FROM FOREIGN AFFAIRS

How to Reform a Theocracy

A Domestic Playbook for Iran's Moderate President

By Kevan Harris

JANUARY 20, 2014

Hassan Rouhani attends a conference on National Unity in Tehran in 2007 (Courtesy Reuters)

When Iranian President Hassan Rouhani delivered a speech last month at Tehran’s Shahid Beheshti University, the audience was a microcosm of his country’s bitter politics. Gathered at the back of the hall and amassed outside on the campus grounds were groups of young women and men who supported Rouhani's election campaign promises: engagement with Western powers, economic rejuvenation, and greater social and political rights. At the front of the hall, scowling, sat university administrators and conservative student groups. Those seated farther from Rouhani chanted, “Release the political prisoners,” while those closer to him shouted, “Death to America.” It was a tough crowd, to say the least.

But Rouhani managed to win it over. “A centrifuge should revolve,” he declared at one point, “but people’s lives and the economy should revolve as well.” Everyone cheered that line.

If Rouhani has any hopes of following through on his campaign promises to reform the Islamic Republic, he must continue to pursue this strategy. Some observers have been quick to compare Rouhani to Mikhail Gorbachev, the Soviet leader who initiated a series of political reforms in his country during the 1980s. That reputation understandably excites Iranian liberals. But it also worries Iranian conservatives, who are keenly aware that Gorbachev presided over the downfall of the Soviet system. In that sense, any sudden moves by Rouhani to liberalize Iran, whether in terms of its domestic politics, economy, or foreign policy, are likely to cause a backlash from conservatives that could cost Rouhani and his centrist allies their foothold in the country’s establishment.

Rouhani seems to recognize that a direct confrontation with Iran’s right wing would be too costly. But that does not mean he should give up trying to relax its grip on the state. It just means that he should do so gradually. Rouhani, in fact, can make real progress toward liberalization through a series of measured but canny steps.

First, Rouhani could focus on reforming Iran’s political institutions, which may even win him the active support of conservatives. At present, Iran’s elites are loosely organized into overlapping and usually short-lived political associations that lack ideological consistency and have no real following among the public. Conservatives have tended to support this political framework, as it makes it difficult both for the public to hold the ruling establishment accountable and for political insurgents to break into it. But given the difficulties conservatives had in organizing and rallying their base ahead of last year’s presidential election, they might now be willing to allow more formalized political parties, if only so they can benefit from a more disciplined campaign apparatus. With four candidates in last year’s ballot versus the single centrist Rouhani, many conservatives believe their own internal discord lost them the election.

Rouhani should aim to legally recognize formal political parties before Iran’s 2016 parliamentary elections. In the short term, such a move could benefit conservatives, as they have been more organized than their rivals in the past. But in the long term, it would be a major victory for Iranian liberals and moderates. As Iranian political parties gain legitimacy over time, the power of the Guardian Council, the unelected body that presently monitors national elections and has a history of rejecting reformist candidates, would begin to erode. As a result, even if particular individuals are prevented from becoming candidates, the public could more easily vote for lesser-known candidates based on party affiliation. The introduction of political parties would loosen the stranglehold that Iran’s first-generation revolutionaries maintain on domestic politics by forcing them to compete directly with fresh faces. (It is easy to imagine ambitious young conservatives being especially vocal in support of this change for a more lawful partisan politics. After all, former Iranian President Mahmoud Ahmadinejad’s conservative supporters often complained of the political glass ceiling put in place by the old guard.)

Second, Rouhani could make incremental progress on economic reform. At present, the most common form of ownership in the country is through state-linked holding companies and institutional investors. Some are affiliated with the Revolutionary Guards or Supreme Leader Ayatollah Ali Khamenei’s office, while most are attached to government pension funds, banks, and an opaque layer of subcontracting firms. But any attempts to expropriate companies and contracts directly from conservatives would solicit a harsh backlash.

Rouhani should instead take a page from the policies pursued by reformists during the late 1990s. After conservatives blocked an effort by then Iranian President Muhammad Khatami to privatize an unwieldy set of public conglomerates, Khatami granted licenses to new businesses in sectors ranging from consumer goods and transportation to telecommunications and banking. State-linked companies still had protected market power, but they suddenly found themselves in competition with new entrepreneurs. Prices for commodities went down, quality went up, and state-linked companies were eventually forced to emulate the market upstarts. If Rouhani cannot beat the entrenched state-linked economic elite, he should allow the private sector to outcompete them.

Finally, Rouhani could attempt to reform his country’s foreign policy by co-opting the conservative establishment and capitalizing on its internal divisions over Iran’s role in the Middle East. Rouhani cannot achieve the foreign policy realignment he desires by just repeating the calls by his reformist predecessor Khatami for a global dialogue among civilizations. This sort of intellectual rhetoric earned the ire of conservatives, who in turn marginalized Khatami in foreign policy decision-making. But, as Farideh Farhi and Saideh Lotfian have pointed out, Iran’s political elite is divided against itself when it comes to the country’s grand strategy. One segment believes that offense is the best defense. In their view, Iran’s mission should be an ideological adversary of the West and project power wherever the United States creates a geopolitical vacuum. A second school of thought, advocated by Rouhani and his allies since the early 1990s, favors a return to Iran’s historical sphere of interest: the country’s long territorial borders and the bodies of water it shares with its neighbors.

The great virtue of Rouhani’s foreign policy vision is that it employs old-fashioned Iranian nationalism to support a strategy entirely consistent with détente with the United States. Using the same nationalist rhetoric, Rouhani could also make an argument against Iran’s entanglement in the Syrian civil war that is palatable to Iranian conservatives -- after all, Syria is not a neighbor of Iran, so why should Tehran sacrifice blood and treasure in contributing to a quagmire brought on by an unwavering Damascus? The same reasoning could be deployed to rebalance its broader relationship to the Arab Middle East. Diplomats in Washington may not like Rouhani’s rhetoric, but they should closely heed his underlying message.

Iran urgently needs reform in all three of these areas -- domestic politics, economics, and foreign relations. But Rouhani must take care not to tip the advantage to his opponents. His challenge will be to keep conservative elites on board with his plans while still reassuring a broader population with high expectations that reforms are under way. It is a tall task, but one for which Rouhani is uniquely suited.