January 19, 2007 -- AS tension builds up between Iran and the international community, a potentially more significant conflict is taking shape within the ruling establishment in Tehran.
The conflict is centered on what looks like a looming economic crisis. Inflation has risen to 17 percent, its highest rate since the 1970s. A cascade of business closures has pushed unemployment, already high even by Third World standards, to its highest level in three decades.
The value of the national currency (the rial) has dropped against regional and global currencies, and is still on the slide. By official estimates, including some offered by Islamic Chief Justice Ayatollah Shahroudi, capital flight has turned into a flood.
In Iran, as in most other Third World economies, the absence of modern investment opportunities gives real estate a leading role in attracting savings at all levels. As soon as an Iranian has some extra income, he tries to buy a piece of land or an apartment. As a result, real estate has been a key measure of Iran's economic performance.
And by that measure, the economy is heading for meltdown. The money that would have been invested in real estate inside Iran now goes to Dubai and Turkey and, recently, Iraq.
SOME within the Khomeinist establishment blame the crisis on President Mahmoud Ahmadinejad's policies. They claim that Ahmadinejad's deliberate provocation of the West has fomented an atmosphere of conflict and uncertainty that frightens investors. Many in Iran's business community are convinced that the dispute over Tehran's alleged nuclear ambitions will intensify, perphaps to full-scale war.
Ahmadinejad's opponents also blame his populist economic policies. The president has been touring the country, distributing vast sums of oil money locally - heedless of the fact that, in the absence of productive investment opportunities, the cash fuels inflation. He has also ordered a gradual termination of government subsidies on mass consumer goods - notably gasoline (of which Iran imports 40 percent of its needs) and domestic gas.
The measures have triggered a backlash among the poor, the constituency that the Khomeinists have always tried to court. Popular discontent is expressed in industrial strikes, anti-regime demonstrations and public criticism of the system even at mosque gatherings.
"Supreme Guide" Ali Khamenei has started dropping hints that he is not happy with Ahmadinejad's performance, implicitly blaming the president for the economic meltdown.
Dissatisfaction with Ahmadinejad was partly reflected in the recent local government elections and elections for the Assembly of Experts, where candidates closely identified with the president did poorly.
Overall, however, the radical factions of the Khomeinist movement (of which Ahmadinejad is a product) did very well. In the local elections, the radicals ended up with 83 percent of the votes; they also did well in the Assembly of Experts' voting.
In other words, although Ahmadinejad's personal brand of radicalism suffered a setback, the Khomeinist movement as a whole remains in radical mode.
ON economic policy, the movement has always been divided between two schools.
One school is called sazendegi or "constructionist." Its theorists claim that the Khomeinist system can't survive in an atmosphere of tension with the outside world and must find ways of attracting partners while neutralizing its enemies.
Taking Communist China as a model, the constructionists argue that the outside world, especially Western powers, don't care about any political system's domestic aspects as long as it poses no threat to them and offers them business opportunities. Like China's regime, which has managed to survive and prosper, the Khomeinist system must find a place in global trade, thus giving the major powers a stake in its survival.
A powerful class of business-mullahs has always advocated the Chinese model. They put their ideas to the test in the early 1990s under President Hashemi Rafsanjani, himself the richest man in Iran. Having ended the war with Iraq, Rafsanjani opened Iran's markets, and presided over a mini-boom that some still remember as the "golden age" of the Islamic Republic.
Opposing the Chinese model from the start were those who won the sobriquet of "The North Koreans of Islam." Their chief theorist was the late Muhammad-Ali Raja'i who briefly served as president in 1981 before he was assassinated.
Rajai's catchword was khod-kafa'i or "self-sufficiency." A genuine Islamic society, he argued, will be impossible while the country is exposed to global commerce dominated by "infidel" powers. With the slogan: "Iranian! Buy Iranian!" he argued that the people of Iran must start with the assumption that they need nothing. Once that "zero base" was established, they should then decide what are the goods and services they can't do without in the context of an Islamic society based on frugality, mutual help and a minimization of needs.
According to Raja'i, the goods and services produced by "infidel" powers, designed to meet the desires of their own populations, don't always meet the requirements of Islamic life.
Ahmadinejad has always cast himself as an heir to Raja'i. In public, he is often greeted with this chant: "Allah's Praise to Muhammad! The friend of Raja'i is welcome!"
And, as governor of Ardabil (northwest of Tehran), Ahmadinejad reorganized the province's economy to reduce trade in foreign-made goods while encouraging local handicrafts and small businesses.
Later, on becoming Tehran mayor, he removed the giant billboards showing David Beckham advertising sunglasses and George Clooney selling coffee from the streets of the capital. (He replaced them with pictures of suicide-bomb "martyrs.")
Living in a nondescript three-bedroom house in a poor neighborhood in Tehran and driving a battered Iranian-made car, Ahmadinejad has used qana'at (frugality) and twazu'e (modesty) as key concepts in his doctrine of "self-sufficiency."
He claims that China has forfeited its "revolutionary purity," while North Korea has not. He believes that businessman-mullahs like Rafsanjani want to lead the Khomeinist revolution into a Faustian bargain with the "infidel," led by the American "Great Satan," in the name of economic prosperity.
FOR the first time since the early 1980s, the North Korean model is clashing with the Chinese one within Iran's ruling establishment. The outcome could shape the Islamic Republic's policies for years to come. Some even think that the duel could decide whether the Islamic Republic survives into its fourth decade.
Amir Taheri is an Iranian-born journalist and author based in Europe.