ANALYSIS OF NFAC'S PERFORMANCE ON IRAN'S DOMESTIC CRISIS, MID-1977 - 7 NOVEMBER 1978

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00269R001100110003-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 125
• Document Creation Date: December 16, 2016
• Document Release Date: December 22, 2004
• Sequence Number: 3
• Publication Date: June 15, 1979
• Content Type: REPORT

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Analysis of NFAC's Pe rform ii nce
On Iran's Domestic Crisis,
Mid-1977 - 7 November 1X978
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Analysis of NFAC's Performance on Iran's
Domestic Crisis, mid-1977 - 7 November 1978 (U)
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"It has been explained to me that it would have
been impossible for the Mullahs to have obtained this
power to lead a large and successful protest movement
had it not been for the general discontent which pre-
vails throughout Persia which has led the people to
hope that by following their advice some remedy may
be found for the grievances from which they undoubtedly
suffer. . . . It is evident that a severe blow has
been dealt at English influence in Persia." British
Ambassador to Iran, 1892.
"Either we are doing something wrong, or else
[the protesters] are all crazy. But there are so
many of them. Can so many all be crazy?" Shah of
Iran. (Tehran 4355, 8 May 1978,11
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Note
The purpose of this report is to address NFAC's
performance in treating the Iranian situation from the
summer of 1977 to November 1978, when it became clear
that the Shah's regime might not survive. We have
therefore examined only the information that was avail-
able to NFAC at the time and discussed the inferences
that were or could have been drawn from it. (We have
not analyzed the quality of that information or dis-
cussed what might have been done to improve it.)
We have ended our study in early November because
by that time NFAC had concluded that the Shah might
fall. Attempts to split the opposition had failed,
strikes, especially in the oilfields, were endangering
the economy, and major rioting had led to the installa-
tion of a military government:, a step the Shah had
been trying to avoid. Thus on 9 November the CIA
appended the following comments to a DIA paper: "CIA
considers that the Shah has delayed so long in taking
decisive action that he has reduced substantially his
earlier good chance of preserving the Pahlavi dynasty
with powers like those of the past. We believe that
the military government appointed by the Shah on
6 November may succeed in the near term in restoring
economic activity and a modicum of public security, but
that this will not form the basis for a negotiated settle-
ment of Iran's political crisis." (citation on p. 52.)
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of events. There was also an intelligence failure in a
second sense--bits of information were available during
summer 1978 that indicated that the Shah was in serious
trouble, but they were not recognized nor were any
warnings conveyed. However, it is much harder to tell
whether there was an intelligence failure in a third
sense of the term--i.e., given the information available,
did NFAC ignore or misinterpret events in ways and to an
extent that consumers can legitimately expect should not
and will not occur? No short answer to this is possible,
1. In the case of Iran there was an obvious intel-
ligence failure in that NFAC did not anticipate the course
but much of the discussion below addresses this point.
2. What went wrong? First of all, the events in
Iran were very unusual. Second, in this case, as in most
other examples of intelligence failure, the problem lay
less in the incorrect interpretation of specific bits of
information than in a misleading analysis of the general
situation which pre-dated the crisis. Like all pre-exist-
ing beliefs, these had to strongly color the perception
of events, especially when the information from the field
was thin and ambiguous. Most NFAC analysts started with
the belief that the Shah and his regime were strong
and the opposition weak and divided. Given these con-
ditions, it is not likely that NFAC could have realized
the situation was extremely dangerous much before some
time in September, and it is not surprising that recogni-
tion did not come until early November. Even so, examina-
tion of this case reveals serious deficiencies in the
system under which analysis is carried out in NFAC. Had
better methods of analysis been employed, the chances of
discovering inconsistencies between beliefs and certain
items of evidence would have been greater, thereby increas-
ing the odds that NFAC would have concluded earlier than
November that the Shah was in deep trouble.
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3. The information I Iwas
limited by the fact that Iranian domestic politics had
had a low priority in the intelligence community for
several years. Furthermore, what was needed was not in-
formation about views of members of the elite, but the
opinion and intensity of feeling amonc wider segments
of society. This was not available. NFAC added to these
handicaps by not being in touch with taon-governmental
experts on Iran, some of whom had views that differed
with those dominant in the government and possessed
information about the opposition and ron-elite segments
that NFAC did not have. F__~
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Intelligence Production_ stem
4. Many of the problems in this case can be traced
to the way in which NFAC produces intelligence. Finished
intelligence ejnerally did a good oblof summarizing and
synthesizing NFX used the data
that was available, although scatterer; items of informa-
tion--some fragmentary and ambiguous--which we can now
see were significant were ignored. TLere is no instance
where NFAC overlooked any substantial body of data. On
the whole NFAC's political reporting had a more pessimis-
tic tone than that of the Embassy in Tehran.
5. What was needed in the Iranian situation, how-
ever, was sustained and thorough evaluation of the most
important questions--e.g., the Shah's ability and willing-
ness to follow a coherent course, the nature and depth
of the opposition, and the ability of the opposition
groups to work together. Such analysis should have
examined alternative interpretations of events and mustered
all the evidence that could be found. Instead, the
format of NFAC production and the informal norms of the
intelligence community led to intelligence that focused
on the latest events and reports, that presented one
view, and that adduced little evidence.
6. The problems are greatest with the NID, which
concentrates on telling what has happened and only rarely
contains analysis or forecasts of political trends and
developments. NID items on Iran often drew conclusions,
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the items lack emphasis.
but did not explain how the conclusion was reached or
what alternatives have been rejected. Almost all arti-
cles are short, since no more than two longer and more
analytical articles were run in each issue. Most NID
items that are more than a few paragraphs long cover
several topics. The result is not only that none of
the topics receive in-depth treatment, but often that
7. In addition, because the system requires that
political NID items be tied directly to reporting and
because items normally must be coordinated with INR/State
and DIA, analysis often stops short of stating the full
implications of the information presented. For example,
several stories in the NID in mid-September 1978 implied
that the Shah's efforts to win over the religious mod-
erates would not succeed. This is especially true if
one takes all the stories together rather than reading
just one of them. But of course they did come to readers
one at a time, and the pessimistic inferences had to
be drawn from the stories, rather than being presented
as the key messages.
8. This type of intelligence production is necessary
for tracking a rapidly changing situation. If the premises
on which the discussion is based are correct and remain
so throughout the period, this mode of analysis will
serve the community and the consumers well. But given
how fragile observers' understanding is of most other
countries, it is rarely wise to assume that discussing
the most recent developments without reflecting on the
more basic questions will be sufficient. II
9. It seems to us that there was a failure at man-
agement levels to see that proper attention was paid to
those topics which bore most directly on whether the Shah
would survive. Indeed it is striking that throughout
the period no papers were produced which had as their
main focus the question of whether the regime could be
overthrown. We think it is not only hindsight that leads
to the conclusion that as the protests grew, analysts
and managers should have sat down and tried to locate the
important questions, many of which were not pegged to the
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latest events. In retrospect, it is covious that it would
have been extremely valuable to have had discussions of
such topics as: when and whether the Shah would crack
down; the conditions under which the opposition would
split; the depth of the feelings against the Shah; and
ossibilities and dangers of political liberalization.
10. From reading most NFAC docum nts one cannot
tell how the analysts reached their juigments and what
evidence they thought was particularly important. At
any number of points in the draft NIE and other NFAC
products one can find unqualified assertions without
supporting evidence presented. Space Limitations explain
the paucity of evidence in the NID, ani reader impatience
is an important factor in the minds of those preparing
other publications, but the result is znfortunate. Here,
as in other areas, we recognize that a7ailable resources
set limits to what can be done, and th.it other equities
have claims on those resources. But t:-me spent on a
systematic exposition of the evidence or and against
a particular belief may well be more valuable than an
equal amount spent on reporting the la:est events.
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11. In addition to producing evidence, or rather
as part of the same process of demonst:.-ating why a con-
clusion is valid, discussions will ofto!n be of greatest
value when they include explicit consideration of alterna-
tive interpretations. Most NFAC analysis on Iran did
not do this. At times, it admitted puzzlement. But
usually it gave a single quite coherent. explanation.
What is most important is not that mangy of those explana-
tions turned out to be incorrect--since-- the evidence was
often skimpy and ambiguous--but that a range of interpreta-
tions was not presented. We think thiE: should be done
on a regular basis, with evidence pres?nted for and against
each of the alternatives. 0 25X1
12. The number of questions on which this can be
done and the number of alternatives that could be developed
are theoretically limitless, but it is often possible to
find a relatively small number of crucial ones, which,
if answered differently, would most alter one's understanding
of the situation and the predictions ore would make. Feed-
back from policymakers would help in choosing the alterna-
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13. The point of this exercise is threefold. First,
it would encourage the analysts to be more explicit about
their reasoning processes by making them contrast their
views with the ones they have rejected. Second, it would
lead them to marshall their evidence in a systematic way.
Third, the process of working through the alternatives and
the evidence should encourage the analysts to think more
thoroughly about some of their important beliefs. Some
of the problems we located in the dominant interpretations
could have been addressed if the analysts had proceeded
in the manner we are suggesting. u
14. One obvious difficulty is that seeing things
from a different perspective or discussing possibilities
that others have not seen or have rejected is not likely
to occur unless it is rewarded by the organization. This
would involve a recognition that in many cases the effort
will not have direct benefits. Usually the dominant view
is correct, or at least closer to the truth than many of
the alternatives. It is now easy to see that alterna-
tives should have been raised about Iran, but the case
must not rest on the claim that the dominant view was
wrong, but on the argument that examining several alterna-
tives will lead to better analysis. II
15. The case of Iran reveals a need for analysts
to make sharp and explicit predictions. The point of
this is not to exaggerate how much we know or to develop
a scorecard, but to help the analysts understand the full
implications of their beliefs. Explicit predictions would
have been especially helpful in the Iranian case because,
as we discussed in other sections, much of the discrepant
information arrived bit by bit over an extended period
of time. Under these conditions it is very easy to fail
to notice that sorts of events are occurring which would
have been unthinkable a year before. Systematic procedures
are needed identifying the gaps that may be developing
between the events and the implications of their basic
beliefs.
16. A related problem with the process by which
finished intelligence was produced in the case of Iran
was that there was little sharp and critical discussion
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among the analysts. NFAC does not have any institutions
that provide the functions of both eva`_uating and stimulat-
ing the analysts that are performed in the academic world
by peer review. In practice, coordination of finished
intelligence rarely leads to discussion of fundamental
judgments. Analysts are then not chal.enged and confronted
with conflicting views and counter-arguments as much as
they could be. Generalists not direct-'-v concerned with a
particular issue may be of help in thi:i; they usually
find it easier psychologically to take a fresh view.
Peer review is certainly no panacea, but it can both help
evaluate the quality of work in instances where consumers
are not experts and can help the anlay;ts by leading them
to see where their arguments might be altered or strengthened.
It is hard to do good work in the absence of mechanisms
for performing these functions. NFAC Las all the require-
ments for peer review except appreciation of its value.
Many analysts and mana eg r pear_ to cc.nsider it threatening
rather than helping. I I
17. The lack of a "community" of analysts dealing
with this problem is noteworthy. The c'ivision of NFAC
and its predecessor by discipline contributes to the
absence of community. So does the tradition in ORPA's
predecessor office of analysts working on "their" country,
building a psychological fence that otters won't cross.
In the view of one of us probably more 25X1
important is the absence o an ins itutional competition
and the supportive criticism it can prcvide. The mechanism
that once existed where a current office and an estimative
office looked at issues from their different perspectives
was not a cure-all, but it did offer or a regular basis
opportunity for different approaches tc surface. No such
opportunity exists, nor did it during the period we are
reviewing.
18. The size of the relevant community was further
reduced by the isolation of the ORPA analysts. They had
few close contacts with academics or other informed
experts outside the government; they had few conversations
with people in State or NSC; even durinx the fall they
were not involved in any of the inter-agency meetings that
considered the Iranian problem, except for ones involving
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the NIE. (NFAC was represented by the NIO or his deputy.)
The problem is not only in the lack of discussions between
NFAC analysts and those from other agencies--ORPA and OER
analysts rarel had thorough talks about what was happening
in Iran.
19. When the number of NFAC analysts working in an
area is small, as it was in Iran, the danger that alterna-
tive views will not get raised is especially great, and
so it is particularly important that all the resources
of the community be employed. This is primarily a matter
of informal relations and depends to a large degree upon
ad hoc arrangements and the compatibility of the in-
dividual personalities.
20. We also think it is important for analysts
to have as extensive contacts as possible with outside
experts from a variety of fields. Without this the
analysts may not come to grips with the range of pos-
sible interpretations of events and may even end up
presenting facts and interpretations that are far removed
from what other knowledgeable observers believe. In our
judgment, NFAC should make strenuous efforts to assure
that its understanding of various countries; i.e., the
crucial background beliefs against which the interpreta-
tion of specific events is done, is as deep as possible.
As with employing alternative arguments (above), the
activity that can build such understanding must be valued
and rewarded by NFAC; results will appear in the long-term,
not in immediate production. II
21. The estimative mechanism, as it functioned during
the period under review, did not much help to compensate
for the problems we have located in the process. Drafting
of the prospective NIE on Iran did not lead to a fruitful
discussion of important issues. By and large, the sections
written by the several drafters were stapled together.
The ideas of the drafters were not challenged by one
another. Judging from the changes in the successive
drafts of the abortive NIE, most of the energy of this
process went into subtle wording changes that would be
apparent only to someone who had seen several versions. E
22. In retrospect, it is apparent that the government
would have been better served by a paper that did address
the shorter-term questions. To have asked for such a
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paper, however, would have required a recognition that
the Shah was in serious trouble, and given the prevailing
beliefs, that could not have occurred ur-til the end of
August at the very earliest. Indeed, IlfR called for such
a paper on 12 September. But it took a week for NFAC
to decide that such a paper should be produced and another
10 days for the State Department to draft it. Apparently
influenced by the mid-September lull, tr.e paper concluded
that "The Shah no longer appears to be in immediate danger
of being overthrown. There is considerable question,
however, of his ability to survive in power over the next
18 to 24 months." II Whether this paper would have
served a useful purpose is difficult to determine. In
any event, D/NFAC decided not to pursue it but to write
a shorter NIE that dealt with both short;- and long-term
problems. Such a draft was prepared by the NIO's office
at the end of October, but by this time it was no longer
relevant.
23. It is obvious that a lot of time and energy
was expended in these efforts. We thinY that managers
could have done a better job of focusinc NFAC resources
on the timely analysis of the most important questions.
The analytical deficiencies in NFAC's hE.ndling of some
of those ques are discussed in the following
paragraphs.
The Analytical Issues
24. Two of the beliefs that underpinned the expecta-
tion the regime would survive were that the opposition
would split and that the Shah would use force if things
became really serious. One problem is that almost no
events short of those which actually shook the founda-
tions of the regime could bring these beliefs into
question. Just because the opposition was united today
did not mean that it would not split tomorrow; the Shah's
refusal to use force today did not prove he would refrain
from repressing the next demonstration. (Indeed the
Shah's refusal to use force reinforced the conclusion
that the situation was not that serious.) This meant
that unrest could grow quite large without leading analysts
to reexamine the basic beliefs which supported their
optimism.
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25. It was generally agreed that "The government
[of Iran] has the ability to use as much force as it
needs to control violence, and the chances that the
recently widespread urban riots will grow out of con-
trol is [sic] relatively small." (Draft NIE, 6 Sep-
25X1 tember 1978, 0 This view was supported by logic and
past history. But because it was impervious to a great
deal of evidence (i.e., the Shah's previous hesitation
to use force did not show that he wouldn't act if the
situation deteriorated), NFAC should have made especially
strenuous efforts to probe the available evidence and
should have alerted consumers to the danger that informa-
tion that disproved the belief was not likely to come
available until the situation became extremely serious.
Furthermore, NFAC could have indicated that this problem
put an inherent limit in the confidence that should have
been placed in this expectation. 0
26. There were important signs that the Shah would
not crack down--through 1978 he had vacillated; he said
his commitment to liberalization precluded extensive
repression; and the United States was urging the Shah to
maintain this commitment and use as little force as
necessary. The events in late September and October
finally undermined the belief that the Shah would clamp
down. Some people became convinced that the Shah lacked
the will. Others came to believe that it was now too late
and that even extensive force might not work. II
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27. NFAC produced no papers that focused on whether
the Shah would crack down. While the Shah's moods were
commented on, the possible im lica ions for his der-idinry
to use force were not drawn.
We think the
primary explanation of these failings was two-fold. First,
the incentives to challenge this belief were slight be-
cause it was shared by all NFAC analysts, was very plau-
sible, and fitted with the pre-existing view of the Shah.
Most observers outside the government also shared this
view and even in retrospect it is hard to say why he did
not crack down. Second, this belief did not need to
figure in the reporting or analysis of most day-to-day
events. When the Shah cracked down it would be news;
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until then the possibility still remained open. Only
when the unrest grew to enormous proportions did his
restraint seem important in explaining what was happening.
So the analysts' main task of dealing wit"i the latest
events did not make them look more carefu.'ly at this
crucial belief. II
28. Another belief subject to the same problem
as the expectation that the Shah would exercise control
if things really got serious was that the opposition
would split. Furthermore, this belief dii not sit too
well with the companion belief that the Snah could clamp
down when he needed to. Repression would presumably unite
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the opposition and the l
opposition to split the
onger
harder
the Shah waited
it would b$~ for
for the
him to
repress because the unre
st was
growing stronger.
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29. The belief that the opposition would split was
widespread throughout the period under consideration. It
can be found at all levels of NFAC. While there were
many ways in which the opposition might have split, the
key issue became the division that the Shah wanted to
bring about in the reli ious leadership and consequently
in its following.
30. We do not think this issue was treated well in
the finished intelligence. In the spring it received
little attention because the production concentrated on
explaining the general causes of the unrest, reporting
disturbances as they occurred, and discussing the danger
that the Shah might use excessive force in controlling it.
After late August with the appointment of a new Prime
Minister, one of whose major tasks it was to strike an
accommodation with the religious leaders, finished intel-
ligence not only summarized the latest reports but was
more pessimistic and accurate than most other reporters.
Nevertheless, problems remained. The articles left
important parts of their messages implicit. They did
not point out that much of their reasoning undercut the
common optimistic assessments, conclude that an agreement
between the government and the clergy was unlikely, or
point out that the Shah might soon face the choice of
repression or abdication. This was, perhaps, a matter of
style and norms--analysts have been conditioned over the
years to keep as close as possible to the. facts and reports
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rather than draw out the implications which consumers
0
31. Furthermore, NFAC did not clarify the lines
of argument, highlight inconsistencies, or pull together
the existing evidence (which here, as on so many other
points, was not extensive). This was particularly true
in respect to the question of whether the moderates could
afford to reach an agreement that Khomeini would de-
nounce. Several field reports indicated that they could
not. Finished intelligence summarized some of these re-
ports and did not challenge their validity, but neither
did it explain how, if they were true, conciliation was
possible. It did not take hindsight to see that what was
crucial was both the desires and the capacity for inde-
pendent action of the religious moderates. Neither point
was singled out for special attention. No definitive
answers were possible, but a more thorough weighing of
the evidence and a more penetrating analysis of the prob-
lems were. Here as at other points the felt need to re-
port daily events seems to have distracted NFAC from
analyzing the fundamental problems. F 1
32. The analysis of the difficulties of staging a
"white revolution" was a bit superficial and over-optimis-
tic. Perhaps NFAC was misled by the Shah's many suc-
cesses--real and apparent--and so lost sight of how hard
it is to modernize, liberalize, and yet maintain control.
The impact of the huge influx of oil money on Iran was
not analyzed well. On this point as on others NFAC's
product suffered badly from the separation of economic
and political analysis. Little was said about the crucial
political impact of rapid economic change--e.g., inflation,
deterioration of life in the cities, the growing income
gap, the bazaaris'loss of economic power to newer people,
or the unemployment produced by the slowdown of the
economy after mid-1977.
33. NFAC analysts were alert to the general problems
posed by liberalization quite early and they generally
did a good job of summarizing the reports from the field,
adopting in the process a slightly more pessimistic--and
more accurate--view than the Embassy. But intelligence
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production stayed too much on the surf.-.ce of events
and did not come to grips with the basic problem of
whether the Shah's dictatorial regime could safely per-
mit a high level of political freedom. In the fall many
in NFAC accepted the optimistic report that the com-
bination of martial law and free political debate was
directing dissent off the streets and into political
channels. This view made some sense, iut was not subject
to careful scrutiny. The possibilitieF that liberaliza-
tion was being taken by Iranians as a Eign of the Shah's
weakness, that the Shah's commitment tc liberalization
showed that his pattern in previous yet..rs of using force
and liberalization undercut rather that- reinforced each
other were barely mentioned. F-1
34. Among the factors accounting for the deficiency
are inadequate information. Reporting from the field was
not particularly good nor was non-governmental reporting.
In addition, some of the dilemmas of liberalization were
not unique to Iran and could have been illuminated if
persons familiar with other countries' attempts to lib-
eralize had been called in, but the use of such general-
ists has not been customary in NFAC. Finally, there was
an operative belief that the limited freedoms the Shah
was willing to permit would be acceptale to the opposi-
tion because it was reasonable enough to see that the con-
siderable gains would only be endangered by pushing for
more. In effect it made eminent sense for a compromise
to be struck on the major program of liberalization. I
35. The issue of the nature and etrength of the
religious opposition itself presents a different sort
of problem. Some in NFAC were atuned to the importance
of religion in Iranian life. The senic.r political
analyst was especially so. He felt strongly about the
deficiencies in information and had cor_sistently called
for increased collection on this subject. Lack of
information was an important part of the problem. NFAC
did not know the extent to which Khomeini had established
a network, did not know his power as compared to that of
the moderates, and did not even know what he was saying
in the recorded messages that were available within the
country or how widespread the circulation of those tapes
were.
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36. Nonetheless, there were four aspects of the
religious opposition movement that contributed to its
appeal and that were not well covered in finished intel-
ligence. First, NFAC saw Khomeini's appeal as almost
entirely rooted in his argument: that modernization was
undermining the hold of Islam on the people. In fact,
much of his fire was aimed at the Shah's politico-economic
program and the degree to which it aided the rich over
the poor. Second, NFAC did not see that nationalism was
an important part of Khomeini's appeal and attracted many
who disagreed with him on other issues. Many in Iran
saw the Shah not only as a tyrant, but as a foreign tyrant.
Khomeini stressed this theme. Third, NFAC said little
about the "populist" tradition of Shi'ism. Since the
Shi'ites do not have an established hierarchy, religious
leaders gain their authority by becoming recognized by
their followers as men of wisdom and piety. This encourages
them to articulate what they think are the desires and
grievances of their people and gives them incentives to
be on the forefront of popular movements. A fourth
factor, the illegitimacy of governments in the eyes of
Shi'ites, was explained by finished intelligence but
perhaps not given sufficient stress.
37. NFAC's outlook did not give credence to the
links between religious leaders and the grievances of a
wide range of the general population. This outlook
powerfully influenced the interpretation of incoming
information and led the analysts to be insensitive to
the possibility that the opposition could unite behind
Khomeini. We wish to stress that it could not have been
clear at the time that the analysts' position was in-
correct. Data was skimpy; several lines of analysis were
possible. But we think it is more than hindsight to sug-
gest that an alternative view could have been discussed
in the finished intelligence.
38. In the course of 1978 a number of reports on
the Shah's mood as events unfolded in his country were
received. In retrospect they assume considerable importance
because, when removed from the background noise of
other voluminous data, they begin to show a pattern.
There are two themes. Over a period of several months
persons who saw the Shah found him more often than not
behaving differently than usual. Instead of being forceful
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and authoritarian, he was depressed, dispirited, and un-
certain. Second, his efforts to liberalize the political
system without surrendering his essential authority sowed
confusion in the minds of his supporters who were accustomed
to firm direction. His overall behavior led them and ma~
other Iranians to believe that he was loEing his grip.
39. NFAC production, beginning in late August, re-
flected the reporting on the Shah's mood, which seemed
to improve in September and October in the view of
Ambassadors who saw him frequently. It did not, how-
ever, discuss what his untypical failure to exercise
leadership might do to the morale of his supporters
(which, we should note, stayed remarkably high until
well into the fall) or to the opposition. We are not sure
why the issue did not receive more prominence, but the
belief that the Shah was strong and able to crack down if
he judged it necessary, the format of pullications that
militated against speculation, and the pi:_ess of events in
the fall are among the likely reasons.
40. Iran's domestic economic situation received
relatively little attention in finished intelligence until
mid-1978. It is clear that political pretest grew in
some part out of societal dislocation cased by a develop-
ment program, and we think it not unfair to suggest that
managers and analysts should have been aL..ert to the inter-
action between the two. There was no assessment of the
political effects of the economic slowdown instituted by
the government in mid-1977. We are awar : that management
now recognizes the absence of political economy as a
problem and that solutions to it are bei.g pursued. They
are not easy to come by, but in our view the lack of a
systematic method of relating politics tC economics
(both terms used in the broadest sense) contributed to
NFAC's failure to assess correctly the course of develop-
ments in Iran.
41. Until the fall of 1978 the dirsar of banning of
veil." Even when the
Embassy received a copy of the newspapen article, it did
not know enough about the context to p:operZ, appreciate
the depth of the insults that it conta'ied.
Twentieth-Century Iran," in N. Keddie, Scholars, Saints,
and Sufis (U. of California Press, 197
The Washigton Post_
story on 11 January 1978 reported the .zuse accurately.
**Hamid Algar "The Oppositional Role a'' the UZama in
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before Khomeini was exiled. But information about him
and about religion in general, virtually ceased from
the mid-1960s on.* Analysts had no way, given the
paucity of data, to estimate the amount of his support
relative to other religious leaders. Khomeini was
mentioned in the field reporting no more often than
his fellow ayatollah, Shariat-Madari. A number of
scholars believed that Khomeini was politically the
most important of the religious leaders; we have not
tried to determine whether their belief was supported
by si nificant evidence that academics, but not NFAC,
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5. The field reported little about the articu-
lated beliefs of the religious protesters. NFAC
analysts had little to rely on in trying to determine
the strength of religious protest; there was no data
that indicated the extent to which tapes and pamphlets
containing Khomeini's speeches were circulating in
Iran. Analysts didn't have any information on what
religious leaders were saying to their congregations.
One of the cassettes Khomeini sent into Iran was ob-
tained and transcribed, and a few of the opposition
leaflets were translated, but this was not nearly
enough to provide a full picture of what Khomeini and
other religious leaders were advocating. Of course
such information would not have told us how the
leaders would behave or how many people would follow
them, but without it it was even more difficult to
understand the motives, beliefs, and values of these
people. This was especially important because, as we
noted earlier, the religious movement was inherently
difficult for Western observers to understand. lul
6. Similarly, although the field had noted the
growth o opposition long before the riots
ccasion lly, an observation such as "we have heard . . .
that religious leaders in Qom have been coordinating
much religious dissident activity by messenger and
telephone" appears in the
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politics. In part this grew out of at optimistic view
of modernization, discussed in a later section of this
report, and in part was probably the product of the
general Western secular bias. Even those outside the
government who saw the Shah as weaker than NFAC analysts
did not believe that the religious grallns would be
instrumental in bringing him down.*
8-. In retrospect, we can identify four elements
in the religious-based opposition movement that contri-
buted to its appeal to a wide range of the public and
that were not well covered in finished intelligence.
a) attacks on the Shah for the way he was changing
Iran: ignoring the mullahs, flouting many
Islamic customs, denying important parts of
Iran's past, and aiding the rich more than
the poor;
b) nationalism, i.e., attacks on the Shah for being
a foreign (US) puppet;
c) the "populist" tradition of Shi'ism whereby
religious leaders gain and retain their authority
by becoming recognized by followers as men of
wisdom and piety, a circumstance that encourages
them to articulate the desires of their people;
For ex e James Bill, "Monarchy in ,risis," a paper
done for a State Department seminar on 10 March 1978,
forecast serious trouble for the Shah, but did not men-
tion religion. And two books complete,] in 1978, Robert
Graham, Iran: The Illusion ofPower a~,:d Fred Halliday,
Iran, Dictatorshipanc Deveopment, ea'h give religious
opposition no more than two pages.
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the traditional role of the Shi'ite clergy as
spokesmen for political protests.
9. Attacks on the Shah for the way he was "moderniz-
ing" appealed to a wide segment of the population. This
element was described in the analysis as deriving from the
view of religious leaders that modernization was under-
mining the hold of Islam on the people. In fact, it was
more directed at how he was changing Iran. Under the
Shah, and especially since the start of the "oil boom"
in 1973, the income gap had increased significantly; the
quality of life in Tehran had deteriorated; corruption and
government favors had boosted the power and income of
new groups as opposed to small merchants and bazaaris.
(For a further discussion, see pp. 53-56). How much the
failure to make this distinction stems from institutional
pressures to use short-hand terms (see pp. 31-32) and how
much from the analysts not understanding it is unclear.
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10. This view of the religious leaders played a
large role in the belief that the Shah could weather the
storm since it was felt that many important sectors of
society found their views repellent. Under this belief,
even those who, like the students and the National Front,
opposed the Shah would find it difficult to join with
Khomeini because they differed so much in their basic
political orientation. In fact, Iranians could favor
modernization and still strongly oppose the Shah, as many
of Khomeini's followers did. Students and many members
of the middle class, without endorsing all that he stood
for, could find important elements in common with Khomeini.
Shared opposition to the perceived gains of the newly-rich
and the impoverishment of the lower ranks of society formed
an important common bond between Khomeini and the political
left and between Khomeini and a wider constituency. (This
was noted by Professor Richard Cottam in a letter to the
editor of the Washington Post on 3 October 1978 and men-
tioned by the Embassy
mentioned that the Qom riots had been sparked by a news-
paper attack on Khomeini, finished intelligence continued
Given the prevailing view and paucity of data,
it is not surprising that even after the Embassy had
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to report that the demonstrators had been "protesting
again 1919 1- of the
veil" or, more
genera y, "against the Shah's modernization program."
11. Although we think the view Dresented here has
been borne out by hindsight--and indeed partly derived
from it--there is still room for disagxreement. We do
not fault the analysts for not having accepted this view
at the time when the evidence was even more ambiguous.
But we do think they should have indicated the existence
of an alternative perception of what the religious leaders
stood for. Even Khomeini and his followers were not
claiming to be totally opposed to modernization and,
while their statements need not have been accepted at
face value, they at least showed what this group thought
was popular and, more importantly, believed by large
numbers of Iranians. Khomeini had for fifteen years
centered his attacks on the Pahlavi dy,rnasty and its
evil ways. If this view was widely believed, the analysts'
stress on the religious opposition as'anti-modern
greatly exaggerated the degree to which it would be cut
off from the wider society.
12. The second element is the possible role of
nationalism.* This factor is not mentioned in any of
the official reporting or NFAC analysis and only received
occasional mention in the mass media. It could be that
this was not a motivating force. But we suspect other-
wise. Some of the slogans painted on walls called for
the death of the "American Shah." A leaflet distributed
during the Tabriz riots spoke of the "anti-Islamic regime
of the Shah and surping American overlords."
Khomeini's recorded speeches which circulated in Iran
strongly attacked the United States in nationalist terms.
The text of the one NFAC had said: "The Americans
have helped impose upon the Iranian people a ruler
who . . . has turned Iran into an official colony of the
United States." In ridiculing the Shah's claim that he
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had brought Iran "into the ranks of the most advanced
industrial countries" by saying: "In large areas of the
capital people live in hovels and dungeons and have to
go a long way to get a bucket of water from some public
tap. People know that Iran is a potentially rich country
with a huge variety of natural resources. But they see
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that foreigners have installed an agent at the top of
the government to make sure that this wealth does not
o to the poor masses.
13. The American role in the 1953 coup was known--
probably in an exaggerated version--by all Iranians, and
American support for the regime has been prominent,
especially in the past several years. The Embassy fre-
quently pointed out that all circles in Iran saw an
American hand in everything that happened. Supporters
and opponents of the regime alike greatly exaggerated
US influence. Thus it is reasonable to believe that a
wide segment of the populace saw the Shah as an American
puppet. To many, he was not only a despised leader, but
a foreign one. This handicap was compounded by the pro-
cess. of rapid social mobilization which almost inevitably
increases nationalism. We think it likely that Khomeini
was seen as a nationalist leader. He frequently criticized
the United States and repeatedly called for a greatly
reduced role of foreigners in Iran.*
14. If this argument is correct,. it would account
for a good deal of the support Khomeini received from
the secular parts of Iranian society. Of course we cannot
be sure we are correct, but the complete absence of any
mention of nationalism in NFAC analysis still strikes us
as unfortunate. While the analysts knew that everyone in
Iran believed that the United States was largely responsible
for most events in that country, neither this fact nor
the implications of it were discussed in 1978's finished
intelligence. Part of the explanation may be the under-
standable hesitancy to engage in discussion which would
have had to have been speculative. Second, nationalism
was associated in the analysts' minds with terrorist attacks
on Americans, which were rare until October 1978. Third,
'Much data on Khomeini's anti-foreign statements became
available in Late 1978; very little appears in o ficiaZ
or other reporting prior to, say, November.
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the analysts knew that the United States did not in
fact dominate Iran and that the Shah was very much his
own man. It was hard to empathize with people who had
what most Americans felt was a distorted view of the
0
15. The third element involves the sparse comment
on the "populist" tradition of Shi'ism, growing in part
out of the fact that the Shiites do not have a recog-
nized hierarchy within the sect. Instead of being ap-
pointed by a superior, mullahs and ayatollahs gain their
authority by becoming recognized by followers as men
of wisdom and piety. This encourages current and as-
piring leaders to articulate what they think are the
grievances and desires of their people. It gives
them incentives to be in the forefront of popular move-
ments. (The Embassy noted this on 17 August: "In Shia
Islam there is no institutionalized hierarchy: a
religious leader attains his prominence by consensus
within his parish. Some of the violence we are witnessing
here results from a fervid competition for eminence by
the Ayatollahs; moderation apparently does not beget
followers from the workers, small shop keepers and
artisans at this time." Obviously
they will not always lead, especially if these movements
conflict with their basic values and interests. But
these incentives mean that there is a greater chance
that the religious leaders will try to articulate popular
demands. Furthermore, the fact that this has often
occurred in the past means that large segments of the
population--even those who are not deeply religious--look
to the religious leaders to play this role. I
1.6. The propensity for religious leaders to act as
spokesmen for wider groups and to voice general political
concerns was reinforced by the Shah's suppression of most
other forms of opposition. Given the support they had
from their committed followers, the religious leaders
could speak out more freely than others because they knew
it would have been very costly for the Shah to silence
them. They became salient rallying points. People would
follow them because they were the only identifiable source
of opposition and they gained strength as they became the
symbol for opposition. (This was noted by Ambassador
Robert Neumann in his comments on the draft NIE (S, p. - 6)) .
It seems to have been the ca-se that many people who disagreed
with Khomeini on many points joined his movement because
it was the only vehicle for trying to bring down the govern-
ment. The NID pointed to this phenomenon in the spring when
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it said: "The politicized clergy, who oppose the Shah
on religious grounds, have been able to exploit other
popular grievances--inflation, poor housing, and the
inadequate distribution of basic commodities--that are
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Although gh the separation of political and
secular grounds may be a bit artificial, the basic point
was important. Unfortunately, this perspective did not
reappear in finished intelligence. II
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17. The fourth element that could feed the power
of the religious-based opposition received more attention
from the analysts, although here there was a problem of
emphasis and follow-up. As the analysts_noted. for the
_q inc% if every anvernment is iligaitimatply
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and there si a fusion between
what Western thought would call the secular and the
religious realms. For the Shiites, it was perfectly
natural for the clergy to become the spokesmen for
political protests, and indeed they would hardly recog-
nize the line between politics and religion that is
so clear to us. In the most thorough discussion of
the religious-based opposition that NFAC produced, the
leading analyst made the following point: "Since re-
ligious, social, political, and economic affairs are
considered inseparable, the mujtahed [religious scholar]
can dispense guidance on political matters and oppose
the will of the state, becoming a leader of the opposi-
tion." Unfortunately this theme,
and others in the paper on the religious-based opposition,
were not elaborated or built on in the spring and sum-
mer. If the consumers had been fully aware of the
Shi'ite tradition, stress and. elaboration would not have
been necessary. But given the problems for non-experts
in understanding 25X&
was dealing with, a fuller treatment was ca .
These factors were not mentioned in most papers--perhaps
because they do not change and the analysts assume the
consumers remember them--and did not appear in the NIE
that was being drafted in the summer of 1978. F-1 25X1
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1. In the course of 1978 a number of reports on the
Shah's mood as events unfolded in his county were received.
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In retro-
e is behavior
.
Iranians saw t e a an in erpre
spect they assume considerable importance, because, when removed
from the background noise of other voluminous data, they begin
to show a pattern.
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Reports From the Field
-- The Economist of 4 March 1978 in a generally good
article said that foreigners were reporting that the
Shah was troubled and disillusioned by events.
Ambassador Sullivan
reported that in a conversation the Shah had seemed
"tired and depressed., almost listless." He had con-
sidered that perhaps something was wrong with his
system and his game plan. The Ambassador noted that
this was the first occasion in the ten months he had
been there that he had seen the Shah in such a mood,
but he stressed that he found it striking.
In mid-May, just after some very serious demonstra-
tions the Shah held a meeting with representatives
of the Iranian media. In commenting on this and
other events said that
"People, including many in the establishment, are
trying to figure out exactly what GOI policy is to-
ward demonstrators."
reported that people are concerned by what is seen
as the Shah's display of "indecisiveness, nervous-
ness and imprecision" in the way he conducted the
above-mentioned interview. The normal conclusion
that many Iranians draw is that "he is losing his
touch." The Embassy noted that some of the Shah's
imprecision derived from his efforts to follow an
unfamiliar policy--liberalization--and that he gets
insufficient feedback to be aware that this is the
image. he is projecting. ecalls that the Shah
had given the same sort o impression to the press
when he announced the formation of the Resurgence
Party in 1975.)
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THE SHAH'S POSITION AND HOW IT WAS PERCEIVED
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-- Many of those in the establishment found that the
Shah was not sending a consistent signal as to
whether they should take a hard or srff line
-- The Embassy reported
that the Shah had told the Ambassador that
e e t he had no choice but to continue liberaliza-
tion. The latter noted that the Shah appeared to be
over his earlier indecision.
-- US News and World Report of 7 August 1978 in an
article which was generally bullish on the Shah's
prospects but acknowledged problems of lack of busi-
ness confidence and flight of money abroad also said
that his "experiment with democracy. . .worries many
Iranians."
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1. Judging the breadth and depth of sentiment support-
ing and opposing the Shah was extremely difficult. In the
period we are concerned with, almost no direct information
D
2. First, the analysts could have commented on the
government's unsuccessful attempts to stage pro-Shah rallies
(see the Washington Post, 20 August 1978). As early as 27
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December 1977, the Embassy recognized that "there is a con-
certed effort to get out the 'silent majority' with the as-
sistance of the Rastakhiz party militants so that government
and party workers, professors, students, parents and other
identifiable groups may be led into positive demonstrations
AnH other shows of loyalty to overwhelm the dissenters. . .
This could have alerted the Embassy and
analysts to the utility of tracing the fate of these at-
tempts since they were seen as important to the GOI and pre-
sumably would be pursued with some energy. It is our under-
standing that over the years Iranians had shown no great en-
thusiasm for demonstrating in support of the government.
I nip 4-
3. In retrospect, the intensity of reeling in -
position can be seen as one of the critical factors in the
overthrow of the regime. At the time it should have been
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seen that intensity would be important because it would
play a large role in determining how people would react
to the Shah's attempts to maintain order. If people were
not willing to run considerable risks of being shot, the
demonstrations could be put down with an amount of force
that was easily within the regime's capabilities. If
fairly large numbers were willing to sacrifice themselves,
on the other hand, the Army would be forced to engage in
quite extensive killing and, as many reports and papers
noted, this could severely strain morale, perhaps to the
point where it could not be relied on. Unfortunately, the
intensity question was rarely addressed. A consultant,
I I made a passing reference to it in his com-
ments p. on the 21 July 1978 draft of the pro-
4. Two other categories of events might have yielded
information on the strength of the opposition to the gov-
ernment. First, the frequent and lengthy closures of the
bazaars could have been more closely monitored in NFAC.
Even if many merchants were coerced into closing their
shops (this was asserted by the Embassy and certainly is
plausible, although little evidence was produced to sub-
stantiate the claim), the closures were a warning sign.
They showed that the opponents of the regime had quite a
bit of power and the regime was either unwilling or unable
to thwart them. Assuming that keeping the bazaars closed
was an important part of the protest movement and that the
Iranian Government for this reason if for no other wanted
to keep them open, the government's failure was noteworthy.
If the closures were a genuine gesture of support for the
opposition and if the bazaaris were paying a price for their
actions, this was an indication of the intensity of feeling
involved. Furthermore, if those inconvenienced by the
closing did not blame the protesters--there were no signs
that they did--this was an indication of the degree to
which at least potential support for the opposition was
widespread.
On 11 May the NID did mention that "Before this year, the
bazaars had not been closed in over a decade,"
but this indicator was not mentioned again.
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5. Second, even if the field could not talk to any
demonstrators and thereby provide some information on
their motives and strength of commitment, the very fact
of repeated protests with significant casualties told us
cnmethina about the intensity of opposition to the Shah.
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1. Because the Shah's full-steam-ahead development
program and its consequences of inflation, corruption, un-
equal income distribution, social dislocation and the like
clearly affected the domestic political climate we think
that some treatment of intelligence production on Iranian
domestic economic matters is called for. We survey that
production in this section, discuss how it was related to
political intelligence, and also treat the matter of joint
political-economic analysis_* Or shnn1 rl nn+A H- 1-hA+-
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2. The volume of finished intelligence on Iran's
domestic economic situation was not large. 1977 had three
items. The first, responding to a request from State/INR,
analyzed the impact of Iran's projected. defense spending.
The memorandum ( 25X1
judged that while Iran could afford to spend the 10 billion
it planned to on military equipment, defense spending at that
level would have an adverse effect on the economy, because
it would siphon off skilled and semi-skilled manpower, and
that military spending was already helping to boost inflation.
"Although Iran can financially afford the
military program, the economy is by no means ready
for it. Most of its current economic problems would
be far less severe without: a mammoth military effort.
Military demands for construction--estimated at $2.2
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billion in 1976--aggravate material and manpower
shortages elsewhere in the economy. Military imports,
which share top priority with foodstuffs in port
off-loading, have added considerably to port and
road congestion. And, the boom in military spending
certainly has been a major factor in the current 20%
rate of inflation."
The paper concluded that "the economic impact of the de-
fense program is not likely to pose serious political
problems for the Shah."
3. Iran in the 1980s contains twc sections on the
economy. The one on agriculture judged that agricultural
performance was the key element in Iran's future develop-
ment and that "the country must be able to feed its popula-
tion with minimum reliance on expensive imports or that
other elements of the Shah's developments program . . .
[would be] meaningless." Describing both the success and
the extensive deficiencies of the land reform program, the
section ends with the following judgment:
"In sum, the planned agricultural develop-
ment, which has been under the sam?: sort of
forced draft as the more spectacular indus-
trial development, is lagging. The problems
are likely to continue for a long period of
time and become more urgent as Irar- finds it
necessary to import more and increasingly ex-
pensive food. The pressure for agricultural
production will rise, and tension between the
bureaucracy and the farmers is likely to mount."
A second section on the economy in general describes
planned development in reasonably optimistic terms. It
notes some problems but does not highlicht them as ex-
tensive and judges that Iran "will probably come close
to the Shah's goal of a per capita GNP equal to that of
Western Europe by the 1980s" although there will be a
serious maldistribution of income. In sum, this economic
section is descriptive rather than analytical and what
little analysis there is is not particularly incisive.
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(This paper was an early effort to carry out integrated
political-economic analysis; it was not a success in
that re and a fact for which one of the ,a t ors of this
report II bears some responsibility.) u
4. In September 1977, replying to a request from
h Ch irman of the Council of Economic Advisers, OER
t a
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nouncements accompanying the appointment of a new cabi-
net under Prime Minister Amuzegar that the Shah was being
forced to abandon his "go for broke" development policy,
that the regime was adopting a policy of growth which
the economy can digest, that project schedules would be
stretched out and that efforts would be made control to
inflation. The paper estimated that two billion dollars
in private capital had fled Iran in the 16 months up to
the end of 1976. It noted that by the end of the Five-
Year Plan in March 1978 operating expenditures and de-
fense spending would be far over planned levels and
development spending would be well under that projected
in the Five-Year Plan. The paper judged that implemen-
tation of the new program would give the Iranian economy
the pause that it needed, and that a stretched out
development program would be "more in step with an ex-
pected slow growth in oil production and the difficul-
ties in increasing the pool of skilled labor." 25X1
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5. From then until early summer of 1978 economic
coverage on Iran focused on the international economic
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situation, noting the problems deriving from a foreign
exchange outflow which was estimated to be running at
two to three billion dollars a year in 1975-77. It also
described the problems of inflation, transportation
bottlenecks, and the like brought on by trying to do
too much too soon and the great slowdown in growth in
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1377. It took special note that Iran, which has been
self-sufficient in food in the late 1960s, was now only
75 percent self-sufficient and that this could drop as
low as 50 percent by 1985 if observed trends continued.
In later drafts of the estimates this was raised to 60
percent. II
7. The contribution noted that "most Iranians have
gained little from the oil and construction booms," that
the Iranian emphasis on military spending and on large
industrial and nuclear energy projects would leave little
in the way of "funding for programs directly beneficial
to the Iranian consumer in the next several years" and
that the government's efforts would "likely be confined
to necessary food imports and to price subsidies, .
[which were] costing an estimated $1 billion annually."
All valid points, but not further explored in the
8. assessed the eco-
nomic program announced by the newly appointed Sharif-
Emami. It judged that the cabinet change was not likely
to convince either the Iran consumer or investor that the
economy was going to improve. It judged that "solutions
to Iran's deep-seated economic problems, . . . will require
more than a new management team."
9. As the dimensions of the Iranian crisis began to
become apparent, economic intelligence production grew
in volume. September brought three
on Iran's economic situation.
culture. It judged that the land reform has accomplished
most of the regime's political goals: "the majority of
peasants now own the land they farm and the once-power-
ful absentee land owners have lost their political base."
"The effects of the land reform on economic and social
development were positive, though not spectacular." It
went on to note that agriculture had been "the stepchild
of the government's development efforts." Despite lip-
service of food self-sufficiency, food imports were four
times what they had been in 1973 and were costing about two
billion dollars annually. II
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10. "Iran: New Government Maintains Low Economic
Profile" I uis a good descrip-
tion of Iran's economic problems especially as they faced
the new government. It noted that unhappiness with the
"Shah's development priorities has added to political and
religious unrest" and judged that the need to placate cer-
tain elements of society might lead to shifts in govern-
ment policy away from industrial and nuclear development
and toward the agricultural sector. The main message of
this paper was repeated in the NID of 18 September.
771
11. Iran's problems is feeding itself already flagged
in the contribution to the NIE and in the unclassified
memorandum of 5 September were discussed at some length
in "Iran: Massive Rise in Food Import Needs." (EIWR
78-038, 21 September 1978, It noted that food imports
running at $2 billion a ye nd expected to rise at a
15 to 17 percent rate annually, could easily triple by
1985 to more than $6 billion at today's exchange rates.
It concluded:
"Given a food import bill of this magni-
tude in the early-to-mid 1980s, the Shah may
be forced into some difficult decisions con-
cering import priorities. Unless oil prices
rise substantially, declining oil export
volume will produce a sizeable current account
deficit by 1981. At that time, the Shah may be
required to moderate either politically sensi-
tive food imports or imports of capital/military
goods to avoid a quick rundown in foreign assets,
which now total about $18 billion."
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The main messages of this item were repeated in the NID
14 October. lul
12. Coverage in current intelligence publications
during the fall dealt primarily with cuts in oil produc-
tion and strikes in the oil fields. The industry began
to be hit in late September but had little immediate impact
because supervisory personnel could keep facilities oper-
ating. (NID, 29 September 1978,E] The government responded
to strikes in many sectors by granting most strikers' de-
mands; it saw "the hand of the Shah's religious and politi-
cal opposition. acting behind the scenes to manipulate workers'
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economic grievances into mass political protest." (NID,
7 October 1978,F- _J A few days later a political-
economic article (NID, 14 October 1978, reported
that "the Iranian Government is being forced to reorder its
economic priorities in light of continuing political unrest.
It put a finger on the limited effects of this priority
shift:
"Although a high-level decision appar-
ently has been made to free military and
nuclear program funds for rural development,
infrastructure, and social welfare projects,
most of the cutbacks will not impact on the
current or next year's budget. Thegovern-
ment will have to find other means to cover
increased payments to public sector workers.
"Government capitulation to substantial
wage and benefit demands is settling widespread
strikes in government and industry. The effect
on the economy cannot be determined, but re-
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newed inflation seems almost certain."
13. A series of items reported the crowing diffi-
culties in the oil fields, with production dropping to a
fourth of normal by the end of October. (NID, 31 October
1978, 0 The NID on the day following the Shah's appoint-
ment of a military government noted that "a major test of
the new government's effectiveness will b? its ability to
convince strikers to return to work. In the vital oil
industry, the strike has widened to incluce support
workers."
14. EIWR 045 of 9 November wrapped up the Iranian
economic situation as being in upheaval, the effects of
which would be felt for years. It noted that capital
flight, although not subject to accurate measurement,
had been generally estimated at three to five billion
since the beginning of 1978 and that once a measure of
political stability was established government would
find it very complex and pressing problems to get the
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Conclusions and Evaluation
15. The record indicates that Iran's domestic eco-
nomic situation received relatively Little attention in
finished intelligence until mid-1978. It is clear that
political protest grew in some part out of societal dis-
Location caused by a development program, and we think
it not unfair to suggest that managers and analysts
should have been alert to the interaction between the
two. While some of the publications mentioned do refer
to the political implications of economic problems, there
does not seem to have been much effort put into integrating
political and economic analysis. For example, no attention
was paid to the political consequences of the policy of the
Amuzegar government to cool off the economy, thus increasing
unemployment. We recognize that there is a lack of politi-
cal economy in this organization. It is not unlike univer-
sity campuses where different disciplines are carried out
by different departments. We are aware that management now
recognizes this as a problem and that solutions to it are
being pursued. They are not easy to come by, but in our
view the Lack of some systematic method of relating politics
to economics (both terms used in the broadest sense) helped
to prevent NFAC from appreciating the political consquences
of socio-economic problems in Iran. As we noted above, maZ-
distribution of wealth, inflation, and accompanying strains
were among the elements which caused ordinary_ Iranians to
demonstrate and riot against the Shah. I
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1. It is often claimed that analysts distort what
should be objective judgments to support official policy,
but unambiguous evidence on this point is usually hard to
come by. The case of Iran fits this pattern. Intelli-
gence generally was consistent with US policy but this
does not mean that the latter was influencing the former.
If such an influence were present, the analysts were not
aware of it.
2. In some cases, one finds that commitment to a
policy--on the part of analysts as well as policy-makers--
increases as more information indicating that the policy
would fail becomes available. This was not the case here.
In some cases the political climate was such that analysts
who warned that the policy was failing had good reason to
ished. Again, that does not
nun
fear that they would be
seem to be true here. I 3. If it were the case that the policy had a strong
and direct impact on analysis, one would expect that the
State Department's Bureau of Intelligence and Research,
being more closely tied to US policy, would be more affected
than NFAC. The former, however, in fact displayed more
doubt about the Shah's ability to maintain his power than
did the latter. The opposite side of this coin is that if
policy were strongly influencing evaluations, one would
expect news reporters, who had no stakes in the Shah's
survival, to have been much more pessimistic than offi-
cial accounts. But this also was not the case. I I
4. But it is at least possible that the belief that
there was no alternative to existing policy--either be-
cause the realities in Iran would not permit an alterna-
tive or because the US Government was committed to sup-
porting the Shah and his policy of liberalization--inhib-
ited analysts from recognizing how precarious the situa-
tion was. If one believes that issuing a warning is use-
less, then one is less likely to believe that a warning
is needed. We cannot be sure that this influence was at
work. When it operates it does so on a subconscious level.
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It is possible, however, that there was some tempering of
NFAC's analysis of the negative effects of the adminis-
tration's human rights policy in response to signals that
intelligence had already fully covered this topic.
5. The problem of determining whether analysis was
influenced by policy is especially difficult because the
analysts generally agreed with the policy. Looking over
the range of beliefs held by people in and out of govern-
ment it is clear that, as a generalization, those people
who thought that the Shah's regime was on balance good for
the citizens of Iran and thought that supporting him was
in the American interest also thought that his government
was quite strong. Those who thought he was evil also be-
lieved that it was bad for the United States to aid him and
saw his regime as relatively vulnerable. Presumably the
judgments about whether the Shah was good or bad for Iran
influenced interpretations of the potency of dissent.
Those journalists and academic analysts who opposed the
Shah were more pessimistic about his chances of survival
than were those in and out of government who had a more
benign view of the regime. To a degree this was logical.
Support for the Shah only made sense if one believed that
he could survive. And if one believed that the Shah was
generally acting in the interests of most of his countrymen
then one would be likely to think that he had a lot of
domestic support. II
6. Even if analysis was not directly influenced by
policy, these three inter-locking beliefs supported each
other and made the analysts especially slow to give full
credit to information indicating that the Shah was in very
serious trouble. It is probably impossible to say which of
the three beliefs came first either in time or in impor-
tance. As the Shah survived over perilous years, people
became more convinced both that the United States should
support him and that he was helping lots of Iranians and
earning their support (or else he would not have survived).
And as they came to believe that he was a good ruler they
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increasingly expected him to be able to survive.* Further-
more, the fact that those outside the government who thought
in the early autumn that the Shah might fall were people who
opposed his rule gave the analysts an easy way to downgrade
these warnings, for they could seem to be--and perhaps were--
the product of wishful thinking.
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8. The unprecedented nature of the revolution and
the Shah's record of survival made it hard enough to see
that past might not be a good guide to the future. To
believe that the unrest would succeed was to expect the
kind of sudden and dramatic change in affairs that strains
our imaginations. The analytic task would have been ex-
tremely difficult if the United States had been neutral
or even anti-Shah. But we cannot completely rule out the
possibility that the subtle influence of US policy may have
made it a bit harder for the analysts to realize that the
Shah's position was becoming precarious.
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in Conclusion
It will be clear to readers who have stayed with us
this far that there is no one reason for NFAC's failure
to assess the deterioration of the Shah's position during
1978. Life is never that simple. We have cited a number
of reason--inadequate information, pre-existing beliefs,
mind sets, a small and isolated community of Iranian
analysts, and a production system that emphasizes reporting
events rather than underlying causes. We conclude with a
dual appeal: analysts, re-examine your assumptions and
beliefs; managers, create an environment conducive to
analyzing foreign affairs, not just reporting them.
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T
Perception and Evidence
Robert Jervis, Perception and Misperce tion in
International Politics (.Princeton Universi
Press 1976) pp. 176-181.
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176-Processes of Perception
Scholars often have been unsympathetic with people whom history has
proven wrong, implying that only a person unreasonably wedded to his
views could have warded off the correct information. But in most cases
those who were right showed no more openness to new information nor
willingness to modify their images than did those who were wrong. Rob-
ert Vansittart, the British Permanent Undersecretary in the Foreign Of-
fice who earned a reputation for courage and foresight by his opposition
to appeasement, keenly noted all indication of German aggressiveness.
But he was convinced that Hitler was aggressive when the latter had been
in office only a few months'33 and did not open-mindedly view each Nazi
action to see if the explanations provided by the appeasers accounted for
the data better than did his own beliefs. Instead, like Chamberlain, he
fitted each bit of ambiguous information into his own hypotheses. Simi-
larly, Robert Coulondre, the French ambassador to Berlin in 1939 who
appreciated the Nazi threat "was painfully sensitive to the threat of a
Berlin-Moscow agreement. He noted with foreboding that Hitler had not
attacked Russia in his Reichstag address of April 28.... So it went all
spring and summer, the ambassador relaying each new evidence of an
impending diplomatic revolution and adding to his admonitions his pleas
for decisive counteraction. 11134 His hypothesis was correct, but it is diffi-
cult to detect differences between his methods of noting and interpreting
information and those used by ambassadors such as Nevile Henderson
who were wrong.135
When evidence gradually accumulates that a view is wrong, those who
hold the view often seem willfully stubborn as they refuse to recognize
that, while their beliefs may have been tenable in the past, they are now
clearly incorrect. But those who are wrong may seem more stubborn
because they receive more discrepant information. Those who are right
may appear more open-minded only because their initial views were
correct.136 If large amounts of discrepant information had later appeared,
133 Ian Colvin, Vansittart in Office (London: Golancz, 1965), p. 23; Martin Gil-
bert and Richard Gott, The Appeasers (London: Weidebtield and Nicolson, 1963),
p. 34.
134 Ford and Schorske, "A Voice in the Wilderness," pp. 573-74.
135 In an earlier article ("Hypotheses on Misperception," World Politics 20
[April 1968], 460-61) 1 applied this argument to Churchill. While it is difficult to
show that he did modify his beliefs more quickly than Chamberlain, one bit of
evidence does point in this direction. In the 1920s Churchill argued strongly for
appeasing Germany, relaxing the economic clauses of the Treaty of Versailles,
and treating her as a member in good standing of the family of nations. This is
especially impressive in light of the fact that before the F irst World War Churchill
had been quite suspicious of Germany's intentions. For the contrary argument that
Churchill suffered from "an inability to envisage changed situations," see Robert
Rhodes.James, Churchill: A Study in Failure (New York: World, 1970), p. 381.
136 Similarly, Cantril's analysis of why people believed Welles's broadcast of
War of the Worlds is badly flawed by the failure to distinguish the person's "criti-
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Cognitive Consistency- 177
they too might have assimilated it to their images. In other words, instead
of a person's being wrong because he is stubborn, he may be stubborn
because he is wrong.l3'
For our purposes, even more significant than the proposition that
those who are later shown to have been wrong are not necessarily more
closed-minded than those who were right is the argument that it is diffi-
cult to specify when a person is being "too" closed-minded. There is no
way to draw a neat, sharp line between that degree of holding to existing
beliefs and disparaging of discrepant information that is necessary for the
intelligent comprehension of the environment and that degree that leads
to the maintenance of beliefs that should be rejected by all fair-minded
men.133 For example, although several authors have examined the seem-
ingly pathological maintenance of the horse cavalry well into the twen-
tieth century, "It is debatable which is the more extraordinary," the un-
warranted faith in this weapons system, or the fact "that the lance and
sword managed to hold their own as respectable weapons 450 years after
the first serious use of gunpowder in war. "139 As we saw in our discussion
of science, sometimes the stubborn man is vindicated.
One reason for the lack of systematic differences between those meth-
cal ability," one of the key variables identified, from a predisposition to accept,
not information in general, but information of a particular type-that indicating
catastrophe. Hadley Cantril, The Invasion From Mars (Princeton: Princeton Uni-
versity Press, 1947).
13' If case studies do not reveal general differences between the way people
who were right and those who were wrong handled information, experimental evi-
dence is available but not totally relevant. Personality variables of dogmatism,
persuasibility, and conformity have been located, and it has been found that people
with low tolerance for ambiguity maintain images in the face of more contradic-
tory information than do those who are not disturbed by ambiguity. (Else Frenkel-
Brunswik, "Tolerance of Ambiguity as an Emotional and Perceptual Personality
Variable," Journal of Personality 18 [1949], 108-83; Milton Rokeach, The Open
and Closed Mind; Irving Janis et al., Personality and Persuasibility [New Haven:
Yale University Press, 1959]; David Shaffer and Clyde Hendrick, "Dogmatism
and Tolerance for Ambiguity as Determinants of Differential Reactions to Cog-
nitive Inconsistency," Journal of Personality and Social Psychology 29 [1974],
601-608.) More directly relevant is the finding that "those individuals scoring
high on the dogmatism scale perceived the broadcasts [from Radio Moscow] as
they had expected them to be, while the low dogmatics found the broadcasts to be
something different from what they expected." (Don Smith, "Radio Moscow's
North American Broadcasts," Public Opinion Quarterly 34 [Winter 1970-711, 549-
50.) But we do not know if these relationships would hold true within the highly
selected group of decision-makers.
138 That this is the case actually serves to advance knowledge by increasing the
heterogeneity of beliefs within the decision-making community. Different people
pursue different lines of inquiry and so an intellectual discipline as a whole hedges
its bets. But when an actor must choose a policy, this logic applies with only
reduced force.
139 Bernard and Fawn Brodie, From Crossbow to H-Bomb (Bloomington: Indi-
ana University Press, rev. ed., 1973), p. 42.
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178-Processes of Perception
ods of drawing inferences that lead to correct conclusions and those that
lead to error is that the correct explanation often is not supported by the
bulk of the evidence. This point is well illustrated by a scientist's discus-
sion of the eighteenth-century debate between the prefornationists, who
argued that a miniature homunculus inhabited the ovum and grew after
it was fertilized, and the epigenesists, who argued that tie egg began as
a simple and undifferentiated cell and became more complex as it devel-
oped. That the latter view is correct should not blind us to the fact that
it is highly implausible and for a long time did not renter the best ac-
count of the available data. "What could be more fantasti= than the claim
that an egg contains thousands of instructions, written on molecules that
tell the cell to turn on and off the production of certain substances that
regulate the speed of chemical processes? The notion of preformed parts
sounds far less contrived to me. The only thing going for coded instruc-
tions is that they seem to be there."140 In politics it is even more frequent-
ly the case that an incorrect belief makes most sense out+ of the available
data. Watergate is only a recent reminder that the actual facts and cor-
rect explanations may be highly implausible. Only after access to most
of the behind-the-scenes dealings has permitted the reconstruction of the
flow of events and decisions are we able to understand what has hap-
pened. Even then we may lack confidence in our explanations or feel that
they are not totally satisfying. So when the evidence is much less com-
plete it is not surprising that the known facts are often best accounted for
by an incorrect explanation.
For this reason those who have reached the right conclusion may be
less reasonable and may be treating the information in less justifiable
ways than those who are wrong. Hunches, luck, and an a,.,:curate general
analysis of the other and his situation often explain why e person is able
to predict correctly what others would do. Those who disagree, far from
being blind to the facts, are often truer to them. A piece of black cloth
in the bright sun reflects more light than a white cloth at dusk, yet we see
the former as darker than the latter. Because context s, heavily influ-
ences the perception of each single bit of information, a correct appreci-
ation of the general situation often leads to doing injustice to particular
facts. For example, in three cases Churchill was correct, but most rea-
sonable men would probably have said that alternative cc nclusions were
better supported by the evidence at hand. When the attempt to force the
Dardanelles faltered because of an uncharted string of mines, Churchill
wanted to push ahead. We now know that a renewed attack probably
would have succeeded-but, as most officials argued at the time, most
of the information indicated that it would fail. To take larger case, it
140 Stephen Gould, "On Heroes and Fools in Science," Na.`ural History 83
(August-September 1974), 32.
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Cognitive Consistency- 179
would be hard to argue that Churchill's view best explained the available
evidence about German foreign policy in the mid- and even late 1930s.
Similarly, Churchill was right to see that Hitler would launch a surprise
attack against Russia in the spring of 1941, but alternative hypotheses
were at least as well supported by data.
Those who are right, in politics as in science, are rarely distinguished
from those who are wrong by their superior ability to judge specific bits
of information. The preformationists were no less "careful and accurate
in their empirical observations as the epigenesists."141 Rather, the expec-
tations and predispositions of those who are right have provided a closer
match to the situation than did those of those who are wrong. Thus many
of the people who interpreted early bits of information about Watergate
as indicating that President Nixon was implicated drew correct inferences
because they had previously distrusted the man. The very fact that they
were so quick to consider him guilty points to the importance of their
previous views and the relatively slight role played by close observation
of the immediate events. Those who took the opposite position were
wrong not because of their faulty reading of the direct evidence-until
near the end their reading was at least as plausible as was that of those
who were correct-but because of their basic misunderstanding of the
president. This line of argument is supported by findings concerning
children's perceptions of their parents' political activities which, because
the investigator did not hold the view set forth here, were unanticipated:
"it was originally hypothesized that student reports of parents' political
characteristics would be more accurate among highly politicized families.
In the case of turnout, the data lend no support to the hypothesis.
Among parents who voted, there are practically no variations at all in the
rate of student accuracy. . . . Sizable variations do occur in reporting
nonvoting, but, surprisingly, the lowest rates of accuracy are among the
most politicized families! Students' strong expectations that their parents
will vote, or a greater sensitivity about reporting nonvoting, apparently
overshadow any perceptual gain from the highly politicized environ-
ment." The same effect appears when we look at data on students' per-
ceptions of their parents' interest in politics. As the parents' education
increases, their children judged their interest in politics to be higher:
"it is more befitting less-educated parents to be uninterested in public
affairs, and consequently more are reported to lack interest. When par-
ents' own reports coincide with these expectations, students' reports are
correct. When they conflict with student expectations, however, students
have `guessed' wrong." Our earlier discussion of cognitive biases and
schemas is relevant here. People learn and remember relatively accurate-
ly when the schema they apply fits the arrangement of the stimuli. Thus
141 Ibid., pp. 30-31.
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180-Processes of Perception
a study showing that cognitively simple people are more prone to per-
ceive balance notes that "complexity is not always functional nor lack
of complexity always dysfunctional. Noncomplex subjects made fewer
errors than complex ones when their simplifying hypotheses matched the
social structure" they were facing. 142
One implication of this analysis is that successful detection of military
and diplomatic surprises is less likely to be explained by the skill of the
intelligence service in piecing together arcane bits of information than
by the degree to which the service's predispositions and expectations fit
the actions that the other is planning to undertake. This also means that
an actor who is trying to surprise another should find out what the other
expects him to do and then do something else rather than to try to alter
the other's predictions about what he will do. It is better to take advan-
tage of the fact that people assimilate discrepant information to their
pre-existing beliefs than it is to fight this pressure. Thus one of the most
elaborate and sophisticated deception campaigns-the Allied effort to
convince the Germans that they would land near Calais rather than at
Normandy-probably would not have succeeded had Hitler not already
believed that Calais would be the target.
This analysis of course raises the question of when will the person's
expectations be likely to mirror the stimuli that he is presented with?
Luck is one answer and perhaps applies in more cases than we like to
think. This may be the best explanation, for example, of why the pre-
dispositions of many of the anti-appeasers were appropriate in the 1930s.
Under most leaders Germany would have tried to regain a powerful posi-
tion in Europe, but she would not have been willing to run very high
risks in order to dominate and so she could have been appeased. Had
Hitler not come to power, many of the Englishmen who now seem wise
would have been dangerous warmongers. A second possibility is that the
person's predispositions fit the environment in which he is acting. A
statesman who is sensitive to threats to his state's security is likely to
perceive correctly if his state is often menaced. A person who correctly
gauges general trends will also be well served by his predispositions in
many cases. Those observers who doubted that democracy could be
maintained in the underdeveloped states often provided the best interpre-
tation of the ambiguous evidence about politics in the third world. The
142 Richard Niemi, How Family Members Perceive Each DJther (New Haven:
Yale University Press, 1974), pp. 68-69; Press, Crockett, and Rosenkrantz, "Cog-
nitive Complexity and the Learning of Balanced and Unbalanced Social Struc-
tures," pp. 549-50. For related arguments from other parts of the field of person
perception, see the research summarized in Mark Cook, Interpersonal Perception
(Baltimore: Penguin, 1971), pp. 108-16, and Hastorf, Schneider, and Polefka,
Person Perception,-pp. 30-34.
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Cognitive Consistency-181
creation of appropriate predispositions is the rationale for job training
programs that alter perceptual thresholds, a subject we will touch on in
the appendix to Chapter 6. Furthermore, people select, and are selected
for, jobs in the expectations of a match between predispositions and en-
vironment, but this is no guarantee that there will be such a match.
Those who are predisposed to see foreign threats, for example, may fill
positions of responsibility in relatively secure as well as in relatively
insecure states. A third and related cause of match comes into play when
the person's previous experiences provide a good guide to the current
situation. This will be treated at length in Chapter 6. An aside here is
that, when self-fulfilling prophecies operate, shared predispositions make
more accurate the perceptions of those who hold the dominant view.
Unless we realize that the differences between those whose perceptions
have been accurate and those whose have been wrong are not likely to
lie in differences in ability to examine specific facts, we will have unwar-
ranted faith that those who were right will continue to perceive accurate-
ly under changed circumstances. We will be likely to assume quickly that
superior intellectual virtues are possessed by those who perceived ac-
curately, to promote those people to positions of greater responsibility,
and to adopt their views in the future.
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