Thousands of Iranians celebrated in Tehran’s streets on 14 July after the agreement between Iran and the P5+1 Group (China, US, UK, France, Russia and Germany) in Vienna. After 12 years of crisis and a diplomatic marathon of 21 months, this first step thrilled Iranians hard hit by sanctions. In the excitement some people, including women, even wore the US flag on their clothes, unthinkable a few years ago.
Within a month, delegations of western businessmen and ministers arrived, hoping for the speedy reopening of the Iranian market. But several important questions remain about Iran’s future and a deal that was to stop Iran from getting the bomb, a project the Iranian authorities had always denied. Iran made important concessions to get sanctions lifted: freezing some research areas, dismantling sites, reducing the number of uranium enrichment centrifuges and agreeing to inspections.
“No one knows if the agreement will be approved in Iran, and we’re not sure if in the United States it will be voted in,” said Ayatollah Ali Khamenei, the country’s Supreme Leader and ultimate decider, on 18 August. This was a reminder of the determination of many US Republicans to torpedo this diplomatic success. After the adoption of UN Security Council resolution 2231 on 20 July, the US Congress must also, by 20 September, agree to the lifting of the sanctions imposed since 2006. If Congress votes against, President Obama has warned that he will use his power of veto. For the bill to be annulled, two thirds of the members of both Houses would need to throw it out, which seems unlikely.
Khamenei’s words also show how he takes into account the opposition of hardline regime splinter groups to all normalisation with the US. But even if a return to old positions cannot be excluded, optimism reigns in Tehran — if only because Iranian leaders are aware of the importance of the Vienna agreement for the regime’s survival.
Queuing for food stamps
Last winter, all over Iran, huge crowds gathered in front of government supermarkets or distribution vans, standing in line for hours on frozen streets for food stamps.They waited for essential foods such as oil, sugar, wheat and eggs, and perhaps some tea and a frozen chicken. In some cities, they fought angrily over this “basket of subsidised goods” (distributed to those in the government’s cash aid programme). It was shocking to see in such a resource-rich country. According to the World Bank, Iran ranks second globally in natural gas reserves and fourth in proven crude oil reserves. The distribution of this basket and the huge public demand for it revealed a sad hidden reality — the severity of economic conditions under sanctions.
These scenes, widely seen and discussed on social media, showed how sanctions had forced many, especially the middle class, into poverty. Seeing Iranians waiting for food stamps also alarmed the regime, and convinced a number of political and religious authorities of the risk of public reaction against the entire political system.
This was not the only reason for Iranians’ pursuing the negotiations with the western powers to the very end. The regional turmoil, with the growing involvement of Iran’s rival, Saudi Arabia, in the civil wars in Syria and Yemen, and the rise in power of IS (Islamic State), counted too. But deterioration in the economy was the key factor. GDP growth, hampered by the embargo and a decrease in revenues from falling oil prices — Iran is expected to lose potential earnings of $40bn in 2015 — will not be more than 1% this year. (It was 6.8% down in 2012, from which it recovered by a modest 1.5% in 2014.)
A broad enough mandate
All this — with inflation too (15% in May 2015) — pushed Iran’s leaders to give the negotiators a broad enough mandate to secure an agreement that allowed the lifting of sanctions without any non-nuclear concessions. A diplomat who did not wish to be named said: “The Supreme Leader responded quickly, not waiting for millions of unhappy people to riot. He rescued the republic and also his legacy. Iran lost so much for all the investment it made in nuclear technology and educating technicians and other employees. This nuclear agreement has prevented the threat against the regime’s existence.”
In contrast to the hardline presidency of Mahmoud Ahmadinejad (2005-13), the composition of the negotiating team suggested the regime’s desire for a deal. President Hassan Rohani, elected in 2013, is best known in the West for his role as lead negotiator on the nuclear issue in 2003-5, under the Islamic Republic’s reforming president, Mohammad Khatami (1997-2005). Rohani appointed Mohammad Javad Zarif, his main colleague during the negotiations, as his foreign minister. Zarif, a former ambassador to the UN, is pragmatic, speaks English, and has won media and general praise. Many papers, delighted with the recent agreement, even compared him to Mohammad Mossadeq (1882-1967), Iran’s first democratically elected head of government, who nationalised oil resources and was then ousted in a CIA-inspired coup in 1953.
It remains to be seen if the deal will bring the economic improvement that Iranians expect. According to forecasts by the Middle East economics journal Meed, even a progressive lifting of sanctions should allow Iran to double its GDP ($427bn in 2014) by 2030 and to attract almost $342bn of foreign direct investment by 2020. For Ali Mashayekhi of investment firm Turquoise Partners, “the capitalisation of the Tehran Stock Exchange could increase by 400% in five years to reach $512bn.” Industry minister Reza Nematzadeh thinks the oil sector alone will eventually benefit from more than $114bn of FDI. The Iranian government also hopes to recover some of its frozen assets. It is hard to know the exact figure: many in the West suggest $100-150bn, though the Obama administration puts it at $56bn. In Tehran, the official estimate is that only $29bn will be recovered in the short term.These differences fuel Iranians’ mistrust of their government’s intentions over the use of these precious financial resources.
The positive effects of lifting the sanctions will not be immediate, though part of the money could be used to buy temporary social quiet. A journalist with a leading Iranian newspaper, who did not want to be named, said he thought it would takes at least two to three years for the economy to improve, “but people don’t want to wait... President Rohani and his team should be concerned about the public’s demands, and they have to address the matter openly to manage expectations for the economy. The frustration may be reflected at the next presidential election if Rohani doesn’t improve the standard of living and boost the economy.”
Any improvement will first require a reform in the banking system, which is not doing well and is burdened with large, doubtful debts. Foreign banks will be reluctant to take part since the Vienna agreement stipulates a return of sanctions within 65 days in the event of any Iranian backsliding. Ahsen Mansour, a businessman in Dubai, said: “The case of the banking sector is representative of the fundamental choices that the Islamic Republic must make on economic policy. Will it move towards a neoliberal option, which would mean dismantling certain banks? What will be the new model chosen to accompany the expected economic transformation? For now, nothing is clear.”
This economic opening will not necessarily mean a greater rapprochement with the US, or internal political reforms. During the discussions with the P5+1 Group, Khamenei often reminded the Iranian negotiators that their mandate was confined to the nuclear question and they were “not authorised to talk of other subjects that the US would try to bring up, such as the situation in Syria or Yemen” (1). Any change to the internal policy line remains uncertain, as shown by a report by Amnesty International that the Iranian authorities executed 694 people between 1 January and 15 July this year.
‘Young people will make changes’
Not everyone agrees. Professor Touraj Daryaee, director of the Samuel Jordan Centre for Persian Studies at the University of California, believes that “from all the signs that have been given so far, it seems there is a genuine policy shift under President Rohani to stick to his pledges. His platform states that first international issues will be addressed, then internal ones: a push for civil society, fewer restrictions on women and Iranians in general were promised. Whether the government likes it or not, young people will make changes and nothing can be done about it.” Everyone knows that the Vienna agreement could not have been reached had it not been approved by the Supreme Leader and his hardline supporters. And the hardliners had to be convinced that this government will not permit dramatic changes or they would not have allowed Rohani to become president.
The signals are so contradictory that it’s hard to gauge Rohani’s margin for manoeuvre in terms of increasing individual liberties. Two weeks after the nuclear deal was announced, he went to Kurdistan (where the population is mainly Sunni); there he proclaimed that in Iran “we don’t have second class citizens” and promised that everyone was treated equally. Yet a few days earlier, the regime had had a Sunni mosque in Tehran razed in the presence of police, security and municipal representatives. About 10% of Iranians are Sunnis, of whom a million live in Tehran. Sunnis are not allowed to have mosques there even though the regime calls the city the capital of the Islamic world. The Sunni minority are perceived as potential collaborators with Saudi Arabia. The government fears that large gatherings at Friday prayers for Sunnis might be a national security threat, encouraging them to challenge the Shia regime.
The question of opening up the political space will be decided on 25 February 2016, when Iranians will vote in parliamentary elections for the Majlis and the all important Assembly of Experts, which has the power to select the Supreme Leader and supervise his activities. The election, which occurs every eight years, may be very important since Ayatollah Khamenei, is 76 and the next Assembly may have to choose his successor. The popular politician Akbar Hashemi Rafsanjani, twice president between 1989 and 1997, has announced his candidature for the Assembly; some see this as the way to major changes. Rafsanjani has urged that Hassan Khomeini, grandson of the founder of the revolution and a reformer, should also run.
The comprehensive Vienna deal will do nothing to diminish the importance of these elections. An editorial in the ultra-conservative newspaper Javan said that “the enemy [the US] will try to use the period following the nuclear deal” to take advantage of “decisive elections for the Majlis and Assembly of Experts.” Those in favour of political opening will not be able to ignore this warning. Daryaee believes that “it all depends on how the current Iranian government will deal with its people. People voted for a change in Iran and so there are expectations for change. I think there is a good chance of change, but there are those who ... would like to uphold the conservative ideals and revolutionary Islam. President Rohani does not control all of the power in Iran, so it will be an uphill battle.”
