Hardliners: The Real Barrier to Iran’s Economic Revival

by Shireen T. Hunter

By now it has become clear that Iran’s expectations of an immediate economic revival following the nuclear deal were unrealistic. Tehran thought that the Joint Comprehensive Plan of Action (JCPOA) would restore its severed links to the international financial system and to sources of foreign investment. Instead, the restoration of Iran’s links with the international banking and financial systems has been delayed, partly as a result of still existing American sanctions unrelated to Iran’s nuclear activities. These sanctions, along with the fines that the US imposed in the past on foreign banks that engaged with Iran, have deterred international banks from dealing with Iran.

Secretary of State John Kerry has called on European and other banks to resume dealings with Iran within the limits set by JCPOA. But international banks have been unwilling to take the risk, particularly in light of the forthcoming American presidential elections and the significant anti-Iran feelings within the US Congress. Given the uncertainties surrounding future US-Iran relations, the hesitation of international financial institutions, although regrettable, is understandable. The Iranian market is not large enough to warrant taking such risks. The same holds true for European countries. Although many of them resent the limitations imposed on their economic activities in Iran by unilateral American legislation, they are unwilling to jeopardize their far more important economic and strategic relations with America for Iran’s sake.

This has always been the case, which the Iranian leadership should have by now realized after trying for nearly 30 years to convince the Europeans to stop following the American lead. In other words, Iranian leaders should understand that Iran’s relations with Europe will only go so far without better understanding between Iran and America. This is not because, as some Iranian hardline publications claim, the EU is a creature of the CIA. Rather, Europe and America have essentially very similar, although not identical, interests in the Middle East and, to a great extent, globally.

For instance, Europe and America agree on the question of Iran’s approach toward the state of Israel. Whether rightly or wrongly, Iran’s anti-Israel stand and its uncompromising position on the question of Palestine is a significant barrier to a true warming of relations with both Europe and America. If Iranians had any doubts on this score, statements by German Chancellor Angela Merkel and more recently the EU’s High Representative Federica Mogherini, possibly the European politician most eager to expand relations with Iran, should have convinced them. Even Iran’s relations with Russia are not immune from the negative impact of the Israel factor, because Vladimir Putin is not willing to jeopardize Russian relations with Israel for Iran’s sake. On the contrary, he and other Russian leaders will continue to play the Iran card in their regional politics while throwing mere crumbs to Tehran, knowing full well that Iran’s options are limited.

Despite these international realities, Iran’s hardliners continue to mortgage Iran’s economic and political future by insisting on policies that, even if they had some obscure justification in the past, have become obsolete in the changed world. This unrealistic, or even surrealistic, aspect of Iranian politics was in full display during ceremonies marking the recent anniversary of the death of Ayatollah Khomeini. Exhortations were made that Iran should not deviate from the path of the Imam. In particular, Iran should not give up its anti-imperialist—read anti-American—struggle and the struggle to free Palestine, even while most Arabs have either made peace with Israel or are in the process of at least accommodating to it. Domestically, the celebrants urged Iran to fight against cultural corruption and creeping capitalism. Instead, they called on the country to continue the struggle to strengthen Islamic values and develop a resistance economy and a jihadi spirit. These measures, they argued, would cure all of Iran’s present ills, since Islamic values, jihadi spirit, and anti-imperialist struggle have been the source of Iran’s strength, independence, and pride since the Islamic revolution.

Absent from all these exhortations has been the following question: if Iran has become so great and strong under the Islamic Republic, why is its economy in such dire condition? Why does it have so much unemployment? And why are its best and brightest leaving the country in droves?

In their hearts, even Iran’s hardliners know that the Islamic experiment has been a failure in every sense of the term. Economically, Iran has not lived up to its potential. For any Iranian with a sense of national pride, it must surely be humiliating to watch the country ask for the help of Turkey and India in order to revive its economy. Politically, Iran has succeeded in uniting its traditional rivals: the Turks, the Arabs, and the Israelis. The Islamic Republic has stymied the country’s flourishing culture and deprived it of an important source of soft power. It is only due to Iranian talent and resilience that the people of the country have found ways to circumvent Islamic restrictions and produce artistic works, like Iranian cinema, that have gained international recognition. More telling, however, is the fact that Islam’s influence in Iran has declined under the Islamic Republic, and the prestige and appeal of the clergy has dramatically eroded.

Yet the hardliners insist on continuing their failed policies. After all, they themselves have benefitted economically and politically from these policies, and they are unwilling to lose their privileges and perks even at the cost of undermining the country and its people. Even ideology now is only a thin guise for hardliners’ efforts to safeguard their parochial interests.

The bottom line is that, even with the nuclear deal and even if America removed all other sanctions as well, Iran’s economic revival and its full international integration will not be possible without basic cultural and political changes and the adoption of a realistic and national as opposed to revolutionary foreign policy. For example, Iran cannot expect fully to develop its tourist industry without relaxing social restrictions. Yet its hardliners consider Turkey’s Antalya—a major tourist attraction, even for Iranian citizens—as a den of moral corruption. In short, Iran cannot expect to develop economically, scientifically, and artistically and join the ranks of advanced nations as it wishes to do, while holding onto rigid, ideologically determined socio-political and cultural policies. The continuation of current polices will only exacerbate many contradictions inherent in the Islamic system with unpredictable but certainly negative consequence for the country, including the hardliners.

For the sake of their own interests, the United States and Europe should help those in Iran, notably the government of President Hassan Rouhani, who want to reform the system. Ultimately, however, no country can expect others to be more concerned about its welfare and interests than its own government and leadership.

Photo: Ayatollah Ahmad Jannati, a noted hardline conservative and chairman of Iran’s Assembly of Experts.

Shireen Hunter

Shireen Hunter is an affiliate fellow at the Center For Muslim-Christian Understanding at Georgetown University's School of Foreign Service. From 2005 to 2007 she was a senior visiting fellow at the center. From 2007 to 2014, she was a visiting Professor and from 2014 to July 2019 a research professor. Before joining she was director of the Islam program at the Center for Strategic and International Studies, a program she had been associated since 1983. She is the author and editor of 27 books and monographs. Her latest book is Arab-Iranian Relations: Dynamics of Conflict and Accommodation, Rowman & Littlefield International, 2019.