The Iran nuclear deal under Rouhani 2.0

An earlier version of the article was published by Aspenia Online.


On May 19, about 45 million Iranians participated in the twelfth presidential election, in which incumbent President Hassan Rouhani gained a determined majority of votes. The election was widely perceived as a referendum on the achievements of the Rouhani’s administration, with a particular focus on the nuclear deal, which constituted the centrepiece of his first mandate. His victory indicates that the majority of the Iranian people is in favour of continuity with regard to the stance of the country towards the international community and the commitments to the nuclear deal, but much of Iran’s posture during Rouhani’s second mandate will depend on the US approach towards the country.

Since his election in June 2013, Rouhani made of the resolution of the nuclear impasse his main goal, portraying the lifting of sanctions as crucial for the recovery of the Iranian economy. Once the Joint Comprehensive Plan of Action (known as the JCPOA) was announced in July 2015, his administration thus committed to ensure Iran abided by its end of obligations, whilst also working towards yielding the economic benefits many Iranians anticipated following the lifting of sanctions.

During his first term, some of the economic indicators improved: inflation (reduced from 35% to 9.5%), growth rate (which reached about 6%), oil exports (3 millions barrels per day) and foreign direct investments ($11 billion). Despite that, unemployment is still high and the non-oil-sector growth remains slow. Furthermore, international investments remain low compared to expectations, mainly because of the hesitation of large financial institutions to deal with Iranian entities, despite the sanctions relief.

The nuclear deal and its impact on the Iranian economy has been one of the main topics discussed during the election campaign and a consensus emerged among moderates and conservatives about the need to continue implementing the JCPOA: even the harshest critic and strongest rival of Rouhani, the conservative cleric Ebrahim Raisi, stated that “the nuclear deal, despite its shortcomings, is a national document”. This means that the opposition to the deal, which was advanced by the conservative camp up until late 2015 is largely gone. What remains is the criticism of the indirect implications of the deal.

In March, the Supreme Leader Ayatollah Ali Khamenei criticised the economic policies of Rouhani’s government, saying that they had fallen short and “do not meet people’s expectations and mine”. In April, he called on presidential candidates to be less reliant on Western investments. This inevitably piled pressure on the incumbent before the May elections, given that his policies heavily relied on attracting foreign investment and technology transfer. During the electoral campaign, the criticism towards the administration’s record on the economy front continued, with both Raisi and the mayor of Tehran, Mohammad Baqer Qalibaf, pledging to “cash in the check” of the nuclear deal and improving the living standards for the Iranian people without looking abroad.

The results of the elections demonstrate that the Iranian people still opted for the opening of the Iranian market to foreign investments and gave the government a confidence vote over the nuclear deal and its ability to help improve the country’s economy. Iran is thus unlikely to reverse its commitments to the JCPOA under Rouhani’s second mandate. What the administration will be pressured to do, on the other hand, is to make sure that the Iranian people will feel the economic benefit deriving from the deal.

To do so, it will carry on with the attempts to attract international investments in Iran. The main challenge in this sense will be the continued hesitation of banking institutions to deal with Iranian entities. During his campaign, Rouhani stated he will negotiate the lifting of US non-nuclear sanctions (which are still in place against Iran and are the reasons for financial institutions’s concerns over potential violations and multi-billion dollars fines) with the American counterpart. But because of Trump’s stance towards Iran, that is likely to be a tall order.

Whilst the Trump administration is no longer advancing its line about the need to rip up the nuclear agreement or renegotiate its terms, the US is thus likely to actively discourage global investment in Iran. Since February, the new administration adopted a number of additional non-nuclear related sanctions against Iran to condemn its missile tests and alleged support for the Houthis in Yemen. Whether, despite that, Iran will maintain its commitments to the nuclear deal remains to be seen. What is clear is that, from an Iranian point of view, the future of the nuclear deal mostly depends on what posture the US will adopt towards the JCPOA and, more generally, towards Iran.

Image: Iranian President, Hassan Rouhani holding press conference after his victory at 2017 presidential election, 22 May 2017, via wikimedia.

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