Iran’s empowered hardliners

BLACKSBURG, VA — Iran’s moderates — who have controlled the presidency for 24 of the last 32 years — are about to be voted out of power, and one person shoulders most of the blame: Former US president Donald Trump.

In 2018, Trump unilaterally withdrew from the 2015 Iran nuclear deal (the Joint Comprehensive Plan of Action or JCPOA) and reimposed harsh economic sanctions on the Islamic Republic. Iran had not violated the JCPOA’s terms. Trump simply wanted to force more concessions from its leaders — or even to create enough economic distress to bring about regime change.

Trump did manage to spur a political shift in Iran — but not the one he wanted. Anti-Western hardliners swept last year’s parliamentary election, crushing their moderate and reformist rivals. Now, Iran is gearing up for a presidential election in June, and moderate politicians aligned with outgoing President Hassan Rouhani, who championed the JCPOA, will almost certainly lose.

Rouhani staked his reputation on the JCPOA. He won the presidency in 2013 on the promise that, by securing a nuclear deal with the West, he would finally free Iran of crippling economic sanctions, which had led to untold suffering in the country. This promise was particularly compelling for Iran’s middle class, which was eager for change.

Iran owes its middle class largely to past reformist presidents. From 1989 to 2005, Akbar Hashemi Rafsanjani and Mohammad Khatami transformed Iran’s economy, which had been shackled by rationing and public ownership, into a market economy with a vibrant private sector. Their market reforms, together with investments in infrastructure, raised millions of Iranians out of poverty. Between 1995 and 2010, Iran’s middle class swelled from 28 per cent to 60 per cent of the population, and the poverty rate plummeted from 33 per cent to 7 per cent.

Under Khatami’s successor, however, things took a turn for the worse. President Mahmoud Ahmadinejad appealed to conservatives who considered the desire for a Western-style lifestyle contrary to the values of the 1979 Islamic Revolution.

Not surprisingly, relations with the West deteriorated under Ahmadinejad. In 2010, the United Nations Security Council introduced Resolution 1929, imposing a new round of sanctions on Iran over concerns that it was not complying with previous resolutions intended to ensure the peaceful nature of its nuclear programme. Economic stagnation followed.

Rouhani’s rise in 2013 amounted to a middle-class revolt against Ahmadinejad and the economic devastation he had brought. When he delivered the JCPOA in 2015, things started looking up for Iran. Thanks to the easing of sanctions, the economy grew by a whopping 13 per cent in 2016 and another 7 per cent in 2017.

Buoyed by this progress, Rouhani won the 2017 election by an even larger margin, with 57 per cent of the vote, reflecting gains in more affluent districts and larger cities. (This does not include districts with significant minority — Sunni, Kurd, or Arab — populations that regularly vote for candidates who are not tied to the Shiite clergy or the Revolutionary Guard.) In the country’s wealthiest district, Shemiranat in northern Tehran, Rouhani’s share of the vote surged from 49 per cent to 79 per cent.

Trump’s abandonment of the JCPOA changed everything. Iranian conservatives have seized on the agreement’s unravelling to convince Iranians that Rouhani’s efforts to engage with the West were utterly misguided. Supreme Leader Ayatollah Khamenei has even begun to push for a “Resistance Economy” that would make Iran less vulnerable to sanctions.

Iranian public opinion has followed suit. In 2015, when the JCPOA was first signed, three out of four Iranians viewed the agreement favourably. Today, that share has fallen to 51 per cent.

As for the presidential election, the conservative Ayatollah Ebrahim Raisi — who lost in 2017 — is viewed favourably by three out of four Iranians, compared to one in three for Rouhani. The poll did not include the Revolutionary Guard commander Hossein Dehghan, who has also entered the presidential race.

To be sure, Rouhani does shoulder some blame for his declining popularity. The economic gains that followed the rollback of sanctions disproportionately benefitted the wealthiest. Among the very first fruits of the JCPOA were 200 new passenger jets to improve the travel experience of the 1 per cent of Iranians who travel abroad. (I won a $100 bet against a friend who expected direct flights between Tehran and New York by the end of 2015.)

Moreover, in 2018, Rouhani announced a hefty hike in the price of gasoline — a measure that disproportionately hurt the poor. When Ahmadinejad did the same in 2010, he at least offered cash transfers to help offset the economic pain. Rouhani didn’t, and Iranians made clear their dissatisfaction, with large-scale riots, which security forces crushed.

This lack of regard for economic justice meant that the brief recovery brought about by the JCPOA raised real per capita spending by the top 20 per cent of income earners by 15.6 per cent, while reducing the expenditures of the bottom 20 per cent by 4.9 per cent. In 2018-2019, when the economy contracted, living standards in rural areas plummeted by 15 per cent, while staying constant in Tehran and the surrounding areas.

US Iran hawks say that Trump’s sanctions have given his successor, Joe Biden, leverage in the negotiations, now taking place in Vienna, to restart the JCPOA. This ignores political dynamics in Iran. Hardliners dominate the country’s legislature, military, judiciary, and state media. Once they take over the executive in June, the chances of reviving the nuclear deal and repairing relations between Iran and the West will be minimal.

But all hope is not lost for the Biden administration — or for Iran. While the negotiations are unlikely to be able to conclude a new deal before the June election, they can clarify a path toward reviving the JCPOA. That will make it difficult for the next president to walk away from the deal, no matter how much he wants to abandon it.

DjavadSalehi-Isfahani, professor of Economics at Virginia Tech, is a non-resident senior fellow for Global Economy and Development at the Brookings Institution and a research fellow at the Economic Research Forum in Cairo. Copyright: Project Syndicate, 2021. 

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