How Iran's president is being undercut

Ahmadinejad's populist rhetoric and confrontational style are popular in some quarters in Iran, but they do not override the growing disaffection with political suppression and economic mismanagement. While the climate of fear has not sat well with voters, Ahmadinejad has even more to worry about from the fallout of Iran's faltering economy. With oil at more than $90 a barrel, Iranian financial reserves look good. But the Iranian economy is struggling: Capital markets are in shambles, investment at rock bottom, and flight of capital an ongoing concern.

Meanwhile, populist policies have raised inflation, impoverishing the middle class without doing much for the poor. Noisy labor unrest has become more frequent across the country, and there has been worry over a spike in crime.

So far, Ahmadinejad has successfully used the threat of war to suppress dissent and divert attention from domestic woes to international crises he is only too happy to fuel. He has accused rivals of espionage and collaboration with the enemy. He has blamed economic hardships on sanctions – which he expects Iranians would be willing to endure in a climate of war.

But as a result of the NIE, Iranians may conclude that there will be no war, no new sanctions, and perhaps even a relaxation of financial restrictions. And they may begin to put up with less and demand more from their government. Iranians supported Ahmadinejad when it looked like the US was gunning for war, but they will probably not support their president if it turns out he is the one looking for trouble. They want prosperity and stability and will take Ahmadinejad to task for the failures of his administration, unfulfilled expectations, inflation, unemployment, and suppression.

At first glance, the NIE appears to have undermined the Bush administration's hard-line approach toward Iran. But the irony is that Washington now has the ability to further undermine Ahmadinejad while regulating Iran's nuclear program through diplomacy and dialogue. Suddenly, Washington may be facing a Tehran that is unyielding on its nuclear prerogatives but is also more pragmatic.

The US should seize the moment with an offer of comprehensive negotiations between the two countries and the prospect of rapprochement. These carrots will not just diminish the power of hardliners such as Ahmadinejad; it will also provide a mechanism to ensure that Iran complies with its nonproliferation commitments.

• Vali Nasr is a professor at the Fletcher School of Law and Diplomacy at Tufts University and the author of "The Shia Revival: How Conflicts within Islam will Shape the Future." Ray Takeyh is a senior fellow at the Council on Foreign Relations and the author of "Hidden Iran: Paradox and Power in the Islamic Republic."

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