Explainer: Iran hardliners set to retain hold on economy, foreign policy after vote

DUBAI, June 16 (Reuters) – An expected victory by a hardliner in Iran’s presidential election on Friday is unlikely to slow his attempt to revive a nuclear deal and break free from sanctions.

The victory of a security hawk like Ebrahim Raisi would allow the new government to take full advantage of the economic benefits of the 2015 revival of the nuclear deal, which the outgoing government may agree to in the coming weeks.

A revived pact would likely see a lifting of the tough US curbs the vital oil exports cut and new revenues flow at the beginning of a new government’s term.

At the same time, a deeply anti-Western government may hesitate to roll back Iran’s regional rivalry with the US-allied Arab Gulf states unless the country’s top authority, Supreme Leader Ayatollah Ali Khamenei, requests it.

Raisi, a hardline judge, is considered a favorite in the five-man race thanks to support from Khamenei. Raisi has spoken out in favor of Iran’s nuclear talks with the world powers.

WILL IRAN CHANGE ITS ATTITUDE ON NUCLEAR TALKS?

Unlikely. Khamenei, not the president, has the final say on Iran’s nuclear and foreign policy.

With the economic misery palpable at home, the Iranian rulers cannot risk starting the talks over after the election.

Iran is negotiating with six major powers to revive a nuclear deal that was abandoned in 2018 by then-US President Donald Trump, who argued it was too soft on Tehran. Under the deal, Iran agreed to cut its nuclear program in exchange for the lifting of international sanctions.

Trump has again imposed sanctions that cut Tehran’s oil revenues and excluded it from the international banking system.

Should an agreement be resumed, Iran expects to be exempt from most US sanctions.

Like Khamenei, Raisi has endorsed the talks, but the middle cleric says a “powerful government should implement them”.

There is no question of restoring relations with the United States, which the Iranian rulers have called the “Great Satan” since they came to power in a 1979 revolution.

WILL A NEW PRESIDENT CHANGE ECONOMIC POLICY?

Whoever wins and gets rid of the toughest US sanctions will stay the ultimate economic goal.

For hardliners, even if they expect victory for one of their own on Friday, the economy remains their Achilles heel.

From key establishment supporters to Iranian workers and business elites, everyone is feeling, to varying degrees, the effects of rampant inflation and rising unemployment.

Iranian clergy fear a resurgence in street protests that have erupted across the country since 2017. Officials acknowledge that the authorities are vulnerable to anger at the rising poverty.

“Raisi’s greatest challenge will be the economy. Protests will be inevitable unless he succeeds in healing the nation’s economic problems,” said a government official.

The candidates have promised to create jobs and end the depreciation of the rial. But no one has published detailed plans.

The prices of basic goods such as bread and rice are increasing daily. Meat is too expensive for many, a kilogram costs the equivalent of 40 dollars. The minimum monthly wage is around $ 215.

Inflation is expected to rise to 39% this year from 36.5% in the previous year, while unemployment this year will rise from 10.8% in 2020 to 11.2%, the IMF estimates.

WILL THE OIL POLICY CHANGE?

The goal remains to exempt oil exports from sanctions.

Sanctions have cost Iran billions of dollars in oil revenues and lost market share in the organization of petroleum exporting countries, largely to regional rivals Saudi Arabia.

Industry analysts say that if the sanctions were lifted, Tehran could increase crude oil production from its current 2.1 million barrels per day (bpd) to 3.8 million barrels per day in months prior to the sanctions.

But the global transition to lower carbon fuels combined with the impact of the COVID-19 pandemic on energy demand makes Iran a less attractive market for many energy companies.

While some European refiners have shown an interest in buying Iranian crude if the sanctions are lifted, not many Western oil companies have publicly expressed their willingness to invest in Iran.

Russian oil and gas producer Lukoil (LKOH.MM) said earlier this month that it would be interested in returning to Iran if sanctions on the country were lifted.

WILL IRAN CHANGE ITS REGIONAL POLICY?

That is not clear, and the highest authority in foreign policy is Khamenei anyway, not the president.

Iran’s Arab Gulf neighbors want to end Tehran’s pursuit of supremacy in the region, where it competes with rival Saudi Arabia for influence from Syria and Iraq to Yemen and Bahrain.

“Regional policy is firmly under the control of Khamenei and the IRGC … which means there will likely be broad coherence (after the elections),” said Henry Rome, an analyst for the Eurasia Group, referring to the Iranian Revolutionary Guard.

Riyadh believes any revival of the 2015 agreement should be a starting point for discussion to curb Iran’s missile program, one of the largest in the Middle East. At the same time, Riyadh has held direct talks with Iran to contain tensions.

“Iran could achieve a victory if issues threatened by Riyadh and its allies, such as the Tehran missile program and its representatives, are not included in the nuclear pact,” said Salah Nasrawi, an expert on Middle East policy.

Additional reporting from Bozorgmore Shrafedin in London Letter from Parisa Hafezi, William Maclean

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