Sara Bazoobandi
Associate Fellow, Middle East and North Africa Programme

The anticipated handshake between US President Obama and Iranian President Rouhani may not have happened at the UN last week, but their phone conversation on 30 September broke the ice, marking the first communication between the American and Iranian leaderships since the Iranian revolution of 1979. 

Cooperation on the nuclear file

Dominating negotiations between the US and Iran is the future of Iran's nuclear ambitions. Recently elected president Rouhani made a direct reference to the issue in his speech at the UN General Assembly, stating that a military nuclear programme would be against the government's religious principles. Iran's new leadership has taken a more focused approach to prove the civilian nature of the country's nuclear programme. And for the first time since 2005, Iran has said it is willing to review limits in the level to which it enriches uranium. Iranian officials have insisted on the importance of the enrichment and have argued that the process will not be suspended; but that they are ready to discuss the framework, level, method and site of enrichment. 

Until resolved, Iran's nuclear programme ‒ negotiations on which are due to be held in Geneva on 15-16 October ‒ will remain the sticking point in the country’s interaction with the international community. At the UN last month, president Rouhani and foreign minister Mohammad Javad Zarif spoke of a nuclear deal within six months or a year, which would relieve international concerns about Iran's nuclear drive.

Change in Iran's strategy

Under the previous administration of Mahmoud Ahmadinejad, economic sanctions imposed by the international community were mocked and their impact was denied. Most of the economic indicators and statistics published by Ahmadinejad's administration were widely understood to be overestimated and hiding the negative effect of the sanctions. For most of his administration Ahmadinejad enjoyed the support of the country's Supreme Leader, Ayatollah Ali Khamenei, who called for an 'economic jihad', asking Iranians to show strength through difficult times, and for the government to apply 'economic resistance' measures.

Sanctions applied in 2010 on international financial transactions and expulsion from SWIFT created a hard-currency shortage in Iran. Oil exports, which form more than 80% of the government's revenue, have been reduced by 50%. As a result, Iran is facing severe economic difficulties. The currency crisis, negative growth, rising inflation and soaring unemployment figures are on the long list of Iran’s economic problems made worse by sanctions.

Now, the country's leaders are acknowledging that pressure from sanctions is mounting. Rouhani has emphasized the need to act swiftly over the deadlock on the country’s nuclear programme. There are political reasons for Iran to be in a hurry, but highlighting the economic difficulties suggests that economic pressures have been a key factor in Iran's change in attitude.

Also significant in Iran's shift is the new government. A moderate president, Hassan Rouhani, was elected this year, replacing a hardline conservative. Most of the appointees to the new administration have a track record in politics of taking a more moderate approach to domestic and international issues. 

Ayatollah Khamenei took a different position at this year's presidential election. During the election campaign many Iranians were hesitant as to whether or not they should cast their vote. Many had lost hope in the importance of their vote after Khamenei's statement following the 2009 election in which he insisted on Ahmadinejad's victory. But a few days before this year's election the supreme leader invited Iranians to participate, 'even if they do not support the Islamic Revolutionary government'.

Complex path ahead

President Rouhani received both welcoming and unpleasant reactions when he arrived back in Tehran from the UN. Iranians have different views on international relations and Iran's place in the world. Nevertheless, most see that improved relations with the US will probably lead to better economic prospects particularly if sanctions are lifted. The same mixture of opinion seems to exist among the establishment. A senior Iranian clergy, Mohammad Taghi Rahbar, said that the slogan 'death to America', often chanted after Friday prayers, was 'not a verse in the Quran' and could be dropped. Another senior Iranian clergy, Ayatollah Javadi Amoli, called the phone conversation between Rouhani and Obama a sign of victory for the Islamic Republic. 

Iran's foreign policy must be approved by the supreme leader. Given the ayatollah’s recent moderate language he seems to be in favour of negotiations. He has not made any comment since Rouhani’s UN speech: this could be a sign of his backing (so far) of the new strategy, while also waiting to see both domestic and international reactions before giving direction to the government on the next steps. Another important player within the establishment, widely anticipated to oppose the normalization of US-Iran relations, is Iran's Revolutionary Guard Corps (IRGC). Their non-confrontational reaction so far suggests there may finally be consensus emerging among the Iranian political elite to resolve the country’s foreign policy crisis. 

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