Iran, once seeking regional dominance, turns inward amid coronavirus and economic woes

When U.S. forces assassinated Iran’s Revolutionary Guard Commander, General Qasem Soleimani on January 3, Google searches for “military draft” surged as American imaginations raced to the worst-case scenario of full-blown conflict.

Iran, once seeking regional dominance, turns inward amid coronavirus and economic woes

Since the Soleimani strike, sanctions, turbulence in the oil market and COVID-19 have knocked Iran from its provocative and aggressive posture. Now, Iran appears to be pivoting from regional power broker to defending its political status quo and financial reserves.

Abbas Milani, director of Stanford’s Iranian studies program, said Iran is retreating from its role as a dominant military force in the Middle East, particularly in Syria. Iran has been locked in a proxy battle with Israel in Syria’s Civil War since 2011, backing Syrian President Bashar al-Assad. In recent months, Iran has scaled back its force, while Israel has leaned in.

“I cannot imagine that they would have taken as many hits as they did…and make no response,” Milani says of Israel’s punishing strikes on Iranian fighters in Syria, which killed twelve on June 7^th. Milani says Israel is bullying Iran out of Syria.

“Now, [Israeli officials] openly say ‘Iran must get out of Syria, we’re going to make this into their Vietnam,’” Milani said.

Milani’s assessment is shared by Israel’s outgoing defense minister, Naftali Bennett, who said recently, “Iran is significantly reducing the scope of its forces in Syria.” A top aide to Iran Foreign Minister Javad Zarif said Iran would continue working with the pro-Assad contingent in Syria.

Jason Rezaian, a Washington Post Global Opinions writer who Iran imprisoned for 544 days on forged espionage charges, sees an Iranian regime sharpening its focus on self-preservation instead of regional dominance.

“They believe they will be in power forever and are prepared to continue doing whatever is needed to ensure their survival,” Rezaian said. But he also doesn’t foresee the regime’s imminent collapse.

“Losing Soleimani stung, but has proven not to be the blow that many predicted,” he said.

In Iraq, Iran has also ceded political capital. Mustafa al-Kadhimi, an American-backed intelligence chief,  took over as prime minister in May. Not only had Iran previously vetoed al-Kadhimi’s appointment, but the Iran-backed paramilitary group Kateb Hezbollah accused him of colluding with the U.S. to kill Soleimani.

“They were kingmakers till a few months ago,” Milani said of Iran’s slipping authority in Iraq. “They had at least as much say in who the Iraqi Prime Minister would be as the United States.”

Economic picture on the ground

On the ground, anemic oil revenue and intense sanctions have choked prosperity and broken morale. Fatemeh, who asked not to publish her last name for fear of retribution, studies psychology at a university outside Tehran. She said basic goods have become unattainable.

“Yesterday we couldn’t afford clothes, today we can’t afford certain types of foods, who knows tomorrow and the days after that what can’t we afford?” It is frightening,” Fatemeh said via WhatsApp.

And Pooya Azadi, who leads Stanford University’s 2040 project tracking Iranian economic and social trends, said the Trump administration’s sharpest sanctions have exacerbated a six-year plunge in oil revenue. Prices dropped from roughly $110 per barrel in 2014 to $18 in April of 2020.

Azadi gave the example of the mind-bending cost of a cheap Iranian-made car called a SAIPA Pride. “If you are an engineer working for a private firm…you have to work for almost two years…and save 100-percent of your salary to buy that car.”

As the economy convulses, Milani notes the government is exploiting the temporary stock bubble to offload state assets on naïve investors. The government has weak cash flow due to the recent loss in oil revenue, and American sanctions. So, Milani says Iran has “concocted” a stock surge to convince Iranians to invest in state-backed assets.

“You can empty your savings account and buy these phony stocks – this Ponzi scheme of a stock market,” says Milani.

Milani explains that the government has made it illegal to publicly question the wisdom of these stocks. The regime-backed banks even send predatory texts to elderly account holders to goad them into pouring their savings into flimsy stocks.

Milani and Azadi both warned of an inevitable economic collapse when the stock bubble bursts and exploited Iranians are left broke and furious.

“People are going to lose their shirts and they’re going to come into the streets,” Milani said.

The regime’s strength

Despite Iran backpedaling militarily and economically, the Ayatollah Ali Khameini, the supreme leader, still projects strength, according to Jason Rezaian.

“There is a high level of hubris within the leadership,” he said.

That confidence neglects the protests that have rocked the country since oil prices soared in November, 2019. When the military accidentally shot down a Ukranian passenger jet in January, those protests rose in size and fury.

He notes the uptick in the scope and frequency of protests around the country “should be cause for concern,” but doesn’t see the government shifting course to placate the protestors.

Fatemeh says the Iranian people “are anti-government right now more than ever,” but does not predict regime change or the regime ceding power.

According to polling released in February by Iran Students Polling Agency and Tehran University, 94 percent of Iranians disapproved of the current situation, and management of the country.

Fatemeh points to the regime’s shooting down of a commercial Ukranian jetliner in January, which killed 176 people on board – an act she called “a shock to all of us.”

“We knew the regime was ruthless and evil, but to shoot their own innocent citizens in the sky…they lost the last bit of trust that we had in them,” she said.

And as far as Iranian sentiment toward the U.S. in the post-Soleimani era, the picture is hazy. Most argue that any Iranian ire toward the U.S. prompted by the Soleimani killing has now shifted back to Khameini, as his government flounders in response to the coronavirus.

Fatemeh hopes to squash the notion that Khameini’s bluster about America reflects the views of most Iranians.

“We love America and the American people. And no, contrary to what the regime in Iran is trying to say, we do not consider America our enemy,” she said.

Rezaian and other experts who study the regime see the US-Iran dynamic with a short-lens and a long-lens.

“I don’t think there will be a major conflict between the U.S. and Iran in the coming months,” Rezaian says. “But a second Trump term could change that.”