Iran has not been in a hurry to issue a hard-line response to U.S. President Donald Trump’s decision on May 8 to withdraw from the nuclear deal and re-impose maximum sanctions on Iran. Although Tehran threatened, through several officials including Ali Akbar Velayati, the top adviser to Iran's Supreme Leader Ali Khamenei, to withdraw from the deal if the U.S. Administration does, Iran preferred to wait and see for several weeks before it takes its final decision. The decision hinges on several variables the most important of which are the directions of domestic balances of power that will eventually shape Iran’s vision for dealing with the realities imposed by the U.S. decision, the extent of success of reliance on staying in the deal along with the European states, Russia and China, as well as the ability of the European states to persuade the United States not to block the P4+1 stance through sanctions.
Interestingly, Iranian President Hassan Rouhani was keen to deliver a speech immediately after President Trump announced withdrawal from the deal. In his speech, Rouhani was focused on sending out direct messages to both the Iranians and the international community, while several institutions and figures in Iran rushed to express certain positions on the U.S. decision that reveal indications the most important of which as are follows:
Calming the Iranians
1- Reassuring the Majority of Iranians. Rouhabi was focused on the topic that Iran’s economy will massively be impacted by the consequences of the U.S. withdrawal from the nuclear deal. He said that the government can stabilize markets. Through this, he sought to avoid the crisis of Iran’s currency collapse where the U.S. dollar was selling for 7200 tomans, or 72,000 rials in the black market because Iranians rushed to buy hard currency, bracing for the hard economic circumstances that Iran is expected to suffer from, even before Trump announced his latest decision.
Iranian newspaper Kayhan, which is close to Supreme Leader Ali Khamenei, on May 7 went far to say that if the nuclear deal had been set afire, the price of the rial would not have reached this low, meaning that all along it favored withdrawal from the accord and resumption of the nuclear program, because of the policy that the Trump Administration has pursued on Iran ever since he assumed office at the White House on January 20, 2017. For it, this policy, overall, aims to antagonize the Iranian regime and not only put pressure on it to change its behaviour.
Separating Tracks
2- Preserving the One and Only Achievement. Rouhani’s government failed to deliver on any of the main commitments that he had declared before the presidential elections held in 2013 and 2017. This would make Rouhani's government insist on staying in the nuclear deal considered as the one and only achievement it has made over the past five years.
That is why President Rouhani, one day before Trump's speech, started to suggest that the option of withdrawal from the deal would not be the immediate reaction that Iran would adopt in response to the U.S. withdrawal. He noted that it is necessary to separate between the U.S. track and the European track. The move can be explained by that Rouhani is currently trying to promote that it would possible to stay in the nuclear deal along with the three European states, Russia and China as part of a new international group dubbed 4+1, replacing the 5+1 group from which the United States withdrew.
This coincided with a meeting held in Brussels only a few hours before Trump’s speech between Iran's deputy foreign minister Abbas Araghchi and assistant foreign ministers of Germany, France and Britain as well as Helga Schmid, Secretary-General of European External Action Service at the European Union, to discuss ways of continuing implementation of the deal after Washington’s exit.
For Rouhani and the negotiating team, from the beginning, there has not been reliance on the economic relations with the United States nor on attracting U.S. investments to the Iranian markets. That is, most of the deal were sealed with European states, as well as Russia and China. Nonetheless, this view will run into an obstacle: rejection by the Iranian regime’s influential institutions, and especially Iranian Revolutionary Guards Corps whose media organizations are expected to launch a harsh campaign not only against Trump’s decision, but also against Rouhani’s policy.
Hence, these institutions will seek to put pressure for a strong response to the U.S. decision rather than waiting for several weeks before taking the decision to withdraw, especially because the U.S. decision, in their view, eviscerates the nuclear deal and prevents Iran from receiving more economic benefits that the Rouhani's government was expecting after the international sanctions were lifted in January 2016.
It should be noted that Rajanews, which is affiliated with the Revolutionary Guards, issued harsh criticism against Rouhani accusing him of “insulting the people”. It said that in the speech he delivered to respond to Trump, Rouhani backed down on threats made by several officials to pull out from the deal and step up uranium enrichment to the 20 per cent level and that he called for more consultations with the other world powers that seek to save the nuclear deal even after President Trump’s decision.
Rouhani’s Fragility
3- Weakening the President. United States’ withdrawal will weaken the stance of President Rouhani in the remainder of his second term thus allowing the supreme leader to exert stronger pressure on him to prevent him from opening up other issues, and directing influential institutions to take measures restricting options available for the president. These include the judiciary authority which took a decision to block the messaging app, Telegram, a few days ago despite opposition from the government. That would embarrass the government with its popular support base that aspires for Rouhani’s success in expanding social and political freedoms, as promised in his electoral program. This appears to indicate that the remainder of the president’s second term in office will witness unprecedented escalation by the Revolutionary Guards Corps and the conservative fundamentalists against Rouhani and the moderate movement in general. This especially so because the former are currently preparing for re-arrange their ranks in the lead-up to the 2020 parliamentary elections.
Pressure Campaign
4- Pressuring Europe. Criticism from these institutions for Rouhani’s government may represent a prelude to a wider campaign that will also involve foreign companies investing in Iran, especially given that the Revolutionary Guards may seek to take advantage of the U.S. withdrawal to call for putting an end to these companies’ investments. This would eventually serve a bid to further strengthen the Guards’ economic influence as it seeks to fill the resulting void.
This influence has been a point of contention between the government and the Guards, after the government insisted that companies affiliated with the Guards should be blocked from entering into bids for development of some oilfields.
Offsetting the Withdrawal
5- Counting on China and Russia. Rouhani’s government may seek to encourage Chinese and Russian companies to increase their investments in Iran not only to offset a potential withdrawal of European businesses- such as Total which in January 2018 announced that it would reconsider its operations in Iran if the U.S. withdraws from the deal- but also to block the Revolutionary Guards from exploiting this situation to re-impose it control on stakes in some large-scale projects, such as development of phase 11 of the South Pars field.
That is why the government might seek to persuade China’s CNPC to acquire Total’s stake in the project, given, in particular, that its current share is up to 30 per cent, while Total has a share of 50.1 per cent, and Iran’s state-owned Petropars holds the remaining 19.9 per cent. But this mechanism can potentially face several obstacles. Most importantly, the world powers will seek to assimilate the realities imposed by the decision of withdrawal so as to avoid severe impact on its interests with the United States.
Supreme Leader’s Position
To conclude, the final decision that Iran will take to deal with the United States’ withdrawal from the nuclear deal and the re-imposing of sanctions on Iran, will hinge on whatever position that Supreme Leader Ali Khamenei will take in the coming period. His position will impact not only on the potential trajectories of the nuclear deal, but also on the indirect confrontations expected to break out between Iran, on the one side, and the U.S and Israel, on the other, in conflict-hit states such as Syria and Iraq.
