On June 27, Iran’s moderate President, Hassan Rouhani, rejected calls to step down amid the country’s soaring cost of living, its plummeting currency rate, street protests and strikes, and the looming threat of an oil embargo by the administration of United States President Donald Trump. Instead, he promised to “bring the US to its knees”.
Iran’s economy has been rattled by the steep devaluation of the rial, the country’s currency, as a result of speculative activities in response to a likely shortage of foreign currency once the oil embargo by the US begins on November 4. The consensus view among economists in Iran is that the price of almost every good in Iran is tied to the value of the dollar. Beginning last October, Trump shifted to a total confrontational stance towards Iran and the value of the rial has since halved.
There are rumours that Rouhani is going to overhaul his economic team to deal with the country’s financial woes as demanded by two-thirds of Iran’s members of parliament. The problems with Iran’s economy are many, including mismanagement, prevalent rent-seeking activities, bribery, fraud and other shady dealings involving misuses of the public sector. The largest problem, however, is that the economy is plagued by a deep-rooted structural problem: The country’s hostile relations with the US, which have resulted in far-reaching sanctions since the seizure of the US embassy in Tehran in 1979.
Fast forward 40 years. The primary reason behind the rial’s current volatility, which has raised anxiety for Iranians thus hoarding dollars to protect the value of their savings, is the economic uncertainty that the re-imposition of sanctions by the US administration has caused.
Ayatollah Ali Khamenei, Iran’s Supreme Leader and the country’s deep state, which is dominated by the hardliners, argue that the US seeks to overthrow the Islamic Republic system regardless. Therefore, they posit, negotiations aimed at detente and improving relations is senseless. A belligerent foreign policy is the only way to deal with the US. It was this line of thinking that led Khamenei to ban any further negotiations with the US shortly after the culmination of the nuclear deal between Iran and the six world powers, which comprises the five permanent members of the United Nations Security Council — US, Britain, France, Russia, China — plus Germany.
What is ignored in this argument are the developments during the nuclear talks (2013-2015) that were primarily between Iran and the US. During those negotiations, the then US president, Barack Obama, came to a head-on clash with Israeli Prime Minister Benjamin Netanyahu and the Israeli lobby over reaching an agreement with Iran, which allowed Tehran to keep its entire cycle for producing nuclear fuel.
In an unprecedented spectacle by an Israeli prime minister that resulted in destroying Israel’s relations with the incumbent US administration, in March 2015, Netanyahu travelled to the US and delivered a speech in a joint meeting of the Congress. In that meeting, Netanyahu effectively accused Obama of being duped by the Iranians in negotiations over Tehran’s nuclear programme and of endangering the existence of Israel. If Obama sought to change the Iranian regime, how can such a large amount of friction and confrontation be explained? In another glaring example that negates the Iranian deep state’s argument, in September 2015, Senate Democrats blocked a Republican resolution against Obama’s nuclear agreement with Iran.
The reality is that there are two currents in the US government regarding the Iranian government. One argues that the current regime in Iran is beyond repair and must therefore be swept aside. The other current, despite its general disapproval of the Iranian regime, contends that an escalation with Iran could lead to a disastrous war in the Middle East. Therefore, the second current argues, a diplomacy of detente and an integration of the country with the global economy will give more weight to reconciliatory policies in the Islamic Republic. The deep state in Iran, unlike the centrists and reformists, views both currents in the US establishment as one. The deep state has therefore continued its hostile posturing towards both currents and repeatedly insisted on a no-negotiation policy.
The deep state in Iran also ignores the fact that the European Union (EU) is unanimously determined to salvage the Iran nuclear deal, although such a move could put it on a collision course with the current US administration. “Neither America nor Europe is trustworthy,” Khamenei remarked in May. Opening a new round of talks between Iran and the US may not be possible under Trump, but cooperating with the EU could certainly reduce the pressure imposed by the US sanctions.
Rouhani’s fate is tied to his ability to convince the deep state about the seriousness of the current economic crisis and the likelihood of broader protests were Iran to abandon the nuclear deal. Failing to do so, Iran’s withdrawal from the nuclear deal is a recipe for more currency turmoil and social chaos as a result of broader anti-government protests. In such an eventuality, Rouhani and his team will lose their relevance even if he superficially survives and does not resign. Iranian Foreign Minister Mohammad Javad Zarif rightfully realises what is at stake. “Failure of the nuclear deal would be very dangerous for us,” he said last month.
Cyrus Namjoo Moghadam is a columnist specialising in Iranian issues.