The Truly Massive Challenges Facing Iran's New President

Why Rouhani will have to start putting out fires, fast.
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Hassan Rouhani, Iran's incoming president (Reuters)

One of the most important questions in the Middle East this year is whether Hassan Rouhani's election will mark a new era -- both for Iranians and the outside world. The answer could mean the difference between peace and yet another war. Rouhani's campaign certainly made lots of promises. One of his most striking posters was a bright blue textograph of his face crafted from a slogan promising "a government of good sense and hope." The Scottish-educated cleric energized an election many Iranians had considered boycotting after pledging that "freedoms should be protected." He also won over key youth and female votes by vowing in televised debates to "minimize government interference" in culture and society and to give women "equal rights and equal pay."

The upbeat promises have continued apace since the June 14 election, particularly on Rouhani's two English and Farsi Twitter accounts. "This victory was a victory of wisdom, #moderation, progress, awareness, commitment and religiosity over extremism & bad behavior," @hassanrouhani tweeted on June 15. The "bad behavior" was clearly a dig at outgoing President Mahmoud Ahmadinejad, whose status has plummeted over the past year. He leaves office almost in disgrace.

Online, Rouhani even discreetly tipped his turban to the Great Satan. Four days after the vote, his account tweeted a decade-old picture of Rouhani visiting a U.S. field hospital set up after the devastating 2003 earthquake in historic Bam. He is pictured next to an American female medic.

Now Iran's new president has to deliver. After the Aug. 4 inauguration, Rouhani faces a grueling test of the popularity he won at the polls against five other candidates. Iran's economy is toxic. Political divisions border on schisms. Regional allies--both secular and Islamist--are literally under fire. And the outside world has threatened military action if Tehran does not compromise on its nuclear program. Rouhani will find few quick fixes either. His gentle smile will only get him so far.

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"It's the economy stupid" applies as much in the Islamic Republic as in any capitalist society. Rouhani inherits an almost existential challenge in putting out the financial fires. The economic situation is beyond grim due to a combination of punishing international sanctions and Ahmadinejad's gross mismanagement.

Iran's currency has lost about half its value since mid-2012. At least one out of four young people is now unemployed--including 4 million university graduates--in a country where more than half the voters are under 35. The Central Bank put inflation at 36 percent this spring, but Rouhani said his incoming team estimated that it was closer to 42 percent. Disgruntlement is visible. Sporadic demonstrations, including a July rally by steelworkers outside parliament, have protested unpaid salaries and layoffs.

Iran's economic lifeline is oil. But crude oil exports were cut by almost 40 percent in 2012--to 1.5 million barrels per day, the lowest in more than a quarter century, according to the U.S. Energy Information Administration. By July 2013, the World Bank reported that Tehran had not paid back loans totaling $79 million for more than six months (out of $679 million due overall), which also meant Tehran would be ineligible for new funding and would find it harder to get new money from commercial creditors.

"For the first time since the imposed war [with Iraq from 1980 to 1988], our economic growth has been negative for two years in a row. And this is the first time that negative growth is accompanied by high inflation -- the highest inflation in the region or perhaps in the world," Rouhani told the country's parliament in July. In Iran's unusual political system, the president's biggest portfolio is the economy--and it could make or break his presidency.

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During the presidential debates, Rouhani was quite conciliatory toward the outside world, at least compared with the defiant and discordant Ahmadinejad. "We need to move away from extremism," Rouhani said on national television. "We should maintain the country's interests and national security to provide conditions where we create opportunities." The key, of course, will be whether Iran and the outside world can settle longstanding questions about Iran's nuclear program.

Unlike the economy, Rouhani is uniquely qualified on this issue. He is a mid-ranking cleric, but he was also the national security adviser for 16 years. As chief nuclear negotiator, he brokered a rare deal with the West in 2003-4, when Iran temporarily suspected uranium enrichment, a fuel process that can be used for both peaceful nuclear energy and the world's deadliest weapon. He left the job shortly after Ahmadinejad took office in 2005.

Rouhani actually took a potshot at Ahmadinejad's team--including Saeed Jalili, the chief nuclear negotiator and another presidential candidate--in the campaign this summer. Among the six major powers negotiating with Iran, Jalili was famed for his long-winded tirades and stalling tactics that went nowhere during the five rounds of diplomacy since April 2012. The joke in Washington was that U.S. officials would actually not have minded if Jalili won the election, because at least they would no longer have to sit across from him at the negotiating table. He may have had the same reputation in Tehran.

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Robin Wright is a senior fellow at the U.S. Institute of Peace and former diplomatic correspondent for the Washington PostMore

She has been traveling to Iran regularly since 1973 and is the author of four books on the country’s revolutionary ideology, leaders, politics, culture and conflicts. A recipient of the National Magazine Award for her reporting in Iran, she has also worked at the Carnegie Endowment for International Peace, the Brookings Institution, and Yale University.

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