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April 8, 2020

Coronavirus Update in Iran 4/08

This week, Iran’s President, Hassan Rouhani, began to lift social distancing despite criticism from health officials. Also, negotiations surrounding Iran’s IMF loan request continue, with the U.S. indicating it plans to block the request. Please see an update on these issues below: 

Rouhani Begins to Lift Social Distancing Requirements 

  • Despite having only instituted safety regulations on March 27th, President Rouhani called for the reopening of certain sectors on April 8th in what he is calling “smart social distancing” policy. He announced that “low-risk businesses” can resume their activities from April 11th, but will not apply to Tehran until April 18th. He also said that schools will open on April 19 and exams will be held on schedule. 
  • As of April 8th, Iran had 3,993 confirmed deaths and 64,586 officially confirmed cases since the outbreak. Many observers believe that Iran’s official counts do not show the true extent of the spread of the infection. 
  • In a cabinet meeting on April 5th, Rouhani said, “although the responsibility of the administration is to support the classes most at risk, at the same time it has a responsibility to provide all the necessary conditions for employment and business. Therefore with the protection of health as a priority and with all the necessary health protocols, we must adopt measures to move the wheel of the economy.”
  • However, Rouhani’s proposed changes were met with stiff criticism from health officials. Alireza Za’ali, the head of the coronavirus task force in Tehran, warned that, “not only have we not reached the phase of controlling this virus, but it is increasing.” In an open letter criticizing calls from government officials and private sector leaders to open the country back up, Iran’s Health Minister Saeed Namaki warned that if regulations were lifted, “its flames will quickly engulf the health system and consequently the country’s economy.”
  • This week, social media and Iran’s state TV were flooded with pictures and videos of packed streets, bustling factories and shops, and busy subway terminals. When some workers were stopped and asked why they were back to work, many cited economic vulnerabilities, putting the government’s inability to provide limited aid during the crisis in sharp contrast.
  • The government has put together a narrow assistance package together. However, almost 75% of Iranians are self-employed or work for small businesses that are unregistered with the central government. Many Iranians will not be able to receive aid since these newly created loan packages rely on tax data and registered business information.
  • According to Alireza, who runs a mobile-phone shop in Tehran, “Living costs are pretty much the same as before the coronavirus. I have to pay for food, rent and bills — and now masks, gloves and hand sanitizer — but I can’t make the money for all of this if I stay home.”
  • Moreover, in their first meeting in more than a month, Iran’s parliament rejected a bill proposing a month-long nationwide lockdown on April 7th. While over 80 members of the Iranian Parliament voted in favor of the bill, many critics cited economic concerns about a lockdown, especially during a time in which the country is still being battered by U.S. sanctions.
  • Parliament’s month-long recess was due to an influx of lawmakers who were diagnosed with the disease. More recently, Ali Larijani, Iran’s Speaker of Parliament, was infected with COVID-19 and is currently quarantined at home.  

Iran’s IMF Loan Request Under Negotiations

  • While the prospects of Iran’s $5 billion IMF loan request remain uncertain, recent reports suggest that the U.S. is planning to block the request. The Wall Street Journal cites senior Trump officials arguing that Iran has “a long history of diverting funds allocated for humanitarian goods into their own pockets and to their terrorist proxies.”They also had concerns that the IMF financing would be used to resuscitate the country’s crippled economy, which has been decimated by a years long sanctions campaign.
  • As the largest shareholder, the United States has its own seat on the executive board, which is responsible for approving major IMF decisions, including this loan request. Normally, a supermajority is required for the vote, with approvals requiring either 70% or 85% of the vote to prevail. At 16.52% of total voting power, the United States has unique veto power over major policy decisions, but may technically be overruled depending on the necessary supermajority required. However, given the position of influence the country has in the institution, it’s projected ‘no’ vote might bring other countries into its corner, rejecting the loan regardless of the supermajority required.
  • Despite the U.S. position on the loan, the European Union has come out in favor of the coronavirus loan, representing a sizable voting block on the IMF’s executive board which approves loan requests. As of April 7th, an IMF spokeswoman said that  “discussions are still ongoing.”
  • While negotiations are still underway, the Secretary of Iran’s Supreme National Security Council, Ali Shamkhani has accused the United States of a “crime against humanity” for Washington’s role in blocking Tehran’s request for an emergency IMF loan, despite not having firm confirmation it will be blocked.
  • On April 6th, a group of American and European foreign policy leaders called for the U.S. to ease humanitarian trade sanctions on Iran in an effort to aid Iran’s fight against the COVID-19 pandemic. Their recommendations included a provision to allow the approval of Iran’s IMF loan request so that a country already ravaged by decades of sanctions can purchase the equipment it needs to combat the pandemic.
  • The joint statement includes former Secretary of State Madeleine Albright; former Secretary of Defense Chuck Hagel; former Deputy Secretary of State Bill Burns; Ambassador Wendy Sherman; former EU High Representative for Foreign Affairs and Security Policy Federica Mogherini; and four former NATO Secretaries-General.
  • While the IMF process continues, Supreme Leader Ali Khamenei finally approved the Rouhani administration’s request for $1 billion in funds from the nation’s sovereign wealth fund. The National Development Fund, controlled by the office of the Supreme Leader, approved the request eleven days after it was made and is expected to, at least partially, be used on unemployment insurance and insurance. 

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