The Stage is Set, But Will Rouhani Deliver in His Next Act?
Last Friday, Hassan Rouhani emerged victorious in Iran’s contentious election, winning nearly 60% of the vote in a contest which saw 72% turnout. The clear victory confirms the incumbent’s popular mandate, and reflects the electorate’s belief that he remains the only politician able to lead on Iran’s wide range of economic, political, and social challenges.
Crucially, his chief opponents Ebrahim Raisi and Mohammad Bagher Ghalibaf were unable to present a cohesive alternative to Rouhani’s economic program, relying instead on unrealistic promises to expand welfare handouts to Iran’s lower classes.
The promises of greater handouts had an undeniable appeal, however, as voters aired their frustrations with the lack of improvement in their standard of living during Rouhani’s first term. While growth has rebounded since the lifting of international sanctions, stubborn unemployment and wage stagnation have left the average Iranian patiently waiting for the much touted windfall of the nuclear deal. Nonetheless, Iranian voters understand that international engagement is a precondition of any eventual improvement in their economic fortunes. In a boon to electoral fortunes, Rouhani and his administration were widely and credibly seen as the most effective advocate for Iran’s international relations.
Yet, just two days after Rouhani’s victory, American President Donald Trump issued a scathing address from the specially-convened Riyadh Summit, during his first overseas trip. Trump’s speech, issued in concert with the Saudi leadership, cast Iran as a chronic human rights violator and the leading supporter of international terrorism. He called for the international community to isolate Iran.
The juxtaposition of Iran’s energetic and significant popular vote (driven in great numbers by Iranian women voters), with the cynical pageantry of the Riyadh Summit, held in a country where elections do not occur and in which women have limited freedoms, could not have been more stark.
While the Trump administration has quickly aligned itself with the particular vision of Iran espoused by Saudi Arabia and its Persian Gulf allies, the rest of the international community has watched the weekend’s events with greater pause. In the election, Iran put its best foot forward; demonstrating quite vividly that it cannot be caricatured as the destructive force portrayed by Trump, but should understood as a multifaceted country whose civil society is yearning for international engagement.
Though Trump’s speech risked adding fuel to the regional rivalry between Iran and Saudi Arabia, President Rouhani struck a measured tone in his first press conference since being re-elected, noting on Monday that the Saudi people remain Iran’s friends.
Overall, the weekend’s events may actually prove a blessing for Iran. By putting Iran’s better qualities into such clear relief, and by making so transparent the subservience of US foreign policy in the Middle East to an agenda defined by Saudi Arabia, a much wider political space is opening for ties between Iran and the wider international community, especially in regards to relations with Europe.
Senior leaders from the European Union, such as High Representative Federica Mogherini, were the first to congratulate President Rouhani on his reelection. His electoral success will no doubt give greater confidence to the slew of major multinational corporations that have been pursuing trade and investment deals in Iran. At the same time, the elections serve as a validation for the European policy that expanded economic relations can help encourage Iran’s move to a more open and accommodating political and social posture.
Consider also that despite the rhetoric, the Trump administration looks unlikely to interfere with the basic sanctions relief afforded through implementation of the JCPOA nuclear deal. As such, the baseline conditions for Iran’s economic engagement with the international business community have improved significantly.
In order to fully deliver on his promise of economic growth and to more effectively attract investment from industrial players and financial investors, the Rouhani administration must commit to a bold agenda of sustained reform. While his first term was largely focused on addressing fiscal and monetary policy (tightening budgets and reducing money supply in order to tackle inflation, for example), his second term must focus on industrial policy.
Iran needs to quickly decide how it will balance the requirement to support domestic industrialization and job creation with the need to welcome leading multinational companies who wish to bring their products to the Iranian market. A lack of clarity on this issue has meant that many long-standing trading partners in Iran are struggling to get the same support from government ministries and agencies that are afforded to outside companies promising new investment in the country.
This unequal treatment belies a lack of coordination among Iran’s government and business stakeholder groups on issues pertaining to the country’s business environment. European governments and trade promotion bodies could do much more to help transfer best-practices to their Iranian counterparts, helping to support the business development efforts of both foreign and Iranian companies. This kind of technical cooperation, which goes beyond delegations and trade events to address the practical challenges facing the business community across-sector, remains the elusive next step in Europe-Iran ties.
Rouhani’s great success has been to set the stage for an economic resurgence. The question now remains whether he can successfully direct the actors to play their parts.
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