WWS 401: The Problem of Caspian Energy

Professor Feiveson

THE EFFECT OF PRESIDENT KHATAMI’S ELECTION

ON IRAN’S ROLE IN CENTRAL ASIA

Elizabeth Blair Sieff

January 4, 1999

EXECUTIVE SUMMARY

After twenty years of isolation under the conservative Islamic Fundamentalist regime established by the 1979 Revolution, Iran has a hope for liberalization in the form of a new moderate president, Mohammed Khatami. Khatami’s election has been hailed as a revolution in its own right, but his ability to advance liberal domestic and foreign policy will be challenged by a powerful faction of hard-line clerics.

For every two steps Khatami takes towards liberalizing Iran, the hard-liners drag the nation one step back. On the domestic side, Khatami initially made progress towards creating a civil society, but the conservatives’ negative reaction to deeper reform points towards a backlash. Khatami’s progressive secular foreign policy has been successful in fostering regional cooperation, but it has met with limited success in encouraging détente with the United States. Both Iran and the US began to take some tentative steps in 1998 to develop a "road map to better relations" (a phrase used by US Secretary of State, Madeline Albright), but it seems that a "dialogue of civilizations" (President Khatami’s initiative) will not provide a sufficient catalyst for cooperation.

The situation seems to have reached an impasse: the US insists that Iranian behavior must improve before concessions can be made while Khatami desperately needs a positive sign from the US so that he can continue to enact change without being discredited by the conservatives. If the United States could gradually provide rewards and incentives for liberal reform in Iran, the two countries could open discussion over the issues of contention: historical grievances, terrorism, weapons of mass destruction and interference with the Palestinian peace process. Tehran and Washington could establish a baseline for positive reform that would serve the strategic interests of both nations.

FOUR REVOLUTIONS

In the 20th Century, Iran has undergone four revolutions: the Constitutional Revolution of 1906, the rise of nationalism under Mossadeq in 1953, the Islamic Revolution of 1979 and the election of President Mohammed Khatami in 1997. The most recent of these watershed events was a declaration of popular support for moderate leadership.

A Moderate President Ascends to Power

Even though Khatami’s election signaled a great hope for liberalization in Iran, his vision will go unrealized until moderates replace conservatives in the key arms of the government. In the near-term, the moderate President will be able to make progress in areas that are amenable to the conservatives: the domestic arena and regional relations. However, the clerics will use their political clout to block reform when they feel that their power structure is in jeopardy. The hard-liners will challenge Khatami’s attempts to improve relations with the United States. Therefore Khatami must move slowly in these sensitive areas, relying upon adept politicking in order not to threaten the clerics.

Given the tradition of misunderstanding between Iran and the West, Khatami’s initiative to begin a "dialogue between civilizations and cultures" is a pivotal first step to the normalization of relations. Historically the Western powers have demonstrated a lack of respect for Iran’s political sovereignty, and similarly the Iranian people harbor anti-Western sentiments. For a normalization of relations to ensue, both sides must reach a mutual understanding, abandon their discourse of hatred and discuss the remaining issues of contention.

Western Oil Interests Clash with Nascent Nationalism

Even though the Constitutional Revolution of 1906 endeavored to curtail foreign influence, it coincided with the birth of the oil industry in 1909 that heralded Iran’s dominance by the Western powers. Upon the discovery of Iran’s oil, the British chartered the Anglo-Iranian Oil Company (AIOC) with an exclusive concession to find and pump oil in a half-million square mile area of Iran. Under the reign of Reza Shah Pahlavi from 1925 to 1941, Iran used its share of the oil profits to advance a campaign of modernization. During this period, Shah Pahlavi protected his geostrategic nation’s sovereignty from predatory powers by balancing Britain and the Soviet Union with a third-party alliance to Germany. Fearful that the Shah’s friendship with the Germans would become a military alliance with the Nazis in World War II, in 1941 Britain and the Soviet Union forced the powerful Shah’s abdication, placed his malleable young son on the throne, occupied Iran and divided it into occupation zones. During the war, the British and the Soviets pursued their own military and geopolitical goals at Iran’s expense, but at the end of WWII the US demanded that both powers evacuate their troops from their respective occupation zones in Iran. However, the US’s seemingly altruistic defense of Iran was motivated by incipient Cold War tensions and oil interests which led the growing group of Iranian nationalists to associate the US with the European imperialists.

The Mossadeq Affair

The most influential of the West’s opponents, Mohammed Mossadeq, became a spokesman for Iranian nationalism. Mossadeq did not approve of the Shah’s policy of playing the European powers’ off against one another. Instead, he believed that the Western powers should play no role in Iranian politics. As a member of the parliament (Majlis), Mossadeq drafted a measure aimed at nationalizing the AIOC that catapulted him to the position of Prime Minister in 1951 on popular support. Mossadeq posed a threat to what the West saw as the status quo in Iran by overpowering the weak Shah to advocate the nationalization of the oil industry and the reduction of the role of Western powers in Iran.

The US was so fond of its "island of stability" and so apprehensive of losing it to the Soviets that Washington was willing to support Iran’s pro-Western Shah at any cost. The 1953 CIA-backed ouster of Prime Minister Mossadeq was born out of the US’s distaste for change in Iran. The mentality behind the CIA-led coup was representative of the US’s tendency to focus on controlling events while ignoring Iranian personalities and social forces. This covert action and the subsequent propping up of an unpopular tyrannical Shah fed into Iranian disdain for the West. Mossadeq had stood for pursuing Iranian interests at the expense of the West, a position that simultaneously incensed the US and rallied Iranian nationalists. On the other hand, the Iranians grew cynical of the Shah’s collusion with the United States, viewing him as an instrument of Western hegemony. Thus the model for leadership in Iran was polar: leaders could either cozy up to the West at the expense of their people or they could demonize the West to assert Iranian positions. This polarity is still engrained in the minds of the clerics in Iran.

The Creation of the Islamic Republic

The Mossadeq affair provided the backdrop for the Revolution of 1979 by seasoning Iran’s nationalism with an element of virulent anti-Americanism. Revolutionary slogans like "death to the American Shah" that were chanted through the streets of Tehran had been formulated during the 25 years prior. The Leader of the Revolution, Ayatollah Khomeini, inherited Mossadeq’s mantle by harnessing the repressed sentiments of nationalism in Iran. By using Shiite fundamentalism as the guiding element of his movement, Khomeini created a new doctrine of Revolutionary ideals that inextricably linked Iranian nationalism, anti-Western rhetoric and religious fanaticism. Khomeini’s Islamic Republic was indeed the antithesis of the secular, pro-Western Pahlavi regime. During the early years of the Revolution, the term "moderate" became pejorative with treasonous overtones. The US further polarized the situation by refusing to recognize the legitimacy of the Islamic Republic of Iran and by using the US Embassy in Tehran for intelligence activity. Washington’s decision to admit the exiled Shah into the United States served to strengthen the Iranians’ association between the treasonous, corrupt Shah and his sponsors, the manipulating, expansionist US. The 1979 Islamic Revolution, its extremist rhetoric, the ensuing hostage crisis, and the counter-productive US reaction marked the beginning of the enmity that has characterized US-Iran relations throughout the latter part of the 20th century.

The US as "the Great Satan"

Since the Revolution, the US has strenuously sought to retard the economic growth of Iran through a variety of means, including the freezing of assets, and the enforcement of sanctions. When any US official, from the Secretary of Defense to the State Department’s Iran Desk Chair, is asked why the sanctions are in place against Iran, he will canonically recite what has become a litany of complaints. The US opposes Iran’s terrorist involvement, attempts to develop weapons of mass destruction, human rights abuses and opposition to the Palestinian peace process. However, the US’s present enforcement of the 1996 Iran-Libya Sanctions Act (ILSA) and the 1987 Executive Orders have been challenged for economic as well as political reasons. Even though the sanctions are hurting Iran economically, they will not be able to force political change. For this reason, the United States has found that ILSA brings it into conflict with its own allies, members of the EU, who support constructive dialogue with Iran and find the extra-territorial enforcement of laws unjust. In Iran, the sanctions are indirectly bolstering the power of the clerics by pushing the nation back into isolation as it was in the early years of the Revolution. If the US continues to play the role of the "Great Satan," the cleric’s anti-American rhetoric will become more compelling.

The US has also earned the epithet, "Global Arrogance," for its attempts to upset Iran’s regime and to meddle with the natural power structure of the region. Most recently, the US has altered the balance of power in the Caspian region in favor of its ally, Turkey, by deliberately excluding two of the largest regional powers, Iran and Russia. The US has also sponsored a Farsi language radio station modeled after Radio Free Europe. Iranians feel this transmission of propaganda is a thinly veiled attempt to stir up a revolt in the Islamic Republic. The ultimate badge of the US’s abuse of its hegemony lies in US Speaker of the House Newt Gingrich’s 1995 call for Congress to appropriate $20 million to stage an overthrow of the Ayatollahs. This violation of Iran’s political sovereignty has profoundly insulted Iran, as it is clearly a throwback to the foreign policy ideals that spawned the Mossadeq affair.

THE STRUCTURE OF THE IRANIAN GOVERNMENT

The political power struggle waging between the hard-line clerics and the moderates stands to jeopardize the new President’s capacity to liberalize Iran. The moderate candidate in the May 1997 election, Mohammed Khatami, was elected President of the Islamic Republic of Iran in an unexpected landslide victory in which he won 70% of the vote. Khatami’s unprecedented call for rule of law, better diplomatic relations with neighboring states and a dialogue of civilizations with the West was heralded as the turning point in Iran’s diplomacy. Khatami’s platform is based on the belief that Iran’s problems stem from internal sources, but are exacerbated by diplomatic isolation. This view contrasts sharply with that of the hard-line clerics who blame the West for all of Iran’s problems. The hard-liners, exemplified by Khomeini and now Khamenei, are known for vilifying the West, supporting tight social controls and strictly adhering to Islamic principles.

Khatami has a base of support in his army of 20 million voters, but this new blood has little influence with the established power centers in the government. Extremely popular with the younger cohort as well as with women, Khatami draws most of his support from first-time voters. The new President ran as an independent, so he does not have the benefit of a coherent party of support. Some analysts have asserted many Iranians voted for Khatami simply because he was not the candidate supported by the clerics.

The Supreme Spiritual Leader

It seems that a conservative override was built into the structure of Iran’s political system as Ayatollah Khomeini’s doctrine of velayat-e faqih provides the most senior religious jurist with the power to interpret the Islamic laws for the community. Under the orthodox interpretation of this doctrine, not only can Ayatollah Khamenei, the present Supreme Religious Leader, ultimately veto any of Khatami’s actions; he can force the president to resign. As the constitutional head of state, Khamenei has the power to set broad policy directions, including foreign policy without being subjected to checks and balances. After Ayatollah Khomeini’s death in 1989, however, the interpretation of this doctrine has been widely debated. Since Khamenei does not have Khomeini’s qualifications, some scholars have reinterpreted velayat-e faqih as more of a "guardianship," questioning the endowment of absolute power. Even if Khamenei’s powers are attenuated, it is unclear where Khatami envisions velayat-e faqih in his "civil society ruled by law."

Even though Khamenei is allied with the staunchly conservative clerics, he may have an incentive to work with, rather than against Khatami. As a politically savvy leader, Khamenei may realize that the Iranian people are eager for moderate reform. In this case, Khamenei would see that it is in the clerics’ best interest to allow a controlled, gradual liberalization, rather than risk a political explosion. Khamenei could have already ousted Khatami, or allowed the Majlis to reject his cabinet, but a fundamentalist backlash of that degree would make a mockery of Iran’s elections and stand as a blatant contradiction of the will of the people. Chances are, if Khatami poses too much of a threat to the ideals of the Revolution, the clerics will find a more subtle means of blocking his deeper reforms.

The Legislative Arms of the Government

The conservatives could undermine Khatami’s platform goals by working through the other arms of the government that they control. The Assembly of Experts is an 86 seat legislative arm of the Iranian government that has the power to oust the Supreme Spiritual Leader and elect a new Ayatollah. The recent election of this body has been hailed as a "triumph of democracy." Yet a candid look at the "eligible" candidates sheds light upon the conservatives’ landslide victory. Hard-line conservatives who dominate the Council of Guardians, the body that decides the eligibility of candidates, disqualified nearly all of the moderates prior to the election. This pre-emptive strike against a popular mandate for change foreshadows the difficulty Khatami will face in enacting reform.

If the conservatives use their power to manipulate the Parliament (Majlis) as they did the Assembly of Experts, Khatami will face opposition from this arm of the government as well. This consultative assembly serves for four years and is presently a pluralistic body. Regardless of this balance, if Ali Akbar Nateq-Nouri, the ultra-conservative Speaker of the Parliament, decides to exercise his power over the Majlis, the balance will tip in favor of the hard-liners. Elections for the Majlis representatives in 2000 will be very telling of the domestic political balance in Iran.

DOMESTIC POLICY REFORM

It seems that for every two steps Khatami takes towards a civil society, the hard-liners drag Iran one step back. In this precarious position, Khatami must move cautiously to prove that he does not pose a threat to the entrenched regime. His initial efforts to relax the social codes were well received, but the recent surge of political arrests, the murder of secular political activists, the crackdown on the freedom of the press, and the manipulation of the recent elections all point towards a conservative backlash. The extent of the crackdown is debatable, but the conservatives seem to be frightened by a society that is turning against them.

More Opportunities for Women

Since the President’s election in 1997, Iranian women have been given more opportunities in the realm of socio-political affairs. Fourteen female members were elected to the Majlis, and a woman was appointed Vice President of Iran’s Environment Protection Organization. For the first time, more women (54%) were granted admission to Iranian universities than men were in 1998-1999. The position of women in Iran has improved so much that Iran even recently appealed to the UN to take action against the mistreatment of women by the Taliban in Afghanistan. As the conservatives have not opposed these progressive changes, these reforms seem to be permissible.

Liberalization of the Media

The press in Iran has acutely felt the backlash indicating that the conservatives were not ready for Khatami’s policy of reducing censorship. After enjoying a year of relative freedom, the media seems to be overcome by a climate of fear. The editors of the most outspoken pro-Khatami daily, Tous, have been arrested and are facing the death penalty for betraying the ideals of the Revolution. Tous, which had become Iran’s most popular newspaper, was closed down within hours of Khamenei’s September 15th 1998 criticism of the excesses of the media. Editors of more moderate publications have been warned to "be careful" during this "sensitive time."

Implications of the Conservative Backlash

The hard-line clerics have proven themselves willing to use their power in the government to stymie Khatami’s progress. The President’s calls for a civil society have been countered by brazen acts by the hard-liners like the arrest of 500 violators of the social codes in a one-night sweep this past August and the attack on the liberal mayor of Tehran. Staunch conservative leaders in the Revolutionary Guard have publicly stated their intent to crack down on the moderates’ "intolerable cultural sedition." This reactionary backlash, while troubling, may point to the fact that the hard-liners are desperately trying to reassert themselves as they lose ground to the moderates.

Khatami’s patient reaction to this crackdown shows that he is willing to make incremental changes. In an address to the UN, Khatami has stated that he believes Iran is making progress towards rule of law. The President alluded to the recent backlash, putting the events in the context of progress:

"Even if the laws are broken on occasion, the law breakers try to justify their actions on the basis of law in some way. And this is a major step forward."

Khatami also stated that the revolution is entering a third stage in which the solidification of a civil society based on rule of law will be achieved. Aware that the government cannot endow the people with freedoms as they are naturally provided, he claimed that the people must learn to exercise and defend their own rights.

FOREIGN POLICY REFORM

Khatami acknowledges that better relations with the West will ameliorate Iran’s domestic situation, but he has made little headway as his opponents, the clerics, feed off the enmity that exists between the US and Iran. In fact, if there were to be a rapprochement between the two countries, the clerics would probably fall from power. One scholar refers to the "Gorbechev phenomenon" to explain why the clerics actually prefer to keep bad relations with the United States. The epithet "the Great Satan" is not merely a pejorative term. As Satan was infamous for his powers of temptation, United States represents the temptations of the West. If the clerics establish a dialogue with the Tempter, they fear that they, like Gorbechev, will get sucked into the unstoppable process of Westernization. The clerics’ strict interpretation of the Revolution is incompatible with Western values; thus they must avoid spiraling down the process of liberal reform by avoiding all dialogue with the West. As the conservatives have the political clout to oppose Khatami’s reforms, they will surely exercise it in this key area. Clearly the views of the two factions are at an impasse.

Khatami is walking a thin line, trying to propose reform without upsetting the clerics. At the UN, Khatami was asked, "Is the only way to defend Islam and to advance its values through waging war on the values of the West?" Khatami responded,

"I am not of the opinion that people who are conversant with reality consider combating the West to be the only way to defend Islamic values. There is a great deal of difference between deciding to defend the identity, independence and honor of a nation and combating another civilization."

Khatami needs to downplay hatred for the Great Satan without appearing as the United States’ lackey. Khatami’s incremental approach to diplomacy may seem painfully slow to the Americans, but with each step he is risking political suicide in Iran.

Khatami Broadcasts Hope for Reconciliation

Khatami’s overtures to the United States during his January 1998 CNN interview have received mixed reactions, but his adept maneuvers should be lauded considering he was bound to caution. The President went out on a limb by expressing "regret" for the 1979 hostage crisis, by "categorically condem[ming]" terrorism, and by extending his appreciation for the American people. If Khatami can truly get Iran to re-evaluate its hatred for the West by opening discussion on key flash point issues like historical grievances and terrorism, liberalism stands a chance of supplanting anti-Americanism as the guiding force of Iran’s nationalism. The precursor for this re-evaluation lies in dialogue, but Khatami knows that the clerics would never support opening direct diplomatic relations with the United States. At a UN news conference Khatami said Iran was not ready to open political and diplomatic channels. He reasserted that he did feel a "dialogue of civilizations" was feasible, but it could not consist of more than the exchange of thinkers, religious scholars, artists, poets and writers. To pursue this baby-step diplomacy, Khatami must be willing to patiently chip away at the hard-liners’ resolve with rational arguments, hoping that the US will offer incentives for cooperation like unfreezing impounded Iranian assets or even revoking sanctions.

The US reciprocated Khatami’s goodwill, but all sides agree that kind words are not enough. In a speech delivered to the Asia Society, Secretary of State Madeline Albright advocated that the two countries work to establish a "road map to better relations," but concrete steps are yet to be taken. The situation seems to have reached an impasse: the US insists that Iranian behavior must improve before concessions can be made while Khatami desperately needs a positive sign from the US so that he can continue to enact change without being discredited by the conservatives. As long as the US is only offering "new words," Iranian conservatives like Foreign Minister Kharazi can denounce these mere "variations in verbitage" as proof that the US is not committed to a "substantive policy revision." In turn, pessimists at the US State Department interpreted Kharazi’s vitriolic discussion of "insufficient dialogue" as an indication that the Iranians were not ready for reconciliation with the US. Even though promising statements have been made, confusion has arisen in the absence of formal diplomatic discourse. Until one country takes definitive action, the US and Iran will not move any closer to détente.

Iran’s National Security

Iran has a legitimate need for self-defense, but attempts to provide for its own national security have spurred conflict. Herein lie the issues of weapons of mass destruction and terrorism. The West sees the Iranian stance on each of these issues as repugnant. However, the countries of the European Union and Iran’s regional neighbors (with the exception of Iraq and Israel) have been willing to tolerate Iran’s position, acknowledging the threats Iran faces. Washington still protests Tehran’s stance on these sensitive issues, citing them as the basis for anti-Iranian policies.

A Menace on the Western Border: Iraq

Saddam Hussein, the tyrannical despot on western border has bedeviled the Islamic Republic since its inception, and present-day Iraq remains a threat to Iran’s security. In 1980, Iraqi forces invaded Iran beginning an eight-year war in which Iran lost 400,000 lives and a great deal of prestige. Controversy over the US’s intervention and Hussein’s use of chemical weapons make the memories of the conflict all the more harrowing. Even though in the last decade the US has led the global community in military and diplomatic crusades to neutralize Iraq, Iran has largely been excluded from these efforts. Despite the enforcement of debilitating sanctions and sharp constraints from UNSCOM Iraq is still, in all likelihood, seeking chemical, biological and nuclear weapons that could be turned against Iran once again.

The Iranian Response to the Palestinian Peace Process

Even though Iran and Israel have never come into direct military contract, Iran is ideologically opposed to the Zionist State. Tehran refuses to recognize Israel, asserting that the Zionists’ aims deprive the Palestinians of their homeland. In the past, Iranian conservatives refused to acknowledge Yasser Arafat’s negotiations on the part of the Palestinians, deploring his willingness to crack down on the political groups fighting for Palestinian liberation. Under Khatami, statements regarding the peace process have become less vitriolic, and Iran even welcomed Arafat to the December 1997 Islamic Summit in Tehran. Iranian officials stated that they did not agree with the logic of the peace process, but that they would not interfere with negotiations. Despite Khatami’s efforts to maintain a neutral stance, hard-liners have been particularly critical of new land-for-security deals. Foreign Minister Kharazi has said that after 50 years of Zionist occupation, Arafat’s attempts to compromise will only humiliate the Palestinian cause.

In the early years of the Islamic Republic, Tehran supported the Palestinian cause through the funding of fundamentalist terrorist groups like Hizbollah, Hamas and Islamic Jihad, but Khatami has denied Iran’s present involvement with these groups. The president has deplored the use of terrorism calling it "a product of desperation and nihilism." Despite this moderate verbal shift, the US still deemed Iran the "most active state sponsor of terrorism in 1997" as it has every year since 1984. Israel also views Iran as "a very significant…threat" and the Israeli Defense Ministry has military preparations in place in the event that its policy of deterrence is not successful. It is these military preparations which incense Tehran. Articles in Iranian periodicals often point out the United States’ hypocrisy in its dealings with Israel and Iran, noting that the US’s double standard carries over into the nuclear realm as well. Even though the US deplores Iran’s quest for civilian nuclear technology, Washington is silent on the topic of Israel’s military nuclear capacity. Iran is distressed by Israel’s nuclear capacity and humbled by the US’s crusade to block Iran’s development of nuclear weapons.

Threat to the Eastern Border: Afghanistan’s Civil War

Opposition to Afghanistan’s leading faction, the Taliban, has provided the US and Iran with an opportunity for cooperation. The Taliban’s lack of respect for human rights, its rash acts of terrorism and its drug trafficking stand as a security threat to both Iran and the US. Even though Iran does not fear a military invasion from its warlord neighbors, Iran has amassed 270,000-armed troops on its Afghan border in retaliation for the Taliban militia’s kidnapping and murder of eight Iranian diplomats and a journalist. Tehran officially supports the resistance movement in Afghanistan, the Masood, and has demonstrated its willingness to provide military aid as well as verbal encouragement. Iran’s geographical location and geopolitical clout have placed it in a position to take definitive action in reaction to a regional threat. Despite their longstanding ideological opposition, Iran and the US have taken advantage of this critical coincidence of interest in foreign policy. The two countries have been working together in the Six Plus Two Group, issuing statements to urge the Afghanis to declare a cease-fire and to enter negotiations to establish a multi-ethnic, representative government.

Weapons of Mass Destruction

In response to regional threats, Iran has turned to technology, amassing a small arsenal to protect its domestic security. Touting its stagnant defense budget and its declining mandatory military service term, Tehran insists that what little it spends on its military is purely for defense. However, Western skeptics note that the development of unconventional weapons is considerably cheaper than that of conventional weapons. Those wary of Iranian armament point to the recently tested ballistic missiles with sufficient range to reach targets in Israel as proof of Iran’s threat to regional security. However, the Iranian Foreign Ministry insists that the successful tests of the Shahab-3 missiles have "created a defense and security balance in the Gulf against outside forces."

It comes as no surprise that the nuclear question factors into one of the "red button" issues that stands in the way of détente between the US and Iran. As a signatory of the Non-Proliferation Treaty, Iran has promised not to pursue nuclear armament, subjecting itself to periodic International Atomic Energy Agency (IAEA) inspections to prove its commitment to the treaty. However, Iran has asserted its need for nuclear technology for civilian use so that it could export more hydrocarbon fuel for hard-currency revenues. Russia has historically supported Iran in the pursuit of nuclear technology, and signed a $780-million contract in 1995 to complete construction of the Bushehr nuclear reactors. The US remains skeptical of Iranian-Russian cooperation, fearing that the introduction of any nuclear technology into Iran could pose a regional security risk.

Iran’s Natural Resources

Blessed with large oil and gas reserves, Iran has the capacity for tremendous economic gain if it could further develop these resources. However, a synergy of three factors is impeding growth in Iran’s energy sector: the depressed state of Iran’s domestic economy, a paucity of foreign investment, and US sanctions. Iran’s present economic situation is poor and prospects will not improve until foreign investment can jumpstart plans to renovate oil fields and to exploit proven untapped reserves, especially of natural gas. Even though waivers have been issued, US sanctions deter investment, much to the dismay of oil interests. The US State Department holds that unfavorable domestic conditions within Iran are the true deterrent of foreign investment. However, Khatami has made an effort to attract investment by setting up free trade zones, loosening visa laws, waiving import fees, offering long term tax exemptions, removing ceilings for investment and easing profit repatriation This initiative is a critical part of Iran’s new diplomacy. Under Khatami, Iran is breaking with the hard line revolutionary ideals that spurred the nationalization of its oil fields in 1979 and slowly liberalizing trade.

Regional Relationships

Khatami’s focus on "replacing confrontation and tension with a dialogue of understanding" has made fostering amity with regional neighbors an important goal in Iranian foreign policy. Two main factors have aided in Khatami’s pursuit of this goal: the "unreserved blessing of the Leader of the Islamic Revolution" and a 68% confidence rating in foreign affairs from the Iranian people. Central Asia has traditionally been an arena of unrest, but under Khatami, Iran’s bilateral and multilateral efforts have proven instrumental in regional stabilization.

Iran’s abandonment of its theocratic foreign policy in favor of a more pragmatic secular policy in the years following the Revolution has been pivotal in its regional diplomatic success. The clerics’ adherence to a policy of seclusion was ineffective in pursuing Tehran’s best interest in the region. When Iran began to open up to the world, its main foreign policy objectives were exporting the Revolution and weapons procurement. When neighboring states rejected Iran’s aggressive attempts to urge conversion to an Islamic form of government, Iran took the hint. As the Revolutionary fervor has toned down in Iran, Tehran has increasingly adopted a more secular outlook for its diplomacy that stresses commercial relations and political stabilization. As stated on its Embassy web page, Iran’s Foreign Policy initiatives now revolve around peace making and economic cooperation.

Leadership Role

Under Khatami, Iran has both hosted and attended myriad conferences aimed to increase cooperation. Some of these conferences have been security-oriented like the Tehran meeting of the Six Plus Two Group to encourage a cease-fire in war ravaged Afghanistan. Others have promoted economic and political cooperation. Iran’s involvement with the Economic Cooperation Organization (ECO) has the potential to improve Iran-Central Asia economic relations significantly. In the Organization of the Islamic Conference (OIC), Iran uses the unifying theme of Islamic ideology to achieve security and to cement cooperation with member states like the United Arab Emirates. Not only has Iran hosted foreign diplomats on its home turf; Tehran has fostered bilateral ties by sending its own diplomats to neighboring heads of States. Historical, cultural and religious ties exist between Iran and many of its neighbors, but Iran’s commitment to stabilizing the region has transcended other affiliations.

Iran as One of the "Big Three" Regional Players

Upon the dissolution of the USSR in 1991, the balance of power in the region essentially shifted to a tripolar model in which Russia, Turkey and Iran jockeyed for influence in the Newly Independent States (NIS). Russia was a military colossus, but it was denuded of its political preeminence due to the fall of its empire. Turkey represented the Western model of a secular state while Iran represented the anti-Western theocracy. Now that the NIS have pursued flexible affiliations, fears of Turkey uniting the NIS under the Turkish flag and of Iran exporting the Revolution to the fledgling states have abated. The regional dynamic is complex, but the vested interest each of the "big three" has in regional stabilization has led to cooperation.

Despite the longstanding rivalry for regional influence between Turkey and Iran, Khatami’s liberal policies have served as a catalyst for better political and economic interactions. The main source of political strain between Turkey and Iran has been the support both countries provided to the other’s opposition groups. However, this tension has quelled after a series of security agreements have been signed. Economically, Turkey and Iran have engaged in a lively trading relationship. Turkey’s extensive debt of $55 billion hampers its capacity for economic cooperation, but Ankara has still entered essential gas contracts with Iran.

Iran and Russia are active trading partners, an arrangement that provides vital hard currency to the financially strapped Russia and military technology to an insecure Iran. Russia depends upon Iran as a transportation corridor offering access to the Persian Gulf and Caspian Sea for shipping. In exchange, Russia has provided Iran with technology that has bolstered its long-range missile program. Russia has also boosted Iran’s nuclear capacity by aiding the construction of civilian nuclear power project at Bushehr.

Other Regional Relations

Of all the NIS, Tajikistan is closest ethnically to Iran and therefore has forged strong ties with Tehran. During the Tajik civil war, Tehran wisely chose not to side with the Muslim opposition groups. Realizing that political Islam should play no role in its diplomacy, Iran played the role of the honest broker, earning accolades from the UN for its impartiality. Iran has also signed bilateral agreements with Tajikistan that have fostered economic ties both through the construction of joint factories, trade and technical assistance. The Tajik Labor Minister has praised Iran, calling for an expansion of cooperation. The two states have a mutually beneficial relationship that will continue to blossom into the 21st century.

Iran’s relationship with Azerbaijan is similarly cordial. Although sixteen million ethnic Azeris live in the north of Iran, Iranian Azeris and Azeris living in Azerbaijan have grown apart after living under such drastically different regimes during the later part of the 20th century. As long as the Azeris of Iran are treated well, they have little incentive to seek secession from Iran to form a pan-Azeri state. Recently opportunities for economic cooperation between Iran and Azerbaijan have increased. Iran has opened a transportation corridor through its territory for the Central Asian states that it has offered to the Azeris for the transport of their oil. At present, US sanctions have prevented close cooperation on drilling and pipeline projects, but Azerbaijan continues to explore various arrangements with Iran. For example, the two states are in the process of developing border terminals to facilitate the transfer of goods and the passage of travelers. There are already thirteen of such terminals, affecting the transport of approximately 1.6 million tons of goods and three million passengers each year.

Iran’s relationship with Armenia has flourished under Iran’s secular foreign policy. Even though the Nagorno-Karabakh dispute pits Muslim Azerbaijan against Christian Armenia, Iran did not chose sides based on religious ties. Tehran highly values its trade relations with Armenia, and has signed treaties with both Armenia and Turkmenistan that employ Iran’s role as a transportation corridor. In 1993, the three countries set up air, rail, and car links that naturally led to the 1995 establishment of a joint company for cargo transportation which has expanded trade. Iran has also helped Armenia to become less dependent upon Russia by signing long-term treaties to provide gas and electricity.

Iran shares a strong cultural and economic link with Turkmenistan. Iran treats its 1.4 million Turkmen nationals well, providing for smooth relations between Tehran and Ashkabad. The two countries have adopted similar stances on Afghanistan, Tajikistan and the Caspian Sea. Iran is one of Turkmenistan’s strongest trading partners, and has become something of an economic mentor to Turkmenistan, with Iranian advisors involved in many projects from infrastructure improvements to natural resource development. Turkmenistan’s concern with exporting its gas to market has provided a new opportunity to strengthen ties between the two countries. Turkmenistan has welcomed Iranian investment and suggestions for pipeline plans and swaps; and partly for this reason, Turkmenistan has not supported the US-sponsored Baku-Ceyhan line.

CONCLUSION

Despite President Khatami’s overwhelming popular mandate, the entrenched conservative opposition has managed to limit his success in realizing reform. The clerics have tolerated liberalization in the realm of superficial domestic reform, but when the status quo was threatened, they used their political clout to preserve the integrity of the Revolution. Khatami’s advancement of foreign policy reform was met with a similar reaction from the conservatives. The clerics have permitted Khatami to make great strides towards the improvement of regional relations and cautious overtures to the United States. However, if Khatami were to make a more overt gesture towards US-Iran détente, perhaps by proposing diplomatic relations, a conservative backlash would follow. Therefore, Khatami’s strategy of cautiously pushing the envelope will bring Iran closer to liberalization than one rash gesture that could discredit him. The conservative mullahs still wield the true political power in Iran, but the rise of a moderate opposition has forced them to redefine their positions on domestic and foreign policy. Khatami’s adept politicking will slowly move Iran towards the liberal side of the spectrum without toppling the system or triggering a major backlash.

APPENDIX: Timeline of Iranian Events

1906 Iran’s Constitutional Revolution asserts Iran’s independence from Western powers.

1909 Oil begins pumping in southwestern Iran under the auspices of the Anglo-Iranian Oil Company (AIOC) in which the British hold a majority share.

1925

Army officer Reza Khan leads a coup against the Qajar dynasty and declares himself Reza Shah Pahlavi, the undisputed leader of Iran.

1940’s Britain and Russia force Reza Shah Pahlavi to abdicate because they fear he will support the Nazis during WWII. His son, Muhammad Reza Shah Pahlavi assumes the throne. Iran is divided into occupation zones and the Persian Corridor is used as a transit route for lend-lease supplies.

1950’s Nationalist Prime Minister Mossadeq comes to power with plans to nationalize the Iranian

oil industry, forcing the Shah to flee.

1953 Backed by the US’s CIA, Britain’s M16 and powerful oil interests, Mossadeq is overthrown in a staged coup and the Shah returns to power. US props up the unpopular Shah with large military and economic grants and loans.

1960’s/70’s The Shah uses oil profits to modernize and Westernize Iran. The Shah’s secular rule becomes increasingly autocratic, giving rise to political opponents, particularly among the orthodox Shiite Muslims. The Shah tightens control in Iran aided by his secret police (SAVAK). Trained by the CIA, SAVAK terrorizes the country while human rights abuses abound. The Shah’s sponsors in Washington "see no evil."

1979 The Shah is toppled by revolutionaries and is forced to flee Iran. A Shiite Muslim Spiritual Leader, Ayatollah Khomeini, takes power and declares an Islamic Republic.

US impounds Iranian assets and freezes economic and military aid to Iran.

1980-1981 Iranian Revolutionaries storm the US embassy and hold 52 US hostages for 444 days.

1980-1988 Iran-Iraq war wages. 400,000 Iranian lives are lost and Iranian infrastructure sustains substantial damage.

The US Navy destroys two Iranian oil platforms and mistakenly shoots down a 290-person passenger jet in the Persian Gulf.

The US isolates the Islamic Republic earning the title of the "Great Satan."

1983 In Beirut, the Iranian inspired terrorist group, Hizbollah, truck-bombs the US Marine barracks killing 241 marines and later destroys the US embassy to protest Israel’s 1982 invasion of Lebanon. The terrorists force a US withdrawal and take Western hostages.

1984 The US lists Iran as a supporter of international terrorism.

1987 US President Reagan’s Executive Order 12613 bans the US purchase of Iranian imports.

1989 Supreme Spiritual Leader Ayatollah Khomeini dies and is succeeded by Ayatollah Khamenei.

1992 US pursues a policy of "dual containment" against "rogue states," Iran and Iraq, through the issue of the Iran-Iraq Arms Non-Proliferation Act.

1995 US Speaker of the House Newt Gingrich calls for the appropriation of $20 million to overthrow the Iranian government.

1996 The Iran-Libya Sanctions Act (ILSA) imposes sanctions on foreign companies investing more than $40 million in Iran’s energy sector.

1997 The moderate candidate, Mohammed Khatami is elected President of Iran by 70% of the voters (20 million supporters).

1998 After 20 years of official hostility between Iran and the US, Khatami calls for a "dialogue of civilizations" during a CNN interview in January.

In July, US Secretary of State Madeline Albright responds to Khatami’s overtures and calls for the construction of a "road map to better relations."

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