Over the next two years, Iran is likely to see harsh political and economic conditions; it is awaiting a parliamentary election station in 2020, punctuated by the prospect of a return to protests. The country will undergo a political transition from Rouhani to another president in 2021, and the likelihoods of a having a political transition at the level of the supreme leader are increasing. Iran is reeling under tough US sanctions and a deepening economic crisis, which spurs internal conflicts over power and resources. Given the peculiarity of Iranian-American relations, the remainder of President Trump's term is a period of labor and awaiting that leaves its impact on shaping the main features of any future political process in Iran.
Shifts affecting "power distribution map" in Iran during 2020
1. Continued expansion of the Revolutionary Guards’ role: The significant developments in the map of the distribution of internal power indicate the Revolutionary Guards’ desire for further expansion, and a shift towards the deep state, which is the core process at the Iranian political level. This means emptying some of the constitutional institutions, such as the government, from its powers and taking some files out of its hand. A development in the government system in Iran can be expected under the heavy weight of calling to reduce the powers of some institutions, such as the presidency and parliament, in favor of other institutions that do not derive their legitimacy from the elections, such as: "the Expediency Council" and "the Supreme National Security Council."
2. Parliamentary elections: The ongoing preparations for the parliamentary elections scheduled for February 21, 2020 showed the tendency of the conservative movement to dominate most of the seats in the next parliament. In light of the announcement of the current Council Speaker Ali Larijani that he does not intend to run in the upcoming elections, Mohammed Baqir Qalibaf is increasingly likely to gain the position of Parliament Speaker, which represents another important development in the context of the strategy of the systematic expansion of the Revolutionary Guards in the map of the distribution of internal power.
3. Iranian presidential elections: It is highly unlikely that a candidate close to Rouhani's orientations will find his way to power in light of the great reluctance of the current government. It may be within the Revolutionary Guard’s future plan to directly or indirectly dominate the presidency and the executive authority in the 2021 elections. But the ongoing talking - so far - is about escalating a conservative, technocratic face of the government leadership in the next stage.
4. Competition for Khamenei's succession: The movements of political circles in Iran show that competition for the position of the supreme leader is heating up. The manifestations of this competition are confined within the conservative current and come to surface in the form of tacit alliances that are taking shape in light of the competition between constitutional institutions. As such, the political process will be during the entire coming period under the umbrella of competition for succession.
Milestones of the social situation in Iran during 2020
Social challenges exacerbated in light US sanctions. Most of the social challenges are associated with widespread poverty and other economic drivers. Experts expect that this situation will continue during the year 2020. But another pattern of protests emerged with the turn of 2020 driven by civil political motives, against the background of the Iranian air defense shooting down a civilian passenger plane.
The year 2019 witnessed a remarkable development in the political and social movement in Iran. It was represented in raising slogans that refused to belong to the two main political currents (the reformist and conservative currents). The means the breakdown of political references that control public opinion and can direct it and the emergence of new references outside the hegemony of the traditional political duo. This development has future repercussions, and it will be very likely to see some of their effects during 2020, as the radical tendency is deepening more across the various classes and social lines. Besides, we are likely to witness attempts to heal the rift between the four existing radicals (economic, ethnic, religious and political), with the aim of coordinating the efforts of the forces opposing the regime, and improving the effectiveness of protest movements.
Scenarios of the Internal Political Process in 2020
First Scenario: Re-escalation of Reformist Trend: This scenario assumes the regime’s tendency to repeat the experience of the 1997 elections that resulted in the rise of the reformist movement, as demonstrated by the reformist President Mohammad Khatami’s assumption of power between 1997 and 2004. In order for the repetition of such a scenario to be possible , it is necessary for parties in the conservative movement to resort to an alliance with the reformists, and to share power with them.
Second Scenario: Direct Military Rule; This scenario assumes the Revolutionary Guards take over the executive power either directly through a revolutionary military government council, or indirectly through bringing a retired general to the presidential seat, and a remote government administration. This ascension can be considered the culmination of the natural development of the revolutionary Guard Foundation from a purely military establishment to a deep state.
Third Scenario: Escalation of Technocrats: This scenario assumes that the regime resort to escalating one of the faces of the technocrats close to the conservative current, and supports him in the upcoming presidential elections, to ensure bringing to the presidency post. Then the new president will begin a partial opening to the West in order to harvest some economic fruits.
External political transformations impacting internal scene in Iran
1. The American Presidential Election: Most Iranian leaders prefer losing President Donald Trump to the next presidential race. There is a belief in the circles of the Iranian regime that changing the current American administration will lead to a breakthrough in Iranian-American relations and ease pressure on Iran. This is what is pushing the regime to postpone taking decision on many issues until after the American elections. This is what has led to a the policy of strategic patience in the face of the current US pressures.
2. Possibilities of escalating tensions between Iran and the United States: At the end of 2019 and the beginning of 2020, the region witnessed a serious security and military escalation between the United States and Iran, culminating in the assassination of Al-Quds Force commander, Qassem Soleimani, and Iran's formal withdrawal from the nuclear agreement. This situation may be repeated for various reasons.
3. Future of the Nuclear Agreement; During the year 2020, Iran continues its steps to gradually walk out of the nuclear agreement to stop the American campaign of "maximum pressure" and force Washington to return to the negotiating table. But the Trump administration is showing no sign of wanting to return to the agreement. It became clear that Washington was willing to negotiate with Tehran on a separate track, outside the framework of the nuclear agreement.
Scenarios of the international trends for the Iranian regime
First Scenario: Opening to the West: This scenario assumes that the political system in Iran will decide to defrost the snow between it and the Western countries, including the United States, through a comprehensive dialogue. Some parties in the Iranian government support this scenario, as do several political trends with varying effects, but overall they are relatively weak. They believe that opening up to the West and engaging in a comprehensive dialogue with it is the main key to resolving many of the country's crises, especially the economic crisis. In the context of this openness, we can place statements by prominent figures in the Iranian government about the possibility of healing the rift with neighbors, getting ready for dialogue with the Western countries on some regional issues such as Yemen, and insisting on passing the laws of the Financial Action Task Force (FATF).
Second Scenario: opening up to the east; the historical experience of Iranian official behavior shows that, under sanctions, the regime is moving toward strengthening its relations with the Russian-Chinese east. The institutions of the revolution are seeking to obtain "survival guarantees" from the eastern powers in light of the pressures on the regime on the western front. If China was the main pillar for Iran during the previous sanctions, then Russia appears today to be the main international actor on which the Iranian regime is taking refuge.
Third Scenario: Waiting until US presidential elections in November 2020: Such a trend can be found in statements by Iranian officials from inside and outside the government, who have indicated several times that it is necessary to withstand sanctions until the end of the US President Donald Trump's term. Of course, these circles expect that the presumed future Democratic President will show more flexibility towards the Iranian file. In this scenario, all outstanding issues will remain open but pending without realistic solutions during the transition period. And until the end of Trump's presidency, Iranian attempts to stay alive will continue, by finding breaths from neighboring countries.
Iranian economic outlook in 2020
In 2019, Iran suffered from the largest wave of recession in its contemporary history, and this recession can be expected to continue during 2020. Sources confirm that about 20 per cent of the production units and factories in Iran are completely bankrupt due to this recession, while some expectations go to the current Iranian year 2020 which will get worse, as according to the International Monetary Fund, the Iranian economy is expected to shrink by 5.5 percent.
In the budget of the next Iranian fiscal year, the government relied on unrealistic figures, such as the sale of government companies and assets worth of 50 thousand billion, and the distribution of bonds and loans documents worth of 80 thousand billion tomans. Government decisions to raise the prices of oil derivatives and reduce social costs may increase inflation. The impact of sanctions on components of the Iranian economy is likely to continue to grow steadily during the next Iranian fiscal year beginning in March 2020.
Figures released by international centers show that the Iranian economy will not improve in 2020. As for inflation, it will be above the level of the thirties, stable at 31 percent at best, while the annual high inflation schedule shows that it will be higher. This is while Iran's share of the global economy will drop by about 8 percent, and the size of Iran's domestic product will experience a contraction of about 10 percent. Next year, unemployment rate which will rise to a record level, to stand at 15.6 per cent. This means that around 1.5 to 1.8 million workers lose their jobs during 2020.
Production expectations, Iranian oil exports in 2020
The effects of sanctions on the oil sector will not stop at the limit of exports, but will go beyond them to affect the total production and the internal consumption of oil products, which entails important consequences in 2020. While the government plans to sell about one million barrels of oil per day according to next year’s draft budget, projections indicate that this cannot be achieved, which opens the door to a large deficit, estimated by parliamentarians at 25 percent during the year 2020.
In terms of oil production, the following scenarios can be drawn:
The first scenario: the continued decline in Iranian oil production; it assumes that Iranian production will continues to decline under the heavy weight of low exports, a lack of technologies, and the necessary absorptive strength. This scenario envisions Iranian production fluctuating between 1.8 and 1.5 million barrels. Iran will move towards focusing on extracting oil from the common fields, which exposes it to friction with countries with which it has positive relations. It will also head for raising oil prices for internal consumption, in order to cover the deficit caused by the stoppage of exports, low production and high cost of extraction. This makes the economy a prone to more crises and higher inflation rates.
The second scenario: a rise in oil sales; it assumes that Iran can achieve a remarkable increase in oil sales during the next year. This is what government seems to have counted on when drafting the next year’s general budget. It is assumed that crude oil sales reach about 700,000 barrels, of which 250,000 barrels are sold to the private sector inside Iran, or to those to whom the government owes compensation for debts. Assuming this, which is a very remote possibility in the event that sanctions persist, Iran can maintain levels ranging 2.1- 2.4 million barrels of daily oil production. Even if a political pathway to ease sanctions is launched, its implementation of this will require a deadline beyond the next year.
The third scenario: the middle scenario; it assumes that Iranian oil production will remain near 1.9 million barrels. In this scenario, Iran can maintain about 150,000 barrels of daily exports as a minimum, and it can expand its absorptive capacity by raising the operating strength in power plants and in refineries. Although, according to this scenario, it will benefit from its revenues resulting from the sale of gasoline and electricity to neighboring countries, it will have to raise energy and fuel prices as well as the prices of oil provided to petrochemical companies and power plants, which means an increase in inflation, and the possibility of the occurrence of noticeable collapses in the shares of petrochemical companies.
EPC | 27 May 2020
EPC | 19 May 2020
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