The resumption of oil commerce between Iran and the West is made complicated by persistence of strained relations between the two sides. While Tehran is keen to gain access to European wealth, Supreme Leader Ali Khamenei and other hardliners have repeatedly made it clear that they will not allow this eagerness to compromise the Islamic State’s fundamentalist identity. That identity is characterized in large part by defiance of the West, and particularly the United States. And even so called pragmatists like President Hassan Rouhani have joined in reaffirming that defiance.
This was made clear on Monday when Hassan Firouzabadi, the Chief of Staff of the Iranian armed forces, declared that Tehran would be carrying out “massive missile drills,” thus doubling down on previous violations of UN Security Council resolutions barring Iran from the development or use of weapons that are capable of carrying a nuclear warhead.
So far, these and other provocations have failed to curtail the European appetite for Iranian oil. But some factions of the Iranian regime seem increasingly anxious about the possible implications for hardline ideology if Iran merely agrees to cooperate with the West in economic spheres. Last week it was reported that there were conflicts within the regime regarding the nature of new contracts with foreign businesses, which some hardliners characterized as violating the Iranian constitution by giving “ownership” of Iranian resources to those businesses.
It is presumably in light of this conflict that the Iranian propaganda network Press TV reported on Monday that National Iranian Oil Company officials had denied reports that foreign entities would be offered a discount on oil transactions. This denial is very much in keeping with Iranian rhetoric regarding the comparative strength of Iran and Western powers, both in terms of economic and military matters. But Press TV’s claim that all foreign transactions will be governed by current market rates may be difficult to reconcile with the same source’s projections about the recovery of the Iranian oil economy.
In line with a number of other recent statements from Iranian officials and media, Press TV says that the current Iranian crude oil export rate of 1.3 million barrels per day will rise to 2 million barrels per day within the first half of the forthcoming Iranian year, which begins on March 21. This seems to require Iran reclaiming substantial amounts of market share from competitors such as Saudi Arabia, who continue to maintain production in spite of low global oil prices, and may deliberately sell oil at a loss in order to box Iran out of major segments of the market.
Chances are that Iran will have to compromise on its defiance of Western business interests if it is to secure any portion of its own promised economic recovery. But those Iranian officials who place ideology ahead of a pragmatic strategy of engagement are likely to stand in the way. Some of them, such the Iranian Revolutionary Guard Corps, may actually stand to benefit from constraining Iran’s recovery, since many reports indicate that the lack of foreign competition helps them to maintain majority control over the nation’s GDP as well as its lucrative black market in foreign goods.
These hardline entities also wield considerable power over the forthcoming elections for the Iranian parliament and the Assembly of Experts, which may help to determine the trajectory of future Iranian foreign and economic policy. The National Council of Resistance of Iran and other representatives of the opposition to the clerical regime have extensively commented on those February 26 elections, emphasizing that none of the competing political factions present prospects for real change, although they do present alternative strategies for preserving the status quo.
It is perhaps for this reason that the leaders of so-called moderate and reformist factions, namely President Rouhani and Mohammad Reza Aref, have joined in a coalition and presented a unified candidate list to their supporters. The hardline factions hold sway over the process, in part through the recent elimination of half of the more than 12,000 people who initially registered as candidates for high office. And this faction appears to be a threat to the strategic re-engagement with Europe that has only just begun.
Victory for Rouhani’s allies is expected to help the Islamic Republic along the path that started with nuclear negotiations and that culminated this month with the acquisition of 100 billion dollars in unfrozen assets, as well as the finalization of a number of potentially lucrative oil sales and infrastructural development contracts with foreign businesses.