When Iranian voters rallied behind Hassan Rouhani in 2013 as their surprise choice for president, they picked a reformer who promised to end the crushing pain of international sanctions. On Saturday, Rouhani delivered, securing the long-sought economic relief that Iran craved and the country’s enemies desperately opposed.
Yet, it is still unclear whether Rouhani’s windfall — up to $50 billion in unfrozen assets and freedom from severe trade restrictions — will be enough to secure a future for his presidency and the more moderate, pragmatic Iran he is seeking to build.
Western powers formally approved the removal of the most onerous economic sanctions after Iran honored promises to significantly curtail key parts of its nuclear program as part of a deal reached in July, voluntarily disabling a reactor and other equipment that the U.S. and Israeli governments had previously threatened to destroy with bombs. Implicit in the agreement is an opportunity for Iran to rebuild its battered economy and end decades of diplomatic isolation, even as the country submits to unprecedented monitoring to guard against cheating on the nuclear deal.
But economists and Iran experts say it could be months or longer before ordinary Iranians feel any benefit from sanctions relief, a delay that could undermine Rouhani’s popularity and weaken his grip on power. Until then, the Iranian president will have to battle hard-liners within his government who will be anxious to use the cash reserves for their own purposes. The country’s economy also will continue to struggle against a ferocious headwind of plummeting oil prices, which could cancel out many of the gains Rouhani achieved through negotiations.
“Government and Revolutionary Guard cronies will immediately benefit from a lifting of sanctions, but to what extent Iran’s independent private sector and civil society benefit will take years to assess,” said Karim Sadjadpour, an Iran analyst at the Carnegie Endowment for International Peace. “Those like Rouhani who want to put Iran’s economic interests before revolutionary ideology long ago won the war of ideas. The problem is their hard-line adversaries have a monopoly of coercion and are willing to employ it.”
The nuclear accord signed last summer by Iran and six world powers called for releasing tens of billions of dollars of Iran’s hard-currency assets that had been frozen in foreign bank accounts under an international sanctions regime put into place over the past six years. The agreement — which hinged on Iran’s willingness to scrap much of its nuclear program — also called for lifting restrictions that had severely hampered Iran’s ability to sell oil or collect payments for its products through the international banking system.
Some U.S. sanctions, linked to Iran’s human rights record and support for terrorist groups, will remain in place.
The nuclear sanctions, imposed by the Obama administration beginning in 2010 with heavy support from Congress, cut Iran’s oil exports in half and triggered a spike in inflation and joblessness. The economic churn helped ensure the election in 2013 of Rouhani, a moderate cleric and dark-horse presidential candidate who promised to seek a rollback of sanctions through a negotiated nuclear accord.
Speaking to parliament on Sunday, Rouhani hailed the nuclear agreement as a “golden page” in Iran’s history. “The nuclear deal is an opportunity that we should use to develop the country, improve the welfare of the nation, and create stability and security in the region,” he said, according to wire reports.
Iran’s regional rivals fear that the lifting of sanctions will unfetter Iranian hard-liners and boost Tehran’s ambitions to become the economic and political hegemon in the Middle East. But Iranian moderates and many U.S. and European officials have expressed cautious hopes that the agreement will help tip the power balance in Tehran in favor of Rouhani and other pragmatists who support rapprochement with the West.
Some analysts believe the nuclear pact — celebrated by millions of ordinary Iranians — will help pro-Rouhani politicians prevail during parliamentary elections next month. Moreover, many Iranians may be willing to give Rouhani time to demonstrate the benefits of a deal that could lead to a lessening of their country’s isolation.
“It’s looking favorable for the centrists and reformists at this early juncture,” said Clifford Kupchan, a former State Department official who is Iran director for the Eurasia Group, a global-risk consulting firm. In the optimistic case, Kupchan said, the deal “unleashes a slow, non-linear evolution toward a more politically and economically liberal Iran.”
Yet, enthusiasm in Iran over the nuclear accord’s “implementation day” on Saturday could be short-lived if the economy fails to improve. Although sanctions helped drive Iran’s economic decline, other forces — including historically low oil prices, official corruption and a broken banking system — will continue to act as a drag on the country’s fiscal progress for the foreseeable future, analysts say.
Oil prices are down by more than 60 percent since June 2014, cutting still further into Iran’s biggest single source of foreign revenue.
Moreover, Western corporations are unlikely to immediately pour investment dollars into Iran, given treaty provisions that allow the sanctions to be quickly re-imposed if Iran is caught cheating, said Michael Singh, a former Middle East adviser to the George W. Bush administration. If Iranians’ expectations for a recovery are not realized, he said, Rouhani could quickly lose ground to hard-liners.
“With oil prices low and corruption endemic in Iran, the economic benefits of the deal may be less than advertised, and they may not trickle down to average Iranians,” said Singh, managing director of the Washington Institute for Near East Policy. Thus, the ultimate beneficiaries of the deal may be Iran’s hard-liners, who could end up collecting the economic benefits of sanctions relief, even as they “receive immunity for provocations” in the Persian Gulf, Syria and beyond, he said.
“Given that one of the West’s aims in concluding the nuclear deal appears to have been to strengthen Iran’s pragmatists, this would be an ironic result,” Singh said.
While maintaining the hope that the nuclear deal will strengthen Iran’s moderates, Obama administration officials have acknowledged their limited ability to influence outcomes inside Iran. But U.S. officials insist that the deal has helped make the world safer, regardless of whether Iran is controlled by conservatives or moderates.
“Nobody’s turning a blind eye to the fact that this is still a regime that bears significant watching,” State Department spokesman John Kirby told reporters Friday.
“This isn’t about trust. It’s not about trying to forge a new friendship here,” he said. “It’s about taking a very big step to try to reduce, in the realm of nuclear arms, their ability to do that much more harm to people in the region.”