The Iranian Presidential Election: Significance and Potential Outcomes

Lynx Global Intelligence

 

With less than a few days before Iran holds its presidential election, a victory for incumbent president Hassan Rouhani is likely. This comes despite blowback from his failure to deliver on political reforms, as well as the underperformance of the economy after Rouhani sold the nuclear accord and removal of sanctions to Iranians as a path to prosperity. Polls have shown that Rouhani may have 54% of the decided vote, sparking the possibility that he may win the election outright on Friday and avoid a runoff.  Polls are scheduled for May 19, with the possible run-off on May 26th.

A couple issues are working in favor of Rouhani and in disfavor of the conservatives. First, every incumbent Iranian president has gone on to serve a second term. With the 2009 election debacle and Green Movement protests still fresh in the minds of the ruling elites, stability and continuity are important factors in the race. Second, Rouhani’s base of reformist/moderate voters has remained solid. When turnout for an election is high, this tends to favor reformists like Rouhani. The conservative base, while mostly consolidated around former prosecutor and current custodian of the Imam Reza shrine, Ebrahim Raisi, is still partially fractured. Tehran mayor Mohammad Bagher Qalibaf, a former chief of the Iranian police force, enjoys significant support.

There are several concerns regarding the election and its outcome. No matter who wins the election, the nuclear accord is certain to remain in place. The Supreme Leader, Ayatollah Khamenei, has ultimate authority over foreign policy issues and the success of the nuclear accord is evidence of his tacit approval. Qalibaf has also indicated support for the agreement. However, a conservative victory would likely still come with risks. Both Raisi and Qalibaf have attacked Rouhani’s tepid economic record, pledging to increase subsidies to poor families and address youth unemployment. Their economic populism reminds the ruling class very much of Ahmadinejad’s destructive economic policies, a situation they do not want repeated.

There is a potential for social unrest. Ayatollah Khamenei warned recently that “disruptors” would be dealt with harshly. Should Raisi or Qalibaf pull off an upset that Iranian voters see as illegitimate, the possibility of protests increases. The regime would likely crack down immediately and decisively. Human rights abuses continue in Iran, but a very public repeat of anything resembling 2009 could give the international community a reason to reassess sanctions.

A victory by either Qalibaf or Raisi may embolden those who wish to see a more assertive Iranian foreign policy. A confrontation in the Persian Gulf or a missile test may invite the Trump administration to junk the nuclear deal. Earlier this year, the administration put Iran “on notice” after Tehran launched a test missile. A US pullout from the nuclear deal would, of course, be harmful to US investors interested in exploring the emerging market in Iran. While current restrictions on business with Iranian banks and the complexity of the sanctions themselves have deterred investors, it would be wise to continue to navigate these issues and prepare for an Iran that is ready to do business with US investors. Lynx Global Intelligence is prepared to provide on-the-ground knowledge of emerging markets in Iran, as well as clarify what the current risks are and explore ways of entering Iranian markets.

Some have suggested that Raisi’s candidacy is really a dry run for fielding a replacement for Supreme Leader Ayatollah Khamenei, who is suffering from prostate cancer. Raisi, a conservative cleric with considerable experience as a prosecutor, is also the custodian of the Astan Quds Razavi, the powerful foundation that manages the shrine of Imam Reza in Mashhad. Raisi is also a member of the Experts Assembly, which has authority to choose the Supreme Leader. Raisi is an untried candidate who has been criticized for his lack of charisma, but the regime may be testing the appeal of Raisi as a potential leader, as well as the resonance of his conservative message.

At the same time, it is too simplistic to see establishment groups in Iran such as the Experts Assembly through a binary reformist vs. conservative lense. Saeid Golkar, a visiting fellow for Iran policy at the Chicago Council on Global Affairs, has instead suggested viewing such groups as divided between “three pillars”: the state bureaucracy, the clerical establishment, and the military. Golar positions Rouhani close to the state bureaucracy, and Raisi with the military. Khamenei navigates these groups, and despite the fact that he has expanded the powers of his office, the Revolutionary Guard still exert significant influence in Iranian politics. Despite this complexity, the regime seeks continuity and an avoidance of any shock to the system—in this case, an unprecedented loss for an incumbent president. The replacement of Rouhani with an administration that may be inclined to pursue an aggressive foreign policy, economic populism, and further antagonize a nation that is ready for change is widely seen as a potentiality best avoided.

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Overview: The Future of the Republic of Turkey Remains Unclear After Failed Coup d’état

Turkish politics have taken a nationalistic turn as domestic affairs spiral out of control. Massive expulsions of bureaucrats, journalists, academics, businesses and political opponents continues to worry the international community.

By:  Zana Silevani, Lynx Global Intelligence

 

Turkey’s significance in the international community

Historically, the Republic of Turkey has served the international community as a commercial hub which has facilitated international trade, communication and intercultural exchange for decades. Modern day Turkey is an extremely valuable partner as it has characteristically carried on it’s traditions of free trade, military cooperation and fortified secular values. Turkey has established it’s presence in the international community—it holds tremendous weight when discussing economic and political affairs. The economic and strategic value of Turkey is attributed to it’s physical coordination as it is situated in a unique geopolitical position. Turkey borders Syria, Iraq, Iran, Armenia, Georgia and Bulgaria with Russia and Ukraine just across the Black Sea.

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In 2014, The Republic of Turkey ranked in as the 27th largest economy in the world [2]. The dynamic nature of the Turkish economy has facilitated strong partnerships with it’s primary import trade partners: China ($24.6B), Germany (23.5B), Russia ($14.7B), Italy ($12.3B) and the United States ($11.8B)—it’s largest export destinations: Germany ($16.9B), Iraq ($10.8B), the United Kingdom ($10.3B), France ($7.87B) and Italy ($7.58B) [2]. Furthermore, as a critical member of the North Atlantic Treaty Organization (NATO), Turkey is an important asset for US interests in the Middle East and Europe. Geopolitical configuration and a versatile economy puts partnerships with Turkey at a high priority, but the many successes of the Republic of Turkey overshadow the murky essence of recent Turkish political developments. Turkish nationalists such as President Reccep Tayyip Erdogan and his Justice and Development (AK) party have consolidated executive power after the recent Summer 2016 coup d’etat attempt which has resulted in the arrest and detainment of thousands of people accused of aiding the coup.

 

The failed 2016 coup attempt and a new face for the Republic of Turkey

July 15, 2016—chaos erupted as a faction of the Turkish military took up arms and attempted to overthrow President Erdogan. The military began with the occupation of the Bosphorus bridge which connects the two shores of Istanbul then attempted to control key points in the Turkish capitol of Ankara [3]. The separatist faction which called themselves the Peace at Home Council, were defeated when loyalists to Erdogan’s existing regime thwarted the coup attempt and restored power. Using state operated media (TRT) Erdogan was able to garnish support to abolish the coup and rally his supporters. At least 90 people were killed and nearly 1,100 more were injured during the coup attempt [3]. The coordination of the coup was ultimately blamed on the exiled cleric Fethullah Gulen who resides in Pennsylvania, USA and is a long time opponent of President Erdogan and his Justice and Development party. The coup attempt resulted in massive material losses, but ideological damage in Turkish civil society took the harshest damage as President Erdogan began a campaign aimed at suppressing opposition through detainments and arrests. Thousands of bureaucrats, academics, political leaders and military personnel have been expelled, arrested, or detained as a result of allegations of involvement in the coup.

The failed July 15, 2016 coup d’etat attempt in Turkey shook the foundations of the state and thrusted Turkey away from it’s traditional secularism and towards civic nationalism. President Erdogan has utilizes a parliamentary state of emergency to bypass constitutional provisions and mobilize political power to the executive branch. President Erdogan and his Justice and Development party have undertaken considerable measures to consolidate executive power [1]. After the summer of 2016, the Turkish state has detained over 35,000 individuals thought to have some sort of tertiary involvement in the influence or potting of the 2016 coup d’etat attempt [1]. Over 17,000 individuals have been arrested in connection with the coup attempt—one third of Turkish security forces have been arrested on specific charges. Arrests after the coup are based on allegation of affiliation with the Gulen movement. Ultimately, Erdogan has delineated executive power to suppress Kurdish influence in Turkey. Kurdish mayors, lawyers and activists have been expelled from their posts and accused of having ties to Kurdish separatist organizations. The new far-reaching executive authority has monopolized AK party initiatives.

 

The new US administration and the future of US-Turkey relations

In early February 2017 President Trump and President Erdogan publicly voiced mutual admiration for one another in a late night phone call, but the US has not established a stance on it’s future with President Erdogan. In the phone call president Erdogan remained firm in his stance to influence decisions which favor disarming Kurdish YPG militias in Syria. The US administration has not commented on future endeavors with Kurdish militias in Syria, but continues to maintain Turkey’s NATO status as a crucial geopolitical asset to strategic operations in Syria. Because of the geopolitical importance of Turkey in air/ground campaigns, Erdogan must cooperate and deter interest in weakening the Kurdish front against ISIS.

The US must leverage Turkish cooperation to grant Kurds in Syria resources to continue to engage ISIS on the ground in northern Syria. The YPG have proven to be non-confrontational and malleable to US interests on the condition of material support. The YPG are a crucial indigenous force who provide essential tactical and intelligence support to US Special Operations Command personnel on the ground in Syria. Ultimately, President Erdogan perceives the new US presidency as an opportunity to initiate communication which supplements Turkish interests in cooperation in the Syrian Civil War. Turkey is seeking to strengthen ties with the US to ultimately influence US military cooperation with Kurdish factions in Northern Syria. Through the recent radical political transition in Turkey in the summer of 2016 was drastic, President Erdogan remains opportunistic in seeking to gradually restore US-Turkish relations which experienced significant strain towards the end of 2016 with the departure of president Obama.

Granting Turkey greater autonomy to influence US defense policy will significantly alter US-Kurdish partnership in Syria. Turkey will ultimately remain a formidable and valuable US defense partner. Though Turkey has taken an abrupt nationalistic and at time anti-western turn, the United States needs Turkey as a partner to supplement it’s campaigns in Iraq and Syria. Turkey provides invaluable resources to the US with optimal strategic capabilities in the global war on terror.

 

[1] http://www.newyorker.com/news/news-desk/the-end-of-democracy-in-turkey

[2] http://atlas.media.mit.edu/en/profile/country/tur/

[3] http://www.businessinsider.com/turkey-istanbul-military-bridges-2016-7

[4] (image) https://www.wired.com/2016/07/turkey-coup-livestream-map/

[5] (image) https://twitter.com/alivelshiot/status/499693038328094720

The Contested Caspian Sea: Oil, Gas, and Legal Disputes. An Overview and Forecast.

The Caspian will be a hotly contested piece of water thanks to its oil resources, naval navigation, and access to the Middle East and Europe for pipeline routes.

By:  Matthew C. Bebb, Lynx Global Intelligence

 

The Caspian Sea is surrounded by 5 littoral states: Azerbaijan, Iran, Russia, Turkmenistan, and Kazakhstan. Each has different vantage points and political capital in the region in order to advance their status in the Caspian. Advancing their presence in the Caspian offers access routes and oil extraction from the sea bed. However, the legal status of the Caspian as to whether it is a lake or a sea is disputed. Once the legal definition of the Caspian is resolved, it will create a legal foundation for each of the state to operate (or not operate) in the Caspian. Until then, the Caspian will be a hotly contested piece of water thanks to its oil resources, naval navigation, and access to the Middle East and Europe for pipeline routes.

The problem with the territorial claims among the 5 littoral states of the Caspian Sea starts with the dissolution of the Soviet Union where 3 new states emerged (Azerbaijan, Turkmenistan, and Kazakhstan). These 3 states did not exist at the time during the original 1920 and 1941 agreements over the Caspian Sea between Iran and the Soviet Union. Furthermore, the question of the Caspian Sea’s boundaries or mineral exploitation weren’t broached in the two bilateral treaties between the Soviet Union and Iran. They were concerned mainly with fishing rights and coastal matters. So, the question since 1991 is whether the status of the Caspian Sea is an inland lake or a sea? If it’s a sea, then it would follow the UN Convention of the Law of the Sea that sets out norms. There have been disagreements among the 5 littoral countries over the right to access these natural resources of oil and gas under the sea, which are argued through different interpretations of the law. As often is the case, these countries are using their interpretations of geography and international law as an argument for their national interests. Thus, the opposing national interests have prevented a consensus on the status of the sea.

 

There have been efforts to come to a resolution to this, but discussions are going nowhere. So, what are the main causes of the dispute?

One of the main issues is the way that Iran interprets the status of the Caspian. Iran considers it a “sea” hence using argument of international maritime law, which allows for freer navigation and using that to get a bigger share of the sea. This is problematic for Iran because Turkmenistan and the other countries are satisfied with the preexisting median line. Then there is Russia which has had a conflicting position since the early 90s. Since then, the Minister of Foreign Affairs and Minister of Energy along with oil and gas firms have all taken differing positions. The Russian Ministry of Foreign Affairs tends to be more supportive of it being a “sea” in order to appease its Iranian partner who’s fighting with them in Syria. The Ministry of Energy and Russian energy extraction firms are more concerned about mineral and energy exploitation. They want an agreement to be made as soon as possible in order to begin drilling without political tension. This has gradually emerged into a position that is often referred to as “common waters divided bottom”. With this policy, Russia is able to maintain surface navigational rights, and therefore naval supremacy, which it views as very important in the Caspian. Furthermore, it has taken a more pragmatic approach to the natural gas exploration and ownership thanks to its naval presence. In 2002, Azerbaijan and Kazakhstan agreed to this “common waters, divided bottom” approach by signing agreements with Russia over sectorial claims of the sea bed. It’s in Russia’s interest that this matter remains unsettled so they maintain the status quo and prevent Turkmenistan from developing their Transcaspian Pipeline, which would be give European states an alternative energy source. This makes it more difficult for the Trancaspian Pipeline to be realized, and that gives one less alternative for Europe that bypasses Russian energy resources. It is doubtful that we’ll see any initiative from Moscow on unlocking this issue.

 

This raises the question of whether Kazakhstan, Azerbaijan, and Turkmenistan have a shared interest to counter Russia?

These 3 countries were not countries when the first agreements were made so they weren’t included. However, Kazakhstan and Azerbaijan have already started developing major projects in their parts of the Caspian. Turkmenistan less so, and they haven’t had as much success because of Russian and Iranian pressure. The Turkmen have been developing their own sectors with outside help from some European firms, especially with their big project is the Transcaspian Pipeline. However, this is the only project that the other littoral states have objected to being crated (especially Russia and Iran). It’s interesting that Russia, Kazakhstan, and Azerbaijan make pledges to protect the environment and the sea, but Kazakhstan had a major pipeline leak and no one raised any fuss about it. Then, Turkmenistan has a pipeline leak and everyone raises hell, especially Iran and Russia. Turkmenistan appears to be the odd man out in the Caspian Sea politics thanks to Iranian-Russian pressures.

 

We’ve assessed the former Soviet states positions. What’s the Iranian position then?

Iran has signed a number of agreements concerning maritime resources, security cooperation, search and rescue, and emergency situations. But all of these agreements are hinged on the unresolved legal status of the Caspian sea. So, some of them in a way cant be implemented without resolving this status of the sea. About 68-70% of the Caspian Sea has been divided between Russia, Kazakhstan, Azerbaijan, and Turkmenistan. It only leaves about 30% for Iran, Azerbaijan, and Turkmenistan to fight over within Iran’s disputed area. Nonetheless, it leaves Iran in a minority holding position. Therefore, it’s important for Iran to have the legal status clarified. Turkmenistan and Azerbaijan will not be willing to change their mind over the existing status quo.

Iran is an interesting position because the bit of the Caspian they believe to be theirs is the deepest of the Caspian that holds 2/3 of the water in the Caspian, which is not very favorable for extracting. The extraction would be extremely difficult and not very profitable with current technology. Iran’s interest of oil extraction is focused more toward the Gulf. That being said, they have much on their hands in the middle east with geopolitical turmoil and oil fields to their south. But when the Caspian Sea does become a priority, it will most likely seek close offshore exploitation with the help of foreign investment (e.g. European countries) now that the majority of their sanctions have been lifted. They currently have help from a Swedish company to build submersible platforms for deep sea drilling. That’s not to say they can’t drill for oil. The technology is there. It’s more of a question of the political will to contest the waters, and even if they win, will they invest in expensive deep water extraction technologies?

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Where do western countries stand in this?

There’s not a lot the west can do to unlock this because of the issues in the Middle East and Eastern Europe with Iran and Russia being the two biggest players. The US has very little leverage in this area. America and the EU are not going to want to spend political capital on this the Caspian issue given the back and forth relations with Iran, Russia, and the United States. However, it is in the EU’s interest to find new markets aside from Russia oil and gas. This gives Iran an opportunity to sell to EU if sanctions are rolled back again. It’s in America’s interest that EU has an alternative to Russian oil and gas because it keeps them out of the Kremlin’s grip. Russia can easily cut off oil and gas to certain European countries with their pipeline transit regime, which has security implications…which has NATO implications…which means US implications. Should America have a say in the matter, it would be in America’s interest if the Caspian’s status was deemed with the law of the sea. It’s in America and Europe’s interest for the Transcaspian Pipeline to be realized. Energy resources from Central Asia can be pushed to Europe, but this is a hard feat to accomplish.

Turkmenistan’s foreign policy is not very conducive to working with partners outside of the country even though they need to rally Western support. They have a fairly aloof attitude, “if you a build a gas pipeline to our fields, we’ll give you gas”. However, the EU doesn’t want to be antagonistic toward Russia by supporting Turkmenistan. Turkmenistan doesn’t have a lot of partners on their side to push their project successfully. In order for a legal argument to stop Turkmenistan’s goal of creating a Transcaspian Pipeline would require a proper legal agreement with total consent. However, Russia, Iran, Kazakhstan, and Azerbaijan are not technically in violation of hindering Turkmenistan because there hasn’t been an established law in the sea.

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A pipeline that’s been under the radar, but recently agreed upon is a pipeline under Azerbaijan and Kazakhstan. After ten years of planning, the two countries recently signed an agreement. Russia attempted to block this. Kazakhstan is looking to export their oil. Kashagan Field (Kazakh) oil needs more markets than its current one. The development of Kashgan field has been continuously postponed due to political pressures and pipeline damage. The recent repairs of the Kashgan pipeline will now allow it go online soon. The pipeline will consist of links through Kazakhstan to the Kazakh port of Kuryk (which is under construction to become a multimodal port) to the port of Azerbaijan. Then diverted to the Transcaspian pipeline to Baku where the oil would go to the BTC pipeline and off to the Turkish Mediterranean coasts, and then to Georgia by rail, and tanker to Odessa in Ukraine and then through Poland for world markets. However, Iran is against this pipeline because the legal of the question of the Caspian is still unresolved and would push out Iranian firms. Iran has opposed the unilateral agreements between the rest of the former Soviet Union littoral agreements of the sea bed. The 47th Working Session of the Iran foreign minister has even mentioned that it has Caspian ambitions by shipping it through Iran or Oman.

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There’s a growing military presence in the sea. Russia recently fired missiles into Syria from the Caspian Sea. They’ve also been the backer of regional training exercises in the area with their CTSO partners. Depending on future sanctions relief, Iran could default back to its independent power stance as it returns to the world stage (and not have to rely on Russia for support). Therefore, Iran could be an instigator as a revisionist power in the area. More likely, there could be a misunderstanding on the local level that could spiral out of control between smaller allied countries that would drag in Russia and Iran. However, these are both unlikely. Russia has levers in the region that it can pull to either mitigate risk or escalate tensions (e.g. neighboring FSU countries, Armenia, and Ngoro Karabakh). There’s a lot of noise coming from Azerbaijan and Turkmenistan about possibly butting heads in the Caspian Sea, but neither have the naval force to assert their claims. Their navies are more like a coast guard that are used to intervene with smugglers. That being said, Russia is the main player in the Caspian Sea due to its geopolitical influence and military presence.

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To conclude, this will be unresolved until the middle of the next decade when these projects can be realized. As long as Iran contests the legal status of the sea, the Caspian Sea will not be resolved. There’s an x-factor, and that is if Putin abdicates power or is relieved from his position, which would change the dynamics of the region.