Sanctioning Iran: Implications and Consequences (part 4)
8 Nov 2012
By Eskandar Sadeghi-Boroujerdi for Oxford Research Group (ORG)
Domestic Political Repercussions
Statements from even the most Conservative quarters, such as that of Ayatollahs Jannati, Alamhoda, and numerous others, after much recalcitrance have gradually come to admit to dire state of the Iranian economy and its consequences for the lives of ordinary Iranians, and to a lesser extent the political elite itself. external page[127] The hardline Prayer leader of Mashhad, Ayatollah Alamhoda, went as far as to say that the “present conditions were warlike”. He also advised his congregation to make preparation securing their food for the future. external page[128]
There have not as of yet been any open criticisms of Khamenei, but some rumblings and indications of discontent amongst the senior ranks of the ruling regime, and Conservative establishment have been heard. external page[129] In order to counter the prospect of a serious break in the ranks of the ruling elite, across the country and in coordinated fashion, Friday Prayer leaders appointed by the Supreme Leader’s office, have been emphasising the imperative of tolerating the hardship inflicted by sanctions, maintaining unity and following the Leader unreservedly. external page[130] Mohsen Rezaei, former Commander of the IRGC and the incumbent Secretary of the Expediency Discernment Council, has also said publicly that the West has been conducting “economic warfare” against the Islamic Republic over the course of the last two years, and it has intensified over the last 6 months. external page[131]
Meanwhile, it appears as if the regime is relying more on Iranians blaming the West, and rallying around the flag, for their current economic travails. Such an outcome is by no means assured, and some reports have actually argued that Iranians are heaping just as much if not more blame on the incompetence of their own government. external page[132]
While domestic criticism of the nuclear policy has periodically flared up, there is as of yet, no major break of ranks on fundamentals. The most “controversial” statement made by a member of the political elite thus far was by Abdollah Nuri, a well-known state Reformist figure and onetime Interior Minister, who called for a referendum on the nuclear programme. external page[133] He argued that given the high cost which the regime and people have paid and severe pressure which Iran is under, a referendum will either strengthen the people’s resolve, or cause the policy to change. A lot was made of Nuri’s statement, but the fact is that he has not been a Minister since the late nineties, and even then, he found himself embattled, arrested and eventually condemned to five years in jail by the Special Court for Clerics. Despite Nuri’s provocative politicking, there is little to no chance that the current ruling regime will let Nuri participate in any future election, or that they will take all that much notice of his recommendation. Moreover, even if he were to put himself forward as a viable candidate, without a major shift in the status quo, he is certain to be disqualified by the Guardian Council. Finally, there is even disagreement within the Reformist camp itself, as chief Reformist political strategist and theoretician, Saeed Hajjarian has come out publicly against the idea of a referendum on Iran’s nuclear programme. external page[134]
Former President Rafsanjani has as usual played up to both sides, and tried to walk a tightrope between his Principalist rivals, some of which remain sympathetic to his politics, and the hardship and discontent of the general public as a result of the economy’s parlous state. While insisting that Iran show willingness to engage, after the Moscow talks, Rafsanjani explicitly criticised the Western powers and accused them of being disingenuous. external page[135] Rafsanjani remains head of the Expediency Discernment Council, which mediates disputes between the Majles and Guardian Council, but was ousted from the important position of Chairman of the Assembly of Experts, the institution which is supposed, at least in principle, to supervise the performance of the Leader and appoint his successor. In October 2012, two of his children, Faezeh and Mehdi Hashemi, languish in jail.
He has resisted confrontation with his erstwhile friend and ally Supreme Leader Khamenei, and for a number of years now, openly criticised Ahmadinejad’s style of diplomacy. external page[136] While there are members of the elite, who continue to be sympathetic to Rafsanjani’s more “technocratic” and “pragmatic” approach, external page[137] few are willing to jeopardise their own political futures or publicly contradict the official line. This includes some members of the traditional right ( rast-e sonnati) around the figure of Assembly of Experts Chairman, Ayatollah Mahdavi Kani, which comprises groups such as, e.g. the Islamic Coalition Party, the Society for Qom Seminary Teachers, and the Society for Combatant Clerics.
While the Endurance Front (Jebhe-ye paidari) affiliated with the radical cleric Ayatollah Mesbah Yazdi, did not perform particularly well in the Majles elections, and the traditional right, specifically individuals like Larijani, Bahonar, and Tavakkoli, continue to dominate the Majles, this vociferous group does constrain the traditional Right domestically in a number of important ways. The members of the Endurance Front, often regarded as Iran’s “neoconservatives”, constantly try to outflank the traditional right in their radicalism, and thereby undermine the latter’s ability to take more moderate positions. This loose group of rightwing radicals are sympathetic to Ahmadinejad (apart from his controversial advisor Mashaei) and have shown more than willing to rebound ferociously on the president’s critics. But, as was stated earlier, while neither of these two groups are prepared to publically or overtly criticise Khamenei’s line on the nuclear programme, the poor standing of the economy will place the regime elite under significantly more pressure. It will also exacerbate intra-factional rivalries, which have always existed, but have been on the increase since 2009. Specifically, intra-factional Principalist infighting has worsened since the 2009 side-lining of Reformist forces, and it is set to continue into the coming year ahead of the 2013 presidential contest.
The most recent and controversial attack on Ahmadinejad has been the letter by a group of embittered ex-ministers to the Supreme Leader, calling on him to strip Ahmadinejad of his powers and hand over the reins of executive power to a council. external page[138] Khamenei has yet to publicly respond, and it is unlikely he, in fact, will do so, since he knows any attempt to remove Ahmadinejad could prove hazardous for the image of the regime as a whole. Excessive and destructive infighting might also provoke the politically active elements of the IRGC to enforce unity by fiat and to intimidate critics, even if they be long-standing members of the traditional right. The attacks on the Deputy of the Islamic Coalition Party, Asadollah Badamchian, after he alleged IRGC interference in the Majles elections is just one example of many. external page[139]
Conclusion
Iran has lost approximately half of its oil revenue, external page[140] but still has substantial revenue flowing into its coffers. However, the economy is facing serious problems. The IMF has predicted a growth rate of 0.4%, which may well be overly optimistic, even the official rate of unemployment stands at well above 20%, with some estimates claiming that 500,000 to 800,000 Iranians have lost their jobs in the past year. external page[141] The Islamic Republic’s leaders are well aware that Ahmadinejad’s economic policies have added to the Iranian economy’s decline, and will try their utmost to rein in the rising prices of basic foodstuffs, inflation and the currency crisis. Whether they will succeed in doing so is still not clear, but there is little doubt they are diligently struggling to circumvent Western financial and energy sanctions by the impromptu and ad hoc means available to them, and thus claw back some of their lost oil revenues. They are also enforcing austerity measures where they deem necessary, and where it is least politically costly. One of the few things Iran has going for it in terms in domestic economic policy is its low levels of debt.
Despite having experienced U.S. sanctions on the development of the energy sector for close to two decades, the current sanctions are unprecedented in the history of the Islamic Republic. While the Iranian authorities publicly recognise that a reorientation of the economy towards domestic production is of long-term strategic importance, for the present, it seems that Iran is willing to play a game of cat and mouse, and make do with makeshift solutions. They are also relying on great power rivalry as a factor constraining the scope and extent of U.S. extra-territorial sanctions. Iran, moreover, thinks it doubtful that the P5+1 will shift its position until after the U.S. presidential election, and the ruling elite of the Islamic Republic, at least for the present, believes it can carry on putting out one fire after another.
Efficacy of Sanctions
As Meghan L. O’Sullivan, former U.S. Deputy National Security Adviser on Iraq and Afghanistan, and an expert on the construction and anatomy of sanction regimes, remarks: “It is first important to acknowledge that sanctions almost never “work” when they make up the entirety of a strategy.” external page[142] While sanctions have the ability to induce Tehran’s recalibration of its cost-benefit analysis in the pursuit of its nuclear programme, there is a general consensus among experts on Iran and sanctions that sanctions by themselves are most unlikely to yield a diplomatic solution to the current impasse. Saddam Hussein’s Iraq and Castro’s Cuba stand as stark reminders.
Previous American encounters with Tehran also reinforce the failure of sanctions in and of themselves to engender Iran’s agreement or acquiescence. The U.S. hostage crisis and the release of American hostages in Lebanon are poignant examples, in which an impasse or serious object of contention dividing Iran and the West, specifically the U.S., and its eventual resolution had little to nothing, to do with sanctions. external page[143]
Similarly, while the regime in Tehran is undeniably under considerable pressure - as are the general populace, suffering the brunt of pressure brought about by Iran’s flagging economy - Iran’s leaders do have the capacity to react to new circumstances and undertake necessary exercises in damage control, despite inefficiency, incompetence and corruption. Such a response of course is fraught with risks. If Iran’s leaders fail in this regard, then discontent and apathy could transform into unremitting anger, hostility and political instability, perhaps forcing the military to take a more visible lead in the running of the country.
Whether in the long-term the Iranian government will be able to meet its budgetary needs in the future is not entirely clear, especially since the precarious state of the world economy could well depress oil prices, and therefore make such a prospect fade fast.
Iran will also have serious difficulties recouping revenues through taxation, since the Islamic Republic’s system of tax collection is relatively undeveloped and tax evasion is widespread. According to the Head of the Organisation for Fiscal Affairs, some 60% of the population do not pay taxes, and 20% of the economy is essentially hidden. external page[144] Moreover, the state’s “legitimacy deficit” seriously constrains it from exerting further pressure on a population riddled with discontent, by increasing the tax burden even further.
The proposals, which have emerged in the negotiations between Iran and the P5+1 thus far, have failed in part because of their perceived lack of appropriate balance, but also domestic factors, which have led governments on both side of the diplomatic impasse to squander potentially fruitful opportunities at various junctures.
Tehran is keeping the door to diplomacy open, while at the same time, augmenting the size of the civilian nuclear programme, external page[145] in order to convey to the West that the sanctions are not impacting Iranian “progress”.
The key dilemma, which Western policy-makers should consider, is that rightly or wrongly, the Supreme Leader and much of the governing elite have staked their legitimacy on the nuclear programme. This is one reason why Oxford Research Group, in consultation with former policy-makers and diplomats with direct experience of the Iranian nuclear file, emphasised that in order to reach a diplomatic solution, Iran should be offered a package with integrated ‘face-saving’ measures. external page[146] This briefing has also sought to make the case that sanctions and defiance are no replacement for serious diplomacy, which ultimately means that both sides must show their readiness to depart from their opening positions.
If Iran’s total submission and relinquishment of all right to uranium enrichment is the endgame, then sanctions are highly unlikely to succeed as long as the present governing elite remains in power. A compromise solution, however, remains feasible and not beyond the realm of possibility.
Another factor which should be considered is that Iran does not believe the U.S. is prepared to offer a deal that would be palatable to it, prior to Obama’s re-election. Similarly, it is doubtful that Ayatollah Khamenei, and Ahmadinejad’s domestic critics, would favour conclusion of a comprehensive deal with the P5+1, if it meant Ahmadinejad could claim it as a victory and capitalise on it domestically. The Iranians thus want to keep negotiations going, so that diplomatic contact is maintained until the arrival of the most apposite time to strike a deal. Iran’s economic turbulence of course impacts its plans in this regard, but nonetheless the aforementioned should be borne in mind.
If the objective is to curb and limit Iranian uranium enrichment activities, and ensure they remain peaceful, then the sequencing of any deal needs to be carefully weighted to promote a “balance of advantage” for both sides of the dispute. As we had previously laid out in our May 2012 report, external pageIran’s Nuclear Impasse: Breaking the Deadlock , it may be possible to exchange the demands made on Iran’s nuclear ambitions with the progressive lifting of nuclear related sanctions. It is still possible for the West to use the leverage provided by sanctions constructively. As yet, however, there are few signs that the U.S., France, Germany and Israel will agree to any such scheme.