On May 19, three experts discussed the intersection of crises for the Islamic Republic, which was one of the original epicenters of the COVID-19 pandemic. The virus coincided with economic and political challenges that have created a perfect storm for Tehran. Speakers included:
- Robin Wright (moderator) – Distinguished Fellow, U.S. Institute of Peace and the Woodrow Wilson Center
- Suzanne Maloney is the interim vice president and director of the Foreign Policy Program at Brookings. She served as a senior advisor to the State Department on Iran.
- Henry Rome is a senior analyst at the Eurasia Group specializing on Iran. He previously worked at Harvard's Belfer Center for Science and International Affairs.
The following is an edited transcript from the event hosted by the Woodrow Wilson Center.
Wright: I’ll set the stage for our two speakers. First, on the pandemic, one of the things that's interesting is that the death rate in Iran is 5.8 percent. The death rate in the United States is 5.9 percent. Now, no one believes the numbers in Iran, and we're not sure about the numbers in the United States. But it's interesting that we're talking about comparable death rates. Iran tried to open again on April 11th in more rural or less populated areas of Iran, and on April 18th in densely populated Tehran. Iran actually reopened drive-ins for the first time since the revolution to give people something to do. But it has not gone well.
Robin Wright
I want to give you a quick timeline. The first reported cases were the two deaths on February 19th. We now know that it probably goes back to at least December. But that's our first benchmark. Within 39 days after Feb 19th, Iran was reporting 3,200 cases a day. That was the peak on March 30th. The curve then steadily went down; 33 days later, by May 2nd, the number of new cases dropped to 802. It looked like the V everyone had talked about was beginning to happen, that Iran was indeed beginning to contain the virus. But 16 days later, May 18th, the number of new cases had soared again to almost 2,300 a day. So, it's reaching a second peak that is very close to what the first peak was.
Iran's medical staff has paid a very heavy price. Yesterday, one of the Iranian papers ran a special eight-page report on the number of physicians and nurses who had died. Its count is 107. There have been some bizarre moments during this pandemic. One of them was when the Revolutionary Guard commander unveiled a handheld device that allegedly detected COVID-19. It appears to have been the same fake bomb-detecting device that had been used earlier. It, of course, does not detect COVID-19. An Iranian huckster promoted camel urine as a cure, and another huckster claimed putting lavender on your butt prevented the disease.
The new wave is having an impact beyond just human lives. The second wave appears to have hit hardest in Khuzestan, where 16 cities have been shut down again. Khuzestan is Iran's most important oil-producing province. So, the second wave has had a serious economic effect. Economically, Iran was already struggling because of U.S. sanctions. Then the oil glut. Iran's budget is premised on $50 per barrel per day with sales of at least one million barrels a day, which is down to less than a third of what they were selling after the nuclear deal was implemented in 2016.
But by April 1st this year, the price of Iran heavy, which is one of its main types of crude, had dropped below $14 a barrel, and sales were estimated to be as low as 300,000 barrels per day. One of the telling things about the economic impact is that Iran's decision to lop off three zeros from its currency and give it a different name. To show you how much the rial has been devalued: When I covered the revolution in 1979, one dollar was worth 70 rials. This month, one dollar was worth 162,000 rials at the free market rate.
And then finally, politically, the virus has hit just as the Islamic Republic began the year of elections, the first for parliament in February, and then the presidency will be voted on a year from this month. Critics blame the parliamentary elections as the reason for delaying the news of the outbreak because they didn't want to discourage people from turning out. The turnout is often a barometer of how popular the regime is or how interested people are in participating in the system.
President Rouhani's handling of the health crisis is likely to have a major impact on who runs next year to succeed him and how Iranians vote--and if they vote. As we all know, Iran faced an unprecedented series of protests in the three years before the coronavirus pandemic. The regime claims it's in control of the situation now, but during this pandemic it has reportedly arrested somewhere around 3,000 activists, journalists and others.
One last little bit of color that is, for me, one of the most telling episodes illustrating the crisis was on National Army Day. Last year, Iran held a very flashy parade through the streets of Tehran, with other parades in more than a dozen cities. This was at the height of tensions with the Trump administration. Last year, tanks and long-range missiles loaded on flatbed trucks rolled through the streets of Tehran. Troops goose-stepped in front of a dais filled with military brass and the president of the country.
This year, it was a very different show. This year, the Army Day Parade featured troops goose-stepping in hazmat suits and face masks. There were columns of ambulances. The flatbed trucks this year didn't carry missiles; they had been converted into mobile clinics. And military vehicles were spewing huge clouds of disinfectant into the air. Members of the band were performing six feet apart. This year, the president skipped the show. He sent a message instead. He said, "The enemy now is hidden, and doctors and nurses are at the frontlines of the battlefield. Our army is not a symbol of militarism, but a manifestation of supporting the nation and upholding its national interests."
The big question, of course, is what the long-term effects of all these crises will be on the revolution. Will it provoke more protests? Anti-regime activity?
Suzanne Maloney: Let me just start off with a few brief remarks about the politics of the virus and the current moment in Iran and a little bit on the U.S.-Iranian relationship and the state of play there. Iran was the first epicenter of the coronavirus outside of East Asia. In many ways, whether deliberately or simply by virtue of the lack of capacity to implement a serious and sustained strategy of containing the virus, the Islamic Republic has chosen to live with a pandemic rather than to try to confront it in a successful fashion.
Suzanne Maloney
We've seen the statistics coming out of Iran. There's a sense that these statistics aren't fully accurate. But even if you're basing your estimations of the scope of the Corona crisis within Iran on the official tallies, it's worth noting that the test rate itself is deeply worrisome. The fact that there are 120,000 known cases, and there have only been somewhere in the realm of about 700,000 Iranians tested. That suggests somewhere between a one in six and one in seven rate of infection. As with many other places, including the United States, the insufficiency of widespread testing is part of the difficulty. But it reinforces the likelihood that the statistics that we're seeing out of Iran really underestimate the scope of the spread of the disease and this broader impact on both politics and economy.
This is a pandemic that hit Iran very early. In fact, while there wasn't an official acknowledgement of the spread of the virus in Iran until the official acknowledgement of two deaths, there was concern expressed publicly by health officials as early as January, calling for a curtailment of flights to and from China. That, of course, didn't happen for many weeks and didn't happen really in any sustained way throughout the crisis. That speaks to one of the problems that Iran has faced throughout this pandemic, which was the early unwillingness to acknowledge the scope and depth of the crisis. This is something that in many respects is emblematic of the Islamic Republic's approach to dealing with other types of crises.
But it was a combination of both paranoia -- you heard some suggestions that this was a hoax or an American conspiracy from some of the senior leadership, including Ayatollah Ali Khamenei at the outset of the crisis -- but it was also a reflection of the necessity. Necessity of the economic relationship with China. Necessity from an ideological perspective because the pandemic in Iran really began in Qom, the seminary city, that's about an hour and a half south of Tehran, which is still extremely important to a country that styles itself as a Muslim republic. And necessity politically.
The fact that Iran had parliamentary elections scheduled for February 21st was a major factor in the decision to try to keep this under the rug to the extent possible in the early weeks of the spread because of the concern that people would not be willing to go out to the polls. Iranian elections are an important legitimizing activity for the Islamic Republic. There were already legitimate concerns that turnout would be low simply because of the fury that had erupted in November after hikes in gasoline prices, which led to major rioting across the country and to severe repression, probably the most severe and sustained repression that we've seen in response to Iranian political upheaval since the early 1980s. The priority was really on trying to avoid an embarrassment at the polls.
Coronavirus actually hit the Iranian leadership in a tougher way and a more direct fashion than in any other country. Obviously, we know of reports even from here in Washington of people close to the center of power who've tested positive. But in Iran, you really had sort of the entire leadership all the way up the chain appear to be implicated. Several dozen members of Parliament tested positive. A number of middle ranking IRGC commanders. Most famously, perhaps vice president Masoumeh Ebtekar, who many of you may remember from the seizure of the U.S. embassy in Tehran 40 years ago as Sister Mary. She was the spokesperson for the hostage takers. She was diagnosed and since recovered, along with a number of other senior people in the executive branch of the Iranian political establishment.
There were a number of deaths as well: influential diplomats, members of parliament, advisers to Iran's foreign minister, Javad Zarif, and to its Supreme Leader Ali Khamenei. This, of course, tracked back to the past that the outbreak emanated from Qom. The religious leadership is relatively intertwined with the senior leadership of the state. Many of those who were infected have since recovered. This is one of the points of pride for some within the Iranian establishment, but it's clear that this hit harder and closer to the structure of power in Iran than it has in many other countries.
What does all of this mean for the future of Iran? This pandemic and the economic impact, as well as the health effects of the pandemic, have produced a new wave of criticism against the system. The frustration in the early weeks was largely focused on the failure of the government to respond effectively to institute a serious quarantine or suspend travel with China. There was also just an enormous amount of frustration expressed in both the popular level, but also within the establishment as well over the sense of inequity. That it is an injustice, that is one of the sore points for many Iranians about the way that the system works today.
There was a lot of discussion of the fact that Tehran had donated three million face masks at the very outset of the crisis to China and that, in fact, Chinese companies were purchasing masks and helping to create a shortage in the domestic market. There was as well the accusation of hoarding, of the distrust and sense of secrecy that was part of the early response to the crisis. It fueled this broader sense that this is not a government that is capable of managing a crisis of this extent in a way that really reflects the Iranian national interest. This is the kind of debate that has really festered in Iran as early as the 1980s in the way that Iranians debated the war with Iraq.
I want to use that as a kind of pivot to the next point, which is that depending on what statistics you believe and the way that the government continues to manage this crisis, we're going to see very high numbers of infected patients in Iran as well, but also casualties. This is a crisis that really does loom as large as the crisis of the war with Iraq. It's one that I think is going to have a profound impact on Iran's demographic trajectory. Just yesterday, an Iranian newspaper published a projection -- which is not a function of the pandemic itself but again has been exacerbated by the current crisis -- that the Iranian society is aging. This has been true for many years since the government instituted a successful family planning process in the late 1980s. Iran is now at a point where, in not too many years, more than a third of the population will be over the age of 60. And that's a very difficult demographic pyramid to be able to support, particularly without a functioning economy.
In terms of the politics, what we've seen so far is that some existing schisms have worsened. You see a very clear distinction in tone in the way that Supreme Leader Ali Khamenei has handled this with the messaging of President Rouhani. Rouhani has come under a great deal of criticism for his own lack of capability and for the sense that there was nobody really in charge. What he's trying to do now is try to manage expectations. He gave a speech just a couple of days ago. It was not a rah-rah speech. He talked about the situation being better than before but also emphasized that the time of COVID is not over.
That's still very much the case because a pandemic is raging in Khuzestan and in other parts of the country at an even higher level than it was at the outset. Khamenei takes a much more antagonistic tone. He continues to emphasize the role and responsibility of the United States and points to the failures of the industrialized world in managing the pandemic and the extent to which the Islamic Republic has essentially performed relatively well by comparison.
Two other points where we've seen existing schisms exacerbated by this crisis: one is of center and periphery. I've never seen the extent and breadth and fury expressed by various provincial officials toward the central government, irrespective of ideological composition or perspective that we've seen published in the Iranian press over the course of the past two months. There's just this deep sense of frustration, distrust and fury at Rouhani, Khamenei, the whole central government out of a sense that the provinces have essentially been left to fight this on their own. That's an important dynamic that we just haven't seen play out in public in quite the same way that we have over the course of the past two months.
The other important point is that all of this has hastened the collapse of any kind of a meaningful coalition representing what used to be called the Reform movement and what has, over the course of the past eight years under Rouhani's presidency, really been a sort of reform-moderate wing of the system. There is now open feuding. There is really no clear strategy for making any kind of a serious political comeback as Iranians look forward to presidential elections next year.
This is important and really can't be understated. For so long in Washington, we have been used to this kind of binary in Iran. Good guys, bad guys, conservatives, reformists. The reality is that the prospects for any kind of a serious reform movement to have a political impact on the future course of the Islamic Republic by working within the system, by elections, by participation in the representative institutions of the Islamic Republic, is effectively minimal at this point. If we're hoping to see a new moderate front emerge from within Iran, it won't be through elections. It won't be through participation in institutions.
Just one final point on the domestic politics. We shouldn't underestimate how much the capacity for repression remains intact. There've been thousands of arrests since the outbreak of the pandemic. There has been a clear strategy to not just retain the Americans and other foreign nationals held in Iranian prisons, even as tens of thousands of prisoners have been released, but also, as in the case of French researcher Fariba Adelkhah, to extend their prison terms. None of this means that the regime is in a stronger position today than it was before the pandemic. I think, if anything, this is a regime that is going to continue to be tested. But we should not underestimate the resilience.
One final point on the U.S. relationship. None of the problems that predated the outbreak of COVID-19 have magically vanished because our attention is distracted. The incentives for U.S.-Iran escalation remain high on both sides, even though the risks now loom even larger than ever before. We've seen this play out in the Gulf. We've seen this play out in the attacks by Iranian proxies against U.S. allies, as well as U.S. forces in various parts of the region. The Iranians at one point thought they might be able to make some traction on sanctions relief as a result of the pandemic. That's clearly not something that the Trump administration was willing to entertain.
What I worry about is that while we are all focused on our own logistical constraints, on the impact of the pandemic around the world, we will fail to appreciate the possibility and even the likelihood of a return to what preceded the pandemic. If you think back to January 3rd, the assassination of Qassem Soleimani and the closest that the United States and Iran have come to direct military conflict in at least 30 years, I think we could be back there again, particularly if we're not careful. I'll end there and thanks to all.
Wright: . One interesting thing is that 23 countries have traced cases of COVID-19 to Iran. It will be interesting to see what kind of rippling effect that may have once we get beyond the pandemic.
Henry Rome: I'm going to touch on the economic implications of U.S. sanctions, coronavirus and the oil price collapse. I'll conclude with a few observations about what we're likely to see over the next six months or so.
Henry Rome
On sanctions, U.S. sanctions, which were imposed starting with the U.S. withdrawal from the nuclear agreement two years ago, have had a very severe impact on the Iranian economy. The economy shrunk by more than 5 percent in 2018 and an additional 7 percent or more than 7 percent in 2019. Oil exports collapsed. Inflation, we saw, soared, weakening the purchasing power of everyday Iranians. The currency weakened dramatically against the dollar, and many Iranians had been put out of work and have been suffering as a result of the economic dislocations incurred by the sanctions.
By the second half of 2019 or so, the economy began a process of adapting to the distortions caused by the sanctions. Certainly, the oil sector has been decimated, but the non-oil sectors began picking up the slack. I'm talking about the services sector of manufacturing, petrochemicals. The Iranians also focused on trade with countries closer to home to countries like Iraq, Turkey, Afghanistan and the Gulf, as opposed to looking more farther afield. The main exception there is China. This trading strategy is aimed at evading U.S. sanctions because trade across borders with one's neighbors is much harder to sanction and harder to stop.
The U.S. continues to say that the Iranian economy is in freefall, on the verge of collapse. It's no doubt that 2018 and 2019 were very bad years, but headed into 2020, we began to see signs that the economy was stabilizing. Then enter coronavirus. The country was never fully shut down. Intercity travel was halted. Shrines and schools were closed. But there was no stay-at-home order. Even those limited restrictions, many of them were lifted in mid-April. The closures essentially disrupted domestic economic activity and also foreign trade.
Even as Iran chooses to reopen and as it experiences the second wave, it also can't force its neighbors to make the same choice. Iraq, in particular, is a good example. Iraq closed most of its borders and has been very reluctant to reopen after seeing its own cases of coronavirus be linked back to Iran. Exports to Iraq were just a quarter of a billion dollars in April, down more than half from six months ago.
Why the Iranians decided to act slowly and reopen quite quickly: the relationship with China, religious dimensions, as well as political necessity. I just want to tack on one more and that's the economic condition. I'd argue that the Iranians were both unable and unwilling to impose a larger lockdown on society for these economic reasons. As with many developing countries, Iran faces a very stark choice: if you were to shut down the country, shut down the economy, it would then have to take responsibility for social welfare benefits, ensuring people can eat in a very essentially a total way. Like many developing countries, Iran simply did not have the logistical or financial capability to do that.
The Iranian economic stimulus came to about $8 billion, which is less than 2 percent of GDP. Just for comparison, the U.S. CARES Act alone totaled $2.3 trillion, 11 percent of GDP. Iran's neighbors in the Gulf, from the very beginning of the crisis, rolled out dramatic stimulus packages as well. Qatar with a package of 13 percent of GDP. Iran was probably unable to contemplate a larger shutdown.
But the other half of this is if they were also unwilling to. Here it's important to look at the budget. President Rouhani proposed his budget at the end of last year in December, and over the course of January and February as the pandemic was clearly starting. The government revised that budget and that revision put into place. It was in that revision that military spending was dramatically increased. For example, the Revolutionary Guards received a 33 percent increase in funding in that revision period. That comes out to be a total of 62 percent increase in funding overall compared to last year. The Basij militia also saw a nice funding increase of 144 percent from the proposal and a 30 percent increase over last year.
These decisions indicated that Iran does not intend to let the public health crisis diminish its capacity for domestic repression and foreign intervention. It's also telling that the government has not had access to the various pools of off-book money that's held by the clerical establishment and the supreme leader. From an economic point of view, the government was both unable and unwilling to take an approach that more decisively prioritized public health.
Within this environment, we had the oil price collapse in March. Iran's heavy grade sold at around $45 a barrel in March. It now sells for under $20, and that's without the discounts and other incentives that Iran offers its buyers. The impact of the oil price collapse is complex for a country like Iran. On the one hand, in last year's budget, oil accounted for 30 percent of government revenue. This year, it's less than 10 percent. This isn't because of a Green New Deal initiative. It's because U.S. sanctions have driven Iranian exports down dramatically from almost two and a half million barrels per day two years ago to under half a million today. But the impact there is that the government had already been planning for a dramatic decline in oil revenue. That has helped Iran insulate the economy from the oil price collapse and some of the volatility.
On the other hand, in an environment as Iran is in -- under severe economic sanctions, facing the coronavirus pandemic -- every dollar matters. And that 10 percent number, that 10 percent of revenue coming from oil looks very optimistic right now. Consider that Iran budgeted for selling 1 million barrels per day at $50 a barrel. If the current trends hold Iran this year, they'll be exporting half that much oil at less than half the price. That's hard currency that Iran needs to support the import of basic goods from countries like China, and it really means a fairly difficult path ahead for how Iran tries to cover that gap.
I'll conclude with a few thoughts about how Iran is trying to muddle through here over the next six months or so. The most immediate response has been to dig deeper into foreign exchange reserves, tapping into the country's sovereign wealth fund. That can certainly work in the short term and in covering some of these gaps. It is worth emphasizing that gives Iran less flexibility and less maneuver room, as you look into the medium and the long term. It's depleting that cushion.
Second, it sought various forms of sanctions relief. Suzanne mentioned a direct request and a fairly consistent campaign from the Iranian foreign ministry to see US sanctions relieved in total, which failed, but also an effort to receive IMF loans. The Iranians have requested five billion dollars from the IMF. The U.S. campaigned to block that request, although the IMF is still working on it, as of the last public reports. It is actually likely that Iran will have access to at least some of that money, if they're able to work out the logistical challenges involved in transferring it. About half that amount is designated under what are called special drawing rights. Those allow a member state to access that money without the opportunity for the U.S. to try to veto it.
But even if Iran gets access to some of this money, we shouldn't overestimate how much of a game changer that would be, especially because it looks as though it would be channeled through various mechanisms like INSTEX and separate systems set up by the Swiss that that are designed to handle humanitarian trade but have their own very significant logistical problems. It's not as though Iran will get billions of dollars deposited into the Central Bank and it can go from there. It is a much more complex process.
In the meantime, Iran is pursuing another risky strategy of raising money. Even before the coronavirus outbreak and the collapse of oil prices, Iran planned to fund 20 percent of its budget by selling off state assets and issuing bonds. We've seen over the past several weeks this process kicked into high gear with a so-called privatization campaign that centered on the Tehran Stock Exchange. I say so-called because it's not privatization according to the textbook definition here. The state-owned companies, which are known for being inefficient and corrupt, are not being handed over to private sector actors who can improve their efficiency and transparency. The shares of these companies are being sold on the stock exchange at very small shares and for millions of Iranians have the opportunity to buy them.
The strategy here is to raise money by persuading individual Iranians to invest in these state-owned companies. This approach has been cheered on not only by President Rouhani, but by the Supreme Leader. Over the past two months, in large part because of this new campaign, the Tehran Stock Exchange's main index has doubled. That's in the midst of a collapse of economic activity and a recession and the fact that these companies themselves are poorly managed and inefficient.
Many economists inside Iran and outside have raised concerns that there is an asset bubble building here. It's just worth flagging that if the Tehran stock exchange experiences a significant crash or other type of dislocation, the effects would be quite severe. Depending on how quickly that would happen, the impact will have on average Iranians could rival that of U.S. sanctions, given how many have invested their savings into the exchange. It's just worth keeping an eye on this financial aspect of the government's effort to cover its gaps.
With the exception of the stock market issues, I see little sign over the next six months that economic conditions would deteriorate so significantly that it would cause Iran to somehow bend the knee and seek negotiations with the U.S. The Iranians have proven over the years that they have an immense capacity to muddle through and keep the lights on despite the severity of the economic conditions. We're likely to see between now and November at least, status quo and stagnation on both the economic fronts and the diplomatic front as well.
Wright: For Suzanne, my question is: This has all coincided with a real change in the balance of power inside Iran. The parliamentary elections were won by hardline and conservative politicians. I wonder what this tells us about who's likely to run in the presidential election, what the mood of the country is. Is the sense that people will want to participate? The turnout has always been used in the past as a reflection of whether people support the revolution or are willing to participate in a system. Are there names who are emerging and who might we see jockeying for position?
Maloney: Obviously, we are used to looking at Iran in increments around elections. Iran has had more elections than any other country in the Middle East -- with the exception of Israel -- in the past 40 years. While they're certainly not free and fair by any international standard, they're often interesting, and they are occasionally competitive and unpredictable. That has been a real marker for us in terms of understanding where the balance of power is going within Iran. It's becoming less relevant, to be frank, simply because this is not an arena of political competition which has been shown to be effective in changing the core policies of the Islamic Republic of Iran. The sole exception to that might be the JCPOA, but effectively, my strong conviction is that that was not a Rouhani gambit. His election was deliberately engineered in order to permit the supreme leader to make that reversal of his prior policies towards the negotiations.
While there is already quite a bit of conversation about who's going to run and what that might mean for Iran, it's almost certainly going to be someone who is by the historical standards of the Islamic Republic from what we understand to be the conservative side of the political establishment. My own presumption is that it doesn't necessarily produce any real change in the balance of power as we see it today.
It's not the most interesting or important political significance in terms of what the future of the country is going to look like. So whether it's [former Parliamentary Speaker] Ali Larijani—and we're all very skeptical that Larijani, having contested elections before, really does stand a chance of capturing the popular vote--or whether it's Mohammed Baqer Qalibaf, the former mayor of Tehran, whether it is someone like Ali Shamkhani, the current national security adviser, it is going to be someone from the conservative side of the ledger and that will probably only consolidate authority under the current balance of power.
What I'm more interested in is who are the defectors? Who is going to defect in a serious way from the Islamic Republic? We've just had a new video from Mohammad Khatami, the former president, who's been largely kept under wraps by the current system. He called for national reconciliation. There have been some interesting signifiers about to what extent there is any real momentum underway to try to bring those who were associated with the Green Movement back into the fold. My guess is it's going to go in the opposite direction. I'm looking and waiting for that political figure, probably someone who's traditionally associated with the Reform camp, who essentially breaks away in the run up to the elections next year and begins to talk about a different political pathway to change. Hasn't happened yet, but I think it's only a matter of time.
Wright: One quick question for Henry: Do you see that changing or shifting or IRGC trying to exploit the pandemic economically to heighten their role in society and government?
Rome: I think that's right, and it actually dovetails nicely with what Suzanne was saying about the centralization of power within the Islamic Republic. Even before the pandemic -- and I'm looking back to the November increase in gasoline prices -- it became quite clear that this was not a decision by the parliament, and it wasn't a decision exclusively by the executive branch. It was one taken outside of those normal channels and by a body that's been established called the Supreme Council for Economic Coordination.
The same is true for the budget. The budget was in a fairly extraordinary set of circumstances, reviewed very closely by other centers of power that were not the parliament, which traditionally had it as one of its few roles. As we've gotten into the pandemic, we've seen that centralization increased with the military and especially the Revolutionary Guards being granted basically the authority to head up the response. So, I think yes. It's part of this broader trend that we're seeing of the supreme leader's office and the Revolutionary Guard slowly taking over levers of power that had existed, even just on paper, from other bodies of the system.
Question from Jane Harman, president of the Wilson Center: I have two questions. Number one, Secretary of State Pompeo recently said we're out of the JCPOA, but we're really not for purposes of snapback [on sanctions by the U.N.]. The Europeans dismissed this idea. I just wonder if that passed the laugh test or is that true? The other one is that there is a story about Iran outing Israel for a cyber-attack on one of its ports. Now we finally have a government in Israel after a full year of disarray. There is this question of annexation of parts of the West Bank that could happen as early as July, if the U.S. gives permission. If Israel annexes the part of the West Bank, something that some of us think will destroy the two-state solution, which some of us think is a much better option, and there is a Palestinian uprising. Where does Iran fit in all this?
Maloney: There is a legal case to be made that the U.S. still has standing under the JCPOA to push for a snapback, essentially to avoid the expiration of the U.N. arms embargo, which would come this fall. While that may be a legal solution available to the administration, it is not one that has a lot of diplomatic sense because it's only going to infuriate our partners and allies and particularly the Europeans. It's a gambit they're trying. It wouldn't be one I would advise.
In terms of how annexation plays to the Iranian's favor, it would be just a gift to a system that has lost most of its appeal internally and certainly all of its appeal externally. It would undercut what we've seen even during the time of the coronavirus: increasing ties between Israel and a number of states across the Gulf because it would make all of those kinds of interactions much more politically toxic and it would give the Iranian's anti-Israeli and virulently anti-Semitic rhetoric a new lease on life. So, it would be terribly unfortunate.
Rome: Just one point to dovetail off of two cyber-attacks, one on each side: Now that we have a government in Israel, there won't be significant changes in how the Israelis handle Iran policy. It's always been a consensus-based policy from the military and national security establishment. The prime minister, and the alternate prime minister and the Minister of Defense Benny Gantz was Netanyahu's chief of staff. While a government is a gift for the Israeli people and the Israeli system, which has been laboring without one for more than a year, it doesn't signal a dramatic change in how Israel approaches Iran.
Question from Mark Fitzpatrick from IISS: Suzanne, at the end of your presentation, you mentioned the potential for US-Iran military conflict. Do you think there's any possibility that such a conflict could be sparked by U.S. efforts to stop Iran oil tankers from offloading in Venezuela? Given that both states are sanctioned by the United States. And the United States has it out for both of them.
Maloney: I think anything's a possibility. I would suspect that the Iranians aren't well positioned to respond, at least in real time, if the United States tries to prevent that offloading or in any way disrupt the shipment of large supplies of Iranian crude to Venezuela. But the Iranians have a real incentive to continue to make their predicament a priority for the international community.
They saw that diplomacy was the response to provocations that took place from May of last year through September with the attack on the Abqaiq and Khurais oil fields in Saudi Arabia. That helped to prompt an enormous new array of diplomatic energy and some proposals for financial relief to Tehran. I can't imagine that they wouldn't try to repeat that playbook, given that the world's attention has been distracted from the specifics of Iran's predicament under U.S. sanctions.
Question Tom Miller of the International Commission on Missing Persons: I've got a question for the panelists on Afghan refugees in Iran. We've seen that they've been going back to Afghanistan. Can you speak to the numbers, how much they've been infected with COVID, how this has affected the relationship between the two countries? What's the status of the border?
Maloney: What we're seeing in Iran is consistent with Iran's past practice in times of economic constraint. There is always new pressure on trying to repatriate Afghan refugees. In this case, it appears that it's been done in some cases with significant force, and that has led to some diplomatic tensions between Afghan authorities and the Iranians. The reality is that the lives of Afghans have always been incredibly precarious.
In Iran, they have very little access to proper benefits and citizenship and even to the formal economy. That shifted to some extent while Iran was relying on Afghan refugees and other South Asian citizens and Shiites in order to mount a transnational expeditionary military force to fight on behalf of [President] Bashar Assad in Syria. In some cases, for a few years, Afghans in Iran were celebrated, but largely they are the subjects of intense discrimination. And that has always intensified at times of economic hardship.
Rome: The most recent incident was a number of Afghan refugees who, according to Afghan government officials, were intentionally drowned by Iranian border guards at one of the crossings. That's just another fairly emotional issue, especially from the Afghan side that adds to this dynamic.
Question from Joe Snow from Northwestern University: You mentioned the widening IRGC responsibilities. What do these increased surveillance efforts look like, whether it's through any kind of social media channels or equipment installation. And how are they using the pandemic to do that?
Rome: It's a really good question, and it has been a bit surprising because while many countries have been heavily relying on their tech sectors and in some countries, for example, Israel, the security establishment to get a better handle on the COVID outbreak, we haven't seen the same level of attention by the Revolutionary Guards on this front. Certainly, they have a very robust internal counterintelligence and surveillance apparatus. Part of this has been the development of a national internal Internet, as well as messaging app that allows the government presumably to monitor their citizens. But there hasn't been a significant effort to expand or take advantage of the crisis to expand their surveillance capacity. I think it's just already so pervasive as it is.
Question from Alfred Biegel, a journalist: Given the domestic turmoil, what are the implications for Iranian support of its proxies and retention in Syria, particularly with the Israelis pounding them quite frequently, and they're paying a high cost? What are the implications in terms of Iranian retention and support to its proxies?
Maloney: There’s a new-found sense of optimism or expectation that, in fact, there may be schisms between the Iranians, the Russians and/or Assad himself. There's very little sign of this or confirmation of this from the Iranian side. They insist the relationship remains as robust as ever. We always anticipated, those of us who watch Iran's activities in Syria, that they would adjust to the reality of Israel's determination to continue mowing the lawn and try to prevent the installation of capacity both within Syria and in Lebanon as well, to supply and produce domestically precision-guided missiles that would really change the balance of power between Israel and its neighbors. Those efforts on behalf of the Israelis continue. The Iranians are adjusting to the pushback, but I don't see any indication that they have in any way rethought their own approach either to the technological efforts that they're undertaking both in Syria and Lebanon or to the broader commitment that they have to preserving Bashar Assad and preserving the Baath regime within Syria.
I'm not optimistic that we have come to any real game change in the nature of that conflict. I have seen many times the hope or expectation that there might, in fact, be real differences between Moscow and Tehran. But what I think is important is that this has been a strategic partnership that has served the interests of both sides. Both appear to be quite committed to retaining it, even where they may have some differences in terms of ultimate objectives and priorities.
Rome: That's exactly right. The Iranians are constantly retooling or reassessing their force structure, their deployments, what makes the most sense on the battlefield. And so certainly it's possible there are various rotations and movements of forces. But I haven't seen any really decisive indications of a dramatic change. The flurry of headlines about this has more to do with Israeli domestic politics than it does Iran. The comments that created quite a number of headlines came from a senior aide to the former defense minister, Naftali Bennett, who is since out of a job and was trying to burnish his credentials on the way out.
Wright: What about Iraq? It has a new prime minister now finally. He's seen as someone who is friendly with the United States. Is it likely to change anything about Iran's influence, intervention, support for proxies inside Iraq. And then the last area that we haven't touched on is Yemen. The Saudis are looking for a ceasefire. The war has taken on costs it can no longer easily absorb. The Iranians have long wanted a peace deal out of Yemen. Do you think the pandemic will get us any closer to finally ending the Yemen war
Maloney: With respect to Yemen, here we're going to see the limits of Iranian influence because ultimately their relationship in Yemen is very different than their relationships in other conflicts, particularly Iraq, as well as Syria, where they have much more sustained direct ties, formative ties really, to the proxy militias that have been involved in the Levant part of the Arab world.
In Yemen, they were the beneficiaries in some respects of decisions by the Saudis and others that enabled them to increase their relationship and direct supply and training of the Houthi militia. But the Houthi militia has its own leadership, its own interests and objectives. My sense is that there is a determination on their side to take advantage of what they see as an opportunity to expand their gains from this war, even if it means perpetuating it. My concern is that not due necessarily to those direct interests on the part of the Iranians, but rather because of the local dynamics, we're not going to see Yemen move to a period of lower conflict, even though there appears to be some political will now on the part of the Saudis. And that is hugely unfortunate.
With respect to Iraq, you see the names change, the faces change. There is intent and goodwill. There is continued engagement on the part of the United States, and this provides an opportunity. But realistically, the Iranians have just a vast amount of sway, not just at the senior leadership level, but at every level beneath that. All of that is strained by the growing evidence of that antipathy on the part of Iraqis toward both the government itself as well as to the Iranian influence over the government. But to date, that really hasn't persuaded the Iranians to alter their approach in any significant way. And I don't see how it would in the short term, unfortunately.
Wright: On the issue of the IRGC getting more money: Does that indicate more ambitious plans in the region and how does that affect both Iraq and Yemen?
Rome: I see it more as an effort by the government to backstop the Revolutionary Guards during all of this tumble. Not necessarily in an effort to expand its portfolio, but I think it ensures, especially during a time of great change with the killing of Qassem Soleimani and his successor now taking the reins of the Qods Force, an effort to ensure that it has the resources it needs to maintain its presence in these theaters.
On Yemen, the inclination from the Saudi side, especially after what's been a fairly tumultuous few weeks in U.S.-Saudi relations, it remains keen to pull the ripcord here and try to see a wind down in the conflict. But the local dynamics have less to do with Iran and more to do with how the Houthis will continue to stand in the way there.
In terms of Iraq, certainly there's a lot of optimism that the new prime minister, who's perceived as a lot more talented, smart. He knows he's not a politician per say and has the confidence of some important sectors of society. But there are just very substantial structural barriers to him getting anything done substantially and lasting ideas on the economy or in terms of trying to find a successful balance between the U.S. and Iran.
It’s important to note that that the Iranians continue to test the U.S. in Iraq. The assassination of Qassem Soleimani came after two incidents: one, the killing of a U.S. contractor in the end of December by Iranian-related militias as well as the storming of the U.S. embassy compound that apparently triggered the [U.S.] president to move on Soleimani. The Iranians responded fairly, fairly mildly. But just two months later, Iranian-backed militias again were killing U.S. forces in Iraq. The U.S. responded fairly mildly, not against Iran itself, but against those militias in Iraq. The signal being sent from Washington, both the consolidation of bases within Iraq as well as its reluctance to act more aggressively to enforce this red line, gives Iran every reason to continue to poke and prod and see where the true U.S. red lines are. That's a recipe for miscalculation in the months ahead.