The "New Iran" must still grapple with old enmities

The winds of change are blowing through Hasan Rouhani’s new Iran. After years of cold, tense and shaky relations with the West, Iran’s relatively moderate and pro-reform president is promising a move away from the assertive and confrontational foreign policies of his predecessor president Mahmoud Ahmadinejad. The shift is towards one based more on the realities of the international order and that seeks to promote engagement with other countries. The interim nuclear deal reached between Iran and the P5+1 (the five permanent UN Security Council plus Germany) in November last year has been an important diplomatic achievement of Iran’s fresh foreign policy approach. Rouhani’s efforts to improve channels of communication have also been reflected in other diplomatic rapprochements, including the re-establishment of a direct diplomatic dialogue between the UK and Iran after a break of more than two years, and Iranian plans to streamline its processing of visas for most countries.

The shift in Iran’s foreign policy is a matter of realpolitik; it is strategic calculations that are shaping the Rouhani government’s choices. Iran’s economy is a shambles and in dire need of economic reform and foreign direct investment. A combination of high inflation of around 32% with negative economic growth (Iran’s economy last year shrank by 1.3% in 2013) is rarely found anywhere else in the world and Iran suffers from double-digit levels of unemployment. Oil is Iran’s “black gold” but the western oil embargo imposed in 2012 led to a sharp 40% or so decrease in Iranian oil exports. With his much more pragmatic approach to foreign policy, Rouhani is seeking to reduce, if not eliminate, the economic sanctions imposed on Iran.

As to achieving economic recovery, a steady improvement of the economy is important to Rouhani for two main reasons. First, hardliners still play a crucial role within the Iranian government, and a powerful minority appears determined to keep the marathon nuclear negotiations deadlocked and so prevent rapprochement with the West. But improved economic conditions could help Rouhani to win Iranian hearts and minds and so bolster his standing vis-à-vis the hardliners. Second, sanctions had the effect of forcing Iran to enhance its nuclear capabilities and so demonstrate its regional power status. It failed to do so, reconciliation with key western powers could actively help Rouhani to boost Iran’s regional and even global standing.

If Iran does conclude a long-term nuclear deal with the West that opens the way to an improved economic and diplomatic dialogue, Tehran is likely to use its regional influence to enhance its geopolitically important location. Thanks to a young population and its natural resources, Iran’s role in the region’s politics may well create fresh challenges for its neighbours and the West too. In short, an Iranian nuclear deal looks likely TO end the status quo between Iran and other key players, particularly when the U.S. is progressively disengaging from the region.

The interim agreement has had the effect of warning Israel and the five Gulf Cooperation Council (GCC) countries of the shifting balance of power in their region. Israeli government has been adamant that the deal with Iran is a “historic mistake”, while within the GCC, Qatar, Oman and Kuwait favour a more open dialogue with Iran, while Saudi Arabia, Bahrain and the United Arab Emirates (UAE), feel threatened. Most of the important players in the region though, see the need for a fresh strategy to counterbalance Iran’s growing power.

For the West, the key challenge has yet to come. A durable nuclear deal would certainly result in a more moderate Iranian foreign policy, but it seems doubtful that even a definitive agreement will greatly change the nature of Iran’s ruling regime. The West will still need to develop a more holistic approach towards Iran that embraces at least three central doctrines. First, the EU and the U.S. need to establish, however gradually, social, cultural and educational ties with Iran. That means a new dialogue that would act as a trust-building mechanism that’s capable of nurturing a pro-western shift in Iranian public opinion. Second, the improvement of bilateral economic relations will be vital for foreign investment in Iran’s infrastructure; the adoption by Iran of global trade norms and increased trade on both sides would be win-win for all. Last, human rights should remain a key component of EU-U.S. foreign policy towards Iran.

These coming shifts in the balance of power will bring challenges for Iran too. In a region made increasingly tense by unresolved conflicts, a more self-confident Iran will need reliable allies if it is to enhance its geopolitical voice. Iran’s desire to pursue a foreign policy based on realpolitik is at odds with its unchanged religious and ideological preferences and certainly hinders any change in its Middle East policies, especially toward Syria. Iran is undoubtedly part of the Syrian equation, for its involvement is critical to any chance of a settlement. But Rouhani’s failure to make a decisive statement on Syria, even after a series of leaked photographs of systematic torture and massacre inflamed the ire of the international community, hasn’t helped; Iran’s approach to the Syrian conflict is slowly alienating it in the region.

All of this could, meanwhile pave the way for Turkey to play a more active role at a time when Ankara is trying to reconfigure its foreign policy vision. Turkey enjoys relatively stable economic, political and cultural relations with all parties in the Middle East together with the EU, the U.S. and Iran itself. Turkey’s soft power capabilities could yet make a substantial contribution to greater stability and reconciliation in the Middle East.

The Arab spring’s revolutions have, needless to say, dramatically changed the regional landscape. The spreading of transnational values across so many countries in the Middle East and North Africa has significantly altered regional politics, including as they do, good governance, universal freedoms and human rights. Iran set up firewalls to prevent the spread of these norms for much the same reason as it gave support to the brutal Assad regime in Syria: What Iran wants in Syria reflects some of its own domestic policy goals. The Iranian political establishment wants to preserve authoritarian rule, while protecting the regional status quo.

The easing of sanctions will provide some relief for Iran, but there is no sign that Iranian policy in the Middle East will change in the short-term. President Rouhani’s political future depends on achieving a lasting nuclear deal, and if that fails, he seems unlikely even to seek re-election. But if the deal succeeds, he will gain significant clout in relation to the “strong state” political establishment with long-term implications for Iran’s domestic politics as well as its foreign policy.