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Iran at a crossroad in 2017

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GESI Analysis, 10/2017

Abstract: Two visions of Iran and the world will clash in 2017. On the one hand, President Hassan Rouhani´s preferences for internal moderation and the integration of Iran in the world economy and multilateral diplomacy. According to this view, the 2015 Nuclear Deal between Iran and the International Community is only the point of departure for a better future.

On the other, Supreme Leader of the Revolution, Ayatollah Ali Jamenei, upholds the view that the Nuclear Deal has a limited scope and is consistent with the traditional anti -Western and anti-American stances of Iranian foreign policy since 1979. Political factions espousing one or the other, some even the repudiation of the Nuclear Deal, will clash at the presidential elections on 19 May 2017.

In fact, the extent of the process of political liberalization and the inevitable generational shift in the ruling elite underlie the disputes over the 2015 Nuclear Deal.


The Islamic Republic born in 1979 sought to achieve independence, freedom, economic development and social justice for the Iranian people.  The restoration of regional power status was also present in that project. For centuries the Iranian elites have looked into its glorious past but have been unable to restore the glory of the Aquemenide Dynasty and the Persian Empire.

The Islamic Regime has survived war and international isolation, the ´regime change´ policies promoted by the United States and the hostility of its Arab neighbors. Notwithstanding this Iran has paid too high a price for independence and his Islamic experiment. The country has lost military and economical might and soft power in the Middle East in the past decades, in comparison with Saudi Arabia or Turkey. The war against Iraq (1980-8) helped to increase the legitimacy of the Revolution and strengthened the institutions of the young republic. Since 2011 the country endured the Western sanctions, which caused an economic downturn (a shrinking of a 9% of the GDP between 2013 and 2015).

Nowadays Tehran is gaining ground in the `Cold War´ against Riad, which under King Salman has led a more autonomous and aggressive policy against the Islamic Republic. Iran has also successfully defended its allies in the Middle East following the failure of the Arab Spring:  the Syrian regime of Bashar el Assad and the Shia regime in Iraq.

Notwithstanding this, the Islamic Regime has shown signs of running out of steam. Against the backdrop of declining living standards, this authoritarian bargain in which citizens agreed to be quiet in return for the provision of material security currently suffers the effects of unmet expectations. The distance between the “establishment” and the people has become bigger, in particular, since the Green Movement in 2009, a harbinger itself of the Arab Spring. The drivers of this increasing alienation between the ruling elites and the people are manifold:

  • The inequality in crescendo between the families and friends of the Regime and the masses. GDP per capita decreased 30% between 2012 and 2014 according to the World Bank. The unemployment is very high amongst young people and women and the IMF predicts that it will not diminish in the coming years.
  • A generational gap between a majority young population (60% under 30, according to the World Bank), who have not known the Sha, and the establishment who made the revolution and fought the war against Iraq and later filled in all the top positions in the Judicial System, the Guardian Council or the Expediency Council.
  • The contradictions between the elected institutions (President of the Republic / Majlis) in the hands of the moderates and the unelected institutions controlled by the Supreme Leader of the Revolution.

To bridge the gap, the Iranian conservative establishment acquiesced to the Nuclear Deal of 14 July 2015 between Iran and USA, Russia, UK, France, Germany, China and the UE. The Ayatollah Jamenei ordered the opening of negotiations with the Americans back in 2011; the centrist Hassan Rouhani, who achieved a landslide victory in the presidential elections in 2013 thanks to his promises of peaceful resolution of the nuclear conflict and economic recovery, is the craftsman of an international alliance of the pragmatist, reformist and moderate-conservative factions to support the agreement.

A year and a half after its announcement, the deal takes on different meanings depending on the faction. The deal with Iran´s worst enemy is a strategic decision of the Islamic Regime to relieve the external pressure (international isolation and sanctions) and have the regime focused on the resolution of internal problems. Since 2009 the Ayatollah Ali Jamenei was increasingly aware that the ´rally-around-the-flag´ policies of the 1980 and 1990s against the Great Satan were not useful in the XXI century to keep people at bay. The regime urgently needs to deliver growth and an improvement of the living conditions to its young majority population. Therefore, it is a deal to achieve some sort of détente with the West to ensure the survival of the regime and its guardians. It is also the answer of a regime on the defensive in the Middle East. Not so long ago, in mid-2015, the Islamic State was at 40 kilometers of the Iranian border. By 2015 the appeal of the Islamic Revolution in the Muslim world had seen better days.

President Hassan Rouhani takes issue with this narrow meaning that the Ayatollah Ali Jamenei has given to the Nuclear Deal. The president Rouhani believes that the deal provides a historical opportunity to change Iran for the better, undertake political and economic reforms and project a country open to the world. He does not preclude further cooperation with the USA in other areas, i.e. the fight against the Islamic State, and wants to open the country to foreign investments. Since 2013 the Rouhani´s executive has attempted to overhaul an economic system neglected by his predecessor, president Ahmadinejad.

The lift of nuclear-related economic sanctions on 16 January 2016 opened the way for the economic recovery but has not yielded the “peace dividend” yet. And this stands out as a political issue of prime importance in an election year as 2017.

The Economist "World in 2017" anticipates that president Rouhani will win a second term in the elections set for 19 May, helped by the economic and political boost from the Nuclear Deal (Iran is expected to have a GDP growth of 5.4%). However, his victory is not certain. The nuclear deal might have doubled the country´s oil exports as well as alleviated its political and economic isolation but has yet to generate tangible results for Iranians. For the time being, the ´trickle-down effect´ to the middle and popular classes is absent and popular support for the Nuclear Deal has decreased since July 2015. Unless the benefits of the deal are spread widely, president Rouhani´s main asset would become his biggest liability as Ali Hashem stated recently in Al-monitor.

To win a second mandate, President Rouhani urgently needs to reengage with the reformist constituency which voted on a mass scale for him in 2013 and again for the Rouhani-backed candidates in the elections to the Majlis in 2015. Civil right issues have been sidelined during his mandate. It will not be easy as he will face the ultraconservatives of the regime.

Furthermore, the unexpected victory of Donald Trump in the presidential elections in USA has compounded the outlook for the future of the Nuclear Deal, the main asset of Rouhani´s bid to get reelected. The first moves of a new American Administration in which the detractors of the Nuclear Deal dominate the security and defense apparatus anticipate a more aggressive policy towards Tehran. The question is how far the Trump administration will go. Their bombastic language and new economic sanctions for ballistic missiles tests will not necessarily spoil the Nuclear Deal –so far there is no indication that president Trump is going to repudiate Obama´s landmark agreement in foreign policy.

What is certain is that president Trump´s policies will affect Iran´s politics. The more hostile his policies towards Iran will be, the more reassured the Iranian hardliners will feel to attack moderate Rouhani because of the failure of his diplomatic opening to yield tangible results for Iranian people. Therefore, a radical American administration will only vindicate Ali Jamenei´s vision.

So far the absence of tangible benefits of the Nuclear Deal has emboldened the hardliners. The Principalists are trying to muddy the waters. The Judiciary Chief has hinted that the president could be questioned because of his relations with an Iranian billionaire sentenced to death for corruption and who would have allegedly confessed that aided financially the election campaign of Hassan Rouhani in 2013. The Principalists have also requested the Judiciary to detain the brother of the president because of corruption charges and some have even asked the Guardian Council to reject his candidacy to the presidential elections.

However, their division and the lack of conservative candidates that could defeat the incumbent in the polls undermine the prospects of the conservatives. Former president Mahmoud Ahmadinejad has been advised by the Ayatollah Ali Jamenei not to run.

Furthermore, the Ayatollah Ali Jamenei and the regime still need détente with the West to address the legitimacy crisis and underpin the Revolution. They urge the improvement of the living conditions of the Iranians that the Nuclear Deal and the lift of sanctions could bring. With this in mind Alireza Remazani has pointed out that the Islamic establishment prefers a moderate administration in Tehran to safeguard the achievements of the hard-won nuclear agreement, given the emergence of hawkish elements in Washington.

In the light of the foregoing my best estimate is that, if the Nuclear Deal survives president Trump´s first months in office and the Iranian economy continues improving, even if it´s at a slower pace, president Rouhani should win a second mandate though it will not be the landslide victory of 2013.

If that should that happen, the question of how far president Rouhani is able to go in the liberalization process remains open. Much will hinge on president Trump´s commitment towards the Nuclear Deal, thus paving the way to the provision of a visible economic peace dividend for Tehran. Thanks to the Nuclear Deal, Iran will have additional funds that the regime could use to create economic opportunities to engage its young working-age population or project power in the Middle East. Another question is whether economic development will bring about political reform.

Last but not least, the death of the pragmatist Ayatollah Ali Akbar Hashemi Rafsanjani on 8 January has left the moderate and international camp without a very important reference and is going to deprive the president of his main backer against Iranian hardliners.

Ayatollah Ali Jamenei

Rafsanjani´s demise, one of the pillars of the Islamic Republic together with Ayatollah Jamenei, is a reminder of the leadership´s mortality. The old guards who made the Revolution are dying at an accelerating rate and, as a Suzanne Maloney of Brooklin has recently said, the process of change itself inevitably create further uncertainty, tensions and openings. In this regard it will be the succession of the Ayatollah Ali Jamenei (78 years-old), Supreme Leader of the Revolution and the most powerful institution in Iran, the one replacement to tilt the balance towards change or statu quo in Iran. This will be the crucial battle.

This transition between the old and the new generation of leaders of the Iranian regime will coincide with a period of Iran´s growing power and influence relative to other states in the region, following decades of losing weight in the Middle East, as the National Intelligence Council of the USA anticipates in the report “Global Trends”, an unclassified assessment of the key trends and uncertainties that might shape the world over the next 20 years.

José Luis Masegosa Carrillo, International Institute of Political Sciences, Madrid. @LamiradaOriente.

Editado por: Grupo de Estudios en Seguridad Internacional (GESI). Lugar de edición: Granada (España). ISSN: 2340-8421.

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