Analysis

With Sanctions About to Be Lifted, Iran Dreams of a Glorious New Era

Tehran hopefully awaits report confirming it has met nuclear deal's demands, but plummeting oil prices will hinder its transformation from a besieged Islamic republic into a flourishing state.

Iranian president Hassan Rohani in 2013.
AFP

Today (or Sunday at the latest), a new era will begin in Iran. At least, that’s the belief of the Iranian Foreign Ministry, which expects that with the submission of the International Atomic Energy Agency’s final report on implementation of the Vienna agreement, most of the economic sanctions that have been imposed on Iran for years will be removed.

The report is expected to confirm that Iran has complied with its commitments under the agreement, including the dismantling of some 6,100 of its 19,000 centrifuges (many of which were not operational), the removal of the core at the Arak nuclear reactor and replacing it with concrete, and the removal of most of its stockpile of enriched uranium, which could be used for making bombs.

AFP

In return, Iran’s global bank accounts and assets will be unfrozen, and international companies will be permitted to invest and do business there without the fear of U.S. sanctions. In addition, large numbers of Iranians will be removed from the blacklists of the U.S. Department of the Treasury and the European Union Economic and Financial Affairs Council. Two-and-a-half years of nerve-racking negotiations led to the nuclear agreement that also ended 36 years of mutual U.S.-Iranian boycotting that began with Iran’s Islamic Revolution in 1979.

Fears of violations of the nuclear agreement are an integral part of it. But, at least at this time, relations between Iran and the rest of the world are going to change dramatically, and their nature and quality will serve as a guarantee for the agreement’s fulfillment.

Obtaining the agreement was dependent on cautious international diplomacy, which made sure, for example, not to harm Iran’s interests in Syria; to calm Saudi Arabia; to compensate Israel; and to tango with Russia. But its future will be dependent on domestic issues – political developments in Iran and the United States over the next decade, and the personalities of the two countries’ leaders; the strength of the U.S. Congress and the Iranian Parliament; the interests of Iranian businesspeople, clerics and reformists; and the pressure by lobbyists in the United States.

The real launch of the new journey will begin next month. On February 26, two election campaigns – one for parliament, the other for the Assembly of Experts, which, among other things, is responsible for evaluating the performance of Supreme Leader Ayatollah Ali Khamenei (77 this year), and appointing his successor – will clarify how the nuclear agreement is perceived by the public and the leadership, and will pave the political path Iran is expected to take.

Iranian Supreme Leader Ayatollah Ali Khamenei saluting the people during a meeting in Tehran on January 9, 2016.
AFP

More than 12,000 people have registered as candidates for a parliament that has only 290 seats. That’s a record number, although many will be winnowed out for not meeting the legal requirements, or for being considered “inappropriately” reformist. Indeed, one of the explanations for that huge number of candidates is that the reformers decided to put up large numbers of contenders so that, even after the brutal culling, they will still have enough people running.

In the election for the Assembly of Experts, more than 800 people are running for 88 seats. Among the candidates are Hashemi Rafsanjani, a former Iranian president who is part of the reformist stream; Hassan Rohani, the current president; and Hassan Khomeini, the 46-year-old reformist grandson of Ayatollah Ruhollah Khomeini, the leader of the Islamic Revolution. According to reports, Khomeini will drop out of the race under pressure from the conservatives.

AFP

The assembly serves for an eight-year term, hence the importance of this year’s election. For all the blessings and good wishes being bestowed on Khamenei, his health is rather poor. He has prostate cancer and reportedly suffers from other illnesses that are liable to kill him or incapacitate him during the assembly’s new term.

But while only Allah knows how long Khamenei will live, the new parliament will have the major task of translating the nuclear agreement into a new way of life – both politically and economically – that will determine whether the agreement will be good for the Iranian public or only the regime. The parliament will have to approve the state budget in March, set its priorities and decide whether to pad Rohani’s last year in office with funds that will allow him to win another term in the June 2017 presidential election, or make his life miserable by undermining the economic reform program he’s planning.

Reuters

The tradition since the 1979 revolution is that presidents serve two consecutive terms, as the Iranian constitution permits. However, Rohani might find himself in his second term as a limited, restricted president, watching his rivals benefit from his great achievement.

Budgetary decisions are not just dependent on the disposition of parliament but on the amount of money that will stream into the state’s coffers after sanctions are lifted – and the price of oil. The draft budget submitted last September assumed a price of $45-$50 per barrel of oil, but this week the price of Brent Crude plunged to $31. At the same time, there was talk in Iran of having to adjust to a price of $30 or less. These prices will have a significant impact on the budgets for education, health, infrastructure development and job creation for the millions of unemployed, particularly the educated among them. Lifting the sanctions is thus crucial to allow Iran to diversify its sources of income and reduce dependence on oil exports.

Bloomberg

Last August, Iran started publicizing its tourist sites and inviting tourists from all over the world (except Israel) to visit its cultural heritage sites. In April, Iran will host its first marathon – dubbed “I Run Iran” – in the historic city of Shiraz. Already, more than 200 people have registered from 35 countries, including Western countries. It seems concern about the bad influence of Western culture isn’t of concern to the race organizers, although the race is for men only. Better hurry if you want a hotel room, because prices are starting to soar.

But marathons – and tourism in general – cannot replace oil, especially now that Iran will be forced to compete for the market share it lost during the sanctions era. It will have to sell oil at below-market prices and compete with Saudi Arabia, which, while also suffering from the low price of oil, has an incredible $700 billion in foreign currency reserves. Iran will also have to change its investment laws, implement banking reforms and alter its change-averse bureaucracy before foreign investors will agree to help rehabilitate its economy.

As a result, Iran is starting its national race with weights attached to its legs, the kind that are liable to seriously delay its transformation from a besieged country into a flourishing state for all its citizens.