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Zarif’s resignation feint can’t stop mounting hardliner pressure

[Notice: The Critical Threats Project frequently cites sources from foreign domains. All such links are identified with an asterisk(*) for the reader's awareness.]

Key Takeaway: Iranian President Hassan Rouhani could have suffered a major blow when Foreign Minister Mohammad Javad Zarif tendered his resignation on February 25. It appears instead to have triggered Supreme Leader Ali Khamenei to intervene to keep Zarif in office, however, potentially strengthening Zarif’s hand and restoring his standing following Zarif’s embarrassment during the recent visit to Tehran of Syrian President Bashar al Assad.

Zarif was the architect and key public face of the nuclear deal that Rouhani has held up as the most significant accomplishment of his presidency, and whose preservation is his key legacy. Zarif’s departure from the administration would have deprived Rouhani of an important and popular ally in the face of mounting pressure from regime hardliners determined to destroy Rouhani’s policies and discredit him personally. His resignation attempt may have been meant to force the Supreme Leader and Rouhani to back him publicly or lose a key player at a critical time. If so, this mini-drama is unlikely to curtail growing hardliner frustration and discontent over the Joint Comprehensive Plan of Action (JCPOA) and the perceived failures of the Rouhani Administration. Revised February 27This edition of the Iran File was revised on February 27, in light of breaking news.   

Zarif resigned immediately after Assad’s unannounced *visit to Tehran. Reports suggest that the Iranian Foreign Ministry was not even notified of Assad’s visit, in which he did not participate. This rebuff was likely the immediate cause of Zarif’s resignation. Hardliners rejoiced at the news of Zarif resigning. Hardline parliamentarian and staunch Zarif critic Karim Ghodousi *reportedly handed out sweets during a session of Parliament after news of Zarif’s resignation broke. Zarif soon recalled his resignation, however, and returned to work on February 27.

Reformist news outlet Emtedad claimed on February 26 that Rouhani opposed Zarif’s resignation and that a “high-level regime official” (supposedly Supreme Leader Ali Khamenei) told Rouhani that Zarif’s resignation would not be expedient for the country. Rouhani formally elected not to accept his resignation on February 27, likely after Khamenei expressed his support for that decision. Zarif’s retraction of his resignation quickly followed.

Hardliner pressure against reformists, which has resurged in recent weeks, likely contributed to Zarif’s decision to resign. Eighteen parliamentarians *signed a motion to interpellate Rouhani on February 18. This follows a previous failed impeachment attempt against Rouhani in August 2018 and an impeachment attempt against Zarif in December 2018. Parliamentarians cited 14 grievances, including the Rouhani Administration’s approach to the effectively failed JCPOA. They accused Rouhani, and thus implicitly Zarif, of “consuming all of the diplomatic capabilities and capacity of the country for the JCPOA.” The motion quickly died but it signifies a trend of growing discontent among hardliners over the JCPOA and Europe’s failures to offer Iran the economic assurances it demands from the deal. Iran has already begun to push the envelope with Europe since the U.S. withdrew from the nuclear deal in May 2018. Zarif’s resignation attempt may stave off hardliner attacks and mounting pressure only temporarily.

Zarif is unlikely to curb strengthening hardliner trends regarding the ratification of key FATF legislation. Iran and Europe have yet to operationalize the recently-established Instrument in Support of Trade Exchanges (INSTEX) between Europe and Iran. The operationalization of INSTEX -- and likely of any follow-on special purpose vehicles (SPV) focused on sanctioned trade such as oil -- are implicitly tied to Iran’s completion of the remaining Financial Action Task Force (FATF)-related action items. Iran’s hardline-dominated Expediency Discernment Council (EDC) has already stiff-armed the ratification of the two remaining bills that Iran needs to implement in order to necessitate Iran’s accession to global anti-money laundering/counter-terror finance (AML/CFT) standards. Zarif is often *present for EDC deliberations over the bills as a subject matter expert and has played a crucial role in reformists’ efforts to get the bills passed in order to appease European concerns over Iran’s illicit finance environment. Reformists’ efforts to persuade hardliners to pass the two remaining bills is becoming increasingly unlikely, considering that recently-extended FATF deadline of June 2019 is soon approaching. Zarif’s continuance as Foreign Minister may extend the fight but it in no way ensures Rouhani’s victory against the growing hardliner tide in Iran.

European actions remain insufficient to appease Iran

[Notice: The Critical Threats Project frequently cites sources from foreign domains. All such links are identified with an asterisk(*) for the reader's awareness.]

ForecastThe Iranian regime will continue to push the envelope of aggressive regional behavior and its missile program despite European concerns. Iranian reformists are working to manage hardliner expectations and frustrations with the limited European economic offers and the Joint Comprehensive Plan of Action (JCPOA) in order to keep Iran in the nuclear deal. Iranian officials of all stripes have criticized a trade mechanism recently launched by the UK, Germany, and France, as well as recent European comments about Iran. The regime will likely continue to signal its unhappiness with Europe by undertaking activities that Europe has deemed “deeply concerning,” such as space launch vehicle (SLV) tests and developing its missile program.

Hardliners and moderates have criticized the newly-established special purpose vehicle (SPV) designed to enable European trade with Iran after the U.S. withdrawal from the JCPOA. The UK, Germany, and France launched the Instrument In Support of Trade Exchange (INSTEX) on January 31, nearly six months after the U.S. first reimposed U.S. secondary sanctions after withdrawing from JCPOA in May 2018. INSTEX is the long-awaited SPV designed to facilitate “essential” or humanitarian trade (such as pharmaceutical, medical devices, and foodstuffs) between Iran and Europe. The SPV has limited significance in its current form, as the humanitarian trade it will facilitate is already exempt from U.S. secondary sanctions. Presidential Advisor Hesameddin Ashena called the SPV “[too] little, [too] late.” Hardliner daily Vatan-e Emrooz ran a front-page *editorial with the headline “Was that it?” Iranian Judiciary Chief Ayatollah Sadegh Amoli Larijani *described the INSTEX as a “limited [action].” The SPV is not yet active and it is unclear when it will become operational, if ever.

The EU subsequently issued a list of 12 “conclusions” on February 2 following the SPV launch. Europe raised concerns with Iran’s ballistic missile program and called on Iran to ratify its remaining Financial Action Task Force (FATF) action items, which would affect Iran’s financing of Hezbollah and Hamas. Iran is unlikely to cease its political and material support to those groups, its close allies, making the Expediency Discernment Council’s (EDC) ratification of the two remaining pieces of legislation unlikely. Foreign Minister Mohammad Javad Zarif met with members of Hezbollah, Hamas, and Palestinian Islamic Jihad (PIJ) in Beirut, Lebanon on February 10-11. Zarif’s visit followed an intensified Israeli air campaign against Iranian and Iranian-backed assets and personnel in southern Syria in recent weeks, including a strike that reportedly *killed 12 IRGC members on January 21. Iran may employ its proxy network even more to respond to Israel’s increased air strike campaign and to deter future Israeli attacks. The effects of the likely Iranian refusal to ratify the remaining FATF items on European willingness to flout U.S. sanctions are unclear, but the outlook is not bright for Iranian trade with Europe.

Regime hardliners will push the envelope in order to signal their unhappiness with Europe. The Iranian regime has continued to intensify its malign behaviors, such as its missile program and SLV tests, since the U.S. last reimposed secondary sanctions in November 2018. Iranian armed forces *unveiled and test-launched a new long-range surface-to-surface cruise missile on February 3. The Islamic Revolutionary Guards Corps (IRGCunveiled a new underground missile production facility on February 8. The Iranian Space Agency reportedly attempted an SLV launch on February 7, less than one month after another failed satellite launch on January 15. Increased hardliner frustration with Europe over the JCPOA and FATF may fuel more malign behavior by the regime.

Regime hardliners may use their leverage over the two remaining FATF-related items still being considered by the EDC to challenge Europe and signal that Europe must offer more than the INSTEX to ensure Iran’s adherence to the JCPOA and keep Iran from restarting its nuclear program. The regime’s key decision makers, particularly Supreme Leader Ayatollah Ali Khamenei, may be holding out in hopes that a Democrat might retake the White House in 2021, bring the U.S. back into the JCPOA, and lift the reimposed sanctions. Two years is a long time for Iran to continue to bear increasing economic pressure, however, apart from the gamble inherent in assuming that a Democrat will win the next U.S. presidential election. The INSTEX lacks the substantive economic aid that Iran desperately needs and that its leader demanded in order to keep them in the Joint Comprehensive Plan of Action (JCPOA), moreover. Reformists may be unable to stave off growing hardliner pressure to leave the JCPOA in the short term let alone before 2021.

Rouhani Pressures Europe to Continue Oil Trade with Iran

[Notice: The Critical Threats Project frequently cites sources from foreign domains. All such links are identified with an asterisk(*) for the reader's awareness.]

Forecast: President Hassan Rouhani is leveraging Iran’s space program to pressure Europe to continue importing Iranian oil despite the reimposition of U.S. sanctions against Iran. The Iranian Space Agency attempted to launch a satellite into orbit using a space launch vehicle (SLV) on January 15. Iran’s space program and use of SLVs supports the regime’s ballistic missile development, which could threaten Europe and the mainland United States. Senior Iranian officials, including Supreme Leader Ayatollah Ali Khamenei, demanded that Europe maintain oil trade with Iran following the reimposition of U.S. secondary sanctions in November 2018. The regime’s recent attempt to launch a satellite into space, against the warnings of the U.S. and the international community, likely signals Rouhani’s impatience with Europe over their delay and likely inability to guarantee Iranian oil exports to Europe.

Rouhani seeks to demonstrate Iran’s space research progress in order to raise the cost of Europe’s potential failure to continue buying Iranian oil. The Iranian Space Agency’s Simorgh SLV attempted to launch the Payam satellite into orbit on January 15, Iran’s first attempt since July 2017. The rocket did not reach the necessary velocity and failed. Iranian Information and Communications Technology Minister Mohammad Javad Azari Jahromi tweeted that another Iranian-made satellite is “waiting [to be placed] into orbit,” soon after the Payam’s failed launch. Rouhani commented that Iran will resolve the remaining problems and soon launch another SLV. U.S. Secretary of State Mike Pompeo and France condemned the SLV launch and claimed that the test aids Iran’s intercontinental ballistic missile (ICBM) pursuits because of the common technologies involved in both undertakings. Significant technical differences between testing a SLV and operationalizing an ICBM remain, however. Iran nevertheless benefits from SLV tests by obtaining engineering experience and data, according to some technical experts. Iran could apply such experience and data toward the development of an ICBM, which Pompeo noted could threaten the mainland United States. Rouhani previously *noted on January 10, before the Payam’s failed launch, that Iran will launch two satellites in the next several weeks. Iran’s next launch may occur during the upcoming 40th anniversary of the Islamic Revolution in Iran on February 11. Iran has historically used the anniversary for provocative gestures such as ballistic missile tests and satellite launches. The timing of these launch attempts is likely also tied to negotiations with Europe regarding continued purchases of Iranian oil.

Iranian officials are growing impatient and hardliner pressure on Rouhani over the JCPOA’s perceived futility is growing. Khamenei and Rouhani have both threatened to resume Iran’s nuclear enrichment following the U.S. withdrawal from the JCPOA on May 8, 2018. Hardline Guardian Council head Ayatollah Ahmad Jannati criticized Rouhani on January 17 for not following through on Khamenei’s June 2016 threat to “set the JCPOA on fire if [the U.S] tears it up.” Jannati stated that “ultimately, [the Rouhani administration] will have to do just that.” The EU, the UK, France, and Germany seek to maintain oil trade with Iran in order to ensure Iran’s continued commitment to the Joint Comprehensive Plan of Action (JCPOA). Khamenei stated in May 2018 that Iran reserves the right to “restart nuclear activities cancelled under the JCPOA” if Europe is unable to maintain its purchases of Iranian oil. Europe has thus far failed to establish a bartering mechanism, commonly referred to as a special purpose vehicle (SPV), for oil trade with Iran. Europe is expected to launch a bartering mechanism “over the next 2-3 weeks,” however, it is unclear if the SPV will include oil trade or only cover humanitarian trade. The EU’s possible establishment of an oil-focused SPV is still problematic because the U.S. may sanction the SPV, thereby endangering the mechanism’s efficacy.

Rouhani aims to accelerate Iran’s space and nuclear research, likely to increase pressure on Europe. Rouhani *recommended increases to the budgets of several institutions and organizations tied to Tehran’s space and nuclear programs for the upcoming Persian Calendar year. The increases come in a budget otherwise aiming at austerity to reflect the growing challenges Iran faces balancing its budget on a weakening economy. Parliament may further increase Rouhani’s proposed increase to space and nuclear-related budgetary line items before sending the budget to Iran’s Guardian Council for final approval. Rouhani proposed the following increases from the current Persian Calendar year’s final budget:[1]

  • The Iranian Space Agency’s budget increased by approximately four percent
  • The Atomic Energy Organization of Iran’s (AEOI) budget increased by approximately 26 percent. AEOI head Ali Akbar Salehi noted on January 15 that Iran can enrich uranium up to 20 percent within four days, levels far beyond the 3.67 percent permitted under the JCPOA. Salehi also *announced the construction of a centrifuge assembly center at one of Iran’s primary uranium enrichment sites on June 5, 2018.
  • Amir Kabir Industrial University, Sharif University, Malek Ashtar Industrial University, and Imam Hossein Comprehensive University received budget increases of approximately 18, 13, 22, and 13 percent respectively. Iran’s state-controlled university system is closely tied to the regime’s aggressive behaviors such as its nuclear program and malign cyber activity. Iranian scientists affiliated with the regime’s previous nuclear weapons research maintain close ties to Malek Ashtar Industrial University, in particular. Imam Hossein Comprehensive University is the higher educational establishment of the Islamic Revolutionary Guards Corps (IRGC), roughly similar to the U.S. Army War College or National Defense University.

Europe’s continued delay in implementing an oil-focused SPV may push Rouhani to concede to hardliner pressure to withdraw from the JCPOA. Mounting hardliner pressure increases the prospects that Iran will soon give up on the nuclear deal. Rouhani *told the Iranian people following the U.S. withdrawal from the nuclear deal that Iran will negotiate with the remaining signatories of the nuclear deal over the next “several weeks” in order to secure “economic guarantees” from Europe. It has now been nearly eight months and the Rouhani administration has thus far failed to secure guarantees from Europe to salvage Iranian oil exports and business deals with European companies. Hardliner pressure following the perceived failure of the JCPOA, Rouhani’s legacy achievement, forced the removal of several of his cabinet members and led to his questioning before Parliament. Rouhani may give in to hardliner pressure, which may increase following Iran’s parliamentary elections in 2020, in order to save his political stock in Iran before presidential elections in 2021. Abandoning the deal would destroy Rouhani’s legacy achievement, however. He himself cannot run for president again in 2021, moreover, weakening his electoral motivation for giving in on his signature accomplishment. Iran continues to benefit from the deal even without the SPV, as there is a big difference between the lack of an agreement on European oil purchases and the full restoration of European sanctions on Iran. The nuclear deal’s elimination of prohibitions on Iran’s ability to purchase “offensive” weapons in a few years and the sunsetting of restrictions on its nuclear programs several years after that also make remaining formally in the deal attractive to Iran. It remains unclear, therefore, how much of Rouhani’s changing rhetoric reflects an effort to coerce Europe into an agreement athwart U.S. sanctions and how much indicates his willingness to withdraw from the deal.

[1] The Critical Threats Project based its calculations on final budgetary allocations for the current Persian Calendar year (1397) from expenses and owned assets reported in the upcoming Persian Calendar year’s (1398) proposed budget. Calculations may vary due to inconsistencies between derived final allocations and reported final allocations between state budget documents.

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Feb '19