Could Rouhani Prove Disruptive?

Editor’s Note:

The following article was recently published in SITREP, The Journal of the Royal Canadian Military Institute.
Re-Published with Permission from SITREP, Issue #6 Nov – Dec 2013

by Reza Akhlaghi

Silicon Valley in the southern region of the San Francisco Bay Area in Northern California has been home to America’s most innovative companies. Many of these companies that started as startups have left their indelible mark on their respective industries for their innovative business practices. The outburst of disruptive innovation and business models from Silicon Valley impacting the revenue and management models of dominant, incumbent players in the market are what make this part of California the envy of economic development for many countries.

As a hotbed of innovation that has challenged and redefined existing business paradigms, Silicon Valley has carved itself an undeniable place in the ideation, development, and commercialization of what have proved to be disruptive technologies and market forces. A prime example is Google. From its early days as a basic search engine, today Google has evolved to become a global player in broadband communications industry that has introduced new rules of engagement with market forces, impacting the entire eco-systems of telecommunications, wireless connectivity, municipal economic development, and telecom regulatory models.

Once a disruptive technology is introduced to the market, the first reactions to it come from dominant or incumbent players who keenly follow how the disruptive technology or product could impact their dominant market position, and whether or not the disruptive technology bears the potential to render their revenue models obsolete.  So the shape of the response to a disruptive force/product by the dominant players is one of the key determinants impacting the fate of the newly introduced product and, subsequently, that of the startup company.

The Start-Up Rouhani

What happened in Iran on June 14 was a well orchestrated yet dynamic presidential election that despite all its shortcomings and criticisms leveled against it, it managed to produce large enough enthusiasm among the Iranian electorate to bring about a surprise win for a candidate whom most Iran observers and analysts had the least expectations to win. That candidate was Hassan Rouhani, whose administration bears hallmarks of a disruptive force in Iranian and international politics.

The Iranian president comes from a clerical background with a long resume in the country’s national security and nuclear establishments. His longstanding inclusion in the inner circles of power elite gives him the required dexterity to maneuver Iran’s corridors of power without falling victim to power-plays by the country’s competing factions.   Both during his election campaign and in speeches after his election, President Rouhani put on display his outlook on such key issues as Iran’s dysfunctional economy, human rights, freedom of expression, and the concept of social and political fairness. He has given further indications of an ambitious administration whose success could prove disruptive not only for Iran’s faction-ridden politics and economy, but also for the international geo-political and geo-energy order.

As a start-up administration with an experienced and mostly U.S. educated team in the fields of domestic and international politics, the Rouhani administration received its equivalent of a first round of funding for a start-up company; that first round of funding (support) came from the Iranian electorate. Nearly 20 million voters cast their votes for Rouhani and put him in the office of presidency. Iran’s middle-class–impoverished under years of gross mismanagement, with rising expectations for transparent governance, and fed up with policies of a commercial elite in charge of much of the Iranian economy–acted as the backbone of support for Rouhani’s election win. The same commercial elite, with an institutionalized culture of corruption, has come to the conclusion that it has a great deal to lose from Rouhani’s disruptive governance model of social and economic transparency.

President Rouhani has encouraged moderation in Iran’s domestic and foreign policies and offered to cleanse the Iranian polity of the toxicity it has been imbued with over the past eight years.  For example, in a document analyzing Iran’s economic challenges and opportunities, Rouhani outlines an economic doctrine whose chief objective, if implemented successfully, is to give a much-needed jolt to Iran’s faction-run economic structure and direct it toward its rightful place in world economy. Rouhani’s strategic vision has already made him a fat target for his domestic and international opponents, who view even the specter of a successful implementation of his policies a tsunami-like disruption to their well-entrenched economic and social status. These forces will do their best to unplug this new start-up administration and prevent it from receiving any additional rounds of funding (support).

Disrupting the Domestic Political Markets
The Rouhani presidency faces challenges from domestic sources and international players. Iranian hardliners with their grip on the Iranian economy and closely tied to the IRGC see the outlook for their monopolistic rule on the economy challenged by Rouhani’s policies.

For Iran observers it is imperative to be cognizant of the fact that visible and invisible ruling factions in Iran have gained their entrenched economic status and dominance over the country’s management system by feeding off a web of business relationships with the IRGC built on principles of cronyism and nepotism. The economic management style of factions can be summarized as managed chaos. What can be inferred from Rouhani’s stated policies and announcements is an outlook for Iranian politics and economy to move from disorder and economic factionalism to an order based on principles of meritocracy and transparency, however limited.

From this perspective, Rouhani’s foremost challenge is the implementation and management of the disruptive force of his policies in the face of powerful influence of a corrupt elite who view his policies as capable of rendering their long established grip on power, economic power in particular, obsolete. Rouhani’s opponents also know that his support among Iran’s youth and middle class remains significant in a society ripe for change. So Rouhani’s opponents need to walk a fine line in their efforts to undermine the Rouhani administration.

In this environment, Rouhani has the unenviable task of convincing his powerful opponents that their long-term interests lie in economic order rather than disorder. The question remains whether or not Rouhani can pull off the task of moving the country to a new and orderly era of economic and political management? For this to happen, Rouhani and his start-up administration need a second round of funding (support); this time from Europe, the United States, and Canada.

Disrupting the International Political Markets

During this year’s annual United Nations General Assembly (UNGA), Rouhani and his team went on a carefully choreographed charm offensive designed to transform Iran’s image under a new administration with strong support from the Iranian electorate. In addition to a media blitz, Rouhani’s itinerary during the UNGA included a speech followed by Q&A at the Asia Society and co-sponsored by the Council on Foreign Relations (CFR). The Rouhani administration, despite the many hurdles on its way to a successful implementation of its policies, has demonstrated willingness to pull Iran out of its isolation and mend ties with the West. This demonstration of willingness is also the realization of the bankruptcy of the Iranian state ideology in social, political, and economic spheres and the inability of this bankrupt ideology to give Iran the status it deserves on the international stage.

Determined to Unplug A Start-Up Administration

Since the advent of the internet age, many internet startups have emerged to challenge the status quo and traditional business models in the entertainment, movie, TV, and radio broadcasting industries. Despite enormous resistance from industry juggernauts, onslaught of industry lobbying aimed at forcing startups out of business using their enormous market power, today consumers and businesses are witness to a wholesale transformation of content (TV, movie, radio) delivery methods that are rendering traditional business models obsolete. The roots of this transformation lie in the innovative ideas by once little-known startups whose only assets were their intellectual property and two or three rounds of funding to keep their operations going.

As a start-up administration, Rouhani faces similar challenges by a myriad of domestic and international players as his policies have demonstrated the potential to transform, if not render obsolete, the way business is done in Iranian politics and economy.

Certain circles of Iranian technocrats with strong links to intelligence-political elite and with vast business operations in the black market see their interests jeopardized if the economy emerges from its chaotic disorder and moves toward relative order. These technocrats are present in government institutions and conduct lobbying in Majles, the Iranian parliament.  The same group includes technocrats with long-standing ties to Russia and China and tasked with protecting Russian and Chinese interests in Iran’s complex political and power machinery.

Also, in the region and beyond what Rouhani’s opponents fear is a smooth re-orientation of Iranian strategic imperatives as Rouhani and his administration inch toward charting a new course for Iran with better diplomatic and economic ties with the West looming in the horizon. These opponents include extreme right-wing think tankers in the United States and their allies in certain circles of the Israeli government, even though Israel would be one of the key beneficiaries of a re-orientation of Iranian strategic imperatives.

Will Rouhani have a Google-like Impact?

In Iran there is a unique opportunity to pull the country away from its strategic impasse and tilt it toward the Western orbit. It is an opportunity for Iran to have a Google-like impact on international politics and geo-energy order as it moves toward re-defining its strategic imperatives under the Rouhani administration.

The continuation of the harsh economic sanctions has made the Iranian leadership think twice about the cost of their adventurous foreign policy, their economic policies, and brutal treatment of their citizens. Moreover, the leadership in Tehran has gradually come to the understanding of the futility of its de-facto alliance with Russia and China; an alliance that has utterly failed to produce positive results for the Iranian economy and the country’s increasingly significant interests in the geo-energy developments of the Middle East and Central Asia.

A robust Iranian engagement with Europe, the United States, and Canada could cause consternation in Russia and China and prompt them, using their point men in Iran’s complex power structure, to derail Rouhani’s policies and reverse the prospects of forging closer economic and energy ties with the West. As a start-up administration, therefore, it is becoming increasingly imperative for Rouhani to receive its second and crucial round of funding (support); this time from Western powers. This support will nearly guarantee Rouhani a Google-like impact on Middle Eastern politics and, subsequently, on the international affairs. Should this support materialize and catapult the Rouhani administration into the next stage of its life, it could permanently alter Western geostrategic and geo-energy interests at Moscow’s and Beijing’s expense.