APuZ 21-22/2020 (pp. 34-38)

IRAN’S ECONOMY IN THE WAKE OF U.S. SANCTIONS AND

CORONAVIRUS CRISIS Wilfried Buchta

Already since before the Coronavirus pandemic, which has been ravaging since February of 2020, ’s economy had been in crisis mode. A situation that was worsened by renewed U.S. sanctions in 2018. At the beginning of 2020, all economic indicators for the , a country with approx. 84 million residents, were negative. While the in 2018 already decreased by 5 percent compared to the one in 2017, there was another almost 10 percent decline in 2019. The International Monetary Fund projects another 6.5 percent drop for 2020. In the time period between 2010 and 2020, the rate fluctuated between 20 and 40 percent. Currently it is at 41 percent, exhibiting an upward trend. As a result, the general public’s spending power experienced a significant decrease, which the impoverished 70 percent of the population are suffering under the most. It is estimated that there are currently six million Iranians who are unemployed, which mainly affects women and young people.1

Foundation and Performance of the Iranian Economy Compared to other wealthy Middle Eastern countries, which typically rely on monostructural economic systems solely built on oil production and its export, Iran also has large oil and resources. In fact, Iran is in fourth place when it comes to oil reserves and second for gas. But the difference is, Iran also has a large pool of skilled workers to pull from. What’s even more important, Iran has a relatively broad industrial and economic foundation. for example listed companies from over 40 different industrial and commercial sectors in 2019, including petrochemistry, mining, mineral products (iron, copper, led, aluminum), , steel, automobile, agriculture, cement, textile and clothing, and food processing, as well as tobacco. The foundation of this broad industrial basis was created under the (1925-1979). After the establishment of the Islamic Republic of Iran, the new rulers wasted no time to convert 90 percent of industrial companies and commercial enterprises as well as almost all banks into

1 All numbers under Mohssen Massarrat: „The Economic Misery“, in: Iran. Theocracy and Republic. Edition Le Monde Diplomatique, N° 27, 2020 (March),pp. 35-39, here. p.35 1 stat-run institutions. Furthermore, the new revolutionary regime’s enthusiasm for social egalitarianism translated into economic advantages for broad levels of the population. Primary beneficiaries were Khomeini’s most loyal allies, that means the most impoverished population, whom he had been courting and whose political and social status he had been trying to raise since 1979. They were labelled the mostazafan („downtrodden“) and the members of the this constituency were considered the pillars of the revolution during the overthrow of the Shah regime. The revolutionary regime took aggressive measures to rebuild the infrastructure in a timespan of only ten years. An impressive accomplishment, considering the fact that at the same time, Tehran had to shoulder an enormous economic, financial and military burden due to the war against (1981–1989). Within the new regime’s first decade of rulership, all of the country’s highways were paved. This created the first ever transportation network to connect cities with even the most remote areas. With the help of agricultural development organizations, which the revolutionary regime had newly established to benefit the rural population, even the tiniest and most isolated villages gained access to electricity and clean drinking water. The health sector, too, was expanded and improved as part of a massive overhaul. Thanks to a reform of the educational system, the illiteracy rate decreased from 80 to under 20 percent. In addition to the growing number of secondary education graduates, the higher education sector was also expanded by founding dozens of new universities all over the country. Today there are 4.5 million students, of which more than 55 percent are female, who attend a variety of universities. In a regional comparison Iran has an excellent foundation when it comes to economic development. Regardless, the economic and social progress is stagnant and has never really lived up to its full potential until today. Why is that? Iran neglected to establish a consistent development strategy that could have helped the country to reach new economic, industrial and technological heights, comparable with the course pursued by for example. As a result, Iran is unable to permanently secure the wealth and standard of living of the Iranian population. The opposite, actually: Today 50 percent of Iranians live beyond the poverty level. The average minimum wage fell from 400 Dollars a month in 2010 to 100 – 130 Dollars in 2018 – an unmistakable sign for the poverty that is spreading throughout large segments of the population.2 In short: The numbers indicate that Iran’s revolutionary regime has broken their promise to the Iranian people, made in 1979, to provide social justice and wealth. Besides external factors, such as U.S. sanctions, there are also homegrown political

2 See Mohssen Massarrat: „The Economic Misery“, in: Iran. Theocracy and Republic. Edition Le Monde Diplomatique, N° 27, 2020 (March), pp. 35-39, here. p. 38. 2 and ideological elements to blame for this. The biggest issue of all, however, is the mismanagement and corruption of the power elite, whose lifeline is their share in the country’s oil income. Until this day, Iran’s economy is plagued by poor health, mainly because of its one- sided dependency on state income from oil exports. In 2014 oil sales made up 33 percent of the national budget and 24 percent of the gross national product. As is the case for other Middle Eastern oil nations, Iran’s plentiful oil resources are both a gift and a curse. On one hand, the oil income had served as a catalyst for economic development, technological and health-related improvements to the infrastructure and the preservation of the State. Keeping the Welfare State alive and well is meant to avoid and absorb social unrest. The regime is subsidizing countless staple , heating oil and gasoline in enormous amounts: in 2006 subsidiaries for energy sources and food made up 25 percent of the gross national product.3 Therefore the crude oil prices are playing a big role in Iran’s rise or fall. And from the time the Iran-Iraq War started in September 1980 until the begin of the Coronavirus crisis in 2020 this price fluctuated excessively, much resembling a roller coaster ride. In April 2020 it was only at 20 Dollar. Iran’s oil revenues are currently as low as ever. In order to guarantee a balanced state budget, Iran needs the oil price to settle between 110 to 130 Dollars per barrel of oil (159 liters).4 Tehran’s budget is becoming more and more imbalanced, especially since U.S. sanctions have been reinstated in May of 2018, which made Iran’s oil exports collapse. While there were still 2.7 Million barrels a day being sold in mid 2018, this number gradually decreased to only 144000 barrels per day in April 2020, due to the U.S. sanctions that were becoming aggressively effective over time.5 The long period of denial when it comes to the Coronavirus pandemic, acknowledged late by the government on February 19th of 2020, hit the Mullah regime at an inopportune time. Not only was it in the middle of a severe economic crisis and a shortage of financial resources already, it was also fighting a legitimacy crisis. Weakened by the disastrous economy, that throws them deeper and deeper into suffocating poverty and angered by the shameless profiteering of the corrupt power elite at the top, the people of Iran are leaning more and more to social and political unrest. As a result, this is the worst loss of trust and support among the broad population, including poverty-stricken Iranians, that Iran’s regime

3 Keith Crane: Iran’s Political, Demographic, and Economic Vulnerabilities, Santa Monica, CA. RAND 2008, p. 89f. 4 Amin Saikal: The Survival and Future of the Islamic Republic, New Jersey, 2019, p. 137. 5 Dalga Khatinoglu, IMF Forecasts Rising Government Debt, Declining Exports, Growth For Iran, , April 16th 2020, https://en.radiofarda.com/a/imf-forecasts-rising-government-debt- declining-exports-growth-for-iran/30558857.html 3 has experienced since 1979. The economic misery led to an eruption of two nationwide waves of social protest, one at the turn of the year 2017/18 and another one in November 2019. Both times the regime squashed the unrest with brutal force. During the November protests alone thousands of protesters were thrown in jail and between 500 and 1500 people were killed.6 Future social unrest is likely considering the ongoing economic crisis. The regime’s loss of legitimacy was heightened tremendously by an event that occurred on January 8th 2020 when a passenger plane with 176 Iranian passengers was shot down over Tehran. This explains why only few members of the Iranian population have faith in the regime’s COVID-19 crisis management.

Coronavirus Crisis The measures taken by the Iranian regime since February 2020 to combat the Coronavirus sound like a chronicle of neglect, cover ups and failures. One of the reasons being, that the regime had political motives to protect their “ connection”. In order to secure a political, and even more importantly, an economic and commercial future, Iran is at the mercy of a close collaboration with China. Due to the severe financial hardship caused by U.S. sanctions, Iran is dependent on China, one of the last customers purchasing Iranian oil. Another thing the Mullah regime cannot afford to lose are China’s multibillion-dollar into Iran’s infrastructure buildup measures, which Peking is helping along by giving out loans and sending thousands of technicians to work on countless related projects. When China officially disclosed the COVID-19 outbreak to the rest of the world in December 2019, the Iranian government decided to downplay the risk that the virus may spread in Iran. Despite the warning of former Minister of Health Hassan Ghazizadeh Hashemi (2013-2019) about the Coronavirus threat at the end of December 2019, for a whole two months president neglected to put any preventive or protective measures into place or establish any emergency plans in case of escalation. Meanwhile daily flights between China and Iran were continuing without restrictions. By the time they were finally suspended at the beginning of March 2020, passengers of both nations had only been tested superficially or not at all for signs of a COVID-19 infection. With the intension to avoid stoking fear and insecurity among the people of Iran at all cost, Rouhani decided to ignore warnings of government officials who reported first possible cases in the city of . Too much was at stake. Too important was the participation of as many Iranians as possible in two events that are highly important for

6 Afshin Shahi/Ehsan Abdoh-Tabrizi, Iran’s 2019–2020 Demonstratons: The Changing Dynamics of Politcal Protests in Iran, in: Asian Afairs 1/2020, p. 1–41, here p 2. 4 the regime’s self-image: The annual victory celebration honoring the 1979 revolution on February 11th and the parliamentary election scheduled for February 21st. Not before February 19th 2020 the Ministry of Health announced that there were two positive cases discovered in Qom. Strangely enough both individuals died the very same night. This hardened the suspicion, also shared by WHO, that the virus had already spread throughout the entire country at that time. But even after officially acknowledging that the virus had arrived in Iran, the government continued to trivialize it and downplay the true extent of the outbreak. Meanwhile the pandemic spread fast and unrestricted to all of Iran’s 31 provinces. By March 10th several dozen politicians had fallen ill with COVID-19, including the deputy minister of health and 29 out of 290 members of parliament, some of which even died later. It had devastating consequences, that the epicenter of the virus was Qom, a city with 1.2 million residents, where 40000 Shiite clergy members and theological students teach and live. Because Qom is not only the most important theological education and science center of the Shiite world, but it is also where the Masuma shrine is located at. With the Imam-Reza shrine in being in first place, the Masuma shrine is Iran’s second-most important site. The holy tombs of saints attract countless pilgrims from all over the world. They flock to the gravesites day or night, to pray to the saints for professional success, health and recovery from illness. The religious practice, to touch and kiss the bars that the grave sites are surrounded with, has been passed down by previous generations. Also located in Qom is the International Al-Mustafa-University (IMU) with its 30000 mainly foreign students. It operates under a cloak of strict secrecy because as an elite theological training center for missionaries and future agents, its main goal is to turn foreign students into preachers and missionaries who are unshakably loyal to Iran, before sending them back to their home countries. Among IUM students are 700 Sunni Uyghurs from Western China. In a video conference at the end of March, the deputy health minister Alireza Raisi confirmed the rumors that had been going around for weeks. The Coronavirus had been brought to Iran by Chinese IUM students that had been infected in China while visiting back home.7 With almost absolute certainty Chinese IUM students also visited the four largest pilgrimage sites of Iran (Qom, Mashhad, Rey/Tehran, ), from where the virus probably spread without hinderance. These sites made for ideal starting points, especially since they are visited by nearly 80 million pilgrims a year, according to Iran’s official records. Despite of

7 Iran Official Says Chinese Nationals, Iranian Students From Wuhan Spread Coronavirus, 3/25/2020, https://en.radiofarda.com/a/iran-official-says-chinese-nationals-iranian-students-from-wuhan-spread- coronavirus/30508613.html

5 repeated warnings by virologists, the clerical curators of the pilgrimage shrines, all favorites and confidants of the Supreme Leader , were able to avoid them from being closed down for quite a long time. Their reasoning for resisting a closure was based on superstition and a religiousness not at all in line with reality. According to them, the pilgrimage sites were blessed by God and the shrines awarded them with godly powers to work wonders. They consider these sites to be dar ol-shafaa, „places of healing“, and every pilgrim who visits them is protected from illness. The fact that their resistance was not driven by the desire to please God, but rather by selfish motives not to lose profit, was something they kept hidden. Because pilgrimage tourism with all its hotels, restaurants and shops, is a multibillion-dollar industry, in which shrine curators and their merchant clients cash in the most. When finally the Ministry of Health managed to close the shrine sites on March 16th 2020 by standing up to the state supported Shiite clergy, it was too late. The virus was spreading. At the beginning of March president Rouhani set up a Coronavirus task force led by the Health Ministry. With the support of the Supreme Leader Khamenei, the Coronavirus task force decided to close schools, universities, restaurants, sports events, hotels and catering businesses, , shopping malls and public places of worship, including mosques. However, working at government offices, banks, factories, in construction and agriculture and at supermarkets was still allowed, along with taking public transportation. Instead, Rouhani just casually reminded Iranians to socially distance. There were no local and regional curfews put into place or quarantine mandates that were enforced by law. So, on March 21st, about 8.5 Million people decided to go celebrate the two-week-long Persian New Year by visiting family and friends in other cities and provinces. Even though Khamenei officially supported the government’s efforts to fight the virus, he still spread conspiracy theories to blame Iran’s enemy number one, the United States, also dubbed “Great Satan”, to deflect the blame from himself. As Khamenei announced in his New Year’s speech on March 21st, the virus supposedly stems from a U.S. weapons laboratory, has been smuggled into the country and is designed to target people with Iranian genes. Iran’s poorly managed and underfunded health system had issues from the start to keep a handle on the pandemic. There were (and still are) a lot of essentials missing that are associated with the virus, such as tests, ventilators, intensive care beds, PPE and sanitizers. These deficits were worsened by the U.S. sanctions which had been renewed in 2018. Ever since then Tehran hasn’t had access to its accounts abroad. Since almost all banks seized the collaboration with Iran, the import of essential medical supplies had almost come to a

6 grinding halt. Still, Supreme Leader Khamenei briskly rejected the offer made by the U.S. at the end of March 2020 to help Tehran combat the pandemic by sending medical relief items and personnel. After all, the United States were a cunning and vicious enemy of the revolution, that could not be trusted, according to Khamenei. It was also Khamenei’s veto that derailed a mission to bring in the French medical humanitarian organization Doctors Without Borders (MSF, médiciens sans frontieres) already approved to enter the country for the end of March by the leaders of the Ministry of Foreign Affairs, the Ministry of Health and the Ministry of Intelligence, all members of Rouhani’s cabinet. Consumed by political paranoia, Khamenei justified his decision with the suspicion that hostile Western spies had infiltrated the organization with the plan to launch an operation from inside of the country, meant to destroy Iran. The decision not to allow the charitable MSF mission, which was already in progress, to take place, was also backed by the Revolutionary Guards. This once again revealed the deep rifts caused by the ongoing power struggle between the elite fractions, a conflict that in the face of COVID-19 should be laid to rest to achieve better results by working together. But unfortunately, that is not the reality. Because while Rouhani’s Coronavirus task force is generally willing to work with the West in order to fight the pandemic, other powerful institutions, also ordered to help with Coronavirus control, are fiercely opposed to it. One of those institutions are the Imam-Reza Health and Medical Treatment Headquarters. Led by the military’s Commander in Chief, General Mohammad Bagheri, the organization was established mid March 2020 at the wish of Khamenei. Their COVID-19 strategy is to treat it as a defense mission against a concealed, planned bioweapon attack against Iran carried out by the U.S. The third member of the trio are the Central Biological Defense Headquarters (CBDH), which are run by the Revolutionary Guards. Another hybrid military medical organization that has been ordered to fight the Coronavirus. The non-transparency and constant conflict that plagues these three organizations prevent Iran from putting a consistent, well-thought out and coordinated virus response strategy into place. Instead, the institutions compete against each other for personnel resources, funds, authority and airtime to dominate the state media’s Coronavirus reporting and therefore control the message. Naturally it does not come as much of a surprise that the regime’s official position when it comes to Coronavirus is overshadowed by a lack of transparency, propaganda and disinformation-based trivialization. All official government data, information and statistics are incomplete, often conflicting with each other and never verifiable. Critical journalists and social media activists

7 that are brave enough to cast doubt on the official COVID-19 reporting, pay for their courage with censorship and imprisonment.8 As an Iranian military spokesperson stated publicly on April 28th, police and Basij Militia had already arrested 3600 individuals over spreading Coronavirus rumors. According to the spokesperson, this offense made them accomplices of the psychological warfare, launched against Iran by external enemies. 9 In an effort to leave the people of Iran in the dark about the true extent of the pandemic, state hospitals and the Revolutionary Guards’ CBDH are systematically fudging the Coronavirus fatality statistics.10 Based on these circumstances, there certainly is reason for distrust towards the official numbers published by the Ministry of Health, which reported 87026 infected and 5481 deaths on April 23rd. According to WHO, these numbers are suspected to be entirely too low. Another report, probably closer to the truth, was published by the Research Center of the Iranian parliament and says that at least 600000 Iranians were supposedly already infected by the beginning of April. Mehran Barati, Iranian opposition politician and German-based spokesperson of the Iran Transition Council, paints an even gloomier picture of the current situation. Based on information secretly received from whistleblowers from inside of the Iranian Ministry of Interior and Ministry of Health, there were already a million infected people by mid April and the number of COVID-19-related deaths was at 160000. To prepare for the worst, the regime supposedly gave orders to dig out fresh mass graves within the borders of existing cemeteries in more than 500 of 2700 cities all over the country.11 Should these numbers be accurate, then the Iranian government has largely lost control over the Coronavirus spread. The Coronavirus lockdown of half of the economy has dramatically increased the financial strain on the almost 20 million day laborers, who typically do not have employment contracts, health insurance or savings, particularly because the government, close to being bankrupt itself, is unable to pay unemployment benefits or short-time work allowance. Threatened by total economic collapse if the lockdown continued, President Rouhani felt he

8 Iranian Journalists Persecuted for Reporting the Pandemic, 4/17/2020, https://iranwire.com/en/features/6936 9 Iran Law Enforcement Arrested 3.600 For „Coronavirus Rumors“, 4/29/2020, https://en.radiofarda.com/a/iran-law-enforce- ment-arrested-3-600-for-coronavirus- rumors/30583234.html. 10 Since March 2020 family members of individuals who passed away from COVID-19 are required to register with CBDH’s Revolutionary Guards in order to receive a death certificate. When issuing the document, the cause of death is often times „corrected“ and changed into pneumonia or heart attacks. https://en.radiofarda.com/a/death-certificates-for-covid-19-victims-in-iran-must-be-issued-by- revolutionary-guard/30545869.html

11 Interviews with the author, 04/23/2020 Berlin. 8 had no choice but to take action. Citing unspecified medical and scientific evidence, he claimed that the Coronavirus curve had successfully been flattened, just in time for the begin of the holy fasting month Ramadan. Therefore, he announced on April 19th that starting April 26th all bazaars, shopping malls and retail stores shall be reopened. Restaurants, holy sites and mosques were supposed to stay closed for the time being. Of course, even some high-ranking members of Rouhani’s government issued warnings against a premature and broad lifting of Coronavirus restrictions, among them the Deputy Minister of Health, Iraj Harirchi. There was concern that with these actions the government may lull the Iranians into a false sense of security that could easily lead to a second and third wave with potentially even more devastating results. In short: Iran is in the middle of its most severe crisis since 1979 and there is no telling what the consequences may be.

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