Testing times for Rouhani

29 August 2017

Iran’s president must ensure the nuclear agreement remains in force, and must also make sure it works for his people

The biggest test facing Hassan Rouhani as he embarks on his second term as president of Iran will be delivering the economic growth his people want and expect. Some 20 months after coming into force, the nuclear deal has failed to translate into strong non-oil growth, and unemployment is higher than ever.

Public perception is that the economy is doing badly, even though inflation has finally been brought under control. The problem for Rouhani is that financial restrictions retained by the US have slowed progress with bringing in foreign investors and expertise to help modernise the country’s infrastructure. There have been plenty of deals signed, but not as many as hoped and certainly not as fast.

The months ahead may start to see some trickle-down effect as projects move into the execution phase. However, the frequent hostile exchanges of words between Tehran and Washington, and the ballistic missile tests that have drawn fresh sanctions, will preserve the air of caution among investors and make contract negotiations more challenging and protracted.

There is a very real possibility of a snap-back of full economic sanctions in light of President Donald Trump’s persistent view that Iran is in violation of the spirit of the nuclear deal.

Rouhani has staked his reputation on the deal. He must ensure the agreement remains in force, and he must also make sure it works for his people.

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