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Homepage > Regions / Countries > Middle East & North Africa > Iraq, Iran & the Gulf > Iran > What Iran’s Elections Mean for its Future

What Iran’s Elections Mean for its Future

Ali Vaez, Fortune  |   9 Mar 2016

Pro-government moderates made strong gains, but the country’s path to prosperity is anything but clear.

A review of the main-stream news and analyses surrounding Iran’s recent elections for the parliament and the Assembly of Experts – the body in charge of selecting the Supreme Leader’s successor – leaves the impression that President Hassan Rouhani and his pragmatist allies have scored a major victory that will pave the way for their vision of integrating Iran into the global economy.

If that is what you think, think again.

While the pragmatists (an amalgam of reformists, centrists, and moderate conservatives) did better than expected – especially in a few major cities, like Tehran, where they had a clean sweep of all 30 seats allocated to the capital — it is premature to declare them victors. The parliamentary elections are not over yet. The fate of nearly a quarter of the parliament’s 290 seats will be determined in the run-off elections set for mid-April. While the pragmatists won 83 seats in the first round, versus the conservatives’ 64, it is the second round that will determine the final balance of power. The pragmatists have a more difficult task ahead, as turnout – particularly of their constituents — is usually lower in the second round.

The next parliament’s political composition remains unclear also because of the relatively large number — 74 in the first round — of independent candidates, who have no discernible factional affiliation. These first-time lawmakers usually join one of the political blocs that form after the new parliament convenes. When that happens in May, their choices could tilt the balance of power. Rouhani could use his power of the purse to absorb some of them to a new pragmatists’ bloc, but it is not guaranteed that he would be able to create a powerful majority caucus. Potentially, the independents could split the legislature by creating pragmatist and conservative blocs of equal weight, thus giving rise to a hung parliament that slows down – rather than facilitates – decision making.

Even if the next parliament were decisively under the pragmatists’ control, it would not necessarily work in harmony with the government and other power centers. In Iran’s multipolar political system, policy shifts occur only when there is a high degree of consensus among the political elite. During President Mohammad Khatami’s first term in office, both the legislative and executive branches were in reformist hands, yet their reforms were blocked by the conservative Guardian Council, which vets all legislation. The same alignment occurred during Mahmoud Ahmadinejad’s tenure, but instead of cooperating, the conservative government and parliament were at daggers drawn for most of that time.

The broad Iranian consensus that allowed the country to move on from the nuclear crisis seems to be lacking when it comes to economic policy. The establishment, broadly speaking, has tried to find common ground between two big ideas. One is “Vision 2025,” a roadmap for the country’s economic, political, social and cultural development that aims to make Iran the region’s premier knowledge-based economy within a decade. The other is Supreme Leader Ayatollah Khamenei’s doctrine of “a resistance economy,” which defines a path for increasing domestic production, decreasing reliance on oil revenues, boosting non-oil exports and encouraging private sector-led growth. Finding an agreed policy is also complicated by the way each camp interprets these guidelines differently.

Rouhani and his allies favor economic interdependence with the outside world, believing that it would deter outside coercion. They want to validate their approach before next year’s presidential elections by demonstrating the nuclear accord’s economic dividends. The supreme leader and his conservative allies, however, fear Western economic influence could be a means of infiltration, and that a rapid opening-up could bring about political liberalization that weakens their grip on power. They thus prefer independence and autarky. These competing visions are on a collision course as the lifting of sanctions opens up international business opportunities, and a friendlier parliament can only take Rouhani so far. The Guardian Council, ideologically aligned with Ayatollah Khamenei, can veto parliament’s decisions. A small group of vocal conservative lawmakers could block his initiatives too, by impeaching his ministers.

Finally, vested interests are bound to resist structural economic reform, equally necessary for resuscitating Iran’s ailing economy. A multitude of quasi-governmental companies, mostly affiliated with the country’s unelected power centers, have mushroomed in the past decade. They are likely to try to preserve their privileges by hindering Rouhani’s economic agenda through elected and unelected institutions.

In the past, the Revolutionary Guards has used its security authority to create an unsafe environment for foreign competitors or marshalled its supporters in the parliament to threaten ministers who went after their economic interests with impeachment. The recent arrest of Iranian-American businessman, Siamak Namazi, along with his 80-year old father, has given cold feet to many in the affluent Iranian diaspora who were considering investing in their home country. In the same vein, Rouhani’s attempts to levy an estimated $20 billion dollars of tax on semi-state organizations affiliated with the clerical establishment and Revolutionary Guards has been impeded by the Guardian Council. Smuggling – which costs the state some $25 billion a year – is another plague that the government cannot cure without cooperation from the judiciary and the Revolutionary Guards, both immune to shifting winds of the country’s electoral politics.

The elections have put more wind in Rouhani’s sails, but the journey ahead is anything but clear sailing. There are partisan shoals awaiting him and the pragmatists on virtually every other turn. This means more clashes and tensions in the months ahead, and less opening and reform for the Iranian economy to fully realize its potential.

 
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