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Iran | May presidential elections and the nuclear deal

Iran | May presidential elections and the nuclear deal

President Rhouhani’s reelection campaign is largely seen as a referendum on his attempts to liberalize the economy and the P5+1 nuclear deal his administration helped brokered.

The May 2017 Iranian presidential election is the next political milestone for the country, and particularly for the incumbent, Hassan Rouhani. The election will probably be a vote on Rouhani’s attempts to reform the Iranian economy, and the nuclear deal with the P5+1. Although socially conservative, Rouhani’s policies are fairly moderate, at least within the Iranian political spectrum. His conservative (also known as principlists or hardliners) opponents are likely to try and use the election to argue against the nuclear deal, but on current indications Rouhani seems likely to win.

A second term for Rouhani from 2017-2021 would significantly improve the chances of the nuclear deal staying in place. But there is uncertainty around the US president-elect’s policies on the country, particularly whether he might withdraw from or undermine the Joint Comprehensive Plan of Action (JCPOA). And it seems increasingly probable that both the US and Iran will commit minor or perceived violations of the agreement, specifically around Iran’s heavy water stock and US sanctions. Nonetheless, continued EU commitment to the deal, particularly by Germany, is likely to partly temper these risks.

Running against Rouhani

The exact timeline for the vote has not been announced yet, but the state-owned Mehr News estimated last month that candidates will need to put their names forward by mid-April, and that from 21 April the Guardian Council will vet and reject or approve candidates. The same account said that the electoral campaign would start on 27 April for 20 days (until mid-May). So far, the only confirmed candidate is Rouhani. As we wrote in early October, former hardline president Mahmoud Ahmadinejad is not running, which improves Rouhani’s chances of re-election (B-03-10-16-IR).

Supporters of Rouhani are already suggesting that he is likely to win. The prominent, fairly moderate former president and businessman Hashemi Rafsanjani told the Iranian press earlier this month that he was fairly confident Rouhani would be re-elected. Precedent also suggests that he will. All four other presidents since 1989 have served two terms, and politicians with similar views and policies as Rouhani did well in the February parliamentary polls. As a result, the pressure already seems to be building on the principlist camp to announce their candidate.

Over the last month, politicians connected with the principlists have told the Iranian press that they have not yet agreed on a candidate. Several of these reports indicated that the factions that make up this loose political grouping are trying to agree on a consensus candidate, particularly since Ahmadinejad – who is highly divisive – is not running. If they can do so, this would put them in a stronger position to challenge Rouhani by uniting their supporters behind a single candidate, rather than several as has happened in previous years.

So far, no one stands out as a consensus candidate for the principlists. And there are some press reports indicating that some principlists are considering supporting Rouhani, because of his conservative social policies and nationalist stance. One name being discussed in the press is Saeed Jalili, who is reportedly a favourite of the hardline principlist cleric Mesbah Yazdi. Jalili ran on the ticket of Yazdi’s principlist political movement in the 2013 presidential elections and is close to Khamenei.

However, Yazdi is reportedly facing strong opposition to Jalili from other principlists. According to analysis from the Iranian news site Khabaronline, he faces particularly strong opposition from supporters of Ahmadinejad, but many principlists oppose Jalili because of the role that he played as chief negotiator for the nuclear deal. Another person who is mentioned frequently in the press as a possible candidate is Ali Shamkhani. But it is unclear if his current role as secretary of Iran’s national security council will be an obstacle. The Supreme Leader Ali Khamenei has reportedly called for the military and revolutionary guard not to interfere in the presidential elections.

Reversing the nuclear deal

The nuclear deal, and Rouhani’s attempts to encourage foreign investment, are likely to be two central themes of the presidential election campaign. Principlists are particularly opposed to the deal, although not necessarily to foreign investment. Many hardline and conservative politicians have indicated in recent weeks that the election of Donald Trump as US president is a positive development, because they assume that it will enable Iran to get out of a ‘bad deal’. In particular, they believe that the agreement gave too many concessions over Iran’s nuclear program.

Trump made repeated campaign pledges to dismantle or renegotiate the deal. Shortly after the election, one of his foreign policy advisors said that Trump will ‘review’ the agreement and send it to Congress with amendments. But as president, Trump will have the executive authority to take unilateral action to end US compliance with the JCPOA, under which Iran agreed to curb its nuclear programme in exchange for sanctions relief from the EU and US. Most significantly, were he to re-impose secondary sanctions on foreign companies conducting business with Iran, this would undermine the agreement and push up associated business risks.

We do not yet know what Trump’s policy on Iran will be, but suspect that he is unlikely to go as far as reintroducing secondary sanctions, because this would meet fierce opposition from several US allies, particularly Germany and Italy. And the EU seems unlikely to re-introduce sanctions lifted under the JCPOA, thereby undermining the effectiveness of such a move. However, the election of a principlist president in Iran would significantly increase the risk of the deal collapsing. This is because it would empower hardliners and politicians who oppose Iran developing relations with Western countries, particularly the US. Such an outcome seems unlikely at present, since Rouhani is in a strong position to be re-elected.

Although it appears more likely that the Iranian government will continue to support the nuclear deal, and European investment in particular, this does not necessarily mean that it is not at risk due to violations by both sides. This year, the IAEA has twice found that Iran has had a greater stock of heavy water – used to cool nuclear reactors – than outlined in the JCPOA. And the US senate is preparing to vote on extending existing sanctions against Iran for another ten years. In this context, in the coming year we expect greater uncertainty around the deal and more antagonistic rhetoric from both Iran and the US.

Featured Image: President Hassan Rouhani, head of Expediency Council Akbar Hashemi Rafsanjani and former parliament speaker Ali Larijani, May 2016, Ebrahim Noroozi, AP, Press Association Images

Published: 29th November 2016
Categories: Company News