The Decline in Oil Prices Will Not Affect Iran's Nuclear Program

The decline in oil prices will negatively impact the Iranian government's efforts to improve the living standards of its people and the country's economy, but it will not affect areas that are of strategic priority for Iran's leaders, such as nuclear negotiations or support for its allies, including Syria. According to Reuters, the dire economic situation resulting from mismanagement and Western economic sanctions in recent years is an undeniable reality in Iran. Experts say that next year's budget reflects the continuation of social pressures in this 76-million-strong country, where leaders are trying to maintain the status quo despite economic pressures. The sharp decline in oil prices in recent months, the most severe drop since the 2008 economic crisis, means more economic pressure on this OPEC member. Iran has lost tens of billions of dollars in recent decades due to declining oil revenues and mismanagement. The forecast of a period of even greater economic pressure may push the Iranian government toward ending the stalemate in nuclear negotiations, which have deprived Iran of global financial and banking relations and deterred most foreign investors. Nevertheless, the likelihood of a significant change in Iran's regional policies, including nuclear negotiations, is very low. One reason for this is that the security budget is independent of the country's general budget and is funded by Ayatollah Khamenei, the Supreme Leader of Iran, who is also the main decision-maker in Iran's nuclear policy. A senior Iranian official, referring to Syrian President Bashar al-Assad, stated, "Our support for brother Assad will never change. Due to the decline in oil prices, we are facing economic pressure. However, we will continue our military and political support for Syria." Ali Vaez, an expert at the International Crisis Group, says that the economic pressure resulting from the decline in oil prices will not force Iran to reach an agreement in nuclear negotiations with the West. He adds, "Iran sees these two issues as unbalanced. Iran's support for countries like Iraq and Syria is not related to Iran's capabilities and resources but is a strategic necessity. For this reason, neither the severe depreciation of the rial in 2012 nor the economic turmoil of 2013 affected Iran's support for its allies in Iraq and Syria." Negotiations between Iran and Western countries to end decades of stalemate in Iran's nuclear programs continue. Iran rejects Western accusations of seeking nuclear weapons. Iranian President Hassan Rouhani presented a cautious budget based on oil at $70 per barrel to the parliament on December 7, considering the decline in oil prices, while the price of oil has now dropped to $60 per barrel. The budget for the Iranian year 1394 is six percent higher than the previous year's budget and is based on a 20 percent inflation rate. Experts say that the 33 percent increase in the defense budget by Hassan Rouhani has fueled speculation that it is an effort to appease hardline military figures and encourage them to support his policies in nuclear negotiations and end Western sanctions. Powerful hardliners and anti-Western elements in the Islamic Revolutionary Guard Corps, which are under the command of Ayatollah Khamenei, have approached nuclear negotiations cautiously. Diplomats and experts say they do not oppose continuing negotiations. One major reason for this is that in the presidential elections, the public supported Rouhani due to deep dissatisfaction with economic mismanagement and his slogan for ending international isolation. Mehrdad Emadi, an expert at the international consulting firm Betamatrix, says that Hassan Rouhani must consider the Revolutionary Guards in outlining his economic policies, as otherwise they may disrupt any nuclear agreement. He states, "A larger defense budget means giving them a bigger share so that they do not oppose during negotiations, especially with the United States. If the Islamic Revolutionary Guard Corps feels that any connection with the West harms its interests, it will disrupt it." Last year, Iran provided a credit line of $3.6 billion for oil purchases and $1 billion for non-oil purchases to Syria. Iran has taken measures to reduce domestic economic pressure, one of which is the reduction of the official exchange rate. The Central Bank of Iran has reduced the official exchange rate of the rial against the dollar to 27,000 rials. This rate was 24,000 rials last December. The adjustment of the 1394 budget based on a 28,000 rial dollar indicates that this trend will continue. Mehrdad Emadi states that Hassan Rouhani is trying to prevent unrest similar to that of 2009 by supporting the poor against the reduction of the current budget. Scott Lucas, an expert on Iranian and Syrian issues at the specialized website "EA World View," states, "The government may cut more subsidies, but the occurrence of political unrest is unlikely because the regime's repression machine makes such movements dangerous for the people as before."