Devastating Floods Further Strain Iran's Creaking Economy

Iran’s economy was already creaking as two weeks of flooding devastated communities across the country, killing 76 people and damaging critical infrastructure and industries. Hundreds of thousands of Iranians have been left to pick up the pieces at a time when economic pressures may mean that their government and fellow countrymen will struggle to provide adequate relief.  

Initial estimates put the flood damage at USD 3.5 billion. Nearly 90,000 homes have been rendered uninhabitable. Thousands of farms have also been submerged, with damage to the agricultural sector alone estimated at nearly USD 200 million. Across the agricultural centers of Golestan, Khuzestan, Lorestan, and Mazandaran, over 800,000 hectares of crops have been destroyed.  

Individual communities have been hammered as factories and farms have closed. In the northern town of Agh Ghala, 5000 people have been rendered jobless after the floods devastated 15 individual industrial plants. At least 60 chicken farms have also suffered major damage.

Although Iran’s largest factories remain intact, the Ministry of Industry has identified 400 industrial sites across six provinces that were hit by flooding. In Lorestan province alone, over 100 manufacturing facilities were affected.

In oil-rich but underdeveloped Khuzestan, the floods hit oil fields and sugarcane fields alike. Officials have confirmed that downpours partially destroyed five out of seven sugar producing factories in the Arab-majority province, including the Dehkhoda Sugarcane Cultivation and Industry Company. Floodwaters also inundated over 30,000 hectares of the adjacent sugarcane fields.  

Iran’s roads infrastructure has also seen significant damage. Roads Minister Mohammad Eslami, told reporters that nearly 14,000 kilometers of roads, making up a third of the country's overall network, has been damaged.

An Underwhelming Response

As Iranians take stock of the devastation, the debate over the government’s disaster management has only grown more heated. On one hand, relief efforts have been complicated by US secondary sanctions. The country's Red Crescent Society issued a statement lamenting "inhumane US sanctions" which it said had blocked the transfer of international cash contributions. "Not a single dollar or euro [in foreign transactions] has managed to get through," the organization said in an updated statement broadcast on state TV a week later. The Iranian agency has also complained about how its ageing fleet of 24 helicopters has slowed response to the disaster.  

On the other hand, the government seems to have done little to address public anger over perceived mismanagement. Iranian social media has hosted numerous videos of citizens berating government officials, including an argument between the governor-general of Khuzestan province and a frustrated local who criticized the government for "aiding Syrians" while neglecting the plight of the flood-stricken at home. In an offensive tone, the governor-general attacked the man for being a "rude opponent" of the regime. The viral video sparked a backlash, prompting the interior minister to intervene and ask the governor-general to apologize to the man. Two days later, another video was released with a title suggesting an apology. But interviewed later, the man in the first video denied claims that he had been approached by the governor-general for an apology.

Flood relief has also become a new battleground for political rivalries. The recent move by the Trump administration to designate the Islamic Revolutionary Guard Corps (IRGC) as a terrorist organization spurred supporters to share photos of IRGC officers and commanders, rushing to provide aid to flood-stricken villages in muddy fatigues. "This is a terrorist back from a dangerous terror operation with his gun, a shovel in his hands," tweeted one user in a sarcastic tone meant to question the logic behind the US measure.

But Iranians have found hope in extraordinary acts of service. In a video widely circulated last week, a group of young men locked arms to form a human dam as rampaging waters threatened to break through a levee in Dehlavieh, near the city of Ahvaz. The dramatic scene was printed on the front pages of leading newspapers.

Reconstruction Efforts Begin

As the extent of the flood damage continues to become clear, the government now considers it "inevitable" that it will be necessary to draw upon foreign currency reserves held by the country’s sovereign wealth fund, the National Development Fund of Iran.

But grassroots reconstruction will also depend in part on donations from the public. In the aftermath of the 2017 earthquake in Kermanshah, which killed over 600, low levels of confidence in government agencies saw the public seek out other fundraising initiatives, including efforts spearheaded by celebrities, who raised huge sums for relief and reconstruction. But a lack of transparency and later controversies surrounding some of those appeals seems to have led the public to once again donate primarily through traditional agencies.

An opinion poll conducted by the Iranian Students Polling Agency (ISPA), suggests that confidence in government relief organizations has risen when compared to previous disasters, notably the 2017 earthquake. In a sign of the country’s economic hardship, 58 percent of respondents said they had not donated because of their own financial circumstances, while 42 percent of respondents had made a donation. Those who were able to give reported donating to a wide range of organizations, including the Red Crescent, the Iman Khomeini Relief Foundation, local mosques, celebrity-led campaigns, as well as directly to flood victims. Just 19 percent of respondents expressed doubts that the donations would reach flood victims. Of the recipient organizations, the Red Crescent, which has already collected over USD 30 million in private donations from within Iran, was the most trusted, chosen by 31 percent of respondents. The Iman Khomeini Relief Foundation was the chosen recipient organization for just 8 percent of respondents, lower even than direct donations to flood victims.

The challenge now facing Iran’s government is how to maintain momentum and political attention as devastated communities face years-long recovery efforts. As Iran’s economy faces unprecedented strain, it may be the strength of Iran’s social ties that determine the fate of the thousands whose livelihoods have been disrupted.

Photo: IRNA

Here’s How the United States Can Help Iran's Flood Recovery

Over the last two weeks, Iran has been ravaged by unprecedented floods, resulting in over 60 deaths and the devastation of whole communities. The natural disaster has only added to the the country’s woes, already reeling from an economic crisis brought about in part by the reimposition of the Trump administration’s decision to reimpose secondary sanctions in November 2018. The coincidence of tightening sanctions and a major natural disaster has led for calls for the Trump administration to take steps to ensure that sanctions policies do not unduly interfere with relief efforts. In the aftermath of the 2003 Bam Earthquake, the Bush administration established new licenses to ensure that the program of then-expanding US sanctions would not stymie relief efforts in Iran, which even came to include the dispatch of American search-and-rescue teams. In 2012, the Obama administration took similar steps to ensure financial aid could reach Iran in the aftermath of yet more devastating earthquakes.

So far, the Trump administration has given no indication that it intends issue new licenses to provide legal clarity to those individuals and organizations wishing to provide aid or to support relief efforts in Iran. A brief statement from Secretary of State Pompeo declared that the US “stands ready to assist and contribute to the International Federation of Red Cross and Red Crescent Societies, which would then direct the money through the Iranian Red Crescent for relief.” However, in an indication of the depth of the Trump administration’s sympathies, Pompeo also claimed that “it is the [Iranian regime’s] mismanagement that has led to this disaster.”

Given the administration’s commitment to imposing “maximum pressure” on Iran through an ever-expanding sanctions program, it is highly unlikely that the administration will prove willing to make it easier for American or foreign entities to provide substantial material or financial relief for the recent floods. However, despite the Trump administration’s regrettable political stance, there are still measures that administration should take—with encouragement from Congress—to ensure that Iran is able to more effectively recover from the floods, in particular by enabling preparedness efforts in advance of the next major natural disaster.

Iran, like all countries worldwide, is facing new and growing challenges related to both climate change and natural disasters. In addressing these challenges, proactive measures of preparation, prediction, and prevention will always have a greater bearing on the protection of human life and mitigation of destruction than the provision of financial aid for relief efforts in the aftermath of a disaster. But in order to succeed in boosting national preparedness for frequent earthquakes, floods, sandstorms, and heat-waves, Iran urgently needs to upgrade its surveying and monitoring technologies to better model and predict meteorological, hydrological, and geological events.

Acquisition of these technologies has been made significantly more difficult by the recent reimposition of US secondary sanctions, meaning that even if Iran takes on board the difficult lessons of the recent floods, it will be hampered in its ability to adapt. The Trump administration should create a new general license to permit the sale of such surveying and monitoring technologies, which produce nothing more than useful information that can be used to save lives. Over the last decade, Iran has undertaken several systematic reviews of its climate change and disaster readiness. In each instance, the acquisition of better technology has been identified as key a priority for authorities.

In December 2017, Iran submitted its “Third National Communication” to the United Nations Framework Convention on Climate Change, a major report which detailed the country’s assessment of the challenges posed by climate change and the status of its preparedness and remediation efforts. The report, compiled by Iran’s Department of Environment in collaboration with the United Nations Development Programme, offers a sober assessment of the Iran’s failures to adequately deal with the effects of climate change—failures which stem largely from weak regulations and mismanagement. But the report also highlights how “years of economic instability and unfair sanctions have delayed mitigation and adaptation measures.” In particular, the report notes that “this situation even has prevented civil technologies transfer to Iran, which has constrained mitigation measures and actions.”

As part of the its national communication report, Iran also submitted a separate “Technological Needs Assessment.” Focused largely on technologies that would help increase energy efficiency and reduce emissions, the report also details ways in which Iran has struggled to acquire the survey and monitoring technology necessary to understand and adapt to new climate change phenomena. New technology is needed to identify “the emerging environmental phenomena and challenges such as desertification, drought, sand and dust storms… and mainstreaming environmental considerations in future national development plans.” Notably, the report also details that “climate change causes inconsistencies in historical and data series obtained from the meteorological and hydrometric monitoring stations,” a reference to the fact that Iran is seeing more unprecedented weather events. Today, Iran’s dams are nearly at capacity after historic rainfall, offering a real world example “of greater inaccuracies in estimating water return period for designing and construction of hydrostructures.”

Beyond climate change, a similar emphasis on the need to improve monitoring technologies can be seen in Iran’s official assessments of disaster readiness. Iran’s 2013 assessment report for disaster readiness, complained in accordance with the United Nation’s Hyogo Framework for Action, identified “neither comprehensive nor substantial” achievement in regards to the availability of “national and local risk assessments based on hazard data and vulnerability information.” The report’s authors point to a wide range of issues preventing effective monitoring for natural disaster risks and providing adequate warnings to the population. These challenges include a lack of satellite imagery and the software to interpret that imagery, a lack of a robust climatological models to develop seasonal forecasts, and a lack of tools to predict the severity of complex weather phenomena while they are developing. Pointing to the dual threats of earthquakes and weather-related disasters, the report notes that sanctions are “a serious hindrance in the increase of seismic monitoring instruments and upgrading early warning systems.”

The lack of sophisticated meteorological tools can also contribute to the loss of life even when there is no full-blown natural disaster. In February 2018, an Aseman Airlines ATR 72-212 aircraft crashed in Iran’s Zagros Mountains, killing all 66 people on board. The interim investigation report released last month by Iran’s Civil Aviation Organization concludes that the accident was mainly the result of “human factors,” including the actions of the cockpit crew. However, the accident transpired as the aircraft entered adverse weather conditions and the investigators have concluded that contributing factors included a lack of “significant meteorological information” about the wind conditions in the mountain area. This oversight was identified in part because data provided by Météo-France, the French national meteorological association, was more accurate in modeling the wind and ice formation conditions at the time of the accident than the data available to Iran’s own meteorological agency. The report recommends that the Islamic Republic of Iran Meteorological Organization undertake efforts to research how it can provide more sophisticated information on mountain weather hazards, something which will require new monitoring technologies.

Multiple agencies in Iran, looking at issues of climate change, disaster management, and aviation safety, have formally detailed the need for more advanced survey and monitoring technologies. They have also identified sanctions as a major impediment to the acquisition of these technologies. It is a common claim that Iranian authorities point to sanctions to deflect away from their own mismanagement. However, in regards to climate change and disaster management efforts, sanctions-related challenges have consistently been described by authorities as just one of many challenges, most of which stem for domestic failures of best-practice adoption. Additionally, the effect of sanctions on Iran’s ability to acquire these much needed surveying and monitoring technologies is readily observed in the relevant trade data.

A general license issued by US Treasury Office of Foreign Assets Control would drastically increase the ease with which suppliers of meteorological, geological, and hydrological monitoring equipment could determine the compliance of sales to Iranian customers. Such a license would benefit US companies as there is precedent for sales of such equipment to Iran. In 2007 and 2008, before US secondary sanctions on Iran were expanded, with just under USD 8,000 dollars worth of “surveying instruments and appliances,” specifically  exported in 2007 and just under USD 80,000 exported in 2008, according to trade data from the US Census Bureau.

But more importantly, a general license would significantly impact the ability of European companies, including the European subsidiaries of American companies, to export meteorological, geological, and hydrological survey and monitoring instruments to Iran. Europe is by far the largest exporter of such technology to Iran, but it’s exports have been significantly impacted by US secondary sanctions.

A review of European exports to Iran since 2000 makes it clear that the vast majority of “hydrographic, oceanographic, hydrological, meteorological or geophysical instruments” (HS code 9015) were purchased by Iran prior to 2009, meaning that much of the technology Iran has deployed is at least a decade old. The imposition of international sanctions on Iran saw exports in these categories fall precipitously, with totals falling from a high of over EUR 16 million in 2006 to just over EUR 375,000 in 2014. A small recovery can be observed in 2016, when Iran received sanctions relief following the implementation of the Joint Comprehensive Plan of Action, but the limited recovery tallied suggests that the lingering impact of US sanctions on banking channels and the anticipation of the Trump administration’s possible withdrawal from the JCPOA dampened sales. In a concerning indication of the likely impact of the reimposition of US secondary sanctions on Iran in November 2018, European exports of goods in these categories fell to just over EUR 5,000 in December of last year, rising slightly to just over EUR 40,000 in the first month of this year. A general license would help address the decline in exports by giving legal clarity to European companies and banks regarding the status of the trade.

Given the seriously degraded commercial environment, any new general license would need to make several provisions. The license should draw on the model of General License D-1, which covers sales to Iran of “certain services, software, and hardware incident to personal communications.” The operational relationship between climate monitoring hardware, captured datasets, and modeling software would be critical to reflect in the license. However, General License D-1 only allows the provision of communications-related services to the government of Iran on the basis they are “no cost.” In the case of the survey and monitoring technology necessary for climate change or disaster readiness, any license must include the more expansive provisions outlined in the longstanding exemptions for humanitarian trade of food and medicine with Iran. Specifically, the general license should authorize sales “to the Government of Iran, to any individual or entity in Iran, to persons in third countries purchasing specifically for resale to any of the foregoing.” In addition, the general license must authorize the activities necessary for the related transactions, such as “the making of shipping and cargo inspection arrangements, the obtaining of insurance, the arrangement of financing and payment, shipping of the goods, receipt of payment, and the entry into contracts.” It should also include permissions for training and technical assistance necessary for the proper implementation of newly acquired technologies in the field. Finally, given that these sales will be denominated in foreign currency, the license must enable Iran to use funds originating from the Central Bank of Iran, such as funds currently held in escrow accounts related to the Trump administration’s waivers for the import of Iranian crude.

The establishment of such a general license, if matched by genuine and proactive communication from the US Department of State and US Department of Treasury, would significantly improve Iran’s ability to acquire much needed surveying and monitoring instruments. Because of its own political decisions, the Trump administration can do little to help Iran respond to the recent devastating floods. However, if American policymakers, including leaders in Congress, truly wish to see the resolution of the current political disagreements with Iran and to reduce the costs borne by the Iranian people, they ought to think long-term. Decisions taken today to provide targeted sanctions relief can help Iranian authorities save lives tomorrow. The provision of scientific tools can empower Iranian stakeholders with more sophisticated information about the evolving risks of floods, earthquakes, forest fires, sandstorms, heat-waves, droughts, and other threats. Preventing Iran’s access to this critical information, even if the unintended consequence of a broad sanctions policy, in no way serves US national security interests and only serves to complicate the earnest work of individuals and organizations committed to protecting lives by improving Iran’s response to mounting environmental threats.

Photo Credit: IRNA