Experts' Comments

Iran’s Twofold Predicament: Coronavirus Epidemic Crisis and American Sanctions

EPC | 11 Aug 2020

Iran’s Twofold Predicament: Coronavirus Epidemic Crisis and American Sanctions

While Iran was suffering heavily as a result of the successive economic sanctions imposed by the US following the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA, the Iran nuclear deal) in May 2018, it was afflicted by a new crisis as a result of the Covid-19 epidemic. Iran was not only the first country in the Middle East to have an outbreak of the virus, it was also one of the countries most affected by its outbreak in the region. The regime's embarrassment in managing the coronavirus crisis was evident, which widened the gap between the people and the regime. The coronavirus crisis has exacerbated the problems of the Iranian regime and complicated the challenges that it must face. This is expected to have potential impacts on the regime’s domestic and foreign policies. In June 2020, the Emirates Policy Center (EPC) had organized a webinar to discuss the repercussions of the US sanctions and the coronavirus crisis on Iran. Below are the most important remarks in the interventions of the experts who participated in that webinar.

Alex Vatanka

Alex Vatanka

There is no doubt that at the beginning of the coronavirus epidemic crisis, the Iranian regime took wrong decisions, such as insisting on holding the legislative elections on time. The regime also favoured the security dimension while dealing with the epidemic crisis, which had negative consequences at various levels. Many Iranians have increasingly felt that the regime has let them down, and that if it were sincere in addressing the issue of the nuclear programme and the consequent harsh economic sanctions, it would seek to make concessions that would allow the creation of a good economic reality for its people. Thoughts by the regime of reliance on assistance by Russia and China and the hope that the Democrats would come to power in the US to ease the pressure on Iran and return to the nuclear agreement are just an attempt to delay the explosion of the internal crises. In general, no major political decisions are expected from President Rouhani who has only a few months left in his term.

What is certain is that the coronavirus epidemic crisis has severely damaged the Iranian economy. Indeed, the Iranian government’s figures on oil revenues appeared completely different from the ones announced by the Central Bank of Iran. However, despite the crises of the coronavirus and continued sanctions, the regime in Tehran continues to insist on adopting the approach of war proxies to materialize its regional influence, an approach which it considers less costly. Since the killing of Soleimani until now, no real change has been observed in the nature of the Iranian regime.

 

Alex Vatanka. Senior Fellow and Director of the Iran Program at the Middle East Institute in Washington D.C. He specializes in Iranian domestic and regional policies.

Javad Salehi Isfahani

Javad Salehi Isfahani

The health crisis in Iran has exacerbated as a result of the government’s delay in taking the necessary measures to combat the spread of the coronavirus epidemic. The regime subsequently eased the quarantine measures due to the worsening economic crisis in Iran. For political reasons, the Iranian regime gave priority to reviving the economy at the expense of public health. However, the results of this reflected negatively on the health situation that is deteriorating throughout the country. The health crisis may reproduce itself again in case this approach continues.

It is clear that both the Iranian President and the Supreme Leader agree on reopening the economy as a priority. Economic risks have heightened in the country due to the significant proportion of the informal economy. Besides, the Iranian economy is dependent on the market economy, and the state does not fully control it. In addition, unlike what is commonly believed, the Iranian economy is not completely dependent on oil. The sanctions have terminated Iran’s opportunities to export its non-oil products to neighboring countries. As for oil revenues, they are now less than 10 billion dollars compared to 120 billion dollars in 2011. Currently, the Iranian regime resorts to the heavy sale of real estate and financial assets equivalent to three times the rate of their sale in 2019.

Generally speaking, Iran today acts in two ways simultaneously: it acts both as a revolutionary regime and at the same time as a developing country. For example, at election times, Iran appears as a developing country rather than as a revolutionary regime. Besides, the current US economic sanctions on Iran do not seem sufficient to drive Iran to retreat from that revolutionary regime. While it is still unclear how the coronavirus crisis will affect the redistribution of the Iranian internal political scene, the effects of the US sanctions on Iranian politics and economy are more predictable than the effects of the coronavirus crisis. It seems that Iran may return to the negotiating table with Western powers with the aim of easing the sanctions in the event that the Democrats win the US presidential elections.

 

Javad Salehi Isfahani. Professor of Economics at Virginia Tech in the United States, and a Visiting Fellow at the Global Economy and Development Program at the Brookings Institution.

Mehdi Khalaji

Mehdi Khalaji

During the period of the current Supreme Leader Ali Khamenei, Iran has shifted from a revolutionary regime to a police state. In the event of Khamenei's departure, his successor will not have the same powers which will shift more to the hands of the Revolutionary Guards as an institution. The lifting of the economic sanctions imposed by the US on Iran will not change the nature of the Iranian regime. It should not be expected that a strong civil society and a robust economy will be established in the absence of sanctions. The Iranian regime will remain totalitarian at home and adventurous at the regional level.

As for the Iranian nuclear programme, which is one of the longest programmes to develop nuclear weapons in history, the possibility exists that the Iranians will return to the negotiating table with the administration of US President Donald Trump if he is re-elected, although that will certainly not be easy. Russia will possibly play an Important role in mediating between Iran and the Trump administration, given Putin's good relationship with the US President, although the final results will remain uncertain.

 

Dr. Mehdi Khalaji. Senior Fellow at the Washington Institute for Near East Policy. His interests focus on politics in Iran and the role of Shiite groups in the Middle East.