Factionalism, Privatization, and the Political Economy of Regime Transformation

The contested Iranian presidential election of 2009—which ignited the most serious challenge to the authority of the Islamic Republic since the revolution—seemed to be a turning point in Iranian politics. The violent repression of the Green Movement by the coercive forces of the state and the timely inauguration of President Mahmud Ahmadinejad to his second term in the presidency were ominous signs of a closing of the Iranian regime and a turn toward military dictatorship. The expanding role of the Islamic Revolution’s Guard Corps (IRGC) in the economic and political realms, the strengthening of the Supreme Leader’s power and position, and the sidelining of the reformists from the ruling elite all pointed to a fundamental change in the nature of the regime. Indeed, that US Secretary of State Hillary Clinton declared Iran to be “morphing into” a dictatorship demonstrates the significance of this issue for both contemporary world affairs and domestic Iranian politics, presenting a bleak image of the future evolution of its political system. The specter of Iranian dictatorship thus came to loom prominently in both Western policy and academic circles alike.

The unexpected election of moderate candidate Hassan Rouhani to the presidency in June 2013, however, has brought this thesis under serious question. Despite the strength and attraction that such a view may have held earlier, these striking developments did not necessarily add up to a reworking of the logic of the political system as was commonly assumed. While there is no doubt that we were witnessing a transformation in the political order of the country, the same pieces of evidence pointing to Iranian dictatorship simultaneously presented a completely different image of the state of Iranian affairs. The ongoing shifts and changes begun with the election of Ahmadinejad in 2005 were instead internal transformations within the confines of the same system of multiple contentious power centers that had been established with the revolution. In other words, to recognize institutional modifications and shifts in power within the regime is one thing—and to argue that these institutional alterations produce a change of regime type to dictatorship is another. To avoid conflating these two seemingly similar—yet vastly different—processes, our knowledge of the precise institutional sites of transformation and the exact mechanics by which these changes have been occurring within the Iranian regime needs to be more fully developed.

This chapter explores the complexity of these processes and assesses the degree of change and continuity in the Iranian political system in light of the tumultuous events unfolding since 2009. Why have elite power relations in Iran been unsettled, and what is the impact of these factional fluctuations of power and processes of change on the institutional structure of the Iranian regime itself? It is critical to ask whether the manner by which institutional alteration occurs within the regime was conducive to the long-term monopolization of power by a single political faction. If so, has the multifactional and competitive nature of the regime been replaced by one of dictatorship, as may have appeared to be the case? Or, is the regime’s system of elite conflict management and institutional restraint a durable feature that will persist in the foreseeable future?

A central issue that may illuminate these political trends is the country’s shift toward economic privatization, which represents the most important case of strategic institutional change undertaken since the 1979 revolution. My analysis, accordingly, does not involve an examination of the purely economic dimension or material result of privatization per se but rather the intricate and highly contentious policy making and implementation stages that constitute its political facet. Privatization, in other words, allows me to explore the built-in regime mechanisms that produce institutional change in the country—to fully expose the impact of the institutional architecture of the Iranian political system on elite contestation. Such a study will increase our understanding of how the regime’s institutions function and will delineate the manner by which the power of political factions guides and influences policy. This dynamic can be very revealing—both in terms of the sources and sites of elite contestation as well as the institutional restraints placed on elite power struggles. It will show us the contours and limits of transformation within the Iranian political system.

This analysis focuses on two levels: the regime’s internal factional composition and its external institutional framework. These levels reflect Iran’s political party capacity and its state institutional capacity, respectively—the two dimensions that political scientists argue must be addressed in order to assess the capability of state elites to monopolize power and construct dictatorship. Iran’s factionalized political scene and high degree of regime checks and balances safeguard not only the competitive and inclusive nature of the Iranian regime but also the system’s adeptness in restraining and inhibiting monopolistic drives for power by any one faction. In other words, the regime legacy of elite conflict management via multiple institutionally embedded power centers has endured, and it will likely define the parameters of Iranian politics for years to come. Moreover, my analysis of institutional change and factional contestation in the Iranian privatization program reveals that—far from being an effort to construct dictatorship—the rise of Mahmud Ahmadinejad and the theocratic hard-liners represents a systemic move for survival by the revolutionary and clerical power base of the regime that counterintuitively integrates them more fully within the multifactional order of power. The economic privatization policies and “China model” of development pushed by other regime elites—particularly former president and current chair of the Expediency Council Akbar Hashemi Rafsanjani—were viewed as existential threats that had to be resisted but yet, at the same time, adapted to. The politics of privatization thus unleashed serious challenges to the political and economic order of the country—the reverberations of which continue to this day.

The transformation we are witnessing in Iran therefore stems from a reworking of the Islamic Republic’s factional architecture rather than its institutional metamorphosis to dictatorship. In a comparative perspective, unlike many Arab countries that have witnessed regime-opposition dynamics of street mobilization with the Arab Spring, the contentious politics of the 2009 Iranian elections represented a fierce intraregime elite struggle over the nature of the country’s shifting economic order that spurred factional mobilization. The political uncertainty that pervades the factional scene today is thus a result of the relatively weakening power of old-guard political elites and the opening of regime gateways to the incorporation of new and rising social forces. The ensuing expansion and growth of the ruling elite circle of power will simultaneously reshape and transform the power dynamics and relationships among the country’s power holders. In this fluid and competitive environment, the prospects of greater political accommodation of multiple social forces within the current regime will be more probable given a conducive international environment—a conclusion that has only been further confirmed by the election of Rouhani to office.