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Iran: Recapping the year 2018

5-01-2019, 14:56

With the year 2018 according to the Christian calendar now out and 2019 now setting in, people traditionally sum up the results of the past year. Even though the Iranian new year of 1398 is still three months away, we will stick to the Russian tradition and look back on 2018, which is already history now.

For the Islamic Republic of Iran, the past “Christian” year was one of the most trying in its recent history with a series of negative factors affecting the country’s foreign and domestic policy, the economy and national security. The worst of them all was Washington’s withdrawal from the Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran nuclear deal, resulting in a resumption of hard-hitting US sanctions and the exit of more than 100 big foreign companies, which had previously been doing business with Iran.

Socio-economic situation. The start of 2018 in Iran was marked by a series of mass-scale nationwide protests demanding better living conditions for the people and putting an end to the government’s policy of spending huge financial resources aimed at attaining military and political goals abroad.

The authorities managed to bring the situation under control, but the protests, though on a lesser scale, continued flaring up throughout the past year. 

The situation was further exacerbated by President Donald Trump’s announcement in May of the US withdrawal from the Iran nuclear accord, and the subsequent introduction of anti-Iranian sanctions in August and November. Iran’s national currency, the rial, plunged to record lows hitting a dismal 190,000 rials to the US dollar in early September. Although it later stabilized somewhat at 100,000-110,000 to the greenback, the downfall led to an economic crisis: according to IMF estimates, inflation spiked to 30 percent, with Iran’s own Central Bank putting the figure at 40 percent. The country’s GDP slipped by more than 3 percent, many enterprises shut down, and unemployment reached 12 percent (18 percent among young people).

It should be noted that the hardest hit by the US sanctions was the Iranian economy, still reeling from the tough international sanctions imposed on the country between 2012 and 2015.

While blaming the economic problems on the country’s overdependence on oil exports, the Iranian President Hassan Rouhani also acknowledged the negative impact of the US sanctions on the living standards of ordinary Iranians. He still believes, however, that "the United States will fail, and the Iranian government, with the support of the parliament, the people and the country’s spiritual leader, will cope with difficulties." 

When unveiling the 2019 draft budget in parliament on December 25, President Rouhani promised that in the upcoming Iranian new year in March, civil servants and pensioners would see their incomes grow by 20 percent, and that state subsidies for the purchase of basic goods for the country’s poor would reach $14 billion.

Meanwhile, Russia, India and China are lending a helping hand to Iran, with Indian Ports Global Ltd (IPGL) taking over, in keeping with a bilateral agreement, the management of Iran’s Shahid Beheshti port for up to 18 months with the possibility of a 10-year renewal. The contract will facilitate the transit of goods between India and Afghanistan, bypassing the territory of Pakistan, and will significantly contribute to the region’s economic growth. Following the French oil company Total’s withdrawal from Iran, China’s CNPC Company has been moving in to fill the void.

Other countries are also offering their services in an effort to offset the negative impact of Washington’s sanctions on Tehran.

Domestic political situation.  The outgoing year saw an increase in the activity of opposition forces, representing the radical, anti-Western segment of the Iranian establishment, including ex-President Mahmoud Ahmadinejad and the loser of the 2017 presidential election, hard-line Islamist Ibrahim Raisi.

Throughout the past year, the opposition was working hard, if not to remove Hassan Rouhani’s liberal reformers from power, than at least to target their individual representatives. In summer, they managed to force the resignation of the Minister of Economy and Finance Masood Karbasian and the Minister of Labor, Social Security and Cooperatives Ali Rabiyi. Earlier, the head of the Central Bank, Valiolla Safe, was equally dismissed, replaced by Abdnnacer Hemmati.

In 2018, divisions in the country’s ruling elite became increasingly visible, but it would still be premature to talk about any serious crisis, much hoped for by the US President Donald Trump. In fact, Trump has played right into the hands of Iran’s radicals and conservatives because instead of undermining Iran’s Islamic regime, the sanctions have hit President Rouhani and his team, who are looking for a dialogue with the West. With the Rouhani government losing its political clout in 2018, its radical and hard-line opponents have been strengthening their positions and their role in the country’s domestic and foreign policy.

While there were no signs last year of Hassan Rouhani being forced out as long as he enjoys the support, at least verbal, of the country’s spiritual leader, Ayatollah Khamenei, the president could still bend under the pressure from the opposition and change his domestic and foreign policy, and not necessarily in the direction of reforms and liberalization.

Foreign policy. In 2018, Iran continued its efforts to impact the situation in the Middle East, primarily in Syria, Yemen, Iraq, Lebanon and Afghanistan. President Trump’s decision to withdraw the US from the 2015 nuclear deal with Iran set forth a new, “offensive,” phase in Tehran’s foreign policy. On the one hand, this reflected the growing role of hardliners among those responsible for taking military and political decisions in Tehran. On the other, the US policy towards Iran has resulted in the moderates in Iran, including in the presidential administration and the government, toughening the country’s foreign policy. 

In 2018, Iran ramped up the number of short- and medium-range missile tests, conducting seven test launches of medium-range missiles, five short-range missile launches, as well as a cruise missile launch. This was a significant jump from just four medium-range and a single short-range missile test carried out in 2017.

Russian-Iranian relations. The Russian-Iranian political dialogue in 2018 reflected the two countries’ shared view on some regional and global policy issues, above all the establishment of a multi-polar world order, strengthening the United Nations’ role in international affairs, countering new challenges and threats, on Syrian and Iraqi settlement as well as the situation in Afghanistan.

Moscow viewed cooperation with Tehran as an important condition for ensuring Russia’s national interests and strengthening stability in the South Caucasus, Central Asia and the Middle East.

In 2018, Russia maintained constant high-level contacts with Iran. Presidents Vladimir Putin and Hassan Rouhani have met 14 times since Rouhani’s election in 2013, and have on many occasions resolved important issues by telephone.

The Russian and Iranian foreign ministers met regularly in Moscow and Tehran, during UN General Assembly sessions, on the sidelines of other international events, and also communicated by phone.

In its relations with Tehran, Moscow proceeds from the assumption that cooperation with Iran is important for ensuring its national interests, strengthening stability in the region and elsewhere in the world. That is why throughout the past year Russia actively defended the Iran nuclear deal, which the US withdrawal threatens to unravel. There is a shared view in both Moscow and Tehran that the breakup of the Iran nuclear deal is fraught with the destabilization of the region and the whole world.

In 2018, Moscow and Tehran repeatedly reiterated their firm commitment to preserving the territorial integrity of Syria, and to a peaceful settlement of the Syrian crisis. They also voiced their concern about the continuing deterioration of the situation in Afghanistan and the growing threat of terrorist attacks by local extremist forces.

In August, as a result of efforts by Russian and Iranian diplomats, Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan signed an agreement of a truly historic significance - the Convention on the Legal Status of the Caspian Sea. The accord, the first of this kind in centuries, created real conditions that define and guarantee the signatories’ joint political, military, economic, and ecological activities in the Caspian.

Russian-Iranian relations were an important feature of the past year, the most notable being the decision to complete the creation of the 7,200 km North-South transport corridor to ensure faster and cheaper shipment of goods from China and India to Europe. Moscow and Tehran agreed to simplify customs procedures, remove existing barriers complicating the free flow of goods and services, and improve communications in the banking sector.

Not all problems existing in relations between Russia and Iran were resolved in 2018, of course. Russia and Iran are only “moving towards a strategic relationship.” Many problems still persist in trade and economic relations with a trade turnover of just $2 billion between two major powers looking nothing but negligible. 

The two countries are working to change this, though. According to a memorandum on the “oil for goods” program signed in 2014, Russia planned to buy 5 million tons of Iranian oil each year (about 100,000 barrels a day), and supply it to other countries. In return, Russia would provide $45 billion worth of goods to the Islamic Republic. Tehran, for its part, committed to spend half of the revenue from oil sales to Russia as payment for Russian goods and services, such as aircraft, airfield and railway equipment, trucks and buses, pipes and construction services in Iran.

In keeping with the program, in November 2017, Russia started importing limited amounts of Iranian oil. (Tehran, which was then emerging from sanctions, had no interest in selling more). With a new round of sanctions back in place, Iran may now have a greater deal of interest in implementing the terms of the 2014 plan.

In March 2018, the Russian and Iranian Agriculture Ministries reached a preliminary agreement for the supply of Russian wheat to the Iranian market.

Military-technical cooperation is another promising area of mutually-beneficial partnership between the two countries. A Russian military delegation visited Tehran in late-December to discuss pertinent contracts in this area.

Russia and Iran are implementing a number of large-scale energy projects, including the construction of the Sirik thermal power station and the electrification of the Garmsar-Inche Burun railway.

In 2018, Russia and Iran continued their cooperation also in the cultural, humanitarian, scientific and educational fields. A national competition in the Persian language and literature was held in Russia, and the program of student and teacher exchanges between Russian and Iranian universities continued unabated.

The “Orthodoxy-Islam” joint Russian-Iranian commission on dialogue is working equally well.

That being said, Moscow and Tehran still differ on certain global and regional issues. However, these differences can be sorted out on the basis of mutual confidence building, and this is probably the main goal Russia and Iran will be working to achieve in the new year of 2019.

 

The views of the author may not necessarily reflect the position of the Editorial Board. 


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