Dr. Amuzegar is an international economic consultant. He was finance minister and economic ambassador in Iran’s pre-1979 government.
In a Newsweek commentary four years ago, a knowledgeable observer of global politics described Iran as “ripe for counterrevolution” and wondered if the July 1999 students’ uprising was the “beginning of the end” of the Islamic Republic.1 Some other seasoned Middle East analysts regarded the same event as “Iran’s second revolution,” or “a revolution within a revolution.”2 A brief review of the situation at the time suggested that these prognoses were unduly alarmist, and that a counterrevolution was not yet in sight. However, it was considered likely that a prolonged intensification of the ongoing sociopolitical crises might ultimately lead to a systemic implosion.3
The passage of time has since proved that the darker forecasts were indeed somewhat wishful. The regime also avoided an implosion, and managed to muddle through, albeit in a crisis mode, thanks to a fortuitous combination of certain internal and external factors.
President Khatami’s initial personal popularity and lofty campaign promises, the election of a reformist new Majlis (national assembly), and the establishment of nationwide city and village councils promised the dawn of a more liberal and quasidemocratic era. The shock of electoral defeat and depressed morale in the conservative camps caused a temporary lull in factional bickering and resulted in a notable relaxation of harsh sociocultural restrictions. Supportive reactions to the Khatami government’s reform agenda by Japan, the European Union and the Persian Gulf countries further reduced Iran’s diplomatic isolation. Warmer relations with Russia and China acted as a counterweight to continued U.S. hostility and trade sanctions.
And, most significantly, a gradual firmness in the price of oil helped the government to cope successfully with its most urgent and vital economic needs. The dramatic course of events in Iran the last few months and intensified turmoil in the region, however, have again spawned new alarmist speculation about potentially ominous developments. President Khatami’s declining popularity and proven timidity have caused great disappointment even among his early ardent supporters. Failure of the sixth Majlis and local councils to implement promised reforms have turned the voters’ early enthusiasm into despair. Renewed strength and self-confidence among hardliners has emboldened the conservative political power centers to go on the offensive and turn the tables on the so-called “liberal” elements. Reactions to increased repression manifested through frequent student demonstrations, labor strikes and civil disobedience have once again prompted ominous new forecasts of an impending revolution or a violent political explosion. Foreign analysts and national commentators now rant about Iran’s reaching the boiling point, the people near rebellion and the regime “confronting a crisis of legitimacy.”4 In a recent symposium on Iran’s current crises, some eminent analysts concluded that “popular revolt was imminent and a revolutionary change inevitable.”5 As the turmoil has intensified in the region with the looming possibility of military action in Iraq, these predictions have gained greater salience.6
All these doomsday scenarios, however, have been dismissed by the Islamic Republic’s officials and its foreign sympathizers as biased, hyperbolic, sensational and altogether without merit. While the country’s mounting difficulties are readily admitted, they are considered hardly a threat to the regime’s survival. Despite Iran’s inclusion in President Bush’s “axis of evil” and its being virtually encircled by countries allied with Washington, Iranian authorities appear defiant about any foreign political or military threats. The ruling clerics self-assuredly boast about their unshakable staying power, due to their “God-sanctioned” legitimacy. President Khatami still proudly speaks of his “Islamic democracy” as a shining model for the entire Muslim world.7 The recent electoral successes of Islamist parties in Turkey and Pakistan are cited as proof of political Islam’s ascendance in the region.
To be sure, there is still no serious immediate threat to the regime’s survival, thanks to its proven determination, resiliency and adaptability to adverse circumstances. Nevertheless, some ominous signs are looming on the horizon. The early promises of a free, just and prosperous Islamic society remain more elusive than ever. And appeals to the people’s “revolutionary patience” no longer resonate with “Khomeini’s children.”8 At the same time, the regime is running out of excuses for its failure to meet the people’s demands. Neither the shah’s alleged “misguided policies,” nor the “imposed” war with Iraq, nor the necessity of postwar reconstruction sacrifices, nor Washington’s economic sanctions seem credible enough to pacify the restless population. For the first time since the 1979 revolution, the regime finds itself virtually powerless to cope with any of its ideological, political, social, economic or diplomatic challenges effectively or resolutely.
IDEOLOGICAL DIVISION WITHIN THE THEOCRACY
By far the greatest challenge to the current theocratic oligarchy is widening ideological differences among the “true believers.” Ayatollah Khomeini’s mantra of “one voice” (vahdat-e kalameh) as an ideal for the revolution that he led – while never achieved during his own lifetime – is now more distant than ever. Contrary to common misperceptions (or over-simplification) in the West, what goes on in Iran today is not merely an ideological battle between “unelected” conservative clerics and “elected” reformers.9 There is more than one battle, and there are more than two groups of combatants. The clerical order itself is divided into at least four distinct factions: (1) reactionary hard-line fundamentalists, who wish to turn the clock back to the Prophet Muhammad’s time 1400 years ago; (2) right-wing religious traditionalists backed by the bazaar and business interests, who want to preserve strict Islamic precepts in sociocultural and judicial affairs but welcome free enterprise and are willing to accept Western science and technology; (3) left leaning Islamist moderates, who emphasize Islam’s egalitarian creed and advocacy of social justice but favor comprehensive state intervention in the economy, and (4) a raft of younger theologians or seminarian rebels in the city of Qom and else where, who are worried that the current fusion of mosque and state– with its mismanagement, injustices and corruption – is bound to spoil the good name of Islam and ultimately deprive them of both future respect and livelihood. The first three clerical factions support, at least formally, the concept of the velayat-e faqih, (rule by an Islamic jurist) and the investiture of joint clerical and political leadership in the person of the faqih (the Supreme Leader or rahbar). The fourth group, along with a number of grand ayatollahs outside the establishment, challenge the concept of velayat as an innovation, if not indeed a heresy, and believe in the separation of mosque and state.
These clerical factions find their counterparts in a number of reformists and secularist factions. There are at least four such groups: (1) Islamic reformers who remain faithful to an “Islamic state” but believe in fresh interpretations of the Quran in the light of new scientific and technological discoveries, in order to make the holy book a living document and Islam a contemporary religion; (2) non-clerical but religion-oriented parties who accept both the 1979 constitution and the supreme leadership but insist on opening up Iranian society to the outside world within existing broad constitutional mandates; (3) Islamic modernists who believe in preserving Iran’s Islamic identity but would leave the government in the hands of technocrats under an “Islamic democracy;” and (4) all-out secular groups that advocate a Western-type participatory democratic system in which Islam and other faiths will all be treated as a personal choice and protected as part of civil liberties and human rights.10
These multidimensional battles are rooted in the historical nature of Iran’s Shia culture, in which there is no structured clerical hierarchy. Each Shiite divine has his own group of followers or “emulators,” and several major theologians may simultaneously coexist as marjaa taqlid (sources of emulation) and vie for the fealty and support of their flocks. Each marja’s political clout depends on the number of followers and magnitude of their monetary contributions. This tradition is in stark contrast with the new concept of velayat-e faqih and its emphasis on central authority, ideological purity, exclusive interpretation
of scriptures and prohibition of theological dissent.
In the Islamic Republic the traditional, consensus-based Shia culture is thus partially revised and formalized. Senior establishment clerics are given the stewardship and/or incomes of various bonyads (parastatal “charitable” foundations) by the rahbar. These bonyads were formed after the 1979 revolution, funded from the confiscated assets of the old regime’s officials and wealthy private associates.
These enterprises, answerable only to the rahbar, have enjoyed not only tax exemptions, but priority access to low-cost credit from nationalized banks, generous allocation of cheap foreign exchange, private foreign-trade monopolies and lucrative government contracts. Some bonyads headed by well-connected clerics have also received regular financial support from the national budget without being subjected to government levies or audits. Many other senior ayatollahs with official positions within the regimes have, by virtue of marriage or blood relations with major bazaaris, also been beneficiaries of the financial generosity of these merchants.
In this new arrangement, the traditional role of the Shiite clergy in shielding and protecting the faithful against autocratic monarchs is vacated, since the state is run by the clergy itself. For this reason, many Iranian grand ayatollahs who are currently disfavored or harassed by the regime – but proud of their traditional independence from the government – have openly challenged the theocratic leadership on such issues as Islam’s tolerance of divergent views, limits in prescribing the people’s daily life, the role of women in the clerical hierarchy, and other life-style issues. Encouraged by these theological dissidents, younger political Islamists have dared to suggest the possibility of “different readings” of the Quran, of adapting certain traditional religious rules to the exigencies of time and place, and even of the necessity of an Islamic reformation or Islamic Protestantism.
While such talk is denounced by the fundamentalists as blasphemy and a capital offense, the velayat’s claim to divine legitimacy is now widely questioned, and the early religious rhetoric has lost its punch. The attendance at Friday prayer sessions has greatly dwindled. Worshippers are now often drafted or otherwise induced by the authorities to show up on these and other special occasions. Religious observance is no longer a voluntary and welcome personal practice, but mostly a state-sanctioned duty.11 And, ironically, while political Islam, initiated by Ayatollah Khomeini, has since gained further ground in Turkey and Pakistan, it has lost its fervor in Iran.
As a result of the intense struggle between religious fundamentalists, theological modernists and advocates of state mosque separation, there are clear signs that the people are turning away from political Islam. Since some of the fiercest current dissidents are the revolution’s former heroes, the regime can no longer rely on the unquestioned loyalty and support of the masses or even its own early defenders. Its ideological vessel is now rudderless. And massive defections from revolutionary ideology have made the cost of suppression increasingly unbearable.
POLITICAL GRIDLOCK WITHIN THE CONSTITUTION
The second manifest challenge to the ideologically divided regime is an unworkable division of power within the government, with no clear links between authority and responsibility. Formally, the Islamic Republic is governed by the 1979 Constitution and its 1989 amendment. Originally drafted by the representatives of a rainbow coalition of diverse ideologies, interests and objectives, it is replete with contradictory mandates, impossibly ambitious objectives, and a system of parallel sovereignty shared by “elected” and “unelected” organs. Its revision before Ayatollah Khomeini’s death, instead of clarifying its numerous paradoxes, made the outcome even more cumbersome by raising the rahbar’s constitutional authority to “absolute power.
Under the current version, all the paraphernalia of a modern state are in place. As in most democracies, there are three independent branches – the Majlis, the judiciary and the executive – in charge of enacting, supervising and implementing law and order. But there are also three additional and extra democratic bodies. An Assembly of Experts, composed of 86 male clergymen, elected periodically by direct popular vote, is in charge of appointing, supervising and, if need be, replacing the rahbar. Then there is a 12-member Council of Guardians (CG) that must (a) approve all bills passed by the Majlis for conformity with the Constitution and the Islamic Sharia before they become law; and (b) vet every candidate’s qualifications for national elective office. Finally, there is the Council on Expediency, composed of some three dozen or so ex-officio members and other officials appointed by the rahbar. This council is constitutionally in charge of resolving legal disputes between the Majlis and the Council of Guardians in addition to advising the rahbar on issues of vital national interest. But in recent years, it has often engaged in enacting laws of its own.
Top officials of the Islamic Republic steadfastly and proudly defend their regime as a “religious democracy” on the grounds that all its major organs are “elected” by the people either directly (as in the case of the Majlis and the president), or indirectly (as in the case of the rahbar). In practice, however, these “elections” bear no similarity to any Western variety. They all consist of a process of voting for a number of preselected and pre-approved candidates who have met specific religious or revolutionary requirements as determined solely by the Council of Guardians – a process that makes the regime for all intents and purposes a closed-circuit theocratic oligarchy masquerading under a democratic facade.
In this regime, the rahbar is the lifetime head of state, with the immense powers enjoyed by the supreme leader in a typical dictatorship. He is the top executive of the government, the commander-in-chief of the armed and security forces, and the only one who appoints the judiciary chief, the commanders of the armed and security forces, the head of the state’s radio and television network, and all members of the Expediency Council. But, unlike most lifetime leaders, he is virtually self-appointed and answerable to no one. The process of this self-appointment is somewhat complex, but the result is clear. The Assembly of Experts that is charged with the appointment and replacement of the rahbar consists of clergymen from various parts of Iran whose qualifications must first be approved by the Council of Guardians before their names are placed on the ballots. But the CG itself consists of six theologians chosen by the rahbar and six lay constitutional lawyers selected by the Majlis from a list of candidates submitted by the judiciary chief. Now, the judiciary chief himself is appointed by the rahbar, and is responsible only to him. Thus his six nominees for the CG are therefore the rahbar’s tacitly approved choices. Furthermore, the Majlis that must choose the six lay members is also composed of deputies whose own credentials for office must have been pre-approved by the CG from among hundreds of declared candidates.
In the final analysis, therefore, the rahbar appoints himself for life, since his constituents – the Experts Assembly – are, in a roundabout way, pre-selected by him. More curious still in this bizarre political structure is that some members of the CG are also members of the Experts Assembly, which means that their qualifications for membership in the latter body are self determined. The CG and Experts Assembly members may also be appointed by the rahbar to the Council on Expediency, which means that they may become both advocates and judges at the same time.
Whether or not some highly twisted interpretation of the Quran can be theoretically reconciled with some watered-down notion of participatory democracy, the resulting model would still not apply to Iran’s Islamic Republic. From Ayatollah Khomeini on down, every clerical leader has steadfastly and repeatedly pointed out that Iran is to be governed by the will of God and not the wishes of man. Periodic elections that are characterized in the West as a manifestation of democracy are, in their view, simply a reaffirmation of the will of God. Ayatollah Mesbah Yazdi, the Islamic Republic’s major theoretician, refutes the anti-democratic characterization of the regime by claiming that “law in an Islamic society is God’s law, which is enforced by the vali-e-faqih.” The claim that velayat-e faqih is tantamount to a dictatorship is both meaningless and blasphemous because the rahbar’s word is God’s word.12 And God cannot be accused of being anti-democratic.
A different type of reasoning used by other clerics makes the claim to a democracy even more farfetched. An advisor to the judiciary chief even argues that the Assembly of Experts does not “select” the rahbar (as the Constitution stipulates) but only “discovers” him. The job of the assembly, he adds, is not to choose the rahbar on behalf of the electorate, but simply to pick out a faqih that is God’s choice and appointed by the Occult (hidden) Imam. For this reason, he argues that the rahbar’s words are above the law and overrule all mundane edicts.13
The constitutional division of authority between the “elected” Majlis deputies and “unelected” centers of power has thus been the source of exhaustive and inconclusive battles between the so-called “conservative” and “reformist” factions since the election of President Khatami in 1997. In this contest, three principal personalities play major roles. Top billing goes to the vali-e-faqih, Seyyed Ali Khamenei, an old-school fundamentalist and rather narrow-minded cleric who considers himself a true heir to Ayatollah Khomeini’s mantle of leadership and a faithful guardian of Islamic orthodoxy. He can be described as a cautious tightrope artist. Like his cohorts who occupy the pinnacles of supervisory, military, security, judiciary and broadcasting powers, he sees any reform agenda based on the rule of law and civil society as the harbinger of his own eventual downfall and the Islamic Republic’s ultimate demise. A recent (unauthorized) poll showed that only 1.2 percent of 1,000 Tehranis canvassed regarded the current rahbar as their favorite politician.14
Constitutionally, the second-highest member of Iran’s ruling establishment is President Mohammad Khatami, a decent, tolerant and well-meaning religious visionary – an Islamic Don Quixote – who believes in the possibility of a synthesis of Islam with Western democracy. He seems convinced, perhaps naively, that only a change in Islam’s image from an austere, violent and autocratic creed to a more humane, peaceful and egalitarian faith can save the Islamic Republic. Whether or not he personally and faithfully believes in the concept of the velayat matters little. He has neither the ability nor thewillingness to challenge the rahbar. On more than one occasion, he has gone on record that the velayat issue is no longer a theological one since it is already embedded in the 1979 Constitution and is the law of the land.
The third major office-holder behind the president, but in certain respects the second most powerful man in Iran, is the ex-president and ex-Majlis speaker Ali Akbar Hashemi Rafsanjani, who is the head of the Council on Expediency. Rafsanjani is a wily, seasoned, streetwise politician, probably the shrewdest and least dogmatic cleric in the Islamic Republic. His credo is “mediate and rule.” Although informally associated with various factions from time to time, he has cleverly avoided being closely identified with any. He enjoys the loyalty and support – albeit at times grudging – of a small segment of the revolutionary elite in the political, security, military, technocratic and bazaari circles.15 But his popular appeal and social standing have been vastly damaged by his poor showing in the sixth Majlis elections.
An intriguing and unsolved puzzle is the true relationship between these three principal political players. Rumor mills regard them as ideological adversaries, political rivals and contenders for Ayatollah Khomeini’s unique mantle. On the surface, the rahbar’s hard-line position and ideological purity on such issues as the inviolability of the velayet-e faqih, the Islamic judicial system, and open condemnation of the United States place him on the side of die-hard fundamentalists. By contrast, Khatami’s repeated emphasis on freedom, tolerance of diversity, and advocacy of dialogue between civilizations makes him the regime’s most “liberal” officeholder opposed to the rahbar’s intransigence. Rafsanjani is a pragmatist go-between who sides with neither one officially, but often finds a compromise whenever a crisis occurs, thereby enhancing his own position as the regime’s éminence grise. Yet some political insiders still believe that the three leaders are not really rivals, and that they closely coordinate their respective roles in frequent behind-the-scenes meetings. While numerous cases can be cited to prove or disprove either of these opposing interpretations, the answer remains moot.
In any event, regardless of personal, philosophical and behavioral differences among them, all three are unanimous in the legitimacy of fusing mosque and state – a combination of state-craft and soul-craft – and the necessity of drawing certain red lines that freedom and human rights must not be allowed to cross. As a result, even during the last five years of Khatami’s “reformist” administration, more than 90 newspapers, journals and other publications have been banned. Scores of journalists, writers, lecturers and even Majlis deputies have been jailed. Attorneys defending press offenders have been disbarred.
Even think tanks and poll-taking agencies that have published public-opinion surveys not to the regime’s liking have been closed and their directors arrested. According to a recent report, Iran ranks number 122 out of 139 countries in terms of press freedom.16 Furthermore, specific constitutional guarantees of habeas corpus, trial by jury, prohibition of torture, and other human rights have been defiantly violated by vengeful, politicized and incompetent judges. In the 2003 Freedom House Annual Report, Iran ranks sixth out of seven as the least free country.
The outcome of the divided sovereignty is frequently political stalemate. Countless days and incalculable resources are often wasted in an interminable tug-of-war between the Majlis and the Council of Guardians. In the last year alone, some 50 bills passed by the Majlis were vetoed by the CG or lingered in the mediating Council on Expediency. To find a way out of this standoff, President Khatami submitted two reform bills to the Majlis in June 2002 to weaken the fundamentalist judges’ ability to conduct extra-constitutional trials of journalists and political dissidents, and to reduce the Guardian Council’s authority to eliminate candidates for elective office.
These bills, now undergoing the long and arduous process of ratification, have intensified intramural differences and defections in both the reformist and conservative camps.17 In all likelihood, both bills will be approved by the Majlis, but their fate in the CG is uncertain. A veto by the Council, or subsequent rejection by the Expediency Council are bound to create a major and unprecedented constitutional crisis – culminating possibly in the president’s resignation, the rumored
mass exodus of reformist deputies from the Majlis or both – with unforeseeable consequences. The regime has thus not yet found a way out of its political gridlock, and the resulting paralysis has stymied all serious efforts at reform.
The third daunting challenge is the incompatibility of the regime’s rigid politico ideological agenda with basic human instincts and modern-day sociocultural lifestyles. The Iranian constitution, the rahbar and the conservative elements who now control the country’s armed forces, the courts, the state’s sole television and radio network and all watch-dog councils want Iran to be a puritanical Islamic land and for Iranians to observe Islam’s strict moral codes in their daily lives. The vast majority of the 65 million or so citizens, however, seem to reject this. Formal polls and barely concealed private behavior show that the majority thinks religion to be a matter of private choice. Although they consider themselves Muslims and respect Islam, they do not want the state religion to dictate their private behavior. They want to be free to speak, listen, write and otherwise live as they choose and enjoy all that is accepted and legal in most other parts of the civilized world.
The results are relentless entanglements between the awakened and rebellious youth embracing a vibrant subculture, and the state’s apparatus of social and cultural repression – the morality police, auxiliary vice squads, a special “antidepravity force,” and various self-appointed groups of ruthless vigilantes in charge of “promoting virtue and preventing vice.” Statutory law-and-order requirements governing various aspects of the people’s daily personal lives are now flouted openly by the post-revolution generation that accounts for more than 50 percent of the population. Mandatory hejab (veil) for women is increasingly observed only in public places, and only when police are in sight. Prohibited alcoholic beverages are readily available from underground sources and amply consumed in private gatherings. Banned Western music is regularly listened to through pirated CDs and counterfeit cassettes in clandestine clubs. Satellite television is illegal, but clusters of concealed dishes cover the tall buildings’ roofs or backyard gardens. Dating, mixed parties and dancing are forbidden, but daily police raids haul scores of repeat offenders to the precincts for punishment. Mobile phone numbers are exchanged covertly between boys and girls at shopping malls and city landmarks to set up dates.
In the absence of a genuinely free press, and with the ever-present threat of jailing and fines, web sites like Emrooz, Rooydad, and some 3,700 other “electronic” newspapers have replaced banned reformist journals and publications in reporting events or policies the conservatives want to conceal from the public.18 Internet cafes have flourished despite periodic crackdowns. Chat rooms, weblogs and other cyberspace contacts are on the rise. Foreign-based radio and TV programs are eagerly received. Despite frequent state-orchestrated chants of “death to America” at various public events, U.S. pop culture is most popular among young Iranians. While Persian films have won numerous prizes at international festivals, the most eagerly sought films in Iran are still the Hollywood variety.
At the same time, the list of nationwide social ills is getting longer by the year, reportedly reaching 25 categories (including violent crimes, drug addiction, child abuse, runaway girls, dysfunctional families, increasing divorce rates, growing prostitution, rising suicides, and even white slave trading).19 According to official estimates, there are some 1.2 million drug addicts in Iran with another million or so occasional drug users. Private estimates for both categories go as high as 6 million – both figures among the highest in the world in ratio to population.20 The majority of the 600,000 prisoners in the country’s jails are addicts. Boredom, lack of recreational facilities, easy availability of heroin at less than cigarette prices, the absence of prohibiting religious fatwas against drug use, and the enforced ban on alcohol consumption are generally cited as reasons for the drug epidemic – particularly among the aimless youth, the poor and the unemployed. According to reports by the World Health Organization, some 4 million Iranian teenagers suffer from depression, and the annual number of runaway minors exceeds one million, of whom 74 percent are girls.21 One fourth of all marriages in Tehran end up in divorce, 70 percent of these due to the drug addiction of one of the spouses.
A senior welfare official talks about the presence of 300,000 prostitutes in Iran driven into the life largely by poverty, homelessness, the absence of adequate social welfare, and drug use. Of these, some 60 percent are teenagers.22 The annual number of suicides has surpassed 20,000.23 Some 4 million people (400,000 families) live in shanty towns around 67 major cities (35 percent of the residents of Tehran), or in crowded quarters with an occupation density five times greater than the urban average.24 Last, but by no means less significant, is the intellectual hollowing out of the motherland. Iran’s most precious and nearly irreplaceable exports are no longer oil, carpets, caviar or pistachios, but technical and professional cadres. The latest estimate of Iran’s brain drain gives a figure of 145,000 a year, of whom over 105,000 are college graduates.25 Some 80 percent of Iranian winners of world educational Olympiads who subsequently study abroad choose not to return home. Three-fourths of young people under 35 years of age and some 32 percent of Iranian university faculty members reportedly wish to emigrate. By one private estimate, there are three times as many Iranians teaching at U.S. universities as there are in Iran. Insufficient compensation, inadequate research facilities, incompetent educational management and hopelessness are often quoted as reasons. Iran’s loss caused by this emigration is said to be larger than the damage sustained during the Iran-Iraq War.26
Complicating this educational “waste” is the increasing number of Iranian female university students who are leaving their male counterparts behind. In 2002, for the fourth year in a row, young women have outnumbered male candidates in passing entrance examinations. Of the 1.5 million applicants sitting for exams, nearly 60 percent were women, who secured 63 percent of 195,000 places. Yet this gender shift – laudable as it may be in many respects – is replete with unintended consequences. For one, a university degree for a female graduate does not mean a guaranteed suitable job, since the percentage of women in the labor force is still shamefully small. The Human Development Report, 2002, of the U.N. Development Programme places Iran eighty-third out of 173 countries in its gender related index, with women’s average annual earnings less than 28 percent that of men. In addition, marriage and family formation for the advanced-degree holders will become increasingly difficult because many girls will refuse to marry less educated men.27
Another endemic scourge is corruption, which has become institutionalized and pervasive. Bribes are now required not only for obtaining lucrative public contracts or foreign-trade permits, but also for routine matters such as obtaining a birth certificate, a driver’s license, a construction permit, hospital or university admissions and even for the payment of utility bills, traffic tickets or taxes.28 A local monthly journal featuring the issue of corruption has recently published the result of a nationwide poll of citizens and business owners. According to this private poll, some 64 percent of the respondents admitted to having paid bribes. Sixty-five percent of bribe-payers claimed that they were asked to pay in order to get their requests processed; 51 percent said the bribe was paid voluntarily to expedite the transaction; and 17 percent said they paid in order to bypass the law.29 Undue state control of the economy, low salaries of state employees, the anachronistic judicial system and a lucrative underground economy (including smuggling) are additional reasons behind corruption.
None of the government’s corporal or monetary penalties for non-Islamic behavior – even the most barbaric punishments such as solitary confinement, public flogging, amputation, stoning to death and execution – has been able to stem the tide of “non-Islamic” behavior.30 Instead of reducing disobedience they have backfired, only providing immense wealth for illegal operators and corrupt judges. Dissenters who have served their time or been pardoned or furloughed often resume their “un-Islamic” offenses despite having tasted torture and other depredations. On the whole, the regime has not found a way to curb its social disorder, and is desperately running out of options to deal with its mounting social ills.
A VULNERABLE ECONOMY
Iran’s economy is currently enjoying a temporary respite from its deep-seated problems due to the continuation of high oil prices and high foreign-exchange income. But its chronic ailments, long recognized and officially admitted, have so far eluded effective remedies. The genesis of this malaise lies in the economy’s state dominated, oil-based and inward-oriented character, aggravated by some inherent weaknesses in its major sectors.
Government-run economic organizations dominate the economy. While the presence of the numerous parastatal and hybrid bonyads makes it difficult to know the exact share of the state in the formal economy, no less than 60 percent of the country’s gross domestic product (GDP) is widely believed to be in state hands.
Despite the government’s intention and repeated efforts since 1990, and particularly under the current Third Development Plan (2000-2005), privatization of state enterprises and downsizing of the government bureaucracy have had an unsuccessful record.31
Furthermore, Iran suffers from a high level of government intervention in the economy, extensive restrictions in banking and finance, undue wage and price controls, inadequate protection of property rights, high trade barriers, and ever changing regulations – all effectively discouraging innovation and enterprise. The Heritage Foundation’s latest annual Index of Economic Freedom places Iran 146th among 156 countries. Heavy and hazardous reliance on oil is Iran’s second economic weakness. Crude exports remain the principal mainstay of the economy, as witnessed by the fact that all six domestic economic cycles since 1979 were directly linked to an oil boom or bust.32 More than 80 percent of the country’s foreign exchange receipts and nearly 70 percent of the government budget are based on crude-oil exports.
A misguided post-revolution emphasis on self-reliance and economic self-sufficiency loom as the country’s third major handicap. While Iran has 1 percent of the world’s population, its registered foreign trade (including oil) is only about three tenths of one percent (.03) of international trade. The formal statistics exclude an estimated $3-4 billion in annual contraband operations. Despite strenuous efforts made by the Khatami government in the last five years to increase non-oil exports through various subsidies, tax exemptions, financial guarantees and other promotional assistance (including a 50-percent depreciation of the Iranian rial), maximum annual foreign sales have remained below $5 billion – about one fourth of the value of average annual imports. And, despite generous financial incentives offered to attract and protect foreign direct investment in the non-energy sector, the total inflow in the entire decade of the 1990s is estimated to have been less than $1 billion. Thus, while Iran ranks thirty-seventh in annual GDP among 140 world nations, its ranking in the attraction of direct foreign investment is 137th.33 The Economist Intelligence Unit’s report for the year 2002 calls Iran and Nigeria the world’s most “inhospitable” countries for foreign investment. Another estimate indicates that of the 60 recipients of foreign direct investment in 2001, Iran was fifty-ninth.34 Per capita foreign investment is a small fraction of such fund flows to Mexico, Malaysia and China.35 According to another report, more than $16 billion in capital has actually fled the country in the last five years.36 Iran’s is thus still a closed economy.
The country’s sector-specific weaknesses are also familiar. Agriculture is rain-fed and water-deficient, and thus subject to devastating periodic droughts. While agriculture uses more than 70 percent of the national water supply, a large percent of this water is wasted. And, while its comparative advantage lies in cash crops (fruits and vegetables), its best land and most of its water are used for producing wheat, rice and barley at several times the world price. Despite considering agriculture the pivot of development since the revolution, Iran still cannot feed itself without imports.
The manufacturing sector, largely nationalized, suffers from poor management, overstaffing, reliance on foreign technology, and protection from competition – with its principal comparative advantage resting on cheap raw materials (mostly below-cost energy). Industrial productivity is estimated to be only 40 percent of the national figure, and less than the average in Asia and Latin America.37 The oil industry, with its nearly a century of operation in Iran, has yet to come up with a patent of its own. All its exploration, production, refining and marketing technologies are borrowed. Its productive capacity has declined by more than 30 percent since the revolution due largely to its aging and poorly maintained wells. Its management is opaque, cumbersome and politicized. And the services sector, while highest in terms of employment and nominal GDP share, is the least socially and economically productive.
The combination of misguided policy orientations and structural weaknesses in the productive sectors now confronts the government with four immediate concerns: sub-optimal growth, rising unemployment, stubborn budget deficits and a widening income gap. Iran’s average annual real GDP growth in the 1997-2002 period is estimated at about 5 percent, still below the planned target. Holding back the growth rate has been inadequate productive investment, low investment productivity, poor choice of public-investment projects and inefficient management. While the government’s official statistics show average annual gross investment in the last four years to have been around 30 percent of GDP – a respectable share – the return on investment projects tells a different story. Poor choice of projects, the absence of prior feasibility studies, and insufficient financing provisions have been the major causes. The sheer number of projects launched each year and the lack of control over either their quality or priority have resulted in more than 9,000 currently unfinished projects, many of them started as far back as 15 years ago. According and jobs, poor management and overstaffing. By one estimate, with 34 official holidays a year, Iran holds the world’s record.43 Adding annual leave and weekends, workers are virtually idle one-third of the year in any one job.
Stubborn and rising unemployment is currently the country’s thorniest problem and the government’s number-one concern. Children born in the state-encouraged baby boom of the 1980s are coming of age now. Of an estimated 760,000 new workers to be employed each year to published reports, while the average completion time for a development project in the world is about three years, Iranian projects usually take under the current Third Development Plan (2000-2005), no more than 490,000 have been able to find suitable work.44 The official number of nine years to complete.38 Furthermore, only 25 percent of total investment outlays have been directed to agriculture and industry, while 70 percent have been absorbed by the services sector, involving brokerage activities, real-estate transactions, gold and currency speculations, domestic trade and hoarding.
National productivity 1997-2001 has reportedly declined by about 2 percent.39 Low labor productivity has been mostly responsible for this decline. According to a high-level planning official, 85 percent of Iran’s labor force and 77 percent of civil servants lack higher education.40 Value-added per hour of work is estimated to be only one-twentieth of the average in advanced industrial countries.41 Critical analysts claim that the productivity of state employees is only 24 minutes for eight hours of work!42 The reasons are many: low educational level, mismatching of skills jobless in Iran is given at 3.2 million or 14 percent of the labor force, but private estimates range from 5 to 6 million. Of greater significance than the jobless rate are some other distinct factors. Unemployment among applicants 15-26 years of age is 26.5 percent; and 70 percent of the unemployed have been out of a job for more than two years. More disturbing still is the fact that in a country suffering from a shortage of technical and managerial cadres, more than 20 percent of the unemployed are college graduates,45 mostly in the agriculture and health sectors. By one report, for the 260,000 annual college graduates, there are only 75,000 jobs available. The official unemployment rate would be much higher if women were allowed to join fully in the labor force. The current share of women in Iran’s 24 million labor force – about 37 percent of the population – is estimated to be less than 12 percent, of which only 2.9 percent work in a management capacity. An emergency domestic-employment program initiated by the government and the exportation of a small contingent of the unemployed to South Asia and the Persian Gulf countries can hardly make a dent in the situation. A study by the Ministry of Labor claims that Iran needs an annual GDP growth of 9.4 percent a year to bring the jobless rate below 10 percent.46
Chronic budget deficits – stated or camouflaged – are another worry for the government. Overstaffing and the inordinately bloated bureaucracy are the principal reasons, as some 70 percent of the budget outlay goes to wages and salaries. According to a high Management and Planning Organization official, the number of public employees since the revolution has increased fourfold, while the population has less than doubled. The number of state enterprises has tripled, and “public” organizations have doubled. Yet, by one estimate, only 40 percent of national income is received by labor. Job-holding workers are usually among the poorer income strata. Money-losing public enterprises are another constant drain on the national budget. Of 190 state corporations audited by the General Inspection Office in 2002, some 48.4 percent were in the red; 6.8 percent only broke even.47 The 100 largest public entities produce 25 percent of GDP, while many of them are on life supports systems.48 The major cause of their fiscal hemorrhage could be found in poor management. According to a senior member of the Ministry of Science and Technology, some 70 percent of public agency managers in Iran have only a high school diploma or less. Nearly all of them owe their appointments to nepotism andprivileged connections rather than professional expertise.
Of equal significance in perpetuating budget deficits is the gamut of government tax exemptions, as well as the inability to collect taxes from a large section of the economy. Iran has one of the lowest ratios of tax revenue to total government revenue among countries in the same GDP bracket. In recent years, tax revenue has constituted about 30 percent of government revenue and only about 6 percent of nominal GDP. Tax exemptions are extensive and significant. Apart from the informal or underground economic activities that totally escape taxes, a substantial segment of the formal economy (agriculture, non-oil exports and a whole variety of educational activities) is legally tax exempt. By various official and private estimates, the tax-exempt segment of the economy is 50 to 60 percent. Until the 2002 tax revision, some 400 bonyads, which control more than 20 percent of the formal economy was also tax exempt. Tax evasion and lax enforcement routinely cause collected revenues to fall short of annual budget projections.
Excessive subsidies are another cause of the budget gap, but lack of transparency does not allow a correct stock taking of annual subsidies. Reliable estimates, however, give the figure as 20 percent of GDP, of which 12 percent goes to energy consumption alone.49 According to various official sources, almost all public utilities – oil, fuel products, gas, electricity, water, telephone and transportation – are sold below production costs. The notoriously low gasoline price (25 cents a gallon for regular gas) has not only encouraged wasteful consumption at home – estimated to be one third more than the world average and requiring about $1 billion worth of gasoline imports – but has also led to multi-million dollar smuggling to neighboring countries (especially Turkey and Pakistan).50
Stubborn poverty and a worsening income gap are the government’s fourth main concern. By official reckoning, 15 percent of the Iranian population live below the absolute poverty line. That is, nearly 10 million Iranians earn less than a dollar a day (62 cents in cities, 32 cents in rural areas). Some 40 percent of the population (26 million) are considered relatively poor, earning about $1.14 a day.51 Data on income distribution (and the so-called Gini coefficient) is both inadequate and unreliable. Yet occasional figures supplied by economic agencies and anecdotal evidence seem to indicate an increasingly skewed distribution of income and a dwindling middle class. According to a high government official, the top 10 percent of the population earns about 30 percent of the national income, while the bottom 10 percent receives only 2 percent.52 A private economic analyst, not sympathetic to the regime, claims that the richest 10 percent receives 70 percent of national income, while 70 percent earns only 10 percent.53
The reliability of all these estimates is subject to both methodological and theoretical questions; however, there is no denying that the Islamic Republic is one of the world’s least equitable regimes. The irony lies in the fact that after 23 years of pursuing “Islamic social justice,” adopting harsh, communist-type measures such as arbitrary appropriation of both tangible and intangible property from their lawful owners, forced distribution of land, generous subsidies, price controls and tens of government-created “charitable” organizations to help the poor, the regime admits its failure to improve income distribution.54
Glaring inequities and acknowledged production inefficiencies caused by misguided policies, poor management and corruption are the major sources of Iran’s lackluster economic performance. But the Achilles’ heels of the economy, if not in fact the whole regime, lies in its oil fortune. With the oil price falling below $15 a barrel, and lingering around $10 for a year, the economic collapse could hardly be avoided. The government remains totally unprepared to deal with such an eventuality, and has yet to find effective means to cope with its unemployment, inflation, slow growth and budget deficit.
Despite some 23 years of effort toward self-sufficiency, Iran is more dependent on the outside world than at any time since the revolution. A large and rising population, low national savings, a paucity of indigenous technologies, and the inadequacy of its non-energy exports to pay for irreducibly minimum import needs, make the country desperately in need of foreign direct investment, technology and knowhow. Yet, while the Islamic Republic has normal diplomatic relations with some 130 countries, its failure to receive a certificate of good behavior from either its Western trading partners or private human-rights organizations is impeding its drive to attract foreign funds. The pursuit of a pseudo Islamic ideology at the expense of the true national interests, an irrational mistrust of foreign powers, the Palestinization of its foreign policy, and a wholesale purge of experienced and knowledgeable diplomats from the Foreign Affairs Ministry have all contributed to this predicament.
Both the United States and the European Union share a list of four basic policy disagreements with the Islamic Republic:
(a) support for international terrorism; (b) pursuit of programs to develop weapons of mass destruction; (c) opposition to the Middle East peace process; and (d) violations of human rights and fundamental freedoms at home and abroad. The Iranian regime has categorically and persistently denied all these allegations. At the same time, it has tried to play the EU against the United States for maximum possible benefits.
Washington and Brussels have followed different paths in their diplomatic approach towards Tehran. The EU, for reasons of historical ties, geographic proximity and commercial interests, has opted for engagement. The United States, stung by the humiliating takeover of its Tehran embassy in 1979, Iran’s overt hostility towards Israel and other alleged mischief in the region, has resorted to containment. Brussels’ modus operandi has focused on a series of dialogues with Tehran, initially called critical, then constructive, and finally comprehensive.
Washington, however, imposed some limited sanctions in the early 1980s, expanded them later in the decade, then made them watertight in 1995 before making a perfunctory easing gesture in March 2000. The U.S. Congress, for its part, imposed an extraterritorial ban on foreign entities investing in Iran’s energy sector in 1996 and renewed the legislation again in 2001.
Of the four areas of dispute with the West, the human-rights issue has proved to be hardest for Tehran to defend. Since 1983, for 19 straight years except 2002, the
U.N. General Assembly, based on the majority votes of its Human Rights Commission, condemned Iran for violating basic human rights, citing frequency of executions, inhumane punishments of convicted offenders, restrictions on the press, discrimination against minorities and failure to follow due process. At the bilateral level, the Islamic Republic has been repeatedly accused by the U.S. State Department as a most active terrorist nation and a country violating religious freedom. Individual European countries such as Britain and Germany have also accused the Islamic Republic of massive human-rights violations. The condemnation has been echoed more strongly every year by Amnesty International and other human-rights organizations as well.
In rebutting these charges, the Tehran government has steadfastly argued that human rights in Islam are different from Western concepts, and therefore the Islamic Republic’s behavior should be judged within its own context. Iran’s foreign minister, on the occasion of a visit to Tehran by the U.N. Human Rights Commissioner in late February 1998, said human rights were “universal, independent of conditions and transcend all boundaries.” Yet in the same breath, he condemned the interpretation of these rights “in abstraction, disconnected from spirituality and religious and historical roots, and divorced from social and cultural backgrounds.”55 A truly candid interpretation of the minister’s double talk was given by Iran’s judiciary chief when he admitted that the West considers some types of punishments as contrary to human rights while “we” do not regard them as such.56
These admissions of differences with the 1948 Universal Declaration of Human Rights (to which the shah’s government was a signatory) have thus far postponed the conclusion of a comprehensive trade and cooperation treaty with the EU. In fact, high EU officials have made it emphatically clear that economic issues were inseparable from political issues and that there would be no comprehensive treaty without a policy shift on Iran’s part.57 Without such a comprehensive trade and cooperation treaty, without the removal of U.S. sanctions, and without admission to the World Trade Organization, Iran will not be able to attract badly needed foreign investment in its non-energy sectors – estimated at $10 billion a year. And without such investments, the hazardous dependence on crude-oil exports will continue to be a drag on economic growth and reduced unemployment – and ultimately a threat to the regime’s survival.
LURCHING INTO THE UNKNOWN
The regime’s inability to come to grips with these five challenges has now damaged both its political legitimacy and its moral sovereignty. Since the 1979 revolution, the rift between the government and the people has never been as wide as it is today. The emphasis on Islamic orthodoxy, a rear-guard and losing battle against the so-called Western “cultural onslaught,” and uncertain economic prospects have now confronted the ruling clerics with three unpleasant choices: harsher and more severe repression, a takeover of the government by disgruntled military or security officers, or ultimate implosion.
Unless appropriate solutions to these challenges are found – and soon – the day of reckoning will not be far off.58 Constant clashes between the people’s demands for political freedom, social justice and economic prosperity on the one hand, and the government’s proven inability to satisfy these demands on the other, are bound to come to a head.
What is going on in Iran now resembles the dénouement of all violent revolutions. After having devoured its children in the early 1980s through mass executions, jailing and exile, the 1979 revolution itself is now being devoured by a new generation of disenchanted youth, dubbed the “third force.”59 Doubtful about the legitimacy of revolutionary grievances against the shah’s regime, heirs to the revolution’s subsequent failure to deliver on its promises, deprived of all the enjoyments available to the youth in other civilized parts of the world, and awakened by the internet and cyberspace to the potential for a happier and fuller life, this third force is determined to seek a better tomorrow.
What binds the young men and women who form this movement is their disillusionment with the current establishment, whether reformist or conservative. They despise the fundamentalist dinosaurs who want to turn the clock back. They also mistrust most of the born-again democrats who now spearhead the cause of the free press and the rule of law; they remember them as old revolutionaries who in their heyday (1981-89) showed no qualms about wholesale executions of their opponents, torture of political dissidents, muzzling of their enemies, seizure and confiscation of private property without due process, and violation of minorities’ rights. The freedom these insider reformists now seek is their own liberty to govern and not necessarily the freedom of others to dissent.
The new force is unduly idealistic, still politically naive, organizationally inexperienced and without money. It still lacks a charismatic leader, different from the rabble-rousers of the past. And it needs a more concrete platform beyond the oftrepeated slogans of freedom, democracy and the rule of law. But the course of events is likely to produce both. For a while, the movement’s leaders can be pushed back, intimidated, jailed and even clandestinely eliminated by conservative elements who now control all levers of political and financial power. But they cannot be silenced. The momentum is on their side. The future is theirs.60
The current theocratic oligarchy, like any organism that is unable to cope with its afflictions, is doomed to expire. Yet the intriguing question is not whether, or even when, there will be an implosion, but what kind of new regime will replace it. The West’s hope, and the opposition’s claim, is that it will be a pluralistic and participatory democracy with all its prerequisites – civil liberties, a transparent and accountable government, free elections and a thriving civil society. But, given the absence of a democratic tradition in Iran’s paternalistic and patrimonial culture, and its historical rule by a monarchic/Islamic accommodation, such hopes and claims may remain just that. One can only wish that this time history will not repeat itself.
1 Fareed Zakaria, “The Beginning of the End,” Newsweek, July 26, 1999. For the story of the student unrest see Geneive Abdo, “Days of Rage in Tehran,” Middle East Policy, October 1999.
2 See Dilip Hiro, “Another Iranian Revolution,” The Wall Street Journal, July 14, 1999; Robert Fisk, “Iran’s Old Guard Brings Revolution Upon Itself,” The Independent, July 14, 1999; and The Economist, July 17,1999.
3 Jahangir Amuzegar, “Civil Society or Civil Unrest,” Middle East Policy, October 1999.
4 See the National Review, July 8 and 26, and November 25, 2002; The Wall Street Journal, July 27, 2002; The Guardian, August 25, 2002; Radio Azadi, September 2, 2002; Boston Globe, December 11, 2002; and Financial Times, December 14, 2002.
5 Front Page Magazine, September 18, 2002.
6 See Scott Peterson, “In Iran a Second Revolution gathers Storm,” The Christian Science Monitor, November, 29, 2002; Jeff Jacoby,“ Iran on the Brink of a Regime Change,” Boston Globe, December 1, 2002; and “Revolting against the Revolution,” The Economist, November 29, 2002.
7 Islamic Republic News Agency (IRNA), October 7, 2002.
8 See msnbc.com/news, December 15, 2002.
9 See, for example, R.C. Hottelet,“ Iran Sanctifies Misuse of Power,” The Christian Science Monitor, August 18, 1999.
10 For a detailed description of Iran’s ideological makeup, see Abbas Shadloo, Ahzab va Jenahhay-e Siasi [Political Parties and Factions] (Tehran: Nashr-e Gostareh, 1379 ).
11 See Babak Dehghanpisheh, Newsweek International, January 6, 2002.
12 Iran Times (Washington), November 9, 2001. In another sermon, the Ayatollah declared any question regarding the rahbar’s political or religious legitimacy as a denial of God’s existence and thus an apostasy. Radio Azadi, July 28, 2002.
13 Hamshahri (Tehran), July 4, 1998.
14 Daily Telegraph (UK), November 2, 2002; Iran Press Service, October 19, 2002.
15 See Daniel Pearl, “Iran’s Rafsanjani,” The Wall Street Journal, July 16, 1999.
16 Reporters without Frontiers (RWF), quoted in Iran Times, November 1, 2002. See also RWF, Iran Annual Report, January 2003.
17 See Iran Emrooz (Internet site), December 16, 2002.
18 Iran Emrooz, December 22, 2002.
19 Iran (Tehran), June 6, 2002.
20 Le Monde Diplomatique, March 14, 2002; BBC News, June 25, 2002; Iran Daily (Tehran), November 24, 2002.
21 Iran Times, October 11, 2002.
22 Iran Mania (Internet site), June 9, 2002.
23 Iran Times, July 5, 2002.
24 Iran Times, April 5, 2002.
25 Iran Times, May 24, and September 20 and 27, 2002; Iran Emrooz, December 17, 2002.
26 For the sources of these figures, see The Economist, October 1, 2001; Iran Emrooz, November 1 and December 17, 2002; and Iran Economics, November/December 2002, featuring the brain-drain subject. 27 Agence France Press (AFP), October 30, 2002.
28 Hamshahri, July 28, 2002; Radio Azadi, November 20, 2002.
29 Iran Economics, October/November 2002, pp. 12-27.
30 By one estimate, the Islamic Republic has now the world’s highest per capita execution rate. Radio Azadi, September 21, 2002.
31 Hamshahri, November 18, 2002.
32 See Jahangir Amuzegar, “Khatami’s Economic Record,” Global Dialogue, Spring-Summer 2001.
33 Radio Azadi, November 11, 2002.
34 Iran Times, July 5, 2002; Hamshahri, April 19, 2002.
35 Asia Times, June 4, 2002.
36 Iran Financial News (Tehran), August 20, 2002.
37 Iran Times, June 6, 2002.
38 For a fuller discussion of Iran’s privatization story, see Jahangir Amuzegar, “Iran’s Privatization Saga,” Middle East Economic Survey, June 17, 2002; Radio Azadi, November 12, 2002; and Hamshahri, December 8, 2002.
39 Hamshahri, November 18, 2002.
40 Iran Times, August 2, 2002.
41 IRNA, June 15, 2002.
42 Iran Times, August 30. 2002.
43 Iran Times, May, 3, 2002.
44 Iran Times, June 14, 2002; Radio Azadi, July 16, 2001; IRNA, October 21, 2002; Tehran Times, November 20, 2002; and Hamshahri, November 19, 2002.
45 Iran Times, October 25, 2002; Radio Azadi, February 27, 2002.
46 Iran Times, September 6 and 27, 2002. See also Hamshahri, January 10, 2003.
47 Iran Times, October 18, 2002.
48 Iran Times, June 21, 2002.
49 Iran Times, July 5, 2002.
50 IRNA, November 21, 2002; and AFP, November 25, 2002.
51 Radio Azadi, October 21, 2002; IRNA, October 21, 2002; and Iran Emrooz, December 23 and 25, 2002.
52 Radio Azadi, October 28, 2002.
53 Iranian Student News Agency, October 18, 2002.
54 Statement by Director of Social Affairs in the Management and Plan Organization, reported by IRNA, October 20, 2002.
55 Iran Focus, March 1998, p. 14.
56 Vision of the Islamic Republic of Iran, Channel 1, March 2, 2002.
57 Iran Times, August 2, 2002; AFP, December 10, 2002; and Reuters, December 14, 2002.
58 See Business Monitor International, “Iran Quarterly Forecast Report,” January 20, 2003.
59 See The Economist, December 19, 2002.
60 For a detailed discussion of Iran’s current situation, see The Economist, January 16, 2003.