What Zarrab’s Arrest means for Rouhani

Reportedly at the heart of Turkey’s sanctions-evading gold-for-oil scheme with Iran, Zarrab is accused of concealing transactions with US banks on behalf of Iranian entities, and especially IRGC-linked companies. His arrest may not be making many headlines in Iran, but it has been closely followed by Iranian officials. Indeed, during the Iranian investigation into Zanjani’s activities, these officials said that Zanjani had revealed his associates in Turkey and that they had been invited to Iran.

Hence, it should be noted that the first Iranian reaction to Zarrab’s arrest came from Zanjani’s lawyer, who has said that Zanjani and his associates had engaged in international money laundering, and that the fact that Zarrab was arrested for evading sanctions is testament that his client had actually served the Islamic Republic. However, Zarrab has in the past rejected links to Zanjani, saying in early 2015 that he even warned relevant authorities about him. Nonetheless, Zarrab’s arrest will most likely have an impact on Iran’s domestic politics.

The implementation of the Joint Comprehensive Plan of Action (JCPOA), and subsequent victory of Rouhani’s allies in the Feb. 26 parliamentary and Assembly of Experts elections, appear to have deepened divisions between the Iranian president and his hard-line foes. One of the most hotly contested areas is the economy, especially as the sanctions relief has yet to be felt.

While Supreme Leader Ayatollah Ali Khamenei emphasized the “resistance economy” in his March 20 Nowruz speech, Rouhani underscored the necessity of constructive engagement with the world. The key question now is whether Iran will transform its economy in the post-sanctions era. Will the shady patron networks under the Ahmadinejad administration remain, or will there be more open integration with the world economy?

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