Special Report
The Economist


Aconnoisseur of the vagaries of history, a benevolent patriot, a “peace” loving school teacher who has not, to date, done harm to anyone.This is how Iran’s President, Muhammad Ahmadinejad , whose earlier broadsides against Israel have provoked comparisons to Hitler, cast himself at a recent press conference. From his ruminative performance, you might not have guessed that his country faces sanctions, and perhaps American military attacks, if it carries on with its nuclear programme. He declared himself unconcerned. Mr. Ahmadinejand does not decide Iran’s nuclear or foreign policies. These are in the hands of the supreme leader, Ayatollah Ali Khamenei, and his lieutenant at the top of the National Security Council, Ali Larijani, a political rival of the President. But Mr. Ahmadinejad has gone out of his way to associate himself with Iran’s ambition to become a producer of nuclear energy only to generate electricity, but which others fear will lead to bomb-making.


The President is a populist in all things and unlike Mr. Khamenei and Mr. Larijani, answerable to Iran’s voters. Having struggled to fend off his domestic critics after coming to power , Mr. Ahmadinejad has learned to silence them by beating a nationalist drum. Hence, his decision to talk up the nuclear issue at every turn, and to announce personally on April 11th, that Iran had successfully enriched small quantities of Uranium. Two weeks later he declared, Iran is a nuclear country. It has the full gamut of nuclear technology at its disposal.


Even if Iran’s scientists find it breeze to perfect and install the batteries of centrifuges of uranium industrially, it will be several years before their country has enough of the stuff to power a reactor and between five and ten, in the opinion of America’s director of national intelligence, before it could make a bomb. Clearly, Iran is some way from being a nuclear country, but Mr. Ahamadinejad has never been one to let facts get in the way of his mission to make Iranians feel strong and respected.


He has been greatly helped by the rise in oil prices - propelled , in part, by the worries about Iran. The country’s oil revenues for the Iranian year that ended in March were in the region of $ 50 billion, nearly twice the figure of 2 years earlier. As long as world prices stay high, the Iranians know that the chances of their being punished with an oil embargo - which would push prices far higher - are virtually nil. By playing down the prospect of lesser sanctions, and by emphasizing the eagerness of China and some Asian countries to sell Iran machinery and consumer goods if European countries refuse to do so, officials are assiduously generating a sense of immunity from misfortune.


To reinforce it, the President has promised unprecedented spending on housing, public works and government bodies, such as the broadcasting authority, that propagate the official ideology. He has also ordered big public banks whose books are full of non-performing loans to land generously, especially to ordinary citizens. With subsidies and controls, the President and members of parliament , who compete to be generous, have ensured that the prices of petrol, electricity and basic foods rise more slowly than inflation, if at all.


In general, Iranians approve of the nuclear programme, though not all believe official assertion and their irritation at what they see as the duplicity of Western nuclear powers, are likely to endure. Indeed, from the huge numbers- almost half the population according to the tourism ministry- that holidayed away from home over the Persian new year, and the lavish wedding parties held nightly in the capital’s smarter hotels, you might think Iranians are pretty cheerful about the future.


But that picture is incomplete. Look, for a corrective, to the private investors who fled the stock market last October, frightened by the furious reaction to the President’s suggestion that Israel should be “wiped off the map”, and have yet to return in large numbers. These investors are cool towards the building industry, once profitable but now in recession. Nor do they want to buy state enterprises; by its own admission, the government stands little chance of hitting its modest privatization target. Instead, Iranians seem to prefer gold: the price of Iranian gold coins reached its highest level in over a decade last month, before the central bank’s intervention brought it down again. From fancy hillside stud farms to Tehran’s textile bazaar and scores of suburban estate agents, the region is identical: “The market is depressed.” The reason? “Politics.”


Split hairs,not atoms


That partly reflects the fact that the economic liberalism nudged forward by M. Khatami, Mr. Ahmadinejad’s timidly liberalizing predecessor has been halted. But it also reflects rather greater worries about the current crisis than the government admits to. Indeed, if European and other countries do join America’s longstanding sanction’s regime against Iran, it is far from clear that in Mr. Ahmadinejad’s words, these countries “will be more hurt than us.”


Some of Mr. Ahmadinejad’s rivals certainly sound less sanguine. Akbar Hashemi Rafsanjani, a former president who lost to Mr. Ahmadinejad in last year’s election, recently predicted that the diversion of the nuclear programme from its “natural course”, by which he meant the reference of Iran to the Security Council, would cause “lots of problems for us”. Mr. Rafsanjani also mentioned another embarrassment that Iranian officials rarely bring up these days: Russia’s foot dragging in completing the nuclear reactor that it has built for Iran at Bushehr on the Gulf Coast; that was due to be finished several years ago.


Mr. Rafsanjani has long let it be known that favours direct – though not necessarily declared – talks with America, aimed at setteling all bilateral differences. The supreme leader’s views, however, are less easy to read. Having said that Iran would respond to American aggression by striking at United States’ interests “anywhere in the world”, Mr. Khamenei recently qualified that vow: Iran would not initiate a confrontation. Mr. Larijani, for his part, has repeatedly asserted that Iran is open to the idea of talks. On April 30th , he spoke of Iran’s “readiness for agreement accommodation.”


Over what? A history of Iranian overtunes suggests that Iran would dangle concessions on its nuclear programme , its support for Arab groups that reject Israel’s as Iraq, in return for an end to American efforts to destabilize the Islamic Republic and a plan to establish full economic relations. But President George Bush has repeatedly shied away from talking to an Islamic theocracy that he detests – despite the urging, most recently of the Relations committee. Instead, the Bush administration is committing new money and resources to promote opposition of Iran’s theocracy.


Recent contacts between the two countries seem to have gone nowhere. Since mid-April , when it is emerged that Muhammad Nahavandian, a member of National Security Council, was in America, his itinerary has been the subject of fervered speculation.


Did he try to make contact with American officials? Was he rebuffed? The Iranians say he went there as an economist, at the invitation of American scholars, but that he also popped in to see Iran’s ambessador at the UN. The State Deptt. Has denied that Mr. Nahavandian, who holds a green card, entered the country “for meetings with US government officials.


Neither did anything come of a very public attempt to set up meeting in Baghdad between American and Iranian officials. Having been talked up last month, the putative negotiations ostensibly aimed at stabilizing Iraq, seem distant now that both sides have sulkily averred that they never really wanted to talk at all. Yet many, in Washington DC and Tehran, argue that America and Iran stand a better chance of resolving their differences over a table than through a megaphone.


Through the geopoliticking , some some human rights activists argue , the lot of normal Iranians is being ignored. Certainly, with parliament, the burecracy and the judiciary all in conservative hands , it is becoming harder to write critically of the government, let alone question the principles that underpin the Islamic republic. One such questioner, Ramin Jahanbeglew, an academic, was recently arrested as he tried to leave Iran to attend a seminar in Brussels. As yet, however, the authorities show no consistent signs of a return to the violent enforcement of the strict public morality laws that Iranians endured as recently as a decade ago.


The State’s reluctance to alienate the citizenry was recently exemplified by Rahim Safavi, the head of the ultra-ideological Revolution Guard. He warned members of Baseej, a national militia answerable to the Guard, not to “interfere in people’s lives…..and ask for identification cards and rifle through CDs and cassettes”. Thus, in summary, is what the Baseej was once known for.


In this time of uncertainty, the authority see their job as that of managing public opinion. Military attacks might make it easier, since they would surely galvanise Iranians against the foreign aggressor. The impact of new sanctions is harder to assess. Mr. Ahmadinejad’s pugnacious optimism, however, may soon be tested.



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