A Powerless Presidency

''DEATH TO AMERICA!'' THE ROAR went up outside the former U.S. Embassy in Tehran last Tuesday, 18 years after Islamic militants stormed the compound and took 52 Americans hostage. Several thousand demonstrators shook their fists and waved their placards (AMERICA CAN'T DO A DAMN THING!); some carried effigies of Uncle Sam. Many were students born after the Iranian revolution and were clearly enjoying the morning off from school. ""Where are you from?'' a group of chador-clad teenage girls asked two NEWSWEEK reporters. At the answer, they broke into wide smiles: ""Oh, we love America!''

It's the Iranians who are hostages now, prisoners of the tired revolutionary rhetoric that most of them long to discard. That includes the new president, Mohammed Khatami, who won a landslide 70 percent of the vote last May on promises to relax the social restrictions that confine Iran's 60 million citizens--and cover everything from what to wear to what to read. His election raised hopes that the United States and Iran might finally be able to sit down together at peace talks in Paris. But Iranians are beginning to fear that their new president is too weak to break free of the radicals who have built their careers on anti-American sloganeering. ""Khatami is in a box with very little room to maneuver,'' says an Asian diplomat in Tehran.

Intrigued by Khatami and his mandate, Washington has made a few tiny overtures. Last month the State Department put an Iranian-exile group called MKO, based in Iraq and dedicated to overthrowing the Tehran regime, on its official list of terrorist organizations. After insisting for two years that no outside investors should finance Iran's energy sector, the White House quietly agreed last summer to let a Western consortium build a natural-gas pipeline across Iranian territory. And though the embargo law requires sanctions against any company investing more than $40 million in Iran, the Clinton administration is not expected to ultimately penalize Total SA, a French oil company, for a big gas project off the Iranian coast. Some European countries complain that Washington hasn't done enough to encourage Khatami--but this is the most significant public message the White House has sent since the revolution.

If Bill Clinton made a bigger gesture, could Khatami respond? Wags in Tehran's affluent northern suburbs call their president ""Saint Diana'' because he visits the poor and comforts the afflicted--but doesn't have a shred of power. Khatami skipped the anniversary demonstrations. His predecessor, ex-president Ali Akbar Rafsanjani, meanwhile, seems unwilling to relinquish control. In fact, he's set up a new office, the Expediency Council, on the grounds of the presidential compound and taken some of his old ministers with him to form a kind of shadow cabinet. Iran's spiritual leader, Ali Khamenei, wields ultimate authority in the country. That makes Khatami a weak third in the power lineup.

Iranians are pressing ahead with their own version of reform. Satellite dishes picking up CNN, the BBC and American soap operas are hidden under eaves throughout Tehran. At night, women push their head scarves back and layer on forbidden lipstick and eye shadow. The daring few sit and smoke cigarettes in hotel coffee shops-- behavior unheard of even a few months ago. Bathtub vodka and black-market beer (at $120 a case) are widely available in this supposedly resolutely dry country. Some Iranian men in the capital now leave for work in the morning wearing ties, a fashion discarded as imperialist after the revolution. Tehran must be the only city in the world where neckties are a radical statement. ""We are still in a revolutionary atmosphere,'' says Shahla Lahiji, an author and publisher. ""But people want an ordinary life.''

The changes may not go far enough fast enough. Many Iranians say it's too early to judge Khatami even though they're disappointed with him so far. But young people voted for Khatami in overwhelming numbers--kids can vote at 15 in Iran, and patience is not a virtue of youth. ""Those young people can create turmoil,'' warns Ibrahim Yazdi, leader of the opposition Freedom Party. ""If Mr. Khatami fails, this political disappointment will be manifested through social protest.'' He gives the president six months to make some significant changes or face unrest in the streets. Tehran University students demonstrated last month in favor of term limits for Ayatollah Khamenei and his successors.

Some things haven't changed. Visitors to the Azadi Hotel, commonly known as the ex-Hyatt, are still greeted in the lobby with the following: AMERICA IS THE NO. 1 ENEMY OF ISLAM AND THE DEPRIVED MASSES OF THE WORLD. The sign is in Persian, not English; it's for domestic consumption only. The trickle of foreign tourists in Iran may not get the message, but it appears that neither do the hotel staff. They are eager for tips, particularly those in U.S. dollars.

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