Expert Speak Raisina Debates
Published on Jan 11, 2018
If Rouhani is the middle, it is not wise to celebrate an attack against him. Not until, organically most if not all of Iran and not just Tehran like in 2009, seeks a change in the political order.
Who benefits from the protests in Iran? Minutes before the Delhi to Tehran flight started to descend, there was a hustle-bustle of a mini market mid-air. Donning high street fashion, women struggled to pull out the hand luggage and began covering themselves up. Some threw a knee length camise on top while others wore a veil. All of them tied their hair and hid the tassels under their head scarf. They were preparing to return home where these were legal requirements since 1979’s Islamic revolution. The Imam Khomeini International Airport is named after the cleric who brought about the change by deposing the Shah, an ally of the US. One of the world’s emptiest airports, it lacked the diversity in people and enterprises. While most airports in the capital cities of the world resemble swanky malls, in Tehran it looked more like a mom and pop store, caught in a time warp. There was a certain ease and coziness about it, but it also reflected Iran’s isolated status in the global market. At its height, the Persian empire controlled 2.9 million square miles ning three continents, but my first impressions in Tehran in March 2016 revealed its economic isolation and — while incomparable to the gulf — the conditions the state imposed on the women of the country. Inside Tehran, everyone I met was talking about the economy. Dalir, a 23 years old Iranian, sits on his father’s spices shop in Tehran’s grand bazaar. He appreciated Rouhani for signing the nuclear deal with America and hoped it would end Iran’s segregation and boost the economy. In July 2015, less than year before my visit, Iran had signed a nuclear deal with the US and five other western nations and the young Iranians, who did not wish to be cut off from the world, were optimistic. ‘There are very few jobs,’ Dalir told me. ‘With the nuclear deal, we hope sanctions would lift and foreign companies will come in.’ Dalir studied business management and was banking on foreign investments to come in and create more jobs.

The ouster of the Shah and the rise of the Ayatollah in 1979 made the US impose sanctions on Iran which over time debilitated Iran’s economy.

As the rest of the world globalised, Iran’s affairs were run by the state. The US expanded the sanctions in 1995 and again in 2006 when the UNSC passed a resolution because Iran refused to suspend its uranium enrichment programme. Finally, in 2015, Obama and Rouhani signed the nuclear deal lifting partial sanctions and giving Iranians hope of a prosperous future. Iranian economist Sayeed Laylaz says the hardliners gave their nod to the deal reluctantly. Laylaz participated in the protests which erupted in 2009 and along with thousands of others sought change in the economy through a change in the leadership to Mir-Hussein Mausavi, socially and economically a more liberal candidate. “The hardliners are most concerned about social reforms like the empowerment of women because then their idea of Islamic Iran is under question,” he told me at his residence in Tehran. The hardliners realised that they were under threat and if they did not give in on the deal and open up to the West, they might eventually face an exit or and lose control over the Iranian society since many Iranians lament the loss of personal liberties. “Iran is like a wagon. The people sitting in the front want complete social and economic liberalisation while those at the back resist it completely. Rouhani represents the middle. So, we asked the liberals and the hardliners to come to the middle and that is how we got the deal with the US.”

Yet, in this push and pull, the Iranian people didn’t quite get what they were looking for. Despite the deal, Iran saw protests on 28 December which turned violent and claimed 21 lives. Did Rouhani fail them or did the US backtrack?

A shrinking food basket

The trigger was the price of eggs. A 50 percent rise in the price of eggs and an increase in other essentials angered the already restless peoples to pelt stones and chant slogans against the authorities. Since last year, the prices of basic food commodities have gone up by 40 percent in Iran and over the last 10 years, Iranians are buying 30-50 percent less bread, meat and milk. The government proposed cutting down the cash transfers for the low-income families and increase the price of petrol by 50 percent which added to the resentment. Tehran, descend, market, Islamic, Iman, Khomeini, Tehran, Shah, Dalir, UNSC, Laylaz, Rouhani, backtrack, trigger, eggs, nuclear, GDP, ISIS, Saudis, Obama, Marandi, IRGC, resistance, economy Post the nuclear deal, the expectations were high. People thought the economy will improve and initial signs suggested it was on the right track. In 2016, the Gross Domestic Product or the GDP of Iran grew by 12.3 percent, according to the Central Bank of Iran. Much of it is because Iran doubled its oil exports to countries like India, China, Japan and South Korea. Foreign investments grew by 60 percent, according to senior Iranian investment official Jamal Farajollah. Boeing, a US aircraft manufacturer, signed a preliminary USD 17.6 billion deal to sell IranAir 80 aircrafts between 2017 and 2025. Rouhani flew to Europe in 2016 and inked deals worth USD 43 billion with French and Italian companies. In 2017, French carmaker Renault signed a USD 780 million agreement to produce 150,000 additional cars a year, which is the largest foreign auto deal in Iran’s history.

Yet, the talk has not had a trickle-down effect. Despite doubling up its oil exports, Iran has not managed to get enough returns since the price of oil dropped. The other reason is that the deal was signed merely two years ago and it will take time before it leads to tangible wealth and jobs on the ground.

Iran currently faces 40 percent unemployment amongst the youth who are half of the country’s 80 million people. And, because Iran continues to lack minimal reforms needed to work with the world, it makes foreign firms skeptical of entering the Iranian market. Iran is a command economy under which key sectors are directly under the state or quasi state control. This makes a lot of the stakeholders very rich, but the masses are left scrambling for a share. Corruption is rife and the industry is inefficient. According to the World Bank, Iran needs to reduce government influence and improve its overall business environment to make it an appealing destination for the investors. The path to recovery has been turbulent also because the US has held back. Foreign companies are still restricted from doing business with more than 200 Iranian entities sanctioned by the US  for non-nuclear reasons. An atmosphere of fear prevails over being barred from trading with the US — a much bigger economy — if a firm finds itself on the wrong side which is not even clearly defined. Major financial banks feel discouraged and are wary of expanding into Iran which means they can’t provide it financing or credit. Iran, hence, is still cut off from international payments systems for using debit and credit cards. Firms also fear ‘snap back’ sanctions if Trump changes the policy towards Iran or the later violates the deal.

From Obama to Trump

Dr. Mohamad Marandi, Dean of Global Studies in the Tehran University, is a pro-government political analyst. In April 2016, he spoke to me at length about the pros and cons of the west doing business with Saudi Arabia vs. Iran. The gist of what he meant was how Iran would be a much better trading partner than the Saudis. “Wahabism is funded by the monarchy. The more business it conducts with the west, the more money it makes and the more it sponsors terrorism,” he pointed out. Reflecting the regime’s desire to expand ties with western investors, he added, “Iran, on the other hand, fights extremists like ISIS.”

Iran is the second largest economy in the West Asia after Saudi Arabia and it hopes to overtake it. Amongst the moderate politicians of Iran, the resounding sentiment in 2015-16 was to open up to the west. Obama, they thought, presented an opportunity to slowly move in a new direction. The election of Donald Trump disturbed their calculations.

A few days after Trump announced victory at the Hilton in Manhattan, an Iranian diplomat told me: “Let us see what he does, if it was just election rhetoric or more.” He was speaking in the context of the nuclear deal. In power, Trump has imposed further sanctions on Iran and refused to certify the deal. So far, the deal stands but its future is uncertain. Trump has returned with full force to Iran’s arch enemy and the US’s Arab ally — the Kingdom of Saudi Arabia. The Saudis are dominantly Sunnis and the Iranians Shias. Both have been vying to dominate the Muslim world. The success of Iran’s partners like Assad and the Shia militias in Iraq has had the Saudis and the US collaborating to limit Iran because it has succeeded in carving an arc of influence stretching from Tehran through Iraq to Syria’s Golan, most of which is under Israeli control, and to Lebanon which shares a border with Israel.

The Saudis are developing an understanding with Israel on Palestine but Iran continues to be the leader of the ‘resistance axis’ which is resistance to Israel, and offers support to pro Palestine group Hamas and staunchly anti-Israel, the Hizbollah.

According to Dr Marandi, the elephant in the room for the US has always been ‘Israel’. Interestingly, Iran was the second Muslim country after Turkey to recognise Israel as a sovereign state but that was under US friendly Shah. The Islamic Revolution of 1979 changed it all. Khomenie used the Shah’s closeness to the US politically and gave the rallying cry of ‘Death to America’. The Unites States and the UK had been meddling in the affairs of Iran. The CIA has publicly admitted that it was behind the notorious 1953 coup against Iran's democratically elected prime minister Mohammad Mosaddeq who nationalised the oil sector. This gave Khomenie and Iranians ample reason to be anti-America and eventually anti-Israel. As the hardliner Iranians sought legitimacy in the wider Islamic world, they displayed themselves to be the ‘better Muslims’ who will resist the west and west-supported Israel by standing up for Sunni Palestinians and started chanting ‘Death to Israel’.

With Iran regionally gaining weight and expanding its orbit, the Saudis are concerned of losing preeminence and the Israelis of war with Hizbollah which may lead to mutual annihilation if not force them to give up occupied territories. But has it worked for Iran?

“No Gaza, No Lebanon” was heard for the first time in the recent protests in Iran. To the horror of regime and the delight of its enemies, some citizens questioned the deep state’s foreign policy. The Iranian government has not declared the money it had spent in Syria and Iraq and on Hizbollah, but some Iranians, it seems, are irked by the largesse shown to these allies. According to The Washington Post, the protests threaten Iran’s ascendant role in West Asia. Iran has increased its influence in the Levant over the last decade by supporting Bashar al-Assad in Syria, the Houthi rebels in Yemen and the Shia militias — since upgraded to paramilitary groups — in Iraq. Hizbollah, the protégé of the Iranian revolutionary guard in Lebanon, played a crucial role in these wars by training Tehran sponsored groups and by fighting ISIS on the ground. But in the middle of the West Asia chaos, the erstwhile Persian empire seems to have taken its eyes off the domestic issues, upsetting people. Will the Iranians stand by the state’s ambitions in the region and support the Palestinian cause? Not until the price of eggs comes down.

Economic cornering only helps hardliners

The agitation began in Masshad, Iran’s second most populous city known for the Imam Reza shrine and controlled by Hardliner cleric Ebrahim Raisi, who was defeated in the last year elections by Rouhani, a moderate by Iranian standards. Internal political wrestling between Raisi and Rouhani camps may well have inflamed the passions causing the protests. Rouhani has also cracked down on the all-powerful IRGC a few months ago by ordering arrests of senior members accused of corruption and giving away large government projects, once in the IRGC’s domain, to the outsiders.  The protests spread to numerous other cities because of the shared frustrations over falling living standards and that is what unites the protestors, and not their opposition to conservative and preference for the liberal political class. They have come out against everyone and their internal and foreign policy. If Rouhani is the middle, it is not wise to celebrate an attack against him. Not until, organically most if not all of Iran and not just Tehran like in 2009, seeks a change in the political order. Iranians put their faith in Rouhani because he spoke of opening up Iran to the world. The Iranians need the deal to deliver just as much as the international community needs to steer Iran away from a pariah status. Economically cornering Iran might make it cautious of the trouble it creates for the Saudis and Israelis, but it also helps the Iranian hardliners who speak of ‘resistance economy’. It provides them with the ammunition they need. They can now say — the nuclear deal does not work, the west fooled us, and continue with their destabilising rant on Islamic Revolution. If the protests at the end of 2017 are to go by, the relatively reformist Rouhani has a tough year ahead of him.
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Anchal Vohra

Anchal Vohra

Anchal Vohra was a Fellow at ORF. She writes on contemporary developments in West Asia and on foreign policy.

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