Iran’s presidential candidates are making final preparations for Friday’s landmark poll, which could have hugely significant implications for the country and the world beyond. At the centre of the contest are differing views over incumbent President Hassan Rouhani’s signature accomplishment: The 2015 landmark nuclear accord and his wider advocacy of economic and political re-engagement with western powers.
While 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 — this is by no means assured. Rouhani is most likely to prevail if he can win big — securing more than 50 per cent of the votes polled — on Friday and thus emerge victor in the first ballot, as in 2013. However, if a second round run-off is needed between the two strongest performing candidates, more conservative opponents of the president could join forces to try to best him.
The election is important not just because it will determine who is president and influence which pathway the country takes in coming years. 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.
While 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 lifting of international sanctions since the nuclear deal with the P5+1 (United States, China, Russia, Britain, France plus Germany), many Iranians still don’t feel as big an improvement in their standards of living as they had hoped, under Rouhani’s reforms, after the economy had been hit hard by years of international sanctions.
Under the terms of the deal, Iran secured phased relief from international sanctions. This is key for the country — seat of the world’s fourth largest oil reserves and the second biggest natural gas stockpile — because sanctions had approximately halved the country’s oil exports to just over one million barrels per day after 2012, helping cripple the economy. To be sure, the economy grew at nearly 9 per cent in the last quarter of 2016 and growth is estimated around 5 per cent this year. Moreover, inflation has dropped to single digits.
Yet, 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 hit in oil prices, which have fallen from more than $100 (Dh367.3) barrel to below $50. A further drag on the economy is Iranian military and financial support for Syria and Lebanese Shiite organisation Hezbollah. Tehran’s support for the Damascus regime, alone, is estimated at billions of dollars a year.
In the context of some 650,000 jobs created in the past year, criticism has also been levelled at Rouhani for high unemployment, which rose to 12.4 per cent last year. His more Conservative challengers — including cleric Ebrahim Raisi and Tehran Mayor Mohammad Baqer Galibaf — have promised, if elected, to create five to six million jobs in their first term, which is unrealistic. Both have said that they also want a more “inward-looking” economy, focused on national production and narrowing the gap between the rich and poor. For instance, Raisi says he will 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 the US and wider foreign investment materialising. Rouhani wants to attract some $140 billion in foreign investment to modernise oil and gas, transportation, and telecom sectors in Iran. Last year, the Iranian Chamber of Commerce estimated the country attracted only $13 billion in foreign investment. While this is a big uplift from $3 billion in 2015, it is still not as much as some had hoped.
With the election of US President Donald Trump, there are also greater risks surrounding the future of the nuclear agreement that former US president Barack Obama had pioneered in 2015, offering the West and Tehran the best opportunity “in decades”, specifically since the revolution in 1979, to move relations forward. While the new US administration recently certified that Iran had complied with the deal so far, it has put Tehran “on notice” after Tehran’s ballistic missile tests, imposed new sanctions and launched a review of the nuclear deal.
While Washington may not, ultimately, unilaterally withdraw from the agreement, it could still undermine the accord by pressurising western countries not to do business in Iran, or create uncertainty around sanctions waivers. That said, it will be opposed by at least some other parties to the deal, including France.
Growing animosity from the Trump team will complicate Rouhani’s vision for greater global engagement and closer ties with the West and — potentially — greater cooperation with key Middle Eastern states too, including possibly Saudi Arabia. He hopes here that more conciliatory policies will improve foreign investment, commercial links and diplomatic ties.
However, conservatives in Tehran are digging their heels in against any fundamental change in foreign policy principles that 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 various 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 dependence on the West.
Taken overall, Friday’s poll could set Iran’s agenda not just for the next four years, but the next decade and beyond. While a Rouhani victory is anticipated by many internationally, this is by no means certain and a conservative win will reshape — potentially dramatically — the country’s domestic politics, economy and international relations.
Andrew Hammond is an associate at LSE IDEAS at the London School of Economics.
