A new horizon for Iran and the US

Iran’s new president has rekindled hopes for a nuclear deal, but there are still plenty of hurdles ahead. Published on MEED, 24 November 2013

No one was expecting an immediate breakthrough, but the mood surrounding the talks between Iran and the main international powers in Geneva this month suggest a deal is moving closer rather than further away. A full resolution of the stand-off between Iran and the West may still be some way off, but at least the idea of it no longer seems so remote.

In part, that is because the pressure of time is weighing on both sides. Iran’s economy needs a break from sanctions and the US and its allies do not want to see Tehran develop nuclear weapons capability. Finding a resolution to the crisis, however, is not simply a matter of Washington and Tehran agreeing a compromise. Both governments need to keep their domestic audiences on board and the US must also keep its regional allies happy, both in the Gulf and in Israel.

Thaw in relations

The current momentum started once Hassan Rouhani was elected president of Iran in June, having campaigned to improve the Islamic Republic’s international relations and turn around its failing economy. Since taking office in early August, he has embarked on a sustained diplomatic effort to reduce tensions with the West in general and the US in particular.

Rouhani has spearheaded several important developments in the weeks leading up to the Geneva talks on 15 and 16 October.

The first came when Iran’s Foreign Minister Mohammad Javad Zarif met US Secretary of State John Kerry on 26 September in New York on the sidelines of the UN General Assembly meeting. That was followed a day later with a phone call between Rouhani and US President Barack Obama. It made the days of Rouhani’s predecessor Mahmoud Ahmadinejad using the UN as a platform to hector and lambast Iran’s opponents feel like a long time in the past.

In Geneva itself, the initiative also came from the Iranian side. At the start of the two-day session, Zarif gave a presentation to China, France, Russia, the UK, the US and Germany, collectively known as the P5+1. Under the heading ‘Closing an Unnecessary Crisis, Opening a New Horizon’, he set out Iran’s main proposals to solve the deadlock.

The details of what he said have not yet been made public, but it seemed to go down well. By the end of the following day, Zarif issued a joint statement with the EU’s foreign policy chief Catherine Ashton, who led negotiations on behalf of the P5+1, in which they referred to “two days of substantive and forward-looking negotiations”.

Jen Psaki, a spokeswoman for the US State Department, also offered a positive review of the talks. “From talking to our team on the ground, their view is that we have never had detailed technical discussions at this level before,” she said.

The Iranian plan is now being considered by the world powers ahead of a further round of talks on 7 and 8 November. Between now and then, teams of nuclear, scientific and sanctions experts from both sides will meet to try to come up with some practical steps to move things further forward.

Conservative backing

All this progress is not simply a matter of a new president being elected in Tehran. There seems to have been a wider change of heart inside the Iranian political arena, with a decision to move away from the confrontation of the past.

Supreme Leader Ayatollah Ali Khamanei has publicly endorsed the approach of his new president, saying in a speech on 5 October: “We support the diplomatic dynamism of the administration”. And although he also offered some thinly veiled criticism of the recent phone call with Obama in that speech, he seems content to give Rouhani far more room for manoeuvre than the new president’s predecessors had.

“Rouhani does seem to enjoy the backing of a larger number of the ruling elite within Iran when it comes to negotiations compared with what previous presidents had,” says Nader Habibi, professor of the economics of the Middle East at the US’ Brandeis University. “Rather than his conversation with Obama being condemned unanimously by the conservatives, we see some conservatives who believe that he did the right thing and some who oppose him. So there is a division within his opponents on that issue, which gives him some room for negotiation.”

How much the sanctions imposed on Iran have forced that change of attitude is difficult to gauge, although the US clearly feels it has been a major factor. In her comments on 16 October, Psaki said: “We’re at this point because of the impact of crippling sanctions that has contributed to the pressure that was put on Iran.”

Certainly, Iranians’ standard of living has suffered in recent years and the sanctions have contributed to high rates of unemployment and inflation, and declining oil sales. On the other hand, the domestic policies pursued by the Ahmadinejad administration have also been criticised for making a difficult situation worse and there is recognition in Iran that the blame for many of the country’s economic problems lies close to home.

“There is a sense that Iran was right to hold on to its moral high ground, despite all the pressures,” says one Tehran businessman, of the hardline approach the country has taken until now. “There is a unity between all factions in the political spectrum with the Supreme Leader firmly supporting Rouhani. There is also a realisation that 90 per cent of the economic problems have been due to bad or terrible management internally and not other things.”

Alongside his new approach on the international stage, Rouhani has also embarked on some domestic reforms, including further changes to the system of subsidies and cash handouts to the public. A combination of the more positive atmosphere abroad and this more professional approach to economic matters has helped to stabilise the Iranian rial and contributed to a rise in the stock market.

If the economy continues to perform well, it should help to shore up domestic support for Rouhani. However, his reforms could also upset some powerful vested interests, including the Revolutionary Guards.

“The Revolutionary Guards’ influence in the Oil Ministry has diminished by the sheer fact that [former minister and senior Revolutionary Guards figure] Rostam Qassemi has been replaced by a moderate, Bijan Namdar Zangeneh,” says Habibi. “The Revolutionary Guards presence in the cabinet has also changed. One of their sources of economic influence was that Ahmadinejad always had seven to 12 members of the Revolutionary Guards in his cabinet. We don’t see that in the Rouhani cabinet.”

If Zarif and his team of negotiators in Geneva can persuade the US to start scaling back some of the sanctions, it should strengthen Rouhani’s position and give a further boost to the economy. But if that does not happen, or if there is a sense the nuclear negotiations might lead to a loss of status for Iran, Rouhani’s domestic opponents could make life difficult for him.

The domestic scene in the US is also potentially troublesome for Obama. Some members of Congress have threatened to ratchet up the sanctions pressure on Iran and it will be difficult to persuade some of his compatriots that Iran can be trusted in any deal.

Regional response

Others in the Middle East region may also be feeling uneasy about the detente between Iran and the US. Israeli politicians have been vocal in their scepticism about what Rouhani is doing, seeing it as little more than a clever negotiating gambit while Iran continues to develop its nuclear capabilities. Arab leaders in the Gulf will also be uncomfortable if Iran manages to lose its pariah status and starts to be seen as a legitimate regional power.

Such shared concerns could even lead to a second detente, this time between Israel and the Gulf states. “This could open the door. There are a lot of coinciding interests [between Israel and the GCC],” says one seasoned regional observer. “A lot of different people in the area are thinking about what America is doing and what its intentions are vis-a-vis Iran. I venture that the Saudis have a few questions and conversations going on with the US.”

Still, the most critical relationship is the fast-developing one between Tehran and Washington. The fact that there now seems to be a serious negotiating process under way gives some reason for optimism that, after so many years of intransigence, a solution might at last be found. But US and Iranian politicians may yet find that selling any deal to their domestic audiences and allies is almost as difficult as the negotiations themselves.