The surprise election of Mahmoud Ahmadi-Nejad, who is being sworn in as president this week, has given rise to dire predictions about Iran's domestic and foreign policies and relations with the U.S. and the European Union. There are reasons for concern. Based on his rhetoric, past performance, and the company he keeps, Ahmadi-Nejad appears a throwback to the revolution's early days: more ideological, less pragmatic, and anti- American. But for the West, and the U.S. in particular, to reach and act upon hasty conclusions would be wrong. Iran is governed by complex institutions and competing power centres that inherently favour continuity over change. More importantly, none of the fundamentals has changed: the regime is not about to collapse; it holds pivotal cards on Iraq and nuclear proliferation; and any chance of modifying its behaviour will come, if at all, through serious, coordinated EU and U.S. efforts to engage it.

Ideologically, Ahmadi-Nejad remains somewhat of a mystery, not so much because he conceals his beliefs as because they are strikingly abstract. His campaign utterances, much like his mayoral tenure, were dominated by lofty phrases about economic justice, Islam, national dignity and the need to protect the national interest against foreigners. Arguably the best indicator of his views are the positions of his allies -- the Islamic Revolutionary Guard Corps (IRGC), the basij militia, and the Abadgaran movement, all of which have embraced socially conservative and internationally confrontational outlooks, and some of which have supported violent activity abroad.

But presidential change is unlikely to signify fundamental policy change. Ironically, the same U.S. observers who before the election argued a reform victory would make little difference because unelected officials make decisions, have been quick to express alarm at a threatened rightward turn. Given Iran's political system, earlier assessments ring truer. Domestic changes may come at the margins, not spectacular enough to provoke international opprobrium, albeit serious enough for those affected. On the foreign front, the style likely will be more confrontational and less appealing to Western audiences, and in the short run at least, Ahmadi-Nejad's surprise victory is likely to aggravate tensions with Washington and perhaps with Brussels. A diplomatic newcomer, Ahmadi-Nejad brings a less sophisticated approach than his predecessor; alone among the candidates, he did not broach improved relations with the U.S. during the campaign and, since his victory, has been at best indifferent about them. But bottom line positions -- on Iran's nuclear program, regional interests, Iraq policy -- almost certainly will not budge in the foreseeable future.

The new president is dismissive of the need to improve relations with the U.S., and his election strengthened those within the U.S. administration who have long believed engagement would only further entrench a hostile, undemocratic regime and who wish to pursue a strategy of "delegitimisation". But though both sides might take short-term comfort from continued estrangement, this posture is unsustainable. On at least two burning issues -- Iraq and the nuclear question -- the U.S. and Iran inexorably must engage, collide or both. While Iran has turned a page on the Khatami era, President Ahmadi-Nejad faces the same situation and President Bush the same dilemmas as before.

In short, and for all their flaws -- hundreds of candidates, including all women, were disqualified by an unelected body, and there were serious charges of irregularities --the election clarified some core realities of Iranian politics, with significant implications that the West cannot afford to ignore:

• The current regime is not about to collapse, and any reform movement will need time to revive. In an election that by regional standards was competitive, had strong participation, and offered a broad choice, Iranians voted on the basis of economic rather than political needs. There is little doubt a vast majority wants genuine reform but at this point is more interested in its well-being, and Ahmadi-Nejad spoke to that issue best. In contrast, the reform movement is in disarray, unable to find a way to participate in the political system without ultimately being stymied and discredited by it. Reformers are disorganised, lack a strong leader, have a desultory eight-year record and are failing to connect with voters' everyday concerns. In other words, for all the dissatisfaction, the regime is not nearing collapse. For the U.S. to assume that popular anger will translate into an organised opposition and that the regime is ripe for a fall would be a risky gamble that virtually nothing in Iran appears to validate.
   
• Serious, coordinated U.S.-EU engagement with Iran on the nuclear issue is required to avert a full-blown crisis or, at a minimum, genuinely test Tehran's intentions. Renewed Iranian threats to resume work at a uranium conversion facility in Isfahan are only the latest indication that the current process is not working. More creative proposals -- allowing Iran to operate a small enrichment capacity under strict international surveillance or joint Iranian/international management of nuclear sites -- should be put  on the table, along with discussion of Tehran's security concerns, before taking the uncertain step of Security Council  referral.
   
• On Iraq, Washington eventually must have   a dialogue with Iran to maximise chances of stability. Even with enhanced regional cooperation, in particular from Tehran, the U.S. will continue to face a resilient insurgency and a tenuous Iraqi political process; without it, the tasks will be considerably more difficult.
   
• Engagement by  the  U.S.  and  the  EU  does  not mean appeasement, and certainly not indifference to human rights abuses. A first test will be the status of Akbar Ganji, a political prisoner whose health has deteriorated dangerously as a result of a hunger strike. His release would constitute an important symbolic gesture by the Ahmadi-Nejad administration.

Tehran/Brussels, 4 August 2005