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How Iran was hit by and could overcome the COVID-19 crisis

Adnan Tabatabai

Date: 12/05/2020
Iran’s government did too little, too late in the early stages of its COVID-19 crisis. However, it is now catching up, in a collective effort with the population, to contain the pandemic. But in order to fully succeed and overcome the economic challenges related to it, Iran must first receive sanctions relief and international economic support.

Iran was hit by the COVID-19 crisis early on into the global pandemic. According to official figures, infections are about to cross the 110,000 mark, with close to 6,700 casualties.[1] Infections initially doubled in a matter of two to three days early on in the crisis, compared to every 39 days currently.[2] While Iran’s curve is flattening gradually, there are concerns about a second wave following the gradual reopening of businesses, which began on 21 April.

It is assumed that Iran’s ‘patient zero’ entered the country while travelling between Iran and China in January. Flights between the two countries carried on for three to four weeks since the outbreak of the pandemic was announced in China. Tehran’s dependency on Beijing as an economic lifeline in times of US sanctions has been growing in the past two years. Iran was, therefore, neither willing nor could afford to halt travel to and from China until the rapid spread of the pandemic forced their hand.

Struggling through the pandemic

As someone who was in Iran when COVID-19 hit the country, I personally witnessed how the political elite and society at large were simply overwhelmed by the scale of this crisis. Government officials were unable to roll out early response measures because by the time Iran’s globally renowned research institutions and medical experts were consulted to provide urgently needed policy advice on how to react, the virus had already spread across the country. And even after receiving information, the lack of administrative coordination in Iran’s complex state bureaucracy slowed down the pace of political action significantly.

Furthermore, the precarious state of Iran’s economy has not allowed the necessary measures to be adopted until recently. Early calls to impose a full lockdown to contain the pandemic effectively were supported by Iran’s military apparatus but rejected by the government of President Hassan Rouhani. His administration lacks the fiscal means to shut down major cities and provide services to households under strict quarantine, including the millions who make a living as street vendors, taxi drivers or via undeclared businesses with no legal claim for any compensation. The government faced the dilemma of exposing its population to a life-endangering virus or increased economic hardship.

The poor state of Iran’s economy is mainly due to corruption and mismanagement. However, the encompassing sanctions regime imposed unilaterally by the US exacerbates these internal problems. Despite the presence of world-class medical staff, the cumulative effect of decades of sanctions has left the country’s health sector with minimal capacities in terms of medication and equipment.

Neither categories of goods fall under the sanctions regime. However, the related financial transactions, shipment and its insurance do. Given this situation, various leaders – including the Secretary-General of the United Nations, António Guterres, and the High Representative of the EU, Josep Borrell – have joined the urgent call for the sanctions to be lifted or suspended, at least until this health crisis in Iran is overcome.

Limited humanitarian support

So far, only minor steps have been taken. The Instrument in Support of Trade Exchanges (INSTEX) and the Swiss Humanitarian Trade Arrangement (SHTA) are European transaction channels through which Iran can be assisted in its humanitarian needs amidst this global crisis. With the blessing of the US Treasury Department and its financial authority Office for Foreign Asset Control (OFAC), SHTA became operational at the end of February, delivering medicine for cancer treatment and organ transplants worth €2.3 million. No direct references were made to the COVID-19 outbreak, and there has been no follow-up through this channel, even though the pandemic would have been more than enough a reason to use SHTA extensively.[3]

INSTEX completed its first transaction at the end of March. In a joint statement, the E3 (i.e. UK, France, Germany), announced that the “medical goods” had reached Iran,[4] clearly indicating that uncertainties about whether this would actually happen existed until the very last moment. Again, no reference to send COVID-19 support was made. Furthermore, while pledges of a €20 million EU support package for Iran have been made, it remains unclear whether or not it has been implemented, let alone through which channel.

Iran’s neighbours Qatar, Kuwait, the United Arab Emirates (UAE) and even Saudi Arabia have done their bit to support Iran early on. Qatar offered its cargo fleet to transport medical aid free of charge. In mid-March, Kuwait donated $10 million of humanitarian support to Iran. The UAE sent two aid aircraft with technical equipment to Iran around the same time. Meanwhile, Saudi Arabia, along with other members of the Organization of the Petroleum Exporting Countries (OPEC), earmarked $500,000 from the OPEC Fund for International Development to assist Iran in purchasing the necessary medical equipment.

It is key to seize this moment of regional solidarity[5] and turn it into a ‘momentum of regional solidarity’, to strengthen regional preparedness and contingency plans for future pandemics.

Precarious economic prospects amid the US-Iran standoff

At this stage, Iran no longer requires technical assistance or equipment. After a languid start of channelling both state and societal capabilities into the fight against COVID-19, the response is now up and running. Mosques across the country have been turned into mask-producing factories, the military has set up mobile hospitals with thousands of beds, and the car industry runs ventilator production lines. Many in Iran are rightfully proud of what the country has been capable of doing collectively, despite internal flaws and external pressures.

There is some confidence in policy circles and the health sector that this crisis will be overcome by late May, with life gradually returning to normal, the number of infections decreasing significantly, and a sense of preparedness – to the extent possible – for a second wave of infections.[6]

However, the overriding concern is the challenge of revitalising an already severely weakened economy. The business sectors hit hardest by this crisis require support through state funding urgently. To be able to manage the economic fallout of the COVID-19 crisis, the government needs cash. Iran is asking for its foreign reserves to be unblocked and has additionally made an unusual request to the International Monetary Fund (IMF) for a $5 billion loan.

The Trump administration rejects these demands, and might very well be banking on the economic hardship induced by COVID-19 to pressure Iran further while only allowing aid to reach the country if it results in the outright humiliation of Tehran. This is because the Islamic Republic would have to accept help with the blessing of its political adversary.[7] The question of humanitarian and economic support to Iran to tackle the pandemic is therefore linked to Iran’s regional policies in the Middle East, its nuclear programme and the standoff with the US.

Alleviating Iran’s economic concerns of the future would allow Tehran to tackle the health concerns linked to the COVID-19 crisis and potential second wave of infections now, and more effectively. If the government was not so concerned about the economic consequences of much stricter lockdown measures, it would be in a better position to postpone the reopening of various business sectors, thereby reducing its population’s exposure to the dangers of newly increasing infections. Reversely, the longer the limitations on and partial shutdown of businesses persist, the more funds the state will have to invest to support its economy.

The uncertain political aftermath

It is too early to say what the mid- and long-term impact of the COVID-19 crisis will be on Iran’s political and social landscape. Politically, a lot will depend on who emerges as the more successful and efficient crisis management body: the government headed by President Rouhani, the military apparatus embodied mainly by the Islamic Revolutionary Guard Corps or religious welfare foundations like the Mostazafan Foundation of Islamic Revolution. There is no doubt that the events of today will play a major role in the run-up to the presidential elections in June 2021.

Socially, much will depend on whether those strata of society hit hardest by the gradual shutdown of the economy will be taken care of by the state and its social institutions via targeted support packages.[8]

With the COVID-19 crisis being a global phenomenon about health and human well-being, European countries and particularly the EU should recall their value-oriented approach, as underlined by High Representative Borrell, and emphasise the need to avoid the politicisation of global health crises. They should also do their bit in enabling international bodies like the IMF to allocate COVID-19-related funds to countries in need, even if that requires pushing back against attempts by the US administration to block IMF loans because of its sanctions policies, to countries like Iran or Venezuela.

Adnan Tabatabai is co-founder and CEO of the Center for Applied Research in Partnership with the Orient (CARPO).

The support the European Policy Centre receives for its ongoing operations, or specifically for its publications, does not constitute an endorsement of their contents, which reflect the views of the authors only. Supporters and partners cannot be held responsible for any use that may be made of the information contained therein.

[1] John Hopkins University, “Coronavirus COVID-19 Global Cases by the Center for Systems Science and Engineering (CSSE) at John Hopkins University (JHU)” (accessed 12 May 2020).
[2] ZEIT, “Wie sich das Coronavirus ausbreitet: Weltweit” (accessed 12 May 2020).
[3] Batmanghelidj, Esfandyar and Sahil Shah (2020), “As Iran faces virus, Trump admin fails to use Swiss channel to ease medical exports”, London: European Leadership Network.
[4] Brzozowski, Alexandra, “EU’s INSTEX mechanism facilitates first transaction with pandemic-hit Iran”, EURACTIV, 01 April 2020.
[5] See Rozen, Laura, “Coronavirus spurs regional humanitarian outreach to Iran”, Al-Monitor, 18 March 2020.
[6] Exchanges with interlocutors in Iran, March to May 2020.
[7] Exchanges with interlocutors in Washington, April 2020.
[8] Bozorgmehr, Najmeh, “Iran steps up support for citizens as it eases coronavirus controls”, Financial Times, 06 April 2020.

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