May 19, 2017 7:20 am JST

Iranians head to polls in tight presidential race

Leading candidates offer contrasting diplomatic, economic policies

HIDEMITSU KIBE, Nikkei staff writer

TEHRAN, Iran -- Iran's presidential election has entered its final hours, with moderate incumbent Hassan Rouhani and a conservative underdog competing closely on highly divergent diplomatic and economic platforms.

Iranians head to the polls Friday. The results may become clear as soon as the next day. If no candidate takes more than 50%, however, a runoff between the top two finishers will be held May 26.

Rouhani is the current favorite to win, trailed by cleric Ebrahim Raisi, an anti-American hard-liner. But a surprise outcome is certainly possible. In an informal poll Wednesday, 35% of respondents said they supported Rouhani, with 18% pulling for Raisi. Around a fifth of surveyed voters gave no answer. Furthermore, more than 10% were still undecided. Lower turnout would seem to favor the conservative side, which can expect bloc voting.

One source of contention is whether to keep pursuing harmony with other countries, primarily the U.S. Rouhani has kept cool toward Washington, which tends to view Tehran with hostility. But Raisi has criticized this approach, arguing Iran should take a tougher stance internationally.

On Wednesday, the U.S. Trump administration extended sanctions relief stemming from the 2015 international nuclear deal. But in the same breath, it imposed narrower penalties related to Iran's ballistic missile program. The effects of these moves are not yet clear: Rouhani can tout the nuclear deal as an achievement of his first term, but the hints of animosity from Washington may end up boosting Iranian voters' support for the more belligerent faction.

Another election issue is economic reform. Despite the lifting of international sanctions, Iran's growth appears lackluster: its 2017 real gross domestic product probably will grow by just 3.2%, says the International Monetary Fund, down 3.3 percentage points year-on-year. Crude oil sales rose following the nuclear deal, but the unemployment rate appears set to stay around 12% owing to a lack of growth in labor-intensive industries that generate jobs for a broad range of jobs.

The U.S. federal government, as well as individual states, maintain sanctions against Iran, citing issues such as human rights and support for terrorism. These penalties have made foreign companies reluctant to establish presence in Iran. Major European banks are still not offering a full range of services, further discouraging foreign companies from doing business in Iran.

Rouhani and Raisi approach the issue from opposite sides. The incumbent favors expanding the private sector by attracting foreign investment, while the conservative cleric says Iran should build an economy that does not depend on foreign businesses.

Rouhani has resorted to public spending cuts to cool consumer price inflation. Raisi promises to pay cash grants to the poor. Some, especially the rural poor, have welcomed Raisi's approach.

The prospect of a victory for the hard-liners raises fear that the confrontation between Iran and the U.S. will worsen and further undermine stability in the Middle East. Under this scenario, the country's economy would inevitably deteriorate, as the likelihood of stronger sanctions from Washington and increased political strain with the international community would grow, says Adam Ramey, an assistant professor of political science at New York University Abu Dhabi.

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