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Nuclear deal to boost Iran's economy, not regional aggression - observers
July 14, 2015 / 8:53 AM / 2 years ago

Nuclear deal to boost Iran's economy, not regional aggression - observers

Iranian Foreign Minister Javad Zarif talks to journalists as he stands on the balcony of Palais Coburg, the venue for nuclear talks, Austria, July 13, 2015. REUTERS/Leonhard Foeger

BEIRUT (Reuters) - An expected influx of cash from an easing of sanctions after a nuclear deal between Iran and major powers looks likely to be directed mainly at reviving a moribund economy rather than increasing Iranian assertiveness.

The critics of the deal, including most Gulf Arab governments and Israel, contend that Iran has made no secret of its determination to expand its influence across the region.

Yet it is the economy where Iran is feeling most pain, and growth and jobs are the things that President Hassan Rouhani promised to deliver when he was elected in 2013 on a ticket of ending Iran’s isolation.

“The priorities of Iran are definitely on the economic side,” said Walter Posch, an Iran expert at the German Institute for International and Security Affairs. “There is so much to do in Iran, to repair and to fix.”

U.S. Treasury Secretary Jack Lew said recently that Iran’s GDP had shrunk by up to 20 percent because of sanctions. He also said the Islamic Republic had lost more than $160 billion in oil revenue since 2012.

Despite being Iran’s most lucrative industry, the oil and gas sector is so run-down that it cannot even refine enough gasoline to cover Iran’s own needs.

Potential investors are queuing at the gates, waiting for sanctions to be lifted so that they can team up with local partners to build up Iran’s infrastructure.

“There are going to be a lot of foreign companies,” said William O. Beeman, an Iran expert at the University of Minnesota who recently returned from a three-week trip to Iran. “You couldn’t go anywhere in the country and not run into a gaggle of potential foreign investors. They’re everywhere.”

All this economic activity, if it generates jobs and stabilises prices, will help Rouhani to justify his drive to end Iran’s international isolation.

Royal Dutch Shell, whose debt to Iran accounts for about $2 billion of the $150 billion or more estimated to be frozen or blocked overseas under sanctions, said last month that it had held meetings with Iranian officials in Tehran.

INFLUENCE OF THE GUARDS

Car and aerospace firms have also approached Iranian companies about potential deals, with French and German firms leading the way.

But the president is not the sole power in Iran. The Revolutionary Guards, the most powerful military force in the country, also play a big economic role, and will undoubtedly benefit hugely from the influx of investment.

It is principally the Guards who, since the 1979 Islamic Revolution, have sought to project Shi‘ite Iran’s influence across the Middle East, putting it at odds with a rival bloc of Sunni powers allied with Saudi Arabia.

In the past four years, Iran has sent military advisers, fighters, cash and weapons to support the beleaguered government of President Bashar al-Assad in Syria. And Hezbollah, Iran’s oldest proxy group in the region, has received more funds and weapons from the Islamic Republic as it has taken a leading role supporting Assad’s forces in Syria.

In neighbouring Iraq, Iranian military advisers have played a key role in helping the Shi‘ite-led government and Shi‘ite militias to push back the broad territorial advances of the Sunni Muslim militant group Islamic State.

Iran also gives political support to the Shi‘ite Houthis who have seized much of Yemen, and to the restive Shi‘ite majority in Sunni-ruled Bahrain, although it denies arming the Houthis or encouraging rebellion in Bahrain.

In a letter to Rouhani two weeks ago laying out policy goals for the government’s development plan, Khamenei said at least 5 percent of the national budget should be allocated to defence to ”increase defence capabilities at the regional power level for achieving interests and national security”. Most NATO countries spend less than 3 percent of GDP on defence.

Yet analysts say it is hard to imagine Iran expanding these activities even further, even if the prospect of more money to pay for expensive operations in Iraq and Syria will be welcome.

“I know the American rhetoric that says, ‘Oh, if we make a deal with Iran, Iran is going to exert its hegemonic forces throughout the region’,” said Beeman.

“I just don’t see it. Iran is already a presence everywhere in the region and I don’t see how this is going to change.”

HEZBOLLAH

Analysts point to Hezbollah as an example of how Iran keeps tight control over its allies and exerts influence pragmatically.

Since the end of a 34-day war in 2006, Hezbollah and Israel have not had a serious confrontation.

Even after an Iranian Revolutionary Guard general was killed, along with the son of a revered Hezbollah commander, in an Israeli strike inside Syria in January, Hezbollah held back from firing rockets at Israeli cities and risking a new flare-up, perhaps wary of fighting two wars at once.

“The Iranians are shrewd politicians and they are rational political actors. And so is Hezbollah,” said Hilal Khashan, a political science professor at the American University of Beirut who has studied Hezbollah extensively.

“Hezbollah does not fight losing battles. It fights when it is assigned by the Iranians, based on rational Iranian decisions.”

For their part, the Iranians see themselves as a stabilising force. Last month, Foreign Minister Mohammad Javad Zarif set out in the Harvard International Review how he thought countries should confront Islamic State - a battle where Tehran and Washington awkwardly find themselves fighting a common enemy.

Mansour Haqiqatpour, deputy head of parliament’s National Security and Foreign Policy Committee, said in an interview that a nuclear deal would not change Iran’s contribution to stability in the region, and that better economic ties would help this.

“We already have good cooperation in economic matters and other fields with other countries,” Haqiqatpour said. “If the obstacles (sanctions) are removed, then these ties can grow.”

Khashan said Iran’s power brokers had come round to a rational view that constant tension with the West, including the United States, was not in Iran’s wider interests.

“They want to build the infrastructure of modernity and they want to play a leading role in regional politics,“ he said. ”These are extremely important to Iran. They want to put an end to the tensions.”

Reporting By Babak Dehghanpisheh; Editing by Kevin Liffey

Our Standards:The Thomson Reuters Trust Principles.
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