It’s been nearly 60 years since the last time Iran asked the International Monetary Fund for a loan. Last week, after much deliberation, Foreign Minister Mohammad Javad Zarif sent a letter to the IMF requesting a $5 billion loan to Iran from the IMF’s rapid-assistance fund for countries dealing with the coronavirus crisis. It’s unclear what will become of the Iranian request, for even if the IMF approves the loan, the United States could veto it.
President Trump has no intention right now of easing the sanctions on Iran or relaxing the “maximal pressure” policy with which he hopes to extract Iranian concessions on the nuclear accord and in its ballistic missile development. But even if the request clears all the hurdles, Iran will still have to submit to the IMF’s dictates that in addition to oversight of its programs to fight the coronavirus also include a demand for economic reform. In the 1960s, President Kennedy asked the Shah of Iran to carry out a series of economic reforms as a condition for receiving a $35 million loan. Washington also dictated to Tehran whom to appoint as prime minister to carry out the reforms.
The Shah, who initially rejected the American demands, which included a major cut in government expenditures, reducing the military budget and holding free elections, was compelled to retreat. Under American pressure, the Shah agreed to appoint Ali Amini, the former Iranian ambassador to Washington, as prime minister. But the reforms were never implemented.
The student protests calling for free elections provided the Shah with the excuse to explain to Kennedy that elections would spell chaos that would bring about the regime’s downfall and usher in Communist rule. Now it was Kennedy who backed off. The loan was approved and the Shah continued to do as he pleased.
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The circumstances today are completely different because the Iranian request derives from a severe humanitarian crisis and the international need to halt the pandemic in which Iran is one of the main hotspots.
The Iranian regime reports that more than 17,361 people are infected and more than 1,135 have died from the virus. Iran has become isolated beyond what even the U.S. sanctions program could have foreseen. Its borders with neighboring countries like the United Arab Emirates, with whom it has extensive trade ties, have been closed.
Turkey has ceased permitting Iranian citizens into its territory, and Pakistan, India and Afghanistan have followed suit. The import of medicines and medical equipment has been almost completely halted and the main tool left to the authorities is to isolate the cities and put the residents under curfew. Neither of these measures have yet been taken, due to opposition by the Revolutionary Guards and the Supreme Leader, but the streets are already quite empty and deserted.
Newspaper reports from different Iranian cities describe very sparse consumer traffic, with a 50-70 percent drop in sales of basic items and zero sales of luxury products. This is an important shopping season when Iranians prepare for the Persian New Year (Nowruz) that falls on March 21. Every year the shops and malls fill up with all kinds of merchandise and the merchants count on this period to give them a financial cushion for the whole year. But the siege imposed by the coronavirus combined with the sanctions that caused growth to drop by over 7.5 percent is trapping Iranians, who already are contending with a shortage of cash, not to mention dollars, which are subject to government restrictions.
The Iranian tourism industry, which brings in an average of $12 billion a year, and exports of non-petroleum products, normally at $40 billion, have shrunk by more than 70 percent, and foreign currency reserves now stand at $73 billion, after having been slashed by more than $40 billion.
On Twitter, Foreign Minister Zarif posted a long list of the medical itmes that are urgently needed in Iran. These include ventilators, more than 160 million face masks, 100 million medical gloves, millions of diagnostic kits and 10 million protective suits for medical staff. This long list reflects not just Iran’s immediate needs but also is lack of preparedness to deal with an epidemic on a smaller scale than the coronavirus.
It also pokes holes in the regime’s declarations that it has the outbreak under control and is using every possible measure to stamp it out. In ordinary times, the publication of such a list of requests would probably ignite widespread public protest, but fortunately for the regime, people are refraining from taking to the streets and demonstrating for fear of infection. And they also understand that protest won’t be of help in getting the virus under control.
The question now is whether and how Iran’s experience with the coronavirus will influence its foreign policy and its relations with the United States and with countries in the region. It’s too early to say how the epidemic will affect the regime’s diplomatic priorities. The realistic working assumption right now is that if the epidemic continues for several more weeks, Iran will have to declare a state of emergency, which would mean freezing production, imposing a curfew and shutting down almost all public services.
Such a situation would give the security forces and the Revolutionary Guards total control in the country. In this forecast, Iran will struggle to keep financing its military activity in Syria, Yemen and Lebanon, but that doesn’t mean that it will completely abandon those arenas. Its main path to salvation from the economic crisis lies in a new nuclear accord and in concessions to the American demands, and the coronavirus is still no help with those.