True believers and money men

Why Iran’s election will likely bring a nuclear thaw, and a new round of tussles with the West

June 10, 2013
June 10, 2013

If Iran and the international community didn’t have the country’s nuclear program to fight about, would the two sides become friends?

Back in January, we invoked Quartz’s 14 rules of geopolitics to forecast that, after Iran’s presidential election, Ayatollah Ali Khamenei will find a path to reconcile with the outside world on his nuclear program. With the June 14 election now days away, we remain alert for a nuclear thaw. But we’re also intrigued by other political dynamics, which suggest that, after finding common language on the nuclear question, Khamenei will find other ways to be at odds with the international community. Why?

The regime will use the election to consolidate power

Iranian elections have surprised over the years: Contrary to Khamenei’s general practice of top-down rule, he has permitted free-wheeling expressions of the popular will, and suffered through sometimes unexpected results. Even when he has applied a heavy hand, it has not blotted out the atmosphere of spontaneity.

But this does not look like one of those elections. The regime has permitted eight carefully vetted candidates, and effectively forbidden fun, a staple of elections past. The outcome is more or less pre-ordained: Khamenei will get an acceptable man to run the government, and complaining about it will come at a cost. Already the regime is punishing alleged counter-revolutionary behavior. That’s because Khamenei fears a nightmarish election circa 2009, when Green Movement liberals filled the streets to protest the official results, and Twitter made its first appearance as a disruptive international political force. The Arab Spring followed from there.

The regime can discard the nuclear issue after the election  

In his campaign speeches, Khamenei has said that the election winner should never suggest compromising with the West on the country’s nuclear program. But once the election is over, he can stop show-boating.

Then Quartz geopolitical rules no. 2 and 7 will come into play (see the Precipice Rule and the Staying in Power Rule). They posit that nations will drive themselves close to a precipice, but only rarely take the plunge. Generally speaking, even seemingly sclerotic leaders wise up in the face of the abyss.

As sanctions steadily escalate, Khamenei is likely to plot a course to a nuclear settlement.

But the regime won’t go totally soft

This does not mean that Iran and the West will become friendly. Khamenei seems a product of the True Believer Rule (No. 11), which explains the outsider behavior of regimes with excess reserves of ideological conviction. Nations falling under Rule No. 11 flout the established order because they believe it does not apply to them. They also understand that such defiance tends to generate massive domestic political support.

This jibes with the Perceived Great Power Corollary (Rule 12, clause 3). Most nations have a high regard for themselves, but these regimes take self-respect to a new level, displaying a grandiose and puckish behavior while demanding that they be treated as a great people.

Khamenei seems troubled by signs that his politically sophisticated people are responding to the election with listless indifference. He has declared this listlessness the work of enemies of the state who would like nothing better than to embarrass him with a low voter turnout (below the 80% of eligible voters who cast ballots in 2009). But apparently, he is not troubled enough to embrace a genuine vote that comes with an uncertain outcome.

This is what suggests that Khamenei will continue to yearn for a fight with the West. After he reaches a settlement allowing for a softening of sanctions, Khamenei will find another reason to be irritated, and another crisis. We just don’t know on what grounds yet.

Money will talk

A question that arises, however, is why Iran’s leaders choose to succumb to behavior types that trigger international sanctions. While the rules cited above explain Iran’s politics, its leaders could decide to act otherwise.

The answer comes in Rule 13—the Getting Rich Rule. It states that leaders often act as they do out of personal interest, plain and simple. In Iran’s case, it has literally paid off to behave as it has. On June 4, the US government alleged that Iran’s leaders have earned billions of dollars through 37 front companies that conduct business around the world in oil, real estate and other sectors. Such sums, if accurate, are motivation enough to carefully orchestrate the transition of power.

Among the chief instruments of official business activity is Iran’s Revolutionary Guard, the force behind the rigging of the 2009 election and a player in vetting this year’s presidential candidates. The Guard is powerful because it is rich, and is rich because it is powerful. Its role is to back up the will of Ayatollah Khamenei. For instance, in May, a senior Guard officer, Col. Rasool Sanaeirad, suggested that security forces will act forcefully against any public election protests. But carrying out such a crackdown requires cash flow from Guard businesses.

As a result, the Guard has won control of businesses that make up one-third of the country’s economy, experts say. In April, Iran awarded a company called Khatam al Anbiya a $970 million contract to develop two natural gas fields, Halegan and Sefid Baghoun, which together contain an estimated equivalent of 400 million barrels of oil. The company is the construction arm of the Revolutionary Guard.

As foreign companies have fled Iran due to Western-led sanctions, Khatam al Anbiya has snapped up contracts to develop many of the country’s major hydrocarbon projects, as well as for road, tunnel and water work.

US authorities are trying to squelch this prodigious business activity. In 2010, the US Treasury Department blacklisted the National Iranian Oil Company as an affiliate or agent of the Revolutionary Guard. And in April of this year, it blacklisted a network of Dubai, Malaysian and Turkish companies for allegedly funneling tens of millions of dollars to an affiliate of Khatam al Anbiya.

Given this Western resistance, the Revolutionary Guard will probably encounter difficulty collecting the same levels of hard currency, and it arguably would be more lucrative for Iranian leaders to simply back down and get sanctions eased. And such a turn would not be unprecedented—Libya’s Muammar Gaddafi did so in 2006 (although, as we know now, he was a little late).

But we are betting that Iran stays the course and only gingerly finds agreement with the West. Iran is not Libya—it is not a tinpot dictatorship built solely on oil, but a long-standing state with thousands of years of history. Money and Rule 13 partly explain Iranian behavior, but only in conjunction with the other rules cited above. Think of the rules as a virtuous cycle: the Revolutionary Guard earns money so it and Iran’s rulers can continue to behave defiantly. And it behaves defiantly so it can continue to earn money.

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