With U.S.-Iranian tensions once again on the rise, questions remain as to what path Iran will take going forward, what the future of the JCPOA (commonly referred to as the Iran nuclear deal) may be and what all this means for the broader region. In this episode of the podcast, Senior Global Analyst Matthew Bey and Middle East and North Africa Analyst Emily Hawthorne delve into the latest issues, internal Iranian politics and its relationship with the United States.
Transcript
Emily Hawthorne [00:00:00] I'm Emily Hawthorne, a Middle East and North Africa analyst at Stratfor and this podcast is brought to you by Stratfor Worldview, the world's leading geopolitical and intelligence platform. Individual, team and enterprise memberships are available at worldview.stratfor.com/subscribe.
Ben Sheen [00:00:27] Welcome to the Stratfor podcast, focused on geopolitics and world affairs from stratfor.com, I'm your host Ben Sheen. Iran inaugurated president Hassan Rouhani for a second term in office this past weekend. But with tensions once again on the rise, questions remain as to what path Iran will take going forward and also the future of JCPOA, commonly referred to as the Iran Nuclear Deal may be and also what this actually means for the region. To hash through the latest on Iran from internal politics to its current relationship with the United States and other regional powers, Stratfor's senior global analyst, Matthew Bey sits down with Middle East and North Africa analyst, Emily Hawthorne in this edition of the Stratfor podcast, thank you for joining us.
Matthew Bey [00:01:15] Hello, my name is Matthew Bey and I am a senior global analyst here at Stratfor and joining me today is Emily Hawthorne, a Middle East analyst and we're here to talk about this weekend's inauguration of president Hassan Rouhani in Iran, this is the second term for Rouhani going forward and it's been in the news for a lot of reasons, the Iran, United States relationship has come under increased scrutiny under President Trump's term, so Emily what are we seeing happening at the high level between the US and Iran over the last six or seven months?
Emily Hawthorne [00:01:43] Once we had the election of President Donald Trump back in November of last year, we sort of immediately saw a few things happen in the Middle East. One was a sense among some of the larger Suni states, including Saudi Arabia, that the new administration in Washington would fully back them in trying to contain a lot of Iranian activity in the Middle East. In fact, this does match really well with some of the priorities in the administration, we can go into that a little bit more later, but we've seen a real priority in the Middle East to do two things. One, combat and contain and fight violent extremist organizations and two, to contain Iranian activity in the Middle East. That, no surprise, has done some interesting things to the US Iran relationship and really added a lot of tension and the JCPOA nuclear deal is just one part of that relationship between the United States and Iran. We have seen over the last six months in Iran, a very important presidential election take place. We just had the inauguration officially of Hassan Rouhani into that position, but in May, in the leadup to the election in Iran, it was very interesting because we did see some tone down of some of the typical acts that we would see from Iran versus the United States and versus the United States' allies like those Arab gulf states. We didn't see the same amount of ballistic missile launches or the same amount of Persian Gulf episodes of interaction between US ships and Iranian ships for instance but now, after Rouhani's election,
Emily Hawthorne [00:03:23] we have seen an uptick in some of those events that have become a little bit par for the course between the United States and Iran.
Matthew Bey [00:03:31] Right I think the most recent of those would have been two weekends ago actually, there was a couple of times, twice in the matter of a week where the United States and the Iranian navy kind of scuffled up, they shot warning shots at each other in two different events. Even before that, I remember that we saw, beginning in April, similar activity starting to happen between Iran and some of the other GCC states. It's not just the United States and you touched upon how the GCC states are actually trying to spin this to their own advantage in a sense under President Trump. One of the things though that is really starting to really increase in fragility is the JCPOA, the nuclear deal, when President Trump was running for the US presidency, he promised to rip it up, one of those many deals he promised to rip up. We're actually seeing momentum or at least an idea that a growing momentum behind that at least increasing the possibility of that. April was the first time that the Trump administration had to re-certify Iran's compliance with the nuclear deal. Secretary of State Rex Tillerson did, you have to do that every 90 days and that most recent re-certification was last month and that was very begrudgingly. Can you go into what was going on around that?
Emily Hawthorne [00:04:37] I think it might be helpful just to start and there's so much rhetoric around this JCPOA nuclear deal, it might be good to just start with what does this deal govern and what does it not touch? There's been a lot of confusion over that and we've seen new US sanctions against some of Iran's activities but nuclear activities were not included in that, maybe you could go into some of the differences between what the JCPOA covers and what it doesn't.
Matthew Bey [00:05:01] The JCPOA was designed essentially to freeze and reduce some of the capabilities that Iran has in its nuclear program but what the Obama administration and the Europeans carefully constructed is either because A it would never pass the Iranian political system they didn't disclude other things was design a deal that did not touch its missile program, it did not touch its terrorist activities, it did not touch its human rights violations. All of these things were kept separate from the nuclear deal.
Emily Hawthorne [00:05:33] And to Iran, some of those activities that are viewed as terrorist activities by the GCC states or by the United States, to Iran that's a normal expression of their military capabilities abroad or their support for proxy groups. They're not going to relinquish that easily.
Matthew Bey [00:05:51] They also see and going on to the point of what proxy groups are to both countries, they can point to the United States sometimes and look at the groups the United States is backing and saying hey, look they're doing similar activities as well, it's not, there are many shades of gray in what you define to be proxy groups. The JCPOA only really touched Iran's nuclear weapons program and anything that could really be contributing to that's development, whenever Iran does something that is pro-terrorism from the United States perspective, or launching off a missile test, those aren't going to be violating the JCPOA, but the United States still needs to sanction those activities and Iran turns around and says hey, you know what, you're violating the spirit of the nuclear deal. But since the nuclear deal is only touching actual physical things about the nuclear program, it's this really gray era where both sides have the rhetoric and they try to spin it domestically within the United States and within Iran and that is a domestic thing or at least a domestic argument that they're trying to sell the current relationship or paint the other person in a different light.
Emily Hawthorne [00:06:46] Both sides see the other side as culpable for really being the partner that is not abiding by the deal and both really view the deal in different ways. The United States, when it's writing, when Congress has been writing these new sanctions, they're very careful to write them in a way that does not infringe on Iran's nuclear activity because technically, Iran is in compliance.
Matthew Bey [00:07:12] Exactly and that's the interesting thing when you look at the United States. The United States, what we've promised to do in the deal is essentially not put back the secondary sanctions on energy companies that are European companies that are doing business with Iran. That's the sanctions that really clamp down on Iran's economy, something that Rouhani had to dig the government out of the problem in the first place. You're right, absolutely when we, the new sanctions are not touching those things, they're only touching other issues like sanctioning companies that were supporting the missile program and things like that.
Emily Hawthorne [00:07:42] Or companies related to the revolutionary guards, a major component of Iran's military.
Matthew Bey [00:07:48] Right and what the Trump administration is doing is looking at a much broader picture. Instead of just defining the relationship with Iran, just looking at the idea of its nuclear program, they're saying well the fact that we have this JCPOA that actually constrains our ability to use our biggest leverage against them which are sanctions that are on its economy which are now a violation of the JCPOA if we were to put them back on the plate, so it is this question of looking at a much broader issue of how can we change the relationship with Iran, change Iran's behavior and see the JCPOA as potentially being something that basically ties their hands behind their back and allows them not to pressure Iran in the ways they want to. Now, the review that we're seeing going forward and there's obviously a huge divide in the White House and in the Trump administration about what the answer is to this question, is it actually worth it to re-open the nuclear issue with Iran to the point where we are willing to sacrifice the JCPOA knowing that Iran might restart the nuclear program, or is it actually better for us to pressure Iran in other alternatives, so you have one faction of the White House who's backing the idea of keeping the JCPOA's fiscally. Rex Tillerson is in that camp, Secretary of Defense James Mattis is in that camp, McMaster's in this camp, all these other figures are in this camp and then you have the other side, the more ideological anti-Iran hawks back faction that is going to be led by figures like Steve Bannon, etc.
Matthew Bey [00:09:08] There is this divide going forward and I think that debate hasn't been settled yet and that's what made the JCPOA very much more fragile than it looked, even two weeks ago or three weeks ago.
Emily Hawthorne [00:09:18] The moment that it became very public that this JCPOA deal on the United States side was in a little bit more trouble than we thought was the moment when the president had to submit his certification for Iran's compliance to Rex Tillerson to take to Congress and that's due every three months based on the available information that the United States has now and that's the same information that the rest of the P5 plus one that signed this deal have, Iran is in compliance but what we've seen now is, the White House is conducting an extra review. They've said that that review will likely be done before October which is when the next three month deadline is due and this leaves us in a bit of a precarious place because it does seem like the United States is looking, this current administration is looking for Iranian infractions.
Matthew Bey [00:10:08] An excuse basically, right?
Emily Hawthorne [00:10:10] Yeah that's the question right? Are they looking for an excuse or are there legitimate infractions that they are trying to look for. Nobody, even when this deal was being painstakingly written, debated, no one said that this was the absolute perfect deal to contain Iranian nuclear activity, a lot of people at the time said this deal needs to be longer than 10 years, a lot of people said that it needs to have a wider umbrella for containing Iranian activity, there were a lot of legitimate criticisms against the deal, but it is interesting now, this administration versus the former administration is really taking out the magnifying glass and trying to find new ways that may have gone unnoticed and in some sense, it does make you wonder if it's an excuse to pin something.
Matthew Bey [00:10:57] Or it's also the question about looking for something that might be concerning that they don't know anything about and then going through the official JCPOA process of actually bringing up a complaint and seeing if Iran complies with opening up military sites, other sites which they have not had to do thus far and if Iran says no, that is actually a violation of the JCPOA and then you can say hey, look they're hiding something, there must be something there that gives us reason or cause to pull out of the deal going forward.
Ben Sheen [00:11:28] We'll get back to our conversation on Iran with Stratfor's Matthew Bey and Emily Hawthorne in just one moment. But if you're finding this discussion interesting, be sure to visit us at worldview.stratfor.com. Much of our broader analysis on Iran is collected under a special topic page, focused on Iran's arc of influence. We'll include a link in the show notes and if you're not already a Worldview member, individual, team and enterprise subscriptions are available at worldview.stratfor.com/subscribe. Now let's get back to the second part of our conversation on Iran with Stratfor's Matthew Bey and Emily Hawthorne.
Matthew Bey [00:12:05] The reelection of Rouhani, who is a moderate figure in Iran, is also going to be kind of interesting when you look at what we've seen across the Gulf countries in the last few weeks, particular Saudi Arabia with Mohammad bin Salman, now the crown prince who has a very anti-Iran position relative to his predecessor that was crown prince, Mohammad Bin Ayyaf, so what do you think Saudi is looking at this? They're obviously pushing in one direction, they have a really good relationship with the Trump administration
Ben Sheen [2100:34:53] so what are they thinking right now?
Emily Hawthorne [00:12:37] I think that the role of Saudi Arabia in terms of appealing to this US administration has been really important leading up to this point. I think there still is a sense of harmonization of views between Riyadh and Washington that Iran is something that needs to be firmly contained and like you said, this new crown prince, this young defense minister, and the crown prince and really the first of the third generation of Saudi leaders, he very strongly said in recent months that Iran is not something Saudi Arabia wants to negotiate with.
Matthew Bey [00:13:18] I believe he even said he wants to take the fight to the backyard.
Emily Hawthorne [00:13:21] Yeah and this was very concerning because it's well known that Iran and Saudi Arabia are engaged in proxy warfare in a number of theaters throughout the Middle East, the most obvious of them would probably be Syria, but there are other places where they try and use soft power or actual, or prop up certain groups or ally with certain groups that really push against each other in places like Lebanon, in places like Yemen, also in Iraq, we're seeing renewed Saudi Arabian interest, it's been very interesting over the last month to see a much more visible, strong Saudi Arabian interest in developing relationships with Baghdad and Iran has very strong relationships across the security and political sphere in Iraq. When we look at Hassan Rouhani taking a second term, he is looking at a Saudi Arabia that under the leadership of this new crown prince, is much more hawkish on Iran's activities, much more willing to harshly answer to anything that Iran does in the Middle East that Saudi Arabia views as counter to their wishes for the region and counter to their vision for the region. I think it's really easy to overblow the Shiite versus Sunni dynamic, that's part of it but this is a competition between two geopolitical powers in the Middle East that are competing for political and economic dominance in the region. Iran is a larger country demographically, they have a highly educated population, there's a lot of reasons also why Saudi Arabia has a lot in its favor in that it's strong. It has an incredible amount of oil wealth, a higher GDP per capita.
Matthew Bey [00:14:58] I think it's also important to point out because you mentioned that the Suni/Shiite divide is probably a little bit overblown, when we look at Iraq in particular for example, a lot of the Shiite there are actually Arabs, they're not Persians, ethnic Persians. Obviously the Sunis on the Arabian peninsula are ethnic Arabs so there is a different kind of relationship there that's not necessarily religious, but more ethnic based so they have been trying to take it to their advantage, so there are multiple fault lines that layer this particular region that span ethnic, sectarian, all kinds of different divisions and Iran and Saudi Arabia are trying to exploit them. Now, let's go back to Iran. Rouhani is facing this world, so is Iran but when we look at the Iranian presidency and how that fits into the Iranian political system, it's not a very strong office to have in terms of the supreme leader is the outsized. He's still the head honcho, the defense establishment, the unelected institutions in Iran, they have a lot of the power, particularly when it comes to things like national security, regional policy. What areas do you think the Rouhani, at least internally, is going to have the biggest impact in his second term or at least things where he has more room to maneuver than he does necessarily on foreign policy issues?
Emily Hawthorne [00:16:14] I think it is a really important point that you bring up that the position of the President in the very unique political system that Iran has, it is an inherently weak position but it is elected and he was elected with a pretty strong mandate in this May election.
Matthew Bey [00:16:33] And he won over the guy that all indications were that the supreme leader was backing 100% or at least 50%.
Emily Hawthorne [00:16:39] And there were indications that his strongest opponent, Ebrahim Raisi, was supported more by the more conservative establishment, the more hard lined establishment, but Rouhani during his first term, I think it's important to look at what did he do right in terms of what he has the most power to do. One of those things is the economy. President Rouhani during his first term was fixated on making sure that the JCPOA nuclear deal came to be signed and came into implementation. That happened in 2015 after years of painstaking negotiations. The JCPOA matters within Iran to normal Iranians to people that voted for Rouhani in a large sense because of how it affects the economy and because of the way that it opens up, takes off some of the sanctions on Iran that limited oil activity and that's Iran's main source of revenue.
Matthew Bey [00:17:34] Also, his economic policies were fundamentally in a different vein than his predecessor Ahmadinejhad. For example he was able to get down a lot of the inflation, I believe it's now under 10% for the first time in a very long time, I believe the 1990s even. He definitely has things that he can point to going forward but one other thing that we have to think about though, is some of the unelected institutions, like the revolutionary guards, the IOTC, they have a lot of political clout as well, they have things that they're trying to protect and that's some of the things that we're going to be seeing I think moving forward in a second term is this big broader question about how we can continue to withstand some of the pressures coming from a relatively different group of actors within Iran. That doesn't necessarily mean that they oppose a nuclear deal fundamentally. The IOJC has its giant economic interests and yes it took advantage of the sanctions under Rouhani's predecessor but at the same time, it's kind of the saying if you raise all the water, all the boats go up, the same thing's kind of true here in the case of the IOJC, a lot of the business interest for example, they spanned ancillary services such as logistics, things like that that could get on board with just a more fully functioning economy.
Emily Hawthorne [00:18:46] Right and this is one of the main reasons why, regardless of the heightened tensions between the United States and Iran, the Iranian leaders across the spectrum, they want to keep that nuclear deal in place. They don't want to be the ones to cause the deal to fall apart and they don't plan on doing that because as you said, the inflation has gone down in Iran over Rouhani's tenure and a large part of that, not a large part of it, but it did have something to do with the nuclear deal, the real GDP going up, that was in large part due to the nuclear deal coming into place. One of the big problems for Rouhani remains unemployment. This is something that even if some of Rouhani's opponents are happy with the general economic progress and if they still want that to keep happening in Rouhani's second term, they can still raise the pressure on him, turn up the heat on him in terms of the things that he's not been able to do well and one of those is changing the unemployment picture within Iran. That's one of his big challenges moving forward. Getting back to your important point about these divides between Rouhani and members of the rest of the Iranian political establishment which is very varied and diverse, it's hard to put it into distinct parties like we would have in the United States, we are seeing in the second term, a greater likelihood of Rouhani falling more in line with some more of the hard line policies. That's been a really interesting dynamic that's just begun to happen.
Matthew Bey [00:20:10] I believe we saw two weeks ago or a week and a half ago, Rouhani sitting down with the IOJC leadership or at least key commanders and at least trying to mend fences to some degree and if you think about it, with the new pressure from Saudi Arabia, from the United States, Rouhani and the IOJC, they need to pragmatically work together. They can't have the same kind of divisions that they had in the first term, especially during the negotiations, if they're going to manage this tension of this new onslaught from the Trump administration and Mohammad bin Salman. I think that is something that is a pragmatic relationship that's going to evolve going forward and one of the interesting things if you just look back at the history of Iran's presidents, they almost always get second term and in the second term, because institutionally the presidents are weak, they don't get a lot done. Previous presidents have typically tried to go against the political establishment, it's never really worked out that way, most of them have either after office they've either been blacklisted, prevented from running for office in the future. One of them was even basically had media blackout, so Rouhani if he goes too far against those interests, he's going to have the same thing happening to him, so he's actually taking much more of a pragmatic role at least in the first few days, obviously it's a four year term, so we'll see how that plays out going forward, but that's in interesting dynamic that I think is something to keep watching. Now going back to the JCPOA which is still
Ben Sheen [00:21:29] I think the most important issue for Iran, it's obviously an important issue for the United States in terms of the way that they pressure Iran. Let's just think about how that could go from here. There's a lot of different options. It's unclear whether or not the United States is going to actually pull out of the JCPOA but if you just think about what happens if that were to happen, that means that the United States would at least potentially start to re-sanction investments into Iran by foreign companies, say European companies.
Emily Hawthorne [00:21:58] That gets to the fact that this JCPOA nuclear deal is not just a deal between the United States and Iran.
Matthew Bey [00:22:02] Exactly. I think that is something that's going to be an important dynamic and we've seen Iran already start to spin that to its advantage. One of the people that was in attendance at the inauguration was the foreign policy commissioner for the EU. We've seen Iran build a lot of economic ties since the JCPOA was put into place. We've had the Total natural nas investment, we've seen a lot of the sales of Iranian oil go back to Europe, so if the Europeans are not on board, this is a very sticky issue and very much a challenge that the Trump administration's going to have to do if they actually want to pull out of the deal because they're going to be essentially going against what their allies want and this is something that the United States did do in the 1990s under President Clinton when we put the sanctions regime into place, the big ones in 1996. At that time, we did put secondary sanctions into force, ironically the first deal that was important that kind of came up in that context was another Total deal with Iran and the same deal that they wanted to now which is kind of a funny and ironic thing, but the Europeans threatened to go to the WTO and essentially block any kind of secondary sanctions. They look at secondary sanctions on their firms for dealings with Iran as an extraterritorial application of US law, that hits on national sovereignty issues and concerns that the Europeans certainly don't like.
Emily Hawthorne [00:23:20] That's where we see a big difference between the former administration and the current administration in Washington. You even had former Secretary of State John Kerry going and actually speaking with European allies and trying to reassure them that the United States was not going to snap any sort of economic penalty on them for doing business with Iran and that's one of the main complaints coming from Iran right now is that they're not feeling that good faith from the United States side that they will freely allow trade into Iran from the EU. We're not talking about US trade with Iran, we're talking about EU trade between many different EU countries and Iran. I think that's a huge point of tension and one of the reasons you've seen a really concerted effort on the EU side and the Iranian side to deepen some of those ties because the deeper those ties are, the more complicated it is to undo them if the United States changes its mind on the JCPOA.
Matthew Bey [00:24:17] Emily thank you for coming and joining me and having a conversation on this. We've got a lot to think about, there's a lot of stuff that's happening in the Iran/US relationship, the JCPOA is definitely becoming more increasingly fragile and here at Stratfor, we will definitely be watching this very closely and thank you for joining us.
Emily Hawthorne [00:24:33] Thank you Matt.
Ben Sheen [00:24:38] That's it for this episode of the Stratfor podcast but you can continue the conversation by diving into our geopolitical analysis on Iran and its arc of influence at Stratfor Worldview. If you're not already a member and value unbiased research and analysis on global affairs, visit us at worldview.stratfor.com/subscribe to learn more about individual, team and enterprise subscriptions. You can even contribute to the conversation by sharing your insights in the forums section on Stratfor Worldview, there you can engage with other readers as well as Stratfor analysts, editors and contributors on the latest developments. If you have a comment or an idea for a future episode of the podcast, email us at podcast@stratfor.com or give us a call on 1-512-744-4300, extension 3917 or you can leave us a review on iTunes or wherever you subscribe to the podcast. We really appreciate your feedback and for more geopolitical intelligence, analysis, and forecasting that brings global events into valuable perspective, follow us on Twitter @Stratfor. Thanks for listening.
