Foreign Relations of the United States, 1961–1963, Volume XVIII, Near East, 1962–1963

212. Special National Intelligence Estimate⁰

SNIE 34–63

Washington, April 10, 1963.

THE IRANIAN SITUATION

The Problem

To assess the situation in Iran and probable internal developments during the next few years.

Conclusions

A. Within the past year, the Shah has reasserted the strong personal leadership from which he had withdrawn during the Premiership of Amini. He has shifted emphasis in the economic field from long-term, centralized planned development to a policy which places chief emphasis on a radical land reform program designed to build up mass political support. His reforms seem to be bringing him new popularity among the peasantry and parts of the urban proletariat, but have alienated the traditional religious, landed, and wealthy elite, and he has not gained the support of the educated urban elements. He can probably count on the support of the military and security forces, which can probably deal with any internal security problems likely to arise. (Paras. 4–5, 7, 10)

B. The Shah’s reforms have started basic changes in the social, economic, and political character of Iran. Economic and political development over the next few years is likely to be confused and erratic. Forces have been set in motion which it will be difficult to organize and direct. However, we believe that his chances of remaining in control are good and he may even be able to make some modest political and economic progress. (Paras. 13–15)

Discussion

I. Changes Since May 1961

1. In May 1961, growing discontent over the autocratic and generally conservative rule of the Shah through a series of puppet Prime Ministers led to outbreaks of public disorder in Tehran. The Shah met this challenge by appointing as Prime Minister Dr. Amini, a respected political moderate. The program of the Amini government was essentially one of evolutionary reform and development. At the same time Amini sought to expand the base of the Shah’s government by eliciting the support of the moderate middle class and the intellectuals while retaining the loyalty of the peasants and the military. A much publicized campaign against corruption raised the standards of bureaucratic honesty and greatly reduced high-level corruption. A modest land reform program was started under Minister of Agriculture Arsanjani. Comprehensive economic planning was to be carried out by the refurbished Plan Organization which would exercise great power over the allocation of funds and resources, including those for the military. The Shah delegated broad powers to the Prime Minister and retired into the background himself.

2. The chief accomplishments of the Amini government were in the economic field. Its efforts to check inflation were largely successful; it built up the country’s foreign exchange reserves, established a central bank, and strengthened other economic institutions. However, these measures provoked a business recession and a drying up of private investment.

3. Amini’s program was unable to capture the support it sought. The conservative elite opposed it, as had been anticipated. The urban intellectuals and middle class and others making up the pro-Mossadegh National Front were unwilling or unable to overcome their prejudice against any program sponsored by the Shah. The land reform program was limited in scope. Amini had no independent political support and in July 1962, when a cabinet dispute broke out over a budgetary issue, the Shah allowed the government to fall.

4. The Shah resumed a position of strong and open leadership. He appointed Alam, an old friend and trusted retainer, Prime Minister, retained the popular Dr. Arsanjani, symbol of the land reform movement, as Minister of Agriculture, and after tentative and unsuccessful overtures to the National Front, made a radical bid to establish a personal political base among the peasantry and the urban proletariat. His principal instruments were a drastic speedup in the land reform program and promises of profit-sharing arrangements for the urban workers. In connection with land reform, the government undertook to establish a system of cooperatives to provide the many functions of management, credit, water control, etc., traditionally performed by the landlords. The Shah granted suffrage to women. The traditional religious, landed, and wealthy elite made common cause with the National Front in opposing the Shah’s revolutionary innovations, but the Shah, with the help of the military, demonstrated the opposition’s inability to stop his program.

5. The Shah’s concentration on the land reform program and his decision to seek to create a popular base have resulted in reduced emphasis on long-term economic development. With the departure of Amini, the Plan Organization has been downgraded to the position of a technical planning and advisory bureau of the Prime Minister’s office. Several key planners have quit and primary responsibility for economic development projects has been returned to the established ministries, with budgetary control in the hands of the Ministry of Finance. The total cost of the Plan itself was reduced by about 25 percent.

6. The Shah’s reform program, although far from completion, has already basically changed the traditional social structure of Iran. Having set in motion what he likes to call his “White Revolution,” the Shah, in recent weeks, has deliberately slowed down its headlong pace, apparently to reduce some of the opposition and to cope with the administrative problems which have arisen. In this process the aggressive and ambitious Arsanjani was replaced with the efficient and moderate General Riahi.

7. The execution of the Shah’s program—and indeed his continuance in power—are dependent on the continuing support of the armed forces and the security apparatus. In the past this support has been forthcoming. There is some dissatisfaction among senior officers who have been or may be adversely affected by the reform program. A number of middle and junior officers favor reform but doubt the ability and the steadfastness of the Shah in carrying it out. However, the new five-year plan for US military assistance negotiated last year has generally satisfied senior military officers. On balance, we believe that the bulk of the officer corps and the security services will continue to support the Shah.¹

II. Probable Developments

8. The requirements of the land reform program and the Shah’s desire to avoid unpopular new fund-raising measures are likely to bring about further modifications in the Third Five-Year Plan. Implementation of many projects will probably be delayed as a result of loss of some of the key development officers, competition between the ministries for control of individual projects, and the lack of administrative skills in the ministries. The planned allocation of 60 to 80 percent of oil revenues for Plan development projects will almost certainly be raided. During the first six months of the present Plan, when 55 percent of oil revenues were to go to the Plan, only about 40 percent in fact did so. In general, short-term political factors are likely often to determine priorities in the allocation of resources. The abrupt changes of direction in Iranian economic policy during the past few years and the radical nature of the Shah’s present program have frightened domestic investors. Under these circumstances, Iran is likely to experience difficulty in obtaining foreign capital. The present business recession and the low-level of private investment are likely to continue for some time.

9. For at least two or three years agricultural production will probably decline as a new rural social and economic pattern emerges in the wake of the land reform program. The extent to which the cooperatives can be adequately staffed and made to work effectively will be critical; marketing and distribution will probably be disrupted. The winter of 1963–1964, and perhaps also that of 1964–1965, is likely to be difficult, and there may be periodic shortages of food, if not actual privation, in some areas.

10. Economic problems will have important political implications. The key question in Iran over the next few years is whether the Shah will be able to control the political forces he has unleashed. The land reform program has caught the imagination of the hitherto lethargic peasants, and their impatience with gradual processes has already been demonstrated in sporadic refusals to accord landlords their legal rights. The aspirations of the urban workers have been excited by the profit-sharing promises of the Shah, but no one in the government as yet seems to know how these promises are to be carried out. At the same time, almost all of the politically experienced, educated urban groups, as well as the landlords and mullahs, will continue hostile in varying degrees to the Shah and his program.

11. The tribes present other problems. The Iranian Kurdish tribes will probably continue to be agitated by the active autonomy movement among their brothers in Iraq, and their geographical proximity to the Soviet Union would make a rebellion particularly dangerous. What will frustrate the Iranian Government is the fact that the future attitudes of the Iranian Kurds will be influenced to a considerable extent by events beyond the boundaries and the control of Iran.

12. Tribal dissatisfaction in other parts of Iran, particularly in the southwest, is part of an ancient struggle between the tribes and the central government. Tribal leaders are aware that their interests are not only contrary to those of the Shah but even more so to those of the new popular reformers such as Arsanjani. Sporadic dissidence and disorder are likely to continue. The Communists and perhaps the UAR might attempt to exploit this. However, the power of the tribes was broken long ago by the Shah’s father and most of them are presently impoverished and disunited. The Iranian military has considerable experience in controlling them. Although the modernization of the Iranian tribes is likely to be a long, sad, and brutal business, it is unlikely to pose any serious threat to national stability.

13. In general we believe that political and economic development over the next few years is likely to be confused and erratic, reflecting the profound dislocations which are taking place in Iranian society. Economic development will continue, but it will be difficult to carry out effectively a comprehensive development program without the positive support of the bulk of the intellectuals and the urban middle class. The prospect for the Shah’s gaining the support of these elements is not bright. The political climate of the near future is unlikely to be conducive to the re-establishment of control over development by such a mechanism as the old Plan Organization. Progress is likely to fall short of the expectations of the rural and urban masses. The Shah’s popularity is likely to decline, and more radical figures such as Arsanjani could emerge as mass leaders. Moreover, there is always a chance that local or regional events will cause a resurgence of the Shah’s preoccupation with military affairs.

14. On balance, however, we think it likely that the Shah will be able to surmount the threats to his position and programs during the next few years. Foreign exchange reserves are satisfactory and oil revenues will almost certainly continue to rise. Development investments of past years will be making their benefits felt in the economy. The Shah has long demonstrated a remarkable ability to play his enemies off against one another and to neutralize any of his allies who threaten to become rivals. He is already successfully facing down the mullahs and the great landlords, and the National Front shows promise of continued disunity and ineffectiveness. We think it unlikely that these disparate elements can succeed in forming a cohesive opposition. This lack of organization among his opposition, plus his own greater popularity with the masses, and his control of the security forces and provincial administrative apparatus, traditional means of manipulating elections, makes it likely that the elections, now promised for this spring or summer, will return a Majlis prepared to support his policy. The election will probably be accompanied by sporadic disorders, but we believe the government will be able to handle them.

15. For the time being at least, the Shah’s position has been strengthened. Barring assassination, his chances for remaining in essential control of the situation appear relatively good, and he may even be able to make some modest progress both politically and economically. While he has set in motion forces which will be difficult to control, he appears to have taken the first steps towards bringing Iran more in line with the political realities of the modern world and has begun to attack the archaic social and economic conditions which have made Iran’s long-term stability precarious.

16. The recent political and economic changes in Iran have not had any significant effect on the country’s foreign policy, nor do we believe they are likely to do so in the future—at least as long as the Shah believes that he can continue to rely on the US to support him personally and protect Iran’s national security. Nevertheless, the Shah is not a man to take direction readily from outside sources, however sound and well-intentioned; many of his people, radical and conservative alike, are xenophobic; and the degree to which Iranian developments can be influenced by foreign advice will probably remain small.

0. Source: Department of State, S/S-NSC Files: Lot 72 D 316, Box 891, NSAM 228. Secret. Submitted by the Director of Central Intelligence and concurred in by the U.S. Intelligence Board. According to a note on the cover sheet: “The following intelligence organizations participated in the preparation of this estimate: The Central Intelligence Agency and the intelligence organizations of the Departments of State, Defense, the Army, the Navy, the Air Force, and NSA.” All members of the U.S. Intelligence Board concurred in this estimate on April 10, except the Atomic Energy Commission Representative and the Assistant Director of the Federal Bureau of Investigation, who abstained because the subject was outside their jurisdiction.
1. See Annex. [Footnote in the source text. The Annex, “Iranian Military and Internal Security Forces,” is not printed.]