2015 saw dramatic changes in the formal relationship between Iran and the major world powers, yet the significance of signing the Nuclear Agreement (JCPOA) does not lie in the signing of the agreement itself, but in its implementation and in the opening up of Iran to the world that is tied to it. Iran’s greater involvement in the global economy and in international relations offers risks as well as opportunities for the international community.
Over the course of 2016 there are several key developments that will have a significant effect on business and political relationships with Iran:
Implementation of JCPOA and the removal of sanctions
The implementation of JCPOA and the removal of international sanctions on Iran is expected to take place as soon as January 2016, but even as preparations are made for putting this document into effect, Iran and the United States are testing the boundaries of the terms that have been agreed to. On Oct. 10th 2015, Iran test fired a nuclear capable ballistic missile, which was in violation of a Security Council resolution that will remain in place until the implementation of JCPOA, but it did not violate the new accord which only calls on Iran to stop working on nuclear capable ballistic missiles, without prohibiting it.
For its part, the US House of Representatives passed a Visa Waiver Reform bill, which if signed into law would require citizens of one of the 38 countries currently part of the program to apply for a visa in order to enter the US if they are dual citizens of, or have traveled to Syria, Iraq, or Iran. While the proponents of the bill argue that it is necessary in the face of terrorism, Iran’s foreign minister made it clear that travel to Iran suggests no similar connection to terrorism and that he regards the bill as a violation of JCPOA in which the US agreed not to take any policy action that is “specifically intended to directly and adversely affect the normalisation of trade and economic relations with Iran.”
The testing of waters by both sides continued over the last week of 2015, when Iran test fired two naval missiles with minimal warning and in close proximity to American Navy ships in the Strait of Hormuz; followed by the Obama administration’s announcement that they had been looking into the implementation of further sanctions against Iran for its missile tests, which it backed down from several days later.
It is expected that this jockeying will continue as the JCPOA is implemented, but it is unlikely that the deal will fall apart because there is a strong desire, particularly within Europe, for Iran to rejoin the global economy and to take part in resolving the more critical issues in the region.
Parliamentary elections and elections to the assembly of experts
These elections, which will take place at the end of February 2016, are important because they will act as a litmus test for popular political feeling in the country and will indicate the political strength of Rouhani’s administration and its success at confronting isolationist tendencies within Iran’s ruling elite. The outcome of the parliamentary elections will help to determine the tone of Iranian foreign policy and the extent to which Iran opens up after the removal of sanctions.
The election for the Assembly of Experts will be of limited importance in the short-term, but it will be an indicator of Iran’s direction in the long-term because the members are elected for 8-year terms and are responsible for choosing the next Supreme Leader if the current Leader dies or becomes unable to carry out his duties.
The Assembly is expected, though not required, to choose the Supreme Leader from among its members. In Iran’s 2009’s presidential election arguments that the election had been rigged sparked the “Green Revolution” and lead to a violent crackdown on protesters. The elections in February are not likely to incite unrest, but the extent to which ‘reform’ and ‘moderate’ candidates are screened in the ballot selection process, will be a sign of the strength of Iran’s ‘more conservative’ political factions.
Assuming sanctions are lifted in January and Iranians begin to feel a little economic and political easing before election day, it is likely that Rouhani’s supporters will be the more successful group, particularly in parliamentary elections. Statements from the Supreme leader and from those on the candidate vetting committee suggest that candidates seen as ‘reformist’ especially those with less esteemed credentials will be left of the ballot for the Assembly of Experts.
Developments and Outcomes of Proxy Conflicts in Syria, Iraq, Yemen, and Lebanon
As Iran’s weight as a regional power has begun to increase to its natural level, the proxy conflicts between Iran and Saudi Arabia have taken on a new intensity. The conflicts between these two countries are playing a defining role in Iraq, Lebanon, and Yemen, where Iran and Saudi Arabia are backing different sides in local conflicts. The balance of power in the Middle East will be determined by the outcomes of these proxy conflicts, which will have a significant effect on where foreign governments are spending money and in turn, where the private sector invests. Though the situation is more complex and includes more players, the outcome in Syria will play a significant part in determining this balance of power. In the first week of 2016, Saudi Arabia executed a number of political dissidents including the country’s most highly respected Shi’a cleric Sheikh Nimr al-Nimr, which has led to protests and the breaking off of ties between Saudi Arabia and Iran.
As the sanctions on Iran are lifted and Iran’s economy begins to recover gradually, it will begin to build economic ties to European countries and it will continue to play an increasingly important role in working with the great world powers to resolve the Syrian war. The West’s concern about terrorism based on the extremist Salafi ideology, which is closely related to Saudi Arabia’s state ideology, will weaken Saudi Arabia more as Iran becomes a viable alternative as a regional partner.
International Trade and the Development of the Local Economy
There are several areas which will play a central role in the revival of the Iranian economy, the most important of these for Iran in 2016 will be: oil and natural gas development, increased safety of air travel within the country and the expansion of international air travel, finding solutions to the environmental issues of drought and pollution, and alleviating poverty and unemployment. Iran’s ability to deal with these quickly will enable stronger foreign investment in the long-term.
Foreign investment focused on helping Iran to deal with these issues is likely to be welcomed, but as mentioned above many in Iran’s ruling elite, including the Supreme Leader remain concerned about protecting Iranian Culture from the infiltration of Foreign Powers or dependence on them.
In November 2016, the US will hold its Presidential Election, and while the candidates running for office have yet to be selected, it is clear that whoever is chosen to be the next American president will play a significant role in determining whether the JCPOA remains intact and in directing American policy towards Iran as a whole.
