Published on August 11th, 2016 | by Farideh Farhi1
Is Rouhani in Trouble?
by Farideh Farhi
While the United States is moving towards wrapping its rather unusual election, Iran is about to begin its electoral cycle. The date for the combined presidential and municipal elections was set for May 19, prior to the start of the fasting month of Ramadan, in order to avoid the hardship imposed on hundreds of thousands of election workers. This is about a month earlier than usual and will likely prompt an earlier-than-usual season for electoral maneuvering by December or early January even if the formal registration period for candidacy will not begin until April 11. By that time, the results of the US elections and the likely impact on the shape of the nuclear agreement, should have also become clearer.
Hassan Rouhani remains the favorite based on tradition, as all of the Islamic Republic’s presidents since the early tumultuous years have been two-term presidents. In addition, so far there are no signs that that the reformist/centrist alliance that elected him in 2013, and then moved the parliament towards the center of the political spectrum in 2015, is falling apart. Meanwhile, the lack of unity that prevented the closing of ranks behind a single candidate in 2013 continues to plague the conservative leadership and ranks. None of the potential candidates mentioned—most of them repeats of past elections—is likely to satisfy the wide range of opinion that exists within the conservative ranks or break the centrist/reformist alliance.
Popular frustration regarding the slow economic impact of the nuclear agreement may prompt some potential candidates to frame their campaign around the rejection of the agreement. Former nuclear negotiator and Khamenei appointee to the Supreme National Security Council, Saeed Jalili, has already hinted at this posture if he runs again. But so far unhappiness with the slow economic effect of the nuclear agreement has not pushed the population to favor its rejection. If anything, a Jalili run is likely to have the same impact as it did in the last election: moving more people to vote for Rouhani in order to prevent Jalili and his point of view from being elected. The same polarizing effect awaits a run by former president Mahmoud Ahmadinejad if he chooses to do so on a populist platform and in the unlikely case he is able to pass the Guardian Council’s vetting cudgel.
Perhaps because of this unpleasant political landscape for the conservatives the attacks against Rouhani are intensifying and will likely worsen as the election nears.
For example, the Friday Prayer Leader of the city of Mashhad, Ahmad Alamolhoda, chose this week to ignore Ayatollah Khamenei’s stamp of approval on the nuclear agreement when he called Rouhani “gullible” for stating that the nuclear has brought Iran respect. To Alamolhoda, the nuclear agreement has only made Iran a market for cheap imports.
Also this week another cleric, Hamid Rouhani, called the president a traitor and one who “forced” the leader to negotiate. Comparing Hassan Rouhani to Iran’s first president Abolhassan Banisadr, who was impeached and removed from office, Hamid Rouhani called for the prosecution of the president for the “crime of treason against the country, lying, and distance from the Leader.” A disqualification by the Guardian Council, preventing a second-term run, would achieve the same result. Hamid Rouhani went on to say that the biggest danger to the country is neither the US nor Israel, but Hassan Rouhani and his way of thinking.
This week’s charges against President Rouhani were so extreme even within the confines of Iran’s highly contested politics that the vice president for legal affairs announced that the government is lodging a complaint against those hurling these insults with the Special Court for Clerics. But, in general, Rouhani has remained aloof from the criticisms, and has continued to defend the economic and political benefits of the nuclear program. At the same time, the Iranian president has acknowledged the frustration with the blockages created by the US financial sanctions and the uncertain commitment of a future administration to the fulfillment of US obligations after Obama leaves office.
The Oil Factor
With oil production and exports significantly higher and associated shipping and insurance problems gradually resolved, Rouhani has figures to back his claim of economic rewards, even though the drop in oil prices and general global slowdown have not allowed Iran to significantly benefit from higher oil exports. Speaking on state television, Rouhani put Iran’s total crude and condensate production in the Iranian calendar month of Tir (June 21- July 21) at 4.12 million barrels per day, up 28 percent from the 3.28 million barrels per day in the 10 months leading up to the lifting of sanctions. Rouhani also stated that crude and condensate exports were up 80 percent over this same period, to an average 2.43 million barrels per day in Tir.
The next big step will have to go beyond trade to attract significant foreign investment in oil and gas fields. After months of wrangling, the cabinet approved the general outlines of the new Iran Petroleum Contracts (IPC) on August 3 and relayed them to the oil ministry for implementation. The details of each contract will have to be worked out with individual contractors, but in general the IPC is designed to make investment in Iran’s upstream projects more attractive by allowing for longer contracts and remuneration fees proportionate to risks taken. Reportedly, the National Iranian Oil Company (NIOC) has already identified 12 to 13 fields as priorities for the first round of investment.
There has been resistance to the new oil contract model in the works for a couple of years. Although no parliamentary approval was necessary, objections by several hardline MPs in the previous parliamentary session led to reexamination and even eventual call by Ayatollah Khamenei for some changes. But if the words of Petroleum Minister Bijan Zangeneh are taken as valid, the changes in the approved draft are mostly legalities and do not undermine the better terms that are needed to entice major international oil companies to Iran.
This is why critics of the original IPC are not yet appeased by the new changes. Former conservative MP Ahmad Tavakoli, now acting as the chairman of the board of his own newly established organization, Transparency and Justice Watch, complained to the heads of three branches of government about the oil ministry’s insistence on two things: designing attractive contracts, because without them foreign capital would not come to Iran, and beginning with France’s Total SA oil company.
Although Tavakoli’s letter is full of hyperbole regarding its preference for Total SA and Iran’s loss of sovereignty over its fossil fuel resources, it nevertheless reflects a real debate over the development of Iran’s onshore fields with some NIOC subsidiaries preferring that the state-owned company itself service those fields. NIOC South has indeed done a better-than-expected job at sustaining those fields in the face of international sanctions and the withdrawal of international oil companies. But the approval of IPC suggests that Zangeneh (and by implication Rouhani) has won the debate over the need for foreign technology and investment to go beyond sustenance and further develop these onshore fields. After all, many of them are old and in need of enhanced oil recovery techniques mastered by Western oil companies to reduce their depletion rate.
So, in the post-nuclear agreement environment, the Rouhani government has been able to overcome a significant domestic obstacle, at least on paper. The next stage will reveal whether the terms are attractive enough for Western oil companies to come to Iran and whether remaining US financial sanctions continue to make them hesitate. Total SA has already signed a confidentiality agreement for the development of South Azadegan oil field, but a technical bid is still to come.
If long-term upstream contracts of 25 or even 30 years with European companies do come, they will validate the fears Rouhani opponents have regarding his gradual redirection of Iran after the nuclear agreement.
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