August 8, 2016

Frustration Grows in Iran Around Sanctions Relief Complications

This week Iranian Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani addressed the Iranian public on the Joint Comprehensive Plan of Action (JCPOA). Both Khamenei and Rouhani acknowledged frustration with the pace of economic relief following the lifting of sanctions, while blaming the U.S. for failing to fulfill its commitments.  As has been the case in the past, Khamenei struck a more strident tone while Rouhani emphasized that the economy was growing in spite of complications.

Khamenei addressed thousands of Iranians from different provinces on August 1 2016, to discuss his thoughts on the current state of the JCPOA. He questioned the economic benefits of the deal stating: “Weren’t the oppressive sanctions lifted so that the people would feel a change in their lives? Has there been a tangible effect on the people’s lives in the past six months [since the nuclear agreement’s implementation]?”

Khamenei’s remarks appear to be at least somewhat reflective of many in Iran, whose support for the accord has slipped since implementation. According to a study done by the Center for International and Security Studies at the University of Maryland, while the nuclear deal is still supported by a majority, the number has diminished in the past year, with the proportion who strongly approve of the agreement dropping by half.

Iran is still struggling to attract large-scale foreign investment as major banks have abstained from conducting any business involving Iran. A major factor behind these banks’ hesitancy is existing U.S. sanctions on Iran for reasons outside the nuclear sphere, including prohibitions on utilizing dollars – the world’s reserve currency – that enter the U.S. financial system. Political risk in both the U.S. and Iran also contributes to the complications, though the maintenance of sanctions has provided a window of opportunity for hardliners like Khamenei to target the deal and American’s trustworthiness. If the sanctions relief issues are not resolved, they could raise trouble for the accord down the line.

In his speech, Khamenei doubled down on rhetoric indicating that the American government cannot be trusted, stating, “They tell us ‘Let’s talk about regional issues, too.’ But the experience of the nuclear deal suggests this is deadly poison and in no way can the Americans be trusted. Negotiation with such a government means diversion from the correct path of advancement of the country, giving constant concessions and allowing a bullying policy in practice.”

Faced with criticism on his signature achievement, President Hassan Rouhani held a nationally-televised press conference on Tuesday. In it, Rouhani stressed many of the same themes of Khamenei but framed the accord in a more positive light. Rouhani emphasized that “the threat of war was lifted” because of the deal. He also stated that “If the deal had not happened we wouldn’t be able to export oil, access to our assets would have become harder by the day, and the sanctions on the automobile sector, petrochemicals, money transfer and precious metals would have caused very dire circumstances for the country. The nuclear deal has created a good situation in the country.”

Rouhani also emphasized the “dignity” the deal has given to the nation by putting them in charge of their oil industry once again. “When we had sanctions, our friends always reached out to others. Sanctions did not bring us any dignity. The first thing that the JCPOA brought for us was dignity.”

“The JCPOA means that you are free to pick dozens of countries to buy [our] oil instead of just two countries,” Rouhani continued. Iranian oil exports have nearly doubled since implementation day on Jan 16, 2016, and some estimates indicate the country’s GDP is expected to rise by 4% this year.

However, Rouhani’s speech suggested disappointment over a lost opportunity. “If the United States had implemented the nuclear agreement with good faith and precision, and had reduced the obstacles and delays that we see today, we could have had more trust and engaged in negotiations on other subjects, which could have been in the interests of the region, the United States and us,” said Rouhani, who was elected to the presidency on a promise of constructive engagement.

Khamenei, as the country’s Supreme Leader, was always a skeptic of the negotiations but provided space for them to proceed as he preserved his own flexibility to hedge his bets. His ultimate endorsement of the nuclear talks was instrumental in protecting the negotiations and final agreement from sabotage from hardline opponents. However, Khamenei’s increasing criticism of the deal is leaving Rouhani open for criticism from hardliners as the president enters an election year in 2017. Rouhani will likely face mounting criticisms of his signature achievement from political opponents, and less political capital to advance an agenda of moderation, so long as complications in sanctions relief continue.

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