This year is shaping up to be a critical one for Iran, 30 years on from the Islamic revolution. The election of President Barack Obama in the US has already led to a significant change in the tone of rhetoric between Washington and Tehran. The election of Iran’s next president, in June, marks an opportunity for further change, especially in domestic policy.

The election is likely to be dominated by two candidates: the conservative incumbent Mahmoud Ahmadinejad, and his reformist predecessor Mohammad Khatami.

While both are likely to seek a friendlier relationship with the US than Iran had with the previous US president, it is in the sphere of economic policy that the largest gaps are likely to emerge during the campaign. Ahmadinejad’s policies over the past four years have been widely blamed for inflation of 20 per cent and employment of about 15 per cent.

A second Ahmadinejad term is unlikely to lead to much change in his economic policies, but his strategy of asserting Iran’s diplomatic and political strength, in the face of opposition from the West, remains a key part of his appeal for many voters.

Khatami, who draws most of his support from young voters and the middle classes, is likely to base his policy platform around less government intervention in the economy, and more privatisation.

While Ahmadinejad’s government has pursued a programme of privatisation over the past four years, it has had limited success because many potential overseas investors have been scared away by international sanctions.

If a privatisation policy is to succeed in the future, resulting in the economic growth that Iran so urgently needs to resolve its rising unemployment problem, it will have to be matched by lowering tensions in the foreign policy sphere. Sustainable economic growth will only be achieved when international companies can invest in Iran without the spectre of US-led trade sanctions.