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Analysis: The double-edged sword of sanctions lifting

World leaders pose for a picture during the final press conference of Iran nuclear talks in Vienna, Austria, on July 14, 2015.
AFP
Iran will be hard pressed to fulfill promises of quick improvement in citizens’ lives

Barring unforeseen developments, the coming days will see the beginning of the implementation stage of the nuclear agreement between Iran and world powers. Over the weekend the International Atomic Energy Agency (IAEA) is expected to publish a final report confirming that Iran fulfilled its obligations under the agreement. Immediately thereafter the foreign ministers of Iran and the EU will declare the "day of implementation of the agreement" under which most of the economic sanctions imposed on Iran by the international community shall be removed.

Once sanctions, which are estimated at several tens of billions of dollars, are lifted the Iranian government will face its citizens' expectations of rapid improvement in their economic situation. Iranian President Hassan Rouhani promised in a speech this week that the new Iranian year starting March 21 will be the "year of economic prosperity." But the ability of the government to meet its promise remains questionable. Iran's ailing economy suffers from a series of structural flaws, chief among them: corruption, lack of transparency, the weakness of the private sector and control exercised by powerful semi-governmental organizations, including the Revolutionary Guards.

Adrian Leung/John Saeki (AFP)

The return of foreign companies in Iranian markets may indeed help Iran's economic integration into the global economy and provide new growth opportunities, but also endanger the economic interests of the Revolutionary Guards, whose insertion into various economic projects was accelerated following the cessation of operations of Western companies in Iran. Revolutionary Guards are wary of the introduction of foreign companies and may put up difficulties. A hint of this concern could be heard in the words of the commander of the Khatam al-Anbiya, the giant construction company and main economic arm of the Guards. At an opening ceremony of two new phases of South Pars project, the official stated that there was no need for foreign engineers for the further development of the field. The government's ability to bring about rapid improvement in the economic situation is also questionable in view of the ongoing decline in oil prices, which dropped in the last few days to a 12 year low.

Lifting the sanctions poses new challenges not only in the economic sphere. It may indeed ease the distress of the citizens but also boost Iran's exposure to Western influences and strengthen the middle class, which is considered a key agent of political change. The Iranian regime is well aware of the risks involved in the resumption of operations of Western companies in Iran. The greatest concern is that of a Western cultural infiltration, accompanied by the economic one. This interference could accelerate processes of social change that would endanger the stability of the regime in the long run. Not for nothing Supreme Leader Ali Khamenei, in his letter to President Rouhani October 2015, stressed that he prohibits the import of consumer goods Americans after the implementation of the nuclear agreement.

While moderates in Iran see the nuclear agreement as an opportunity for improving the relations with the international community and economic reconstruction, conservatives perceive it as an opportunity for the West to deepen its penetration of Iran in order to bring about regime change by using agents of liberal influence in Iran.

Iranian Presidency/AFP

To this backdrop it’s possible to understand the increasing political repression of ordinary Iranians, especially ahead of the elections to parliament and the Assembly of Experts expected on February 26. These elections are an important test of the political power of Rouhani, who strives to strengthen his supporters hold of the legislature. The Conservatives, however, are concerned that if the moderate candidates will obtain a majority in parliament, it may help them in promoting civil reforms. Recent weeks saw the arrests of dozens of political and social activists, journalists and artists. At the same time the internal security forces have stepped up their activity in the major cities to enforce the Islamic dress code.

If lifting the sanctions will lead to improved economic situation of the people of Iran, it is likely to contribute to the stability of the regime, at least in the short term. It is doubtful, however, whether the regime would be able to stave off for too long the process of change taking place in society increasingly alienated from the values of the Islamic revolution. Iranian leaders have used the sanctions for years to shirk responsibility for the financial crisis and blame the West for exacerbating economic hardship. Once the sanctions are lifted, the government will face the expectations of its citizens. Should it fail, removing the sanctions may sooner or later turn out to be a double-edged sword that would endanger the stability of the regime.

Dr. Raz Zimmt is a research fellow at the Alliance Center for Iranian Studies at Tel-Aviv University and at the Forum for Regional Thinking.

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