Zarif’s Economic Legacy

The news that Foreign Minister Mohammad Javad Zarif had resigned was unexpected, but it will be unlikely to lead to perceptible changes in Iran’s economy, or even its foreign policy. His departure has caused psychological shock in the country and has already unsettled some markets in the short term, but it will have no overall effect on the crumbling economy of Iran. The reason is simple: For all practical purposes, Zarif's influence has been dwindling for quite a while.

"Mr JCPOA"

Whether we take the side of his opponents, who believe Foreign Minister Zarif whitewashed the regime’s odious domestic and foreign policies, or the side of his supporters, who praise him for his reformist leanings and for reducing tensions in Iran’s foreign policy, the fact is that his resignation does not change the balance of power in Iran.

A year and a half ago, during the parliamentary session to approve President Rouhani’s second-term cabinet, Mohammad Javad Abtahi, a principlist conservative member of parliament, described Zarif as “Mr JCPOA”, referring to the Joint Comprehensive Plan of Action — the official name for the nuclear agreement. For many, the JCPOA was a summation of Zarif’s record. And when, on May 8, 2018, President Trump officially announced that the US was leaving the deal, Zarif was finished at the foreign ministry.

Over the last nine months, Zarif has been an unsuccessful foreign minister, and has been perceived as such from both inside and outside of Iran. He was unable to provide a convincing scenario of how the JCPOA could work with its European signatories but without the US. He even failed to persuade the domestic opposition to join the Financial Action Task Force on Money Laundering (FATF) and to convince them that passing laws against money laundering is one of the easiest and most trouble-free things that any government can do, even a government as untransparent and aberrant as Iran.

In addition, Zarif actually played no role in the regional foreign policy of Iran. He had even lost the ability to win public opinion. At one time, he impressed many with the power of his rhetoric and his mastery of language, which he used to justify the policies of the Islamic Republic, even in sensitive and controversial areas such as Iran’s missile program. But in his last interview during the Munich Security Conference, which ran from February 15 to February 17, there was no sign of his previous power for persuading his opponents. It used to be that when he said: “Let me stand up and answer you...” his audiences were impressed, but his recent claim to be “a professor of human rights” has become a butt of jokes for his detractors.

The ministry of Zarif ended not on the evening of February 25, but on the evening of May 8, when the JCPOA effectively collapsed.

The JCPOA and the Broken Iranian Economy

During the campaign for the 2017 presidential election, Rouhani promised that he would secure not only one JCPOA, but a second and a third deal too, “with this same Mr. Zarif” at his side. At the time he was unaware that the original JCPOA would not be successful throughout his second term, and he could not have predicted that both he and Zarif would be unable to claim the success they promised.

Just when it seemed that the JCPOA would start to produce results, the United States abandoned the agreement. President Trump ordered the sanctions to be re-imposed in two phases. Europe opposed Trump and announced that it was standing firmly behind the JCPOA, but a few weeks before the three-month deadline of the first phase, 53 European companies left Iran [Persian link]. The Iranian government had pinned its hopes for an economic recovery on these companies.

The government had successfully controlled inflation despite the recession and had hoped for an economic boom after the JCPOA went into effect. What Rouhani’s government could not have predicted was that even some of the semi-successful business arrangements that had come out of the JCPOA began to collapse when the framework of the deal was no longer intact.

In the meantime, Zarif was trying to remake the foreign ministry in the interests of boosting the economy.

Changes that Failed

After receiving a vote of confidence from the parliament, Zarif announced that he planned to change the structure of the foreign ministry and reintroduce the post of “deputy for economic affairs,” which Gholamreza Ansari took up in March 2018. His job was to facilitate foreign commerce and foreign investment and to help the private sector. But the US pulled out of the JCPOA only a few weeks later, and the prospects for foreign investment vanished. Then Iran’s foreign commerce, even in the strong petroleum sector, was disrupted.

“The most important goal of the economic deputy’s department is to play a role in introducing Iran’s domestic economic capabilities to the outside world and to provide foreign countries the ability to work with the private sector inside the country,” Zarif had said in July 2018 [Persian link]. “It must be decided [by the authorities] outside the foreign ministry whether this ministry is in charge of foreign policy in economic and other areas. We do not claim a monopoly on foreign policy, but we do claim that we are responsible for foreign relations. And economic actions must be coordinated with the foreign ministry so as to avoid hurting national interests through useless competition among Iranian businesses in other countries. But it seems that this goal has not yet been realized.”

...And the End

It is not yet clear how the story of Zarif’s resignation will end, and what reverberations will be felt. But what is certain is that he has not been playing a meaningful role as the foreign minister for quite a while and, in general, his absence will make no difference to the downward spiral of the Iranian economy.

There was a time that Zarif was viewed as a master politician who was committed to helping the Iranian economy through diplomacy. And he made some progress. But then a combination of forces and circumstances put an end to this. The fact is that he stopped being the foreign minister even before he resigned from the foreign ministry on February 25.