The fatal flaw in Iran's regime

International Herald Tribune:

By Ray Takeyh

WEDNESDAY, AUGUST 3, 2005

WASHINGTON As Iran's hard-line president-elect, Mahmoud Ahmadinejad, prepares to assume office this week, there is a pervasive perception that the country's conservatives will finally be consolidating their power after eight years of struggle against the reformers. But rather than unifying Iran's right wing, Ahmadinejad is likely to fracture it if he acts on his pledges to bolster economic equality and end corruption.

For the reality remains that Iran's current corrupt economic system is sustained by the conservative establishment, which has always been uneasy about Ahmadinejad's egalitarian economic pledges. The contradictions that have always plagued the conservative movement are now likely to surface, making stalemate and deadlock once more the currency of Iranian politics.

Iran's most recent election was notable in that it reflected the revolt of the younger generation of conservatives who are offended by the corruption of their elders, and a hard-pressed working class who have suffered continuous economic strain. Ahmadinejad managed to adroitly mobilize these constituencies, which historically had served as the backbone of the conservative bloc.

The elder clerics, accustomed to the privilege of power, had always looked warily at the young mayor but were compelled to accept him because of his popularity among the lower classes. Now that Ahmadinejad has been elected, he may find the task of carrying out his campaign promises far more difficult than he imagined.

Over the past 26 years, the clerical oligarchs have constructed an economy designed to operate to their direct benefit. As Ahmadinejad noted in his campaign, the epidemic of corruption has even reached into the oil industry through a network of ostensibly private companies. These well-connected companies have positioned themselves as compulsory partners for foreign investors who seek access to Iranian petroleum markets.

What the new president did not mention during his campaign critique was that these companies are all owned by the clerical leaders and their families, who are not about to relinquish such easy wealth. Ali Akbar Hashemi Rafsanjani, Ahmadinejad's principle challenger for the presidency, may have been the most notorious example of such corrupt practices, but he is one of many.

Outside the oil sector, the bonyads, the massive semi-government foundations with vast religious and philanthropic missions, have metamorphosed into huge holding companies that dominate the trade and manufacturing sectors while evading competition, taxes and state regulations. Ahmadinejad will find that these vast holdings, too, belong to none other than the clerical power brokers who have the institutional power to undermine his presidency, as they did with Muhammad Khatami.

Ahmadinejad is likely to prove similarly ineffective at addressing the other factors that distort Iran's economy: heavy state subsidies on key consumer goods; the job creation crisis that adds at least half a million university graduates to unemployment rolls each year; and the relatively low levels of foreign investment, which stem from the conservatives' protectionist impulses and the revolutionary ideology that continues to permeated their rhetoric and policies.

The subsidies present a special problem, as preserving the political status quo requires the conservatives to avoid provoking the popular ire that would quickly ensue any significant revamping of the subsidies on gasoline and bread. Only a genuinely elected government enjoying popular support would be able to persuade a jaded public to endure the pains of profound economic reforms.

The implicit message of Ahmadinejad's candidacy was that Iranians should put aside their lofty ambitions of creating a democratic regime for one that deals effectively with their economic predicament. In a sense, the Iranian hard-liners were emulating their Chinese counterparts in seeking to mollify an aggrieved public not through political modernization but economic rewards. But such a tacit bargain is unlikely to succeed in Iran, as the conservatives are too implicated in the corruption of the system to restructure it. Ahmadinejad's campaign against corruption and in favor of economic equality may have made these oligarchs nervous, but they have enough power and influence to prevent him from fulfilling his pledges.

As Iran's reactionaries assume control over all levers of power, it is hard to see a new democratic dawn on the horizon. But the conservatives' strategy may contain the seeds of its own destruction. By obstructing the peaceful reform movement, the hard-liners have already deprived the Iranian people of their democratic rights; now the new regime is likely to disappoint their hopes for economic reform, too. Faced with political disenfranchisement and continued deprivation, the Iranian people may yet express their clamor for change through protest and defiance.

On the eve of their most impressive power grab, Iran's conservatives may be sitting on top of the kind of smoldering public resentment that they can neither control nor appease.

(Ray Takeyh is a senior fellow at the Council on Foreign Relations.)