Bloomberg |�Arsalan Shahla and Golnar Motevalli: Iranian conservatives won a majority in parliamentary elections, according to the semi-official Mehr news agency, sweeping Tehran and other cities in a repudiation of President Hassan Rouhani�s engagement with outside powers.

Mehr didn�t give a final breakdown, saying that more than 220 out of 290 members of parliament will be hardliners and conservatives. The official turnout was 42.5%, the lowest in the history of the Islamic Republic.

The election had been widely predicted to hand control of the legislature to conservatives empowered by instability and economic damage triggered by U.S. policies. Participation was held back by the powerful Guardian Council�s disqualification of hundreds of moderates and reformists.

Hard-liners and conservatives won all 30 seats in Tehran, the largest and most influential constituency, Fars said Saturday after polls closed at midnight. They also dominated in Esfahan, Khuzestan, Mazandaran and several other provinces, Mehr reported. Participation was held back by the powerful Guardian Council�s disqualification of hundreds of moderates and reformists, Rouhani�s loss of political credibility as the U.S. reimposed sanctions, and a reported surge in coronavirus cases in Iran this week.

Turnout in the 2016 election, which was dominated by reformers and moderates who supported Rouhani and the nuclear deal with global powers, was almost 62%. Several polling stations in both affluent and working-class neighborhoods of Tehran, the capital, were largely empty on Friday.

Given the vacuum among moderates candidates, conservative factions loyal to Supreme Leader Ayatollah Ali Khamenie and generally opposed to engaging with the West were widely expected to prevail. Ayatollah Khamenie, on his official news portal, praised the �shining of the Iranian nation in the big test of the elections,� while accusing a �foreign propaganda apparatus� of invoking coronavirus �to dissuade people from taking part in the elections.�
Soleimani�s Killing

Recent military exchanges, including the killing of General Qassem Soleimani by a U.S. strike, and highly charged rhetoric that�s punctuated the confrontation with Washington, have also energized Ayatollah Khamenei�s base.

For Mohammad, a 29-year-old voting in Tehran, a shift in the balance of power won�t make much difference. �They�re all cut from the same cloth,� he said of the country�s politicians, withholding his last name due to the sensitivities of talking to the foreign media in Iran. �I don�t really think there�s much to set them apart.�

If arch-conservatives emerge victorious they�ll control most branches of the state for the first time since the end of Mahmoud Ahmadinejad�s presidency in 2013.

Rouhani, who delivered on his promise to end Iran�s long-running nuclear standoff with global powers but was unable to build a new era of prosperity when faced with President Donald Trump�s economic offensive, will be largely sidelined.

Black List

In a timely reminder of how hard-liners can influence economic policy, the Paris-based Financial Action Task Force announced on Friday that Iran�s banking system will be returned to its so-called black list of countries after failing to ratify legislation required to bring the sector in line with its counter-terrorism financing and anti-money-laundering standards.

Hard-liners, currently a minority in Iran�s parliament, have for several years fiercely opposed and effectively stalled the pro-FATF legislation that Rouhani promoted and struggled to ratify, and which would have effectively seen Iran adopt the United Nations� Palermo Convention against organized crime.

Some 7,200 candidates vied for seats on Friday. About 75 current lawmakers were barred from running again by the powerful Guardian Council, tipping the field heavily in favor of conservatives wedded to the theocratic ideals of Iran�s 1979 Islamic revolution.

Friday�s election also had significant potential consequences for the Iranian economy and the wider Middle East region, including any hope Iran will renegotiate its landmark 2015 nuclear settlement from which the Trump administration withdrew in 2018.
Looking Ahead

�The crux of this vote is whether it will indicate the outcome for the next presidential elections, which will be more significant,� said Ellie Geranmayeh, senior policy fellow at the European Council on Foreign Relations.

�If the Rouhani opposition does take over parliament, they will see this as ammunition that galvanizes them, and they won�t want him to have any foreign policy success in his last year,� she said.

Some prominent conservative politicians are using the election to stage a comeback and a potential springboard to compete in the 2021 presidential poll, when Rouhani will be ineligible to stand for a third term.

They include the former mayor of Tehran, Mohammad-Bagher Ghalibaf, who�s also a former general with the powerful Islamic Revolutionary Guard Corps. Firebrand cleric Hamid Rasaei, who campaigned against the nuclear deal as it was being negotiated, is also hoping to re-enter parliament.
Threats to Ministers

Amid concerns of a low turnout, the commander of Iran�s IRGC on Thursday urged citizens to vote in a show of show defiance to the U.S. �Every vote by the people is a slap in the face of an enemy,� the semi-official Tasnim news reported the commander as saying.

If the new chamber does decisively swing in favor of conservatives, Rouhani may struggle to ratify any key legislation during his final year in office, including efforts to bring Iran�s banks within international anti-terrorism financing standards. Ongoing attempts to impeach some key ministers, including Oil Minister Bijan Namdar Zanganeh, are also likely to escalate.

Rouhani�s credibility was already battered by the failure of the nuclear deal to deliver the economic relief he�d promised after a decade of international sanctions.

From the get-go, foreign businesses were afraid to sign deals, fearful of running afoul of remaining U.S. sanctions. Any lingering hopes evaporated after the U.S. quit the accord and began imposing fresh sanctions, which have since clobbered the economy. The International Monetary Fund estimates Iran�s economy shrank by 9.5% last year.

Conservatives want Iran to abandon Rouhani�s push to open up to Western investment and trade, and focus instead on increasing self-reliance. While oil exports, down 80%, show no sign of recovering, construction, steel production and exports for cash to immediate neighbors are doing well.

A crisis budget released in December boosts handouts for the poor and defense spending, though it�s based on ambitious growth and oil export assumptions.
(Adds background)