One man is stoking fear over Iran's presidential election — and the nuclear deal

5/4/2017 4:10:26 PM

Ebrahim Raisis poster carried by a supporter who perhaps dont want to be recognized

Ebrahim Raisis poster carried by a supporter who perhaps dont want to be recognized

CNBC, May 3, 2017 - Supporters of Iranian cleric and presidential candidate Ebrahim Raisi vawe Iranian flags during Raisi's electoral rally prior to presidential elections in Tehran, Iran on April 29, 2017.
The likely successor to Iran's supreme leader has entered the country's presidential election, and that's throwing a lot into question.

Many still expect President Hassan Rouhani to win another term when Iranians go to the polls on May 19. But the emergence of Ebrahim Raisi as the conservative favorite has tightened the race and raised concerns about oil, a historic nuclear deal, and the fragile reopening of the Iranian market.

Raisi was an unknown until he rose to prominence last year when Ayatollah Ali Khamenei named him the custodian of an important Shiite shrine. The move sparked speculation that Raisi is in line to succeed the 77-year old supreme leader.

A hardline victory this month would put conservatives on a collision course with a combative Trump administration, endangering the 2015 agreement that put limits on Iran's nuclear program in exchange for sanctions relief.

Hanging in the balance is Iran's oil production, which has grown by roughly a million barrels a day since sanctions were lifted. So too are investment plans by energy giants to develop the country's massive oil and gas reserves, and billions in aircraft sales by companies including Boeing.

 

 

More broadly, the election represents a choice between joining the global economy under Rouhani — who spearheaded the nuclear deal — and the so-called 'resistance economy' championed by hardliners, which is designed to protect politically connected domestic businesses.

Khamenei has not publicly backed Raisi, but generals from the influential Islamic Revolutionary Guard Corps paid the candidate an official visit, cementing the view that he is the ayatollah's choice.
Raisi could backfire on hardliners

Raisi has his own baggage. Beyond his role at the important Imam Reza shrine, Raisi is perhaps best known for serving on a notorious commission that sanctioned the executions of thousands of political prisoners in 1988.

'The man has literally nothing to offer. He's got no charisma. He's unknown. He doesn't speak well. He flopped in the first presidential debate' on Friday, said Alex Vatanka, senior fellow at the Middle East Institute.

The Eurasia Group named Raisi the main loser of the first of three debates in a briefing. The political risk advisory group said he was upstaged by fellow conservative and Tehran mayor Mohammad Qalibaf, as well as First Vice President Eshaq Jahangiri, who served as a surrogate for his boss, Rouhani.

 

 

 

One argument says the hardliners would not have put forward Raisi unless they were certain of his victory. That has raised worries about vote rigging and a repeat of the massive protests that broke out following 2009's contested presidential election result.
RBC Capital Markets warned last month that 'the regime is not above engineering an outcome that does not represent the will of the Iranian voters, as was the case in the violent 2009 polls.'

But the prospect of social unrest on that scale is anathema to Khamenei, for whom succession planning is top of mind, Vatanka said

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'The last thing he wants is to create unnecessary political excitement and tension around an election result that can be disputed,' Vatanka told CNBC. The regime could perhaps produce 500,000 fraudulent votes and still avoid mass protests, but it would be impossible to fix millions of ballots without provoking a response, he added.

The Eurasia Group believes Khamenei will ultimately decline to back any of the six candidates, having been burned by firebrand former President Mahmoud Ahmadinejad , whom he supported in 2009. Strong support from Khamenei for a candidate may only mobilize moderate and reformist voters, it said.

 

 

 

The election will depend on the economy and whether voters feel the benefits of the nuclear deal have trickled down to them, in Eurasia Group's view.

Rouhani has restored a sense of security by preventing hyperinflation and shortages, but unemployment remains high, particularly among young people.

Following the nuclear deal, oil is flowing more freely, but there is a sense that Rouhani's promise of prosperity has not come to pass.

'He's not being hit on the nuclear deal,' Vatanka said. 'He's being hit on how he oversold it.'

 

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