Iran’s Presidential Election

Politcal shifts, new opportunities?

The June 13 announcement of Mahmoud Ahmadinejad’s landslide victory in Iran’s much anticipated presidential election has triggered a wave of protests unlike anything seen in the Islamic Republic since the 1979 revolution. Many experts predicted a neck-and-neck race between Ahmadinejad and reformist candidate Mir Hossein Mousavi, who galvanized female and young reform-minded voters, and were shocked to learn that Ahmadinejad received 63% of the vote to Mousavi’s 34%. Alleging election fraud, Ahmadinejad’s opponents have taken to the streets in protest, demanding that the ruling clerical establishment call for new elections. As the opposition continues to build momentum and the gulf between the two camps widens, Ergo asked five of our leading Iranian experts to discuss the implications and potential outcomes of the current situation.

• Expert 1: Former diplomat in the Iranian Ministry of Foreign Affairs

  "The election was heavily rigged. Two of the candidates were even supposedly beaten by Ahmadinejad in their own home towns. The regime’s actions show for the second time (the first was in the case of Khatami’s 8-year term) that the Islamic Republic is incapable of reforming itself. This does not augur well for Iran’s long-term stability." "The regime is playing for time in announcing that the Guardian Council will make a final decision on the legality of the election. If it decides in favor of Ahmadinejad, further unrest is likely. This could lead the hardliners to attempt an internal coup d’état, implying a growing role for the main backers of the regime: the Islamic militia and the Revolutionary Guard."

• Expert 2: Professor of political science at a major Iranian university and recognized scholar on Iranian politics

  "The Iranian government will no longer be the same, no matter what happens. If they get control of everything again, the nature of the regime would be different in the eyes of the people, many of whom feel cheated. For them, the nature of the religious establishment will be equated with corruption. If somehow the reformers are able to force concessions on the part of the conservatives, it would be perceived as a defeat for those in power. And again that is going to change the nature of the government."

• Expert 3: Iranian political journalist published widely in international media

  "People, especially the young, feel cheated. Ahmadinejad, and indeed the Supreme Leader who has backed him, cannot ignore the clear crisis of legitimacy that they are facing. The twentieth century history of democratization in Iran tells us that any successful ruler must acknowledge the balance of forces between the Islamists on the one hand, and the secular, more liberal tendencies on the other. The former Shah of Iran ignored the Islamists and his rule came to an end after 26 years (1953-1979). The events of the past two weeks in Iran are reminiscent of the revolution of 1979 and should be regarded as a serious warning by the Islamic establishment."

• Expert 4: Election monitor in Tehran for the June 2009 presidential election

  "Mousavi is not very different from Ahmadinejad. He belongs to the regime too. If you don’t belong to the regime you can’t be a candidate. People who vote[d] for Mousavi don’t realize who is Mousavi. They don’t remember what was the behavior of Mousavi during his mandate as prime minister. When I ask them if they think he’s different from Ahmadinejad, they can’t answer. The only things they know are that they don’t want more Ahmadinejad."

  Expert 5: Human rights activist for Iranian minorities

  "The election results mean that Ahmadinejad's policies of pursuit of nuclear power and confrontation with the West enjoy the support of Supreme Leader Ayatollah Khamenei, the repository of true power in Iran. The optimism of Western commentators before the election now looks very naive. Iran is moving further from – not closer to – democracy. Reports that Ayatollah Khamenei has asked the Guardian Council to consider complaints about the results, however, show that even he cannot altogether dismiss the aspirations of Iran's young urban population."

Ergo's House View

Ergo has undertaken numerous studies on the political and business environment in Iran, as we believe there will be tremendous opportunities when the atmosphere becomes more favorable for foreign investment. Just days before the election, renowned emerging markets investor Mark Mobius said Iran has “huge potential” and that he was looking to invest in the country that has been off-limits to Americans for so long. Many forward-looking Western investors understand that Iran, which controls the world’s second largest oil reserves, is a sleeping giant. Forced to remain on the sidelines as a result of restrictive economic sanctions and political uncertainty, these investors are waiting to swoop in the moment the circumstances change.

While it is improbable that a Mousavi victory would have substantively affected Iran’s key international policies – which are ultimately determined by the Supreme Leader – his stated opposition to Ahmadinejad’s divisive rhetoric and failed policies suggested that a Mousavi presidency might have sown the seeds for gradual but meaningful reforms. For over a decade, many Iran experts have been heralding the coming “counter-revolution”– the rise to power of a liberal reform movement that would challenge the most anachronistic ideals of the 1979 regime. This month’s events may fall short of producing the systemic shift Iranian reformists and many Westerners have been hoping for, but prudent investors will closely monitor developments to be prepared to seize opportunities when the tides eventually begin to turn.