The scourge of the novel coronavirus is showing no signs of deceleration, and has put billions of people under lockdown, breaking the wheel of global economic activity. The virus has been particularly harsh towards Iran, infecting more than 44,000 people and killing close to 2,900, making Iran the seventh-most affected in terms of total cases and sixth in number of deaths.
Iran’s Economic Suffering is Also Enormous
In addition to these tragic human costs, Iran has suffered a serious blow to its economy as it struggles to deal with the negative consequences of shutdowns. Already under the weight of the US sanctions which have strangled Tehran’s jugular vein – energy exports – the country’s problems are now being compounded by the coronavirus outbreak.
Since becoming one of the epicenters of the coronavirus, most of Iran’s neighbors – Turkey, Afghanistan and Pakistan – shut their land borders, thus disrupting much of their bilateral trade ties with Iran. To make matters worse, an almost complete halt of religious tourism has further dented one of the core industries of the Islamic Republic.
The Geopolitical Dimension
While the macroeconomic impact of the current situation will become clearer in a few months, it is likely to spill over into other areas, particularly the geopolitical sphere. Being a major player in the regional proxy wars, Iran for years has channeled vast sums of resources to protect its interests beyond borders. From supplying arms to favored groups in Yemen to overtly managing the government in Baghdad, Tehran has been one of the most active states in the Middle Eastern battleground.
However, all of that force projection requires financial muscle, something Iran barely has anymore
Its oil export volume was already dwindling as most of the key buyers were forced to redirect their imports due to the pressure of sanctions and now the Saudi output increase has brought down fuel prices to record lows, further tightening the primary source of government revenues.
Tehran Shows No Signs of Backing Down Geopolitically
But so far, Tehran hasn’t shown any willingness to bend with Foreign Minister Javed Zarif going on a Twitter spat against the United States. He posted on Mar 26: “#Covid19 ravages the world, sparing no nation. Even the world’s largest economy needs others to help it fight the pandemic, yet refuses to halt its #EconomicTerrorism against Iran. Does the US want a ‘forever pandemic’? Moral imperative to stop observing the bully’s sanctions.”
Khamenei too played the same war of words during his Nowruz speech, calling the US the most malicious and hostile of his nation’s enemies. Beyond rhetoric too, recent developments in the region suggest Iran doesn’t plan to apply the brakes. In fact, just this Saturday, the Tehran-backed Houthis launched rockets into Riyadh and another city, which comes less than a month after them seizing control of Al Jawf and advancing to the oil-rich province Marib close to the Saudi Arabian border.
The situation has been no different in Iraq either, where there has been an uptick in terms of attacks at the US bases. Anadolu Agency reported on Tuesday that two rockets were intercepted near the Ain Al-Assad base. This comes two weeks after strikes at the Taji military camp killed two Americans and one Briton, which Washington blamed on Kataib Hezbollah — a Tehran-backed group. It also coincides with the US scaling down presence in Iraq as just this month, it pulled out of three bases.
How Long Can Iran Continue On This Path?
The question then is, how long can the Islamic Republic go on like this? The health crisis is not slowing down, with thousands of new cases being reported daily while the global recession poses further threat to an already heavily-sanctioned economy. On the other hand, arch-rival Saudi Arabia has been largely successful throughout, with only 1,720 infections recorded and 16 deaths from coronavirus. Thanks to better connected markets, Saudi Arabia likely to sail through the storm more efficiently, tilting the regional balance of power in favor of Riyadh over Tehran.
However, Iran’s economic woes go way back and if anything, the country has learned to make up for its lack of resources, especially by leveraging sectarian sympathies from Shiite populations across the Middle East. Though it remains a test as to how effectively Iran can cash in on that pro-Tehran sentiment without sufficient funding and arms.