How the Iranian regime set off a coronavirus bomb on its own economy

The coronavirus has shattered all hope of seeing the Iranian economy emerge from less than two years of deep recession. To the chagrin of the regimes in power, the virus began to affect precisely the sectors that seemed ready to grow after having resisted the return of American sanctions.

According to the International Monetary Fund, the Iranian economy contracted 4.8% in 2018 and 9.5% in 2019. The closest thing to the good news was that the IMF and the World Bank predicted zero growth in 2020. It would be catastrophic for most economies, but the Islamist regime in Tehran viewed it as a ray of light. No more.

By sacrificing public health to politics, the clerical regime transformed Iran into a coronavirus bomb exploding across the Middle East. When the epidemic broke out, Tehran failed to cut, limit or even supervise contacts with China. As always, ordinary Iranians have been the primary victim of the Islamist regimes' incompetence and psychopathic indifference towards their own citizens.

From late January, social media reported cases of viruses in Iran, particularly in the holy city of Qom. Rather than take action, the regime denied and charged those who reported the problem with the spread of rumors. The result a month later is an official death toll from 77, probably massively underestimated, while the country's deputy health minister admitted to testing positive for coronavirus the day after a press conference at during which he sweatily insisted that the situation was under control.

The epidemic will hit the Iranian economy in three ways. The first is the decrease in trade with China; the second, a decline in trade with regional neighbors; and third, a reduction in economic activity in Iran. The result will be another year of recession. The magnitude of these effects will depend on the duration of the epidemic in China, the Middle East and Iran.

China is Iran's first trading partner. In 2019, bilateral trade was $ 23 billion, already down from $ 35 billion in 2018, but still enough to keep China as Iran's number one partner. Trade data shows that Iranian non-oil exports to China account for 23% of its total non-oil exports. China is also the only paying customer for Iranian oil. In 2019, he bought $ 7 billion worth of crude oil from the Islamic Republic and was also the main customer for Iranian petrochemicals.

As the Chinese economy slows, Chinese demand for Iranian products will also increase. A prolonged trade disruption will also hit Iran hard as 25% of Iranian imports, including the main inputs for manufacturing and services, come from the Middle Kingdom.

Then there is the grim regional picture. Due to sanctions, Iran has adjusted its trade strategy to focus more on regional partners in order to replace the European and East Asian countries that have restricted ties economic. More than half of Iranian non-oil exports are now destined for Iraq, Turkey, the United Arab Emirates and Afghanistan. The spread of the coronavirus will disrupt this trade. As the epidemic develops inside Iran, foreign restrictions are expected to be tightened, which will disrupt much of Iranian non-oil trade and tourism.

Finally, the virus will reach domestic markets once the regime has recognized that it must quarantine certain cities and temporarily close non-essential businesses. Many workers may decide to stay at home for an extended period for fear of infection. This will worsen Chinese and regional headaches. Production speed and services will decrease, which will no doubt depress gross domestic product.

Unfortunately, the Islamist regime compromised the health of its citizens and then ridiculed an offer of American aid. According to experts, the coronavirus is the most deadly for high-risk patients who have already suffered from health problems. The Islamist regime in Iran is a high-risk patient who may soon find himself on economic assistance.

Saeed Ghasseminejad is a senior advisor in Iran and in financial economics at the Foundation for the Defense of Democracies. Twitter: @SGhasseminejad