Presidential Election: Improved International Climate

BMI View: Moderate cleric Hassan Rouhani won Iran's Presidential election, which took place on June14. While this is unlikely to result in a drastic improvement in relations with the West, Tehran will adopt more conciliatory tones in nuclear talks. As a result, the risk of an Israeli military attack on the Islamic Republic in 2013 have declined significantly.

Presidential elections were held in Iran on 14 June 2013. Hassan Rouhani, a moderate cleric, won the ballot in the first round with 50.7% of the vote. According to figures from the Ministry of Interior, nearly 50.5 million Iranians voted in the elections, equivalent to 72.7% of eligible voters. The Guardian Council is expected to confirm election results on June 26, 2013, and Rouhani is set to be inaugurated president on August 3.

Rouhani, an Iranian politician, lawyer, academic and diplomat, is firmly entrenched in Iran's political establishment. He has been a member of the Assembly of Experts since 1999, of the Expediency Council since 1991 and of the Supreme National Security Council since 1989. He has also served as Iran's top nuclear negotiator from October 2003 to August 2005, under reformist president Mohammad Khatami. That said, the new president offered the most pointed challenge to the current order among the six candidates who ran for election. In his campaign speeches, he has spoken in favour of increased freedom for the press and for a less pervasive security apparatus, and pledged to free political prisoners. He was also one of the earliest and most vociferous public critics of outgoing president Mahmoud Ahmadinejad's economic and foreign policies within the Iranian political establishment. Indeed, his candidacy was endorsed by Iran's former presidents Mohammad Khatami and Akbar Hashemi Rafsanjani, two of the most prominent reformist politicians in Iran.

A Landslide Victory
Iran - Results of Presidential Elections, % of Total Valid Votes

Importantly, Rouhani's landslide victory is a clear signal of the Iranians' discontent vis-a-vis Tehran's aggressive foreign policy, which has led to ever tighter sanctions that have hurt the economy. While, in a live televised debate days before the election, all six Iranian candidates said they backed Iran's right to nuclear energy, Rouhani said progress shouldn't come at the expense of the economy and the well-being of the population. The new president boasted that, when he served as Iran's chief nuclear negotiator under Khatami, Iran warded off threats of war and sanctions, and said that the way to deal with the world is through moderate dialogue instead of aggressive rhetoric. In contrast, Saeed Jalili, a hardline conservative and a strong defender of Iran's right to enrich uranium, as well as the conservative elite's favourite candidate, won only 11.3% of the vote.

Nuclear Standoff: An Israeli Attack On Iran Is Unlikely In 2013

In Iran's political system, the Supreme Leader remains in charge of key decisions such as those relating to defence, foreign policy and the country's nuclear programme. However, this is not to say that the president, which is the country's highest official to be elected by direct popular vote and the chief of the executive, does not have an influence in terms of Iran's foreign and nuclear policy. As the presidency of the reformist Mohammad Khatami in the 1997-2005 period showed, Iran can behave quite differently under individual presidents despite the same supreme leader. During that time, Iran showed more commitment to its international obligations and had better relations with the West, and Tehran agreed to halt its uranium enrichment activities and give UN inspectors full access to its nuclear sites.

We believe that a major breakthrough in negotiations remains off the cards over the short term. The latest round of negotiations between the so-called 5+1 powers (the United States, Russia, China, France, Britain and Germany) and Iran, which took place in Almaty, Kazakhstan, in April, showed that the parties remain far apart in substance. Iranian negotiators did not accept the offer to give up its most sensitive uranium-enrichment work to allay concerns that Tehran is seeking the means to make atom bombs, in exchange for modest relief from crippling economic sanctions. Moreover, it remains to be seen whether Rouhani will able to exert influence on the selection of the next nuclear negotiator, as well as if he will appoint moderate officials at the head of the ministries of defence and of foreign affairs. As a result, we do not see economic sanctions on the Islamic Republic being eased anytime soon.

A Slight Improvement
MENA - BMI Short-Term Political Risk Rating, Scores out of 100.

That said, Tehran will likely adopt more conciliatory tones with the West. As a result, confidence in a negotiated solution to the nuclear stand-off will probably increase. Indeed, the White House said on June 15 that it is prepared to engage Iran directly over its disputed nuclear programme, with a view to reaching a diplomatic solution that will fully address the international community's concerns. While there remain significant obstacles to a major improvement in Washington-Tehran relations, it is possible that US President Barack Obama will seek to take advantage of Rouhani's more cooperative approach to pursue a strategy of rapprochement with the Islamic Republic, which could be a valuable legacy for its second term in office ( see our online service, 28 January, 'Iran Rapprochement Could Bolster Obama's Legacy'). It is therefore highly unlikely that the US will decide to support an Israeli military attack on Iran's nuclear facilities directly, which would certainly increase risks for Jerusalem. As a result, we have increased Iran's short-term political risk rating to 42.5 out of 100 from 41.7 out of 100 previously, due to an improvement in the 'Regional Profile' sub-component.

This article is tagged to:
Sector: Country Risk
Geography: Iran

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