PROBABLE DEVELOPMENTS IN IRAN THROUGH 1953

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A002500030001-2
• Release Decision: RIPPUB
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• Document Creation Date: December 22, 2016
• Document Release Date: September 12, 2012
• Sequence Number: 1
• Publication Date: November 13, 1952
• Content Type: NIE

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COPY NO.
FOR THE CHIEF,
SECURITY INFORMATION ACQUISITION & DISTRIBUTION DIVISION
DEPT.OF STATE
NATIONAL INTELLIGENCE ESTIMATE
PROBABLE DEVELOPMENTS IN IRAN
V. THROUGH 1953
NIE ?75
Published 13 November 195
The following member organizations of the Intelligence
Advisory Committee participated with the Central Intelli-
gence Agency in the preparation of this estimate: The in-
telligence organizations of the Departments of State,
the Army, the Navy, the Air Force, and the Joint Staff.
All members of the Intelligence Advisory Committee con-
curred in this estimate on 6 November 1952.
CENTRAL INTELLIGENCE AGENCY
--SECRET-
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..SECR.F.T
PROBABLE DEVELOPMENTS IN IRAN THROUGH 1953
THE PROBLEM
To estimate probable future developments in Iran through 1953.
CONCLUSIONS
1. The Iranian situation contains so
many elements of instability that it is
impossible to estimate with confidence
for more than a short period. On the
basis of present indications, however, it
appears probable that a National Front
government will remain in power through
1953, despite growing unrest. The gov-
ernment has the capability to take effec-
tive repressive action to check mob vio-
lence and Tudeh agitation and will prob-
ably continue to act against specific chal-
lenges of this sort as they arise. The
government is likely to retain the back-
ing of the Shah and control over the
security forces. Although the danger of
serious Tudeh infiltration of the National
Front and the government bureaucracy
continues, we believe that Tudeh will not
be able to gain control of the government
by this means during 1953. Neither the
groups opposing the National Front nor
the Tudeh Party are likely to develop the
strength to overthrow the National Front
by constitutional means or by force in
1953.
2. Even in the absence of substantial oil
revenues and of foreign economic aid,
Iran can probably export enough to pay
for essential imports through 1953, un-
less there is a serious crop failure or an
unfavorable export market. The govern-
ment probably will be able to obtain
funds for its operation. Some inflation
will occur. Capital development will be
curtailed, and urban living standards
will fall. However, we do not believe
that economic factors, in themselves, will
result in the overthrow of the National
Front in 1953.
3. If present trends in Iran continue un-
checked beyond the end of 1953, rising
internal tensions and continued deteri-
oration of the economy and of the budge-
tary position of the government might
lead to a breakdown of government
authority and open the way for at least
a gradual assumption of control by
Tudeh.
4. Settlement of the oil dispute with the
UK is unlikely in 1953.
5. During 1953 Iran will attempt to sell
oil to other buyers, both in the Soviet
Bloc and the West. Shortage of tankers
will limit sales to the Soviet Bloc to token
amounts. Small independent Western
oil companies will probably not buy sig-
nificant quantities of oil. We estimate
that major Western oil companies will
not be willing to make an agreement
with Iran so long as the current legal,
1
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economic, and political obstacles exist.
Nevertheless, some moderate-sized oil
companies are becoming restive, and it is
possible that combinations for the pur-
chase and transport of substantial quan-
tities of Iranian oil may be made unless
there is direct and strong objection by
the US government. The British would
probably regard any arrangement be-
tween US oil companies and Iran, in the
absence of British concurrence, as a seri-
ous breach of UK-US solidarity.
6. Kashani or possibly another National
Front leader might replace Mossadeq
during 1953. Any successor would prob-
ably be forced to resort to ruthless tactics
to eliminate opposition. In his struggle
to eliminate his opposition and particu-
? larly if he failed to do so, Tudeh influence
and opportunities for? gaining control
would increase rapidly.
7. The Mossadeq regime almost certainly
desires to keep US support as a counter-
weight to the USSR and appears to want
US economic and military assistance.
Nevertheless, there will probably be an in-
2
creasing disposition to blame the US, not
only for Iran's failure to sell substantial
amounts of oil or to obtain an oil settle-
ment, but also for Iran's financial and
economic difficulties.
8. Therefore, the US Point Four and mili-
tary missions are likely to find it even
more difficult to operate during 1953
than at present. They would probably
be placed under severe restrictions if
Kashani or other extremists came to
power. However, neither the Mossadeq
Government nor a successor National
Front regime is likely to expel these mis-
sions during 1953.
9. The USSR appears to believe that the
Iranian situation is developing favorably
to its objectives. We do not believe that I
the USSR will take drastic action in Iran I
during 1953 unless there is a far more ,
serious deterioration of Iranian internal I
stability than is foreseen in this estimate. I
However, the USSR has the capability for i
greatly increasing its overt and covert in-
terference in Iran at any time, to the
detriment of US security interests.
DISCUSSION
INTRODUCTION
10. Events since the nationalization of oil in
1951 have profoundly changed the political
climate in Iran. The political forces which
brought Mossadeq and the National Front to
power are powerful and lasting. The Shah
and the formerly dominant landowning class
have lost the political initiative, probably
permanently. Nevertheless, the coalition of
urban nationalists and religious zealots which
Mossadeq heads has no agreed program for
the future, being united primarily by a com-
mon desire to rid the country of foreign in-
fluence and replace the traditional governing
groups. The ability of the National Front to
remain in power, as well as Iran's ultimate
role in the East-West conflict, will depend in
large measure on the National Front's success
in working out solutions to the serious social,
political, and economic problems which will
confront it during the next year.
11. Although unrest in Iran derives from a
complex of factors extending far beyond the
oil dispute with the UK, this dispute none-
theless has become the focal point of political
activity. Mossadeq rode to power on the
issue of nationalization of oil, and his present
political strength derives largely from his con-
tinued defiance of the UK.
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3
PROSPECTS FOR A NEGOTIATED
OIL SETTLEMENT
12. British Attitude: We believe that the UK
will almost certainly continue to insist that
there be some form of neutral arbitration of
the amount of compensation for the seizure
of Anglo-Iranian Oil Company properties even
though nationalization per se is no longer an
issue. The UK will probably also continue to
resist making payments against Iranian
claims without first obtaining firm Iranian
commitments to follow through with a settle-
ment.
13. In taking this stand, the UK is motivated
primarily by considerations of prestige and
precedent. The Conservative government
would face strong political opposition at home
if it agreed to Mossadeq's present terms. Per-
haps more important, the British feel that
capitulation to Iran would threaten their own
and the Western oil position generally in other
parts of the Middle East. Meanwhile, the
British feel under no immediate compulsion
to make a settlement with Mossadeq. In the
first place, increased production in other areas
has already made up for the loss of Iranian
crude oil production, although the refining
capacity at Abadan has not been fully re-
placed. Secondly, although the UK believes
that lack of oil revenues will result in pro-
gressive economic and political deterioration
in Iran, it does not appear to regard a Com-
munist takeover in Iran as imminent.
14. Moreover, the British are not likely to be
induced to make greater concessions to Iran
by the prospect of Iran's selling oil in the ab-
sence of a settlement with AIC. The UK
probably believes that in the absence of an
agreement between Iran and a major US oil
company, it can continue to exert economic
pressure on Iran and prevent the shipment
and sale of significant quantities of Iranian
oil in world markets. The British would
probably regard such an agreement, in the
absence of British concurrence, as a serious
breach of UK-US solidarity.
15. Iranian Attitude: Although the Mossadeq
Government desires and needs revenues from
the sale of oil, its attitude toward the oil dis-
pute is conditioned largely by political consid-
erations. The National Front has manipu-
lated oil nationalization into such a powerful
symbol of national independence that no set-
tlement would be acceptable unless it could be
presented to the Iranian public as a clear po-
litical victory over the UK. Mossadeq . has
been under growing pressure from extremists
such as Kashani who maintain that Iran's oil
resources are a curse rather than a blessing
and that Iran should reorganize its economy
to avoid dependence on oil revenues. On the
other hand, Mossadeq's strength with other
elements in the National Front has depended
largely on his continued success in persuading
the Iranian people that he is doing his best to
restore oil revenues but that he is being
blocked by British intransigeance, injustice,
and greed. Whether or not Mossadeq has the
political strength and prestige to persuade the
Iranian public to agree to an oil settlement on
terms which the UK could accept, his per-
formance to date provides no indication that
he desires to or will do so. On the contrary,
he has made successively greater demands for
British concessions.
16. We believe, therefore, that a negotiated
oil settlement during the period of this esti-
mate is unlikely.
PROBABLE DEVELOPMENTS IN THE ABSENCE
OF A NEGOTIATED SETTLEMENT
The Oil Problem
17. Despite the severance of diplomatic rela-
tions with the UK, Iran will probably be re-
ceptive during the coming year to further
proposals for a settlement of the oil dispute.
For political as well as economic reasons it will
also make every effort to sell oil to other buy-
ers, both in the Soviet Bloc and , the West. It
will avoid entering into any agreements which
could be construed as violating Iran's sover-
eignty or its control of the oil industry.
18. It is unlikely that Iran will sell significant
quantities of oil during 1953 unless it can
make arrangements with a major Western
petroleum distributing firm or a combination
of moderate-sized firms. Although it is likely
to sign further trade agreements with Soviet
Bloc countries calling for delivery of Iranian
ee
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oil, the the extreme shortage of tankers available
to the Soviet Bloc will restrict shipments to
token amounts. It also is unlikely to sell
financially significant quantities of petroleum
to small independent Western oil companies
in view of the difficulties which these com-
panies would have in chartering the necessary
tankers and in breaking into established mar-
kets. We estimate that major Western oil
companies will not be willing to make an
agreement with Iran so long as the current
legal, economic, and political obstacles exist.
Nevertheless, some moderate-sized oil com-
panies are becoming restive, and it is possible
that combinations for the purchase and
transport of substantial quantities of Iranian
oil may be made unless there is direct and
strong objection by the US Government.
19. Barring an agreement with a major West-
ern concern or combination of moderate-sized
firms, Iran will not realize sufficient revenue
from oil to alleviate appreciably either the
government's fiscal problem or the nation's
economic difficulties. The principal effect of
such limited sales would be political. They
would enhance Mossadeq's prestige by en-
abling him to claim success in defying the UK
and to claim that his government was making
progress toward restoring oil revenues.
Economic and Financial
20. To date the loss to Iran of oil revenues
does not appear to have been directly reflected
in reduced consumption levels, although in-
vestment has been slowed. Wholesale prices
and the cost of living index have risen very
little since early 1951. Since the beginning
of 1952, there has been some drop in real in-
come and business activity, and a correspond-
ing rise in unemployment, mainly because of
the postponement of government disburse-
ments under budgetary pressure.
21. Until mid-1952, the government financed
its deficits mostly by selling government as-
sets to the government-controlled Bank Melli
and borrowing from semi-public institutions.
By mid-1952, the government had exhausted
nearly all its gold and foreign exchange hold-
ings except for the legal minimum required as
backing for the currency. Since mid-1952,
4
the government has been meeting its deficit,
currently running at 300,000,000 rials a
month, principally through unsecured loans
from the Bank Melli.
22. Mossadeq is not likely to make substantial
reductions in government expenditures. Al-
though he at one time considered reducing
the armed forces budget, more recently he
appears to have realized the importance of
these forces in maintaining order throughout
the country. He cannot afford to stop pay-
ments to the unemployed oil workers at Aba-
dan. Although he may attempt to resettle
some of those workers in other areas, he will
be reluctant to do so as long as there is a
possibility of reviving the oil industry. Mos-
sadeq may, in fact, be forced to increase gov-
ernment expenditures, to provide, for exam-
ple, working capital for factories and to
finance the small economic development proj-
ects already under way. Moreover, he must
find funds for relief during the slack winter
months, when some unemployed agricultural
and construction workers customarily migrate
to the cities.
23. Prospects for increasing government reve-
nues during 1953 are slight. The only sig-
nificant sources of increased tax revenue are
the wealthy landlords and capitalists. Al-
though Mossadeq has the authority and will
probably make greater efforts to tap these
sources, perhaps in some cases by outright
confiscation, even full exploitation of these
sources would not eliminate the government
deficit. On the basis of recent experience,
further bond issues are not likely to raise ade-
quate amounts.
24. In the absence of foreign aid during 1953,
therefore, the government will probably re-
sort increasingly to deficit financing, primari-
ly by unsecured loans from the Bank Melli
and by increasing the amount of currency in
circulation. The government may also re-
sort to confiscation of property and the sale of
government stocks, such as opium and rice.
25. Iran's imports will continue to decline.
Although exports are expected to be slightly
higher than the 1951-1952 level, they will be
sufficient to meet only about one-half Iran's
imports prior to the oil dispute. In view of
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the near exhaustion of foreign exchange hold-
ings, imports will have to be reduced to ap-
proximately this level, thus contributing to
inflationary pressures and causing some re-
duction in urban business activity. Reducing
imports will cause sharp reductions in the
availability of luxury goods and some reduc-
tions in capital goods during 1953, but is not
expected to deprive Iran of essential imports.
There will also be a trend toward barter agree-
ments, and the already substantial Iranian
trade with the Soviet Bloc will tend to in-
crease.
26. The net results of the financial and eco-
nomic steps likely to be taken by the govern-
ment during 1953 will probably be: price in-
creases of perhaps as much as 20 to 30
percent; some reduction in living standards
in the cities; a substantial increase in the na-
tional debt; a reduction of privately held and
government stocks; and further postpone-
ment of the government's own economic de-
velopment program. A continuing low level
of capital goods imports will lead to some
deterioration of Iran's physical plant; at the
same time, upward pressures on the price
level, arising in large part from government
deficits and declining public confidence, will
bring nearer the danger of runaway inflation.
Moreover, the government will have little mar-
gin of safety for coping with such unantici-
pated eventualities as a serious crop failure.
Although we do not believe that these devel-
opments, singly or collectively, are likely in
themselves to cause the overthrow of the Na-
tional Front in 1953, a continuation of these
trends beyond 1953 will have a serious effect
on political stability.
Political
27. The principal internal political problems
facing a National Front regime will be to re-
tain popular support, to preserve unity in the
National Front, and to maintain the morale
and effectiveness of the security forces.
28. During 1953 the dispute with the UK will
gradually become less effective as an instru-
ment for rallying popular support behind the
government. As the economic effects of the
loss of oil revenues become more noticeable,
5
the government will be under greater pressure
from large property owners to restore oil in-
come. Tudeh and the more radical elements
in the National Front will increase their de-
mands for social and economic improvements.
In response, the National Front government
will probably attempt a more vigorous en-
forcement of agrarian and labor legislation.
Enforcement will be haphazard and will re-
quire increased use of force. The agrarian
program will be bitterly opposed by some land-
lords, and clashes between peasants and land-
lords are likely to increase.
29. The illegal Tudeh Party will continue to
profit from the gradual economic deteriora-
tion that will take place during 1953 and from
the haphazard enforcement of the govern-
ment's program for social and economic im-
provements. The party will continue its
efforts to weaken and divide the National
Front, will attempt to instigate riots and dis-
orders by peasants and urban workers, and
will intensify its propaganda against the US
and the Shah. It will probably make some
further progress in infiltrating the National
Front and some government agencies. How-
ever, the government has the capability to
take effective repressive action to check mob
violence and Tudeh agitation. It has re-
cently outlawed strikes and will probably con-
tinue to act against specific Tudeh challenges
to its authority as they arise. We believe
that Tudeh will not be granted legal status
during 1953 and that it will not develop suffi-
cient strength to gain control of the govern-
ment by parliamentary means or by force.
There is serious continuing danger of Tudeh
infiltration of the National Front and the gov-
ernment bureaucracy, but we believe that
Tudeh will not be able to gain control of the
government by this means during 1953.
30. To maintain itself in power, the govern-
ment will rely increasingly on the security
forces. As stated above, the government can
and probably will avoid substantial reduc-
tions in the military budget. Recent changes
in the high command are not believed to have
significantly reduced the morale and effec-
tiveness of the security forces. These will
probably remain loyal to the government and
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if given explicit orders will probably be capa-
ble of maintaining order except in the unlike-
ly event of simultaneous nation-wide riots and
disturbances. We do not believe that the
Tudeh Party will develop sufficient strength
during 1953 to instigate disturbances beyond
the capability of the security forces to
control.
31. Mossadeq will probably continue to bene-
fit from the inability of the opposition to
unite or exert effective power. In the past,
Mossadeq has shown great skill in isolating
his opponents and attacking them one by
one. He is likely to continue those tactics
and to adopt progressively forceful measures
against the opposition. The Majlis has
granted him authority to rule by decree until
mid-February, and we believe he will be able
to have this power extended if he considers
it necessary.
32. It seems probable that the National Front
will remain in power during 1953. It is likely
to retain the backing of the Shah and control
over the security forces. The groups oppos-
ing the National Front are not likely to have
the strength or unity to overthrow it. How-
ever, we are unable to estimate with confi-
dence whether Mossadeq himself will remain
in power during 1953. Kashani, Mossadeq's
strongest potential opponent, will probably
continue to exert a strong influence on Mossa-
deq and consequently will probably prefer to
remain in the background while Mossadeq
continues to shoulder responsibility. On the
Other hand, Kashani is building up his own
political strength and might, should he so
desire, be able to oust Mossadeq by parlia-
mentary means during 1953.
33. Kashani would also be the probable suc-
cessor to Mossadeq in the event of the latter's
death. Regardless of how Mossadeq is re-
placed, Kashani or any other National Front
successor could not be assured of the support
of all the diverse elements of the National
Front. Any successor regime would, there-
fore, be likely to resort to ruthlessness to
destroy opposition. In its struggle to do so,
and particularly if it failed to do so, Tudeh
influence and opportunities for gaining con-
trol would increase rapidly.
6-R--E--T---
6
34. If present trends in Iran continue un-
checked beyond the end of 1953, rising in-
ternal tensions and continued deterioration
of the economy and of the budgetary position
of the government might lead to a break-
down of government authority and open the
way for at least a gradual assumption of
control by Tudeh.
PROBABLE DEVELOPMENTS IF THE UK AND
IRAN REACH AGREEMENT ON THE OIL
QUESTION
35. If the Iranian Government reached an oil
settlement with the UK ? no matter how
favorable to Iran -- it would almost certainly
be confronted with violent demonstrations in
urban centers by the Tudeh Party and prob-
ably by extremist elements in the National
Front. There would also be immediate dan-
ger of Tudeh sabotage of oil installations.
However, the government would almost cer-
tainly have the backing of the Shah, the
security forces, and the more moderate Na-
tional Front elements and would probably be
able to suppress these disturbances. The re-
sumption of large-scale oil exports would go
far toward easing the government's budgetary
difficulties and would enable it to take steps
to increase the supply of goods and reduce
inflationary pressures, and to expand its eco-
nomic development program. Nevertheless,
anti-foreign sentiment, particularly against
the UK, would remain strong, and even with
substantial oil revenues the government
would still have great difficulty in dispelling
the antagonisms aroused between landlords
and peasants and between the "haves" and
"have nots," which would continue to be a
major cause of instability.
PROBABLE DEVELOPMENTS IF IRAN SELLS
SUBSTANTIAL QUANTITIES OF OIL WITHOUT
BRITISH CONCURRENCE
36. If Iran were to succeed in making a con-
tract for the continuing sale of substantial
quantities of oil to a major Western oil com-
pany without having reached a settlement
with the UK, the economic effects would be
substantially the same as those described in
paragraph 35 above. Tudeh reaction would
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almost certainly be violent, and there might
be some opposition from extremist elements in
the National Front. In any event, the gov-
ernment could suppress any disturbances that
might arise and its prestige would be consid-
erably enhanced. Basic causes of instability
would remain, but the government would be
in a stronger position to arrest the trend
toward eventual Tudeh control.
IRANIAN RELATIONS WITH THE US AND USSR
37. The Mossadeq regime will probably con-
tinue its pressure on the US to persuade the
UK to agree to Iranian terms in the oil dis-
pute and will be quick to criticize any signs
of what it considers US support for the UK.
It will also continue to request financial
assistance, arguing that the withholding of
US aid increases the danger of ultimate Tudeh
control.
38. The Mossadeq regime will not wish com-
pletely to alienate the US. Mossadeq almost
certainly desires US support as a counter-
weight to the USSR and he appears to desire
US economic and military assistance. Never-
theless, as internal tensions mount, there will
be an increasing tendency to blame the US,
not only for the failure to restore substantial
oil revenues, but also for Iran's financial and
economic difficulties. The US military and
Point Four missions in Iran may therefore
find it even more difficult to operate during
1953 than at present.
39. Kashani or other extremist National
Front leaders who might succeed Mossadeq
would probably be more opposed than the
Mossadeq regime to the exercise of US influ-
ence in Iran and would probably place greater
restrictions on US missions in Iran. How-
ever, their recognition of the need of US sup-
port to counter Soviet pressure and their
acknowledgment of the value to Iran of Point
Four aid would probably check any inclina-
tion they might have either to terminate
Point Four aid or to expel the military
missions.
40. Iran's official relations with the USSR
will probably remain cool and guarded. Al-
though both governments will seek to increase
7
trade between Iran and the Soviet Bloc, the
National Front will almost certainly avoid
any action which would subject Iran to Soviet
domination. On the other hand, it will not
wish to destroy the USSR's value as a counter-
weight to the West. In the UN, Iran will
probably take a neutralist, anti-colonialist
position and support any attempt to establish
a neutral Arab-Asian bloc.
41. For its part, the USSR appears to believe
that the Iranian situation is developing
favorably to its objectives. While continuing
its support of Tudeh and its violent radio
attacks on the government and the Shah, the
Soviet Union is unlikely to take any drastic
action to influence the Iranian situation dur-
ing 1953 except in the unlikely event of a far
more serious deterioration of Iranian internal
stability than is foreseen in this estimate.
42. The USSR, however, has the capability for
greatly increasing its interference in Iran at
any time, to the detriment of US security
interests. Its capabilities include: greatly
increased support of disaffection and subver-
sion in Azerbaijan, including the infiltration
of Soviet Azerbaijanis; greatly increased
financial support for Tudeh; offer of economic
and financial inducements to Iran; stirring
up of the Kurds; and heavy pressure for the
removal of the US missions, legalization of
Tudeh, and removal of legal bans on the
Tudeh press. The USSR would probably re-
frain from use of Soviet armed forces in Iran,
because of the possible global consequences of
such intervention. Soviet intervention short
of the use of Soviet armed forces would prob-
ably not result during 1953 in the direct over-
throw of the Iranian Government or the de-
tachment of Azerbaijan but could have a
seriously adverse effect on the stability and
integrity of Iran and on US security interests
there.
43. Negotiations on the future of the USSR's
Caspian Sea Fisheries concession, which ex-
pires 31 January 1953, may provide an indi-
cation of a change in Soviet-Iranian relations,
although both Iran and the USSR will prob-
ably confine themselves at most to hard
bargaining.
:Veltaillamizir A r_
Declassified in Part - Sanitized Copy Approved for Release 2012/09/12 : CIA-RDP79R01012A002500030001-2
Declassified in Part - Sanitized Copy Approved for Release 2012/09/12 : CIA-RDP79R01012A002500030001-2
-SECRET
; Declassified in Part -Sanitized Copy Approved for Release 2012/09/12 : CIA-RDP79R01012A002500030001-2