Within weeks of Iran’s surprise acceptance of a ceasefire in its war with Iraq last July, perceptions of the regime in Tehran on the Arab side of the Gulf underwent a radical transformation. Governments in Kuwait, Riyadh and Bahrain pledged to forget past clashes, restore full diplomatic ties and launch a new era of political cooperation. Dollar signs danced in traders’ eyes as they saw a revival of a once booming reexport business with ports on the Persian coast.
 
 Many Shi‘i sympathizers of the Islamic Republic, on the other hand, saw the final collapse of a revolutionary ideal, the defeat of a new patron, the eclipse of a beacon. A new, post-war era has dawned, but one whose characteristics await definition as Iran itself sets new priorities and grapples with internal divisions.
 
 Members of the Gulf Arab political and business elite often say they welcomed the Islamic revolution when it erupted ten years ago. Arab nationalists saw a new ally in the fight against Israel and believed Islamic solidarity would replace Persian nationalism as Tehran’s credo. They rejoiced in the overthrow of the Shah, despised for his oil deals with Israel and his seizure of the Tunb islands in the southern Gulf in 1971. Leftists hailed the crumbling of a pillar of American influence in the region. Disadvantaged Shi‘a were elated by a new Islamic order that promised social justice and political power for their co-religionists across the water.
 
 But as the new regime took shape, Iran’s revolution quickly came to be seen as a specifically Shi‘i one that sought to shake the Sunni foundations of the Arab states. Frightened rulers rallied behind Baghdad when war broke out in September 1980, and especially after Iranian troops went on the offensive in 1982 and inched steadily closer to Basra and Kuwait.
 
 Anti-Iranian sentiment peaked in 1987 after a series of Iranian missile attacks against Kuwait, Iranian strikes on Arab shipping in the Gulf and the Mecca riots in which more than 400 Iranian pilgrims died. For most citizens, the Iranian revolution ceased to mean anything more than war against the Arabs.
 
 Sympathy for Iran persisted only among the Shi‘i minorities, many of Iranian origin, in Kuwait, Saudi Arabia and the United Arab Emirates, and the Shi‘i majority in Bahrain. Tehran radio broadcasts portraying the ruling families as corrupt, sacrilegious and manipulated by the West struck a sympathetic chord in poorer Shi‘i neighborhoods that had not fully shared in the oil boom. Even scions of wealthy Shi‘i merchant families, alienated by rampant Western consumerism, were drawn to a movement that advanced a more authentic Islamic identity.
 
 In Saudi Arabia, Shi‘i riots shook the Eastern Province in 1979. Bahraini Shi‘a, with support from Iran, attempted to organize a coup in 1981 and plotted to blow up the island’s refinery as recently as December 1987. In Kuwait, a handful of pro-Iranian militants launched a campaign of violence against Western influence and the ruling families in 1983, when a group composed mostly of Lebanese and Iraqi Shi‘a bombed the US and French embassies and Kuwaiti government buildings. Their movement peaked in 1985 and 1986 with a spectacular assassination attempt against the emir and coordinated bombings at outdoor cafes in the capital, less than 50 miles from the Iran-Iraq war front.
 
 They were energized by Iranian advances on the battlefield, including the capture of Iraq’s Faw Peninsula in early 1986 and a push to within ten miles of Basra in early 1987. But the near collapse of the Iranian army in a series of Iraqi offensives that began in April 1988 dealt a devastating blow to pro-Iranian militants in the Gulf, whose tiny ranks had already been thinned by arrests and suicide missions.
 
 In Kuwait, silent support for the bombers never exceeded a minority of the Shi‘i community, itself only 25 percent of the Kuwaiti population. Big Shi‘i merchant families went so far as to put ads in local newspapers disassociating themselves from the violence.
 
 Khomeini’s credibility plunged when, after repeatedly vowing to fight until the end, he embraced a UN ceasefire agreement and reestablished full ties with Britain, France and Canada. Iran’s sympathizers felt abandoned, even deceived, as Tehran moved to patch up ties with Kuwait, Saudi Arabia and Bahrain soon after the ceasefire.
 
 Arab governments in the Gulf have been all too willing to take up the new hand of friendship extended by Tehran. Fearful of Iraq’s new military prowess, mindful of Iraqi territorial claims and needing cooperation with Iran within the Organization of Petroleum Exporting Countries, Kuwait has upgraded diplomatic representation reduced during the war and vowed to turn over a new leaf in relations. Bahrain has taken similar steps. Saudi Arabia, the only state to have actually cut ties, will probably resume them shortly, although it remains the most bitter.
 
 The Gulf Cooperation Council (GCC) -- Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE and Oman -- is moving back to its traditional policy of balance between the region’s two biggest military powers. It knows that US naval vessels sent to protect its shipping from Iranian attack in the Gulf last year will not be around forever, at least in their current numbers.
 
 The GCC is thus anxious to work out a modus vivendi with Tehran. Progress will be slow until a formal Iran-Iraq peace is signed. Traders, meanwhile, are anxious to reestablish lucrative business ties with Iran, particularly in Kuwait and Bahrain. They are embracing a new version of Iran’s revolution -- pragmatic, in need of friends, and pledged to internal development instead of external expansion.