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Said A. Arjomand is professor of sociology and director of the Stony Brook Institute for Global Studies at the State University of New York at Stony Brook.

Iranian President Hassan Rouhani recently marked the end of his first year in office not only with smiles, but also with further evidence of his efforts at domestic reform and geostrategic reorientation. In Iran's case, these two imperatives have long gone hand in hand.

Mr. Rouhani now says that Iran would be willing to work with the United States in Iraq. The dire threat to both Iranian and U.S. interests posed by the Islamic State of Iraq and the Levant has, evidently, brought the two countries closer together. In the days since the anniversary of Mr. Rouhani's election, Foreign Minister Mohammad Javad Zarif has overcome earlier reservations and expressed optimism about reaching an international deal on his country's nuclear program by the July 20 deadline.

If rapprochement can be achieved, the removal of international sanctions stemming from Tehran's nuclear program would give a tremendous boost to Mr. Rouhani's economic policy. And it is here that the President has invested much of his energy and political capital.

Coming into office, Mr. Rouhani had a clear priority: Fix an economy devastated by eight years of predecessor Mahmoud Ahmadinejad's demagogic mismanagement. Mr. Rouhani replaced Mr. Ahmadinejad's incompetent thugs with a reasonably qualified cabinet and capable administrators, and has embarked on an ambitious program of economic development, expanded health care and environmental protection.

He has made little headway combatting rampant inflation, but small businesses and the entrepreneurial middle class seem to be thriving. In early June, I found a recently opened complex of expensive restaurants opposite the new luxury Grand Hotel in Shiraz packed with affluent customers.

Mr. Rouhani is vigorously cultivating economic ties with Persian Gulf states, including Kuwait, whose ruler he entertained in Tehran in early June before leaving on an official visit to Turkey, where he signed 10 deals aimed at doubling bilateral trade in 2015. On the environmental front, Mr. Rouhani is also busy undoing his predecessor's damage. Tehran's air pollution, widely blamed by those with respiratory illness on low-octane "Ahmadinejad gasoline," has visibly declined with the introduction of high-octane fuel and other restrictions.

Last but not least, Mr. Rouhani has launched his national health-insurance program and ordered state hospitals to limit patients' co-payments for all medical expenses to 10 per cent. The President has made clear that he wants to pay for the program by phasing out the monthly state stipends paid to more than 74 million registered citizens, which Mr. Ahmadinejad offered when he eliminated a wide range of subsidies.

The strongest factor working in Mr. Rouhani's favour is the support of Ayatollah Ali Khamenei, the country's Supreme Leader. Unlike Mr. Ahmadinejad's reformist predecessor, Mohammad Khatami, who acted more like the leader of the loyal opposition than head of the executive, Mr. Rouhani has worked closely with the ayatollah.

In his speech to commemorate the 25th anniversary of Ayatollah Ruhollah Khomeini's death on June 4, Ayatollah Khamenei fully appropriated the discourse of the dissident clerics aligned with Mr. Khatami. Thus, he described the regime as a religious democracy in which all high state offices, including his own, derive their legitimacy from the will of the people as expressed in elections.

But Mr. Rouhani needs more than the backing of Ayatollah Khamenei, who is 74 and has health problems. With Mohammad Reza Mahdavi Kani, the 83-year-old chairman of the Council of Experts (the body of clerics that elects the supreme leader) gravely ill, there are suggestions that the council should elect Ayatollah Khamenei's successor now. Clearly, the clerical elite is concerned about its future leadership. Should a succession process begin soon, it would significantly constrain Mr. Rouhani.

The President's relations with the Iranian Revolutionary Guard Corps and other security forces are of more immediate concern. Last month's unceremonious killing of a billionaire businessman detained by security forces on corruption charges seemed to reflect the tacit division of power between Mr. Rouhani and Iran's security apparatus.

Nonetheless, tension is simmering beneath the surface. Mr. Rouhani seems to have halted the expansion of the Guard's economic empire. The Guard's commander has publicly expressed hostility to Mr. Rouhani's administration, while the chief of staff of the armed forces has expressed support.

It is Iraq, however, that poses the most complicated mix of challenge and opportunity. Determined to prevent its disintegration, Iran has provided military and political support to Baghdad. This appears to align Iranian and U.S. policies, with both determined to counter the gains of radical Islamist forces in Iraq and Syria. Mr. Rouhani's circle is fully prepared to talk to Washington.

After a year in power, Mr. Rouhani's domestic program is proceeding smoothly and quietly. But, given the uncertainty of the domestic and international political context, there are no guarantees of success. Much depends on whether a nuclear deal with the international community is achieved, and the likelihood of that outcome has unexpectedly increased, owing to the common interest of Iran and the United States in coping with the collapse of Iraq.