IRAN: Oil, Grandeur and a Challenge to the West

The Shah is the Shadow of God.

— Old Persian proverb Ever since the oil crisis that rocked the world last year, the autocratic ruler of Iran has, to many people, indeed seemed to be basking in the light of the Almighty. Iran sits atop an estimated 60 billion bbl. of crude oil, or roughly one-tenth of the world’s proven reserves. The disposition of “this noble product” (as Iranians like to call it), and the money to be made from it, is in the firm hands of one man: His Imperial Majesty Mohammed Reza Pahlavi, Aryamehr (Light of the Aryans), Shahanshah (King of Kings). Once dismissed by Western diplomats as an insecure, in effective playboy-King, this emperor of oil commands new respect these days, as much for his ambitions as for his wealth. By means of what he has called a “white revolution,” the Shah is determined to transform Iran, a country that still includes nomads whose life-style has not changed in a thousand years, into a Middle Eastern superpower.

Iran today has a unique position in the world: it is a Moslem nation but not an Arab one. For that reason, the Shah was not invited to last week’s summit conference of Arab leaders in Rabat (see following story). Yet it plays a key role in the power politics of the Middle East, without being directly involved in the struggles between Israel and its Arab neighbors. Iran has a proud past and almost unlimited future potential, which the Shah intends to develop with his new-found oil wealth. Within the councils of OPEC, he has consistently argued for keeping prices high—essential, he believes, if the countries of the Middle East are ever to achieve the high standard of living taken for granted in the West. Laudable though that ambition may be, many Western leaders find it hard to accept the Shah’s argument, especially since he frequently combines it with moralizing messages about the need for industrial nations to scrimp and economize. Iran is one of the handful of nations that has helped push Western Europe to the edge of economic disaster —and has begun a major redistribution of wealth. Whether he is seen as hero or villain, the Shah cannot be ignored. Thus it is no accident that U.S. Secretary of State Henry Kissinger (see story page 40) will spend no less than three days of his current diplomatic junket in Tehran.

In the eyes of Iran’s 32 million people, the prosperity and national prestige the Shah is bringing them has bathed their ruler with new luster. Thus last week, when the Shadow of God celebrated his 55th birthday—his 56th by Iranian reckoning, which counts the day of birth as one’s first birthday—the national holiday was observed with particular fervor. The capital city of Tehran (pop. 3.8 million) glowed from the light of millions of colored lamps. As part of the festivities, the Shah and lissome Empress Farah reviewed a mass exhibition of gymnasts in the $185 million sports complex built for the recent Asian Games. The Shah also grandly pardoned 148 prisoners who had been convicted of such charges as robbery, drug use, antistate activities and “plots against the monarchy.”

Another and perhaps more impressive affirmation of the Shah’s position in Iranian life took place at Golestan Palace. He presided over a salam or birthday levee of a thousand courtiers and high officials. Some of the men were dressed in cream-colored trousers and high-necked gold-braided uniform jackets; it was a scene oddly reminiscent of the days of Metternich. At a signal from the master of ceremonies, they carried out a prescribed ritual: a bow, a kiss bestowed on the outstretched imperial hand and flowery salutations, “Tavalod-e-Shahanshah Aryamehr ra Tabrik Arz Mikonam [Greetings on your Imperial Majesty’s birthday].”

In the 33rd year of an often uncertain reign, Mohammed Reza Pahlavi has brought Iran to a threshold of grandeur that is at least analogous to what Cyrus the Great achieved for ancient Persia. Items:

> Iran is now producing 6.1 million bbl. of oil daily and is the world’s second-greatest oil-exporting nation, after Saudi Arabia. Iran’s refinery at Abadan is the world’s largest. More important, the Shah was one of the first oil potentates to take complete control of production and reserves: since 1954 all income from production has gone to the National Iranian Oil Co., which is completely controlled by his government.

> Iran’s oil revenues are increasing astronomically. Technocrats working on the country’s latest five-year development plan have been forced to rejiggle the revenue side of the ledger almost daily; it now stands at $23 billion in oil income this year, v. $5 billion last year. Even if there is no further increase in oil prices, income next year should be more than $25 billion.

> Unlike Saudi Arabia, whose resources are almost inexhaustible (see chart), Iran is expending both its oil and its oil income to create a broad industrial base in the country before the crude begins to run out (1990, by Iranian estimates). That involves a heavy investment in social development, since 40% of Iranians are illiterate. Outside the cities, many live in poverty; about 85% of Iran’s land is untillable without artificial irrigation. This year Iran will spend $16 billion on projects ranging from dams to schools to hospitals. By the end of the current five-year plan, the Shah will have spent more than $68 billion on domestic improvements.

> With excess oil income, Iran is also undertaking aid and investment abroad. This year’s expenditures include $700 million to the International Monetary Fund to assist nations with balance of payment problems and $350 million to the World Bank. Additionally, Iran this year has committed $7 billion worth of grants, loans and deposits against future purchases from a dozen countries, including Britain and France. For an estimated $100 million, the government recently bought 25.04% ownership of the steel-producing branch of West Germany’s 162-year-old Krupp steel empire. In August the Shah endowed a million-dollar chair in petroleum engineering at the University of Southern California.

No other member of the club of suddenly wealthy oil nations is advanced enough or populous enough to match Iran’s projected scale of social and economic growth over the next two decades. Certainly no other oil power has a leader quite as visionary and energetic in his planning. Even though the Shah’s ambitious plans for Iran are barely under way, the country has already achieved such a pre-eminent place in the Middle East that businessmen and diplomats alike are beating a jet-pattern path to the Shah’s door.

Great Civilization. Important visitors, naturally, are granted audiences with the man who makes the decisions. The Shah was educated in Switzerland and has traveled widely abroad; he converses with his visitors as fluently in French or English as in Farsi, the principal Iranian language. In any of the three tongues, he can evangelistically describe his goals for Iran’s “Great Civilization”—a phrase redolent of the American “New Frontier” and “Great Society” of the ’60s. When the civilization matures, the Shah believes, it will turn Iran into the “Japan of West Asia” —a Third World miracle the like of which has not been witnessed since West Germany’s Wirtschaftswunder.

Already oil money has begun to transform Iran into an empire of paradoxes. The old Persia remains for those who seek it: the Qashqai tribe in the southwest still graze their cattle in the Zagros Mountains and locate water in a 1,000-year-old system of interconnected wells known as qanats. In Tehran entrepreneurs who make $50,000 a day take jet flights to Europe to complete a business deal (and see banned-in-Iran movies like Last Tango in Paris) or perhaps buy a vacation villa in Provence.

Some of the wives of these new middle-class millionaires, who celebrate Women’s Emancipation Day each February and can divorce their husbands as easily as men once could divorce wives under Islamic law, are dressed by Balenciaga and Dior. But on the street they pass other women who still wear the traditional speckled chador, or robe of modesty. The bustling streets of Tehran are so clogged with automobiles, including the made-in-Iran Paykan (Hillman) and Chevrolet Iran (Opel) as well as double-decked Leyland transit buses, that the city has belatedly begun to consider building a mass-transit system.

Contradiction leaps out everywhere in Iran nowadays. In Tehran, the mud huts of the poor lie hard by the condominiums of the rich. In the bazaars of Isfahan, a merchant accustomed to dealing with Iranians is likely to find himself negotiating simultaneously with a Russian steel-mill technician and an American helicopter expert.

The glue that holds this disparate society together is the Shahanshah. “Who built your new mosque?” the headman of the village of Hesar Khorvan on the slopes of the Elburz Mountains is asked. “The Shah, of course,” he answers firmly. For the bourgeois Tehrani, the Shah has grown to be a kind of imperial security blanket. “The middle class has become dependent on him,” says one businessman. “They feel secure. They don’t know what might come their way if he were not around, and that makes them pro-regime.”

The Shah’s underlying aim in building his Great Civilization is to make Iran not only secure but self-sufficient. “Since World War II,” says Premier Amir-Abbas Hoveida, “we have seen that pacts and bilateral arrangements don’t work when you need them. Our buildup is our only way of survival.” The Shah is succeeding so adroitly that even old adversaries look at him with respect. The Arab states of the Persian Gulf, who share nothing culturally with Iran but religion,* are apprehensive about the massive military power the Shah has been building up with oil income. At the same time, they are pleased with the Shah’s insistence on higher oil prices.

The Soviet Union, which during World War II occupied and attempted to annex Iran’s northernmost province of Azerbaijan, is now almost purringly cooperative. Moscow has toned down the anti-Shah propaganda it formerly beamed forth as a way of promoting Iran’s outlawed Communist (Tudeh) Party. In exchange for Iranian natural gas, which is piped over the border from Aga-jari, the Soviets constructed Iran’s first super steel plant at Isfahan—now only 24 miles from an American-staffed helicopter school that is the world’s largest. Relations with Moscow are so correct these days that the Russians made no complaints when the Shah recently raised the price of natural gas from 30.7¢ per 1,000 cu. ft. to 57¢.

The Shah considers himself a good friend of the U.S. Indeed, relations between Washington and Tehran have generally been excellent since 1953, when the CIA fomented demonstrations that led to a coup against the late leftist Premier Mohammed Mossadegh, thereby allowing the fledgling Shah to return to power after a brief, humiliating exile in Rome. These days, however, there is more than a single view of the Shah in official Washington, and sometimes he is given to wondering which one reflects the real Government position.

Hired Gun. At the Treasury Department, for instance, the Shah is generally thought of as a tyrant and a megalomaniac whose stubbornness and greed over oil prices represent a threat to the economic stability of the world. Treasury Secretary William Simon has publicly described the Shah as a “nut” and as “irresponsible and reckless.” The Shah is somewhat more highly regarded at the Pentagon. The Defense Department is pleased with the Shah’s massive purchases of sophisticated U.S. weapons, but some intelligence analysts cynically regard the Shah as little more than America’s hired gun in the Middle East. At the State Department, by contrast, the Shah is considered an enlightened ruler who is propelling his backward people into prosperity and is defending his own country, as well as U.S. interests, against the spread of Communism.

What makes the Shah a key figure in the Middle East, some U.S. diplomats believe, is the fact that like Secretary of State Kissinger, he has managed to deal equably with both sides. He considers the Israelis arrogant and even “masochistic.” But Iran nevertheless provides Israel with 50% of its oil. In return, Israeli experts on irrigation and land reclamation have transformed Iran’s Ghazvin Plain into a fertile oasis. At the same time, the Shah responded favorably last October to a request from Saudi Arabia’s King Faisal and dispatched six Iranian air force C-130 transports to ferry Saudi troops and equipment to the war against Israel. High on the agenda of Kissinger’s talks with the Shah will be the unresolved confrontation between their two governments over rising oil and commodity prices.

Hard Words. The Shah, whose government will spend $1 billion this year to subsidize imports of meat, wheat, sugar and soybeans, insists that rising oil prices are no different than rising commodity prices. He seeks to tie the two together in an economic index that would help to limit further increases. The U.S. position is that oil is artificially priced, which the Shah himself admits, while agricultural increases are a response to free market conditions. President Ford, and Kissinger in his latest United Nations speech, abruptly cautioned the oil-producing nations not to price their product at disastrously high levels. The Shah, more accustomed to hand kissing than hard words, bristled. “Nobody can dictate to us,” he told newsmen on a state visit to Australia and New Zealand. “Nobody can wave a finger at us because we will wave back.” In his 90-minute interview with TIME (see box preceding page), the Shah warned, “If this is a serious policy of the U.S. Government, then on this subject we are going to have a very serious clash.”

When the Shah talks about clashes these days, other nations sit up and take notice. Undeniably, Iran is becoming one of the world’s major military powers. To equip his 160,000-man army, 40,000-man air force and 11,500-man navy, the Shah recently contracted for such imposingly modern weapons as 70 U.S. F-4 Phantom jets, 800 British Chieftain tanks and an assortment of destroyers, Hovercraft and troop-transport planes. In a deal that probably saved Long Island’s Grumman Aircraft Corp. from bankruptcy, the Shah earlier this year ordered 80 F-14s at a cost of nearly $1.5 billion. By 1980 Iran will have more fighter-bombers (839) than any NATO nation except the U.S. The Shah, a skilled pilot with more than 5,000 flying hours in fixed-wing aircraft and helicopters to his credit, insisted on checking out the Phantoms personally.

Jugular Vein. Some of Iran’s Arab neighbors wonder whether the Shah really needs all that expensive hardware and worry about his ambitions. “With each generation of weaponry,” one Pentagon expert observes, “his defense perimeter expands.” In answer, Iranians point out that they share a 1,100-mile border with the Soviet Union; and the Russians, they argue, have never really given up their interest in gaining control of Iran’s oilfields some day. Iran also has an inimical and testy neighbor in Iraq, which has been massively supplied with Soviet weaponry. The forces of the two states frequently clash head-on along the border. In the most recent skirmish last spring, Iran lost 42 men in a fierce firefight but killed at least 39 Iraqis in return.

The Shah maintains that he is building a force with the primary mission of protecting Arabs and Iranians alike in the Persian Gulf, from which 86% of the non-Communist world’s crude shipments originate. The gulf at its neck narrows until the supertanker channel is only twelve miles wide at the Strait of Hormuz, which Premier Hoveida calls “our jugular vein.” Iran worries that dissident forces, like the radical Popular Front for the Liberation of Oman, which is currently fighting Sultan Qabus in Oman, could block the strait by sinking a supertanker. The Shah’s response has been a pride of military powers so vast that he not only can neutralize the guerrillas but also dominate the gulf. Says one U.S. diplomat: “The Arabs like to call it the Arabian Gulf. But it really is the Persian Gulf. It’s the Shah’s lake.”

A well-equipped military loyal to the Shah would also be helpful in putting down any dissident uprising within Iran. The Emperor freely admits that opposition to the monarchy is not tolerated in Iran, and he has methodically repressed dissent. His principal instrument for maintaining internal security, as he sees it, is SAVAK, Iran’s feared secret police organization which routinely scrutinizes even job applications and requests for exit visas. Its name is an acronym from the Farsi words Sazeman Ettelaat va Amniat Keshvar (Security and Information Organization). The Shah himself insists that SAVAK is not large, and some Western observers in Tehran wonder whether it is as efficient as Iranians believe. Nevertheless, the secret police, through a large network of informers, have been responsible for making countless arrests of leftists on occasionally vague anti-Shah charges and for at least 200 executions. The Shah, who has twice been a target of assassination attempts, travels with a heavy security guard and makes fewer public appearances these days.

If the Shah has both strong intimations of mortality and a divine sense of mission, it may well be because his dynasty is of surprisingly recent origin. His father, Reza Shah, was a swaggering 45-year-old army major in 1921 when he seized power from the corrupt Qajar dynasty. Harsh and intractable, Reza Shah was unable to cope with the world powers that interfered in Persian affairs after oil was discovered. Finally, in 1941, on the ground that he had become dangerously friendly with the Hitler regime, Reza Shah was packed off to exile in South Africa by the British and Russians. The throne passed to his shy, diffident 22-year-old son.

In his first years on the throne, the Shah was generally considered a figurehead monarch who cared more for fast cars, fancy living and pretty women than for the tasks of kingship. That impression was reinforced by his failure to deal firmly with Premier Mossadegh during the 1950s, and by his ineffectual early struggles with the landowning “thousand families” who largely controlled his country. In 1950 he attempted unsuccessfully to force them to hand over their land to their peasants; the Shah set an example by deeding 450,000 acres of crown property to the 42,000 farmers who worked the royal farms.

Not until 1963, when he undertook Iran’s white revolution (now officially known as the Revolution of the Shah and the People), was he able to break the power of the landlords and smash the vestiges of feudalism that paralyzed the country. The move gave him fresh strength from a new base of support in the middle and lower classes. Confident of his power, the Shah in 1967 finally decreed his coronation—after 26 years on the throne. Rather like Napoleon, he crowned himself with the 10,400-carat ruby and diamond royal crown. For Farah, the first Shahbanou (Imperial Consort) of Iran ever accorded the honor of being crowned, a special diadem was fashioned by Van Cleef & Arpels.

Theoretically at least, Iran is a constitutional monarchy, with a Parliament consisting of the Majlis or lower house and a Senate and Premier. In fact, the Shah is one of the world’s few remaining absolute monarchs. He guides all of Iran’s essential business and makes the final decisions. Searching for a comparison to the Shah’s power, Premier Hoveida considers the most recent parallel to have been the French presidency under Charles de Gaulle. “Parliament does not impede the executive,” Hoveida explains, “so we have a more efficient system and there is a dialogue.”

To stress the strength of the throne, Iran lays heavy emphasis on kingly privilege. Not only do aides, including the Premier, kiss his hand, but peasants also kiss his feet as a mark of respect. When the Shah stands, everyone in his presence also stands until he sits again. Iranian public works, from the 609-ft.-tall Mohammed Reza Pahlavi dam, Iran’s highest, to the Aryamehr steel complex, are named in honor of the Shah or the Shahbanou. “The outside world thinks that we want that sort of thing,” said Empress Farah in an interview last week with TIME (see box, page 36). “We don’t.

But people want it, and if we don’t accede, they think we are not interested.” In the most lavish display of opulence in Iranian memory, the Shah three years ago celebrated 2,500 years of Persian empire with a $100 million extravaganza at Persepolis, attended by Ethiopia’s Emperor Haile Selassie, nine other Kings and 16 Presidents.

The Shah has five palaces. Each winter the family skis at St. Moritz from a villa named Suvretta that was once owned by Movie Actress Audrey Hepburn. The Shah moves between his residences by helicopter or JetStar corporate jet, using the national Iranair fleet for larger hops. His recent visit to Australia required three jets, including one Boeing 707 used solely for luggage. Inside Iran, where the alert ears of SAVAK may be tuned toward caustic remarks, there is little open criticism of the way in which the Shah is building his Great Civilization. Outside Iran his development has been praised by the United Nations and the Club of Rome. But there is also skepticism not so much about the laudable end of the Shah’s programs but about the means.

Allergic to Caviar. The most pointed criticism is that a nation of 32 million people cannot possibly be drawn into the technocratic 21st century by the fiat of a single man, no matter how good his intentions. The Shah at 55 is in good health—his worst indisposition, ironically, is an allergy that prevents his eating Iran’s world-famous Caspian caviar —and he works a 15-hour day with scant time out for family life. But for all the Shah’s skill and experience, sooner or later decisions must be shared more than they have been up to now.

One reason why so much power is kept in imperial hands is that Iran has a dangerously small pool of trusted technocrats capable of running the country. The armed forces, which have a lavish pay scale matching those of most corporations, constantly vie with private industry for talent. Universities have room for only one of every ten hopeful students who apply. The Shah’s immediate circle of advisers is also surprisingly small. Among them are Premier Hoveida, 54, a dapper man who has held his job nine years; Hushang Ansary, 46, Minister of Economic Affairs and Finance; Amir Assadullah Alam, 55, who acts as the sovereign’s right hand as minister of the court; and Jamshid Amuzegar, 51, who until recently served as the Shah’s voice and goad at OPEC meetings. Amuzegar last April was shifted to Interior Minister, partly so that he might help ensure more honest elections than have been held in the past. “Even the dead voted,” the Shah told TIME, recalling those elections, “and more than once.”

Far from having limitless funds to finance both a growing army and an expanding economy, the country will actually soon be capital-short. Says Dr. Abdul Majid Majidi, 46, a technocrat in charge of Plans and Budget Organization, the superagency that draws up and carries out the Shah’s five-year development programs: “In three years’ time we will be coming into U.S. and European markets to borrow. We can absorb it all.”

Already some inadequacies in rapid economic growth—Iran’s G.N.P. is currently expanding at an astounding rate of 50% a year—are becoming clear. The five-year plan by 1978 will create 2.1 million additional jobs. But there will be only 1.4 million Iranians qualified to fill them. That opens up the prospect of importing vast numbers of guest workers from other nations, as Western European powers do. Iranians are not sure they like the idea. There are sizable groups of foreigners in Iran already; the U.S. community, many members of which work on military-assistance programs (and who refer to the Shah as “Ralph” in conversations that his secret police might find critical, and thus un constitutional), is already 15,000 strong.

Last month the Shah decreed free and compulsory elementary school education throughout the country. The problem, however, is that Iran does not have enough teachers. One reasonably successful palliative up to now has been the creation of a “literacy corps” of high school graduates who spend most of their two-year military service teaching school. The corps has a program in which teachers travel with nomadic tribesmen and at each stop pitch a white school tent alongside the tribes’ black goat-hair tents. The Shah also decided that each schoolchild should have a free daily glass of milk — an impossible task for the country’s modest dairy industry. Even imported powdered milk would not improve the situation.

Iran’s expanding economy, moreover, might easily be strangled by a tradition of bureaucratic bungling and red tape. Simply to retrieve an incoming airfreight package from Tehran’s international airport requires 13 signatures from as many offices, a process that takes about three hours. A Tehran resident, complying with the law by paying an additional $1.20 tax assessment not long ago, had to try for nearly a month before he found the appropriate offices and could fill out the proper forms. “A thousand-rial [$13] bribe would have settled it in three minutes,” he said bitterly.

One byproduct of such bureaucracy, as the Shah is aware, is corruption. Foreigners flocking to Iran to do business have discovered that even in the army, payoffs have been demanded. Only at the very top, apparently, is there total honesty. But crackdowns have begun. Wealthy Businessman Hussein Hamadanian was recently arrested by the secret police for embezzling from one of his companies and is awaiting trial. He faces a prison sentence of up to 10 years and may well receive the maximum penalty as a warning to others.

Another aspect of Iran’s development that bothers critics is the Shah’s unstated decision that political progress for the time being must take second place to economic growth. Decentralization of political power is moving slowly, and there is scant evidence of any quick shift from benevolent but absolute monarchy to at least limited democracy. Theoretically, Iran is a nation of competing political parties. Hoveida’s Iran Novin (New Iran) holds power with a dominating 235 seats in the 267-seat Majlis. But Mardom (The People’s Party), which has all but one of the remaining seats, was created on the Shah’s order as a kind of loyal opposition. As it is, neither party is outspoken or forceful. Citizens of Tehran, who tend to be both apolitical and cynical, sardonically dismiss them as the “yes” party and the “of course” party.

Clockwork Orangers. Younger Iranians chafe at such restrictions, but the government is in no hurry to change the situation. Premier Hoveida, in an interview with TIME Correspondent William Stewart, dismissed protesters as “a bunch of Clockwork Grangers.” Said he: “The survival of the state cannot come about with a permissive society.” The Shah himself is even blunter: “We want to catch up and do it quickly. In these very specific conditions, the blah-blahs of armchair critics are obviously ignored. If this is intolerance, I accept it.”

Convinced that change is impossible, many students simply remain abroad after they complete foreign studies, even though the Shah’s social-minded program is as ambitious as anything they could prescribe for Iran. The shortage in doctors—presently 22,000—could be nearly wiped out merely if all the Iranian doctors living in the U.S. would come home again.

In contrast with the dissident young, older Iranians appear to have accepted the priorities. In place of political freedom, they are willing to accept a stunning improvement in their lifestyles. Comments a Western diplomat in Tehran: “If you want to call that buying off —economic gain for the loss of political expression—you might be right.” As the middle class is uneasily aware, Iran’s new prosperity is unevenly shared. A scant 10% of the people control 40% of the wealth, while the bottom 30% enjoy only 8% of it. Inflation, now running at 20%, diminishes even these gains. Until the situation improves, the Shah’s white revolution will be incomplete.

In moments of reflection, the Shah has been known to confess some unease about aspects of his Great Civilization.

He worries in particular about the contamination of Iran’s proud cultural heritage by modern life. In fact, there is an untrammeled kind of frontier spirit on the loose in Iran today; past heritage is being bulldozed into rubble as the country tries to build a future.

Grand Goals. But there are larger questions about Iran’s future that remain unanswered. What if the Shah were to die suddenly? Would Empress Farah, who has been designated regent for Crown Prince Reza, 14, be able to carry on the great projects now under way? Is the Shah’s imposing military buildup a deterrent against war or a provocation? The Shah has not only filled the power vacuum that existed in the gulf after the British left but has shown an interest in establishing a strong naval presence in the Indian Ocean. Inevitably, such a move would increase the fears of Iran’s neighbors about the Shah’s geopolitical ambitions. Will the people and, above all, the army remain loyal if the grand goals of the white revolution are unrealized and if untrammeled economic progress outstrips social growth? After all, some are still alive who witnessed the ouster of the last monarch but one by an ambitious, dissatisfied soldier. On the record so far, the future favors the Shah. Between oil and ambition, therefore, he and his developing nation are bound to be increasingly visible, increasingly vocal and increasingly vital.

* There are differences even in religion. Most Arabs belong to the dominant Sunnite branch of Islam; Iranians adhere to the smaller Shi’ite sect.