Iran File

Rouhani Submits to Hardliner Pressure

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Forecast: The reimposition of U.S. sanctions and the Iranian economy’s continued decline will give regime hardliners greater political and economic influence. President Hassan Rouhani appointed Mohammad Eslami Roads and Urban Development Minister. Eslami is close to the hardliners’ economic empire and likely the Islamic Revolutionary Guards Corps (IRGC). This appointment is a political concession to hardliners, likely in order to induce them to stop attacking Rouhani’s reformist government. Hardliners will more likely leverage the return of U.S. sanctions on November 5 and ongoing economic turmoil to demand additional concessions. Eslami will likely help IRGC-affiliated companies play greater roles in Syrian reconstruction efforts and development projects in Iran, thus expanding their regional economic influence and dominance of Iran's economy.

Hardliners coerced Rouhani to make political concessions. Rouhani proposed four nominees to fill cabinet vacancies on October 20 following months of hardline pressure on Rouhani to address the failing economy and reshuffle his economic team. Hardliners have co-opted economic difficulties and public disaffection to drive five senior officials from the administration since July 2018. Parliament *approved Mohammad Eslami as Roads and Urban Development Minister on October 26. Eslami *maintains close ties to Iran’s defense industries and the Foundation of the Oppressed (Bonyad-e Mostazafan), an IRGC-affiliated business conglomerate and holding company. The foundation is one of the regime’s most powerful tools to exert economic influence and dominate the Iranian economy. Eslami has held senior positions in the organization and its affiliated entities for years, serving as the foundation's civil division executive deputy and as chairman of the boards of directors of two subsidiary construction companies. Eslami’s accession to the ministry may presage a rightward shift in the cabinet’s political center of gravity.

Eslami will enable hardliners to expand their economic control domestically and abroad. The Roads and Urban Development Ministry is central to both Iran’s own infrastructure development and Iranian reconstruction efforts in Syria. The ministry *has discussed possible Iranian participation in Syrian transportation and construction projects on numerous occasions with Syrian officials in recent months. These engagements have included *ongoing negotiations over Iranian companies constructing 30,000 residential units in Syria and connecting Iranian rail lines to Syria through Iraq. The Foundation of the Oppressed would benefit through participation in these lucrative projects and thus expand hardliners’ economic influence regionally, which Eslami’s promotion makes likely.

Rouhani’s survival strategy includes offering increased economic influence to hardliners in exchange for a political ceasefire. Eslami is the antithesis of the economic policies and approach Rouhani has promoted during his presidency. Rouhani seeks to reduce the IRGC’s economic domination domestically and favors a diverse private sector. Eslami is contrastingly tied to the IRGC’s monopoly over various economic sectors. Yet Rouhani seems determined to make such a concession: he had previously *offered IRGC financier and hardline industrialist Parviz Fattah the position of Cooperatives, Labor, and Social Welfare Minister on August 14 after Parliament *impeached the incumbent. Fattah reportedly refused that proposal, presumably forcing Rouhani to find another IRGC-friendly individual to bring into his cabinet.

Hardliners will nonetheless leverage mounting pressures to instigate additional changes to Rouhani’s administration. Eslami’s appointment marks a political win for regime conservatives, and they will seek to replicate this victory. Hardliners recognize the success of their pressure campaign to undermine and discredit Rouhani thus far. They will therefore continue to condemn the reformist government. The reimposition of U.S. sanctions, the perceived failure of the Joint Comprehensive Plan of Action (JCPOA), and public discontent present hardliners an opportunity to extract additional concessions. Hardliners may push for the interpellation of additional senior reformist officials, possibly including First Vice President Eshagh Jahangiri or Rouhani himself, as the second round of U.S. sanctions return.