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I think the feeling that "Republicans are evil" comes from how Republicans take the more selfish and cynical approach to almost every issue.Gay Rights:Republicans historically have been against gay rights, gay marriage, anti-discrimination laws especially those applying to LGBT issues, Homosexual adoption, etc. Thankfully this appears to be changing.Healthcare:Republicans seem to hate any initiative which provides health care to the poor, unemployed, disabled or those for any other reason cannot afford healthcare. There is nothing more "evil" than turning your back on people who are suffering, especially when they are your neighbor.The Environment:The Republican platform favors burning oil, coal, adding more nuclear power. They deny climate change, and demonize people like Al Gore who try to make a difference here. To liberals it is certainly "evil" to destroy or hurt the environment which stewards us all.Gun Control:Republicans love their Guns. It's certainly a constitutionally protected right, nobody is trying to deny that the Second Amendment happened... however when looking at the issue of Guns and Gun Control, it is undeniable that these are instruments of death, and that the United States has a gun problem. In opposing every single attempt to not outlaw, but rather regulate guns, Republicans seem evil.The Economy and Taxes:While liberals acknowledge that government costs money, and needs taxes... liberals attempt to ease the burden of this through a progressive tax system where the wealthy are taxed more, and the poorest are perhaps not even taxed at all. Republicans feel that their money is theirs, don't tax them at all, slash taxes wherever possible. If they are taxed they want the poorest people to pay exactly the same as the rich (This they call "Fair Tax"). They claim they want a balanced budget, however if asked to choose between a balanced budget and lower taxes, they'll take lower taxes. This kind of selfishness to a liberal seems evil... even rich liberals like Warren Buffet.Business Before Everything Else:Basically Republicans love commerce. They are in favor of outsourcing, deregulation, lower corporate taxes, business influence over politics, businesses given the rights of citizens... you name it. Placing business needs and the pursuit of wealth above everything else to liberals is selfish and at times evil when juxtaposed with human rights, the environment, workplace safety, fair compensation etc.Foreign Policy, Terrorism and War:Republicans tend to be more war oriented than liberals. They favor a U.S. dominated world. They disdain the U.N and Europe. Republicans tend to be less knowledgeable about other cultures. They oppose nuclear disarmament. When looking at government spending, the only place they don't want to cut the budget is on defense, wherein the U.S. already spends 17x more than any other nation. This type of war mongering (War being death and suffering) to liberals seems evil.Religion vs. Education / Religion vs. Science / Religion vs. Women's Rights:Republicans seem to get their Christian based religion all over the place, trying to get evolution out of school textbooks, prayer in school. Teaching the 10 commandments, putting "God" into the pledge of allegiance. They even take the constitutional approach that the founders intended the country to be a "Christian Nation" and the constitution should be interpreted as such. In public debate they disdain those who do not want religion celebrated in public school. They are against "The right to Die" for the terminally ill. This all seems pretty evil to a liberalGeneral Nastiness:This is tough to explain, but if you follow the media and politics, I think you will see that Republicans are more apt to demonize, belittle, smear and argue with fallacious methodology. Do a google image search for "Conservative Propaganda". Then do a google image search for "Liberal Propaganda". Try a few other related searches using terms from both sides.Also here is a fascinating article on Conservative propaganda:Why conservatives prefer propaganda to realityIn Summary:I could go on... I realize I have oversimplified many of these issues, and glossed over many details, but I hope that you are beginning to see the trend. People view Republicans as evil because their outlook on the world begins with selfishness, and the willingness to exert their ideas of how to live life upon others.Republicans are Evil pt.2So I originally wrote this thinking of a Republican's world view, but witnessing this 2016 election I realize I have some more to say on the subject this time focusing on Republican methodologiesAd Hominem AttacksA favorite method of argument for Republicans is the Ad Hominem attack, they vilify and mock their opponents, to the point that they are unwilling to listen to a word uttered by them and see it in a good light.Now to be fair some of this does exist going the other direction, but it's really the quantity of it that astounds me. My father is constantly sending me these awful chain mails... so I looked online and here is a blog of someone else's dad who apparently has done the same thing:MyRightWingDad.netRefusal to Accept a FactSo full disclosure, this is a bit of a Straw Man, but I will attempt to be as objective as possible. I get into arguments all the time with Republicans about the National Debt. I have been told many times by Republicans that "Obama is the worst president of all time.", I have my issues with Obama, but I dig into this one, when asked "What has Obama done that is so bad?" an inevitable topic is 8 Trillion dollars added to the National Debt... granted this is a lot of money but Republicans have amnesia on this topic. I launch into my points:The U.S. Budget doesn't turn around on a dime, the president to affect the bottom line must first sign policy into lawThe President inherited a huge deficit, 1.4 Trillion dollars a year, two wars and an economy is meltdown such that the worlds leading economists both liberal and conservative were asking for ~ 1 Trillion dollars of stimulus. An economic situation caused by deregulation and lack of oversight by both Clinton & Bush presidenciesThe interest from Bush's 5 Trillion dollars of added debt has cost the nation ~750Billion over Obama's presidency (I did the math, you can too its all publicly available information, and side note Bush inherited a surplus from Clinton so his 5 Trillion is a direct result of his actions)Obamacare was close to revenue neutral when it was passedThe annual U.S. deficit is on a downward trendAnyway I can go on, but the long and short of it is that none of that matters to Republicans, 100% of it is Obama's fault... and Obama knows it!Obama Ribs The Republican Candidates (This video is hillarious)Dog Whistle PoliticsSocialists! Wimps! San Francisco Values! Welfare Queens! Shariah Law! They want to take your Guns! Thugs! Entitlements!Republicans love their Dog Whistles. Republicans have developed an entire language to describe the world that makes them think they are correct, and disparages any dissent. These words evoke visceral reactions in Republican Ranks, and end any meaningful attempts at conversation.Racism, with a Big Fat Helping of More RacismTed Cruz tried to use this one in a debate:“You know, I’m reminded of what FDR’s grandfather said,” he said, tugging at his overall straps and placing the piece of straw in his mouth just so. “He said, ‘All horse thieves are Democrats. But not all Democrats are horse thieves.”Well to use his style, here is my response:You know, all White Supremacists are Republicans, but not all Republicans are White Supremacists.The Republican party lacks diversity, and for good reason. The Republicans have demonized minorities for years. If you are a racist in this country, there is no possible way you would be a Democrat. Ask a Democrat what their values are and they might say: Tolerance, Diversity, Education, Community, Equality, Compassion, Respect, Environmental PreservationA Republican might answer: Freedom, Godliness, Opportunity, Individualism, Free Markets, Success, StrengthRepublicans Are Simply Hate-MongersViral Video Shows Racist White Woman Going Berserk After Mistaking Two Brazilians for TerroristsDonald Trump Rally - Free Hugs [Extended Version]Conservatives Are Evil in the Trump Era:I will periodically update this section as I have some time.Trump vs. The Environment. One of the biggest issues for me personally is our nations energy future, and the protection of the environment. I don’t consider myself a radical by any means, I am not talking about banning fossil fuels or even steps that would disrupt commerce in a meaningful way. For those of us that care about this planet, Trump’s record on the environment is worse than any of us could have imagined.Trump appoints Scott Pruitt, a man who has sued the EPA multiple times and takes his queues from industries that pay him to be their lapdog. This is corruption of the highest order, and he’s gutting the EPATrump signed an executive order allowing waste dumping in streams, reversing a protection Obama put in place. Who wanted that?He canceled the legally mandated environmental study for DAPL allowing a pipeline to be built despite a torrid history of leaks amounting in millions of gallons in similar projects.Trump has announced he wants us out of the Paris Climate Change accordsA Final ThoughtOnce again, this is my take on how I see Republicans, and why I can identify with people who see Republicans as evil. This is an opinion and of course it is subjective, but I do encourage you, that if you disagree with some of my examples to tell me where I am wrong and why.

Share Buyback Disasters: Case Studies of FailureReturning to the UK equity market, it is also possible to identify a rogues’ gallery of buybacks that have failed. A sample of these firms amply illustrates the pitfalls of buying back overvalued stock.1. Cyclical Industries: BHP (Mining)BHP is an Australian headquartered mining, metals, and petroleum business. Their experience provides a cautionary note for executive management of highly cyclical businesses. With EBITDA growing +60% year-over-year, significant operating cash flows (USD $12.2 billion) and ‘underlying’ return on capital at 41%, BHP announced a USD $10 billion capital management program with its interim results, in February 2011. This buyback program was subsequently completed six months early (end-June-11). It is reasonable to describe the initiation of this buyback program as managerial hubris.In its results release, BHP cited “confidence in the long-term outlook” and a “commitment to maintain an appropriate capital structure.” Despite management’s confidence, subsequent share price performance was dire (see chart below). One year following the repurchase announcement, BHP’s TSR was -22%. Stretching the time horizon to four years (e.g., to February 2015), BHP’s TSR was -26%, compared to the broader UK large-cap index’s TSR of +31% over the same time period.This case study highlights the difficulty of successfully timing stock repurchases for commodity price-sensitive business models. Despite relatively high levels of supply concentration, BHP is a price taker in the iron ore, copper, and metallurgical coal markets, which collectively account for the vast bulk of group sales. Key commodity prices for BHP fell sharply from 2011. While calling the direction of commodity prices is notoriously treacherous, given the underlying strength of the business, more counter-cyclical thinking from management would have been constructive. Perhaps BHP fell into the trap of thinking “this time is different,” underpinned by a never-ending commodity “supercycle”?At the time of writing, BHP’s stock price is £19, still below the £23 level at the time of the 2011 repurchase announcement. Iron ore prices and copper levels are also substantially below 2011 levels. Near peer Rio Tinto suffered a similar experience following its repurchase activity in 2011. Together, their experiences provide a sobering perspective on the danger of mis-timing share repurchases.2. Massaging Metrics: 3i (Private Equity)3i, an investment manager focused on mid-market private equity, provides an intriguing case study, even though it didn’t actually reduce its share count. Following a bumper year bringing the firm’s Balance Sheet towards a net cash position, 3i announced its intention to return cash to shareholders via a B share process in May 2007. A B share process gives shareholders in UK firms the opportunity to elect for their gain to be treated as either capital or income, depending on their tax requirements. For companies with significant retail shareholders, a B share process is generally viewed as a positive.This was 3i’s second B share return in the space of two years. The primary motive given was the optimization of their return on equity along with maintenance of an efficient balance sheet. The decision to return this cash garnered little interest from securities analysts on the results call.Subsequent shareholder returns for 3i proved exceptionally poor, even in the broader context of the Global Financial Crisis. In the year following the full year results announcement in May 2007, TSR for 3i was -23% vs. the large-cap UK index at -3%.Underperformance continued. Four years down the line, 3i’s TSR was -60%, compared to the UK index up 4% (see Figure 8). While it is true that financial leverage can turbo-charge operating returns, 3i’s experience shows it can work both ways. This has proven particularly true for financial service firms.Interestingly, 3i had to fall back on a rights issue in early 2009, as the executive board decided “a more conservative financial structure for 3i is appropriate.” The purpose of the equity offering was to reduce debt on the balance sheet. The primary winners from this cycle were advisors earning fees.3. Contradictory Decision-making: Morrisons (Supermarket)Destroying value through share repurchases is not isolated to bulk miners or financial service firms. The experience of Morrisons, a UK supermarket group, in the 2011/12 period is instructive. Shortly after the appointment of a new CEO, Dalton Philipps, in 2010, the firm committed to returning £1 billion through share repurchases in the two years to March of 2013. The primary motivation mentioned was to enhance shareholder returns. On this basis, the equity retirement program proved an abject disaster.Morrison’s was operating in a weak macro environment, with low wage growth, in a market being heavily impacted by the growth of discounters, such as Aldi and Lidl. Additionally, Morrison’s lacked any meaningful capability in local (convenience formats) or online. These two areas remain some of the highest structural growth areas of the UK retail market.In his outlook statement, Phillips forecast “a challenging year in 2012.” The annual report further notes “a very tough economic climate.” It is unusual to see this kind of language in official company communication when initiating special returns. Despite these structural and cyclical disadvantages, management elected to return cash. In hindsight, this appears extraordinary.In 2011 and 2012, Morrison returned >£0.3 billion and >£0.5 billion, respectively, in share buyback form, equivalent to approximately 4% and 7% of its average market value in each year. TSR from these levels proved dreadful. Four years after the initial announcement of the repurchase program, Morrison’s TSR was -21% compared to a UK market TSR of +37% over the same time period.Morrison’s share price has never recovered to the near £3 levels it traded at prior to the buyback program (see below). Today, it still languishes near £2.4 per share. The CEO responsible for these errors was ousted in early 2015. His experience offers a sobering perspective on misallocating capital.Financial Engineering Does Not WorkOne of the prime reasons share buybacks have got a bad name is the dubious practice of managing share count dilution. Many, many publicly listed firms engage in modest buyback programs to reduce stock option exercise dilution and manage reported earnings per share (EPS). High technology firms, most often listed in the US, have been particularly guilty.This type of engineering in isolation rarely (if ever) works. McKinsey has shown that while there is a relationship between total returns to shareholders (TSR) and EPS growth, there is no correlationbetween share repurchase intensity and TSR. Unsurprisingly for seasoned investors, fundamentals (organic sales growth, margins, returns on capital, etc.) are more important. Arguably, it would be far better to increase low paid workers’ remuneration and/or fund moon-shot style investments than engage in financial engineering. This is a vital area for more rigorous debate by all stakeholders.Common Problems with Disclosure Regarding Share Buyback PoliciesPerhaps the most striking feature of this study is the lack of detail that management teams have provided historically when announcing plans to buy back stock. Ambiguity is not unusual and is rarely (if ever) challenged by securities analysts on conference calls, post results.Opacity has been a key theme across repurchase announcements. Vague reference to financial discipline and future confidence are common. What is clear is that the track record of firms solely aiming to manage their capital structure through a buyback process has often been underwhelming.CAPITAL STRUCTURE MANAGEMENTWe have considered the experience of BHP, Rio Tinto, and 3i in detail. According to their public statements, all three firms were aiming to manage their capital structure via a share repurchase program. For example, BHP sited “confidence in the long-term outlook” and “commitment to maintain an appropriate capital structure.” At their results call, BHP CEO Marius Kloppers went further, stating “BHP continues to be very well positioned to deliver value to our shareholders…We believe we are well positioned to continue to outperform.” He could not have been more wrong. Each program destroyed substantial equity value. The experience of Evraz, buying back due to reduced leverage and improved liquidity, provides a contrary example. This apparent contradiction presents an intriguing puzzle.This trend has been further underpinned by the growing use of rolling repurchase programs by firms. Under these arrangements, all surplus capital, as defined by the individual corporate, is automatically returned to shareholders via a buyback. The timing and execution are outsourced to a third party to avoid a conflict of interest. Management justifies their approach by noting how difficult it is to identify and exploit the top and bottom of market cycles in advance. This is a cop-out. By definition, permanent rolling repurchase programs do not account for periods of overvaluation. While calling overall market cycles is highly challenging, insiders spotting dislocations in specific sectors where they have worked for over 30 years is not. This is rarely acknowledged and should provide food for thought for every board and other stakeholders.CLEAR LANGUAGE AND MESSAGING IS VITALOften, the rationale that has been advanced has been dubious. While British American Tobacco(BAT) created substantial value from buying back stock at the turn of the decade, the explanation provided suggested surplus capital (failure to conduce M&A) and financial engineering (boosting reported EPS) as the key motives. With the benefit of hindsight, this was unhelpful. In reality, BAT management clearly had a private view that regulatory risk was manageable and pricing power could offset volume challenges. That is why they were so keen to buy assets (engage in M&A). Over time, this view was proven spectacularly right. Arguably, BAT management could have been more explicit in public.There have been exceptions to this trend. When initiating their successful repurchase program, Next clearly stated “shareholder value can be enhanced by returning surplus capital to shareholders.” At the time, the Next chairman noted the excellent position of the balance sheet (albeit it was still a net debt position) and expectation for strong positive cash flows.Management also made it crystal clear that organic investment in the core business remained the most attractive option for capital allocation, and repurchases would not in any way impair this. This candor deserves credit. Ahead of their time, Next management was addressing concerns that buybacks reduce real investment. Other management teams can still learn from this approach.Nevertheless, mixed messages were also evident. There is more than a hint of financial engineering in the fact that Next was only prepared to buy back stock in the open market when such action resulted in an increase in earnings per share. In their annual report, Next management observes they “decided to embark on a program to enhance EPS through share buybacks.” As discussed, this motivation lacks any meaningful empirical justification. This has not stopped successive generations of UK executive management teams using it as a reference point. Examples outside the UK are common.Unfortunately, explicitness from executive management does not guarantee success. For example, when initiating their buyback, Rolls Royce stated, “The aim of the buyback is to reduce the issued share capital of the Company, helping enhance returns for shareholders.” This proved wildly optimistic. The review of Morrison’s also demonstrated the primary motivation was enhancing shareholder returns. Yet, the repurchase decision destroyed significant value for remaining shareholders.A Framework for More Robust Capital AllocationSo what can we learn from the experience of these UK listed firms during the past 20 years? Is it possible to develop a more robust framework to help boards and other stakeholders improve their approach to capital allocation? The answer is firmly YES!1. On an Overall Basis, Buybacks Do WorkThis review supports the thesis that on average, firms that buy back substantial stock create value. Due to their flexibility (vs. dividends) and relative tax efficiency (capital gain vs. income), buybacks remain an important tool for future capital allocation. There, announcements can contain valuable information. All that said, it is vital to ring-fence announcements that are “in the noise” from more meaningful repurchase activity. Too many buybacks appear token in nature, designed to manage share count and boost reported EPS. This is not an optimal use of capital and should be challenged.2. Beware of HubrisThe cure for high prices is high prices. This is particularly true for price taking and highly cyclical business models. Returning a substantial amount of cash as a special return several years into what appears to be a super-cycle is likely a bad idea. The experience of 3i, BHP, and Rio Tinto provide a strong proof statement. Spending time with management would have risked Stockholm syndrome.On the other hand, the cure for low prices is low prices. The decision by Evraz to aggressively repurchase stock amid a cyclical low in steel was well rewarded. While no management team can expect to buy at the absolute bottom, their inside knowledge of the industry, past cycles, capacity utilization, customer demand, marginal cost, and marginal pricing underpinned their information advantage vs. other public market participants. This is a valuable lesson.3. Hubris, Coupled with Management Change, Is a Red Warning LightSpecial care should be exercised by new management when taking on a new firm or new industry. This review identified the hubris shown by Morrisons in repurchasing stock. While an experienced grocer, the new CEO had limited experience in the UK market. Phillip’s had spent much of his career working in Germany, Brazil, and Canada. With hindsight, his decision to aggressively return cash to shareholders, rather than transform Morrison’s position in the local and online markets, proved costly.A similar lesson is evident at Rolls Royce. Incoming CEO Warren East had developed his reputation in the semiconductor industry, primarily with ARM Holdings. His decision to continue with the buyback program initiated by his immediate predecessor has been shown to be a mistake. This again provides an important lesson for board members, employees, pensioners, regulators, and investors.4. Clear Goals Need to be MandatoryStakeholders in all their shapes and sizes would be better able to evaluate the success (or failure) of repurchase programs if boards were more explicit articulating their goals when initiating share buybacks. For management themselves, improved transparency at the outset would allow those managers with the best track record for allocating capital greater flexibility and freedom for future decisions. This also applies to activist shareholders pushing target firms to initiate repurchases to spur improved performance. Arguably, the market environment is already changing. For example, at the time of writing, Masayoshi Son, the founder and Chairman of Japanese conglomerate Softbank, has announced a new buyback explicitly aimed at closing a perceived valuation gap. Criticism of repurchase activity continues to build on social forums such as Twitter.Always Take Care of Every StakeholderReferences to enhancing EPS helps fuel the fire of populists. Managing share dilution from employee compensation is not a valid reason for buying back stock. Recognition of this risk demands careful scrutiny of planned repurchase activity by all stakeholders, particularly if funded by debt (what Hyman Minsky categorized as Ponzi finance).It may seem trite, but bears repetition; board members need to be careful in balancing the needs of all stakeholders. Capital and operating investment in the business that exceeds the cost of capital will always be the optimal path forward. Alongside economic profit, full-time headcount, wage growth, tax contribution, and impact on local communities are also important key performance indicators. It is vital that boards do not give the impression that share buybacks are at the expense of these aims. While not perfect, the approach taken by Next offers a good starting framework

Steve Miller, George Rickey, Copyright © 1977Steve Miller, Copyright © 2001, 2011, 2015(Author’s note: It’s fitting in 2015, after signing a cooperation treaty with Iran after 35 years of bad relations, to look back at the hugely important relationship that existed between the United States and Iran prior to the Shah’s exile, and the 1979 Iranian revolution. Few people today realize how deep America’s ties were with Iran. In looking at just Foreign Military Sales (FMS) contracts with Iran for U.S. arms sold in the late 1960s through 1977, it amounted to more than $90 billion (in 2015 dollars). What you will read below contains, in part, a strategic arms report I co-authored in 1977. I hope you will find the following information interesting, and come to appreciate the critical loss America suffered when we no longer had our regional partner to blunt Communist hegemony among the unreliable states of the Middle East.)In February 1976 I completed my Air Force enlistment and moved into civilian life. My dad was not thrilled at all about my choice in leaving the Air Force, and put it this way: “You got out in the middle of a danged recession with double digit inflation, and double digit unemployment! What were you thinking?!?” Looking back on it, it was a cavalier decision on my part, but, it was typical behavior for someone in their early 20s, thinking they were invincible, and coated with Teflon. As for my dad, his feelings would be valid for any parent, in any age, or any society. Having grown up during the Great Depression, however, it likely amplified his feelings.In any case, I was only a civilian about six weeks when I received a phone call from a project manager at the Air Force’s Rome Air Development Center (RADC) in upstate New York. He queried me to determine if I was the “right” Steve Miller, late of the Air Force, with a background in electronic warfare, radar systems, and Southeast Asia airborne reconnaissance operations; that was me. The man said in a rather circumspect way, that RADC had a defense systems manufacturer under a $105 million (2015 dollars) contract for work pertaining to my background, and would I be interested in a job interview? Due to security concerns he could not say much more about it for the time being. I was given a man’s name, D.D. Johnson, and a date & time a week hence, to meet him for an interview at the local Hilton Hotel near the airport.I turned up at the appointed time and place to meet Mr. Johnson. Before proceeding to discuss things, he had me sign a commercial non-disclosure agreement, and a rider acknowledging that what we discussed was U.S. Government information “For Official Use Only.” Definitely not top secret information I previously worked with in the Air Force; but, I got the point.The Q&A about my skills was the most perfunctory interview I ever had. Johnson reaffirmed my military background in the areas the RADC manager asked about. He verified I still had an active top secret clearance, and was I willing to work OCONUS for the next three years in an austere location? Sure – why not? I wasn’t busy doing anything else.I went to work for General Dynamics, Fort Worth Division, as an Electronic Warfare Systems Engineer. I reported-in for newhire orientation, a classified security briefing, and program indoctrination. I only spent eight days there, and then left the country for my new assignment in Iran. Our in-country team never had more than two dozen men assigned to it. Although several team members were aboard for ancillary duties such a human resources, facility maintenance, and materiel management, 80% of us were EW and SIGINT experts. Although nothing was said overtly, it was obvious we were all military veterans; about half were retirees. Our on-site program manager was a retired Army Colonel, Robert Fate. Fate had been a tank platoon leader in WW II, serving under General Patton. When queried about his service under Patton, especially after the Army crossed the Rhein River into Germany in 1945, Fate joked that it was a “cake walk,” describing his tank crew duties at the time, “I had one guy shootin’, one guy lootin’, and two takin’ pictures!” Although we addressed Bob by his first name, we still said yes sir and no sir when he asked us a question or told us to do something. Regardless the fact we were civilians, the work we were doing was done with General Dynamics-built military equipment, and we functioned with a military operational tempo.Our work was conducted at a remote site carefully selected to monitor Iranian airspace for the frequent high speed incursions of Soviet MiG-25 Foxbat air superiority fighters. We also collected signals intelligence emanating from any detectable Soviet ground station, aircraft or ship in the Arabian Sea or Persian Gulf. Ultimately, the information we collected, and that of the Embassy’s defense attaché office & CIA team, allowed us to conduct further research and analysis of Soviet, and other state actors, intentions in the Middle East. In August 1977, one of the DAO analysts and I were tapped to cull through the collected information and prepare a “sitrep” (situation report) of Iran’s regional status in preparing themselves politically and militarily to both defend themselves, and take on the role of the United States’ anchor in maintaining strategic stability in the Persian Gulf and Arabian Sea.The idea of preparing a comprehensive sitrep about Iran was not part of our contracted SOW (statement of work) from RADC. The whole idea came to the surface in June 1977 five months after Jimmy Carter became President of the United States. He campaigned for the presidency on the idea that people and institutions in Washington, D.C. were what was wrong with the country. Whatever the status quo was inside the beltway, the Carter Administration questioned its validity. One of the topics to be questioned was the “Nixon Doctrine.”In President Kennedy’s inaugural address in January 1961, he set the tone for American foreign policy for the next eight years when he said: “Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty.” This became known as the “Kennedy Doctrine.” The embodiment of this doctrine is exactly what happened in Vietnam, and nearly tore the country apart.Richard Nixon’s subsequent presidential campaign was built on extricating the country from Vietnam. Not looking to fix blame on neither Presidents Kennedy, nor Johnson, on U.S. participation in the War, it was at least instructive to anyone paying attention to the words of the Kennedy Doctrine, such as “pay any price,” or “bear any burden.” The hundreds of billions of taxpayer dollars, and 58,000 American lives lost in the War clearly demonstrated just how much skin-in-the-game might be necessary to “support any friend,” or “oppose any foe.”Books published decades later about the Nixon Administration and the goal of getting America out of Vietnam reveal, when Nixon and Kissinger stepped into their new jobs, neither of them had any specific plans for exiting the War. They both knew, however, the Kennedy Doctrine had to be junked, and a new policy put in its place. In July 1969 during a speech in Guam, Nixon outlined his new foreign policy that became known as the Nixon Doctrine. Nixon stated that, "the United States would assist in the defense and developments of allies and friends," but would not "undertake all the defense of the free nations of the world." This doctrine meant that each ally nation was in charge of its own security in general, but the United States would act as a nuclear umbrella when requested. The Doctrine argued for the pursuit of peace through a partnership with American allies.In Nixon's own words in a televised speech to the whole country in November 1969, he said:• First, the United States will keep all of its treaty commitments;• Second, we shall provide a shield if a nuclear power threatens the freedom of a nation allied with us or of a nation whose survival we consider vital to our security;• Third, in cases involving other types of aggression, we shall furnish military and economic assistance when requested in accordance with our treaty commitments. But we shall look to the nation directly threatened to assume the primary responsibility of providing the manpower for its defense.As a consequence of this shift, direct sales of weaponry to nations no longer under the nuclear umbrella of previous US security guarantees, dramatically increased as US guarantees were withdrawn. Author Michael Klare stated the Nixon Doctrine "opened the floodgates" of U.S. military aid to allies in the Persian Gulf, such as Saudi Arabia and Iran, who found themselves flush with oil sales revenue, allowing them to fund a huge military expansion. Total arms transfers from the United States to Iran increased from $103.6 million in 1970 to $552.7 million in 1972. During the same timeframe, Saudi Arabia increased their spending for military equipment from $15.8 million in 1970 to $312.4 million in 1972. The stage was now set for President Carter to promulgate his own doctrine, and declare the Nixon Doctrine null & void.When Jimmy Carter became president in January 1977, he took office with the stated objective of making both US domestic and foreign policy more humane and moral. His ambitious (many claimed he was more naïve than ambitious) foreign policy objectives would come to pass by tackling human rights abuses, third world country economic development, address environmental problems and reduce the global transfer of conventional arms. Soon after taking office, Carter assigned the newly appointed National Security Advisor, Dr. Zbigniew Brzezinski, to begin researching how to roll back the Nixon Doctrine as soon as practical, and replace it with a new foreign policy embodying the just stated Carter goals.In May 1977, Carter issued Presidential Directive number 13 (simply, PD-13) with the intent of reversing the Nixon Doctrine. PD-13 required arms transfers to be directly linked to continuing US security interests, and tied them closely to the human rights records of the recipient governments. Among its many limitations, PD-13 placed limits on sales dollars of the weapons, and barred the U.S. from introducing more sophisticated weapons than those already present in a region, and limited weapons produced and developed primarily for export.Critics of PD-13 stated the Carter Administration failed to apply the tenets of PD-13 on a consistent basis. An example of Carter’s uneven application of PD-13’s rules was limiting Latin American aircraft sales, but, endorsed major aircraft sales to Israel, Saudi Arabia, and Egypt. Carter attempted to convince other major, arms supplying countries to buy-in on PD-13’s concepts, but got nowhere with it. After 18 months of multilateral talks with the USSR, UK, France, China, Belgium, Sweden and other high-profile arms producers, with only the Soviets expressing interest, the effort was abandoned. Carter decided the U.S. would continue the pursuit of PD-13 on their own.Prior to promulgating the Carter Doctrine of limiting conventional arms transfers expressed in PD-13, neither the Kennedy nor Nixon Doctrine attempted to dictate an arms recipient’s method of running their country or how to deal with their own citizens. Since the start of the Cold War U.S. policy toward Communist global hegemony was, at least in-practice, to treat the Soviets as enemies, and any nation-state who also saw the Soviets as an enemy, was America’s friend. The U.S. has never condoned human rights abuse; but, which issue had greater urgency…stopping the spread of Communism, or curbing human rights violations? Western democracies saw Communism as the greater threat.In hindsight PD-13 had good intentions; but, it created a whole raft of unintended byproducts. One of the worst unexpected consequences of the Carter Doctrine was giving rise to illegal, international arms dealers. If a previous supporter of western democracies found itself running afoul of PD-13, and unable to procure U.S. arms, that did not stop them; they simply went to a black market arms dealer to secure what they needed. The Carter Doctrine did not fix very many human rights violations; but, it created the multi-billion dollar illegal arms trade.When it came to implementation of PD-13, discussions with foreign governments were only conducted once a comprehensive sitrep was completed and understood by State Department members of the Politico-Military Affairs Bureau charged with conducting the arms transfer negotiations with the 3rd world countries listed in PD-13. Iran was one of the countries that would be greatly affected by PD-13’s policies. What is written below is the report I co-authored, and then an itemized report-out prepared after a subsequent high level meeting with the Shah of Iran, and his top advisers.-----------------------------------------------------------------------------------------------------(SITUATION REPORT PREPARED FOR PD-13 MEETING WITH THE SHAH)Table of ContentsSection I: IntroductionSection II: Iranian force planning and military equipment objectivesA. Threat perceptions, political assumptions and other determinantsB. Force structure and anticipated Iranian acquisitionsSection III: US assessment of Iranian military planningA. Military threats to IranB. Iranian absorptive capacityI. INTRODUCTIONSince World War II and the assumption by the United States of global responsibilities in the pursuit of peace, stability and economic and social development, Iran has been of special interest to us. During the ensuing three decades, the relationship has evolved in response to each of our national interests and the increasing strength and influence of Iran. Initially our relationship was narrowly based on geo-political, factors; it now encompasses most areas of inter-governmental and private sector concerns:• Deterrence of Soviet ambitions: A mutual interest in deterring the expansion of Soviet power and influence, particularly in the Middle East, has been and remains the bedrock of the relationship. Iran's nearness to the Soviet Union, its historical experience of Soviet expansion, and its strong anti-communist leadership have led to objectives and policies which dovetail with our global policies first enunciated by President Truman.We have both gained great benefits in connection with this shared interest. The United States is the only Western country capable of providing an ultimately meaningful deterrent to protect Iran. In the first two decades of the postwar era, Iran was essentially a recipient of United States assistance and advice and, except for its membership in CENTO and the provision of various intelligence and military facilities to us, played a clearly backseat role. This situation has changed. Today, as a growing regional power, Iran has the financial strength, and is rapidly developing the military capabilities and influence, to do much more itself.• Access to Iran's unique geo-political position: Iranian cooperation with the US on a variety of matters is of great importance to us. United States overflight rights provide us with the most direct and satisfactory air link between Europe and countries to the east of Iran. In addition, landing rights have been important to support our air surveillance of the Indian Ocean, and port access for ship visits remains useful.• Provision of petroleum for the United States and its allies: Iran is an important source of petroleum for the United States and crucial supplier of our allies and friends: over 8% of United States petroleum imports; over 16% of those for Western Europe; almost 22% for Japan; and over 50% for Israel. Iran has been a dependable secure source of petroleum; it did not join the 1973-74 Arab oil embargo and continued its shipments to Israel. Iranian leaders have frequently reiterated that Iran will not join politically motivated embargoes. Iran's location enables it to make an important contribution to the security of oil transiting through the Strait of Hormuz; about 60 percent of oil in international trade passes through the Strait.• Furtherance of regional stability and development: United States policy, for the last several years, has been to assist and encourage Iran to become a regional power which would, together with Saudi Arabia, assume security responsibilities in the region and play a generally more active role in support of our mutual interests. Iran has accepted this role — since it coincided with the Shah's view of Iran's key position in the area — and has used its military power (in Oman), its financial strength (loans to India, Pakistan, Afghanistan,. Egypt, Jordan and Syria) and its general influence to help resolve regional disputes (i.e.; resumption of India-Pakistan relations and resumption of Afghan-Pakistan dialogue).Iran is the only regional power which has been able to develop and maintain close and confidential relations both with the Arab confrontation states and with Israel. Iranian leadership has remained in close touch with United States negotiators, has counseled moderation, and has encouraged Arab and Israeli leaders to take steps toward peace.As the strongest power in the Persian Gulf, Iran has maintained good relations with Saudi Arabia and the small Arab states of the Gulf, has settled major differences with Iraq, and has been seeking a collective security arrangement to include all Gulf countries.Finally, Iran has proposed broader regional cooperative arrangements involving all the littoral states of the Indian Ocean or, as a step in that direction, some kind of common market among Iran, Afghanistan, Pakistan and India.• Maintenance of beneficial economic, commercial and cultural relations: In 1975 the United States overtook Germany as the largest supplier of civilian goods and services to Iran's burgeoning market. United States non-military sales to Iran in the 1975-1980 period should exceed $20 billion, which would result in a trade surplus for the United States despite the sharp increase in US oil purchases from Iran. In addition, United States firms continue to move into various joint undertakings in Iran and US private investment in Iran now totals roughly $500,000,000. The Ex-Im Bank exposure (loans and guarantees) in Iran is about $1 billion The United States - Iranian Joint Economic Commission, established in 1974, has opened potentially useful cooperative links in such diverse areas as nuclear and other forms of energy, agriculture, housing, manpower training, transportation and science.Cultural ties are extensive, including over 30,000 Iranian students — the largest contingent from, any foreign country — studying in this country; over 50 United States universities have collaborative ties to Iranian institutions.The Nature of Our Security/Military TiesDespite the changes in the relationship over 30 years, the central core continues to be cooperation on security affairs.The development of Iran's military capabilities has gone through a number of distinct stages which have been largely determined by the availability of external military and economic assistance, the extent of Iran's financial and manpower resources which could be allocated to defense, and the Shah's views of the strength of the western world, particularly the United States.Until 1973, financial constraints kept the development of' Iran's military capabilities far below the rate the Government of Iran felt necessary. Between 1945 and roughly 1963, the principal aim was to build, for the first time, a modern military force which would have the capability of ensuring internal stability. A secondary objective was to have a limited capability to defend Iran's frontiers with Iraq and Afghanistan. During this period, Iran's vital interests in freedom of navigation and political stability in the Persian Gulf area were guaranteed by the presence of British power.A variety of factors in the period from 1965 to the mid-1970's contributed to an acceleration of Iran's military buildup so that it could meet new contingencies: a) the British in 1968 announced their intent to give up their historic role and actually left the Persian Gulf in 1971; b) relations with Iraq, which was becoming increasingly dependent upon Soviet arms and support, were poor. Clashes on the Iran-Iraq border were not infrequent, Iraq encouraged the Arabic-speaking and oil rich area of Iran to break away, Iran actively supported and supplied the Kurdish rebellion in Iraq, and Iraq maintained a steady barrage of anti-Iranian propaganda and occasional direct subversive actions against Iran; c) throughout the Middle East, radicalism — Egyptian, Palestinian and others — was perceived as posing a direct threat to Iran; d) the 1965 Indo-Pakistan war led to a larger Soviet role in the Indian subcontinent; e) the United States, bogged down in Vietnam, and its role in the world increasingly criticized domestically, seemed unlikely to give its friends meaningful security support; f) Iran's economy improved following twenty years of outside assistance and entered a period of high sustained growth which has continued to this day.The Iranian Government established as its key objective the defense of the Persian Gulf — to take over the British role, alone if necessary, together with the Gulf Arab states if possible- Since the early 1970's, Iran has given priority to the creation of a modern air force, seeking first to equal and in time to surpass that of Iraq. Iran's naval forces, starting with smaller craft suited to the Gulf, and its ground forces, have also increased.In 1968 in recognition of the improvement in the Iranian economy, the United States ended its grant military assistance. Between the end of World War II and until the early 70's total US assistance was $1.4 billion — approximately $900 million in grants and $500 million in loans.The massive increases in oil revenues starting in 1973 enabled Iran to enter the current stage of its military development.II. IRANIAN FORCE PLANNING AND MILITARY EQUIPMENT OBJECTIVESA. Threat Perception, Political Assumptions and Other DeterminantsIn Iran, ail major government decisions are made by the Shah. His personal perceptions — based on broad balance-of-power concepts and a long historical perspective — shape Iranian foreign policy and military strategy, and thus military force planning. Central to the Shah's perception of Iran's role in world politics is his keen awareness of his country's historic weakness vis-a-vis the outside world and his determination to rectify that situation. Only in the Shah's lifetime has Iran emerged from a period of centuries when it was powerless before the competing pressures of Russia and Britain and lesser neighboring states. Although never a colony, Iran's territory was at times occupied by these powers — most recently in the 1940's when it required a major US initiative to bring about Soviet withdrawal. One residue of this recent history is the Shah's desire to be as independent as possible from all outside powers, including the United States.At the core of the Shah's strategic outlook is his abiding distrust and fear of the Soviet Union. For the past decade, the Shah has developed a reasonably correct relationship with the Soviets, including the sale of large quantities of natural gas and the purchase of some weapons (mostly ground and air defense), and he has deployed the bulk of Iranian forces away from the Soviet border. He apparently does not anticipate a direct Soviet attack on Iran in the near future, as long as the West remains strong and alert to any Soviet move. However, the Shah believes that, in a period of strategic parity, the Soviets may be tempted to attack Iran. The Shah wants enough strength to deter a Soviet attack or, should one occur, to raise the costs. In the event of such an attack, the Shah intends to fight a delaying action until outside (i.e.; US) forces can exercise their influence.The Shah also sees the Soviet Union as aspiring, over the longer run, either to control directly the oil wealth of the Persian Gulf or to be able to deny it to others. In his view, Iran blocks the Soviet path to the Gulf and is in danger of being outflanked by a "pincers" movement, by the growth of Soviet influence in Iran's neighbors to the west (Iraq and Syria) and to the east (Afghanistan and India currently, Pakistan potentially). Eventually, as the Shah sees it, the Soviets hope to weaken Iran indirectly by the actions of one or more of their client states in the region. The current use of Cuban surrogates by the Soviet Union in Africa and their presence in Iraq and South Yemen have increased the Shah's long term concerns.The Shah views Iraq as the most immediate, serious military threat to Iran. The current disposition of Iran's military forces underlines this: four of six divisions and the majority of the Iranian aircraft are oriented toward the Iraqi frontier. Iran-Iraq differences were resolved, at least temporarily, by an agreement in 1975, and political relations have been stable since then. Nevertheless, suspicions and regional rivalry persist.The Shah wishes to deter an Iraqi attack by possessing sufficient deterrent forces to be able to cause unacceptable retaliatory damage to Iraqi forces and infrastructure. Iran is aware that Iraq is emphasizing the buildup of its own offensive capabilities and that crucial Iranian targets, including its oil facilities, remain extremely vulnerable to Iraqi ground or missile attack.Should war occur, Iranians expect it to be a short intense conflict involving limited penetrations by each side; they want to assure that when a ceasefire is declared the line between the parties will be on Iraqi, not Iranian territory. The Shah believes that a result that includes destruction of Iran's oil production and shipment resources may be a de facto defeat.While relying primarily on his own forces to defend against invasion, the Shah also looks to the United States to stand with Iran and thus to deter a possible attack by the Soviet Union. Iran relies on the US to supply the most important weapons for the forces. Iran will continue to depend on the US for the foreseeable future.Iran has been impressed by the heavy equipment losses in modern warfare (i.e.; the 1973 Sinai campaign) and recognizes that immediate assistance from the US or Western Europe may be impossible because of other crises and demands or the possible closure of access airspace as occurred when the US assisted Israel in 1973.It is clear that heretofore the Shah has viewed potential, military threats from the east as secondary to the Iraqi threat. In the border zones, Iranian forces are lightly developed, and plans for strengthening forces in the region have been deferred. In recent years, the Shah has concentrated on diplomatic actions to protect his interests in South Asia — improving his relations with both Afghanistan and India — seeking to ease tensions between Pakistan and its two South Asian neighbors — and giving to Pakistan, his CENTO ally and a buffer between Iranian and Indian power, assurances of military support against Indian or Afghan military action or internal tribal elements. However, in the longer run, Iran wishes to be in a position to respond to military contingencies in the east while maintaining a sufficient deterrent force against Iraq. Faced with perceived threats from east and west and a poor road network in a large rough country, the Shah is emphasizing the mobile and quick reaction capabilities of his armed forces through the acquisition of large quantities of armor, self-propelled artillery, assault helicopters, and fighter aircraft for air superiority.Across the Gulf, the Shah doubts the ability of the conservative regimes from Kuwait to Oman to fend off radical pressures and fears that Gadhafi-like regimes in the area would threaten Iran's oil facilities and transit routes through the Strait of Hormuz. Since the British withdrawal from the area in 1971, the Shah has in effect assumed the major responsibility for the region, although seeking to cooperate with Saudi Arabia and the small Gulf states in security arrangements (as in the case of putting down the Dhofar rebellion in Oman). He is continuing to develop airlift and amphibious assault capabilities. Also, in order to ensure passage through the vital Hormuz Strait, Iran is now emphasizing its antisubmarine and anti-mine capabilities.Beyond the Strait of Hormuz, the Shah is concerned about the security of shipping (primarily Iranian oil exports) in the Indian Ocean. Extension of Soviet and Cuban presence and influence in Africa and Soviet access to facilities in Aden (in lieu of Berbera, Somalia) have recently reinforced this concern. He intends to expand the navy, with, the intention of partially protecting Iranian oil exports in the direction of the Cape of Good Hope and the Straits of Malacca. The Shah is also increasing Iran's political involvement with Indian Ocean littoral states, primarily in the Horn of Africa and in Southern Africa.Other DeterminantsThe Shah's stated goal is to create, before the end of this century, an Iran comparable to any one of the major nations of Western Europe of the mid-1970's. In this period of rapid nation-building, the military modernization program — while related primarily to the perceived military threats discussed above — is also seen as contributing to the national integration of an ethnically diverse people, to the improvement of public literacy and health and particularly to economic development. The Shah has consistently sought to acquire the very latest military technology (by purchase or co-production) in part to speed-up the process of Iran's industrial modernization, in part for the prestige that accompanies such weapons and technology.The development of a large and well-equipped military is also viewed by the Shah as a symbol of Iran's sovereignty and independence. Following the 1973 oil price increase, Iranian revenue surpluses enabled the Shah to pay for the very latest and best military equipment available, which further enhances growing Iranian prestige and -influence.Given the Shah's commitment to building up his military forces, there are two additional factors which add to the urgency of his arms purchases. He wishes to acquire modem armaments from the US now rather than in an uncertain future. He also wishes to pay for his purchases now in view of persistent worldwide inflation.B. Force Structure and Anticipated Iranian AcquisitionsThe present authorized strength of the Iranian armed forces is 411,000. Iranian armed forces are the largest in the Persian Gulf area and, with the exception of Israel, the most modern in the Middle East. The total planned strength of 511,000 by 1985 will assure Iran maintains its current position in relation to the other Persian Gulf states.Imperial Iranian Air Force (IIAF)Fighter Force:The Shah envisions a modern air defense fighter force of over 400 aircraft. In addition, the F-4E's and F-5E's, which will reach the end of their life cycle by the early 1990's, may be used in the air-to-ground attack role until retired or replaced.The Shah desires this quality fighter force to deter attack or, should one occur, to be able to respond to multiple penetrating hostile aircraft along Iran's 4,400 mile border. The aircraft will be strategically located in sufficient numbers to provide what he considers to be a credible defense. Iran's operational concept calls for two F-16's to provide protective escort for each F-14. The F-14's role is to detect and destroy penetrating aircraft at maximum range, while the F-16, working with its command and control aircraft (E-3A's) and the ground radars, will operate primarily within Iranian airspace for counter-air operations. The overall Iranian air doctrine is in accord with traditional and classic roles and missions for USAF fighter aircraft.Reconnaissance AircraftThe mission of the RF-4E's and RF-5A's after hostilities began would be in a support role. Iran wants additional reconnaissance aircraft to determine movement or placement of troops and location of artillery or mobile SAM sites. It would also use them for bomb damage assessment (BDA) to ensure that destroyed targets are not wastefully retargeted. Iran, wants to upgrade its current capabilities because the RF-5A's do not meet its photographic or infrared requirements and are unable to operate in an intense electronic countermeasures (ECM) environment.Tanker/CargoIran has ordered thirteen KC-707's and eleven 747 tanker/cargo aircraft and will wish to enhance this capability. These aircraft will support the AWACS and fighters. In addition, Iran wants to have the refueling and freight carrying capability to transport supplies directly to Iran in the event that enroute overflight or basing rights were denied. The GOI has requested a study to determine the feasibility of modifying the current inventory of nine 747 freighter aircraft for inflight refueling.AirliftIran believes its fleet of 50 C-130's is inadequate for current airlift requirements and therefore desires to add-to its capabilities. The C-130 aircraft are used for airborne and resupply operations, disaster relief and transportation of logistics material. The Iranians consider them a national asset for meeting other transportation requirements due to the lack of a well-developed road and railway network in a large and rugged country.The GOI recognizes that it does not have the capability to move outsized and heavy military equipment. Iran would like to have airlift with the capability to move large cargo rapidly to meet a penetrating force, or as an alternate, the capability to redeploy an airborne division.Anti-Submarine WarfareIn order to protect the vital oil links or sea lines of communication (SLOC) exiting the Strait of Hormuz, the Iranians desire an anti-submarine warfare (ASW) capability. The six P3F's currently in the IIAF inventory provide the IIAF with only a limited ASW and long-range surface patrol capability. Iran believes it requires five aircraft to be airborne simultaneously in periods of tension and, therefore, perceives the need for additional aircraft. Iran believes that a few hostile submarines in the Gulf of Oman and Arabian Sea, where the SLOC's converge before branching out toward the Straits of Malacca to the east and toward the Cape of Good Hope to the southwest, could play havoc with oil tankers bound for Japan, Western Europe and the US. Therefore, the Shah considers it essential to provide adequate sea surveillance and ASW capability.Imperial Iranian Ground Forces (IIGF)The IIGF, equipped primarily by countries other than the United States, plan a 10-15 percent increase in manning through the late 1980's. They will concentrate on integrating the helicopter force, re-equipping units with older equipment and possibly establishing a larger ground force presence in the Southern and Eastern parts of Iran. Deliveries from third countries will include continuation of the Chieftain Tank program, with the final phase Chieftains possessing more modern armor and engines. Mobility equipment, primarily wheeled vehicles, may be obtained from the USSR. Improved tank transporters would be the most significant of these. The Iranian government will wish to acquire additional self-propelled artillery and cargo carriers.The Imperial Iranian Navy (IIN)The IIN emphasis will be on attaining full proficiency in the four modified SPRUANCE class destroyers and the three TANG class submarines already on order and on minesweeping helicopters. Since the IIN is likely to seek little new equipment from the US, its mission and intentions are less clear than those of other Iranian services. We believe that Iran wishes through third country purchases of ships (frigates, logistics ships and submarines) to have at least a limited capability to protect SLOC's across the Indian Ocean against any future naval threats. As a regional power, Iran wants to "show the flag" around the Indian Ocean littoral. And, as the strongest Persian Gulf power, Iran wishes to have a modern patrol and minesweeping capability, with limited amphibious warfare potential.To achieve these goals, Iran may procure frigates, logistics support ships, and additional submarines from European sources.III. US ASSESSMENT OF IRANIAN MILITARY PLANNINGA. Military Threats to IranIraqIraq remains Iran's most likely military opponent despite improved relations since the end of the Kurdish rebellion in 1975. Both countries remain competitors in the Persian Gulf with widely differing views of how the region should evolve politically. To a significant degree each perceives its defense requirements in the context of the potential threat posed by the other. Both maintain the bulk of their armed forces along their common frontier and each cites the threat from the other when pressing its superpower patron for arms. Both have, however, major military concerns which do not involve the other.Primarily because of its Air Force, Iran's forces, as measured by static indicators, are militarily superior to Iraq and are expected, to remain so through the mid-1980s. Qualitative factors in a net military assessment involving essentially untested forces are difficult to judge with any confidence, and the outcome of postulated conflicts can become heavily dependent on the assumed scenarios. There are a number of scenarios in which Iran's superiority could -be offset through combat variables. The ground forces are relatively balanced, with both sides capable of making incursions into the other's territory, and both could conduct air strikes across borders. Because of logistic difficulties neither state is likely to be able to wage full-scale hostilities for more than two weeks or to bring a war to a decisive conclusion.A sustained conflict is unlikely during the next decade. Both have been careful to limit the size and scope of past border clashes. Each has vital installations vulnerable to attack by the other and neither could be confident of success during prolonged hostilities. Nonetheless full-scale war could occur as the result of a Soviet-sponsored move by Iraq against the vital oil resources in Iran or because of a miscalculation during more limited hostilities, such as an Iraqi move against Kuwait or renewed Iranian support for the Kurds.Terrain severely limits the military options for an Iraqi ground attack. The mountains along the northern two-thirds of the border generally favor the Iranians. Along the southern third of the border, adjacent to Iran's oil fields, the terrain permits large-scale offensive operations most of the year. Rivers and lowland flooding may present significant obstacles during the spring. In addition, vital Iranian military/economic objectives are within a relatively short distance of the border. Abadan and other key oil production/distribution facilities, for example, are within artillery and missile range of Iraq.This should present no problem in the North because of the good defensive terrain. However, during most of the year in the South, Iraq should be able to achieve an important initial advantage and cripple Iranian petroleum facilities.Iran, however, will have some Chieftain tanks which will be superior to anything possessed by the Iraqis. In addition, the integration of Iran's attack and assault helicopters into tactical units will greatly increase the antitank capability and mobility of Iran's forces.Most of the new army units Iran will form by the mid-19 80s, however, will not be stationed near the Iraqi border.The new helicopter units and the large numbers of antitank guided missiles acquired by the Iranians will partially compensate for this inferiority but rapid reinforcement by units in the interior will remain crucial.Iran's air superiority is crucial to its overall edge over Iraq. Unless the Air Force were able to defeat the Iraqi Air Force quickly and provide support to ground units, the Iranian Army would be hard pressed to hold Khuzestan. The TV and laser guided bombs give the Air Force an enhanced ordnance delivery capability. In addition, the greater ordnance payload of Iranian aircraft combined with the fact that most Iraqi targets are within easy reach of Iran should permit a strong Iranian interdiction campaign against Iraqi support units. Many military targets in Iran, on the other hand, can be reached only by Iraq's MIG-23s, SU-20s, and medium bombers.The Iraqi Air Force, however, can strike the important oil targets in Khuzestan and at Kharg Island and Iran will be incapable of preventing serious damage to these facilities either now or in 1985. Iran also has the capability to inflict similar destruction on Iraqi, oil facilities but, due to the Iraqi air defense system and dispersed targets less vulnerable to ground attack, Iran would not possess the same capability without superior forces.Iran has on hand, or on order, sufficient equipment to provide an effective air defense system, but, because of difficulties in absorbing the equipment, Iran presently has a very limited air defense capability. Iran also has no mobile SAM system to protect its armored units, leaving them vulnerable to air attack. Both have man-portable air defense systems (MANPADS).AWACS should reduce the possibility of a surprise Iraqi attack and could ultimately provide effective coordination for Iranian air defense forces. Iraq will have no similar capability. Iran's air defense system should become an effective force and armored units will be equipped with a mobile SAM system. Iran will also retain its advantages in ordnance, payloads, avionics and ECM although the acquisition of sophisticated French equipment by Iraq may narrow the gap somewhat in ordnance and ECM.For example, Iran's advantage against surprise attack and the ability to concentrate fighter forces where most needed will be dependent on its ability to employ AWACS effectively.Effect of US Arms Sales on the BalancePrimarily because of its larger Air Force, Iran's forces, as measured by static indicators – are militarily superior to Iraq and are expected to remain so through the mid-1980s. A refusal to sell additional major equipment would significantly narrow Iran's level of air superiority and might require the permanent deployment of additional ground forces to the Iraqi border, but Iran will still have more high performance aircraft than Iraq, better ordnance, an aerial refueling capability, more sophisticated ECM gear and better pilots.Iran's emphasis on acquiring a larger and more sophisticated air force than Iraq results in part from inherent Iranian vulnerability to Iraqi attack. Since the heart of Iran's economic life is in its southwest oil facilities and in nearby transportation assets, and since many are within Iraqi artillery and missile range irrespective of Iraqi ground or air attacks across the border, Iran is compelled to adopt a strategy of counter-value deterrence. Equivalent Iraqi economic facilities are further from the border, more widely dispersed, and less vulnerable to Iranian ground attack. Thus, to follow this counter value strategy, Iran would require an Air Force fully capable of inflicting severe damage on these Iraqi facilities.The sale of additional air defense aircraft would further increase Iran's advantages over Iraq. The additional aircraft would permit Iran to maintain a credible air posture along its Soviet border during a conflict with Iraq. Iran will still need to reinforce rapidly and support its units along the Iraqi border, and transport aircraft could greatly improve Iranian capabilities. Sale of additional self-propelled artillery pieces would not significantly affect the numerical balance.The foregoing analysis assumes that the Iranians will be able to absorb new equipment. The acquisition of additional quantities of advanced military equipment will predictably create a range of problems for Iranian forces. The impact of new equipment on Iranian military capabilities will depend on such factors as the quantities acquired, timing of deliveries, the extent and effectiveness of advanced preparations (such as manpower training, construction, and creation of Iranian management systems), progress in absorbing existing inventories and equipment on order but net yet delivered, and the effectiveness of USG management of security assistance and absorption strains. Iran's absorptive capacity is discussed in detail later on.Soviet UnionA military conflict between Iran and the Soviet Union is unlikely. The two countries have fairly good political relations, Iran buys Soviet military equipment, and present and projected Iranian military deployments are not concentrated along the Soviet frontier. Nonetheless Iran maintains a historical suspicion of the Soviet Union.Naval ThreatsThe Iranian Navy operates unchallenged in the Persian Gulf. The Iraqi Navy is capable of mounting raids against Iranian shipping and oil facilities in the northern Gulf and of mining the Shatt al Arab. Its short coastline and limited naval facilities, however, make its missile boats a relatively vulnerable target for Iran. Purchase of additional mine-sweeping equipment should improve Iran's ability to clear the Shatt al Arab and Persian Gulf ports.A conflict between India and Iran is extremely unlikely, and relations are currently very good. The Shah visited India in February 1978 and is pleased with Prime Minister Desai's attempts to strike a more balanced relationship between the US and the USSR. Iran also supplies about 20 percent of India's oil. Nonetheless a confrontation could occur as an outgrowth of a war between India and Pakistan.Iran would be able to oppose the Indian force with two guided missile destroyers and three guided missile frigates. The Navy's limited operational readiness probably precludes a larger deployment. The Iranian Navy would be supported by the Iranian Air Force and might be aided by the Pakistani Navy, but this would depend on the scenario. Even without aerial refueling, Iranian F-4 fighter bombers operating from airfields at Chah Bahar and Bandar Abbas can provide air cover to warships operating in the northern Arabian Sea.Without Air Force support, the Iranian Navy would be unable to defeat the Indian Navy. The Indian fleet has more seagoing experience and is combat seasoned against Pakistan. The Iranians, on the other hand, have participated in CENTO exercises but have no combat experience. Even with air support the Iranian fleet could be extremely vulnerable to India's submarines since the Iranians have almost no ASW capability.The Iranians will have sophisticated ASW equipment aboard the Spruance destroyers but probably will not be ready to use it with maximum efficiency in a combat situation. Iran will have three submarines of its own but Indian ASW capabilities, while limited, will still be much superior to those of Iran. As a result Iran might need additional fighter aircraft to ensure an adequate defense of its ships in those waters.Purchase of additional ASW aircraft and HARPOON anti-ship missiles could improve Iran's capability to defend its fleet against Indian surface units. Acquisition of additional tanker aircraft could improve Iran's aerial refueling capabilities thus extending the range of the air cover available to the Iranian fleet.Capabilities for Contingencies in the South and EastIran is not now threatened by any Arabian Peninsula state, Pakistan or Afghanistan. The Shah does, however, feel compelled to prepare for contingency threats which would result from sharp changes in the political orientation of his neighbors, i.e. radical takeover in the Gulf or the fragmentation of Afghanistan or Pakistan, by having the capability to project Iranian armed forces into the Peninsula or along his eastern borders. Since the circumstances in which such a conflict might arise and the forces which might become engaged are highly uncertain, the force balances which might result in these situations are difficult to evaluate. We can, however, comment to a limited extent on what current Iranian forces night be able to do in these areas and how that capability may change by 1985.At present, if given sufficient time to prepare, Iran possesses the forces which could permit the landing of one infantry brigade by sea and one by air on the Arabian Peninsula in an initial assault. These forces would be supported by Iranian naval units and about 150 fighter aircraft. Additional ground and air deployments would be limited by the need to protect against a possible Iraqi/ Soviet reaction and Iran's limited ability to support such an operation. A force of this size would exceed that of any of the smaller Gulf States.By 1985 Iran's capacity to project force into the Peninsula will have improved considerably. The number of fighter aircraft could be raised to 250 or more, while leaving at least 300 fighters to face Iraq and the Soviet Union. Iran would be able to move about 3,000 men by sea and a greater number by air. If additional transports were acquired, several thousand more troops could be deployed.Iran does not maintain any significant military forces along its border with Afghanistan or Pakistan. With sufficient time to prepare, Iran could move one infantry brigade by air and two by road to either border. In addition, about 75 fighter aircraft could be deployed to the area for a short time. The infantry forces are insignificant, but the fighter aircraft would be quite valuable, for example, to Pakistan in a war with India. Iranian naval operations against India would only be possible with Iranian air superiority.By the mid-1980s, Iran will have constructed several air bases in the Eastern border area. Iranian ground force plans are less certain. There are several reports that Iran plans to form at least one and possibly two divisions; while there are no reports on plans for artillery groups, one might also be stationed in the East. These new units, if formed, would strengthen Iran's defense posture in the region, and Iran should be able to move a reinforced armored division and 150-200 fighter aircraft to Pakistan or Afghanistan with little notice.The sale of additional fighter aircraft would enable Iran to deploy aircraft to its Eastern borders while maintaining a large number of fighters opposite Iraq and the USSR. More significant would be the sale of additional transports which could improve considerably Iran's capability to rapidly reinforce units in the area and to support this augmented force.Although Iran has requested additional self-propelled howitzers from the US, we are uncertain how they would be deployed. Some would go to the Iraqi or Soviet borders, but a significant number may be assigned to possible new units along the Eastern borders. US approval of all or most of the howitzers would, therefore, permit Iranian ground force expansion along the Eastern borders.The Multiplier Effect of AWACSOne issue of importance is the so-called "multiplier effect" of the AWACS and how the sale of AWACS might affect Iranian needs for additional aircraft. We have examined the impact of AWACS on these aircraft procurement questions and we have concluded that it would increase the efficiency of current and future Iranian combat operations. However, we have been unable to quantify the precise impact on aircraft needs.If used properly, AWACS should improve Iranian air defense in several respects: 1) earlier detection of an attack; 2) better allocation of resources to meet an attack; 3) improved command and control and kill probability for interceptor and SAM forces; and 4) fewer friendly losses per engagement through improved tactics. One important result would be to reduce the risk of surprise attack — this should reduce Iranian aircraft losses on the ground. Moreover, greater engagement opportunities should result in higher hostile aircraft losses and somewhat higher exchange ratios favoring Iran. Both of these effects should allow Iran to attain an air advantage over Iraq earlier than would be the case without AWACS.Iranian Absorptive CapacityOVERVIEWIran's capability to absorb modern military equipment is an important issue for its overall military development. The rapid expansion of the Iranian armed forces and the US role as the Shah's chief arms supplier raise questions about Iran's ability to absorb all the equipment being acquired without a continuing, sizable US presence.An interagency review of Iranian absorptive capacity has revealed serious problems with certain systems (i.e.; the I-HAWK and Army Aviation), but important successes with others (i.e.; F-4, F-5 and C-130). The degree of success of particular programs relates in large part to the emphasis given them by the Government of Iran. Iranian combat units should be able to operate all the modern weapons they acquire over the next decade.However, Iran will require outside support for its new equipment, particularly for high technology weapons during periods of conflict. US personnel assisting Iran are prohibited by law and contract from performing combat or combat-related activities in connection with such assistance.Iran's ability to absorb certain kinds of equipment is already strained. There could be a short-term degradation of capabilities in some areas if the development of skilled manpower, maintenance and logistical capabilities does not keep pace with the influx of new equipment. On the other hand, Iranian progress in overcoming its problems and proper Iranian and US management with regard to the quantities and timing of certain new equipment may ensure that any such degradations in capability do not occur or are minimal. Thus, whether certain new equipment would severely strain absorptive capacity is a matter of judgment. This issue could become more critical as Iran's superiority over Iraq becomes increasingly dependent on its ability to handle such advanced equipment as AWACS, the F-16, the F-14 and I-HAWK.Present plans call for the number of US personnel to peak between 1980 and 82 and to begin to decline thereafter. Iran has sufficient total personnel to man the new weapon systems being acquired. The critical consideration, however, is whether Iran will be able to provide enough skilled technicians in the support and maintenance areas to satisfy the needs of its armed forces.Iran's ability to develop skilled military manpower is hampered by a number of deeply rooted obstacles including the minimal exposure of many trainees to modern technology; Iran's 60 percent illiteracy rate and its poor but improving education system; the fact that most military training courses are taught in a foreign language; and use of those skilled personnel already in the armed forces at less than maximum efficiency. Although the government is attempting to alleviate these difficulties through increased emphasis on the recruitment of skilled personnel, expanded military and civilian training programs, and more efficient personnel practices, the difficult nature of these problems and their interrelated effects make it likely that Iran will be short of skilled personnel for at least the next decade.Although the Iranian Army has the least sophisticated weapons of all the services, it employs the bulk of the US advisors in Iran. As of mid-1977 approximately 2,600 US civilian technicians were assisting the Army Aviation program to develop a division-size heliborne force. Because of the declining quality of the Iranian personnel entering the program, construction delays, and maintenance and logistic problems, the completion date has been pushed back from 1978 to 1981. No appreciable decline in the level of US personnel is foreseen during this period.The Navy has considerably more sophisticated equipment than the Army, but is assisted by only a few hundred US personnel. It has also experienced a decline in the quality of recruits but has been able to meet its needs by shifting skilled technicians from active naval units into training programs on the Spruance Class destroyers and Tang Class submarines. This has only been accomplished, however, with some reductions in fleet readiness.Construction delays present a more serious difficulty for the Navy. Construction of almost all naval support facilities is behind schedule. Unless key facilities are completed on time, the Navy could face problems in keeping the Spruance destroyers and Tang submarines operational and in maintaining crew skills at acceptable levels.The Air Force is the most sophisticated of the armed forces and has demonstrated an ability to absorb advanced military equipment. A major reason for this success has been the intense personal interest of the Shah. The ability of the Air Force to continue its success will be severely tested over the next decade. Based on past experience and present trends, however, Iran should be generally successful in meeting this challenge even with the acquisition of AWACS and the possible purchase of additional fighter aircraft. The most serious difficulties have been experienced by the Improved HAWK surface-to-air missile program. This project suffered from a relatively low-level of priority within the Iranian Air Force, personnel problems, and construction delays. Strenuous US and Iranian efforts will continue to be necessary to improve program implementation.At present there is a technical manpower shortage of about 7,500 personnel in the Air Force. If no corrective action were taken, this shortage might increase to 15,000 by 1982. The Air Force, however, is increasing its emphasis on recruiting skilled manpower and making more efficient use of the technicians it already has to keep the shortage of technicians from growing. The introduction of advanced Air Force equipment such as the F-14, F-16, AWACS and I-HAWK over the next five years, however, will require an increase in the number of US contract personnel with the Air Force. Numbers of US military advisory personnel, on the other hand, are likely to decrease, since those assigned to older programs will be decreasing at a rate greater than those assigned to newer programs.Recent international exercises involving Iranian and US forces have been impressive in scope and complexity. In two exercises, over 400 IIAF sorties were flown, and one featured 669 IIAF and 597 USAF sorties. These side-by-side exercises demonstrate long strides toward self-sufficiency by Iran.The number of US personnel supporting Iranian military programs remained relatively stable for three years at about 5,400 after a 60 percent increase between 1972 and 1975 primarily as a result of the Army Aviation program and then rose to about 6,900 at the end of 1977. With no significant reduction in the number of personnel supporting this program likely before 1982 and large numbers of US personnel required to support the advanced aircraft being delivered in the early 1980s, the number of US personnel supporting Iranian military programs may reach 8,000 by 1981-1982. The number should begin to decline after 1982 primarily because of a sharp reduction in the number of personnel necessary to support the Army Aviation project.In addition to US personnel, there is a large number of third country nationals assisting the Iranian armed forces. The number of non-US military advisors, mostly British and Soviet, has doubled during the past five years to 300. More significant are the large numbers of mostly Asian workers employed in military depots, shipyards, maintenance shops and logistic centers. Third country nationals play a role in supporting the F-4, F-5, and naval shipyard programs.U.S. and third country technicians will remain vital to many of Iran's defense programs over the next decade. Iran is capable of manning all the weapons systems which it is acquiring but will continue to have only a limited capability to support and maintain them without significant US assistance.I. Manpower Constraintsa. The ProblemThe major constraint on Iran's ability to absorb all the modem military equipment being acquired is a shortage of skilled military manpower. Iran has enough manpower to meet its overall military personnel needs, current and projected. (The projected military strength of 511,000 in 1982 will be about ten percent of the estimated number of males fit for service at that time). There are also enough skilled Iranian personnel to operate weapons in the inventory, and we estimate that sufficient Iranian personnel should be available to operate the new weapons which are already on order and will be delivered over the next decade. Weapons operators, however, amount to only a very small portion of total military manpower. The critical consideration is whether Iran will be able to provide skilled personnel to fill the more numerous technical positions in maintenance and logistics.Iranian efforts to provide such personnel are hampered by a number of deeply rooted obstacles. Among these are:• Minimal exposure of many military recruits to modern technology. Instructors have to devote considerable time to teaching the use of simple tools and to explaining basic concepts.• Trainees prefer to be weapons operators, which have high prestige, and they oppose accepting technical positions, which rate as dead end jobs.• Low education levels. Over 60 percent of the population at the present time is illiterate. This level will decline slowly but steadily into the 1990s. The majority of enlisted conscripts are also illiterate and lacking in military-related skills on induction. Many Iranian schools, with their heavy emphasis on rote memorization and discouragement of initiative, impart few skills applicable to operation of or maintaining modern military equipment. Regulars and Homafars (similar to Warrant Officers), however, are relatively better educated than the conscripts.• Linguistic difficulties. Military course materials and lectures are generally in English, which may be the third language for some trainees who have learned a language other than Persian at home, and then Persian and English in school and in the military.• Inefficient allocation of skilled military personnel. Training programs are often pressed to provide graduates as quickly as possible, sometimes with only the barest compliance with course requirements. Because of construction delays, newly graduated trainees are transferred to other programs or make-work jobs, and their competence in the new skill is degraded. Perhaps most importantly, technicians trained on one item of equipment are often shifted after several years to new programs (i.e.; F-14 and F-16 aircraft, Spruance-class destroyers and Tang-class submarines). This practice may lower the operational readiness of the units from which the technicians are transferred until they are replaced (see further discussion on this point below).• Competition from the civilian economy. Trained technicians may earn several times as much in civilian life as in the military. Many military technicians moonlight at civilian jobs after duty hours and tend to leave the service as soon as their enlistment period is up. There is no firm information on how many skilled technicians leave the military annually. It is believed to be a significant drain on the military's skilled manpower pool but adds skilled workers to the domestic economy.The Iranian government, of course, is aware of these problems and is attempting to overcome them by increasing educational and training programs in the general population and in the armed services, by better military personnel management, and by raising the salaries and privileges of military technicians to more competitive levels. These programs are proving to be relatively successful. The large quantities of modern military equipment already on order, however, combined with the difficult nature of these problems, ensures Iran's continued dependence on foreign technicians to support and maintain certain weapons systems well into the 1980s.b. Iranian Attitudes toward the ProblemAs part of his goal of military modernization and maximum independence, the Shah would like ideally to have all of his military equipment operated and maintained by Iranian personnel. He realizes, however, that in order to achieve an acceptable level of performance by his armed forces, he must allow some degree of foreign (primarily American, since the bulk of his modern weapons are of American origin) military presence over the next decade or so. The following Iranian policy toward the American military presence in Iran, with which the US has implicitly agreed up to this point, has emerged:• The Iranian Armed Forces should be able to conduct combat operations against any local adversary except the USSR without direct involvement of US personnel. Therefore, all weapons operators will be Iranians. Under no circumstances will US personnel be expected by Iran to operate Iranian weapons in combat.• Although ideally all repair and maintenance work should also be done by Iranians, until such time as Iranians will be able to do such work on their own, Iran will rely on the US to provide contract technicians both to maintain equipment and to supervise Iranian support personnel.• Iran will provide as rapidly as possible enough qualified personnel to be trained by the US so that eventually all US advisors and technicians may be phased out.c. Case Studies of US-supported Iranian Military ProgramsThe degree of Iranian success in achieving these goals has varied from service to service and from weapons program to weapons program. Case studies of particular military programs which are supported by the US reflect these differences.Case #1 – Army Ground ForcesThe Army is the largest of the armed services and has undergone a rapid expansion during the past four years. Since 1973 manpower has grown by 50 percent and the number of tanks has almost doubled. The expansion will be at least as impressive during the next five years as the Army adds some 30-50,000 men and almost 1,000 tanks to its strength.The Army generally has received less modern equipment than either the Navy or Air Force. As a result, with the exception of Army Aviation, the ground forces have a lesser requirement for technically trained manpower and most training for Army personnel takes place in Iran. During US Fiscal Year 1977, for example, the Army sent only 62 personnel to training courses in the US.There is little doubt that, given an expansion of the draft, the ground forces will be able to meet their total manpower requirements through 1982. Planned expansion in the armored and helicopter forces, however, will likely exacerbate the existing shortage of high quality, trainable manpower in the Army.The highest quality technical personnel in the ground forces are reserve officers, reserve noncommissioned officers and career NCOs, generally in that order of descending quality. Reservists, however, serve only two years and some specialties require close to a year of training to acquire adequate skills. There is no well-organized recruitment campaign to attract volunteers and the basic conscript soldier is rarely used in a skilled position. Thus the only long-term source of trainable personnel, other than career officers, is the career NCO and it is in this category that the Army experiences its most serious shortfall. The number of authorized career NCOs is not adequate to meet current requirements and only 72 percent of the authorized positions for career NCOs are actually filled. Recently, however, increased efforts are being given to recruitment.The Army is moving to meet this problem through increased emphasis on the recruitment of skilled personnel and, more recently, through considering the use of conscript soldiers in more technical positions. The use of conscript soldiers as antitank missile gunners is an example. Nonetheless the shortage of skilled personnel is expected to worsen during the next decade as more helicopters and armored vehicles enter the active inventory.Case #2 – Army AviationAs part of its plan to increase the mobility and antitank capabilities of its ground forces, Iran is developing a division-size airmobile force, the Imperial Iranian Army Aviation (IIAA), equipped, advised, and trained by the US. Like most other Iranian military programs, the IIAA has expanded rapidly during the past four years from a small force of 100 helicopters to some 450 helicopters and over 10,000 men. Equipment deliveries are almost complete and a projected increase of 4,000 additional personnel will occur mainly in logistic programs. To further improve its capabilities Iran began the construction during 1977 of facilities to co-produce 400 US helicopters beginning in 1979.Iran's helicopter force is the largest in the Middle East and the progress of the program has been impressive considering the short time frame in which this expansion took place. Many Iranian pilots and mechanics compare favorably with those of Iran's neighbors and there is high-level Iranian interest in ensuring the success of the program. Nonetheless the sheer size of the project is causing difficult problems.The major difficulty has been the vast amount of technical skills which has to be transferred to Iranian military personnel over a relatively short time. The program includes training for 1,750 pilots and 7,000 technicians, of which 62 to 75 percent have finished training. The initial students had adequate technical and linguistic backgrounds, but the quality of subsequent classes declined sharply until the pilot training program was accepting students with a sixth grade education. The completion rate for students who initiated language and basic technical training prior to detailed mechanic or pilot training has fallen from 85 percent in 1975 to 50 percent at present because of a continuing decline in the quality of trainees entering the program. As a result, training standards are being lowered to enable slower students to pass.In addition, construction delays and maintenance and logistic problems have delayed the formation of new units. Many newly graduated pilots are idle and the skills they acquired during training are being degraded. As a result, a program was begun in late 1976 to give these pilots 400 hours of refresher training.The helicopter program employs by far the greatest number of US civilian and military personnel involved with the Iranian military. As of mid-1977, approximately 2,600 civilian contractor personnel and 26 US Army employees were working with the IIAA. Given the problems already experienced in this program, this number is expected to remain at least at the present level through 1981 and taper off thereafter. In addition, the number of foreign personnel involved in the helicopter co-production, effort is planned to peak at 500 in 1981-82 and then slowly decline to 80 by 1985.Case #3 – Armored VehiclesIn addition to its role in the helicopter program, the US is improving the Army's firepower and mobility by providing self-propelled artillery and armored vehicles. Deliveries are nearly complete and present involvement by US personnel is minimal. Future expansion could strain the Iranian Army's already weak logistic structure unless an increasing share of the military's limited supply of skilled manpower is allocated to the ground forces.Iran's three armored divisions are currently equipped with US, British, and Soviet armored vehicles. US personnel are required primarily as advisors and as managers of a facility that rebuilds armored vehicles. Iran supplies all weapons operators but maintenance and logistic support is weak. Current maintenance training is inadequate to maintain a high state of readiness and there is no training program for unit-level maintenance.Iran should be able to achieve a reasonable degree of self—sufficiency in supporting its armored vehicles within a few years. Expansion of the armored forces, however, could slow this progress without proper planning. The Iranians may form two additional armored divisions by 1980, increasing armored vehicle inventories by about one-third.If these reports are accurate, the number of armored vehicles in operational units would almost double during the next eight years, including 1,500 British Chieftain tanks and 800 Soviet BMPs, with an ensuing strain on the Army's maintenance system. These increases probably would not require any more US personnel since most purchases will be from -third countries.Case #4 – the NavyThe Imperial Iranian Navy is the largest and most dynamic naval force in the Persian Gulf. As with the other armed services, Iran's naval expansion is fairly recent. Since 1973 the Navy has grown to 28,000 men, three guided missile destroyers, four guided missile frigates, numerous support ships and 36 helicopters. The Navy's growth during the next-five years will be even more impressive as 16,000 men, four Spruance destroyers, three Tang submarines, 12 French missile boats, and numerous auxiliary units join the force.The Navy may have difficulty in reaching its overall manpower goal of 44,000 men by 1982 but the ratio of skilled manpower to the total force is far smaller than for the Air Force. Iran already has scaled down its previous plans for a manning level of 60,000 by the early 1980s and at the current rate of growth will reach a manning level of 36,000 by 1982.Shortfalls in the quality of personnel are difficult to quantify. According to sources close to Iranian naval programs, however, the quality of the average recruit, as measured by test scores, has declined about five percent over the past year. Other US observers note that the removal of skilled personnel from existing naval units for input into training programs has resulted in an overall fleet manning level of 75 percent, and less in technical ratings, with a perceptible decline in the operational readiness of existing units.Iran, of course, is aware of the problems being experienced by the Navy and is taking steps to alleviate them. Increased emphasis has been placed on the recruiting program. A more dynamic Iranian officer has assumed responsibility for recruitment and a USN TAFT advisor with extensive expertise and experience in recruiting has been appointed to assist. The Navy has begun to recruit women for support positions and eventual establishment of a women's midshipmen course is planned. Increased emphasis is also being placed on recruiting skilled specialists for technical positions through development of a program similar to the IIAF HOMOFAR program which recruits civilians and provides them with technical training in exchange for a military commitment. As a result of these programs, recruitment figures in the fall of 1977 began to show marked improvement.Based on the success in handling past purchases and the progress of present training programs, the Navy should be able to man all weapon systems as they enter the inventory despite possible shortfalls in manning levels. An examination of particular programs, however, makes clear that Iran will be unable to maintain its new Spruance destroyers and Tang submarines, the two manor US naval programs, without significant US or third country assistance during the 1980s.Case #5 – Spruance-Class Destroyer ProgramIn support of the Shah's goal of protecting his oil shipping lanes by projecting Iranian naval power into the northern Indian Ocean, the US is supplying Iran with four sophisticated Spruance destroyers. The original purchase in December 1973 was for two destroyers. The figure was increased to six in September 1974, then reduced to four in January 1976 because of funding difficulties. Construction of the first ship has just begun, with deliveries to commence in November 1980 and be completed in September 1981.About 3,000 Iranians will have to be trained to man and support the destroyers — 1,200 for crews and 1,800 in staff, support, and replacement roles. Training is being accomplished in the US and contractor involvement in Iran should be limited mainly to accompanying Iranian crews during initial shakedown and underway training. This should require about 50 contractors per ship and would be similar to services provided the US Navy when a new ship is introduced. The arrival of the destroyers and other purchases, however, will require 167 contractor personnel at the naval shipyard at Bandar Abbas and continuation of the US Navy TAFT component at about its present level of 109 men through 1985.Two major difficulties are already apparent to those involved in the program. First is the quantity of the students being inducted into the training pipeline. In the first year of training, FY 1975, the number of students entering the program was 44 percent less than required. The number of students declined even more precipitously during FY 1976. In an effort to increase the number of students Iran has begun removing technical personnel from existing naval units for training on Spruance units. This has alleviated, at least temporarily, some of the problems in the training program but only at some expense to existing fleet readiness.A second difficulty is construction delays. Iran intends to base its Spruance destroyers at Chah Bahar but construction contracts for this naval base have only recently been signed. Present plans calls for support facilities to be in place for the destroyers by 1981 at the earliest. Giver, the delays endemic to construction programs in Iran, a more likely completion date is 1982 or 1983. This means that the destroyers will have to be supported by temporary facilities at Bandar Abbas for one to three years. The construction of the Chah Bahar base could be completed sooner if resources were taken from existing projects, such as facilities under construction at Bandar Abbas, but this would only result in shifting the problem to other programs.Neither of these difficulties will necessarily require more US personnel to be stationed in Iran. Both will probably combine, however, to keep the Spruance destroyers from becoming fully operational until the mid-1980s.Case #6 – Tang-Class Submarine ProgramIn addition to the Spruance destroyers, Iran has purchased three Tang submarines from the US. They currently are being overhauled and will arrive in Iran between 1979 and 1982. The program has slipped about two years because of increased overhaul requirements coupled with the need to utilize one submarine as a training ship. A small number of US contractor personnel, less than 50, will provide specialized services in Iran on an as needed basis through 1985.There appear to be no major personnel problems at present with the submarine purchase. The program calls for training 800 Iranian students of whom 228 had completed training by mid-1977. Most students have previous sea experience and the attrition rate is only 15 percent versus the 47 percent anticipated. As in the Spruance program however, this has only been accomplished by removing skilled personnel from existing units. Construction delays may also adversely affect the program.Case #7 – Bandar Abbas ShipyardThe Bandar Abbas shipyard will support both the destroyers and the submarines. When completed, it will provide Iran with one of the largest and most sophisticated shipyards in the Middle East and will markedly reduce the Navy's reliance on foreign facilities. The shipyard will eventually employ some 3,000 skilled Iranians and 167 US civilians, up from 100 at present.The major problem currently confronting the program is construction delays. Most support services need to be in place by 1979 but contracts have not yet been signed. As a result, the construction program is likely to be six months to a year behind schedule. If support facilities are not ready when the destroyers and submarines arrive, the newly acquired skills of their crews and support personnel are likely to diminish appreciably and some retraining may be necessary.Case #8 – Air ForceThe Air Force is the most modem of the armed services and, like the rest of the military, has undergone a remarkable expansion in recent years. Since 1973 the number of personnel has doubled and the number of fighter aircraft has almost tripled. The size of the Air Force will increase more slowly over the next decade to 147,000 men but there will be a rapid increase in the sophistication of its inventory as F-14 and F-16 fighter aircraft, AWACS, and the I-HAWK surface-to-air missile system are integrated into operational units.The Air Force has already demonstrated a considerable capacity to absorb- modern military equipment. Since 1957 Iran has received 209 F-4D/E fighter-bombers, 366 F-5E/F interceptors, 64 C-130 transports and numerous other military aircraft. All of these aircraft are manned by Iranian crews and, in the case of the F-4s, F-5s, and C-130s, maintenance support is provided mainly by Iranian technicians with only minimal direct US or third-country involvement, a positive demonstration of "absorptive capacity."A major reason for this success has been the intense personal interest of the Shah. As a result, the Air Force generally receives the most skilled recruits and preference in military budget allocations.Iranian Air Force leadership is also deeply involved in developing an effective force. Indicative of the impact of this high-level interest over the past year has been an increase in flying time by 30 percent, a rise in the operational readiness rate to over 80 percent, increased participation in combined arms exercises, and recent deployments of Iranian aircraft to West German bases and forward installations along the Iran-Pakistan border.The ability of the Air Force to continue absorbing high technology items will be tested over the next decade. Based on past experience and present trends, however, Iran should be generally successful in meeting this challenge even with the acquisition of AWACS and the possible purchase of additional fighter aircraft. The Air Force strength of 147,000 projected for 1982 is more than adequate in total numbers to support the force structure planned for the 1980s. As with the Navy, however, the critical question is whether there will be sufficient skilled technicians. The IIAF developed its Homafar program to recruit and to technically train civilians, in exchange for a military commitment, to fulfill its needs for skilled technicians. However, at present there is a technical manpower shortage in the program of about 7,500 personnel. If no corrective actions were taken, this shortage could increase to about 15,000 by 1982 as a result of planned acquisitions. A shortfall of this magnitude is unlikely to materialize, however, as numerous steps are already being taken to meet the problem. Reorganizations and manpower revalidations, for example, are being used to pare excess personnel and to allocate personnel resources more efficiently. These include a reorganization of the Air Defense Command which should release some 6,000 personnel for duty with the Tactical Air Command (TAC). A reorganization of TAC operational squadrons and maintenance units could release up to 20 percent of the present maintenance force for work on the new aircraft.In addition to making more efficient use of existing manpower, the Air Force is attempting to increase recruitment and is planning to use more Iranian and third-country civilian personnel for such base functions as civil engineering and vehicle maintenance. The Air Force achieved 76 percent of its most recent recruiting goal as compared to less than 50 percent in 1976. Increased emphasis is also being given to the recruitment of women for support positions. Using Iranian civilians for base support could release a significant portion of the 25,000 Air Force personnel now engaged in this activity.Case #9 – F-4 Phantom II ProgramThe F-4 program began in 1968. A total of 152 aircraft was purchased through FMS cases and direct commercial contract. Currently, all F-4 units are operational and flyable rates are consistently in the 80% range. Over 1500 operations and 5300 maintenance personnel have been trained. Completion rates for this training exceed 99.9%. A recent FMS case, signed in October 1977, provides backseat training for 200 navigators in the US. The majority of these are scheduled to replace pilots who are currently in the backseat of the F-4. Although some problems still exist in the F-4 programs, none is considered critical.Case #10 – F-5 ProgramThe F-5 program began in February 1974. A total of 141 F-5E and 28 F-5F aircraft have been procured. All F-5 units are operational with a flyable rate of close to 90 percent. Over 500 pilots and 1,500 maintenance personnel have been trained. Maintenance training completion rates run almost 100 percent. The only significant difficulties faced in this program were those attributed to aircraft components which were not standard in USAF F-5Es. At present, there are no significant problems with the program.Case #11 – F-14 ProgramUnder the F-14 program, 80 F-14 aircraft and 694 Phoenix missiles have been procured. Of these, 63 aircraft have been delivered to date. The current flyable rate is 65 percent. Forty-one pilots and 26 Weapons Systems Operators (WSO's) have been trained to Phase 1 Combat Capability, most of which were experienced air crew members drawn from the earlier F-4 and F-5 programs. Approximately 900 maintenance personnel have been trained. Eight hundred ninety-six maintenance personnel are presently in on-the-job training in Iran. Some of the more qualified will deploy to a new base in the spring of 1978.The most significant problems associated with the F-14/ Phoenix system were caused by attempting to put a new, advanced weapon system on a newly constructed base 24 months after program implementation. Thirty-six to forty months would have been more appropriate. Lessons learned from this program should enhance the rapid development of capabilities for future weapon systems (F-16 and AWACS).The original planning FMS case for Contract Technical/ Contractor Maintenance Services at Khatami AFB anticipated a requirement for close to 2500 US technical specialists by January 1978. Only about 600 personnel were needed and deployed. Intense management efforts by the US have held the number of US contractor personnel required to a very low level.Although hampered by problems at the outset, a logistics system that did not interface with- the IIAF system and late construction by the IIAF, progress is rapidly accelerating. Interface problems have been minimized and all intermediate level maintenance facilities are scheduled for completion by March 1978.Case #12 – F-16 Program160 F-16 aircraft, with accompanying support equipment, will begin entering the IIAF inventory, with delivery of the first four aircraft in July 1980. The total value of the F-16 LOA's is $3.3 billion. The three bases scheduled to house the aircraft have already been identified by the IIAF. All three bases are currently active and are supporting aircraft operations. All three bases have been surveyed by a USAF/ IIAF/MAAG joint task force.To further facilitate the introduction of this system, a joint IIAF/TAFT Program Management Office has been established to track and resolve any and all potential problem areas. The IIAF has developed and approved a 10 year manpower projection to include the F-16 weapon system. The IIAF, consequently, has already begun to identify those personnel who will be required for F-16 support. By co-locating with other weapon systems, as presently projected, the manpower requirement will be significantly less than that required for deploying to a new base. Also, the F-16 being a single seat, single engine fighter, is easier to man and maintain than previous systems such as the F-14, a two-engine, two-seat system. Pilot training has been increased as replacements for the F-16 pilots, who are projected to come from qualified F-4 and F-5 air crews. The readiness of F-4 and F-5 units may be temporarily lowered if significant numbers of personnel are diverted to the F-16 programs. The need for US contractor personnel will reach an upper limit of 1000 technicians in 1982, and is expected to be halved in 1984.Case #13 – AWACSIran has just purchased seven E-3A AWACS aircraft to strengthen its air defenses in the 1980's. The AWACS will supplement some existing and some additional ground radar stations to provide Iran with air traffic and air defense radar coverage.The first aircraft is to be delivered in December 1981 and the seventh in September 1983. The system will require the training of some 780 Iranian skilled personnel. The number of US personnel involved in the program is expected to reach a maximum of 400 in 1983 and is actually likely to peak at a much lower figure. In any event, the number of Americans is expected to be halved in 1986.As in the case of the F-16, the AWACS- program is so new that no Iranians have yet been trained. The acquisition of AWACS, however, will considerably reduce the number of skilled personnel that would have been required for an all ground radar Iranian air defense system thus alleviating the demand on the military's skilled manpower pool.Case #14 – P-3F ProgramTo support its expanding Navy, Iran purchased six P-3F long-range naval reconnaissance aircraft in July 1972. The six aircraft arrived in mid-1975 and were assigned to the Air Force instead of the Navy. The aircraft are presently regularly stationed at Bandar Abbas from which they fly reconnaissance missions. They eventually will be armed with the Harpoon anti-ship missile.The US has trained 215 Iranians as flight crews and maintenance technicians for the aircraft. In addition, 72 US Navy and contractor personnel provide support in Iran.Difficulties in the program included construction slippages, inadequate storage and maintenance facilities, and poor supply programs. The situation became so serious that in mid-1976 only one or two aircraft were operationally ready on a daily basis. As a result of the lack of operationally ready aircraft, the skill levels of Iranian personnel were declining through lack of practice. Strong remedial measures have been taken to upgrade the status of the P-3F squadron and increase its capability, and operational readiness rates have shown recent improvement.Case #15 – Improved HAWKTo strengthen its air defenses, Iran purchased 37 batteries of Improved HAWK surface-to-air missiles beginning in July 1972. The first battery arrived in 1975 and only five batteries remain to be delivered. Iran plans to deploy 32 of the batteries, use two for training and rotate three for a maintenance float. At present ten batteries are deployed, six at permanent and four at temporary sites. As part of the I-HAWK purchase, Iran is also receiving an automatic fire control system, a complete maintenance depot, and a missile firing range. All hardware deliveries are on schedule.The program calls for training over 3,800 students — 1,300 officers in the US and 2,500 enlisted men in Iran. To date all training is on schedule. Supporting the Iranians are 175 contractor and 15 US military personnel. Contractor support is expected to peak at about 360 by 1979-80 and then begin to taper off.Iran had little air defense doctrine, organization, personnel, training or logistic base into which the I-HAWK system could be integrated. The result was that virtually the entire force structure had to be developed from scratch in a comparatively short period of time.The program has had major accomplishments. For example, the deployment of the first three of seven AN/TSQ-73 "Missile Minder" fire distribution centers, the first AN/TSQ-73 tactical deployments in the world.As with almost all major Iranian programs, there have also been problems. For instance, the training of air defense officers in the US has been hampered by the students' inadequate educational backgrounds. Some trainees lacked adequate education, were unable to comprehend effectively English, and generally had an apathetic attitude. To alleviate these problems, Iran assigned a full-time senior liaison officer to the US Air Defense School. Inspections of I-HAWK units in Iran revealed that the returning students were not ready for operational roles. This problem is expected to be resolved through the ongoing operational training and the recently implemented program in which contractor representatives will provide maintenance training.Another problem is that most new personnel and equipment cannot be assigned to operational sites. Construction of the sites is already two years behind schedule and only 40 percent complete, while equipment deliveries are 80 percent complete and training is on schedule. The result is that many newly trained personnel lost their trained expertise after graduation for lack of an active unit to join. Other problems impacting the program include problems with the quality of Iranian logistic support, inadequate communications support, and poor distribution of repair parts within country.One of the major problems in the Iran I-HAWK program was until recently, the low priority the Iranian Air Force placed on the I-HAWK relative to aviation systems. Now, as a result of a re-emphasis on air defense, steps are being taken to alleviate these problems. Temporary sites are being constructed where newly graduated students can sharpen their skills. To supplement an ongoing program involving OJT operational training, a contractor on-the-job maintenance training program has been established and will be fully under way in early 1978. These programs will enable Iranian personnel to progress to a higher skill level after entering their units. Despite these steps, it may be years before the Iranians are able to maintain and operate their I-HAWK system effectively without US assistance. This is not unexpected since the I-HAWK is an extremely complex system which has been a challenge for even the US to deploy and support effectively.Case #16 – Peace Log ProgramPeace Log was conceived in 1973 as a program to enhance logistics support capabilities in the IIAF. The current three year phase beginning January 1977 is being performed by Lockheed Air Service under a $190 million contract. Management systems and procedures are to be developed by Lockheed during the first three years (1977-78-79). These procedures should create a depot level management capability by the end of 1979. The remaining three years of the program, 1980-81-82, will require training and qualification of IIAF personnel who will gradually replace the entire contractor staff. The objective is to obtain Iranian self-sufficiency in logistics management by the end of the sixth year of the contract, but this may be optimistic.These programs and others being considered should enable Iran to keep the shortage of skilled personnel about at present levels despite the increase in size and level of sophistication contemplated over the next decade. However, much depends on the level of success in Iran's recruitment and training effort, The Iranian Air Force will have to make a major effort to cope with deliveries of significant quantities of new aircraft before the mid-to-late 1980s. On the other hand, Iran's extensive experience with C-130s, F-5s, F-4s and F-14s could facilitate proper absorption by the time new deliveries are made. Iran could probably handle such purchases by shifting skilled recruits from other programs or by rapidly increasing the number of foreign advisory personnel. Although most armed forces bring new equipment "on line" by diverting personnel from other programs, this practice could, in the case of Iran, impact on capabilities until or unless adequate replacements for the transferred personnel are available. Irrespective of further purchases, Iran will remain dependent on some outside sources of assistance in making its Air Force effective until the late 1980s or early 1990s.d. US Military and Civilian Presence in IranAs of November 1, 1977, there were 1,084 US military, 339 US DOD civilian officials and 5,489 US civilian contractor personnel in Iran, working on programs related to the defense sector, for a total of 6,912 principals plus 9,289 dependents for a grand total of 16,201 Americans in the defense sector. The total estimated number of Americans residing in-country was approximately 30,000.The number of US personnel directly involved in US military programs in Iran is expected to peak at around 6,000 in 1982 and could drop well below the present level by 1984.A major expansion of the US advisory effort occurred between 1972 and 1975 when the number of US personnel grew by 60 percent as a result of the Army Aviation program. At present US contractors account for 80 percent of the American personnel helping the Iranian military and will continue to provide the bulk of US personnel through 1985. The Army Aviation project currently accounts for almost 50 percent of US contractor personnel and will account for about 4 0 percent of such personnel through 1985, although its share of the total will slowly diminish through this period.Although future arms sales, equipment deliveries, and training and maintenance requirements cannot be known with certainty, some observations can be made on the likely future size of the US presence in Iran. No significant reduction in the number of US personnel appears possible without cuts in the Army Aviation program. Since the number of US personnel assisting Imperial Iranian Army Aviation is expected to remain at least at present levels through 1982 and will be augmented by the US personnel involved in the helicopter co-production project, no significant reduction would appear likely before the 1983-85 period.The number of Americans will probably rise by 1982 since the number necessary to support the F-16, AWACS, Air Force logistics, and I-HAWK programs are all expected to peak about that time. The number of contractor personnel involved in these programs, plus the F-14 project, may reach about 2,800 by 1980. Combined with the 3,200 contractors expected to be involved in ground force programs and a US military advisory presence maintained at present levels, the number of US military and civilian advisors should be around 8,000, and possibly more, when smaller programs and the Navy are taken into account.The number of US personnel should begin to decline after 1982, although concrete numbers again are difficult to project. The need for US personnel to support the Army Aviation program should be substantially less by 1985, since the program will then have been in existence for 12 years. If the anticipated declines occur, the level of US personnel probably would be less than 4,000 by 1985. Reductions are also probable in the F-14 program since that aircraft will have been in Iran's inventory for almost a decade, longer than the F-4 or F-5 programs at the present time. The reductions projected for the F-16 logistic programs are less certain but reasonable. Even if the level of US participation in these two programs could not be reduced at all, the number of US personnel should decline by 1985.Implications of US PresenceUS personnel performing services sold under the Arms Export Control Act of 1976 are expressly prohibited by law from performing any duties of a combatant nature, including any duties related to training, advising, or otherwise providing assistance regarding combat activities outside the United States in connection with the performance of those defense services. This language has been incorporated in the Letter of Offer and Acceptance, DD Form 1513, which must be signed by the Iranians for each sale. The Shah is aware of this prohibition. He has never sought assistance from US personnel during past periods of Iranian hostilities nor was such assistance required.However, future conflicts involving Iran might pose this question more sharply.Because the Iranians will not be able to maintain their modem equipment without US contractor support for many years, there is a possibility that the Iranians would apply pressure on American personnel for them to assist in hostilities. On the other hand, the dependency on US personnel could serve to restrain the Iranians.e. Other Foreign Presence in IranThere is no accurate or detailed information available on the numbers of third country nationals assisting the Iranian armed forces. The number of non-US military advisors, however, has doubled during the past five years to an estimated 300. Most are British or Soviet personnel advising the ground forces. Their numbers should rise slightly over the next decade as the large quantities of military equipment on order from both Britain and the Soviet Union are received and likely additional orders are placed.More significant are the large numbers of mostly Asian workers employed in military depots, shipyards, maintenance shops, and logistic centers. Over 100,000 skilled and semi-skilled foreign workers have entered Iran in recent years but the exact number involved in military programs is unknown. Some idea of the magnitude of their involvement can be gathered, however, from the fact that, of the approximately 3,000 skilled jobs to be filled at the Bandar Abbas shipyard, most will be filled by foreign workers well into the 1980's. Third country nationals also play a significant role in supporting the F-4 and F-5 programs and in armor maintenance and ammunition production.f. Foreign Technicians and Iranian Military CapabilitiesIran seems capable of manning all the major weapon systems already on order and programmed to enter its inventory through 1985. As a result, we believe that it is unlikely that US or other foreign personnel would become, or would be requested to become, directly involved in Iranian combat operations during brief or low intensity conflicts. No major system presently is in storage except for I-HAWK. Even in this case, however, the difficulty is not a shortage of weapon operators.For other than a short, low-intensity operation, Iran will continue to have limited capability to support and maintain its modern equipment without US and other foreign assistance. Iran's logistic system, for example, is directly linked with those of the US armed forces, particularly in the case of the Air Force. Although Iran maintains ordnance and spare parts stockpiles, a high-intensity conflict of more than one to two weeks would likely require significant US resupply if Iran's forces are to be able to sustain combat operations.Even if a resupply effort were not necessary, however, continued assistance on the part of US advisors would be necessary to enable Iran's air forces to sustain operations. In general, most weapons acquired before 1973 could probably be maintained, but the more modem recent acquisitions could be rendered ineffective without US assistance. In the near term, the I-HAWK system, for example, could lose operational reliability without continued assistance by US contractor personnel. The helicopter force probably could continue operations for a short time without US contractor assistance but qualified sources close to the program indicate that a large portion of the entire force would be inoperable within two weeks. Similar problems would afflict the F-14 and F-16 fighter programs. The F-4 and F-5 fighters, C-130 transports, and tanker/cargo aircraft, however, could operate for a considerable period of time with US assistance only at the depot level.The participation of third country nationals would also be necessary although not; as critical as that of US personnel. British and Soviet experts would be necessary to enable Iran to repair its armored vehicles and trucks. This, however, would only be crucial in a long war.II. Construction ConstraintsIran's ability to absorb new military equipment is constrained primarily by the shortage of skilled Iranian manpower. Another factor worth noting, however, is that of military construction problems. Both civilian and military projects presently compete for local construction materials and contractors. This competition will become even more pronounced over the next five years. The trend may work to the disadvantage of the military. However, the Shah has given military construction a high priority.Iran is already short almost 1.5-million housing units and even the revised Fifth Plan calls for building far less than the 320,000 units needed annually just to stay even with population growth. On top of this shortage, the government is doubling industrial construction and private projects are increasing. At the same time the military has a number of large-scale projects of its own either planned or under way. These include construction of naval facilities at both Bandar Abbas and Chah Bahar, the new I-HAWK sites, and plans for several new military equipment garrisons, airfields and heliports.With demand for their services high, construction contractors find themselves in a sellers' market. Military construction often occurs in some of the most remote and harsh areas of Iran while civilian projects are generally clustered around major population centers. As a result, unless the government is prepared to pay the price or accept shoddy workmanship, Iranian contractors sometimes move on to another construction project leaving their military work unfinished. This has already become a major problem in most military programs and will certainly worsen during the next five years until the large military projects are brought to completion.At the same time, however, military projects do have a beneficial impact on the local civilian economy. Often they represent the first wide scale introduction of modern conveniences such as electricity, telephones, radio, roads, health care, and modern education into outlying, areas. The construction of the naval base at Bandar Abbas is a good example and the base at Chah Bahar and others planned for Iran's eastern border should have a similar effect.III. Financial ImplicationsThe Shah is attempting to use his greatly increased oil revenues to move ahead rapidly with both civilian and military development.He believes strongly that there is little point in creating a prosperous society without the military strength to defend it. Thus, the Iranian budget shows roughly 25 percent ($9 billion) earmarked for military expenditures, including an average of about $2 billion in payments for military purchases from the US. Traditionally, amounts from other accounts have also cone for military support. At the same time, some items declared as military spending would be more appropriate to civilian allocations, i.e.;, telecommunications, roads and various public works.Iran enjoys a strong resource base (oil, natural gas, copper), approximately $12 billion in foreign exchange reserves, an excellent international credit rating and a very low debt servicing ratio. On the other hand, the government has had to cut back economic development programs due to, among other things, anticipated financial constraints. Moreover, the country has experienced major structural problems in beginning the transition from a largely traditional society to a balanced and self-sustaining industrial state. These structural problems are placing a constraint on economic growth and, together with other factors, could contribute to social tensions in Iranian society. The Iranian government will have to manage these problems carefully so that they are not translated into political dissatisfaction among groups crucial to the stable evolution of the state. For both of these reasons, they cannot be ignored. And to cope with them will require continued major commitments of public funds.One source of recent domestic complaint has been the inadequacy of physical infrastructure. The transportation and communications systems have been severely overburdened. The country has experienced its own "energy crisis," with Tehran blacked out for up to six hours a day in the summer of 1977, more than 1000 plants seriously affected, and industrial production cut in half. In addition, other major problems calling for a large government response are coming into view: (1) agricultural growth and rural development to head off discontent and slew migration to urban areas; (2) manpower policies (job training and job creation) in the cities as growth levels off, or the stimulation of reverse migration back to the countryside; (3) the extension of social services (especially education, health, water, and other amenities) to the urban poor. The Iranians realize the need to establish clear spending priorities. The key assumptions in their analysis are (a) a recognition that oil production will peak in the early to mid-1980s, (b) a need for urgent industrial diversification and, (c) oil sales will provide the basis for real growth rates much lower in the future than in the past, unless OPEC begins to raise the real price of oil.It is clear, therefore, that the Government of Iran will face increasingly hard choices in allocating available funds between military and civilian sectors. The opportunity cost in the future of continuing to spend one-quarter of the public budget on military facilities could possibly be large — in terms of development projects foregone and the risks of social dissatisfaction and political discontent. A militarily strong Iran requires a cohesive and prosperous domestic base for its defense effort.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -FMS AGREEMENTS WITH IRAN(Million US Dollars by Fiscal Year)YEAR TOTAL FMSPrior to FY 72 1,244,600,000.00FY 72 520,300,000.00FY 73 2,167,700,000.00FY 74 4,157,400.000.00FY 75 2,495,900,000.00FY 76 1,688,400,000.00FY 77 5,803,100,000.00TOTAL 18,077,400,000.00- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -MAJOR END ITEMS DELIVERED TO IRAN UNDER FMSAircraft cargo C-130 13Aircraft cargo KC-707 13Aircraft fighter F-4D 32Aircraft fighter F-4E 177Aircraft fighter F-5A 38Aircraft fighter F-5B 16Aircraft fighter F-5E 141Aircraft fighter F-5F 28Aircraft fighter F-14A 80Aircraft patrol P-3 6Aircraft recon RF-4 13Aircraft Utility 20Helicopter AH-1 202Helicopter UH-1 56Helicopter HH-43 12Helicopter RH-53 6Miscellaneous Aircraft 332Destroyers 5Drydocks floating 1Patrol Craft 20Patrol Frigates 1Patrol Gunboats 1Submarines 1 (Subsequently returned)Misc boats and craft 45Carrier CGO armored 416Carrier pers armd full track 903Tanks 461Tank recovery vehicles 266Artillery SP 155MM how 440Artillery SP 5 in how 42Artillery SP 175MM gun 46Semi-trailers all types 123Trailers all types 527Trucks 1/4T all types 2,212Trucks 21/2T all types 143Trucks 5T all types 530Other trucks 5Commercial trucks 26Pistols 39,403Rifles 4Submachine guns 250Machine guns 3,220Howitzers 155 MM 1Mortars 81 MM 15Rifles recoilless 106 MM 100Other weapons up to 75 MM 13Launchers rocket 1,203Fire Control Computers 1Artillery charges (Thous) 87,810Art proj 5 in and over (Thous) 19,960Bombs (Thous) 181,675Cartridge up thru 20MM (Thous) 208Cart 37MM to 75MM (Thous) 67,258Cartridge 75MM to 90MM (Thous) 11,880Cartridge 105MM to 155MM (Thous) 23,700Grenades (Thous) 274,000Mortar Rounds 60MM (thous) 23,825Mortar rounds 81MM-4.2 in (Thous) 89,623Naval Mines--depth charges 872Riot Control Gun Ammo (Thous) 2Rockets Thous) 56,000Torpedoes 323Dragon Missiles 9,717Harpoon missiles 14Hawk missiles 1,442Maverick missiles 2,500Phoenix missiles 424Sidewinder missiles 288Sparrow missiles 516Standard missiles 128TOW Missiles 19,064Electronic countermeasures eqp 3Radar air search eqp 32Radar grd contrl (GCA) eqp 5Radar mortar tracking eqp 6Radio grd-air comm eqp 174Radio mbl+transportbl eqp 5Radios non-tactical (SP) 53Tel+tel terminal-trans eqp 733Fork lift trucks 264Tool kits and sets 2,178Generators 30KW + larger 4,333- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -US-IRANIAN MILITARY RELATIONSHIP POST-MEETING SUMMARY(between President Carter & Shah)TABLE OF CONTENTSI. IssuesII. The Setting: The Importance of the Military Supply RelationshipIII. US Arms Transfer Policy (PD-13)IV. Congressional AttitudesV. Assessment of Military ForcesA. The Iranian PerspectiveB. Iranian Military PreparationsC. Pending Iranian Requests for Major Defense EquipmentD. U.S. AssessmentVI. ProblemsA. Absorptive CapacityB. Financial ImplicationsChart 1 - Iranian Armed Forces - Significant ProgramsChart 2 - Current and Projected Iran-Iraqi InventoriesVII. ConclusionsVIII. OptionsA. Alternative Approaches for Explaining to the Shah the USG Posture on Arms Sales1. Importance of Our Military Supply Relationship with Iran2. Importance of Restraining Future Iranian Requests for Major Arms PurchasesB. Alternative Suggestions for Responding to Iran's Request for 140 Additional F-16s- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -US-Iranian Military RelationshipI. IssuesThe President and Secretary Vance have assured the Shah of the basic importance we attach to our military relationship with Iran. The Congressional AWACS debate and the direction set by the President's arms transfer policy (PD-13), however, have raised the question whether we can — or should — continue to maintain our stance on arms sales to Iran as in the past. Clearly, a difficult policy choice is posed between the mandate for restraint expressed by PD-13 and the Congress and Iran's requests for sales of sophisticated military equipment.There are two subjects which should be addressed in discussions with the Shah. First, we should convey a general posture or attitude on major arms transfers to Iran. Second, as the President has promised the Shah, we should respond to his specific request for 140 additional F-16s. The Iranians will probably interpret our handling of these two issues as establishing the policy line on arms transfers that the Administration will follow with Iran during the next three years.Whatever decisions are taken on these issues, we should apprise the Shah of the relationship of his interest in new, sophisticated equipment to PD-13 and the Congressional perspective. Our objective should be to convince the Shah of the wisdom of our approach and enlist his support and cooperation. Whether or not we can elicit a positive reaction from him, we owe it to our long-standing relationship to explain our position fully and to listen carefully to his point of view. Both of us have an interest in maintaining a dialogue and in avoiding surprises and misunderstandings.II. The Setting: The Importance of the Military Supply RelationshipThe Shah's interest in creating a strong military force is not a recent development, but has its origins in his father's strenuous, but less than successful, efforts in the 1920s and 30s to strengthen the central government's control over dissident tribal elements and resist Russian and British pressures. During World War II, with British and Soviets troops in Iran, the present Shah began the task anew, obtaining the assistance of US military advisory missions in creating a strong military force. Up to the late 60s we had provided the GOI with about $1.5 billion in grant and loan military assistance.Throughout this period the Shah persistently pressed for more US aid and for modern US weapons. In general, the US closely scrutinized these requests, providing only the equipment we believed Iran could afford and absorb and was appropriate in terms of the regional arms balance. An exception was our decision to sell 32 F-4Ds in 1967 in response to our concern that the Shah might seek Soviet aircraft if we denied the sale.A new attitude toward military sales was adopted in May 1972 when President Nixon, pursuant to the Guam Doctrine, decided that we should allow Iran to make its own decisions on the acquisition of military hardware. In effect, this decision meant that we would deny Iran only the most sensitive advanced weapons technology, (i.e.; Lance missiles, naval mines, nuclear submarines and sophisticated electronic gear). The full impact of this liberal policy was not realized — and probably not anticipated — until the December 1973 OPEC decision quadrupled oil prices and provided Iran with the means to carry out its civilian and military modernization aspirations.Our willingness to sell Iran a substantial portion of its military equipment, particularly for the Air Force, and to support these systems adequately, is at the core of our overall relationship. The Shah was undoubtedly relieved by the discussion with Secretary Vance in May, which reaffirmed our continued commitment to close ties with Iran, and later by the President's strong personal support for the AWACS sale. The heavy Congressional attacks on our arms sales relationship — the AWACS debate, Senator Byrd's call for a moratorium on arms sales and the Senate Foreign Relations Committee Resolution — have, however, renewed his deep concern at the reliability of the United States as a supplier of military equipment. As a very practical man, he probably recognizes, and grudgingly accepts, the necessity for adjustments in our arms sale program from the liberal policy adopted in 1972. Learning the extent of the change will be the number one objective of his visit. As the Shah makes all decisions on military purchases, changes in policy carry the potential for being interpreted as a personal rebuff.We cannot predict how the Shah would react to a change in our military relationship, but it could affect his attitude on other important US issues. Depending upon the extent of that change, he has the ability to take measures contrary to important US interests: reduce intelligence cooperation, direct commercial sales and investment opportunities elsewhere and, where immediate Iranian interests are marginal, such as Africa, be unresponsive to our requests for parallel action. Iran will continue, of course, to pursue its own intrinsic national interests — which would very likely remain generally parallel to our own — even if our arms relationship changes. Fundamental Iranian interests require a close relationship with the US for many reasons — especially as a counter to the Soviet Union. Iran would not wish to see this relationship badly damaged.III. US Arms Transfer Policy (PD-13)The US arms transfer policy enunciated on May 19 calls for restraint in arms transfers and the employment of arms transfers as an "exceptional" instrument of foreign policy. PD-13 establishes guidelines that govern transfers to non-exempt countries unless the President personally approves an exception; it also established a sales ceiling for FY-78 that will be progressively reduced in subsequent years.Approval of some major items on the Shah's list of desired military equipment could require exceptions to specific PD-13 guidelines, (i.e.; the bar against commitments to sell weapons that are not operationally deployed by US forces). The F-16 has not been deployed with the USAF; the guideline may be deemed not to apply to the sale of the 140 F-16s, however, because we have already sold the aircraft to Iran.The total value of the requested Iranian sales will also create problems over the next three years in managing the sales ceiling. We have told Congress that the $1.2 billion AWACS sale will be counted in FY-78. Prospective new sales (i.e.; 140 F-16s) will be counted as letters of offer are signed. In the years ahead, if such new orders are added to the large continuing follow-on support and technical assistance requirements, there is likely to be restricted room for major new equipment sales to other countries. For example, in FY 77 Iran accounted for almost half of total Foreign Military Sales.Iran is, in fact, the principal test case for the arms transfer policy. Sales to other Middle East countries are examined primarily with respect to how they impact on the Arab-Israel confrontation. Sales to Iran — more than to any other country — are judged by Congress and the press in terms of the President's intent to limit arms transfers. Similarly, other suppliers and recipients will examine critically our attitude on arms sales to Iran in formulating their reactions to our efforts to promote multilateral restraint in arms transfers.IV. Congressional AttitudesThere is diversity in the views of individual Members of Congress on the question of arms sales worldwide and to Iran in particular. Those Members who see Iran as a strong bulwark against Soviet pressures in the Middle East and those who appreciate Iran's close cooperation with Israel are generally disposed to endorse or at least not to oppose our proposals for sales. Increasingly, however, Members are concerned at the high dollar levels and sophistication of the equipment we have sold to Iran. This attitude was forcefully expressed by Senator Byrd's call for a moratorium of sales to Iran and for revisions in arms control legislation and by the recent Foreign Relations Committee Resolution urging restraint in the transfer of sophisticated weapons to the Persian Gulf area. Critics of arms sales to Iran — who are much more vocal than supporters — make the following points:• We cannot be sure of the political evolution of the GOI and should be wary of arming a country whose future rulers might not share US foreign policy perspectives.• Iran is essentially an underdeveloped country which lacks the technical capability to use the advanced technology it is buying.• Continuing sales of advanced weapons to Iran contravene the spirit if not the letter of the President's arms transfer policy.• Our arms sales to Iran and the US technical support these require create an implicit US involvement in Iranian foreign relations which could lead, in the worst case, to the growth of a Vietnam-like commitment for the US.• By selling Iran expensive military hardware we create upward pressures on oil prices.• The Shah's arms purchases inevitably feed a regional arms race with potentially destabilizing consequences.• The transfer of our most sensitive advanced technology to Iran is threatened by compromise through Soviet capture of equipment or penetration of Iranian military forces.• Excessive military expenditures divert funds from civilian spending on economic development needed to moderate social tensions.• Iran's record on human rights, though improving, is repugnant to many congressmen.These arguments were advanced in the Senate and House debates on the AWACS sale. Although the sale was not disapproved, pushing it through Congress required the expenditure of considerable political capital and set the stage for renewed, intense opposition to other major sales to Iran in 1978.Some Members asserted, based on previous DOD testimony on the AWACS, that the aircraft would reduce Iran's need for additional fighter aircraft because its radar and command and control capabilities increase the effectiveness of each fighter — the "multiplier effect." Congress will examine any F-16 sale in light of the President's assurance during the AWACS debate that the "multiplier effect" will be taken into account in any future decisions on fighter aircraft.Against this background it is questionable that a proposal to sell 140 additional F-16s would succeed with the Congress next year. There is also a high probability that in its current mood Congress will propose more restrictive legislation affecting arms sales worldwide. The notification of an F-16 sale in the near future would exacerbate that mood.V. Assessment of Iranian Military ForcesA. The Iranian PerspectiveOnly in the Shah's lifetime has Iran emerged from a period of centuries when it was powerless before the competing pressures of Russia and Britain and lesser neighboring states. Although never a colony, Iran's territory was at times occupied by these powers—most recently in the 1940s when it required a major U.S. initiative to bring about Soviet withdrawal.Iran has maintained correct relations with the USSR for a decade and does not deploy significant forces against its Soviet border, but Iranian suspicions of hostile Soviet intentions have not diminished. The Shah perceives a "pincer" movement surrounding Iran, planned and assisted from the USSR. To the west, there is the Soviet-supported radical regime in Baghdad with which Iran has a history of conflict. Relations are stable now, but in the past Iraq laid claim to the Arab-populated and oil-rich areas of Iran and Iran lent support to the Kurdish rebels. Iraq was the first of the two to introduce jet fighters, ground-to-air and ground-to-ground missiles, and other sophisticated equipment into the area. The Shah views Iraq as Iran's primary threat.On the east, the Shah sees a Soviet thrust toward the Indian Ocean through the promotion of instability and radical elements hostile to Iran in Afghanistan and Pakistan and possibly through Russian encouragement of Indian actions against Pakistan. Although the Afghan armed forces are clearly no match for Iran's, the Shah is concerned that young Russian-trained officers might take over that government and invite Soviet or Cuban assistance. He is committed to resist the further fragmentation of Pakistan which could bring to power elements threatening to Iran or place on Iran's border an Indian-dominated state.Across the Gulf the Shah doubts the ability of narrowly based feudal regimes to fend off radical pressures and fears that Gadhafi-like regimes in the Gulf sheikhdoms would threaten Iran's oil facilities and transit routes through the Strait of Hormuz. Since the British withdrawal from the area in 1971, the Shah has felt that Iran can rely only on itself to assure regional security. Hence, he was pleased to respond to Oman's request for troops to help put down the Darfur rebellion. Beyond the Persian Gulf, the Shah sees Iran's maritime supply line threatened by the growth of radical regimes in the littoral states on the Horn and in Southern Africa.Behind all of these movements the Shah considers the Soviet Union to be the guiding force. Iran does not envisage and is not prepared for an all-out direct conflict with the Soviet Union, but it is building deterrent strength to raise potential costs and, if attacked, delay a Soviet advance until outside powers could render assistance. The Shah may fear that in a future period of strategic parity between the U.S. and the USSR, the latter could be motivated by the need for new oil supplies to threaten Iran with conventional armaments.B. Iranian Military PreparationsThe Shah is using his oil wealth rapidly to develop an enlarged, modern and—in view of the large size of his country—highly mobile military force. He is seeking to bolster Iranian self-sufficiency through agreements to co-produce arms in Iran. Several major defense purchases are being financed by oil barter in order to assure a source of funding in the event of a drop in regular oil revenues. The Shah has consistently shown an interest in the latest technology in order to leapfrog the development process and to project Iranian prestige in the world. Given the vulnerability of his oil centers and supply lines, he believes in the creation of clearly superior forces to deter aggression.In the Ground Forces the emphasis is on armor based on British Chieftain tanks and APCs and on mobility with transport and attack helicopters. The Air Force is well equipped with air superiority fighters; its air defenses are being developed with the AWACS aircraft and Hawk and Rapier missiles. In addition, to compensate for Iran's weakness in ground transportation infrastructure, the Air Force has a substantial transport capability. The Air Force is modelled after the USAF, using our aircraft, procedures, training, logistics system and English. For this reason, the Shah has bought no significant aircraft in Europe. He will not wish to buy aircraft from the USSR, for he wishes to avoid having Iranians trained there or bringing Russians to Iranian air bases. The Iranian Navy has evolved in recent years from a border patrol force essentially limited to Persian Gulf waters to a regional navy that the Shah plans will be able to undertake missions in the Indian Ocean. A listing of major Iranian purchases for the three services is given at Chart 1.C. Pending Iranian Requests for Major Defense EquipmentIran has indicated it is interested in acquiring the following major defense equipment:1. 140 F-16s as an addition for the Iranian Air Force inventory. Cost: about $2 billion. This is the only item on the Shah's immediate agenda.Three years ago the Shah first expressed interest in acquiring 300 F-16 aircraft to augment his Air Force. In early 1976 he divided this request in two segments: as a result of financial pressures owing to a temporary oil lifting shortfall, the initial purchase was to be limited to 160 aircraft which we notified the Congress that year. Shortly after we made the notification, he added the remaining 140 planes to his request. We advised Congress of the request for 300 F-16s, but did not increase the sale proposal to include the 140 planes. The Shah plans that 160 F-16s will provide a two-for-one ratio with his 80 more expensive F-14s (in accord with the US concept of high-low mix). The 140 F-16s would be deployed mainly at new bases Iran is constructing in the south and the east.2. 160 F-16s (over and above the 300) as replacement for F-5s beginning about 1985. Cost: about $2.4 billion. The useful life of the F-5s should extend to 1991-92.3. 250 F-18As, F-15s, or more F-16s to replace the F-4s, commencing in the mid-80s. Cost: over $4 billion. The F-4E has a useful life until 1994.4. 100 advanced medium STOL transport aircraft (AMST) to replace Iran's C-130s in the late 1980s.5. 8 FFG-7 guided missile frigates. Cost: over $2.5 billion, plus possibly $1 billion for other support costs. We have an Iranian request for price and availability information, but no formal request to purchase. These ships have not yet been deployed with U.S. forces. The same data have been requested from the UK, FRG, Italy, and the Netherlands for comparable ships. Iran has also explored with us and the UK the purchase of four large fleet replenishment ships.In addition, Iran may request U.S. approval for the release of advanced electronic systems, including secure communications (USG equipment denied) and other advanced electronic programs, and for additional co-production projects (co-production of advanced model Maverick and Harpoon missiles has been denied) .Finally, Iran will purchase from the U.S. each year supplies of spare parts and other military equipment and support services to maintain and operate previously acquired systems. Such sales could amount to an average of about $1.5 billion annually.D. U.S. AssessmentIn our judgment, Iran has on order, with deliveries scheduled into the mid-1980s, equipment which should give it the capability adequately to defend itself against aggression from Iraq, the most likely threat. The two countries now are closely matched, with Iran possessing an advantage based on the superiority of its Air Force. Although our estimates cannot be certain, future improvements in Iraq's overall combat capability will probably be matched by Iran. The Iranians have more and better aircraft, pilots, weaponry, and electronics than do the Iraqis. In contrast, about 15 percent of the Iraqi fighter force consists of obsolescent aircraft. Iraq's growing air defense system would reduce this Iranian advantage but not eliminate it Chart 2, presenting the inventories of the two countries portrays Iran as having the numerical edge in equipment.Iran's numerical advantage is misleading, however, since a portion of its ground force equipment is in storage or deployed with rear area units. In terms of armor and air defense weaponry in combat units, transportation and logistics capabilities, and combat experience, the Iraqis have a clear advantage. Also, Iraq's wartime re-supply source—the USSR—is much closer than Iran's. The Iranians rely on their large numbers of helicopters and heavy artillery, the quality of their armor and the superiority of their Air Force to offset these Iraqi advantages.The outcome of any conflict between the two sides is also dependent on the tactical scenario and on qualitative manpower factors which are difficult to compare. The Iranians, for example, are presently vulnerable to a surprise Iraqi air attack which could be exceedingly damaging to Iran's military and economic centers. By 1985, the addition of AWACS, the IBEX communications monitoring project, and the F-16s should remedy this deficiency if the Iranians are able to man and properly manage these systems.The single most important problem faced by the Iranians is a shortage of skilled manpower able to operate and maintain the sophisticated weapons systems being acquired. Iraq faces the same problem but of lower magnitude since its equipment is less sophisticated. Since Iran's advantage over Iraq will become increasingly dependent on the superiority of its Air Force and the ability of the Iranians to use the sophisticated air weaponry and electronics being acquired, the problem of skilled manpower will become even more important for Iran over the next decade. Although considerable progress has been made, much remains to be done before the Iranian armed forces can be considered a well-trained military force.On the basis of forces presently projected for the region, Iran also has the capability to deal effectively with likely threats from the east or across the Gulf. Iran is acquiring the air and sea transport capability to enable it to respond to military requirements across the Gulf. The development of significant new dangers, i.e.;, the combination of geographic threats, states actively assisted by Russians or Cubans, or Indian or Pakistani hostility, would, of course, change the security equation. Such developments, in our opinion, do not now appear in prospect, although they are taken seriously in Iranian planning. In general, we believe the Shah overstates the dangers to Iran in his "worst case" analysis.Iran's naval forces, assisted by land-based air power, seem well suited at the present to their security responsibilities in the Persian Gulf and regional waters. It is not clear what possible threats to Iran might justify a future major expansion of its naval forces to project power into the Indian Ocean. It is our view that new naval forces do not assist Iranian security as much as ground and air forces. If older ships are not retired, additional ships represent an ineffective employment of scarce manpower.Iran is acquiring the military equipment necessary to inflict considerable damage on an invading Soviet force. In any engagement with the Soviets, however, the war-fighting qualities of Iran's officers and men would be crucial as would the particular scenario and the response of the U.S. and other powers.In summary, Iran's major strength lies in its Air Force. As currently planned, this force, in combination with ground and naval units and an adequate air defense system, can be expected by 1985 to deter and defend successfully against any single non-Soviet threat which we now envisage. An increase in the strength of the Iranian Air Force (i.e.;, more F-16s) should, of course, give Iran deterrence and defensive capabilities beyond what it now has, placing the country in a better position to meet the Shah's contingency planning requirements.The Administration has assured Congress that it will take into account the AWACS "multiplier effect" in evaluating future Iranian requests for sophisticated fighter aircraft. In summary, we understand that Iran factored into its plans for the purchase of air defense fighters (i.e.; F-16s) the assumption that the U.S. would sell it the AWACS aircraft. The AWACS will improve the effectiveness of interceptor aircraft by enhancing the command and control of those aircraft and their ability to engage hostile planes earlier and more efficiently. With the AWACS the duration of air battles should be shorter. Iran believes that it needs additional fighters for deterrence and to overwhelm an invading force—possibly from multiple directions—with superior numbers. Although, as discussed in this paper, several factors bear on the decision whether or not to sell Iran additional fighters, we do not believe that the "multiplier effect" will in itself reduce the Iranian requirement for an adequate number of interceptor aircraft.VI. ProblemsThe multi-billion dollar program of rapid military modernization set by the Iranian Government has naturally given rise to a variety of problems. These are discussed in two categories: Iran's ability to absorb or assimilate sophisticated equipment and the implications of large Iranian military expenditures for the country's social and political development.A. Absorptive CapacityIn recognition of Iran's problems in assimilating new weapons systems, the Department of Defense in early 1976 adopted a policy that confirmed the need for rigorous examination of all factors prior to approving new major defense sales to Iran. Since that time, we have also talked frankly with senior GOI officials of the dangers of overtaxing Iran's absorptive capacity. These corrective actions have been necessary because of:• Excessive delays and bottlenecks at ports, rail and highway terminals;• Long delays in facilities construction;• Severe logistic management problems;• Critical shortages of skilled manpower.Clearly, these are the difficulties of a society developing at a forced pace with consequent pressures on materials, capital equipment, organizational arrangements, and trained manpower. In general, problems for the military services persist in varying degrees, particularly where sophisticated equipment is involved, but they have diminished and are being managed more effectively.While infrastructure problems have delayed and will continue to delay specific programs, shortages in skilled manpower will persist. In part these shortages are being met by foreign (mainly U.S.) personnel. Some 50 U.S. companies (with about 5,500 technical employees) and about 1,200 DOD personnel are presently involved in security assistance programs in Iran. With their dependents, the U.S. defense-related community constitutes about half of the estimated 31,000 Americans resident in Iran, the largest Western foreign community. The U.S. Embassy projects that the total American civilian population will grow at about three percent over each of the next three to five years, while the U.S military element may expand by five percent annually. In general, relations between the American community and Iranian society are excellent, although life in Iran does pose a substantial adjustment for Americans.B. Economic ImplicationsThe Shah is attempting to use his large oil revenues to move rapidly on both civilian and military economic development. He believes strongly that there is little point in creating a prosperous society without the military strength to defend it. Thus, Iran now devotes roughly 25 percent ($9 billion) of the general budget to military expenditures, including an average of about $2 billion in payments for military purchases from the U.S. The Iranian Government will have to be careful that the sustained high level of military spending does not have an adverse impact on Iran's economic evolution and give rise to political tensions in the rural sector and within Iran's developing middle class.Iran enjoys a strong resource base (oil, natural gas, copper), over $10 billion in foreign exchange reserves, an excellent international credit rating and firm prospects for long-term industrial growth. On the other hand, the country has experienced major structural problems in making the transition from a largely traditional society to a balanced, self-sustaining industrial state. The Government will have to devote increased funds to the inadequate physical infrastructure (electricity, water, sewage, roads, and public transportation), lack of housing, agricultural development (to increase productivity and raise rural living standards) and social services for the urban poor, especially those recent migrants from the countryside.In the future, the Government will encounter tough choices on priorities between military and civilian economy expenditures. Given the levels of current military commitments alone and the strong upward pressures exerted by international inflation and rising personnel costs, it will be difficult to shift resources from military to civilian programs.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -CHART IIRANIAN ARMED FORCES - SIGNIFICANT PROGRAMSA. Major US Foreign Military SalesIranian Air ForceItem (Qty) (Value) Year Approved Program Completion DateF-4Ds (32) ($59 million) 1967 1969F-4E (177) ($856 million) 1969 1978I-Hawk Batts/Msls (37/1811) ($687 million) 1971 1980Laser Guided Bomb Kits (4162) ($30 million) 1972 1979F-5E (141) ($345 million) 1972 1977F-14 (80) ($2,497 million) 1972 1979Phoenix Missile (694) ($413.2 million) 1972 1982KC-707 (13) ($260 million) 1973 1978Maverick (2500) ($71 million) 1973 1977Electronic Warfare Program ($22 mil)PEACE OWL 1974 1980RF-4E (12) ($135 million) 1974 1978CBUs (6000) ($22 million) 1974 1980F-5F (28) ($127 million) 1974 1978F-16 (160) ($3,600 million) 1976 1981Logistics Support System ($191 million)PEACE LOG 1976 1980RF-4E (5) ($68.2 million) 1977 1978I-Hawk Training ($183.7 million) 1977 1979I-Hawk Motors/Parts ($54.7 million) 1977 1987F-14 Training ($28.7 million) 1977 1981E-3A: AWACS (7) ($1,303 million) 1977 1984P-3F (6) ($73 million) 1972 1979Iranian NavyEx-US DDs (2) Modernization ($58 million) 1972 1976RH-53D (6) ($115.1 million) 1973 1978MK-46 Torpedo (514) ($79 million) 1973 1978Spruance (CG-993) (4) ($1,437 million) 1973 1982Standard Msls (508) ($44.9 million) 1973 1981Tang Submarines (3) ($90 million) 1975 1982Iranian Army214 Helicopters (332) ($1,200 million) 1972 1979AH-1J (202) ($447 million) 1972 1978Helo Trng Cntr ($199 million) 1974 1978Helo Log Cntr ($226 million) 1974 1978Helo Trng Cntr ($167 million) 1977 1981Helo Log Cntr ($139 million) 1977 1981Helo Support Cntr ($250 million) 1977 1981AH-1J Support ($57 million) 1977 1982155mm How (50) ($9.3) 1968 1972175mm How (38) ($8.5 million) 1971 19768" How (14) ($54.6 million) 1971 1976155mm How (200) ($55.7 million) 1972 1978155mm How (60) ($15 million) 1973 19788" How (28) ($59.1 million) 1973 1978155mm How (130) ($342.1 million) 1974 19788" How (9) ($54.3 million 1975 1979175mm How (8) ($54.3 million) 1975 19792.75" Rockets (734,000) ($65.5 million) 1973-75 1977Dragon Msls/Trkrs (20703/1218) ($95.8 million) 1974 1978B. Iranian FMS Program Totals for Fiscal Years 1972-77Value of FMS Agreements $17.2 billionValue of FMS Deliveries $ 5.2 billionValue of Weapons and Ammunition(Includes combat ships and aircraft) $ 9.1 billionC. Major US Commercial ProgramsNational Communications SystemC-130 Transport Aircraft (56)Boeing 747 Transport Aircraft (12)Shipyard Construction - Bandar AbbasShipyard Construction - Chah BaharProject IBEX - Communications IntelligenceD. Examples of Third-Country PurchasesCountry Item Year ValueUSSR APCs, Air Defense Artillery and Trucks 1967 $110 millionUSSR AA guns, APCs Rocket Launchers, Prime movers, AMMO 1970 $135 millionUSSR 130 mm Guns, AMMO, Prime Movers 1972 $ 72 millionUSSR Trucks, road building and engineering equipment 1974 $250 millionUSSR Tank Transports, SA-7s, ZSU-23/4 1976 $ ?Estimated total purchases from USSR as of January 1, 1977: $1.4 billionUK Chieftain Tanks (1162)(approx. 1/2 Chieftain sales) 1971-75 $480 millionUK Scorpion Tanks (354) 1973-74 $ 52 millionUK Rapier 1970-75 $701 millionEstimated total purchases from UK as of January 1, 1975: $1.7 billionNetherlands F-27 transport, aircraft (25) 1971-74 $48.3 millionItaly Helicopters (277) 1969-74 $176 millionFrance Patrol Boats (18) 1974-75 $320 millionTotal Third-Country purchases (1954-77) probably exceed $4 billionIranian Arms Imports 1950-1980, Courtesy of the SIPRI Arms Transfer Database, consulted 14 July 2011.Steve Miller, George Rickey, Copyright © 1977Steve Miller, Copyright © 2001, 2011, 2015