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Progress still looks way off for Iran
Donald Trump’s threat to ditch the Iran nuclear deal could boost the country’s hardliners. But how does Iran’s political system and economy operate? Alex Rankine reports.
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Donald Trump's threat to ditch the Iran nuclear deal could boost the country's hardliners. But how does Iran's political system and economy operate? Alex Rankine reports.
Who runs Iran?
The president is Hassan Rouhani, who was re-elected for a second four-year term in May, defeating more conservative rival Ebrahim Raisi with 57% of the vote to 38%. Rouhani is widely seen as a moderate within Iran's political landscape. He has called for greater political freedoms and improved women's rights, but not challenged the fundamentals of Iran's Islamic constitution.
He was key in driving through the 2015 nuclear deal that will see Iran curtail its nuclear programme in exchange for an easing of international sanctions, despite opposition from more conservative hardliners in Tehran.
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No. Iran's democratic institutions exist in parallel with an unelected theocracy, led by the Supreme Leader, 78-year-old Ali Khamenei, who has held the post since the death of Ayatollah Khomeini in 1989. The Supreme Leader directly controls a swathe of institutions including religion, the judiciary and the military.
The president leads on economic policymaking, the cabinet and diplomacy, which is why he is often the most prominent face on the international stage, despite his comparative lack of power. But his policies are all ultimately subject to the Supreme Leader's veto.
What keeps Khamenei in check?
The Supreme Leader is chosen and monitored by the 88-member Assembly of Experts, which is separate from the parliament. Its members are legal and religious authorities who are elected to eight-year terms.
However, the body is controlled by Khamenei nearly 80% of candidates at last year's elections were disqualified before they could get onto the ballot. The upshot is that the Assembly of Experts has never questioned Khamenei, although it may take on renewed importance should a new Supreme Leader need to be chosen.
So is Iran a democracy?
Not really. Elections are genuinely competitive (once the vetting is out of the way) and the elected parliament is far from a compliant rubber stamp. But the electoral authorities keep reformist politicians off the ballot paper and open dissent is not tolerated. Protests in 2009 and 2011 were met with harsh crackdowns and widespread allegations of torture being used against political prisoners.
Nevertheless, the government may find it hard to ignore growing demands for political and cultural liberalisation, especially from the young, who feel shut out by the current system. As Ray Takeyh notes in The Atlantic: "the most stark dichotomy in Iran today is not between hardliners and moderates, but... between the state and society".
What is the Revolutionary Guard?
The Islamic Revolutionary Guard Corps (IRGC) is another key power player in Iran. Separate from the regular military, it is tasked with upholding the ideals of the 1979 revolution and defending the regime it's a "state within a state," writes Con Coughlin in The Daily Telegraph, one that has "developed into an organisation that rivals the official organs of government in terms of the day-to-day power and influence".
Former President Mahmoud Ahmadinejad was a former Guardsman, and his presidency (2005-13) saw a significant expansion of the IRGC's business interests, to include health, agriculture and petrochemicals. Up to a third of Iran's economy was at one time thought to be under the control of the IRGC and connected enterprises.
What impact has this had?
It has held back growth, by deterring foreign investors who are wary of inadvertently trading with guard-linked businesses, which are still subject to US sanctions. As a result, Tehran led by Rouhani, but presumably with the implicit consent of the Supreme Leader has recently cracked down on the IRGC business network. It has been forced to transfer ownership of some companies back to the state, and at least a dozen guards and affiliated businessmen are thought have been detained over suspect deals.
Yet even if the government reduces the IRGC's role, it will remain a key power player: indeed, Rouhani recently boosted the budget for overseas operations and missile development as compensation for the IRGC's lost business interests. When a new Supreme Leader is chosen it could be the guards, not the Assembly of Experts, that plays the pivotal role. "They have been putting all the pieces in place for a very forceful show of force if Khamenei passes away," Abbas Milani of Stanford University told Business Insider in January.
Has the nuclear deal helped?
Rouhani sold the nuclear deal to Iranians as a solution to their economic problems, but many have grown frustrated with the slow progress since sanctions were lifted. There has been a flurry of new investment French oil giant Total signed a $5bn contract to develop a gas field in July and growth has picked up.
But the banking system remains weak and more than one in ten people are unemployed, with a youth unemployment rate thought to be as high as 30%. With Donald Trump now threatening to scrap the deal, further progress may be some way off.
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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
