Post-Khomeini Iran

The death of the Ayatollah Ruhollah Khomeini on June 3, 1989, closed a turbulent chapter in Iran's long history and opened a new and still uncertain phase in its evolution as a nation. The passing of the man who branded America as the "Great Satan" also created expectations that a decade of U.S.-Iranian animosity will, in time, come to an end.

In the last few months an indirect and unacknowledged dialogue has begun between Iran and the United States-prompted, unfortuitously, by Israel's abduction of a radical Lebanese Shi'ite leader, Sheikh Abdul Karim Obeid, on July 28, and the subsequent execution of an American hostage in Lebanon, Colonel William Higgins. Despite its tragic auspices, this indirect dialogue has been noteworthy for its largely moderate and unprovocative tone and the efforts of both sides to avoid confrontation and crisis.

These developments bode well for the future of U.S.-Iranian relations. Before any breakthrough can be expected, however, certain trends in Iran must continue and deepen. Similarly, U.S. attitudes will need to develop in new directions and some of the old premises of U.S. policy toward Iran will need to be reassessed in response to the changing scene there.

II

Most observers of Iranian affairs had long expected that Khomeini's death would create a power vacuum in Iran, with intense infighting among its Islamic leaderships. Developments during the months immediately preceding the Ayatollah's death only fueled these expectations. Ayatollah Hossein Ali Montazeri, the designated successor as Iran's spiritual leader, was abruptly and unceremoniously dismissed on March 28, 1989; moderating trends in Iranian politics were reversed amid the outcry against the controversial author Salman Rushdie; radical figures appeared to have regained Khomeini's ear and favor.

During this period Iran's leadership was engaged in a heated debate over the reform of its Islamic constitution, focusing especially on the respective roles of the president, the parliament and the prime minister. As it stood, the constitution, especially the division of executive power between the president and the prime minister, had made governing almost impossible.

On one side of the debate stood the proponents of a strong presidency with powers even to dissolve the parliament; on the other stood the supporters of a strong parliament who warned against creeping dictatorship should the parliament's privileges be curtailed and the president assume too much power.

Most observers believed that if the constitutional debate were not resolved during the Ayatollah's lifetime, and the ultimate outcome did not receive his imprimatur, these differences would degenerate into open conflict. Considering that divergences within the political leadership extended into the military and the Revolutionary Guards, the possibility of armed clashes-perhaps even civil war-was not ruled out.

Despite these dire predictions, the transition of power in Iran so far has surprised even the most optimistic of Iran-watchers; the Iranian leadership has displayed unexpected unity and alacrity in filling the political vacuum.

Immediately after Khomeini's death, the 80-member Assembly of Experts, charged with selecting his successor, elected President Hojatolislam Sayed Ali Khamenei as Iran's new spiritual leader by a two-thirds majority. Khamenei received pledges of allegiance from the cabinet, the parliament and the military. In a show of unity, the regular defense forces and the Revolutionary Guards jointly did likewise. To enhance Khamenei's credentials, several prominent clerical figures also recounted how the Ayatollah Khomeini had on several occasions expressed his confidence in Khamenei's leadership abilities.

Meanwhile, Hojatolislam Hashemi Rafsanjani emerged as Iran's prospective chief executive. His presidential aspirations had become quite clear by the fall of 1988, as did his views on constitutional reforms: he favored a strong presidency. Initially the radicals were expected to oppose both Rafsanjani's candidacy and constitutional reforms. Within the murky and ill-defined factionalism of Khomeini's Iran, Rafsanjani had long been labeled a moderate because of his support for private enterprise, his misgivings about Soviet intentions, his willingness to improve Iran's relations with the West and his periodic remarks about the possibility of resolving U.S.-Iranian differences.

Then came the frenzy of denunciation of Salman Rushdie in February and March 1989 for the irreverent depiction of Islam in his novel Satanic Verses-a frenzy which Rafsanjani joined after some effort to distance his government from the Ayatollah's intemperate death sentence on Rushdie. This brought the radicals back to Rafsanjani's camp, apparently believing they could elevate him to a position of figurehead. With their control of the parliament and the office of prime minister, they assumed they would run the country. Khomeini's death, however, undermined the radicals' strategy, for their support made Rafsanjani the uncontested candidate for the presidency.

The last potential roadblock to a smooth transition involved the political ambitions of Khomeini's son Ahmad. It was speculated that the radicals would use Ahmad as a symbol to advance their own political agenda, and should he decide to enter the presidential race, they would withdraw their support from Rafsanjani. Indeed, had Ahmad Khomeini decided to run for office, he would have been a formidable rival since he represented Khomeini's blood and spiritual legacy. In a culture with Iran's Islamic and pre-Islamic heritage of emphasizing heredity in spiritual and political leadership, Ahmad's family links would have made him unbeatable. If Rafsanjani had nevertheless decided to challenge him, this would have generated the sort of infighting that analysts had long predicted. This situation was avoided when Ahmad-struck by grief at his father's death and fearful of the regime's prospects-lent his prestige and support to the emerging joint leadership of Khamenei-Rafsanjani.

The date of the presidential elections, during which the constitutional reforms were also to be voted upon, was advanced from August to July 1989. Rafsanjani ran virtually unopposed-the only other candidate being a little-known and colorless politician-and was duly elected with an 85 percent majority. Voter turnout was low, however, robbing Rafsanjani of an overwhelming national mandate.

The surprising unity and speed of the Iranian transfer of power reflected acute awareness that any sign of strife or delay would encourage internal and external enemies and would endanger the regime's survival. These feelings were reflected in statements like that of Ahmad Khomeini who, in congratulating Khamenei on his election as the country's new leader, said that the unity of the Iranian leadership had blinded enemies of the Islamic regime.

Rafsanjani's election seemed, therefore, a victory for the moderate realist camp. The cabinet he presented to the parliament on August 27 was weighted in favor of those who could be best described as technocratic realists. Its most notable characteristic was the removal of extreme hard-liners from sensitive positions. These included the minister of interior, Hojatolislam Ali Akbar Mohtashami; the equally notorious attorney general, Hojatolislam Moussavi Khoeiniha; and the minister of information and head of the intelligence services, Ayatollah Mohammad Rayshahri. The last named, however, reportedly declined the offer to continue in his position and was appointed to the post of attorney general.

Also important was the removal of Mir Hossein Moussavi, whose office of prime minister was eliminated. Moussavi can best be characterized as a hard-line technocrat who advocated a statist economy. In foreign relations he had long supported expanded ties with the Soviet Union and other Eastern bloc and Third World countries, and he opposed normalizing relations with the United States. Nevertheless, in recent years he had not approved of Iran's involvement in subversive and terrorist actions, which he once complained had had "disastrous consequences" for Iran.

Foreign Minister Ali Akbar Velayati was kept on in the new government. A pragmatic realist, as well as a shrewd politician who survived many twists and turns of Iran's politics, Velayati had tried since 1984 to inject some measure of normalcy into the conduct of Iran's foreign relations. He had also tried to improve the quality of the foreign ministry staff, educating the mostly inexperienced revolutionary youths, who had replaced the old diplomatic service, in the realities of international life. A few hard-liners were included in the cabinet, but even these were not particularly extreme.

Parliamentary debate on President Rafsanjani's proposed cabinet was lively. A group of radical deputies urged him to retain Interior Minister Mohtashami. Many deputies complained that six members of the cabinet were U.S.-educated and thus, in their eyes, suspect in their revolutionary credentials. The foreign ministry, for one, came under vociferous attacks by some radical deputies as being a hotbed of pro-Western tendencies, although Velayati ultimately received a respectable vote of confidence.

The difficulties facing Rafsanjani in trying to point Iran's foreign policy into a new direction were evident even before he became president, during the crisis generated by Israel's abduction of Sheikh Obeid and Hezbollah's assassination of Colonel Higgins. To Rafsanjani's conciliatory remarks directed to the United States, not only Hojatolislam Mohtashami but also a potentially far more consequential personality, Ahmad Khomeini, responded by warning against any departure from Imam Khomeini's uncompromising stand. Even Ayatollah Khamenei, Rafsanjani's most important ally, said that he might oppose Rafsanjani in case of any deviation from the Imam's revolutionary principles. This verbal assault on Rafsanjani's position partly reflected the fact that the transition in Iran is still in a stage when every issue is discussed in the context of the Ayatollah Khomeini's political legacy.

Nevertheless, the parliament ratified the proposed cabinet in its entirety, although the speaker, Ayatollah Mehdi Karubi, warned against assuming that parliament would always agree with the president or would relax vigilance against any deviation from the revolutionary path set by the Imam.

Foreign policy is the area where the unity of Iran's political leadership will be most severely tested and upon which it might founder. It is also the area where the radicals are likely to put the most pressure on Rafsanjani. Although the radical faction has lost ground since the death of Khomeini, it would be a mistake to interpret their official eclipse as evidence of lack of influence. On the contrary, although their most prominent representatives have been excluded from the new cabinet-or, as reported of some, refused to serve in it-their point of view is still represented within the bureaucracy and the military, especially the Revolutionary Guards, as well as in major segments of the population. There is also some indication that an informal network is being created among the radicals that may be transformed into an official party with an active and open role in politics.

The radicals have not abandoned the hope that Khomeini's son may still be persuaded to champion their cause. They continue to portray themselves as the true representatives of the Imam's legacy. Moreover, it should be remembered that the emergence of the Rafsanjani-Khamenei axis was not the result of a showdown between the radicals and the moderates, ending in an unequivocal victory for the moderates, but rather the product of a broad compromise on the principal elements of Iran's domestic and foreign policies.

Indeed, in the months immediately preceding Khomeini's death and following the Rushdie affair, Rafsanjani had to engage in some inflammatory rhetoric to protect himself against the radicals. Especially notable were his comments that the Palestinians were justified in killing Westerners in retaliation for Israel's actions.

Thus, while Rafsanjani will have a chance to shift Iran in a more moderate direction, he will have serious difficulties if he tries to move too far, too soon, beyond the agreed consensus. Although he has emerged as the most powerful figure in Iran, his authority is not unchallenged-particularly in the parliament. Rafsanjani resigned as commander in chief of the military after his election as president-explaining that he wanted to concentrate on economic issues-and Ayatollah Khamenei assumed that position.

Yet his resignation was probably reluctant, under pressure from his opponents and perhaps even his current allies who do not want to see him become too powerful. Some observers also see this development as a sign that, ultimately, Khamenei may try to act as the balancer between the two factions, much as Khomeini himself did before.

Rafsanjani, therefore, is not poised to return one-man rule to Iran. Rather, Iranian politics will involve much ongoing intra-regime bargaining, national debate and forming and reforming of a consensus acceptable to most of the important actors and their constituencies.

III

The broad consensus that allowed the smooth transition of power in Iran was reached in the spring of 1989 after a remarkably open debate of nearly a year and some interesting gyrations following Iran's acceptance of a cease-fire in its war with Iraq.

The principal points of this debate were not novel, but they had acquired great urgency amid the destruction of Iran's economy, worsening living conditions and growing public disaffection during the last three years of the war. This situation demanded concrete and swift decisions and would no longer permit a policy of drift and paralysis.

In economics, principal questions centered on the respective roles of government and the private sector, plus the acceptable level of foreign financing of Iran's postwar reconstruction and thus the acceptable level of its foreign borrowing. Closely related was the question of the relative importance of professionalism and revolutionary commitment in economic management. Also in contention was the choice of Iran's economic partners and their impact on Iranian policy.

In social policy, meanwhile, debate centered on the rigidity of application of certain Islamic moral codes and even, to some extent, their interpretation. In foreign relations, the basic principle of nonalignment, illustrated by the slogan "neither East nor West," was not challenged. But there was sharp debate on the choice of Iran's principal partners, especially the extent to which Iran should improve relations with the West. The issue of Iran's ties with the United States was particularly controversial-whether there should be any effort to normalize relations.

Western observers have long puzzled over whether there are significant differences in the thinking of various Iranian leaders-whether, indeed, there are any "moderates" in Iran. This question came to the fore during the Iran-contra affair of 1986-87. U.S. Secretary of Defense Caspar Weinberger expressed the feelings and frustrations of many Americans when he said that all Iranian moderates are dead. The fact is that differences of opinion have always existed within the leadership of revolutionary Iran.

The words moderate and radical do not sufficiently reflect the complexities of Iranian politics; there are different types and varying degrees of both moderation and extremism. Many individuals who started as radicals went through a learning process about Iran's internal realities and the facts of international life. Under the impact of its economic and political problems, and the reactions of the outside world, these people have moderated their views. One such personality is Ayatollah Khamenei, Iran's new spiritual leader, whose positions have gradually become more moderate and realistic. Whatever words are used to characterize the opposing camps, it is clear that the basic structure of Iranian society is marked by deep national dichotomies-between Persian nationalism and Islam, modernization and cultural purity, economic efficiency and social justice.

Those Iranians who can be called moderates have a traditional interpretation of Islam that emphasizes such principles as the sanctioning of private property. Thus, they are opposed to government control of the economy and support a central role for the private sector. In social matters, they favor a less rigid application of Islamic moral codes and a more liberal interpretation of Islamic rules. They emphasize competence and professionalism in the running of the country and, with certain exceptions, they favor the return of Iranian technical experts living in exile.

In foreign policy the moderates favor an attitude toward the outside world that is less confrontational than the radicals' view. They favor abandoning subversive and terrorist activities and advocate improving Iran's ties with the West, including, under the right circumstances, the United States. Until recently, the moderates were quite suspicious of Soviet intentions and did not favor close relations with the Soviet Union. During the last year, however, their position has altered because of changes in Soviet policy on a number of issues important to Iran, such as Afghanistan and the Iran-Iraq dispute, and because of consistent Soviet efforts to court Iran.

Moreover, nationalist and statist tendencies are stronger among the moderates than among the radicals: moderates would put Iran's interests as a nation ahead of the pursuit of elusive and ill-defined global ideological aspirations. The moderates' principal constituency includes the business community, notably the bazaar merchants, as well as industrialists, entrepreneurs, professionals and other middle classes.

The radicals, by contrast, have an unconventional or revolutionary interpretation of Islam and highlight its egalitarian dimensions and admonitions against undue accumulation of wealth. Thus, they favor a state-controlled economy, redistribution of wealth and, in general, a greater economic leveling of society. They take a more rigid position than do the moderates on the application of the Islamic moral code, not so much because of religious piety as because they consider any laxity as threatening to bring back prerevolution, bourgeois middle-class cultural values and to undermine Islamic revolutionary zeal. Partly for this reason, the radicals oppose the return of the exiles. Indeed, in 1985-86 when the government was trying to encourage some of them to return, Hojatolislam Khoeiniha said that Islamic revolutionaries would not allow the return of those who had "sucked the blood" of the Iranian people. The notable characteristics of the radicals are vociferous anti-Americanism, aversion to expanded relations with the West and the advocacy of better ties with the Soviet Union.

The radicals are divided, however, on the issue of exporting the Islamic revolution and on Iran's involvement in terrorism and subversion. At least in the last few years, the more technocratic types, such as ex-Prime Minister Moussavi, have shown increased awareness of the disastrous consequences of such policies for Iran. But others, such as the notorious Hojatolislam Mohtashami, have remained unrepentant. These differences first came to the fore after 1984 as a result of Iran's growing economic difficulties and political isolation, along with the gradual but steady deterioration of its military position against Iraq. These developments led to the first concerted effort to reduce Iran's isolation and to expand its diplomatic ties. The Ayatollah gave his blessing to these efforts by saying that the lack of relations with other countries would damage Iran. He counseled that even the Prophet Mohammed had established ties with other states, and excluded from this general mandate only the United States and Israel.

Iran's first Western overtures also took place during this period, illustrated by the visit of West German Foreign Minister Hans-Dietrich Genscher to Tehran in July 1984. On the economic front, meanwhile, Iranian officials periodically indicated that the private sector should play a greater role, and there was some relaxing of moral codes. Yet no clear and consistent line was adopted, on either domestic economic issues or foreign policy. In economic policy, indecision and near-paralysis continued as different factions resisted changes of which they did not approve; foreign policy was characterized by parallel and often contradictory signals and sudden shifts.

Three factors explain this situation: the more-or-less equal force of the moderate and radical factions, the Ayatollah Khomeini's unwillingness to come down categorically in favor of one group or another and his insistence on the maintenance of superficial unity within the leadership. Yet the moderates were often disadvantaged because, in many instances, the Ayatollah's feelings and preferences were more supportive of the radicals, although not always for their reasons. Indeed, he only acceded to the moderates' relatively rational reasoning when external circumstances made pursuit of the radical line suicidal and endangered the existence of the Islamic regime. For example, it was only after the moderates convinced Khomeini that continuation of the Iran-Iraq War would destroy his regime that he finally sanctioned the cease-fire, although by doing so he said he felt as though he was swallowing poison.

In economic policy the radicals could always count on the Ayatollah to urge the population to endure greater sacrifice in order to maintain Iran's independence. Thus, last winter, when the issue of foreign borrowing was still being debated and after the radicals regained the Ayatollah's favor by exploiting the Rushdie affair, he said that Iranians must choose between "gluttony and independence," thus indicating a preference for the radicals' position of minimum foreign borrowing and of not compromising ideological principles out of economic necessity. Yet Iran's economic and financial difficulties, with their potential for seriously eroding the regime's base of support, increasingly made the radicals' position on economic policy untenable.

By the spring of 1989 a more moderate consensus was emerging on the broad outlines of Iran's economic policy. Economic reconstruction and some alleviation of the people's financial hardship surfaced as the government's first priority. And it became clear that economic reconstruction would require harnessing the domestic base of capital and some foreign borrowing. There is, indeed, a fair amount of Iranian capital that could be invested-provided the government were to give the private sector a freer hand and create a safer environment for business: curbing the activities of revolutionary committees, developing legal safeguards and increasing the confidence of the business community that there would not be sudden changes in government policy. Thus it was agreed that the private sector should play a larger role and that some foreign financing is inevitable. Given the Iranians' bitter memories, going back to the nineteenth century, of the loss of political independence through foreign indebtedness, it was decided that this borrowing should be limited to specific projects with a capacity to generate foreign exchange earnings.

In exchange for concessions on economic policy, the radicals seemed to have exacted a price in foreign policy. This trade-off was reflected in the severing of Iran's diplomatic relations with Britain in March 1989, in strains in Iranian-West German ties, in the radical change in Soviet-Iranian relations and in the expansion of Iran's economic and trade relations with other East European countries and China.

Of these developments, the dramatic improvement in Soviet-Iranian relations is particularly noteworthy. The Iranian regime no longer considers the U.S.S.R. as the other "Great Satan." It has concluded far-reaching economic agreements with that country, including joint exploration for oil in the Caspian Sea-and perhaps later in northern Iran-a departure from Iran's historical aversion to Russian involvement in oil exploration in Iran's northern province.

The Soviet Union's political presence in Iran has increased, Iran has adjusted its Afghan policy in a direction more supportive of the Soviet position, and on two occasions-the Rushdie affair and the July-August hostage crisis-the Soviets have acted as mediator between Iran and the West.

In exchange the Soviet Union called for the withdrawal of Iraqi troops from Iranian territory and supported an ultimate resolution of the Shatt-al-Arab dispute along the lines of the 1975 agreement. There has also been considerable speculation that Moscow would ultimately agree to meet Iran's defense needs.

What is important in these new Soviet-Iranian relations is that this policy had the blessing of the Ayatollah Khomeini, who met with Soviet Foreign Minister Eduard Shevardnadze in February of 1989, and thus closer relations cannot be challenged as being against his wishes. Even Rafsanjani, despite his earlier misgivings, had to regularize his relations with Moscow by visiting the Soviet Union in June 1989 shortly after Khomeini's death.

With the post-Khomeini transition, the Rafsanjani-Khamenei team has emphasized the urgency of economic reconstruction, as reflected in Rafsanjani's speech to parliament when he submitted his cabinet for approval. He asked the Majlis whether Iran could be independent without productivity and he answered his own question: so long as Iran had to import its wheat, meat, machinery and even skilled manpower from abroad, it would have neither economic nor political independence. Rafsanjani also said that economic reconstruction would require social reforms-including cultural regeneration, respect for law, educational excellence, greater freedom of expression and more equal treatment for women. He called on those exiled experts who were not "traitors" to return home under "his personal guarantee." He will face stiff resistance in these areas from those who have profited from the near state of lawlessness in Iran and the priority accorded to revolutionary zealotry, rather than to professionalism and academic excellence, in granting access to education and jobs. Nevertheless, the activities of the Ministry of Interior to centralize all law enforcement agencies, including the revolutionary committees under its jurisdiction, the creation of a National Security Council under presidential supervision and some efforts at bureaucratic streamlining indicate the government's resolve to tackle these problems.

It is difficult to see how Iran can resolve its economic problems without changes in its foreign policy. Although Eastern-bloc countries, China and some other states do afford Iran a small range of choice, ultimately the economic and technological backwardness of these nations and their financial difficulties make them unappealing partners. Thus, Iran's economic recovery will require access to Western capital and technology; this will not be possible without some prior political understanding. Meeting Iran's military needs will also require an understanding with the West because, in the face of Western opposition, even the Soviet Union may not be willing to sell Iran the arms it desperately needs to redress its inferiority relative to its neighbors.

But Iran's relations with the West cannot improve to the point of allowing significant financial transfers and rearmament without a breakthrough in its relations with the United States. The moderates recognize this fact, but this is also the area where they are most vulnerable to radical pressure and censure. There is also the dark specter of the Western hostages.

IV

How is the United States to regard post-Khomeini Iran, now that the moderate alternative is more than a mere possibility or a vision for a far distant future? As moderates are constrained by the dynamics of Iran's domestic politics from taking bold actions to improve relations with the United States, so domestic politics also limit the U.S. ability to make gestures toward Iran that would strengthen the moderate trend and enable it to resist radical pressures and reciprocate by meeting U.S. concerns.

The most significant constraint on the United States is, of course, the unresolved hostage problem. Morally as well as politically, the United States finds it difficult to take any positive steps toward Iran as long as its citizens are held captive by pro-Iranian factions in Lebanon. Yet this reluctance makes it much more difficult for Iranian moderates to gain support for a policy of ending hostility with the United States and of doing whatever Iran can to gain the release of as many American hostages as possible.

America's reluctance goes deeper. Is it wise, many ask, to help the Iranian moderates before it is clear that they are totally in control and have proved their goodwill and influence by freeing the hostages? This trend of thought was clearly illustrated on September 7, 1989, in the petition signed by 186 members of Congress advising the United States to support the Iranian opposition rather than try to help the moderates in power. This resolution was extensively discussed in Iranian media, and the opponents of improved U.S.-Iranian relations pointed to it as evidence of continued American animosity toward the Islamic republic, and thus of the futility of trying to reach a modus vivendi with America.

This reasoning, growing from bitter memories of the Iran-contra affair, ignores the fact that no single personality can determine Iran's policy without first being able to sell that policy to influential political groups and forge a consensus. Certainly, no Iranian personality can be expected to put his political career on the line on the basis of a vague expectation of future American support. It also ignores the impact of Western attitudes on the evolution of Iran's internal politics.

It can be argued that the West's cool response to Iran's overtures in the past, especially during the summer and fall of 1988, helped weaken the moderates' position even before the outbreak of the Rushdie affair. For example, Iran was disappointed in its expectation that, after it accepted the cease-fire and improved its relations with most Gulf states, the West would be less indulgent toward Iraq. Iran soon discovered that it could not hope for any preferential credit facilities from the West, including West Germany, which, among European countries, had had the best relations with Iran.

Yet the behavior of both the Iranian and the U.S. governments during the hostage crisis of July-August 1989, the congressional faux pas notwithstanding, gives some cause for optimism that an eventual normalization of ties may be possible. Indeed, the U.S. approach to Iran under the Bush Administration has been far more subtle than before. A new sophistication is reflected not so much in what the administration has done but rather in what it has refrained from doing. For example, after Khomeini's denunciation of Rushdie, the United States expressed support and commitment to freedom of artistic expression, but it did not escalate its rhetoric against Iran. The offer of compensation to the Iran Air victims was also a good gesture. The Bush Administration has acknowledged signs of Iranian moderation. This change in U.S. attitudes has not gone unnoticed or unacknowledged by Iran, as illustrated by President Rafsanjani's remark that the Bush Administration is acting more "wisely" than its predecessor. However, past patterns of thinking about Iran still influence policy in Washington.

Since the Islamic revolution, U.S. policy toward Iran has been preoccupied with two objectives: containing the contagious impact of the Islamic revolution and preventing Soviet domination of Iran.

Until 1983 the Soviet threat seemed to Washington the more dangerous. In that year, however, Soviet-Iranian relations deteriorated, and as the U.S.S.R. became bogged down in Afghanistan, the likelihood of Soviet domination of Iran was reduced. Meanwhile, Iran's success in expelling the Iraqi invaders and its growing involvement in Lebanon, especially its role in terrorist attacks, broadened its revolutionary challenge to the United States.

America's Middle East allies also manipulated the Iranian factor to advance their own goals. Egypt, which wanted to return to the Arab fold, lobbied hard in Washington for a pro-Arab and anti-Iranian policy. At least some Israelis continued to see Iran as a strategic counterweight to the Arab world; they entertained the hope that, after Khomeini's death, the Arab military challenge would force Iran to return to the old tacit understanding with Israel. On the other hand, an increasing number of Israeli experts and politicians have come to regard Iran and its revolutionary Islam as a more formidable threat to Israeli security than the Arabs. They argued that Arab-Iranian animosity created an opportunity for Israel to forge an alliance with moderate Arabs against Iran and to induce them to be more flexible on the Arab-Israeli issue.

This strategy had some appeal in Washington, a formula whereby the United States could please the Arabs without having to antagonize Israel-an appeal partly responsible for the U.S. policy of active support for Iraq in the last two years of the Persian Gulf war. The changes introduced by Mikhail Gorbachev's so-called new thinking and the ensuing improvement in U.S.-Soviet relations further softened U.S. concerns over the Soviet role in Iran, thus reducing any incentives for reaching a compromise with Iran through the application of a carrot and stick policy.

At a more fundamental level, there has also been a tendency to minimize Iran's regional importance and its significance for the United States. Pointing to the diminishing Soviet threat and using oil reserves as the primary yardstick, American experts argued that the Arab states-and even Iraq alone-were far more important to the United States than was Iran. Iran's military weakness and mounting economic difficulties through 1988 enhanced U.S. unwillingness to compromise-reflecting a lack of understanding of the impact that Washington's attitudes have on the evolution of Iran's domestic politics. During the summer and fall of 1988, the moderates were trying hard to improve relations with the West and to end hostility with the United States, a policy fiercely opposed by the radicals. But they were given little to show for their efforts.

Nor has the United States recognized that its own ability to depreciate the Soviet danger during the 1980s was at least in part due to the Iranian moderates' unwillingness to offer the Soviets any encouragement. Indeed, Iran never played its Soviet card effectively, a failure that contributed to the success of U.S. policy in the Persian Gulf and Afghanistan during 1987-88.

The basic U.S. attitude toward Iran throughout 1988-89 has boiled down to a single proposition: in the post cold war era Iran is no longer important and if the United States waits long enough the Iranians will have no choice but to come back on American terms. If recent changes in Tehran have created new opportunities to begin some movement in the direction of ending U.S.-Iranian hostility, Washington has not fashioned a response. The United States has still not decided whether to wait patiently until Iran comes to its senses and makes the first move, or alternatively to offer incentives to encourage the positive trends in Tehran. Nor has the United States decided how far it can encourage Iranian moderation by adopting a conciliatory stand, or whether the moderates would be better helped by U.S. pressures to show up the bankruptcy of the extremists' policy.

The experience of the last several years offers some guidelines for a balanced U.S. approach that would stand a better chance of encouraging moderation in Iran and of helping to end U.S.-Iran hostility. The following points are fundamental.

First, the United States cannot hastily dismiss Iran as an unimportant element in the Middle East. Its size, population, resources, and ethnic, religious and cultural links in the Persian Gulf and South and Central Asia make it intrinsically important. The great-power competition in that area long predates the cold war. In this context Iran's policies will have an impact in either helping or hindering U.S. regional interests. Already changes in Iran's Afghan policy may have contributed to recent U.S. difficulties there. Western complacency about Soviet gains in Iran without any countervailing Western presence may also come to be regretted, especially if there were any changes in the directions of Soviet foreign policy.

Second, the United States should not be too complacent that economic difficulties and military needs will force Iran to return on America's terms. While hostile relations with the United States would limit access to Western capital and technology and delay economic recovery, Iran can nevertheless limp along and find other economic partners. The Soviet Union has already become significant economically and others, such as North and South Korea, China, Japan and some European countries, offer alternatives. Moreover, the Iranian national character lends itself more to accepting hardship than to doing what could be interpreted as groveling.

Third, the expectations of a collapse of the Islamic regime after the Ayatollah Khomeini's death have been disappointed, and the prospects of one of the opposition groups gaining power have not improved. Yet there is a moderate alternative in Iran, and the country's acute needs and the death of the Ayatollah Khomeini have strengthened its hand. During the last few months, Iran has been working to create conditions in Lebanon that could facilitate the release of hostages, especially by curbing the most extreme members of Hezbollah. It has, for example, improved its ties with the more moderate Shi'ite organization in Lebanon-Amal-and it has been reported that 70 of the most extreme Hezbollah members are being held in Iran under the pretense that they are pursuing religious studies in the holy city of Qum. These efforts have accelerated since the July-August crisis, though opposition to the policy remains. Under these circumstances, it will be difficult for the moderates to gain support for their policy without offering some concrete and tangible benefits.

Given the lack of other realistic and more palatable options, the continuation of President Rafsanjani's pragmatic evolution could be of value to the United States. For example, in view of the radicals' determination to undermine Rafsanjani or at least to censure him, it is inappropriate for the West to demand bold actions from him without offering much in exchange.

Rafsanjani's election has created great expectations among Iranians for rapid improvement in their economic conditions. He has promised more imports of food, medicine and other essential consumer products as well as investment in the country's reconstruction. Failure to meet some of these expectations would undermine him and give the radicals an opportunity to declare the failure of economic liberalization.

To succeed, he will need funds. The United States can sustain its more flexible approach to the issue of Iranian assets without losing that bargaining chip. It could also withdraw U.S. opposition to lending and investment by the World Bank and the International Monetary Fund, or by other Western countries. The option of economic pressures would remain, but such steps would show discreet goodwill and tangibly help the moderates' economic policy succeed.

The United States can encourage the United Nations to press Iraq for withdrawal from Iranian territory, the main stumbling block to progress on the peace talks. It could also discreetly indicate that it favors settlement of the Shatt-al-Arab dispute on the basis of joint sovereignty. This would cost the United States nothing politically with the Arabs, since Iraq's heavy-handedness toward Kuwait and its intervention in Lebanon have revived some of the old Arab fears about Iraq's ambitions.

While the United States cannot turn a blind eye to any Iranian attempts to subvert or dominate its neighbors or otherwise threaten vital U.S. interests, its legitimate role and security interests in such places as Afghanistan and the Persian Gulf should be recognized. The United States must also realize that its own interests regarding Iran's regional role, as opposed to those of U.S. allies in the region with priorities of their own, may not always coincide.

A return to the artificial intimacy that the shah's Iran enjoyed with the United States is neither possible nor desirable for either country. But there is no sound reason why normal and fruitful relations cannot be restored, based on mutual respect. A measured and cautious policy that tries to help the moderates of Iran can do U.S. interests no harm, and may hold the potential of yielding positive results.