Iran's President Likely To Lose Favor

Forbes:

Iran's President Mahmoud Ahmadi-Nejad on Aug. 15 said his country would not back down on the nuclear issue and praised Hezbollah's resistance to Israel. His popular support comes from his appeals to social justice and Iranian nationalism. It also reflects working-class anger at the corruption of the administration of Akbar Hasemi Rafsanjani, president from 1989 to 1997, and disillusionment with the culturally elitist administration of Mohammed Khatami, president from 1997 to 2005.

Ahmadi-Nejad's appeal thus depends on his ability to portray himself as the defender of the Iranian nation against the West in the nuclear dispute, and on his administration's ability to create economic opportunities for underprivileged Iranians.

Ahmadi-Nejad was elected president in June 2005. One year into his presidency, his popularity is still high, based on a combination of appealing to Iranians' nationalist sentiments in the field of foreign policy, while promising massive government expenditure to provide economic opportunities for Iran's young population.

Ahmadi-Nejad has portrayed himself as the straight-talking champion of economically disadvantaged Iranians. He has set out to spend Iran's burgeoning oil revenues on its poorer provinces. In March, Iran's parliament, the Majlis, approved his budget for 2006-07, which saw a 25% increase in expenditure.

However, the economic news since his election has largely been bad: READ MORE

--The stock market went into freefall following the elections.

--In a bid to increase investment, Ahmadi-Nejad reduced interest rates in April, causing Iranian investors to withdraw their deposits from Iranian banks and buy gold coins.

--Despite an announcement by Supreme Leader Ali Khamenei in July that 80% of shares in state-owned companies would be privatized, investor confidence remains low, and the privatization program continues to struggle.

In the nuclear confrontation with the West, Ahmadi-Nejad has carefully cultivated his image as the champion of Iran's "inalienable right" to enrichment technology, which the United States and the West are seeking to deny.

His declaration in October that Israel should be "wiped off the map" was aimed not only at bolstering his support among conservatives in Tehran, but also assuaging Arab fears of rising Iranian power:

--By portraying Iran as the champion of the Muslim world against Israel, he sought to address anxiety among Iran's Arab Sunni neighbors about growing Iranian/Shia power by rallying them behind Iran against Israel.

--Another manifestation of this policy was his letter to U.S. President George W. Bush in May, in which he portrayed himself as the global advocate of the rights of Palestinians and the entire developing world.

In the recent war between Israel and Hezbollah, Ahmadi-Nejad and the entire Iranian leadership have stood firmly behind Hezbollah. However, the Iranian public seems wary of a confrontation with Israel and is questioning the wisdom of spending the nation's oil revenues in Lebanon when they are needed at home. Should Iran become embroiled in a further outbreak of fighting, Lebanon may become a domestic political liability.

Ahmadi-Nejad's populist domestic and foreign policies have won him few friends among Iran's political and intellectual elites:

--He has come up against opposition from the conservative-dominated Majlis.

--He is resented by pragmatists because of his leftist economic policies and reformists for his right-wing political agenda.

--Both oppose his radical foreign policy.

--He has purged the state apparatus.

Ahmadi-Nejad's popularity is likely to decline in 2007:

--Increases in government expenditures will ensure that inflation continues to hover in the high double-digits. Underprivileged Iranians will become increasingly disillusioned by the disparity between their income and rising consumer prices.

--It seems unlikely that the nuclear standoff with the West will lead to either military action or punitive sanctions against Iran in the near future because of divisions within the United Nations Security Council. Unproductive diplomatic skirmishing or possibly substantive negotiations are more likely. In either case, Ahmadi-Nejad's ability to exploit the issue for domestic political gain is likely to diminish.

--Furthermore, he is likely to be increasingly marginalized in the foreign policy arena.

In the shorter term, Ahmadi-Nejad's declining popularity may affect the outcome of the elections for the Assembly of Experts, slated for November. Support for far-right candidates among his supporters may weaken at the expense of candidates critical of the president.

If the nuclear confrontation with the West does not escalate, Ahmadi-Nejad's ability to project himself as Iran's national champion will diminish. His populist economic policies are unlikely to reduce inflation and unemployment, and they could make life more difficult for the working-class Iranians he claims to represent. He may increasingly be seen as a liability by Khamenei, who may move to sideline him.