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Iran: Winning Abroad While Losing at Home

Since the 1979 Islamic Revolution, Iran’s foreign policy has relied on supporting allied and proxy forces throughout the Middle East. Revolutionary Iran has nurtured several groups over the last five decades, such as Hezbollah in Lebanon, the Badr Brigades in Iraq, Fatemiyoun Brigade of Afghanistan, and several Shia militias to support its embattled ally in Syria. These proxies and allies have given Tehran tremendous regional influence but have also imposed a heavy toll on Iran’s populace.

These armed groups give Tehran significant leverage over its adversaries and grant it a uniquely strong strategic position in the Middle East. On the other hand, Iran’s support for these groups has isolated the regime and weakened its economy. Its support for non-state armed groups and terrorist organizations has pitted Iran against many states in the region and powerful countries further afield. The regime’s confrontational foreign policy has inevitably resulted in a crescendo of international economic sanctions, which has devastated the country’s economy and severely impacted the living standards of the average Iranian. Moreover, the regime’s focus on foreign policy priorities and state security have necessarily distracted from other priorities, such as water security. Thus, regardless of the outcome of nuclear negotiations between Iran and the P5+1, the country will continue to face the formidable task of economic reform.

The Benefits of Proxies

Revolutionary zeal, as well as perceived national interests, provided the initial impetus for Iran’s support for proxy forces. Since 1982, for example, Iran has supplied Hezbollah with weapons, financial support, and military training to deter Israel. Likewise, Tehran created the Badr Brigade—a group of exiled Shia Iraqis—to fight alongside the Islamic Revolutionary Guard Corps (IRGC) during the eight-year war between the two countries. The Badr Brigade became indispensable after the American invasion in 2003, as the group played a significant role in extending Iran’s influence in Iraq.

Iran also supported the Houthis in Yemen to establish a foothold on the tip of the Red Sea and to bleed Saudi Arabia from its underbelly. At small cost to itself, Tehran has inflicted tremendous damage and imposed significant costs on its primary regional adversary. Finally, the IRGC mustered several Shia groups to support Assad and quell the revolution in Syria. The Fatemiyoun from the Afghan Shia, Hezbollah from Lebanon, and the Zainebiyoun from Pakistan’s Shia, are only three of many groups that Iran controls in Syria and constitute important tools in Tehran’s toolbox in the event of military confrontation with Israel or the U.S. in the future.

Economic Complications

At the same time, Iran’s penchant for supporting revolutionary forces abroad has brought devastating consequences down on the domestic front. In the early years of the revolution, little attention was paid to the economic health of the Islamic Republic; in fact, Ayatollah Khomeini once claimed that economic dealings were reserved for “donkeys.” In other words, the purpose of the revolution was to promote revolutionary Islam—not the economy. International sanctions imposed on Iran in response to its support for proxy forces have had a grave impact on Iran’s economy. Iran’s Gross Domestic Product (GDP) has steadily declined for over a decade because of international sanctions—especially those meted on the oil sector. In 2020 the country’s GDP was roughly a third of what it was in 2012. This abysmal economic performance, naturally, has driven rising unemployment, which stood at almost 10% in 2021 and is set to increase in 2022 and 2023, according to the IMF. Unemployment rates are much higher among Iranian youth—one in four young people remains without a job.

The Iranian economy is also beset by extreme inflation, with prices in some instances tripling. Combined with high unemployment rates, poverty has spread across the country. More than 35% of Iran’s population now lives below the poverty line. This economic hardship contributes to social unrest, which is itself costly for Iran. These numbers though might be higher because reliable data is lacking in some instances. The dire economic numbers would also suggest that it will not be an easy task to restore economic balance in the country, even if international sanctions were lifted.

Neglecting Precious Resources

Perhaps most seriously, the continuous tension between Iran and other countries within the international arena has diverted Tehran’s attention from existential economic threats, such as water security. Successive Iranian governments since 1979 have pursued policies of maximum water extraction instead of moderating water consumption. Jostling with other states has only exacerbated Iran’s water insecurity and pushed Tehran to adopt self-sufficient economic policies—such as the protection of homegrown cereal crops like wheat—that further strain the country’s water resources.

The government has also created subsidies that allow for the widespread misuse of water. For instance, Ali Asqar Qane, the deputy of the National Water and Wastewater Engineering Company of Iran’s planning and development, said that each cubic meter of water costs the government 10,000 rials to distribute in urban areas, but only charges consumers 4,000 rials. The mismanagement of Iran’s water supply will continue to plague the country’s water supply as the population grows. It is estimated that 97% of Iran is experiencing a drought to some degree, and there are 11 mega cities with a total population of 37 million that are already suffering from water shortages. Several Iranian cities have faced recent social unrest because of water shortages. In Isfahan, demonstrations have become commonplace. Similarly, there were several protests in Khuzestan in 2018 and 2021. Addressing water security must be a priority for future Iranian governments. Until now, previous Iranian leaders have found it easier to sweep under the rug.

The Iranian government, similar to many other countries in its vicinity, has prioritized the survival of the regime over the well-being of its people for decades. Though the government remains intact and capable of rectifying its current situation, Iran faces many deepening and system-wide problems—economic underperformance and water scarcity first among them. These issues are structural in nature and will be very difficult to tackle; but that only partly explains the lack of government success on these fronts over the last five decades. Pinning the hopes of economic revival on the removal of international sanctions represents wishful thinking. Regardless of the outcome of the nuclear talks, Tehran faces profound problems of its own making.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.

Dr. Massaab Al-Aloosy is a Non-Resident Fellow at Gulf International Forum and a researcher focusing on Iraq, Iran, and Shia non-state armed groups. He holds a PhD from the Fletcher School-Tufts University and is the author of The Changing Ideology of Hezbollah, Palgrave 2020.

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