Iran’s Internal Challenges and Domestic Politics

Panelists discuss the political and economic challenges facing Iran internally, including the recent protests and the pressure to deliver economic development under the stress of sanctions.

SEIB: Hello, everybody. Welcome to the first session of today’s Council on Foreign Relations symposium on “Inside Iran: Forty Years After the Iranian Revolution.”

This session—the first half of the program—will focus on “Iran’s Internal Challenges and Domestic Politics” with Richard Nephew and Ray Takeyh, who are at—on your screen, actually, right there. And Robin Wright, who is here in person with me. And I’m Gerry Seib. I’m the executive Washington editor of the Wall Street Journal, and I will be presiding over this discussion.

Just a program note before we get going, please be on the lookout for an upcoming Lessons from History meeting at the Council on Foreign Relations scheduled to take place later this month that takes a historical look at the Iranian Revolution.

There is an awful lot of ground to cover, so I thought maybe, Robin, I’d start with you and maybe at about ten thousand feet, if we could, and to Ray and Richard in just a minute.

If you think about forty years after the revolution, and you look at the situation inside Iran today and think about what it was like in those tumultuous days in 1980, is there anything really different about the internal schisms that you see in Iran now versus the ones that were existing then? And if so, what are they and how do they matter?

WRIGHT: First of all, thank you very much for hosting, and it’s a very timely event. And for anybody who doesn’t know, it’s Gerry’s birthday, so happy birthday.

SEIB: (Laughs.) Thank you. Just don’t sing Happy Birthday. (Laughs.) Resist the temptation, that’s what I say, resist the temptation.

WRIGHT: Iran is one of the most emotional issues in foreign policy and has been now for forty years. Iran has—for us in Washington particularly, it seems always to be—whether it’s—you know, they call us the great Satan, or the kind of axis of evil that we’ve called Iran—it has been a very tumultuous relationship. But a lot actually has changed in Iran.

When you look at the political system in the early years, it was a one-party state, the Islamic Republican Party. It was a system dominated—61 percent of those elected to the first parliament were clerics.

Today you have a multi-party, a multi-factional state with very deep divisions, even among those who support the system. And you have a society that is very vocal; it’s no longer a totally state-controlled media. There are a lot of different opinions, and as Gerry and I were talking about before we started, you walk down the street in Tehran, and Iranians are very vocal. They were very vocal in griping under the Shah, and they are very vocal in griping—(laughs)—about the revolution.

Because it’s such an emotional issue, I thought what it might be useful to do is look at some of the numbers of how Iran has changed that don’t reflect just our—the feelings we have about the place. So in—as I said, in 1980, the first parliament had 61 percent clerics; today there are only 6 percent clerics. The first parliament had only six women; today there are seventeen women—more women than clerics in today’s parliament. The first parliament, thirty-six hundred candidates ran; in the last election, twelve thousand ran.

Iran has changed in terms of what it is as a society, too. In 1980 only 37 percent of the population was literate, only 24 percent of its women; today 81 percent of society is literate and 86 percent of women are literate. There are more women in Iranian universities that there are male—men.

What happened is really very interesting, and it’s my favorite story about Iran. In the early years of the revolution, the clerics called on Iranian women to breed an Islamic generation, and boy, did they. And the average family had—in the 1980s had over six children. And the population doubled in that first decade of the revolution. And the clerics had the moment that I call the moment they kind of plummeted to earth in their understanding of politics. They realized they couldn’t feed, clothe, house, and educate a population that had doubled since the revolution. So they called on women to limit the number of children they had. Every form of birth control became free—condoms, Norplant, IUD, tubal ligation, vasectomy. The big water tower in Tehran had a sign that said, “Vasectomies here.” (Laughter.) Clerics would, on U.N. Population Day, give lectures about have just two children. And they introduced a program where every young couple had to go through a sex education class before they got their marriage license in order to have kind of an understanding of birth control and so forth.

So I decided to go to one of these classes, and they were very graphic. I learned a lot—(laughter). And what happened was they brought the birth—population growth level down to under two children. And what it did was create a decade in the population that—today, that decade is over half the population and over half the electorate. And I call them the determinators, and they are now in their late twenties and mid-thirties, and they really—all of them born since the revolution, all of them have expectations that are very 21^st century. They are tech savvy, they are well-educated, the women are among them, and it has changed the face of the revolution, the face of society, the expectations, and the clerics have realized that, and they have had to accommodate.

Now they still arrest people willy-nilly, and so forth—a lot of the practices haven’t changed, but they have recognized that Iranian society has changed more than at any time in history. And they have to accommodate it in order for the revolution to survive.

SEIB: Ray, let me bring you in. You know, I got to Washington in 1980, and I think it’s fair to say that every year since 1980 there has been somebody in the administration in Washington desperately searching for the internal schism, the deep unrest, the angry divide that will bring down the regime, and forty years on, American officials are still looking for that.

Why is it not there, and is it any more—is it any more perilous as a regime now than it was forty years ago?

TAKEYH: Well, I would say the Islamic Republics politics today are the least interesting of the four decades that it has been in power, all the statistics notwithstanding. In the first decade of the revolution it was about consolidation of the revolution, creating a series of institutions and a cadre. Then came the Rafsanjani presidency that was about economic reconstruction and reintegration. Then came probably the most exhilarating reform movement in history of modern Iran, if not all of the Middle East: an attempt to amalgamate religion and pluralism that failed.

President Ahmadinejad, for all his bombast and crudeness, actually introduced themes that have become prevalent since then: social justice as a basis of economy and income inequality. President Rouhani’s presidency is a Seinfeld presidency; it’s about nothing. (Laughter.) It has no particular interesting aspect of it other than an arms control agreement that’s no longer in existence.

Are the schisms and divisions there? I think more pronounced than ever before for several reasons. The Iran today resembles very much the Iran of 1978, although it may not end the same way. The class cleavages are pronounced. The ostentatious display of wealth by those connected to the regime is quite remarkable. When one of the parliamentarians say it’s not going to be foreign intervention but corruption that will actually bring down the government, and that was—(inaudible). So the state and society are more distant from each other than ever before, and all those tech-savvy individuals that Robin is writing about—or talking about are aware of what the problems are and who is responsible for it. So all those schisms and cleavages are there, more so than at any point, I’d say, since 1978—and a regime that has proven itself incapable of reforming itself.

And there is a problem with economic expectations that affects the Islamic Republic that, to some extent, effected the Shah’s regime. It wasn’t so much that it was unfulfilled expectations that undermined the Shah’s regime. Every country has cyclical economic problems. By 1978 a vast majority of Iranians arrived at the conclusion that the good times are over and I didn’t get mine, and I’m never going to get mine. By this time I think many in Iran are looking at the system, and the corruption, and the wealth accumulation by those connected to the clergy, and are saying the same thing: the good times are not—this is just not economic decline or unfulfilled expectations, but the good times are over, and I didn’t get mine.

NEPHEW: Yeah.

SEIB: Well, Richard, let me pick up there because we’re in a world now where oil is about sixty dollars a barrel. The Iranian regime is under some pressure, to say the least, from the Trump administration. Sometime in the—and in May, the waivers that the administration granted a series of large countries to continue buying Iranian oil will end.

The question obviously is how extreme is the economic pressure created by that energy situation for the Islamic Republic.

NEPHEW: Yeah, I think the economic pressure is considerable. You know, when you think back to a few years ago when the JCPOA was being negotiated, you know, we saw very high inflation, we saw very high unemployment, we saw that the banking system was largely insolvent. And you can make an argument that there are similar dynamics underway, you know, today; that the Iranian unemployment problem has not been resolved—it wasn’t resolved by the JCPOA, in part because it didn’t have that much time to be implemented—that inflation is once again very high, that the broad state of the Iranian economy remains in shambles. And that really hasn’t changed.

I think the key question really is how much more pressure can the current sanctions regime bring to bear, and then of course politically, what does that economic pressure result in. And those are different sorts of questions, and they lead to different sorts of answers. But I think that, you know, with oil being where it is, with the fact that reductions, you know, have been pretty significant, there is no question the Iranian system is under strain.

The next question really comes, what is the oil market going to look like, you know, six months from now and six months thereafter, and what degree of cooperation is the Trump administration going to get from the Japanese, from the Koreans, from the Chinese, and from the Indians to continue reductions. And I think what the Trump administration found this last year is it’s a lot easier to say Iran is going to zero than it is to actually deliver that. So that’s a whole separate question—is what’s the momentum of the economic pressure? Is it going to be something that stabilizes over time as sanctions pressure at least also starts to plateau, or is this something that the Trump administration and Iran itself can make much more aggressive and much more severe?

SEIB: So what—and what’s your answer to that question?

NEPHEW: You know, I think it’s going to be very hard for the administration to bring oil sales much further down than where they are today. I think that the oil market has certainly, you know, got sufficient inventories that you could see additional reductions. I think going to zero is implausible from the standpoint of the oil market, and then you have to add the political factors on top of that of what the Chinese and the Indians are going to do. Even if, you know, price of oil was forty dollars a barrel, would they be prepared to go to zero?

So I think that if the Trump administration was prepared to take a very patient and incremental approach to sanctions escalation, they could continue to have reductions, and they could continue to apply pressure. I think that we should all ask the question of whether or not this administration is patient enough to allow that kind of gradual, incremental approach to sanctions, or whether or not they are convinced that the regime is about the crumble and are therefore going to—in my view—press their luck by going too hard and too fast. And then you run the risk of potentially having blowback and pushback from countries you need to make reductions.

SEIB: So Robin, the on-the-ground question in Tehran is what are the effects of economic pressure, and let me—let me just read you something from the U.S. intelligence community’s Worldwide Threat Assessment, which just came out a couple of days ago, which says the following: Nationwide protests, mostly focused on economic grievances, have continues to draw attention to the need for major economic reforms and unmet expectations for most Iranians. We expect more unrest in the months ahead, although the protests are likely to remain uncoordinated and lacking central leadership.

Do you share that belief that that’s what we’re going to see again?

WRIGHT: Well, the economy is where the revolutionaries—aging revolutionaries—are most vulnerable. And we saw that a year ago in December, January 2017, ’18 in a protest that spread from—into thirty of the thirty-one provinces in Iran.

The administration made noises as if this was something that was going to be precipitous, pivotal, and continuing, and they haven’t really. We have seen, you know, some brave women get out on the streets and wave their white hijabs, and you see a willingness to speak out against the system or to challenge the system.

But we have not gotten to a point that I think that—for all the wishful thinking in Washington that this is going to be something that leads to the demise of the Islamic Republic any time soon. I do think that the next year is going to be very interesting to watch in terms of how the system in Iran adapts to sanctions.

I covered Iran throughout the 1980s. I’ve been going to Iran almost every year since 1973, and I covered those eight war years when sanctions on Iran, the shortages in Iran were stunning. You would go into a store and there would be a few bags of rice, a few bags of tea, you know, a couple of condiments, and very little else; where all meat was rationed, and you had coupons; all gas was rationed. Kids were often not taken to school because their parents didn’t have the gas to take them, and the public transportation system was either non-existent or pretty poor.

And that’s not what we’re likely to see in Iran over the next year. Iranians are very good, very wily at figuring out how to get, you know, the stuff they need.

To what degree will this population, this generation kind of say, enough, and do something—we saw that in 2009 with the Green Movement, but we also how in 2013 they participated in the political system, and they voted for Rouhani. Iran faced—the more interesting years will be the next two years when you see parliamentary and presidential elections, and to see do Iranians participate, who turns out, and who succeeds Rouhani. It’s a two-term presidential limit.

There is an enormous amount at stake in defining the next step of the revolution. We keep waiting for that moment that the revolution returns to normalcy or it collapses as the Soviet Union did. And we’re not at either juncture yet, but a lot could happen—I think play out in the next two years. But I’m not sure that it’s going to play out in—whether President Trump is a one-term or two-term president, I’m not sure that we’ll see the denouement while he in office.

SEIB: So Ray, what price do you think President Rouhani has paid for the demise of the JCPOA, at least as far as the U.S. participation in it goes? I mean, there’s a lot of speculation about having lost ground because of having put so many eggs in that basket only to see it overturned.

TAKEYH: Well, I want to preface by saying the problems of Iranian economy are not limited to the JCPOA. One of the things that has happened over the forty years is Americans’ always make the Iran debate about themselves. (Laughter.) There are almost actually eighty million people making eighty million mistakes every day, so there is that.

President Rouhani has had a very unusual presidency because he has oscillated. On the one hand, he has been one of the most relentless attackers on the Islamic Republic, airing its dirty laundry on variety of speeches, in variety of ways. He’s been a very caustic critic of the regime.

On the other hand, he has—periodically calls for unity, as he has today—these days. So he oscillates between a rebel and a member of the establishment that he is, and he hasn’t figured out his own identity after all these years.

What price did he pay for putting so much emphasis on the JCPOA? Well, probably a substantial one, but either way, most second-term Iranian presidencies end in some sort of a(n) erosion of popularity. That happened to President Ahmadinejad. It certainly happened to President Khatami, and it is happening—that same cycle is beginning to happen to President Rouhani as he fades from the scene. He faded faster than others did because, as I mentioned, he had no particular agenda or program beyond seeking some kind of an agreement with the international community on the disputed nuclear issue.

SEIB: And so, Richard, if the JCPOA is still in existence but without U.S. participation, what is your guess about the way European allies are going to approach the whole subject of the JCPOA over the next year or two? I mean, they’d like to avoid the whole subject. Can they? And can they simply outwait Donald Trump?

NEPHEW: Well, I think that—I agree. I think that’s certainly what they would like to do. And I think that they have elected essentially a strategy of buying time where they are pursuing, with the Iranians, the special purpose vehicle, which is now called INSTEX, which is not terribly easy to relate to—(laughter)—you know, with the idea basically of trying to keep some trade going between Europe and Iran. And the idea is we won’t be able to reconstitute all the business activity that you, Iran, were expecting pursuant to the JCPOA, but we’ll give you something, and that if we’re all reasonably patient, maybe in 2021, there will be a new president, and that new president will allow us to go back to essentially where we were in 2016.

You know, I think that there are a couple of problems with that strategy. Problem number one is that the Europeans have already found that it is not very easy to escape U.S. sanctions pressure, and that as much as they said a year ago that they were going to be able to buck up European trade, they really didn’t do enough in advance of the withdrawal decision to insulate their companies from U.S. sanctions pressure. And so they have been playing catch-up throughout all of 2018.

And the practical reality is by the time they got the SPV or INSTEX together, by the time they got some of their investment and trade vehicles together, their companies were out, and they were not likely to go back in, especially with the fact that U.S. economic pressure and sanctions remain as forceful as they were. So that’s problem number one.

Problem number two is that they are not in control of the Iranian political system. Actually, to Ray’s good point, just as this is not an issue about the United and its policy, this is not an issue about the Europeans and European policy. And I think the Iranian government—and more importantly the Khamenei government, are going to have to make some decisions about how far they are prepared to, you know, deal with the unmet promises of the JCPOA, how much the political system can tolerate that degree of abuse coming from the United States, especially if U.S. sanctions increase.

And I think you can already start to see some of the pressures here. The Iranians have already begun nuclear activities that are not in violation of the JCPOA, but they are edging towards it. And I think, you know, from a European policy perspective, they run a very real risk of losing control of the situation—if they ever had it—sometime this year. And then they are really going to be playing catch-up between, you know, us, and between the Iranians.

So, you know, truly at this point I think the Europeans may be able to try and keep at least some business going. They may be able to convince the Trump administration to leave the SPV alone. But I think in terms of really delivering the promises of the JCPOA, they are going to fall short. And so the question that really comes to the Iranians: what are you prepared to do, what’s your response?

SEIB: And just one quick follow-up: what’s the Saudi role in all of this? Can they—are they in a position to use oil weapons against the Iranians at this point?

NEPHEW: Well, they certainly can try, and I think that if we go back to 2014 when we saw the Saudis—shall we say—attempted to nose prices down a little bit. That had something to do with Iran. It had something to do with reducing its own revenues. But it wasn’t just about Iran. It also had to do something about reducing U.S. oil revenues and trying to edge shale producers out of the market. It may have had something to with Russia and what was going on in Syria.

So I think the Saudis do have some ability to play in these areas, but they have their own pressures, too. The Saudis are not in a position to let oil drop to the floor because that causes problems at home as well. And so if I had to describe the Saudi oil price weapon, it’s something that they can wield, but on the margins. And I think that they’ve done that in the past, to some regret. I don’t know that they will be eager to do that again in the near term.

SEIB: So before we turn to audience questions, Robin, I want to ask you and Ray the same question to close out, one I’m interested in, which is the generational change question. You sort of started to get at this in your opening comments.

So just do the math. If you were a twenty-five-year-old Iranian student who stormed the embassy in 1979, you are now sixty-five, right? That generation is about to depart from the scene. You would think, logically, that the generational change that that implies would—could at least bring a significant change in the political dynamic, not just within Iran but in terms of the U.S.-Iranian relationship.

Are there signs of that? Or is that simply not the way it works?

WRIGHT: What we haven’t seen is the kind of leadership that emerged in 2009 with Mir-Hussain Mosavi and Karoubi, who were presidential candidates who lost and who took to the streets, and the spontaneous turnout among people who wanted to challenge what had happened to their vote. The protests have been—the economic protests recently have been disjointed, and leaderless, and have been localized largely. They didn’t have that mass feeling of common purpose.

I do think there is common purpose in the economic disgruntlement now. The question is how does it—how does it mobilize itself, how does it crystalize, how does it take on the revolutionaries. You mentioned those who had taken over the embassy. I have interviewed the three masterminds who took over the embassy in 1979, and they all went on to—one ran for parliament and became chairman of the foreign relations committee, and got up in parliament and called for the renewal of relations. And he was one of those who turned out in 2009, was arrested, was part of the Stalinesque trial, and spent many years in jail, only recently released. Another went on and ran for city council and all. When I went to see him, he really wanted to talk about, you know, garbage disposal and, you know, city problems, environmental problems, and so forth.

And they all thought this was a way of protesting the U.S. role—the possibility that the U.S. would take in the shah, like returning the shah to the throne, as it had done in 1953 in the coup against Mosaddegh. And they didn’t—they didn’t have a big agenda at the time, and they weren’t politically sophisticated. They became kind of drawn into the political system, but again, have drifted apart. And that factualization at the top, the aging at the top, the lack of imagination in solving the problems, in addressing the needs, that’s where you really feel that the revolution is fraying—seriously fraying. But is that enough to actually move it into something different?

And the kids have—the younger generation have not yet created the kind of political alternative. The MEK, the group based in Paris, certainly is not an opposition group. The monarchists certainly are not an alternative. You just haven’t seen that faction emerge in Iran that creates leadership, and anyone that does, you know, sometimes ends up in Evin prison.

SEIB: Ray, are we approaching a generational change in Iranian leadership that’s meaningful?

TAKEYH: Yes, in a sense, that is happening. The revolutionary generation—those who fought the revolution—are old and the revolution exhausted, but I think we always forget—and you saw that with the rise of President Ahmadinejad. There is a slice of the public, the war generation as they are called, who actually believe in the original promise of the Islamic Republic: Islamic Republic that was not corrupt, that was not accommodating of the Western norms, and did not seek integration into the global markets—people like Said Jayveevee (ph) and so on. And they are also waiting for their turn to come to power to establish a more ideologically pristine government, to essentially cleanse it of the corruption of the clerics, and establish a government that is more in line with Imam Khomeini’s original vision.

They tend to look back on the 1980s with a measure of nostalgia, which is insane. The 1980s were not a good time in Iran. So there is that slice of younger generation that is also agitating for its turn to come to power.

In terms of the larger public, no, I don’t think anybody in the larger public believes in the promise of the revolution, and you see a very corrosive spirit of cynicism pervading the country, which is actually almost worse than opposition because everybody is sort of cynical, and tired, and reluctant to essentially grant the regime any sort of leeway. And it’s the regime that’s—at this point, I mean, President Rouhani’s budget was surreal. In midst of economic decline that was talked about, he is increasing subsidies by 20 percent; the imperial misadventures of Iran, which serve none of its national interests, continue. Unless he has found a printing press someplace that—(laughter)—that kind of provides the money, he is exhausting—they are exhausting whatever meager resources the country still has at its disposal.

WRIGHT: Can I just tell you one quick anecdote that I think is really telling? Khomeini has fifteen grandchildren. All of them are reformists. Two of them have tried to run for parliament and have been turned down.

SEIB: Wow.

WRIGHT: And it’s just—you can again see that generation, even among the revolutionaries, is no longer united.

SEIB: So at this point I think we would like to invite members into the conversation here and in New York as well. A reminder that we are talking on the record.

I will call on people here and, Ray, if you will do the same in New York, we could just alternate.

Wait for the microphone, speak directly into the microphone, state your name and your affiliation, and please limit to one question at a time.

Barbara?

Q: Thanks. Barbara Slavin from the Atlantic Council. Thanks, guys—very, very interesting stuff.

To Ray and to Robin, how important is it that people who are dissatisfied now—and I would argue the vast majority of Iranians are dissatisfied with the status quo—how important is it that they remember ’78, ’79, ’80, ’81, and they remember what went wrong then? And how does that impede their desire for change now?

And also, the regional context: Syria, Yemen, Libya, Iraq, and fear of chaos and violence. Thanks.

SEIB: Ray, you want to start?

TAKEYH: Sure. The argument is aired quite often that Iranians had one revolution, therefore they don’t need another one, as if every society gets one. (Laughter.) If you don’t get it right, that’s it, you miss your turn. (Laughter.) You have to learn with a clerical tyranny mired in corruption and suffocating in its inefficiencies because, you know, you had your turn and you blew it. (Laughter.) So I don’t understand that argument about, well, look back at what went wrong in ’79.

What went wrong in 1979 is, to be very honest about the Iranian Revolution, is there is a lot of revisionism taking place about the Iranian Revolution, namely it was a liberal revolution hijacked by clerics. No, you wanted an Islamic republic; you just didn’t—it wasn’t a promise that was forfeited, it was a promise that was kept. So what Iranians have today is buyer’s remorse. That’s what they wanted. Istiklal Azadi, Hukomati Islami—independence, freedom, Islamic government. The latter two don’t exactly work together, but that’s what they wanted.

So I’m not—the regional situation, I don’t know if any Persian looks at Arabs and says, wow, you know, their experience are applicable to ours. That’s the cultural chauvinism of the country. So I’m not quite sure if the lessons of the region and lessons of ’79 are a deterrent to those who want to change their regime. Now, there may be other deterrent factors—absence of organization, the resilience of the security services, it’s easy to go along as opposed to change things around—but the argument that you get one revolution of a lifetime doesn’t work for me.

SEIB: Robin, anything to add?

WRIGHT: Yeah, I think the majority of the population didn’t—was not around in 1979 and the early 1980s, and they don’t—they have no nostalgia for the revolution. They also don’t have any nostalgia for the shah. Some of the ideals of the revolution—the idea of independence from the outside world—still attracts them. There is this frustration with the United States, even those—among those who don’t like the revolution.

But I also don’t think they—I think they—I think they felt threated at one point by ISIS because it came within twenty-five miles, and that’s why they—the government moved so quickly to help the Iraqis, the Kurds particularly. But I don’t think they—I think the Persians feel quite separate from the Arab world, thank you.

SEIB: Ray?

TAKEYH: I’m looking for anyone in New York that may have a question. Sir? Oh, it’ll come to you.

Q: Hi. Clarence Schwab (sp). This is a question for Ray.

You had mentioned specifically one word which was interesting to me, which is “misadventures.” Can you explain exactly what you mean by Iran’s misadventures?

TAKEYH: Sure. There are some things that the Islamic Republic is doing in terms of its foreign relations that does—do make sense, the relationship with Iraq. There are some things they do in the Levant which make no particular sense.

It is often suggested that there’s a continuity between the shah’s foreign policy of regional domination and the Islamic Republic. That’s actually not true. The shah saw Iran as a Persian Gulf power. He didn’t muck around in Syria. He mucked around a little bit in Lebanon at a very minimal level and the politics of Lebanon eluded him, but he didn’t have aspirations to change the complexion of the larger Middle East. His was more Gulf-oriented policy. And before that, it was dealing with the great powers.

So the Islamic Republic’s foreign relations is a profound discontinuity from previous Persian dynasties, and this discontinuity is animated by an ideological factor. Not nationalism; it’s an ideological factor. And that comes—and all ideological regimes do naughty things. In the 1960s the Chinese used to give economic assistance to countries with greater GDP than China. You know, that makes no sense. So I think what they’re doing in Lebanon, billions that they have spent in Syria, assisting all kinds of paramilitary organizations, it doesn’t serve the national interest of the country. What does it mean for Iran to become a Mediterranean power? I mean, this hostility toward Israel, which has been self-defeating, at considerable cost. None of that is part of the Persian dynastic culture—foreign policy culture.

SEIB: Question here, if I could just go right here.

Q: Thank you. Sara Shirzad from Eurasia Foundation. Thank you so much for the conversations and discussions. Very interesting.

What we’ve been seeing in—since 2017 is that the core supporter of the Iranian regime is losing its faith and they started understanding how the regime doesn’t help them anymore. They are on the streets ask for changes. These are the people who usually regime look at them during the elections, try to mobilize them, and make them vote for themselves—for them. Yesterday we heard from Supreme Leader Khamenei that he wants a big reform in the—in the power structure. I wanted to see what your thoughts are about this power structure, and how this would influence the relationship of U.S. and Iran, and if this is a kind of solution to losing the legitimacy of the Iranian regime among its core supporters. Thank you.

SEIB: Robin?

WRIGHT: Well, I think the next panel’s going to address U.S.-Iran, and I don’t want to step on their toes.

SEIB: OK. Richard? Ray?

NEPHEW: I mean, the only thing—the only thing that I’ll say—and this goes to issues of reform and some of the economic issues that have come up. You know, I think the—if there is one thing that we’ve heard over the course of the last few years, it’s that there is increasing concern with the degree to which the IRGC is involved in things that are beyond its remit. One could imagine a set of reforms that potentially excised the IRGC from some of these core economic issues, and that’s been a serious political issue for the Rouhani administration, a serious political issue even going back to Ahmadinejad.

And I would just say that if you are looking for things that could potentially change the way in which the United States, but more importantly the international economy perceives Iran, removing or modifying the IRGC and some of these more pernicious actors’ role in the economy is quite significant. It’s unclear kind of what level of reform and political reform and power reforms are actually being described, but in terms of the reform agenda that’s the one thing I would just point to that could potentially have a very significant role to play. And we’ve already seen this in how the Iranian banking system, for instance, got in a lot of trouble when it started talking about banning the IRGC from being able to do banking in Iranian banks.

So it’s an interesting question of how those power dynamics are going to flow and evolve. And I think it’s one that we don’t know the answer to yet, but it certainly will have an impact.

TAKEYH: Anyone in New York? Yes? Yes, ma’am.

Q: Hilary Cecil-Jordan.

Given Trump’s unpredictability and his apparent concern or focus on Iran right now, is his—some action in the future—in the near future of concern to Iran watchers?

NEPHEW: I’m happy to offer a thought.

Look, you know, again, this goes to the—to the next panel too, so I don’t want to step on their toes here. But I will say that one of the things that I think we have seen out of this president is while he is prepared to say a lot in rhetoric, he is not necessarily prepared to do a lot in terms of action, especially, you know, kind of the actions I think that you’re alluding to—some sort of significant use of military force and so forth. But—and this is the key element for me—a lot of that will be determined by what the Iranians choose to do at this moment.

You know, I think it’s a given that there will be an additional emphasis in Iran on misadventures, and I think you talked about some of that with regard to the Rouhani budget. But more importantly is the nuclear program. And if the Iranians decide that they need to respond to the U.S. breach of the JCPOA by breaching the JCPOA in turn, to me that is the potential biggest and most significant factor that could lead to some kind of major escalation.

TAKEYH: There is a lot of talk—and it’s always been talk, but I’m beginning to take it more seriously—about starting 20 percent enrichment. That seems to be in the air now, and I wouldn’t be surprised if that starts.

NEPHEW: I agree.

SEIB: Here in Washington we’ll go here and then next there.

Q: Hi. Tara Bahrampour with the Washington Post.

I think Richard touched on this a little bit, but I’d like to hear a little bit more of an update on the Revolutionary Guard and how much power they have structurally and economically, and how that could help shore up the current regime or, you know, kind of stymie change.

WRIGHT: I want to hear from Richard myself because I think that is the big question we all have. Are they so ingrained in the system that they cannot be removed? And are they so ingrained that if the revolution is in trouble they make a move politically and they become the alternative? So I’m interested in what Richard has to say.

SEIB: And since we’re piling them onto you, Richard—(laughter)—I would add any diminution of Revolutionary Guard activity in the economy would be a considerable victory for President Rouhani, right?

NEPHEW: I would think so. And, you know, look, if we look over at the last few years, you know, I think there is a considerable case to be made that the reform agenda has directly targeted the IRGC, and that the IRGC has actually been willing to accommodate that agenda to some extent. And in my opinion, I think part of that is because they’ve been bought off by additional freedom of action within the region and the ability to, you know, kind of set their own agenda in the near abroad, you know, whether it’s Syria or Yemen and so forth.

But I think if you look at the banking reform that I was referring to earlier and the idea that Iranian banks could potentially deny service to the IRGC because that denies them access to the international economy, that’s a significant step. If you look at the fact that the IRGC was forced to divest itself of the telecommunications company just a few weeks ago as well as the mobile company, where they had owned a significant economic stake. If you look at the fact that political leaders of all stripes have talked about the IRGC going back to what it’s good at, you know, which is dealing with military issues and security issues and so forth, which is I think how people have phrased it in order to say we’re not saying you’re bad, we’re just saying you’re bad here and we need you to move over there. I think that all suggests that from at least an economic perspective their power is changing.

I don’t know I would say waning just yet. You know, you still look at, for instance, the main construction company of Iran, Khatam al-Anbia, it’s still an IRGC company. There’s no indication it’s not going to be an IRGC company. And it was created in part because they were the people who had the ability to do stuff in the aftermath of the Iran-Iraq War, and construction was certainly a part of that.

And that goes to the broader question of, you know, are they still the big red button you press when you need help? And I think the answer to that is yes. If there’s one thing that I believed happened in the time of sanctions—I have responsibility for this so I blame myself to some extent, although I think it’s also an inevitable element—sanctions pressure did allow the IRGC to claim a privileged position in the economy, and that’s because they were the guys who could do the smuggling and they were the guys who could get things done. And one concern I’ve got is all this reform stuff, whether or not it’s real, whether or not it’s halting, whether or not it has any chance of succeeding, could be undone by the fact that they’re looked upon, again, as the people who can get stuff done. And we haven’t seen that yet, but I think that pushes back on the idea that their authority’s waning.

As to the political side of things, my own perspective is, could they be the people called upon? I am very concerned about the idea that regime collapse is taken synonymously with democratic government emerges. I think there’s a lot of waypoints along that. And if I had to look for people who are going to be in a position to exercise political control, I do look for the people who are in the security services. And the IRGC is at the—at the top of that list.

WRIGHT: Can I just add one quick thing? And that was to your point about Rouhani coming out the winner. Rouhani’s a lame duck, full stop. And there one of the questions is, who would be the force, the pressure, the institution that could say to the IRGC, enough, you know, you’ve got to get out? And I think that’s where you get the balance of power right now is not in Rouhani’s—you know, not in Rouhani’s favor.

TAKEYH: Sir? Obviously, you’ve been very patient. Thank you.

Q: My name is Manik Mehta. I am a syndicated journalist. My question goes to Richard.

You mentioned about China and India being heavily involved in Iran. What is your take on India’s huge investment in the Chabahar Port, which is being used to circumvent Pakistan to ship goods to Afghanistan?

And secondly, I didn’t hear much about Iran’s foreign trade. How does it conduct that, in view of sanctions imposed upon it? Thank you.

NEPHEW: Sure. I mean, so with regard to Chabahar, Chabahar has been one of those very curious episodes for U.S., you know, foreign policy and sanctions policy because for a long time the U.S. was a very clear advocate of the Chabahar Port’s development for exactly the purpose you just said, aiding Afghanistan and trying to get supply and support into Afghanistan. It was Congress, actually, in the heat of imposing sanctions on Iran, that cut Chabahar out of the sanction and provided for an exemption, which the Indians have used here to develop the port.

So, you know, the way that I look at Chabahar specifically is in that lens of what I means in terms of Afghan reconstruction, and the degree to which the U.S. is interested in the port supporting that. You know, whether or not that always remains the case, and whether or not U.S. sanctioners will regret that decision at some point down the road is a potentially different question that goes to the future of Afghanistan and what our stake is there.

With regard to your question about foreign trade you know, look, foreign trade for Iran at this point is essentially the oil trade, right? You know, they do have non-oil exports. A lot of those non-oil exports are still oil commodities—you know, things like petrochemicals, for instance, which are also subject to U.S. sanctions, in fact even more stringent ones. They’ve tried to develop export sectors like the automobile sector, which we then sanctioned. They tried to develop cement, actually, and construction services, which we’ve yet to sanction but I would not put my hopes that that’s not coming.

So, you know, how do they facilitate it? You know, in large part it’s been the oil trade. It’s been just by selling oil to the customers they could—they could sell it to. And that’s obviously much more difficult now that the reductions in sales are supposed to happen, and the revenues are supposed to be kept in escrow accounts in those foreign countries.

SEIB: We have a Washington question here.

 Q: Hi. Paul Dabbar from the Department of Energy.

So can you comment on the seeming discrepancy between Iranian policy towards trying to engage with Europe on SBVs and the JCPOA sanctions topic, while they concurrently have very aggressive intelligence operations in Europe against people who oppose the current regime?

SEIB: Ray, do you want to have a crack at that? It’s an interesting question.

TAKEYH: Well, I think because they’re confident that Europeans have, once again, embarked on their 1990s policy, which was called critical dialogue, where they were critical of the United States with dialoguing with Iran. (Laughter.) So I think that’s the power and lure of the JCOPA at work.

I’ll ask—oh, Bill, I’m sorry. If you can just wait for—

Q: Robin, would you talk about—Bill Luers.

Robin, would you talk about the supreme leader? None of you have mentioned him. Theoretically he’s the power behind everything. Is he out of it? Or I am told that part of his role in undermining the reform movement has been to move back toward social justice and try to incorporate into the reform movement the Ahmadinejad effort to deal with the poor and redistribute money. And I’m also told that part of the backdrop of the political dynamics right now is who replaces Khatami—Khamenei. And who might, in the current government, such Rouhani, position himself to be the selected new supreme leader?

WRIGHT: Well, I did mention that next two years we have two very important—in 2020 and 2021—two really important elections that will define Iran’s future. But of course, the biggest question is, indeed, who will be the next supreme leader. There has been a lot of talk for a while about the current supreme leader, who had prostate cancer, being ill and, you know, all the jockeying behind the scenes. I think he’s proven that so far he’s pretty healthy. And he’s only a year older than Nancy Pelosi. (Laughter.) And—

SEIB: Just to cite one, right?

WRIGHT: And if you shaved off his beard, you might—and took off his turban, you might look at him a little bit differently. There was a lot of talk about if the supreme leader had died earlier in—during the period that Rouhani had produced the JCPOA, and had lifted the pariah status of Iran, and, you know, engaged with the outside world again, that Rouhani would be a successor. I think one of the byproducts, if I were a betting woman—and I think we’re still—you know, unless he has a heart attack like Khomeini did and dies suddenly, you know, that question may not be imminent. But if I were a betting woman, I think the demise of Rouhani, the lame duck status, the failure of the JCPOA—or the collapse—the problems of the JCPOA make it less likely that he would be the logical or popular choice to replace the current supreme leader. And that then leaves a lot of questions.

There’s no designated heir. One of the former presidential candidates, a cleric in Mashhad named Raisi has been talked about as one of the kind of favored alternatives. He’s a hardliner, young, an ideologue. Not very sophisticated. Not very worldly. And, you know, one of the byproducts of the end of the JCPOA may be far more consequential in terms of determining or influencing the kind of public sentiment, the feeling among the revolutionaries, if the question should come up that we need a new supreme leader. And you may find you get someone who veers much more hardline. And that then steers the revolution for a very long time, much more—much longer than a presidential candidate.

SEIB: Ray, do you have a question there?

TAKEYH: A question from New York? Oh, yes, ma’am. I’ll come back to you next.

Q: Thank you. Arlene Getz. Two related questions.

Robin, you mentioned earlier back in the day when there was very little available on the shelves in Iran, what are we seeing now in terms of the impact of sanctions domestically ? And to what extent have the European—well, the remaining signatories of the JCPOA been able to offset them?

And then, related to that, the protests—the internal protests that we saw a little over a year ago—to what extent have those—are those continuing? Simmering beneath the surface? And are they related to the continuing economic woes?

WRIGHT: I think they’re simmering. I think there’s a sentiment simmering under the surface. And I think it’s simmered on a lot of issues under the surface for a very long time, because a lot of people don’t find the vehicle, the will, or the daring to get out and express what they feel. In terms—it’s clear that the impact of sanctions is not nearly what it was in the 1980s. But you also have different expectations, different generation. You know, people in the early days with the revolutionary fervor and Saddam Hussein invading Iran. You know, that nationalist fervor that kind of was willing to endure the hardships that they—the young—very young who volunteered to be cannon fodder during the war. It played out on a lot of different levels.

I don’t think you find that today, although the hardships are not yet as—I mean, if they—I interviewed the Iranian foreign minister in December. And I asked him about sanctions, and exactly that question, what the impact would be. And he said: If there’s one thing that Iranians have learned in the last 40 years, it’s how to break sanctions. And to a certain degree, that’s true. (Laughter.)

SEIB: I think we had a question right here.

Q: Jim Nathan from American University.

I was always puzzled about if there’s a foreign office view of the Iranian purposes. You know, if their foreign office has a view of what they’re doing in the region. It’s hard for me to understand if it’s an interactive dialogue between the kind of vision of maybe a Thirty Years War that the Saudis are trying to ignite, or if it’s an interactive vision of the problem of the Israelis hostility, or if it’s a problem of American power, or if they have another vision of propagating Shia interests. It’s just hard for me to fathom what they think they’re doing. And I wondered if there’s a clear statement that somebody could make of, from their standpoint, what their purposes are.

SEIB: Ray, you want to have a crack at that one?

TAKEYH: Well, I was going to leave it to the next panel, but if you insist. (Laughter.) I mean, in a sense the policy of—if you kind of look at Iranian foreign policy and what motivates it, there are different dimensions to it. There is pragmatism to the country’s foreign policy. There is responding to opportunities. And ideology is sort of water in a flower pot. It affects everything, it permeates everything. This is a deeply ideological state. And the notion of expanding the frontiers of the revolution is very much believed in. I mean, Ali Khamenei talks about it all the time. This was supposed to be a revolution without borders. And it might have exhausted itself at home, but there’s still a lot of borders that it wants to find itself ensconced in.

I would—just one more thing before I open up for question here—there has been some discussion about the hardship that the Iranians went through in the 1980s as a result of the war and the scarcity of the war, and whether that implies a measure of resilience in their character. I think that misses the point of how controversial the Iran-Iraq War is in Iran today. The idea, the mistakes that the government made about prolongation of the war, the idea that reconstruction aid never really—never really got to places it wanted to, the regime has a version of the war, of martyrs happily dying on behalf of the Islamic Republic. But there is a lot of concern, and a lot of anguish, and a lot of anger at the regime for the manner that prosecuted the war. War could have been ended in 1982. It went on another six years. The Iran-Iraq War is a profoundly controversial issue within Iran itself. And if that’s what the Islamic Republic is counting on as a basis of this prolongation, it’s problematic.

I’ll ask a question here. Sir, do you still have your question? I said I’ll come back to you. Yes. Yes. I’m pointing right at you. (Laughter.)

Q: In another room in this building there was a question asked—Herbert Levin, Council member.

Was asked of the ten challenges facing the United States. Which on the international side are the most challenging? The consensus of the room was that for the American people, that would be the 12^th or the 14^th. Americans are concerned with health care and the environment. Somebody said, well, what about—what about Latin America? They said, well, that’s to get the Florida vote for the Republicans. Americans really don’t give a damn what happens in that country. My question is, in terms of what goes on in Iran, how much is determined by the various internal problems and divisions that you’ve outlined for us? And how much is determined by the external things that we are very conscious of because of the press?

TAKEYH: Go ahead.

NEPHEW: I’ll just say, I mean, my sense is that in Iran, anyway, some of those things are more linked than they have—than we have the luxury of linking them here. You know, here, you know, the degree to which one foreign policy issues or one foreign trade issue affects more than one specific segment of the population is pretty rare. That’s not the case with respect to Iran. And so, you know, I think, you know, the fact that the JCPOA promised an end of sanctions, at least as it was billed although that was never actually true, you know, was something that was seen as—you know, across divisions inside of Iran—as a significant event, and something that was, you know, celebrated and talked a lot about.

Here in the United States, I mean, there are probably people who didn’t realize it happened. And I think that just points to an asymmetry of interests here. The same thing happens with regard to sanctions now and the pressure that’s being put back again on Iran. Economically, we can debate what’s the role of sanctions in the economic problems of the country, but sanctions are in there. And I think the Iranians are aware that sanctions are in there. And from that perspective, I think it does mean that Iranian foreign policy and its foreign issues are something that’s much more prevalent than we might make as a comparison point here.

WRIGHT: Can I just add one thing? Ninety-nine percent of Iranians—99 percent of Americans haven’t a clue what Rouhani said anytime in the last year. Ninety-nine percent of Iranians will know every word that Donald Trump said.

SEIB: Well, I think we’re off to a pretty good start for the day on this topic. We will take a brief break here for the next fifteen minutes, and the second session will begin at 6:45. Thank you all for a bunch of really smart questions. (Applause.)

(END)