Iran policy change behind Cabinet crisis. Bow to free market comes at expense of economic reform

Prime Minister Mir Hossein Musavi's inability to set up a cabinet enjoying parliamentary support is due to Iran's acceptance of the United Nations cease-fire resolution, say exiles who follow Iran's political life closely. The prospect of rebuilding the country's economy, crippled by eight years of war, is exacerbating rivalries between politicians who advocate state interventionism in the economy and those who support a free market.

Mr. Musavi submitted 21 names for the 24-seat Cabinet, three of which Parliament rejected Monday. According to the Iranian constitution, Musavi himself will be caretaker of the six leaderless departments: agriculture, education, foreign trade, energy, reconstruction, and the Revolutionary Guards.

The agriculture, foreign trade, and reconstruction ministries are central to the debate over land reform, participation of foreign businesses in rebuilding Iran, and other free market vs. state intervention controversies. The Revolutionary Guards, meanwhile, are blamed for the string of losses that forced Iran to accept the UN resolution.

Musavi is caught between a parliamentary majority that reproaches him and several cabinet members for not convincing Ayatollah Ruhollah Khomeini to reform the Iranian economy, and bazaar tradesmen who have rallied the support of a series of wealthy clerics led by President Ali Khamenei and Ayatollah Khomeini himself, a former deputy to Iran's Parliament who now lives in Paris explains.

``Most of the new assembly deputies campaigned and were elected on a political platform that included the continuation of the war and the reinforcement of state interventionism in the economy,'' the ex-deputy said.

``Those guys find it hard to swallow that Ayatollah Khomeini not only accepted the cease-fire but is now making concessions to private entrepreneurs. They are completely bewildered.''

There has been a campaign aimed at convincing private businessmen to contribute to the reconstruction of the economy. European businessmen say they have been showered over the past weeks with proposals of contracts emanating from Iranian private companies.

In the past, most of Iran's imports and exports would go through state-owned companies. Foreign observers in Tehran say this new trend marks a reversal by Khomeini, who previously had openly supported campaigns aimed at reducing the role of the private sector in the Iranian economy.

The main consequence of this new policy is the weakening of the influence of Musavi, long known as a sworn enemy of private entrepreneurs and a supporter of state interventionism in the economy. This further reinforces the power of the acting commander in chief of the armed forces and Speaker of the Parliament Hashemi Rafsanjani, who in this affair sides with the free marketeers and Mr. Khamenei.

On Sept. 6, Musavi submitted his resignation. But Khomeini forced him to remain in office.

An Iranian journalist visiting London said the conflict between the Cabinet and the Legislature will weaken the influence of both. According to this journalist, Musavi may de facto become a caretaker prime minister.

Iran's domestic problems have thus far had no influence on the conduct of the peace negotiations with Iraq, a European ambassador insists. Iran's Parliament overwhelmingly approved Minister of Foreign Affairs Ali Akbar Velayati and Minister of Justice Hasan Habibi, who lead Iran's team of negotiators.

The diplomat said Iran's entire ruling elite wants a return to the 1975 peace treaty with Iraq and opposes any concession on Iran's rights on the Shatt al Arab, the waterway that forms the southern border between Iran and Iraq.