Iran’s regime is heading for a possible showdown with one of its main backbones...
President Hassan Rouhani ordered Iran’s military forces to sell their oil-, gas- and energy-related assets. This could mean a direct confrontation between ‘liberal’ forces under Rouhani and the ultra-conservative Ayatollah Khamenei forces, of which the Islamic Revolutionary Guard Corps (IRGC) is the most battle hardened.
Rouhani’s move didn’t come out of the blue, but is mainly caused by the unexpected vigor of the anti-regime demonstrations that have spread throughout the whole country. After a wave of harsh and violent oppressive moves by Iranian security forces and the Basij (semi-military militia), which should have removed protests from the street, it still continues, with some even stating that they have grown in power. In contrast to former protests, like the one in 2009, this time there is widespread support for change under the rural population as well, which has been always the main power base of the hardline ayatollahs and IRGC.
At the same time, Iran is confronted by an enormous economic crisis, culminating in large-scale unemployment, extreme high inflation and a total shutdown of the financial sector. Current protests are not only caused by an anti-regime view of the population but mainly by the economic crisis, high levels of corruption, and illegal behavior of power brokers such as the IRGC. The unrest is spreading, as thousands of Iranians are currently withdrawing their money from bank accounts. Until now, the ruling regime hasn’t found an answer to the crisis, leaving the country going down further.
Iran’s president fears a conservative backlash. His relationship with Khamenei — arguably Iran’s true power broker — has cooled. Ongoing discussions regarding a possible successor to the aging, ailing Khamenei have become a direct conflict between the Rouhani government and the leaders of the Velayat-e Faqih, the hardline Ayatollahs. Rouhani seems to be trying to change the course of the protest by addressing the mood of the protestors and attack the IRGC. For Rouhani, the protest could be a godsend — but if it isn’t successful, it will surely mean the end of his position.
Rouhani said that his order for his country’s armed to divest its energy and other assets is necessary to save Iran’s economy, as the IRGC and its proxies are under U.S. sanctions. Possible new sanctions on the IRGC and aligned parties are expected soon, which would directly negatively affect foreign direct investment in Iran’s economy.
Many think Rouhani’s move is desperate, as he already tried this in 2013, when the IRGC was urged to divest its economic interests — and the opposite happened.
During a meeting with the media, Rouhani also indicated that not only should the armed forces divest their assets, but that Iran’s state pension fund and branches of the government should follow suit, as well. This move, however, shouldn’t necessarily be seen as a further liberalization of the Iranian economy, but perhaps only to attack the conservative power-hold that threatens Rouhani. For the Iranian government, it is an end game.
Without any room to maneuver, Rouhani’s end seems to be near. The threat of new U.S. sanctions — even if the EU has already stated to block them — will have a negative effect on Iran’s economy. A further meltdown won’t give Rouhani any more time for changes.
At the same time, the IRGC — which is not only the main economic force that Western companies need to deal with Iran, as they hold strategic assets, companies and banks needed for foreigners to act in Iran, but also the military and security force of the regime — has become almost untouchable in the eyes of the conservatives. The successes of the IRGC-led military operations in Syria and Iraq have put them in a position of unknown power. To undermine this, Rouhani is playing va banque, and the results will not only decide his future but also of Iran’s economy.
Backlash is quite possible here, and a powerless Rouhani would be unremorsefully removed. Ultra-conservatives will not only be more inclined to confront any possible changes in their regional or global relations, but to also violently crush any opposition. The latter is still considered easily accomplishable, as the current protests have not been centrally organized centrally, and most groups are leaderless.
In the coming weeks, oil analysts should not only watch the ongoing meltdown on the NYSE or LSE — which is removing trillions of investment cash from the market, which is also hitting oil and gas companies — but also pay close attention to Middle East analysts.
The relative stability that Iran has endured since 1979 could be over with a bang. Power struggles are emerging, and the outcome is anyone’s guess. Looking at the region, the position of the IRGC and conservatives still looks stronger than Rouhani’s ‘modernizing’ forces or the fragmented protest movements. Khamenei’s strongmen could still survive the current public onslaught.
Economic crisis, financial disasters and massive illegal transactions to Hezbollah, Hashd or Assad aren’t yet really threatening the conservatives in Tehran and Qom. European politicians and companies seem to be betting on the wrong horse again — potentially supporting the continuation of a repressive and ultra-conservative anti-western regime.
A Tehran implosion will push oil prices far above $80 per barrel. Current price fluctuations in the market are only temporary, as fundamentals are still strong. With an already-tightening oil market, further oil production decline, and deferral of possible Iranian upstream projects, this will only put more upward pressure on prices.
The regional fallout will be huge. The Iranian conservatives won’t sit by idly, waiting for the outcome of the Rouhani-Khamenei confrontation. IRGC generals and spokesmen are already heating up the debate. Recently, IRGC generals have made statements about the country’s increased missile capabilities. This week, IRGC General Hossein Salami claimed that they have developed a missile that can target moving sea vessels with the highest accuracy. The general compared the Iranian missile with Russia’s Iskander short-range advanced ballistic missile.
Analysts stated that this Iranian missile is most probably the “Persian Gulf” ballistic missile with a 300-kilometer range, which is a more advanced version of Fateh-110 missile. This could mean an increased threat not only to its Arab neighbors, but also to the immense tanker traffic going through the Strait of Hormuz and the Gulf of Aden (Yemen).
By Cyril Widdershoven for Oilprice.com
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