Iran’s next step is a defining moment
Iran’s presidential candidates are making final preparations for a landmark poll on Friday, which could have significant implications for the country and the world.
At the centre of the contest are differing views over incumbent President Hassan Rouhani’s signature accomplishment — the 2015 nuclear accord, and his wider advocacy of economic and political re-engagement with Western powers.
He is widely seen internationally as a modest favourite for re-election — not least as all Iranian presidents have won a second term since 1981, but this is by no means assured. Rouhani is most likely to prevail if he can secure a big win, getting more than 50% of the vote, and emerge as victor in the first ballot, as in 2013.
But, if a second-round runoff is needed between the two strongest-performing candidates, more conservative opponents of the president could join forces to try to beat him.
The election is important not just because it will determine who is president and who will influence which pathway the country will take in coming years but also because the victor, and his allies in the Assembly of Experts, will also have a significant voice over who becomes the next Supreme Leader if Ayatollah Ali Khameini, 77, who took power in 1989, dies in office during the next presidential term.
Although Rouhani’s vision for greater engagement with the West is centre stage in the debate, his fate may rest more on the interrelated issue of public perceptions of the economy, which is the second-largest in the Middle East.
Despite the staged lifting of international sanctions since the nuclear deal with the permanent members of the United Nations Security Council (the United States, China, Russia, the United Kingdom and France) and Germany many Iranians still don’t see as big an improvement in their standards of living as they hoped for under Rouhani’s reforms.
Under the terms of the deal, Iran secured phased relief from international sanctions. This is key for the country, the source of the world’s fourth-largest oil reserves and the second-biggest natural gas stockpile, because sanctions had halved the country’s oil exports to just over one million barrels a day after 2012, which helped to cripple the economy.
The economy did grow at nearly 9% in the last quarter of 2016 and growth is estimated at about 5% in 2017. Moreover, inflation has dropped to single digits.
But key industrial sectors, including construction, are in recession and some of the positive economic dividends emanating from the lifting of sanctions have been overshadowed by the drop in the oil price, which has fallen from more than $100 a barrel to about $50.
A further drag on the economy is Iranian military and financial support for Syria and the Lebanese Shia organisation, Hezbollah. Tehran’s support for the Damascus regime is estimated at billions of dollars a year.
About 650 000 jobs were created in the past year, but Rouhani has been criticised for unemployment, which rose to 12.4% last year.
His more conservative challengers, including the cleric Ebrahim Raisi and the Tehran mayor, Mohammad Baqer Ghalibaf, have promised, if elected, to create five to six million jobs in their first term, which is clearly unrealistic.
Both have said they also want a more inward-looking economy, focused on national production and narrowing gaps between rich and poor. Raisi, too, says he would triple monthly cash handouts to poorer citizens.
At the heart of the debate over the economy is that some conservatives say Rouhani has bet too much on US and wider foreign investment materialising. Rouhani wants to attract about $140-billion in foreign investment to modernise the oil and gas, transportation and telecoms sectors.
Last year, the Iranian Chamber of Commerce estimated the country attracted $13-billion in foreign investment. Although this is a big increase from $3-billion in 2015, it is not as much as some had hoped for.
With the election of US President Donald Trump, there are also greater risks surrounding the future of the nuclear agreement, which former president Barack Obama said in 2015 offered the West and Tehran the best opportunity “in decades”, specifically since the revolution in 1979, to move relations forward.
Although the new US administration recently certified that Iran had complied with the deal, it has put Iran “on notice” after its ballistic missile tests, imposed new sanctions and launched a review of the nuclear deal.
Washington may not unilaterally withdraw from the agreement but it could still undermine the accord by putting pressure on Western countries not to do business in Iran, or by creating uncertainty about sanction waivers. That said, it would be opposed by some other parties to the deal, including France.
Growing animosity from the Trump team would complicate Rouhani’s vision for greater global engagement and closer ties with the West and, potentially, greater co-operation with key Middle Eastern states, including Saudi Arabia. He hopes here that more conciliatory policies will improve foreign investment, commercial links and diplomatic ties.
But conservatives in Tehran are digging their heels in against any fundamental changes in foreign policy principles, which have been generally consistent since 1979.
This includes broad-based opposition to the Middle Eastern policies of Israel, the US and Saudi Arabia, and also Iranian support for militant forces in the region, including Hezbollah.
The alternative pathway favoured by some conservatives includes closer economic and diplomatic ties with Russia at the expense of greater interdependence with the West.
Friday’s poll could set Iran’s agenda not just for four years but for the next decade and beyond. A conservative win would reshape the country’s domestic politics, economy and international relations.
Andrew Hammond is an associate at the Centre for International Affairs, Diplomacy and Strategy at the London School of Economics