China appears to be in stronger economic shape than Europe, but whatever modest gains it has posted are outweighed by the massive collapse in Chinese “soft power” and influence around the world. From the secretive way Beijing concealed the depth and danger of the coronavirus crisis; to its overt attempts to link proffered aid to other countries to acceptance of its political demands; to its ongoing predatory lending practices in the context of the Belt and Road Initiative; other countries, particularly in Europe, have begun to revise their initially rosy expectations that China would become the new responsible stakeholder of the international order. The ratcheting up of tensions with India, the continued clashes with other claimants in the South China Sea, and the increasing repressive actions taken from Hong Kong to Xinjiang have fueled concerns about Chinese ambitions for the future. Significantly, over the last several months, European and Asian partners of the United States have begun to take much more seriously questions about vital supply and technology chains that connect the continent to Chinese sources and how these dependencies may create unwelcome vulnerabilities.
Thus, the pandemic has made Russia more susceptible to U.S. sanctions pressure, while common concerns about Chinese activity are providing a new rationale for rebuilding and reconnecting ties with the United States. European partners who were envisioning a greater equidistance from the United States are now, in the wake of the pandemic, looking to secure investment and supply chains across the Atlantic than with the dragon of the East.
Among the revisionist states, none has taken the battering of the Islamic Republic. There are lessons here for the Biden presidency that should not be ignored. Despite all the lamentations, Trump’s Iran policy has had its share of successes precisely because it shattered long-standing assumptions. Many in the foreign policy establishment insisted that should Trump abrogate the Iran nuclear deal, known as the Joint Comprehensive Plan of Action, America would stand alone, incapable of multilateralizing its economic sanctions. But in the end, the European leaders complained, and the European businessmen complied. The next pillar of wisdom to fall was the notion that should America walk away from the deal, Iran would rush to the bomb. The mullahs have accelerated aspects of their nuclear activities, but the Islamic Republic is still years away from having a bomb. The sabotage of Iran’s nuclear installations by unknown actors have moved the atomic goalpost further out of Tehran’s reach. And finally, the notion that Trump’s killing of Iran’s famed Revolutionary Guard commander Qasem Soleimani would spark a war. Instead, it provoked a missile attack on an unoccupied portion of a U.S. military base in Iraq with sufficient forewarning from Tehran.
The American-imposed sanctions have devastated Iran’s economy which shrank by 7.6 percent in 2019 and another 6 percent in 2020. Its oil exports have declined from 2.5 million barrels in the aftermath of the Iran deal to 133,000. President Hassan Rouhani acknowledged in August 2020 that the American sanctions have caused Iran a loss of $214 billion dollars in revenue. Trump has succeeded in draining Iran’s treasury as no president before him.
Since his election in 2013, Rouhani had an idea about how to revive Iran’s economy while keeping its politics quiet. He would not engage in structural reforms that could spark unrest. Despite its ideological professions, the regime relies on an elaborate welfare state to keep its sullen citizens at bay. An arms control agreement, he thought, would pave the way for Western commerce and investments. Iran would dispense with sanctions, export its oil, and retrieve its frozen funds. None of this was sound economic planning in a nation saddled with a bloated budget, onerous subsidies, and rampant corruption. But this was less about economics than politics. And then it all came crashing down once Trump reinstated the sanctions. To be fair, even before the re-imposition of sanctions, most international investors were not rushing back to a country that was committed to destabilizing the Middle East in name of Islamic salvation.
Iran’s failure to resuscitate its economy through foreign subsidy has led Supreme Leader Ali Khamenei to push forth his crackpot theories. “I strongly believe that the key and remedy to the country’s problems stands in promoting internal production.” Once more, this is more about politics than economics. The notions of self-sufficiency and self-reliance have been hallmarks of the regime’s rhetoric since its conception in 1979. But, for Khamenei, if Iran is to remain a pristine revolutionary state then it has to segregate itself from the global economy. He has even spoken of dispensing with oil, a commodity whose price is determined by factors beyond any single nation’s control. By relying on internal markets and trade with neighboring states such as Iraq and Afghanistan, Iran is to be immunized from Western pressures. The problem with this theory is that Iran needs oil revenues and it cannot provide for a nation of eighty-five million people by relying on its own markets and the local states. Khamenei’s ideas can only impoverish an already stressed nation.
In the midst of all this, Iran was one of the first countries to be affected by coronavirus—which its leaders have done much to mismanage. Even the unreliable statistics coming out of Iran are horrific—the country is coping with over 600,000 cases and 35,000 deaths (as of November 2020)—but some sources believe that the real number may be three times higher than official statistics. Khamenei and the hardliners have used a variety of conspiracy theories to explain the spread of the contagion and the means of addressing it. Khamenei has led the charge by claiming that the virus “is specifically built for Iran using genetic data of Iranians, which [the United States] obtained through different means.” And as for the cure, the head of the Revolutionary Guards, Hossein Salami, recently displayed a device called Mustaan that he claimed could detect the coronavirus. In the meantime, the pandemic continues to spread with spikes in infections and deaths, with Mohammadreza Zafarghandi, the head of the Medical Council, warning that Iran is now facing a “catastrophic mortality rate.”
The pressure of sanctions has had an impact on Iran’s imperial footprint. Democratic Party leaders once assured that no matter how stressed its economy, Iran would sustain its foreign policy adventurism. In the past year, Iran has reduced its support to militias in Iraq and Syria as well as its most prized and lethal protégé, Lebanon’s Hezbollah. As a Syrian fighter in an Iran-backed armed group confessed, “The golden days are gone and will never return … Iran doesn’t have enough money to give us.” The killing of General Soleimani has also hampered Iran’s operational capability. He was unique in terms of his expertise in mass murder and ability to forge agreements among bickering militia leaders—his absence now complicates Iran’s proxy war strategy throughout the region.
In the meantime, the Sunni world is sorting itself out against Iran. The looming threat of the Islamic Republic has already pushed the Gulf rulers toward Israel in terms of intelligence cooperation. For long, the received wisdom suggested that the plight of the Palestinians would thwart formal diplomatic ties between Jerusalem and Arab capitals. Yet the region has once more surprised Washingtonians set in the way. Both the United Arab Emirates and, more importantly, Bahrain have now formalized ties with Israel. The latter is of particular interest given its status as a virtual Saudi protectorate, as it would not have made such a leap without Riyadh’s approbation. More such normalizations are likely to occur, as Iran sustains its animosities while other states in the region decide to pursue mutual benefit with Israel, especially in terms of trade and development.
Today, the Islamic Republic is a regime without a constituency. During the past two years, Iran has been rocked by a series of demonstrations that must have frightened the regime. Unlike the previous protest movements, the recent spate of demonstrations are not upper-middle-class urbanites complaining about political repression and Islamic cultural restrictions. This is now the revolt of the poor, the constituency in whose name the revolution was waged; a cohort that was supposed to be tied to the regime by piety and patronage. In 2018, when the regime tinkered with fuel subsidies, massive protests engulfed all of its major cities. A year later marchers took to the streets and chanted “Death to Khamenei,” and “The clerics should get lost.” Nor were the regime’s imperial ventures beyond reproach as the demonstrators yelled, “Leave Syria, think about us!” and “Not Gaza, not Lebanon, my life for Iran.” The guardians of the revolution had assumed that imperialism would burnish their credentials at home and help deflect attention from their misrule. It appears that, unlike the mullahs, most Persians don’t wish to spend their meager resources on Arab civil wars—not especially when a pandemic is raging through the country and the related economic impact threatens further impoverishment. U.S. sanctions were not enough to cause a collapse in Iranian power; it took the impact of the coronavirus to change the regional balance of power in a direction that actually favors U.S. interests.