NEWS ANALYSIS : Voting Is Over, but Not Iran’s Revolution : Politics: Rafsanjani’s moderate forces were strengthened. But the radicals aren’t giving up.

President Hashemi Rafsanjani has emerged victorious in his showdown with Iran’s radical clergy and is now poised at the next phase of Iran’s revolution--a battle to convince his citizens that he can restore their prosperity and to convince the rest of the world that Iran’s days as an international troublemaker are over.

Despite the angry “Death to America” rhetoric that still reverberates through the streets of Tehran, the overwhelming defeat of the anti-Western hard-liners in last week’s parliamentary elections almost certainly will open a wedge in more than a decade of hostility with Washington and Europe as Rafsanjani seeks to implement a five-year economic program that envisions $27 billion in foreign investment, diplomats and analysts say.

The price for moderation in Tehran is that the West will have to come to terms with the idea that Iran’s Islamic regime is likely here to stay. What Rafsanjani, a mullah (cleric) himself, wants as much as foreign finance is recognition of Iran’s theocracy as a player in the Persian Gulf and on the international stage, the analysts say.

“Even the most arrogant of the arrogant clerics have given indications that if the U.S. were ready to recognize the clerics, they would concede to a minimal relationship. They are increasingly resentful that they are branded by their neighbors here as pariahs,” said one Middle Eastern diplomat.

“The situation in Iran now is the clergy has already recognized that they have lost the support of the people, but notwithstanding that they will do everything possible to hold on to power,” even if that includes overtures to countries once considered enemies of the revolution, added an envoy who has worked to bridge the gap between Iran and the West. “We must also remember that if an attempt is made to topple them, there will be bloodshed, and they will be more ruthless than the shah (Mohammed Reza Pahlavi) ever was.”

The elections--which diminished the voice of the radicals in the Majlis, Iran’s Parliament, to less than 30% by the radicals’ own count--leave all sides with a precarious balancing act in the coming months: a moderate government in Iran that must make good on promises for a better economy, now that it can no longer blame either the war with Iraq or the hard-liners in the Parliament for inflation; the radicals, who will be seeking to build coalitions to regain their hold on the government, and finally the West, which must convince itself that Rafsanjani is sincere and not merely a fanatic in sheep’s clothing.

Part of the difficulty in predicting Rafsanjani’s likelihood for success is that he has forged the path toward moderation so far through political finesse, several analysts said. Opponents have not been vanquished, but merely silenced.

Credit for the victory of Rafsanjani-allied parliamentary candidates goes not so much to overwhelming public support--many voters were so disillusioned with both sides that they wrote “Allah” on their ballots, or even the name of a formerly popular Iranian singer--as to Rafsanjani’s having prevented many of his most formidable opponents from running.

The soft-spoken president persuaded hard-line mullahs to work for the release of the Western hostages in Lebanon by arguing not that hostage-taking was wrong but that the hostage-holders were likely to be overtaken by events and forced out of Lebanon, according to one official familiar with the hostage negotiations.

“It was only a matter of time before the Lebanese authorities, with the assistance of the Syrians, would move in, and they would be forced to release their hostages dead or alive,” he said. “Rafsanjani was able to convince the clerics that they were running out of time--’Let’s make the best of the situation while we have the ability to get some credit out of it.’ ”

Still, analysts here say it doesn’t matter why Rafsanjani needs the West--but simply that he does.

Finance Minister Mohsen Nourbakhsh, in a meeting with foreign journalists after the election, outlined an ambitious five-year development and reconstruction plan, already underway, that envisions $27 billion in foreign investment.

“I believe our overall economic and political policies and direction will, to a large extent, alleviate some of the lack of confidence that exists,” said the UC Davis-educated financier.

Yet like most Iranian officials these days, Nourbakhsh was careful to draw the line between courting Europe, which is considered politically correct as long as it hews to Iran’s terms, and courting the United States, which isn’t.

U.S. companies have been “crowded out” of a lucrative Iranian market in the years since the 1979 revolution, and Iran is in no hurry to get them back, he said. “If political obstacles could be removed, then opportunities would open up, and we certainly would take advantage of them. But the political situation that is prevailing between Iran and the U.S. doesn’t leave much room for working.”

With talk like this, diplomats say, Iranians hope to unleash an army of American entrepreneurs who will storm the Congress and demand a halt to the U.S. embargo on imports from Iran. Indeed, American exports to Iran have bounded upward in the past two years, to $650 million in 1991.

But will the foreign help come quickly enough to help Rafsanjani weather what is sure to be a painful move to liberalize Iran’s economy? An upcoming end to subsidies of key foodstuffs and commodities, recommended by the World Bank, will be painful for a population already bitter over rising prices.

Unifying and freeing the exchange rate, the World Bank’s second key recommendation, promises to irritate the bazaar merchants and fuel inflation even more.

Already, there have been protests, quickly hushed up, in a small community in southern Iran and in some sectors of Tehran itself. Grumbling is everywhere. When will it turn more serious?

As much as financial help, Iran is looking for legitimacy, and a key talking point since the Gulf War has been a formal role for Iran in future security arrangements for the Gulf. Iran expressed outrage when the Arab Gulf sheikdoms signed formal agreements with the United States and informal promises with Egypt and Syria, cutting Iran out of the equation altogether.

The United States and Britain have indicated that, along with the release of the hostages, Iran could win confidence in the region by toning down its revolutionary sloganeering and ending its meddling.

The West has indicated that Phase 3 must involve ending Iran’s involvement in Lebanon and Sudan, specifically in removing Revolutionary Guards posted in both countries, diplomats said.

The radicals would be peeved over either move, and some say Rafsanjani has permitted Iran’s campaign to spread Islamic fundamentalism in Sudan to appease the hard-liners as much as to irritate neighboring Egypt.

But the radicals aren’t in a mood to be placated. Already, they’re regrouping in a bid to regain power, either by forming coalitions in the new Majlis or biding their time until the next elections with the certainty that Rafsanjani’s economic program will fail.

“If we want to look at the results of the election, many people who were eligible to vote did not participate, and this shows their protest to the policies which may result in the weakening of the goals of the revolution,” Moussavi Khoeini, the mastermind of the U.S. Embassy takeover in 1979 and currently the key strategist for the hard-liners, said in an interview.

“With the unfortunate and unequal conditions of this election, it’s very natural for us to make our connection with people wider and to take advantage of more outlets for communication with people,” he said. “As some of our deputies are no longer in the Majlis, they have more free time to communicate to the people. These next four years until the next Majlis election will be a period of political activity. This is not the end--it is the start of a real political confrontation.”