sprawling hall at his pink-marbled palace in Tehran. Impeccably dressed in clerical black robe and white turban, Hassan Rouhani, the new gentler face of the Islamic republic, has encouraging news to share with visitors.


Only a few days earlier, Iranians noticed growing signs of fatigue on the 65-year-old president’s face, as if he had, in a matter of just a few months, aged several years. But when he spoke to the Financial Times this week, Mr Rouhani had capped his 100 days in office with the first signs of improvement in an economy ravaged by sanctions and the monumental mismanagement of the outgoing administration led by the populist Mahmoud Ahmadi-Nejad.

Most significant was his 99th day, when he delivered the six-month nuclear agreement with world powers, the first easing of tensions with the west in a decade. The deal offered modest relief from punishing international sanctions in return for Iran’s suspension of the most controversial parts of its nuclear programme.

Mr Rouhani, an experienced technocrat with a doctoral degree from Glasgow Caledonian University, is breathing a sigh of relief. So is a beleaguered nation of 75m people, weary from the bellicose authoritarianism of its leadership and the pressures from western powers suspicious that Tehran’s rapidly advancing nuclear programme is intended to produce nuclear weapons.

One of Mr Rouhani’s most troubling discoveries upon taking office was to find the treasury empty. Astonishingly, Iran earned $600bn in oil revenues over the past eight years, more than its total accumulation since oil was discovered more than a century ago. The economy, however, was on the verge of collapse.

“This government has inherited serious economic problems,” begins the president, seated under a picture of the two Ayatollahs who cast a long shadow over Iran – the late Ruhollah Khomeini, leader of the 1979 Islamic Revolution, and Ali Khamenei, the supreme leader to whom Mr Rouhani answers. “But we are very hopeful about the future of the country’s economy ... The nuclear deal has created a positive atmosphere.”

Since his June election, Mr Rouhani’s emphasis on the economy and engagement with the world has begun to change international perceptions of Iran and shift the mood at home.

He has moved quickly to bring back veteran professionals and experienced diplomats, many of whom were marginalised or purged by the previous Ahmadi-Nejad administration.

Yet in Tehran and capitals around the world, Mr Rouhani’s intentions are still being tested. The verdict has yet to be delivered on whether his charm offensive is an attempt by Iran to secure temporary relief from international pressure or a signal of a strategic shift in the behaviour of the Islamic regime.

The question on everyone’s lips: is Hassan Rouhani for real?

The man

Mr Rouhani comes across as personable and engaging, a man who appears to understand the depth and scope of change required in Iran but also mindful of making promises that are beyond his ability to deliver.

He is forceful and resolute when he speaks of Iran’s red lines in negotiations that will now proceed to find a permanent solution to the nuclear programme. Demands in Israel and the US Congress for Iran to dismantle its nuclear facilities meet with firm and swift rejection. No, “100 per cent,” he says.

Asked how he could have a Twitter account (and a very active one) when the site is one of many that are blocked in Iran, he deflects the question with humour.

“You can do it even now,” he tells his visitors, as the hall packed with aides erupts into laughter. Then, shifting to a serious tone, he suggests that this is the kind of problem that he should be able to resolve soon.

A regime insider whose experience has largely been in the security and diplomatic establishments, Mr Rouhani is more technocrat than cleric. He makes little reference to religion and is said to be particularly fond of studying statistics tables.

He belongs to the conservatives’ pragmatic wing that considers diplomatic engagement rather than confrontation essential to the survival of the Islamic Republic.

He is, however, something of an accidental president. Some people who know him suspect he ran in the June election to raise his political profile, rather than because he believed he would win.

It was only after his mentor and ally, the influential Akbar Hashemi Rafsanjani, was barred from the race that he became a serious contender.

The reformist opposition, determined to claim back the presidency it was denied in 2009, allied with Mr Rafsanjani and threw its weight behind the centrist Mr Rouhani in the final days of the campaign. He won an outright victory in the first round.

So surprising was the Rouhani triumph that a story making the rounds in Tehran (though it is not clear if it is fact or legend) has it that at 2am after the election, hundreds of Revolutionary Guards surrounded Mr Rouhani’s residence in northern Tehran. He stepped out to meet them unsure whether their presence was designed as protection or a prelude to his arrest.

Part religious authoritarianism, part democracy, Iran’s political system needs elections to shore up its legitimacy. But as Iranians discovered in the 2009 flawed presidential vote, even this limited democratic participation is not guaranteed to reflect the people’s choice.

The pressures

Mr Rouhani faces a delicate balancing act to fulfil the social and economic expectations of Iranians and satisfy the demands of the outside world. He is conscious that he must tread carefully at home, referring obliquely more than once during the interview to other centres of power.

If Mr Rouhani has put so much emphasis during his first three months on foreign policy, it is probably because success can help him consolidate the authority of the presidency and, most importantly, revive the economy.

For now, the president has secured the support of the supreme leader, the most powerful figure in Iran’s theocracy. Ayatollah Khamenei is backing the nuclear negotiations and the economic reforms . Perpetuating this consensus between the two men, however, depends on whether Mr Rouhani can deliver an acceptable final nuclear deal and bring an end to sanctions.

Obtaining a lifting of sanctions, however, requires satisfying a very different constituency – western powers whose restrictions have shut Iran out of the global financial system (between $50bn and $100bn of Iran’s foreign exchange holdings are frozen) and slashed its oil exports by more than half.

One of the toughest elements in the negotiations will be the size of the low-level uranium enrichment programme Iran will maintain. The west will want it small; Iran will want it to be as large as possible.

The president says the size should be determined by Iran’s domestic needs for nuclear power – a remark that suggests scale but still leaves some room for negotiation.

Mr Rouhani, however, is not waiting for the end of sanctions to wage economic battle. The government, he says, has started to restrict the money supply, reduce inflation and reverse the economic decline.

Among its most egregious actions, the Ahmadi-Nejad administration used Iran’s central bank as a piggy bank, ordering it to dole out loans that had little chance of being repaid. Now the central bank has been freed from political pressure, and half-completed provincial projects – another hallmark of the former president’s misguided populism – are being cancelled.

Mr Rouhani’s team predicts Iran will emerge from recession in the next fiscal year beginning in April.

The hope

Nuclear talks have served another important purpose: to pave the way for a potential historic shift in relations between the US and Iran after decades of hostility.

“Death to America” graffiti is still prominently splashed on facades in the Iranian capital and the slogan is chanted at rallies. But perhaps because of the resolutely anti-American attitude of the regime, the Iranian public is ready, if not eager, to mend ties with America.

So are Washington and Tehran tiptoeing towards a resumption of bilateral relations? Mr Rouhani chooses his words cautiously. The nuclear negotiations, he says, are allowing the two sides to “test” whether they are capable of having a different relationship.

“Problems of 35 years cannot be resolved in a short period of time. We need to decrease tensions at this stage and create mutual trust step by step,” he says. “If the steps taken in [the interim nuclear deal agreed in] Geneva are implemented carefully and precisely, it would mean that we have taken one step forward towards trust.”

He dodges a question on whether he might invite Barack Obama to Tehran at some stage, but does not dismiss the suggestion outright. He tells the FT about his impressions of the US president, based on the now famous telephone exchange during Mr Rouhani’s recent trip to the UN in New York.

“I found him to be someone with very polite and smart language,” he says. “The problems with the US are very complicated ... but despite the complexities there has been an opening over the past 100 days which can later widen.”

The suspicion

As Mr Rouhani engages in a confidence-building exercise with western powers, however, Iran’s aggressive regional policies continue to fuel suspicions, particularly with Arab neighbours. Iran and Saudi Arabia, the two regional heavyweights, are fighting a proxy war in Syria, backing opposing sides in the civil war financially and militarily.

As president, Mr Rouhani can influence regional policy. But far more powerful are the hardline military elements in the regime, especially the elite Revolutionary Guard and its al-Quds force.

Mr Rouhani says he is talking to European governments about Syria and is willing to hold broader negotiations if his country takes part in a peace conference scheduled for January (whether Iran will be invited to the talks in Geneva is still unclear).

He points to common concerns with the west in Syria, not least the growing strength of Sunni extremists among the rebels. Iran’s solution, he says, is free and fair elections. “Whatever Syrian people wish for in the election, we all have to surrender to.”

When the FT suggests that the president must be very optimistic to believe that Syrian leader Bashar al-Assad would abandon power, Mr Rouhani says he is neither optimistic nor pessimistic, acknowledging that he cannot predict the future of Syria.

The difficult balance

Mr Rouhani is seen as a leader in search of economic efficiency rather than the vastly more controversial political change sought by reformists.

Surprisingly, the president rejects this assumption, insisting that economic and political reform must be pursued with equal vigour. “Obviously economic problems and foreign policy are important but these would not stop us from thinking about cultural issues and domestic politics,” he says.

Iranians sceptical of his promise for change, however, point to the continued imprisonment of the leaders of the opposition Green movement, Mehdi Karroubi and Mir-Hossein Moussavi. The movement was brutally repressed following the 2009 unrest sparked by the alleged rigging of the presidential vote against Mr Moussavi.

Mr Rouhani says his government is trying to “implement its duties” towards the two men, but cannot resolve the problem within 100 days. “Some issues in this country need consensus of other branches and officials. More time is needed for such consensus. But in this case I am optimistic.”

Mr Rouhani appears to have a strategy and – so far at least – the critical support of Ayatollah Khamenei who is muting hardline factions’ criticism of nuclear diplomacy.

But just as he desperately needed an interim deal to strengthen his hand at home, Mr Rouhani also needs western reassurance of the benefits of confidence building. His aides warn that another burst of US Congressional sanctions, for example, would not only destroy Mr Rouhani’s efforts to restore trust with America, but damage his credibility at home.

The past week has produced a rare moment of hope. It has also highlighted that, within Iran and without, many now have a stake in keeping a smile on Mr Rouhani’s face.

The prize of a nuclear weapons-free and prosperous Iran and a more stable Middle East is enormous – but the process of getting there is also exceedingly fragile.

By Financial Times

 

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