The re-election of Iranian President Hassan Rouhani means the country will continue to benefit from relaxed sanctions. However, further social liberalisation will be limited and Iranian foreign policy will be largely unchanged.

Many believe Hassan Rouhani’s win in Iran’s presidential election on 19 May represents a clear rejection of the ideological establishment, and a desire to see Iran engage further with the international community and reform its domestic politics and society. Tehran and other cities saw huge gatherings of people from across Iranian society celebrating Rouhani’s win. While Rouhani provides hope for Iranians, he faces many obstacles from both inside and outside Iran in reforming and liberalising the country. So what will his second term look like?

Rouhani’s campaign message was based on the outcomes of the Joint Comprehensive Plan of Action (JCPOA), which saw the lifting of sanctions on Iran and relief for its crumbling economy. Iran’s economic indicators have been positive since the lifting of sanctions, with inflation falling from around 40 to 10 per cent, an increase in oil exports and a stabilising currency. The JCPOA allowed Rouhani to demonstrate Iran’s willingness to engage politically with the West and enlarge Iran’s role in the international community. Rouhani also relied on his appeal to different parts of Iranian society including the upper and middle classes, the young and old, and the religious and secular. Rouhani developed a strong female support base through his campaign to end gender discrimination and improve women’s rights in the country.

In contrast, Rouhani’s main opposition candidate, Ebrahim Raisi, focused his campaign on a populist platform, calling for tough economic measures to combat poverty, the re-Islamisation of Iranian society—including in universities—and the enforcement of sex segregation.

Rouhani’s first major challenge will be to ensure the economy remains stable. The economic situation is likely to continue to improve in many areas due to the effects of the JCPOA. One of Rouhani’s greatest achievements from the JCPOA is the series of new Airbus aircraft that have arrived in Iran since the beginning of 2017. Boeing has also signed deals with several Iranian airlines. Iran’s exports of oil and gas will continue to improve. The country’s economic diversification is likely to be ongoing. Iran will continue to develop its automotive, military, technology, medical, pharmaceutical  and agricultural industries. Start-up businesses are also on the rise, providing space for young entrepreneurs with access to the IT sector.

Regionally, many of the Arab Gulf states will also increase economic ties with Iran. Gulf states such as the United Arab Emirates and Oman will remain key trading partners. Even Iran’s main regional rival, Saudi Arabia, has begun investing in the country’s food production and commodities.

Yet Rouhani faces many economic challenges. The banking system is constrained by the remaining US sanctions, making it hard for Iranian businesses to perform transactions in US dollars. Corruption is an ongoing problem and many Iranian businessmen lack the business culture necessary to navigate the international business arena. The Revolutionary Guard, which is tightly aligned with the Supreme Leader Ayatollah Khamenei, has a strong influence over the economy, which may obstruct international investment in large projects.

Rouhani’s efforts to reform Iranian society will be hindered by domestic political constraints. Rouhani is restricted by the power of Supreme Leader Khamenei, who can dictate all foreign and domestic policies. Social movements such as My Stealthy Freedom, which aims to overturn compulsory hijab laws among other restrictions on women, will remain constrained by the religious establishment.

It is unlikely Rouhani can secure the release of former presidential candidates Mir Hossein Mousavi and Mehdi Karroubi, who have been under house arrest since the 2009 Green Movement; or former President Mohammad Khatami, who has been banned from appearing in public. Improvements in Iran’s human rights should not be expected; there is little discussion of its persecution of political activists, dissidents and minorities.

Iran’s involvement in regional conflicts will not change under Rouhani. Whether under a reformist or hardline conservative, Iran’s Syria policies are steadfast. Syrian President Bashar al-Assad is a close ally of Tehran, which has propped up his government since the beginning of the conflict. Iran’s interest in Syria is strategic rather than ideological. Its alliance with Assad reflects the desire to retain influence in the Shia crescent and deter any US-backed influence in the region, especially from Saudi Arabia.

The same is true for Iraq, where Iran will continue to support the government in fighting Islamic State so the unrest does not threaten Iran’s sovereign borders. While Iran and the US have different policies in dealing with the civil unrest in the Middle East, Tehran will engage in some cooperative measures in Iraq to combat the threat of Islamic State and ensure that both states’ interests remain intact.

While some commentators argue that Iran is meddling in Yemen’s civil war, this notion is overhyped. Although Iran opposes Saudi policies in Yemen, it cannot directly involve itself in the conflict due to Yemen’s isolated location on the Arabian Peninsula. Iran-Israel relations will remain hostile during Rouhani’s second term.

Many of these regional disputes are influenced by the US presence in the region. Under the Trump administration there is little evident desire for an improvement of Iran-US relations. Trump’s recent visit to Saudi Arabia and Israel and the US$110 billion (AU$147 billion) weapons deal with Riyadh signal the retraction of the US-Iran rapprochement that occurred under Obama. Iran will remain sceptical of US intentions in the region.

While Iranians are unlikely to see any major shift away from the state’s Islamic principles, Rouhani will attempt to slowly reform social norms to appeal to the young and more secular Iranians. Economically, the relief from sanctions under the JCPOA will allow Iran to continue to diversify its economy and provide it further access to the international community. Rouhani is likely to lead Iran down a path of further economic engagement and openness with the other states in the region and further abroad. Regardless of the eagerness to further re-engage with the international community, however, many of its foreign policies will endure to protect the country’s geostrategic interests.

Will McEniry is an intern with both the Australian Institute of International Affairs National Office and Australian Institute of International Affairs Victoria. He was part of an AIIA delegation that visited Iran in April 2017.

This article is published under a Creative Commons Licence and may be republished with attribution.