United States Institute of Peace

The Iran Primer

Rouhani and the Economy: The Pitfalls

            The Institute of International Finance has warned that president-elect Hassan Rouhani faces tough economic hurdles that will not be solved easily or quickly. Its new report says that rolling back sanctions is far off. The following are key points from the report issued on June 20.

• The recent election of Hassan Rouhani signals the possibility of a softened stance in Iran’s external relations
• We estimate the economy to have contracted by 3.5% and the 12-month CPI (consumer price index) inflation rate to have surged to above 60% in FY2012/13, ending March
•State institutions have been politicized and the data they have been producing has often been tainted
• The sharp rial depreciation has fed into higher CPI inflation, which according to our estimates exceeded 60% in May 2013
• Continuation of the sanctions combined with average oil prices at $108 per barrel could drain official reserves to below $50 billion by end-2014 (but still adequate)
• Iran’s fiscal breakeven price of oil has risen from $107 per barrel in 2010 to around $144 per barrel in 2012 due to the sanctions
• As long as oil prices remain above $100 per barrel, the current sanctions will continue to provide Iran with large foreign exchange receipts and therefore limit the impact of the sanctions on the Iranian economy
• Sanctions, combined with lower oil prices, would pose serious challenges to the authorities in managing the economy and, possibly, in maintaining internal political stability

Rouhani: First Presser on US, Reforms, Nukes

      On June 17, president-elect Hassan Rouhani called for new ways “to build trust” with the international community on Iran’s controversial nuclear program. Rouhani, in his first press conference, said both the United States and Iran need to find a way to heal "a very old wound.” He spoke expansively on domestic issues and foreign policy, promising to follow the “path of moderation and justice, not extremism.” The following are excerpts with a link to the broadcast dubbed in English.

The United States and Foreign Policy
            “Relations between Iran and the United States are a complicated and difficult issue. It's nothing easy. This is a very old wound that is there, and we need to think about how to heal this injury. We don't want to see more tension. Wisdom tells us both countries need to think more about the future and try to sit down and find solutions to past issues and rectify things… [Talks] should be based on mutual respect and interests, and should be [held] on equal footing…
            “The Americans must expressly state that they will never interfere in Iran’s domestic affairs. Secondly, all rights of the nation need to be recognized by the Americans… Unilateral bullying policies need to be scrapped… [If these conditions are met] the ground will be paved for settlement… But everyone should realize that the future government will definitely defend the rights of the Iranian people. We will never dispense with that. We are prepared to see tensions alleviated. If we see goodwill we can also take some confidence building measures…”
            “We have to enhance mutual trust between Iran and other countries... There is a fresh opportunity for interaction on the global level.”
Syria and Regional Issues
            “My government’s priority in foreign policy is to have friendly, close relations with all neighbors. We will have very close relations with our 15 neighboring countries… based on mutual respect and interests.”  
            “The final decision-maker about the fate of Syria is the Syrian nation… We are opposed to foreign intervention [in Syria]. We hope peace and tranquility will return to Syria through the co-operation with countries of the region and world.”
            “The Persian Gulf region and the Arab countries are strategically important both in terms of politics and economics. The Gulf states are our neighbors and brothers, but Saudi Arabia in addition to being our brother and neighbor hosts the Muslim kiblah [referring to Islam’s holiest site, the Kaaba] and we have highly close cultural, historical and regional ties with each other
Nuclear Program
            “Our program is transparent, but we can take more steps to make it clear to the world that our nuclear program is within international regulations… The solution for moving forward on the nuclear issue is thus transparency and mutual respect.”
            “Basically, negotiations with P5+1 [the United States, Britain, China, France, Germany and Russia] will hopefully be more dynamic. We believe that that the nuclear issue will be solved only through talks, not sanctions and threats. We need dialog and mutual confidence. We will use past experiences. The basic rights of Iranians will be considered and government will work to gradually remove these brutal sanctions.
            “We are in a new and special situation now. There are many more confidence building measures that we can take. In 2005 we came to a final agreement as to how to win international trust… Enrichment will continue… We have many ways of building confidence other than suspending enrichment.”
            “The Iranian nation has not done anything wrong to deserve these sanctions… If sanctions have any benefits, it will only benefit Israel. It has no benefits for others.”
“Making use of the lever of sanctions, this is not the right time for that. ... Even in the West, they are facing economic problems and dilemmas, and they themselves know the sanctions are to the detriment of the West.”
            “The basic solution [for high inflation] is to activate production, increase production and funnel investments in the right direction, direct liquidity to production units. We have sufficient investment, but these need to be led in the right direction. The banks and financial institutions need to be able to provide the right sort of capital, so there needs to be reforms in banks, they need incentives. Production is not just industry and agriculture but also tourism which can also generate jobs.”
            “On increasing this minimum wage and helping remove the problems [of the poor]… wages need to be increased in proportion with the inflation rate. This problem needs to be tackled, and the government will try to put the law into effect.”
Domestic Politics and Social Policy
            The future government will include “moderates, principlists and reformists. There will be no restrictions. I don't like the word coalition, it will go beyond factions and be based on meritocracy.”
            “This will be a government of hope. All legal and rightful demands of all groups and factions will be considered. It is my duty to implement the basic law.”
            “Any kind of syndicate or guild needs to be activated based on law… The running of social affairs needs to be assigned to the guilds and syndicates themselves.”


Obama on Rouhani Victory

      On June 17, President Barack Obama said that the United States is open to engaging with Iran through bilateral channels. But Tehran must recognize that sanctions will not be lifted absent “significant steps” show that Iran is not developing nuclear weapons, he stipulated. On Iran’s election, Obama acknowledged that President-elect Hassan Rouhani has indicated interest in better relations, but he also noted that the supreme leader is likely to make the ultimate decisions. The following is an excerpt from Obama’s PBS interview with Charlie Rose.

CHARLIE ROSE:  Seventy-five percent of the people voted. The moderate won. What does this say and what are the opportunities there? 
BARACK OBAMA:  Well, I think it says that the Iranian people want to move in a different direction and, you know, if you contrast this with the violence and suppression that happened in the last presidential election, obviously you have a much more positive atmosphere this time.
The Iranian people rebuffed the hard liners and the clerics in the election who were counseling no compromise on anything, anytime, anywhere. 
Clearly you have a hunger within Iran to engage with the international community in a more positive way.  Now Mr. Rouhani, who won the election, I think indicated his interests in shifting how Iran approaches many of these international questions. 
But I think we understand that under their system the Supreme Leader will be making a lot of decisions.  And so we’re going to have to continue to see how this develops and how this evolves over the next several weeks, months, years.  I do think that there’s a possibility that they decide -- the Iranians decide -- to take us up on our offer to engage in a more serious, substantive way. 
And you know, our bottom lines have been show the international community that you’re abiding by international treaties and obligations, that you’re not developing a nuclear weapon.  Based on that there are a whole range of measures that can be taken to try to normalize the relationship between Iran and the world but we don’t know yet if they’re going to be willing to take up that offer.  They have not been during my entire first term when we
showed ourselves open to these discussions. 
CHARLIE ROSE:  You’re prepared to have someone in your administration talk to them immediately or does it have to be conditioned on other things as you’ve suggested? 
BARACK OBAMA:  No, I think that my general view is we are open to discussions both through the P5-plus-1 and through potential bilateral channels and we recognize that you’re not going to solve problems all up front as a precondition for talks but there has to be a serious recognition that the sanctions we put in place, for example, the most powerful sanctions, economic sanctions that have ever been applied against Iran, that those will not be lifted in the absence of significant steps in showing the international community that Iran is not pursuing a nuclear weapon. 
And as long as there’s an understanding about the basis of the conversation, then I think there’s no reason why we shouldn’t proceed. 
Photo Credit: NASA/Bill Ingalls

Election:What Rouhani Victory Means for Iran

Shaul Bakhash

            Hassan Rouhani’s surprising first round victory in the presidential elections represents a significant shift in the Iranian political landscape. In a field of candidates dominated by conservatives, Rouhani ran as a moderate. He questioned the necessity of the expanding security state and the constant oversight of student and civil society associations by the security agencies. He spoke of the need for greater freedom of press and speech. He devoted attention to women’s rights issues and promised to establish a ministry for women’s affairs.
      On the economy, while all the candidates promised to address problems of inflation and unemployment, Rouhani also focused on the institutions that make rational economic policy possible. He said one of his first acts would be to revive what were once key institutions such as the Plan Organization and the Supreme Economic Council, which outgoing President Mahmoud Ahmadinejad did away with.
      On foreign policy, during the election campaign the Supreme Leader, Ali Khamenei, continued to stress the need for resistance and steadfastness in the face of the ‘hegemonic’ West, warned against those who naively believe compromise with the West will gain Iran positive results, and ridiculed the idea that Iran was internationally isolated. But Rouhani, while appearing as steadfast as the other candidates on Iran’s nuclear rights, stressed the need to find a way out of the impasse with the West on the nuclear issue and to end Iran’s diplomatic isolation. He did not shy away, but rather defended, the softer line on the nuclear issue adopted by the government of President Mohammad Khatami, when Rouhani served as head of the National Security Council and as Iran’s chief nuclear negotiator.
            Rouhani may not make good on all his electoral promises, but his victory—he racked up nearly 51 percent of the vote—was a reaffirmation by a majority of Iranians of the desire for a more moderate, more sensible course in both domestic and foreign policy. That Tehran mayor Mohammad-Baqer Qalibaf came in second with 16 percent of the vote confirms the centrist inclinations of a large majority of Iranians. True, Qalibaf ran as a conservative, was a Revolutionary Guards commander, and even boasted during the election campaign (to a right-wing, para-military audience) of his role in suppressing earlier student protests. But most Iranians think of Qalibaf as the able manager, during his eight years as mayor, of a capital city of 10 million, when he built parks and recreation centers, broadened roads and improved the communications system. Together, Rouhani and Qalibaf accounted for 67 percent of the vote.
      The poor showing of the conservatives and hardliners in the election is also striking. Saeed Jalili, who ran on a platform that stressed conservative social values (women’s main role, he said, was as mothers and housewives) and, echoing Khamenei, resistance and steadfastness against the West, garnered less than 12 percent of the vote, and Ali Velayati, Khamenei’s foreign policy adviser, less than 7 percent. Rouhani, moreover, received, and welcomed, the endorsement of Khatami and another former president, Hashemi Rafsanjani, both denigrated by the conservatives for their association with the so-called ‘seditionist current’ of the Green Movement.
            We cannot be certain, of course, if turnout was as high (over 70 percent) as officially claimed; and we have to accept the official figures at face value. Still, the widespread expectation that the next president would be hand-picked by Khamenei needs reevaluation. While he is the ultimate decider on major issues, it is becoming clear that Khamenei is not as much in control of his lieutenants and the political class as was widely assumed. He could not get the conservatives to unite behind a single candidate, and the conservative vote ended up split among several contenders. Iran’s political leaders—even men close to Khamenei—continued to feud with one another even after he called on them to stop bickering and termed such infighting a sin. The country chose a president who, at least during the campaign, adopted a posture not in step with the policies preferred by the Supreme Leader.
            Khamenei will now have to live with yet another president who has a mind and agenda of his own. Since Khomeini’s death and Khamenei’s succession as Supreme Leader in 1989, Iran has had three presidents: Rafsanjani, Khatami, and Ahmadinejad. Each man put his own stamp on policy and the administration, certainly in his first term. Rafsanjani steered the country in a far more pragmatic direction in the economic sphere, privatizing state-owned enterprises and allowing the private sector greater room. He also opened up the social space for women and the young. Khatami considerably broadened political and press freedoms and the country during his first years in office enjoyed a short-lived political spring. Ahmadinejad, in the Hugo Chavez style, led a largely populist government. But in each instance, Khamenei, backed by the conservatives, was able to neutralize the president, and even to reverse his policies, in the second term. Admittedly, Ahmadinejad remained feisty and difficult to control nearly until the end.
            Rouhani will come to office with something of a popular mandate and commitment to a different set of priorities than have characterized Iranian government policy over the last few years. The change he promises is not of the scope with which Khatami initiated his reformist presidency in 1997; but he promises change nevertheless. Whether he will succeed, or whether he will initiate a change of direction only to be blocked by yet another rightwing backlash, remains to be seen.
This article was originally published by the Middle East program at the Woodrow Wilson International Center for Scholars as Viewpoints No. 28. Click here for PDF format.
Shaul Bakhash is the Clarence Robinson Professor of History at George Mason University.


US Report: Human Trafficking Rises in Iran

            In its annual report on human trafficking, the State Department called Iran a “presumed source, transit, and destination country for men, women and children subjected to sex trafficking and forced labor.” The number of teenage girls in prostitution has reportedly risen significantly in Tehran. Between 35,000 and 50,000 children are forced by their parents or other adults to beg in the capital’s streets or work in sweatshops. The Islamic Republic has earned the lowest possible ranking on handling human trafficking every year since 2006. The following is an excerpt from the 2013 Trafficking in Persons Report.

            Iran is a presumed source, transit, and destination country for men, women, and children subjected to sex trafficking and  forced labor. Iranian and Afghan boys and girls residing in Iran are allegedly forced into prostitution within the country. In Tehran, there has reportedly been a recent significant increase in the number of teenage girls in prostitution. Iranian women, boys, and girls are purportedly subjected to sex  trafficking in Iran, as well as in Pakistan, the Persian Gulf, and Europe. Azerbaijani women and children are also believed to be subjected to sex trafficking in Iran. According to some estimates, there are 35,000-50,000 children forced by their parents or other adults to beg in the streets of Tehran or to work in sweatshops; some of these children are also reportedly forced into prostitution in Iran and abroad.
            Afghan migrants and refugees are reportedly subjected to forced labor in Iran. Pakistani men and women migrate voluntarily to Iran for low-skilled employment such as domestic work and construction. Some are suspected of being subsequently subjected to conditions of forced labor, including debt bondage, and experience restriction of movement, nonpayment of wages, and physical or sexual abuse. NGO reports indicate criminal organizations, sometimes politically connected, play a significant role in human trafficking in Iran. Unconfirmed reports indicate that some religious leaders and immigration officials are involved in human trafficking.
            The Government of Iran does not comply with the minimum standards for the elimination of trafficking and is not making significant efforts to do so. The government did not share information on its anti-trafficking efforts with the international community during the reporting period; this impedes the collection of information on the country’s human trafficking problem and the government’s efforts to curb it. Publicly available information from NGOs, the press, international organizations, and other governments indicate that the Iranian government is not taking sufficient steps to address its extensive trafficking challenges.
Recommendations for Iran
            Share anti-trafficking data with the UN and develop partnerships with international organizations; institute victim identification procedures to proactively identify victims of trafficking, particularly among vulnerable populations such as persons in prostitution, children in begging rings, and undocumented migrants; offer specialized protection services to victims of trafficking, including shelter and medical, psychological, and legal assistance; take measures to ensure sex and labor trafficking victims are not punished for unlawful acts committed as a direct result of being subjected to sex trafficking or forced labor; increase transparency in government anti-trafficking policies and activities through public reporting; and accede to the 2000 UN TIP Protocol.
            The Government of Iran made no discernible law enforcement efforts against human trafficking during the reporting period. A 2004 law prohibits trafficking in persons by means of threat or use of force, coercion, abuse of power or of a position of vulnerability of the victim for purposes of prostitution, slavery, or forced marriage. The prescribed penalty under this law reportedly is up to 10 years’ imprisonment, which is sufficiently stringent, but not commensurate with penalties prescribed under Iranian law for other serious crimes, such as rape. The Constitution and labor code both prohibit forced labor and debt bondage; the prescribed penalty of a fine and up to one years’ imprisonment is not sufficient to deter these serious crimes. In addition, the labor code does not apply to work in households. NGOs reported that these laws remained unenforced due to a lack of political will and widespread corruption. There were no reports of investigations or prosecutions of trafficking cases or convictions of trafficking offenders. It was reportedly extremely difficult for female trafficking victims to obtain justice; Iranian courts accorded legal testimony by women only half the weight accorded to the testimony by men, and women who were victims of sexual abuse were liable to be prosecuted for adultery, which is defined as sexual relations outside of marriage and is punishable by death. The government did not report efforts to investigate or punish government employees complicit in trafficking related offenses. There were reports that government officials were involved in the sex trafficking of women and girls; some officials that operated shelters for runaway girls reportedly forced them into prostitution rings.
            The Government of Iran made no discernible efforts to protect victims of trafficking during the reporting period. There is no evidence that the government has a process to identify trafficking victims among vulnerable populations found in the country. Iran has deported large numbers of undocumented Afghans without attempting to identify trafficking victims among them. The government also has reportedly punished victims of sex trafficking for unlawful acts committed as a direct result of being subjected to human trafficking, for example, adultery and prostitution. There were reports that government officials raped individuals held in detention, some of whom may have been trafficking victims. There were no reports that the government referred trafficking victims to protective services. Some welfare organizations unrelated to the government may have helped Iranian trafficking victims.
            The government reportedly opened several shelters for street children in Tehran, though it is unclear what type of services were available to children in these shelters or if the shelters served any child victims of trafficking. There is no information to indicate the government provided assistance to repatriated Iranian victims of trafficking. The Iranian government did not provide foreign victims of trafficking with a legal alternative to removal to countries in which they may face hardship or retribution.
            There were no reports of efforts by the Government of Iran to prevent trafficking during the past year, such as campaigns to raise public awareness of trafficking, to reduce demand for commercial sex acts, or to reduce demand for child sex tourism by Iranians traveling abroad. There was no apparent improvement in the transparency of the government’s reporting on its own anti-trafficking policies or activities and no apparent efforts to forge partnerships with international organizations or NGOs in addressing human trafficking problems. Iran is not a party to the 2000 UN TIP Protocol.

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