The election of Hassan Rouhani as Iran’s president attracted everyone’s attention with the inaugural ceremony attended by officials from more than 50 countries. The event gave rise to numerous propositions about a possible progress in the regime and in Tehran’s future relations with the rest of the world. The prevailing perception is that the victory of a moderate and pragmatic candidate gives hope for a more fruitful dialogue which may facilitate the solution of numerous persisting problems. There is a good deal of reasoning in the propositions, yet deep-seated stereotype thinking still prevails. The assessments definitely need serious correction if we do not want to miss the opening opportunities – once again.

In a situation of rigid Western economic sanctions and complicated relations with practically all of its neighbors, Iran nevertheless is turning into a most important state in a vast geopolitical area that embraces the Middle and Near East, Central and Western Asia. The Iranian aspect is present in practically all international problems that draw global attention, such as nuclear nonproliferation, the Middle East peace process, the legal status of the Caspian Sea, Central Asia, etc. Tehran is an active participant in the dialogue of civilizations and, naturally, remains one of the key players on the hydrocarbon market. To a large extent, Iran’s role has been enhanced by the difficulties brought about by the Arab Spring in other major countries in the region, including Egypt – Iran’s traditional competitor – which is sinking into the quagmire of internal political confrontation.

Prior to the presidential election I happened to visit Iran and talk with some leading politicians and clerics about the situation in the country, their perception of the Iranian nuclear program and other issues that link Iran with other countries in the region and major world powers. Given the role played by the religious factor, it was particularly interesting to hear the opinions of religious leaders when visiting the holy Shi’ite city of Qom.

PRIDE AND PREJUDICE

Naturally, the topic that permeated all of my meetings was the so-called “nuclear file.” The meetings helped me understand why the protracted and boggy “dialogue” with Iran had so far been largely futile. The reason is that the nuclear issue is usually discussed in the narrow, literal meaning: the focus is made on technical aspects, which undoubtedly are important but which are not the most important ones. The prime motive that guides the Iranians is not the wish to possess nuclear arms as such but something more substantial and fundamental, that is, an ability to effectively ensure its full sovereignty in all of its manifestations, occupy a more noticeable and widely respected place in the system of regional relations and in a broader international context, and achieve the highest level of technological development. Iranians need firm guarantees that their country will not be treated like Iraq, Libya or Syria. At this point Tehran sees no solid political guarantees of its sovereignty and free choice. Hence its desire to back up its international and regional positions with force and create some deterrence against possible armed invasion. The shortest and most radical way to do to is to obtain a nuclear status. Certain steps to broaden the format of talks with Tehran were taken in the past. In June 2008, the six international negotiators (Russia, the United States, Great Britain, France, Germany, and China), which maintain contact with Tehran on the nuclear issue, passed on a set of extended proposals to Iran. They contained the promise to foster an exchange of opinions on regional security and nonproliferation; develop cooperation on Afghanistan (to fight illegal drug trafficking, help refugees, and protect the Iranian-Afghan border); promote cooperation in the field of agriculture and transport infrastructure; and continue the dialogue of civilizations. However, this initiative led nowhere. Moscow is the only party that is conducting broad dialogue with Tehran by engaging with it in the Shanghai Cooperation Organization and other formats.

Washington, on the other hand, seems to benefit from the truncated format of talks with Iran. Since Tehran’s negative reaction to certain technical proposals is easy to predict, there appear more and more new pretexts for toughening the sanctions, which the Americans believe will help achieve the main goal – removing the antagonistic regime in the country. This situation reminds me of the drawn-out and knowingly futile negotiations conducted by the UN Special Commission (UNSCOM) to ensure Iraq’s compliance with policies concerning Iraqi production and use of weapons of mass destruction. The negotiations actually created a political and psychological basis for aggression against the sovereign country ten years ago.

The Iranian issue needs new negotiation formats in order to deal with the heavy burden of problems that have turned the country into a “besieged fortress.” And this will require reciprocal steps from each party. Unilateral attempts to threaten Iran or put pressure on it lead nowhere and only change the configuration of unyielding problems.

This is a thorny path as Iran has a bad reputation in Europe and America. Mahmoud Ahmadinejad’s presidency made the West and many countries in the Middle and Near East consider Iran an eccentric country, largely due to the individual features of this politician. This perception partly spread to countries that traditionally support Iran. However, conversations with Iranians reveal that their fundamental approach to global and regional issues is based on their incessant quest for national identity and thorough analysis of international events. True, Tehran often speaks loudly about things that others prefer to keep hushed up and in many instances Iranians, who have put forth ideas challenging their time, have succeeded in anticipating events.

Here is one of the most vivid examples of this, which is quite illustrative. Iran was the first country in the Third World to raise the question of building a fairer economic world order that would, among other things, ensure the rights of these countries to their subsoil resources. Iran adopted a Law on the Nationalization of Oil Fields in March 1951, long before other Middle and Near East countries followed suit. Then Prime Minister Mohammad Mossadegh spoke up publicly about the need to put an end to the British and American control and even went as far as breaking up diplomatic relations with Great Britain. In reply, Washington and London set up an oil boycott against Iran.

Western countries then pooled their efforts to cut the “high-handed” Iranian premier down to size and Mossadegh was removed from office in August 1953 as a result of direct interference in Iran’s internal affairs.

Considering how the situation evolved subsequently in the Middle and Near East and the world as a whole, one can say that Mossadegh and his supporters had gone ahead of their time by putting forth ideas that would be realized in a new international environment and would lead, among other things, to the nationalization of subsoil resources and the creation of OPEC. (Incidentally, after the 1979 Islamic revolution, March 20, the day when Iran’s oil industry was nationalized, was declared a public holiday.) It’s useful to remember such historical examples and make no haste in declaring Iran an “eccentric” that “is out of step” with the rest of the world.

Iranians think that their political model corresponds to the 21st century realities and fits well into the emerging multipolar world. Moreover, they emphasize that Western countries, which have taken up the job of “lecturing” Iran, have entered a period of long crisis and can hardly act as mentors for states with a long experience of independent development and a developed democratic system, even though different from that in the West.

At a recent meeting with Iran’s top government officials, its supreme leader Ayatollah Ali Khamenei described Iran’s “trump cards” as follows: “A perfect geographical location, a history to be proud of, an ancient civilization with deep roots, natural riches and tremendous human resources.” Speaking of history, Ali Khamenei recalled that the efforts to nationalize Iran’s oil fields had failed once but subsequently “the victory of the Islamic revolution and the creation of the Islamic Republic provided a decisive and categorical response to the blows Iran had been receiving from foreigners.”

Khamenei named the development of science and technology a key factor in national revival and the starting point for increasing Tehran’s influence on events in the region and the world. “The rate of scientific progress over the past ten years has been fair enough and we should not let it slow down as we need to achieve the desired level of economic development, open up new frontiers and move closer to world standards in the field of research.” The supreme leader said that if Iran “learns to discern the real nature of the opposite side’s behavior” and understand the goals, methods and patterns of action used by the opposing forces, it would be able to avoid undesirable consequences and defeats. “What is important is… that we should not allow a situation where our movement forward will be obstructed,” he said.

The view on national development and foreign policy has been firmly mixed in the minds of Iranians with a skeptical, and one can even say ironical, perception of the West’s attempts to portray its way of life and values as the only “civilized system.” Numerous publications in Iran are quite critical about the history of the West and its current image. Iranians often cite crises in the European Union and the Western financial system to prove their point, and vehemently reject any “advice” from Washington and European capitals made in an unacceptable or forceful manner.

Iranians urge Russia, China and other countries that pursue independent foreign policies to pool their efforts for a more effective response to Western pressure. Tehran is trying to portray the sanctions imposed by the United States and the European Union as aggressive actions directed not only against Iran but also against “all forces that resist Washington’s diktat.” SANCTIONS AND THE ECONOMY

Sanctions affecting two main sectors – energy and finance – are the biggest headache for Iran’s leadership. The United States and the EU countries have imposed a ban on the import, purchase and transportation of Iranian crude oil and petroleum products, as well as on related financial and insurance services. They have also banned the import of petrochemical products from Iran, the export of petrochemical equipment and technology to Iran, and investment in its energy and petrochemical industries. Iran responded by redirecting oil export to the Asia Pacific Region.

As for financial and banking sanctions, they are much more painful to both Iran and the countries that continue to maintain normal trade and economic relations with it. On December 31, 2011, U.S. President Barack Obama signed an act imposing harsh sanctions against foreign banks that carry out operations with the Central Bank of Iran, including export-import transactions. In May 2012, Obama authorized the freezing of bank accounts, blocking of property, denial of entry to the U.S. and other measures against individuals and companies that violate unilateral American sanctions against Iran.

America has built a well-considered and rigid system of measures against countries that refuse to join its sanctions. The European Union has followed suit and declared unilateral economic sanctions against Tehran in October 2012. It banned all operations with Iranian banks, except for those related to purchases of medicines and food and humanitarian aid, and blacklisted several Iranian companies, banks and oil enterprises.

Iranian politicians think that their country has been used by the United States to test its mechanism of pressure on independent states. If this process is not stopped, they say, such sanctions will become a routine practice in international relations.

Assessing the effectiveness of the sanctions is a special issue. On the one hand, they have caused serious economic problems. Inflation soared and the national currency lost 70 percent of its value even according to official reports. However, Iran has survived and its economy has not collapsed. Moreover, Iranians are trying to give a systemic and thoroughly considered response to the sanctions. Tehran has had to speed up diversification of its economy and ensure maximum use of domestic resources. In the long-term, adaptation to the sanctions can spur further development. For example, the export of agricultural and industrial products is growing. People are buying more of domestically made goods, including cars and household electrical appliances, thus stimulating their production.

On the whole, the situation is not as bad as it may seem. Over the last eight years, the economy has been growing at a rate of 4-5 percent a year. The petrochemical industry has increased output, steel production has gone up from 10 million to 24 million tons, cement production has grown from 33 million to 89 million tons a year, and motor vehicle production has doubled (from 960,000 to 2 million). However, Iran has failed to achieve the targets set out in its development program for 2005-2010, which projected an annual economic growth of 8 percent. What is worse is that oil export revenue is decreasing.

RUSSIA AND IRAN

The U.S. and EU sanctions are essentially exterritorial and affect the interests of third countries, including Russia, primarily in the financial and banking sector. Russian banks do not want their business ties with traditional partners in America to deteriorate. In 2008, trade turnover between Russia and Iran reached $3.7 billion but then decreased by 20 percent the same year to $3 billion due to the economic and financial crisis. However, it grew in 2011 but only to fall again to $2.3 billion following the sanctions in 2012, and it keeps going down, as evidenced by the first several months of this year.

This factor necessitates the creation of an alternative payment mechanism that would use the national currencies of Russia and Iran or third countries for direct settlements with Russian exporters. Moscow and Tehran are committed to implementing their agreements despite complications. On the whole, prospects for broader cooperation look quite good. In July 2010, during the Iranian oil minister’s visit to Moscow, the two countries signed a roadmap for energy cooperation for the next 30 years. It calls for exchanging hydrocarbon production and processing technologies and expertise, conducting geological exploration, carrying out joint projects to develop oil and gas fields using Russia’s advanced technologies, designing and building infrastructure for the transportation and storage of hydrocarbons, and supplying equipment for the oil, gas and petrochemical industries.

The government of Iran has launched an ambitious program to overhaul its ore mining and metallurgical industries, under which it intends to increase the production of steel from 20 million to 55 million tons and that of aluminum from 400,000 to 1 million tons by 2025. Russia has wide experience of providing technical assistance in these sectors since Soviet times. Iran’s fifth five-year development plan (2011-2015) envisages the purchase of new planes for the country’s airline fleet. Russia made attempts to foster cooperation in this sector in the past, jointly with third countries, and should resume these efforts again.

Owing to its geographical location, the Iranian market offers good opportunities for Russian exporters of agricultural produce (wheat, rye, barley, corn, and sunflower cake). In 2012, Russia exported 485 million U.S. dollars’ worth of grain to Iran and was one of its largest suppliers.

The Bushehr nuclear power plant, being built with Russia’s technical assistance, is to be commissioned in September 2013. Now the two countries need to make a decision on their further nuclear cooperation. This will largely depend, of course, on how the international community and influential regional countries view Tehran’s policy, especially in the field of nonproliferation, and on how the situation inside Iran, the region and the world as a whole evolves. The Syrian crisis is also a factor to consider. IRAN IN THE REGIONAL CONTEXT

Damascus is one of the few close and trusted partners of Tehran in the region and Iranians are deeply involved in Syrian affairs. Tehran’s official position on Syria is that the crisis should be resolved through Syrian-Syrian talks without outside interference. The Iranian leadership has held meetings with the UN Secretary-General’s special representatives for Syria (Kofi Annan and Lakhdar Brahimi).

According to Iran’s Six-Point Plan for Syria, once hostilities cease, arms and troop supply to the Syrian opposition must be stopped in order to create conditions for Syrian-Syrian talks. They should lead to the formation of an interim government, which will be able to prepare a free national election in Syria. The future government will be formed on the basis of the will expressed by the Syrians, without outside interference. Tehran supported a plan to create a quadripartite committee with the participation of Iran, Egypt, Turkey, and Saudi Arabia. Iranians attended all of the committee’s meetings at all levels. Iran presided at a trilateral meeting with Syrian and Swiss officials, which made it possible for European countries to send humanitarian aid to Syria.

Iranians have come close to understanding that the Syrian crisis can hardly be resolved without changing the situation in the region as a whole and without creating a regional security system. This will give Tehran a role in the search for a comprehensive solution to regional security.

What can be done to intensify the dialogue with Iran?

First of all, it is necessary to acknowledge the fact that the situation around Iran is part of a larger conflict-ridden area that encompasses the Middle and Near East and the adjacent regions. Problems associated with the “Iranian file” can be resolved only if Tehran is treated respectfully and if an atmosphere of trust, security and stability is created in the region. The Iranian crisis should be considered in conjunction or even in a package with other regional problems that worry Iran.

There is no need to devise new negotiation mechanisms. Instead, it is necessary to restore the format that worked before – the multilateral Middle East Arms Control and Regional Security Working Group. It was created as part of the Middle East peace process in January 1992 at a Moscow meeting between the foreign ministers of Russia, the United States and other leading world and regional nations. The Group made progress in drafting a code of conduct for the Middle East countries in the field of security, which called for rejecting the use or threat of force. There were plans to create a regional center to monitor the military situation in the region and send fact-finding missions to problem-ridden regions of the Middle and Near East. Unfortunately, the Group’s regional security activities were stopped at Egypt’s initiative (which was its big strategic mistake, as time subsequently proved) in 1996 under the pretext of “pressure” on Israel which had run into new difficulties at the talks with the Palestinians.

The work of a body to address Middle East security issues could be restored as follows.

At the initial stage, experts could meet to prepare a ministerial meeting. In addition to the traditional parties to the Middle East peace process (Russia, the U.S., the EU, the UN, Arab countries participating in the League of Arab States, and Israel), the Group should also engage with Iran and Turkey. The decision on the resumption of the Middle East Arms Control and Regional Security Working Group’s operation can be made by the foreign ministers of interested countries at their meeting.

There have emerged subjective prerequisites for implementing this plan: Mohammad Javad Zarif, an experienced diplomat, former Iran’s permanent representative at the United Nations, has been appointed new minister of foreign affairs. He is one of the leading experts on regional security in the Middle East and the Persian Gulf area. Zarif has repeatedly put forth constructive proposals on the matter at various international forums.

The situation in Egypt is similar. The post of foreign minister has been given to Nabil Fahmy, a former permanent representative at the UN and ex-ambassador to Tokyo and Washington. Fahmy took an active part in all of the Working Group’s major events. The participation of experts of this level could guarantee continuity and effectiveness of the Group’s activities.

Renewed contacts between Israel and Palestine are one more factor in favor of the restoration of a multilateral format of the Middle East peace process. In fact, the bilateral format cannot produce a formula for the final Israeli-Palestinian settlement, which would address such issues as refugees, the distribution of water resources, the future of Jerusalem, and relations with other countries in the region. There must be a multilateral negotiation mechanism that would tie the proposed solutions to the interests of other countries in the region.

The people of Iran and its new leadership can become constructive partners in building a regional security system for all countries without exception. Hassan Rouhani made quite an encouraging inauguration speech in the Iranian parliament on August 4, 2013. “Regarding foreign policy, as a person who has been elected by the noble people of Iran, I state with all determination that the Islamic Republic of Iran stands for peace and stability in the region. Iran is a haven of stability in this turbulent part of the world… Calm and stability in all the surrounding regions are not only a dream and wish but a need and comprehensive necessity for the Islamic Republic of Iran… Transparency is the key that opens the gate of trust. The kind of transparency we mean cannot be unilateral or exist without practical implementation mechanisms in bilateral and multilateral relations.” Much will now depend on Iran’s readiness to take practical steps towards a broader dialogue with other countries.