Last May the world watched as Iran elected a new president to serve under the theocratic rule of Supreme Leader Ali Khameni. The elected victor was Hassan Rouhani, a previous government minister, academic and theologian, who had been involved in Iran’s so-far unsuccessful nuclear negotiations team. But despite his previous career, both the Iranian government and the international sphere as a whole hailed Rouhani’s victory as a move towards a more liberal approach to Iranian international engagement, and potentially an end to the need for the imposition of economic sanctions. That move was realised for the first time at the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland last week, when Rouhani gave a speech as part of a session on Iran’s international position. The Iranian President spoke of welcoming back Western commerce, namely oil supermajors, to the economy in attempts to restore ‘normal’ relations between Tehran and the West. This website has published previously on several connected issues, such as the nature of the WEF as a ‘transnational capitalist agency’ (http://wp.me/p3g0mz-K), political conflict in the 2013 Iranian election (http://wp.me/p3g0mz-26), and the activities of BP in Iran (http://wp.me/p3g0mz-3D) which is of distinct historical significance to the nature of Iran as a theocracy.
The World Economic Forum
If there was ever a place for Rouhani to make his pro-engagement speech, and if there was ever an event to signify the importance of political economy to international relations, it was the session on Iranian international position at Davos. The WEF has always been a strangely perceived ‘agency’. It is not an institution as such, although it does have permanent staff and publications, and it is not a corporation. It is, almost literally, the physical manifestation of Kees Van Der Pijl’s ‘transnational capitalist class’. Highly important individuals from politics, economics, finance, culture etc., both public and private, are invited for a week in a luxury ski resort, to discuss contemporary political economy for the world to watch. This year, the focus was on the Syrian conflict, as well as political disturbances in Egypt, the on-going disputes between China and Japan, and the aforementioned talk on Iran involving President Rouhani himself. To make a plea to the Western, or more importantly, capitalist powers at Davos meant bypassing the lengthy diplomatic niceties that would be necessary for state-to-state engagement. Instead, Rouhani chose to appeal to capital itself.
Rouhani’s Speech and the Significance of Oil
The Iranian economy has been suffering from economic sanctions imposed by the United States on the internal government and connected companies, and more recently by the United Nations for failure to halt its plutonium enrichment programme. Last fiscal year, for instance, the Iranian economy shrank by almost 5%, as oil production was restricted third. The international rhetoric has been firmly against Tehran since George Bush’s 2002 ‘Axil of Evil’ speech, in which the US identified Iran, along with Iraq and North Korea, as the main threats to global security. Rouhani’s election and his subsequent public desire to re-engage with the global economy and the Western capitalist powers can only mean good things for security in Middle East, although it is suspected that the Western corporations engaging with Iran will, as per tradition, take more than they give.
The focus of Rouhani’s speech was oil. Since private British actors struck wells in 1909, oil has been a huge determinant of Iranian politics, influencing its internal dynamic as much as its foreign policy. After decades of exploitation, the Iranian government nationalised its oil resources and expelled foreign companies, which led to a huge boycott an almost complete halt in production. Since, investment has been rocky. The 1979 revolution didn’t do much good for foreign supermajors, but President Rouhani actively welcomed them back in his speech, and in a personal seminar with oil executives. Whilst American companies were not present, representatives from BP (British), Eni (Italian), Royal Dutch Shell (Anglo-Dutch) and Total (French) attended what was said to be a friendly and productive meeting, which stressed the sincerity with which Rouhani is attempting to court Iran’s old investors.
Rouhani’s cabinet has been drawing up potential models for re-investment and production into Iranian oil resources, and has also asked companies to contribute their own ideas. It will be an interesting process; the political economy of oil in Iran has always been controversial. BP’s predecessor – the Anglo-Persian Oil Company, later Anglo-Iranian – had practically free reign over its operations for half a century, and fought through the League of Nations to keep it that way. Contracts after that were fairer but still out of Iran’s control – the 1973 OPEC crisis, and the capital flooding of the Iranian economy as consequence, had a profound impact on domestic politics and pushed some of the factors in the overhaul of the government in 1979. How Rouhani intends to balance private interest with his theocratic bosses and the interests of the Iranian people is to be watched closely.
Rouhani has to tread carefully. He has stressed his commitment to a peaceful nuclear programme, and whilst he neutralises the sanctions connected to such a problem, he is welcoming big Western business back to the Iranian economy – this will be, perhaps the first popular ‘welcome’ of its kind; after all, such big business was present in Iran previously on the invitation of the autocratic Shah. Care needs to be taken, however, with the profits of such business. The government of Mohammad Reza Shah in the 1970s found out all too well the consequences of flooding the economy with excess cash; Rouhani will need to watch his own back as he stops playing tug of war with the international elite, and starts a game of economic draughts. Persian foreign relations have a distinct habit of being compared to various sports and games (polo, cricket, chess etc.). These comparisons are set to stay for the time being.