Nuclear Issues

If the intended aim of the new round of U.S. sanctions were to change Iran’s behavior, it already has. Just not the behavior the Trump team had in mind—Iran abandoning its pursuit of pro-market economic reforms. President Hassan Rouhani, who was elected twice, in 2013 and 2017, on a platform of liberal economic reforms, has piece by piece put aside his reform agenda. Because of the economic havoc wreaked by the re-imposition of U.S. sanctions, he finds himself in the odd position of overseeing price controls, punishing commodity hoarders, subsidizing imports of a variety of goods, including mobile phones, and has lost the most liberal members of his economic team

Trump's strategy appears to be one of brinkmanship—rocking the boat in hopes that the other party is less risk-tolerant and will give in before the boat capsizes.

In 2006, in the midst of a fierce war between Israel and the Lebanese militant group Hezbollah, former U.S. Secretary of State Condoleezza Rice famously stated that the world was witnessing the “birth pangs of a new Middle East.” She was right—but not in the sense she had hoped. Instead of disempowering Hezbollah and its sponsor, Iran, the war only augmented the strength and prestige of what is known as the “axis of resistance,” a power bloc that includes Iran, Iraq, Syria, Hezbollah, and Hamas in Palestine.

Iran has entered uncharted territory following the landmark nuclear deal between Tehran and six world powers. I recently came back from a six-week trip to Iran where I had the opportunity to observe first-hand the changes, developments, and uncertainty in the country. The widespread optimism that initially surrounded the deal, and the expectations that it would bring an economic windfall, have been significantly diminished since, and there were many questions: Should Iran integrate into the global economy? How much will the economy improve with the lifting of sanctions? What will the policies of the next US president be, and what will this mean for Iran? With the recent victory of Donald Trump, these questions have become all the more important to Iranians.

This chapter explores the complexity of political processes in Iran and assesses the degree of change and continuity in the Iranian political system in light of the tumultuous events unfolding since 2009. Why have elite power relations in Iran been unsettled, and what is the impact of these factional fluctuations of power and processes of change on the institutional structure of the Iranian regime itself? It is critical to ask whether the manner by which institutional alteration occurs within the regime was conducive to the long-term monopolization of power by a single political faction. If so, has the multifactional and competitive nature of the regime been replaced by one of dictatorship, as may have appeared to be the case? Or, is the regime’s system of elite conflict management and institutional restraint a durable feature that will persist in the foreseeable future?

Aaron Arnold, Associate of the Project on Managing the Atom at the Belfer Center, writes in The Diplomat that a key threat to the ongoing implementation of the Iran nuclear deal is the risky nature of the Iranian financial sector. While Iran is banking on receiving greater foreign investment, continued problems with the Iranian financial sector, including lack of sufficient regulatory controls and the potential ties to terrorist financing, have made companies cautious about investing in Iran. He suggests that the United States work with Iran to bring its banking system up to the same standard as the global economy, and to consider closer integration of Iran into the world economy in order to preserve the effects of the nuclear agreement.

Iran is holding a high-stakes parliamentary election Friday. In mid-January, the conservative Guardian Council surprised some observers with the massdisqualification of reformist candidates in Iran’s upcoming parliamentary elections. This institutional gambit was partially rescinded a few weeks later, after a new review of the qualifications of the candidates. While the disqualifications show that the conservatives still hold the reins of power in Iran’s political system and set the terms of the game, as the reversals signal, they cannot dictate the final results or eliminate competition.

With the successful negotiation of the nuclear agreement, the coalition that backed President Hassan Rouhani on the deal will begin to fragment as factional rivalries and infighting increase and once again shape political competition inside Iran. The electoral results, however, will not have a significant impact on the continued implementation of the nuclear agreement. Instead, the conservative establishment in Tehran seeks to maintain leverage over Rouhani on broader international developments as well as domestic matters. In particular, these elections will be more important in determining the future path of development Iran chooses and how economic reform will be undertaken by the Rouhani administration.

The United Nations’ nuclear watchdog has certified Tehran’s compliance with the terms of a nuclear accord the United States, Iran and other world powers reached in April 2015. The historic agreement is aimed at curtailing Iran’s controversial nuclear program, and paves the way for longstanding sanctions against Tehran to be lifted. Sanctions targeting Iran, and particularly its lucrative energy sector, have crippled the country economically and isolated it diplomatically.

Ronak Desai examines what the lifting of Iran sanctions mean for India.