Iran’s Coronavirus Strategy Favored Economy Over Public Health — Amir Handjani
When the coronavirus hit Iran in February, it presented its leaders with a choice: Close the country down to contain the outbreak and risk the wrath of a population already fed up with economic hardship, or try to keep the economy ticking over and risk the outbreak spiraling out of control.
Three weeks after announcing its first case, Iran has the third-most confirmed cases of any country, after China and Italy, nearly 14,000, with at least 724 deaths as of Sunday. Travelers have spread the illness across towns and cities, and across its borders to over a dozen countries. Government efforts to protect an economy battered by U.S. sanctions have failed to cushion the blow. Iran this week asked the International Monetary Fund for a $5 billion loan to help it combat the outbreak, the first time in six decades that Iran has asked for IMF assistance.
Iran’s approach contrasts with that taken by some of its neighbors in the region, notably Israel. It ordered anyone arriving in the country to quarantine themselves for two weeks or risk investigation. Officials said the move would help protect the economy in the long term, despite the short-term damage it would inflict on the important tourism and tech sectors. Farther afield, Italy, which has been equally hard hit, has placed its entire national territory under quarantine. The U.S., too, has introduced more restrictions in recent days.
Iranian officials identified the central city of Qom as the center of an outbreak that was announced on Feb. 19, but refused to quarantine the city, calling such measures relics of the era before World War I. Qom, a religious center and pilgrimage site, would have proven both costly and difficult to quarantine.
Iranian President Hassan Rouhani on Sunday that his government didn’t intend to impose a lockdown ahead of the Persian New Year holiday, beginning March 20. “It’s been rumored that some shops and some jobs in Tehran or some cities will be quarantined. There is no such thing at all. No lockdown today, neither during the New Year’s holidays. Not before, not afterward. Everyone is free to go about their business and activities,” Mr. Rouhani said in remarks broadcast on state television.
After the virus spread to other cities, the government kept the roads open to the northern part of the country, despite pleas from local officials there to restrict traffic, though it has urged Iranians not to travel and has canceled large gatherings such as Friday prayers.
After many Iranians refused to follow official guidelines to prevent the spread of the virus, the armed forces on Friday took further action and said, beginning Saturday, they would clear streets and shops and monitor all citizens online and, if necessary, in person. The campaign is being led by a military commission set up on orders from Supreme Leader Ali Khamenei, chief of staff of the armed forces Maj. Gen. Mohammad Bagheri said on state television.
Iran’s strained health-care system has also been unable to take other measures that could halt the epidemic, such as tracing potential infections and conducting widespread testing, which proved effective in South Korea.
“The economic embargo of Iran made them hesitate to shut down the internal economy, the internal consumption, which is what’s keeping the country afloat right now,” said Amir Handjani, an expert on Iran’s economy with the Washington-based Truman National Security Project. “They made the decision to put their internal economic viability ahead of public health.”
Shutting down businesses and transportation links would have tested the patience of Iranians who months earlier took to the streets in economic protests. Public anger with the leadership surged again in January over the military’s attempt to conceal that it had shot down a Ukrainian passenger jet on Jan. 8. A wide-ranging quarantine, especially head of the new year celebrations, could have inflamed tempers further.
Nonetheless, many private businesses are struggling as consumers opt to stay home. Some companies ask their employees to do the same. Car maker Iran Khodro — a national icon whose output was already slashed by U.S. sanctions — is halting production to counter the spread of the coronavirus among its employees, Iranian media reported on Thursday.
Khalvatsara, a guesthouse in the central city of Isfahan, said all business had stopped since the coronavirus outbreak. “We had two German guests who canceled,” said Fatemeh, an employee at the guesthouse. “We didn’t think it morally fit to stay open, even though we disinfected everywhere. Some even wanted to come from other cities in Iran but we rejected them.” Fatemeh, who asked to be identified by her given name, said she had now moved back in with her parents.
“I spent my savings before this, because I had counted on the income from New Year,” she said.
With the coronavirus shutting down hotels, restaurants, schools and other public institutions, up to two million jobs might be lost, said Sadegh Alhosseini, an independent economist in Tehran.
“Those are the poorest people of Iran,” he said, adding that without an income they will lose access to the health system, risking the further spread of the virus. The government has few economic tools at its disposal, he said, adding that the U.S. should lift sanctions on Iran for a period to help Iran’s health-care system rebound.
Iran’s domestic economy is heavily dependent on the service sector, which is particularly vulnerable to the impact of the coronavirus and generates approximately 12 million jobs, or about half the country’s labor force, according to the Statistical Center of Iran. Iran’s government likely thought imposing more economic pain on the population “would have given people another reason to panic, protest and voice their grievances,” said Mr. Handjani. “But I think they made a miscalculation. [The coronavirus] spread more than they thought it would.”
Iran officials and economists have blamed U.S. sanctions for hobbling Iran’s health-care system. Foreign Minister Javad Zarif on Thursday said efforts were “stymied by vast shortages caused by restrictions on our people’s access to medicine/equipment.” Mr. Zarif on Twitter listed the most urgent of Iran’s needs, including 3.2 million test kits, 160 million protective masks and 1,000 ventilators.
Demand for Iran’s oil, meanwhile, is sagging. China, Tehran’s last sizable customer after U.S. sanctions were imposed, has trimmed back imports as it struggles with the aftermath of its own coronavirus outbreak. Iran’s currency has also lost 10% of its value since the virus was detected in the country, adding to a 70% drop since U.S. quit a multinational deal to limit Iran’s nuclear program in 2018. Non-oil exports also have diminished as neighboring countries closed borders and halted flights.
To keep the economy moving, Mr. Rouhani’s government is trying to encourage consumer spending ahead of the New Year by enrolling 100 businesses in a program to promote online shopping. It has extended loan and utility payment deadlines and offered loans to small businesses. On Thursday, Mr. Rouhani ordered the payment of livelihood support packages to seven million people worth about $13 to $130 — about half of them in the form of low-interest loans.
There are other risks for Iran’s leaders, however. The stimulus measures, while potentially helping Iranians in the short term, could also exacerbate the rampant inflation that drove thousands of Iranians into the streets in November.