What are Rouhani’s goal for economy and foreign policy?

May 28th, 2017

Awake Goy

Iranian Diplomacy- During the presidential campaign, Hassan Rouhani published his plan of action to be implemented in case of a reelection. Here is a brief review.

Even before the presidential race, Iran’s Supreme Leader Ayatollah Ali Khamenei demanded presidential hopefuls to prioritize employment and people’s livelihood at the top of their agenda for the next four years. Livelihood and unemployment were both among the main lines of criticism brought up by President Rouhani’s rivals during the campaigns, although Rouhani was the only candidate who made his plans for the next four-year presidential term public, uploading it on his campaign website.

Rouhani’s plan of action for the twelfth administration, dubbed Freedom and Liberty, Peace and Progress, is a 250-pages plus pamphlet which discusses economy and employment, politics, culture, society, science and technology, environmental issues and sustainable development, healthcare, foreign policy and defense. Due to a brevity of space, we only review the economy section, written with an emphasis on employment, and the foreign policy section that seems to be a continuation of Rouhani’s moderate pro-détente approach in his first presidential term.

Economy and Employment

Economic reforms planned for the second half of the current Persian calendar decade (2017-2022) targets ‘sustainable development and omnipresent anti-poverty employment’.

The plan of action introduces ‘Empowerment of the Administration to Offer Better Services’ package, hailed as not only a vantage point for comprehensive economic reforms but also the main prerequisite for other structural and policy-making reforms. Emphasizing on fiscal rule as a tool for the regulation of annual budgets and appropriate management of oil revenues, the plan promises to include in the budget foreign exchange currency obtained by oil export regardless of oil price fluctuations in order to stabilize the share of the administration and the National Iranian Oil Company from oil revenues.

‘Islamic bonds’ are also named as tools to cushion government revenues from fluctuations, possibly caused elsewhere. The plan also vows to ban government borrowing from banks, as one of the major pillars of ‘resistance economy’, the economic model promoted by the Supreme Leader Ayatollah Khamenei, in order to make the economy endogenous.

According to the published pamphlet, the administration is going to employ experts in various fields to boost productivity and efficiency. In order to get the private sector more involved in management activities, the administration plans to adopt a service redemption policy in activities relying on public budget. The proposed master plan suggests to rename the National Development Fund as the National Wealth Fund, to turn it into a major organization to help expand the private sector and attract foreign capital. The change is expected to make private sector capital more appealing for equipping infrastructure and foreign investment less risky. The fund, the administration, and banks will jointly finance construction and infrastructure projects. The mechanism is meant to use capital as a leverage to make the private sector involved.

The master plan also promises to stabilize the administration’s achievement in controlling the inflation rate through banking reforms, which is in turn based on five axes: a) strengthening the Central Bank’s supervisory role, b) monetary policy-making, c) improved banking business environment, d) the administration’s financial discipline, and e) increased lending power. The administration also aims to change the structure of its debts to the banking system, by gradually turning all debt into bonds. In expanding the capital market, the plan prioritizes small- and medium-scale enterprises as finance target.

The package is holistically focused on improving production and employment. The latter goes hand in hand with improved quality of life. Important factors mentioned in this regard are less pollution in metropolises and efficient energy consumption that could lead to employment. The target is to reduce the equivalent of a million bpd of crude oil in domestic consumption. The private sector and foreign investors at the heart of the program will be in charge of revolutionizing the urban transportation pattern and will be reimbursed the equivalent of the energy saved in form of crude oil. Privatization in the energy sector is also part of the plan to reform the energy market and create jobs. To further advance the plan in production and employment, the plan emphasizes on the development of the private sector and extroverted economy.

Interaction with global and regional economy is on the agenda for the country ‘to take back our jobs’. Within the framework of resistance economy guidelines, this will be directed toward increased non-oil exports with high added value. China, India, Japan, Indonesia, and Europe are mentioned as the main targets. When it comes to regional economy, border provinces lie at the heart of interaction with neighboring countries as well as in efforts to make Iran into a transit hub by connecting the East to the West and the North to the South. This is expected to help develop the underprivileged border provinces and replace illegal importation with a proper exchange system.

The proposal also aims to fight domestic regional inequality to foster justice. The administration is to group homogenous provinces into five divisions, each given local ministers or presidential aids in order to make decision-making processes more flexible in view of different conditions in every region. The local decision-making headquarters will rotate in different provinces within each division.

There is also a step-by-step targeted program to eliminate absolute poverty among 10 million individuals with the least amount of income, promising to enhance their livelihood to a level five times higher than the present by the end of the administration’s second term. This includes changing the targeted subsidies organization into a national welfare fund, increased distribution of food in borderline schools, full renovation of vulnerable schools, and a facility to use cash handouts as collateral for bank loans. Considering unemployment as the most tangible issue for the public, the plan proposes business development in economic sectors like a) information technology, b) tourism, c) logistics, and d) transportation; industrial sectors like a) textile and clothing, b) furniture, and c) automobile parts, agricultural sectors like herbal medicine as well as processing and finishing industries. Government intervention in the labor market would focus on university graduates’ internship programs, incentives such as insurance exemptions for employers, on-job training programs, the overhaul of technical and vocational training, etc.

Foreign policy

Active diplomacy for expansion of international cooperation, peace, moderation, and economic prosperity is the hallmark of the master plan in foreign policy. After discussing at length the (unfortunate) legacy of the Ahmadinejad era and the achievements of the first Rouhani administration, the proposal brings up its own assessment of major global trends, which include redistribution of global power, spread of global power, and demographic changes underway. It then moves on to discuss the developments caused by the interplay of these trends. These include:

a) Renewed pivotal role for Asia-Pacific in international security and world economy;

b) Changing global equilibria, which do not necessarily guarantee a peaceful transition of power from West to East;

c) Weakened globalism, which has brought regionalism to higher priority in foreign policy-making;

d) Decreased coherence and legitimate liberal order, failing to address needs for justice in the multicultural atmosphere;

e) Failed states turning into a major security issue;

f) Discredited zero-sum games in an age of abundant uncertainties;

g) Climate change and environmental crises turning into an indispensable part of international security;

h) Non-governmental actors that must be taken into foreign policy considerations;

i) Failed states that could no longer resolve certain issues without collective will and institutionalized international cooperation;

j) Emergence of retrogressive movements and empowered populist and radical political factions and parties.

After a thorough discussion regarding Iran’s status in today’s world, the threats, issues, and problems lying ahead of the country are brought up. These mainly include regional tensions, Iran’s image in public opinion, disconnection from world trade network, environmental crises in the region, terrorism and insecurity surrounding the country, revival of Iran’s political status in the region and the world, the unclear pattern of interaction with superpowers, and the country’s share in world economy and trade.

After this lengthy prelude, the proposal introduces its objectives and vision. Constructive regulation of international relations, improves status, and effective involvement in the region and the world are going to be pursued, “relying on rational responsibility”, “dignifying alertness”, and “courageous initiative”. In improving the country’s regional and global status, the plan deems it necessary to upgrade ties with neighbors, as well as other countries in the region and the world. In doing so, it promises to actively propose plans for mutual trust-building in the region and improved economic cooperation, mechanisms for strategic and security cooperation in the region, solutions to grueling conflicts, and efforts to establish security in allied countries like Syria and Iraq.

One of the main goals of the Islamic Republic is, according to the master plan, to prevent monopoly by a certain country over resources of power and wealth in the Persian Gulf and Western Asia. While stressing that Iran does not intend dominance over the Persian Gulf or any other region, it recommends opposition to intervention by foreign powers, ban on the proliferation of nuclear arms, the realization of a nuclear arms free zone, and the establishment of a regime to control conventional arms. The proposal emphasizes on an unprecedented need for détente in the region, asserting that Middle East countries have never been as instrumental in the destiny of the region and it should be seen as a historical opportunity. The foreign policy apparatus is thus required to convince the regional actors with the idea of ‘regional cooperation over development, cultural and trade exchange, shared security’.

The Rouhani administration’s two main solutions to help undertake all these is to maintain commitment to the nuclear deal and prevent its international collapse and to avoid traps aimed to provoke Iran into a war by adopting strategic continence. The administration’s step-by-step strategy for regional diplomacy aims to restore stability in the region while simultaneously supporting incumbent governments and sociopolitical reforms to terminate the spread of violence and radicalism. The strategy emphasizes the following measures:

Continued diplomatic talks in Geneva and Astana to end the Syrian war
Beginning of intensive talks to assure counties concerned about scrambled regional balance and Iran’s intensions
Evaluation of all possibilities to end the Yemeni war
International agreement and support for reconstruction of crisis-hit countries and help refugee return, humanitarian aid for residents of war-stricken areas
Establishment of a forum for regional talks with neighbors in Persian Gulf and Western Asia
Encouraging ME states to establish regional institutions and regimes in order to guarantee shared interests and reach assuring deals in arms control, cyberspace, environmental preservation, human security, and joint fight with terrorism based on a single definition
Paving the ground for bi- or –multilateral convergence and cooperation in energy, trade and transit sectors

The proposal sums up Iran’s short-term plans as follow:

Use of active diplomacy in the international scene to illuminate Iran’s principled positions;
Continued détente and threat-elimination aimed to change the security attitude against Iran;
To open a rift in the positions of superpowers and prevent consensus against Iran;
Neutralization of US-Zionist measures aimed to make international consensus against Iran;
To enhance political-economic ties with Europe;
To relieve mutual concerns between Iran and Europe;
To avoid rushed decisions, moves, and stances that could lead to international reaction and sensitivity;
To continue and expand political and economic cooperation with Russia and China within the framework of national interests;
To manage relations and try to reduce tensions with the United States, while remaining decisive and active against the new US administration’s baseless threats against the country;
To reduce tensions with Arab countries in the region and prevent an Arab-Zionist coalition;
To improve economic and cultural ties with Central Asia and Caucasia;
Comprehensive expansion of ties with India;
Regional cooperation to control extremism, sectarianism, and religious rifts in the region, effectively working for peace;
Active pursuit of environmental problems and crises, particularly those of dust and water and soil pollution.

Middle-term plans include:

To expand regional and extra-regional Bilateral and multi-lateral security, economic, political, and cultural cooperation;
To establish regional and extra-regional mechanisms to resolve environmental crises surrounding the country;
To take initiative from the US in different areas of bilateral ties;
To gradually reduce the US’ antagonizing capacities, turning them into positive capabilities;
Efforts for constructive ties with Europe over human rights, fight with drug smuggling, and the refugee crisis;
To gradually eliminate obstacle and comprehensively rebuild ties with Europe;
To improve ties with new and emerging powers;
Bilateral and multi-lateralization of ties with Russia, China, and India;
To establish lasting bilateral and multi-lateral economic and security ties with neighbors;
To establish regional institutions particularly for security and cooperation in the Persian Gulf as well as a Caspian Cooperation Organization;
To establish the legal regime of the Caspian Sea based on a realistic understanding of the interest of all beneficiary countries while stabilizing Iran’s legal, historic right to the sea;
Improved public diplomacy, aimed to present a more realistic image of Iran for the world’s public opinion;
To improve tourism industry and the number of tourists visiting Iran each year;
To complete the North-South corridor; to rebuild and develop air, rail, road, and shipping fleets;
To develop scientific diplomacy among academic, research, and think tank institutions in other countries at the disposal of joint international and regional goals;

Last but not least are the long-term plans proposed:

To draft a national foreign policy doctrine document, relying on collective wisdom and efforts to reach a national consensus;
To revive the Foreign Ministry’s leadership status in foreign policy-making processes, foreign policy implementation, and prevention of diverse positions and parallel activities;
To enhance the structural and functional capacity of the foreign policy apparatus and prepare it for interaction with challenges in the present situation;
Use of the international capacities, capabilities, and credibility of national figures to advance major goals in foreign policy;
Full realization of an economy-centered foreign policy through implementation of active economic diplomacy to attract foreign investment, technology, and knowledge and open new markets;
To gradually turn commercial ties with developed countries into long-term economic cooperation and deepened economic and industrial ties;
To lift restrictions, facilitate and develop Iran’s access to markets of capital, science and new technology;
To adopt effective energy diplomacy aimed to improve Iran’s role in security, production and transport of energy;
To forge a strategic unity with energy-consuming countries that have the capital and technology to participate in upstream and downstream oil and gas projects;
To invest in construction of refinery facilities adjusted to Iran’s crude specification in target countries;
To use Iran’s special capacities to turn into a regional pole in transit, energy transportation, and date transfer;
Strategic industrial cooperation with countries in possession of advanced technology, with an emphasis on improving human life and joint security;
To host regional research, technology development, and innovation projects in strategic areas of energy and advanced aerospace and nuclear technologies;