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What Iran’s Election Means for the Future

Fatemeh Haghighatjoo

      Dr. Fatemeh Haghighatjoo was a member of Iran’s parliament between 2000 and 2004. Elected at the age of 30, she was the youngest woman member ever elected to the Majles and one of only 13 women — among 290 — in the sixth parliament. Haghighatjoo charged the Revolutionary Guards with torture and the Guardian Council with manipulating elections. The Guardian Council subsequently barred her from running for office. Haghighatjoo is now directing the Nonviolent Initiative for Democracy, a nonprofit organization based in Boston.

What does the presidential election tell us about Iran’s political climate?
      The election shows that Iranians want to open up the political space and increase civil liberties. They want to see the removal of the securitized atmosphere. The state interferes in every aspect of people’s lives. People are arrested for next to nothing. Iranians want to see a more rational government take over.
            For the first time, foreign policy played an important role in the presidential election. Even the government did not anticipate that it would come up as a key issue during the presidential debates. Foreign policy dominated the campaign because it is connected to people’s everyday life.
            Iranians sent a clear message to the government that they want to see the nuclear issue resolved because they realize how it negatively impacts their daily lives. But that does not necessarily mean that Iranians do not want development of nuclear technology. President-elect Hassan Rouhani put this in nice sentences. “It is important for centrifuges to spin, but people’s lives should run too,” he said during the campaign. Rouhani sees the connection. 
 
What does the election mean for change in domestic policy?
             On security issues, Rouhani will try to reduce the influence of the security apparatus in daily life. The government looks at everything through the lens of security. Even youth playing with water guns in a park may be seen as a threat. Rouhani has said that he does not want a securitized atmosphere. He wants to relax controls on civil society and cultural affairs.
             On the economy, Rouhani will reverse outgoing President Mahmoud Ahmadinejad’s populist policies. Economic growth rates have been negative for two consecutive years. Rouhani‘s team will have a hard time to reversing this trend. His goal will be creation of job opportunities and a positive growth rate. On subsidies, he will likely enact more efficient reforms. Ahmadinejad executed the reforms poorly. His government borrowed money from the central bank, which dramatically increased inflation to more than 40 percent.
             On education, Rouhani may try to reverse changes made to higher education. Ahmadinejad’s government purged professors, pushing them to retire early. The social sciences and humanities also suffered. Women were barred from more than 70 majors, and women’s studies departments were shut down.
             But some of these actions were probably ordered by the supreme leader. And Rouhani will not challenge Ayatollah Ali Khamenei on every issue. Women’s issues are usually secondary to other issues, unfortunately. 
             On cultural affairs, he is likely to lift some unnecessary restrictions on the cultural and arts community to allow more productions.
 
What does the election mean for the balance of power between supreme leader and presidency?
             Over the past 16 years, Khamenei has consolidated his power over the legislative, judicial and executive branches and curtailed their independence. Rouhani has a good relationship with Khamenei and is trusted. He has a great ability to convince people as well, which will help the new president to extend his power. But Khamenei will not sit by while his real power shrinks. Rouhani will engage Khamenei and prioritize which issues to take bolder action on. Rouhani’s priorities will likely be foreign affairs and the nuclear issue, his specialties.
 
What does Rouhani’s election mean for nuclear policy and negotiations?
             Rouhani’s main priority is fruitful negotiations with P5+1 (the United States, Russia, China, Britain, France and Germany). He will almost certainly not accept suspension of uranium enrichment. The national consensus is that Iran must continue to enrich uranium domestically. But Rouhani will work on building trust with the West and the United States to gradually lift sanctions. He may accept U.N. measures that ensure Iran will not militarize its nuclear program.
             On the other hand, the nuclear issue has become something of a domestic political game in Iran. Rouhani will try to strengthen his approach to nuclear talks by engaging all key players including the Supreme Leader, the Revolutionary Guards and parliament while preventing radicals from trying to sabotage his approach to the talks.
 
What did the election say about the balance of political power?
             During the campaign, Rouhani promised to form an inclusive cabinet that would bring moderates from both the reformist (centrist) camp and the principlist (conservative) camp. He understood that in order to get things done, politicians from both the left and the right need to view his election as a win-win situation.
             Rouhani’s government will likely be particularly cooperative with parliament. This speaks to his background as a former deputy speaker, former chairman of the Foreign Relations Committee, and former chairman of the Defense Commission. Rouhani served in parliament for two decades between 1980 and 2000.
 
What does the election mean for youth, who now dominate the population?
             The youth participated in the election to say no to the status quo. But they have some doubts. They recognize that amending the constitution is out of the question for now. So they have minimalized their demands in the hopes of changing smaller things. The youth mainly want to see economic improvement, social relaxation and more civil liberties. The rate of unemployment is extremely high and inflation is above 40 percent.
             Rouhani’s trump card has been the youth, so he won’t forget their demands if he is thinking about re-election in 2016.
 

Iran: The Week in Review

Hanif Zarrabi-Kashani
            The Middle East Program at the Woodrow Wilson International Center for Scholars offers the latest news on Iran, based on a selection of Iranian news sources. It is a weekly summary of up-to-date information with links to news in both English and Farsi.

  • July 11: ISNA posted photos of President Mahmoud Ahmadinejad touring recent industrial projects and attending an inaugural ceremony in the port city of Hormozgan.
  • July 11: 516 students from the University of Science and Technology wrote an open letter to President-elect Hassan Rouhani congratulating him on his election win but also reminding him to adhere to his campaign promises of changing the prevailing security environment in the country and calling for the release of political prisoners and other jailed critics. The letter was written to coincide with the “month of Tir,” which is the month of the 1999 student uprising that shook the nation.
  • July 11: In an article titled, “70 key statements that Rouhani should not forget,” ISNA writes, “In the run-up to this year’s presidential election, President-elect Hassan Rouhani promised and expressed his opinion on many matters regarding students, politics, the economy and social issues.” The article lists 70 statements that Hassan Rouhani made during the campaign period. A few of them include: “The people want honesty…A free media isn’t afraid of democracy…Humiliating people is not acceptable…We can benefit from the advice of Mr. Rafsanjani…War with the United States is unacceptable…The period of suspension of (nuclear) enrichment has passed…Cinema needs to be revolutionized…The people want stability, security, and a peaceful life…Higher education is an important factor in human development…Nobody should be punished without a trial…The future government will be a government in which men and women are equal…We cannot produce scientific knowledge if the environment of our universities is dominated with a security presence…etc.”
  • July 12: In an interview with ILNA, former reformist MP Ahmad Shirzad spokeabout the growing public discussions about Hashemi Rafsanjani returning to the Friday Prayer podium. Shirzad said, “Public interest over the years in regards to Mr. Rafsanjani has had its ups and downs, and at the moment there is a steady rise of interest in him. I personally prefer the manner in which he speaks and connects with the people in a calm, firm manner. Even in these past few years when he wasn’t speaking at Friday prayers, people still heard what he had to say.”
  • July 12: Another well-known reformist politician Hojjat Al-Islam Majid Ansari also spoke about Rafsanjani returning to the Friday prayer podium saying, “In my opinion Rafsanjani should immediately return to Friday Prayers during this sensitive period because he fully understands religious and global political issues. I believe his presence at the podium is greatly missed. In regards to his return, I believe (certain) extremist individuals are controlling the higher authorities (on this issue).”    
  • July 12: Tabnak News posted a series of photos of Friday Prayers at the University of Tehran with President-elect Hassan Rouhani in attendance.  
  • July 13: Tabnak News posted a series of photos of women attending the second of two volleyball matches of the World League Finals between Germany and Iran over the weekend. Some female fans had to wait outside of the Azadi Sports Complex while a certain number of women were allowed inside to watch the match. Another set of photos of the match reveals Vice President Mohammad Reza-Rahimi in attendance as well as the female section of spectators.
  • July 13: Lenziran posted a 45-minute interview in Persian with Ali Mohamad Besharati, a long-time career politician in Iran. He has held many different positions in government including former member of parliament as well as numerous ministerial positions, and has served as an advisor to former President Ayatollah Hashemi Rafsanjani. Besharati discusses his life before and after the Iranian Revolution and his substantial political career. 
  • July 13: Fars News posted a series of photos of former presidential candidate Gholam-Reza Haddad-Adel being honored at a ceremony celebrating his contributions to the arts. Former presidential candidates Saeed Jalili and Ali Akbar-Velayati were also present at the ceremony to show support for their fellow politician. During the ceremony, Adel declared that the recent presidential elections were “the pride of the nation and the government,” and also touched on the topic of cheating in the 2009 presidential elections and “slander from seditionists.” Adel pointed out, “The nation won’t forget the hypocritical behavior and slander from the seditionists.”
  • July 13: On his personal website, Iranian MP Ali Motahari said his offices were illegally wiretapped and under video surveillance. According to Motahari, surveillance equipment was discovered in the air conditioning ductwork, and when his staff reviewed their office’s surveillance cameras they discovered that up to nine men entered the premises the previous night. He also said neighboring shop keepers were forced to comply and remain silent about the intrusion into his office. “When a well-known representative of parliament is treated like this, who knows the level of oppression that normal-everyday people are faced with?” said Motahari. The MP from Tehran urged the Ministry of Intelligence to review the videos and to provide an explanation since, “wiretapping is only acceptable when the judiciary has issued an official warrant, and permission is granted by the Speaker of Parliament.” The aforementioned branches of government are headed by the Larijani brothers.
  • July 14: President-elect Hassan Rouhani made a visit to the Iranian Parliament with his senior advisors to discuss the status of the relationship between the executive and legislative branches of government as well as the economy and subsidies. ISNA posted photos of the symbolic event where Rouhani and Speaker of Parliament Ali Larijani gave speeches. Rouhani said his future government doesn’t want a confrontational relationship with the parliament and representatives of parliament will not be deceived by inaccurate statistics. Both statements are seen as indirect criticisms of outgoing President Mahmoud Ahmadinejad’s administration. Lenziran also posted a four-minute video clip of Rouhani’s speech (in Persian) where he cited a 42 percent inflation inflation rate for the country.
  • July 14: During the same joint-session of the new government and members of parliament held at the parliament building, Speaker of Parliament Ali Larijani used his time at the podium to introduce the president-elect and expressed, “Over the years, Mr. Rouhani has held many different responsibilities in the Parliament, today, in this manner, he returns (to Parliament) to his place of origin.” He continued, “Our dear guest today, Mr. Rouhani bears the heavy responsibility of the executive branch, fortunately over the years Mr. Rouhani has had many important responsibilities as secretary of the National Security Council, which has made him extremely familiar with much of the country’s issues. We hope that Mr. Rouhani’s previous experiences in Parliament and the National Security Council will help in the solving of the sensitive and complex issues facing the country in a scientific and rational manner.” Larijani also warned, “Now more than ever we need to unite (politically) in order to be strong in the face of international issues.”
  • July 15: ISNA posts a series of photos of President Mahmoud Ahmadinejad at a ceremony celebrating the work of female and family activists. During the ceremony, the outgoing president said, “They say that behind every successful man, there is a successful woman… I believe that this statement brings women down and doesn’t give women the credit they deserve.” The president continued, “During the election (2013 presidential election) some people said that they would bring four women into their cabinet, while others said they would bring five. I told them that this was cowardly. Do you think the character of a woman should be used and advertised for political purposes in an election? How are you any different from someone who sticks a picture of a woman on a product in order to sell more of it? Unless is it that the election is more important than women?” Toward the end of the ceremony, the group of women activists also recognized the work of President Ahmadinejad’s wife (Azam Farahi) in their shared field, and expressed their appreciation and gratitude to her.
  • July 15: Member of the Women’s Council on Reform and former Deputy for Social Affairs of the Ministry of Interior, Ashraf Boroujerdi said, “Fortunately, under Mr. Rouhani’s plan to promote discussion and differing perspectives amongst various groups, there has been no exclusivity in this relationship… We have not met with him yet due to his busy schedule but up until now we have had six meetings, and women from various fields with different intellectual perspectives were present during these meetings. We have officially submitted the demands of these women (that were made during the meetings) in writing to the president-elect.”
  • July 16: President-elect Hassan Rouhani spoke at a ceremony honoring veterans and martyrs and compared the context during “the holy defense” (Iran-Iraq War) with the international problems that Iran currently faces today. Rouhani said, “We won the frontline battle against the world because whenever we are act in a more pure, creative, harmonistic, and brotherly manner, we have always been victorious, and today we need to use the same methods.” Rouhani also warned about domestic political issues and the current mistrust between society and the government. “I thought that the enemy in recent election was the perpetual fissure between the government and the people. This is increasing day by day and this fissure will never be filled,” warned Rouhani. Mehr News also posted photos of the ceremony.
  • July 16: In an interview with ISNA, the Secretary General of the Women's Society of the Islamic Republic of Iran and the daughter of the late Ayatollah Khomenei, Zahra Mostafavi said, “It is necessary for the future government to prevent the rights of humans, both men and women, from being violated. If I speak with Mr. Rouhani I will tell him to look at men and women with an equal eye.”  
  • July 16: During a ceremony celebrating the 16th anniversary of the Iran’s Social Security Fund, out-going President Mahmoud Ahmadinejad emphasized, “It is the responsibility of government to frequently redistribute wealth into society and to prevent the accumulation of wealth (in the hands of a few)  and to prevent ghettos.” ISNA posted a series of photos of the event that reveal controversial presidential advisor, former Head of the Social Security Fund, and current caretaker, Saeed Mortazavi, in attendance.
  • July 16: Iran’s House of Cinema, which acts as the country’s only domestic organization that supports independent films, has been closed since January 2012. The CEO of the House of Cinema published an open letter addressed to all three branches of government, and even security forces such as the police, to reveal the plight of the group and to find a way to solve the situation “before it’s too late.” In conjunction with the letter, Iranian filmmakers held a rally at the headquarters to draw attention to their situation. Mehr News posted a set of photos of the public rally.

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Ex-officials say Reinvigorate Iran Diplomacy

July 15, 2013
The Honorable Barack H. Obama
President of the United States of America
The White House, 1600 Pennsylvania Avenue NW
Washington, DC 20500 

Dear President Obama,
            The election of Hassan Rouhani to be Iran’s next president presents a major potential opportunity to reinvigorate diplomatic efforts to resolve the standoff over Iran’s nuclear program. We strongly encourage your Administration to seize the moment to pursue new multilateral and bilateral negotiations with Iran once Rouhani takes office and to avoid any provocative action that could narrow the window of opportunity for a more moderate policy out of Tehran.
            Once the new president has been inaugurated, the United States should pursue coordinated multilateral engagement on the nuclear issue through the P5+1. Additionally, the U.S. should prepare to redouble its efforts to pursue direct, bilateral negotiations with Iran to engage on issues beyond the nuclear file, such as human rights and regional security. After assessing the orientation of the new Iranian government, the U.S. and partners should prepare to offer a new set of proposals to limit Iran’s enrichment and nuclear materials stockpiles combined with stringent oversight and verification measures.
            While it will take time to secure an agreement to resolve all concerns, diplomacy will only succeed if we are prepared to leverage existing sanctions and other incentives in exchange for reciprocal Iranian concessions. Further, in the leadup to Rouhani’s inauguration, it is critical that all parties abstain from provocative actions that could imperil this diplomatic opportunity. For the U.S., no further sanctions should be imposed or considered at this time as they could empower hardliners opposed to nuclear concessions at the expense of those seeking to shift policy in a more moderate direction.
            It remains to be seen whether this opportunity will yield real results. But the United States, Iran, and the rest of the international community cannot afford to miss or dismiss the potential opportunity before us. In the past, when one side has failed to seize an opportunity to resolve the standoff between the U.S. and Iran, it has only produced worse outcomes and diminishing options. Given the current state of Iran’s nuclear capability, the heightened tensions in the region, and the potential for a confrontation, all parties involved should be ready and willing to seize this opportunity to achieve diplomatic progress towards a peaceful resolution of the standoff.
 
Sincerely,
Barry Blechman, co-founder of the Stimson Center
 
Prof. Juan Cole, University of Michigan
 
Prof. Farideh Farhi, University of Hawai'i at Manoa
 
Amb. Chas Freeman, former US Ambassador to Saudi Arabia
 
Lt. General Robert G. Gard, Jr. Former President of National Defense University
 
Col. Sam Gardiner, United States Air Force, Retired
 
Morton Halperin, former Special Assistant to the President, Senior Director for Democracy at the National Security Council, and State Department Director of Policy Planning
 
General Joseph P. Hoar, former Commander in Chief, United States Central Command
 
Amb. Steen Hohw-Christensen, former Ambassador of Sweden to Iran
 
Amb. Peter Jenkins, former Ambassador of the UK to the IAEA
 
Amb. Dennis Jett, Professor of International Affairs, Penn State University
 
Brig. General John Johns, former Deputy Assistant Secretary of Defense
 
Larry Korb, former Assistant Secretary of Defense
 
Amb. John Limbert, Former Deputy Assistant Secretary of State for Iran
 
Reza Marashi, former Iran Desk officer, US Department of State; Research Director, National Iranian American Council
 
Alireza Nader, Iran analyst
 
Amb. François Nicoullaud, former Ambassador of France to Iran
 
Dr. Trita Parsi, President, National Iranian American Council
 
Bruno Pellaud, former Deputy Director General of the International Atomic Energy Agency
 
Amb. Thomas Pickering, former Under Secretary of State
 
Paul Pillar, former National Intelligence Officer for the Near East and South Asia, Central Intelligence Agency
 
Gary Sick, Iran specialist on National Security Council under Presidents Ford, Carter and Reagan; Columbia University
 
Anne-Marie Slaughter, former State Department Director of Policy Planning 
 
John Steinbruner, Director, Center for International and Security Studies at Maryland, University of Maryland
 
Greg Thielman, former Director of the Strategic, Proliferation and Military Affairs Office in the Department of State’s Bureau of Intelligence and Research
 
Amb. Roberto Toscano, former Ambassador of Italy to Iran
 
Dr. Jim Walsh, Massachusetts Institute of Technology’s Security Studies Program (SSP)
 
Wayne White, former Deputy Director of the State Department's Bureau of Intelligence
 
Col. Larry Wilkerson, former Chief of Staff to Gen. Colin Powell
 

Report: New Progress on Arak Reactor

            Iran’s heavy water reactor near the central city of Arak will likely begin operating in 2014, according to a new report by the Institute for Science and International Security. U.N. Security Council resolutions dating back to 2006 have urged Iran to stop construction on the Arak reactor because it could open another potential route to nuclear weapons aside from enriching uranium. David Albright and Christina Walrond warn that the reactor’s operation could “needlessly complicate negotiations and increase the risk of military strikes.”
            The reactor could produce enough weapons-grade plutonium for about two nuclear weapons a year. But the report also notes that Iran has no declared plans to build the necessary separation plant to process the plutonium.
Tehran has claimed its reactors are for generating electricity and medical research. The following are excerpts with a link to the full report at the end.  

            Despite the delays and problems in procuring essential equipment abroad and making fuel domestically, Iran is currently expected to finish the Arak reactor. However, additional delays in commissioning are expected. In any case, the reactor is widely viewed as unnecessary. Sufficient medical isotopes—Iran’s stated justification for the reactor— can be produced in the Tehran Research Reactor or obtained via international commercial markets. Iran has also recently announced its siting of a second research reactor, which would also produce medical isotopes. More importantly, the Arak reactor’s operation would open a second potential route to nuclear weapons for Iran, in this case via plutonium. The first route is its centrifuge program that could make highly enriched uranium. Operating the Arak reactor would heighten concerns that Iran aims to build nuclear weapons. Its operation would needlessly complicate negotiations and increase the risk of military strikes.
 
            Iran has stated that its IR-40 heavy water reactor, located near the city of Arak, will begin operating in 2014. This reactor has been under construction since June 2004 and development work goes back at least another decade. The IR-40 reactor is designed to produce 40 megawatts thermal (MWth) of power and use natural uranium oxide fuel that Iran is producing at the Esfahan conversion and fuel fabrication facilities.
 
            United Nations Security Council resolutions, the first of which dates to 2006, have called for Iran to halt construction of this reactor. The reactor poses a notable proliferation threat because it can produce significant amounts of weapons-grade plutonium –about 9-10 kilograms annually or enough for about two nuclear weapons each year. Before it could use any of this plutonium in a nuclear weapon, however, Iran would first have to separate it from the irradiated fuel. Iran has no declared plans to separate plutonium from the irradiated Arak fuel, although it has not agreed to forgo separating plutonium. If it decided to create a secret plutonium separation program, it would also need to divert the irradiated fuel, which would be detected relatively quickly by the International Atomic Energy Agency (IAEA). Nonetheless, suspicions remain that after the reactor operates, Iran will overtly or covertly build a plant to separate plutonium produced in this reactor. Although the reactor still will require significant work before it operates, Iran reported to the IAEA during the last Design Inventory Verification (DIV) visit in May 2013 that pre-commissioning of the reactor using dummy fuel assemblies and light water will begin in the fourth quarter of 2013 and commissioning using real fuel assemblies and heavy water would begin in the first quarter of 2014, with the start-up planned for the third quarter of 2014…
 
 
 

US Report: Limited Sanctions Impact

            The following are excerpts from a new Congressional Research Service report on Iran sanctions with a link to the full text at the end.
 
Summary
            Increasingly strict sanctions on Iran—which target primarily Iran’s key energy sector as well as its ability to access the international financial system—have harmed Iran’s economy, but not to the point where key Iran leaders have been compelled to reach a compromise with the
international community on Iran’s nuclear program. And, the strategic effects of sanctions might
be abating as Iran adjusts to them economically and advertises the adverse humanitarian effects.
 
Oil exports fund nearly half of Iran’s government expenditures, and Iran’s oil exports have declined to about 1.25 million barrels—a halving from the 2.5 million barrels per day Iran exported during 2011. The causes of the drop have been a European Union embargo on purchases of Iranian crude oil and decisions by several other Iranian oil customers to avoid U.S. sanctions by substantially reducing purchases of Iranian oil. To date, 20 of Iran’s oil customers have received and maintained an exemption from U.S. sanctions for doing so.
 
The loss of revenues from oil, coupled with the cut-off of Iran from the international banking system, has caused a sharp drop in the value of Iran’s currency, the rial, and caused inflation to increase to over 50%, according to many experts. Iran’s economy shrank slightly from 2012-2013 and will likely shrink again during 2013. There have also been unintended consequences including a shortage of some advanced Western-made medicines.
 
Iran has found some ways to mitigate the economic and political effects of sanctions. Government-linked entities are creating front companies and making increased use of barter trade. Iranian traders are using informal banking exchange mechanisms and, benefitting from the fall in the value of Iran’s currency, increasing non-oil exports such as agricultural goods, minerals, and industrial goods. Affluent Iranians are investing in hard assets such as real estate.

            Sanctions have not compelled Iran to change its position on its nuclear program, but sanctions may be slowing Iran’s nuclear and missile programs by hampering Iran’s ability to obtain needed foreign technology. However, Department of Defense and other assessments indicate that sanctions have not stopped Iran from developing some new weaponry indigenously. Iran is also judged not complying with U.N. requirements that it halt any weapons shipments outside its borders, particularly for providing arms to the embattled Assad government in Syria. And, sanctions do not appear to have altered Iran’s repression of dissent or its efforts to monitor public use of the Internet.
 
Effect on Iran’s Nuclear Program Decisions and Capabilities
            There is a consensus that U.S. and U.N. sanctions have not, to date, accomplished their core strategic objective of compelling Iran to verifiably limit its nuclear development to purely peaceful purposes. By all accounts—the United States, the P5+1, the United Nations, the International Atomic Energy Agency (IAEA)—Iran has not complied with the applicable provisions of the U.N. Security Council resolutions requiring that outcome. Five rounds of
P5+1—Iran talks during 2012 and thus far in 2013, the latest of which took place in Almaty,
Kazakhstan during April 5-6, 2013, produced no breakthroughs. The talks have centered on P5+1 proposals that Iran suspend enrichment of uranium to the 20% purity level in exchange for a modest easing of international sanctions…
 
Counter-Proliferation Effects
            A related issue is whether the cumulative sanctions have directly set back Iran’s nuclear efforts by making it difficult for Iran to import needed materials or skills. Some U.S. officials have asserted that, coupled with mistakes and difficulties in Iran, sanctions have slowed Iran’s nuclear efforts by making it more difficult and costly for Iran to acquire key materials and equipment for its enrichment program. However, International Atomic Energy Agency (IAEA) reports have said that Iran’s capacity to enrich uranium more rapidly continues to expand, as does its stockpile of 20% enriched uranium. And, Director of National Intelligence James Clapper testified on March 12, 2013, that Iran “is expanding the scale, reach, and sophistication of its ballistic missile arsenal.”
 
Effects on Iran’s Regional Political and Military Influence
            Sanctions do not appear to have materially reduced Iran’s capability to finance and provide arms to militant movements in the Middle East and to Syria. Iranian support to Syrian President Bashar Al Assad appears to have escalated since early 2013, according to U.S. officials. Some press reports, quoting the U.N. panel of experts, say Iran has been exporting arms to factions in Yemen and Somalia. Iran’s arms exports contravene Resolution 1747, which bans Iran’s exportation of arms…
 
General Political Effects
            Some experts assert that sanctions could accomplish their core goals if they spark dissension within the senior Iranian leadership or major public unrest—either of which could cause Iran to assess as too high the costs of rejecting a nuclear agreement with the P5+1. There has been a split since early 2011 between President Ahmadinejad and Supreme Leader Ali Khamene’i, but the rift has been driven primarily by institutional competition and differences over the relative weight to attach to Islam or to Iranian nationalism—not primarily about international sanctions. These tensions escalated as Iran entered its June 14, 2013, presidential election period, and most of the candidates permitted by the regime to run for president are considered close allies of Khamene’i.
            At the popular level, there has been labor and public unrest over escalating food prices and the dramatic fall of the value of Iran’s currency. However, public strikes and demonstrations have been sporadic and do not appear to threaten the regime. Without an uprising or the major threat of one, the Iranian leadership is unlikely to feel significant pressure to curb its nuclear program.
 
Human Rights-Related Effects
            U.S. and international sanctions have not, to date, had a measurable effect on human rights practices in Iran. Executions increased significantly in 2012, according to the State Department (human rights report for 2012, released April 19, 2013, but that is likely a result of a continued crackdown against opposition activity stimulated by the 2009 uprising in Iran. Nor has the regime’s ability to monitor and censor use of the Internet and other media been evidently affected to date, even though sanctions have caused several major firms to stop selling Iran equipment that it could use to for those purposes. German telecommunications firm Siemens, accused by Iranian and outside activists in 2009 of selling technology that Iran used to monitor the Internet, announced on January 27, 2010, that it would stop signing new business deals in Iran as of mid-2010…
 
Economic Effects
Oil Export Declines. Oil sales have accounted for about 80% of Iran’s hard currency earnings and about 50% of government revenues. As noted in Table 1, sanctions have halved Iran’s oil sales from the 2.5 mbd of sales in 2011. This drop is expected to deprive the Iranian government of over $50 billion in revenue for all of 2013.
Falling Oil Production. To try to adjust to lost oil sales, Iran has been storing unsold oil on tankers in the Persian Gulf and it is building additional storage tanks on shore. Industry reports in June 2013 indicated Iran might have as much as 30 million barrels of crude oil in floating storage. The storage represents an attempt to keep up oil production because shutting down wells risks harming them and it is costly to resume production at a shut well. However, Iran’s oil production has fallen to about 2.6 - 2.8 mbd from the level of nearly 4.0 mbd at the end of 2011
GDP Decline. Sanctions have caused Iran to suffer its first gross domestic product contraction in two decades. An IMF global report issued in late April 2013 said that Iran’s economy shrank 1.9% from March 2012-March 2013, and will likely shrink another 1.3% in the subsequent one year period. U.S. officials testified on May 15, 2013, to a larger GDP drop for 2012-2013—on the order of about 5% - 8%. The IMF report predicted the economy would return to growth, at about 1%, for the one year after that (March 2014-March 2015). The recession has elevated the unemployment rate to about 20%, although the Iranian government reports that the rate is 13%. Economists assess that there is a burgeoning number of non-performing loans.
Currency Collapse. The regime has been working to contain the effects of a currency collapse. The value of the rial fell on unofficial markets from about 28,000 to one U.S. dollar to nearly 40,000 to one dollar in early October 2012. Prior to that, the rial’s value had fallen from about 13,000 to the dollar in September 2011 to about 28,000 to the dollar as of mid-September 2012. Observers say the unofficial rate is about 37,000 to the dollar in May 2013.
Hard Currency Depletion. The currency collapse has fed analysis that Iran might deplete its hard currency reserves—hard currency is needed to support the value of the rial. The IMF estimated Iran’s hard currency reserves to be about $101 billion as of the end of 2011. Experts estimated the reserves probably fell below $90 billion at the end of 2012,
but Iran’s economics minister told journalists in late April 2013 that the reserves were still approximately $100 billion…
Inflation. The drop in value of the currency has caused inflation to accelerate collapse. An April 22, 2013 government attempt to unify the exchange rate set off a wave of hoarding of key foodstuffs by Iranians who are expecting the prices of those goods to rise sharply. The Iranian Central Bank acknowledged an inflation rate of 31% rate in April 2013—the highest rate ever acknowledged by the Bank. Many economists assert that these official figures understate the actual inflation rate substantially, and that is between 50% and 70%. Some assert that inflation has been fed by the policies of Ahmadinejad, particularly the substitution of subsidies with cash payments.
Industrial Production. Almost all Iranian factories depend on imports and the currency collapse has made it difficult for Iranian manufacturing to operate. Iran’s production of automobiles has fallen by about 40% from 2011 levels, and will likely fall further as a consequence of Executive Order 13645 of June 3, 2013, discussed earlier. Iran produces cars for the domestic market, such as the Khodro, based on licenses from European auto makers such as Renault and Peugeot.
Shipping Difficulties. Beyond the issue of the cost of imported goods, the Treasury Department’s designations of affiliates and ships belong to Islamic Republic of Iran Shipping Lines (IRISL) reportedly are harming Iran’s ability to ship goods at all, and have fed inflation by raising the prices of goods to Iranian import-export dealers. Some ships have been impounded by various countries for nonpayment of debts due on them.
Domestic Payments Difficulties. Some reports say the government is in arrears in salary payments to military personnel and other government workers. In order to conserve funds, in late 2012, Iran’s parliament—against Ahmadinejad’s urgings—postponed phase two of an effort to wean the population off subsidies. -That effort provides for cash payments to about 60 million Iranians of about $40 per month to 60 million Iranians to compensate them for ending subsidies for commodities such as gasoline. Gasoline prices now run on a tiered system in which a small increment is available at the subsidized price of about $1.60 per gallon, but amounts above that threshold are available only at a price of about $2.60 per gallon, close to the world price. Before the subsidy phase out, gasoline was sold for about 40 cents per gallon.
Flights Curtailed. Because of the decline in Iran’s trade with European countries, KLM and Austria Airlines announced in January 2013 that they would be ending flights to Iran later in 2013. Lufthansa, some other European airlines, and most airlines in the Persian Gulf, Middle East, and South Asia region still fly to Iran regularly.
 
 

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