By Trudy Rubin

QOM, Iran _ The liveliest debate about the relationship between Islam and democracy is going on inside a theocracy. Inside Iran. This debate matters as America prepares to go to war with neighboring Iraq.

The White House hopes the demise of Saddam Hussein will prod Arab rulers toward democracy. But if Arab regimes implode, the most likely beneficiaries will be the Islamists rather than the thin layer of Arab liberals. Yet there’s little serious debate in the Middle East on whether Islam can be melded with democracy. Most Arab Islamists disdain pluralism and Western institutions as anti-Islamic because they permit more than one truth. What an irony that Iran _ whose Ayatollah Khomeini inspired Islamic radicals the world over _ has become debate central over the wisdom of clerical rule.

Debate is especially intense in the dusty city of Qom, where thousands of seminary students in turbans and cloaks rush among mosques and brick seminaries and sit at the feet of leading ayatollahs. Many dissident clerics worry that Iran’s system of religious rule is corrupting the clergy with power and turning young people against religion.

These include followers of Ayatollah Hossein Ali Montazeri, a top scholar who was set to succeed Khomeini but was pushed out just before the leader’s death for having views that were too independent and pluralistic. The 80-year-old Montazeri was just released from five years of house arrest for having blasted Iran’s “monarchical setup,” a system by which a supreme religious leader can trump the elected parliament, control the judiciary, the military, and much of the media.

The crush of well-wishers sent Montazeri to the hospital with heart palpitations, but his son Ahmad greets me in a modest room lined with floor cushions and rows of Islamic legal volumes. “My father believes that no one should be arrested for presenting his ideas freely,” says Ahmad Montazeri. Islam contains no injunction, the son says, for punishing freedom of speech.

Across the street, another revered cleric, Grand Ayatollah Yusef Saanei, receives visitors in his book-lined study, his white wispy beard nodding as he talks about his controversial religious rulings or fatwas. They include a ruling that all people are equal in the Holy

Koran, be they men, women, Muslims or non-Muslims.

Saanei has also ruled that no person is infallible, a judgment many here interpreted as a slap at the over-aggrandizement of power by the current supreme leader, Ali Khamenei. “The leader should be elected by the people,” says the ayatollah. Montazeri and Saanei are wrestling with the dilemma of combining popular will with a government that adheres to the laws of Islam. This issue has come to a head because Iranians elected a reformist parliament and president who opened the country up to unprecedented discussion.

But Iranian glasnost produced a conservative backlash from top clerical leaders. Eighty newspapers have been shut and many people jailed for discussing once-taboo subjects like the rightness of “velayat-e faqih, Iran’s rule by a supreme clerical leader. And the debate goes further: it confronts the compatibility of democracy and Islam.

One of the brightest scholars to address this issue, Mohsen Kadivar, was sent to jail for 18 months for his book about the limits of theocracy. “After I came back from prison,” Kadivar told me, “I said democracy and “velayat-e faqih are incompatible.” The reason: the supreme cleric is impervious to the public’s control. But Kadivar thinks “we can have an interpretation of democracy compatible with Islam.” His concept: a referendum on a parliamentary system that would govern in accordance with precepts of religious law. “If we can convince a majority,” he says, “we can have a religious state.” If the majority disagree, they cannot be forced. If an Islamic state is later voted out of power, the people’s will should be obeyed.

Could an Islamic state truly be dismantled by voters? What about the minority that didn’t vote for a religious state? Kadivar’s hybrid seems unrealistic. And yet it matters that bright minds are grappling with democracy’s relationship to Islam and recognizing that religious rule can become clerical fascism. In a region where many Muslims can’t imagine a secular state, someone must parse the democratic alternatives.

This isn’t happening in the Arab world. So pay attention to the debate in Iran.