Partially Blurred Image of Iran on a Map (Picture: Getty Images/iStockphoto/Marcio)

Iran: Euphoria Following the Nuclear Deal Has Passed

Four months on from the reformist victory in the double election and five months after the closing of the nuclear deal new prospects for Iran have opened up on the international stage. Yet, a climate of insecurity in the Islamic Republic remains and the country stays unpredictable.

On 26 February 2016, Iranians went to the polls to elect the next parliament and the Assembly of Experts. The process was overshadowed by sweeping disqualification of reform-minded candidates. Nevertheless, reformists achieved substantial electoral gains over their Islamist rivals.

The Assembly of Experts is the highest constitutional organ of the Islamic Republic, responsible for appointing and dismissing the Supreme Leader of the Islamic Revolution, a position held by Ayatollah Khamenei since 1989. From a total of 166 approved candidates, 88 were elected to the Assembly. The reformist faction, in the belief that it had been unfairly penalised in the approval process, sought to weaken Islamist candidates close to Khamenei by urging supporters to vote for less radical, well-known rivals.

At least in Tehran, this strategy proved highly successful. Of the 16 candidates on the reformist list for the capital, 15 were elected to the Assembly, including the leaders of the reformist camp, former President Hashemi Rafsanjani and current President Hassan Rouhani. The defeat of hardliner Ayatollah Mohammad Yazdi, chairman of the outgoing Assembly of Experts, and Ayatollah Mesbah Yazdi, spiritual leader of the radical parliamentary group Front of Islamic Revolution Stability, came as a massive surprise.

The incoming parliament comprises 120 reformists, 83 Islamists, 81 independents and 5 representatives of religious minorities. The fate of a seat from the Isfahan district remains unclear. However, as many reformist candidates were disqualified by the authorities to run for election, less than a third of those included on the reformist lists are actual reformists. Two thirds are independents and critical moderate conservatives whom the reformists placed on their lists. How they will behave in the future remains to be seen. There is good reason to expect a government-friendly parliament.

The Assembly of Experts will remain loyal to Ayatollah Khamenei. However, change could be in store in light of the ailing health of the 76-year-old, who might not survive the Assembly’s’ full eight-year term.

Iran’s parliament wields only limited influence on foreign and domestic policy: decisions here are the remit of Ayatollah Khamenei who has the power to reverse parliamentary decisions by decree. Even so, a mostly government-friendly parliament would strengthen Mr. Rouhani’s cabinet and pave the way for the resolution of a number of issues such as sluggish economic growth, high inflation and unemployment and rampant corruption.

Nuclear deal has not ended climate of insecurity

The World Bank estimates that Iran’s economic growth totalled 0.5 percent in the period from March 2015 to 2016. Against the backdrop of lifted sanctions following the nuclear deal between Iran and the P5+1 group of world powers – the US, UK, France, China and Russia plus Germany – growth is expected to rise to over 4 percent in 2016/2017.

The unemployment rate, however, remains stubbornly high, currently at 11.7 percent. Iran’s Minister for Economic Affairs, Ali Tayabnia, announced in March that the country’s banks are practically bankrupt, adding that the government – itself the largest debtor – was powerless to help them.

These issues can be traced back to the sanctions still in place, mismanagement, corruption and the dualism within the country’s power structure.

The termination of economic and financial sanctions imposed as a result of Iran’s nuclear activities and of the sanctions on Iranian banks means that the country is once again permitted to buy oil and natural gas, operate oil tankers and trade currency, gold and precious stones. The sanctions imposed separately by the US and the European Union on grounds of terrorism and human rights violations remain in place though. Long-standing American sanctions forbid US citizens, firms and banks from conducting business with Iran.

The governor of Iran’s Central Bank, Valiollah Seif, recently complained that European banks were also reluctant to allow Iran to access credit or use the SWIFT system. The spectre of renewed sanctions in case Iran does not comply with the terms of the nuclear deal has created a climate of insecurity which acts as a deterrent to long-term investment.

Power struggle between reformers and Islamists continues

In the wake of the nuclear deal and the double election, the power struggle between the pragmatic-reformist camp and the conservative Islamists has gathered pace. The reformist camp is intent on expanding the results of the nuclear deal – lifting of sanctions and opening up to the West. Ayatollah Khamenei, who supports the Islamists and has been increasingly critical of the nuclear deal, claims that it is a conspiracy by Iran’s enemies designed to gain control of the country.

Currently, the reformers lack the resolve to decisively challenge the critics of the nuclear deal. The government has conceded that they are powerless to act against the basij militia and the arbitrary detention of anyone following Rouhani’s call to return to the country and serve its people by Iran’s numerous security agencies, secret services, judiciary and revolutionary guards.

With a year to go until the end of his presidential term, President Rouhani has yet to make good on a number of his electoral promises, including freeing the opposition leaders of the “Green Movement”, Mir Hossein Mousavi, Zahra Rahnavard and Mehdi Karroubi; strengthening civil rights and improving the situation of minorities.

As the latest edition of the Bertelsmann Stiftung’s Transformation Index, BTI 2016, finds, there is considerable potential for popular uprisings in the future: “Silence and apparent order on the streets are deceptive. As in the Arab world, any spark could trigger mass social-revolutionary protests; in fact, the massive 2009 demonstrations following the rigged presidential elections (the “Green Movement”) showed the depth of frustration felt by Iranian citizens.”

Investment decisions are on hold pending the outcome of the US presidential elections

Although the nuclear deal has, for the time being, neutralised the threat of imminent war and opened up new prospects for Iran on the international stage, the early euphoria has dissipated. The thesis of American paradigm change favoured by Western journalists and researchers whereby Iran will be transformed into a regional stabiliser to the detriment of Saudi Arabia has turned out to be entirely wrong.

While relations with high-ranking officials in the West have improved perceptibly, the provocative ballistic missile test conducted shortly after the lifting of sanctions and the martial tone of high-ranking radicals and military officials shows that the country remains unpredictable. The German Interior Minister Thomas de Maizière doubts that Iran fully adheres to the nuclear deal. He reported on numerous illegal proliferation activities. There were about 90 illegal actions in Germany’s biggest federal state North Rhine-Westphalia to approach technique that would be used for nuclear weapons and launchers .

Many investment decisions are on hold pending the outcome of the US presidential election, with the result that the changes Iran so badly needs are unlikely to come about before November 2016. A victory by neoconservative Donald Trump could spell the end of the nuclear deal, dashing Iran’s hopes of economic development and paving the way for a resurgence of radical ideology. Former president Mahmoud Ahmadinejad is waiting in the wings.

Behrouz Khosrozadeh is a political scientist and lecturer at the University of Göttingen, Germany. He is one of 246 country experts who worked on the latest edition of the Bertelsmann Stiftung’s Transformation Index, BTI 2016.

Text in collaboration with Mandy Lüssenhop, University of Göttingen.

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