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CNN Live Event/Special

Inside Iran

Aired June 01, 2003 - 16:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


SOPHIA CHOI, CNN ANCHOR: The date, November 4, 1979. The place, a U.S. embassy, Tehran, Iran. A noisy crowd of about 500 people, many of them students, seize the embassy compound, taking dozens of U.S. diplomats hostage. Fifty-two of those hostages would be held for more than a year. But it was more than a kidnapping, more than a protest. It was actually a wake-up call to the American people that the United States was, indeed, vulnerable to international terrorism.
Today, the spotlight is again on Iran. The question on many people's minds, especially after Iraq, will the U.S. now turn its sites on Iran? The words, regime change, proved to be a rallying cry in the U.S.-led war in Iraq, but now that the war is pretty much over, there are more rumblings about regime change, in time in Iran. Some analysts say destabilizing the clerical rule in that country could help secure the region. And there is another concern, who is Iran helping in the war on terror? Here's CNN National security correspondent, David Ensor.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): The American relationship with the Iranian Islamic regime got off to a terrible start in 1979 with what most of the world considered a terrorist incident, U.S. diplomats held hostage for 14 months.

The issue of terrorism still divides today, with the Bush administration accusing Iran of harboring al Qaeda terrorists. Not guilty, says Tehran.

JAVAD ZARIF, IRANIAN AMBASSADOR TO THE UNITED NATIONS: For the past 14 months we have vigorously pursued a costly campaign against al Qaeda by strengthening security of our eastern borders and border areas, arresting, interrogating, expelling, extraditing, prosecuting, and jailing suspicious elements infiltrating our territory.

ENSOR: But U.S. intelligence officials say there is evidence al Qaeda's Saif al-Adel and others are in Iran. The question is, why?

SHAUL BAKHASH, GEORGE MASON UNIVERSITY: There may be people inside the administration in Iran who want to hold onto these al Qaeda elements as a means of countering what they see as American hostility and pressure.

ENSOR: What to do about it? The Bush administration national security team has yet to decide. KENNETH POLLACK, SABAN CENTER, BROOKINGS INSTITUTION: There are some who are saying, We took care of Afghanistan, we took care of Iraq, we got to do Iran next.

ENSOR: But with U.S. forces tied down occupying Iraq, other administration officials say a conflict with Iran would be biting off more than even the U.S. can chew. Better, they say, to use the momentum the U.S. got from overthrowing Saddam Hussein.

They want to use this as a leverage to try to get the Iranians to cease their ties with terrorism and also to end their nuclear program, without having to go to war.

ENSOR: After all, Iranian officials hint, they may soon turn over some al Qaeda prisoners to Saudi Arabia or elsewhere. And since the 1997 election of President Mohammed Khatami, Tehran's support for other terrorism appears to have diminished.

BAKHASH: I think the Khobar Towers incident, when an American military housing complex in Saudi Arabia was bombed and many Americans were killed, and to which the Iranians were linked, that kind of thing we probably won't see any more.

ENSOR: But Iran still backs Hezbollah, freedom fighters, say President Khatami, suicide bombing terrorists, say Israel and the United States. And the shipload of weapons captured by Israel last year bound for the Palestinians were from Iran, say the Israelis.

(on camera): Tehran and Washington may disagree about Hezbollah, but both call al Qaeda terrorists. The questions for U.S. officials, who from al Qaeda is in Iran? Who is helping them to stay?

The question for Tehran, what do you intend to do about it?

David Ensor, CNN, Washington.

(END VIDEOTAPE)

CHOI: The White House is also looking at the nuclear factor. President Bush is urging Iran to halt any nuclear weapons programs it may have. We invited the Iranian ambassador to address these concerns, but he is traveling today and was unable to be on our program.

Jim Walsh of Harvard University is an expert on Iran, terrorism and weapons of mass destruction, and he was good enough to join us today. Jim, thanks.

JIM WALSH, HARVARD UNIV.: Happy to be here. Sophia.

CHOI: So, should the rest of the world be afraid of Iran at this point?

WALSH: Well, I think there's reason for serious concern. In this day and age any time a country pursues either highly enriched uranium or plutonium, that's the stuff with which you make nuclear weapons, then I think it's serious. So there is danger in not doing anything to stop it, but there is an equal if not greater danger in overreacting and trying to do too much. I think we have to put this as a serious threat but it has to be put in context.

CHOI: All right. Give us a brief overview of Iran's nuclear program at this point.

WALSH: Well, I think one way to understand where Iran is is by comparing it to other countries. There's a continuum here. Countries like the U.S. and Russia have thousands of nuclear weapons integrated with their force structure. Then there are countries like India that have crossed that nuclear threshold. They have some weapons, but they aren't part of the general military, part of the general force structure. Then there's a country like North Korea. It may be across that line, it may not be across that line.

And then further back you have Iran. They have a program, but they don't -- they have neither the reactors that would produce enough nuclear material for a bomb, nor do they have the other facilities that would allow them to get there quickly, but they seem to be working on them, and that's why people are concerned.

CHOI: Yes, there are two new facilities that they are working on, in fact.

WALSH: Right. And there a couple of aspects of that that are worrisome. I mean, as I said before, anytime a country pursues enriched uranium, especially in this day and age when uranium is cheap and you really don't need to go that route, you have to ask the question why? Particularly if you have lots of oil reserves and natural gas reserves.

And then they have what is alleged to be a heavy water facility, which raises questions, because that's not the sort of facility that really goes with their power program, with the Bushear (ph) reactor that the Russians are helping with.

So there are some questions here. The IAEA, the International Atomic Energy Agency, visited some of these sites in February and we'll soon be getting a report on their assessment of where Iran is at, but so far the problem is we've been surprised. Iran has not been as forthcoming as perhaps some of us would have liked.

CHOI: And how significant is that IAEA report expected to be?

WALSH: Sophia, I think it's going to be very, very important. I think after talking with people in IAEA, they also think it's going to be an important report. They're taking it very seriously. They're probably a little nervous about it.

There are two sides that are going to watch it very closely. I think on one hand, the United States, particularly folks who want to take a tougher line on Iran, even destabilize Iran. They're going to be looking at this report to see if there is evidence to support their argument. The Israelis will be also looking closely, and on the other hand the Iranians are going to want a clean bill of health, they are going to want the report to say, hey, we're a member in good standing of the Nonproliferation Treaty. You can inspect any time you want. Stop hassling us. And we'll just have to see where on that continuum the report comes out.

CHOI: Jim Walsh with Harvard University, it's always great to see and get your insight. Thanks.

WALSH: Great to see you, thank you.

CHOI: All right. Much of Washington's diplomatic contact with Iran has been with the reformist government of Iranian President Mohammed Khatami, but he is not the only ruling force in Iran. As CNN's Christiane Amanpour explains, there's a second ruler, a conservative religious leader blocking the way of change.

(BEGIN VIDEOTAPE)

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT (voice-over): It is often said of Iran that there are two competing governments running the country. There is the popularly elected president, Mohammed Khatami, who was swept to power on a wave of hope in 1997, and then reelected with an even bigger majority in 2001.

There is an elected parliament, which is dominated by Khatami- style reformers. The population of Iran is young. More than half are under the age of 21, and many are fed up with the politics of religious extremism and international isolation. They desperately want their economy improved, because close to 1 million university graduates enter the job market every year, and many cannot find jobs.

These are the people who had been electrified by Khatami's message of democratic and social reform, and they had put their trust and faith in his ability to deliver.

But he has not been able to deliver, and that's in large part because of the other government running Iran. This is the unelected one. The most powerful person in the country is Ayatollah Khamenei. Iran's constitution gives him authority over all affairs of state. He is called the supreme leader and was appointed upon the death of Ayatollah Khomeini, who led Iran's 1979 Islamic revolution.

The supreme leader directs the army, intelligence services, foreign policy, and the judiciary. Indeed, although there is more democracy in Iran than in much of the Arab and Muslim world, watchdog bodies under the authority of the supreme leader also vet candidates for elections.

Since President Khatami's election six years ago, there has been an ongoing political battle between his reformers and the religious leaders over the country's future direction.

Recently, the parliament asked the supreme leader to stop the organizations under his control from blocking their reforms. In a rare move, members of parliament have told the supreme leader that the choice between democracy and dictatorship for Iran lies in his hands. Voters in Iran are losing patience and hope with the slow pace of change at home, and analysts are divided over where this power struggle will lead. Many are also saying that mounting pressure from the United States, which calls Iran part of the axis of evil, has inflamed the power struggle, putting the democrats and the reformers on the defensive and putting national security in the hands of the clerical establishment.

Christiane Amanpour, CNN, London.

(END VIDEOTAPE)

CHOI: Coming up, we know Iran is a massive country with a wealth of natural resources, but how did this country on the other side of the world lead to the downfall of a U.S. president? The answer is coming up on the other side of this break.

(COMMERCIAL BREAK)

CHOI: Before the break, we looked at the two governments of Iran. There are many in Washington who believe that excessive pressure on either one could tip the balance of power, allowing hard- liners to slam the door on relations with America. CNN's senior political analyst Bill Schneider says that would leave the U.S. with a dangerous foe, one that it has underestimated before.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): The Iranian revolution of 1979 came as a surprise to the United States.

JON ALTERMAN, CSIS: We had a whole policy, a defense policy in the Persian Gulf which was based on having the shah there protecting American interests, who were shocked when the shah fell.

SCHNEIDER: More than 30 years into the Cold War, the U.S. assumed its enemies would come from the radical left, communists and communist-inspired radicals like the Soviet Union and Fidel Castro and the Viet Cong.

Suddenly in Iran, a whole new enemy appeared. A religious fundamentalist, anti-communist and anti-American, a leader who seemed to want to take his country back to the seventh century, and a country that seemed to want that.

There was wild rejoicing when Khomeini returned to Iran in February 1979. Once in power, Khomeini wrought revenge on the country he called the Great Satan. The torment of 52 American hostages for 444 days helped bring down one U.S. president. Another president was lured into an embarrassing arms for hostages deal with Iran.

ALTERMAN: The idea of Khomeini standing up to the West and standing up for Iran and for Islam is a something that a lot of Iranians still find attractive.

SCHNEIDER: But there's another side to Khomeini's legacy, a fundamentalist ideology that rejects freedom and human rights and subjugates women, a brutal reign of terror against opponents. Death decrees against free thinkers like author Salmon Rushdee, dangerous nuclear ambitions and sponsorship of terrorist organizations like Hezbollah.

Anything positive?

PROF. SHAUL BAKHASH, GEORGE MASON UNIV.: The only positive thing you might say is that by politicizing a large number of Iranians demand now for democratic, accountable government, for a system of checks and balances, for the rule of law is fairly widespread, and I think genuinely understood.

SCHNEIDER (on camera): Khomeini's model of Islamic government has inspired radicals all over the Muslim world, much as the Soviet Union once inspired leftist radicals. The radical Islamist threat has outlasted the communist threat, and may prove to be far more dangerous.

Bill Schneider, CNN, Washington.

(END VIDEOTAPE)

CHOI: President Bush is dismissing the idea that Iran could find itself in the crosshairs of the U.S. military, but with all the talk about regime change, you can imagine there is concern among Iranians. How do they see their relationship with the U.S.? Fawaz Gerges is the chair of Middle Eastern studies and Arab politics at Sarah Lawrence College, and he joins us now from New York. Glad you're with us tonight.

FAWAZ GERGES, MIDDLE EAST ANALYST: Thank you, Sophia.

CHOI: So, let me ask you about the different factions that are kind of fighting for power inside Iran right now. Tell me about the struggle.

GERGES: Sophia, there's a major power struggle taking place in Iran between the reformists and the ruling conservative class. Unfortunately, the nature of the American-Iranian relationship has become a critical variable in this particular struggle. While reformists would like to rebuild the bridges to the United States, and restore diplomatic relations, conservative clerics are deeply opposed to the American foreign policy and of course, (UNINTELLIGIBLE) relations, and in this particular sense here, Americans threats against the Iranian governments appear to play into the hands of the reactionary conservative class who use the American threats to discredit the reformist agenda and argue that the reformists are in collusion with Washington.

So in this particular sense here, the United States should be careful not to take any particular actions that unwittingly play into the hands of the conservative clerics, and, of course, weaken the reformists inside Iran.

CHOI: How fearful are Iranians right now, that they're next, that they are in the crosshairs of the U.S.?

GERGES: Well, I think regardless of the political orientation, the Iranian leadership, there is a genuine belief that Iran will be next on the American list of targets, after Iraq. And in this particular sense, Sophia, here we cannot understand Iranian actions either in Iraq or some of the alleged support for some fringe militant elements without understanding that the Iranian leadership is trying to send a message to the United States that it has options and could retaliate against American vital interests.

And secondly, I think, the Iranian leadership wants to make sure there is friendly government in neighboring Iraq, and not a hostile one, and, of course, it wants to make sure that the interests of the Shia community, which represents about 60 percent of the Iraqi population, are well respected.

And also, thirdly, and finally here, I think the Iranians are very concerned about the American military presence on all of its borders, in Afghanistan, in Iraq, in the Persian Gulf. The Iranian leadership feels that American military bases surround Iran and the Persian Gulf, that is the Iranian gulf, is basically becoming an American military base.

And here I think what this shows is that there is a great deal for both the United States and Iran to sit down and talk about their mutual interest and how to manage their tensions, and I think it's in the interest of the United States itself to really stress to the Iranian leadership that the United States does not intend to target Iran after Iraq and does not intend to use Iraq either to subvert the Iranian government, or in fact to create a hostile regime to Iran.

And of course at the same time, the Iranian leadership must be told that it must end its actions, support for certain fringe Islamist elements. I think at the end of the day, both Iran and United States have much to talk about, and engagement is the way to go.

CHOI: All right. And on that note, we thank you for joining us. Fawaz Gerges, thank you.

Well, it's not the kind of post-war Iraq Washington wants. Iran's influence is spilling into the vacuum left by Saddam Hussein. We will have a live report when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ZARIF: We are not interested in imposing any type of government on the Iraqi people. We do not believe anybody should have their image of a future Iraq imposed on the Iraqi people. It is for the Iraqi people -- if this is a process for democratization of Iraq, it is for the Iraqi people to decide.

(END VIDEO CLIP)

CHOI: Even though Iran says it doesn't want to influence a future of Iraq, it may do so indirectly. The removal of Saddam Hussein from power is allowing many Shia Muslims in Iraq to do something they haven't done for years, practice their faith. And as CNN's Matthew Chance reports, many of the religious leaders have strong ties to Iran.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN CORRESPONDENT (voice-over): For millions in Iraq, this is what their newfound freedom has come to mean. Under Saddam, this country's Shia Muslim majority was fiercely suppressed. Now, religious zeal and old links with Iran have resurfaced. It's hardly the situation Washington must have intended.

"President Bush may have been the one who eliminated Saddam, he says, "but it is God that we thank, not America."

For centuries, Najaf's religious colleges, or Hausa (ph), have been a focus of Shia Islamic study and revolution. Iran's Ayatollah Khomeini was a student, as were many Shiite militants of Hezbollah in Lebanon. Now classes are swollen with returning Iraqi exiles who fled Saddam's rule for Iran. The Hausa (ph), say clerics, blossoms again.

(on camera): Washington may not altogether like it, but the fact is the toppling of the Saddam Hussein's regime has unleashed a wave of religious fervor here, and it is the Shiite clerics, many with strong links to Iran, that now want political power. And may even get it.

(voice-over): And this is one man who could deliver. Ayatollah Mohammed Bakr Hakim spent the last 23 years in Iran. Now he and his Supreme Council for the Islamic Revolution in Iraq have returned to popular support. But he told me accusations Iranian agents were now fermenting revolt here were absurd.

AYATOLLAH MOHAMMED BAKR HAKIM, COUNCIL FOR ISLAMIC REVOLUTION (through translator): The accusations are false and unjustified. There's been a dispute between America and Iran for more than 25 years. Now they try to drag us into it, but we do not believe our relations with Iran should affect America, the Iraqi people or the rest of the world. We're independent.

CHANCE: It seems clear that many Iraqis, Shiites included, don't want an Iranian-style Islamic republic, but a democracy. The ayatollahs and Washington appear to agree at least on this, but many of Iraq's religious majority do want a bigger role for their faith, and like or not, closer ties with America's old enemy may result.

(END VIDEOTAPE)

CHANCE: While U.S. forces say one of the good things about this religious renaissance is that cities and towns like Najaf and Karbala, the holiest shrines for Shias in Iraq are still the best, most well run as well, so religious power having a positive affect in those areas, Sophia.

CHOI: All right, Matthew Chance in Baghdad, thank you. Stay with CNN. After a short break, "NEXT@CNN" tackles this summer's weather forecast. Hurricanes and wildfires, how bad can it be? Find out right after this.

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Aired June 1, 2003 - 16:30   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SOPHIA CHOI, CNN ANCHOR: The date, November 4, 1979. The place, a U.S. embassy, Tehran, Iran. A noisy crowd of about 500 people, many of them students, seize the embassy compound, taking dozens of U.S. diplomats hostage. Fifty-two of those hostages would be held for more than a year. But it was more than a kidnapping, more than a protest. It was actually a wake-up call to the American people that the United States was, indeed, vulnerable to international terrorism.
Today, the spotlight is again on Iran. The question on many people's minds, especially after Iraq, will the U.S. now turn its sites on Iran? The words, regime change, proved to be a rallying cry in the U.S.-led war in Iraq, but now that the war is pretty much over, there are more rumblings about regime change, in time in Iran. Some analysts say destabilizing the clerical rule in that country could help secure the region. And there is another concern, who is Iran helping in the war on terror? Here's CNN National security correspondent, David Ensor.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): The American relationship with the Iranian Islamic regime got off to a terrible start in 1979 with what most of the world considered a terrorist incident, U.S. diplomats held hostage for 14 months.

The issue of terrorism still divides today, with the Bush administration accusing Iran of harboring al Qaeda terrorists. Not guilty, says Tehran.

JAVAD ZARIF, IRANIAN AMBASSADOR TO THE UNITED NATIONS: For the past 14 months we have vigorously pursued a costly campaign against al Qaeda by strengthening security of our eastern borders and border areas, arresting, interrogating, expelling, extraditing, prosecuting, and jailing suspicious elements infiltrating our territory.

ENSOR: But U.S. intelligence officials say there is evidence al Qaeda's Saif al-Adel and others are in Iran. The question is, why?

SHAUL BAKHASH, GEORGE MASON UNIVERSITY: There may be people inside the administration in Iran who want to hold onto these al Qaeda elements as a means of countering what they see as American hostility and pressure.

ENSOR: What to do about it? The Bush administration national security team has yet to decide. KENNETH POLLACK, SABAN CENTER, BROOKINGS INSTITUTION: There are some who are saying, We took care of Afghanistan, we took care of Iraq, we got to do Iran next.

ENSOR: But with U.S. forces tied down occupying Iraq, other administration officials say a conflict with Iran would be biting off more than even the U.S. can chew. Better, they say, to use the momentum the U.S. got from overthrowing Saddam Hussein.

They want to use this as a leverage to try to get the Iranians to cease their ties with terrorism and also to end their nuclear program, without having to go to war.

ENSOR: After all, Iranian officials hint, they may soon turn over some al Qaeda prisoners to Saudi Arabia or elsewhere. And since the 1997 election of President Mohammed Khatami, Tehran's support for other terrorism appears to have diminished.

BAKHASH: I think the Khobar Towers incident, when an American military housing complex in Saudi Arabia was bombed and many Americans were killed, and to which the Iranians were linked, that kind of thing we probably won't see any more.

ENSOR: But Iran still backs Hezbollah, freedom fighters, say President Khatami, suicide bombing terrorists, say Israel and the United States. And the shipload of weapons captured by Israel last year bound for the Palestinians were from Iran, say the Israelis.

(on camera): Tehran and Washington may disagree about Hezbollah, but both call al Qaeda terrorists. The questions for U.S. officials, who from al Qaeda is in Iran? Who is helping them to stay?

The question for Tehran, what do you intend to do about it?

David Ensor, CNN, Washington.

(END VIDEOTAPE)

CHOI: The White House is also looking at the nuclear factor. President Bush is urging Iran to halt any nuclear weapons programs it may have. We invited the Iranian ambassador to address these concerns, but he is traveling today and was unable to be on our program.

Jim Walsh of Harvard University is an expert on Iran, terrorism and weapons of mass destruction, and he was good enough to join us today. Jim, thanks.

JIM WALSH, HARVARD UNIV.: Happy to be here. Sophia.

CHOI: So, should the rest of the world be afraid of Iran at this point?

WALSH: Well, I think there's reason for serious concern. In this day and age any time a country pursues either highly enriched uranium or plutonium, that's the stuff with which you make nuclear weapons, then I think it's serious. So there is danger in not doing anything to stop it, but there is an equal if not greater danger in overreacting and trying to do too much. I think we have to put this as a serious threat but it has to be put in context.

CHOI: All right. Give us a brief overview of Iran's nuclear program at this point.

WALSH: Well, I think one way to understand where Iran is is by comparing it to other countries. There's a continuum here. Countries like the U.S. and Russia have thousands of nuclear weapons integrated with their force structure. Then there are countries like India that have crossed that nuclear threshold. They have some weapons, but they aren't part of the general military, part of the general force structure. Then there's a country like North Korea. It may be across that line, it may not be across that line.

And then further back you have Iran. They have a program, but they don't -- they have neither the reactors that would produce enough nuclear material for a bomb, nor do they have the other facilities that would allow them to get there quickly, but they seem to be working on them, and that's why people are concerned.

CHOI: Yes, there are two new facilities that they are working on, in fact.

WALSH: Right. And there a couple of aspects of that that are worrisome. I mean, as I said before, anytime a country pursues enriched uranium, especially in this day and age when uranium is cheap and you really don't need to go that route, you have to ask the question why? Particularly if you have lots of oil reserves and natural gas reserves.

And then they have what is alleged to be a heavy water facility, which raises questions, because that's not the sort of facility that really goes with their power program, with the Bushear (ph) reactor that the Russians are helping with.

So there are some questions here. The IAEA, the International Atomic Energy Agency, visited some of these sites in February and we'll soon be getting a report on their assessment of where Iran is at, but so far the problem is we've been surprised. Iran has not been as forthcoming as perhaps some of us would have liked.

CHOI: And how significant is that IAEA report expected to be?

WALSH: Sophia, I think it's going to be very, very important. I think after talking with people in IAEA, they also think it's going to be an important report. They're taking it very seriously. They're probably a little nervous about it.

There are two sides that are going to watch it very closely. I think on one hand, the United States, particularly folks who want to take a tougher line on Iran, even destabilize Iran. They're going to be looking at this report to see if there is evidence to support their argument. The Israelis will be also looking closely, and on the other hand the Iranians are going to want a clean bill of health, they are going to want the report to say, hey, we're a member in good standing of the Nonproliferation Treaty. You can inspect any time you want. Stop hassling us. And we'll just have to see where on that continuum the report comes out.

CHOI: Jim Walsh with Harvard University, it's always great to see and get your insight. Thanks.

WALSH: Great to see you, thank you.

CHOI: All right. Much of Washington's diplomatic contact with Iran has been with the reformist government of Iranian President Mohammed Khatami, but he is not the only ruling force in Iran. As CNN's Christiane Amanpour explains, there's a second ruler, a conservative religious leader blocking the way of change.

(BEGIN VIDEOTAPE)

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT (voice-over): It is often said of Iran that there are two competing governments running the country. There is the popularly elected president, Mohammed Khatami, who was swept to power on a wave of hope in 1997, and then reelected with an even bigger majority in 2001.

There is an elected parliament, which is dominated by Khatami- style reformers. The population of Iran is young. More than half are under the age of 21, and many are fed up with the politics of religious extremism and international isolation. They desperately want their economy improved, because close to 1 million university graduates enter the job market every year, and many cannot find jobs.

These are the people who had been electrified by Khatami's message of democratic and social reform, and they had put their trust and faith in his ability to deliver.

But he has not been able to deliver, and that's in large part because of the other government running Iran. This is the unelected one. The most powerful person in the country is Ayatollah Khamenei. Iran's constitution gives him authority over all affairs of state. He is called the supreme leader and was appointed upon the death of Ayatollah Khomeini, who led Iran's 1979 Islamic revolution.

The supreme leader directs the army, intelligence services, foreign policy, and the judiciary. Indeed, although there is more democracy in Iran than in much of the Arab and Muslim world, watchdog bodies under the authority of the supreme leader also vet candidates for elections.

Since President Khatami's election six years ago, there has been an ongoing political battle between his reformers and the religious leaders over the country's future direction.

Recently, the parliament asked the supreme leader to stop the organizations under his control from blocking their reforms. In a rare move, members of parliament have told the supreme leader that the choice between democracy and dictatorship for Iran lies in his hands. Voters in Iran are losing patience and hope with the slow pace of change at home, and analysts are divided over where this power struggle will lead. Many are also saying that mounting pressure from the United States, which calls Iran part of the axis of evil, has inflamed the power struggle, putting the democrats and the reformers on the defensive and putting national security in the hands of the clerical establishment.

Christiane Amanpour, CNN, London.

(END VIDEOTAPE)

CHOI: Coming up, we know Iran is a massive country with a wealth of natural resources, but how did this country on the other side of the world lead to the downfall of a U.S. president? The answer is coming up on the other side of this break.

(COMMERCIAL BREAK)

CHOI: Before the break, we looked at the two governments of Iran. There are many in Washington who believe that excessive pressure on either one could tip the balance of power, allowing hard- liners to slam the door on relations with America. CNN's senior political analyst Bill Schneider says that would leave the U.S. with a dangerous foe, one that it has underestimated before.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): The Iranian revolution of 1979 came as a surprise to the United States.

JON ALTERMAN, CSIS: We had a whole policy, a defense policy in the Persian Gulf which was based on having the shah there protecting American interests, who were shocked when the shah fell.

SCHNEIDER: More than 30 years into the Cold War, the U.S. assumed its enemies would come from the radical left, communists and communist-inspired radicals like the Soviet Union and Fidel Castro and the Viet Cong.

Suddenly in Iran, a whole new enemy appeared. A religious fundamentalist, anti-communist and anti-American, a leader who seemed to want to take his country back to the seventh century, and a country that seemed to want that.

There was wild rejoicing when Khomeini returned to Iran in February 1979. Once in power, Khomeini wrought revenge on the country he called the Great Satan. The torment of 52 American hostages for 444 days helped bring down one U.S. president. Another president was lured into an embarrassing arms for hostages deal with Iran.

ALTERMAN: The idea of Khomeini standing up to the West and standing up for Iran and for Islam is a something that a lot of Iranians still find attractive.

SCHNEIDER: But there's another side to Khomeini's legacy, a fundamentalist ideology that rejects freedom and human rights and subjugates women, a brutal reign of terror against opponents. Death decrees against free thinkers like author Salmon Rushdee, dangerous nuclear ambitions and sponsorship of terrorist organizations like Hezbollah.

Anything positive?

PROF. SHAUL BAKHASH, GEORGE MASON UNIV.: The only positive thing you might say is that by politicizing a large number of Iranians demand now for democratic, accountable government, for a system of checks and balances, for the rule of law is fairly widespread, and I think genuinely understood.

SCHNEIDER (on camera): Khomeini's model of Islamic government has inspired radicals all over the Muslim world, much as the Soviet Union once inspired leftist radicals. The radical Islamist threat has outlasted the communist threat, and may prove to be far more dangerous.

Bill Schneider, CNN, Washington.

(END VIDEOTAPE)

CHOI: President Bush is dismissing the idea that Iran could find itself in the crosshairs of the U.S. military, but with all the talk about regime change, you can imagine there is concern among Iranians. How do they see their relationship with the U.S.? Fawaz Gerges is the chair of Middle Eastern studies and Arab politics at Sarah Lawrence College, and he joins us now from New York. Glad you're with us tonight.

FAWAZ GERGES, MIDDLE EAST ANALYST: Thank you, Sophia.

CHOI: So, let me ask you about the different factions that are kind of fighting for power inside Iran right now. Tell me about the struggle.

GERGES: Sophia, there's a major power struggle taking place in Iran between the reformists and the ruling conservative class. Unfortunately, the nature of the American-Iranian relationship has become a critical variable in this particular struggle. While reformists would like to rebuild the bridges to the United States, and restore diplomatic relations, conservative clerics are deeply opposed to the American foreign policy and of course, (UNINTELLIGIBLE) relations, and in this particular sense here, Americans threats against the Iranian governments appear to play into the hands of the reactionary conservative class who use the American threats to discredit the reformist agenda and argue that the reformists are in collusion with Washington.

So in this particular sense here, the United States should be careful not to take any particular actions that unwittingly play into the hands of the conservative clerics, and, of course, weaken the reformists inside Iran.

CHOI: How fearful are Iranians right now, that they're next, that they are in the crosshairs of the U.S.?

GERGES: Well, I think regardless of the political orientation, the Iranian leadership, there is a genuine belief that Iran will be next on the American list of targets, after Iraq. And in this particular sense, Sophia, here we cannot understand Iranian actions either in Iraq or some of the alleged support for some fringe militant elements without understanding that the Iranian leadership is trying to send a message to the United States that it has options and could retaliate against American vital interests.

And secondly, I think, the Iranian leadership wants to make sure there is friendly government in neighboring Iraq, and not a hostile one, and, of course, it wants to make sure that the interests of the Shia community, which represents about 60 percent of the Iraqi population, are well respected.

And also, thirdly, and finally here, I think the Iranians are very concerned about the American military presence on all of its borders, in Afghanistan, in Iraq, in the Persian Gulf. The Iranian leadership feels that American military bases surround Iran and the Persian Gulf, that is the Iranian gulf, is basically becoming an American military base.

And here I think what this shows is that there is a great deal for both the United States and Iran to sit down and talk about their mutual interest and how to manage their tensions, and I think it's in the interest of the United States itself to really stress to the Iranian leadership that the United States does not intend to target Iran after Iraq and does not intend to use Iraq either to subvert the Iranian government, or in fact to create a hostile regime to Iran.

And of course at the same time, the Iranian leadership must be told that it must end its actions, support for certain fringe Islamist elements. I think at the end of the day, both Iran and United States have much to talk about, and engagement is the way to go.

CHOI: All right. And on that note, we thank you for joining us. Fawaz Gerges, thank you.

Well, it's not the kind of post-war Iraq Washington wants. Iran's influence is spilling into the vacuum left by Saddam Hussein. We will have a live report when we come back.

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ZARIF: We are not interested in imposing any type of government on the Iraqi people. We do not believe anybody should have their image of a future Iraq imposed on the Iraqi people. It is for the Iraqi people -- if this is a process for democratization of Iraq, it is for the Iraqi people to decide.

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CHOI: Even though Iran says it doesn't want to influence a future of Iraq, it may do so indirectly. The removal of Saddam Hussein from power is allowing many Shia Muslims in Iraq to do something they haven't done for years, practice their faith. And as CNN's Matthew Chance reports, many of the religious leaders have strong ties to Iran.

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MATTHEW CHANCE, CNN CORRESPONDENT (voice-over): For millions in Iraq, this is what their newfound freedom has come to mean. Under Saddam, this country's Shia Muslim majority was fiercely suppressed. Now, religious zeal and old links with Iran have resurfaced. It's hardly the situation Washington must have intended.

"President Bush may have been the one who eliminated Saddam, he says, "but it is God that we thank, not America."

For centuries, Najaf's religious colleges, or Hausa (ph), have been a focus of Shia Islamic study and revolution. Iran's Ayatollah Khomeini was a student, as were many Shiite militants of Hezbollah in Lebanon. Now classes are swollen with returning Iraqi exiles who fled Saddam's rule for Iran. The Hausa (ph), say clerics, blossoms again.

(on camera): Washington may not altogether like it, but the fact is the toppling of the Saddam Hussein's regime has unleashed a wave of religious fervor here, and it is the Shiite clerics, many with strong links to Iran, that now want political power. And may even get it.

(voice-over): And this is one man who could deliver. Ayatollah Mohammed Bakr Hakim spent the last 23 years in Iran. Now he and his Supreme Council for the Islamic Revolution in Iraq have returned to popular support. But he told me accusations Iranian agents were now fermenting revolt here were absurd.

AYATOLLAH MOHAMMED BAKR HAKIM, COUNCIL FOR ISLAMIC REVOLUTION (through translator): The accusations are false and unjustified. There's been a dispute between America and Iran for more than 25 years. Now they try to drag us into it, but we do not believe our relations with Iran should affect America, the Iraqi people or the rest of the world. We're independent.

CHANCE: It seems clear that many Iraqis, Shiites included, don't want an Iranian-style Islamic republic, but a democracy. The ayatollahs and Washington appear to agree at least on this, but many of Iraq's religious majority do want a bigger role for their faith, and like or not, closer ties with America's old enemy may result.

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CHANCE: While U.S. forces say one of the good things about this religious renaissance is that cities and towns like Najaf and Karbala, the holiest shrines for Shias in Iraq are still the best, most well run as well, so religious power having a positive affect in those areas, Sophia.

CHOI: All right, Matthew Chance in Baghdad, thank you. Stay with CNN. After a short break, "NEXT@CNN" tackles this summer's weather forecast. Hurricanes and wildfires, how bad can it be? Find out right after this.

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