IRAN A YEAR AFTER KHOMEINI - LIVING WITH THE LEGACY

C O N F I D E N T I A L STATE 163440

FOLLOWING ABU DHABI 2793 DTD MAY 17 SENT ACTION SECSTATE
WASHDC, INFO ANKARA, BAGHDAD, DOHA, ISLAMABAD, LONDON,
PARIS, RIYADH, FRANKFURT, ISTANBUL, KARACHI, USCENTCOM
MACDILL AFB FL, DIA WASHDC, AND CJTFMEBEING REPEATED TO
YOU FOR YOUR INFO

QUOTE: C O N F I D E N T I A L ABU DHABI 02793

FROM AMCONGEN DUBAI

E.O. 12356: DECL: OADR
TAGS: PGOV PINS ECON IR
SUBJECT: IRAN A YEAR AFTER KHOMEINI - LIVING WITH THE LEGACY

REF: ABU DHABI 2107


1. CONFIDENTIAL - ENTIRE TEXT.
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2. SUMMARY: A YEAR AFTER KHOMEINI'S DEATH, IRAN'S
LEADERS ARE DIVIDED OVER THE COUNTRY'S FUTURE POLITICAL
DIRECTION. THEIR DISAGREEMENTS, ALTHOUGH SOMETIMES
EXPRESSED IN OBSCURE THEOLOGICAL TERMS, ARE ON DISPLAY
IN VIGOROUS DEBATES IN THE MEDIA, PARLIAMENT, FRIDAY
SERMONS, AND OTHER PUBLIC SPEECHES. THIS DEBATE,
HOWEVER, IS FOR INSIDERS ONLY, AND THE OPINIONS OF
THOSE OUTSIDE THE RULING ELITE ARE NEITHER SOUGHT NOR
CONSIDERED. WHILE THE POLITICIANS ARGUE, THE ECONOMY
CONTINUES TO STAGNATE. EFFORTS TO REVIVE DOMESTIC
PRODUCTION, REBUILD THE OIL INDUSTRY, AND CONTROL
RUINOUS INFLATION HAVE BEEN COMPLETELY INADEQUATE.
HAVING MADE A REVOLUTION THAT REJECTED ECONOMICS AS A
BASIS OF NATIONAL POLICY, THE NEW LEADERS ARE FINDING
THAT PART OF KHOMEINI'S LEGACY VERY DIFFICULT TO
CHANGE, NOR IS THERE YET ANY OVERWHELMING PRESSURE ON
THEM TO DO SO. APATHY IS MORE PREVALENT THAN
RESISTANCE AND THERE SEEMS NO SIGNIFICANT ORGANIZED
OPPOSITION THAT WOULD THREATEN THE REVOLUTION ITSELF.
END SUMMARY.
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THE FEW RULE AND ARGUE; THE MANY WATCH
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3. THE MASS POLITICS, WHICH CHARACTERIZED THE IRANIAN
REVOLUTION AND THE EARLY YEARS OF THE ISLAMIC REPUBLIC,
ARE OVER. PERHAPS THE LAST MANIFESTATION WAS
KHOMEINI'S FUNERAL. GONE ARE THE MILLION-STRONG
MARCHES AND DEMONSTRATIONS WHICH PROCLAIMED "DEATH TO
THIS" OR "LONG LIVE THAT". NOW, ZEALOTS COMPLAIN WHEN
IRANIAN RADIO TV IGNORES TWO HUNDRED PEOPLE
DEMONSTRATING AGAINST WOMEN'S IMMORAL DRESS (REFTEL).
AND A TEHRAN UNIVERSITY PROTEST AGAINST U.S.-IRAN TIES
IS ALMOST IGNORED.

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4. IRAN'S LEADERS ARE IN THE BUNKER WHERE THEY
SQUABBLE LOUDLY AMONG THEMSELVES. THE SUPERNUMERARIES
WHO USED TO MARCH AND SHOUT, HOWEVER, NOW ONLY WATCH.
MOST OF THEM HAVE SHIFTED FROM SUPPORTING THE REGIME TO
ENDURING IT. THEY GRASP AT ANY SIGN, SUCH AS ANOTHER
INCH MORE EXPOSURE OF WOMEN'S HAIR, OR FIVE MINUTES
MORE MUSIC ON IRAN RADIO, THAT MIGHT INDICATE THINGS
ARE GETTING BETTER.
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5. BASED ON OUR OBSERVATION, WE WOULD ILLUSTRATE THE
BREAKDOWN OF IRANIAN POPULATION ROUGHLY AS FOLLOWS:

(A) 0.5 PERCENT ARE IN THE REGIME.

(B) 2.5 PERCENT SUPPORT IT.

(C) 2.5 PERCENT OPPOSE IT.

(D) THE REST (94.5 PERCENT) ENDURE IT.

THOSE IN THE REGIME ARE TWO GROUPS: AN OUTER CIRCLE OF
THOSE WHO, THROUGH POSITIONS IN THE GUARDS, THE ISLAMIC
COMMITTEES, ETC. HAVE ACCESS TO SCARCE GOODS AND
SERVICES SUCH AS SUBSIDIZED CONSUMER GOODS AT
SUBSIDIZED PRICES, REASONABLE HOUSING, AND UNIVERSITY
PLACES. AN INNER CIRCLE OF ABOUT 5,000 SENIOR CLERICS,
MINISTERS, JUDGES, FRIDAY PREACHERS, PARLIAMENT
DEPUTIES, AND PROVINCIAL OFFICIALS, ACTUALLY RULE
IRAN. WITHIN THIS GROUP. TWENTY-TO-THIRTY VETERANS OF
REVOLUTIONARY POLITICS MAKE THE DECISIONS. THIS LAST
GROUP INCLUDES SUCH SURVIVORS AS AYATOLLAHS ARDABILI,
YAZDI, MESHKINI, JANNATI, MAHDAVI-KANI, AND REYSHAHRI.
OTHER MEMBERS ARE PRESIDENT HASHEMI-RAFSANJANI, SUPREME
LEADER KHAMENE'I, MASHHAD BOSS VA'EZ TABASI, PARLIAMENT
SPEAKER MAHDI KARROUBI, AND FORMER INTERIOR MINISTER
MOHTASHEMI-POUR.
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6. MEMBERS OF THIS GROUP ARE INTERCHANGEABLE PARTS OF
A MACHINE. LONG PERSONAL ASSOCIATIONS AND TIES OF
MARRIAGE AND BUSINESS GIVE THIS GROUP ITS COHESION.
WHEN ONE MEMBER IS ELIMINATED BY DEATH, NATURAL OR
OTHERWISE, ANOTHER REPLACES HIM AND POLICIES CONTINUE.
DESPITE PERSONAL RIVALRIES, MEMBERS SHARE A LOVE OF
POWER, A DETERMINATION TO HOLD IT AT ALL COSTS, AND A
WORLD VIEW SHAPED BY KHOMEINI'S UNCOMPROMISING AND
IDIOSYNCRATIC VISION OF A UTOPIAN ISLAMIC STATE.
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7. WITHIN THE ELITE, THERE IS FREE-WHEELING VIGOROUS
DEBATE WHICH OFTEN SPILLS INTO PUBLIC VIEW. BUT THIS
DEBATE IS BY AND FOR INSIDERS. OUTSIDERS -- BE THEY
CLERICS LIKE AYATOLLAH MONTAZERI OR NATIONALISTS LIKE
MAHDI BAZARGAN -- ARE NOT WELCOME TO PARTICIPATE. MOST
IRANIANS ARE OF COURSE FREE TO WATCH AND LISTEN TO
THEIR BETTERS ARGUE, BUT OUTSIDERS' OPINIONS ARE
NEITHER SOLICITED NOR CONSIDERED. THE ELITE HAS SHOWN
THAT, WHEN THREATENED OR QUESTIONED, IT CAN ACT
DECISIVELY AND BRUTALLY.
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GUARDIANS OF PURITY
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8. THE CURRENT LEADERS ARE DIVIDED OVER WHETHER IRAN
MUST CHANGE ITS MILITANT, REJECTIONIST POLICIES IN
ORDER TO ESTABLISH NORMAL RELATIONS WITH THE OUTSIDE
WORLD AND REBUILD HER ECONOMY. ON ONE SIDE ARE THOSE
WHO PUSH ECONOMIC RECONSTRUCTION AND ARGUE THAT UNDER
PRESENT CONDITIONS A POLICY OF CONFRONTATION, SLOGANS
AND HARSH SOCIAL RESTRICTIONS HAS ALIENATED BOTH
IRANIANS AND FOREIGNERS FROM KHOMEINI'S ISLAMIC
UTOPIA. THEY SAY THAT IRAN, WITH HER MATURE
REVOLUTION, NO LONGER HAS ANYTHING TO FEAR FROM STABLE,
PREDICTABLE RELATIONS WITH OTHER STATES AND SYSTEMS.
SUCH RELATIONS MAY EVEN BRING IRAN ECONOMIC AND
POLITICAL BENEFITS.
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9. ON THE OTHER SIDE ARE THOSE WHO, WHILE NOT
EXPLICITLY OPPOSED TO RECONSTRUCTION OR IMPROVED LIVING
CONDITIONS, RESIST THE POLITICAL AND SOCIAL CHANGES
SUCH STEPS WOULD REQUIRE. FOR THEM, GUARDING THE
PURITY OF KHOMEINI'S VISION COMES BEFORE ALL THINGS.
THEIR BANNER IS THE "IMAM'S LINE", A SHORTHAND FOR
NEGATIVE AND SIMPLISTIC THINKING THAT HAS LED TO THE
ISLAMIC REPUBLIC'S EXCESSES AND SELF-DESTRUCTIVE
POLICIES. IF GUARDING THAT VISION MEANS IRAN'S
CURRENCY IS WORTHLESS, THAT HER FACTORIES PRODUCE
NOTHING, AND THAT HER OIL INDUSTRY CONTINUES TO
DETERIORATE, THEN SO BE IT. SUCH THINGS WERE NEVER
IMPORTANT TO THE IMAM AND WHY SHOULD THE GUARDIANS OF
HIS LEGACY CONSIDER SUCH THINGS?
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NOW FOR THE VERY BAD NEWS
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10. THE IRANIAN ECONOMY IS A DISASTER. EVEN THOSE WHO
BENEFIT BY SPECULATIONS IN CURRENCIES AND SCARCE
COMMODITIES ADMIT THAT SOMETHING NEEDS TO BE DONE TO
RESTART ECONOMIC ENGINES THAT HAVE BEEN SHUT DOWN SINCE

1979. THE IRANIAN RIAL IS ALMOST WORTHLESS (NOW
TRADING AT ABOUT 1350 TO THE U.S. DOLLAR) AND THE
RESULTING INFLATION HAS DESTROYED THE PURCHASING POWER
OF WAGE AND SALARY EARNERS AND OF PENSIONERS. TOP
GOVERNMENT SALARIES ARE EQUIVALENT TO USD 150 PER
MONTH, AND MOST EMPLOYEES MUST HAVE SECOND JOBS.
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11. IRANIAN INDUSTRY IS PRODUCING AT ABOUT THIRTY
PERCENT OF CAPACITY. MUCH OF IRAN'S FOREIGN CURRENCY
EARNINGS GO FOR IMPORTS OF FOOD AND CONSUMER GOODS -
REFRIGERATORS, TELEVISIONS, CAR BATTERIES, TIRES, ETC.
-- WHICH HAVE NO DIRECT AFFECT ON PRODUCTIVITY.
OVER-REGULATION OF IMPORTS HAS LED TO CORRUPTION AND
PROFITEERING AS SUBSIDIZED GOODS IMPORTED UNDER STATE
LICENSES ARE DIVERTED TO THE FREE MARKET FOR LARGE
PROFITS. MANY ENTERPRISES ARE UNDER CONTROL OF THE
LARGE "FOUNDATIONS" WHICH HAVE STRANGLED PRODUCTIVITY
AND PROFITS IN THE NAME OF ISLAMIC SOCIAL JUSTICE.
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12. IRAN HAS AN ENORMOUS HIDDEN DEBT WHICH SOME
ESTIMATE AT USD 200-300 BILLION. THIS DEBT IS WHAT
IRAN DID NOT SPEND IN THE LAST TEN YEARS ON THE OIL
INDUSTRY, ROADS, POWER STATIONS, PORTS, SCHOOLS AND
HOSPITALS. IT IS ALSO WHAT SHE DID NOT EARN FROM
NEGLECTED OR RUINED INVESTMENTS. INSTEAD, IRAN FOR TEN
YEARS PUMPED AND SOLD CRUDE OIL TO BUY FOOD AND
WEAPONS, AND INVESTED ALMOST NOTHING IN HER ECONOMY.
FROM 1978, HUNDREDS OF PROJECTS -- FROM THOSE STILL ON
PAPER TO THOSE NEEDING ONLY THREE BOLTS TO FINISH --
WERE ABANDONED AND LEFT FOR RUST AND VANDALS TO DESTROY.
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13. AS A DELIBERATE POLICY, THE AUTHORITIES ENCOURAGED
THOUSANDS OF IRANIANS, WHO COULD NOT ADJUST TO THE
RESTRICTIONS OF LIFE IN AN ISLAMIC REPUBLIC, TO LEAVE
THE COUNTRY. ALTHOUGH OFFICIALS TALK ABOUT THEIR
RETURN, THERE ARE FEW SIGNS THAT THE ORIGINAL POLICIES
THAT DROVE THEM OUT ARE CHANGING. MANY TRAINED AND
WELL-EDUCATED IRANIANS WHO HAVE NOT LEFT HAVE, FOR BOTH
ECONOMIC AND POLITICAL REASONS, GIVEN UP WORKING IN
THEIR SPECIALTIES AND EARN A LIVING IN THE FLOURISHING
BLACK MARKET. OTHERS, WHO HAVE STUCK IT OUT FOR TEN
YEARS IN THE HOPE OF BETTER TIMES, ARE GIVING UP AND
LOOKING FOR ESCAPE ROUTES.
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14. THE ECONOMIC AGREEMENTS WITH THE SOVIET UNION WERE
FOR SHOW ONLY. GIVEN IRAN'S ENORMOUS ECONOMIC NEEDS,
THE AMOUNTS INVOLVED ARE INSIGNIFICANT. THE
GOVERNMENT'S MAIN PURPOSES WERE POLITICAL: TO SHOW
THAT IRAN HAD FRIENDS IN THE OUTSIDE WORLD AND TO SHOW
THE PEOPLE THAT THE GOVERNMENT WAS "DOING SOMETHING" IN
THE ECONOMIC SPHERE.
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POOR PROSPECTS
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15. POLITICAL AND ECONOMIC PROSPECTS ARE POOR.
ALTHOUGH SOME INDIVIDUALS WITHIN THE LEADERSHIP SAY
IRAN MUST GIVE UP BANKRUPT SLOGANS AND STOP MAKING
NEEDLESS ENEMIES, THEIR VIEWS HAVE NOT LED TO ANY
CONSISTENT NEW POLICY. ONE DAY LEADERS SPEAK OF
TOLERANCE, THE NEXT DAY THEY LAUNCH A NEW CAMPAIGN
AGAINST UNISLAMIC DRESS AND BEHAVIOR. TALK OF CHANGE
HAS REMAINED TALK, APPARENTLY MUCH OF IT AIMED AT
CONVINCING FOREIGNERS TO EXTEND CREDITS AND MAKE
INVESTMENTS. SLOGANEERING AND IDEOLOGY MAY NO LONGER
HAVE THE MASS APPEAL OF TEN YEARS AGO, BUT THEY ARE
STILL POWERFUL WEAPONS IN TEHRAN'S POWER STRUGGLES.
MANY OF TODAY'S LEADERS CAME TO POWER BY IMITATING
KHOMEINI'S OBSTINATE REFUSAL TO COMPROMISE, AND THEY
WILL NOT EASILY ABANDON THIS FORMULA.

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16. IRAN'S POPULATION GROWTH IS OUT OF CONTROL,
GROWING AT MORE THAN THREE PERCENT PER YEAR. THE
COMBINATION OF POPULATION GROWTH AND NO INVESTMENT
MEANS THAT SERVICES -- SCHOOLS, WATER, TRANSPORT, AND
ELECTRICITY -- ARE BREAKING DOWN UNDER THE PRESSURE.
AFTER LIVING OFF THE STORED FAT FROM THE PREVIOUS
REGIME FOR TEN YEARS, IRAN WILL EITHER HAVE TO MAKE
RADICAL POLITICAL CHANGES TO REBUILD OR RESIGN ITSELF
TO PERMANENT THIRD-WORLD POVERTY.
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POLITICAL BACKSWING NOT EVIDENT
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17. DETERIORATING LIVING STANDARDS AND THE LACK OF
CHARISMATIC LEADERSHIP HAS, AND WILL, LEAD TO OUTBURSTS
OF FRUSTRATION. BUT THESE SHOW NO SIGN OF
TRANSFORMATION INTO SIGNIFICANT POLITICAL PROBLEMS FOR
THE REVOLUTION AS A WHOLE. THERE IS NO ORGANIZED
OPPOSITION WITH STRENGTH CAPABLE OF THREATENING THE
REGIME'S GRIP ON POWER. THE DISPUTES MANIFEST IN THE
SPEECHES AND THE PRESS ARE WITHIN THE RANKS OF THE
REVOLUTION ITSELF. THERE IS LITTLE HAPPENING IN THE
STREETS AND IT IS NO THREAT. APATHY AND WAR WEARINESS
PROVIDE A KIND OF SUPPORT THROUGH INERTIA. MOST
IRANIANS WE SPEAK TO PREFER THIS REGIME -- IT IS THE
DEVIL THEY KNOW -- TO THE IDEOLOGY OF MOHAHEDIN AL
KHALQ OR A RETURN TO A DISCREDITED MONARCHY. AND WHILE
TODAY'S LEADERS FEUD OVER MANY ISSUES, THEY REMAIN
HIGHLY AWARE OF THEIR COLLECTIVE POSITION AND POWER.
THEY RARELY THREATEN EACH OTHER PERSONALLY. THERE IS
NO APPARENT LESSENING OF THEIR ABILITY TO DEAL
RUTHLESSLY AND EFFECTIVELY WITH THEIR OPPONENTS OR
THOSE WHO QUESTION THEIR RIGHT TO RULE. SO FAR,
DESPITE THEIR INEPTNESS IN MANY AREAS, THE REVOLUTION'S
INNER CIRCLE LOOKS CAPABLE OF SURVIVING. WALKER
UNQUOTE BAKER

CONFIDENTIAL