Iran politics: Unknown quantity

The Economist Intelligence Unit ^

[Alex Marko]

The landslide victory of Mahmoud Ahmadinejad in second round of the presidential election leaves conservative factions of the clerical establishment and the military in firm control of most of Iran’s levers of political power. This is the culmination of a process that started with the 2003 municipal elections, and therefore does not constitute a sudden lurch towards a more austere social policy and away from political and economic engagement with the West. However, the defeat of Akbar Hashemi Rafsanjani has been a decisive setback for those who had hoped that the election might mark a turnaround in the fortunes of the reformist camp.

Mr Ahmadinejad has sought to dispel notions that he is a fundamentalist ogre intent on re-imposing the strictest Islamic codes of behaviour, forging ahead with the development of nuclear weapons and curbing the activities of foreign investors. In his first statements after his victory—with 61.7% of the vote, against 35.9% for Mr Rafsanjani—he said that one of his priorities would be to stimulate domestic production through rooting out corruption and breaking down bureaucratic barriers to investment. Indeed the prospect of having a president whose views appear to be in tune with those of parliament and of the clerical establishment may have worked in Mr Ahmadinejad’s favour among electors who have grown weary of the stalemate between conservatives and reformists. His comments on the nuclear question were measured, as he reiterated the familiar theme of Iran’s right to use peaceful nuclear technology and pledged to continue negotiations with the EU. He also attempted to project an image of tolerance in his attitudes towards political debate and social policy.

Khamenei’s man?

The principal victors in the election, aside from Mr Ahmadinejad, have been Iran’s supreme leader, Ali Khamenei, the Islamic Revolutionary Guards Corps and the Abadgaran bloc that dominates the Majlis (parliament), having swept aside the reformists in the February 2004 election. What is not yet clear is the extent to which Mr Ahmadinejad will be beholden to these three poles of influence once he assumes office in August.

Mr Khamenei had made clear that was not comfortable with the idea of Mr Rafsanjani returning to office. This was couched in public references to the need for “new blood”. This disguised a real sense of threat that the mercurial Mr Rafsanjani would be more effective that the outgoing president, Mohammed Khatami, in circumventing the supreme leader’s powers and pursing his own political agenda. Mr Ahmadinejad did not appear to be Mr Khamenei’s first choice among the four conservative candidates that that were initially qualified to stand. However, once the results of the first round were known Mr Khamenei is likely to have thrown his weight behind the former mayor--while of course maintaining a public position of neutrality.

Mr Khamenei has shown himself to be a skilled political operator in his long battle to blunt the efforts of the reformists to change the structure of the Islamic republic. His methods have entailed mixing strong-arm tactics, such as were used to block reformist candidates in last year’s parliamentary election, with more conciliatory measures. An example of the latter has been Mr Khamenei’s tolerance of a measure of social freedom. This suggests that any fears that Mr Ahmadinejad would proceed to impose Talibanesque strictures on Iranian civil society are overblown. Westernised sections of Iranian society may have been shut out of Iran’s main political institutions, but they will not necessarily be forced to revert to the cloistered lifestyle of the early years of the Islamic revolution.

Mr Khamenei has also been content to allow the Expediency Council under the leadership of Mr Rafsanjani to play an effective role in moderating some of the more doctrinaire initiatives of the new Majlis, for example in preserving the principle of privatisation in the 2005-09 five-year plan. It is questionable whether Mr Rafsanjani will be able to resume his Expediency Council post in the wake of his humiliating election defeat. If he is replaced with a hardliner, the conservative domination of the Iranian political system will be complete. However, Mr Khamenei may opt to retain this body’s ability to exercise checks and balances through ensuring that it does not fall under the sway of the conservatives.

Foreign policy shift

Mr Khatami’s failure to make headway with his plans for domestic political reforms—in particular his effort to curb the powers of the Guardian Council—were offset to a degree by his success in the field of foreign policy. Under his presidency Iran’s relations with the EU and with its Gulf Arab neighbours improved markedly, and Mr Khatami also devoted much effort to fostering Iran’s ties with China, Japan, India and a host of African states. The revelation in late 2002 that Iran had been concealing a major programme to master the nuclear fuel cycle placed Tehran’s relations with the EU under strain. However, the diplomatic channels that had been opened at Mr Khatami’s initiative enabled Iran to pursue a negotiated settlement of the issue.

The choice of foreign minister will provide an important indication of whether Mr Ahmadinejad will live up to his pledge to pursue “moderation, justice, peace and co-existence” in his foreign policy. Foreign diplomats will also been watching closely to see if Mr Ahmadinejad places figures from the Revolutionary Guards and Abadgaran in senior Ministry of Foreign Affairs positions.

Oil shake-up

One of the strongest themes of Mr Ahmadinejad’s campaign was the supposed corruption of the Iranian oil industry. He depicted the industry as being in the thrall of private interests, many of them linked to the family of Mr Rafsanjani, and he promised to ensure that the poorer strata of Iranian society would derive more tangible benefits from Iran’s considerable oil export revenue. It seems likely that the days of the current oil minister Bijan Zanganeh, are numbered. He has already been the victim of continuous sniping from conservatives in the Majlis, and it would make sense for Mr Ahmadinejad to appoint one of his own associates to this critical post.

His comments on corruption in the industry indicate that he plans to make thoroughgoing changes in the ministry and to the structure of the National Iranian Oil Corporation. He said that he wished to promote domestic capabilities in operating the oil and gas industry—this does not necessarily mean that major changes are in prospect, as local firms already play a dominant role. However, Iran will have difficulty in meeting its goal of adding at least 1m barrels/day (b/d) of oil production to its current capacity of just over 4m b/d by 2009 without tapping into the technological expertise and capital resources of international oil companies. This is because of the complex structure of most of Iran’s main oilfields and the need to use advanced recovery techniques to sustain production.

Owing to his populist appeal and close relations with the military, Mr Ahmadinejad has already been likened to the Venezuelan president, Hugo Chávez. However, as he addresses the task of reforming the Iranian oil industry he will be anxious to avoid the precipitous drop in output that accompanied a similar exercise undertaken by Mr Chávez.

Economic risks

Mr Ahmadinejad has the advantage of brimming state coffers as he attempts to carry out a programme of redistribution of wealth towards the poor. However, his advocacy of increased subsidies and sharp cuts in interest rates runs the risk of stoking inflation and provoking a flight of capital. Mohammed Khoshchehreh, an Abadgaran MP with close ties to Mr Ahmadinejad, said that the new government would seek to reduce lending rates to single digits by the end of the year from 16% now, as a means to stimulate investment by small businesses. However, any such move would result in negative real interest rates, given the current rate of inflation at about 15%, and would be likely to put the value of the Iranian rial under severe pressure. There also been some concern voiced in the Iranian business community about Mr Ahmadinejad’s derogatory comments on the role of private banks and about his threat to use agents of the Ministry of Intelligence to probe suspect stockmarket activity.

Having been one of the outsiders at the start of the election campaign, Mr Ahmadinejad remains an unknown quantity in many respects. He has undoubtedly benefited from the support of the Revolutionary Guards, whose influence over Iranian politics has grown appreciably over the past few years. He has also managed to tap into a strong seam of support for a change from clerical rule, whether it be by avowed reformers like Mr Khatami or by reformed conservatives like Mr Rafsanjani. He has presented himself as a nationalist with strong moral views, but opposed to all forms of extremism. For the time being that is all the outside world has to go on.

[nuconvert]

"What is not yet clear is the extent to which Mr Ahmadinejad will be beholden to these three poles of influence once he assumes office in August. "

I think this sums up this writer's knowledge of what went on.
Ahmadinejad will be "beholden" to Khamenei if he wants to hold on to his job and his life.