Exit the Shark

On January 8, Akbar Hashemi Rafsanjani died of a heart attack. The 82-year-old cleric was a major political figure in Iran and his passing is a significant event for Iran and the region.

Analyses of history usually follow one of two lines—the “Great Man” or the “Great Wave.”1 The former postulates that the progression of history is shaped by strong personalities that bend the path of society through the force of their will. The latter says that history is a progression of impersonal forces which shape society and the people who participate are simply playing their role. In reality, both describe history, although we tend to lean toward the Great Wave explanation. This is because there are trends that develop in economies, societies and institutions that affect how history evolves, and the great people are usually those who correctly figure out the trends and move them forward. There are always those who resist; if the wave is strong enough, they tend to fail.

However, people do matter. Some personalities are so strong that even though they may not be “on the right side of history,” they slow the progression of a trend. And, if they are part of the trend, history suggests their support accelerates the movement.

Rafsanjani was this sort of figure, and so we want to mark his passing with a dedicated report. We are not suggesting that he was a good man; if anything, he was involved in many activities that harmed the U.S. Still, as we will discuss below, he was a pivotal figure in Iranian history and his death changes how Iran’s leaders will act going forward.

Our analysis will begin with a description of the structure of Iran’s government. A short biography of Rafsanjani will follow. We will discuss his influence on Iranian society and the political system, then examine how his death may affect future Iranian activities. We will conclude with potential market ramifications.

The Structure of the Iranian Government
The Iranian government is structured as both a democracy and theocracy. The ultimate power of the state rests with a Supreme Leader, an ayatollah by requirement; he is the commander in chief, appoints the head of the judiciary and the state-controlled media and approves the elections of the president. In theory, the Supreme Leader can overturn laws created by the legislature and remove officials for being “irreligious.” An elected Council of Experts, composed of clerics, appoints and can remove a Supreme Leader. Within the Council of Experts, a 12-person Guardians Council is appointed. This group approves all the candidates for elections. Elections for municipal and federal offices are held consistently, but these posts have limited power and it is not unusual for liberal candidates to be kept off ballots by the Guardians Council.

The idea of a nation ruled by clerics was somewhat novel for Shiites. For most of its history, this variant of Islam was mostly quietist, avoiding political involvement. Its members, often oppressed throughout the Muslim world, awaited the return of the 12th Imam, a messianic figure who would end their suffering. It is also important to note this quietist theology took a literalist view of the Koran.

The former Ayatollah Khomeini offered a competing theology. Instead of quietism, he devised a theology that suggested Shiites should become active in government. He suggested the Koran be interpreted by clerics to fit modern times, opposing the literalist tradition of the quietists. Assuming Islamic law was the ultimate authority, he argued that clerics, interpreting the Koran, should become the political leadership in an Islamic nation.2 These changes allowed the Ayatollah Khomeini to graft Islam to the revolutionary leftist movements of the 1970s.

Khomeini also established a democratic government that included a president and a parliament (the Majlis) which were expected to conduct normal policy functions, such as providing general public goods. Although the president and parliament have some influence due to their voter mandate, the real power rests with the Supreme Leader and the clerics, as we noted above.

The political structure breaks down into conservatives and liberals. The latter are considered reformists and call for more social freedoms, market economies and engagement with the West. This faction has mostly been eliminated from political influence in Iran.

Conservatives break into three categories. The Hardline faction is very socially conservative and populist in economics. It wants very limited contact with the West. Former President Ahmadinejad would fall into this group. The Traditionalist faction is also socially conservative, although less so than the Hardline faction. They are cautious with the West and tend to align with the more economically affluent. The current Supreme Leader Khamenei is part of this faction. The Pragmatist faction is also socially conservative but more open than the other two groups. They tend to support ties with the West and better relations with the nearby Sunni states and prefer a market economy. Rafsanjani was in this group.