Political rivalries complicate Iran’s data policies and banking regulations

By Steven Terner



In early January, the veteran US diplomat Dennis Ross published a report about Iran-related challenges facing the Biden administration. Ross said both the Biden administration and the Iranian government will be interested in returning to the Joint Comprehensive Plan of Action (JCPOA), aiming to exchange Iranian nuclear capabilities for relaxing economic sanctions. In fact, as Ross stated in an interview, not only does Iran want sanctions relief, but it absolutely needs it.

However, even if there is a lifting of sanctions, Iran would still have a long list of issues to resolve in order to attract foreign investment. Some of the Islamic Republic’s most difficult challenges will be the scantily reported, yet extremely significant, issues associated with bringing its data policy and banking regulations up to international standards, such as those of the European Union’s (EU) Global Data Protection Regulation (GDPR). For Tehran, these efforts will be just as complicated to navigate as international diplomacy.

Data policy and banking system modernization – Background

Iran’s government is acutely aware that its innovative and highly skilled hi-tech and biotech ecosystems hold massive potential for international cooperation and investment. For example, on December 9, 2020, the Vice President of Science and Technology, Sorena Sattari, called on all capable companies to develop plans for high-capacity cloud computing infrastructure. Then, on January 13, the Minister of Communications and Information Technology, Mohammad Javad Azari-Jahromi published an editorial in the Etemad newspaper. He stated: “The world is entering the era of ‘smart governance,’ and this new era needs to redefine all concepts of governance based on data abundance and intelligence and to increase policy accuracy.” The Iranian minister then called for the restructuring of government systems with a focus on incorporating cutting edge technologies.

Despite Iran’s potential, in order to attract international investment, the country must revamp its banking and data infrastructure. Whether Iran will be able to make the necessary changes, and at what rate, will depend in large part on President Hassan Rouhani’s policy successes and on the efforts of rival political factions vying for governmental control and economic influence, particularly the Islamic Revolutionary Guard Corps (IRGC).

Rouhani’s recent efforts 

Over the past few months, mounting health and economic crises pushed the Rouhani administration to work feverishly to bring the country’s technological infrastructure up to date. This has included connecting remote villages to a nationwide high-speed broadband network to ensure consistent access to communication, as well as developing an automatically self-updating database of citizens’ personal, financial, and health information.

The goals of Rouhani’s programs are quite broad. They include equipping the population with the tools it needs to succeed economically, cutting back on governmental bureaucracy, providing hospitals access to patients’ medical records to facilitate treatment, and increasing transparency as a defense against fraud. Some pushback has been ideological, framing resistance on ethical grounds, such as how to protect citizens’ data, what content to allow on the internet, and whether to allow access to foreign companies. However, such opposition is also pointedly political.

For example, in December, the Rouhani administration authorized the Ministry of Communication to negotiate with Instagram, Twitter, and Google. In response, Abolhassan Firoozabadi, the Secretary of the Supreme Council on Cyberspace (SCC), criticized such negotiations on the grounds that those companies are part of a supposed American effort to control the internet. The SCC is a policy advisory body under the supervision of Supreme Leader Ayatollah Ali Khamenei, who strongly supports IRGC efforts to expand its influence. It is not surprising, therefore, that on January 13 the SCC decried the Ministry of Communication for inadequately monitoring the internet. In particular, the SCC urged the Ministry of Communication to ensure internet usage and content remain in line with Islamic values, and to prevent infiltration by foreign entities.

Ascendant IRGC and its opposition to Rouhani

IRGC influence was growing steadily in Iran even before the global COVID-19 pandemic began. But it capitalized on the crisis and expanded its reach in 2020 by reopening shuttered offices around the country as it oversaw the virus response.

The IRGC opposes Rouhani’s economic policies because many aim to crack down on its widespread corruption and to break up its industrial monopolies. The IRGC’s opposition to Rouhani’s efforts to trade nuclear aspirations for the lifting of economic sanctions is a bit more complicated. Instead of opposing the opportunity outright to seek foreign investment in Iranian industries, the IRGC wants to be in control of the process so that it can maximize its own economic interests and extend its control over the population.

The IRGC successfully took control of the Majles in last year’s parliamentary elections and hopes to replace Rouhani with its own candidate in the upcoming presidential election in June. At that point, it would be willing to take the steps needed to bring Iran’s data policies and banking systems up to date. In the meantime, however, the IRGC will work to sabotage Rouhani’s policies, fearing that his successes would make it more difficult for the powerful paramilitary organization to secure economic and political control. In contrast, Rouhani and his supporters need to attract international investment quickly and set the economy on the path to recovery soon if they hope to have any chance of retaining power.

Stalemate will continue until the summer

Despite the Rouhani administration’s efforts to modernize the Islamic Republic’s data policy and banking regulations to meet international standards and attract foreign investment, the IRGC seems poised to extend its hold on the government and economy. It should, therefore, be expected to continue to curb Rouhani’s efforts to enact legislation to modernize Iranian data policy and banking regulations until the presidential election in June. At that point, either the IRGC will be in the driver’s seat after having won the presidency, or someone within Rouhani’s camp will be given a four-year mandate. In either scenario, Iran’s next president will be better able to enact the long overdue legislation to modernize the country’s data and banking policy and attract international investment.

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  • Steven Terner

    Steven Terner is an advisor at Gulf State Analytics, a Washington-DC based geopolitical risk consultancy. He runs Iranian Economic News, a website that analyzes Iran’s domestic economic issues.

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