Foreign Relations of the United States, 1977–1980, Volume XI, Part 1, Iran: Hostage Crisis, November 1979–September 1980

50. Paper Prepared in the Central Intelligence Agency¹

Washington, undated

THE U.S. STAKE IN IRAN

I. Introduction

The purpose of this paper is to analyze the U.S. stake in Iran from a broader perspective than that of our present concern with the hostages. In effect, it attempts to leap across the morass of negotiating tactics and turbulent Tehran politics to the situation a year hence, however the hostage situation is resolved. Its approach is: first, to define critical U.S. national interests in Iran as they now appear; second, to identify the range of possible Irans of, say, 1981; and third, to analyze each of these in terms of U.S. interests.

II. Assumptions

A. Khomeini’s attempt to rule a semi-developed state of the late twentieth century by the standards of a tenth century theocracy will ultimately fail.

B. If there were ever any possibility of the U.S. doing business with the present regime, it has been destroyed in the past few weeks.

C. The Soviet Union’s primary national goals are to strengthen itself and to weaken the U.S. It will exploit any opportunity open to it in the pursuit of these goals, restrained only by its calculations of risk. It is not in the interest of the United States to become, or to be perceived as becoming, weaker than the USSR.

III. U.S. National Interests

1. U.S. national interests in Iran are many and complex, but events of the past two years have served to clarify in the starkest way which of these can be termed vital. We have four critical national interests; two of them vital. These four are listed below in priority order:

A. It is vital to prevent the turbulence in Iran, or the outward drive of a Shiite state, from disrupting the flow of oil from the Western shore of the Gulf.

B. It is vital to deny Iranian oil to the Soviet Union and to keep Iran out of the Soviet sphere of influence.

C. It is critical to avoid serious confrontation with the USSR.

D. It is critical to keep Iranian oil flowing to the West.

In subsequent paragraphs, each of these goals is viewed in geo-political terms.

A. The Flow from the Gulf

2. The “quarantine” of Iran is ranked first because the loss to the West of the oil of the Arabian Peninsula and Iraq would threaten its collapse. The Iranian debacle can impact on the Gulf States in at least three ways:

—Export of radicalism, either leftist or Muslim, leading to political instability. Production facilities would be subject to physical damage and export flows to political uncertainty.

—A reinforcement of the growing tendency among exporting states to see a reduction of production as the most desirable course in a period of short supply and unspendable national revenues.

—Military interruption of oil flow from the Gulf by a power controlling the Straits of Hormuz. Such a power might be a resurgent Iran, the USSR, or conceivably Iraq if Iran became even weaker.

3. So far, the industrial economies of the West and Far East have proved remarkably resilient; they successfully weathered the crisis of 1973–74 both in energy supply and money flows and are managing reasonably well with the uncertainties of Iranian supply; they have come to understand their vulnerability and taken some tentative steps to reduce it. The non-oil LDC’s have done less well and their ability to absorb an even greater shock is questionable.

4. Cessation or severe reduction of the oil flow from the Gulf, however, coupled inevitably with price rises on a scale hitherto unimaginable, would test and perhaps even break the resilience of the West. It would produce at the least severe depression and inflation. Turmoil in the LDC’s would contribute by interrupting the supply of other commodities. In such a situation, the stability and orientation of major U.S. allies, and of the U.S. itself, could no longer be assumed. The USSR and its allies, with a basically autarchic economy, would be shielded from these effects. In simplest terms, the present world power equation, in which the military strength of the USSR is roughly balanced by the economic and technological strength of the West, would be fundamentally and perhaps irretrievably changed to the detriment of the West.

B. Denial to the USSR

5. Even without Iran, the power balance will be exceptionally delicate in the early to mid-1980s. In this period Soviet military strength will grow substantially relative to that of the U.S., an imbalance that will only be redressed when military programs now underway or under consideration come to fruition in the later years of the decade. On the other side of the scale, the USSR will be subject in roughly the same time-frame to increasing economic difficulty, most notably in the energy field. Petroleum production has peaked and will apparently begin to decline sharply. The Soviet economy, lacking the West’s cushion of unnecessary consumption that can be conserved, can only maintain its present position by a combination of drastically reduced exports and purchases in the Western market. In fact, the Soviet leadership may be able to maintain its military power advantage only by accepting even greater economic and ideological disadvantages—sacrifice of technology imports for imports of grain and petroleum, political turmoil in Eastern Europe, a reduced standard of living at home, all adding to a demonstration that the Soviet model for a modern state is a failure.

6. Moreover, the Soviet leadership itself is in a state of interregnum. The introverted cluster of old men surrounding the fading Brezhnev are jockeying among themselves to succeed him, but appear united in resistance to the admittance of younger and more vigorous men to their circle. Their behavior as a group, with or without Brezhnev, is likely to become increasingly erratic and unpredictable until power passes to the next generation, although it could lapse into paralysis. We know little of the policy views of the younger men, although some analysts have suggested that they are impatient with the caution of their elders: the Soviet state has too long tolerated the pretensions of a declining West; it should take advantage of the power it has achieved and press more aggressively toward its national goals.

7. We are not sure how fully the Politburo yet understands its predicament. If the power balance is delicate without Iran, however, it will become even more so when the Soviet leaders recognize their situation and the possible role that Iran might play in it. To an old Soviet leadership that sees its achievements of decades past gravely threatened by a lack of petroleum, or to a younger one that sees its opportunities for the future equally threatened, the prospect of a chaotic Iran, its armed forces shattered and its allies alienated, may become tempting in the early 80s. Not only could Soviet energy shortages be alleviated, but the supply of foreign exchange could be assured. Moreover, in geo-political terms the Soviets would be in a position from Iran to dominate the Middle East and South Asia, and ultimately to deny Gulf oil to the West.

8. Either leadership would of course calculate the risks. They would be relatively small if a Marxist, preferably controlled Communist, regime could be brought to power in Tehran without overt Soviet intervention, but would appear much greater if military intervention were required. How much greater would in turn depend on Moscow’s assessment of the “correlation of forces.”

9. In that the Politburo members would see geography as on their side. Not only are their general purpose forces stronger than those of the U.S. (and any allies that might become involved), but their ability to project that power into Iran far exceeds that of the U.S. Against this they would weigh the danger that a venture in Iran could not be confined to Iran and its neighbors but might escalate to nuclear confrontation. The critical factor for them would be the U.S. leadership. They clearly see the present one as weak and indecisive, but they do not fully understand the U.S. political process. To them the U.S. is unpredictable and especially dangerous in adversity, when it may react like a wounded animal. Both these considerations will be strongly operative in the election year 1980. Moreover, they may calculate that the administration that takes office in 1981 will have a mandate to restore U.S. military strength, although any actions it could take would not substantially affect the power balance for several years.

10. This is not an estimate that the Soviets will seize the Iranian oil fields. It is rather that the combination of the Soviet need for oil, the power vacuum in Iran, the “strategic window” of the early 80s, the perceived weakness of U.S. leadership, and the geographic advantages of the USSR make such an action a thinkable course either for an erratic older Soviet leadership or an aggressive younger one. The Politburo might come to see Iran as the schwerpunkt² of the long Soviet struggle with the U.S. A successful Soviet operation in Iran, even if it did not lead to a cut-off of other Gulf oil, would affect the power balance almost as decisively as a long-term disruption of that supply.

C. Avoid Confrontation with the USSR

11. Controlling risks by avoiding confrontation is obviously a desirable goal for the U.S., but it ranks below those of protecting the other Gulf states and denying Iran to the Soviets. These are vital to the U.S. national interests in the long term. Indeed, they may only be achievable by risking confrontation. That said, the arguments that make military action appear less risky for the USSR in the early 80s window are equally applicable to risk-taking by the U.S. Short of a direct threat to our vital interests, the risk of military confrontation with the USSR should be limited, particularly so on ground so disadvantageous as Iran.

D. Maintenance of Iranian Oil Flow to the West

12. Obviously, a substantial and dependable flow of Iranian oil would, at least in the short run, relieve pressure on the oil market and limit economic difficulties in the West. The market, however, has absorbed a considerable decrease in Iranian production and continuing uncertainties as to its future. A complete cut-off of exports would drive prices higher, slow Western growth and severely handicap the non-oil LDCs, but would be far less traumatic than the loss of oil from across the Gulf. Its loss has already to a certain extent been discounted in the West; supply will in the longer run decrease in any case.

IV. Interests of other Powers

13. It is as critical for the West Europeans and Japanese as it is for the U.S. that the flow of non-Iranian Gulf oil be sustained and that the world power balance not be seriously disturbed in favor of the Soviet Union. There is no question that these states recognize the importance of the flow, but some will believe that they can better protect themselves by bilateral than by multilateral action. Some will not see the balance as so seriously threatened, short of Soviet military operations in Iran. The greater weight they give to avoidance of US-Soviet confrontation will make it difficult to convince them of the reality of the Soviet threat. As to Iranian oil flow, they are likely to view this and to seek ways to maintain it in bilateral, nationalistic ways, regardless of the position of the U.S.

14. The Middle Eastern states, and particularly those of the Gulf, are of course less concerned with the economic well-being of the West than of their own, but their interest in avoiding infection from Iran is as great as ours in protecting them from it. Some are concerned over the general U.S.-USSR power balance (Saudi Arabia) but most (Iraq) would be more concerned over the clear and present danger of a Soviet-oriented Iran. They would fear a U.S.-Soviet confrontation, if only because it might force them to chose sides between a USSR that was militarily stronger in the area and a West on which their economic well-being depends. Their attitude toward Iranian oil as opposed to Iranian politics will range from indifference to pleasure at the effect of its loss on a sellers’ market.

15. China desperately needs a strong West to divide Soviet attention, but it sees the West as losing its will in the face of Soviet power. China may well believe it sees the dangers to Western interests in the Iranian situation more clearly than the West itself. It certainly will be more strident in pointing out those dangers. For Peking some degree of U.S.-Soviet confrontation would be desirable, because it would have the effect of strengthening U.S. will and accelerating Western arms programs. In China’s view Gulf oil, from Iran or elsewhere, is important only in that if it flows south it strengthens the West, but that if it flows north it both weakens the West and strengthens the USSR.

16. The non-oil LDC’s outside the Middle East will be forced by their dependence on foreign sources of energy and the general weakness of their economies to view Iran in essentially opportunistic terms. They will want a maximum flow to keep prices down and their economies turning over, and they will deal with whoever can provide such a flow, if anyone can. This means they would prefer the status quo in the Gulf. If the status quo were disturbed, they would want to see stability restored by whatever power had the strength to do it, and if that power were Soviet they would not be overly concerned. In any case, they would see themselves, accurately, as having little influence over the course of events.

V. Possible Irans of 1981

17. There are at least six possible outcomes, each with infinite variations, for the present mess in Iran. In general terms, these are:

—Survival of Khomeini’s primitive Moslem theocracy.

—Replacement of Khomeini, et al., by a radical nationalist regime.

—Replacement of Khomeini by a Soviet-oriented Communist or strongly Communist-influenced regime.

—Disintegration of Iran into a number of smaller ethnically-based entities, with or without partition or occupation by neighboring nations.

—Civil war, involving any of a number of combinations of antagonists, ethnic, political, and religious.

—Emergence of a right or center-right regime backed by the military.

18. Any of these outcomes could lead to any other. In fact, by 1981 Iran could have seen all of them. The present state, and the anarchy into which it seems to be collapsing, is clearly a transitional phase. A civil war could lead to the emergence of a strong state of the left or right, to partition, or back to anarchy. The uncertainties are so great that there seems little purpose in speculating on the likely sequence of events, although it can be said that a leftist outcome appears the most probable and a rightist one the least. For the purpose of this paper, however, the important thing is not to determine what might produce a particular outcome or assess its probability, but rather to see how each might affect the U.S. national interests defined above.

[Omitted here is material unrelated to the hostage crisis.]

VI. Conclusions

39. As long as Iran remains in chaos, it will be a source of political instability in the Middle East and uncontrollable economic fluctuation throughout the non-Communist world. As long as it remains weak, and Western attitudes are not defined, it will present temptation to a USSR that may well become desperate for energy. These statements, and the four U.S. national interests discussed above, suggest a policy for the U.S. once the hostage issue is behind us. First, define Western attitudes, lest the Soviet Union miscalculate. Second, take concrete steps with our allies to make this position credible. Third, take measures with them to shield the Gulf States from subversion and military action. Fourth, work toward a degree of strength and stability at least in strategic areas of Iran. Fifth, prevent the extension of Soviet power and influence in these areas.

40. The discussion above suggests that among possible lines of development in Iran one, the extension of Soviet influence behind a shield of nationalism, offers a greater threat to U.S. interests than any other. Two, however, offer greater promise of protection for major U.S. interests than the others. These are: 1) emergence of a strong left-nationalist regime; 2) disintegration of Iran, leaving a relatively stable Khuzistan protected from Soviet influence. A choice as to which of these goals to pursue, and of the means to achieve it, is beyond the scope of this analysis.

1. Source: Central Intelligence Agency, Office of the Director of Central Intelligence, Job 81M00919R: Executive Registry Subject Files (1976–1979), Box 14, Folder 11: C–372 Iran. Secret. Drafted by Richard Lehman. Sent under a November 22 covering memorandum from Turner to Carter, Mondale, Vance, Brown, and Brzezinski, and distributed at the November 22 SCC meeting (see Document 47). In a November 23 memorandum, Brzezinski recommended that Carter scan this paper and an attached companion paper prepared by Waller. Brzezinski suggested “we should take advantage of the first opportunity to begin organizing a series of actions which make it less likely that the less attractive alternatives” Lehman outlined would come to pass. He suggested that Carter raise the issue at the next NSC meeting “especially because I have encountered real reluctance (notably from State) to reach any specific recommendations regarding covert activity within the SCC.” (Carter Library, National Security Affairs, Brezezinski Material, Country File, Box 30, Iran 11/21/79–11/27/79)
2. A German military term variously defined as the focal point, concentration of effort point, central point of attack, center of gravity of an attack, i.e., that thing which is most important as a target.