Widespread Protests, New Sanctions and Iran’s Options
The first stage of the US’ unilateral Iran sanctions imposed on such sectors of the country’s economy as the gold trade, automotive, aircraft, mining, computer and software came into effect on 6th of August. As a part of its determination to fully implement the sanctions, the US administration does not fail to threaten the reluctant governments by saying that “non-complying nations will endure the consequences.” Doubtlessly the sanctions aim at paralyzing Iran’s economy with the ultimate aim of incapacitating the Islamic Republic. The interesting point, however, was the outbreak of anti-regime protest in major Iranian cities including Qom, the center of Iran’s revolutionary ideology and home to influential Shiite clerics, prior to August 6 and November 4, when the more important comprehensive second stage of the sanctions will be activated. This point calls for elaboration.
As a matter of fact, the widespread protests of early August were more a reflection of the psychological frustration dominating the masses than a direct result of the deteriorating economic conditions. In other words, since comprehensive embargoes had not yet officially begun, and Iran enjoys the highest level of oil export of the last five years, these indications are primarily due to the panic arising from the soaring foreign exchange rates against the Iranian rial. So the worse is yet to come. The next year’s budget will radically suffer from the prospective significant reduction on Iran’s oil exports, even more critically, from a ban on the transfer of foreign exchange to the country by early November. Since the Iranian economy is largely under state control, the Iranian government will try to neutralize the impact of the economic challenges to the possible extent. Then how should we interpret the growing tension in Iran?
First of all, the economic problems caused by the sanctions imposed on Iran during the former President Mahmoud Ahmadinejad's second term between 2009 and 2013 have gone unresolved under President Rouhani. Due to the statist and complex structure of the economy, the unspoken crisis remained unfelt until Rouhani came to power in 2013. The optimistic atmosphere brought about by the nuclear deal of 2016 was met positively by the ordinary Iranians. However, the common expectation as to a substantial increase in foreign investments and a subsequent economic growth was failed by D. Trump’s ascendance to power and his decision to abandon the deal.
Nevertheless, the economic problems caused by the previous sanctions do not suffice to explain the widespread demonstrations and the sudden rise of the dollar against rial. Iranian and foreign investors doing business in Iran are worried by the unprecedented pressure and the upcoming “strongest sanctions in history” which the US administration has declared to exercise and impose on Iran. Even the ordinary Iranians rush to convert cash and also immovable property to gold and dollar. That 1 US dollar which equaled to 35,000 rials a year ago showed a dramatic and steady rise during the last year and reached to 120,000 rials tell a great deal about Iran’s alarming economic situation. Although rial recovered slightly against the dollar which now equals to 100,000 rials a substantial amount of capital has already left the country. Some even went as far as to speculate that Iran will experience a Venezuelan-like economic collapse which further provoked the public reaction and the demonstrations. To these were added environmental problems as well as the water shortages in the blazing summer heat in some areas and electricity outages.
On the other hand, apparently there is also a disillusionment among Iranians from the Rouhani government. The great hopes and expectations carried by the Iranian urban middle class from Rouhani and his promises for establishing better relations with the world and for solving the chronic economic problems of the country seem to increasingly fade away. For many at home, a fundamental change is necessary if the country’s problems are to be solved.
Ankara is also particularly concerned with the straining US-Iran relations and the comprehensive economic sanctions. Like many other countries, Turkey, which declared its noncompliance with the unilateral sanctions, has resisted the US pressures for the last few years in several areas. There is no sign that the US Treasury and Foreign Affairs officials, who visited Turkey in mid-July, have received a favorable reply to their demands. On the contrary, senior officials, especially Foreign Minister Çavuşoğlu and President Erdogan, have declined to comply with such unilateral sanctions. Given the fact that US-Turkey relations were already tense because of the illegal imprisonment of a high-ranking Halkbank official in the US allegedly for breaking the Iran sanctions and the US attitude towards the July 15 coup attempt, the new Iran sanction can escalate the situation.
The following point should be underlined: the Turkish-US disagreement on Iran is one of the consequences of the bad relations between the US and Turkey and not the causes of the tension. The US-based FETÖ terror organization’s coup attempt which was carried out in a period when the US-Iran relations was at the peak of the last forty years, and the fact that the US has never spoke against such countries like the UAE which has provided much more space to Iran than Turkey did during the previous sanctions regime, prove that the US administration exploits Iran crisis as a pretext against Turkey. In fact, Turkey's stance on the Iran sanctions issue is quite clear: Ankara does not accept the instrumentalization of sanctions in inter-state relations which the US has recently applied against Turkey too. Moreover, despite all its foreign policy disagreements with Tehran, Ankara gives great importance to the neighboring Iran’s political and economic stability. Since the chronic instability in Syria had brought much damage to Turkey and the region a similar power vacuum in Iran will expose Turkey to grave consequences.
Other Actors' Positions
Certainly, curtailing Iran’s oil export is the backbone of the US sanction against this country and there is no consensus on Iran’s oil partners on this point. Such countries as South Korea and Japan have already stopped or significantly reduced their oil purchases from Iran but others such as China insistently refused to do so despite the American pressure. India, as another major importer of Iran’s oil, is still to take a clear position. Russia does not only comply with the sanction but also provides political support to Iran. Also, European countries are working on finding a way to escape the sanction by at the same time without endangering their relations with the US.
EU countries, particularly France and Germany, have a long history of operating in the Iranian market and do not want to lose it. Yet, they will have hard times in finding a way to do so. Under these circumstances, the upcoming quartet meeting between Turkey, Germany, France, and Russia, states with a similar stance against the US sanctions, becomes more important. The hectic diplomatic traffic shows that Iran might very soon turn into a wrestling field between the US and other which are not happy about its Iran policies.
What is next?
In any case, the fragile Iranian economy will certainly suffer greatly from the sanctions especially after the 4th of November. This may cause bigger protests in Iran where not only the marginal segments of the society but also the middle-class Iranians can participate. The demonstrations will quite possibly be supported and proved by the international media broadcasting in English and Persian among. On the other hand, there is a tendency to promote the Los Angeles-based Reza Pahlavi, son of Muhammad Reza Pahlavi, to lead the disorganized anti-regime groups which do not have any clear leadership. There is also the fact that Iranians with diverse ideologies have formed various political parties and organizations, particularly in the US and Europe. This rising activism can be interpreted as evidence that diaspora dissidents are expecting that the ongoing process will be in their favor.
Being aware of Iran’s economic fragility, the US administration is increasing its pressure on Iran with each passing day and Iran is running out of time to find a way out through diplomatic means. The Trump administration steadily adds new items to its already-long list of demands from Iran. Following his election to presidency the President Trump first began his anti-Iran rhetoric by his technical objections to the nuclear deal but he gradually targeted Iran's regional activities and even the Islamic Republic’s legitimacy. When he proposed to have talks with Iran “without preconditions” after the dramatic decline of rial against the dollar he was actually stressing his awareness that the US had the upper hand. Even if the changes in the upper echelons of the Iranian economic bureaucracy or the political support of other countries give Tehran some time, it is highly likely that if the Iranian administration does not go to a serious and comprehensive settlement with the US, the current crisis will evolve to a stage that will affect the whole region.