Former majles speaker Akbar Hashemi Rafsanjani was elected to the newly empowered presidency on July 28, 1989, in a non-competitive election, amassing nearly 95 percent of the vote after the Guardian Council allowed only two of 79 applicants to stand for election. The Islamic Left still controlled the majles and succeeded in installing one of its own, Mehdi Karrubi, as Rafsanjani’s replacement as speaker. A constitutional referendum was held in conjunction with the election to ratify the proposed amendments, with more than 97 percent voting in favor of the changes, according to regime figures. The passage of the amendments retroactively legitimized Khamenei’s unconstitutional succession to the Supreme Leadership. They erased doubts that his appointment may have been temporary, paving the way for him to retain the office indefinitely. Even with the institutional hurdles removed, longevity in the position would require shrewd political acumen.

At the outset of his succession, Khamenei lacked not only clerical bona fides but also Khomeini’s political popularity and authority and had to move cautiously to buttress his position. Khamenei recognized that some of his modernist idiosyncrasies displayed as president would not serve him as Supreme Leader, as he relied on the backing of the traditionalist-dominated clergy to legitimize his rule and the velayat-e faqih system. Khamenei knew the other pillar of support he needed to cultivate was the IRGC. One of his first decisions was to retain Mohsen Rezaei as commander of the IRGC, and he expanded his existing ties with the IRGC to further solidify his base of support. Khamenei’s alignment with the traditionalist conservatives and IRGC led to him adopting a hardline disposition as Supreme Leader from the outset, which has stuck with him throughout his tenure.

Rafsanjani shared a conservative outlook with Khamenei but had forged his path as a “pragmatist,” leading a coalition known as the “modern-right.” Rafsanjani’s coalition was backed by an emerging social group of technocrats and the nouveau riche who sought a society with religious influence but did not favor repressive state enforcement of strict religious adherence, in contrast to the more hardline, traditionalist conservative devotees of Khomeinism. The “modern-right’s” focus was largely economic, favoring free-market liberalizing reforms and the privatization of much of the state-controlled industries. They sought to move Iran away from an informal, bazaar-led economy in favor of creating a modern, industrialized state and backed ties with the West to achieve this vision.

Lacking Rafsanjani’s vast connections, political gravitas, and authority, Khamenei had no choice but to ally with him at the outset of his presidency, giving Rafsanjani a wide berth to direct the course of Iran’s post-war reconstruction phase. As Khamenei found his footing in the early going, it was clear that Rafsanjani was the dominant figure in the diarchy. However, the constitutional powers vested in the Supreme Leader gave Khamenei a powerful trump card and the eventual upper hand.

The Iran-Iraq war had devastated the country and destroyed its most important industries and infrastructure, including the country’s main port at Khorramshahr, the Abadan oil refinery, and the Kharg loading facility. According to Iran expert Nikki Keddie, “Problems like inflation, unemployment, deficit spending, overwhelming dependence on oil, and declining agricultural self-sufficiency were worse than ever.” Rafsanjani recognized that successful reconstruction would require Iran to moderate its foreign policy bellicosity, liberalize the economy, and allow limited social reforms to create conditions that would stimulate economic growth and attract foreign aid and investment. It was also crucial for Iran to be perceived as politically stable, necessitating a smooth transition at the top echelons post-Khomeini and the minimization of political infighting.

As the weaker figure in the diarchy, Khamenei largely supported Rafsanjani’s pragmatic efforts to restore détente with the Arab world and Europe and implement limited domestic reforms, particularly in women’s rights. However, tensions between Khamenei’s and Rafsanjani’s worldviews could only be papered over for so long. Khamenei’s top two priorities as Supreme Leader were inherently contradictory; on the one hand, he sought national rebuilding, which required liberalization; and on the other, he sought to buttress Iran’s commitment to the Islamic Revolution and Khomeinist principles with renewed fervency.

Speaking at Rafsanjani’s inauguration in August 1989, Khamenei clarified that the Islamic Republic would never waver from its revolutionary DNA despite the new president’s calls for a more responsible Iran on the international stage. “There are those who suggest that Iran has entered into a new era with a new orientation. I assure you, Iran continues on the path of the Islamic Revolution and has not diverted from its [revolutionary] ideals,” Khamenei intoned. Khamenei also poured cold water on establishing diplomatic ties with the U.S., which Rafsanjani ultimately saw as necessary for the Iranian reconstruction project because he believed the U.S. was inherently hostile to the Islamic Republic and sought regime change rather than simply behavioral change. He remarked during his address, “Questions have been raised, until when Iran will refuse diplomatic relations with the U.S. The answer is the same as Imam Khomeini gave – until such a time that the U.S. terminates its policy of force, tyranny, oppression and hostility, and support of the enemies of the Islamic Republic and the Zionist regime.”