Iranian elections highlight future challenges

Iranian elections highlight future challenges

Less than two months before Iran elects its next president, the country faces a set of political and economic challenges. The outcome of the elections will have a significant impact at home and will set the tone for Iran’s international policy in the next four years. While President Rouhani’s re-election is a likely prospect, a victory for the country’s hard-liners cannot be ruled out.

May 19 is set to be a decisive date as Iranians head to the polls to elect their next president. The election will be closely watched by investors and the international community, and is likely to have deep repercussions at home and abroad. More than one year after the landmark signature of the Joint Comprehensive Plan of Action (JCPOA), also known as the nuclear deal, which opened the country to international investments, the May elections are widely seen as a test of Hassan Rouhani’s reformist agenda.

Rouhani is seeking re-election but his campaign faces challenges from Iran’s hardliners (or principlists) and senior clerics. Donald Trump’s criticism of the nuclear deal during the U.S presidential campaign has also cast a shadow over the future of U.S-Iranian relations and the nuclear agreement.

Iran faces a combination of political and economic risks

The relaxation of economic sanctions following the signature of the nuclear deal has opened up and provided a boost to the Iranian economy, resulting in more foreign investments and an increase in exports and oil revenues. In December, Rouhani’s government announced an ambitious new budget plan of $100billion in a bid to stimulate growth. The Iranian population has nonetheless seen little improvement in its living standards.

Unemployment rates went up in 2016 and job creation remains one of the key economic challenges for the months ahead. International investors are still cautious to launch and expand operations in the country as a result of wider regional instability and security concerns, lack of transparency and remaining U.S sanctions. The latest IMF report on Iran underlined the positive effect of the lifting of sanctions on economic growth while highlighting Iran’s structural problems. Growth was mainly driven by the oil sector in 2016 and has not reverberated through other business sectors.  

Domestic and international politics is another risk factor. Iran has stepped up its involvement in the Syrian conflict alongside Russia and Turkey. The country’s growing involvement in Syria and ongoing support for Shia militias in the region continues to fuel distrust among the international community regarding Iran’s intentions and reliability as a partner.

The election of Donald Trump in the U.S has opened a period of uncertainty for Iran’s nuclear deal and the future of U.S-Iranian relations. The American president’s tough approach to Iran could encourage investors to put their projects on hold in the upcoming months. Additionally, the tensions between reformists and hardliners, and the divergent views of Iran’s leadership about the future of the country could further complicate the picture and act as a deterrent for investors.

The prospects for Rouhani’s re-election

Since 1981, every Iranian president has secured a second term in power. Despite the diplomatic success of the nuclear deal, several factors could affect Rouhani’s ability to be re-elected. Rouhani has staked his re-election on the economic benefits brought by sanctions relief. As the lifting of sanctions fails to deliver the expected results for the people, Rouhani’s government faces growing criticism from the opposition. Earlier this month, Iran’s Supreme Leader Ali Khamenei criticised the government for its economic record, stating that “people should feel improvements regarding creation of jobs and manufacturing.”

During his first term in office, Rouhani relied on a diverse and fragile coalition of conservatives, reformists and moderates. The difficulties of keeping the coalition together have weakened his position in Iranian politics and could affect his ability to secure re-election.

The election of Donald Trump in the U.S has defied predictions and emboldened Iran’s hard-liners. The Islamic Revolutionary Guard Corps, particularly powerful under the Ahmadinejad presidency, is looking to regain the influence it has lost under Rouhani’s presidency. While no candidate has yet emerged among the hard-liners, it is clear that Rouhani will face strong opposition from the selected candidate.

Rouhani’s prospects are also affected by the battle between reformists and hard-liners for the succession of Ali Khamenei. Khamenei’s health has prompted speculations about potential successors and their visions for Iran’s international policy as the Revolutionary Guards and the country’s leading clerics attempt to secure the selection of an anti-reformist candidate.

The death of former Iranian president Akbar Hashemi Rafsanjani in January dealt a blow to the reformist camp. Rajsanjani was not only a staunch supporter of the nuclear deal and a key ally for Rouhani but also a member of the Assembly of Experts, the council tasked with choosing Khamenei’s successor.

The impact of the high-stakes election

In the context of heightened tensions between Iran and the American administration, the outcome of the elections is expected to have a deep impact on Iran’s prospects in the next four years. The results will set the tone for Iran’s relations with the West and will determine whether Iran will pursue its policy of economic liberalisation.

Rouhani’s re-election would increase the chances of maintaining the nuclear deal in place despite uncertainties on the stance the new U.S administration will adopt. A Rouhani victory would also send a signal to investors about Iran’s commitment to further opening its economy to foreign investments.

While polls suggest that the incumbent president is likely to be re-elected, the victory of a hard-line candidate cannot be ruled out entirely. This scenario would cast serious doubt over the future of the nuclear deal by adding to the risks of violations on both sides, while offsetting the path of economic liberalisation chosen by Rouhani since 2013.

 

About Author

Cecile Guerin

Cécile Guerin is a London-based analyst. She has worked as a Counterterrorism Research Fellow at the Asia-Pacific Foundation, a policy assessment think tank monitoring emerging geopolitical threats. She holds an MSc in History of International Relations from the London School of Economics.