External Affairs

Amid the Deepening Gulf Crisis, Where Does Iran Stand?

As the newly re-elected Hassan Rouhani said after the twin terror attack in Tehran, the people of Iran – the fastest growing economy in the region – are moving forward.

A lawmaker in the Iranian parliament during a ceremony in Tehran, in a file photo. Credit: Reuters/Morteza Nikoubazl

The twin terror attacks on the Iranian parliament and Imam Khomeini’s shrine on June 7, for which ISIS has claimed responsibility, have underlined the danger posed to the region by extremist ideologies. The targets were symbolic – the mausoleum of the founder of the revolution and the seat of Iranian democracy. Whatever be the motives behind the attack, its impact will be to rally people around in support of the country.

The attack, however, cannot divert attention from the bigger story. Iran recently concluded its 12th presidential election with an impressive 73% turnout. The high voter turnout, and President Hassan Rouhani’s re-election, testifies to the stability of the system.

The Iranian Majlis is housed in a complex that pre-dates the Islamic revolution and even the Pahlavi dynasty. It was a product of the Iranian Constitutional Revolution of 1905-11 during the Qajar dynasty. The first Iranian constitution was adopted in 1906. The building constructed to house the parliament, thus, has a historical significance going beyond the contemporary context. It is located in the centre of Tehran. Imam Khomeini’s shrine is outside the city on the way to the airport. The attack on the two complexes, far apart, shows a degree of co-ordination, which goes beyond a lone wolf attack.

Iran has suffered a series of terror attacks in the Sistan-Baluchistan province bordering Pakistan in the past few years. The last such attack on April 26 resulted in the killing of ten Iranian guards. The responsibility was claimed by Jaish ul-Adl, an extremist group based in the Pakistani side of the border. Over the past three years, there have been more than a dozen such incidents, which even forced Iran to write to the UN Security Council.

Despite repeated re-assurances from the Pakistani authorities, the attacks keep recurring. The attack in the national capital, however, carries a graver message. The terror attack has been condemned by Iran’s neighbours. This includes not only Qatar, but also Saudi Arabia, though the Islamic Revolutionary Guard Corps (IRGC) has blamed the latter for the attack. The Iranian government has in its statements blamed ISIS and has avoided blaming Saudi Arabia. The supreme leader said, “The Iranian people are moving forward, and today’s fumbling with firecrackers will not affect the will power of the people.” 

Iran’s presidential election

Iran held its presidential election on May 19 and Rouhani clinched victory in the first round with 57% votes, as against 38.5% for his nearest rival Ebrahim Raisi. The outcome has renewed Rouhani’s mandate to pursue economic liberalisation at home, and engagement with the international community.

Rouhani’s victory in the first round was by no means foreseen. The election took place after the demise of Ayatollah Hashemi Rafsanjani, who along with former President Mohammad Khatami, was instrumental in bringing Rouhani to power in 2013. Thus, there was uncertainty about his support base. Raisi was supported by influential members of the clergy and the judiciary. This included the group of senior clergy based in Qom. As head of the Imam Reza Foundation, he already had the support of the clergy based in Mashad. He also enjoyed support of IRGC and Basij, a loosely organised vigilante group, which functions under the IRGC.

In the event, Rouhani clinched the election with a wide margin over Raisi, who mustered 15,449,786 votes, as against 23,549,616 votes secured by Rouhani.

Iran’s economy

Rouhani had taken over from Mohammad Ahmadinejad in 2013 in difficult circumstances. During Ahmadinejad’s period, Iran’s GDP growth had turned negative, with inflation above 35%. The sanctions had halved Iran’s crude oil exports to around one million barrel per day. Under Rouhani, Iran’s GDP growth is back in positive territory. With above 5% growth, Iran is the fastest growing economy in the region. Oil exports have climbed back to 2.2 million barrel per day. Inflation has been brought down to 14%, since Rouhani took over. Unemployment remains high, and was an issue in the presidential elections.

Though the macro-economic picture has improved, this has not been easy. The Rouhani administration had to roll back subsidies, which was a courageous decision.


Lifting of sanctions did not quite bring the expected benefits due to continued banking difficulties. Major international banks still remain wary of the US position. However, this has not prevented European companies from making a quick comeback to the Iranian market after lifting of sanctions. Airbus has concluded a deal worth more than $20 billion to supply civilian jetliners. Three of these aircrafts have already arrived. Recently, Iran took delivery of ATR aircrafts, also of European origin. Mercedes, Volvo, Peugeot are not simply selling in the Iranian market, but have also established plants in Iran. A trend which is likely to accelerate.

US sanctions

Despite the campaign rhetoric, the Trump administration has maintained US commitment to the nuclear deal struck between Iran and P5+1. Following Iran’s missile tests, US imposed sanctions against Iranian and Chinese companies engaged in missile proliferation. But this does not affect secondary, nuclear related US sanctions, which have been lifted under the Joint Comprehensive Plan of Action. On the eve of Iran’s recent presidential elections, the US also gave the waiver required under the National Defence Authorisation Act, 2012, while announcing continued inter-agency review of Iran’s policies. Boeing has also concluded a deal to supply civilian aircraft to Iran worth more than $20 billion.

India’s interests

India has interests on both sides of the Gulf, just as Iran has relations with Pakistan and China. India has core interests in regional connectivity with CIS countries and enhancing its energy security. Chabahar project and the International North South Transit Corridor are critical to giving us improved access to Afghanistan and Central Asia. Farzad B is important to us; it is also important to Iran. It will bring investment in upstream exploration in Iran at a time when major international oil companies are cutting capital expenditure.

Both countries also have to find a banking solution. This was done successfully at the height of sanctions. Rupee payment arrangement saved India more than Rs 90,000 crores in foreign exchange. UCO bank played a major part in sustaining non-oil trade, as well as finding means for part payment for crude purchase from Iran. There has been some progress on bilateral level recently. The European countries have already established multiple banking channels.

Regional situation

There was strong criticism of Iran in US President Donald Trump’s speech in Riyadh during his recent visit to the kingdom. But, it is hardly logical to blame Shia Iran for the rise of ISIS, an extremist Sunni group.

The spat between Qatar on one hand, and Saudi Arabia, UAE and Bahrain on the other hand, may be linked more to intra-Arab issues, rather than Iran. In fact, it is Oman, not Qatar, that has the closest relations with Iran. Nor can Trump’s visit be blamed for triggering the quarrel between Qatar and her erstwhile Arab allies. Both sides in the dispute are part of the American camp. Their falling apart places strain on the US, which has to mediate to keep them in the fold. The US has a command centre in Qatar, naval base in Bahrain and Saudi Arabia and Bahrain are its allies historically.

All sides need to exercise caution. The situation in the Gulf region is extremely tense. The ISIS philosophy is against Shia Iran, but it poses a more direct threat to the Saudi regime. It calls itself caliphate, which is a direct challenge to the House of Saud, which calls itself as the servant of the two holy shrines.

D.P. Srivastava was India’s ambassador to Iran, 2011-2016.