TSG IntelBrief: Khamenei’s Challenges and Unease In Iran’s Power Structure
November 14, 2013

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BOTTOM LINE UP FRONT 

 Iran’s supreme leader Khamenei has recently exhibited a more balanced tone for domestic and foreign policy issues
 
• It comes at a time of political transition, with Iran’s new president Rouhani, a worsening economy, and political factionalism
 
• The other component of change, with the impact of continuing sanctions, is how Iran seeks to be viewed in the international context: from aggressive and intransigent to responsible regional stakeholder open to dialogue with major powers
 
• However, tense internal issues, such as a wave of recent executions, fear of new unrest, and pressure from hardliners, continues to complicate change from within
 
• Khamenei is left with a balancing act—with Rouhani’s handling of the foreign policy portfolio in the balance—of speaking to change demands of younger Iranians and maintaining the hardline caucus.  

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In recent speeches, Iran’s supreme leader Ayatollah Ali Khamenei, struck a surprisingly balanced tone in addressing domestic and foreign policy matters, which is a departure from his usual partisan and openly ideological take on key domestic and foreign policy issues. His change in tenor comes at a sensitive time in Iran’s domestic politics as well as its regional and international standing, which are closely tied to each other.

Domestically, Iran is in the midst of a quiet political transition underscored by the coming to power of President Hassan Rouhani; the country is also suffering from a worsening economy impacted by continuing international sanctions due to its alleged quest for nuclear weapons capability. Another deciding factor in this political transition is the intensification of factionalism. Political rivalry based on factionalism is one of the hallmarks of Iranian politics. This intensification is fueled by the prospects, under Rouhani, for more openness and transparency in Iranian politics and economy, which could bring about a more participatory political process and, as a result, jeopardize the interests—financial, chief among them—of certain elite groups in the country. The end result of this intensifying factionalism remains unknown due to its dependence on another transition underway: Iran’s relations with the outside world.

Internationally, the Iranian foreign policy apparatus seems determined to extricate the country from the backbreaking sanctions that have been imposed since 2006. The sanctions have wreaked havoc on the Iranian economy, raising concerns among the Iranian leadership about the prospects for social unrest. Sanctions have also started to impact one of Iran’s prized assets: its influence over regional developments. And on the international stage, parallel with its negotiations with the 5+1 (US, UK, France, Russia, China and Germany) that are currently underway, Iran is also reconstructing its image from hard-line intransigent political entity to a more benign and responsible regional power open to constructive dialogue and compromise with key global powers.

But a closer look at developments inside Iran gives an image of the country discordant with Rouhani’s platform of moderation. In recent weeks Iran has witnessed a wave of executions, reportedly over 40, in response to what appear to be emerging security challenges in its western and eastern borders by Kurdish and Baluchi insurgents respectively. Both Kurds and Baluchis belong to the country’s Sunni minorities. The  executions comes at the same time as Iran’s hardliners express pessimism over nuclear negotiations, with some of them even calling Rouhani and his foreign policy team “appeasers of the West and willing to bow to Western pressures.” Today, Rouhani’s supporters wonder why there hasn’t been any reaction on the part of his administration to domestic challenges posed by hardliners. This has led some segments of the Iranian population to call the Rouhani administration another (former president) Khatami-in-the-making.

Since his election to the office of presidency in mid-June, Rouhani has remained preoccupied with matters of foreign policy, chiefly negotiating with the P5+1 over Iran’s nuclear program. One of the immediate goals of these negotiations is to ease sanctions and bring a semblance of normality to Iran’s trade with the outside world, in particular removing the barriers to financial transactions enforced via SWIFT (Society for Worldwide Interbank Financial Telecommunication). The latter has left billions of dollars and Euros of unpaid Iranian cash in the hands of its trading partners in Asia and Europe.

Easing of sanctions would undoubtedly have a positive psychological impact on the Iranian public and their sentiments about the future of the Iranian economy. Another key Iranian foreign policy goal is to prepare the ground for the return of Western investment in Iran’s energy sector, which is in dire need of revitalization and infrastructure upgrade, and whose further decline could greatly impact Iran’s geopolitical standing in the region and beyond.

This is the environment Khamenei finds himself saddled with; that is, ensuring the country’s discordant domestic and foreign policy visions do not lead to open factional confrontation while the country is undergoing a crucial dual transition. Khamenei’s efforts are aimed at striking a balance in Iran’s disparate power structure to prevent factional infightings from breaking into the open, which could provide ground for the eruption of social unrest in a country that only four years ago was struggling to emerge from large-scale, anti-government riots. Therefore, Khamenei’s support for negotiations and his outreach to hardliners to rally behind Rouhani’s negotiating team is a notable shift by a leader who has consistently supported the most conservative elements in Iranian politics.

Khamenei wants Iran’s power elite to understand the significance of projecting an image of ideological unity to Iran’s restive and change-seeking young population as well as to the outside world. But in speaking to the contentious and sometimes quirky nature of domestic politics, influential rightwing columnists and editors are currently questioning the ability of Rouhani’s nuclear negotiating team and their efforts to diffuse tensions with the West. And recent assassinations of a high-ranking IRGC commander as well as that of a deputy industry minister have fueled speculations about factional infighting possibly entering a new phase.

The apparent inefficacy of Khamenei’s efforts in bringing ideological cohesion to Iran’s power structure is a development parallel to the marginalization of clergy in key policy matters, and the steady militarization of the policy apparatus in the hands of elite members of the IRGC.

The recent and emerging developments in Iran could contribute to increasing unease among Iran’s power elite, should Rouhani turn his attention from Iran’s nuclear dossier to the country’s domestic politics.

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FORECAST

• Khamenei’s decisions could be increasingly influenced by the elite members of the IRGC

• Attempts by Iran’s hardliners to undermine Rouhani’s policies and his socio-political base could be reflective of Khamenei’s courses of near term action.

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FACTSHEET  

• According to October 2013 Congressional Research Service reporting, Iran’s oil exports, which fund upwards of half of government expenditures, have declined to less than half of the 2.5 million barrels per exported during 2011

• Lost oil revenues and barriers in using the international banking system caused a sharp drop in the value of Iran’s currency, raised inflation to over 50%, and reduced Iran’s reserves of foreign exchange

• Iran’s economy shrank from 2012 to 2013, and will likely do so again during 2013

• Iran’s GDP is among the top 20, but its growth rate is rated among the lowest 20 in the world

• The 2012 population estimate for Iran is 79 million, with 45% between 0-24 years.
 

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