TEHRAN - Iranian President Mohammad Khatami top advisor, amid uncertainty over the political and economic course of his new government.

Khatami picked former prime minister Mir-Hossein Musavi for his "shining background in political and revolutionary affairs," according to a presidential decree.

Musavi, staunchly opposed to rapprochement with the United States, led the government from 1981 to 1989, for most of the period when the country was at war with neighboring Iraq.

He opted for centralized economy and shifted the country away from the West and toward the socialist bloc aligned with the former Soviet Union….

Musavi, an architect by profession, has in recent weeks spoken harshly about relations with the West, notably the United States, and criticized the former government for following Western economic models.

His appointment appears to runs counter to pledges by Khatami to follow a market economy and to seek rapprochement with the outside world.

Mullahs' Ambitions for Persian Gulf, Agence France Presse, October 16 

THERAN - Iran, conducting huge naval exercises in the Gulf, hopes a display of military muscle will present it as an alternative to the United States and its allies in protecting regional security.

On the one hand, the Islamic republic has launched a diplomatic initiative to win the trust of its Gulf Arab neighbors, hoping that a rapprochement might hasten the departure of foreign forces.

On the other, it has staged a growing number of military exercises and boasted of building and acquiring new weapons to deter possible attacks by the United States or its allies….

Iranian military officials have also announced the manufacture of jet fighters, bombers and unmanned stealth reconnaissance aircraft designed to enhance Iran's defensive capabilities and ease reliance on arms purchases.

In a rare disclosure, former president Ali Akbar Hashemi Rafsanjani said last week that Iran possessed long-range anti-aircraft missiles capable of assuring security in the Gulf….

But far from reassuring the Gulf Arab states, such a display of military might is likely to raise concern….

"It is not just overtures without any deeds to be done by Iran on the issue of weapons of mass destruction," said Kuwaiti Information Minister Sheikh Saud Nasser al-Sabah….

Around 120 Iranian warships along with around 40 planes and helicopters and submarines are taking part in the maneuvers which extend from Iran's southwestern coast to the border with Kuwait's territorial waters.

U.S. Department's Measure Encourages "Godfather" of State-Sponsored Terrorism, Iran Zamin News Agency, October 15 

The clerical regime's official news agency, IRNA, yesterday quoted ex-President Ali-Akbar Hashemi Rafsanjani as saying that the death decree on Salman Rushdie "remains in force and no one can change it."

The regime's Foreign Ministry, Friday prayer leaders, and newspapers have welcomed the State Department's inclusion of the Mojahedin in the list of "terrorist groups" and described it as "a victory" for the mullahs' regime.

Meanwhile, only a few days past the release of the State Department's list, Mohammad Khatami, the mullahs' new President, met with the regime's affiliated terrorists in the Middle East and encouraged them to escalate their terrorist activities against peace. According to the reports from Iran, Khatami promised to give them political and financial assistance.

A statement by the Press Office of Mojahedin in Washington, D.C. said: "All indications are that Iran's criminal mullahs have viewed the State Department's measure against the Mojahedin as a green light for carrying out further terrorist actions against the Iranian Resistance and throughout the region, and are rushing to exploit this situation."

Mojahedin Clash with Guards in Western Iran , Iran Zamin News Agency, October 16

According to a report by the Mojahedin's Command Headquarters inside Iran, in the early hours of Monday, October 13, a group of Revolutionary Guards attacked a unit of Mojahedin combatants in the Salehabad region of Ilam, western Iran.

A statement issued by the Press Office in Paris of the People's Mojahedin of Iran said: "The Mojahedin combatants reacted with heavy fire, using RPG-7 rockets, heavy machineguns and AK-47 automatic rifles, forcing the Guards into retreat. The Guards left some equipment and ammunition as they fled. None of the Mojahedin was hurt in this clash. No information is available on enemy casualties."

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