The IRGC and political protests

2019 was a very challenging year for Iran: Economic hardship and stagflation, massive domestic protests and violent repression of them, external sanctions, and political pressure have left a heavy footprint as the country moves into 2020 and beyond.

Nonetheless, the start to 2020 has been a disaster in every sense.  Iran and the US came close to an intense military confrontation after the assassination of Qassem Soleimani, the commander of the Islamic Revolutionary Guard Corps’ (IRGC) Quds Force, on 2 January.  Later, on 7 January, after staging missile attacks on US military bases in Iraq as retaliation, Iran’s military accidentally shot down a Ukrainian civilian plane killing all 176 passengers and crew.  This incident, especially the fact that it took the Iranian officials 3 days to admit full responsibility, has sparked another wave of protest in Tehran which will once again challenge the legitimacy of the Islamic Republic.

National unity after US assassination of Qassem Soleimani turned to anger after civilian aircraft was shot down killing all 176 onboard

Interestingly, the emotional reaction to Qassem Soleimani’s assassination produced a wave of domestic and regional empathy for the Islamic Republic as the victim in its ongoing confrontation with the United States.  Nonetheless, the incompetence that was put on display after the shooting down of the Ukrainian flight, has led to an unprecedented loss of confidence in the Iranian government and the IRGC which interestingly took full responsibility for the incident.

So against the above background, what shape will domestic, economic, and foreign policy take over the next 12 months?

One of the key drivers determining the country’s developments is the power position of the IRGC within the overall power structure.  To understand the emerging picture, we need to first examine the transformation of the IRGC and current divisions within the military organisation and its paramilitary arm, the Basij.

Experts agree that the IRGC is undergoing a generational shift as younger, and more radical commanders emerge without the battle experience that veterans gained from the Iran–Iraq war of the 1980s. This generation has instead been shaped by the quasi-confrontation between Iran and the United States since the invasions of Afghanistan and Iraq and by more recent events in Syria.

The older generation tended to have a more nuanced approach to political and social phenomena, whereas the younger generation is power hungry and willing to engage in violent approaches to civil protest. Analysts believe that this segment of the Corps sees everything in battlefield terms, which is one reason they had no qualms about killing protestors in order to sustain their own power.

The new breed of IRGC and Basij commanders view any internal or external anti-Iranian movement as an existential threat by enemies. Transferred to political decisions, this school of thought concludes that the only legitimate way to conduct politics is through force and the projection of power.

This segment of the IRGC had gained the upper hand over the past few months as a direct consequence of the US policy of maximum pressure on Iran. Interestingly, they may have experienced a heavy blow after the recent shooting down of the Ukrainian passenger place.  It is still too early to gauge the political fall-out and there will be consequences for IRGC’s power position in Iranian politics. 

In general, a combination of recent events and the reactions by the political establishment — especially its admission that the Iranian population has genuine grievances — suggest a deeper political fallout, including sacking and prosecuting some of the commanders the IRGC on the one side and of the riot police and the paramilitary Basij on the other.

This intensifying factional tension will impose itself on a new arena in early 2020, i.e. the competition for parliamentary seats.

Majles election

The first important political event in 2020 will occur on 21 February with the Majles election.

So far, the most notable declared candidate for the Iranian parliament is former Tehran mayor and presidential candidate Mohammad Baquer Qalibaf. In the absence of long-term Majles speaker Ali Larijani, who has decided not to nominate himself, Qalibaf is a serious contender for the speakership in a new parliament that is most likely to be dominated by conservatives.

Low voter turnout is the primary factor that will play to a conservative win. Iranians are feeling strongly discontented and alienated, especially as a result of poor economic conditions and the recent crackdown, and weak turnout is therefore expected.

In the past, Guardian Council (GC) approval of reformist candidates and voter participation has been directly correlated. Interestingly, in the aftermath of the recent protests, the Council’s spokesperson Abbas Ali Kadkhodaei gave an interview to Agence France Press stating that it will be less restrictive in approving candidates this time round.

If that happens and voters believe they have a genuine choice between reformist and conservative candidates, they may be more willing to participate.

The political establishment also has an interest in high participation because they see it as legitimising the Islamic Republic.

So far, some leading reformist faces in the current Majles, such as the outspoken Parvaneh Salahshouri, have withdrawn their candidacy in protest against the recent crackdown on demonstrations. The most notable reformist to emerge is former Vice President Shahindokht Mollaverdi who is one of the two women to occupy that post under President Hassan Rohani. (Iran has 12 VPs.)

Some reformist strategists, such as Abbas Abdi, believe the intensity of the recent protests underscores that reformism is still alive and that it is needed in today’s political discourse.  In fact, the political establishment could opt to activate more popular reformist figures to regain political legitimacy.  Nonetheless, many reformist figures have opted to stay out of the race for the upcoming Majles and it is most likely that the next Majles will be controlled by the conservative factions.

The only event that could shift the domestic mood from its current rejection of political activity would be tangible progress in lifting sanctions and improving Iran–US relations. Failing that, a newly conservative Majles is likely to undermine the Rohani administration and even push to impeach the president in the second half of 2020, paving the way for hardline networks to dominate the 2021 presidential election.

The succession issue

Another topic looming large in the Iranian political landscape is the succession to become the next Supreme Leader. The competition is fierce, but all key stakeholders wish to see a peaceful transition of power.

The gradual empowerment of hard-line factions as a consequence of US pressure will have a knock-on effect for the succession decision.

The Assembly of Experts, which will select the next Supreme Leader, currently also has some empty seats to fill in the February election. Hard-line clerics who lost their seats in the 2016 election, such as Taghi Mesbah Yazdi and Mohammad Yazdi, will try to regain their place in the Assembly.

Conventionally, the Assembly would wait for Ayatollah Ali Khamenei to die and then elect the successor, but Khamenei may well try to influence the decision before his demise. To secure the survival of the political structure, he and some of his confidantes have been discussing ways to alter that structure and reduce the level of factional disagreement.

Various proposals may surface after the Majles election, such as eliminating the position of president and introducing a so-called executive deputy for the Supreme Leader who would function as head of the executive branch.

Another possibility would be to transfer some of the responsibilities of the Supreme Leader to the Economic Coordination Council, which consists of the heads of the three branches of power. Incidentally, the recent decision to increase fuel prices was taken by that Council and subsequently endorsed by Khamenei himself.

Knowing Khamenei, he will try to hold on to the existing Constitution and at the same time empower the more conservative political forces. He is therefore likely to encourage the Assembly to elect a designated successor before his death, and if so Ebrahim Raissi, the current head of the judiciary, is the most probable candidate. That is not yet a certainty. New developments, especially a foreign policy achievement for Rohani, could shift the balance of power on the succession issue.  It also remains to be seen how the recent developments and the loss of confidence in the IRGC will impact Khamenei’s position of the commander-in-chief of the armed forces.  Former reformist Majles speaker, Mehdi Karroubi, who is currently under house arrest, opined in an open letter that Khamenei did not have the competency to be a supreme leader.  Though Karroubi has no influence over the decisions, his sentiments will resonate with many members of the clerical establishment. 

The main concern for moderate forces is the potential introduction of an executive deputy to the Supreme Leader which would obviously create an unelected power centre. If hardliners get their way, less and less attention would be paid to elected bodies.

Iran–US relations

The Trump Administration continues its so-called maximum pressure on Iran.  The 3 January assassination of Qassem Soleimani took the pressure to a new level, but what followed after the Iranian retaliation, was a clear de-escalation.  In fact, Washington’s response to Iran’s retaliation was the imposition of some new sanctions rather than military escalation. 

There are strong signs that Rohani is using the domestic situation to persuade Khamenei that this is the right moment to engage President Donald Trump. In fact, in the midst of recent tensions, Iranian authorities have indicated willingness to engage Washington as soon as the US president lifts sanctions on Iran.  Also the US side has signalled that diplomacy could be used to settle the issues.

There are still too many complications on both sides, however, the expected weakening of the IRGC in the domestic power equation may pave the way for a serious push from the Iranian side.  In light of these developments, the Iranian political establishment is divided over the potential benefits of talking to Trump, not wishing to negotiate with Washington from a position of weakness.

Some analysts believe Tehran will wait for the next US president to engage Washington, but the Rohani administration’s logic in planning to approach Trump before the 2020 US election is that a deal under Trump could have more depth because he would be able to manage the pushback from Republican Congress members.

If no deal is possible in 2020, Iranian moderates would try to develop the environment for some degree of engagement in early 2021. That said, their hands may be tied as Rohani will be out of office by July 2021.

If Trump is re-elected, he may be in a stronger position to demand more concessions from Tehran. Rohani and Foreign Minister Javad Zarif therefore have two strong reasons to reach out to the United States early in the new year: for one, some easing of sanctions could mobilise voters to participate in the Majles election; for another, Trump’s need for a foreign policy achievement to use in his re-election bid puts Iran in a more favourable position.

Iran–US relations could undergo three different potential scenarios in 2020.

The first is early engagement. A new prisoner swap between the two countries could be a strong indicator that they want an interim deal in order to move towards negotiating a new version of the Joint Comprehensive Plan of Action (JCPOA).  However, the window seems to be closing on this scenario due to recent events.

The second scenario is engagement in autumn 2020, a possibility that will depend entirely on political dynamics in both countries and the regional situation, especially the political fallout from IRGC’s shooting down of the Ukrainian plane.

The third scenario is continuation of the status quo as both sides escalate tensions in an effort to secure greater leverage for potential future negotiations.

The complex domestic dynamics in both Tehran and Washington and the fluidity of the political landscape make it very difficult to predict where Iran–US relations are headed, but a de-escalation and talks remain a possibility.

Iran–EU relations

Iran–EU relations face multiple challenges. Iran’s gradual reduction of its nuclear commitments within the JCPOA is reaching the point of being unacceptable to the Europeans. Deteriorating human rights conditions in Iran are also compelling European governments to adopt a tougher line.

In early January, Iran took the fifth and final step in its gradual retreat from its nuclear commitments and announced that it will not observe any more restrictions on its nuclear program, though it remains fully commitment to IAEA monitoring its nuclear activities. 

While the Europeans are enraged by the poor human rights situation in Iran, and they don’t want to be seen as appeasing Iran in order to hold on to the nuclear deal, the core European interest is to sustain the JCPOA in the hope that the United States will return to the agreement, which the European Union sees as a major achievement in international diplomacy.  This priority was confirmed during an EU foreign ministers’ meeting in Brussels on 10 January.

So far, despite Iranian escalation, the E3 (France, Germany, the UK) have not initiated the Dispute Resolution Mechanism (DRM) – that could be the beginning of the end for the JCPOA.  The response from Iran could be extreme, including exiting the agreement. On the other hand, a positive development — such as the operationalisation of Instrument in Support of Trade Exchanges (INSTEX) — could persuade Iran that it is wiser not to do so.

Some EU forces see the DRM as an opportunity to renegotiate the nuclear arrangement, and the big question is whether the Iranians might take the same view. Tehran would like to avoid being dragged to the UN Security Council (UNSC) for non-performance of its commitments and therefore to escape the fast-track snapback of sanctions. A new UNSC resolution could also bring Iran before the Council, but that would entail a longer process and could be vetoed by Russia or China.

The most significant price Iran would have to pay for withdrawing from the JCPOA is having EU and UN sanctions re-imposed.

The EU might, however, be compelled to think twice before initiating the DRM because Tehran could leave the Nuclear Non-Proliferation Treaty as a result. That would be interpreted as a decision to develop nuclear weapons and cause other world powers to react.

It is clear that the pragmatists in Tehran want at least a skeleton JCPOA to remain in place to avoid wide global sanctions. The Rohani government will therefore continue to look for dialogue, including a chance to redefine the scope of its commitments within the agreement.

A return to multilateral talks to negotiate JCPOA 2.0 would also be seen as an opening to address all the deal’s shortcomings.

In an optimistic scenario, all parties would return to the negotiating table to hammer out a more comprehensive deal between Iran and international powers in the upcoming year.

Other international relations

There are strong signs that the Arab states that have antagonised Iran over the past few years — Saudi Arabia and the UAE — will opt to improve their relations with Tehran.

It seems as if a ceiling of violence and hostile rhetoric was reached in 2019 and that all key stakeholders would now like to move the needle into more neutral territory. Iran’s Hormuz Peace Endeavour (HOPE) may be a first platform for diplomatic efforts to normalise relations in the Persian Gulf region.

At the same time, intensification of the US maximum pressure policy will motivate Iranian hardliners to lash out regionally as a way of projecting power. The state of regional relations thus depends in part on Iran–US dynamics.

In the meantime, Iran will continue to consolidate its relations with Russia, Turkey, and China, which will be the main powers in its emerging trade strategy.

Tehran — shaken by a recent wave of anti-Iran protests in Iraq — will continue to develop relations with Baghdad as an important regional ally and export market. Nonetheless, a lot will depend on the political process within Iraq.

Economic outlook

There is no doubt that the recent protests will cause economic damage, although the Iranian economy is showing signs of a return to modest growth in 2020. It has absorbed the initial shocks of external sanctions, which led to a cumulative decline of close to 11% over 2018 and 2019.

The recent escalation and the incident with the Ukrainian plane have led to major disruptions in European flights to Iran – a phenomenon that will impact business developments, especially tourism. 

In a new budget bill now before the Majles, it is assumed that Iran will export 1 million b/d of crude and gas condensates at an estimated US$50 per barrel. The realisation of this target will depend on the country’s overall success in managing the negative impact of US sanctions.

At the same time, the government will have to rely on internal and external borrowing. Interestingly, Moscow has agreed to extend a US$5 billion loan to Iran, which will consolidate Iran–Russia trade relations further.

In the absence of European efforts, Russia, China, and other Asian countries are stepping up as trading and technology partners to Iran. In line with a regional strategy of increasing interaction with immediate neighbours, Tehran will also expand trade and investment relations with Iraq and Turkey, and pay increased attention to the Eurasian Economic Union (EEU) — composed of Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan — which Russia created in 2014.

Despite political upheavals, the country’s top priorities remain economic and technological development and job creation. It is also certain that the government will continue to use its hard currency reserves to invest in labour intensive sectors such as agriculture and construction. Expected expansion of these sectors will help Iran return to positive GDP growth in the next two years.

Besides sanctions, the key drivers of economic deterioration are corruption and mismanagement. In 2020, financial bottlenecks will compel the government to improve governance efficiency, fuelling factional divisions as the effects permeate the deep-rooted affiliations that link corrupt and political networks.

Needless to say, any improved relations between Tehran and Washington would boost the Iranian economic outlook.

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