The Buzz

Will Higher Oil Prices Mean Four More Years for Hassan Rouhani?

It’s twelve months to go before President Hassan Rouhani faces the Iranian electorate to secure another four-year term. Not unlike in the United States, it is not too early to think about his chances.

Rouhani has been through six months of critical political tests that will set the stage for the contest next year: the bumpy implementation of the JCPOA on the Iranian nuclear program, the election of the new parliament and Assembly of Experts (the clerics who will chose the next Supreme Leader), and major budgetary battles that go to the heart of the Islamic Republic’s future direction. Will he face a major challenger in 2017? Will any of it matter to the United States?

The JCPOA is Rouhani’s signature achievement. Implementation of the nuclear deal since January has been fraught with challenges, though. Global firms are hesitant to work within Iran’s opaque business sector and the remaining US unilateral sanctions for support of terrorism and human rights violations make standard international financial transactions challenging. Technocrats in Rouhani’s administration know that most of these problems are of the result of years of Iran’s own misguided economic policies.

This has not stopped politicians in Tehran from blaming the US for actively discouraging European and Asian firms from investing after the JCPOA, though, and even asking for additional concessions from Washington to compensate. The president’s more conservative and “hardline” detractors are using the failure of the nuclear deal to provide an immediate economic boon to attack him, but it does not seem that these criticisms are building much traction. In the end, the Iranian leadership is grudgingly realizing that the problems of reintegrating into the global economy are not going to be easily solved in the near term. The JCPOA should still be a net plus for Rouhani.

The president faces other hurdles in improving Iran’s financial outlook. This year’s much delayed budget was finally approved last month without the defense and household-income-subsidy reductions he originally wanted. The regime is also still locked in an existential debate about how much or how little integration into the international system it should pursue. While Rouhani’s team may want to focus on foreign direct investment and cleaning up corrupt business practices, Supreme Leader Ayatollah Ali Khamenei is explicit in his fear that Iran should not be “swallowed” by America through greater global integration. This battle over how to build Iran’s so-called “Resistance Economy” will play out most prominently over the degree of foreign ownership that will be allowed in the energy, manufacturing and other sectors.