The NCRI points out that Rouhani has arranged for only a small increase to funding for the regular army but a much larger increase in funding for the already highly powerful Iranian Revolutionary Guard Corps and its foreign expeditionary Quds Force. In fact, the IRGC’s budget will rise by about 48 percent in 2015. Similarly, the Intelligence Ministry is set to receive a 40 percent increase and a special religious court will receive 37 percent more than last year.
All of this leads to the conclusion, as expressed by the Foundation for Defense of Democracies opinion piece, that “Rouhanomics… is less about growth than it is about regime self-preservation.” Indeed, the NCRI emphasizes that the broader economic policies showcased in the coming year’s budget are hurtful to the very people who helped to sweep Rouhani into power.
Bread prices in Iran already saw a 30 percent increase at the beginning of this month, and now middle and working class Iranians are poised to pay higher taxes in the coming year to fund domestic and foreign security forces and their associated policies. The Foundation for Defense of Democracies observes that Rouhani is apparently being careful not to completely cut off public welfare. But any domestic unrest that results from the modest worsening of citizens’ economic situations will be met by a proportionately increased architecture of government repression.
But what will surely be of greater concern to foreign powers is the fact that the same budget priorities can be expected to contribute to the continuation of Iran’s expansion of influence beyond its borders, even in spite of the economic challenges posed by falling oil prices. The Tower has provided a thorough analysis of this expansion of influence in Syria and Iraq by way of Shiite militias that Iran controls and in many cases created.
The article criticizes current United States policy in the region for relying too heavily on local Iraqi forces to defeat and destroy Sunni militants of the Islamic State. The Tower says that exclusive focus on air support is clearly intended only as a supplement to forces on the ground, which are certainly fighting against a common enemy but are almost certainly not serving the US’s broader interests in the area.
The Tower notes that sectarianism is often the main tool in Iran’s regional policy and that it is systematically using local Shiite support to gain leverage in or direct control over multiple neighboring countries. In this way, the article notes, Iraq is a direct analogue to Syria, where Iran already has strong control and virtually unshakeable influence.
Indeed, many of the same Shiite militias have been shared across both theaters of war, having been created in response to the Syrian rebellion or even in response to the American presence in Iraq in 2007, before relocating to fight where they were needed, upon Iran’s directions.
Not only does Iran exert a high degree of control over these forces, according to The Tower it is not even willing to allow local institutions to develop. The Iran-created National Defense Force has effectively replaced the Syrian army with militias and the Iraqi army has been similarly reorganized under Quds Force commander Qassem Suleimani. These militias reportedly serve Iran’s interests by maintaining Iranian control in regions stretching across a straight line from Tehran to the Mediterranean.
Another article in The Tower reinforces the above observations about Iran’s entrenchment in the territory of its war-torn neighbors. Despite the considerable economic stresses created by falling oil revenue, Iranian officials have reaffirmed unfailing support for the Assad regime in Syria, and the government extended an additional line of credit to Damascus. A former Syrian army general, Manaf Tlass, put the terms of such lending in stark terms: “[Assad] sold Syria to the Iranians” in order to hold onto power.
Russia also shares Iran’s and Assad’s interest in keeping the Syrian dictator in power, as newly evidenced by reports indicating that Russian arms are en route to Syria along with Iran’s financing. But Iran is demonstrating unique commitment to the preservation of its alliance, seeing as the financial risk of investing in that war effort is greater now than ever.
Earlier in the presidency of Hassan Rouhani, there were some indications that Iran might be heading toward a miniature recovery. Those indicators have mostly dried up now, thanks to two major factors: falling oil prices and a loss of investor confidence due to Iran’s failure to agree to a deal with foreign powers exchanging some of its nuclear capabilities for large-scale sanctions relief.
The Wall Street Journal quotes the Carnegie Endowment as saying that Iran’s involvement in the Syrian Civil War has cost it billions of dollars, limitations on oil revenue have cost it tens of billions, and international sanctions have cost it hundreds of billions.
Although it is not the largest of these three factors, oil price is becoming an increasingly pressing issue. World Bulletin reports that Iran must now reduce its official oil price in order to preserve most of its existing market share – a move that might spell trouble for the coming year’s budget, which is based on oil prices that are above their current level. Meanwhile, the International Monetary Fund estimates that Iran has seen an 11 percent reduction in its oil revenue in the fiscal year 2013-2014.
This drop has been largely enabled by Saudi Arabia’s decision not to cut OPEC production in order to stabilize prices. The Asia News Network says that this “serves to undercut Iran in a manner that the UN sanctions never could.” It also quotes a 2006 Washington Post article as saying that Saudi influence over price decreases could single-handedly limit Iran’s ability to funnel “hundreds of millions each year to Shiite militias in Iraq and elsewhere.”
This seems to contradict Iran’s insistence that its support for its allies will never waver. But that narrative stands to be severely tested if economic indicators continue to worsen as they have been. Many analysts have suggested that that depends to a large extent on the future of nuclear negotiations between Iran and the West. The Wall Street Journal, for instance, claims that a final deal would largely make up for the recent slump.
Some outlets, including Voice of America News, have suggested that the US’s broad-based rapprochement with Cuba might lead to a similar softening of relations between the US and Iran. But Voice of America also points out that any such softening would contradict the strong anti-Western rhetoric that has been a defining feature of the Islamic Republic of Iran for its entire history.
The continuation of Iran’s self-serving regional and domestic policies, especially in light of major economic stresses, may suggest that the regime is still very much unwilling to cooperate with foreign powers. Commitment to those policies may thus endanger a nuclear agreement and further advance the economic slump that has followed a short-lived period of growth.