Iran’s economy is particularly vulnerable to supply chain problems because of its reliance on China. |
Iranian media are admitting the country has severe economic hurdles ahead. This is an issue that affects the whole world and not just Iran.
Supply-chain problems have become the norm during the pandemic. China, which has lockdowns in the key city of Shanghai, is spreading global economic chaos.
Iran is vulnerable because it is already under sanctions and also because Tehran signed a 25-year deal with Beijing and relies on China.
Iran’s regime believes that China is the future, and it wants to be untethered from relying on the West. But the West is perhaps weathering the economic storm better and also has different pandemic policies geared to opening up, while China is closing down. Iran didn’t count on this, and now it is facing real troubles.
Video of clashes and protests over the past week are only one part of the Iranian economic problem. Because Iran crushes dissent, it is hard to know if the videos reflect widespread discontent. What we can measure is that even Iranian media outlets, especially those affiliated with the IRGC, are no longer talking about missiles and drones but are droning on about economic issues. For instance, the semi-official Fars News Agency published an article about subsidies for basic products such as oil and eggs.
Major media that usually champions “martyrs” is now reporting on the price of eggs, butter, oil, and chicken.
When major media that usually champions “martyrs” are talking about eggs, butter, oil and chicken prices, that is because there is a huge problem. The media don’t say there is a huge problem, but why put articles about subsidies at the top of the pro-government propaganda media website unless this is a serious issue. People don’t need subsidies when they can afford basic goods.
Tasnim News Agency published articles about a new program to build 100,000 housing units and help people buy cars. An article about cars said the system was working to create more “transparency” and “fairer supply.” That sounds like the system is breaking down. Another article seemed to reflect inflation fears, noting a desire by the government not to have rents and housing increase more than 25% in the near term.
Other articles promised that Iranians would get more subsidies and deposits in their accounts. Another article even touched on the price of bread and more talk of subsidies. “What about the subsidies?” asked an article at Tasnim. Solat Mortazavi, vice president for executive affairs, said bread and other basic goods would not become more expensive, Fars reported.
The regime doesn’t want to admit how bad things are, so it is promising more subsidies, more housing, more cars.
Clearly, the issue here is that there are huge fears of things becoming more expensive. Inflation is now looming over Iran and the rest of the world. Supply-chain chaos is harming Iran. The regime doesn’t want to admit how bad the situation is, so it is promising more subsidies, more housing and cars, and that the prices won’t increase.
Iranian media admit “some problems.” The reality is likely that this is the tip of the iceberg. It’s possible that while “maximum pressure” did cut off some funding to Iran and its proxies, the real tidal wave of inflation and supply-chain chaos, caused by one of the consequences of the pandemic and Tehran’s reliance on China, could swamp Iran.
The regime is putting out messages that are designed to forestall the protests and chaos that could arrive. In a difficult position, what will Iran’s regime do? It will likely reach out to China, Qatar and Turkey and try to shore up its failures.
It has a problem because Russia is also being pressured by the West. Iran can’t seem to get much from Russia if Moscow is now under huge pressure from the West. Meanwhile, Iran can’t get the “deal” it wants in Europe, and the deal may not help enough to alleviate the problem.
It’s not clear if Iran can mobilize its proxies if it is also suffering too much at home.
Can Iran afford to push tensions in the region, perhaps via distraction by using the Houthis or Hezbollah? It’s not clear if it can mobilize its proxies if it is also suffering too much at home. It has already wasted resources on weapons for decades, while harming the average person.
Iran’s only way around its failed policies was to try to use proxies because it didn’t want to sacrifice ordinary Iranians. Now, its economic uncertainty could cloud the region in a different way than its proxies.
Seth Frantzman is a Ginsburg-Milstein Writing Fellow at the Middle East Forum and senior Middle East correspondent at The Jerusalem Post.
