Iran in 2014: Don't expect Rouhani to transform Iran

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Editor’s note: Michael Rubin is author of Dancing with the Devil: The Perils of Engaging Rogue Regimes, forthcoming in February 2014. The views expressed are his own. This is the latest in the '14 in 2014' series, looking at what the year ahead holds for key countries.

The past year was a time for change in Iran. Iranians went to the polls and elected Hassan Rouhani who, after Mahmoud Ahmadinejad’s eight year interlude, returned Iran’s presidency to the reformists. Rouhani’s diplomatic charm offensive, telephone call with President Barack Obama, and tentative nuclear deal suggested a new international posture. But just as important were Rouhani’s domestic actions.

During the Ahmadinejad years, the Islamic Revolutionary Guard Corps (IRGC) had gained unprecedented political and economic power. More parliamentarians, governors and deputy governors, ministers and deputy ministers were veterans of the IRGC than at any time in the Islamic Republic’s history. Ahmadinejad himself was the first president who gained his legitimacy from time spent in the military during the Iran-Iraq War rather than in revolutionary clerical circles. The past became present, as informal networks of battle buddies from the Iran-Iraq War trenches trumped the formal political wire diagram in Islamic Republic decision-making.

Herein lies the challenge. While expectations are high that Rouhani will transform the Islamic Republic at home and on the diplomatic stage, it is not clear that he can or even wants to do so. True, Rouhani quietly moved to unravel the IRGC’s chokehold on Iranian politics, but he has replaced ministers and fired governors whose backgrounds were in the IRGC in many cases with veterans of the intelligence service, equally despised by ordinary Iranians. Indeed, extricating the IRGC from the economy will be difficult: Khatam al-Anbia, the IRGC’s economic wing, controls up to 40 percent of the economy and Ahmadinejad awarded the group billions in no-bid contracts in the energy sector alone during his administration, a position the IRGC is unlikely to abandon and which effectively gives the elite military budgetary autonomy.

Next year will be the make-or-break year for the new president, whose honeymoon period is almost over. The Iranian public’s patience is not infinite. Rouhani must remember the experience of former President Mohammad Khatami, who captured the popular imagination in 1997 with a call for dialogue of civilization and rhetoric of reform.

The Iranian public held out for hope and change until 1999 when, against the backdrop of repeated newspaper closures and an attack by security forces on a student dormitory, the public rose up in what was then the largest anti-government protest in Iran since the revolution. I was in Tehran at the time and witnessed the aftermath. Ordinary Iranians gathered in homes, storefronts, and hotels to watch a speech by Supreme Leader Ali Khamenei in reaction to the protests. They hoped he would call for justice and endorse reforms. Instead, he castigated protestors and threw his support wholly to the security forces that had been so abusive in previous days. Iranians hoped Khatami would speak up for their rights, but the smiling reformist remained silent as security forces detained thousands, and subjected hundreds to humiliating abuse. It was at the point, Iranians realized, that their hopes in Khatami were premature at best – if not entirely misplaced. The Supreme Leader and old guards’ self-interest were simply too great to overcome. Khatami, like Ahmadinejad after him, became a lame duck. This is by design. The Supreme Leader prefers not to eliminate rivals, but to weaken them to the point of impotence. Rouhani’s time is limited.

Not surprisingly, cynicism in Iran is rife. Iranians might have embraced Rouhani, but their patience is not infinite, especially given the gap between public expectation and policy reality. Rouhani’s record of reform has been inconsistent at best: While he won the release of some prominent internal dissidents, security forces continue to arrest others. The regime has increased the frequency of public executions, apparently to ensure that ordinary citizenry do not confuse diplomatic outreach abroad with lessened commitment to revolutionary ideology at home. The symbolism of the regime’s refusal to allow Khatami to travel to Nelson Mandela’s funeral, effectively continuing its ban on his travel, was not lost on the Iranian public.

Iranians also wait to see whether Rouhani will fulfill his promised to repair Iran’s moribund economy. According to the Statistics Center of Iran, the Iranian economy shrank 5.4 percent over the past year. While inflation officially hovers around 30 percent, the Iranian Central Bank’s price index of foodstuffs shows staples such as vegetables, rice, fruit, meat, and tea have increased between 50 and 70 percent. Sanctions relief may not provide the relief many Iranians seek: While sanctions have impact, it is an open secret among Iranians that the real reason for the Iranian economy’s poor performance are statist policies, poor management, and an undisciplined and populist subsidy policy.

The coming year will show definitively where Rouhani stands on investment priorities. The December 14 announcement by the Oil Ministry that average oil revenues have been $11 above the $92 per barrel assumption upon which Iranian officials set the budget forces a decision about what to do with that surplus. Should such money be siphoned off for the nuclear program, military projects, or to support Hezbollah or pro-Assad militias in Syria, then it would suggest that Rouhani is unable or unwilling to bring change. There is precedent for such disappointment. During Khatami’s second term, Iran’s trade with the European Union nearly doubled while simultaneously the price per barrel of oil skyrocketed. Rather than invest the hard currency windfall in the Iranian economy, the lion’s share went to Iran’s then-covert nuclear and ballistic missile program, suggesting either Khatami’s insincerity or the possibility that he had been sincere, but did not hold the reins of power.

Rouhani might be sincere, and he may genuinely desire to resolve Iran’s myriad internal problems and external crises. But Iranian presidents are most powerful on inauguration day, and quickly lose power with the passage of time. Nor are reformists democrats or liberals as they are so often depicted abroad; they subscribe just as fully to the theocratic system, but simply want to tweak its implementation. The Iranian people and international community might hope for change, but 2014 might very well be the year when they conclude the emperor has no clothes.

How both Iranian and Western diplomats react to unmet expectations and Iranian business as usual will be the 64 million rial question.