How the food crisis can impact the regime in Tehran and its foreign policy direction
As early as March of 2022, there has already been a concern that Russian aggression will not only cause food shortages in Ukraine (especially on its occupied territories), but will also lead to a global food crisis.
For the absolute majority of the Middle Eastern nations, the consequences of the disruption of food supplies such as grain from Ukraine, will be catastrophic. For example, before the war, Egypt imported nearly 80% of its grain from Ukraine and Russia. In March 2022, a month after the start of the Russo-Ukrainian war, grain exports from Ukraine to Egypt fell by 42%. Besides Egypt, the top importers of Ukrainian grain included countries like Lebanon, Tunisia, Libya and Yemen. Libya, for example, imports 60% of its grain from Ukraine. The food crisis did not omit some internationally isolated countries, for instance Iran, either. After the Islamic revolution of 1979, Iran has strived (not always successfully) to implement agricultural policies to secure its agricultural independence. Nowadays, and especially after the drought of 2021, Iran is heavily reliant on imported grain to satisfy nearly one third of its entire domestic needs. On 2 May 2022, Mohammad Reza Mortazavi, the head of the Federation of Iranian Associations of Food Industries, stated that Iran is dependent on foreign grain more than ever before. According to Fahreddin Amerian, the head of the Iranian-Brazilian Chamber of Commerce, more than 40% of Iranian grain imports come from Ukraine and Russia.
According to the Ukraine’s Parliament Committee on Economic Development, since 24 February 2022, Russia has seized around 400 thousand tons of grain from temporarily occupied territories of the Zaporizhzhia, Kherson, Donetsk and Luhansk regions. In addition to that, the Russian army is destroying grain elevators, stocks, agricultural vehicles and infrastructure, thereby sabotaging the sowing campaign in Ukraine.
The blockade of the Ukrainian ports and the deployment of mines across trade routes in the Black sea made the export of previous harvests’ agricultural produce practically impossible. As of this moment, there are around 25 million tons of grain held in the port of Odesa, and Ukraine is unable to ship a total of 90 million tons of grains.
In late April and early May, Russia tried to illegally ship 27 thousand tons of Ukrainian grain on the ‘Matros Pozinich’ ship, which then left Crimea for the port of Alexandria in Egypt. After Egypt’s refusal to receive the grain, Russia attempted to sell it to Lebanon. After Lebanon’s refusal, they shipped the grain to Syria.
According to the recent announcement made by the UN’s Global Network Against Food Crises (GNAFC), Russia’s invasion of Ukraine has put more than 400 million people worldwide on the brink of starvation and should the situation can escalate, it will become one of the largest food shortage crises in human history.
Iranian loaf of bread at European prices
On 12 May, Iranian Major General Hossein Salami, leader of the Islamic Revolutionary Guard Corps, stated that “for us, Iranians, it is necessary to perform a surgery on our economy and, of course, we must understand that in the current situation difficulties are imminent. I therefore ask all the representatives of Basij forces (paramilitary organisation in the Islamic Republic of Iran) – you must urgently help the people of Iran, as our enemies are awaiting for our weakness to appear”.
What is the meaning behind this “surgery” of the economy? Back on 1 May, the Iranian people woke up to the news that the Iranian government cancelled its subsidies for the imported grain. Subsequently, the prices have immediately skyrocketed. In some areas, prices increased by as much as 500%. Bread has always been an integral part of a traditional Iranian diet, hence, after the price of bread and other baked goods increased, these products started to disappear from the store shelves. The price of industrial flour increased by 444%.
Last Wednesday, we walked into our local bakery. The price of bread (with the exception of traditional Iranian bread) and baked products grew threefold. The man, who stood ahead of me in line, was baffled by the fact that the loaf of bread that cost him 6,000 tomans just two weeks ago (0.20$) was now priced at 17,500 ($1.72). Despite this, the price of a traditional Iranian bread (i.e. thin, flat breads such as lavash, barbari or sangak) remained the same. Sangak bread still remained below 5,000 tomans ($0.17).
Three weeks ago, the Iranian government claimed that despite the sharp increase of flour prices, the prices of a traditional Iranian bread would not increase. Jalil Rahimi Jahanabadi, a member of the National Security and Foreign Policy Commission in Iranian parliament and a representative of the so-called “reformist” wing of Iranian politics, strongly criticised the government’s decision to cancel the subsidies. Jahanabadi stated in his Twitter account that the cancellation of subsidies and the subsequent increase in flour prices, as it was tied to the dollar and other market prices, “was a great mistake of the government”’. “The patience of the Iranian people has reached its lowest point” – he said.
The Achilles’ heel of Iran’s regime
Over the past several years, Iranians have grown to be increasingly wary of the merciless consequences of the economic crisis. Not only does this crisis grow deeper, but it also seems to be completely out of Tehran’s government control. According to official governmental statistics, inflation in Iran is rated at 40% and numerous experts claim that considering the seriousness of the increases in price of various foods, these indicators are even higher in reality. The level of poverty in Iran skyrocketed to a colossal level. According to official government statistics, around 60% of the 84 million nation live in poverty. Around 20 to 30 million Iranians live in absolute poverty. For comparison, in 2010 the same statistics reported those in absolute poverty to be around 10 million.
According to Iranian media, prices of rice, one of the most important ingredients in Iranian cuisine, increased by 130%, which forced the more impoverished citizens to purchase bread as an alternative. The price of beans increased by 120%. Likewise for oil, eggs, sugar and butter. Back in November 2021, even Tehran experienced periodic disruptions in deliveries of oil and butter, which used to vanish from store shelves from time to time.
Besides the cancellation of subsidies for flour, the government previously cancelled subsidies for certain medications. Earlier in April this year, prices of Iran-produced medications grew by 100-200% and imported ones sometimes by as much as 600%. According to official calculations, subsidies for medication and food cost around $100 million per year.
Ali Khamenei, Iran’s Supreme Leader, personally controls not only Iran’s domestic and foreign policy, but also supervises national economic strategy and has a direct influence over domestic macro policies. At the same time, Khamenei is not personally held accountable for the economic situation in the country. Moreover, he has repeatedly blamed Hassan Rouhani, the predecessor of the current president Ebrahim Raisi, for the economic hardship at hand. In his traditional weekly address, Khamenei did not mention the rapid increase of prices and called on the government to support Raisi in this time of hardship. The president himself promised that the government will pay less well-off citizens small sums of money for self-sustenance at around $12-15.
The Iranian government also stated that it will introduce digital coupons for those, who will need to purchase a limited amount of bread by its subsidised (discounted) price. The rest will be sold at its market price. It is expected that this “digital bread” scheme will be rolled out within around two months from now. According to Iranian officials, the list of products which will be included in this scheme are expected to be expanded soon and will likely include other products, such as chicken, cheese and cooking oil.
Bread protests
Despite the fact that Tehran, for evident reasons, is repressive towards any sign of social dissent, occasional waves of public turmoil have taken place in the Islamic Republic throughout the entirety of its 43 year existence. The most widespread protests broke out after the presidential election of 2009 and became the first significant challenge for the regime. Occasional protests throughout different locations continued until 2017, when they transformed into large rebellions and were subsequently suppressed. It is estimated that in November of 2019 around 1500 people in numerous Iranian cities were killed by the military and security forces during the unprecedented protests which later became known as the “Bloody Aban”.
It was therefore expected, that under the current economic conditions described above, agonising economic measures such as the increase of bread prices, would lead to another wave of street protests. Last week, Iranians took to the streets in southwest Iran. Anti-government slogans echoed through the streets, often targeting the current regime (i.e. the Islamic republic), rallying against president Raisi and Supreme Leader Khamenei. Protesters also shouted pro-Shah slogans. The largest protests took place in the southern province of Khuzestan, in the cities of Ahvaz, Dezful, Izeh as well as the port city of Bandar-e Mahshahr. As seen in various messages across social media, demonstrators in Izeh set a local mosque ablaze as well as a few shops. The government responded by shutting down the internet in Khuzestan and media reports stated that 22 demonstrators were arrested. Coincidentally, the province of Khuzestan also holds the main oil reserves of Iran, as well as major oil refineries.
The government also made sure that the Iranian media, which are already under close scrutiny and censorship, would omit mentions of the skyrocketing bread prices. As per internal sources of Iran International, a prominent Iranian TV channel based in London, all directors and reporters of the Iranian state Radio Farhang have recently received direct orders from Alireza Habibi, the general director of the radio. Habibi insisted that his subordinates avoid discussing economic hardships in Iran. He has subsequently sent out a warning, saying that any violations of these orders will lead to retribution, as such actions can “threaten the country’s national security”. Habibi also noted that for the sake of improvement of the “psychological security” of Iranian citizens, he advises against any “pessimistic” and “critical” captions concerning bread prices.
Why Iran is important for Ukraine
Iran’s domestic problems, which at first glance has a little in common with Ukraine, are vital. For many months now, Iran has been holding tense negotiations with Western countries in Vienna with regards to its nuclear programme, as well as the possibility of lifting current sanctions on Iran. As a result of sanctions, Iran, a country that is ranked fourth globally for the quantity of oil reserves (9.5% of the global reserve), ranked second in quantity of natural gas (16% of the global amount) – is now practically stripped of the right to sell its oil on international markets. Iran is one of the strongest players in this market and one of Russia’s fiercest competitors there. From the start of the Russo-Ukrainian war, Iran saw its chance to lead the negotiation process to its logical conclusion. Russia, being Iran’s official ally, continuously impeded this process, intentionally obstructing Iran’s return to the global markets.
In March 2022, Javad Oji, the Minister of Petroleum of Iran, stated that the government can achieve its optimal output only two months after a potential deal along with the long-awaited withdrawal of sanctions on Iran. Iran confirmed that it intends to produce 3.8 million barrels of oil every day. The main obstruction in the negotiation process for Iran and the West is the status of IRGC, which have been designated as a terrorist organisation by the United States. Iran demands the reversal of this designation. More than forty years after the revolution, the IRGC became a rather heterogeneous organisation. Besides the more conservative, ‘hawkish’ wing of the organisation, which was led by the late Qasem Soleimani (who in fact, had close ties to the Kremlin), and continues to play a key role in spreading Iranian influence in the region, the IRGC also has more pragmatic fractions. IRGC’s main goal is to preserve their power, and therefore, preserve their unprecedented monopoly in the Iranian economy.
Of course, due to the absence of any organised opposition (and this is the present situation in Iran), any future demonstrations of public dissent will not lead to a regime change. However, they can lead to very unpredictable and catastrophic consequences, both for the government and the nation as a whole. Could it be that the continuous spread of increasingly radical moods and protests among Iranians, which continue to grow after the downfall of the economy in 2018, will lead to indirect cooperation of Iran with the West? This question is even more relevant due to the fact that Iran’s main ‘ally’, Russia, is not only sanctioned themselves, but is also cynically trying to sabotage Iran’s attempts to export and sell its oil.
Recently, Iran held its fifth round of negotiations with Saudi Arabia, its archcompetitor in the Persian Gulf. Iran’s Supreme National Security Council achieved important agreements with the leadership of Saudi intelligence. This historic cooperation can serve as another piece of evidence that Iran is ready to amend its disagreements with others. For Russia, this will mean the loss of its leverage on the energy markets.
