COVID-19 in Iran

Iran’s coronavirus epidemic is the worst in the Middle East. Yet the Islamic Republic has downplayed the epidemic, substantially boosted funding for the Islamic Revolutionary Guard Corps (IRGC) and state propaganda agencies, and pursued closer alignment with Beijing.

Situation Overview

The regime has reported 66,220 confirmed cases and 4,110 fatalities. But there is no reason to trust these figures given the regime’s history of deception and its inability to acquire accurate data in some of Iran’s border regions. Images of mass graves have emerged. Some reports indicate that 10,000 or more may have died. Accurate numbers might never surface if the regime does not allow health authorities access to crucial data.

The regime has allocated little funding for combatting the epidemic. The government has instructed Iranians to resume normal routines starting April 11, which may trigger renewed and even deadlier outbreaks of the epidemic. The rest of the Middle East will likely also suffer because of the regime’s coronavirus policies.

Much like their Chinese counterparts, senior Iranian officials knew about the epidemic in January but did not acknowledge it, fearing that doing so would undermine the economy or weaken turnout in Iran’s February 21 parliamentary elections. The regime also refused to adopt basic recommended public health protocols such as quarantining hot spots and enforcing social distancing.

While it is difficult to track the spread of COVID-19 in Iran, the virus appears to have spread from China to Iran, either through Mahan Airline flights between the two countries or from Chinese seminary students studying in Qom, Iran’s holiest city. Mahan Airlines, in close cooperation with the IRGC, never halted its flights to China during the current crisis. The IRGC has also tried to dampen domestic criticisms of Beijing.

Supreme Leader Ali Khamenei has reluctantly allowed President Hassan Rouhani to withdraw $1 billion from Iran’s National Development Fund to counter the epidemic. This comes after weeks of refusing to do so, even as the death toll mounted. But even as greater public resources become available, the ruling clergy and IRGC refuse to dip into their own enormous personal and institutional wealth to address the needs of ordinary Iranians.

COVID-19 in the Greater Middle East

Source: JHU Coronavirus Resource Center
Data current as of 5:30 PM, April 9, 2020.

Economic Impact and the 2020–2021 Budget

The epidemic has deepened Iran’s economic recession. Early reports showed an initial 30 percent reduction in non-oil exports. Oil exports have decreased further as global demand and oil prices have plunged. At the same time, Iran’s imports have increased, widening Tehran’s trade deficit. Iran’s Parliament Research Center reports that the volume of financial transactions has decreased significantly since the epidemic. Iran’s economy is likely on the path to a third consecutive year of recession. To stimulate its economy, Iran could draw on its $300 billion worth of currency reserves, the $100 billion the regime has stashed away in its sovereign wealth fund, or Khamenei’s $200 billion business empire. But the regime has yet to do so.

Tehran introduced its 2020–2021 budget before the epidemic. But even after recent significant revisions, the budget shows that the regime is not making the necessary sacrifices to fight the pandemic. Revenue projections rely heavily on presumed tax revenue and privatization of state assets, which are unlikely to materialize. Meanwhile, the final budget includes a massive increase in military spending. The IRGC’s budget increased by 92 percent, from $5.6 billion to $10.7 billion. Propaganda organizations will receive $6.5 billion, a remarkable amount given Iran’s economic plight.

What to Watch for

The COVID-19 epidemic is likely to exacerbate internal instability in Iran, which could in turn lead the regime to try to distract the population by highlighting external challenges abroad. This could lead to greater regime aggression across the region, as demonstrated by attacks on U.S. and allied interests in Iraq and Saudi Arabia.

The epidemic will increase pressure on an already beleaguered economy suffering from high unemployment and high inflation. Public protests have greatly declined since the epidemic started, for fear of contagion. But after the end of the epidemic’s first phase, Iran could experience greater popular unrest, especially in the impoverished areas of large cities, such as Tehran, which experienced major protests and regime violence in November 2019. But Tehran is hardly the only city set to experience this unrest. Thus, significant challenges to the regime likely lie ahead.

Alireza Nader is a senior fellow at the Foundation for Defense of Democracies (FDD), where Saeed Ghasseminejad is a senior Iran and financial economics advisor. They both contribute to FDD’s Center on Economic and Financial Power (CEFP). For more analysis from Alireza, Saeed, and CEFP, please subscribe HERE. Follow Alireza and Saeed on Twitter @AlirezaNader and @SGhasseminejad. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.