President Hassan Rouhani will seek to transform Iran's economy and secure another term in office next year
President Hassan Rouhani will seek to transform Iran's economy and secure another term in office next year © Lionel Bonaventure - AFP/File
President Hassan Rouhani will seek to transform Iran's economy and secure another term in office next year
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Arthur MacMillan
Last updated: March 2, 2016

After Iran elections, Rouhani aims for economic reform

Banner Icon With elections having eliminated politicians that opposed his historic nuclear deal, President Hassan Rouhani will now seek to transform Iran's economy and secure another term in office next year.

The 67-year-old cleric, elected in 2013, should find the going easier, analysts say, after voters elected a more moderate parliament likely to be more willing than its predecessor to work with the government.

Rouhani signalled Tuesday he immediately aims to bring economic reform in Iran, starting with privatisation of the auto sector, a major industry that in recent years struggled, producing cars that many see as too expensive, environmentally inefficient and, worst of all, unsafe.

"The car industry should become competitive," the president said at an auto conference in Tehran, noting that "government support cannot be everlasting" and insisting that Iranians need choice.

"The fact that we set up one or two companies and say 'this is it, take it or leave it'. The government will not support such a logic."

With almost 80 million people, foreign companies have since last July's nuclear deal between Tehran and six world powers looked to Iran as a long unserved market with its young population an untapped source of potential major growth.

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However, the biggest contract since sanctions were lifted under the landmark agreement has gone the other way, with Iran buying 118 Airbus passenger planes in a $25-billion purchase.

Rouhani has also faced domestic pressure to prevent foreign and particularly US companies from using their economic influence to "infiltrate" Iran and undermine the Islamic republic's political system.

Managing change

However, Amir Mohebbian, a Tehran-based political analyst with close ties to Iran's Foreign Minister Mohammad Javad Zarif, said there is no major disagreement on the need to reform the economy.

The only tension is over how changes will be managed. Rouhani guided Iran out of recession last year but growth has since stagnated.

"We want to import the industries and technology, not the products," Mohebbian said.

"Because if it's just the products then there will be no employment for our people and money will simply fly out of the country. And that is what some officials have spoken up about."

Rouhani and his cabinet ministers have said foreign money will benefit the nation's youth -- whose unemployment rate at 25 percent is two-and-a-half times the national average -- by creating jobs.

"It's going to be 'economy, economy'," Ellie Geranmayeh, an Iran specialist at the European Council on Foreign Relations said of the president's priorities ahead of his re-election bid in June 2017.

With the world's largest combined proven oil and gas reserves, an industry underdeveloped since the Islamic revolution in 1979 and subsequent war with Iraq, the potential is enormous.

"He will push for reintegration into the international economic platform, particularly with European investment in Iran's energy market," Geranmayeh added of Rouhani.

Predecessors hit problems

But it won't be a free for all. With the return of pro-Rouhani reformist politicians when Iran's new parliament convenes in May, the president will have to balance competing demands.

While supreme leader Ayatollah Ali Khamenei backed Rouhani on the nuclear deal and wants a better economy he has been cautious about foreign involvement and will hold the president to account.

Naming Khamenei and Iran's most powerful military force, the Revolutionary Guards, Geranmayeh said: "Rouhani will want to maintain his existing positive relations with other power centres and avoid radical steps that led to his predecessors being sidelined."

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Despite overwhelming public support, Iran's only reformist president Mohammad Khatami's 1997-2005 tenure was crippled by crises and disputes with the Guards and other influential bodies, such as The Guardian Council, who blocked his legislative efforts after they had been passed by MPs.

On the opposite side of Iranian politics, Mahmoud Ahmadinejad, Khatami's hardline successor, also clashed with Khamenei.

But Francois Nicoullaud, a political analyst and France's ambassador to Iran between 2001 and 2005, said economic development should not prove a problem "unless the guide (Khamenei) throws a spoke in the wheels".

In contrast, "the most sensitive issue will be bringing about an opening on social and cultural issues or human rights," matters close to the reformist camp, Nicoullaud added.

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