Nina Mamedova, Ph.D. (Econ.), Iran sector head, Institute of Oriental Studies, Russian Academy of Sciences (Moscow, RF)

Irans geographic location, its ethnodemographic situation and cultural and civilizational impact have at all times made it an integrating factor in the geopolitical expanse that included Central Asia and the Caucasus. The majority of countries or territories of the present-day region were in the past parts of Iran or were tied to it with all sorts of bondssome of them even conquered chunks of Iranian territory. All of them have been exposed to Iranian cultural influence, including the culture of economic development. Iran was mainly responsible for dissemination of Islam as a unifying religious constant.

The specificity of state formation in the 19th and 20th centuries and inclusion of Central Asia and the Caucasus in the Russian Empire and then the Soviet Union decreased Iranian influences in the region. In fact, the Soviet Union as a European power and its republics bordering on Iran exerted a much more powerful geopolitical impact on it. Here is a graphic example of such impact: at the end of World War II there appeared democratic autonomies in Iranian Azerbaijan and Kurdistan. The external factor reappeared in the region when the Soviet Union fell apart and new independent Central Asian and Caucasian states emerged. Many of the changes of geopolitical and purely national nature are determined by what major world and regional centers are doing. In the last ten years their role, degree of involvement and the level of influence have changed many times, yet Iran and its politics can be counted as a permanent factor of local geopolitical processes. Today, as in the past, Iran is the regions territorial core. In the past Tehran exploited the historical and cultural-civilizational closeness to influence its neighbors in the region. Today, it can also exploit its status of a large oil-rich country and its ideology forged in the Islamic revolution of 1979. In the conditions when control over the sources of energy fuels and transport infrastructure have acquired special importance these two aspects have actualized the aims, potentials and real content of Irans foreign policy course.

When in 1979 the country acquired its theocratic regime, its foreign policy became part of the tasks formulated by its Islamic ideology. The two pillars of foreign and domestic policyneither West nor East but Islam and export of the Islamic revolutionaffected Tehrans regional policies. During the new regimes first ten years they dominated Irans ideology. This explains its openly negative attitude to the Soviet military presence in Afghanistan, its rejection of peaceful means in settling its conflict with Baghdad that was regarded as a regime repressing its Shia majority. At that time, which is described as the most aggressive period in Irans foreign policy, the new Central Asian and Transcaucasian states were parts of the Soviet Union, therefore Iranian influences were indirect. During the latter half of the 1980s and Gorbachevs perestroika that relieved ideological pressure, indirect Iranian impact betrayed itself in a revived interest in religion1 as one of the identifying features and contributed to centrifugal trends in Central Asia and the Caucasus. It provoked a series of mass actions, the largest of them taking place in Kazakhstan in 1986 and Uzbekistan in 1989.

Political and academic discussions of the new regional problem that took place in the early 1990s demonstrated that, first, the vacuum of power in the region will spur up rivalry between Russia, Iran, and Turkey; second, that there was a danger of an increased role of political Islam, or fundamentalism, coming from Tehran if it stepped up its influence; third, that the new republics would distance themselves from Russia to become even more independent in an expectation of Iranian and Turkish support.

Life corrected the forecasts. In the last decade the world and the region have changed. Accordingly, the geopolitical, national, foreign policy and economic aims have also changed: there appeared new factors that revived an interest in this vast area. We can say that today, as distinct from the early 1990s, the region is facing the following problems: export of Caspian oil to the world markets and routes of oil and gas transportation; the change in relations with Russiathe region has to move away from its previous desire to distance itself from the Russian Federation up to recognizing it as a priority trend in the relationships with the CIS, Iran and Turkey; the U.S. direct presence in the area that has created a possibility of a greater American influence on it (in the past this influence was realized indirectlythrough Turkey and the West-oriented states); the military operation in Afghanistan and its consequences; the events around Iraq.

Tehran has to take these realities into account when dealing with the regions countries. In the first years of their independence Irans foreign policy was ideologically dominated. Ideology was an absolute priority for the country that claimed ideological leadership in its region. Gradually the priorities shifted toward Irans economic interests. Its foreign economic ties were greatly affected by the need to maintain or even increase economic potential, especially in the export-oriented branches (oil production, petrochemistry, and metallurgy) that depended on foreign investments. Central Asia and the Caucasus stopped looking at Iran (and Turkey) as their foreign economic priority (power-related projects were the only exception). Maleki, who enjoys great influence in his country, has written that by the end of the 1990s the new independent states were not of priority for the new administration in Iran.2

The events in Afghanistan rekindled interest in the region. When talking to President of Kazakhstan Nazarbaev at the Eurasian Economic Forum in Almaty First Vice President of Iran Mohammad Reza Aref pointed out that his country was regarding the region as its priority. Tehran initiated a discussion of aid to Afghanistan at the October 2002 ECO summit. There were plans to coordinate the efforts in this sphere with those of U.N. and EU. I would like to note that the EU signed a trade agreement with Iran that considerably boosted the latters influence in ECO. Still, one should say that Tehran displays a great interest in the region because the United States had come there and because the U.S. positions and those of Russia, one of the key political and economic partners of Iran, are drawing closer together.

Evolution of the Islamic Regime in Iran as a Factor of Regional Politics

I have already written that a new stage of Irans direct impact on the region made possible by the emergence of new independent states there coincided with the changes gaining momentum inside Iran. These were called the reformist movement that changed considerably the countrys domestic and foreign policies. It is this movement and its prospects that are shaping Tehrans regional policies.

It should be said that from the very first days of the Islamic Republic of Iran the ruling clergy could not agree on many political issues. At times these contradictions reached the boiling point threatening the systems stability but never exceeded it. The late 1980s and early 1990s were one of such periods when the country was moving toward economic liberalization; another time the boiling point was reached in the mid-1990s when Khatami came to power and started a process of political democratization. When the United States included Iran in its axis of evil the political situation in the country grew tense. There is no doubt that the way the tension will be relieved will considerably affect the region.

For the first time the reformist movement betrayed itself as a movement of pragmatics who started market reforms. In the past, the ruling regime had cut down the countrys contacts with the West in a most dramatic way in an effort to become independent of Western influences. This and Irans anti-Western foreign policies decreased efficiency of its foreign economic ties. Iran tried to concentrate on dealing with Muslim countries despite the fact that its own industry and consumer market had been West-oriented. Industry was virtually paralyzed. The paralysis was made even worse because the huge public sector (that grew bigger after nationalization) was inefficient. High oil prices (up to $30 per barrel in the early 1980s) helped stem economic decline and stabilize GDP. (In the 1980s the average annual growth rates were not higher than 1.7 percent.) The distributive nature of the rigidly centralized economy helped the country avoid starvation during eight years of the war between Iran and Iraq. As soon as the war ended it became clear that foreign and domestic economic policies should be re-adjusted. Having realized that economic liberalization was less damaging than an economic collapse, Ali Akbar Hashemi Rafsanjani elected president in 1989 launched economic reforms. He lowered the level of state regulation, allowed privatization, and recognized that his country needed foreign investments (banned by 1979 Constitution) and a new foreign policy course. New economic conditions called for new economic contacts, with the developed countries in the first place, and new markets (the need created by the expected industrial growth). There are no doubts that Irans unprecedentedly active contacts with the regional post-Soviet states were purely pragmatic: Iran looked at them as potential markets that over time would boost its importance as a potential core of East-West transportation routes.

One should recognize, however, that geopolitics and ideology (the desire to spread Islamic influence) were top priorities. Iran wanted to become the leading regional power by detaching the new states from Russia. In February 1992 Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, and Azerbaijan were invited to the ECO summit in Tehran where they officially confirmed their desire to join this organization. This graphically demonstrated that certain geopolitical changes had taken place and that the efforts to integrate its Muslim states within the region strengthened the positions of the pragmatically minded Muslim clerics inside the country. Rafsanjani who snatched initiative from other countries and tried to draw the post-Soviet Central Asian and Caucasian states into Irans orbit was unanimously supported by the new religious leaders. (Khomeini died in 1989 and the Council of Experts elected Ali Khamenei as the new rahbar responsible for the countrys foreign policy.) Rafsanjanis second term clearly demonstrated that despite accelerated economic development the countrys economic potential refused to increase.

The Islamic state model that in peacetime failed to prove its social and economic advantage was gradually shedding its ideological attractions. This became especially clear in Irans relations with the Muslim CIS countries that decreased their economic and political involvement in ECO. The Iranian economic structure demanded wider ties with the world market not so much to export oil as to import technologies and attract money. The latter needs a favorable political and economic environment. This explains why when the U.S. embargo on trade with Iran was introduced in the mid-1990s (in connection with support Tehran extended to the Islamic organizations fighting for a Palestinian state) and the ILSA sanctions against the investors in the Iranian oil and gas industry followed suite, the country found itself in economic straits.

After the first few reform years when GDP (in constant prices) had been increasing by over 10 percent the growth rates dropped (in 1995 they barely reached 1.6 percent).3 Economic instability that brought the Islamic regime to the brink of a catastrophe lowered the level of pragmatism in its regional policies. Iran tried to increase political trends in ECO so that to weaken the U.S. desire to isolate the Islamic regime in the country. The majority of the ECO members did not support these efforts. In 1995 Iran that feared Moscows domination in the region was actively opposing Russias, Armenias, and Rumanias ECO membership, though their joining could have alleviated the effects of its economic isolation. Russia repeated its attempt to join ECO in 1997 and was stopped by Pakistan and Azerbaijan while Iran approved of Russias intention.4

The reforms were going on and received a new impulse when Mohammad Khatami was elected president in 1997. Despite his membership in the Majmae Rouhanioune Mobarez (Militant Clerics Association) that concentrates on social and political rather than economic changes, the situation forced him to continue the reforms began by the pragmatics. A foreign policy approach also changed. The president formulated a dialog of civilizations conceptiona clear evidence of his desire to theoretically substantiate the need to normalize relations with the West. Today, this trend has acquired priorityit is the developed countries that determine the prospects of Iranian modernization, which requires foreign investments. This affects both the economic and social sphere. The baby boom of the 1980s swelled the workforcethe size of able-bodied population has outstripped economic developments. To avoid social upheavals the country has to create from 600 to 700 thou jobs a year; 90 percent of the Majlis members insist that foreign investments can cure unemployment.5

In fact, the need to increase capital investments both with domestic and foreign money has become an acute political problem. The country is adjusting its economic laws to the world standards thus opening new possibilities for closer relations with the developed countries and the regional countries that are experiencing the same problems. Some positive results have become obvious. For example, in the last three years GDP was increasing by 5 percent on average, though part of the increase should be attributed to high oil prices. In 2000 the GDP volume (calculated in accordance with PPP) amounted to $378 billion ($5,900 per capita). At the turn of the century Iran joined the countries with an average per capita income.6 The savings ratio reached 27 to 30.6 percent.7 Today the private sector has come to the fore in the investment process: in 1997/98 it accounted for 63.7 percent; in 2000/2001, for 68.6 percent, especially in retooling where its share toppled 80 percent in the late 1990s and early 2000s. This has extended the sphere of cooperation with Central Asia and the Caucasus. Iranian private sector is figuring prominently in their economies.

The new reformers pay particular attention to democratization within the constitutioneither by adding new meanings to the old articles or by amending some of them. One feels certain that this variant of political evolution and modernization of an authoritarian Islamic regime can be used by other theocratic forces both at the level of state and at the level of Islamic movements, parties, etc. The religious reformers are convinced that they can rely on Ijtihad (the right to interpret and apply religious norms) depending on what is needed at any given time. In the last five years the reformers revived party and political activities; there are dramatic changes in culture, sport, health protection, education and the state women policy.

Politically the reformers are all united around the Militant Clerics Association headed by Mehdi Karroubi, the Majlis speaker, the Mosharekiat party formed by Reza Khatami, the presidents brother and Majlis vice speaker. The party has other prominent members such as Mohammad Reza Aref, First Vice President; Habibollah Bitaraf, Minister of Energy, Mostafa Tajzadeh, Deputy Interior Minister for Political Affairs, Hossein Nasri, Advisor to the President and Secretary of the High Council of Free Trade-Industrial Zones, and Abbas Abdi, respected political figure and analyst. The latter was arrested as one of those who launched a public opinion poll about a possibility of restored relations with the United States. The court hearings that followed just added fuel to the bitter political strife that was tearing the country apart. The Islamic Revolution Mujahedin Organization also belongs to the reformer wing. This large party is headed by Mohammad Salamati, Behzad Nabavi, and Mohsen Armin, all of them very popular with the nation.

The conservatives are holding firm on their high posts, especially in the religious structures that rule the country: the rahbar who fills the highest post in the country according to the constitution, the Supervising Council, and the judicial power. The conservatives are organized into the Majma-e Ruhaniyat-e Mobarez (Society of Militant Clergy) from which the Militant Clerics Association detached itself in 1989. The Islamic Coalition Association is the most respected structure that supports the conservatives and the Islamic form of government. When dealing with the youth the conservatives rely on the Ansare Hezbollah party that in Central Asia and the Caucasus is often associated with extremist Islamic organizations. Set up in 1993, it is a structure of the Islamic Hezbollah party. It relies on part of the basij (volunteers), with branches in many educational establishments, industrial enterprises, etc. The program suggests that it is an extremist Islamic organization. For example, it opposes the interests of the nation to the interests of Islam and is convinced that to protect the latter the country should draw on all its potentials and give money to Islamic movements all over the world. It is defending the following foreign policy principles: opposition to the West, the U.S. and Israel in the first place; use of non-diplomatic means when dealing with foreign policy problems; support for the Muslims against the non-Muslims.8 Despite the above, it can be described as conditionally extremist: it is acting within Iran and uses common means of political struggle such as mass rallies and marches. In the last few years it lost its prestige among the Iranian students who tend to support Khatami by forming associations.

The elected bodies of power faithfully reflect the correlation between the reformers and the conservatives. In the Majlis of the sixth convocation the reformers with 189 seats out of the total 290 are in absolute majority; the conservatives have 54 seats. There are 16 reformers among 84 members of the third Council of Experts that elects the rahbar for eight years (the incumbent rahbar was elected in October 1998).9 Reformers won 75 percent of seats in 112 city councils, conservatives got 12.5 percent, independents, 12.5 percent.10 Today, these forces are locked in struggle over two presidential bills. If adopted they will increase the presidents power and limit the interference of the Council of Guardians in the electoral system.

Their adoption will strengthen the regimes democratic and secular nature. The Islamic component of power is crumbling, yet its presence or, to be more exact, the dual nature of state power preserves stability. According to hojatoleslam Seyed Abbas Nabavi, head of the Institute for Development and Islamic Civilizations, it would be wrong to oppose the religious and state systems at the time when the world is drawing into a new globalization-connected order. He has said: The rule of religion in the Islamic republic system must preserve its political system to the extent that it could have positive interaction with the trend of Globalization.11 He further added that this should not be taken to mean that the country should be isolated from this worldwide process. The government admitted: In the Globalization process, one cannot close its borders since this will lead to economic isolation and undermine independence. Lets not pay the post of own ignorance with a self-imposed economic isolation.12

Irans Economic Role in the Region

Iran and its leaders are convinced that its economic presence is the key to its increased influence in the region. So far, it is not strong enough to claim the position of the regional leader. Turkey likewise failed to do this, though its economic presence in the region is much more tangible. For example, its investments (a new trend in its economic policy) are tied to the new Muslim states and have already topped $8 billion; the 1999 trade turnover reached $1 billion.13 Information about Iranian investments including those made by the companies working in the region is very contradictory. It seems that the total amount of investments barely reached the figure of $0.6 to 0.8 billion. In 1995/96 the trade turnover with Central Asia and the Transcaucasus (without Georgia) was $803.3m; in 1996/97, $1,053.6m; in 1997/98, $876.5m; in 1998/99, $604.2m.14 After the crisis of 1998 trade turnover revived. The figure does not include oil that anyway plays a negligible role in trade with these countries. The figures are worse than in case of Turkey yet are comparable. The following facts are extremely important for Iran: first, in the 1990s its trade balance with the region was positive; second, its industrial products comprised a considerable part of its export. The countrys strategic task is to increase export of finished goods rather than oil by all means available. Being a reliable market, the Central Asian and Caucasian republics have an important role to play in this. Iranian goods that find little demand in the European and other world markets are bought in the region despite the latters limited nature explained by the low purchasing power of the local population. For example, in Azerbaijan up to 90 percent of consumer goods are imported, nearly a third of them arrive from Iran and Turkey. The republics of Central Asia and the Caucasus open Iranian shops, joint ventures and joint trade and industrial alliances. It was through this market that in 1995/96 Iran realized of up to 12.4 percent of its export (without oil); in 1996/97, up to 19 percent; in 1997/98, up to 19.6 percent. The financial crisis of 1998-1999 cut down its import-export operations with the local countries. Even when the president described Irans economy as ailing, 12.6 percent of foreign currency income earned outside oil exports was obtained by trade with the Central Asian and Transcaucasian countries. They are very similar where their resource potentials are concerned. The prospects of economic cooperation with them are connected with supplies of meat products and grain from Kazakhstan that remained stable for the last forty years and with metal export in which Iran occupies the 23rd place in the world.

Trade still dominates Irans economic ties with the region, yet it is gradually being pushed to the background by transit supplies. In future services may replace trade as the dominating sphere. Iran is actively involved in creating and retooling the railway net in the region; road building; setting up terminals along its frontiers (at the northern border in particular) and in organizing the North-South transportation corridor. It has already established free trade-industrial and special zones along its borders with Central Asia and the Caucasus (in Serakhs, Anzali, and Noushahr). Another such zone will soon appear in Astara. Irans possible involvement in joint Caspian oil and gas transportation projects is being realized slowly but surely. The pipeline between Neka and Tehran has been completed to become part of the oil swapping system. The gas pipeline between Iran and Turkey completed in 2002 has changed the regions balance of energy; it boosted Tehrans positions and opened Iranian territory for laying export pipelines across it. The talks on a huge gas main pipeline from Iran through Pakistan to India (2,600 km long that will cost $4 billion) have been resumed. Poland demonstrated its interest in completing the 140 km-long gas pipeline between Iran and Armenia with the piping capacity of 1m c m. If its capacity is brought up to 5m c m, it will be able to receive gas from Turkmenistan.15

Irans involvement in oil and gas projects and its stand on the future transportation routes of Caspian oil are far from straightforward. It prefers the southern route that will cross its territory. With this aim in view it offered an idea of swapping oil supplies. Iranian leaders are convinced that alternative routes will be selected under U.S. pressure. As an OPEC member Iran needs neither increased oil supplies to the world market nor Caspian oil in Europe. Obviously, the positions of Iran and the regional countries, especially those of the Caspian basin (that want to put their energy fuels on the world market as promptly as possible), cannot be brought closer. At the same time, Tehran favors their OPEC membership, which may coordinate the interests of all involved in energy projects. This has not happened yet, but Irans desire to use its territory for moving Caspian oil to the world markets is mainly of a geopolitical nature: it will boost its influence on the world oil-and-gas market and among the oil consumers. Irans support for the southern route is not prompted solely by the far-reaching political aims described above. There are also purely economic interests. Oil transit will earn money and will create new jobs thus alleviating the most painful Iranian problemthat of employment. This explains why it is busy developing the labor-consuming transport infrastructure inside the country and in the region. Tehran initiated the majority of the ECO transport projects and is one of their major investors. As distinct from other transportation means, pipelines are promptly repaid. Irans employment problem cannot be resolved with the help of the CIS countries that are living under the pressure of excessive workforce. In fact, the pressure is even greater because private enterprise is still poorly developed there. Therefore joint projects can make a major contribution to solving this acute regional problem.

The economic component of relationships presupposes orientation toward a definite development model. One should say in this connection that the Iranian variant of economic evolution was positively received in Central Asia and the Caucasus. The regional countries will draw even closer together if Iran continues economic modernization with due account for world experience.

Political and Ideological Influence

Today, one can say that the forecasts of the early 1990s about possible dissemination of Iranian fundamentalism in Central Asia and the Caucasus have been disproved by the evolution of Islamic regime in Iran. The fundamentalist threat can be described as hypothetical rather than real. Turkey, Israel, and the United States are still brandishing the forecasts. For example, certain media presented a promptly settled incident with an Azeri research vessel in the disputed (from the Iranian point of view) area of the Caspian Sea as military threat of Iranian fundamentalism. There are reasons to disagree with this.

In fact, when dealing with its regional neighbors Iran is cautiously using religious instruments. In the past decade Turkey, a secular state, demonstrated much more religious fervor. This was true not only of non-state religious organizations such as İskenderpaşa and Erenköy that were actively building mosques and setting up Muslim centers but also of state structures. For example, the Foundation of Religious Affairs (TDV) specially created to prevent dissemination of the Iranian version of Islam opened several Islamic schools and theological departments in the Muslim regions of Russia.16 According to M. Sanai who heads the Cultural Center at the Embassy of the IRI in Moscow, his country does not intend to pursue any religious and fundamentalist aims by exploiting religious feelings.17 Afghanistan may again become a source of fundamentalism because its state consolidation has not yet been completed. If this happens (there is at least 35 percent certainty), the supporters of the Islamic statehood will become more active in Central Asia.18 If the situation develops according to the Islamic variant (especially if it follows in the Taliban footsteps), the Islamic factor may counterpose these developments and split the Islamic project, or Iran that has left the peak of Islamic extremism behind may somewhat defuse the projects radicalism. One cannot exclude a possibility that the growth of the Islamic component in Central Asia may prove useful for the conservative wing in Iran.

Tehran has not abandoned its efforts to spread its religious influence far and wide, the Imam Khomeini Relief Committee being especially active in this respect. Its branch in the Nakhichevan Republic of Azerbaijan has been engaged in local charities while the Committee is explaining the advantages of the Islamic system of which this and similar funds are part.

Cultural contacts and frequent references to pre-Islamic cultural affinity are making up for reduced religious activities in the region created by the changed foreign policy priorities. Iran is busy teaching the Persian language, supports centers of Iranian studies and pays much attention to cultural contacts. One of the best examples of these efforts is the Association of the Universities of Caspian States (Astrakhan, Daghestan, Kalmykia, Turkmenistan, and Iran) set up in the late 1990s on the initiative of the Astrakhan Technological University and supported by Iran as one of the centers of Iranian studies.

Pragmatism in state policies that is obviously prevailing over ideological considerations manifested itself not only in the rejection of fundamentalism that the leaders of the new independent states were not willing to embrace but also in Irans position on the conflict between Azerbaijan and Armenia over Karabakh. The unresolved conflict blocked the movement (that became especially active in Azerbaijan in 1991-1992 during Abulfas Elchibey presidentship) for detaching the areas with predominantly (up to 40 percent) Azeri population from Iran. Since officially Armenia has no troops stationed in Karabakh, the relations between Tehran, Moscow, and Erevan cannot be described as support for the aggressor. Political, economic, and military-technical relations between Iran and Armenia allow the latter to keep its economic potential afloat.

It has become abundantly clear that the Islamic factor alone will not boost Irans prestige among its regional neighbors both in the economic and foreign policy spheres. Secular power structures are gaining importance, which creates a better balance between the religious and secular components. These developments may lead to the best possible modernization variant that will answer the interests of Iran and its neighbors, including Russia. Indeed, it will not cause any radical changes of the already well-established contacts or provoke domestic social and ethnic conflicts capable of upsetting the regional balance of forces. This explains why Russia regards its cooperation with Iran in the nuclear power and military spheres as its priority together with a more active political dialog that stimulates positive changes in Tehran.

There is no organized secular opposition inside the country and abroad, therefore the Islamic regime cannot be changed by force. The regime has preserved its legitimacy from the point of view of the countrys potential economic, sociopolitical and foreign policy development. The reformers rely on the youth that comprises 70 percent of the country. The young people want to live in a more open society and to establish normal relations with the U.S., which depends not so much on the Iranian leaders as on the United States itself. The public opinion poll carried in Iran late in 2002 showed that the absolute majority favored negotiations with America. Tehran insists that contrary to Washingtons accusations the country has nothing to do with terrorist organizations.

It is common knowledge that in the 1980s Iran extended military and material support to the Palestine movement. According to frequent official statements, Iran stopped its financial aid along the state channels. It seems that Islamic funds and organizations that have nothing to do with the government and Majlis continue their support for Hezbollah.

There are no convincing facts of contacts with other extremist Islamic organizations, including those active in Central Asia and the Caucasus. There are no facts behind American statements that Iran harbors those of the Taliban and al-Qaeda fighters who managed to escape from Afghanistan. It seems that such statements are inspired by those who want to undermine Irans positions in Afghanistan and confirmed by information that remnants of Taliban detachments crossed into Iran, where they were detained and handed over to the Afghan side. All contradictions with Afghanistan are settled in work order; the countries exchange visits of top leaders. Iran has somewhat changed its attitude to Israel the very existence of which was flatly denied in the past. The reformers are prepared to accept the solution to the Palestinian problem that would take care of Israels right to preserve its statehood and any variants which would be accepted by the Palestinians.19 These new trends contribute to Irans better relations with Europe and boost its regional prestige.

The legal status of the Caspian is the most painful problem in Irans relations with the regional countries. On the whole it is still dedicated to its idea of condominium that cannot be realized because of the coastal states divergent interests. Iran does not agree with the variant formulated by Russia, Kazakhstan, and Azerbaijan because it cuts down its share of the Caspian Sea as compared with its own variant. On top of this, Iran being excluded from all projects of oil extraction and export due to American efforts is not interested in moving Caspian oil to the world market.

The Situation Around Iraq and Its Possible Impacts on Iran

During the antiterrorist operation in Afghanistan and in expectation of the U.S. military action against Iraq Iran took a fairly constructive position from the point of view of European and even Islamic states: it condemned the use of force and called on Iraq to cooperate with the U.N. inspectors. Tehran cannot reject the plans to remove Saddam Hussein and create a government with Shia representation. Iraqi opposition is based in Iran together with paramilitary units headed by leader of the Iraqi National Congress Ahmed Chalabi and leader of the Shia Supreme Council for Islamic Revolution Mohammad Baqir al-Haqim. Being in constant contact with them and the leaders of the largest Kurdish parties of Iraq, Iran can be described as one of the active participants in the events that are unfolding around Baghdad the results of which will inevitably affect Central Asia.

Both leaders of the Iraqi KurdsMasud Barzani (the Kurdish Democratic Party) and Jalal Talebani (The Union of Patriots of Kurdistan)are in contact with Iranian officials concerning a new government of Iraq. Both parties say that they want nothing but autonomy, yet one cannot exclude a possibility of separatist sentiments. Even though units of the Revolutionary Guard Corps are stationed in Iranian Kurdistan, the Kurdish factor may be used either to remove the Islamic regime in Iran or to split it using the ethnic factor. If separatist trends develop further, it can become the regions sore spot. Recently, the tense relations between Tehran and Baku may add fuel to separatist sentiments among the local Azeris. On the whole, Iranian Turks are not willing to detach themselves from Iran, yet the Azeri factor may be used to weaken the regime, especially by the forces based outside Iran. Instability in Iranian Azerbaijan will increase the danger of conflicts in the Caucasus among the local states and among the adjacent autonomies, including those that are part of Russia.

On the eve of the Iraqi crisis the domestic situation was tenser than on the eve of the operation in Afghanistan. Iraq, just as Afghanistan of the Taliban, is not among Irans friends, but its conservative clergy is reacting much more vehemently to the military operation against Iraq than was the case with Afghanistan. This is probably explained by the fact that Irans position on the Afghan issue brought it no dividends (the United States refused to correlate its position). And since the events took an opposite course, the rahbar described all anti-Iraqi actions in the following way: Touching on a possible U.S. attack on Iraq, the leader said: Any attack on any Islamic country would harm the whole Islamic world as he urged Muslims to close their ranks against the world hegemony.20 He also pointed out: All Muslim nations know that main target of the imperialists and Zionists is Islam and the Islamic Ummah.21

Iran has left the peak of Islamic extremism behind, its pragmatic interests are gradually pushing away its purely ideological considerations. If the conservative wing manages to use anti-Americanism to stop reforms, this will be just a short episode that will cause a wave of protest.

In this way, the past decade has clearly demonstrated that Iran is exerting stabilizing influence on Central Asia and the Caucasus. Tehran can constructively contribute to settling regional disputes: its role in the Tajik settlement, its position on the conflict between Azerbaijan and Armenia and on the problems of Afghanistan and Iraq meet its own national interests and stabilize the regional situation. Positive dynamics in improving relations with the rest of the world, in building up Irans economic potential, and the obvious shifts in evolution of the ruling regime suggest that Iran will not only remain one of the key states in the region but will probably increase its influence.

1 See: A. Maleki, Iran and Turan: Apropos of Irans Relations with Central Asia and the Caucasian Republics, Central Asia and the Caucasus, No. 5 (11), 2001, p. 91.
2 Ibid, p. 96.
3 See: Salname-ye amarie keshwar, 1377 (2000), Tehran, 2000, p. 837.
4 [http://polpred.ru/free/turcija/23.htm].
5 See: Tehran Times, 19 June, 2002.
6 See: World Bank. World Development Report 2002, pp. 232-233.
7 See: Central Bank IRI. 2001/2002, No. 24.
8 See: S.M. Rawandi-Fadai, Politicheskie partii i gruppirovki v Irane, Candidate thesis, Moscow, 2002, pp. 128-130.
9 See: Journal of South Asian and Eastern Studies, No. 4, 2001, p. 37.
10 Ibid., p. 30.
11 See: Discourse, Vol. 2, No. 2, 2000, p. 23.
12 Tehran Times, 5 November, 2002.
13 See: E. Urazova, Trends in Turkeys Economic Cooperation with Post-Soviet Turkic States, Central Asia and the Caucasus, No. 5 (11), 2001, pp. 118-121.
14 Calculated from Salname-ye amarie keshwar, 1378 (2000/2001), Foreign Trade section.
15 See: Tehran Times, 21 February, 2002.
16 See: B. Aras, Turkish Foreign Policy Toward Transcaucasus, Central Asia and the Caucasus, No. 5 (11), 2001, pp. 79-82.
17 M. Sanai, Tehran i Tsentralnaia Azia, Persia, No. 1, 2000.
18 See: A. Malashenko, Musulmane v nachale veka: nadezhdy i ugrozy, Moscow, 2002, p. 12.
19 [http://www.iran.ru], 18 October, 2002.
20 Tehran Times, 7 December, 2002.
21 Ibidem.

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