The West's Iran policy: For real change through trade

Despite four years of moderate rule under President Rouhani and the historic nuclear deal with the West in 2015, little has changed in Iran. There has been no improvement in the human rights situation and the lifting of economic sanctions has mainly benefitted companies close to the state, writes political analyst Ali Fathollah-Nejad

By Ali Fathollah-Nejad

The ink on the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal, had barely dried when the then German Minister of Trade and Energy Sigmar Gabriel landed in Iran along with a large business delegation. The Germans were the first ones in; after all, Iran had been hailed by financial services firms as the most lucrative economic bonanza since the collapse of the Soviet Union.

The German vice chancellor′s visit attracted its share of criticism – critics said it was a premature, if not a plainly false signal to an unaltered authoritarian regime – but in Germany in particular and in Europe in general the renewal of economic and political ties with Iran was rationalised as an integral part of a "change through trade and rapprochement" policy and as such was nearly immune to objective appraisal.

The Islamic Revolutionary Guard Corps and its economic empire

Now, on the second anniversary of the Iran deal and after the end of President Hassan Rouhani′s first term in office, a balance can be taken: has Europe′s policy of rapprochement favoured change in the Islamic Republic or not?

There is still hope that an Iranian opening towards the West will provide the space necessary for Iran′s civil society to act as an agent of change. But the facts so far are hardly encouraging: firstly, the human rights situation under President Rouhani has only worsened.

Iran′s shameful record in executions per capita is only topped by China.

Secondly, the bulk of post-JCPOA trade agreements signed with Iran has benefitted the economic empires of the Islamic Revolutionary Guard Corps (IRGC), the Supreme Leader and the 'bonyads' – tax-exempt economic empires disguised as Islamic charities.

As the news agency Reuters reported in January 2017, of almost 110 agreements worth at least $80 billion signed after the July 2015 JCPOA, 90 were signed with companies owned or controlled by Iranian state entities.

In other words, the revitalisation of trade between Iran and the outside world has almost exclusively benefitted the authoritarian state.

Germany′s then trade minister, Sigmar Gabriel, meets the Iranian oil minister in Tehran (photo: picture-alliance/dpa/M. Kappeler)
Sigmar Gabriel in Tehran: Gabriel (at the time still trade minister) travelled to Iran with a body of industry representatives in July 2015, shortly after the signing of the nuclear deal, with the aim of securing trade contracts worth millions. But has the lifting of economic sanctions had any impact on Iranian society? "The facts would seem to indicate otherwise," writes Ali Fathollah-Nejad

This is hardly surprising given the reality of the Islamic Republic′s politico-economic power configuration, in which the private sector is only granted marginal status in the face of dominant state or semi-state entities.

Thirdly, Germany′s foreign cultural and educational policies have barely incorporated the spectrum of Iran′s diverse cultural scene; rather, they have often merely followed the paths offered by the Islamic Republic, prompting criticism by some Iranian artists. And fourthly, President Rouhani′s policy of "moderation" towards the West has been effectively undercut by an increasingly assertive, if not hegemonic, Iranian regional policy run by the IRGC and the Supreme Leader′s Office.

The futility of the "authoritarian stability" paradigm

As the 2011 Arab uprisings have dramatically shown, the West′s decades-long "courting" of Middle Eastern autocracies is barely sustainable. This policy of "authoritarian stability", long legitimised as a way to ensure stability, together with the neo-liberal nature of economic policy has allowed an elite to enrich itself while circumventing the bulk of society.

Ironically, the presidents of Tunisia and Egypt, both countries praised as economically successful and politically stable, were the first ones chased away by popular upheavals. The nature of relations with the West helped foster social inequality and cement authoritarian structures, which turned out to be the engines of the Arab revolutions.Some will object that Iran is in far better shape than its Arab neighbours. However, with the exception of Iranian civil society′s century-long battle against dictatorship and for democracy, such a claim is barely tenable.

The socio-economic indicators are equally bleak, with a very high rate of unemployment, especially among the youth, massive poverty and the monopolisation of immense wealth in the hands of those loyal to or part of the regime.

At the same time there is no meaningful political participation by the bulk of the population, whose destiny is in the hands of an exclusively Islamist political elite. The potential for unrest and upheaval is very much there. Put differently, a sober assessment suggests that the stability of Iran is rather fragile. 

Readjusting foreign and development policies

All of this raises the question of what Germany and Europe can do better in order to achieve the promises implied by "change through trade and rapprochement"?

Berlin should first try to help establish a unified EU policy on Iran, one grounded in universal principles rather than short-term business interests.

Although such a demand may appear unrealistic, the absence of a common EU foreign policy in an increasingly multipolar world is likely to significantly reduce the continent′s weight in the twenty-first century.

Negotiating the nuclear deal in Lausanne: U.S. Foreign Minister John Kerry and Iran′s Javad Zarif (photo: Reuters/Brendan Smialowski/Pool)
Hopes running high following the nuclear deal: the economic sanctions imposed on Iran by the USA and the EU were lifted following agreement of the nuclear deal between Iran, the five veto powers of the UN Security Council and Germany. Since then some 110 business deals have been concluded between foreign and Iranian companies, worth at least 80 billions dollars. The benefits of this economic upturn, however, have been confined solely to the Islamic Revolutionary Guard Corps and its business empire, Iran′s Supreme Leader Ali Khamenei and the tax-free Islamic foundations or ′bonyads′

As foreign-policy spokesman of the German Green Party Omid Nouripour noted in late May 2017: "If the Europeans fail to finally speak with a single voice, they will soon bid farewell to the main stage of world politics." As a starting point, the human rights organisation Amnesty International has called for Iran business to be tied to the respect of human rights.

Last but not least, the lessons from the “Arab Spring” formulated by the German Development Institute (DIE) ought to be applied to Iran policy as well. Only through harmonising foreign and development policies, which DIE recommends to be serving as guiding principle for policies towards the Middle East and focusing on the well-being of the bulk of the population can Iran policy be placed on a sustainable footing.

A key goal should be promoting inclusive and sustainable development in Iran.

Iran policy during President Rouhani′s first term too often resembled the old, failed paradigm of "authoritarian stability".

In the future, Germany in particular and the EU in general should use their economic and political strengths in the relationship with Iran that lie in their central role in the modernisation of Iran′s industrial infrastructure; in the good reputation they enjoy across the Iranian political spectrum and their substantial role they have played in helping Iran improve its standing in the international system.

Hence, measures shall be taken towards the realisation of the desirable objectives underpinning a "change through rapprochement" policy, binding the deepening of relations to the following conditions: respect for human rights; economic reforms benefiting the majority of Iranians; and de-escalating Iranian regional intervention policies.

Similar policy recommendations were put forward, at the time of Iran′s presidential election, by two members of the German Bundestag′s Committee on Foreign Affairs: Johann Wadephul, rapporteur on relations with the Middle East, the Gulf States and Iran for the CDU/CSU parliamentary group, as well as Omid Nouripour, the Green Party′s foreign-policy spokesperson.

Such conditionalities should be accompanied by a set of policies aimed towards a regional detente, maintaining a policy of equidistance towards Iran and Saudi Arabia, which in practice means being equally critical of the regional roles of Riyadh and Tehran to avoid giving the impression of favouritism; and launching an inclusive regional security architecture through a Conference for Security and Co-operation in the Middle East (CSCME).

These necessary corrections to Iranian domestic and foreign policies, even if gradual, will help put Iran policy on sustainable ground, as well as do justice to the aspirations of the Iranian people.  

Ali Fathollah-Nejad

© 2017

Ali Fathollah-Nejad is Iran expert with the German Council on Foreign Relations (DGAP) and teaches at Harvard Kennedy School′s Belfer Center for Science and International Affairs.