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The Iranian elections for the new President

Giancarlo Elia Valori

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[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] T [/yt_dropcap]he outgoing President of the Islamic Republic of Iran, Hassan Rouhani, won re-election in the first round by garnering over 56% of the vote. Rouhani won with 14,619,848 votes on a total number of voters equal to 25,966,729 accounting for 53,6% of total votes.

The difference between the two figures is related to the so-called panachage, namely voting for candidates from different parties instead of those from the set list of a party, and the votes cast for his regional lists.

However, the main loser is Ebrahim Raisi, an eminent cleric of the Shiite clergy.

In addition to Raisi, the other challengers – initially 1,636 candidates had decided to run for election, but they were soon reduced to six, after the vetting and approval of the Guardian Council – were Mohammad Bagher Ghalibaf, the mayor of Tehran who dropped out of the race before the opening of the polling stations; the former Minister of Culture, Mostafa Agha Mirsalim; the former vice-President of the Republic, Mostafa Hashemitaba, and the current vice-President, Eshaq Jahangiri.

They are complex and, anyway, remarkable figures: besides being mayor of Tehran, Ghalibaf was Chief of Police from 2000 to 2005 and formerly Commander of the Revolutionary Guards’ Air Force from 1997 to 2000.

Qalibaf holds a Ph. D. in political geography and was also Managing-Director of Khatam al-Anbia, an engineering firm directly owned and controlled by the Pasdaran, namely the Iranian Revolutionary Guards.

He had run also in the previous presidential elections, but his project – today as at that time – was to federate all conservative oppositions under his leadership and propose the creation of the Ministry for Foreign Trade.

Proposing a new Ministry to solve a problem is never the right solution.

Subjecting foreign policy to the economy is his most common trait, even in the propaganda of his group, namely the “Progress and Justice Population of Islamic Iran”.

Mostafa Mirsalim got only 1.17% of the votes.

He studied and had a long professional career as an engineer in France. He returned to Iran at the outbreak of Khomeini’s Islamic Revolution, thus becoming Chief of the National Police in 1979. He was proposed by the then President Banisadr as a candidate for Prime Minister as a compromise candidate acceptable to both Banisadr and the Majilis, namely the Parliament, dominated by the Islamic Republican Party.

A political story halfway between the pro-Western “Shiite Republic”, the offspring of Banisadr and the nationalistic-modernizing thrusts present in the 1979 revolution, and the identity-based and Shiite restoration – all the more so that Mirsalim was later adviser to Ali Khamenei for long time.

He served as Minister of Culture and Islamic Guide from 1994 to 1998. His tenure was characterized by a strongly conservative Islamist direction, aiming to stave off the “cultural onslaught of Western culture” in Iran. He was later appointed to the Expediency Discernment Council, a body set up to resolve differences or conflicts between the Council of Experts and the Parliament.

Besides being vice-President, Hashemitaba is Minister of Industries and Head of the Iranian Olympic Committee.

He is described as having “centrist” views – as we would say in the West – and he is co-founder of the “Executives of Construction Party”, a grouping   linked to Rafsanjani.

During the election campaign Hashemitaba focused mainly on environmental protection and agricultural reform.

Jahangiri was the first vice-President of Rouhani’s government and also served as Minister of Industries and Mines between 1997 and 2005 under President Khatami. Formerly he had been Governor of Isfahan Province and a member of Parliament for two terms.

He graduated in physics and later also acquired a Ph. D. in Business Management.

Having garnered many reformist votes in the 2013 elections, he decided to run again for Presidency, in connection with the area close to Rafsanjani, Khatami and to the current winner of the election.

Raisi is a Shiite cleric, as well as custodian and Chairman of the Astan Quds Razavi foundation, the Bonyad or autonomous charitable foundation managing the Imam Reza shrine in Mashhad – a foundation worth 210 billion US dollars a year.

Raisi served in several positions in Iran’s judicial system and is also a member of the Assembly of Experts from South Khorasan Province.

He run for Presidency in the 2017 elections as leader of the “Popular Front of Islamic Revolution Forces”, a recent alliance founded in 2016 by twenty-five groups of the conservative spectrum.

Since 1979, however, all Iran’s Presidents have been re-elected and Rouhani can boast two clear successes: inflation, which has fallen from 40% to 10%, and the GDP growth, which is currently equal to + 4.6%.

For the re-elected President the current problematic issues are above all the P5 + 1 agreement, which has been implemented only partially and with the old sanctions still largely in place, as well as the new tension with President Trump, who aims at playing the Sunnis off against the Shiites for a possible new conflict marginalizing Iran. Finally another problematic issue is Iran’s strategic stability, with conflicts in Khuzestan and attacks on Pakistan’s border.

Hence the cards Raisi could play during the electoral campaign were precisely security, the Shiite national and religious unity, as well as the sense of defeat looming large on Iran considering the probable future failure of the P5 + 1 nuclear agreement.

Hence, in a country where the average age is 31 and over 50% the population was born after the 1979 Islamic Revolution, young voters have not chosen the identity-based, nationalistic and anti-Western platform of Raisi, a man of Khamenei and his likely successor as Supreme Leader.

At electoral level, the struggle was between the front supporting continuity of relations with the West and the front of close-mindedness, which is witnessing Trump’s new policy in the Middle East.

An old-fashioned policy aiming at confrontation with Iran managed by   the Sunnis and Israel, with a likely “small war” between Israel and Hezbollah in the coming months and a major clash between Iran and Saudi Arabia in the coming years.

It is no coincidence that during the electoral campaign Raisi criticized the cutting down to size of the Iranian nuclear system and pointed an accusing finger at “Westerners’ untrustworthiness”.

As already said, however, Rouhani can boast his economic achievements: in addition to the data and statistics already reported, the “reformist” presidential system (indeed, we still use these silly definitions) has led economic growth to 12.5% and has reduced youth unemployment to 30%.

The outgoing President showed some signs of weakness last Sunday when the presidential car was stoned by angry miners due to an accident that had killed 42 of their workmates. However, one-third of the Iranian voters live in cities where Rouhani is still very popular and where the electoral turnover is 40%.

In smaller cities, where the Shiite clergy is still very powerful, the electoral turnover rises to 90% and tends to favour the religious and conservative right parties.

The Revolutionary Guards, which are partly a group of conscripts, have certainly favoured Raisi, but this does not necessarily mean that the policy line, based on anti-Western and revolutionary purity and opposed to the JCPOA nuclear agreement, is fully shared by the Pasdaran.

On their press they have already defined Raisi as “Ayatollah” and there are pictures of Iranian soldiers in Syria who praise the cleric of Mashhad. Meanwhile, however, Rouhani has included many members of the intelligence services in his staff and has “purged” many elements coming from the Pasdaran.

Khamenei has strongly favoured Raisi, also during the election campaign, but here the real issue is another: what is the electoral and economic value of the JCPOA and can it solve Iran’s productive and hence political crisis?

The Conservatives, who, in some of their regions – like it or not – have accepted the P5 + 1 and the JCPOA agreement are posing one single question: while it largely solves our economic problems, what is the cost of the lack of security resulting therefrom?

Moreover, if the agreement had no decisive impact on the Iranian economy, only the geopolitical and strategic damage to its security would remain.

Nevertheless, apart from the fact that paradoxically the Revolutionary Guards’ companies have much benefited from the JCPOA, the real problem is the natural and obvious low pace of its effects on the Iranian economy.

In the six months following the signature of the nuclear agreement, Iran regained access to 4.2 billion US dollars of frozen funds abroad and increased its exports by approximately 7 billion US dollars.

Again in the period following the JCPOA agreement, oil exports increased by 400,000 barrels/day, with 5 billion US dollars of revenue gains.

Moreover the government’s economic plan, voted early this year, envisages 30 billion new foreign investment, as well as other foreign direct investment and domestic investment, while it is worth noting that only 4 billion US dollars were available for investment at the time of sanctions.

It should also be recalled that Iran has acquired a 2.8% shareholding of the Asian Infrastructure Investment Bank.

Banks, however, are the real weak point of Iran’s economic system.

The central bank’s scarce liquidity – for obvious anti-inflationary reasons – many non-performing loans, non-homogeneous banking practices, corruption and, in short, a banking system which remained isolated from the rest of the world for many years and currently has no longer the faintest idea of the extent to which finance and banking have changed.

Just think that in 2012 all the thirty Iranian banks were disconnected from SWIFT, and still today, after the partial lifting of sanctions, many Iranian credit institutions face difficulties in using the system of the Society for Worldwide Interbank Financial Telecommunications.

Furthermore, for the sole purpose of upgrading the extractive industry, Iranian experts deem it necessary to invest over 100 billion US dollars.

Hence, if it goes on like this, amidst objective difficulties and the Saudi and Sunni rearmament, the Iranian population who, according to opinion polls, initially strongly supported the JCPOA (42.7%) will see its enthusiasm dampen, as is currently the case (22.3%).

27% of the Iranian population thinks that Rouhani’s bad management is one of the causes of the economic crisis, while 45% of the Iranian population blames the external conditions that are not under the new President’s direct control.

Furthermore, the increase in oil exports has been largely neutralised by the fall in the oil barrel price.

The non-oil Iranian product, however, will rise by less than 3% a year, while Rouhani’s primary goal is to cut inflation – hence he will not support the State’s deficit spending, which is largely direct or hidden welfare.

Hence, at mass level, the psychological and propaganda mechanism which has emerged in the presidential election is increasing pessimism about the JCPOA economic effects and the feeling of strategic weakness in the face of new threats to Iran’s security, over and above mistrust of the way in which the West seems to want to do everything to destabilize, marginalize and impoverish the Iranian people.

Rouhani has found the Iranian masses still relatively optimistic about economic growth and Iran’s opening to the rest of the world, but if this did not happen the Conservatives would regain power quickly.

The question is rhetorical: hence, what is in our interest, both in Italy and in Europe?

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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Middle East

Battling for the Future: Arab Protests 2.0

Dr. James M. Dorsey

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Credit: Institute of Security Studies

Momentous developments across Arab North and East Africa suggest the long-drawn-out process of political transition in the region as well as the greater Middle East is still in its infancy.

So does popular discontent in Syria despite eight years of devastating civil war and Egypt notwithstanding a 2013 military coup that rolled back the advances of protests in 2011 that toppled Hosni Mubarak and brought one of the country’s most repressive regimes to power.

What developments across northern Africa and the Middle East demonstrate is that the drivers of the 2011 popular revolts that swept the region and forced the leaders of Egypt, Tunisia, Libya and Yemen to resign not only still exist but constitute black swans that can upset the apple cart at any moment.

The developments also suggest that the regional struggle between forces of change and ancien regimes and militaries backed by the United Arab Emirates and Saudi Arabia is far from decided.

If anything, protesters in Algeria and Sudan have learnt at least one lesson from the failed 2011 results: don’t trust militaries even if they seemingly align themselves with demonstrators and don’t surrender the street until protesters’ demands have been fully met.

Distrust of the military has prompted an increasing number of Sudanese protesters to question whether chanting “the people and the army are one” is still appropriate. Slogans such as “freedom, freedom” and “revolution, revolution” alongside calls on the military to protect the protesters have become more frequent.

The protests in Algeria and Sudan have entered a critical phase in which protesters and militaries worried that they could be held accountable for decades of economic mismanagement, corruption and repression are tapping in the dark.

With protesters emboldened by their initial successes in forcing leaders to resign, both the demonstrators and the militaries, including officers with close ties to Saudi Arabia and the UAE, are internally divided about how to proceed.

Moreover, neither side has any real experience in managing the crossroads at which they find themselves while it is dawning on the militaries that their tired playbooks are not producing results.

In a telling sign, Sudan’s interim leader Abdel Fattah Abdelrahman Burhan praised his country’s “special relationship” with Saudi Arabia and the UAE as he met this week with a Saudi-Emirati delegation at the military compound in Khartoum, a focal point of the protests.

Saudi Arabia has expressed support for the protests in what many suspect is part of an effort to ensure that Sudan does not become a symbol of the power of popular sovereignty and its ability to defeat autocracy.

The ultimate outcome of the dramatic developments in Algeria and Sudan and how the parties manoeuvre is likely to have far-reaching consequences in a region pockmarked by powder kegs ready to explode.

Mounting anger as fuel shortages caused by Western sanctions against Syria and Iran bring life to a halt in major Syrian cities have sparked rare and widespread public criticism of president Bashar al-Assad’s government.

The anger is fuelled by reports that government officials cut in line at petrol stations to fill up their tanks and buy rationed cooking gas and take more than is allowed.

Syria is Here, an anonymous Facebook page that reports on economics in government-controlled areas took officials to task after state-run television showed oil minister Suleiman al-Abbas touring petrol stations that showed no signs of shortage.

Is it so difficult to be transparent and forward? Would that undermine anyone’s prestige? We are a country facing sanctions and boycotted. The public knows and is aware,” the Facebook page charged.

The manager of Hashtag Syria, another Facebook page, was arrested when the site demanded that the oil ministry respond to reports of anticipated price hikes with comments rather than threats. The site charged that the ministry was punishing the manager “instead of dealing with the real problem.”

Said Syrian journalist Danny Makki: “It (Syria) is a pressure cooker.”

Similarly, authorities in Egypt, despite blocking its website, have been unable to stop an online petition against proposed constitutional amendments that could extend the rule of President Abdel Fattah el-Sisi until 2034 from attracting more than 320,000 signatures as of this writing.

The petition, entitled Batel or Void, is, according to Netblocks, a group that maps web freedom, one of an estimated 34,000 websites blocked by Egyptian internet service providers in a bid to stymie opposition to the amendments.

Mr. El-Sisi is a reminder of how far Arab militaries and their Gulf backers are potentially willing to go in defense of their vested interests and willingness to oppose popular sovereignty.

Libyan renegade Field Marshall Khalifa Belqasim Haftar is another, Mr. Haftar’s Libyan National Army (LNA) is attacking the capital Tripoli, the seat of the United Nations recognized Libyan government that he and his Emirati, Saudi, and Egyptian backers accuse of being dominated by Islamist terrorists.

The three Arab states’ military and financial support of Mr. Haftar is but the tip of the iceberg. Mr. Haftar has modelled his control of much of Libya on Mr. El-Sisi’s example of a military that not only dominates politics but also the economy.

As a result, the LNA is engaged in businesses ranging from waste management, metal scrap and waste export, and agricultural mega projects to the registration of migrant labour workers and control of ports, airports and other infrastructure. The LNA is also eyeing a role in the reconstruction of Benghazi and other war-devastated or underdeveloped regions.

What for now makes 2019 different from 2011 is that both sides of the divide realize that success depends on commitment to be in it for the long haul. Protesters, moreover, understand that trust in military assertions of support for the people can be self-defeating. They further grasp that they are up against a regional counterrevolution that has no scruples.

All of that gives today’s protesters a leg up on their 2011 counterparts. The jury is out on whether that will prove sufficient to succeed where protesters eight years ago failed.

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As Marsha Lazareva languishes in jail, foreign businesses will “think twice” before investing in Kuwait

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IF THERE IS one thing to glean from the case of Marsha Lazareva, it’s that foreign businesses must now think very carefully before investing in Kuwait.

For more than a year, Lazareva, who has a five-year-old son and is one of Russia’s most successful female investors in the Gulf, has been held in the Soulabaiya prison by Kuwaiti authorities. Those authorities claim she ‘stole’ half a billion dollars, a claim she strenuously denies.

Human rights groups and prominent officials, including the former FBI director, Louis Freeh, and Jim Nicholson, former Chairman of the Republican Party and former US Ambassador to the Vatican, have called for her release and expressed concerns about the apparent absence of due process in a country where Lazareva has worked for over 13 years. Both Freeh and Nicholson visited Kuwait in recent weeks with Neil Bush, son of the late President George H. W. Bush. Bush has said Lazareva’s incarceration ‘threatens to darken relations between the U.S. and Kuwait, two countries that have enjoyed a long and prosperous relationship.

Russian officials have been equally concerned. Vladimir Platonov, the President of the Moscow Chamber of Commerce and Industry, confirmed that a single witness gave testimony in Kuwaiti court, and only for the prosecution. ‘I myself worked in prosecution for more than eight years, and I cannot imagine any judge signing off on an indictment like this,’ he said. ‘One fact of particular note is that Maria was given 1,800 pages of untranslated documents in Arabic.’

Serious questions surrounding the safety and future viability of investing in Kuwait are now being raised. Through The Port Fund, a private investment company managed by KGL Investment, Lazareva has contributed hundreds of millions of dollars to local infrastructure and economic development projects during her time in the country. Until 2017, when a Dubai bank froze $496 million without cause, she had worked largely unobstructed.

But as things stand, more foreign investment is unlikely to be forthcoming. Jim Nicholson has said that the ‘imprisonment and harassment’ of Lazareva ‘threatens’ U.S. support. adding that the ‘willingness of the U.S. to do business with Kuwait’ is based on ‘its record as a nation that respects human rights and the rule of law’. Mark Williams, the investment director of The Port Fund and a colleague of Lazareva’s, has called on international investors to ‘think twice before doing business in this country’. 

These comments will surely concern the Kuwaiti government, who said last year that FDI was ‘very crucial’ to the success of its Kuwait Vision 2035 road map. In September 2018, the FTreported that the government planned to reverse its traditional position as an investor in order to diversify its economy, carrying out a series of reforms designed to facilitate foreign investment and assist investors.

But despite these changes, which have propelled Kuwait to 96th—higher than the Middle East average—in the World Bank’s ‘Ease of Doing Business’ report, investors may be unwilling to take the risk so long as Lazareva remains in jail. Lazareva’s lawyers have accused Kuwait of violating international law by breaching a long-standing bilateral investment treaty with Russia. Lord Carlile of Berriew, QC has brought the case to the attention of the British public and the EU, writing in The Times that ‘there is no evidential basis to justify any claim of dishonesty, corruption or any other criminal wrong’. He added: ’Anyone thinking of doing business in Kuwait should read on with mounting concern.’

What’s worth remembering is that Kuwait is an important, long-standing ally of the UK, and a country generally seen as stable and fair. It is equally a major non-NATO ally of the United States, where there are more than 5,000 international students of Kuwaiti origin in higher education. But these relationships, and the investment to which they have historically led, have been cast into doubt. And it now seems certain that relations will continue to sour so long as Marsha Lazareva languishes in Soulabaiya.

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Economic reform in the Gulf: Who benefits, really?

Dr. James M. Dorsey

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For Gulf leaders, long-overdue economic reforms were never going to be easy.

Leaders like the crown princes of Saudi Arabia and the United Arab Emirates, Mohammed bin Salman and Mohammed bin Zayed, quickly discovered that copying China’s model of economic growth while tightening political control was easier said than done. They realised that rewriting social contracts funded by oil wealth was more difficult because Gulf Arabs had far more to lose than the average Chinese. The Gulf states’ social contracts had worked in ways China’s welfare programmes had not. The Gulf’s rentier state’s bargain—surrender of political and social rights for cradle-to-grave welfare—had produced a win-win situation for the longest time.

Moreover, Gulf leaders, struggling with mounting criticism of the Saudi-UAE-led war in Yemen and the fall-out of the killing of journalist Jamal Khashoggi, also lacked the political and economic clout that allowed China to largely silence or marginalise critics of its crackdown on Turkic Muslims in the troubled northwestern province of Xinjiang.

The absence of a welfare-based social contract in China allowed the government to power economic growth, lift millions out of poverty, and provide public goods without forcing ordinary citizens to suffer pain. As a result, China was able to push through with economic reforms without having to worry that reduced welfare benefits would spark a public backlash and potentially threaten the regime.

Three years into Mohammed bin Salman’s Vision 2030 blueprint for diversification of the economy, Saudi businesses and consumers complain that they are feeling the pinch of utility price hikes and a recently introduced five per cent value-added tax with little confidence that the government will stay the course to ensure promised long-term benefit.

The government’s commitment to cutting costs has been further called into question by annual handouts worth billions of dollars since the announcement of the reforms and rewriting of the social contract to cushion the impact of rising costs and quash criticism.

In contrast to China, investment in the Gulf, whether it is domestic or foreign, comes from financial, technology and other services sector, the arms industry or governments. It is focused on services, infrastructure or enhancing the state’s capacities rather than on manufacturing, industrial development and the nurturing of private sector.

With the exception of national oil companies, some state-run airlines and petrochemical companies, the bulk of Gulf investment is portfolios managed by sovereign wealth funds, trophies or investment designed to enhance a country’s prestige and soft power.

By contrast, Asian economies such as China and India have used investment fight poverty, foster a substantial middle class, and create an industrial base. To be sure, with small populations, Gulf states are more likely to ensure sustainability in services and oil and gas derivatives rather than in manufacturing and industry.

China’s $1 trillion Belt and Road initiative may be the Asian exception that would come closest to some of the Gulf’s soft-power investments. Yet, the BRI, designed to alleviate domestic overcapacity by state-owned firms that are not beholden to shareholders’ short-term demands and/or geo-political gain, contributes to China’s domestic growth.

Asian nations have been able to manage investors’ expectations in an environment of relative political stability. By contrast, Saudi Arabia damaged confidence in its ability to diversify its oil-based economy when after repeated delays it suspended plans to list five per cent of its national oil company, Saudi Arabian Oil Company, or Aramco, in what would have been the world’s largest initial public offering.

To be sure, China is no less autocratic than the Gulf states, while Hindu nationalism in India fits a global trend towards civilisationalism, populism and illiberal democracy. What differentiates much of Asia from the Gulf and accounts for its economic success are policies that ensure a relatively stable environment. These policies are focused on social and economic enhancement rather than primarily on regime survival. That may be Asia’s lesson for Gulf rulers.

Author’s note: first published in Firstpost

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