Iran's Reformers Won. Now Can They Hang Together?

They voted in record numbers, and they voted overwhelmingly for change. When Iranians handed allies of President Mohammad Khatami a big win in Feb. 18 parliamentary elections, they cleared the way for faster political and social liberalization at home. The reformers' victory also signals a gradual reduction of Iran's support for Islamic radicalism in the Middle East and for a continuation of the rapprochement with the West that Khatami has already begun.

But Iran is unlikely to transform itself overnight. Khatami has to be careful not to completely lose touch with the conservatives, who still retain control over the security apparatus and the judiciary. In addition, Khatami's supporters are far from united. They comprise a broad coalition of some 18 factions with considerable differences between them. The exact composition of the Parliament won't be clear until after runoff elections are held in several weeks.

The winners are likely to agree on a political and social reform program, including guarantees of freedom of the press and more liberal election rules. Economic issues are a more divisive matter. Khatami's coalition, known as the May 23 front, contains many oldline leftists who will be reluctant to pass laws that make it easier for companies to fire employees. They'll also resist cutting ample state subsidies on fuel and basic foods, and some are skeptical of foreign investment. "It will be easy to agree on matters such as press freedom; economic issues will be tougher," says Siamak Namazi, an analyst at Atieh Bahar Consulting, a business consultancy in Tehran.

In the coming weeks, investors interested in Iran should monitor the cohesiveness of the new ruling coalition. A key to the prospects for economic reform will be the Parliament's choice for speaker of the majlis. Former President Hashemi Rafsanjani might be able to unite more left-wing reformers with those of a more free-market bent. But he fared poorly in the Feb. 18 vote. Another candidate is the president's brother, Mohammad Reza Khatami, easily the leading vote-getter in Tehran. Reza Khatami, however, is a doctor with little political experience, and may lack coalition-building skills.

COMING TO GRIPS. Still, Iran's general direction can only be encouraging to the international community. While Khatami and many of his associates are clerics who helped lead the revolution 20 years ago, they are promoting a more pragmatic, tolerant brand of Islam. And the political involvement of younger, well-educated people such as Khatami's brother may lead to better thought-out policies. "The Iranian version of political Islam is finally trying to come to grips with modernity," says Ali Ansari, an Iran specialist at the Royal Institute of International Affairs in London.

Whatever their ideological baggage, Khatami's key aides are pragmatists who realize they must deliver better economic performance. Real income has declined since the revolution and the riyal is worth less than 1% of its value at the time of the Shah's departure in 1979. Today's higher oil prices may buy time. But the government, which now welcomes foreign investment in principle, may add sweeteners such as tax holidays to pull in capital from foreign companies and expatriate Iranians. Oil executives expect Iran to adjust the terms it is offering foreign oil companies to attract more investment.

Khatami is likely to warm up ties with the West. The initial focus will be on Europe, where Iran has reestablished import credit lines. But Khatami knows Iran's rehabilitation will be incomplete without a rapprochement with the U.S. It won't be easy to break 20 years of ice, but both Khatami and the Clinton administration may be ready to try.

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