Iran has become a regional epicenter of the COVID-19 pandemic with a myriad of impacts on the country and the region. The pandemic has drawn attention to the Iranian government’s handling of the health crisis and spurred a debate in the west about the extent to which international support for the country is possible because of the sanctions regime imposed by the USA. Iran’s regional influence was also brought up by some commentators as a reason for why financial aid for tackling the pandemic can bolster this influence indirectly. Iran’s advocacy campaign for the lifting of these sanctions, coupled with a logic of expediency on the side of the USA and the EU who see a threat in Iran’s inability to control the pandemic, is now leading to the lifting of restrictions on, and unfreezing of assets for medical supplies. Iran also received a green light to negotiate a loan from the International Monetary Fund (IMF) for the country to be able to tackle the pandemic.
Additionally, the long stumbling European financial instrument to conduct trade with Iran, INSTEX, successfully conducted its first transaction with Iran at the end of March. Efforts by the Iranian President Hassan Rouhani to gain international support have sparked a debate within the Islamic Republic. His rivals, mainly from the Principalists camp, have criticized him for requesting a $5bn loan from the IMF. Rouhani’s Conservative and Principalist rivals received the vast majority of seats in the Iranian Parliament in the February 2020 elections, which gives them more influence over Iran’s foreign policy.
President Rouhani has two motivations to reach out to the international community. First, the government wants to prevent the country’s hard-pressed economy from ailing further as petroleum exports become minimal along with the slump in its price. Government statistics say that the non-oil growth of the economy improved in the last 9 months of last year from negative to zero on a year-on-year basis. Both unemployment and inflation rates also slightly improved. The pandemic will erode these relative improvements while the price of crude oil in global markets is in free-fall due to the Saudi-Russian oil rivalry. Foreign trade, tourism, and pension funds will all suffer, fueling inflation and unemployment in Iran. The President understands that the pandemic could turn into a catalyst for future protest movements, which Iran has been experiencing more frequently in the last two years. Rouhani is attempting to turn the crisis into an opportune moment to aid his country’s economy. Second, if Rouhani receives an IMF loan and can unfreeze some assets abroad, he may be thinking of leveraging repayments in some way to negotiate with the USA on more solid ground. Rouhani’s openness towards the international community could even, in part, be intended as a message of goodwill for future negotiations.
The pandemic may have some negative impact on Iran’s regional influence as multiple crises could be causing a distraction at a leadership-level, restrictions on movement in the region which put some limitations on mobilization, and declining economic revenues to bankroll activities. Inversely, a confrontation between the USA and Iraqi Shia militias can further empower Iran if the USA retreats further. Already, European military missions are withdrawing from Iraq because of the pandemic and the USA-led international coalition is repositioning itself with fewer troops in fewer bases for security reasons. This means the pandemic is likely to have different impacts on Iran’s regional influence, both negative and positive.