can the vienna agreement solve iran's problems?

7/23/2019 Can the Vienna Agreement Solve Iran's Problems?

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Can the Vienna Agreement Solve Irans

Problems?Seyedamir Hossein Mahdavi

In July 2015, Iran along with the ve permanent SecurityCouncil members, and Germany (known as the P5+1)reached a Joint Comprehensive Plan of Action in Vienna.The agreement, among other stipulations, provided Iranwith the promise of sanctions relief in return for veriablecurtailing of its nuclear program. The Iranian governmentand its people have had high hopes over the past few yearsfor the economic effects of a potential lifting of the sanctionsThe countrys difcult living conditionsespecially afterSecurity Council Resolution 1929 was adopted on June 920102was a determining factor in the election of PresidentHassan Rouhani in the presidential election of 2013. Rouhanimade resuming relations with the West and the eliminationof sanctions his campaign themes, and since the beginningof his rst term in 2013, he has given almost his entireundivided attention to negotiations with the P5 + 1. The

street celebrations across Iran after the Vienna Agreementalong with the attention paid by the press, political partiesand even the regimes opposition groups from outside ofthe country were indications of how much Irans people aredepending on the expected economic effects of this agreement

The government and people of Iran hope that with normalization of therelationship between Iran and the world, serious economic criseswidespreadunemployment and low growth in purchasing power, as well as the lowpurchasing power itselfwill be resolved. For their part, Irans global criticsand regional rivals have raised many concerns about the increase in Irans

January 2016

No. 96

Judith and Sidney Swartz Directorand Professor of PoliticsShai Feldman

Associate DirectorKristina Cherniahivsky

Charles (Corky) Goodman Professorof Middle East History andAssociate Director for ResearchNaghmeh Sohrabi

Senior FellowAbdel Monem Said Aly, PhD

Goldman Senior FellowKhalil Shikaki, PhD

Myra and Robert Kraft Professorof Arab Politics

Eva Bellin

Henry J. Leir Professor of theEconomics of the Middle EastNader Habibi

Sylvia K. Hassenfeld Professorof Islamic and Middle Eastern StudiesKanan Makiya

Rene and Lester Crown Professorof Modern Middle East StudiesPascal Menoret

Neubauer Junior Research FellowRichard A. Nielsen, PhD

Junior Research FellowsHarith Hasan Al-Qarawee, PhDHikmet Kocamaner, PhDDavid Siddhartha Patel, PhDJean-Louis Romanet Perroux


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Seyedamir HosseinMahdavi is a formermember of the CentralCouncil of MujahedinInqilab, a reformistparty in Iran, and on the

editorial board of severalreformist newspapers. Heis currently a researcherat the Crown Center anda graduate student atHarvard University.

The opinions and ndings expressedin this Brief belong to the author

exclusively and do not reect those of theCrown Center or Brandeis University.

regional power and the leverage it could wield once it receives billions of dollarsin now frozen assets. But how realistic are these different sets of expectationsand concerns?

This Brief will assess the validity of the optimism and expectations resultingfrom the Vienna Agreement and the possible large scale relief of sanctionsensuing from it by examining some of the most trenchant obstacles the Rouhanigovernment faces today. Specically, the Brief will rst identify three inter-related economic and political crises that arose independent of the sanctions

and thus cannot be resolved through the unfreezing of Irans assets abroad: thelegacy of former president Mahmood Ahmadinejads economic mismanagementthe unprecedented number of job seekers entering Irans economy, and theexpanded role of the Islamic Revolutionary Guard Corps (IRGC) in the Iranianpolitical arena. It then looks at the ways in which these three crises form aperfect storm, such that the ow of money as a result of the lifting of sanctionswhile ameliorating one crisis will only work to exaggerate another one. Againstthis backdrop, the Brief will conclude by examining three probable scenariosconcerning the effects of the agreement on the future of Iran in the short andmedium terms, including the February 2016 Parliamentary and Assembly ofExperts elections.

Iran Today: Economic and Political Crises

The level of organized governmental corruption under Ahmadinejad, alongwith the inationary depression, has created the worst economic conditionsever recorded according to Iranian national statistics. The corruption was sowidespread that two former presidential deputies are currently imprisoned, andthe accusation of a $2.7 billion oil fraud under Ahmadinejads presidency is stillin court.3 Aggravating Irans domestic difculties is the historic growth in thenumber of job seekers. The baby boom of the 1980s, which sparked a 50 percentgrowth in Irans population in less than a decade,4now seriously threatens theeconomy of Iran. Todays youth aged 25 through 35, who account for 23 percent

of the Iranian population, entered the job market almost a decade later in lifeowing to the policy of expanding post-graduate education in Iran. Moreoverexactly in the middle of Ahmadinejads presidency, in 2009, the worst politicacrisis during the thirty-seven-year history of the Islamic Republic of Iran tookplace, which had deep effects on the political structure of Iran. The protestmovement caused by the 2009 presidential election, which was suppressed bythe IRGC, led to a restructuring of power within the Iranian government. Whatresulted, particularly the IRGCs intervention to the highest possible extent inboth the Iranian economy and politics, is among the major factors damagingefcient governance in Iran.

Ahmadinejads Legacy: Economic Mismanagement

Ahmadinejad was fortunate to have come to power in 2005 when oil prices werereaching their highest long-lasting level since the establishment of the IslamicRepublic.5This permitted him to bypass the law by implementing provocativeshort-term policies that allowed him to spend the resources at his disposal inorder to buy political loyalty. This practice, which continues today, becamea necessary tool for consolidating the position of the Supreme Leader in thesecond period of Ahmadinejads presidency due to the widening rift betweenthe Supreme Leader and a signicant number of Irans ruling elites as a resultof the contested 2009 presidential election. The respective needs of the Leaderfor loyalty and of Ahmadinejad for popularity, along with the internationalsanctions imposed on Iran, severely weakened the Iranian economy.


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responsible for it. At present, a land-mongering caseinvolving the head of the Election Commission in theInterior Ministry during the 2009 election is beinginvestigated in court.9 Similarly, the 2009 publicprosecutor of Tehran, who issued the order to squashall protests, is free under heavy bail.10 The rst vicepresident11 and the executive vice president underAhmadinejad have both been imprisoned, after being foundguilty of corruption.12 The largest economic corruption

case in Iranian history, in which one person receivedapproximately $3 billion worth of Iranian oil to sell inorder to bypass sanctions and did not return a singledollar to the treasury, is also being investigated. The latestcase that has attracted the attention of the media is thedisappearance of an $87 million oil rig. 13The money for thepurchase of the rig was paid to an intermediary companybut no rig has entered Iranian waters.

Rouhanis Plight: A Flood of Unemployed PeopleIn 2011, as a result of Ahmadinejads populist economicpolicies along with the sanctions, Iran fell into a worsening

recession. Iran is currently confronted with the largestpool of job seekers in its history, and, if it fails to properlyrespond to this enhanced labor supply with a very higheconomic growth rate, it will likely enter into an era ofirreparable economic crisis. The highest birthrate in thehistory of Iran occurred in 1980, coinciding with the rstdecade of the Islamic Revolution and the commencementof the eight-year-long Iran-Iraq war. Some regard the highbirthrate as a natural result of demographic trends, whileothers attribute it to the governments encouragement ofpopulation growth during the war. Whatever the cause(or causes), Irans population grew from 39 million at

the beginning of the 1980s to 57 million by the end of thedecade.14

People born during the baby boom of the 1980s graduallyentered the labor market starting in 2005. In fact, duringthe eight years of Ahmadinejads presidency (200513)the labor market was faced with the greatest number ofjob seekers in modern Irans history15. But because of theimport-oriented economic policies in the eight years ofAhmadinejads presidency, and despite the ow of nearly$700 billion into the country, only fourteen thousandnew jobs were created on average per year.16This numberis considered to be close to zero for a country with apopulation of eighty million. To remedy this problem, andto prevent the occurrence of a crisis, the Ahmadinejadgovernment delayed the entry of people born in the 1980sinto the labor market by rapidly increasing the number ofhigher education offerings (albeit many of low quality)expanding both doctoral and masters programs.17As suchyoung people who were ready to work spent a few moreyears in university before applying for jobs. According tothe projections of the ministry of economic affairs,18 from2013 until the end of Rouhanis term in ofce in 2017, eightmillion job applicants will be entering Irans labor market.

From 2011 to 2013, production, consumption, andinvestment in Iran decreased by 14, 13, and 36 percent,respectively. The dollar exchange rate tripled, and pricesrose by 70 percent.6 The purpose, for Ahmadinejad, ofthe reckless increase in liquidity, which led to severeination, was to win over the working class as his ally.However, as with the policies of his strategic ally HugoChavez, the former president of Venezuela, Ahmadinejadspopulist policies hurt these low-income groups the most.

The Ahmadinejad government printed large amounts ofmoney without backing to nance two populist projects:building housing for low-income families and paying cashsubsidies to all Iranians as a substitute for subsidizingenergy products. By some measures, at least half of the 40percent ination by 2013 was due to the Ahmadinejadsgovernments ordering the Central Bank of Iran to nancecheap mass housing projects.7

Facing no barriers and often working with the approvalof the Supreme Leader, Ahmadinejad implemented hispopulist projects at the cost of damaging the foundations

of the national economy. He reduced development credits,distributed money to people, and xed currency pricesin the rst six years of his government in order to createtemporary welfare projects, and he spent all foreignexchange earnings on imports. The Iranian economysdependence on imports has increased systematically since2005, leading to the emergence of a new class of wealthyentrepreneurs. Eighty-three billion dollars worth of goodsand services entered Iran in 2011, the highest amount spenton imports in the countrys history.8

Ahmadinejads team worked on the assumption that they

would be in power for only a short time, and decidedto make the most of the opportunity to accumulate themaximum amount of wealth. And this could happen onlythrough trade and imports, not through production. Soinstead of creating companies, they preferred to importgoods to nance their own elites, while making availablecheap foreign goods using the income derived fromoil sales. The thirst to accumulate wealth in order tostrengthen those close to Ahmadinejad severely damagedproduction in Iran and led to widespread corruption.

In addition, widespread international sanctions led toextensive plundering by the so-called maa networksthat, with the support of the government in the securityatmosphere that prevailed in the country after 2009,operated smuggling networks to bypass the sanctions.As such, the effects of sanctions might have been lessdeleterious on the Iranian economy than the effects ofmismanagement and the determination to accumulatewealth through reliance on imports.

By 2013 when the Rouhani government came to power,corruption was so prevalent that the Supreme Leader gavehis permission to the judiciary to deal publicly with those


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This means that in order to just keep unemployment at itscurrent rate, Rouhanis government must create new jobsequivalent to almost half the number of current availablejobs by the end of his second term in ofceprovided he isre-elected in 2017.To understand the critical nature of the situation in Iranover the next six years, one needs to consider that thehighest annual job creation rate in the history of Iran was

that of 2004,19 when more than eight hundred thousandjobs were created, concurrent with an economic growthrate of 7 percent. Thus, even a repetition of this past recordwill not be enough to stabilize the current unemploymentrate. At the same time, it should be noted that theeconomic growth of more than 8.4 percent20 occurredduring the presidency of Mohammad Khatami,21 whenrelations between Iran and the world were much better, oilprices were higher, and the Security Council had imposedno economic sanctions on Iran. The current economicsystem, which is more corrupt and more militarized, hasfewer resources, and is more isolated from the outside

world than in 2004, cannot be expected to produce the onemillion jobs or more annually that is needed to confront thecurrent crisis.

Governance: The Intervention of the IRGCAlong with all the aforementioned economic issues, thebiggest political crisis in the Islamic republics historyoccurred precisely in the middle of the Ahmadinejadpresidency when after the 2009 electoral crisis, theIRGC emerged as an even more signicant player in thegovernment of Iran. The IRGC was formed in May 1979in response to the revolutionaries distrust of the army,

which was left over from the monarchy. Two years laterwith the beginning of the eight-year war with Iraq, theIslamic Republic began to organize Islamic volunteerforces to confront domestic threats by opposition groupsas well as Iraqi attacks on Irans western borders. Thecommencement of Ayatollah Khameneis leadership in 1989was concurrent with the end of the Iran-Iraq War. WhenKhamenei was selected as the Supreme Leader of Iran, notonly did he pay considerable attention to the IRGC, buthe also assigned it new roles, to replace the narrower roleit had had during wartime. During the four presidentialterms of Ali Akbar Hashemi Rafsanjani (1989-1997) andMohammad Khatami (19972005), Khamenei strengthenedhis own power against the executive branch of thegovernment by developing and extending the role of theIRGC, which then began to be involved in various types ofconstruction projects, medical care, commercial industries,intelligence, and cultural activities as well as in organizingthe Iranian revolutions proxies in the Middle East. TheIRGC is currently active as well in constructing railroads,managing hospitals, banking, and media in addition todomestic security and foreign policy.

The Green Movement of 2009, which is considered to bethe most important protest movement in the history othe Islamic Republic, changed the dynamics of the IRGCwithin Irans power structure. Many of the regimesveteran gures supported the protests against thecontested re-election of Ahmadinejad either implicitly orexplicitly. In addition, a considerable number of peopleespecially in Tehran, supported the movement by marchingin the streets. During this period, commanders of the

IRGC, along with its civilian branch, and its militia (Basij)played the most important roles in confronting protestsand enforcing the Supreme Leaders commands. A greatnumber of political reformists were arrested by the IRGCand the protests were nally suppressed, with about 100casualties.22

The effective and successful role the IRGC played inconfronting the crisis of 2009 dened a new role for itin Irans domestic policy. The status of the IRGC wasenhanced after this period, and it was now dened as theprotector of the revolutions achievements with respect

to core Iranian policies. Concurrent with internal Iraniandevelopments, instability in the region helped the IRGCextend its role in Syria, Iraq, and Yemen.23As of now, theIRGC not only has signicant leverage with respect to alldomestic affairs in Iran, but also plays key roles in Iranspolicies.

As it has evolved over the past six years, the relationshipbetween the Supreme Leader and the IRGC could beconsidered more of a horizontal relationship, dened byshared interests, than the vertical one of commander andsoldiersa sort of give-and-take and mutual interaction

in which both parties are inevitably bound to meetthe requirements of the other. Before 2009, AyatollahKhamenei used the IRGC as a means of extending hispower, but the IRGC was, as noted, the protector of theregime against the Iranian Green Movement and in effectsucceeded in saving the regime in the face of massiveprotests.

One of the manifestations of this reconguration of theSupreme Leader/IRGC relationship was in the 2013presidential election. As explained elsewhere,24 Khamenewho is well aware of the economic difculties caused bythe sanctions, persuaded the IRGC to accept the decisionto hold a relatively healthy presidential election in 2013an election that ushered in the moderate Hassan Rouhaninto the executive branch. This meant that in returnthe IRGC was given a relatively free hand to intervene inthe Rouhani presidency, particularly on the issue of thenuclear negotiations. As a result, the IRGC has imposedmany pressures against any action to decrease animositybetween Iran and the West during the rst two years oHassan Rouhanis presidential tenure. Almost all of themedia outlets, MPs, and political groups supported by theIRGC were against the nuclear agreement.


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the rialand injects it into the economy, the subsequentexchange rate decline will hurt Iranian exporters. But ifthe released dollars are used to import goods, this wilnegatively affect domestic product sales.

So if the released money is used to create temporaryprosperity domestically, it will lead to a loss of jobs, butif the government invests the money outside the countryseconomy, then the national thirst for tangible results from

the nuclear agreement will not be satised. Thus, the issueof how to use the blocked money leaves the governmentbetween two difcult choices: to respond to widespreadunemployment, or to raise Iranians purchasing powerNeglecting peoples purchasing power will presumablyreduce popular support for the government of PresidentRouhani. But the persistence of high unemployment rateswill also reduce chances for the survival of PresidentRouhanis government as well as the outlook for hisreformist supporters in the medium term, potentially alsoleading to social and political unrest among unemployedyouth.

Restoring condence among domestic investors will alsobe a major challenge. The growth rate of investment inIran in 2012 and 2013 was negative 23.8 and negative 6.9respectively.29A high ination rate, a sharp devaluation ofthe national currency against the dollar, and the threat ofa military strike led people to withdraw their capital fromthe production sector and keep it in safe assets, such asforeign currency and gold, or take their capital out of thecountry.

During this period, some of the people close to former

president Ahmadinejad and/or the IRGC got the upperhand in bypassing sanctions as a result of the prohibitionof exchanging money abroad and the ban imposed on manygovernment agencies. Informal commerce and evadingsanctions have in fact been institutionalized in the Iranianeconomyand certain military-security networks thathave been earning a living from this institutionalizationwill continue to exist after the Vienna Agreement. Theyhave formed an economic infrastructure compatible withtheir own political and economic interests.A trade system built on the circumvention of sanctionshowever, would be a major barrier to economic growthafter the suspension of sanctions. The private sector needsa transparent and competitive environment in order toconduct business. Independent investors wont be ableto compete with rivals who enjoy the support of militaryintelligence, and judicial insiders. Meanwhile, the Rouhangovernment wont be able to enjoy the fruits of the ViennaAgreement and create jobs in the absence of the privatesectors trust and investment growth. The governmentwill be forced to ght the so-called maas, whom Rouhanidescribed as the merchants of sanctions in Iran andChina and elsewhere.30

Moreover, the IRGC has effected several practicalmeasures to block Rouhanis reforms, such as arrestingcyber activists as well as a Washington Post reporter inTehran and preventing speeches by reformist gures inIranian universities.25The IRGC knows very well that thenormalization of relations between Iran and the world andthe removal of sanctions will lead to a decrease in its rolein the Iranian economy. In addition, alleviating the tensionbetween Iran and the United States and increasing the

possibility of extending negotiations to non-nuclear issuesmay decrease the inuence of forces in the region who areclose to the IRGC.

Unlimited power in the hands of one branch of the politicalsystem and the interference of military force in all aspectsof governance are among the evident obstacles to idealgovernance in Iran. President Rouhani has tried to limit theIRGCs involvement in domestic economic activities, butthus far with little success. And he has noted, implicitlyreferring to the IRGC, that [w]ith the consolidation ofpower in one institution corruption is created, regardless

of what you do. If the guns, the money, the newspapers, thewebsites [are] gathered in one place, certainly there will becorruption.26

At present, all hopes of the Rouhani governmentand of Iranian society are pinned on the lifting ofsanctions. However, solving the problems of corruption,unemployment, and the intervention of the armed forcesin running the country may be more difcult than solvingthe nuclear issue. These three problems facing Rouhanisgovernment cannot be resolved just by freeing Irans frozenassets abroad. Lifting of the sanctions can somewhat

reduce the intensity of these three major crises, but itmight also have deep political and social consequences inthe country.

Sanctions Relief and the Perfect Storm

Budget revenues in Iran have been under intense pressurefrom last years falling oil prices in addition to the U.S.-led sanctions. The Iranian government has practicallyno resources to create new jobs, and its income is notenough to pay the previous government`s debt to banks

and contractors, not to mention the ongoing costs ofrunning the government. That is why the most importantconsequence of the Vienna Agreement for Irans economichealth would be increased capital investment in thecountry. The government is waiting both for the releaseof a portion of the moneyroughly $100 billion27thathas been blocked by the sanctions regime, and to attractforeign investment. The direct ow of oil revenue into thecountrys economy will cause a Dutch disease,28similar towhat happened during the rst term of the Ahmadinejadpresidency. This means that if the government converts allthe released money into the countrys national currency


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entry into Iran and its market, will be reected inlimitations on cultural freedoms, such as a strict dress codeor a ban on concerts, in the coming months.

Governance in Iran after the ViennaAgreement: Three Possible Outcomes

The post-agreement era in Iran will certainly be differentfrom the period before the agreement was concludedThere are three possible scenarios with respect togovernance in Iran: the strengthening of Rouhanisgovernment, success for the opponents of the agreement, ormaintenance of the present balance of power.

The rst possible outcome is the ascendancy of Rouhanover his opponents. Under the current power structure inIran, the executive branchthe only part of the politicalsystem under Rouhanis controlhas the upper hand onlywith respect to the implementation of economic policiessuch as foreign exchange, banking, and taxation; powerin the other domains of governance is in the hands of non-elected institutions. It should be kept in mind, howeverthat the entire power structure in Iran, both under therule of the founder of the Islamic Republic, AyatollahKhomeini (197989), and during the era of AyatollahKhamenei (from 1989 to the present day), has operatedunder the permanent threat of regime change. The JointComprehensive Plan of Action is the rst ofcial documentsince the Revolution of 1979 under which Iran and theWest, and particularly the U.S., reached an understandingregarding some sort of security guarantee for the Iraniansystem. In other words, the JCPOA functions from the

Iranian perspective as a reduction (or perhaps evenelimination) of the threat of regime change that has beenhanging over Iran for over a decade for the following fourreasons: it is the rst comprehensive agreement betweenIran and the US since the revolution; it is the only timesince 1979 that sanctions are being removed not added; ithas for the time being marginalized the discourse of regimechange in the United States; and it has secured Irans rightto industrial uranium enrichment thus guaranteeing Iranssense of sovereignty.

With the removal of the dual threats of war and regime

change, the opponents of the Rouhani governmentespecially the IRGC, will have a harder job convincingtheir supporters and members that the Islamic Republicis under an existential threat by the West. Under suchconditions, if Rouhani keeps his distance from the leadersof the Green Movement and the reformists, the SupremeLeader will feel safe from any internal threat, allowingthe Rouhani government to gain Khameneis support incarrying out its domestic agenda.

And a government crackdown on this powerful networkwill certainly trigger a response from the maas powerfulsupporters.

The Iranian opponents of the nuclear deal did whateverthey could, including holding rallies, making speeches,and writing articles, to prevent the deal. The post-deal era and the entry of an independent private sectorinto the economy could potentially launch a nancial

competition with those opponents. The form and extent ofa confrontation between the government and the military-intelligence maa remain unclear, but the consequences ofthat confrontation would be decisive for the future of Iran.

The social and cultural impacts of the nuclear deal will alsotrigger a response, from the Supreme Leaders social baseto President Rouhani. The majority of the Basijis are thosewhom President Obama called those hardliners chantingDeath to America in Iran.31 The best estimate of thenumber of this social sector can be derived from the fourmillion votes (12 percent of those voting) cast for Saeed

Jalili, Irans top nuclear negotiator during the Ahmadinejadpresidency, in the 2013 presidential elections. This group,though relatively small in numbers, plays an importantrole in the Iranian power structure. Staunch supportersof the Supreme Leader, and described as strongly Islamic,hostile to Western culture, and committed to a permanentght against the U.S., its members are said to be the rstto come to the ruling regimes help if a problem arises.32Hence it makes strategic sense for the Supreme Leader tokeep them satisedfor which reason the Supreme Leaderdeclared after the Geneva Agreement, in a meeting withthe IRGCs student branch, that the ght against the U.S.

will continue.33

But as demonstrated above, satisfyingthe Supreme Leaders staunch supporters, however, is notcompatible with integration into the world economy.

The contrast between the cultural, social, and economicconsequences of integration into the global market andthe IRGC loyalists revolutionary beliefs constitutes one ofthe most signicant obstacles to the Rouhani governmentin proceeding with its economic policy. In the earlymonths after the Vienna Agreement, the conservativenewspaper Kayhan, acting as the mouthpiece of this socialbase, oated the possibility of McDonalds entry intothe country as changing a page in history with FrenchFries.34The intellectual discourse of the loyalists revolvesaround concepts such as the Wests cultural invasionand a cultural NATO.35They have grown sensitive to theentry of Western brands into Iran, and even to Westerntourists visiting the countryand it will not be easy tochange their system of values. Meanwhile, the events of2009 have not been forgotten, and the Supreme Leader hasnot developed enough trust in supporters of the Rouhanigovernment to rely on the moderate faction and ignore thesupport of his own loyalists. It can be expected that theBasijis frustration with the Vienna deal, and with Western


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An indication that this scenario will come to pass wouldbe accreditation of pro-government candidates for theAssembly of Experts and Parliament elections scheduledfor February 2016. If the representation of technocrats andmoderate parties in the Iranian parliament is strengthened,Rouhanis administration should derive economic benetin the short term and be able to initiate a course of long-term economic growth. And given the age of the SupremeLeader, a moderate Assembly of Experts could potentially

during its eight-year period choose a new Leader whocould direct the future of the Islamic Republic inaccordance with Rouhani policies and steer it towardintegration in the international community.

The dominance of radical forces currently linked to theSupreme Leader, on the other hand, would constitutethe worst possible outcome of the nuclear agreement.Currently, the opponents of the agreement controlall sectors of power except for the executive branch,including the military and judiciary, the media, and thesecurity apparatus, which are sufcient to stymie all

of Rouhanis plans for Irans future governance. Sincethe start of negotiations, the opponents focused alltheir efforts in nullifying P5 + 1 negotiations with theslogan We are worried36and the Vienna Agreementhas indeed done real harm to the interests of Rouhanigovernment opponents. Even during the last two years, alot of work was done to reduce the support of the Leaderfor Rouhanis foreign policy in such a way that Rouhaniwould fail in his most important promise to the voters:solving the nuclear problem. But the Leaders perceptionof the ungovernableness of Irans economy with continuedsanctions as well as his historic trust in Javad Zarif as

Rouhanis foreign minister led to his decisive supportof the negotiations. Thats why Rouhani succeeded inpreventing discussion of the agreement text in Parliament,and why Parliament gave its approval to the SupremeNational Security Council headed by the President.

The Supreme Leader has not allowed governmentopponents much space to maneuver other than to protest,but that might change if implementation of the agreementstrengthens his internal opponents (thus leading to arenewed sense of an internal threat for Khamenei), or ifits cultural consequences lead to a loss of groups loyal tohis leadership. In fact, the current positive cooperationbetween Ayatollah Khamenei and President Rouhani islimited to the economy and foreign policy. As Rouhanisucceeds in advancing his agenda with regard to cultureand internal politics, the Supreme Leader will empowergovernment opponents to confront Rouhani. And in thecase that Khamenei gives a green light to governmentopponents, their attacks will not be restricted to the areasof culture and domestic policy and will certainly includethe Vienna Agreement as well. Not allowing a majority ofthe candidates that support the government to run in theFebruary elections may be the best indication of this.

A third possible outcome is preserving the balance ofpolitical forces as they were at the time of the ViennaAgreement. It seems that for the Supreme Leader, thedesirable outcome is restoration of international relationsand eliminating security threats (from ISIS, Israel, andthe opponents of any agreement with Iran in the U.S.)as well as high economic growthand if Rouhani canrealize that, he will enjoy the relative support of theLeader. However, as demonstrated in this Brief, economic

development seems impossible without there beingcultural, social, and political ramicationsand the IRGCand other opponents of the Rouhani government will seekto preserve their power by keeping the cultural and socialenvironment closed to change. The lack of tangible effortson the part of Rouhani toward fullling his promises inthe areas of politics and culture shows that he regardsthe economy as the major issue in the medium term andis ready to continue working within the current powerbalance.

Moreover, Rouhani has shown that he has learned

sufcient lessons from the terms in ofce of his two mainsupporters, Hashemi Rafsanjani and Mohammad KhatamiIn the 1990s, Rafsanjani confronted the legacy of eightyears of war and Irans impasse in foreign relations bychampioning economic development without grantingpolitical freedom. Khatamis program of political reformat a rate exceeding the level of tolerance for it withinthe political system led to the erosion of trust betweenKhamenei and the reformist government Khatami oversawNow, Rouhani is trying to advance his governmentsagenda by striking a balance between his various goalsby preserving the trust of the Leader, and by avoiding

strong conicts with the other sectors in the regimeBut his governments lack of efforts to expand politicaland cultural freedom needs to be tolerated by the Iranianelectorateand its unclear whether the young peoplecrying freedom for political prisoners in the 2013campaign are willing to be patient with the currentbalance of power.

Endnotes

1 Joint Comprehensive Plan of Action, Vienna, July 14, 2015.*

2 United Nations Security Council, Resolution 1929, 2010.*3 Arash Karami, Irans Oil Minister Accuses Former Ofcialsof $2.7 Billion Oil Fraud, Al-Monitor, Iran Pulse, 2014.*

4 Iran Population (live), Worldmeter.info.*5 Crude Oil Price History Chart, Macrotrends.net.*6 Muhammad Hussein Rahmati and Seyedaly Madanizadeh

Stagation and Exits, Central Bank of Iran, March 1393(AH)[in Persian].*

7 Irans Economy Struggles to Support Ahmadinejads Ill-Conceived Housing Vision, The Guardian (Iran: TehranBureau), January 30, 2014 (last modied on June 3, 2014).*

8 World Trade Organization, Trade Proles: Iran.*9 Fararu, July 25, 1394 (AH) [in Persian].*
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10 Iran Disbars Ex-Tehran Prosecutor Saeed Mortazavi, BBC News: Middle East, November 16, 2014.*11 Iran Jails Former Vice President over Corruption, Aljazeera, February 15, 2015.*12 Iran Arrests Former Vice President, Radio Free Europe/Radio Liberty, November 15, 2015.*13 Bozorgmehr Sharafedin, Broker Says Hes Innocent in Missing Iran Oil Rig Case, Reuters (U.S.), September 4, 2015.*14 Statistical Center of Iran, Population Trend and Average Annual Growth 13851260(AH).*15 Summary of the Results of the Employment Census of year 2013, amar.org, 1392 (AH)[in Persian].*16 Rare criticism of Ahmadinejads economic results on Iranian state television, BBC Farsi, April 15, 2013 [in Persian].*17 Demographic trends and average annual growth from 1881-2006. [In Persian]*18 Finance Minister: The Iranian Government Should Provide Jobs for 8 Million, DW.com, October 10, 2014[in Persian].*

19 Comparing the performance of different sectors in the economy in 83 years, TMGIC.ir, November 1, 1384 (AH)[in Persian].*20 The Economic Growth Rate for 2011 was announced at 3.2 percent, donya-e-eqtesad.com[in Persian].*21 The comparison of the performance of various sectors of Irans economy in 83 years, TMGIC.ir, November 1, 1384 (AH)[in

Persian].*22 Akbar Ganji, Irans Green Movement Five Years LaterDefeated but Ultimately Victorious, The World Post, June 9, 2014

(updated August 9, 2014).*23 Sen D. Naylor, Will Curbing Irans Nuclear Threat Boost Its Proxies? Foreign Policy, July 20, 2015.*24 Can Iran Surprise by Holding a Healthy Election in June?, Middle East Brief no. 73 Brandeis University, Crown Center for

Middle East Studies, May 2013.*25 Arash Karami, The tumbling turban: Who is behind attacks on Reformists in Iran?, Al-Monitor, Iran Pulse, November 30, 201526 Arash Karami, Rouhani Criticizes Consolidation of Power in Government, Al-Monitor, Iran Pulse, December 9, 201427 Nader Habibi, Irans Frozen Funds: How Much Is Really There and How Will They Be Used? The Conversation, August 11, 201528 Dutch disease is the negative impact on an economy of anything that gives rise to a sharp inow of foreign currency, such as the

discovery of large oil reserves. The currency inows lead to currency appreciation, making the countrys other products less pricecompetitive on the export market. It also leads to higher levels of cheap imports and can lead to deindustrialization as industriesapart from resource exploitation are moved to cheaper locations. The origin of the phrase is the Dutch economic crisis of the1960s following the discovery of North Sea natural gas.

29 Achievements in the governments monetary and nancial system, Central Bank of Iran, September 2, 1394(AH)[in Persian].30 Arash Karami, Rouhani: Merchants of Sanctions Upset by Nuke Deal, Al-Monitor, Iran Pulse, August 3, 201531 Jesse Byrnes, Obama Links Republicans to Iranians Chanting Death To America, The Hill, August 5, 201532 Khameinei.ir, June 18, 1394 (AH)[in Persian].33 Irans Khamenei: Nuclear Deal Wont Change Our Policy Towards the U.S., Associated Press, July 18, 2014.*34 Suspicious Attempts to Decrease Expectations Regarding the Nuclear Agreement, Kayhan, July 3, 1394 (AH)[in Persian].35 Akbar Ganji, Khamenei Is Pessimistic about Nuclear Negotiations, Hufngton Post, February 22, 2014 (updated April 24, 2014)36 Worried or Valiant? The Dialectic between Irans Nuclear Negotiations and Its Domestic Politics, Middle East Brief, no. 81

Brandeis University, Crown Center for Middle East Studies, June 2014.*

*Weblinks are available in the online version atwww.brandeis.edu/crown
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Can the Vienna Agreement Solve IransProblems?

Seyedamir Hossein Mahdavi

Recent Middle East Briefs:Available on the Crown Center website: www.brandeis.edu/crown

Abdel Monem Said Aly and Shai Feldman, Saving the Middle East, No. 95

Sarah El-Kazaz, The AKP and the Glen: The End of a Historic Alliance, No. 94

Jean-Louis Romanet Perroux, Libyas Untold Story: Civil Society Amid Chaos,No. 93

Asher Susser, Jordan Facing Up to the ISIS Challenge: A Net Assessment, No. 92

Hikmet Kocamaner, How New is Erdogans New Turkey, No. 91
http://www.brandeis.edu/crownhttp://www.brandeis.edu/crown

can the vienna agreement solve iran's problems?

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