© CONFIDENTIAL COVERING SECRET THIS DOCUMENT IS THE PROPERTY OF HER-BRITANNIC MAJESTY’S GOVERNMENT ‘NBP 020/28 E t q fl BRITISH POLICY ON IRAN — 1974 — 1978 ii ki [ NW Browne l fl f f a ll Foreign and Commonwealth Office [ CONFIDENTIAL COVERING SECRETCONFIDENTIAL Foreword by the Permanent Under-Secretary In March 1979, Dr David Owen, then Foreign and Commonwealth Secretary, commissioned a det historical analysis of British policy towards Iran in the years leading up to the revolution, The intention was not to apportion blame for the fact that, in common with virtually every other observer of Iran during these years, we failed to predict the fall of the Shah: the purpose was rather to examine the history of our policy towards Iran and the information and judgements on which it was based, and to examine where, if anywhere, we had gone wrong and how we could do better in the future. Mr Nicholas Browne hus spent almost a year preparing this study, using Foreign and Commonwealth Office files and discussing the issues with those who had primarily been concerned within the Office and with experts from other Government services and from the universities. I believe Mr Browne’s study to be of real value. It is, of course, a personal interpretation of British policy towards Iran and has been printed as he wrote it. I have thought it right, however, that the views of Sir Anthony Parsons, who was Ambassador in Tehran throughout almost the whole of the period in question, should be attached. Mr Browne raises questions which are of general interest to us all in the conduct of foreign relations. Such matters as the balance between political and commercial work, the degree of commitment to a particular ruler, the extent to which it is possible in an authoritarian régime to keep in touch with oppositions and the ability to forecast the future of governments, particularly in the Third World, are of abiding interest Mr Browne’s conclusions have not yet been submitted to Ministers nor even yet discussed, as I intend, at one of my regular meetings of Deputy Under-Secretaries. His Paper will receive serious consideration but I should be interested first to see any comments which readers may have on the final chapter of the study, bearing in mind that if we devote more resources to one activity, eg political work, we shall have to devote less to something else. Please send comments in the first instance direct to the Head of Planning Staff. CONFIDENTIALCONFIDENTIAL BRITISH POLICY ON IRAN 1974 — 1978 Contents Chapter i Introduction Chapter Iran 1974-1978 Chapter II British Analysis 1974-1978 Chapter IV ‘Shortcomings of the British analysis Chapter = V Analysis of other governments and institutions Chapter VE ‘The revolutions in Egypt, Iraq and Libya Chapter VI ritish Policy 1974-1978 Chapter VIE Policy of other Western governments Chapter IX Losses to Britain from the fall of the Shah Chapter =X Could the losses have been avoided? w@ the analysis (ii) British policy before the crisis ii) British policy during the crisis Chapter XI Conclusion: lessons for the FCO Annexes CONFIDENTIALCONFIDENTIAL CHAPTER I Introduction This paper was originally commissioned by the former Foreign Secretary, Dr David Owen, in early 1979, According to his instructions it attempts the following tasks. It describes the British analysis of Iranian politics from 1970 to 1978, with particular reference to the period from 1974, and considers whether mistakes were made. It then compares the British analysis with that of other governments, and experts outside government. The paper then describes British policy in Iran during the corresponding period, and considers whether the policy of other Western governments was significantly different. It goes on to review briefly the losses to Britain from the fall of the Shah. In its concluding chapters the paper examines whether the losses to Britain could have been mitigated or avoided if political analysis had been more acute or different policy decisions had been taken. Finally it suggests some ways in which mistakes might be avoided in future. CONFIDENTIALCONFIDENTIAL CHAPTER I Jran 1974-78 In order to set the paper into context it seems best to begin with a brief sketch of events in Iran in the 1970's as they appear to one instant historian in late 1979. At this early stage, and without access to many sources of material, particularly official Iranian Papers, the account cannot be definitive and is intended as far as possible to be neutral. But the paper demands an interpretation of events not simply a chronology, and there will inevitably be room for disagreement with the account. Mohammad Reza Pahlavi camo to the throne in Iran in 1941, after his father Reza had been obliged to abdicate following British and Soviet invasion of his country. During the second world war he was hardly able to act independently. Even after the withdrawal of foreign forces by 1946 the Shah played only a diffident role in the political life of the country. In the early 1950°s he was upstaged by Mohammad Mossadeq, who nationalised Iran's oil fields and embarked on a long dispute with the West. Eventually Mossadeq’s popularity waned and the Shah was able after a brief period of exile to contrive his dismissal and imprisonment. (The British part in the events of these years is discussed in Chapter VI In the late 1950's and early 1960's the Shah's political stature grew. In a key confrontation in 1963 he defeated the opposition which was being mobilised against him ‘over the so-called ‘White Revolution’, of which the most important provision was land reform. Fortified by this he steadily asserted his personal rule, reducing the national assembly to a rubber stamp. His coronation ceremony in 1967 was a symbol of his increasing confidence. Meanwhile an impressive rate of economic growth was being achieved with Iran’s oil revenues, and major industrial projects being undertaken. In 1971 the Shah embarked on his most successful period. In February a bold challenge to the international oil companies led to the Tehran Agreement, increasing Iran's il revenues. In August the celebrations of the 2,500th anniversary of the Persian Monarchy drew world leaders to an extravagant party at Persepolis. In December Iranian troops landed at Abu Musa and Tunbs Islands in the Persian Gulf, asserting Iran's doubtful claim to the islands on British military withdrawal from the area, During the year Iran had signed contracts for the sale of 700 Chieftain tanks by Britain, showing the resources the Shah had at his disposal to develop his armed forces. The only blot on the regime’s record that year ‘was an attack on the police station at Siahkal near the Caspian Sea by a guerilla band, the first incident of this kind, and the subsequent assassination of the military prosecutor. Inflation was also becoming a preoccupation of the Government for the first time for many years. 1972 was a year of consolidation. Spending on economic development continued to increase and there were few internal security problems. The following year Iran began sharply to assert a new regional and world role, The Shah began to talk of his ambitions for his country — the era of the ‘Great Civilisation’ — and boasted that Iran would soon join the ranks of the industrialised countries. He sought to revitalise the bureaucracy with talk of an administrative revolution, and appointed an active new leader of one of the political parties in the hope of convincing Iranians that political activity was not futile, CONFIDENTIAL‘CONFIDENTIAL ‘A new agreement with the consortium of oil companies in Iran was signed in July, giving Iran greatly increased control over its own oil industry. Iran began to forge diplomatic relations with a number of distant third world countries and closer to home an Iranian force was despatched to help the Sultan of Oman. Above all the Shah took a leading part in the OPEC decisions in October and December to quadruple the price of oil, making the momentous announcement himself in Tehran at the second of the two OPEC meetings. On the debit side inflation continued to be a problem, there were student troubles throughout the year, and in October a plot to kill members of the Shah’s family was revealed. The rise in oil prices was followed by 18 months of frenetic commercial activity. In ‘August 1974 the projected expenditure in the development plan was doubled, and ambitious new targets were set for the improvement of infrastructure, the social services and agriculture in particular. Tehran teemed with foreign businessmen willing to camp on the floors of hotels. Iran lent its surplus funds to Western industrialised countries as well as to the developing world, But even in 1974 inflation and shortages of basic commodities were irritating difficulties, and there was no clue how the Shah would surmount the obstacles of an inefficient bureaucracy and a seriously underdeveloped infrastructure in his march to the ‘Great Civilisation’, One or two Iranian leaders who protested at the headlong pace of economic development were ignored. The Shah was by then in a hurry and there was one obvious reason for this; he had often spoken of the possibility of abdicating in favour of his son in about ten years’ time and wanted tran to have established a durable base for future economic prosperity by then. Also his optimism at the time was unbounded, and he felt that the sooner his rosy vision of Iran under the Pahlavis could be realised the better. Two French doctors have recently maintained privately that they diagnosed Iymphona, a cancer of the lymph glands, in the Shah in 1973 and this may well have added to his sense of urgency. But lymphona can be present in widely differing degrees of severity, and there was no sign that illness was affecting the Shah's physical or mental performance. By February 1975 there were indications that the decision to go for rapid economic growth was causing serious difficulties, and a mood of re-appraisal could be detected in Tehran. The main problem was an unexpected shortage of cash brought about by a decline in world demand for oil as the free world economy experienced a mild recession, and a simultaneous rapid increase in the cost of Iran’s imported goods. In addition the ports and transport had been unable to cope with the rush of new trade and there was a serious shortage of skilled manpower. Soaring rents in Tehran were a sign that the economy was out of control. By the summer the brakes were being applied and a severe ‘anti-profiteering’ campaign was launched against the bazaar merchants and other middlemen and retailers. Meanwhile the Shah had taken another new step in his search for a political structure which would mobilise popular participation in government affairs without threatening his own leadership. Existing political parties were dissolved in March and one party, the ‘Rastakhiz’ or ‘Resurgence’ party established in their place. Elections to the national assembly took place in June but there was no genuine enthusiasm for the new experiment; pressure to join the party was widely resented. Terrorists continued to give the security authorities difficulties; in May two foreigners were assassinated, the first such attack for two years. CONFIDENTIALCONFIDENTIAL By 1976 there was a general malaise in Iranian society. In February the allegations that the Grumman Corporation and Tate and Lyle among others had been offering large inducements to senior Iranians, and the dismissal of the Commander of the Iranian navy for corruption, were evidence of financial malpractice in the administration, The Iranian Government were reduced to lying about inflation, claiming that it had been eliminated when it was at an annual rate of 20% and still rising. Moreover the economy had become too complicated for the Shah himself to exercise his customary supervising and co-ordinating. role. Despite this gloomy picture the regime celebrated the 50th anniversary of the Pahlavi dynasty in March, an event greeted without enthusiasm; at the same time without regard for public opinion they abandoned the Islamic calendar in favour of a new one taking the Achaemenid dynasty as its starting point. In October the Shah finally felt obliged to admit that mistakes had been made. In ‘an interview with the local press he conceded that progress had not been up to expectations, and that unless expenditure was curtailed and productivity increased there would be no Great Civilisation. Everyone should be prepared for sacrifices. Prestige projects began to be cancelled, and there was no longer talk of Iran spreading its influence far and wide. The Shah was thus under pressure for the first time for many years. He had been unable to fulfil his promise of greatly increased wealth and improved social services for all Iranians, and Iran was very far from joining the ranks of the industrialised nations. There were other sources of strain; the regime was coming under increasing criticism in the West for its treatment of its opponents and in November President Carter came to power in the United States with the intention of making human rights a major international issue. In December at an OPEC meeting in Doha, Saudi Arabia refused to agree to an Iranian proposal for a sharp increase in price, and effectively thwarted Iran’s efforts to increase her oil revenues by putting more of its own cheaper oil on the market. This was another dent to the Shah's prestige, Meanwhile the Shah had been handicapped by losing the advice of two of his closest confidants. The Court Minister Asadollah Alam had fallen ill that autumn, and although he returned to work for a while the following May was unable to take his usual heavy burden. The airforce commander General Khademi had died the same year in a hang-gliding accident. ‘The Shah reacted to these circumstances by taking the crucial decision to allow ‘more genuine political debate in Iran — the so-called liberalisation policy. Early in 1977 Iran’s prisons were opened for inspection by the International Red Cross, for the first time since 1972 the public were admitted to trials of political prisoners, and prisoners who hhad allegedly been detained for political reasons began to be released. It seems that he had concluded that fifteen years of strict rule had not had the effect he had hoped of mobilising the Iranian people into working together to build the Great Civilisation in their country. His series of experiments with guided democracy, including the Rastakhiz party, had all been failures. The future of the monarchy and his son’s position was very much in his mind, He may have been advised that in an increasingly complex and rapidly developing society the lid could no longer be kept tightly down. The only course seemed to be to give the people more say in their own affairs, hoping that the result would not be chaos that past experience had taught him untrammelled political activity could lead to, His health may hhave been a factor in the decision to take the plunge. He must also have been aware of the risk of damage to Iran’s relations with the West from the lack of human rights in ran, though there is no evidence that the United States pushed him into his decision. CONFIDENTIALCONFIDENTIAL Whatever the reasons for the Shah's move it was to set off a momentous series of events. It is possible to distinguish three broad groupings in Iran in early 1977. First there were the diehard opponents of the Shah's regime, most of whom had either been lying low or been imprisoned since the early 1960's. These included some influential religious leaders, notably Ayatollah Khomeini (who had been exiled in Iraq since opposing the Shah at the time of land reform) and Ayatollah Talaghani, who resented the low esteem in which the regime held Shi'a Islam and their autocratic behaviour and, in Khomeini’s case, implacably opposed monarchy itself; their mosques acted as havens of social and political discontent with the regime. They also included the old generation of National Front politicians of Mossadeq’s era like Mehdi Bazargan, Shahpour Bakhtiar, Karim Sanjabi and Dariush Foruhar who had been leading lives of obscurity interspersed with periods of imprisonment, There were also the politically active students who often had links with the two guerilla groups, the Marxist Cherikhaye Fedaiye Khalq and the radical Islamic Mojahedine Khalq. Finally there were poets and writers like Sa’eed Soltanpour and Gholam Hussein Sa’idi who were diehard opponents. The second broad grouping were those who had supported the Shah while the going was good but who were increasingly unhappy now that things were rougher and the economy was in difficulties. The most prominent were the bazaar merchants who had run Prosperous businesses throughout the 1960's and early 1970’s in a secure environment for which they were grateful. But a combination of inflation the threat of being rapidly superseded by modem productive and distribution methods in the rush to develop the country, and the régime’s anti-profiteering campaign in the summer of 1975 had made them sullen and resentful. The bazaar had strong traditional links with the mosque and funds began to flow into the coffers of mullahs preaching against the régime. This group also included many of the educated middle class, like lawyers and teachers, who had tolerated the régime but were increasingly tired of the repression and vapid propaganda, The third grouping were the ordinary townspeople, many of whom had come into the cities in 1973 and 1974 attracted by stories of astronomic wages particularly in the construction industry. When the boom collapsed work was harder to come by. Housing was extremely costly — in December 1976 the average worker spent 60 or 70% of his pay on accommodation ~ and in south Tehran totally inadequate even by regional standards. Basic necessities were expensive and often in short supply. The gap between the poor of south Tehran and the rich of the north whom they served was glaring. The sudden improvement in their fortunes and the equally sudden reversal, the bewildering changes around them, and the rapid spread of Western customs at the expense of the traditional Islamic based culture were all disorienting experiences. These people can have had no thought that the régime could be overthrown, but they were susceptible to any encouragement, pethaps from the mosques, to make their grievances heard and ready for signs that complaints might achieve something. The first reaction to the Shah’s decision to liberalise came from writers and lawyers. Early in 1977 a letter was sent to the Prime Minister complaining of the basic failings of the Rastakhiz Party, and further letters followed to the Shah, Prime Minister and newspapers about free speech, political activity and the rights of the judiciary; Bakhtiar, Sanjabi and Forouhar were among the authors. The régime ignored the letters but took no action ‘against the writers. Meanwhile a series of long power cuts in Tehran had been a humi CONFIDENTIALCONFIDENTIAL demonstration of the regime's mistakes of economic planning, and the dismissal of the whole government including the long standing Prime Minister Amir Abbas Hoveida in August was a further admission of blame. In October a reading of literature implicitly critical of the regime at the Goethe Institute in Tehran was attended by some 10,000 people, In November the students joined in the protest with a scries of demonstrations in Tehran before the Shah's departure to the United States to see President Carter. Later that month the demonstrations were strictly repressed and a gang of thugs organised by the regime broke up a meeting of leading writers and lawyers near Tehran, but the Shah made clear that this was not to be the norm and that he intended to stand by the policy of liberalisation. In January 1978 the regime placed an article in the press traducing Khomeini as an adventurer and non-believer, which provoked a riot in the religious centre of Qom in which a number of demonstrators were killed. ‘The Qom riots proved to be the beginning of an accelerating cycle of violent protest which faltered only once, during the summer months. Despite the threat that was developing to his position the Shah remained determined not to abandon liberalisation and not to resort to oppression. On the occasions when the military took # hand in events it was generally after insistent pressure from them on the Shah to allow this, rather than on the Shah's initiative. His own preferred response to the pressure was to look for an accommodation with his opponents, offering them concessions as necessary. This was seen by the opposition as weakness on his part, and each concession was followed by new demands. The political initiative passed from him to Khomeini and his opponents, and the urban masses began to join the Khomeini bandwagon as the Shah’s vulnerability became apparent. The security forces, who had loyally supported the Shah, began to be affected by the overwhelming surge of opposition to him. The opposition became emboldened, and by the end of the year they could only be satisfied by the Shah’s departure from Iran. The Qom riots were followed by a succession of violent demonstrations at 40 day intervals, following the Shi'a practice of commemoration of the dead after this period. There were riots in Tabriz on 18/19 February in which tanks were used for the first time to restore order, disturbances throughout the country in early April, and on 11 May for the first time riots in Tehran. Meanwhile Khomeini’s message of opposition to the regime was being widely circulated in Iran on cassettes and by leaflets. The Shah continued to retreat and on 6 June dismissed the long serving head of SAVAK General Nassiri, a bete noire of the regim’s opponents. In June it appeared that the cycle of mourning demonstrations had been broken, but by late July there was unrest in Mashad and in early August the trouble became so serious in Isfahan that martial law had to be imposed. The Shah’s response to signs that the unrest was not being quelled was a promise of further liberalisation in a major speech on 5 August in which he said that the parliamentary elections due to take place in June 1979 would be “100 per cent free”; on 17 August he undertook that bills would be presented to the National Assembly to provide for freedom of assembly and expression. After a disastrous act of arson at a cinema in the south western city of Abadan for which the government blamed religious extremists but which a suspicious People saw as a government uttempt to discredit religious leaders, and further sporadic demonstrations in provincial towns, the Shah dismissed Jamshid Amuzegar’s government. which had served for a year and replaced him with Ja’afar Sharif-Emami. Sharif-Emami decided with the Shah’s agreement to be conciliatory; among other measures the new ‘CONFIDENTIAL