The recent success of pro-government reformist candidates in Iran’s parliamentary elections has provided President Hassan Rouhani with long-awaited support. Nevertheless, the country still has huge economic problems. And in the coming months, it is they that will determine the nature of the confrontation between the president and his opponents advocating a hard line, both inside and outside the parliament.
The Iran after elections landscape highlights the evolving BRICS Iran role, amid nuclear deal impact and economic challenges.
Motivations Behind Electoral Wins
Usually, elections are won and lost for political reasons, and the latest elections in Iran are no exception. However, in this particular case, there are grounds to believe that the main driver of political change was economic considerations. This is evidenced by the mass turnout at polling stations. Since July, when Iran signed a historic agreement on the nuclear program with the five permanent members of the UN Security Council and the European Union, public expectations regarding the improvement of the economic situation have reached a peak.
Rouhani understands very well the importance of economic expectations, after all, it was they that brought him to the presidential post in 2013. The completed electoral campaign also received support thanks to promises to put the economy in order, weakened by years of harsh economic sanctions and internal management errors. It is not surprising that Rouhani chose as a priority reaching an agreement with the outside world that would allow closing the nuclear dossier and opening the road to economic recovery.
Inherited Economic Challenges
From his predecessor, Mahmoud Ahmadinejad, Rouhani inherited an economy that was first distorted by years of generous redistribution of oil revenues in favor of the president’s supporters, and then suffered from stagflation caused by “the harshest economic sanctions in history” (as US Vice President Joe Biden called them). In 2013, when Rouhani became president, inflation exceeded 40%, and GDP decreased by 6%.
Rouhani’s headache was intensified by economic destabilization that followed the introduction of full-scale financial sanctions, which cut Iran off from the international banking system. Unable to sell oil and facing a blockade of the central bank by the US and EU, Rouhani set himself an ambitious task: to try to give a new start to economic growth and slow down the accelerated prices.
Progress and Persistent Issues
Rouhani achieved certain success in reducing inflation, which has now dropped to 13%. However, restarting the economy turned out to be much harder. Taking into account the forecasts of the International Monetary Fund, according to which the country’s GDP this year will at best stagnate or even shrink, Iran’s economy may well face a second wave of recession (W-type recession).
However, since the sanctions have been lifted, the IMF forecasts that next year GDP growth will reach about 5%. Such rates would make Iran’s economy the best in terms of indicators in the Middle East. This would open new jobs, which is extremely important for Iran, where double-digit unemployment rates have persisted for a long time (official youth unemployment exceeds 25%).
Obstacles to Economic Development
However, a number of obstacles stand in the way of the country’s economic development. The first is extremely low oil prices, which have collapsed by 70% since mid-2014. A similar trouble happened in 1999, when President Mohammad Khatami tried to conduct his experiment with reforms, and prices fell below $10 per barrel. Then, as now, the first two years of the reformers’ rule were accompanied by unfavorable external events in the world oil markets.
That crisis was caused by market demand factors related to the Asian financial recession. This time the factors are on the market supply side, and they lead to a global oversupply of oil. One can forgive conspiracy theory supporters who do not understand this, who noted that pro-reform presidents apparently negatively correlate with world oil prices.
Rouhani’s main difficulties are internal. They arise from Iran’s complex post-revolutionary institutional architecture. It is a labyrinth of various decision-making bodies, which are also intertwined with an even larger number of bodies and departments created to ensure compliance with Islamic dogmas and revolutionary norms.
Over the past decades, this system has led to incredible political fragmentation at all levels, if not to open struggle between different factions. In this labyrinth of power, Rouhani is waging a tense battle with his conservative opponents – a battle that is perhaps still far from completion.
Conflicting Economic Visions
Moreover, Rouhani’s economic recipes (an attempt to open the economy to foreign trade and foreign investment, as well as to carry out economic reforms in favor of the private sector after the lifting of sanctions) contradict the ideas of conservative hard-liners in Iran. The so-called principalists, who defend the “resistance economy” based on years of harsh austerity in conditions of self-sufficiency and reliance on internal resources, Rouhani’s desire to declare Iran “open for business” (as well as to invite foreigners to an active role in Iran’s economy) causes as much anxiety as his nuclear agreement.
The reduction of the powerful conservative block in the newly elected parliament undoubtedly became a vivid expression of the interests of Iran’s young electorate. This situation echoes the words of former US President Bill Clinton, who told Charlie Rose in 2005 that Iran is the only country with an electoral system “where liberals (or progressives) received from two-thirds to 70% of the voters’ votes in six elections… there is no other country in the world about which I could say the same, including, of course, my own.”
A decade later, Clinton will undoubtedly rejoice at the preservation of this trend. But although conservatives may be experiencing a period of decline, they are definitely not out of the game. This is evidenced by the flaring battle for the future of the economy.
It is here that Rouhani will face the most difficult task. Victory in the elections may have raised the stakes for him, as public expectations have increased. However, as Khatami, who lost to Ahmadinejad in 2005, had to understand, economic growth and economic recovery cannot be achieved at the expense of the electorate’s aspirations for greater equality and social justice.
For more on nuclear deal impact, check [Link to related BRICS article].
According to IMF reports on Iran economy sanctions, reforms drive growth .
In conclusion, Iran after elections shapes the BRICS Iran role, navigating Rouhani reforms, nuclear deal impact, and conservative opposition for economic recovery.
