US President Donald Trump told Israeli Prime Minister Benjamin Netanyahu that he was demanding “significant changes” to the Iran nuclear deal to remain in the pact, according to press reports one week after their meeting in Washington on March 5.

In January, Trump said he would cancel sanctions waivers for Iran issued as part of the nuclear deal and withdraw from the pact negotiated by his predecessor unless major changes were made by his stated deadline of May 12. The changes the administration is seeking include the indefinite extension of limits on Iran’s uranium enrichment and other nuclear activities and an intensified inspections regime.

EU leaders have launched a diplomatic effort to save the agreement, but some reports have said Trump has adopted an uncompromising approach in talks. Reuters in February that the US might accept a commitment to improve the deal over time, according to a State Department cable that suggested the president might accept a lower threshold than he publicly outlined in January. Other reports have said that the president continues to oppose a supplemental agreement that could include elements of the changes he is seeking in favor of amendments to the nuclear deal itself, which was ratified by the United Nations Security Council.

European diplomats, as well as other signatories Russia, China and Iran, have effectively ruled out any renegotiation of the pact itself. The recent ouster of US Secretary of State Rex Tillerson, who favored remaining in the deal, could also complicate efforts to convince Trump to remain in the agreement. His replacement, Mike Pompeo, has criticized the deal in the past, though some sources have said his views on the issue may have evolved.

President Trump appears likely to scrap deal

Trump will remain under pressure from key advisors and US allies to keep the deal in place, and this lobbying may influence his decision-making, as seen in his decision in August 2017 to reverse his campaign pledge to withdraw from Afghanistan. However, the president has also proven his willingness to abandon international agreements negotiated by his predecessors and has made clear his opposition to the Iranian government and the deal itself. Trump has repeatedly called the agreement “the worst deal ever,” diminishing the likelihood of a compromise before May 12.

US withdrawal from the nuclear deal would almost certainly lead to greater regional instability and could trigger retaliation by Iran or its proxies in the Middle East. The US and Iran are on opposing sides in a number conflicts in the region, including Syria and Yemen, and Iranian proxies in Iraq have previously threatened to target US coalition forces in the country. US allies in the region, including Israel and Saudi Arabia, could also be affected and any Iranian response might include cyber operations.

The reimposition of US sanctions on Iran will exacerbate the country’s economic challenges. Iran has attracted just $25 billion in investment since the agreement was signed, significantly below expectations for an economy of its size. Remaining US sanctions are already a major deterrent to investors, and reapplying sanctions that were lifted as part of the nuclear deal would only amplify concerns for investors about the risks of doing business in Iran. The European Union has said it would provide legal protections for its companies and banks, and it could coordinate these efforts with other countries, who could bar their companies from complying with extraterritorial US sanctions on Iran as they did the 1990s.

Iran’s response remains uncertain

It is unclear whether these measures will prove effective in helping Iran to substantially improve its ability to attract foreign investment if the deal collapses, especially from Western companies. Iranian President Hassan Rouhani has said his country would remain in the deal even if the US withdraws, so long as Iran’s interests are protected. However, underscoring the importance of attracting greater investment, Rouhani’s deputy foreign minister warned in February that Iran might scrap the nuclear deal if banks continue to blacklist the country and it fails to secure promised economic benefits.

The added political uncertainty, alongside concerns about the domestic challenges of doing business in Iran — including corruption, a lack of transparency and protectionism — are likely to weaken the country’s investment prospects in the coming months and years should the US exit the agreement.

It is not clear if the nuclear deal will survive if the US withdraws from the pact. Nationwide protests in January that left more than 22 people dead were inspired in part by frustration over the country’s poor economy and took place amid widely held perceptions that the deal has failed to generate the anticipated economic benefits. President Rouhani, a moderate whose administration negotiated the nuclear deal, has seen his popularity damaged by the fall in support for the deal, and its collapse could undermine his efforts to promote economic and political reforms that could improve the domestic business climate in the wake of the demonstrations.

Iran is not likely to pull out of the pact immediately, given pressure from Europe and other signatories to remain in the deal. Nevertheless, unless there is a recovery in the country’s economic and investment prospects, Iran’s commitment to the deal could gradually erode following a US withdrawal, resulting in its eventual collapse.

*[This article is based on a report by .]

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Tanzanian President John Magufuli ordered officials to accelerate work on a proposed liquefied natural gas (LNG) terminal in August 2016, but the outlook for the project remains uncertain amid a slow-moving and complex decision-making process. In late January, a senior official at state-run TPDC told reporters that the government hoped to conclude a so-called host government agreement with international oil companies (IOC) by 2018. The agreement will set out the key terms under which foreign companies Royal Dutch Shell, ExxonMobil, Statoil and Ophir will build and operate the $30 billion LNG plant, and talks have been underway since September 2016.

The timeline on the LNG terminal, a flagship project with the potential to have a transformative impact on Tanzania’s economy, has been pushed back repeatedly due to a myriad of regulatory and operational challenges.

Originally targeted for completion by the early 2020s, Norway’s Statoil warned in November 2016 that the project could be pushed back to 2026 at the earliest. Statoil’s Tanzania country manager, Oystein Michelsen, told that the project could be brought forward if the government was ready, but said a final investment decision would not be made within the next five years due to uncertainty over a stable investment framework and local ownership requirements.

The comments were a blow to Magufuli’s high-profile efforts to accelerate the long-delayed project. His office has made progress in resolving issues around land acquisition for the plant, but has failed to resolve delays that stem from more complicated concerns about regulations and the investment climate. Indeed, some of the president’s actions, including an anti-corruption drive that has ousted top officials with oversight of the industry, have slowed already complex negotiations with IOCs.

Economic uncertainty in Tanzania

Magufuli’s shifting economic policies have also damaged the wider investment climate, reinforcing a cautious approach within the industry. In a bid to decrease reliance on foreign aid and to fund an ambitious program to reach middle-income status by 2025, Magufuli is seeking $45 billion in new revenues to fund an ambitious industrial strategy. New taxes have been imposed on a range of sectors—including mining, banking, shipping and telecoms—prompting some foreign companies to reconsider their presence in the country, according to press reports. Some firms have also reportedly been pressured not to pass higher costs on to consumers and to invest in local projects such as smelters that businesses deem commercially unviable.

On February 2, the president said he would intensify a crackdown on tax evasion by large companies that businesses argue has led to unfair tax claim cases. The Economist said in May 2016 that an unnamed foreign company was given seven days to resolve a $5 million claim, and when it failed to do so, the funds were withdrawn directly from its bank account. Given the difficulty of taxing Tanzania’s vast informal sector, which the African Development Bank says accounts for 55% of gross domestic product (GDP), foreign investors and large companies are likely to face continued scrutiny and financial pressure as the drive to boost revenues intensifies.

The negative impact of disputes over taxes and revenues on the business climate is indicative of a wider failure of the current administration to fully consider the implications of the policies it has implemented. Underscoring this, in January the International Monetary Fund (IMF) warned in a that uncertainty in the private sector over the government’s new economic policies, along with a failure to follow through on an ambitious public investment strategy, were among the main downside risks to growth.

Tanzania’s port of Dar es Salaam, a major hub for trade to landlocked East African countries, has lost significant business to rival terminals in the region after the government announced in 2015 that it would apply a VAT on goods shipped overland to neighboring countries like Zambia and Uganda. In a reversal of an informal agreement with operators, in June 2016 lawmakers ordered local and foreign-backed telecoms firms to list on the local exchange. The fact that one firm told the Financial Times that the decision had been made without any industry consultation reinforces concerns about an unpredictable and narrow policymaking process.

LNG project faces uncertain prospects

Recent government action in other areas has made it critical that investors use ongoing talks to secure provisions that protect their investments from future policy changes. The lack of clarity has only reinforced the need for a cautious and deliberate approach in the wake of other policies viewed critically by the industry.

In December 2015, Statoil officials expressed concern about the uncertain impact of a new petroleum code approved several months earlier on existing contracts. Even as exploration continues, above ground challenges have made it increasingly unclear when the LNG project might be completed. Although exploration in both countries began in earnest in 2010, Tanzania appears to have increasingly fallen behind its rival gas-rich neighbor Mozambique, which despite its own delays approved changes to key contracts in December 2016 and hopes for a final decision on an export terminal this year.

Years of discussion and unrealized promises about the economic benefits of Tanzania’s nascent gas industry have already contributed to the growth of unrealistic expectations among the public. For example, East African civil society group Twaweza said in August 2015 that some 17% of Tanzanians believed they would be employed in the sector, and some 53% incorrectly thought offshore discoveries were already producing. Majorities also said that natural gas will provide electricity supplies and improved living conditions, responses that may fail to fully consider the complexity of delivering such direct benefits.

Internationals nongovernmental organizations such as Oxfam have undertaken projects to promote transparency in the public discourse around LNG, but major challenges remain in managing expectations. Amid growing uncertainty over when, or if, the LNG project will be delivered, the government and industry face growing reputational risks should public attitudes harden. The 2013 protests in Mtwara over a gas pipeline reflect local sensitivity over natural resource projects, and if IOCs and the government are seen as having failed to deliver on past commitments, it could create a more contentious climate for investment in the oil and gas sector.

*[This article is based on a report by .]

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On January 8, Iraq’s elite counterterrorism troops reached the eastern bank of the Tigris River in Mosul for the first time since the offensive to retake the city from the Islamic State (IS) was launched on October 17, 2016. Iraqi forces have made notable gains against IS in Mosul since the start of this year, and further advances will allow for an eventual assault on the western half of the city, which remains entirely under militant control.

The narrow streets of western Mosul’s Old City will complicate military efforts against entrenched militants there, making the battle for the remaining half of the city tougher than the ongoing fight for the east, which has already killed thousands of militants and Iraqi security forces.

Despite the protracted fighting, the 100,000-strong anti-IS coalition is backed by the US-led coalition, and vastly outnumbers the 6,000 insurgents that were initially estimated to be in Mosul. Although the completion of the offensive to retake Mosul could still be weeks or months away, there is little doubt it will be eventually recaptured.

The loss of the Islamic State’s last remaining major urban stronghold in Iraq will mark a major setback for the group, damaging its state-centric narrative and depriving it of significant resources. However, IS has demonstrated the continued capability to conduct attacks outside Mosul, including major assaults on Kirkuk and Rutba in October 2016, and a wave of attacks blamed on the group that killed more than 20 people in Baghdad on January 8.

After Mosul Falls

Even with the fall of Mosul, IS will retain networks of supporters and areas of influence that it can exploit to launch operations across Iraq. Surviving elements of IS will likely focus on terrorism as a means to undermine the country’s institutions, rather than by seeking to gain control over territory as they have since 2014.

The conditions and grievances that have fueled the Sunni insurgency in the post-Saddam Hussein era remain largely intact, creating the potential for IS to regroup in the wake of its looming defeat in Mosul. The US-backed Sunni Awakening movement had helped to largely militarily defeat the Islamic State’s progenitor, al-Qaeda in Iraq, by 2008. However, the group was able to exploit regional instability and Sunni perceptions of marginalization by Iraq’s Shia-led authorities to gradually rebuild its networks and influence, culminating in its territorial expansion over 2014.

Failure to address widespread feelings of Sunni disenfranchisement, or to resolve issues such as power sharing and governance in Sunni areas like Anbar province, will lay the foundations for future insurgencies led by IS or a successor organization.

High levels of violence and instability are likely to persist even if Iraqi forces defeat IS militarily. In the absence of strong leadership or a political pact that addresses the country’s various social cleavages, the loss of a common enemy will increase competition both among and between Iraq’s various ethnic and sectarian blocs. For example, there is deep anxiety within Iraq’s minority communities over the future role of powerful Shia militias that have been accused of retaliatory violence against Sunni civilians and engaged in repeated clashes with Kurdish armed forces in Tuz Khutumu over 2016. Although groups such as the Badr Organization and Kataib Hezbollah formally report to Iraqi Prime Minister Haider al-Abadi, in reality they answer to Iran and powerful Iraqi figures in the political and clerical establishment.

Failure to address the political and security concerns these armed groups present could lead to the rise of rival Sunni paramilitary units, which could seek backing from Gulf powers as part of the wider Sunni-Shia proxy battle playing out across the Middle East.

Relations between Kurdish authorities in Erbil and Shia leaders in Baghdad could also deteriorate as Erbil refuses to hand over territory, including oil-rich Kirkuk, which it captured as a result of the conflict with IS.

Further Unrest Ahead in Iraq

Division within Iraq’s main Sunni, Shia and Kurdish blocs further damages the country’s long-term prospects. Reports of attempts by controversial ex-premier Nouri al-Maliki to undermine his successor and fellow Shia, Prime Minister Abadi, as well as the inability of Kurdish leaders to agree on presidential succession in their semi-autonomous region, are an indication of the country’s ineffectual and fractured leadership.

Iraqi leaders have also demonstrated an inability to cooperate on the country’s myriad of challenges. For example, a key proposal to form a national guard force that would increase the number of Sunnis in the armed forces has been stalled in parliament for more than a year, preventing progress on reforms necessary to address the main drivers of the country’s sectarianism.

Political jockeying also continues to undermine the effectiveness of the country’s institutions—as evidenced by parliament’s August 2016 ouster of Sunni Defense Minister Khalid al-Obaidi on questionable charges, a decision that has left the post vacant at a critical juncture.

This political dysfunction will only prolong the current instability, setting the stage for continued unrest and violence even after the fall of Mosul.

*[This article is based on a report by .]

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The vote of no confidence by the eastern parliament, the Tobruk-based House of Representatives (HoR), underscores the fragility and volatility of the current political situation in Libya.

In August 2014, an armed coalition known as Libya Dawn seized the capital Tripoli and set up a parallel administration, forcing the internationally recognized government to flee to Tobruk in the east of the country. In an attempt to resolve the nation’s political and geographic division, in December 2015 the United Nations-brokered Libya Political Agreement (LPA) was announced.

Under the peace plan, the HoR—the internationally recognized parliament—was expected to vote to endorse the unity government. However, a formal vote had been repeatedly prevented by anti-Government of National Accord (GNA) lawmakers, despite the fact that 100 members of parliament (MP) in the HoR signed a pro-GNA petition in February 2016.

No-Confidence Vote in Libya

In the vote of no confidence by the HoR, 61 out of a total 176 MPs voted against the proposed unity government cabinet, while 39 lawmakers abstained and one voted in favor. Despite protests from pro-GNA lawmakers that the vote had not been expected, the numbers were sufficient for a quorum.

Some opposition to the GNA is motivated by the desire to maintain the influence of parallel institutions in the east, and to protect the powerful military general, Khalifa Haftar. Since 2014, Haftar has led a campaign against Islamists and their perceived political allies, which has made him unpopular with supporters of the Libya Dawn forces that captured Tripoli, a coalition that included Islamists and powerful tribes from the wealthy western city of Misrata.

Some in the east are also determined to challenge the growing strength of long-time political rivals in Misrata who have led the GNA offensive against Islamic State (IS) in Sirte and could extend their presence in the strategic oil-rich Sirte basin in central Libya. The presence of the unity government in Tripoli, where pro-Misrata militias are present, is also perceived in the east to leave the Government of National Accord vulnerable to the influence of rival forces.

In the wake of the vote, Prime Minister Fayez Seraj, who heads the nine-member Presidency Council (PC) that acts as Libya’s head of state, said he would form a new cabinet and present it to the HoR for approval. The decision to continue to seek the backing of lawmakers in the east shows that expanding the GNA’s limited authority, which at present extends largely to ministries in Tripoli, depends upon securing the support of competing centers of power. The HoR had voted for the government to submit a new list within eight to 10 days, but the lack of progress in naming new appointees demonstrates how such a timeline was never feasible.

The HoR has also demanded the new cabinet comprise just eight members, down from 17 currently. The smaller cabinet makes it more difficult for the GNA to secure support and represent various interest groups. For example, The Libya Herald reported on August 29 that Musa Koni, a member of the PC, was angered at the lack official posts secured for fellow southerners. The process of replacing the ministers is potentially fraught, as it could expose Seraj and other members of the PC to pressure from different factions, especially those in the east and west, who may struggle to agree on candidates.

The reshuffle itself is likely to undermine the gradual consolidation of power by GNA ministers since the PC arrived in Tripoli in March. Given the extent of opposition to the GNA among some in the east, further challenges to its authority are likely by the HoR and its allies, especially those of General Haftar, who faces an uncertain future if all armed forces are unified under the Presidency Council as called for in the LPA.

The inability of successive Libyan governments since the 2011 revolution to form effective and independent security institutions remains a key driver of the country’s perpetual instability.

Economic challenges in Libya exacerbate political uncertainty

A sustainable improvement to the current security and economic challenges facing Libya requires a resolution the country’s political crisis. High levels of crime and sporadic violence in Tripoli, including frequent and regular between rival militias, underscore the limited capacity of the government, which is unable to secure even the capital.

Beyond Tripoli, the unity government remains dependent on alliances with armed groups to exercise authority. The deterioration of public services and the economy has reached critical levels, and if not ameliorated, the GNA could experience an irreparable loss of public support.

Attacks on personnel and infrastructure, as well as unrest at oil ports that lie under the control of militias, have contributed to a precipitous decline in revenues from oil sales, which are at around 15% of 2013 levels, depriving the government of its main source of funds. Underscoring the challenge of restoring lost output, which has been slashed to around 207,000 barrels per day (bpd) from a peak of 1.6 mn bpd, in August state oil company chief Mustafa Sanalla warned that the organization needed up to $1 billion to repair damaged energy infrastructure and to pay tens of millions in arrears to international service companies.

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Currency shortages have made it difficult to secure imports and pay wages, and there is growing anger over power and water cuts, which have worsened since July. These conditions have fueled ˛ą˛Ô»ĺĚýand led the United Nations envoy to Libya, , to warn in August that support for the GNA was “crumbling.” Libya’s divisions have undermined the government response, as evidenced by the decision of eastern officials in June to order bank notes independent of the GNA-backed central bank in Tripoli, a move that officials warned could trigger hyper-inflation.

The Islamic State (IS) has staged repeated attacks on oil fields and ports in the Sirte basin from nearby strongholds, and its territorial losses in the key oil-producing region will only encourage greater competition for control of these strategic resources. There is a precedent for fighting over oil infrastructure in the region between eastern and western forces. In December 2014, pro-HoR fighters repulsed a surprise assault on the Ras Lanuf and Al-Sidr export terminals by the Libya Dawn group, an armed coalition that included Misratan militias and was allied with the now defunct General National Congress.

Receding IS threat may worsen conflict over resources

Diplomatic efforts and joint opposition to the threat from IS largely suppressed fighting between these factions since 2015. However, recent progress in the Misratan-led, GNA approved campaign against IS has been accompanied by an upsurge in belligerent rhetoric and posturing by eastern forces. On , an official from General Haftar’s Libyan National Army, which is allied with the HoR, warned its forces would secure major oil fields and ports, including Zueitina, Al-Sidr and Ras Lanuf, to protect them.

Many of the ports and fields in eastern Libya are held by the Petroleum Facilities Guards (PFG), a militia allied with the GNA and led by tribal leader Ibrahim Jathran. Both and Libyan officials have warned of the threat to oil infrastructure from possible fighting, especially near Zueitina where the presence of pro-Haftar forces has been reported.

In June and August, small pro-Haftar forces and the Benghazi Defense Brigades, an anti-Haftar militia that includes Islamists, engaged in small-scale clashes in the vicinity of eastern oil infrastructure, including the field in Jufrah. An escalation of the conflict for control over Libya’s lucrative energy infrastructure could jeopardize efforts to restore lost output, and undermine political reconciliation efforts.

Foreign powers will continue to constrain the ability of any group outside of the GNA to monetize Libya’s oil revenues by working to prevent exports outside of official channels. However, even with progress in the campaign against IS, Libya’s political institutions will remain too weak and divided to effectively maintain order, thus minimizing the GNA’s ability to capitalize on recent security gains. For example, although the PFG is allied with the GNA, it has led a blockade of oil ports under its control since 2013, and officials from the state-run have criticized a recent deal to reopen the facilities, warning that the agreement would encourage other groups to target infrastructure in hopes of extracting concessions.

Thus, gains in the conflict against the Islamic State could lead to a resurgence of the unresolved conflict between rival forces in eastern and western Libya, creating fresh political and security challenges for the country’s embattled government. Resolving Libya’s enduring political divisions remains critical to fostering the conditions for a gradual improvement in the economic and security situation in the country.

*[This article is based on a report by .]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

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The comes amid growing evidence of the severity of the economic crisis affecting Saudi Arabia. Official data from July showed the for the first time since the 1980s as cuts in government spending compounded the impact of the fall in oil prices. The construction industry, which relies heavily on state-funded infrastructure projects, has been especially badly affected, with tens of thousands of foreign construction workers left stranded having not received wages for up to eight months.

The deteriorating economic outlook has given fresh impetus to the government to consider economic reform, and in June, Riyadh unveiled the $72 billion (NTP). The 110-page plan identifies the government’s key economic policies and targets for the five-year period from 2016-20, as part of the long-term economic blueprint laid out in the agenda. The NTP seeks to transform the economy by privatizing state-owned assets such as ports and companies, including a 5% share of national oil company Saudi Aramco. Key sectors such as pharmaceuticals, information technology, tourism, construction and mining are also prioritized for investment.

Although the plan demonstrates a greater level of urgency on the part of the government to address the country’s structural economic challenges, more clarity on terms and regulations is necessary to attract investors. For example, Saudi Arabia has pledged to stimulate private-sector investment in the mining sector, but the government has not provided any specifics on promised regulatory changes or incentives for investors. Proposals to privatize state assets could also face local opposition over concerns that newly privatized firms will implement mass layoffs to trim bloated payrolls. Moreover, an historical lack of transparency at even well-regarded state enterprises such as Aramco may prove problematic for investors.

Businesses in Saudi Arabia will, however, benefit from planned bureaucratic and regulatory reforms, which will be less controversial than the privatization plans and far easier to implement. Saudi Arabia was ranked 82 out of 189 economies in the and plans to move up the ranking to number 20 by 2020.

In order to achieve this, Saudi Arabia plans to resolve some of the most frequent complaints voiced by foreign investors, including the difficulty of securing visas and permits. The government also plans to reduce the time it takes to resolve commercial disputes and tackle other issues related to contract enforcement, another key concern. Reducing the cost and difficulty of securing government approvals and complying with local requirements in areas like employment law will be critical to the outlook for investment.

Non-oil sector to struggle despite renewed government vigor

Compared to previous diversification strategies, there is evidence of a more substantive commitment by the government to tackle its structural economic challenges. Each of the country’s 10 development plans announced since the 1970s has been unsuccessful in diversifying the economy. Earlier development programs lacked clear targets or mechanisms to stimulate the private sector, while politically difficult decisions, such as reducing subsidies and the public wage bill, have been avoided.

The NTP notably differs from past economic program in that it sets out 346 targets for government bodies and establishes units to monitor and track progress toward implementation. Cuts have also been made to costly subsidies on water and energy, though King Salman’s decision to remove the utilities minister in April after higher water prices sparked a public backlash underscores the sensitivity of the reforms and potential opposition to measures that impact living standards. The king further signaled his commitment to reform by reshuffling the cabinet in May to bring into government figures with proven commercial experience like Labor Minister Adel Fakeih, former chairman of food company Savola Group.

Despite the positive intent demonstrated by changes announced to date, the non-oil sector of the economy is likely to grow slowly in the coming years. The private sector’s dependence on state contracts and spending has been a key sticking point of past efforts to diversify the economy, and the non-oil sector has consequently suffered as the government cut planned spending by 14% in its 2016 budget. Local profits have been reduced by government austerity at the same time that economic disruption has limited the ability of Saudi firms to raise financing from banks.

The government has said the private sector would fund around 40% of financing, or $48 billion, for key projects such as new schools and power plants, but new taxes, fees and subsidy cuts will raise costs for local operators. Foreign investment will help to ameliorate the impact of this, but the ultimate level of interest will be determined by the specific terms and progress in resolving regulatory barriers.

Political, structural risks to reforms

The bureaucratic and personnel changes are indicative of the strong support for the economic program at the highest levels, most notably by Deputy Crown Prince Mohammed bin Salman who has led the reform effort as its chief architect and champion. The plan represents the biggest economic restructuring effort since the country’s founding, a move that risks upsetting traditional centers of power in the bureaucracy, royal family and clerical establishments. Prince Mohammed’s foreign and domestic policies have provoked criticism from other members of the ruling family, and his own lack of support within the ruling elite has the potential to leave him and his economic agenda isolated.

Progress in diversifying the economy will thus remain vulnerable to changes in the domestic political environment or resistance from vested political interests and conservative clerics who oppose liberalization.

Structural imbalances such as those in the labor force will remain, limiting the growth of the private sector. Less than 20% of all employees in the , a figure that reflects the poor quality of local education and a persistent mismatch in skills and training. In polling and employment, Saudis have also indicated their preference for less-onerous and more generous government positions. These structural challenges are unlikely to be reversed in the medium term, and the private sector will face greater pressure from the government to hire locals as the state seeks to trim spending on wages. While the failure to meet targets over the employment of local nationals could expose businesses to regulatory scrutiny, companies will likely struggle to recruit local workers with the necessary skills.

Weak economic conditions will also persist, resulting in a bleak outlook for the employment of foreign laborers in key sectors such as construction. In May, the region’s largest construction firm, the Binladin Group, laid off up to 77,000 expatriate employees, many of whom had not been paid for months. The failure to pay wages and difficulties in securing exit visas have contributed to . Although the overall threat from protest in Saudi Arabia remains moderate, a demonstration by hundreds of construction workers  disrupted traffic in Jeddah, while in May laborers set fire to Binladin Group property in Mecca. Mounting frustration over local conditions could manifest in more frequent and disruptive protests without government intervention.

*[This article is based on a report by .]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

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On March 8, images showing ’s supreme leader, Ayatollah Ali Khamenei, in public were broadcast on state television, in an apparent attempt to end speculation in foreign media that he was unwell. Although Khamenei appeared to be in good health, reports have drawn attention to the uncertainty surrounding Iran’s succession process. Despite the predominance of hard-liners in the regime, it remains unclear who will ultimately prevail in this process, which will have significant consequences for the country’s long-term economic and foreign policies.

state television showed undated images on March 8 of Khamenei addressing environmental activists in Tehran, in an attempt to quiet rumors in foreign media that he was in a critical condition in hospital. The claims first in the press after the supreme leader had been out of the public eye for several days, and came after he spent a week in hospital in September recovering from prostate surgery.

Though there is no indication that Khamenei suffers from any imminent or chronic medical challenges, growing domestic and international speculation over his health is indicative of the uncertainty over his successor. The supreme leader holds ultimate authority over all of Iran’s religious, political and military institutions, and any change in power will have considerable domestic and international consequences.

Ongoing competition for influence among reformer and hard-liner politicians, both of which have their own internal divisions, will further complicate and shape the emergence of Khamenei’s successor. Conservatives have come to dominate the Assembly of Experts, which is responsible for selecting the next supreme leader, and their influence will be extended if reformist candidates associated with the 2009 anti-government protest movement are again barred from running in a February 2016 vote to select assembly members. The Guardian Council, which is responsible for vetting candidates for the Assembly of Experts, parliament and other bodies, has banned a number of prominent political opposition figures associated with the unrest, which was the worst to affect Iran in decades, from seeking office.

Ayatollah Ali Khamenei / Flickr

Other groups capable of influencing the selection of a new leader include the incumbent president at the time of Khamenei’s death or incapacity, the clerical establishment, loyalists of the current supreme leader and members of the military and security services, including the Revolutionary Guards, a body that Khamenei has increasingly relied upon to consolidate his own power.

The diverse number of actors and the opaque nature of the process makes it extremely difficult to predict who will eventually emerge as successor. The transition process has been formalized institutionally, but it has only been tested once after the death of the Islamic Republic’s founder, Ayatollah in 1989. Khamenei’s selection itself highlights the potential for unforeseen outcomes, as he was initially considered an unlikely candidate because he lacked experience as a senior cleric.

While a number of figures have been identified as possible candidates in press reports, no clear favorite has yet emerged. Ayatollah Sayyed Mahmoud Hashemi Shahroudi, a conservative but not considered among the radical wing, has been cited as a strong contender given his revolutionary and religious credentials. But his Iraqi ancestry and lack of political charisma are reportedly threats to his ascension.

Other conservative candidates include the former judiciary head, Mohammad-Taqi Mesbah-Yazdi, who was appointed as chairman of the Assembly of Experts in March and will hold the position until his term expires in 2016. However, at 83 years old, Mesbah-Yazdi’s age and extremist positions, including advocacy of violence against reformists, will likely make it difficult to attract widespread support. The current judiciary chief, Sadeq Larijani, is another possible candidate, but despite good ties with the security services and past service under Khamenei, his youth and experience are thought to be obstacles to his candidacy.

Other likely contenders include Sayyed Mojtaba Hosseini Khamenei, the supreme leader’s son who currently holds a powerful role in his father’s office, but there is a resistance in some quarters to a dynastic transition. This will also likely affect the candidacy of Hassan Khomeini, a grandson of the former supreme leader, whose ties to the 2009 reform movement will probably be a significant barrier to his selection. Similarly, opposition from hard-liners is seen as likely to prevent 80-year-old former President Ali Akbar Hashemi Rafsanjani from emerging as a serious contender, despite his decades of service in senior positions.

The absence of a clear choice for supreme leader increases the potential for a disputed process, raising the prospect of an intervention by the powerful Revolutionary Guards to end a protracted deadlock and prevent the emergence of a leader who might threaten their interests.

Though it remains unclear who will ultimately be selected as Khamenei’s successor, the influence of hard-liners in the Assembly of Experts, military and judiciary make it more difficult for a reformist candidate to take power. Assuming no change in these dynamics, the most likely scenario involves what might broadly be described as a policy of continuity, or possibly even greater support for more conservative policies, in the event that an ultraconservative candidate such as Mesbah-Yazdi is chosen.

The ascension of a more conservative supreme leader could carry significant risks to recent domestic and foreign policy reforms, including new contracts intended to incentivize investment from foreign and especially Western oil companies. Khamenei’s successor might also lack the same level of influence over the Republican Guards, who could seek to undermine pro-business reforms advocated by President that threaten their commercial interests in telecommunications, construction, auto manufacturing and other industries.

It is also unclear how the new leader will influence ongoing nuclear talks between Iran and world powers, given that the supreme leader holds ultimate responsibility for foreign policy and the nuclear issue. Khamenei has remained critical of the West, but he has nonetheless defended the ongoing nuclear talks from hard-liners and provided space for them to continue, even while he has expressed doubts that they will achieve their stated aim. Thus any change in approach by the country’s next supreme leader could create considerable uncertainty regarding Iran’s willingness to negotiate or adhere to any deal resulting from the current nuclear negotiations.

*[This article is based on a report by .]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

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