Though much of the focus since Mahmoud Ahmadi-Nejad’s June 2005 electoral victory has been on Iran’s foreign policy, the fate of his presidency will ride at least as much on his domestic performance. Elected on a platform of economic justice and clean government, he will be judged chiefly on those grounds. So far, results have been decidedly mixed. High oil prices have enabled greater expenditure on social programs. But on the whole, the president has been unable to fulfil promises, and his still early tenure has been marked by repeated conflicts with other institutions and power centres. The drubbing experienced by the president and his allies in the December 2006 elections for municipal councils and the Assembly of Experts signalled serious problems, both within the conservative camp and with the wider public. It also suggested that domestic rather than foreign pressure remains the best and safest road to reform.

Ahmadi-Nejad came to power with bold populist ambitions but quickly ran into trouble. His plans were immediately tempered by a parliament (majles) whose members, although predominantly conservative, come from a different background and who, in unprecedented action, rejected some of his most important cabinet nominees. Many of the policies abruptly imposed by the new government have been opposed by more technocratic bodies such as the Central Bank and the Management and Planning Organisation, and some subsequently have been reversed. Ahmadi-Nejad’s attacks against private “plunderers” and “corrupt officials” have rattled civil servant and domestic entrepreneurs without triggering concrete change in government openness or accountability. Instead, his appointment of close associates to positions for which they are unqualified, coupled with the award of billion dollar no-bid contracts to the Islamic Revolution Guard Corps (IRGC), have brought charges of cronyism and political favouritism.

Ahmadi-Nejad retains important political assets. Arguably most significant is the nationalist fervour born of Iran’s nuclear program and the resulting international reaction. Pursuit of populist politics via a strategy of permanent campaigning and support for forces such as the IRGC and its poorer sister, the basij militia, are likely to be calculated to fortify backing from core constituencies that brought him to power. They also are designed to strengthen the foundations of the Islamic Republic at a time of greater international pressure and potential U.S. or Israeli military action.

In the absence of policy shifts, however, the ride promises to get rougher. The December elections were more than a bump in the road. They confirmed widespread dissatisfaction with domestic policies and, more ominously for the president, revealed cracks in the conservative coalition that carried him into office. Even on the foreign policy front, and particularly regarding threats against Israel and Holocaust-denial, dissatisfaction is growing. While Khatami, his predecessor, was criticised for being overly passive and conciliatory, Ahmadi-Nejad is blamed for being too adventurous – a more serious and damaging charge. There is also greater scope for a challenge from reformists as they shift their focus from an unfair presidential electoral process in 2005 and monopoly conservative control over institutions to a critique of the president’s policies.

Elections, as before, are likely to be the ultimate arbiter of Iran’s political future. No one knows this better than Ahmadi-Nejad whose critique of government performance under the two previous presidents ushered him to power and who has spent most of the past year as if preparing for the next campaign. The outcome of the next presidential election in 2009 is far from decided. Much will depend on whether the president can fulfil the bulk of his promises and maintain his coalition. Ironically, Ahmadi-Nejad also may be banking on Washington’s next move to help him restore unity among the political elite and regain the popularity he appears to be frittering away.

The U.S. administration points to mounting domestic criticism of the Iranian president as evidence its strategy is working. This is true, but only up to a point. Greater isolation from the world community almost certainly has emboldened Ahmadi-Nejad’s opponents. But Washington would be mistaken to conclude that the solution lies in heightened pressure of the sort currently contemplated – a more aggressive posture in Iraq and a naval build-up in the Gulf – much less any more direct military intervention.

Ahmadi-Nejad’s critics within the regime may have little difficulty invoking concern about Iran’s isolation to sharpen their attacks against a political foe; they will have no hesitation at all closing ranks behind him if they believe the Islamic Republic or its vital interests are at stake. On basic foreign policy issues – from the right to domestic enrichment to aspirations for a greater regional role – there is broad consensus within the regime; what differences exist essentially concern style and tactics. A military escalation would postpone domestic change, strengthen more radical forces and possibly trigger Iranian retaliation that could spiral out of control. By signalling its openness to broad engagement with Iran without preconditions on the nuclear issue, Iraq and bilateral relations, the U.S. would be rendering a far greater and wiser service both to itself and to the region as a whole.

Tehran/Brussels, 6 February 2007