Iran’s Challenges over Shared Gas Field
As Saudi Arabia and Kuwait sideline Iran by asserting ownership of the contested al-Durra/Arash gas field, observers point to Iran’s own deficiencies and delays in capitalizing on its share of this and other joint fields. They attribute the escalation of disputes over shared gas fields with neighbors—and Iran’s limited response to mere podium declarations—to a combination of domestic political hurdles, tense foreign relations, and the crippling impact of sanctions on industrial advancement. This situation has become another focal point for reformist analysts, who are pressing the authorities to engage in dialogue with the West to lift the sanctions and take decisive action to get the country off the FATF blacklist.
CBI’s Struggle against FOREX Volatility
Despite subtle promises of financial stability ahead of the election by the Central Bank of Iran (CBI), recent initiatives—such as the launch of high-interest deposits and the auctioning of gold coins—have raised questions about the integrity of the bank’s currency reserves. Economic reports highlight that during the auction process, gold coins were exchanged at currency rates surpassing 93,000 tumans. This reflects the CBI’s approach to sell gold to the highest bidder, aiming to protect its currency reserves and divert the FOREX market’s volatility towards gold investments. However, these strategies have not succeeded in curbing the rising trends in the currency market, which experienced an even sharper increase post-election. This has led to growing concern among analysts regarding the upward trajectory in the FOREX market.
Northern Forests at Risk
With the arrival of tree-planting day and natural resources week, media and official attention has spotlighted the critical state of Iran’s northern forests amidst warnings from environmental experts. The stark underfunding of conservation efforts—comparatively as low as the annual earnings of just three soccer players—alongside systematic destruction for real estate development further jeopardizes the future of the ancient Hyrcanian forests. Despite efforts to curb illegal construction, environmental discourse is mired in political and ethnic controversies, conflicting with tourism expansion plans and sidelining the needs of local communities. The dire lack of budget and prioritization places the preservation of these vital ecosystems in jeopardy, casting a grim outlook for Iran’s northern forests.
Critical Look at Foreign Policy amid Hardline Ascendancy
Reformist-leaning, former diplomats are increasingly vocal in their criticism of the nation’s foreign policy, pinpointing a lack of cohesive strategy that leads to a noticeable misalignment between military initiatives and diplomatic endeavors. The recent electoral success of hardline candidates in Tehran, coupled with ultra-hardliners’ steadfast dismissal of the necessity for the JCPoA and FATF, fuels apprehension regarding a potential shift towards more rigid policy stances. However, considering the backdrop of ongoing economic challenges and escalating concerns over the impact of a possible Republican presidency in the U.S. on Iran’s financial stability, any hardening in Iran’s foreign policy remains at the level of speculation, especially when the ultimate decision-making authority resides with the supreme leader rather than the Majles.
Ra’isi’s Algerian Summit: Navigating Sanctions, Forging Alliances
Conservative observers are heralding President Ebrahim Ra’isi’s trip to Algeria for the Seventh Summit of Heads of State and Government of the Gas Exporting Countries Forum as a pivotal journey with broad implications. They view it as a strategic move to counteract sanctions, foster unity among gas-exporting nations, and leverage mutual positions with Algeria on various issues, including the Gaza crisis. Despite the conservative media’s enthusiastic portrayal of Iran-Algeria relations, underpinned by shared Arabic-Islamic values and the potential for cultural and economic exchanges, the trade volume between the two nations remains at a mere $15 million. With strategic planning and the resolution of banking and transportation hurdles, this could potentially surge to over $2 billion in the long term, but Iran will have to face tough rivals like Turkey, which already boasts over $2 billion in exports to Algeria.
New Headaches for Iran in Caucasus
At the just-concluded Antalya Diplomacy Forum 2024, Turkey and Armenia declared readiness to normalize relations. Iranian experts are warning that while this would reduce tensions in the South Caucasus between Azerbaijan and Armenia, and thus bring about more stability in the region, it could also weaken Iran’s position and its geopolitical connectivity with Armenia. Iranian experts argue that the normalization of relations between Armenia and Azerbaijan could embolden Turkey and Azerbaijan in their territorial ambitions at Iran’s expense. In addition, it could spell growing influence for Turkey, in effect reducing Iran’s standing and relations with Armenia. Russia, the other major power in the region, has been in favor of the Turkey-Armenia détente because it opens up transportation routes that were not available before. However, given the interests of China and NATO in the region, the game of counterbalancing becomes even more difficult for Iran in the Caucasus if this normalization proceeds.
Could Another Khamenei be Supreme Leader?
Amid discussions of the “oversight” responsibility of the Assembly of Experts (AoE) or the diversification of membership to allow lay and female members into the elite 88-man body that will decide the next supreme leader, another question has assumed greater importance: is Mojtaba Khamenei qualified to succeed his father? Based on two considerations, clerics in Qom have challenged the perception that Ali Khamenei disapproves of the hereditary approach: 1) in their view, Mojtaba does have the credentials for the office; and 2) the AoE is free to rule as it sees fit.
Iran’s Unhappiness with Iraq
Unsure about the extent of its influence in next-door Iraq, Iran has two great worries there: 1) the presence of American military forces nearby and 2) the autonomy of Iraqi Kurdistan, which Iranian authorities fear could fan separatist sentiment in Iran, not to mention suspicions of close ties between Iraqi Kurdistan and Israel. The head of a Tehran-based center for Arab studies notes that the provincial administration in Iraqi Kurdistan and the central government in Baghdad are united in a wish to extend the U.S. military presence. At the same time, he observes, U.S. officials at the highest levels have avoided appearing in public with the prime minister of the Kurdistan Region in his visit to Washington. Small comfort for Iran, but comfort regardless.
Iran’s Nuclear Posture Unbalancing IAEA, West
Iranian commentators seem to agree that the Islamic Republic is not rushing into the production of a nuclear bomb, at least for the present. Nonetheless, Iran’s seesaw behavior concerning enrichment of uranium to 60-percent purity and its prevention of the entry of one-third of the IAEA’s inspection team into Iran is leaving the international nuclear watchdog guessing on how to proceed at its next Board of Governors meeting on 4 March. Iran’s inconsistent stance—what some consider a balancing act—seems to be influenced by the outbreak of hostilities in Ukraine and Israel-Gaza, suggesting the country is leaving its options open in case there is no revival of the JCPoA and an uptick in tension with the West, particularly the U.S.
Shot in Arm for Iran’s Energy Sector
Iran’s moribund oil sector may be getting a new lease on life. India, which cut its crude oil imports from Iran in 2019 in response to U.S. sanctions, seems poised to return as a major importer of Iranian oil, pending the suspension or removal of sanctions. At the same time, sanctions or not, the Iranian oil sector is seemingly proceeding with joint ventures involving Russia’s Transneft, the world’s largest oil pipeline operator. Iran’s energy deals with Russia reportedly total $40 billion. Oil Minister Javad Owji claims Iran and Russia have drawn closer together lately.
Free-Trade Zones Not Delivering on Promise
According to Iran’s Customs Administration, the free-trade zones Iran first set up in 1990 to spur trade and investment have resulted in a trade deficit of nearly $3 billion this year, meaning Iran’s imports through these zones far outweigh exports—certainly not what Supreme Leader Ali Khamenei hoped to see. An economist believes the number is far higher if one factors in smuggling. Iran’s loss is a gain for trade partners like Russia and Turkey, which are eager to engage with Iran in the free-trade zone in Anzali. Tourism remains among the untapped potentials of these zones. Hojjatollah Abdolmaleki, who took over their management after his exit from the Ra’isi administration, is proposing land-lease arrangements allowing foreign investment partners to develop these areas, hastening to add that this would not result in the sale of Iranian territory to foreigners.
Iran’s Image Overhaul amid Domestic Hurdles
Iran is actively working to redefine its global image beyond military prowess and associated negative perceptions, focusing on cultural and academic outreach through collaboration with foreign influencers and media. This initiative, driven not only by financial motives, recognizes the tourism successes of neighboring countries and the possibility for altering the attitudes of potential investors. However, Internet censorship, compulsory hijab laws, and limitations on access to international credit cards pose significant challenges for foreign visitors. Moreover, the special treatment given to these foreign visitors incites feelings of resentment among the Iranian people, further complicating the nation’s image renewal campaign.
Plan for Afghan Immigrants Sparks Concerns
The administration’s initiative, which offers citizenship benefits such as health insurance and banking services to authorized Afghan migrants for a nominal investment, has ignited criticism amid concerns over insufficient oversight and the potential threat of infiltration by recognized terrorist groups. While the plan’s stated objective is to utilize migrant capital for domestic economic gains, Iran could also derive unspoken benefits from the established Afghan community within its borders, potentially influencing engagements with the Taliban. However, the backdrop of unresolved water rights disputes with the Taliban, combined with worries about national identity and widespread distrust in government policies, has intensified criticisms.
Natural Gas Crisis amid Swap Failures
Despite the initial enthusiasm for a gas swap agreement with Turkmenistan, the arrangement, mirroring patterns from past years, fell through once again. While this deal was poised to fulfill a fraction of the natural gas demand in Iran’s northern provinces, authorities started to issue warnings about potential shortages with the onset of cold weather in Iran. The supply of gas, particularly methane for petrochemical plants, has been suspended, with responsibility placed on the ministry of petroleum, criticized for its failure to engage domestic investors in the absence of foreign ones. This situation, occurring concurrently with Qatar’s plans to increase gas production from a field shared with Iran, has intensified internal criticism of Iranian policies and the repercussions of sanctions.
