirable Iranian actions or limit a possible future arms race in the area. The Shah has shown he is willing to seek substitutes in place of our assistance and there are others, notably the British and French, who would not be likely to share our qualms.

Rather, we believe that we should seek affirmatively to increase the utility of our services to the GOI so as to maintain our influence over its policy. We should be prompt and positive in handling requests and provide the best quality advice available. It will also be necessary energetically to counsel the GOI to undertake the necessary measures to improve training, management skills and systems integration, if Iran’s massive building program is to succeed. Failure could lead to GOI frustrations which could be attributed to the USG and possibly be seriously damaging for the US position in this country.

Public Attitudes

Only among the small scattering of educated and liberal young professionals have we heard criticism of the vast amounts being budgeted for defense. These criticisms are muted, we suspect, because the private economy is doing so well, and because not many of the elite are eager to prejudice their positions by seeming to oppose the Shah. Further, as in most of the world, the Iranian public is not prone to dispute the need for a strong military. All are aware of their sad history in the nineteenth century and through World War II when Iran was pushed around by stronger powers. No one wants to risk danger to the country’s oil resources facilities. Finally, in the absence of any public analysis of the external threat or the effectiveness of the systems devised to meet it, there is no opinion-forming leadership for a critical attack on the military.

This state of affairs could change, of course. Should—a remote possibility—the economy drastically slow down or—more possible—infla[Page 12]tion become an issue of crisis proportions, the military burden might come to be regarded by many as intolerably heavy. Or, should the military become involved in overly harsh treatment of dissident elements or scandals seriously offensive to the public, the respectability of the Services could suffer. There are no grounds for predicting any of these developments, however, and it seems probable that the military will continue to provide a valuable, accepted support for the Shah. Consequently, there are no present grounds for concern about a close US identification with the Iranian military, but we should continue to monitor our position carefully.

The Military in Politics

Although the Pahlavi line owes its beginnings and its salvation in 1953 to military intervention, there is no public or private evidence that the Iranian armed forces now aspire to a political role. The Shah has seen to that. Following purges of communists and others whose loyalty was suspect, the Services have been heavily larded with SAVAK agents and military personnel are subject to close scrutiny on security grounds. Occasional trials of officers accused of espionage for the USSR maintain the desired tension. As a consequence, at least in part, perhaps the greatest failing of the military leadership now is the unwillingness of subordinates to make even simple decisions. Loyalty and obedience take precedence over proficiency, energy and initiative.

For these reasons, few officers complain to Americans about Service conditions. But we know they are poorly paid in comparison with contemporaries in the booming private sector. It is very difficult to obtain a discharge from the regular Services. And there is considerable inter-service rivalry and some resentment at the way officers who fail to make the grade are summarily dismissed. While it is possible that some Greek- or Moroccan-type colonels might wish to move against the Government, we believe that type of action is exceedingly unlikely. Motivation for a military conspiracy would seem to be lacking as long as (1) the Iranian economy sustains its momentum and its benefits are distributed with a measure of justice that feeds hope, and (2) there is no disaster, especially a military defeat, for the Shah’s foreign policy.

In the event of a transition in the regime, following the natural death or removal of the Shah by other means, the military is likely to be the dominant force in controlling political developments. No other institution combines the structure, discipline and assets necessary for political direction. The probability is that the Armed Forces would act as one unit, although it is conceivable that in a period of dire stress individual units might pursue divergent goals. Assuming general discipline, chances are that a transition could be peacefully accomplished. If forced to choose the key military figure in a transition, we would pick General Mohammed Khatami, as the husband of the Shah’s sister [Page 13]well-connected in the establishment, and as head of the Air Force, leader of the most effective of the three Services. Few politicians have his stature and following. He is extremely pro-American as is, we feel, the majority opinion in the three Services. Under new leadership, with the military exerting substantial influence, we would not anticipate any major change in Iranian policy, especially as it affects US interests. On the basis of the present relationship, we would expect that our military supply and advisory role would be continued unchanged. Our long and close collaboration with the military elite should pay dividends during an uncertain period of political transition.

Military Role in Development

The military’s contribution to national development is as yet not fully realized. In a country with 57 percent of the population rural dwelling with few of the amenities of modern life and only 35 percent of the population literate, military service could have an important role as a modernizing agency. Each year between 60,000 and 80,000 men and women are conscripted for two years military duty. Although all are taught to read and write, few receive much technical instruction. More could be done in the military to create the reservoir of skills needed for industrial development.

Because of its financial resources and, compared to other government agencies, its useful reserve of technical and managerial competence, the military has taken a significant part in the direction of key industries. Although most are defense-oriented (aviation and ammunition) others are in the civilian sector (cement and machine tools). This function allows the Shah to exercise greater direct control over industrial development and enables him to give impetus to his desire for a local capability for manufacturing defense-related items.

The crucial effect of the military program on the economy is the drain of funds and skilled manpower away from civilian development projects. With military expenditures totaling about $1.3 billion in the current budget and actual outlay close to $1.8 billion, the ability to continue both military and development programs is hinged on the continued growth in oil income. Military loan payments abroad are expected to rise from $220 million this year to at least $400 million in FY 1976. We have the impression that little study has been given to this problem by the GOI. Although the rise in oil revenues has made previous doubters seem unrealistic pessimists and the GOI perhaps unduly optimistic, it seems probable that the rising curve of military debt repayment will ipso facto reflect on Iran’s capacity to pursue social and development programs. In any event, we are no longer, as we once were, in a position to help manage the Iranian economy or influence the GOI to favor priorities of our choosing. The Iranians alone will make [Page 14]their decisions on the buildup, and if we do not sell items to them, someone else will.

Implications for the US

The US role in the Iranian military buildup offers significant benefits for our balance of payments and the maintenance of a close political relationship with the GOI. We have concluded that it would not be to our advantage to seek to influence GOI buildup decisions on the basis of possible effects on future Iranian foreign policy or economic development decisions. Our military relationship also appears to hold more advantages than dangers for the US in terms of public attitudes and the likelihood of an Iranian military role in a transition government.

Notwithstanding our solid present position, however, the future is not apt to be problem-free. The massive investment in US military equipment and services with deliveries scheduled over a relatively short time span will clearly strain the absorptive capabilities of the three Services. The Shah is obviously counting heavily on the success of his program; serious delays or foul-ups could lead to frustration in the GOI which would adversely affect our standing here. It is incumbent on us to do everything possible to prevent difficulties in the buildup. To this end we recommend that:

(1) Through military and civilian channels we should counsel the GOI on the necessity for (a) adequate training to keep pace with expanded force structures and hardware acquisitions; (b) improved management capabilities at all levels; and (c) accelerated development of force integration and regional planning.

(2) For our part, we should continue to provide carefully picked advisors who will have the requisite qualities to establish successful relationships with their Iranian counterparts.

(3) We should respond as rapidly as possible to Iranian requests, providing the most advanced non-nuclear equipment sought by the GOI.

III. Foreign Affairs

A. Principles of Iran’s Foreign Policy

Iran’s foreign policy has continued closely aligned to its national progress and the Shah continues to stress that it is in harmony with the “White Revolution.” Under the Shah’s leadership Iran has emerged as a power in this area. The country is moving ahead to strengthen its position through increasing its military capability, maintaining close ties with the US, augmenting its trade relations and encouraging foreign investments and technological exchanges. The Shah is seeking to fashion an image of Iran adhering to an “independent” foreign policy built [Page 15]upon friendly bilateral relations with all nations as contrasted to a polarized image. In so doing he is making good use of the diplomatic tools of economic and cultural agreements. That the Iranian sovereign has been successful in his efforts to put his country on the political map is evidenced by his recent visit to London in June and to Moscow in October, the Empress’ visit to the Peoples Republic of China and President Nixon’s visit to Iran last May.4

Recently Prime Minister Hoveyda declared Iran is working to improve the lives of its people, while offering its neighbors—both near and far—cooperation and friendship. The Shah terms the cornerstone of Iran’s foreign policy “peace and international understanding.”

The stated bases for the Shah’s foreign policy in the foreseeable future are likely to continue to be: the strengthening of bilateral relations with all countries—especially his neighbors—couched in terms of peaceful co-existence; support of the United Nations and world peace; and stress on national integrity and inviolability of the principle of non-intervention in the affairs of others. With respect to the latter, he will continue strongly to stress above all else national independence for his country. These tenets, coupled with the Shah’s strong advocation of social justice, world peace through disarmament, and reduction of economic disparity among nations, present a seeming dichotomy when weighed against his heavy program to provide Iran’s military forces with the latest of modern weaponry (short of the ultimate in sophisticated equipment). He is quick enough to recognize this, saying that until world peace is achieved it is necessary to have a strong military which is capable of defending the country’s integrity should the necessity arise.

During 1972 the Shah’s most outstanding accomplishments in his policy of non-polarized bilateralism have been his improvement of Iran’s relations with the Peoples Republic of China and the Soviet Union while at the same time strengthening Iran’s friendly relations with the United States, which he cherishes and overwhelmingly depends upon for his military supplies and technical economic assistance (as distinct from AID programs).

[Omitted here is Section B.]

IV. Prognosis

A. American-Iranian Relations

Relations between the two nations are about as soundly based as can be imagined, with each side deriving valuable benefits from the [Page 16]current happy alignment. Moreover, it is difficult to imagine any reshuffling of allegiances or power relationships in the area that would lessen, at least for any length of time, the dependence of each side on the other. We believe this would probably remain the case even in the unlikely event that the present dynasty passed from the scene. Nevertheless, some observers believe they can detect in current trends the genesis of possible future misunderstandings between Iran and the United States, stemming less from any basic divergence of interests between the two countries than from the presence in the peculiarly strategic Persian Gulf area of several mutually interacting political dynamics in a state of potential disequilibrium.

In looking at the future, the question arises if Iran and the United States are likely to grow less dependent on each other. Briefly listed, the benefits we derive from the relationship are: important intelligence facilities; the only secure air corridor from Europe to Southeast Asia; good markets, a friendly investment climate for US business, and direct contributions to our balance of payments; a current and future reliable source of oil to our allies, and perhaps to us; a staunch political ally in regional and world councils; and an increasingly strong and stable territorial entity standing in the way of Soviet ambitions in the strategic Persian Gulf and Indian Ocean areas. For Iran, the United States is the leading source of military equipment and technological assistance, a friend whose political and psychological support can be relied upon and, of overwhelming and fundamental importance, the sole power in the world strong enough to thwart Soviet designs on Iranian territorial integrity and independence.

Looking ahead, it is possible to imagine some of the advantages in the relationship eventually becoming marginally less important. For example, advancing technology might render the intelligence facilities less important to us, while the Iranians could eventually become somewhat less dependent militarily on us as they manufacture more military equipment themselves and bring their own military personnel to a higher level of proficiency. However, other factors in the mutuality of dependence formula will remain equally compelling in the future, or even grow stronger; and it is difficult to imagine a situation either in which Iran could dispense with its ultimate reliance on the United States for its safety or in which we could countenance an Iran taken into the Soviet orbit.

Moreover, these geopolitical imperatives would, in our view, be likely to reassert themselves even if, as we consider most unlikely, this dynasty should disappear. For we believe that whatever group eventually succeeded to power, perhaps after a period of greater or lesser instability, would be of an Iranian nationalist, rather than Communist, orientation, at least in its foreign relations. Any regime dedicated to [Page 17]promoting essentially Iranian objectives would have to look askance at the Soviet Union just as the present one does. Thus, the felt Iranian need for the United States to counterbalance the Soviet Union would remain and the essential basis for our continuing cooperation would remain.

While the foregoing might seem to paint such an essentially rosy picture that no problems between the United States and Iran could be expected to arise in the future, we do see the possibility, as suggested earlier, that the natural thrust of Iran’s power and ambitions in the Persian Gulf, the Arabian peninsula and vis-à-vis Iran’s Arab neighbors in general could eventually lead to divergences between our two countries and create problems for us in the Arab world, and possibly elsewhere. Since this cloud on the horizon might appear to be no bigger than the proverbial man’s hand, and the growing strength of Iran can properly be regarded at this time as a force for stability in the Persian Gulf and peripheral areas of the Arabian peninsula, it may be argued by some that it is mere carping to make such a suggestion. However, events can often move faster than surface indications would suggest when power relationships in an area of such strategic importance as the Persian Gulf are in such great—and growing—imbalance as they are today.

Perhaps one way of viewing the Gulf area is to regard it as an arena of at least five interacting dynamics, some of which are better known than others. Well known and often noted, for example, is the weakness, and potential instability, of the Arab states, particularly the mini-states, touching the Gulf, following the withdrawal of British power. Possibly less well known but coming into growing recognition every day is the increasing dependence of several countries of the world, including India, on oil from Gulf countries.

The other three dynamics, and this could be of key significance, are centered on Iran and probably still are not so well appreciated by much of the world. These are the growing power position of Iran, vis-à-vis the other Gulf states, especially on the military side, as Iran embarks on a massive military buildup; the vaulting ambition and powerful sense of mission of the Shah for himself and for Iran; and the often ill-concealed sense of impatience and superiority that the Shah and Iranians generally feel towards the Arabs. The other side of this coin is that Arabs tend to dislike Iranians and to be fearful of Iranian power. Not to labor the point, Iran’s already dominant power position in the Gulf is fated to grow to overwhelming proportions in the coming years including, particularly, its military superiority. Thus we have a situation in which the Shah—enormously ambitious, determined and shrewd, but also the victim of certain phobias growing out of his own family background and out of the history of the Persian monarchy it[Page 18]self—perceives that Iran must militarily dominate the Persian Gulf in order to assure the continued flow of Iran’s oil, on the income from which are based all the Shah’s hopes of bringing Iran into the era of the “Greater Civilization.”

Being not a little self-centered and egotistical, the Shah does not perhaps perceive with equal clarity that certain countries—Iraq and India, for example—will be uneasy with a situation in which the Shah has in his hands the military capability both to interdict the movement of Iraqi oil exports and Indian imports from the Gulf. For these two countries are almost as dependent as Iran on the uninterrupted flow of oil in the Persian Gulf and relations between Iran on the one hand and India and Iraq, particularly Iraq, on the other, are already under some strain. In these circumstances, it would not be difficult to envisage Iranian-Indian rivalry increasing as Iranian military power waxes, with the Shah’s phobia about finding himself “surrounded” being pressed on us more insistently than before. A possibility that comes to mind is that India will work to strengthen its presence in the Gulf, through increased technical assistance to the Arab states therein and perhaps through stepped up military training aid to Iraq, in an effort to counterbalance, with the weak Arab states, the power of Iran. Thus, it is possible to envisage a situation in which the great powers would have avoided rivalry in the Gulf only to see the regional powers engage in this activity, with possible complications for our diplomacy the result.

A more likely scenario in which Iranian-American divergencies could occur involves the Arab states across the Gulf. The exact outlines of a development that might create problems for us are hard to foresee, especially in view of the constructive role Iran is presently playing in assisting militarily and otherwise both in the Sultanate of Oman and North Yemen. However, subversive movements, encouraged among others by Baathist Iraq, are already present in Oman and could take root and spread in the United Arab Emirates, or even in Saudi Arabia; the Shah is quick (often too quick, in our view) to perceive developments affecting the Gulf as constituting a threat to Iran; and his military capability for intervening will be increasingly overwhelming. Thus it is possible to imagine circumstances in which Iran would feel compelled to intervene militarily to protect its own interests, as it preceived them, but which would be seen by the Arab states, including especially Iraq, as constituting Iranian aggression. In such a situation, Iranian and Arab nationalisms could find themselves in open conflict, with the United States in an extremely awkward posture in view of our expected growing dependence on Arab oil in this decade.

In conjuring up the foregoing ghost, we are not saying that it is likely to happen. Nor do we intend to imply that situations affecting the Gulf might not conceivably arise in the coming years in which we [Page 19]would actually welcome the application of Iranian military power. In sum, what we are saying is that the Gulf is an area of growing power imbalances, that Iran will be increasingly able to be the prime mover and shaker of events therein and that the leader of Iran is determined to so dominate events in the Gulf that they move in directions which will enhance Iranian safety, as viewed by the Shah. Happily for us, the Shah will pay greater heed to our advice than to that of any other power, but we must not forget that he is determined to be his own man and will be pushing Iran’s own interests as he sees them.

Having said this, the Shah and Iran remain by all odds our best hope among the countries of the area to play a responsible role in the Gulf of helping to assure peace and stability in an area of already great and growing strategic interest to the US. Given our increasing dependence on Gulf oil for our energy requirements, the stakes in our relations with Iran are high. While we cannot overlook the possibility that problems of Iranian-Arab relations could complicate our relations with the Arabs—and at a time of increasing American dependence on Arab oil—we have confidence that the Shah’s basic caution and good sense can be relied upon.

  1. Source: National Archives, RG 59, Central Files 1970–73, POL 1 IRAN. Secret. Drafted by Killgore, Henry L. Taylor and Henry Precht of the Political Section of the Embassy, and Escudero; cleared by Killgore; and approved by Heck. Repeated to Amman, Ankara, Athens, Beirut, Bonn, Cairo, Colombo, Dacca, Hong Kong, Islamabad, Jerusalem, Jidda, Kabul, Kuwait, London, Manama, Moscow, New Delhi, Nicosia, Paris, Sanaa, Taipei, Tel Aviv, and Tripoli.
  2. International. [Footnote in the original.]
  3. In telegrams 140 and 242 from Tehran, January 8 and 13, the Embassy reported that seven accused terrorists, including some implicated in the 1972 murder of Brigadier General Said Taheri, had been executed. (National Archives, RG 59, Central Files 1970–73, POL 23–8 IRAN) See Foreign Relations, 1969–1976, volume E–4, Documents on Iran and Iraq, 1969–1972, Document 218.
  4. President Nixon made an official visit to Tehran May 30–31, 1972. See ibid., Documents 200 202.