When French oil major Total warned in November 2016 that it might be forced to pull out of a deal to develop phase 11 of the South Pars gas field, it threw into stark relief one of the biggest challenges Iran faces in the year ahead: how best to respond to the belligerent rhetoric from Washington and the pressure it is exerting on Iranian economic activity.
Total’s CEO Patrick Pouyanne said his company may be forced to retreat if the US presses ahead with tougher sanctions and President Donald Trump goes ahead with a threat to pull his country out of the 2016 nuclear deal, known formally as the Joint Comprehensive Plan of Action (JCPOA).
Tehran has adopted a hardline approach to such risks. Iran’s Petroleum Minister Bijan Zangeneh told the French oil firm it should not expect to recoup any money if it did retreat. “No capital will be returned to this company,” he told local media on 21 November. Even so, any pain from international investment drying up is likely to be far greater for Iran itself than for any business.
In the event that Washington does renege on the nuclear accord, President Hassan Rouhani – who staked so much of his political capital on finalising the deal – could turn in hope to Europe and Asia as allies in trying to keep the deal alive. There are some grounds to think the rest of the world will want to stick by the commitments they have made. David Petraeus, a former commander of US Central Command, told an audience in London on 22 November that “withdrawing from a multilateral deal without a very clear violation by Iran would be more likely to isolate the US than it would be to isolate Iran”.
However, Rouhani and his inner circle know they will also have to fight a rear-guard action against hardliners at home, who are wondering how to regain the initiative after losing the presidential election so comprehensively in May 2017. Conservatives in Iran dislike the deal almost as much as Trump does and if it collapses, it could give their opposition to Rouhani added momentum.
The health or otherwise of the nuclear deal is not the only issue Tehran will be looking ahead to with some caution. An emboldened Saudi Arabia under the leadership of Crown Prince Mohammed bin Salman – supported by the mercurial Trump – continues to look for ways to confront Iranian influence around the region. To date it has launched a war in Yemen, instigated a boycott of Qatar and threatened to tear apart the ruling coalition in Lebanon – all of which can be traced back to Riyadh’s desire to stamp its authority on the region and dampen Iranian power.
For all its activity, the kingdom cannot yet point to any clear successes on the regional stage, which may embolden Iran’s Supreme Leader Ali Khamenei to persist with the current foreign policy that he, rather than Rouhani, directs. The current state of affairs is not without danger, however, not least because Prince Mohammed bin Salman may decide to up the ante and take even more risk in the future.
The threat of a serious confrontation remains real. Although the US does not look like it has the appetite for waging further wars in the Gulf, its strong support for Saudi Arabia and Washington’s at-times bellicose rhetoric may yet make a regional clash more likely. There have been frequent incidents involving US and Iranian naval vessels in Gulf waters in recent years, and any mistake could easily escalate into something more serious.
For Tehran, the security threats it faces mean it will continue to insist on its right to develop advanced ballistic missile capabilities, despite concerns raised in the region and by US and European powers that the missile programme is itself destabilising.
Whether this situation can be successfully handled through diplomatic channels alone remains to be seen. Brigadier-general Massoud Jazayeri of the Islamic Revolutionary Guard Corps (IRGC) said in early December that negotiations on its missile capabilities were “out of the question”.
In Syria and Iraq, Tehran looks to be on fairly firm ground. The role of the Quds Force – an elite wing of the IRGC that has propped up President Bashar al-Assad in Damascus and taken on the jihadist group Islamic State in Iraq and Syria – has been widely recognised. In addition, Iranian-backed forces within the Hashd al-Shaabi (Popular Mobilisation Units) in Iraq, have also been successful in pushing Kurdish forces back from disputed territories around Kirkuk following the Kurdish independence referendum in late September. All this has placed Iran – and more particularly the commander of the Quds Force, major-general Qasem Soleimani – in a strong position.
Other domestic tensions could weigh more heavily on the Tehran government. Even without the threat of oil majors pulling out, the economy remains constrained by lingering US sanctions, which are dissuading many international banks from getting involved. A potentially more destabilising issue is the fact that Supreme Leader Khamenei is now 78 years old and thought to be suffering from poor health. The appointment of a successor, when the time comes, could be an era-defining moment, which will decide if hardline conservatives or more moderate reformers hold sway in the years to come.