Iran: What’s in Store?
No. 2 2003 April/June

Opening the discussion, the experts amended the traditional view
of the two oppositional power centers: one is grouped around Iran’s
spiritual leader, Ayatollah Ali Khamenei, who relies on the support
of the clerical conservatives; the other group is situated around
the moderate President Mohammad Khatami who leads the reformists.
Most of the participants at the symposium agreed that there is a
third center referred to as the pragmatists. They are grouped
around ex-president Ali Akbar Hashemi Rafsanjani. Several experts
argue that a fourth center has come into being in Iran as well –
the so-called neo-reformists.

The interaction between all of the reformist forces in Iran is
very complicated. This also refers to the Khatami and Rafsanjani
groups which belong to the “traditional opposition.” Reforms
advocated by these groups differ in content and priorities. Whereas
the Khatami group advocates political liberalization, supporters of
Rafsanjani insist on accelerated economic reform and modernization
of the industrial facilities. While President Khatami and his
supporters believe that liberalization of the government regime is
a necessary prerequisite for economic reform, the Rafsanjani group
asserts that the existing political and ideological power structure
in Iran provides enough ability for immediate modernization.

The conservatives are represented, above all, by Khamenei and
the Qum orthodox clergy. A majority of the speakers in attendance
agreed that Khamenei, who holds the position of head of state,
actually exercises much greater control over the entire system of
government. Even the parliament, a relatively democratic
institution, is controlled by conservatives through the Council of
Guardians, which sees to it that Iranian laws are in line with
Islamic rules and the Constitution.

Another government body, the Expediency Council, has the right
to annul decisions made by the Council of Guardians. It is headed
by ex-president Rafsanjani who seems almost envious of Khatami and,
as a result, less inclined to oppose the Council of Guardians. By
allying himself with Rafsanjani on fundamental issues, Khamenei can
effectively reduce Khatami’s influence should the latter start
dismantling the existing political system.

Some of the experts emphasize that, in the long run, the Islamic
regime in Iran will represent a united corporation of the clergy.
Its leaders may differ on some issues, but all of them want the
theocratic regime to be preserved. This also applies to President
Khatami and his group who call for Iran’s modernization “from
above” within the framework of the existing political system.

However, not all of the experts agree with this conclusion.
Several argue that Khatami and Khamenei have gone separate ways,
and this trend is reinforced by the aggravation of the political
situation in Iran since mid-2002. Yet, most of the experts agree
that there is little chance Khatami and his party will become any
more radical in their reform initiatives. It seems more likely that
they will give up their demands for radical liberalization of the
state’s Islamic structure and for increased presidential powers.
One factor that is forcing the group to revise its position is the
desire not to endanger its “consensus” with Khamenei, however
fragile it may be; this is important in the face of pressure from
the U.S. administration which has included Iran in the ’axis of
evil’ and has threatened to overthrow the Iranian regime.

Meanwhile, it seems that the general atmosphere in Iran is
becoming more and more radical. First, Iranian society is showing
signs of frustration as the government-proclaimed liberalization
initiatives have yielded no net results, nor has there been much
headway in economic or political reforms. Second, the authority of
President Khatami is falling. Many analysts believe he has lost any
ability to counter the stronger conservatives and live up to
society’s expectations. Khatami’s credibility gap became manifest
following the municipal council elections on February 28, 2003
which were won by the conservative contenders.

The forces advocating for more radical reforms have been more
active. The experts point out that this activity is aggravated by
the general disillusionment with the efforts of ’traditional’
reformers, as well as with the overall effects of Ayatollah
Khomeini’s revolution. According to estimates, at least 70 percent
of the population display their discontent, which manifested itself
in the electorate’s apathy during the elections to local government
bodies alluded to above. This is a natural reaction of the
dispossessed; many of these citizens are poor, possess limited
freedoms and have a feeling of general isolation from the rest of
the world.

However, one should not equate dissociation from religious
conservatives and negativism with regard to religion – the latter
is feebly expressed. Importantly, the disillusionment of a large
part of Iranian society with Khomeini’s Islamic revolution is mixed
with a sentiment that remains in favor of preserving the country’s
national and state identity, cultural uniqueness, and

Social Basis For The Reform

The loss of the offensive potential of the Khatami-led reformist
movement, together with the emergence of more radical
neo-reformists on the political stage, is creating the
prerequisites for intensified public activity in society, above all
within three major groups: students, the intelligentsia, and
technocrats. However, these groups have different “neo-reformist
potentials” and remain a “thing-in-itself” – the intelligentsia and
technocrats to a larger extent, and students to a lesser

The mid-1990s were marked by politicization of the student
, which reflected dramatic changes in the demographic
situation in Iran. People aged 15 to 25 make up 20 percent of the
country’s population. This part of the electorate (Iranian citizens
are granted the franchise at the age of 16, and in some cases at
the age of 15), which grew up in an Islamic system and which is the
most active, sets the tone of public and political life. Millions
of students, most of whom live in large cities, above all in
Teheran, are to a great extent politically minded, and a majority
of the student organizations advocate reforms. These include youth
organizations of the Mosharekat Party and the largest student
organization, Daftare Tahkime Vahdat, which actually is a political
party. Its branches are active at all universities and are united
into the Central Council which meets every month. This organization
can quickly mobilize students for protests, and in the last few
years it has initiated strikes and demonstrations at various
university campuses.

The transformation of Daftare Tahkime Vahdat, which has turned
from an advocate of Islamic rule into a protagonist of democratic
reforms, reflects the evolution of political views within the whole
of Iranian society. The need for change within the ruling regime,
specifically by making it less Islamically pronounced, is becoming
ever more evident to many Iranians. These changes cannot be carried
out within the framework of the religious corporation. Students,
who supported Khatami after his first election as president and who
are becoming disillusioned with him, now want radical changes. Some
experts maintain that the students are not so concerned with
reforms within the constitutional frameworks, as they are with the
secularization of the regime.

The intelligentsia in Iran is another serious force: 1.4
million Iranians have received a higher education, while another
30,000 have obtained a higher theological education. Teachers and
journalists are the more active part of the secular intelligentsia.
They received the freedom of speech under Khatami and now they want
to consolidate their other former achievements; they also want to
advance more radical changes in society.

Paradoxically, the potential for reform is actively displayed by
the religious intelligentsia who have a background of political
activities and are united in various organizations, parties and
groups. Religious figures traditionally enjoy a great deal of
authority, and their control over huge flows of money only adds to
this power. Through their influence, the madrasah students become
their followers.

The technocrats, on the other hand, have close ties with the
state government, the economy and new technologies, and are one of
the most active social groups in Iran. It was a group of
technocrats in the Rafsanjani government which first initiated
economic liberalization, spoke about the need for broader political
freedoms, and established the first secular political party –
Kargozaran – in the Islamic Republic of Iran. In the 1997
presidential elections they threw their support behind Khatami.

Technocrats in the Mosharekat Party insist on the adoption of
laws that would broaden presidential powers in order to facilitate
work on the budget, as well as to initiate reforms in the tax
regime and banking sector. Some people who are employed by the
state government admit that the regime needs to be reformed. These
people, many of whom advocate a market economy, will always be a
force to be reckoned with. The possibility cannot be ruled out that
under certain circumstances they will stop supporting Rafsanjani
and Khatami and side with the more radical elements of society,
that is, the students and the intelligentsia.

Of the various political forces the following have an influence
on the political situation in Iran.

Leftwing groups opposed to the Islamic regime. Experts
contend that these groups cannot be expected to influence the
political situation in the country at present. First, they all
operate from abroad. Second, they are not united and do not enjoy
repute in Iran. These factors doom the leftists to the margins of
the political spectrum.

Another leftwing organization, Mojahedin-e Khalq, once viewed as
an alternative to the incumbent regime, has watched its political
fortunes fade. The support it expressed for Iraq during the
Iran-Iraq war turned Iranian society against the organization. And
then, following the events of September 11, 2001, the United States
included the party on its list of international terrorist
organizations, causing Mojahedin-e Khalq to curtail its political

The leftwing Islamists also have great potential for
initiating reform, as well as the capability for influencing the
political situation inside of Iran. These are clerics led by the
Militant Clergy Association, and the Mojahedin of the Islamic
Revolution. In 1997, the latter supported Khatami as a presidential
candidate representing the leftwing Islamic forces; they now
advocate the reform of the state system within the constitutional
framework. Members of this party pay particular attention to
substantiating the need for reforms on the basis of Islamic
principles. This political party with the Islamic name is a
supporter of Islam’s reformation. Its leaders occupy ministerial
posts in the Khatami government and have vested secular government
bodies, especially the president, with additional powers. In
certain circumstances the leftwing Islamists may side with student
organizations, while preserving at the same time their
contradictory ideology.

The rightwing modernists are represented by parties
oriented toward rich business people, and for whom economic
liberalization does not necessarily require the secularization of
the political system. These include Kargozaran, the party of
technocrats who champion freedom of enterprise, privatization, and
an attractive investment environment. Apart from this, the
rightwing modernists will not provide much support to reforms.
Managers and business people will not necessarily seek to break the
religious corporation if, theoretically, they are free to engage in
their business affairs and, simultaneously, retain positions among
the clergy, i.e. combine power and business. However, some experts
predict that growing protests may prompt the rightwing modernists
to form an alliance with the leftwing Islamists. Both Khamenei and
Khatami will then be forced to reckon with a broad political
coalition. Importantly, such a coalition would be able to influence
the leaders from inside the religious corporation.

The internal opposition to the present “mullahs’ regime”
includes Ayatollah Hussein Ali Montazeri. His ideas are very
popular, especially among young people. Montazeri proposes revising
(within certain limits) the Constitution in favor of the presidency
and the Islamic state, while combining Islam and human rights.
Although the experts disagree over the extent of the elderly
ayatollah’s influence on society, they agreed that the very
emergence on the political stage of a dissident cleric, who is
opposed to the centralization of clerical power (now in Khamenei’s
hands), is symptomatic of Iranian society drifting toward
reformation of the Islamic state.

In 1979, following the rise to power of the Islamists,
representatives of the upper classes and well-educated members of
the middle class were forced to flee Iran. Many of them have
achieved success in business and now enjoy prestigious positions
and well-paid professions abroad. This ’nonpolitical
has some influence over Iranian society. Although
their children have received a solid education abroad and largely
assimilated into their new countries, representatives of the
diaspora have not lost their Iranian identity. And the diaspora
supports pro-Western liberal ideas, and most of its representatives
are secularists. If its ties with Iran were stronger (it maintains
contact with people in Iran largely via the Internet), this group
could realistically help strengthen the reformist movement.
However, the diaspora is unable to play any significant role in
shaping sentiments in Iran, yet it does help to determine public
opinion about Iran, which is important.

Who The Conservatives Rely On

The increased activity among the pro-reform forces has resulted
in a more stringent policy by those institutions on which the
clerics rely for their power. The Islamic Revolution’s Guard
, which has always been the most reliable support for the
regime, is now playing an increasingly important role. There is
speculation that the Corps and other secret services, which
reliably protect the regime, are actually saving Iran from

Following the Khatami-initiated replacement of the secret
services leadership (the main targets were the most odious
figures), the Guard Corps’ policy remained unchanged. The Corps
remains a tool in the hands of Khamenei rather than the whole of
the regime; their leaders are directly subordinate to him. Khamenei
makes all of the personnel appointments and determines the amount
of the Corps’ funding.

The Guard Corps contrasts in this respect with the army which,
to all appearances, will not side with the clerics if their
position was threatened. Unlike the Corps, the army is intended to
counter external rather than domestic threats.

A major role in countering the pro-reform movement is assigned
to Iran’s main secret service – the Ministry of Information.
It uses its numerous agents and mass media which it controls to
drive a wedge into the student movement, as well as to persecute
and compromise liberals.

On the whole, the secret services, including Basij (people’s
, demonstrate their unequivocal support for the
conservative forces, while the judiciary plays an active
role in suppressing dissent as well.

In their struggle against the pro-reform forces, clerics use
the Council of Guardians to filter out candidates to
Majlis (parliament) members, under the pretext of their
“disloyalty” to the Islamic regime. The present constitution
enables the Council to filter out parliament resolutions, too; it
also gives the conservatives the power to block liberal bills. The
government has actually no levers to influence organizations
subordinate to the conservatives. When the Majlis approved
the government-proposed bill for including the Guard Corps and
other Islamic foundations in the 2002/03 budget as accountable
entities, the Council of Guardians rejected the notion. The
Expediency Council also refused the parliament proposal, saying
that these issues remain Khamenei’s prerogative.

Summing up the above, the speakers agreed that the secret
services and the Council of Guardians are major factors enabling
Khamenei and his colleagues to remain in power.

The Economic Situation And Social Stability

The effect of economic factors on the political situation in
Iran is largely manifest in employment, privatization, and the
attraction of foreign investment into the country. These problems
also divide the clerical conservatives and the pro-reform

The Khatami government, continuing with Rafsanjani’s policy of
economic liberalization, has drawn up a program for privatizing
almost 550 enterprises, including Islamic foundations. To date,
only a small portion of these have actually been privatized.
Privatization is proceeding with difficulty; often new owners are
more interested in selling out their equipment and land than in
organizing production. Opponents of the reforms take avail of such
developments and have been staging protests against privatization

The government has done nothing to create a favorable climate
for foreign investors, although the need for foreign investment in
the Iranian economy has become obvious. Proponents of the reform
initiatives are trying to change society’s attitude to foreign
businesses, arguing that foreign capital will help create new jobs
in Iran. Ninety percent of Majlis deputies have supported plans to
attract foreign investment, which they have described as the only
way to solve the unemployment problem. Yet, these plans continue to
be met with great difficulties.

Other obstacles to the reform initiatives include the continuing
problems with the currency rate and subsidizing practices. In 1999,
the government established a uniform (floating) market exchange
rate; there is a preferential import exchange rate (1,755 rials per
dollar in 2002, compared with the market rate of about 8,000 rials
per dollar). The preferential rate is used to import essential
goods (flour, baby food, pharmaceuticals) while maintaining their
prices. On the one hand, this alleviates social effects of economic
problems, but on the other, impedes normal development of the
economy and inevitably leads to the aggravation of the economic
situation in the future. The import privileges are the greatest for
Islamic foundations which are also exempt from taxation and,
consequently, from accountability. These foundations use their
privileges to provide aid to the population – a factor eagerly
exploited by the regime to serve its interests. The subsidies help
maintain not only flour prices and electricity rates (this takes up
to U.S. $1bn) but also unprofitable state-controlled enterprises
(about 60 percent of the national budget). This practice helps the
conservatives to win over the hearts of the population and,
simultaneously, provides the opportunity to accuse the president
and his government of their failure to govern the state.

The state subsidies will hardly prevent social tensions in view
of growing unemployment which hits the hardest the younger and more
active groups of the population. One of the experts suggested that,
if the reformers fail to solve this problem, the entire system of
Iranian statehood will be simply wiped out by a powerful protest
movement. Yet, most of the experts were more restrained in their
forecasts, but even they expressed doubt that the “Islamic economy”
can endure unchanged. At the same time, in case of a crisis,
protests will be directed against Khatami and his government rather
than against the conservatives.

Foreign Factors And Their Effect On Iran

Several major foreign factors appear to have the greatest effect
on the situation in Iran.

Russia. Russia-Iran relations are not a subject of
political disagreements in Iran, as pragmatically minded
policymakers (both reformers and conservatives) do not question the
need for a partnership with Russia. Economic ties play a special
role in their position. In particular, the speakers pointed to
Russia’s assistance in building a nuclear power plant at Bushehr,
which has evoked harsh criticism from Washington. The experts
emphasized that a decision from Moscow to withdraw from this
project, which is under the rigid control of the International
Atomic Energy Agency, might provoke Iran to acquire possession of
nuclear weapons. Russia’s assistance has been checking this
tendency and demonstrating the possibility for Iran to use nuclear
energy for peaceful purposes.

The development of Russia-Iran relations objectively helps
strengthen the positions of pragmatists on the political stage in
Iran. They cited several examples of how maintaining good relations
with Moscow helps neutralize radical Islamist approaches. This
refers to Chechnya, Iran’s peacekeeping efforts in Tajikistan, the
neutralization (in the spring of 2002) of Hezbollah’s activities,
and the prevention of a “second front” at the height of the
Palestine-Israel confrontation. Russia’s diplomatic efforts caused
Iran to enter into negotiations on its accession to the IAEA
Additional Protocol on Guarantees, which would make Iran’s nuclear
program more transparent for international inspectors.

The European Union. The EU’s so-called ’critical dialog’
with Iran on the conclusion of a trade and cooperation agreement,
linked with progress on political and humanitarian issues (human
rights, Mideast settlement, terrorism, non-proliferation), has
yielded positive results as well. The experts stated that the EU’s
position has already caused Teheran to make some concessions on the
human rights issue, among them the restoration of the public
prosecutor’s office, and the separation of civil and criminal legal
proceedings. The judiciary has allowed observers into prisons and
agreed to establish a de-facto moratorium on stoning.

The United States. The Bush administration’s hard line
toward Iran only provokes the consolidation of power in the hands
of the clerical conservatives. Although U.S. pressure gives a
signal to pro-Western forces in Iran that they are not alone, the
experts agreed that this pressure is counter-productive as it is
consolidating isolationist forces.

The U.S. invasion of Iraq will continue to influence the
situation in Iran. The U.S. military action against Iraq, conducted
without UN approval, unequivocally provokes the consolidation of
the conservative positions. Furthermore, the U.S. campaign in Iraq
may encourage Iran to start developing nuclear weapons as a
deterrent to Washington. This would be the primary negative result
of the above developments.

In the future, there may arise new factors that will have an
effect on the situation in Iran. In particular, the experts
discussed the possible consequences of the threat that may threaten
Iran’s territorial integrity should Iraqi Shiites be given broad
autonomy. In this case, it is plausible that the U.S. could
manipulate the Shiite population against Iran’s Islamists. In the
long term, liberalization in Iraq could change the balance of
forces in Iran to the advantage of the reformers.

Another way the situation in Iraq may influence developments in
Iran may be a decline in oil prices. Most of the experts pointed to
Iran’s dependence on the international oil markets. Revenues from
oil exports comprise 50-60 percent of the national budget. A fall
in oil prices may force Iran to cut imports and industrial
production. It may also cause disproportions on the domestic market
and soaring inflation, while a drastic slash in oil prices may
undermine the regime. Yet, most of the speakers agreed that, even
in a worst-case scenario, the conservatives would most likely
accuse Khatami and his government of economic mistakes and
increased social problems.

Possible Developments In Iran

A majority of the experts hold that radicalization of Khatami’s
position is unlikely, while his devotion to the policy of gradual
modernization of the regime is the more probable course. At the
same time, many of the experts (43 percent) do not rule out growth
in the influence of the conservative forces.

More than half of the experts (62.5 percent) estimate the
Iranian population’s discontent with the government’s economic
policy as highly probable, but a majority of them (87.5 percent)
believe an aggravation of the social situation is a medium

Possible developments in the political situation in Iran are
shown in the table below.

According to a majority of the experts, the more probable
variant is a compromise between different forces, with some
domination by the conservatives. But even if the religious
corporation is preserved as a whole, one should not rule out the
introduction of individual secular elements into the system of

Major possibilities for political development in
Iran, %
High probability Medium probability Low probability
Victory of reformers in the near future 12,5 25 62,5
Preservation of the status quo 50 50 0
Khatami’s resignation and his takeover by the
0 50 50
Khatami’s resignation and large-scale protests that will give
power to reformers
12,5 0 87,5

President Khatami is expected to continue his policy of gradual
and therefore inefficient transformation of the current regime in
Iran. This supposition rests on his lengthy presidential
background. Radicalization of his positions is possible only if
there is a threat to his personal interests and security. Khatami’s
rivals in the ruling clan are not yet planning his resignation; it
cannot be ruled out, however, that the blame for any future
economic problems will be put on him – without any risk of
aggravating the political situation. But if Khatami demonstratively
resigns from his post amid a spontaneously growing crisis, the
conservatives may take tough measures to suppress the opposition

To all appearances, Khatami has exhausted his reform potential
or is close to this point; therefore one may expect the emergence
of a new (neo-reformist) project for merging the Islamic and
liberal models of government. The regime may preserve its Islamic
appearance, with the clergy retaining some of their powers, while
the bulk of the powers will be delegated to elected bodies.
However, this secularistic project will prove difficult to
implement due to the general weaknesses within the social and
political spheres.

Despite the new neo-reformist trend, the status quo in Iran will
most likely remain until the 2005 elections – provided an external
factor does not interfere in the natural course of events before